Jan 30, 2017

Trading: Warning Signs of Failure

Dr. Brett Steenbarger recently wrote a fantastic article about warning signs of failure among traders. There is one that I would like to write further about as I have seen it in many traders. Often the bias is not completely evident but it is hidden below the surface and causing the trader to constantly misjudge the message of the market:

"Becoming Fixed in a Bullish or Bearish Stance: There are reasons to take a directional view at various times, but chronically taking one stance or another is a sign of imposing one's views on markets, rather than following the flows of supply and demand they suggest that the trader is not truly evidence-based."
- Dr. Brett Steenbarger,  performance coach 


You cannot be a perma-bear, or a perma-bull. The trader must observe the markets with neutrality, with an open mind. The trader must analyze the data and make a decision based on what the data is telling him. Like Brett says, you must become an evidence-based trader.

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 27, 2017

Which Of These 2 Strategies You Would Choose?

Your task is to decide which of these two strategies you would choose for your trading and why. For each strategy, I have included the trading results (wins and losses) from a one-week period trading the SPDR S&P 500 ETF Trust (SPY) from two different trading systems that I am testing right now: 

Strategy 1: +35, +60, −25, +120, −75, −60, +35, +22, +120, +85, −60, −55, −20, +75 

Strategy 2: +30, −10, +50, −25, −18, +45, +45, +20, +50 

What strategy would best suit you and why? Study the results and pick your answer (on the related Twitter Poll).

I will share my answer and my thoughts later. Stay tuned!

Here is my solution,

Strategy 1: 

Total gain = 257 (sum of all trades)
Total sum of winning trades = 552
Total Sum of losing trades = 295
Profit Factor = (total wins/ abs(total losses)) = 1.57
% of winning trades = 57%
% of losing trades = 43%
Average trade = 18.35 ticks

Strategy 2: 

Total gain = 187 (sum of all trades)
Total sum of winning trades = 240
Total Sum of losing trades = 53
Profit Factor = (total wins/ abs(total losses)) = 4.53
% of winning trades = 66.67%
% of losing trades = 33.33%
Average trade = 20.78

So, while strategy 1 showed a larger total gain (257 against 187), the Profit Factor is much larger on Strategy 2 (4.53 against 1.57). This means that Strategy 2 is a lot easier to trade than Strategy 1, as you earn 4.53 dollars for every dollar that you lose trading that strategy.

Note that the average per trade on Strategy 2 is also a little bit higher.

While both strategies are very good, I would choose Strategy 2 and I would leverage it a little bit to obtain or surpass the total gain of Strategy 1. Strategy 2 is smooth, robust so it can be leveraged to bigger gains. My next step would be to draw a equity curve of both trading strategies to analyze the size and duration of the drawdowns (the sample is too small for this).

(Note: this is a simplification of a decision making process. The samples on both trades are very small to make a real trading decision. What I am trying to explain here is how to decide between two or more good performing systems)

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 26, 2017

A Common Element Among all Successful Traders


If there is a common element among all successful traders that I have met it is that they all possess equanimity.

Equanimity: mental or emotional stability or composure, especially under tension or strain; calmness; equilibrium.

Trading psychology is very important and at some point, and when you are well advanced in your trading learning curve it will be the most important thing to master. Of course, well before that point in time you will need to research, test and find a trading edge.

Trading is all about working with your time tested edge in the market and taking small bets over and over again using prudent risk management guidelines. Only then, you will have to master the mental skills that will enable you to take as much money out of the market as you can using your trading edge.


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 25, 2017

Natural Characteristics That Will Make You a Poor Trader

The vast majority of people are not natural musicians, natural athletes, natural managers or natural anything. That includes trading. The human brain must be trained to excel at trading.

I want to share with you this quote from Jack Schwager (author of the Market Wizards series) on how he became a net profitable trader: 

"In my own case, I have traits—which I know through doing the books—that are negative for being a good trader. One that I cite often, because it’s such an obvious one, is patience. One of the things that good traders have is patience. And patience translates into trading in two critical ways." 

"First, waiting for a trade, not just jumping the gun because you want to do something, or you just lost some money and want to make it right back, or you’re making money too slowly, or you’re bored, etc. Being a good trader means having the patience not to do that. Just to wait and do nothing. "

Second, it also means even if you’re making good money but the trade still looks like it could go a lot further, and you’re worried about giving profits back, you need the patience to just be able to stay with the trade."

