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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. (more…)

      14 Meaningless Phrases -You Will Always Hear on Blue Channels

        
        Education
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      1. The easy money has been made

      When to use it: Any time a market or stock has already gone up a lot.BLUE CHANNELS IN INDIA

      Why it’s smart-sounding: It implies wise, prudent caution. It implies that you bought or recommended the stock a long time ago, before the easy money was made (and are therefore smart). It suggests that there might be further upside but that there might also be future downside, because the stock is “due for a correction” (another smart-sounding meaningless phrase that you can use all the time). It does not commit you to any specific recommendation or prediction. It protects you from all possible outcomes: If the stock drops, you can say “as I said…” If the stock goes up, you can say “as I said…”

      Why it’s meaningless: It’s a statement of the obvious. It’s a description of what has happened, not what will happen. It requires no special insights or powers of analysis. It tells you nothing that you don’t already know. Also, it’s not true: The money that has been made was likely in no way “easy.” Buying stocks that are rising steadily is a lot “easier” than buying stocks that the market has left for dead (because everyone thinks you’re stupid to buy stocks that no one else wants to buy.)

      2.I’m cautiously optimistic. (more…)

      Funniest Stock Broker Quotes

        
      Education, Humour
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      “Even though your friend likes the stock thinking people will always need underwear, we have a Sell on the stock, it’s still very, very discretionary spending.”
       
      Broker on the phone to a client.
       
       
      “Should I ask my girlfriend to live with me?”
       
       “Not if you want to make her happy.”
       
       Floor conversation.
       
       
      “I decided to bring my lunch in, instead of buy it. Times are tough.”
       
       “What have you got?”
       
       “Lobster.”
       
      Floor conversation.
       
       
      “This market is worse than divorce. I’ve lost half my wealth, but I still have my wife.”
       
       Broker on the phone to a client.
       
       
       “The guy says…I need you to…and then he stops because he has to think and talk at the same time.”
      Floor conversation. 
       “I’ll do it mate, you can pay me money to do it, but you’re not going to make any money out of it” (more…)

      10 Steps-Every Trader Should Take

        
        Education
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      1. Trade in a conceptually correct manner
        Trading because Mars lines up with Venus might work occasionally, but there is no real basis for trading in this manner. Patterns you trade should make sense and have some sort of statistical edge. It does not have to be complex. In fact, simpler is better (e.g. I’m known as the trend following moron).
      2. Trade small
        Any ONE trade should NOT have a material impact on your life. ANY one loss should be viewed as an “expense”—no different from what you do in any other business. Remember, It’s a marathon, not a sprint! You’ll only be smarter in the future. If you’re in the learning phase, I can promise you you’ll look back years from now and say “what the heck was I thinking!”
      3. Ignore the news
        Ever have a stock you’re long come out with good news and then you watch in agony as it drops? Every be short a stock that comes out with bad news and then you watch in agony as the stock rises? The news is irrelevant. It’s the reaction to the news that’s relevant. What is, is.
      4. Forget about logic—Don’t worry about the “whys”
        Stocks trade on emotions–period. There often is no logic as to why a stock rises or falls. Again, what is, is.
      5. Know YOUR Methodology
        Each method will have its sweet spot. I can’t speak for every methodology, but I can tell you this about momentum based swing trading: It works well in trending markets (duh!) and doesn’t work so well in choppy markets (duh duh!).
      6. Don’t deal in mediocrity 
        Pick the best and leave the rest. Stocks should be in an obvious trend (or transition) and set up. The stock should also trade “cleanly.”
      7. Do NOTHING unless there is something to do! 
        Your performance is based on the good trades less the bad trades. By avoiding the markets in less-than-ideal conditions, you’ll have fewer bad trades hence, better performance! My favorite thing to do is to take the “can’t stand it test.” If you can’t stand NOT taking a trade because all the signs are there, then you probably should take it. Otherwise, don’t trade.
      8. Stack the odds in your favor: Market/Sector/Stock
        Your odds will greatly improve if only trade when the market, sector, and stock are all trending in the same direction.
      9. Let things work 
        Results in trading (especially momentum based swing trading) are often skewed—most of the gains come from a few big winners. Therefore, it’s crucial to catch these occasional homeruns. And, you’ll never catch any big winners if you micro manage your trades ( i.e. exit early).
      10. Money management 
        Trade small, use stops, take partial profits when offered, trail stops.

      Trading Notes for Traders

        
        Education
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      Traders should work on replacing subjectivity with cut and dry analysis.

      Keep yourself in a box and stick with what you know.

      The markets are complicated enough without our tendency to over analyze.  All a trader needs is to learn how to read a small number of indicators and trade them well.  Find a niche; your own niche. Simplification not complication makes a successful trader.

      When contemplating a trade think first and foremost about how much you are willing to lose before you attempt to calculate your expected gain.

      A stock is, at any given time, in the process of testing a specific price level.

      Questions that make a trading decision valid:  WHY are you considering a trade? WHEN will you enter it? WHERE do you see it going?

      Multiple time frame correlation is important for high probability trades.

      Let the chart tell you its story.

      OBEY your rules of engagement…ALWAYS.

      Be well paid to be a follower.

      Loss of mental capital (drive, will, confidence) is greater than loss of monetary capital.

      Let the price action CONFIRM your trade analysis.  Example: let a break-out test the break-out first.

