You have to learn how to lose; it is more important than learning how to win. If you think you are always going to be a winner, when you lose, you will develop feelings of hostility and end up blaming the market instead of trying to learn why you lost. If trading is your life , it is a torturous kind of excitement. But if you are keeping your life in balance, then it is fun. All the successful traders I’ve seen that lasted in the business sooner or later got to that point. They have a balanced life; they have fun outside of trading. You can’t sustain it if you don’t have some other focus. Eventually, you wind up over trading or getting excessively disturbed about temporary failures. I think the leading cause of financial disablement is the belief that you can rely on the experts to help you. It might, if you know the right expert….Typically, however, these so-called “experts” are not traders. Your average broker couldn’t be a trader in a million years. More money is lost listening to brokers than any other way. Trading requires an intense personal involvement. You have to do your own homework, and that is what I advise people to do. Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay the losers. |
Archives of “successful traders” tag
rss10 Habits of Successful Traders
1. Follow the Rule of Three. The rule of three simply states that a trade will not be made unless you can carefully articulate three reasons for doing so. This eliminates trading from an indicator alone.
2. Keep Losses Small. It is vitally important to keep losses small as most all of large losses began as small ones, and large losses can put an end to your trading career.
3. Adjust Stops. When a trade is working move your stop loss up in order to lock in gains.
4. Keep Commissions Low. There is a cost to trading but there is no reason to overpay brokerage fees. A discount brokerage is just as good as a premium brand name one.
5. Amateurs at the Open, Pros at the Close. The best time to enter trades are after lunch when the professionals are looking to get in at a better price than one provided in the morning.
6. Know the General Market Trend. When trading individual stocks make sure you trade with the general market trend or condition, not against it.
7. Write Down Every Trade. Doing this will allow you to learn what is working and what is not. It will also help you determine what types of trades work best for your personality.
8. Never Average Down a Losing Position. It is a loser’s game when you add to a loser. You add to winning positions because they are winners and are proving themselves to be such.
9. Never Overtrade. Overtrading is a direct result of not following a well thought out plan, deciding it is best to trade off emotion instead. This will do nothing but cause frustration and a loss of money.
10. Give 10 Percent Away. Money works the fastest when it is divided. When we share we prime the economic pump of the universe.
Trading is a game of rules. We either make the decision to abide by them or we break them. We do the latter at our own peril.
The Greatest Traders
What separates the 10% that make money from the 90% that don’t?
10,000 hours.
In his recent book ‘Outliers’ Malcolm Gladwell describes the 10,000-Hour Rule, claiming that the key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that ‘try their hand’ at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to turn $500 into $1 million! It is precisely this mindset that has resulted in the current economic mess, a bunch of 20-somethings being handed the red phone for financial weapons of mass destruction. The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn’t see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time?
Trading success, comes from screen time and experience, you have to put the hours in!
Education, education, education.
The old cliché touted by politicians when they can’t think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.
Think for yourself.
“NO! NO! NO!”… “Bear Stearns is not in trouble”…”Don’t move your money from Bear! That’s just silly! Don’t be silly!”
A quote from well known stock guru Jim Cramer aired on CNBC days before Bear Stearns lost 90% of its value. Many followed this call and felt the obvious pain as a result. As the old saying goes, “too many cooks spoil the broth” it is very much the same in trading. Successful traders blinker themselves from the opinions of others; they focus on their own analysis of fundamental and technical information.
Adapt or Die.
Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.
Fail to plan, you plan to fail.
The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.
“Be like Machine”
As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field.
Know your tools
Every trader has a set of tools they use, DOM, Charts, News feeds etc. These tools are a traders bread and butter; they are the most vital part of a traders arsenal, without which it would be impossible to trade. The best traders have mastered their order entry methodology, they know all about the features they need from their charts. This mastery of their tools, allows the trader to get the very best out of the resources they have available to them and ensures perfect execution of their trading ideas.
Know Thyself
Behind all the egos and excess, the best traders know their limitations; they focus on what can go wrong in a trade, and expend a lot of energy in limiting and controlling their risk before thinking about profits. They have a heightened sense of self-awareness and focus on incremental self improvement.
Profit & Loss
The best traders focus on the trade itself rather than the P&L; they view each trade as a technical exercise and focus on getting the most out of the market in accordance with their plan. They do not think in terms of the grocery payment, the electric bill and the desire to make X amount to cover a mortgage payment. Focusing on the money behind a trade can cloud technical objectivity.
