Secret of Successful trading –II

Rule No. 7: Keep It Simple

I’ve found that the best trading systems are simple. It’s easy to understand why they work and it’s easy to follow their rules. The more complicated a system is, the more room for error there is. That’s probably why I’m such a fan of the PAC Trading System, which remains a very simple trend following strategy.

Rule No. 8: Trade Less, Not More

I see a lot of new traders who think they have to be in the market at all times. They also tend to think that every trade decision needs to be all-in or all-out. The truth is, there are times when the right trade is no trade at all and you have to wait for the market to show you where it’s heading. Trying to be all-in, all the time will lead to whipsaws that whittle away at your portfolio.

Rule No. 9: Focus on Fewer Stocks

Due to popular images of the trading world’s go-go culture, many people thinks that being a successful trader means frantically chasing hundreds of stocks. The truth is, most of history’s great traders – legends like Jesse Livermore, Gerald Loeb, and Nicolas Darvas – spoke often about the danger of trading too many stocks. For Chopad System traders, we focus on the 4-8 true market leaders. The big money is made in those elite leaders, so there’s no reason to be trading dozens of lesser-quality stocks.

Rule No. 10: See the BIG Picture and Follow the Larger Trend

For trend traders, it’s important to focus on the big trends in the market and in individual stocks. Getting too caught up in the intraday action can cause you to make poor, emotional decisions. Often times, the best traders only need to check the market once or twice a day. Some check it even less. When you find yourself getting rattled by the day-to-day market noise, switch to weekly charts or step away from the market altogether for a day or two. A big picture perspective is essential.

Rule No. 11: NEVER Stop Learning

The moment you think you’ve got it all figured out is the moment you’ve likely topped out. Great traders never stop learning, researching, and getting help from other traders. Though the general trading strategies that have been proven to work for decades will continue to work, the details are changing often and need to be adapted to. Be humble and don’t ever stop learning.

Rule No. 12: Don’t EVER Quit

You have to have patience, discipline, and perseverance to succeed at this game. Every trader will hit losing streaks and frustrating times. It’s during these times when the urge to quit or change strategies is at its highest. Don’t do it. If it was easy, everyone would be making millions trading. It requires hard work and mental toughness to be a successful trader and there will be times when you have to swallow your pride, buck up, and persevere even when you don’t feel like it. But remember, as Mike Ditka said, “You’re never a loser until you quit trying.”

Secret of Successful trading Part -I

I like to keep things simple. As Albert Einstein said, “Everything should be made as simple as possible . . . but not simpler.”

With that in mind, here is a list of 12 simple rules that I have found to be the key to successful trading. If you’re not getting the results you want as a trader, you’re breaking one or more of these rules.

Rule No. 1: Follow YOUR Dreams

The dream of being a successful trader, especially someone who trades for a living, is one of those “big” dreams that naysayers love to squash. Don’t listen to these cynics. There are too many examples of people who have started with very little and made fortunes trading. You can be certain they’re glad they didn’t listen to the naysayers. On the other side of the coin, make sure that you really enjoy trading before committing to it. All the great traders I know have a true PASSION for the game of trading. If you don’t have a passion for trading, you won’t last long.

Rule No. 2: Put Your Time and Energy into the Things You Can Control and Don’t Worry about the Things You Can’t Control

You must realize that you can’t control what the market, or a particular stock, does. All you can do is control your reaction to what it does. Focus all your effort on making good decisions based on what actually happens and don’t worry about trying to GUESS what happens next or beat yourself up over things that happened in the past.

Rule No. 3: Find the Trading System that Fits YOU Best

Guys like Warren Buffett make millions with value investing, guys like Nicolas Darvas made millions trend trading, and some guys make a living day trading. There is no “Holy Grail” trading strategy that magically spits out money. There are several different trading systems that “work” and each of these strategies will outperform others at certain times. You need to find the system that fits your personality best and stick with it. The new trader will go broke constantly changing their strategies and chasing different systems.

Rule No. 4: Protect the Money You Have with Proper Risk Management

Defense wins championships, in sports and in trading. That means protecting the downside first. I’m all for positive thinking, but to succeed as a trader you must always plan for the worst. You should never enter a trade without knowing exactly where you will exit it if it goes against you.

Rule No. 5: Give Yourself an Unfair Advantage

To succeed as a trader, you need to stack the odds in your favor and the only way to do this is to cut your losses quick and let your winners run. Successful trend traders can make a fortune hitting well below 50% winners. They do this by making sure that, over the long term, the profits on their winners are much larger than the losses on their losers. It’s such a simple strategy, but so many new traders fail to understand it.

Rule No. 6: Follow Your System’s Rules

Never trade on hunches, guesses, predictions, or emotions. Once you decide on the system that’s right for you, you need to follow its rules. Is there ever a time for discretion? Sure, but I like to say that discretionary decisions should be limited to 10-15% of your trades. If you’re making “exceptions” to your system’s rules more often than that, you’re heading down a destructive path.

Dennis Gartman’s 22 “Rules of Trading

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account.Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry.This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly,"reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far-more often than not, retracements happen... just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is often more important than an

understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty-five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when... and how

infrequently this rule may be invoked!