- Why does Mindset Matter
- Overcome outside forces
- Learning a new skill-requires focus
- Set backs, highs and lows (big wins and bigger losses)
- Who are you
- THE #1 REASON INVESTORS FAIL
- They don’t have a strategy
- Eliminates & controls emotional decisions
- Allows you to make quicker and easier decisions
- Creating & practicing a strategy will make you a better trader and investor
- Secret is not buy & sell signals
- Mentality & controlling your emotions
- Rule based strategy helps
- They don’t have a strategy
- FOMO Trading
- What is it?
- Common emotions
- What drives it
- Big winning streaks
- Repetitiive Losses
- News and rumours
- Social Media and chat rooms
- THE 4 STAGES OF FOMO TRADING
- Is it too late to get in *BUYS*, what if it goes to $X?
- Buy the dip *BUYS MORE*
- Rock bottom – cut my losses *SELLS* its driving me crazy I want to forget about it as quickly as possible
- Stock goes back up – miss gains bc you have a grudge
- Things a FOMO trader says
- FOMO Trader vs Succesfful Trader Mindset
- Instant gratification vs delayed gratification
- Mindset Principles of a Successful Traders (Google chess mindset)
- Success comes from mastering the simplicity in nature and fundamentals
- Stocks move up, down, and sideways
- Is it going up or down or sideways?
- Trade the same stocks
- Egoless / Humble / Yes, You will be wrong / Yes, the best are wrong – a lot
- Cut losses
- Hold no attachment to trades
- Not all trades work
- Be prepared to change your analysis on a dime
- What I think is what I think right now- that may change in a day, week, or year
- Playing vs yourself (video game single player
- You cannot will prices to move as you wish
- Listen to what the market is telling you right now – you do not talk to the market
- People love to short the market because when it happens they were right
- The market goes up 72% of the time so it’s no fun being right about stonks always go up
- it’s not our job to be right; it’s our job to make money.
- Be Prepared / Have a Strategy / Do Your Homework / Gameplan
- Map out every trade
- Targets and stop losses
- What happends when price goes south?
- Wait for setup that meets your criteria
- Don’t force
- Create a strict set of rules to trade (study*)
- “If you fail to plan, you are planning to fail!” Benjamin Franklin
- Luck favors the prepared
- Work Hard at Your Craft / Practice Makes Perfect
- Play chess not checkers
- Every move (buy/sell) has a purpose
- Never stop learning
- Nuances are learned
- Intuition = feel
- The chess gambit
- Intuition comes from experience
- Play chess not checkers
- Visualize Success
- Conversion Worksheet
- You Do You
- Don’t take others trades without understanding why
- Stick to your strategy
- Don’t chase profits
- Ignore meme stocks
- Ignore Aunt Mary Anne
- Do your own due diligence (DD)
- Short Memory
- Every trade is a new tarde- don’t carry over successes and failures
- Jordan kept shooting no matter how poor his night was
- You must have a short memory
- Don’t hold grudges over certain stocks
- Accept, assess, learn, and move on from losses or mistakes
- Fear & Greed
- Keep emotions in check
- Fuel for the stock market
- Most strategies are simple, emotions are not
- Be fearful when others are greedy, and greedy when others are fearful
- Create a trading log
- Hold yourself accountable for gains and losses
- Controls your emotions by having to write FOMO
- Price & shares
- Why you bought / sold
- Gain / loss PERCENTAGE
- SUPER STOCKS
- All stocks move up, down, and sideways
- Apple, Tesla, and Amazon
- We’d all be rich – picture of Conor McGregor
- ONE GURU
- Hundreds of people saying buy this stock don’t buy this stock
- Use this strategy don’t use that strategy
- I am not going to tell you what stocks to buy and not to buy
- Teach you how to make decisions for yourself
- Newsletters good to give you ideas on stocks to trade
- Narrow your focus
What is the Mindset of a Trader?
