20 Habits of Great Traders
1) Patient with winners and impatient with losers
2) Making money is more important than being right
3) View Tech Analysis as a picture of where traders are lining up to buy and sell
4) Before they enter every trade they will know profit target or stop exit
5) Approach trade no.5 with the same conviction as the previous 4 losing trades
6) Use naked charts
a) As we mature we begin peeling off indicators
b) Prices action is key
7) Comfortable making decisions with incomplete information
8) Stopped trying to pick tops & bottoms long ago
a) They make their money in the meat/middle of a trend (wait for confirmation)
b) A trend is much more likely to continue than it is to reverse
9) Do not think of the market as expensive or cheap
a) Ignore whether you think something is overpriced or understand, think price action
10) Aggressive with trade size when doing well or modest when not
a) Do more of what is making, less of what is not
11) Realised that the market will be open tomorrow
12) Never add to a loosing position
13) Judge trading success on anything but money
14) Read about mobs, riots and human psychology, example:
a) The wisdom of crowds by James Surowiecki
b) The art of strategy by Avinash Dixt and Barry Nalebuff
c) Market Mobs and Mayhem: A modern look at the Madness of Crowds by Robert Menschel
15) See themselves as money makers
16) Practice reading the right side of the chart and not the left
17) Have an edge in the market
a) An edge is what makes you feel that gives you a greater than 50:50 chance of determining the future direction of price
18) Determine position size based on risk, not round number
19) Buy strong markets and sell weak markets
a) Trade on a chart that is clear, if not clear, stay out
20) Play the reaction, not the news
10 Things A Trader Needs to
START DOING …To Mint Money
1. Start trading the price action by using charts. The market doesn’t care about your opinions but the chart expresses the collective actions of all market participants. Learn to understand what the chart is saying.
Start to understand that the market determines whether any single trade wins or loses not you and not an imaginary “they”.
2. We can only surf the price waves not control them.
Start to take 100% responsibility for your losses.
3. You enter the trade, you exit the trade, the wins and losses are yours alone. The blame game is a losing game in the markets.
Start to bounce back from losing trades quickly, move on don’t ruminate.
4. If your position size and risk management are correct no one losing trade should emotionally devastate you it should be only one of the next hundred trades with little significance by itself.
Start caring more about what the market is doing and less about what you think it should be doing.
5. ALL that really matters is current price action not your opinion of what might be price action later.
Start to change your position quickly when you are proven wrong in a trade.
6. The best trades start out as winners immediately, when you have to start hoping and stressing early it is very probable that the trade will be a loser.
Start to have a positive expectation of your robust method for long term success regardless of your short term results.
7. Traders that make money are able to trade through their losing streaks with small losses to get to the big wins.
Start to define trading success by trading a robust method with discipline over the long term.
8. Consistently trading a winning system over the long term is what makes money in the market.
9. Start to only risk 1% of your capital per trade.
When you risk only 1% of your capital per trade you turn down the volume of your emotions while trading and decrease your risk of ruin to almost zero. This 1% refers to the amount of loss you will take not on your total position size of capital in a trade.
10. Start to cut your losers short and let your winners run.
The primary thing that makes money for most rich traders is having small losses and big wins not percentage of winning trades.
If what you are doing is not making you money in the long term then why not stop doing what you are doing and start doing what the money makers are doing?
Bad traders make a little money in the short term but lose big money in the long term. Rich traders lose a little money in the short term but make big money in the long term.
Trading Wise Words
Turtle Trading Principle
Trade with an edge, manage risk, be consistent, and keep it simple.
The entire Turtle training, and indeed the basis of all successful trading, can be summed up in these four core principles.
Curtis Faith, Way Of Turtle
Why Chart Patterns Repeat Themselves
All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope.
That is why the numerical formations and patterns recur on a constant basis.
Jesse Livermore, How To Trade In Stocks
Stick To Your Trading Rules
Successful trading is about finding the rules that work and then sticking to those rules.
