1st EDITION17 PRO TRADERS THE ONE THING I Wish Someone Would've Told Me... CHATWITHTRADERS.COM 03 Anand ‘Lucci’ Sanghvi Options tape reader • Head Trader & Founder of Sang Lucci “Don’t focus on the money.” There have been two points in my life where I’ve focused entirely too much on the money, and that has tremendously impacted my bottom line and ability to pull out profits consistently from the markets. Once when I was just starting out I focused too much on paying my bills and making a certain amount of cash flow every month when unfortunately, Mother Market doesn’t care at all about that. Constantly focusing on my financial woes led me towards making bad decisions in the market, and subsequently worsening my situation and even extending my learning curve. The second point was after I had made significant money within a short period of time to the tune of about $2 million inside of a year. The desire for material possessions, second & third businesses, expanding operations and biting off more than you can chew becomes a driving force, and you become greedy with profits, often electing to hold on to positions for bigger gains because the profits aren’t enough. Again, Mother Market doesn’t care and if she doesn’t give you the follow through, whatever profits you have will evaporate regardless of the advancements you want to make in your life. Being influenced by the money is an easy thing to succumb to simply because you’re staring at your P&L all day, but in the end everything has to do about the trade you’re in right now and making solid decisions. The money will come. sanglucci.com Listen to my interview with Lucci at @sanglucci chatwithtraders.com/ep-008. CHATWITHTRADERS.COM 05 Assad Tannous Head Trader & Founder of Asenna Wealth Solutions. “Prevention is the first step when dealing with emotions while trading, prevention is the best cure.” Find a strategy that you become comfortable with, that suites your personality and exerts the least amount of emotional capital. Even then, most traders have exaggerated emotional swings throughout their trading careers. The problem is most traders become so emotional they fail to identify they have lost emotional control. An exercise I used when starting out to combat loss of emotional control is to set an alarm to trigger at certain intervals, with intervals being closer together in periods of high market volatility. When the alarm is triggered make a conscious effort to calm down and look at yourself in the third person. I still do it to this day but without the alarm. asenna.com.au @asennawealth In reality though.CHATWITHTRADERS. new traders sometimes lack appropriate psychological resilience for the ensuing battle.” Surely. Avoid this pitfall by creating a trading strategy of your own! Research and refine it yourself. Simply implement their strategy and become profitable. it’s not that straightforward. privatetradingcoach. Why? Well. This will give you total confidence to trade your system through thick and thin. The new trader throws in the towel just before the next string of profitable trades materialise. if you could learn just one successful strategy from an established trader everything would be breezy. Can anyone really have 100% confidence in a strategy they didn’t personally develop or research? As soon that strategy goes through a losing period.COM 06 Davey Newall Independent UK trader • Trading Coach “Work hard to develop your own trading strategy including the psychology to execute it flawlessly and consistently. safe in the knowledge that this losing run is totally normal and expected.com @davey_ptc . psychologically and emotionally it easily destroys any new trader. At the same time the established trader who developed the system continues trading it. I’ve never looked back. real time constraints. and capital/ risk management controls) brought the picture together for me. Of course those self-imposed constraints are not determinants of profitable trading. which in my mind translated to insufficient P/L to sustain my trading operation.com/futurestradingfil @fil_lorinc . facebook. empirical probability. At the outset I had an unfounded fear that if I followed this advice I simply wouldn’t take enough trades. and real pressures. which for a long time I misunderstood.” This is obviously a loaded directive. I created for myself an essential roadmap for when I do and when I do not want to trade. Using a base set of analytics. My predominant challenge seemed to be that I’m a real human being with real liabilities. my focus was misdirected. the proof was in the numbers.CHATWITHTRADERS. then trade the plan.COM 07 Fil Lorinc Futures trader • Coder “Slow down and be patient. Stepping back and building from the core the mechanics of a successful trade plan (integrating risk/reward. unsurprisingly. plan the trade. They are useless.com Listen to my interview with Ilan at @ilanazbel chatwithtraders. Only use these technical indicators during the education phase of your trading career.CHATWITHTRADERS. This makes them meaningless for building systems that are sustainable over the long term. Once you have some interesting ideas. they can teach you about marketing dynamics and provide you a basis for creating new and innovative ways of looking at market movements. Stochastic. RSI. then use more sophisticated non-lagging smoothing algorithms like kernal regressions. learn R.COM 9 Ilan Azbel Algorithmic trader • Founder of Autochartist & Seer Trading Systems “Throw out all existing arithmetic technical analysis tools such as Moving Averages.” I have spent hundreds (and possibly thousands) of hours trying to create systems using commonly used technical indicators. autochartist. Bollinger Bands. . until I finally realized that because they are parametric one can get the answer you are looking for by simply changing the period of analysis.com/ep-014. etc. that simply making a couple percent each month adds up over time. . Active trading? We’re looking for 10% gains each month. I figured slow and steady is what large funds endeavor to do. not each year. Not only do little wins add up. In fact there were times I sat in cash waiting for great opportunities instead of taking the good opportunities offered. they enable traders to develop a better intuitive feel for the market and therefore better prepare them to act when a great opportunity presents itself.” As an aspiring trader.com Listen to my interview with Jason at @jasonleavitt chatwithtraders.com/ep-017. I wish someone would have told me to slow down and not set my sights so high. Because of this I passed on a lot of perfectly good set ups that didn’t offer me “enough” upside potential.CHATWITHTRADERS. steady moves. beat the market by a small amount. leavittbrothers. Low risk. This was a mistake.COM 10 Jason Leavitt Swing trader • Founder of Leavitt Brothers “Slow and steady wins the race. collect dividends. we tend to get caught up in this and often shoot ourselves in the foot wondering what could’ve been if we just held on a little longer. If it was only about one big trade. they pull themselves further away from the reality of what it takes to be a truly successful trader. and I would say. they focus on what could’ve been great? I mean.com/ep-015. but what then? How much does that really tell you about your capability to trade for the long-term and make a career out of this? There is no such thing as ‘The Big Trade. aspiring traders. while at the same time appreciating how much worse a position could have been had we not taken a small loss on a trade. . we should take more time understanding that it is more important to recognize success in each small trade we take.’ ” Why is it that when most people talk about what could’ve been. how unhealthy is that? We only go through life one time. Sure you could hit that big trade. Instead.’ The ‘Big Trader’ is the guy who wakes up each day and over time. it’s far more important to be grateful for what you have and spend more time appreciating what could’ve gone wrong! As young. It may not sound all that glamorous.com Listen to my interview with Joel at @joelkruger chatwithtraders. this would be nothing more than an exercise in gambling. Young traders have a tendency to get sucked into the illusion of the big trade that will make their career. but I promise. jkonfx. and as they chase this illusion.COM 11 Joel Kruger Forex trader • Former currency strategist • Founder of JKonFX “No such thing as ‘The Big Trade. it’s definitely effective.CHATWITHTRADERS.’ there is only the ‘Big Trader. continues to turn out profitable results. net Listen to my interview with John at @johnwelshtrades chatwithtraders. . That’s what I have become.COM 12 John Welsh Independent biotech trader “Learning how to manage risk will make you the big bucks. It’s frowned upon.CHATWITHTRADERS. I don’t tell them I am a day trader. If I am wrong on that perceived edge. johnwelshtrades.com/ep-018. I let the market tell me what to do and I take my loss quicker than anyone else. I look for an edge that gives me the advantage over another trader. I don’t gamble. I tell them I am a risk manager.” When I tell people what I do for work. because no one is perfect in trading. This is called managing risk. I’m trading calculated risks when I see an opportunity. setup or indicator. Immerse yourself in the charts. leading only to frustration as we get stuck in the never-ending search for our Holy Grail trading system. but rather one of skill development.com Listen to my interview with Lance at @lancebeggs chatwithtraders. But you can do it! yourtradingcoach. but from your own skill and expertise.CHATWITHTRADERS. but it’s a false path. The reality is that a system cannot adapt to the uncertainty and variability that exists in market conditions and environments.com/ep-013. And learn to ADAPT and exploit opportunity as it unfolds at the right hand edge of the chart. It’s not easy.COM 14 Lance Beggs Full-time futures trader • Part-time trading educator “The path to success is not one of finding the right system.” Often we’re told. the trend structure. “You just need to trade your system with discipline”. The right path is one in which your edge comes not from your system. . Study the way price moves within that structure. Develop skill in real-time analysis of current market conditions. Recommended: Lance’s Price Action Trader course is an extensive resource created to help you develop your trading skill – huge value. Develop skill in adapting tactics to suit the current market conditions. Study market structure – the support & resistance structure. It sounds logical. Learn more. as I find with many traders they often get in the game thinking that there success will be almost instantaneous. Learn more.CHATWITHTRADERS. Take the time to learn and trade. triforcetrader. Be receptive to new information and understand that you must be flexible enough to roll with the punches.com/ep-007. swing trader. Do not rush into the market expecting immediate results. you can subscribe to his daily market commentary and watchlists.com Listen to my interview with Matthew @triforcetrader at chatwithtraders. However.” This statement is especially meaningful to me. Recommended: To learn about the patterns and rules that helped Matthew achieve almost a 600% return in ‘14. . this is the antithesis of what the truth is. Whether you are learning to be an investor.ly Guru “Stock trading is not a sprint. but strong enough to survive the ever shifting tide of the market. and understand that you will be in a constant state of learning.COM 15 Matthew Owens Stock. options and futures trader • Profit. it’s an endless marathon of learning. or day trader. slow down and take your time to learn. the application for any length of time and risk management is where people come unstuck. Most traders tend to have either limited psychological fortitude or unrealistic expectations.com/ep-004. At no time should a single trade cause you to lose so much money that you have to stop trading. both of which make it difficult to stick with a perfectly good strategy for any length of time. thechartist. To find a strategy with a positive edge is quite straightforward however. . A slow and steady long term application of a strategy with a positive edge might not be sexy but it will allow you to stay in the market and earn some extra income.COM 16 Nick Radge Head Trader & Founder of The Chartist • Author of Unholy Grails “A single trade should never make you nor break you.au Listen to my interview with Nick at @thechartist chatwithtraders.CHATWITHTRADERS.com.” The key trait for trading success is the long term application of a strategy that has a positive edge. sanglucci. It should be assumed that while trading. Making logical decisions get thrown out of the window. Once you’re in a bad trade. and you must be ready to take a financial earnings hiatus to start trading solo. average to expert. In the end. With the weight of putting food on the table. . a mentor can help reduce that learning curve. you’ll be in a heightened state of whirl-winding emotions. The key is. that should be the base layer of your emotional state. what separates you from scrub to average. is trading under additionally stressful circumstances. when starting off trading in the traditional sense (without salary). Usually the worst scenario you can be in. and it almost feels like life flashes across your eyes. you must anticipate far out. It’s important to stay calm and be able to make logical decisions when trading.COM 18 Peter Zhang Partner at Sang Lucci • CEO of Flammarion Capital Partners “Do not rely on trading money to eat.CHATWITHTRADERS. Trading has always been analogous to competitive sports.com Listen to my interview with Peter at @pz_sl chatwithtraders. on top of performing in the markets. your emotions take over. Otherwise.” Overall. it can drag on your entire life. what ends up happening is a very bad feedback loop.com/ep-009. the entire experience is very daunting and emotionally difficult to deal with as is. As always. Your likelihood of blowing up your account skyrockets and your drive to trade drops. and then you’re in a bad trade. is simply how you can manage your own psychology. com/ep-005. don’t try to predict.COM 19 Steve Burns Options trader • Author of New Trader. Learning to identify trading signals from historic chart patterns using technical indicators is the simplest path to trading success and profitability. Rich Trader “React to price action. rather than trying to predict the markets or make great picks.” The active pursuit of understanding price action and following its path of least resistance should be every traders goal.com Listen to my interview with Steve at @sjosephburns chatwithtraders. newtraderu. .CHATWITHTRADERS. Profitability comes from identifying the long term trend and trading it regardless of personal opinion. and make you better able to position to ascertain new heights. you have to accept that you will be wrong. .com Listen to my interview with Tim at @rb_trader chatwithtraders.. will ultimately get you through the tough markets.” To be a great trader. the tenacity to overcome adversity and persevere. and will to continue. But like any great endeavor. rb-trader.com/ep-016.CHATWITHTRADERS.. while adhering to your beliefs and trading plan. a LOT! There will be long periods of drawdowns that will test your resolve.COM 20 Tim Biggam Options trader for 30+ years • Partner at RB Trader “It is psychologically demanding to be a trader. It