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The Trading Plan- Discipline

  
  Education
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Trying to win in the markets without a trading plan is like trying to build a house without blue prints – costly (and avoidable) mistakes are virtually inevitable. A trading plan simply requires a personal trading method with specific money management and trade entry rules.
Discipline was probably most frequent word used by the exceptional trades that I interviewed.
There are two reasons why discipline is critical. 

  • Its a prerequisite for maintaining effective risk control.
  • You need discipline to apply your methods without second guessing and choosing which trade to take.

A final word, remember that you are never immune to bad trading habits – the best you can do is to keep them latent. As soon as you get lazy or sloppy, they will return !

Ways to Increase Willpower For Traders

  
  Education
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  • Plan in advance and operate on the basis of habit
    • You need to have a trading plan that covers all permutations that the market can possibly throw at you. You need less willpower to follow a clearly defined plan than to try adhering to broad principles in reaction to the market.
    • Keep practicing applying your trading plan, so that you can make following the rules a habit. It is like driving, the more you do the less effort it requires progressively.
  • Motivate yourself, remind yourself of the importance of what you are doing
    • You need to remind yourself of the importance of achieving good trading results, of the importance of not throwing your hard-earned money away.
    • Use visualization techniques to picture situations where you follow your trading plan successfully. Thinking that you have lots of willpower actually makes it so.
    • Think of some trader you admire that have lots of self-control and unfazed by market movements (e.g. Ed Seykota)
  • Exercise your willpower
    • Willpower is like a muscle, the more you exert your willpower in whatever tasks, the greater your capacity for self-control.
    • You can get yourself to follow rules such as sitting up straight, opening doors with your left hand, etc.
  • Have sufficient food
    • Exercising willpower uses up glucose. Being hungry means you don’t have the energy to exert willpower.
  • Have sufficient rest
    • You can replenish your ‘willpower’ stores through sleep. Get sufficient sleep every day.

42 Wisdom Points For Traders

  
  Education
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  1. First Things First
    You sure you really want to trade ? It is common for people who think they want to trade to discover that they really don’t.
  2. Examine Your Motives
    Why do you really want to trade ? Did you say excitement ? Then don’t waste your money in market, you might be better off riding a roller coaster or taking up hand gliding.
    The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
  3. Match The Trading Method To Your Personality
    It is critical to choose a method that is consistent with your your own personality and conflict level.
  4. It Is Absolutely Necessary To Have An Edge
    You cant win without an edge, even with the world’s greatest discipline and money management skills. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.
  5. Derive A Method
    To have an edge, you must have a method. The type of method is not important, but having one is critical-and, of course, the method must have an edge.
  6. Developing A Method Is Hard Work
    Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple failures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of professionals. Why should you be any better ? If it were that easy, there would be a lot more millionaire traders.
  7. Skill Versus Hard Work
    The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may provide proficiency, but not excellence.
    Virtually anyone can become a net profitable trader, but only a few have the inborn talent to become supertraders ! For this reason, it may be possible to teach trading success, but only upto a point. Be realistic in your goals.
  8. Good Trading Should Be Effortless
    Hard work refers to the preparatory process – the research and observation necessary to become a good trader – not to the trading itself.
    “In trading, just as in archery, whenever there is effort, force, straining, struggling, or trying, it’s wrong. You’re out of sync; you’re out of harmony with the market. The perfect trade is one that requires no effort.”
  9. Money Management and Risk Control
    Money management is even more important than the trading method. 

(more…)

What U Can Learn From Occam’s Razor About TRADING

  
  Education
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I have seen too many traders that randomly add condition after condition to their trading strategy, hoping that it will increase their hitrate. What they are trying to do is to add assumption after assumption to their hypothesis, until their hypothesis (“price will move in to this or that direction for this or that amount”) is hopefully correct more often than not.

Going this way usually ends in paralysis through analysis or in total chaos because there are so many conditions when entering a trade that it is impossible for a human brain to follow the system, thus inducing mistakes.

 Enter: Occam’s Razor

Occam was one of those scholastic philosophers, living around 1300 A.D. He developed a principle called Occam’s Razor which states that “among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected. Other, more complicated solutions may ultimately prove to provide better predictions, but—in the absence of differences in predictive ability—the fewer assumptions that are made, the better.” But Occam was not the first, even Aristotle, who was living a mere 2000 years ago, theorized about this concept.

Now the thing is that of course when you add or remove certain conditions to your trading strategy, the predictive ability of your strategy will vary thus rendering Occam’s Razor seemingly invalid. Seemingly. Because trading is a game of incomplete information, we can never exactly know the predictive ability of a model.

Even after testing thoroughly, we will always only get an estimate (our winrate). Because of this fact you should base your trading strategy on as few assumptions as possible. (more…)

Don’t Let Negative Emotions Control You

  
  Education
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Successful traders do not allow negative emotions to affect their decision-making. Trading is a stressful process, and you will experience many setbacks. Expect them, however, and don’t see losses as indications that you will never succeed. Instead, be prepared to identify your negative reactions and act on them in positive ways.

