Charts have always been an essential element for technical analysis. Traders use charts to organize data, extract meaningful information, and make effective trading decisions. Furthermore, dedicating effort to creating clean and easy-to-read charts may help you gain situational awareness and industry insight. Not to mention, colors, layout, typefaces, indicators, and overlays should all be carefully chosen while designing a chart. Today, we’ll discuss Renko Charts in detail.
What Is Renko Chart?
Renko is a type of chart that helps traders filter out small price movements and focus on more significant trends. Renko bricks create these charts after a price moves by a specific value. When a price of an underlying security rises, Renko bricks turn green while they turn red if the price falls. Hence, it becomes easy for traders to determine the price direction. Renko charts are known to be extremely useful in trading trends.
History of Renko Charts
Rice traders created brick charts hundreds of years ago. Instead of recording each price change, the merchants devised a technique to record only significant adjustments. Wisely, they saved time and resources.
The Japanese term Renko means both “brick” and “calm road”. A seamless model price change model with no sudden small movements is the essence of these charts. Traders were creating Renko charts manually on paper. Thanks to modern computing technologies that help traders create them automatically or with minimum manual input requirement.
Renko appeared for the first time in Steve Nison’s book titled “Beyond Candlesticks”. The financial expert detailed the fundamental Renko methods that many traders still utilize while trading Forex.
How Does Renko Chart Work?
Renko charts comprise bricks that move up or down at a 45-degree angle. While the bricks never face each other, traders select the chart’s brick size, and the time for new bricks is determined consequently.
Let’s examine the chart below for the Euro 50 Index to make it more simple to understand. A 35-brick size signifies that the price must move 35 points from the previous brick’s closing price to build new brick in the following direction. Since bricks cannot form next to each other, the price must move 70 points opposite to make a brick. The bricks in this example only emphasize 35-point advances. Notably, price moves of less than 35 points do not form new blocks.
The chart’s timescale is set as D1. So fresh new bricks for the Renko chart will only develop based on the day’s closing price. The price must drop 35 pips below the preceding red brick’s bottom to form another red brick. Because this is a daily time frame, the price might drop 50 points below that level, but no new brick is drawn if it closes fewer than 35 pips beneath the previous red brick.
Traders can change the timescale to anything from a second to a month. Choosing a minute chart means bricks are formed based on the minute’s closing price. Renko charts display price data for currencies, commodities, stocks, indexes, ETFs, and Treasury bills.
Develop an understanding of Renko Charts
Since Renko charts exclude minor price changes, they can effectively identify trends, and even traders can use them as a trailing stop-loss.
For example, the chart above indicates a prolonged upswing from mid-May to early June. Not to mention, the Renko chart never reversed. A trader maintaining this position might have made 385 points (11 x 35) before the appearance of the first red brick, signaling an exit as the downturn had begun.
Then came a prolonged fall in October, possibly signaling traders to short holdings and avoid purchasing. Also, traders who held long positions through green bricks saw steady returns.
But there is a downside as well. Between June and October, the Renko chart looks a bit messy. Trying to purchase or sell based on color or direction changes within this period could end up traders in frustration and financial loss. Therefore, it is always best to use Renko charts in conjunction with price action research and other trading systems rather than employing them individually.
A little about Renko Bars
Renko bricks are sometimes also known as bars or blocks. The name bar stems from bar charts, representing a period like a candlestick chart.
For instance, each bar represents 50 pips in the EUR/USD currency pair, as shown in the example below. We’ve also marked indicators of turbulence and trend reversals.
Comparison of Renko Charts with Other Indicators & Charts
Heikin Ashi Charts VS Renko Charts
Heikin Ashi chart averages recent price moves, whereas the Renko chart emphasizes the overall trend. This candlestick chart uses preceding candle values to provide a smoother average price than standard candlesticks.
The screenshot below displays the differences between them. While the left $1.50 Renko brick illustrates price activity for five months, the Heikin-Ashi chart presents price actions for crude oil for five months.
