Trader Mindset

Chartists are discretionary traders. This is true for those who have a CMT designation. How can you define your edge if you are looking at the same charts everyone else is looking at? Charts need to be interpreted. That's discretionary. You don't have the same emotional makeup that your chart-teaching coaches have. You don't have the same life experiences that they do. If you haven't backtested your rules, you don't know your numbers. What is the expected value of a trade that you put on in a head and shoulders formation? It's integral to know if you are trading too big or too small for the risk that you are willing to take. What is your optimal bet size for any trade that you put on? What is your risk of ruin? Don't optimize for share size or contracts...that's amateurish. Forget tiers... Most indicators are lagging indicators, they don't give you trade signals for entries or exits. Indicators are emotional band-aids and won't relieve you of having to live with the uncertainty that we are traders must live with. We must make decisions with imperfect and incomplete information. That's the world we choose to live in. Learn to develop your inner voice - for free.

Measuring your activity is a good way to begin improving your trading. Time blocking is more quantitative. You can add qualitative aspect of it also by calculating the sum total of all your trading activity each day. By the end of the week, you'll be able to see what you're earning per hour. Marry this with your trading journal and you'll be able to determine what your time and efforts are worth fundamentally. How effective and how efficient are you at what you're doing? Challenge yourself to always get the most insightful information you can on your own behavior. Be brutally honest with yourself. No one else will and you don't want to mindfuck yourself into eternity. Control what's controllable. Here is a great book on gaining insight on yourself. It's free.

Your #1 job as a trader or speculator is to play superior defense. "Your first loss, is your best loss." Bad news becomes worse news, it rarely gets better. Offset the risk and then you can think with a clearer head. Don't lament over a losing position when your emotional and financial systems are shocked. Use you entry rules to get back in. That's the best you can do today. Your main goal is to preserve you capital and play superior defense. I'm not a big fan of band-aid positions - to me it's black and white. You're making money or not. Follow you rules, but have a circuit breaker that you enact when an outlier event hits one of your positions. Get the Inner Voice of Trading Audiobook Free.

How you place value on your time or money determines your trading style. If you value your time more, you're likely not sitting in front of a wall of monitors all day. It's not worth your time. If you value your money more, you may be holding on too tight and thinking that you have more control over your risk by sitting at a monitor. You don't. That's the illusion of control. Stop orders will get hit regardless of whether you're watching them or not. Let your control issues go. Delegate your hyper vigilance to your stop orders. Acting this way is a bad habit. Find out what works and scale that. Backtesting will get you a good idea of what has worked in the past. If what you're using is available to the general public, how do you think that adds to your trading edge? It doesn't. Two Free Offers: Tony Saliba's Options Playbook Inner Voice of Trading Audiobook

Learning to pitch backers is a great skill to scale your trading business. Go from trading your account to several accounts to getting big allocations from Global Macro Hedge Funds. You are great at what you do and it's a unique skill to manage risk in the markets. Business owners know what they know about their own business, but it's a rare skill to have to manage risk in the markets. Partner up with successful business owners because they are risk takers by nature. Even just the simple process of keeping losses small is a big leap for many potential business owners who you can partner up with. Two Free Offers: Tony Saliba's Options Playbook Inner Voice of Trading Audiobook

When bad news hits the tape everything is correlated and it always works against you. You have to be careful that parts or segments of your portfolio don't become "one big trade." Study the correlation risk between instruments and modify your position sizes in your trading system and portfolio accordingly. Since instruments can behave similarly, you can inadvertently end up with the financial effect of over 100% of the risk you think you have. This will cut your vol and smooth out your equity curve. Two Free Offers: Tony Saliba's Options Playbook Inner Voice of Trading Audiobook

Consistency is the key to your success as a trader. You might have to learn to deal with the monotony in order to do so. New York Yankee Closer Mariano Rivera had one pitch that he relied on - a cut fastball - and although the opposing teams knew the pitch was coming, he was very effective at what he did. Rivera has the most Saves in the history of MLB. You can reduce your activity to what creates alpha and trade set ups that have positive expected value. Be economic in your activity b/c you'll also need to conserve your energy. It's a marathon, not a sprint. Do one thing very well, create alpha, and keep losses small and you'll have a long career. Get your free copy of the Inner Voice of Trading Audiobook.

