Weblog of Joe Ross, Trading Educator and Trader for over 5 Decades

Research studies have demonstrated that when people’s psychological resources are taxed to the limit, they make impulsive mistakes. Maintaining discipline takes psychological energy, and when you use it up, you have to rest. Just like a muscle, when you are worn out, you need to take a break and regain your strength. It’s vital to consider that the mind has limited energy, and that after putting in a hard and tedious effort, you must take a rest and rejuvenate, so you can face the market action with a renewed sense of vigor. Holidays are one of the best times to stand aside and regain your composure.

Trading often comes down to performing in a peak performance state at a few key moments. To take advantage of these key moments, you must be relaxed. If you have strained your mental “muscles,” you’ll have difficulty taking advantage of these opportunities. Your mind will be elsewhere or you’ll be too tired to act decisively. When you’re tired, it’s hard to gauge market action accurately. You’ll be prone to decision-making biases and you may act impulsively because you are too tired to patiently wait for the proper signals to enter or exit a trade. By staying relaxed yet full of energy, you’ll be able to trade in a logical and disciplined manner.

You don’t need to perform at a peak performance state every minute of your life. Many people can work for only a limited number of hours a day, and if we try to work in marathon stretches, it eventually catches up with us, and is shown by our weak performance. Just as a runner must rest when his or her muscles ache, it’s vital to take breaks after a marathon work session.

Part of trading profitably is the acknowledgment of your limitations and putting together sensible ways to work around them. Don’t think you are superhuman. Take a few days off to rest and regain your mental and physical strength. Get plenty of rest so that next week, you will be ready to handle whatever the market throws at you.

How does a trader live in the moment? Perhaps the first step is just intellectually considering the existentialists’ proposition that anxiety is sometimes a matter of focusing on, and mulling over, the past, or worrying about the future. When you consider it, it seems reasonable to think that if you could just forget about the past and avoid thinking about the future, you will live in the present. It seems unrealistic and perhaps a little reckless, however, since it is often prudent to both learn from past mistakes and to make sure you avoid potential adverse events. But again, when you do so, it takes you out of the moment. You start to analyze and remove yourself from the ongoing experience rather than enjoying it. In contrast, trying to stay in the moment will keep you focused on the trade. And by focusing all your energy on the trade of the moment, you will reach that higher level of awareness where you’ll see the market more clearly and be able to run through all possibilities at lightening speed.

These concepts sound good in theory, but how do you put these ideas into practice? First it may all depend on how many past conflicts you have in the back of your mind and your self-esteem. If you are unsure of your abilities, it’s hard not to worry about the future, especially when you are facing extreme pressure in the midst of a trade. If you are easily shaken by uncertainty and stress, your mind will tend to wander toward your past mistakes and regrets and you’ll tend to question your ability to control your destiny. But, if on the other hand, you are especially confident, you are not likely to be troubled by your past, and can more easily live in the moment. That said, it may be extremely difficult for some to live in the moment for very long, or to stay there and completely cast aside all past regrets or worries about the future. You can strive to reach this state of existence for a short time, however, at least long enough to evaluate a trade and take decisive action. The first step is to monitor your thoughts and identify instances where you are mulling over the past. The second step is to actively try to push such thoughts out of your awareness. For example, you may think, “I wish I hadn’t lost so much money on my last trade,” or “I’m frustrated that I’ve had so many losing trades.” You may think these thoughts throughout the day and it’s difficult to just shut them out. But it is definitely possible to put them aside for about an hour, while you monitor a trade and decide what action to take next. You may similarly worry about the future: “I wonder if I will keep losing or will I finally make huge gains?” After you are aware of the kinds of thoughts that indicate you are mulling over the past or worrying about the future, such thoughts can be pushed aside temporarily. It may be necessary to yell “stop” or think, “Don’t think about that right now; I can consider these issues later, after I’m done evaluating my trade.” Now, using these strategies won’t put you in that ideal mental state where you are completely in the moment, but it will help you get to a mental state that is close to the ideal. It may take some practice, but you can eventually reach this mental state.

The best traders are not self-conscious about their mistakes. They don’t regret past mistakes or worry about the future. They live in the moment. You can also live in the moment, if you practice cultivating the proper mindset. When you reach this peak level of experience, you’ll not only be more profitable, you will enjoy trading, and find it to be fulfilling in its own right.

