Archives of “stock market” tag
rss‘The Psychology of Trading-Book Review
Author Brett Steenbarger has done a great job with this book. He covers what I personally believe is the most important element in trading: psychology.
New traders will probably not last through their first year in the markets without blowing up their accounts by taking losses too personally. Many times draw downs cause traders to start gambling when they become desperate to recover their losses. Many times increasing position size when they should be decreasing it is an ego-driven desperation to get back their losses. Other similar bad mental behaviors creep into our trading careers as dysfunctions in our personal lives cloud our minds from being able to make the right decisions in following our systems and established trading principles.
What this book shows is how to take the proper perspective and observe our greed and fear, enabling us to see them for what they are instead of getting caught up in these powerful emotions that lead to terrible consequences in our accounts and lives.
This book is a very good book on both psychology and trading. It is packed with lessons from the authors patients and his own experiences. What the book shows is that we are the most important element in our trading. We must have the right mind set in trading, and while developing as a trader we need to keep a log of the emotions we feel on our losses and wins to better understand ourselves and why we make emotional charged decisions that we shouldn’t while trading. (more…)
7 Things Traders Must Manage -To get Success in Trading
1. Traders must be great risk managers.
“At the end of the day, the most important thing is how good are you at risk control.” -Paul Tudor Jones
2. Traders must manage their own stress.
Trade position sizes that keep your stress level manageable, if you can’t talk calmly to someone while trading you are trading too big.
3. Traders have to be able to manger their emotions, we have to trade our plan not our greed or fear
“There is nothing more important than your emotional balance.” – Jesse Livermore
4. Traders must manage their ego and need to be right.
“As a trader, you have to decide what is more important—being right or making money—because the two are not always compatible or consistent with one another.” -Mark Douglas
5. Traders must manage entries. When the time is right take the entry. Don’t wait until it is too late and chase, and don’t get in prematurely before the actual signal, also don’t get carried away and be to aggressive trade the right size.
6. Traders must manage the exit. Whatever our exit strategy is we have to take it. Sell at your target, exit into an exhaustion gap, or take the trailing stop, whatever the plan is follow it.
7. We have to manage our thoughts. We have to focus on what is happening right now. Mentally time traveling back into the past and reliving our losses has no value, we have to learn from our lessons and move forward. Mentally time traveling into the future and believing that big profits await if we take a huge position size and go for it, may be the most dangerous mind set of all. We must manage our mind and focus it on following a tested trading plan.
24 Reasons 95 Percent Traders Don’t Make Money
- Lack of homework on what works.
- Allowing big losses in your trading account,
- Quitting when they learn trading isn’t easy money.
- Inability to trade volatile markets.
- Inability to emotionally manage equity curves.
- Trading without a positive expectancy model.
- Never committing to one trading strategy.
- Changing trading systems.
- Trading based on opinions.
- Not managing the risk of ruin.
- Over thinking their trades.
- Reactive trading decisions based on internalizing emotions.
- Trading with leverage without understanding the risks.
- Trading on margin without understanding it.
- Over trading.
- Trading without a plan.
- Not understanding what it takes mentally to be a trader.
- Setting stops in obvious places.
- Selling short what looks expensive.
- A lack of discipline.
- Watching Blue Channels (Whole Day )
- Reading PINK PAPERS
- Watching Fundamentals ,Results of Companies (All Manipulative )
- Looking and Listening GROWTH ,INFLATION ,IIP ,RBI (All Manipulative in India )
The Stock Trader's circle of Sucess and Failure
The following graphic describes two types of traders. The first (the circle on the left) describes what I believe to be the characteristics of all beginning traders, most of which end up quitting. There is a progression here from bad to worst. However, if the beginning trader can break through this cycle somewhere around undisciplined fear (#3) and paralysis of analysis (#4), the chances of his success improves exponentially.
