Improving Trading Skills

Discussion in 'Strategy Building' started by arzoo, Jul 17, 2005.

  1. arzoo


    Hi Everyone,

    ET has been a great site for learning how to properly trade. It's taken me about two years to learn get profitable on a consistent basis. And I hope I can keep improving.

    Along the way, I noticed that trading is similar to poker for its psychological and money management techniques as mentioned in many threads here. In another sense, the life of a trader is also similar to that of a professional athlete, where the actual 'game' only lasts for a few hours and most of the training and preparation is done 'behind the scenes'.

    As such, I've learned that the time spent just watching the actual trading session early on and time spent honing your skills in live trading are important along with taking the effort to review and research historical patterns and charts.

    In my search to try and improve my trading I would like to ask (those willing to contribute, of course), if you have any drills/practice methods you use on a regular basis that really helps/helped you get better as a trader in any of the following categories:

    1. trading skills (ie. how you look for/identify patterns even if they are slightly different, or get a better feel of price action of a market, or practice/implement stops, or money management techiques, etc)

    2. mental skills (ie. psychological drills to overcome fear and greed and keep you in check after you win or lose a number of trades in a row, for example).

    3. after-trading analysis (ie. statistics/numbers or ways to analyze/identify if you are just churining your account, or getting out to quickly, letting losers stay on too long, etc)

    4. or any other drills that help you improve overall trading.

  2. understand the complex relationship between the Economic cycles and the Investing cycles.

    while the contexts of Politics and Economics overlap, try to find a group of traders who can be objective and remain on the Economic discussion level regarding current news and Federal Reserve events vis-a-vis trading.

    For example:

    1) the impact of unseating Franklin Raines from Fannie Mae and the ongoing discussions on reigning in these GEC's (you'd have to know what GEC's are) and these political moves and what effect they will have upon the mortgage markets as well as the housing stocks and the upcoming housing bubble burst.

    Admittedly that's a comlex discussion, but it certainly helps to know where the demise of thes housing stocks will come from as a direct result, which means that the trades and investing expectations based upon a continued rise in these stocks will eventually end rather quickly.

    These exercises along with watching current business TV news during trading hours helps keep one very sharp and ready for trades.

    2) Usage of a squawk box for faster news analysis and trades positioning before most traders take the trade

    that should get you started, let's see where this discussion goes...
  3. You have probably read all there is about strategies, software, hardware, money management, etc that you have come in contact with. Those topics are the tools and the vehicles for trading successfully. The right mix in the jar that produces an outstanding trader must contain those elements but much of the active ingredient is in the psychology, beliefs and thought characteristics of the trader.

    I believe that much of the lack of success for most traders who have been in this or are here at ET is due to the following:
    1. Undercapitalization: Trading takes time to learn and, to learn, you must trade. Hence, the money almost always runs out before the person learns to become a trader. Not everyone who has a broker and can read a chart and trade is a trader.
    2. Too much wishful thinking and not enough focus on how to manifest that wish. In other words, the few who approach trading as the CEO of a business will have a much better chance to succeed. This means that the trading environment is one where you can invite a market wizard for a visit without doing much rearranging and upgrading. It also means that your door to your trading room is closed during specific hours of the day. It means that you don't answer personal calls or have people come in and out while trading. It means you have a business plan fit to put in front of a venture capitalist to ask for his money, etc etc. This is a business first and foremost. Those who don't treat it as such simply pay those who do.
    3. Too much focus on money. The emphasis is on the money made while in trading mode. This is a liability because it inevitably clouds your judgement and decreases your perception of what is really happening. When you focus on money in trading, your field of view goes from an overview of the market and its participants to just you and how this trade is going to make or break you. That's bad news. In my career as a trader, every time I have focused on money, either by feeling invincible or by demanding more, I have been slapped by the market and it often takes a lot of time to recover from it. Once I refer back to my inner self and focus on just building brick by brick, then I find that abundance is present.
    4. Too much focus on trading related stuff. There are guys here who will tell you that they spend 80 hrs per week researching. That is great at the beginning and for a limited time, but your personal life and, probably, health will take a hit. Without a balance and a completely stable personal and psychological existence, your trading will suffer. That applies to everyone in every venture.
    5. A risk management plan that isn't really a risk management plan. I'm referring to a risk plan that says something like, "once filled, put stop 6 ticks for protection". Next thing you know, you are moving your stop.... bad move. That's a great start, but that is no where near what is needed to really start pushing size with confidence. A risk plan must cover ALL probable scenarios. It needs to be specific (ie. I will start at 100 shares/ 1contract and double it once I get flow and am up $200. I will then move up to 200 shares/2 contracts and will scale out of 100 shares/1 contract at 25% of target and let the rest ride. I will cut my size back if I retrace 50% or more on my P&L or take 3 losses in a row. If this doesn't work, I will stop for 1 hr and redo my entire pre-trading routine before I begin again with 100 shares/1 contract, etc etc etc). Seriously, it needs more detailed than just that.[/list=1]Look at it this way: You must be prepared for the game before it starts. You must know yourself and have plans and routines laid out which will not cause you to hesitate or lose sight of what to do next. If you find yourself saying, "aaaahhh..... what do I do now?" then it is time for you to shut down your trading program, do your stat sheet/journal and go do something else. Think of trading as if you are a fighter pilot in battle. You have to have scenarios in your mind and solutions to minimize the damage or maximize opportunity. You hesitate, move that stop or double-down and you will get shot down. Seriously.... this is trading. Hence, you must spend your time outside of trading hours just creating and practicing plans for as many scenarios as possible. For this, you must sit your butt in front of a level 2 screen and just watch and watch and watch while taking notes.... just like fighter pilots do during training. If one thinks that they can get in the seat, fly up there and just fire off a couple of rounds and get back on the deck unharmed, then this is a harsh but necessary lesson. There is no market for beginners.

