Profit making in trading is a function of the market matching your methodology. We trade with a philosophy and we profit when it correlates with the current market environment. We make money when our winning percentage is high and our losses are kept small, or when or wins are big and are losses are small. If we have the discipline to follow a system consistently and manage our risk, then the profits will come when the market is conducive to our method. Until then it is our job to keep our losses and drawdowns under control. 1.Day traders have trouble making money in markets that lack intra-day volatility. 2.Trend followers can’t make money when markets don’t trend in one direction for any length of time. 3.Momentum traders lose money when stocks fail to breakout over resistance and trend. 4.Traders that use chart patterns don’t make money when trend line breaks don’t lead to sustained trends. 5.Swing traders don’t make money when support levels fail and stop losses are hit before a reversal. 6.Dip buyers don’t make money when downtrends begin and lows get lower. 7.Option trades lose money when markets fail to trend before the option expires. 8.Option sellers lose money when parabolic moves put the sold options in the money. 10.Investors lose money in bear markets. 10.Perma-bears lose money in bull markets.
Success is a manner of deciding what is most important to you, and then making the right choices to getting to where you want to be. Success has a price, and we have to pay that price upfront before we see the result of our efforts. 1.Don’t let where you start in life define where you end up. 2.Write down your goals for your career, finances, relationships, health, and happiness. 3.Invest your effort, time, and energy into actions that move you toward your goals. 4.Say no to people that try to waste your time, energy, or money. 5.Go in one steady and focused direction toward your most important goals. 6.Learn from your mistakes, recalculate, and keep going. 7.Learn from people that you admire. 8.Relentlessly pursue what you are passionate about in life. 9.Guard your health by eating healthy and getting exercise. 10.Guard your thoughts carefully; what you accept as reality can create or destroy everything very quickly. The harder and longer we work at doing the right things to reach our goals, the better the probabilities are that we will get to where we want to be. A lot of happiness can be found on the path to success, and we have to enjoy the pursuit. However, there is no guarantee of outcomes, even if we pay the price. Giving up, allowing our fears to take over, and failure is far more costly, and that path usually leads to long term unhappiness.
At times, markets have nice price trends where being long or short for days or weeks will lead to profitability. These are the markets that most new traders make money in by having a bias and holding onto that belief. This usually doesn’t end well because they are unable to understand when the trend is changing. Other markets trade within ranges. These traders buy support and sell resistance over and over. These are the markets that will make them the most money. Then there are times of high volatility and no trend, no support, and chaotic price action. These fake breakouts and momentum that unexpectedly fades and reverses will quickly take profits. It’s time to step back, trade smaller, trade less, and wait for a pattern to emerge from the chaos when the market rewards taking quick profits and punishes your signals. It’s best for most traders to do nothing during corrections and downtrends and wait for an uptrend or bull market to come back. In the current market defense is more important than offense. Keeping your capital safe is more important than trying to grow it. This is the time to focus on: 1.When prices are below the 200-day moving average. 2.Your total risk exposure. 3The VIX levels. 4.The Average True Range. 5.Your position sizing.
The stock market goes through cycles of up trends, down trends, and range bound price action. This is caused by equities as an asset class going through phases of accumulation and distribution. Bull markets are where the easy dollars are made. You can buy the best growth stocks as they break out of price bases to new all time highs and trend higher and higher after each great earnings report. You can buy a stock and just let it go higher for weeks and months, easy peasy. This is where the old ‘let your profits run” axiom works: in trends. The bulk of my stock market trading profits were made with the right stocks in a bull market. It only takes a couple of leading stocks to make you great market beating returns. Early in the strongest bull markets you don’t have to do much, you are just holding winners and being happy. Bull markets have ascending vertical support levels: primarily moving averages. You don’t get stopped out though because end of day support holds as your stocks make higher highs and higher lows. In a range bound market you have to do some work, you have to start buying dips and selling strength. There are horizontal support and resistance levels. You can buy fear and sell greed and make money. You have to start working at it though earning the money now requires entry and exit decisions. In a down trend, correction, or bear market the party is over. You can actually lose money rather easily. Buying dips loses money as lows get lower. Doing nothing loses money as prices fall. Waiting too long to get out loses money because you miss the rally. Selling short as prices fall and riding the trend down is usually not as easy as buying and riding an up trend because downtrends tend to be filled with rallies and volatility. Bull markets contain the easy dollars this is where you have to maximize your ability to ride a trend. Range bound markets can be profitable if you can buy the dip and sell the rip. This is where you have to earn your dimes through active trading. For most people the key is to not lose much money in a bear market. Selling early at the first sign of trouble can save a lot of hard earned bull market profits. I have avoided the biggest stock market downtrends since 2008 because there is so many warning signs before a plunge. This has saved me from major drawdowns and the mental and financial pain of losses. Down trends are where you are picking up pennies in front of a steamroller. Day traders and some swing traders can make some money in down trends but remember that for most that is not where the real money is made.
