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This is a very personal issue for me. It affects the very core of my psychology, motivation, and mentality. I recently read a thread called Time to Give Up
I get a lot of emails and PM's from people seeking advice. Usually they've been losing money and don't really know what to do next. But I received a particular letter recently that made me want to write this post.
What are some of the characteristics …
It really effected me and got me thinking at the same time. In my trading journal I have documented my progress so far.
I thought I would start this journal thread because I think that getting other peoples input and feedback would be great. I have some experience with discretionary trading more than algorithmic trading which I am still working on. I am very accountable …
How do you know you're not wasting your time? How do you know that your progressing in the right direction with the right tools for success? I have no idea myself. When I get down on myself and become unsure, I always end up looking at my journal, and my trading stats. But from my journal you can see that its not a pretty sight. So I want to kind of flip this idea around. I like to ask myself questions, and questions from the community and see what we get. I am hoping others find this process beneficial although the example of myself is only a sample of 1. I am sure here on the forum @Big Mike or other long standing members have seen hundreds if not thousands of traders come and go. What do the success stories have in common? What do the failures have in common? Can we put that into actionable steps to help move towards the things that make people successful and away from things that end up in failure.
I can only speak of my own personal journey. Lets start with the first question, am I wasting my time? For me the answer at this moment is no. But depending on my psychology at the moment I may be inclined to say yes out of frustration. I enjoy trading, I enjoy doing the homework, unraveling the mysteries of the market, and playing this game where your opponents are both yourself and the entire financial world at the same time. I think the answer to the question is more of a personal introspection than anything else.
How do you know if you're on the right path to find success in trading (lets make it simple and say profitable trading)? I sure have no idea how to tell. But that is maybe because I have not defined what the right path is. Using a generalized examples of things that are mostly attributed to the failure of new traders are: Lack of capitalization, psychology, no written trading plan, no risk management, lack of spouse/family support, not willing to put in the work, seeking the next holy grail. The list goes on. But the key thing I want to mention is that none of these are intrinsic to the person/trader. All of these problems can be fixed. But it doesn't tell you how you are progressing in a stepwise fashion towards your goal. Its actually just vague actions to take that may help you be successful. But doing them does not guarantee success.
So if someone had a written trading plan, had proper capitalization, worked on their psychology, had a risk management procedure, had family support, and stopped seeking the next holy grail. Is that the right path? For me it comes down to results. I haven't seen much results even though I have done all of the above. But that does not mean I haven't made progress. I think that seeing progress in your work help keeps you motivated.
How do you analyse your performance and progress in the spectrum from newbie trader to expert? What critical benchmarks need to occur for success? How many have I accomplished? What is the next step?
On the flip side of things, what areas are really not worth the time spent? Searching for the holy grail is probably the largest problem there. Some people spend months or years switching systems, instruments, charts, everything and anything under the sun. But what about continuing to learn about those techniques anyway? There is definitely a fine line between continuing trader education, and grail seeking to the point it becomes detrimental.
The real core of what I am trying to get across is this, as selfish as it is though I think every trader asks themselves and others this question. Am I on the right path to profitable trading? If so, what can I do to continue to progress effectively towards my goal? If not, what do I need to change in order to become more aligned with a successful path?
Sorry to be so blunt but no edge, no funny. If you have no edge then your most important and urgent task should be to find an edge.
No amount of journaling, planning, money/risk mamagement, support from friends/Family, wiilingness to put in the hard work etc. etc, would help except maybe feedback from your peers as you are doing right now.
Try to picture yourself as a casual gambler with no edge that visits Las Vegas. You have read everything about the seducing martingales that exits on the net to beat the roulette wheel but alas apart from the sporadic winnings you get at times, you still feel something is missing and can't really make the money you felt could be made.
The real question in my book is how to find an edge?
In his book Mark Douglas defines an edge as beeing nothing more than an indication of a higher probability of one thing happening over another. ... The only evidence you need to gather is whether the variables you use to define an edge are present at any given moment. The rest is proper execution, enough capital to survive the rough passages and a sound state of mind.
I don't have time for a detailed answer but here is a quick one.
a) Do you accept that trading is not for everyone? I will tell you that I believe this to be an absolute fact. If you agree with me, then you should have an "ultimate stop loss" at what point you completely stop trading and acknowledge it is not right for you. This was discussed in detail in the "Time to give up thread".
b) As far as what separates most of the winners from losers, I can think of two excellent points:
1) Read this thread:
I'm creating this thread with the purpose of a 'catch all' for any trading related question that futures.io (formerly BMT) members want to ask, but don't want to create a new thread for -- or find an existing thread to reply to.
