The only way to be successful in the markets

Successful businesswomanSome might have longer holding periods they like to stick to. Some might prefer switching positions on a much more frequent basis. It all comes down to the same. Getting exposure to opportunities. Here’s a quote from Nassim Nicholas Taleb’s book ‘The Black Swan’ describing that phenomenon. Quote from page 170:

“… seemed to follow implicitly, though not explicitly, Louis Pasteur’s adage about creating luck by sheer exposure. ‘Luck favors the prepared,’ Pasteur said, and, like all great discoverers, he knew something about accidental discoveries. The best way to get maximal exposure is to keep researching. Collect opportunities…”

So whenever a trade doesn’t work keep in mind the outcome of one single trade doesn’t really matter. What it all comes down to is to repeat the process over and over again. In the long run doing research on a regular basis and getting exposure to opportunities is the only way to be successful in the markets.

A Dozen Observations on Life and Markets

Trading is the most difficult of sports: nowhere else does one begin a career by opposing the world’s most accomplished professionals.
Extreme trading size produces extreme emotional outcomes, leaving traders with certain trauma or addiction.
A universal trade setup: Hope, then despair.
Fidelity to purpose: the mark of good trades and great traders.
Mentors cannot achieve more for you than they have accomplished for themselves. (more…)

Methods Employed By Exceptional Players

First, be sure that you really want to trade. As both Krausz and Faulkner confirmed,
based on their experience in working with traders, it is common for people who think they want to trade to discover that they really don’t.

Think about why you really want to trade. If you want to trade for the excitement, you might be better off riding a roller coaster or taking up hang gliding. In my own case, I found that the underlying motive for trading was serenity or peace of mind-hardly the emotional state typi-cal of trading. Another personal motive for trading was that I loved puzzle solving-and the markets provided the ultimate puzzle. How-ever, while I enjoyed the cerebral aspects of market analysis, I didn’t particularly like the visceral characteristics of trading itself. The con-trast between my motives and the activity resulted in very obvious con-flicts. You need to examine your own motives very carefully for any such conflicts. The market is a stem master. You need to do almost everything right to win. If parts of you are pulling in opposite direc-tions, the game is lost before you start.

How did I resolve my own conflict? I decided to focus completely on mechanical trading approaches in order to eliminate the emotionality in trading. Equally important, focusing on the design of mechanical systems directed my energies to the part of trading I did enjoy-the puzzle-solving aspects. Although I had devoted some energy to mechanical systems for these reasons for a number of years, I eventu-ally came to the realization that I wanted to move in this direction exclusively. (This is not intended as an advocacy for mechanical sys-tems over human-decision-oriented approaches. I am only providing a personal example. The appropriate answer for another trader could well be very different.)

It is critical to choose a method that is consistent with your own person-ality and comfort level. If you can’t stand to give back significant prof-its, then a long-term trend-following approach-even a very good one-will be a disaster, because you will never be able to follow it. If you don’t want to watch the quote screen all day (or can’t), don’t try a day-trading method. If you can’t stand the emotional strain of making trading decisions, then try to develop a mechanical system for trading the markets. The approach you use must be right for you; it must feel comfortable. The importance of this cannot be overemphasized. Remember Randy McKay’s assertion:

“Virtually every successful trader I know ultimately ended up with a trading style suited to his per-sonality.” Incidentally, the mismatch of trading style and personality is one of the key reasons why purchased trading systems rarely make profits for those who buy them, even if the system is a good one. While the odds of getting a winning system are small-certainly less than 50/50-the odds of getting a system that fits your personality are smaller still. I’U leave it to your imagination to decide on the odds of buying a prof-itable/moderate risk system and using it effectively.

You can’t win without an edge, even with the world’s greatest discipline and money management skills. If you could, then it would be possible to win at roulette (over the long run) using perfect discipline and risk con-trol. Of course, that is an impossible task because of the laws of probabil-ity. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Inci-dentally, if you don’t know what your edge is, you don’t have one.

To have an edge, you must have a method. The type of method is irrele-vant. Some of the supertraders are pure fundamentalists; some are pure technicians; and some are hybrids. Even within each group, there are tremendous variations. For example, within the group of technicians, there are tape readers (or their modem-day equivalent-screen watch-ers), chartists, mechanical system traders, EIliott Wave analysts, Gann analysts, and so on. The type of method is not important, but having one is critical-and, of course, the method must have an edge.

Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple fail-ures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of profession-als. Why should you be any better? If it were that easy, there would be a lot more millionaire traders.