Candlestick Charts VS Renko Charts
Unlike Renko charts, Candlestick charts concentrate on timing and price information. A new candlestick develops after each specific interval, regardless of the price movement. Assuming at least one transaction in a trading day, a candle forms reflecting the day’s high, low, close, and open prices, as seen below.
On the other hand, Renko charts do not construct a new brick showing the daily high, low, closing, and opening points after every time lapse. Instead, it only produces a new brick after meeting the minimum movement threshold.
Given below are two cotton contracts shown in the graph. The chart on the left utilizes 1.00 Renko bricks, while the one on the right uses daily candlesticks.
How to trade using Renko Charts
Since clients can employ Renko Charts in different trading strategies, let’s go through a few of them below.
Charting Patterns
Renko chart patterns are comparable to candlestick chart patterns due to similar heads, shoulders, rounded tops/bottoms, triangles, etc. Unlike a candlestick chart, a Renko chart has fewer price changes, making such patterns simpler to notice. You can use different chart pattern scanners to recognize these chart patterns conveniently.
Renko trailing stops
Renko charts can assist traders in riding out a trend until a significant reversal occurs. Long-term trends can result in big gains.
Resistance & Supports
Renko charts assist traders in spotting resistance and support levels that a candlestick or bar chart may not show. A strong resistance level or support zone is indicated by Renko charts turning lower or higher. Traders might take short bets around resistance or purchase near support. In this region, keeping an eye on breakouts in the Renko charts might signal the beginning of a new trend.
Scalping using Renko Charts
A scalping strategy seeks to benefit from minor price swings multiple times a day. Renko charts can show broad trend direction, but they may not always be accurate because the bricks don’t refresh like candlesticks. Hence, using Renko charts for scalping might not be optimal for this method.
However, scalpers might arrange Renko bricks to develop in 30-minute increments or less. However, to emphasize tiny trends and reversals appropriate for scalping, traders can use the Renko charts.
Swing Trading Using Renko Charts
Renko charts can assist swing traders in capturing trends and holding positions until a significant reversal occurs. For example, while the price rises, the Renko chart creates green bricks until a specific size reversal. That’s how swing traders can predict the size of the price reversal. When it happens, they might choose to exit their long positions.
Indicators such as Renko or candlestick charts might operate as trading triggers. Swing traders can also take short positions when the price is stalled at resistance and hold them until the price declines to support or the Renko chart reverses. Not to mention, a comparative approach would be to go long near support.
Renko Chart Limitations
Due to their lack of emphasis on time, Renko charts lack detail. A stock that has ranged for a long time might produce a single box, not telling the entire story. Renko charts may help some traders in such a scenario, but others are likely to suffer.
Renko charts often ignore highs or lows and consider closing prices only. Hence, it omits a lot of pricing data because prices for highs/lows could differ significantly. Although closing prices help traders reduce noise, it can dramatically reduce the price before a new box emerges and warns the trader. By then, avoiding a loss might become too late. Therefore, traders employing Renko charts commonly use stop loss to predetermined levels rather than relying on Renko signals only.
In Renko Charts, sometimes a whipsaw effect occurs, leading to false information, especially when the bricks start changing colors too early due to the chart’s design. That’s why it’s best to use Renko charts as a confluence along with other technical indicators/confirmation signals for the trade setups based on your trading plan.
How to set up Renko Charts on MT4?
MetaTrader 4 (MT4) platform doesn’t come with a built-in feature of Renko Charts. However, customers may download it as third-party tools and indicators. There are multiple Renko chart indicators in MT4’s “CodeBase” tab. You may choose to display the Renko chart as an indication downside of the charting area.
Trading on MT4 with third-party software is risky since the writer’s market knowledge, and coding competence needs to be factored in. It is better to download it from the community website www.mql4.com. (For mt5 check out, www.mql5.com)Furthermore, Renko chart indicators also come with unique setup requirements.
Pros and Cons of Renko Charts
If you employ Renko charts instead of typical bars, you are likely to find them incredibly useful for price analysis. But these charts also have a few demerits of using them. Let’s have a quick look at both pros and cons of Renko Charts below.
