All Entries Tagged With: "Attitude"
How to Think About a Loss
October 26, 2011 at 12:58 pm
We all lose here and there, it’s just part of trading. You can’t avoid it, but that isn’t the issue. Where many traders struggle is how to handle a loss gracefully.
Instead if equating a trading loss with personal failure, shift your mentality for what a loss means.
Does it mean you’re stupid? Not necessarily.
Does it mean you were wrong? Yes, in at least one way.
Does that mean you will never get it back? Absolutely not.
Losses are an event, yes, but it’s also a distribution from your account. Consider them a cost of doing business as a trader. Brick-and-mortar stores have overhead, but as a trader, the biggest portion of your overhead is the losses you take.
When businesses cut costs, they’re reducing their overhead as much as possible to fatten their profit margins. Do the same with your trading. Reduce your ‘loss overhead’ by accepting a loss quickly and moving on to the next trade.
It’s much more fun to always be adding to your account rather than seeing funds flow out, but as soon as you start viewing trading losses as something impersonal, it’s going to change your perspective in a very helpful way. Rather than fret over them and allow losses to cloud your thinking or alter your mood, viewing them through the proper lens will help you more quickly get them back and then some.
Like it or not, trading is a business…how are you managing yours?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Can You Trade Full-Time? Part 1
September 30, 2011 at 7:57 am
One of the most common questions I am asked is whether someone is fit to trade full-time, and if they’re equipped with what it takes to make it. You might be wondering the same thing, and if so, this 4-part video series is for you.
A recent email exchange with a subscriber who had just reached a crossroads with his career path brought about the questions we’ll cover, so I wanted to share this exchange with you over the course of the next few posts.
Keep in mind that the things I’ll be sharing are my opinions of things I think are needed in order to trade full-time, but your unique situation may differ. Think of this series as a list of things to consider as you count the cost when weighing whether or not you’re ready or able to trade full-time.
Here in Part 1, we’ll discuss the question “Do I have what it takes to make it?”
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Intelligence is Only Part of Trading Success
August 24, 2011 at 10:46 am
In a recent conversation with a trader who had just accepted some small but frequent losses, it came to light that his emotions were flaring. Taking a small loss here or there doesn’t affect him, but taking a few in a row does.
What’s interesting though, is that it wasn’t the money that bothered him so much. It was the fact that he came to doubt his intelligence after a string of losses.
Every one of us has been there, and it’s no fun. Losing is a part of trading, and each of us knows that, but how we cope with those losses will determine how quickly we rebound from those hits that inevitably come.
Here are 3 steps I suggested he take…
1. Trade smaller. If you’re getting frustrated and angry, it’s a sign you’re placing too much importance on each trade. The way to diminish that is by reducing your size for a little while so that trades take on much less importance and you’re simply focusing on managing them properly.
2. View losses differently. Losses aren’t fun, but when viewed in a different light, they can be seen as helpful. They will make you better, because you scrutinize your mistakes and either learn something new or get reminded of a lesson you’ve previously learned. Losses also free up your capital and attention to shift toward another trade which may quickly overcome that loss.
3. Expect losses to happen. This isn’t negative thinking, but rational thinking. Begin each day knowing you might take several trades, and some might be losses. That makes it easier to accept them when they happen and it allows you to keep moving without letting emotions take over. Expect winning trades as well. And be sure you’re stopping out for smaller losses than the winning trades are providing. That will keep you net profitable and that’s the aim.
Remember, being right every time is not the aim of trading, so get out of that mindset as soon as you find yourself in it. Intelligence is only a small part of trading. Trading is a numbers game, and it’s one that requires you to deal with emotions rather than allow them to flare. Those who have an edge and who can manage emotions (tied to both losses and gains) are the ones who will succeed in trading.
What else would you tell this trader?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Don’t Let Trading Be Everything
August 2, 2011 at 2:15 am
I love trading – it’s such a challenge with multiple rewards. I look forward to it, I think about it alot, and I’m passionate about it so I work quite hard to continually improve at it.
But it’s good to constantly remind myself that trading isn’t everything.
It can’t be. There’s too much more to life than just watching numbers and letters on the screen. Trading is a means to an end, and for each of us that may be something different. What we have in common though is that we have to keep trading in perspective.
One of the ways to ensure you’re doing that is to have off-the-screen goals. Maybe you’ve got another hobby or you’re a runner or a cyclist or a golfer or you have a side business. Whatever “it” is, the good thing is that you have it. Don’t view it as a distraction – think of it as a necessary diversion.
Thinking about your trading constantly shows that it’s important to you, but it borders on obsessive and that’s not good. Inevitably, there will be tough days filled with frustration, and that’s not something worth fixating on. Being able to walk away from your desk and shift your mind to something else (once you’ve reviewed your trading session) is critical to your ability to return tomorrow mentally prepared.
Check out this post for more of my thoughts on The Importance of Off-the-Screen Goals.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Take Time to Rest & Relax
August 1, 2011 at 7:15 am
This week I’m on vacation – and how sweet it is! But I’m still going to deliver some goods for you to read here…every day, actually, so keep coming back.
Today I wanted to discuss the importance of stepping away from the screens from time to time to rest up and recharge. The market will always be there when we return, but if we trade with fatigue of any sort (physical, mental, or emotional), we’ll be far from our best. That brings suffering to both our confidence and emotions – both of which we need in this game.
