Peter Thiel: Going from Zero to One

perspective on investing before the go big.

What are the factors to know the vast scale of success

on investing start ups?

#DecodingInvesting

Overflows

I choose to grow each day

To be purposeful at work and play 

And throughout life's highs and lows 

I choose a life that overflows 

I choose to take steps forward 

To make sure each day is fully explored

And whether I meet with joys or sorrows

I choose a life that overflows 

I know that no diligence is wasted

That little by little goes far when added

I know that goodness echoes 

So I choose a life that overflows

Someday I'll look back 

At my well-traveled track

I'll beam because my heart knows

I chose a life that overflows. 

Life is a choice. 

#StartTheWeekRight 

#Monday

Source: The Coffee Bean and Tea Leaf Planner 2016

Profit Taking Friday!

protect your gains. 

have you secured your profits? 

#fridaygains

Get Rid of Overtrading Once and for ALL

Overtrading refers to taking so many trades to the extent that the trader’s edge erodes. It is bad for all kinds of traders and even investors. But it is truly a cardinal sin for day traders.

I know this day trader called Hubris. He has always been a profitable trader, or so he claims. Hearing that he is such a wonderful trader, I grabbed the chance to watch him during one of his trading sessions.

Yes! 2 points in pocket. This is easy.

Let’s see… oh, there’s another trade over there. I’m shorting right now, just in time.

Ah, lost a point. We’ll only get better. See! Right there, there’s a chance to recoup my losses.

Sheeeesh, two losses in a row mean that the next trade will be a winner. I must continue.

At the end of the session, Hubris wonders how did he manage to wipe out 30% of his trading account in a single session.

Does Hubris’ experience sound familiar? Does it sound like you?

If you answered yes, then you might be able to make vast improvements in your trading performance after reading this article.

THE ROOT OF OVERTRADING

UNREALISTIC EXPECTATION OF MARKET VOLATILITY

Day traders need volatility to make a living. When the market is not going anywhere, we should not trade.

However, because of a lack of understanding of the market and the need to trade, traders rationalize and tell themselves that the market is going to move.

Dr. Brett Steenbarger, the author of The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist, explained this mismatch of expectationsreally well on his blog.

OVERESTIMATION OF TRADING SKILLS

This is Hubris. He thinks he cannot lose, and is invincible in the market. He might understand the market well, but he does not know himself.

He over-estimates his trading skills and is confident that he can trade in any market condition.

THE COMMON WORK ETHIC

Our innate work ethic dictates that we must work for income. That is perfectly correct.

What is wrong is the meaning of “work” for traders. Traders tend to think that work means taking trades. That is wrong, and that is what leads to overtrading.

We are working when we are waiting for the best trade.

We are working when we are following our trading rules and executing the trades.

We are working even when we are not taking trades. And if we do our work correctly, we will get paid.

FIXING OVERTRADING – THE ONE BULLET ACTION PLAN

THE SUPREME RULE TO COUNTER OVERTRADING

The One Bullet Action Plan has just one simple rule.

Take only one trade a day.

No exception. No rationalization.

Take one trade. If it’s a winner, shut down your trading terminal. If it’s a loser, shut down your trading terminal.

After shutting down your computer, go do something you enjoy. Play with your kids. Read a book. Do something that takes your mind off trading.

WHY DOES IT WORK AGAINST OVERTRADING?

As we discussed above, the causes of overtrading are psychological and diverse. They mostly involve our minds playing games with us.

So our solution focuses on physical actions. (Shut down the computer and go play.) Instead of convincing your mind, let’s move away physically .

There is only one simple but absolute rule. The more rules there are, the more space for your mind to convince you to take another trade. Having only one absolute rule denies your mind of rationalization.

ARE YOU SURE TAKING ONE TRADE A DAY IS A GOOD IDEA?

Your mind is already trying to rationalize away this supreme rule. So let’s get it out of our way.

Knowing that you have only one bullet will force you to take only the best trades. You will be more alert and more selective in your trades. More likely than not, your trading performance will improve.

Taking one good trade a day is enough for your trading edge (if any) to materialize. Assuming you do have a trading edge, how much you can earn depends on the amount of your risk capital.

There is also the problem of undertrading which means that we are not maximizing the full potential of your trading strategy.

Don’t worry about that. Far more traders ruin their account because of overtrading compared to undertrading. In fact, no trader has ever lost their trading account by not taking a single trade.

CONCLUSION – YOU MUST STOP OVERTRADING

You must stop overtrading because it is a huge obstacle to your trading success.

You must stop overtrading because only you can do it. Although the One Bullet Action Plan works against overtrading, you have to commit to it.

Don’t be like Hubris. My other friend, Sophrosyne, is a better trader. 

Now, you knew this already. 

Will you add this on your #NotesToSelf trading journal? 

#CuttingLosses 

Source: Galen Woods

Similarities Between Forex Trading and Drinking

However distant such activities as the Forex trading and alcohol consumption may seem at a first glance, at a second one, it is possible to notice some weird similarities that draw parallels between the currency speculations and drinking. Some rules of drinking work perfectly in the online Forex market.

