When I first started out as a trader I read and listened to a lot of interviews of top traders. I got to meet and learn from a variety of successful traders in the Chicago area and they all told me the same thing.

“You and only you are responsible for your trades.”

Over and over again I would hear them talk about how trading is a direct reflection on yourself. The style you choose and the way you trade must fit with who you are.

What is Trader Intuition?

Another theme that was talked about is how they developed a feel for the markets, their intuition as it’s called. Great traders have the ability to sense the rhythm and pace, and can pick up on the nuances of the market.

The traders I know down in the pits at the CBOT use this “feel” everyday to make trading decisions. So how then, do we develop this intuition ourselves and know when to trust it?

The answer lies in differentiating our intuition from our emotions. New traders execute trades based on how they feel or what they want to happen at the time of the trade, they don’t have a calculated edge, they’re just shooting from the hip.

Experienced traders execute trades based on calculated risks and a predetermined edge. For those of us who consider ourselves experienced, we’ve learned to let go of the emotional attachment to a trade or idea. This opens up the door for objective observation.

Think of Yourself as an Observer

When you place a trade based on an emotional response you will most often lose. In the long run it’s certain to lead to ruin. Instead of approaching the markets with the attitude of “myself versus the market,” I prefer to take a more passive approach as observer; only jumping in when I can identify a clear edge.

The most objective role we can pay is the role of the observer. Over time, I found that I’m just as calm and level headed while in a trade as I am on the sidelines, this is a big step in the path to progressing as a trader.

The funny thing is, the more systematic you become in your trading, the easier it is to identify subtle changes in the market. These subtleties are often hard to pin point exactly, that’s your intuition talking.

When to Disregard Your Intuition

Realize that the tendencies and biases you bring to trading will 99 times out of 100 be wrong. Your initial feelings and instincts are simply human in nature, thus new traders act just as others do. Make a note of these initial feelings and learn to set them aside, do not act on them.

It took me a good year or two to fully grasp my trading emotions. One thing that resonated with me early on was a short audio series by Peter Reznicek. I find that listening to podcasts like these while taking walks is a great way to absorb the information at a deeper level.

After a few years of studying the markets, focusing in on one method and a few select markets I began to develop a “feel” for the markets I was trading. This is the intuition you want to listen to.

Here you can read more about my story and why I think all new traders should begin with swing trading along with why I migrated to day trading.

Understanding Your State of Mind

There are things we pickup on in the markets without us even consciously realize it. When I feel good, I trade well. When I’m in a “groove” or “rhythm” I come into each day looking at the markets in an objective manor, I can clearly assess the risks, and determine where the best opportunities lie.

It’s only when you can accept the risks and trade without fear that you will be in a state of mind to become completely “in tune” with the markets.

How to Get into a Trading Groove

Mark Douglas (and more commonly great athletes) call this feeling being “In the Zone.”

Being in the zone doesn’t necessarily mean that you are currently in a position. You could be sitting on the sidelines waiting for a setup when you notice something different about the markets, a small change. Maybe you can’t pin point it exactly, it’s usually a combination of factors you pick up on subconsciously. This is the time when I trust my intuition.

I know what it’s like to think the market should do one thing and have it do another. Things don’t always make sense. The more you observe your thoughts and reactions the better prepared you will be to react on the right side of the market.

Notebooks, Journals, and Post It’s, Oh My!

I’m a big fan of post it notes. I keep them all over my desk. I record little things that I want to revisit later. Key levels, bigger picture items, a stock that caught my attention that I’d like to look at later in the week. These act as great reminders.

The notebooks are great too. When I created my trading journal I leave plenty of room for notes. I am constantly reviewing my old notebooks and observations.

You’ll know when you’re in the zone, that groove, that rhythm, listen to your intuition when you’re in this state of mind. Just make sure not to get too cocky and think you’re invincible. It’s when we fall back on our emotions that the rug gets pulled out from under us.

The Bottom Line

It’s only when we are in a rhythm that we should be listening to our intuition. When you have developed a rhythm and are in a clear state of mind and thinking objectively our intuition can be of great value.

Going Forward…

Well, racing has begun which means my time I have to devote to the blog decreases. Once I finish trading for the day it’s usually right to the bike for a 2-4 hr training ride.

I do my best to put out a weekly blog post and newsletter, in addition to recording new videos and webinars and market analysis for the members area, but just a heads up that there will be a few weeks here and there that I’m unable to publish a post.

Have a great week everyone!

Thanks for reading!

Honestly, most traders aren’t. It’s not because they’re not picking “good” stocks or placing good entries, it’s because they’ve never stopped to take a deeper look at their risk to reward.

There are three primary ways I come up with new topics for this blog. First and foremost, are suggestions from you, the reader. Second, interesting things I come across in my readings (some trading related and some not), and third, by sifting through my old notebooks and trading logs to find things “clicked” for me in my trading, I call these “light bulb” moments.

