An Interview with a Modern Day Nicolas Darvas


Don’t Miss to Watch 3 VIDEO’s

Who is Dan Zanger?

Dan Zanger is the modern day version of Nicolas Darvas.

His mother Elaine loved the stock market and Dan would often watch the business channel with her. One day in 1978 Dan saw a stock explode across the ticker tape at the bottom of the screen hitting $1. He made his first purchase and sold the stock a few weeks later at over $3. From that sale on, he was hooked on the action of the market tape, usually carrying a quotetrek with him to stay up on stock prices on his jobs in Beverly Hills as an independent contractor building swimming pools.

He attended a seminar led by William J. O’Neil and this was a major turning point in his ability to select winning stocks. Dan studied chart patterns 25 to 30 hours per week learning to select stocks that would make big moves, before they moved. As technology and internet stocks took center stage in the stock market in 1997, Dan began to see powerful moves underway. He sold his Porsche for approximately $11,000 to have the necessary capital to jump fully into the market. Over the next year, he parlayed the 11,000 dollars into 18 million with the knowledge acquired over two decades playing the market and re-reading the works of William O’Neil. With this success, Dan was able to become a full time trader and leave contracting behind.

He recommended Darvas’ strategy and told traders that the Darvas System is, “widely used and followed today by the best traders in the world, and still this breakout method is little understood by most…”

Dan Zanger is still a big advocate of Darvas’ teachings and he tells traders that applying the Darvas method will “yield fortunes beyond the reader’s wildest dreams.”

Dan Zanger holds the world record for one-year stock market portfolio appreciation, gaining over 29,000%. In about two years, he turned$11,000 into $42 million.

Zanger was listed by Trader Monthly magazine as one of the top 100 traders in the world with an annual income of $25 million!

Here are some great videos where he discusses his methods:

 

Ed Seykota Interview

 
Van Tharp:

Have you played around with any other significant ideas in terms of position sizing besides market’s money? If so, what are they?

If you could give me ten rules to consider with respect to position sizing what would they be?

Ed Seykota:

“Playing around” with “when market money becomes your money” seems to be an exercise in math-turbation.

I don’t know what you mean by playing around with ideas. I feel you either think things through or you don’t.

Ten rules for position sizing:

1. Bet high enough to make meaningful profits when you win.

2. Bet low enough so you are ok financially and psychologically when you lose.

3. If (1) and (2) don’t overlap, don’t trade.

4. Don’t go adding a bunch of rules that don’t work, just so you have ten rules.

Life Wisdom – Jim Rohn

Success is both a journey and a destination.

It’s the steady, measured progress toward a goal and the achievement of a goal.

Success is both an accomplishment and a wisdom that comes to those who understand the potential power of life.

It’s an awarenesss of value and the cultivation of worthwhile values through discipline.

It’s both material and spiritual, practical and mystical.

Success is a process of turning away from something in order to turn toward something better – from lethargy to exercise, from candy to fruit, from spending to investing.

Success is responding to an invitation to change, to grow, to develop, and to become – an invitation to move up to a better place in oder to gain a better vantage point.

But most of all, success is making your life what you want it to be. Considering all the possibilities, considering all the examples of others whose lives you admire, what do want from your life? That is the big question!

Remember, success is not a set of standards from our culture but rather a collection of personal values clearly defined and ultimately achieved.

What is Hope ?What is Regret ?


What is Hope?

Hope is a feeling of expectation and desire for a certain thing to happen. It’s an individual’s desire to want or wish for a desired event to happen.

Hope may be the most dangerous of all human emotions when it comes to trading. Hope is what keeps a trader in a losing trade after it has hit the stop. Greed and hope are what often prevent a trader from taking profits on a winning trade. When a stock is going up, traders will often remain in the trade in the “hope” of recouping past losses. Every swing trader hopes that a losing trade will somehow become a winning trade, but stock markets are not a charity. This type of thinking is dangerous because the group (stock market) could not care less about what you hope for, or what is in your best interest. Rest assured, when your thinking slips into hope mode, the market will punish you by taking your money.
 
What is regret?

Regret is defined as a feeling of sadness or disappointment over something that has happened or been done, especially when it involves a loss or a missed opportunity.

The negative implications of this emotion are obvious. It is only natural for a stock trader to regret taking on a losing trade or missing a winning trade. But what is important as a trader is not to hyper focus on losing trades or missed opportunities. If you lose money on a trade, then you should simply evaluate what went wrong and move forward. Other than the lessons that can be gained from evaluating each trade, there is no point to spending further time regretting the decision to enter the trade. It is also human nature to feel regret when an opportunity is missed. If you miss a winning trade, then you must move on to the next potential trading opportunity.

