Some Useful Trading Tips

Here is a few tips to help you to become a better trader:

Cash is a positon too!

Most new traders think that a trader should be trading all the time, never miss a good opportunity! However, the reality couldn’t be more different. We are humans not algo traders. Day trader, momo trader or swing trader, quality is always more important than quantity. NEVER enter in a trade without a plan and certainly NEVER enter in a trade because of FOMO (Fear of Missing Out). Don’t ever forget that CASH is a strong position, too. It enables you to act when there is a good opportunity.

Consider Swing Trades

I personally like swing trades for number of reasons. I am a busy guy with number of Business interests. I don’t (and some cases can’t) spend my all day in front of a PC watching stocks. In swings, I generally look for good setups to enter in a trade, add, add more, hammer and exit. This tried and tested method generally works very well for me but wouldn’t work for most of the new traders (or traders with small account sizes) because of their account size and the maximum pain they can take in a swing positon. Perhaps starting small, testing the system and learning from it is the best for the new guys. I always have a plan while swinging. This plan includes where I enter, where I add, where I cover or if it goes against me where I exit the trade. Before entering into any trade, I always know what my maximum loss will be (NEVER change this during the trade!) and what I expect from the trade (i.e. how much I want to make from that trade – when reached, I am out). If it works against me and if it makes me nervous, I cut it out and move on to the next one. Sounds easy? Probably yes. However, in practice, this method needs immense discipline which you can’t develop overnight. It takes years for change to take place and constant practise to maintain it. Most new traders are looking for that magic formula to enable them being profitable overnight. Let me tell you: IT DOESN’T EXIST. If anyone telling you otherwise is after your wallet.

Set Trading Goals

I covered importance of setting goals previously in here. Setting goals for yourself will make you not only a better trader but also a more successful person in every part of your life. The goals you set should be achievable and measurable so it is crystal clear to you when they are achieved so you can move to bigger goals. If you are a new trader, your first goal should be not making profit but PROTECT your capital. If you can achieve this, then the sky is the limit…

Admit Mistakes and Learn From Your Mistakes

We are humans. We all have Ego. Admitting mistakes is not in our DNA. However, one thing you will notice from successful traders is they all admit their mistakes to themselves and to others. We all do mistakes daily. Important thing is learning from those mistakes and try not to do them again. It is a process and will take time. In trading, the same mistake can manifest itself in many different ways. The only way to learn is to experience it. You can ask, read or learn from others but the real learning only happens when you experience it in real life. The most important thing here is minimising the impact of your mistake. This in my opinion comes to admitting mistakes quickly, take action and always trade with correct trade size that you are comfortable with. You can read more about trade size here..

Constant Learning & Adapting & Having an EDGE

One of the most important things in life for me is constant learning. I am a student of life and I love learning new skills whenever and wherever I can. Similarly, I love getting more out of my trading and adding more ‘weapons’ to my trading arsenal by learning different types of trading, different types of trading vehicles and methodologies. Don’t forget, the market is constantly changing, there are number of different ‘cycles’ in the market. The best traders can see and analyse these cycles and make informed decisions about their positions and type of stocks in their portfolios. They scan stocks accordingly. They plan accordingly. One thing you need to do to become a better trader is ADAPTING. You need to adapt to the market conditions and change with the market. As a trader, you always need an EDGE. The change in market and your speed of adapting to that market is one way of having an EDGE. Information is another. Always KNOW what you are trading. Research the stock (or chart if more of a technical trader) and always know why you are trading it and what is your EDGE against other traders. If you can’t find the answer, move on to the next stock until you know you have an edge. And don’t foget any fool can enter in a trade, but only smart one knows when to exit a trade. Be smart.