One of the biggest “light bulb” moments occurred when I started to look at all my trades in terms of risk and began to factor in R-Multiple and Expectancy.

Why Entry’s Don’t Matter

I spend a lot of time analyzing my trades, but at the beginning, I was more focused on where my entry may have failed, or how I could optimize and add parameters for better entries. After rereading Van Tharp’s book Trade Your Way to Financial Freedom, I was reminded that entries just aren’t as important as people think.

It’s true the smaller the time frame, the more precision is needed when placing trades, but over the long term the effect your entry’s have on your results is not a factor of where you enter, it’s how you exit.

Let me explain:

How to Profit From Your Exits, the Importance of Risk/Reward

Before placing any trade you should ask yourself:

• What is my risk?
• What is my reward?

I only trade trades with favorable reward to risk ratio. What’s favorable you might ask? Well there are really three factors that tell you this and they all stem from your system’s expectancy.

Expectancy is simply the average amount you can expect to make. There are a couple ways you can calculate this, I use (Avg. $ W x Win %) – Avg. $ L x Losing %).

It might look something like…

Avg. $ W = $200

Avg. $ L = $75

Win % = 45%

Losing % = 55%

So (200 x .45) – (75 x .55) gives you an expectancy (or average profit per trade) of $48.75 less commission and slippage.

You can also take a look at your R-Multiple for each trade, add them up and divide by the number of trades in your data set to get your expectancy in terms of risk.

In order to look at your trades in terms of R we want to determine what your risk per trade is. If you’re risking $100 per trade then $100 = 1R, if you make $200 on a trade you have a +2R, if you lose $50 on a trade you have a -0.5R.

After 20 trades you may have…

8 winning trades of (+4R, +4R, +3.5R, +2.5R, +2R, +1R, +1R, +0.5R,

12 losing trades of (-1R, -1R, -1R, -1R, -1R, -1R, -1R, -0.75R,-0.5R, -0.5R, -0.5R, -0.5R)

Adding these together and dividing by 20 gives you your expectancy in terms of R.

Sum of winning trades = 18.5R

Sum of losing trade = -9.75R

Notice the system only has a 40% win rate. Win rate is important, but is not the be all end all.

Net of 8.75R / 20 trades = 0.44R

Meaning for every dollar you risk you can expect to make $0.44. So for every $100 at risk you can expect to make $44 (on average). Obviously the more data you have in your statistical set the better, but this should give you an idea of the power of looking at your system in terms of R.

The entry is only a small factor. As individual trades we need to be able to hold onto your positions long enough to see those bigger R returns of 2, 3, and 4x +.

Two Final (but no less important) Calculations to Make

How often do you trade (frequency) and much do you pay in commission and slippage? These important factors can turn a positive expectancy into a negative one if you’re not careful.

Let’s say you trade the futures markets and pay $5.00 per round turn and rarely have any slippage when getting in and out of your trades.

Continuing the example from above, If you risk $100 per trade and have a $5.00 commission charge you’re total R is now $105 and brings your R-multiple down to 0.39R

Now it’s time to factor in your “opportunity”. On average how much can you expect to make per day or per week based on the # of trades your system fires off.

For example if you place 40 trades per month and have an expectancy multiple after commission of 0.39 then your expectancy per day would be 0.78 (40 trades / 20 trading days per month x .39).

In other words you could expect to make $0.78 for every dollar risked, or $78 for every $100 risked. Keep in mind this is on average, some days will be more some will be less.

9 Traits that Make up Winning Traders

I’ve spent a lot of time studying what leads great people to their success. I even did a presentation on the topic at the 2013 NY Traders Expo called 10 Steps to Developing a Winning Traders Mindset.

In my post 12 Characteristics of Highly Successful Traders I outline commonalities I’ve found among winning traders. Van Tharp has a shorter list of 10 that I find accurate as well.

1. They have a well-researched, positive expectancy system.
2. Their system fits their personality, beliefs and objectives, and concept they are trading.
3. They understand that they must predefine their worst-case loss before they enter into the trade.
4. They think about each trade to determine the potential reward-to-risk ratio.
5. They have a business plan to guide their investing.
6. They understand that position sizing is key.
7. They spend a lot of time working on themselves and use their trading performance as a benchmark for how they are doing in their self development work.
8. They take total responsibility for their own trading results.
9. They learn from their mistakes.

How to Select the Best Trades

Finding high r/r opportunities is similar to a cheetah stalking its prey. While the cheetah is the fastest animal on the planet it does not gallivant around the savanna chasing after every gazelle that comes its way. Instead, it waits stealthily in the grass for the “easy” prey (The young wounded gazelle that has strayed from the heard). This yields him with the highest reward to risk.