I've …
If you find that you are sharing a lot of similarities with members in that thread asking the same question over and over again, then you are almost certainly on the wrong path and need to break loose from that way of thinking. I am primarily talking about how everyone expects to be told what to do directly or specifically, or how they want to develop an "if, then, else" system.
2) Yes I have seen a huge number of traders fail. I would say more than anyone else on the forum. Most of them never set themselves up for success in the first place. I made a detailed post about this recently but not sure what thread, sorry. Point is, most of them had completely unrealistic expectations to begin with, and then they pursued a path that continued down that (wrong) road and ultimately led to complete failure. The solution in my mind is to simply acknowledge from the beginning that you are most likely wrong about everything, until proven otherwise, instead of the opposite which too many inexperienced traders make, and then create measurement goals to help you in a categorical way break down the various elements of trading into sub-sections so you can evaluate yourself (score yourself) on each of these on an ongoing basis.
Willpower alone is not enough to succeed. It is a prerequisite to simply being a player.
Ask yourself, if you are in a room of 100 professional traders, how are you going to beat them? You should have a clear answer, otherwise there is little chance you will be able to do it.
I think Trendisyourfriend nailed it here. Do you have a quantifiable edge? Have you backtested it(This means manually)? Does it have a positive expectancy when taking into consideration all market conditions? Do you have trading plan that reflects how to exploit this edge day in and day out?
If you have all of that , then it is a matter of do you have the psychological skills to trade it. Some have a great plan with a positive expectancy and can never trade it well enough to make money..
As a minimum, if you are questioning whether or not you are on the right track suggests that your edge is not one that has you very excited. Once you get an edge you believe in, you will no longer question whether you are on the right path; the path will be getting your psychology in the right place to trade your plan properly(which in itself is a large task)..
All the best,
Wolf
BTW... great thread by @madLyfe with a couple of vids on how to deconstruct any task to make it simpler to tackle.. A valuable tip for something as complex as trading..
Edge is important, of course. But placing all the emphasis on the edge is inappropriate.
But if you don't have all the other building blocks in place, you'll never be able to get to where you actually have an edge.
It's like saying in order to beat Tiger Woods at golf, you first need to be able to beat Tiger Woods at golf.
You need to build a foundation. And all of those other things you mentioned in your poll are layers in that foundation. There is no single thing in trading that is going to make you profitable. Instead, it is a combination of all the little things that will.
I really like this answer because it takes a more holistic approach to trader development. If all you had to do was find back testable edges, automated trading would be the best approach 100% of the time.
Very interresting question. Thank you for your thread. I ask myself the same. How do I know I am on the right path?
I try to become a trader now since two years (fulltime). I am still not profitable yet. I can only tell you what I do.
Since I dont know what is rigth or what is wrong, or what helps me and what not. My solution is simple. I do everything. I read every book I found about trading. I bought every video courses. I am in several trading rooms.
I have several mentors for trading. I am reading and writing in forums. I learned to program in Ninjatrader. I spent 30k to 40k usd only for trading education.
I am sure people are telling me know, that is wrong. You dont have to buy courses and books. It is all about the psychology. Maybe that is true. But I think first you have to come to that point where the psychology counts.
I've got good news for you. In your case it is easy to find out whether you are making progress or not.
Before I begin you should know that the way you ask the question gives an indication that you should be optimistic. I can't make proper judgement yet but there are grounds for a positive outlook. The main reason I say this is that you are clearly not lost. The fact that you can give such a comprehensive background to your question and the fact that despite being clearly under some emotional/psych pressure your writing is clear is very good.
In this message I will outline a simple way for you to make an evaluation. You can use it now to get a general feeling and use the same structure to continue evaluating at regular periods.
Structure:
The structure for success in trading (or sports, or study or any sort of process where learning and a feedback loop is important) is relatively straightforward. Lets think in terms of a pyramid.
1. Level I: The Foundation: The bottom of the pyramid
The foundations for success are the things that you have mentioned in your mail. Support, capitalization, the grey matter to be able to experience trading in a structured way. If you were a kid thinking about a sports career this is the phase where you look at your kid and you evaluate - do they really enjoy this activity. Does it suit them.
In your case, you have stuck at things and clearly have a handle on all the ingredients that are necessary. You have committed capital and continue to do so despite losses. This is in fact encouraging. You are not mad.
The outputs of this Foundation Level are twofold. Visually think of the next level of the pyramid being split in two pieces.
