- Devise a trading plan and follow it. I believe the best trading strategy is the one you’ve been able to review, back test and fits your trading style and risk tolerance. It is important that you know all vitals of the trade (the entries, possible exit targets, and where your stops may be prior to placing your trade orders.) By having a concrete plan, you assist in removing the emotion out of the equation.
- Stick with the trend!There’s a reason why the cliché “The trend is your friend” exists. It’s because it’s true! Successful traders will always tend to follow the trend when trading. Remember, if you trade with the trend, you have the majority of the market on your side.
- Control your emotions.This by far is the hardest thing for any trader to do. After all, it has been said that emotional control is 90‐95% of trading and the rest is your strategy. Therefore, I can’t say it enough times… Figure out a way to trade without emotions. To help with this matter, I believe it’s vital that you trade only with capital you can afford to lose. If you are using money that you need to pay your bills, you will almost certainly get emotional about every trade you make. In addition, I found that the more confident you are about your trading strategy, the better the chances are that you can trade with little emotional stress.
- Record your trades in a trade journal.When I first started trading, I was a bit lax about this concept. But once I started doing recording my actions, I found that I was able to identify my strengths and weaknesses. I take about 30‐45 minutes each day after I’m finished trading for the day to review my trades and to analyze any disconnect from my original plan. This helps me strengthen my conviction of my plan.
- Never trade unless the signal is clear.There are times when the market can confuse you. For me, confusion is a clear cut signal to keep out of the market. I always want my trades to be high probability signals. My signal has generated a winning percentage of more than 70%. So if I’m uncertain about a signal why would I want to take it, knowing that the chance of it winning is more like a coin toss or less? To me, that is gambling… and I do not consider myself a gambler.
- Never make trades because you are bored. Sitting on the sidelines waiting for your next trade signal to line up can be very unsettling. Many traders have learned that trading out of boredom can blow out your account in a hurry. For me, trading out of boredom while failing to follow your trading signal is gambling.
Archives of “trades” tag
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You Don’t Need to be Right to Make Money
You have to do the mental work to let go of the need to know what is going to happen next or the need to be right on each trade. In fact the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader. Mark Douglas The most successful traders have found a way to inoculate themselves from the stress of trading, and from the outcome of their most recent trades. Here’s how they do it: They have an unshakable belief in the fact that 1) While the outcome of any given trade is uncertain they believe in their edge over a series of trades. In other words they know the expectancy of their method and have confidence that over a series of random outcomes, the odds are in their favor. 2) Anything can happen! In other words they have learned to think of every trade like tossing a coin – they don’t need to know what will happen. They don’t expect to either win or lose. This firm belief in the uncertainty of any given trade, while knowing that over a series of trades you will be profitable, is very liberating. When you learn the mental discipline of letting go of the result of any individual trade you keep your mind in a state where it can easily perceive the opportunities that the market is offering. It is not distracted by focusing on your expectations of what you think should happen – it can perceive what is most likely to happen. The Body/Mind Connection
Chess Lesson That Can Really Help Profits
There are useful parallels between chess and trading. In the below quotation there is actually more than one lesson for those willing to consider it.
Pal Benko, a chess grandmaster said:
“Patience is the most valuable trait of the endgame player. In the endgame, the most common errors, besides those resulting from ignorance of theory, are caused by either impatience, complacency, exhaustion, or all of the above.”
1) Ignorance of theory
2) Impatience / Patience
3) Complacency
4) Exhaustion
See this 1 chess lesson morphed into 4 lessons:
Let me have a little go at highlighting some things that we can perhaps learn from this chess quote that apply to trading. (I’d love it if you told me yours in the comment section below. Go on, be brave and join in – dialogue is good :-))
1) Ignorance of Theory
Ed Seykota has been recorded as saying something like: until you master the basic literature and spend some time with successful traders, you might consider confining your trading to the supermarket.
