“The market doesn’t know your emotions or care about your portfolio. The market is moving on. And so should you.” – Terry Savage

One of the most challenging aspects of trading is learning to understand and appreciate that our constant desire to be right and smart in the markets will always cloud our judgment and too often work against us at the most inconvenient times.

In this current bull stampede, there are unfortunately too many traders and investors who are short or sidelined and now in desperate need for the market to move lower. How do I know this happening? This past week alone I received dozens of emails from those who expressed utter confusion and disappointment in why I’m not paying much attention to a number of bearish factors (i.e. low volume, overbought conditions, VIX readings, earnings/data not surpassing expectations, Baltic Dry Index, poor February seasonality, etc.) My reply in every single case was the following:

“The price action remains positively firm and our job is to be aligned with the price action as long as it remains that way. While that doesn’t mean we ignore the risks or think this market is somehow has magically become invincible, we have to constantly align our positions in the direction that offers the great probability for profit. In this environment that means you stay opportunistically bullish until we see that change. And, don’t worry – I’ll be here to help you see that change as soon as it happens.”

The challenge, as all of us will learn soon or later learn, is that Mr. Market doesn’t listen or care about anyone’s else opinion but his very own. This is especially true when we are wrong and not following his hidden and often very confusing agenda. Mr. Market often acts like a rebellious teenager and does exactly what he wants to do, when he wants to do it, and at the same time pays no respect for anyone who disagrees with him or believe he should act logically or within reason. In fact, a recent tendency is for the market to do exactly the opposite of tendencies we’ve seen so many times before. This is why you must place so much importance on what the market is actually doing rather than what you think it should do.

In truth, we’ve all been there, haven’t we? I know I have. In fact, more times I can even recall or really care to admit. I have also wasted and missed far too many opportunities by devoting precious time and energy looking for reasons to justify mistakes I have already made hoping that somehow that will make it better or help me to overcome my disappointment in my bottom line performance. Unfortunately, that never works and, even worse, only increases the pain and lengthens period of poor performance. This is not good especially if you are trying to make a living from trading!

While I know many of you don’t want it, here is some free advice for those who were positioned wrong for the past few weeks and who are significantly under performing so far this year. Your job right now is not to spend a moment longer asserting you were just early (which is the equivalent of being wrong in this game) but rather own up to the mistake and then figure out why the mistake was made. After you do that, it is just as important to figure out what lessons there are to be learned so you don’t repeat the same mistake again. In simple, ask yourself this – what could you have done differently or better to have profited more since this rally began? That’s the question to ask right now. Once you have your answer, then move on.

In my experience, that’s what winners do that losers do not. And, since we all desire to be winners, that’s what you need to do right now to get back on track especially if your among the many who have been left in the dust in this bull stampede!

Members often tell me about the books they find most helpful. As you know, there’s a lot out there to read if you so desire about just about every topic you can think about regarding investing, trading and the markets.

Recently a member expressed appreciation for my prior recommendation of Jason Zweig’s Your Money & Your Brain. I recommended the book after he told me about several situations over the past few years where he seemed to mentally work against himself and his performance in the markets.

With my member’s expressed permission, here are some of key points of Zweig’s book many of which are true gems for both traders and investors alike:

1. There are only three kinds of investors – those who think they are geniuses, those who think they are idiots, and those who aren’t sure.

2. One of the clearest signals that you are wrong about an investment is having the hunch that you are right about it.

3. Investors who focus on price levels earn between five and ten times higher profits than those who pay attention to price changes.

4. The only way to be more certain it’s true is to search harder for proof that it is false.

5. Business value changes over time, not all the time. Stocks are like weather, altering almost continually and without warning; businesses are like the climate, changing much more gradually and predictably.

6. When rewards are near, the brain hates to wait.

7. The market isn’t always right, but it’s right more often than it is wrong.

8. Often, when we are asked to judge how likely things are, we instead judge how alike they are.

9. Most of what seem to be patterns in stock prices are just random variations.

10. In a rising market, enough of your bad ideas will pay off so that you’ll never learn that you should have fewer ideas.

11. The more often people watch an investment heave up and down, the more likely they are to trade in and out over the short term – and the less likely they are to earn a high return over the long term.

12. Investing is not you versus “Them”. It’s you versus you.

13. The single greatest challenge you face as an investor is handling the truth about yourself.

14. Hindsight bias keeps you from feeling like an idiot as you look back – but it can make you act like an idiot as you look forward.

15. Ignorance of our own ignorance haunts our financial judgments.

16. Investing requires taking a stand on at least some of the uncertainties that the future holds. So your goal is to be as sure as possible that you don’t think you know more than you really do. How much you know is less important than how clearly you understand where the borders of your ignorance begin. It’s not even a problem to know next to nothing, as long as you know you know next to nothing.

17. Being part of the herd is fun while it lasts, but it’s seldom lucrative for very long, and it’s impossible to predict when the herd will change its “mind.” If you want to make more money than other people, you can’t invest like other people.

