The ex-Madoff trader CNBC just had on reinforced some of the facets of a trader discussed here. The guy traded from 1991-2000 for Madoff. Reading between the lines he made some $$$ and since 2000 has chosen to be a gym rat it sounds like, working as a personal trainer and spending most of his time with his wife and family. What's that suggest? I read that he apparently is somewhat frugal with his money and realized that if he accumulated enough then he would have choices to pursue. That certainly is important to me. When asked what he might do now, since he had a bunch invested with Madoff (apparently invested after he left as a trader), he said "I don't need much stuff, look at how I'm dressed (he had on a Nike shirt and looked like he's just come from the gym). The guy certainly didn't seem like he had a big ego, rather he seemed rather down to earth.
A successful trader should also consider professional support from their broker throughout the trading day. For example, at ProTrade, we have traders on the floor of the NYSE that provide market intelligence and color direct through IM on a intra-day basis.
The one defining characteristic of successful traders is their refusal to quit in the face of adversity. Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough.
Although most of us know the OP is a good trader and has good intentions with his thread, IMO, its basically of no value to any struggling or aspiring trader. Its just more fluff and it wont help anybody. Where are the nuts and bolts? Where are the threads were guys like EricP tell us about where we should be devoting our time in studying the markets? Explain some of your strategies? What type of trading do you do? What do you look for? How do you figure out an exit strategy? Do you trade break outs? MR? Do you even use charts? This is the type of info thats lacking around here. I'm sure you could answer these questions without offering up your strategy on a silver platter. Now that would be helpful. For example, Dustin gave out some useful info a while back when he urged people to buy strength and sell weakness. Stuff like that.
Funny... I hear ya but you know the irony of that is that reading "Mr Know it all" posts is an exercise in psychology itself and many of us in this thread failed by going for the bait and actually validating and perpetuating his efforts to degrade, insult, attempt to outwit or outshine other members here.... ahhhh but he calls this having a normal discussion? Being a successful trader is just as much knowing when to stay out of the market as it is when to get in it. Some of the same principals can apply to communication and/or knowing how to communicate or not communicate with a "know it all" My psychological assessment of him is a jealous type kid who may have had some moderate success trading and now its all going to his head and he cannot contain his excitement. This in turn leads to a compulsion to prove to others that he is superior in his thinking and reasoning. He is looking for attention and praise while demonstrating what he thinks is an "Alpha Male" Traders stance. As for me, my bank account is all the attention and praise I need but I enjoy the comraderie and brotherhood that Elitetrader offers. Psychology has been and always will be a component of successful trading but maybe he will understand that some day. I can only imagine how he would feel if he were to read his own posts 10 years from now as (hopefully) a mature adult.
ChkItOut, Good questions and comments. I'll do my best to address them. My purpose in creating this thread was to help describe what I believe is the mindset of the generic successful trader. How do they think? The characteristics I described were things like logical, humble, skeptical, competitive minded and tight with their money. I believe that those mental aspects are beneficial for the aspiring trader, although those alone will not get you a dime of profits from the markets. Certainly, to be profitable, you need a system or strategy that give you a trading edge (puts the odds in your favor), the discipline to follow your strategy and the money management principles to ensure that you don't blow up alone the way. The biggest hurdle most traders face is developing a trading strategy that both offers and tradable edge, and is something that gives them the confidence to trade. Unfortunately, I can't tell you a cookie cutter system to do that. While there are thousands of ways to extract profits from the markets, none of them offer the ability to scale to unlimited size. Therefore, the best trading edges are those that you find yourself, from your own eyes, watching the markets on a daily basis. Dustin tends to be profitable by buying strength and selling weakness (I know this, and trade with him daily). Personally, I can't make a dime that way, and I always will trade counter trend, buying weakness and selling strength. Is either method 'correct'? Of course not. We all must do what seems to make sense to us, and work for us, as individuals. The worst thing a trader can do, IMO, is to provide all of the details to their trading strategies on a public forum. This is a certain method to see the trading edge become less and less profitable, to the detriment of those trading it. The OPG style of trading is an excellent example of this. That trade style was exceptionally profitable in the early days, until it was pumped by certain people with a vested interest in expanding the number of traders using that method. Now, the number of traders successfully using that method is much, much lower (as is their profit margins). The real winners in such a situation, is the brokerage firms of the traders, that generate larger and larger commissions off of traders following what becomes little more than a breakeven strategy. But, I digress... I guess what I'm trying to say is that I can't and won't provide the details of my trading methods, but I think they are irrelevent, anyway. If I told everyone what I was doing, then they would be much less effective for anyone, so really no one would benefit. That said, I think the mental aspects are what are generic to all traders, and if one can maintain that sort of mental attitude, then it will help them to generate and test trading ideas until they find something that works well for them. For example, what if I (or someone