‘Do not move unless it is advantageous,
Do not execute unless it is effective,
Do not challenge unless it is critical’
Sun Tzu
When you sleep you sleep, when you eat you eat, when you trade you trade – that’s it.
Ask yourself why you trade, and avoid the obvious answers, such as I want to make money, money is the result; money is just the end product, a reflection of your energy. Think, you can get a steady job, no risk, and make regular good money.
Why do some people play music, even if they don’t become as big as the Beatles? Why do some people become charity workers in Africa?
Your reason for trading will to a large degree determine your level of success. Do you love doing it; does it make you a better person? Be truthful, perhaps you are a gambler by nature and are busily satisfying your addiction right now, Remember the unexamined mind is a wild beast.
There are many factors that can contribute to your failure as a trader and possibly only a few that contribute to your overall success. First, examine your own behavior, examine your own expectations. Do you expect to make a killing every time? Do you expect it to be easy? Do you expect it to be damn easy? Your expectation will determine your results, one way of another. If you’re expecting to make a killing, you probably will at some point, but you will possibly lose the same amount again and again in the process.
This document is deliberately as unstructured as the market; as it is only out of the chaos that islands of high probability arise. Firstly, invest in yourself, it’s easy to be fooled by the massive hype and marketing out there, the systems that are put on auto-pilot to produce vast riches while you sleep or play golf. “Secrets” that have been handed down and are a guarantee for immense wealth, ha. Old ideas re-packaged and sold to the desperate masses that have been used and abused over the years. Mostly, all these ‘new age’ ideas are a re-write of Lao Tzu, ‘The Tao’, now called manifestation, the Secret, the law of attraction and other cleverly marketed buzz words. Search the web and you will find millions of sites that have the answer.
All this sounds pretty depressing, is there absolutely nothing out there that works? Maybe the answer lies within, not some easy, quick-fix that will make it all right. Think about it, you say things like ‘I am a trader’. Who is? Indeed, what is that I am? Where was “ I ” before you were born and where will that “ I “ go after you’re gone?
Everything that exists, exists only in your perception as if you were not there. If you had no consciousness, would it exist at all? One can have no certainty about that. Does a tree falling in a forest, when no one is present, make a noise?
So where is all this leading to, and what has it got to do with trading?
I believe that all exists in the mind, and in the mind alone. The results of your trading are already know to your mind, as your mind is part of a much bigger mind. You are a representation of something much bigger, an all knowing something, an all encompassing something, or maybe nothing.
So, let us assume for a moment that your mind is capable of knowing when to pull the trigger, and when to enjoy your prey and that if you allowed your mind to trade for you and you left everything that clutters it out you would become a master trader.
Alas, our minds are full of all sorts of ideas and notions. Stuff we’ve accumulated over the years, mostly due to our deficient education system, our obsession with defining the indefinable and placing everything in neat little boxes which we can open at will when we need to. I will not go into the background for all this, get yourself a copy of the Tao and convince yourself that your formal education has not been as beneficial as it’s made out to be.
Let me describe some trading scenarios you may be familiar with, bear in mind that I am not going to describe any trading system or methodology as I am writing this for those who have already recognized the need to have a basic system they can follow. Although, having said that, let’s look at a completely non-structured approach to trading first.
We all know that the market goes up, goes down and consolidates, and that even while it consolidates it does not remain static, it may move 5 points up and the 5 points down and so forth. So think of this; you turn on your trading platform and you bring up a chart of any instrument you like or even one you’ve never traded before. You have a quick look at it (lets say a 1 minute chart) and determine that it’s in a minor up trend, so you buy it, you now have a 50/50 chance of winning. It goes up 10 points and you’re happy, you think, hmm, I’ll hang on to this for 100 points, it continues to nudge up slowly, you leave your stop loss order say 15 points below where you entered to give it ‘room to breath’. Suddenly it drops 40 points completely out of the blue as far as you’re concerned, as you have no way of knowing that some big player has just sold his first few lots. Your stop loss is now 3 points away from the price and you think. I’ll give it more room to correct, I can’t be wrong, I refuse to be wrong, and so you move it 20 points down. unbeknown to you, that same big player now unleashes the rest of his position on the market and it drops another 50 points, your stop loss is now toast and you’ve been slipped, so now from being up 30 points, you’re down 50.
Something happens to you now, you get angry. damn this, you think, just a stop run and you buy it again, this time you place the stop 60 points below your entry, so they don’t do it to you again. Other market players small or big think differently, they start selling and there you go again. This process may be familiar to you.