In Conclusion
The greatest traders work hard to get ahead and even harder to stay ahead. Through increased and niche knowledge they constantly adapt with the market and remain profitable in every environment. Drive, tenacity and the will to succeed is the greatest edge of every successful trader.
Ignore Your Guts
In my studies I have often found something that is rather interesting and maybe different than most would suspect. The most successful traders I have studied don’t rely on gut calls or feels, but rather adhere to a disciplined set of rules or guidelines and are humbled enough to admit that their emotional decisions aren’t consistent enough to hold up during the heat of the moment.
Ironically, most would think just the opposite that the more successful a trader is, the more ‘feel’ he or she has or the more ‘instinct.’ Sure, it looks macho to make calls or predictions and when proven correct a person is often praised and viewed as having some superior knowledge, but in reality these people are one step below those that have already moved through this stage and left it behind.
As an individual trader it is simply impossible to remain emotionless, making the proper trading decisions at all times, when the action is heated. Even when there is a lull, our emotions kick in and we feel a change is needed or something should be done, when in reality our rules may say to stay put or do nothing.
The 'Self-Factors' of Successful traders
- – Knowledge of oneself and how one acts and behaves in situations and environments.
- Self-Belief; – Self-Confidence – assuredness in one’s actions, judgments and abilities.
- Self-Trust; -The ability to have faith in oneself under duress and pressure.
- Self-Reliance; – Ability to depend on one’s own capabilities, judgment, and resources , and acceptance that nobody else is responsible for profits and losses.
- Self-discipline; – A structured approach that keeps a person focused and grounded against negative forces and pressures.
- Self-Control; – Is the ability of exert mind muscle and will-power to overcome the negative effects which can so easily distract and distort perceptions and judgments.
- Self-Motivation; – Describes the initiative to undertake risks and activities when the mood and environment have been counterproductive.
- Self-Esteem; – High regard, respect or value for one’s self, but not to the level of being conceited, or having an over-inflated opinion of their worth.
- Self-efficacy; – Belief in one’s own competency and ability.
In summary, successful traders take responsibility for their own actions, but rarely beat themselves up. – If I was to sum it up succinctly, they know themselves, they like themselves, they believe in themselves, and above all – ‘they are comfortable in their own skin’. (more…)
The Secret
What’s the secret of successful traders and how did they make the transition from clueless learner to consistent pro?When the same tools are available to anyone, why do some people out perform others?
The successful traders have discovered The Secret.
It is not the latest indicator, program or hot tipster. It is something that everyone has inside them already.
The Secret is believing in your method and trading it. Believing to the point of having it ingrained into your brain so that it becomes as automatic as breathing. If the charts do this, then I will do that. Trading your plan means cutting losers, riding winners, managing money and risk well. When you arrive at the point of realizing that your self-discipline can only get you so far and that the next step should be reflex trading then you will have found The Secret.
Having to exercise self- discipline to me means that there is still something inside you that you must fight to control. If emotions are still in control of your trading then you must find a way to turn that fear and greed into a move productive energy. Trading your method as a reflex means that there is no struggle to control wayward thoughts. (more…)
The Secrets of The World’s Greatest Traders
Traders and investors have made and lost some of the world’s most significant pools of wealth. It’s no coincidence that many of the wealthiest individuals in the world today (and through history) have been successful investors. Names like Warren Buffet, George Soros, John Paulson, David Einhorn, Bill Gross and Sir John Templeton have become synonymous with strategies that have created astonishing success, in many case creating a groundswell of books and analysts who study their lives with a toothcomb to understand “what” the magic formula was…
Even outside these heavyweights of the trading world, hundreds of thousands of individuals around the world attest to have ‘the best‘ strategy to generate consistent positive returns (in fact, Google alone reveals over 10.4 million results when searching for best trading strategies). At a macro-level, the long-standing efficient market hypothesiswould make it notionally impossible for any trading strategy to be effective (as it asserts a level of information efficiency in the market). The past quarter century however, has seen a gradual move away from the efficient hypothesis to greater considerations of information asymmetry and behavioral biases driving inefficiencies (opportunities) in the market. So faced with this complexity, how do some traders generate such astonishing success?