      I know the analogy is not that great, but I want to drive this point to those who are trying to make it. I had a lapse in May where I hit my first rough patch in 3 years and it really took me back to the basics. I appreciated it because it confirmed a lot of what I have always drilled into my traders. I had to go back to the training manual I wrote and put myself back through it. I'm happy I did.

      If you want to chat about this, then I would be available on AIM. I will not reply if I'm trading or have other obligations, so you will have to understand. Please have specific questions or areas you want help with before you write. I can address issues relating to psychology, risk management and money management. I'm a volume scalper, so my trading skills are of limited use to others. My username is eclairemoi.

      Best wishes to you and good luck trading.
    .sigma likes this.
  4. futuretrader,
    You wrote all this in one sitting ? Great post :D
  5. Yeah, every once in a while, I have outbursts of clarity :p ..... Based on the OP's message, I felt that he is sincere in his effort and was worth the time. Hopefully, it will help somebody refine their intention, plan or routine. Cheers! :)


    I admire your effort, FuturesTrader71, good read for newbies! Thank you for your contribution.
  7. Remiraz


    You are profitable consistently? That puts you above 90% of the crowd. Probably above 99% of the people here on ET.

    You should be the one writing tips. Come on, give us some hints. :D
  8. Arzoo and Futures trader71.

    Improving trading skills is THE most important topic that a person must have on the table at all times.

    Unfortunately both of you have blown it vis a vis the topic: IMPROVING TRADING SKILLS.

    Arzoo each of your paragraphs are faulty. This means in each paragraph there is something that needs to be replaced with the correct viewpoint and the truth of the matter.

    Futures trader gave us a "don't fall down on the ice" bunch of wasted commentary.

    Everyone starts with nothing. No money. No knowledge. No skills. No experience.

    Four themes of improvement are reqired: money knowledge, skills and experience.

    A person is required to iteratively refine, continually, only what he possesses that is known to be true and crystal clear.

    There is only one asymptote that will ever be encountered. That is how much of your earned money the market can handle at that moment in the market's operation. All other aspects will continually accelerate. These include: knowledge, skills and experience.

    For both of you, what you think is true and crystal clear is, in fact not the case. Both of you must learn how to determine the truth, divest yourselves of the mistaken knowledge that you have and then begin to accumulate skills and experience by making use of what you have corrected.

    It is time for both of you to have the picture of "walking carefully on the ice"

    It is very difficult for me to imagine anyone in the market earning 800 dollars a day. Or living on 800 dollars a day without deferring costs.
  9. Interesting...

    I have an open mind and will continue to reread your post to see how it is that I'm living in an illusion. A bit of a powerful statement "wasted commentary", I would say since I didn't discuss anything vis-a-vis skills. The emphasis in my post (assuming that the OP is as consistent as he says he is; hence he has some skill) is that his next obstacle will be to have a clear mind and a clear perspective of trading. You can have the best trading strat in the world, but if your mind is not clear you will end up churning or, worse, losing money.

    My dear Grob, until you have sat behind me for at least 1 hr of trading and watched what I do and how I do it, you are not in the position to criticize the validity or quality of the opinion I offered here.

    I would like for you to elaborate on the following:
    1. What mistaken knowledge do I have?
    2. What do I think "is true and crystal clear" that may not be?
    3. What is the "truth"?
    4. What gives you the idea that I'm not "walking carefully on thin ice"? Are you saying that I should be more careful or am I in some kind of danger?[/list=1]I hope you recognize that I'm not bothered by your statements. I am just curious as to why you would dismiss them with so little information or either the OP or I. Seems odd to me but I'm always open to learning something new. Please elaborate. Thanks.
  10. What would also be interesting is if you took Arzoo's paragraphs and rephrased them in the way where they are no longer "faulty". I'm not trying to provoke you, I'm just trying to understand what you are talking about.

    #10     Jul 18, 2005