OK, you’re not stupid, you have your system and you look for high probability set ups only. But the same thing happens as described above, except here, you are really furious as you stuck to your rules and still came a cropper. Now your whole stance becomes charged, you start seeing set-ups where none exist, you start your revenge and end up losing double what you were willing (assuming you were) to lose, and the cycle goes on.
Here’s another one, you play your set-up and it works beautifully, you make a killing, more than double what you expected; now your ego is well happy and pleased with itself. You have just made 100 points, so you think, hmmm, I’m in the zone, I’m on a roll. The next set-up arrives and boy, you’re in faster than Speedy Gonzales, but alas it’s a loser; 20 points down. Never mind you think, still up 80. This goes on, and by the end of the day you’re down 100 points, you’re angry as hell and feeling depleted and frustrated. Sound familiar? No? You’re a master trader, close this document and call me and I will take lessons from you.
Still reading? So you know what I’m talking about, good, we can move on from here.
Let’s take a look at how we can correct these scenarios and trade consistently and successfully. These are my views and are based on my own experience, you can take them or leave them, or you can take some and not others, hey, you are a free person.
Meditate before you trade, why? Because it will stop the incessant chatter going on inside your head, it will stop you thinking things like ‘if I lose this my wife will kill me’ and others…. It will let you focus on the trade itself. The trade has nothing to do with you, it’s neither personal nor impersonal, and it is just what it is. If it’s a good one you will make money, if its not you will have incurred an expense (not a loss) and you will objectively move on. What type of meditation? Any at all, as long as your mind is empty of garbage. I use a form of Zen meditation that I’ve adapted to my own needs, if you’re looking to strictly follow someone else’s discipline , think again, do what suit you, but get the mind to stay quiet.
Transcend greed and fear, both will harm your trading. It’s often said that when all are greedy, become fearful and vice versa. To me that is nonsense, all you can do is react to market conditions, without any emotion at all. The market does indeed represent a plethora of emotions, and you need to respond to them as you see them happening right in front of your eyes, if you add yours to them you will become just another statistic. The market neither knows nor cares about your hopes, aspirations and needs. The charts you look at are a completely objective picture of what is now.
Have a clear idea of what your set up is, and how much you are willing to spend to see if it works, coupled with your money management system (I won’t go into that). Simply stated – never spend more than 3-5% of your working capital in any one day, and if you have 3-4 days like that consider taking a break as something is amiss.
Have a daily target in mind and once you achieve it go and do something else. Unlike most professions, you do not get paid for doing more or spending more time. You are your own boss, be gentle with yourself. If you have to go on after you’ve hit your target and you’ve satisfied yourself with the answer you’ve given, trade tiny lots, as now you are only doing it because you love it and have nothing else to do. Better, get another hobby, go to the gym, read a book or just go for a walk or even an afternoon nap. Why have a target at all? Because your mind then has a clear idea of what’s expected of it and will not come under further pressure. It will have achieved the goal you set for it and as you reward it, it will learn that it has done well and do it again.
Trading is like hunting, you spend hours in the bush and only pounce when the best opportunity arises, anyone can pull the trigger but only a few can hit the target time and time again, so when you are not pulling the trigger you are still in ‘trading mode, even though it appears that you are doing nothing. In fact you are doing the most difficult part of this business.
Many books say ‘let your profits run and cut your losses short quickly’, easy to say, less easy to do. Sure, by all means, if the deer gets away, don’t chase it, preserve your energy for a better opportunity; few tigers go hungry for long. As for letting your profits run, here you can employ various methods, you can remove profit in stages as you see it accumulating, or you can remove all at the first sight of any retracement, and the wait for good place to re enter with a very small stop loss, not risking more than a fraction of what you’ve already banked. In either case you may have left 100 points on the table, that’s fine, other tigers need to eat too, feel gratitude for what you’ve got and off to the golf course you go.
Be thankful for what you get, many others are giving it away. You see, trading is a very natural state, we are always trading, whether it be emotions, feelings, goods or what not, there is enough, more than enough for everyone
So, have I given you any practical advice? Probably, but will it help your trading, that is the question
It will only help if you are willing to accept what is, that’s exactly what the market is, a statement of ‘what is’. If you are part of the herd, you will be prey, if you separate yourself from the herd you will become the hunter.
Finally, to become a ‘master trader’ you must master yourself first, and this is a lot harder than it sounds, there is a sentence in the Tao that says ‘Intelligent people know others but enlightened people know themselves,
Here is a list of books/sites that I find highly useful:
“Tao Te Ching” – Lao Tzu
“Extraordinary Popular Delusions and the Madness of Crowds” Charles Mackay
‘Trading in the Zone” – Mark Douglas
“Fooled by Randomness” Nassim Nicholas Taleb
“Come into my trading room” Alexander Elder
Do not execute unless it is effective,
Do not challenge unless it is critical’
Sun Tzu
When you sleep you sleep, when you eat you eat, when you trade you trade – that’s it.
