Tradingcitat

Mr. Market has a great knack for turning even the most polished of veteran chartists into incorrect fools.

Never risk more than 1% of your total equity in any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical.

We use technical analysis not because we think it means something, but because other people think it means something. We are always looking for market participants to take us out of a trade, and in that sense, knowing the technical points at which people are likely to be buying or selling is helpful.

A great company could be a terrible investment if its price has already more than discounted the bullish fundamentals. Conversely, a company that has been experiencing problems and is the subject of negative news could be a great investment if its price decline has more than discounted the bearish information. Fundamentals are not bullish or bearish in a vacuum, they are bullish or bearish only relative to price.

To succeed as a trader, it is absolutely necessary to have an edge. You can’t win without an edge, even with the world’s greatest discipline and money management skills. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.

I started tasting success when I developed my own successful methodology and this was a slow gradual process that took years of research and trading experience. I also read just about every book I could find on the markets and successful individuals. Out of the hundreds of books that I read, there were probably no more than ten that had a major influence on me. However, I don’t think there is no such thing as a bad book, it’s still worthwhile. Sometimes, one sentence can even change your life.

Most often, traders have four fears. There’s the fear of being wrong, the fear of losing money, the fear of missing out and the fear of leaving money on the table I found that basically, those four fears accounted for probably 90% to 95% of the trading errors that we make. Let’s put it this way: If you can recognize opportunity, what’s going to prevent you from executing your trades properly? Your fear. Your fears immobilize you. Your fears distort your perception of market information in ways that don’t allow you to utilize what you know.

We know that the random element in the market represents at least 40 to 60 percent activity. Therefore, it’s not logical to look at every tick or to think that every tick or every chart formation has meaning. They don’t. There are too many traders trying to look at the markets from too stringent an analytical viewpoint. Most of what happens in the markets is meaningless. Why try to interpret every little movement, every little reversal, every little tick? In trying to do too much, they’re actually paying too much attention to the market. You have to keep a distance from the market. Only then will you have the psychological resources to let your profits ride. You won’t be looking at every tick and interpreting it in a fearful way.

We don’t look at data neutrally, that is, when the human eye scans a chart, it doesn’t give all the data points equal weight. Instead, it will focus on certain outstanding cases. It’s human nature to pick out the stunning successes of a method and to overlook the day-in, day-out losses that grind you to the bone. Thus, even a fairly careful perusal of the charts is prone to leave the researcher with the idea that the system is a lot better than it really is.

We typically trade our beliefs about the market and once we’ve made up our minds about those beliefs, we’re not likely to change them. And when we play the markets, we assume that we are considering all of the available information. Instead, our beliefs, through selective perception, may have eliminated the most useful information.

Is not some magical source that is the key to the markets, as most people believe. The metaphor of the “Holy Grail” ………….is all about finding yourself.

More importantly, if you cannot accept that losses will occur, then you cannot accept a good trading system that will make a lot of money in the long run but might lose money 60 percent of the time.

Most of traders lose because they don’t have a winning strategy. Apart from this even among those traders who do, many don’t follow their strategy. Trading puts pressure on weaker human traits and seems to seek out each individual’s Achilles’ heel.

To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. In a sense, they generally are correct. In trading, however, the person who can easily admit to being wrong is the one who walks away a winner. Besides trading, there is probably no other profession where you have to admit you’re wrong. In trading, you can’t hide your failures. Your equity provides a daily reflection of your performance. The trader who tries to blame his losses on external events will never learn from his mistakes. For a trader, rationalization is a guaranteed road to ultimate failure.

You get recession, you get stock market declines. If you don’t understand that’s going to happen, then you are not ready and you will not do well in the markets.

I think you have to learn that there’s a company behind every stock and there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.

Everyone has the power to follow the stock market. If you made it through fifth grade math, you can do it.

If you make a bad trade and you have money management you are really not in much trouble. However, if you miss a good trade there is nowhere to turn. If you miss good trades with any regularity you’re finished.

Most private traders on a losing streak keep trying to trade their way out of a hole. A loser thinks a successful trade is just around the corner, and that his luck is about to turn. He keeps putting on more trades and increases his size, all the while digging himself a deeper hole in the ice. The sensible thing to do would be to reduce your trading size and then stop and review your system.

A beginner never writes down a plan because he has nothing to write. He is having too much fun chasing hot tips and trying to make a quick killing. Even if he wanted to write, he wouldn’t know where to begin. A serious amateur or a semi‐pro who writes down a plan, including money management rules, is on his way towards the expert level.

I have stated before that whenever your worst fears are not realized about a trade and the market is letting you out better than you expected, it is not just luck. Rather your position is most likely correct and should not only be held but perhaps added to.

Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself.

Maximize the good, minimize the bad, and continually forgive yourself.

Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong, not taking the loss, that is what does the damage to the pocketbook and to the soul.

I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.

The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.

Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting.

Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.

If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Don’t focus on making money; focus on protecting what you have.

Most traders take a good system and destroy it by trying to make it into a perfect system.

How did Berkshire’s track record happen? If you were an observer, you’d see that Warren did most of it sitting on his ass and reading. If you want to be an outlier in achievement, just sit on your ass and read most of your life. But they fire you for that!

Experienced traders control risk, inexperienced traders chase gains.

Don’t overestimate the skill and wisdom of professionals.

Show me a good loser and I’ll show you a loser.

Great traders do their best work when they are not trading; unsuccessful traders do not work when they are not trading.

I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough.

To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

A theme I have found in my research is that persistent uptrends rarely end abruptly.

If you’re the smartest person in the room, you’re in the wrong room. Success is, like so many things in life, contagious.

Discipline comes from confidence, confidence comes from methodologies that work.

Investing is the intersection of economics and psychology. . . . The economics – the valuation of the business, is not that hard. The psychology — how much do you buy, do you buy it at this price, do you wait for a lower price, what do you do when it looks like the world might end, those things are harder. Knowing whether you stand there, buy more, or something legitimately has gone wrong and you need to sell, those are harder things. That you learn with experience.