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qxr1011
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Keep It to Yourself

Непрочитанное сообщение qxr1011 » 10 апр 2004, 00:49

In the movie "Broadcast News," Tom, the future star network anchor, asks Aaron, the under appreciated correspondent, "What do you do when your life exceeds your dreams?" Aaron retorts, "Keep it to yourself." This is a good piece of advice for winning traders. One of the issues that would-be traders often forget to consider is how their lives may change when their hard work pays off and they begin to trade profitably. In one of our studies at Innerworth, we found that relatively few of our subscribers expected to encounter adverse effects when they finally make huge trading profits. In other words, it doesn't seem as if a lot of our subscribers harbor a "fear of success." That said, it does seem, however, that many newly successful traders claim that success isn't what they had expected. There are many tales of how winning traders finally realized huge profits only to face unpleasant social consequences for their hard earned success. For example, once your family and friends see that you have a little extra money, they may be envious or jealous. They may resent you for having more money and resources than they do. There's also the common misconception that trading is "easy money" and that you don't really deserve the profits you've worked so hard to earn. At an extreme, winning traders may feel out of place with their new wealth or discouraged that their family and friends don't give them the respect or admiration they were expecting. Some successful traders may feel a strong urge to find new friends and new surroundings. Do you secretly believe that the more profits you make, the more difficult your life will be? If you do, this belief may lie in the back of your mind, powerfully influencing your motivation to trade. There's an easy way to neutralize this tendency, however. Just keep your success to yourself. There are many good reasons to do so.

Many traders achieve success, but it is often transitory. It's hard to maintain success over time. One of the main reasons for a lack of lasting success is extreme stress. Stress, and the social pressures behind it, should be minimized. Social pressure is a significant source of stress. For example, if you decide to increase your standard of living or brag about your success as a trader to build up your reputation in your social network, you'll feel a strong need to maintain social status and protect your reputation. These social dynamics are more powerful than traders realize. They shouldn't be under estimated. The best way to neutralize this influence is to just keep your success to yourself. Don't show off. Don't talk to your friends about trading, and certainly don't tell them how well you are doing. The more you stay humble and modest, and secretive to some extent, the more easy it will be to stay focused on trading. Remember, winning traders don't trade for the profits anyway. They find trading inherently rewarding. They trade for the enjoyment, for the pleasure it brings them. Paradoxically, when traders forget about the profits, they achieve high levels of performance. When they focus on the profits, however, their performance usually starts to falter. So in the end, there's no reason to make drastic changes to your lifestyle just because you are making wins. In the long run, it's better to keep your success to yourself, save your profits for a drawdown or other rainy days, and enjoy the process of trading. By doing so, you'll achieve lasting profitability.
The day will come !

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qxr1011
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Decision Making Styles

Непрочитанное сообщение qxr1011 » 20 апр 2004, 16:10

When it comes to trading decisions, everyone has their own style. Although styles change as one gains more experience, each trader has his or her own natural style. Some people are intuitive while others are more concrete and analytical. Many traders are risk averse, while others are impulsive and seek out risk. Each style has its advantages and limitations. It's useful to know which style suits you, and it's important to know how your inherent style may influence your trading decisions.

There are at least three basic decision making styles: Data oriented, Intuitive, and Impulsive. The data-oriented trader focuses on concrete evidence and is extremely risk averse. He or she tries to seek out as much supporting data for a trading decision as possible. The trader who prefers to do extensive backtesting of a trading idea exemplifies this decision making style. It's useful to incorporate elements of this style into your overall trading style regardless of your natural inclinations. It's vital to make sure that you have adequate information before executing a trade, and it's particularly important to trade a detailed trading plan in which risk is minimized and entry and exit strategies are clearly specified. But the data-oriented trader may take things a little too far. He or she may search for "perfect" knowledge that just doesn't exit in the trading world. Knowledge is always fallible and the markets only repeat themselves when they do. At some point, one must accept the fact that he or she is taking a chance and no amount of data analysis can change this fact.

The intuitive trader is the opposite of the data-oriented trader. He or she bases trading decisions on hunches and impressions rather than on clearly defined data. There's a difference between being an intuitive trader who develops this style over time and one who is naturally intuitive. Traders who are naturally intuitive discount data driven decisions. They aren't used to making detailed analyses of problems and situations, and thus, tend to take unnecessary chances without sufficient justification. The experienced intuitive trader, in stark contrast, bases decisions on data and specific market information. But, since he or she is a seasoned trader, one analyzes the data quickly and efficiently. It happens so quickly that it seems like it occurs intuitively, but it is actually based on solid information. Ideally, all traders should gain extensive experience to the point where sound decisions are made with an intuitive feel.

Finally, the last decision-making style is the impulsive trader. This is the most dangerous style. The impulsive trader allows his or her decisions to adversely influence trading decisions. Rather than looking at information logically and analytically, information is discounted completely. The impulsive trader seeks out risk and enjoys taking risky, exciting trades. Impulsive traders can often make huge profits one day and see large drawdowns the next. Many traders may have this style to some extent, and it's something to rein in. Don't let a need to seek out excitement get the better of you.
The day will come !

