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Hallmark of a Position Day Trader

  
  Education
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  • Routine and Predictable daily methodology
  • Psychological Control: Discipline, Focus, Patience
  • Macro vs Micro Market Analysis … seeing the Big Picture
  • Comprehensive intraday Hit List analysis
  • Multiple intraday Set-up opportunities
  • Various chart pattern recognition … low risk opportunities
  • Capital preservation = risking less than 50% maximum stop loss.
  • Expectation & Time Exits: Scalp, Breakeven, Profit Target, Let Profits Run
  • Trading Execution Commitment: honoring Set-up signals, not P&L

    • 7 Crucial Points for Traders

      
      Education
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    1. You don’t choose the stock market; it chooses you.  A little bit of early trading success can have a profound effect on a person’s soul.  If it does choose you, you’ll have to accept that your life and investing will become forever connected.
    2. Your methodology must provide an unshakeable foundation that you believe in totally, and you must have the conviction to trade based upon it.   If your belief is tentative or if you don’t have complete faith in your methodology, then a few bad trades will destabilize and erode your confidence. 
    3. A calm mindset that can focus on the execution and not on the outcome is what produces profits.  It takes total emotional control.  You must maintain your balance, rhythm and patience.  You need all three to stay in the game.
    4. The markets are always conniving with ingenious techniques to get you to lose your patience, to get you frustrated or mad, to bait you to do the wrong thing when you know you shouldn’t.  A champion doesn’t allow the markets to get under his skin and take him out of his game.
    5. Like a great painting, all good trades start with a blank canvas.  Winning traders first paint the trade in their mind’s eye so that their emotional selves can reproduce it accurately with clarity and consistency, void of emotions as they play it out in the markets. (more…)

    Important goals for traders

      
      Education
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    1) Risk management goals – Goals pertaining to trade sizing and drawdowns;

    2) Idea generation goals – Goals pertaining to the process of generating sound trading ideas and formulating these into plans;

    3) Execution goals – Goals pertaining to implementing trade ideas/plans so as to maximize reward and minimize risk;

    4) Position management goals – Goals pertaining to the management of positions once they’re entered, including hedging and scaling in/out;

    5) Portfolio management goals – Goals pertaining to achieving good diversification among ideas and allocating capital effectively to those ideas;

    6) Self-management goals – Goals pertaining to maintaining a constructive mindset for optimal decision-making;

    7) Personal, non-trading goals – Goals that reflect desired outcomes in areas of life outside trading that might spill over into trading performance, including physical fitness, relationships, spirituality, etc.

    Trading Advice

      
      Education
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    1) Cut Risk – It’s that “above all else, do no harm” principle. If you don’t have a feel for the market, trade small while you regain your feel. Preserve as much of your capital as possible to lay the foundation for your recovery; 

    2) Focus on Your Strengths – It’s not unusual for frustrated traders to try to make all kinds of changes in their trading in a frantic effort to gain some traction. These efforts can compound difficulties by getting traders further and further from their strengths. During rebuilding periods, you want to focus on the markets and strategies that you know most about, that represent your strengths. 

    3) Reach Out – It’s especially helpful to reach out to traders who trade markets and strategies similar to yours. Are they also struggling? If so, this suggests that market changes, indeed, may be at the root of the problem. If the traders you contact are succeeding, try to find out what they’re doing differently from you. It may well be that a simple tweaking of execution, holding times, and risk management could turn your performance around.  (more…)

    Three Questions for the End of the Trading Day

      
      Education
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    1) Did I trade well today? – Did I make good use of my preparation? Did I follow rules about position sizing and execution? Did I adapt well to shifts during the trading day? Was I patient in finding trades with good risk/reward characteristics?
    2) What did I learn about myself today? – What about today’s trading can I bring to the next day to make myself better? How can I learn from what I did right and wrong today? What goals can I set for tomorrow to make sure that I carry over that learning?
    3) What did I learn about markets today? – Did markets do what I expected? Are my views on markets any different based on today’s trade? What levels did I observe in today’s trade that can inform decision making tomorrow? What themes from today will I be tracking tomorrow?

