1. Have a plan before you initiate a trade. A detailed trading plan is your blueprint to success. It will help you define you as a trader, the way you trade, will help you find, execute and manage trades with ease and most importantly will help you put the education puzzle together.
2. Always analyze all closed trades, winners and losers. Having a trading journal will help you identify what works for you and what not; it will funnel you in the right direction. It is by far the most helpful method of personal trading introspection.
3. Maintaining a positive trading attitude will improve your money management and risk management skills. A negative trading mentality will alter your thinking and mindset. Your attitude will determine whether or not you are profitable with your trading. Your attitude is more important than your market knowledge and even your level of experience. It is important how you react to the market and not what the market will do to you.
4. Controlling Emotions. Emotional swings and emotional stresses impact your mental state of mind and will affect your trading decisions. When you trade with emotions you don’t trade clearly and rationally. Some books talk about separating your emotions from trading. But how is this possible? To even try to separate emotions is like fighting a losing battle, taking control over them that is a different story. Trading involves the most emotional COMMODITY in the world which is….money. Money outlasts hate, love, greed and anything else you can ever imagine. The only way to control your emotions as a trader is to have a solid trading plan.
5. Trade in the zone –Focus is key in trading. Make sure you are do not have any distractions around, no internet browsing, no phone answering, no kids playing, it should be just you and the charts. Let the charts speak to you and they will tell you what to do. (more…)
Archives of “stock market” tag
rssAll Type of Traders Are Trying To Catch Trend Only
Long term trend followers are trying to be right about the long term trends in the markets they trade using mechanical systems.
Buy and hold investors are trying to be right about the stock market indexes and mutual funds being in a long term trend over their lifetime.
Value investors believe that under priced stocks will reverse and trend higher over the long term based on the cheap price they are getting based on a companies fundamentals.
Day traders are trying to capture the trend that happens in one day’s time frame.
Swing traders bet that the trend reverses off support or resistance levels and give them a profit.
Can Slim traders are trading the trend of a hot growth stock out of a base price range or cup with handle pattern
Bear are betting that the trend reverses and something goes down in value and they make money.
Call buyers are trying to capture an up trend, call sellers want to profit from a down trend.
Put buyers are trying to capture a down trend, put buyers want to profit from an up trend.
Traders buying long option strangles are betting on a trend either way bigger than what is priced in, Strangle sellers are betting the trend will be less than what is priced in.
All trading methods are simply an effort at trend identification and capturing profits by entering at a high probability moment and exiting with profits in place.Being on the right side of the trend in your time frame is what a successful trading method is all about.
TRADING MANTRA'S
Even the best traders in the market have trading sessions that are less than optimal. Human nature dictates that we make mistakes, and trading the stock market is no exception. Subsequently, there is always room for improvement, whether you are a novice trader or a seasoned veteran.
- Stick to Your Guns – Don’t try to run from the market. The only way to boost trading profits is to stay in the game and keep trading. Running from the trades and the action will keep you out of the market, whether it is hot or cold. Sticking to your trading plan and enacting trading discipline are the keys to producing profits.
- Set Stop Losses and Take Profits – “Set and forget” trading is generally profitable. When you place each trade, remember to place your exit and stop loss, and then let the market be your guide. Have a preset limit of how much you’re willing to win and how much you can lose. Technical analysis will tell you the best price for selling (near resistance) and the best place for buying (near support). Support and resistance points are the best places to put limit orders. (more…)
Shinzo Abe will not revive Japan by rewriting history
The headlines shout that Japan is back. Shinzo Abe has returned the country to centre stage after more than a decade in the wings. This week’s turbulence aside, the stock market has boomed, consumers have been spending and growth looks like picking up. Abroad, Japan is commanding attention. There are three things to say about this reversal: two are mostly positive and the third seriously negative.
When the Japanese prime minister tips up at next month’s meeting of the Group of Eight advanced industrial nations, it is a fair bet his fellow summiteers will want to get to know him. The same could not have been said of his recent predecessors.
The prime minister’s office has had a fast revolving door. Between 2006 and Mr Abe’s election victory in 2012 there were as many occupants as years. Other world leaders would shake hands with their Japanese counterpart in the near certain knowledge that he would be gone before their next big gathering. America’s Barack Obama was said to be especially irritated by the time wasted in these fleeting encounters.
Mr Abe, of course, was one of those who passed through the revolving door – presiding over a failed administration between 2006 and 2007. His political prospects now, however, are better than any since Junichiro Koizumi’s premiership in the opening years of the century.
Mr Abe’s ruling Liberal Democratic party faces elections to the upper house in July, but if the polls are any guide it is heading for a comfortable majority. Barring any accidents, that would leave Mr Abe with a clear run until the next poll for the lower house in 2017. (more…)
THE BEST TRADERS ARE HUMBLE
When an ordinary man attains knowledge, he is a sage; when a sage attains understanding, he is an ordinary man.
– Anonymous
With some technical trading knowledge and experience, you become a trader.
But when you become consistent and profitable, you feel ordinary again. This is because you’ve grown aware of the great uncertainty you face in the markets.
You’ve gained a strong appreciation of risk. In fact, your respect for risk is so deep that you would feel humble. And in that sense, you will feel ordinary.