Being a trader is not just about formulating better strategies and performing more extensive analysis, but is also about developing a winning mindset. According to many studies of traders, what separates a winning trader from a losing one:
It’s NOT that winning traders formulate better trading strategies
It’s NOT that winning traders are smarter
It’s NOT that winning traders do better market analysis
What separates a winning trader from a losing trader is their psychological mindset.
Mindset of a Master Trader – What Traders need to know
Most traders when they first begin trading mistakenly believe that all they need to do is find a great trading strategy. After that, all they’ll need to do is come to the trading market each day, plug in their great trading strategy, and the market will just immediately start pumping money into their account.
Unfortunately, as any of us who have ever traded have learned, it’s not that easy. There are plenty of traders who use intelligent, well-designed trading strategies and systems who still regularly lose money rather than make money.
The few traders who do consistently win the game of trading are those who have developed the appropriate psychological mindset that enables them to be consistent winners. There are certain beliefs, attitudes, and psychological characteristics that are essential to conquering the world of trading.
Attitude About the Markets and About Yourself
Attitudes and beliefs about the market include things such as believing that the market is rigged against you. Such negative – and erroneous – beliefs can have a significant impact on your ability to trade successfully. If you’re looking at the market as being out to get you, then you’re not looking at it properly, in accord with reality, and therefore you can’t hope to be able to objectively evaluate market opportunities. The market is completely neutral – it doesn’t care whether you make money or lose money.
Our beliefs about ourselves are critical elements of trading psychology. One personal characteristic that almost all winning traders share is that of self-confidence. Winning traders possess a firm, basic belief in their ability to BE winning traders – a belief that is not seriously shaken by a few, or even several, losing trades.
In contrast, many losing traders have serious, nagging self-doubt. Unfortunately, if you see yourself as a losing trader, cursed with bad luck or whatever, that belief tends to become a self-fulfilling prophecy. Traders who doubt their ability often hesitate to push the button and initiate trades, and thereby often miss good trading opportunities. They also tend to cut profits short, overly fearful that the market will turn against them at any moment.
Winning traders have a healthy respect for the fact that even their best market analysis may sometimes not match up with future price movements. Nonetheless, they possess an overall confidence in their ability as traders – a confidence that enables them to easily initiate trades whenever a genuine opportunity arises.
Key Characteristics of a Winning Trader
Psychologically, the very best of traders share the same key characteristics, including the following:
They are all comfortable with taking risks. People with very low-risk tolerance, who cannot accept losing trades, are not cut out to be winning traders, since losing trades are simply part of the game of trading. Winning traders are able to emotionally accept the uncertainty that is inherent in trading. Trading is not like investing your money in a savings account with a guaranteed return.
They are capable of quickly adjusting to changing market conditions. They don’t fall in love with, and “marry”, their analysis of a market. If price action indicates that they need to change their view on probable future price movements, they do so without hesitating.
They are disciplined in their trading and can view the market objectively, regardless of how current market action is affecting their account balance.
They don’t give in to being excessively excited about winning trades or excessively despairing about losing trades. Winning traders control their emotions rather than letting their emotions control them.
They make the necessary effort and take the necessary steps to be self-disciplined traders who operate with strict money and risk management rules. Winning traders are not reckless gamblers. They carefully calculate potential risk against potential reward before entering any trade.
One of the most important psychological characteristics of winning traders is the ability to accept (1) risk and (2) the fact that you may well be wrong more often than you are right in initiating trades. Winning traders understand that trade management is actually a more important skill than market analysis. What determines profits and losses is often not so much a matter of how or when you enter a trade, but much more a matter of how you manage a trade once you’re in it.
Understanding how Trading Works
Winning traders know the difference between a “bad trade” and a trade that loses money. This is a critical point to understand. Just because you end up losing money on a trade, that doesn’t mean it was a bad trade – it just means that it was a losing trade. What makes a trade a good trade is not whether it wins or loses – a trade is a good one as long as it offers greater potential reward than risk, and the odds or probabilities of it being successful are in your favor, regardless of how it turns out. If you take a trade for good reasons and manage the trade well once you’re in it, then it’s a good trade, even if you end up getting stopped out for a loss. (Conversely, even if a trade happens to make money, if it wasn’t initiated for good reasons and with a favorable risk/reward ratio, then it’s a bad trade even though it may have happened to turn out profitably).
