I will try to share a few lessons of what I have gleaned in the trading business. Take it as a grain of salt. You may or may not agree with them or even think I am crazy but I believe in them.
Trading is the toughest psychological game on the planet. Until you learn how it is played you don't have a prayer.
Making money should be boring. You should know so well what is going to happen you have trouble keeping awake. If it is exciting you are in it for the adrenaline rush and are gambling. You will pass by sure winners in search of a gamble or risky trade. You won't even realize you are doing this.
You must find setups or a way to trade that fits you. There are more profitable ways to trade then there are people trading. In the same way you can't wear someone else's shoes or glasses you can't trade their setups as they don't fit who you are. Even if they are winning setups for someone else they will be losers for you because you are not them. Have you ever seen a nice pair of shoes on the shelf in the store then tried them on and they don't fit. Setups are the same. It takes time to learn what kind of trader you are scalper, swing trader, or trend trader. It doesn't matter what you want to be, you are who you are. Trying to be someone you are not will never work, never.
Markets are like people they all have a personality. Like a setup you have to find a market that fits you. Trying to trade a market that does not fit you is like trading the wrong setup, it will never work. It doesn't matter what market you like, you must trade something that fits you. some markets are even bi-polar and have different personalities during the day and night.
Trading is like fishing. You can fish anytime but if want to catch fish you fish when the fish are there. You must find the times that fit you and your setups.
It is the nuances that will make your setup a winner not the setup alone. As you learn your setup you will begin to notice confirming factors. You must learn to look for this conformation or confluence of things that signal green. It is like giving some one a gun to hunt and they use it like a club because they don't know how to use it properly.
The better you get the farther in advance you will be able to see. You will begin to anticipate what is about to happen. It is a like a good chess or checker player that can see the moves farther in advance. The best trades are the one you see coming way in advance.
There is no indicator that will help you. You need to see without any indicators. Indicators can be used as training wheels but have too much lag to be of use. They tell you what has already happened but are useless to help with what is about to happen. If you can't look at pure price action and see what is happening you don't understand things yet. The only indicator you need is the one between your ears.
I believe in Van Tharp's statement we trade our beliefs. If you don't understand that meaning you don't understand things yet.
The market runs on stops. Until you understand what this means you are short sighted.
If you don't have a trading plan you are a disaster waiting to happen. You are running a business with no plan. A business with no plan will not be a business very long.
Many people have a daily goal, I threw mine out and don't have one anymore. For me, it pressured me to take less than ideal setups which is stupid. I know what a good setup and must wait for it. My daily goal now is to just trade my setups and only my setups, anything less then I pass on it. On some days I will make less than what was once my daily goal and some days I make many times that. What it did do is dramatically reduce my draw downs or losing trades. I trade less but make more. I think to say the market will give you X amount each day is a bit arrogant and not realistic. The market will teach you very fast to not be arrogant.
The best trades are the ones that are hardest to make.
You must always be humble. I am not a home run hitter and never will be but a base hitter. What you need to realize is home run hitters strike out a lot. I never knock it out of the park but get on base most of the time. It is who I am. Learn who you are and trade it. Trade who you really are, not who you want be.
If you want to trade think like a trader. If you want to win think like a market maker.
In summary trading is a very tough business, one of the toughest. It has been quoted that it has a 90% failure rate which may even be conservative. So if you want to survive you must do what the other 90% are not doing. It is not one thing that will get you there but many small things. On its own each is insignificant but when combined together is a winning formula. If you can get consistently profitable you can earn more money than you can ever spend but be prepared for the many dead bodies on the side of the road of your journey. Just don't be one of them.
Trading is a lot like learning a sport. You can read hundreds of books on golf but that will not make you a good golfer. Golfing will make you a good golfer. But if you read everything about golfing and apply that to your actual golfing you will be even better.
Learning to trade isn't a quick thing. It doesn't takes weeks or months but years and there are no shortcuts. A good mentor can cut this time down but this is not about learning a setup but the basics and psychology of trading. Some people never "get it", they aren't dumb or stupid it just doesn't fit who they are. Some people can paint or play a musical instrument as if they were born to it. Some people it takes longer and some just can't do it.
Trading is warfare. Measure - counter measure. As soon as you find something that works, you will discover it doesn't work for long. The one constant in trading is there is no constant. You have to be prepared to adjust every day to new conditions. If you like consistency you're doomed, however if you like something different, new rules, and a new challenge every day you are in luck.
