Reblog: The Difference Between Great Traders and Good Traders: The Art of Totis Porcis


The following is an excerpt from Barton Bigg’s book, Hedgehogging, where he relates a conversation with “Tim”, a successful macro investor (emphasis mine).

Tim works out of a quiet, spacious office filled with antique furniture, exquisite oriental rugs, and porcelain in a leafy suburb of London with only a secretary. My guess is he runs more than $1 billion, probably half of which is his. On his beautiful Chippendale desk sits a small plaque, which says totis porcis—the whole hog. There is also a small porcelain pig, which reads, “It takes Courage to be a Pig.” I think Stan Druckenmiller, who coined the phrase, gave him the pig.

To get really big long-term returns, you have to be a pig and ride your winners… When he lacks conviction, he reduces his leverage and takes off his bets. He describes this as “staying close to shore… When I asked him how he got his investment ideas, at first he was at a loss. Then, after thinking about it, he said that the trick was to accumulate over time a knowledge base. Then, out of the blue, some event or new piece of information triggers a thought process, and suddenly you have discovered an investment opportunity. You can’t force it. You have to be patient and wait for the light to go on. If it doesn’t go on, “Stay close to shore.”

What separates the great traders from those who are just good?

The answer is knowing when to size up and eat the whole hog.

Let me explain.

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Reblog: The Rare Trading Edge


Being a profitable trader is not just about changing what you do but who you are. Unprofitable traders tend to be impulsive, greedy, impatient, and take actions that are random. You don’t need to do one great trade, the odds are that one big trade will cause more damage than good. Like most lottery winners that end up bankrupt most new traders with windfalls from luck give all the money back when the risk of trading too big catches up with them in big losses. The skills a new trader needs to learn is creating good trading signals, proper position sizing, the discipline to follow their plan and the flexibility to go with the price action.

The magic happens after consistently following a quantified trading system day after day and month after month and let profits play out. The sustainable money in trading is learning how to minimise losses, exit winning trades while the money is still there and the compounding of capital over time. The magic happens with the creation of a system that fits your own beliefs and risk tolerance and the repeating of your entries and exits over time.

There are many profitable systems that can make you money, if it was a matter of an idea or a backtest everyone would be rich. It is the execution of the right idea over time with discipline and self control that makes all the difference. The rare trading edge is the trader’s mastery of their own mind and emotions.


Reblog: 10 Things A Trader Needs to Give Up


It is easy to become obsessed with adding to our trading arsenal with knowledge, books, chart patterns, indicators, moving averages, and gurus, that we forget to analyse what we need to remove from our plan.

One of the largest determining factors as to whether a new trader ends up as a winning trader, is how well they can filter out what doesn’t help them make money. Traders can’t follow every indicator, trade every method, and endlessly add to their trading methodology. As traders we have to make choices. We must know what makes money and what to remove from our trading strategy.

  • Give up your need to be right: The market is always right, don’t strive to be right in your predictions and opinions. Strive to go with the flow of the market.
  • Give up control: No matter how long you watch a live stock stream, you have no power over the movements. Save your emotional energy by not trying to cheer on your positions and get wrapped up in every price tick.

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Reblog: 10 Signs a Trade is About to Go Bad


Most traders have been in that one monster, parabolic trade where they made a killing. The problem is the exit. It is important to always be wary and plan a trailing stop to get out of your huge winners. So many investors and traders just get lucky, get in the right trade at the right time, and catch a monster trend. Their patience to hold pays off by catching a full move in their favour by letting their winner run. Unfortunately, this patience is a liability if they also hold all the way back down, coughing up big profits. One part of the exit is a well-placed trailing stop under a near term support price, or moving average. Additionally, you can use the psychology of the market as an indicator that it is time to look for a profitable exit.

10 Signs Your Big Winning Trade Is About To Go Bad and it is time to look for the exit.

  1. If they put the ticker symbol, currency, commodity, or index that you are trading as a live permanent quote on CNBC, the end of the trend is near.
  2. If a bull or bear is on the cover of a major national magazine, that market is very close to ending.
  3. If you are on the side of the vast majority of traders, and people against you are vilified, then the trend is almost over.
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Reblog: 3 Simple Money Flow Index Trading Strategies


If you have been day trading with price action and volume – two of our favourite tools – then the Money Flow Index (MFI) indicator would not feel alien to you. Once you move pass the fancy name, the money flow technical indicator essentially acts as a momentum oscillator that calculates the volume and price data in order to measure buying and selling pressure.

By calculating the indexed value based on the stock price and volume of the number of bars specified in the money flow index settings, it plots a line on the chart that oscillates between the 0 and 100 level.

