1. Undisciplined
2. No money management
3. Unprepared
4. Over trading
5. Easily tilted
6. Does not trade with probabilities
7. Trades emotionally without controlling: greed, hope, fear, and euphoria
8. Does not have a trading plan and strategy
Archives of “trades” tag
rssMark Douglas : Trading in the Zone
Without doubt the foremost reading, it seems, in trading circles. Douglas’ book, in my view, deserves its place at the top of a traders reading list. Whether you are trading currencies, commodities, stocks or futures this book will have something for everyone. The book tackles the psychology involved in being a successful trader. The book attempts to give the reader the tools to develop the Confidence and discipline to become and consistent winner.
I think the book is a superb read and although I cannot say right now how succesful it has been, it is one of the few books that I pick up nearly every day and read another chapter again and remind myself of some of Douglas’ inspiring ideas and thoughts.
The book ends with a great 20 trades learning excercise that is a must.
The key learnings I get from reading this book :
1)The market is random; you cannot predict it. Unless you know every individual who has a position in the market and you know their strategy for each trade it is impossible to know what will happen next.Give up trying to predict, and focus on the now moment and managing yourself , your money and your strategy.
2)The Power of Association. Douglas uses throughout the book a story about a boy and his fear of dogs. He uses this analogy to describe how previous experiences that have given pain, or expected pain, to us will mean that our mind will do everything possible to protect itself from future pain when it is exposed to similar circumstances at some point again in the future. i.e. If you recognise a market pattern where previously you lost a trade you will be compelled to exit the trade at that point or not take that trade on; because you will not want to experience pain. Douglas again talks about the here and now and describes how we can overcome these internal obstacles.
101%….Don’t miss to Read this Book !!!!
Mind over the Market Video Interview with Mark Douglas
What is the most important part of your trading? The chart? Managing the risk? Finding the Holy Grail of trading that can’t lose? (I have bad news for you about the Holy Grail).
I am convinced how a trader emotionally reacts to the markets while trading will determine their success more than anything else.
Mark Douglas is a trader and author of Trading in the Zone and The Disciplined Trader two great trading books for traders at all levels that deal primarily with how to develop the correct mindset to be a successful trader.
My favorite Mark Douglas quotes.
Trader Psychology: (more…)
Don't Lose the Lesson!
Losing trades can have the same affect – if you let them. However, if you look at each trade as just one of your next 100 or even one of the next 1000 trades you’ll make in the next year, you’ll begin to attach far less emotion to the outcome of each trade. Detaching emotion from individual trades is one of the best ways to build confidence in yourself and your long-term success as a trader.
Losses are inevitable; they simply are a part of trading. How you handle losses is what can ultimately determine your level of success moving forward. Even a losing trade can be beneficial if you take what you can from it. Ask yourself, “Why did this trade fail? Is it a function of a market reversal, or a miscalculation on my part? Was my stop-loss set too close as a result of too large a position? Did I micromanage this trade and adjust my numbers on the fly? Did I completely abandon my trading plan?” A loss means you’ve already paid the tuition, so you might as well stick around for the lesson.
Ask the right questions when a trade doesn’t work out or when you hit a rough patch with your trading. The answers you find can help you greatly as you progress as a trader. Whether those answers allow you to avoid making the same mistake again or if they just give you some closure following a bad experience, take what positives you can find and move forward.
Bottom line: cut the loss but keep the lesson!
Never turn a winner into a loser.
We have all violated this rule. However, it should be our goal to try harder not to violate it in the future. What we are really talking about here is the greed factor. The market has rewarded you by moving in the direction of your position, however, you are not satisfied with a small winner. Thus you hold onto the trade in the hopes of a larger gain, only to watch the market turn and move against you. Of course, inevitably you now hesitate and the trade further deteriorates into a substantial loss.
There’s no need to be greedy. It’s only one trade. You’ll make many more trades throughout the session and many more throughout the next trading sessions. Opportunity exists in the marketplace all of the time. Remember: No one trade should make or break your performance for the day. Don’t be greedy.
