Ratan Jain's Collections from Various Resources

100 % members of any Net forum ,surf & collect materials of use to them & even post the link or excerpts of that topic ,thinking it may benifit us.That is infact a sharing attitude.Which is good.

As the saying goes "Kaane ko sari duniya tedhi dikhti hai". Roughly translated a squint eyed man thinks the world is crooked.

Have you gone out of your way NOT to take care of your Trading results? Why would some traders deliberately hamper their success – make trading decisions that are doomed to fail?

Self Sabotage behaviour is when there is no logical or rational explanation of your action. It is making the same mistake over and over gain. Self sabotage is not following your rules, or in many cases not having a trading plan.
gFT UK

How do you break free from self-sabotage behavior?
Just think where you could take yourself if you were able to manifest your goals, you are able to take care of your trading results.

* Recognise Symptoms
* Decide and Take Action
* Your Commitment

Take care of your trading - Stop sabotaging your success!

Best wishes in making your dreams come through. God Bless and Happy Trading.

PS: Picked up word to word from Internet

Stick With The Plan
This may seem like a common sense statement, but the reality of market timing is that the majority of timers "think" they can stick to a timing strategy, however when the market moves against them, as it always does as some point, they are swayed by financial news stories, the desire to be "with" the crowd, and their own emotions, often exiting the strategy at exactly the wrong time.

Think about it. Let's use a fictional market timer named Mark for this example.

Mark has a strategy he knows has, over many years, outperformed the stock market. Mark knows going in there will be times when the strategy will lose. He sees this in the historical trades. He accepts this or at least he thinks he does.

But then, the market turns against Mark's first buy or sell signal and he is down 2%, then 4%. Mark is counting the dollars. He wakes up during the night with feelings of dread. Maybe "this" time it is different.

The next day, Mark exits the strategy and immediately feels better. He starts searching the internet for a better timing service. They are easy to find. We have personally seen some that "guarantee" 800% and 1000% returns. Much better than that 4% loss.

Of course the day after Mark exits the strategy, the market reverses and within a few more days, the strategy is now back in positive territory. Mark cannot enter, because he has lost 4% and knows it is not wise to enter mid-trade.

Mark is now feeling upset again. The initial feelings of relief when he exited the trade are gone. Mark is starting to feel he is missing out all over again.

After watching the market continue to advance, Mark finally makes a decision and re-enters the position after it has a nice 10% gain. Mark is feeling good again as the market has obviously turned and he is back on board.

Immediately the market takes back 4-5% of those gains and Mark now has a loss, that never should have occurred, of 8% to 9%.

Those who stayed with the strategy from the initial buy or sell signal are in positive territory and have a nice gain. Mark, however, exits again, with double his original loss, and quits market timing for good.

None of this need happen. When you start following a strategy, plan to stick with it for several years. That is how the smart money makes profits. They do not let emotions rule their marketing decisions. They stick with the plan!

The Trend Is Your Friend - Trade With The Trend
Personally, all of my strategies are based on trend trading. I know that the financial markets are usually in a trend, either up or down. So i enter the markets "after" I've identified a trend.

It is great to catch a reversal. It is also very difficult. Let me rephrase that.... it is almost impossible. I read stories of those who have perfectly caught a reversal, but they are news stories "because" it is so uncommon.

It is much easier to wait for a trend to begin, and then jump on board. If the trend fails, and some do, a well managed timing strategy will exit to cash, or reverse position, with only a small loss (or even a small gain). When the trend keeps going, that same well managed timing strategy rides the trend as far as the trend goes. This is where the power of trend trading is seen. By never missing a trend, and staying with the trend, trend following market timers make huge profits over time.
gFT UK

Finally, one of the most dangerous trading methods is to take a contrary position and pray for a reversal. Such trades rarely work out. But many, many traders try them. And... many, many traders lose a lot of money.

Let Your Profits Run - Cut Your Losses Short
The second part of this rule (cut your losses short) is the toughest one.

It involves admitting that you were wrong. But in market timing, as in "all" trading, it is a rare moment indeed where you will eventually be proven right after first being proven wrong.

All strategies should be designed with strict risk management right from the start. NEVER let losses grow. If your strategy gives a buy or sell signal, and the indicators then go into reverse: reverse your position (or go to cash) immediately. If you look at our various strategy trade histories you will see that we rarely take a loss of more than a few percent. Never be afraid to change from a bull to a bear, or vice versa.

