Defense is Better than Attack in Trading “Defensive strategic trading clearly is more successful in the long run than you might think! There will always be people who briefly achieve huge returns using daring maneuvers, but in the long term the strategist with an approach based on sound statistics will be successful…” When an advancing army anticipates attack, they tend to prepare themselves so that they can fend off the attack successfully. When a state of war seems hopeless, an intelligent and experienced general would tell his army to wait and let the enemy attack first, while they prepare for the attack. Defense is better than attack. In football, when a team is too desperate to score goals at all costs, their defense may be unknowingly put in disarray and this may enable the opposing team to utilize the sudden weakness and score a goal, thereby frustrating the team’s effort. The same is true of trading, because the most important goal is not to lose our money. When we achieve the goal, there would be times when profits would come normally. We not need to bury our heads in the sand, ignoring reality. We would need to come to grips with the fact that we may not survive the markets permanently until we learn how to deal with the uncertainty of the markets. The way risk is handled clearly differentiates between a market veteran and a novice. A market veteran does not react negatively during a loss; whereas a novice does. A veteran waits for another trade after some negativity – she/he does not overreact when there is loss. If we feel that all our trades will be profitable, we might later be surprised that we are not right. The market does not ask for our approval before it turns against us. The fly does not ask for our permission before it perches on us. Negativity happens in all ventures. The ultimate action we can take is to tame the risk and not gamble our funds away – as many traders do. The quote above is from Rene Wolfram. The quote below is also from him, (Based on his interview in Tradersonline-mag.com, September 2014). The quote below ends this article: “Most traders think topics like mental coaching or risk management are boring, but that’s exactly where the problem is: These things are the most important ones in trading. And there’s another problem: Many traders know trading approaches that work but are simply incapable of implementing them on a regular basis.”
I want to learn Forex but there are hindrances "When you're in love with a market, it shows...in your trading account."- Old Trader It’s no longer news that Forex markets are full of opportunities. Sure, there are challenges, but once you learn what it takes to overcome those challenges and become consistently successful, then the opportunities in the markets would bring you rewards. Why do some people feel reluctant to try Forex markets? It’s because they think success in the markets isn’t easy. Success in other fields is also not an easy thing. More than 12 year ago, a young woman told me she wanted to become an actress, plus the reasons why she wanted to become an actress. Obviously, she was dreaming of becoming a celebrity, thinking of the glamor, fame, benefits, and riches that are being enjoyed by successful actors and actresses. I only advised her to weigh all the pros and cons of what she wanted to do. Within a short time she joined a local theatre group and began practicing with them. Several days later, she followed them to a film location. That was when she was exposed to the dark sides of the local film industry: instant privation. This also included paling into insignificance when compared to veteran actors/actress on the location. She saw that her chances of becoming an instant celebrity were very slim. What she dreamed of didn’t come as quickly as she’d previously imagined. She thought she would join the industry and quickly become a star; but the reality was different. When I later saw her, I asked how far with her experience with her new career. She told me the dismal things she faced, including having to work hard without any financial compensation. She swore never to go into the movie industry again and she stood by her promise. Perhaps, she could eventually realize her dreams if she’d pressed on for as long as it’d take her. Can you see how this true story relates to trading? Nothing good in life is easy to achieve. Sadly, there are many people who’re interested in Forex, but because of one flimsy alibi or another, they keep on postponing the experience that has the potential to bring them financial reward. Flimsy Alibis Some have tried everything they think they can do, without attaining any success. They may now threaten that if the new course or strategy that they want to purchase doesn’t work, they’ll never trade again. As Philip Yancey says, a truly paranoid person organizes his or her life around a common perspective