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George Soros – "It's not whether you're right or wrong…"

  
  Education
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The full quote – “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

Soros’s style of trading is very unforgiving and he is always ready to admit when he is wrong and cut his losses. Admitting one’s mistake is one of the key things to successful trading – he or she will be psychologically prepared to take action to reduce their losses without much delay.

How many of us always hold on to unrealized losses, and hope or even believe that the stock will regain its price? I guess many of us are guilty of that. Some stocks drop in price for a reason and there are even more reasons for them to drop further until you realize how bad your unrealized losses are!

As Soros take huge positions and high leverage in his trades, he has to be decisive to cut loss so as to lose as little as possible when he is wrong. On the other hand, when he is right, he make sure his profits can more than overcome his losses several folds. He understands he cannot be right all the time – the principle is to minimize your loss when you are wrong and maximize your profit when you are right.

Trade Like an O'Neil Disciple:Must Buy -Must Read !

  
  Education
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Here is my brief review. Detail review will follow later.
In a year around 40 to 50 books on trading are published, I read most of them, there are very few which have actionable trading ideas and can help you enhance your trading skills. Trade Like an O’Neil Disciple: How We Made 18,000% in the Stock Market is one of the best books I have read in recent years. I am already reading it second time and taking extensive notes.
If you are growth/ IBD/ momentum/ CANSLIM kind investor you will find practical ideas and some new ways of entering and exiting trades. You will also learn how explosive returns are possible under right circumstances using those methods.
The book also goes in to details of short selling and has couple of good short selling strategies.
The book is not for beginners and those looking for simple methods without much effort, you need to have some foundation about growth and momentum investing before appreciating and understanding it.
A must buy for growth/momentum investor who want explosive returns…..

5 Trading Wisdom

  
  Education
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“Never let the fear of striking out get in your way” – Babe Ruth

“If you can’t take a small loss, sooner or later you will have to take the mother of all losses” – Ed Seykota

“Don’t think about what the market is going to do. You have absosutely no control over that. Think about what you are going to do if it gets there.” – William Eckhardt

“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing money” – Marty Schwartz

“The worst mistake a trader can make is to miss a major profit opportunity. 95% of the profits come from only 5% of the trades” – Richard Dennis

Spotting the Best Trades

  
  Education
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Let me begin by telling you of my system for isolating trades with odds 10 to 1 in my favor. Those are million dollar odds. Unfortunately, I still haven’t developed a method for calling all the big moves all the time. What I have done is develop a set of criteria that will, when they coincide, tell you the odds are heavily in favor of either an up or down move.

This method seldom speaks, but when it does, you have as close to a sure thing as you’ll ever get. As you will see, this method will not call all the swings, but that’s not its purpose. Its function is to segregate the super trades from trades that are questionable.

Trading in this manner is much easier because it allows you to take a longer term view of the market. I have found there is no need to monitor the market on a trade-by-trade basis, or, at times, even a daily basis. The signals are so strong that you don’t need to concern yourself with a microscopic view.

I use two major tools for selecting “bankable trades”. They are: 1) premium relationships, and 2) open interest. When these two click, the odds are 75% in your favor. To further substantiate the 75% probability, I also check contrary opinion, the market’s reaction to news, trend direction, and a few chart formations.

by Larry Williams, excerpt from his book, How I Made $1,000,000 Trading Commodities Last Year.

Trading Quote

  
  Education
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wins-losses“There is a random distribution between wins and losses for any given set of variables that defines an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like “right” and “wrong” or “win” and “lose” no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”

Few more Seconds

  
  Education
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Many of us have made trades after a quick look at our charts and later we look back and say “I wish I would have taken a little more time before I did that”.

In the world around us, everyone is always rushing to do everything especially in making a decision. I understand that sometimes you are forced to make quick decisions, however as a trader, you will regret quick decisions more times that you will congratulate yourself.

If we have committed to our risk management, money management, trading strategy along with our overall plan for our session, then I recommend that if you truly want your sessions to be more successful, take a few more seconds in every step.

