Top Five Trading Lessons From Market Wizard Dr. Van. K. Tharp from the book “Market Wizards”:
“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely a crowd follower. In addition, losing traders tend to be disorganized and impatient.”
The profitable trader is able to manage stress, has a positive outlook on life and expects the best from themselves and their trading. They take responsibility for their wins and losses. They know who they are and are in touch with their goals. They have specific rules to guide their trading and are organized and patient.
“The simple truth is that most people are risk-aversive in the realm of profits – they prefer a sure, smaller gain to a wise gamble for a larger gain – and risk-seeking in the realm of losses – they prefer an unwise gamble to a sure loss. As a result, most people tend to do the opposite of what is required for success. They cut their profits short and let their losses run.”
Most traders are unprofitable because they take profits quickly but let losers run. Many traders can have a nice winning streak or be profitable in a bull market only to give back their profits with one big loss or lose all their bull market profits during the next bear market.
“Most people approach trading to make a lot of money, and that is one of the primary reasons they lose.”
The best way to go broke fast is try to get rich quick. Trying to speed up the process of big profits usually just leads to huge losses.
“If you are really committed, then not only are you certain that you are doing the right thing, but somehow events just seem to occur to help you.”
If you really want to be a profitable trader only time separates you from your goal. If you do the work, learn, grow, and persevere you will eventually get to where you are going if that is what you truly want.
“The realization that you are responsible for the results you get is the key to successful investing. Winners know they are responsible for their results; losers think they are not.”
Blaming high frequency traders, dumb money, option pinning, market makers, insider traders, or simply “them” for your trading losses is not going to do anything to help your trading. The only real metric to measure whether your trades are good trades is whether you followed your trading rules with discipline. We only control whether we follow or planned entries and exits then the market determines whether we make money or lose money.
“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely a crowd follower. In addition, losing traders tend to be disorganized and impatient.”
The profitable trader is able to manage stress, has a positive outlook on life and expects the best from themselves and their trading. They take responsibility for their wins and losses. They know who they are and are in touch with their goals. They have specific rules to guide their trading and are organized and patient.
“The simple truth is that most people are risk-aversive in the realm of profits – they prefer a sure, smaller gain to a wise gamble for a larger gain – and risk-seeking in the realm of losses – they prefer an unwise gamble to a sure loss. As a result, most people tend to do the opposite of what is required for success. They cut their profits short and let their losses run.”
Most traders are unprofitable because they take profits quickly but let losers run. Many traders can have a nice winning streak or be profitable in a bull market only to give back their profits with one big loss or lose all their bull market profits during the next bear market.
“Most people approach trading to make a lot of money, and that is one of the primary reasons they lose.”
The best way to go broke fast is try to get rich quick. Trying to speed up the process of big profits usually just leads to huge losses.
“If you are really committed, then not only are you certain that you are doing the right thing, but somehow events just seem to occur to help you.”
If you really want to be a profitable trader only time separates you from your goal. If you do the work, learn, grow, and persevere you will eventually get to where you are going if that is what you truly want.
“The realization that you are responsible for the results you get is the key to successful investing. Winners know they are responsible for their results; losers think they are not.”
Blaming high frequency traders, dumb money, option pinning, market makers, insider traders, or simply “them” for your trading losses is not going to do anything to help your trading. The only real metric to measure whether your trades are good trades is whether you followed your trading rules with discipline. We only control whether we follow or planned entries and exits then the market determines whether we make money or lose money.
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What is the Mindset of a Trader?
Being a trader is not just about formulating better strategies and performing more extensive analysis, but is also about developing a winning mindset. According to many studies of traders, what separates a winning trader from a losing one:
It’s NOT that winning traders formulate better trading strategies
It’s NOT that winning traders are smarter
It’s NOT that winning traders do better market analysis
What separates a winning trader from a losing trader is their psychological mindset.
Most traders when they first begin trading mistakenly believe that all they need to do is find a great trading strategy. After that, all they’ll need to do is come to the trading market each day, plug in their great trading strategy, and the market will just immediately start pumping money into their account.
Unfortunately, as any of us who have ever traded have learned, it’s not that easy. There are plenty of traders who use intelligent, well-designed trading strategies and systems who still regularly lose money rather than make money.
