- A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to
transform himself. That’s the kind of thing winning traders do.
- The winning traders have usually been winning at whatever field they are in for years.
- It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to
satisfy them. Those who want to win and lack skill can get someone with skill to help them.
- The “doing” part of trading is simple. You just pick up the phone and place orders. The “being” part is a bit more subtle. It’s like being an athlete. It’s commitment arid mission. To the committed, a world of support appears. All manner of unforeseen assistance materializes to support and propel the committed to meet grand destiny.
- In your recipe for success, don’t forget commitment – and a deep belief in the inevitability of your success.
Archives of “trader” tagrss
The following is an excerpt from an article in Naval Institute magazine – there’s a lesson not only for navigating a ship, but for traders too.
Shortly after dark, the lookout on the wing of the bridge reported, “Light, bearing on the starboard bow.”
“Is it steady or moving astern?” the captain called out.
Lookout replied, “Steady, captain,” which meant we were on a dangerous collision course with that ship.
The captain then called to the signal man, “Signal that ship: We are on a collision course, advise you change course 20 degrees.”
Back came a signal, “Advisable for you to change course 20 degrees.”
The captain said, “Send, I’m a captain, change course 20 degrees.”
“I’m a seaman second class,” came the reply. “You had better change course 20 degrees.”
By that time, the captain was furious. He spat out, “Send, I’m a battleship. Change course 20 degrees.”
Back came the flashing light, “I’m a lighthouse.”
#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.
One of intelligent honest things that Livermore did was to get out of one market by selling a related market, inducing the other traders to think that there was weakness in one market which would carry over to the related market. The art of indirection and letting people use their own intelligence and inferences to come to their own conclusion. for example if he wanted to get out of cotton, he’d sell some coffee. If he wanted to get out of a common, he’s sell the preferred or a related company that owned a big chunk of it, like sell Christiana which owned general motors et al. This technique one wonders how often is it used today. When it happens, is it artful indirection or chance? How to quantify and what predictions to be made? Would the robots be smart enough to do this?
There was a moment in late 80s Energy trading, when legend has it that a great admirer of Livermore who runs a venerable hedge fund near New York was Bearish to the tune of 40,000 lots. If you think it’s not much, just remember that Exchange limit for open speculative position in any contract was 6,000. Of course, his positions were in all possible inter-month spreads and across products. So once decision to cover was made, he picked up the phone and asked for the cockiest trader in the Crude pit. “Are you a man or mouse?” Trader thought it was a prank: “Come on Paul, what do you want?” “I’ll give an order to sell 1,000 market, and I mean worst. But if I don’t see Crude print through even– they’re all yours! Do you accept?”
1. All successful traders use methods that suit their
personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.
2. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.
3. To be a winner, you have to be willing to
take a loss;
4. HOPE is not a word in the winning Trader’s vocabulary;
5. When you are on a
losing streak — and you will eventually find yourself on one — reduce your position size;
6. Don’t underestimate the time it
takes to succeed as a trader — it takes 10 years to become very good at anything;
7. Trading is a vocation — not a
8. Have a business/trading plan;
9. Identify your greatest weakness, Be honest — and DEAL with it (more…)
There is so much ink and pixels spilled on how to succeed in trading. So I thought, I would zag instead of zig and outline how to fail as a trader. Without further ado, the 10 vital steps you must take in order to fail in trading:
- Start out undercapitalized
- Ignore risk management
- Compare yourself to other traders, not yourself
- Look for the right system
- Don’t keep a journal
- Be secretive
- Be casual
- Fill your charts with as many indicators as possible
- Trade with your emotions
- Be inconsistent
Traders often pass through a series of 5 stages before becoming successful. In order, these are:
- Unconscious Incompetence – Brand new traders enter at this stage, full of excitement and overconfidence that they will amass riches overnight. “How hard could it be? Price either goes up or down, right?” one may ask. The trader funds his account and starts quickly, taking lots of trades and unknowingly take on lots of risk. After a few initial successes, he is disappointed that price somehow turns on him every time he enters and he subsequently takes revenge by doubling up on new trades.
- Conscious Incompetence – After realizing how out of touch with the reality and danger of the market he was, the trader progresses to the next stage and sets out to educate himself by buying loads of books, attend seminars and signed up for courses, searching for the “holy grail.” The trader seeks advice and entry signals from other traders in forums who brag about their earnings and wonders why it is not him.
The PlayBook can be applied to all markets. No matter how tempted you might be to think otherwise, markets are markets. There’s a universal trading psychology that applies to all of them. The temptation of a bad trader—perhaps I should be fair and say the unseasoned or untrained trader—to short when you should go long exists everywhere. By the same token, great traders are all alike in the sense that their passion, willingness to invest in their trading future and relentless dedication to learn more and to become better than they currently are is universal. Whether you are a trader in Singapore, London, Russia, Brazil, Australia, or Hong Kong, you can be sure the mindset of your market’s great traders is the same: They find the setups that make the most sense to them, then internalize this knowledge, get bigger in their best setups and then act – trade -on it. This is your path to becoming a “proper” trader.
1.Does your self-esteem rise and fall with your latest trading ?
2.Have you ever taken a trade just to prove your ability as a trader ?
3.Do you brag about your winning trades to others ?
4.Do you try to hide your losing trades from others ?
5.Do you ever make up false stories about your trading to impress others ?
6.Do you worry about what other people think of your as trader ?
7.Make an honest self-assessment of your trading.
8.Complement yourself and give yourself credit when you do something right.
9.When you make a mistake or do something that doesn’t serve your trading ,plan how you will correct this tomorrow or in the future.Say to yourself ,”That’s not like me.I can do better.”
10.Notice your improvement and commit to doing better each day ,week ,month ,and year
Similes and metaphors play an important role in both the internal thought-process of a day trader as well as in communication between two traders. To describe the emotional reactions coupled to the movement of a stock in likeness to a rollercoaster, or to compare averaging down in hopes of breaking even to digging one’s self out of a hole is to use simile to quickly illustrate a particular situation as clearly and succinctly as possible. Every trader uses these analogies, each having his own favorites, and they are used to add structure to an environment that often lacks useful tools for explaining particular occurrences.
Sports metaphors also play an important role in quickly passing information to another trader with a small chance for confusion. Traders use base-hit as a metaphor to describe a solid but ultimately small-scale win in the market, and home run for when a trade is “out of the park”.
Ultimately, metaphors and similes can be used by a trader to keep his mind in the right place, and maintain emotional control. By metaphorically comparing trading to baseball or basketball, the Michael Jordan truism about never missing a shot he didn’t take or Babe Ruth’s statistical record for strikeouts helps the trader keep in the back of his mind the inalienable reality that he won’t get a hit every time he swings the bat. (more…)