Respect the price action but never defer to it.
The action (or “eyes”) is a valuable tool when trading but if you defer to the flickering ticks, stocks would be “better” up and “worse” down—and that’s a losing proposition. This is a particularly pertinent point as headlines of new highs serve as sexy sirens for those on the sidelines.
Discipline trumps conviction.
No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and, above all, never believe that you’re smarter than the market.
Opportunities are made up easier than losses.
It’s not necessary to play every move, it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.
Emotion is the enemy when trading.
Emotional decisions always have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. It’s that simple.
Zig when others Zag.
Sell hope, buy despair and take the other side of emotional disconnects in the context of controlled risk. If you can’t find the sheep in the herd, chances are that you’re it.
Adapt your style to the market. (more…)
Archives of “trumps” tag
rss26 Quotes for Trading & Life
1. Don’t try making sense out of it. You’re in an insane asylum – things are not going to make sense, people will do things that don’t make sense, that they cannot adequately explain. People don’t know what makes them tick, only that they tick.
2. Happiness, of course…is all in your head. If you don’t know that, if you haven’t come to that realization, you will never be happy.
3. The Bull Market Syndrome. People, when they are met with success, take personal credit for it (bull markets breed geniuses), and when they are met with failure, blame luck.
4. Actually, luck is responsible for both! If you can only die by being struck by lightning, eventually, you will die by being struck by lightning! Conversely, if a man were to live forever, and bought a lottery ticket every week, eventually, he will win the lottery, with a probability that approaches certainty. Just stay the course, keep doing today what you must do today. As Woody Allen says, “Fifty percent of success is just showing up.”
Luck Trumps Brains. To get luck, keep showing up each day with your shoes on.
5. Creativity trumps money every time.
6. Fortunately in life, you don’t have to succeed at everything you do, only a few things. One success often justifies all prior attempts.
7. You can buy great a education – you can not buy brains.
8. The Oswald Principle: Usually, the best course of action in life, is to take no action (and usually, the best thing to say is nothing!). The guys in jail or there not because they didn’t do anything. Usually, you should just sleep in! If nothing really bad happens today, as my friend Oswald said to me in eighth grade, it’s been a good day!
9. You don’t have the problems you think you do. Actually, the only real problems are health and criminal problems. Everything else is just a frivolous, meaningless nuisance.
10. Never say never. Everyone, however righteous they may claim to be, however upstanding they say they are, will, under the right circumstances commit the crime. A cold morning, wet, hungry, tired, angry….they’ll do things they never dreamed they would! (more…)
Positive awareness trumps negative self talk
The language you use as a trader can provide either positive reinforcement through honest self awareness or negative results through demeaning self talk. In other words, when discussing your trading with others or in your journal become aware of how you view yourself. Do you see yourself as an amateur, a whipping post, a loser? Do you blame an indicator or the market or an advisor for your failures and lack of discipline? When you are with others do you brag about your winners and hide your losers? All of this talk is based on fear: fear of being wrong, fear of what others might think of you and your decisions; fear of the market; fear of being afraid. When you practice positive self awareness you create a fertile learning environment that allows you to grow and progress as a BETTER trader, not focus on BECOMING a GOOD trader (implying that you are a bad one). When I work with individuals I often hear the following: “If I would just do this I would become a good trader” or “If I had your discipline I would be a able to make money.” These statements are grounded in a sense of doubt and fear. Instead, these statements should be replaced with “I am becoming a BETTER trader because I know the market cannot hurt me” AND “I am becoming a BETTER trader the more I stick with my rules.” See the difference between the two? One is focused on the joy of progress; the other on the fear of not being good enough. Are you focused on progress or failure? Listen to yourself and you will quickly figure it out. It is EASY to get down on yourself and much HARDER to remain positive in the face of adversity.
These 16 Rules Will Make You A Better Trader
1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!
2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.
3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.
4. This is Not a Business of Buying Low and Selling High: It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.
5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it, however, and fewer still embrace it.
6. “Markets Can Remain lllogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe. (more…)