1.Follow people that add value to your tweet stream. Look for the sharing of information that you find useful. 2.Follow a variety of traders, ones that are like you and also those that stretch you to question what you think you know and challenge you to grow as a trader. 3.Look to follow and support the people you like and not attack what you do not like. 4.There are lots of groups of traders on twitter. Find the group that fits your own personality. 5.Understand that everyone does not trade on the same timeframe. Do not jump to conclusions quickly before you understand a trader’s timeframe and stop loss level. 6.Do not take any one trade too seriously on social media. You do not know someone else’s trade size or what will make them change their minds. One trade should be just one of the next 100 if the position sizing is right. 7.If you want to unfollow someone just do it, don’t make it a dramatic thing with a ‘twitter unfollow suicide note’ proclaiming your disappointment and that you will be unfollowing now. That is a sign of self importance. Just move on. 8.There is a fine line between challenging someone and trolling someone. A challenge is an open dialogue about the facts. Trolling is a preconceived belief and judgement and then personal attacks. Do not waste your time and energy on trolls. The block button is like your mute button use it to turn off the noise. 9.Use Twitter for a purpose. Twitter can be a tool for learning, growing, searching for information, breaking news, making friends, collaborating, connecting, sharing, network building, and entertainment. Do not waste your time, get out of twitter what you came for. 10.Twitter is like an interconnected worldwide texting platform. You can meet people from around the world in real time. You can follow your favorite traders. You can build your own audience by sharing value with the trading community. Everyone’s twitter experience is different. Build your own Twitter account and use it exactly the way you want to.
So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points, and not planning their defense. In trading, you must play both sides of the ball. A boxer has to punch so they can win and also block so they don’t get knocked out. You have to be able to score points against the market while not allowing the market to score on you. You have to stay in the game to have a chance to win. You have to manage the risk of ruin so you don’t have a career ending injury. 1.Your entry signals are your offense 2.Your trailing stops for winning trades are your defense for not losing your open profits. 3Letting a winner run is your offense, cutting your loser short is your defense. 4.Your automatic buy stop is your offense and your automatic stop loss is your defense. 5.Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move. 6.Identifying a trend is your offensive play while creating a trading plan on how to trade it is your defensive play. 7.Your choice on what to trade is playing offense, choosing your position size is playing defense. 8.Your watch list is playing offense choosing how much capital to risk on any one trade is playing defense. 9.In trading your wins are not permanent and your profits can be taken back, when you score you have to next ensure that you are not scored on. The goal of keeping your hard earned profits has to be far above the desire for making quick money with big risks.