MT

 

 

Some of my favorite Trading Quotes

“I think to be in the upper echelon of successful traders requires an innate skill, a gift. It`s just like being a great violinist. But to be a competent trader and make money is a skill you can learn”. – Michael Marcus, Trader

“Successful investing is anticipating the anticipations of others.” – John Maynard Keynes

“No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.” – Robert Rhea

“In bear markets, stocks usually open strong and close weak. In bull markets, they tend to open weak and close strong.” – William J. O’Neill

“The policy of being too cautious is the greatest risk of all.”– J. Nehru

“You don`t need to be a weatherman to know which way the wind blows” – Bob Dylan

“The market does not know if you are long or short and could not care less. You are the only one emotionally involved with your position. The market is just reacting to supply and demand and if you are cheering it one way, there is always somebody else cheering it just as hard that it will go the other way” – Marty Schwartz, Pit Bull

“More men have become great through practice than by nature.”– Democritus

“Volatility is greatest at turning points, diminishing as a new trend becomes established.” – George Soros

“I was seldom able to see an opportunity until it had ceased to be one.” – Mark Twain

“Panics do not destroy capital—they merely reveal the extent to which it has previously been destroyed by its betrayal in hopelessly unproductive works.”– John Stuart Mill (1806 – 1873)

“Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole. There is nothing extraordinary or superhuman in any one of those actions; only the fact that they are done consistently and correctly, and all together, produce excellence.” – Daniel F. Chambliss, Professor of Sociology

“Success consists of going from failure to failure without loss of enthusiasm.” – Winston Churchill

“Every trader has strengths and weakness. Some are good holders of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach.” – Michael Marcus

“The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder

“Vision without action is a daydream. Action without vision is a nightmare.” – Japanese proverb

“A great trader is like a great athlete . You have to have natural skills, but you have to train yourself how to use them.” – Marty Schwartz, Pit Bull

“One characteristic I’ve found among successful traders is that they function effectively when they’re not trading. When markets become very quiet and range bound, they occupy themselves with a variety of activities, from sharing ideas with peers to conducting research. Traders who do not tolerate inactivity well inevitably feel the need to trade, often when there is no objective edge present. For them, losing money is less onerous than experiencing boredom.” – in Trader Feed

“To be a super-trader, you’ll need an edge to overcome the laws of probability and the uncertainty of the marketplace. That edge comes from information flow, the ability to correct your habits in terms of the market’s characteristics, and being able to take risks, cut losses, expand your information network, ferret out ideas, and take recommendations.” – Trading to Win, Ari Kiev

Two rules for investing/trading:

Rule number one : most things will prove to be cyclical

Rule number two : some of the greatest opportunities for gain and loss come when other people forget rule number one

Howard Marks

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell. If you want to have a better performance than the crowd, you must do things differently from the crowd.” – Sir John Templeton

“Money won’t buy happiness, but it will pay the salaries of a large research staff to study the problem.” – Bill Vaughan

“A lot of people get so enmeshed in the markets that they lose their perspective. Working longer does not necessarily equate with working smarter. In fact, sometimes is the other way around.” – Martin Schwartz, in Pit Bull

“The markets are the same now as they were five or ten years ago because they keep changing-just like they did then.” – Ed Seykota

“I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever evolving. I constantly learn and change.” – Thomas Busby in Trade To Win

“Have no fear of perfection – you’ll never reach it.” – Salvador Dalí

“The ability to foresee that some things cannot be foreseen is a very important quality”. – Rousseau

“A handful of patience is worth a bushel of brains” –

Dutch Proverb

“Investing is no different. It is a game of repetition where hundreds of small actions result in one larger result. But most importantly, it is a game of risk management. It is not the home run hitter who wins in the long-run. Rather, it is that strategist who devises the best long-term plan who ultimately wins. While hitting home runs is sexy it is rarely a recipe for success in the investment world. Aim high, but play small. Over time, good risk management and patience wins. Power is no substitute for precision and patience. The same is true in the world of investing.” – in The Prag Cap

“The game taught me the game. And it didn’t spare me rod while teaching.”– Jesse Livermore

“I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend.” – Jesse Livermore

Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” – Bruce Kovner, hedge fund manager

“Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul.” – Jesse Livermore, Reminiscences Of A Stock Operator

“I have learned through the years that after a good run of profits in the markets, it`s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it.”– Martin Schwartz, in Pit Bull

“It is not enough to have a good mind. The main thing is to use it well.” – Rene Descartes

“A peak performance trader is totally committed to being the best and doing whatever it takes to be the best. He feels totally responsible for whatever happens and thus can learn from mistakes. These people typically have a working business plan for trading because they treat trading as a business” – Van K Tharp

