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Quick Wisdom For Traders

staying on trackSometimes we need reminding how to stay on track with our trading. Here are some points I've learnt over the years.

1. Never over trade. Best not trade at all than over trade.
2. Understand your personality then build your strategy around it to find your personal edge.
3. Don’t give up – you’ll get there with discipline and persistence.
4. Don’t trade to be a millionaire overnight.
5. Get comfortable with losing yet celebrate the wins.
6. Cut your losses short, let your winners run.
7. Risk management, risk management, risk management – don’t leave home without it.

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More on the BBO Strategy

weekly timeframeIn last week's article we revisited the BBO Strategy 10-years after it was first published in Unholy Grails.

You can read that HERE.

The article prompted numerous questions about the strategy so I'll address two of the more popular ones.

The first was, "Being busy I prefer to trade weekly charts. How does the BBO Strategy perform on that time frame?"

Great question.

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The BBO Strategy 10-Years On

equity growth strategyIt's been 8-years since Unholy Grails was released and 10-years since I first started the project.

One of the most popular strategies was the Bollinger Band Breakout (BBO) strategy.

Back in the late 90's I took the basics of the strategy from Ken Fitschen's well-known Aberration Trading System. Aberration has been named “One of the Top 10 Trading Systems of All Time” by Futures Truth and remains a popular trading strategy for commodity trend following.

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Small Change. Big Impact.

Small ChangeJohn Wooden was 99 years old when he died in 2010. He was an American basketball player and one of the most revered coaches in the history of the game. He was loved by his players and renowned for his short and simple inspirational messages when coaching them.

One such message was:

‘When you improve a little each day, eventually big things will occur ….’

It’s a simple concept that encourages us to make small positive changes in our lives each day. All of which, when combined overtime, will culminate in that big positive impact that many of us are looking for in our lives.

This approach can equally be applied to our trading.

Then we first start, we’re full of enthusiasm, aspirations and big goals.

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50 Bite Size Trading Tips and Tricks

  1. 50 Bite Size Trading Tips and Tricks Don’t try to read into other people’s trading decisions.
  2.  By all means like a stock, but don’t try to be best friends with it forever. Instead, spend time nurturing positions that are being kind to you.
  3.  Beware the Beginner's Cycle. The want to be right will cause you to collect courses and books and will only be a costly and frustrating exercise. The secret is elsewhere.
  4.  Actually, there is no secret. It’s all in the maths.
  5.  Losses when trading are inevitable, but losses should always be limited.

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Why the Long Face?

why the lobg faceIt’s an odd psychology.

People think market all-time highs means expensive.

And all-time lows means cheap. 

Nothing could be further from the truth.
U.S markets have consistently been pushing into new highs for some time.
Yet while this has been happening, we still see traders looking for reasons to short the markets. 

Too expensive they say. 

It seems we are never happy. Even when longer term trends are clearly in play.

So why the long face?

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When to Cut and Run

When to Cut and RunCutting your losses fast and letting your winners run is a common phrase we hear all the time. Yet applying this simple strategy to your trading can be harder than it seems.

The first thing is that many of us find it hard to admit when we are wrong. As kids we were disciplined and corrected whenever we made a mistake. Whether it be by parents, teachers or peers. We associate being wrong with an unpleasant experience, and therefore avoid it at all costs. We were never taught that being wrong is Ok. That the experience is a lesson and something to learn from in the future.

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World Stockmarket Rotation Strategy

ETFI've been asked my opinion on people trying to avoid paying capital gains tax by not buying and selling within a 12-month window.

My personal view is twofold.

Firstly, tax can be minimised to some degree using company structures, family trusts or investing through a SMSF.

Secondly, I liken tax to advertising. If advertising adds value to the bottom line then it's beneficial to the business. If it doesn't, then don't advertise

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Why Being Consistent is Difficult

consistencyTrading consistently is more difficult than it looks.

One of the key reasons for this is that in real life, for the most part, we have routine and logic.

We get up. Eat breakfast. Get ready for work. Tend to the kids. Go to work and so on. It’s a routine that we could do with our eyes closed. Most of us often do!

Yet the markets are not so logical.

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Trading and Hindsight Bias - Part 2

Trading Hindsight Bias Part 2Last week I discussed Hindsight Bias. You can read that article HERE.

The conclusion?

We can't know what the future holds for a single stock. Basing a complete strategy on an individual stock that has been cherry-picked from past performance may be risky.

The solution is to better understand the robustness of the strategy itself. To do that it should be tested over a larger universe of symbols.

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