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Thread: Trading Wisdom

  1. #21
    aenigma's Avatar
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    10 Market insights from Mark Douglass

    1. The four trading fears - 95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears

    2. The proverbial empathy gap - You may already have some awareness of much of what you need to know to be a consistently successful trader. But being aware of something doesn’t automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it.

    3. The market doesn’t generate happy or painful information - From the markets perspective, it’s all simply information. It may seem as if the market is causing you to feel the way you do at any given moment, but that’s not the case. It’s your own mental framework that determines how you perceive the information, how you feel, and, as a result, whether or not you are in the most conducive state of mind to spontaneously enter the flow and take advantage of whatever the market is offering.

    4. The flaws of fundamental analysis - Fundamental analysis creates what I call a “reality gap” between “what should be” and “what is.” The reality gap makes it extremely difficult to make anything but very long-term predictions that can be difficult to exploit, even if they are correct.

    5. A good trader is a confident trader - I’ve worked with countless traders who would spend hours doing market analysis and planning trades for the next day Then, instead of putting on the trades they planned, they did something else. The trades they did put on were usually ideas from friends or tips from brokers. I probably don’t have to tell you that the trades they originally planned, but didn’t act on, were usually the big winners of the day. This is a classic example of how we become susceptible to unstructured, random trading—because we want to avoid responsibility.



    6. Anything could happen - The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that “anything can happen.” They don’t just suspect that anything can happen or give lip service to the idea. Their belief in uncertainty is so powerful that it actually prevents their minds from associating the “now moment” situation and circumstance with the outcomes of their most recent trades.

    They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren’t. They have stopped trying to predict outcomes. They have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favor, just like the casinos.

    7. Most people are obsessed with being right - Why do you think unsuccessful traders are obsessed with market analysis.They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.

    The typical trader won’t predefine the risk of getting into a trade because he doesn’t believe it’s necessary. The only way he could believe “it isn’t necessary” is if he believes he knows what’s going to happen next. The reason he believes he knows what’s going to happen next is because he won’t get into a trade until he is convinced that he’s right. At the point where he’s convinced the trade will be a winner, it’s no longer necessary to define the risk (because if he’s right, there is no risk). Typical traders go through the exercise of convincing themselves that they’re right before they get into a trade, because the alternative (being wrong) is simply unacceptable.

    If he exposed himself to conflicting information, it would surely create some degree of doubt about the viability of the trade. If he allows himself to experience doubt, it’s very unlikely he will participate. If he doesn’t put the trade on and it turns out to be a winner, he will be in extreme agony. For some people, nothing hurts more than an opportunity recognized but missed because of self-doubt. For the typical trader, the only way out of this psychological dilemma is to ignore the risk and remain convinced that the trade is right.

    8. Trading has nothing to do with being right or wrong on any individual trade - For the traders who have learned to think in probabilities, there is no dilemma. Predefining the risk doesn’t pose a problem for these traders because they don’t trade from a right or wrong perspective. They have learned that trading doesn’t have anything to do with being right or wrong on any individual trade. As a result, they don’t perceive the risks of trading in the same way the typical trader does.

    9. We have to be rigid in our rules and flexible in our expectations - We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective.

    10. Market losses are simply the cost of doing business - When I put on a trade, all I expect is that something will happen. Regardless of how good I think my edge is, I expect nothing more than for the market to move or to express itself in some way. However, there are some things that I do know for sure. I know that based on the markets past behavior, the odds of it moving in the direction of my trade are good or acceptable, at least in relationship to how much I am willing to spend to find out if it does. I also know before getting into a trade how much I am willing to let the market move against my position. There is always a point at which the odds of success are greatly diminished in relation to the profit potential. At that point, it’s not worth spending any more money to find out if the trade is going to work. If the market reaches that point, I know without any doubt, hesitation, or internal conflict that I will exit the trade.

    The loss doesn’t create any emotional damage, because I don’t interpret the experience negatively. To me, losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades. If, on the other hand, the trade turns out to be a winner, in most cases I know for sure at what point I am going to take my profits. (If I don’t know for sure, I certainly have a very good idea.) The best traders are in the “now moment” because there’s no stress. There’s no stress because there’s nothing at risk other than the amount of money they are willing to spend on a trade. They are not trying to be right or trying to avoid being wrong; neither are they trying to prove anything. If and when the market tells them that their edges aren’t working or that it’s time to take profits, their minds do nothing to block this information. They completely accept what the market is offering them, and they wait for the next edge.

    Source: “Trading in the zone”
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  2. #22
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    Out of every one hundred men, ten shouldn't even be there, eighty are just targets, nine are the real fighters, and we are lucky to have them, for they make the battle. Ah, but the one, one is a warrior, and he will bring the others back. - Heraclitus ( This applies Well to Trading as in Many other Ways of Life )
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  3. #23
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    Fatigue gets worse up to a certain critical point, when gradually or suddenly it passes away, and we are fresher than before. We have evidently tapped a level of new energy, masked until then by the fatigue-obstacle usually obeyed.
    There may be layer after layer of this experience.
    A third and a fourth “wind” may supervene. Mental activity shows the phenomenon as well as physical, and in exceptional cases we may find, beyond the very extremity of fatigue-distress, amounts of ease and power that we never dreamed ourselves to own, sources of strength habitually not taxed at all, because habitually we never push through the obstruction, never pass those early critical points. - William James
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  4. #24
    There are different factors which effect your trading, you should even know what you are capable of, you need to be very active as well as steer your trades intelligently.

  5. #25
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    The best traders don't try to figure out all of the market’s peculiarities. They follow their methodology and find great mental freedom in following their rules and structure. They've created their own playing board, their own mental market world. They are absorbed in it and find pleasure in marvelling at all the subtle nuances they have discovered. - Linda Bradford Rachske
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  6. #26
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    The greatest shortcoming of the human race is our inability to understand the exponential function. - Albert Allen Bartlett - Small Accumulated Gains consistently, Goes Way ahead of Home Runs .... Measure Your Risk & Reward & Evaluate Yourself Against the Execution of Process as Against the Outcome of Each Trade
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  7. #27
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    Many of life's failures are people who did not realize how close they were to success when they gave up. - Thomas Edison.. Grit & Persistence are desirable Virtues for success in any Spectrum of Life
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  8. #28
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    If you are excited by an investment, there is a very good chance that it is a bad idea. Good investing is slow and boring. - Patrick O’Shaughnessy
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  9. #29
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    The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge. - Stephen Hawkings
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

  10. #30
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    The man who follows the crowd will usually get no further than the crowd. The man who walks alone is likely to find himself in places no one has ever been. - Alan Ashley
    Wish You Green Trades !

    Warm Regards !

    Aenigma ..... :)

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