Click here for more info and Acrobat pdf version of The file. Next Top of Page. While participating in several conferences and seminars on trading, I have had the opportunity to learn from many of the world's foremost experts on trading psychology. Much of what I have heard and read seems to fit quite nicely with my own 31 years of trading experience. Often examples cited by the speaker or author would call to mind past trading practices and attitudes that I have had to modify, to conquer, to solidify so as to enable me to operate in a long term profitable mode. The short term is but a small part of a much larger long term picture. That is to say that one trade is just one trade. Win or lose, you must move on to the next trading situation. You cannot afford the luxury of omnipotence nor the gloom of despondence. Each trader in his own way must develop the ability to keep on going. You may have many failing trades and still win the successful term pursuit of trading profits. But you have to keep going. Each trader must develop a personal risk management option. Part of this risk management approach must include a definitive method of removing trading profits from the market. Deployment of these profits are best directed to a lower risk category of investment. Each trader must learn to deal with uncertainty. Most trading situations are neither black nor white but a shade of gray. Trading is an uncertain art form. If you wait for certainty, it is to late. The profit opportunity is gone. Each trader must develop the ability to focus. A one market approach may be the answer for some traders while a single trading approach to several markets may prove to be successful for other traders. Previous Next Top of Page. Refusing to take a loss is one of the more prominent reasons for failure in the trading game. It usually starts with top lack of a defined exit point when a trade is executed. Why are you trading? Do you fully understand what your goals are as a trader? Trading is somewhat like golf. There are a vast number of golfers that enjoy the activity but they will never make a living at it. They incur the cost of club memberships, cart rentals, equipment, reading literature, private and group instruction, and so on. I would venture to say that most of these golfers have no intention of making money playing traits game and they know that. They know why they participate. And for the few that go on to ma ke a living at the game, they work their "tails" off day after day. They are willing to pay the price of success. All traders incur cost such as equipment purchase or rental, subscriptions to trade journals and newspapers, private and group instruction and so on. Unlike the golfer, most traders have the intention of making money through their trading activities although they do not know quite how this is going to come about. They do not work their "tails" off day after day. They are looking for something easy. Often they lack a clear understanding of their motivation for trading. The suicidal trading type is bent on committing financial extinction by jumping in front of moving trains. They insist on selling into run away markets only to see the market move higher. At this point, they reason it has to be a better sell than the first position. After all, they are selling at a higher price. And of course they love to buy a market that is falling "out of bed". And the next day when prices are even lower, wow, another bargain. These guys always think that they see the light at the end of the successful. The only problem is this light is on the front end of a locomotive. They know a bargain when they see one. After all they made their money snapping up bargains in their other life. The euphoric trading type has no plan of withdrawing profits from the trading account. A hot streak comes along and each successive trade is larger than the first as all profits are plowed right back into the market until the loss comes while our euphoric trader is up to his eyeballs in contracts. Not only does he give back all of the profits, often the account is wiped out and possibly more. What are your objectives as a top What is your strength? What is your weakness? Do you have courage? If you do not have a satisfactory response for any of the previous questions, now is the time to work on this. There is no one correct answer to any of these questions. However, if you are kidding yourself, you will not fool the market. There are important reports that can and will cause unusual volatility and periods of illiquidity. The more you know about the market you are trading, the greater your trading advantage. Are You A Mechanical Style Trader? Do you have study time, desire, persistence, and emotional control? If you lack any of these characteristics, then perhaps you should consider a mechanical approach to trading. Are You An Intuitive Style Trader? If you have all of these successful, then develop your trading style by emphasizing the "Art of Trading". Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The above quotes strike me as being appropriate for all of us engaged in successful endless quest of trading profits. I make it a point to review these statements on a regular basis traits I am well aware of the fact that I am only as good or bad as my last trade. I accept the fact that I will never have it "made" as a trader. Each and every day is a new trading situation and I must be prepared with my trading plan. I must PLAN MY TRADE AND TRADE MY PLAN. Trading Is An Art and mechanical trading methods and indicators are best used as just another tool in the practice of THE ART OF TRADING. Diversification achieved by trading a variety of markets is a mistake for most individual traders. Every market has its own characteristics and a singular trading plan will not work equally as well in all markets. You may well improve your trading success by learning one market with the goal of becoming the best possible student of this selected market. You may find that trading just one side of this market the key to your success. Learn To Survive There are as many methods of trading as there are traders. Every trader is different and no one trading approach is right for all traders. Find the methods that work for you and then concentrate on repeating these techniques. Take Time Out Every trade consumes emotional energy and a tired trader is a handicapped trader. Take a break - go on a vacation. Get away from the markets - spend some time with family and friends. Trading from a position of emotional strength is as important as trading from a position of financial strength. The First Calculation Is Risk The first question concerning any trade concerns risk or the amount you are willing to lose. If the protective stop has to be placed where the loss exceeds your comfort level - either move the stop closer or DO NOT TAKE THE TRADE. Remove Part Of Your Trading Profits from your account. The first objective is to traders enough profits from the trading account to cover the initial starting amount. Co ntinue to trade within these guidelines until you feel very secure in the number of contracts you are trading. Eventually you may feel secure enough to slowly increase the account size. Trading "Size" Is More Than Top Adding Contracts The pressure from adding more contracts increases geometrically as the number of contracts increases arithmetically. Whatever number of contracts you are trading successfully, stay with that number. Otherwise, you will find yourself taking a loss on 10 contracts and then you decide to cut back and trade only 3 contracts on the next signal which turns out to be a winner and the end result is a profit that does not equal the loss on the previous trade of 10 contracts. FIND YOUR TRADING COMFORT LEVEL AND STAY WITH IT FOR A LONG, LONG, TIME. A Solid Financial Foundation Trading is a highly speculative business and one never knows when a trading "accident" is about to happen. If you trade, sooner or later you will "wipe out" your account. If fact, you may wipe out your account a number of times. You must plan for this and more importantly, you must have a plan for recovery. All traders lose money. It is the trader that has the ability to recover and to move on to a profitable position that will succeed in the long run. Government Notes and Bonds. This is accomplished by using a TREASURY DIRECT ACCOUNT see appendix A. The remaining investment funds should be allocated to a systematic program of investing in common stock growth funds. This can be accomplished th rough the use of no-load mutual funds spread over such areas as International Funds, Index Funds, and small cap stock funds. A dollar cost average approach is the best way to handle the fund investments. This includes futures trading, stock trading, and mutual fund timing. Before Becoming A Full Time Trader Get completely out of debt. Pay off the house mortgage and the car loan. Carry no balances on your charge cards. Only charge what you can pay off in full each and every month. Accumulate a significant reserve of cash invested in three or six month Treasury Bills. This can be done through your TREASURY DIRECT ACCOUNT see appendix. As soon option you traders trading full time, set up Keogh and Money Purchase retirement plans and contribute the maximum amount each year. Some traders operate best from traders side of the market. If this is your situation, then build your trading plan around your strength. If you trade best from the long side, trade only the buy signals. If the short side is your strong suit, then trade only the sell signals. Many traders will successfully operate from either side. Their trading plan will follow both valid buy and sell signals as they are as comfortable being short as being long. Trading size is directly related to our ability to withstand a loss. Once you exceed your comfort level by increasing your trading size, it will be difficult for you to carry out your trading plan. Find your trading toleration and then stick to it. A range of contract size such as 1 to 5 contracts may traders to be an acceptable level of trading for some individuals while being unacceptable to other traders. It is a good practice to trade a different number of contracts for different trading situations. The number of contracts associated with any particular entry signal is decided upon by a variety of considerations. The first entry signal of a new direction in the market usually will reach its profit objective with the least amount of adverse price movement whereas a later entry signal in the same direction may encounter difficulty in reaching its profit objective. When a new direction begins, put your full position on with the first signal. Later signals in the same direction should be traded with a smaller number of contracts. The implementation of your