Best Thread Lessons from successful traders

[trader_dante]

I'm in the fortunate position of being in contact with several extremely successful traders. We are talking about those that are consistently taking several hundred thousand pounds per week out of the markets and also those that have, in the past, made many millions from trading. I would like to pass on a few tips - or pointers - that they have told me. What you make of them or how you interpret them is up to you - I will simply relate them as they have been related to me.

1. If you are bearish, do not be afraid to pay down.

Sell on signs of weakness. It takes guts to sell when price has already fallen considerably. The opposite applies for bullishness. Buy on signs of strength.

2. Double tops and bottoms can be very profitable opportunities

Sell at double tops and buy at double bottoms AS they form. These are potentially very profitable opportunities and you can trade them with tight stops.

3. Act on intuition

Intuition comes from studying the market and watching it over a long period of time. If you get a strong feeling about a market - even if you are not sure completely why - act on it. But know that feelings can be wrong and be quick to act if the market does not confirm your intuition.

4. There is no such thing as a price that is too high or a price that is too low.

The market is never too high or too low.

5. Have guts when a position goes onside

There is little point in calling a top or a bottom only to take a few points. You have to be able to hold a position.

6. Fading moves can be very profitable but there is no room for stubborness

When a price is at extremes and you want to attempt to fade it, take small positions and be prepared to act quickly to cut your losses if price does not turn. Look for areas where the market last found it hard to get above/below. Look carefully at the price action. Is it stalling? Remember that there is no room for stubborness in the market.

7. Look for clues

The market almost always tips its hand to which way it is going. If you can't see this, you haven't watched it long enough.

8. Remember why you got in.

If you are position trading a market and you are, for example, buying a considerable distance above support, then that last support is the reason for entry. Until that is invalidated, your trade reason still stands. The "market" knows or cares nothing of where your break even point or fixed trailing stop is. These two latter terms, if based on monetary concerns (not wanting to lose, wanting to protect profits) rather than based on technicals (keeping a valid s/r level between you and the price) are useless.

9. Support/Resistance is the key to the market

This is one of the only technicals that the professionals keep coming back too. Where are the support and resistance points? To determine their validity, watch the strength of the price at them.

10. See the bigger picture

You have to have the ability to see the bigger picture. Where are we on the higher timeframes? How much room do we have to move?

11. Get involved

Invariably, those that make big money, get involved. You need to live and breathe your market to make money consistently. Watch it as much as you can. Time spent watching is time spent learning.

12. Fundamentals

Fundamentals are useful but remember that how a market should react and how it does react are two very, very different things. Don't get married to a fundamental opinion if the price does not confirm it.

 

[rollsafe]

I also recommend the following ....article The Paramouncy Principle
by Mike Elvin follow this link to read the article, T2W Day Trading & Forex Community

 

[hwagta]

I'm in the fortunate position of being in contact with several extremely successful traders. We are talking about those that are consistently taking several hundred thousand pounds per week out of the markets and also those that have, in the past, made many millions from trading...

I am very interested to learn what markets your friends trade. I'm not enquiring about their strategies, but I am keen to know which instruments allow for/provide the large volumes and liquidity that I suppose are necessary to generate such earnings. Do they trade in FX spot, FX CFDs, FX futures, oil futures . .? It seems reasonable to assume they trade intra-day (although they may not) and have to place large orders for immediate execution, so do they have problems with slippage, or with the kind of market-maker hi-jinks one reads about on this forum?

Thanks in anticipation of your reply.

 

[trader_dante]

One trades the S&P intraday with overnight positions from time to time. The other does both intraday and position trading in many markets including the FTSE and the Bund. I can't talk about slippage or other issues as I have not discussed this with them.

 

[gustavhunter]

One trades the S&P intraday with overnight positions from time to time. The other does both intraday and position trading in many markets including the FTSE and the Bund. I can't talk about slippage or other issues as I have not discussed this with them.

I would suspect that with the volumes and revenues they are generating they would have direct access to some markets and brokers who court their business. Its the unfortunate reality that smaller traders wont get the same service that the big boys get.

