Before I continue, allow me to rate this book at 10/10. After last excellent read, this book is on par with the last book. The author although presented only 4 "mistakes"; the whole book covered all the necessity and basic traits for traders to be success in the world of trading. I myself spend a lot of time in digesting this book. The sub chapter on "capital requirement" really attracted my attention since it brought some new ideas and really opened up my mind on new possible stuff. As such, I really appreciate that mistake no 2 on "Using too much leverage".
Overall, although this book focus much on theoretical stuff with some repetition from other similar books, I personally like it so much that I really highly recommend this book to any traders throughout the world. The theory mentioned worth to reread once a while for refreshing purpose as well as a good reminder. Thumbs up to the author in producing such a simple, yet excellent write up! Since it is an excellent book.... of course there are some good quotes for future references... Here we are:
The test to tell you if you are truly prepared emotionally and financially to trade futures:
Step 1: Go to your bank on a windy day.
Step 2: Withdraw a minimum of $10,000 in cash.
Step 3: Walk outside and with both hands starting throwing your money up into the air. '
Step 4: Go home and sit down and calmly say, "Gosh that was foolish. I wish I hadn't done that."
Step 5: Get on with your life.
The impact of failing to carefully consider capital requirements for trading a given portfolio can be disastrous.
The only reason to venture into something as risky as futures trading is to earn above average rates of return.
No matter how profitable a particular trading approach may be, if the day-to-day volatility of returns is too great there is a chance that you may stop trading due to either lack of trading capital or a lack of emotional wherewithal.
The market you are trading just seems to know where your stop is and trades to or just beyond that price just long enough to stop you out, before merrily resuming the trend that you had anticipated in the first place. If you place stop loss orders in the market you had better just get used to this cruel twist of Murphy's Law because it is not an uncommon occurrence.
The most cruel paradox in futures trading is that a trader's short term successes can plant the seeds of his long-term failure.
Intelligence can be an obstacle to trading success. Well, one thing that intelligent people do is to analyze things more deeply than others. In future trading such a propensity can be a very dangerous thing since future markets do all kinds of unpredictable things.
In future trading trying to understand exactly why something is happening can be a costly exercise in futility.
In every other endeavor we are taught to think first, then react. In futures trading - with a caveat to follow - you are often far better off reacting first and then think later.
To the undisciplined trader a quote machine can be the equivalent of a slot machine. You see the opportunities flashing before your eyes and you feel compelled to play.
The danger is that if you are constantly tinkering with your existing system, then you may never truly develop the confidence in it that you need to have in order to stick with it when the going gets tough.
"If you get signal to go short on the next day's open and the market gaps sharply lower the next day, the easiest thing to do is to not make the trade. The hard thing to do - and the right thing to do - is to make the trade anyway." ~~~ Richard Dennis.
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