Everyone thinks they will be the exception but I got news for you, you're not!
From trading I have bullet holes, stab marks, missing limbs and not just tire tracks on my face but skid marks. I am not so much a winner but a survivor.
Many people think trading is easy but it is not in the least. It is countless hours of hard work and the learning never ends. But if you make it, there are huge rewards hence its attraction.
For those of you who think I am full of it. That's perfectly OK as I will soon be walking on your dead body along with so many others who thought they knew everything and pave the streets. Thanks for cushioning the way.
The following 31 users say Thank You to ctnz for this post:
You're totally right man. Thanks for posting your thoughts. Trading is the toughest business out there. Indicators helps your trading, but if you didn't conquer the psychology you're doomed to fail every time.
Though I dont agree with everything i support this motivational speech.
PS ex i dont agrree with 9 (or i may not understand it ) .
Your should think above your personal beliefs . I have seen people waiting for ever for the mrket to relapse just because they strongly believed that . Your decisions should be based on logic and not sentiment (i have also seen people making the wroing trade for the right reasons but i can respect that )
I am not talking about believing the market will go up or down. You can't think above your personal beliefs or emotions because it is who you are. It is totally impossible. If you think you can trade without your emotions you are completely wrong. If you try to put your emotions or feelings in a jar when you trade they will find their way out (usually in a mouse click at the most worst possible time).
Give it a read. It may help you understand what I am talking about. Because as you stated "i may not understand it". Based on your statement you're missing a big piece of the puzzle. I am maybe not doing a very good job of explaining my statement as it is like trying to explain the color blue to a blind man. But I do thank you for the feedback and comments. We are here to help and learn from each other.
The following 3 users say Thank You to ctnz for this post:
Hello, just wanted to say that was a great read, many thanks for good info
Market Mind Games: A Radical Psychology of Investing, Trading and Risk: Denise Shull
^this book you mentioned seems good, Ill go ahead and order it, but before I complete the order do you have any other suggestions for me to pick up?
where is a good place to start learning about Van Tharp? book/site/youtube? I don't know who this person is yet
Denise's book is good value. Not expensive at all plus it WILL pay dividends and can even change your personal life for the better. Look for Torrents and you can download a lot of trading books in .pdf form for free. One of the rules for trading success is you have to always keep your costs down.
Look for books that talk about trading psychology and thinking as opposed to technical books and indicators.
There is no one author who is best. Each can teach you something. Read as much as you can from different people. Even when you read something you don't agree with you learn who you are not. All those little somethings from many books add up to a winning combination. One pearl from one person isn't huge but a single pearl from several people and you have something of real value, a pearl necklace.
You don't just read trading books and stop. The learning never ends and should be a part of your trading plan. People think a trading plan is just about setups but it is much more. Your trading plan is a "living document" and should be continually amended as you grow or think of new things to add. It is not work so much as a part of being profitable and successful. Its only cost to you is only a little time. What it costs if you don't is possible failure. You get back what you put into something. I read my trading plan almost every day.
I worked as a computer consultant for several decades. I had to explain complex technical things to non technical people (e.g. management). I found analogies worked well for me for taking something complex and making it simple for anyone to understand. I still do it a lot to this day. People who cannot explain something in simple terms simply means they don't understand it themselves. I hope my ramblings and way of writing is not difficult to understand. Some people have told me my writing style drives them nuts or that I am talking down to them. I can assure I am a very humble person and mean no offense in any of my comments.
Geez, talk about a motor mouth. I best stop immediately and put my soapbox in the closet, way in the back.
Last edited by ctnz; November 3rd, 2012 at 01:06 AM.
The following 4 users say Thank You to ctnz for this post:
Strangely, you just helped me define a characteristic about myself that I've been thinking about for a few years but couldn't put my finger on a word for it. I'm actually very happy I posted on your thread
I just got a big smile! Its like the word 'analogies' was absent from my vocabulary, and reading you describe your characteristic just gave me a small epiphany. I have the exact same talent, making complex things simple. That's actually a good piece of the puzzle why I'm even in this field of study, because no one else I know has a clue about this stuff and it takes a person like you to make people understand (eventually ill be there too ha). I've envisioned myself becoming a mentor or teacher later down the road of life because of this natural communication talent.
Ill go ahead an look over Van Tharp tomorrow in the morning, its a little late now ha. Thanks again for the feedback