18. Knowing, or even imagining, that someone else is relying on your advice can make you feel more accountable, forcing you to go beyond your gut feelings and fortify your opinions with factual evidence.

19. Find out who has a negative view and give this devil’s advocate a full hearing.

20. Whether you should take a risk depends not just on the probability that you are right but also on the consequences if you are wrong. You must always weigh how right you think you are against how sorry you will be if you turn out to be mistaken.

21. We are often most afraid of the least likely of dangers, and frequently not worried enough about the risks that have the greatest chances of coming home to roost.

22. When an intangible feeling of risk fills the air, you can catch other people’s emotions as easily as you can catch a cold.

23. Overreacting to raw feelings “blinking” in the face of risk is often one of the riskiest things an investor can do.

24. There’s safety in numbers only when there’s nothing to be afraid of.

25. Many of the world’s best investors have mastered the art of treating their own feelings as reverse indicators. Excitement becomes a cue that it’s time to consider selling, while fear tells them that it may be time to buy.

26. A mistake that stems from an action hurts worse than a mistake that results from inaction.

27. Once you have a handful of options, adding even more choices will lower you odds of making a good decision and increase your chances of regretting whatever decision you do make.

28. The harder the choice feels, the less people want to choose. Yet, the threat of having less choice almost always disturbs us.

29. The closer you come to hitting your target, the more regret you are apt to feel if you miss it.

30. The human brain is a brilliant machine for comparing the reality of what is against the imagination of what might have been.

31. There’s no end to the roads not taken.

32. Investors probably hurt themselves more by avoiding risks they imagine they might regret than by taking risks they really do end up regretting.

33. Instead of making judgments one at a time, you should follow policies and procedures that put your investing decisions on autopilot.

34. The more you can automate your investing, the easier it should be to control your emotions.

35. The pleasure you expect tends to be more intense than the pleasure you experience.

36. We often find out that what we thought we wanted before we got it is no longer what we really want once we have it.

37. There are two tragedies in life. One is to lose your heart’s desire. The other is to gain it.

38. Your memory of what was is shaped largely by what is.

39. If you focus too narrowly on the task at hand, you may never use your peripheral vision.

40. Chance favors the prepared mind.

Those are some very interesting and I think overall very helpful observations! When you have time, Jason’s website is also worthwhile and has many items of interest you might find helpful as well.

* This report was originally posted at the members’ only site on July 19, 2011. If you’re not a member, I invite you to become one. Here’s what I offer.

Every once in awhile I read something from another trader who I respect that I really wish I wrote myself. Here’s one such example:

“One of the most difficult things to get investors and traders to understand is that no matter how much they investigate an investment, they will probably do better if they did less. This is certainly counter-intuitive, but the way that our brains function almost guarantees that this will happen. This kind of failure also happens to those investors frequently regarded as the smartest. In essence, the more information that investors have, the more opportunity that they have to choose the misinformation that suits their emotional purposes.

Speculation is observation, pure and experiential. Thinking isn’t necessary and often just gets in the way. Yet everywhere we turn, we read and hear opinion after opinion and explanation on top of explanation which claim to connect the dots between economic cause and market effect. Most of the marketplace is long on rationale and explanation and short on methods.

A series of experiments to examine the mental processes of doctors who were diagnosing illnesses found little relationship between the thoroughness of data collection and accuracy of the resulting diagnosis. Another study was done with psychologists and patient information and diagnosis. Again, increasing knowledge yielded no better results but did significantly increase confidence, something which the smartest among us are most prone to have in abundance. Unfortunately, in the markets, only the humble survive.

The inference is clear and important. Experienced analysts have an imperfect understanding of what information they actually use in making judgments. They are unaware of the extent to which their judgments are determined by just a few dominant factors, rather than by the systematic integration of all of their available information. Analysts use much less available information than they think they do.

This underscores the value of using a simple method. I didn’t say easy – I said simple!” – Jeff Cooper

I could not have said that any better than Jeff. Well done!

* This report was originally posted at the members’ only site on July 20, 2011.

“It is deceptively simple, endlessly complicated, a child can play it well, and a grown man can never master it. Any single round of it is full of unexpected triumphs and perfect shots that end in disaster. It is almost a science, yet it is a puzzle without an answer. It is gratifying and tantalizing, precise and unpredictable. It requires complete concentration and total relaxation. It satisfies the soul and frustrates the intellect. It is at the same time, rewarding and maddening and it is without doubt, the greatest game mankind has ever invented.” – Arnold Palmer

What a wonderful quote about the game of golf. Although to a lesser extent, the same things can be said about trading as anyone who trades every day in the trenches will tell you.

I was reminded about this perspective this weekend when watching an hour interview Charlie Rose recently conducted with Mr. Palmer. Many people don’t know this, but it was an biography of Arnold Palmer that I read as a child which originally sparked my interest in taking up the game. So, all of these years of both frustration and incredible enjoyment, I owe directly to Mr. Palmer.

