Archives of “trade management” tag

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What's the difference between winning traders and losing traders?

  
  Education
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winners-and-losers1Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:

The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.

Five market scenarios that place you at the most risk.

  
  Education
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FIVE-







  1. 1.Bad Markets – A good pattern won’t bail you out of a bad market, so move to the sidelines when conflict and indecision take hold of the tape. Your long-term survival depends on effective trade management. The bottom line: don’t trade when you can’t measure your risk, and stand aside when you can’t find your edge.
  2. Bad Timing – It’s easy to be right but still lose money. Financial instruments are forced to negotiate a minefield of conflicting trends, each dependent on different time frames. Your positions need to align with the majority of these cycles in order to capture the profits visualized in your trade analysis.
  3. Bad Trades – There are a lot of stinkers out there, vying for your attention, so look for perfect convergence before risking capital on a questionable play, and then get out at the first sign of danger. It’s easy to go brain dead and step into a weak-handed position that makes absolutely no sense, whether it moves in your favor or not. The bottom line: it’s never too late to get out of a stupid trade.
  4. Bad Stops – Poor stops will shake you out of good positions. Stops do their best work when placed outside the market noise, while keeping risk to a minimum. Many traders believe professionals hit their stops because they have inside knowledge, but the truth is less mysterious. Most of us stick them in the same old places.
  5. Bad Action – Modern markets try to burn everyone before they launch definable trends. These shakeouts occur because most traders play popular strategies that have been deconstructed by market professionals. In a sense, the buy and sell signals found in TA books are turned against the naïve folks using them.

Observation

  
  Education
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observation

I don’t think the alternatives are trading to not lose vs. imprudent boldness. Rather, the alternative is to trade or not to trade. One should trade when there is a demonstrable edge in one’s favor: then it’s trading to win. If one lacks that edge and (rightly) fears losing, the rational choice is to refrain from trading. The pallbearers enter the picture when there’s a need to trade that exceeds the limits of one’s demonstrable edge. Such “boldness” also manifests itself in improper sizing of trades and poor trade management. It has nothing to do with trading to win–and everything to do with the need for stimulation. Trading to not lose is certainly more effort than it’s worth and also expensive. Unlike the “bold” trader, the fearful trader exits positions prematurely, fails to enter trades with good edges, and undersizes positions.Most trading problems boil down to deficient self-control and resulting impulsivity. The impulse for excitement and the impulse to avoid harm are flip sides of the same coin–and not infrequently alternate within the same trader. Both take the trader away from the prudent trading to win.

Trade Management & Quotes For Traders

  
  Education
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Trade Management

  • Let winners run. While momentum is in phase, the market can run much further than might be expected.
  • Corollary to that rule: Do not exit winners without reason!
  • Be quick to admit when wrong and get flat.
  • Sometimes a time stop is the right solution. If a position is entered, but the anticipated scenario does not develop then get out.
  • Remember: if one thing isn’t happening the other thing probably is. Historically, this has never been good for me…
  • Be careful of correlations. Several positions can often equal one large position bearing unacceptable risk. Please think.

Trading Quotes :

  • I am responsible for risk management, money management, trade management, doing the analytical work and putting on every trade that comes.
  • I am not responsible for the outcome of any one trade. Markets are highly random. I do not have a crystal ball. I am not as smart as I think I am.
  • Risk management is the first and last responsibility. I can make almost any mistake and be ok as long as I do not violate my risk management parameters.
  • Opportunity comes every day. Do not neglect the work. Must do analysis every day.
  • Opportunity comes every day. Get out of poor positions. Move on.
  • I am a better countertrend trader than a trend trader. Sometimes the crowd is right, and they will run me over at those times if I’m not quick to admit I’m wrong.
  • If you’re going to do something stupid, at least do it on smaller size.

Traps and Pitfalls

  
  Education
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Realistically, there are many ways to lose money in the financial markets and, if you play this game long enough, you’ll get to know the most of them intimately. Fortunately, a survivalist plan empowers you to avoid many of the traps and pitfalls faced by other traders. Above all else, learn the five market scenarios that place you at the most risk.

  1. Bad Markets – A good pattern won’t bail you out of a bad market, so move to the sidelines when conflict and indecision take hold of the tape. Your long-term survival depends on effective trade management. The bottom line: don’t trade when you can’t measure your risk, and stand aside when you can’t find your edge.
  2. Bad Timing – It’s easy to be right but still lose money. Financial instruments are forced to negotiate a minefield of conflicting trends, each dependent on different time frames. Your positions need to align with the majority of these cycles in order to capture the profits visualized in your trade analysis.
  3. Bad Trades – There are a lot of stinkers out there, vying for your attention, so look for perfect convergence before risking capital on a questionable play, and then get out at the first sign of danger. It’s easy to go brain dead and step into a weak-handed position that makes absolutely no sense, whether it moves in your favor or not. The bottom line: it’s never too late to get out of a stupid trade.
  4. Bad Stops – Poor stops will shake you out of good positions. Stops do their best work when placed outside the market noise, while keeping risk to a minimum. Many traders believe professionals hit their stops because they have inside knowledge, but the truth is less mysterious. Most of us stick them in the same old places.
  5. Bad Action – Modern markets try to burn everyone before they launch definable trends. These shakeouts occur because most traders play popular strategies that have been deconstructed by market professionals. In a sense, the buy and sell signals found in TA books are turned against the naïve folks using them.

Trading is stressful

  
  Education
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 It certainly can be stressful, and it certainly is stressful for many. It doesn’t have to be, however. Successful traders have a certain mindset. They put little importance on any given trade. Their focus is on the long haul, not short-term gains. They know that if they attend to the aspects of trading that are within their control (i.e., trade selection, entry, risk control, and trade management), the profits will take care of themselves.

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