 

[prop]

"One trades the S&P intraday with overnight positions from time to time"

i work with Dante and in turn have spent a lot of time chatting with the s & p trader in question
the one thing that always comes across with him is that he truly has followed his own path, trades in a way that is purely his own, and i think this in itself is an important lesson for newer traders that ask for this indicator or that method, this guy has his own ( and it really is his own) very distinct style that works for him, and theres the lesson, find your own way and it will pay
and in reply to the post above from gustavhunter, he trades the same way as us (futures not spread betting) he doesnt do anything that different, he just does it better, interestingly i asked our boss the other day "who is the best trader you ever met and what did they do differently to everyone else"
his reply they didnt do anything different really, they just did it better !

the other interesting one is immersing yourself in your market !

the big difference i have noticed with said spooz trader and another big trader (and they are big) is their immersion in the market, face up to the screen, not walking round the office, in the screen as if they are trying to climb inside it, the market has become part of them and they are most certainly part of it, completly enveloped in the price action, the market, the trade, earmuffs on chaps ! we dive at 5

 

[gustavhunter]

and in reply to the post above from gustavhunter, he trades the same way as us (futures not spread betting) he doesnt do anything that different, he just does it better, interestingly i asked our boss the other day "who is the best trader you ever met and what did they do differently to everyone else"

He must do it in quite good sizes then to generate those revenues. Is he purely a price taker or can he bid and offer on the exchange (either via a broker or direct)? If you get into intra day trading thats definately the way to go.

I trade spread bets on a personal basis and via direct lines to banks on a professional one. So I'm slightly hampered in the products I can use for my PA. I'm curious about the way people trade in these forums. I guess I'm just an info junky at heart.

 

[trader_dante]

Hello, just wanted to resurrect this old thread I created as I think that after a few losing trades, it is invaluable to reasses and come back to the wisdom of those that have gone before (and still are) making huge amounts of money in the market. The tips I presented in post #1 are from some of the best traders I have ever met and probably will ever meet.

Also, I've found that the cause for any serious losses I take, above and beyond an expected loss from a trade that simply doesn't work, can be rooted in one of those tips.

The recent large loss I took in the Dow for example has its roots in point 3 - I didn't act on intuition. Even though I had a gut feeling that the Dow was going to collapse I refused to accept the fact that it could go lower. Which in turn brings me back to point 4 and point 6. There is no such thing as a price too low and if you are going to try and pick a bottom you may need several attempts - you cannot just hold stubbornly. There is no room for this behaviour in the market.

Finally point 10 came to mind. Be able to see the bigger picture. I am now starting to work off numbers rather than charts. It's hard because I have never been good with numbers but working with numbers rather than a chart gives you one very important psychological advantage: you are not constrained by the top or the bottom of the screen.

New traders (and maybe even some old ones too) should be aware of the subconscious influence that the top of the chart and the bottom of the chart has on your trading decisions and market outlook. In a violent upmove the price is always heading into the TOP right of your screen. In a down turn, the price is heading into the BOTTOM right of your screen.

The chart always has both a floor and a ceiling. The market does not.

 

[options]

Hello, just wanted to resurrect this old thread I created as I think that after a few losing trades, it is invaluable to reasses and come back to the wisdom of those that have gone before (and still are) making huge amounts of money in the market. The tips I presented in post #1 are from some of the best traders I have ever met and probably will ever meet.

Also, I've found that the cause for any serious losses I take, above and beyond an expected loss from a trade that simply doesn't work, can be rooted in one of those tips.

The recent large loss I took in the Dow for example has its roots in point 3 - I didn't act on intuition. Even though I had a gut feeling that the Dow was going to collapse I refused to accept the fact that it could go lower. Which in turn brings me back to point 4 and point 6. There is no such thing as a price too low and if you are going to try and pick a bottom you may need several attempts - you cannot just hold stubbornly. There is no room for this behaviour in the market.

Finally point 10 came to mind. Be able to see the bigger picture. I am now starting to work off numbers rather than charts. It's hard because I have never been good with numbers but working with numbers rather than a chart gives you one very important psychological advantage: you are not constrained by the top or the bottom of the screen.

