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7 Trading Rules for Flash Traders

  
  Education
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1. Keep adding to losing positions. 
What the heck, price bound to turn soon. Martingale method sounds great. Consider adding on double to loosing trades. When price turns I’ll laughing all the way to the bank even I have to close my initial entries at loss.

2. Don’t use any stop-loss
Why bother with stop-loss. It’s for pussies anyways

3. Don’t waste time with money management
Thank you very much but I already know how to manage my own money. Why bother with money management nonsense.

I can use my time doing more trading and making money instead delving into all that mumbo-jumbo technical jargon.

4. Keep trading
I cannot afford to loose any opportunities. I need to be always in markets, day in day out. After all life is to short to waste golden opportunities. I cannot afford them passing by me.

5. I trust my great indicators
Why bother to learn to read charts and all that price action garbage while my sweet indicators are doing it for me. Leave the hard work to those suckers.

6. Buy the bottoms and sell the tops
I cannot understand why those people wasting their time trying to read charts. When price moves up significantly I sell, when price moves down I buy. Simple, buy low sell high as the saying goes.

7. Always check media and internet for good tips.
Let those suckers do the hard work again and I just use their work. After all all those experienced people in media cannot be far of from the truth as they have the insight knowledge.

THE STOCK TRADER’S TWO DEEP SEATED INSTINCTS

  
Analysis, Education
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One of the stock market classics that should be on every speculator’s bookshelf is Edwin Lefevre’s Reminiscences of a Stock Operator.  Written in 1923, you may assume its contents have scant application to the more sophisticated traders of today.  That assumption could not be farther from the truth, for while technology may change and access to information may level the playing field in many respects, human nature hasn’t changed, especially when it comes to managing risk and the uncertainty associated with it.

While I could list many pertinent Lefevre quotes here, one that affects all of us in one way or another is the following.

TWO DEEP-SEATED INSTINCTS (more…)

Recognize Your Mistakes

  
  Education
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“I believe that truth is healthy and that most people can get what they want if they understand what is true and learn how to successfully deal with it. But I recognize that some people have problems applying this to their and others’ mistakes and weaknesses. That is because there commonly exists a stupid paradigm that “successful” people don’t make mistakes and don’t have weaknesses, whereas the truth is that everyone makes mistakes and has weaknesses. I believe that most important difference between “successful” people and “unsuccessful” people is that the successful people recognize their mistakes so that they learn from them and they recognize their weaknesses so they develop strategies to get around them.”

Believe you can win

  
  Education
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If other traders can do well in the market, so can you. However, if you don’t have enough courage and confidence in yourself, you will never achieve success. The events over the past few years have tested many people in this way and many now believe the game is rigged against them and, even worse, that no matter what they do, in the end they will ultimately fail in the markets. In my experience, nothing could be farther from the truth and those who will win in the markets first start by believing they can do it. Of course, those who do create success also must back up that belief in themselves by working hard and show consistent determination to find, develop and exploit their trading edge.

Vantage Point teaches trading

  
  Education
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I saw this poster for Vantage Point and immediately thought of trading the markets, of how there are so many traders with so many points of view. There is also the question of the the truth: is  it the price, or is it where the price ‘should’ be? Does the truth even exist? One thing is for sure and that is, like the characters in this film, no individual has the complete picture.

A million traders, a million points of view, no truth.

Some Rules for Living Applied to Trading

  
  Education
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I ran across these rules for living, and thought they apply beautifully to the process of trading successfully.  They are as follows:

  1. Show up.
  2. Pay attention.
  3. Live your truth.
  4. Do your best.
  5. Don’t be attached to the outcome.

Show up.  Woody Allen has said 90% of the story is showing up.  And I think that can be true for trading.  Showing up means being prepared and ready before the market opens.  It means getting your entry and exit orders in the market in a timely fashion.  You’ve done your research, and you’re clear about your intentions.

Pay attention.    Watch the price action.  Be cognizant of what your chosen indicators are saying.  Know what news is breaking, and watch the market’s reaction to the news.  Be alert to twists and turns in market direction.  Don’t wander off mentally or physically.

Live your truth.  Your truth could be fundamental or technical or a combination of the two.  But if you don’t trade in accordance with your guidelines, you can get yourself on the wrong side of the situation and yourself.  Be who you say you are as a trader.  Are you honest, perceptive, courageous, steady, and disciplined?  Are you trading in the manner you have chosen or committed to trade.

Do your best.  Honestly, all you can do is your best.  But your best can get better as you practice and learn.  Learn from your mistakes, and forgive yourself past digressions.  Each day is a new day, and each day brings new opportunities.  It’s your job to capture what you can of the opportunities even as you rigorously protect your capital.

Don’t be attached to the outcome.  This is the hard part, and this is the essential part.  The results of any given trade or trading day are really not indicative of whether or not you will be profitable.  One trade or day is simply not the measure of success, and is really irrelevant.  If you’re showing up, and paying attention, and living your viable truth, and doing your best, you can accept whatever outcome develops.  Of course, if the outcome is disastrous over time, you need to go back to the drawing board and develop better methods.

Nuggets

  
  Education
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Price — The Truth, The Light, The Way

  • Work to understand price
  • Price does not move in a straight line
  • Big moves take time
  • Volatility is your friend and helps to compress time
  • Although volatility is your pal, it can cut both ways
  • If a stock moves 30% a day, then you can’t trade with a 5% stop
  • Don’t expect a volatile stock to stop behaving as it has been and only move in your favor just because you’re now in it.

 

Random Thoughts:

  • Observe but be slow to shift gears — we are trend followers, not predictors
  • It’s the market’s “job” to shake you out
    • The market will do what it has to do to create the most pain (for the most people)
    • The market will often do the obvious in the most un-obvious manner
  • Err on the side of the longer-term trend
    • DO wait for entries
    • DO use protective stops
    • DO trail and scale as offered

The realization that you are alone

  
  Education
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 At some point in time the realization strikes that you are alone in the market – there is only you. The illusion that the market can ‘do’ anything to you falls away and it becomes obvious that you are 100% responsible for everything that happens to your account. You either give yourself money, or else you give your money away – there is nothing else.

The market is one of the few arenas where there are no external constraints, except in the case of a margin call. It never forces you to take a position, long or short, or tells you to get out of your position. It does not say how long to stay in a position or what time to exit, how much profit or loss is enough. There are no external constraints at all, and as such people run riot. You are relying on yourself 100% and there is only ever you to blame.

The above is a core part of a winning trading psychology, yet its difficult to adopt. Shifting the blame is a basic way we defend our ego every single day of the week – yet in the market this practice is absolutely unsupported by price action. How can any other market participant be doing something to you if he is totally unaware of your existence or what position you hold?

Its necessary to really ponder this until the truth of it shines out:

You are alone…

Willingness to Make Mistakes

  
  Education
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“[Michael Marcus] also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Willingness to Make Mistakes

  
  Education
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“[Michael Marcus] also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

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