Winning traders operate on the premise that if they continue to make “good trades” as defined above, that they will ultimately be profitable overall. Losing traders incorrectly identify any trade that loses money as a “bad trade” and any trade that makes money as a “good trade,” regardless of whether there was a reasonable basis for making the trade – and that leads to bad, losing trading in the long run. Evaluating trades solely on the basis of whether they happen to win or lose is doing nothing more than looking at random rewards similar to playing a slot machine.
The Upside-Down Mental Attitude of a Winning Trader
One reason that losing is so common among traders is that many attitudes and principles that serve us well in life do not work well at all in the profession of trading. Unaware of this fact, most traders lack a basic understanding of what trading is all about.
In our ordinary, daily lives, we are taught to avoid risky situations. But trading is all about taking risks.
Trading is an inherently risk-filled endeavor.
Winning traders who genuinely accept the risk of trading have the ability to enter a trading opportunity without hesitation and to just as easily close a trade when it isn’t working. They are not burdened with the emotional pain that causes them to lose their focus or self-confidence as a result of a trade not working out.
Traders who have not learned this attitude toward trading are driven by emotional reactions to winning or losing trades and have not truly accepted the fact that trading is a risk-filled business. Because they are not acting in harmony with reality, they do not make the best possible trading decisions.
Engaging in trading – and being successful at it – puts a huge demand on us, namely the demand that we maintain confidence while dealing with the continual uncertainty of trading in the markets.
In the profession of trading, facing the truth about what we’re engaged in is one of the key elements to success.
Habits of Winning a Trader
Winning traders regularly review and evaluate their trading performance. They understand that trading is a skill that is only mastered through rigorous practice over time.
Winning traders are flexible. They aren’t ego-invested in their trades. They are able to always view the market objectively and easily cast aside trade ideas that aren’t working.
Winning traders do not hesitate to risk money when they see a genuine profit opportunity based on their market analysis and trading strategy. However, they do not risk money recklessly. Always aware of the possibility of being wrong, they practice strict risk management by putting small limits on their losses.
Habits of a Trader
Understanding that the Market can’t be Predicted
Winning traders are aware of, and accept, the fact that the market is ultimately unpredictable, that there is no surefire market analysis technique or strategy that will infallibly predict price movements. Because they are keenly aware of this fact, they carefully watch for signs that their analysis is mistaken, and if they see such signs, they quickly adjust their trading position.
In contrast, losing traders, once they have put a trade on, tend to only look for market action that confirms that they are right, and minimize or rationalize away any market action that seems to contradict their analysis. Thus, they often end up staying in losing trades too long and taking unnecessarily large losses.
Freedom and Discipline of a Trader
Trading is basically without boundaries, the market is a completely free environment. You are free to buy or sell, enter or exit, at any point in time. There are basically no rules that require you to either open or close a trade at any given price or time. Despite the fact that one of the primary attractions of trading is the complete freedom to make our own decisions – to basically do whatever we want, whenever we want – the only way to consistently succeed in trading is to self-impose a set of rules to govern our trading and to practice strict discipline in following those rules.
What’s the problem? The problem is that we all instinctively love having the freedom to do whatever we want and hate having any rules and restrictions placed on us, even those of our own creation.
Self-discipline is critical to winning trading. Unfortunately, self-discipline is typically the hardest discipline to come by. Most of us do a better job of abiding by the rules imposed on us from outside ourselves, e.g., a “No Parking” sign, than we do of abiding by the rules we create for ourselves. Our attitude tends to be one more of, “Well, I made the rule, so I’m free to break it”. While that’s technically true, but it’s not an attitude that will serve you well in trading.
