Tuesday, 12 January 2021
Quote for the day
"The successful investor is usually an individual who is inherently interested in business problems." - Philip Arthur Fisher
Monday, 11 January 2021
30 Of The World’s Best Trading Rules
Here is the inconvenient truth about successful trading. It’s work.
Trading is more than just numbers — it is a three dimensional fight that rages primarily inside the traders themselves. Missing any crucial element can ruin a trader quickly. The trader must first develop a robust trading system that fits their own personality and risk tolerance. Then they must trade it with discipline and faith consistently through ups and downs. But that’s not all. Risk exposure must also be managed carefully through position sizing and limiting open positions. The risk management has to be able to carry the trader through the losing streaks and enable survival for the chance to even make it to the winning side.
Here are thirty rules that can help the new trader survive that first year in the trading the markets or take the unprofitable trader much closer to profitability.
Trade with the right mind set.
TRADER PSYCHOLOGY
1. Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.
2. Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.
3. You must have a trading plan before you start to trade, that has to be your anchor in decision making.
4. You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut a loser short the moment it is confirmed that you are wrong.
5. Never trade position sizes so big that your emotions take over from your trading plan.
6. “If it feels good, don’t do it.” – Richard Weissman
7. Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.
8. Do not worry about losing money that can be made back worry about losing your trading discipline.
9. A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake o your nerves as much as for the sake of capital preservation.
10. A trader can only go on to success after they have faith in themselves as a trader, their trading system as a winner, and know that they will stay disciplined in their trading journey.
Bring your risk of ruin down to almost zero.
1. Never enter a trade before you know where you will exit if proven wrong.
2. First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3. Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4. Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5. Never expose your trading account to more than 5% total risk at any one time.
6. Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7. Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8. All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9. Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10. Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.
Develop a winning trading system that fits your personality.
1. “Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2. Go long strength; sell weakness short in your time frame.
3. Find your edge over other traders.
4. Your trading system must be built on quantifiable facts not opinions.
5. Trade the chart not the news.
6. A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7. Only take trades that have a skewed risk reward in your favor.
8. The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9. Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10. Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.
Source: http://www.traderplanet.com/
Trading is more than just numbers — it is a three dimensional fight that rages primarily inside the traders themselves. Missing any crucial element can ruin a trader quickly. The trader must first develop a robust trading system that fits their own personality and risk tolerance. Then they must trade it with discipline and faith consistently through ups and downs. But that’s not all. Risk exposure must also be managed carefully through position sizing and limiting open positions. The risk management has to be able to carry the trader through the losing streaks and enable survival for the chance to even make it to the winning side.
Here are thirty rules that can help the new trader survive that first year in the trading the markets or take the unprofitable trader much closer to profitability.
Trade with the right mind set.
TRADER PSYCHOLOGY
1. Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.
2. Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.
3. You must have a trading plan before you start to trade, that has to be your anchor in decision making.
4. You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut a loser short the moment it is confirmed that you are wrong.
5. Never trade position sizes so big that your emotions take over from your trading plan.
6. “If it feels good, don’t do it.” – Richard Weissman
7. Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.
8. Do not worry about losing money that can be made back worry about losing your trading discipline.
9. A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake o your nerves as much as for the sake of capital preservation.
10. A trader can only go on to success after they have faith in themselves as a trader, their trading system as a winner, and know that they will stay disciplined in their trading journey.
Bring your risk of ruin down to almost zero.
RISK MANAGEMENT
1. Never enter a trade before you know where you will exit if proven wrong.
2. First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3. Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4. Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5. Never expose your trading account to more than 5% total risk at any one time.
6. Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7. Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8. All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9. Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10. Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.
Develop a winning trading system that fits your personality.
YOUR ROBUST METHOD
1. “Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2. Go long strength; sell weakness short in your time frame.
3. Find your edge over other traders.
4. Your trading system must be built on quantifiable facts not opinions.
5. Trade the chart not the news.
6. A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7. Only take trades that have a skewed risk reward in your favor.
8. The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9. Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10. Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.
