Archives of “perspective” tag

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Set Goals

  
  Education
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Each of us needs to set goals within our personal trading programs to become successful.

We all need to know exactly what those goals mean and how to best achieve them.

It will not happen overnight, however many people seem to start strong when they decide to be a trader but then quit when things do not happen fast enough for them. Or maybe they do not start very strong, but get serious when they get into their routine of executing trades and soon become discouraged and stop doing what was working. Or maybe they finish each session strong, but that was just to recover what was lost during the rest of the time when they were not focusing on their trading strategy.

To reach a level of continuing growth as a trader, each of us must have a plan in place and then ensure that we do everything possible to begin each day very strong in our preparation steps. We must then continue to make strong confident decisions while we trader even when the results are not what we expect.

Finally, we all need to have a target each day that determines when to finish our session and be strong enough to adhere to that plan. If we keep going, it generally leads to massive losses and frustration which then stays with you until you begin to trade again. This will cause a very sour perspective of trading when you attempt to start a new session. Start Strong. Trade Strong. Finish Strong!

Seven essentials needed to become a competent trader

  
  Education
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  1. Have a vision about your trading. Understand why you trade. It is never just about the money. Money can be had in any endeavor. Develop perspective on why trading is so important to you and what characteristics you want to possess that distinguish you as a trader. Be clear on these. This is motivating, and helps you to keep committed to your personal goals when things become difficult. Trading is a tough business with lots of adversity. If you haven’t got a clear sense of what you are all about in your trading, you will find trading very difficult.
  2. Make a commitment to your vision and turn it into a daily mission. Put into daily practice what you need to do to reach your goals. Put the work in even when other things that are more ‘fun’ or appealing tempt you to get off track. Do these every day, day after day and don’t let up. Keep a journal and track your progress — not just on the money, but more importantly, on your personal progress as you grow and develop into a competent trader. It’s the only way to become good and eventually great at trading.
  3. Know what you can control and what you can’t. You can’t control whether a trade is a winner or a loser. You can control how you react to the market. Before you can become a consistent trader, you must first control how you respond to the market and your actions. We can always be in control of ourselves and how we act. Being able to regulate our actions has a lot to do with how we see ourselves as a trader and our vision for ourselves.
  4. Focus on the process of trading rather than the outcomes of your trades. You can control how you select your trades, set risk, enter, manage, and exit your trades. You can never control how they will turn out. Place your attention on what you can control – the process of trading, not the outcomes. The process is where you can make a difference.
  5. Develop the necessary mental skills to trade well. Technical skills are important, but so are mental skills. Spend time learning how to stay focused on the present moment. Learn how to ‘mentally park’ losses and trading errors. Learn how to let winning trades run and cut losing trades short. These are all crucial mental skills that are not found in reading the MACD or price bars.
  6. Practice your trading. A major league baseball player doesn’t just show up at the ball park and expect to play well; traders shouldn’t expect to just show up at the screen and trade well either. It takes serious, dedicated practice to develop excellence.
  7. Make one trade at a time. Keep your focus on this trade and this trade only. Bring all of your knowledge, skills, and abilities into focus on the current trade. Let previous trades and future trades go – they have nothing to do with the current trade.

Quotes -The Disciplined Trader,Mark Douglas

  
  Education
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Never Revenge On The Market

 There is a direct correlation between your ability to let the market tell you what it is likely to do next and the degree to which you have released yourself from the negative effects of any beliefs about losing, being wrong, and revenge on the markets. Not being aware of this relationship, most traders will continue to observe the market from a contaminated perspective

Harmony With Market

 
Your last trade obviously has nothing to do with the potential that exists in the market at any given moment. When you feel compelled to get back, it puts you in an adversary relationship with the market. The market becomes your opponent, it is you against it, instead of being in harmony with it

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.

An Hour With Arnold Palmer

  
  Education
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“It is deceptively simple, endlessly complicated, a child can play it well, and a grown man can never master it. Any single round of it is full of unexpected triumphs and perfect shots that end in disaster. It is almost a science, yet it is a puzzle without an answer. It is gratifying and tantalizing, precise and unpredictable. It requires complete concentration and total relaxation. It satisfies the soul and frustrates the intellect. It is at the same time, rewarding and maddening and it is without doubt, the greatest game mankind has ever invented.” – Arnold Palmer

What a wonderful quote about the game of golf. Although to a lesser extent, the same things can be said about trading as anyone who trades every day in the trenches will tell you.

I was reminded about this perspective this weekend when watching an hour interview Charlie Rose recently conducted with Mr. Palmer. Many people don’t know this, but it was an biography of Arnold Palmer that I read as a child which originally sparked my interest in taking up the game. So, all of these years of both frustration and incredible enjoyment, I owe directly to Mr. Palmer.

Now in the twilight of his years, I found this recent interview really enjoyable particularly after the 30 minute mark. If you have an opportunity to watch this, I thinkhis advice about developing a system is so very important especially for new traders and investors as well as what the discussion after that about what it takes to win. Much like the quote above, the perspectives are priceless. Even if you don’t play golf or even hate the game, don’t miss this interview!

Click Below Link and Enjoy

http://www.charlierose.com/view/interview/11823

Anything Can Happen

  
  Education
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The point is that from our own individual perspective as observers of the market, anything can happen, and it takes only one trader to do it. This is the hard, cold reality of trading that only the very best traders have embraced and accepted with no internal conflict. How do I know this? Because only the best traders consistently pre-define their risks before entering a trade. Only the best traders cut their losses without reservation or hesitation when the market tells them the trade isn’t working. And only the best traders have an organized, systematic, money-management regimen for taking profits when the market goes in the direction of their trade.

