Over the course of 15 years working as a performance coach with traders and investors, from day trading shops to hedge funds and investment banks, I’ve enjoyed an unusual front row on the factors that contribute to success and failure in financial markets. During that time, I’ve conducted numerous interviews, directly observed hundreds of traders and administered countless personality tests. That experience has convinced me that much of what we think we know about trading success is just plain wrong. In this article, I tackle three myths of trading success and offer alternate perspectives.
Here’s the deal:
I’m not a chart pattern trader.
The Ascending Triangle chart pattern is one of the few patterns I trade.
Because when other traders get stopped out, they help “push” the market further in your favor.
In short, you EXPLOIT the stop-loss orders of losing traders — and that’s why it works.
And because this is so powerful, I’ve created a new trading video on Ascending Triangle chart pattern.
- What is an Ascending Triangle chart pattern and why does it work
- You should always go short when the price is at Resistance, right? Wrong! I’ll explain why…
- How to better time your entries & exits when trading the Ascending Triangle
- When is the best time to trade Ascending Triangle (and why)
- How to find high probability breakout trades with the Ascending Triangle chart pattern
You ready to learn this powerful chart pattern?
Then go watch this video below now…
Now, here’s a question for you…
How do you trade the Ascending Triangle chart pattern?
The original post by Rayner Teo appears on tradingwithrayner.com and is available here.
What is price action trading and why it does make you a better trader
Price action trading is a type of trading that allows traders to observe and study the current market. This, in turn, allows you to anticipate the market trend and make certain assumptions/decisions based on the current (and actual) price movements.
Price action trading is the purest type of trading that eliminates all noise.
It does not anticipate, it reads the market.
Price action is great!
Is price action trading better than other types of trading?
Hard to say.
It is really difficult to say if one type of trading is better than another. What matters is which type of trading fits your personality.
Another important element of trading is money management. What matters is even not that much the trading system, but the way you use it.
Profitable traders will agree with me.
This is the second part of the article. The first part can be accessed here.
Stage Four: The Determined Trader
- This is the stage in which you learn to specialize in certain markets and trading methods.
- Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it
- You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader
- You test your methods and they seem to work. You gain tremendous market knowledge.
- You reflect back on yourself and you can’t help but laugh at your foolishness.
- Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments
- You realize that the Holy Grail is not about technical indicators or price patterns
- You calculate risk before profits and place strict money management on all your trades.
- You cut losses short and learn to scale out on your winners.
- You start accept losing as a natural part of the game
- You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities
- Your psychological makeup has changed from an amateur mindset to a professional one.
Stage One: The Clueless Trader
- Heard of a day trader making millions, or buying options is safe and can make you rich quickly
- Beginner Luck in first few trades.
- You will buy just to see the market reverse and you will short just as the market starts to rally. Someone is tracking my trades and making me lose money.
- Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason
- You have no clue how the mechanics and psychology of trading works. What’s worse? You are not aware that you don’t know.
- Most traders will blow their entire account multiple at this stage.
- Mostly you start your trading in fag end of bull market
- You will spend more time finding a broker charging least brokerage.Tracking World Markets, Bitcoins instead of making a trading plan for next day.
- A big majority of people will leave trading and blame the randomness of markets, or say markets are always manipulated
- You don’t know what is short selling or have never tried it, no idea of stop loss as well
- You are in the unconscious incompetence stage, at this stage, your capital is at maximum risk
Looking back, I now realize that what allowed me to finally establish consistency into my trading was not a better trading strategy or a different method, but something I never expected when I started out as a trader.
In today’s society where the average attention span has dropped to 8 seconds, where 140 character tweets seem too long (#TLDR) and people skip YouTube videos after just a few seconds, we easily lose the connection to ourselves…
The concept of “self-awareness” has a woo woo ring to it and most traders will not listen to you if you start a trading conversation by referring to self-awareness. However, if you really want to make this work and if you want to finally realize your goal of becoming a pro trader, you have to listen and I am 100% certain that you will be able to relate to my story as well.