As you well know, trading is very demanding, so for us to show up each day with our full focus, we have to stay rested and avoid burnout.
I felt this post from the past was particularly pertinent to the current market environment. We’ve seen lots of day-to-day indecision, some sizeable gaps, and some wide-ranging bars in both directions lately. That’s not allowing many stocks to establish quality bases, which means the opportunity that’s out there is rather narrow at the moment. That will at some point change, but for the time being this is a good time to step away and let some of the dust settle.
Check out this post:Â The View From the Hammock for more of my thoughts on R&R.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Pro’s Are Patient
July 18, 2011 at 9:11 am
The British Open is my favorite major to watch. It requires so much of the players, from execution to mental toughness to using their imagination to get the ball in the hole. Plus, it happens in July when it’s 147 degrees here in Texas, and I like to disappear into the home theater where it’s cool and dark and watch the guys wearing sweaters as they fight the sideways rain squalls!
In watching yesterday’s final round, the leaders were each asked during their pre-round prep what the most important element would be for their game in the final round. Without exception, they all said the same thing: Patience.
Experience taught them that. Eventual winner Darren Clarke was quick to admit he’s not normally a patient person, yet that was his focus as he headed out to try to claim his first major title.
A little gray hair goes a long way.
Had it been an interview with amateur leaders of the local club championship, the answers given may have been along the lines of “I need to make a lot of birdies.” And while that may be true, it’s not the priority of a pro when conditions are less than ideal.
True Confidence
Patience is not my strongest suit. I’m aware of it though, and therefore continue to keep impatience in check. I have to work on it. Self-honesty is important though, so I can’t ignore the occasions where impatience costs me opportunity, and those in turn serve as reminders to wait for the best opportunities to come along.
Through my premium service, I encounter a lot of traders who are overly anxious. Impatient doesn’t even begin to describe them. They’re willing to throw caution to the wind just for the thrill of being in something.
Or to avoid looking scared.
I think they fear it’s a show of cowardice if they sit on the bench for a little while. Ironically though, the biggest sign of confidence that you know what you’re doing is having the guts to sit on your hands when you don’t see what you like. You don’t chase the wind – you have a plan, and you execute it when the time is right.
Instead of taking that approach, these highly impatient traders don’t realize the primary importance of preserving capital and the secondary aim of turning a profit. Instead, they want to be highly active every day, and it’s as though they’re missing out if they exercise some caution. I don’t mind telling them that my service isn’t the right fit for those who feel the continual need to be in something.
Wait For It
The fact of the matter is that there are times when the sidelines are the best place to be. Just like the British Open leaders identified the greatest virtue of the day to be patience in the face of harsh weather conditions and tremendous pressure, you as a trader have to recognize when patience is the best course of action for you.
You’re still agile enough to take action should conditions present an opportunity, so it’s not as though you’re immobilized or stuck like a buy-and-hope investor type. But when the market is overly sensitive to the news flow, we’re getting huge gaps on nearly a daily basis, reversals are happening frequently, and the setups are sparse, the best course of action is to take very little to no action.
We all know the oft-used quote from Jim Rodgers, but it’s this kind of attitude I’m referring to…
“I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, ‘I just lost my money, now I have to do something to make it back.’ No you don`t. You should sit there until you find something.”
If you’re predisposed to trading the long side, then wait for market weakness to dissipate before committing capital. If you like the short side and we’re seeing relentless rallies, the only thing you’re missing out on by not trading is pain. Recognize that and embrace the option of doing nothing when what you see doesn’t fit your skill set.
Professionals know there are times to lay low and wait for the best opportunities, but amateurs tend to force the issue out of impatience. Which would you rather be?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Be Imperfect!
June 24, 2011 at 9:43 am
Society trains us to want to be perfect. And in many endeavors, that’s something worth striving for. Surgeons, for example, can put you at ease when they tell you they’ve performed this operation hundreds of times without any problems. Students with perfect grades get academic scholarships, saving boatloads of tuition money. And the list of examples of the benefits of perfection goes on and on.
From our appearance to our performance, someone else will always be a little better, and it causes us to try to perfect whatever it is we’re doing for the sake of improvement (or keeping up). Unfortunately, it carries over into our trading – much to our detriment.
You see, when it comes to trading, there’s no room on the perfection list. And that’s a good thing, because perfection isn’t required for success.
The very worst traders try to be perfect. They either stay sidelined in search of a perfect strategy (backtesting galore), or they practice trade until they make $1M in hopes of duplicating it live, or they simply refuse to lose.
Perfection in trading is paralyzing, both to you and your account. Growth is prevented, confidence suffers, and you feed the very traits you should strive to shun.
I’ve said before that in trading, you succeed by not failing. But that doesn’t mean you can’t have failed trades – quite the contrary. Expect losses! As negative as that might sound, it will mentally prepare you to accept them gracefully and move on to the next trade which might be a far bigger winner).
The best traders are imperfect – by choice. They grow from mistakes, not successes. Lose small and face the music when your current approach isn’t working. That shows true confidence. By definition, imperfection brings opportunities for growth – both in your account (lose small and win bigger) and in your abilities as a trader (learn new methods). But you’ll miss out if you’re not willing to bend.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
