- STAY DISCIPLINED AND ONLY TRADE YOUR METHOD. If you do not have a robust system, method, or strategy do not trade again until you have one.
- ONLY TAKE TRADES WITH IN THE PARAMETERS OF YOUR TRADING PLAN. Trade your plan not your emotions. If you do not have a plan that defines entries, exits, and position sizing do not trade again until you have one.
- YOUR FIRST LOSS IS YOUR BEST LOSS. When your planned stop is first hit just get out. In trading hoping is a very expensive emotion
- UNDERSTAND THE MARKET ENVIRONMENT. There are times to be short, times to be long, and times to be out. Volatility is many traders kryptonite. If the market itself is not conducive to your strategy wait until it is.
- CHOOSE YOUR SPOTS CAREFULLY. Do not rush trades, wait until you get the right set up, trend, or break out you are waiting for, the market isn’t going anywhere, wait for the fat pitch.
Archives of “trades” tag
rssCourage and Trading
According to Plutarch, “Courage stands halfway between cowardice and rashness…” Clearly, we don’t want to be reckless; and clearly, we don’t want to be hesitant and timid. What we need is a balance. As we go about our trading moderating our greed and our fear to a combination of healthy desire and clear minded caution, we use courage to go forward.
Courage doesn’t mean closing your eyes, holding your nose, and jumping into the deep end. It does mean moving forward with clean and clear perception as well as steadfastness of purpose.
You don’t need courage if you’re totally confident and unafraid. Courage, according to John Wayne, is being scared to death and saddling up anyway. Because people tend to fear the unknown, and the unknown is all that is certain about any given trade, we need to employ courage. Since trading is always new, since anything can happen and it often does, since the wildness lies in wait, we need to overcome uncertainty and fear so that we can appropriately enter, exit, and remain in trades.
When asked what he meant by “guts”, Ernest Hemingway told Dorothy Parker in an interview “grace under pressure”. Trading is all about grace and gracefulness under pressure.
The good news is that courage is like any muscle. It grows and becomes stronger the more you use it. Often as I trade I’m unaware of utilizing courage. I know I’m extremely alert. I may even be excited. I’m not aware of any fear until something starts to go wrong. However, that alertness and excitement is a product of adrenalin running. Excitement or fear comes from the interpretation you give to the adrenalin high. The more you act as if you’re unafraid, the less afraid you become. It all gets easier. Act the part and become the part. Make it your goal to trade with increasing grace under pressure.
The difference between excitement and fear depends of what you are imagining.
Are you imagining loss or are you imagining profit? Of course, you always have to keep the alternative in mind as trading is all about balancing the alternatives, profit with loss. But you don’t have to put loss into the foreground of your mind, because you never would put on a trade unless profit was the probable outcome. Direct your imagination towards profit, and suspend all thoughts of loss–once you’ve put your stops in.
“Don’t cry before you’re hurt.” says a proverb. I would add, don’t mourn a loss before you experience it. Don’t even mourn it after you take it, get on with the next trade, and the next, and the next. Anticipate profit. That’s what you’re there to experience. Ah yes, and as another proverb states: “Fortune favors the brave.”
Be Patient
Be patient. If a trade is missed, wait for a correction to occur before putting the trade on.
Be patient. Once a trade is put on, allow it time to develop and give the most worthless piece of advice ever given. Taking small profits is the surest way to ultimate loss I can think of, for small profits are never allowedit time to create the profits you expected.
Be patient. The old adage that “you never go broke taking a profit” is maybe to develop into enormous profits. The real money in trading is made from the one, two or three large trades that develop each year. You must develop the ability to patiently stay with winning trades to allow them to develop into that sort of trade.
Be patient. Once a trade is put on, give it time to work; give it time to insulate itself from random noise; give it time for others to see the merit of what you saw earlier than they.