There is a reason for this. It is easy to make back a small loss. But large losses are not only hard to make up, but the psychological pain you experience from them could cause you to quite the strategy. And quitting with a loss not only guarantees that you will lock in the loss, but it is likely to have a detrimental effect on your buy and sell decisions for a long time.

The opposite of course is "letting your profits run." I never set a profit target. As far as I'm concerned, when we have a profitable trend going, the sky is the limit. We will stay with that trend as long as it is profitable. 20%, 50% 100%. We "never" limit profits.

This is why small losses do not concern us. We know that when we have our next profitable trend, we will ride it to the end.

Never Make Timing Decisions Based On Tips
A tip is rarely more than opinion, and frequently a bad one at that.

Even if the tip comes from a friend, don't take it. If you have a hard time with this, go back to "The Trend Is Your Friend."

Burn this into your head! Unfortunately, in market timing, a "friend" is not always a friend.

Remember this: - There is "always" a reason to doubt a trade. There is always someone who knows, absolutely, that the trade is wrong. In fact, they are often willing to go into great detail why you are making a bad trade.

Why would they do this? Simple, it is to prove to themselves that their trade is the more correct one.

Again, this is all emotions. And allowing emotions to have any say in your market timing (or any trading) decisions, guarantees that you you will have even more emotions to deal with. The emotions caused by losses.

Stick to the trading plan. Trade with the trend, cut your losses short and let your profits ride, and never, but never, listen to others. Successfully following and profiting from a trading strategy can be accomplished only by you, and you alone.


PS: Copied from Internet

How to Stay Objective in a Trade

Perhaps one of the most challenging skills in becoming a successful trader is Maintaining Objectivity in trades. While there are a variety of factors which contribute to you losing objectivity in a given situation, there is a clear and defined path you can follow to re-gaining it. In simple terms, it is called Thinking Backwards.

The Issue
More times than not, losing objectivity occurs when you micro-manage a situation. It may be in the form of watching the tape or over-thinking a position but in essence, you lose sight of the MACRO picture or WHY you were in the trade in the first place. As a result, you make poor decisions which generate poor results.

How Can you Overcome This?
Know your reason “why?” and ask yourself frequently:

* Why am I in this trade?
* Why do I like/not like this position?

These questions will help you to continually clear up your picture as data points (or your own bad habits) attempt to fog up your view.

Red Flag
The more difficult it is for you to answer your reason WHY, the more likely it is you have lost objectivity in the situation.

The Solution – Thinking Backwards
1) Acknowledge that you have lost objectivity. Now that you are aware of the problem, you can begin to deal with it.

2) Remove yourself from the day-to-day noise and write down what your original thesis was. Clearing off your mirrors will tell you what direction you are moving.

3) Begin to Think Backwards by creating three columns with the following headings (Support, Do Not Support, Undecided). This will force you to Objectively lay out and evaluate the situation.

4) Talk to yourself: “Based on the data points I wrote down in each column, if I did not have a position on, what would I do?” Asking yourself this question forces you re-evaluate the trade from an unbiased perspective.

5) Compare your response with your original position/thesis to create a WIN-WIN


WIN No 1: is if there is a discrepancy, you can be proactive in creating a new game plan which may involve taking some or all of the risk off or even reversing the position.

WIN No 2: is if there is no discrepancy, you have instilled deeper conviction in your original thesis and can then hold or even add to the position.

In closing, losing your way is not nearly as important as how long it takes you to get back on course. We all get lost from time to time and the skill of Thinking Backwards can serve as your map to Re-Gaining Objectivity in your trades.

VERY IMPORTANT:

ALL THESE ARE COLLECTED FORM THE INTERNET

I will not repeat this again and again

The "Not So Simple" Rules of Trading

NEVER ADD TO A LOSING POSITION
R U L E 1

Never, ever, under any circumstance, should one add to a losing position ... not EVER!

Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out. The only thing that can happen to you when you average down into a long position (or up into a short position) is that your net worth must decline. Oh, it may turn around eventually and your decision to average down may be proven fortuitous, but for every example of fortune shining we can give an example of fortune turning bleak and deadly.

