Sentry Page Protection
TIPS AND INSIGHTS REGARDING TRADING
Learning to be a Consistent Active Trader requires effective trading edges, disciplined tactics, and emotional dexterity. Below are some useful tips and insights you can use to improve your performance:
- Consistency fosters profits.
- Consistency IS repeatedly applying the same tactics to the same setups and opportunities.
- Strive to Eliminate random trades.
- Be objective, keep your emotions in check.
- Be disciplined, accept responsibility, own your trades.
- Trade setups and situations you are familiar with.
- Focus on and Master one reliable setup before expanding your skill set.
- Understand your edge and the probabilistic nature of your edge.
- Manage external influences and understand how they effect your objectivity.
- Plan the trade, trade the plan.
- Write your rules down and be disciplined in their application.
- Objectively see your setup/opportunity.
- Define your risk and set your position size accordingly.
- Execute your plan and take profits or losses systematically.
- Obey your risk.
- Be flexible with profit expectations, NEVER violate your risk plan.
- Recognize and quickly take action when a trade is not working. It's just a trade, it's NOT personal .
- Never let a trade turn into an "Investment".
- Do not add to losing positions. "Averaging Down" is an emotional decision that violates your trade plan and is very likely to turn a bad trade into a unsustainable loss. Follow your plan, take the loss, and wait for the next opportunity.
- Entries/Exits
- Beyond finding the right tickers to trade, learning to get great entries and exits is one of the biggest challenges all traders face. Having a disciplined approach for both entries and exits minimizes common frustrations.
- Focus on trading your system consistently (recognizable chart patterns, s/r levels, and SIMPLE technical systems are often better than complex processes). If your entry decision has multiple "if xxx and xxx and sometimes if xxx or xxx then do yyy" you will always second guess or find reasons to avoid the trade.
- Learn from your opportunities. Study charts and identify "great entries", then zoom into the the chart, do not show bars to the right of the "great entry", and study what the chart looks like. You will likely be surprised at what you discover.
- Scaling into and out of positions: Adjusting position size dynamically (adding to winners, trimming losers, and taking profits when they are available) can substantially improve your overall performance. Scaling into a position should NEVER violate your trade plan or risk rules. Similarly, taking profits systematically and in accordance with your trade plan should be the rule, not the exception.
- Patience is Trading
- Learn to be in a trade only when a conforming, high-probability, opportunity is presented. Accept waiting patiently and objectively is an active part of trading.
- Never force random trades, boredom trades, or fear of missing out trades.
- Cash is the only 100% risk free trade (and this too is debatable).
- Look at the Big Picture
- Home-runs are great but your primary goal should be consistency over a series of trades (consider your performance over 10's or 100's of trades).
- Stocks go Up and Down, you can profit from moves in both directions. Learning to profit from Long and Short positions doubles your opportunities.
- Strive to Continuously Learn and Improve your Performance
- Learning to BE consistent is a SKILL that requires dedicated practice and effort to master.
- Be open to learning from your successes and failures.
- Keep track of your activities and decisions and their ultimate outcome.
- Hold yourself accountable: Look for patterns in your decisions/outcomes and make the required changes to improve your performance.
- Manage your Ego and your Perspective
- Check your Ego at the door or the Market will humble you without mercy.
- Your bias, risk tolerance, time-frame, and trading style is unique to you and your situation. Recognize you do not know other traders perspective, risk tolerance, time-frame, nor their tactics.
- Enjoy the Active Trading lifestyle
- The market is always there, choose to participate on your own terms and on your own schedule.
- ENJOY YOUR LIFE, its the only one you get.
WHY TRADERS LOSE MONEY
Whether you’re a new trader or seasoned veteran, we have all been there. A series of ever increasing losses and some nice, although tiny, wins. The feeling that the market is out to get you, personally. The hopelessness that you will never figure ‘it’ out. Searching and searching for the perfect indicator or next big thing. This is not a unique experience, in fact almost every active trader has been there at some point in their journey. This cycle is vicious, painful, and for most, mentally and financially frustrating. The good news is the cycle can be broken, you can become a consistent and profitable trader. Below are the top reasons most active traders struggle:
- Random Trades – A random trade is any trade that does not have a significant edge, ie is not a high probability opportunity. The market is probabilistic, pseudo-random, dynamic and ever changing. Opportunities continuously present themselves. There is no reason to be involved in low probability trades because there is ALWAYS a better trade available. Taking action to remove random and low probability trades from your portfolio has a significant, immediate and direct impact to your bottom line.