Take a few more seconds to not just look at the charts, but to truly see and understand what you see. Take a few more seconds to determine where you entry point and exit point is and not just wing it.

Take a few more seconds to prepare and instead of just looking and deciding, clearly see and understand what you see and you will enhance your trading performance.

Trading Wisdom Via Linda Raschke

  
  Education
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It’s important as a trader to always be studying and sharpening your skills. Here is a short video jammed packed with concepts from Linda Raschke that all traders can use in their trading plan.
Key concepts from the video:

  • The fewer decisions that you can make during the trading day, the better off you will be.
  • All exit strategies should be based of your initial entry.
  • 75% of trades test out best by taking your profits quickly.
  • Shorter the time frame, the less justification for trailing stops.
  • Trend followers often pay up to ensure they get a position.

 

Market Beating lessons

  
  Education
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BULL-FIGHTOn the school of hard knocks:

The game taught me the game. And it didn’t spare me rod while teaching. It took me five years to learn to play the game intelligently enough to make big money when I was right.

On losing trades:

Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul.

On trading the trends:

Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market the game is to buy and hold until you believe the bull market is near its end.

On sticking to his plan:

What beat me was not having brains enough to stick to my own game – that is, to play the market only when I was satisfied that precedents favoured my play. There is the plain fool, who does the wrong thing at all times everywhere, but there is also the Wall Street fool, who thinks he must trade all the time. No man can have adequate reasons for buying or selling stocks daily – or sufficient knowledge to make his play an intelligent play. (more…)

Risk Management -From ASR TEAM

  
  Education
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  • When markets aren’t trending; risk management is everything.
  • In a volatile market, capital preservation is the most important consideration.
  • Don’t be afraid to take small losses.
  • Not to hang on to my losers hoping they will come back.
  • Put in a stop right away and stick to it.
  • Set stop losses every time I trade.
  • Once again I learned that the first loss is the best loss. I let a few go too long again this year.
  • The importance of waiting for setups and limiting losses
  • Opportunities are easier to make up than losses!
  • Must have a stop on every position no matter how strong an opinion I may have!
  • Risk management. I took some losses because I made some trades based on hope and not on price action.
  • Leverage doesn’t work so well during market corrections and makes risk management difficult.
  • In my short-term trading I learned to place stops against my will and philosophy.
  • Faster exits for less risk.
  • Patience!

Key Lessons For All Traders

  
  Education
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Find a Trading Method That Fits Your Personality

Traders must find a methodology that fits their own beliefs and talents. A sound methodology that is very successful for one trader can be a poor fit and a losing strategy for another trader. Colm O’Shea, one of the global macro managers I interviewed, lucidly expressed this concept in answer to the question of whether trading skill could be taught:

If I try to teach you what I do, you will fail because you are not me. If you hang around me, you will observe what I do, and you may pick up some good habits. But there are a lot of things you will want to do differently. A good friend of mine, who sat next to me for several years, is now managing lots of money at another hedge fund and doing very well. But he is not the same as me. What he learned was not to become me. He became something else. He became him.

Trade Within Your Comfort Zone

If a position is too large, the trader will be prone to exit good trades on inconsequential corrections because fear will dominate the decision process. Steve Clark, an event driven manager, advises, you have to “trade within your emotional capacity.” Similarly, Joe Vidich, a long/short equity manager warns, “Limit your size in any position so that fear does not become the prevailing instinct guiding your judgment.”

In this sense, a smaller net exposure may actually yield better returns, even if the market ultimately moves in the favorable direction. For example, Martin Taylor, an emerging markets equities manager, came into 2008 with a very large net long exposure in high beta stocks in an increasingly risky market. Uncomfortable with the level of his exposure, Taylor sharply reduced his positions in early January. When the market subsequently plunged later in the month, he was well positioned to increase his long exposure.

Had Taylor remained heavily net long, he might instead have been forced to sell into the market weakness to reduce risk, thereby missing out in fully participating in the subsequent rebound.  (more…)

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