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Stock Market > Getting Started in Technical Analysis > Flashcards

Getting Started in Technical Analysis Flashcards

1
Q

General trading range information? (3)

A

Chart patterns inside trading ranges are irrelevant.
Never trade within a trading range.
Charts spend most time inside them, they can last for years.

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2
Q

Are supports/resistances exact points?

A

No, just tension areas.

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3
Q

What do breakouts from trading ranges suggest?

A

A price move in the direction of the breakout.

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4
Q

What two factors determine the significance of a trading range?

A

Time duration and width.

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5
Q

When can you use averages to extrapolate price movement?

A

Only in trends.

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6
Q

What does a price holding above/below the SMA indicate?

A

Strength / weakness unless it’s over-extended.

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7
Q

Define SMA mathematically.

A

SMA = S / n

S = sum of n prices
n = number of prices
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8
Q

What is the difference between conventional and internal trendlines?

A

Conventional trendlines exclude price anomalies which tends to increase their accuracy.

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9
Q

What determines the accuracy of a trendline?

A

The time duration.

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10
Q

How do you determine a conventional trendline?

A

Connect the two most recent relative highs or lows.

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11
Q

Are trendlines / trend-channels major indicators?

A

No, oftentimes they must be redrawn to include price development. Only use them as minor supporting factors.

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12
Q

What is the head and shoulders pattern?

A

A triple peak with the shoulders being lower than the head. It’s a common sign of a trend reversal and is considered confirmed if the price breaks below the neckline.

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13
Q

What are rounded tops / bottoms?

A

A strong sign of an impending price move in the direction of the curve.

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14
Q

What is a wedge?

A

A long term form of price consolidation.

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15
Q

How to use price consolidations?

A

Prices tend to continue in the trend direction after the consolidation, but watch for the direction of the breakout from them. They are very reliable failed signals.

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16
Q

What is an island reversal?

A

A gap that gaps back down, a strong sign of a reversal unless it’s filled.

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17
Q

How do you read oscillators?

A

Readings above/below EQ show strength / weakness.
Draw lines excluding upper and lower 10% of readings.
Readings near or past these lines show hyperextension.
Adjust the time duration to capture the desired length of reversals.

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18
Q

What are oscillators?

A

Measurements of momentum that all function the same way. They include RSI, MACD, Stochastics, Roc, etc.

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19
Q

How do you read MACD?

A

Wait for the short term line to cross the long term. These can provide buy / sell signals.

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20
Q

How do you use oscillators?

A

Use them to set alerts / scanners then watch for price movement.

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21
Q

What is divergence?

A

Disproportionate movement of the price and oscillators. This shows potential reversals but be careful, several divergences often occur before the price reverses.

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22
Q

How do you compensate for trends when using oscillators?

A

Raise the EQ and 10% lines proportionately.

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23
Q

What is the relationship between the popularity and accuracy of indicators? What does this mean for the future?

A

Inverse, the more popular the less accurate it is. Look forward to many triple reversals in the decades to come.

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24
Q

What are Ross’ three scanner criteria for day trading?

A

Above average volume (set a %)
Up 5% or more already
Less than 50 million float

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25
Q

What is Ross’ flagging strategy?

A

Wait for a flag after you see a wide ranging candle with a strong close, buy on the first green candle afterwards. Typically used with 5 minute charts.

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26
Q

Should you clutter your charts with numerous drawings?

A

No, keep it simple “stupid.”

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27
Q

Do brokerages always adjust for stock splits?

A

No, check for: integer-proportionate jumps, news, and the company’s website.

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28
Q

What is a filled gap and what does it mean?

A

It is a failed sign where the price returns to below the gap. It suggests a likely move in the opposite direction of the gap.

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29
Q

What are three possible confirmation conditions you can use? What are the positive and negative effects of this?

A

A certain penetration %
A specific time delay
A Specific number of indicators

This will increase accuracy but decrease entry and exit price quality. Find a happy medium.

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30
Q

What is the only way to test strategies / systems?

A

In several current markets without the benefit of hindsight.

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31
Q

Should you have your stop determined before entering a trade?

A

Always! One slip-up and you can blow up your account.

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32
Q

How do you adjust for volatility?

A

Decrease your share size, even for stocks you have previously invested in.

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33
Q

Should you reduce leverage for related markets?

