10 Trading Lessons I Wish I Had Learned 20 Years Ago

by Darrin Donnelly on April 4, 2016

I wish I’d learned the following 10 lessons before I ever made a single trade.  I’d be a much wealthier man if I had.

If you can hammer these lessons into your head, you’ll save yourself from a lot of unnecessary suffering as a trader.

1)  Trying to “get a feel” for trading is just an excuse for not putting in the time, study, and commitment to learning a system that actually works.

2)  There is no ONE system or philosophy for making a living as a trader.  The key is to find the proven system that fits best with your personality.  And then stick with it! [click to continue…]

What March Madness Can Teach You about Successful Trading

by Darrin Donnelly on March 21, 2016

Nicolas Darvas described himself as a “techno-fundamentalist.”

He based his trading strategy, the Darvas System, on a combination of BOTH technical analysis and fundamental analysis.  This reliance on both types of analysis separated Darvas from many trend traders, back then and still today.

Some trend traders rely exclusively on technical analysis and disregard the fundamentals.  They believe that every fundamental that can be known about a stock – past earnings, projected earnings, market direction, market outlook, etc. – is already reflected in the actual price of the stock.

This reasoning seems logical.  However, I think the viewpoint misses something key.

Yes, the technicals ARE more important than the fundamentals to a trend trader.  That is, no matter how great the fundamentals look, if the technicals are poor, the stock needs to be avoided.  You can’t “force” the technicals to match up with the fundamentals no matter how much you think (or hope) they should.

However, traders who have learned to properly recognize trends and technical patterns can take their success rate to a much higher level when they add fundamental analysis to their repertoire.

The NCAA basketball tournament offers us a helpful analogy. [click to continue…]

Do What You Love and the Money Will Follow

by Darrin Donnelly on February 24, 2016

Jack Schwager is one of my favorite writers. His Market Wizards line of books is MUST reading for anyone interested in trading. The five books in this series are made up of interview after interview with the world’s most successful traders. You’ll find plenty of trading advice and endless motivation in these essential books.

You’ll also find advice on how to be successful at anything else you do in life. In these books, I’ve found that some of the shortest answers to Schwager’s questions offer the most profound advice on living a successful life.

In Hedge Fund Market Wizards, two short question-and-answer exchanges reveal what I believe to be one of the most honest answers about life’s “secret to success.” [click to continue…]

How to Determine the Health of the Market

by Darrin Donnelly on February 16, 2016

Nicolas Darvas (along with so many other legendary traders) said that knowing the health of the general market was CRUCIAL to his strategy’s success.  Darvas knew that one couldn’t rely solely on the action of individual stocks.  The market’s overall direction had to be clearly determined before Darvas would make a trade.

Determining the health of the market isn’t as easy as it sounds.

In hindsight, anyone can see when the market was bullish, when it was bearish, and when it was choppy.  You simply look at a long-term chart and say, “Here’s where it was going up, here’s where it was going down, and here’s where it was moving mostly sideways.”  Sounds simple enough, right?

But when you’re trading the market every day and you’re in the heat of the battle, it can be much more difficult to rationally decipher just how healthy or unhealthy the market is.   [click to continue…]

How to Set Trading Goals

by Darrin Donnelly on January 6, 2016

I’m a big believer in the power of goal setting. There’s plenty of data to back up the fact that people who set and write down clear goals are much more successful than people who don’t.

However, traders need to be careful about HOW they set goals. Many traders start the new year, quarter, or month by setting a goal of achieving a specific percentage return on their portfolio. For instance, a trader may set a goal of making a 100% gain in the next year.

Setting trading goals like that is a big mistake and here’s why. [click to continue…]

A Billionaire Trader’s Surprising Secret to Success

by Darrin Donnelly on July 28, 2015

Paul Tudor Jones II, one of the most successful traders ever.

Paul Tudor Jones II, one of the most successful traders ever.

Paul Tudor Jones II:
“The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. … If they are going against me, then I have a game plan for getting out.

“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. …

“My guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check.” [Source]

Paul Tudor Jones II is one of the wealthiest men in the world. Forbes says he’s worth $4.6 billion. He started out as a broker in the late 1970s and earned $1 million in his second year on the job. He decided he wanted to be a self-reliant trader instead. [click to continue…]