Independent thinking leads to successful trading

来源: FreeTrader 于 2011-07-21 19:06:20


View on The market and Methodology (Trading philosophy)

The reason on why the US booms is that both Wall Street and US dollar currency are built on top of US military forces, its superiority of technology and production efficiency.

The Theory of Dow is the foundation of financial Academism. Nowadays, however, the market is under well control thanks to the invention and use of computer. If the market were to drop, the only reason would be: Big boys want to unload cheap shares they collected from lower prices. All others, such as how bad the economy is, are irrevalent.

The market could be read with limited accuracy periodically. Thus, TA couldn't be perfect. So sometimes traders have to stay sideway and wait.

Why trading for making a living?

It brings freedom. One should strictly stay away from trading unless he/she wants to make it a serious career. Think about it, so many smartest wall street money managers, who work very hard, still lose money sometimes, how come an amateur trader could win over them?

Also, middle class of the US has been shrinking because:
1) higher percentage of wealth consistently turns to wall street and
2) revolutionary technology has caused less and less work force necessary.
Nowadays, 70-80% of the US seniors have to work in their 70s, not for wage but for medicare. In other words, they can't retire. Consequently, make a living through trading or investing is attractive.

How to pave the road of successful trading?

Traders must be dedicated on and devoted to the trading art itself, not the result of it, which is money, although they are not special or different from others. Many people assume trading requires no skills, they want stock leads recommended with points of both entry and exit. Rarely do people have the will to learn and popularly they want to make money by just clicking the button. Unfortunately, none makes money by this kind of help. Having learned it from a hard way, which also reveals why majority of the people could not be successful, I never talk about individual stocks, instead, just talk about principles.

There is no secret. It's pretty much predictable on the progressive evolution: make trades, lose money, keep the bad cycle and then meditate about trading, then make planned trades, lose money again, keep the better yet still bad cycle, and then meditate again. Over and over. Finally make it.

It's important to learn from books, ie, knowledge and wisdom of others, yet the most important is to learn from one's own experience and mistakes. Along the learning curve, decisive and clear topics in various aspects could be elaborated from different perspectives.

The market is the utmost real teacher. Unless one wants and delves into convincing oneself on believing or disbelieving anything, nobody else could do it for him. Not just for trading or investing, but everything.

Trading is mostly of psychological game. As a human nature, people hardly accept faults and shortcomings of their own. The path leading to success is full of and paved by finding and fixing the problems of oneself which is good for doing everything.

It's also a rational game requiring emotion control. Professional traders have to be objective and rational, ie, collect FACTs and DEDUCE logically then conclude the TRUTH.

Everybody is different on these two exclusive factors, so it's up to oneself to get the self-suitable method to do trading successfully.

Focusing on doing right things, not money which is just a number on the account.

It takes at least 5 or 6 years to train a potential trader.


An assumed successful trader should have experienced two big bull markets and two big bear markets before he could be considered to have the ability to survive on various market conditions.

Trading as a profession is NOT simple.

The only way to get and keep a trader job is: get a convincing trading record. It has nothing to do with education, age, seed captial etc. If there is no convincing profitable record, one will lose the trader job even he has one. If there is convincing profitable record, it's easy to get one anywhere.

Actually, the greatest gain from trading is not money, neither freedom, but the independent thinking on insights of life, such as what life and living matter and are for.

For example, I personally deeply understand many people don't like the critism on the Chinese culture. However, it's based on the professionality, objectivity and rationality that are developed and trained by trading. Being seriously lack of reasonabilities, the Chinese culture is a big obstacle for successful trading which requires objectivity, honestly accepting facts and mistakes, logical deduction and independent thinking because it's compatible with none of these merits.

Strategies

Nakedly writing index futures options is easier most of the time, unless there is big swing. The main problem of the strategy is stop-loss which is not a real issue for experienced traders.

Stock Trading Principles:

1, don't nakedly buy options. Buying puts assumes longed stocks have potential to go up, and the potential is so big that the buyer wants to risk the time value paid for puts. Big money may buy puts because the selling pressure could hurt itself if it would choose to unload.

2, don't trade outside of regular session hours, unless necessary.

3, trend is in terms of daily chart, sometimes weekly chart is needed but totally unnecessary for confirmation.

4, don't catch falling knives unless have become very experienced.

5, NEVER use TA indicators. Proven useful TA arsenal include price/volume, SMAs, support/resistance and simple shape analysis. Nothing more.