40 steps in the trader’s journey from new trader to rich trader.

40 steps in the trader’s journey from new trader to rich trader.

They are as follows:

1. We accumulate information, we learn- buying books, asking questions, maybe going to seminars and researching what really works in trading.
2. We begin to trade with our ‘new’  found knowledge.
3. We make profits only to give it back very quickly and then realize we may need more knowledge or information.
4. We accumulate more information.
5. We switch the stocks we are currently following and trading.
6. We go back into the market and trade with our improved system. this time it will work.
7. We lose even more money and begin to lose confidence that we can even be traders. The reality of losing money sets in.
8. We start to listen to other traders and what works for them.
9. We go back into the market and continue to lose more money.
10. We completely switch our style and method.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ in a single trade and put on a big position believing it is a sure thing and the market quickly takes our money.
14. We start to understand that trading successfully is going to take more time and more knowledge than we ever anticipated. MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALIZE REAL WORK IS INVOLVED AND THAT THIS IS NOT EASY MONEY.
15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realize that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is based on our ability to execute our methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We learn smaller positions lower the volume of our emotions so we trade smaller and this surprisingly makes us better with our discipline.
37. We learn that risk management is one of the biggest keys to winning as a trader, we start to understand that big losses will make us unprofitable so we finally trade a smaller and consistent position size.
38. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our position size only as our account grows.
39. We are making more money than we ever dreamed possible.
40. We go on with our lives and accomplish many of the goals we had always dreamed of. Money is our new tool to do what we have always wante

The Top 7 Things Traders Must Manage For Success

The definition of man-age:

• To direct or control the use of; handle.
• To exert control over.
• To make submissive to one’s authority, discipline, or persuasion.
• To direct the affairs or interests of.
• To succeed in accomplishing or achieving, especially with difficulty; contrive or arrange.

1. Traders must be great risk managers.

“At the end of the day, the most important thing is how good are you at risk control.” -Paul Tudor Jones

2. Traders must manage their own stress.

 Trade position sizes that keep your stress level manageable, if you can’t talk calmly to someone while trading you are trading too big.

3. Traders have to be able to manger their emotions, we have to trade our plan not our greed or fear

“There is nothing more important than your emotional balance.” – Jesse Livermore

4. Traders must manage their ego and need to be right.

“As a trader, you have to decide what is more important—being right or making money—because the two are not always compatible or consistent with one another.” -Mark Douglas

5. Traders must manage entries. When the time is right take the entry. Don’t wait until it is too late and chase, and don’t get in prematurely before the actual signal, also don’t get carried away and be too aggressive trade the right size.

6. Traders must manage the exit. Whatever our exit strategy is we have to take it. Sell at your target, exit into an exhaustion gap, or take;

 the trailing stop, whatever the plan is follow it.

7. We have to manage our thoughts. We have to focus on what is happening right now. Mentally time traveling back into the past and reliving our losses has no value, we have to learn from our lessons and move forward. Mentally time traveling into the future and believing that big profits await if we take a huge position size and go for it, may be the most dangerous mind set of all. We must manage our mind and focus it on following a tested trading plan.

10 Things A Trader Needs to START DOING if They Want to Make Money

There are many trading principles that are common among  successful rich traders. It is important to learn the things that allow them to win so we can follow in their footsteps and make money. There are 10 things that new traders can start doing tomorrow to improve their results immediately. If you have been trading for a while but have not been profitable these  may be things that you need to start doing to stop losing money.

 1. Start trading the price action by using charts. The market doesn’t care about your opinions but the chart expresses the collective actions of all market participants. Learn to understand what the chart is saying.

Start to understand that the market determines whether any single trade wins or loses not you and not an imaginary “they”.

2. We can only surf the price waves not control them. 

Start to take 100% responsibility for your losses.

3. You enter the trade, you exit the trade, the wins and losses are yours alone. The blame game is a losing game in the markets.

Start to bounce back from losing trades quickly, move on don’t ruminate.

4. If your position size and risk management are correct no one losing trade should emotionally devastate you it should be only one of the next hundred trades with little significance by itself.

Start caring more about what the market is doing and less about what you think it should be doing.

5. ALL that really matters is current price action not your opinion of what might be price action later. 

Start to change your position quickly when you are proven wrong in a trade.

6. The best trades start out as winners immediately, when you have to start hoping and stressing early it is very probable that the trade will be a loser.

Start to have a positive expectation of your robust method for long term success regardless of your short term results.

7. Traders that make money are able to trade through their losing streaks with small losses to get to the big wins. 

Start to define trading success by trading a robust method with discipline over the long term.

8. Consistently trading a winning system over the long term is what makes money in the market.

9. Start to only risk 1% of your capital per trade.

When you risk only 1% of your capital per trade you turn down the volume of your emotions while trading and decrease your risk of ruin to almost zero. This 1% refers to the amount of loss you will take not on your total position size of capital in a trade.

10. Start to cut your losers short and let your winners run.

The primary thing that makes money for most rich traders is having small losses and big wins not percentage of winning trades.

If what you are doing is not making you money in the long term then why not stop doing what you are doing and start doing what the money makers are doing?

Bad traders make a little money in the short term but lose big money in the long term. Rich traders lose a little money in the short term but make big money in the long term.

Elliot's Wave Principles

The 7 Psychological Mistakes Traders make That Blow up Their Accounts

How well traders managed risk and how fast they could cut losses when they were wrong. If you made money this week BRAVO! great job! However the vast majority of traders likely lost money in the Bernanke Put trade finally failing and becoming a sell the news event. Most call option buyers were losers this week and most put sellers were crushed. This is the week that traders discovered if they were managing risk and would suffer single digit losses or blow up in leveraged positions. Buy the dip traders lost money for the first time in a long time. This market has been a difficult environment for most both emotionally and financially with many head fakes and reversals then THE PLUNGE this week. Luckily the market forces traders to take two days off each week. It is time to reflect and count or winnings and losses and see what we can do to get better. For most this week was not their fault it was just a volatile and choppy week that caused many systems to lose. This is the kind of week that separates the traders who manage risk from the traders who do not, and this makes all the difference.

“Where you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt.” -Paul Tudor Jones

Many will be surprised that great  traders are not born that way, most blow up there first accounts, Alexander Elder, Dan Zanger had to start all over again after going to near zero the first time out of the gate. Nicolas Darvas also had a huge draw down at first of over 50% before making his $2 million. While the 1% risk rule can change a blow up into a draw down thinking errors are what cause traders to risk big and the wrong times. Account blow ups usually stem from wrong thinking not bad math.

When a trader blows up their account it is usually due to not implementing proper risk management but psychological mistakes are WHY they stop managing risk.

Trading too big to “get back to even”.

Going “all in” on one trade that they believe they just can’t lose.

Being on the wrong side of an asymmetric trade.  Being short options for possible small gains if right but big losses if wrong.  In the long term eventually this blows up.

Fighting a trend over and over again, a trend that a trader or investor cannot even believe is very dangerous because shorts look better the higher a stock goes and longs look like they are getting a bargain the lower the stock sinks.

In a losing trade the trader starts thinking “add more to a losing position” instead of “I need to cut my loss short”.

The trader believes they are right and the market is wrong.

Traders are trading markets they do not even fully understand and a trader must fully understand the risk and leverage involved in currencies, futures, options, and commodities to prevent possible blow ups due from ignorance.

If a trader can tightly control risk and position sizes this will get them closer to getting in the club with the 10% of winning traders.

“The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.” -Ed Seykota

Source: Trader Planet

Thought of a Trader

The Way of Learning