Now in the twilight of his years, I found this recent interview really enjoyable particularly after the 30 minute mark. If you have an opportunity to watch this, I think his advice about developing a system is so very important especially for new traders and investors as well as what the discussion after that about what it takes to win. Much like the quote above, the perspectives are priceless. Even if you don’t play golf or even hate the game, don’t miss this interview!

I frequently share inspirational quotes with my membership and one of my favorites has to be this:

“First, you decide what you want specifically; and second, you decide if you’re willing to pay the price to make it happen, and then pay that price.” – Nelson Bunker Hunt

What a terrifically true and powerful statement. If you had the privilege of knowing some of the most profitable and successful traders in the world as I have, you would quickly figure out that each and every one went through this process and ultimately made made numerous sacrifices to achieve the level of performance only others could dream about and many think is simply impossible. Yes, these are traders who are making over $500K a year if not several times that just trading their own money independently.

While so many in this business want others to think it is easy for them, that they’ve somehow become smarter than the market, and/or that everything they touch easily turns to gold AND that they are just the person to show you how to do it provided that you give them money (If you are unfamiliar read Ritholtz’s Investor Types To Avoid), I’m going to let you in on a little secret that I want you to always remember – there are no magic secrets to successful trading and investing!

The reality is that to be successful you must work really hard for a very long time and consistently make huge sacrifices to improve yourself so you can give yourself every opportunity at success. Yes, it is that simple and so difficult at the very same time. As my late father often told me “Anything worthwhile is not going to come easily or by chance….you simply have to work at it as hard and as often as you possibly can and, even then, you will not win all of the time.”

In the many years I’ve been mentoring others, I have learned all too painfully that while many have the desire to be successful in the markets, when it comes right down to it most do not fully understand and appreciate that they must also make tremendous amounts of sacrifice to achieve the goals they’ve set. Yes, they may give it a good try for a little while and dedicate themselves when things are working well and the markets are cooperative. But, when times get rough, their strategies are out of sync, and they experience painful demoralizing defeats as we all do, these same people give up on themselves and the goals they’ve set. Based on recent emails I’ve received, recent market conditions have already caused many to give up and quit.

Whatever it is that you want, both from the markets and in life in general, do yourself a favor and please figure that out first and then decide if you’re truthfully willing to pay the price and make the sacrifices that you’ll need to take to make it happen before you start that journey. That way, when the tough times come, you won’t bail out but instead you will step up and do what is necessary to stay on the right track.

For me, this was always the easy part as I knew that I wanted to trade for a living and to do it to the very best of my ability. As my members will tell you, the intense efforts I put in every day also show by clear example the level of commitment and enormous sacrifices I have made and continue to make to achieve my success. Although at times I have wondered if it is all worth it, in the end, the decision was clear and my commitment remains. To achieve my goals I must continue to make many sacrifices and work like crazy, but so far it has been well worth it and given me every chance of success. In the markets – that’s all any of us can ever hope to expect!

No matter what the market conditions may be, especially in weeks like this, it is very good idea to do everything you can to stick to the normal trading routine. While none of us can control what the markets do, we can control what we do everyday to be in the right place at the right time and to take advantage of opportunities we see by creating and maintaining an optimal state.

How do you create and maintain an optimal state? One way, at least if you are like me, is to develop a daily routine and stick to it no matter what. This will also help relieve some of the stress and tension markets like this create for all of us. What you do today, in essence, should be exactly the same thing as you did last week, the week before, and the week before that. The market’s performance shouldn’t disrupt or change your daily approach, how you spend your time, or even what you focus on. Doing this will help you sustain calm under pressure which is important.

For those of you who don’t work by the routine and are feeling stressed, I do have some suggestions for you to consider. First, I would recommend you increase the time and effort of your workouts. This will also help you get to sleep faster and burn out excess energy, frustration and emotion. Nothing will impact your judgment or increase your vulnerability to emotional market swings than being stressed out or overworked. I also recommend you try to go to sleep one hour earlier especially when feeling stressed. Also, if you can take an entire day away from the trading desk during the weekend, I recommend you do so to clear and rest your mind.

Second, I recommend you do not watch television and make a concentrated effort to read less news and opinionated social media. While this is helpful to many traders and investors as a general course of action, this is especially true in a noisy, news-driven market. While most seem to think being in the know will translate into making more profits, usually the exact opposite occurs as information overflow turns into paralysis by over analysis. In all likelihood, you already know everything you need to know to make money in the weeks ahead and more information and opinions are not going to build the bridge between here and those profits.

Another area I would recommend is for you to work on improving your eating habits. While often helpful generally, especially during stressful situations try to eat far less food while increasing the frequency of your meals to maintain and sustain optimal energy levels throughout the day. Also, try to eat more energy-focused foods and be mindful of your intake of both caffeine and energy drinks. If possible, avoid those altogether or at least moderate your intake as both will keep you hyped up and more emotional than necessary. Everyone is different here, but in general when stress increases, poor eating habits also increase and that will work against you and maintaining an optimal state.

