- Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.
- Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.
- Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.”
- Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.
- Pliability the ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.”
Archives of “Thought” tag
rssTen traits of successful people
- Positive thinking. They think of success, not failure, regardless of how difficult the situation.
- Makes conscious decisions regarding what they’re after, and draw out specific plans to reach their goals.
- Action-oriented.
- Never stop learning.
- Being persistent and hard working.
- Analyze details and seek out all the facts.
- Focused, doesn’t let other people or things distract them from their goals. Learns to save money.
- Being innovative.
- Communicate with others effectively
- Integrity.
3 things that will kill your trading success
Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.
Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.
Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.
These 7 Things -Traders Must Avoid
- Trading with no stop losses. You can’t control how big your profits are, the market will trend as far as it does. However, you can control and limit the size of your losses with a stop loss and a carefully managed positions size. Not having an exit plan if you are wrong can be very expensive when a trend takes off against your position and you start hoping instead of just cutting your losses and moving on.
- Your opinion can cost you money. Trading your opinion against all other market participants can be very expensive. The market goes where it wants and when you disagree with where it is going it will cost you. Going with the flow in your time frame is the best way to make money. Fighting the flow of the market can be expensive.
- Egos are expensive things. Inflated egos cause a trader’s #1 priority to be proving they are right and refusing to admit when they are wrong. It is very expensive for ego gratification to be higher on a trader’s list than making money.
- Trading off predictions can cost a lot of money when they are wrong. There is more to be made by reacting to what the market is doing instead of predicting what you think it will do later. The future does not exist and it is expensive to pretend like it does.
- Stubbornness causes small losses to become big losses. It causes a trader to make the same mistake over and over because they do not assimilate feedback. Instead they keep doing the same thing over and over and expect different results but keep getting the same results. Stubbornness is expensive.
- Not having an exit strategy for a winning trade can be very expensive. It is possible to ride a big winning trade back to even. If there is no plan to lock in profits while they are there a winning trade can even turn into a big loser. Trailing stops and targets can put the profits in the bank.
- Trading too big of position sizes for your account can be very costly because no manner how good your winning trades are you are set up to give back the profits with a few big losing trades in a row,
Don’t focus on making money; focus on protecting what you have
- You need to determine where you will get out before you get in. You need to specify your exit point when you get in. When you set an exit point, you need to know how much money you are willing to lose on this idea and also at what exit point you think you are wrong in your assessment. You should not place a stop too close, because that is likely to lead to multiple losses.
- Some times, options can provide the same protection as stops.
- At the portfolio level, it may also be prudent to specify a maximum loss from the starting stake for each year.
- Be willing to get out quickly when you are wrong.
- If you are not sure whether you are wrong or right and you have made a loss, partially liquidate 50%. If you continue to be wrong, liquidate 50% more. Then what is left is not a big deal.
- When your losses are small, you will bet again. When your losses are big, you are afraid to bet and you lose great opportunities.
- Never risk more than 1% of total equity on any trade is probably a effective money management tool for many.
THE SUCCESSFUL TRADER … ACCORDING TO MARK DOUGLAS
There is a reason why so few traders succeed. It is not for lack of study or effort or passion. It is not for lack of education or a Bloomberg platform subscription. It is not because only a select few have access to technical “secrets” (a.k.a. indicators). No. So few succeed at trading for the same reason that so few succeed at living an abundant life.
The unsuccessful refuse to think differently when faced with difficulties believing that luck has passed them by. They do not succeed because the want of instant gratification and its fleeting rewards has replaced the need for sustainable, hard fought, earned rewards indicative of a mindset prepared to tackle failure as nothing but a mathematical equation: here is the problem now let’s find the solution.
The mediocre search for easy answers to difficult problems believing that the right answers to their questions are found somewhere “out there”. The successful make difficult decisions where there are no easy answers, questioning whether their perception of what is out there is a distorted reflection of what is inside of them.
The best traders, according to Mark Douglas, think differently than others because they know that what is most important is “how they think about what they do and how they’re thinking when they do it.”
5 Reasons Traders Lose Money
- Your method or system doesn’t work. This is a big one, and one of the hardest to fix. If you’re buying random stocks based on chatroom tips, that won’t work. If you’re buying based on what you think about the news, that won’t work. If you’re using some untested technical pattern, that won’t work. The only way you can build enduring success is to have a system that is your own and in which you fully understand the edge and variability of the system results. The only way (that I know) to do this is either to be taught such a system in enough detail that you own it, or do develop your own. Finding a system that works is not easy. I think most traders who fail probably failed because they were doing something that didn’t work and couldn’t work.
