8 Things To Learn as a Day Trader (ZT)# Stock
b*y
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“Self-control is so important. You have to conserve your assets. That’s
what insulates you from the downturns and gives you the ammunition to make
money.” This is a classic rule for traders, you need to be able to survive
the learning years in order to stay in this game for the long haul, you do
that by taking small losses so you can live to fight another day. You need
to protect your capital and emotional capital in choppy downtrending markets
in order to take advantage of the healthy markets.
“CIS discovered he had a talent for winning games. At 15, he says, he could
earn 400,000 yen a month gambling. One secret was identifying the machines
most likely to give bigger payouts. Another was being able to endure 13
hours at a time in smoke-filled and deafeningly loud pachinko parlors; he
had to play thousands of consecutive games to take advantage of the odds”.
You need to find an edge and exploit that edge and do it over and over
again. If you are day trader or a swing trader then you know that you have
to do a lot of trades to make a difference in your account for the year.
“That’s how he now plays the stock market. CIS says he bets wrong four out
of 10 times. The trick is to sell the losers fast while letting the winners
ride. For him, a well-played stop-loss is just about the most beautiful
trade there is.” It doesn’t matter how much research you do, how much
time you spend in front of your computer, how much you scrutinize your
entries, etc…you are going to be wrong half the times, one of the biggest
hurdles for beginning traders is accepting that fact and that’s when they
get in trouble. Risk management is everything.
“Some people can do it, some can’t,” he says with a shrug. But the game
taught a bigger lesson: when to cut and run. “I was a pretty confident
player, but just like in the real world, the more opponents you have, the
worse your chances are,” he says. “You lose nothing by running.” You don
’t have to be in the game all the time, the market might be open 5 days a
week but that does not mean it is open for you to extract money from it 5
days a week, many times sitting on sidelines is the best thing you can do as
a trader.
“He found success after a friend gave him a piece of advice: Forget the
fundamentals. CIS doesn’t subscribe to the Nikkei or any other newspaper.
Nor does he scrutinize earnings reports or parse central bank statements or
spend much time looking at moving averages or other price chart patterns
normally associated with technical trading.” TUNE OUT THE NOISE and figure
out what works and what is important within your time frame, you figure out
what is important within your time frame not by reading books from the 40’
s,50’s 60’s etc..but by studying what is working now based on your own
work.
If there’s one basic principle, he says—repeatedly and slowly, as if
instructing a child—it is this: “Buy stocks that are being bought, and
sell stocks that are being sold.” Many made fun of this quote by CIS but
this is not his quote, this was one of the famous quotes of one of the most
successful hedge fund managers-Paul Tudor Jones, not so funny now. They are
different ways to make money in the market and this is one of them, and yes
it can be that simple, trust me. However many people want to believe that
it has to be complex and proprietary for something to be valid or work, but
it is all a gimmick, making your strategy complex and calling it proprietary
is a marketing scheme, makes it more sellable.
That’s more profound than it sounds, according to Hersh Shefrin, professor
of behavioral finance at Santa Clara University in California and author of
Beyond Greed and Fear, a 2007 book about the role of psychology in investing
. The human mind is hard-wired to bet on reversals, Shefrin says. “If you
can get yourself out of that mindset and bet against the crowd, who act
instinctively, then you have an opportunity to make money,” Shefrin says.
Again this is pretty much what Paul Tudor Jones said in his Market Wizards
Book, if you think about it for a while you will get it and even build a
scan out of it, here is what he said; “We have tested every system under
the sun and, amazingly, we have found one that actually works well. It is a
very good system, but for obvious reasons, I can’t tell you much more
about it. What type of realm does it fall into: contrarian? trend following
? Trend following. The basic premise of the system is that markets move
sharply when they move. If there is a sudden range expansion in a market
that has been trading narrowly, human nature is to try to fade that price
move. When you get a range expansion, the market is sending you a very loud,
clear signal that the market is getting ready to move in the direction of
that expansion.”
