Archives of “when in doubt” tag

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Ten overriding principles

  
  Education
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  1. Always live to fight another day
  2. Entries must have a statistical edge
  3. Patience and discipline
  4. Be a jellyfish (swim with the current)
  5. Trade only liquid securities
  6. Focus on trying to capture the middle 80% of a move
  7. Know your exit points when you open a position (and stick to them!)
  8. When in doubt, reduce position size by 50%
  9. Limit losses to 2% of total equity for any single trade
  10. Start each day with a clean financial and emotional slate

The above list is relatively generic, but it helped provide me with a framework for organizing how I would approach trading as a business, what strategies I should adopt, how those strategies should be executed, and ultimately defining what success should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even more important, I believe, is the process that one goes through in order to arrive at these rules and to make sure that as new market situations unfold and new blind spots are revealed, the rules and guidelines are enhanced to maximize the opportunity for the trader to continue to grow and develop.

10 Trading Thoughts

  
  Education
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ten101. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.

I have always found getting out to be the best of all three choices.

  1. No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
  2. Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
  3. If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
  4. The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
  5. Stops are not for sissies.
  6. Plan your trade, then trade your plan. He who fails to plan, plans to fail.
  7. Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
  8. Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
  9. It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.

One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!

Trading Should Be Effortless

  
  Education
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  • Money comes in bunches.

That one says it all. You can’t force trades. You can’t simply work harder in order to be ‘in sync’. Sometimes you are, sometimes you are not. You simply have to accept that as being part of the trading business. What you can do, is to closely monitor if your performance is in sync with the market’s performance. If the markets make new highs and your overall portfolio is going down something is wrong. You need to address that issue. Fast. The best way is to step aside and drastically reduce exposure and risk. That’s what I did.

  • Trading should be effortless.

A true piece of wisdom. In my experience when I trade well it is like shooting fish in a barrel. Almost everything works. I don’t need to be overly patient with positions. The money comes in very fast. That’s exactly how trading should be. The exact opposite was the case during the first 2 months of this year. So I did what I had to do. I recognized the situation for what it was and admitted my efforts were not leading my portfolio anywhere. It was like folding when you are dealt a bad hand in poker. So I folded. Now I am waiting for the next hand. If it is a bad one I fold again. If a series of trades start to really go my way I push it hard and increase exposure and trade aggressively.

  • When in doubt stay out.

This one is key. That’s how I interpret the adage: It doesn’t mean you don’t trust your instincts or your methodology. As a trader you should adapt to new situations. You constantly analyze the markets and your performance. Then you adjust your trading. Then you compare your expectations with the actual outcome. Then you adjust your trading. Then you repeat the process. At times things simply do not work. That’s when doubt creeps in. You know something is not ‘feeling right’. Your job is to protect your capital. Your job is not ‘to be right’. Put another way: You should be able to exit or reduce exposure without the need for explanations. The markets usually give you those explanations at some later point in time.

Trading Wisdom

  
  Education
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“When in doubt do nothing.  Don’t enter the market on half convictions; wait till the convictions are fully matured….. And so, whenever we feel these elements of uncertainty, either in our conclusions or in the positions we hold, let us clean the house and become observers until as that eminent trader Dickson G Watts wrote, “The mind is clear; the judgement trustworthy.”

20 Skills for the Trader

  
  Education
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1.      Know the difference between trading and investing.  We are traders, NOT investors.  ••  Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.

2.      Don’t let losers run!  Always use stops .  Riskmanagement is very, very important in your trading.  Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right.  The best traders are the first to admit (to themselves and the market) that they made a mistake.

 3.      Trade only price pattern set-ups.

 4.      Trade for skill, NOT the money.  If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’.  And SCARED MONEY NEVER WINS!

5.      Concentrate on what you are trade.  Each market has personalities, habits and friends…get to know them all.

 6.      Focus on your executions.  Remember, every execution is a trade.  Money is valuable…don’t leave it on the table. (more…)

Trading psychology

  
  Education
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The market is always right–except at significant tops and significant bottoms.

Keep and open and flexible mind. When in doubt, get out.

If you must have a guru, take him or her with many grains of salt

Do not add to losing positions.

Try every day to make yourself stronger, better and more integrated as a person.

Stay true to yourself. Lying to yourself and others, and trading on hope and prayer do not work

Most importantly, accept and recognize that you are not perfect. You are human and are going to make mistakes. Trading is the only profession where losing is actually winning. BUT— unless you accept mistakes as mistakes and learn from them, you will not progress and be upside down. Unless you are able to get your trading brain out of the cave you will not accumulate regret. It is only through the true acceptance of a mistake as a mistake that we accumulate regret. This is how we learn and grow as traders and human beings.