As trades we need to wait patiently for not only our setups, but the best setups with the highest reward to risk ratio. Only then do we place our bets and let the numbers do the rest.

Proof that Position Sizing and Risk Control is the Secret to Profiting from the Markets

The “Secret” that Made the Biggest Difference in My Trading

If you’ve become frustrated with your trading results and can’t seem to make money in the markets it’s not because your entry’s are no good as studies show that with good reward to risk ratio’s, controlling your position size (keeping your positions small), and holding onto your winners long enough, even random entries can product consistent profits over time.

Over the years many things have played an important role in my trading, but most importantly the position sizing and risk control measures I employ are the two factors that have made the biggest difference.

Thanks for reading!

Do you want to know the fastest way to progress as a trader? Do an 80/20.

You’ve probably heard of the 80/20 principle as made famous by Richard Koch in the book The 80/20 Principle: The Secret to Achieving More with Less. If you haven’t, here’s a quick overview.

The 80/20 principle (aka the Pareto Principle) states that for many events, 80% of the effects come from 20% of the causes.

Italian economist Vilfredo Pareto developed the principle in the early 1900’s after observing that 80% of the land in Italy was owned by 20% of the population and 20% of the pea pods in his garden contained 80% of the peas. It’s a phenomenon he saw occurring over and over.

More common in business, we find that “80% of our sales come from 20% of our clients.” It also holds true in trading, maybe not exactly to the 80/20 ratio, but in most cases “80% of our profits, come from 20% of our trades.”

Note: This does not mean that you necessarily have a winning percentage of 20%, rather after netting out for losses it’s those 20% of our winners put us in the black for the month.

80/20 Applied to Trading

Looking at it from another angle, you’ll probably find that without a rule to limit your losses, a few big losers (say 20% of your trades) account for 80% of your trading losses.

You may also find that 20% of the time you break your rules and 80% of the time those trades result in losses (you get the idea).

As Hedge Fund Market Wizard, Steve Clark puts it, “Do more of what works and less of what doesn’t.”

So what’s working for you in your business right now?

Weekly 80/20 Exercise

Once a week (usually Sunday night or first thing Monday morning) I ask myself four questions. These questions help me stay focused on what’s working and put an end (or at least limit) those things that are not.

The four questions to ask are:

• What’s working right now (in my trading & in my life)?
• What’s not working?
• What 20% should I be doing more of?
• What things can I stop doing or limit my time doing?

The objective is to stop doing the things that are getting in the way of you reaching your goals.

A few other questions you might ask are:

• What people and activities are producing a positive impact on my life?
• What things do I enjoy doing?
• What am I good at?

Focus Your Efforts

Pick one thing and do it well.

Become a lifelong student of the trading game and commit to mastering your strategy. Focus on exactly what you are the best at and then focus on doing those trades well.

Don’t be afraid to cut the weakest positions in your portfolio in order to allocate that capital to a better opportunity.

Assess which trades are working, which are not? What setups are doing well? What time of the day do you see the most profit potential? Etc…

“The goal is to make the [equity curve] go from bottom left to top right,” – Steve Clark.

Everything we do in our trading should contribute to this objective. If something is holding you back or slowing you down, ditch it and move on to something else.

What’s the “Next Best” Opportunity?

On days where the market is exceptionally bullish and breaks out to new highs, I will evaluate my positions, noting the weakest longs in my portfolio (that is the stocks that did not breakout to new highs with the market).

I will do the same thing when the market is exceptionally bearish, noting my shorts that are the least weak. As another trade idea or opportunity approaches I will then cut these weakest links in my portfolio and allocate the capital towards the next best opportunity.

Given our trading capital is a finite dollar amount, this process of keeping the good and scrapping the bad ensures you are getting the most out of your resources.

Picking the Right Strategy for Market Conditions

As we know, the market moves in specific market cycles. The strategies we employ at different times of the year in response to these market cycles is very important.

I often get questions related to how much of my trading is day trading versus swing trading. My answer, “it’s dynamic” always changing and is a factor of market volatility.

Gauging Volatility Cycle

There will be times when my portfolio is 70% day trades, 30% swing trades and other times it’s flip flopped, sometimes it’s closer to 50/50. The way I gauge when to day trade versus swing trade is based of the volatility.

I find the following two statements hold true:

• More volatility = better day trading opportunities
• Less volatility = better swing trading opportunities

The sweet spot is VIX 25-35. This level of volatility is big enough to create nice intraday price movements, but not too extreme to shake you out of your swing positions.

You’ll find a webinar in the member archive that explains more on how you can adapt your strategy to changing market conditions.

What to Do When Things Aren’t Going Well

The first thing to do is stop. If things haven’t been going well for you in your trading, you’re experiencing anxiety and trouble sleeping close out your positions and take a break.

Get away from the screen for a week or two, get outside, immerse yourself in other activities, get active playing sports, read from a good book, and surround yourself with people who energize you.