"And so patience is a really important thing. And it’s not merely a trait I don’t have—it’s a trait I have in reverse. I am an impatient person. I am the type of person that, before the advent of iPhones, would not walk around without a “Time Magazine” in my hand because God forbid I would have to wait in a line for two minutes and not be able to do something."

"I have natural characteristics that would make me a poor trader. And if I am net profitable as a trader, it is simply because of things that I have learned from people who are successful. I know, for example, that patience is important. I know I don’t have it. I’m cognizant of that weakness."

What traits are preventing you from becoming the trader that you wanted to be?


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 20, 2017

What is the Best Path to Trading Profitability?

I was a bit perplexed when I saw the final results of this trading poll. When asked what was the most thing for profitable trading, most answered "big wins/ small losses". That is a bit mind-boggling to me as what is obviously most important is to have a trading edge, a winning system as stated in the third option (only 23% of the total votes).

This implies that most traders surveyed believe in trend following in some form. Let me share two thoughts on trend following,

"The effectiveness of trend-following has been decreasing in recent years since there is no barrier to entry and everyone can identify trends using the same tools and indicators. For example, my analysis indicates that the top systematic trend-following Commodity Trading Advisors have realized annualized returns below 2.5% in the last 10 years on the average." - in Forbes

"Here there is an argument worth mentioning: some traders think that because trends always form in the markets, trend-following will always be a profitable style. However, the net profit from trend – following has two main components: profit from trends minus loss from choppy market activity. Usually, choppy markets cause trend-following methods to lose money. Therefore, it is not enough to have trends, it is also necessary that losses from choppy markets are not substantial." - in Forbes

My point here is: in trading anything that works, works. I am a consistently profitable trader and I trade a high winning percentage system. That option, my very own definition of trading success had only 5% responses in the survey. 

Are traders in general too formatted to a specific type of trading? Yes!

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

As the World Keeps Advancing, so Must Technical Analysis

The world advances and so must technical analysis. The popular trading methods of the past while still popular do not work well. Why is that?

Well, when technical analysis started to be disseminated, computers were not available to test the patterns, theories and indicators. It was a visual art. Remember that old book from John Murphy, The Visual Investor?



There were no backtesting results to prove or disprove the claims,

"Technical analysis methods of the old school include mainly chart patterns and some hypotheses of market behavior, for example Dow Theory. We have to keep in mind that personal computers were not available when technical analysis was first conceived and traders could not perform quantitative evaluation of claims made." 

 "(...) classical technical analysis was a “visual” method based on charts." 

"During the early years of technical analysis, when prices moved below the neckline of a head and shoulders, for example, due to high autocorrelation in returns, the probability of a continuation of a trend reversal was high and the actual pattern was irrelevant at that point." 

Is there anything really to a Head & Shoulders pattern? I do not think so. Peter Brandt might disagree, but I do not think it is possible to create a profitable trading strategy around these ancestral techniques.

(excerpts are from the article Why Some Technical Analysis May No Longer Be Effective (Forbes))

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 17, 2017

No Edge, No Trade

At the end of the book I ask the reader, 

"What exactly is your methodology? What defines your trading? Could you explain it in a clear and concise way to another trader? If you cannot answer these questions, you are not ready to risk money in the markets. A trader must be able to write down his or her trading methodology in precise terms." - in Trading Course: How to become a Consistently Winning Trader 

If you cannot answer these questions in a clear, definitive way you must work harder on your methodology by testing new trading concepts, variations of your current method that may improve your backtests, or find a new approach that is more effective in the current market that you are trading. 

When you do not have a trading edge there is no point in entering the markets, risking your hard earned money. Of course, you can make exploratory trades with minimal size but you should conserve your capital for your future ventures with a proven, time tested edge that can be translated into consistent trading profits over time. Be patient, be tactical!

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 11, 2017

Steps on the Way to Consistent Profitability

There are basically five stages on the way to consistent profitability. In which phase are you in now?

I. The first is the losing phase where traders tend to lose often and big. The trader is new to the market and knows nothing about what it takes to trade profitably even if the trader thinks he or she knows enough (the most dangerous to their trading accounts and emotional stability).

II. There is a second phase where traders have learnt to correct some of their most recurring mistakes but they still lose on average but not by much. It is still mostly a hit or miss approach but the downside is more contained now as the trader has been burnt a few times before and knows how the market might hurt him or her.

III. Then comes a phase where the trader knows a lot of technicals, stock tickers, read a few popular trading books and is likely familiar with the views of a few trading experts. The trader is now basically break even on its trades. 