When technical traders allow regret to rule their thinking, they tend to “chase trades” in the hopes of still being able to make money on the position by entering it well above the trigger price. The problem with this thinking is that the reward/risk of the trade no longer meets the parameters of good trade management. For instance, by entering a trade 1 point higher than the trigger, the potential reward may be 1 point, but the potential loss may also be 1 point. This sets the reward/risk ratio at 1 to 1. Recall that we prefer trades to have at least a 2 to 1 reward/risk ratio. However, if the trade had been entered at the appropriate trigger price, the reward/risk ratio would have been 2 to 1. Successful and profitable online traders learn to discipline their mind to eliminate regretful thinking.

50 Trading Rules

1. Plan your trades. Trade your plan. 2. Keep records of your trading results. 3. Keep a positive attitude, no matter how much you lose. 4. Don’t take the market home. 5. Continually set higher trading goals. 6. Successful traders buy into bad news and sell into good news. 7. Successful traders are not afraid to buy high and sell low. 8. Successful traders have a well-scheduled planned time for studying the markets. 9. Successful traders isolate themselves from the opinions of others. 10. Continually strive for patience, perseverance, determination, and rational action. 11. Limit your losses – use stops! 12. Never cancel a stop loss order after you have placed it! 13. Place the stop at the time you make your trade. 14. Never get into the market because you are anxious because of waiting. 15. Avoid getting in or out of the market too often. 16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action. 17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success. 18. Always discipline yourself by following a pre-determined set of rules. 19. Remember that a bear market will give back in one month what a bull market has taken three months to build. 20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point. 21. You must have a program, you must know your program, and you must follow your program. 22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable. 23. Split your profits right down the middle and never risk more than 50% of them again in the market. 24. The key to successful trading is knowing yourself and your stress point. 25. The difference between winners and losers isn’t so much native ability as it is discipline exercised in avoiding mistakes. 26. In trading as in fencing there are the quick and the dead. 27. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success. 28. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long. 29. Accept failure as a step towards victory. 30. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don’t let ego and greed inhibit clear thinking and hard work. 31. One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door. 32. The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed. 33. It’s much easier to put on a trade than to take it off. 34. If a market doesn’t do what you think it should do, get out. 35. Beware of large positions that can control your emotions. Don’t be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts. 36. Never add to a losing position. 37. Beware of trying to pick tops or bottoms. 38. You must believe in yourself and your judgement if you expect to make a living at this game. 39. In a narrow market there is no sense in trying to anticipate what the next big movement is going to be – up or down. 40. A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss – that is what does the damage to the pocket book and to the soul. 41. Never volunteer advice and never brag of your winnings. 42. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss. 43. Standing aside is a position. 44. It is better to be more interested in the market’s reaction to new information than in the piece of news itself. 45. If you don’t know who you are, the markets are an expensive place to find out. 46. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen. 47. Except in unusual circumstances, get in the habit of taking your profit too soon. Don’t torment yourself if a trade continues winning without you. Chances are it won’t continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost. 48. When the ship starts to sink, don’t pray – jump! 49. Lose your opinion – not your money. 50. Assimilate into your very bones a set of trading rules that works for you.

Observation and Analysis

 
“Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders. Do not believe in traditions because they have been handed down for many generations. But after observation and analysis, when you find that anything agrees with reason, and is conducive to the good and benefit of one and all, then accept it and live up to it.”

- Siddhārtha Gautama (Buddha)

A commitment to reason, observation and analysis (of the self-reliant empirical variety) has been a winning trade for thousands of years.

Why don’t more people practice this, in markets and in life?

Common Characteristics between 

Successful Gamblers and Successful Speculators



On a warm summer’s evenin’ on a train bound for nowhere,
I met up with the gambler; we were both too tired to sleep.
So we took turns a starin’ out the window at the darkness
‘Til boredom overtook us, and he began to speak.

He said, “Son, I’ve made my life out of readin’ people’s faces,
And knowin’ what their cards were by the way they held their eyes.
So if you don’t mind my sayin’, I can see you’re out of aces.
For a taste of your whiskey I’ll give you some advice.”

So I handed him my bottle and he drank down my last swallow.
Then he bummed a cigarette and asked me for a light.
And the night got deathly quiet, and his face lost all expression.
Said, “If you’re gonna play the game, boy, ya gotta learn to play it right.

