Friday, November 21, 2014

Are You a Winner ?

You were born to win, but to be a winner, you must plan to win, prepare to win, and expect to win.       Zig Ziglar

Not everyone is ready for success. Some secretly fear it. Reasons will differ from person to person. Some will not want to out-earn their parents. The fear is that if they improve their social status, friends and loved ones may no longer care for them in the same way. Other people just don't believe they deserve success. Successful people however, don't have such worries. As they are comfortable with themselves and comfortable with what they are trying to accomplish in life. No self-doubts! They have a firm commitment to their goals, and know that if they work hard enough, they'll achieve what they set out to achieve. When it comes to enduring success as a trader, the odds are against you. Every year, thousands of would-be traders try to make it, but very few realize their goals. Even those who make it,  success is short lived. Achieving and maintaining success is largely a matter of psychology. If you approach trading with the right mindset, you'll increase your odds of success. 


Many people, although they will rarely admit it, think they are just not deserving of success. To be a successful trader you must firmly believe that you are deserving. If you do not believe that you deserve success, you will give back any winnings you take out of the markets. Instead of giving back profits why not strengthen your internal attitude. Accept more success into your life, feel worthy of success, visualize yourself as a successful trader. As much as we want to become profitable traders, or stay profitable, it's often difficult to truly believe that it can be done. We are all aware of the failure rate, and all of us know that staying successful requires work. You must keep working to stay successful. Nevertheless, the first step is to truly believe you can be successful and stay that way, if you work hard enough. 


Once you decide to be successful, you also need to believe you are worthy of success. For many, it is an issue of self-image. Successful people see themselves as "winners"who can do anything if they set their minds to it. If you have a low self-image, visualize yourself as a success occasionally. Imagine working hard and beating the odds to gain success and keep it. Imagine taking heroic steps to achieve the success you deserve, and the sense of accomplishment that you'll feel when you achieve success. Many people limit themselves psychologically, but if you are willing to redefine and stretch your limits, and start thinking of yourself as a winner, you'll get there and stay there.


Reprint from PrudentTrader archives


Thursday, November 13, 2014

The Best Laid Plans

If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much!      Jim Rohn

Many traders will say that they just cannot seem to stick with their trading plan. You may develop a viable trading plan only to abandon it impulsively. Why? What is it that goes wrong? Most often the problem is the plan is to vague, parts are missing and when a plan is incomplete it is very hard to follow and execute. Many newer traders experience additional concerns, the thoughts and emotions that are experienced when the plan is actually executed. The best plans are developed when one is calm and clear-headed, usually long before the plan is to be executed. Strategies are clearly specified, yet when the plan is executed later on, a barrage of emotions may be experienced, and these emotions, if left unchecked, can thwart the best laid plans.


Emotions can color and change our perspective. When you develop a plan during the quit evening it makes perfect logical sense. Then the market opens the next morning and everything suddenly looks different. Perspective's can change very quickly and for many reasons. Perhaps you are preoccupied about other unrelated problems or for some reason you are suddenly worried about money. Your child's tuition is due, or you need a new car, or it's hot and stuffy in your office, or you are just weary and groggy for no apparent reason. It could be that the markets are just behaving more erratically than you had anticipated. Whatever the feelings, or the reasons for them they influence your thoughts and perceptions. What should you do? That varies from trader to trader. Some will stand aside and wait for their mood to improve. Many seasoned traders, who have seen it all and aren't easily fazed, may ignore their feelings and continue on. A newer trader however may be easily shaken. It is at this time that trading errors are made or trading plans abandoned entirely. 


Fortunately there are preventative measures you can take. First and foremost, develop a clearly defined trading plan, knowing exactly when you will enter and what signals indicate that you should exit. Focus all your energy on executing the plan. I know this is easier said than done. When you are emotionally distracted your psychological resources are at their limit and you have few resources left to execute your trade. This is not the time to re-think your plan. Probably the best solution is to limit your attention to executing your trading plan as you have it outlined. Don't second guess it. Think of it as trading as if you were a soldier. When soldiers are ready to fight, they don't question their skills. They don't worry about whether they are unprepared. They are ready to fight an opponent, and need to focus only on winning, and just do it. And that's what you should do just execute your plan under the stressful conditions. There's no reason not to. You factored in the risks up front when you outlined your plan and you know deep down that you can't experience any real harm should the plan fail this time. In many ways, your fate is already determined. if you choke under the pressure, you may mess it all up. If it's a loser, there's nothing you can do. If it was meant to be a winner, however, and you let your emotions fowl up your plan, then you have lost one of the trades that may have been one of the winners across a series of trades. And from a purely statistical vantage point, you want to win on every possibility that you could have. That means executing your plan rather than abandoning it. The best-laid plans can be ruined if you don't execute them properly. But if you clearly define your plan and focus solely on executing it, you'll trade profitably in the long run.


From PrudentTrader Archives 2005

Thursday, November 6, 2014

Its All About You!

Tell me and I forget. Teach me and I remember. Involve me and I learn. 
Benjamin Franklin

As children, parents and teachers tell us whether or not we are doing well. When we get older our significant others offer praise when we met their expectations and punish us when we break the rules by going our own way. Society tends to reinforce looking to others for the standards that we should achieve. The media bombards us with images of success: Buy a sleek, new sports car and impress the neighbors. Wear the latest designer fashions and watch heads turn as you walk by. As a result of our surroundings, it becomes natural to ask yourself, "How well am I doing?" which in turn leads to asking, "How well 'should' I be doing?" When "should" and "must" enter the picture, it can place a lot of unnecessary pressure on us to perform. When the pressure is on, it is very common and we often usually choke under the strain. There's a danger when you look outward. You start to judge yourself. You start to think that you are doing well or poorly based on how others may see you. Instead look inward, and follow your own personal standards for where you want to go next. 


Comparing ourselves to others is useless, time consuming, and counterproductive. Look inward for your own personal standards instead of outward in an effort to beat out the next guy. Each trader brings his or her own knowledge, personality, trading method, and tools to the trading arena. Through a coordinated integration of these various components, the trader builds up a set of individualized trading skills that produce lasting success. This integration doesn't happen over night, but though hard work and persistence. Over time, you make trade after trade, gaining key experiences along the way, until it all comes together in the end. You need to find one's own personal talents, accentuating your strengths and working around your limitations. Every trader is on his or her own path. For some people, the path is full of many curves and is quite long. For others, the path is straight and short. Follow your own path and accept the amount of effort and time it will take to reach your goals. 


Studies of successful and creative people have shown that such people tend to work by their own standards. Even in competitive situations, creative people don't compare themselves to others. They look inward and let their internal standards guide them. They know that through persistence and determination, they will achieve success. They don't force it. They know that if they allow themselves to follow their passion, success will come naturally. If you take a similar approach to trading, you'll achieve lasting success.