Finally, please take significant steps to build a wall between your work and personal life so you can get the break you deserve. The best way to do this is to set work hours and stick to those even when market conditions are challenging and emotions run high. While many traders constantly check what the futures are doing right before bed, checking emails, and researching potential trades at all hours, you and your brain need several hours of solid rest and time away every single day to perform at your very best when you are at work. In fact, after 6PM and my after-hours preparation is finished, as part of my daily routine I turn off my cell phone and I never check emails or do anything related to the market. For me, that has made a world of difference.

Good and efficient routines take weeks, if not years, to develop into automatic routines but in my experience are well worth it. By taking small but consistent steps now to improving your work routine, will work wonders for you in the long-run.

One of the greatest privileges of my life was my friendship with Irwin T. Yamamoto who passed away two years ago today on July 15, 2009 at the age of 54.

Our friendship began eight years ago after I wrote an something that discussed The Yamamoto Forecast and his excellent track record. Following that Irwin contacted me by email and our friendship flourished in all of the years that followed.

We would talk at least once per month about the market and I could always count on him offering a different perspective. In fact, in 2008 my wife and I traveled to Maui with the goal of meeting and spending time with the man who will always be known as “The Maui Contrarian.”

As with all great friendships, I learned a lot from Irwin and I’m better at what I do because of him. While our strategies were very different, it was also these differences that I believe also made us so interested in one another. They say that opposites attract and that you frequently learn from people who are the most unlike you. This was especially true with us. In my case, I really wanted to learn how Irwin was able to achieve the level of success he had for so many years and at the same time make it look so darn easy. What I ultimately discovered was a man who possessed simply all of the right characteristics, strategies, and the ideal mind set to a succeed in the market over the long-term.

It is a tragedy that Irwin is no longer around to share and help investors around the world with his contrarian perspectives. This post is dedicated to Irwin’s memory and, to honor him, I would like to share some of the many lessons I learned in the sincere hope that it may benefit you as well.

Lessons From Irwin T. Yamamoto

• Be a consistent contrarian:  Being contrarian was Irwin’s nature. Whenever possible he took the unpopular view and found ways to make money from it. While some people love to think they are a contrarian as far as the market is concerned, when the heat is on and everyone (including the market itself) thinks you are dead wrong, they always run back to the herd. Irwin never did. Not once. No matter what. And, trust me, he was tested many times throughout his career.

• Have courage:  Every call Irwin made was a bold call. If it wasn’t bold, he simply didn’t make it. He refused to hedge his bets by trying to take the middle road or offering up so many contradicting opinions so he could later say he was right no matter what happened as so many experts do. To do well in the market, we all have to have the courage to make and stick with our convictions. Often the investment decisions that will work out the best are the ones that simply require the most courage to make.

• Believe in yourself:  Irwin had an unshakable belief in himself. That’s so very important when you have your hard-earned money in the market. Through thick and thin, Irwin always expected to win and he did more than most. Every winner I’ve met has possessed this important characteristic. However, what made Irwin truly special was that he also had the humility to keep his confidence in check.

• Focus on quality not quantity:  Irwin told me often that he was a happy man if he could just one good opportunity in the market every year. Yes, that’s right – just one opportunity. In fact, subscribers to his newsletter will testify to the fact that Irwin rarely had more than just a handful of positions on at any given time and was not afraid to be in cash for extremely long periods when he found no excellent opportunities to share.

• Patience:  When taking the unpopular and contrarian view, Irwin understood that time was on his side. Although he would admit that it was “not easy to be alone in the crowd and swim continuously against the tide,” by maintaining a long-term perspective, Irwin was not tempted by the seduction of the short-term market swings. His focus was instead to concentrate on the big picture trends and profiting from them.

• Ignore short-term noise:  Irwin had the ability to ignore the short-term noise and concentrate on what really matters over the long haul. Yamamoto believed that the real-time coverage of the markets were severely detrimental to investors and he refused to watch the market during the day. Irwin told me that he would stay up late enough (Hawaiian time) to watch the premarket futures and premarket headlines, but then would go to bed once the market opened no matter what was going on. By doing this, the daily ups and downs didn’t phase him which is why he was able to be so consistent in his approach. In a day and age where everything is coming at us fast and in real-time, this was Yamamoto’s edge and he used it well.

• Let your track record speak for itself:  There’s a lot of puffery out there in the investment world as people try to sell newsletters, tips, advice and tools on the backs of people’s hopes and fears. Irwin never did. He simply did his job, produced the best results he could, and let the cards fall where they may. In both good times and bad, he never sought out public exposure or engaged in aggressive marketing techniques that is so very common today. Yamamoto was successful because he simply produced excellent results. He didn’t waste time creating hype or seeking attention by telling others how right he has been in the past. Instead his focus was on finding the next opportunity. Always.

