“Intuition although seemingly spontaneous, apparently emotional, stems from a form of “information” that has become built-in from past experience. Discipline means choosing what to do unencumbered by the fear of making a mistake. Confidence means trusting our intuition that what we “see” is what we “know.” There’s no escaping to the external, to the objective, and no standing on the shaky ground of emotions. So the question becomes, How do we create within ourselves the heroic condition of confidence wherein risk is not danger but life?
Archives of “confidence” tag
rssTrader's mindset?
How does someone know that they reached the trader’s mindset? Here are a few characteristics:
1. No anger whatsoever.
2. Confidence and being in control of the self
3. A sense of not forcing the markets
4. An absence of feeling victimized by the markets
5. Trading with money you can afford to risk
6. Trading using a chosen approach or system
7. Not influenced by others
8. Trading is enjoyable
9. Accepting both winning and losing trades equally
10. An open mind approach at all times
11. Equity curve grows as skills improve
12. Constantly learning on a daily basis
13. Consistently aligning trades with the market’s direction
14. Ability to focus on the present reality
15. Taking full responsibility for your actions
Developing the trader’s mindset takes time. It usually takes traders 2-5 years before they can read through the above list and honestly say that it describes themselves.
Beliefs of Winning Traders
Winners share certain behaviors and beliefs. Check to see if you possess the traits and beliefs of winning traders
1. My trading objectives are perfectly clear, and I truly believe I will achieve these goals. If you have the belief that you will win, you increase your chances of trading to win. In order to have this level of conviction, you must have a thoroughly-tested plan. You also must have a clear vision of how you will proceed with your plan to reach your goal. The more detailed you can visualize your goals being achieved, the more you will strengthen your internal belief and confidence that you will reach your goals.
2. I have created a plan to achieve my trading goals. I’m sure you’ve heard the saying “I didn’t plan to fail; I failed to plan.” Without a plan, your results will tend to be mixed and uninspiring. Commit to writing down your trading plan, and make sure you can answer the questions found in a recent TrendWatch on creating your trading plan.
3. I prepare my plan before the trading day starts. If you don’t have a plan of action once the trading bell rings, you are moving from the proactive mentality into a reactive approach. I contend that the more reactive you become, the more you will get in late to market moves and dramatically diminish your reward-to-risk ratio. I prepare after the close for the next day’s trading, seeking to stay proactive and a step ahead of the rest of the crowd.
4. I regularly monitor my trading results to measure my progress toward my goals. Trading results tend to follow a zig-zag approach similar to how a plane is guided to its destination. At periodic steps along the way, if a pilot is off course, they will set a new course towards the target. This is called course correction. Once you have defined your trading target, your periodic evaluation should lead you to assess what is taking you off course and encourage you to make the necessary corrections to get you back on target. (more…)
Patience
1) If you insist on trading during unstable or volatile markets, keep your positions small.
2) If you go into cash, don’t get upset on days when we rally, it’s simply part of the game.
3) Don’t buy or sell stocks because someone else is doing it. Have your OWN plan, find a philosophy that works for YOU, and don’t blindly follow anyone!
4) Wait for the wind to be at your back. Right now, it’s swirling. No sense in forcing trades to make a few pennies when there are dollars to be made in better environments.
5) Let the market correct, let the dust settle, don’t be in such a rush to trade. I see too many people trying to bottom-fish this market and I feel like screaming: “You don’t have to trade!”
I am not saying all this to be an ass. I simply want traders to learn from my mistakes. I have lost too much money in the past by forcing trades in unfavorable environments. You are better off protecting your capital and more importantly, protecting your confidence. Wait for proper bases to form, wait for some institutional accumulation, and wait for sentiment to be “less bullish.” In other words, wait for a healthier environment…it might not be that far away. The key right now is discipline and patience.
Trade Like Michael Jordan
How does basketball exactly relate to golf and perhaps trading successfully? Well, you’re going to soon find out!
In this article, Michael provides 10 rules for maximizing competitiveness and if you’ve been trading for any period of time, you’ll instantly recognize their value to trading successfully. In fact, here’s my personal take on how Jordan’s rules directly relate to making us all better traders:
Focus on the little things. It is true, if you focus on the little things (finding and exploiting attractive entry points, proper position sizing, sticking to stop loss levels, unbiased chart analysis, etc.) they’ll all add up to contribute to your big picture success and bottom line. When the pressure is on and tension and stress is high, traders must rely on the basic skills they’ve developed through constant practice to make the tough trades. That practice and constant dedication to improve oneself will make a world of difference when opportunities are the most plentiful.