A

Yes, split one investment between the related markets.

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34
Q

What is the formula for maximum loss per trade?

A

(R% * PF) / (S + c + s)

R% = Max risk % , PF = Portfolio size , S = stop $ , c = commission $ , s = slippage

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35
Q

What are acceptable maximum risk levels and what are the benefits of this?

A

2% -6%. This significantly increases your chances of long term profitability.

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36
Q

How do you use volatility to select stocks?

A

Avoid extremely volatile markets, i.e pennystocks.

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37
Q

Where should stops be placed? What are two general methods to determine this place?

A

At or before a reversal. Use current / past patterns and tension areas.

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38
Q

Are tension areas useful for setting stops?

A

Extremely.

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39
Q

What is the principle of measured moves?

A

Prices tend to move in relatively equal-sized increments. If a price jumps 50 cents it will likely continue or retract about 50 cents. More reliable if multiple moves overlap.

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40
Q

Are chart patterns better for determining entry or exit?

A

Entry but they are still useful for determining exits.

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41
Q

What is the concept of “contrary opinion?”

A

90% of people will be wrong; if most people think a stock is going up, it will likely go down. Inverse applies.

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42
Q

Are oscillators good for setting stops?

A

Yes, use them as a warning to bring your stops in closer.

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43
Q

Does every price jump indicate a breakout?

A

No, they are often corrected. Do your research.

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44
Q

What are bull / bear traps?

A

False breakout signals, typically a sign of a price move in the unanticipated direction.

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45
Q

When are bull / bear traps considered failed?

A

If the price closes beyond the boundaries of the trap.

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46
Q

What is the most reliable indicator in technical analysis?

A

Failed signals.

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47
Q

Do failed signals dictate an immediate price move in the unanticipated direction?

A

No, they generally imply a move in the unanticipated direction. Sometimes prices “flutter” before reversing; the failed signal is considered intact until a close beyond the failed signal.

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48
Q

How do you best use failed signals?

A

Use them as an indicator to immediately liquidate your position and potentially reverse it if the situation warrants it.

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49
Q

Where do you set stops on breakouts from flags?

A

At the middle or opposite end of the flag.

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50
Q

What should you do if you see the price approaching tension areas?

A

Tighten up your stop

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51
Q

Should you set entry, exit, stop, and reversal conditions before entering a trade?

A

Yes, always.

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52
Q

What is one possible way to avoid exiting a trade prematurely?

A

Set your stops slightly looser initially then gradually bring them in closer as the position develops.

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53
Q

What is the formula for the “expected gain per trade?”

A

EGPT = (W% * P) - (L% * L)

W% = win % , P = average profit , L% = losing % , L = average loss

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54
Q

Do prices rise as fast as they fall?

A

Not usually, “gravity” tends to pull them down faster. Use this to time trades.

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55
Q

What are three benefits of diversification?

A

It averages out your losses, protects you from “bad luck”, and ensures your participation in trending markets.

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56
Q

What is the true transaction cost?

A

Commission plus slippage.

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57
Q

What is slippage?

A

Failure to buy or sell at your intended price.

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58
Q

Do different market types require different approaches?

A

Yes.

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59
Q

How do you select markets using “suitability?”

A

Only participate in markets that best suit your strategy.

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60
Q

Can failed breakouts from trendlines be used as failed signals?

A

Yes.

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61
Q

What are the three factors for selectin markets?

A

Diversification, volatility, and suitability.

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62
Q

How do you use diversification to select markets?

A

Choose stocks that aren’t closely related; or you can split one investment between related stocks. I.e. split one investment between two oil companies.

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63
Q

Do pros have trading strategies? Does specificity enhance their accuracy?

A

Yes and yes. The more specific the more accurate they are.

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64
Q

What are three ways to confirm bull / bear traps?

A

A pullback to the median of the signal, a pullback to the opposite end of the signal, and the delay of a reaction.

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65
Q

What do prices and charts symbolize?

A

The net result of human behavior.

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66
Q

How do you synthesize fundamental and technical analysis?

A

Use fundamentals to indicate the direction and technicals to find entry and exit points.

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67
Q

What are the two perspectives of the stock market?

A

Fundamentalists and technical analyst.

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68
Q

What do price charts show? (5)

A

Price history, patterns, major trends, entry / exit points, and volatility?

