Trader Mindset

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.

There is no such thing as 'revenge trading'

One of my first tasks as a magazine editor was to "fact check" Jon's written work. Easiest job ever...

You have an emotional system that you run right alongside your trading system. If you're lucky, the two act in harmony. Frustration is a feeling that can derail your trading. You have to learn to understand what the positive intention of your frustration is in order to continue forward. What is your frustration trying to communicate with you?

With his free time he runs a family office.

Richard Sandor is considered the founder of financial futures. He also founded the Chicago Climate Futures Exchange. Now he's created an OTC market for small banks to better manage risk.

Jared Dillian is the author of the the acclaimed book Street Freak. He also writes a daily research note at www.dailydirtnap.com.

I've been a big fan of meditation coach Susan Piver for a very long time. She's one of the best meditation coaches you can find, especially if you're not in an area where yoga or meditation is available. Many traders don't know where to start, so I thought it would make sense to bring in an expert on the subject and record a real conversation between us about the positive impact meditation has had on our lives. It's actually quite easy to begin a meditation practice.

Renown energy expert Phil Flynn speaks with Michael Martin about crude oil and natural gas. Brent crude is in a bigger glut than WTI so we spoke about the potential for the Brent / WTI spread to invert.

Aaron Brown is the Chief Risk Manager at AQR. He works with PhD's, CQF's, and some of the best minds in quantitative finance. His firm runs over $US 100 billion and they used advanced math to manage risk. Yet, I think that one of his greatest challenges was for Aaron to write a book on risk management for non-professionals using layperson's terms. That's what he's done with his new book Risk Management for Dummies. I read the book cover to cover and then recorded this podcast interview with him. You can read my Amazon book review.

Steve Sears and Michael Martin speak about the fallout from China in the gaming industry, the effect of ESPN and Start Wars on Disney, and volatility. Michael gets Steve's feedback on using long-dated options as surrogate vehicles for investing and Steve discusses what he thinks he and his readership got out of his book. Stocks discussed ASHR, WYNN, MGM, DIS, VIX, and FXI.

25 years ago Manny Ochoa was like many of you: he had a model that worked but wanted to grow his business to scale his operations to the pro level. He used his own limited capital as his initial grubstake and built a track record. That led to an allocation from a major (and legendary) prop trading firm and eventually to owning a seat on the CME.

Can you have capitalism with a sense of spirituality? My guest today thinks so. Motivated by an incident at Occupy Wall St., author and coach Kim Ann Curtin investigated how to be a capitalist while having a conscious. Curtin interviewed over 50 Wall St thought leaders on the subject and condensed her findings in her new book Transforming Wall St.