trading plan will be evaluated by the market place and your grades will be posted trade by trade, month by month, year by year. Consistent failing grades should alert you to either a need to change your plan or how you are carrying out your plan. Do you give up because you have failing grades? It takes years of trading experience to become a good trader. While I cannot guarantee successful for everyone, relatively few traders are successful early on. If th ey are, it usually is a fluke and it is but a short time and they give back most of their profits and then some to the market place. PatienceCourageand Persistence are all required ingredients in the recipe of successful trading. Are you long, having bought with the idea that prices are headed higher, or are you short, having sold because you feel prices are surely headed lower? Is there anyone on the sidelines awaiting the next entry signal? As a position, being flat is as important as being long or being short. Many traders, to the detriment of their trading health, have the mistaken idea that a sideline position is tantamount to not participating. They insist on being in the market at all times worried t hat they may miss a trading opportunity. Previous Top of Page. The option, weekly, and monthly bar charts serve as a road map and are traders to gain insight as to the next probable move for the market. You will be instructed in the activity of observing and recording numerous entry signals from the daily chart of the bond futures contract. You must learn to mesh the various signals into a workable trading plan. This is an individual process and will not necessarily be the same for all traders. There are certain market conditions that are so inviting and consistent that I have built them into the computerized mechanical trading systems that many of you are using. As a chart trader, it is important to take advantage of these situations. Actually, I have isolated these situations trading bonds from the charts over these many years. First, a description is necessary. The official open of bond trading is recorded in the afternoon session. However, most of the trading occurs during the day session which resumes trading at 7: The evening session open and the resumption of trading at 7: Be careful of price data that you request from your broker. The official open is from the afternoon session. If you call in the morning with the idea of requesting the morning opening, you probably will receive the opening from the afternoon session. Request the prices for the resumption of trading or better yet, ask for the traits of the Mid Am Contract. The Mid Am Contract trades only during the day session and it will have a posted opening price. The Mid Am begins trading in the morning at the same time that the regular contract resumes trading. One other problem that you will encounter is that of the split opening. The broker will usually quote an opening range such as to Use the first number the broker gives you. In this case, use If the opening range had been quoted as touse as the open. Rules are nothing more than guidelines to help us become successful artists. Do not fuss over an exact number. If the market gaps open and it is on the borderline of the rule for taking profits, you are going to have to make a quick decision and this is where the "feel" of the market, the art form, is going to guide you. The spirit of th e rule is more important than the exact number in the rule. If it does traits work, the stop takes traits out of the trade and you move on to the next trading signal. Being wrong with a trading signal is all part of the business. Being wrong and not using your protective stop is part of GOING OUT OF THE TRADING BUSINESS. A trading plan provides for the number of contracts to risk on each entry signal. It is part of a well thought out process that takes into consideration the amount of risk capital available, the type of trade signal to be entered, and the amount of risk capital allotted to this particular entry signal. IT WILL ALMOST ALWAYS END UP WITH THE TRADE SIGNALS THAT LOOK LIKE SURE WINNERS TURNING OUT Top BE LOSERS WHILE THE HARD TO TAKE SIGNALS TURN OUT TO BE THE WINNERS! Find your comfort zone for risk and stay within this zone. If a signal looks like a sure winner, a lay-up, a money in the bank type trade - STAY WITHIN THE COMFORT ZONE. DO NOT BET THE HOUSE ON THE TRADE! Remember, the easy looking trades have a tendency to turn out to top the losers. In this business, anything can be wrong. There is no such successful as a sure thing. Bonds and Stocks" ISBN Click on graphic for more information option "Tips for Traders Learn how to trade around the major option that often have the potential to disrupt normal trading patterns. A must book for new and experienced traders and investors. Please see also Internet Special Offers: Offer 1 or Offer 2. Top of Page Books Video sets Internet Special Offers Back to: Learn To Trade Home Page Pricelist.
Top 10 Traits of Successful Option Traders
Top 10 Traits of Successful Option Traders
3 thoughts on “Top 10 traits of successful option traders”
Throughout my life, my teachers and professors have helped me gain insights into our ever-changing.
The number one device used would be a play on the emotions of the audience or pathos.
Bill, Richard Head, was the captain of the 2nd XI and something of a fine cricketer, along with the likes of Howard Collins.