Not predefining your risk, not cutting your losses, or not systematically taking profits are three of the most common—and usually the most costly—trading errors you can make. Only the best traders have eliminated these errors from their trading. At some point in their careers, they learned to believe without a shred of doubt that anything can happen, and to always account for what they don’t know, for the unexpected.

Keeping Perspective – You’re Not “A Trader”

  
  Education
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  One of the things everyone who trades needs to do is to keep things in perspective. Trading is something we do, but it’s not the only thing we do. There are a great many other parts of our life and what makes us who we are. Trading needs to account for that and be incorporated into your life in a compatible, supportive fashion.

Be cautious about identifying yourself as “a trader”. I say that because when you label yourself in that way you automatically create an association in your mind based on what you have come to think of as a trader. That association will have been built up from all the things you have seen, read, heard about, and experienced in that regard – much of which probably has absolutely nothing to do with you specifically.

That last part is the key. Trading is a very personal thing. No two people are going to trade exactly the same way. When you think of yourself as “a trader”, though, you associate yourself with actions and perceptions and images which come at least in part from other traders. That image in your mind may create internal conflict which hampers your performance.

So thing of yourself as “someone who trades” rather than as “a trader”. It could help to release you to trade the way you are capable.

5 Trading Pitfalls and how to Solve Them

  
  Education
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Pitfalls
1. Focusing on the P & L

2. Losing objectivity while in a trade

3. Becoming emotional about a trade

4. Lacking confidence: exiting early, failing to put a trade on, not sizing up

5. Difficulty adapting to a changing market

Solutions
1. Quantify success base on the caliber of the trade (i.e. high quality entries/exits).

2. Continuously ask yourself, “is my original reason WHY I entered this trade still there?”

3. While you are in a trade, ask yourself, if I had no position on right now, what would I do? Buy? Sell Short? Do nothing? Then re-evaluate your trade size and direction.

4. Confidence should always come from within. Step#1: Write bullet list of data points proving WHY you are a skilled trader. Step #2: Prime yourself each morning by reading it over to yourself. Could be the most valuable 30 seconds you spend each day.

5. Flip your perspective by keeping track of what is not working (by default this tells you what IS working).

Keep your eye on the ball and your head in the game!

If you don’t learn from your losses who will?

  
  Education
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If you don’t try you don’t fail, if you don’t fail you don’t learn, if you don’t learn you don’t grow” – Om Malik

Failure is an inherent part of trading. No trader can get every trade correct. One of the lessons in the new Jack Schwager book, Hedge Fund Market Wizards, is that “Don’t try to be 100% right.” In fact the pursuit of perfection in trading will likely lead to catastrophic results. That is why some perspective on failure and loss is a key to staying in the trading game.

Atul Gawande, a surgeon and writer, has an interesting piece up at the New Yorker which is a transcript of a commencement speech he recently gave at Williams College.* Although he is discussing medicine his perspective on failure is worth contemplating. Here is a quote:

So you will take risks, and you will have failures. But it’s what happens afterward that is defining. A failure often does not have to be a failure at all. However, you have to be ready for it—will you admit when things go wrong? Will you take steps to set them right?—because the difference between triumph and defeat, you’ll find, isn’t about willingness to take risks. It’s about mastery of rescue.

It is a bit of cliche to say that your trading losses represent tuition paid. If you don’t learn from your own failures no one will. Those losses will then be not just a financial loss but a lost opportunity as well.

The Success Of Warren Buffett

  
  Education
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Singular focus – Since Warren Buffett was a young boy, he had almost a singular focus to accumulate wealth. He also believed his way to wealth would be through the stock market. At a very early age, he knew what he wanted and where he wanted to go. Successful people always have long-term visions of their life. This is a lesson especially for younger folks. You will only really succeed in life once you know what you want to accomplish. As Yogi Berra said, “If you don’t know where you are going, you may end up some place else.”

Dedication – Mr. Buffett spends about 18 hours every day dedicated to investing capital. This is the type of dedication needed to succeed at his level. I doubt he wastes anytime in front of the television or shopping at the mall. Almost all his time is spent thinking and working on Berkshire Hathaway. This type of dedication can have its drawbacks as well. The book does not portray his family life in a very positive manner. He was separated from his first wife (it appears they did not divorce for P.R. reasons) and did not spend much time with his children as they grew up. There is only so much time in a day, and he spent it mostly on business-related activities.

Independent thinking – Buffett has come up with his criteria for investing in companies. These criteria have been developed over years of studying and reading about his craft. He will only invest in companies that meet these criteria. He does not feel pressured when things do not go his way nor when outside sources suggest new rules for investing. The most telling story of this was back in 1999 during the “technology stock bubble”. Many people were saying he was too old and out of touch. They said he did not understand the “new economy”. Buffett continued to plot his course using the rules he knew and understood. He has been vindicated as the technology market crashed and Berkshire Hathaway has continued to thrive.

Alliances – Mr. Buffett has developed partners and allies to help him attain his goals. He uses these partners to manage his businesses, help find new investments, and to obtain access to capital. Mr. Buffett will be the first to tell you that his wealth would be a small fraction of what it is today without these business associates. (more…)

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