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qxr1011
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The Anatomy of Persistence

Непрочитанное сообщение qxr1011 » 08 июн 2004, 19:05

Trading is a profession where one must not give up in the face of adversity. "You've got to go into the trading day expecting to lose," is what some seasoned traders warn. It's not the most optimistic outlook, is it? Trading in today's market isn't like trading in the steadily upward trending market of the late 1990s, where even the most inept online investor expected to strike it rich by just purchasing a few hundred shares of almost any company and using a buy-and-hold strategy. Today's market requires more skill and persistence. And to make the huge profits, you've got to take some risks. And taking risks means you must be ready to face some losses. Even when you control your risk on a given trade (which we strongly advise), you are bound to face loss after loss and watch your account balance diminish. As much as you objectify the loss, and see it as merely percentage points, there's still part of you that experiences the loss and feels the pain. At these times, it's hard to keep going; it's easy to fall victim to the "why bother" attitude. You may feel you might as well give up. It is at these times, though, when you must be the most persistent. You must believe that you can master the markets and recover from the slump. There's a right way to go about this and a wrong way to go about this, however. Persistence is a complex issue and an understanding of it will help you approach a setback with the proper mindset.

Motivational theorists argue that people's expectations of reward or punishment influence whether they will persist or give up. If you believe, for example, that there is no way you'll make a profit no matter how hard you try, you'll want to give up. On the other hand, if you believe that success is assured, you will not only persist, you'll enthusiastically charge ahead in anticipation of a reward. But it doesn't take much trading experience to realize that trading isn't an activity where success is assured. Novice traders who open an online investing account are very enthusiastic. They tend to believe that trading is "easy money," but they soon face the harsh reality that market conditions change, and what worked in one market fails in another. Losses are the rule rather than the exception, history only repeats itself when it does, so-called conventional wisdom is right only when it is right, and no trading strategy is foolproof. From a purely motivational point of view, if one believes that trading is easy, that he or she is skilled at it, and that success is assured, he or she will persist. Such thinking exemplifies the overconfident investor. In some ways it is easy to motivate yourself to get out of a slump. Just tell yourself you are the "greatest trader in the world," convince yourself that your talents are boundless, and positively think, "If I just apply myself, I'll be a success." That strategy works for about three trades at best, if you are lucky. Then, reality sets in and you realize that shallow, unrealistic optimism is more detrimental than helpful in the long run.

It's more useful to study your reasoning more closely. When one is in a slump and feeling stuck and disappointed, he or she tends to think, "I'll never be profitable, and there is nothing I can do about it." The consequences of such reasoning are that you'll never feel like putting on a trade ever again. It is better to think, "Profitable trading is almost impossible, but I can learn how the markets work, develop the requisite skills, and eventually achieve consistent profitability." Granted, this isn't the most optimistic way to look at trading, but it does hold some realism. It isn't overly optimistic. Profitable trading is "almost" impossible. The key word here is "almost." It is vital to acknowledge that trading is a challenge that few seem to master. By acknowledging the difficulty, you are looking at the world realistically and will be able to handle setbacks more easily. If you aren't expecting very much in the first place, your hopes won't be easily dashed when you face a setback. The second key issue is the need to develop requisite trading skills. Here's where realistic optimism comes in. We know for a fact that there are traders who have developed trading skills and have realized success. It is realistic to hold this belief and it is realistic to believe that if you put in the time and effort, and get the proper amount of training, you can achieve profitability also. Holding such an attitude is optimal. It addresses the limitations of trading, but it also offers hope. So when you are ready to throw in the towel and give up, cultivate an optimistic yet realistic attitude: One can achieve success as a trader through hard work, extensive experience, and persistence. By keeping this in mind, you'll gladly work tirelessly until you achieve the consistent profitability you have been striving for.
The day will come !

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The Highly Motivated Trader

Непрочитанное сообщение qxr1011 » 28 июн 2004, 15:23

Jim is a novice trader who is deeply frustrated and ready to give up. He's read all the trading books, followed all the trading "gurus," and worked tirelessly day after day. Despite all his efforts, however, his account is almost completely wiped out. Jim's experience is common. When they start out, novice traders are extremely excited. They dream of success and the recognition that huge profits will bring. Some achieve early success, but many soon discover that achieving consistent profitability is elusive. Many are drawn to trading, but few can trade profitability. The winning trader is a special breed, a person who is highly motivated, but at the same time, he or she is realistic and able to persist in the face of adversity.

It's easy to get yourself "psyched up" when you first start out trading: One can merely convince himself or herself, "All I have to do is apply myself and I'll achieve profitability." This can often be a useful positive attitude, but the "power of positive thinking" doesn't usually go very far in terms of achieving trading success. It makes you feel good in the short term, but then you find that mere hard work and persistence doesn't pay off. It is necessary to use sound trading strategies, expose yourself to a variety of market conditions, and hone your trading skills. Successful trading requires talent, and there's no way to develop one's talents without extensive practice.