• Be in control of your destiny:  Irwin understood both his strengths and weaknesses and created a business model that he loved. He started his newsletter back in 1977, found a format he liked (a typed newsletter usually no greater than a couple of pages sent out once per month) and he stuck with it all of those years. Although he was under pressure by his subscribers to make more frequent updates, go online, etc., he never did because he saw it as overkill and unhelpful to his clients. Say what you want, his outperformance among his peers over a long period of time shows he was ultimately right.

• Know yourself:  Irwin’s strategy was reflective of who he was and took advantage of his unique skills and personality. Irwin didn’t use indicators, sophisticated timing strategies or mess around with investments he didn’t know much about. Rest assure he never even considered daytrading stocks or adopting strategies of others that didn’t match his own personality. He knew who he was and aligned his strategy accordingly.

• Be happy:  The market and the performance of his investments never impacted his mood. In fact, some of the happiest conversations I had with Yamamoto was when he should have been the most frustrated and disappointed in his recent performance. When times were bad, he simply kept doing what he always had been doing and refused to let the market get the upper hand over his emotions. A skill many of us so desperately need.

• Keep learning:  Yamamoto was always in a learning mode and displayed a child-like enthusiasm for learning new things. It was my impression based on our conversations that he never felt like he knew everything or that there wasn’t so much more to learn. He was an avid reader and spent the vast majority of his free time reading and, more importantly, thinking about the market. Like many great students, Irwin sought out the ideas from people who he disagreed with the most so that he could “know his enemy.”

• Think like a businessman:  He told me often that he viewed himself as a businessman. A successful one “simply looks to purchase wholesale and sell retail.” His goal was to know the worth of a company and then acquire it below its true value. After finding an interesting opportunity, he would then scour the balance sheet and read all of the footnotes focusing primarily on the company’s cash position and relative cash flow. If those things looked good, he was especially encouraged if he saw insider buying. A simple, but effective strategy. To my knowledge, Irwin had only one stock screen in his toolbox – the new 52-week low list.

• Play make believe:  Irwin was insistent that most people shouldn’t be in the market until after they acquired the skills and strategies to consistently succeed. He often urged people to play “make believe” by mentally selecting a few stocks and tracking them for some time to see how they react to news and events. Only after doing that for long periods of time and after showing success should a person ever be in the market with their own money.

• Don’t lose your values:  We would often talk about how subscribers often wanted us to sway bullish or bearish, especially at the sentiment extremes. Like offering short sells after a major correction or buys after a rally, versus the exact opposite and how that often was the wrong approach. Irwin would often lose subscribers because of it, but he didn’t care. He stayed true to his own views through thick or thin even if it cost him money and lost subscription revenue.

In the end, it was a true honor to have Irwin Yamamoto as dear and loyal friend and so much wish he was still around so that we could discuss and debate the issues and opportunities that face the markets today!

Many have asked me over the years how I trade while on vacation. Here are my two rules: 1) I don’t trade during vacation, and 2) I close out all positions no matter what their upside potential before I leave.

There was a time when I wasn’t nearly so smart. Like others I would drag the cell phone and laptop with me and every single chance I would get I would check in to see how the market was doing and my positions. I know I’m not alone in doing that since every single time I go on vacation I see groups of people doing the same thing from the strangest of places. In fact, I recall not too long ago sitting and holding hands with my dear wife on a beach in Kauai enjoying a most amazing sunset while others were not paying any attention and instead had their heads and eyes only on their laptops, iPhones or other gadgets. Talk about a missed opportunity!

Sooner or later, many of us learn to mature and wise up. Vacations are for taking time away from the market and not for working. Like most lessons, I wasn’t smart enough to realize why without first having the lesson taught to me in a most painful and memorable manner.

Back in the Spring of 1999, my wife and I were on vacation and I took my laptop so I could trade. I recall being really juiced up because I had a trade in play that was already blowing past my profit targets daily and looked likely to make my month if not my entire year. At worst case I thought I could at least pay for the entire trip just with the profits from that one trade.

Well, you can probably guess what happened next. While sleeping in a little bit during during our trip, I woke up a little late to finally check in and quickly discovered that my trade was down by over 30% after some speculation that the stock I was trading had cooked its books. Not only was I terrible vacation partner for that day, but the whole trip was ruined because I couldn’t stop beating myself up for being so stupid. To this day, that was one of the worst vacations we ever had!

So, please learn from my experience. When on vacation – be on vacation!

With that said, I know many of you treat the entire summer as a pseudo vacation period away from the markets. I know this because website traffic slows down significantly and my email inbox suddenly becomes almost manageable. The period between the first of July and the end of August before the kids go back to school is when most people tune out. And, in recent years, the market’s performance has given them plenty of justification for doing so.

