| 1. Managing the risk of ruin. Do not risk so much on any one trade that 10 losing trades in a row will destroy your account. risking 1% to 2% of your trading capital per trade is a great baseline for eliminating the risk of ruin. 2. Only trade with a positive risk/reward ratio. Only take trades where your possible reward is at least two or three times the amount of capital you are risking in the trade. 3. Always trade in the direction of the prevailing trend. Always trade in the direction of the flow of capital for your specific time frame. Shorting rockets and catching falling knives is not profitable in the long run. 4. Trade a robust system. Back test and study your trading method, system, or style to ensure it is a winning system historically. The key is that it had bigger winners than losers over the long run in the past. 5. You must have the discipline to take your entries and exits as they are triggered. You must take your entries when they trigger, your losses when they are hit, and your profits when a run is over to be a successful trader. 6. You must persevere through losing periods. All successful traders were able to overcome their losing periods to come back and make the big money. If you quit you will not be around for the opportunity to win big. 7. If you want to be a winning trader you must follow your trading plan not your fear and greed. Emotions will undo a trader more than anything else. Trading too big is due to greed, missing a winning trade due to no entry is a sign of fear, traders must trade the math and probabilities not their own opinions or emotions. |
Archives of “winning system” tag
rss10 Points For Successful Trading
Trading Methodology:
- Winning system-Only trade tested systems with a positive expectancy in the long term.
- Faith– Your system has to allow you to trade your beliefs about the market.
- Risk/Reward-Never trade unless your profit expectations are greater than your capital at risk.
Trader Psychology:
- Discipline-You have to keep trading your method even when it doesn’t work for a given time period.
- Ego-Admit when you are wrong.
- Emotions-Trade the math not your emotions.
Risk Management:
- Risk of Ruin-Never risk more than 1% of your total account capital on any one trade.
- Position Sizing-Use your capital at risk to understand the right amount to trade based on the securities volatility.
- Capital at risk: Never put more than 6% of your total capital at risk at any given time on all positions.
- Trailing stops- Always have an exit strategy to lock in your winners.
During and After the Trade
1. What’s your game plan if it goes against you and threatens your survival?
2. Will you be able to get out? Did you take that into account in your workout?
3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?
4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?
5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?
6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?
7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?
8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time?
9. After the trade did you learn anything from the trade?
10. Are you organized sufficiently to have a record of all your trades for your accounting and learning?
11. Should you modify your existing systems based on it?
12. How does recency and frequency and value affect your future?
13. Did you fit your after activities to your mojo?
14. If you made a good profit, did you take some capital out of the fray for a rainy day?
15. Have you learned to say “fair” whenevever anyone asks you how you’re doing and are you sure that you don’t spend a fortune after a good trade, and dissipate your profits with non-economic activities?
16. Is there a better use for your time than monitoring the ticks or the market every minute of the day if you do, and if you don’t, do those who do so and have much faster and better equipment than you have an insurmountable advantage against you?
Trading Psychology
- Are you trading because you want to trade? Consider trading a business not a game.
- Are you not trading? This is the opposite of trading too often. You may be so scared of taking a loss that you avoid trading altogether.
- If you get stopped out of several stocks, walk away.Paper trade until the profits return.
- Follow the system.Would you be making more money if you followed your trading signals? Understand why you’re ignoring the signals you receive.
- Don’t overtrade.Sometimes the best place for cash is in the bank. You don’t HAVE to trade.
- Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
- Focus on the positive. The loss your suffered today pales to the killing you made last week.
- Ignore profits. If you find yourself getting nervous about a winning trade or making too much money, then concentrate not on the bottom line but on improving your trading skills. Get used to making too much money.
- Obey your trading signals. Otherwise, what are you trading for? Plan your trade and trade your plan.
- Don’t trade when you’re upset.This also goes for being too excited.
- Abandoning a winning system. Don’t become bored with your winning system and search for new, more exciting ways to lose money.
The Trading Beast
The markets are no place to be unsure of yourself and wishy-washy, it is not a place for 2nd guesses, wishing, hoping, or gambling. If you want to win in this jungle you need to be an unstoppable beast .
Complete confidence in your system and method. You do not jump around in your trading or doubt yourself, it is not about you, it is the system. Either it wins long term or it doesn’t. Either you have confidence in it or you don’t, make up your mind.