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The Natural Born Trader

Непрочитанное сообщение Phoenix » 22 апр 2004, 20:16

If pushed to do so, most trading experts can delineate the characteristics of the ideal trader: intuitive, yet also logical and objective; spontaneous, yet disciplined; genuinely confident and open to criticism. It's possible that some people are natural-born traders in that they organically possess these characteristics. Do you believe traders are born? Or do you think trading is something that most people can learn if enough time and effort is devoted to learning how to trade skillfully? Regardless of whether natural-born traders do exist, your opinion on this matter can greatly influence how you go about learning how to trade and how resilient you are to trading setbacks.
Psychologist Carol Dweck has conducted several seminal studies demonstrating that the assumptions we hold about a specific ability, such as trading skills, powerfully influence how we interpret and react to events. Some people view abilities as fixed entities whereas others view abilities as malleable. A person who believes that traders are born and not made is showing an entity view of trading ability. There is a significant consequence for holding such a belief. If one believes that one is a natural born trader, he or she sets high performance goals. Doing so is understandable. People who believe they have a natural born ability to trade try to take advantage of these talents. If you are virtuoso, you might as well use your skills and achieve high levels of performance. This thinking strategy works well if one actually can put on trade after winning trade and realize huge profits (such as in the bull market of the 1990s). One's expectations are confirmed, and it would take large losses before one gives up. Many traders in our Innerworth Master Interview series discussed how they were drawn to trading while realizing huge profits during a bull market. They seemed to be able to do no wrong and started to believe they had inherent trading abilities. But unfortunately, market conditions changed and they soon were unable to make consistent profits. When this happens, one's current losing performance doesn't match one's view of oneself as a "natural born trader." One feels disappointed and somewhat disillusioned, and may think, "I guess I don't have any special trading talents; I might as well just give up."

It's much more useful to view trading ability as malleable, as something that one can learn through repeated practice and effort. In other words, it's more adaptive to believe that traders are made not born. When one views trading as something that can be learned through practice and effort, setbacks are merely viewed as objective feedback, rather than as an evaluation of one's inherent ability to trade. People who view an ability as malleable rather than fixed are mastery-oriented. They aren't concerned with meeting high performance goals; they just focus on the process of developing their skills. No matter how severe the setbacks they encounter, they continue to persist. They believe they can eventually develop a high level of skill as long as they keep trying, focus on the process of learning the skill, and gain as much experience as possible.
Whether there are such people who are natural born traders is a matter of debate. In the end, however, such issues are best deliberated in chat rooms or barroom discussions. It's not useful to believe that traders are born. Holding such a belief is likely to do more harm than good. It's much more adaptive to believe that one can learn to trade if enough effort is devoted to the endeavor. By believing that you can master trading through practice and experience, you'll persist even when faced with severe setbacks. And eventually you'll develop the skills of a consistently profitable trader.
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The Big Win

Непрочитанное сообщение Phoenix » 22 апр 2004, 20:24

Ask seasoned traders about their biggest winning trades, and they will recount those few times where luck was in their favor and they unexpectedly made a big win. Although no story is the same, many of these trades had something to do with the masses responding to media news. For example, a trader may hear of a shortage of a specific commodity before the masses hear about it. A large profit is made from buying low before the major networks report the story, and selling high as the masses respond to the news. And there are those times where a trader is lucky enough to hold a position of a low-cost stock and make a huge profit when a television network financial analyst mistakenly reports the price as higher than it can ever be, and forecasts that the price will move even higher. By capitalizing on such news, traders can make huge profits. As fun and exciting as these stories are to hear, though, it's essential that you put them in proper perspective. In some ways, such stories are much like listening to how a friend bought a winning lottery ticket, or how a poor college student randomly put $10 in a slot machine in Las Vegas and made $45,000. Yes, it happens. But it isn't something you should count on. The most prudent way to make money trading is to work at it consistently, and through hard work and persistence, make steady profits.
Many novice traders dream of making "easy money." Perhaps that's one of the main reasons many are drawn to trading. Unfortunately, trading profitably isn't easy. Although many novice traders dream of turning $1,500 into thousands, it almost never happens. One would be better off taking the $1,500 and spending it on trading instruction and practice trades than on trying to build it up into a large pot of capital. Profitable trading requires that you carefully plan your trades in terms of entrance strategies, exit strategies, and risk control. It is also vital to have sufficient trading capital and to use trading strategies with a proven track record. These tactics aren't going to make you rich overnight, but they will help you make small steady profits over time. Some trades will be winners; many trades will be losers. But once you develop rock-solid trading skills, you'll make steady profits. And eventually, you'll see your profits grow exponentially. But none of this is going to happen if you continue to dream of making the big winning miracle trade.


