Things I Learned After 30 Years of Trading

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Here are 65 lessons I learned after spending thirty years trading and investing in the stock market from 1991-2021.

  • A trend can go farther and longer than I ever expect.
  • The best traders are open-minded and flexible in their trades.
  • For most traders less trades is better than more trades, focus only on the best set ups and stocks.
  • Be opened minded to the potential of new stocks and markets.
  • Price action is the only truth in the stock market.
  • Never add more capital to a trade that is already losing money, that is trend fighting with more size and hope.
  • Never enter a trade unless you know where you are getting out with a stop loss, trailing stop, or profit target.
  • I prefer end to day stops over hard set stops in the market.
  • Volume in the market is like votes being cast at different price levels.
  • Breakouts usually retest back to old resistance that will be new support.
  • A time stop out of a trade not going anywhere can free up capital to trade on better setups.
  • The best trades work right from the start.
  • Some of the best trading systems are simple, it is the trader’s psychology that creates the biggest edge.
  • You only need a few technical indicators and price action to trade, more indicators can add confusion.
  • Fundamentals do not equal technical price action, emotions and beliefs drive most price trends.
  • The economy and the stock market are two very different things.
  • Trade smaller during losing streaks and bigger during winning streaks.
  • Self destruction starts when a trader refuses to accept being wrong about a trade.
  • The bigger the position size the louder your emotions will be.
  • Self confidence comes over time as you prove your system is valid and that you are disciplined in following it.
  • Focus on just making one good trade at a time.
  • Breaking your own trading rules can be expensive.
  • Long positions in the stock market are the path of least resistance the majority of the time.
  • The faster you admit you were wrong about a trade the smaller the loss will be.
  • You must limit your total risk exposure of positions at any one time.
  • Stocks are more like a beauty contest in the short term and a cash flow contest in the long run.
  • Moving averages are my favorite technical indicator because they quantify trends.
  • A chart patterns best use is to quantify entries and exits in the direction of the momentum.
  • A candlestick pattern just gives better odds of one thing happening over another.
  • Many times a bull market will be lead by the financial sector going higher.
  • The market doesn’t know you exist or care about your opinion.
  • Opinions and predictions are worth nothing. A system with an edge is priceless.
  • There are seasonal patterns to the market, understand them.
  • High short interest on a stock can be bullish.
  • You must have a quantified system with an edge if you hope to be profitable over the long term.
  • The market is always pricing in the future not the present.
  • Short selling is a much more difficult game than going long in the stock market.
  • Downtrends are much more volatile than uptrends.
  • Volatility can lead to a lot of false signals, you must manage for this.
  • Short sellers have to overcome the effort of CEOs, dip buyers, congress, the president, and the Federal Reserve to keep the stock market prices up.
  • Most big moves start with a strong momentum signal.
  • Many times, the most difficult trade to take is the right trade.
  • Other traders are better used as examples on how to trade not copying their trades.
  • The best trades are many times difficult to enter.
  • Taking a stop loss is more difficult for new traders than holding a losing trade.
  • The best traders do all their research when the market is closed so entering or exiting when the market is open is automatic.
  • A good trader must have a positive mindset.
  • Hard work is only rewarded in trading when it is the right type of effort.
  • Trading will teach you about yourself.
  • All traders are eventually humbled.
  • Let trades come to you, don’t chase a trade.
  • A good trading process can help you get lucky.
  • You must survive losing streaks.
  • Markets usually take time to make a top or a bottom before reversing.
  • All stocks go through cycles of accumulation, distribution, and range trading.
  • Conviction on a trade can lead to big wins or big losses, it is neutral as a benefit to a trader.
  • Trend following makes money, trend fighting loses money.
  • You can build a watchlist of stocks based on fundamentals but you still have to trade the price action on the chart.
  • Most bottoms in price come with a confluence of other oversold indicators and bullish divergences.
  • Maximum pessimism is at market bottoms, maximum optimism is at market tops.
  • Leverage in trading can cut both ways, use it with caution and good risk management.
  • The big money usually tips their hand for their sentiment by the end of the day.
  • There are no perfect trades only good risk/reward ratios on entry.
  • Perma bears make money only during downtrends, perma bulls make money only during uptrends, perma pigs blow up their account when they end up on the wrong side of any trend.
  • Trade like a casino, not a gambler.
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