Archives of “term success” tag

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Fragile Traders vs. Anti-Fragile Traders

  
  Education
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Reading Nassim Taleb’s newest book Anti-Fragile really got me thinking about how traders are broken.
Traders can become fragile and be broken in several ways:

  1. They can quit because they believe that trading successfully is impossible.
  2. They can lose half their account or all of their account and just give up.
  3. They can become emotionally traumatized by one huge loss or a string of losses and just not be able to trade any more due to the pain going forward.
  4. A trader can lose faith in them self as a trader.
  5. A trader can lose faith in their system.
  6. A trader can trade too big and blow up their account, they want to trade, they believe they can make it back but have no money.

A trader can become anti-fragile they can benefit from adversity at times by:

  1. Having 100% confidence that they will be in the 10% percentile of  consistently winning trades, it is just a matter of time.
  2. They do not give up after losing the majority of their very first account  they just accept it as paying tuition and start again this time with faith they will win.
  3. The anti-fragile trader trades small, their emotions do not bleed into their trades, each trade is just 1 of the next 100. They risk 1% of capital per trade.
  4. The successful trader identifies themselves as a successful trader, losing trades do not change who they are.
  5. The trader believes that time is on their side and draw downs are just temporary, short term losses do not change the trader’s belief in long term success.
  6. Successful traders know that their trading account is their life blood, guarding  it against big losses is their #1 priority.

Fragile traders are inevitably  broken, anti-fragile traders are not only not broken but benefit from circumstances by learning, growing, and becoming more resolved to win. Adversity makes them stronger.

Trading Wisdom – Michael Marcus

  
  Education
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winningtradeWhat is the best thing a trader can do to increase their chances for long-term success? Market Wizard Michael Marcus gives us a glimpse with this insightful quote: “Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers. In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.” True words of wisdom!

Mark Cuban’s post mortem on Facebook

  
  Education
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His latest take on the facebook IPO is here. His points are in bold.

1. Say goodbye to the individual investor on Wall Street. Mr. Cuban argues that because the media hyped the FB IPO that Wall Street is to blame. OK, I agree the IPO was hyped. But is that Wall Streets fault? Isn’t it the media’s fault? Isn’t it the buyers fault for not doing their due diligence? Didn’t Morgan Stanley spend millions propping up the stock the first day?

No one has long term success by reading any single piece of media, especially without knowing the writers intentions.

Here is a brief explanation on how the market works. If there are more buyers than sellers it goes up or vice versa. Or more important right now, if they have the means to buy.

2. The Valuation Bubble in Silicon Valley is bursting – but not for the reasons you think. The idea of private investment seems great but the execution is far off. The value of any market is liquidity. That has to be one of the important factors when making an investment. You know why futures are gaining popularity and what will eventually lead to their demise? A central market place and the lack thereof. Their spawns will kill the market and liquidity. The less central a market place the more likely the forces within that market are able to take control.

Mark agrees with me on liquidity but my interpretation is that he makes an argument against his point not for it. Didn’t the public market do a much better job at pricing? Didn’t the private market fail more dramatically than the public is this case? (Some one that knows the details better than I, when they went public did private shares get converted 1 to 1? If it did not get converted 1 to 1 let me know and I will gladly change it)

I believe Shark Tank is a great reason why Wall Street will always exist. I do not feel bad for the euntrepreuners and or the Sharks. Each assume the other person will add value. Wall Street assumes the same thing but to more people But as Mr. Cuban already knows, not everyone can win. But would they do better if there were 10 sharks or 100 sharks? Would more companies get funded?

If you allow people to be stupid, they will continue to be stupid. Howard Lindzon wrote a post as well that I disagreed with on the basis of access. They are both a lot more successful than I so I could be wrong. Also both of those guys should know that you are more likely to get screwed privately than publicly. I think this might be changing but it hasn’t yet. Open is not bad, closed is not bad, bad is bad. Liquidity and cash is always king, deeper markets should lead to better pricing. (more…)

The Stock Trader's Steps to Success

  
  Education
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Mark Douglas, in his classic book on trading behavior entitled THE DISCIPLINED TRADER: DEVELOPING WINNING ATTITUDES, describes what he believes are the three steps to a trader’s ultimate, long term success.  The following steps have very little to do with technical anaysis and everything to do with the trader’s mental resources.  Douglas explains that the “more sophisticated you become as a trader, the more you will realize that trading is completely mental.  It isn’t you against the markets, it’s just you” (204).  So, if it is just you what are the steps?

1.  STAY FOCUSED ON WHAT YOU NEED TO LEARN.  The trader needs to stay focused on mastering the steps to achieving his goals and not the end result, knowing that the end result, money, will be a by-product of what he knows and how well he can act on what he knows.   A big part of what the trader needs to learn is how to accept missed opportunities.  “Except for the inability to accept a loss, there isn’t anything that has the potential to cause more psychological damage than a belief in missed opportunities.  When you release the energy out of the belief that it is possible to miss anything, you will no longer feel compelled to do something, like getting into trades too early or too late.” (205).

2.  LEARN HOW TO DEAL WITH LOSSES:  Douglas outlines two trading rules for dealing with losses both of which are designed to help the trader deal with any threat of pain and confront, head on, the inevitability of a loss.  The first is to predefine what a loss is in every potential trade.  By predefine Douglas means “determine what the market has to look like or do, to tell you that the trade no longer represents an opportunity” (206).   Secondly, “execute your losing trades immediately upon perception that they exist.  When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with” (207). 