It may be fun to daydream of how the markets will move in your favor and make you a millionaire from a single trade, but that's unlikely to happen. In addition, hoping for such a lucky event is bound to distract you from what you actually need to do to become a consistently profitable trader: You need to learn to trade systematically, objectively, and consciously. Only then will you make the profits you desire.
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Dynamics of Discipline

Непрочитанное сообщение Phoenix » 22 апр 2004, 20:29

The winning trader is the disciplined trader. Basically, that means outlining a very specific trading plan and following it. But people differ in terms of their ability to maintain extreme self-control and discipline. As you may have casually observed, some people are very disciplined while others are sloppy and undisciplined. Neil Simon's characters Felix Ungar and Oscar Madison illustrate the stark contrast between the disciplined and undisciplined. Felix was a neat freak who wanted everything in its place, while Oscar was sloppy and more impulsive. But there were times when Oscar was extremely disciplined. He was a well-known sports writer and he must have shown an acceptable amount of self-control in order to put out his column every day. Although he was a fictional character, Oscar shows how it's possible to be undisciplined in terms of personality traits, yet able to show discipline when completing a specific task, such as executing a trading plan. Let's consider a few ways that you can maintain self-control and discipline.
Keep in mind that you don't have to be disciplined all the time. You only need to be disciplined when you are putting on a trade. It sometimes helps to remember this fact. It eases some of the pressure to think that you only need to be focused when you make specific trades, rather than during all waking hours. A second strategy is to outline a very detailed trading plan. You should specify exactly what signals tell you to enter a trade, and what signals tell you to exit. Some traders make the mistake of leaving some of these factors unspecified, figuring they can just "wing it" when the time comes. But this approach presents problems for discipline. When you don't know what to do specifically, you will be sloppy and less likely to maintain self-control.


It's also important to make sure your energy level is high, yet your stress level is low. Psychological resources are required to maintain self-control and discipline. When you are tired and worn out, you have little energy left over to focus on managing your trade. To keep your peak performance edge, it's vital to make sure you are relaxed, rested, and energized. If you aren't, you'll tend to make careless mistakes.
Perhaps one of the best ways to maintain self-control is to feel confident as you execute and manage your trade. It's healthy to be skeptical and overly cautious while planning your trade, but once you have outlined your trading plan, you must execute it with unwavering confidence. You can't question it. You can't second-guess your decisions. You must execute your plan as if you are absolutely positive it will succeed. You can mull over its success later, after the trade is through. So don't minimize the importance of self-control and discipline. The more disciplined you can trade, the more profits you'll realize.
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Emotional Baggage: How to Unload It

Непрочитанное сообщение Phoenix » 26 апр 2004, 18:12

Bob's been trading for the past year. He's still a novice, but he has made hundreds of trades. He's going long on Intel today. He has a plan. He has managed his risk. This trade is just like any trade he has put on before. There's no reason to feel different about this trade, but for some reason, it is different. He's not sure he can make the trade today. He has been wondering why he continues to trade. He thinks, "Is this still fun? What's the point? What am I trying to accomplish in the big picture?" In this trade, right now, Bob is carrying around excess emotional baggage. He has taken an ordinary trade and made it symbolic of a bigger issue; it has a deeper meaning. Bob is contemplating what this trade means for him. Most traders advice taking the day off when one is feeling out of sorts. But in Bob's case, it may not work. Bob is questioning his reasons for trading. He isn't sure why he is doing it, and he is elevating the significance of his routine trading activities. He can try to put it out of his mind today, but next week it's likely to creep up again. In the back of his mind he knows he doesn't have a plan for the big picture. Many traders can achieve some short-term success; the challenge is maintaining enduring success over the long haul. Winning traders seek out new challenges. They further hone their skills and continue to enjoy the game. But Bob is ready to stagnate. He is almost ready to quit. He needs to find some answers, and fast. Do you see how trading fits in the big picture for your own life? If you don't, you may be heading for a downfall.
It's vital to know who you are, where you've been, and where you are going next. It may sound simple intellectually, but emotionally, it's difficult to have a clearly defined identity, to have integrated significant past experiences into that identity, and to know what you want to do in terms of the journey you're traveling on from now until the end of your life. If one doesn't know the answers to these fundamental questions, he or she is likely to let these unresolved issues interfere with his or her trading performance.


Finding answers to past and future psychological concerns isn't easy. It takes some amount of reflection, and the realization that some issues can never be fully resolved. So what can the typical trader do? When we've discussed this issue in past columns, many readers have asked us how they can get rid of past emotional baggage. A couple of trading coaches said they thought that few people could actually resolve the emotional baggage themselves. Indeed, there's only so much that can be accomplished by reading self-help articles on a website. If a person has deep-seated unresolved psychological issues, some form of professional help is warranted. But for many traders, the key to resolving emotional baggage is to practice self-awareness. Psychologist Carl Rogers believed that people's past conflicts tend to lie right below the surface of their awareness. If they merely looked hard enough, and let their minds think freely, they could identify psychological issues. Basically, one can contemplate what he or she wants to be and compare it to an honest look at who one really is. If there's a discrepancy, one feels tension and uneasiness. These feelings need to be resolved. Changes in one's goals or life plans must be addressed. For example, if a man believes that he should be a good husband and father, yet thinks that the time he devotes to trading interferes with these needs, he will feel uneasy and ambivalent about trading. Something has to change. He may not need to give up trading, but he does need to explore the issue, and devise a solution. Perhaps he can set up clearly defined times where he devotes quality time to his wife and children. The main point is that trying to push such issues out of awareness is just going to make things worse. Ongoing psychological conflicts must be brought into awareness and resolved. A brutally honest look at one's aspirations, limitations, and realistic possibilities can go a long way in terms of helping you toss out past emotional baggage. If you work at it hard enough, you'll be able to focus on your trading and cultivate the peak performance mindset of a winning trader.
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Impulse Control Strategies

