Tradersmentality
Tired of Losing?"The Market cannot hurt Me. I can only hurt my Self!" - Josh Ridenour
There is a Time for Losing - The 29th verse of the Tao Te Ching is about how there is a time for everything in life. A time for being ahead, a time for being behind. In the market, there is also a time for everything. A time for large profits, small profits, break even trades, losers, and consecutive losers which lead to a draw down. It is easy to get caught up in the heat of the moment depending on where you currently are. But it does not really matter what part of the cycle you are in, it is all part of a traders life and the cycle of a trading performance.
Stop Predicting! It is a false belief to believe prices and markets can be predicted. If it were possible eventually the majority of market participants would figure it out and there would be no one left on the other side of the trade, and the market would cease to exist entirely. If it were possible to predict markets, you could avoid losing trades and only take winners. Anyone who has been trading for very long knows this is simply not the case. The problem with making predictions is you then shut your mind off from the information the market gives you. Instead of being open to what is happening, your mind becomes rigid and can only take in what confirms your beliefs. This prevents you from being able to flow with the market, and open your self to the opportunity in front of you. The best traders admit when they are wrong, get out, and even reverse if necessary.
If you dont believe this - listen to a stock analyst on Mad Money or any other TV show about stocks. They are often so confident in what they say that they might even convince you! But there is a reason why he is on TV talking about markets, and not trading them. If he could trade the markets and make money he would have no reason to go on TV as the financial rewards are miles apart. In fact, analysts make the worst traders because they are so caught up in their thoughts and beliefs about market direction that they cannot trade effectively!
Cease efforts "Wu Wei" In Eastern Philosophy there is a term "Wu Wei." It cannot be fully understood or explained in words, only experienced. At the essence of its meaning is to "Let be" to "allow" or "flow like water down a stream." The point is to stop resisting, and stop trying so hard. The harder you grasp at something, the harder you try to succeed, the more you fail. If you are constantly trying to make money, and constantly trading, you are probably not making a consistent return.
Rather than trying so hard, let trading come naturally. Profitable trading is effortless. It does not require thought, only action. In fact, I try to do as little as possible, and trade as little as possible. My most profitable weeks I hardly trade at all! This has become a fundamental aspect of my trading system. Instead of constantly trying to make money all the time, I simply wait for a pot of gold to be in front of me before I do anything. Then, I take it. Again if you dont believe me; try as hard as you can tomorrow to make as much money as possible and see what happens!
Stop Trying to Remove or Control Emotions - Most traders who have been trading for a while come to the idea that emotions prevent them from success and are standing in their way. I know, as I have been there. And so we try as hard as we can to remove emotions from our trading. There is a problem with this concept. You are a human right? As long as you are human, you will have emotions; no matter how hard you try to remove them. It is simply not possible. So removing emotions or attempting to do so is the wrong approach. Instead; use your emotions to your advantage! They are warning signs; listen to them.
Then there is the negative internal dialogue which the market often brings out. After a series of losing trades, many traders get upset and feel bad. They blame the market for taking from them, and feel like a loser. How do you think a trader will perform after feeling this way for a few days or longer? His performance suffers as he tries to take back what was once his and he compounds his mistakes by trading out of a negative mindset.
You have to learn to recognize and become aware of your internal dialogue. It is very important to your trading career, and your every day life. Most of us live our lives without the slightest idea as to what we are doing to our selves. Your mental structure is a choice. This is what I mean when I say "The Market cannot hurt me, I can only hurt my Self."
My Trading Psychology book "A Traders Mentality - The Path of Self Discovery and Being a Trader" is all about these ideas and how to free your mind and better your trading performance.
If you found this helpful, please like! Feel free to comment or ask questions.
