Archives of “successful traders” tag

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Five Defining Features of Market Pros

  
  Education
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Upon thinking about the differences between the highly successful traders I recently talked with and their less successful counterparts, five features stand out. Pretty much everything else follows from these five:.

1) The less successful traders are anticipating market movement and trading accordingly. The highly successful traders are identifying asset class mispricings and trading off those.

2) The less successful traders are trading particular instruments and pretty much stick to those. The highly successful traders recognize that any combination of trading instruments can be considered an asset class and appropriately priced (and gauged for mispricing).

3) The less successful traders think of their market as *the* market. The highly successful traders focus on interrelationships among markets that cut across nationalities and asset classes.
4) The highly successful traders place just as much emphasis on understanding markets as predicting them. The less successful traders don’t ask “why” questions.

5) The less successful traders are convinced they have proprietary information of value that they must not disclose to anyone. The highly successful traders use their proprietary information to selectively share with other highly successful participants, thereby gaining a large informational edge.

If I had to use one phrase to capture the essence of the highly successful traders, it would be analytical creativity. These traders are creative in their thinking about markets and rigorous in their pursuit of this creativity

Learn From Paul Tudor Jones: Risk Size Is Key

  
  Education
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We’ve all heard the “experts” preach to us that we should only take trades which offer at least a 2:1, or better yet a 3:1 reward to risk ratio and on the surface this seems like sound advice, but is it really?
RETHINK YOUR STRATEGY
I used to be one of those educators who would jump on the risk/reward bandwagon until one day when I stepped back and took an objective look at what trading is and how I can best optimize my chances of success. When I did this I realized that not only was the whole risk/reward premise false but that it had the potential to ruin chances for trading success by keeping me out of some of the best trades.
YOUR WINNERS CAN RUN….IF YOU LET THEM
The proponents of risk/reward ratios say that in order to be successful the trade must out produce the amount of money you have at risk by at least double or triple your risk amount but what they fail to take into consideration is that the reward side of any trade is unknown. 
WHAT YOU CONTROL
You see the only part of the trading equation that you have any control over is the risk side of the trade. The reward side of any trade is a complete mystery. Oh sure, we all have our best guesses as to where the market might go next, but in the end it’s really just a crap shoot. Sometimes we’re right and sometimes we’re wrong and if we’re honest with ourselves we will admit that we really don’t know where the market is going next.  (more…)

Warren Buffett Teaches : Part -II

  
  Education
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Test……..one million……..two million…………three million…

This is how Buffett tested the microphone before his speech at the annual shareholders’ meeting of Berkshire Hathaway. He really enjoys the game of making money. Not to spend it, but to accumulate it. The early investors in BH turned $10,000 into $100 mill for 40 years. (more…)

Three Myths of Trading Psychology

  
  Education
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Myth #1: Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts.Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.

 Myth #2: Anyone, with dedicated effort, can get to the point of trading for a living. That is nonsense. How many people make their living from acting or musical performance? What proportion of people playing sports can actually make their livelihood from athletics? Many people play chess or poker, but how many can sustain a living from it?Quite simply, to make a living from any performance activity means that you are consistently good at what you do. Not everyone has the talent, skill, or drive to be that successful—in any field. Across the many traders I’ve met in various settings, from home-based, independent traders to professional ones in firms, the best predictors of trading success have been the size of the trader’s account and the resources available to the trader. If a person were to make 30% per year on their accounts year after year, they would be among the world’s most successful money managers. Most money managers of mutual funds, hedge funds, and pension funds cannot sustain such performance. This leads the trader to accept huge leverage and court a risk of ruin when an inevitable string of losing trades occurs. Indeed, such excess leverage is a main cause of emotional distress in trading. Take a look at how the Turtles made their money: they learned a trading method, learned to be consistent with that method, and were given enough money by Richard Dennis that they could trade multiple markets with enough size to scale into positions in each. Even with those resources, not all of the Turtle students could succeed. Talent, skill, and opportunity are the ingredients of success, and these are relatively normally distributed in the trading population, just as they are relatively normally distributed in the population at large. (more…)

Successful Traders

  
  Education
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“Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.”

