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Essentials of a Winning Psychology

  
  Education
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Four fears that block a winning psychology:

  1. Fear of Loss
  2. Fear of being wrong
  3. Fear of missing out
  4. Fear of leaving money on the table.

Realize that trading is based on probabilities, as such, every trade is unique. In other words, the past does not equal the future.

Probability thinking manifest other states and beliefs:
  • Because we know that we will succeed in the long run and because we know we will protect ourselves no matter what the market does, we acquire the state of “self trust” and the state of being “carefree”.

In turn these states allow us to remain….

  • Focused, confident and carefree when we are experiencing the inevitable prolonged drawdown.
  • Because at the micro level we know that the market is random, we will not allow euphoria to set in and lead us to reckless trades. Each trade will only be one in a series of probabilities.
  • We will view market information not as a source of pleasure or pain but merely as data providing us with opportunities.

Personal Attributes Essential to a Winning Mentality
  • Awareness – the ability to step outside ourselves and observe. The more effectively we can do this, the easier our progress to “Acceptance”.
  • Honesty – the ability to seek to perceive reality in spite of our filters.
  • Courage – the willingness to bear the pain brought about by our awareness and honesty.
  • Commitment – the willingness to do whatever is necessary to achieve our goals

To succeed, a trader must have a vision about where he is heading, and must internalise that a winning attitude is total submission to the trading outcome.
This means managing Fear and Euphoria. To do this, we need to ACCEPT, with every fibre of our body, the belief that at the micro level the market is uncertain and unpredictable and at the macro level it is relatively certain and predictable.

Trading Wisdom

  
  Education
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The most important thing is to have a method for staying with your winners and getting rid of your losers. By having thought out your objective and having a strategy for getting out in case the market trend changes, you greatly increase the potential for staying in your winning positions. The traits of a successful trader: The most important is discipline – I am sure everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win. You have to have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade. You can’t let a losing trade get to you emotionally. If a trade doesn’t look right, I get out and take a small loss.

How I Look At The Markets

  
  Education
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The markets are a science. Plain and simple. Some like to look at fundamentals and guess what will happen next. I like to look at the numbers. The facts. The only thing you can trust. Billion dollar hedge fund manager David Harding views the markets similarly:

Our approach to markets is a science. It is an unpublished science, but it is a real one. You would have thick leather-bound volumes of papers on it if there were a willingness to “open the kimono,” as the horrible modern expression has it. The process of trading our system is like repeatedly drawing different colored balls from the statistician’s apocryphal bag. As we draw out a ball it becomes part of the track record, and we put it back in the bag, but there is no guarantee that the balls will come out in the same order in the future.

Trend following is speculation in its purest form–find an edge and exploit it consistently over time. That attitude is critical for any entrepreneurial success. Throw the lottery mentality away. Forget the one hit wonder luck the press propagates to the masses of lemmings

Defining A Great Trader

  
  Education
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Great traders that we have had the pleasure to know and to be around, on exchange floors and on trade desks, had certain repeatable traits that all level traders can learn, or take something from;

  • Empathy and the ability to listen.
  • Faith in their own ability to get things done, if life and in work.
  • Humility, and a willingness to accept defeat as graciously as accepting success.
  • Desire to work towards, and not to just expect, having more success than defeat.

They listened more than they spoke. They had two ears and one mouth and had learned to use them in the right proportion. The ability to listen, either to a mentor, to your inner self, or to the market, is critical for success.

They had an undying faith and belief in their own ability, and accepted that most things that went wrong were probably outside of their control, because they planned their work. Their brutal honesty with themselves and with others allowed them to develop a faith in their own ability that was beyond the norm.

They were humble, and understood that they were not smarter, stronger, nor wiser than others; they just knew that there were few others that had more faith in their own ability to follow something through and to achieve their goals. (more…)

The Ten Cardinal Rules for Traders

  
  Education
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1. Learn to function in a tense, unstructured, and unpredictable environment.
2. Be an independent thinker versus a conventional thinker.
3. Work out a way to handle your emotions and maintain objectivity.
4. Don’t rely on hope and fear in the conventional sense.
5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
6. Modify your normal responses to certain events.
7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
9. Understand the larger framework in which trading occurs—how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your ego and your need to have things your way.Do the hard thing. – Richard Dennis

15 Great Investor Quotes

  
  Education
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Insightful Investment Quotes

warren-buffett quoteWarren Buffett (Net Worth $39 Billion) – “‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
george-soros quoteGeorge Soros (Net Worth $22 Billion) – ”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”
david-rubenstein-quoteDavid Rubenstein (Net Worth $2.8 Billion) – “Persist – don’t take no for an answer. If you’re happy to sit at your desk and not take any risk, you’ll be sitting at your desk for the next 20 years.”
ray-dalio quoteRay Dalio (Net Worth $6.5 Billion) – “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.” (more…)

Typical Traids of Top Traders

  
  Education
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First, let me say that I know of examples of successful trader’s that don’t have each of the characteristics that I would say the “typical” good trader shares. So there are exceptions to each of these. (more…)

"TRADING WISDOM: ADDICTION TO PERFECTION"

  
  Education
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“One of the great evils of trading is false exactness…Trading is a fuzzy process and I mean fuzzy in the best sense of the word. That is, as in fuzzy logic, as in the willingness to accept the idea that things aren’t exactly quantifiable and to forge ahead anyway” –John Bollinger (creator of the Bollinger Bands)

 

 

Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.

Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?


 

 

The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.

Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.

This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear— fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain. (more…)

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