The Essentials of Trading

Information and resources to learn about trading and the markets

Some interesting posts from fellow bloggers

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Here are some very interesting posts by other bloggers which I found interesting.

Cross-Talk: Trading Coaches as Whores – Brett Steenbarger makes some excellent points here about both how the reality is that some folks just are not cut out to be top level traders. This is something folks in trading education tend to shy away from, especially coaches. Obviously, they’re financial interest is in people thinking they can achieve greatness. It’s the classic conflict of interest. This is a big reason why I have always made sure any coaching arrangement I’ve entered into has had very specific objectives and isn’t just some rambling engagement with no definition. I’ve written on this subject before (Trading Coaching and Mentoring and Trader Development: The Value of Coaching and the Difficulty of Finding One)

Dow 300 Point Days and Volatility Clustering – This is an interesting discussion of a topic which has been making the rounds among some bloggers in recent days. The post shows some nices statistics on the difference between Bull and Bear markets. It’s always work studying price action, as I discussed in The Essentials of Trading.

Making The Plan Your Own – This posts hits a couple of points that I try to harp on right on the head.

I Think We Have Turned the Corner Due To the SEC Decision – I’m not sure I necessarily agree that this particular action has turned things around. He makes some good points, and it stablizes a portion of the market, but there are a number of much wider issues still plaguing the money and credit markets. Confidence and the willingness to take risks are just not anywhere near back to “normal” levels.

Do I need anything beyond your trading course?

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This question came in the other day from a trader named Randy:

Should the Essential of Trading Software (he means my trading course DVD) I purchased be able to teach me to become a profitable trader alone or will I need additional tools as well? Also, will I have to learn how to do programming to be truly successful or can it all be done in a more simple manner, such as plugging data into a spreadsheet by hand with simple calculations? Is this all explained your book + course?

Speaking to the latter part of Randy’s inquiry first, trading does not require programming or the use of spreadsheets or any major quantitative skills. Some methods one might employ do go in that direction as there are definitely strategies based on hard core math, statistics, and programming. You may have heard of algorithmic (algo) trading, which is automated and often based on such things. Most folks do not employ such complex methods. They get along just fine with existing chart packages, data/news feeds, and such.

That said, when it comes to system testing programming and/or spreadsheet skills can come in quite handy. There are charting packages like Metastock which allow for serious system testing. I have used them. I have also used Excel extensively. I’ve even done a bit of work in C (Jack Schwager of Market Wizards fame actually recommended I learn C for system testing purposes). Heck, back in the day I did system testing by hand with pencil and calculator. You definitely learn some things when you’re that closely involved in the calculations.

Getting back to what my course provides, a good analogy is like someone getting a PhD. In most cases there is a basic knowledge base and competency which the candidate for a doctorate must demonstrate via exams of some kind. This is the education the individual should have picked up through his or her classwork along the way. In order to actually earn the degree, however, the student must take what they know, add in considerable research, and produce an accepted dissertation.

I see my course as being the primary education the PhD candidate must have – the stuff that gets them through their exams. But It not only provides the information and knowledge the trader must have. It also helps the trader discover a path for himself or herself to achieve their trading objectives, which is the dissertation part of the analogy.

I don’t tell you how to trade. There’s no way I can do that because trading is a very personal thing. What I do is help you take your personality, your interests, your life situation, and your skills and bring them together to create a plan for your trading – one which gives you the highest likelihood of reaching your goals in the market.

Hopefully that answers the question.

Choosing between trading education and information alternatives

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A little while back I asked for suggestions about things I could do as fundraising activities to help support my volleyball causes while also providing value to traders. I had a number of useful responses with three opportunities being the most strongly suggested.

1) Coaching
This one has come up very frequently of late. I’ve said on several occasions that my schedule makes one-on-one set-ups impractical. I could, however, work something out which is more group oriented. I’m thinking perhaps weekend group online get-togethers, supported by email correspondence and maybe one one-on-one session per member each month. That’s just one idea, though. I’m open to other suggestions.

2) Technical Analysis Course
This is something I’ve contemplated doing for a while now, but just haven’t taken on. It would be a lot of work, but if there’s sufficient interest I’d be willing to run something.

