Trading Educators Blog

Next to lack of discipline, I find that pride has resulted in the destruction of many traders. Pride is a powerful emotion. Pride is what we feel when we've made a great trade or done something that makes us look good in the eyes of others. Trading is a tough business. Few traders succeed at it, so when you are doing well, you feel proud. But watch out! There come a time when pride can overpower y...

There are at least three things you can do to avoid mounting losses: 1. Write off a relatively small loss 2. Admit your mistakes 3. Don't let the desire to protect your reputation interfere making logical trading decisions. The three are common human shortcomings, and you need to be aware of them. None of us are immune and if you are not aware of these weaknesses you will not be able to keep them ...

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...

Trading futures is gambling only when you trade them without full knowledge of what you are doing. There is a good measure of self-knowledge required to choose the proper course to follow if you want to become a trader. It has even been postulated that many small traders in the futures markets, without knowing it, secretly want to lose. They jump in with high hopes—but feeling vaguely guilty. Guil...

​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...

There is a tendency to become overemotional when trading. Overcoming the propensity to play emotionally requires a conscious commitment to specific trading objectives. This entails choosing a target, developing a strategy, and finding a method for adhering to it. A goal enables you to keep a relatively even keel through good and bad periods, to sustain momentum, and to keep from becoming bored. Of...

We sometimes delude ourselves into thinking that the most successful traders somehow were somehow born different from the rest of us. We imagine they were born to win no matter what they did. But if that were true, you would also have to believe that those who succeed tend to do so because of their genes, social background, or luck, and not because they pursued success with more diligence, patienc...

​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...

You must be disciplined in following the plan of your trade religiously. Once you have closed your position, you should record everything about the trade. Write down where you wanted to enter the trade, what you expected out of the trade, and what you actually did get out of the trade. Make sure to include notes that will help you learn from the trade, reasoning what actually took place once you e...

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 ...

I keep one of sorts, it is part of my monthly homework. The journal is very basic and includes what trades I made during the day and my reasons for getting into the trade. My journal has changed a bit over time since my reasons for entering a trade now are pretty consistent. I think there are three reasons for keeping a journal. One reason is to have a manual backup in case there's a system or sof...

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 ...

There is a great attraction in all aspects of the modern age to immediacy. Likewise, most of the trouble in trading occurs through this love affair with the "now," with impatience, and with trying to hurry up the trading game. Traders want to make money in the markets now, today, and not tomorrow or next week. We love the Now. We are devoted to it and give it much weight. This problem may be espec...

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 ...

Most successful traders failed at some point in their careers and wiped out their account. Many traders lose because they do not understand the nature of the decision-making process, which should be based on rational price action analysis versus emotional, irrational reactions to price action. A reason should be required for each market action taken. When fear exits a trade, it is more difficult t...

You can find seasonality in all markets but I personally think there is a big difference in "reliability" or "strength" of seasonality in the markets. I personally think seasonality is strongest in the commodity markets. In all markets where you have a physical product and a production cycle during the year. Because the production cycle is always the same you get typical seasonal behaviors in thes...