By contrast, if you buy a stock or a commodity or a currency at progressively higher prices, the only thing that can happen to your net worth is that it shall rise. Eventually, all prices tumble. Eventually, the last position you buy, at progressively higher prices, shall prove to be a loser, and it is at that point that you will have to exit your position. However, as long as you buy at higher prices, the market is telling you that you are correct in your analysis and you should continue to trade accordingly.

R U L E 2

Never, ever, under any circumstance, should one add to a losing position ... not EVER!

We trust our point is made. If "location, location, location" are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.

INVEST ON THE SIDE THAT IS WINNING
R U L E 3

Learn to trade like a mercenary guerrilla.

The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.

Once, when Lord Keynes was appearing at a conference he had spoken to the year previous, at which he had suggested an investment in a particular stock that he was now suggesting should be shorted, a gentleman in the audience took him to task for having changed his view. This gentleman wondered how it was possible that Lord Keynes could shift in this manner and thought that Keynes was a charlatan for having changed his opinion. Lord Keynes responded in a wonderfully prescient manner when he said, "Sir, the facts have changed regarding this company, and when the facts change, I change. What do you do, Sir?" Lord Keynes understood the rationality of trading as a mercenary guerrilla, choosing to invest/fight upon the winning side. When the facts change, we must change. It is illogical to do otherwise.

DON'T HOLD ON TO LOSING POSITIONS
R U L E 4

Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.

Holding on to losing positions costs real capital as one's account balance is depleted, but it can exhaust one's mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.


GO WHERE THE STRENGTH IS
R U L E 5

The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.

We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is.

Nortel went from approximately the split-adjusted price of $1 share back in the early 1980s, to just under $90/share in early 2000 and back to near $1 share by 2002 (where it has hovered ever since). On the way up, it looked expensive at $20, at $30, at $70, and at $85, and on the way down it may have looked inexpensive at $70, and $30, and $20--and even at $10 and $5. The lesson here is that we really cannot tell what is high and/or what is low, but when the trend becomes established, it can run far farther than the most optimistic or most pessimistic among us can foresee.

R U L E 6

Sell markets that show the greatest weakness; buy markets that show the greatest strength.

Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.

Those in the women's apparel business understand this rule better than others, for when they carry an inventory of various dresses and designers they watch which designer's work moves off the shelf most readily and which do not. They instinctively mark down the work of those designers who sell poorly, recovering what capital then can as swiftly as they can, and use that capital to buy more works by the successful designer. To do otherwise is counterintuitive. They instinctively buy the "strongest" designers and sell the "weakest." Investors in stocks all too often and by contrast, watch their portfolio shift over time and sell out the best stocks, often deploying this capital into the shares that have lagged. They are, in essence, selling the best designers while buying more of the worst. A clothing shop owner would never do this; stock investors do it all the time and think they are wise for doing so!

MAKING "LOGICAL" PLAYS IS COSTLY
R U L E 7

In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral.

Rule 6 addresses what might seem like a logical play: selling out of a long position after a sharp rush higher or covering a short position after a sharp break lower--and then trying to play the market from the other direction, hoping to profit from the supposedly inevitable correction, only to see the market continue on in the original direction that we had gotten ourselves exposed to. At this point, we are not only losing real capital, we are losing mental capital at an explosive rate, and we are bound to make more and more errors of judgment along the way.

Actually, in a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly.

Many years ago I was standing on the top step of the CBOT bond-trading pit with an old friend Bradley Rotter, looking down into the tumult below in awe. When asked what he thought, Brad replied, "I'm flat ... and I'm nervous." That, we think, says it all...that the markets are often so terrifying that no position is a position of consequence.

R U L E 8

"Markets can remain illogical far longer than you or I can remain solvent."

I understand that it was Lord Keynes who said this first, but the first time I heard it was one morning many years ago when talking with a very good friend, and mentor, Dr. A. Gary Shilling, as he worried over a position in U.S. debt that was going against him and seemed to go against the most obvious economic fundamentals at the time. Worried about his losing position and obviously dismayed by it, Gary said over the phone, "Dennis, the markets are illogical at times, and they can remain illogical far longer than you or I can remain solvent." The University of Chicago "boys" have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on. There is not much else one can say. (Dr. Shilling's position shortly thereafter proved to have been wise and profitable, but not before further "mental" capital was expended.)

R U L E 9

Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.

