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A Dozen Reflections on Life and Markets

  
  Education
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reflectiononlifeI’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. (more…)

Traders needs Patience , Decisiveness & Gratitude

  
  Education
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1. Patience
 
“The waiting is the hardest part” – Tom Petty
 
“Patience pays. Wait. Let the hand of God work for you. One who has created you let Him create all the environments, circumstances, and facilities & faculties” – Yogi bhajan
 
I don’t know about you but I trade to put food on the table for my family. In the long run if f I don’t make money – we don’t eat. A lot of trading is waiting. Waiting for the best trade to come to you, waiting for your scales to be hit, waiting for final target to be hit, etc. If you are impatient you lack the ability to wait for these things. If you are trading for excitement or thrills then you will find yourself taking stupid trades out of a need for action and in return you will not experience the results you desire. Much better to head to Vegas or go bungee jumping. Before I put ONE DOLLAR at risk I want to be sure that the odds are stacked in my favor. You won’t find me trading out of boredom, or taking a low odds trade because I feel the need to do “something”. I am fine being flat. You should learn to love the waiting – the waiting is what enables you to make the money.
 
2. Decisiveness.
 
“It’s better to be boldly decisive and risk being wrong than to agonize at length and be right too late” – Anonymous
 
“Procrastination in the name of reducing risk actually increases risk” – Colin Powell
 
“Take time to deliberate, but when the time for action has arrived, stop thinking and go in” – Napoleon Bonaparte
 
“In any moment of decision, the best thing you can do is the right thing, the next best thing you can do is the wrong thing, and the worst thing you can do is nothing” – Theodore Roosevelt (more…)

Don't be afraid to be a sheep

  
  Education
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  1. Follow the trends. This is probably some of the hardest advice for a trader to follow because the personality of the typical futures trader is not “one of the crowd.” Futures traders (and futures brokers) are highly individualistic; the markets seem to attract those who are. Very simply, it takes a special kind of person, not “one of the crowd,” to earn enough risk capital to get involved in the futures markets. So the typical trader and the typical broker must guard against their natural instincts to be highly individualistic, to buck the trend.
  2. Know why you are trading the commodity markets. To relieve boredom? To hit it big? When you can honestly answer this question, you may be on your way to successful futures trading.
  3. Use a trading system, any system, and stick to it.
  4. Apply money management techniques to your trading.
  5. Do not overtrade.
  6. Take a position only when you know where your profit goal is and where you are going to get out if the market goes against you.
  7. Trade with the trends, rather than trying to pick tops and bottoms.
  8. Don’t trade many markets with little capital.
  9. Don’t just trade the volatile contracts.
  10. Calculate the risk/reward ratio before putting a trade on, then guard against holding it too long.
  11. Establish your trading plans before the market opening to eliminate emotional reactions. Decide on entry points, exit points, and objectives. Subject your decisions to only minor changes during the session. Profits are for those who act, not react. Don’t change during the session unless you have a very good reason.
  12. Follow your plan. Once a position is established and stops are selected, do not get out unless the stop is reached or the fundamental reason for taking the position changes.
  13. Use technical signals (charts) to maintain discipline – the vast majority of traders are not emotionally equipped to stay disciplined without some technical tools.

Top Ten Reasons Traders Lose Their Discipline

  
  Education
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Losing discipline is not a trading problem; it is the common result of a number of trading-related problems. Here are the most common sources of loss of discipline, culled from my work with traders:

10) Environmental distractions and boredom cause a lack of focus;

9) Fatigue and mental overload create a loss of concentration;

8) Overconfidence follows a string of successes;

7) Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red;

6) Loss of confidence in one’s trading plan/strategy because it has not been adequately tested and battle-tested;

5) Personality traits that lead to impulsivity and low frustration tolerance in stressful situations;

4) Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades);

3) Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions;

2) Not having a clearly defined trading plan/strategy in the first place;

1) Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.

Trade like a cheetah

  
  Education
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cheetahI read a quote about trading a long time ago that went something like: “Trading consists of extended stretches of intolerable boredom interspersed with moments of sheer terror.”

No terror for me today but I felt like one of my favorite animals – the cheetah. Just sit with orders in the market wait for price to come  so you can pounce on it.

Most people only pay attention to the speed of the cheetah because that part is exciting. But that part only lasts a few seconds.

What they don’t pay attention to is the fact that the cheetah spends the majority of its hunting time lying in wait and silently stalking its prey – “intolerable boredom.”

Waiting, and waiting, and waiting some more for the right situation to present itself.

Yes, that part is boring, but it’s also the most important part. It wouldn’t matter how fast the cat was if it just ran around without a plan. (more…)

Top Ten Reasons Traders Lose Their Discipline

  
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discipline-a

Losing discipline is not a trading problem; it is the common result of a number of trading-related problems. Here are the most common sources of loss of discipline, culled from my work with traders:

10) Environmental distractions and boredom cause a lack of focus;

9) Fatigue and mental overload create a loss of concentration;

8) Overconfidence follows a string of successes;

7) Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red;
6) Loss of confidence in one’s trading plan/strategy because it has not been adequately tested and battle-tested;
5) Personality traits that lead to impulsivity and low frustration tolerance in stressful situations;
4) Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades);
3) Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions;
2) Not having a clearly defined trading plan/strategy in the first place;
1) Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.

Mix It Up A Little

  
  Education
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Does boredom cause you to do silly things? If so, you’re certainly not alone.

