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Self awareness for Traders

  
  Education
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1) the recognition that our thinking and our emotions are intertwined and both influence our perception and judgment that leads to our decisions and actions (this view also happens to be consistent what the leading brain scientists are now saying)

2) much of our motivation – the intertwined thinking/emotion that drives our behavior – is actually subconscious, e.g. we assume we are trading the market but on other levels we are also trading our P&L and our feelings about our P&L  (and what our P&L represents to us) is just one example.

3) when we understand (self-awareness) the underlying/subconscious motivation for our behavior we are in a better position to choose an alternative.

Obviously, nothing can guarantee change or improvement (contrary to many claims made by pseudo “experts”), but at least an approach that emphasizes expansion of awareness puts the odds in your favor.

And I have to play the probabilities here. Because more people tend to respond to a change process that includes an emphasis on self-awareness, I choose to use this  approach in my own trading and in my coaching….it simply has the highest probability
of actually helping.

Six Rules of Michael Steinhardt

  
  Education
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1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.

2. always make your living doing something you enjoy: Devote your full intensity for success over the long-term.

3. be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.

4. make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.

5. always trust your intuition:  Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.

6. don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.

Focus on Being

  
  Education
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The one thing that is at the core of every person’s trading, no matter what tools are utilized, is a human being. The Professional Traders recognize that being is the start of the entire process, who they are as people, as traders. By focusing on yourself first and then on the rest, you address the core of your trading business. Just like every sports team looks up to its coach for direction or like a company looking up to its CEO for direction the results of your trading all begin and end with you as you are the captain of your own ship. It is you, the human being, making all the decisions about trading like what to trade, when to trade, what resources to use, what strategy to use, the knowledge you will acquire, who to listen to and so on. Professional Traders develop and maintain a very high quality of being. Being is more important than doing. If you are fatigued or stressed, your judgment can be impaired. If you are naive or ignorant you are more likely going to make mistakes. If you are anxious or scared you will not be able to think clearly as you would when relaxed. If you are emotional in trading you will see losses in your account. No matter what you do if you are not at 100% of what you should be you will not the results you wish for. (more…)

Lose the bad attitude ,Better attitude equals better decisions

  
  Education
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You can’t be a winner in the markets or in life if you don’t also have a winning attitude and surround yourself with those who offer the same. It is far too easy when the chips are down and our strategies are out of sync to start beating ourselves up and feel like a worthless moron. That comes with the territory. If it would be easy, everyone would be making loads of the money in the market and we know that isn’t true as most can’t even keep up with the S&P. Remember, trading and investing is not a precise science and a lot more luck is involved than many will tell you. So, in this business, when you fall down, you’ve got to dust yourself off and get back on the horse and, more importantly, keep plugging away. When you start thinking negative thoughts, and we all do, stop them immediately. You can’t consistently win in the markets if you can’t consistently foster and maintain a positive attitude in everything you do.

Positive awareness trumps negative self talk

  
  Education
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The language you use as a trader can provide either positive reinforcement through honest self awareness or negative results through demeaning self talk.  In other words, when discussing your trading with others or in your journal become aware of how you view yourself.  Do you see yourself as an amateur, a whipping post, a loser?  Do you blame an indicator or the market or an advisor for your failures and lack of discipline?  When you are with others do you brag about your winners and hide your losers?  All of this talk is based on fear:  fear of being wrong, fear of what others might think of you and your decisions; fear of the market; fear of being afraid.  When you practice positive self awareness  you create a fertile learning environment that allows you to grow and progress as a BETTER trader, not focus on BECOMING a GOOD trader (implying that you are a bad one).  When I work with individuals I often hear the following:  “If I would just do this I would become a good trader” or “If I had your discipline I would be a able to make money.”  These statements are grounded in a sense of doubt and fear.  Instead, these statements should be replaced with “I am becoming a BETTER trader because I know the market cannot hurt me” AND “I am becoming a BETTER trader the more I stick with my rules.”  See the difference between the two?  One is focused on the joy of progress; the other on the fear of not being good enough.  Are you focused on progress or failure? Listen to yourself and you will quickly figure it out.  It is EASY to get down on yourself and much HARDER to remain positive in the face of adversity.