For those who are looking to scale back a little during summer but NOT trade during their vacations, I think Alan Farley’s advice on how to trade remotely can be of some help. Here are his 10 recommendations:

1. Long-term charts:  Weekly price patterns work very well for folks unable or unwilling to watch the short-term markets. Just keep in mind that you’ll need to focus on trade setups lasting for weeks or months instead of hours or days. The hard part will be in picking the entry point that takes full advantage of the longer-term trends.

2. Trade smaller size:  You don’t have to be a gunslinger to book long-term profits. Stop using margin, take small positions, and then get out of the way. This lowers risk considerably by letting price jump around without shaking you out of good trades. Even a hundred shares can produce outstanding gains when held for weeks or months.

3. Choose wisely:  Pick the right stocks to trade. This means you should forget about Chinese rockets, thinly traded biotechs and secondary agricultural players. Instead, limit your portfolio to slower movers that are less likely to exhibit overnight price shocks. More-lethargic sectors that let you sleep at night include: cleaning products, packaging and beverages.

4. Play the exchange-traded funds:  ETFs let you take on measured exposure to entire market groups. This has both benefits and disadvantages for remote traders. On the plus side, you can avoid company news that sends individual issues through the roof, or over a cliff. On the negative side, you have to play against automated programs that dominate these instruments.

5. Loose stop-loss strategies:  Remote traders need a quick nightly review to check out the day’s progress and readjust their stop losses. Longer-term position stops aren’t placed in the same way as a day trader or a swing trader. You keep them loose and out of the way, making sure they’ll only get hit if there’s an obvious change in trend.

6. Apply weekly Bollinger Bands:  Long-term Bollinger Bands show remote traders the most favorable periods to enter and exit positions. It takes patience, though, because many weeks will pass between major trading signals. Here’s a hint: Place a weekly 5-3-3 Stochastics under the price bars and look for convergence with Bollinger Band signals.

7. Let the market come to you:  Place deep limit orders and sit on your hands until they get hit. Look at the weekly pattern and find the price where weak hands will get shaken out. That’s where you want to place your buy or sell order. You won’t get filled every time, but this technique will get you into many great trades at perfect prices.

8. Use dollar cost averaging:  Long-term trades are price-sensitive because of the great distance between closing bars. You can address this challenge by combining classic investing and trading techniques. Build the position over time with dollar cost averaging, but line up your entries with large-scale support and resistance. For example, add to your position each time the market pulls back and tags a horizontal weekly Bollinger Band.

9. Play the index cycles:  Negotiate the minefield of conflicting trends with a smoothed Wilder’s RSI (relative strength index). Place a 14-day RSI, smoothed by 7-periods, under the S&P 500 index chart. Then watch for major turns below 20, and above 80. These cyclical shifts are highly predictive and tell you when to establish longer-term positions.

10. Master the waiting game:  Stalk your long-term setups and do nothing until the market planets come into perfect alignment. It’s easy for remote traders to feel left out of the action and start chasing the market. But their edge relies on absolute detachment until their chosen entry prices come into play.

This is a very good set of recommendations. In fact, many of these are also appropriate for those of you who cannot stay on top of the market as much as I can most of the time.

A common theme you know I stress so very often is how important it is to use and adopt a trading and investment strategy that is in complete agreement with the amount of time, skill, and effort you can put in. Vacation time is no different. And, always remember, the market and its opportunities will be here when you return!

In looking for paths to improve myself and to help those who I’m privileged to mentor, I have been reading a number of books and articles regarding applied sports psychology. Many of these books can offer more perspective and guidance regarding the mental aspect of trading much better than most books I have read that focus exclusively on trading and the markets.

Traders and investors, after all, have a habit for making things far more difficult than they really need to. And, as many of you are aware, the biggest challenges in the markets usually come from within and not from the market.

One of my favorite in the applied sports psychology realm is Dr. Bob Rotella. Dr. Bob is a sport psychologist for many professional golfers and is considered one of the best in his field. He has written a number of terrific books about golf and trading. In fact, if someone in the trading field simply performed a search and replace feature for the word “golf” with “trading” I think many would think these are some of the best books about the mental side of trading ever written.

To give you some idea, a couple of years ago Dr. Bob wrote this article to help golfers achieve better performance. The concepts outlined there are as helpful to a golfer looking to win as it is a trader looking to achieve peak performance in the market. To see what I mean – let’s review each of Dr. Bob’s 10 rules and my own interpretation of Bob’s comments as they relate directly to trading:

Rule 1: Believe you can win. If other traders can do well in the market, so can you. However, if you don’t have enough courage and confidence in yourself, you will never achieve success. The events over the past few years have tested many people in this way and many now believe the game is rigged against them and, even worse, that no matter what they do, in the end they will ultimately fail in the markets. In my experience, nothing could be farther from the truth and those who will win in the markets first start by believing they can do it. Of course, those who do create success also must back up that belief in themselves by working hard and show consistent determination to find, develop and exploit their trading edge.