could be stocks and commodities.” Almost all the space in trading courses is devoted to how to analyse a market or a chart. real estate or anything imaginable. A trader is a person who buys and sells at a profit. . antiques. This is good but trading is a skill all on its own. Someone who can do both has the keys to the kingdom.net Listen to my interview with Tim at chatwithtraders. a trader will always make at least some money. timwalker. It requires skills of instinct and timing and many other things.COM 21 Tim Walker Independent swing trader • Author of How to Trade Like W D Gann “The most important thing of all is to become a TRADER. An analyst almost never makes money.CHATWITHTRADERS.com/ep-006. used cars. but also not look back is critical in this game. no matter how good I get at trading. there will always be losing trades. Once you learn how to lose. Nothing else matters. It’s not about trying to be right all of the time or feeling/sounding intelligent. As a matter of fact.com @wallstjesus . Once I came to the realization that. trading gets a hell of a lot easier.COM 22 Wall St Jesus Son of the Market Gods • Lord of Wiseguy Activity “Learning how to lose in trading is just as important as learning how to win. Trading is rather simple to me now. I see it everyday: traders getting knocked out just because they never learn to master this one critical aspect of trading. there is no way I’d be able to use my current trading strategy earlier in my career because I avoided taking small losses. WINNERS > LOSERS.CHATWITHTRADERS. Without being able to do this you will NEVER be able to succeed in this game long term. that’s when I finally started to see the light and things began to roll for me. Admitting when you are wrong on a trade and being able to not only stop yourself out. optionjesus.” Understanding this has easily been the most important lesson in my career. They want others to view them as intellectually superior to salaried professionals. . girlfriend.COM 24 Zach Hurwitz Equities trader • Trading coach • Systems developer • VWAP specialist “Dissociate yourself from the identity — the image. I should focus on developing technical skills more so than proving to everyone — to myself. All too often. Coincidentally.com/zach Listen to my interview with Zach at @zachhurwitz chatwithtraders. or colleagues — that I would one day become something impressive. whereas the latter is essentially guaranteed to meet an eventual risk explosion. that’s also the one common experience across all of us: the feeling of what it’s like to be a beginner (and therefore. sanglucci. That’s just bullshit — fluff that developing traders feed themselves to ease the pain of not having an edge. the persona — of being a trader. revering them as cowboys/risk-takers. I’d rather be a bad trader who is honest about my skill level than a good trader far too confident in my abilities — the former can grow to become talented and self-aware. as brave radicals amidst a world of otherwise predictable careers. my family.CHATWITHTRADERS. developing traders want the badge of honor that comes with making a living (or not) by clicking a mouse.” Instead. a terrible trader).com/ep-011. 2 ND EDITION 23 PRO TRADERS THE ONE THING I Wish Someone Would've Told Me.. .. COM 3 Contents BUSINESS Tim Grittani pg 05 Michele Koenig pg 07 Bryan Wiener pg 09 PROCESS Dan Shapiro pg 12 Jeff Davis pg 13 Bryce Edwards pg 14 Ari Pine pg 15 STRATEGY Paul Singh pg 17 Craig Peters pg 19 Kevin Davey pg 21 Tom Basso pg 23 Nicola Duke pg 25 Luke Cummings pg 27 POSITION SIZING Jack Litle pg 30 Jon Boorman pg 32 Trader Steve pg 34 PSYCHOLOGY Chris Sayce pg 37 Stuart McPhee pg 39 Kam Dhadwar pg 41 Jesse (@PsychoOnWallSt) pg 43 PERSPECTIVE Bert Mouler pg 46 FuturesTrader71 pg 48 John Carter pg 50 .CHATWITHTRADERS. They’re fed up with their 9-5 job.CHATWITHTRADERS. Who wouldn’t want in? Unfortunately. it was suddenly a whole different ballgame. where you blow up your account once early on before finding consistency—it took me 9 months of studying/trading before I did. and then they stumble across a service promising riches and telling the stories of successful subscribers who “made it”. where you experience some early success (or luck) before eventually giving it all back. Whatever the case. low pay.” Most people become traders looking to make a radical change to their life.. many fail to understand the long road they must travel before reaching success.COM 5 Tim Grittani Day Trader • Equities Trading is not easy. but when I started trading and my money was on the line.. I do not know a single millionaire trader who didn’t blow up . Perhaps your story will be like mine. Perhaps it will be like others. expect glorious failure. I studied my ass off and everything looked so easy in hindsight. expect to fail before you can succeed. CHATWITHTRADERS.COM 6 their account at least once before finally finding their niche and learning to be consistent. You will likely be no exception. So don’t start trading expecting instant earnings. You probably won’t pay the bills with trading profits anytime soon. Definitely don’t expect to get rich overnight and don’t trade far too large when you’re in your learning period. If I hadn’t traded small for my first six months, my blowup would have been beyond recovery and I would not have had the opportunity to later succeed. Go into trading with money you can afford to lose, and let every loss be a lesson that helps you to improve. If you fight through those early losses and keep them manageable, the lessons you take away from them will set you up for success down the road. MORE ABOUT TIM GRITTANI Interview: chatwithtraders.com/10 Website: tradetheticker.blogspot.com Twitter: @kroyrunner89 CHATWITHTRADERS.COM 7 Michele Koenig Day & Swing Trader • Equities Trading is a business and should be treated like one.” Take the time to educate yourself about the basics... What style of trading do you want to focus on—are you interested in day trading or swing trading? What instruments are you going to trade—stocks, options, futures? Do you understand various order types, long/short, margin etc? Have you considered whether you qualify for trader tax status? These are the types of questions most traders starting out never even consider. Most are in a hurry to start pushing buttons without even considering some very basic questions which they need to be able to answer. Take the time to develop a plan... What chart timeframes are you going to use—daily, intraday, both? Are you going to use technical analysis or fundamentals? What criteria are you going to use to determine your entries? What risk will you set and how will you determine that? How will you manage the trade while it’s active? How will you determine when you exit? CHATWITHTRADERS.COM 8 Do you understand that losses are part of trading? How will you handle drawdowns? The emotional side of trading is the most difficult, and we’re often our own worst enemies. There are always ups and downs in trading, so having put some thought into the emotional side is very important—most give little thought to this early on… Many come to trading with a false view that it’s going to be easy, but it’s very much the opposite. By spending some time to answer these basic questions before you start trading will help you to be better prepared, but also know that your plan will be a work in progress as you develop as a trader. MORE ABOUT MICHELE KOENIG Interview: chatwithtraders.com/44 Website: tradeonthefly.com Twitter: @offshorehunters During this time I still had a salary and a bonus. But still I was sheltered from what it would be like in the future. I had the luxury of feeling out the industry.... but it was kinda like the static that you’d see on a TV which is leftover from the Big Bang. Soon after I began at Trading Machines.. As a young options floor trader. So there was a decent amount of volatility. I had a great salary and a great bonus for a few years. so I was sheltered from what it would be like when I finally went on my own—outside of the pit and onto the electronic market.” Let me preface this by saying that I was recruited out of college to become an options trader and had no trading inclination before graduation. working under Haim Bodek. After 9/11 happened the market volatility returned.CHATWITHTRADERS. but then the drought happened between 2002-2005. where I had no friendly advantage for paper on the floor. in mid 2000.COM 9 Bryan Wiener Options Trader • Former-CME Market Maker There will be extreme ebbs and flows in the options market and you need to be able to deal with trading droughts. . I came in right after the internet bubble burst. with a salary and time to learn the market. .CHATWITHTRADERS.com Twitter: @dirtyautomatik . But post-AAPL split. and it’s been a grind for over a year. Don’t go into trading full-time. giving up said salary. don’t take a comfortable salary for granted. that might just be boredom speaking for you. because the water isn’t always warm. Well. as I found a great niche trading AAPL wings.com/40 Website: sanglucci. making six-figures.COM 10 And that was delayed even further after I left Trading Machines. I hear so many people say they want to quit their job to become a full-time trader.. I have been trying to find my new trade. even doctors and lawyers. Consider this before you take the plunge. MORE ABOUT BRYAN WIENER Interview: chatwithtraders. So what’s the takeaway? In my professional opinion. unless you have a plan that you are so confident about that it’s not even a question of whether or not you should do it. Since there’s no blueprint to success. the lucky profitable ones.com/66 Website: accessatrader. you have to figure out things the hard way—through trial and error. In trading we don’t have a luxury of a mulligan.com Twitter: @danshep55 .” We hear the expression all the time “no one is perfect”. If we deviate from those rules. None of us growing up wanted to be traders. You either trade with a process or you die without one. However trading is its own animal. heck most of us didn’t even have a clue what trading was. chatwithtraders. MORE ABOUT DAN SHAPIRO Interviews: chatwithtraders. Sure. value and process is all we have to keep us from the other 90%. when you open your first brokerage account. we’re all human beings who have many faults displayed daily.com/32. Our rules are our lifeline. For the 10% of traders out there.CHATWITHTRADERS. we die.COM 12 Dan Shapiro Day Trader • Former-Prop Trader I wish someone had told me how important it is to be perfect. order flow software.” Until a trader understands this they will waste a lot of time and energy. This is your process. The idea that some tool will lead to success or somehow lead to consistent profitability is being sold to you from many sources and is hard for aspiring traders to resist. MORE ABOUT JEFF DAVIS Interviews: chatwithtraders. Spend time on what emotions will trigger and managing them. Realize that these are just tools used in the craft and how and when you use them is what’s important. and technical analysis are just tools.com/70 Website: medium.CHATWITHTRADERS. Spend more time on how you will manage the trade once you are in one. The magic comes in the actions you take.COM 13 Jeff Davis Algorithmic Trader • S&P Futures Specialist There is no magic pattern. Charts.com/@shaq48_trading Twitter: @shaq48_trading . indicator or line on a chart— the magic is only in your process. for risk management. for regulating their emotions when they’re on tilt etc. Consistent profitability can only come about by consistently applying a series of processes. Develop. Particularly for short-term discretionary traders.com/51 Website: - Twitter: - .COM 14 Bryce Edwards Day Trader • ASX Equities Trading is just a series of processes. but they should also think about developing processes for all elements of trading.CHATWITHTRADERS. you have the ability to create good habit patterns whereby your natural reaction to unforeseen circumstances will be to follow your process and do the right thing.” Most traders already have a process for scanning the market. refine and apply your processes. for scaling in/out of positions. analyze. the process approach brings structure to their trading operations and helps to somewhat suppress the rogue emotional human element. By developing a series of processes and operating purely on their application. MORE ABOUT BRYCE EDWARDS Interviews: chatwithtraders. Get comfortable with uncertainty as this is useful in all parts of your life. Either you have an exploitable edge or you do not. it seemed to me that this fits into the larger framework of process driven trading (this is a hat tip to the successful Morgan Stanley group led by Peter Muller). The process comes with an estimate of how many times you should expect to be wrong. you won’t hear it from me. you . if all of your trades are winners then you are not taking appropriate risk. But after thinking about it.” At first I thought I would write about a very particular detail that would have helped me most at my start (and for far longer than that). Winners and losers both make up trading. Wrong is actually the wrong word. then there is no need for psychology. they are neither wrong nor right.COM 15 Ari Pine Head of TradeCo Global • Quantitiative Trader Focus on process. There is much talk about psychology in trading.CHATWITHTRADERS. In fact. not every trade needs to be a winner. Which leads to thinking about psychology and that need to always have a winner. Even if your trading is not automated. A preoccupation with psychology indicates a lack of confidence in the process—that need to make money on every trade. If you understand your edge and you have a reasonable idea of how to tell if it is degrading. go out in the markets and beat that edge to death.com Twitter: @std_dev . Then. if there is a “one thing” then that one thing is to focus on process. In the end.com/61 Website: tradingtechnologies. Again. Find an exploitable edge. Understand that not every trade will be a winner but all trades are part of the whole.COM 16 should still know what your set ups and exits are. MORE ABOUT ARI PINE Interviews: chatwithtraders. this ends up being something of a re-write of “plan the trade. then trade the plan.” Yet you have to have a good idea of what your edge is and where it is coming from.CHATWITHTRADERS. ” We are professional traders. the nervous system. but I explained very clearly how to deal with the gap down. we would hold onto our stop. Our mental stops were hit. our human frailties. market understanding. Understanding a setup is simpler than understanding the tax code. we talked about how to handle a possible over reaction. we get out. The Sunday before the sell-off. Picking stocks and understanding setups is the easy part. setups are not what makes a good trader. However. This is more complex as it brings into play. He explained how relieved he was to be out of the position. I’m working with two students who both traded GOOGL through a market sell-off (as did I). you need to know how to profit from it. Once in a trade.COM 18 Paul Singh Day & Swing Trader • Equities Focus less on stock picking and setups—focus more on managing the trade once the stock is picked. not stock pickers. If the morning level broke. This is what separates winning and losing traders.. and ability to adapt. risk tolerances. Most traders have been successful in other walks of life and mastered many complex ideas.. If the opening gap down level