Archives of “trading” tag

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Activity and Inactivity

  
  Education
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active-inactive

I’ve noticed that my trading is more and more characterised by periods of doing a lot of trading, followed by periods of doing nothing except watching.
This seems to be a positive thing, as the old days consisted of trading every day no matter what the conditions, where as now I find that the markets will go into a mode that I just do not like the look of. In such cases if I try to force something, to “find a trade”, then I’ll get burned for sure.
To some degree I think this is because I have not yet spent much time on developing my strategies for trading insides large consolidation patterns. Of course it gets easier as they become more developed but by that time they are also getting old, and in the past I start making good trades in them just as they are about to end. The hard parts to trade are the start of trends / end of consolidation, and the end of trends / start of consolidation. These are times when the market is changing its basic mode, and are great places to lose money.

Over Trader Anonymous : Here's A Great Tip

  
  Education
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overeating

Over trading is the single most damaging thing to an account. the commissions alone will eventually slowly eat away at capital and that’s not even taking into consideration the mental and emotional drain you will go thru. Your soul goes into a dark place when you over trade and get poor results. Sometimes it made me even angry and i used to lash out at others.It took me years to figure out that trading more ironically meant more losses, (more…)

Cutting Losses

  
  Education
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cuttinglosses

I simply cut my losses and by doing so kept them small. I’ve had my share of bad decisions in my trading career and keeping losses small in order to avoid huge losses is the toughest part.

Why is that so? From a psychological point of view nobody wants to sell at a loss as in most situations in life making mistakes and admitting them is associated with being a loser. That’s why most people prefer sticking to a losing position. They don’t want to be labeled a loser. So they start hoping their position will turn around and end up being a huge winner. The stock then keeps tanking. Then they hope they will be able to sell for a break even. The stock then goes down even more. That’s when being objective and balanced isn’t possible anymore. Losses have become huge and they are trapped.

The cost is simply huge. You lost money. You lost time. There’s an opportunity cost as well as during that time other stocks would have made you a profit. You lost huge amounts of energy as you couldn’t get this stock out of your mind.

Notice I’ve made ample use of the word ‘huge’. Avoid huge losses at all cost. Avoid thinking in terms of huge gains as well. Stay balanced. Stay focused and calm.

Six Questions Worth Asking at the End of the Trading Day

  
  Education
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six2What opportunities did I miss and what could have alerted me to those opportunities?
* What kind of trades are making me money? Where am I losing my money? What can I do about that?
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* When I took heat on trades, what could I have done to enter at better prices?
* Was the level of risk that I took in trades commensurate with my conviction in the trade ideas?
* What were the themes and markets driving prices today that I should be alert for tomorrow?
* What are the themes, economic reports, and markets that might drive prices overnight that I should be alert for in the morning?

Emotional Intelligence

  
  Education
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emotional1

Dictionary meaning of emotional :actuated, effected, or determined by emotion rather than reason
Dictionary meaning of intelligence : the faculty of understanding

If you are a trader already and have money in the stock market then you know how you react or respond when your trades don’t happen the way you want them to. It is just a matter of learning from your trades and not being attached to them. It is a good idea to have some money to donate so that when the market hasn’t gone your way, you know that the loss is not really a big deal and that you can make it back. (more…)

Sun TZU and Trading

  
  Education
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artimg48 

As a trader you must have three pieces working in synch. Your equipment, your trading tools, and your mind. The Art of War by Sun Tzu is a book that has been applied to every facet of human experience. While originally meant to be a book that taught war strategies the lessons it imparts can and will change your life. (more…)

Market Wisdom From Bernard Baruch

  
  Education
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bernardbaruch

You don’t read a lot about Bernard Baruch anymore, but his teachings about the market are useful today as they always have been. There are several good books about him including his own “Baruch: My Own Story” which I recommend highly especially for those of you looking for a book to take with you on your vacations.

Baruch started out as most traders do – i.e. losing lots of money because he lacked the knowledge, experience, & discipline. “You have to lose money in order to better yourself.” (more…)

Essentials of a Winning Psychology

  
  Education
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fear-1
Four fears that block a winning psychology:

  1. Fear of Loss
  2. Fear of being wrong
  3. Fear of missing out
  4. Fear of leaving money on the table.

Realize that trading is based on probabilities, as such, every trade is unique. In other words, the past does not equal the future.

Probability thinking manifest other states and beliefs:
  • Because we know that we will succeed in the long run and because we know we will protect ourselves no matter what the market does, we acquire the state of “self trust” and the state of being “carefree”.

In turn these states allow us to remain….

  • Focused, confident and carefree when we are experiencing the inevitable prolonged drawdown.
  • Because at the micro level we know that the market is random, we will not allow euphoria to set in and lead us to reckless trades. Each trade will only be one in a series of probabilities.
  • We will view market information not as a source of pleasure or pain but merely as data providing us with opportunities.

Personal Attributes Essential to a Winning Mentality
  • Awareness – the ability to step outside ourselves and observe. The more effectively we can do this, the easier our progress to “Acceptance”.
  • Honesty – the ability to seek to perceive reality in spite of our filters.
  • Courage – the willingness to bear the pain brought about by our awareness and honesty.
  • Commitment – the willingness to do whatever is necessary to achieve our goals

To succeed, a trader must have a vision about where he is heading, and must internalise that a winning attitude is total submission to the trading outcome.
This means managing Fear and Euphoria. To do this, we need to ACCEPT, with every fibre of our body, the belief that at the micro level the market is uncertain and unpredictable and at the macro level it is relatively certain and predictable.

Observation

  
  Education
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observation

I don’t think the alternatives are trading to not lose vs. imprudent boldness. Rather, the alternative is to trade or not to trade. One should trade when there is a demonstrable edge in one’s favor: then it’s trading to win. If one lacks that edge and (rightly) fears losing, the rational choice is to refrain from trading. The pallbearers enter the picture when there’s a need to trade that exceeds the limits of one’s demonstrable edge. Such “boldness” also manifests itself in improper sizing of trades and poor trade management. It has nothing to do with trading to win–and everything to do with the need for stimulation. Trading to not lose is certainly more effort than it’s worth and also expensive. Unlike the “bold” trader, the fearful trader exits positions prematurely, fails to enter trades with good edges, and undersizes positions.Most trading problems boil down to deficient self-control and resulting impulsivity. The impulse for excitement and the impulse to avoid harm are flip sides of the same coin–and not infrequently alternate within the same trader. Both take the trader away from the prudent trading to win.

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