Your highest leverage is studying the rules as a starting point, but spending much more time on the mental models — the psychology — behind rule deviation.
Sentiment is king. Price is queen.
Sentiment is perception. Doesn't matter if the perception is correct or wrong or being manipulated and pumped. However, when perception is backed by great fundamentals, the sky's the limit.
I am a non-traditional technical trader and also a long-term investor who does not just follow literally what is written in technical trading books. This will surely make you lose money. I have my own unique way of trading discretionary with technical.
For trading, I prefer day trading over swing trading. I prefer to know the result of a trade there and then and take the money and run. Start the next trading day with fresh data, and trade and close it there and then.
Having said this, it is too hard to day trade. Give up. Too many algorithms f...ing around retail traders with traps and stop-loss hunting. This is even worse when comes to indices Futures. Lose tons of money to the gambling habit caused by emotional roller-coaster ride I kept breaking my own reminders not to let emotion get into me as the system is cracked against you but so far failed miserably
Reminder to Self:
20 Habits of Wealthy Traders
Credit goes to http:// www. capital-moments.com/20-habits-of-wealthy-traders/
A few days ago, I read an article demonstrating what an author thought were the 20 habits of wealthy traders. Some I totally concurred with – others I was in total disagreement with – the last section of points I could understand but wasn’t totally convinced. Get the best traders in the world into interview rooms and ask them the same set of questions; you will usually get different answers. Although these answers will contradict one another; paradoxically none of these traders are wrong. It all depends on the strategy. Your actions should only follow your strategy. The measurement of success is not in the result but in the process of following your trading rules systematically.
1. Patient with winning trades and enormously impatient with losses
This is the main difference between most traders and long-term investors. Long-term investors gladly invite losses to their portfolio if they are confident that stocks will realize their inherent value. Whereas most traders – whether short-term or long-term – will cut losses quickly to manage risk and limit overall account loss.
2. Making money is more important than being right
As with anything in life, you will find that traders are on either side of this question. Personally, I believe they are of equal worth if one is trading their own account. In terms of practising trading as an ‘art’, traders will find being right is more important. For those managing large sums of money on behalf of others; making money will be more important.
3. View Technical Analysis (TA) as a picture where traders are lining up buy and sell
4.They know where they will exit for either a profit or loss before they enter every trade
This depends on the strategy. Value investors constantly calculate the intrinsic value of companies which fluctuates constantly. Therefore, their exit points are subject to change during a trade. This needs to be taken under consideration by Value investors. The rigidity of Trend trading doesn’t allow for room to change loss stops and exits for profits. However, this does limit the Trend trader because price will change whilst a trade is being executed. A benefit of Trend trading is the ability to have medium-to-wide stop losses, which will allow an investment instrument to incur a loss till a certain point before stopping out. Therefore, if the Trend trader is worth his gold, he will be accurate or very close to where he thinks the investment’s price will go. And so, the loss will most likely reverse and correct its position into a winning trade.
5. They approach trade number 5 with the same conviction as the previous for losing trades
6. They use naked charts
Some do. Some don’t.
7. They are comfortable with incomplete information
I concur. No one is omniscient.
8. Stopped trying to pick tops and bottoms a long time ago
True; however, Value investors have a specific target they desire to exit. Trend traders are the poster boy for number 8. Rule
9. Do not think of the market as expensive or cheap
I disagree. Most Value investors do because it is integral to their core trading systems. Trend traders can but are irrelevant to their trading systems.
10. Are aggressive with size when they are doing well and modest when they are not
True, but so do average and bad traders. Most of them implode because they over-leverage or over-extended their risk-gain strategy. * Mark Hanna – “This is not a tip; it’s a prescription. Trust me. If you don’t, you will fall out of balance. Glitch your differential and tip the f*ck over. Or worse yet. I’ve seen this happen: implode!” *Jordan Belfort: “No I don’t want to implode sir” *Mark Hanna: “No. No you don’t” (Wolf of Wall Street).
11. Realise the market will be open tomorrow
Totally concurred. *Warren Buffet “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years” (Sure Dividend 2016)
12. Never add to a losing trade, never
This is false. Average to great Value investors always buy more stock when it’s decreasing in value to average-down-cost of their holding. If their analysis is correct, then the stock will realise its internal value. Those stocks that were bought when prices were falling will now be perceived as a bargain
13. Judge their trading successes on anything but money.
Some do. Some don’t. Evidently… we are all unique.
14. Read about mobs and human psychology
Most traders and investors will come to realize that trading is mostly a game of human psychology. People create the market and so the market moves and thus is caused by people. Understanding human psychology is well-documented and proven to increase traders’ track records.
15. See themselves as market makers.
The big institutions that have enough resources can. The minor capital funds do not.
16. Practice reading the right side of the chart instead of the left.
Some do. Some don’t. Whatever works for you…
17. Have an edge in the market.
This is absolutely correct. The edge is what distinguishes the difference between average traders and great ones.
18. Determine position size based on risk; not round numbers.
Mostly agree; but either can be used to determine position size amongst many other processes.
19. Buy strong markets and sell weak markets.
Again, it depends on what one means by strong markets and weak ones. Value investors perceive the investment world in this way; therefore they agree to this rule. However, it is totally irrelevant to Trend traders.
20. Play the action, not the news