Although a positive attitude is useful, a healthy skepticism is paramount. When it comes to trading, you can't believe anything your read or hear. Even when a trusted mentor teaches you the "conventional wisdom," it is essential to remember that so-called conventional wisdom is true only when it is true; it is false the rest of the time. History in the markets only repeats itself when it does. And the only time you actually know that you've stumbled upon a profitable trading strategy is when it, indeed, produces a profit. Convincing yourself you can master the markets with sheer determination and willpower isn't going to get you very far. You must accept the fact that, in the end, trading is like a game. You've got to take it seriously on the one hand, but learn to enjoy the process on the other. Traders take the game seriously in that they acknowledge that real money is on the line and it is likely that real losses can wipe out one's trading account. They address this issue through risk management. On the other hand, they know that no trading strategy is foolproof. They realize that despite all their efforts, it is quite possible that some unforeseen adverse event can go against their trade, or that market conditions may just not be conducive to one's trading plan. That's where a happy-go-lucky attitude is useful. It is vital to view trading like a sport. If you score the winning point, fine. But if you miss it, don't get too bogged down. Just pick yourself up and try again. Eventually, with enough practice and experience, many novices will move into the realm of the seasoned professional. It is not going to happen over night, however. It will take time and practice. That's where the motivation comes in. It is easy to stay motivated for a short time, if you think the payoff will be large and relatively immediate. But trading is a profession where years can go by with little progress. Some seasoned traders warn that it may take several years to achieve consistent profitability. Over the years, a great deal of money will be spent on commissions, losses, apparatus, and instructional materials. The would-be professional trader isn't fazed by it all, though. He or she views the money spent on trading as similar to what any professional spends on college tuition. He or she believes that eventually, his or her time and effort will pay off. The winning trader is highly motivated. He or she admits that trading is a challenge and that success is far from assured. Despite this harsh reality, the winning trader persists until he or she achieves consistent profitability.
The day will come !

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A Positive Yet Realistic Attitude

Непрочитанное сообщение qxr1011 » 07 июл 2004, 17:10

"Think positively" is a popular saying among motivational speakers. There is power in thinking positively. Well, sometimes there is, and sometimes there isn't. When faced with poor odds and seemingly impossible challenges, it is vital to think optimistically. An optimistic attitude is the only way you can keep persisting when faced with insurmountable obstacles. A negative, or pessimistic, attitude won't get you very far under these conditions. Even the most minor setback will make you feel as if you want to give up. Trading is a challenging profession, however. Trading lore is replete with stories of novice traders who work tirelessly to achieve big rewards, yet success eludes them, time and time again. That said, there are also many traders who persisted, even after blowing out their accounts more than once, until they achieved consistent profitability. A positive mindset is essential for trading success. At some level, extreme optimism is an asset when it comes to mastering the markets. Without it, you won't achieve consistent profitability. On the other hand, it is important to show the proper amount of optimism. It is important to be humble, but sure of your abilities and the positive outcomes you'll achieve.

Profitable trading is elusive. It can be so hard at times that many seasoned traders warn novices that it is more realistic to go into trading with the expectation of losing money. This caveat is not necessarily a pessimistic statement but a realistic one. First, it isn't necessary for every trade to be profitable to make an overall profit across a series of trades, and indeed, many trades result in losses. Thus, it is vital to assume you'll realize more losses than wins, and to manage risk on any one trade accordingly. Second, it is a fact that many times, novice traders lose a lot of money trying to survive the learning curve. One will become very disappointed if he or she is not prepared to lose some money early on when first starting to trade. The best way to look at it is as "tuition" you spent to learn valuable lessons. It is also vital to remember that there are key points while planning a trade where a skeptical attitude is useful. It is important to not let the "bright side" cloud your thinking. The fact is that there are many adverse events that can go against your trade, and the winning trader tries to anticipate what these events might be. For example, impending earnings reports or rate hike announcements can sour a well-planned trade. It is useful to anticipate these events. This is where pessimism can put you on the right path. It is useful to over-analyze a little as you plan out your trade. That said, it is also vital to know when to stop being a pessimist. Once you have carefully accounted for all possibilities, and you are certain that you have done all you could to plan your trade, it is essential to move on. You must be optimistic and decisively put your plan into action. When you execute your trade, you must show rock solid confidence. This is where an optimistic attitude comes in. When the right market conditions present themselves, you can't choke. You must act with confidence and trade your plan. Second-guessing at this point isn't going to help you. You must optimistically follow through. Focus on your immediate experience, what you must do next according to your plan. Worrying about the past and questioning your trading skills is just going to distract you, and you won't be able to execute your plan effortlessly or flawlessly.

An optimistic attitude is powerful when used properly. It is important to be optimistic when it comes to the big picture; remind yourself that if you put in enough time and effort, you'll eventually achieve profitability. Once you have worked through a solid trading plan, it is useful to execute it with an optimistic and decisive attitude. But when you plan your trade, it is useful to be a little pessimistic and skeptical as you try to anticipant all possible events that may go against your trade. The proper amount of optimism will ensure that you trade profitably and consistently.
The day will come !

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Learning From Past Mistakes

Непрочитанное сообщение qxr1011 » 16 июл 2004, 15:55

Losses and setbacks are a fact of life. It is necessary to experience setbacks and recover from them in order to achieve success. The trader who has never experienced a severe drawdown, or blown out his or her trading account, has never learned to realize the worst-case scenario and recover from it. Setbacks, even severe ones, can be important learning experiences and opportunities for growth. It is vital to extract a lesson from past mistakes, and learn to turn a negative event into a positive event. That said, it is important not to become paralyzed by setbacks. Rather than mull over past defeats, or trading losses, winning traders use the setback as a motivator, an opportunity to hone their skills and improve. They examine what they did wrong, learn from their mistakes, and view the temporary setback as a new and refreshing starting point from which to achieve higher levels of future performance.

Winning traders don't get been bogged down with self-doubt, regret, and defeat. Instead, they use the "loss" as a motivator for change and improvement. They examine their past "losing" performance in scrupulous detail, discover the factors associated with poor performance, and correct these factors. They aren't afraid of taking a brutally honest look at themselves. Indeed, they welcome it. After closely examining the facts, they can't wait to experience new opportunities to hone their skills until they eventually achieve lasting success.

