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Avoiding Trading Mistakes

  
  Education
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In Jack Schwager’s New Market Wizards, William Eckhardt said that one mistake traders make is putting too much importance on any single trade. His suggestion was to remember that any one trade is just a small part of the bigger picture and needs to be treated dispassionately. When the individual trade becomes too important, we tend to do things to make the trade work, for example we take profits too quickly or we let losses go in hopes of a return to profitability.

Dutch Bank Algo Blamed For GBP Flash Crash

  
Education, Forex
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Another rogue algo takes matters into its own binary hands. Time to institute circuit breakers for the tiny FX market, which alone celebrated Obama’s latest set of oratory delight by flash crashing all on its lonesome…

From Goldman’s Mitesh Parikh:

 
 

GBP – what just happened

To save being asked anymore times – the short answer is I honestly don’t know.. 1.5290 – 1.5168 between 7.56am and 7.57am.. unlikely it was for a fix (that would make sense if closer to 8am), and price action doesn’t suggest a mis-hit since it was ‘walked’ down over the course of the minute albeit exceptionally aggressively (not everyone executes as subtly as we do… no comments please!) We saw Dutch interbank names selling aggressively towards 1.5200 with some suggestion that their algo blew up from a few market sources, although we can’t comment on the validity of this.  Needless to say the market has corrected, cable is back above 1.5300, cross now sub 0.8430 , exactly where we started.

20 Trading Wisdom Lines

  
  Education
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(1)  Those who work their plan will prosper, but those who chase fantasies lack judgment.

(2)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.

(3)  Trying to “get rich quick” is wrong & leads to poverty.

(4)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.

(5)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.

(6)  A person without self-control is as defenseless as a city with broken-down walls.

(7)  The wise control their temper.  They know that anger causes mistakes.

(8)  The intelligent are always open to new ideas, in fact they look for them.

(9)  Get all the advice that you can & be wise all the rest of your life.

(10)  Fools despise advice; ‘the wise’ consider each suggestion.

(11)  Fools think they need no advice, but ‘the wise’ listen to others.

(12)  To learn, you must want to be taught.  To refuse correction is stupid.

(13)  Anyone willing to be corrected is on the path to success. Those who refuse correction have lost their chance.

(14)  Hard work brings prosperity; playing around brings poverty.

(15) If you love sleep, you will end up in poverty.  Stay awake, work hard, & there will be plenty to eat.

(16)  The foolish will lose in the end, ‘the wise’ will end up with the winnings.

(17)  The wise save up for the future, but the foolish spend whatever they get”.

(18)  Truth stands the test of time; lies are soon exposed.

(19 Be faithful & honest with yourself in your trading, bediligent & consistent & it will bring you Prosperity.
(20) Steady plodding brings prosperity; hasty speculation brings poverty.

Think carefully about each one of these quotes.  I think you’ll find out a little something about yourself you didn’t already know.  For example, your “strengths” and “weaknesses” in your trading should be clearly pointed out be analyzing each one of these phrases.  These simple and short phrases should help you become a better trader — and hopefully a better person in general!

20 Wisdom Points for Traders

  
  Education
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(1)  Be faithful & honest with yourself in your trading, be diligent & consistent & it will bring you Prosperity.
(2)  Those who work their plan will prosper, but those who chase fantasies lack judgment.
(3)  Steady plodding brings prosperity; hasty speculation brings poverty.
(4)  Those who want to do right will get a rich reward. But those who want to “get rich quick” will quickly  fail“.
(5)  Trying to “get rich quick” is wrong & leads to poverty.
(6)  Wealth taken from gambling quickly disappears; wealth from diligent effort & hard work grows“.
(7)  Follow the rules & keep your financial life intact; ignoring them means financial ruin.
(8)  A person without self-control is as defenseless as a city with broken-down walls.
(9)  The wise control their temper.  They know that anger causes mistakes.
(10)  The intelligent are always open to new ideas, in fact they look for them. (more…)

Trading On Fear & Panic

  
  Education
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Fear-Panic

First, no matter what, as a trader it is your #1 job never to put yourself in a “panic” position. No trade, no matter what you think of its future potential, outweighs that rule. If you trade for a living, your goal is always to “live to trade another day” which means tight risk management and taking every step to avoid this situation.

On every trade I make, I know where I have to exit no matter what before I make the trade. If I can’t figure that out, then I don’t make the trade. I learned, like you are right now, that trying to figure out an exit after you’re down significantly in a position never is to your advantage. Right now, you’re emotionally connected to that trade, if not trapped by it. (more…)

Learning from Mistakes…

  
  Education
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A Reader of our Blog had sent me the following question …

“When should a trader know when to say it is enough and I need to get out of the position. More importantly, how do you find a balance between learning from a mistake and not being weighed down by it on your next trading decision.”

Here was my advice:

* if you have “edge” in a trade, then winning or losing on a trade will be determined long before you find out the outcome (profit/loss) on the trade.

* important to focus on the process of the trade… making ONLY high quality trades

* your job as a trader is not to determine or decide how much you make or lose…that is up to the market. Your job is to put on trades with “edge.”

as far as not being weighed down by the mistakes, my suggestion is to begin a “lessons learned” spreadsheet where you document mistakes you make and the lesson you learned from it.

I also suggest you start a qualitative trading journal that way you can get the emotions out of your head and onto the paper.

this will help you move past your barriers and get some closure on them so you can be focused on the next trade.

Learning from mistakes and moving on

  
  Education
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A Subscriber of mine asks me the following question …

“When should a trader know when to say it is enough and I need to get out of the position. More importantly, how do you find a balance between learning from a mistake and not being weighed down by it on your next trading decision.”

Here was my advice:

* if you have “edge” in a trade, then winning or losing on a trade will be determined long before you find out the outcome (profit/loss) on the trade.

* important to focus on the process of the trade… making ONLY high quality trades

* your job as a trader is not to determine or decide how much you make or lose…that is up to the market. Your job is to put on trades with “edge.”

as far as not being weighed down by the mistakes, my suggestion is to begin a “lessons learned” spreadsheet where you document mistakes you make and the lesson you learned from it.

I also suggest you start a qualitative trading journal that way you can get the emotions out of your head and onto the paper.

this will help you move past your barriers and get some closure on them so you can be focused on the next trade.

Confidence

  
  Education
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Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully. 
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading and investing decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the environment (media, others’ opinions, etc.) that could sway the trader from sticking to his trading plan will have far more power. When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche.  (more…)

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