A Personal Conversation…..

The markets have calmed down a little from last months’ volatility and seem to be moving in much nicer ups and downs.  I hope everyone is doing well with it.

I had a conversation with a client of mine yesterday and I would like to post it here.  It is a little different than my usual blog but I feel is it very much what a lot of people think trading has to be like.  Now, this person is a big baseball fan so you will see that I explained things to him in baseball terms.  Since we are all familiar with the All American Sport, I am sure you will all get the analogy.  Here it is….

Client:  You know any professional has pressure. You have to have it. You can’t be without pressure. The best baseball player deals with it all the time. From the opposing team or his own numbers or the guy in the minors that wants to prove that he belongs in your place. So, to trade without pressure is not something that is doable for most. And to me the pressure is important to be there because you groom yourself to achieve in the most stressful of environments. Paul sent me a thing about the men and woman who achieved in the most stressful of times. The pilot who landed safely in the Hudson etc. that makes sense. To think you are not under stress, or only trade when you not, will not help if you do this for a living. How you trade and handle yourself during those times is the difference between success and failure.

Me: I agree that how you believe and handle yourself during those times is the difference between success and failure but it is not my belief that it has to be surrounded with stress and pressure.

Different people will handle the same situation differently based on their views/interpretations of what the particular environment means to them.  Not all people will consider it to be stress/pressure.  But it is still how you handle the situation that makes the success not if it has stress/pressure or not.

Let’s take your favorite sport, Baseball and equate it.  A player coming up to bat with bases loaded and 2 outs.  It seems obvious to those watching that it is a stressful situation, but is it?  Does that batter see it as stressful or does he see it as an opportunity to do his best?  Does that put undue pressure on him or does it give him a challenge to overcome? Or does it relax him knowing that he is going to do his best this time as he does every time.

These are all different ways that a player can handle the same situation.  The ones that can tune out the “internal chatter” and focus on the play are the great ones.  Like your favorite player, Evan Longoria

Client:  I’m keeping that chat.  You are correct; strive to win when I am in that situation. Don’t look back, look forward. I am at that place in time because I put myself there. Seize the moment!

Are you all Seizing your moments?

Until next week…Green Trades Everyone!

-Michele

Trusting Yourself

This has been an interesting time in the markets recently and in the world.  The markets have been reacting to all of it and so might we be in our trading.  I have a client, and friend, who I chat with regularly during the trading day, and he is very regimented to his trading plan.  He is what we all strive to be with our plans.  He has also been on the floor of the CME as a trader and has gained much knowledge through that time. The other day he saw a set up that his “gut” told him was a good trade to take but it did not fit his plan.  He took the trade and made a great trade.  Green all the way.  But then he became very conflicted about it as he “did not trade his plan.”  And so much so that he proceeded to beat himself up about it for hours.  Now, how many of us beat ourselves up over a green trade?   I would venture to guess that not many beginning traders do.  Veteran traders might have a different answer.  There answer would be “depends on why I took it?”  What is the reason for this difference you ask…  This difference has to do with the discipline they normally show for their trade plan and the knowledge they have gained from trading the markets over time.

 In the beginning of your trading career, you have very little reference to go on for how the markets work and what they do at what time. There are many emotions involved with taking the trade or not, winning and losing and how you view trading as a whole. But, as we sit in front of our charts, day in and day out, we learn and our subconscious learns too.  We learn on a conscious level to trust our trade plan. That it works well for us and we should trust it.  We work on our emotions to not get in our way.  On a deeper level, our computer brain is learning too, and at a very fast rate.  Much faster than our conscious can keep up.  Our subconscious files all these learnings away in its file cabinets (neuron pathways to be exact).  As we are learning our trade plan, our subconscious is learning the market.  One day, after you have been trading a long time, your ‘gut’ tells you to take a trade.  ‘It’ has seen this set up many times and knows that the probability for a win is very high.  You can decide whether to take it or not at that time but it will present the offer.  In this case, my friend took the trade and later recognized why the feeling had been so strong in him to take it.  Yes, he went against his trade plan for that one instance (and that is the key, it was only for one instance in a long line of trading his plan), and he was successful.  And now he is back to trading his plan exactly as written.  Until the next time his subconscious ‘sees’ a great set up and lets him know.  He can then decide whether to take it or not.