The Solution is Within Yourself
Losing traders mistakenly believe that mastering the market itself is the key to winning. They fail to face the reality that the market can’t be mastered. You can’t control the market.
What you can control is yourself and what you do in relation to the market’s actions. Winning traders realize this fact and put greater effort into mastering themselves and their trading actions than they put into trying to master market analysis. It’s not that market analysis isn’t useful. It’s just that the amount of available information available to consider, as well as the number of different technical or fundamental indicators, is virtually endless. Plus, what’s significant at one point in time may be utterly insignificant at another point in time.
It’s just all too much information to sort out and ultimately impossible to deal with perfectly. A trader’s time is better spent on mastering themselves and their trading skills.
Learn About “Turtle Trading”
If you want to learn more about what it takes to be a master trader, check out http://www.turtletrader.com/rules/ to learn about Turtle Trading rules and philosophy.
Summary of Being a Winning Trader
Trading is a difficult game to master. Very few people become highly successful at it. However, it is possible for virtually anyone to become a master trader as long as they are willing to make the necessary effort.
Attaining the proper psychological mindset for winning trading requires rigorous self-examination and self-discipline. You have to learn to cultivate good trading habits because they aren’t things that come naturally to most people. Making the necessary changes in yourself that will enable you to become a consistently profitable trader will more than likely affect how well you deal with life overall, not just how well you deal with trading.
Bottom line: Make the commitment to becoming a winning trader and that will enable you to become a winning trader. You can do it – but it’s up to you, not the market, to put money in your pocket.
Psychological Mindset Of Successful Traders
The stock market does not know or care about your feelings or thoughts. However, stock traders are constantly distorting market information with their pre-existing beliefs. Winning a trade depends on both your prowess with numbers as well as controlling your emotions.
In this post, I am going to teach you about the psychological mindset of successful traders and how you too can develop one.
Trading Psychology of Successful Traders
The term trading psychology refers to the state of mind that a trader is in while he or she is trading. If you are trading without the right trading mindset, the odds will be stacked up against you. Not only do you need to have sound technical analysis and a good fundamental analysis while trading, but you also ought to have the right mindset to boost your chances of success.
Having the right trading mindset helps you to be continually protected and improved throughout your entire trading career. Before you learn a trading strategy, the first thing you should do is to work on developing a positive mindset.
You need to eliminate emotions and biases that are in your mind in order to objectively know what the stock market is telling you. So how do you develop an open-minded conviction as a trader?
Get comfortable with taking risks
If you want to be a winning trader, you need to develop a high risk tolerance. You are going to lose money at some point in your trading life, which is why you should forget about searching for a trading system that offers a 70% strike rate.
Loss often generates powerful emotions like self-doubt, uncertainty, fear, and apprehension. However, winning traders understand that losing money is part of the game of trading, and the outcome of each trade is not known.
Always be ready to put your money on the line for potentially better results without letting fear of losing money put you on the sidelines. A winning trader is able to emotionally acknowledge that risk and reward go hand in hand in the world of trading.
Nonetheless, you also need to understand the importance of money management and take responsibility for managing your risks.
Don’t just place trades
A winning trader tends to take a break from trading when their results are poor. However, the trader doesn’t take a break from analyzing his/her results. You need to carefully figure out whether it is time to adopt another trading strategy or sit on the sidelines when your strategies fail to work.
So many losses are made because some traders just place trades without doing proper analysis. Don’t just guess at what to do. You need to have a sound reason for all the trades you place. That is what successful traders do!
Never stop learning
One of the most common things that winning traders do to improve their trading psychology is creating a great base of knowledge. Increasing your knowledge about how the world of trading works helps you make better decisions, both on the short and long-term. Getting to know about how trading works can help you react in a calm manner to the many curveballs that will cross your way in the course of trading.
Think of it this way: You would never take on a massive plumbing repair without learning about the potential things that could go wrong and what is involved with the job. You would have to do some research to prepare yourself for all possible outcomes. Similarly, winning traders educate themselves in order to make more informed decisions and minimize risks.