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69
Q

What are the four major types of charts for stocks?

A

bar, close-only, point and figure, and candlestick charts.

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70
Q

When is a trend considered no longer intact?

A

When it breaks below a resistance in the opposite direction.

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71
Q

Define uptrend.

A

A series of higher highs and lower lows.

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72
Q

Define downtrend.

A

A series of lower highs and lower lows.

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73
Q

Should you use percentages or share size when calculating past moves?

A

Percentages, stock splits will distort data if you use share size.

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74
Q

Are there reliable patterns in every chart all the time?

A

No, there rarely are. It’s your job to find these few predictable patterns and capitalize on them.

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75
Q

What are four mid-trend entry / pyramid strategies?

A

Enter after a 35% / 65% retracement, enter after a micro-pullback, enter after a breakout from a range or flag, enter when a long term moving average shows strength.

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76
Q

What are the three pyramiding rules?

A

Only add to winners, don’t add if your stop will yield a loss, and don’t add in increments larger than your initial investment.

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77
Q

Should you adjust your stop as you profit?

A

Yes, use a trailing stop.

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78
Q

Should you change your stop just because it’s getting close?

A

NO! That defeats the purpose of having a stop.

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79
Q

Are all stops based off of technical indicators?

A

No, sometimes you need to set a $ or % because indicators are too far out.

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80
Q

What are the five keys to chart analysis?

A

Tight stops, confirmation conditions, use fundamentals, use failed signals, and see the big picture.

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81
Q

What is a peak / double peak?

A

A standard from of tops / bottoms. It can indicate a reversal.

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82
Q

What are flags / pennants?

A

Short term forms of consolidation. Generally regarded as “pause” in a major trend.

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83
Q

What is a triangle formation and what are the three types?

A

A long term form of consolidation. Usually just a pause in a major trend. The three types are ascending, descending, and symmetrical. Watch for breakouts from these.

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84
Q

What is a wide ranging candle?

A

A candle that is significantly taller than those surrounding it. Can be a strong sign depending on the open / close.

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85
Q

What is thrust day?

A

A day that closes beyond the previous day’s high / low.

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86
Q

What is a reversal candlestick?

A

One that opens strong then reverses direction. They are more meaningful with greater magnitude.

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87
Q

What is a spike?

A

One that closes far beyond surrounding candlesticks. Its only useful if the close is strong / weak and it occurs during a trend.

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88
Q

What are the four types of gaps?

A

Common: occurs in a trading range - useless
Breakaway: first sign of a breakout - strong indicator
Runaway: occurs during a trend - shows strength
Exhaustion: occurs at the end of a trend - soon followed by a reversal

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89
Q

What is a gap?

A

A candle that opens beyond the close of the previous candle.

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90
Q

What are Bollinger bands?

A

A type of price envelope that uses standard deviation instead of a set percentage.

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91
Q

What do Bollinger bands show?

A

Tension areas and volatility.

92
Q

Are price bands major or minor indicators?

A

Minor. Just use them as supporting factors.

93
Q

What are price envelope bands?

A

The average price plus / minus a set percentage.

94
Q

Are clusters of relative highs / lows meaningful?

A

Yes, they show tension areas. Increased reliability in long term charts.

95
Q

When are penetrations of tension areas significant?

A

When they’re high in magnitude or time duration.

96
Q

What are supports / resistances?

A

Tension areas.

97
Q

How long should you plan for the next day? What three things do you do during this time?

A

30 - 60 minutes daily. You should check for news, thoroughly plan new trades, and update exit strategies for existing positions.

98
Q

How do you adjust for a losing streak?

A

Decrease your share size until you’re back on your feet. It may be useful to define exact conditions for both of these.

99
Q

How do you adjust leverage to your account size?

A

If your portfolio grows, increase your share size. If your portfolio shrinks, decrease your share size and current risk.

100
Q

What are the nine types of failed signals?

A

Bull/bear traps, false trendline breakouts, filled gaps, failed spikes, failed wide ranging candles, failed consolidations, double failed consolidations, failed tops / bottoms, and failed curves.

101
Q

What is the seven part risk control system?

A 
Max risk per trade - % or $ of portfolio
Stop loss strategy
Diversify
Reduce leverage for related markets
Adjust for volatility
Adjust for account size
Adjust for losing streaks.
102
Q

What are four general facts about all failed signals?

