Reblog: Ten Signs You Are Probably A Terrible Trader


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.

  1. 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.
  2. 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.
  3. 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.
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Reblog: Principles of Profitable Trading


A profitable stock trader’s success is not based on picking the right stock at the right time. There are dynamics that determine success other than entries and picks. Millionaires aren’t  created because they have a magic system for trading through all market environments. There are a couple of things that influence profitable trading, and they could surprise you.

#1. Having the right mindset to win; psychology.

#2. Managing your risk exposure on each trade; risk management.

No system will work if you can’t trade it consistently. You must stick to your method when you are losing. Whether it’s to keep taking entries, to go to the sidelines and wait for volatility, or to settle down and wait for a trend to emerge.

You must stay in the game and be ready to take your entry signals. The primary reason that traders lose money is that they give up when things get tough because they don’t have faith in their system. A trader must persevere,  never quit learning, never quit working, and always be ready to trade.

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Reblog: Does Your Trading Psychology Have A Dark Side?


Having worked with highly skilled traders of financial markets at a variety of money management organizations, I’ve noticed one distinctive marker of success: the great traders leverage one or more great strengths in their personalities and in their information processing. Those strengths differ from one exemplary money manager to another, but in each case some distinctive strength is evident.

One portfolio manager, for example, is introverted and highly analytical. He works from an enclosed office that creates a quiet, distraction-free environment. His trading draws upon patterns in high frequency data not tracked by the vast majority of market participants. When those patterns appear, his software enters orders in the market, essentially eliminating any subjective elements from his decision-making. This automation frees him up to conduct new research for much of his day. By leveraging his analytical capacities and emotional self-control, he has created an approach to trading that has been successful for over a decade.

A second portfolio manager is quite different. He is quite extroverted and works on an open trading floor with a team of junior traders. He watches markets closely and continually communicates with market participants on the buy and sell sides. He is unusually skilled at distilling what others are thinking and feeling, particularly as markets are moving. He explains that his “edge” in trading is his ability to feel the fear and greed of others and exploit the biases in decision making that result from these emotions. For example, he detects unusual bearishness and risk-aversion among traders prior to a central bank meeting. When the meeting produces little surprise, he quickly takes the other side and accumulates a large position. By leveraging his social competencies, he also has crafted an approach to trading that has yielded long-term success.

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Reblog: 3 Valuable Trading Psychology Tips From Our Loss In $SQQQ


The mind of a trader

Knowledge has to be improved, challenged, and increased constantly, or it vanishes – Peter Drucker

We couldn’t agree more, especially in the business of stock trading; the more you learn, the more you earn.

As such, much of the knowledge we share on this blog focuses on recapping technical chart patterns of past stock and ETF trades that led to successful, profitable outcomes.

However, equally priceless lessons can be learned by walking through losing trades that did not work as expected.

In this article, we share three insightful, psychological tips (or reminders for experienced traders) from our recent losing swing trade in $SQQQ.

Grab your notebook and continue reading to improve your success as an equities trader…

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Reblog: Why you shouldn’t try to trade like George Soros


George Soros, founder of Soros Fund Management LLC

 

Traders tend to be overconfident and discount what they don’t know about the market and individual securities. They see patterns instead of random noise. And they have a hard time admitting their losses and focus too much on gains.

In summarizing the science of behavioral finance, Statman says we’re pretty much hard-wired to consistently make these mistakes — and lose money. Since we tend to think of ourselves as better than average on most everything from driving to investing, it clouds our rational judgment. A body of research has found this to be particularly true when it comes to amateur stock traders.

Statman said that average returns of frequent traders “lag those of infrequent traders and the average returns of infrequent traders lag average returns of investors who abstain from trading.”

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Reblog: How To Be A Grown Up Trader


I do not think traders start making money until they mature and understand the big picture. I have been on this journey myself and went through the wild excitement of the internet bubble, day trading and the experience of making a few hundred dollars in a few minutes the first time and the delusion of the get rich quit trading scheme and the expectations of doubling or tripling an account within a year. The game of trading has large amounts of money flowing through the markets that we want to capture for our accounts and can give rise to emotions that make us act immature through the delusion of ignorance, ego, and greed. We can easily become unrealistic and go down the wrong road, it is crucial for success that we stay on the right road.

1. Quit believing all the riches of people promising that you will be rich if you just sign up for their newsletter, seminar, or join their premium service. Look for realistic resources to learn from. The more hype the more the probability of a service being a scam.

2. Quit thinking you are going to double or triple your account in less than a year, even if you do that just means in almost all situations you are taking on too much risk. If you can achieve a 20%-25% annual return then you are among the best traders in the world, these are close to the annual returns of legends like George Soros, Warren Buffet, and Paul Tudor Jones.

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Reblog: Do NOT Look For a Trading Strategy That Suits Your Personality


What Feels Comfortable and Natural Usually Doesn’t Work

Why do almost all speculator lose money? They lose because successful speculation requires that we consistently do that which is psychologically uncomfortable and unnatural” – Richard Weissman

There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win, you have to act like the minority. If you bring normal habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose” – William Eckhardt

Most of what we naturally do and think do not work in trading. Here are a couple of examples:

  • We are naturally inclined to cut our winners short and let our winners run

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Reblog – Confirmation Bias: Can trading psychology affect investment?


We’re all susceptible to confirmation bias – paying more attention to our own preferred data and largely ignoring contradictory evidence. For investors, this psychological blind-spot can be very costly.

In every-day life, we like to think that our decisions are logical, rational and objective but often they are anything but.

Balanced analysis frequently goes AWOL as our pre-conceived beliefs take over. Let’s take a General Election as an illustration of this point.

Voters often seek positive news that shows their favoured candidates in a glowing light while paying scant attention to information that casts the opposing candidate in a good light.

Objectivity

If their existing belief is that their party is always strongest on say, maintaining law and order, they may place greater emphasis on campaign speeches reinforcing this claim than independent figures showing cuts in police or army numbers.

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Reblog: How to Cut Losses and Let Winners Run


Loss Aversion – Cut Losses Short & Let Winners Run

If you’ve been trading for a while, you’ve probably heard the following ubiquitous mantra of trading: “Cut Your Losses Short & Let Your Winners Run”.

Why Should You?

Stocks can literally go to zero. It happened many times before and will happen in the future, regardless of how big the company is.

MANY oil and coal companies recently filed for chapter 11 bankruptcy and their stocks got delisted. You may also remember Lehman Brother and General Motors. What happens when your stock falls off a cliff and gets delisted? You simply lose all the money you invested in that stock.

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Reblog: 10 Things a Trader has to Beat


To be a profitable trader you must overcome these ten things:

  1. You must beat the market benchmark you are competing against or you might was well just buy and hold that index.
  2. You must beat your emotions by following a trading plan.
  3. You must beat your ego by taking losses early when you are proven wrong.
  4. You must beat your greed by managing your position sizing to limit your risk exposure.
  5. You must beat your fears by letting a winning trade run when there is no reason to exit.
  6. You must beat your desire to predict the future by reacting to what price action is actually happening.
  7. You must beat the trader on the other side of your trade.
  8. You have to make enough money to beat your commission costs.
  9. You must not let the market beat you up with too many losses and make you quit.
  10. You must beat the naysayers who think active profitable trading is impossible.

The original post is authored by Steve at newtraderu.com and is available here.

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