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Floored

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.

TRADING RULES

rules-mind

The hardest lesson I have had to learn is to “Act in my own best interest”. And to overcome and correct things like:
1) trading without a stop
2) refusing to admit I am wrong and to get out of a losing position
3) trading for the sake of trading
4) chasing entries (going long on the top tick, shorting on the bottom tick)
5) revenge trading (after a series of losses)
6) trading while sick or tired
7) trading without a plan (entry, exit, money management rules)
8) …
Anytime that I am in a position and either don’t know why I am, or what my profit target is, or what my stop loss is, etc. – I am not acting in my own best interest and have always struggled to close out the position immediately.
The times I have without any further hesitation, it turned out to be a wise choice and saved my butt from significant losses (more so than I already incurred).
The bottom line is that you will do much better in this profession if you can answer YES to the question – “Am I acting in my own best interest”?

Two Facts

anirudhsethithougts
Iam tracking Indian Stock Market and Global Market since 1992.Yes after 17 years ..I had seen these are two real facts of Trading.

#1: Small-range market periods lead to large-range market periods. Low volatility breeds high volatility, which in turn leads to low volatility.
Just about the time everyone is resigned that market conditions will never change is exactly when conditions will change.
#2: Trading is a business where you can never be right. Never. No matter what we do, our mistakes will always outnumber our correct decisions. That’s why grading ourselves on every minute` decision will come up with more of a batting average score than college test score.
Mistakes can always outnumber correct actions… so long as correct actions outweigh mistakes. It ain’t the size of our right or wrong actions that counts: it’s how much they weigh in $$ values. Size does matter.
The great news is, as traders we never have to be perfect. We don’t even have to be 50% perfect. We only need to maximize our wins and minimize our losses. And we only need to win once per day, more days than not to be good. Just barely profitable = the top ten percentile of our profession. Anything beyond that is outperforming 90% of the field.

Willingness to Make Mistakes

“[Michael Marcus] also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Willingness to Make Mistakes

“[Michael Marcus] also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. [He] taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.”

– Bruce Kovner, Market Wizards

Bruce Kovner, now retired, is one of the all-time trading greats.

His observation is strikingly similar to the Soros observation (paraphrase): “It doesn’t matter how often you are right or wrong — what matters is how much you make when you are right, versus how much you lose when you are wrong.”

In many ways trading is remarkably different from any other profession. Imagine if doctors, lawyers, or company executives were encouraged to “make mistakes” on a regular basis. (They do make mistakes of course. They just can’t admit them, let alone be open about them.) (more…)

Learn from Turtle Trading

“Good judgment comes from experience, and experience comes from bad judgment.” Barry Le Platner

All beginning traders lack one key ingredient for success: experience.  Experience is simply exposure to a particular activity over an extended period of time.  Good judgment is a by-product of experience and is necessary for success in all areas of life, from driving, cooking, golf, to surgery, etc, as well as, you guessed it, stock and options trading.  We can sum it up as follows:

EXPERIENCE = TIME + SPECIFIC ACTIVITY = GOOD JUDGMENT

Unfortunately, very few beginning traders have enough “education” money to succeed at trading because good judgment requires that a person remain focused on a specific activity long enough to draw sound conclusions.  In other words, good judgment is based on trust in the specific activity without doubting its overall effectiveness.  (more…)

Admit Mistakes

“To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. In a sense, they generally are correct. In trading, however, the person who can easily admit to being wrong is the one who walks away a winner. Besides trading, there is probably no other profession where you have to admit you’re wrong. In trading, you can’t hide your failures. Your equity provides a daily reflection of your performance. The trader who tries to blame his losses on external events will never learn from his mistakes. For a trader, rationalization is a guaranteed road to ultimate failure.”

BELIEFS

What you believe, consciously or unconsciously, propels your trading in its many directions.  It might be so simple a matter as whether you believe a market is going up or down or nowhere.  Traders have biases that distort their perceptions and effect their actions, and they need to guard against these with various protections and bias detectors.

Other beliefs are more veiled and ubiquitous.  For example, you may consciously intend to make money, but you have a counter impulse that thwarts you due to unconscious beliefs that go against that intention.  Perhaps you unconsciously believe that money is the root of all evil, or that rich people are corrupt, or that there isn’t enough to go around and so you shouldn’t be greedy, or that you should be laying up your treasure in heaven, and not on this earth.  Perhaps on some level you believe you shouldn’t make more money than your parents.

When you want something, you have to really want it and not be ambivalent about it.  It has to be your desire, and not some alien value set by your parents or society.  The flower loves the sun, and stretches to receive its rays.  The plant loves water and digs its roots deep seeking the object of its desire.  If you want to make money trading, you really have to admire money and have good purposes for its use.  If you want to be a master trader, you have to be comfortable with that role, and not see trading as wasteful gambling, or an unworthy profession.

Perhaps you believe that you don’t deserve to make money trading, or that you have to work hard for your rewards.  Maybe you believe that only the big boys win, that the market is stacked against the ordinary trader.  Maybe you believe that it’s impossible to make money in the futures markets or, worse, any market.  Maybe you believe it’s possible to make money trading, but it’s not probable that you can keep your winnings.  All such ideas run in opposition to easy and effective trading.

Just as insidiously you may doubt that your system really works, or that it won’t work this time.  Some traders get superstitious: for example, they believe that they always, or tend to, lose money on Fridays, and so, of course, they do.  When any of their superstitious factors occur, somehow they manage to lose.

Acting On Impulse

Why do so many traders abandon their trading plan? Is it their personality, an inherent pitfall of the trading profession, or temporary insanity? A host of factors may contribute to a lack of discipline. Depending on your personality, background, training, and experience with the markets, you may have trouble reigning in your tendency to act on impulse.

For some people, impulsivity is in their nature. They have trouble focusing their attention. They are easily bored. Seeking out quick thrills relieves the tedium of life. For others, impulsivity is related to emotionality. Some people have so much trouble controlling their emotions that they react impulsively out of frustration. Minor setbacks are inevitable in the trading arena. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly agitated, and may close a position early, or in a fit of confusion, make a major trading blunder that can only be remedied by closing the position.

That said, any trader can act impulsively at times. There are many situational factors that contribute to impulsivity. Research has shown, for example, that when people are tired, they have difficulty focusing their attention. As much as part of your conscious mind cares about sticking with your trading plan, your unconscious mind thinks, “Who cares? I want to take a break.” Psychological resources are limited. When you push yourself to the limits, you will have trouble focusing on your ongoing experience, concentrating on your trading plan, and sticking to it. (more…)

The Pain is Unjustified

pain-I’ve always said, you don’t have to blow out an entire account before we figure out the significance of being disciplined. You don’t need to feel pain to learn that lesson. You just have to commit to the process of becoming disciplined. It poses a more fundamental question, are you willing to do what it takes to become consistently profitable?

How do we overcome this pain and impulsiveness? Through belief in a system, and a full understanding of the probabilities. You MUST embrace loss as a part of this profession, if you don’t you are in the wrong industry. Do not place another trade. This belief comes with repetitions. The belief has to be earned through proof and practice.

Before you proceed with your next trade, I want you to think about the power of your MIND. (more…)