0071713166.pdf by Tharp Van K

Author:Tharp, Van K.
Language: eng
Format: epub
Published: 2009-08-11T03:55:43+00:00

N What do I believe about trading?

N What trading concepts do I believe work?

N What risk management principles work?

N How do the best traders trade?

N Who are some of the best traders, and what do they believe that I believe?

N What are the secrets to making money in the markets?

N What have I read lately about trading that resonates with me?

N When I try to predict what a stock will do from a chart, what concepts come up for me?

Market Beliefs 111

To give you a sample, here is a list of my beliefs, one from almost every category:

1. I believe we are in a long bear market in which market valuations (price/earnings ratios) will go down to the single-digit range.

2. I believe that whenever you enter a trade, you must know the point at which you are willing to say, “I was wrong about this trade” and get out. This is your stop loss point.

3. I like to trade stocks that are very efficient (i.e., moving up with very little volatility).

4. Sometimes there are a lot of efficient stocks to select from, and sometimes one cannot find any.

5. When you get stopped out of a trade, make sure (if you can) that you don’t lose more than 1% of your equity in that trade.

6. The best traders trade by finding a niche that fits them and then becoming an expert in that niche.

7. One of the secrets to making money is to have well-thought-out objectives and then understand that you meet those objectives with position sizing.

8. What have I read about trading lately that resonates with me? I just noticed a Warren Buffett quote: “Diversification is a substitute for not thinking.”

Each belief fits me. They may not fit you at all; however, I believe that you’ll have trouble as a trader/investor if you ignore some of those beliefs (i.e., the second, fifth, sixth, and seventh). But that’s another story. Anyway, your job is to now write down 10 to 15 beliefs from each category.

When you’ve finished the exercise, look over each belief and run it through the Belief Examination Paradigm: N Who gave me the belief—where did it come from?

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