This is my first post on the Factory so here goes. I have enjoyed the factory and definite kudos to guys like Vegas and his various trading models.
My first post (and hopefully not my last) is about psychology. Some people dismiss this area but in my opinion it is a huge determining factor as to whether someone will make it or crash and burn as a trader.
In meeting many new traders I find that most questions that they pose revolve around trading systems and how to make the most money from the market. Rarely am I asked questions related to the mentality and mind of a trader which we all soon discover in our trading journey is a major facet that will determine if we will be successful or not.
In this post I wanted to illustrate the importance of trading psychology and understanding your own mental parameters by using the experiences of 3 different traders that I met.
The first trader I ever met was veteran bank trader who had little formal education, was divorced, drank too much and enjoyed drugs. I was shocked as to how someone with excessive habits like this could have had such a long trading career. It was not too long into my trading journey that I discovered that this type of individual was common place on the trading floor. I spent much time with this trader to try to pick up any useful tips or what trading system he used. I noticed that he placed very little weight on technical analysis (walk onto the FX trading floor of any bank and ask them what they think of the RSI indicator and the stochastics - most won't have a clue what you are talking about and the rest will probably say something obscene!). He traded more based upon 'gut instinct' of the market that was developed over considerable time. His key to success was learning over time price behaviour (price action). In addition he told me that he never trades when he has a hangover, is high or had a recent arguement with his ex-wife!!
How true it is that events taking place in our lives outside of our trading can have a major impact upon our trading. How many traders have traded whilst angry at the market and then make a trade to try to get one back only to further their losses. How many people have traded whilst convinced that their broker is out to get them only to make more bad trading decisions. How many have traded at times when their life is undergoing major changes only to lose the necessary concentration and confidence that it takes to be successful.
Another trader that I know told me that he went to a seminar about swing trading and came back from the seminar fired up that he was going to change his method to swing trading. Convinced that this was the path to greater profits he began to research various swing trading systems until he finally found one that he was going to adopt. After failing miserably and having to go back to day trading that had been working for him he told me why he had failed. He said that he would spend time researching a possible trade and then would execute with the various stop loss/ take profit parameters in place. He said that he found himself lying awake at night wondering what the market was doing and would get out of bed and check on his trade. He said that he also would execute a trade and then panic when the trade went against him because he could not wait for the big swing that he was expecting. Finally he concluded that this style of trading just was not good for his personality and went back and resumed his day trading style and was able to sleep at night again without worrying what was happening in the Asian session!
This reminds me of the old adage 'if it aint broke then don't fix it'. How often are traders enticed away from models that have been working for them in favor of the latest or most fashionable indicator. If your trading model is working and making you money then keep doing it. Secondly it is important that your trading method works within the parameters of your own mentality. Whilst you can work on changing your mentality it may be better to understand yourself and adapt a style or method around yourself as opposed to trying to adopt someone elses mentality.
The third trader that I met is one that I met recently. This trader told me that whilst he has had some success this was somewhat diluted and in some cases replaced by his losses. His money management strategy was reasonable but it became apparent to me the more we chatted was that he was lacking in a key area that is essential if one is to become a successful trader - CONFIDENCE. Every time his trade was up 10 pips he would exit the trade being afraid that the trade would turn against him and every time the trade was down 5 pips he would exit afraid that it would get worse. This is a common obstacle in trading because no one can say with 100% accuracy where the market is going. If they could they would have all the money in the world. Lack of confidence will destroy you as a trader. Confidence needs to be developed over time and in trading it does not come over night but it can be developed as we understand the market better. One way to boost your confidence level is to thoroughly research your trading model - know it inside and out and especially know how it responds around the vulnerable areas because all trading models have an achilles heel and it is how you handle those points which is vital.
Well there it is folks just a few things that I have picked up along the way in the wonderful world of trading. If this business was easy everyone would be doing it but over time and with the right approach and mentality success (whatever you define it to be) can be achieved.