One way of educating yourself is by sticking with professions who understand how markets work. The skills and strategies that you are going to learn from them can help a great deal.
Knowledgeable traders also understand that importance of adjusting to changing market conditions. In short, they change their view on probable future movements in prices without dilly-dallying when markets indicate that they need to so.
An improved trading psychology can have mind-blowing results on your trading career by helping you minimize impulsive actions and errors in judgment. Considering how you react when placing trades can help you get to know the triggers that prompt you to make poor decisions.
Once you become mindful of your emotional reactions and personal tendencies in trades, you will be able to identify shortcomings that often hold you back. You can then work on eradicating those emotionally reactive responses while trading, and develop a sturdier sense of steadiness.
Welcome to the presentation. My name is Tim Racette and it’s my pleasure to be speaking with you.
In being here at the expo this late in the day, I know you are truly dedicated to becoming better traders. In the next 60-minutes you will learn the principles that make up a winning traders mindset and I promise you will take away some valuable techniques for improving your own trading.
As Yogi Berra once said, “Baseball is 90 percent mental. The other half is physical.”
I believe trading is 90% mental; the other half is execution. There’s no doubt execution is incredibly important, but without the proper mindset, a trader lacks a foundation to build upon.
For the past 10 years I have studied some of the greatest winners of our time, ranging from traders to athletes to business leaders. What makes them great? How did they come to be winners? I’ve documented my findings and condensed this knowledge into today’s presentation.
The goal of this talk is to give you a specific action plan to help you develop into winning traders. I began with the title “10 Steps to Developing a Winning Trader’s Mindset,” but as time went on I realized what I had put together are really 10 principles. I’ll provide many examples from winning traders and conclude with a list of action steps in hopes that one day you may join the top ranks of the trading elite.
I’m a full-time stock and futures trader. I began my career in 2006 and went full time in the fall of 2009. I was born and raised in the Chicago-land area.
I currently reside in Madison, WI and spend my winters in Scottsdale, AZ. It was in Arizona that I discovered my other passion, mountain biking. As some of you know, I competitively race mountain bikes and spend my time away from the computer riding and training for races.
Trading itself has opened a world of opportunity for me. It’s given me the ability to live my life according to my own terms and travel quite a bit. If you ever find yourself down in Costa Rica, I highly recommend visiting the little town of Santa Teresa on the Pacific Coast.
While much of my trading knowledge has been gained from experience, I learned my most valuable principles from a couple very successful traders back home in Chicago. These lessons came from the floor of the CBOT and a few individual screen traders with 30+ years of experience. Needles to say I’ve had some fantastic mentors along the way which helped accelerate my learning curve.
You can read more about me, my trading, and my travels at my blog, EminiMind.com.
My presentation today is comprised of 10 slides, each covers 1 of the 10 principles that I believe make up a winning trader’s mindset. I’ll be referencing quotes and ideas from a number of great traders as we go.
You’ll recognize this quote from the opening slide.
“Winning is not a sometime thing, it’s an all time thing. Winning is habit. Unfortunately, so is losing.”
Having missed more than 9,000 shots in his career, lost almost 300 games, and on 26 occasions was entrusted to take the game winning shot and missed, Michael Jordan says,
“I have failed over and over and over again in my life. And that is why I succeed.”
How did legends such as Michael Jordan become to be such great winners? It starts with commitment. Committing to do “whatever it takes,” (under ethical and moral standards I might add). All great success begins with a commitment to yourself. Go out and give 110% because if something is worth doing, it’s worth doing well.
In trading, commitment begins with our time. In being here today you’ve shown the first step in that level of dedication. After commitment we build confidence, confidence in ourselves and our trading system. This confidence leads to the development of consistency, and once we understand how to adapt to ever changing market conditions we begin to produce consistent winning trades over time.
Let’s delve into the specific principles, which help build confidence and consistency in trading.