This will help clean the slate and bring clarity to your ideas. Do an 80/20 analysis and determine what things are working and do more of them.

After this break, it’s important to start slow. Begin trading with a smaller position size and gradually increase as your confidence begins to grow.

It’s important to work smart not hard because after all or 80% of our productivity comes from 20% of our efforts.

What things have you stopped doing or cut out to make your life more productive? I’d love to hear about them below!

Thanks for reading!

This is the 3^rd time being invited to speak at the Trader’s Expo (my two previous talks were held in Las Vegas), but before I get into the details of my talk let me share a little of what happened during my trip.

Taking a Bite out of the Big Apple

This would be my first time to New York City. I was flying in from Phoenix Sky Harbor airport to JFK and was hoping there wouldn’t be any snow to delay my flight.

Luckily both to and from flights were uneventful (had it been a week earlier I would have been stranded for days).

I decided to stay at the Tryp hotel a few block south of the Marriott Marquis where the Trader’s Expo conference would be held. It turned out to be a great recommendation. It had everything I needed plus a nice modern decor.

Tuesday Morning, It’s Showtime!

My day started off with a run through Central Park. It was a little chaotic getting there with dodging all the people, but a run or walk always makes for a great way to start the day.

I followed up my run with breakfast at Andrews Coffee Shop, which was quite good.

If you enjoy the hustle and bustle then city life is great. That being said, the big city is no longer for me, I need my space, less concrete and more trees!

I headed over to the expo around noon to do an interview with Tim Bourquin for the MoneyShow. I was especially excited to find out I would be following Jack Schwaeger, author of the Market Wizards book series.

I did a series of 3 video interviews that are supposed to be up on the MoneyShow.com website shortly.

The topics discussed were that of managing trading emotions, the importance of developing a routine, and some of the aspects that make up a winning trader’s mindset.

In the meantime here’s a trader interview I did with Tim the week leading up to the expo.

What to Do When Technology Fails

As I learned from Brian Tracy in his book Speak to Win, I made sure to arrive for my talk 30-mins before to get my laptop setup and verify everything was setup up the way I wanted.

As a side note, if you want to dramatically improve your public speaking (or simply become a more effective communicator) I highly recommend this book. I found it incredibly helpful and learned a lot. I also would add that the audio version is the way to go.

Well, as it turns out my Microsoft PowerPoint was acting up and crashing as soon as I would open the program. After a number of reboots with no resolve I was afraid I’d have to present without slides. Not the end of the world, but a bit frustrating nonetheless.

Magically (as is the case with technology) the problem fixed itself on the 4^th or 5^th reboot and my presentation went off on time.

A Full House

Strangely, I don’t really get nervous when speaking in front of an audience. If I’ve rehearsed well and am passionate about the material I’m covering I guess my nerves just turn into excitement.

The room was a bit larger than and I’d presented to previously.

It looked like it could seat about 150 people. There were probably 50 people in attendance when I began my talk, but Jack Schwager had a presentation finishing at the time I started so a flood of people (maybe 50-60 more) filled the rest of the seats a few minutes after I started speaking. It ended up being a great turnout.

My talk delved into what makes winning traders great and what techniques we can use to turn ourselves into winning traders.

During the presentation I referenced quotes from great traders, and stories from my own trading. I could sense people were engaged and you could feel the energy in the room, I thought it went well.

Turns out it went better than expected. I had a flood of people thanking me afterwards with comments like, “that was the best presentation of the entire expo.”

To all those that came out and attended live, your presence and comments really mean a lot. Thank You!

Light’s, Camera, Action!

I got to meet and hangout with a lot of great traders while in New York, but was still left with time to get out and see the city a bit. All in all it was a great trip, but I’m happy to be back in Arizona

Recording, Slides, and Transcript

Video cameras were not allowed in the presentation, but I did create a recording just before I left, and have the presentation slides and full transcript available below if you’d like to view it.

10 Steps to Developing a Winning Traders Mindset

Download the Presentation Slides (PDF)

Full Transcript

I’d love to hear what you think about the presentation, leave your thoughts below!

Thanks for reading!

Things have been busy as I prep for New York. Here’s what’s happening this week!

Upcoming Schedule

Webinar: Trading Methods for the Part-time Trader

Fri. Feb 15, 2013 from 12:00 – 1:00 pm EST

More Info: Click Here to Register

* If you can’t make the live webinar go ahead and register as I will be sending out the recording following the presentation.

Live: Interview with Tim (New York)

Tues. Feb 19, 2013 from 1:00 – 1:30 pm EST at the Marriott Marquis Hotel

The Money Show will be conducting a live interview with me at the Traders Expo (taking place just outside the exhibit area). This interview will be recorded and I will post it on the blog when I get back from the expo.

