Trading Educators Blog
When you are riding a winner, avoid looking at it all the time.Search out new trades in other markets.Absorb yourself with looking for opportunities elsewhere, if you are the type that must have market action.Diversification is the key word here.But remember, you can afford to take only the very, very best trades elsewhere when you are riding a winner.Don't blow away the profits you are making on ...
Are you having trouble finding a balance between your trading and the rest of your life? Since you took up trading, do you seem to be possessed by it? Trading can be all-consuming. You don't seem to have time for your family, or any recreational activities. Is it always going to be that way? Have you gotten into something in which you are now trapped? What I'm describing is what happens to many p...
Humans don't like taking chances with their money. If given the choice, they would take a sure thing rather than a gamble, even if it meant making relatively little profit. What do you think most people would do, take $100 right now or take a gamble in which they would either receive nothing or $200? Most people would take the $100 but would you? If you trade the markets as a short-term trader, y...
People have a natural affinity to follow others. It can be very adaptive at times. If you see someone slip on an icy sidewalk, for example, it would be wise of you to start walking slowly and carefully to protect yourself from getting hurt. People are so attuned to others that they mimic their behaviors without knowing it. Psychologists call this phenomenon contagious behavior. Contagious behavio...
Some people live in a world of delusion and fantasy. They see what they want to see and ignore what they don't want to see. Traders are especially prone to this ailment. When your money is on the line, you are consumed with avoiding loss. Trading is a competitive business where few make it in the long term. This fact always lurks in the back of your mind, putting added pressure on you. In the back...
Many traders underestimate the influence of stress. Stress is not only a psychological reaction, but a biological response as well. When you are stressed, your body reacts instinctively. You are agitated, on edge, and ready to lash out. Your attention is restricted. Your mind is closed and inflexible. The stress response has a specific biological, adaptive function: Your energy is channeled into m...
If we had a crystal ball, trading would just be a matter of buying at a bottom, holding the stock as the price continued to rise, and selling near a top, right before the public sells in a state of panic. But we don't have a crystal ball, and there is no foolproof way to forecast the markets. Sure, if you have enough capital, are willing to wait long enough for a stock price to increase, and will ...
People come from humble beginnings to achieve wealth, status, or fame. But to get ahead, successful people often had to break conventional rules. This readiness to break the rules is often associated with an affinity toward risk. Although they may achieve success, they may also have a shaky self-image. Sure they achieved a lot, but a voice deep inside their psyche still questions their self-worth ...
Why do you trade? Most people would think it's obvious. It's for the money, right? What many winning traders know, however, is that money is a poor motivator in the end. It's much more satisfying to pursue trading for the pure joy of mastering the markets, regardless of how much money you make. Winning traders are motivated more by the process of trading than by the profits they are making. It's c...
The human mind is capable of extreme optimism. We have a strong need to win. This need can be so strong that everything looks rosy. For example, you may look backward at old charts and think, "It's easy to see winning patterns." Behavioral economists call this optimism, 'hindsight bias.' When we know how a stock price moved in the past, we think it all seemed inevitable when we look backward. For ...
Is learning the trading business like learning any other business? The importance of how you learn the business of trading cannot be minimized because of the factors that determine your success or failure. Learning the business of trading is basically no different from learning any other business. Winning means learning major guidelines and concepts that you repeat so often in your own behavior t...
I was watching an old movie "Coach Carter," starring Samuel L. Jackson. I couldn't help thinking about the many similarities between what a coach must do to prepare his players and what a trader must do to prepare to trade. Since trading is largely a self-directed business venture, embarking on a trading career requires that you are able to set clearly defined objectives and develop a specific pla...
Being a contrarian trader means not just following the crowd. It means being willing to break the rules when necessary! Statistics show that the “crowd” loses close to 80% of the time position trading, and very close to 90% of the time day trading. Why would anyone want to do what all those people are doing? So, what is it the crowd is doing? For the most part they are struggling with ...
Consider the following: As a trader you are in a business. Your strongest opponent has plenty of capital. He follows a program and he does it without emotion. He is totally aware of the fact that no one knows where the next tick will fall. Whereas he usually has good insights regarding the major forces that drive the market, he does not fool himself into thinking he can explain the vagrancies of p...
Dear Joe, Sometimes I absolutely dread sitting down to trade. I have had so many bad experiences that I’m not sure I can pull the trigger. Is there anything I can do about it? What happens to us as we trade colors the way we see things in the market and influences the way we approach them. We take a big hit in a particular market, and we decide never to trade there again. Or, when we have a great ...
Master Traders develop a style that is a reflection of their education and character. Most individual trading styles are either positional or combinational and, rarely, a synthesis of both. However, there are other styles. Positional traders take x amount of positions within a specific price area where the market is thought to be favorable to their trading strategy. This may occur on short t...
From a longtime friend and student: "I thought that I’d pass on something that you might want to share with your trading community. I spent way too long thinking that range bars and/or tick bars were my way to the holy grail and I would like to tell you what I realized and why I think I was wrong." "First some background: I got started down that path, because wasn’t seeing format...
How should you feel about losses? I once read somewhere that you are supposed to love losses. Does that make sense to you? It doesn't to me. The worst aspect of losing is that it tends to create pessimism. Traders should feel bad when they lose money only if they fought the market trend, or violated their own trading strategies. The best traders have a healthy "so what, big deal!" attitude that ma...
Taking a second look at potential trades at times results in “why didn’t I see this before?” For instance, what if you are looking at a market as it approaches a support area? Isn’t it reasonable to ask yourself, “If this market breaks through and I am long, what will I do?” Ask yourself how such an event would change the picture. If you have a position, will you still want...
I was asked the following question: “Joe, is it important to be creative in your trading?” I’m not sure I can describe it in terms of importance. The creative process is somewhat of a mystery, even to scientists who study it, but that is only because scientists do not recognize the spiritual factors of our lives and consequently in our trading. The Bible says: “There is a spirit in man.”&nbs...