The academics will never understand this, but those of us who trade for a living know that there are times when every trade we make (even the errors) is profitable and there is nothing we can do to change that. Conversely, there are times that no matter what we do--no matter how wise and considered are our insights; no matter how sophisticated our analysis--our trades will surrender nothing other than losses. Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again. The latter usually happens when we begin following the rules of trading again. Funny how that happens!

THINK LIKE A FUNDAMENTALIST;
TRADE LIKE A TECHNICIAN
R U L E 10

To trade/invest successfully, think like a fundamentalist; trade like a technician.

It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade. If the market fundamentals as we understand them are bullish and the trend is down, it is illogical to buy; conversely, if the fundamentals as we understand them are bearish but the market's trend is up, it is illogical to sell that market short. Ah, but if we understand the market's fundamentals to be bullish and if the trend is up, it is even more illogical not to trade bullishly.

R U L E 11

Keep your technical systems simple.

Over the years we have listened to inordinately bright young men and women explain the most complicated and clearly sophisticated trading systems. These are systems that they have labored over; nurtured; expended huge sums of money and time upon, but our history has shown that they rarely make money for those employing them. Complexity breeds confusion; simplicity breeds an ability to make decisions swiftly, and to admit error when wrong. Simplicity breeds elegance.

The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested.

UNDERSTAND THE ENVIRONMENT
R U L E 12

In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.
gFT UK

Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment.

And finally the most important rule of all:

THE RULE THAT SUMS UP THE REST
R U L E 13

Do more of that which is working and do less of that which is not.

This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing.

The Importance of the Psychology of Trading

After many long hours, you have completed a system that you have incorporated into your trader’s business plan. Your money management strategy is within the bounds of your comfort range and you start to trade following your system’s rules. Despite the fact that you have completed all of this work, you find that you are still losing money while your system is showing that you should be making money. This is when you discover the importance of the Psychology of Trading. Or do you?

At this point, most traders maintain the status quo and refuse to admit that a psychological issue might be holding them back from following their rules. Those traders who are able to do the self-analysis and arrive at this difficult conclusion and take action before their capital runs out have a chance to become professional traders.

1. Very few traders actually have a workable business plan. If there is a business plan in place, it will give traders the confidence and the direction necessary to follow their trading rules.
2. Very few traders have adequately tested their trading methodologies. Failure to sufficiently test a trading system will create a lack of confidence when things become somewhat difficult because there is no benchmark for expectation available to a trader when testing is incomplete.
3. Trading with “scared money” is also an issue that causes traders to fall short of the mark. “Scared money” is money that has not been specifically allocated for trading and risk taking. When traders are using “scared money,” they have a tendency to focus on the consequences of losing it, especially if it has been borrowed.
4. An environment that is not conducive to sustaining a healthy focus on trading is another obstacle to trader success.
5. Unresolved issues from a trader’s past can cause a trader to feel unequipped to make money in this profession. A part of the trader believes that by following the rules money can be made in trading while other parts refuse to accept this reasoning.
6. Psychological issues from a trader’s past that result in fear of failure and/or success can limit a trader. The more losses traders experience in their life, the more they will do to avoid losses at all costs. However, a trader must be willing to lose to become an overall winner in the markets.

Conclusion

In trading, performance is a key issue. Since performance is largely dependent on the right psychology, a trader’s psychological well being is more critical to top performance in trading than it is in most other professions. When traders realize that performance is part of the overall picture and take the necessary steps to overcome the issues that weaken their discipline, they will begin to follow their trading rules. At this point, they have dramatically increased their chances of success in one of the most difficult professions. In a nutshell, completing a good trading plan plus believing and following that plan are keys to overcoming many of the psychological obstacles to successful trading.

Ratan,
It is known ,we all collect from Net.Infact these will benifit our members.
Incidentally is it coincidental that Suman is not been seen after Swagat vouched for a permanent animosity.
Asish

Good Job Ratan,
Psyschology is an important part of trading,
1)taking profits off table
2)sleeping over profits/loss
3)control of greed and fear
4)sticking to s/l

All of them and the ones u mentioned.

One thing i would like to add here,is that you have to be a very good programmer to make a system purely based on your style of trading,sometimes the traders trade on hunch,do not expect the system to be like the trader.

Life and trading throw up a variety of permutations and combinations and unexpected events due to these,very difficult to get rid of psychology part.