Not losing money is a legitimate and important step on the way to success. You may be struggling, but you’ve struggled further up the ladder to success than you might realize.

—Adam H. Grimes, Chief Investment Officer at Waverly Advisors

IV. Suddenly after coming across some quality trading material that he is now ready for, the trader will begin to think independently, use his own data, and the trader will likely be able to become more selective in his or her trading. The trader is now profitable most of the time but will experience large drawdowns from time to time. The consistency is lacking.

V. The trader elevates himself to the consistently winning plateau by working on a strategy that fits him or her and by learning the mental skills of profitable trading. He or she trades effortlessly, does not care about other traders think or do, and may even laugh while listening to a market call on CNBC or Bloomberg. In this phase where only a tiny percentage of traders will arrive, he or she may be able to trade for a living or trade professionally for a firm. The trader has finally made it and knows it. 

One of the reasons I designed this trading course and wrote the book was in part to shorten the learning curve and save time and money to the aspiring consistently profitable trader.

Feel free to email me and give me feedback on where you are currently standing in the ladder to consistent profitability.

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature.

"It took me five years to become a profitable trader and almost another five years to become extremely consistent. If I had come across the right trading material and concepts earlier, I’m sure the learning curve would have been far shorter. This practical book will give you the materials and concepts I wish I’d had early in my career." - Henrique M. Simões

Jan 10, 2017

Don’t Be Too Attached to Money

"If you have any attachment to money—and who doesn’t?—it is very tough to trade correctly. This is one of the lesser-known secrets about trading success. When you are trading, you shouldn’t be thinking about the money. You should be thinking in point terms, as if you were playing a game.

Of course, that must come after you’ve designed a business plan and put strict risk-management rules in place, such as not risking more than 1 percent of your capital in a single trade. But when you are trading, executing your trades, and watching the market, you should be thinking only in market terms, not in money terms. You should say to yourself, “I am up twelve points on this stock,” and not, “I have a profit of twelve hundred dollars on this trade.” Try that approach, and your trading surely will benefit."

(this is an excerpt from the book Trading Course: Chapter 6 - Tricks of the Trade)


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Jan 9, 2017

Now Available on Amazon

My new book is now available on Amazon. Check it out, Trading Course: How to Become a Consistently Winning Trader (buy it on Amazon)




Contents


1 First Things First
   1.1 Your Final Goal
   1.2 Who Should Take This Course
   1.3 The Necessary Commitment

2 Developing a Trading Strategy 
   2.1 Choosing a Trading Style
   2.2 Research and Testing
   2.3 Trading with an Edge
   2.4 Trading Systems
   2.5 Risk Management
   2.6 Changing Market Conditions
   2.7 Repetitive Trading Patterns

 3 The Mental Game
   3.1 Trading with Confidence
   3.2 The Right Trading Mind-Set
   3.3 Admitting and Correcting Mistakes
   3.4 How to Think about Individual Trades
   3.5 Avoiding Self-Sabotage
   3.6 Overtrading
   3.7 Self-Coaching
   3.8 Flawless Execution  
   3.9 How to Manage Drawdowns

4 Markets: What Works and What Doesn’t 
   4.1 Being in Sync with the Market
   4.2 Market Type: Momentum, Mean Reverting
   4.3 Indicators and Trading Techniques
   4.4 How to Trade Stocks

5 Creating the Right Trading Structure 
   5.1 Trading Routines
   5.2 Trading Journal
   5.3 Business Plan
   5.4 Education and Training

6 Tricks of the Trade 

Appendix A: Interviews with Two Top Traders
Appendix B: An Example of a Backtesting Study
Appendix C: Reinforcing the Message
Appendix D: Glossary

Trading Course Now Available in Book Format

My new book was just released. It will be available on Amazon soon but you can buy it now here: https://www.createspace.com/6707748

Jan 6, 2017

Your Bet Size Controls Your Emotions

"Bear in mind that your bet size controls your emotions. There is a correct trading size for every trader, and finding that size is absolutely essential to success."

