All of us are in a position of having to pick and choose environmental information because we can’t be aware of everything at once. If you pick and choose market information on the basis of having to justify your beliefs, you are putting yourself at an extreme disadvantage. You will be excluding from your awareness information that may be more indicative of the consistency of the market and its potential to move in any given direction.
– Mark Douglas, The Disciplined Trader
Many books written about the stock market always remind you to paper trade, practice, practice. This I agree with, but paper trading is like having a practice fire drill, it is never quite the same as the real thing. However, the one point everyone seems to miss about paper trading is that those traders who can paper trade successfully in the first place already have a special gift. This gift will allow them to sit there all alone week after week with nobody to see, or even care about, the results, and not rush into a real trade impulsively.
– Tom Williams, The Undeclared Secrets that Drive the Stock Market
Integrity is the ability of a trader to trade with complete and uncompromising adherence to his or her virtues, beliefs, and personal trading methodology. Traders with integrity have the ability to enter into a trade with undivided attention, and are not distracted by what anyone else is saying or doing. They know that their trading methodology is completely valid.
People who trade from integrity are operating from a position of strength, free of fear, totally in charge of their mental environment. They will rigorously obey the rules they have developed for their trading methodology. Specifically traders with integrity are immune from what their vices, disempowering beliefs, and unconscious are telling them about the rational reasons the market is acting in a certain way. They will continue to trade within their trading methodology.
Quite simply, traders with integrity will be brutally honest at all times with themselves. They will always hold themselves responsible for their actions and beliefs, and will demand a strict code of personal conduct.
– John Hayden, The 21 Irrefutable Truths of Trading
Money management or risk control strategies are the most critical requirement for a successful trader. Without exception, every outstanding trader will tell you that it is the most important factor that determines your success. All traders starting out make many mistakes, and are constantly making learning distinctions. As these traders obtain good judgment, they will make many new learning distinctions.
Unfortunately, most new learning distinctions result in a loss of equity. Traders who have risk control strategies will be able to survive these errors. Without risk control parameters, the likelihood of losing a large percentage of trading capital will be overwhelming. The preservation of capital is a primary consideration.
– John Hayden, The 21 Irrefutable Truths of Trading
Emotional decisions are lethal in the markets. You can see a good model of emotional trading by going to a racetrack, turning around, and watching the humans instead of the horses. Gamblers stomp their feet, jump up and down, and yell at horses and jockeys. Thousands of people act out their emotions. Winners embrace and losers tear up their tickets in disgust. The joy, the pain, and the intensity of wishful thinking are caricatures of what happens in the markets. A cool handicapper who tries to make a living at the track does not get excited, yell, or bet the bulk of his roll on any race.
– Alexander Elder, Trading for a Living
The market is never wrong in what it does; it just is. Therefore, you as an individual trader interacting with the market — first as an observer to perceive opportunity, then as a participant executing a trade, contributing to the overall market behavior — have to confront an environment where only you can be wrong, and it’s never the other way around. As a trader, you have to decide what is more important — being right or making money — because the two are not always compatible or consistent with one another.
– Mark Douglas, The Disciplined Trader
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