    Market Wizard’s 25 Trading Clichés and Axioms to Follow, Memorize and Practice

      
      Education
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    1. THE MARKET ITSELF IS THE ULTIMATE WEILDER OF JUSTICE. JUDGE, JURY AND PROSECUTOR.
    2. RECIPE TO LOSE FOR SURE: OVER-ANALYZE, PROCRASTINATE, HESITATE.
    3. LEARN TO SWEAT OUT, HANG ON TO AND SCALE OUT OF YOUR WINNERS.
    4. HIT SINGLES AND DOUBLES, NOT HOMERUNS. THE HOMERUNS ARE USUALLY THE RESULT OF GOOD TRADING AFTER A PROFITABLE TRADE HAS STARTED TO MAKE ITS MOVE
    5. A BIG LOSS CAN DESTROY YOU. IS RISK WORTH TOTAL DESTRUCTION?
    6. LOVE TO LOSE MONEY. NOT BECAUSE YOU’RE AN IDIOT, BUT BECAUSE LOSING MONEY IS AN IMMEDIATE FEEDBACK MECHANISM. EMBRACE THE SIGNAL AND DITCH THE TRADE.
    7. NEWS IS HISTORY. THIS IS THE MOST IMPORTANT AND LEAST OBSERVED RULE. DAYTRADING ARCADES UP AND DOWN WALL STREET HAVE DOZENS AND DOZENS OF LCD’S TUNED TO ONE STATION, CNBC. BY THE TIME THEY PUKE IT OUT, IT’S ABOUT 7 TO 12 HOURS OLD. THERE IS NO SUCH THING AS “BREAKING NEWS” ANYMORE. SOME TRADERS TELL ME THEY TUNE IT OUT. YOU CAN’T. IT GETS INTO YOUR SUBCONSCIOUS AND AFFECTS YOUR TRADING. PUT YOURSELF ON A TOTAL NEWS BLACKOUT FOR A WHILE AND SEE WHAT HAPPENS TO YOUR RESULTS. LOSE TOUCH WITH THE REST OF THE WORLD. ISOLATE YOURSELF TO YOUR ALGORITHMS, DATA, CHARTS AND MASTERING YOUR TRADING PLATFORM. AND IF YOU WORK FOR A FIRM WITH DOZENS OF LCD’S TUNED TO CNBC, MAINLY SO THAT THEIR “GUY” WHO IS ON ONCE A WEEK IS SEEN AND HEARD BY EVERYONE AT THE FIRM. THIS PERSON RARELY KNOWS HOW TO TRADE. I KNOW OF A FEW FIRMS OUT THERE LIKE THIS.
    8. THE FIRST LOSS IS THE BEST LOSS BECAUSE IT HURTS THE MOST. LEARNING TO LOSE IS IMPORTANT. LEARNING TO LOSE AS LITTLE AS POSSIBLE IS THE MARKET’S PAVLOVIAN WAY OF TEACHING YOU HOW TO TRADE PROFESSIONALLY AND PROFITABLY
    9. EARN THE RIGHT TO TRADE BIGGER. YOU’LL KNOW WHEN YOU’RE READY. DON’T RUSH IT. THE BIGGER YOU GET, THE MORE IMPORTANT EXECUTION STRATEGY BECOMES. YOU DON’T WANT TO BE SLOPPY, LIKE MOST PEOPLE I’VE MET, EVEN THOSE THAT WERE SO CALLED MENTORS TO ME, OR WHO I CALLED “MAESTRO”. SLOPPIEST TRADER IN THE WORLD. TINY ORDERS LEAVING ELEPHANT FOOTPRINTS WHILE SMART TRADERS TAKE MAMMOTH ORDERS AND DON’T MAKE A RIPPLE
    10. BE YOURSELF. DON’T TRY TO BE SOMEONE ELSE. FIND THE STRATEGY THAT WORKS FOR YOUR PSYCHE. IT TAKES WORK, READING, TESTING, AND INNER-REFLECTION. YOUR CHARACTER HAS THE CORRECT STRATEGY OUT THERE. YOU HAVE TO FIND IT. DON’T TRADE WHAT SOME SCHMUCK WANNABE HEAD TRADER AT A SHADY FIRM TELLS YOU TO TRADE, OR USE A STRATEGY TAUGHT BY A FIRM THAT LETS YOU ONLY TRADE THAT STRATEGY. GET OUT OF THESE FIRMS. (more…)
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