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The Path To Becoming A Master TraderA question I hear and a situation I face myself on occasion is "I had a setupto enter ...
Recently I was reading an excellent book called "Trading from Your Gut" byCurtis Faith. Curtis was one of the original Tur...
and should not be confused with emotions. There is no place for emotions intrading, but intuition comes with practice and ...
Be Consistent - Once you identify a strategy that gives you a winning       edge you must consistently use it. If you star...
After you learn the mechanics and fundamentals of trading (left braintraining), the real work begins. We must understand o...
logical, not fuzzy. Our brain has the capability to be intuitive and logical. Theright side of the brain is used for our i...
Later in the book Curtis discusses some lessons he learned about keepingtrading simple, which echo many of the lessons we ...
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The path to becoming a master trader

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TRADING TO A MASTER

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Transcript of "The path to becoming a master trader"

  1. 1. The Path To Becoming A Master TraderA question I hear and a situation I face myself on occasion is "I had a setupto enter the market and I found it very difficult to pull the trigger, why?" Iwould like to address this issue and then write about simplicity in trading onyour way to becoming a Master Trader.The majority of trading success comes from the mental side of trading notthe strategy like most aspiring traders assume. Just like any endeavor worthpursuing you must learn the proper way to trade first and then practice,practice, practice... In my opinion trading success breaks down like this: Psychology = 85% Risk Management = 10% Strategy = 5%Psychology is so important for a trader to be consistently profitable. For thisvery reason Online Trading Academy offers courses on trading psychology.After you learn the mechanics and fundamentals of trading (left braintraining), the real work begins. We must understand ourselves and how wewill react to certain market conditions. Traders must also train their intuitivemind (right brain training) to help them identify profitable trading patternson a consistent basis. In class we instruct students on how to spotsupply/demand levels. This takes time to train the mind what to look for onthe charts. Risk management is very crucial to your success in trading, butwithout the proper mental state of mind even the best risk managementwont help you much.Strategy seekers are people coming into classrooms and internet websiteslooking for the Holy Grail of trading, like there is some magical formula orsecret that everybody knows but them. I see this too often and honestly itamazes me that people really believe all this hype about trading systemsthat make millions of dollars for just $29.95. If trading were really that easythe unemployment rate in the United States would not be at 8%.
  2. 2. Recently I was reading an excellent book called "Trading from Your Gut" byCurtis Faith. Curtis was one of the original Turtle traders that Richard Dennistrained and later went on to make millions in the markets. What firstsparked my interest in this book was the concept of trading from your gutand how all these Turtle traders were taught a very mechanical tradingsystem to extract millions from the markets. Using a mechanical tradingsystem requires extreme discipline in order to keep placing trades no matterhow many losses you have in a row. For most traders this is impossible to dobecause our respect for money gets in the way. I mentioned earlier aboutsystems that you can buy for $29.95, trust me this is not one of thosesystems. Curtis does an excellent job explaining why we have trouble pullingthe trigger on trades sometimes. He starts out explaining how computerswere once thought to be able to think like the human mind only faster. To adegree they can, but when it comes to finding chart patterns(supply/demand levels being one of them) the computer performed verypoorly at this compared to the human mind. Computers are designed to belogical, not fuzzy. Our brain has the capability to be intuitive and logical. Theright side of the brain is used for our intuitive side thinking (spottingrepetitive patterns) and our left side of the brain is used for our logicalthinking (structure and logic). The problem most traders have is we are leftor right brain dominant. This is where the problem begins with not onlytrading, but in other aspects of our lives as well.To become a Master Trader we must allow the right brain to work as a teamwith the left brain. If one side or the other is dominant you can expectproblems in making consistently profitable decisions when it comes totrading.Our right brain is the one who sees recurring patterns on our charts. Justlike watching a movie many times we can anticipate that when we seemarket patterns that we know what will happen next. Where does thisassumption come from? The answer is your gut. Intuition comes from here
  3. 3. and should not be confused with emotions. There is no place for emotions intrading, but intuition comes with practice and time.Our left brain does all the logical thinking for us. It wants a logical reasonbefore it can allow itself to respond to a situation. For this very reason whenthe right brain sees a pattern that it has identified the left brain will not letyou respond to the setup because it cannot see a logical reason for taking it.This is why traders have a hard time pulling the trigger because the leftbrain does not have a logical reason for the trade setup.Training our left and right brains to work as a team is very important. Theright brain is far more advanced than the left brain gives it credit for, butwithout a logical reason to react the left brain will shut down any ideascoming from the right brain.In order to train our minds to work together we must be rule based tosatisfy the left brain and able to identify patterns on charts to satisfy theright brain. If we create rules for these patterns we are identifying thenwhen it comes time to make a decision both brains will be satisfied and aninstant decision can be made.Later in the book Curtis discusses some lessons he learned about keepingtrading simple, which echo many of the lessons we teach in our courses: Trade with an edge - whatever market strategy you decide to use look for it to have something that gives you an advantage over other traders. One way to making money in the markets is having this edge. A strategy that has a proven profitable track record and sound rules are what you are looking for. Manage Risk - Futures markets have a lot of leverage and many traders find themselves trading with so much risk that they are capable of losing all their trading capital in just a handful of trades. Look to only risk 1-2% of your total account value on any one trade.
