Start Here: Top 20 Posts

I went back and tried to pick out the best 20 posts that new readers can start with when coming to this website. I will be permanently placing them at the top right sidebar.

Top 20 Posts

Let me know if I am missed an article that you believe should be on this list.

Could you Trade Full Time?

I get this question often and always offer the same answers to allow the person to determine if they can trade full time. I don’t trade full time and I am not sure if I ever will because I am great at what I do: trend trade longer time frames.


Take this quick quiz and honestly determine if you are built to trade full time:

  • Are you properly capitalized?
    I wouldn’t suggest anyone start to think about trading full time until they have at least six figures that can be used solely for trading. Living expenses must come from other income or saved funds. Without six figures (and the more then better), I suggest you continue to build your stake.
  • Are you a successful part time trader?
    Why do you think you can succeed being a full time trader if you haven’t made money as a part time trader? Have you built your own stake to six figures trading part time? If so, you pass this question with flying colors.
  • Have you developed a system that works?
    Does your system have a positive expectancy? Have you back tested the system (I don’t hold too much weight to this question)? Do you understand position sizing and do you implement it properly so you don’t blow-up with one or two trades?
  • Does your system offer enough opportunity?
    Without opportunity (multiple trading signals per day/ week), you will not be able to achieve your system’s expectancy. A lack of opportunity may skew your results and turn your anticipated positive expectancy to a negative expectancy and cause you to go broke.
  • Can you handle your emotions?
    How do you handle your emotions now with longer term positions or part time trading? Do you follow your rules, all the time? Will you have pressure to make money every month, week or day? Can you handle being alone (most cases) and staring at a computer for large portions of the day?
  • Finally, do you have spouse or other influence that will interfere with your endeavor?
    A spouse, friend or family (member) can have a negative affect on your trading that may result in subconscious sabotage. Outside negative forces or nagging pressure people may lead you down a path that is not controllable because you are trying to prove something rather than “just trade” based on your acquired skills. Make sure the closest people in your life support you while making the move to full time trading.

Focus on the Decisions!

Take the time to visit the blog article, The Key to Breaking Trading Slumps, by Dr. Brett Steenbarger as he expands on my recent post about Focus on Decisions, Not Outcomes

Dr. Steenbarger also suggests an idea that I think is wonderful for all bloggers and in particular, financial and stock bloggers.

I’m interested in using posts to initiate some cross-blog discussions of issues: sometimes to agree and elaborate, sometimes to respectfully disagree and offer alternatives. If you’re a financial blogger taking a reasoned stand on an issue or taking the time to elaborate a point of importance to traders, by all means send me your URL and I’ll do my best to include your work in a discussion post.

Here are a few words of expansion by Dr. Brett based on the advice I offer in my original post:

This advice is spot on. Performance anxiety occurs when we become so concerned with the outcome of a performance that our worries interfere with the process of performing. Who hasn’t had the experience of fretting over making a perfect entry, only to have the market make its move without you on board? Or seeing a market move away from your entry point and telling yourself you won’t “chase” the market, only to see it make the extended move you expected all along? Those are manifestations of performance anxiety.

Many new readers have started to visit over the past month so for those of you not familiar, Dr. Brett Steenbarger has a must read blog and a couple of trading books published by Wiley:

Author of The Psychology of Trading (Wiley, 2003) and Enhancing Trader Performance (Wiley, 2006) with an interest in using historical patterns in markets to find a trading edge. He is also interested in performance enhancement among traders, drawing upon research from expert performers in various fields.

Trading Mistakes: Avoid at all Costs

Traders are human and we all make mistakes. However, successful traders learn from their mistakes and capitalize from their experience using their next opportunity. Many of the items listed below are obvious but are not known by novice investors and can be forgotten by experienced traders.

