Trader Mindset

Make sure you allocate funds to your marketing budget first. Don't skimp on the quality of your handouts. I'd create a nice 4-pager that folds over, in color, and have a bio about yourself, a summary of your trading style, and how what you do fits in with other managers. Unless you have 12 months of return data, I'd keep the performance in the Disclosure Document. Else, you'll be needing to update...

You need sales training to raise money. If you're afraid of rejection, you have to hire someone to do this for you. Money will not walk in the front door because you are licensed, have an office, or even a decent track record.  You need to ask for the business, ie, ask for the money. Clients will not decide unless you ask them.  In the beginning, you might not be able to hire anyone because of lac...

What do you do when you have all your capital committed, but you get a NEW trade signal before you get stopped for a loss or take a winner to free up some buyer power? This can happen when you have a smaller account. It can also happen if you have a larger account, but have a maximum amount of the account that you commit to margin.  If you have a smaller account, my recommendation is to sell the b...

When you trade with a system, you'll find that a few times a year the markets just stall right when you have a few positions on. Once this happens, it's important to remember that you have to play superior defense and protect your capital.  Professional traders sometimes use what are referred to as "time stops" to offset risk. Here's how to do it... If after you get long, for example, and the mark...

Backtesting is valuable for system design, as well as getting emotionally prepared for what's possible. It shows you what your gains and losses would have been had you followed your rules over the previous time period that you're testing.  There are more things to measure besides gains, losses, and drawdowns.  For all the trades that you make, you'll have commissions and fees that you can calculat...

The duration of your drawdown is "how long" it takes you to get back to the previous high. It's one thing to be down 10%, but how long will it take you to recover? If your losses are "in model" there's no reason to panic. You can get this information from backtesting your rules in a simulator. If you are trying to read charts, you're out of luck because your activity is based upon guesswork.  Whil...

If you want to be a professional trader, losses are part of the business. How you deal with losses, collectively called drawdowns, differentiate the amateurs from professional behavior. If you're down 20%, you need to do 25% to get back to even. This is important because you don't participate in the upside, ie, absolute performance, until you actually make the client money.  Your sharing in the pr...

Gains look like gains only to the extent that you keep your losses small.  Most traders lose and quit the business in frustration because they are underfunded, focused on short-term time frames, and trade to large for their capital space. You can gear your target RoR for a high number, like 100%, but you'll also have to endure a drawdown of 40-60%.  I'd focus on consistency in your approach and yo...

We make predictions all the time, so why not in your trading? Professional traders will backtest and then add new elements or parameters to their existing system(s).  Markets will evolve also, so you need to keep pace with evolving market environments. That means experimentation with something new.  You can also test your hunches within the discretionary percentage of your trading. For example, so...

Many of our students set goals based upon what they want the end result to be. Hard to have ownership of going from point A to point B if you don't know how to get there. Typical goals could be delineated accordingly: "I want to gain 15 lbs of muscle," "I want to lose 10 lbs of gut fat" or "I want to earn $X or X% this year." Instead, focus on what you have to do to get those results. For example,...

Frustration is the antithesis of confidence and euphoria. It can cripple you and distract you from your sense of persistence and determination. Unlike other teachers, I don't put a negative connotation on euphoria - as long as you don't abandon your trading rules, have at it.  You can avoid frustration in the first place by "not" having expectations of the outcomes of anything (or any trades).  Th...

Bitcoin Bandits Although most people speaking about Bitcoin or crypto currencies can't tell you what the significance of blockchain technology is, I've read stories about people quitting their jobs to become bitcoin traders because of what they perceive as the opportunity of a lifetime.  I remember the hubris during the dot.com boom very well. Regular Joes who had 9-5 type jobs were quitting their...

Stoicism can help you develop your overall philosophy and way of life around trading.  However, you can't philosophize your way into emotional intelligence. Trading is experiential and that is the only way you'll be able to learn how to conjugate your trading rules with your tolerance for risk and your level of respect for the markets.  A good site where you can learn a great deal about stoicism i...

