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Question from a subscriber:
“Once I’ve achieved success as a trader, then what? I’ve heard that after awhile trading can become boring.”

I know you would all like to have that problem, but I can vouch for its being true. I am always having to find new ways to trade or I do become bored. However, I have never run out of ways to trade that remain exciting, at least for a fairly long time.

After the objective techniques of trading (discipline, controlling losses, self-control, self-confidence, etc.) are mastered, the great traders have prescient insight and the ability to envision themselves and their methods as part of a higher realm where art, science, and markets become one with all life.

My friend Kent Calhoun says it this way: “The great traders I’ve known have an enthusiasm for life. The word ‘enthusiasm’ comes from the Greek word ‘Enthios’ and means, ‘God within.’ Enthusiasm is contagious and causes men to rise above their abilities. Napoleon was known as the ’100,000 man,’ because on the battlefield his enthusiasm was worth another 100,000 men. Henry V was a brilliant ’100,000 man’ who lead his troops, outnumbered more than five to one, to startling victory at Agincourt, where over fifty Frenchmen died for every one Englishman. Great traders, scientists and artists recognize there is great art in all scientific endeavors, and there is great science in all artistic endeavors. Living one’s life is the ultimate artistic statement.”

Of course, you can always turn to helping others. There is a lot to be said for giving back some of what you have received in the way of good fortune. There is great reward and satisfaction in seeing another person make it as a successful trader.

“Sometimes I absolutely dread sitting down to trade. I have had so many bad experiences that I’m not sure I can pull the trigger. Is there anything I can do about it?”

What happens to us as we trade colors the way we see things in the market and influences the way we approach them. We take a big hit in a particular market, and we decide never to trade there again. Or, when we have a great trade in a market, it produces pleasure, so we try to trade there again as soon as we can.

How do you envision the markets overall? More importantly, how do you conceive of your role in the market? Do you see the markets as potentially hazardous arenas in which you must be very, very careful? Do you see them as though everyone in them is out to take your money? Or do you view them as a place in which there is dynamic profit opportunity?

Each time you sit down to your trader workspace, do you feel uncomfortable and wish you were somewhere else? Or are you really eager to jump into your work, look over your charts, and get down to trading? Does plowing through new material feel like a lot of hard work, or does it excite you to learn new information that will add to your ability as a trader?

The way you envision the markets will have a powerful influence on your actions! So it’s absolutely necessary for you to be very much aware of just what your perception is and what past experiences colored your perception. You need to honestly assess your vision of – and feelings towards – the markets and your role in them. It will surely be time well spent.

Here’s something to think about: the longer you sit in front of your screen, the more bad experiences you are going to have. The thing that defeats most day traders is that of overtrading. As you continue to sit in front of your trading screen, your focus and your sensibilities become increasingly numb. The longer you sit there, the more the probabilities increase in favor of your making bad decisions and wrong trades.

Let me ask you a question that may put the entire situation into perspective for you. Have you ever seen old people in a nursing home sitting hour upon hour staring at the TV screen? If you haven’t, can you picture what it would be like? Almost everyone has seen people who either by choice or circumstance, sit all day watching TV. They sit and watch the “boob tube” hour after hour. What do you suppose this is doing for their minds? Do you think they are becoming increasingly sharp? Is sitting there all day helping them to grow? What would you say is happening to their minds? Are they not going to suffer from an increasing amount of atrophy as they fail to think – as they fail to use their minds?

When I see a trader sitting in front of his trading screen all day long, it generates the same kind of picture for me as when I see someone watching TV all day. They are destroying their minds. At least with TV you might learn something. But what are you learning watching a cursor tick up and down hour after hour?

Trading is a terrible occupation if all you do is trade. Taking signals from a mechanical trading system is one of the most mind numbing, emotionally crippling things anyone can do. The shorter the time frame being watched, the worse it is. Is it any wonder that 90% or more of day traders last only 3-6 months in the market?

A successful trader has two major things going for him/her: 1. Plenty of money to have an excellent life-style. 2. Plenty of time to do some good in this world. But if you sit and trade all day, what do you have to show for it in the end? What have you produced that is of benefit to anyone but yourself?

I’ll let you answer that. But my suggestion to you is that you strive to trade less, not more. Learn what the good trades look like, and then trade them only when they occur. And when they do occur, focus your money – trade as many contracts on the good trades as you can. Don’t trade more of the time on lots of trades, trade lots of contracts less of the time on the good trades.

Use your time and money to help those less fortunate than you. After all is said and done, it is more blessed to give than to receive. Do you know what the word “bless” means? It is a verb meaning to “make happy.” Paraphrased, that old saying translates to “you will be a happier person if you ‘give,’ than if all you do is strive to ‘get.’” But if you are busy spending all your time on a 1-minute chart trying all day long to get, you’re not going to be able to get much of the happiness that is available from giving.

You alone determine whether you will succeed or fail at trading. You alone are in control; take responsibility for your performance and your life. There are always tremendous opportunities in the markets. It is not what happens, it is what you do with what happens that makes the difference between profit and loss.

You cannot marry a market or a single trading style. You have to look. Look at a variety of time frames and a variety of markets until you find the one(s) for you, the one(s) that fits your comfort level and trading style.

Most traders move from trading system to trading system, over time, until they find one that suits them — one that is comfortable to run, and tests well over (back-tested, then real) time. But don’t expect a non-discretionary trading system to work forever. Markets change too much for that to be practical.

You will hear about mechanical systems that work, and even ones that have worked for a long time. But those are usually not the ones available to you. They are successful because they are closely held, and the person using that system is not about to tell you about it.

On the other hand, some traders never stop looking for the perfect system. That, too, is a problem.

There are many systems or methods that can generate nice profits over time. To settle on a trading system that’s right for you:

First, you have to believe in the process by which the system generates trades. Who was the developer, how did he arrive at his methodology? Does it make SENSE to you?

Maybe you’re a visual sort of person and you are drawn to Candlestick charting. Take the time to understand why the patterns mean “reversal” and not just accept the “picture”. Go deep.

Second, whatever system you decide to go with, back-test it. In today’s modern world of software, there’s no excuse not to run all the recent back data you can through your system to see what the results would have been. Don’t worry about testing the system for years and years. You can’t trade history. Forty days back is enough of a test. You need to know if the system is working now.

THINK about the system you are choosing and why it’s right for you. THINK about the results you get from your back-testing and your real-time testing of your system. Be very methodical when you are trading your system.

Third, work on your discipline. Unless you can control yourself, you can never control your trading. In order to control yourself and your emotions, you have to believe totally in your trading system or method, and above all, in yourself.  

Only the first couple of minutes are Portuguese, then it’s Joe..

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Is it true that selling a market when it is limit up is usually a great strategy?

This brilliant strategy stems from the idea that selling a market at limit up, may result in the trader gaining two limit moves in his favor while theoretically not losing any money the day of entry.

I think is that this is an absurd idea. I don t advise this high risk approach as a trading tactic.

Keep in mind that most markets that remain limit up on the close, will open sharply higher the next day over 90% of the time. The limit-up sell is recommended only as a partial profit taking measure, not to initiate short positions which may be considered on the next higher
open.

If ever trapped into a limit up move situation try to buy deferred futures contracts or call options immediately and ask how many contracts there are to buy on the most active futures contract. If there are over 1000 contracts to buy, do not assume the most active futures contract will come off limit to trade the remainder of that day.

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