Trade what is… for in doing so your trading is based on fact, substance and reality. It provides clarity, confidence, manageability, and useful feedback for consistent success where appreciation for winning, and respect for losing, keeps you in the game.
Do not trade what you think should be….for in doing so your trading is based on egotism, a false sense of foresight, the desire for validation and approval, and the “win at all cost” mentality, which leads to confusion, anxiety, anger, and despair…not to mention the inability to trade another day.
So, what can you do about the fear that keeps you from following your trading plan and maintaining your commitments? How to overcome fear that keeps you from following your trading plan. Well, let’s begin with what causes fear. Fear stems from a perceived threat that may or may not be real. Threat begins as a perception and a thought. In other words, when we have interpreted that an event is threatening our physical, mental, emotional, social or spiritual well-being we have given that event a meaning. Now, meaning is a crucial process that controls not only what you perceive but how you perceive it. For example, that price action is moving toward my stop and that means that I’m going to lose in this trade (the movement of the price action may or may not take you out and at this point it is only an opinion but it is often treated as a fact). In other words, the meaning here would be activated by a limiting or irrational belief about the inevitability of losing, and this in turn would prompt another limiting belief about what that says about you; i.e., “I’m a very poor trader and a loser because my stop loss was hit.” It often continues to spiral downward from there. So, what you are thinking is the genesis of the emotion that you experience…the fear.
Secondly, fear determines what you choose to do. This is where you become immobilized or act in erratic illogical ways that increase your risk and destroy your desired results. At this point it is important that you identify the thinking/beliefs that are fuelling the fear. Here is an important question to ask; “What must I be telling myself or believing to feel this fear.” This introspective inquiry will help you ferret out the underlying fear based programming that created that belief and in-turn developed the fear response in the first place. (more…)
The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.
I don’t know whether I make myself plain, but I never lose my temper over the stock market. I never argue with the tape. Getting sore at the market doesn’t get you anywhere.
A world that’s more riot than profession, the trading floors of Chicago are a place where gambling your family’s mortgage is all in a day’s. At a time when markets are unhinged, FLOORED offers a unique window to this lesser-known world of finance. These men may not have degrees, but they’ve got guts, and penchant for excess that solicits simultaneous feelings of revulsion- and a desire to root them on. But like many aspects of our economy, technology is changing the way these traders do business, and these eccentric pit denizens aren’t the type to take kindly to new tricks. Computerized trading may take the emotion out of the job, but it may also take some of these old-timers out- dinosaurs in a young man’s game.
I’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
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…)
In the book “Reminiscences of a Stock Operator,” Edwin Lefevre writes:
“The speculator’s deadly enemies are: Ignorance, Greed, Fear and Hope.“
In today’s commentary we will take a look at “Hope” and see why it is one of the four deadly enemies of successful market timing.
Each of us has a desire for success. That is why we use market timing in our investing. Not only to increase our gains in both bull and bear markets, but importantly to protect our capital against loss.
But that same desire for success can stand in the way of our ability to recognize reality, even if it is right before our eyes. All of us have a survival instinct that typically causes us to focus on good news. Bad news is avoided, or at least put on the back burner.
When we take a position in the market, whether bullish or bearish, we hope it will be successful. Hope can be such a powerful emotion, that when the same trading plan that told us to enter a position originally, reverses and tells us to exit immediately, our emotions may very well focus on the possibility that if we just hold on a bit longer, any loss may be erased. (more…)
I spent hours reading and re-reading this book, and eventually made a summary of all the key quotes. In a series of posts I’ll be sharing these quotes with you, and hopefully they will inspire you to take your trading to the next level. I hope you enjoy my first selections:
1. You will need to learn how to adjust your attitudes and beliefs about trading in such a way that you can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow you to become reckless.
2. Trading is an activity that offers the individual unlimited freedom of creative expression.
3. The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create some measure of consistent success.
4. The hard reality of trading is that, if you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible.
5. One of the principal reasons so many successful people have failed miserably at trading is that their success is partly attributable to their superior ability to manipulate and control the social environment, to respond to what they want. (Unfortunately) the market doesn’t respond to control and manipulation (unless you’re a very large trader).
6. The tools you will use to create this new version of yourself are your willingness and desire to learn, fuelled by your passion to be successful. Successful traders have virtually eliminated the effects of fear and recklessness from their trading.
7. Attitude produces better overall results than analysis or technique. (more…)
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…)
Here are a list of ten types of traders I have observed on social media. We have all likely been more than one of these types at some time or another while trading. But we need to focus like a laser on the only real reason we should be trading: to make money and once we have made it, to keep it.
- Greedy Traders: They trade too big and risk too much because their only goal is the easy money. They usually end up blowing up their account.
- New Traders: They have no idea how the markets work so their only goal should be knowledge. New Traders do well to stay students until they have done their homework. Rushing in to make money without risk management, a winning method, the right mind set, and a trading plan will result eventually in failure 100% of the time.
- Arrogant Traders: Their only goal is to prove they are right and satisfy their fragile egos. Arrogant traders will lie, delete tweets and posts, never admit when they are wrong. When they are wrong they will hide it under a cloak, when they are right they will scream it from the roof tops.
- Trend Traders: Their only goal is to ride a trend and make money. Trend traders will buy high and sell much higher, they will short and cover much lower. They look like genius’ and prophets in a trending market either way it trends but they look like they can’t even trade in choppy or whipsawing markets. In the long term they do very well.
- Scared Traders: Their only goal is to not lose their capital. Scared traders will immediately close losing trades and also immediately take profits. They are very stressed out in trading due to not understanding the nature of trading itself or just can not handle the uncertainty or risk. They either need to do their homework to develop their faith in or if they have done the homework trading may just no be for them. (more…)