3) “Signal” Service
This one is probably the most problematic. Because of my analyst job I have restrictions. Certainly I couldn’t do anything intraday day. The best I could do would be end of day type analysis – like a here’s what I’m seeing for tomorrow type of thing – and/or some kind of swing/position trade ideas report based on what I’m looking at for my own trading.

If any of the above is of interest to you, let me know by leaving a comment or contacting me. If enough people agree, I’ll get things moving.

Trading is All About You

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Chris Perunna wrote Focus on You on his blog yesterday. It echos a lot of what I wrote recently in My First Major Lesson: Trade to Your Personality, though Chris leans a bit more toward Sun Tzu in terms of the know thyself idea, extending it to suggest that knowing one’s self means knowing one’s enemy – that enemy being other traders in the market.

Obviously, this is an adversarial view on trading. He makes that very clear by stating, “It is you versus the other trader.” By definition in some markets you are literally trading opposite another trader (The Zero Sum Game). As such, it is competition in a somewhat indirect way. You never really get to face your opponent, though.

My concern with the way Chris expresses things in that regard, though, is that there’s a difference between individual psychology and mass psychology. Let’s face it. Individuals can be subject to enormous numbers of different personality quirks. If I understand myself, that doesn’t mean I’m going to understand someone else, especially someone with a very different developmental path and background to my own.

It doesn’t matter whether I understand Trader X, though. The markets are a collective expression. Prices move on the basis of group psychology, not the mental processes of Trader X. It’s these broader patterns on which we need to be focused – though certainly understanding how we ourselves react to the stresses and strains of trading can help in that regard, at least to a degree.

Still, Chris’s point that your success or failure in trading comes primarily from inside yourself is spot on. I’m not talking here about trading psychology as folks often think about it, but rather in the broader mental approach to trading that determines where you focus your efforts.

Brett Steenbarger takes things a step further in Eternal Truths About Trading Success. In his post the good doctor discusses some key trader mental traits of good traders. It ties in nicely with Chris’s broader discussion.

Do You Do Trader Coaching John?

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Do I do trader coaching? This is a question I get from time to time. I have, in the past, worked out arrangements with individuals to be a trading coach for them, but it’s not something I’ve done much of recently. Quite simply, I don’t have a great deal of time for it. The bulk of my days during the week is taken up by my job as a stock market analyst, and I quite often have things to do in the evenings as well. For example, last night I was interviewed for an upcoming audio program.

This is not to say that I’m opposed to the idea of working with traders. It’s that I have to make those kind of arrangements judiciously because I generally have a lot of projects I’m working on at any given time. It’s a numbers game really. I can impact many more people’s trading (hopefully positively) writing on this blog, developing new books, creating new courses, and things like that than I can doing 1-on-1 coaching.

All of this being said, I’m open to working things out on the coaching side of things, so long as the trader can clearly outline what they require and I am capable of providing that to them. If you are looking for some personalized assistance, or are interested in setting up some kind of group coaching, feel free to send me a proposal. I will let you know whether it makes sense for me.

Watch Your Open Orders!

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In my ongoing quest to educate traders and help them along the path of trading development, I will share with you some further advice today, based on my own personal experience. This isn’t one I’m proud of, mind you. In the cause of trading education, though, I’m willing to share my embarassment.

You see, I’ve started using a new trading platform for my futures trading. The other day I was doing some trading and had a few different orders in the system. I eventually cancelled my orders, but apparently forgot one.

I think you see where this is going. 🙂

Yup. The order got filled, much to my surprise. It ended up costing me 7 points. To say that I was angry with myself would be a grand understatement. In the final analysis, that one stupid error cut my gains for the week more than in half.

Please, please learn from my mistakes. Always know what orders you have working and the positions you have on. It really could save you a lot of money.

What Type of Trader Are You?

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Van Tharp has created a kind of trader personality test which is really interesting. If you aren’t familiar with him, Van is one of the early trading psychology trainers and educators to become well known. He was featured in Market Wizards, and later authored Trade Your Way to Financial Freedom, which is a book I definitely recommend.

Tharp’s new test takes you through something like 35 questions (quick multiple choice) and at the end provides some determinations on what type of trader you are. If you’ve been through other personality type tests, you’ll be familiar with the general concept. Might be that you get something useful out of it.

Give it a shot: http://tharptradertest.com