Have total confidence in what you can do. As Michael says “If you have 100 percent confidence that you can pull off a shot, most of the time you will.” I couldn’t agree more. While we all make trades based on imperfect information and conflicting data, at all times we must be 100% confident in the trades we make. There’s a good reason why so many traders say you must always “trade to win” instead of “trading not to lose.” There’s a huge difference. In addition, the only way to have confidence you really need in the trades you make is to actually do the work the leads up to making those trades in the first place.
Don’t think about the prize; think about the work. Novice traders focus on how much money they stand to gain or lose from trading while great traders focus simply on the process of trading well and to their best of their ability. That’s a key difference. Sometimes a good trader will be very unhappy even if they make money in a particular trade because they didn’t trade it well or the trade violated their strategy and they got away with it whereas a novice trader will simply focus on the profits or losses no matter how and why they earned them. Money, and the rewards the flow from successful trading, are a low priority to the successful trader – instead trading well and trading even better the next time are the two top priorities. (more…)
Fragile Traders vs. Anti-Fragile Traders
Reading Nassim Taleb’s newest book Anti-Fragile really got me thinking about how traders are broken.
Traders can become fragile and be broken in several ways:
- They can quit because they believe that trading successfully is impossible.
- They can lose half their account or all of their account and just give up.
- They can become emotionally traumatized by one huge loss or a string of losses and just not be able to trade any more due to the pain going forward.
- A trader can lose faith in them self as a trader.
- A trader can lose faith in their system.
- A trader can trade too big and blow up their account, they want to trade, they believe they can make it back but have no money.
A trader can become anti-fragile they can benefit from adversity at times by:
- Having 100% confidence that they will be in the 10% percentile of consistently winning trades, it is just a matter of time.
- They do not give up after losing the majority of their very first account they just accept it as paying tuition and start again this time with faith they will win.
- The anti-fragile trader trades small, their emotions do not bleed into their trades, each trade is just 1 of the next 100. They risk 1% of capital per trade.
- The successful trader identifies themselves as a successful trader, losing trades do not change who they are.
- The trader believes that time is on their side and draw downs are just temporary, short term losses do not change the trader’s belief in long term success.
- Successful traders know that their trading account is their life blood, guarding it against big losses is their #1 priority.
Fragile traders are inevitably broken, anti-fragile traders are not only not broken but benefit from circumstances by learning, growing, and becoming more resolved to win. Adversity makes them stronger.
7 dirty words you can’t say while trading
Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.
Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.
Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a dark background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.
Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks. (more…)
You Don’t Need to be Right to Make Money
You have to do the mental work to let go of the need to know what is going to happen next or the need to be right on each trade. In fact the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader. Mark Douglas The most successful traders have found a way to inoculate themselves from the stress of trading, and from the outcome of their most recent trades. Here’s how they do it: They have an unshakable belief in the fact that 1) While the outcome of any given trade is uncertain they believe in their edge over a series of trades. In other words they know the expectancy of their method and have confidence that over a series of random outcomes, the odds are in their favor. 2) Anything can happen! In other words they have learned to think of every trade like tossing a coin – they don’t need to know what will happen. They don’t expect to either win or lose. This firm belief in the uncertainty of any given trade, while knowing that over a series of trades you will be profitable, is very liberating. When you learn the mental discipline of letting go of the result of any individual trade you keep your mind in a state where it can easily perceive the opportunities that the market is offering. It is not distracted by focusing on your expectations of what you think should happen – it can perceive what is most likely to happen. The Body/Mind Connection
THE LAWS of Lifetime Growth:
LAW ONE: Always make your future bigger than your past. Find out more
LAW TWO: Always make your learning greater than your experience. Find out more
LAW THREE: Always make your contribution bigger than your reward. Find out more
LAW FOUR: Always make your performance greater than your applause. Find out more
LAW FIVE: Always make your gratitude greater than your success. Find out more
LAW SIX: Always make your enjoyment greater than your effort. Find out more
LAW SEVEN: Always make your cooperation greater than your status. Find out more
LAW EIGHT: Always make your confidence greater than your comfort. Find out more
LAW NINE: Always make your purpose greater than your money. Find out more
LAW TEN: Always make your questions bigger than your answers. Find out more
Psychological
The goal of any trader is to turn profits on a regular basis, yet so few people ever really make consistent money as traders. What accounts for the small percentage of traders who are consistently successful is psychological—the consistent winners think differently from everyone else.
The defining characteristic that separates the consistent winners from everyone else is this: The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused,and, above all, confident in spite of the adverse conditions.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.They
no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.
You don’t need to know what’s going to happen next to make money; anything can happen, and every moment is unique, meaning every edge and outcome is truly a unique experience.
The trader that it’s his attitude and “state of mind” that determine his results.