This was the first podcast we had to take a break in the middle to scalp Doge! On Podcast #27, Greg, Bob, and Jerry discuss Dogecoin, the people’s currency, and discuss best practices for trading according to Unknown Market Wizards, by Jack Schwager.
Mental State of Mind: To facilitate the outstanding trades, you need to be doing nothing in between. I always ask myself: Am I in a state of readiness? Am I fully prepared? Am I wasting my financial capital and mental capital on subpar trades instead of waiting patiently for the real trade opportunities?
Consistent Profits in Trading: It is also virtually impossible to succeed at trading if you are dependent on trading profits to pay your living expenses. ….The moral is: Be sure you really want to trade. And don’t confuse wanting to be rich with wanting to trade. Unless you love the endeavor, you are unlikely to succeed. A lot of losing traders I have known thought they had to make money consistently. They had a paycheck mentality; they felt they had to make a certain amount every month. The reality is that you may go through long periods when you don’t make anything, or even have a drawdown, and then have a substantial gain.
Psychology: Don’t trade so large that fear dominates your trading. You want your decisions being driven by your prefrontal cortex rather than your amygdala. It’s so critical to avoid marginal trades because they waste monetary and psychological capital.
Have a Plan – Defining your trade management plan before you get into a trade is far preferable to doing so after you have placed the position. Why? Because before you are in the trade, you have the advantage of making decisions with full objectivity. Once you are in the position, you lose this advantage.
It was also the first time I ever wrote a trading plan. I did it mainly for my wife to convince her that it was a good idea to resume trading rather than to do something else.
The lesson is that to succeed in the markets, you have to find a methodology that you are comfortable trading. If there is anything in your approach that is uncomfortable, you need to figure out how to change it.
Get Good at Taking Losses – “A trader’s job is to take losses. A losing trade doesn’t imply you did anything wrong. The hard part about trading is that you can do the right thing and still lose money. There is not a direct feedback loop that tells you, “good job.” I only have control over the orders I place. I don’t have control over the outcome of trades. Whenever I place a trade, I think, “A year from now when I look back at the chart, will I be able to see in the chart the day and the price at which I took a position?” If the answer is yes, then it is a good trade, regardless of whether it wins or loses.”
Use Stops – People have difficulty in cutting losses because they are afraid of getting out of the trade and then seeing it go in their direction. It’s an ego thing. I was making the same mistake for years. I would get into a trade, put in my stop, and see the position trade at a loss for ages but without hitting my stop. But if you entered a trade and it went the wrong way, don’t be afraid to get out instead of waiting for that stop to be hit.
Conviction: I realized that I was in a position, hoping for it to work. The second I realized that I was hoping and not trading anymore, I immediately liquidated everything. That lesson has stuck with me to this day. I never want a position where I am hoping that it will work. I had to go through that experience to know the difference between a trade where I have full conviction and a trade where I am hoping. IF You Hope a Trade Will Work, Get Out If you find yourself hoping your trade will work, that is a sure sign that you lack conviction.
If you are hoping a trade will work, you are gambling and not trading.
Brandt’s motto is: “strong opinions, weakly held.” The implication is that you should have firm conviction when you enter a trade, but you should be quick to abandon that position if the trade moves against you.
You make your money in the sitting.” [Shapiro was referring to a quote in the book Reminiscences of a Stock Operator by Edwin Lefevre, whose unnamed protagonist is widely assumed to be based on Jesse Livermore. The specific quote is: “After spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!”]
Good traders would rather make money than be right
With Bitcoin shooting through the stratosphere in value over the last couple months, many are diving into the universe of cryptocurrencies. Many folks may not even know there are literally thousands of cryptocurrencies swirling about beyond Bitcoin. Some are serious endeavors designed to solve problems while others are simply jokes named after someone’s dog. In this post we discuss the second most popular crypto: Ethereum
We have owned some Ethereum off and on for several years now. In fact, at one point the price rose so high that Jerry paid off his car. But what is this Ethereum? How is it similar and different from Bitcoin? And can it rise to Bitcoin levels of value?