Непрочитанное сообщение Phoenix » 03 май 2004, 21:36

The most serious malady facing many novice traders is a lack of discipline. Rather than sticking with a trading plan, many novices lose control. They impulsively abandon their plan and often pay the consequences with inconsistent profits, or usually, severe losses. Psychologists tend to refer to discipline as "impulse control." There are a series of classic research studies that illustrate how people can increase their ability to control impulses. As a trader, you may find these self-control strategies interesting.
In a seminal study on impulse control, Dr. Walter Mischel and colleagues studied children's ability to delay gratification. Typical of many children, the participants were a little hungry and they were offered pretzels for a snack. To get a pretzel, all they had to do was ring a bell and a lab assistant brought one over. But there was a catch: If they could wait long enough, and avoid ringing the bell, they could receive a bunch of pretzels, a delayed but more desirable reward. What's interesting about this study are the situational and psychological factors that related to how long a child could delay gratification. The first factor was the visibility of the reward, whether it was right in front of the child or hidden. As you might expect, it's hard to delay gratification if the pretzels are right in front of you. Children couldn't wait. When the pretzels were right in front of them, they would rather eat a single pretzel immediately than wait for a bowl of pretzels later. This finding is particularly apt to trading. When making a swing trade, for example, it may not be a good idea to constantly monitor the trade on your screen. Some traders say it's a lot like looking at a slot machine. It tempts you to play it, to take action when you really just need to wait for the exit signal. If you have a problem with impulse control, you may want to avoid looking at your screen when there is no pressing reason to monitor the trade. Or you may want to use the automatic settings on your trading platform to fight the urge to act on impulse. Whatever you do, it's useful to remember the natural human tendency to want to sell off a trade to avoid risk, rather than waiting patiently for the signals to line up and exit according to your trading plan.


People can also use thinking strategies to increase impulse control. For example, Dr. Mischel found that children could refrain from eating the pretzels by looking at them from a different perspective. If they thought of the pretzels as food, they wanted to eat them. But if they thought of the pretzels as looking a lot like a pile of logs, it was easier to hold off. Similarly, if they pretended there was a frame around the pretzel, and convinced themselves that they were merely looking at a picture of a pretzel, they could more easily delay gratification. This finding is also pertinent to trading. One of the main reasons novice traders abandon their trading plan is that they view the capital they invest in a trade as actual money, and the pleasing, nurturing images that go with it. They think of what they can buy with the money, and how pleasurable it would be to spend the money. Of course, there is actual money on the line, but it doesn't help to think of it that way. It's more useful to look at trading capital as abstractly as possible. Rather than actual money, it should be viewed as percentage points or just numbers that don't relate to anything tangible. If one is able to objectify capital, one can more easily maintain discipline. Just as children can avoid eating pretzels if they could just not see them as food, traders could avoid acting out of fear and greed if they could just not see trading capital as car payments, luxury items, or house payments. It may be an intellectual exercise, but it works. The more you can objectify the money you put on the line with each trade, the more you can act logically and unemotionally.
If impulse control is a problem for you, don't give up hope. There are strategies you can use to increase your ability to maintain discipline: avoid looking at your screen unnecessarily and objectify the trade as much as possible. (And always remember to follow a detailed trading plan; don't leave any aspect unspecified, or you'll be tempted to abandon your plan prematurely.) By controlling your impulses, you'll be able to trade more consistently and profitably, and achieve the long-term success of a winning trader.
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Situational Impulsivity

Непрочитанное сообщение Phoenix » 03 май 2004, 21:39

We are all familiar with the stereotype of the compulsive trader. Similar to compulsive gamblers, compulsive traders are looking for thrills. They like the sensation of putting on a big, reckless trade. They are drawn to the adrenalin rush, the feeling of risk and uncertainty. They ignore risk controls and detailed trading plans. They trade by the seat of their pants, and pay no mind to logical, objective trading decisions. Although impulsivity is often a character trait that develops as a result of early childhood experiences, it's possible that anyone can act impulsively occasionally. Almost anyone may act impulsively under the right situational conditions.
One definition of impulsivity is the ability to delay gratification. For example, in a series of experiments, participants were asked to decide between taking an immediate, small monetary reward (that is, $50 right now) and a larger reward given later (that is, $1000 in two months). Impulsive people tend to take the smaller, immediate reward. They have difficulty delaying gratification. They can't wait for the larger reward. They want what they can get as soon as possible. But even disciplined people can act impulsively when the conditions are right. For example, when people's psychological resources are taxed excessively, they act impulsively. In one study, participants were asked to remember a list of words, and hold it in memory, while making probability judgments. Their mental resources were pushed to the limit. Under these conditions, participants indicated that they would prefer an immediate, smaller reward to a delayed, larger reward. In other words, they acted impulsively. It's as if they had no extra psychological resources to devote to delaying gratification.