Trading Quotes
“Rich people don’t make big bets. Really rich-and smart-people don’t make big bets. First they are not out to “prove” anything, they are out to make more money, and second, they know that risk control is as important as the other two legs of speculation, selection and timing. That is all this business of … trading gets down to, selection, timing, and risk control.” “Trading well is not easy, but it is something you can learn if you have the perseverance combined with the humility to be realistic about your own strengths and weaknesses.” “Most often, traders have four fears. There’s the fear of being wrong, the fear of losing money, the fear of missing out and the fear of leaving money on the table. I found that basically, those four fears accounted for probably 90% to 95% of the trading errors that we make. Let’s put it this way: If you can recognize opportunity, what’s going to prevent you from executing your trades properly? Your fear. Your fears immobilize you. Your fears distort your perception of market information in ways that don’t allow you to utilize what you know.” |
15 Trading Rules
1. Don’t be a tradeaholic
- Someone who has to have a trade on at all times or they feel their missing out
2. You trade to make money – not for fun, games, or to escape boredom
3. Never add to a bad trade
- This may work occasionally, but will hurt you in the long run
4. Once you have a profit on a trade, never let it turn into a loss
5. No hoping, no wishing, no would’ve, no opinions, no should’ve
6. Don’t be a one way trader – be flexible, opportunities on both sides
7. Know your risk on each trade. Trade with stops to limit losses
- Sell down to the sleeping point (My favourite since 15 yrs )
8. Look for 3-1 profit objective trade
9. When initiating a trade, always get your price (use a limit order)
10. When liquidating a bad trade, always use a market order
11. Have a plan. Trade it. Monitor it.
12. Make 10 points on a million trades, not a million points on one trade
- Aim for consistency (it adds to your batting average)
- There are more opportunities to make many reasonable trades
13. Learn from your own mistakes
14. Pay attention to weekly lows and highs
15. Technicals and fundamentals are equally important.
How do *your* coping efforts work for you?
Take a look at how well you trade after a position has gone against you. Do you trade better after a drawdown or worse?
How about after you have a few winning trades, days, or weeks in a row? Do you trade better or worse? Breaking down your performance as a function of recent performance will tell you a great deal about how effective you are in coping with risk and reward.
The other excellent indicator of whether your coping is working for you is your emotional experience during trading. If you find that anxiety, overconfidence, frustration, and stress are pushing you into poor decisions, you know that you’re not coping well with the uncertainties of markets.
Finally, it is helpful to identify the sequences of coping behaviors that you utilize when you’re making good decisions and the sequences when you’re trading poorly. Knowing how your individual coping responses come together to form coping strategies can help you cultivate your coping strengths.
Tracking how you deal with challenges when you are at your most effective enables you to create a mental model of that coping that you can call upon during periods of high stress. We cannot avoid the stresses of trading, but those do not have to generate distress and biased decisions.
The story of 2 monks and the power of letting go
I believed you have heard of many versions of the story about 2 monks. No? Let me refresh your memory, and explain to you how it is applicable to trading.
There were two Buddhist monks walking along the bank of a river, making their way to back to the temple.
As they were walking, they came across a beautiful lady standing at the side of the river. She stopped them and asked if one of them is willing to help her across the river. The junior monk did not bulge but the senior monk without any doubt, carried her on his back and across the river. The senior monk put her down on the other side and she thanked him profusely and hurried off. The junior monk was taken aback by the gesture but kept to himself. The senior monk returned and they carried on with the journey.
As they walked, the junior monk kept brooding about the incident until it was unbearable and broke the silence, “why did you carry that woman across the river? Knowing that our religion forbid us to touch women!”
The senior monk replied peacefully, “I put her down a moment ago and you are still carrying her.” (more…)
Winners Trade to Win
As you already know, I am not a slave to conventional wisdom. It is my belief that most popular beliefs held by the masses are not wise at all. This applies to all walks of life, not just the stock market.
The latest bit of unwise conventional wisdom is the idea that one must “focus on not losing money in order to make money”. Play it safe and protect your capital has been a popular mantra over the past month. What a load of crap.
You know what happens when you focus on not losing money? You lose it. Either that or you make meager gains (all hail consistency, as in consistently average!). It’s akin to an athlete playing not to get injured. That is when you get hurt. The team that plays not to lose rarely wins.
In trading, playing not to lose will cause you to pass up on good trades and scare you out of trading volatile, yet lucrative markets. If you have put in the blood, sweat and tears that accompany hard work and dedication, know what you are doing, and have a sound methodology and edge, don’t ever play not to lose.
Note that this doesn’t mean you throw caution to the wind. On the contrary, a trader must be vigilant about managing risk, position size and ones emotions. These three factors, along with having an edge, allow one to play to win, rather than lose, and put on winning trades.