Trading Tip #12: Had a Bad Trade? Handle it Like a Bad Golf Shot.

Trading Tip #12: Had a Bad Trade?  Handle it Like a Bad Golf Shot.  It is Your Fault.  Deal With it Quickly and Always Move Forward.

tip 12One issue that holds back most new traders, and separates the good traders from the great traders, is the ability to move forward after a bad trade.  How many times have you heard someone say, “I lost money the market when it went the wrong way.  I should not have listened to my broker.  This guy said the stock would go up I am so pissed I listened to him, I actually meant to be long”?

As a trader, you need to own your trades.  No one has a gun to your head to put on a trade.  It is nobody else’s fault if you lose money.   When you are out talking to your friends about a good trade, do you then give credit to someone else?  No, of course not.  At those times, you are the superstar. Continue reading

Trading Tip #11 You Want to be a Trader? Do Not Paper Trade

Trading Tip #11 You Want to be a Trader?  Do Not Paper Trade.

Trader

There seems to be many programs for paper trading.  As Seen On TV “Backtest your strategies.” Almost every on-line trading system has this.  Very few strategies work all the time.  I address various Trading Styles in Trading Tip #9.  Unless you are in a college trading competition, I think paper trading is pointless.

There are many who might not agree with me.  Let’s take the past few trading days as an example. On 2/27/2013 the market was up over 200 points .  If you were paper trading, you would feel a sense of pride and, I am sure, at some point you would have said to yourself “I would have nailed it today.”  Now let’s back track to 2/25/2013 just a few days before when  when the market got slammed.  A paper trader would not feel like their guts were being ripped out. The feeling of trying to find the right place to sell.  The fear, hoping that it would not bounce back in their face. The over-whelming feeling of “when is this market going to stop going down?” Continue reading

Trading Tip #9 – Trading Styles: Do Not Have Just One

Trading Tip #9 – Trading Styles: Do Not Have Just One

David On Trading Floor

In the late 1980’s, my venture into the trading world began in the Gold pit on COMEX.  The first day was the Friday before Memorial Day weekend.  I walked in and noticed that being in the pit with a badge on was very different from stepping into it as a clerk to give your broker his position. With my heart beating out of my chest, I made my first trade. I bought one contract (100 oz.) and sold it a dime higher.  I made $10.  After commission, it was about $8.  I realized that, during the broker training practice sessions, everyone was a hero.  Once you had real money on the line, trading was decidedly different. Continue reading

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

Kick-Butt-swift-kickingThe day after getting your butt kicked can be one of the most important trading days of your career. I am not talking about the normal, or slightly above normal, butt kicking. I am talking about one of those days that you just got hammered for whatever reason. Maybe you were stubborn, thinking “the market has to come back.” Maybe you added to a bad position and it just kept going against you. Maybe you said, “I Hope” and she wasn’t around to hear you scream her name. Or maybe, like me, you got caught on the wrong side of a world news event driven market, and the market gapped against you. Continue reading

Trading Tip #6 Hit the bid –Take the Offer and Just Do the Trade!!!

Trading Tip #6 Hit the bid –Take the Offer and Just Do the Trade!!!

I was away from my desk today and I wanted to short NFLX.  So, I called one of my brokers and told them to sell  ( Short ) NFLX at the market and hung up the phone. NFLX was emotiontrading at 175. 25 and I waited for the email on my execution, knowing that it wouldn’t  be exactly there, but I had hoped that it would be close. The email came and, yes, I was filled at 173.46. I had to laugh for a moment because it was trading $176.00 when I got the email. In response to my request for times and sales, I received an email showing me that the order was placed at 9:35, along with a note from my broker saying maybe next time I should use a limit order*.  First off all, I called to place the order at 9:32.  3 minutes to fill an order in this market is an eternity. In the pit, if an order took 3 minutes to fill the clerk would have 3 as@holes and the broker would have 2 – by getting chewed out by the client.  And, most likely, the broker would have to adjust the client from money out of his own pocket. Continue reading

Trading Tip #5 – Never Add to a Losing Position. Except…

Trading Tip #5 – Never Add to a Losing Position.  Except…

Those of you who just read Trading Tip #4 – Being Able to Admit When You’re Wrong, there is a section that speaks about never adding to a losing position.  While this is true almost all the time, there is one instance when I find adding to a losing position can be part of the trading strategy. Continue reading

Trading Tip #4 – Being Able to Admit When You’re Wrong

Trading Tip #4 – Being Able to Admit When You’re  Wrong

trading4

I remember the last conversation with my ex-wife just before we started the divorce. I sat her down, looked into her eyes and I said, “I’ve spoken to all the mathematicians, and it is theoretically impossible for me to be wrong every time.”

As a trader, one thing I know I am good at and have no issues with is admitting when I’m wrong and then changing direction quickly. It is an essential quality for being successful. Continue reading

Trading Tip #3 – If You Hear the Word “Hope”

Trading Tip #3 – If You Hear the Word “Hope”

stock

THERE IS NO HOPE IN TRADING.  It is like I tell my executive coaching clients who trade – If your thoughts keep returning to “I hope it goes up” or “I hope it goes down”, GET OUT!!!  Get flat and take another look at your view of the market.  Hope is on a date with an old friend of mine and, trust me, it is not going well.  Too many traders are concerned about being flat and missing part of the trades.  Don’t be.  You can always get back in.  No one catches every part of a trade.  Being flat is the best and only way to think clearly, even if its just for a moment.  How many of you have been crushed in a down move by hoping the market would go back up or saying “ this market has to bounce“?  The most important thing about understanding market movements is that the market doesn’t have to do anything.  No one is bigger or smarter than the market, and if you think you are, in time you will be carried out like so many traders before you that you never heard about. Continue reading

Trading Tip #2 – Test and test often

Trading tip’s Rule #2 - Test and test often –

This goes for  the all types of traders, from the smallest to the largest. Once a position is established long or short, it’s best to test and test often. Let’s go with the long position for this example. Looking at the recent move in Facebook, let’s say that Trader one is a short-term day trader who likes to be flat by the end of the day, so he/she buys 500 Facebook shares at $27.75.  The stock moves to $28.  I would suggest testing the market by selling just 100 shares at $28.

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Trading Rule #1 – Leave your ego at the door.

IMG_0272As President of Sterling Commodities, part of our risk management for the Clearinghouse was to go over all of the traders accounts every night.  We needed to watch and analyze their trading patterns so that we could tell when it was time to talk to a trader and tell them to pull back or even take a few days off to regroup.  We were able to tell when traders were about to move to the next level of trading – both in size of positions and risk tolerance – and then give them guidance.  We helped them move to the next level. Continue reading