More Info: New York Traders Expo

Live: The Traders Expo (New York)

Tues. Feb 19, 2013 from 4:30 – 5:30 pm EST at the Marriott Marquis Hotel

My presentation “10 Steps to Developing a Winning Trader’s Mindset” is scheduled for Feb 19, 2012 at 4:30 PM to 5:30 PM EST.

More Info: New York Traders Expo

Additional Happenings

Here are some new things you can take advantage of right now…

Updated eBook 40% Off Special

I have just finished updating My Trading Rules eBook with even more great videos and 2 additional bonus webinars.

This revised and updated version includes everything you need to start trading successfully and covers both the Breakout Method and Fibonacci Retracement Method for the ES and 6E Futures along with guidelines for expanding to other markets.

In light of the traders expo use coupon code ‘NYTEXPO’ to get a copy of my Trading Rules for the ES & 6E Futures for 40% Off (expires this weekend).

A Preview of My Traders Expo Talk

I also just interviewed with Tim Bourquin of the “Money Show” about my trading strategies and my upcoming talk for the New York Traders Expo.

Here’s  My Interview with Tim Bourquin from Monday February 11, 2013.

See some of you next week at the expo!

Thanks for reading!

There are a couple fundamental reasons for this, but first we must understand the different players that make up the market.

The Market Players:

• Speculators (Traders) – Those who make carefully calculated bets, addressing the issues of risk versus reward.
• Gamblers – Those who throw money at the markets on the principle of hope.
• Hedgers – Farmers & businesses such as Southwest Airlines and those which use commodities and basic materials in their business.
• Investors – Most likely all of us, this is the largest segment of the market.
• Locals – Individual pit traders. This group varies slightly from speculators as most of these traders are looking to take the opposite side of the trades put on by brokers.
• Brokers – Lining the top step of the trading pit, this group places orders which are based off instructions from their investors. These orders are usually taken by phone and then transferred to the brokers by a runner.

The market is a collection of the viewpoints and expectations of all these players. In addition to having different viewpoints, they also have different time horizons.

Long term investors make up the biggest percentage of market holdings. Traders (both intraday and of the short term weekly and monthly time frames) make up a rather small portion of the total market.

That being said, since 2008 with the introduction of high frequency trading (HFT) the volume transacted by traders is much larger than in past years. Certain data has shown as much as 30% of all volume is a result of HFT.

Here’s a video clip from 60-minutes highlighting some of the more detailed aspects of high frequency trading.

Why Market Reactions Are Not Always Logical

Contrary to popular belief there is a large disconnect between the stock market and the economy. The market by nature, prices in future events in anticipation of what will happen.

We’ve all heard the saying buy the rumor, sell the news.

Developments which have very negative implications on the economy and investor sentiment can prompt central bank countermeasures that can lead to a rally. All of these future possibilities get priced into the market at the time of the initial reaction.

Bearish events can trigger future events with bullish consequences, thus after the release of a poor economic number, earnings report, or policy statement that is worse than expected, the market can rally. Potential future actions policy makers may employ such as the fed lowering interest rates, adding liquidity, or easing monetary policy (things we’ve seen in the past few years) have all been the result of this seemingly irrational market behavior.

How to Gauge Fundamentals from Technical Data

When I look for stocks to swing trade there are a couple factors that I consider. Stocks that are making 52 week highs are there for a reason, they have fundamental strength. While short term traders have the capability to push a stock to new highs it’s the role of the investors to keep it there.

At the same token, stocks that are making 52 week lows are down there for a reason. They are fundamentally weak, there are larger fundamental reasons dragging the stock down that far. In this way, we can quickly scan for stocks that are “fundamentally” weak or strong.

*I realize there is much, much more analysis involved in valuating companies with accuracy, the point here is to simplify the process of gauging quickly whether or not a stock is generally sound on fundamental grounds before putting on a position.

How to Improve Your Market Forecasting and Intuition

I highly recommend keeping two trading journals, one for recording your trades and a separate one for recording market observations. In this second journal, make notes on what is happening in the broader market, and then write down what you think will or should happen as a result. Once the outcome is revealed, make notes and compare your initial hypothesis.

This is a great way to build your understanding of macro economics and trading intuition. Always remember to, “expect the unexpected.”

In the markets, anything can happen.

Thanks for reading!

One of the more frustrating aspects of being a trader is knowing (or not knowing for that matter) when to trade various strategies and on which markets.

It’s become clear to me that in order to make it as a trader you do need a little luck on your side. Which is to say that we all create our own luck, true?

“The harder I work the luckier I get!”

This is a phrase I often hear successful people use and it really is true. Yes, it’s nice to “catch a break,” or get in to a reversal position just as the markets are beginning to turn, but a lot of this “luck” can be created yourself. It stems from hours and hours spent in front of the screen both during and after market hours.