More and more I see traders make simple mistakes primarily because they are bored with what they are doing NOT because they don’t know what they’re doing.

Contrary to popular opinion, traders and investors often do get bored. I know I certainly have. After all, if you’re doing it correctly, good trading and investing should be both boring and routine. If that’s not the case for you, it probably is because you’re either trading far too aggressively (i.e. the gambler) and/or you have no risk management skills whatsoever.

In my experience, most humans and including those of us who are very disciplined and focused, will from time to time seriously crave to change things up a little. No one, including me, likes to do exactly what they need and should do every day. Most of you are no different than me. The problem is that when we both get bored, very bad things tend to happen if we don’t first realize that our trading and investing is being negatively impacted by boredom and do something about it.

For example, in my experience traders tend to either disconnect from the market entirely (which can be dangerous with positions open or lost opportunity) or they do the exact opposite by increasing their overall risk to “make it more interesting.” Likewise, investors tend to become far more active (i.e. they turn into traders and churn positions) just to do something to keep themselves preoccupied or they buy and sell stocks that normally they wouldn’t even consider. In either case, neither one tends to work very well.

When you start to see the signs that you are becoming bored and have the urge to do something “different,” I recommend mixing things up a little. For example, when I become bored with my trading and daily routine I often do the following which seems to help:

  • Head to the gym (intense and exhausting exercise is the best cure for boredom I know)

  • Mix up the daily routine (I like to flip my day around and do things I usually do at the end of the day first)

  • Try to learn something new (I often try to study a different sector/different market now, but in previous years I would enjoy playing around with a new indicator or two)

  • Read about something you know nothing about (if you do this, you’ll be amazed by how much it will stimulate your brain)

  • Take some time off and do something else (while I always have a long “honey-do” list to keep me busy, that’s also why there are golf courses!)

Now, for those of you who make a living trading and who feel they cannot leave the game for an hour, much less an entire trading day, I have some suggestions for you as well: (more…)

15 Types of Traders-Challenges Specific to Each one

  
  Education
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1)Strategic Trader :This type of trader has a great chance of success but is (a ) likely not to recognize emotional mistakes ,(b ) lean toward perfectionism  ,and (c ) have a strong desire to be right

2)Planning Trader :Again ,this type of trader has an excellent chance of success.Your major challenge is the desire for excitement and the need to be right.You easily could become bored with trading and do things to lessen the boredom and thus limit your profits.

3)Detailed Trader :The detailed trader has a good chance of success,but you could be so into details of what you are doing that your miss the big profits.

4)Administrative Trader :You may be overly critical of yourself but not recognize mistakes that are right in front of your eyes.Furthermore ,under stress your may question your commitment to trading because your don’t find it satisfying.An administrative trader also has a good chance of success.

5)Facilitative Trader :This kind of trader has an above average chance of success.However ,you could have a problem with logic and ideas because you are always finding something new.Furthermore ,you may need external confirmation of your ideas ,beliefs ,and systems.

6)Innovative Trader :You have an above -average chance of success.However ,you probably want external confirmation for everything you do and have a strong need for a mentor.Furthermore ,you may  tend to abandon a good system prematurely if it goes against you because of your emotional reactions.

7 )Value-driven Trader :You have an above -average chance of success in trading but find that you must do things your way.In addition ,discipline ,follow -through ,and attention to details will always be a problem for you.You also may find trading boring and do things to fulfill your need for excitement.

8)Independent Trader :You are driven by logic and could easily reject systems that work well because you don’t understand them logically.Furthermore ,your trading could dominate your time and leave you socially isolated.That said ,you have a good chance of success if you apply yourself.

The remaning 7 types have a much more difficult time becoming successful in trading arena. (more…)

Self-Assessment

  
  Education
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* How many of your trades today (or this week) had an explicitly defined risk and reward?

* How many of your trades today (or this week) did you execute according to the defined risk and reward?

* How many of your trades today (or this week) were based upon clear market patterns and a clear identification of how the market was trading?

* How many of your trades today (or this week) were placed out of fear of missing a move? Out of frustration following a loss? Out of boredom in a slow market?

* How many of your trades today (or this week) would you place again if you had the same circumstances?

* How many of your trades today (or this week) came from advance planning and preparation?

* How many of your trades today (or this week) were sized properly, given your level of confidence in your ideas and your desired risk management?

* What did you learn today (or this week), and how will you put that learning to work tomorrow (or next week)?

* How did you feel about your trading at the end of the day (or week)? Proud? Disgusted? Regretful? Satisfied?

* What can you do tomorrow (or next week) to feel proud of and satisfied with your trading?

Ten Common Reasons Traders Lose Discipline And How To Avoid Them.

  
  Education
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There is very little that is new in the world of trading psychology but mastering the basics and mastering our mind is essential if we are to develop as highly efficient traders. The following are common discipline issues and suggestions to counteract them. Discipline is needed if you are to succeed as a Forex trader
1. Boredom and a need to trade for the “buzz”
Try to use dead time between trades for things like self improvement training i.e. read a book by your favorite personal development guru or learn to meditate/practice Yoga! Anything that keeps you in the right frame of mind for the job of trading. A positive mindset will have a positive impact on your bottom line over time.
2. Trading when tired.
One of the great things about trading is that we can close for business whenever we want. If you are not in the correct mindset for trading then shut the shop! There will be no customers banging on the door shouting for you to open up.
3. Not taking a loss well and revenge trading (more…)

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