There are two very different types of traders, one that wins and one that whines. Whiners hardly ever win and winners rarely whine. Trading is a tough business and you have to be able to keep the right mind set to get you through the rough spots. When the markets start trying to knock you off your trading plan and system. Mental strength more than any other one thing will determine your success. You can come back from losing your whole account but you can’t come back from completely losing your faith and confidence in yourself. Your mind must be one of a winning trader . We should not entertain internal or external whining. Keep the faith, stay focused on your long term destination and what it will take to get there. Winning traders take responsibility. Whining traders play the victim. Winning traders take the right entries. Whining traders get in too early or too late and miss the opportunity. Winning traders find a way to make money. Whining traders find an excuse why they did not. Winning traders add value by entering a trading discussion. Whining traders add value by leaving a trading discussion. Winning traders study ten times as much as they trade. Whining traders trade ten times more than they study. Winning traders enjoy the game and the profits. Whining traders enjoy their delusions of the big score. Winning traders build a mentor relationship. Whining traders think they are too smart for a mentor. Winning traders are realistic about their possible returns. Whining traders are delusional about what returns are probable for them. Winning traders are focused on their trading expertise. Whining traders are scatter brained and their style drifts to what they think will work. Winning traders approach their trading as a business. Whining traders approach their trading as a hobby or gambling. Winning is a state of mind as much as a winning process. Whining is trading with the wrong set of mind and feeling like a victim when the error was trading without a good long term process.
One of the biggest mistakes new traders make is to focus on the rare ‘Black Swan’ event happening instead of simply trading a methodical system. Too many traders continually bet on a big crash happening by buying put options or selling futures short in the middle of a bull market than simply going with the trend of the market. Too many new traders want to be the next Paul Tudor Jones by being right about a crash. Paul Tudor Jones did double his account selling short on Black Monday but the rest of his career was based on steady trades taken in the direction of a trend or betting against extended market tops and bottoms. Black Swans are rare events and do not produce steady market returns due to there randomness and rarity. For me the warning from Nicholas Nassim Taleb about the dangers of Black Swans in the markets applies more to risk management than creating a system around their occurrence. Taleb had both great success while trading the possibilities of Black Swans on a few occasion and severe drawdowns when none appeared over prolonged periods of time. I believe that profitability lies in trading signals inside a winning system not betting on a Black Swan event to make you rich. The governments of the world all focus on preventing bad events from occurring which bring down the probabilities of events outside the Bell Curve. The path to trying to capture a Black Swan event usually causes a drawdown and could lead to ruin . While a trader has to manage their position size so they are not ruined by an outsized move caused by a Black Swan event, in the long term your profits will be made by normal price action of White Swan market action. The path to long term profits is buying the deep dips caused by fear or trading with the trend. Trend followers will capture a lot of Black Swan profits because they will be on the right side of a trend when the Black Swans do take flight.
“By mid-1978, I had been a security analyst for eight years and it had become intolerable. I knew I had to do something different. I always knew I wanted to work for myself, have no clients, and answer to no one. That, to me, was the ultimate goal.” – Marty Schwartz This is what it’s all about freedom. Freedom to eventually do whatever you want to do with the market being your only boss as you try to take money from it. This vision of freedom is what drives me to take the risk and do the work to get to the finish line. I don’t strive to be a billionaire with multiple houses, I am only looking for freedom. I have enough money to do whatever I want I now want enough money to do nothing. Most of the traders interviewed by Jack Schwager and Michael Covel were not flashy they simply traded for a living whether managing money for others or their own money. Marty Schwartz is a Market Wizard. In his prime he had streaks of 20% return months. (Yes, 20% return months). He did what is impossible for most. He traded a lot of futures in his time and in recent years he has shifted to selling option premium which was surprising to me. He always found ways to come back from losses and make money consistently. Schwartz explains how his Marine training helped his trading. There is no point in just taking punishment and that retreating can also be a form of offense. He explains “The most important thing is to keep enough powder to make your comeback.” Never bet all your chips and never lose all your chips. Marty Schwartz’s 6 Key Trading Rules: “I try not to go against the moving averages; it is self-destructive.” Stay in the same direction of the moving average trend in your own timeframe. “Before putting on a position always ask, ‘Do I really want to have this position?” Are you taking a signal or just acting on an opinion? “After a successful period, take a day off as a reward.” You have to stop and enjoy the fruits of your labor to prevent burn out and stay motivated. “My biggest losses have always followed my largest profits.” Winning streaks can be dangerous because they lure a trader into feeling like they know something and then trade too big. “Bottom fishing is one of the most expensive forms of gambling.” There is a big difference between buying a dip and catching a falling knife. “Before taking a position, always know the amount you are willing to lose.” Know what your maximum loss potential is before you ever take a trade.