These studies illustrate that the ability to delay gratification depends on the total amount of psychological resources one has available. When people engage in too many tasks simultaneously, they have difficulty maintaining discipline and control. What are the implications for trading? It's vital to free up as many psychological resources as possible. If you don't have enough psychological energy, for example, you'll tend to act impulsively. Remember that you need psychological resources to maintain discipline. If you are tired, you'll have difficulty maintaining discipline. If you are overly stressed, you won't have enough psychological energy to devote to making logical trading decisions. Anything that distracts you and uses up your limited psychological resources will interfere with your ability to stay disciplined. So take steps to ensure that you have as many psychological resources available as possible. Get plenty of sleep. Make sure you are rested, relaxed, and ready for action. Make sure you eat properly and get plenty of exercise. You'll feel more energized and you'll have extra psychological resources to devote to controlling your impulses. By taking steps to increase your energy level, you will be able to maintain discipline and achieve consistent, profitable results.
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Going with the Flow

Непрочитанное сообщение Phoenix » 03 май 2004, 21:43

Jason has had a rough day. He has been putting on trade after trade with little success. "Why can't the market cooperate with me," he thinks. "I'm so angry. I want to get even." Jason's viewpoint is quite common among novice traders. He is personifying the market, getting angry at it as if it were a real person, and wanting to seek out revenge. It's understandable to feel anger and frustration when circumstances aren't going our way. We have a natural inclination to want to blame someone, and it's often easier on our psyche to blame another person. It makes us feel in control. We can put on our combat boots and get ready to fight. The only problem is that although the market reflects the actions of market participants, it is not useful to personify the market. The market isn't something we should fight against. It isn't a person. It is much more useful to take a more objective, detached, and analytical approach.
When you personify the market, and view it as if it were a person acting for or against you, you will naturally see your emotions move from warmth and security during wins to anger and animosity during periods of losses. Emotions are useful in interpersonal settings because they quickly and efficiently allow us to analyze a vast amount of information about people and situations without thinking. But when it comes to trading, over-emotionality isn't useful. It is vital to accurately gauge market action, analyze it objectively and make sound, rational decisions. It is hard to make such decisions when your emotions are running rampant.


Rather than fight with the markets, you need to get in sync with the markets; you need to go with the flow. Market action changes rapidly, almost too rapidly to accurately discern at times. The best way to stay in tune with the markets is to be able to focus intensely on the action. All your available energy should be focused on intuitively feeling how market prices move up and down. You can't achieve this psychological state, however, if you are overly emotional. First, over-emotionality will use up limited psychological resources. Second, you'll be reluctant to get in tune with the markets if you are angry at them.
It is much better to stay emotionally detached. Don't think of the market as a person. Instead, think of it as just a series of ticks on the screen, or wave patterns controlled by an abstract force, such as gravity. It's harder to get angry at an abstract force, and you'll be able to stay more objective and unemotional. The more you can think of what you are seeing as nothing more than a stream of unemotional information, the more easy it will be to act freely and intuitively, and getting in tune with the market usually produces optimal performance as a trader.
It's essential to do whatever you can to cultivate an objective, unemotional approach to trading. It's easier to cultivate this mindset when you aren't worried about what might happen should you lose. That's why it is best to trade money you can afford to lose, control your risk on any given trade, and trade a well detailed trading plan, so you will know that you can react decisively to market events. The more you can achieve an objective mindset, and flow with the markets, the more you will achieve and maintain profitability.
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qxr1011
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The Consistent Trader

Непрочитанное сообщение qxr1011 » 12 май 2004, 16:09

The winning trader is a consistent trader. A winning trader puts on trade after trade in a free flowing, carefree manner. Profits pile on with each trade. Trading consistently means approaching each trade in a logical, well-prepared, and decisive manner. Striving for consistency should be a main objective, especially for novice traders.

Trading profitably is a matter of probabilities. If you trade a sound trading method with a strong track record, success is merely a matter of odds: If you make enough trades, the odds should work in your favor, and you'll take home profits. It's like rolling dice or flipping a coin. For example, if a coin is flipped over and over again under identical conditions, it will tend to come up heads 50% of the time. But the key to getting heads 50% of the time is to repeat the flip of the coin "under identical conditions." When one views trading as analogous to flipping a coin, the theoretical probability of getting heads is the best-case scenario. However, finding "identical conditions" when trading the markets is difficult. Market conditions are hardly ever "identical," and the adept trader is always looking out for subtle changes. You can't control the markets. You must take what the markets have to offer. Since you can't count on the markets for consistency, you must search for it by looking inward. The first step in cultivating a consistent trading style is identifying sources of inconsistency. Remember the analogy of flipping a coin. You must flip the coin under identical conditions, time after time, to maximize profits. So how can you trade consistently time after time? One way is to limit your risk in a consistent manner. For example, only risk about 2% of your trading capital on each trade. Novice traders have a tendency to get a little excited when they have hit upon a winning streak, and increase the amount they risk on a trade to take advantage of the streak. This approach produces a jagged equity curve, however, and an emotional rollercoaster ride of extreme ups and downs. By keeping your risk constant, you can introduce consistency into your trading.

