Show's Truths of the Trade

Discussion in 'Trading' started by showyouwang, Jul 15, 2007.

  1. Alright so I put together some old scribblings in my notebook to form a list of rules of thumb. Some are good advice, some are just my observations and read like Murphy's law. Really about half of them are actually novel and haven't been drilled into the minds of beginners, so I thought I would contribute back to the community that I've learned quite a bit from. Don't worry I have my flame-retardant suit on.

    -The smaller the timeframe, the more competitive it is in terms of edge and cost. (If you want to daytrade, you pay more for data feeds, platforms, etc.. it is a trade: more expenses to lower risk)

    -This time is NOT different, and if it has happened before it will happen again.

    -The more capital you are working with, the more fundamentals matter (although this applies to hundreds of millions of dollars, so is not very applicable to most traders). In other words, the more predictive and less reactive you must be.

    -There are many many ways to make money in the markets but even more ways to lose it.

    -Manipulation happens but the markets will eventually go where they want to go.

    -More volatility = wider stops

    -The most successful traders COMBINE fundamental analysis, technical analysis, sentimental analysis, and pattern analysis. Don't be so arrogant... you wouldn't buy a new television because of the specifications on a sheet. You would also want to see the picture it produces, get other peoples reviews and experiences with the brand, and factor in the company that makes it and the price of the set. You want to know everything, and good traders have no biases and will use anything they observe to work

    -The simpler the strategy the more flexible it will be when the market changes

    -Reward is usually pegged to risk. However, entries alter your risk without altering your reward. Exits alter your reward without altering your risk.

    -If you start trading out of boredom, develop alternative strategies for shorter timeframes. Keep busy.

    -It pays to follow the herd, except at extremes

    -The less quantitative your methods are, the less susceptible you are to edge erosion. (again, quant and program trading is another kind of real-life trade: you are trading decreased emotion and statistically more consistent results with decreased returns and greater edge erosion)

    -Trading can be as simple or complex as you want it to be. It's a trade! (And all your actions in life and trading should be perceived as such)

    -The most experienced and the best prepared always get the money.

    -If you look at the trees instead of the entire forest, you not only miss the big picture but you will find yourself surrounded if there's a forest fire

    -Put in the screen time. There are no shortcuts, not in this business.

    -Trading requires confidence BUT that confidence should come from success and experience. Don't trick yourself into a reality that is not congruent to what actually is the truth.

    -Always accept responsibility since you were the one who placed the trade. Fact is, there was someone on the other side of the trade who took your money cause he was more experienced and better prepared. Find out how he did it.

    -Experience is the most important thing in this business. You always hear, cut losses and let your winners run.. but how far? Experience will tell you.

    -You will know the instant you become profitable. If you are even slightly unsure, then you are not.

    -Don't be skeptical of people who post astounding returns. As the old saying goes... millions come easier to a trader that knows how to trade than thousands does to one who doesn't

    -You should not listen to others to make trading decisions, but there are those out there with tremendous success in the markets and you should pay attention to their actions and advice. Only an idiot ignores the voice of experience.

    -News is overrated, actions speak louder than words. Don't believe me? Check the level 2 when a bank upgrades a stock.

    And a personal favorite, comes from a movie I like.. extra points to whoever knows it. Is the juice worth the squeeze?

  2. If you hesitate you masturbate.