held. the mental game. Trader A panicked and sold at the open for a 50 point loss. panic selloff and bounce.CHATWITHTRADERS. despite . As an example. or engineering ratios. CHATWITHTRADERS. Very different results.com/58 Website: themarketspeculator. Trader B understood the market.com. and as of this writing is up 30 points on the position. Same setup.blogspot. To become a winning trader.au Twitter: @pauljsingh . which lead to poor decision making.COM 19 the big loss. MORE ABOUT PAUL SINGH Interview: chatwithtraders. spend more time learning ‘how’ to trade. adapted his plan. Different trade management. his own psychology. He did not manage his emotions. not ‘what’ to trade. Same stock. Two traders. One more thing that’s been key in my development over the past ten years is. in such pursuits.CHATWITHTRADERS.5%-2% per trade drummed into me so many times that it’s has never been a problem for me. only to realise that much simpler techniques yield the same trading performance. when setting profit targets. close scrutiny of such ideas during backtesting. I now use a simple percentage target most of the time. like me. .COM 20 Craig Peters Algorithmic Trader • Equities Focus on what actually works. While it would be an oversimplification to say that the pursuit of some sophisticated ideas wouldn’t be fruitful. you have a strongly analytical mind. and investing too much emotional capital in bad trading ideas.” If. This will prevent you from wasting too much time. I’ve had the message of only risking 0. we have the tendency to over complicate things in the pursuit of ideas and theories to more accurately capture market behaviour. thinking about whole portfolio risk. For example. I have personally wasted at least a couple of years in total. don’t spend time on grand theories. should be done as early as possible. not just risk per trade. CHATWITHTRADERS... MORE ABOUT CRAIG PETERS Interview: Website: - Twitter: - . I’ve been severely burned by overtrading and taking too much risk in my portfolio as a whole. Therefore three trades in seemingly unrelated stocks. As much as this rule is one of the most important rules to follow. So I limit the number of trades I have on at any one time to a total of six. or up to twelve if I keep very tight risk management stops in place.COM 21 thankfully. Today’s markets seem to have much more correlation across international boundaries than in the past. can end up being affected in the same way by the same piece of economic news/event. CHATWITHTRADERS.COM 22 Kevin Davey Algorithmic Trader • World Cup of Futures Championship Winner Having one trading strategy is not enough.” Back when I first started creating algorithmic/mechanical trading strategies, I constantly searched for the “perfect” strategy. You know, the one strategy that would, by itself, make me fabulously wealthy... I spent a lot of time and effort looking for that strategy. Many times, my historical backtest told me I had such a strategy, but every time I started trading such a perfect strategy with real money, I almost always lost. It took me a long time to realize one of the secrets to successful trading; you need to trade multiple strategies. There are numerous reasons for this... First, every strategy will likely eventually stop working. If you only have one strategy, and it breaks, you are in trouble. Second, when you have a bunch of strategies, the strategies can be “good,” but do not have to be “great.” And good strategies are easier to create than great strategies. Third, markets change over time, and having multiple strategies lets you participate in whatever the day’s hot market is. With CHATWITHTRADERS.COM 23 multiple strategies, you’ll have your fingers in every market opportunity. But the biggest reason why you should create and trade multiple strategies is diversification. The concept of diversification is well documented in financial literature, and it turns out not only to be academically acceptable, it is great in the real world, too. Simply create strategies for different markets, with different timeframes and different strategy themes (trend, mean reversion, etc) and you’ll have a diversified portfolio. Trading such a portfolio really helps control the drawdown, while still allowing profits to accumulate. It is the best of both worlds, and I wish someone had told me about it years ago! MORE ABOUT KEVIN DAVEY Interview: chatwithtraders.com/38 Website: kjtradingsystems.com Twitter: @kjtrading CHATWITHTRADERS.COM 24 Tom Basso Trend Follower • Market Wizard Risk, volatility and money management are far more important to success than how to buy and sell.” I started out in trading looking at all sorts of trading strategies and this was before personal computers, so I had lots of tedious work. When I finally got to a place where I could make it work, I spent the next 20 years learning how to improve that strategy with various ways of controlling risk, controlling volatility, diversification theories, hedging techniques and margin control. Only then did I have something I felt was truly robust. Why is this important? The general area of money management, which includes diversification, market selection, risk and volatility control, and hedging, smoothes the performance. In other words, making that performance more robust in varying conditions, helping the psychology of the trader to allow him/her to hang in there during tough markets. Without these in place, it’s going to be a wild ride and most can’t take the heat. MORE ABOUT TOM BASSO Interview: chatwithtraders.com/30 Having a fixed method for taking profit that is as robust as the one you have for selecting trades means that exits are automatic and so much easier. but really bad at managing them so I wasn’t profitable.com/63 Website: - Twitter: @nictrades . When I first started I had a strategy with an edge.CHATWITHTRADERS. For some.COM 26 Nicola Duke Swing Trader • Futures & Forex Exits are as important as entries. and for others that means all in or all out. that means taking partial profits at fixed signals. This was my turning point to becoming a profitable trader. I was really good at seeing and executing the trades. Nothing is more destroying than having a winner come all the way back to a scratch or a loser. is just as important as how you enter—it can make the difference between whether or not you’re profitable.” When people first start learning to trade they’re on an endless search for setups and usually the big “swing for the fences” trade. But how you take profit in a trade and get out when you’re wrong. I personally like to take partial profits and try to run the rest. MORE ABOUT NICOLA DUKE Interviews: chatwithtraders. then you’re in trouble. an edge needs to be repeatable. i.” Having an edge and understanding not only what it is. is actually understanding why it works. If you don’t know why your approach works. It need not be elaborate or complicated—it’s something that gives you an advantage against the market. if you plan on becoming a successful trader. But more important than what your edge is.e. An edge is essentially a technique or approach that will give you a higher probability of being profitable than not. but also why it works is non-negotiable.CHATWITHTRADERS. Additionally. . what exactly are you doing that gives you an advantage? If you don’t know. Because markets are dynamic and you need to be prepared to adjust your approach accordingly.COM 27 Luke Cummings Hedge Fund Manager Trading without an ‘edge’ is otherwise known as gambling. If you’re edge can’t be consistently exploited then your career as a trader is going to be short lived. then it’s going to be difficult to make adjustments as circumstances demand it. MORE ABOUT LUKE CUMMINGS Interview: chatwithtraders.CHATWITHTRADERS.com/31 Website: longandshortofit. In the absence of a known edge.au Twitter: @lukecummings81 .COM 28 The ability to identify and continually exploit an edge is what separates a professional trader from a novice.com. profitable trades are nothing more than the result of temporary good fortune. Silicon Valley legends like Bill Gates. The big bet principle is woven into the fabric of the universe . If you see a guy walking down the street with a supermodelcaliber girlfriend on his arm. which meant betting big on his own selfconfidence. and why of making big bets. Mark Zuckerberg. and Jesse Livermore have in common? They all knew and practiced the art of the big bet. Larry Page and Sergey Brin were masters of the big bet—in respect to betting big on their best ideas.COM 30 Jack Litle Global Macro Trader • High-Stakes Poker Player Focus on the how.” Learn how to size your big bets properly and learn how to trade cautiously and conservatively when big bets aren’t appropriate (which is most of the time). Bruce Kovner. guess what? He had to approach her at some point. T. Boone Pickens. Steve Jobs. Winners know how to bet big. when. Virtually every single superstar trader or investor you’ve heard of grew rich from big bets. Stanley Druckenmiller. The big bet is multi-disciplinary. What do George Soros.CHATWITHTRADERS. Warren Buffett. Carl Icahn. Paul Tudor Jones. It tends toward outliers and fat tails. “bet the farm on rare occasions—and always have a farm in reserve. The first is. But doesn’t this make sense? There’s a reason why only a small percentage of traders get rich.” Instead it should read. be incredibly aggressive. when true opportunity presents itself.com/45 Website: mercenarytrader. you won’t rise above the churn. “take care of the losses and the profits will take care of themselves.CHATWITHTRADERS.” The art of the big bet is rarely discussed. “never bet the farm. Opportunity distribution is not smooth or frequent—it is lumpy and rare. If you fail to aggressively maximize your best opportunities.” Baloney. The second wrong piece of advice is. Opportunity maximization thus favors a simple formula: Stay cautious and conservative most of the time—and then.com Twitter: @mercenaryjack .COM 31 because of the way opportunity is distributed. MORE ABOUT JACK LITLE Interview: chatwithtraders. There are two pieces of conventional trading wisdom which are completely wrong. It is one of the hardest trading lessons to master. CHATWITHTRADERS. I’ve traded for many portfolio managers over the years and I don’t believe any of them size positions in their portfolios to account for a stocks volatility or for when they are wrong on an idea. but the truth is people did tell me all those things. I feel I could’ve reached the current path in my journey much quicker. But had I have known the role position sizing plays and truly understood just how significantly it can impact your trading. Even as a prop trader years later. It was only after I went through a long period of losses and introspection that I broke everything down to its component . having never been taught the concept. and when you’re young you don’t listen. Their mandate was more about weighting their exposure in a portfolio relative to a sector or an index.” I could easily say something about the need to be patient and disciplined. as those are important.. I still wasn’t position sizing in the way I do now..COM 32 Jon Boorman Trend Follower • Chartered Market Technician The one thing I wish someone would’ve told me before I started trading is the importance of position sizing. Traders are only human and need to make their own mistakes for behavioural lessons to hit home and to develop mental fortitude. Exits relative to entry determine whether a trade results in a profit or loss. and I came to recognize the basic building blocks of any positive expectancy trading system.com/43 Website: jonboorman. but position size determines by how much.com Twitter: @jboorman .CHATWITHTRADERS. position sizing is a major variable in any system— when used correctly it can help you manage risk effectively and succeed in achieving your objectives. having been inspired by the work of Van Tharp on the subject.COM 33 parts. For that reason. MORE ABOUT JON BOORMAN Interview: chatwithtraders. ” A big “ah-ha!” moment for me was getting a grip on the concept of expectancy. combined with a reasonable win rate.CHATWITHTRADERS. Trend following and the concept of expectancy. I found out that successful trend followers could win over a long period of time. proved this was not the case. they have to win more times than they lose. could work.COM 34 Trader Steve Trend Follower • Trading Coach Spend time to understand the basic maths behind winning. They have a belief that. while at the same time they were losing on most of their trades—how good is that? A lot of people cannot grasp or accept this. This realisation came around the same time as determining to risk only a small portion of my trading capital on each trade. but also on . along with having weak risk control. There is also a need in a lot of traders that they need to be proven right on a trade or an investment—they refuse to cut their losses when things go against them. so there was a seismic shift not only in my performance. Certainly when I started trading I fell into this trap. and understanding how the basic mathematics of small losses countered by the occasional big winners. to win. MORE ABOUT TRADER STEVE Interview: Website: thetrendfollower.COM 35 controlling my emotions.CHATWITHTRADERS.com Twitter: @uktrendfollower . Then it was solely down to me to remain disciplined and committed through the bad times and the good. Once I “got it”. accepting losing trades. or even a run of losses. became a whole lot easier—knowing that over the long haul the basic mathematical logic held up. ” I once read a blog by a successful investor who had a ‘crazy punt fund’ in this he used to make all the bets he wanted to make that were not part of his strategy. as it is a side of his personality that if not allowed to express itself could come out in more damaging ways. You could do so by opening a second brokerage account.CHATWITHTRADERS. and use the other one to experiment. In Market Wizards’ Jack Schwager asks Ed Seykota if when he interferes with his system..COM 37 Chris Sayce Trend Follower • Equities Make use of two trading accounts. it goes without saying that you must still apply appropriate risk control to the ‘crazy punt fund’! My experience from when I first started trading. . His answer was that he needs to interfere occasionally. Put another way. use one to trade your plan with complete discipline.. let’s say you have a winning system but you’ve lost patience with it. The idea is actually rather sound from a psychological point of view. Of course. but the fact you know the system is a winning one means you should probably continue trading it. was I found a system that I was okay with—it made money and suited me. does it affect his bottom line. Well you can address the patience issue at a later date. if I had of stayed with my initial strategy I would of made a lot more money. applied new ideas etc.. I would of walked away with the experience and a lot more money! MORE ABOUT CHRIS SAYCE Interview: chatwithtraders. Now the positive in this situation is that I gained a lot of necessary experience which I use everyday.CHATWITHTRADERS. changed things around. After 18 months of tinkering I went back to my initial system and looked at the trades I’d made.. It was clear.com/33 Website: - Twitter: @chrissayce . But if I had of applied my rule of two trading accounts.COM 38 However I got bored. ” Many decisions and actions that are required of us are