In tough times like 2016, traders often feel as though things can never go their way. This feeling typifies how stock trading can be incredibly emotional. We all want to make money, and that can mean chasing a stock on its way up or calling a bottom on its way down. Everyone has bought a stock at one point or another because they felt like it “just can’t go any lower” or “this rally is just getting started.” But the traders who consistently beat the market are those who realize that emotion has nothing to do with the performance of a stock. These successful traders also obtain many other qualities; today’s article highlights 10 of their most lucrative traits and their implications on your portfolio. Remove Emotion From The Equation As I mentioned above, successful traders are those who have removed emotion from the equation. A stock does not increase in value because people think it will go higher; rather, it does so because traders and investors have made the conscious decision to allocate capital toward it. We all know this, but often forget it in the heat of the moment. Before you submit your order, reflect on why you’ve decided to enter the trade. Is it because you “just have a feeling that it will go higher” or that you conducted thorough technical or fundamental analysis? 2. Don’t Chase Anything, Ever Seems simple, right? Buy low and sell high, they say. But this is much easier said than done due to the interference of emotions. Everyone wants to make money, but more experienced traders know that more often than not, chasing a stock will result in losses. In theory, this makes sense. Take the scenario of people sitting at their monitors, just like you, and watching the same stock spike right before their eyes. Before they can even enter the trade, thousands of share have traded hands and the stock spikes even more. By the time your trade goes through, it is likely that much of the air has deflated and the stock begins to rapidly descend from its high, as money managers are ripping the carpet out from under you before you can even realize it. Learning not to chase a stock higher (or lower, if you’re on the other side of the trade) comes with experience. If you’ve fallen victim to the scenario I just played out, use it as a learning experience. 3. Be Patient, Young Grasshopper The previous two points go hand-in-hand with patience. It is advantageous to wait for a stock to show signs of a bottom before attempting to catch a falling knife. Likewise, it is smart to deal with the short-lived pain of seeing a stock spike before your eyes for the rewarding feeling of purchasing shares after its descent. Moreover, make sure you wait until your prospective trade has fully setup to your specifications, and don’t assume that any indicator will produce a buy/sell signal. Always confirm before you earn. 4. Bulls Make Money, Bears Make Money, And Pigs Get Slaughtered So don’t get greedy. If you’ve used technical analysis to project a price target and the stock is currently trading at that level, place the sell order and do not change it. This applies to both long and short positions. He who believes that they can squeeze more return out of their trade — the inexperienced trader — is often compelled to sell at a smaller gain. Remember that any profit is a good profit. 5. A Penny Saved Is A Penny Earned Losing money sucks. No trader is in the industry of losing money. If you’re looking at a lackluster trade setup for the hope of making up for yesterday’s bad day, you’re breaking rule number 3 and not realizing that money saved is money earned. It hurts more to lose money than it feels good to make money. Remember to be diligent and be content with earning and losing no money. 6. Know Your Risk Tolerance Every trader is different, and only you know your risk tolerance. Are you the type of trader who can risk 20% to make 20%, or do you feel the need to have a much higher risk/reward payout in order to enter a trade? Be sure to define your risk before placing any trade orders. Doing so helps ensure that you have an exit strategy, which is arguably just as important as your entrance strategy. A little extra work in the beginning can make all the difference in the end. 7. You Won’t Be Right All The Time Even the best traders aren’t right 100% of the time. But to be a good trader, you just have to be right more often than you’re wrong. Think of it like baseball: the Hall of Fame hitters are those who got out 7 out of 10 times. While this would correlate to a lot of red in a stock portfolio, the idea remains the same. You won’t, and don’t have to be perfect. If you follow in the footsteps of the successful Wall Street traders, then being right more than you’re wrong will come easily. 