(this is an excerpt from the Trading Course: Chapter 2.5 Risk Management)


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Best Pre-Market Tweets (Jan 6, 2017)

I started this week a new daily segment that will bring the best of the Finance Twitter to our readers every day. These are what I considered today’s best pre-market tweets:

"The S&P 500 hasn't moved in an intra-day range of more than 1 percent for 14 straight days. (the last new all-time high actually on Dec 13)."
Ryan Detrick, CMT (‏@RyanDetrick)

"The absolute best hedge is reduced exposure, i.e. cash. Most would be better off to focus on refining their Long side process." 
Larry Tentarelli, systematic trader ‏(@LMT978)

"VIX briefly touches 11. 52-week low is 10.93."
Carl Quintanilla, CNBC (‏@carlquintanilla)


"Just finished my new book Think and Trade Like a Champion - going into production next week - scheduled release date April 2017."
Mark Minervini, momentum stocks trader (‏‏@markminervini)


Jan 5, 2017

Why Are So Few People Able to Make Money Trading the Markets?

"Why are so few people able to make money trading the markets? My answer is that profitable trading requires both technical and psychological skills—even if you have a good technical knowledge of the markets, this is not enough per se to make you a consistently winning trader.

We will discuss this in depth throughout the course. In the meantime, remember that an investment in knowledge pays the best interest."

(this is an excerpt from the Trading eCourse: Chapter 1 - First Things First)


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Best Pre-Market Tweets (Jan 5, 2017)

I started this week a new daily segment that will bring the best of the Finance Twitter to our readers every day. These are what I considered today’s best pre-market tweets:

"Amazon $AMZN has had a double-digit drawdown in all 20 years it's been public, averaging - 36%!"
Josh Brown (@ReformedBroker)

"Returns since the election...Russia: +21% ($RSX), Mexico: -18% ($EWW)"
Charlie Bilello, Director of Research at Pension Partners ‏(@charliebilello)


"I have noticed long term successful traders have a uniform chart they like to view the action through... sorta like speaking a language." 
stt2318, Traders Toolbox (@stt2318)


"The future belongs to those who learn more skills and combine them in creative ways."
Robert Greene, Bestselling author (‏@RobertGreene)  

Jan 4, 2017

Best Pre-Market Tweets (Jan 4, 2017)

I started this week a new daily segment that will bring the best of the Finance Twitter to our readers every day. These are what I considered today’s best pre-market tweets: 

"I have no control over whether or not a trade will be profitable. My job is to enter orders. Nothing more, nothing less!" 
Peter Brandt, trader ‏(@PeterLBrandt)


"World's biggest stock markets (Market Cap, USD, Trillions): United States 25.2, China 6.5, Japan 5.0, Hong Kong 4.0, UK 3.1, Canada 2.0, France 1.9, Germany 1.87."
David Ingles, Bloomberg TV ‏(@DavidInglesTV) 


"Getting away from charts/quotes and screens after trading hours is a must. (It) helps recharge and clear (the) mind so upon return you are again motivated."
CtheLightTrading, trader (‏@canuck2usa)  


"Until I read Livermore's Reminiscences of a Stock Operator, none of it made sense. Once the message sunk in, it all made sense."
Larry Tentarelli, trader (@LMT978)

Jan 3, 2017

Trading With Confidence

"Successful traders are confident in their abilities to win over the long term. Confidence comes both from good past experiences of winning but also from solid preparation that comes from good market research." - in Trading Course: How to Become a Consistently Winning Trader

You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!

Best Pre-Market Tweets (Jan 3, 2017)

I am starting today a daily segment that will bring the best of the Finance Twitter to our readers every day (or whenever I have the time for it, as trading is a very time and energy consuming business!). These are what I considered today’s best pre-market tweets: 

"New traders usually are part-timers and 70 percent can't put the effort in acquiring sophisticated data and building strategies." 
@StoicTrader


"Since '50, the S&P 500 Index in January ranks as the 6th strongest month - so right near the middle. The past 10 years though? 12th - the worst."
@RyanDetrick 


"Here's my prediction for 2017. All the predictions you read will NOT play out. Predicting is for amateurs and all it creates is bias. 
@AsennaWealth 


"Winning trades are like Pocket Aces in poker. The goal is to extract as much money from the table as you can, not get out for a quick $."
@LMT978


Jan 2, 2017

A System for All Markets?

"Every trader who wants to develop a trading system has this question: Should I develop a trading system for a specific market, or should I develop a robust trading system that works across several different markets?"


You will follow practical steps and acquire the essential skills a successful trader must have in order to consistently win, and you'll also learn:

- how to develop a trading system
- how to utilize the best trading techniques within a trading methodology
- how to think about the psychological aspects of trading and the markets
- how vital it is to treat trading like a business

As you master this breakthrough program, you'll build yourself a distinctive trading signature, hitting win after win, and you'll be well on your way to financial independence!