“If a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
Archives of “tendencies” tag
rssLet the market make the decisions, not your ego.
The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.
William Eckhardt-Quotes
I take the point of view that missing an important trade is a much more serious error than making a bad trade.
Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.
You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.
I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.
The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.
If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose. (more…)
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…)
Movin’ On
The market doesn’t know your emotions or care about your portfolio. The market is moving on. And so should you.
– Terry SavageOne of the most challenging aspects of trading is learning to understand and appreciate that our constant desire to be right and smart in the markets will always cloud our judgment and too often work against us at the most inconvenient times.
—
The challenge, as all of us will learn sooner or later, is that Mr. Market doesn’t listen or care about anyone’s else opinion but his very own. This is especially true when we are wrong and not following his hidden and often very confusing agenda. Mr. Market often acts like a rebellious teenager and does exactly what he wants to do, when he wants to do it, and at the same time has no respect for anyone who disagrees with him or believes he should act logically or within reason. In fact, a recent tendency is for the market to do exactly the opposite of tendencies we’ve seen so many times before. This is why you must place so much importance on what the market is actually doing rather than what you think it should do.
Or, better yet, we could just listen to some Bad Company:
William Eckhardt Quotes
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return. “I take the point of view that missing an important trade is a much more serious error than making a bad trade”.
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”
"Your Special Unique Trading Strengths and Weaknesses"
Each one of us is born with special unique abilities and we are naturally drawn to them and develop them along the way. They manifest themselves in all areas of our lives. There are also things we don’t like to do or that are difficult for us to do. It simply makes sense to focus on what we like and what comes easily to us and avoid or delegate what we don’t like or find hard and stressful to do.
The same is true with trading. There are parts of your trading that you’re naturally good at. There are aspects of trading that you love, that excite you, and give you passion. The more you trade the better you seem to get in these areas.
What is your special trading or investing capability? Pause and think about it. WRITE IT DOWN. I can’t guide you or even suggest what is uniquely easy and effective in your trading.
The best part of my trading is ______________________________________.
The part of trading I most enjoy is___________________________________.
You can build on these and exponentially improve your trading results and your trading ease and enjoyment. It also makes sense that your methods and time frames are compatible with these strengths and tendencies.
Now we need to acknowledge the opposite. Each of us has innate limitations and vulnerabilities that also affect our trading and investing. There are parts of the trading game that are hard for us, that we don’t like, may even hate. As much as we try to overcome these areas we frequently relapse into these frail deficiencies. We say we’ll never do that again, and then, of course we do.
Let the market make the decisions, not your ego
The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.
Self-Factors' of Successful traders
- Self-awareness; – 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…)
Let the market make the decisions, not your ego.
The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.