How We Create Our Trading Karma

Mistakes are not a problem in trading.

The problem is repeated mistakes.

We repeat mistakes when we don't learn.

We don't learn if we don't review and reflect.

We look for the next trade, but fail to thoroughly evaluate the last one.

We don't want to miss the next move, so we miss learning about the last one.

And we repeat mistakes.

For better or worse, we create our trading karma.

Sourc: www.traderfeed.blogspot.com/

Quote for the day

"It doesn't take time to think right. It only takes the willingness to do so." - Kenneth G. Mills

What is the Pareto Principle?

The Pareto Principle is named after Vilfredo Pareto an Italian economist who first noticed an 80/20 distribution in statistics and published his first work on this in 1896. Pareto is said to have first observed the mathematical formula when he observed about 80% of the total land in Italy was owned by 20% of the people. In his continuing statistical research he kept seeing the 80/20 pattern of distribution.

The Pareto Principle is best known as the 80/20 rule that points out that approximately 80% of results come from 20% of efforts. Or around 80% of effects come from 20% of the causes. In business many times 80% of sales are from 20% of customers. In sales you will see the top 20% of sales people make 80% of all sales. Many stores will see that 80% of their sales come from 20% of their products. At many work places 80% of the total work is completed by 20% of the employees. In many countries the top 20% of earners have paid approximately 80% of income taxes. As a trader or investor 80% of your profits will likely come from 20% of your positions. In stock market over 80% of the returns come from approximately 20% of all stocks.

The 80/20 rule is basically a power law distribution for specific sets of parameters that is shown with many business, investing, natural phenomena, real estate and government data sets exhibiting this percentage of distribution.

The 80/20 rules also shows that winners grow exponentially as a bigger percentage in statistics.

To implement the Pareto Principle into your own life find and focus on the 20% of your actions that matter most and produce the 80% of results. Start with your goals, if you want to be rich, lose weight, have a happy marriage, be close with your family, and have peace of mind then ask yourself what actions produce 80% of the positive results in those areas. It is easier to expand the 20% of the most important actions than trying to just do more work.

Pareto rules for life success may look like this:

1. Growing your income has the biggest impact of wealth. The best way to grow your income is to build a business.
2. Eat less. The biggest impact on your weight is the quantity of your food.
3. Give your spouse positive attention. This has the greatest impact on a successful marriage.
4. Living close to your family and spending quality time with them creates positive relationships.
5. Managing your thoughts has the greatest impact on your peace of mind. Be careful what you believe and think about.

80% of your success in key areas may come from the 20% of these actions.

While the 80/20 Pareto Rule is not exact it is filter you can use to see what efforts produce the most results. It can be a great tool for time management so you don’t waste your time on actions and things that don’t matter as much and focus like a laser on what creates big results and makes a difference.

Source:www.newtraderu.com

Quote for the day

"Few things are needed to make a wise man happy; nothing can make a fool content; that is why most men are miserable." - Francois de La Rochefoucauld

Strategy vs Tactics in Trading

In trading the two terms tactic and strategy are not used enough and when they are used many times they are mixed up. Trading tactics are the actual means that are used to achieve a single specific goal or target, but a trading strategy is the big picture plan that combines many different tactics together to achieve the overall objective of your profit and loss statement over a longer period of time. A strategy involves combining all the complex dynamics of a trading system and the decision making structure that guides tactical execution of a trading plan.

A trading tactic is a one specific trading signal or set up that is implemented to achieve a profitable outcome and grow the capital used in that position.

A trading strategy is the type of method you are using in your trading. A trading strategy defines your time frame, the principles that will lead to profitability and your return goals and risk tolerance. Your strategy will create the overall structure for developing your trading system, position sizing, markets traded, and watch list. Your trading strategy could be trend following, day trading, swing trading, or position trading while your specific entry and exit is your tactic.

Your tactics will drill down and allow you to create a trading plan for entries, exits, and position sizing to create a high probability of profits for each individual trade. Combining your tactics together and looking at total risk and possible returns builds a trading system that is your overall strategy with each trade execution being a tactic.
Source:www.newtraderu.om

Quote for the day

"Without frustration you will not discover that you might be able to do something on your own. We grow through conflict." - Bruce Lee

There are 3 Kinds of People in the World ( & in the Stock Market)

By Ronald Colunga

There are three kinds of people in this world that we live in. There is that unique group of people classified as “Wills.” Then, we have the “Wont’s.” Last but not least we have the “Cant’s”. We all at least know one person in each of these categories. Let’s determine which one are you, shall we?

Wills

First, let’s talk about the wills. This certain group of people are the ones with the positive energy. They always believe they “Will” do whatever they put their mind to. There is nothing that can stop them, nothing that they can’t handle. These are the people that help others, they use their positive energy to influence others to apply that “Will” lifestyle to their lives as well. Wills strive to achieve their goals, they strive to help other achieve theirs. Not only do they have the mindset to help them achieve greatness, but they have the mindset to help others achieve greatness, which makes them wonderful people. Always giving off a good vibe and good energy, making you want to be around them. Ask the wills for advice, they will (no pun intended) guide you in the right path. “The wills accomplish everything.”

Wont’s

The wont’s are also known as the “Opposers” or the “Haters” this day and age if you like to be retro, so to speak. The wont’s are of course, the ones that say won’t to every single question. I guess you can also say the wont’s are somewhat of the jealous types, they don’t want anyone to do better than them. They shut everyone down with the won’t speech and discourage an individual. With their won’t mentality they also hurt themselves, wont’s begin to answer their own questions with their same answer and speech and begin to discourage themselves. “The wont’s oppose everything.”

Cant’s

Here we go with the cant’s, this is a group of individuals that accomplish nothing. These are the people that tell everyone they can’t do anything. These are the ones that don’t get enough from their failures that they have to bring other people down with them. The negative energy with the cant’s is incredible. DO NOT let their negative energy bring you down. Instead use that energy to make you into a “Will” use their can’t mindset to give you inspiration and motivation on your path. “The cant’s fail in everything.

Source: http://amsdaily.net/

Three Types of People produce Three Types of Traders

If you are of the first kind, “the wills”, you will overcome all the obstacles on your way to consistent success. You will accept, even embrace, uncertainty as the driving force behind the next big opportunity for gain. You will lose gracefully and move on to the next trade, knowing that trading is a game of probabilities and possibilities; not certainties and absolutes. You will leave money on the table, thankful for what you were able to gain; not bitter by what was left. If you are of the first kind you will succeed. You will indeed. 

If you are of the second kind, “the won'ts”, you will look for the always elusive easy road to riches. You won't believe in the effort required to become a disciplined trader, driven by solid habits repeated daily. You won't apply the skill necessary for managing risk as that would require planning and preparation, something you just do not have time for. You won’t develop your own well defined trading edge, depending instead upon others to do it for you. If you are of the second kind your opposition to anything other than what is easy will make it quite difficult to succeed when times get tough, and they will but you won't.

If you are of the third kind, “the cant's”, you will blame everyone and everything for your failures. You can't succeed because you are too busy finding fault in any trading strategy that produces a loss. You can’t succeed because anyone who does so has some special knowledge or gift that you obviously cannot possess. You can't succeed because the market is rigged. If you are of the third kind…quit. You are a quitter with a quitter's attitude. Be in the majority. Be a can’t. It's easy.

So, what kind of person (trader) are you?

www.thecrosshairstrader.com