When a Good Strategy Is Losing Money – Part 1 “But in the market any price is always history. It’s the price of the last transaction, holding no guarantee for even the nearest future.”– Dirk Vandycke What do you do when a good trading system, whose historical results have been satisfactory, gets into a losing streak? Good strategies lose now and then, and then gain now and then. Losing streaks are alternated by winning streaks, and what you can do is to minimize your losses in losing periods, controlling the drawdowns on your accounts. This is done so that your capital would be intact when a winning period comes around. This is a reality of trading as there’s no way around that. Yet, it doesn’t preclude you from being consistently profitable in spite of occasional drawdowns. People who’re rational in other fields tend to be irrational when trading. They don’t know that trading is just any other business in life. There’s no strategy on earth (and there’ll never be a strategy on earth) which doesn’t experience drawdowns. No matter what trading approach you’ve adopted, there’ll be periods when the price actions are against you. We’re happy when we make money, without giving any thoughts to how we control our emotions when we lose. We’re able to remain calm during losing streaks, providing that we’re willing to do that. Let’s think about a system that wins about 65% of the time. That means we may have about 35 losing trades out of 100. When you buy such a system, you can lose the first 10 or 20 trades (or even more) in a row. Then you conclude that the system is trash. You don’t know that the system would soon start winning many trades in a row. Trading has to with probabilities and profits are analyzed over a long period of time – not over a short period of time. When about 100 trades are analyzed, then you’d see the merit of a good strategy. Trading should be treated like an enterprise: losses being the cost of running the enterprise and profits being the reward you gain from your venture. Our society is rife with perfectionism tendency, and that’s why there are many people who criticize everything, expecting too much of other people while they themselves aren’t perfect. Those who do well in life are probably correct less than half of the time, yet, mistakes are often ridiculed. Perfectionism has no place in profitable market speculation. You got to know that one needs to stick to a positive expectancy system even in a period of losses, for it’ll soon be in a winning period. However, most people dump such a system and look for another fool-proof one. The truth, however, is that another ‘fool-proof’ system that has good results in the past would also experience drawdowns. Would you then dump such a system again? You might trash the new system and look for another one. For you to be called a super trader, you got to stick to a good strategy throughout its vicissitudes. Profitable speculation in the market needs perseverance, rules, and determination. You get rich slowly, not quickly. Success comes at cost – it requires effort and doggedness. Keep a log of your trades and look for ways to optimize the system. Should you disagree with this, you may want to go from one trading method to another, for life. Otherwise, you may want to master a good trading method and stick to it for life. Should you prefer the latter, you may eventually reach financial freedom. A good system makes money eventually, but you’ll need to be faithful to it, which is something that irrational trades don’t want to do. You make money when a market moves. A fast-moving market like Forex is ideal, since you make money when the move is in your favor. But you don’t make money when then move is against you. Please take risk and money management seriously. This is your life insurance in the markets. All traders experience negativity, but good traders deal with negativity triumphantly. You need to risk only 1%, or better, less per trade. You need to make sure that you don’t go down less than 4% or 5% in total. When the position sizes are too big, it would be difficult to control emotions. The most important thing in trading is not to lose one’s capital. We trade not to lose, and that’s the only way to prepare for slow and steady growth when the time comes. Only effective risk managers can survive in the markets indefinitely. We learn much more from losing trades, and we learn very little from profitable trades. Therefore, it’s what we learn from losing trades that make us better traders. In other words, loses are the catalyst that enables us to hone our trading skills. This article is ended by the quote below: “Without a plan and money management the best setups in the world are useless.”– Dave Landry Copyright: Tallinex.com
When a Good Strategy Is Losing Money - Part 2 “When I was 20 to 25 years younger, every move in the markets would make me excited. By the mid-90s, I got my emotions under control. I learned to focus on eliminating risk on the front end, so that I would have fewer problems on the back end.”