The Top 3 Reasons Traders Lose and Give up1). Over-trading and Random trading. Most people and traders think in order to make money as a trader you have to be trading all the time. If you are simply watching the market, you are missing out, or not doing your job by not trading it. This leads to over trading, and trading randomly or outside of your edge. Any trades taken that are not apart of your trading plan and do not align with your clearly defined edge, should be considered random trading. This is common after losing, because the natural tendency to want to make back what you lost. This only compounds mistakes and adds to the losses, making it even harder to recover both emotionally and financially.
Being excited or eager to trade is normal, especially for beginners who are drawn to the profit potential. We are all in the market to make money, and if you are not in the market you are not making money. But more often than not, being out of the market is the right thing to do. It is often better to not make any money, than to lose it!
By understanding, developing, and only trading your edge you increase your likelihood of earning a consistent income. Remember, all edges have a failure rate between 40-60%. So it is important to not jump back into the market after losing, until the next time your edge sets up. If you do not know what your edge is, you should only trade SIM or not at all until you develop one.
2). Scalping or Not Allowing for Windfall Profits. There is an old saying on Wall Street "you cant go broke taking profits." But you absolutely can go broke by taking profits, primarily when your losses are bigger than your wins.
It has become common these days for people to advocate scalping. But they do not understand that the math is against them.
They think since the high frequency trading firms are scalping for ticks or a point, that they should too. But a retail trader cannot compete with these institutions. They have algorithms that can make 10 trades faster than you blink, pay minimal commissions, have direct access to the exchanges, hedge their trades, and often use wide stops and scale in to positions.
A beginner should never scalp, and even those with experience are better off swing trading as it offers a less stressful and less difficult way to trade profitably. When swing trading it only takes 1 out of 10 trades to offset all the losers and provide a profit. This is the complete opposite of scalping, where it takes 10 winners to offset one large loss. Or if you are using a smaller stop like twice your target (1 point target and 2 point stop), it still takes 2 trades to make up a single loss and a third to make a minuscule profit after commissions. What happens when you lose again? This cycle repeats over and over, and the trader dies slowly but surely from 100 bee stings.
3). Wrong Mentality. There are many examples of the wrong traders mentality which prevents success for so many. One of which is losing. Most traders do not like to lose, they see losing as a problem. They do not understand that losers lead to winners, and that losing is the natural cycle of trading and is imperative to a consistent return. You cant win if you dont lose!
Another example is emotions. Most traders see emotions as the enemy, that which stands between themselves and the market, and prevents them from succeeding. So they work to try and remove emotions. But this is not possible. As long as you are a human you will have emotions. You can never remove them. The key is to understand them, and use them to your advantage in the market. And when you are not in the right mental state, remove yourself from the market altogether.
A third example is fighting the market. This relates back to the first topic, over trading and random trading. Many traders do not realize the market does not always offer what they are seeking. A trading range is a good example of this. In a trading range, the market goes sideways there are many failures, and the market does not get very far. What happens to a trader who does not realize this? He continues fighting the market, looking for a large gain when the market is not offering one.
So it is important to understand your self and the market. Not just the market. You need to be able to realize when you should not be trading because your mind is not in the right state productive to trading. As well as knowing and understanding your edge, which also means the market context it works well in, and when it does not.
For more understanding on these topics and more, including how to develop an edge and how to better your traders mentality, see website below.
If you found this helpful please like! Feel free to comment or ask questions.
Top 3 Reasons Traders Lose or Give Up1). Over-trading and Random trading. Most people and traders think in order to make money as a trader you have to be trading all the time. If you are simply watching the market, you are missing out, or not doing your job by not trading it. This leads to over trading, and trading randomly or outside of your edge. Any trades taken that are not apart of your trading plan and do not align with your clearly defined edge, should be considered random trading. This is common after losing, because the natural tendency to want to make back what you lost. This only compounds mistakes and adds to the losses, making it even harder to recover both emotionally and financially.
Being excited or eager to trade is normal, especially for beginners who are drawn to the profit potential. We are all in the market to make money, and if you are not in the market you are not making money. But more often than not, being out of the market is the right thing to do. It is often better to not make any money, than to lose it!