A

They are more reliable if they’re: high in magnitude, high in quantity, or the first sign of a breakout.

They’re considered intact until a close beyond them.

103
Q

How much cumulative risk should you have in your portfolio?

A

25% -35%.

104
Q

What information should be included in your trader’s diary?

A

Reasons for trade, how the trade turned out, lessons, charts, and photos / videos.

105
Q

How do you analyze segmented trades?

A

Divide trades into many categories based on the reason for entry, time frame, fundamental or analytical, etc. and compile data on these. Analyze the data to find the best strategies.

106
Q

Should you maintain an equity chart?

A

Yes, most likely a close-only chart. Analyze and act on it regularly.

107
Q

Should you differentiate major positions and short term positions?

A

Yes, invest much less into short term plays.

108
Q

Should you wait for a better entry if you are confident a major trading opportunity exists?

A

No, go for it! Don’t be greedy.

109
Q

Should you ever just “wing” a trade?

A

No! Plan each and every trade thoughtfully and carefully.

110
Q

Should you ever try to “force” a trade when the timing isn’t right?

A

No. Wait for a confirmation pattern.

111
Q

Should you focus on long-term or short-term charts as you are entering a trade?

A

Look at short term charts, if the market isn’t close to where you want it, don’t enter. Wait until it’s ripe.

112
Q

Should you rely on tension areas to spot reversals?

A

No, they often cruise through them. Wait for a pattern to indicate the reversal when it’s close to a tension area.

113
Q

Should you follow your “gut” if you have an immediate instinctual feeling about a chart?

A

Yes, but still plan thoroughly.

114
Q

If you miss the first part of a major trend, should you sit out the rest of the move?

A

No, use a mid-trend entry method to capitalize on the remaining move.

115
Q

Should you ignore failed signals if you see several reasons to enter the trade?

A

No! They failed for a reason.

116
Q

Should you ever enter a trade as it gaps in the unanticipated direction?

A

No, wait for it to fill.

117
Q

Should you primarily use market or limit orders?

A

Market; limit orders tend to get partial fills.

118
Q

Should you double-down on a pullback near your entry point after you were ahead?

A

No.

119
Q

Should you set a specific stop point prior to entry?

A

Always.

120
Q

Should you exit a trade before it hits your stop if patterns suggest a negative move for your position?

A

Yes.

121
Q

Should you “ride” a trade if the premise for that trade is broken?

A

No, exit immediately.

122
Q

Should you exit a major trade if you are dramatically wrong on just the first day?

A

Yes! Get out!

123
Q

Should you hold your position if an apparent major breakout against you appears?

A

No, exit immediately! Especially if it’s gapping!

124
Q

Should you liquidate your position if it’s volatility spikes and it is working against you?

A

Yes.

125
Q

What should you do if you can’t watch the markets for some time?

A

Make sure you have GTC stops set or liquidate all your positions.

126
Q

If you enter a trade as it’s approaching a resistance and it consolidates, what should you do?

A

Get out if you’re betting on a reversal.

127
Q

Should you reverse your position if your gut feeling tells you your position is wrong?

A

Yes.

128
Q

Should you ever become “complacent” with a position?

A

No, always know your entry, exit, and reversal points, no matter how far out they are.

129
Q

Should you immediately enter a trade as soon as you get stopped out?

A

No, take a breather.

130
Q

What should you do during a losing streak?

A

Reduce position size, use tight stops, slow down, and take less trades.

131
Q

Should you change your strategy when on a winning streak?

A

No, don’t get cocky. Gradually increase your share size as your account grows. Don’t take any trades that you would have deemed too risky.

132
Q

Should you treat small and large positions differently?

A

No, have the same diligence with all trades. Never say “It’s just fifty shares.”

133
Q

Should you hold large positions with impending major reports about to be released?

A

No, liquidate then wait for the market’s response.

134
Q

Should you take small, quick profits on major positions?

A

No, let your winners run! If you are dramatically right, never take profits on the first day.

135
Q

Should you exit a position if it’s gapping in your direction?

A

No! Are you crazy?

136
Q

Should you use objectives or trailing stops to exit winning trades?

A

Trailing stops, they tend to obtain better exits.

137
Q

Should you scale out of large position if it quickly gains 50% - 60% of your objective?