The Rich Get Richer, the Lucky Get Luckier

I consider myself lucky, but I also work very hard (and I’d like to think I work smart). The methods I’ve developed during my trading journey are unique to my tolerance for risk, time management, and patience level.

The iterative and constant process of adapting has a much greater impact to our trading than the dollar signs in our account lead us to believe. When you really get to understand how a system or market works based of personal observations, live trading, and back testing, nuances and obscure price movements stand out.

Observing market cycles and taking copious notes on what we think is going to happen (pre-event), what we believe should happen, and what actually happens (post-event) is a great way to develop and prepare our thought process for everyday and larger macro market movements.

As we age, we all live though experiences that shape us. Perhaps, more so in trading than in other disciplines, our past experiences have a great impact on the way we approach and react to the markets.

Adapting to changing market conditions is something all traders must do in our own way. To some, when the going gets tough, the weak and apathetic minded individuals give up or say it can’ t be done, while the strong willed and those passionate about their craft push on.

Here’s a video tribute to traders that I put together, some are comical, some more serious.

Deliberately Seek Out Criticism

For me, I’m always questioning, analyzing, and sharing my ideas with others to gain feedback and new perspectives. Only when I understand the opposing side completely do I feel comfortable with my own view points. Even though I stubbornly grasp onto my ideas, I’m always willing to entertain the other side.

Don’t get me wrong, stubbornness can be a good thing (at times). When my car wouldn’t start, and after multiple attempted to jump it, my friend suggested that I replace the battery. “That can’t be it,” I thought. I had just tested it a week ago and knew the battery was working fine.

After some initial frustration, I gave it another go, swapping cables and letting the battery charge for a few minutes and she started right up. Stubbornness is a byproduct of perseverance and it’s the value in expecting nothing less than the best from ourselves that allows us to achieve great things.

Darwinism at Its Finest

I find that this perseverance or “survival of the fittest” mentality has taken me farther than my adversaries. When confronted with a daunting task which do you instinctively turn to, fight or flight? It’s nearly impossible to control our instinctive reactions. To change our mindset takes time; months if not years.

It takes conscious effort to reshape the way our trading mind reacts instinctively. What we do have control over are the people we associate with, the places we go, and the external sources we expose ourselves to.

Be the selector, the hunter, not the hunted. Put yourself in opportunistic situations.

I’ve found that the more I surround myself with people who hold similar principles and morals, the closer I become to being the person I wish to be.

Clarity of Thought Leads to Mastery

The better we can identify who we are as individuals, the easier it will be to identify which style of trading is right for each of us. Clarity of our ideas and a simplification to the core principles leads to the mastery of our craft. Leo Babauta of Zen Habits has some great ideas for simplifying your lifestyle to bring greater happiness.

So to come full circle, while it is certain market conditions will change, our guiding principles and general market beliefs should remain constant.

It is with these principles that our trading systems are derived. Therefore as volatility fluctuates, market cycles roll over, and economic conditions ebb and flow over the years, we need to hold a strong conviction to our core ideology.

Guiding Principles

Here are some of the things I strongly believe about the markets, they may or may not seem important to you, but all that matters whatever you believe in, you believe whole heartedly.

• The market is an aggregate of human emotions

• The outcome of each individual trade is unpredictable

• The better prepared trader has the greatest chance of success

• Be patient with profits, quick with losses

• One cannot avoid losing trades

• A stock is never too high to buy or too low to sell

• The best trades are winners from the start

• Always know where you would be proven wrong on a trade before you enter

• When in doubt, cut your position size in half

• No two trades are exactly alike

• As long as humans exist, a market will exist

The stock market as a whole is an unbeatable game. That is, no system out there can win 100% of the time over the long term. As traders we can however, profit from its fluctuations, price imbalances, and knowledge we have about various trends and patterns.

At the end of the day, we all face challenges. In trading, as in all business ventures it comes down to the economics of opportunity cost.

As Steve Jobs once said, “If today were the last day of my life, would I want to do what I’m about to do today?”

Excluding the monetary aspect, trading is a journey towards finding ourselves, who we are, and what we truly believe in.

Follow your passion and do what you love as that will lead to the greatest richness of all, true happiness.

Thanks for reading!

1. Day trading is exciting! This is why I trade

False. Good trading is boring, or as Jack D. Schwager so eloquently explains, “trading just as in archery, wherever there is effort, force, straining, or struggling it is wrong.” A good trader is calm and collected. With experience your mindset, heart rate, and excitement level remain in this state throughout the entire trading process.

I highly recommend the 10 part audio series by Peter Reznicek which digs deeper into this topic and uses Jack D. Schwager’s book Market Wizards as a framework.

How to Keep Calm

Here’s an exercise to help build a calm and level head when entering “battle” as some traders call it. This technique is also one which many pro athletes will use (to some degree) and it’s one I often use when gearing up for a race. It’s a visualization technique and it goes like this:

You will need to read through the exercise first, and then try it with your eyes closed.

