Great video on trading, psychology, probabilities, risk, and trade management. A must watch for anyone who is new to trading or is struggling. I like a lot of what this guy has to say. I have added a few of my favorite tidbits, along with a few of my own, below.
There are many great points in this video, but a few standout.
- Take care of risk and the rest will follow. Most traders will stumble into quite a few winning trades. It’s controlling the losers that makes all the difference.
- As you follow a plan you gain confidence, which is emotional capital. When you don’t follow a plan, you have no method so you will lose confidence, which means you lose emotional capital. Losing emotional capital makes it harder to stick to a plan/strategy and a vicious cycle begins.
- The “price risk” and “information risk” distinction is important. Amateurs prefer one, while pros prefer the other…and what type of risk you choice will significantly impact your trading.
- It only takes one trader, anywhere, to nullify your edge. The market is always a tug-of-war. You are taking a trade and adding to one side of the market, but another person or people can shift that balance in the other direction. This is why we must accept that losing trades are a constant in trading. We can’t forecast what other individuals will do at all times. We may have a perfect buying opportunity according to our method, but if someone decides they are going to start selling a big position today, that asset is going to feel the brunt of that increased selling.
- Your own psychology is the greatest hurdle to trading success. There are loads of great trading resources on this site and others, but most people’s psychology prevents them from succeeding anyway. Part of the psychological problem is that person blames others, not them self, and the cycle of poor performance continues.
- If you don’t have enough money to manage your risk effectively the markets and your own psychology will work against you.
- We all have a monkey on our backs. Learn what yours is.
- Losing is not bad. It is just part of trading. Get used to it. Get out of bad trades when you are supposed to and move on.
- Trading is just a series of data points. If you manage risk, even random entries can still produce a profit! (depending on your profit taking method/scaling out etc.)
- The outcome of any given trade is random, even if we know our strategy has an edge. While I win more than 50% of my trades, I don’t know the outcome of my next trade. This means we should not lie to ourselves or try to convince ourselves that any given trade is going to be a winner or loser. We can’t know. Let the trade play out according to the strategy.
- I am more of an all-in and all-out trader, but this webinar provides some good guidance on scaling out of positions.
If you interested in learning a complete method of swing trading stocks, including how to find trades, how to manage risk, where to enter and where to exit, then check out Cory Mitchell, CMT’s Stock Market Swing Trading Video Course. More than 12 hours of video show you how to swing trade efficiently, in less than 20 minutes a day.