Trading Educators Blog
As you trade, do you ever just think, "It's all just random, why even bother trying at all?" If you passively think you have no control, you may end up making less money. A team of scientists studied a group of university students who played a computer game of roulette. All participants reported they had gambled recreationally in the past year. Researchers asked participants to describe the strat...
Self-control is often the key to trading success. Masters of the market are disciplined. They don't sporadically act on a whim. They develop specific trading plans and follow them. Trading is largely a matter of capitalizing on odds. If you assume that a given trading strategy has a past performance record of 50%, for example, it's a matter of odds as to whether that particular strategy will obtai...
You must be disciplined in following the plan of your trade religiously. Once you have closed your position, you should record everything about the trade. Write down where you wanted to enter the trade, what you expected out of the trade, and what you actually did get out of the trade. Make sure to include notes that will help you learn from the trade, reasoning what actually took place once you ...
Have you ever made a small losing trade and thought, "It's alright.I'll win on the next one." The next trade comes along, and you lose. And then the next one is a loser, and so on, and so on...until finally, you are in a severe drawdown. Before you dig yourself into a hole that is virtually impossible to climb out of, it is vital for survival to constantly monitor your progress. Take a good hard ...
Anyone is allowed to make one mistake. When the mistake is repeated, watch out! The third repetition of the same mistake constitutes self-destructive habitual behavior that must be reversed. Stop all trading immediately, and thoroughly examine your self-discipline. Once the reason for the repetitive mistake is understood (usually fear, anger, greed, or guilt) it must be corrected before trading ma...
It's not the number of times you fail that matters. It is all about getting back up after you've been knocked down. Ask any successful person and you'll find that he or she has experienced a mountain of failure. Trading is a challenging profession. Few make it, and of those who do, many eventually blow out their accounts and give up the profession. What's the difference between the successful, wi...
Have you ever had a bad day when nothing seemed to go right? First, you got up late. Second, your computer wouldn't boot up, and third, when it did, you couldn't seem to get in and out at the right time when executing even the most basic trade. What really upset you was when your Data line went down for 10 minutes during a critical moment in your trading plan. Traders face setback after setback, ...
Are you experiencing an emotional roller coaster, euphorically celebrating wins, but facing despair when losses mount? If you are, you may be taking things a little too personally. If you want to trade like a winner, you need to take responsibility for your actions, taking every precaution possible to neutralize adverse events and to control risk. That said, when things go wrong, it may not alway...
Early in the trading day, as part of your daily preparation (you do have a daily preparation, don't you?) it's helpful to practice a little to get a "feel" for what you might do and how you might trade. One way to do it is to make a few small trades, using just a small percent of your normal trading size. Putting on a small position usually helps you focus. Once you've entered the market, see how...
As traders in the markets, it's informative to study everyday examples of mass psychology. Although humans are highly intelligent, they can act like cattle blindly following the leader of the pack to the slaughterhouse. For example, have you ever observed how people drive in busy rush hour traffic? On a crowded freeway, it's common to see people refuse to acknowledge that the flow of traffic has ...
Because we don't know what "successful" means to every individual, we should divide traders into different groups. I think most traders can be found in one of the following groups: Group One - these are mainly traders new in the trading business. They have read a book or two and they find trading very interesting, but they still don't know where to start. Group Two - these are the traders who alr...
Have you ever been so excited about a trade that you couldn't sleep at night? Or perhaps you are trying to dig yourself out of a hole and worry has taken a toll. Studies of disasters, ranging from major environmental catastrophes to minor laboratory accidents, happen when people are under extreme stress or experience physical exhaustion. When people are tired, there's an increased risk of disaster...
I'll try to give you a few things to think about, but unless you can overcome your inability to accept risk, you don't have much of a chance to make it as a trader. Trading and risk are virtually one and the same. Shorter term trading isn't about using a buy-and-hold strategy, and minimizing risk by holding on for the long-term. Short-term traders capitalize on volatility and the fact that volati...
The winning trader stays ahead of the crowd. In ever-changing market conditions, you have to think of new, innovative trading ideas. But it isn't always easy. There are times when you feel mentally stuck and unable to think creatively. When you are feeling a little stuck, there are specific steps you can take to get your creative juices flowing. Creativity can't be forced. If you try to force you...
The expectations you hold about where your trading career is going can have a powerful impact on what you do and how you do it. Consider three traders, Jake, Steve, and Paul. Each has a different outlook, and this outlook dictates how they approach the markets. Jake is a pessimist. He wants to become a profitable trader, but his attitude gets in the way. He thinks, "I just don't have the talent t...
There are several major mistakes that traders, especially beginning traders, are making much of the time. Here is a (for sure not complete) list. Mistake #1: Because of hype they hear from many sources, beginning traders believe they can learn trading in a couple of days or weeks. The truth is, becoming successful in the trading business takes much longer and is harder to achieve than it seems in ...
Your ability to concentrate fully and intensely can mean the difference between consistently taking home huge profits and barely staying above water. It's really important that you pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make a wise decision once all information has been scrutinized. You can't be distracted and unfocused while formu...
Marvin has been following a company stock for the past year. It's a great company with solid management, high sales growth, and consistently high earnings. It is in a booming industry sector and a favorite of the media. After a year's worth of careful deliberation, Marvin has decided to pull the trigger and buy a large position. He can't see what can go wrong. What can go wrong? It's a good compa...
Don't follow the crowd! You've been warned over and over, but few are that independent minded. Breaking away is harder than it looks. We are all familiar with the rebel, the person who breaks all the rules and is skeptical of the status quo. At the other extreme, the ultra-conformist seems to follow the rules too blindly. Neither extreme is optimal for trading. It's necessary to find the right bal...
Jake has just made three losing trades in a row? He decides he is in a slump and is now worried that he can't get out of it. But is he really in a slump? Perhaps he's just panicking for no good reason. He may just have a pessimistic attitude, but this might be enough to keep him stuck. Thoughts are powerful. The reality of the situation may not matter. All that matters in the end is your percepti...
