Archives of “stock market” tag

rss

STOCK MARKET RULES: THERE ARE ONLY TWO!

  
  Education
#  #  #  #  #  #  #

The stock market has only two rules, both of which are vague and confusing. It is up to you to make them clear and simple to understand.
 Here are the guidelines:
You must write these rules down so that you will not forget them.
You must always follow these rules.
These rules will never change.
You must keep them forever.
These rules are never to be broken.
You must never add to these rules.
 Here are the rules:
 KNOW WHEN AND WHY TO BUY.
KNOW WHEN AND WHY TO SELL.
 Now, take these rules and develop your trading methodology around them.  (more…)

The Easiest Daytrade To Make

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

ss-7853536-potOfGold Essentially there are 3 timeframes to trade when it comes to “daytrades”:

1) the open

2) the close

3) and everything else in between

As you know by now, #3 is really the toughest to trade. It is the lowest probability trade of the three types, and your stops frequently get hit. Frequently, even if we get the direction right it is not very profitable because we get whipsawed like crazy. However, this is where many trades can be made, so the scalps do add up to a good chunk if you know what you’re doing.

So those who had joined us and getting Intraday calls-ofcourse having upperhand and minting money. (more…)

Just Avoid These 7 Words -If U Are A Trader

  
  Education
#  #  #  #  #  #  #  #  #

Be careful how you use the following words and phrases as they become road blocks or worse take you down the wrong path.

Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and either do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a black background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated. (more…)

This One Thing that Separates losing traders from the Winners

  
  Education
#  #  #  #  #  #  #  #  #  #

Making money in the financial markets is not only challenging but just surviving an account blow up is also a win for many new traders. There is one thing that ultimately determines your success in the markets. It is not your stock picking skills, your trend following or even trading a robust method. The dividing line between the winners and the losers in trading and investing is risk management. If you trade all in and risk it all over an over you will eventually blow up your account, and the funny thing is that it will likely be on your ‘can’t miss’ trade that is just way to obvious to everyone and is a crowded trade. Traders that believe have 10 losing trades in a row are impossible will discover it is very possible. Each trade should be large enough to return enough to make it worth your while, but small enough to make it inconsequential to your results in the long term. Trading small not only eliminates the financial risk of account ruin that is ever present in a market environment that is not conducive to your methodology but small risks also keep your logical brain in control of your trading and your emotions on the side lines.Nothing is more painful in my opinion than to build up an account during a great string of wins only to give it back with a string of losses in a different market environment. Small bets and staying out when he market waves get wild is a great formula to avoid big draw downs. You can still win big when you are right by letting a winner run but always lose small when you are wrong. The bet size on each trade will make or break ever trader at some point usually sooner than later. (more…)

Niccolò Machiavelli – Adapting To Change

  
Analysis, Education
#  #  #  #  #

The market environment has somewhat changed over the past few days. Former leaders are not acting as well as they used to and the jury is still out if we are headed towards a meaningful correction or if we are in the process of further constructive rotation. Further sector rotation would allow for the market to grind even higher and while doing so provide a new set of leading stocks. If you want to thrive as a trader you absolutely have to monitor changes in the market. Then you adapt and adjust your trading approach accordingly.

As I just finished reading Niccolò Machiavelli ‘The Prince’ a few  days ago I was struck by the following passage. The quote is obviously related to trading insofar as this is great insight and also a universal rule for success. You keep doing what you always did when things change – you get crushed. You adapt your approach when the environment you operate in changes – you succeed and prosper. Enjoy the quote.

This must suffice as regards opposition to fortune in general. But limiting myself more to particular cases, I would point out how one sees a certain prince today fortunate and tomorrow ruined, without seeing that he has changed in character or otherwise. I believe this arises in the first place from the causes that we have already discussed at length; that is to say, because the prince who bases himself entirely on fortune is ruined when fortune varies. I also believe that he is happy whose mode of proceeding accords with the needs of the times, and similarly he is unfortunate whose mode of proceeding is opposed to the times. For one sees that men in those things which lead them to the aim that each one has in view, namely, glory and riches, proceed in various ways; one with circumspection, another with impetuosity, one by violence, another by cunning, one with patience, another with the reverse; and each by these diverse ways may arrive at his aim. One sees also two cautious men, one of whom succeeds in his designs, and the other not, and in the same way two men succeed equally by different methods, one being cautious, the other impetuous, which arises only from the nature of the times, which does or does not conform to their method of proceeding. From this results, as I have said, that two men, acting differently, attain the same effect, and of two others acting in the same way, one arrives at his good and not the other. From this depend also the changes in fortune, for if it happens that time and circumstances are favourable to one who acts with caution and prudence he will be successful, but if time and circumstances change he will be ruined, because he does not change his mode of proceeding. No man is found able to adapt himself to this, either because he cannot deviate from that to which his nature disposes him, or else because having always prospered by walking in one path, he cannot persuade himself that it is well to leave it; and therefore the cautious man, when it is time to act suddenly, does not know how to do so and is consequently ruined; for if one could change one’s nature with time and circumstances, fortune would never change.