counterintuitive. Let me give you some examples.CHATWITHTRADERS.COM 39 Stuart McPhee Forex Trader • Author of Trading in a Nutshell Most of the actions required to trade successfully are counter-intuitive. It is counter-intuitive to close that losing trade at a loss as it denies us the opportunity of at least breaking even and getting our money back. If we open a trade and it moves into a losing position. As we are trading to make money. If we experience a losing streak of several losing trades in a row. it is intuitive to think about and focus on making money. it is intuitive to close that trade to realise the profit and keep the money or. . It is counter-intuitive to focus on protecting the money that we have. move our stop close to the price. If we open a trade and it moves into a profitable position.. at the very least. it is intuitive to hold on to that trade in the hope that it will soon return to break-even and we can close the trade with minimal loss.. providing it the opportunity to continue moving higher. It is counter-intuitive to hold off from closing the trade. It is counter-intuitive to think that other things like the size of our trade and where our exit is are more important.com/19 Website: stuartmcphee. it is intuitive to think that our decision to enter a trade.com Twitter: @stuartmcphee . It is counter-intuitive to scale back the size of our trades in order to manage our risk and protect our capital. is the most important and will ultimately affect whether our trade is a winner or loser. when we first start trading. Finally.CHATWITHTRADERS. MORE ABOUT STUART MCPHEE Interview: chatwithtraders. being the first decision we make. it is intuitive to commit more money into the next few trades in order to win our money back sooner.COM 40 resulting in a decrease in our trading capital. CHATWITHTRADERS. but if you don’t know ‘how’ you are lost dreaming about it. All traders learn to know. is purely through dedication and commitment to becoming a more disciplined and a more patient human being (not just as a trader). The only way you’ll become the trader you aspire to be. When trading without these traits you’ll constantly be reminded (by the market) that this is something you need to improve on. frustration and self-doubt—because you cannot trust yourself to do the right thing. It’s like knowing that you need to lose weight. any trading strategy without the discipline to follow it and the patience to wait for the right trades is pretty much useless. Which results in mindless trading. how could you become a more disciplined and a more patient trader?” Without having a specific set of techniques to build discipline and patience you only ‘know’ these are important traits. This will mean being motivated through a thorough understanding of: • Why are you in this business in the first place? • Why do you need this discipline? .COM 41 Kam Dhadwar Futures Trader • NLP (Neuro Linguistic Practitioner) Specifically. which is simply not enough. then commit to a lifestyle full of discipline—consider how you eat. Learn the importance of mindfulness and self-awareness in everything that you do.com/41 Website: thetradingframework. sleep. MORE ABOUT KAM DHADWAR Interview: chatwithtraders.COM 42 • What will happen if you don’t obtain it? Think about the situation you’ll find yourself in if you don’t commit right now to becoming a more disciplined human being. you cannot help but become a more disciplined trader.com Twitter: @l2st . live. and trade.CHATWITHTRADERS. When you get this and you practice it. as it’s now in your blood and in the core of who you are. COM 43 Jesse (@PsychoOnWallSt) Day/Swing Trader • Equities Take it slow. Technical analysis. Embrace the process. Crawl before you ball. Mastering your emotions takes time. even if you have a tremendous amount of success starting out. scaling in/out. execution. price & volume—those aspects of trading are the easiest to learn. if you aren’t emotionally prepared for your sole source of income to derive from a completely unpredictable source. you’re gonna bury yourself trying to comeback from a big loss or a losing streak.CHATWITHTRADERS. too many new traders want to go full-time immediately. Start small. skipping the most vital part of what they need to learn for how to become a career trader. scanning. The most important rules you need. The initial 99% consists of learning how to manage your emotional game. to graduate from being a greenhorn to being green in the bank.. take pride in the journey. and put your dick . A lot of time. The problem with this is..” Many new traders want to go big right away. are developed in the beginning—the other 1% come later when you eventually learn how to trade with size. Also. The tortoise will always beat the hare.com/57 Website: psychoonwallstreet.CHATWITHTRADERS. MORE ABOUT JESSE Interviews: chatwithtraders.com Twitter: @psychoonwallst .COM 44 back in your pants because the only person you’re competing against is yourself.wordpress. I’ve come to realize that they have one thing in common.” From trading the markets myself and being lucky enough to know some very proficient traders. Always be mindful of your biases.g. I’m a systematic trader. I use machine learning to discover novel algorithms and trade as many markets as possible—remember. articles. diversification is the only free lunch.000+) of trades that have been successful X% of the time with an expected payoff of Y. Know the maximum potential profit a market can provide and strive to capture 1% of that. 1. both as a human and as a trader. you are much more likely to survive in the long term. to be truly great. Make sure to evaluate the signal content of your predictors—do .COM 46 Bert Mouler Algorithmic Trader • Machine Learning Look at what everyone else is doing—read books. you have to step outside the box.CHATWITHTRADERS. If you’re not there for the six sigma events. and spend the least amount of time in the markets as possible. therefore I’m much more comfortable risking capital on a trade when I have a large sample size (e. boundless creativity. forum posts—then do things differently. However. I keep to a set of very simple principles. There are literally millions of ways to make money in the market. Finally. A “tiny” edge utilized over and over and over will result in “huge” longterm profits.COM 47 you really think you’re going to outperform using the same tools that everyone else uses? And keep your trade to parameter ratio (# out-of-sample trades / # free variables) high.CHATWITHTRADERS. as always.com Twitter: @bmouler . utilize proper money management. MORE ABOUT BERT MOULER Interview: chatwithtraders.com/42 Website: profluentcapital. You don’t need to be right all the time—you don’t even need to be right half the time. Trading is about being deliberate about the time you spend in front of the market. Look inwards. Everyone has been taught that if you do one thing. You have to modify yourself to fit what the market says it wants to do. constant change and modifying yourself to fit the market. Time is unrecoverable once it passes—don’t throw it away.” In 15 years of trading and training prop traders.COM 48 FuturesTrader71 Futures Trader • Former-Prop Firm Owner Your education so far is designed around conformity and predictability. Trading is about probability. You have to respect risk like an alligator handler respects the primal response of an alligator—so never take your eye off of risk. you should expect a predictable outcome. Do this as a business owner. . Trading doesn’t work this way. The inability to look inwards and be aware of your relationship with fear and with losing is the reason traders make money in theory but not in real life. Trading is about probability and stacking the odds while minimizing risk.CHATWITHTRADERS. The best chance you have of making it is to understand that you have to make it your own approach. I have learned that the greatest part of the struggle to being a consistent trader is modifying who you are as a person. Understand how you respond to fear.com/37 Website: futurestrader71. Learn to calm your mind through meditation. Define what a trade is worth to you. MORE ABOUT FUTURESTRADER71 Interview: chatwithtraders.CHATWITHTRADERS.COM 49 Want to do this for real? Then understand why price moves and focus on the auction.com Twitter: @futurestrader71 . Take the trade and let the market tell you if it agrees with your current bias. there has to be angst. as no one is buying or selling. The reality is that markets move in such a way as to trick most of the people. Or suck people in long with a break to new highs.. the goal is to suck people in short. then the stock isn’t going to move. Have you ever noticed how an “obvious top” is never obvious until well after the fact? During the heat of the moment. If they are both happy.CHATWITHTRADERS.COM 50 John Carter Options Trader • Author of Mastering the Trade A true trading journey involves unlearning most of what you were taught in the first few years of your trading life. and then rip their heads off. What happens in the past has very little to do with what will happen in the future. where probes for support and resistance are the norm. and so on—these are oversold readings. news and price have very little in common. .” It’s not magic. most of the time. Complacency in a market means that both buyers and sellers are happy with the current price.. Why is this? For a market to move. That just doesn’t work in today’s markets. so the markets can be taken down to shake out the weak hands. it’s just math. CHATWITHTRADERS. or suck them in short. The key to navigating these waters is to sit back and realize. this means you don’t know what is going to happen next. then there is nothing to fear. And if you don’t know what is going to happen next.com/69 Website: simplertrading.COM 51 The markets’ job is. And if anything can happen. and then spit them out. Set your risk parameters and stay on the path of least resistance.com Twitter: @johnfcarter . to get people on the wrong side of the trade. anything can happen. in essence. MORE ABOUT JOHN CARTER Interviews: chatwithtraders. Suck them in long. . The majority of traders don’t have a system.COM 5 Jerry Robinson Swing trader · Investor · Economist · Best-selling author · Founder of FTM Daily @FTMdaily What’s the reason why most traders never succeed? No system. and the lifestyle that trading affords.000 each day using options. when IBM or Walmart moved 10¢20¢ he would make a lot of money with very low risk. it left this lasting impression on me. with his wife. computers and everything we have access to.CHATWITHTRADERS. Although I’ve got to admit. He would trade during the first few hours each morning and close his computer by midday – he was done. With the Internet the way it is now. he had a yacht which he lived on for 5-6 months out of the year. ‘You’ve got to be kidding. . Because he had a lot of money. Because at the time I was working a slob-job where I wasn’t happy and I’d think. I have to make my life something like this’. They’re attracted by the amount of money they can make. He would trade companies like Walmart and IBM.000-$2. ‘Man. you really can trade from almost anywhere. I saw what he was doing I was like. this is fantastic’. the lifestyle is very good when you succeed as a trader – you have the ability to work from anywhere in the world. In fact this might be the most motivating thing that drove me to become a trader… I met this older guy (who was probably in his late sixties). I’ll tell you a personal story about one of the very first traders I met. and he would make $1. they’re certainly more slippery than we are (that’s a cultural way of saying it. many times. When you lose money you required to get lick your wounds and keep going. they know exactly who we are. Trading is really sweet in that respect. I was incredibly frustrated and I almost threw as a trader. you have to continue. if you don’t have a system that’s not my recommendation to you. trading is a dirty game). do not give up if bridge and set you really want this. So “Many times. not to . But often new traders see this and they caught up by it. they forget that in order to get there they have to have a plan.COM 6 You can do it from a yacht (out in the middle of the ocean). It vision of what was the worst time in my trading career. or from home in your pyjamas. When we type in an order for 100 shares of a particular stock. If you really want to succeed. in the towel. Now I will say this. Or if they aren’t smarter than us.CHATWITHTRADERS. because you’ll continue losing money. They see guys like you and me coming a mile away.” JERRY ROBINSON over. the guys on Wall Street are smarter than you. So that’s why it’s important for traders to have a system. people are excited by the dream and vision of what people are life could be as a trader. And I think back on this time – what if I had done but they don’t that?! build the This is one of the things that I tell new traders. I could not make money life could be to save my life. and they know how to shake us out and take our money. Here’s the thing you must remember. but they don’t build the bridge and set excited by the forth the hard work that’s required to get there. if you really forth the hard want to have that lifestyle that you have in your mind then you work that’s cannot give up. me and everybody that we know put together. dream and I went through a period where I lost money for an entire year. but if you stop trading then it’s there. it doesn’t work that way.COM 7 give up. Aaron’s take: • To survive and excel as a trader. You have got to have a system of your own. This is how to find out what works for you. Behind every truly successful trader are many years of hard work and grit. many of them are thousands of dollars – I’ve never done any of those yet I still succeeded. Sit down. but I do. Look at them and become intimately familiar with the tools of your trade.CHATWITHTRADERS. But most of all. No. and to understand that you can’t do this without gaining some knowledge and experience. Now there’s a lot of seminars and coaching programs out there. realize that it’s going to take time. so pay me and I’ll tell you’. Without this. What is necessary is a genuine drive to succeed and the perseverance to push through times when you feel like throwing in the towel. looked at strategies used by other traders. I read through many trading books. Unfortunately there’s a lot of TV infomercials and websites out there that make it sound like ‘anybody can make a million dollars overnight by trading this one stock that you don’t know about. you’ll only ever be as great as your last guess. Instead. take the charts that you trade. . if you want to do this long term. print them out and draw on them. you must have a set of rules or parameters (a system) that you can stick to. and started experimenting with some of them. • High priced trading education is not absolutely necessary. Regardless of how good you are as a trader. You also need strict discipline to follow a trading plan. As Victor Niederhoffer found out. So if it’s too costly for you to be wrong once. then you will blow up at some point. if you don’t have the discipline to maintain correct position sizing.CHATWITHTRADERS. he blew up several times due to poor risk management. the other reason why a majority of traders fail. which means they’re also likely to blow up. Besides poor risk management and a lack of discipline. Many trading legends were successful