Inner Voice of Trading Audiobook - FREE You have to conjugate your feelings with what it is you think you know about trading. If they don't "feel" good, you won't take the signals and you'll spend a great deal of time second-guessing yourself. When you do that, it's emotional not intellectual. You are insecure or lack confidence in what you do. This book discusses how I failed my way to success so to speak in sometimes painful detail. Persistence and determination have a great deal to do with your success in trading, and in most things in your life. For a limited time, get the audiobook for free - no coupon codes. Foreword by Ed Seykota.

A purchase of 5,000 calls could be part of a synthetic options position. Why would it be bullish if the trader actually sold 500,000 shares short and used the calls to hedge? You can use Tony Saliba's option trading simulator to backtest your ideas. Become a student and get immediate access. Get Tony's most recent book for Free.

Don't cauterize your winners. Let them run. Position size your trades so that you can stay with them as long as possible. You can trade smaller if the vol is bothering you. Then backtest to see how the results would have played out. You can blend two or more systems to smooth out your trading curve. Adjust your positions by conjugating them with the ATR. Trade smaller with higher vol instruments and larger with lower vol instruments. Always risk the same amount per trade. Make sure you are taking on enough risk to meet your financial goals. You can haircut your equity when you are in a drawdown. Trading using tiers for position sizes is amateurish as you inadvertently trade larger or smaller than what your optimal risk should be. Optimal risk per trade can be calculated from backtesting. Trade with consistent position sizing so that you are only risking the same percentage for each instrument. One or two percent per trade is extremely aggressive in today's world. Think more along the lines of .1 to .2% per trade.

You enter and exit the market with stop orders. No need to be anal and use Limit orders - they make the order less liquid. Your goal is to let the market come to you. Trading otherwise is impulsive. Love yourself and stop looking at 10 minute bars. There's nothing material there. Trading is about making money, not the action. Buying and selling is not trading. Sometimes the best trades are ones you don't get filled on. Don't chase the market. If it stalls, you'll go head-first into the back end of it. Use protective stop orders 100% of the time. Trail the market with stops in winning trades and reinvest your gains into the stop order. Your stop price is the point where you are willing to transfer the risk to someone else. You are not smart enough to have price targets. Humans suck at prediction. Technical analysis is no more scientific than economics at large.

Timing has as much to do with your success as does your trading process. Just because you have a system, does not mean that you will begin harvesting cash. The markets must be amenable and compatible with the rules that you are going to deploy. This is true if you are a credit option trader also. Selling option premier doest not mean you will keep it. Monte Carlo your system to see how it would have done if you vary the start date. The trading year typically doesn't start on January 1… Features are not benefits… You don't need to program "hot keys" or the buttons on your mouse. I don't have real-time quotes.

You need to monitor your mental health, your amount of sleep, and your diet. Don't be afraid to take a mental health day to reset. This is a marathon, not a sprint.

You are responsible for all your success and failure. That type of integrity will need to manifest in how you handle money - your money and your client money - your investments and your trades. Until you backtest, you don't know your numbers. You need to know the expected value of a trade. You need to know what the probability is of your risk of ruin. You can't get this without a simulator or backtesting software. If you have talked yourself into the Johnny Cochran logic of "If it doesn't fit, you must acquit," (no basis in law) you have sold yourself on an outcome that is not based on 100% integrity and is not a 360 degree outlook. Your success as a trader will come from your knowledge of yourself - what you know, what you think, and how you feel. You have to own everything you do and that includes all the results of the trades you take and the ones you don't.