80% of trading is behavioral
80% of trading is behavioral, maybe only 20% is based on the other things that a trader does. Like much of personal finance it is not the math but the behavior that makes all the difference. Most people’s problem with being broke does not lie in their budget it is due to their behavior of spending too much money becasue they lack self control. The inability to say no to yourself in the present is what leads to most of the problems that we encounter at a future time. You can’t out earn stupid and you can’t budget away a lack of self control or work ethic. The same applies to trading.
Wanting to be a trader is only the beginning, once you make that decision you have to do the work to learn how to create a winning trading system. Having a robust trading methodology is still by far not enough it has to be expressed in a trading plan that also controls risk and fits your personalty. Even then, a trading plan is not enough you still have to follow it with discipline consistently for it to work out for you in the long term and make you profitable. But wait, there’s more…. you have to have the passion and perseverance in the market to shake off a losing streak and draw down and keep going. A great trading method is useless if you quit before you give it a chance to hit the big winning streak. (more…)
10 Reasons Trading is So Difficult ,Why Only 5% Traders Across Globe Mint Money
- You can back test a system as much as you want but when you start trading it the profitability will be determined by the market conditions not past price history. What looks great on paper can lose on a lot of consecutive trades right at the start.
- Your stop can be hit and then the market go in the direction you were positioned for.
- Sometimes that pullback that you are waiting for to buy never comes until the trend is over.
- Sometimes every momentum signal you buy will be a loser for a long time.
- Many times the market whipsaws you in a position for absolutely no reason you can understand.
- Sometimes your biggest position sizes are losing trades and your smallest position sizes are the winners.
- There is no ‘market’ you are trading against a herd of people all making decisions for many different reasons, and they are not predictable.
- You can feel foolish under performing buy and holders during straight up bull markets when you’re trading in and out.
- Some trading lessons can’t be learned they have to be experienced with real money.
- Money is made and kept based on the math of probabilities, risk, and reward not because a trader is the smartest but because they are the most flexible and adaptable.
22 Trading Principles -By Paul Tudor Jones
- It is possible to see that a market is dramatically overbought and prepare for, and then capture, huge gains after the sell off.
- Risk small amounts to make big profits.
- Bet against times when numerous leaders must agree.
- Long hours and a strong work ethic are keys to being a successful trader.
- While it is good to trade any market that will turn a profit, specializing in a market can lead to great success.
- The markets go down faster than they go up.
- If the market will not go down during bad news, it will likely go higher.
- The stock market moves in patterns and in cycles. Past price patterns repeat themselves due to human emotions.
- Many times traders think a big position order size means that a whale knows something, most times they do not.
- It is okay to skip a trade if you can’t get your entry price.
- A momentum move does not just stop, it takes time to roll over.
- It is possible to trade successfully by gaming the actions of other traders.
- Be aggressive at high probability moments.
- Always stay in control of your trading and manage risk.
- Focus on risk management as the #1 priority in trading.
- Having the right mindset during a big loss that it is just temporary, is the key to coming back and being successful.
- Letting profits run is sometimes a great plan.
- Being long at all time highs in the indexes is a great strategy.
- Great money managers trade with passion.
- Even Market Wizards have doubts about winning when entering a trade.
- When the top in a market is reached, there is a lot of money to be made shorting as panic selling sets in.
- Guys from Tennessee can trade!
20 Points of Successful Traders
- They have the resilience to come back from early losses and account blow ups.
- They focus on what really matters in trading success.
- They have developed a trading method that fits their own personality.
- They trade with an edge.
- The harder they work at trading the luckier they get.
- They do the homework to develop a methodology through researching ideas.
- The principles they use in their trading models are simple.
- They have mental and emotional control is key while winning or losing.
- They manage the risk to avoid failure and pain.
- They have the discipline to follow their trading plan.
- Market wizards have confidence and independence in themselves as traders
- They are patient with winning trades and impatient with losing trades.
- Emotions are dangerous masters to the trader; they know how to manage their own emotions.
- Market wizards evolve as a trader to avoid eventually failing in a method that has lost its edge over time.
- It is not the news but how the market reacts to that news is what they watch for.
- The fully understand the right way to position size for their goals of returns and drawdowns based on their risk/reward and winning percentage.
- Market wizards understand comfortable trades are usually losing trades while the more uncomfortable trades are usually the winners.
- They are good losers. Cutting losses when proven wrong and even reversing the direction of their trades when the price action dictates it.
- The best traders are always learning through their own mistakes.
- Passion for trading was the fuel for their eventual success.
Anti-Fragile Trader
The Anti-Fragile Trader is someone that puts on very small position sizes in low probability trades, but shifts huge amounts of risk to the trader on the other side of the trade. The methodology of the anti-fragile trader is to bet on the eventual blowup of the traders making high risk trades for a small premium.
The favorite tool of the Anti-Fragile Trader is the out-of-the-money option contract. For pennies on the dollar, they can control huge amounts of assets. While they expire worthless the majority of the time, when a random Black Swan event hits the market affecting the option contract, they can return thousands of percent on capital at risk, and makeup for all the past losses.
The creator of the anti-fragile concept, Nassim Nicholas Taleb, traded long option strangles, betting on both directions to capture any huge trend event up or down. A company being purchased and rocketing up, or a disaster and a company stock sent crashing, was hugely profitable for Taleb. He also bought option contracts on futures markets. The key is very tiny bets on these trades versus total account equity. Tiny losses and tremendous wins was what made the system profitable. (more…)