- Emotional Trades – Fear of Missing out (FOMO) is an absolute killer for many traders. Buying high and selling low is the typical symptom of these trades while devastating losses are the usual outcome. Other emotions effect the management of active trades: Greed and hope cause you to refuse to take profits and let winning trades turn into losers. Fear and panic cause you to sell for unanticipated and often excessive losses. Removing emotional trades, like removing random trades, has a significant impact in your bottom line. By planning your trades and having the discipline to follow your plan, emotional trades are largely removed from your trading regime.
- Failing to manage risk – Risk management is usually the last thought most active traders have. It usually starts with “XYZ stock is going to the MOON!” and quickly turns into something like “Why did that happen?” or “OMG, not again!?!?” as the stock plummets against them. Risk should be defined BEFORE a trade is entered as part of your trade plan. Defining risk ($ at risk and appropriate position size) based on the trade idea/setup must be understood and accepted before ANY trade is executed.
- Letting a Trade become an Investment (bagholding) - Failing to follow a plan and letting a trade get away from you to the point you can no longer afford to take the loss often leads traders to the conclusion that "It's ok, I'm an Investor not a Trader" and then weathering the storm only to tie up the account for extended amounts of time just to take a bigger loss later. Taking losses quickly when they are affordable is key to long term success, you can ALWAYS re-enter if the situation changes to high-probability outcome.
- Adding to losing positions - Many, many, many traders fight losing positions, adding and adding to them, making the position bigger and bigger such that every tick in the wrong direction makes bigger and bigger losses. Don't fight, leave your ego at the door, admit when your wrong and wait for the next setup. Smartly adding to winning positions, make wins bigger and bigger and bigger.
- Trading the wrong stocks – There are literally thousands of stocks, options, futures, bonds, ETFs, cryptos, and many other instruments available to trade. Focusing on highly liquid, dynamic, and high probability setups is the key to consistent success.
- Failing to learn and accepting responsibility – Many traders accept losses are part of trading and should be expected very casually. Yes, losses happen, they are part of the game, but they should be unusual, not normal or typical outcomes. If you are not learning from losses, studying and reviewing your trades, you are never going to minimize their occurrence. If your win rate is less than 75%, you MUST take a step back and understand WHY. Focusing on trades that work for you (trades that are actually profitable, not just fun or shoulda worked, be objective) is the foundation of consistency. YOU are the only person trading YOUR money, if YOU are not doing everything YOU can do to improve YOUR performance, who is to blame? Accept full, total, and complete control of your trading decisions. Always hold yourself accountable, objectively monitor your own performance, and critically review your actions to find opportunities to improve.
TRADING RULES
Every Stock, Option, Bond, or other Securities Trader MUST HAVE rules. Due to the probabilistic nature of the markets, your rules must account for every potential outcome to protect your account (and often to protect your account from you!).
This List is far from all inclusive, but starting is usually the hardest part:
Global Rule #1 – Preserve capital, do whatever you have to do to defend and protect this precious and limited resource.
Global Rule #2 – Plan your trade, trade the plan. Only apply risk when the odds are significantly in your favor.
Global Rule #3 – If you doubt the relevance of a rule or whether you should follow your rules ‘this time’, see rule #1 and rule #2. Be disciplined and rigorous in your rules and flexible in your expectations.
Global Rule #4 – Never use sacred money for trading. This is money you need for rent, gas, kids braces, etc. Sacred money is Scared money, both of these are cursed, damned, jinxed, etc. and are likely to lose.
Global Rule #5 – If you are trading randomly and/or emotionally, stop, regroup and try again. There is only one person that can make you be disciplined, hold yourself accountable. Be objective, if you not “in it” try again later but don’t force trades when you can not see them.
This List is far from all inclusive, but starting is usually the hardest part:
Global Rule #1 – Preserve capital, do whatever you have to do to defend and protect this precious and limited resource.
Global Rule #2 – Plan your trade, trade the plan. Only apply risk when the odds are significantly in your favor.
Global Rule #3 – If you doubt the relevance of a rule or whether you should follow your rules ‘this time’, see rule #1 and rule #2. Be disciplined and rigorous in your rules and flexible in your expectations.
Global Rule #4 – Never use sacred money for trading. This is money you need for rent, gas, kids braces, etc. Sacred money is Scared money, both of these are cursed, damned, jinxed, etc. and are likely to lose.
Global Rule #5 – If you are trading randomly and/or emotionally, stop, regroup and try again. There is only one person that can make you be disciplined, hold yourself accountable. Be objective, if you not “in it” try again later but don’t force trades when you can not see them.
