Wednesday, November 21, 2012

Lessons in Technical Trading

thekirkreport.com talks about mistakes in trading.
The report asked a question from its subscribers: "what is the most important thing you've learned about investing, trading, and/or the markets?"

Some of the lessons learned were:

  • Success takes longer than expected
  • That you must learn to trade and trust yourself and not to become so dependent on the opinions of others, which ultimately keeps you from becoming the best you can be
  • The very best profit opportunities occur in the midst of extreme emotional sentiment
  • Persistence and dedication to a daily routine is key
  • Developing an edge is the first step for trading successfully. Without that, disciplined trading will only make sure you gradually losing money
  • You have to respect the market even if you think it is under some kind of manipulation
  • Anything can happen. Trading is all about probabilities
There is more in the report which was mentioned earlier.
Dennis Gartman gives a set of trading rules. The basic themes are:
  • 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.
  • 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.
  • 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.
  • 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.
  • Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

4 comments:

Dinesh said...

Dear Sir,
Thanks for sharing. I think experience and simplicity are very important. The other good advise was with regards to independence. I would like to add that it is better to start small, test the water, adjust the style (if required) and move on.
Regards,
Dinesh

Dinesh Rishi said...

Developing an edge is the first step for trading successfully. disciplined trading will only make sure you gradually losing money

Sir can you plz explain a littel about this

"Without that,disciplined trading will only make sure you gradually losing money"

Rakesh Shethia said...

How can we differentiate between a normal trend and a trend forced upon.. i.e manipulated by a group of people. Similarly, how different would it be for such a trend to reverse. Latest example from you is Jet. Earlier one that I doubt is a rally in Tata motors that started from around Rs.139/-, and even Maruti. Your comments please.

Abhishek said...

Read Trading in the zone to get your answer