Wish you all the best in becoming the best trader YOU can be.
- Monaco
My first post (and hopefully not my last) is about psychology. Some people dismiss this area but in my opinion it is a huge determining factor as to whether someone will make it or crash and burn as a trader.
In meeting many new traders I find that most questions that they pose revolve around trading systems and how to make the most money from the market. Rarely am I asked questions related to the mentality and mind of a trader which we all soon discover in our trading journey is a major facet that will determine if we will be successful or not.
In this post I wanted to illustrate the importance of trading psychology and understanding your own mental parameters by using the experiences of 3 different traders that I met.
The first trader I ever met was veteran bank trader who had little formal education, was divorced, drank too much and enjoyed drugs. I was shocked as to how someone with excessive habits like this could have had such a long trading career. It was not too long into my trading journey that I discovered that this type of individual was common place on the trading floor. I spent much time with this trader to try to pick up any useful tips or what trading system he used. I noticed that he placed very little weight on technical analysis (walk onto the FX trading floor of any bank and ask them what they think of the RSI indicator and the stochastics - most won't have a clue what you are talking about and the rest will probably say something obscene!). He traded more based upon 'gut instinct' of the market that was developed over considerable time. His key to success was learning over time price behaviour (price action). In addition he told me that he never trades when he has a hangover, is high or had a recent arguement with his ex-wife!!
How true it is that events taking place in our lives outside of our trading can have a major impact upon our trading. How many traders have traded whilst angry at the market and then make a trade to try to get one back only to further their losses. How many people have traded whilst convinced that their broker is out to get them only to make more bad trading decisions. How many have traded at times when their life is undergoing major changes only to lose the necessary concentration and confidence that it takes to be successful.
Another trader that I know told me that he went to a seminar about swing trading and came back from the seminar fired up that he was going to change his method to swing trading. Convinced that this was the path to greater profits he began to research various swing trading systems until he finally found one that he was going to adopt. After failing miserably and having to go back to day trading that had been working for him he told me why he had failed. He said that he would spend time researching a possible trade and then would execute with the various stop loss/ take profit parameters in place. He said that he found himself lying awake at night wondering what the market was doing and would get out of bed and check on his trade. He said that he also would execute a trade and then panic when the trade went against him because he could not wait for the big swing that he was expecting. Finally he concluded that this style of trading just was not good for his personality and went back and resumed his day trading style and was able to sleep at night again without worrying what was happening in the Asian session!
This reminds me of the old adage 'if it aint broke then don't fix it'. How often are traders enticed away from models that have been working for them in favor of the latest or most fashionable indicator. If your trading model is working and making you money then keep doing it. Secondly it is important that your trading method works within the parameters of your own mentality. Whilst you can work on changing your mentality it may be better to understand yourself and adapt a style or method around yourself as opposed to trying to adopt someone elses mentality.
The third trader that I met is one that I met recently. This trader told me that whilst he has had some success this was somewhat diluted and in some cases replaced by his losses. His money management strategy was reasonable but it became apparent to me the more we chatted was that he was lacking in a key area that is essential if one is to become a successful trader - CONFIDENCE. Every time his trade was up 10 pips he would exit the trade being afraid that the trade would turn against him and every time the trade was down 5 pips he would exit afraid that it would get worse. This is a common obstacle in trading because no one can say with 100% accuracy where the market is going. If they could they would have all the money in the world. Lack of confidence will destroy you as a trader. Confidence needs to be developed over time and in trading it does not come over night but it can be developed as we understand the market better. One way to boost your confidence level is to thoroughly research your trading model - know it inside and out and especially know how it responds around the vulnerable areas because all trading models have an achilles heel and it is how you handle those points which is vital.
Well there it is folks just a few things that I have picked up along the way in the wonderful world of trading. If this business was easy everyone would be doing it but over time and with the right approach and mentality success (whatever you define it to be) can be achieved.
Wish you all the best in becoming the best trader YOU can be.
- Monaco
) and nice first post! 
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