Qualities of Successful Traders

  
  Education
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Emotional stability. You don’t have to be nuts to trade, but it helps!  That is a joke, of course. Emotional stability is grace under pressure. A successful trader must be able to remain calm in difficult situations. Traders that rank very high on the emotional stability scale have very low anxiety levels, remain calm, relaxed, and have a low suspicion level. They tend to be trusting individuals and are not paranoid. You won’t hear them blame the market makers for forcing the stock to hit their stop and they take responsibility for their actions. Successful traders tend to be well
grounded.
 

Discipline. Successful traders are ones that can follow the rules. They are the guys that drive the speed limit. They tend to be perfectionist and take pride in their work. They like to take a project from start to finish and get joy from completing it successfully. Pilots, trained to follow checklists, tend to make good traders. An impulse oriented individual will have difficulty achieving the discipline to become a successful trader.
 

Intelligence. Bill says that successful traders tend to be intelligent. They need not have the IQ of Einstein but they are above average in intelligence. They tend to be good problem solvers and good with numbers, such as statistics. They understand that trading is based on probability, that not every trade will work as planned.

20 Trading Advice for Traders

  
  Education
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  1. You have to love trading to do the work that takes you over the hump to winning.

  2. Successful traders are not born, they are built through hard work and discipline.

  3. Trading is not complicated, discipline, perseverance, risk management, passion, and a winning method that fits your personality is all you need. If you have them you will win, if you are missing one you lose.

  4. Where you are currently as a trader is not where you have to stay, the right homework done with an open mind can move you into a different place.

  5. Trading skill is built through work ethic.

  6. You must dedicate yourself to winning at trading. Every day you improve by working at it. (more…)

Three Keys to Trading Success

  
  Education
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The successful trader is creative. I think it’s fair to say that his approach is a short-term trend-following method. His way of evaluating the market trend, however, is unique. He is definitely not just looking at the same old 14-period oscillator that comes pre-programmed in most charting applications. Similarly, he has clear stop points and price targets, but these are defined in a unique way, based upon the market conditions he’s observing. This “out-of-the-box” thinking style is common to successful traders, I’ve found. They look at markets in unique ways that help them capture shifts in supply and demand. to find a way of trading that you can make your own. You’re more likely to stick with a method that fits with how you think (and that fits with your skills) than if it’s something you’ve blindly copied from others. Our trader believes in his method, and that gives him the brass ones to hang in there during relatively lean periods.

2) The successful trader is always seeking improvement. If our trader is already successful, why does he need to talk with Henry? He knew that, by sharing his ideas, he would learn a great deal about the strengths and weaknesses of his trading. Sure enough, Henry found that the average size of the trader’s losers was larger than it needed to be. A simple modification of stop-loss rules improved the system’s performance meaningfully. Similarly, by putting a filter on the system–only taking trades if certain conditions were met–the average profit per trade went up significantly. That could aid position sizing. The trader knew he had something good, but good wasn’t good enough. He wanted better.

3) The successful trader is persistent. One thing I want to stress: the trader’s methods were very sound–and Henry found ways to make them better–but they were not perfect. Out of about sixty months analyzed, fourteen were losers. The drawdowns were not hellacious, but there were periods of flat performance and drawdown. What that means is that a successful trader needs to have the confidence to ride out these periods of poorer performance to get to the periods of success. That is one reason why it’s so important

Is Your Self-Esteem Tied To Your Account Equity?

  
  Education
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Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with you’re trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.  When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state.  And our internal state has a lot to do with how well we trade.

Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.

Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory.  A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.

Responsibility

  
  Education
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Responsibility”You must have the ability to ntake responsibility for all of your own trades, and not look at the market as the reason for your loss.It simply is not worth it to get angry with the market….Instead, these traders learned the key to reducing losses and getting on the road to profits is to constantly analyze the trades one makes, and then learn from the mistakes.

Controlling your emotions is key because you cannot win every trade. Successful traders know that they will lose some of the time. By having a risk management/trading plan they can avoid major losses and enjoy their profits.

Take note of this quote! It makes a valuable point!


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