By understanding, developing, and only trading your edge you increase your likelihood of earning a consistent income. Remember, all edges have a failure rate between 40-60%. So it is important to not jump back into the market after losing, until the next time your edge sets up. If you do not know what your edge is, you should only trade SIM or not at all until you develop one.
2). Scalping or Not Allowing for Windfall Profits. There is an old saying on Wall Street "you cant go broke taking profits." But you absolutely can go broke by taking profits, primarily when your losses are bigger than your wins.
It has become common these days for people to advocate scalping. But they do not understand that the math is against them.
They think since the high frequency trading firms are scalping for ticks or a point, that they should too. But a retail trader cannot compete with these institutions. They have algorithms that can make 10 trades faster than you blink, pay minimal commissions, have direct access to the exchanges, hedge their trades, and often use wide stops and scale in to positions.
A beginner should never scalp, and even those with experience are better off swing trading as it offers a less stressful and less difficult way to trade profitably. When swing trading it only takes 1 out of 10 trades to offset all the losers and provide a profit. This is the complete opposite of scalping, where it takes 10 winners to offset one large loss. Or if you are using a smaller stop like twice your target (1 point target and 2 point stop), it still takes 2 trades to make up a single loss and a third to make a minuscule profit after commissions. What happens when you lose again? This cycle repeats over and over, and the trader dies slowly but surely from 100 bee stings.
3). Wrong Mentality. There are many examples of the wrong traders mentality which prevents success for so many. One of which is losing. Most traders do not like to lose, they see losing as a problem. They do not understand that losers lead to winners, and that losing is the natural cycle of trading and is imperative to a consistent return. You cant win if you dont lose!
Another example is emotions. Most traders see emotions as the enemy, that which stands between themselves and the market, and prevents them from succeeding. So they work to try and remove emotions. But this is not possible. As long as you are a human you will have emotions. You can never remove them. The key is to understand them, and use them to your advantage in the market. And when you are not in the right mental state, remove yourself from the market altogether.
A third example is fighting the market. This relates back to the first topic, over trading and random trading. Many traders do not realize the market does not always offer what they are seeking. A trading range is a good example of this. In a trading range, the market goes sideways there are many failures, and the market does not get very far. What happens to a trader who does not realize this? He continues fighting the market, looking for a large gain when the market is not offering one.
So it is important to understand your self and the market. Not just the market. You need to be able to realize when you should not be trading because your mind is not in the right state productive to trading. As well as knowing and understanding your edge, which also means the market context it works well in, and when it does not.
For more understanding on these topics and more, including how to develop an edge and how to better your traders mentality, see website below.
If you found this helpful please like! Feel free to comment or ask questions.
Day Trading - Only Strong Trend Days Day Trading - Only Strong Trend Days (Can also be used on HTF)
There are generally only 2-5 strong trend days a month. The majority of trading days are some form of trading range days, either within a range or a weak channel which reverses and forms a trading range. On strong trend days the market offers what most traders want - a high probability of a large reward, with a tolerable risk. Usually the risk feels greater (and often is) on a strong trend day because there is a sense of urgency, and the bars are often bigger than normal.
On trading range days the bars tend to be smaller, offering what appears to be a lower reward, but there are many more failures and reversals. This makes it very difficult to identify a good setup, and even when there is one the market does not make it very far before there is an opposite reversal. This lures unsuspecting traders in, who continue fighting the market taking every trade or only the losers. This type of market is like a boa constrictor. The more you fight, the more you struggle, the tighter its grip and the harder it is to overcome the draw downs and emotional fatigue.
Because these types of days are hard to trade and do not offer what I want (a good chance at a large reward), I choose to sit these days out. Instead, I wait for a strong trend day, and then continue to wait some more for a pullback and my edge. Does this mean I miss out on some good moves? Sure. But I do not care. I trade to win, not to trade for fun. It does not matter what I miss, it only matters what I take and the actions I make in the market.