– David J. Merkel Mr. Liam* was attracted to a trading strategy software as it was being pitched. The 2-year historical results were amazing, as shown by the vendor of the software. The results showed a historical hit rate of 70%, but the software was very expensive. In order to purchase the software, Mr. Liam had to pay in 4 installments. After that, he was able to get the software. However, Liam lost money with the strategy, and he got the vendor arrested. Because Liam was a good reader – reading many trading article and magazines – he discovered that there were successful traders. Since he was inspired by testimonies from super traders, he continued working to improve his knowledge. When he attained some level of competence, he put the strategy to test again and saw that the strategy was wonderful. He realized that he himself, not that strategy, was responsible for his loss. He felt sorry for the strategy vendor, and as a result of that, he visited the vendor and tendered his heartfelt apology. He even gave the vendor a cash gift of $1000. A great strategy can’t work for a suicide trader. The Power of Choice Anyone who says she/he can never lose is an accomplished fabricator. Anyone who says their strategy doesn’t lose is also a distinguished fabricator. Losses are a blessing in disguise because they’re the secrets that help us become better traders. When you lose money with a good strategy, after being faithful to it, it’s up to you to decide whether to quit or continue. There was a legendary trader who made and lost fortunes in the markets. We got much to learn from such a great trader, so that we know what’s behind his success and imitate him. We also want to know the cause of his failure so that we can avoid that in our trading. The truth about trading is timeless and it will forever be. Humans drive the markets, and as such, various human emotions are reflected in price actions. When things go wrong, we want to make sure that the effects on our portfolios are minimal. Successful traders lost in the past. Yet, they continued until they reached a stage where they start making money effortlessly. When they were losing, some people tried to discourage them, thinking they’d their best interest in heart. If you allowed yourself to be discouraged because of the current fleeting losing streak, in future, you’ll only be green with envy when you hear how much successful traders are being paid. Super stars, celebrities, politicians, athletes, etc.; have always faced ignominious defeats now and then in their careers. Greatest role models accepted defeats in the past, but they moved on. Greatest role models accept defeats today, and they move on. Their transitory failures were the secrets of the enviable breakthroughs they enjoyed later. Check the stories of very great people in various walks of life, past and present. You’ll understand what I’m talking about. Super traders today refused to be discouraged when things were tough, when their friends and folks were asking them to try another “safe” ways to earn livelihood. The other “safe” alternatives that many members of the public prefer to trading are the major reason why more and more members of the public are getting poorer and poorer. Those who allowed themselves to be discouraged paid a heavy price for their short-sightedness. The Inevitable Experiences It’s easy to criticize others while we’re being blinded to our imperfection. Everyone thinks they’re right, until the markets prove them wrong. We’ll do ourselves great favor by focusing on our own weaknesses and working on them: instead of focusing on other people’s weaknesses. All traders will experience negativity. You can continue to experience negativity, irrespective of what you do, until you start asking what’s really wrong with your life. At this stage, you’ll doubt your possibility of becoming a profitable market speculator. Yes, all traders experience negativity, and sadly, that’s the stage where most others quit. No wonder then that few people can share testimonies to the possibility of everlasting success in the markets. Very few traders move beyond the stage where they lose, no matter what they do. Indeed, very few people will rise up and continuing struggling again, after they’ve been floored by the markets. You must master yourself before you master the markets. Bad trading results are an evidence of personality flaws in you and good trading results are evidence that you’ve controlled those flaws. The few people who rise up to struggle again will inevitably reach a stage when they start making money effortlessly and consistently. These are the people that the public call “market wizards,” “super traders,” “pros,” “expert speculators,” “gurus,” “witches,” “mad geniuses,” etc. The public think something is special about them, but these people know that there’s nothing special about them. They’re consistently profitable because of their many years of experiences, plus their winning speculation principles have been practiced again and again until they become their second nature. You think they’re smarter, more brilliant, more fortunate, more intelligent, and more innovative. Nevertheless, they think they’re not better than you. What makes the difference is that they decided to continue fighting for success at the stage that most others quit. We’re given the power of choice to use for future glory or future regret. Even if we’ve challenges in the markets, why can’t we seek help from professional traders and coaches? If you got a persistent toothache, you go to a dentist. Then why not seek help from a trading professional when you’ve a challenge? The quote below ends this article: “You also need to be able to trade a setup even when it is profitable. By that I mean that you need to stick to it throughout all the ups and downs. After all, it takes several tries with some setups for the trade to work. Until it does, you must be able to continue trading with confidence.”– Ruediger Born *His name has been changed. Copyright: Tallinex.com
Opening up higher chakras is the secret of the secret of the secret.... It can happen from meditation or you can cheat a little using entheogens like Cannabis.
If you smoke some you can perhaps feel (I do at least) that something happens in the heart area. If you then try to "listen" to your heart you can get insights and you are able to think things through alot better.