William J. O’neil
Perfect Speculator
Perfect speculator must know when to get in;
More important he must know when to stay out;
And most important he must know when to get out once he’s in.
Source: Trend Following: How Great Traders Make Millions in Up or Down Markets
Emotional Makeup Is More Important
I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.
William Eckhardt
Emotional Discipline: The Key To Trading Success
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.
Victor Sperandeo
Human Emotion In Trading
Human emotion is both the source of opportunity in trading and the greatest challenge.
Master it and you will succeed.
Ignore it at your peril.
Curtis Faith, Way Of Turtle
What We Can Learn For Trading From A Fable
A monkey was carrying two handfuls of peas. One little pea dropped out. He tried to pick it up and spilt twenty. He tried to pick up the twenty and spilt them all. Then he lost his temper, scattered the peas in all directions and ran away.
Fables, Leo Tolstoy
15 Points for Trading System & Money Management
Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
2. “Markets can remain illogical longer than you or I can remain solvent”, according to our good friend, Dr. A. Gary Shilling.
Illogic often reigns and markets are enormously inefficient despite what the academics believe.
3. An understanding of mass psychology is often more important than an understanding of economics.
Markets are driven by human beings making human errors and also making super-human insights.
4. The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom.
If we learn nothing more than this we’ve learned much indeed.
5. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t.
Do the trade that is hard to do and that which the crowd finds objectionable.
Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.
6. There is never one cockroach: Bad news begets bad news, which begets even worse news.
7. Never, under any circumstance add to a losing position…. ever!
Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
8. Trade like a mercenary guerrilla.
We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
9. The objective is not to buy low and sell high, but to buy high and to sell higher.
We can never know what price is “low.” Nor can we know what price is “high.”
Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
10. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral.
That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
11. Sell markets that show the greatest weakness, and buy those that show the greatest strength.
Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily.
In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
12. Do more of that which is working and less of that which is not.
If a market is strong, buy more; if a market is weak, sell more.
New highs are to be bought; new lows sold.
13. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly.
In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
14. Be patient with winning trades; be enormously impatient with losing trades.
Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
15. To trade successfully, think like a fundamentalist; trade like a technician.
It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
Learn To Lose
Gorman & Kennedy, Visual Guide to Elliott Wave Trading-Book Review
Instead, this visual guide shows how to actually use Elliott waves in trading, both as a stand-alone tool and, more perfunctorily, in combination with technical indicators. It also includes two chapters on incorporating Elliott waves into options trading strategies
Many of the Elliott waves the author illustrate (and naturally the illustrations are abundant) are of the “real world” vs. the “textbook” variety. That is, they are tricky to decipher even in hindsight. This difficulty has led many critics to claim that Elliott wave theory is useless in real time. In fact, the authors admit that “under the Elliott wave model, there is usually more than one valid wave count at any particular time” and that “sometimes these wave counts point in opposite directions.” (p. 195)
For the trader in doubt (who is not pursuing an option strategy that can profit under more than one scenario), Gorman and Kennedy provide visual cues—usually familiar patterns such as channels and wedges, sometimes Fibonacci levels—that help the trader make sense of the waves. The chapter titles in Part II (“Trading Examples”) point to some of these cues: “How Zigzags and Flats Set Up a Trade for the Next Impulse Wave,” “How a Triangle Positions You for the Next Move,” “Riding Wave C in a Zigzag,” and “Using Ending Diagonals to Trade Swift and Sharp Reversals.”
The authors draw the majority of their examples from the futures and FX markets, which tend to trade more technically than do stocks. They describe sample trades as these trades progress over time, explaining how they set stops and targets, what they were thinking (and feeling) during the trades, and what they learned from them.
Visual Guide to Elliott Wave Trading will help the trader who is interested in wave theory as a practical tool for increasing his bottom line—even if he can’t properly label all the wave levels on his charts.