Stock traders are the world’s worse at making poor trading decisions while denying that poor decisions were made in the first place. It is a disease called denialism and it starts when a trader abandons his rules (or worse yet has none), and trades whatever feels or looks right whenever it feels or looks right Once the trade is entered, denialism begins to spread like a cancer looking for its next body part to attack. The disease grows in stages, with each successive stage sucking more life out of its victim.
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rssThe 7 Habits of Highly Successful Traders
Traders must have the perseverance to stick to trading until they break through to success. Many of the best traders are just the ones that had the strength to go through the pain, learn, and keep at it until they learned to be a success.
- Great traders cut losing trades short. The ability to accept that you are wrong when a price goes to a place that you were not expecting is the skill to push the ego aside and admit you are wrong.
- Letting a winning trade run as far as it can go in your time frame is crucial to having big enough winners to pay for all your small losing trades.
- Avoiding the risk of ruin by risking only a small portion of your capital on each trade is a skill to not get arrogant and trade too big, if you risk it all enough times you will lose it all eventually.
- Being reactive to actual price action instead of predictive of what price action will be is a winning principle I have seen in many rich traders. Letting price action give you signals is trading reality, trading your beliefs about what price should be is wishful thinking.
- Great traders are bullish in bull markets and bearish in bear markets, until the end when then trend bends.
Great traders care more about making money more than any other thing. Proving they are right, showing off, or predicting the future is not as important as hearing the register ring.
Just watch these 4 things to get success in Trading
Trust your gut If something looks like crap and smells like crap, then chances are, it is crap. Listen more to your gut to tell you when to cut a loss and move on. - Keep it simple If something is working, keep doing it. There aren’t any bonus points for being clever. The money is the same color no matter how you make it. So do the simple things and chip away at the profits. I once had a client who felt he had to do complicated trades in order to make money. Bottom line was, he was wrong. Keeping it simple is the proven strategy for success.
- Probabilities don’t lie If you’re not carefully tracking the metrics on your trades, you might as well be gambling at a casino. Make it a point to track the data on your trades and study them. That way, you can do more of what’s working and less of what’s not.
- Avoid speculating and predicting I can’t begin to tell you how many times I see traders blow up their accounts because they try to speculate or predict what’s going to happen in the future. The simple fact is, no one knows. Even the best traders have a winning percentage of around 50 percent. That means successful trading is not about being right, it’s about what you do when you’re wrong. The bottom line is, trade what you see, not what you think.
Trust your gut If something looks like crap and smells like crap, then chances are, it is crap. Listen more to your gut to tell you when to cut a loss and move on. Letting Winners Turn in to Losers
Trading problem that I want to focus on is allowing winning trades to turn in to losers. Many of us have probably had a time when a trade was making big loot, and we started to count the profits like they were ours before we exited the trade. When the stock started to lose the ground it had gained, we avoided selling because we had built up an emotional attachment to the paper profits we had seen. Instead of selling the stock to lock in some gain, we opted to hold out for the stock to go back to where it used to be, promising to sell when it came back to the point where we felt good about the trade. The stock drifts lower, and eventually the gain turns in to a loss. We ultimately sell it at the bottom, swearing never to do it again. But without some reprogramming, we probably will.
The Solution
Like Kenny Rogers used to sing, “Don’t count your money, when you are sitting at the table, there will be time enough for counting, when the dealing’s done.” Do not calculate your profits before you lock them in. Avoiding the profit watch will help you avoid an emotional attachment to the paper profits, giving you greater clarity to take the exit door when the market tells you it is time to do so.
I hope this outline of mental problems and some solutions helps you become a better trader. The difference between those who succeed in trading and those who fail is not the system they play, but how well they play it. Your mind is a powerful thing, don’t let it beat you in the market.
The Psychology of Trading
There is an old saying that the market is driven by fear and greed. Anyone that has placed more than a couple of trades will surely have experienced these two emotions. All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let’s look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios.