else) spelled out exactly my exact trading methods that I use to make a lot of money. What would you do? Would you immediately begin to trade it? I hope not. I would hope that you'd be extremely <i>skeptical</i> and while wanting to trust me, you'd still have to test out the idea for yourself. Maybe you'd find a way to backtest it. Maybe you would paper trade the idea going forward. You would be very <i>logical</i> to careful review the method, and put it to a rigorous test to see for you own eyes whether the strategy seems to be viable. The last thing you'd want to do is to lose, trading with real cash. Being <i>competitive</i> and a <i>tightwad</i>, you'd feel like an absolute moron if you trusted some anonymous guy on the interest with some new fangled idea, traded it with real money, and after 4 weeks had lost $15k trading it. Anyone that would do this, does not have much hope to become a successful trader, IMO. The mental aspects are what are generic, and key IMO, to successful traders. I regularly chat with a group of friends in a chatroom every day. These are many of the very best traders on ET (IMHO), and a dozen of them have generated over $1M in profits this year. That said there are probably 8-10 major 'styles' of trading out of those 12 traders. Some trade with the trend (as you mentioned with Dustin), some trade counter trend (like me). Some trade only the opening and closing hour of the session. Some trade huge share size on low prices stocks, while most hate those little suckers. My point is, that the styles and strategies are about as different as can be, but the mental mindset is very consistent. Take it for what it's worth. The mental game, IMO, is what will make you a great trader, not having some nuts and bolts of a 'strategy' given to you. "Give a man a fish and he eats for a day, teach a man to fish, and he will eat forever" => I believe that the mental side is what you want. A strategy, is just a fish, that will work... until it doesn't. One additional thought that I'd add to describe my personal trading... I view my trading as a casino, where I take on the role of the house. Look at it as the roulette wheel. Every gambler that walks up to my roulette wheel is making a 'trade' with me. Every chip that they put on the felt, is a bet where I know that the odds are in my favor. The only way that I can lose, in the long run, is if I take a bet that is larger than I can afford to lose (bad money management). That's why I have table limits at my roulette wheel ("If you can't afford to lose, then you can't afford to play"). So, I view my trading as taking thousands upon thousands of trades, and the individual results of those trades are meaningless to me. Some times, the drunk gambler will put $500 on the lucky number 7, and hit that number, costing me $18k. I just smile, wish him good luck, and let him continue to play, knowing that every bet he makes will net me a profit, on average. Anyway, that's my mindset for my trading... Don't get too concerned with the little picture, focus on doing your job (following your strategy) and the big picture will take care of itself. I'll dig up a post I made a few years ago that I think might be pertinent, as well, to post next.
Good Trades, Bad Trades. Winning Trades, Losing Trades. Many people think that a winning trade is a good trade, and a losing trade is a bad trade. This can be a very unprofitable and naive view. A more successful way to look at your trades (IMHO) is to view a good trade as <i>any</i> trade in which you <b>followed</b> your trading plan precisely. Of course, you must also have confidence that your trading plan is sound, and will be profitable over the long term. A bad trade is <i>any</i> trade in which you <b>did not follow</b> your trading plan, regardless of whether the trade was profitable or not. This is a very important point. The most dangerous trades are trades in which you did not follow your trading plan, but managed to close out profitably. Why are these dangerous? They reinforce the idea that you can 'wing it', or ignore your stop-loss limit, or wait a little longer for the market to turn when <i>your</i> system tells you to GET OUT! <b>By ignoring your system, you have failed.</b> By ignoring your system, you have lost your structured plan which ensures that you can trade reproducibly day after day without emotion. In short, by not following your well thought-out trading plan, you have given in to the emotion of the moment. This is a dangerous and losing path to follow. Conversely, by following your plan, you have eliminated emotion from your trading. Over time, you can <i>modify</i> your trading approach to reflect your increased understanding of the market and to build in the lessons you have learned from your previous winning and losing trades. However, you will modify your trading plan when the market is <i>closed</i> after carefully reviewing your reasons for the change. You will not be giving in to emotion by changing your trading plan 'on-the-fly' during the trading day on a whim. Hopefully, this concept is clear. A 'losing' trade can be a 'good' trade. Simply follow your plan. Assume you enter a long position in WXYZ at a price of 90.62 and subsequently exit your position when your stop loss is hit at 90.19. Immediately thereafter, the stock reverses and goes directly to 93 without even hesitating. Unfortunate? Yes. Annoying? Yes. But did you make a <i>mistake</i> by exiting? <b>Absolutely NOT</b>. The trade was exited per your trading plan. The stop loss in your trading plan was design to protect your account balance against a devastating loss, and you followed your plan. It was a successful trade, a good trade. Pat yourself on the back for doing the right thing. During the trading day, don't focus on whether individual trades are profitable or not. Instead, focus on making 'good' trades => i.e. Always following your plan. After the market is closed, you can work to refine or modify your trading plan as needed. But during the day, follow your rules!
Precisely. That is what I said a few posts back. It is about an edge and money management. Psychology and all the other fluff do not overcome the house advantage He lost me, when he tried to get the moderator to move some of the responses after his first 8-10 posts, so he could pontificate without interruption. Many words, little value.