Pros
1. It becomes pretty easy to determine the market’s trend and trade routes using Renko charts.
2. Renko charts are easy to interpret since the change in color of a chart brick indicates sell or buy.
3. Renko chars are ideal for trading resistance and support regions (including breakouts).
4. Renko charts deliver more vital trading indications than Japanese candlestick charts without evaluating volumes.
5. Renko charts come with easy recognition of visual patterns and generate quality signals.
Cons
1. Smoothing reduces both market noise and helpful volatility. As a result, trading only bricks causes issues with leading signal interpretation.
2. The bricks indicate lagging patterns. Each time the latency varies. It is evident during consolidation.
3. It is not feasible to employ indicators directly linked to trade volume and time scale.
Conclusion
Losing trades is part of a trader’s life irrespective of the strategy or chart type. However, traders can always control the risk exposure and how much money they are willing to lose on failing trades. Therefore, adding a stop loss to your trades will be of tremendous significance in managing your risk.
Visit our website to learn how to use different forex trading tools and indicators. In addition to providing educational resources, we also finance traders who can prove their ability. Check out our funding plans if you are interested in trading with a large sum of capital.
Frequently Asked Questions – (FAQs)
What time scale works best for the Renko chart?
There is no specific time for incorporating Renko charts. Instead, you can use them on any time scale. However, short periods benefit the most from these tools since the market noise is typically higher than daily or weekly time frames.
How to calculate Renko Chart?
New bricks emerge when the price moves by more than the size of a brick, as set by the trader or the ATR indicator connected. The chart’s susceptibility to market noise varies depending on brick size.
What are the best indicators that investors should use in conjunction with the Renko indicator?
Renko bricks work nicely with all price movement indicators that ignore trade volume, including Bollinger Bands, RSI, MACD, etc.
How to pick the size of a Renko box?
The appropriate brick size is chosen manually or using ATR based on the asset’s current value. In the latter situation, the market volatility determines the size of a Renko box.
How can I trade Renko charts successfully?
Trend techniques work best when paired with additional indicators and chart pattern analysis. Clients usually trade Renko charts with Japanese candlesticks, called Heiken Ashi.
How does Renko bar work?
The bricks indicate the change in price without volatility. That’s how spotting the pattern becomes much more manageable. Since the bricks are not time-restricted, one brick might be drawn for minutes or days, depending on its size and market activity.
Where can I find the Renko chart in MT4?
Unfortunately, the Renko indicator isn’t a default feature in MT4. But you can get it from third-party resources. You can also find upgraded indicators that indicate bricks as transparent rectangles or even colorful lines.
Volatility refers to the frequency and magnitude of price changes of financial instruments. An asset is said to be highly volatile if its price swings a lot over a short period, such as one day. Contrary to this, there is no volatility if the asset price does not move within a short span. The forex market is known to have increased volatility levels. While volatility help scalpers find multiple trading opportunities and make quick profits, it can also lead them to incur severe trading losses if the market moves unfavorably. In this article, we discuss the most volatile currency pairs in detail.
What are the most volatile currency pairs, and how to trade them?
Traders employ various trading strategies to trade and benefit from the forex market volatility. For instance, standard deviation and price variance help traders predict how much an underlying currency pair will fluctuate over a specific time. Investors can also evaluate FX volatility by observing the currency pair’s true range or the percentage of the spot range. The volatility of different currency pairs varies. The higher a currency pair is volatile, the more significant risk it carries and vice versa. Given below is the list of the most volatile currency pairs.
Australian Dollar/Japanese Yen – AUD/JPY
Canadian Dollar/Japanese Yen – CAD/JPY
Australian Dollar/Pound Sterling – AUD/GBP
New Zealand Dollar/Japanese Yen – NZD/JPY
Australian Dollar/US Dollar – AUD/USD
On the other hand, The liquidity and volatility of other major forex pairs, such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF, are relatively lower. Notably, emerging market currencies, such as the USD/ZAR, USD/MXN, and USD/TRY are known to have the world’s highest volatility levels.