- You control risk. You do not expose yourself to being ruined because your bet size is consistently what you are comfortable with. Ten losses in a row is only a small draw down. If you are not afraid of ten losses in a row, what is stressful? NOTHING.
- You play follow the leader. You are not the lone wolf, you are going with the market not trying to predict it. Your entries and exits are based on historical patterns not your personal opinions, you are not trying to beat the market you are trying to be on its side, it always wins.
- You will not quit.Your exit strategy for your trading career? Never. You plan to never quit playing the greatest game on earth. You are a trader, that is what you do. Not quitting in most areas of life means that you eventually win big, the market is no different.
- You don’t need a guru. Your winning system is your guru. You don’t need to ask for a fish, you know how to fish. You only listen if you can learn how to catch more and bigger fish and somebody is a better fisherman than you.
The markets eat up lambs, chickens, pigs, and sloths. However beasts eat well off their prey.
Trading Psychology
Are you trading because you want to trade? Consider trading a business not a game.
Are you not trading? This is the opposite of trading too often. You may be so scared
of taking a loss that you avoid trading altogether.
If you get stopped out of several stocks, walk away. Paper trade until the profits return.
Follow the system. Would you be making more money if you followed your trading
signals? Understand why you’re ignoring the signals you receive.
Don’t overtrade. Sometimes the best place for cash is in the bank. You don’t HAVE
to trade.
Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
Focus on the positive. The loss your suffered today pales to the killing you made last
week.
Ignore profits. If you find yourself getting nervous about a winning trade or making
too much money, then concentrate not on the bottom line but on improving your
trading skills. Get used to making too much money.
Obey your trading signals. Otherwise, what are you trading for? Plan your trade and
trade your plan.
Don’t trade when you’re upset. This also goes for being too excited.
Abandoning a winning system. Don’t become bored with your winning system and
search for new, more exciting ways to lose money.
My Checklist :During and After the Trade
1. What’s your game plan if it goes against you and threatens your survival?
2. Will you be able to get out? Did you take that into account in your workout?
3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?
4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?
5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?
6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?
7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others? (more…)
10 Trend Commandments
You shall learn from successful trend followers to make big returns in the market.
- You shall follow the trend only, and have no guru that you bow down to.
- You shall not try to predict the future in vain, but follow the current price trend.
- You shall remember the stop loss to keep your capital safe, you shall know your exit before your entry is taken.
- Follow your trend following system all the days that you are trading, so that through discipline you will be successful.
- You shall not give up on trading because of a draw down.
- You shall not change a winning system because it has had a few losing trades.
- You shall trade with the principles that have proven to work for successful traders.
- You shall keep faith in your trend following even in range bound markets, a trend will begin anew eventually.
- You shall not covet fundamentalists valuations, Blue Channels talking heads, newsletter predictions, holy grails, or the false claims of black box systems.
If you want news and entertainment watch BLUE CHANNELS, if you want to learn how to trade & Mint Money then Read www.AnirudhSethiReport.com
A trader is the weakest link of any trading system
So true. Tony Robbins also said “Success for anything is 80% of psychology and 20% of mechanics”. A trading system is mechanics of trading. If a trader has an absolutely winning trading system, but he/she has failed to execute it. This system is failure. For who can follow it consistently, it is a great system. So who is more important? It is the trader or the system?
Some people say it is hard to design a winning system. Or I don’t know how to do? Does it really true? Read what Richard Dennis said.
The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught. What they can’t do is give (people) the confidence to stick to those rules even when things are going bad.
Richard Dennis has also proved that trading is a skill not talent. Tony Robbins also said “Every skill is learnable”
Ten Ingredients to become A Great Trader
It is all a game of risk management, mind, and a robust system. Everything else is just noise.
- Passion for trading, only passion can fuel the work ethic needed to do the hard work that leads to success.
- Goal oriented traders succeed, if you know why you are trading and where it leads you may just get there.
- Perseverance: It is hard to lose if you never quit.
- Resiliency: The ability to come back from losses may be the secret to trading success.
- Back testing systems and methods before trading them speeds up the learning curve and side steps a lot of learning through real losses. (more…)