Another source of inconsistency is the market conditions under which a trade is executed. Although top-notch traders have mastered a variety of market conditions, it's wise for novice traders to stick with what they know, at least initially. Some traders, for example, know they are most profitable when trading in a bull market two hours after the open. This may not be a very challenging set of conditions in which to hone one's skills, but trading under these ideal conditions builds confidence. Your initial goal as a novice trader should be establishing consistency. Once this criterion is met, the novice can build skills in a variety of market conditions. By striving for consistency initially, you'll build up the skills to trade profitably over the long haul. The profits will not only be monetary, but psychological as well.
The day will come !

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Balanced Optimism

Непрочитанное сообщение Phoenix » 13 май 2004, 22:49

A reality of trading is that a trader must doggedly make trade after trade, yet may often face loss after loss before realizing a win. Trading requires persistence in the face of seemingly constant setbacks. It takes a rare person to be able to pick oneself up after a fall and be ready to face another potential setback with enthusiasm. Dr. Martin Seligman has studied how an optimistic mindset helps people persist in the face of setbacks. Optimists, for example, do better in school, win more elections, and succeed more at work than pessimists. He's studied several occupational groups from top notch winning athletes to traders on the floor of the exchange. But he claims that one of the most ruthless professions is that of an insurance agent. The common lore among insurance agents is that it's often the rule that an agent makes nine calls, and receives nine brush-offs, before making a sale. Selling insurance requires optimism. But even relatively enthusiastic insurance agents fail in the end. For example, Met Life hires 5,000 enthusiastic, new agents a year. Half of these quit in the first year and 80% are gone by the end of four years. Dr. Seligman conducted studies to determine the extent to which optimism is correlated with persistence. Findings from these studies illustrate how you as a trader can learn to persist when faced with constant setbacks.
Optimism is related to explanatory style; that is, the reasons people tell themselves for why they failed. Pessimistic people explain their failures by attributing them to global, internal, and stable causes. For example, they tell themselves personal statements such as "I'm no good" or "No one wants to buy insurance from me." These statements make the person feel pessimistic. They want to give up easily rather than persist. Dr. Seligman developed a measure of optimistic explanatory style. He administered the measure to salespersons at Met Life. Optimistic salespersons sold 37% more insurance than pessimists. Agents who scored in the top 10% on optimism sold 88% more insurance. Dr. Seligman also compared his measure of explanatory style to standard industry measures used for hiring salespersons. He found that his measure of explanatory style was a much better predictor of sales.


These findings suggest that if you want to succeed as a trader, you must cultivate an optimistic thinking style. You'll face a lot more losers than winners as a trader, and it will take persistence in the face of the defeat to keep going until you hit upon a series of winning trades. That said, Dr. Seligman warns that optimism may not always be a virtue. Although optimism often leads to superior performance, there may be sound reasons to be pessimistic occasionally. Pessimists, for example, may be sadder, but they are also wiser. Studies have shown that pessimists more accurately judge how much control they have over situational circumstances. Pessimists are more realistic in their judgments and thus, it may be beneficial to think pessimistically occasionally. Optimism may make you feel good, but pessimism helps you evaluate the feasibility of your plans, goals, or ideas. Traders, especially novices, are notoriously overly confident. It's vital for survival to cultivate a balanced sense of optimism. Optimism helps you persist in the face of a setback, but a healthy sense of skepticism will keep you based in reality. It's useful to question your trading plan before you implement it, for example. Ask yourself, "Have I accounted for every possible adverse event that may go against my plan? Have I managed my risk appropriately?" Asking such questions and making sure you have the answers will help you survive in the long run. So use optimism wisely. It's essential to be optimistic as a trader. It will keep you going in a tough game like trading. But also be skeptical. Don't put blind faith in every trading idea that crosses your mind. Think it through. A balanced sense of optimism will ensure your survival and help you achieve the profits you seek in the long run.
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Discovering Your Inner-worth