      Trading Errors:  The “Fudge” Factor

      1. Trying to catch a falling knife.

      2. Picking Tops

      3. Failure to wait for confirmation.

      4. Lack of patience.

      5.  Lack of a clear strategy.

      6. Failure to assume responsibility.

      7.  Failure to quantify risk.

      Trading Opportunities Through Analyzing Baseball

        
        Education
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      If you got Pennington to find any valuable info when you asked him to develop quantitative analogies between forest life cycles and those of corporations to find some profitable trades you could certainly do the same in finding some numerical formula that could identify trade opportunities by analyzing baseball.

      Each team– a stock, the aggregate teams– the market, each player– a corporate division, each salary– an investment made in the division and the company, each relevant performance statistic– a relevant performance statistic. Identify the right decision mix that makes teams perform better over time and improve over time and analyze similarities in companies doing the same.

      The greatest liability is  also the greatest asset– human decision and performance permeate the game of baseball from start to finish and one could question whether it’s possible to find a truly consistent system as a result. I would argue that this complexity makes it a perfect analogy to market/company performance. It moves based on imbedded and sometimes unexplainable intellect and experience of its participants. The chaotic human decision making process is pervasive in both.

      10 Powerful Psychological Traits of the Rich Trader

        
        Education
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      Ten Powerful Psychological Traits of the Rich Trader

      1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong.
      2. They have the ability to not only close a losing trade but reverse and go in the other direction when it is called for.
      3. The rich trader is not trying to prove anything about themselves they are focused on making money.
      4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action.
      5. Rich traders know that the market action is their ultimate boss regardless of their opinions.
      6. No matter how sure they are about a trade they still ALWAYS manage the risk.
      7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak.
      8. A great trader is one that can admit to anyone that they were wrong.
      9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities.
      10. Rich traders love what they do, win or lose.

      When you are trading like that, it is hard to be beaten. Time is your friend.

      4 Pillars of Trading

        
        Education
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      4 Pillars

      I “see” the market through the lens of four primary metrics: fundamentals, technical, structural and psychology.

      When viewed in isolation, each of those approaches has inherent flaws.

      1. Fundamentals are best at the top and worst near a low.

      2. Technical indicators often trigger buy signals higher, on breakouts, and sell signals lower, after a stock has broken down.

      3. Structural factors — debt, derivatives and currency effects — can self-sustain in a cumulative manner until such time they overwhelm the system.

      4. Psychology, such social mood and risk appetites, can gain momentum until they snap under the weight of the herd mentality.

      Neuroscience in Trading :Anirudh Sethi

        
      Analysis, Education
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      Image result for Neuroscience in tradingTrading is an interesting field to say the least. It revolves around a great deal of decision making, and a lot of choices which will have diverse effects. What is responsible for the decisions made? Naturally, the trader’s thoughts and considerations in relation to his or her trading experience. So, to a certain extent neuroscience comes into the picture.

      Neuroscience refers to the way the brain works, along with its cognitive functions. In fact neuroscientists focus their studies on the human brain, and how it has an impact on behavior and thinking functions.

      Financial decisions are very important, and it goes without saying that they are affected by the individual’s financial literacy, experience as well as cognitive constraints. Decisions are also affected by one’s level of confidence, level of objectivity, and the element of risk involved. The amount of money involved is also prevalent, as the higher it is, the bigger the risks are and the more cautious one is more likely to be, as long as greed and over confidence do not cloud one’s decision. Thus, there are several factors which all have an effect on the decision that is finally made.

      Therefore the neuroscience behind trading decisions is a very complex matter. Despite efforts to try to understand how the brain works and how it effects trading psychology and the subsequent decisions made by traders, one cannot say for sure how it all works out as there are so many factors and issues involved. There are however some patterns and trends that were noted after neuroscientists conducted certain studies in this regard.

      For instance, there is a general belief that traders invest in a diversified portfolio in order to limit risk, and once this is done, they are less pressured to make substantial trading decisions since they have their investments spread out quite well. There are others who prefer to take bigger risks because they want to stick to certain stocks only, because they have a belief that they are going to do better off that way. Evidently in this case pride and confidence comes into play. (more…)

      5 Steps To Becoming a Long-Term Success in Trading

        
      Analysis, Education
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      1. Make Rational, Not Emotional, Decisions — Do you have a plan to enter and exit your trades? Or do you just wing it? If you have a plan, write down your rules, and make sure that you trade your plan. If you don’t, or can’t, follow your rules, hire someone who can.
      2. Respect Risk — Stock Market  is not going anywhere. If you risk too much, your emotions will take over, and you will likely go broke. Always know where you are going to exit before you enter and how much you are going to risk if wrong.,
      3. Don’t Judge Your Success One Trade at a Time — Losing money is part of trading. It happens to everyone. Once you learn to expect that will happen, you can plan for it and get past normal pitfalls, such as giving up on your system after a few losing trades.
      4. Think like a winner — Remember that winning starts within. How you think is everything.,
      5. Ask For Help — Making money on Wall Street is simple, but it is definitely not easy. Don’t let your ego get in your way of making money. Most people have a hard time asking for help. That’s just one reason why most people lose money on Stock Market . You don’t have to go it alone. Find someone you trust and are comfortable with, and don’t be afraid to ask for help.

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