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Accept The Risk

Is the money you risk on each trade real for you? Do you really accept the amount of money you are risking and are you willing to let it go? I find it helps me to think of risk as the amount of money I’m willing to spend to find out whether my edge is going to work on this trade. Note that I say spend. I actually think of each trade as though I’ve purchased a lottery ticket. I think that the amount of my stop has already been paid to find out if the edge works, so that as the trade proceeds I’m not afraid to lose anything. This is why the first point about knowing your expectancy is so important – if you trust your expectancy over a series of trades you don’t have to be afraid of the outcome of any single one.

Cut Losses Short

Cut losses short is the sister rule to the let profit run, and is usually just as difficult to implement. In the same way that profitability comes from a few large winning trades, capital preservation comes from avoiding the few large losers that the market will toss your way each year. Setting a maximum loss point before you enter the trade so you know before-hand approximately how much you are risking on this particular position is relatively straightforward. You simply need to have a exit price that says to you this trade is a loser and I will exit before it gets any bigger. Due to gaps at the open, or limit moves in futures we can never be 100%
certain that we can get out with our maximum loss, but simply having the rules, and always sticking to it will save us from the nasty trades that just keep on going and going against our position until we have lost more than many winning trades can make back.

If you have a losing position that is at you maximum loss point, just get out. Do not hope that it will turn around. Given that trades are either winners or losers, and this one is shouting Loser at you, the chances that it will turn around and become a large winner is tiny. Why risk any more money on this losing trade, when you could simply close it out (accept the loss) and move on. This will leave you in a much better place financially and mentally, than holding the position and hoping it will go back your way. Even if it did do this, the mental energy and negative feelings from holding the losing position are not worth it. Always stick to your rules and exit a position if it hits your stop point.

A GOOD Trader WILL:

Excerise
(EXERCISEEEE ! 🙂 )

1. Always wait for the setup: No Setup-NO Trade.

2.Knows that THE BEST trades work almost right away.

3.Never takes a big loss. If it doesn’t ‘feel’ right. Remove it!

4.Always perfecting his craft

5.Is patient with winning trades:Impatient with trades that fight back.

6.Knows that DISCIPLINE is the key to winning at everything!

7.Never gets emotionally attached to trades, trading, losses or profits.

8.Will always trade with the size that makes him unemotional

Positive Affirmations

affirmationsRepeat the words yourself to ingrain them in your brain.
Repeat the words yourself to ingrain them in your brain.

  • I am a consistent trader.
  • I have complete confidence in my abilities.
  • – I follow my trading plan.
  • I know the markets today are capable of doing anything.
  • I am prepared to trade what I see.
  • I will have winning and losing trades today.
  • I set stops immediately after I enter a trade.
  • I will never add to a losing position.
  • I have complete confidence in my abilities.
  • I have supreme concentration.
  • I will immerse myself into the market flow.
  • I will take what the market offers up to me.
  • I know what my trading edge looks like.
  • I will not hesitate when my system gives me a signal.
  • I have complete trust in probabilities.
  • I will buy when my system signals me to buy.
  • I will sell when my system tells me to sell.
  • I will trade responsible size, never risking too much.
  • I am moving closer to my goals everyday.
  • I am a skillful trader but always striving to do better.
  • I learn from my mistakes so I do not repeat them.
  • I have complete confidence in my abilities.
  • I am an excellent trader.

Are you A Discretionary Trader? How would you be able to tell?

Here is a quiz that will help you decide. Answer Yes or No to the following questions.
1. Do you sometimes buy newsletter recommendations without having a real plan for how you’ll get out of the trade?
2. Do you occasionally (or often) take trades based upon some interesting indicator that you learned in a workshop (i.e., when you see that indicator go, you usually get into a trade, but again you have no real plan about how you’ll get out of the trade)?
3. Do you trade three or more different systems in the same account?
4. Do you trade more than ten different systems?
5. Do you sometimes enter a trade and later not remember why?
6. Are you unsure of how many systems you have?
7. Do most of your systems lack a complete set of rules to guide your behavior?
8. Are your systems equivalent to the setups used to get into the trades and nothing more?
9. Are you unable to list the rules for the last trade you made?
10. Are you able to list the rules for any of the last five trades you made? (more…)

A Trade or a Gamble?