The Travail of the Signals Provider “No matter how great a setup looks, there’s always a chance you can still be wrong… Realize that knowing when not to trade is as important as knowing when to trade. I often joke that we are more wait-ers than trade-ers.” A signals provider is a trading professional who gives buy and sell recommendations to interested clients. This can be thru newsletters, email alerts, SMS, auto trading, social trading, etc. In most cases, stop loss levels, take profit levels, exit dates, money management recommendations, and so on are included with the signals. While there are trading signals systems that lose money over time, there are also trading signals that win money over time. Unless doctored, historical performances of good signals systems have average winners that are bigger than average losers. For a strategy to work, it must be followed as recommended. Unfortunately, many clients would either add irrelevant rules or do something else that is against the strategy, and they’ll still put blame on the signals provider. We tend to forget that signals providers aren’t gods. One associate professor, who’s also a trading advisor, tells of his experience with clients. When the markets conditions are favorable, the clients will be happy and send him their good will. When the markets conditions aren’t favorable, they become sad and send him words of anxiety and hopelessness, plus questions. When the markets crash further, the clients call, email, and send in words of frustration, plus oaths. Inexperienced traders that trade based on my recommendations hold me in high esteem whenever the strategy is making money. They may even become overconfident. They may add additional positions that are contrary to my recommendations and risk far too large portions of their portfolios, contrary to my suggestions. However, when the signals strategy is experiencing a losing streak – as it’s normal for all strategies under heaven – many people would think I’m stupid. They’d even wonder if I’m a professional as I claim. They unsubscribe from my services before the signals start making money again. When new signals aren’t sent because the existing market situation precludes the entry criteria from being met, some clients initiate trades of their own. When they gains from such trades, they feel proud of themselves. When they lose money, they blame the signals provider who failed to send signals when they needed them. Such is the travail of the signals provider. Good traders who follow positive expectancy religiously are sometimes referred to as wise fools. Good traders aren’t those who make money from the markets only; they’re those who can keep their hard-earned profits and survive terrible losing streaks. This reminds me of when I was a private tutor (many years ago). Parents hired private tutors to teach their kids at home, with the hope that the teachers are magicians who can perform academic miracles on their kids. You see, there are many factors that contribute to academic failures of children. When a kid fails an exam in spite of the effort of a private tutor, the tutor would be the one to blame for the failure, even if she/he doesn’t deserve that. They don’t usually blame schools, school teachers, the kids, technology, environment, etc. Something that sounds perfect in theory may fail in practice. A good strategy that sounds great when analyzed will experience occasional drawdowns. Our job is to lose as small as possible during losing streaks and move forwards during winning streaks. Conclusion: For many years, I’ve been happily engaged in the markets. I’ve learned that the principles that lead to trading success are logical and simple, yet at the same time a priceless treasure. That’s why I appreciate sharing my convictions and wonderful secrets with others. Today I know that success in the market is attainable rather than elusive. The quote at the beginning of this article is from Dave Landry. The quote below is also from him: “With my methodology there will be extended periods where there is nothing to do. Trying to make something happen during these conditions because you need the money will create losses. Also, trends take time to develop.” Copyright: Tallinex.com
What Super Traders Don’t Want You To Know “Trading and investing are games of possibility. We know from quantum physics that the universe is a place of infinite possibility. Isn’t it time that you found your own individual self and expressed that in your trading and investing?” The markets offer riches that can’t be accessed unless you become a trader or an investor. Despite your trading experience, you’re to stand your ground in determination, no matter the challenges and uncertainty in the markets. Refuse to give up or give in to the pressure to quit. Imagine if setting a goal for yourself, you planned to make a certain percentage within a month or a quarter, but you ended up reaching that goal only after six months or one year; don’t feel bad. Instead, say, “I’ll meet the goal sooner next time.” You don’t need to be discouraged simply because you fail to meet a goal for a period of the time. We believe it’s possible to make profits in the markets, and that can be done consistently on annual basis. What you don’t believe, you don’t get empowered to become. We don’t care what causes the beginning of a long-term bias in a market. What matters is that we profit from the bias, without knowing why the bull and the bear take their positions. Many people make money from long-term biases, and certain people lose; but a determined trader will not quit. If a horse throws off a determined rider, she or he will mount it again. “Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did,” said Mark Twain. Poverty has become widespread and it’s bound to continue increasing globally. Think about your loved ones and your future. Think about your children and your financial security when you become old. Do you want your child to be richer than you? Please think about teaching your kid the art of trading, for it doesn’t hurt if your kid becomes the wealthiest person in your family. Trading is one of the greatest jobs and one of the highest paying jobs in the world, but it’s also one of the most challenging. When the challenges are overcome, honestly, things would become easier than thought. Our breakthrough begins in a new direction, for speculation is a fantastic lifestyle in which our brains help us make money and our self-control helps us remain permanently successful. WHAT SUPER TRADERS DON’T WANT YOU TO KNOW. Copyright: Advfnbooks.com This piece is ended with a quote from Mercedes Oestermann van Essen. The quote at the beginning of the piece is also from her: “Becoming comfortable with who you are, and learning what motivates you in a positive and expansive way is the first step on the road to lasting trading success and financial freedom.”
