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3 Trading Truth

TRUTHLINKSHumility:  We are in a business with change.  I have never met a person who has been successful at anything who thought they had it all figured out.  Yes, celebrate and enjoy but tomorrow you start over at the beginning.  Celebrate later and not until the play is over.

Perspective: Trading is emotional.  Eliminating the highs and lows is important because it takes out so much energy.  Yes it would have been cool to dive into the end zone but I would have had to pick myself off the ground and had to be on the extra point team the next play. The low is never as low or the high is never as high as it is in reality, generally.  Having perspective is how it all evens out.

Preparation:  When asked why athletes make better traders I always respond because they are willing to work long hours for the few times when it all lines up.  For football, you train 6 months the play a season.  You have 12 games.  You spend 4 days preparing, 1 day playing, 1 day reevaluating, and 1 day resting.  We prepare for those times and we always are waiting for the next time.  One trade can make your day, one week can make your month, one month can make your year, one year can make your career. (more…)

The Virtue of Patience

patienceWaiting for the right opportunity increases the probability of success. You don’t always have to be in the market. As Edwin Lefevre put it in his classic Reminiscences of a Stock Operator, “There is the plain fool who does the wrong thing at all times anywhere, but there is the Wall Street fool who thinks he must trade all the time.”
One of the more colorful descriptions of patience in trading was offered by Jim Rogers in Market Wizards: “I just wait until there is money lying in the comer, and all I have to do is go over there and pick it up.” In other words, until he is so sure of a trade that it seems as easy as picking money off the floor, he does nothing.

10 Tips for Traders

1. Bulls make a little. Bears make a little. Pigs get slaughtered
In other words, do not be a greedy trader. If you are a bull, don’t expect to get in at the bottom and out at the top. If you are a bear, don’t expect to pick an exact market top and ride a market all the way down to the lowest low. Thinking otherwise allows the destructive “greed” emotion to take over. Greed has been the ruin of many traders.

2. Any fool can get into a market, but it’s the real pros that know when to get out
Indeed, market entry is certainly an important element of successful trading. However, exiting the trade is paramount. Many times a traders will allow a market to “go against” him or her for way too long and way too far–meaning big trading losses. See next item.

3. Use protective buy and sell stops
One of the major mistakes many traders make is not using protective buy and sell stops when they enter a trade. Or, traders may pull their protective stop, “hoping” the market will turn in their favor. Don’t be fooled into using “mental stops.” Determining where to place protective buy and sell stops BEFORE market entry is one of the best money-management tools available. (more…)

The Virtue of Patience

The Virtue of PatienceWaiting for the right opportunity increases the probability of success. You don’t always have to be in the market. As Edwin Lefevre put it in his classic Reminiscences of a Stock Operator, “There is the plain fool who does the wrong thing at all times anywhere, but there is the Wall Street fool who thinks he must trade all the time.”
One of the more colorful descriptions of patience in trading was offered by Jim Rogers in Market Wizards: “I just wait until there is money lying in the comer, and all I have to do is go over there and pick it up.” In other words, until he is so sure of a trade that it seems as easy as picking money off the floor, he does nothing.

Mark Weinstein (also interviewed in Market Wizards) provided the following apt analogy: “Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for Just the right moment. It will wait for a baby antelope, and not Just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.” (more…)