Wednesday, May 11, 2016

Only a fool accepts widely held trading maxims

Trading maxims that are treated as gospel, but nobody actually investigates their accuracy.

Why do we implement them into our trading plans without investigating? 

It is because we are sheep, and it's easier to be a follower.

Successful traders think like wolves and never follow the herd. In fact, they avoid the herd like it's the plague.

Last summer I realized I had spent my entire trading career as a sheep in wolves clothing when it came to risk management.

For years I had steadfastly held on to the belief that you must get 2:1 on every single trade. After getting stopped out of a number of trades that initially went my way I decided to investigate the 2:1 mantra.

My research was enlightening and totally changed my attitude towards risk management and probability trading. It showed that had I taken on 1.3:1 risk instead of 2:1in rangebound markets, I would have increased my profits and win rate.

I am no longer mislead by this false risk management "truth".

Let this be an important lesson. Never accept strategies that the herd adopts and investigate everything, no matter how nice it sounds.


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Thursday, April 28, 2016

It's the small wins that hurt

This is what holds many traders back.

The small wins.

Yet we love to take those small wins, and avoid small meaningless losses like the plague.

We are afraid of losses. It doesn't matter it it is big or small, that L is scary.

It's all about the fear of the loss.

Here is the rub: the fear of the loss is always worse than the loss itself.

Losses don't hurt as bad as you think.

Remember what it was like getting a shot when you were 10 years old? That drive to the doctor was terrifying. But then you turn your head, feel that little jab, and it's over and you wonder what you were so scared about.

Trading losses are the same.

Not only are losses not so bad, but often it means you are trading correctly.

I embrace small losses.

The reason is small losses combined with big wins means you are doing something right. On the other hand, small wins mean you are doing something wrong.

It's the small wins that hurt.




If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com

Saturday, April 16, 2016

Don't choose unhappiness over uncertainty

It's a flaw in our brilliant minds and one that afflicts most traders. It's a big reason why 90 percent of traders fail.

I'm watching one of my students trade a few weeks ago and he keeps taking these ridiculously small wins. Over and over again, he takes these small .3R gains only to watch the stock run without him. I don't say a word and just watch.

He is in agony.

I mean it looks like he has literally been slapped in the face. Finally I ask him why he keeps taking these small losses.

His response is priceless (actually it's costly):

I don't know what is going to happen so I'm protecting my profit.

And there you have it.

We are wired to choose unhappiness over uncertainty.

This novice trader knows he can't succeed continually taking these small wins since two regular size losses will wipe them all out. That's why he's unhappy about it. Yet he can't control himself.

He's inflicted with the uncertainty disease, feeling more discomfort with uncertainty than unhappiness.

Fight your programming and embrace uncertainty.

It's the only way you succeed.

Uncertainty is the way.





If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com

Monday, April 04, 2016

Subtract Your Way To Trading Success

Swing Trading Master
So you know about swing trading breakouts . . . fantastic. You can make a lot of money trading those.

So you know about stochastics . . . that's great. Extreme conditions lead to extreme profits.

So you trading using Fibonacci retracements . . . awesome. I know a guy who makes a killing off this mysterious phenomena.

So you know about trading options . . . brilliant. There are some rich options traders.

So you know how to trade divergences . . . excellent. In 2008 this style was a personal gold mine.

So you know how to trade multiple timeframes . . . magnificent. My buddy kills it by looking at three different time frame charts.

So you know how to use Level 2 . . .superb. Lots of money can be made gaming the algos.

So you know how to trade breakouts using options when stochastics are oversold, while analyzing Fibonacci retracement levels when there is a divergence, everything aligns on multiple timeframes and level 2 shows support.

WTF?

You know a lot of things, but you don't know anything.

Master a few things by subtracting your way to success.




If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com.

Thursday, March 31, 2016

Define yourself as a trader

We can choose to define ourselves as traders by the trades we take.

This is not about the money we make.

Rather it's the place within the setup that we enter.

Do you require more confirmation, content to give up some gain in exchange for safety?

Or do you jump in early, aggressively jumping in pre-breakout in order to maximize every inch of the trade?

One is not better than the other.

However, you must know which type of trader you are and adjust your trading style, risk management and expectations accordingly.

Define yourself as a trader.



If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com.

Wednesday, March 23, 2016

Prepare for the worst and the worst Martin Shkeli joke you ever heard

Martin: I have a horrible migraine. Prison guard: A bottle of Advil is $750,000
It's easy to lose sight of the dangers of trading when things are going well. A few good trades and you are invincible.

But it only takes one bad trade to wipe all the profit away.

Anybody remember KBIO?

A novice trader shorted the $2 stock. The next day it gapped up eight hundred percent. His account went from plus $36,000 to -$107,000 in one night. 

In twenty-four hours his life changed to the point of cowardly begging for money on social media.

He should have planned like a stoic and practiced premeditatio malorum, translated as a premeditation of evils.

In other words, prepare for the worst.

If the above mentioned KBIO trader had planned like a stoic, he probably would not have taken that trade or he'd have at least position sized in a way that protected his account. 

I know what you are thinking: that's quite the negative attitude. 

Living as a stoic does not mean you are a negative person.

Think positively but prepare for the worst while planning for success.



If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com. 

Saturday, March 19, 2016

It starts with one: habits, excellence and 112 push-ups

Aristotle said excellence is not an act, but a habit.

What he was telling us is that excellence does not begin fully formed, but builds over time through habit. Excellence does not start excellent.

Dream big, but start small.

With one.

At the beginning of the year I told a skeptical friend that by year end I would do 300 pushups without stopping.

He shook his head and said "nope", so I decided to prove him wrong.

As a symbol and to get me started on a routine, I did one pushup (one armed Rocky style).

I woke up on day two and did 10.

I decided I would add only 1 or 2 everyday the second I woke up.

As of March 18th I am currently at 112 pushups and a habit has formed.

This new habit is leading me to my goal of excellence.

Aristotle would be proud.

Leave a comment if you can see how this related to trading.




If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com.