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Flexibility in Markets

  
  Education
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Persistence is a key. Always keep looking for new trading ideas.

Knowing when to quit is another key. If you’re wrong, admit it and move on. Managing risk is the name of the game.

But flexibility, in my opinion, is the toughest one. Just because you’re long and get stopped out, doesn’t mean you can’t turn around and go short it if the market tells you it’s a good idea. In fact, my favorite trades are when traditional charting patterns don’t work out the way the book says they should. Turning around and doing the opposite, a lot of times, offers the best risk/reward.

And most importantly, you can’t marry your ideas. If the market proves you wrong, pay attention. No egos remember? I came in a few weeks ago looking to short treasury bonds on a breakdown. And they ripped right in my face. So what?

It’s not about being right, it’s about making money.

Be flexible

Patience

  
  Education
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The most difficult thing for traders to do is to sit there and wait. Why? Because, we live in a world that is on a total dopamine, hypomanic binge. This is never more clearly manifest than by those who absolutely have to be in the markets at all times, desperately need to be trading and simply cannot wait. They are human do-ings, rather than human be-ings.

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There is a wonderful advantage to waiting for the right entry and exit points. This allows you to be in a market- neutral mindset, and frees you from looking frantically for bearish or bullish views to justify your biases. Granted, you are not making money, but you are also (and much more importantly) not losing it. You are preserving capital. You can take time to reflect study, hone and refine your trading plan, adopt some healthy exercise and dietary habits, and become a stronger and more centered person. Simply waiting without stress for the right opportunity allows you to become a more rational and impartial observer.

Patience frees you from active involvement in the chaotic, and often reckless, behavior of others in the markets, and it puts you and your trading plan into a clearer perspective. It allows you to see yourself as a human be-ing, rather than a human do-ing.

When you first started trading, what did you hear constantly? Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you have no financial capital to use, you are out of the game. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.

If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.

Ten Powerful Psychological Traits of the Rich Trader

  
  Education
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Ten Powerful Psychological Traits of the Rich Trader

  1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong.
  2. They have the ability to not only close a losing trade but reverse and go in the other direction when it is called for.
  3. The rich trader is not trying to prove anything about themselves they are focused on making money.
  4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action.
  5. Rich traders know that the market action is their ultimate boss regardless of their opinions.
  6. No matter how sure they are about a trade they still ALWAYS manage the risk.
  7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak.
  8. A great trader is one that can admit to anyone that they were wrong.
  9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities.
  10. Rich traders love what they do, win or lose.

When you are trading like that, it is hard to be beaten. Time is your friend.

Be Responsible

  
  Education
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Be responsible for your own trading destiny. Analyze your trading behavior. Understand your own motivations. Traders come into commodity trading with a view to making money. After awhile they find the trading process to be fascinating, entertaining and intellectually challenging. Pretty soon the motivation to make money becomes subordinated to the desire to have fun and meet the challenge. The more you trade to have fun and massage your ego, the more likely you are to lose. The kinds of trading behaviors that are the most entertaining are also the least effective. The more you can emphasize making money over having a good time, the more likely it is you will be successful.

Be wary of depending on others for your success. Most of the people you are likely to trust are probably not effective traders. For instance: brokers, gurus, advisors, system vendors, friends. There are exceptions, but not many. Depend on others only for clerical help or to support your own decision-making process.

Don’t blame others for your failures. This is an easy trap to fall into. No matter what happens, you put yourself into the situation. Therefore, you are responsible for the ultimate result. Until you accept responsibility for everything, you will not be able to change your incorrect behaviors.

We want to be right

  
  Education
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 Two wrongs don’t make a right in life but in the stock market two wrongs (and plenty more) will help you get on the right road to making money.   The market says the trading game is about making money not about stroking the ego.  The “right” road is the “wrong” road when your on Wall Street.  Hey, if  you doing it to be right, then you’re “doing it wrong!”

Herd Mentality

  
  Education
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“Making money is easy, it is keeping it that is hard.” 

Keeping the profits is what successful trading is all about. It’s not about making money. It is about risk management. Good risk management translates into good profits. Great risk management translates to great profits and a long-term career.

So what about the herd mentality?

You have all heard about it over the years. Psychologists talk about it all the time, but how does it play out in the applied trading world?

The cliché is that following the herd is dangerous – bad for trading and leads to huge losses.

But my perspective is different and one that states that following the herd is  bad only if it was not YOUR game plan. You see, traders don’t mind losing money. That’s right. They don’t. What they mind is losing money doing stupid things. And one of the stupidest things a trader can do is to follow someone else’s game plan instead of their own.

If you are going to lose money (and you are going to about half the time) then you might as well lose it doing the right thing, which is listening to YOUR ideas. Your instincts. Your research and YOUR game plan.

Trading is not complicated. We make it complicated.

Simplify the process. Break your trading down to its basics and follow your plans. And if your plans happen to be in line with the herd, then so be it. And if they don’t, that is fine too. The point is to be consistent in your approach and let the market come to you.

Successful traders are committed

  
  Education
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ACCEPTANCE OF OFTENTIMES ILLOGICAL MARKET BEHAVIOR

DISCIPLINE IN THE FACE OF UNCERTAINTY

PATIENCE WHEN LITTLE IS TO BE ACCOMPLISHED OTHERWISE

FOCUS ON THE RIGHT NOW INSTEAD OF WHAT MIGHT BE

PERSONAL RESPONSIBILITY FOR EVERY ACTION AND REACTION

PASSION WHEN ALL ELSE FAILS

MAKING MONEY WHEN WRONG

Trading Wisdom

  
  Education
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Everything in this world involves risk but by far the greatest risk is staying in your comfort zone because this involves the risks of lost opportunities. The secret to risk lies in knowing how to minimise its impacts on you. If you want to be a successful trader you must become passionate about the learning process. You must become totally focused on trading well as opposed to making money. You must learn from someone who can show you how to trade successfully rather than rely on machines and promises of “golden eggs”. You must become absolutely disciplined in the activity of trading.

H + W + P = E

  
  Education
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Understanding your own trading psychology is critical to being a successful portfolio manager. 
Are you focused on trying to make money? Or are you more focused on trying not to lose money?
The truth is that making money is the easy part. It is keeping it that is so hard.
Statistically, you are going to make money half the time anyway as I have found that discretionary traders make money on approximately 45-55% of their trades. That is not my opinion – that is what the data say.
The difference between being profitable and not profitable or modest and substantial returns is not about the frequency of being “right.” It is about how much do you MAKE when you are right and how much do you LOSE when you are wrong.
Don’t trade to be right. Trade to make money. In order to make money, you have to lose less.
As a trading psychology coach, the formula I use with my clients is as follows:
H + W + P = E
Hoping + Wishing + Praying = EXIT THE TRADE! 

To Be Right vs Making Money

  
  Education
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the_thinkerThere is a strong psychological bias to be right about we do with our investment. In most people, this bias greatly oversides the desire to make a profit overall in our approach, or it inhibits us from reaching our true profit potential. Most people have overwhelming needs to control the market. As a result, they end up with the market controlling them.

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