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The realization that you are alone

  
  Education
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 At some point in time the realization strikes that you are alone in the market – there is only you. The illusion that the market can ‘do’ anything to you falls away and it becomes obvious that you are 100% responsible for everything that happens to your account. You either give yourself money, or else you give your money away – there is nothing else.

The market is one of the few arenas where there are no external constraints, except in the case of a margin call. It never forces you to take a position, long or short, or tells you to get out of your position. It does not say how long to stay in a position or what time to exit, how much profit or loss is enough. There are no external constraints at all, and as such people run riot. You are relying on yourself 100% and there is only ever you to blame.

The above is a core part of a winning trading psychology, yet its difficult to adopt. Shifting the blame is a basic way we defend our ego every single day of the week – yet in the market this practice is absolutely unsupported by price action. How can any other market participant be doing something to you if he is totally unaware of your existence or what position you hold?

Its necessary to really ponder this until the truth of it shines out:

You are alone…

Methods Employed By Exceptional Players

  
  Education
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1. FIRST THINGS FIRST
First, be sure that you really want to trade. As both Krausz and Faulkner confirmed,
based on their experience in working with traders, it is common for people who think they want to trade to discover that they really don’t.

2. EXAMINE YOUR MOTIVES
Think about why you really want to trade. If you want to trade for the excitement, you might be better off riding a roller coaster or taking up hang gliding. In my own case, I found that the underlying motive for trading was serenity or peace of mind-hardly the emotional state typi-cal of trading. Another personal motive for trading was that I loved puzzle solving-and the markets provided the ultimate puzzle. How-ever, while I enjoyed the cerebral aspects of market analysis, I didn’t particularly like the visceral characteristics of trading itself. The con-trast between my motives and the activity resulted in very obvious con-flicts. You need to examine your own motives very carefully for any such conflicts. The market is a stem master. You need to do almost everything right to win. If parts of you are pulling in opposite direc-tions, the game is lost before you start.

How did I resolve my own conflict? I decided to focus completely on mechanical trading approaches in order to eliminate the emotionality in trading. Equally important, focusing on the design of mechanical systems directed my energies to the part of trading I did enjoy-the puzzle-solving aspects. Although I had devoted some energy to mechanical systems for these reasons for a number of years, I eventu-ally came to the realization that I wanted to move in this direction exclusively. (This is not intended as an advocacy for mechanical sys-tems over human-decision-oriented approaches. I am only providing a personal example. The appropriate answer for another trader could well be very different.)

3. MATCH THE TRADING METHOD TO YOUR PERSONALITY
It is critical to choose a method that is consistent with your own person-ality and comfort level. If you can’t stand to give back significant prof-its, then a long-term trend-following approach-even a very good one-will be a disaster, because you will never be able to follow it. If you don’t want to watch the quote screen all day (or can’t), don’t try a day-trading method. If you can’t stand the emotional strain of making trading decisions, then try to develop a mechanical system for trading the markets. The approach you use must be right for you; it must feel comfortable. The importance of this cannot be overemphasized. Remember Randy McKay’s assertion:

“Virtually every successful trader I know ultimately ended up with a trading style suited to his per-sonality.” Incidentally, the mismatch of trading style and personality is one of the key reasons why purchased trading systems rarely make profits for those who buy them, even if the system is a good one. While the odds of getting a winning system are small-certainly less than 50/50-the odds of getting a system that fits your personality are smaller still. I’U leave it to your imagination to decide on the odds of buying a prof-itable/moderate risk system and using it effectively.

4. IT IS ABSOLUTELY NECESSARY TO HAVE AN EDGE
You can’t win without an edge, even with the world’s greatest discipline and money management skills. If you could, then it would be possible to win at roulette (over the long run) using perfect discipline and risk con-trol. Of course, that is an impossible task because of the laws of probabil-ity. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Inci-dentally, if you don’t know what your edge is, you don’t have one.

5. DERIVE A METHOD
To have an edge, you must have a method. The type of method is irrele-vant. Some of the supertraders are pure fundamentalists; some are pure technicians; and some are hybrids. Even within each group, there are tremendous variations. For example, within the group of technicians, there are tape readers (or their modem-day equivalent-screen watch-ers), chartists, mechanical system traders, EIliott Wave analysts, Gann analysts, and so on. The type of method is not important, but having one is critical-and, of course, the method must have an edge.

6. DEVELOPING A METHOD IS HARD WORK
Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple fail-ures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of profession-als. Why should you be any better? If it were that easy, there would be a lot more millionaire traders.

