Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.
Participating in the markets can only develop your trading skills. You need to become a part of the markets, to know the state of the markets at any given time, and most importantly, to know yourself. You need to be patient, confident, and mentally tough.
Good traders offer no excuses, make no complaints. They live willingly with the vagaries of life and the markets.
In the early stages of your trading career, pay attention not only to whether you should buy or sell but also to how you have executed your trading ideas. You will learn more from your trades this way.
Never assume that the unreasonable or the unexpected cannot happen. It can. It does. It will. (more…)
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Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.Focus On Playing To Win – Want To Know Why?
The focus on avoiding losing is an easy condition to slip into. I found it especially so if you’ve had some tough periods in your life. Perhaps you lost a business, blew up a trading account or went for that promotion and failed to get it.
It is particularly easy when you are taking down data to analyse your performance as most effective performers do. That data is right in front of you. Clear as day. You can see exactly how many losing trades you have had, how many losing days, weeks etc.
You have an understanding that it’s all about probabilities and that if you follow the old saying “limit your losses and let your winners run” you can be a successful trader with a seemingly bad win rate (30-40%). As long as your winners outshine your string of small losers you will be OK. (more…)
Thought from Peter Brandt
“The irony is that in real time, I never fully feel like I am trading successfully because I am always aiming for performance that is higher than I am attaining. I am generally my own worst critic and constantly set the bar higher than my last jump. The result is that it is difficult for me to crow about the “successes” of my trading career.
But, to the degree I have been consistently successful through the years, I believe it is due to three factors. First, I am obsessed with risk management. I spend more time and mental energy focusing on risk control protocols than on anything else. Managing losses and losing periods is my number one priority. If I can just tread water during the inevitable tough periods, sooner or later I will find myself caught in a favorable tide.
Second, my trading approach is overly simple by design. The result is that I know with as much certainty as is possible with a discretionary approach when there is a trade entry in my program. It does not mean that the trade will be profitable – only that the trade is there.
Third, I have tried to engage market speculation systematically, breaking down the process of trading into every conceivable component. What flows from this is an understanding of what components of trading are controllable and measurable and what components are uncontrollable. By the way, whether the next trade or series of trades will be profitable is not a controllable factor. Once a trader learns this — it is then possible to remove ego from the equation.” – Peter Brandt
Ten Characteristics of Successful Traders
1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);
2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;
3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;
4) The ability to become more aggressive and risk taking when trading well and with conviction;
5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position;
6) Ongoing ability to learn new skills, markets, and strategies;
7) Distinctive ways of viewing and following markets that leverage their skills;
8) Persistence and emotional resilience: the ability to keep going in the face of setback;
9) Competitiveness: a relentless drive for self-improvement;
10) Balance: sources of well-being outside of trading that help sustain energy and focus.
Weakest Part of Trading
The weakest part of any trading method is the trader themselves. There are many, many, robust trading systems and methods that do make money in the long term. The problem is the trader having the discipline and mental toughness to trade one of them consistently. The vast majority of time it is not a system failure but traders that fail in this game through one of seven common errors. If you can understand these error and overcome them you could make a lot of money in the right market conditions.
- The trader must have the discipline to take the system’s entries and exits.
- The trader must have the discipline to take the stop loss on a losing trade when it is hit and not keep holding and start hoping.
- No matter the method the trader has to manage risk through proper position sizing, getting greedy and trading too big will blow up even the best systems.
- It is the trader that must have the perseverance to stick to the method even during losing periods, and also stick with trading until success is reached.
- If a trader can not manage their mind then the stress will break them, I have seen this happen many times. If you can’t handle losing you can’t trade.
- The trader must find a robust method, must understand why it has an edge, and must believe in their methodology.
- The trader has to know themselves and trade the method that fits their risk tolerance levels and own psychology.
The good news is that if none of these error fit you when you lose money in a trade then the market was just not conducive to your methodology, and it is not your fault so don’t dwell on it.
Learning through Failure
Very often we learn more from our failures than from our successes. The path to success travels inevitably through certain failures.
A look at successful traders and entrepreneurs shows that they have been able to survive failure as many times as they have had to. They use failure as feedback. They learn from it and make changes and go on. Many super traders have experienced crushing loss in their early trading years. All of them picked themselves up, made adjustments, and with the sure belief that they could make it back through better trading, did just that.
Successful traders are able to ride through periods of drawdown easily because they believe the drawdown to be only temporary. They distinguish the difference between simple losses and loss that comes from mistakes. Their confidence in their methods and their ability and their vision of what the markets can provide reassures them about their future success. Any period of loss is viewed as transitory.
Fear of failure keeps many traders from the success they so dearly want. They are afraid to fail and therefore either afraid to trade or to admit the failure and learn from it. I’m not saying you should like loss. Winning traders don’t want to punish themselves, but successful traders don’t dread loss either because they know that whatever happens, they can make it back. And they can learn.
Strangely enough, failure is often a necessary stepping stone to success. Those who are too fearful of failure may never get to the success they long for. Fear can lead us not only away from the thing we fear but also away from the thing we seek. Ironically, fear can also lead us directly into the thing we fear. My thesis is that underneath fear of failure is a sense of scarcity.
Confronted with a drawdown, a trader who fears failure will often stop trading or change methods or systems only to junk the new methods or systems at the next drawdown.