1. Flexibility (George Soros)
Hold no attachment to trades
Colm O’Shea a trader at George Soros’ hedge fund recalls that Soros had the least regret of anyone he’s ever met. He has no emotional attachment to an idea. When a trade is wrong he will just cut it, move on and do something else.
“I remember”, he says, “one time he had this huge Forex position. He made something like $250 million in one day. He was quoted in the financial press talking about the position. It sounded like a major strategic view he had. Then the market went the other way, and the position just disappeared. It was gone. He didn’t like the price action, so he got out. He doesn’t let his structural views on how he believes the market will play out get in the way of his trading.”
Change opinions on a dime
When people ask me for my opinion about the markets I always tell them, “what I think the market should do today may not be the same view I hold tomorrow.” As traders, it’s not our job to be right; it’s our job to make money.
A quote from O’Shea, “the most important change in my trading career occurred when I learned to divorce my ego from the trade. Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself.”
Focus on the here and now
Quick decisive decision making is crucial. We base our decisions on the information in front of us at the time of the trade.
You have to stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you NOW. Forget what you thought it was telling you five minutes ago. Remember the objective is not to prove you’re right, but to hear the cash register ring.
Intuition is gained from experience
Whether you consider yourself a discretionary trader or mechanical trader there’s a level of intuition and feel that develops from observations and experience.
In addition to live trading and reviewing charts, the quickest way I’ve found for developing a sound trading intuition is to keep a log of market behavior.
Write down what is happening in the market. Then write down what you think will or should happen as a result. Once the outcome is revealed, compare your initial hypothesis. This is a great way to build a solid macro understanding and strong intuition.
2. The Importance of Implementation (Colm O’Shea)
Right strategy for the idea
With so many markets and instruments out there to trade there are many ways to express your ideas. It begins with an observation or hypothesis. Sometimes buying the underlying is the best trade. Other times, a derivative or currency makes for a better play.
When looking to express an idea in the markets, seek out the trade with the least risk, greatest reward potential.
Draw a line in the sand
Know where you are to be proven wrong before even entering a trade. Start by deciding where the market would have to go, that is at what level your idea would be invalidated. This is where you place your stop. Colm O’Shea stressed this idea in his trading.
Even though I place my trades manually, I try to be as mechanical as possible. This means, if I see a setup that meets my criteria, I take it. The mechanics of trading should not be left up to the judgment of the trader. To be a winner you have to be able to toe the line and pull the trigger.
Embrace uncertainty and risk
I accept that a trade will be a loser even before I enter the position. That is, I’m accepting the worse possible scenario and I’m okay with it. This keeps me focused and objective during the entire trading process.
3. Belief is in the Numbers (Richard Dennis)
Think like a “Turtle”
The turtle trader experiment resulted from a dispute between commodity speculator Richard Dennis and long time friend Bill Eckhardt over the idea of whether great traders were born or made. Dennis believed that he could teach people to become great traders. Eckhardt thought that genetics and aptitude were the determining factors.
In order to settle the matter, Dennis suggested they recruit and train some traders, giving them actual accounts to trade and see which one of them were correct.
The most profitable trader of the group, Curtis Faith found that the rules instructed by Dennis were easy to follow because they were not only very precise, but provided answers for each of the decisions they were to make while trading. This made it easier to trade consistently because there was a set of rules which defined exactly what should be done.
Ignore individual trade outcomes
The best way to gauge our trading performance is not to look at the result from our last 1 or 2 trades; it’s to look collectively at a group of say our last 20 trades. In this way, the outcome of each individual trade is masked. This also helps dilute any “recency bias” that we may encounter and prevents past trades from influencing future decisions.
Calculate your expectancy
Expectancy is simply you projected return over a longer period of time. Expressed (Avg $ W x Win %) – (Avg $ L x Loss %) – commission per trade.
Dennis says, “If you know that your system makes money over the long run, it is easier to take the signals and trade according to the system during periods of losses. If you are relying on your own judgment during trading, you may find that you are fearful just when you should be bold and courageous just when you should be cautious.”
