Trading Secrets :)

Discussion in 'Psychology' started by ATSTRADER, Apr 25, 2006.

  1. These ten simple “Trading Secrets” you probably know very well. I'm posting them here as a summary of all topics in the trading psychology session... let me know if I didn't cover here any of the causes of trading losses :)

    1. No matter what market does, it is only important what you do in the market! If you look at the chart and realize that you just missed a large price move, don’t be frustrated. Just follow your strategy, sometimes you will make more profits in the tight trading range then during large price fluctuations.
    2. Stick with your Trading Plan. Always have a trading plan for your trades, either it is a part of long term strategy or just one single intraday trade. And most importantly, follow it don’t change your plan during the trade.
    3. Have a mechanical order execution. If you have the strategy developed, it really helps to have it auto executed. Emotions should not be evolved neither into the decision making nor it the order execution process.
    4. Trend is your friend. Market moves in trends, identify the main trend follow it. There is many points to enter the ongoing trend and only one is wrong – when trend is reversing. Surprisingly, most of the traders trying to catch “top and bottoms”…
    5. “Let your Profits run and cut your Losses short” - everybody know that, rare traders could follow. Your Risk Management strategy always should include the mechanism that executes this simple rule.
    6. “Buy Low, Sell High” – another simple truth, that nobody knows exactly how to implement. Theoretically, if you place the Buy order below the Sell order anywhere in the market, sooner or later both of these orders would be filled and the trade will be closed profitably. Timing is the main issue that you are dealing with, when you are trying to find he point to buy or sell.
    7. Never gamble. Successful trading is not an exiting game, it is very boring planed process of pulling the money “out of the pockets of the other traders”. It is business, and as any other business it takes time to capitalize and all strategies should be well planned.
    8. Do NOT follow the crowd. Try to understand what are the other Market players doing and if your feel that you are “in the crowd”, get yourself out of the market…It helps sometimes to have no position in the market. Here is the joke for you from the Trading Pits… to proof this point :)
    Q: Why did the trader fall from the roof?
    A: He slipped down.
    Q: Why did the second trader fall from the roof?
    A: He was trying to save the first one and slipped down too…
    Q: Why did the third trader fall from the roof?
    A: He jumped down trying to understand the mistakes that the first two traders made.
    Q: Why did the forth trader fall from the roof?
    A: He followed the third because he thought that the downtrend has begun…
    Q: Why did the fifth trader fall from the roof?
    A: He was learning the experiences that the falling traders had, because he decided to write the book about them…
    Q: Why did the sixth trader fall from the roof?
    A: He was reading the book that the fifth trader wrote… :)
    Follow the trading crowd and you will always be on the loosing side of the market, or listen to the “experienced guru” and repeat his mistakes…
    9. Count your money. Do NOT overtrade. There are no miracles in the Market, you always have the better chance to make money if you have more money. You should always calculate money for every single trade, because no matter how much money you have:
    10. Nobody is bigger then the Market!

    Try to apply these "secrets" in your day-to-day trading strategies, and when you will have a loosing trade, check which one of these "Secret Rules" you broke…. Good Luck!
  2. I like it!:D
  3. Buy high - Sell higher

    I would say that #4 (Trend is your friend) and #8 (Do NOT follow the crowd) contradict each other.
  4. bitrend


    11. Don't fight the Fed. :D
  5. I don't. The crowd has no clue where the trend is.
  6. The "crowd" is the trend.
  7. thirst


    the crowd isn't always the trend. The crowd likes to fight the trend. Price movement have an inherent trend about them that most people fail to identify, by the time they do, its too late.
  8. There is absolutely no contradiction... To understand that you have to know that for every Buyer in the market there is always a Seller... If many people bought stock or futures contract, then a small group of other investors, that much more better capitalized sold that instrument to them... Market will trend in the direction of that small group, against the large crowd that bought... Small traders are always trying to fight the trend...
    Large traders, in most cases, are in the trend by default :)
    Please don't start another discussion, about who is Large and who is small... it is all relevant, indeed :)
  9. ============
    True on the no clue.

    Many like to predict tops, bottom fish ;
    or like one of the somewhat funny CNN news woman asked ,
    on a 1% correction, ''is the bull market over????:p :cool:
  10. bitrend


    The crowd has no clue where the trend is because the crowd is inside the trend itself :D. It's like being at the bottom of the Titanic, have no clue where it goes. And when the alarm sounds and there's a race to get out of the ship with narrow exits, most will get crushed.

    #10     Apr 25, 2006