Ask yourself why you trade, and avoid the obvious answers, such as I want to make money, money is the result; money is just the end product, a reflection of your energy. Think, you can get a steady job, no risk, and make regular good money.
Why do some people play music, even if they don’t become as big as the Beatles? Why do some people become charity workers in Africa?
Your reason for trading will to a large degree determine your level of success. Do you love doing it; does it make you a better person? Be truthful, perhaps you are a gambler by nature and are busily satisfying your addiction right now, Remember the unexamined mind is a wild beast.
There are many factors that can contribute to your failure as a trader and possibly only a few that contribute to your overall success. First, examine your own behavior, examine your own expectations. Do you expect to make a killing every time? Do you expect it to be easy? Do you expect it to be damn easy? Your expectation will determine your results, one way of another. If you’re expecting to make a killing, you probably will at some point, but you will possibly lose the same amount again and again in the process.
This document is deliberately as unstructured as the market; as it is only out of the chaos that islands of high probability arise. Firstly, invest in yourself, it’s easy to be fooled by the massive hype and marketing out there, the systems that are put on auto-pilot to produce vast riches while you sleep or play golf. “Secrets” that have been handed down and are a guarantee for immense wealth, ha. Old ideas re-packaged and sold to the desperate masses that have been used and abused over the years. Mostly, all these ‘new age’ ideas are a re-write of Lao Tzu, ‘The Tao’, now called manifestation, the Secret, the law of attraction and other cleverly marketed buzz words. Search the web and you will find millions of sites that have the answer.
All this sounds pretty depressing, is there absolutely nothing out there that works? Maybe the answer lies within, not some easy, quick-fix that will make it all right. Think about it, you say things like ‘I am a trader’. Who is? Indeed, what is that I am? Where was “ I ” before you were born and where will that “ I “ go after you’re gone?
Everything that exists, exists only in your perception as if you were not there. If you had no consciousness, would it exist at all? One can have no certainty about that. Does a tree falling in a forest, when no one is present, make a noise?
So where is all this leading to, and what has it got to do with trading?
I believe that all exists in the mind, and in the mind alone. The results of your trading are already know to your mind, as your mind is part of a much bigger mind. You are a representation of something much bigger, an all knowing something, an all encompassing something, or maybe nothing.
So, let us assume for a moment that your mind is capable of knowing when to pull the trigger, and when to enjoy your prey and that if you allowed your mind to trade for you and you left everything that clutters it out you would become a master trader.
Alas, our minds are full of all sorts of ideas and notions. Stuff we’ve accumulated over the years, mostly due to our deficient education system, our obsession with defining the indefinable and placing everything in neat little boxes which we can open at will when we need to. I will not go into the background for all this, get yourself a copy of the Tao and convince yourself that your formal education has not been as beneficial as it’s made out to be.
Let me describe some trading scenarios you may be familiar with, bear in mind that I am not going to describe any trading system or methodology as I am writing this for those who have already recognized the need to have a basic system they can follow. Although, having said that, let’s look at a completely non-structured approach to trading first.
We all know that the market goes up, goes down and consolidates, and that even while it consolidates it does not remain static, it may move 5 points up and the 5 points down and so forth. So think of this; you turn on your trading platform and you bring up a chart of any instrument you like or even one you’ve never traded before. You have a quick look at it (lets say a 1 minute chart) and determine that it’s in a minor up trend, so you buy it, you now have a 50/50 chance of winning. It goes up 10 points and you’re happy, you think, hmm, I’ll hang on to this for 100 points, it continues to nudge up slowly, you leave your stop loss order say 15 points below where you entered to give it ‘room to breath’. Suddenly it drops 40 points completely out of the blue as far as you’re concerned, as you have no way of knowing that some big player has just sold his first few lots. Your stop loss is now 3 points away from the price and you think. I’ll give it more room to correct, I can’t be wrong, I refuse to be wrong, and so you move it 20 points down. unbeknown to you, that same big player now unleashes the rest of his position on the market and it drops another 50 points, your stop loss is now toast and you’ve been slipped, so now from being up 30 points, you’re down 50.
Something happens to you now, you get angry. damn this, you think, just a stop run and you buy it again, this time you place the stop 60 points below your entry, so they don’t do it to you again. Other market players small or big think differently, they start selling and there you go again. This process may be familiar to you.