To learn more, I spoke with Jack Schwager who is perhaps best known for his “Market Wizards” book series in which he has interviewed a cross section of the most successful traders and investors in the world. In May 2012 Jack released the latest book in this best-selling series, “Hedge Fund Market Wizards” (a behind-the-scenes look at the world of hedge funds, from fifteen traders who’ve consistently beaten the markets).
Jack Schwager is a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. He is currently the co-portfolio manager for the ADM Investor Services Diversified Strategies Fund, a portfolio of futures and FX managed accounts. He is also an advisor to Marketopper, an India-based quantitative trading firm, supervising a major project that will adapt their trading technology to trade a global futures portfolio. Previously, Mr. Schwager was a partner in the Fortune Group, a London-based hedge fund advisory firm, which specialized in creating customized hedge fund portfolios for institutional clients. His previous experience includes 22 years as Director of Futures research for some of Wall Street’s leading firms and ten years as the co-principal of a CTA.
Q: Is there a strategy or style which is most effective at generating return?
[Jack Schwager] The diversity of strategies people use is truly remarkable, I saw people using completely different strategies to the degree that if I had set out to invent 15 different strategies for a fictional work…. I couldn’t have made the strategies more different to the ones I saw in real life! This illustrates a point I have made in all my works insofar as there really is no ‘holy grail‘ or single style that is most effective. Those people looking for a single unified strategy are not asking the right question.
It’s a matter of finding an approach that works for the individual. A person has to know whether they are comfortable with fundamental or technical, long term or short term, certain types of markets, wider risk or less risk… You can go through a whole checklist of things and find it’s different for each individual.
Even when looking at differences between asset classes we see that every market can be traded using different strategies be they fundamental, technical, or a mixture. If we take equity markets we see that traders can use strategies including fundamental, value, extreme long term, and day. If you want a microcosm that proves diversity, there it is! (more…)
Five Rules for Traders
You can avoid the emotionalism, the second guessing, the wondering, the agonizing, if you have a sound trading plan (including price objectives, entry points, exit points, risk-reward ratios, stops, information about historical price levels, seasonal influences, government reports, prices of related markets, chart analysis, etc.) and follow it. Most traders don’t want to bother, they like to ‘wing it.’ Perhaps they think a plan might take the fun out of it for them. If you’re like that and trade futures for the fun of it, fine. If you’re trying to make money without a plan-forget it. Trading a sound, smart plan is the answer to cutting your losses short and letting your profits run.
Do not overstay a good market. If you do, you are bound to overstay a bad one also.
Take your lumps, just be sure they are little lumps. Very successful traders generally have more losing trades than winning trades. They don’t have any hang-ups about admitting they’re wrong, and have the ability to close out losing positions quickly.
Program your mind to accept many small losses. Program your mind to ‘sit still’ for a few large gains.
Recognize that fear, greed. ignorance, generosity, stupidity, impatience. self-delusion, etc., can cost you a lot more money than the market(s) going against you, and that there is no fundamental method to recognize these factors.
Better to be Profitable Than Right
The ultimate goal of a futures trader should be to have overall trading success by being profitable. There is no single-best path one can take on the destination to trading success and profitability. However, there are a few general trading tenets to which all successful traders have subscribed. One such trading tenet is “losing your ego” when trading futures.
Mark Cook, a well-respected trader and trading educator from rural Ohio, for many years has stressed that traders need to lose their egos before getting into trading futures markets. He is also an advocate of survival in futures trading. One must survive in this challenging arena before one can succeed. I enjoyed listening to Mark at a trading seminar a few years ago. He even used to wear bib-overalls (with no shirt) at some of his trading seminars – just to drive home the point that trading futures is not easy and that ultimate success takes a lot of hard work.
My good friend and respected trader and educator Glen Ring also espouses the notion, and may have even coined the phrase, “it’s better to be profitable than right in futures trading.” Those who know or have talked to Glen know he, too, is a no-nonsense, no-hype trader who takes a yeoman’s approach to the business. When asked what direction a specific market “will” go in the future, Glen is never afraid to say, “I don’t know,” before he adds that, “successful trading is not a business of predictions but one of probabilities based on past price history.” (more…)
50 Trading Rules
1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don’t take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point.
25. The difference between winners and losers isn’t so much native ability as it is discipline exercised in avoiding mistakes.
26. In trading as in fencing there are the quick and the dead.
27. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
29. Accept failure as a step towards victory.
30. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don’t let ego and greed inhibit clear thinking and hard work. (more…)