would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
2. Wealthy Traders Realise
that Making Money Is More
Important than Being Right
It is human nature to want to
be correct in our assumptions
and predictions on the market.
We all want to believe we are
interpreting market data properly
and have made the right choice
to go long or short the market.
But wealthy traders rarely have
a bias on the market prior to
the open or any time prior to
entering a trade. Once they do
make a trading decision, if the
trade becomes a loss, indicating
they were initially wrong, they
will have no problem immediately
making a trade in the other
direction.
I have interviewed successful
traders who form a bias in the
morning and will only trade in the
direction of that bias for the day,
but they are rare.
Instead of trying to force
their opinion on the markets,
determined to prove themselves
correct, wealthy traders will
switch sides at a moment’s notice
if the market tells them it is time
to do so – even if they were
“sure” the market was going to
go the other way that day. Being
right is not important – growing
their trading account and net
worth is.
3. Wealthy Traders View
Technical Analysis as a
Picture of Where Traders
Are Lining up to Buy and Sell
Many traders view moving
averages, Fibonacci and trendlines
as exact places where price is
expected to turn and move in the
opposite direction. Successful
traders do not view technical
analysis that way. Wealthy traders
see charts as snapshots of where
traders are lining up to buy or
sell. Instead of seeing bars, lines
and clouds, wealthy traders see
price points where traders have
placed orders to enter and exit the
market, either as stop losses or
entry points. The stock, option or
futures contract has no idea where
it will find support or resistance.
It is the market participants who
determine this and experienced
traders know this and will place
their own orders around those
levels to take advantage of the
95 per cent of traders who lose
money trading.
4. Before They Enter
Every Trade They Know
Where They Will Exit for
either a Profit or Loss
We have all heard that we should
be using stops whenever trading to
avoid large losses. However, very
few traders actually know where
they will place a stop and a profit
target before they enter every trade.
Wealthy traders leave nothing to
chance and plan every trade in its
entirety before they even enter.
Your written trading plan
should have objective measures
of where your stop loss should
be placed as well as where you
will take profits. Not knowing, or
simply guessing at where these
price points will be after you
have entered a trade can lead to
indecision or price targets outside
of the average range of the
security you are trading. Why set
an arbitrary profit target of three
points when the average range of
that market is only two points?
Furthermore, wealthy traders set
position sizes and stop losses that
are almost always a function of their
risk tolerance for any given trade.
For example, if the maximum risk
on any one trade is two per cent of
their trading account, the number of
shares they will trade (based on the
price of shares) and a reasonable
stop loss is calculated before the
trade is placed. We rarely talk with
a wealthy trader who says their
position size is 1000 shares. They
usually tell us it depends entirely
on what they are trading. They take
their maximum acceptable loss and
work backward to find a stop loss
and position size that matches that
objective measure.
5. They Approach
Trade Number Five with
the Same Conviction as
the Previous Four Losing Trades
We have all had that run of bad
trades that shakes our confidence
in the “edge” we think we have in
the markets. Our setup appears
again and instead of taking
that fifth trade, we hesitate, not
wanting to endure another losing
trade. Of course, that fifth trade
would happen to work beautifully
and not only would have made up
for the previous four losses but
put us net-positive for the day.
Unless the market has indicated
something has changed and we
truly believe our strategy is solid,
there is no reason to hesitate if
the trade setup presents itself.
Even automated system traders
will tell you that a run of losing
trades that goes beyond the
normal drawdown in back tests
is normal. The key, of course, is
knowing when your “edge” is no
longer an “edge” vs. a statistical
run of trades that just have not
worked out.
Wealthy traders are able to
shrug off losing trades and enter
the next trade with the same
enthusiasm and confidence they
had on the first trade. Teammates
of Evan Longoria, an All-Star
baseball player for the Tampa
Bay Rays, often describe his
batting success as his ability to
forget about the previous bad
swing or missed pitch and focus
solely on the next pitch coming
toward him. Wealthy traders have
mastered the ability to forget
about the previous trade and
focus exclusively on the next
opportunity.
Your trading plan should
include some sort of
consequence for a string of
losing trades. For Tim Bourquin
personally, after four losing
trades in a row, he forced himself
to trade a single share of stock
until he felt confident in his
trading decisions again. Yes,
commissions wiped out any
profit on a single share of stock,
but he would much rather pay
a commission than take a large
loss trying to force his will on the
market.
6. Wealthy Traders
Use “Naked” Charts
When we first begin trading,
we want to see confirmation
from as many indicators as
possible before we would enter
a trade. We put so many lines,
arcs and levels on our charts
we could barely see the price
bars beneath. As we mature as
traders, we begin peeling off
those indicators and eventually
came back to charts that had
price bars, volume and pivot
points that represented previous
highs and lows. Nearly every
wealthy trader we interview tells
us that they watch one thing on
their charts: price. By “naked”
charts we mean those that are
barren of indicators and show
just price and perhaps volume at
each price level.
At some point in everyone’s
trading career, they realise there
is no magic indicator, no matter
how hard they look for it. The only
thing that matters is price – and
supply and demand at that price.
If you have an indicator you feel
gives you greater insight into
future price movement, excellent.
Just know that too much faith
in any one, or combination of
indicators, is sure to
fail at some point.
Wealthy traders
firmly believe in the
phrase, “Price pays”
and are able to trade
with nothing but
information on price
and the demand in
the market at that
price.
To be continued....