Now, close your eyes… you’re sitting at your computer, hand on the mouse, it’s morning. The markets are open and you’re getting ready to make your first trade. You identify your levels and the criteria for entry. You don’t hesitate, once things line up you pull the trigger. You’ve accepted that this trade will be a loser, even before your order is filled.

You’re now in the trade and things are beginning to move, first against you by a few ticks, remain calm, you’re stop and targets are in place, there’s nothing for you to do, but sit patiently and wait. Calmly you glance over at the time, noting when you placed the trade, then back to the charts. Minimize your DOM, you won’t need it for a while. Now picture you’re state of mind, calm breathing, you’re simply an observer watching the markets, waiting for either a signal to tighten your stop, or your profit target to be hit. A few minutes pass and the trade starts to move a few ticks in your favor. You once again remain calm and don’t mess with your stop or target.

A few more minutes go by and you’re up a few points approaching your target. According to your criteria it’s now time to tighten your stop so you move it from the initial point to a closer level which reduces your risk. Not too tight mind you, there’s still some wiggle room. Finally, price continues inching in your favor and ding! Your profit target gets hit. Now it’s time to record the trade and move on to the next one.

 You observe yourself, patient, calm, and focused. Now come back to reality and on your next trade, take a deep breath and keep a clean head.

Visualization is a proven way to improve performance when you’re away from the screen, off the court, or preparing for a race. Know exactly what you’re going to do and when you’re going to do it.

2. To be considered a full-time trader I have trade all day long

False. I’ve found that trading less yields more profits. Spending 16 hours in front of the screen is just not productive, not to mention unhealthy. If you’ve read The Four Hour Work Week by Tim Ferriss you’re probably familiar with the viewpoint that being productive isn’t a factor of squeezing as much as you can into your day. In fact, productivity is not the goal at all, efficiency is.

If 80% of your profits come between the hours of 7-10 AM, is it worth spending another 5 hours in front of the screen to potentially make 20% more, with the risk of giving it all back? No. Spend your time where it’s the most effective, doing the things that are working.

Therefore, if trading the Euro is going well in the morning session, focus on that block of time, make your trades, take your profits and get out. Go do something else for the rest of the afternoon. Just because you’re not actively trading doesn’t mean you can’t be thinking about trading, strategizing or reviewing charts after hours.

To me, being “full-time” in the sense of hours worked is NOT the goal. Making the most amount of money with only the amount of time required to the point of diminishing marginal returns is.

Focus on a block of time each day to trade and be as diligent and alert as you can be. Then get out and do something else fdilor a while. You’ll find you’re trading improves.

3. Most traders lose money

True. Actually, all traders lose money. What keeps professional traders net positive on balance is their ability to see the forest for the trees and not let one (or a few) individual trades impact them negatively. Set your sites on the bigger picture and make the system fit the numbers. That’s helped me stay calm in rocky times.

One losing trade is not big deal if you’re position sized accordingly.  While books like Reminiscences of a Stock Operator depict “The Boy Plunger” Jesse Livermore taking huge risks and reaping huge rewards. He also lived a life of excessive highs and deepening lows.

Strive for balance, track your net worth and shoot for a smooth equity curve extending up and to the right. If your trading is sending this curve into a tizzy (and feels like riding a wild bull), you’re position size is too big.

4. A traders mind is his greatest asset

True. “A man is what he things about all day long.” – Ralph Waldo Emerson.

We are made up of the things we believe and as traders our mindset is everything. A great trader walks with confidence and conviction. Whether or not others share the same believes as you is irrelevant. The only thing that matters is your conviction to your beliefs.

Train your mind to make quick decisive decision and respond quickly. Develop a sense of feel by practicing, not until you get it right, but until you can’t get it wrong. Train yourself to see the markets through your eyes and your beliefs, not the media and talking heads on TV.

5. Anyone can make it in this business

False. It takes a certain type of individual to make it as a trader consistently over the long term. How do you know if you possess these skills? You don’t until you take the plunge, although I can tell you from experience it takes a strong drive, determination, and willingness to be patient and see things through.

The way we react to life’s challenges makes us who we are. Weigh the opportunity costs. Factor in the time required. Ask yourself, what are you willing to give up to succeed. Once the answer becomes “whatever it takes,” you know you’re in the right place.

Thanks for reading!

I just got settled in my home away form home Scottsdale, Arizona. I’ve been coming out here for the past couple winters now and it’s an absolute blast. The weather is great, the people are friendly, and the biking is phenomenal. On top of all that, everyday is beautiful, what else could you ask for.

For some reason, changing environments is something I like to do a lot. It keeps me fresh and alert. Whether it’s a weekend getaway or extended 3 month stay, by mixing things up I find my ambition, willingness to try new things, and curiosity continue to strengthen.