because they had the ability to react to what was happening (going all the way back to Jesse Livermore. even though he was an amazing trader who had some of the best returns ever. you’re not going to make it. then generally only time separates them from success. If somebody decides they’re going to be a winning trader and they’re not going to stop until they are. you will eventually blow up. There’s also perseverance. Without the discipline to follow your plan. Where as some traders focus on predicting (instead of reacting) and believe they cannot be wrong. and Nicholas Darvas).COM 8 Steve Burns Options trader · Author of New Trader. and continue taking entries and exits as specified in your plan. is due to their inability to react. Rich Trader · Founder of New Trader U @SJosephBurns What’s the reason why most traders never succeed? Risk management is a universal principle amongst the traders who have ‘made it’ over a long period of time. and you put your entire account at risk enough times. it becomes worthless. . This goes to show that if you cannot manage risk. Get to the root of the problem and figure out what’s gone wrong before you continue. Peter Zhang Major in Quant Finance · Partner at Sang Lucci · CEO of Flammarion Capital Partners @PZ_SL What’s the reason why most traders never succeed? Unfortunately. The market will still be there when you’re ready. Trade positions relevant to your account size. I’ve seen these traders go down the spiral of. that’s fine. Teach a man to fish and you feed him for a lifetime. and many times. or looking for services that give them picks. They’re either looking for fish*.COM 9 Aaron’s take: • Without a sound understanding of how to manage risk. • When you lack the discipline to follow your trading plan. they get addicted to a couple good trades even though they’re losing money over time. stop ... many aspiring traders are looking to get rich quick. No one trade (or series of trades) should have the potential to take you out of the game. ‘I just need a better * Give a man a fish and you feed him for a day. .CHATWITHTRADERS. If this means sitting on the sideline for a few weeks or a few months.you’re moving into dangerous territory. you will eventually run your account into the ground. they’re just scratch (floating around breakeven). They can’t think in terms of. because they’re not even really trading – they are just piggy backing on others. So maybe I should just buy 2. they may open a prop account. is because they don’t have the right stomach tolerance. because that’s how I’m going to make greater amounts of money’. they don’t learn real stomach tolerance. Instead of owning up to the fact that they don’t know how to trade. They never even get to the point where they can adjust their own psychology. So they always get stuck ordering position lots of 200/500/1. they continue following everybody’s picks. as a hand trader they’re not what we call ‘linearly scalable’. I can make a couple hundred dollars or breakeven. Another issue for traders in this category is. Therefore. I feel like that’s a large majority.000 shares at this breakout right now. where they just continue to find more and more service providers. and they learn some of the best practices. They haven’t come to terms with the reason why they’re making mistakes.COM 10 service provider’. They’re stuck on a vicious cycle (like a gambling addict). unfortunately.CHATWITHTRADERS. and they cannot come to grips with the fact they don’t know how to trade. They need to learn the art of . Which may indicate they’d be better off as a maker in the market versus a taker – meaning they don’t cross the spread. ‘If I buy 1. Then there are those who are really trying to trade. they continue to dump money into them. seek out a good education. and that’ll actually turn them onto profitable trading. because their emotional tolerance and stomach tolerance doesn’t scale this way. the difficulty for these traders is they may not be losing money. But a lot of times.000 shares.000 shares. It’s really hard for for traders traders to come to terms with the fact that it’s actually their own to come to ego which prevents them from being successful. I like when the markets are choppy.these are more professional hand trader ways of looking at the market. and therefore I’m going to make sure I trade “It’s really hard 50% less than I usually trade this afternoon”. I’m a premium seller. Although it’s tougher to quantify. the deeper problem is right there within themselves and their inability to project properly onto the markets. I know I hate breakouts. and letting trades breathe a little more . and they don’t look in the right areas. as well as learning more about themselves.COM 11 working an order into a trade. what your behavior is like prevents them – and learn how to use this to your best ability. Unfortunately traders in the first year (or even two years) are generally looking for those hot picks. actually their It’s important to understand your own psychology.CHATWITHTRADERS. what your lifestyle is like. and they don’t ever get to the point where they can actually try to do a little bit of . Therefore I know when I should be PETER ZHANG increasing my exposure and playing a little more aggressively – if it’s my type of market. So if it’s a breakout market successful. And many times terms with the fact that it’s they’re taking trades while trying to match their ego with the next best trader. It will require them to learn a little more. this is often an area where they can scale up their trading to go from breakeven to profitable. who you are own ego which as a person.” I’m actually going to scale back. from being Personally. It’s just unfortunate a lot of traders are not in the camp of learning how to fish. So most of the time. “I did not have a good morning. They’re not able to look back and say. and trade advanced methods when you’re ready to level up. save your money and focus on learning how to form your own trade ideas. Aaron’s take: • Blindly following another person’s trades is not the way to develop real trading talent. . over time. It’s very hard to be reflective and that’s one of the unfortunate truths for aspiring young traders (even older traders. market structure affects each and every participant. • Make a conscious effort to increase your stomach tolerance. • An ignorance of market microstructure will occasionally be the cause for unprofitable trading. That’s just the unfortunate nature of the ‘greed’ that is sold out there.CHATWITHTRADERS. Although as you zoom out by timeframe this becomes less likely. Forget alert services. This means you become more comfortable with taking losses.COM 12 reflection. But nevertheless. it’s sometimes harder for older traders who are trying to learn). which will allow you to scale effectively. so it’s beneficial to know what goes on below the surface. Style drift depletes a trader’s energy. .COM 13 Zach Hurwitz Equities trader · Trading coach · Systems developer · Founder of TheVWAP. they’ve got little left to devote to a subject worth mastering (once the trader finally stumbles across a worthwhile strategy). identified what fulfilled both my intellectual curiosity along with my financial needs – I stopped spinning my proverbial wheels and began building sustained progress. time. Early on I explored options and futures subjects. and enthusiasm. too. pattern-based trading).” but found myself drawn back to equities (and more importantly. But they also fall short in terms of focus – rarely will traders master a single subject.CHATWITHTRADERS. confidence leads to consistency. consistency is what we all seek in our own trading.com @ZachHurwitz What’s the reason why most traders never succeed? Many traders fail in the moment because of poor risk management. “Rarely will It’s understandable that traders can’t choose one style easily traders – where do new traders even begin? – and so they often let master a popularity proxy for ‘success’. Sustained progress builds confidence. let alone ever build myriad of ‘common’ approaches. arbitrarily oversizing their trades. After they’ve slugged through a single subject. Once I recognized my strengths – and perhaps more importantly. let alone ever build skill in many subjects. skill in many I’m guilty of this. Although once they get into it. Then you have people who get into trading.COM 14 Aaron’s take: • Many traders fail to ever master a single strategy. they quickly realize it’s not easy – in fact it’s extremely difficult and they generally give up. and that’s why the majority never reach a high level of success. they never learn the full process of how to develop mastery with anything they attempt. Once you identify an approach that resonates with you. Therefore.CHATWITHTRADERS. if you listen to what many educators are saying. So I believe that many traders give up too soon. this is going to be so easy’. Continually changing strategies is an energy drain and a time suck. drive it into the ground with investigation. . “Trading is so easy.” and they really ram it down your throat. Adam Ryan Futures trader · Founder of Optic Trader @OpticTrading What’s the reason why most traders never succeed? A lot of aspiring traders give up too soon. thinking ‘wow. look how I made a thousand dollars with just 30 minutes of work. Part of the problem is. because they don’t realize how difficult it’s going to be to succeed. If you do not perform today and get a few kills. it’s also not impossible. Lance Beggs Full-time futures trader · Part-time trading educator · Founder of Your Trading Coach @LanceBeggs What’s the reason why most traders never succeed? There are many reasons… The first one is their relationship with loss.. But in this game you eat what you kill. learn from your mistakes. Plain and simple. But on the same note.COM 15 Aaron’s take: • Have an awareness of marketing hype – trading is not easy. That is something that traders often don’t understand. and you need to learn how to manage them. So be prepared for challenges. and one day you quite possibly will pocket a thousand dollars with 30 minutes of work.. you do not eat. . you make no money. You need to accept that losses are just part of the game. so you need to expect losses.CHATWITHTRADERS. and you can’t understand until you’ve got experience – so it takes time. Trading is a performance activity in an environment of uncertainty. People come from different backgrounds and jobs where income is pretty secure. Just don’t expect that day to come next week. persevere. They’re looking for the quick buck systems and not treating it as a process of skill development. in the study of about deliberate practice and effective methods of growth and development. hit the charts and study this game. And this is why many get stuck in the systems mindset.CHATWITHTRADERS. “Traders aren’t Essentially. All the answers. Aaron’s take: • Losing trades are unavoidable. is to sell systems. they approach trading as a systems game. they don’t have a proper process for growth and development. it would be worthwhile reading the game. I believe. They aren’t building building ‘deep domain knowledge’. ‘deep domain knowledge’. instead immersing of one as a process of growth and development. traders aren’t immersing themselves they aren’t in the game. No trader has ever achieved . Many are looking at this game from a systems perspective. everything you need is there in the charts.” LANCE BEGGS you’ve got to hit the books. Unfortunately there are no shortcuts.COM 16 Additionally. price action. For those themselves in with the wrong perspective. yet that’s where I was during my earlier years as a trader. That’s probably the main reason. By looking for this shortcut. I make fun of it. The easiest way to make a million bucks trading. and that’s why there’s a whole industry geared around this. but there are many more traps around – this is not an easy game. To summarize. get in there and study them. and failed traders showing their systems. many traders simply aren’t using the right process for learning. There are countless forums filled with mediocre advice. and the study of price action. the majority of professional traders are wrong more often than they’re right. they fantasize. They literally just fly by the seat of their pants. In fact. They pretty much just wing it… They get into a position and they don’t know where their stop is. • Shortcuts do not exist. they don’t know what they’ll do if the market gaps up and then sells off. They hope.CHATWITHTRADERS. and they want things to go their way. they don’t know if it’s a short term trade or a long term trade. they dream. because . This is where effective risk management comes into play. Jason Leavitt Swing trader · Position trader · Founder of Leavitt Brothers @JasonLeavitt What’s the reason why most traders never succeed? First of all. but they don’t have a plan.COM 17 a 100% win rate. The answers to your trading success do not rest within someone else’s neatly packaged system. The greatest way to reduce your initial learning curve is with some old-fashioned study of price action. nor do they need to. the traders that don’t succeed don’t have a plan. They don’t know what they’ll do if the market goes up. they don’t know what they’ll do if the market gaps up. They just don’t. they don’t know if they’re going to scale out. they don’t know if they’re going to add a new position if it breaks out and then pulls back. And traders have to do the same thing. Even though 90% of the plan will never matter. and practicing certain plays based on the type of defense that the opposing team is likely to play. and perhaps they’ll slap a new technical indicator on their charts also. at least they’ll contemplate. Now instead of playing breakouts. They constantly jump from one strategy to the next. ‘What will I do if the market does this. they’re buying pullbacks. obviously most of them are never going to happen. So they’re constantly shifting from one style of trading to the next. “What’s my plan for today? What am I going to do if this happens? What am I going to do if that happens?” Play devil’s advocate – that’s what they need to do. you have to . to the next. Another thing aspiring traders often do is ‘style drift’.CHATWITHTRADERS. Then they actually workout and practice many different plays in order to capitalize on this. but going through the motion of outlining a plan is an extremely helpful exercise. can you imagine if they showed up and didn’t have a game plan – that would never happen! They spend an entire week looking at game films. Because in order to zero in on what works for you. then a month later they see something on a message board and get tempted to trade Fibonacci retracements. they have to have a detailed plan. it is necessary when you first start out. One day they’re swing trading stocks and playing chart patterns. but they don’t.’ and. Although in saying this. ‘what will I do if the market does that?’ If they have ten of these different scenarios that they’ve thought out. All traders need to sit down and say.COM 18 they don’t actually have a plan. Think about a football team. a taking a loss” perfectly normal loss turns into a huge loss.CHATWITHTRADERS. but they’re goes against afraid of taking a loss. It wasn’t a problem when I first started. “Well if it can just go back up to where it was two days ago. there is no end to the amount of information you can get. then I’ll get out with a small loss. they can easily find support for that opinion. they should get out. Now.COM 19 experiment with several different styles.e. and services (i. This creates a major problem. just to recap. you have to stick with it. but they’re negotiate with the market. and avoid the temptation to go elsewhere. • They don’t know how to zero in on one thing. When they get into a a position that position that goes against them. .” but it doesn’t go afraid of back up. blogs. I’ll get out at breakeven. And no matter what a trader wants to do. Before they know it. it keeps moving against them. or what their opinion is. They say. “If it can just go back up. they don’t take a loss. these are the main points of failure: • They don’t have a plan. so instead of exiting they bargain and them. But once you do zero in on what works. and they’re constantly changing their strategy.” and then it goes against them even more. Next they say. Twitter and StockTwits). Even though TV is less prevalent now that it was back then. Not only do they suffer because of the money that they JASON LEAVITT lost. but it is right now. but also their confidence is shot. with all the websites. “They get into In addition to this. their emotions are shot and it spirals from there… One other problem that many traders have right now is ‘information overload’. So ‘style drift’ can be a big issue when new traders are starting out. they should get out. Many people don’t understand their personality flaws from everyday life also . • Make a deal with yourself that you will never let a small loss turn into a big loss. • They don’t ignore the excessive amount of information that’s out there. outlining exactly what you will do in different scenarios. Aaron’s take: • Refer to Jason’s summary above – he nailed it! John Welsh Biotech trader · Fundamental analyst @JohnWelshTrades What’s the reason why most traders never succeed? It all goes back to the mental aspects of trading. So if you flip this around and you want to know how to become successful: • Have a detailed plan. • Hone in on something that works for you.COM 20 • They don’t take a loss. • Try to ignore a majority of the information that’s out there. because most of it’s noise.CHATWITHTRADERS. that doesn’t necessarily mean the group is right. It’s about having self-awareness. They’re not doing the research and homework themselves. somebody needs to teach you how to fish. because they are too busy following ‘the group’. Aaron’s take: • Traits of your personality will often reflect in your style of trading. In order to learn you need to be able to study why somebody is buying. it’s important to realize that just because the group is thinking one way. and needing conformation from other people. needing support. and the ability to control both your positive and negative characteristics. if you want to learn how to fish. because they’re getting confirmation from other people. no questions asked – and those people are truthfully not making any money. if you’re involved with a group (or a chat room). the most profitable (and popular) products around are alert services. when a group trade goes wrong and a trader loses money. i.COM 21 apply to trading. • Build the confidence and skill necessary to formulate and . instead of following blindly just because they made a good call two months ago. That’s why a lot of traders fail. Often what happens mentally. What this tells you is most traders just want to know what to buy.e. and others may have the opposite effect. If you look online. So that’s why I believe the majority of traders fail. Some of these traits will help to you form quality trading practises. You know. being insecure. But it doesn’t work that way. not being humble. they then try to chase the loss and make the money back.CHATWITHTRADERS. Therefore. They’re not taking the time to study and understand how to manage risk. Stuart McPhee Equities + FX trader · Author of Trading In A Nutshell @StuartMcPhee What’s the reason why most traders never succeed? Many traders aren’t taking the time to do everything that needs to be done. Markets move money from the hands of many. Leave your ego at the door. validate rules and test them. They’re also not taking the time to develop a plan. in order to trade successfully. as well as prove and disprove different strategies. to the hands of a few. most market participants do lose money.COM 22 execute your own trade ideas. Additionally they’re not taking the time to become methodical in their process. just remember. This means they’re not treating it as professionally as they . and don’t worry about trying to prove a point. there is absolutely no reason to make it back from that same stock. While it’s often hard to go against the grain.CHATWITHTRADERS. structured and organized as a trader. They’re not taking the time to become more disciplined as a person. You are not required to have the same views as the majority. and as a trader. • Revenge trading – forget it! If you happen to lose money in a particular stock. trading is a hobby and not a profession. but trading demands more of my time and respect. trading as a but at the end of the day it costs them money. because they do not invest the time to help themselves breakthrough. I don’t make one cent from playing golf. and I’m going to say the word again ‘time’ – not investing the time.COM 23 should. In fact it costs me money.” I’m a huge fan of this quote from Tim Walker. Amateurs will forever struggle. requires an immense dedication of time. Golf for me is a hobby. So to many. and I’m not a professional – I still love playing golf.” STUART MCPHEE the next step of becoming professional. • “There is no room for amateurs in the game of life.CHATWITHTRADERS. They don’t take hobby. If you’d like a detailed explanation . BUT it’s a hobby. they’re happy to do it. In this sense. But I am not a professional golfer. While I don’t make any money playing golf. and I feel as though it neatly summarizes Stuart’s point. “Too many And from what I see. trading is no different to any other area of life where your goal is to ultimately become a pro. which is one of the reasons why I don’t like looking at a screen for ten hours a day. traders treat They enjoy it. Aaron’s take: • To be a great trader. Here’s a great analogy I use… I play a lot of golf. they spend time doing it. too many traders treat trading as a hobby. and my membership fees cost a lot of money. I recently bought a set of clubs that cost a lot of money. CHATWITHTRADERS. Or just going into trading for the wrong reasons. I could just leave it there. When most people go into trading. Aaron’s take: • Setting realistic expectations for yourself as you become a trader can make a world of difference to your mindset (and ... I suggest listening to Tim’s interview on episode 006 of the Chat With Traders podcast. or even what their ultimate success will look like. But I think the number one reason most traders fail is due to false expectations. They go into this expecting something other than what they’re going to get. Adam Grimes Diversified trader · Systems developer · Author of The Art & Science of Technical Analysis @AdamHGrimes What’s the reason why most traders never succeed? False expectations. they don’t understand what success looks like. not doing the work. even if they are very successful. They don’t understand what success looks like along the way as they overcome obstacles. There are a lot of other reasons that cause traders to fail like being undercapitalized.COM 24 of this quote. Attempting to trade an approach that doesn’t feel right. Specifically.COM 25 results) along the way. But. Mike Bellafiore Prop trader · Co-founder of SMB Capital · Author of The Playbook + One Good Trade @MikeBellafiore What’s the reason why most traders never succeed? It really depends on what type of trading that you’re doing. it’s likely you’ll feel like a constant underachiever. Many new traders choose a type of trading. also be mindful not set the bar too low. is like trying to force a square peg in a round hole – it doesn’t work. if you don’t think fast. as it’s healthy to push yourself. a product.CHATWITHTRADERS. By setting the bar artificially high. Aaron’s take: • Develop an approach that meshes with your own personality type. you may be better off as a global macro trader. Instead. . then you’re not going to become a really good active trader. or a timeframe that doesn’t best fit their personality and their thinking talent. you realize. that has nothing to do with trading…” But of course it does. since you’re more prone to succumbing to biases. I just don’t prepared to want to dig that deep. experience or drawdown ever again. So it’s a matter of being prepared to dig deep. I still remember looking at my father’s TV. “You know.” to have to look into my psychology. of being but some people are just going to say. there is so much opportunity’. we come to the market with rosecolored glasses. and usually with larger positions. Just like multiple systems can diversify one’s strategy (by removing a single point of failure).COM 26 David Bush Quant trader · Systems developer · 1st Place winner of BattleFin @Alphatative What’s the reason why most traders never succeed? While I certainly speak for myself on this topic. “It’s a matter So your lenses constantly change while you develop as a trader. this risk part is pretty important. I imagine many other traders are like this also. ‘Wow. it’s too challenging. and examine my own belief system? Come on.CHATWITHTRADERS. and who think differently . it has everything to do with trading. You mean I’m going dig deep. But once you get thrown down a staircase or two and you’re hurting. seeing the ticker tape and this is probably 21 years ago now. I like to surround myself with people who are brighter than me. So I certainly went into the market thinking. Especially as a discretionary trader. that was not fun. and you don’t want to live through that kind of trade. CHATWITHTRADERS. Understand it can be rough in the early stages. The ones who go on to become great traders embrace the fact they don’t know everything. However. and to me. To succeed as a trader. Especially as a quantitative trader. I’d say ‘digging deep’ – that’s what is required. more knowledge. But some traders are going to leave it at a certain level and aren’t willing to push on to get to where they could be. and what they already know – these are the ones who will never reach their full potential. But I feel like this is more than some people are up for.COM 27 than me. and it can be rough later on too. Aaron’s take: • The life of a trader is one of constant growth and betterment. There are going to be bad periods for any approach or strategy. So if I can condense this down to two words. because you should know your risk parameters and the size of a normal drawdown etc. . they push their comfort zone and they’re prepared to ‘dig deep’. they become comfortable with who they are. you need to overcome a lot of biases and be able to take a hard look into the mirror. although as you develop you’ll be better prepared for these times. This way I’m exposed to more ideas. that’s probably the number one reason most traders fail. and more perspectives. so I’m constantly exposing myself to new ways of thinking. some will reach a point where they plateau. less is more – so you have to concentrate on one specific setup. The best part is there are many working setups that are shared for free in the public domain. and many great books that you can buy for a small cost. I believe that if you learn one great setup.COM 28 Ivaylo Ivanhoff Swing trader · Position trader · Co-founder of Social Leverage 50 @Ivanhoff What’s the reason why most traders never succeed? In the beginning most traders don’t have an edge. But in the beginning. So they constantly jump from one thing to another. and they never become masters of one particular setup. This way you can take a working setup from another trader that you know is already profitable. And even when they do find a setup with an edge.CHATWITHTRADERS. most don’t concentrate enough efforts on learning everything about that set up to make it profitable for them. Over time you’ll be able to start adding new setups. or based on your own study of past winners. but if they don’t see results within a few weeks they’ll move on to something else. which you can then tinker to fit your own lifestyle. Most traders will try to trade a particular setup. because there will be times when you need to sit on the sideline and do nothing (your setup won’t have an edge in certain market conditions). and trade it for the first couple years you will become successful. Of course you still have to know when to trade this setup. . everyone goes through tough times and dark days. With most setups there will be certain market conditions where your expectancy to profit decreases. . is you will begin to pick up on which market conditions deliver greater results. Because as a trader. The added benefit of becoming intimately familiar with a single setup. The second thing is to learn that when you understand something. reason being.CHATWITHTRADERS. • The point from Ivan’s response which I’d like to highlight. And when you’re not trading well. it causes many novice traders to become stagnant. is the importance of understanding when your setup has an edge. you need to trade it larger. Brad Jelinek Prop trader · Futures markets @JelinBra What’s the reason why most traders never succeed? The first thing you must have is that desire and fight inside of you – you have to really want to do this. But it’s that knowingness and willingness to do anything it takes that keeps you moving forward.COM 29 Aaron’s take: • By now you should be noticing the theme of ‘style drift’ is prevalent throughout this guide. You can’t defeat someone who keeps getting up after every setback. traders enter the market with a lot of confidence because they are often smart. you’ll be unstoppable. So if you cannot uphold a high-level of commitment. if you have a lionheart and an undeniable passion for what you do. or they may be more intelligent .CHATWITHTRADERS. but in reality. reduce your position sizes.COM 30 you need to cut down your size (drastically sometimes) and be prepared to exit positions quickly. in addition to the desire to succeed. and there will be moments when you’re pushed to the verge of breaking point. you will crumble when the going gets tough. One may be inclined to do the opposite as a way to reaccumulate losses quicker. • When you hit a rough patch. If you can do this you’ll stay alive – and if you’re alive. you’ll be able to figure out a way to get back to trading normal size again in the future. this is how things escalate from bad to worse – fast. Andrew Falde Options trader · Systems trader · Educator at SMBu @AndrewFalde What’s the reason why most traders never succeed? One reason is. On the other hand. So it’s about managing yourself this way. Aaron’s take: • Trading will test you. And quickly their those who are attracted to the markets. “Okay. “I have what it takes. try harder. because most of my friends aren’t even interested.. So they look at trading and say. They approach it the same way they approach anything else in their life… Lets use sports as an example. you practice harder. Lets say they call the top in . Or in business. cut your prices and make decisions that allow you to control how you’re going to achieve greater profits.” They also say.COM 31 than a lot of their peers. I am ANDREW FALDE going to will this system to