You got to know when to hold ‘em, know when to fold ‘em,
Know when to walk away and know when to run.
You never count your money when you’re sittin’ at the table.
There’ll be time enough for countin’ when the dealin’s done.

Now Ev’ry gambler knows that the secret to survivin’
Is knowin’ what to throw away and knowing what to keep.
‘Cause ev’ry hand’s a winner and ev’ry hand’s a loser,
And the best that you can hope for is to die in your sleep.”

So when he’d finished speakin’, he turned back towards the window,
Crushed out his cigarette and faded off to sleep.
And somewhere in the darkness the gambler, he broke even.
But in his final words I found an ace that I could keep.

You got to know when to hold ‘em, know when to fold ‘em,
Know when to walk away and know when to run.
You never count your money when you’re sittin’ at the table.
There’ll be time enough for countin’ when the dealin’s done.


The 7 Habits of Highly Successful Traders

 
  1. Traders must have the perseverance to stick to trading until they break through to success. Many of the best traders are just the ones that had the strength to go through the pain, learn, and keep at it until they learned to be a success. 
  2. Great traders cut losing trades short. The ability to accept that you are wrong when a price goes to a place that you were not expecting is the skill to push the ego aside and admit you are wrong.
  3. Letting a winning trade run as far as it can go in your time frame is crucial to having big enough winners to pay for all your small losing trades. 
  4. Avoiding the risk of ruin by risking only a small portion of your capital on each trade is a skill to not get arrogant and trade too big, if you risk it all enough times you will lose it all eventually. 
  5. Being reactive to actual price action instead of predictive of what price action will be  is a winning principle I have seen in many rich traders. Letting price action give you signals is trading reality, trading your beliefs about what price should be is wishful thinking.
  6. Great traders are bullish in bull markets and bearish in bear markets, until the end when then trend bends. 
  7. Great traders care more about making money more than any other thing. Proving they are right, showing off, or predicting the future is not as important as hearing the register ring.


    Shut Up and Listen

     
Being reactive to actual price action instead of predictive of what price action will be is a winning principle I have seen in many rich traders. Letting price action give you signals is trading reality, trading your beliefs about what price ‘should be’ is wishful thinking.

Great traders are bullish in bull markets and bearish in bear markets, until the end when the trend bends.

These two rules or habits simply aren’t being utilised, either because people don’t know them, or think they’re better than them.

Let me tell you this – no-one is better than the rules. And the traders that have been ignoring them are feeling this right now where it hurts.

I know of professionals who are quitting over what the market has been doing recently. I know of professionals who are at breaking point – literally a nervous wreck because they cannot fathom that the market will go higher….and yet it does.

If you don’t follow these two rules, you will never flow with the market. You will constantly be in conflict; constantly fighting and stubbornly protecting your ‘rightness’, and you will never be in tune with what the market is saying.

These two rules can be neatly summed up in one sentence.

Shut Up and Listen.

Stop talking. Stop thinking. Just listen to what the market is telling you.




A Winning Trading Method is Really All About this…..

Successful trading is the attempt to be on the right side of the flow of capital. Each change in price happens with a new agreement between the current buyer and seller. Buyers and sellers are always equal for a transaction to take place, the cause of movement is determined by whether the buyers want in more than the sellers want out. Prices moves when capital flows into and out of a market, and inflow pushes up prices because demand becomes more than supply, price discovery happens to find out what sellers are willing to take to sell their position.

Many crazy over bought or over sold trends occur because one side has little pressure on it, position holders, shorts, or buyers sit tight as a trend accelerates. Equity markets rise when new money has to enter to be put to work but there is little interest at selling due to position holders sitting on winning positions.

Price resistance on a chart is caused by simply being the place that current holders are taking their profits. Price support happens at the price that people on the sidelines are ready to get back in at. These are simply spots where capital flows in and out.

Growth stocks trend higher due to the demand on it from institutional money managers, it is the flow of capital into the stock in pursuit of owning the future earnings growth that drives a stock upwards, not P/E ratios or opinions.

Finding ways to quantify and trade the flow of capital is what a winning trading method is really all about.


Ten Ways to Trade Like the 

Legendary Bill O’Neil

 
If one of the greatest traders in the world told you how to buy and sell the best stocks for the most profits would you listen? Well we have a chance to do just that with Bill O’Neil’s book “How to Make Money in Stocks”. His lifetime of research on how the market actually works is in his book. Not his opinions but through studying the markets as a scientist would.