What Is the Right Time to Trade? “Trading success depends on your system, your relationship with yourself and your relationships with others. Your feelings drive all of these components. When I first started, I thought it was all about the system. How silly and naïve I was in those days.”– Mike Melissinos What do you think is the answer to the questions that makes the topic above? There’s no general answer, for it depends on your trading style and approaches. Let’s take some examples. A scalper looks for opportunity to enter the market in the short-term, and when the opportunity presents itself, the scalper enters the market immediately, taking advantage of short-term market movements. Some swing traders or positions traders have various entry criteria for opening and closing positions. Some enter immediately the entry criteria are met, while some would wait for the market to close or the following day before they enter. Some traders use pending orders to take advantage of certain price actions and once a pending order is filled, trading begins. Some speculators use fundamental events to enter the market as soon as the entry requirements are met and some use fundamental events to project long-term movements. As you can see, the right time to trade really depends on your trading style and approaches. Once you enter the market by whatever means or criteria you choose, just make sure that you stick to your trade management rules – plus entry and exit rules. Irrational emotions tempt speculators to go against their rules. While it is difficult to control one’s temper while driving on a busy road, some have learned to control their temper while driving. You can control your emotions while trading and therefore, avoid taking actions that you’ll later regret. This piece is ended with the quote below: “Trading success comes from developing for yourself a good, well thought-out trading plan. That’s a plan which is based on your personal needs, strengths, interests, and all of that.”- John Forman Copyright: Tallinex.com
Seth Klarman: A Winner on Wall Street INSIGHTS INTO THE MINDSET OF SUPER TRADERS – Part 6 “Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” Name: Seth Klarman Date of Birth: May 21, 1957 Nationality: American Profession: Value investor, funds manager, financier and philanthropist Career Belonging to the Jewish ethnicity, Seth was born and raised in the US. He’d worked for Max Heine and Michael Price, which is now part of Franklin Templeton Investments. In 1982, he founded Baupost Group and the firm grew and grew. Recently, it was estimated that the firm was managing more than $22 billion US dollars. He also authored a book titled: “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.” That book – now out of print – is seen as a value investing classic. In the year 2013, he earned an income of $350 million US dollars and subsequently, he was named among the highest earning funds manager. As of the year 2014, he was worth $1.3 billion US dollars. Sometimes they call him the Warren Buffett of his generation. Seth is involved in philanthropy and politics, heavily donating to the causes he believes in. He lives in Brookline, Massachusetts, and he’s married to Beth Klarman. Insights: Seth makes great returns on his investments despite his unconventional investment methods. Sometimes, he makes up to 50 per cent per annum, by investing in unpopular instruments and looking for undervalued markets. You don’t need to do what most others are doing before you can make money in the markets. No matter how odd your strategies are, they’re OK as long as you make consistent gains. Let people criticize you. Let them say your trading style is weird; you’re fine as long as it works for you. You don’t need to be a star or a celebrity before you can make money as a trader. There are many people who make money in their private living rooms without the public knowing. In certain cases, most of the so-called professionals who speak at seminars, trading shows, public events, and on radio/television programs aren’t successful traders. Some of the loudest mouths are flops in the markets. As for Seth, he doesn’t always speak in public and doesn’t usually grant interviews, He keeps a low profile, despite being a market wizard. The public don’t know when the markets are overbought or oversold and that’s why their timing tends to be wrong. For those who know how to play the markets, outperformance is possible. According to Seth, successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgment, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and its price fluctuations is a key factor in his or her ultimate investment success or failure. Some investors think of buying alone, though at times, it’s better to bet on long-term bearish trend with some success. When one pays too much attention to the possibility of stocks going up without thinking of the possibility the stocks going down, one may easily miss trading opportunities on the downside. People invariably showcase their inability to profit from long-term investments based on real fundamental figures. Value investing is inherently long-term in nature. Computer programs and mathematics can do little to help you in the markets. In the end, you’d need to use common sense when handling investments. Unlike many people, think about how you can lose and try to control that. Don’t think only of how much you can gain. We like to look for simple solutions to intricate challenges: seeking success formulas. Searching for the Holy Grail is common, while that doesn’t exist. Remember what happened to CHF Pairs on January 15, 2015. When analysts express too much confidence in certain markets, you need to be very careful. The quote above is from Seth Klarman and the quote below is also from him. The quote ends this piece: “Investors must try to understand the institutional investment mentality for two reasons. First institutions dominate financial market trading; investors who are ignorant of institutional behavior are likely to be periodically trampled. Second, ample investment opportunities may exist in the securities that are excluded from consideration by most institutional investors. Picking through the crumbs left by the investment elephants can be rewarding. Investing without understanding the behavior of institutional investors is like driving in a foreign land without a map. You may eventually get where you are going, but the trip will certainly take longer, and you risk getting lost along the way.” Further reading: Advfnbooks.com What Super Traders Don’t Want You To Know: http://www.advfnbooks.com/books/supertraders/index.html Copyright: Tallinex.com