So how does a trader know if the day is a trading range day or likely to become a strong trend day and should be traded? In order to help guide you, here are some common characteristics of a trend day.
"......"
After the above has been identified - it is still better to wait for a pullback and an edge like a "......."
This increases the likelihood of a good trade with a strong traders equation. It also helps decrease stress of prices going against the position as it often does when you just enter at the market or without an edge. Of course, waiting is not easy. Just like Tom Petty said "Waiting is the hardest part!"
Does this mean you are less likely to lose? Usually, but not always. Even with trend trades fail, although less often. It is absolutely possible to lose money selling in a bear trend or vice versa. The key is to continue onward, and enter the next with trend trade if there is one. If not, or it also fails, prices are more than likely in a trading range and you just haven't yet realized it. If this is the case, it is often better to stop trading and wait for a strong trend day, rather than continuing to fight the market when it is not offering what you expected.
**These ideas and strategies can also be applied to higher time frames and long term investing.
"..." = withheld material from original post (members only material).
If you found this helpful please like! Feel free to comment or ask questions
Trading - Only Strong Trend Markets Day Trading - Only Strong Trend Days (Can also be used on HTF for investing)
There are generally only 2-5 strong trend days a month. The majority of trading days are some form of trading range days, either within a range or a weak channel which reverses and forms a trading range. On strong trend days the market offers what most traders want - a high probability of a large reward, with a tolerable risk. Usually the risk feels greater (and often is) on a strong trend day because there is a sense of urgency, and the bars are often bigger than normal.
On trading range days the bars tend to be smaller, offering what appears to be a lower reward, but there are many more failures and reversals. This makes it very difficult to identify a good setup, and even when there is one the market does not make it very far before there is an opposite reversal. This lures unsuspecting traders in, who continue fighting the market taking every trade or only the losers. This type of market is like a boa constrictor. The more you fight, the more you struggle, the tighter its grip and the harder it is to overcome the draw downs and emotional fatigue.
Because these types of days are hard to trade and do not offer what I want (a good chance at a large reward), I choose to sit these days out. Instead, I wait for a strong trend day, and then continue to wait some more for a pullback and my edge. Does this mean I miss out on some good moves? Sure. But I do not care. I trade to win, not to trade for fun. It does not matter what I miss, it only matters what I take and the actions I make in the market.
So how does a trader know if the day is a trading range day or likely to become a strong trend day and should be traded? In order to help guide you, here are some common characteristics of a trend day.
"......"
After the above has been identified - it is still better to wait for a pullback and an edge like a "......."
This increases the likelihood of a good trade with a strong traders equation. It also helps decrease stress of prices going against the position as it often does when you just enter at the market or without an edge. Of course, waiting is not easy. Just like Tom Petty said "Waiting is the hardest part!"
Does this mean you are less likely to lose? Usually, but not always. Even with trend trades fail, although less often. It is absolutely possible to lose money selling in a bear trend or vice versa. The key is to continue onward, and enter the next with trend trade if there is one. If not, or it also fails, prices are more than likely in a trading range and you just haven't yet realized it. If this is the case, it is often better to stop trading and wait for a strong trend day, rather than continuing to fight the market when it is not offering what you expected.
**These ideas and strategies can also be applied to higher time frames and long term investing.
"..." = withheld material from original post (members only material).
If you found this helpful please like! Feel free to comment or ask questions
Day Trading - Only Strong Trend Days (Can also be used on HTF)Day Trading - Only Strong Trend Days (Can also be used on HTF)
There are generally only 2-5 strong trend days a month. The majority of trading days are some form of trading range days, either within a range or a weak channel which reverses and forms a trading range. On strong trend days the market offers what most traders want - a high probability of a large reward, with a tolerable risk. Usually the risk feels greater (and often is) on a strong trend day because there is a sense of urgency, and the bars are often bigger than normal.