3.  BECOME AN EXPERT AT ONE MARKET BEHAVIOR: Simplicity and focus is the mother of success.  “You need to start as small as possible and then gradually allow yourself to grow into greater and greater amounts of market information.  What you want to do is become an expert at just one particular type of behavior pattern that repeats itself with some degree of frequency. To become an expert, choose one simple traing system that identifies a pattern.  Your objective is to understand completely every aspect of the system.  In the meantime, it is important to avoid all other possibilities and information” (209).

Three simple steps yet ironically it is in the simplicity that traders find the most difficulty.  Trading is not difficult, we make it so.  Remember this the next time you enter a trade. 

Dear Readers & Traders………..Don’t miss to read this Book !!101% it should be in your Library.-Technically Yours ,Anirudh Sethi

10 Things A Trader Needs to START DOING …To Mint Money

  
  Education
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There are many trading principles that are common among  successful rich traders. It is important to learn the things that allow them to win so we can follow in their footsteps and make money. There are 10 things that new traders can start doing tomorrow to improve their results immediately. If you have been trading for awhile but have not been profitable these  may be things that you need to start doing to stop losing money.

 1. Start trading the price action by using charts. The market doesn’t care about your opinions but the chart expresses the collective actions of all market participants. Learn to understand what the chart is saying.

Start to understand that the market determines whether any single trade wins or loses not you and not an imaginary “they”.

2. We can only surf the price waves not control them. 

Start to take 100% responsibility for your losses.

3. You enter the trade, you exit the trade, the wins and losses are yours alone. The blame game is a losing game in the markets.

Start to bounce back from losing trades quickly, move on don’t ruminate.

4. If your position size and risk management are correct no one losing trade should emotionally devastate you it should be only one of the next hundred trades with little significance by itself.

Start caring more about what the market is doing and less about what you think it should be doing.

5. ALL that really matters is current price action not your opinion of what might be price action later.  (more…)

Focus on Being

  
  Education
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The one thing that is at the core of every person’s trading, no matter what tools are utilized, is a human being. The Professional Traders recognize that being is the start of the entire process, who they are as people, as traders. By focusing on yourself first and then on the rest, you address the core of your trading business. Just like every sports team looks up to its coach for direction or like a company looking up to its CEO for direction the results of your trading all begin and end with you as you are the captain of your own ship. It is you, the human being, making all the decisions about trading like what to trade, when to trade, what resources to use, what strategy to use, the knowledge you will acquire, who to listen to and so on. Professional Traders develop and maintain a very high quality of being. Being is more important than doing. If you are fatigued or stressed, your judgment can be impaired. If you are naive or ignorant you are more likely going to make mistakes. If you are anxious or scared you will not be able to think clearly as you would when relaxed. If you are emotional in trading you will see losses in your account. No matter what you do if you are not at 100% of what you should be you will not the results you wish for. (more…)

For many traders, promising to follow rules doesn’t work for long

  
  Education
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How many times have you broken the rules?

For many traders, promising to follow rules doesn’t work for long. One reason is willpower fatigue, a well-documented phenomenon.  I regularly receive emails from traders who are very bright and hard working – often with a degree from a top school or a successful prior career– and they are so frustrated with themselves about ‘breaking rules’ in trading.

For most traders, the work required to succeed is not what was expected. Trading discipline is not about willpower to follow rules. It seems like that on the surface, and it sort of is in the beginning of one’s trading career, but there are three reasons why simple willpower is not the answer for long-term success:

First, discretionary trading means by its very definition that we must use our judgment to make a decision – not simply use willpower to follow a rule. (more…)

Mental Toughness

  
  Education
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MENTALTOUGHNESSYou must eliminate “Human Emotion” as much as possible in this business. It is paramount to success.  Unless you are adapt at predicting the future, your mind is a far weaker ally than all the tools in your toolbox.

Using a Star Wars analogy: the Jedi were superior in mind control and were able to play tricks with weaker minds. Humans are emotional bunches who are not fully prepared for the forex market.

Really once you overcome fear, self-doubt, emotions, and attachment to money you, will be on your way to long term success. Depending on how much power those words have over you, will determine amount of time needed to develop needed skills for growth.

Remember you will learn how to control fear, self-doubt, emotions, and attachment to money as those are human emotions buried inside each of us since birth. Abundance is our birthright, yet many never reach full potential. (more…)

Don't Lose the Lesson!

  
  Education
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lessonLosing trades can have the same affect – if you let them. However, if you look at each trade as just one of your next 100 or even one of the next 1000 trades you’ll make in the next year, you’ll begin to attach far less emotion to the outcome of each trade. Detaching emotion from individual trades is one of the best ways to build confidence in yourself and your long-term success as a trader.

Losses are inevitable; they simply are a part of trading. How you handle losses is what can ultimately determine your level of success moving forward. Even a losing trade can be beneficial if you take what you can from it. Ask yourself, “Why did this trade fail? Is it a function of a market reversal, or a miscalculation on my part? Was my stop-loss set too close as a result of too large a position? Did I micromanage this trade and adjust my numbers on the fly? Did I completely abandon my trading plan?” A loss means you’ve already paid the tuition, so you might as well stick around for the lesson.

Ask the right questions when a trade doesn’t work out or when you hit a rough patch with your trading. The answers you find can help you greatly as you progress as a trader. Whether those answers allow you to avoid making the same mistake again or if they just give you some closure following a bad experience, take what positives you can find and move forward.

Bottom line: cut the loss but keep the lesson!

Two Thoughts For Traders

  
  Education
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2-POINTS1.      It’s okay to be wrong as long as you aren’t very wrong for very long. The worst thing is to be stubborn and override your process because you are emotionally invested in what you believe.

2.      The expression “you’re only as good as your last trade” is incorrect. You are only as good as your process. One can get a trade right for the wrong reasons, and a trade wrong for the right reasons. It is crucial to distinguish the two for long-term success, and stick to your strategy.

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