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20 Trading Wisdom Lines

  
  Education
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(1)  Those who work their plan will prosper, but those who chase fantasies lack judgment.

(2)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.

(3)  Trying to “get rich quick” is wrong & leads to poverty.

(4)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.

(5)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.

(6)  A person without self-control is as defenseless as a city with broken-down walls.

(7)  The wise control their temper.  They know that anger causes mistakes.

(8)  The intelligent are always open to new ideas, in fact they look for them.

(9)  Get all the advice that you can & be wise all the rest of your life.

(10)  Fools despise advice; ‘the wise’ consider each suggestion.

(11)  Fools think they need no advice, but ‘the wise’ listen to others.

(12)  To learn, you must want to be taught.  To refuse correction is stupid.

(13)  Anyone willing to be corrected is on the path to success. Those who refuse correction have lost their chance.

(14)  Hard work brings prosperity; playing around brings poverty.

(15) If you love sleep, you will end up in poverty.  Stay awake, work hard, & there will be plenty to eat.

(16)  The foolish will lose in the end, ‘the wise’ will end up with the winnings.

(17)  The wise save up for the future, but the foolish spend whatever they get”.

(18)  Truth stands the test of time; lies are soon exposed.

(19 Be faithful & honest with yourself in your trading, bediligent & consistent & it will bring you Prosperity.
(20) Steady plodding brings prosperity; hasty speculation brings poverty.

Think carefully about each one of these quotes.  I think you’ll find out a little something about yourself you didn’t already know.  For example, your “strengths” and “weaknesses” in your trading should be clearly pointed out be analyzing each one of these phrases.  These simple and short phrases should help you become a better trader — and hopefully a better person in general!

Apply Will Power in Trading

  
  Education
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Much of successful trading has to do with having the discipline, the willpower, to follow the trading plan. And much of a good trading plan goes counter to a human’s natural reactions to the market. Hence the greater your willpower, i.e. the better you are able to have self-control or self-regulation, the better your trading.

Below are some key points from the article and Roy Baumeister’s YouTube videos, and my thoughts on how they apply to trading.

The Nature of Willpower

  • Willpower is a limited resource that gets depleted when you use it.
    • I typically find that my trading at the early part of the session is good. I would follow my trading plan well and profits usually follows. However towards the later part of the morning, I start to make mistakes and go counter to my trading plan, that’s when my results suffer.
    • Be aware of when you have run out of juice. I find that once I start make a few consecutive trades that violate my trading plan, I recognize that my willpower has been depleted, I am not making good decisions, so I go take a break, or stop trading for the day entirely.
    • Some traders recommend not trading for more than 3 hours a day. Yes you may miss a run away market after you stop trading, but recall your experiences when the market trended very well the entire day but yet you lost money. To extract money from the marketsrequires willpower to make the right trading decisions. When you are not able to follow your trading plan, the probabilities favor you giving money to the markets instead, regardless of the market situation.
  • When your willpower is depleted, you feel your emotions more intensely (more…)

20 Wisdom Points for Traders

  
  Education
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(1)  Be faithful & honest with yourself in your trading, be diligent & consistent & it will bring you Prosperity.
(2)  Those who work their plan will prosper, but those who chase fantasies lack judgment.
(3)  Steady plodding brings prosperity; hasty speculation brings poverty.
(4)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.
(5)  Trying to “get rich quick” is wrong & leads to poverty.
(6)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.
(7)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.
(8)  A person without self-control is as defenseless as a city with broken-down walls.
(9)  The wise control their temper.  They know that anger causes mistakes.
(10)  The intelligent are always open to new ideas, in fact they look for them. (more…)

50 Trading Rules

  
  Education
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1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don’t take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point. (more…)

Five Qualities For Successful Trader

  
  Education
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  1. Capacity for Prudent Risk-taking.The young successful trader is not afraid to go after markets aggressively when the opportunity presents itself.
  2. Capacity for Rule Governance. The young successful trader has the self-control to follow rules in the heat of battle, such as rules of position sizing and risk management.
  3. Capacity for Sustained Effort.The trader uses productive time to do research, preparation, work on himself, outside of market hours.
  4. Capacity for Emotional Resilience. All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not lose self-confidence and motivation in the face of loss and frustrations.
  5. Capacity for Sound reasoning. The successful young trader exhibits an ability to synthesize data and generate market and trading scenarios.

Emotions

  
  Education
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Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts. Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.

The Two Trading Problems

  
  Education
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The old saying indicates that fear and greed are the emotions that dominate markets.

Eliminating emotion from trading is both impossible and undesirable. The “feel” for markets possessed by the best traders is a form of emotion; Antonio Damasio’s writings on this subject are must reading.

