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Basic Truths about Trading

Psychology is undoubtedly the biggest part of trading stocks. When you keep this in mind and make this fact the highest priority, you'll be miles ahead of your trading peers.

Below are few more things to keep in mind:

  • The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. Everyone, including some of the brightest minds in the world, is against me and I am against everyone. Its every man for himself.

  • The money I want to make belongs to other people who have no intention of giving it to me.

  • The market is like an ocean, it moves up and down regardless of what I want. The market does not know I exist and I cannot influence it. I cannot control the market any more than a sailor can control the ocean, but I can control my own behavior.

  • Trading is all about management managing myself, my money, my attitude, and my positions. It is not about predictions, forecasts or opinions.

  • There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his play an intelligent play (Jesse Livermore).

  • Trading without imagination is like painting by numbers and is about as rewarding (William R. Gallacher).

  • The market is not going to reward anyone for observing the obvious.

  • A mistake made by many traders is that they become so involved in trying to catch the minor market swings (generating lots of commissions in the process) that they miss the major price moves.

  • Advisors are only wrong when you get too many of them start thinking the same thing.

  • A strategy to enter and exit trades will not help you unless you are both disciplined and organized.

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