Up 2,500 points this month

The market is back in full swing and we have been rewarded handsomely. In the last 24 hours I have had some nice gains and I am on track to another good month.

Perseverance goes a long way in this business. I started out this month from behind after  losing 4 trades in a row and digging myself into a small hole. I continued to execute my plan and manged to make back my losses and then some. I have also brought my batting average back to a respectable level.

The best way to pull yourself out of a losing streak is to have amnesia when you approach new positions. You got to forget about the last trade and how much you made or lost and move on to the next trade. Every trade is different and you do not want your emotions spilling over to the next trade. This allows you to stay focused and execute your plan based on what you see is happening instead of your emotions taking over and dictating what you do.

Risk to Reward

I have been so busy this week that I have not been able to trade my personal account much. But here is an update of where I am at as we approach the middle of the month.

If you notice my batting average has suffered severely because I have not been able to pay as much attention to my positions. But because I maintained a solid risk to reward on each position I have still been able to see consistent results. Stay Tuned!

You must learn how to lose before you can expect to win

I have officially conquered a demon of mine traders. For the life of me I could not find any success in the markets during the summer. Year after year after year I would struggle and give back profits during this season. Well August in particular, but all of that is behind me. Now I did not close out the month with a lot of profit which is understandable for August,  but I did close out the month with style considering my draw down.

If you take a look at my draw down for this month it only reached .97%. This is less than 1% of my portfolio. How was I able to accomplish this you might ask. Well by taking my lumps, dusting myself off and continuing to push forward.

30% of my trades were losing trades. But because I had a defined risk unit and an area where I was looking to get out of the market if it went against me. I was able to cut my losses and preserve my capital for other opportunities. Trading is a lot easier once you take your emotions out of the game and just execute.

One strategy that I use that helps me to be less emotional and more objective while I am in a trade is to have a defined risk amount, one that I am comfortable with losing if the market moves against me. Have you defined a risk amount that works for you. If not then keep adjusting your risk unit until you are comfortable and no longer losing sleep over your positions.

Master Traders use D.O.P.E. not HOPE

There are many characteristics and skills required by traders in order for them to be successful in the financial markets. The ability to understand fundamentals and the ability to determine the direction of the trend are a few of the key traits needed, but not one of these is as important as the ability to contain emotions and maintain discipline.

Below are the 4 key traits that I feel are nessccesary for a trader to master in order to become what is referred to as a Self Actualized Trader.

Discipline
Observation
Patience
Execution

Discipline:

“Failing to prepare is preparing to fail.”

Proper preparation is required before every open. The easiest thing to do is prepare. If you don’t, on behalf of the other market participants, we thank you.

“Never mistake activity for achievement. If you don’t have time to do it right, when will you have time to do it over?”

Perfect trading practice makes perfect trading. You learn by breaking down each trade into small pieces and reviewing each piece. Develop a plan before you trade or do it later with less cash and more frustration. (Remember to Back test, Study, Back test, Study and more Back Testing etc….)

Remember money management is required on every trade. It only takes one trade to undo months of profitable trading. So always remember, that the one trade that can undo it all is always lurking around the corner. “Control your own destiny or someone else will.”

Put yourself in the best position or you will not have a position come tomorrow.

Observation:

“A man should look for what is, and not for what he thinks should be.”
Albert Einstein

A trader should look at a chart for what it is, and not for what he wants it to be. Face reality as it is, not as it was or as you wish it to be. Bend your view to the charts, not the charts to your view.

You want to be diligent in looking for other opportunities, but still mindful and conscious of what is  currently on your plate. If you are not conscious of what is on your plate you will not see what is falling off the sides. In other words you want to manage your current positions effectively with still looking for other trading opportunities.

Patience:

“Be quick but do not hurry.”
Pull the trigger when you see the trade but not before.

“Do not let what you cannot do interfere with what you can do.”

You become a better trader by being patient and waiting for the plays that make sense to you and trading more of them with more size.

There are times when you should have positions on, and times when you should look to be flat. Knowing when to trade and knowing when to be patience and sit on your hands in cash is a necessary step towards obtaining trading mastery. Remember remaining flat in cash is a position too, a big part of trading is not just making profit but retaining it as well.

Execution:

A good plan violently executed now is better than a perfect plan executed next week.
George S. Patton

A trading plan is just words until you act on it.

I was once told by a mentor of mine “He who hesitates is poor.”

So If you are thinking about getting out, your competition is already flat.

Confine yourself to the present and always do whatever’s next. ” Stay in the now moment opportunity flow”

A trade is not connected to another, unless you let it. Move on, understand what happened in the past but do not have an emotional attachment to it.

Michael Jordan is one of the greatest athletes and competitors of our time. One of his most famous quotes is “I’ve failed over and over and over again in my life and that is why I succeed.” With that being said we are what we repeatedly do. So excellence, therefore, is not an act, but a habit.

The view of trading changes after a loss it is your job to get it back to where it was. And maintain it through periods of adversity.

Traders should periodically review and assess their performance and refine their approach. This means not only should they review their bottomline and their positions, but also how they prepared for the trading session the night before, and how they’re progressing in terms of ongoing education, among other things. This periodic assessment can help the trader correct mistakes, which in return helps to enhance their overall profitabilty. It also helps to maintain the right mindset and be more psychologically prepared to execute their plan the next morning.

In closing it’s important for a trader to be able to read a chart and devolope a directional bias, but there is often a psychological component to trading that shouldn’t be overlooked. Establishing trading rules, building a trading plan, doing research and getting experience are all simple steps that can help a trader overcome these little mind matters.

Obtaining Trading Mastery

One of my favorite sci-fi movies of all time is Frankenstein. It was so interesting to me how Frankenstein was put together from scratch. I always felt if I could apply this approach to my trading, by taking this trait from this trader and this trait from that trader I would become a great trader. It is my belief that a trader should always be learning and trying to improve as a trader. If we could build the ultimate market player what traits and qualities would the trader possess? Well I have done my best to compile a list of these traits.

Disciplined
Observant
Patience
Courageous
Accepting
Accountable
Amnesia
Responsible
Persistent
Open
Flexible
Relaxed
Comfortable
Competent
Diligent
Driven
Prepared
Economical
Honest

Over the years on my path to greatness and trading mastery I have diligently worked at these traits. I feel they are vital and necessary to become a MASTER TRADER. What traits do you feel are good traits to have as a trader and how have you been working to develop these traits?