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Effectiveness Is the Measure of Truth

  
  Education
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In trading as in life, effectiveness has to be the measure of truth. If something doesn’t work, there is no point in continuing to do it. Misperceptions, false unconscious or conscious beliefs, and unhelpful behaviors can contaminate and desecrate your most sought after results.

Imagine the frustration of a trader who perceives that a market is changing direction when in fact it is persisting in its original thrust. Or consider, for further example, an investor who bought into the belief that buy and hold is a valid investment strategy. That investor had to have experienced devastating losses over the past year. Or ponder the trader who repeatedly fails to utilize stop losses and experiences numerous outsize losses because he won’t accept a loss. (more…)

Learn from Your Mistakes

  
  Education
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The most successful traders and aggressive investors learn from their mistakes. Many even go as far as writing down what went wrong and analyzing the problem. Mistakes can be costly, so use them as learning experiences and don’t make the same mistake twice. Unfortunately, many people are doomed to make the same mistakes over and over again. This behavior is usually a sign of emotional reactions to price momentum and the absence of any well-thought-out strategy. My father once told me that the best education comes from learning from the mistakes of others. Most people fail in the market not because of technology or a lack of information but because of emotional reactions and a failure to learn from their mistakes and the mistakes of others.

Are you a discretionary trader?

  
  Education
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How would you be able to tell?  Here is a quiz that will help you decide.  Answer Yes or No to the following questions.

  1. Do you sometimes buy newsletter recommendations without having a real plan for how you’ll get out of the trade?
  2. Do you occasionally (or often) take trades based upon some interesting indicator that you learned in a workshop (i.e., when you see that indicator go, you usually get into a trade, but again you have no real plan about how you’ll get out of the trade)?
  3. Do you trade three or more different systems in the same account?
  4. Do you trade more than ten different systems?
  5. Do you sometimes enter a trade and later not remember why?
  6. Are you unsure of how many systems you have?
  7. Do most of your systems lack a complete set of rules to guide your behavior?
  8. Are your systems equivalent to the setups used to get into the trades and nothing more?
  9. Are you unable to list the rules for the last trade you made?
  10. Are you able to list the rules for any of the last five trades you made?

If you answered Yes to as many as two of the questions above, you have some elements of a no-rules discretionary trader. However, if you answered Yes to 6 or more questions above, you definitely are a no-rules discretionary trader.

Chances are you seldom make money in the market because you are not playing a winning game. You probably make many mistakes. In fact, since you don’t have rules, I would consider everything you do to be a mistake until you have a set of rules in place.  How can you effectively learn from any of your trading experiences if you do not know which ones are mistakes? (more…)

4 Points to be Successful Traders

  
  Education
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1) Diversify: If you have a pattern you  trade successfully, you don’t have to grow your size. Instead, look to diversify  to a different pattern (different market, different time frame) not correlated  with the first. You’ll smooth out your returns, as one pattern makes money while  the other experiences drawdown. You’ll also achieve the portfolio manager’s goal  of superior return for less risk exposure.
2) Review Entries: Review your trades for the week and see how much heat  you took on your winners. This will give you an idea of how good your entries are.
3) Review Exits: Review your trades for the week and see if the market  went in your favor or against you after you exited. This will give you an idea  of how good your exits are.
4) Work Orders: Get into the habit of working orders to buy at bid, sell  at offer or to place orders between the bid and offer to avoid paying a price  that is out of line with “fair value”. For the frequent trader, the single tick saved by good execution adds up over time.
The successful traders I’ve worked with never stop working on themselves. This is equally true of successful athletes, musicians, and chess champions. Small, steady improvements can create massively greater performance over time.

How can you enhance perceived self efficacy

  
  Education
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Self efficacy is built through four processes:
Mastery experience
Role modelling
verbal persuasion
psychological cues.
These four are in order of importance. Most critical way to build self efficacy is through a mastery experience.

Mastery experience is basically a successful experience of mastering a task. Mastery experiences happen when the learner has reached the point where they understand the content knowledge enough to perform a task on their own or masters the task. It happens if the learner goes in to sufficient depth on material he trying to learn. It happens as a result of immersion in a particular field or task. It happens with plenty of prior exposure to the content.

