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With every market defeat lessons are learned

  
  Education
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Here are some of the lessons I learned:  LESSONS LEARNED

  1. 1)When faced with severe losses, it’s nearly impossible to objectively evaluate your position.
  2. 2)Leverage can be a killer.
  3. 3)A trading plan should be simple, not based on the collective opinions of 15 financial authors.
  4. 4)Never buy front month out of the money options, they are strictly for crazy speculators.  If you’re going to use these, sell them to crazy speculators against your longer-term positions.
  5. 5)Bullish and Bearish divergences fail frequently.
  6. 6)If you want to arrive early to the party, be prepared to wait a long time for the action to arrive.
  7. 7)Those funny Greek names, Delta and Theta, actually mean something!
  8. 8)It’s not acceptable to have multiple blowups like this.  Many great traders have suffered a crushing capital blow early in their careers, only to return stronger and wiser.  Others, like Jesse Livermore, ended his career (and life) after one too many detonations.

Could you Trade Full Time?

  
  Education
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Take this quick quiz and honestly determine if you are built to trade full time:

  • Are you properly capitalized?
    I wouldn’t suggest anyone start to think about trading full time until they have at least six figures that can be used solely for trading. Living expenses must come from other income or saved funds. Without six figures (and the more then better), I suggest you continue to build your stake.
  • Are you a successful part time trader?
    Why do you think you can succeed being a full time trader if you haven’t made money as a part time trader? Have you built your own stake to six figures trading part time? If so, you pass this question with flying colors.
  • Have you developed a system that works?
    Does your system have a     positive expectancy? Have you back tested the system (I don’t hold too much weight to this question)? Do you understand position sizing and do you implement it properly so you don’t blow-up with one or two trades?
  • Does your system offer enough opportunity?
    Without opportunity (multiple trading signals per day/ week), you will not be able to achieve your system’s expectancy. A lack of opportunity may skew your results and turn your anticipated positive expectancy to a negative expectancy and cause you to go broke.
  • Can you handle your emotions?
    How do you handle your emotions now with longer term positions or part time trading? Do you follow your rules, all the time? Will you have pressure to make money every month, week or day? Can you handle being alone (most cases) and staring at a computer for large portions of the day?
  • Finally, do you have spouse or other influence that will interfere with your endeavor?
    A spouse, friend or family (member) can have a negative affect on your trading that may result in subconscious sabotage.     Outside negative forces or nagging pressure people may lead you down a path that is not controllable because you are trying to prove something rather than “just trade” based on your acquired skills. Make sure the closest people in your life support you while making the move to full time trading.

True False Questions

  
  Education
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True or False

  1. The big money in trading is made when one can get long at lows after a big downtrend.
  2. It’s good to average down when buying.
  3. After a long trend, the market requires more consolidation before another trend starts.
  4. It’s important to know what to do if trading in commodities doesn’t succeed.
  5. It is not helpful to watch every quote in the markets one trades.
  6. It is a good idea to put on or take off a position all at once.
  7. Diversification is better than always being in 1 or 2 markets.
  8. If a day’s profit or loss makes a significant difference to your net worth, you are overtrading.
  9. A trader learns more from his losses than his profits.
  10. Except for commission and brokerage fees, execution costs for entering orders are minimal over the course of a year.
  11. It’s easier to trade well than to trade poorly.
  12. It’s important to know what success in trading will do for you later in life.
  13. Uptrends end when everyone gets bearish.
  14. The more bullish news you hear the less likely a market is to break out on the upside.
  15. For an off-floor trader, a long-term trade ought to last 3 or 4 weeks or less.
  16. Other’s opinions of the market are good to follow.
  17. Volume and open interest are as important as price action.
  18. Daily strength and weakness is a good guide for liquidating long term positions with big profits.
  19. Off-floor traders should spread different markets of different market groups.
  20. The more people are going long the less likely an uptrend is to continue in the beginning of a trend.
  21. Off-floor traders should not spread different delivery months of the same commodity.
  22. Buying dips and selling rallies is a good strategy.
  23. It’s important to take a profit most of the time.
  24. Of 3 types of orders (market, stop, and resting), market orders cost the least skid.
  25. The more bullish news you hear and the more people are going long the less likely the uptrend is to continue after a substantial uptrend.
  26. The majority of traders are always wrong.
  27. Trading bigger is an overall handicap to one’s trading performance.
  28. Larger traders can muscle markets to their advantage.
  29. Vacations are important for traders to keep the proper perspective.
  30. Undertrading is almost never a problem.
  31. Ideally, average profits should be about 3 or 4 times average losses.
  32. A trader should be willing to let profits turn into losses.
  33. A very high percentage of trades should be profits.
  34. A trader should like to take losses.
  35. It is especially relevant when the market is higher than it’s been in 4 and 13 weeks.
  36. Needing and wanting money are good motivators to good trading.
  37. One’s natural inclinations are good guides to decision making in trading.
  38. Luck is an ingredient in successful trading over the long run.
  39. When you’re long, limit up is a good place to take a profit.
  40. It takes money to make money.
  41. It’s good to follow hunches in trading.
  42. There are players in each market one should not trade against.
  43. All speculators die broke
  44. The market can be understood better through social psychology than through economics.
  45. Taking a loss should be a difficult decision for traders.
  46. After a big profit, the next trend following trade is more likely to be a loss.
  47. Trends are not likely to persist.
  48. Almost all information about a market is at least a little useful in helping make decisions.
  49. It’s better to be an expert in 1-2 markets rather than try to trade 10 or more markets.
  50. In a winning streak, total risk should rise dramatically.
  51. Trading stocks is similar to trading commodities.
  52. It’s a good idea to know how much you are ahead or behind during a trading session.
  53. A losing month is an indication of doing something wrong.
  54. A losing week is an indication of doing something wrong.
  55. One should favor being long or being short – whichever one is comfortable with.
  56. On initiation one should know precisely at what price to liquidate if a profit occurs.
  57. One should trade the same number of contracts in all markets.
  58. If one has $10000 to risk, one ought to risk $2500 on every trade.
  59. On initiation one should know precisely where to liquidate if a loss occurs.
  60. You can never go broke taking profits.
  61. It helps to have the fundamentals in your favor before you initiate.
  62. A gap up is a good place to initiate if an uptrend has started.
  63. If you anticipate buy stops in the market, wait until they are finished and buy a little higher than that.
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