As a result of the inherent risk in emerging market economies, their relative currencies are considered exceedingly volatile. The US Dollar/South African – USDZAR chart below shows how volatile developing market currencies can be, with the USD/ZAR rising by roughly 25% in just over a month. That’s not the first time a currency pair from an emerging market has swung dramatically.
For forex traders, present volatility readings and potential volatility changes hold critical significance while making trades. Traders should also modify their positions according to the currency pair’s volatility. Reducing your position size might become necessary when trading highly volatile currency pairs.
This knowledge helps traders set suitable stop loss (SL) and take profit (TP) limit orders based on volatility. Investors should also understand the key characteristics of the most volatile and least volatile currencies. In addition, traders need to be able to gauge volatility and be alert to any events that could cause it to spike or plummet significantly.
How to measure a currency pair’s volatility?
Traders need to evaluate the volatility of a currency to establish the appropriate position size. Investors can employ various indicators to measure a currency pair’s volatility, including but not limited to the Average true range (ATR), Donchian waterways, and Moving Average indicators. Volatility implied readings, which indicate the predicted degree of volatility obtained from options, are another option for traders to investigate.
Please note that market volatility has several implications for traders.
Important socioeconomic events can significantly affect a currency’s volatility, such as trade wars and Brexit. Volatility can be influenced by data releases as well. An economic calendar can help traders remain on top of upcoming data releases.
Many technical components of trading, such as resistance and support levels, trendlines, and price patterns, still apply to volatile currency pairs. A mix of technical analysis and risk management concepts can help traders cater to the market’s volatility and use it.
Traders need to stay abreast of the latest FX news, research, and rates to anticipate probable volatility shifts. Various online sources provide information related to trading, such as our Academy, helping you make informed trading decisions when dealing with the most volatile currency pairs. Learn more about forex and refine your trading tactics with the help of Traders Central.
Which currency pairs are the least volatile?
When it comes to currency pairs, the most stable currencies happen to be the most liquid ones. This is because, besides being large, these economies are typically more developed. As a result, more trading volume is generated, resulting in a more stable price. Therefore, it shouldn’t be surprising that EUR/USD, EUR/GBP, and USD/CHF are some of the least volatile currency combinations.
According to the chart below, USD/CHF has a low ATR (Average True Range) compared to other currency pairs. You can measure volatility in various ways, including the currency pair’s true range. To determine the FX pair’s volatility, investors can also use the Bollinger Bandwidth (another commonly used technical indicator).
The volatility of two currencies can also have a correlation impact. The more favorably connected two currencies are, the less volatile they may be. Notably, the US Dollar (USD) and Swiss Franc (CHF) are considered safe-haven currencies.
It is not uncommon for the USD and CHF to rise against their sentiment-linked counterparts when the market suffers periods of risk aversion. As a result, the USD/CHF has a low level of volatility.
What is the difference between trading the most and least volatile currency pairs?
Highly volatile currencies tend to move more pips than those with low volatility over a short period. Moreover, trading volatile currency pairs carries excessive risk.
Slippage is more likely to occur when trading high-volatility currency pairings than low-volatility currency pairs.
Trading high-volatility currency pairs necessitate determining the appropriate position size.
How has the FX market’s volatility changed over the previous years?
Over the recent years, bond investors have turned to FX trading, spotting market trends due to a lack of activity in fixed income markets. That became the turning point for the enormous but typically obscure foreign currency markets.
During the COVID-19 outbreak, central banks bought bonds at around $2 billion per hour, crushing volatility and reducing its usefulness as a signaling tool. In addition, the collapse of Interest rate differentials made currency markets more unpredictable than before.
Investors now believe that a currency market alternative is always available if bond markets get shattered. Clients now look upon currencies to predict market moves instead of focusing on the bond market projections. The volatility of numerous currencies, including the US dollar (USD), the Chinese yuan (CNY), the Euro (EUR), and the British pound (GBP), has increased, according to a State Street index of goods prices.
How can investors find updated information concerning possible currency market fluctuations?