As traders, it's crucial that you keep accurate records of all factors that may impact the outcome of your trades so that you can learn from your losses, improve your performance, and do better next time. From a psychological viewpoint, document factors associated with the loss, such as whether you were in a bad mood or acting on impulse rather than with a calm and relaxed trading style. Other factors, such as market conditions, trading strategy, preparation for the trade (such as backtesting), or risk management strategy should also be noted. Armed with this knowledge, one can study a series of losing trades and identify the factors that led to the trades "going wrong." One can then change these factors in subsequent trades and monitor improvement. The key is to take an upbeat psychological approach. Rather than mulling over one's failure, it's more useful to view the past failure as an opportunity to grow and improve. Viewing a loss as a growing experience changes your perspective immediately. You will now focus on what you can do to achieve the bigger goal of becoming a seasoned trader, rather than mulling over the loss from a few of the many trades you will make throughout your career. In the end, it is essential to keep the bigger picture at the forefront. You'll be a successful trader in the long run if you just keep honing your skills. By monitoring the factors associated with poor performance, and changing these factors in future trades, you can learn from your mistakes and trade profitably and consistently.
The day will come !

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Quick Decisions

Непрочитанное сообщение qxr1011 » 22 июл 2004, 21:23

Trading is fast paced. The markets can move rapidly, and it is sometimes necessary to react quickly and correctly. Depending on your experience and natural inclinations, however, making the right decisions quickly can be difficult. When decisions are made on the spot, they are often wrong, and wrong decisions produce losses. It is usually better to plan your trades carefully rather than make decisions on the spur of the moment.

Research studies have shown that when people are asked to make spontaneous judgments, they tend to rely on heuristics, or rules of thumb. For example, people have a powerful inclination to avoid risk, and when asked to make decisions rapidly, they do whatever they can to reduce risk and potential loss. That can mean holding on to a losing trade and hoping that it will turn into a win, or closing out a trade prematurely and missing out on an opportunity that would have produced a substantial profit. People also may base their decisions on the availability heuristic, the tendency to base judgments on memories instead of current facts. For example, when trading a tech stock while under pressure, we may incorrectly assume that it will increase because vivid memories of tech stocks are readily available. Yet in the particular trade we are monitoring at the moment, the stock may not increase. Similarly, if we have made a series of winning trades in the recent past, we have fresh memories of these wins and tend to over-estimate the probability that our current trade will also be a winner. These heuristics are especially powerful when we are under pressure and we believe that the outcome of a trade is particularly uncertain. We deal with uncertainty by relying on what we are most comfortable with and tend to go with our hunches, but it is at these times when our hunches are usually wrong. When people are uncertain, they tend to be a little anxious. Controlling anxiety, no matter how slight, requires psychological energy. Since psychological energy is limited, coping with anxiety takes away energy from our decision-making processes. With limited psychological resources available for processing decisions, we are not able to consider all alternatives carefully and objectively. Instead, we act on impulse, and our impulses are usually wrong.

Rather than make decisions spontaneously, it is wise to carefully plan a trade before executing it. If you carefully determine an entry and exit point, you'll be able to implement your plan when faced with uncertainty and required to act decisively in the heat of the moment. The more detailed your trading plan, the easier it will be to follow your plan. And, the more you can trade your plan, the more you will trade profitably and consistently in the long run. Although some traders can trade by the seat of their pants, many traders do better by carefully planning their trades and by following their plan closely. By avoiding spontaneous decisions, you can realize the consistent profits of a winning trader.
The day will come !

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The Big Comeback

Непрочитанное сообщение qxr1011 » 30 июл 2004, 16:34

Despite all our best efforts, it's hard to pick ourselves up after a fall. You've heard it time and again: Traders must learn to expect losses, take them in stride, and recover from them. Depending on your track record, however, this is often easier said than done. Sure, if you are a seasoned trader, and have rock solid confidence, it is relatively easy to take a severe drawdown in stride, keep trading, and win back what you've lost. Novice traders don't have it as easy. A severe drawdown may actually reflect a lack of trading skills. When a novice trader tells himself or herself, "I don't have the skills to trade profitably and I should just give up," there's a grain of truth in it. It is hard to pick oneself up after such a severe fall because in the back of your mind, you think your fears may be legitimate. In the end, however, such a cynical view is never going to allow you to achieve the financial success you dream about. The only way to become a serious, winning trader is to keep trading, gain extensive experience, and hone your trading skills. That isn't going to happen if you feel stagnated and paralyzed after a setback. Fortunately, there's a lot you can do to pick yourself up and press on.

After we've faced a severe setback, it's hard not to feel extremely disappointed. Most people feel insecure to some extent, and a major letdown brings out this sense of inadequacy. The mind is wired to make this happen. Our memories are linked such that when one bad memory is triggered, others are triggered as well. It's a viscous cycle; a failure occurs, then another failure is remembered, one's disappointment intensifies, another failure is recalled, and the cycle continues. It is important to break the cycle before it intensifies.

