 |
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 29 November 2006 Table of Contents (1) Quote on the Future (2) Interview Excerpt - Interviewed by Grace Cheng (3) Learn from the Best Traders (4) Trading Plan Workshop ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Stay up to date with all that is happening at Trading Plan, by subscribing to our 'Trading Blog' (no email address necessary). I am continually adding content and every update of this site is announced here, including minor content updates, page additions, and product releases. So stay plugged in by subscribing to this site's RSS feed. Copy and paste the address below into your RSS reader to receive the Trading Plan RSS feed... http://www.trading-plan.com/Trading-Plan.xml Not sure what RSS is? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Previous Issues Only just joined the mailing list? That's OK - you can read all of the previous issues of the Trading-Plan ezine. Visit http://www.trading-plan.com/ezines_previous.html to access the archive. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Online Trading Forum Do you want to learn from the experiences of others in a friendly online trading forum? I now frequent and contribute to the online trading forum called Stock Meeting Place. Membership is easy and free. You can come along and ask any trading question in one of the numerous sections of the forum and receive a helpful response from one of the many members (approximately 2000). This forum is the only place online where you will also find Daryl Guppy, the well known trader and author. Remember, there is no such thing as a silly question so visit, sign up and ask a question. Visit http://www.trading-plan.com/trading_forum.html for more information. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -- 1 -- Quote on the Future “You control your future, your destiny. What you think about comes about. By recording your dreams and goals on paper, you set in motion the process of becoming the person you most want to be. Put your future in good hands - your own.” Mark Victor Hansen -- 2 -- Interview Excerpt - Interviewed by Grace Cheng Q. You have written a lot about the psychology of trading. How big a role do you think it plays in a trader’s success? A. I can’t do this question justice regardless of what I write here. It is close to everything in determining someone’s trading success – it really is! The problem for most traders is however, is that if you tell someone who is starting to trade that their mindset or psychology is going to be the most important part of their success (and not their entry signal for example), they just laugh at you and think you are joking. If only they knew how serious I was. Here is the irony of trading – the primary reason why people trade is to make money. Yet, it is the money that often causes people to make all the mistakes and not make money, because they focus too much on it. For example, the most important thing you can when trading is to cut your losses, yet deep down people don’t want to because it appears to go against the primary reason why you are trading – to make money. By cutting the loss, you are denying yourself the opportunity to make back the money in that trade. The other thing with money is that I don’t think there are many other things in life that affect our emotions as much as money does. So when we are trading and our own money is on the line, it is difficult to not get too emotional with our decisions yet emotions often lead us to making poor trading decisions. One final thing about the psychology and again I am not doing this important topic justice with the few comments I have made here. Trading is decision making. Often you are faced with several alternatives of what you can decide to do, however generally it boils down to two options. You either decide with what you feel like doing or you decide with what you know has to be done to trade well. Most people select the former whereas those who are successful with their trading, ignore what they feel like doing and do what has to be done to ensure overall long term success. This is a key separator between successful traders and the rest. Q. Both profits and losses can have a big psychological impact on traders. How do you deal with them? A. Profits – I love them. Who doesn’t? It helps reinforce the reason why we trade in the first place. The key with profits is to get excited about it and feel good, but not too excited. Getting too excited leads to high emotions but worse than that, it can lead to feelings of arrogance and ‘can do no wrong’. This is a terrible mindset for a trader to be in because it will lead to poor trading decisions. Losses – no problem. Like everyone, when I first started, I didn’t like having losing trades. I think it was probably reading the ‘Market Wizards’ book by Jack Schwager (which I still say has had the most influence of anything on my trading life) that made me realise that even the very successful traders all had losing trades. Not every trade was profitable. So, I realised in that sense, I wasn’t any different to them. The difference was how they reacted to those losing trades. All of the traders interviewed in that book (without exception) emphasized that cutting losses was one of the most important things (if not the most important) they did! The fact that they all said it, despite their vast array of different trading approaches, meant a lot to me and convinced me of the importance of doing it. During early 2000, I suffered some significant losses when the NASDAQ collapsed. Those losses really hurt me emotionally and financially. When I took time to reflect on that time, I realised that if I wanted to make this trading thing work for me, I had to cut losses whether I liked it or not. I remember committing to myself that from