4. Accept Mistakes (Ray Dalio)
Mistakes lead to improvement
Check your ego at the door and accept that you will be wrong. Mistakes provide the path to improvement and ultimate success. Each mistake offers an opportunity to learn from the error and to modify one’s approach based on this new information.
Whenever you make a significant mistake in trading, write it down, both to reinforce the lesson and to serve as a future reminder. Then change your trading process based on this new experience. In this way, mistakes can become the essential ingredient for continual improvement as a trader (or any endeavor for that matter).
Be bold, embrace disagreement
Ray Dalio, founder and trader of the largest hedge fund in the world Bridgewater, employs a culture encouraging independent thinking and innovation. Dalio believes there must be thoughtful disagreement and non-ego impaired exploration of mistakes and weaknesses to achieve goals.
Imagine how much better decision making would be if people who disagree were more open to trying to get at the truth through thoughtful discourse. It is a process that produces discovery.
Collaborate on ideas
Something you may not know about me is that I studied architectural design in college. One of the things I loved about design studio was the ability for collaboration. When an idea first pops into your head it seems fantastic, but as you begin to discuss your idea with others, questions arise that you may not have thought about at first. Thinking through all these facets leads to the development of a structurally sound idea.
Seek out opposing views
The better we understand the opposition, the better we can understand who is on the other side of our trades and how they might react.
The great thing about being a trader is that you can always do a much better job, no matter how successful you are. Most people are busy trying to cover up their mistakes. As a trader, you are forced to confront your mistakes because the numbers don’t lie.
5. Find what works for YOU
Do as others do NOT
In order to achieve greatness we must get uncomfortable. As a trader, you can’t be afraid of going against the grain.
If you do the same as others do, you can expect to be average. Going against the grain is tough. There can be a lot of social pressures and questioning from family and friends. In order to live your life the way YOU want, you need to put yourself in opportunistic situations. Surround yourself with the people you want to be like who share your same moral beliefs.
Think about the opposite
Look at things from all angles and think about the opposite action. When a lawyer prepares a case they will often prepare the opposing arguments first. In this way they know what to expect and have all their bases covered. In trading, think about who is on the other side of your trades and if you were that person, how you would react.
Just because everyone is buying gold, doesn’t mean you should too. The media and the talking heads are often on the wrong side of the trade.
Learn by doing
There’s no substitute for experience. Go out and try something. If it doesn’t work for you, learn from it and move on.
Isolate yourself from negativity
Surround yourself with people who have a positive impact on your life. Learn from those who’ve come before you, taking bits and pieces, making them your own.
Get uncomfortable, don’t be afraid to be different!
6. Over Prepare (Ed Seykota)
Follow your passion
Winners don’t just work harder than everybody else. At some point they fall in love with their craft to the point where they want to do little else, it becomes their life. Trader Ed Seykota says,
“I feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life.”
Luck favors the prepared mind
No one is perfect, especially in trading, but preparation pays. It’s essential to know more than the other players in the game. You’ve heard the saying the rich get richer, well the lucky also get luckier. To increase your luck, you must adequately prepare for the day ahead. The trader who shows up better prepared will be the one with the greatest chance of coming out ahead.
Think like a chess player
Always be thinking 2 steps ahead. Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be.
Never stop learning
The worst thing we can do is to stop learning. We get settled with our lives and become complacent, stuck in our comfort zone. In order to evolve as a consistently profitable trader you must constantly be on the lookout for opportunities. I find myself always thinking about the markets and new ways to implement my ideas. Life is an iterative learning process.
7. Visualize (Jesse Livermore)
Believe in yourself
Greatness starts from within. You must believe in yourself and your ability to become successful.
Attitude influences behavior
Jesse Livermore made and lost his fortune a number of times over. Donald Trump is another example. These individuals share the same mindset; they believe that they can build back up from scratch. Their mental attitude and belief in themselves gave them the confidence to achieve greatness.
One reason Tiger Woods was such a great golfer is not necessarily the hours spent at the range, but time spent off the course using a combination of visualization techniques and internal biofeedback.
