Trader Mindset

Chartists are discretionary traders. This is true for those who have a CMT designation. How can you define your edge if you are looking at the same charts everyone else is looking at? Charts need to be interpreted. That's discretionary. You don't have the same emotional makeup that your chart-teaching coaches have. You don't have the same life experiences that they do. If you haven't backtested yo...

Measuring your activity is a good way to begin improving your trading. Time blocking is more quantitative. You can add qualitative aspect of it also by calculating the sum total of all your trading activity each day. By the end of the week, you'll be able to see what you're earning per hour. Marry this with your trading journal and you'll be able to determine what your time and efforts are worth f...

Your #1 job as a trader or speculator is to play superior defense. "Your first loss, is your best loss." Bad news becomes worse news, it rarely gets better. Offset the risk and then you can think with a clearer head. Don't lament over a losing position when your emotional and financial systems are shocked. Use you entry rules to get back in. That's the best you can do today. Your main goal is to p...

How you place value on your time or money determines your trading style. If you value your time more, you're likely not sitting in front of a wall of monitors all day. It's not worth your time. If you value your money more, you may be holding on too tight and thinking that you have more control over your risk by sitting at a monitor. You don't. That's the illusion of control. Stop orders will get...

Learning to pitch backers is a great skill to scale your trading business. Go from trading your account to several accounts to getting big allocations from Global Macro Hedge Funds. You are great at what you do and it's a unique skill to manage risk in the markets.  Business owners know what they know about their own business, but it's a rare skill to have to manage risk in the markets. Partner up...

When bad news hits the tape everything is correlated and it always works against you. You have to be careful that parts or segments of your portfolio don't become "one big trade." Study the correlation risk between instruments and modify your position sizes in your trading system and portfolio accordingly. Since instruments can behave similarly, you can inadvertently end up with the financial effe...

Consistency is the key to your success as a trader. You might have to learn to deal with the monotony in order to do so. New York Yankee Closer Mariano Rivera had one pitch that he relied on - a cut fastball - and although the opposing teams knew the pitch was coming, he was very effective at what he did. Rivera has the most Saves in the history of MLB. You can reduce your activity to what creates...

Inner Voice of Trading Audiobook - FREE You have to conjugate your feelings with what it is you think you know about trading. If they don't "feel" good, you won't take the signals and you'll spend a great deal of time second-guessing yourself. When you do that, it's emotional not intellectual. You are insecure or lack confidence in what you do. This book discusses how I failed my way to success so...

A purchase of 5,000 calls could be part of a synthetic options position. Why would it be bullish if the trader actually sold 500,000 shares short and used the calls to hedge? You can use Tony Saliba's option trading simulator to backtest your ideas. Become a student and get immediate access . Get Tony's most recent book for Free .

Don't cauterize your winners. Let them run. Position size your trades so that you can stay with them as long as possible. You can trade smaller if the vol is bothering you. Then backtest to see how the results would have played out. You can blend two or more systems to smooth out your trading curve. Adjust your positions by conjugating them with the ATR. Trade smaller with higher vol instruments a...

You enter and exit the market with stop orders. No need to be anal and use Limit orders - they make the order less liquid. Your goal is to let the market come to you. Trading otherwise is impulsive. Love yourself and stop looking at 10 minute bars. There's nothing material there. Trading is about making money, not the action. Buying and selling is not trading. Sometimes the best trades are ones yo...

Timing has as much to do with your success as does your trading process. Just because you have a system, does not mean that you will begin harvesting cash. The markets must be amenable and compatible with the rules that you are going to deploy. This is true if you are a credit option trader also. Selling option premier doest not mean you will keep it. Monte Carlo your system to see how it would ha...

You need to monitor your mental health, your amount of sleep, and your diet. Don't be afraid to take a mental health day to reset. This is a marathon, not a sprint.

You are responsible for all your success and failure. That type of integrity will need to manifest in how you handle money - your money and your client money - your investments and your trades. Until you backtest, you don't know your numbers. You need to know the expected value of a trade. You need to know what the probability is of your risk of ruin. You can't get this without a simulator or back...

The sum total of all your trading activity will accumulate in your track record. You can be successful and be making a great deal of money right now, but you still might not be a good fit for a particular allocator. I know a few traders with 20+ years who cannot get big allocations in today's environment b/c their results are too volatile. These traders have their own models and have been trading...

With options you can bet where you think something is going to go and also where it might not. You can backtest and simulate option strategies for outright directional trades as well as multiple option positions. This includes butterflies and condors. Love the VIX? Don't fall in love... You can create a vol trade around any instrument and perhaps better manage your risk. Tony Saliba's new book sho...

Trading Tribe The is a variance between what you think, what you know, and what you feel. Thoughts are creative, knowledge can relate to intelligence, and what you feel is emotional. Your emotions effect your judgement, your judgment effects your behavior, and your behavior effects where you end up in life. We didn't talk about stocks or commodities in the Incline Village Trading Tribe. We didn't...

If you subscribe to get NYSE data, you literally get everything that trades there. You're not likely going to need all those names running through your simulator. I removed all the nonsense that I knew I didn't want to be in. I called that process "raking the data." I removed the following from the data feed: -stocks below $20 per share -stocks above $100 per share -shares with less than 1 million...

Use equity pairs trades to stay in trades longer. If you are trying to increase your holding time but are scared, you can buy one long and sell another short against it. Ideas to Test Look at the strongest equity sectors from a relative strength standpoint. You'd buy the best name long and sell the worst short. You are looking for the long to outperform the short. This is a relative value trade. I...

Human beings are emotional beings. We all have emotional systems. If you are not connected to your emotions, you are likely to see them emerge when you are under the pressure of trading. A system is a set of rules that you can follow. After you get the system generated order, you have to enter the trade into your platform. That's where the fun starts. The Trading Tribe was set up by Ed Seykota to...

Discretionary chart reading is problematic as you can't backtest it and calculate the expected value of a trade. Only trade set ups (the combination of entries, exits, and position sizes) that have positive mathematical expectation. Get a simulator and backtest your trading ideas to find the expected value. The software I spoke about in an earlier episode will do the calculations for you. Expected...

The Average True Range (ATR) is a measurement that professional traders use to adjust their position sizes to normalize risk across all instruments. Normalizing risk allows you to look at Gold the same way you look at Sugar or AMZN for that matter - they are all the same percentage risk to your portfolio. Don't make the mistake of trading with "tiers" as no one optimizes their trading for the numb...

Don't write covered calls. Don't come up with a strategy on the fly. You need to know the math before you put the trades on. Backtesting does NOT predict the future, but it gives you an idea how the idea(s) would have worked out over the last 20 years. What is past is prologue, but at the same time history rarely repeats itself the same way. I encourage you to backtest b/c you can use the hypothet...

I don't trust stocks. Commodities are so much more reliable. David Stendahl - Signal Trading Group   Moore Research  

You have to backtest at the portfolio level - not one security at a time. Simple models are best. If you are testing on Trade Station, you can only test one idea and one security at a time. That might lead you to try 45 indicators or studies onto the name - that's your ego talking and you'll not likely have the same scenario show up the same way they more overlays you have. Again, simple is best....