Figure 1: Money Flow Index of CTRP Fluctuating Between the 0 and 100 LevelsFigure 1: Money Flow Index of CTRP Fluctuating Between the 0 and 100 Levels

When a stock’s price rises, the money flow index also rises and is a sign of increased buying pressure.  Conversely, if the stock price drops, the Money Flow Index will also decline and is a sign of selling pressure.  Therefore, you can easily predict the directional momentum in the market by keeping an eye on the money flow index.

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Reblog: William J. O’Neil – 23 Trading Rules That Will Make You a Better Stock Trader


WillimJOneil

William J. O’Neil is one of the greatest stock traders of our time, achieving a return of 5000% over a 25 year period.

He uses a trading strategy called CANSLIM, which combines fundamental analysis, technical analysis, risk management and timing.

You can learn this exact trading strategy in his best selling book, How To Make Money In Stocks: A Winning System in Good Times and Bad.

His financial successes led him to:

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Reblog: Trading As A Business – My Step By Step Guide


You have all probably heard that you need to treat trading as a business if you want to be successful. But what does this actually mean? Instead of letting it be just another meaningless phrase, let’s take a deeper look to fully understand it.

The ideas behind “treating trading like a business” are very important to get you on the right track and after we have taken a look at the different aspects, I am sure you will get some ideas on how to take your trading to the next level and treat it more like a business.

Your setups are your products and services

Every business has either physical/virtual products or services to sell in order to generate profits. The business, hopefully, knows everything there is to know about their products, where it is from, how it is built, what the benefits are, what the potential struggles are, how to keep improving their product, what their customers want, and how to use it in the best possible way. The business must be the #1 expert in what they are offering. Obviously.

As a trader, your setups and your strategies are your products. Your setups are a set of rules and triggers to help you find potentially profitable trades. Whether your setups consist of classic patterns, indicators, pure price action or a combination doesn’t matter here.

What is important is that YOU must be the expert in your setups and patterns. You must know every little detail, when the setup works best, during which market conditions it doesn’t work, in which markets and timeframes to use it, how to improve the odds, how to set stops and pick targets, when to move stops and how to manage trades, when to add to a position or take some off the table, when to stay out, etc.

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Reblog: 15 Quotes From Legends In Sports That Will Help Boost Your Trader’s Mindset


That Will Help Boost Your Trader’s Mindset

Being a top athlete takes a lot of grit and perseverance. Because whenever one feels complacent is exactly when one might fall flat on one’s face. So, professional sports are constant acts of pushing past limits. And not every person can manage such levels of physical and mental efforts.

That is why top athletes often have these extraordinary nuggets of wisdom they occasionally share with the world. And what’s fascinating is how these pearls of wisdom are relevant in trading. But not only — they’re also relevant in business, relationships; in fact, they’re relevant in life in general.

Here are some of the best motivational statements by legends in sports:

1. Success is where preparation and opportunity meet. – Bobby Unser, automobile racer

In trading: Rash decisions that will leave you in a weak position. Always come prepared.

Trader's mindset Michael jordan

2. Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.  – Michael Jordan, basketball icon

In trading: When failure smiles at you, the best thing you can do is smile back, while acknowledging that the lessons that stick are those that hurt. Your failures are stepping stones on your way to success.

3. I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed. – Michael Jordan

In trading: Again, be patient with yourself. At first, you will make mistakes; you will fail. But you want to fail. You need to fail. Failure is good for you. It builds resilience of mind; develops wisdom; it is the foundation upon which mastery, success, and happiness rest upon.

4. In baseball and in business, there are three types of people. Those who make it happen, those who watch it happen, and those who wonder what happened. – Tommy Lasorda, Hall of Fame baseball player and manager

In trading: You miss 100% of the trades you don’t take. Stay active, trade small. Engagement leads to success. There is no overtrading if you’re trading a proven system.

5. There may be people that have more talent than you, but there’s no excuse for anyone to work harder than you do. – Derek Jeter, longtime Yankees shortstop

In trading: You have to depend on your own work ethics to get ahead in this field. Don’t wait for trade ideas from others. Work on being completely self-reliant.

6. Everybody’s got plans… until they get hit. – Mike Tyson, boxing icon

In trading: The satisfaction of instincts cannot be the main way by which you place and manage your trades. You need a plan, and you need to follow it with consistent and conscientious regularity.

Trader's mindset Arnold Schwarzenegger

7. 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, professional bodybuilder, actor, businessman, politician

In trading: Muscles need a certain amount of stress in order to grow. It is with muscles as it is with life –meaningful growth requires challenge and stress. So, don’t think of losses, mistakes, and failures as the end of the world. They’re just opportunities for growth.

8. Bodybuilding is much like any other sport. To be successful, you must dedicate yourself 100% to your training, diet and mental approach. – Arnold Schwarzenegger

In trading: Whoever focuses solely on his/her market edge while neglecting his/her trading psychology will soon discover trading to be an unwinnable battle.