8. Learn From And Cut Your Losses Because you won’t always be right, you’ll undoubtedly experience some losses. The stock market is incredibly humbling, and a long stretch of winning trades can instantly be cut short by devastating losses. But losing trades are healthy in the long run of your trading career, so long as you learn from them. Ask yourself why the trade went awry, and learn how to minimize similar mistakes in the future. Also, make sure that you exit a position as soon as your risk is fulfilled or a technical barrier — such as support, resistance, volume, etc — has been broken. 9. Don’t Turn A Trade Into An Investment If you’ve entered a trade, it’s most likely due to a technical or fundamental catalyst that caught your eye. For example, you may have boughten a stock because you thought its earnings would beat estimates. Even more, let’s say the technical setup is incredibly bullish and signals that the stock will exhibit upward moment. Unfortunately for you, though, the company’s earnings are lackluster and the stock falls sharply. What do you do now? Do you hope that the stock rebounds in the near future, giving you a better exit point? Hopefully not, because once a trade goes the opposite direction and you decide to hold onto it, you’ve turned that position into an investment. If you created a position with one intention, make sure you exit it with the same and don’t change your thesis to justify the price movement. 10. Take Technical Analysis With A Grain Of Salt The thing about technical analysis is that it works until it doesn’t. As illustrated by the example above, a stock may have a bullish technical setup that isn’t supported by its fundamentals. Even though traders can cross out the name of a stock, conduct technical analysis, and make a decision regarding its future price movement, the best traders recognize that a fundamental hiccup can trump even the best technical story. Make sure you take the time to research the sector and industry of prospective stock, and make note of any sector-, industry-, or stock-specific catalysts before outlaying any capital.
1.Stop breaking your trading rules. Discipline is an edge. 2.Stop trading such big position sizes. Risk management and self control is an edge. 3.Stop trying to predict what will happen next and learn how to react to what is happening. 4.Stop worrying about other’s trades and trade your own system. 5.Stop thinking every dip will be a crash and every rally will go straight up. 6.Stop buying junk stocks and quit selling momentum stocks short. 7.Stop holding a losing trade past your stop loss level. 8.Stop buying too late in an uptrend and quit selling short too late after a plunge. 9.Stop trading your opinions and start trading some quantified signals. 10.Stop being a perma-bull or perma-bear and be a perma-system follower.
When I asked “What kind of psychological edge do you have in your trading?” in my Facebook trading group I had a lot of great answers. Here are a compilation of many of their great answers. Here are the 20 mental trading edges that a trader can use in their battle for profitability in the markets. 1.#1 goal is capital protection 2.Focus on following a process 3.Rarely committing trading errors 4.Discipline 5.Focus 6.Trading with the predominant trend instead of your opinion 7.Using entry and exit signals instead of emotions 8.The goal is trading with discipline not trying to make money in every trade 9.No regrets on a trade that followed your plan 10.Patience 11.Look at charts of the next highest timeframe 12.Trade for capital appreciation not to pay monthly bills 13.Trading your own capital 14.Having realistic trading return expectations 15.Previous trade, irrespective of profit or loss has no influence on next trade – (Srinath Madas) 16.Trading with a position size that keeps your emotions out of your process 17.Living a healthy lifestyle 18.Living a balanced life 19.You know that you are the weakest link in the trading process 20.“Tons and tons of evidence that the models work over time as long as risk management criteria is adhered to.” – Richard Weissman
Trend Followers make money during market trends not because they predict anything but because they buy what is going up and they sell what is going down. They discover ways to measure and react to trends based on historical price patterns . Trend traders identify a trend and enter a trade with the predefined risk of a stop loss with a managed position sizing. Trend traders make a plan on how to exit based on their stop loss at a price level that will tell them that they were wrong. “The whole world is simply nothing more than a flow chart for capital.” – Paul Tudor Jones What causes a “trend”? 1.Investors and traders have capital that they want to put to work, they choose to buy what they think will appreciate in value. As more and more capital flows into an asset it goes up in value as more outside money wants in to a limited supply of a stock. Stocks with smaller market caps can go up faster than big cap stops due a smaller supply of shares in small cap stocks. 