Rule 2: Don’t be seduced by results. You must stay in the present and focused on executing each trade to the best of your ability. Don’t let yourself think about how much you hope to win, but instead focus on both proper and consistent execution and risk management. Do this and the results you desire will follow.

Rule 3: Sulking won’t get you anything. One of the worst things you can do for your prospects of winning is to get down when things don’t go well and market conditions are not favorable. If you start feeling sorry for yourself or thinking the trading gods are conspiring against you, you’re not doing your job by focusing on the next trade. Good traders readily accept and realize their mistakes, they learn a lesson if there is one to be learned, and they quickly move on to the next trade. They don’t let a series of bad trades or mistakes carry over to the next.

Rule 4: Beat them with patience. Every time you have the urge to make an aggressive trade, especially out of emotion, take a step back and reevaluate. The moment you get impatient, bad things tend to follow. In tough markets, stay patient and let others beat themselves in order to be ready and fully prepared to pick up the low lying fruit from the sheer destruction and capitulation from others.

Rule 5: Ignore unsolicited advice. You will have lots of well-meaning friends and experts who want to give you advice. Don’t accept any of it. In fact, stop them before they can say a word. Formulate your own opinions and generate your own analysis and you’ll do far better as your skills develop and improve. In life, as in trading, to succeed you must find your own way as no other person no matter how much you may want them to is going to take you where you really want to go.

Rule 6: Embrace your personality. The key is to find what works best for you and this can take years to discover. There are many good approaches out there, but in reality there is only one trading approach that will best utilize your skills, talent and personality to create and sustain your profitable edge. One of the most common mistakes a trader can make is to try to embrace or copy a strategy of someone else. Like a fingerprint, your strategy and focus should be unique to yourself. Yes, learn as much as you possibly can from others who are successful, but still understand that in the end your priority is to develop your own strategy toward the markets and that path will be unique and unlike any other.

Rule 7: Have a routine to lean on. Every trader should follow a mental routine on every trade. It keeps you focused on what you have to do, and when the pressure is on, it helps you manage your emotions and nerves. While none of us have any control over the markets, we all have control on how we trade and the decisions we make. Having a solid routine will inject consistency that will keep you calm under pressure. No matter if the market is up 2% or down 2%, your routine should look exactly the same each and every day.

Rule 8: Find peace in the market. The market has to be your sanctuary. Yes, you will experience both good and bad times (everyone does), but through it all you must learn to enjoy and revel in the journey. It is the path you take that will provide the most content, not the end destination. In time, you must also learn never to trade for emotional or ego satisfaction, but instead, trade because you enjoy the challenge.

Rule 9: Test yourself. Don’t look for easy trades and setups at all times. Test yourself by working challenging trades and difficult markets in order to test and improve your skills. For example, if you’re uncomfortable and not skilled in trading options, spend a month just trading options. If you’re uncomfortable with shorting stocks, spend a month just shorting stocks. We only have the opportunity to improve if we constantly test ourselves and work on things we find most difficult. If you don’t learn to work on your weaknesses, sooner or later they will catch up to you when it will hurt the most.

Rule 10: Find someone who believes in you. Having confidence in yourself is important, but it helps to have someone who believes in you, too, whether it’s a spouse, a friend or a mentor. No man’s success can be entirely attributed to his own actions. You must surround yourself with people who believe in you and will hold you accountable for your progress.

As you can see, this is a very powerful set of rules that will not only help you trade better, but also to help you find more success and contentment in any challenging endeavor.

When I look back and think about the things that make me the most proud of what I have accomplished over my life, each memory can be directly attached to some specific obstacle I had to first face and then overcome to achieve an important goal. In mentoring another trader this morning, I was thinking about this and an important lesson I learned back in high school. If you don’t mind, I thought I would share the lesson with you as I think it is instructive.

When I was younger there not much more than I desired than to pummel anyone I competed with on the golf course. My competitive spirit and energy was focused on being one of the best golfers not only in our high school division, but within the entire state as well. Unfortunately, I didn’t have much natural talent or skill so I had to really work hard for each victory.

I recall there was a match in particular that I wanted to win more than any other. The guy and his team I was competing against were the nastiest, most despicable creatures I ever met on the golf course. They were rude, obnoxious, ego maniacs who did just about everything they could to upset you including laughing at poor shots, stepping on putting lines, conveniently coughing during swings, and other assorted unsportsmanlike conduct.

Unfortunately for me and my team, they also had the skills to back up their behavior and they were considered the best in our division and were unbeaten.

Facing a critical approach shot on the last hole in which I was tied evenly with my competitor, I was had a daunting 3-iron shot 220 yards over water into a well-protected green on a long par 5. While my tee shot was perfect, my competitor previously stepped up and hit a terrific shot into the green in two (10 feet away from the pin) and I had to hit a similar shot to have any chance of winning the match. The problem was that I despised hitting my 3-iron. It was the very club I was least confident with and I avoided using it whenever possible. In fact, I never even practiced with the 3-iron as I was that uncomfortable hitting the ball with it.