How are your emotions during trading?  Are your entries just a matter of fact or do you have to wrestle with your emotions?  If your emotions are getting in the way of your trading, please contact me so we can talk and get you through it.  Trading is what you make of it and I hope you are making it enjoyable.

Until next week…Green Trades Everyone!

-Michele

Do You Let Your Emotions Do The Trading?

The higher our emotions are, the more difficulty we have staying grounded.  –Market Profile

I am sure you have, at some time in your life, gotten into a discussion and all of a sudden the discussion got completely off track.  You were originally intending to make a light point but then it became you on a soapbox.  Once you stopped, you looked around and saw, with complete astonishment, that the person you were talking to was just staring at you with open mouth.  This is what emotions can you do you when they are in control of you and you are not in control of them.  While that can be good in love and caring, it is not good in trading.

These last two weeks have seen many large swings in all the markets.  The emotions of the general populous have been swinging along with it.  There has been much joy and pain in the room where I trade in the early mornings.  And, as the day continued, these emotions became more evident in the trades that were taken.  I heard several newer traders taking trades and justifying the fact that they were not following their trade plans with many excuses.   Some of these trades worked out but most did not.  These traders saw the market ‘getting away without them’ and didn’t want to be ‘left behind.’  I also noticed that many of the veteran traders were sitting on the sidelines waiting for the trade to fit their trade plan.  When it did, they were in without hesitation. The veterans where not trading by their emotions but by their plan.  And because of this, they fared much better than the traders that were trading from their emotions.  A trader that has removed the ability of their emotions to trade for them, is not worried about ‘missing’ a trade as they know a new one will come along and it will be one that fits their trade plan exactly as it should.  And with this confidence and control, they are successful day after day, and year after year.

Do you let your emotions trade for you?

Until next week…Green Trades Everyone!

-Michele

What is a Mental Mindset?

In last week blog post, I mention “How we approach our trades is our Mental Mindset.”  What does that mean?  Webster’s Dictionary defines it as 1) a mental attitude or inclination; 2) A fixed state of mind.  How do we develop a ‘fixed state of mind?”  Through our programming.  From birth to about six years of age, our conscious brains are not fully formed.  That is why you can play peek-a-boo with a toddler and they actually are surprised when you remove your hands from your face and they see you are there.  At those formative years, you are operating from your subconscious mind.  This is the part of the brain that keeps us alive, beats our heart while we walk, tells us when we need food so we don’t starve, allows us to drive and keeps us safe from harm, or at least what it remembers as possibly being harmful to us.  When we do something that it views as a threat, it reacts by having us feel fear or a number of other emotions that it hopes will get our attention and get us to stop the offending activity. Emotional responses are one of the ways our subconscious mind communicates with us.

While we are learning all these new and fascinating things about the world, we form automatic responses so we don’t have to re-learn these things over and over again but can go on to learn new things.  These automatic responses are stored in our subconscious mind and are triggered whenever something happens in the world that matches the criteria for that response.  Much like a computer program or our trading plans.  Now, do you think the way you need to react to an event is the same now as when you were six?  I should say not!  Yet many of you find that you are doing some trading based on emotions that you are feeling at that time.  Maybe you move your stop to ‘give the trade some breathing room to work out,’ or you close out your trade before it reaches its target to preserve some green in your account balance only to have it go to your target.  All this is based on emotions and programming that was put in place before you were six years old!  Can it be changed?  The answer is a resounding YES!!!

Until next week…Green Trades Everyone!

-Michele

When Did You Decided That….?

