The Foundations Of Trading Success

The Foundations Of Trading Success involves developing a profitable trading system from constant development and many years of forex experience and observing daily market changes and world events and storing the data for future better performance.

A lot of the fear that I used to feel came from the fear of failure rather than the fear of losing money. After spending a biblical amount of time studying and trying to trade profitably, and then seeing yourself lose trade after trade was such a moral drainer.

Nowadays I dont feel this so bad, I believe I have reached a stage now where I can at least make some money, or at the worst not lose too much. I try not to think to much about the future, and what I will be doing in a year.

To overcome this-

I like the excercise Mark Douglas suggests in his book, trading in the zone. This is to trade in batches, this means taking 10-20 trades without any form of hesitation and without looking at the past, and then assessing the results.

Or do what I have done this year, which is to split my year in 6 blocks, of 2 months. At the end of each section its time to go through the records and look at what was done and what can be learned for the next block of trades.

Trying to achive professional status in one giant leap is pretty hard, by breaking the year up we create almost a ladder to reaching our goals.

Trade===> Assess performance===> Improve the areas that need it===> trade again and so on.

Another thing that should help with psychology is a drawdown limiter. We should stop after so much drawdown and re-assess and re-group before moving forward. For me this is 4 trades lost, and then its an automatic week off. Of-course this does not end the drawdown, it just stops it for a time, it does not mean that when we start again we will win. But it does mean that our mindset will recover. This may not be as important for the system trader, but for those of us using discretion, we ned to stop ourselves digging our own grave. If you are not at the stage where you are completely unaffected mentally by losses, then stopping untill we are fit is an essential.

Just like a footballer, they wont play if they are injured, simply because it will make their injury worse, so if your mind is injured due to a few losses, there is I high probability for making your situation worse.

If your not fit to trade dont!

I don’t want to highjack this thread, or proceed in different direction than medici has in mind, so I’ll just post few lessons from Stock market wizards that I’ve read previously “cut and copied” somewhere from the internet.

 

1. Successful traders use trading methods that suit their personality
2. You can't control what the market does, but you can control your reaction to the market
3. To be a winner, you have to be willing to take a loss
4. HOPE should never be in your vocabulary
5. If you are on a losing streak, reduce your position size
6. Don't underestimate the time it takes to succeed as a trader
7. Approach trading as a vocation, not a hobby
8. Have a business / trading plan
9. Be honest about your weakness and DEAL with it
10. Know when to do nothing
11. Being a great trader is a process. It's a race with no finish line.
12. Never ever listen to other opinions. Make your own trading decisions
13. Analyze your past trades. Study what happened to the stocks after you closed the position
14. Don't take on excessive leverage. It only takes one mistake to knock you out of the game
15. Great traders continue to learn and adapt
16. Don't just stand there and let the truck roll over you
17. Being wrong is acceptable, but staying wrong is totally unacceptable
18. Contain your losses
19. Good traders manage the downside; They don't worry about the upside
20. Wall street research reports will tend to be biased
21. Knowing when to get out of a position is as important as when to get in
22. To excel, you have to put in hard work
23. Discipline, Discipline, Discipline !!!!

Medici, thanks for your wisdom. I'm trying to understand your trading principle of "follow, don't anticipate". However, I think it is impossible to not anticipate.

By observing price action and momentum at a certain price level (support/resistance/pivot levels), I am able to follow where price is likely to go.
However, before I enter the trade, am I not anticipating where price would go when I set a predetermined target profit or risk/reward?

So am I not following and anticipating in that sense? Thanks in advance~!

Hello. Glad you like the entertainment. Don't know about wisdom...it's part experience, and part reflection and the joy of writing.

I agree that it's hard not to anticipate. After all, that's probably how our brains developed - by reading the signs in nature and anticipating where pray or food could be found. And we seem to have terrible difficulties with uncertainty and not knowing. Thus all the weird beliefs people hold and even go to war for.

The problem is that we see patterns, anticipate and form beliefs where there is little ground for that. In the markets we act under uncertainty and with incomplete information.

Under such conditions anticipation may become a fool's game. Our minds fill up with ideas about what we think the market will be doing, instead of focusing on what it is doing.

Like I said, I used to be an anticipator, but these days I tend to think in scenarios instead. In the context of what the market is doing, what may happen? What are the potential risks and rewards from the scenarios? What are the probabilities?

Placing trades based on such considerations has made all the difference, as there is no personal involvement or investment in beliefs about what will happen.

So it's about seeing and acting objectively/impersonally rather than based on beliefs coloured by desire, fear or the need to be right. Objectively all you can do is assess risks, which then is related to being able to read the market and follow it's rhythm.

I have just discovered (and read through) this thread! What a delight!

Thanks to Medici and all the other contributors. I shall read this one again and again because there is so much of value in here!

I am still learning to become a succesful trader, having discovered the markets little over a year ago, and have made just about all the mistakes mentioned! I have also come to realize that I am the biggest risk in my trading and that I have to find MY strategy that works for ME and then follow it with Discipline!

Please don't let this thread die!

the same way Walter Hriniak became one of the best major league hitting instructors yet could not hit a lick himself ... while Ted Williams was recognized as a horrific hitting coach go figure

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