There are two ways to stop the viscous cycle from turning a minor setback into a major disappointment. First, make a list of triumphs you've made as a trader. When you face a setback, you can read through the list and remind yourself of the times you have succeeded. This list of memories of successes will counteract your tendency to recall past failures. When you recount your past triumphs, your mood will turn from pessimism to optimism. Second, you must address the possibility that you may truly believe that you lack trading skills and can never really become a profitable trader. Obviously, such a belief isn't going to help you persist after a setback, but there may be some truth in it, and if you merely try to deny it and block it out of your consciousness, it may have a more powerful adverse influence on your motivation. The best way to neutralize this thought is to acknowledge it, and refute it. Remember to think in terms of the big picture. You may not have adequate trading skills right now, but if you work long and hard enough, you can develop the skills you need to trade consistently and profitably. Remembering this fact will powerfully influence your ability to recover from a setback. By trading one day at a time, and making trade after trade, you can gain valuable experience with the markets, and hone your trading skills until you become a consistently profitable trader.

Don't let a minor setback turn into a major slump. Take proactive steps to stop the downward spiral of negative thinking. Think realistically yet positively. By accepting your limitations and fighting to develop your trading skills, you can make a dramatic comeback and achieve financial success.
The day will come !

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Trusting Your Intuition

Непрочитанное сообщение qxr1011 » 06 авг 2004, 15:47

Many people who begin trading think of it in purely mathematical terms: If the ultimate multiple regression equation could be devised, one could simply put in the inputs and get the outputs. And the outputs could be used to forecast the markets. The working assumption seems to be that the markets can be predicted in much the same way that engineers can use equations to construct a bridge. But the markets are far less consistent, and in some ways, they are more complex. In contrast to what a novice trader may expect, seasoned traders tend to rely on abstract feelings rather than facts. They trade intuitively. How do you observe the world and gather information about it? Do you just want the facts and the specific details and none of that "touchy-feely" stuff? Or are you more intuitive? You don't believe in "facts." You think reality is subjective and prefer to think in theoretical and abstract terms. It is useful to identify whether you are intuitive or data oriented. If you are data oriented, it may be useful for you to learn to trust your intuition.

Philosophers have contrasted the "intuitive" to the "sensor." The Sensor type prefers cold, hard facts and sees the world as rational, predictable, and orderly. Intuitive types are more fanciful, and see the world as random, theoretical, and conceptual. A trader who is a sensor may want to know the specific price level where resistance begins. He or she would prefer to follow a specific set of rules and may want to pin down exactly where an abstract value, such as resistance, begins and ends. An intuitive trader, in contrast, views the "rules" to identify resistance as merely guidelines, which may work at times but not always. For example, perhaps resistance will be a round number or a previous peak or trough, perhaps it will not. No one knows for sure; such guidelines are just possibilities, not hard and fast rules. Sensors look at market concepts literally, believing they are true-life entities, rather than just abstract concepts. An intuitive trader looks at the markets in a figurative sense. All signals and indicators are subjective in the end, may be a little inaccurate, and are a mere approximation of reality. There's a good chance they will be wrong and that's all right.

When it comes to the markets, it's generally advantageous to be an intuitive trader. Reading charts and getting a feel for the markets is subjective in the end. Trading decisions are merely based on educated guesses. It isn't exact, but mushy, random, unpredictable, and conceptual. It's not linear, matter of fact, and predictable. Because the markets are so complex and chaotic, it takes intuition, hunches, and a kind of creative and artful mastery to win consistently. The logical analysis of facts and figures can only go so far when you are trying to trade the markets, which have inaccurate figures and are largely inexact. So if you are a "natural" intuitive type, you've got a head start. And if you are a data-oriented, sensor, try to nurture your more intuitive side. Become an intuitive trader, and you'll see your profits grow.
The day will come !

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The Mentally Tough Trader

Непрочитанное сообщение qxr1011 » 11 авг 2004, 17:58

Winning traders have learned to handle extreme levels of stress. The markets are chaotic and unpredictable; in other words, they are stressful. The mind has limited resources, and when you feel stressed, too much of your resources are devoted to managing the stress. Little energy is left to focus on trading. Did you ever "cram" for an exam in school? It takes twice as long to learn material when you cram. Why? It's because you are more stressed when you are trying to learn in a pinch. When traders are struggling to cope with the chaos of the markets, they are similarly trying to perform in a pinch, under less than ideal circumstances. As they push themselves to the limits, they sap up psychological energy. As they use up resources, they have little psychological energy left to trade effortlessly. They are more prone to panic and may ride an emotional roller coaster as they face winning and losing trades. It's essential for survival to be able to cope with the ever-increasing demands of the markets.

Dr. James Loehr in his book "Stress for Success" notes that if one can learn adequate coping skills, events that usually produce stress need not necessarily produce the stress response. One can develop "mental toughness" as Dr. Loehr calls it. The mentally tough person can endure high levels of stressful events, yet not feel it. Coping with stress is similar to weight lifting, according to Dr. Loehr. If you lift more than your body can physically handle, your muscle tissue will be damaged. But, if on the other hand, you never push yourself to the limits, you'll never develop additional strength. One must build up muscles gradually. Stress management works in much the same way. You don't want to damage your psyche by trying to handle too much stress, but on the other hand, if you shy away from stress, you'll never be able to take the stresses and strains of the markets in stride and trade effortlessly, and in a peak performance mind state. The key is to learn how to handle greater levels of stress, but also find time to recover. When it comes to the markets, for example, it's tempting to trade all day, and work late into the night back testing or learning about new trading strategies. Working tirelessly at such a pace is bound to wear you out eventually, however. It is vital to rest and recover. That doesn't mean shrinking back from the markets, but learning to deal with the pressures of the markets at a gradual, realistic pace.