Randomness is omnipresent. It's everywhere in your life and in your trading.  On any given trade, it's hard to determine if I had good or bad luck, if I have any skill, or if I'm in the right place at the right time. But once you have monthly returns from over several years of trading you can begin to run statistical analysis to get a better idea if you are good or lucky.  If nothing else, the con...

Please considering leaving even a 2-sentence review. It would help spread the word about the show.  You can eliminate the risks you can't see by removing names from your "watch list" or data that you've raked - the step before you run the data through your simulator. Carbon Monoxide of Trading Pro traders focus on "not losing" rather how much they can make. Of course we need to make money, but by...

"Mental stops" are not really stops, per se, but thoughts. It's a price where you are losing money, but aren't emotionally ready to take the loss, so you don't take it. Maybe you're not willing to take the loss because you've done a lot of work to research the trade and you feel it's not fair that you didn't get paid. Well get used to it. Neither the market nor anyone cares about what you put into...

Challenge your own way of thinking and let other traders help you uncover your blind spots. We all have them. I'm looking for people who think differently than I do so I can learn. I don't have a monopoly on ideas and I can be a bonehead at any given time. I rely on systematized trading rules and by gaining new insight from other people (who are mostly much more intelligent that I am) I am better...

It's impossible to imagine the value of the blockchain and crypto currencies, so I'm a long-term investor at this point. I think the value is in my process, not the instrument that I'm trading. Two, I'm not going to let any one security put my trading process in jeopardy. I've talked before about what I look at and how I rake the data to include instruments within my trading system. I'm not going...

Goals need to be realistic and attainable. You also need to consider the growth in competing areas of trading.  If you're making money, how do you know it's not random luck or a bull market?  I'd love it if everyone could turn $10k into $1,000,000 but the majority who try will lose all their marbles. Those that do will be lucky having been "in the right place at the right time."  Think of it's thi...

Whenever you have a margin call, offset the instrument that is generating the margin call. Don't meet a margin call with cash. CTAs with margin to equity ratios of 12-15% are considered aggressive in today's day and age.  Margin is set by the exchanges, but can be made more stringent by the IB or FCM. Margin levels are set to protect investors as well as the integrity of the exchange mechanism. Ma...

Favorite Yoga Pose - Ardha Chandrasana You have to practice your yoga the most when you're off the mat and not in class. That's the whole point. Like great trades, you have to take them home at night. Time Blocking Trading begins the night before. I run my systems at 6 pm Sunday night for Monday's trading. Call in the orders by phone. The orders are worked during the day and all I do is wait for t...

If the average person cannot explain to you what the blockchain is, how is the recent level of bitcoin a bubble?  I've seen this before in the commodity markets and although we're likely to see volatility that's uncommon in the markets, you can study the spread of viruses to get a better feel for this type of growth.  You can control the effect of volatility in your portfolio by decreasing your po...

Focus on process and stay out of the results. Performance will show up if you trade a system with positive expected values. By focusing on the process or your system, you become the casino. Each time your system is open for business [trading], you are making money. You should strongly consider investing in a backtesting simulator.  When I started trading, I put a high level of emotion of making mo...

The measurement for volatility takes into account the magnitude of the vol, not the direction. You obviously don't want to be in high vol, directionless markets, unless you are trading option butterflies or condors that can take advantage of those types of markets.  For equities, you can deploy what's called a "pairs trade." Anyone can gear their portfolio for 100% RoR, but you have to be willing...

By trading a complete trading system, you solidify places in your trading where your success can break down. Relying on system-generated trades, you get to focus on high expected value trades and eliminate the sub-optimal trades.  Benefits of a complete trading system: A good cure for daily set-ups is a systematized set of rules. It takes out all the uncertainty around your decision making process...