Saturday, September 09, 2017

Four Important Trading Insights

Here are a few valuable insights I've gathered from my recent work with skilled, successful traders:

1)  What you trade is as important as how you trade:  The successful traders are trading instruments that move in meaningful ways and that capture their best ideas.  That means trading instruments that show the right kind of movement, and it means expressing your ideas through positions that offer the best risk/reward.  The successful traders have many ways to capture ideas:  many time frames, many instruments (stocks, futures, options), many markets.

2)  Balance matters:  When trading gets difficult, it's often the traders most passionate about trading--who devote most of their waking hours to trading--that are most vulnerable.  It's easiest to see markets clearly when trading fits into your life, not when you are frantically fitting your life into trading.  The goal is to have a happy, fulfilling life no matter what markets or P/L are doing.

3)  The best trading ideas come to you:  So much of trading boils down to real time pattern recognition.  You see many things, and you see them line up, and the idea comes to you that the market is making a top or bottom, that the momentum move will continue, etc.  Finding the good trade means shutting down the ego, emptying the mind, and becoming receptive to insight.  If you are actively *trying* to make money and thinking about how much you're making or losing, you fill your mind with outcome-thinking, which crowds out the process focus.

4)  Develop a higher cause:  I hear traders fretting over losing trades, getting frustrated and losing discipline and focus because of missed opportunities.  Chill.  There are people with real problems in the world: their homes flooding, their lives in jeopardy, their futures uncertain--in Houston, in Florida.  I've been impressed with traders who are strongly grounded in their religion.  Of course they don't like making trading mistakes, but they don't let the most recent trades dictate their moods or perspectives.  Perspective is the most powerful psychological tool of all.

When we develop relationships with other dedicated, successful traders, we build role models.  We learn from their experience, accelerate our development, and contribute meaningfully to the growth of others.  Trading goes best when it is yoked to rewards (intellectual fulfillment and challenge; committed teamwork) that are independent of the most recent trading results.

Further Reading:  The Power of Doing Nothing