Markets exist for one purpose and only one purpose only—they exist to facilitate trade. Facilitating trade means that the markets will do anything they can to get individuals to participate in the market. How they do this is through movement. Markets move up and down searching for buyers and sellers. The crucial point here is that markets must move for their survival. Understanding this literally changed the way you think about the markets. Think about it. Markets have to move! This concept is major for anyone who has had to sit through a trend-following strategy trading in a sideways market. The knowledge that the market has to move eventually changes the way you look at trading.
I'm sure I'll keep a few, like the Market Wizard series. Most of the books on trading strategies I find pretty useless. However, I find value in those written about trading psychology. I'll let you know if I find anything worth keeping.
Mastering Your Inner Game All traders make mistakes, but the successful traders have learned how to manage their inner game. First you need to have an edge, a combination of good trading strategy and risk management. But it’s also critical to have the right mindset. It doesn’t matter how good you are at knowing how to trade if you can’t hold your wits together. Most novice traders are always looking for the “Holy Grail”. They chase the latest and the best charting software, newest indicators, data and news services, along with mentors and influencers. But what they don’t realize is that there is no magical “Holy Grail” because the market doesn’t care about you or whether you succeed or fail. The market's primary objective is to facilitate trades (see above). You can’t control the market. The market does what it wants to do. Nothing can be predicted with absolute certainty, only varying degrees of probability. You have been trained as you grew up not to make mistakes, and if you feel that you can’t control the outcome of a trade, then worry sets in. Your brain starts to project into the future and it’s seeing bad things on the horizon. So your brain becomes a negative assessment machine, and you continually traumatize yourself with worries and fear. And fear will eventually make you panic. Ninety percent of traders lose because they are making fear-based trades or impulse-based trades. On the fear side, they are afraid to pull the trigger at the right time, or they get out of trades too early. The impulse-based trader gets involved in revenge trading, throwing good money after bad. What you want is mindful trading where you make well-reasoned decisions with your emotions under control. Which fear keeps you up at night? Fear of uncertainty (hesitation) Fear of loss (pulling the trigger at the wrong time) Fear of missing out (impulse trades and exits) Fear based urgency to make up for prior losses (revenge trading) Fear of not being right (making a mistake) Fear of inadequacy (not feeling that you’re good enough to trade) Fear of self-sabotage (blowing yourself up) Fear of success or failure Fear of growth and change (moving out of your comfort zone)
Have you ever wondered why most traders consistently lose money? There are several reasons why this happens, but it’s usually because traders follow some outside system they picked up somewhere, and followed it blindly. It may work for a while, until it ultimately fails. Some traders can make a string of five or six good trades, but then give them all back on the seventh trade. Others try to time the market, and buy when the market is at its peak, while selling when the it is at the low. The Right Way to Trade The key to success is to strip away all of the external systems and to simplify your trading. The key to successful trading is not about making the most money but being consistent. First Rule: There is no such thing as OVERBOUGHT or OVERSOLD in the market. How many times have you seen a market rise, and just keep rising? You tell yourself it has to fall, but it just keeps going up. The same happens with markets that are oversold, and keep dropping for days or weeks. You need to develop a mindset that there is no such thing as overbought or oversold markets. Second Rule: The right way to trade Tops and Bottoms is to GO with them. Markets will go as high as they want, or as low as they want. Don’t try to stand in their way, or they will run you over. Go with the market.
POINTS AND TOUCHES If you read the available literature about point spacing and trendline touches, the authors say that point spacing is important and the more touches a trendline has the more significant it becomes. I have no idea what that means. Does significant mean that a breakout from a trendline with three touches declines less than a five-touch trendline?
When you watch an NFL football game, you would notice how the offense and defense are built around distractions and misdirections. It’s a game within the game. The stock market is no different. Technology has allowed noise into our lives for good and bad. Bankers, brokers, analysts, talking heads, tipsters, and the rest of old and new media are in the business of making noise, and hell of a lot of noise, in order to intentionally distract you.
The question then is how do you know that you know how to trade? "It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side (Greed) or the bear side (Fear), but the right side (Both). It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation." — Jesse Livermore
I agree the most useful thing is trading psychology. All technical stuff and trading strategies are good to know but changing all the time, so nothing is definitive about them. Below is a good trading psychology video that I found very useful and correct in the absolute sense - meaning it’s always 100% right.