Trader Mindset

I don't believe there is anything that can be called "advanced trading." Most of the time that I see that expression, it's in marketing literature.  The best trading rules that make your money are easy to understand and simple to execute. Words like "advanced" are there to feed your ego.  My take is that if a trader has a strong sense of self, then finding the right trading methodology is easy (or...

There were times when I invited huge vol to my portfolio. It would run up 20% and then dive-bomb to -20%...that's intraweek! The portfolio comprised of outright directional trades including long/short futures, debit option trades, and long stocks.  What I found over time though, was that all this ebb and flow created an equity curve that looked like a heart monitor. I had to find a way to create p...

Frustrated about your trading? Maybe you're fine right where you are and you just have to accept "what is" and take life on life's terms.  I see this a lot in traders who always want to be somewhere else when they are doing fine right where they are. If this sounds like someone you know, listen in...

In this episode, Michael Martin discusses the evolution of your trading rules and system design.     

Although it takes a bit of time and effort, building a systematized set of trading rules is worth it in the long run. Instead of reading charts to come up with trading ideas subjectively, each evening you'll run your trading rules to generate orders which you'll enter the following morning.  In this episode, Michael Martin recounts how he developed his original model and how it evolved into what h...

Start with long-dated Call options and turn them into a Bull Call spread by selling the upper strike when the underlying reverses down. Cover that leg when the vol crashes.  You can create other structures too, such as condors or butterflies all based upon a core holding of long dated calls. 

If you put every dollar you have to work, you don't give yourself any room when Murphy's Law kicks in.  If you keep some dry powder, you'll be able to able to withstand some shocks to the system, as well as have capital to deploy when something falls into your lap.

Michael Martin interviews options trader and portfolio manager Hari Krishnan on the current environment and how traders can position themselves with options to capture greater profits.  Krishnan is the author of The 2nd Leg Down: Strategies for Profiting after a Market Sell-Off. 

Crypto investing is missing some key components that an investor's are used to in trading equities, options, and futures.  In this episode, Michael Martin discusses what's missing and why you should measure 8 times and cut once in the crypto space. 

With the likelihood of the fed tightening, investors who rely on certain instruments for income are in a tough spot. They can use options to transfer the risk and hold their current positions.

Key inflection points can happen with the fundamentals as well as the technicals. 

I've seen too many traders try to trade something on a hunch because they thought earnings were going to be a blowout. It's much more complicated than that.  There's the EPS, top-line growth, expenses, one-time charges, and forward-looking statements that get reported.  I've seen companies beat by $0.02 per share, but the forward-looking statements are bearish or cautious and the stock sells off. ...

If you believe the adage that "good trading is boring," then system trading is boring to the nth degree.  There are days, sometimes weeks, that I don't generate an ORDER, never mind a trade. Then there are times when there are so many orders, you have to write them all out first in a general ledger and number the tickets.  On the flip side, system trading is also very peaceful because I'm able to...

Focus on your process and stay out of the results - you're powerless over them.  All you can do is control the "controlables" - that is, your behavior.  

Seasonal commodity spreads can be very a reliable type of trade for your portfolio. While commodities are surely not for everyone, commodity spreads are considered "hedged" because the trader is simultaneously long and short the same commodity but in different expiration months.  A great source of information on spreads is at Moore Research Center. You can find them on the internet at www.mrci.com...

Some investors will test you by asking you questions that are deliberately off the mark. Stick to you message throughout even if they try to knock you off balance. You might take a meeting as a CTA and someone interviewing you might say something along the lines of "We're looking to allocate $10MM to a crypto-only portfolio in the next 5 days" when they know you're looking for assets.  It's ok to...

Every once in a while, the market will open below the point where you would have stopped out your long position or above where you would have covered your short position.  The best practice is to offset the position right away. Bad situations become worse.  Your first loss is your best loss.  Aggravating as it might be, this has not happened enough to me to convince me to stop holding positions ov...

You need a great deal of help when you're getting started. That doesn't mean you have to give away the house in order to get it. For one, I'll help you as much as I can with what I know that will save you time and money.  Second, pay as you go compensation plans have the most flexibility, as opposed to "you were here at the beginning, there are two of us, so you get 50%." That's a bad deal. When y...

Coach your clients about what they should expect. It will save you tons of time in work and having to explain things, and in the process make you look like a pro.

It's the differences that sell. Your potential clients are looking for more than just performance from you.  Spend some time taking notes on this episode if you're looking to get new assets from potential clients.

There are a ton of moving parts to your trading business. Pick your partners carefully - sometimes you can't unwind things as fast as you set them up.  Everyone flirts hard to get your business and the best deal you can strike is on the day you walk in the front door - it only gets worse after that - and that's why people change firms.  Measure 8 times and cut once. 

If volatility increases while you have an existing position on, you should probably cut the size of the trade down to reflect the new vol.   

Market vol is increasing due to higher level of discomfort and uncertainty, but don't go adding new indicators now. They're not as telling as you'd think. 

In this episode, Michael Martin discusses the various reasons you might consider to add short selling to your portfolio. You can short sell for real returns, or you can use it to cut the vol in your long-only strategy. 

If you enter a short sale late as can happen with breakouts to the downside, you might have it rally in your face before it becomes meaningfully profitable. In today's episode, Michael Martin discusses one way that you can enter the market short with a more improved entry - and potentially less risk.