Trader Mindset

Your Daily Process Can Be Killing Your Career or the prospects for your trading career. Professional traders bifurcate their trading day into preparation and tactical.

After the close, pros get prepared for the next day in terms of research and running their models.

During the following day, they spend their time focusing on trading tactics and managing risk.

This type of focus on your behavior provides a platform for enhanced performance due to your focus.

If you try to do 14 things at one time while trading, the lack of focus can lead to your making errors, missing trades, or taking small losses.

This is a short list of what can happen... I would not try to find trades "on the fly."

That's amateurish and chasing trades or markets is not a sound strategy in order to build a long-term track record on your P&L, nor is it behavior that you can replicate for years and years energy-wise.

Do your work the afternoon or night before, and spend the next day executing the plan.

Don't waver from this discipline. It will serve you better.

Routine or ritual? The things that you do might feel good, but not actually effect your P&L.

That doesn't mean they are bad, but it's a good idea to keep a journal on your activities so that you can measure their efficacy. Why?

Time and energy.

Physical and emotional economics.

Your trading career is summed up by your trading P&L but also what you need to experience in order to achieve those results - regardless if the P&L is positive or negative.

Routine or ritual? The things that you do might feel good, but not actually effect your P&L.

That doesn't mean they are bad, but it's a good idea to keep a journal on your activities so that you can measure their efficacy. Why?

Time and energy.

Physical and emotional economics.

Your trading career is summed up by your trading P&L but also what you need to experience in order to achieve those results - regardless if the P&L is positive or negative.

This pertains to trades that you are in, not trades that you are about to enter. Consistency and discipline will show up on your P&L. That's the numerical representation

If you see a chart on Twitter or StockTwits, delete it. It's not helpful, insightful, nor entertaining.

How do you handle your winners?

Do you feel enough anxiety to want to take it out of your portfolio and get rid of it?

Are you afraid you're going to lose it?

Those are emotional issues, not financial ones. These emotions might appear for you whether you're a discretionary chart reader or system trader.

Do you have the willingness to love it and let it grow up and develop into something amazing?

Do you become overbearing and stalk the trade and keep it on your monitor all day?

When the vol expands, you can trim the position so that you have the same percentage risk that you did when you added the position to your portfolio, or when you added your last risk unit.

When vol expands, you can cut the number of contracts per risk unit.

Allocators are looking at your daily equity volatility and in today's environment, they are looking for low-vol gains.

This pertains to trades that you are in, not trades that you are about to enter. Consistency and discipline will show up on your P&L. That's the numerical representation

If you see a chart on Twitter or StockTwits, delete it. It's not helpful, insightful, nor entertaining.

How do you handle your winners?

Do you feel enough anxiety to want to take it out of your portfolio and get rid of it?

Are you afraid you're going to lose it?

Those are emotional issues, not financial ones. These emotions might appear for you whether you're a discretionary chart reader or system trader.

Do you have the willingness to love it and let it grow up and develop into something amazing?

Do you become overbearing and stalk the trade and keep it on your monitor all day?

When the vol expands, you can trim the position so that you have the same percentage risk that you did when you added the position to your portfolio, or when you added your last risk unit.

When vol expands, you can cut the number of contracts per risk unit.

Allocators are looking at your daily equity volatility and in today's environment, they are looking for low-vol gains.

Practice Having Discipline Like for a baseball pitcher, it's about feel and consistency.

That means discipline.

You need to do the same thing over and over in order to be good an anything and that's especially true for trading.

In trading, that means you have to start with good habits, trade positive expected value trades, and consistently replicate that process.

If you have a smaller account, you might think you are relegated to penny stocks or fallen angels.

I would not do that because the emphasis is on making lots of transactions. Unless you are an HFT firm, the number of transactions work against you.

Stay in your winners for as long as you can. They go a long way to ensure you are successful or are becoming a successful trader.

What I would do if I had a small account or was underfunded, is to either trade commodity spreads or option strategies.

You can create hedges with either strategy and limit your risk while putting the odds in your favor.

The margin requirements are also smaller so you don't have to tie up a great deal of your trading equity in one trade.

Practice Having Discipline Like for a baseball pitcher, it's about feel and consistency.

That means discipline.

You need to do the same thing over and over in order to be good an anything and that's especially true for trading.

In trading, that means you have to start with good habits, trade positive expected value trades, and consistently replicate that process.

If you have a smaller account, you might think you are relegated to penny stocks or fallen angels.

I would not do that because the emphasis is on making lots of transactions. Unless you are an HFT firm, the number of transactions work against you.

Stay in your winners for as long as you can. They go a long way to ensure you are successful or are becoming a successful trader.

What I would do if I had a small account or was underfunded, is to either trade commodity spreads or option strategies.

You can create hedges with either strategy and limit your risk while putting the odds in your favor.

The margin requirements are also smaller so you don't have to tie up a great deal of your trading equity in one trade.

The benefits of running a system are multi-fold. Once you trust your model, you can go deep...

Once it's live and trading, you will learn about the markets, your model itself, and most importantly, yourself.

You have to be there and be conscious of all that's around you. A good trader will not become too euphoric in good times (they are what they are) nor too despondent during the bad times (as long as they are 'in model').

It's possible to have worse results than what you saw in the Monte Carlo simulations. That requires a great deal of discipline, for it's the daily discipline that will help you express your edge...every day, every week, and every month.

It's the consistency to be disciplined that will show up on your P&L.

So you can outperform a great lot of traders, even some pros, if you can be consistent with your daily discipline and not wavering from it.

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Inner Voice of Trading

Managing Expectations

The benefits of running a system are multi-fold. Once you trust your model, you can go deep...

Once it's live and trading, you will learn about the markets, your model itself, and most importantly, yourself.

You have to be there and be conscious of all that's around you. A good trader will not become too euphoric in good times (they are what they are) nor too despondent during the bad times (as long as they are 'in model').

It's possible to have worse results than what you saw in the Monte Carlo simulations. That requires a great deal of discipline, for it's the daily discipline that will help you express your edge...every day, every week, and every month.

It's the consistency to be disciplined that will show up on your P&L.

So you can outperform a great lot of traders, even some pros, if you can be consistent with your daily discipline and not wavering from it.

Free Offers

Inner Voice of Trading

Managing Expectations

We traders are people who have to live with uncertainty and make decisions with imperfect information. No way around it. We willingly decide to take this lifestyle on.

Most people can't live with the uncertainly. John Q. Public and Public Pensions will pay you handsomely to make the decisions under the conditions that we must make and as long as you are consistent, they will continue to do so.

You can't do this from the beach or it flip-flops. That's Tim Ferriss stuff. If you want to be a beach bum, go for it. This is not for you.

You have to be dressed as if your best client can walk through the front door at any time. Looking like a frat boy is not how you install confidence and you're not going to trade $2,000 into millions.

Tiger Woods played his best golf while his personal life was a big lie. Think about the emotional system he needed to play his "game."

When his personal life blew up, so did his game. It's as if he needed the secrecy and his clandestine behavior to play at a high level consistently. Maybe that's how he got "in the zone."

That's how his emotional model served him. How is yours serving you?

Nothing should get in the way of you feeling happy and trading. If trading is making you feel bad, you can quit trading.

Go for a quality, happy life first. Put a protective stop on your trading career to preserve your happiness. Driving yourself nuts is not worth it.

Free Offers

Inner Voice of Trading

Managing Expectations