Trading Basics

By | February 27, 2014
  • The market is not physical. It’s an amalgamation of the mindset of all trading participants. The daily tug-of-war between the bulls and the bears reveals what they are thinking on a daily basis. Make sure to look at the market’s close in relation to the session high and low.
  • Never buy just because the price is low, or sell just because the price is high. Never average a losing trade. Don’t become impatient with the market. Always have a good reason for initiating every trade. Remember, the markets are always right.
  • Traders need to listen to the market. To listen effectively to the market, traders need to know and pay attention to their trading methods, but also pay just as much attention to themselves as they pay to their charts and the market. The trader’s challenge is this: Learn who you actually are, and then consistently and consciously develop the qualities that allow you to trade well.
  • As traders, the more we can detach ourselves from the emotions of hope, greed and fear, the better our chances for trading success. Why are there hundreds of good technical analysts but few good traders? Because they need to spend more time on their personal psychology than their analytical methodology.
  • “If I had eight hours to chop down a tree, I’d spend six hours sharpening my axe.”–Abraham Lincoln. I like this maxim, because it is similar to trading: Research and learning are very important. Preparation for trading takes much longer than executing and watching the trade.
  • The market has far more patience than the majority of traders. There is an old saying that the market will do whatever it takes to drive the largest amount of traders crazy. Trends can persist as long as there are traders fighting them. Don’t fight the tape.

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