9. Champions keep playing until they get it right. – Billie Jean King, International Hall of Fame tennis star

In trading: Whatever you do, trade small. If you can’t stay in the game, you can’t learn. It’s simple as that. Failures and mistakes have to be small —so small that they can teach you instead of ruining you. If they’re too big, you’ll eventually get booted out of the game.

10. A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. – Wayne Gretzky, hockey icon

In trading: It doesn’t take a lot to predict price action (human behavior) and capitalize on it. You only have to assume that people will always try to escape a disagreeable situation with the smallest possible expenditure of intelligence. With that in mind, you need a plan to guide your own behavior, and you need to trade that plan with discipline and vision.

11. Always make a total effort, even when the odds are against you. – Arnold Palmer, golf legend

In trading: Part of being a good trader is knowing how to go through drawdowns with grace, courage, patience, and vision.

12. The more difficult the victory, the greater the happiness in winning. – Pele, Brazilian, soccer legend

In trading: You fall, you fail, but after some time, you learn. And eventually, you master! Then get-rich-quick prospectors watch you from the outside, jaw hanging. They see how trading is simple and they think it’s a straight line. It never is.

Trader's mindset Muhammad Ali

13. He who is not courageous enough to take risks will accomplish nothing in life. – Muhammad Ali, Boxing icon

In trading: Here’s something that’ll raise a lot of eyebrows: Even if you’re a consistently profitable trader, you will never become incredibly wealthy by being too conservative. For that to happen, you gotta be wild sometimes, take some daring bets, with size, and be truly ok with failure.

14. It isn’t the mountains ahead to climb that wear you out; it’s the pebble in your shoe. – Muhammad Ali

In trading: When you approach the markets with equanimity, all mental stories are thrown away, and what remains is just the market as it is.

15. Persistence can change failure into extraordinary achievement. – Matt Biondi

In trading: Patience/ resilience/ non-delusion will be rewarded by the markets.

Bonus. If you aren’t going all the way, why go at all? – Joe Namath, Hall of Fame football quarterback

In trading: Resilience is key! Do what you have to do to stay in the game long-term. In due time, you’ll be able to:

  • Trade and understand the market like no one
  • Trade with size
  • Turn small accounts into big accounts

And best of all: Nobody will be able to take that away from you.

The original compilation is by Yvan, appears on tradingcomposure.com and is available here.


Reblog: Some Things I’ve Learned Over The Last 30 Years


Today marks 30 years since a confident young man walked into the back office of Schroder Investment Management in London, to start his first day on the job, the first in his career. Ask me a question back then and I would have answered assuredly and quickly. Today I’d be more likely to say ‘I don’t know’ with just as much confidence.

Now older, wiser, but with just as much hair, I have over the years seen many people come and go. Clients, colleagues, bosses, company mergers, bankruptcies (thankfully not my own), through bull and bear markets, booms, crashes, and have seen my own fortunes fluctuate too before setting out on my own a few years ago.

Thirty years is a long time. The good news is it was all worth it.

The first thing to point out is I don’t have all the answers. That’s not what this post is about. I’m always learning. But I have benefited enormously from people sharing their time and expertise, so if I can help others in the same way, I’m happy to share what I’ve learnt also.

These are 30 observations, guiding principles, or simply things that work for me. Some of you who have followed me for a while will recognise many of them. These aren’t universal truths, they’re my truths, my beliefs, shaped by my experience.

And that’s probably a good place to start.

“The more you believe something to be true, the more you will have accumulated evidence to support it.”

That’s a quote from trading coach Van Tharp, and I’ve applied it to so many areas as a simple way of explaining people’s expression of their beliefs, my own, and the realisation of how powerful confirmation bias is. Van believes we don’t trade the markets, we trade our beliefs in the market. A trading system therefore is simply a set of beliefs, and I think he’s right.

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Reblog: Trading Tips by Ed Seykota


If you are a trend follower then  you must have heard of Ed Seykota. Ed Seykota was first featured in the book “Market Wizards” and has one of the best track record of all time. In one of the accounts he managed, he had a return of 250,000% over a 16 year period. Comparable to the likes of Warren Buffet, George Soros and William J. O’Neil.

Ed Seykota has an Electrical Engineering degree from MIT and is a systematic trader. His trading is largely confined to the few minutes it takes to run his computer program which generates signals for the next day. I’m sure most traders would like a system that does that.

With such an amazing trader around, it makes sense to pay attention whenever he talks. So here are the 39 best things said from the man him self, Ed Seykota.

Quotes by Ed Seykota

Technical analysis

1. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.

2. If I were buying, my point would be above the market. I try to identify a point at which I expect the market momentum to be strong in the direction of the trade, so as to reduce my probable risk.

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