What is self-awareness? Forget the spiritual mumbo-jumbo
Unfortunately, most people, and especially traders who are often numbers driven and very rational, associate the term self-awareness with something spiritual and connect the wrong assumptions with it. This is very unfortunate because I have never met a successful trader who is not also very self-aware. You’ll see soon that self-awareness is something very different from what you believe it is.
There are seven things that I believe are pretty common in the successful traders I have known, read about, and seen in action. Whether it is stock trader Nicolas Darvas in the sixties, commodity trader Ed Seykota in the twentieth century, or Jesse Livermore at the turn of the last century, many of their principles hold true to this day. The closer I get to these principles, the better I trade. The farther I stray from them, the worse I do. In trading, discipline pays. Adopt these seven habits of highly successful traders.
- Traders must have the perseverance to stick to trading until they are successful. Many of the best traders are the ones that had the strength to push through the pain, learn from their mistakes, and keep at it until they made it.
- Great traders cut losing trades short. The ability to accept that you are wrong and put your ego aside is the key to personal and professional success.
Continue Reading →
Over 90% over traders will end up losing money in the stock market. Chances are if you are reading this you are probably loser in the Market. In order to encourage you to quit before you lose all your money, I created a list below to make you realize you are terrible at trading and should probably find another dream to pursue.
- You follow “professional” traders on twitter. The truth is many on twitter are complete phonies and have built a fake trading persona to end up selling you something in the end. More on this can be found on my guide on how to identify fraud traders.
- You look at inspirational quotes or quotes given by “famous” traders as part of your trading regimen. This is non-sense, this won’t help you.
- You assume psychology is a major part of trading, much more than an actual system. As such, you constantly remind yourself that you lost money in your last trade because of psychological mistakes and thus you refer to #2 on the list to regain focus (stupid trading quotes). If psychology was such a big part the simple solution would be to write programs that would trade for you (this isn’t a money maker). The truth is, many “professional” traders instill that psychology is big so that they can sell you their products for improving your “weak” psychology. Just to be clear I am sure most of you lack discipline, but even with discipline you still would lose money.
Continue Reading →
A profit vs loss ratio is something that can by itself help you succeed investing in the stock market. They work wonders for new traders and are used by professionals as well.
This article will explain what a profit vs loss ratio is, how to set one up, and how to stay disciplined to utilize it effectively.
What They Are
A profit vs loss ratio is a plan that you put in place to limit your downside exposure on all your trades to x% while setting a target on your upside to x% return per trade. Depending on how you setup your ratio, you can be wrong more than you are right and still make money in your portfolio.
The whole point of your profit vs loss ratio is to be able to say, “hey, even if I am wrong x times in a row and then am right once, I still am making money”.
How to Setup Your Ratio
There are 2 factors to any ratio: maximum loss % per trade, and your target profit % per trade. Once you know these you know your ratio.
There are some common mistakes that the majority of traders make as they dive into trading before they have really studied what does and does not work. All new traders will find many of these things familiar. Some of us had to fight our natural impulses hard to overcome these bad habits.
A Dozen Dumb Things that New Traders Do
- Being a stubborn bear in a bull market. Continuing to sell short inside a strong uptrend not only causes the loss of money as a market makes higher highs but you miss out on the easy profits made buy simply holding positions or buying the dips.
- Being a stubborn bull in a bear market. Some markets are under distribution and keep making lower lows. If a market is not in an established uptrend or trading range then it can go lower if support does not hold. A stop loss gets you out of a downtrend.
- Risking your entire trading account on one trade. You should never risk your whole trading account and trading career on one trade. Safety comes in trading a small size so every trade is just one of the next one hundred trades not your whole future on the line. This is a poor choice financially and emotionally. It is also a sign of arrogance believing you can predict a non-existent future.
Continue Reading →