2.Key moving averages provide lines that traders can use for quantified entry and exit signals. The 50 day and 200 day moving averages are great examples of support areas where pullbacks in the best stocks reverse and up trends begin. 3.Many times a stock will trend straight up with sustained momentum and a short term moving average will act as support for the entire up trend with few if any breaks in price beneath these key short term moving averages . For example the 5 day or 10 day exponential moving average. 4.Stocks go up for only one reason: The current seller is not willing to sell for the current market price and the buyer is willing to pay more. Stocks move up because sellers will not sell for the current price and buyers are willing to pay more to get in. The stock market is an auction not a retail store, supply and demand make prices. Buyers and sellers are always equal, it is the price that changes to adjust to the supply and demand at different levels in price. 5.Capital flows where earnings expectations grow. Traders and investors buy stock in companies they believe will increase in value based on the underlying companies projected increase in earnings. 6.The only reason buyers buy a stock is that they believe they will be able to sell it for a higher price later. Stocks go up on the belief of higher prices in the future. 7.Short sellers can drive trends by selling heavily on the belief that a stock will go down and drive the price down. Then short sellers can cause a rally when all the holders will no longer sell and the price rises and cause the short sellers to panic and buy back the shares they shorted. There are always two sides to a short sell, they have to first borrow shares to sell short and then they have to buy back to cover their shares creating future buying pressure. The markets go from up trends, to range bound, to down trends. The big money is in the big wins that you can capture in the big trends.
En Golden Trading Rules That Can Help New Traders 1.Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that will eventually end badly when you find yourself on the wrong side of a strong trend. 2.Never lose more than 1% to 2% of your trading capital on any one trade. This means use position sizing aligned with stop loss placement so w.hen you are wrong the loss is not big enough to damage you financially, mentally, or emotionally. 3.Never trade anything you do not understand 100%. Do not trade futures, forex, or options until you understand the risk and how they work. 4.Trade in the direction of the trend in your trading time frame. 5.Only look for low risk/high reward trades or high probability setups , when you don’t have any signals, don’t trade. 6.Trade your plan, your system, your signals, the chart, and price action, not your own opinions, bias, or predictions. 7.You have to trade the right winning methodology that you are comfortable with that fits your own personality. 8.If you do not have a full trading plan with rules on entries, exits and risk management stop trading until you create one. 9.The size of your wins and losses ultimately determine your trading success regardless of your winning percentage. No system is profitable with huge losses. 10.Your risk management rules will ultimately determine the success of your technical trading system.
Here are 7 mistakes traders make that are eventually their undoing. I have made almost all of these mistakes with zeroes on the end at times. It takes years to learn these lessons and they are usually learned only the hard way through the financial pain of losses and the mental pain of being wrong. Correcting these mistakes can go a long way to getting you on a profitable track. 1.Taking trading losses personally. If you are following your signals and system the market determines if you win or lose. You can only control what you do not what the market does. 2.Trading too big. If you have strong emotions that make it difficult to follow your trading plan you may be trading too big. Big trades can lead to big losses and big losses can result in being unprofitable. 3.Trying to catch every move in a market. You can only trade your signals on your own timeframe. If you did not have a signal inside your own timeframe then their is no trade. 4.Focusing on hindsight. Hindsight is a parasite that taps your resources of energy in the present moment. Hindsight is 20/20 but all you should have been doing in the past was following your own trading plan and signals. 5.Spending too much time in front of the screen. Only watch price as much as is needed for your own trading time frame. 6.Not doing your homework. Make a plan for what you will do when the market is open while the market is closed. 7.Becoming biased based on recent price action. Trade based on long term historical data do not be biased to recent action.