You go long and the market immediately goes down – you go short and the market immediately goes up. That’s 2 consecutive losses, and you are getting a little ‘anxious’ so you don’t take the ‘next’ trade. Of course, this trade is a winner. Now to make the situation worse, you then ‘chase’ the move, and as soon as you enter the trade it immediately reverses, thus giving you another loss – this is now 3 in a row. Ok, one more ‘try’ – this can’t happen on every trade can it? (more…)
6 Trading Rules
1.IF YOU DON’T LIKE THE TRADE YOU’RE HOLDING, GET OUT.
2.AFTER TWO HOURS OF TRADING, ASK YOURSELF: “DO I FEEL GOOD ABOUT MYTRADING TODAY?” Once two hours have passed, A day trader should have made at least two, or perhaps more, trades, “but enough to evaluate what you have done.” If the trader feels good about the day’s trading, continue. If not, stop trading that day.
3.ALL CYLINDERS OF THE ENGINE MUST BE RUNNING EFFICIENTLY. “Day-trading is a job, and your paycheck is determined by your ability. You can only maximize your ability if you have all the information you need to make trading decisions. “If a piece of equipment that one uses for trading is not working, stop trading.
4.HAVE COMPLETE FAITH IN YOUR INDICATORS.This is a must for success.Many times your indicators give you a buy or sell signal, and you don’t follow it because you don’t have the confidence the signal is right this time. Successful day traders believe in their indicators, but also are aware that nothing is 100% foolproof.
5. TO ANYONE WHO ASPIRES TO BECOME A DAY TRADER, OBSERVE THOSE WHO ARE SUCCESSFUL. “Any information you can procure on the trading philosophies, mechanics and techniques is well worth your while.”
6.DAY-TRADING IS A LONG-TERM COMMITMENT. “I fervently believe it takes several years to become a true professional”
Are You A Subjective or Objective Trader?
Subjective: Based on or influenced by personal feelings, tastes, or opinions.Proceeding from or taking place in a person’s mind rather than the external world.
Subjective traders they are intertwined with their trades.Their signals are generally entering out of greed and exiting based on their own internal fear. The believe in their opinions more than the actually price action. They base trades off of whether they are feeling good or bad about a particular trade. A subjective trade comes out of the imagination of the trader, from their own beliefs, opinions, and what “should” happen in their view. Many times reality is not even cross checked as a reference, and if it is the subjective traders sees what they want to see instead of what is really going on. Their compass is their emotions and they have internal goals other than making money.
Objective: (Of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts. Having actual existence or reality. (more…)
You Need To Learn How To Dance In The Rain
Every trader will experience storms during their trading career.
You might have days or even weeks without any storms, but they will come. Violent movements, large losses, markets that react opposite than your strategy tells you will happen and so much more.
We cannot keep these situations from happening; however we can make a decision to either wait for the storms to pass or step out and dance in the rain.
If we are planning on waiting until there are no storms, no struggles, no disappointments or no losing trades then we will be waiting for a very long time. Expect the storms to occur and have a plan as to how you will work through the storm.
When we work through the storm with a higher awareness of our risk management, money management and patience we will come out the other side stronger than before and will be ready for the next time a storm breaks out.
It is not the fact that storms happen, it is being ready to get out in the storm and still be productive. Instead of fearing the storm, learn how to dance in the rain.
Psychological
The goal of any trader is to turn profits on a regular basis, yet so few people ever really make consistent money as traders. What accounts for the small percentage of traders who are consistently successful is psychological—the consistent winners think differently from everyone else.
The defining characteristic that separates the consistent winners from everyone else is this: The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused,and, above all, confident in spite of the adverse conditions.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.They
no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.
You don’t need to know what’s going to happen next to make money; anything can happen, and every moment is unique, meaning every edge and outcome is truly a unique experience.
The trader that it’s his attitude and “state of mind” that determine his results.
20 Skills for the Trader
1. Know the difference between trading and investing. We are traders, NOT investors. •• Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.
2. Don’t let losers run! Always use stops . Riskmanagement is very, very important in your trading. Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right. The best traders are the first to admit (to themselves and the market) that they made a mistake.
3. Trade only price pattern set-ups.
4. Trade for skill, NOT the money. If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’. And SCARED MONEY NEVER WINS!
5. Concentrate on what you are trade. Each market has personalities, habits and friends…get to know them all.
6. Focus on your executions. Remember, every execution is a trade. Money is valuable…don’t leave it on the table. (more…)