Trader Mindset

What are your personal Mission Statement and Strategic Plan for your trading? If you have them, my guess is you have tasks and goals with specific dates.  Professional traders also have Emotional Plans to take into account the Relative Strength Indicator (RSI) of their feelings about what they do during the day. Our psychology and emotional makeup dictate how we act and behave during the day.  How...

We as humans love stories and our brains are great at putting pieces together and following logical sequences. That doesn't mean they are worthy of investment or for trading.  "Stories" as they relate to investment themes are a bad for of entertainment. When you marry this logic with fear or greed, you can put yourself in a very unenvious situation very quickly by losing a great deal of money quic...

The business of trading is going to AI and more algorithms in the hands of new traders and retail investors. If you are trying to figure out what headlines are going to drive prices, you're a better person than me. I would rely on computers to do that  Bill Dunn, a 100% purely systematic trader since the early 70s, has been incorporating all the data he can find and incorporates that into his mode...

If you want to be a professional trader, losses and drawdowns are part of the business. You have to learn to live with them and be at peace at the same time.  If you've backtested your rules as you should have, you can tell from the Monte Carlo simulated results where you are in your current drawdown with respect to where you are now. Backtesting can give you perspective on that is great detail. I...

Why do I practice yoga? It's impactful on my life and therefore it affects my trading. I had no idea what impact it would have on me when I began my practice. If you haven't started, I would give it a try.  One of my teachers Erich Schiffmann has called yoga a "moving meditation" - you lose yourself in the vinyasa flow and don't think about the choreography of the flow.  Become mindful of your bre...

Forget chart patterns and focus on price. Price is the only thing on Wall St. that will tell you truth.  Every chart pattern will be captured in the price and the values of price over time. You can hire a programmer to capture those price movements and design your own algorithm to enter and exit trades as well as the correct position size.  Chart patterns are supposedly created by plotting prices...

If any of our shows have resonated with you and you've gotten some valuable insight, please subscribe and leave a review. There's a lot more to come and we need your support. It feels good to have a winner when you are coming out of a drawdown. Trades, like hitting in baseball, will come in groups and segments. We are powerless over when and how those streaks will show up. All we can do is follow...

Don't cut your winners - add to them. They're hard enough to find in the first place. Even though they are trades, look to hold them for as long as possible.  Everyone sees the same moving averages, breakouts, and pullbacks. Everyone is looking at the same contracts and stocks. So how do you make the monster gains? You can be lucky, you can bet big, OR you can have a winning trade and decide to st...

Be open to learning new things and new ideas. They can lead you to garner insight on your trading. We make our money as traders in position sizing. I use position sizing to be analogous with risk management. I can always move my entries and exits to accommodate my trading size. It's the effect of volatility on my position that determines my open trade equity - which can be positive or negative. If...

Like your dog, your stop order is your best friend. Your stop orders stand sentry to your risk management program so learn to trust them. Broker-Dealers have great incentive to execute your orders when the price trades at or through the stop price so you can count on them to do a job for you. You don't want to be shooting from the hip and making decisions on the fly. Stop orders are the ultimate e...

Group your positions for better risk management.   You can have stops on each position. Put them on the groups and sectors as a whole as well.   For example, you might have a stop on your open gold trade limiting a decrease in your equity by 1% from the current market level. You might have the same for Tesla or Apple Inc.   Consider putting stop on all the metals in your portfolio so that collecti...

The one surefire way you can become the best you can be - they way you become great - is to focus on Rules not Patterns Head and shoulders patterns are not carved in stone. They look recognizable but must be interpreted. Like the Chinese language, there are more than a dozen dialects to this pattern.  Humans like us are bad at estimation and prediction. Read Phil Tetlock.  For every well-known "ch...