2. Level II: The Operations: The plan and the execution of the plan
On nexusfi.com (formerly BMT) and in every trading book on the planet there are two operational aspects that are the key to your success. If you never make it to the next level you can be successful if you get this level right.
I ask you two simple questions:
a. Have you developed a plan ?
b. When you are trading are you executing this plan/sticking to the plan
The questions are simple and honest answers are important. If you try to kid yourself or are determined to look for the easy way out here you will never make it and should stop now - get a less expensive hobby. The answers and key to improving are in your journal.
The Plan:
Do you have a trading plan? Do you? Really?? I don't want to see it but if I asked you to mail it to your husband or your wife would they say "This looks thought out, simple, clean and professional". Would your father or your mother be happy with it ? Would your teenage kids be proud of you for having spent your time developing it and polishing it? Please note, I am not asking you whether you have rocket science in your pocket. I am just asking do you have one ??
The Execution:
Let's presume that you have a plan and that it is up to scratch. It is a worthy plan. It reflects the expertise that you have developed since you started trading. It is your intellectual property. The really, really, really important question is: "Are you following your plan?". I know a number of traders , some of whom are on nexusfi.com (formerly BMT), who are amongst the cleverest people I have met in my 45 years. They have a world of experience in life and business. They have intimate knowledge of the markets, the platforms, the tactics and the strategy. They have plans. They do not follow their plans. They are not making progress. They cannot make progress.
Truth with a capital T: "If you do not follow your plan, you commit two sins. Firstly you cannot attain the goals of that plan. This is bad and causes financial pain. Equally bad maybe even worse, you cannot make your plan better."
Ask yourself the question. "Am I following my plan?"
3. Level III: Strategic Development: The Dream
Everybody in this business who will survive and develop will need to develop in a strategic way over the years. Let's not spend too much time on it right now as it is not directly relevant. Let it suffice to say that following 1, 2 or 3 years of pulling in the cash with a great plan and super execution you will want to develop in some other way. I don't mean to stick my head down Mikes pants in any way but it is a relevant example that we are all familiar with. @Big Mike went down the road of nexusfi.com (formerly BMT), he shares his ideas about retirement in the sun and has the family and dogs that we are familiar with. Let's say that this is what we can see of the strategy. It leads to the dream.
I don't want to stray too much from the message of this thread but you or anyone else might like to go and look at the Webinar of Manesh Patel. I hope I have the right link here. He hit the nail on the head a few times in this webinar.
It is my pleasure to welcome back Manesh Patel of E.I.I. Capital Group for another webinar presentation on Wednesday, September 12th @ 4:30 PM Eastern US.
The topic is "Psychology of Trading", and some of the items discussed will …
Summary and Notes:
OK. Lets bring it altogether. You have to ask youself just 3 questions
1. Do I have a good foundation -------------------- YES / NO
2. Do I have a plan -------------------------------- YES / NO
3. Am I following the plan ------------------------- YES / NO
Notes and Answer Key:
Question 1:
If you answer NO to question 1. Then you cannot make progress until you put in a good foundation. Like I said in the beginning. You seem to have a foundation and the brains to go to question 2.
Question 2:
If you answer NO to question two (remember, you just need "a" plan. Not the plan that can shoot the eyelashes off a fly just a good plan that you feel is worthy) then you can and WILL make progress by improving this plan with your latest structured knowledge. If you answer YES to question 2 then excellent. Proceed to question 3.
Question 3:
Let me turn things around here a little. If you answer YES to question three even if you are still not consistently profitable. "Yes, I follow my plan well but the results are not good and I still manage to follow my plan" - then you a gold medal contender. Following the plan and being able to move forward when looking death in the eye is the stuff that champions are made of. If you are doing this ... despite the fact that the losses are mounting ... you have ice in your heart my friend. You are good. Sounds a bit funny huh? It is a little counter intuitive but it is the truth.
If you answer NO to question 3 then we are in a difficult spot. Yes you have a foundation, Yes you have a plan but No you are not following the plan. Many are the ways that this ain't gonna work. Not only are you not making progress but you will never be able to make progress and improve your plan unless you hit it.
nexusfi.com (formerly BMT) is full of clues and tiny footprints and tracks that tell us that this is the rocky road. "Moving your stops", "Not taking signals because you don't think they look good", "Constantly chaning the chart". You know this stuff.
I am a glass half full guy. Maybe knowing this for some people is an ice breaker.
Final Words:
treydog999. Tell me the answers to those questions and you will tell me and yourself the answer to the question "Am I making progress?".