When we become very anxious or frustrated, however, our assessments of risk and reward are impaired: that is the enduring message of behavioral finance research. Regional cerebral blood flows no longer activate those executive parts of the brain responsible for planning, judgment, and decision-making. Rather, we regulate our motor activity as part of “flight or fight”. In the flight mode, we flee from risk and inhibit trading decisions. This leads to immediate safety, but also missed opportunity. In the fight mode, we confront risk and activate trading decisions. This leads to the relief of taking decisive action, but also poses increased possibilities of loss.

With market volatility at record levels, it’s not unusual to experience outsized losses when trades are wrong. These losses place a figurative magnifying glass on our flight or fight responses, activating stress modes at exactly the times we want to be most deliberate and planful. (more…)

Conscientiousness and Trading

  
  Education
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  • Self-Efficacy. Self-Efficacy describes confidence in one’s ability to accomplish things. High scorers believe they have the intelligence (common sense), drive, and self-control necessary for achieving success in trading. Low scorers do not feel effective, and may have a sense that they are not in control of their trading. However, consideration needs to be given to motivation for success as complacency with the way things are may be the reason for a low score.
  • Orderliness. Traders with high scores on orderliness are well-organized and stick to routines and schedules. They tend to make trading plans and use them. Low scorers tend to be disorganized and scattered. Trading plans are viewed as not being important as rules are too confining.
  • Dutifulness. This scale reflects the strength of a person’s ability to stick to a trading plan. Those who score high on this scale have a strong sense of moral obligation. Low scorers find trading plans overly confining and thus less likely to follow or even create one. Perhaps trading is seen as more of a “hobby” or just for “fun.”
  • Achievement-Striving. Individuals who score high on this scale strive hard to achieve excellence. Their drive to be recognized as successful keeps them on track toward their goals. Low scorers are content to get by with a minimal amount of work, and might be seen by others as lazy.
  • Self-Discipline. One of the largest contributors to success as a trader is self-discipline. High scorers are able to strictly adhere to a trading plan and stay on track despite distractions. Low scorers procrastinate, are easily discouraged and show poor follow-through. The lack of self-discipline will make your trading career rather short lived.
  • Cautiousness. Cautiousness describes the disposition to think through possibilities before acting. High scorers on the Cautiousness scale take their time when making trading decisions and manage risk well. Low scorers often trade without deliberating alternatives and the probable consequences of those alternatives. Scoring too high on this scale can have its downside as trading opportunities may be missed for the discretionary trader. The more mechanical systems trader will account for this through their strategy.

Three Myths of Trading Psychology

  
  Education
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Myth #1: Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts.Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.

 Myth #2: Anyone, with dedicated effort, can get to the point of trading for a living. That is nonsense. How many people make their living from acting or musical performance? What proportion of people playing sports can actually make their livelihood from athletics? Many people play chess or poker, but how many can sustain a living from it?Quite simply, to make a living from any performance activity means that you are consistently good at what you do. Not everyone has the talent, skill, or drive to be that successful—in any field. Across the many traders I’ve met in various settings, from home-based, independent traders to professional ones in firms, the best predictors of trading success have been the size of the trader’s account and the resources available to the trader. If a person were to make 30% per year on their accounts year after year, they would be among the world’s most successful money managers. Most money managers of mutual funds, hedge funds, and pension funds cannot sustain such performance. This leads the trader to accept huge leverage and court a risk of ruin when an inevitable string of losing trades occurs. Indeed, such excess leverage is a main cause of emotional distress in trading. Take a look at how the Turtles made their money: they learned a trading method, learned to be consistent with that method, and were given enough money by Richard Dennis that they could trade multiple markets with enough size to scale into positions in each. Even with those resources, not all of the Turtle students could succeed. Talent, skill, and opportunity are the ingredients of success, and these are relatively normally distributed in the trading population, just as they are relatively normally distributed in the population at large. (more…)

Five qualities for Successful Traders

  
  Education
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secrets_successful_trader

  1. 1)Capacity for Prudent Risk-taking.The young successful trader is not afraid to go after markets aggressively when the opportunity presents itself.
  2. 2)Capacity for Rule Governance. The young successful trader has the self-control to follow rules in the heat of battle, such as rules of position sizing and risk management.
  3. 3)Capacity for Sustained Effort.The trader uses productive time to do research, preparation, work on himself, outside of market hours.
  4. 4)Capacity for Emotional Resilience. All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not lose self-confidence and motivation in the face of loss and frustrations.

5)Capacity for Sound reasoning. The successful young trader exhibits an ability to synthesize data and generate market and trading scenarios.

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