By pushing yourself to greater levels of challenge, but at the same time, resting and recovering, you can build up mental toughness in the same way that a weight lifter can handle greater and greater loads. There are some basic steps that a person can take to prepare for stress and become inured to it. First, it is vital to get as much rest and relaxation as possible. People who do not get the proper amount of sleep have limited psychological resources to cope with daily stressful events. Getting extra rest is vital. This may mean taking planned naps during the day to rejuvenate. Don't make the mistake of thinking that you'll be "missing out" on a trading opportunity by taking a break. Look at it this way: How much are you going to make if you are too tired and wiped out to focus on the market action and trade effortlessly? The proper amount of rest can increase your ability to cope with stress. Second, it is also important to exercise and eat nutritious meals. Emotions are physiological responses. The more energy the body has to cope with stress, the more "tough" the body can be when extreme levels of stress are encountered. Regular exercise helps the body and mind release pent-up stressful emotions. By making sure you allow your stressful emotions to dissipate, your body and mind will recuperate and be ready to deal with extreme levels of stress.

Trading is stressful and demanding. It takes psychological energy to cope with the chaotic markets day in and day out. By taking preventative steps to prepare to cope with the stress, you can develop a sense of mental toughness that allows you to be more resilient during the trading day. The less impact stress has on your mind and body, the more energy you can devote to trading. You'll trade more effortlessly, logically, and profitably.
The day will come !

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A Guidebook for Work Productivity

Непрочитанное сообщение qxr1011 » 21 сен 2004, 16:17

Trading is a demanding profession. If you are a novice trader seeking consistent profitability, you have your work cut out for you. Many people are attracted to trading, but few actually become profitable traders. It takes a special kind of person to pursue trading, the kind of person who takes setbacks in stride and can persist even when all seems hopeless. There are three key strategies the novice traders can use to persist in the face of adversity: (1) Cultivate a fighting spirit, (2) set up an alternative reward system, and (3) focus on the process not the prize.

Traders often walk a tightrope between arrogant and unrealistic overconfidence and feelings of incompetence and inadequacy. Trading is a profession where it is realistic to work under the assumption that you'll see many more losses than wins. It's hard to work under such conditions. We are used to getting paid for a job well done, but novice traders are likely to put in long hours and the only reward they get is losses. Trading requires persistence, especially during times of disappointment and seemingly endless failures. Most people's confidence is severely shaken upon meeting such circumstances, and they often react with arrogant overconfidence. They build themselves up to the point where they are unrealistically optimistic. But it is vital to remain realistic, ready to face setbacks head on and unafraid to look at one's limitations. By cultivating a fighting spirit, one can look at setbacks as minor, commonplace events and take them in stride.

Although profits are an obvious and natural reward for trading efforts, they are not always tied to the amount of work we put in. If you focus on the profits, it is likely that your mood will rise and fall with your account balance. Setting up an alternative reward schedule will provide more consistent rewards and allow you to persist even when faced with a losing streak. Reward yourself after putting in a fixed amount of time (the end of each day, for example). Buy yourself a nice dinner or do something you find enjoyable. By patting yourself on the back for your efforts, you'll consistently feel satisfied with your profession, and stick with it.

Finally, it is essential to focus on the process, not the prize. Trading is about making money, but the irony is that if you focus on the outcomes of your trades, you'll put excessive pressure on yourself and choke under it. By focusing on intrinsic, rather than extrinsic, rewards, you'll feel more comfortable and creative, and trade more profitably in the long run. It may seem counterintuitive, but by focusing on the process of trading, rather than profits, rewarding yourself for effort rather than outcome, and cultivating a fighting spirit, you'll trade profitably and consistently.
The day will come !

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Trusting Your Intuition

Непрочитанное сообщение qxr1011 » 09 дек 2004, 17:28

Seasoned traders have learned to trust their intuition. Do you? How do you observe the world and gather information about it? Do you just want the facts and the specific details and none of that "touchy-feely" stuff? Or are you more intuitive? Are you skeptical about so-called facts? Do you think reality is subjective, merely an artificial construction that differs from person to person? Many people haven't learned to trust their intuition. They prefer cold, hard facts and see the world as rational, predictable, and orderly. Intuitive types are more fanciful, and see the world as random, theoretical, and conceptual. The markets aren't always logical. It's useful to learn to trust your intuition.

Many novice traders are fact oriented, and that can be a good thing. Since they have yet to accumulate a vast repository of experience, it is better to stay fact oriented and concrete for a while. For example, they may want to know the specific price level where resistance begins. Or they may try to search for a specific set of rules to identify precisely where resistance begins. Over time, however, the seasoned trader learns to take a more intuitive approach to trading. An intuitive trader, in contrast, merely views the "rules" to identify resistance as mere guidelines, which may work sometimes but not always. For example, perhaps resistance will be a round number or a previous peak or trough, perhaps it will not. No one knows for sure; such guidelines are just possibilities, not hard and fast rules. It is useful to avoid looking at market concepts literally, believing they are true-life entities. They are merely abstract concepts. An intuitive trader looks at the markets in a figurative sense. All signals and indicators are subjective in the end, may be a little inaccurate, and are a mere approximation of reality.

Reading charts and getting a feel for the markets is subjective, and that's when you must learn to trust your intuition. Trading decisions are merely based on educated guesses. It isn't exact, but mushy, random, unpredictable, and conceptual. It's not linear, matter of fact, and predictable. Novice traders often have difficulty trusting their intuition. They want to find all the specific facts and unfailing rules that can be used to forecast the markets. They tend to think that if the "right" set of signals can be discovered, they can make big profits. It would be nice if it were that simple but it is not. The markets are so complex and chaotic that it takes intuition, hunches, and a kind of creative and artful mastery to win consistently. The logical analysis of facts and figures can only go so far when you are trying to trade the markets, which have inaccurate figures and are largely inexact.

