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Trading Truths

  
  Education
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    1. It’s all about risk management … never risk what you can’t comfortably lose.
    2. Never fall in love with a stock.
    3. To be succesfull in trading; study, understand and practice. The rest is easier.
    4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
    5. Never take on a position larger than your comfort zone. (Don’t overtrade)
    6. Patience. never chase a stock.
    7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
    8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
    9. No one ever went broke taking a profit!
    10. Once you find a good one, hang on unless of course they do you wrong.
    11. Never add to a losing position! (Unless scaling in was part of the plan).
    12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
    13. Do not overtrade.
    14. Trade price not perception.
    15. Know the difference between stocks that you want to stay married to and those that are just a fling.
    16. The only sure way to make a small fortune is to start with a large one.

      17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

    17. Cut your losses quickly and you may have a chance.
    18. An indicator works until it doesn’t.
    19. “MR. MARKET” IS ACTUALLY “MRS. MARKET” ONLY WOMEN CAN THINK, AND ACT THE WAY THE MARKET DOES. THAT IS WHY -ON AVERAGE -WOMEN ARE BETTER TRADERS THAN MEN, THEY UNDERSTAND WHAT THEY DEALING WITH! (more…)

    Trading Truths

      
      Education
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        1. It’s all about risk management … never risk what you can’t comfortably lose.
        2. Never fall in love with a stock.
        3. To be succesfull in trading; study, understand and practice. The rest is easier.
        4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
        5. Never take on a position larger than your comfort zone. (Don’t overtrade)
        6. Patience. never chase a stock.
        7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
        8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
        9. No one ever went broke taking a profit!
        10. Once you find a good one, hang on unless of course they do you wrong.
        11. Never add to a losing position! (Unless scaling in was part of the plan).
        12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
        13. Do not overtrade.
        14. Trade price not perception.
        15. Know the difference between stocks that you want to stay married to and those that are just a fling.
        16. The only sure way to make a small fortune is to start with a large one.

          17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

        17. Cut your losses quickly and you may have a chance. (more…)

        Ten Ways to Trade With an Edge

          
          Education
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        An edge is an advantage that a trader has over his competitors, allowing him to generate and retain profits from other traders . There can be many types of  trading edges through risk management, psychological management, and through better trading methods.

        Here are a few:

        1.  A selective trader that only trades the best set ups, trends, and stocks has the advantage of waiting for the fat pitch and not just swinging at every ball thrown his way.
        2. Simply using correct position sizing can put you in the top 10% of traders simply by not blowing out your account and staying in the game by maximizing winners and minimizing losers..
        3. Risking no more than 1% of your capital per trade brings your risk of ruin down to almost zero and allows the trader to survive losing streaks. You have the edge of being around to have a winning streak later on.
        4. Only taking trades with a risk-to-reward of 3 to 1 or better gives the opportunity to have bigger winners than losers in the long run which is needed to be profitable. 
        5. Trading in the direction of the trend in your time frame gives you an edge over those losing money by fighting the trend.
        6. Having the discipline to follow a trading plan gives you an edge over those that trade based on fear and greed. (more…)

        The Power of Regret

          
          Education
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        Everyone knows that chasing price is usually not beneficial, we either end up catching the move too late, or we get poor trade location, which makes it more difficult to manage the trade.

        However, there are other forms of chasing that are just as common, maybe more common, and just as counter-productive.   As a trading psychologist I see these all the time.

        Traders who are not profitable are often too quick to chase after new set-ups and indicators, or a different chat room, if that’s your thing.  Obviously, we need to have a trading edge, whether it is from the statistical perspective of a positive expectancy, or simply the confidence in a particular discretionary strategy such as tape reading, following order flow, market profile, etc.

        Chasing a trade is the fear of missing out. The fear of missing out is associated with various emotions, including regret. In my work with traders and in my own trading, I’ve seen the incredible power of regret. There’s a lot of talk about fear and greed in trading, but the power of regret is often overlooked. Some of my own worst trades, and those of my clients, often have a ‘regret from missing a prior opportunity’ component. When I finally finish my book on the psychology of financial risk taking, I will include much about this overlooked but very powerful emotion. (more…)

        Patience and Discipline

          
          Education
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        While these two virtues are over-worked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed. Don’t trade just for the sake of trading or just because you haven’t traded for a while. Let those very good trading “set-ups” come to you, and then act upon them in a prudent way. The market will do what the market wants to do — and nobody can force the market’s hand.

        Evolutionary Trading

          
          Education
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        evolutionary_educationThe problem with “evolutionary trading” is the constant adjusting to the ever changing wind, and, thus, loosing sight of your original port of call. By the time you get to your final destination, you have carved out a new routine.

        Knowing exactly, precisley, what your set-ups can deliver, will prevent you from manipulating your original system. This internalization of singular vision, can only come from tirelessly backtesting.

        TRADING EMOTIONS

          
          Education
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        The hardest thing to master as a trader once you understand Market Rhythm is not the market, it is YOU. Emotional trading will break you fast.

        Trading is not hard, it is mastering your emotions that is. Trading will teach you more about your human short coming than visiting a psychiatrist. As a trader, you must learn the discipline of waiting for proper market set-ups. That is hard!

        Your EMOTIONS are screaming for you to jump in or you will miss out. NOT TRUE!! If you miss one trade set-up, the market is generous and will give you another. Learn to trade in harmony with your trend and with proper signals.

        The emotions that are deadly to your trading success.

        REVENGE, we all know it and have done it. It happens when you are tricked by the market and decide to take another trade before looking at the big picture, then BAM you are on the wrong side of the trade again. Pissed off and refusing to move while your money is going further down the drain. Scared to let go for fear that you are going to get tricked again.

        PANIC, that is when you lack the confidence to enter or ride a profitable trade. This happens when you have taken some hits and now you lack the confidence to trade profitably.

        IMPATIENCE, this happens when you can’t wait for a proper trade set-up and jump on a price hiccup/retracement, often finding yourself on the wrong side of the trade.

        ANGER, you know that feeling that comes over you when you have taken a hit or two and you want to kill your computer. (more…)

        Evolutionary Trading

          
          Education
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        The problem with “evolutionary trading” is the constant adjusting to the ever changing wind, and, thus, loosing sight of your original port of call. By the time you get to your final destination, you have carved out a new routine.

        Knowing exactly, precisley, what your set-ups can deliver, will prevent you from manipulating your original system. This internalization of singular vision, can only come from tirelessly backtesting.

        10 Essential Trading Words

          
          Education
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        1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

        2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

        3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

        4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

        5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

        6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.

        7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.

        8. Consistency – Stick to your method of trading ideas’ generation.

        9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.

        10. Have a plan – Which are stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t  just wake up and sit in front of your monitor without having a clue what are you going to trade today.

        10 Essential Trading Words

          
          Education
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        1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t simply take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.

        2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.

        3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.

        4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.

        5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and offers good risk/reward ratio.

        6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum. (more…)

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