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Losing is Part of the Game The great traders realize that losing is an intrinsic element in the game of trading. This attitude is linked to confidence. Because exceptional traders are confident that they will win over the long run, individual trades no longer seem horrible; they simply appear inevitable.
There is no more certain recipe for losing than having a fear of losing. If you cant stand taking losses, you will either end up taking large losses or missing great trading opportunities – either flaw is sufficient to sink any chance for success.
#knowledge : Dont be pappu in stock market…
#Knowledge : Dan Zanger’s Top 10 Rules for Trading :
1. Make sure the stock has a well formed base or pattern.
2. Buy the stock as it moves over the trend line of that base or pattern and make sure that volume is above recent trend shortly after this “breakout” occurs. Never pay up by more than 5% above the trend line. You should also get to know your stock’s thirty day moving average volume.
3. Be very quick to sell your stock should it return back under the trend line or breakout point.
4. Sell 20 to 30% of your position as the stock moves up 15 to 20% from its breakout point.
5. Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly.
6. Identify and follow strong groups of stocks and try to keep your selections in these groups
7. After the market has moved for a substantial period of time, your stocks will become vulnerable to a sell off, which can happen so fast and hard you won’t believe it. Learn to set new higher trend lines and learn reversal patterns to help your exit of stocks.
8. Remember it takes volume to move stocks, so start getting to know your stock’s volume behavior and then how it reacts to spikes in volume. You can see these spikes on any chart. Volume is the key to your stock’s movement and success or failure.
9. Many stocks are mentioned in the newsletter with buy points. However just because it’s mentioned with a buy point does not mean it’s an outright buy when a buy point is touched. One must first see the action in the stock and combine it with its volume for the day.
10. Never go on margin until you have mastered the market, charts and your emotions. Margin can wipe you out.
# knowledge : Are you Addicted to trading ?
Whether we admit it or not, many of us are lured into the world of trading because of the potential to make big money. There are a few ways that you can get over your addiction to trading.
1. Leave trading for few days
Leave your trading desk for a while and treat yourself to a nice couple of days, a week, or a month and go for vacation in some remote area where there is no internet connectivity or go out and play a sport, Whatever you do, just be sure to give yourself time away from the charts.
Just like an elite athlete, you need time to rest too. This will give your mind some time to recover from market stress and help you come back to trading refreshed and full of vigor.
2. Keep a journal
By having a trade journal which details all your ideas, thoughts, and actions, it will be easier for you to see if you have been trading too much.
3. Know your limit
Set a maximum trading loss. It may be anywhere between 1-3% per day. Just set a concrete percentage of your account as your limit. It will help you exercise control over your trading which is something that those who have an addiction do not have.
“Volatility scares enough people out of the market to generate superior returns for those who stay in.”
#knowledge : Discipline Why it is very important?
Discipline was probably most frequent word used by the exceptional trades that I read. There are two reasons why discipline is critical. Understand That You Are Responsible Its a prerequisite for maintaining effective risk control. You need discipline to apply your methods without second guessing and choosing which trade to take.
A final word, remember that you are never immune to bad trading habits – the best you can do is to keep them latent. As soon as you get lazy or sloppy, they will return !
Trading is trend and price based, and not opinion based. This means that if you buy stock at Rs 100, and then the price falls to Rs 95 you can take your loss and square off your trade. This is one common quality of successful traders.
In trading you should remember Churchill’s words,
‘You have to lose many a battle to win the War’.
Along with that one should also remember word of George Soros,
“It’s not important whether you are right or wrong, it more important how much you lose when you are wrong and how much money you make when you are right”.
This requires you to square unfavorable trade, and to pyramid your profitable ones. In trading, everything else is illusion and hope, the sole reality being a price.
The reality is that you could not trade without emotion, and when you understand this and the role that emotions play in your decision making you would not want to trade without emotions.
for this you need to understand How your Brain Works
The main ‘controllers’ of emotional memories in our brains are the amygdala and the hippocampus.The hippocampus plays a major role in the forming and storing of memories whereas the amygdala is the controller of our emotions.
You need an emotional factor in decision making to appreciate possible outcomes of a decision. Most real life decisions cannot be based entirely on logic as the information that we have is usually incomplete or ambiguous.
You need to experience your emotions, accept them and use them in your trading.
For example, there may be a feeling of fear on entering the market, because your last trade went into loss. However, if there is a good trading opportunity based on your trading plan then the effective action would be to take the trade, even though you have the feeling of fear.
Emotions bring an urge for action but we do not have to take that action. So as a trader your work should be on managing your emotions not to ignore.