work. I have a good head on my shoulders. meaning they lose money. “They have So in many areas of life. This is the approach they bring to the market. I am going to will this trade to work. most people fail at this however I am generally smarter. you can work longer hours. no place in the But when it comes to trading. they have to learn very quickly their markets. and when I try to understand something I do well.” I have seen very successful businessmen and investors that come to trading. if you’re losing. “I’m going to hang on to this trade until I am right.. and they receive negative feedback from the market. and the worst thing that could happen is they get rewarded for it a few times.CHATWITHTRADERS. I know I am going to be right”.” willpower has no place in the markets. learn more and through sheer effort you’re going to improve and achieve better results. Using their willpower they say. But I’m well suited for success. have often experienced willpower has this in one way or another. So if they were to try they would probably fail. because I have other success in my life. and you’ll be rewarded with positive results. family or friends. I’m also passionate about this. willpower will lead you to overcome the to learn very issue at hand. to know when you’re wrong. As soon as you’re wrong. but the market doesn’t play by the same rules. yet they say. Using options I can take other approaches to defend myself. this time with a little more size.COM 32 something that’s highflying or up big for the day. because I still get to hang on to my idea. I’m going to short this thing. “Oh. I don’t always have to close the position. and it drops right away. Then it happens a second time and they do it again. Yet the whole time they’re just trying to will it and figure out why it should go down. . then you need to do something about it. that’s great. and you get to a point that has exceeded your expectation of what should happen. the whole market goes up 6%. their stocks go up 11%. So that’s why I believe most traders never make it – they bring success from other areas of their life and try to apply it to the market. This is one of the reasons I love to trade options. why it’s got to work out.” But prices take off. And through sheer willpower they think it’s going to work out for them. by bringing in a different trade that can enhance the position. and why they’re right. I know it works. and understand there’s nobody who can be right 100% of the time. Then all of a sudden the December rally comes and the market breaks out. I’ve been conditioned. without closing the original one. they’ll say. I should’ve taken a bigger size”. For my psychology that works great. But they don’t even realize that the whole market was consolidating so every pop was faded.CHATWITHTRADERS. “Oh well. Instead the mentality that works is. You can start out as a day trader right from day one. these two factors often attribute to new traders being overly confident. • The worst thing that can happen to you. And that’s why traders get impatient with the market. there’s no barrier to getting involved. you’re trading without a plan and every decision is based off of a gut feeling. because this means you’ll be more inclined to do it again. Truth be told. and . Know where you’re getting out before you get in. which commands respect.COM 33 Aaron’s take: • Being ‘smarter’ than the average person isn’t a prerequisite for profitable trading. when you most probably shouldn’t. The market is a beast of it’s own. what their personality is best suited to. Then before you know it.CHATWITHTRADERS. • Having the stubbornness and willpower to hold on to a losing trade is a sure-fire way to damage your account. is you profit from breaking your rules. Because they don’t find out who they are. and neither is success in other areas of your life. Brian Shannon Swing trader · Author of TA Using Multiple Timeframes · Founder of AlphaTrends @AlphaTrends What’s the reason why most traders never succeed? Besides the fact you have to have capital to start. only to be humbled by the almighty force of the market. ” their ego gets in the way and says. timeframe. Aaron’s take: • Slow down. “no. they begin pulling up news. “Often their Often their downfall is a combination of impatience and ego. downfall is a When they get into a trade and see the price moving against combination them.” All along. not understanding their appropriate timeframe and being impatient. They want to get involved in the market right away.CHATWITHTRADERS.COM 34 what their appropriate timeframe in the market is. Trading success first comes from having a solid understanding of yourself. it’s extremely difficult. not learning the mechanics of how the market actually trades. It’s only after they get seriously hurt. Also. and they see it as an opportunity to make easy money. “I’m BRIAN SHANNON going to cut my loss here.” their ego does not allow them to take a quick loser when they should. just buy a little more. without taking the time to investigate which approach. they’re compounding their problems. When in fact. looking for other opinions and of impatience and ego. it’s definitely going to bounce. Even though they went into the trade with a plan and said. do they stand . until after they’ve made too many big mistakes. Many people come to trading and want to dive in right away. and not understanding the psychology of money flow before they start the sizing up positions. and market may be suitable for them. So the reason why the majority fail comes down to. prepare. or greater. so they just give up. While I agree it’s not easy to beat the market. and often people are deterred by a really bad experience along the way.COM 35 back and look at what went wrong – which was essentially a lack of preparation. • Ignoring the psychological reasons that motivate buyers and sellers at certain levels. Howard Lindzon Trader · Investor · Hedge fund manager · Angel investor · Co-founder of StockTwits @HowardLindzon What’s the reason why most traders never succeed? They don’t have the right mentorship. or they caught during the years of a bear market.CHATWITHTRADERS. Learning to trade and invest is a long process. By understanding markets on a deeper level (beyond price) you’ll be able to better anticipate future movements. I don’t think ‘beating the market’ should even be in your vocabulary – it should be about ‘destroying the market’! If you’re going to trade. why would you do this to earn 12% a year when the S&P is 9% a year? I do this because I want to have years of 80-100% returns. But most people give up because they can’t find a mentor. Also the media drums into people that you cannot beat the market. . may lead to unnecessary losses. Plus this is not for everybody. everyone now has some degree of access to successful traders. This type of media and started wasn’t as easily accessible in 1990 when I started.” Then I say.” Aaron’s take: • Many traders give up because they struggle to find the mentorship that’s required. But if you’re willing to ride them out. . and started for the wrong reasons – that’s the main problem.COM 36 So most traders give up because they have the wrong expectations. But when a trader says. the same thing… I would say to anybody. I think I can make 80% a year. which you can learn from.CHATWITHTRADERS. or try a few financial reasons. if you refuse to take advantage of this – then it’s wasted. and begin forming relationships with those who can help you improve. Most of the time you can solve these problems now that you have podcasts etc. “Expect to lose and have years when you are down 40%. “You know. However. but now there for the wrong is no excuse not to dig into a few podcasts. And expectation wise.” HOWARD LINDZON sites and see if you can find a mentor through these channels. So put yourself out there. But with the advances in technology and the Internet opening windows of opportunity. with people telling you the truth about their expectations. well they should dollar cost average in a low cost ETF. “What is your expectation?” If they just want to earn more than cash. then you should get in. But “Most traders give up because they have the wrong they also give up due to having the wrong framework for getting started. own experiences. start learning and find a strategy that fits your risk profile. . Whereas I don’t have a problem with being wrong on a trade. They oversize their positions. they trade too much. This is particularly true in futures trade – that’s and forex. Where as this is not the case in futures and forex.” soon run out of buying power.COM 37 • Having clear expectations about what you aim to achieve from participating in the markets. my default because you’re reined in based on what your capital is.CHATWITHTRADERS. I approach money management differently. because they’re worried about being wrong. seldom do I have more than 15% of my capital committed to margin. but even still. and they’re too aggressive. Not so much in stocks with a cash or margin account. I see so many traders who are afraid to put on a position. is they trade too big. And because of this. In fact. trying to build up a position that’s larger than their account can support. I naturally assume that I will be wrong on a trade – that’s my default position.. Peter Brandt Legendary trader · Classical chartist · Author: Diary of a Professional Commodity Trader @PeterLBrandt What’s the reason why most traders never succeed? They are afraid to lose – that’s the number one reason.. will help you to build the necessary framework to get there. and you position... “I naturally assume that I will be wrong on a The second reason. Maybe you’re trading too large. So I believe a mistake that many aspiring futures traders make. is trading way too large.000. and you must treat it with caution. If you have a fear of pulling the trigger because you want to avoid being wrong. I think I’ll buy 10 contracts. Like I mentioned at the very beginning.000 in my account.” Well. the margin on one contract of beans is $3. I buy one contract of beans for every $100. they’re shocked at how small I trade.000 in my account.. “My goodness.. Leverage is a double edged sword. • Just because there is an insane amount of leverage being offered to you..000 and I have $30. While I know this topic may be considered as somewhat of a buzzkill. . doesn’t mean you should take it. novice traders come into the futures markets and they say.000.CHATWITHTRADERS. these are the pitfalls that more traders need to be made aware of.. if they wish to succeed. When I tell them this. then there’s likely an underlying issue. or 10 per $1.COM 38 The problem is. you’ll need to get accustomed with the fact that you are often wrong. I believe there are huge benefits to understanding WHY most traders never succeed. having now completed the guide you must admit. Aaron’s take: • As a trader. And this brings us to the close. If you have any questions.com. The ultimate goal of creating this guide was to help you become more self-aware of your own trading habits. I hope it serves you well. Now go out there and crush it! Aaron Fifield Chat With Traders . and to serve as a valuable resource that you can easily reflect on from time to time. and taking another step forward to improve your trading.COM 39 For that reason. I congratulate you on making it all the way through.CHATWITHTRADERS. or tweet me at @chatwithtraders. comments or queries I encourage you to email me at aaron@chatwithtraders. com/ep-019-stuart-mcphee Adam Grimes: chatwithtraders.com/ep-018-john-welsh Stuart McPhee: chatwithtraders.com/ep-021-adam-grimes Mike Bellafiore: chatwithtraders.com/ep-013-lance-beggs Jason Leavitt: chatwithtraders.com/ep-012-adam-ryan Lance Beggs: chatwithtraders.Listen to the full interviews Jerry Robinson: chatwithtraders.com/ep-001-jerry-robinson Steve Burns: chatwithtraders.com/ep-022-mike-bellafiore .com/ep-009-peter-zhang Zach Hurwitz: chatwithtraders.com/ep-017-jason-leavitt John Welsh: chatwithtraders.com/ep-005-steve-burns Peter Zhang: chatwithtraders.com/ep-011-zach-hurwitz Adam Ryan: chatwithtraders. com/ep-035-howard-lindzon Peter Brandt: chatwithtraders. .com/ep-023-david-bush Ivaylo Ivanhoff: chatwithtraders.com/ep-036-peter-brandt ..com/ep-029-brian-shannon Howard Lindzon: chatwithtraders. Plus.com..com/ep-028-andrew-falde Brian Shannon: chatwithtraders. more trader interviews are available online at chatwithtraders.David Bush: chatwithtraders.com/ep-024-ivanhoff Brad Jelinek: chatwithtraders.com/ep-026-brad-jelinek Andrew Falde: chatwithtraders. . CHATWITHTRADERS.COM 3 Contents Foreword pg 04 Why You Need a Mentor pg 06 When Am I Ready For a Mentor pg 08 Who Will Mentor You pg 10 What Should A Mentor Teach You pg 15 How To Get Maximum Benefit From Mentoring pg 16 Final Words pg 18 . and I like that you’re thinking this way. without going on to write 3000 words like I have here.COM Foreword As I read through my emails each week. that the purpose of writing this guide is not to give you a rigid step-by-step process for how to get a trading mentor. I would like you to keep this in mind as we continue. nor does it refer to one person who should do or act in a certain way. As far as I’m aware. And to give you some ideas 4 . So what is it? Well. I imagine this is the question you’ve been asking yourself also. the question I’m referring to goes something along the lines of… “How do I get a trading mentor?” Like I said. So let me explain… When I use the word “mentor”. Mentoring is organic. The real purpose of writing this guide is to give you a ‘loose framework’ for how you may be able to find someone who plays a bigger game than you do right now.CHATWITHTRADERS. Seeing as you’re taking the time to read this guide. It’s not something that should be pigeonholed. But you might be surprised to know. it’s a good question. I’m using it as a general term to describe a flexible and often informal relationship that can vary from person to person and field to field. But the only problem is. there’s one question that pops up more than anything else—and it’s a good question. The role of a mentor will serve a different purpose for everyone. such a process does not exist. I feel like an email is not the ideal medium to give the detail response it deserves. and how to set expectations.COM about how you may be able to best approach someone. I would have been stumped for an answer. if you would of hit me with this question about how to get a trading mentor at the end of 2014. But having had the opportunity to speak with many successful traders (many who owe at least a portion of their success to a mentor-like figure). build and maintain a relationship with this person.CHATWITHTRADERS. and it’s only right that I pass this on to you. 5 . To further set the scene. I’ve picked up a thing or two about actively seeking help. it’s pretty steep in the beginning and tapers off over time. these team members may be in the spotlight or behind the scenes. whose on the team? Accountants. and you guessed it—mentors too. Just on a side-note..CHATWITHTRADERS. “There’s no such thing as a self-made millionaire”. So lets break that down. I was almost going to disregard such a bold claim.. A trader who is mentoring you. If you continue to push ahead on your own. One of the great benefits of having a mentor. I once heard someone say.COM Why You Need A Mentor. and can therefore steer you in the right direction when you’re heading off course. it’s important to highlight that the learning curve for