Not only did O’Neil’s firm study the best performing stocks of the past 100+ years but the AAII tested his system among fifty others for 12 years in real time and it won!

From January 1998 through December 2010, the American Association of Individual Investors has conducted an independent, real-time study of over 50 leading investing strategies, including CAN SLIM. The results show that IBD’s CAN SLIM strategy outperformed all other strategies, gaining +2,487.3% while the S&P 500 rose just 29.6%.

“After surveying all the top performing equity managers in the United States, Bill O’Neil was number one. His track record is second to none. And I’ve always wanted to work for the best.”

“In terms of long-term track record, yes. He has the best numbers. If you go back 20-25 years and you stack all the guys together that have been in the market that long, Bill’s got the highest returns. Higher than Peter Lynch. Higher than Buffett. It’s fantastic. I’ve painstakingly studied each of the firm’s market calls from I think it was 1968 onward because I wanted to see exactly where O’Neil was saying buy and sell. It just struck me, this accumulation/distribution and follow-through day technique works great because he’s never missed a major bull or a major bear market.”-Chris Kasher
  1. Do not diversify broadly, instead focus on the leading stocks in the best industry groups.
  2. Cut any loss when the stock is down 7%/8% from your buy point.
  3. Buy stocks that are going up in value, not down.
  4. Add to a position as the stock goes up in value from your buy point not at lower prices.
  5. Buy stocks near their highs for the year not their lows.
  6. Study price charts to discover how the best stocks behaved historically in price action.
  7. Trade long based on the trend of the general market.
  8. Buy the best stocks in the market as they break out of properly formed bases or when they bounce off their 50 day moving averages.
  9. Do not be influenced by others trade your plan.
  10. Buy stocks with the best earnings and sales growth at the right time using charts.

Chimpanzees Are Like Stock Traders

 — They Take Gambles



Humans aren’t the only gamblers in the animal kingdom.

Our closest primate relatives, chimpanzees and bonobos, demonstrate behaviors considered basic to human economics such as delaying gratification and assessing risk, according to new research published Wednesday May 29 in the journal PLoS One.

Though they don’t bet on stock exchanges or casinos, they also have strong emotional reactions to games of chance — like when they are betting on food showing up. They don’t like losing or waiting for payouts, and can even correct their own behaviors based on successes or failures.

“Apes are also experiencing rich emotional reactions in an economic context,” study researcher Alexandra Rosati, of Yale University, said in a statement. “They are making decisions about their most valuable resource, which is food.”

“Even though economists can be quite puzzled about human behavior and what it means, biology suggests that these economic biases have their roots in non-human foraging behaviors,” Rosati said.

Testing for gamblers

Researchers performed two tests on 37 wild-born chimpanzees and bonobos from sanctuaries in the Congo.

In the first, they tested how long each ape was willing to wait for a big reward when a smaller one was already in front of them. In the second, they asked apes to choose between a “safe” reward — like some peanuts visible in a dish, or take a risk by blindly reaching into another dish for a hidden reward that could either be better or worse than the safe reward.

The two species of apes reacted differently, but both showed behaviors like those used by humans in economic contexts.

The chimpanzees were able to delay gratification — they were willing to resist a small treat once they knew a bigger one could be on the way, a risky move because they could lose out on both by waiting.

On the other hand, bonobos adapted their behaviors based on experience. They stopped taking risks if they kept losing their gamble.

Gambling and emotion

The animals emotions didn’t always seem to align with their decisions — the easily angered chimpanzees were more patient and bigger risk takers.

The calmer bonobos were less patient and more risk averse. They did not wait for the larger treats, and they quickly adjusted their behaviors if they made losing gambles. This evidence surprised the scientists and clouds the common assumption that feelings like regret and frustration affect our economic behavior.

“Emotional reactions are thought to be important in human economic decisions,” Rosati said. “One of the things that deters people from being too risky is that you feel upset if you gamble and lose.”

Economics and environment

Rosati and Hare think this suggests that economic behavior evolved to fit the natural environments of different species.

Bonobos live in regions where food is abundant, whereas chimpanzees live in environments where food is scarcer and varies in availability from season to season. The chimp’s patience and risk taking could have held a food-finding advantage.

Chimpanzees frequently hunt small monkeys for food, which can be an economically risky behavior — hunting takes a lot of energy, and hunters don’t always catch their prey. They will also travel a lot further to seek out a higher quality fruit patch, suggesting they have a higher capacity for patience.

