Thought of the Day (May 18, 2010)

Markets operate in an atmosphere of uncertainty. Trading signals are clear in the middle of the chart, but as you get closer to the right edge, you find yourself in what John Keegan, the great military historian, called “the fog of war.” There is no certainty, only odds.

Here you have two goals– to make money and to learn. Win or lose, you have to gain knowledge from a trade in order to be a better trader tomorrow. Scan your fundamental information, read technical signals, implement your rules of money management and risk control. Now you are ready to pull the trigger. Go!

– Alexander Elder, Come Into My Trading Room

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Thought of the Day (May 17, 2010)

Ego is another problem. Ego can be devastating. I firmly believe that if you have an ego when you’re trading the markets, you will potentially give back what you’ve made. Ego will keep you in when you’re supposed to get out.

– John Nofsinger, Investment Madness

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Thought of the Day (May 16, 2010)

A significant proportion of traders with whom I have talked make the lion’s share of their money from a relative handful of good market moves. Many of their trades are narrow winners, narrow losers, or total scratches. If, however, they fail to honor stops, those occasional big winners will be balanced by one or two large losers, which will undo many weeks of good trading. Although there may be room for a measure of discretion in entering trades, the use of discretion in honoring stops is a slippery slope that leads to trading ruin.

– Brett Steenbarger, The Psychology of Trading

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Thought of the Day (May 15, 2010)

It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.

– Jesse Livermore, Reminiscences of a Stock Operator

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Thought of the Day (May 14, 2010)

Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

Jesse Livermore, one of the greatest speculators of all time, reportedly said that, in the long run, you can’t ever win trading markets. That was a devastating quote for someone like me, just getting into the business. The idea that you can’t beat the markets is a frightening prospect. That is why my guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check. I am more scared now than I was at any point since I began trading, because I recognize how ephemeral success can be in this business. I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.

– Paul Tudor Jones, Market Wizards by Jack Schwager

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Thought of the Day (May 13, 2010)

Trading is a study of the market and oneself. The only limitation imposed on a trader is his or her own creativity and ability.

– Robert Rotella, The Elements of Successful Trading

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Thought of the Day (May 12, 2010)

Most people react differently when they’re under pressure. They tend to be more emotional or reactive. They tense up and judgement is often impaired. Many talented athletes can’t cut it because they choke when the pressure’s on. You could be a brilliant analyst but a lousy trader. Consistency is far more important than brilliance. Just strive for consistency in what you do and let go of the performance expectations.

– Linda Bradford Raschke, The Mental Aspect of Trading

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