Archives of “trades” tag

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Cut Your Losers

  
  Education
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A big debate among traders is whether to sell your losing stocks or hold onto them. Obviously, dependent on both the short and long-term outlook of a stock each side could have a winning argument.

Whether there is a right or wrong answer, when solely using technical analysis for your stock picking analysis, YOU MUST ALWAYS SELL YOUR LOSERS.

The great thing about technical analysis is that it takes emotion out of trading; however, emotion will always be there for other traders. That is why stocks can easily dip or jump higher in a single day – generally it is a reaction to a tangible action that just happened.

When executing trades through the signals of technical analysis, there are always stop points or places where the trade is consider a failure . For the most part, that point of interest is determined by recent price action of a stock. Learn more about the art of stops.

Technical analysis all about using the setup that gives the trader the highest probability of success. Once that setup is broken, your original probability is out the window. Get it?

Basically once your stock dips below the “failure” point the criteria that you essentially bought the stock on no longer stands. Now you are just swinging into the wind hoping for the stock to come back.

Instead I recommend you cut your losses and move on to the next trade. It’s all about keeping the odds in your favor.

Your Own Trading Coach!

  
Economy, Education
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Your Own Trading Coach!We can’t control how markets move, so we can’t control whether any single trade we make will be profitable or not. But we can control how we make trades: how we enter, how we size positions, how we exit, and how we contain losses.
Having rules about all of those helps us set specific goals about the process of trading, rather than about the outcome.
The goal of your learning is to trade well, just as the goal of a pitcher is to make a good pitch. If you do that often enough, you’ll win your share of outings.

4 Ways Your Brain Is Making You Lose Money

  
  Education
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brainYour brain doesn’t like to lose

Loss aversion, or the reluctance to accept a loss, can be deadly.  For example, one of your investments may be down 20% for good reason.  The best decision may be to just book the loss and move on.  However, you can’t help but think that the stock might comeback.

This latter thinking is dangerous because it often results in you increasing your position in the money losing investment.  This behavior is similar to the gambler who makes a series of larger bets in hopes of breaking even.

Your brain remembers everything.

How you trade in the future is often affected by the outcomes of your previous trades.  For example, you may have sold a stock at a 20% gain, only to watch the stock continue to rise after your sale.  And you think to yourself, “If only I had waited.”  Or perhaps one of your investments fall in value, and you dwell on the time when you could’ve sold it while in the money.  These all lead to unpleasant feelings of regret. 

Regret minimization occurs when you avoid investing altogether or invests conservatively because you don’t want to feel that regret. (more…)

Trading Rules & Strategy

  
  Education
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Trading Rules
  • The purpose– a good set of trading rules promote growth they do not create limitations. Not trading during x period of time is not a rule, it is a limitation. Do not get me wrong there are times when you need to limit yourself but that is not all times. If you have a plan, you will be able to understand when you are most at risk of trading poorly. Eventually, you can work through it. Sometimes all it takes is being aware of it.
  • Simple-They need to be simple. They need to hang over and direct all of your actions. The only way you are going to remember and use them to your fullest ability is if you can understand them. Rules are more simple than limitations.
  • Must apply– Rules or a trading plan are only as good as your ability to apply them. Once again, you have to believe in them, you have to make them your own.
  • Cohesive- All rules needs to eventually act as one. Each rule dependent on another. This will make it easier to follow and understand which one you are breaking. This also makes the application easier.

Strategy (more…)

Re-Evaluate

  
  Education
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Stop_SignBe willing to stop trading and re-evaluate the markets and your methodology when you encounter a string of losses. The markets will always be there. Gann said it best in his book, How to Make Profits in Commodities, published over 50 years ago: “When you make one to three trades that show losses, whether they be large or small, something is wrong with you and not the market. Your trend may have changed. My rule is to get out and wait. Study the reason for your losses. Remember, you will never lose any money by being out of the market.”

A Good Reminder

  
  Education
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Trend follower Ken Tropin: In this business you need to have ample payoffs from your winning trades but make sure your losing trades do not generate big losses—so the returns have a fat right tail but not much left tail! Suppose over time you make money on half your trades and lose money on the other half. If the winning trades are double the size of the losing trades, then you have a pretty profitable investment.

The 20 Rules of Trading

  
  Education
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artimg51

  1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
  2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand. (more…)

Lehman To Sue One Or More Big Banks Over Derivatives "Fraudulent Transfer"

  
Analysis, Economy, Education
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Lehman Holdings will be filing a lawsuit against one or more major banks in regards to the valuation of derivatives. This will occur today or Monday. It is the first such lawsuit (valuation dispute) of its kind by Lehman. Some of the counterparts to Lehman’s existing trades weren’t willing to play nice, so the “estate” felt it necessary to rack up another few thousand billable hours and take this battle to court.

Which banks you may ask? The Valukas report indicated the beneficiaries of the alleged fraudulent transfer were as follows: Goldman Sachs, Barclays, Morgan Stanley, JPMorgan, Citadel L.P. and DRW Trading. Surely, another lawsuit for shady business practices against Goldman is all the firm needs right now.

 

Count down 3, 2, 1 to be a Trader

  
  Education
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3) Focus on the psychology and mental skills that are necessary to succeed in the market.  Learn to read the market charts in terms of the pscychology of the other traders.

2) Learn about risk control in depth.  What this really means, options available to you, how you can marry it up with your financial objectives in the market place etc.

1) Only when you have the above dialled in should you investigate ways of putting trades on in the most advantageous positions to generate the returns you are looking for.

I think if people were to count down 3, 2, 1 there would be many more successful traders. 

Assessing Your level of Impatience

  
  Education
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  • Do u wait for your Predetermined signal to exit a trade ?
  • Do u enter trades early with insufficient evidence ?
  • Do u change your trading plan after the market starts trading ?
  • Can u wait for the market to fill your at your price ?
  • Do u feel rushed or hurried as you trade ?
  • Do u sometimes trade just to have something to do ?
  • How does this help  or hurt your trading ?
  • One way to slow things down is to write each days’s trading plan in advance.
  • Set your firm intention to follow your plan.
  • At the first violation of the trading plan ,take a break ,and recommit to a steady application of the plan.

SUPPORTIVE BELIEFS :

  • Time is on my side
  • I have all the time I need to accomplish what I want.
  • The world is an abundant place.
  • The market is rich source of unending opportunity
  • I can be in alignment with the quiet part of me even as I watch the market.
  • The Market moves in its own rhythm ,and I can move fast or slow depending on it’s pace.
  • A person is able to create wealth slowly through trading.
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