Archives of “trading” tag
rssTrading Rules: Strategies For Success
1. Divide your trading capital into ten equal risk segments
2. Use a two-step order process
3. Don’t overtrade
4. Never let a profit turn into a loss
5. Trade with the trend
6. If you don’t know what’s going on, don’t do anything
7. Tips don’t make you any money
8. Use the right order to get into the markets
9. Don’t be whimsical about closing out your trades
10. Withdraw a portion of your profits
11. Don’t buy a stock only to obtain a dividend
12. Don’t average your losses
13. Take big profits and small losses
14. Go for the long pull as an outside speculator
15. Sell shorts as often as you go long
16. Don’t buy something because it is low priced
17. Pyramid correctly, if at all
18. Decrease your trading after a series of successes
19. Don’t formulate new opinions during market hours
20. Don’t follow the crowd – they are usually wrong
21. Don’t watch or trade too many markets at once
22. Buy the rumor, sell the fact
23. Take windfall profits when you get them
24. Keep charts current
25. Preserve your capital
26. Nothing new ever occurs in the markets
27. Money cannot be made every day from the markets
28. Back your opinions with cash when they are confirmed by market action
29. Markets are never wrong, opinions often are
30. A good trade is profitable right from the start
31. As long as a market is acting right, don’t rush to take profits
32. Never permit speculative ventures to turn into investments
33. Don’t try to predetermine your profits
34. Never buy a stock because it has a big decline from its previous high, nor sell a stock because it is high priced
35. Become a buyer as soon as a stock makes new highs after a normal reaction
36. The human side of every person is the greatest enemy to successful trading
37. Ban wishful thinking in the markets
38. Big movements take time to develop
39. Don’t be too curious about the reasons behind the moves
40. Look for reasonable profits
41. If you can’t make money trading the leading issues, you aren’t going to make it trading the overall markets
42. Leaders of today may not be the leaders of tomorrow
43. Trade the active stocks and futures
44. Avoid discretionary accounts and partnership trading accounts
45. Bear markets have no supports and bull markets have no resistance
46. The smarter you are, the longer it takes
47. It is harder to get out of a trade than to get into one
48. Don’t talk about what you’re doing in the markets
49. When time is up, markets must reverse
50. Control what you can, manage what you cannot
The secret of discipline
Discipline seems to be that elusive element in trading, the thing you just can’t seem to get no matter how hard you try. Its a willo-the-wisp that we’ve only heard rumours about. Do you jump from system to system, method to method, change your chart constantly and have a favourite indicator of the month? We roughly call this poor discipline.
However I’ve discovered that there is something more fundamental underneath this behavior, which is a lack of belief in the system you are using. You have no faith in it. If you did, all such behavior and “discipline problems” would vanish in a puff of smoke.
To prove the point, consider this: imagine if I gave you a magic box, and if you put a dollar in this magic box and pulled the lever it would always dispense one dollar fifty.
What would you do? Yes thats right, you would do it over and over and over wouldn’t you? Probably for hour upon hour you would do it.
Would you at any time become bored with this magic box and go in search of a better one? Would you try to improve it or invent your own? If you had absolute faith in the fact that the box will dispense the dollar fifty I say you would have no discipline issues what so ever. You’d sit there putting in dollars and cranking the handle like maniac.
The problem is that in trading the dispensing of the dollar fifty is not so obvious but blurred under a win / loss ratio and other complications, but quite honestly the process of trading is the same.
Hence I say that if you are still jumping from system to system and have poor discipline, try reframing it as having no faith or belief in the system you are using.
Hallmark of a Position Day Trader
The 20 Rules of Trading
- 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!
- 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…)
Emotional Discipline
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading. I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”
Cutting losses
There is one big difference between traders, who make money and traders who don’t. It is called risk management. Even if you blindly pick your stocks, in the long-term you will make money as long as you cut your losses short. Add to risk management a proper equity selection model and then you are in top 5% in the world. The 5% that actually make money, consistently. This is the biggest secret of successful traders – cutting losses short. It saves capital and it saves your piece of mind.
If you browse on the internet, you will find thousands of articles that preach that losses should be cut short. It is well known fact and yet you’ll be surprised how few people actually utilize it, even those who write about it. Words are free. You can say whatever you want. Many people don’t practice what they preach and this is why the biggest edge someone could have is called discipline.
There are two types of traders: the ones that cut losses short and the ones that lose everything and go out of business. If you can’t define your risk in advance and most importantly if you can’t accept it, you should not be trading at all. Reading about cutting losses short will never be enough. It is human to believe that you are different and that you know better and that it will never happen to you. You have to experience it to realize it. It is part of the learning curve. I knew about this rule long before I committed serious money to trading and yet I didn’t practice it until I had my portion of outsized losses. Today, the thought of how and where I’ll exit a trade, is the most important.
I know that there are many people who preach that they don’t use stop losses and yet they are successful. Well, if they are successful doing that, then they are not really traders. They are investors and they limit their risk by hedging, which is a whole new chapter.
Glossary of Trading Terms and Phrases
Better Lucky than Smart – The only thing we have going for us.
Buyer Outside – Something sales traders say to force your hand when they get tired of watching you play stock market.
Clean up – If you believe that I have a bridge to show you.
CSA – Clusterf**k Service Alternative: When it’s easier for you client to just write a check rather than trade with your team of farm animals.
DFIU – The latest IM catch phrase meaning “Don’t F**k It Up”.
Discount Bid – Chinese trading fire drill. There’s a 1 in 10,000 chance you actually get a trade on at the price but it’s a good exercise for going through the motions and a great way to kill a few minutes and piss some people off.
Down a Touch – This thing just came off like a f**king prom dress. (more…)