Tag Archives: discipline

Patience and Discipline Psychology.

10 Dec

PsychologyAll humans (including new traders and professional traders alike) experience emotions (often whether they like it or not), and trading is one activity that can elicit many different emotions and rather strong emotionss (like many monetary activities). As a result, new traders and professional traders alike, should know that their emotions are going to affect their trading whether they like it or not. In response, professional traders either have or develop personalities that allow them to overcome their emotions and trade profitably. Two of the most important such personality traits are patience and discipline, because they allow a trader to handle one of the most difficult aspects of trading (i.e. waiting for their next trade). Continue reading

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Money Management (III)

2 Dec

money-managementAs a trader I need to keep in mind that even the most successful system will have series of losses. This is called Drawdown and it is part of life. I am mentally prepared that this is going to happen sooner or later,  it helps me prepare and control my risk. When I look at my equity curve and it points up steadily over the period of time, I know that I’ve been disciplined and successful in controlling risk.  This gives the confidence a boost beyond imagination. Getting into the zone and acquiring trader’s mindset will take time, here are tips that may help:

  • Try to be calm when trading. If your mind is occupied with some other concern than try to avoid trading until things settle down and you believe that you can trade calmly.
  • Develop ability to focus on present reality and not how you would like reality to be. No one can see the future, so try not to predict it.
  • Understand that  making money is not the only point. I personally don’t look at dollars when trading, I look at pips and keep a log in pips made or lost.
  • There is always room to learn more. Never stop your self from reading more, keep your updated with news at all times.
  • Being open minded, keep opinions to a minimum. Don’t let others opinion affect you before you make a trading decision.
  • Avoid anger at all cost.
  • Learn to enjoy the process and make trading as your passion.
  • Only trade one system or method at a time. What hurts the novice traders the most is the impatience when testing a system. Stick to one system at one point of time.
  • Understand that we cannot control or conquer the market. Market is so big that no one can really control who wins and who lose.
  • Stop feeling that brokers or market has taken you for a ride. There is no conspiracy, there is hidden agenda. Stop feeling that you are being cheated by the market.
  • When it goes bad, take responsibility of the results. Don’t blame market, broker or some one else for your loses. Accept your losses and move on.

25 Disciplinary Rules in Day Trading.(V)

1 Dec

21. Learn to sweat out (scale out) your winners. The net effect of scaling out of your winners will be an increased average win per tradetrading rules while keeping your losses to your pre-defined risk parameters. You should never scale out of your losers. If your trade size is more than a one lot and your trade is a loser, you must exit the entire position en masse. If your trade size is more than a one lot and your trade is a winner, it is best to exit one-half of your position at your first price target. If you trade with protective stop loss orders, you should amend the order to reflect the change in trade size (remember you have exited one half of your position) and raise or lower the stopp price, depending on whether it’s a long or short position, to your original initiating trade entry price. You now are essentially “playing with the house’s money.” You can’t lose on your remaining position, and that’s obviously a fantastic position in wich to put yourself. Place a limit order a few tics above or below the market, depending on your possition, sit back and relax.

22. Make the same type of trades over and over again-be a bricklayer. A bricklayer shows up for work every day of his working life and executes with the same methodology – brick by brick by brick. The same consistency applies to traders, as well. Please review Rules 6 and 20. I have not changed my trading methodology and execution strategy in 20 years. I guess I’m the bricklayer.

23. Don’t over – analyze. Don’t procrastinate. Don’t hesitate. If you do you will lose. I can’t tell you how many times traders have come into my office terribly depressed because they “knew” the market was going one way or another however, they failed to put a position on. When I asked them why they did not put the trade on, their responses are always the same: they did not want to chase the market. They were waiting to be filled at the absolute best possible price ( and never got filled ), or only two out of three of their market indicators were present and they were waiting for the third. The net result of all this procrastination and hesitation is the trader was corect in deducing market direction but his profit on the trade was zero. We don’t get paid in this business unless we put the trade on. Don’t over analyze the trade. Place the trade and then manage it. If you’re wrong, get out. But you’ll never be right unless you actually make the trade.

24. All traders are created equal in the eyes of the market. We all start out the day the same. We all start out at zero. Once the bell rings and trading begins, it’s how we conduct ourselves from a behavioral standpoint that will dictate whether or not we will make money on the day. If you follow the 25 Rules, you should do well. If you do not, you will do poorly.