New traders (and maybe even some old ones too) should be aware of the subconscious influence that the top of the chart and the bottom of the chart has on your trading decisions and market outlook. In a violent upmove the price is always heading into the TOP right of your screen. In a down turn, the price is heading into the BOTTOM right of your screen.

The chart always has both a floor and a ceiling. The market does not.

I wanted to give you a rep point for that Tom, but you have used up your quota from me this week

That is so so so important, many people do not realise it. You look at the screen, see price near top (or bottom) and think (on many levels) that it will stop and reverse at that point. And you miss out on the follow through!!!

I have often thought, how is it possible to get around these constraints? The only thing I can come up with is to have a smaller chart, higher timeframe inside the main chart.
This will normally show that in reality, price is still at a mid point and can still travel further in both directions. This helps to avoid 'tunnel' vision.

 

[gamma]

many people do not realise it. You look at the screen, see price near top (or bottom) and think (on many levels) that it will stop and reverse at that point. And you miss out on the follow through!!!

A very interesting point to me this is
I find the major issue seems to be getting the reversal exactly right getting the reversal on the turn of a penny seems to be people aim for,after a reversal there is still room to make a profit if traders try to get away from being spot on they will do better.

 

[gamma]

"I have seen the enemy...and it is me.

An excellent quote, Options

 

[trader_dante]

[/COLOR]That is so so so important, many people do not realise it. You look at the screen, see price near top (or bottom) and think (on many levels) that it will stop and reverse at that point. And you miss out on the follow through!!!

I have often thought, how is it possible to get around these constraints? The only thing I can come up with is to have a smaller chart, higher timeframe inside the main chart.
This will normally show that in reality, price is still at a mid point and can still travel further in both directions. This helps to avoid 'tunnel' vision.

Just saw this old post. Excellent point, options. Looking at the higher TF is key even if you trade the lower ones. I am surprised by how many people I see just looking at the 5m chart of an instrument and nothing else. The profitable traders I know that perhaps use the 1m, 5m or even the ladder itself, are often keeping an eye on the hourly, daily whereabouts of price.

 

[JRP2891]

People wishing to emulate successful traders should be careful when choosing their role models. Livermore certainly attracts the glorious loser mentality, and perhaps those who place him at the top of their trading heroes are experiencing difficulties in their trading due to a sub-conscious need to reflect his results.

 

[meanreversion]

People wishing to emulate successful traders should be careful when choosing their role models. Livermore certainly attracts the glorious loser mentality, and perhaps those who place him at the top of their trading heroes are experiencing difficulties in their trading due to a sub-conscious need to reflect his results.

Another excellent post, JRP.

I've just finished reading "The Greatest Trade Ever", about John Paulson, and I have to say I am in awe of the way he planned and executed his trade, it makes Soros' £ trade in 92 look a little amateurish.

But should I attempt to John Paulson? Well, he had $100mio in the bank when he first started going short sub-prime, so even if it didn't pay off, he wouldn't be struggling too much!

However, for a textbook case of how to make a killing, this example takes some beating.

 

[dmt257]

To the thread starter......are these guys trading a few select charts or are they looking at many and picking off the best trades?

 

[trader_dante]

To the thread starter......are these guys trading a few select charts or are they looking at many and picking off the best trades?

There is not a clear answer to that.

Most of the professionals I sat with were trading one market, sometimes two.

However, one of the bigger traders that unofficially mentored me traded many different markets.

 

[founders.forex]

To survive in the Forex trading market in the world and make lots of money from the Forex market every time, being a normal Forex trader is not good enough. For this you will need to become a professional Forex trader.
Secrets behind the successful Forex traders are:
1. Professional Traders are NOT intellectuals- They Simply Follow a SIMPLE Forex Trading System.
2. Research and Work Smart, NOT HARD.
3. The successful Forex traders possess Discipline, Determination, Money Management and Mindset for Success.

 

[trader_dante]

To survive in the Forex trading market in the world and make lots of money from the Forex market every time, being a normal Forex trader is not good enough. For this you will need to become a professional Forex trader.
Secrets behind the successful Forex traders are:
1. Professional Traders are NOT intellectuals- They Simply Follow a SIMPLE Forex Trading System.
2. Research and Work Smart, NOT HARD.
3. The successful Forex traders possess Discipline, Determination, Money Management and Mindset for Success.