“If somebody had told me my method would not work I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.” – Jesse Livermore

“The most important organ in the body as far as the stock market is concerned is the guts, not the head. Anyone can acquire the know-how for analyzing stocks.” – Peter Lynch

 

“I discovered, from the analysis of over 25,000 people, that men who succeed in an outstanding way, seldom do so before the age of forty, and more often they do not strike their real pace until they are well beyond the age of fifty.” – Napoleon Hill, Think & Grow Rich

“Obviously the thing to do was to be bullish in a bull market and bearish in a bear market… I came to learn that even when one is properly bearish at the very beginning of a bear market it is not well to begin selling in bulk until there is no danger of the engine back-firing.” – Jesse Livermore

“Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets.” – Alexander Elder
“Money doesn’t always bring happiness. People with ten million dollars are no happier than people with nine million dollars.” – Hobart Brown

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.” – Ed Seykota, trader

“To be a good trader, you need to trade with your eyes open, recognize real trends and turns, and not waste time or energy on regrets and wishful thinking.” – Alexander Elder

“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes

“The markets are unforgiving, and emotional trading always results in losses.” – Alexander Elder

“When a falling stock becomes a screaming buy because it cannot conceivably drop further, try to buy it thirty percent lower.” – Al Rizzo

“Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed.” – Peter Lynch

“There is only one side of the market and it is not the bull side or the bear side, but the right side.” – Jesse Livermore


“I know at last what distinguishes man from animals; financial worries.”

Romain Rolland

“Learning trading means living a few years of your life like most people won’t,so that you can spend rest of your life like most people can’t”

MonacoTrader

Top 5 Trading Mistakes and Practical Tips

We all do mistakes. It is part of the game. I wanted to compile Top 5 most important mistakes that traders (including myself) do and what to learn from them and how to avoid making the same mistake again. The most important thing is to realize the mistake and then take appropriate action to correct it.

Let’s have a look at the type of mistakes:

(New) traders expect too much too soon…

If you are in a new relationship, you know that relationships require commitment and hard work! You need to get out of your comfort zone and do things that you normally wouldn’t do to please the other half. In time, hopefully it gets easier, you know what your partner’s likes and dislikes (and you wouldn’t take her to Malaysian restaurant ever again if she has nut allergy – like I did it with my wife when we were dating). Trading is like relationships. You can’t expect too much too soon (if you do, you will get a slap!). You need to learn, absorb as much as you can and work on it. Things take time, trading is not a get rich quick scheme, in the contrary, it requires discipline, hard work and total commitment to make it a success. It is not uncommon for good traders to spend a few years to get to the top of their game. And don’t forget, as a trader, you are a student for life, constantly learning and adapting to ever changing market conditions. So next time when you think you traded for full 10 days and still can’t make top dollars, think about how much it would take to master anything in life. Tip: A trading diary is a good way of recording your lessons in trading. So you can go back and see what works what not for you. In time, you will see the changes and improvements which will motivate you and make you a better trader.

Undertrading or Overtrading

This is a common problem for newbie and also for experienced traders. Unfortunately, human nature is greedy. We are never satisfied with what we have (this is also part of what advances humanity as a whole). We don’t or can’t see ourselves overtrading until the session is finished. Then we review the day see that we have overtraded to make more money. Or perhaps over traded and took more risk to be able to finish the day in green (and most of the time you will end up more in red). In some circumstances, some folks are scared to take great trades and giving up easy potential profits because they are not willing to enter a trade when they see a good opportunity (undertrading). Both of these can manifest themselves in variety of different ways. I chat to many traders and see this often (including myself). Tip: The best way to overcome overtrading or undertrading is to have a trading plan for the day. You can write this down or tell to yourself that what do you expect to achieve from the trading session. This of course very much depends on the overnight scans and also morning action, so your plan will change according to this. Once you reach your trading goal for the day, make sure you are not starting to take trades are much riskier than your normal setups. When you are in Euphoria from your winnings, you tend to think you will win with any given trade (absolutely not good trading habit). This happens to me a lot and lately, I start to leave the session all together to give myself a small break to come back to planet earth! This way, I can think more sensible and take calculated risks again instead of any risk! Easier saying then done, still working on this and leaving the session for a break and go for a coffee or drive is my way of coping with it. Everyone is different, whatever works best for you. Find it.