The difference between the novice and seasoned trader is that the seasoned trader has a wealth of experience. Seasoned traders can scan many aspects of a trade simultaneously and automatically. At first, they had to deliberately look for signals and carefully put it all together. But over time, they developed an intuitive feel for putting it all together to make a fast, intuitive judgment. It's much like driving a car. The student driver must carefully attend to various aspects of driving, but over the years, seasoned drivers can scan many inputs at once and make quick driving decisions. It's the same with trading. By making as many trades as possible and in a variety of market conditions, you'll collect a wealth of experience and hone your intuitive skills. Over time, you'll be able to make quick, accurate assessments of the market and act decisively. It may not happen over night, but over time, you'll develop this skill set. The more experience you gain, the more accurate your intuition, and eventually, you'll trade effortlessly and profitably.
The day will come !

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It's About You and No One Else

Непрочитанное сообщение qxr1011 » 05 янв 2005, 16:35

Throughout our lives, we look toward others to define ourselves. As children, parents and teachers tell us whether or not we are doing well. Significant others offered praise when we met their expectations and punished us when we broke the rules by going our own way. The broader society tends to reinforce looking outward for the standards that we should achieve. The media bombards us with images of success: "Buy a sleek, new sports car and impress the neighbors. Wear the latest designer fashions and watch heads turn as you walk by." Out of sheer habit, one continues to ask, "How well am I doing?" and that question usually leads to asking, "How well 'should' I be doing?" When words like "should" and "must" enter the picture, however, one places a lot of unnecessary pressure on oneself to perform. And when the pressure is on, we usually choke under the strain. There's a danger when you look outward. You start to judge yourself. You start to think that you are doing well or poorly based on how others may see you. But it is much better to look inward, and follow your own personal standards for where you want to go next.

Comparing ourselves to others is useless, and at times, counterproductive. You'll make more profits if you learn to look inward for your own personal standards than outward in an effort to beat out the next guy. Each trader brings his or her own knowledge, personality, trading method, and tools to the trading arena. Through a coordinated integration of these various components, the trader builds up a set of individualized trading skills that produce lasting success. Such integration doesn't happen over night, but though hard work and persistence. Over time, one makes trade after trade, gaining key experiences along the way, until it all comes together in the end. One needs to find one's own personal talents, accentuating one's strengths and working around one's limitations. Every trader is on his or her own path. For some people, the path is full of many curves and is quite long. For others, the path is straight and short. It is essential that you follow your own path and accept the amount of effort and time it will take to reach your goals.

Studies of successful and creative people have shown that such people tend to work by their own standards. Even in competitive situations, creative people don't compare themselves to others. They look inward and let their internal standards guide them. They know that through persistence and determination, they will achieve success. They don't force it. They know that if they allow themselves to follow their passion, success will come naturally. If you take a similar approach to trading, you'll achieve lasting success.
The day will come !

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Overcoming an Emotional Vulnerability to Losses

Непрочитанное сообщение qxr1011 » 10 янв 2005, 16:58

It can be said over and over again, "Don't let your net worth determine your self worth," but it is little solace to those people who have spent their entire lives letting their successes and failures determine how they feel about themselves. Even if you have fairly high self-esteem, it's hard not to feel a little disappointed when you aren't making enough winning trades, or are experiencing a severe drawdown. From childhood to adulthood, we are told that unless we do well in society, we are not worthy. It's important to do well, and if trading is your profession, a series of losses can be devastating to your self-esteem. Not all people link their self-esteem to how well they are performing at their job, but if you are one of the people who do make your feelings of self-esteem contingent on how well you are doing in the markets, coping with losses can be psychologically painful. However, a study in the December 2004 issue of "Psychological Science" offers a remedy (Niiya, Crocker, and Bartmess, 2004).

Dr. Jennifer Crocker and her colleagues at the University of Michigan have been studying college students who base their self-esteem on how well they are doing in school. They have shown that the more college students' self-esteem is based on, or contingent on, their academic performance, the greater their drops in self-esteem on days when they receive worse-than-expected grades on exams and papers. The same phenomenon is seen among novice traders. Traders who let their self-esteem be dictated by the number of winning trades they make on a particular day experience a rollercoaster ride of emotions, ranging from omnipotence on winning days to feelings of despair and hopelessness on losing days.

In a recent experiment, Niiya, Crocker, and Bartmess (2004) showed how people who base their feelings of self-worth on performance can cope with failure more easily. Whether a person feels a sense of low self-esteem after a failure depends on how one views a particular talent or ability. If a person believes that a talent or ability is trait-like, and unchangeable, he or she will experience low self-esteem after a failure. If on the other hand, a person believes that a talent or skill can be improved and honed through experience, he or she will be less upset after a failure. Participants were randomly assigned to either fail or succeed after completing an academic task. Half of the participants were "primed" to think that intelligence was a fixed entity that could not be changed, while the other half were reminded that intelligence isn't permanent and trait-like, but can be modified with practice and experience. People who allowed their self-esteem to be determined by performance and who believed that intelligence was fixed and unchangeable felt low self-esteem after a failure. In contrast, people who believed that intelligence was malleable didn't report lower levels of self-esteem after a failure. This finding has a direct bearing on how to cope with trading losses. Don't over-interpret losses. A series of losses doesn't mean that you'll never learn to trade profitably. With training, practice, and experience, you can hone your trading skills.