On trading range days the bars tend to be smaller, offering what appears to be a lower reward, but there are many more failures and reversals. This makes it very difficult to identify a good setup, and even when there is one the market does not make it very far before there is an opposite reversal. This lures unsuspecting traders in, who continue fighting the market taking every trade or only the losers. This type of market is like a boa constrictor. The more you fight, the more you struggle, the tighter its grip and the harder it is to overcome the draw downs and emotional fatigue.
Because these types of days are hard to trade and do not offer what I want (a good chance at a large reward), I choose to sit these days out. Instead, I wait for a strong trend day, and then continue to wait some more for a pullback and my edge. Does this mean I miss out on some good moves? Sure. But I do not care. I trade to win, not to trade for fun. It does not matter what I miss, it only matters what I take and the actions I make in the market.
So how does a trader know if the day is a trading range day or likely to become a strong trend day and should be traded? In order to help guide you, here are some common characteristics of a trend day.
"......"
After the above has been identified - it is still better to wait for a pullback and an edge like a "......."
This increases the likelihood of a good trade with a strong traders equation. It also helps decrease stress of prices going against the position as it often does when you just enter at the market or without an edge. Of course, waiting is not easy. Just like Tom Petty said "Waiting is the hardest part!"
Does this mean you are less likely to lose? Usually, but not always. Even with trend trades fail, although less often. It is absolutely possible to lose money selling in a bear trend or vice versa. The key is to continue onward, and enter the next with trend trade if there is one. If not, or it also fails, prices are more than likely in a trading range and you just haven't yet realized it. If this is the case, it is often better to stop trading and wait for a strong trend day, rather than continuing to fight the market when it is not offering what you expected.
**These ideas and strategies can also be applied to higher time frames and long term investing.
"..." = withheld material from original post (members only material).
If you found this helpful please like! Feel free to comment or ask questions
Day Trading Trend or Trading Range? Can be applied to investingIn the previous article we discussed only trading on strong trend days or strong markets. We also identified what increases the likelihood of a day (or market) becoming a strong trend. As said before, there are only a handful of strong days a month (or only a few strong markets at any given time). Because of this, it is just as important to identify and understand when a market is likely not a trend and more likely a trading range.
Within the first hour or two of the open (when day trading), it is often obvious if the day will likely become a trend day or a trading range. Once the market has been identified as likely a trading range, it is unlikely to become a trend day as the market tends to continue what it has been doing. In this case it is more likely to continue to have heavy two sided trading and less likely to convert into a strong and healthy trend.
But wait - most channels are some form of trading range right? Yes. This is a form of slanted trading range, or a trending trading range. This is where the market is technically in a trend but it is very weak and likely to reverse at any time. In fact, by the close it will likely reverse and the trend is unlikely to remain intact.
Characteristics of a Trading Range Day
"............"
So if most days are not trend days and are instead some sort of trading range, cant a day trader use this information to his advantage? Of course, if it aligns with your trading style or method. But you must understand that you are not likely to win on many trades, or win a large reward. Instead most trades even strong ones, only go for 1X the risk. On top of that there are many trades to take, most of which fail. This makes it difficult to remain focused and continue trading without emotions and without missing the trades you need to win to recover losses.
What about only taking strong trades like ".......?" That is a reasonable thing to do, but the probability is still often lower and the reward is as well. And on these days most stop order entries fail, resulting in repeated failures. This is a "............." If not, you will likely get stopped out just before prices go your direction! Or the market will only go in your favor temporarily before stopping you out.
This makes trading difficult for beginners and even for those with experience. However most do not realize they should simply remove themselves from the market during these times. Instead they continue to trade as they think they should, and continue to grow losses, making it harder to recover even on a good trading day.
"I do not like to trade when the market is likely to reverse at any time. I only like to trade when the market is not likely to reverse at all." - Josh Ridenour
**These ideas and strategies can also be applied to higher time frames and even long term investing.
"..." = withheld material from original post (members only material).
If you found this helpful please like! Feel free to comment or ask questions