Successful traders turn fear into gain. They realize that losses are a part of their business, and they expect them. But while they know that some trades will cost them money, they let those same trades become a gain in knowledge. Remember that each time you have a loss, this gives you some guidelines on how to alter your strategy. Perhaps your stop loss needs to be set higher, perhaps you need to alter how you identify trends, or perhaps you need to use new indicators. (more…)

7 -Market Wisdom

  
  Education
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  1. First Things First
    You sure you really want to trade ? It is common for people who think they want to trade to discover that they really don’t.
  2. Examine Your Motives
    Why do you really want to trade ? Did you say excitement ? Then don’t waste your money in market, you might be better off riding a roller coaster or taking up hand gliding.
    The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
  3. Match The Trading Method To Your Personality
    It is critical to choose a method that is consistent with your your own personality and conflict level.
  4. It Is Absolutely Necessary To Have An Edge
    You cant win without an edge, even with the world’s greatest discipline and money management skills. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.
  5. Derive A Method
    To have an edge, you must have a method. The type of method is not important, but having one is critical-and, of course, the method must have an edge.
  6. Developing A Method Is Hard Work
    Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple failures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of professionals. Why should you be any better ? If it were that easy, there would be a lot more millionaire traders.
  7. Skill Versus Hard Work
    The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may provide proficiency, but not excellence.
    Virtually anyone can become a net profitable trader, but only a few have the inborn talent to become supertraders ! For this reason, it may be possible to teach trading success, but only upto a point. Be realistic in your goals.

4 Words For Traders :Hear ,Receive ,Believe & Apply

  
  Education
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HEAR

To HEAR you have to listen and listen intentionally. You will not HEAR properly if you are focused on other things. This situation is especially true on a webinar or during the trading day when the markets are open. It is essential to set distractions aside and HEAR what is being stated.

RECEIVE

To RECEIVE something you have to HEAR it and come into agreement with it.  To RECEIVE is to take it unto yourself and personally grab hold of what you have heard and make it your own.

BELIEVE

To be successful you have to believe that what you HEAR and RECEIVE can add value to your current situation. You have to BELIEVE that a specific strategy repeated and correctly  executed, regards of any specific outcome, will provide successful results over time. You will act on what you believe In all areas of life.  Please make sure you really do BELIEVE it and are not allowing any contradictory mindset to compete with your belief because it is possible to hold two opposing beliefs at once. This is being double minded and leads to instability.  Being firm and unswayed in what you BELIEVE can lead to becoming a successful trader. (more…)

Discouragement Reveals Our Courage

  
  Education
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Discouragement is between you and your dreams. Imagine the ways you deal with it in life, business, sports, board games and romance, and then take a tip from deep in the desert. I’ve discovered after living here for two decades that desert rats, as they fondly call themselves, deal with the hardships or heat, privation, and loneliness in eight ways.

1. Books: This is a lifelong plunge.
2. Booze: So is this, so try the other seven first.
3. Exercise: This was my adaptation many years ago; the washes are my sidewalks.
4. Refrigerator People: Live with one hand on the door.
5. Hobby: For most, it’s fixin’ cars.
6. Estivation: Not found in some dictionaries, this is the desert form of hibernation.
7. TV: Hours of it.
8. Sex: Beats watching the cactus grow, or does it?

One of the first questions to ask a person to know them better is: “What do you do in your spare time?” The answer in the desert is always one of the above. And from that you will be discouraged or encouraged. Think of encouragement as a cheerleader that says, “Do it!, Don’t give up!” until you reach your dreams.

26 Points For Traders

  
  Education
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  1. First things first
    • Do you really want to trade?
  2. Examine your motives
    • Why do you want to trade?
    • Don’t trade for excitement.
  3. Match the trading method to your personality
    • Choose a method congruent with your personality and comfort
  4. It is absolutely necessary to have an edgeDerive a method
    • MUST HAVE
  6. Developing a method is hard work
  7. Skill versus hard work
  8. Good trading should be effortless
    • Be in sync with market
  9. Money Management and risk control
    • 1-2% AUM
  10. The trading planDiscipline
    • Draw up trading blueprint/business plan
  12. Understand that you are responsibleThe need for independence
    • your choices led to your results
  14. Confidence
  15. Losing is part of the game
  16. Lack of confidence and time-outs
  17. The urge to seek adviceThe virtue of patience
    • Get out of trade if you need an opinion
  19. The importance of sittingDeveloping a low risk idea
    • “Be right and sit tight”
  21. The importance of varying bet size
  22. Scaling in and out of trades
  23. Being right is more important that being a genius
    • Go for consistency trade-to-trade, not perfection
  24. Don’t worry about looking stupidSometimes action is more important that prudence
    • Don’t talk about your position
  26. Catching part of the move is just fine
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