of fear. Anything that happens feed that fear. The fact is that such people have really lost interest in the markets. While it’s wise to learn from the past, we shouldn’t live in the past. Some think that they’re currently facing serious expenses and therefore they’ll have to wait till next year before they can start learning/trading. The fact is that there’s no guarantee that their expenses will be reduced next year. Some say they want to learn everything they need to know about trading, including taking any courses and reading any books they can find. They think they can’t start until they’ve done that. The fact is that they’re yet to learn anything or read any books. If they’re yet to do it, would they be able to do it at all? Some think they can learn trading by trial and error. This is possible, but time-consuming and circuitous. They may think they can become a market wizard at will. Then, what stops them from becoming a market wizard? You may think you can only trade when you’re less busy. Do you work only when you’re less busy? Trading is a serious business; it’s not for those who’re less busy. You may think you can’t trade because your family doesn’t support that. You may want to think of how to win their support. Maybe if they know and appreciate the truth and realities of trading, they may support you. The way we view our circumstances is more important than the circumstances themselves. If you say you don’t want to trade now, but in future, you may have forgotten that ephemeral wishes don’t mean anything. Anyone who doesn’t have the time for trading can’t trade. Anyone that doesn’t have resources to trade can’t trade. We worry so much about protecting ourselves that we fail simply to step up. These are facts. Conclusion:What you can do today, don’t postpone till tomorrow. The best time to do anything is now. Make your decision and learn how to approach the markets as rationally as possible. There are numerous ways to make money in the markets – just as there are numerous traders in the markets. The quote below ends the article: “We are all different and there are many ways to win in the markets – the important thing is to develop your own best method.”– Charles E. Kirk Copyright: Tallinex.com
Those kind of returns are possible taking big risks at the right time. But it's cyclical. great 3-4 years followed by 1-2 flat years. As we all know.
There is nothing wrong with gambling in the hope of huge returns as long as you know it's high risk and take profits off the table from time to time.
Tharp's book is essential reading i.m.h.o. Some of his materials i didn't quite believe at first but many years later I am like "damm..he was dead right." One quote that has always stuck with me was when he said "successful trading/investing actually goes against basic human psychology. We are not happy to sit and stalk a stock for say 6+ months, or sit tight in a winning position for 12months+. In short..we desire action." I see this all the time. Most people would rather be busy than actually make profits.
Emotions that differentiate between losers and winners “After placing the orders, we leave the rest to the market forces.” – Sam Evans Good traders make a new trade regardless of the outcome of the last trade. However, rookies often allow irrational emotions to guide their actions when they are making trading decisions. Why are some traders always frustrated while others play the markets joyfully? Let’s read some cogent examples. 1. The bad trader is afraid to make a new trade because of the fear that it may lose. This fear comes regardless of the fact that the setup may be flawless and there’s no reason not to trade the setup. On the other hand, as long as the entry criteria are met and there’s no reason not to enter the trade, the expert wouldn’t hesitate to take the trade. 2. The bad trader tends to be fatalistic in outlook, thinking that trading is a scam or that permanent success isn’t attainable. On the other hand, there are more than enough proofs that trading success is possible, plus permanent success. The expert always keeps their chin up. When facing roll-downs, the expert knows it’s a fleeting experience. 