Archives of “trailing stops” tag

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What As A Trader You can Control and What You Can not ?

  
  Education
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We can control:
How much we risk per trade.
How big a position size we take.
What time frame we trade.
What market we trade.
Our style of trading.
Whether we stick with our trading plan or go off of it.
If we honor our stop losses and trailing stops.
How we react to a winning or losing trade.

 We can not control:

Whip saws when the trend reverses on us.
Gaps in opening prices both up and down.
Headline risk.
Natural disasters.
Whether a trend continues or reverses the moment we open a position.
Whether any individual trade wins or loses.
How many winning or losing trades we have in a row.
 The battle for your long term trading success is won or loss in your head. The decision to whether keep going after losing money or to quit is made at the point of maximum frustration with the markets. To keep going you have to keep positive, and keep trading. Knowing the difference between you making a mistake or the market simple not matching your style will go a long way in keeping down your stress and negative self talk.

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.

 

Trading Mantra

  
  Education
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There are some things we can control as traders and some things that we can not. We need to learn the difference to limit our frustration and win in this game.

We can control:
How much we risk per trade.
How big a position size we take.
What time frame we trade.
What market we trade.
Our style of trading.
Whether we stick with our trading plan or go off of it.
If we honor our stop losses and trailing stops.
How we react to a winning or losing trade.

 

 
We can not control:
Whip saws when the trend reverses on us.
Gaps in opening prices both up and down.
Headline risk.
Natural disasters.
Whether a trend continues or reverses the moment we open a position.
Whether any individual trade wins or loses.
How many winning or losing trades we have in a row.
 

 

The battle for your long term trading success is won or loss in your head. The decision to whether keep going after losing money or to quit is made at the point of maximum frustration with the markets. To keep going you have to keep positive, and keep trading. Knowing the difference between you making a mistake or the market simple not matching your style will go a long way in keeping down your stress and negative self talk. 

Three of Buffett’s rules

  
  Education
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  • Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
    If you lose money on an investment, it will take a much greater return to just break even, let alone make additional money. Minimize your losses by finding quality companies that are temporarily selling at discounted prices. Then follow good capital management principles and maintain your trailing stops. Also, sitting on a losing trade uses up time, money and mental capital. If you find yourself in this situation, it is time to move on.
  • The stock market is designed to transfer money from the active to the patient.
    The best returns come from those who wait for the best opportunity to show itself before making a commitment. Those who chase the current hot stock usually end up losing more than they gain. Remain active in your analysis, look for quality companies at discounted prices and be patient waiting for them to reach their discounted price before buying.
  • The most important quality for an investor is temperament, not intellect.
    You need a temperament that neither derives great pleasure from being with the crowd or against it. Independent thinking and having confidence in what you believe is much more important than being the smartest person in the market. Most of the time, the best opportunities are found when everyone else has given up on the stock market. Over-confidence and emotion are the enemies of a high quality portfolio.

3 Lessons

  
  Education
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classroomUnderstand the various scenarios that the market may present you and then plan your actions for each of them. That is preparation, not prediction. Prediction tends to bind you to one point of view because when that doesn’t come true, you don’t know what to do.

Always have an exit plan. Many people could have avoided the catastrophic losses they took in the markets this year if they, or their financial professionals, had engaged in stronger risk management practices, including the use of trailing stops

Understand the various scenarios that the market may present you and then plan your actions for each of them. That is preparation, not prediction. Prediction tends to bind you to one point of view because when that doesn’t come true, you don’t know what to do.

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