The sum total of all your trading activity will accumulate in your track record. You can be successful and be making a great deal of money right now, but you still might not be a good fit for a particular allocator. I know a few traders with 20+ years who cannot get big allocations in today's environment b/c their results are too volatile. These traders have their own models and have been trading the same asset class in mostly the same manner for 2 decades. Allocators are looking for very low daily vol today. Your daily volatility will increase due to market forces as well as the relative strength of your attachment to your rules. You have to do your own simulations, backtesting, and research. This is an ongoing process. Markets will evolve - so will you and your model will need to keep pace also. And you thought that you can buy someone else's trading rules and make a career?

With options you can bet where you think something is going to go and also where it might not. You can backtest and simulate option strategies for outright directional trades as well as multiple option positions. This includes butterflies and condors. Love the VIX? Don't fall in love... You can create a vol trade around any instrument and perhaps better manage your risk. Tony Saliba's new book shows you how you can do with while minimizing your risk. (I published the book). Click here to get Tony Saliba's new book for free. If you are interested in studying this further, you can study with Tony AND get access to his proprietary options trading simulator.

Trading Tribe The is a variance between what you think, what you know, and what you feel. Thoughts are creative, knowledge can relate to intelligence, and what you feel is emotional. Your emotions effect your judgement, your judgment effects your behavior, and your behavior effects where you end up in life. We didn't talk about stocks or commodities in the Incline Village Trading Tribe. We didn't talk about feelings either, except to get into the willingness to feel our feelings. Then someone would "send" and get into showing us what it felt like to feel what they were feeling. We can relate to the feeling, not to the drama that got someone into the feeling. That was the "story." This is why buying another person's trading system or "proven" rules is a mishap waiting to happen as you may understand some/all of the trading rules, but that you can incorporate them into something that you can replicate is highly improbable. Their rules are not backtested despite there working for some people. Our teachers and courses teach proven, backtested rules and include what the emotional tradeoffs are at each point. Denying your feelings around trading and risk leaves you with a blind spot that will reveal itself just when you are most insecure. See how we can help you learn to trade for long-term success. https://martinkronicle.clickfunnels.com/welcome2bu3bjg9

If you subscribe to get NYSE data, you literally get everything that trades there. You're not likely going to need all those names running through your simulator. I removed all the nonsense that I knew I didn't want to be in. I called that process "raking the data." I removed the following from the data feed: -stocks below $20 per share -stocks above $100 per share -shares with less than 1 million ADTV -Preferred Stock You can figure out what is best for you. What is left is what you will run through your simulator. This also helps you stay objective and can stop you from obsessing about one particular name. Also, it's fantastically hard at best to keep track of all the potential names to trade. This process can help you stay open-minded.

Use equity pairs trades to stay in trades longer. If you are trying to increase your holding time but are scared, you can buy one long and sell another short against it. Ideas to Test Look at the strongest equity sectors from a relative strength standpoint. You'd buy the best name long and sell the worst short. You are looking for the long to outperform the short. This is a relative value trade. If the market crashes or corrects, the sting of the down move will be offset by the short position. You have to test these ideas, but this is a creative way to get your testing ideas going.

Human beings are emotional beings. We all have emotional systems. If you are not connected to your emotions, you are likely to see them emerge when you are under the pressure of trading. A system is a set of rules that you can follow. After you get the system generated order, you have to enter the trade into your platform. That's where the fun starts. The Trading Tribe was set up by Ed Seykota to help traders understand the emotions that would derail one's trading. Scenario 1: you get a system generated order, but you do not enter the trade. Scenario 2: you have no orders for the particular day, but you enter an order on the fly. In both scenarios, there is a variance between your trading system and your emotional system. Befriend your emotions and make them allies not antagonists. They are trying to teach you something.

