Lessons by Joe Ross

When I have an open trade its not just money at stake but also the dreams I have of financial independence. This is really the stressful thing - the fluctuating belief in myself and my system. Its easy to doubt oneself and lose hope that trading will ever make money.

Excellent point. Not just the immediate circumstances but overall recent performance causes emotional rollercoaster ranging from euphoria to apathy. Both are dangerous. Hopefully your trading career will be long enough that a month or two of disa pointment won't really matter, as long as you learn from it.

That's when it's time to look at things over a longer period of time. Look over your journal and it will show that your overall performance isn't as bad as that last string of bad trades. Or maybe the opposite-- that your not as sharp as you think and you have to remain prudent even though you just had a run of good trades.

It really helps to keep your goals reasonable. We need to smooth out the peaks and valleys of emotion. That way we can be healthy and live long enough to succeed.

Thanks for ur post
I'm quite stress because of yesterday market, short ranging made me crazy, sigh.....

Master Traders develop a style that is a reflection of their education and character. Most individual trading styles are either positional or combinational and, rarely, a synthesis of both. However, there are other styles.

Positional traders take x amount of positions within a specific price area where the market is thought to be favorable to their trading strategy. This may occur on short term weakness when the longer trends are bullish. A known risk is assumed for a specific profit taking area. Positions remain until the losses or profits are taken or the price action analysis negates the trading strategy.

Combinational traders do not have the patience of positional traders, and want immediate profitable results or will exit the market quickly. These traders add additional orders as the market moves their way, building up large positions for fast two- to six-day price moves, then take profits and exit the market.

A third type of trader is a system trader, who adheres to a trading system discipline.

A fourth type of trader is the method trader. Methods differ from systems in that a method can be traded either as a system with no discretion, or traded with discretionary intervention. A method allows for a trader to be able to change parameters. A method gives full-disclosure of all its parameters and the logic behind the method. It should be realized that both systems and methods are based not so much upon a rationale as they are upon pure statistics, i.e., when a certain setup or pattern occurs, and you behave in a certain way, the result is statistically in accordance with the probable outcome.

The complete trader is able to combine all or parts of the above approaches with his own style. Trading mastery combines observation, scientific knowledge, good judgment, intuition, and creative instincts with decisive action.

so...
how to choose the best trading style?

regards,

Joe answers that question in the last paragraph you have to be a Jack of all trades.....master of all trades

Thanks Joe!

Is it true that selling a market when it is limit up is usually a great strategy ?

This brilliant strategy stems from the idea that selling a market at
limit up, may result in the trader gaining two limit moves in his favor while theoretically not losing any money the day of entry.

I think is that this is an absurd idea. I don t advise this high risk
approach as a trading tactic.

Keep in mind that most markets that remain limit up on the close, will
open sharply higher the next day over 90% of the time. The limit-up
sell is recommended only as a partial profit taking measure, not to
initiate short positions which may be considered on the next higher
open.

If ever trapped into a limit up move situation try to buy deferred
futures contracts or call options immediately and ask how many
contracts there are to buy on the most active futures contract. If
there are over 1000 contracts to buy, do not assume the most active
futures contract will come off limit to trade the remainder of that
day.

A few days ago I received the following question: “I need help finding a forex broker. I notice that spreads among many of them are pretty much the same. So how do I choose?”

The spread is definitely not the most important factor in choosing a broker when you are choosing among those offering the same spread. Most important in choosing a brokerage firm is the per trade slippage, the difference between the entry order price and execution price.

Based on a study I saw some years back, ten orders were placed with five forex brokers. All orders were placed in the same market at the same price, at the same time of day. The difference in slippage from worst to best was over $800. Slippage one year for one particular firm, trading one and two contracts of EUR/USD, was over $20,000 per account. All the fills were supposedly legitimate. One order for 15 contracts was to sell at a specified price. The market took over two minutes to fall in one-pip increments from “.30” to even money, at “00,” before an up tick occurred. All 15 contracts were unbelievably filled at 00. Slippage on the order was a staggering $3,000. A week later another order was slipped over $2,000. At that point, all accounts held by the trader were closed because he complained. USD/JPY once had the daily high and low in a rather tight range. One trader was filled on his buy stop and sell stop at the high and low of the day, 360 pips times ten. You might call it, legalized theft. The broker probably took both sides of the orders. Forex markets are notorious for their slippage, as is seen in any of the exotic currencies.

Any broker who allows this kind of slippage to occur on his customer’s orders is not worth having as a broker.

Some time ago I spent 4 days in a Forex trading office, teaching and working with the traders there. It was interesting to see how these traders speak with one another, and to listen to what they say. I couldn’t help making some observations which I will now share with you.

If you are a part- or full-time trader, you may have enjoyed the attention this wild and wooly occupation brings at social gatherings and events. Many are interested in trading, and find you interesting as a successful trader. At first, the attention may be enjoyable; but a need to maintain this reputation may impact your trading attitude and mindset, and therefore, your bottom line.