7. SKILL VERSUS HARD WORK
Is trading success dependent on innate skills? Or is hard work suffi-cient? There is no question in my mmd that many of the supertraders have a special talent for trading. Marathon running provides an appro-priate analogy. Virtually anyone can run a marathon, given sufficient commitment and hard work. Yet, regardless of the effort and desire, only a small fraction of the population will ever be able to run a 2:12 marathon. Similarly, anyone can learn to play a musical instrument. But again, regardless of work and dedication, only a handful of individuals possess the natural talent to become concert soloists. The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may pro-vide proficiency, but not excellence.
In my opinion, the same principles apply to trading. Virtually any-one can become a net profitable trader, but only a few have the inborn talent to become supertraders. For this reason, it may be possible to teach trading success, but only up to a point. Be realistic in your goals.

8. GOOD TRADING SHOULD BE EFFORTLESS
Wait a minute. Didn’t I just list hard work as an ingredient to successful trading? How can good trading require hard work and yet be effortless?
There is no contradiction. Hard work refers to the preparatory pro-cess-the research and observation necessary to become a good trader-not to the trading itself. In this respect, hard work is associated with such qualities as vision, creativity, persistence, drive, desire, and commitment. Hard work certainly does not mean that the process of trading itself should be filled with exertion. It certainly does not imply struggling with or fighting against the markets. On the contrary, the more effortless and natural the trading process, the better the chances for success. As the anonymous trader in Zen and the Art of Trading put it, “In trading, just as in archery, whenever there is effort, force, strain-ing, struggling, or trying, it’s wrong. You’re out of sync; you’re out of harmony with the market. The perfect trade is one that requires no effort.”

Visualize a world-class distance runner, clicking off mile after mile at a five-minute pace. Now picture an out-of-shape, 250-pound couch potato trying to run a mile at a ten-minute pace. The professional run-ner glides along gracefully-almost effortlessly-despite the long dis-tance and fast pace. The out-of-shape runner, however, is likely to struggle, huffing and puffing like a Yugo going up a 1 percent grade. Who is putting in more work and effort? Who is more successful? Of course, the world-class runner puts in his hard work during training, and this prior effort and commitment are essential to his success. (more…)

Why 95% fail

  
  Education
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When setting a grand goal, (such as total financial freedom via trading world markets) we are mentally prepared at the outset to encounter some kind of difficulty. When we get to it, it can psychologically look something like this:


A large barrier blocks the way to our goal, yet we KNOW that the realization of our goal lies somewhere on the other side if we can surmount this obstacle. With great efforts then we focus our attention and do the necessary work to get over it.

Yet what we then find is another obstacle; the next block. At this, a small percentage might become discouraged and quit, but others tackle this new obstacle with the same determination that they did on the last one. The problem lies in our inability to consider the enormity of the task at hand. If we could look around the wall to see forwards in time, we may see something like this:


If we had the benefit of such insight we might be able to accurately guess at just how far we had to go and how many more difficulties we have to get over, but we don’t. At each wall, a tiny percentage fall by the wayside, exhausted by these seemingly continual fruitless efforts. The only question is at what point do we jack it in at take up some other pursuit? Interestingly no matter how far we got, once we decide to quit and join the 95% we are no different from someone who gave up at the first obstacle, even if we gave up at the very last wall.

Or do we just doggedly keep going over wall after wall? Its obvious that the only option we have is to either quit or keep going at it and never giving up. Which will you be?

Trading Losses

  
  Education
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Those who have chosen this very unique career of “trader” face a mountain of challenges each day based on ever-changing market conditions. Added to the market challenges are emotions, which can be 90% of the game. You can have a great method, strategy and be taught by the best, but if fear, apprehension or hesitation come up the trader won’t take the trade…..this is an emotional block. All successful and experienced traders learn quickly to become the masters of their emotions. To accept and manage their weaknesses and leverage their strengths.

At first most traders start by researching and determining a method to trade. They do little to emotionally prepare for what’s to come. Yet they quickly find out that their emotions come into play early on, especially if they experience immediate losses. Losing money coupled with one’s own emotional “baggage” can impact the minds thought process and outcome.
My work focuses on the power of the mind and in particular the power of thought. These three problems and solutions do too. Nothing happens without the some form of thought, be it sub-conscience or conscience. After all, isn’t this what we’re left with when sitting in front of our monitors trading? What comes into our minds, as we trade can be avalanches of different thoughts. These thoughts then have the ability to assist us and add to our success or become our worst nightmares resulting in multiple losses.

