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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…)

42 Ways To Trade Like A Market Wizard

  
  Education
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What if you could read the principles for success for some of the world’s greatest traders? Well you can, here is how author Jack Schwager summed up the the similarities of the ‘Market Wizards’ he spent years interviewing in his second book.

The following is a summarized excerpt from Jack D Schwager’s book, The New Market Wizards. I highly recommend this book for all active traders.

  1. First Things First
    You sure you really want to trade ? It is common for people who think they want to trade to discover that they really don’t.
  2. Examine Your Motives
    Why do you really want to trade ? Did you say excitement ? Then don’t waste your money in market, you might be better off riding a roller coaster or taking up hand gliding.
    The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
  3. Match The Trading Method To Your Personality
    It is critical to choose a method that is consistent with your your own personality and conflict level.
  4. It Is Absolutely Necessary To Have An Edge
    You cant win without an edge, even with the world’s greatest discipline and money management skills. 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. Incidentally, 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 not important, but having one is critical-and, of course, the method must have an edge.
  6. Developing A Method Is Hard Work (more…)

Trading Game is Simple It’s Just not easy

  
  Education
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 I believe that good traders are able to trade the markets effortlessly – it’s simple to them. But getting to the point of doing anything effortlessly is not easy. In fact, it’s really hard. A good analogy would be describing an athletes ability to perform his or her skill. If we took two people – one being a person who runs two miles everyday versus a person who hasn’t ran for the past two months, who will have the easier time running one mile? The answer is simple of course. The person who runs everyday will be able to run one mile easily – it will be effortless to them. However, the person who hasn’t ran in two months will find it extremely hard to and likely have to take breaks in-between so that he or she can finish.

In order for trading to become simple, there are some crucial and necessary steps that need to be taken. There needs to be consistency in the traders approach to the markets. It’s unfortunate, but we are in a day and age where traders are obsessed with just “trading for the fun of it”, and they aren’t realizing that that’s what’s preventing them from being consistent and successful. Again, if we go back to our analogy, does a great athlete deter from their routine? No. In fact, they have routines that boil down to eating, and sleeping habits in order to keep themselves moving in the right direction. It’s really not a mystery, but for whatever reason most traders seem to fail that this approach is what’s needed if you want to be good.

There really is a direct correlation between traders who are good and traders who are not. There is a direct correlation between traders who are consistent and traders who ride the roller coaster. That difference is preparation. Preparation and repetition is what makes anyone great at what they do. But preparing is not easy. It takes focus, will, and a lot of discipline. In trading that translates to having a very specific trading plan, with specific rules and the discipline to do it every single day. And as you prepare yourself everyday in your approach to the markets, you’ll find that trading becomes simple. It becomes effortless.

So if you want to be a good trader, scratch that – if you want to become a great trader, step back and think about what it really takes, and prepare yourself. It won’t be easy, but sooner or later you’ll realize how simple it really is.

Doubt and Disappointment-Two Friends of Traders

  
  Education
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We all want certainty both in and outside the charts. Problem is certainty is nothing more than hope wrapped in expectation.  Life is uncertain. A successful trade is uncertain.  If certainty is what we want then certainty we will get.  However, be prepared to meet certainty’s friends, doubt and disappointment.  Doubt and disappointment are, shall we say, in “cahoots” with certainty.  You can’t have one without the other.  This is a blessing really that we all too often turn into a curse.  A blessing because we have two new friends who can help keep us balanced, honest, and above all, human.  A curse because we choose to ignore their advice when we should be embracing it.  Embrace it you say?  Yes.  Because doubt and disappointment can lead to new discoveries and a deeper appreciation for what life has to offer.  Maybe, just maybe, what we believe to be certain, you know, that which we wrap up in hope and expectation, is not so certain after all.  Maybe, just maybe, our friends doubt and disappointment can lead us down a better path and a better life.  Maybe, just maybe, doubt and disappointment can teach us a new understanding about the markets and the charts, wherein we pin so many of our hopes and expectations. (more…)

Doubt and Disappointment

  
  Education
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We all want certainty both in and outside the charts. Problem is certainty is nothing more than hope wrapped in expectation.  Life is uncertain. A successful trade is uncertain.  If certainty is what we want then certainty we will get.  However, be prepared to meet certainty’s friends, doubt and disappointment.  Doubt and disappointment are, shall we say, in “cahoots” with certainty.  You can’t have one without the other.  This is a blessing really that we all too often turn into a curse.  A blessing because we have two new friends who can help keep us balanced, honest, and above all, human.  A curse because we choose to ignore their advice when we should be embracing it.  Embrace it you say?  Yes.  Because doubt and disappointment can lead to new discoveries and a deeper appreciation for what life has to offer.  Maybe, just maybe, what we believe to be certain, you know, that which we wrap up in hope and expectation, is not so certain after all.  Maybe, just maybe, our friends doubt and disappointment can lead us down a better path and a better life.  Maybe, just maybe, doubt and disappointment can teach us a new understanding about the markets and the charts, wherein we pin so many of our hopes and expectations.

What a ride this market has been on!  No roller coaster can compare. And the ride is far from over and triple digit days will continue for some time.  Today could easily be a triple digit day to the upside or downside or both!  Who knows? We have no certainty about where this consolidation will end and in what direction.  All I know is when a certain trend begins we will still be faced with doubt and disappointment, either because we doubt the new trend or are disappointed that the direction is not quite what we expected, when we expected it.  Then again, nothing in the market is quite what we expect.  Don’t be surprised if the market does exactly the opposite of what you want or expect.  If you are certain of its direction…I have two friends to introduce you to.

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