• If you trade Forex too much or drink irresponsibly, without stop, you will end up in trouble. For the foreign exchange, it will be an account balance wiped by overtrading while for drinking, it can result even in more serious problems. Do not forget that you decide how much you drink or trade, not your friends or the market.
• Same as with alcohol, when approaching the Forex trading, you should be very careful deciding where to trade (market conditions), what to trade (currency pairs) and with whom you trade (your broker). Otherwise, it may end up wrong for your positions like it would end up for your health and well-being with drinking.
• One of the most important rules that the Forex traders usually learn too late is never to trade when you are tired or hungry. Look at your drinking buddies — they would never drink on empty stomach or when they are already feeling dizzy from the lack of sleep. So, remember that the foreign exchange market should not deprive you of your normal sleep and food consumption habits or else, the market will deprive you of your money.
• Try it first before you decide to taste more — it is a good rule that works fine with beverages and at the same time is essential for the currency traders (especially the new ones). Always test new strategies, methods, brokers, trading instruments, etc. on demo; switch to real account only when you are sure that you like the results.

Of course, this all should not be considered too seriously. The similarities were drawn just for fun. However, always remember never to “Drink and Trade”. Of that I am talking seriously. 

A bit of fun about forex trading. 

Did you laugh? :D 

#LifeLessSerious

#TradingHumour

Source: Andriy Moraru

Sophrosyne

Just like trading minus attachment.  

have you experienced it already? 

#WordOfTheDay 

Source

The Ultimate Trading Business Checklist: 10 Things You Must Know

You want to trade from home, because it is a simple way to make money. You do not want to run a business, because it is complicated.

The bad news is that successful traders conduct their trading activities like a business. This is because businesses make money, and hobbies don’t. To make money, having a business mind-set is essential. Hence, traders cannot avoid running a business.

The good news is that a trading business is easier to manage than other businesses. (I’m referring to the long/short trading business, and not the import/export type.)

We’ve condensed what every trader needs to know into the 10 items listed below. To become a professional trader, work your way down this list.

DEFINING YOUR TRADING FIELD

Trading is our industry. But what’s your sub-industry?

This is the first question a trader has to answer. This is because it defines the playing field for your trading business.

1. DECIDE ON YOUR TRADING MARKET.

What market will your trading business deal in?

The common options are:

• Individual Stocks – publicly traded ownership of companies
• Stock Indices – a performance measure of a basket of stocks
• Commodities – foodstuff, metals, fuels, etc
• Forex – the exchange rate between two currencies

Research the market that interests you. Make sure that you understand it works.

For a start, answer these questions:

• Which fundamental forces drive the market? (Even technical traders need a basic understanding of the market’s fundamentals.)
• What are the active trading hours of the market?
• What are some popular examples of your chosen market? (For e.g. S&P 500, NASDAQ 100, and DOW 30 are popular stock indices.)

2. CHOOSE YOUR TRADING INSTRUMENT.

After deciding on your trading market, you need to choose a financial instrument to express your market views.

Here are your options:

• Direct (Spot)
• Options
• Futures
• Contract-For-Difference (CFD)
• Spread-Betting

SPOT TRADING

You can trade stocks and forex directly (in the spot market). Some stock indices might be tradeable as exchange-traded funds (ETFs).

DERIVATIVES TRADING

The other four instruments – options, futures, CFDs, and spread-betting – are derivatives. This means they derive their market worth from the value of underlying assets.

For instance, a call option on AAPL appreciates in value when the underlying AAPL stock rises. Another example is a futures contract on crude oil (CL). Its value falls when the price of crude oil falls.

Why do we trade derivatives?

First, it is impractical or impossible to trade the underlying market.

Buying physical commodities is impractical and unnecessary for speculators. A stock index is just a number that reflects the performance of a basket of assets. It is not possible to buy or sell a number. Hence, futures is often used to speculate on commodities and stock indices.

Next, derivatives offer leverage. Derivatives allow traders to control the underlying asset with a small amount. Leverage allows an efficient use of your trading capital. However, leverage amplifies both gains and losses, and you must exercise caution.

Before you trade with any financial instrument, make sure you know the following.

• What does the instrument represent? (For e.g. a call option is a right to buy)
• What are its basic jargon? (For e,g. futures are traded in contracts and spot forex in lots.)
• Which organization regulates its trading? (For e.g. the NFA and CFTC regulate the futures trading industry in the US.)

3. PICK UP A TRADING STRATEGY

Your trading strategy is the centerpiece of your trading business. In fact, it is the key to sustaining it. It must tie in with every aspect of your trading business.

First, choose a trading strategy that makes sense to you.

Then, select a time-frame that you can trade realistically. Do you have time for day trading strategies? Or should you focus on swing trading?

Need some ideas? Take a look at our reviews of trading setups.

Finally, work out what you need to trade the strategy practically.