Be impatient. As always, small loses and quick losses are the best losses. It is not the loss of money that is important. Rather, it is the mental capital that is used up when you sit with a losing trade that is important. –
Self Observation and feedback
Three questions to ask at the start of the trading day:
Am I bringing baggage to the day’s trade? Am I carrying over frustrations from losing money or missing opportunity? Am I feeling particular pressure to make winning trades? Am I locked into a view of markets because those views haven’t been paying me?
Am I prepared? Have I identified significant price levels for the day? Have I gained a feel for how various markets have been trading overnight? Do I know if economic reports are scheduled for the day and what the expectations are?
What am I working on? Do I have goals for the day? What have been the mistakes I’ve been making that need to be corrected? What improvements have I made that I want to cement? What kinds of trades have been working best for me, and am I prepared to actively look for those?
The idea is to become a good self-observer!
The Right Approach to Losses
First of all, understand that losses are a necessary part of any risk taking activity. The goal should always be to blunt the impact of losses as opposed to eliminating the losses altogether. There is a distinct difference between minimizing the impact of losses versus minimizing the number of losses. If the money you are risking stands between you and hunger, think twice before placing it on the line. Risk capital must be true risk capital.
Second, losses are better teachers than wins. As noted above, wins often lead to complacency. Losses usually compel you to figure out “why.” If small and incidental to your overall strategy, they confirm that your plan is working. If relatively outsized and/or unexpected, losses make you examine the precedent trades and determine if your strategy should be adjusted. This is how advancement happens. Thomas Edison needed nearly 10,000 tries to find filament for an incandescent bulb that would last for more than a few hours. Of the thousands of attempts that did not produce the bulb, Edison did not see them as failures, but rather as things that didn’t work which was useful knowledge in and of itself. By knowing what didn’t work, Edison was able to find his way to what did. Containing and then examining your losses will help you do the same with your trading strategy.
Third, recognize that losses that are kept small relative to your portfolio are a big part of the fuel that propels your account higher. They say that you are taking prudent steps to grow your account… that you are “in the game.” The alternative, especially if you accept that losses are a necessary part of trading, is no risk taking or the taking of outsize risk (refusing to cut losers). Neither of these provide a path to account growth. If you can find/develop a trading method that allows for (in fact, embraces), many small losses while still delivering profits overall, you will have gone a long way toward eliminating the trepidation that most new traders feel about entering the fray. You will also be able to stop worrying about having the “right” picks.
My Trading Resolutions for next 3 months
Think for myself - Stay focused on the reasons why I bought a stock and sell when those reasons are no longer compelling
- Don’t let successful trades turn into losses
- Be ruled less by emotion and fear and more by logic and knowledge
- Read some good books on trading
- To avoid being whipsawed, I will give myself more room for the trade to work
- Follow my own rules
- Be easier on myself when I screw up and don’t let my ego inflate when I’m right
- Don’t force trades – there will always be another opportunity
- Honor thy stops!
- Stop chasing hot and popular stocks
- Do my own research
- Keep learning
- Learn to be less nervous and take more risks
- Remember that lost opportunity is better than lost capital
- Trade less – don’t overtrade
- To try and limit the number of opinions I allow to affect my trading. Paralysis by analysis has hurt me
- Avoid any trade where I use the word “hope” in my reasoning process
- To follow my logical, well-conceived, long-term game plan, without making irrational changes due to short-term market conditions
- Tune out the daily noise and useless banter
- Reduce the number of positions currently held
- Have more faith in my own abilities
- In trading, learn to be fearless
- Don’t be too greedy
- Slow down!