A

Yes, it’s okay to take a quick SIZABLE profit, but still let some of the position ride its course.

138
Q

If you still like a trade but it reaches your objective, should you exit it?

A

No, use a trailing stop to maximize profits.

139
Q

If you are heavily positioned and the price is skyrocketing, should you scale out?

A

Yes, if things look too good to be true, watch out. Still let a portion of your position ride though.

140
Q

Should you have a re-entry plan when taking profits on a trade that has a long term potential?

A

Yes, wait to re-enter after the correction.

141
Q

Should you scale out when trading large positions?

A

Yes, better to make money than to be 100% right.

142
Q

Should you pay more attention to your objective / tension areas or current price action / evolving patterns?

A

Current price action and evolving patterns. Don’t let your bias skew the facts.

143
Q

Should you hesitate when you see a major trading opportunity?

A

No, plan it out, then get in!

144
Q

Should you try to take direct profit from micro-pullbacks?

A

No, don’t go long on a down-trending market. Don’t try to “dance between the raindrops.”

145
Q

Do winnings trades normally start off rough?

A

No, they tend to be right from the very start.

146
Q

Can you be completely wrong about at trade but only take a small loss?

A

Yes, that is why it’s crucial to time each trade right.

147
Q

Should you stare down intra-day charts on swing trades?

A

No, intra-day decisions are almost always losers. Only adjust your stop at the end of day recap or to groundbreaking news.

148
Q

Should you always check the market before close on Friday?

A

Yes, things tend to seem clearer at the end of the week.

149
Q

Should you act on vivid “dreams” you have about the market if you remember them clearly?

A

Yes, this is your subconscious communicating with you.

150
Q

Are you ever immune to bad trading habits?

A

No, as soon as you get sloppy they’ll show up. Stay diligent.

151
Q

Should you anticipate a reversal as a market approaches new highs / lows?

A

No, markets this strong will tend to continue in their current direction.

152
Q

Are narrow consolidations at the top of an uptrend bullish or bearish?

A

Bullish, they’re just a pause in the major trend. The opposite holds true as well.

153
Q

Where should you place your stop if you’re trading a breakout from a narrow range?

A

The opposite side of the range.

154
Q

Are breakouts from trading ranges that hold for one or two weeks strong signals?

A

Very, they are one of the most reliable indicators of an impending trend.

155
Q

Are consolidations on the top or bottom of a wide, extended trading range reliable?

A

Yes, these tend to be very reliable signals.

156
Q

Should you trade in the direction of wide gaps?

A

Absolutely.

157
Q

Are gaps out from congestion patterns good signals?

A

Yes, especially in bearish markets from 1 - 2 month trading ranges.

158
Q

When is a daily “breakaway gap” considered strong?

A

When it holds for over a week.

159
Q

If a breakout into new highs / lows gaps back within a week, what will probably happen?

A

This is likely a bull / bear trap. The trend will likely reverse.

160
Q

If a consolidation forms after a price reverses from new highs / lows, what will likely happen?

A

A reversal top is likely in place. Set your stop just past the other side of the flag and let it ride.

161
Q

What will likely happen if a stock breaks out from a range then pulls back three quarters of the way down the range?

A

A trap is likely in place, exit and potentially reverse your position.

162
Q

How should you view an apparent V top / bottom with a consolidation forming nearby? What if it breaks towards the V?

A

At first it appears as a true V pattern. After it breaks from the consolidation towards the V, it will likely be a failed signal.

163
Q

Are V patterns that are followed by multi-month consolidations usually major tops / bottoms?

A

Yes.

164
Q

Are tight consolidations useful for mid-trend entry?

A

Very, they allow easy entry with a very meaningful close stop.

165
Q

If a tight flag during a major trend becomes a failed signal, which directions should you expect the price to go?

A

In the direction of the breakout from the flag.

166
Q

What do “curved” consolidations suggest?

A

An accelerated move in the direction of the curve.

167
Q

Are failed signals from curved consolidations strong indicators?

A

Yes.

168
Q

Do extreme wide-ranging days with a very weak close useful warning signals?

A

Yes, these tend to be very good early warning signals of a reversal.

169
Q

Do near vertical large price moves over two to four days usually continue?

A

Yes, they tend to extend for the following weeks.

170
Q

Are spikes good short-term reversal signals? Where should you set your stop?