THE LOSER’S CYCLE OF DESPERATION
Simply put, a trader enters the stock market with little if any knowledge about what to expect. How can he? No experience = no knowledge. Not only that, but his expectation of untold riches distorts his perception of reality. Once in the market he seeks the holy grail that will make him rich. When he doesn’t find it he continues his search as fear begins to shackle his feet. The fear leads to paralysis of analysis or the thinking that the more indicators and patterns and candlesticks etc. that he uses the more likely he will win. Wrong! (more…)
Twenty Six Market Wisdoms from Warren Buffett
1. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
2. Chains of habit are too light to be felt until they are too heavy to be broken.
3. Risk comes from not knowing what you’re doing.
4. Only when the tide goes out do you discover who’s been swimming naked.
5. If past history was all there was to the game, the richest people would be librarians.
6. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
7. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price
8. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful
9. Time is the friend of the wonderful business, the enemy of the mediocre. (more…)
PSYCHOLOGY & RISK for New Traders
The issues faced by the New Trader are greed, stress, impatience, fear, and lack of desire to learn. “When a new trader enters the stock market with money but no experience, the odds are he will quickly gain experience by losing money.” RISK The New Trader must make managing money a priority, run trading like a business, control trading size, admit when he is wrong, and lock in strategy driven profits. “When you go to your computer to trade, you should approach it as if you are entering an auction, not a casino.” |
Emotional Intelligence
Dictionary meaning of emotional :actuated, effected, or determined by emotion rather than reason
Dictionary meaning of intelligence : the faculty of understanding
If you are a trader already and have money in the stock market then you know how you react or respond when your trades don’t happen the way you want them to. It is just a matter of learning from your trades and not being attached to them. It is a good idea to have some money to donate so that when the market hasn’t gone your way, you know that the loss is not really a big deal and that you can make it back. (more…)
10 Attributes Exceptional Traders possess
- A persistent unquenchable motivation to compete and achieve personal stock market mastery
- A personally developed hands-on strategy in writing that fits your personality.
- The ability to be brutally honest and objective about your beliefs and weaknesses.
- An inner resiliency to weather all market storms with little emotional scar tissue.
- Well-defined risk management rules and an ability to accept responsibility for losses.
- Unassailable confidence in your system and yourself.
- Discipline to follow your methodology and act decisively.
- A strong ethic for working hard but also working smart.
- Patience and an ability to wait for high probability trades to materialize.
- A willingness to embrace change, to modify your thinking, to rewrite your methodology and transform yourself.
4 Types of Problems For Traders
1) Problems of training and experience – Many traders put their money at risk well before they have developed their own trading styles based on the identification of an objective edge in the marketplace. They are not emotionally prepared to handle risk and reward, and they are not sufficiently steeped in markets to separate randomness from meaningful market patterns. They are like beginning golfers who decide to enter a competitive tournament. Their frustrations are the result of lack of preparation and experience. The answer to these problems is to develop a training program that helps you develop confidence and competence in identifying meaningful market patterns and acting upon those. Online trading rooms, where you can observe experienced traders apply their skills, are helpful for this purpose.
2) Problems of changing markets – When traders have had consistent success, but suddenly lose money with consistency, a reasonable hypothesis is that markets have changed and what once was an edge no longer is profitable. This happened to many momentum traders after the late 1990s bull market, and it also has been the case for many scalpers after volatility came out of the stock indices. Here the challenge is to remake one’s trading, either by retaining the core strategy and seeking other markets with opportunity or by finding new strategies for one’s market. The answer to these problems is to reduce your trading size and re-enter a learning curve to become acquainted with new markets and methods. Figuring out how you learned the markets initially will help you identify steps you need to take to relearn new patterns.
3) Situational emotional problems – These are emotional stresses that are recent in origin and that interfere with decision making and performance. Some of these stresses might pertain to trading, such as frustration after a slump or loss. Some might stem from one’s personal life, as in a relationship breakup or increased financial pressures due to a new home or child. Very often these problems create performance anxieties by putting the making of money ahead of the placing of good trades. The answer to these problems is to seek out short-term counseling to help you gain perspective on the problems and cope with them effectively.