The few traders who do consistently win the game of trading are those who have developed the appropriate psychological mindset that enables them to be consistent winners. There are certain beliefs, attitudes, and psychological characteristics that are essential to conquering the world of trading.
Being a trader is not just about formulating better strategies and performing more extensive analysis, but is also about developing a winning mindset. According to many studies of traders, what separates a winning trader from a losing one:
It’s NOT that winning traders formulate better trading strategies
It’s NOT that winning traders are smarter
It’s NOT that winning traders do better market analysis
What separates a winning trader from a losing trader is their psychological mindset.
Most traders when they first begin trading mistakenly believe that all they need to do is find a great trading strategy. After that, all they’ll need to do is come to the trading market each day, plug in their great trading strategy, and the market will just immediately start pumping money into their account.
Unfortunately, as any of us who have ever traded have learned, it’s not that easy. There are plenty of traders who use intelligent, well-designed trading strategies and systems who still regularly lose money rather than make money.
The few traders who do consistently win the game of trading are those who have developed the appropriate psychological mindset that enables them to be consistent winners. There are certain beliefs, attitudes, and psychological characteristics that are essential to conquering the world of trading.
8 investing lessons Everstone’s Prashant Desai picked while working with Rakesh Jhunjhunwala
"'Bhav bhagwan hai' (price is God)." That's the first and foremost in a series of lessons from none other than ace investor Rakesh Jhunjhunwala that a former colleague of his has picked and put together on social media.
Prashant Desai, Senior Director at PE and realty investment firm Everstone Capital, has handpicked and compiled eight lessons on investing from the Big Bull, according to a chain of Tweets by Ravi Dharamshi, founder and MD, ValueQuest Investment Advisors.
Both Desai and Dharamshi have earlier worked in RARE Enterprises, an asset management firm owned by Jhunjhunwala, whose plan to foray into aviation took Twitter by storm recently.
"I worked with Rakesh Jhunjhunwala as his Head of Research and what an amazing learning experience it was. Working closely with him led to several investing lessons, which I still keep going back to,"
Here are those eight lessons:
1. 'Bhav bhagwan hai'
2. Right or wrong doesn't matter
What matters is how much money you made when you were right and how much you lost when you were wrong.
3. Don't borrow to invest
Markets may remain irrational more than the rational being can remain solvent.
4. Risk
Beware of this four-letter word. Only invest what you can afford to lose in the short term.
5. Investing cannot be taught
Make mistakes. Make a mistake that you can afford so that you can live to make another one. But never repeat the same mistake.
6. Be an optimist
That's the first quality necessary to succeed as an investor.
7. Conviction and patience
In stock markets, your patience is tested, and conviction is rewarded.
8. Wisdom and wealth are not related
"'Bhav bhagwan hai' (price is God)." That's the first and foremost in a series of lessons from none other than ace investor Rakesh Jhunjhunwala that a former colleague of his has picked and put together on social media.
Prashant Desai, Senior Director at PE and realty investment firm Everstone Capital, has handpicked and compiled eight lessons on investing from the Big Bull, according to a chain of Tweets by Ravi Dharamshi, founder and MD, ValueQuest Investment Advisors.
Both Desai and Dharamshi have earlier worked in RARE Enterprises, an asset management firm owned by Jhunjhunwala, whose plan to foray into aviation took Twitter by storm recently.
"I worked with Rakesh Jhunjhunwala as his Head of Research and what an amazing learning experience it was. Working closely with him led to several investing lessons, which I still keep going back to,"
Here are those eight lessons:
1. 'Bhav bhagwan hai'
2. Right or wrong doesn't matter
What matters is how much money you made when you were right and how much you lost when you were wrong.
3. Don't borrow to invest
Markets may remain irrational more than the rational being can remain solvent.
4. Risk
Beware of this four-letter word. Only invest what you can afford to lose in the short term.
5. Investing cannot be taught
Make mistakes. Make a mistake that you can afford so that you can live to make another one. But never repeat the same mistake.
6. Be an optimist
That's the first quality necessary to succeed as an investor.
7. Conviction and patience
In stock markets, your patience is tested, and conviction is rewarded.
8. Wisdom and wealth are not related