Traders can find updated information on multiple financial websites featuring economic calendars, such as FXStreet.com, DailyFX.com, etc. Knowing forthcoming significant event risks can help traders avoid trading mistakes.
Forex traders should know the event risks that affect major currencies. Moreover, investors trade the news because it may enhance short-term volatility. Thus they want to trade news with the most market-moving potential.
Price action and volatility are often driven by:
Monetary policy changes
Economic data surprises
Global leader tweets
Fiscal policy shifts
Economic Calendar covers major events and economic data from the most-traded nations. It helps you determine each event’s relative significance. Traders can also filter out the economic calendar by the level of the potential impact of the upcoming news on the currency market. By choosing “HIGH,” you can see events known for triggering higher volatility in the forex market.
If you explore the Economic Calendar, you’ll see that the most significant events relate to inflation, economic growth, interest rates, retail sales, manufacturing, and consumer confidence. For example, Central bank rates, Labor statistics, Growth (GDP), Balance-of-trade, etc.
All these economic releases’ relevance may fluctuate depending on global events. For instance, Interest rate choices may be the emphasis at one moment but not at another. Therefore, staying abreast of the market is crucial.
To learn more about trading markets, check out our Academy. We have a wide range of educational resources, across all financial markets, including currency, indices, stocks, and cryptocurrencies. We also help competent traders reach their full potential with our funding solutions.
Whether you are an active day trader or have invested some funds in the stock market, you might be aware that the stock market doesn’t open all days a week, limiting the number of trading days each year. This article will debrief how many trading days there are in a year. We’ll also discuss why trading days fluctuate and who defines trading schedules, and what factors can impact how often you trade. But first, let us explain a trading day.
Image Source: Swingtradesystems.com
What Is a Trading Day?
A trading day refers to any day when the stock market is open. Unless there is a big event at a national level, such as National Holiday, the market usually remains open from Monday through Friday. It is worth mentioning that regular trading hours (RTH) are different from electronic trading hours (ETH).
From 9:30 am until 4:00 pm, the Nasdaq and the NYSE exchanges remain open for business. The trading day begins and closes with the bell’s ring in most cases. As soon as the closing bell sounds, all trading ceases and resumes on the next day.
Sometimes the stock market remains closed even on weekdays. For instance, a funeral of a state’s head is a public holiday or a day designated for a state event. Also, the market may shut down at 1:00 pm instead of 4:00 pm due to unavoidable circumstances, like an emergency.
How many trading days are there in a year in the United States?
Usually, a trading year averages 252 days, or 21 days per month and 63 days every quarter. However, the numbers keep fluctuating from year to year. For instance, there were 252/365 trading days in 2019 and 253 in 2020 since it was a leap year. Last year had 252 trading days. March had the most 23, while other months averaged 21 days per month, or 63 days each quarter. Notably, 104/365 days were weekends, besides 09 market holidays in 2021.
Below is the simple equation you may use to find the number of trading days in a year.
Total trading days per year = Trading days – (Weekends + Holidays)
= 365 – (104+9)
= 252
Who defines trading hours?
The primary stock exchange in each nation sets the trading timetable for the stock market. The NYSE determines the trading timetable in the US, and most other stock exchanges follow it for both days and hours. In addition to trading hours Monday through Friday, the NYSE practiced a two-hour trading session every Saturday until 1952. However, the NYSE and other US exchanges now stick to Friday – Mon trading schedule.
The New York (NY) time zone is the base of the trading hours. Hence, traders from other time zones must trade during the NYSE’s trading day. These exchanges allow remote trading via electronic platforms, but only during designated market hours. The NYSE remains open between 9:30 am to 4:00 pm ET for those not in the Eastern Time Zone. In California, the market timings are from 6:30 am to 1:00 pm.
Why does the number of trading days vary?
As mentioned earlier, the number of trading days varies annually. This variation can be due to holidays, weekends, leap years, or significant events. Let’s have a quick look at each of the listed variables.