Discretionary chart reading is problematic as you can't backtest it and calculate the expected value of a trade. Only trade set ups (the combination of entries, exits, and position sizes) that have positive mathematical expectation. Get a simulator and backtest your trading ideas to find the expected value. The software I spoke about in an earlier episode will do the calculations for you. Expected Value Formula E = (Ave Win)(% Win)-(Ave Loss)(% Lose) Roulette 2 Kings

The Average True Range (ATR) is a measurement that professional traders use to adjust their position sizes to normalize risk across all instruments. Normalizing risk allows you to look at Gold the same way you look at Sugar or AMZN for that matter - they are all the same percentage risk to your portfolio. Don't make the mistake of trading with "tiers" as no one optimizes their trading for the number of shares. You are trading like an amateur if you are trading a security risking $2 if the daily volatility is $6. Downtiming to intraday time frames is a foolish endeavor and even in doing so, you can't change the fact that the daily vol at $6 is too big for what you're trying to do at $2. Average True Range ATR Gorilla Glue #4 Jack Herer

Don't write covered calls. Don't come up with a strategy on the fly. You need to know the math before you put the trades on. Backtesting does NOT predict the future, but it gives you an idea how the idea(s) would have worked out over the last 20 years. What is past is prologue, but at the same time history rarely repeats itself the same way. I encourage you to backtest b/c you can use the hypothetical results in your marketing and discuss how bad the "bad" would have been in the past. Most investors or backers want to know the worst case scenario. Backtesting can give you an idea of the magnitude and duration of the drawdown, the worst loss, the expected value of a trade, and the best run of winners. Knowing these numbers can help you build confidence in your ability and also give you great insight on your emotional intelligence regarding trading performance - gains and losses. Get Tony Saliba's book for Free. Go to MartinKronicle.com and look in the top right corner for the details. Access to his options trading simulator is here: choose "options." It's for students only.

I don't trust stocks. Commodities are so much more reliable. David Stendahl - Signal Trading Group Moore Research

You have to backtest at the portfolio level - not one security at a time. Simple models are best. If you are testing on Trade Station, you can only test one idea and one security at a time. That might lead you to try 45 indicators or studies onto the name - that's your ego talking and you'll not likely have the same scenario show up the same way they more overlays you have. Again, simple is best. Test one simple idea across hundred of securities. Why would you spend weeks trying to find a model to trade only the ES or TSLA? That's myopic... Tradingblox Mechanics (the follow up to Trading Recipes) I used CSI Data as the data source. Seasonality in commodities is VERY reliable and it applies to both outright directional trades and spreads. MNNAX was the ticker for Munder Net Net Fund. I said MMNAX which was not the ticker.

Entries don't mean anything unless you know your exit and position size. Entries are just prices. Entries, exits, and a position sizing algorithm are the 3 crown jewels to a basic trading system. Don't look at intraday charts - they are worthless and contain the most random data compared to Daily, Weekly, or Monthly charts - in that order. Trading is a game of failure - like baseball. You simulate your trading rules to a) see if they would have been profitable; and b) give you an idea if you have strong feelings about the frequency of losses and the drawdown. Trading is systematized attrition of your capital until a winner hits. Risking 1-2% per trade is insane. Start with 0.10% or 1/10th of 1%. Break your capital up into 1,000 units. Don't trade size in your initial entries. Wait for the market to show you which way it's going to go before you add more. Forget price targets. That's ego talking so that you can be "reasonable" with yourself around greed and fear. How do you know that what is a 3-bagger can't become a 10-bagger? Learn from Scott Kaminski, Victor Sperandeo, Peter Borish, Tony Saliba, or Michael Martin.

Michael Martin follow-up with many of the questions with a more detailed context than is possible with 140 characters. If you don't know who you are, any strategy will look good to you - and that is perilous for new traders. The StockTwits AMA stream has been published at Medium if you'd like to read some of the questions.

Michael Martin speaks with trading expert Pete Renzulli. Over his career, Pete has held many roles across his trading career. He discusses how he developed his trading edge in this funny and insightful discussion.

Michael Martin reads and ad libs off an article he wrote for MartinKronicle.com. The post is on how traders and PMs can raise money from investors and allocators.

Michael Martin speaks with Cornelius Luca, foreign exchange expert. Topics include Brexit and European elections.

Michael Martin speaks with former CFTC Commissioner Chilton. Topics include position limits, Dodd-Frank, and disgraced FCM heads Corzine, Bennett, and Wasendorf.