After every World Series and Super Bowl game the winners and losers of these games have different levels of energy. It is the same for traders during winning streaks versus losing streaks. Losing money hurts more than making money feels good. Missing trneds hurt, exiting a trade with a small win only to see a potentially big win emerge later can be painful. Do not underestimate the ability to push through pain and losing to get to profitabilty as a trader. Perserverence is one of the most powerful skills of rich traders. The ability to overcome losses, setbacks, and doubt separates the rich traders from those new traders that quit trading early on. Your desire for trading success can overcome any obstacle. Trading is a game and you can learn the rules. 90% of traders lose money so you can fade the majority. You can trade with the trend, manage risk, and stay diciplined in your winning process. This is the formula for profitable trading. Profitable trading is energizing, following your trading process is energizing, believing in your trading methodology will energize you to keep going.
In trading focus is crucial. You have to know who you are as a trader and exactly what your method and trading plan is, and you must follow it. In trading discipline makes money, focus makes money, stocks in up trends make money, while risk management allows you to keep the money that you have made. You could say you must be picky to be a good trader. Here are the areas to be picky about: 1.A good trader is picky about the methodology they decide to trade, they study diligently to see what works before they begin trading. 2.Be very picky about the stocks you trade, only trade the very best stocks in up trends long and only short the biggest junk stocks that are in downtrends. 3.Being picky about your entry point is crucial, stick with your trading system and follow your predetermined plan. Enter only when the odds are in your favor for a winning trade. 4.You can not just trade any position size of stock, you have to be picky about the quantity of shares you trade and base it on your risk management guidelines. 5.Be very picky about who you follow on social media and who’s trading books you read, look for a teacher not a stock picker and beware of big promises and big egos. 6.Only study the principles of the very best traders of all time to build your own trading system. Look only for what works not theories or academic opinions. 7.Listen to real traders not talking heads on financial television. 8.Study the charts of the greatest stocks of all time and backtest your trading systems through multiple market environments. 9.If you trade options only trade the ones with the most liquidity so you do not lose money between the bid/ask spread. Avoid penny stocks, believe me, they are dangerous. 10.Continuously filter all your sources of trading information, ONLY keep that which enables you to make money in the markets. In trading the pickiest 10% of traders win with discipline and focus while the 90% of traders that do what is easy lose money consistently. Be picky about everything and choose your path carefully.
Here are the top personal finance rules that could change your long term success and allow you to end up with a high net worth instead of being deeply in debt, living paycheck to paycheck, and always feeling financial pressure. These are more behavioral than mathematical in most cases. Self control, patience, and consistency are your top tools to be successful in your personal finances. 1.You will need either a budget to ensure you spend less than you make or the self control to simple buy what you need within your means. 2.Play great financial offense. Expand your income to increase your standard of living. You will be more successful if you do something you love because you will bring more energy to it. Look for a mission in life not just a career or a job. The worst thing you can do is just work for money, that is a low energy endeavor. 3.Play great financial defense. You can’t out earn stupid spending as entertainers, sports stars, and the majority of lottery winners have shown. Spend money on things that are worth their cost. Buy things that create value for you in happiness, experience, or entertainment. Stay away from spending large amounts of money on things you will regret later. 4.Buy a newer built house in a growing area with good schools, businesses, and attractions. Avoid old money pit houses or buying in a declining area. If you buy in the right place at the right time your house could double in value in a few years. 5.Use a 15 year mortgage to buy your house not a 30 year mortgage. If you use a 15 year in 7 years you will be about halfway done, you will save a ton on interest, and will be working on the principle owed. After 7 years of a 30 year you are just getting started on getting it paid off. 6.You can marry anyone you love so focus on looking for and dating people that will be financial asset in your life. Stay away from drama, people that are materialistic, princesses, and spoiled little boys in men’s bodies. If you want to be married choose someone that will bring added value into your life and wants to pursue the same goals in life. 7.Do everything in your power to avoid divorce. It is a 50% drawdown in your net worth. The most important step is in who you choose to marry but once married your behavior and choices will play a huge part in whether your marriage ends in happily ever after or divorce court. 8.If your company matches your 401K contribution get the full match so you can double your money tax free. 9.DO NOT TAKE out money from your tax differed retirement account until you are retiring. The penalties and taxes will eat your capital up. 10.Invest in companies you believe in. Don’t just be a customer be an investor. 11.Buy cars that are 1 or 2 years old so someone else can take the initial depreciation from the cost of buying it straight form the dealer. 12.Try to avoid car payments when possible. Maintain your car and keep it after it is paid off. Divert the car payment money to saving or investing. 13.Only spend the money on college if it fits into your life and career goals. A four year college is not for everyone. College should be a step on a path to your goals not a goal itself. 14.Only spend money you are planning to spend. 15.Money in itself can’t make you happy but being broke can make you unhappy. 16.Buy assets not just depreciating consumer goods. 17.Creating cash flowing assets. 18.Stay up to date on technology and trends. 19.Create multiple income streams. 20.Always have enough savings that you don’t have to put up with anyone’s BS.