Much to my chagrin, the yardage I had left into the green provided no other choice but to hit that 3-iron. Other clubs would have me hitting over the green into a big pot bunker or too short in the water that protected the front of the green. Since my competitor was already on the green in two and had a relatively easy putt for a win, I could not lay up and take the easy way out either.

After taking a few practice swings, I gulped and then proceed to snap hook the ball so much that it went screaming out of bounds and could never be found. I was so upset by what I had done that I then proceeded in a fit of range to chuck that 3-iron into the pond. Not only did I lose the match and the entire tournament for my team, but I became just like my enemy – a spoiled sport and loser. And, of course, to make matters even worse, my golf coach, my entire team and beloved Father were watching the whole debacle unfold from the green.

I was so upset that I stormed off and told my father to take me home and we didn’t speak a single word the entire way. I was so very disappointed in not only that I lost, but I let everyone down and also enabled those bastards get the better of me!

The very next morning Coach pulled me aside before our team meeting and asked me where my 3 iron was. I told him in a snarky manner, as if he didn’t already know the answer already, that it was still back in the pond. He then told me that if I was going to play again for his team that I first needed to go fish it out and bring it to him.

On the next very next team practice, Coach started out by asking me again for my 3-iron. I then proudly pulled it out of my bag and handed it to him after diving into a muddy pond filled with moss, mud and other lively reptiles which I considered both cruel and unusual punishment. Coach then took one look, handed it back to me, quickly grabbed my golf bag away and said to me in a not too happy voice…

“Son, I am going to teach you to love that 3-iron. For the next three weeks, you are benched. Instead, in every practice and in every round, every single shot you take will be only with this 3-iron. At the end of the three weeks, if you can’t show me you can hit that thing like a PGA pro, you are going to stay benched for the rest of the year!”

At first I thought Coach had it in for me and was just trying to punish me for losing the match. With the exception of that final hole blowup, I was playing quite well and this was going to screw up my game not to mention hurt my team. However, I still trusted Coach enough to know I needed to do what he told me if I was ever going to play for him and the team again. You see, Coach realized that I do what many people do which is that I avoided playing and practicing with the 3-iron because I knew it was my weakness and when it mattered the most, I paid the price. Truthfully, I was completely unprepared and not skilled enough for that 3-iron approach shot and when the pressure was on, I choked.

At first I thought I was going to go crazy when practicing and playing with that 3-iron. I mean how do you hit a 3-iron 100 yards to a par 3 green, use it to blast out of a bunker or make a putt? It also didn’t help that I felt like a stupid idiot and those who played with me had far too much fun watching me hack around with it. But, slow and sure, after the three weeks passed, I learned how to hit the darn thing.

Although I would never admit it to anyone at the time, I also discovered enjoyment in learning how to play all sort of different types of shots with it. After hours and hours at what seemed like sheer torture, the 3-iron was no longer my obstacle but instead became an asset. And, in the process, I learned a life lesson that sticks with me some 25 years later. To this very day, that very same 3-iron sits in a corner of my office and every time I see it I remember the valuable lessons it taught me.

First and foremost, we cannot let our fears and weaknesses conquer us by simply avoiding them. Sooner or later, they will always catch up to us and hurt us if we let them. Looking back, I should have known that someday I would have to hit the 3-iron well and should have taken time to practice with it first so that I could do so when it mattered!

Second, I must say that when we screw up or choke as I did, we need to look at ourselves first and foremost to place blame and own up to it. Instead of having a fit of rage and throwing the 3-iron in the pond, I should have instead taken responsibility for not practicing with my 3-iron and preparing myself for that shot. In sum, I should have taken the defeat in stride, figured out what lesson I could learn from it, and used it as an opportunity to grow and get better. My reaction to the shot in so many ways was so much worse as it clearly showed the level of immaturity I see so often in traders who lose and look everywhere else but to themselves to why they were defeated.

Finally, when you have an obstacle in your way, the best way to overcome it is to make it your best friend. By focusing on nothing but hitting that 3-iron for three weeks, I actually learned to like hitting the club and, in turn, I hit it much better and consistently. Yes, it was uncomfortable at first, not a lot of fun, and required confidence in Coach and myself that it was the right thing to do, but in time the struggle I undertook created a skill that continues to help me play well to this very day.

In the markets, we all face numerous obstacles. For many of us, the biggest obstacle we face is ourselves and not the markets. For example, many of us trade in ways that sabotage our returns by avoiding mistakes, failure and whatever weaknesses we have instead of facing and owning up to them. However to thrive and succeed, we must always constantly work and challenge ourselves to face these obstacles and learn to enjoy the process of overcoming them. That’s what makes our journey in the markets so very rewarding!

In the end, it is never about the money you earn, but the lessons you learn and obstacles you overcome that will determine your success. The only question that remains for you is this – what obstacles are in your way today and, more importantly, what steps are you going to take right now to work on overcoming them?