- Incorporate the use of smart trailing stops
- Use ETFs to properly diversify
- Remove my ego from my trading decisions
- Avoid getting easily frustrated or impatient
- Control and limit my losses
- Focus on making the next trade, instead of the last one
- I will not average down into losing positions
- Create more careful and detailed records with a commitment to review them regularly
- Learn to incorporate a systematic screening method like you
- Use emotions (both personal and market) to my own advantage
- Know my exits before making any trade
- Don’t be swayed by the latest and greatest strategy I hear about
- Keep it simple. Complex strategies are no better
- Avoid crowded trades
- Take time to look for reasons NOT to buy
- Let profits run longer. take losses quicker
- Trade what I see, not what I want to see
- Be more proactive and react faster to situations I find
- Make bigger, but less frequent trades
- Stay patient
- Focus on value of companies and not on the temporary market emotions
- Be more nimble
- Keep better notes
- Adopt an opportunistic versus a rigid bull or bear bias toward the market
- Enjoy the game more
- To quit counting the value of my account on a daily basis
- Stop looking for the holy grail
- Figure out what trade related information to consume on a daily basis and keep what is useful and leave out that which is not
- Avoid information overload by limiting what I read
- Don’t read stock blogs
- Turn off the TV and dedicate more of my time to become a better trader
- Set up a lazy portfolio
- Focus on proper asset allocation
- Never forget that “when you are through learning you are through”
- Recognize mistakes early, exit, and move on
- Take partial profits routinely, but keep money on high-performing stocks
- Follow my system
- To screen & scan my watchlist in a consistent manner each and every time
- Take routine breaks away from the market to refresh and gain more perspective
- Add more fundamental research to my technical research
- Concentrate on finding just one really good idea per year like Warren Buffett
- Stop searching for shortcuts or quick fixes – take baby steps
- Read at least 3 more trading books in next 3 months
- Focus, focus, focus – ignore all outside distractions
- When a strategy works, have the courage to follow it through, when it does not work, to have the wisdom to stop trading
- Find and exploit long-range sector themes
- Open my ears and keep my mouth shut
- Never panic
- Be humble
Think for myself 4 Pearls of Wisdom for Traders
· The best trades come when the crowd leans the wrong way. In other words, the majority piles in one way but profits come from trading it the other way.
· Market direction is only as strong as the leadership that guides it. Stocks play follow-the-leader even when the charts tell a different tale.
· Follow the professionals in quiet times and the public in wild times.
· Good timing on bad stocks makes more money over time than bad timing on good stocks.
101% U all Should Buy this Book and 101% u should read…………..!!
Just completed reading this Book (Already read 3 times and everytime …..Something NEW…..I learn )
Here are 10 Lessons from the Book :
1. The Process and the Practice: “Confidence doesn’t come from being right all the time: it comes from surviving the many occasions of being wrong” (27).
2. Stress and Distress: “Thinking positively or negatively about performance outcomes interfere with the process of performing. When you focus on the doing, the outcomes take care of themselves” (56).
3. Psychological Well-Being: “We can recognize the happy trader because he is immersed in the process of trading and finds fulfillment from the process even when markets are not open” (72).
4. Steps Toward Self-Improvement: “Your trading strengths can be found in the patterns that repeat across successful trades” (105).
5. Breaking Old Patterns: “Many trading problems are the result of acting out personal dramas in markets” (133)
6. Remapping the Mind: “When we change the lenses through which we view events, we change our responses to those events” (168)
7. Learn New Action Patterns: “Find experienced traders who will not be shy in telling you when you are making mistakes. In their lessons, you will learn to teach yourself” (203)
8. Coaching Your Trading Business: “Long before you seek to trade for a living, you should work at trading competence: just breaking even after costs” (230)
9. Lessons From Trading Professionals: “If you don’t trust yourself or your methods, you will not find the emotional resilience to weather periods of loss” (267)
10. Looking For the Edge: “The simplest [trading] patterns will tend to be the most robust” (311).
And a final admonition: “Know what you do best. Build on strengths. Never stop working on yourself. Never stop improving. Every so often, upset the apple cart and pursue wholly new challenges. The enemy of greatness is not evil; it’s mediocrity. Don’t settle for mediocre” (341).
Technically Yours
Anirudh Sethi/Baroda
Clear your mind
Someone asked a surfer what he does when a big surf comes along, and he goes underwater. The surfer said it was simple. “If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.“
Trading Lesson: If you let your emotions get the better of you, you could lose all of your capital. However, if you take a moment and think about your trades, you can have much better results.
Three most important elements that all great traders share
|