In like manner, it is possible that nature may have tailored our own capacities for risk, patience, and emotional control to suit our own evolutionary needs. Behaviors that might seem irrational through the sober eyes of economics may have some kind of biological basis, and therefore may not really be irrational at all.

The study certainly proves that we aren’t the only ones with the power to weigh risks and rewards.

“I think this kind of study shows that they have the cognitive skills to do these kinds of cost-benefit analyses in much the same way as humans, and they seem to be assessing risk very similarly to humans,” Rosati said. 


Secret to trading success: You

 
“You are the weakest part of your system”. That is a defeatist statement and completely untrue. It makes your expectation to fail easier to accomplish and more importantly it makes failure easier to handle. It shifts the pressure away from you and unto fate.

Would you fly on an airline if their motto was “Our pilots are the weakest part.” I do not think so. You are your system. Even if your system is automated you added the inputs, parameters.

Taking responsibility for your action is not easy. Taking control of the outcomes of trading or life is a huge responsibility. You will have moments of weakness, but you are not weak. The market does not go straight up and either does the road to success.


Confidence: How to Apply the 

Goldilocks Principle as a Trader Read more

An absolutely crucial characteristic all successful traders share is confidence. Success is only achieved when a trader has the confidence to execute his ideas without being overcome by emotional fears. I believe that creating a game plan and sticking to it will foster confidence in the long run because the trader defines all aspects of his trade that he can control; the rest is left to the market. Confidence based on winning trades is fleeting, but confidence based on the ability to objectively execute ideas leads to long-term, unbreakable confidence.

Yet I often see two primary psychological problems that traders experience with regard to confidence. There is overconfidence and underconfidence, both of which lead to very serious complications in one’s trading. Overconfidence occurs when the trader has had a string of winners and feels indestructible. A common statement of reflection once destruction occurs is usually something like: “I thought I knew more than the markets” or “I thought I had trading all figured out.” The trader usually begins to get sloppy in their trading and takes poor risk/reward trades, believing it will just work out for them. Hard-earned profits can disappear in a very short time if overconfidence is present — unless the trader has learned the techniques to recognize this and nip it in the bud quickly.

Underconfidence occurs when the trader either can’t pull the trigger or has trouble staying with the trade because he lacks confidence in his analysis and price objectives. These errors result in lost opportunities and money left on the table. Underconfidence is debilitating and must be overcome for a trader to ever become profitable.

Many times when trading errors are present as a pattern, the trader assumes if they can just have confidence, it will solve many trading problems. But,if too much is harmful and too little is harmful, then what is the correct amount of confidence to have in trading? I think many traders believe that if they just have a string of winners, that will give them the confidence they need to forge ahead. Yes, sometimes a winner can give you some confidence to get to the next trade, but what about the other side of the coin? The other side of the coin is a string of losing trades; this will destroy one’s confidence. Can a trader’s confidence be maintained even in the face of a string of losses?

After many ups and downs with “confidence,” I finally believe I have learned that my true confidence comes not with my winning trades but in my ability to control the losers and manage my trades. I noticed a consistent positive attitude that was associated and linked with how I was handling my losses. I started to feel good about how I would take a loss. There was an immediate down emotional feeling if I experienced a larger loss than necessary or exceeded a maximum daily loss. That led me to change the behavior in order to avoid the feeling that I didn’t like. Aha! I had control of that! I cannot control the markets, but I can control the parameters of my trades: entries, exits, stops, trading amounts, the number of trading positions, etc.

I was asked recently in our T3Live active trading course by a new trader how I have built my level of confidence. I told the class that my confidence comes from my controlling the losers, not from the winners. Strive for excellence in learning to manage your trades and feel good about the losers as long as you adhere to your game plan. Losses are an inevitable part of trading, and you must accept them and be happy to take them as long as it fits within your defined framework. Knowing that you will never let a loss get out of control and knowing that you will never blow up will create an unshakable confidence and the winners will come.


10 Common Trading Errors

 
What are the common errors, the improprieties, the lack of attention to proper mores, the p’s and q of trading that cause so much havoc and could be rectified with a proper formal approach? Here are a few that cost one fortunes over time.

1. Placing a limit order in and then leaving the screen and not canceling the limit when you wouldn’t want it to be filled later or some news might come out and get you elected when the real prices is a fortune worse for you

2. Not getting up or being in front of screen at the time when you’re supposed to trade.

3. Taking a phone call from an agitating personage, be it romantic or the service or whatever that gets you so discombobulated that you go on tilt.