Holidays
In 2021, the US had several federal holidays like Columbus Day and Veterans Day. However, the stock market didn’t close on all of them except the Good Friday, a non-government holiday. The stock market has nine annual holidays in the year, which are as follows:
Jan 01, 2021 – New Year’s Day
Jan 18, 2021 – Jr. Martin Luther King’s Day
Feb 22, 2021 – Presidents’ Day
Apr 02, 2021 – Good Friday
May 31, 2021 – Memorial Day
Jul 04, 2021 – Independence Day
Sep 06, 2021 – Labor Day
Nov 25, 2021 – Thanksgiving Day
Dec 25, 2021 – Christmas Day
Note: The stock market observed any holiday falling on a weekend on the last day of the previous week or the first day of the following week.
Weekends
As stated previously, the US market has nine official holidays, and you might wonder why the number of trade days changes when the same number of holidays are honored each year? The answer is in the number of weekends every year.
Yearly weekend days vary based on when the year’s first-weekend fall. Even though it’s a leap year, business days get reduced if the year begins on a Saturday.
Major Events
The stock market might close unexpectedly due to major national events not foreseen in the trading schedule. For example, on Dec 05, 2018, the US stock market closed to mourn former President (George H.W. Bush). The market also remained closed in 2012 for two days due to Hurricane Sandy and four days in 2001 due to the terrorist attack on Sep 11, 2001.
Leap Year
Leap years have one extra day every four years. This extra day increases the total number of trading days per year. For example, 2020 had 253 trading days. However, a weekend starting on Saturday can prevent a leap year from adding an extra trade day.
Do you trade every day?
Since now you know how many trading days are there in a year, you might ask if you can trade on each one? Even for day traders, that isn’t certain. Factors that generally restrict the number of business days each year include.
Unexpected events
Important family reunions, dental appointments, illness, or other occasions might keep you from trading. Therefore, the chances are that you might not be able to trade, even if you wish.
Stalemates
A devastating defeat or a losing streak usually necessitates some time off. Doing so allows you to de-escalate and restore emotional control.
Vacations
Being a day trader is demanding, especially when constantly checking your trading screen for excellent trade setups and maintaining open positions. Vacation time is quite beneficial but will undoubtedly decrease your trading days.
Trading Style
If you are a day trader, you probably find yourself entering trade setups on almost all trading days. However, that might not be the case for swing traders. They won’t trade on all trading days unless they find setups that fit their plan, which may not be that frequent.
We understand trading knowledge is not always the limiting factor, but undercapitalization can indeed affect your trading performance, making you want to flip a small account fast. We want to extend our support to them by providing them with the funding solutions they require. If you are a consistent trader but are undercapitalized, check out the funding solutions by Traders Central to see if that’s something that fits you.
“It’s not always easy to do what’s not popular, but that’s where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized”
– John Neff
“Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pay it.”
– Albert Einstein
“I have two basic rules about winning in trading as well as in life: a) If you don’t bet, you can’t win. b) If you lose all your chips, you can’t bet”
– Larry Hite
“The trend is your friend until the end when it bends”
– Ed Seykota
“Today, people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value”
– Warren Buffet
“The goal of a successful trader is to make the best trades. Money is secondary”
– Alexander Elder
“Amateurs think about how much money they can make. Professionals think about how much money they could lose”
– Jack Schwager
“You create your own game in your mind based on your beliefs, intents, perception and rules”
– Mark Douglas
“There is a time to go long, a time to go short, and a time to go fishing”
– Jesse Livermore
“If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.”
– Bill Lipschutz
“Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you”
– Larry Hite
“Remember that stocks are never too high for you to begin buying or too low to begin selling”
– Jesse Livermore
“It is the job of the market to turn the base material of our emotions into gold”
– Andrei Codrescu
“You get a recession; you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets”
– Peter Lynch
“I have found that when the market’s going down, and you buy funds wisely, at some point in the future, you will be happy. You won’t get there by reading. Now is the time to buy”
– Peter Lynch
“The market can stay irrational longer than you can stay solvent”
– John Maynard Keynes
“Invest for the long haul. Don’t get too greedy and don’t get too scared”
– Shelby M.C. Davis
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute”
– William Feather
“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.”