• If you want to use options strategies like straddles/strangles, you need an options broker.
• If you plan to day trade, you will need a discount broker to cut your trading costs.
• If you need a custom indicator to trade, choose a platform that allows custom coding.

As you can see, your trading strategy has wide implications on other aspects of your trading business.

SETTING UP YOUR TRADING INFRASTRUCTURE

Your trading infrastructure must support the execution of your trading strategy. This is why you must decide on your trading strategy first.

4. SET UP YOUR TRADING COMPUTER.

A computer is essential for analyzing and trading the markets. It is the workhorse for your trading business. You don’t need a supercomputer from NASA, but you do need a reliable machine.

When setting up your trading computer, consider the following.

TRADING STYLE

Day traders need faster machines as each incoming price tick is important to them. Furthermore, quick execution is crucial. On the other hand, swing traders can do with a basic computer setup.

For back-testing of trading systems, a high performance computer will save time.

TRADING PLATFORM REQUIREMENTS

Always check the minimum requirements of your trading platform. Make sure that your trading computer can handle its load.

BUDGET

Balance your trading needs with your budget. Consider your trading needs and decide if you really need that costly gaming computer.

5. CHOOSE YOUR TRADING BROKER.

You need to place your trades through a broker. For a trading business, your broker is a critical link to the markets.

When choosing a broker, you must consider its:

• Trading costs (commissions) and fees
• Technical reliability
• Financial stability

Google for the review of any broker. Very likely, you will find more dissatisfied traders than happy ones. The reality is that no broker is perfect, and traders love to complain about their brokers. That does not mean that you should switch your broker constantly. Conduct your due diligence, and always think twice before changing brokers.

For more information on how to choose your trading broker, refer to this in-depth guide.

Your broker might fail. Make a plan for that too.

6. SET UP YOUR TRADING PLATFORM.

A trading platform is basically an order entry software. You enter your buy and sell orders through it.

It is either a desktop software, mobile app, or a web application. Some trading platforms have integrated charting functions and other analysis tools.

Trading platforms differ in the type of order entries they support. Your trading style and strategy will dictate what you need.

These are some useful order entry functions.

• One-click order entry (essential for day traders)
• Bracket orders (great for placing concurrent stop-loss and target-limit orders)
• Chart trading
• Auto-trail stop-loss orders
• Auto-reverse

The trading platform is the control station for your trading business. Choose one that supports your trading strategy. Then, familiarize yourself with its functions.

(Note that your trading platform must integrate with your broker’s technology. Hence, your choice of broker constrains your trading platform options.)

RISK MANAGEMENT

A successful trader is a great risk manager. Pay attention to this section if you want your trading career to last.

7. SIZE YOUR TRADING POSITION.

Position sizing is critical to a trader. Trade too small, and you get a poor return on investment. Trade too big and, you risk blowing up your account.

There are three golden rules of position sizing.

• Start small.
• Scale up slowly.
• Have a system. Learn more about position sizing models here.

8. MASTER YOUR EMOTIONS.

Your fear and greed will cause you to pray and hope. Your flaring emotions form the main stumbling block to consistent trading results.

The first step to mastering your emotions is to become aware of them. Start a journal to record how you feel before, during, and after taking each trade.

Then, use these resources to improve your trading psychology.

• TSR Trading Psychology Articles
• Dr. Brett Steenbarger’s Articles
• High Performance Trading: 35 Practical Strategies and Techniques to Enhance Your Trading Psychology and Performance
• The Psychology of Trading: Tools and Techniques for Minding the Markets

9. WRITE YOUR TRADING PLAN.

Every business has a plan. For an individual trader without a supervisor, a plan for your trading business is essential. Many traders have plans in their mind. But having them on paper does help with give it a structure. And a structured plan reduces risk.

A trading plan should include everything we have discussed above.

More importantly, a trading plan should focus on reducing risk. Include rules to ensure your trading edge, avoid over-trading, prevent technical failures, and prevent account blow-ups.

REGULATORY

10. KNOW YOUR TAXES.

Nobody likes to pay taxes. But this is a good problem as only profitable traders get to pay taxes.

Taxes for a trader is tricky. It depends on your trading style, markets, and tax jurisdiction. Hence, it is difficult to find specific advice.

To get the basics, start with these.

• Tax Guide for Traders (Fairmark)
• Tax Implications of Trading (Tradeking)
• Guide to Investor Tax (Fool.com)

When in doubt, consult a tax professional or your local tax authority.

THE TRADING BUSINESS CHECKLIST – LOOKING FORWARD

This checklist offers a skeleton for your trading business. It is up to you to build it up into a profitable and sustainable venture.

As you gain experience, you will see the interplay among different aspects. You must plan and accept trade-offs within your trading business. For instance, choosing a more expensive broker that offers the trading platform you prefer.

Do not treat your trading business setup as a one-off project. Ultimately, your trading business must evolve over time to keep its edge. 

The importance of having a checklist is a guide to know if its applicable to us.

What would you like to include on our checklist?   

#StartTheWeekRight

#MondaysBeLike 

Source: Galen Woods