4. Talking to people during the trading day when you need to watch the ticks to put your order in.

5. Not having in front of you what the market did on the corresponding day of the week or month or hour so that you’re trading for a repeat of some hopeful exuberant event which never happens twice when you want it to happen.

6. Any thoughts or actual romance during the trading day. It will make you too enervated or too ready to pull the trigger depending on what the outcome was.

7. Leaving for lunch during the day or having a heavy lunch.

8. Kibbitsing from people in the office who have noticed something that should be brought to your attention.

9. Trying to get even when you have a loss by increasing your size and risk.

10. Not having adequate capital to meet any margin calls that mite occur during the day, thereby allowing your broker to close out your position at a stop while he takes the opposite side. What others do you come up with?


Mark Cuban -Great Quote ,Traders Just Read it



“With every effort,I learned a lot with every mistake and failure not only mine but of those around me I learned what not to do I also got to study the success of those I did business with as well I had more then a healthy dose of fear and an unlimited amount of hope and more importantly no limit of time and effort the point of all this is that it dosent matter how many times you almost get it right.No one is going to know or care about failures and neither should you all you have to do is learn from them and those around you because all that matters in business is that you get in right once Then every one can tell you how lucky you are.”




Trading: Doing the Homework

Many new traders fail in the stock market simply because they rush in without putting in the proper time and discipline in doing their homework. Trading is a professional endeavor much like any other career, you will only get out of it what you put into it. There is no easy money, you will have to earn it by out witting, out playing, and out smarting the majority of other market participants.
You need to learn ten things to be a successful trader:
  1. How to manager your risk per trade.
  2. What systems and methods really make money over the long term.
  3. What system fits your personality and beliefs about the market.
  4. How much heat you can you handle. How big can you trade with out emotions taking over?
  5. You must learn how the market actually works, trends, flows, and functions.
  6. Learn to focus only on what makes money in the market, everything else is noise.
  7. Discover who the greatest traders of all time were and study how they operated.
  8. Find out what the best books on trading are and read them.
  9. Study the charts of the stocks you are trading to understand how it works with trends, support, resistance, and moving averages.
  10. Practice paper trading, simulated accounts, and trading small positions of real money until you have mastered your trading plan.
You must build yourself into a focused and disciplined trader. Your faith and self confidence must be so strong that you will succeed, the only question is when and how big will your account grow when you find yourself in the right market conditions trading the right system.
You should do so much work on building yourself up as a trader that when you are in that zone in the right market conditions as a ruled based discretionary trader that you are doing exactly what needs to be done to make money.
When trading in the zone you should feel like this: You know exactly what to do, because you did the homework.


Consistency is the Key

Consistency is an essential component for a successful trading career. This is how you achieve confidence and become comfortable with “riding a trading bike”.

Psychological comfort is the key to a long term trading career and is achieved by becoming consistent with small profits. If you can make consistent $ per day: it can be increased drastically within a year and become exponential in long term.

When I hear from students that their goal is ”to make a lot of money“, I always emphasize that there are few essential steps that must be achieved prior : building confidence by achieving consistency with small lot size is the step that cannot be skipped.

Create at least a 3-6 months learning curve with the goal of achieving consistent profits first on demo, then on live account. Set a reasonable lot size that is appropriate for your financial circumstances with a focus of achieving confidence and psychological comfort. Once these steps are accomplished: at the end of every profitable month add another lot size. By the end of the first year: you increased your lot size drastically and you are achieving much higher and consistent profits.

Be realistic! Skip Zillionaire syndrome..Leave Ego at the door each and every morning. Focus on being successful today by being consistent and therefore becoming confident trader.