I was speaking to a client a couple of weeks ago, let’s call him John. John and I had done some work in the past and it had been a good move for his trading career. We were catching up on things and he said something that caught my ear “I expect to lose 30% of my trades.” I asked, “When did you decide that you had to lose on your trades and by that percentage?” “What do you mean?” he asked. “Well, if you’re going into every trade wondering ‘is this going to be the loser?’ how effective do you think you are going to be in that trade?” He was a little confused so I explained further…
Now, I know that many of you think it’s the law of probability or numbers or whatever your word is but think about this…. How often do we get in our cars and think “Well, I wonder if today will be the day I get into an accident?” (After all, the statistics are high on that one.) Or when we go to bed at night, do we wonder “Am I going to wake up tomorrow?” Of course we don’t! If we did, we would never go to sleep or drive in a car or do a ton of other things we do to live our lives and have fun. But, we think it’s ok to wonder if this trade is going to be the loser that we are expecting or not…?
How we approach our trades is our Mental Mindset and what we concentrate on happening, will. What John had was a Limiting Belief. And it was limiting his trading success. Since he had such a strong belief that he would lose, of course, he would unconsciously make sure of it by letting his emotions and doubts get in the way of following his trade plan. He would limit his winners by closing them out as soon as they showed the slightest chance of reversing and taking his green. How many of you have done that before only to watch it turn back and go in your direction for a big win that you missed out on? It is a self-fulfilling prophecy and has no place in your trade plan.
We did some work on John’s limiting belief. If you ask him, he will tell you, while he thinks that losing may be part of the process of trading, he does not believe he has to lose. He no longer wonders if the current trade he’s in will be the loser. Short and simple, he does not EXPECT to lose when he takes a trade. This has made him more relaxed in his trading and is showing itself in his balance sheet.

Until next week, Green Trades Everyone!

-Michele

You’ve Done Your Homework, But….

You’ve done your homework and created your trade plan. Countless hours of putting your plan together, listening to your mentor and studying charts and books. Weeks monitoring the charts and trading your trade plan in your ‘practice’ account. You’ve done it by the book. Now your confident. It’s time to put your money where your homework is……

You’ve opened your charts, done your checklist and your first trade signal has presented itself in front of you. Confidence high, you take the trade, and get stopped out. First loss. Not a problem. You understood before you started that successful traders both win and lose and losing is a part of winning. You’ve also heard, more than once that “successful traders don’t win every trade.” Moving on, still confident, the next trade is taken. Another loss, but this one hurt your pride a little because you got stopped out quickly and then the market turned and went back in your direction and would have hit your target if you weren’t stopped out. You double check. Yep, you placed the stop where your trade plan told you to put it. You feel a bit wounded but are trading your plan and you must stick with it. The day is done and your account is down, but you knew that could happen. “Tomorrow will be the day.”

After a good night’s sleep and a few mouse clicks, your new trade is in front of you. Hey, this one looks good. It’s a little more risky than yesterdays’ trades , but look at that profit potential! You jump in the trade. With a nice start to the trade, you’re feeling good and now it’s time to move your stop to breakeven, just like your plan says. Surprise news – market reverses and blows through your stop…an unexpected loss. Is something wrong with my plan? Has the overall market personality changed, affecting my system and rendering all my back-testing irrelevant? Your confidence turns to doubt.

You decide to sit out the next trade and “watch” it. I mean, isn’t it wise to make sure the system gets back on track before you “throw good money after bad?” Isn’t that what a good trader does? Your “watched” trade is a winner!

You now “beat yourself up” because you know that when you started your “live” trading, you made an agreement with yourself to take the first ten trades…..no matter what….and here, you chickened-out and missed a big winner that would have gotten you even. What’s happening?!!!

What’s happening is that you are being controlled by your emotions. They are in control of you and you are not in control of your trading. The scenario above plays out in every trader….new or veteran.

However, the winning trader realizes what is happening and takes control and nips the problem at it’s heart. The winning trader seeks out a solution to this problem and gets their mental house in order.

There are many more losing traders than winning traders, and it is rarely their trade plan.

Until next week. Green Trades Everyone!

-Michele