  4. 4. Be Consistent - Once you identify a strategy that gives you a winning edge you must consistently use it. If you start to pick your trades and not follow your plan you will inevitably pick the losers and let the winners go. Plan the trade and trade the plan consistently. Keep it Simple - Learning a simple strategy to follow the markets will lead you to consistently following your plan. Make sure your rules are written down and that you have back tested your strategy. Doing this will satisfy both right and left sides of your brain. Allowing you to pull the trigger without any hesitation.Your goal in trading should be to become a Master Trader. This is a traderwho uses both sides of their brain to make confident and successful tradingdecisions. As I mentioned earlier this will take time to practice, but if youapply yourself you can master this challenge of trading. I received awonderful quote from a reader in London recently and I would like to share itwith you.“Opportunities are never lost. Someone will take the ones you’ve missed.”A question I hear and a situation I face myself on occasion is "I had a setupto enter the market and I found it very difficult to pull the trigger, why?" Iwould like to address this issue and then write about simplicity in trading onyour way to becoming a Master Trader.The majority of trading success comes from the mental side of trading notthe strategy like most aspiring traders assume. Just like any endeavor worthpursuing you must learn the proper way to trade first and then practice,practice, practice... In my opinion trading success breaks down like this:Psychology = 85%Risk Management = 10%Strategy = 5%Psychology is so important for a trader to be consistently profitable. For thisvery reason Online Trading Academy offers courses on trading psychology.
  5. 5. After you learn the mechanics and fundamentals of trading (left braintraining), the real work begins. We must understand ourselves and how wewill react to certain market conditions. Traders must also train their intuitivemind (right brain training) to help them identify profitable trading patternson a consistent basis. In class we instruct students on how to spotsupply/demand levels. This takes time to train the mind what to look for onthe charts. Risk management is very crucial to your success in trading, butwithout the proper mental state of mind even the best risk managementwont help you much.Strategy seekers are people coming into classrooms and internet websiteslooking for the Holy Grail of trading, like there is some magical formula orsecret that everybody knows but them. I see this too often and honestly itamazes me that people really believe all this hype about trading systemsthat make millions of dollars for just $29.95. If trading were really that easythe unemployment rate in the United States would not be at 8%.Recently I was reading an excellent book called "Trading from Your Gut" byCurtis Faith. Curtis was one of the original Turtle traders that Richard Dennistrained and later went on to make millions in the markets. What firstsparked my interest in this book was the concept of trading from your gutand how all these Turtle traders were taught a very mechanical tradingsystem to extract millions from the markets. Using a mechanical tradingsystem requires extreme discipline in order to keep placing trades no matterhow many losses you have in a row. For most traders this is impossible to dobecause our respect for money gets in the way. I mentioned earlier aboutsystems that you can buy for $29.95, trust me this is not one of thosesystems. Curtis does an excellent job explaining why we have trouble pullingthe trigger on trades sometimes. He starts out explaining how computerswere once thought to be able to think like the human mind only faster. To adegree they can, but when it comes to finding chart patterns(supply/demand levels being one of them) the computer performed verypoorly at this compared to the human mind. Computers are designed to be
  6. 6. logical, not fuzzy. Our brain has the capability to be intuitive and logical. Theright side of the brain is used for our intuitive side thinking (spottingrepetitive patterns) and our left side of the brain is used for our logicalthinking (structure and logic). The problem most traders have is we are leftor right brain dominant. This is where the problem begins with not onlytrading, but in other aspects of our lives as well.To become a Master Trader we must allow the right brain to work as a teamwith the left brain. If one side or the other is dominant you can expectproblems in making consistently profitable decisions when it comes totrading.Our right brain is the one who sees recurring patterns on our charts. Justlike watching a movie many times we can anticipate that when we seemarket patterns that we know what will happen next. Where does thisassumption come from? The answer is your gut. Intuition comes from hereand should not be confused with emotions. There is no place for emotions intrading, but intuition comes with practice and time.Our left brain does all the logical thinking for us. It wants a logical reasonbefore it can allow itself to respond to a situation. For this very reason whenthe right brain sees a pattern that it has identified the left brain will not letyou respond to the setup because it cannot see a logical reason for taking it.This is why traders have a hard time pulling the trigger because the leftbrain does not have a logical reason for the trade setup.Training our left and right brains to work as a team is very important. Theright brain is far more advanced than the left brain gives it credit for, butwithout a logical reason to react the left brain will shut down any ideascoming from the right brain.In order to train our minds to work together we must be rule based tosatisfy the left brain and able to identify patterns on charts to satisfy theright brain. If we create rules for these patterns we are identifying thenwhen it comes time to make a decision both brains will be satisfied and aninstant decision can be made.
  7. 7. Later in the book Curtis discusses some lessons he learned about keepingtrading simple, which echo many of the lessons we teach in our courses:Trade with an edge - whatever market strategy you decide to use look for itto have something that gives you an advantage over other traders. One wayto making money in the markets is having this edge. A strategy that has aproven profitable track record and sound rules are what you are looking for.Manage Risk - Futures markets have a lot of leverage and many traders findthemselves trading with so much risk that they are capable of losing all theirtrading capital in just a handful of trades. Look to only risk 1-2% of yourtotal account value on any one trade.Be Consistent - Once you identify a strategy that gives you a winning edgeyou must consistently use it. If you start to pick your trades and not followyour plan you will inevitably pick the losers and let the winners go. Plan thetrade and trade the plan consistently.Keep it Simple - Learning a simple strategy to follow the markets will leadyou to consistently following your plan. Make sure your rules are writtendown and that you have back tested your strategy. Doing this will satisfyboth right and left sides of your brain. Allowing you to pull the triggerwithout any hesitation.Your goal in trading should be to become a Master Trader. This is a traderwho uses both sides of their brain to make confident and successful tradingdecisions. As I mentioned earlier this will take time to practice, but if youapply yourself you can master this challenge of trading. I received awonderful quote from a reader in London recently and I would like to share itwith you."Opportunities are never lost. Someone will take the ones youve missed."

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