Trading is a lot like poker. You're trying to made smart decisions under great levels of uncertainty with imperfect information.  That has been the case since the beginning of speculation. In many bubbles and manias, there sometimes isn't any fundamental information that's worth knowing. In that regard, you have to trade against the crowd or herd.  Chart reading as a skill is lot like trying to un...

Sitting on your hands is sometimes best. Like the Red Sox should have done with John Farrell. Only trade when you have an edge. Casinos in Vegas never close because they "never" don't have the edge (in most games). Exiting Winners can be a hard trade. You don't want to get out too early, and you don't want to overstay your visit so to speak. In order to make the most money and have total sanity ar...

It's been a big week on behavior... You have to be willing to feel all your feelings around trading. What might be holding you back from great success could be your reluctance or lack of willingness to feel new feelings around techniques or trading styles that are different from what you're currently doing. Go back and listen to the "Rituals and Routine" episode. You might understand a trading tec...

Your Daily Process Can Be Killing Your Career or the prospects for your trading career. Professional traders bifurcate their trading day into preparation and tactical. After the close, pros get prepared for the next day in terms of research and running their models. During the following day, they spend their time focusing on trading tactics and managing risk. This type of focus on your behavior pr...

Routine or ritual? The things that you do might feel good, but not actually effect your P&L. That doesn't mean they are bad, but it's a good idea to keep a journal on your activities so that you can measure their efficacy. Why? Time and energy. Physical and emotional economics. Your trading career is summed up by your trading P&L but also what you need to experience in order to achieve those resul...

This pertains to trades that you are in, not trades that you are about to enter. Consistency and discipline will show up on your P&L. That's the numerical representation If you see a chart on Twitter or StockTwits, delete it. It's not helpful, insightful, nor entertaining. How do you handle your winners? Do you feel enough anxiety to want to take it out of your portfolio and get rid of it? Are you...

Practice Having Discipline Like for a baseball pitcher, it's about feel and consistency. That means discipline. You need to do the same thing over and over in order to be good an anything and that's especially true for trading. In trading, that means you have to start with good habits, trade positive expected value trades, and consistently replicate that process. If you have a smaller account, you...

The benefits of running a system are multi-fold. Once you trust your model, you can go deep... Once it's live and trading, you will learn about the markets, your model itself, and most importantly, yourself. You have to be there and be conscious of all that's around you. A good trader will not become too euphoric in good times (they are what they are) nor too despondent during the bad times (as lo...

We traders are people who have to live with uncertainty and make decisions with imperfect information. No way around it. We willingly decide to take this lifestyle on. Most people can't live with the uncertainly. John Q. Public and Public Pensions will pay you handsomely to make the decisions under the conditions that we must make and as long as you are consistent, they will continue to do so. You...

Setting Price Targets is fear-based behavior and you don't want to let fear dominate your trading. Setting price targets is about your fear, not greed. You set a price target so that you seem "reasonable" with yourself in terms of what you want from the trade. Why set your sights so low...? You need to start thinking bigger to allow your trades go to 20-1 in a reward to risk ratio. Let the market...

Price targets hurt your performance. Human beings are "bad" at prediction. There is not much science in guessing where a bull or bear run will end. Previous highs don't necessarily infer a price point where a rally will stall. Fundamentals matter. Institutions - the biggest traders in the crowd - place their wagers based upon fundamentals and their overall business. If you don't have a simulator,...

Take a mental health day whenever you feel you need it. No one is going to be there to give you permission to do so. Trading is a grind and a marathon. Doing the same thing day in and day out can become monotonous. You're not loser nor are you losing focus by taking care of yourself. If you're taking 3 day weekends ever few months/weeks, you might not feel the burn that others feel. I think it's v...

Preserve your sanity by implementing maximum levels of allowable losses per day, week, and month. When they are hit, you stop trading for that period of time. For example, if you set a daily loss on your equity of 1% and you lose that much on your overall positions, you go flat. If you have a 8% rule on your overall equity for the month, you quit for the month even if it's only the 21st of the mon...