Some Money Launderers are 

“More Equal” than Others

“All animals are equal, but some animals are more equal than others.”
- George Orwell’s Animal Farm
It’s been many, many years since I read George Orwell’s Animal Farm, but the message conveyed in it will remain with me forever.  The book is many things, but more than anything else, it is a portrayal and critique of human nature and the political systems that we create. For those that need a refresher, or have not read the book, here’s the basic plot.
There’s a farm headed by a Mr. Jones, who drinks so much he becomes unable to take care of the farm and feed the animals.  Over time, the animals (in particular the pigs), decide human beings are parasites and the pigs lead a revolt and run Mr. Jones off the property.  They change the farm’s name from Manor Farm to Animal Farm and create a list of 7 commandments.  They are:
  1. Whatever goes upon two legs is an enemy.
  2. Whatever goes upon four legs, or has wings, is a friend.
  3. No animal shall wear clothes.
  4. No animal shall sleep in a bed.
  5. No animal shall drink alcohol.
  6. No animal shall kill any other animal.
  7. All animals are equal.
Rather quickly, the pigs assume leadership over the farm and one pig in particular, Napoleon, consolidates power after running his primary competitor off the property.  It goes downhill from here fast.  The pigs start to walk on two legs, drink alcohol and sleep in beds, amongst other things. Understanding that their new lifestyle in in direct contrast with their original seven commandments, they simply decide to make some adjustments.  The adjustments are:
  1. No animal shall sleep in a bed with sheets.
  2. No animal shall drink alcohol to excess.
  3. No animal shall kill any other animal without cause.
Rather quickly, even these adjustments becoming too binding for the glutinous and power hungry pig oligarch class.  They decide to just condense everything down to one commandment:  All animals are equal, but some animals are more equal than others.
The above process is one for the ages, a process that has been reenacted time and time again by our species over the millennia.

12 Insanely Difficult Words 

That Lead Spelling Bee Winners To Triumph



The National Spelling Bee is upon us, an annual event that dates back to the Coolidge administration that has served as a defining moment of immortality for 91 victorious children.

While the point of the Bee is to spell the words, not define them, half of the fun for the viewer is to get a taste of some of the more arcane elements of language.

We went back through the history of Spelling Bee winners to find the coolest words that won a kid a trophy.

Ordered sequentially by year:

2009: Laodician (adj.) - lukewarm or indifferent in religion or politics

Spelled by Kavya Shivashankar.

2004: autocthonous (adj.) - formed or originating in the place where found, native

Spelled by David Tidmarsh

2002: prospicience (noun) - the act of looking forward, foresight

Spelled by Pratyush Buddiga

1999: logorrhea (adj.) - excessive and often incoherent talkativeness or wordiness

Spelled by Nupur Lala

1997: euonym (noun) - a name well suited to the person, place, or thing named

Spelled by Rebecca Sealfon

1996: vivisepulture (noun) - the act or practice of burying alive

Spelled by Wendy Guey

1989: spoliator (noun) - One who plunders, pillages, despoils, or robs

Spelled by Scott Isaacs

1980: elucubrate (verb)- to solve, write or compose by working studiously at night.

Spelled by Jacques Bailly

1962: esquamulose (adj.) - Not covered in scales, or of scale like objects, a smooth skin

Spelled by Nettie Crawford and Michael Day

1961: smaragdine (adj.) Of or relating to emeralds, having the color of emeralds.

Spelled by John Capehart

1959: eudaemonic (adj.) - producing happiness, based on the idea of happiness as the proper end of conduct
 

Spelled by Henry Feldman

1951: insouciant (adj.) - lighthearted unconcern, nonchalance

Spelled by Irving Belz


The Battle is With Yourself

 
“Years of experience eventually teach you that your main battle, always, is with yourself — your propensity for errors, for rationalizing marginal hands into good hands, lack of concentration, misreading other players, emotional eruptions, impatience, and so on. Your opponents are merely dim outlines that come and go. Few of them ever reach the exalted heights of damage that you can inflict on yourself.”

- Larry Phillips, Zen and the Art of Poker

Many great traders have expressed some version of the opinion, “Your greatest opponent is yourself.” Do you agree?

If so, what are the implications?

On the positive side, if “we have met the enemy and he is us,” as Pogo once said, what does that say about growth opportunity?

If you had perfect discipline, perfect motivation, and perfect emotional control, how good (or great) a trader could you be?

