Reblog: 7 Habits of Highly Successful Traders


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.

  1. 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.
  2. 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.
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Reblog: Avoid These 7 Beginner Trading Mistakes


When you first start trading, the most likely short term outcome bar far is that you will blow up account.And then quit. But it doesn’t have to be this way! If you avoid these simple beginner trading mistakes then I guarantee that you will have a better shot at trading long enough to become consistently profitable.

Ninety percent of traders lose ninety percent of their money in ninety days. Or so we are told. No one really knows if that is true. Avoid these 7 beginner trading mistakes and hopefully you will avoid become a trading casualty statistic!

  1. Trading too large

Blowing up your account need not be inevitable. But if you insist on risking five, ten, twenty…even one hundred percent of your account on your first trade, I can almost guarantee you that you will eliminate your trading account long before the ninety days are up.

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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: 10 Powerful Trading Tools


A trading tool is anything that has a function that helps you be a profitable trader.

  1. Back testing software is a tool that helps you see what type of price action trading signals were profitable in the past price data.
  2. An entry signal is a tool that tells you when to get into a trade because the odds are in your favor for a winning trade.
  3. A stop loss is a tool that limits the size of a losing trade.
  4. A trailing stop locks in open profits when a trend starts to bend.
  5. Position size determines how big your trade should be based on market volatility.
  6. A profit target is a tool to measure the potential reward if your trade works out.
  7. Moving averages are tools for quantifying a trend.
  8. Passion for the markets is the powerful internal trading tool that gives you the energy to do the needed work to be a profitable trader.
  9. Perseverance is a psychological trading tool that keeps you going even when you want to quit.
  10. Self control is an internal trading tool that enables you to follow your trading system regardless of your emotions.

Your greatest trading tools are going to be perseverance and self control. These are the only things that will buy you the time to learn how to build a profitable trading system, and once you have developed a system that works to then follow it long term.

This article was written by Steve of newtraderu.com and can be found here.


Reblog: Top Stock Trading Techniques of All Time


Every successful trader on the planet has one thing in common – he has an edge. By that, we do not mean he has information about a company much before others and takes a position based on the information. On the contrary, the successful trader is on the same footing as anyone else, the big difference is he knows how he will act when he sees his signal on the screen and that gives him the edge over everyone else who will be swinging their bat blindly. Unlike a novice, he will trade only and only if the signal shows itself at other times he is waiting patiently.

That is all that it takes to be a successful trader, to know what to do and when to do it. But this is a huge wall to climb for a novice trader as he does not has the patience to wait or the ability of self-control.

Successful trading can be broken down into five techniques which have been followed by professional traders for whom it is now second nature.

Approach: For a successful trader, trading is his life and passion. It is as much a business as it is a game. How you approach trading decides how you will succeed. A casual approach to trading will result in mediocre results. But if trading is approached as a business with all aspects of it thought through the trader can be assured of success. The common trait among the successful traders is the businesslike approach to trading with a lot of attention to even the smallest details, writing their own logs, taking complete responsibility for their trades irrespective of the outcome.

Retail traders generally tend to search for a person or an event to blame for their losses, but a successful trader owns the losses and considers it as part of the game. It is this winning attitude that is the differentiator. Just like a successful businessman takes responsibility for the mistake of his managers and workers and moves on in the search for a solution, a good trader also moves on to the next trade. He knows that this is just one of the thousands trade that he will take in his lifetime.

Keeping it simple: A successful trader trades simple strategies. A retail trader, on the other hand, will jump from one strategy to the other if he does not see profits accumulating. He prepares complex entry and exit signals and most times mixes up his strategies. This results in loss of faith in his strategy and he jumps to test some other strategy. A professional trader will have very few and simple sets of rules which he follows and trades. His chart patterns are simple, like a breakout or a retracement entry. Such a trader has very clearly defined rules for entry and exits. A series of losses does not deter him as he knows that his strategy has been built to overtake such days in the long run. He has strong money management rules that will reduce his position in case of series of losses. On the other hand, a retail trader will increase his trading bet in order to retrieve his losses in the next trade, he seeks revenge from the market for taking money from him.