25. It’s the market itself that wields the ultimate scale of justice. The market moves wherever it wants to go. It does not care about you or me. It does not play favorites. It does not discriminate. It does not intentionally harm any one individual. The market is always right. You must learn to respect the market. The market will mercilessly punish you if you do not play by the rules. Learn the condition yourself to play by the 25 Rules of Trading Discipline and you will be rewarded

25 Disciplinary Rules in Day Trading.(III)

29 Nov

11. The first loss is the best loss. Once you come to the realization that your trade is no good It’s best to exist immediately. “It’s never a loser until you get out” and “Not to worry, it’ll come back” are often said tongue in cheek, by traders in the pit. Once the frase is stated, it is an affirmation that the trader realizes that the trade is no good, it is not coming back and it is time to exit.

12. Don’t hope and pray. If you do, you will lose. When i was a new and undisciplined trader, I can’t tell you how many times that I prayed to the “Bond god”. My prayers where a plea to help me out of  a less than pleasant trade position. I would pray for some sort of divine intervention that, by the way, never materialized. I soon realized that praying to the  “Bond god” or any other “futures god” was a wasted exercise. Just get out!

13. Don’t worry about news. It’s history. I have never understood why so many electronic traders listen to or watch CNBC, MSNBC, Bloomberg News or FNN all day long. The “talking heads” on these programms know very little about market dynamics and market price action. Very few, if any, have ever even traded one lot in any pit on any exchange. Yet they claim to be experts on everything. Before becoming a “trading and markets expert,” the guy on CNBC reporting hourly the Bond Pit, was a phone clerk on the trading floor. Obviously this qualifies him to be an expert! He, and others can provide no utility to you. Treat it for what it really is… entertainment. The fact is: The reporting that you hear on the business programs is “old news.” The story has already been dissected and consumed by the professional market participants long before the “news” has benn diseminated. Do not trade off of the reporting. It’s too late.

14. Don’t speculate. If you do, you will lose. In all of the years that I have been a trader and associated with traders, I have never met a successful speculator. It is impossible to speculate and consistently print large winners. Dont’t be a speculator. Be a trader. Short-term scalping of the markets is the answer. The probability of a winning day or week is greatly increased iy you trade short term: small winners and even smaller losses. (I like this one)

15. Love to lose money. This rule is the one that i get the most questions and feed -back on by traders from all over the world. Traders ask, “What do you mean, love to lose money. Are you crazy?” No, I’m not crazy. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly. It will save you a lot of trading capital and will make you a much better trader.

25 Disciplinary Rules in Day Trading.(II)

27 Nov

6. Develop a methodology and stick with it. Don’t change methodologies from day to day. It is requaired to write down the specific market prerequisites (set-ups) that must take place in order for them to make a trade. I don’t necessarily care what the methodology is, but I do want to make sure that you have a set of rules, market set ups or price action that must appear in order that you will take the trade. You must have a game plan. If you have a proven methodology but it doesn’ seem to be working in a given trading session, don’t go home that night but try to devise another one. If your methodology works more that one-half of the trading session, then stick with it.

7. Be yourself don’t try to be someone else. In all of my years as a trader I never traded more than a 50 lot on any individual trade. Sure, I would have liked to be able to trade like colleagues in the pit who were regulary trading 100 or 200 lots per trade. However, I didn’t possess the emotional or psychological skill set necessary to trade such big size. That’s ok. I knew that my comfort zone was somewhere between 10 and 20 lots per trade. Emotinally I couldn’t handle that size. The trade would inevitably turn in to a loser because I could not trade with the same talent level that I possessed with a 10 lot. Learn to accept your comfort zone as it relates to trade size. You are who you are.

8. You always want to be able to come back and play the next day. Never put yourself in the precarious position of losing more money that you can afford. The worst feeling in the world is wanting to trade and not being able to do so because the equity in your account is to low and your brokerage firm will not allow you to continue unless you submit more funds. You require to place daily downside limits on your performance. For example, your daily loss limit can never exceed $500. Once you reach the $500 loss limit, you must turn your PC off and call it a day. You can alalways come back tomorrow.

9. Earn the right to trade bigger. Too many new trader think that because they have $25.000 equity in their trading account that they somehow have the right to trade five or ten e-Mini S&P contracts. This cannot be further from the truth. If you can’t trade a one lot successfully, what makes you think that you have the right to trade a 10 lot? Remember: if you are trading poorly with two lots you must lower your trade size down to one lot.

10. Get out of your losers. You are not a “loser” because you have a losing trade on. You are, however, a loser if you do not get out of the losing once you recognize that the trade is no good. It’s amazing to me how accurate your gut is as a market indicator. If, in your gut,  you have the ideea that the trade is no good then it’s probably no good. Time to exit. Every trader has losing trades throughout the session. A typical trade dayfor me consists of 33 percent winners. I exit my losers very quickly. They don’t cost me much. So, although I have either lost or scratched over two-thirds of my trades for the day, I still go home a winner. (others will follow)

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