As far as trading goes, January is a great time. As my buddy Ben Lichtenstein likes to say, “New Day, Fresh Start!” A new year offers a clean slate and the opportunity to begin anew. I’ll be looking at the same 3 markets intraday the ES (E-mini S&P), the 6E (Euro Futures), and the ZS (Soy Bean Futures) along with continuing to swing trade equities.

The members only section of the site is packed with hours upon hours of detailed webinars, how to videos, and cool trader documentaries. I also continue to post my weekly market analysis, and share other cool things that I come across.

New York, New York

The first of many cool happenings in 2013 will be the New York Trader’s Expo. Here are the specifics.

Presentation Title: “10 Steps to Developing a Winning Trader’s Mindset”

Where: Marriott Marquis Hotel

When: Feb 19, 2012 at 4:30 PM

More Info: New York Traders Expo

If you’re attending please stop by and say Hi! I hope to see you there!

Electronic Music Mixes

Music has always helped me focus. As I write this blog post I’m listening to a little classical Claude Debussy. It’s been a while since I’ve put together an electronica track mix. Look for that in the coming month. Here’s one that has got a lot of attention.

Blogging, One on One, & Expansion

As of now, I plan to continue blogging on a weekly basis and sharing as much as I can. I’ve been doing a few one on one sessions with traders each month and I must say they are quite enjoyable.

Those who I’ve had the pleasure to working with have followed up with great feedback and improvement in their trading as well as a better grasp of how trading fits into their lifestyle. Here’s where you can find more info on the one on one mentoring sessions.

I will continue to share my views on the markets, tricks for juggling all that life throws at you and of course some of my mountain biking experiences.

As for now, I’m about to go on a little afternoon hike.

Here’s to a successful 2013!

Tim

Thanks for reading!

I have some fun things planned for the next few months. The full schedule is outlined below and will be updated as new webinars and events get added to the schedule.

Trading Webinars

At the end of November I will be doing a webinar entitled “A List of Things I Would Do Differently if I Were to Start Trading From Scratch.”

I thought this would be a fun topic helpful to a lot of traders. I will be sharing stories and lessons from my trading that I hope you can learn from (quicker than I did).

Live Trading Challenge

This will be the second annual live trading challenge put on by Infinity Futures. It’s a great opportunity for a handful of professional traders to demonstrate our trading strategies in action.

In last year’s challenge I made it to the semi-final round “beating” John Carter of Trade the Markets. While it’s structured as a competition, the spirit of the challenge is fun and inviting.

There are some rules to the challenge that place limits on the # of contracts and markets traded to keep things even, but remember this is just a small snapshot into our trading. We don’t take the outcome of the challenge too seriously (aside from the winner, buying a round of beers for the rest of the contestants .

The Traders Expo – New York City

Finally, I have been invited back for the third time to speak at the Traders Expo, this time in New York City. I’m excited! You may find it surprising, but I’ve never been to New York City before so if have any suggestions of cool things I should check out (aside from the tourist staples) drop them in the comments section below.

The Traders Expo event will held Nov 17-19^th at the Marriott Marquis Hotel. I’m scheduled to present on Tuesday the 19^th from 4:30 – 5:30p. My topic will be 10 Steps to Developing a Winning Trader’s Mindset. I’ll be sharing specific techniques for developing a winning mindset in trading, but more importantly, help you build a framework for building confidence and the ability to adapt to any situation.

I wasn’t able to make the Las Vegas Trader’s Expo happening this weekend, but you can read about my experience at last year’s expo in The 10 Mistakes You Can’t Afford to Make in Vegas.

Upcoming Event Schedule

Webinar: Things I Would Do Differently if I Were to Start Trading From Scratch

Fri. Dec 7, 2012 at 12:00 PM – 1:00 PM EST

Click Here to Watch the Recording

* Even if you can’t make the live events, still go ahead and register as I will be sending out the recordings following the presentation.

Infinity Futures Live Trading Challenge – Quarter Finals

Dec 4, 2012 at 9:00 AM – 10:30 AM EST

Click Here to Watch the Recording

Infinity Futures Live Trading Challenge – Semi Finals

Dec 11, 2012 at 9:00 AM – 10:30 AM EST

Click Here to Watch the Recording

Infinity Futures Live Trading Challenge – Finals

Dec 20, 2012 at 9:00 AM – 10:30 AM EST

Click Here to Watch the Recording

The Traders Expo (New York)

Feb 17-19, 2013 at Marriott Marquis Hotel

My presentation “10 Steps to Developing a Winning Trader’s Mindset” is scheduled for Feb 19, 2012 at 4:30 PM to 5:30 PM EST.

More Info: New York Traders Expo

If I have enough interest I will hold a little EminiMind social get together at the New York Trader’s Expo. Drop a note in the comments section if you’re interested.

Thanks for reading!