If someone was ready to start trading and had a basic understanding of the markets and asked me for some of my best advice on how they could make money as a trader, this is what I would tell them. 1.Understand that trading is like any other professional endeavor, you will be monetarily rewarded based on the effort and work you put into it to learn how to trade. Trading is one of the few fields where amateurs can go compete with professionals with a very low price of entry. Your trading tuition will have to be paid through the experience of losses and time doing your homework. You will get out of trading the effort you put into it. 2.If you have to get others opinions about your trade, asking others advice on entries and exits, then you really need to stop trading and work on a detailed trading plan that gives you a road map of how manage a trade. If you don’t have a trading plan every thing you do is random. There is no edge in randomness. 3.Do not waste your time on searching for the Holy Grail of trading, an easy money, can’t lose, trading method does not exist because markets change in cycles. Trading is always a competitive event between traders and market conditions are always changing from volatile to stable and from trending to choppy, so nothing works in all market environments. 4.Successful trading is based on your winning trades collectively being bigger than your losing trades are collectively. So your goal is to either trade a system with a few huge wins and a lot of very small losses or a high winning percentage system that keeps the losing trades controlled. 5.Do not look for a good trade, instead look for a great winning methodology to trade with. Have the right trading process and the money will follow eventually. Looking for easy money in the markets is the process for losing money. 6.Your risk management while trading will determine your trading success more than your method. You have to make it safe to be wrong a few times in a row and not lose all your trading capital. 7.If you want to be a successful trader then focus on what is actually happening with price action and stay away from your own opinions and biases of what should happen. Wanting to be right for the sake of your ego is another expensive game. You can’t predict a nonexistent future. 8.You can’t use anyone else’s system, you have to trade a system that fits you. One that you understand and can trade with discipline because of your confidence in it and yourself. 9.Look for and find your own edge. What are you the best at doing in the markets? Some are masters of shorting, others trend following, some are great at selling options that expire worthless. Usually the type of trading you are the most passionate about gives you the drive to research it until you find that edge. 10.Master some aspect of trading, find something to be an expert on. A market, a stock, IPOs, options, futures, day trading, trend following, etc. Don’t be a jack of all trades, be a master of one type of trading.
Flexibility for the trader to move with price action is the key to successful trading. Stubbornness is very expensive in the markets when you are on the wrong side of a trend. You can be rigid with your rules and risk management but you must be flexible when it comes to how the future plays out in price action for any market or stock. It is not those that predict the future that make a lot of money in trading but those that react to what is actually happening that are able to profit from price action. The ability to enter when your signal and then ride a trend as it emerges is the key to profitability. 1.The ability to change your mind and reverse your trade in the other direction when proven wrong is a powerful trait. This enables you to quickly get on the right side of a trend and not stay on the wrong side. 2.The ability to admit you are wrong and take your stop loss can save your account. The faster you admit you are wrong the smaller your losses will be. 3.Put your ego aside and look at what is happening not what you believe should happen. Signals must replace opinions as your entry and exit signals. 4.Trade the present price action and not predictions by yourself or anyone else. 5.Always realize the markets are bigger than you are, they are always right. Market trends can be a steam roller and your job is to ride that steam roller not be run over by it. Be flexible and willing to go with the flow of the markets whatever direction they take you in.