- Take no trades without establishing a complete and precise trading plan before the initial trigger.
- Keep an open mind for new market scenarios based on what the price action and pattern setups provide.
- Always trade with the trend.
- Once I am in a trade, stick with the original plan for target and stop-loss – Don’t panic!
- Make every trade meet the strategy requirements and what happens from there is up to the market.
- I need to exercise greater patience in both buying and selling.
- Be more willing to take a position, even if it is very small. It is tough though to gain the confidence to do so as the market has been tough. (more…)
Archives of “trades” tag
rss10 Trading Rules
Always wait for the setup: no setup – no trade. Agree. If your strategy doesn’t provide you a good risk/reward trade to make, then your job is to be patient until it does. Ironically, this often requires you to sit out some very good moves in the market and be inactive at the very same times you want to be aggressive.- The best trades work almost right away. Agree, but with one important caveat – this rule greatly depends upon your strategy. Some strategies will require greater patience than others. If trading short-term, this rule is almost always correct, but if your time frames are longer, then you also have time on your side which requires more patience but that patience can pay off if your analysis is correct.
- Never take a big loss. If it doesn’t ‘feel’ right. Remove it! Disagree. Sometimes you have to take a big loss to prevent the risk of an even greater loss. Refusing to take a big loss when a mistake has been made can be very costly. I also disagree with the view that “If it doesn’t feel right, remove it.” Actually, some of the best trades you will ever make in your career are those trades that feel wrong and about as far from “right” as you can make it. Don’t believe me? Think over the last month or so about the trades you missed because they didn’t feel right but your strategy told you to hold or buy them anyway! It is also interesting to me that this rule says to trade by feel and at the same time advises in another rule not to trade by emotion. You can’t do one without the other!
- Always perfect your craft and sharpen your skills – good traders are constantly learning. Agree. No matter how skilled, intelligent, and successful you have been, there is always room for improvement. Moreover, because of the ever-growing changing nature of the market, what you do now to trade successfully won’t always work in every situation and the next market environment. Only experience and constant dedication to your job will provide you with the weapons for enduring market success.
- Be patient with winning trades – impatient with trades that fight back. Agree. Another good ways of saying – let your winners run and cut your losers short. The truth is that most individual traders and investors do the exact opposite – they sell winners too quickly and they hold losers far too long letting trades that went awry become long-term “trapped” investments. (more…)
Learn from winning trades
If the good trades–those that line up for me, are made with conviction, and bring little heat–are on the long side or short side, that says something about the market. The really good trades usually are in the direction the market wants to move. If I’m thinking bearish but making money on the long side, that tells me something important.
Risk Management Game
A random person is pulled off the street and given $10,000 to trade. They have no prior experience which, on the bright side, means they have no bad habits, emotional baggage, or preconceived notions. Before trading they go through a five day crash course on market basics (order entry process, chart reading, pattern recognition, etc…). Suppose you are tasked with the responsibility of drafting a set of risk management rules which they are required to abide by. The objective is to make them survive as long as possible in the trading arena so they can learn as much as possible through first-hand experience.
What types of rules would you set?
The ideal approach of course is to structure a set of rules which makes it as difficult as possible to blow up the account while still leaving them open to accumulating profits. The goal isn’t so much helping them capture large gains as much as it is helping them survive. After learning how to survive, then they can modify their approach to being more aggressive and seeking larger gains.
Here are two of my top rules: (more…)
Trading Wisdom
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Think -Prepare -Act
Trading can be difficult at times, especially when the market is a mess. But there are two simple things to remember: know when to sell, when not to, and cut your losses so you can stay in the game.
Even if you make a lot of mistakes in your trading business, you’ll still be net profitable at the end of the year if you simply do two things right; cut your losing trades as soon as they hit their stops and let your winners ride until there is a technical reason to sell. The challenging part, of course, is applying this in actuality, not only understanding it theoretically. |
The Ten Things Profitable Traders Do Differently
The following 10 reasons may be why the 10% of long term profitable traders take the money from the 90% that are unprofitable. I see these differences in real life all the time. There is a big difference between profitable and unprofitable traders that usually comes down to homework, mental discipline, and risk management.