Common Mistakes to Avoid while Trading:

  • Failure to cut losses: Pride, ego, or stubbornness prevents the trader from selling.
  • Not knowing “how much” to trade on each position: Overtrading positions can kill your account and take you out for good (risk of ruin). (Learn to position size)
  • Average down in price: Placing good money after bad is a loser’s game.
  • Listening to rumors: Forget the talking heads, rumors and tips as they are nothing but garbage and a sure way to substantial losses
  • Lack of patience: It takes years to master trading as an advanced skill; even then, you are never done learning or adapting
  • Not knowing when to sell: Determine your price objectives and risk-to-reward ratios prior to entering the trade; never allow emotions to make this decision.
  • Buying 52-week lows: Don’t be afraid to buy stocks making new highs. The garbage sits at the bottom along with weakness and downward momentum. Buy strength and the momentum moving higher.
  • Pure Fundamentalist: Technical analysis is a must! Use candlestick charts that show the price, volume and major moving averages – this is all you need, don’t complicate the process.
  • Making trading decisions based on taxes: Never buy or sell based on taxes alone.
  • Buying based on dividends: Don’t buy based solely on dividends; most growth stocks will never give out dividends
  • Buying familiar names: Yesterday’s leaders are not likely to be tomorrow’s stars. Look for solid new companies with great earnings, sales and a product in demand. Don’t buy a stock based on a popular household name.
  • Lack of action: Be able to move on a dime. Time is money, don’t procrastinate or hope for something that may never happen.
  • Lack of Consistency: Develop a method suited to your personality; stick to it and don’t trade blindly.

The secret to winning big in the market is not to be right all the time but to lose the least amount of money possible when you are wrong. As long as you win larger than you lose, you will become a consistent winner at the end of each year.

Focus on Decisions, Not Outcomes

Six Secrets of Successful Bettors: Winning Insights into Playing the Horses, a book I randomly stumbled upon while walking through Barnes and Noble this weekend. Now, I haven’t read the book and probably won’t but the table of contents read like it was coming from the trading world (the two entities are very similar when run like a business). The six secrets discussed along with the titles of the chapters would be perfectly sufficient for an author writing a new book on trading.

The six secrets are:

  • Act as an entrepreneur not a gambler
  • Make the best use of available resources
  • Only bet when there is a significant edge
  • Manage bankroll effectively to maximize advantage
  • Know how to handicap yourself using effective record-keeping
  • Effectively handle emotions as well as money

Chapter Titles:

  • Chapter 1 – A Hard Way to Make An Easy Living
  • Chapter 2 – The Information Edge
  • Chapter 3 – The Never-Ending Quest for Value
  • Chapter 4 – If I Only Knew How to Bet…
  • Chapter 5 – Woulda… Coulda… Shoulda… Doesn’t Get it Done
  • Chapter 6 – It’s One Long Game
  • Chapter 7 – The Road Ahead: Issues Facing the Game

Charter six, It’s One Long Game, started with the title phrase of this blog post:
Focus on Decisions, Not Outcomes.

I quickly reminded myself how true this is when trading as too many investors focus on the short term results or the money won and lost in each trade rather than the net result.

The idea of the game is to make the right choices and understand that some of those choices will turn out to be losers. Losers are part of the game and must not affect you emotionally as long as the decision was correct. You must study, analyze and focus on your decisions, not on the amount of money won or lost on each individual trade. As long as your decisions are correct and consistent, you will be a winner over the long term.

Chapter six has been appropriately titled to translate to the trading world:
It’s One Long Game – GET USED TO IT!

On another note, I also started to read a book titled The Wolf of Wall Street while at Barnes and Noble and it had an interesting start but turned into a complete story about a scum bag from the late 1980’s and early 1990’s. I can only imagine what’s going on in the sleazy Hedge Funds of today. I put it down after I realized the guy was only interested in talking about Quaaludes, cocaine and ridiculous drinking. He scammed people out of tens of millions of dollars, cheated on multiple wives, admits he lied for a living and went to prison (he sounds very proud of the accomplishments mentioned). I feel bad for his children. He was in it for the short game – get rich quick! Loser is all I can say.