1) How many successful currency traders do you know? I've read about 3 (primarily fx) off the top of my head: Michael Marcus, George Soros and Bill Lipschutz. None of which I know are messing around with a "simple forex trading system" to the best of my knowledge. They are considering fundamentals and adding not so much "technicals" but more a decent knowledge of how price works and how it moves. Of all the professional treaders I've actually met that make money consistently, I've only seen one in FX - he had been at the game for several years and while he made money, he probably took home the same amount of money I did as a journalist. Everyone else was in Equities and Fixed Income.

2) Completely agree. But you need to keep a record. It is absolutely vital. Hardly anyone does it and I do think that is why many people are not profitable. Also, with your record, it is vital to note down what happens after you have got out which is what a lot of people that DO keep records, fail to note down. Was there a better way to have entered and exited? This should be done on every trade and is absolutely key. This is how you refine your technique.

3) Those are the things that we see everyone say but professionals also possess an excellent memory first and foremost. Also, an ability to make decisions under pressure without hesitation. They also know when to underbet and overbet. These are the things you rarely see the gurus talk about.

 

[Benji871]

1) 2) Completely agree. But you need to keep a record. It is absolutely vital. Hardly anyone does it and I do think that is why many people are not profitable. Also, with your record, it is vital to note down what happens after you have got out which is what a lot of people that DO keep records, fail to note down. Was there a better way to have entered and exited? This should be done on every trade and is absolutely key. This is how you refine your technique.

I also keep a record and i agree with recording everything. Even if i lose then i can look back both before and after what i felt, why i did it etc and where i am most likley to go wrong/right in the future in both terms of risk and psychologically.

For instance i used to always try and guess the market with "its can't go lower/higher its gone too far" and those are very expensive in terms of thinking/philosophy especially when you are repeating the same mistakes and not realising it. I had a mental block on taking mental stop losses (found out that by recording - but deep down i probably knew these things, i just needed to justfy the proof it to my ego/reality). It helped me change my views as the recordings told me that in all likleyhood they were going to go farther the wrong way - now i can take them far better.

This insight has allowed me to pinpoint why i am doing it (the liberal stop losses and the it can't go lower/higher attitude). And i beleive it was because using my investment "thinking" and trying to sub-consciously/attitude fit it for speculation when they are too different things - even though i know they are but its because thats what i was used to doing at the start.

For instance "value" investing as an example; if it goes down and you believe its fair value before then it makes sence to hang on and buy more as it is a long term investment as its the business that counts and the price is there as a gateway which may not reflect the real value (in my opinion).
You therefore are not going to be too bothered if you intend to hold it for years to come and it happens to drop lower.

However with speculation (and in my opinion for me thats what it is because i'm betting on price movement in comparison to the underlying business itself) the price is more important (as i use spreadbetting) and with me not realising my mindset i used to get tempted and to "average down" as its what i would do investing as its what i felt safe psychologically doing.

The problem here i believe is that sub-conciously my mind can not psychologically know the difference. This is because I am using the same set of rules (price data/charts) but playing a different game. The mind only knows the numbers and the visual chat patterns and because it was used to doing one thing and felt safe doing it when investing because the results were positive - hence the false feeling of "safety" when trading and making the same mistakes. - I know its not the best explanation but i don't know how to put it. I guess the mind is used to one thing and sees the other as the same because its using the same data.

- When you have bought upwards and the price is going down in investing and you think its has value you buy more of the same business but at a better price. The right/wrong is in the business.

- When speculating if the price has gone down after you have first bought upwards you were wrong - wrong about the price in the first place - otherwise you would have bought at the now lower price instead of the previous higher price which you originally bought at. The right/wrong is in the price.

Also memory wise i think if you don't write it down you will either forget it. Or your memory will "re-ajust" to compensate your "ego" as mine seemed to have done.

- In my opinion anyway...

 

[rider5]

We are talking about those that are consistently taking several hundred thousand pounds per week out of the markets and also those that have, in the past, made many millions from trading.

Hi TD,

With numbers like that, what is the amount of capital that these traders have at their disposal?