Trading Wisdom

Technicians seem to be more willing to accept a small loss generated by the trading system than fundamental traders. Traders must accept the assumption that the markets reflect the true reality. Our pride and opinions should not interfere with sound trading approaches.
Jerry Parker

I'd be a bum on the street with a tin cup if the markets were always efficient. (Warren Buffett).

From my trading experience, I have found this to be true - Sell on the stall before the fall.

Amateur traders teach amateur traders to trade like amateur traders.

No system wins 100% all the time, Money Management is the "Holy Grail"

Focus on being profitable for the week - Individual trades may go against you and individual trading days can offer little opportunity.

You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader. Many aspire to this but few succeed. An amateur looks at a quote screen and sees millions of dollars sparkle in front of his face. He reaches for the money - and loses. He reaches again - and loses more. Traders lose because the game is hard, or out of ignorance, or lack of discipline or because of both. - ALEXANDER ELDER

Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool - remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game. - ALEXANDER ELDER

Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is an expensive proposition. Traders who are not at peace with themselves often try to fulfill their contradictory wishes in their market. If you do not know where you are going, you will wind up somewhere you never wanted to be. You can succeed in trading only if you can handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his or her capital as successfully as a professional scuba-diver watches his or her air supply. - ALEXANDER ELDER

Most often, traders have four fears. There’s the fear of being wrong, the fear of losing money, the fear of missing out and the fear of leaving money on the table. I found that basically, those four fears accounted for probably 90% to 95% of the trading errors that we make. Let’s put it this way: If you can recognize opportunity, what’s going to prevent you from executing your trades properly? Your fear. Your fears immobilize you. Your fears distort your perception of market information in ways that don’t allow you to utilize what you know. - MARK DOUGLAS

We know that the random element in the market represents at least 40 to 60 percent activity. Therefore, it’s not logical to look at every tick or to think that every tick or every chart formation has meaning. They don’t. There are too many traders trying to look at the markets from too stringent an analytical viewpoint. Most of what happens in the markets is meaningless. Why try to interpret every little movement, every little reversal, every little tick? In trying to do too much, they’re actually paying too much attention to the market. You have to keep a distance from the market. Only then will you have the psychological resources to let your profits ride. You won’t be looking at every tick and interpreting it in a fearful way. - JAKE BERNSTEIN

Managing risks is in many ways the foundation of the entire process. Managing risk comes down to two things. First is how you are going to place your stops. That goes back to cutting your losses short. Consider trading as a business venture. Managing risk means recognizing what the costs of trading are. Make a comprehensive plan. Winning traders always treat their trading like a game, but they also look at the whole thing as a money-making business. – GLEN RING

Most aspiring traders underestimate the time, work, and money required to become successful. To succeed as a trader, one needs complete commitment. Just as in any entrepreneurial venture, you must have a solid business plan, adequate financing, and a willingness to work long hours. Those seeking shortcuts are doomed to failure. And even if you do everything right, you should still expect to, lose money during the first five years – losses that I view as tuition payments to be made to the school of trading. These are cold, hard facts that many would-be traders prefer not to hear or believe, but ignoring them doesn’t change the reality. – MARK D COOK

You have to be very, very honest with yourself. You must not kid yourself. Whether you have a position that is underwater or you are sitting on a huge profit, you have to look at it in exactly the same way. That is the main reason why people lose money in the market. I am very glad that that's the case because if it wasn't the case, it would be very difficult for people like me to consistently make money in the market. Alpesh B. Patel

I made my money because I always got out too soon. (Bernard Baruch)

Just because the price goes up doesn't mean you're right; just because the price goes down doesn't mean you're wrong. (Peter Lynch)

I will tell you the secret of getting rich on Wall Street. You try to be greedy when others are fearful, and you try to be very fearful when others are greedy. (Warren Buffet)

Have patience and discipline and use proper money management so your not afraid to pull the trigger then time comes.

Putting everything on a solid trading plan helps to overcome psichological state of mine that is messing with us.

Plan your trade and trade your plan. Always have a backup plan incase something goes wrong and the trade goes against you. Im using Igrok's method that tells me to hide my stop below/above technically significant level and bind a reverse order at the same price. This helps to take emotions of the trading if the market decides to turn against us.

My 2 cents...

Knowledge, understanding & wisdom.

Knowledge is obtaining the facts: the information.
Understanding is knowing what the information means.
Wisdom is applying that understanding into prudent and fruitful action.

This principle applies to all areas of life, including the markets.