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Sun Tzu Art of Trading

  
  Education
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suntzu“Now the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose.”

“Ponder and deliberate before you make a move”

Think deeply and have a rational plan before you trade. Don’t act impulsively or recklessly.

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“It is the rule in war, if our forces are ten to the enemy’s one, to surround him; if five to one, to attack him; if twice as numerous, to divide our army into two. If equally matched, we can offer battle; if slightly inferior in numbers, we can avoid the enemy; if quite unequal in every way, we can flee from him.” (more…)

Traits of A SUCCESSFUL TRADER

  
  Education
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Courage…courage-1

“The credit belongs to the man who is actually in the arena, who strives valiantly; who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who at best, knows the triumph of high achievement; and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.”
Theodore Roosevelt

Persistence…persistence1

“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.”
Calvin Coolidge

The above quotes strike me as being appropriate for all of us engaged in the endless quest of trading profits. I make it a point to review these statements on a regular basis as I am well aware of the fact that I am only as good or bad as my last trade.

I accept the fact that I will never have it “made” as a trader. Each and every day is a new trading situation and I must be prepared with my trading plan. I must PLAN MY TRADE AND TRADE MY PLAN.

Trading lessons are simple—but not so easy

  
  Education
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1. Be with the trade you are in at the moment.  Stop trying to control anything but your own trade.  The markets are going to do exactly what they want to and when they want to. YOU have the power to control what YOU feel, think, believe and do.

2.  All that matters for you is the trade you are in.  You may never see that trade again.  Savor it, cherish it and be with it for as long as it lasts.

3. Celebrate your victories with yourself.  Celebrate the trade and with the trade.  The instruction is to refrain from boasting or grandiose behavior when you make a winning trade.  The markets will humble you, and pride always comes before a fall. Napoleon said that the most dangerous moments come with victory. Decry and avoid hubris.

Also celebrate your defeats with yourself and the trade because they are mistakes.  Mistakes are our greatest teachers because it is through them that we learn. What do we learn?  Not to make them again!

Constantly strive to look inward, to know yourself, to raise yourself to the highest level of authenticity.  Be rigorously honest about who you are.

Always Remember

  
  Education
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One must always remember Slansky’s admonition which is that you have to take account of whether you’re a winner or loser, and what your average rate of win is relative to the distribution of losses. If you’re a good player, never accept a bet with a small edge if it might subject you too close to gambler’s ruin, or getting stopped out of you position even if you have an edge. Many a good player doesn’t call bets in one’s favor if it has too high a variability relative to his bank roll. Many a t-grade should not be taken when the variables like an announcement put the normal tit and tat into jeopardy. I hate to force a weaker player, (assuming I might ever have that luxury again) into making a good shot. Board players are the same way. They can sometimes create a crisis, a tension where if the weaker player makes the rite move, he might pull out a draw or victory. Much better to grind the poor sinner or market into oblivion.

The Emperor’s Three Questions & Answers for Traders

  
  Education
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Tolstoy’s story “The Emperor’s Three Questions” poses three questions:

1. What is the best time to do each thing?

2. Who are the most important people to be with?

3. What is the most significant thing to do at all times?

In the story, the Emperor traveled far and wide in his Kingdom to find the answers.  One day, he came upon a hermit who lived in a small hut atop a high hill. When asked these questions, the humble hermit replied:

1. The most important time is now, because that is the only time over which you have  power and control.

2. The most important person is the one you are with right now because you never know if you will be with that person again.

3. The most significant thing to do at all times is be happy and share that happiness with the person you are with.

The trading lessons are simple—but not so easy:

1. Be with the trade you are in at the moment.  Stop trying to control anything but your own trade.  The markets are going to do exactly what they want to and when they want to. YOU have the power to control what YOU feel, think, believe and do.

2.  All that matters for you is the trade you are in.  You may never see that trade again.  Savor it, cherish it and be with it for as long as it lasts.

3. Celebrate your victories with yourself.  Celebrate the trade and with the trade.  The instruction is to refrain from boasting or grandiose behavior when you make a winning trade.  The markets will humble you, and pride always comes before a fall. Napoleon said that the most dangerous moments come with victory. Decry and avoid hubris.

Also celebrate your defeats with yourself and the trade because they are mistakes.  Mistakes are our greatest teachers because it is through them that we learn. What do we learn?  Not to make them again!

Constantly strive to look inward, to know yourself, to raise yourself to the highest level of authenticity.  Be rigorously honest about who you are.

Taking personal responsibility for your thoughts, feelings and actions is the first step to true inner peace—both in trading and in life.  Never forget the ten most important words you can ever and always ask yourself:

Am I doing the best I can do right now?

The ultimate victory in competition is derived from the inner satisfaction of knowing that you have done your best and that you have gotten the most out of what you had to give…Howard Cosell

Trading Rules – For A Survival Of The Trader

  
  Education
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1. Plan your trade. Trade under the plan.

2. Write down your results.

3. Keep positive mood irrespective of your losses.

4. Do not bring the market from work to home.

5. Constantly raise level of your purposes.

6. Buy during bad news and sell during good.

7. Do not be afraid to buy at high position and to sell at low.

8. Always have well planned time for market studying.

9. Isolate yourself from opinions of others.

10. Always be quiet, persevering and consecutive; operate rationally.

11. Never enter into the market because you are bored to be out of the market. To be out of a position is also a position.

12. It is not necessary to enter and leave from the market too frequent.

13. Traders usually study not at profits, but at losses. Study every loss for improvement of the knowledge about the market.

14. Successful trading is combined and often accompanied by negative emotions. The most important element of successful trade is you are.

15. Always discipline yourself to follow certain rules in advance.

16. Do not allow big profits to turn in big losses

17. You should have the plan, you should know the plan – and you should follow it.

18. Perceive losses with advantage.

19. Halve your profit and never risk more than 50 % of profit operating against the market.

20. A key to successful trade – self-studying.

21. There is no so much distinction between getting in the market and losing there in natural abilities, that in ability to study the errors correctly. (more…)

4 signs of out of control trading

  
  Education
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1) Overtrading:  This is a very common problem for an out of control trader.  If you find that your size is much bigger than normal or you are trading at times that you don’t usually traffic, then make sure you slow down and write down a plan and stick to it.

2) Comfort in bigger losses:  When I hear a trader feeling comfortable about larger than usual losses that scares me.  This comfort tells me that the trader is not thinking rationally as losses should never be tolerated and especially outsized losses.

3) Trading new securities:  If a trader deviates at all from the strategy that made him successful, especially when he is a down streak, this concerns me.  

4) One sided trading:  This sign is correlated to having an opinion on the market.  If I see a trader constatnly focused on one side, regardless of what the broad market is doing, this person is so focused on being right that nothing else matters.  It is so important to be right that even if they make up 20% of what they lost it will seem like a victory to them.

Let the market make the decisions, not your ego.

  
  Education
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The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.

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