What are trading seminars and what value do they have?

We can look at the advantages and disadvantages.

Seminars are a form of information exchange. A group of people interested in trading come together for discussion of specific trading techniques and learning of topics related to the business of trading.

There can be one or more speakers in a trading seminar, and these speaker or speakers are usually experts in the trading business.

Lots of traders attend seminars each year, some attending more than once. There are many who learn best in this manner of education.

What are the advantages and disadvantages of a trading seminar if you choose to attend or if you’re thinking of attending?

Advantages:
• Learn about cutting-edge ideas, innovations, and technologies

• A wealth of knowledge presented at one time in one place; a lot of learning, with most material compressed into two or three days.

• A sense of fellowship, where traders of a like-mind can meet others with the same interests, problems, and concerns that they may have in learning to trade or to improve existing trading techniques. You are able to network with and share information.

• There is a sense of renewed hope and inspiration, as traders discover they are not alone in their trading concerns. Stress is lessened by sharing experiences with others. Being with others who understand an individual’s trading problems or concerns, is an effective morale booster!

• For those who don’t like to read, or attend classes, a seminar offers a practical way to improve knowledge of a specific subject.

• A seminar offers the opportunity to “get away” from the usual routine. A nice vacation, in a good hotel in a situation of camaraderie can produce fresh ideas and new insights.

• Knowledge and comprehension gained at a trading seminar can “turn on the light.” Odd pieces of previous learned information suddenly come together and a new level of understanding is achieved.

• Trading can be a lonely business. A Trading seminar offers the opportunity to meet other traders and to make friendships that can last a lifetime.

Disadvantages:
• Cost! Attendees must absorb their own costs. Seminars usually have an entry fee. All travel costs, some or all food costs, hotel costs, and miscellaneous costs must be absorbed by the attendees.

• There’s a chance that the speaker(s) may not be sharing correct knowledge, or not at all knowledgeable themselves. Tips, tricks, and strategies need to be weighed as to “value” and “accuracy” before using them.

• The time spent away from your home, business, or family. Time is always a concern when scheduling activities and some traders simply can’t spare the time away from their lives to attend a seminar.

• There’s always the chance that what is covered may not actively help your trading or your trading concerns, and that the seminar will be a waste of time, where nothing you learn is of any use to you.

• There’s a chance you will expect too much from a seminar and therefore be disappointed. A seminar can present material too complicated for some and too simple for others.

Overall, seminars, if chosen carefully, are an excellent way to learn, and can be a wonderful experience. There should be a handout or materials that you take with you to help cement what you have learned at the seminar. For some seminars offer specific cures for trading or other problems. Keep in mind, a trading seminar is an elective event, and success or failure in trading may or may not hinge on attending one!

A key item to look for is follow-up. Whether it is via Internet, email, forums, chat rooms, or the ability to repeat the seminar at a reduced cost, you don’t want your seminar experience to “die at the door,” as you leave.

Have you ever felt as if the more you know, the less you know, and the more you become confused? Why is this?

People have the tendency to believe that the accuracy of their forecasts increases with more information. This is the illusion of knowledge - that more information increases your knowledge about something and improves your decisions. However, this is not always the case - increased levels of information do not necessarily lead to greater knowledge. There are three reasons for this. First, some information does not help us make predictions and can even mislead us. Second, many people may not have the training, experience, or skills to interpret the information. And, finally, people tend to interpret new information as confirmation of their prior beliefs.

Let me give you an example of how too much information can lead to a paralysis of confusion.

I met a man who was an avid student of the teachings of W.D. Gann. Gann believed in the movement of prices along a 45 degree angle. He also believed that time intervals of 3, 5, 9, and others had great importance. So the man I knew created moving averages of 3 bars, 5 bars, 9 bars and multiples thereof. Of course, 3 x 9 equals 27 and so he kept 27 bar moving averages. 5 x 9 is 45, and so he also kept 45 bar moving averages. He also watched 135 bar moving averages (3×45) and others. He looked for agreement among all of these moving averages, which of course, led to great confusion, since it was rare indeed and most likely coincidental when all of the moving averages showed some sort of agreement (confluence). So this man suffered greatly from paralysis of analysis. He simply had too much information, and he was unable to pull the trigger on a trade.

