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IF TRADING WERE ONLY A MATTER OF MAKING MONEY

If trading were only a matter of making money, reading this book wouldn’t be necessary. Putting on a winning trade or even a series of winning trades requires absolutely no skill. On the other hand, creating consistent results and being able to keep what we’ve created does require skill. Making money consistently is a by-product of acquiring and mastering certain mental skills. The degree to which you understand this is the same degree to which you will stop focusing on the money and focus instead on how you can use your trading as a tool to master these skills. – Mark Douglas

making money

Self-esteem and Trading Acccount

Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with you’re trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.  When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state.  And our internal state has a lot to do with how well we trade.

Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.

Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory.  A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.

15 Truths About Trading

1) 45-55% (Average winning % of any given trader)
2) Traders do not mind losing money, they mind losing money doing stupid things
3) You can lose money on a Great trade
4) Focus on the Trade, Not the Money
5) Trading is a game of Probabilities, not Perfection
6) Trade to make money, not to be right
7) 8) The market does not know how much you are up or down, so don’t trade that way (Think: “If I had no trade on right now, what would I do”)
9) Learn to endure the pain of your gains
10) There is no ideal trader personality type
11) Fear and Fear drive the markets, not fear and greed
12) Keep it simple: Up-Down-Sideways
13) Make sure the size of your bet matches the level conviction you have in it (No Edge, No Trade; Small Edge, Small Trade; Big Edge, Big Trade)
14) Making money is easy, keeping it is hard
15) H + W + P = E(Hoping + Wishing + Praying = Exit the Trade!)

What's the difference between winning traders and losing traders?

Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:

The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.

Suggestions to Speculators

Be a Cynic When Reading the Tape

We must be cynics when reading the tape. I do not mean that we should be pessimists, because we must have open minds always, without preconceived opinions. An inveterate bull, or bear, cannot hope to trade successfully. The long-pull investor may never be anything but a bull, and, if he hangs on long enough, will probably come out all right. But a trader should be a cynic. Doubt all before you believe anything. Realize that you are playing the coldest, bitterest game in the world.

Almost anything is fair in stock trading. The whole idea is to outsmart the other fellow. It is a game of checkers with the big fellows playing against the public. Many a false move is engineered to catch our kings. The operators have the advantage in that the public is generally wrong.

They are at a disadvantage in that they must put up the capital; they risk fortunes on their judgment of conditions. We, on the other hand, who buy and sell in small lots, must learn to tag along with the insiders while they are accumulating and running up their stocks; but we must get out quickly when they do. We cannot hope to be successful unless we are willing to study and practice—and take losses!

But you will find so much in Part Three of this book about taking losses, about limiting losses and allowing profits to run, that I shall not take up your thought with the matter now.

So, say I, let us be hard-boiled cynics, believing nothing but what the action of the market tells us. If we can determine the supply and demand which exists for stocks, we need not know anything else.

If you had 10,000 shares of some stock to sell, you would adopt tactics, maneuver false moves, throw out information, and act in a manner to indicate that you wanted to buy, rather than sell; would you not? Put yourself in the position of the other fellow. Think what you would do if you were in his position. If you are contemplating a purchase, stop to think whether, if you act contrary to your inclination, you would not be doing the wiser thing, remembering that the public is usually wrong.

Day Trading is like Monopoly

I know a lot of traders who are just eeking by or breaking even at the end of the month. Many of these traders ask what they could be doing better or what my “secret” is.Monopoly. You buy 4 houses and sell them to buy a hotel. In other words, you find a simple, routine, monotonous way of trading and you just do it over and over. Most of the guys I talk to have a trading strategy, most of them have tested it. What they don’t have is the confidence to just stick with it. Trading shouldn’t be a roller coaster, but rather it should be routine like filling out TPS reports.Mental Toughness by Daniel Teitelbaum. In his book he states that you need to break down the walls that are stopping you from reaching success. He has you work on several mental exercises to help you focus on what you need to do. After all, if you knew that you had to take that GOOG trade this morning or your family would die you’d be plenty motivated to take the trade and to do it right.

So what’s the secret? It’s painfully simple – Day Trading (or any type of trading) is like

I think the main reason that most traders can’t stick with it is that they haven’t got enough mental focus. They get tired and sleep in past market open, or they become unsure of themselves so they fail to initalize the first trade of the day when the setup is right in front of them, or they rationalize that some piece of news or the other will do such and such to the market. All of these rationalizations are subconscious disruptions coming to the surface.

If you’ve ever failed to stick with your trading plan and end up taking the one losing trade of the day, I strongly recommend you check out

Make a committment to yourself, to your family and to your trading by taking the next 30 signals without deviating from your trading plan and I guarantee that you will learn the secret to your trading success – you.