Непрочитанное сообщение Phoenix » 13 май 2004, 22:56

John and Jay are both novice traders, but their approach to trading is markedly different. John is drawn to trading for the profits. He fantasizes about achieving great wealth, and imagines that when he amasses the riches he desires, he'll finally receive the respect and recognition from his family and friends that he's wanted his whole life. He doesn't dispassionately think that it would be pleasant, but unnecessary, to achieve wealth and respectability; he needs it. He thinks, "If I can only make it as a trader, I can show everyone that I deserve their respect." In stark contrast, Jay doesn't care what anyone thinks of him. He focuses all his attention on building up his trading skills. He thinks it would be nice to make consistent profits, but he doesn't feel that he absolutely must obtain great wealth. He enjoys trading for its own sake. It's fun. He would trade for minimum wage if he needed to. He doesn't want to do anything else. He feels confident that if he applies himself, and tirelessly works to succeed, he will eventually become a profitable trader. But until then, he enjoys what he's doing and finds it fulfilling. John and Jay have very different approaches to trading. John is looking for external validation. He cares what others think of him. Jay, in contrast, looks inward for validation. The only opinion that matters to Jay is his own. Jay has a strong sense of inner-worth, and because he lets his own motives and values guide him, he is likely to reach his goal of become a winning trader.
Winning traders don't let their net worth define their self worth. They have rock solid self-confidence. Through a set of critical life experiences they've learned to trust their instincts and let their personal values guide them. They have a clear sense of inner, rather than external, worth. Our website is called "Innerworth" because we know that the single most critical characteristic of winning traders is that they look inward for guidance, rather than outward to the external world for validation. If you want to be a winning trader, you must cultivate a peak performance mindset, and you can't do that if you're concerned with what others think of you, or if you're trying to consciously or unconsciously please anyone but yourself. It may seem ironic, but the traders who end up as winners aren't concerned with wealth, glory, fame, or seeking the respect of others. It's not about the money in the end. In the final analysis, profitable trading is about developing a set of skills that allow the trader to move into a higher level of existence, an experience that is fulfilling in and of it self. An experience that is both engaging and challenging. An experience where one tries to reach greater levels of accomplishment, but at the same time, always looks inward to his or her own personal standards. It's only about the trader's personal viewpoint, the markets, and nothing else.


Do you look inward for your own validation, or are you concerned with impressing others, and proving to them that you are superior? When you allow other people to define what you should be doing, you pay a big price: You allow your personal worth, your self-esteem, to be defined by someone else, the external world. And when that happens, you'll eventually burn out as a trader and join the legions of others who have been drawn to trading but fail in the long run. So always remember, all that matters is what you think. Do what you want to do. If you can look inward for validation, you'll be a member of the elite group who are winning traders.
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qxr1011
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The Wild and Carefree Trader

Непрочитанное сообщение qxr1011 » 17 май 2004, 15:43

Perhaps one of the most frequent questions people ask us at Innerworth is, what is a winning trader really like? Every day in our newsletter, we've shared with you the answers you expect to hear. Winning traders plan their trades. They leave no aspect of their trading plan unspecified. They manage their risk and they keep their emotions under control. The truth is that some winning traders are highly self-controlled and disciplined, but some aren't. We will stick to what we usually say, however. If you are a novice trader who is still learning how to trade, it is wise to plan your trades and trade your plan. But for a moment, we'll let you in on a little secret, and tell you about a couple of verified winning traders, the kind of traders who make at least a 100% profit a year. We don't suggest you use them as a model, but for your own knowledge, you just might find our discovery intriguing.

First, there isn't just one way to trade and there isn't just one ideal trader personality. In the end, it's a matter of gaining awareness of your unique personality and developing a trading style that matches it. Some winning traders are highly disciplined; they backtest extensively and are self-controlled in both their personal and professional lives. But there are other winning traders who are wild and carefree. They don't take life too seriously and they don't take themselves too seriously either. Sure, they are proud of what they do; they work hard and they truly enjoy trading, but they put things in the proper perspective. They know that trading is fun and rewarding in its own right, and they are out to have a good time. In their personal lives, they make sure that they have a good time as well. They are uninhibited and aren't afraid to take risks. They work hard, but they also play hard. They play so hard that if you were to see how wild they were, you couldn't believe that the next day that they were going to make trade after successful trade. A carefree attitude, and a strong passion for life, is needed to be a successful trader. Trading is challenging. It isn't easy money as many novice traders hope. It takes a knack to identify winning strategies and an intuitive ability to read the markets accurately. Few people have such natural ability, and it seems that those who do are the kind of people who know how to find a balance between the hard work it takes to trade day in and day out and a zest for life that keeps them wanting to seek out adventure and find personal meaning in what they do. That often means the kind of person who enjoys taking a risk and gets a little thrill out of playing the game of trading. It takes a creative person who doesn't care what people think of them, and in many ways, may come across as a social deviant who has trouble conforming to social standards. They look inwardly and do what they want to do, regardless of the social consequences.

The stereotype of a winning trader is a Spock-like rational decision maker who objectively analyzes information and steadfastly follows a trading plan. Not all traders fit the mold, however. Some are wild and carefree to the point of being deviant rule breakers. Perhaps, the mutual fund types of investors wouldn't want to put their money in the hands of such seemingly reckless traders, but if they make over 100% profit a year, isn't it worth the risk? It all depends. But we thought that you'd like to hear a little gossip about a few actual winning traders. You may still not believe us, but we hope our illustration has been thought provoking.
The day will come !

