The Trader's Academy - by Traders for Traders

60 lashes and a month of bread rationing for this man!!

Seriously, I hope your mum's okay, I know what it's like, mine is 85, though still like a butterfly, but getting frailer all the time.. Learn from it and put it behind you is my advice, and remember that tomorrow is always another day. I never leave trades open overnight unless they're in the middle of a very strong trend, and then I will leave them only in the direction of that trend! Right now, with the markets being where they are, they can go either way in the short term.

At least that. You are kind.
My trading has improved but I still manage to exit winning trades early and then open against the trend. Not clever at all.

Ask yourself this ' Is there any rational reason, apart from my own irrationality, why I should exit this trade now? If not, stay in. It works for me. As for trading against the trend, well, I think it's been said many times - when the trend is strong as it was yesterday, don't do it. It's like surfing, it's a real struggle paddling out through the waves and you keep getting knocked back, but it's a hell of a lot easier riding the waves back into shore.

I know it has said so many times every where but I want to say it one more time to emphasize on how important it is for new traders.

Technical analysis is not just pattern recognition. there is a reason behind it. for example when a pair bangs its head several times to a resistance area it is not just a double or triple top. It has a story behind it. It shows us that buyers cannot move the price higher, or there is not enough demand compared to the supply. it doesn't matter which system you use the reality is there and will hurt you if you do not pay attention to what is going on.

So I think the most important thing in any market is its support/resistance areas. It can be horizontal lines, channels, trend lines, or round numbers. Anyone who trades any system should pay attention to those areas.

Very true

My word, 66% of eur/usd traders currently short...guess there's going to be a lot of sorrow drowning tonight!

Whatever happend to parity?

It died at 10,500. Biggest fall in the dollar in over 7 years today!

All closed up, that's enough for me today. Catch some of you tomorrow

Glad you like it I'd like to add a bit to what I said. Here is an excerpt from Jack Schwager's The New Market Wizards:


Jack Schwager:
Anything to add regarding traits that differentiate winning from losing traders?

Charles Faulkner:
A final critical characteristic distinguishing winning traders from losing traders relates to what I've termed "operating metaphors." An operating metaphor determines how we view the world, and it shapes our beliefs, actions, and life-styles. Some of the metaphors used by traders to describe the market are a woman, war, and a game, to name a few of the more common ones. As an example of the game or puzzle-solving metaphors, Richard Dennis says, "It's like playing a hundred chess games at once." Pete Steidlmayer says he's "solving the markets." Paul Tudor Jones sums it up with, "It's a game, and money is a way to keep score." Each operating metaphor will lead a trader's brain to a different set of beliefs and a different approach to the markets, with some being more effective than others.

Contrast the metaphors I just cited with some of the operating metaphors I've typically heard around the trading floor. "I got torn up today," makes the market into a beast of prey. "We took a hit" reflects thinking that the market is a war and the speaker a wounded participant. Which metaphor will result in your feeling more objective about the market--playing a game, even a high-stakes game, or defending yourself from an attacking wild animal? The answer is obvious. The difference is in what is suggested by the metaphor. In the game, there are winners and losers, but your survival isn't at stake, as it is with being attacked by a wild animal. You may respond brilliantly to save yourself from the beast, but that metaphor doesn't encourage you to learn and practice long-term strategies and tactics the way a game does. Having an operating metaphor appropriate to your trading style is fundamental to success.


I believe this is absolutely essential, as it puts your trading in that bigger perspective Cat talked about. It's no longer just about winning and losing. Thinking about P/L every second of trading can be quite tortuous. Ideally, I'd like to be so absorbed in the process, that I don't think about the wins and the losses. An operating metaphor can help with that.

And if you don't like the warrior talk, then develop your own operating metaphor. It's personal after all. Maybe you are a surfer, or a dancer, or an artist. And maybe it relates to a bigger purpose than trading.

In the game of chess I particularly like to solve the end game puzzles but I do not like to sit thru an entire game playing from start to finish and I'm quite good at doing this. For trading, the daily market movement is the entire game which is enormously complex. I narrow down to a certain type of scenario which I see the parallel with the end game in chess which I try solve the puzzle with the same approach I would use to solve a chess puzzle. If I win I feel I'm on top of the puzzle but if I lose I look at it again to see why I lose in this particular end-game setting ? It may mean there's something I don't know about or not aware of and this new knowledge will be incorporated into the rules. That's the trading metaphor I adopt.

As an alternative try meditation. Can be useful if you get laid up. Its also quite handy if you find yourself having an off day and you need to realign your thought processes. Switch off the screens and just clear the head for 10 minutes. Also gives the market a chance to sort itself out with another set up . Headspace app is really quite good. So much of trading is about training the mind to behave in a way that, when you first start out, is the opposite to what your head is telling you.

Thought I'd take something I posted a couple of years back here on ff and re-post it here. it refers back to my fighter pilot analogy on this thread, so if you're not into the warrior aspect of trading, then you can ignore this post. The posts below are not all mine, the ones that are mine have an asterisk next to them.