As Tiger’s caddie Steve Williams describes it,
“instead of spending hours on the practice field right before a tournament, he pictures how he wants to swing the club, creating a mental image of himself that he is then able to relate to the movement of his body and transfer to his golf swing.”
Envision your ideal self
Before you fall asleep each night, take moment to envision your ideal self. Close your eyes for a moment…
What does your ideal self look like?
What are you wearing?
How do you carry yourself down the street?
What things surround you?
What people surround you?
When repeated and practiced with deep though these visualization exercises go a long way towards turning ourselves into the person and trader we want to be.
8. Evaluate Yourself Based on Your Goals (William Eckhardt)
Don’t compare yourself to others
This principle goes far beyond trading. There is absolutely no reason to compare your situation to that of others.
What is your unfair advantage?
Everyone has something that is unique to them and no one else. Trader Bill Eckhardt is quoted with saying if a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process.
Something like this happens in the market. There is a persistent tendency for equity to flow from the many to the few. In the long run, the majority loses. To win you have to act like the MINORITY. If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.
Draw your own conclusions
“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.” That’s a quote from Jesse Livermore.
Set personalized metrics
We each live in our own reality with our own beliefs. Winners compare themselves to their own goals, not to the achievements of others.
9. Establish a Routine (Martin “Buzzy” Schwartz)
Create a solid foundation
Dedication and discipline are the foundation of success, hands down. A consistent routine develops habits that transform into subconscious behaviors.
Champion futures trader Martin “Buzzy” Schwartz ran a lock tight schedule waking everyday at 6:45, asleep at 10:30.
For a period of time I used to run a split sleep schedule, sleeping for a few hours waking up to trade the Euro open and then returning to bed before the NYSE open. Over time it took its toll on the body, especially with racing mountain bikes. What it did teach me however, is the importance of adhering to a routine, day in and day out.
Focus on what you CAN control
You have more power over your trade outcomes than you might think. While no one can control the market itself, you can control your actions and reactions. You can control how well you prepare and plan for the given trading day, and most importantly you can control your risk exposure associated with a position.
Schedule meditation, walks, and exercise
I’m a big believer in having balance in life. Think time is incredibly powerful. When you’re in a rhythm you feel great. Taking walks, listening to podcasts, getting outside, exercising, playing sports, sitting quietly, meditating, these are all things that help bring a healthy balance to a person’s life and have a great impact on a person’s long-term success.
10. Be Humble (Paul Tudor Jones)
Always question yourself
As Paul Tudor Jones puts it, “don’t be a hero. Don’t have an ego. Always questions yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
Feeling invincible is a death trap
If you’re not careful the market will take from you in an instant that which you worked longest and hardest to obtain. When you’re experiencing a string of winners and feel like you are untouchable that’s precisely when you should be the most cautious.
Use positive self talk
Studies show positive self talk has a strong impact on your actions so it’s important to talk to yourself in a positive way. Responding positively to situations helps keep a clear head and reinforces a good attitude. As I said before it is our attitudes that influence our behavior.
I’m not alone when I say that it is better to give than to receive. I’ve had the privilege to learn from some exceptionally great traders who were doing their part to give back what they had learned. I’m a strong believer in giving back anyway I can.
Here’s an Action Plan for you to consider:
Commit (commit to doing what you love)
Be flexible (do not become attached to your trades)
Focus on execution (trade the right strategy for the idea)
Calculate your expectancy (the #s need to make sense)
Hold yourself accountable for your mistakes (this is the path to improvement)
Do what works for YOU (don’t be concerned with what others are doing, go against the grain)
Establish a routine (it’s always best to over prepare)
Determine your unfair advantage (we all have one, what’s yours?)
Visualize what you want, then make it happen!
Put some thought into these principles and incorporate them into as many aspects of your life as you can. Trading is a fantastic teacher of life’s greatest lessons. Allow the trading journey to shape you into the person you want to become.
Thank you so much for your time today. I wish you the best of luck in your trading!