3. While there is no reason not to trade a setup, the bad trader feels that a trade setup needs much more time to consider before an execution is made. She/he wants lots of confirmation and guarantee before opening a trade, without knowing that one can trade the best setup and still lose. 4. I was doing it before; I used to check several different websites for fundamental, sentimental, and technical confirmation before I took a trade. I wanted to be sure that most pundits were saying the same thing before I took a trade. Needless to say, I still lost in spite of my painstaking effort. The expert trader is satisfied with the limited information she/he has access to. We don’t need to look for complicated analysis or think that there must be a million reasons supporting a setup, before we trade the setup. No matter how beautiful a strategy is, it would still sustain occasional losses. You may think that a particular trading methodology is wonderful, but when it goes thru baptism of fire in charting effort, we’d see how it can survive. When risk is under control and the performance is enhanced, the results can then be optimized. When a position first goes in our favor before reverting to the opposite route, we can get out without sustaining any loss on that trade. Irrational emotions are the reasons why the bad trader is worried while trading, getting frustrated or hesitating to take a trade and eventually missing a great trade or sustaining huge negativity in the markets. Rational emotions are the reasons why the expert trader is calm when trading – being profitable overall. We evaluate the motion in the markets as money-making opportunities and when we consider the cost of each trade (particularly low spreads), we’d appreciate the benefits over time. We’ll only consider the probability of making money after we also put spreads into consideration. Since there is a cost for each trade, we wouldn’t want to overtrade. The quote below ends this article: “Strange as it may seem to some, my trading has evolved to a point where I no longer attempt to predict whether stock prices will rise or fall… I found that most of my profits came as result of simply cutting off trades that were either losing or giving up their previous gains; and I could profit from trades entered practically on the flip of a coin.”- Chris Ebert Copyright: Tallinex.com
“Learn From the Generals of the Markets” – Almost Free Copies Now Available In a recent interview in TRADERS’ magazine (November 2014), Ian Cassel says: “Always surround yourself with people that are better than you. Your friends have far greater influence over your future than you think. If you want to be successful, start hanging out with successful people. If you want a better marriage, hang out with other couples that have a great marriage. Your life will change for the better.” How true is this statement! When you hang out with those who hate trading, those who’ve been floored by the markets and sworn not to have anything to do with the markets again, those who’re afraid of the challenges the markets offer, those whose job is to discourage you from attaining your goals in life, you can’t become successful in the markets. We need to surround ourselves with successful traders or at least, read about them, plus the principles that can be learned from them. The 20 generals of the markets featured in this book below will inspire you and reveal the principles behind their success. You’ll do yourself a great favor when you buy the eBook; now at a giveaway price. For a limited time only – just a few days – you’ve the opportunity to get the eBook version for 0.99 GBP, which is almost free. Here are the links: http://www.amazon.co.uk/gp/product/B00KA70YW2 http://www.amazon.com/dp/B00KA70YW2
Soros has a secret: it's his backache. http://www.irishtimes.com/business/...et-big-and-backache-soros-s-secrets-1.1893639 Buy bubbles, bet big and backache – Soros's secrets As the most successful hedge fund manager in history turns 84, what lessons can he offer? 8/12/14 George Soros is 84 today. His career is remarkable both for its longevity and its returns – his Quantum fund has generated $39.6 billion in profits over the last four decades, making Soros the most successful hedge fund manager in history. How has Soros managed to stay at the top for so long? What are the secrets to his success? Can investors learn from his methods? Or is Soros a one-off, a gifted speculator with an inimitable knack for timing? Short selling Never dependent on rising markets, Soros has long been a skilled exponent of short selling, where traders profit by betting on market declines. Although most equity markets went nowhere in the 1970s, Soros’s market-neutral trades helped fuel returns of more than 4,000 per cent during that difficult decade. His most famous bet was in September 1992, when Soros’s shorting of sterling forced the Bank of England to devalue the currency and leave the European Exchange Rate Mechanism (ERM). That trade earned Soros an estimated £1 billion and ensured he will forever be remembered as the man who “broke” the Bank of England. Alarmed by the deteriorating global economy, he netted returns of 32 per cent after coming out of retirement in 2007 and even profited amid the chaos of 2008, a disastrous year for most investors. Last year, Soros’s main fund earned an estimated $1 billion by shorting the Japanese yen. Cautious contrarianism Soros’s willingness to bet against the consensus means he is often considered a contrarian. Indeed, he has even spoken of the “joy of going against the herd”. However, he