Behavior Modification- Correct knowledge and the ability to change behavior are the most important parts of successful trading.
- It has taken years to understand that being wrong is what trading is all about.
- Trading is not taking long to look at a trade.
- Losing never stopped her from staying with her plan as she knew how to lose small and go with her program.
- If you can't EXECUTE in getting in, you sure can't execute to get out.
- A trained trader understands success as "You lose good and you're wrong small."
- Learn from others' mistakes, and it is cheaper than learning from your own mistake
- In your trading you will find you do not ever control the market but only your position
- You can stop (remove) your position wherever YOU want!
- I have often said the BIG money is on the surprise side.
- The BIG LOSERS are on the familiar side or the popular side of a trade. I call that the
expected side. - The big mistake made by traders is thinking and expecting trading to be a favorable game. Trends both short- and long-term do exist but not 100% of the time.
- The correct way to control positions is to only hold them once they prove to be correct. Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad.
- Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct. You decide what is correct according to your plan.
- You never want to be in a position that is never proven correct. By making the market prove you correct in order to hold a position is acknowledging that trading is a losers' game and not a winners' game.
- What makes this strategy more comfortable is that you must take action without exception if the market does not prove the position correct. Most traders do it the opposite by doing
nothing unless they get stopped out, and then it isn't their decision to get out at all -- it is the market's decision to get you out. Over time it has proven to be the
rule which keeps the losses small and keeps a trader swift and fast to take that loss.
- By using the rule properly, you are productive and don't have to face the demoralizing effect of the market when you have a proven wrong position. This enables you to continue to trade with the proper frame of mind. You are more objective in your trading this way than letting a negative reinforce your thinking. This way you only let good trading reinforce your thinking and actions.
- Trading is a losers' game. He who loses best will win in the end!
- Trading is not gambling! Treat it as a business where you only want the best merchandise for the shortest possible time in order to have the maximum profit with the least possible chance of failure.
- The price action must confirm the position or get out quick. What I have done in trading is to enter a position and have a chart position that is a good spot to exit if the price moves adversely. It would be the first 15-minute high (resistance) and low (support), if it were violated adverse to my position.
- In trading most of you have a greater chance of being wrong than right! Trade accordingly . . . which means expect the limit (being wrong more likely) in your trading.
- You must trade in the long run! So what is a trader to do in a losing game? You must trade in the long run! How can you trade in the long run? Only way I know is that you must keep your losses small and take more small losses than small winners to come out ahead. This often means washing a position for the sake of being able to keep in the game.
- The theorem now is to assume your position is wrong until the market proves what you
positioned is correct. Keep your losses quick and small. Don't ever let the market tell you
you're wrong. Always let the market tell you when your position is correct. - It is your job to know you are wrong and not the market's job.
- It's okay to be wrong small but never okay to be wrong big if you expect to trade in the long run.
- Learn to be wrong, fast.
- Without a correct method to press your correct positions, you will never recover much beyond your losses. You need rule two to ensure you have a larger position when you are correct.
- Rule 2 must be used if you expect to make money in the long run. Your validation of
how you add is according to your trade plan, and a day-trading plan is certainly going to be geared for the quick profit so why shouldn't you have your biggest position to work with from the start? Right or wrong, you are going to use Rule 1 to protect at all cost.
- I use to watch a very good trader put a big position on and take it off until it proved to be correct. He made good trades and ended up with bigger gains by doing it that way than by adding after being proven right.
- It is understood that you want to have a larger position when correct.
- These two rules are to give you the long-term ability to continue to trade with the least amount of drawdown and the best possibility of making the most money in the long run. Huge drawdown is the critical reason some traders go out of the business.
- Experience has proven these rules a necessity in survival and reaching your objective of making the most return with the least amount of risk.
- You will become the best trader you can be by being wrong small, not right small!
Rule #1In a losing game such as trading, we shall start against the majority and
assume we are wrong until proven correct! (We
do not assume we are correct until proven wrong.) Positions established must be reduced and removed until or unless the market proves the position correct! (We
allow the market to verify correct positions.)
Rule #2
Press your winners correctly without exception.
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