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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1. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.
I have always found getting out to be the best of all three choices.
- No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
- Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
- If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
- The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
- Stops are not for sissies.
- Plan your trade, then trade your plan. He who fails to plan, plans to fail.
- Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
- Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
- It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.
One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!
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.
Always wait for the setup: no setup – no trade. Agree. If your strategy doesn’t provide you a good risk/reward trade to make, then your job is to be patient until it does. Ironically, this often requires you to sit out some very good moves in the market and be inactive at the very same times you want to be aggressive.
- The best trades work almost right away. Agree, but with one important caveat – this rule greatly depends upon your strategy. Some strategies will require greater patience than others. If trading short-term, this rule is almost always correct, but if your time frames are longer, then you also have time on your side which requires more patience but that patience can pay off if your analysis is correct.
- Never take a big loss. If it doesn’t ‘feel’ right. Remove it! Disagree. Sometimes you have to take a big loss to prevent the risk of an even greater loss. Refusing to take a big loss when a mistake has been made can be very costly. I also disagree with the view that “If it doesn’t feel right, remove it.” Actually, some of the best trades you will ever make in your career are those trades that feel wrong and about as far from “right” as you can make it. Don’t believe me? Think over the last month or so about the trades you missed because they didn’t feel right but your strategy told you to hold or buy them anyway! It is also interesting to me that this rule says to trade by feel and at the same time advises in another rule not to trade by emotion. You can’t do one without the other!
- Always perfect your craft and sharpen your skills – good traders are constantly learning. Agree. No matter how skilled, intelligent, and successful you have been, there is always room for improvement. Moreover, because of the ever-growing changing nature of the market, what you do now to trade successfully won’t always work in every situation and the next market environment. Only experience and constant dedication to your job will provide you with the weapons for enduring market success.
- Be patient with winning trades – impatient with trades that fight back. Agree. Another good ways of saying – let your winners run and cut your losers short. The truth is that most individual traders and investors do the exact opposite – they sell winners too quickly and they hold losers far too long letting trades that went awry become long-term “trapped” investments. (more…)
Going Pro, means leaving the amateur life behind. It means showing up on time and doing the work. No excuses. No calling in sick. No blue flu.
In fact, Pressfield has a list of 20 things that a professional life entails. Here they are…
- The professional shows up every day
- The professional stays on the job all day
- The professional is committed over the long haul
- For the professional, the stakes are high and real
- The professional is patient
- The professional seeks order
- The professional demystifies
- The professional acts in the face of fear
- The professional accepts no excuses
- The professional plays it as it lays
- The professional is prepared
- The professional does not show off
- The professional dedicates himself to mastering technique
- The professional does not hesitate to ask for help
- The professional does not take failure or success personally
- The professional does not identify with his or her instrument
- The professional endures adversity
- The professional self-validates
- The professional reinvents herself
- The professional is recognized by other professionals (more…)
I ran across these rules for living, and thought they apply beautifully to the process of trading successfully. They are as follows:
- Show up.
- Pay attention.
- Live your truth.
- Do your best.
- Don’t be attached to the outcome.
Show up. Woody Allen has said 90% of the story is showing up. And I think that can be true for trading. Showing up means being prepared and ready before the market opens. It means getting your entry and exit orders in the market in a timely fashion. You’ve done your research, and you’re clear about your intentions.
Pay attention. Watch the price action. Be cognizant of what your chosen indicators are saying. Know what news is breaking, and watch the market’s reaction to the news. Be alert to twists and turns in market direction. Don’t wander off mentally or physically.
Live your truth. Your truth could be fundamental or technical or a combination of the two. But if you don’t trade in accordance with your guidelines, you can get yourself on the wrong side of the situation and yourself. Be who you say you are as a trader. Are you honest, perceptive, courageous, steady, and disciplined? Are you trading in the manner you have chosen or committed to trade.
Do your best. Honestly, all you can do is your best. But your best can get better as you practice and learn. Learn from your mistakes, and forgive yourself past digressions. Each day is a new day, and each day brings new opportunities. It’s your job to capture what you can of the opportunities even as you rigorously protect your capital.
Don’t be attached to the outcome. This is the hard part, and this is the essential part. The results of any given trade or trading day are really not indicative of whether or not you will be profitable. One trade or day is simply not the measure of success, and is really irrelevant. If you’re showing up, and paying attention, and living your viable truth, and doing your best, you can accept whatever outcome develops. Of course, if the outcome is disastrous over time, you need to go back to the drawing board and develop better methods.
It’s been said too many times to count – that you must trade according to your personality. In the movies they might call it “being true to yourself” or something cheesy, but it’s a necessity in this job.
Recently I was asked which chart patterns I prefer to trade, continuation chart patterns or reversal chart patterns. My answer was that while I will actually trade either, I suppose the continuation and breakout type of patterns are the ones I trade more often than reversals or buying on support levels.
I don’t think one setup is superior to the other, they both have their pros and cons, and you have to go with what fits your style best.
Buying on support is an anticipatory play, which may take a few extra days to get moving. It can give you a lower cost basis than another trading strategy, but will require greater patience on your part while you wait for the stock to find traction.
Buying a stock which is breaking out puts you (by definition) in a stock that’s already on the move. This is a confirmation play. You get instant feedback on how your trade is developing and how much momentum the stock has.
The setups you select for your trades need to incorporate your personality tendencies on managing those trades once you are in them. For me, I tend to be a bit impatient and I want to know as soon as possible whether or not I’m right or wrong on a trade. Other traders don’t live in the left lane, and they’re willing to give a stock some time to get moving one way or another. They place their protective stop and turn their attention to something else in the meantime while waiting for their trade to make a move. Personally, I prefer to have my money at risk for the shortest timeframe possible. I really prefer the times when the market conditions are producing breakout plays and continuation patterns like the bull flag or ascending triangle patterns.
So, when you’re doing your homework and looking for quality setups to trade, be sure to consider the ones which fit your personality and your style of trading. Those will be the trades which you ultimately will manage the best.
& Still the expectations are ENDLESS !
This (Trading) is not a job where you get paid by the hour. You get paid for doing the right thing”
-“Forget that your money is at stake. Money in trading account is just a tool for making money. Preserve your tool. You need it to make money”
-“Don’t let the outcome of one trade alter your trading discipline. One trade doesn’t make a system…”
-“Trading is a game of probabilities. You don’t have to be right every time. You just have to follow your rules”
-“You decide your fate; the market doesn’t”
-“Pure followers of stock pickers will never be around…Learn or you are bankrupt”
-“Be aggressive in trending market and conservative in choppy market”
“Take home runs when you can, but don’t beat yourself up about missing a few. One trade should never make or break your account”