Marty has scored enormous percentage gains in every year since he turned full time trader in 1979, but he has done so without ever losing more than 3 percent of his equity on a month-end to month-end basis. In the US Investing Championships held by Stanford University Professor Norm Zadeh, his performance was nothing short of astounding. In nine of the ten four-month championships he entered, he made more money than all the other traders combined. His average return in these nine contests was 210 percent – non annualized! In his single entry in a one-year contest, he scored a 781 percent return.
“I turned from a loser to a winner when I was able to separate my ego needs from making money. When I was able to accept being wrong. Before that, admitting I was wrong was more upsetting than losing the money.”
”When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.”
”By living the philosophy that my winners are always in front of me, it is not so painful to take a loss. If I make a mistake, so what! “
”Before taking a position always know the amount you are willing to lose.”
”The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.”
”I always take my losses quickly. That is probably the key to my success.”
”The best advice I can give to the ordinary guy trying to become a better trader is Learn to take losses. The most important thing in making money is not letting your losses get out of hand.
Don’t speculate unless you do it full time
Take your losses swiftly and clearly; the first loss is the your easiest loss
Don’t trade too many securities; focus on a few investments that can be monitored carefully.
While there are a lot of traders out there, many of them don’t make any money. Well, it’s time for a wake-up call folks. Here are six reasons why you do not — and may not ever — make money as a trader:
You don’t put in the proper amount of effort. You don’t put in the full-time commitment it requires to be profitable in trading because you treat it like a hobby. Trading is not a part-time job. It’s serious business.
- Failure to be disciplined and consistent with your process. There’s no excuse for this. It’s all up to you.
- Trading like a gambler instead of a trader. You’re taking irresponsible risks rather than thinking in terms of probabilities and trading when you have an edge.
- Actually putting on trades without a solid game plan. What are you thinking? You must know your game plan and execute it.
- You over think things. Trading is a simple game — up, down, sideways. Keep it simple and make money.
- Not trusting yourself to do what you know you need to do. You spend too much time listening to other people. Trust yourself and execute what you know.
The good news: every one of these things is entirely in your control. All you have to do is choose to make things happen.
1. The three E’s: enter, exit, escape
Rule No. 1 is having an enter price, an exit price, and an escape price in case of a worst-case scenario. This is rule number one for a reason. Before you press the “Enter” key, you must know when to get in, when to get out, and what to do if the trade doesn’t work out as expected.
Escaping a trade, also known as using a stop price, is essential if you want to minimize losses. Knowing when to get in or out will help you to lock in profits, as well as save you from potential disasters.
2. Avoid trading during the first 15 minutes of the market open
Those first 15 minutes of market action are often panic trades or market orders placed the night before. Novice day traders should avoid this time period while also looking for reversals. If you’re looking to make quick profits, it’s best to wait a while until you’re able to spot rewarding opportunities. Even many pros avoid the market open.
3. Use limit orders, not market orders
A market order simply tells your broker to buy or sell at the best available price. Unfortunately, best doesn’t necessarily mean profitable. The drawback to market orders was revealed during the May 2010 “flash crash.” When market orders were triggered on that day, many sell orders were filled at 10-, 15-, or 20 points lower than anticipated. A limit order, however, lets you control the maximum price you’ll pay or the minimum price you’ll sell. You set the parameters, which is why limit orders are recommended. (more…)
This is the most inspirational speech I have ever heard. I know many of you want to be full time traders but somehow miss the courage to try it.
Yes, trading is hard at the beginning, some of you don`t have what it takes to be a great professional trader, but…the question I ask you is, “Do you want to be asking yourself this question for the rest of your life and wonder how it would have been?…”
Listen to this magnificent speech from Steve Jobs. It can be a life changer for you:
A trader has to have patience & discipline to succeed.
The bottom line is – you need to work out a plan, and then stick to it…regardless.
If you decide on trading only a particular strategy, then you must wait for that setup to occur. In the meanwhile, if price makes some moves, you should not trade those, simply because they do not fit within your plan.
Psychologically, you need a lot of discipline to stick to a plan, because you always feel you are missing out on the moves.
And if you are trading full time, then this becomes a very big issue. Since you keep waiting for a trade & if the opportunity does not occur, then you get tempted to twist your plan & get into the action…..which is the surest way to disaster.
One can make a living from trading…provided it’s done in the correct way.
It’s not an overnight-get-rich-scheme.
It has to be built up slowly & takes a lot of effort & dedication.
Once you accept this fact, it becomes somewhat easier
Take this quick quiz and honestly determine if you are built to trade full time:
- Are you properly capitalized?
I wouldn’t suggest anyone start to think about trading full time until they have at least six figures that can be used solely for trading. Living expenses must come from other income or saved funds. Without six figures (and the more then better), I suggest you continue to build your stake.
- Are you a successful part time trader?
Why do you think you can succeed being a full time trader if you haven’t made money as a part time trader? Have you built your own stake to six figures trading part time? If so, you pass this question with flying colors.
- Have you developed a system that works?
Does your system have a positive expectancy? Have you back tested the system (I don’t hold too much weight to this question)? Do you understand position sizing and do you implement it properly so you don’t blow-up with one or two trades?
- Does your system offer enough opportunity?
Without opportunity (multiple trading signals per day/ week), you will not be able to achieve your system’s expectancy. A lack of opportunity may skew your results and turn your anticipated positive expectancy to a negative expectancy and cause you to go broke.
- Can you handle your emotions?
How do you handle your emotions now with longer term positions or part time trading? Do you follow your rules, all the time? Will you have pressure to make money every month, week or day? Can you handle being alone (most cases) and staring at a computer for large portions of the day?
- Finally, do you have spouse or other influence that will interfere with your endeavor?
A spouse, friend or family (member) can have a negative affect on your trading that may result in subconscious sabotage. Outside negative forces or nagging pressure people may lead you down a path that is not controllable because you are trying to prove something rather than “just trade” based on your acquired skills. Make sure the closest people in your life support you while making the move to full time trading.
1. Do the Math
Sit down and go over your expected Risk to Reward Ratio for each trade. If you have already been trading for a period of time sit down and analyse how much you are making each trade and your winning %. These two numbers will help you formulate a solid profit goal. No trading strategy works 100% of the time so you need to work out how much you lose per losing trade vs. how much you make per winning trade and then figure in your percentages. From there you should have a realistic idea of how much you can expect to make in through your trading.
2. Don’t Expect Instant Returns
Trading is a business and like any other business it requires not only capital investment but time investment as well. It takes time to find your rhythm and develop your trading skills. Try not to be to hard on yourself during the learning phase and remember to focus on the positive aspects of your trading. The vast majority of traders lose money and this number is even higher with traders who are just starting out. Factor this in when you are setting your goals.
3. Skill vs. Profits
Try to come up with goals that are not directly tied to your P&L statements. For example, set a goal of following your rules for every trade for an entire trading day. Once that is completed shoot for an entire week, then a month, and pretty soon you will be doing following your rules without even realising it. Train yourself to develop your trading skills and reward yourself when you reach those goals.
4. It Takes Money
It takes money to make money. Small accounts are fantastic for testing out whether or not trading is for you but when you get serious and want to go full time make sure you have enough capital to support your business. Solid traders should expect to make 8% in the market over the course of a month. That equates to 96% over a given trading year. Make sure this figure allows you to have the lifestyle that you are expecting.