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The Trader’s Mindset-ABC

  
  Education
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ABC

In the classic play-adapted movie Glengarry Glenn Ross, the successful big shot from Mitch & Murray is called in to pep talk a group of sad-sack real estate salesmen. His immortal manta for sales success is “ABC.: Always Be Closing.”

The trader’s version of this mantra is slightly different. For us it’s not Always Be Closing, butAlways Be Climbing.

What does it mean to “ABC,” or Always Be Climbing?

It means you always want to be in shooting distance of new equity highs. Not just from a cumulative profits standpoint, but from a knowledge standpoint as well.

Half the reason risk management is so important is to keep you in the mix, with new equity highs either currently being exceeded or not a far distance away. And when market conditions are challenging or sluggish, there’s no better time to book new highs on the knowledge and research side. (Many traders say their best research — and their biggest breakthroughs — were achieved in adverse conditions.)

The Climbing Mindset (more…)

Trends- Reversals- Cycles

  
  Education
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Many assume the continuation of trends beyond their turning points. Such thinking is evident in the news. The opposite view is the statistical lack of trends and the assumption of reversion to the mean. However trends exist in a random or due to macro effect such as government (mis)policy or herding, none of which can be ignored except to one’s detriment. The pure quantification of price makes discernment of the change of cycles hard to see except in retrospect, thus other forward and current input seem worthy to consider. There are tells to macro effects if they can be discerned. The random trends also may have their characteristics. Philosophers like to define their terms, and traders also need to define their time frames to clearly state the issues. This seems to be a common point of misunderstanding in debates on these issues.

 

7 Points For Traders-Must Read

  
  Education
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  1. The trader must have the discipline to take the system’s entries and exits.

  2. The trader must have the discipline to take the stop loss on a losing trade when it is hit and not keep holding and start hoping.
  3. No matter the method the trader has to manage risk through proper position sizing, getting greedy and trading too big will blow up even the best systems.
  4. It is the trader that must have the perseverance to stick to the method even during losing periods, and also stick with trading until success is reached.
  5. If a trader can not manage their mind then the stress will break them, I have seen this happen many times. If you can’t handle losing you can’t trade.
  6. The trader must find a robust method, must understand why it has an edge, and must believe in their methodology.
  7. The trader has to know themselves and trade the method that fits their risk tolerance levels and own psychology.

The good news is that if none of these error fit you when you lose money in a trade then the market was just not conducive to your methodology, and it is not your fault so don’t dwell on it.

Trading for a living

  
  Education
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You’ve got to bring your A game to the table each and every day. There is no sitting in a cubicle playing solitaire, visiting with facebook friends, talking with others in the break room about fantasy football, etc. that is going to get the job done for you. Your efforts, whatever they may be, will be directly related to your bottom line returns!

  • Past success means absolutely nothing. You are only as good as your next trade, your next week, your next quarter, etc. In addition, what you do next always has the potential to unravel whatever success you’ve acquired previously. Few careers offer you the potential for self-destruction so quickly the way trading for a living provides.

  • The pressure to perform will create unbelievable amounts of negative stress and energy you’ll have to deal with daily. Most people don’t have to worry or fear that being wrong will cost them their paycheck. After all, just look at economists, bankers, and politicians!

  • There will be little to no respect or understanding for what you do for a living. People will assume you’re a “day trading gambler.” Or, in my view, which is even worse, many idiots will express the view that they could also “trade for a living” if they decided to. This is true even in by those who’ve shown no consistent success in the markets on a “part-time basis.”

  • Working in isolation you’ll often miss close human interaction and the lack of a competitive “team” like atmosphere. Also, building and holding outside friendships, especially for men later on in life, are often very difficult for those who don’t meet a lot of people through their jobs.

  • Sitting 12 hours a day every day at the computer will wreak havoc on your overall health and fitness. Many traders are overweight, have back issues, eyesight problems, etc.

  • Like many highly skilled professions it requires constant education & learning. In many, but not all careers, once you’ve acquired a certain amount of skills and knowledge, little more is expected of you. In trading, you’ve got to always be in learning mode. In addition, what you think you know right now and what is working for you, will not someday in the future. That’s the way of constant evolutionary state of the marketplace.

  • You’ve got to be a jack of all trades. I’ve often said that if trading was the only thing I had to do, my life would be a whole lot easier. Instead, independent traders must spend time serving as their very own tax accountant and tech support guru. In my view, there’s nothing worse than a hardware or software issue that takes you away from concentrating on the markets. (more…)

Where’s the Risk?

  
Analysis, Education
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“The most risk is always going to be in the areas that had the biggest moves up already, and everybody’s talking about ‘em, and then you get sucked in at the most inopportune time — and then you don’t know what hit you.

Your job is to make sure it never happens to you — if you miss something, it’s OK!   What’s not OK is you jumping on top of the pile, after the run, and burying yourself.”

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