I was in my office today working on my next book The PlayBook when I got pinged with this from the trading community:
Mike, what do you do when you’re a practicing trader, working, saving, and studying to begin trading live, and you feel your motivation begin to peter out. You have this goal but the road there seems like it will out last you.
It reminded me of how I needed to talk to one of our better traders about these comments in his monthly review:
Last 1 & 1/2 weeks production started to drop off: lacked energy, admittedly start to dog it on my overnight preparation, didn’t research and attack health care sector plays as voraciously as I could (i usually do a lot of work on sector plays: solar, social media, nat gas, coal to name a few), didn’t want to get out of my comfort zone to trade high beta’s and thin momo stocks, didn’t respect loss as much and would load up on random plays on a whim (taking shots).
Traders are often wired to grab on too tightly. They are wildly ambitious. Some even irresponsibly driven. Failure is not something they can tolerate. If they could they might not have ever tried this silly sport of trading, with more potential rejection than a NYC bar. The traders above strike me as holding on too tightly.
I see this with GMan at times. I saw this with Dr. Momentum from One Good Trade. I see this with that developing trader from our desk above.
What is progress? What is failure for the new and developing trader? Is it a month where you did not exceed last month’s P&L? Not necessarily. Is it not making money in your first six months of trading? Maybe not. Framing your progress incorrectly breeds unnecessary stress and regret.
Everyday that you trade you get better. Everyday where you gain screen time you improve as a trader. Often when reading the new regrets of a developing trader I think of that great Dave Matthews line, “Where are you going?”
I have found five suggestions to be very helpful to me as a trader, which relate to the comments from the developing traders above and their inability to sustain their energy.
1) Make sure you take some time off.
2) Do things outside of work so that you do not value yourself from your trading. Trading is the game we play. It is not who we are.
3) Be grateful for the privilege of trading. It really is so cool that we get to do this for a living. Be thankful for this opportunity, no matter how short or long.
4) Stop judging your trading by your P&L. For example that trader on our desk had a better month than the prior though he did not make more money. He worked on his sizing. There was less opportunity this month than the prior so comparable results are an improvement. He gained another month of experience.
5) It is okay to fail. How is Oprah doing with OWN? Remember that Michael Jordan commercial about all his failures before triumph. Oh man if you only knew how many stupid mistakes I make every week as a trader. Failure is a blessing to learn.
They say an artist is the only one who can truly judge his work. You know what you need to work on as a trader? Are you doing it? If so, then isn’t that so much more important than your P&L? And if you are doing all you can then why are you so concerned about your results?
Bella
5 Comments on “Five Suggestions for Traders”
In my opinion the only real measure of progress as a trader is how many less mistakes you make each day/ week/ month/ year.
As traders we have an unlimited number of mistake combinations that are made each day, so it can be tricky and very subjective to simply write out a huge list and cross each one off. To simplify and keep my mind more clear, here is what I use as a consistent measure.
I start with the core components of my day:
1)Set ups.. I go into the day with a long and short list as well as alerts to set. Is this trade from my daily list/ plan? Do I have a plan for every possibility I could encounter while in this trade?
2)Did I check and take into account general market conditions? This includes the sector i am trading.
3)Trade entry: Did I let the set up develop or did I enter too early/ late? Too early, risk is small, but probabilities may be diminished. Too late and risk goes up considerably.
4)Risk management: If the trade fails did I adhere to my preset stop loss. If trade works, did I take profits at my targets?
5)Money management: Did I adhere to my daily stop loss, max shares?
Nothing else matters when measuring progress as a trader for the simple reason that each of the categories above each have their own subset of mistakes. So to keep your mental state clear, put your long list of mistakes into these categories and I believe you will find it much easier to accurately measure your progress.
Thxs for sharing Justyn. I really like how you think about the trading day.
