A world that’s more riot than profession, the trading floors of Chicago are a place where gambling your family’s mortgage is all in a day’s. At a time when markets are unhinged, FLOORED offers a unique window to this lesser-known world of finance. These men may not have degrees, but they’ve got guts, and penchant for excess that solicits simultaneous feelings of revulsion- and a desire to root them on. But like many aspects of our economy, technology is changing the way these traders do business, and these eccentric pit denizens aren’t the type to take kindly to new tricks. Computerized trading may take the emotion out of the job, but it may also take some of these old-timers out- dinosaurs in a young man’s game.
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Practice Trading As A Game, But Trade To Win
When you are developing your trading skills and trading mindset have fun at it, and treat it like a game. Develop a stress free environment where practicing and learning are fun. This is where “Paper Trading” can help you. “Paper Trading” is a great way to practice your trading in a stress free environment where you can have fun while learning and improving. When you ready to trade with real money, trade to win! Be relaxed yet focused. Don’t get too serious or you will lose your edge and become uptight and stressed. Instead flow with the markets but make no mistake about it, you are there to win! The Navy Seals have a great saying, “It Pays To Be A Winner!”, and “Second Place Is First Loser!”, and this is true for trading as well.
Six Insights for Disciplined Trading
1) Trading is a probability game. You can’t be a perfectionist and expect to be a great trader. Your losses (that you hope will return to breakeven) will kill you.
2) Jumping in too soon or getting in too late. These mistakes come from traders not having a well-defined plan of how they will enter the market. This positions the trader as a reactive trader instead of a proactive trader, which increase the level of emotion the trader will feel in reacting to market movements. A written plan helps make a trader more systematic and objective, and reduces the risk that emotions will cause the trader to deviate from his plan.
3) Not taking profits on winners and letting winners turn to losers. Again this is a function of not having a properly thought-out plan. Entries are easy but exits are hard. You must have a plan for how you will exit the market, both on your winners and your losers. Then your job as a trader becomes to execute your plan precisely.
4) Great traders don’t place their own expectations on to the market’s behavior. Poor traders expect the market to give them something. When conditions change, a smart trader will recognize that, and take what the market gives.
5) Emotional pain comes from expectations not being realized. When you expect something, and it doesn’t deliver as expected, what occurs? Disappointment. By not having expectations of the market, you are not setting yourself up for this inner turmoil. Douglas states that the market doesn’t generate pain or pleasure inherently; the market only generates upticks and downticks. It is how we perceive and respond to these upticks and downticks that determine how we feel. This perception and feeling is a function of our beliefs. If you’re still feeling pain when taking a loss according to your plan, you are still experiencing a belief that your loss is somehow a negative reflection on you personally.
6) The Four Major Fears – fear of losing money, being wrong, missing out, leaving money on the table. All of these fears result from thinking you know what will happen next. Your trading plan must approach trading as a probabilities game, where you know in advance you will win some and lose some, but that the odds will be in your favor over time. If you approach trading thinking that you can’t take a loss, then take three losses in a row (which is to be expected in most trading methods), you will be emotionally devastated and will give up on your plan.
Have you ever been to a situation when you moved the stop because you couldn’t accept the lose, but ended up losing big chunk. Or you were too sure about the direction of the trade, you didn’t even put a stop loss but trade went opposite your way and ended up losing ten times more then what you suppose to lose. What about this scenario, you were sitting on big profit; you didn’t partial because of greed or overconfidence and ended up giving every thing to the market. Never been to this kind of situation, that’s great, but if been through this kind of horrible situation and still having this problem then you are not alone. We human naturally like that, can’t accept loses or in other word we like to win. In the trading word it is impossible to win 100% of the time, trading is game of probability .Very simple concept which part of the probability we don’t understand. Probably we understand probability but when we involve in a trade our ego overleaps the logical part of our brain.
What should we do, we will let our ego to ruin our trading career or we will say good bye to our ego.
1.Be honest to your self
2.Admit you mistake
3.Overconfidence is you enemy
5.Try to keep record of every trade
6.Never revenge trade
7.Market is always right not you.