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Take a Break, Relax, and Rejuvenate

Непрочитанное сообщение Phoenix » 21 май 2004, 01:21

The mind is similar to a muscle. When you go on a long run, for example, you soon run out of energy. You can't go any farther. Your muscles begin to ache and you need to take a rest and recuperate before you start moving again. It's the same when it comes to working as a trader. It's vital that you consider that the mind has limited energy, and that after putting in a hard and tedious effort, you must take a rest and rejuvenate, so you can face the market action with a renewed sense of vigor.
Trading often comes down to performing in a peak performance state at a few key moments. To take advantage of these key moments, you must be relaxed. If you have strained your mental "muscles," you'll have difficulty taking advantage of these opportunities. Your mind will be elsewhere or you'll be too tired to act decisively. When you're tired, it's hard to gauge market action accurately. You'll be prone to decision-making biases and you may act impulsively because you are too tired to patiently wait for the proper signals to enter or exit a trade. By staying relaxed yet full of energy, you'll be able to trade in a logical and consistent manner.


You don't need to perform at a peak performance state every minute of your life. Many people can work for only a limited number of hours a day, and if we try to work in marathon stretches, it eventually catches up with us, and is shown by our weak performance. Just as a runner must rest when his or her muscles ache, it's vital to take breaks after a marathon work session. In the end, it's a matter of personally identifying how many hours you can perform at your peak performance state, and developing a specific plan to make sure that you have enough rest and relaxation to work in this optimal state when it is necessary. If you work too many hours without taking a rest, you'll expend all available energy. It's vital that you take a rest and rejuvenate.
Part of trading profitably is the acknowledgment of your limitations and putting together sensible ways to work around them. Don't set yourself up for failure by trying to live up to expectations that you personally just can't achieve (such as putting in 60 hours a week or going without enough sleep). It is necessary to work only for a reasonable number of hours, and to take frequent breaks to regain your mental composure, and be ready to tackle the new challenges the market throws at you. If you know how to manage your energy so that it is always at an optimal level, you'll be able to trade profitably and consistently.
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qxr1011
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The Trader's Worst Enemy

Непрочитанное сообщение qxr1011 » 03 июн 2004, 17:29

If you're not careful, you can be your own worst enemy. There are many different ways to sabotage your efforts as a trader. Some of them are at the forefront of your mind, such as not planning your trade or not trading your plan, while others are deep seated; they lurk at the back of your mind and work behind the scenes. It's wise to review the possibilities occasionally and make sure that you are not unwittingly sabotaging your own efforts to trade profitably and consistently.

Many traders are conscious of how they ruin their own trading efforts. The common way is to trade by the seat of one's pants. Rather than clearly specify a trading plan and following it, novice traders often make up their plan as they go along. What usually happens, unfortunately, is that one doesn't have a clear idea of when to enter, exit, or what to do when market conditions don't meet their expectations. Without at least a general idea of what to do, one is likely to panic at key moments of trading and act impulsively. It is common to hear a novice trader say, "I don't know what it is, but I can't stick with my trading plan." The usual explanation, however, is that the trader has not actually planned the trade; one's "trading plan" is merely a vague, undefined idea of what to do, rather than a clearly specified plan that can be easily followed. Clearly specifying a trading plan that provides a clear roadmap is the best weapon against self-destruction.

Traders also sabotage themselves by failing to control risk adequately. They may trade undercapitalized accounts, for example, or they may carelessly risk substantial amounts of capital on a single trade. This is likely to produce a significant blow to one's account balance should the trade be a loser. Whether the outcome is favorable is not the only relevant issue, however. Merely knowing that one is taking an enormous risk carries a toll psychologically. The added stress usually takes the form of extreme impulsivity. The best antidote to this problem is to carefully manage risk and lessen the potential negative impact of a losing trade. If you truly believe that you have little to lose on a single trade, you'll feel more at ease, and you'll be less likely to crack under the strain.

Our motives can also lie below our awareness. Trading can be very stressful. The outcomes can be quite important to one's ego. If you are trying to support a family with your profits, for example, it's hard to avoid letting this fact influence your thinking. Similarly, if you know you are working against the odds, it is hard to maintain an optimistic attitude. One is likely to just want to give up, stop trading, and take a long rest. It's hard to face such possibilities, and many traders avoid doing so. Instead, they press on, trying to trade in the face of adversity. One is usually confused, distraught and secretly wanting to make a mistake. If the solution to the problem isn't obvious, one may secretly wish to shout out for help out of desperation but can't do it easily. What may happen next is that the trader may address the problem indirectly and unconsciously by making a few trading mistakes so that he or she has an excuse to take a break from trading for a while. Although this strategy may work for some people, it has its limitations. One may take big hits to one's trading account or even worse; initial losses may be the precursor to a downward spiral, which may take years to recover from. It's better to identify such problems early, and take a break before the problem manifests itself as self-destructive behavior. If you seem confused and overly stressed, it could be a sign that you're close to the breaking point. It's vital at that point to take a long rest. Stand aside, spend some time alone and make sure that you have realistic long-term objectives and that you know how to achieve them. Once you know your long-term plan is realistic (fully capitalized, sound trading methods, etc.), you'll be able to trade decisively, calmly, and with self-confidence. So don't underestimate the many different ways it is possible to sabotage your efforts. Consider the possibilities and make sure they aren't working behind the scenes to thwart your best-laid plans to trade profitably and consistently.
The day will come !

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