a trader never completely ends. At first I was somewhat puzzled by this.. has likely made all the mistakes you can imagine (plus more). you’re potentially going to have a tough time making progress. shift your mindset from thinking of trading as a one-man sport and start thinking about how you’ll build your team.. lawyers. who has years of experience. co-workers. partners. while discussing ‘learning hurdles’. but don’t feel as though there is a final destination 6 . until this person went on to explain why… He described everyone who makes it to the big league as having a support team behind them. If you plan on really making something out of your career as a trader. banks. So that should tell you something. is having the ability to bypass some of the major learning hurdles that stunt the progress of many traders. Yes. Since we’re digging into why you need a mentor. So try to be as clear as possible in your own mind. which is the difference between mentoring and coaching (or education)… It’s my interpretation that a coaching arrangement is more formal.” ROBERT KIYOSAKI . Peter Brandt is a prime example of this. but ultimately it’s up to you to decide why YOU need a mentor. In this section I’ve outlined the overarching reasons why having a mentor is beneficial. which is what we’ll continue to focus on throughout the reaminder of this guide. even after 45+ years of trading and an incredible track record. he still considers himself to be a ‘student of the market’.CHATWITHTRADERS. “Learn from someone who is already where you want to be. structured and often involves monetary payment from the student. Whereas mentoring is typically opposite to this.COM 7 you’ll arrive at where everything is beer and Skittles (as they say). a coach is often called upon to help solve a specific problem over the course of a fixed amount of time. Broadly speaking. about what you want to achieve from your relationship with a mentor. we should address something that’s often confused. CHATWITHTRADERS. In other words. There are two things that immediately strike me as prerequisites you should consider. before attempting to chase down a mentor. until then you’re not worthy of a mentors time. but I’ll keep this brief and straight to the point. You need to experience the pain and frustration of being an entrylevel trader. Knowledge Equally important is how well you understand markets and grasp common trading principals. So. And to take it one step further. These are. you need to continue striving for betterment without being deterred. Reading a book or listening to a podcast about the realities of trading is not the same as having lived it out in real-time. Knowledge-wise you should feel like an intermediate trader. one— experience. here’s why… Experience First. and two—knowledge. and know first-hand how easy it is to get burnt by Mother Market.COM When Am I Ready For A Mentor? There’s much that could be said on this subject. you need to be able to talk the talk… 8 . you’ve got to touch the stove to know it’s hot. even though your account balance may not reflect this (that’s okay). even when you feel like a total loser. (some) real market experience goes without saying. You need to be able to prove to yourself that you can take a few hits without throwing in the towel. There will eventually come a point when you either. you’re essentially asking someone to take time out of their day to expend brain energy on you.COM 9 A mentor is not there to answer generic questions or teach you the absolute basics. staying focused. A potential mentor wants to know that you are serious and committed. and a push in the right direction. Remember. and books are dirt cheap. an ear to listen. “Mentoring is a brain to pick. hit a (genuine) roadblock. so prove that you’re worth it. or the rate at which you’re learning compared to the amount of time and effort you’re putting into your study begins to plateau. and what steps you have taken to get there on your own. CROSBY . Be proactive and educate yourself as much as possible—while of course.” JOHN C. The internet is a beautiful thing. Google is your friend.CHATWITHTRADERS. in trading there are some individuals who are not entirely honest and not exactly who they claim to be..CHATWITHTRADERS. genius person] as a potential mentor. if you’re not already.. as a mentor. but the chances of it happening are slim to none. it would be super badass. If you identify [insert famous. Just something to be mindful of. Identifying a Potential Mentor Obviously a mentor should be someone much more successful and knowledgable than yourself.. Right. lets imagine you’re an up ‘n coming basketball player. so best not to throw caution to the wind. and there’s no doubt you’ll still benefit in a major way. As cheesy as it sounds. Where to Look For a Potential Mentor While a mentor won’t come knocking at your door.. would be a good fit for you. As you’ve probably experienced by now. it’s very possible that you could meet someone willing to mentor you 10 . As an analogy. so who’s it gonna be? It’s wise to spend some quality time thinking about who. being mentored by someone such as a retired minor league coach is much more realistic. this is someone who really could change your life.COM Who Will Mentor You. It’s also important that you use a good judgement of character. Instead. What’s the likelihood of being mentored by Kobe Bryant or Michael Jordan? Yes. incredibly wealthy. but within reason. you’re setting yourself up for disappointment... Another suggestion is to follow the personal blogs of traders who have an approach which resonates with you. Many active traders are constantly sharing insight. even drop them a line via their contact form—start building rapport. you’ll find all sorts of traders knocking about there. Take Twitter for example. and whether or not their style of trading clicks with the way you like to trade. This is a good way (and a quick way) to get a sense of what someone is all about.COM without stepping a foot past your door. and speaking about the positions they’re trading. But Twitter is not the only option. You may also consider getting involved in Facebook groups. and there’s also some really decent traders in the group who regularly offer support too. It’s also totally fine to tweet someone you’ve never met before. 11 . Pro Tip: A helpful and often underused feature of Twitter is the ‘list’ functionality. the internet and social media has opened up unlimited opportunities for us. Here you can interact with other like-minded traders. share and comment on their articles. As traders. giving their take on the market. like the Chat With Traders one which is free to join. or even jump into an existing conversation if you can add value or give another perspective. Read. this is an easy way to categorise and easily monitor who you follow. without being worried about coming off as “creepy” (as you might appear on a platform like Facebook). it’s just one of many. Plus you can see what they’re reading from the links and articles they pass around.CHATWITHTRADERS. start small and see where it goes.com for a painless way of scheduling times. With the power of Skype and other communication apps. drive and enthusiasm (unless they’re intimidated). you must research and absorb all you can find out about the person. we live in a world without borders and technological advances are booming. It’s kind of like asking someone to marry you on the first date! Instead get to know them. This free tool takes all your available times and automatically converts them into your mentors timezone. Okay.COM The main thing is to put yourself out there. It’s not enough to ‘want’ a mentor or even be ‘lucky’ enough to find one. Reaching Out and Forming a Relationship This should be obvious. when reaching out. is asking the person to “be your mentor” right off the bat. you’ll end up finding the person who becomes your mentor in a way you least expected. Pro Tip: Use Calendly. That’s a big ask—far too big for the first interaction. moving on… One of the common mistakes made by those seeking a mentor. I wouldn’t mind betting.CHATWITHTRADERS. Like I hinted earlier. you can speak for hours on end with someone on the direct opposite side of the world. 12 . So remember. someone who may potentially mentor you doesn’t need to be in the same city or even the same country as you are. and it won’t cost you a cent. This is the sort of preliminary preparation required to make the most of your interactions—homework comes first. There’s no way around it. but before you even consider reaching out to who you think would make a great mentor. because people are attracted to ambition. mentoring is a relationship. This not only shows you’re serious. make sure they know you respect them. Then when it feels natural (there’s that word again). which will take time and will not happen over night. give them a small ego boost (but also keep your dignity. do what feels right… Maybe you’ll ask another question in a few weeks time. If you do this right it’ll be received positively and you’ll come across as someone who is eager to learn. but if you follow up a day later it’ll likely have the opposite effect. The ultimate way of showing this is by taking their advice. If at any point you’re unsure how to best approach this. So to get the ball rolling. it’s important to make sure they know you’re grateful for their time. If you’re communicating by email and you don’t get a response within a week or so. or you might reply to a couple tweets they post. putting it into action and sharing the result with them. Once you get a response. All this time you’re simply nurturing a relationship with someone who may eventually become your mentor.COM You need to develop a relationship with this person. don’t be a complete suck up). When doing so. but it will also give you another reason to make contact with your potential mentor. just put yourself in their shoes. From there. then send a short follow up.CHATWITHTRADERS. How would you like to be approached by someone asking you for help? What would make you want to give up your time for the gain of someone else? 13 . think about asking for a brief 15 minute Skype call with a specific purpose. a natural way of doing this might be to ask for their input on a specific topic or a single question. 2. but every no is one step closer to a yes—so don’t be discouraged. You’re making a real effort to better yourself. Going into this you need to expect to hear “no” numerous times. Established traders know how difficult it is in the beginning. if the response you received was the opposite of what you were hoping for. Additionally.COM 14 On the otherhand.” PETER DRUCKER . Helping you helps them. So in someway they may feel obliged to pass their wisdom onto someone who they believe has the potential to be a great trader. that’s okay. it’s natural to wonder why someone else would want to mentor you.CHATWITHTRADERS. When a trader is forced to vocalise their approach and communicate it to someone less experienced in a way that they’ll understand. this actually helps to crystallise things in their own mind too. Paying it forward. there’s two main reasons that come to mind right now: 1. which takes courage and many people don’t even have that! Why would someone want to give up their time to mentor you? If we go back to ‘put yourself in their shoes’. So why would they? Well. some traders are incredibly passionate about what they do and like the opportunity to discuss it with someone who is hungry and shows a genuine desire to learn. and chances are they had someone who helped them out during their early stages. “No one learns as much abut a subject as one who is forced to teach it. those who are successful trade a strategy that aligns with their personality. but don’t check out—keep an open mind. As Nicola Duke highlighted on episode 63. Because as you’ve probably heard numerous times on the podcast. but at the end of the day. This will probably challenge some of the preconceptions and thoughts you already have about trading. A good mentor will likely focus on how you can best develop a profitable methodology of your own and what they believe to be true about markets. you still need to put in the hard yards for yourself. call you out when you drop the ball and be honest with you. There is no free ride. So encourage and embrace raw feedback from your mentor. even if it’s not what you want to hear in the moment.COM What Should a Mentor Teach You? Managing Expectations Make no mistake. listen and trust what they’re telling you. 15 . A mentor will guide you in the right direction and should care about your development as a trader. her mentor of many years never once showed her a single setup or told her what stock to buy or sell. Their role is to push you beyond your comfort zone. and that’s rarely a bad thing. In many cases a mentor may not teach you their exact trading strategy (or strategies). scoring a mentor does not guarantee you a one-way ticket to trading riches.CHATWITHTRADERS. This way your mentor won’t feel as though it’s a chore to speak with you. do so without hesitation. you could offer to analyse their strategy or automate some part of their trading process. • If you live in the same city and your mentor has an office. put your skills to use. manners will get you a long way. Don’t be all take. If there’s anyway you can make your mentors life easier in return. be creative and try to return the favour as much as possible. Therefore you should never take the opportunity to learn from an experienced trader for granted. As I emphasised earlier. mentoring is a relationship. and the relationship will last much longer. • If you are a programmer. When your mentor gives you a piece of advice or an action item. and like every healthy relationship it’s a two way stream. Next. take. So don’t be a punk—always show your appreciation! You need to understand your mentor is sacrificing time which could be allocated to their own trading. you must fully commit to becoming a better trader. An example of this could be: • If he/she needs a website and you have prior experience designing websites. go .COM 16 How to Get Maximum Benefit From A Mentor Like your mother told you as a young one. offer to come in and help with paper work. take.CHATWITHTRADERS. or spending quality time with their family and friends. … it doesn’t matter what it is. don’t take it personally. If your mentor happens to be in living in an opposite timezone and is only available at 4:30am on the weekend. People are busy. not your mentor. The last thing I’ll share is. Take whatever time you can get—remember. it is the height of wisdom to find the perfect mentor and offer your services for free. get up and show up.COM 17 ahead and act on it. The positive is you’ve probably learned a lot regardless and since you’ve been through the process of linking up with a mentor once. In fact. work in with their availability. it’s you that needs this. this will show that you’re not relying on your mentor to hold your hand and you have some real initiative. you can certainly do it again! “Value learning over money—you must value learning above everything else. Such mentors will often divulge more than the usual trade secrets. I’d encourage you to go above and beyond too. Choose a place that has people and mentors who can inspire and teach you.CHATWITHTRADERS. This will lead you to all the right choices.” ROBERT GREENE . If you get six months down the track and you find it doesn’t work out.