I will never forget the statement he made to me: “Joe, I know so much. Why then is it that I never seem to be making money?”

I think from the above description you should be able to figure it out, just as I did.

Do you ever sit there looking at your screen hour after hour, a little tired and bored? You feel like you need some action, but nothing much is happening. You think to yourself, “I might as well get long, it’s likely to go up before the Close.” So you place your order, even though you have no specific plan or reason for the trade. It’s just something to do, because you’re bored or just because you think you should.
My friend, if that’s you, you are probably overtrading.

Overtrading can be a number of things: trading too large a size for your account; trading too often; or simply putting on trades unnecessarily, and without a trading plan.

Some traders may overtrade because they assume a real trader must trade all day. Others overtrade because they crave the excitement and the adrenalin rush that trading can bring. Still others overtrade because of some frustration they feel in their lives. For them, putting on trades is like playing the lottery: every trade brings hope of success and fulfillment. Others are just plain greedy and hope to make as much profit as possible during the trading day. However, overtrading usually doesn’t pay.

Does trading more mean you make more money than trading less? Not according to studies that have been made. For the most part, over-traders end up churning their own account. Commissions and fees eat up a huge portion of their profits.
The reasons for overtrading are very similar regardless of the timeframe traded. Some traders put on trades for the thrill of making a big win, while others over-extend their trading knowledge or trading abilities. Regardless of the reasons, the net results are the same — their trading accounts are unnecessarily depleted.

One way to stop overtrading is to force yourself to follow a method. A method is supported by a very detailed trading plan. Of course you can develop your own detailed trading plan, in which case you will have developed your own method. Whether it is your own method or someone else’s, it is to your advantage to stick with it. Before you put on a trade, make sure your trading plan is clear. Identify the signals or indicators you will use to monitor the trade. Anticipate which indications will signal when a trade is going against you. Prove your trading plan with real money on the line, and make sure that you have sound reasons for putting on a trade. Make sure you are taking advantage of good setups, rather than acting on the urge to put on a trade. By carefully monitoring your trading plan, you can reduce overtrading and the potential damage it can do to your trading account. Limiting your trades will not only increase your chances of making profits, but you’ll feel a sense of psychological stability that comes with consistently profitable trading.

When prices are in a trading range, count the number of closes above or below a specific price near the vertical mid-level of the trading range. If 70% of the closes are above the mid-level price, and the market cannot rally and close above reaction highs, a severe correction may be imminent. If a market breaks and cannot close below reaction lows, then expect a rally to carry prices above the reaction highs. E.g. Let’s assume that a futures chart is showing that about 90% of the Closes are above 445.00, yet prices cannot Close above 455.00. If prices finally do Close above 455.00, a powerful buy signal would then be in place.

Another way to determine that prices are about to break out of a trading range is to note if you have a 1-2-3 followed by a Ross hook within the trading range. If both are present, the percentages favor a breakout to follow, and entry by way of a TTE is acceptable.

A 1-2-3 formation followed by a Ross hook is a consistent objective chart pattern for defining that a trend or swing is in process. Once the point of the Ross hook has been violated, this pattern is enough to establish that a trend or swing does exist.

Whenever we miss a big move and then try to find some pattern, indicator, rationale, or modification to make to what we are doing so that the next time we will not miss such a move, it is a part of the hunt for something magic; a continuation of our quest for the holy grail of trading.

What a terrible mistake to allow yourself to make. Winning in the markets consists of making some small profits and some larger profits on a regular basis. Obviously there will be some losses. We regularly want to keep losses small, but there are times when a loss will get away from us and turn out to be bigger than desired.

If adversity causes you to become upset, then you really need to examine your thinking and your approach to trading. Your trading plan must allow for disappointment and loss.

You’ve got to believe in what you are doing and be able to trade from the knowledge that when you follow your rules and your plan, you will make money from your trading.

When you become disillusioned and start to change your plan, your rules, or both, you are setting yourself up for a sucker play. The worst thing that can happen to you is that you will lose the courage of your convictions. Without that courage you cannot trade with any level of confidence.