STRATEGIES FOR SUCCESS

  
  Education
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trading-rules

After a year or so of trading, I found that I had standardized on about 15 rules/guidelines that have changed only slightly since then.

As requested, here are ten overriding principles that have survived the past five
years, through bull and bear markets:
Always live to fight another day
Entries must have a statistical edge
Patience and discipline
Be a jellyfish (swim with the current)
Trade only liquid securities
Focus on trying to capture the middle 80% of a move
Know your exit points when you open a position (and stick to them!)
When in doubt, reduce position size by 50%
Limit losses to 2% of total equity for any single trade
Start each day with a clean financial and emotional slate
The above list is relatively generic, but it helped provide me with a framework for
organizing how I would approach trading as a business, what strategies I should
adopt, how those strategies should be executed, and ultimately defining what success
should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even
more important, I believe, is the process that one goes through in order to arrive at
these rules and to make sure that as new market situations unfold and new blind
spots are revealed, the rules and guidelines are enhanced to maximize the
opportunity for the trader to continue to grow and develop.

 

20 Trading Skills for Traders

  
  Education
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1.      Know the difference between trading and investing.  We are traders, NOT investors.  ••  Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.

2.      Don’t let losers run!  Always use stops .  Riskmanagement is very, very important in your trading.  Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right.  The best traders are the first to admit (to themselves and the market) that they made a mistake.

 3.      Trade only price pattern set-ups.

 4.      Trade for skill, NOT the money.  If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’.  And SCARED MONEY NEVER WINS!

5.      Concentrate on what you are trade.  Each market has personalities, habits and friends…get to know them all.

 6.      Focus on your executions.  Remember, every execution is a trade.  Money is valuable…don’t leave it on the table.

 7.      Model Yourself After Successful and Experienced Traders.  You will be all you can be…but you need to start somewhere. 

 8.      Be Teachable.  Learn something new every day (or at least every week).  The ‘Losing’ and ‘Winning’ trades can teach you a whole lot.

 9.      Remember that even the best of the best traders lose money.  Learn to accept your losses and move on to the next trade.  That’s just part of the business – you will NEVER win 100% of the time.

 10.  Use only 1 contract at the beginning.  Large wins at the beginning generally means large exposure. (more…)

Trading Lessons

  
  Education
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Trading lessonsThe market is always right–except at significant tops and significant bottoms.

Keep and open and flexible mind. When in doubt, get out.

If you must have a guru, take him or her with many grains of salt

Do not add to losing positions.

Try every day to make yourself stronger, better and more integrated as a person.

Stay true to yourself. Lying to yourself and others, and trading on hope and prayer do not work

Most importantly, accept and recognize that you are not perfect. You are human and are going to make mistakes. Trading is the only profession where losing is actually winning. BUT— unless you accept mistakes as mistakes and learn from them, you will not progress and be upside down. Unless you are able to get your trading brain out of the cave you will not accumulate regret. It is only through the true acceptance of a mistake as a mistake that we accumulate regret. This is how we learn and grow as traders and human beings.

Gann's trading rules

  
  Education
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  • Never risk more than 10% of your trading capital in a single trade.
  • Always use stop-loss orders.
  • Never overtrade.
  • Never let a profit run into a loss.
  • Don ‘t enter a trade if you are unsure of the trend. Never buck the trend.
  • When in doubt, get out, and don’t get in when in doubt.
  • Only trade active markets.
  • Distribute your risk equally among different markets.
  • Never limit your orders. Trade at the market.
  • Don’t close trades without a good reason.
  • Extra monies from successful trades should be placed in a separate account.
  • Never trade to scalp a profit.
  • Never average a loss.
  • Never get out of the market because you have lost patience or get in because you are anxious from waiting.
  • Avoid taking small profits and large losses.
  • Never cancel a stop loss after you have placed the trade.
  • Avoid getting in and out of the market too often.
  • Be willing to make money from both sides of the market.
  • Never buy or sell just because the price is low or high.
  • Pyramiding should be accomplished once it has crossed resistance levels and broken zones of distribution.
  • Pyramid issues that have a strong trend.
  • Never hedge a losing position.
  • Never change your position without a good reason.
  • Avoid trading after long periods of success or failure.
  • Don’t try to guess tops or bottoms.
  • Don’t follow a blind man’s advice.
  • Reduce trading after the first loss; never increase.
  • Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.
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