Sure, we can say over and over again, "Don't let your self-worth be determined by your wins and losses," but for some people that just doesn't help. They've been basing their self-esteem on how well they perform their whole life. It's hard to change over night. But these people aren't doomed to wavering self-esteem. If they merely remind themselves that trading can be learned, and that you don't need to be a "natural born trader" to make it in this business, then you won't be as disappointed by your losses. Don't expect to trade skillfully immediately. Some novice traders may catch on fast, but that shouldn't get you down. With training and practice, you can also hone your trading skills and learn to trade profitably. The more you remind yourself of this fact, the more you can bolster your self-esteem when you face losses. So don't give up. If you are the kind of person who sees your self-esteem rise and fall with your account balance, stay relaxed, and remember that traders are made not born. If you remember this fact, you'll eventually master the markets and achieve enduring success.
The day will come !

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Breaking the Rules

Непрочитанное сообщение qxr1011 » 03 фев 2005, 15:42

The traders who make the greatest profits tend to take the greatest risks. They are rule breakers who go their own way. They search for innovative trading methods. They think outside the box. From Jesse Livermore to Paul Tudor Jones, there are many inspiring tales of talented, supertraders who make huge profits by bending the rules and doing whatever they want, no matter what. There are far more traders, however, who blow out their accounts because they don't bring the proper amount of discipline to their trading. You've got to learn the rules before you can learn how to break them. If you're a novice trader, it's essential for your survival that you focus on learning conventional wisdom and how to trade with discipline.

When first starting to trade, it is useful to follow some basic guidelines. For example, it's useful to manage risk and to trade a well-defined trading plan with clearly specified entry and exit strategies. It is also useful to manage risk and use tools, such as protective stops, to take precautions against mounting large losses. Conventional techniques are useful to incorporate into your trading style. It's also useful to follow conventional wisdom, such as avoiding the first hour of trading or standing aside right before a possible rate hike or earnings report.

Conventional wisdom is only right when it is, but as a novice trader, you don't know when it is right and when it is wrong. Don't undervalue experience. The more experience you accumulate as a trader, the more you can anticipate how the markets will behave and how you can act accordingly. Some jewels of conventional wisdom are right much of the time, and it's useful to keep some of them in mind. For example, it's important to try and survive the learning curve. Don't take on a big position like a rogue trader trying to make big profits unless you are sure of what you are doing. Look at the big picture. A given trade is just one trade among a set of trades, but this is only true when the amount of money you risk on that trade is relatively small. But if you risk 50% of your account on a single trade and it goes sour, then the particular trade is especially significant and isn't just a single trade among many. It has potentially grave consequences. Managing risk helps you survive. It's a conventional piece of wisdom worth following.

Unlike novice traders, master traders know when to push limits. They get on a roll and know that when things "click," they must push themselves to take bigger positions and to execute more trades. It may be breaking the rules, but to the master trader, it is how big profits are made. It is important to note, though, that master traders can afford to take a greater risk. They have well-honed skills, and should they lose substantial amounts of capital, they can diligently work to make it all back. A novice trader, in contrast, will have more trouble making back losses, and should they realize a big loss, they must stop trading and recovery financially before attempting to trade actively again.

Although it's often useful to follow conventional wisdom, it may be wrong at times. Markets change. The behavior of any given stock is fixed in time. Price movements don't occur in a vacuum, but in the context of media reports, economic news, and international politics, just to name a few. Just when you think you know how a stock price will change over a particular time window, conditions change. A trading strategy that worked well one month may no longer work when conditions change. The master trader is continually looking for new strategies and tries to look at the markets from new perspectives. While the masses look at the market in simple terms, the master trader is more creative. He or she looks for a new vision of the markets, and tries to develop a trading strategy that will capitalize on a unique set of market conditions. By being first in line and ready for action, the crowd is beaten and profits are taken before the masses catch on.

Unlike novice traders, master traders can afford to take bigger risks and do the unconventional. It may not be a good idea to be too unconventional when you first start trading, but eventually, you must be creative and go your own way if you want to reach the status of a seasoned, winning trader. Until then, it's essential that you keep trading cautiously at first, but gradually push yourself to new levels. If you continue to trade and gradually take on larger positions, and take more risks, you'll hone your skills to the point where you can break the rules and make big profits.
The day will come !

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The Anatomy of Fear

Непрочитанное сообщение qxr1011 » 04 фев 2005, 16:27

Market action is often driven by fear and greed. Dreams of wealth can drive almost anyone to take unnecessary risks, but the fear of losing is powerful. Fear is an instinctual feeling. As humans evolved, they learned that unless they protected themselves and their resources, they wouldn't survive long. On the psychological side of things, when we perceive fear, we react quickly and get ready to either stand up and fight, or run away to save ourselves. These same emotions play out in trading, and it's worth understanding the psychological anatomy of fear. What psychological factors drive our fears and how can we control our fears? The more you can understand and handle your fear, the more you'll be able to control it during critical moments of trading where it is more useful to stay calm and relaxed.

We are fearful when we sense impending doom. A common event that produces fear is putting on a trade that seems at first glance to be a sure loser. It is easy to panic and react impulsively, but you may have other options. Gaining a more in-depth understanding of fear may help you control it. In a classic study on emotions Dr. Craig Smith asked people to describe events where they were extremely afraid. For example, fear-provoking events included being mugged, losing control while driving in a snowstorm, or getting lost in the mountains. As might be expected, people didn't find fear to be a very pleasant emotion, but people differed on the extent to which they tried to shut it out and ignore their fear. When people are fearful, they aren't sure what will happen next. They believe that their doom is inescapable, and that they can't possibly gain control of the situation. These research findings have a direct bearing on why you may feel afraid while trading. There are many times when you make a losing trade and feel that you just can't get out of it. The loss is inevitable and you can't control the outcome. It's hard to know what to do. You don't want to feel the pain of taking a trading loss, but no other alternatives seem viable.

