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The two best predictors of long-term trading success are

1)  Originality – Traders who develop their own, unique approach to markets are more likely to succeed that traders that employ generic methods.  My common impression when I meet a promising trader is, “Wow…why didn’t I think of that?”  I quickly recognize that the trader has achieved an insight that others have not.  That original thinking is more likely to generate distinctive results than run-of-the-mill thinking you could hear from any of a dozen market participants.
2)  Flexibility – The worst traders I know are perma-bulls or perma-bears.  They fit markets to their own thinking, rather than adapt to changing markets.  The best traders work with a kind of anti-confirmation bias:  they actively scan for information that does not fit with their views.  That enables them to be flexible and adapt quickly to new market conditions.    
If I were to place these two predictors of success under one umbrella, it would be “real-time creativity.”  The successful trader sees and approaches markets in fresh ways–and continually refreshes those perceptions and methods.  

12 Reflections on Life and Markets

I’ve never seen a trader succeed whose explicit or implicit goal was to not lose. The trader who trades to not lose is like the person who lives to avoid death: both become spiritual hypochondriacs.

No union was ever destroyed by a failure of romance. It is the loss of respect, not love, which ends a relationship.

Love, once present, never dies. It must be killed.

Sometimes we select markets–and trading styles–much as we choose romantic partners: by their ability to validate our deepest-held images of ourselves. Our choices generally succeed, for better or for worse.

Many a trader fears boredom more than loss, thereby experiencing the two in sequence.

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1+14 Mental Behavior of Traders

  1. Boredom: The trader wants some “action” so they put on a trade. Trades are for when entry signals are hit not to alleviate boredom.

  2. Pessimism: The trader starts to have a negative attitude about losing money. Be positive if you are learning form losses becasue you are paying tuition for this education.
  3. Frustration: Frustration comes from expectations not being met. Don’t focus on your P& L, focus on executing your trading plan.
  4. Overwhelm: Focus and simplicity are the keys to profits, complexity and lots of information are the road to be overwhelmed and unprofitable.
  5. Disappointment: Disappointment should not come from losing trades, disappointment should only come because of a lack of discipline in trading your plan.
  6. Doubt:Only trade a system AFTER you have thoroughly researched, back tested, or studied it in real time. Trade only with proven faith in a system, naive hope quickly leads to doubt and failure. (more…)
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