My Trading Resolutions for next 3 months

  
  Education
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  • Think for myself
  • Stay focused on the reasons why I bought a stock and sell when those reasons are no longer compelling
  • Don’t let successful trades turn into losses
  • Be ruled less by emotion and fear and more by logic and knowledge
  • Read some good books on trading
  • To avoid being whipsawed, I will give myself more room for the trade to work
  • Follow my own rules
  • Be easier on myself when I screw up and don’t let my ego inflate when I’m right
  • Don’t force trades – there will always be another opportunity
  • Honor thy stops!
  • Stop chasing hot and popular stocks
  • Do my own research
  • Keep learning
  • Learn to be less nervous and take more risks
  • Remember that lost opportunity is better than lost capital
  • Trade less – don’t overtrade
  • To try and limit the number of opinions I allow to affect my trading. Paralysis by analysis has hurt me
  • Avoid any trade where I use the word “hope” in my reasoning process
  • To follow my logical, well-conceived, long-term game plan, without making irrational changes due to short-term market conditions
  • Tune out the daily noise and useless banter
  • Reduce the number of positions currently held
  • Have more faith in my own abilities
  • In trading, learn to be fearless
  • Don’t be too greedy
  • Slow down!
  • Incorporate the use of smart trailing stops
  • Use ETFs to properly diversify
  • Remove my ego from my trading decisions
  • Avoid getting easily frustrated or impatient
  • Control and limit my losses
  • Focus on making the next trade, instead of the last one
  • I will not average down into losing positions
  • Create more careful and detailed records with a commitment to review them regularly
  • Learn to incorporate a systematic screening method like you
  • Use emotions (both personal and market) to my own advantage
  • Know my exits before making any trade
  • Don’t be swayed by the latest and greatest strategy I hear about
  • Keep it simple. Complex strategies are no better
  • Avoid crowded trades
  • Take time to look for reasons NOT to buy
  • Let profits run longer. take losses quicker
  • Trade what I see, not what I want to see
  • Be more proactive and react faster to situations I find
  • Make bigger, but less frequent trades
  • Stay patient
  • Focus on value of companies and not on the temporary market emotions
  • Be more nimble
  • Keep better notes
  • Adopt an opportunistic versus a rigid bull or bear bias toward the market
  • Enjoy the game more
  • To quit counting the value of my account on a daily basis
  • Stop looking for the holy grail
  • Figure out what trade related information to consume on a daily basis and keep what is useful and leave out that which is not
  • Avoid information overload by limiting what I read
  • Don’t read stock blogs
  • Turn off the TV and dedicate more of my time to become a better trader
  • Set up a lazy portfolio
  • Focus on proper asset allocation
  • Never forget that “when you are through learning you are through”
  • Recognize mistakes early, exit, and move on
  • Take partial profits routinely, but keep money on high-performing stocks
  • Follow my system
  • To screen & scan my watchlist in a consistent manner each and every time
  • Take routine breaks away from the market to refresh and gain more perspective
  • Add more fundamental research to my technical research
  • Concentrate on finding just one really good idea per year like Warren Buffett
  • Stop searching for shortcuts or quick fixes – take baby steps
  • Read at least 3 more trading books in next 3 months
  • Focus, focus, focus – ignore all outside distractions
  • When a strategy works, have the courage to follow it through, when it does not work, to have the wisdom to stop trading
  • Find and exploit long-range sector themes
  • Open my ears and keep my mouth shut
  • Never panic
  • Be humble

Eleven Rules for Traders

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies. (more…)

My Favorite Passage

  
  Education
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It is interesting to observe the way most futures traders play the futures game in relation to the possible ways that money games can be played:

1. The most effective approach to the objective of maximizing results is to play a favorable game on a small scale.
2. Less desirable, but still providing a reasonable chance of success, is playing a favorable game on a large scale with enough profits coming early in the game to avoid ruin.
3. A basically unfavorable game may yield profitable results (presuming that one insists on playing unfavorable games) if one plays seldom and bets heavily.
4. The only road that leads inevitably to disaster is playing an unfavorable game continuously.
The trader who trades on impulse or uses some other invalid method of making trading decisions is following the fourth route, which is crowded with bumper-to-bumper traffic.

11 Trading Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

Market Thesis

  
  Education
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thesis-paperPurely academic, non applicable information. Writing them out helps me organize these assumptions into ideas. Hopefully you find some use for them.

1) Trading is like any other business, but not only in the conventional sense. The market is manipulated. The underlining principle behind this statement is that equities market is the same as any other market in the economy, whether it be technology or tube sock market – those with the biggest market cap control movement and direction.

2)While prices are moving in a current path identified by trend lines, heads of market are processing information and making preparations for the next shift. During the time traders see the trend forming and change their “bias” in accordance with the trend, heads of market have processed new information and are ready to take prices to a new level.

3)Technical analysis is a visual interpretation of how crowds behave in relation to price. It does not influence how prices will or should behave. When prices reach a certain level, the technical indicator at that level does not dictate how prices will react, rather, (more…)

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