THE MARKET VOTING MACHINE
Despite what you have learned, been told, or otherwise conditioned to believe, the Stock Market is a popularity contest. Voters cast their ballots when they choose to buy or sell any security. What influences their decision to buy or sell ranges from fundamental data, PRs, tweets, conference calls, rumors, fear, greed, and so on. The continuous flow of these votes is what makes the market move. If everyone agreed that XYZ stock was worth $27.32, the stock would always trade for $27.32, day and night, rain or shine.
What is often lost on traders is the simple fact that both the buyer and seller have to agree on a price for a transaction to occur. If the buyers are not willing to pay what sellers are asking, there is no transaction. Similarly, if sellers are not willing to accept what buyers are offering, no exchanges take place. When there are imbalances in agreement on price, such as when buyers are eager to buy and sellers are reluctant to sell, the price will rise or fall in search of balance. Ultimately, the only truth in the market is the last price as it represents the most recent agreement in value between the highest bidding buyer and the lowest asking seller. This ‘truth’ is very dynamic and continuously changes as buyers and sellers shift their perspective, new or sidelined buyers/sellers enter the market, and/or new events impact everyone’s perspective.
What often drives changes in price are the participant’s emotions as well as events affecting their emotions. News releases, earnings, personnel changes, even price-action itself etc. all change people’s emotional state regarding the value of a security. As traders emotions rage, significant imbalances and oversold/overbought conditions arise, creating amazing opportunities for others. Euphoric buyers and "greedy" sellers drive up prices, only to see it come crashing down moments later, leaving late buyers holding the bag and late sellers asking "why didn't I sell?". “Smart” buyers pull their bids as scared sellers race for the exits plummeting stock prices, only to have it rebound and sellers saying "why did I sell?". This cyclical nature of the market continuously repeats and creates opportunities for the 10% who are ready to act accordingly.
What is often lost on traders is the simple fact that both the buyer and seller have to agree on a price for a transaction to occur. If the buyers are not willing to pay what sellers are asking, there is no transaction. Similarly, if sellers are not willing to accept what buyers are offering, no exchanges take place. When there are imbalances in agreement on price, such as when buyers are eager to buy and sellers are reluctant to sell, the price will rise or fall in search of balance. Ultimately, the only truth in the market is the last price as it represents the most recent agreement in value between the highest bidding buyer and the lowest asking seller. This ‘truth’ is very dynamic and continuously changes as buyers and sellers shift their perspective, new or sidelined buyers/sellers enter the market, and/or new events impact everyone’s perspective.
What often drives changes in price are the participant’s emotions as well as events affecting their emotions. News releases, earnings, personnel changes, even price-action itself etc. all change people’s emotional state regarding the value of a security. As traders emotions rage, significant imbalances and oversold/overbought conditions arise, creating amazing opportunities for others. Euphoric buyers and "greedy" sellers drive up prices, only to see it come crashing down moments later, leaving late buyers holding the bag and late sellers asking "why didn't I sell?". “Smart” buyers pull their bids as scared sellers race for the exits plummeting stock prices, only to have it rebound and sellers saying "why did I sell?". This cyclical nature of the market continuously repeats and creates opportunities for the 10% who are ready to act accordingly.
WHY INTENSITY MATTERS
Consider all the times you were stopped out only to have it immediately reverse. Wouldn't it make more sense to enter positions near the bottom instead of being stopped out? What about all the times you bought the top because you FOMO'd (Fear Of Missing Out) the trade and then it dumps? It happens all the time, you know it, I know it, be objective about it. If it happens all the time, isn't that the basis of a winning strategy? Buy fear, sell euphoria, manage risk, take profits, rinse & repeat - RD
Unsurpassed by other market events, moments of Intense Fear as well as Intense Greed typically represent the beginning of significant reversals and are often amazing opportunities for those who are ready. These opportunities provide maximum return with limited risk for both Long and Short intraday and swing positions. The Ideal Intensity Indicator (I^3), finds these opportunities in real-time on stocks that are worth trading. Using the Ideal Intensity Indicator with confirming setups can lead to long term consistency and profitability.
BUY FEAR, SELL GREED
Certainly you have heard this expression: “Buy Fear, Sell Greed.” But do you actually buy when it’s scary and sell when it’s euphoric? If you’re a 90% Trader, you don’t. You buy safe and sell scary, or worse buy euphoria because you don’t want to miss out, then sell when everything collapses, usually at the bottom. These random, inconsistent, and low probability trades are why you are losing money. Learning to buy when its ‘scary’ and sell when its ‘euphoric’ is greatly simplified with the Ideal Intensity Indicator. Combining I^3 with our high probability setups, signals, risk management and emotional controls taught in our learning center provides the foundation for success. Are you ready?