Energy Analyst Brynne Kelly speaks with Michael Martin about the fundamentals of the crude oil market. Brynne puts out daily market analysis on the crude complex and has several decades of experience dealing in the physical crude oil market.

Michael Martin answers a questions sent to him via Twitter, "Besides Sugar, what are your 3 favorite markets to trade?" This podcast is the answer.

Jeff is at the helm of a Modern Trader Magazine - a storied publication that dates back to 1972. It was originally known as Commodities and then Futures Magazine. Today's incarnation is not relegated to commodity futures only, but equities, options, and exchange traded funds. Go to >>ModernTrader.com

Join Michael Martin, publisher of the new book Managing Expectations by Market Wizard Tony Saliba and listen to this free chapter from the upcoming Audiobook. This is Chapter 4 of the 24 chapters and it's called "Options Gamma." For a limited time, you can get free copies of the ebook and audiobook when you purchase the hardcover. Go to >> Managing Expectations Managing Expectations: Driving Profitable Options Trading Outcomes through Knowledge, Discipline, and Risk Management 450 pages with over 200 charts and graphs Written by Anthony J. Saliba with Foreword by Jack Schwager.

Ally Hamilton is a Santa Monica-based yoga teacher, writer and life coach, who streams online yoga classes all over the world. She's the co-creator of http://YogisAnonymous.com, which has been featured in The New York Times, Yoga Journal, Self Magazine, Shape Magazine and The Wall Street Journal. She's a regular contributor for The Huffington Post, a wellness expert at MindBodyGreen, and writes an almost-daily blog athttp://blog.yogisanonymous.com. Ally Hamilton changed her life with the eight limbs of yoga, a spiritual tradition first recorded in the Yoga Sutras 1,600 years ago. Join Ally as she shows you how to apply the wisdom of this honored tradition to your modern-day life. Physical poses―asanas―are the best-known aspects of yoga, but in the eight limbs practice, healing comes through exploring your relationship to the world and to yourself while learning to recognize the obstacles that block your path. Yoga's Healing Power shows how to create the life you want from the inside out, working with your mind and emotions, your body and breath, your memories and your pain. With hands-on exercises, meditations, journaling prompts, and stories of healing, this book helps you uncover your particular gifts and begin to feel joy.

Russell Rhoads is the Director of Education with the Chicago Board Options Exchange (CBOE).

Dr. Norman Rosenthal, MD is an expert in Transcendental Mediation and has written a new book on the subject called Super Mind: How to Boost Performance and Live a Richer and Happier Life Through Transcendental Meditation. In 1980s, he was a pioneer in the use of light therapy to treat Seasonal Affective Disorder or Winter Depression. He speaks with Michael Martin on the many benefits that TM provides its practitioners regardless of whether they trade or manage risk.

This is a TBT interview that I recorded with Larry about 5 years ago. You'll hear the difference between the audio in that we are using newer hardware and software.

In today's trading environment, you need more going for you than just a set of rules to make it as a trader. There's compliance, clearing and execution, legal, accounting, and creating a track record. Most traders don't like the sales and marketing end, so they bury their heads and create trading models. Unfortunately, that is not the path to getting discovered by a seeder or allocator. An aspiring PM or trader needs to begin the thought and planning processes at the same time they are developing their models. If you don't know what you're doing, take a course in sales and marketing. Michael Martin ends this podcast by reiterating why you need to have your own model that you yourself have developed.

By the time he retires in a few years, Peter Brandt will have traded across 6 decades. He is the author of Diary of a Commodity Trader and the brains behind Factor Research.

Brian Shannon is a prolific blogger and author and a major contributor to StockTwits. His blog Alphatrends.net is celebrating its 10th year. His book is called Technical Analysis Using Multiple Time Frames.

Matt Davio is an expert at trading with Market Profile. You can learn more about Matt and Market Profile at MarketProfileTradingAcademy.com

Financial markets are a creation of humans: humans who respond with fear and uncertainty, humans with damaged egos, humans who curse others for their mistakes, humans who make predictions, and humans who follow the crowd. Market prices, like humans, are sometimes - but not always - driven by sentiment.