The best strategy you can use to avoid letting your reputation influence your performance—especially when enduring a drawdown period—is to keep your conversation low-key about your trading career. Why? The more you present yourself socially as a "successful trader," the more psychological effort you will spend defending this reputation. Several research studies have documented that one of the biggest obstacles to sound decision-making is the need to save face in social situations. People are so reluctant to face the adverse social consequences of having made a poor decision that they stay on a losing course of action, rather than admit they were wrong. For example, some traders are reluctant to sell off losers in order to avoid the possible social criticism that acknowledging a failure may bring.

Suppose you have told your friends about a large position, and within minutes, hours, or days, it tanked, hard and fast. Most folks can’t wait for the next opportunity to ask you (even though they probably know the answer) how your “hot trade” is doing. If you got rid of it, at least you have the solace of managing the trade properly—even though you must tolerate a volley of smug “you-thought-it-would-go up and such, but-it crashed-instead” comments. On the occasions when you ignored your protective stop, however, and held onto the bad trade, the “Boy, you-really-ARE-dumb” looks (and perhaps comments) can exacerbate the psychological devastation you've by now, surely, inflicted on yourself. And we all know the negative impact a negative attitude can have on our trading.

As another example, how many times has the market gapped up, then chopped through the rest of the day, handing you more losses than wins? Inevitably, those are the days when well-meaning friends call on the phone. “You must have made a fortune today!” they gush. “Not really,” you mumble with a sinking heart, remembering the frustrating trading environment. After you hang up the phone, the subsequent feelings can lead you to believe you must have been a dope that day; surely every trader in the world except you grabbed huge gains. In social environments, once you announce and identify yourself as a trader, you will feel a need to defend your reputation. Trading is hard enough, why introduce additional social and psychological pressures that will adversely influence your trading results? Keep the specifics of your trading career to yourself. There is no sound reason to discuss the specifics of your career socially. It’s often done just to build up your ego, and enjoy the attention of others. You'll pay a price for this short-term gratification in the long run. Avoid specific observations or trading choices. That way, you'll avoid embarrassing questions and comments that will interfere with your trading.

Great post Joe

Focus, discipline & staying humble are so important & I'm sure people can relate to this post.

Kind Regards
Steve

Edit... I've just read through Joe's other posts on FF dating back a few years and there are some real golden nuggets of advice for anyone considering becoming a serious trader.

This is one most valueble and helpful post to me..thanks..

I learned years ago that whenever anyone asks me "How's the trading going?", or any variation thereof, to respond with exactly the same answer every time. "Fine." Then I immediately ask them a question about their life, letting them know in a polite way that I'm not going to discuss it. Now, no one who really knows me even asks. On the rare occasion when I've been pushed, I've said, "I really don't want to discuss that at this time."

Not even my wife asks me as she knows that if I want to talk about it, I'll raise the subject. I like it this way. Of course that's why I frequent these boards, just to see some discussion of like-minded people.

I agree with Joe in that talking about it with non-traders only leads to no good.

Shrug. Most of the time it's just not a good idea to talk about current trades. Not only might others decide to follow suit, and lose money, but it exposes you to analyst pride.

If you want to talk about a trade you care about, wait till it's done.

Thanks for the article!

Yeah, even as a newbie I'm already pretty much over talking about trading with all but one or two individuals. It's a bad policy in general and besides - you can't really even get into a discussion of any depth at all before the person that you're speaking with goes through the following stages:

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Great post Joe...Thanks.

Right on the target Ross Joe. Cheers.

Id like to ask the owner of this thread for an advise. I need to stay focus and concentrate but i see that im still lacking these values. Once im not focused i miss what shouldnt be missed according to my charts, because at the end, that is all that i got. My drawings, my charts never lie to me, i just need more focus and concentration. This is a strong question but i hope you can answer and recommend something maybe to read or to practise etc.

Thank you.

Hi belekas. I cannot go into a long explanation here in the forum. But I suggest you do some serious self-introspection as to why you are unable to focus. It has been my experience after having trained many, many traders that when one is having trouble with concentration there is usually some underlying factor in their persona that deprives them of the ability to fully focus on the task at hand. I can tell you that I regularly meditate deeply into the reasons for my actions. Doing that has helped me considerably in ironing out any personality quirks that I had that interfered with my ability to focus. One that I discovered early in my career was one I did not think I had--fear. On the surface, I felt unafraid, but after deep self-inspection, I found that in certain situations, I did experience fear, and I unconsciously failed to focus when and where I needed to. I'm not saying that fear is a problem for you. It could be some other cause of distraction. But the only way you will discover what it is, is through self-examination. It's not easy, but if you work on it, you will discover the underlying reason you are not able to fully focus on trades you really should be in.

Hi Joe Ross,

Very insightful post. I enjoyed very much reading it.

Apologies if the following question is too personal:

In your career, did you make more money trading, or selling your products from the website?

(I am asking for the following reason: if you made decent money from trading, what made you feel that you would have to 'sell' your knowledge - and if you made more from selling your products, what part of your trading background has given you the expertise to develop trading tools?)

regards
daytrading