- Winning traders let winning trades get as big as possible before exiting. They have the really big winners to pay for all the losers.
- Winning traders have no patience for losing trades, they keep losses small. They know how not to give back their profits with big losing trades.
- They are focusing on trading actual price action not their own opinions or beliefs.
- They are experts on the trading vehicles that they trade.
- The trade with the trend in their time frame.
- Good traders know that their trailing stops are smarter than they are.
- Profitable traders know that it is their robust methodology that makes them profitable not any one trade.
- Winning traders are great risk managers. Their #1 concern is how much they can lose, their #2 concern is how much they can make.
- Profitable traders have put in the time, usually years and thousands of hours to learn what really makes money in the markets.
Profitably traders have studied historical price data, chart patterns, trends, and price action.
Undertrade, undertrade, undertrade – Bruce Kovner
The lesson here is straightforward. Trade less frequently and trade smaller than you think you should.
Of these two, trading smaller size is easier to grasp and much more intuitive. If you are risking less, then your P&L won’t swing as wildly, allowing you to stay more level-headed and to make better decisions without getting scared or euphoric. You also are unlikely to lose as much during a bad run, allowing you to sidestep potential catastrophic losses and to stay in the game, both financial and psychologically. Ultimately, it’s steep drawdowns that end careers. If you can avoid big declines In your equity and be in the right place psychologically to bounce back, then you will have a long and successful career.
But trading less frequently is equally important. By making it a priority to trade less frequently, you are making sure that you think harder and deliberate before entering and exiting a position. This allows you to focus on executing your methodology, rather just impulsively leaping into and out of positions. That should boost the quality of each trade and in turn, your overall success.
You are also making sure that you are picking your spots, thereby boosting the percentage of your trades that are winners. Even a small increase in your win rate, e.g. from 40% to 43%, would mean a measurable improvement in profitability. Having more winners, and having those extra winners generate bigger gains on average than the losers, can mean the difference between a so-so year and a great year.
Where is your head during the market day?
1)Are you looking through the rear-view mirror, criticizing your last trade?- 2)Are you looking at your profit/loss for the day and filtering trades through that?
- 3)Are you distracted by people or the phone?
- 4)Are you thinking about yourself and how well or poorly you’ve been doing?
- 5)Are you locked in an opinion of what the market “should” be doing instead of observing what it *is* doing?
- 6)Are you wanting to get your money back after a loss or hold onto it after a gain?
- 7)Are you focusing more on yourself or on what markets are doing?8)Many times, our head just isn’t in the game. We can’t be focused on performance outcomes and immersed in our performance at the same time.
1)7 Things You Must Do to Win at Trading.
| 1. Managing the risk of ruin. Do not risk so much on any one trade that 10 losing trades in a row will destroy your account. risking 1% to 2% of your trading capital per trade is a great baseline for eliminating the risk of ruin. 2. Only trade with a positive risk/reward ratio. Only take trades where your possible reward is at least two or three times the amount of capital you are risking in the trade. 3. Always trade in the direction of the prevailing trend. Always trade in the direction of the flow of capital for your specific time frame. Shorting rockets and catching falling knives is not profitable in the long run. 4. Trade a robust system. Back test and study your trading method, system, or style to ensure it is a winning system historically. The key is that it had bigger winners than losers over the long run in the past. 5. You must have the discipline to take your entries and exits as they are triggered. You must take your entries when they trigger, your losses when they are hit, and your profits when a run is over to be a successful trader. 6. You must persevere through losing periods. All successful traders were able to overcome their losing periods to come back and make the big money. If you quit you will not be around for the opportunity to win big. 7. If you want to be a winning trader you must follow your trading plan not your fear and greed. Emotions will undo a trader more than anything else. Trading too big is due to greed, missing a winning trade due to no entry is a sign of fear, traders must trade the math and probabilities not their own opinions or emotions. |