Source: http://www.traderplanet.com/
Quote for the day
"Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength." - Arnold Schwarzenegger
Sunday, 10 January 2021
The 'Self-Factors' of Successful traders.
"Self-reverence, self-knowledge, self-control - these three alone lead to power" - Alfred, Lord Tennyson.
I am using the above quote to emphasise the importance of what I call the 'self-factors' in trading. - The self-factors highlight the importance of developing and adopting the right balance of behaviours and attitudes in trading for one to be on the right side of the success/failure line. - The positive ‘self-factors’ include qualities and traits which are common to many successful traders: Amongst some of the positive Self-Factors I include:
Self-awareness - Knowledge of oneself and how one acts and behaves in situations and environments.
Self-Belief - Self-Confidence - assuredness in one’s actions, judgments and abilities.
Self-Trust -The ability to have faith in oneself under duress and pressure.
Self-Reliance - Ability to depend on one's own capabilities, judgment, and resources , and acceptance that nobody else is responsible for profits and losses.
Self-discipline - A structured approach that keeps a person focused and grounded against negative forces and pressures.
Self-Control - Is the ability of exert mind muscle and will-power to overcome the negative effects which can so easily distract and distort perceptions and judgments.
Self-Motivation - Describes the initiative to undertake risks and activities when the mood and environment have been counterproductive.
Self-Esteem - High regard, respect or value for one’s self, but not to the level of being conceited, or having an over-inflated opinion of their worth.
Self-efficacy - Belief in one’s own competency and ability.
In summary, successful traders take responsibility for their own actions, but rarely beat themselves up. – If I was to sum it up succinctly, they know themselves, they like themselves, they believe in themselves, and above all – ‘they are comfortable in their own skin’.
On the other hand, failing and struggling traders display some or many of the opposite tendencies. Typically they possess or are caught up in cycles of ‘self-defeating’ behaviour; they may be riddled by self-doubt, and wracked by self-consciousness. They may lack the necessary self-belief and self-trust which is needed to overcome the many inherent biases and injurious traits that people naturally possess which make trading such a difficult task.
We use the word ‘self’ in so many ways without really thinking about how relevant and crucial it is: Trading is not just about knowing ‘the market’, ‘a strategy’, ‘a set of rules’, it is also about knowing your-‘self’, developing your ‘self’ and managing your ‘self’.
There is a reason we find reference to 'the self' mentioned so often in the performance literature, it is because it is so relevant and matters: I will finish with some examples, from various fields of performance; sport, combat, trading and endeavour, including one significant one from the trading literature:
"Know yourself. - You can't improve on something you don't understand" - Vince Lombardi.
"It is said that if you know your enemies and know yourself, you will not be imperilled in a hundred battles;
If you do not know your enemies but do know yourself, you will win one and lose one;
If you do not know your enemies nor yourself, you will be imperilled in every single battle."
Sun Tzu - Chinese General, military strategist, and author of The Art of War.
"In actual practice a man has to guard against many things, and most of all against himself -- that is, against human nature." - Jesse Livermore - Reminiscences of a Stock Operator.
And my own personal favourite, which I quote on my business website (www.bgtedge.com).
"It’s not the mountain we conquer, but ourselves." - Sir Edmund Hillary – The first man to climb Mount Everest.
Edited Article of Steven Goldstein from http://hometraderuk.blogspot.co.uk
I am using the above quote to emphasise the importance of what I call the 'self-factors' in trading. - The self-factors highlight the importance of developing and adopting the right balance of behaviours and attitudes in trading for one to be on the right side of the success/failure line. - The positive ‘self-factors’ include qualities and traits which are common to many successful traders: Amongst some of the positive Self-Factors I include:
Self-awareness - Knowledge of oneself and how one acts and behaves in situations and environments.
Self-Belief - Self-Confidence - assuredness in one’s actions, judgments and abilities.
Self-Trust -The ability to have faith in oneself under duress and pressure.
Self-Reliance - Ability to depend on one's own capabilities, judgment, and resources , and acceptance that nobody else is responsible for profits and losses.