This is why I encourage you to write out the reasons and rationale for every trade that you make until you have developed a keen recognition of the trades that are your trades. Write out your trading plan every day for every trade. Then you can go back over your trading and be able to see why and when you are successful.

Trading Educators

You must be disciplined in following the plan of your trade. Once you have closed your position, you should record everything about the trade. Write down where you wanted to enter the trade, what you expected out of the trade, and what you actually did get out of the trade. Make sure to include notes that will help you learn from the trade, reasoning what actually took place once you entered the trade. Explain why the trade was a winner or a loser. If you keep detailed records, you can learn from past trades and increase your chances of recognizing your strengths and weaknesses. Build on your strengths, and stay away from trades in which you have demonstrated weakness. We are not all perfect traders. Most of us do better with one kind of trade than another. But if you don’t keep a record, you will suffer many painful losses while discovering the trade that is your trade.

Another good thing to do is to keep a diary of your feelings. Learn which feelings go with the winning trades. Keeping such a diary will help you to become a more intuitive trader. In my book Trading Is a Business, I describe how to do that. It certainly helped me to know when a trade “felt right.” But at first, much to my own pain and regret, I ignored those feelings. When I began being obedient to my feelings, my wins increased substantially.

Trading Educators

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If you had the opportunity to learn a simple technique that offers you all of the following, wouldn’t you want to grab it? This technique:

• Tells you where to place your stop loss in any market or time frame.
• Tells you where to set your objectives, so that you are paid to trade.
• Tells you which market to be in today, to make the most money.
• Tells you which time frame to be in, today.
• Tells you how many contracts to trade in accordance with your risk tolerance.

Can you imagine, no more guessing at where to place your stop loss! Wouldn’t you want to know which markets and time frames to trade every single day? Wouldn’t it be great to no longer be stuck in one market and one time frame? How could anyone really believe that they should trade the same time frame in the same market each and every day? You want to go where the money is, but it can be in a different place tomorrow than where it was today!

How to be a successful trader is one of the best kept secrets in the world. The insiders don’t want you to know how to do it. Yet trading can be one of the most profitable ways to make money ever conceived.

To let you in on the secrets of successful trading you are provided with a live seminar! You can get an inside look at the reality of trading from a 52-year professional who trades and earns his money in the markets. As one trader said:

“I guess I’ve seen and read almost everything on trading published over the years. I’ve never seen anything as complete and as unique. Joe’s methods will completely change the way most traders view the markets. His seminar makes trading a whole new ball game.”

You need to know what the successful traders know, so at the seminar you will learn the following:

• The way the markets really work and how you can take advantage of that knowledge.
• Why markets exist and how you can take advantage of them to substantially lower your risk.
• How to know where prices will move next and how to avoid being trampled by the insiders when it happens.
• How to get more leverage on your money than you might think.
• How you can trade always knowing where to put your stops in the market.
• How to considerably reduce your margin requirements for each trade you make, and in some cases eliminate them entirely.
• How you to be paid to trade before the insiders run your stop.
• What to do to make a pile of money when a market forms the right setups.
• How to use the Law of Charts™ and the Traders Trick™ the ways the pros do.
• Five different setups that let you locate winning trades.

Learning the rationale of price movement will put you far ahead of most traders. You can find out how to trade in a way most traders never even hear about before they lose all their money and disappear into the night. You can position yourself at much lower risk than traders who trade using only standard techniques.

You’ll see that prices these days swing, not trend, and you’ll find out how to take advantage of the momentum that initiates those swings.

The setups you will learn enable you to trade in markets at the exact time they have the best liquidity. Beautiful setups can be found in all markets: grains, softs, energies, metals, financials, currencies (forex and futures), stocks and stock indices. They are even available in Single Stock Futures and Contracts for Difference. The setups can be day, swing, or position traded. There are traders who use them for option trades as well.

You will have proven to you that the odds of winning on the trade setups taught at the seminar are greater than those for the way most people have been taught to trade. You will discover how you can win with trades even as markets move sideways and other traders are being unmercifully whipsawed.

To learn how to really trade successfully is why you should take a seminar. You will learn everything mentioned above and more.

Click to learn more about Joe Ross’ Trading Seminar coming to Dallas, Texas on March 20-21, 2010