Naturally with trading, getting comfortable with the basics is an important step. Make sure, however, not to end up one of those paralysed and stuck in student mode. At some point you have to be willing to move from student to trader. One of the useful ways of ‘spending time with traders’ if you are not employed in a trading firm is to utilise things like Stocktwits, trading groups, forums etc. (more…)
Characteristics of Perfect Trader
-Sense of calmness
-Ability to focus on the present reality
-Not caring which way the market breaks or moves
-Always aligning trades in the direction of the market, flowing with the market
-Not caring about the money
-Always looking to improve your skills
-Profits now accumulating and flowing in as your skills improve
-Keeping an open mind, keeping opinions to a minimum
-Accepting the risk in trading
-No Anger
-Learning from every trade
-Winning and losing trades accepted equally from an emotional standpoint
-Enjoying the process
-Trading your chosen approach or system and not being influenced by the market or
others
-Not feeling a need to conquer or control the “market”
-Feeling confident and feeling in control of “yourself”
-A sense of not forcing the markets or yourself
-Trading with money you can afford to risk
-No feeling of ever being victimized by the markets
-Taking full responsibility for your trading
When you can read the list above and genuinely say that’s me, you have arrived!
Tony Oz Trading Wisdom – The Stock Trader
Tony Oz: ‘The Stock Trader – How I make a living trading stocks.” Page 163-164
[…] The thing that drives me crazy about traders is that they always tell you about a great pick they had, and how they have left so much money behind. It is always about how much money they leave behind. I used to participate in these conversations myself, and I would share my grief about the trades that got away from me. In fact, I would even do so unintentionally while teaching a seminar. Now, every time I am about to tell a story about a trade that got away from me, I take a deep breath, and I tell myself, “No one really cares!” As they say,”Misery loves company.” You might be in pain for letting a big winner go early, and you feel you have to tell the world about it. It is not going to get you anywhere. Stop feeling sorry for yourself. It is impossible to be right all the time. When you are right and you have not capitalized on being right, you are simply wrong.
One of my dear friends bought XYZ stock at 70. The stock went up to 85, and he sold it. He never told me he was in the stock prior to him selling it, and after the stock has already declined back to 75. He was so proud of himself, because he bought it at 70 and sold it at 85, especially after the stock dropped back to 75; consequently, he did everything right. He then said to me, “keep an eye on it and buy it if it trades higher than 85. I have a stop buy order on it at 85 1/2 myself.” I never really followed XYZ stock; however, every time I spoke with my friend he would say, “did you see XYZ stock today? It went up a couple of bucks. It is my pick of the year!” A few months go by, and XYZ stock took out the 85 level. It was now at 180. My buddy is glowing. “I told you, it is my pick of the year,” he says. XYZ goes up to 240 and announces a 3 for 1 stock split. “It is my pick of the year,” my buddy says. The stock ten folds, it was a great pick. My buddy was right.
No! He was wrong! Although he made a great call, he never bought XYZ back once it hit his buy target! It was his pick of the year, and he has zero dollars to show for it. Moral of the story, put your money where your mouth is. Do not use the “I should have done…” phrase. Only speak about your actions, learn from your profits and losses.
Euro Last Support or Hope :136
Last week ,The epicenter of many of questions seems to be southern Europe, where Greece, Portugal, Spain and to a lesser extent the remainder of the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) have flamed investor concerns that burgeoning public debt may significantly weaken investor demand for sovereign debt and exacerbate an already trouble budgetary crisis.
Many investors have taken to selling the euro is as a means by which to reduce exposure to these problem areas and/or speculate on one or more of these crises spiraling out of control.
-Just look at above chart :Weekly chart includes a powerful rally of Year 2009 and more recently and two-stage selloff, starting in the first half of December and picking up steam over the course of the past 3 ½ weeks as traders looked to capitalize on weakness stemming from the problems in Greece, Portugal and Spain.