Self-discipline - A structured approach that keeps a person focused and grounded against negative forces and pressures.
Self-Control - Is the ability of exert mind muscle and will-power to overcome the negative effects which can so easily distract and distort perceptions and judgments.
Self-Motivation - Describes the initiative to undertake risks and activities when the mood and environment have been counterproductive.
Self-Esteem - High regard, respect or value for one’s self, but not to the level of being conceited, or having an over-inflated opinion of their worth.
Self-efficacy - Belief in one’s own competency and ability.
In summary, successful traders take responsibility for their own actions, but rarely beat themselves up. – If I was to sum it up succinctly, they know themselves, they like themselves, they believe in themselves, and above all – ‘they are comfortable in their own skin’.
On the other hand, failing and struggling traders display some or many of the opposite tendencies. Typically they possess or are caught up in cycles of ‘self-defeating’ behaviour; they may be riddled by self-doubt, and wracked by self-consciousness. They may lack the necessary self-belief and self-trust which is needed to overcome the many inherent biases and injurious traits that people naturally possess which make trading such a difficult task.
We use the word ‘self’ in so many ways without really thinking about how relevant and crucial it is: Trading is not just about knowing ‘the market’, ‘a strategy’, ‘a set of rules’, it is also about knowing your-‘self’, developing your ‘self’ and managing your ‘self’.
There is a reason we find reference to 'the self' mentioned so often in the performance literature, it is because it is so relevant and matters: I will finish with some examples, from various fields of performance; sport, combat, trading and endeavour, including one significant one from the trading literature:
"Know yourself. - You can't improve on something you don't understand" - Vince Lombardi.
"It is said that if you know your enemies and know yourself, you will not be imperilled in a hundred battles;
If you do not know your enemies but do know yourself, you will win one and lose one;
If you do not know your enemies nor yourself, you will be imperilled in every single battle."
Sun Tzu - Chinese General, military strategist, and author of The Art of War.
"In actual practice a man has to guard against many things, and most of all against himself -- that is, against human nature." - Jesse Livermore - Reminiscences of a Stock Operator.
And my own personal favourite, which I quote on my business website (www.bgtedge.com).
"It’s not the mountain we conquer, but ourselves." - Sir Edmund Hillary – The first man to climb Mount Everest.
Edited Article of Steven Goldstein from http://hometraderuk.blogspot.co.uk
Quote for the day
"Investors, most of them, have a herd mentality. They want to invest only if other people are investing" - Jessica Livingston
Saturday, 9 January 2021
Formulas for Managing Trading Emotions
I truly believe the hardest thing about real trading has not been the math, the method, or picking the right stock, currency, commodity, or futures contract. The most difficult thing about trading is dealing with the emotions that arise with trading itself. From the stress of actually entering a trade or the fear of loss as a trade goes against you. Even winning trades can be stressful as the fear of losing the paper profits that you are holding with a winner can even effect a trader. Then most importantly the ability of dealing with the emotional lows of a string of losses or the highs of many consecutive wins can cause a trader to lose their confidence or discipline. The bottom line is how you deal with those emotions will determine your long term success in trading more than any other one thing.
To manage your emotions first of all you must trade a robust trading methodology after you have confirmed that it will be a winner in the long term with your edge if you stay disciplined. You also must trade your method with proper position sizing and risk management to keep the volume down on your emotions and ego. If you have that the next step is the management of your emotions.
We must understand that every trade is not going to be a winner and not blame our self for equity draw downs if we are trading with discipline.
Do not bet your entire account on any one trade, in fact risking only 1% of your total capital on any one trade is the best thing you can do for your stress levels and to bring your risk of ruin to virtually zero. (This is based on your stop loss placement, not 1% position sizing).
With that said here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading: (The ‘=’ sign should be read as ‘equals’ and the ‘-‘ symbol read as ‘minus’ to understand the formulas here).
Losing Money – Trading Better = Despair
Do not despair look at your losses as part of doing business and as paying tuition fees to the markets.