– George Soros
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”
– Paul Samuelson
“A handful of men have become very rich by paying attention to details that most others ignored”
– Henry Ford
“The stock market is a device for transferring money from the impatient to the patient”
– Warren Buffett
“All the math you need in the stock market you get in the fourth grade”
– Peter Lynch
“If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume”
– Benjamin Graham
“A company has only so much money and managerial time. Winning leaders invest where the payback is the highest. They cut their losses everywhere else”
– Jack Welch
“We are in the business of making mistakes. Winners make small mistakes; losers make big mistakes”
– Ned Davis
“In the short run, a market is a voting machine, but in the long run, it is a weighing machine”
– Benjamin Graham
“There’s no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or worse, to buy more of it when the fundamentals are deteriorating”
– Peter Lynch
“The big money is not in the buying or the selling, but in the waiting”
– Charlie Munger
“Seek advice on risk from the wealthy who still take risks, not friends who dare nothing more than a football bet”
– J. Paul Getty
“You make most of your money in a bear market; you just don’t realize it at the time.”
– Shelby Cullom Davis
“A peak performance trader is totally committed to being the best and doing whatever it takes to be the best. He feels totally responsible for whatever happens and thus can learn from mistakes. These people typically have a working business plan for trading because they treat trading as a business”
– Van K. Tharp
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”
– Warren Buffett
“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliché, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short”
– Victor Sperandeo
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ” – Warren Buffett
“Money is made by sitting, not trading”
– Jesse Livermore
“That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”
– Paul Tudor Jones
“I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell”
– Tom Basso
“The goal of a successful trader is to make the best trades. Money is secondary”
– Alexander Elder
“You only have to do very few things right in your life so long as you don’t do too many things wrong”
– Warren Buffet
“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages”
– Jesse Livermore
“It’s not what we do once in a while that shapes our lives. It’s what we do consistently”
– Anthony Robbins
“ It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently”
– Warren Buffett
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have”
– Paul Tudor Jones
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
– Warren Buffett
“You have to identify your weaknesses and work to change. Keep a trading diary – write down your reasons for entering and exiting every trade. Look for repetitive patterns of success and failure”
– Alexander Elder
“It is always the best discretion to let the market show us where it is going and just simply follow, rather than predict where the market is going and place a position”
– Anne-Marie Beiynd
“In trading/investing, it’s not about how much you make but rather how much you don’t lose”
– Bernard Baruch
“If a trader is motivated by the money, then it is the wrong reason. A truly successful trader has got to be involved and into the trading, the money is the side issue. The principal motivation is not the trappings of success. It’s usually the by-product”
– Bill Lipschutz
“The core problem, however, is the need to fit markets into a style of trading rather than finding ways to trade that fit with market behavior”
– Brett Steenbarger
“My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks”
– Bruce Kovner
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that”
– Charlie Munger
“Timing, perseverance, and ten years of trying will eventually make you look like an overnight success”
– Christopher Isaac Stone
“Trade What’s Happening… Not What You Think Is Gonna Happen”
– Doug Gregory
“I set protective stops at the same time I enter a trade. I normally move these stops to lock in a profit as the trend continues”
– Ed Seykota
“The fundamental law of investing is the uncertainty of the future”
– Peter Bernstein
“If you can’t take a small loss, sooner or later you will take the mother of all losses”
– Ed Seykota
“By living the philosophy that my winners are always in front of me, it is not so painful to take a loss”
– Martin Schwartz
“Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected”
– George Soros
“Risk no more that you can afford to lose, and also risk enough so that a win is meaningful”
– Ed Seykota
“An average trader loses money, so in this profession, you need to be way above average to make consistent money trading the markets”
– Henrique M. Simões
“Win or lose, everybody gets what they want from the market. Some people seem to like to lose, so they win by losing money”
– Ed Seykota
“It’s not whether you’re right or wrong that’s important, it’s how much money you make when you’re right and how much you lose when you’re wrong”