then on, I was going to do everything in my power to cut losses when a trade didn’t head in the direction I had anticipated. So the combination of some painful losses myself and reading that book has now led me to have not one problem with taking a loss in a trade. I appreciate that it is one of the most important things I can do – there is almost a sense of relief when I do exit a losing trade because I have totally eliminated the possibility of any further loss. This is a good thing because most traders know that if you don’t cut a loss when you should, it only gets more difficult to do if the loss grows. As the loss gets bigger, it just gets harder and harder. The easiest it will ever be to cut is right at the beginning when it is only very small. Q. What's the one thing you would tell a new trader? A. This question is not fair :-) With the benefit of experience, there are so many things I wish I knew when I first started that I now just accept and take as ‘the way it is’. If you were to force me to answer with only one thing, it would probably be that trading isn’t as easy as you probably think it is. Many people think that trading is easy money – it is probably the hardest easy money there is. If a new trader can appreciate right from the start that trading isn’t as easy as they think it is, they will most likely approach it with a more committed effort and be prepared for the challenges that trading presents. I could have also answered with: * be humble – you are not going to get every trade right * be committed – trading is not easy and any half hearted attempts will not get you anywhere * educate yourself – there is so much to learn and whilst you can learn from actually trading, you can save yourself a lot of money and stress by learning from someone else who has come before you * take it slowly/be patient – trading success is not going to happen overnight. For most people, this is a life long endeavour so does it really matter if it takes you a few years to start trading profitably * keep it simple – people have a tendency to overcomplicate matters and develop intricate and complex solutions to problems. When we accept that trading is not easy, we think only a complex solution (trading plan) will work. In trading, simple does work. It is also makes it much easier for us to follow the plan when it is simple. * whatever you do, protect your capital – it goes without saying that if you have no money left, you can’t make money. This is an important issue because any new trader is not focused on protecting their money, they are focused solely on making money! The full interview of myself by Grace Cheng is available at www.gracecheng.com -- 3 -- Learn from the Best Traders Here is a great opportunity to learn from the best. I am going to develop a section on the trading-plan website devoted to interviews of successful traders. You have the opportunity to participate in this by asking the questions - what do you want to know from these people? Is it about psychology, how to set stops, how to develop the right level of discipline, entry setups, technical indicators or how to reduce emotions when trading? Just picture yourself lining up outside a room waiting to meet the best trader ever known to Man. There is excitement in the air and everyone around you is so looking forward to meeting this person. You just paid $500 to meet this person for 5 minutes, so you don't want to waste this opportunity. As you walk into the room to meet him yourself, you are allowed to ask only two questions - what are they? To submit a couple of questions, please visit http://www.trading-plan.com/interview_questions.html - these contributions will form the basis of the questions I pose to my interviewees. As a sign of my appreciation, I will make available to you a couple of priceless trading ebooks. -- 4 -- Trading Plan Workshop With anything in life, preparation is a key to success. Trading is no exception and time spent on developing your trading plan is time and effort well invested. "Give me six hours to chop down a tree and I will spend the first four sharpening the axe." The Trading Plan Workshop - an online course which leads you through the mindset, money and method to develop a trading plan - a must if you want trade profitably over the long term. "The questions so far tackled seem to be of paramount importance to a successful trading future. I am very happy with the material so far covered." In 'The New Market Wizards' by Jack Schwager, Howard Seidler said it best when he stated, "In regards to being successful in the markets, I think the single most important element is having a plan." This course goes for almost 3 months with over 40 messages sent every two days. You are able to send me your answers along the way for a personal review and comments. At $197 USD, this is most likely less than your next losing trade. I have been humbled by and appreciative of the comments I have received from people working through it, which include: "There is an absence of hype. In working through it there is a sense of integrity; one of its biggest appeals for me is that there are no outlandish claims. It takes a practical commonsense approach, carefully explaining every step along the way; providing sufficient links to provide greater detail and explanation on the major concepts and topics." "Indecision, fear, lack of confidence & so on; you have named them all & in your workshop plan have set forth means of rectifying them." "This workshop is not about any GRQ scheme - as far from it as you can get actually. What it does is teaches you the most important aspects that will allow you to survive and then thrive in the markets." Please visit http://www.trading-plan.com/trading_plan_workshop.html for more information. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
|