Game of speculation
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.” – Jesse Livermore
Think -Prepare -Act
Trading can be difficult at times, especially when the market is a mess. But there are two simple things to remember: know when to sell, when not to, and cut your losses so you can stay in the game.
Even if you make a lot of mistakes in your trading business, you’ll still be net profitable at the end of the year if you simply do two things right; cut your losing trades as soon as they hit their stops and let your winners ride until there is a technical reason to sell. The challenging part, of course, is applying this in actuality, not only understanding it theoretically.
Undertrade, undertrade, undertrade – Bruce Kovner
The lesson here is straightforward. Trade less frequently and trade smaller than you think you should.
Of these two, trading smaller size is easier to grasp and much more intuitive. If you are risking less, then your P&L won’t swing as wildly, allowing you to stay more level-headed and to make better decisions without getting scared or euphoric. You also are unlikely to lose as much during a bad run, allowing you to sidestep potential catastrophic losses and to stay in the game, both financial and psychologically. Ultimately, it’s steep drawdowns that end careers. If you can avoid big declines In your equity and be in the right place psychologically to bounce back, then you will have a long and successful career.
But trading less frequently is equally important. By making it a priority to trade less frequently, you are making sure that you think harder and deliberate before entering and exiting a position. This allows you to focus on executing your methodology, rather just impulsively leaping into and out of positions. That should boost the quality of each trade and in turn, your overall success.
You are also making sure that you are picking your spots, thereby boosting the percentage of your trades that are winners. Even a small increase in your win rate, e.g. from 40% to 43%, would mean a measurable improvement in profitability. Having more winners, and having those extra winners generate bigger gains on average than the losers, can mean the difference between a so-so year and a great year.
Where is your head during the market day?
- 1)Are you looking through the rear-view mirror, criticizing your last trade?
- 2)Are you looking at your profit/loss for the day and filtering trades through that?
- 3)Are you distracted by people or the phone?
- 4)Are you thinking about yourself and how well or poorly you’ve been doing?
- 5)Are you locked in an opinion of what the market “should” be doing instead of observing what it *is* doing?
- 6)Are you wanting to get your money back after a loss or hold onto it after a gain?
- 7)Are you focusing more on yourself or on what markets are doing?8)Many times, our head just isn’t in the game. We can’t be focused on performance outcomes and immersed in our performance at the same time.
Observation, Experience, Memory and Mathematics
“Observation, experience, memory and mathematics – these are what the successful trader must depend on. He must not only observe but remember at all times what he has observed. He cannot bet on the unreasonable or the unexpected, however strong his personal convictions may be about man’s unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities – that is, try to anticipate them. Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass.
“A man can have great mathematical ability and an unusual power of accurate observation and yet fail in speculation unless he also possesses the experience and the memory. And then, like the physician who keeps up with the advances of science, the wise trader never ceases to study general conditions, to keep track of developments everywhere that are likely to affect or influence the course of the various markets. After years of the game it becomes a habit to keep posted. He acts almost automatically. He acquires the invaluable professional attitude that enables him to beat the game – at times! This difference between the professional and the amateur or occasional trader cannot be overemphasized. I find, for instance, that memory and mathematics help me very much. Wall Street makes its money on a mathematical basis. I mean, it makes its money by dealing with facts and figures.”
Art of Trading-10 Rules
1. Always wait for the setup: No Setup-No Trade.
2. THE BEST trades work almost right away.
3. Never take a big loss. If it doesn’t ‘feel’ right. Remove it!
4. Always perfect your craft and sharpen your skills(good traders are constantly learning)
5. Be patient with winning trades: Impatient with trades that fight back.
6. DISCIPLINE is the key to winning at everything!
7. Never get emotionally attached to trades, trading, losses or profits.
8. Always trade with the size that makes you unemotional(emotional trading is the quickest way out of this game).
9. Keeps things simple and do not over-think or over-complicate your trading. LESS IS ALWAYS MORE.
10. Stay humble at all times.