A

Yes, set stop at the extreme of the spike.

171
Q

How do you analyze the chart for different signals?

A

If you see one signal, imagine if it wasn’t there; what other patterns do you notice? Do they all “agree” with each other?

172
Q

What can happen if a runaway gap is filled?

A

A potential reversal.

173
Q

If a possible island reversal pulls back to the most recent consolidation or trading range, is it confirmed?

A

It is nearly confirmed.

174
Q

Does a market fairing well despite a bearish market show extreme strength?

A

Yes, the opposites hold true as well.

175
Q

If a market consistently trades higher intra-day, where should you expect it to close?

A

Expect a close in the same direction.

176
Q

Are multiple consecutive flags reliable continuation patterns?

A

Sometimes.

177
Q

What is a “cup and handle” formation?

A

A curved top / bottom followed but a higher / lower curve in the same direction. It’s usually a sign of a continuation pattern.

178
Q

Can public opinion easily change a strongly trending market?

A

No, a serious uproar is usually required to turn a price on it’s head.

179
Q

Are normal signals or failed signals more reliable?

A

Failed signals.

180
Q

What can happen if a price seems unaffected by tremendously bullish or bearish news?

A

A possible reversal may be in place.

181
Q

How often should you review charts?

A

Daily - especially if you’re busy.

182
Q

How often should you review long term charts?

A

Every two to four weeks.

183
Q

Should you maintain a traders diary? Should it contain extensive elaboration and chart photos / videos?

A

Yes and yes. Do it religiously.

184
Q

What should you do if you notice a pattern that you suspect to yield a certain result?

A

Create a “patterns chart book” full of patterns you suspect to hold merit. Paper-trade these and analyze the results.

185
Q

Should you regularly review your trading rules, trading diary, and patterns chart book?

A

Yes, schedule these reviews.

186
Q

What is the first step to becoming a trader?

A

Decide if it’s truly what you want to do with your life. Think long and hard on this.

187
Q

What is the second step to becoming a trader?

A

Figure out the true reason why you want to become a trader. If it’s for “excitement”, you might be better off at an amusement park.

188
Q

Should you match your trading method to your style / personality?

A

Yes! This is critical! If you cant handle occasional large losses, don’t trade with larger stops. Countless other analogies apply.

189
Q

Do you need an “edge” to succeed trading?

A

Yes! If you can’t easily explain your edge to laymen, you don’t have an edge. Much like “If you look around and you don’t see the ‘fish’, you’re the ‘fish.’”

190
Q

Do you need to derive a trading method? Must this method have and edge?

A

Yes and yes. This method must suit you though, personalize it.

191
Q

Is developing a successful method hard work?

A

Extremely, expect the process to take lots of time and hard work. Expect many dead-ends and multiple ‘failures’ before you find a successful trading approach.

192
Q

Should good trading be effortless?

A

Yes, the hard work is in having the vision, creativity, persistence, drive, desire, commitment, etc. The execution should be smooth, effortless. Much like a good stroke applying draw to a cue-ball.

193
Q

What are three money management and risk control tips?

A

Never risk above 5% equity per trade. Pre-determine your entry, exit, stop, and reverse points prior to the trade. If you lose a predetermined percentage of your starting capital (i.e. 10% - 20%) take a breather. Figure out what you’re doing wrong.

194
Q

Does successful trading require a trading plan? What does a trading plan require?

A

Yes, a trading plan requires a synthesis of your personal trading method with specific money management and trade entry rules.

195
Q

Discipline is a critical component to all successful traders. What three things is it primarily needed for?

A

Risk control, application of your method without questioning your commitment, and to keep bad trading habits at bay.

196
Q

Who’s fault is it when you are wrong on a trade?

A

Only your own. You will not find a successful trader who blames anyone but themselves. The flip side is that only you are responsible for your successes.

197
Q

Should you consider listen to other’s opinions when trading in the market?

A

Absolutely not, you need to think for yourself independently. Even “tips” from a much better trader can lead to devastating results.

198
Q

Is confidence requires for successful trading?

A

Yes, you must believe that you have already won before the “game” even starts. It will give you the strength to make tough calls and not panic.

199
Q

Is losing part of the game?

A

Yes, losses are inevitable, its your job to minimize them with proper risk control. You can not have a fear of losses, it’s a sure way to failure.

