Trader Mindset

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...

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...