| How do you build confidence? There are many ways but only one process: multiple small successes. I am very much an advocate for boring trading. What I mean by that is I trade the same edge over and over again without variation. By trading the same edge over and over again I know when to get in and when to get out. I know what to look for when a trade is working and I can safely add to my position. On the other hand, I know what to look for when the trade is not working and I can exit with a small loss. By following the rules EVERY TIME you can succeed, not in making money every time (impossible!), but by following the same plan every time. These small successes give you the confidence to trust yourself each and every time your edge presents itself. This is true in any new venture, whether it be golf, bowling, drawing, flying, etc. Each small success gives birth to greater confidence which in turn brings further successes. You can then replace a vicious circle of failure with a confident circle of success. It is so EASY to want the lottery ticket or the home run every time at bat but HARD to accept when the numbers do not add up or when all the preparation leads to nothing more than the hard earned single. |
Archives of “failure” tag
rssYour Comfort Zone
High achievers (in life and in the market) frequently step outside their comfort zone. That’s the way they learn and make progress. At the same time, they also expect to fail (more often than not), but do not see failure or mistakes they make as problems, but as educational experiences.
The natural instinct of all of us is to seek safety and shelter, unfortunately at the exact same time when we should be aggressive and risk tolerant. Those who do well in the market understand this natural human tendency and they consistently work against it when others are doing the exact opposite.
The key for today is to first understand what your comfort zone is and then take a step outside of it. Remember, the market doesn’t reward comfort and decisions that “feel” good to make. That’s the law of nature and it is true of this market like any other.
10 Different Types Of Traders. Which One Are You?
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…)
Trading Recipe!
The recipe for success in trading are as follows:
- *Identify a signal
- *Take immediate action
- *Feel good no matter what the result, as long as the trade is consistent with your technical bias based on sound probabilities
On the other hand, experiencing hesitation or self-doubt, just at the moment of action, is the recipe for failure!
Are you losing more or failing more?
Losing and failure are not the same thing. No matter the outcome of the trade, I am guaranteed two things: I am paying commission and assuming my head is not up my ass, I learned something about myself, the market, and the relationship between the two. Fortunately, losing is a part of trading. Yes I said fortunately, if everyone won the best could never be rewarded. Failing on the other hand is not necessary. What is the difference between failing and losing? Having less capital because of something I know. FAILURE Are you losing more or failing more? |
Perseverance
It is very important to give yourself a realistic time frame when you are testing new systems or new markets.
Ask yourself:
- Do I get disappointed easily?
- How do I deal with my disappointments?
- Do I get mad and frustrated and let my emotions dictate what I do?
- Do I get out of the game?
- Do I play the blame game?
- Do I examine what I did and tweak things to make them better?
- Do I do a combination of all the above?
- Do I jump from one strategy to another without giving it a fair chance?
“Success is never final, and failure is never fatal; it’s courage that counts.”
Be Imperfect
As a trader – or an investor – you will not be right all of the time. If you can accept your imperfection, and work within it, you will be much more successful:
If you have a perfectionist mentality when trading, you are setting yourself up for failure, because it is a “given” that you will experience losses along the way. You must begin to think of trading as a game of probability. Your losses ( that you hope will return to breakeven) will kill you. If you cannot take a loss when it is small ( because of the need to be perfect), then you will watch that small loss grow into a larger loss and so on into a vicious cycle of more and more pain for the perfectionist. Trading on hope does not work. The markets can remain irrational for a lot longer than you can remain solvent.
The object should be excellence in trading, not perfection. Moreover, it is essential to strive for excellence over a sustained period, as opposed to judging that each trade must be excellent. This is a marathon…not a sprint.
The greatest traders know how to take cut losses and let winning positions run. Perfectionists often do exactly the opposite. They get in at the wrong time, stay in too long and then get out the wrong time. Perfectionists are always striving and never arriving. The market will find the flaw in a perfectionistic trader and exploit it day after day.
Between Theory And Fear
Hell tortures you to stop learning.
George Soros is setting up institutions to study the failure of economic thinking. They have succeed in demonstrating failure, he said this afternoon at the CEU in Budapest, but not in discovering what to do about it.
The source of the problem, he explained, is relying too much on theory, on knowledge, and not on how our not knowing what to do makes us act in ways that change the world, which world we don’t see because we expect it to conform to our theories. We need to be able to discard our theories when they are proven wrong, and we need to understand that no general theory is enough, because our actions are constantly changing the world we need to respond to and understand.
So I said to him after his talk:
– You have divided human activity in two parts, theory, and manipulation. Theory doesn’t work, and manipulation of markets is based on crowd behavior, that is, fear. But since ancient Greece, the parts to human activity have been divided into not two, but three: you have left out practical action.
Practical action differs from manipulation, fearfully following and leading each other, in that its end is making learning easier. It’s purpose is outside of itself, in the part of life where we learn, where we find beauty, what makes life good.
Why not establish institutions that study how economic relations are practical: what forms of cooperation lead to a life of learning and freedom from manipulation, and which don’t. And study how to make the transition from the present institutions based entirely on greed and fear to the kind we need to have. Do you understand?
– I have studied maximization of happiness.
– No that’s not what I mean. Counting results of fear based behaviors: doing that is living still in the world of the theoretical and the manipulative. We need to study how to cooperate, study what forms of cooperation help us learn to make our lives better.
Let’s go, says George Soros assistant, urging him as she has been doing for the last few minutes as we talked. OK, I say, I tried. You remember me, right?
– Yes, he nods his head.
I’d asked him for a job the day before when I saw him walking down the street from the University to his hotel.
Practical necessity. I need to get out of this hell of Budapest, this place putting pressure on me not to learn.
People say it is difficult to diagnose the political problems of our times, but I don’t see the difficulty. We’re together in this hell trapped between theory and fear.
Perfectionism And Trading
Perfectionism: Many traders try very hard to always be right. If the market shows that they are wrong with a loss, they work very hard to turn that loss into a profit. They may average down on a losing position or just hold the stock after their stop price has been exceeded with the hope that the market will turn around and turn their loser into a winner. It is the pursuit of perfectionism that causes us to ignore that trading stocks is a matter of probability. Trying to always be right leads to failure, for eventually, one of those losers fails to turn around and gives the trader a portfolio crushing loss. |
Lao Tzu: A Wise Trend Follower
“A good traveler has no fixed plan, and is not intent on arriving.” “If you look to others for fulfillment, you will never be truly fulfilled.” “When I let go of what I am, I become what I might be.” “People in their handlings of affairs often fail when they are about to succeed. If one remains as careful at the end as he was at the beginning, there will be no failure.” “Respond intelligently even to unintelligent treatment.” “If you do not change direction, you may end up where you are heading.” “The power of intuitive understanding will protect you from harm until the end of your days.” “When you are content to be simply yourself and don’t compare or compete, everybody will respect you.” |