The Blind Traders and the Market

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

blind-men

There is an old parable known as “the blind men and the elephant.”  In this story, there are four blind men who are asked to determine what an elephant looks like.  The first blind man feels the leg of the elephant and says, “The elephant is like a tree because it is large and round like a pillar.”  The second man feels the tail and says, “The elephant is like a rope because it is small and coarse.”  The third man feels the ear and says, “The elephant is like a fan because it is flat and thin.”  The fourth man feels the trunk and says, “The elephant is like a snake because it is long and curves.” 

A king comes to the four blind men and says, “all of you are correct.”  The king goes on to explain that each one had drastically different descriptions of the elephant because they are all feeling different parts.  So, they are all correct.  The elephant has all the features described by the four blind men.

This parable is a good analogy describing different types of profitable traders. Many of the arguments that erupt between traders on social media are due to not understanding the others  time frames or not understanding the other trader’s position sizing, stop loss level, or expected winning percentage. Also too many cult members of Elliot Wave, Trend Following, Market Profile, Day Traders, and option traders etc. think their way of trading price action is the only way when their way is only one of many paths to profitability. There are as many ways to trade price action to be profitable as there are profitable traders.

The elephant in the room is that profitable traders do a few things in common: (more…)

List of Common Characteristics of Great Traders -10 Points

  
  Education
#  #  #  #  #  #  #  #

1. They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.

2. They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.

3. They totally understand the concepts they are trading and how those concepts generate low-risk ideas

. 4. They all understand that when they get into a trade, they must have some idea of when they are wrong and will bail out

. 5. They all evaluate the ratio of reward to risk in each trade they take. For mechanical traders, this is part of their system. For discretionary traders, this is part of their evaluation before they take the trade.

6. They all have a business plan to guide their trading. You must treat your trading like any other business

7. They all use position sizing. They have clear objectives written out, something that most traders/investors do not have. They also understand that position sizing is the key to meeting those objectives and have worked out a position sizing algorithm to meet those objectives.

8. They all understand that performance is a function of personal psychology and spend a lot of time working on themselves. You must become an efficient rather than inefficient decision maker.

9. They take total responsibility for the results they get. They don’t blame someone else or something else. They don’t justify their results. They don’t feel guilty or ashamed about their results. They simply assume that they created them and that they can create better results by eliminating mistakes.

10. They understand that not following their system and business plan rules is a mistake. If you make even one mistake per month, you can turn a profitable system into a disaster. Thus, the key to becoming efficient is to eliminate such mistakes.

What elements from the above list do you need to work on more than any other? Yes, take a moment to think about this today. As you set your top priorities for this new second quarter, I recommend focusing on just one of these elements by outlining specific steps you need to take this quarter to improve. For some, this will require further study. For others, it only requires just some minor behavior modification, refocus and attitude adjustment. Many times the difference between being great and mediocre

Use losers to learn a lesson and strengthen your trade execution

  
  Education
#  #  #  #

Losing trades can be the best ‘teacher’ you’ll ever have. However, just as with winning trades, it’s important to note that there will be a normal statistical variance of losing trades within any trading edge. So, you should not fall into the mental trap of thinking that EVERY losing trade you have was a major failure or that it means something is ‘wrong’ with your trading method or trading ability. Sometimes, perfectly good trade setups will fail, as that is just part of the game we call trading, so you just have to accept these trades and move on…assuming that you stuck to your trading strategy and the trade wasn’t taken out of greed, revenge or fear (over-trading).

The losing trades that you NEED to learn from and that you can learn a lot from, are those ‘stupid’ losing trades that you unfortunately did take out of greed, revenge or fear…and I know you know what I’m talking about here. After the trade is finished, you can record in your trading journal what you did wrong and why the trade was a failure; use these types of losing trades as a lesson and dissect what went wrong, you can then use this information to strengthen commitment to sticking to your trading strategy and plan.

The aim here, is to hopefully not make the same ‘stupid’ trading mistake twice, after all, your hard-earned money IS on the line every time you enter a trade. As you learn from ‘stupid trades’ it should help build your confidence because you will begin to see the power of remaining disciplined and consistent in trading, and you will start to see that you CAN trade successfully if you just stop making stupid trades.

Atkeson & Houghton, Win By Not Losing-Book Review

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

 Nicholas Atkeson and Andrew Houghton, founding partners of Delta Investment Management, have written what, in the words of the lengthy subtitle, is a disciplined approach to building and protecting your wealth in the stock market by managing your risk. Win By Not Losing (McGraw-Hill, 2013) is a mix of stories about some not-so-famous investors (in fact, a few are identified simply by their first names) and an introduction to tactical investing.

The authors contend that “stock prices are influenced by oddities in human behavior that often cause security pricing to be predictable.” (p. 120) They support their contention by sharing some of their observations from the trading floor of an investment bank. Earnings momentum, for instance, can be both predictable and profitable: “the cycle of exceeding analysts’ estimates is often predictable in light of the pressures on analysts to be overly conservative.” (p. 121) And one study found that “over the 60 trading days after an earnings announcement, a long position in stocks with unexpected earnings in the highest decile, combined with a short position in stocks in the lowest decile, yields an annualized ‘abnormal’ return of about 25 percent before transaction costs.” (p. 122) (more…)

Go to top