Focus On Obstacles

Often we’re discouraged because of some tough challenge or obstacle in our way. But a shift in mindset from a Zen proverb can change everything: “The obstacle is the path.”
The obstacle isn’t something standing in our way. It’s the way itself.
That might seem strange, so let’s look at a few examples:
  • You are struggling with writing, and procrastinate. Procrastination is the symptom, but it also illuminates the path you should take: you are dreading something about the writing, you are shying away from discomfort, you are afraid of the writing or what will happen when you publish the writing. So work with that dread, the discomfort, and the fear. You’ll be stronger for having done that.
  • You are shy and can’t meet people. This can be seen as an obstacle to social happiness, or as a path for something to work with. Many people will avoid this obstacle of shyness, and instead stay home and not socialize. Instead, go towards this shyness, explore it, find out what you’re afraid of, work with that fear. You’ll get better at handling the fear, even let go of it, and it will no longer stand in your way.
  • You are stressed out and overwhelmed at work. You can complain about this problem (and it will then continue for the rest of your life), or you can immerse yourself in it, let it lead you to self-exploration, and deal with the source of that stress and overwhelm. You’ll learn that you have unrealistic expectations and ideals, learn to let go of them, and the stress will go away. You’ll now have a tool for dealing with stress for the rest of your life.
  • People criticize you for doing things different, and don’t understand what you’re doing. You can get mad at them, rage against the unfairness of the world, or avoid them. Or, instead, you could embrace this concern, thank them for caring about you, and engage them in a conversation about what you’re going through, why you decided to do it, and how you could use their support. They might not completely understand, but they also might understand you better, which is great. And you’ll now be better at dealing with this forevermore.
  • You are jealous, angry, weak, impatient, grieving. You can deal with any of these issues, if you are willing to go into them, and be OK with experiencing these discomforts.
The examples can go on forever, but the principle becomes clear: when there’s an obstacle, don’t go around it. Don’t run from it. Go into it. Work with it. Explore it. Learn how to be with it and deal with it, and you’ll have a skill for life.
And what’s more: you will no longer be limited by obstacles in your path.

10 More Trading Rules

 
1) Trading rules don’t normally fall out of the sky.

2) The emotional work is normally not undertaken by developing traders. After all this game should be easy.

3) Not enough time has been spent finding a system that is a fit to the personality of the trader.

4) You don’t really feel congruence with the approach.

5) As soon as you have a few losers you tinker with the approach or move to a new approach.

6) You are under-capitalized or for some other reason you mess with the approach then don’t hold yourself accountable for the fiddling and blame the approach.

7) You have unrealistic expectations as to the performance of the system in terms of win rate.

8) You are ‘bricking it’ about entering drawdown territory.

9) Your system actually isn’t complete. You haven’t got all of the following bases covered: market selection, position sizing, entries, stops, exits, tactics.

10) You learned a system or got a system from a marketeer or pseudo trader and it’s actually just crap.


Ed Seykota’s 6 Rules from the Whipsaw Song

1. Do not be overly concerned about whipsaws a good trend pays for them all.

A whipsaw is when you enter a position but get stopped out quickly when the market reverses opposite to your position. If you are a trend trader this may happen many times in a row in a range bound market. This can be very frustrating to a trader and it may cause them to completely change their method. The fact is that one really good trend will pay for all of these whipsaws as long as you keep your losses small, and if you change your system you lose the benefit of that big trend.

To avoid whipsaw losses, stop trading. -Ed Seykota

2. When you catch a Trend, ride it to the end.

Your system must be able to take a position in a trending market, but then also be able to ride that trend to the end. Most new traders will jump out of trades before they are finished trending because they are scared the market has gone too far and will take back their paper profits. Let a trailing stop take you out of a trade when the trend is over, and only exit once you are stopped out.

“The trend is your friend except at the end where it bends.” -Ed Seykota

3. When you show a loss, give the loss a toss.

Every single successful trader ever interviewed as far as I have read has said something along the lines of “Cut your losses short”,”Let your winners run.” “Pull the weeds, water the flowers”.

“The elements of good trading are cutting losses, cutting losses, and cutting losses.” -Ed Seykota

4: We know if our risk is right when we make a lot of money, but can still sleep at night.

Risk is the amount of risk per trade: the dollars risked between your entry and your stop loss based on your position size and what percent this is of the total capital in your trading account. Also how much your total risk is in regards to how many positions you have open at one time as a capital at risk for your entire account.

“Here’s the essence of risk management: Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don’t play.” -Ed Seykota

5. When price breaks through, or there is a shock news announcement – DO NOTHING. Your stops are already set.

Stick with your stop losses. Do not let anything stop you from exiting a trade based on your predetermined stop.

“It can be very expensive to try to convince the markets you are right.” -Ed Seykota

6. When you get a draw down after a series of losses, stick to your plan and pull the trigger on your entry signals.

A draw down in equity happens to all traders not just new traders. This is where the trader has a long string of losses or an overall losing period. If you are averaging 50% wins in your trading, you will still have a series of 1o losses at some point in your account.

Don’t change your methods in a draw down. If you have tested your system and it works, stick to it and keep taking your entry signals or you will miss that one big trend that pays for all or most of the previous losses. There is one thing here to remember – sometimes your method has to be adjusted for market volatility or if it is range bound.

“It’s all about sticking to your plan and experiencing feelings as they arise. If you are unwilling to feel your feelings, the temptation is to avoid them by jumping off your system.” -Ed Seykota