Lack of Patience

It still amazes me how patient we can get in a losing trade (and not cut it off and take the loss – unless it is a planned swing trade it is completely different story) and if we are winning how impatient we can get…We just want to take that profit (although you know that it is too early!). This is a psychological phenomenon. If you are wrong, human brain tries to find reasons why you are right (i.e. you start looking at Twitter for supporting arguments for your loosing trade, you look at the internet and read anything available out there to prove your point to yourself and others) but the reality is you are wrong. Market is acting against you and you are wrong. Period. If you are winning, Fear of Missing the Profits, kicks in and you look for any excuse to get rid of that trade so you can proudly say you made money on that trade. Tip: Patience is a learned process. It can be developed as a trading habit. As a hyper-active person, I haven’t unfortunately blessed with patience. However, some of you following my trades know that I can be very patient when it comes to some swings (especially if I am convinced about the particular trade). I frequently make very good money on that patience (perhaps most of my largest wins come from patient trades).  One important thing here is not mixing patience with hope. They are completely two different things. If you are in a trade and ‘hoping’ that the price action will change and hopefully you make money, you need to cut it off there and then. Patience is acceptable when you have an edge. The edge that gives you confirmation and conviction of that trade. Otherwise simply let it go….

Size…Size….Size…

I have written about size control in my blog a few times. In my opinion, controlling trading size is the BEST thing you can do in trading. Most traders take too much risk with trading size compared to their account size. I am seeing too many (especially new) traders smoked with only one or two trades simply because they played too big!

Trade size is directly correlated to the risk of that position. The more size you have, obviously the more risk you are taking at a given trade. Most good traders chose not to go full size in a position but keep adding to a winner. In this way, you can just risk the profit and have a nearly risk-free trade. But we all know that, life is unfortunately not that easy and trades go against us. In this case, the importance of the trade size once again come to play….

Tip: For me it is very easy. If the trade is making you nervous (a bit of nervousness of course normal, what I am talking about is being very nervous / being scared from that trade – it can take you out if it goes against you) then you should be out of that trade immediately! Not later, do it now! Like the bees programmed to protect the queen bee, your number one job as a trader is protecting your trading capital. For most traders, if they are smoked, they don’t have another chance to come back to trading. That’s it. So next time when you trade, manage your trading size accordingly, if it starts to get you really nervous, you know what to do…And don’t forget, it will be your fault if you are nervous, because it means you are trading with wrong trading size!

Failing to accept responsibility against your own mistakes

Forget about accepting responsibility for your own mistakes, some traders do not even realize they have made a mistake (see some AVXL cult longs). Realizing your mistakes will make you one step closer to become a better trader. Accepting responsibility for your mistake is great for you for two reasons: 1) You know what you have done wrong so you will hopefully learn from that mistake 2) Now you know what works instead, next time you will use that to your advantage to make a successful trade. I am unfortunately seeing a big blame game between traders. A wrong trade is never their own fault! It is always someone else’s fault (someone told me to buy this, someone told me to sell this otherwise I wouldn’t, etc.). Tip: GROW UP! You are responsible for your own actions. It is all good that we share information via internet or other mediums but it is ENTIRELY your responsibility to enter a trade or not. If you do, you should have a PLAN in the first place – why you entered in that trade. Have you executed that plan to A to Z? If the trade went against you what was your risk mitigation plan? Don’t forget self-justifications distort reality and if you are not in reality you are not learning. So next time something goes wrong, first understand what went wrong, then accept your mistake and think about what you learned and what you will do about it next time. I also strongly suggest to write this down (we tend to forget mistakes easier than our success).

I always tend to take responsibility and announce my mistakes to my friends and followers. I like doing this because I am learning something new every time from my own mistake. I also have the upmost respect to people who do the same in our community. We are very blessed with great traders and we can also learn from each other’s mistakes.

Thank you for your time and I hope you found this useful.

MT