admits to being “very cautious” about doing so, saying one is “liable to be trampled on”. The trend is your friend most of the time, he writes in Soros on Soros. “Trend followers only get hurt at inflection points, where the trend changes”. Buy bubbles Not only does Soros caution against battling the herd, he sometimes likes to join it, even if it means jumping on to an economically unjustifiable trend. “When I see a bubble forming, I rush in to buy, adding fuel to the fire,” he said in 2009. “That is not irrational.” One such example is gold, which he described as the “ultimate asset bubble” in early 2010. Gold had soared 40 per cent the previous year and many commentators took his words to mean he believed the precious metal was set to fall. However, Soros was actually buying gold, which was then trading at abouat $1,200, the reasoning being that buying into bubbles can be very profitable, if one gets out in time. Soros did just that, selling most of his holdings in early 2011, some six months before the bubble burst after prices topped out above $1,900. Reflexivity Soros does not believe in the idea of efficient markets driven by rational investors, instead arguing for the “twin pillars of fallibility and reflexivity”. Markets can influence the events they anticipate, he says. One cannot truly separate market sentiment and economic fundamentals, as the former can actually shape and change the latter. Bullish sentiment may cause prices to rise, and rising prices in turn create a wealth effect, affecting consumer spending. In a negative environment, the reverse applies. Investors’ views influence events, and events influence investors’ views. There is, he says, a “two-way reflexive connection between perception and reality which can give rise to initially self-reinforcing but eventually self-defeating boom-bust processes, or bubbles”. Animal instincts According to his son, Robert, Soros’s trading was always influenced by more than reflexivity. “My father will sit down and give you theories to explain why he does this or that”, he once said, “but I remember seeing it as a kid and thinking, ‘Jesus Christ, at least half of this is bullshit’. “I mean, you know [that] the reason he changes his position on the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm and it’s this early warning sign.” Soros snr has admitted to relying greatly on “animal instincts”, saying the onset of acute pain was often “a signal that there was something wrong in my portfolio”. His decisions, then, “are really made using a combination of theory and instinct”. Bet big Stanley Druckenmiller, who managed money for Soros in the 1990s, came up with the idea of shorting sterling in 1992, but Soros disagreed with the suggestion that he steadily build the position. If the odds really were in your favour, said Soros, you must bet big, and “go for the jugular”. “I learned many things from him,” said Druckenmiller, “but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” He added: “It takes courage to be a pig. It takes courage to ride a profit with huge leverage. As far as Soros is concerned, when you’re right on something, you can’t own enough.” Acknowledge your mistakes “I’m only rich because I know when I’m wrong,” Soros said in 2008, saying he had “survived by recognising my mistakes”. There have been a few. Soros took a hammering during Black Monday in 1987, lost billions in Russia in 1998, took a pounding during the dotcom blow-up in March 2000, and paid $54 for Bear Stearns shares in March 2008, just days before the firm was sold for $2 a share. Far from being mentally crushed, Soros swiftly bounced back in all cases. “He doesn’t care whether he wins or loses on a trade,” said Druckenmiller, who described him as “the best loss-taker I’ve ever seen”, someone who “can easily walk away from the position”. His philosophical beliefs undoubtedly aid Soros in this regard. “To others, being wrong is a source of shame; to me, recognising my mistakes is a source of pride. Once we realise that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes.” Inimitable While investors who follow Warren Buffett’s value-driven and long-term approach are likely to do just fine, it’s likely that ordinary investors who attempt to ape Soros’s methods will end up in the poorhouse. Buying bubbles, short selling, nipping in and out of markets, going with your gut, betting the farm – it’s not exactly conventional advice. Intellectually and emotionally flexible, someone who honed his timing over a lifetime in the markets, Soros is the supreme speculator. He once asked Byron Wien, an investment strategist and friend, why he went to work every day. Why not work on the days when it makes sense to do so, he asked, when there is something special to be done? Wien replied: “George, one of the differences between you and me is you know when those days are and I don’t.”