It’s OK to be wrong: Not reacting to losses takes more energy and time for a trader than to search for the right strategy. It is only after years and hundreds of trades that a trader learns how to be emotionally neutral in any situation. Many professional traders follow the trend following strategies which normally has a win-loss ratio of 0.4. In other words, six out of every ten trades that a trend follower takes will result in a loss. A retail trader will be crestfallen with such a ratio and would abandon the strategy at a time when the next trade would have resulted in a huge profit. The professional takes these losses in his strides and knows that they are in line with the long-term averages. Taking losses are important of trading, the trick is to keep them small so that one or two profitable trades will take care of the accumulated losses. Since trading is a game of uncertainties it is obvious that there will be occasions when the price moves in a different direction than the one suggested by the pattern or the signal. How one reacts to these uncertainties determines the winner in the long run. Trading consistently with discipline and tweaking the strategy after learning from the losses will in the long run help overcome uncertainties.

Plan your trade and trade your plan: Trading, like any competitive sports, requires more work out of the playground rather than in it. For a day trader, there is little time to plan as the prices move rapidly. He has to have a plan in place and trade according to the plan, the strategy has to be so engraved in him that it becomes muscle memory. Last minute thinking will only lead to losses as well as confidence. Most traders, irrespective of the time-frame they trade also do not change their trading plan and second guess when the time for action comes.

Continuous improvement: One of the key aspects of all successful traders is that they seek to improve their performance continuously. They are not competing with anyone but with themselves and the way they do this is by keeping their own logs. This way they know their mistakes that need to be rectified, their previous track record as well as how the strategy has performed at the various points of time. They are learning aspects of trading and psychology and try to incorporate these in their trading. A successful trader is always a student of the market learning with each uncertainty and ticking the checklist of having encountered another surprise so that next time he knows how to react to it.

Making money consistently in trading requires discipline and consistently more than selecting a trading strategy. The techniques used by successful traders suggest that after the initial work of selecting a strategy is done they pay more attention to the psychological aspect of trading. Ultimately it is how one reacts to unpleasant surprises is what decides the winner from the losers. This is true for life as much it is for trading.

This article appeared on tradesmartonline.in and is available here.


Reblog: 12 Dumb Things New Traders Do


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

  1. 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.
  2. 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.
  3. 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.
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Reblog: Why I Ditched Technical Indicators (And Why You Should Too)


While the article talks about Forex, the underlying concept applies to stocks as well.

technical-indicators

Technical indicators are no doubt a favorite topic in the financial markets. They can range from a simple moving average to a complex array of algorithms.

It doesn’t matter whether you’re trading stocks, commodities, futures or any other market; technical indicators are a common theme.

Useful? Well, that’s another matter entirely.

But of all the financial markets, Forex is arguably the worst offender of overutilizing indicators. Proprietary languages like MetaTrader’s MQL have made it relatively easy for newcomers to design anything imaginable.

Other trading platforms offer similar languages. There are even businesses that do nothing but custom code indicators for clients.

And if you ask me, it’s closer to being part of the problem than the solution.

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Reblog: How To Use The Reward Risk Ratio Like A Professional


The reward to risk ratio (RRR, or reward:risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable.

A trader who uses the RRR incorrectly will never become profitable on the other hand. In this article, I will show you what you need to know about the RRR.

Busting myths around the reward:risk ratio

Let’s first tackle some of the common misconceptions about the RRR to help you understand what most people get wrong before then diving into the specifics of the RRR.

Myth 1: The reward:risk ratio is useless

You often read that traders say the reward-risk ratio is useless which couldn’t be further from the truth. When you use the RRR in combination with other trading metrics (such as winrate), it quickly becomes one of the most powerful trading tools.

Without knowing the reward:risk ratio of a single trade, it is literally impossible to trade profitably and you’ll soon learn why.

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Reblog: Why Having A Trading Routine Is Vital To Your Success


I think we can all agree that habits are what determine our success or failure in any endeavor, trading included. So, how do we go about developing the type of habits that will lead us to profitable trading?

The answer: Routine.

Proper trading habits do not just magically appear out of thin air (unfortunately). They can sometimes take years to form. However, luckily for you, you have the power to put into motion a plan that will bring forth the proper trading habits sooner than otherwise possible. The development of positive habits, the ones that lead to success in any field, is something you can make a conscious effort to achieve simply by implementing consistent daily routines.

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Reblog: What is Gap Trading?


Forex Gap Trading

When trading, one cannot overstate the importance of gaps.

Gaps refer to areas on a chart where the price of a currency or stock moves sharply up or down with little or no trading in between. As this area represents an abnormality in the normal price pattern of the stock / instrument, it gets referred to as a gap.

So of what use can a gap be to an investor? Because the tiny area represents a fluctuation in the pricing, a trader can potentially exploit the gap and make a profit.

Gaps occur as a result of underlying fundamental / technical factors that vary for each stock or instrument and require monitoring and knowledge by the investor.

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