Justyn I like what you wrote, but would like to use your post to start a conversation here..”what about the mistakes that you made that you may not even realize its a mistake”. I wholly agree making less mistakes is a good thing and having a plan and trading the plan are necessary. But when new information is presented during the day that wasn’t in your plan and you fail to capitalize are you counting that as a mistake. Example.. you have a setup for a breakout in a stock, your alerts set, it breaks out. Volume is there, the bid looks good, everything is confirming you pull the trigger because you believe the probability is say 80/20 on this play. Soon though before reaching a target for profit it starts to fail you act properly and exit as planned. No mistakes to chalk up..right? But wait a minute..an 80/20 setup just failed with everything saying it should have worked. Did you as a trader use this new information and maybe short the failed breakout now? Maybe that stock now pulls back quite a bit on that failure and I would count that maybe as only a missed opportunity for one level of trader but for a higher level trader its a mistake not to act on the new information. I truly believe you can work hard and journal and study and still miss lots of stuff because at your level you don’t even realize a mistake may have been made. This is where having someone other than yourself help to assess progression is key. I had a conversation today with a trader I work with that I told 3 weeks ago he was progressing and I saw improvement that at that time he was still oblivious to. Today he acknowledged that what I already knew, he was just now beginning to realize. Without mentoring or coaching you can only evaluate your progression according to your own possibly limited view. Every trader needs to track and go over what they are doing and try to improve and make less mistakes without a doubt. The one huge mistake I see many traders make that never makes it into their review is seeking a higher level of ability for guidance and instruction. The go it alone mentality is a mistake that leads to slower progression and sometimes loss of dream. The internet make it easy to find lots of info for free and can truly help, but the pervasive idea that going it alone is a wise choice leads to months and years of opportunity cost that may never be fully made up. Top athletes and performers use coaches and mentors to find the next level but many learning traders scoff at the idea of getting real help and think another rule or journal is going to do the trick. They can categorize and sub -categorize but never find the column to get help and check that off. A mistake that affects progress more than any other.
Justyn I like what you wrote, but would like to use your post to start a conversation here..”what about the mistakes that you made that you may not even realize its a mistake”. I wholly agree making less mistakes is a good thing and having a plan and trading the plan are necessary. But when new information is presented during the day that wasn’t in your plan and you fail to capitalize are you counting that as a mistake. Example.. you have a setup for a breakout in a stock, your alerts set, it breaks out. Volume is there, the bid looks good, everything is confirming you pull the trigger because you believe the probability is say 80/20 on this play. Soon though before reaching a target for profit it starts to fail you act properly and exit as planned. No mistakes to chalk up..right? But wait a minute..an 80/20 setup just failed with everything saying it should have worked. Did you as a trader use this new information and maybe short the failed breakout now? Maybe that stock now pulls back quite a bit on that failure and I would count that maybe as only a missed opportunity for one level of trader but for a higher level trader its a mistake not to act on the new information. I truly believe you can work hard and journal and study and still miss lots of stuff because at your level you don’t even realize a mistake may have been made. This is where having someone other than yourself help to assess progression is key. I had a conversation today with a trader I work with that I told 3 weeks ago he was progressing and I saw improvement that at that time he was still oblivious to. Today he acknowledged that what I already knew, he was just now beginning to realize. Without mentoring or coaching you can only evaluate your progression according to your own possibly limited view. Every trader needs to track and go over what they are doing and try to improve and make less mistakes without a doubt. The one huge mistake I see many traders make that never makes it into their review is seeking a higher level of ability for guidance and instruction. The go it alone mentality is a mistake that leads to slower progression and sometimes loss of dream. The internet make it easy to find lots of info for free and can truly help, but the pervasive idea that going it alone is a wise choice leads to months and years of opportunity cost that may never be fully made up. Top athletes and performers use coaches and mentors to find the next level but many learning traders scoff at the idea of getting real help and think another rule or journal is going to do the trick. They can categorize and sub -categorize but never find the column to get help and check that off. A mistake that affects progress more than any other.
I have not failed. I’ve just found 10,000 ways that won’t work.
~ Thomas Edison
There are no traffic jams along the extra mile.
~ Roger Staubach A man is not finished when he is defeated. He is finished when he quits.
~ Richard M. Nixon