– George Soros
“Accepting losses is the most important single investment device to ensure the safety of capital”
– Gerald M. Loeb
“There is no single market secret to discover, no single correct way to trade the markets. Those seeking the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer”
– Jack Schwager
“Trader has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit”
– Jesse Livermore
“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”
– Jim Rogers
“The hard work in trading comes in the preparation. The actual process of trading, however, should be effortless”
– Jack Schwager
“Successful investing is anticipating the anticipations of others”
– John Maynard Keynes
“I have learned through the years that after a good run of profits in the markets, it’s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it”
– Martin Schwartz
“By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical”
– Larry Hite
“Frankly, I don’t see markets; I see risks, rewards, and money”
– Larry Hite
“I get real, real concerned when I see trading strategies with too many rules”
– Larry Connors
“If you don’t respect risk, eventually they’ll carry you out”
– Larry Hite
“All you need is one pattern to make a living”
– Linda Raschke
“If you can learn to create a state of mind that is not affected by the market’s behavior, the struggle will cease to exist”
– Mark Douglas
“What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower”
– William O’Neil
“Why do you think unsuccessful traders are obsessed with market analysis? They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist”
– Mark Douglas
“A great trader is like a great athlete. You have to have natural skills, but you have to train yourself how to use them”
– Martin Schwartz
“I always laugh at people who say, “I’ve never met a rich technician.” I love that! It’s such an arrogant, nonsensical response. I used fundamentals for nine years and got rich as a technician”
– Martin Schwartz
When in doubt, get out and get a good night’s sleep. I’ve done that lots of times and the next day everything was clear… While you are in the position, you can’t think. When you get out, then you can think clearly again”
– Michael Marcus
“Learn to take losses. The most important thing in making money is not letting your losses get out of hand”
– Martin Schwartz
“My attitude is that I always want to be better prepared than someone I’m competing against. The way I prepare myself is by doing my work each night”
– Martin Schwartz
“When I became a winner, I said, “I figured it out, but if I’m wrong, I’m getting the hell out”, because I want to save my money and go on to the next trade”
– Martin Schwartz
“Don’t worry about what the markets are going to do, worry about what you are going to do in response to the markets”
– Michael Carr
“Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in-between”
– Michael Covel
“The men on the trading floor may not have been to school, but they have Ph.D.’s in man’s ignorance”
– Michael M. Lewis
“Every trader has strengths and weaknesses. Some are good holders of winners but may hold their losers a little too long. Others may cut their winners a little short but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach”
– Michael Marcus
“Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake”
– Michael Steinhardt
“Some people make shoes. Some people make houses. We make money, and people are willing to pay us a lot to make money for them”
– Monroe Trout
“I was convinced that I was totally incompetent in predicting market prices – but that others were generally incompetent also but did not know it, or did not know they were taking massive risks. Most traders were just “picking pennies in front of a steamroller,” exposing themselves to the high-impact rare event yet sleeping like babies, unaware of it”
– Nassim Nicholas Taleb
“Trading is a psychological game. Most people think they are playing against the market, but the market doesn´t care. You’re really playing against yourself”
– Martin Schwartz
“A lot of people get so enmeshed in the markets that they lose their perspective. Working longer does not necessarily equate with working smarter. In fact, sometimes is the other way around”
– Martin Schwartz
“I believe in analysis and not forecasting”
– Nicolas Darvas
“5/1 risk/reward ratio allows you to have a hit rate of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time and still not lose”
– Paul Tudor Jones
“Everyday I assume every position I have is wrong”
– Paul Tudor Jones
“There is a saying that bad traders divorce their spouse sooner than abandon their positions. Loyalty to ideas is not a good thing for traders, scientists – or anyone”
– Nassim Nicholas Taleb
“Where you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt. After a while size means nothing. It gets back to whether you’re making 100% rate of return on $10,000 or $100 million dollars. It doesn’t make any difference”
– Paul Tudor Jones
“We want to perceive ourselves as winners, but successful traders are always focusing on their losses”
– Peter Borish
“Trading is very competitive and you have to be able to handle getting your butt kicked”
