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

 

 

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

Stock Trading – Top 10 Tips for the New Stock Trader

1) Trading Style: Everyone is different. We all do the same things, waking up, going to toilet, have a shower, eat breakfast, go to work, etc…But everyone is doing this in a different way. Trading is no different. Trading is buying and selling stocks but the way we do it differs. Everyone’s trading style is unique. I strongly suggest the new comer to give a good thought on this. What type of trader do you want to become. Can you spend hours in front of the computer, or do you have to work and perhaps check it once or twice a day? It is always to have a good idea of what kind of trader you will be (day trader, swing trader, long term, short term, etc.) BEFORE you start trading with real money. The good thing is, you can always change your mind or adapt to a different style that suits you later on…

2) A Realistic Expectation from trading: When traders first start trading, they are generally attracted to trading from a website or documentary they watched. They have seen these successful traders making a killing! How difficult can it be to buy or sell a stock and make a mint! The answer: VERY Difficult! In fact, 95% of the traders loose all their money or left trading before loosing everything. Put it this way, if I told you to give me $25K of your hard earned money and tell you there is 95% chance that you will never see that money again, would you give that to me? Think about that for a second. That is what market is telling you! I strongly suggest to have realistic expectations from your trading and only use money that you can afford to loose!

3) Select A Good Broker that can match your trading style: There are numerous brokers out there. Some are great for shorting and there are some others with low brokerage fees, etc. Do your homework, compare the brokers and choose the one that matches your trading style. Once again, if they don’t deliver, you can always switch to a new broker.

4) Try to find a ‘Low-Risk High-Reward’ Trading Method: Stock trading is a very risky business. No method is 100% risk free, otherwise all of us traders would be billionaires! For example. choosing stocks with good news, good momentum, good historical trend and positive ratings (for long trading) could be a relatively less risky way to start your journey…

5) Find a flexible trading method: Will your method work in most market conditions? Unfortunately, the stock market doesn’t just go up or down. Sometimes it might go sideways for days, too. Consider these factors while deciding on your stock trading method(s). If your method is working only in bull or bear market, then you won’t last long…

6) Trade The Best Stocks Available: Easier said then done! Finding the BEST stocks takes advanced skills and experience. If you are a day trader then the best stocks will be high volume / momentum stocks. If you are a swing trader, you need to be able to see the swing patterns and accordingly. If you are a member of a stock trading community, it would be a good idea to follow the daily recommendations to start with but make sure to understand how they select their stocks, what tools they use, etc. If you don’t want to pay for a service, there are so many people on twitter posting their watch-lists daily. Find the traders that match with your trading style and start following them. Try to understand why they choose those stocks in their watch-list, etc. Ask them questions, most will be happy to help (however, avoid asking questions during stock trading hours).

7) Know When To Exit: From what I see, most new comers focuses on what and when to buy (or short) a stock, yet few ever consider the best time to exit. Paper profits only become real money when you convert them to cash. Know when to exit!

8) Educate Yourself: A “winning edge” consists of the favorable factors that set winners apart from losers. You must have a reliable advantage to consistently make money trading. The first thing I suggest you do is to familiarize yourself with all the available trading tools. There is ton of information on the web (for FREE) where you can learn simple trading methodologies, how to use free tools (such as FinViz etc). The more you have in your toolbox, the better trader you will become.

9) Cut Your Losses Quickly: If there is only one tip that I can give you, this is it! We have all been there, done that. Hoping and praying that a bad trade will turn into a good one. Some traders even add to their losses and make the already awful trades into a disastrous ones. CUT YOUR LOSSES QUICKLY! I can not stress this enough. Probably this will become one of the most difficult things to do, however, ALL consistent traders have learned this and use this tip daily – that is why we are still in the game.

10) Learn to Smell the Bullshit from a mile away: There are so many wonderful people in the online trading community BUT unfortunately there are number of people out there who are simply scam artists and/or Fake Gurus (FURUs). If something seems too good to be true, then it probably is. Try not to pay for FURU services / alert services or ‘tools’ that will make you a millionaire overnight! Question everyone and everything in the trading market before purchasing anything. Don’t be a SHEEP, be a WOLF.

Good luck!

MT