*"One of the books that helped me become a better trader was Johnnie Johnson's ' Wing Commander ', an account by Britain's top scoring ace of WW2 of his exploits. In the book, he describes the mood in the pilot's mess shortly before a flying sortie against the enemy as being comprised of two types pf pilot - those who nervously checked their entire escape kits were in order - the hunted, and those who calmly walked out to their Spitfires or Hurricanes for a pre-flight check and a chat with their ground crews, leaders and wingmen - the hunters. Invariably, the former did not live long.

I refer to this in this post because I see a great parallel between these fighter pilots of the Second World War and us traders, with the welcome exception that one's life as a trader is not on the line ( I hope! ), only one's trading account. In the five years I've been trading, one of the biggest things I've had to learn is that the forex market is neither a place for inexperience or timidity. If you have the skills to make money in this business, and by that I mean you do actually know what you are doing, then this counts for nothing if you do not combine this with aggression and conviction when the time comes to pull the trigger. Many of the biggest moves happen fast following a pullback or fake to an area or support and resistance, and the experienced trader will recognize this and act with speed and conviction, not with fear of loss or hesitation."
----------

"I think one of the reasons trading is so difficult is the extreme cognitive dissonance required. Most of us learn to trade under the illusion of fast and easy money but to succeed, we need to take the exact opposite position, to take small chunks consistently and be patient. We need to be ultra cautious with risk but at the same time be bold and aggressive when the market dictates. Almost every aspect of successful trading is marked with similar polar extremes which we need to switch between. Most people can do that to some extent, but only when they feel like it - to do it on an external command, ie when market conditions dictate, is incredibly difficult."

------------


* "It is my firm belief that one of the reasons so many traders fail to make money, apart from lacking the necessary technical ability, is because life in other areas just does not train people to be risk takers, in fact, life teaches us to be overly cautious from a very young age, a mind-set we bring into trading, but one which ultimately will lead to our downfall as traders. What we have to be able to do is throw a good deal of caution to the wind, and, like the successful fighter pilots of WW2, to fix onto our target and go for it with all guns blazing. This does not guarantee that we won't crash and burn, but it does put the odds of being a winner firmly in our favour."

-------------

"I agree that we are not wired to take risks (as brilliantly shown by Tversky and Kahneman). Hence, taking risk/dealing with uncertainty (trading) is logically a source of psychological discomfort (cognitive dissonance)."

---------------

"However, I think that having fear (better yet, respect) for the market is not necessarily a bad thing. In fact, it may be a very positive thing. Someone inexperienced without any fear of the market is likely to lose his/hers shirt in no time. Someone who has some fear (as long as it is not paralyzing fear) is likelier to live just long enough to learn how to survive, and possibly even to thrive at some point. I do agree that not all trades are created equal. One should not let fear prevent from trading bigger size on trades that give a higher win probability. In the end it may all come down to experience."

-----------------

"You want to be patient when u're not in a trade. You want to be aggressive when you are in the trade. Any other combination opens you up to harms way."

------------------

* " Resurrecting this thread for this single fact about the fighter pilots of WW2, one that provides a great parallel to trading. Most of those killed had less than 100 hours actual flying time, and some of them as little as ten. The life expectancy for these novice pilots was just three days during the Battle of Britain. Compare that with the more experienced pilots, those that had been flying for a number of years and had amassed as much as a thousand hours of practice, not just of flying, but also of shooting. These pilots did significantly better and on the whole were the ones who survived the war. In trading terms, this means that if you are putting your money on the line with a live account without having put in the necessary time required to learn about the markets, then expect to get burnt. Just like the fighter pilots of WW2, the overall majority of traders who blow their accounts and who don't come back to trading as a result, are those without the experience and knowledge required. "

Great post Cat, thank you for sharing.

also have a look at this thread I opened a year or so ago, again on the psychological side of trading. I think there are some interesting views on it -

http://www.forexfactory.com/showthread.php?t=459430

The trader's job is mostly misunderstood by others and is a lonely endeavour. Posting this video here again for us traders.

lonely endeavor is overrated, you have even more time to participate in social activities.

besides, social interactions in a 9 to 5 job are at times forced and have this hierarchy or pecking order vibe going.

If you mean that it is less of a problem that many say it to be, I guess it depends on who you are. Being alone suits me because I'm pretty introverted anyway and am perfectly happy spending all day completely alone. I know people who would hate this however, and they most definitely would not be suited to trading. If you're someone who is happy with your own company, then the lonely aspect of trading is not going to be a problem at all. I agree with your last point, that 9 to 5 doing something that you hate, surrounded by people you are forced to get along with can be a far lonelier experience than spending the day by yourself doing something that you love.

it surprises me that you see yourself as introverted, to be honest

yes, although a 9 to 5 doesn't have to be awful, i had quite a good job i quit because i wanted to trade full time, which was my long term goal. lots of people think of a job as a necessary inconvenience in order to survive, something they need, something they have to do, i see it as an opportunity to provide value and in return i get a valuable experience, that way you are not a slave, you are your own master and treated that way, it's all a matter of perspective.

i don't see loneliness (or privateness for a more positive connotation) as bad either, especially in a focused activity where you want to be in the zone.