Thought For A Day
Archives of “January 28, 2019” day
rssSeven essentials needed to become a competent trader
- Have a vision about your trading. Understand why you trade. It is never just about the money. Money can be had in any endeavor. Develop perspective on why trading is so important to you and what characteristics you want to possess that distinguish you as a trader. Be clear on these. This is motivating, and helps you to keep committed to your personal goals when things become difficult. Trading is a tough business with lots of adversity. If you haven’t got a clear sense of what you are all about in your trading, you will find trading very difficult.
- Make a commitment to your vision and turn it into a daily mission. Put into daily practice what you need to do to reach your goals. Put the work in even when other things that are more ‘fun’ or appealing tempt you to get off track. Do these every day, day after day and don’t let up. Keep a journal and track your progress — not just on the money, but more importantly, on your personal progress as you grow and develop into a competent trader. It’s the only way to become good and eventually great at trading.
- Know what you can control and what you can’t. You can’t control whether a trade is a winner or a loser. You can control how you react to the market. Before you can become a consistent trader, you must first control how you respond to the market and your actions. We can always be in control of ourselves and how we act. Being able to regulate our actions has a lot to do with how we see ourselves as a trader and our vision for ourselves.
- Focus on the process of trading rather than the outcomes of your trades. You can control how you select your trades, set risk, enter, manage, and exit your trades. You can never control how they will turn out. Place your attention on what you can control – the process of trading, not the outcomes. The process is where you can make a difference.
- Develop the necessary mental skills to trade well. Technical skills are important, but so are mental skills. Spend time learning how to stay focused on the present moment. Learn how to ‘mentally park’ losses and trading errors. Learn how to let winning trades run and cut losing trades short. These are all crucial mental skills that are not found in reading the MACD or price bars.
- Practice your trading. A major league baseball player doesn’t just show up at the ball park and expect to play well; traders shouldn’t expect to just show up at the screen and trade well either. It takes serious, dedicated practice to develop excellence.
- Make one trade at a time. Keep your focus on this trade and this trade only. Bring all of your knowledge, skills, and abilities into focus on the current trade. Let previous trades and future trades go – they have nothing to do with the current trade.
7 Things Each Trader Has To Accept
If you truly are serious about being a trader then there are seven things that you will have to accept.
You will have to accept that over the long term at best only 60% of your trades will be winners. It will be much less with some strategies.
Accept that the key to being a successful trader is having big wins and small losses, not big bets paying off. Big bets can lead quickly to you being out of the game after a string of losses.
Accept that the best traders are also the best risk managers, even the best traders do not have crystal balls so they ALWAYS manage their capital at risk on EVERY trade.
If you want to be a better trader then you need to accept that trading smaller and risking less is a key to your success. Risking 1% to 2% of your capital on any single trade is the first step to winning at trading. Use stops and position sizing to limit your losses and get out when your losses grow to these levels.
You must accept that you will have 10 trading losses in a row a few times each year. The question is what your account will look like when they happen.
You have to accept that you will be wrong, a lot. The sooner you accept you are wrong and change your mind the better off you will be.
If you really want to be a trader then you are going to have to accept the fact that trading is not easy money. It is a profession like any other and requires much work and effort and even years to become proficient. Expect to work for free and pay tuition to the markets through losses until you learn to trade consistently and profitably.
10 Minute Toughness
If you’re looking for a simple program to develop the mental skills necessary to be a successful trader, then check out 10 Minute Toughness – The Mental Training Program for Winning Before the Game Begins. Jason Selk works with many of the worlds top athletes to develop the mental toughness needed for sports success and his program translates perfectly to trading. I’ve been working with the book for a few months now -its easy to read, easy to implement and the program is excellent! As the book says “No psychobabble, no self-help cliches, no touchy feely theories. 10 Minute Toughness is the simple and effective mental-training program to help you get focused, stay on target and find a competitive edge.” The program contains short impactful exercises to help you
- calm your heart-rate and maintain a relaxed state of mind
- stay focused on the aspects of your trading that will most help you succeed
- build confidence
- perform mental run-throughs that prepare you for the market day
What I particularly find helpful is the emphasis on process goals. Many of us focus on goal setting in terms of performance goals like making so many points a week. A process goal shifts the focus to concentrate on the specific aspects of trading that will help you achieve the performance you are looking for. It helps you keep your attention each day on the one or two things that will improved your trading. The book is very consistent with what Brett Steenbarger teaches and yet somehow I found it more accessible and easy to implement. The detailed examples of top athletes, baseball, basketball and football players makes the book fun to read and easy to get. This book will make a great addition to every traders library
Visualizing The World's Greatest Fears
What are the greatest fears by country? Throughout the world, people are concerned about very different things – from inequality to AIDS and from nuclear war to religious hatred…
By region, North Americans and Europeans are generally most fearful of inequality. However, each other region had their own number one perceived fear. Africans, not surprisingly, were most afraid of AIDS and other diseases. South Americans were most afraid of nuclear warfare and Asians were most afraid of pollution and environmental concerns. Lastly, people in the Middle East were most concerned about religious and ethnic hatred.
Culture and history also makes the fears of specific countries to be more heightened. More than half of Lebanese people (58%) fear religious and ethnic hatred the most. 49% of Japanese people most fear nuclear weapons. In Spain, where 51.4% of youth are unemployed, it is not surprising that 54% of Spanish people fear inequality the most. Spain is also where the fear of inequality has grown the fastest – it has increased 27% in the last seven years. (more…)
All Traders Must Read This Poem From Both Side :Yes From Up & Down…Read
Make Your Own Luck With Consistency
- Don’t make decisions based on the outcome of 1, 2 or 3 trades. Start thinking in big sample sizes.
- Accept randomness. The outcome of a trade is completely random and independent of the one you took before.
- You are never suddenly a better trader. Therefore, always apply the same tactics to your money and risk-management.
- Love your trading journal and start analyzing as much of your own data as possible.
- Streaks are normal. Next time you are about to change your trading strategy think twice and stick to it a little longer
Feynman: Mathematicians versus Physicists- video
The Tortoise and the Hare
Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.
Then, one day, the annoyed tortoise answered back: “There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten.”
The young hare squealed with laughter. “Beaten? By whom? Surely not by you. I bet there’s nobody in the world that can win against me, because I’m so good. If you think that you can beat me, why don’t you try?”
Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.
As might be expected, the tortoise invested in high quality blue chips, companies with household names.
The hare, as anticipated, invested his money in dotcom stocks and options.
You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.
The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, “I’ll have 40 winks and still remain way ahead of that stupid old turtle.” (more…)
Margin Call-Movie
The movie Margin Call is an outlier in any number of ways. The financial blogosphere has been abuzz ever since the trailer came online.