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Essentials of a Winning Psychology

  
  Education
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winningFour fears that block a winning psychology:

  1. Fear of Loss
  2. Fear of being wrong
  3. Fear of missing out
  4. Fear of leaving money on the table.

Realize that trading is based on probabilities, as such, every trade is unique. In other words, the past does not equal the future.

Probability thinking manifest other states and beliefs:
  • Because we know that we will succeed in the long run and because we know we will protect ourselves no matter what the market does, we acquire the state of “self trust” and the state of being “carefree”.

In turn these states allow us to remain…. (more…)

Ray Dalio Principles

  
Education, Life
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Afew gems taken from Ray Dalio’s Principles. Here’s the link to the ‘Principles’ Ray Dalio founder of Bridgewater Associates published:

  • I remained wary about being overconfident, and I figured out how to effectively deal with my not knowing. I dealt with my not knowing by either continuing to gather information until I reached the point that I could be confident or by eliminating my exposure to the risks of not knowing.
  • While most others seem to believe that learning what we are taught is the path to success, I believe that figuring out for yourself what you want and how to get it is a better path.
  • How much do you let what you wish to be true stand in the way of seeing what is really true?
  • How much do you worry about looking good relative to actually being good?
  • The most important qualities for successfully diagnosing problems are logic, the ability to see multiple possibilities, and the willingness to touch people’s nerves to overcome the ego barriers that stand in the way of truth.
  • Know what you want and stick to it if you believe it’s right, even if others want to take you in another direction.
  • In a nutshell, this is the whole approach that I believe will work best for you—the best summary of what I want the people who are working with me to do in order to accomplish great things. I want you to work for yourself, to come up with independent opinions, to stress-test them, to be wary about being overconfident, and to reflect on the consequences of your decisions and constantly improve.

Typical Traits Of Top Traders

  
  Education
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Temperament – In general, people with more analytical and even tempered personalities make better traders.

There is a counterbalancing trait which is the willingness to take risks. Some traders with volatile temperaments are successful because they can take risks easily and can keep trading after getting knocked down. They also tend to blow up more often.

Character – Humility is a very important ingredient in trading success. The truth does not care what you think of yourself. The markets don’t care what you want to believe reality is. Trader’s that are humble are better able to examine their methods and trading objectively and make changes where appropriate.

I’ve known a lot of successful traders that most people might consider arrogant but when it comes down to their own success and the reasons for that success they were able to see the faults in themselves and their trading. The trader’s that were out of touch with reality tended to blow up and have short-lived success.

Intelligence – General intelligence is correlated with success but not as highly as you might think. The ability to discern patterns and relationships with limited information is very useful.

I’d say that you need to be relatively smart to be successful but not extremely smart. Smart enough to understand the principles but beyond that it doesn’t necessarily help you. I’ve seen many very smart people tie themselves up in knots by second-guessing themselves.

Social Skills – Most of the really successful traders are not very socially skilled. Many tend to be reclusive and introverted. There are some exceptions. (more…)

Robert Meier's Eleven Rules

  
  Education
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1. Ask yourself what you really want. Many traders lose money because subconsciously their goal is entertainment, not profits.

2. Assume personal trade responsibility for all actions. A defining trait of top performing traders is their willingness to assume personal responsibility for all trading decisions.

3. Keep it simple and consistent. Most speculators follow too many indicators and listen to so many different opinions that they are overwhelmed into action. Few people realize that many of the greatest traders of all time never rely on more than two or three core indicators and never listen to the opinions of others.

4. Have realistic expectations. When expectations are too high, it results in overtrading underfinanced positions, and very high levels of greed and fear – making objective decision-making impossible.

5. Learn to wait. Most of the time for most speculators, it is best to be out of the markets, unless you are in an option selling (writing) program. Generally, the part-time speculator will only encounter six to ten clear-cut major opportunities a year. These are the type of trades that savvy professionals train themselves to wait for.

6. Clearly understand the risk / reward ratio. The consensus is that trades with a one to three or one to four risk / reward ration are sufficient.

7. Always check the big picture. Before making any trade, check it against weekly and monthly as well as daily range charts. Frequently, this extra step will identify major longer-term zones of support and resistance that are not apparent on daily charts and that substantially change the perceived risk / reward ratio. Point & figure charts are particularly valuable in identifying breakouts from big congestion / accumulation formations. (more…)

The traits of a successful trader

  
  Education
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sachin

The most important is discipline – I am sure everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win.” – Gary Bielfeldt

The Ten Cardinal Rules

  
  Education
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10rules

1. Learn to function in a tense, unstructured, and unpredictable environment.
2. Be an independent thinker versus a conventional thinker.
3. Work out a way to handle your emotions and maintain objectivity.
4. Don’t rely on hope and fear in the conventional sense.
5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
6. Modify your normal responses to certain events.
7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
9. Understand the larger framework in which trading occurs— how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your ego and your need to have things your way.

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