At some stage the learners are able to interpret the results of their actions and use those results to develop their own capability to engage in future actions or tasks. Then the learner become auto learners. They are able to participate in tasks on a first hand basis with little or no assistance from outside influences. When you experience a intense mastery experience you get a feedback on your own capabilities. Long and sustained efforts are required for mastery experience.  (more…)

Mark Douglas : Trading in the Zone

  
  Education
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Without doubt the foremost reading, it seems, in trading circles. Douglas’ book, in my view, deserves its place at the top of a traders reading list. Whether you are trading currencies, commodities, stocks or futures this book will have something for everyone. The book tackles the psychology involved in being a successful trader. The book attempts to give the reader the tools to develop the Confidence and discipline to become and consistent winner.

I think the book is a superb read and although I cannot say right now how succesful it has been, it is one of the few books that I pick up nearly every day and read another chapter again and remind myself of some of Douglas’  inspiring ideas and thoughts.

The book ends with a great 20 trades learning excercise that is a must.

The key learnings I get from reading this book :

1)The market is random; you cannot predict it. Unless you know every individual who has a position in the market and you know their strategy for each trade it is impossible to know what will happen next.Give up trying to predict, and focus on the now moment and managing yourself , your money and your strategy.

2)The Power of Association. Douglas uses throughout the book a story about a boy and his fear of  dogs. He uses this analogy to describe how previous experiences that have given pain, or expected pain, to us will mean that our mind will do everything possible to protect itself from future pain when it is exposed to similar circumstances at some point again in the future. i.e. If you recognise a market pattern where previously you lost a trade you will be compelled to exit the trade at that point or not take that trade on; because you will not want to experience pain. Douglas again talks about the here and now and describes how we can overcome these internal obstacles.

101%….Don’t miss to Read this Book !!!!

Coach Yourself as a Trader

  
  Education
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What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

coach

And here is how I answered:

  • 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
  • 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule. (more…)

Trading Wisdom

  
  Education
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“You are the sum total of ALL your experiences in life.

And if you discount ANY of them ~ you negate and discount your very ability to be a consistent and successful trader.

So ~ what IS your definition of CONFIDENT?

If we look up the definition of the word “confident” in Roget’s Thesaurus as you know I like to do, we can find the following:

“…believing, undoubting, unhesitating, without a doubt, convinced, satisfied, assured, unafraid, courageous, unscarred, undaunted, daring, venturesome…”

Is that you?  Is that your definition?  Or, is this your definition:

“…hopeful, expecting, try to reassure, hold out hope, make promise to…”

Or do you know?  Right now, if someone were to ask you what your definition of confidence is ~ what would you say?  Right off the top of your head? (more…)

Trading Experiences

  
  Education
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A major key to success as a Trader and Investor lies in your mind.  Actually, it lies in your ability to use your mind optimally and creatively.

Please remember – there is NOTHING WRONG WITH YOU.  You don’t need to change YOU.  What you most likely need to change is the “software” that you are running in your mind.  When we are born we do not get a user’s manual on how best to use our mental abilities.  So we learn by soaking up what we see and hear around us as we grow up.  And often times what we learn is not conducive to being a successful trader and investor.

One of the key mental approaches is to “Welcome Every Experience.”  Welcome every experience that comes to you.  It may be an expectation, or it may be a surprise.  It may be ‘good’, or it may be ‘bad’ based on your first assessment of it.  It may involve someone getting hurt, someone getting promoted, a tragedy, a triumph, a windfall, a bankruptcy, an ‘aha’ moment….anything.  The most useful way to approach experiences we receive (which are mostly experiences we can’t control as they are outside of us) is to welcome them and learn from them.  Realize that they are exactly what we need in that moment, at that point in our lives.  And since we don’t have a time machine, once something has happened, there’s no changing it. (more…)

Coach Yourself as a Trader

  
  Education
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What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

And here is how I answered:

  • 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
  • 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule.
  • 3. Study and work hard. Sounds so simple but we live in a very lazy society. It is extremely important to my success for me to continuously study the markets on a fundamental and technical level and learn from my successes and mistakes. If you think about it, we would all start at square one on every trade if we didn’t learn from past situations where we succeeded or failed. Applying the knowledge gained from past experiences allows me to properly analyze similar situations in the future with slightly greater odds of success (or at least I would like to think). Never stop learning is a phrase that I will never stop saying as it proves to be truer the older I get.
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