Is trading success dependent on innate skills? Or is hard work suffi-cient? There is no question in my mmd that many of the supertraders have a special talent for trading. Marathon running provides an appro-priate analogy. Virtually anyone can run a marathon, given sufficient commitment and hard work. Yet, regardless of the effort and desire, only a small fraction of the population will ever be able to run a 2:12 marathon. Similarly, anyone can learn to play a musical instrument. But again, regardless of work and dedication, only a handful of individuals possess the natural talent to become concert soloists. The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may pro-vide proficiency, but not excellence.
In my opinion, the same principles apply to trading. Virtually any-one can become a net profitable trader, but only a few have the inborn talent to become supertraders. For this reason, it may be possible to teach trading success, but only up to a point. Be realistic in your goals.

Wait a minute. Didn’t I just list hard work as an ingredient to successful trading? How can good trading require hard work and yet be effortless?
There is no contradiction. Hard work refers to the preparatory pro-cess-the research and observation necessary to become a good trader-not to the trading itself. In this respect, hard work is associated with such qualities as vision, creativity, persistence, drive, desire, and commitment. Hard work certainly does not mean that the process of trading itself should be filled with exertion. It certainly does not imply struggling with or fighting against the markets. On the contrary, the more effortless and natural the trading process, the better the chances for success. As the anonymous trader in Zen and the Art of Trading put it, “In trading, just as in archery, whenever there is effort, force, strain-ing, struggling, or trying, it’s wrong. You’re out of sync; you’re out of harmony with the market. The perfect trade is one that requires no effort.”

Visualize a world-class distance runner, clicking off mile after mile at a five-minute pace. Now picture an out-of-shape, 250-pound couch potato trying to run a mile at a ten-minute pace. The professional run-ner glides along gracefully-almost effortlessly-despite the long dis-tance and fast pace. The out-of-shape runner, however, is likely to struggle, huffing and puffing like a Yugo going up a 1 percent grade. Who is putting in more work and effort? Who is more successful? Of course, the world-class runner puts in his hard work during training, and this prior effort and commitment are essential to his success. (more…)

Books For Professional Traders

Yes ,List from our Library 

Note that the literature listed below can easily be found in book stores or via the internet.

TRADING Psychology

The following books and articles target some of the core psychological obstacles that traders face every day and techniques to maximize their trading performance. This is an extremely important part of the reading list, in my opinion.

  • “The Mental Edge: Maximize Your Sports Potential with the Mind-Body Connection” – Kenneth Baum“How Successful People Practice” – James Clear (
    • I’m a big believer in visualization techniques and the contribution it can make to trading success.  I first used visualization during my years playing hockey.
  • “Zen and the Art of Management” – Financial Times, September 16, 2013
  • “Good To Great” – Jim Collins
    • The book is centered on how companies can go from a position of mediocre to greatness.  Many of the concepts are readily applicable to the trading business and to building yourself into an elite trader.

All the books of Dr. Ari Kiev.:

  • “Trading to Win: The Psychology of Mastering the Markets”
  • “Trading in the Zone: Maximizing Performance with Focus and Discipline”
  • “The Psychology of Risk: Mastering Market Uncertainty”
  • “The Mental Strategies of Top Traders: the Psychological Determinants of Trading Success”
  • “Hedge Fund Masters: How top Hedge Funds Set Goals, Overcome Barriers and Achieve Peak Performance”
  • “Mastering Trading Stress: Strategies for Maximizing Performance”
    • Prior to his passing, I had been organizing a conference with Dr. Kiev.  He revolutionized the hedge fund industry in terms of trader performance


5 Wisdom Thoughts For Traders

  1. Learn to think in probabilities. In some types of analysis, it’s easy to forget that any conclusion is only valid within the range of statistical probability. For instance, if we do valuation work, we might think that is the value, and just wait for price to converge. Technical tools make us face the reality in the market, and that is that markets are not very predictable, and are only predictable within a range of probabilities.
  2. Learn to cut your losses. It’s impossible to say what is the “most important” thing in trading or investing, but this certainly is a candidate. Many methodologies do not have any way of telling you when you’re wrong. For instance, if price is under your valuation and it goes down, the logical course of action is to buy more. At some point, declining prices carry a message, and technical tools can force us to respect that message.
  3. Understand how a market has been trending. This can be as easy as squinting at a price chart and see if it “goes up, down, or is pretty flat”. You don’t need moving averages or indicators to do this–simple visual inspection is enough. However (and this is a huge “however”), do not assume that a market that has been trending in the past will continue to trend in the future. That requires a few more steps.
  4. Understand when the rubber band might be stretched a bit too far. Markets tend to move in waves: directional movements will alternate with pullbacks or flat periods. Sometimes, a market goes a bit too far, too fast and can be set to snap back. Buying a market (or shorting) when it is overextended is chasing, and can open the trader up to some stunning losses. There are simple technical tools that will highlight when markets are perhaps a bit overextended, and can tell us to wait for more favorable conditions.
  5. Enforce discipline. Markets are random, but you cannot be random. The only way to get consistent results out of difficult and competitive markets is to always act with consistency and discipline. Technical methodologies encourage us to face market conditions and to immediately evaluate the results of our actions. There is no better way to drive toward consistent behavior.
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