OK, you’re not stupid, you have your system and you look for high probability set ups only. But the same thing happens as described above, except here, you are really furious as you stuck to your rules and still came a cropper. Now your whole stance becomes charged, you start seeing set-ups where none exist, you start your revenge and end up losing double what you were willing (assuming you were) to lose, and the cycle goes on.
Here’s another one, you play your set-up and it works beautifully, you make a killing, more than double what you expected; now your ego is well happy and pleased with itself. You have just made 100 points, so you think, hmmm, I’m in the zone, I’m on a roll. The next set-up arrives and boy, you’re in faster than Speedy Gonzales, but alas it’s a loser; 20 points down. Never mind you think, still up 80. This goes on, and by the end of the day you’re down 100 points, you’re angry as hell and feeling depleted and frustrated. Sound familiar? No? You’re a master trader, close this document and call me and I will take lessons from you.
Still reading? So you know what I’m talking about, good, we can move on from here.
Let’s take a look at how we can correct these scenarios and trade consistently and successfully. These are my views and are based on my own experience, you can take them or leave them, or you can take some and not others, hey, you are a free person.
Meditate before you trade, why? Because it will stop the incessant chatter going on inside your head, it will stop you thinking things like ‘if I lose this my wife will kill me’ and others…. It will let you focus on the trade itself. The trade has nothing to do with you, it’s neither personal nor impersonal, and it is just what it is. If it’s a good one you will make money, if its not you will have incurred an expense (not a loss) and you will objectively move on. What type of meditation? Any at all, as long as your mind is empty of garbage. I use a form of Zen meditation that I’ve adapted to my own needs, if you’re looking to strictly follow someone else’s discipline , think again, do what suit you, but get the mind to stay quiet.
Transcend greed and fear, both will harm your trading. It’s often said that when all are greedy, become fearful and vice versa. To me that is nonsense, all you can do is react to market conditions, without any emotion at all. The market does indeed represent a plethora of emotions, and you need to respond to them as you see them happening right in front of your eyes, if you add yours to them you will become just another statistic. The market neither knows nor cares about your hopes, aspirations and needs. The charts you look at are a completely objective picture of what is now.
Have a clear idea of what your set up is, and how much you are willing to spend to see if it works, coupled with your money management system (I won’t go into that). Simply stated – never spend more than 3-5% of your working capital in any one day, and if you have 3-4 days like that consider taking a break as something is amiss.
Have a daily target in mind and once you achieve it go and do something else. Unlike most professions, you do not get paid for doing more or spending more time. You are your own boss, be gentle with yourself. If you have to go on after you’ve hit your target and you’ve satisfied yourself with the answer you’ve given, trade tiny lots, as now you are only doing it because you love it and have nothing else to do. Better, get another hobby, go to the gym, read a book or just go for a walk or even an afternoon nap. Why have a target at all? Because your mind then has a clear idea of what’s expected of it and will not come under further pressure. It will have achieved the goal you set for it and as you reward it, it will learn that it has done well and do it again.
Trading is like hunting, you spend hours in the bush and only pounce when the best opportunity arises, anyone can pull the trigger but only a few can hit the target time and time again, so when you are not pulling the trigger you are still in ‘trading mode, even though it appears that you are doing nothing. In fact you are doing the most difficult part of this business.
Many books say ‘let your profits run and cut your losses short quickly’, easy to say, less easy to do. Sure, by all means, if the deer gets away, don’t chase it, preserve your energy for a better opportunity; few tigers go hungry for long. As for letting your profits run, here you can employ various methods, you can remove profit in stages as you see it accumulating, or you can remove all at the first sight of any retracement, and the wait for good place to re enter with a very small stop loss, not risking more than a fraction of what you’ve already banked. In either case you may have left 100 points on the table, that’s fine, other tigers need to eat too, feel gratitude for what you’ve got and off to the golf course you go.
Be thankful for what you get, many others are giving it away. You see, trading is a very natural state, we are always trading, whether it be emotions, feelings, goods or what not, there is enough, more than enough for everyone
So, have I given you any practical advice? Probably, but will it help your trading, that is the question
It will only help if you are willing to accept what is, that’s exactly what the market is, a statement of ‘what is’. If you are part of the herd, you will be prey, if you separate yourself from the herd you will become the hunter.
Finally, to become a ‘master trader’ you must master yourself first, and this is a lot harder than it sounds, there is a sentence in the Tao that says ‘Intelligent people know others but enlightened people know themselves,
Here is a list of books/sites that I find highly useful:
“Tao Te Ching” – Lao Tzu
“Extraordinary Popular Delusions and the Madness of Crowds” Charles Mackay
‘Trading in the Zone” – Mark Douglas
“Fooled by Randomness” Nassim Nicholas Taleb
“Come into my trading room” Alexander Elder