Just watch 136 level.Three consecutive close below this level+ Weekly close will take to 131.70-130 level.
-If not breaks 136 & trades above 138 level will create buying upto 140-141 level.
-Best Strategy :Sell on Rise.
-Will update more very soon.
Updated at 13:10/8th Feb/Baroda
Test yourself
Don’t look for easy trades and setups at all times. Test yourself by working hard trades and difficult markets in order to test and improve your skills. For example, if you’re uncomfortable with trading options, spend a month just trading options. If you’re uncomfortable with shorting stocks, spend a month shorting stocks. We only get better if we constantly test what we think is most difficult.
Risk Management For Traders
One of Sun Tzu’s most famous quotes is: “Every battle is won before it is fought.” The phrase implies that it is planning and strategy that wins wars and not the battles themselves. Similarly, successful traders commonly quote the phrase: “Plan the trade and trade the plan.” Just like in war, planning ahead can often mean the difference between success and failure.
Stop-loss (S/L) and take-profit (T/P) points represent two key ways in which traders can plan ahead when trading. Successful traders know what price they are willing to pay and at what price they are willing to sell, and they measure the resulting returns against the probability of the stock hitting their goals. If the adjusted return is high enough, then they execute the trade.
Conversely, unsuccessful traders often enter a trade without having any idea of at what points they will sell at a profit or a loss. Like gamblers on a lucky or unlucky streak, emotions begin to take over and dictate their trades. Losses often provoke people to hold on and hope to make their money back, while profits often entice traders to imprudently hold on for even more gains.
Take-Profit Points, trading greed, trading fear, trading emotions, financial behavior
A stop-loss point is the price at which a trader will sell a stock and take a loss on the trade. Often times, this happens when a trade does not pan out the way a trader hoped. The points are designed to prevent the “it will come back” mentality and limit losses before they escalate. For example, if a stock breaks below a key support level, traders often sell as soon as possible.
On the other side of the table, a take-profit point is the price at which a trader will sell a stock and take a profit on the trade. Often times, this is when there is limited additional upside given the risks. For example, if a stock is approaching a key resistance level after a large move upwards, traders may want to sell before a period of consolidation takes place. (more…)
Characteristics Of A Losing Trader
1. Undiscplined
2. No money management
3. Unprepared
4. Overtrading habits
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
Lose your money,but keep your discipline.
Trading is about following a method, system, or rules that give you an advantage over other market participants in the long run. There are good bets and bad bets. There are traders who follow a trading plan with discipline and others that start trading out of fear and greed after strings of losses or wins. Just because you lost money does not mean you made a mistake. Just because you made money does not mean you did not make a mistake. The goal of trading is to make money over the long term not be right every time. Losses are a part of trading. There is a big difference between a loss after following your plan versus a loss after a loss of discipline.
Losses are simply getting out of a trade with less capital than you entered it. The question is was the loss due to your method or your lack of discipline?
A mistake however can be many things, and mistakes can be profitable which is dangerous to the long term health of your trading account.
- Trading a position size so big that your risk of ruin is inevitable is a big mistake whether your individual trades are a win or a loss.
- Abandoning your method to start trading a different time frame or style than you have researched is a mistake because your edge is gone.
- Adding to a losing position is a big mistake because eventually you will be in the trade that does not revert to the mean and you lose your whole account.
- Believing that you are above your own trading plan and can start just trading as you wish is a death wish for your account.
- Trading based on beliefs instead of reality is a dangerous place to trade and is a mistake.
- Taking your entries a little sooner than they are triggered or an exit a little later than your stop loss is a mistake.
- Diversifying traded markets or stocks before doing the proper research is a mistake.
- Trading so big that your emotions interfere with your trading plan is a mistake.
- Trading when you are very sick or going through emotional personal problems is a mistake.
- Making trading decisions based solely on ego, fear, or greed is always a mistake whether you win or lose.