It is useful to remember, however, that events don't make you afraid. It is the interpretation of those events that make you afraid, your mental representation. You are scared because you mentally believe that you are about to get hurt, there is no way out, and that there is nothing you can do. If you were to think instead, "I'm not going to get hurt, I have several alternatives I can pursue, and there is a lot I can do to get out of this," you wouldn't feel fearful at all. Fear is a useful emotion. It protects us. Indeed, if you are in the midst of a losing trade, and all would objectively agree that you can't possibly win and that there is no way out, then there is no use feeling afraid any longer than necessary. If you can't win, then you might as well close out the position and take the loss. But there are those times when we jump to conclusions prematurely and close out a trade at the first sign of a loss. Instead of acting impulsively, it is useful to make a careful analysis of your situation and make a prudent decision. You may not want to mull over a lost cause, but it's useful to remind yourself that you are fearful because you believe harm is inevitable and that you have no viable alternatives. For a brief moment, you may want to think, "Maybe I can get out of this. Perhaps I do have alternatives. Maybe I can think of a plan to get me out of this." Using such a thinking strategy will give you a little time to think about whether you indeed have viable alternatives. For example, you may decide upon careful deliberation that the masses have reacted to some disappointing news unnecessarily and sold too early, forcing a stock price down. It's quite possible that the fundamentals of the company suggest that the price will recover upon a future earnings report. Waiting it out may make sense, but if you react quickly before considering all possible alternatives, you may end up selling a position that could have turned out to be a winner. Considering viable alternatives isn't the same thing as false hope. If you know that there is no way the trade will turn around, then by all means, close the position and take the loss. But if there is a way out, it is useful to control your fear and consider your options. So remember, your thinking patterns dictate your feelings. If you feel your demise is sealed, you'll panic and may act impulsively. But if you calm down, and consider that you may have more options that you initially thought, and that you can realistically avert a grim outcome, you can control your fear and save the day.
The day will come !

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Do the Ends Justify the Means?

Непрочитанное сообщение qxr1011 » 09 фев 2005, 19:41

In this cutthroat world we live in, we often follow the motto, "The ends justify the means." Blind ambition, self-sacrifice, and extreme self-control are valued. If you can work tirelessly, wait long enough, and quickly recover from endless setbacks, you'll be one of the select few who survive and reap the rewards. It's true in many walks of life and it's true in the competitive world of trading. Trading is difficult. Of the many that try, few realize enduring success.

To be successful as a trader, you must be willing to do whatever it takes, no matter how exasperating. The risks and sacrifices are many. You may not be able to spend as much time with your family as you prefer. You might have to work extra jobs to build up capital and pay for trading expenses. It is often necessary to focus exclusively on trading. You can't be wishy-washy. Only the persistent and dedicated will survive. But in the final analysis, you must ask yourself if the ends justify the means.

It's possible to make huge profits in trading. The difficulty is surviving. Many of the "Market Wizards" from the 1980s, for example, aren't in the business today. You can be at the top of your game one year, and looking for a new profession the next. Survival is important. What's the sense of reaching the status of a master trader if you just burn out after a year? It's an unpleasant truth. Few achieve lasting success, and of those that do, many traders burn out. The stress is enormous. Your money and ego are often on the line. When you aren't trying to learn new trading methods, you may spend your leisure time trying not to worry whether or not the market will go against you on the next trading day. Even while you relax with friends, you may worry about the markets in the back of your mind. It's hard to make it as a trader. It's vital that you find a way to avoid joining the club of burned out traders.

How can you avoid burn out? First, minimize stress as much as possible, and try to effectively cope with significant stressful events. Don't pretend that you don't have stress. Trading is inherently stressful, but many deny stress rather than actively cope with it. But passively ignoring stress can accentuate the impact of stress rather than relieve it. It's better to acknowledge you are taking risks and that outcomes of your trades are uncertain. If you acknowledge the risk up front, and minimize it through risk management, you'll feel more relaxed. Second, it is essential to focus on the inherently rewarding aspects of trading. If you don't love what you're doing, you won't last very long. Trading is inherently rewarding. It's intellectually challenging. It's fun to test personal hypotheses about the markets and see if your hypotheses are supported. Sometimes it's easy to forget this fact, especially during a drawdown, but trading is fun, and it's better to enjoy it than view it as a burden. Third, cultivate a sense of balance between work and personal life. It's necessary to focus all your available time to devising new trading methods. Becoming a master trader and staying there requires a large time commitment, and it may be difficult to balance work and leisure time. But it is important to spend time with friends and loved ones. It may be difficult to divide your time equally between your work and personal life, but you must devote some time to feeling connected to other people. Fourth, it's important to find personal meaning. Why do you spend so much of your time and energy trading? The answer to this question is significant. There's no right answer. Some traders view trading as a way to support their family, and see their efforts as meaningful for that purpose. Other traders set aside part of their winnings for charity in order to feel they are making a greater societal contribution. However you answer this question, you must make sure that you find your efforts personally meaningful.

Trading is difficult. It takes time and effort. In the final analysis, though, you must feel that it has meaning. The ends don't always justify the means. It's vital that you feel it is all worth it in the end. Answers to these difficult personal questions will help you achieve and maintain lasting financial success.
The day will come !

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