I love to trade a lot – which is of course a euphemistic way of saying I love to gamble. Although I have been to Vegas more than a dozen times I never laid down so much as a dollar bet in any casino. I have absolutely no interest in backjack, craps, slot machines or any other games of chance and I look down with disdain at the excited masses crowding the cavernous Vegas gambling halls. But deep down, if I am honest with myself, I have to admit that whenever I trade a lot I am just as much of a sucker as every hopeless loser that gives up his hard earned money to Steve Wynn or Sheldon Adelson

If you are constantly trading just for the sake of trading, just for the rush of being “in the game”, just for the momentarily thrill of being right you are gambling. You are trading without an edge, without any solid information and are therefore completely vulnerable to the random vagaries of price. (more…)

Where Is Your Head When You're Trading?

head-tradingWhere is your head during the market day?

Are you looking through the rear-view mirror, criticizing your last trade?
Are you looking at your profit/loss for the day and filtering trades through that?
Are you distracted by people or the phone?
Are you thinking about yourself and how well or poorly you’ve been doing?
Are you locked in an opinion of what the market “should” be doing instead of observing what it *is* doing? (more…)

Hesitation

Hesitation-You are watching a stock that has all the signals you look for in an opportunity. The proper point to enter comes, but you wait. You second guess the opportunity and don’t buy the stock. Or, you bid for the stock at a price that is not likely to get filled if the opportunity does pan out the way you anticipate it will. As a result, you get left behind while the market pushes the stock higher. A short while after the initial entry signal, when the stock has made a decent gain, you decide to finally enter the trade. After all, the market has proven your analysis correct, so you must be smart, and right! Not long after you enter, the stock turns south and you end up with a losing trade. If only you had bought when you first thought about it.

The Solution

This is really just a confidence issue. You are either not confident in your ability to analyze stocks, or you are not confident in the methodology that you are using to pick trades. (more…)

40 TRADING TIPS

1. Trading is simple, but it is not easy.

2.  When you get into a trade watch for the signs that you might be wrong.

3.  Trading should be boring.

4.  Amateur traders turn into professional traders once they stop looking for the “next great indicator.”

5.  You are trading other traders, not stocks or futures contracts.

6.  Be very aware of your own emotions.

7.  Watch yourself for too much excitement.

8.  Don’t overtrade.

9.  If you come into trading with the idea of making big money you are doomed.

10.  Don’t focus on the money.

11.  Do not impose your will on the market.

12.  The best way to minimize risk is to not trade when it is not time to trade. 

13.  There is no need to trade five days a week.  

14.  Refuse to damage your capital.

15.  Stay relaxed.

16.  Never let a day trade turn into an overnight trade.

17.  Keep winners as long as they are moving your way.

18.  Don’t overweight your trades.

19.  There is no logical reason to hesitate in taking a stop.

20.  Professional traders take losses because they trust themselves to do what is right.

21.  Once you take a loss, forget about it and move on.

22.  Find out what loss parameters work best for your setup and adjust them accordingly.

23.  Get a feel for market direction by “drilling down” (looking at multiple time frames).

24.  Develop confidence by knowing and executing your trade setups the same way every time.

25.  Don’t be ridiculous and stupid by adding to losers.

26.  Try to enter a full size position right away.

27.  Ring the register and scale out of your position.

28.  Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment.

29.  You want to own the stock before it breaks out and sell when amateurs are getting in after the move.

30.  Embracing your opinion leads to financial ruin.

31.  Discipline is not learned until you wipe out a trading account.

32.  Siphon off your trading profits each month and stick them in a money market account.

33.  Professional traders risk a small amount of money on their equity on one trade.

34.  Professional traders focus on limiting risk and protecting capital.

35.  In the financial markets heroes get crushed.

36.  Stick to your trading rules and you will never blow up your trading account.

37.  The market can reinforce bad habits.

38.  Take personal responsibility for each trade.

39.  Amateur traders think about how much money they can make on each trade.  Professional traders think about how much money they can lose.

40.  At some point all traders realize that no one can tell them exactly what is going to happen next in the market.