Traders over time, come to the realization that trading will force them to face ALL their old and current emotional baggage and blocks. And that NOT being able to manage or “dump” the baggage, can hit the bottom line quickly.
When a trader’s plan doesn’t work they tend to blame it on the method, when in reality it usually comes down to an emotion causing them to react inappropriately. We can pick up automatic emotional blocks that prevent us from implementing a method effectively. Many try to get over these emotions on their own, but few master the changes needed.

But lets get specific and to the heart of these three trading problems. The first reason traders lose may seem obvious but in reality it stems from long term social conditioning. It’s their inability to ACCEPT LOSS. Losing generates powerful emotions, such as fear, uncertainty, apprehension, and self-doubt especially with men. And while women today can also be as affected, the data is supported mostly by men as they represent a larger portion of the client base.

Men are socially conditioned to succeed from the time they enter the world. From little boys being read, “The Little Train That Could” to the environments that surround them as they grow up. They are guided to be become achievers. Influenced by family, friends, education, and career environments they are encouraged to seek professions of Doctors, Lawyers, and Bankers. Images and social metaphors reinforce them. Striving to be right, number one, the breadwinner, and the best, always seeking perfectionism. They are socially conditioned to be the family providers. Add to this various cultural pressures and demands and men have a built-in fundamental obligation to succeed. (more…)

You are alone…

  
  Education
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aloneAt some point in time the realization strikes that you are alone in the market – there is only you. The illusion that the market can ‘do’ anything to you falls away and it becomes obvious that you are 100% responsible for everything that happens to your account. You either give yourself money, or else you give your money away – there is nothing else.

The market is one of the few arenas where there are no external constraints, except in the case of a margin call. It never forces you to take a position, long or short, or tells you to get out of your position. It does not say how long to stay in a position or what time to exit, how much profit or loss is enough. There are no external constraints at all, and as such people run riot. You are relying on yourself 100% and there is only ever you to blame.

The above is a core part of a winning trading psychology, yet its difficult to adopt. Shifting the blame is a basic way we defend our ego every single day of the week – yet in the market this practice is absolutely unsupported by price action. How can any other market participant be doing something to you if he is totally unaware of your existence or what position you hold?

Its necessary to really ponder this until the truth of it shines out:

You are alone…

A Trader’s Journey

  
Education, Video
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Dave shows how many successful traders take the same exact journey. They start with a simple method but slowly make it more complex. They search for the perfect indicators, thinking that if they work hard enough, they’ll find them. Unfortunately, it becomes so complex that they lose sight of basics. The true enlightenment comes when they return back where they started. They come to the realization that what they were looking for was right in front of them all along. They realize that although not perfect, simple methods can work quite well.

 

26 Quotes for Trading & Life

  
  Education
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1. Don’t try making sense out of it. You’re in an insane asylum – things are not going to make sense, people will do things that don’t make sense, that they cannot adequately explain. People don’t know what makes them tick, only that they tick.

2. Happiness, of course…is all in your head. If you don’t know that, if you haven’t come to that realization, you will never be happy.

3. The Bull Market Syndrome. People, when they are met with success, take personal credit for it (bull markets breed geniuses), and when they are met with failure, blame luck.

4. Actually, luck is responsible for both! If you can only die by being struck by lightning, eventually, you will die by being struck by lightning! Conversely, if a man were to live forever, and bought a lottery ticket every week, eventually, he will win the lottery, with a probability that approaches certainty. Just stay the course, keep doing today what you must do today. As Woody Allen says, “Fifty percent of success is just showing up.”

Luck Trumps Brains. To get luck, keep showing up each day with your shoes on.

5. Creativity trumps money every time.

6. Fortunately in life, you don’t have to succeed at everything you do, only a few things. One success often justifies all prior attempts.

7. You can buy great a education – you can not buy brains.

8. The Oswald Principle: Usually, the best course of action in life, is to take no action (and usually, the best thing to say is nothing!). The guys in jail or there not because they didn’t do anything. Usually, you should just sleep in! If nothing really bad happens today, as my friend Oswald said to me in eighth grade, it’s been a good day!

9. You don’t have the problems you think you do. Actually, the only real problems are health and criminal problems. Everything else is just a frivolous, meaningless nuisance.

10. Never say never. Everyone, however righteous they may claim to be, however upstanding they say they are, will, under the right circumstances commit the crime. A cold morning, wet, hungry, tired, angry….they’ll do things they never dreamed they would! (more…)

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