200
Q

Should you trade if you’re lacking confidence or feel like you can’t get it right?

A

No, take a break. Ease back into the market slowly.

201
Q

What should you do if you have the urge to seek advice?

A

Liquidate that trade, oftentimes the mere doubt of yourself is a sure sign to get out.

202
Q

Do you always need to be in the market?

A

No, understand the virtue of patience. Like a hunter waiting patiently for prime game to pass by.

203
Q

What is the importance of “sitting?”

A

You must know when to sit and refrain from the market, as well as when to sit and let your winners run. Novices go broke by not cutting losses, pros go broke by taking small profits.

204
Q

What are low-risk ideas? Should you develop them?

A

Low risk ideas have extremely specific criteria and are paired with risk tolerance. I.e. open a donut shop next door to a police station.

205
Q

What is the importance of varying your “bet” size?

A

You don’t go all in on a pair of two’s. Vary your bet size proportionately to your EGPT (expected gain per trade) for each strategy. Some traders are known to vary their bet size by as much as 100 to 1.

206
Q

What is the benefit of scaling out of trades?

A

It allows you to lock in a majority of your profits while still partaking the rest of the more risky move.

207
Q

Which is more important: being right or being a genius?

A

Being right; don’t get caught up trying to pick exact tops / bottoms to maximize profits. Focus on consistency, not “trick shots.”

208
Q

Should you worry about looking “stupid?”

A

No, but avoid talking about your trades. It just complicates things. However, don’t hold on to a position just because you don’t want to look dumb.

209
Q

Should you always wait for a price correction before entering a position to get a better price?

A

No, this is often the wrong thing to do. If you believe that the market has major potential, enter at market value.

210
Q

Is it okay to just catch part of the move?

A

Yes! The goal is to make money! Don’t be shy about mid-trend entry. Find reasonable entry strategies and go for it.

211
Q

Which is more important: how many wins you have, or how big your wins are?

A

The size of your wins; don’t take small profits on major investments. Maximize gains, not your number of wins.

212
Q

Should you be open minded?

A

Yes, if a trade warrants a reversal of your position, go for it.

213
Q

Should you tolerate more risk on a trade just because you’re net-profit on it?

A

No, that’s money in your pocket. Treat it as a normal trade.

214
Q

What two ways should you avoid “hope?”

A

Don’t “hope” the market will bounce back - cut your losses short. Also, don’t “hope” for a price correction so you can get a better price and high potential stock - just go for it.

215
Q

Should you act based on comfort?

A

No, act based on what’s right. Oftentimes, the uncomfortable thing is the right thing to do.

216
Q

Should you risk money you can’t afford to lose?

A

Absolutely not, that’s a recipe for disaster. You can’t win if you “have to” win.

217
Q

Should you think twice when the market lets you off the hook “easy?”

A

Yes. For example, you held a position over the weekend and news came out that should cause the price to plummet before market open on Monday. But come Monday the price isn’t even near your stop, you should hold because it’s resistance to the news is intrinsic strength.

218
Q

Is the mind a terrible thing to close?

A

Yes, it’s like a parachute; its only good when it’s open.

219
Q

Are the markets an expensive place to look for excitement?

A

Very; don’t trade for excitement, trade to win.

220
Q

What is the successful state of a trader?

A

Calm, like a professional pool player. Take the “Oh… look at that” approach. Remain calm and detached.

221
Q

Is stress a good sign in trading?

A

Absolutely not, immediately identify the cause and fix it.

222
Q

Should you pay attention to intuition?

A

Yes, intuition is your subconscious communicating with you.

223
Q

What is the most important part of trading?

A

You must love what you do. You need a passion for it. You can’t win if your heart isn’t in it.

224
Q

What are the six elements of achievement?

A

Have goals and avoidances
Strive for your best, anything less is not acceptable
Break huge goals into chunks, gain satisfaction from each chunk
Focus on the task at hand, not the end goal
Only rely on yourself to achieve goals
Make self-to-self comparisons to measure progress

225
Q

Are prices random? Can the markets be beat?

A

They are not random, you can beat them. It won’t be easy, but with hard work, dedication, and determination, you can live the dream.

226
Q

Should you keep trading in perspective?

A

Yes, there is much more to life than trading.

Stock Market (3 decks)

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