Expectations – Reality= Disappointment
Enter trading with realistic expectations. You can realistically expect 15% -20% annual returns on capital with great trading after you have experience and have done the necessary homework. More than that is possible but you will have take on more risk and be one of the very best traders or investors to achieve greater returns than this.
Disappointment in a loss+ Caused by lack of Discipline = Regret
If you followed your trading plan and lose money because the market did not move in your direction so be it, but if you went off your plan and traded based on your feelings and opinions then you should feel regret and stop being undisciplined.
Winning Trades – Fear of Ruin = Enjoying your Trading
Trading is much more enjoyable when you are risking 1% of your capital in the hopes of making 3% on your capital with a zero chance of ruin or have a very high winning percentage with very small losses when wrong. It is not enjoyable when you are putting a huge percentage of your capital on the line in each trade and are only a few bad trades away from your account going to zero or a big draw down.
Understanding what makes money + Years of successful trading = Trading Wisdom
To get good at trading you have to trade real money. Wisdom comes from putting real money on the line for years and proving to yourself that you can come out a winner in the long term.
Belief through back testing + Experience of winning with it for years = Faith in your system
Whether any individual trade is a winner or loser should not influence your faith in your system and trading method. You should trade in a way that each trade is just one trade out of the next 100. Much of emotional trading can be overcome when you do not have doubts about your method. When you believe in your method, system, risk management, and your own discipline, you will overcome many of the emotional problems that arise in the heat of trading during a live market.
Most new traders will be very surprised at the emotions that rise up during active trading when real money is at risk, I hope this blog post gives many a heads up on this factor and how to overcome it.
Source: www.newtraderu.com
To manage your emotions first of all you must trade a robust trading methodology after you have confirmed that it will be a winner in the long term with your edge if you stay disciplined. You also must trade your method with proper position sizing and risk management to keep the volume down on your emotions and ego. If you have that the next step is the management of your emotions.
We must understand that every trade is not going to be a winner and not blame our self for equity draw downs if we are trading with discipline.
Do not bet your entire account on any one trade, in fact risking only 1% of your total capital on any one trade is the best thing you can do for your stress levels and to bring your risk of ruin to virtually zero. (This is based on your stop loss placement, not 1% position sizing).
With that said here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading: (The ‘=’ sign should be read as ‘equals’ and the ‘-‘ symbol read as ‘minus’ to understand the formulas here).
Losing Money – Trading Better = Despair
Do not despair look at your losses as part of doing business and as paying tuition fees to the markets.
Expectations – Reality= Disappointment
Enter trading with realistic expectations. You can realistically expect 15% -20% annual returns on capital with great trading after you have experience and have done the necessary homework. More than that is possible but you will have take on more risk and be one of the very best traders or investors to achieve greater returns than this.
Disappointment in a loss+ Caused by lack of Discipline = Regret
If you followed your trading plan and lose money because the market did not move in your direction so be it, but if you went off your plan and traded based on your feelings and opinions then you should feel regret and stop being undisciplined.
Winning Trades – Fear of Ruin = Enjoying your Trading
Trading is much more enjoyable when you are risking 1% of your capital in the hopes of making 3% on your capital with a zero chance of ruin or have a very high winning percentage with very small losses when wrong. It is not enjoyable when you are putting a huge percentage of your capital on the line in each trade and are only a few bad trades away from your account going to zero or a big draw down.
Understanding what makes money + Years of successful trading = Trading Wisdom
To get good at trading you have to trade real money. Wisdom comes from putting real money on the line for years and proving to yourself that you can come out a winner in the long term.
Belief through back testing + Experience of winning with it for years = Faith in your system
Whether any individual trade is a winner or loser should not influence your faith in your system and trading method. You should trade in a way that each trade is just one trade out of the next 100. Much of emotional trading can be overcome when you do not have doubts about your method. When you believe in your method, system, risk management, and your own discipline, you will overcome many of the emotional problems that arise in the heat of trading during a live market.
Most new traders will be very surprised at the emotions that rise up during active trading when real money is at risk, I hope this blog post gives many a heads up on this factor and how to overcome it.
Source: www.newtraderu.com
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