On days off in the markets, I often try to make time to reflect on lessons learned in
my recent trades. Here are some of my favorite trading lessons:
1. One of the lessons I've learned is that trading is a mirror of other elements of
my life. If I am behaving in an undisciplined way outside of trading, my trading
shows undisciplined behavior like not following stops. If I feel depressed about
something in my personal life, my trading observations will not pick up as many
opportunities as I cannot see the possibilities that I see when I am in a positive
frame of mind.
2. Treat every trade as both a potential loser and a potential winner. Know how to
tell the difference when you're in it.
3. Think positive. Have confidence in yourself. If you don't feel good about what
you're doing, change it immediately.
4. Never make a trade on a market that just completed a major move if the only reason
for making the trade is that you just saw a major move and missed it. To relate this
to trading, winning traders and losing traders experience the trading environment
differently. It makes them feel different and as a result their actions consistently
vary. In psychological terms, they interpret the market differently because they have
a separate belief system in the way that they see themselves relative to the stock
market.
5. Know When Not to Trade. This skill is just as important as knowing when to pull
the trigger. Part of being a great trader is being a keen observer of what a stock
is telling you.
6. Accept total responsibility for the results of your trading. Even if you
authorized someone else to trade on your behalf, it was you who made this decision -
nobody forced you. Remember losers always look for somebody else to blame. Winners
look to themselves particularly if they have to take a loss on some trades - as is
inevitable for all traders and all systems.
7. Don't trade for excitement or entertainment. Avoid the highs that come from quick
profits or the lows that can appear after losses. If you have a sound system it does
not matter whether any particular trade makes a profit or a loss. What matters is
that the probabilities over time are in your favor. You must remember that no system
is perfect, and prepare for losses along the way. You should measure yourself on
whether you followed your rules and executed your system, for both winning and losing
trades. The process of trading is much easier when you focus on execution of a
system rather than on whether each individual trade was right or not, because you
take your ego out of the process. This makes you more rational and less emotional,
which leads to better investment performance.
It is critically important to protect your psychological capital by not overtrading
or playing for excitement instead of profits. This can cause you to be emotionally
"drawn down", and then sit out, usually as a move just begins that could have been a
big opportunity. Yet you miss the new big trend because you were financially and
emotionally exhausted by overtrading in a tough market. As a result, you can't see
through the negative emotions because you feel beat up by the markets. Managing your
internal psychological state of mind is equally important as managing your financial
position.
The desire to buy at the low or sell at the high is not what will make you the most
money over time. More important is the psychological damage that comes from taking
too big of a loss or a long series of small losses. I unfortunately see too many
circumstances where a trader gets involved with a hot trading method after it has run
up, then takes the pain of the drawdown and gives up just before a run to a new high
in that method. While the system shows great overall performance, the trader shows a
good-sized loss. The usual cause of this is excessive optimism about getting rich
too fast, which leads the trader to put too much capital into each trade and thus
magnify the pain of the drawdown. You must position yourself to be able to still be
in the gain after a system's drawdown. So make sure you study the system's
historical drawdown tendencies, then multiply the worst drawdown by a factor of two
to determine the percentage of capital you could allocate and still handle a
worst-case drawdown, both financially and psychologically. In most systems, you
prefer to see maximum drawdowns no more than 20-25% from the peak in the equity
curve. So could you handle it if the drawdown was twice that (40-50%)? If this is
unacceptable to you, then you need to define a drawdown point based on past history
where you would be able to pull the plug on the system. If maximum drawdown were all
under 20%, you might say that if drawdown exceeded 25%, then you would pull the plug.
Just make sure you define your risk tolerance in advance, so that you avoid
emotional decisions in the heat of the trading process.
SUPPORT RESISTANCE
Nasdaq Composite 1375 1425
S&P 500 875 900
Dow Industrials 8200 8400
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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