013231231X.pdf

if you are honest with yourself you might admit that accepting losses is actually easier than accepting gains, simply because it is much more familiar

“Expect gains; do not be surprised by them.”

Those words have rung in my ears since. This one comment sparked the honest realization that I viewed trading as a gamble rather than a controlled vehicle for consistent profits

I would say things like “playing with houses money” and “the trade is now risk free.” This mindset was not only wrong, but also very dangerous, in that when a reversal set in I was constantly not only giving back the houses money but also taking a draw through the initial risk. In hindsight, I was far too cavalier when I was in trades that were going in my favor. I needed to look at the unrealized gains not as house money but as my money and to count these gains as risk, just as I would the initial risk I had taken on the trade. When I finally embraced this, it changed my trading forever and dramatically increased the speed at which my equity curve rose

You may fall into the trap of increasing risk because a specific trade appeals to you more than another. Whenever you increase or decrease your risk levels, it is imperative to remain consistent for at least the next ten trades. Increasing risk on one trade, which may result in a loss, then subsequently reduc- ing risk once this loss occurs, will only increase the number of prof- itable trades needed to make up the previous loss. An ever-chang- ing risk value will lead to an erratic and ever-changing equity curve for your portfolio. Identify your appropriate risk levels and stick with them

. An effective phrase used often in trading says

from failed moves come fast moves.
The concept is simple. When so many are looking for the same move to occur, if this move does not transpire all those traders will be like the airline passengers heading for the exits simultaneously. This creates an incredible opportunity because so many traders must now reverse their positions, thus sparking a significant move that you can capitalize on.

Whenever I review any potential trade, regardless of the direction, before going any fur- ther I first ask myself where a stop should be in the event I am wrong and the trade does not work

at some point a trade that goes beyond your original stop won’t come back, but will instead inflict significant financial damage and erode your confidence level exponentially

8. Updates:
Any journal should also contain an update sec- tion in which you comment on the trade and relay any- thing you might be seeing or feeling while the trade is being managed. This section is critical for future growth as you recall what your emotions were at the time of the trade. In this section, you can update where and when the trade is ultimately closed and the gain or loss incurred

To assume these funds and their traders don’t know what the average Joe is doing, seeing, or feeling is an ignorant mistake. Traders at these mutual funds now prey on the basics of technical analysis to execute a better price point regardless of whether they are buying or selling. Have you ever been stopped out of a stock at a predefined level only to see it roar back with a vengeance after stopping you out? Did you feel like a sitting duck or that someone might have known exactly where your stop was? Well, would you be upset to know that probably both were true?

n late 2009, Fifth Third Bancorp had been consolidating under an angular descending downtrend for several months. On January 7, the stock broke above this downtrend and proceeded to pursue a multimonth rise. An anticipatory trader could have taken this trade ahead of the break, setting a stop below the previous November lows, while a reactionary trader could have moved in when the stock broke and closed above this line