Archives of “discipline” tag

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Sticking to the Plan

  
  Education
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A Trading Plan only has value if it is utilized as intended. It does you no good to have one if you do not stick to it. We all know this, yet traders find reasons to deviate from their Plan, almost always with negative consequences. Why? There are several reasons.

  • The Plan does not match the trader: A Trading Plan is a personal thing intended for a specific trader, based on her/his personality and circumstances. If it is not created honestly based on reality rather than hope, then it will not match the trader, and likely it will be neglected.
  • Lack of Patience: Trading Plans are intended to be long-term, at least relatively so. Many traders give up on their Plan, or often more specifically the trading system in the Plan, after a period of sub-par performance rather than sticking it out through the inevitable rough times.
  • Lack of Discipline: Trading according to a plan requires continuous performance of a set of actions in a proscribed manner. Doing so takes discipline. Traders lacking discipline do not stick to Trading Plans. (The word “discipline” is probably the most frequently used in regards to trading success.)
  • Self-Destructive Behavior: Sometimes traders have deeply ingrained issues of a psychological nature which tend to sabotage them. It is something which can be overcome with work, but first it must be recognized and addressed.

These are not the only reasons traders fail to stick to Trading Plans, but they do represent a large portion of the explanations for it happening. The point is that a Trading Plan is little more than a document if not put in to practice.

I hope this sequence has been helpful to you. Definitely feel free to drop me a question or leave a comment with your thought, experience, or ideas on the subject.

The Battle is With Yourself

  
  Education
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Years of experience eventually teach you that your main battle, always, is with yourself — your propensity for errors, for rationalizing marginal hands into good hands, lack of concentration, misreading other players, emotional eruptions, impatience, and so on. Your opponents are merely dim outlines that come and go. Few of them ever reach the exalted heights of damage that you can inflict on yourself.”

– Larry Phillips, Zen and the Art of Poker

Many great traders have expressed some version of the opinion, “Your greatest opponent is yourself.” Do you agree?

If so, what are the implications?

On the positive side, if “we have met the enemy and he is us,” as Pogo once said, what does that say about growth opportunity?

If you had perfect discipline, perfect motivation, and perfect emotional control, how good (or great) a trader could you be? 

“What advice would you give to a novice trader?” by Jack D Schwager

  
  Education
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This was taken from the book “The New Market Wizards”, it’s one of the questions posted by Jack D Schwager to Gil Blake. And this was his answer:
“There are five basic steps to becoming a successful trader.

  • First, focus on trading vehicles, strategies, and time horizons that suit your personality.
  • Second, identify non-random price behaviour, while recognizing that markets are random most of the time.
  • Third, absolutely convince yourself that what you have found is statistically valid.
  • Fourth, set up trading rules.
  • Fifth, follow the rules. In a nutshell, it all comes down to: Do your own thing (independence); and do the right thing (discipline).”

Trading Secret

  
  Education
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My SecretI feel certain that my discipline in executing each and every trade according to my trading methodology is the secret to my success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.

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. 

Top 6 Mistakes Traders Make

  
  Education
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1. Failure to have a trading plan in place before a trade is executed. A trader with no specific plan of action in place upon entry into a futures trade does not know, among other things, when or where he or she will exit the trade, or about how much money may be made or lost. Traders with no pre-determined trading plan are flying by the seat of their pants, and that’s usually a recipe for a “crash and burn.”

2.Expectations that are too high, too soon. Beginning futures traders that expect to quit their “day job” and make a good living trading futures in their first few years of trading are usually disappointed. You don’t become a successful doctor or lawyer or business owner in the first couple years of the practice. It takes hard work and perseverance to achieve success in any field of endeavor–and trading futures is no different. Futures trading is not the easy, “get-rich-quick” scheme that a few unsavory characters make it out to be.

3.Failure to use protective stops. Using protective buy stops or sell stops upon entering a trade provide a trader with a good idea of about how much money he or she is risking on that particular trade, should it turn out to be a loser. Protective stops are a good money-management tool, but are not perfect. There are no perfect money-management tools in futures trading.

4.Lack of “patience” and “discipline.” While these two virtues are over-worked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed. Don’t trade just for the sake of trading or just because you haven’t traded for a while. Let those very good trading “set-ups” come to you, and then act upon them in a prudent way. The market will do what the market wants to do–and nobody can force the market’s hand. (more…)

The Five Investing Essential Truths

  
  Education
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5-number

Markets are notoriously hard to read and people see only what they themselves want to see.

Bulls will find reasons why certain stocks will go higher, while at the same time, Bears will find many reasons for the same stocks to go lower.

The seldom-admitted truth is that most of the time, markets exist in some indeterminate state!

The main thing is that you cannot trust consensus and you cannot rely on the “Establishment.”

You can’t find refuge in the herd and you must resist the urge to join the crowd.

Your passion of the moment will most certainly create a disaster over the years!

On the other hand, if you do stick with the following five essential truths, you do stand a better than average chance to invest profitably:

1. Markets are unpredictable and ill-suited to forecasts.

2. Long-term fundamentals are key.

3. Investor emotion leads to volatility.

4. Valuation discipline should guide investment selection.

5. Perspective and patience are always well rewarded.

 

Qualities of Successful Traders

  
  Education
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Emotional stability. You don’t have to be nuts to trade, but it helps!  That is a joke, of course. Emotional stability is grace under pressure. A successful trader must be able to remain calm in difficult situations. Traders that rank very high on the emotional stability scale have very low anxiety levels, remain calm, relaxed, and have a low suspicion level. They tend to be trusting individuals and are not paranoid. You won’t hear them blame the market makers for forcing the stock to hit their stop and they take responsibility for their actions. Successful traders tend to be well
grounded.
 

Discipline. Successful traders are ones that can follow the rules. They are the guys that drive the speed limit. They tend to be perfectionist and take pride in their work. They like to take a project from start to finish and get joy from completing it successfully. Pilots, trained to follow checklists, tend to make good traders. An impulse oriented individual will have difficulty achieving the discipline to become a successful trader.
 

Intelligence. Bill says that successful traders tend to be intelligent. They need not have the IQ of Einstein but they are above average in intelligence. They tend to be good problem solvers and good with numbers, such as statistics. They understand that trading is based on probability, that not every trade will work as planned.

Trading Vs. Professional Gambling

  
  Education
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Prof.Gambling

Marcel Link in his excellent High Probability Trading is not the first to equate the skills of the professional gambler with the skills needed to succeed as a trader but he does it very convincingly:

[The professional gamblers] don’t take unnecessary risks or gambles. They know when the odds are in their favor and will bet more when the odds get better. If the odds aren’t there, they won’t risk nearly as much, if anything. They know how to protect their winnings, and they know how to call it a day when Lady Luck is blowing on some other guy’s dice. Having this discipline lets them come back to the table the next day. […] (more…)

Great Traders: Five Distinguishing Features

  
  Education
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number5* Everyone is wrong in the markets at times. The difference between the great traders and the unsuccessful ones is in how long they stay wrong.

* Addictive traders get high from action; great traders get high from mastering markets–and mastering themselves.

* Great traders do their best work when they are not trading; unsuccessful traders do not work when they are not trading.

* Every loss of discipline is a self-betrayal; great traders are true to themselves and stay disciplined as a result.

* Great traders focus on the two things they can always control: when they play and
how much they bet.

You will never achieve greatness by minimizing your weaknesses. At best that will
bring you to average. The path to greatness lies in maximizing strengths: becoming
more of who you are when you are at your best.

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