Breakthrough Concepts in Trading

Found somewhere on the web… words of experience well worth sharing
  1. I had to believe that my analysis was as good as anyone else's (including any well-regarded guru) and that I would be better off without others' opinions and advisory services. In my opinion, if you're relying on others' opinions about the market, you're not where you need to be.
  2. Other than a trading partner who I've known for 18 years and bounce ideas off of because we both know how each other thinks, I trade alone and have my own strategies that I've developed (although I have incorporated certain ideas from others that I've learned along the way).
  3. I realized that getting in and out of trades needs to be easy and simple. It's the research that goes into your methodology and its constant evaluation and improvement that involves the hard work.
  4. I learned to identify a trend and trade with the trend except for low-risk reversal plays.
  5. I had to decide whether I wanted to be an analyst or a trader. A trader is more interested in execution and results.
  6. I realized that sentiment and contrary opinion is only useful at extremes and when confirmed by other technical indicators. The crowd is often right during the trend but then completely misses the reversal as the crowd is generally wrong at that point.
  7. I learned to distinguish among trading time frames and figure out which one I wanted to trade in. For example, we may trade lower than the lows we saw in October 2002 but if you've been short over the past year, you've missed out on some good opportunities on the long side. As part of this, I developed methods to help identify the magnitude of the various time frames that impact my trading.
  8. I've learned to not "anchor" myself to a belief about the market and instead be flexible. I had to make sure I wasn't "filtering" the information the market was providing to support a viewpoint that I was holding onto.
  9. Ruth Roosevelt, a trading coach and psychologist, has said that successful trading boils down to (1) finding a strategy that works, (2) verifying that the strategy works, and (3) implementing the strategy as it was designed to be traded with consistency and discipline
trading breakthroughs
  1. Switched from trading Stocks to trading Futures.
  2. Realizing that trading Futures is gambling. Just using probabilities and entries where the trade makes sense. Define strategy and measure the set-up and exit according to plan.
  3. Understand that I will lose more often and lose less $ compared to my winning trades and $. It is possible to be profitable with a 30% win rate.
  4. The discovery of MAE (Maximum Adverse Excursion) and MFE (Maximum Favorable Excursion).
  5. This one most of all… Stop Caring.

The number one thing that's helped me is to make it a core belief that I absolutely, positively never know what's going to happen with a trade, since each result is a random event. This way I have no attatchment to a position and the result of each trade has no bearing on my ego or emotions.

I accept that trading is just a numbers game. Each trade is random, but over time you'll make money if you manage risk properly (assuming you have some kind of edge).

About 2 1/2 years ago… I was as scared as Bambi during hunting season, trading 1 lots in the ES. This fear really started to piss me off because I could feel how it was FILTERING my judgement. Every damn little tick against me had me trying to re-evaluate the whole reasoning for my trade entry...this went on for MONTHS. Then one morning just after the market open, thinking of all the fear I had from previous trade days, I said F@%& THIS!

I then entered a 10 lot ES position (I had never done more then 1 lot before), set my target at 1.5 pts and a stop at 1.5 pts. I said to myself, "are you scared now… you better be!", and I forced myself to sit on my hands and let the trade play out one way or the other… I literally stood back from my PC so I could not mess with the keyboard and I forced myself to overcome the fear. I did this all day and I made +2.75 pts for 10 ES for the day after commissions. I was so amazed at the end of the day, but I was totally mentally wiped out.

The PROCESS to manage my fears started that day, and I will always see that day as a major turning point in my trading. FEAR kills in trading, and you will NEVER become profitable without some way of removing your fears from your reasoned thoughts during trading activities. The best way I can describe what happens when FEAR rules your trading, is to think of your "reasoned thoughts" on one side of a long row of constantino wire. A pile of money is sitting on the other side of that constantino wire...FEAR is the constantino wire, and to get to the money your "reasoned thoughts" get ripped to shreds in their attempt. You must remove the FEAR (constantino wire) from your pathway to the MONEY, so that your "reasoned thoughts" have a chance.

BTW, there are two ways to remove your FEAR in trading. You can do the daily snip-snip and remove small sections of that constantino wire until one day you have a clear path. The other way (the method I prefer), is to slide a "Bangalore" under the constantino wire (FEAR) and blow the $hit out of it… your choice!

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