Wednesday, 25 November 2020
Tuesday, 24 November 2020
38 Steps To Becoming A Better Trader
Here is an excellent article I read some time ago and recently rediscovered. It accurately describes the process most traders go through on their long and winding path to success.
In my own experience, not all traders go through every step, and not every step is met in the order presented here. In fact, this can be quite an iterative process with the trader getting stuck in a loop and repeating certain steps time and again until they either realize the problem for themselves, or are given a nudge from a more experienced hand.
01. We accumulate information – buying books, going to seminars and researching.
02. We begin to trade with our ‘new’ knowledge.
03. We consistently ‘donate’ and then realise we may need more knowledge or information.
04. We accumulate more information.
05. We switch the commodities we are currently following.
06. We go back into the market and trade with our ‘updated’ knowledge.
07. We get ‘beat up’ again and begin to lose some of our confidence.
Fear starts setting in.
08. We start to listen to ‘outside news’ and to other traders.
09. We go back into the market and continue to ‘donate’.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.
15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.
Source: http://www.tradingsimulation.com
The original article was published in 'CTCN' by "Anonymous Trader".
In my own experience, not all traders go through every step, and not every step is met in the order presented here. In fact, this can be quite an iterative process with the trader getting stuck in a loop and repeating certain steps time and again until they either realize the problem for themselves, or are given a nudge from a more experienced hand.
01. We accumulate information – buying books, going to seminars and researching.
02. We begin to trade with our ‘new’ knowledge.
03. We consistently ‘donate’ and then realise we may need more knowledge or information.
04. We accumulate more information.
05. We switch the commodities we are currently following.
06. We go back into the market and trade with our ‘updated’ knowledge.
07. We get ‘beat up’ again and begin to lose some of our confidence.
Fear starts setting in.
08. We start to listen to ‘outside news’ and to other traders.
09. We go back into the market and continue to ‘donate’.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.
15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.
Source: http://www.tradingsimulation.com
The original article was published in 'CTCN' by "Anonymous Trader".
Quote for the day
"The real voyage of discovery consists not in seeking new landscapes, but in having new eyes." - Marcel Proust
Monday, 23 November 2020
Casino vs. Stock Market
Casinos
When people go to the casino, they often have a very detailed game-plan about how disciplined they are going to play, what their risk limit is, how much they are willing to lose at most and plans about leaving with more than what they came with. However, the casino managers are aware of the ‘preparation’ of the average gambler and they found ways to trick them into abandoning their good intentions.
When people go to the casino, they often have a very detailed game-plan about how disciplined they are going to play, what their risk limit is, how much they are willing to lose at most and plans about leaving with more than what they came with. However, the casino managers are aware of the ‘preparation’ of the average gambler and they found ways to trick them into abandoning their good intentions.
- Free alcoholic drinks to seduce people to take more risk than what they had planned
- Women and other attractions to create arousal and to stop people from thinking too much about risk and potential losses
- Bright and flashy lights and sounds to create a casual atmosphere with lots of excitement
- Everything in a Casino is designed to make you want to spend your money, often created by professionals with a psychological background, including odors, sounds, patterns of the carpets, etc.
- Casino chips are used to make you forget you are actually playing with real money
Although trading and investing is a very hard thing to do successfully, the way the media presents investing in the stock market is comparable to a large scale casino where the only goal is to create attention, excitement and awaken the hopes of people who are looking for a fast buck. The following attributes of the mainstream media and trading websites often create a wrong impression of trading and can be the cause of a negative trading performance:
- TV channels and newspapers use attention grabbing headlines and slogans to attract people
- Pictures and photos of young , rich men are used to awaken hopes and dreams of a certain clientele
- The hosts of investing shows have often little to do with sophisticated investors, but are very emotional to draw a lot of attention
- If there are extreme rallies you can read and hear about it everywhere and you can witness that even ‘the average Joe’ now suddenly sees himself as an investor
Sunday, 22 November 2020
Calm Trader, Rich Trader
By Steve Burns
Traders that are emotionally calm and cool that approach trading as a business, have greater odds of profitability than the thrill seekers and gamblers that come to the market. One third of trading is based on logic, and two thirds is based on emotions.
Here are 10 things that a trader has to overcome to stay calm and be profitable.
1. Impulsiveness. The biggest thing that following a trading plan does is trade impulsiveness for proven rules.
2. Impatience. Quantified entries and exits make you wait for a signal and avoid the noise.
3. Anger. You have to depersonalize the outcome of your trades. Each trade is just an entry and an exit, with no emotions required.
4. Uncertainty. We must accept the randomness of our short term results and understand our long term edge.
5. Laziness. You have to do enough homework when the market is closed to be ready when the market is open.
6. Greed. Following the correct position sizing parameters replaces the need for big wins and helps you focus on risk management.
7. Fear. The confidence in your system will relieve the fear of failure.
8. Ego. The desire to make money has to override the need to be right about specific trades.
9. Hope. A stop loss has to replace the need to hope a losing trade comes back to even.
10. Stress. You have to manage your risk exposure to losses in order to reduce your stress level.
The profitable traders are rarely, if ever, emotionally stressed. The egomaniacs and the gamblers are usually the ones that lose it all. The calm traders are the ones that typically keep a level head and maximize opportunities when the market presents them.
Are you a calm trader?
Traders that are emotionally calm and cool that approach trading as a business, have greater odds of profitability than the thrill seekers and gamblers that come to the market. One third of trading is based on logic, and two thirds is based on emotions.
Here are 10 things that a trader has to overcome to stay calm and be profitable.
1. Impulsiveness. The biggest thing that following a trading plan does is trade impulsiveness for proven rules.
2. Impatience. Quantified entries and exits make you wait for a signal and avoid the noise.
3. Anger. You have to depersonalize the outcome of your trades. Each trade is just an entry and an exit, with no emotions required.
4. Uncertainty. We must accept the randomness of our short term results and understand our long term edge.
5. Laziness. You have to do enough homework when the market is closed to be ready when the market is open.
6. Greed. Following the correct position sizing parameters replaces the need for big wins and helps you focus on risk management.
7. Fear. The confidence in your system will relieve the fear of failure.
8. Ego. The desire to make money has to override the need to be right about specific trades.
9. Hope. A stop loss has to replace the need to hope a losing trade comes back to even.
10. Stress. You have to manage your risk exposure to losses in order to reduce your stress level.
The profitable traders are rarely, if ever, emotionally stressed. The egomaniacs and the gamblers are usually the ones that lose it all. The calm traders are the ones that typically keep a level head and maximize opportunities when the market presents them.
Are you a calm trader?
Source: www.newtraderu.com
Quote for the day
"Fear has a far greater grasp on human action than the impressive weight of historical evidence." - Jeremy Siegel
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