Being Grateful as Traders “Education is incredibly important for traders. Traders should look to educate themselves as much as they can along their trading journey.”– James Hughes In USA, Thanksgiving Day is around the corner. Thanksgiving Day is a national holiday celebrated primarily in the United States and Canada as a day of giving thanks for the blessing of the harvest and of the preceding year. Several other places around the world observe similar celebrations. It is celebrated on the fourth Thursday of November in the United States and on the second Monday of October in Canada (definition source: Wikipedia.org). This year, Canada celebrated their Thanksgiving Day on October 13, 2014; the US will celebrate theirs on November 27, 2014. The essence of this holiday is to give thanks. In trading also there are many things we can give thanks for. We tend to complain and fret over the disadvantages we think we face, without thinking of the advantages we enjoy. When we ponder the blessings we enjoy in our trading career (as well as in life), those seeming disadvantages pale into insignificance. During my quite time, many reasons to be thankful as a trader came to my mind. Obviously, traders now enjoy great tools and services that were not available to those who were speculating just a few decades ago. Here are some of the reasons to be thankful. There are many more reasons than these. Could you think of additional reasons? 1. We’re grateful for the opportunity to trade and invest our money. 2. We’re grateful for good brokers out there who treat their clients fairly. 3. We’re grateful for funds managers who help us make profits by managing our funds. We’re grateful for great opportunities like copy trading/social trading, winning signals services, etc. which help us make money. 4. We’re grateful for regulatory bodies that regulate brokers, financial institutions, etc. They make financial markets safer for us to trade. 5. We’re grateful for cutting-edge trading platforms, data feeds and other tools that are available to us. 6. We’re grateful for free and paid education materials that are available to us. We enjoy trading education through various means, including books, DVDs, trading rooms, webinars, etc. 7. We’re thankful for many career opportunities that are available in the world of trading. 8. We’re grateful for winning trading systems and software – manual, semi-automated and automated strategies that are at our disposal. There are many strategies out there that work. 9. We’re thankful for those analytical tools and indicators that are available to us. These things help us to analyze the markets objectively. 10. We’re thankful for the fact that trading is a fantastic life-style. We can trade anywhere in the world as long as we have access to a good Internet connection. 11. We’re thankful that the markets don’t discriminate on the basis of nationality, gender, religion, education background, race, tribe, color, etc. The markets are a level playing ground, offering anyone an equal opportunity to be successful irrespective of the aforementioned factors. 12. We’re grateful that there are many good trading coaches the world over. They help us master various aspects of trading psychology, risk management, positions sizing, trading systems, chart patterns, trend cycles, etc. These coaches are selfless and altruistic individuals who love to help struggling traders. As for me, when the going was tough and I wanted to quit, I was inspired by successful coaches who made me realize that there are people who’re making consistent profits and that I can be successful too. 13. We’re thankful for the riches and financial freedom the markets proffer. Many people have made billions of dollars as traders and some of them are among the richest individuals on this planet. You mayn’t become a billionaire (or even a millionaire), but you can become financially free and live a fulfilled life. I define financial freedom as being able to meet your basic needs and still save money for future use. 14. We’re grateful for the availability of positive expectancy – which makes us make money regardless of occasional losses. If there were someone who can’t lose in the markets, that person would soon have all the money in the world. We do the right things to get the right results. The secret to trading success is in controlling your losses and adding to your winners. 15. We’re grateful that the markets don’t offer short-cuts to lasting success. More haste in trading is equal to less speed. Short-cuts are very dangerous. Those who take short-cuts are trying to dodge realities, but realities will face them eventually. 16. We’re grateful for the movement and liquidity present in the markets. Super rich individuals don’t seek to double their portfolios overnight. Instead, they seek slow and steady returns (which translate into great wealth over time). Retracements in the markets can be played by any trader, since they reflect smoothing of positions by large financial establishments. The smoothing of positions by large financial establishments sometimes cause contrarian movements in the markets, which are sometimes called significant rallies or dips. 17. We’re thankful that we’re free moral agents who can choose what our fate will be. Being active in the markets is a matter of interest and choice. When you’re interested in something, no-one needs to beg you or persuade you constantly before you do it. You’d even be willing to spend your time, resources and energy in order to master what you’re interested in. But if you aren’t interested in something, you won’t do it no matter how much noise is made about it, even if you’re persuaded again and again. The list can go on… The tools and services we enjoy as traders ought not to be taken for granted. Can you think of any other reasons we should be grateful as traders? Conclusion:We wish Americans a peaceful, blissful and rewarding Thanksgiving Day celebration. At the same time, we are grateful for wonderful opportunities the markets offer us. Yes, there are many reasons to be grateful as traders. When you taste success in your trading career, you’ll be hooked, and as such, you’d do well to strive for permanent success, not temporary success. May you become a successful trader. I end this article with the quote below: “Remember, trading from your highest and best self is all that matters to getting your desired trading results.”– Dr. Woody Johnson Copyright: Tallinex.com