Trader Mindset

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If you think you can trade the gold market by owning the miners, you can. 

However, they may be hedged having sold their production forward.

If that's the case, the company probably won't participate any bull moves in gold and your upside is limited. 

Had to learn this one the hard way many moons ago. 

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I think it's normal to feel regret (or anger, disappointment, or any other emotion) about a trade or process that your attempted when it didn't work out. 

Whatever that feeling is, take it and use it as an input to create a new rule - a trading boundary around yourself and your behavior.

Do that in each instance you feel such strong feelings and you'll be able to see and measure your evolution and growth.

This is the natural order of things. 

Remember, things don't "happen to you" - that's being a victim.

You get to decide to trade. 

You get to decide to experience all the feelings and emotions that go with your decision to trade.

Stay empowered and use these very valuable data points to your benefit. 

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You can use your systematized set of rules to draw good boundaries between yourself and your clients. 

When you run money for a living, you are always sitting at the head of the table. 

Whether you run an RIA or are a CTA, you have to have ownership over everything that happens in the account.

Clients often like to "run ideas by you" - I would strongly advise against this. 

That's not what you do - you run the money based upon your rules or trading model and that's it. 

You don't need any outside help. 

If you are at a big brokerage firm or wirehouse, then you need to manage the relationship in a different way. 

But being a Financial Advisor or Consultant is a marketing job - your expectation is to gather assets, not create trading gains. 

When you're on your own, you have full discretion over the account and if the owner of the money has strong ideas, you can either pass on taking the account or have them open another account somewhere else that they can trade their hunches. 

You don't want their garbage in your portfolio. 

You do not want to take an account where you know there will be trouble ahead of time. 

When you settle for less, you get less than you settled for - and in my experience, it will only get worse. 

Then you're in a living hell and second-guessing yourself because you are now running two models: yours and what you think the client wants to do. 

One of my mentors said that when you do this, "you get the worst of both models." 

The next thing that will happen is that they'll call you to override one of your protective stops because they "know someone who is in the industry" or "they have hunch" that they want to go on. 

This is the time to resign from the account and tell them to work with that person full-time as you obviously don't have their full confidence. 

Boundaries: Good fences make good neighbors. 

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If you're an equities trader, you have more fundamentals at your disposal that you'll know what to do with.

The risk can be that you start to look at fundamentals when the stock is going against you in order to justify staying in the trade.

Unless you've backtested those criteria, this is not the time to start doing so. 

Offset the trade and protect your capital - you can backtest all you want when you're in cash.

Two, if you're trading growth names, they will likely have high P/E multiples.  

Not all the time, but most of the time. 

You are going to have to pay for quality.

Even if they are labeled "overbought" to some. 

If you ask 100 people what that even means, you're going to get 100 different answers.

Buy irrationality and sell greater levels of irrationality. 

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In my experience, when you don't have a plan, things go from bad to worse more than they go from bad to "getting better." 

Mistakes happen. Bad trading is another ball of wax.

When you're in that rut, you can compound things by not keeping it simple and just offsetting the trade.

I can remember guys trying to sell options calls on stock positions that were losing money instead of doing the smart thing and selling the stock for a small loss.

Instead of doing the smart thing, the trader has a loss on the books, has sold the call at the wrong time, and in selling the call has capped his upside. 

This is the way to compound errors. 

Keep your initial model simple. 

Risk on and risk off. 

You can learn about combinations and more sophisticated trading when you are already profitable in one area. 

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Whether you're just starting out or trying to trade a new asset class, you're going to learn more about trading it by doing it. 

After you have the basics down it's time to go live. 

It's like having kids, you can only prepare so much before you just have to jump in. 

There's no perfect day, time, or market environment to begin. Today is the day.

The sooner you start, the sooner you get to figure out what works best for you and what doesn't. 

Be in the mindset of doing and remove what not essential. 

The biggest part of trading is emotional and psychological so the sooner you get to feel those feelings, you get to calibrate your emotional system with what you know and that will make all the difference.

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When I was coming up there was no internet nor mobile technology. 

I had two sources of information: my older friends on the trading floors and the bookstore. 

Today it must be a daunting to know where to start or what to focus on - there's too much information.

If you find yourself stuck or in a rut, I'd remove the inessential items.

Get good at one thing first and you can expand from there. 

And with that, I'd focus on longer-term trading and get good at that. 

Once you have that down, try another asset class or another time frame and expand from there. 

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Trading is too hard to be great at everything - you need to pick one thing and focus on it.

Most trades represent sub-optimal risks, so you should be eliminating as many names from your list as possible. 

They all don't represent opportunity, so delete them. (How does that feel?)

You can further simplify your risk management by using Stop orders. 

They are the Swiss Army Knife of trading.

Focus on one asset class and one trading style therein.

Lastly, I would learn a longer-term trading strategy as there is more proof in the public domain that they work better than daytrading or short-term strategies. 

You can learn those later but start with a longer-term strategy, get good, and build your confidence, and then work on the short-term tactics if you want. 

There are more successful traders trading longer-term strategies than day traders. Remember, the losers don't show up. They are out working other jobs now.

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Systems don't remove emotion from your body, but you can learn to trade methodically with some practice.

One way you can do that is to develop a habit of entering your buy stops above the market and let the market come to you.

In doing so, you can put yourself in the place of having to feel some strong emotions and concurrently NOT taking other actions. 

Easy to write about, harder to do. 

Do this long enough and you will be in effect systematizing your trades. 

Do it even longer and you will have put yourself in the habit of solely following your rules and not sabotaging your trading. 

At that point you can say that you're very close to being a purely systematic trader. 

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There are a few reasons why you enter a trade in several stages. 

You can keep your ego in check.

Or you might want to have a larger position on as a trend unfolds. 

You can test your ideas to see (and feel) what's best for you.

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