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Trade to Trade Well- Not Make Money
By: DTI
Posted: 8/26/2010 2:53:00 PM
Referenced Stocks:
Trade To Trade Well, Not To Make Money!
I have repeated this statement hundreds of times to my students. It seems like a contradiction but it really is not. Traders who routinely make enormous amounts of money trading don’t mentally count the dollars while they’re trading. They don’t keep a mental calculator continuously running in their head to constantly keep track of how much money they’ve put into their account. “Let’s see, I bought 1000 shares of Haliburton and it’s up one point, times one dollar a share, equals 1000 dollars!”
Nothing and I mean nothing, will blow your concentration and cloud your judgment faster than keeping that calculator running in your head, calculating the dollars you’ve made or lost each minute that goes by during the trading day.Another booby trap is to announce to the world, your husband, wife or even your dog that you’re going to make a specific amount of money trading today. You’re setting yourself up for failure. Setting as specific dollar amount you must bring home each day, especially if you’re a beginning trader, assures that it probably won’t happen. This need to make a specific amount of money colors your view of the market and pressures you to open positions that are marginal trades because you have promised yourself or worse yet, someone else - that you’re going to bring home the cash! Your pledge echoes in your mind, so you force trades. Odds are, you lose money. Now you’re embarrassed with yourself and you start questioning your self-esteem, which automatically leads to more losses. The cure for this illness: From this point forward, your goal is not to make money. Your goal is to trade to trade well! Money is a by-product of trading well. A very interesting thing starts to happen when you focus on trading well. Your profits will start to add up a lot faster than they did when making money was your primary goal. This is simply because traders who focus on trading well cut their losses and let their winners run. They protect their capital and leave unnecessary risks to others. They recognize a choppy market and sit on their hands and don’t trade. They make promises to no one, including themselves, about the money they want to take home. Traders who trade well let the market come to them. They are extremely patient and disciplined. They wait for the perfect setup and entry point. If that perfect point doesn’t come along, oh well, they wait for the next one knowing that another chance is just around the corner. Once in the trade, they mechanically and methodically manage their position, taking profits at specific points, and moving their stop loss to protect their principal. Traders who trade well don’t trade simply for the excitement of the trade because they have become addicted to the thrill. They don’t trade out of boredom or when they are sick or tired. They don’t trade especially if they have stress in their life that disallows their full focus on the market. Successful traders always abide by their trading rules and never stray from them. Traders who trade well are perfectionists and are very wealthy as a result of their unwavering discipline. You too should have this goal.
Happy Trading!
Past performance is not indicitive of future results. Futures trading involves substantial financial risk. Please consult your personal financial advisor before using this information for your own trading purposes.
Goals for Novice Traders
BY: Cory Mitchell, CMT
When you begin trading, there are a lot of questions. With all the information out there it can be hard to decide where to start. Setting goals can help, but often novice traders set the wrong type of goals. As a novice trader your initial goals should help you eventually make money, but making money should not be your goal. Instead, opt to make your initial goals about process and emulating traits of professional traders.
Make Your Goals About Process, Not Results
Initially, traders want to make goals about numbers: "I will make 1% per day on my $30,000 capital," or "I will make 30% per year." While it seems simple, to actually get to certain percentage or dollar targets you will need to refine your market approach and hone your discipline. By plunging into the market and expecting to make a certain amount of money, the goal becomes almost impossible to reach over the long-term. These types of goals require the trader to truly understand the capabilities (and limitations) of the trading plan they are employing, not just think they understand.
Based on the method being used, it may be impossible to reach a dollar or percentage goal, but it still could be valid and provide a good return; therefore, the trader must either abandon the strategy or deviate from it in an attempt to find more yields. For many traders this becomes an endless cycle of abandoning strategy after strategy. Looking at charts in hindsight makes trading look easy, but those who trade know it is harder than it looks. Novice traders must not only become knowledgeable about the markets, but also about themselves.
Just like any other business, to become a good trader you must focus on a solid process. Results will not come instantly. Most businesses require quite a bit of time before profits are made, and many businesses fail completely. Trading is no different. Without understanding how the markets truly work and developing a winning process, the results are based on chance, not skill. (For related reading, see: 10 Steps to Building a Winning Trading Plan.)
To build a winning process for trading the markets, try using these three goals.
Always Have a Plan
In business school, you are taught that to start a business you need a business plan. Trading is a business. Therefore, every time you trade you must be trading according to a well-thought-out and calculated plan.
The plan should include how trades will be entered and exited and how money will be managed. The plan should be very detailed, outlining the markets that will be traded, risk parameters, if filters will be used on trade signals, what constitutes a trade and exit signal, position size, what market environments will be traded, and how that will be determined, such as ranges or trends.
Therefore, the goal here is to create a complete plan before making another trade.
Learn Not to Trade
Especially when a specific dollar amount is the goal, traders will push to achieve that goal, even when opportunities are not present. The market does not present statistically probable trading opportunities at all times, often you will be far better off sitting on your hands or watching TV than trading. This does not sit well with most people; they want to continually be doing something. In the markets this can slowly (or quickly) erode the profits that came during good trading times.
Trading during slow times or making impulsive trades outside the scope of the plan is such a common issue that it deserves special attention. Make one of your goals to be as disciplined as possible, only making trades that are outlined in the plan. (For related reading, see: The Key to High Returns Is a Disciplined Strategy.)
Keep It Simple
A complex strategy can be very alluring. Many people believe because something is complex it is more likely to work. Avoid getting too fancy with your analysis and trading strategies or making a winning trading plan more complex—usually this only results in destroying the profitability of it. If you like the stock market, stick with trading stocks. If you like currencies, then trade FOREX. Focus on only one market and a couple of simple strategies when starting out.
The goal here is to avoid constant tinkering to improve performance, or continuously switching markets, strategies or analysis methods. Stick to the plan. If it occasionally needs to be reworked a bit that is fine, but keep the revisions simple and avoid getting overly complex.
The Bottom Line
When starting out, be a niche trader focused on a very few manageable goals. Results will come in time if you are trading according to a trading plan, not trading when there are no opportunities, and avoiding getting too complex. (For related reading, see: The Importance of Trading Psychology and Discipline.)
I think that if you scalp and can cut off your losers early, you can trade almost any account size. Traders who go for a tight stop and a large TP are the ones who definitely need a larger account, also those large TP chasers who are willing to take a lot of heat via drawdown. A scalper with an appropriate stop and willingness to exit trades even earlier when momentum isn't on their side will live to see more days on a tiny account than any other type of trader, they will also find it easier to handle greater leverage.
It is possible, however 50$ on NQ is just 2.5 points.
Such small moves can often happen in seconds so you will have to be very very conservatieve and consistent.
Make sure you tested the system before you go live because the deposit could be gone before you know it.
Good trading day overall even though I was distracted trying to get audio to work I managed to get some decent trades in along with 2 chicken trades. LOL!
Today I started a 1,000 dollar challenge as I listed in a previous post. 1 contract per 1,000 …
Just started it. Up $340 on the first day of trading. I will be posting video's daily to YouTube. First one is up but doesn't have sound. Just got all the stuff together and all the video's from now on will have sound.