- You are impatient and take impulse trades. So, you have a system and it works, but if you don’t have the patience to wait for setups, then you essentially don’t have a system at all! Too many traders force trades or execute trades out of boredom. Don’t do this—it will destroy whatever edge you have in your system.
- You take trades on the wrong size. Any trading methodology depends on the balance of a large number of winners and losers. If you are randomly doing some trades bigger and some smaller, you can easily wipe out that edge. (On the other hand, some traders do make good, disciplined use of varying position sizes, but this is also a well-developed and tested part of their methodology.) Be consistent and disciplined in everything you do; that’s why the market pays you.
- You ignore stops. What do you do when a trade hits your stop? You get out. End of story. If you can’t develop this one skill, you can’t be a trader. You cannot afford, even once, to ignore your stop. Maybe the trade will work out this one time; maybe your prayers will be heard and the bad loss will turn around and become a winner? Ok, great, now what? Now you’ve just had a serious break of discipline and have had a bad learning experience as well because you got paid to do something wrong! The ongoing impact of a mistake like this and the false learning will ripple through your trading career for months or years. Don’t do this—respect your stops.
- You get out of winning trades without any reason. I think this is one of the great, underappreciated problems of learning to trade. Many people can develop the discipline to respect their stops, but then cave under the pressure of a winning trade. The thought of a winning trade reversing and giving back profit, the pressure of knowing the open winning trade would cover many losing trades, or the simple greed of wanting to ring the cash register—these can be overwhelming psychological pressures. It’s just as important to manage your winners with discipline, and that your trading plan has clear rules for when and how you get out of winning trades as well as losers.
The solution to most of these problems is not exciting: have a plan that works and execute that plan with discipline. Of course, there’s a lot more we can do at each step, but being aware of these errors will help protect against some of the worst, and most avoidable, mistakes that wait for the developing trader.
Some advice from Jeff Bezos
During one of his answers, he shared an enlightened observation about people who are “right a lot”.
He said people who were right a lot of the time were people who often changed their minds. He doesn’t think consistency of thought is a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today.
He’s observed that the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved. They’re open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.
This doesn’t mean you shouldn’t have a well formed point of view, but it means you should consider your point of view as temporary.
What trait signified someone who was wrong a lot of the time? Someone obsessed with details that only support one point of view. If someone can’t climb out of the details, and see the bigger picture from multiple angles, they’re often wrong most of the time.
My mind has to be free…
To execute trades without making mental errors you have to be free of thinking that “this trade will be a winner”. The typical trader expects “this trade” to be a winner, or why would they take it, right? But, you can’t think this way if you want to make consistent money. Once you start expecting each trade to win, you become emotionally attached to it, when as you should know by now, it is not any ONE trade that matters, but the overall series of trades and your ability to remain disciplined over that series that matters.
5 Types of Mindset
1) An open mindset – Traders succeed when they see things that others don’t. Sometimes those are overarching themes and trends; sometimes they are short-term patterns in market behavior. To see things differently, we need a mind that is open to new and different information and open to shifts in market behavior.
2) A quiet mindset – Minds filled with noise can’t process new information. When we’re focused on ourselves and our profits/losses, we’re no longer focused on markets. We can’t exercise self-control in our actions if we are not able to sustain control over our thought processes.
3) A constructive mindset – Losses happen. We miss opportunities. The great trader learns from mistakes and embraces the lessons from drawdowns. If every day brings wins from trading or wins from learning, there is always something of value to be taken from each day.
4) A positive mindset – It’s because we cannot count upon our profits and losses to make us happy that we need to lead a fulfilling life outside of trading. A life that is filled with meaningful activities, fun activities, activities that bring us close to others, and activities that give us energy is most likely to provide us with the emotional fuel needed to power through challenging market times.
5) An action mindset – All the best ideas and intentions will get us nowhere if we aren’t prepared to act upon them. The action mindset is one focused on plans, translating excellent ideas into excellent risk/reward opportunities. Preparation is idea-focused, but also execution-focused. It is as important to work on our implementation of ideas as our generation of them.