Tuesday, August 30, 2011

Unlock your mind: find out what refrains you from pulling the trigger

"Desire is the starting point of all achievement." - Napoleon Hill

There are many good books on trading available in the market, they cover all different aspects, such as: trading strategies, technical analysis, money management... you name it.

All of them are really important for a trader's growth and in pursuing his/her own trading style, but one of the aspects of trading that is fundamental (and most difficult) to master for anyone seeking success in this business is without any doubt the psychological aspect, the trader has to learn to master his/her emotions before he/she can start seeing any degree of success, not even the best strategy or trading system will work if the trader can't pull the trigger at the right time. You will find hundreds of books on that matter, but you will not learn how to master your emotions just by reading books, it is not that easy, trading is an art, you need to practice over and over again, to focus on doing what is right, until you get up and running.

AS we know that a good part of trading is psychological, if you don't have the right state of mind when trading, no matter what you do or try will seem to work and you will end up missing the good trades and taking the ones that will not work, and that is so frustrating!

You will never reach the level of excellence you're looking for if you don't find the reason why you can't take the good trades, if many times, when you decide to just watch the market, it does exactly what you expected it to do with all the details, but every time you try, boom! It fails! That drives you nuts!

So, what would be the reason that is stopping you from succeeding when you have a system that you're sure if you follow it and take those setups you will lose sometimes, yes, but most of the trades will work and at the end of the day you will be deep in green? What is holding you back? It makes no sense at all, it's statistics, pure math, something logical, isn't it? You're sure it works week in, week out and you still can't make it! Why?!

See if any of the situations below sound familiar to you and could be bothering your trading:

Is it the platform you use? If your platform fails now and then, that might be the reason why you're not confident enough, you're not sure you will be able to sell your position when you have to and your platform stops working for any reason... Do you think commissions are too expensive? They'll turn out to be affordable if you get the right platform, get one you can trust.

Or maybe your internet connection fails always at the most important time, right when you decided you would enter the order the connection drops and when it is back up again, you already missed the opportunity, then next time you will be afraid that would happen again... Make sure you have a good connection and an alternative way to have your order in either by a second internet connection (dial up, 3G or other) or by phone.

Or maybe last time you tried to trade you were instantly stopped out seconds after you got in, and now you're afraid that will repeat over and over again... Shrug it off and be ready for the next opportunity.

Or maybe the place where you work from,  as you will have to spend several hours in there everyday, is your office comfortable? is the lighting good enough? is it pleasant to stay there? Is it noisy outside?

Try to check anything that might be bothering you, even a small thing that you take for granted could be important.

All the above are good reasons to make your mind fool you next time you have to pull the trigger, making you miss one, two, three good setups, and then you're so upset you missed so many good setups you take a trade as a revenge... Exactly the one that fails and you get stopped out again... it looks like a nightmare, a never ending cycle!

Patience, persistence and a calm state of mind are really important qualities in this business, without those characteristics, it will be really difficult for you to see any success, if not impossible!

If you already have a system you have confidence on, a system you trust, start today doing it differently, you will not get different results by doing the same thing you have been doing before, make the commitment to take all the good setups that are presented to you by your system, no matter what, if you get stopped out on the first trade, try the next one, if your system is good it would be rare to be stopped out twice in a row.

It might also be a good idea to trade smaller than what you're used to, maybe half or even 1/4 of the size you're used to trade, at least until you gain some confidence again to trade bigger.

Another good idea is to use a good money management system, that is to scale out half size quickly after you get +2 or 3 points, for instance, so that if the market comes back to your entry level or below it, you will be protected, and most important, in a relaxed state of mind as you will not be risking anything but your time, consider it as an insurance price that will be deducted from your profits. Your success will depend partly on your trading techniques and money management rules, so give them some thought before taking the next trade.

It all will depend on your state of mind, have a purpose for trading, a strong reason why you need to make money in the markets day in, day out. That will also help in most cases.

Our mind is very powerful, much beyond what we can think of, decide to do whatever is necessary to succeed and do it! And you will start moving towards those targets and level of excellence you've been dreaming of. It takes time, but once you start moving in the right direction it will make you feel stronger, and the moves will be faster. Act now, stop postponing your success!

"You cannot expect to achieve new goals or move beyond your present circumstances unless you change." - Les Brown

Best of luck!

Saturday, August 20, 2011

Enjoying the volatility?

When trading with our methodology we really don't care whether market is going up or down, it's all the same for us, we don't want to marry a position and try to squeeze 100 points out of a single trade, all we want is to make a couple of ES (Emini SP500) points every trading day, adding up towards our next US$ target. If you want to have consistent positive results, I strongly advise you to find a third party's or create your own methodology as soon as you can, once you find one that works, stick to it and repeat it day in, day out, like a bricklayer.

If the market continues like that making wild ranges in the weeks to come our strategy of making only 1 point a day is totally out of question, we are gunning for much more, for you to have an idea, last Friday, if one would have taken all the 4 good setups that were presented in our trading room, he would be up +70 points (yes, seventy - see chart below with all the 4 trades) in one single day! WOW! What a day!

Of course we know that was an exceptional day and it does not happen very often, but with this kind of volatility, 3 to 5 points a day is not a crazy dream, it's very doable, actually even +10 points a day.

We usually have a bias when we start a new trading day but we've learned long enough to trade what we see, so we wait and let the market tell us what it wants to do before we take our first trade, then, if we take a trade and get stopped out, we will patiently wait for the next good setup for we are sure it is very rare to get stopped out twice in a row when using our trading system, but if the trade works, as it usually does, then we just manage the trade as per our rules for protecting the position by scaling out and trailing.

The good news are, although the targets are much wider in our trades today due to the high volatility, the same is not true for our STOP, as market keeps respecting our levels with the same precision as it used to before the volatility started, allowing us to continue using the same 1 to 3 points STOP on both our scalping and day trades.

We have been using our trading system religiously for 52 weeks now, it failed to work only on 2 of those 52 weeks, so by observing how the setups work during the last year, we know that statistically around 8 out of every 10 trades we take will work and (with this kind of volatility) we can make 5 points or more on full size on each winning trade, so when/if we get stopped out we only lose from 1 to 3 points depending on the kind of setup we've taken.

So, you don't need to be that good in math to know that if we take all or most of the good setups that are presented every single day, at the end of the day our accounts will be deep in the green.

See the chart below with the awesome calls we made on Friday based on our trading setups: (click on chart to enlarge it)

Do the right thing and decide to win from this week, you can do it!

All traders are created equal in the eyes of the market, if I can do it, you can too.

Best of success to you in your trading! Cheers!