Source :www.tradersonline-mag.com
that Making Money Is More
Important than Being Right
It is human nature to want to
be correct in our assumptions
and predictions on the market.
We all want to believe we are
interpreting market data properly
and have made the right choice
to go long or short the market.
But wealthy traders rarely have
a bias on the market prior to
the open or any time prior to
entering a trade. Once they do
make a trading decision, if the
trade becomes a loss, indicating
they were initially wrong, they
will have no problem immediately
making a trade in the other
direction.
I have interviewed successful
traders who form a bias in the
morning and will only trade in the
direction of that bias for the day,
but they are rare.
Instead of trying to force
their opinion on the markets,
determined to prove themselves
correct, wealthy traders will
switch sides at a moment’s notice
if the market tells them it is time
to do so – even if they were
“sure” the market was going to
go the other way that day. Being
right is not important – growing
their trading account and net
worth is.
3. Wealthy Traders View
Technical Analysis as a
Picture of Where Traders
Are Lining up to Buy and Sell
Many traders view moving
averages, Fibonacci and trendlines
as exact places where price is
expected to turn and move in the
opposite direction. Successful
traders do not view technical
analysis that way. Wealthy traders
see charts as snapshots of where
traders are lining up to buy or
sell. Instead of seeing bars, lines
and clouds, wealthy traders see
price points where traders have
placed orders to enter and exit the
market, either as stop losses or
entry points. The stock, option or
futures contract has no idea where
it will find support or resistance.
It is the market participants who
determine this and experienced
traders know this and will place
their own orders around those
levels to take advantage of the
95 per cent of traders who lose
money trading.
4. Before They Enter
Every Trade They Know
Where They Will Exit for
either a Profit or Loss
We have all heard that we should
be using stops whenever trading to
avoid large losses. However, very
few traders actually know where
they will place a stop and a profit
target before they enter every trade.
Wealthy traders leave nothing to
chance and plan every trade in its
entirety before they even enter.
Your written trading plan
should have objective measures
of where your stop loss should
be placed as well as where you
will take profits. Not knowing, or
simply guessing at where these
price points will be after you
have entered a trade can lead to
indecision or price targets outside
of the average range of the
security you are trading. Why set
an arbitrary profit target of three
points when the average range of
that market is only two points?
Furthermore, wealthy traders set
position sizes and stop losses that
are almost always a function of their
risk tolerance for any given trade.
For example, if the maximum risk
on any one trade is two per cent of
their trading account, the number of
shares they will trade (based on the
price of shares) and a reasonable
stop loss is calculated before the
trade is placed. We rarely talk with
a wealthy trader who says their
position size is 1000 shares. They
usually tell us it depends entirely
on what they are trading. They take
their maximum acceptable loss and
work backward to find a stop loss
and position size that matches that
objective measure.
5. They Approach
Trade Number Five with
the Same Conviction as
the Previous Four Losing Trades
We have all had that run of bad
trades that shakes our confidence
in the “edge” we think we have in
the markets. Our setup appears
again and instead of taking
that fifth trade, we hesitate, not
wanting to endure another losing
trade. Of course, that fifth trade
would happen to work beautifully
and not only would have made up
for the previous four losses but
put us net-positive for the day.
Unless the market has indicated
something has changed and we
truly believe our strategy is solid,
there is no reason to hesitate if
the trade setup presents itself.
Even automated system traders
will tell you that a run of losing
trades that goes beyond the
normal drawdown in back tests
is normal. The key, of course, is
knowing when your “edge” is no
longer an “edge” vs. a statistical
run of trades that just have not
worked out.
Wealthy traders are able to
shrug off losing trades and enter
the next trade with the same
enthusiasm and confidence they
had on the first trade. Teammates
of Evan Longoria, an All-Star
baseball player for the Tampa
Bay Rays, often describe his
batting success as his ability to
forget about the previous bad
swing or missed pitch and focus
solely on the next pitch coming
toward him. Wealthy traders have
mastered the ability to forget
about the previous trade and
focus exclusively on the next
opportunity.
Your trading plan should
include some sort of
consequence for a string of
losing trades. For Tim Bourquin
personally, after four losing
trades in a row, he forced himself
to trade a single share of stock
until he felt confident in his
trading decisions again. Yes,
commissions wiped out any
profit on a single share of stock,
but he would much rather pay
a commission than take a large
loss trying to force his will on the
market.
6. Wealthy Traders
Use “Naked” Charts
When we first begin trading,
we want to see confirmation
from as many indicators as
possible before we would enter
a trade. We put so many lines,
arcs and levels on our charts
we could barely see the price
bars beneath. As we mature as
traders, we begin peeling off
those indicators and eventually
came back to charts that had
price bars, volume and pivot
points that represented previous
highs and lows. Nearly every
wealthy trader we interview tells
us that they watch one thing on
their charts: price. By “naked”
charts we mean those that are
barren of indicators and show
just price and perhaps volume at
each price level.
At some point in everyone’s
trading career, they realise there
is no magic indicator, no matter
how hard they look for it. The only
thing that matters is price – and
supply and demand at that price.
If you have an indicator you feel
gives you greater insight into
future price movement, excellent.
Just know that too much faith
in any one, or combination of
indicators, is sure to
fail at some point.
Wealthy traders
firmly believe in the
phrase, “Price pays”
and are able to trade
with nothing but
information on price
and the demand in
the market at that
price.
To be continued....
Source :www.tradersonline-mag.com