“Now that he has more money, there’s no choice but to hold positions
longer, because shifting such large sums in and out of the market influences
prices.” For all you aspiring money managers who’s interest is not just
gathering assets but to outperform the market then realize that the more
money you trade the hardest it will be. Having too much money to trade is
one of the biggest hindrance to a money managers performance.
what insulates you from the downturns and gives you the ammunition to make
money.” This is a classic rule for traders, you need to be able to survive
the learning years in order to stay in this game for the long haul, you do
that by taking small losses so you can live to fight another day. You need
to protect your capital and emotional capital in choppy downtrending markets
in order to take advantage of the healthy markets.
“CIS discovered he had a talent for winning games. At 15, he says, he could
earn 400,000 yen a month gambling. One secret was identifying the machines
most likely to give bigger payouts. Another was being able to endure 13
hours at a time in smoke-filled and deafeningly loud pachinko parlors; he
had to play thousands of consecutive games to take advantage of the odds”.
You need to find an edge and exploit that edge and do it over and over
again. If you are day trader or a swing trader then you know that you have
to do a lot of trades to make a difference in your account for the year.
“That’s how he now plays the stock market. CIS says he bets wrong four out
of 10 times. The trick is to sell the losers fast while letting the winners
ride. For him, a well-played stop-loss is just about the most beautiful
trade there is.” It doesn’t matter how much research you do, how much
time you spend in front of your computer, how much you scrutinize your
entries, etc…you are going to be wrong half the times, one of the biggest
hurdles for beginning traders is accepting that fact and that’s when they
get in trouble. Risk management is everything.
“Some people can do it, some can’t,” he says with a shrug. But the game
taught a bigger lesson: when to cut and run. “I was a pretty confident
player, but just like in the real world, the more opponents you have, the
worse your chances are,” he says. “You lose nothing by running.” You don
’t have to be in the game all the time, the market might be open 5 days a
week but that does not mean it is open for you to extract money from it 5
days a week, many times sitting on sidelines is the best thing you can do as
a trader.
“He found success after a friend gave him a piece of advice: Forget the
fundamentals. CIS doesn’t subscribe to the Nikkei or any other newspaper.
Nor does he scrutinize earnings reports or parse central bank statements or
spend much time looking at moving averages or other price chart patterns
normally associated with technical trading.” TUNE OUT THE NOISE and figure
out what works and what is important within your time frame, you figure out
what is important within your time frame not by reading books from the 40’
s,50’s 60’s etc..but by studying what is working now based on your own
work.
If there’s one basic principle, he says—repeatedly and slowly, as if
instructing a child—it is this: “Buy stocks that are being bought, and
sell stocks that are being sold.” Many made fun of this quote by CIS but
this is not his quote, this was one of the famous quotes of one of the most
successful hedge fund managers-Paul Tudor Jones, not so funny now. They are
different ways to make money in the market and this is one of them, and yes
it can be that simple, trust me. However many people want to believe that
it has to be complex and proprietary for something to be valid or work, but
it is all a gimmick, making your strategy complex and calling it proprietary
is a marketing scheme, makes it more sellable.
That’s more profound than it sounds, according to Hersh Shefrin, professor
of behavioral finance at Santa Clara University in California and author of
Beyond Greed and Fear, a 2007 book about the role of psychology in investing
. The human mind is hard-wired to bet on reversals, Shefrin says. “If you
can get yourself out of that mindset and bet against the crowd, who act
instinctively, then you have an opportunity to make money,” Shefrin says.
Again this is pretty much what Paul Tudor Jones said in his Market Wizards
Book, if you think about it for a while you will get it and even build a
scan out of it, here is what he said; “We have tested every system under
the sun and, amazingly, we have found one that actually works well. It is a
very good system, but for obvious reasons, I can’t tell you much more
about it. What type of realm does it fall into: contrarian? trend following
? Trend following. The basic premise of the system is that markets move
sharply when they move. If there is a sudden range expansion in a market
that has been trading narrowly, human nature is to try to fade that price
move. When you get a range expansion, the market is sending you a very loud,
clear signal that the market is getting ready to move in the direction of
that expansion.”
“Now that he has more money, there’s no choice but to hold positions
longer, because shifting such large sums in and out of the market influences
prices.” For all you aspiring money managers who’s interest is not just
gathering assets but to outperform the market then realize that the more
money you trade the hardest it will be. Having too much money to trade is
one of the biggest hindrance to a money managers performance.