The winning trader will not inflexibly keep doing what doesn’t work. His open mindedness allows him to recognize the difference between market conditions and methodologies that do or don’t have a probability of success. A trader with a sense of abundance and a verified method for trading won’t crumble under temporary loss because he’ll know he’s simply passing through a difficult time that will end. He distinguishes between loss and inept or error prone trading.
The flexible trader with the willingness to admit mistakes will learn from the failure, honor that failure as feedback; make corrections, and proceed with the improvements. The winning trader, just as the winning athlete, is in a constant and never ending process of development and growth.
Look at the history of your trading and write down several major failures. As you study each failure, look for similarities and differences between them. Look for the lessons. Identify and define the problems. Look for valid solutions.
As you trade each day, do the same thing with individual mistakes. Write them down as they occur along with the lesson learned. Look for repetitions. Commit to your own development and growth as you learn through experience. Remember, if you can’t make a mistake, you can’t make anything, including money.
Confronted with a drawdown, a trader who fears failure will often stop trading or change methods or systems only to junk the new methods or systems at the next drawdown.
The winning trader will not inflexibly keep doing what doesn’t work. His open mindedness allows him to recognize the difference between market conditions and methodologies that do or don’t have a probability of success. A trader with a sense of abundance and a verified method for trading won’t crumble under temporary loss because he’ll know he’s simply passing through a difficult time that will end. He distinguishes between loss and inept or error prone trading.
The flexible trader with the willingness to admit mistakes will learn from the failure, honor that failure as feedback; make corrections, and proceed with the improvements. The winning trader, just as the winning athlete, is in a constant and never ending process of development and growth.
Look at the history of your trading and write down several major failures. As you study each failure, look for similarities and differences between them. Look for the lessons. Identify and define the problems. Look for valid solutions.
As you trade each day, do the same thing with individual mistakes. Write them down as they occur along with the lesson learned. Look for repetitions. Commit to your own development and growth as you learn through experience. Remember, if you can’t make a mistake, you can’t make anything, including money.
cfor Traders
1) Cut Risk – It’s that “above all else, do no harm” principle. If you don’t have a feel for the market, trade small while you regain your feel. Preserve as much of your capital as possible to lay the foundation for your recovery;
2) Focus on Your Strengths – It’s not unusual for frustrated traders to try to make all kinds of changes in their trading in a frantic effort to gain some traction. These efforts can compound difficulties by getting traders further and further from their strengths. During rebuilding periods, you want to focus on the markets and strategies that you know most about, that represent your strengths.
3) Reach Out – It’s especially helpful to reach out to traders who trade markets and strategies similar to yours. Are they also struggling? If so, this suggests that market changes, indeed, may be at the root of the problem. If the traders you contact are succeeding, try to find out what they’re doing differently from you. It may well be that a simple tweaking of execution, holding times, and risk management could turn your performance around.
4) Stay Constructive – You may well be in a rebuilding period. This happens to the best athletes and sports franchises. It doesn’t mean you’ve lost all talent and skill. Identifying the kinds of trades that are working for you is a start toward rebuilding: you want to find the common denominators behind your successful trades so that you can emphasize these going forward.
5) Work on Your Self-Talk – Hard as it is, it’s important to stay positive during a rebuilding period. The last thing you want to do is create additional interference by beating up on yourself and dampening your motivation. This is one of the areas where coaching can be helpful. Setting attainable goals and creating plans for learning new patterns and trading strategies can fuel optimism, determination, and focus.
6) Control the Budget – It very much helps to have a cash cushion to weather these rainy day periods. Living within one’s means also helps greatly. I’ve generally found that traders can adapt to shifting markets if they have enough time to make the transition. It’s when the pressures of bringing in money month to month add to the performance pressures of a drawdown period that turnarounds become difficult to sustain.
Perhaps the best advice, however, is preventive. Identify slumps early and control losses before they get out of hand. Perform regular inventories of your winning and losing trades, so that you’re always on top of what’s working for you and minimizing what’s hurting performance. During your best times, remember that markets always change and keep powder dry to weather the inevitable lean times. Ironically, the best way to master declines in trading performance is to embrace them early and turn them into prods for learning and development.
The 12 Steps and Counting
I admitted I was powerless over my affliction to taking small profits.
I made a decision to turn myself over to the care of those who affably might help me as God has helped others.
I made a searching inventory of all the losses I have taken.
I admitted to other human beings especially the spec list the nature of my wrongs.
I am ready and willing, but perhaps not able, to remove these defects.
I humbly ask all my supporters and friends to help me remove them. (more…)
Ten Characteristics I See Among Successful Traders
There’s no one formula for trading success, but there are a few common denominators that I’ve tracked in my years of working with traders:
1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);
2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;
3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;
4) The ability to become more aggressive and risk taking when trading well and with conviction;
5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position; (more…)
10 Things that each Trader Must Master
THE THREE M’s: Mind (psychology), Method (a trading edge) and Money (risk or money management).
But what does each of those things mean? Many of these answers came from other great traders sharing their wisdom in books and my own successful trading through all types of markets with bigger and bigger accounts that created a need for me to up my game and get better and better.
Mind (psychology) You must have the right winning mind set to make it in trading.
Discipline to follow your trading plan.
Perseverance to keep going through the losing periods.
Faith that your trading method works. (more…)