You can be free. You can live and work anywhere in the world. You can
be independent from routine and not answer to anybody. This is the life
of a successful trader. Many aspire to this but few succeed. An amateur
looks at a quote screen and sees millions of dollars sparkle in front
of his face. He reaches for the money
- and loses. He reaches again - and loses more. Traders lose because
the game is hard, or out of ignorance, or lack of discipline or because
of both. - ALEXANDER ELDER
Every winner needs to master three essential components of trading; a
sound individual psychology, a logical trading system and good money
management. These essentials are like three legs of a stool - remove
one and the stool will fall, together with the person who sits on it.
Losers try to build a stool with only one leg, or two at the most. They
usually focus exclusively on trading systems. Your trades must be based
on clearly defined rules. You have to analyze your feelings as you
trade, to make sure that your decisions are intellectually sound. You
have to structure your money management so that no string of losses can
kick you out of the game. - ALEXANDER ELDER
My ability to do what is uncomfortable enhances the profitability as I
have a willingness to buy a stock on extreme strength following a
significantly bullish news item. In such situations, most investors
will wait for a reaction that never comes, or at the very least will
place a price limit on that buy order. I also realize that if the news
is sufficiently significant, the only way to buy the stock is to buy
the stock. Any more cautious approach is likely to result in missing
the move. In a similar fashion, one should also be ready to immediately
liquidate a holding, even on a sharp one-day decline, if a negative
news item has changed the outlook for the stock. The rule is : Do what
is right, not what is comfortable. - RICHARD DRIEHAUS
