Originally posted by DT-waw
"The right state of mind" can help you in trading... it's an illusion. Everything comes down to the nature of market, risk, position management and simply luck.
I think that successful trading is a combination of:
1) how your trades/strategy/system fit with the nature of markets you trade - you can try to trade with market swings, by using optimization, of course to the past data.
2) right position management. If you lose 20%, you have to earn 25% in order to go flat. Your task is to minimize that negative effect.
3) LUCK. You can only optimize your system rules, parameters and position management to past data. Future is unpredictable, uncertain. So, you have to be lucky to some degree, in order to be profitable.
I can tell myself that i trade with not my own money. OK i trade with my best friend money. So what? Markets are chaotic. This approach won't help me much IMO.
I appreciate your response. I understand how you feel about what you say. Please try and understand that the purpose of my post was not to diminish the importance of strategy, systems, risk management, or even luck. I essentially agree with what you say. My intent was only to add another dimension to the arsenal of what we have to work with as traders. For me, as well as for so many, it is the mental approach that accountability plays into that I felt (hoped) would be helpful....or at least something to put into words for others to evaluate. I am a big believer in trying to verbalize what I have come to slowly realize over a long time. If this "accountability" mindset does nothing for you, that is fine. Nothing works for everyone. Perhaps I should have included my beliefs in why different personalities are more suited for different strategies. A whole different issue that I could go on about forever. Probably an important issue to talk about, but not right this moment. I will, however, for the sake of you and others that have not seen what I wrote in another thread, indulge myself and you as well, and paste my advice to a beginner trader who asked how to best start. You will see that essentially I am consistent in my beliefs that trading is learnable. My "accountability" remarks were intended to help others, who like myself have learned what to do, but have had problems keeping the proper focus on what not to do as well.
This is an answer to a 17 year old that asked (or I believed at the time was asking) how to learn to trade as a beginner:
Originally posted by rs7
I could give a glib answer here too, but my real advice is to start watching a few stocks and get a "feel" for them. Pick say 4 or 5 stocks in 4 or 5 different industry groups. Make sure they are actively traded.
Watch what these stocks do relative to each other both within their own groups and compared to the other groups. Watch what one group does compared to another. Watch what they (both the stocks and the groups) do relative to the markets as a whole.....s&p, and nasdaq. I don't think the Dow, which is only 30 stocks is all that important to watch, but watch it anyway....doesn't take much time.
Look at charts of the stocks you follow. See if you recognize any repetitive patterns.
Do paper trades...keep score for yourself. (Make sure you buy at the offer and sell at the bid!...it will be worse in real life, so don't cheat by going by last price).
Go over your trades when you are done. See if you can spot what the winning trades had in common. What the losing trades had in common. (other than results).
Don't buy stocks that are moving up very quickly. Don't try to short stocks that have sold off dramatically. Know what rules apply to shorting stocks!
Don't buy stocks that are laggards. Buy the strongest stocks, short the weakest.
Successful day trading consists of (IMHO)
1. Discipline
2. Timing
3. Stock Selection
Hope this helps....best of luck!
Now as you can see, I didn't say anything complicated. I did not talk about specific strategies. I did not talk about finding a style to suit one's personality, risk tolerance, whatever. Just a starting point for the novice. What I believe works overall. Do I personally trade as described here to this young man? Pretty much this is my basic approach. But do I alter to adapt to different market environments? Of course....but sometimes you just need to remember the basics.
Learning to trade is one thing. Understanding yourself is another. For me, I needed to understand that I had to think more objectively about my personal account activity. It has helped me. And like I stated, I only hoped that my thoughts could possibly help someone else. I don't think I am so unique.
And finally, LUCK...yes, it exists, it comes into play. But the good and bad luck seem to cancel each other out over time. My time frame as a trader is over 20 years. I try not to look at my results in short periods. I get aggravated like everyone else if I have a bad day. I feel better when I have a good day. But I try and stay as emotionally even keeled as possible. Because the truth is, I cannot undo the bad luck, and I can't count on pressing the good luck always working. I do, however try.
One last thought ...about pressing.....
If you flipped a coin and it came up heads 9 times out of nine, and you needed to wager on the 10th flip, what would you do? Would you feel that a tail was due? Would you feel that it was statistically a 50/50 proposition so it didn't matter? Would you feel that "heads are on a roll"? Is there a right answer to this? I believe there is. Does that make me an illogical person? I know this is off the subject, but I find it an interesting question to ask prospective traders (I have been in the position to interview and hire...but not now, so please don't take this there). What would you answer? And why?
). Anyway, it worked for several months. Then when it stopped working, I stopped doing it. It is about adapting. And remembering that the market is never wrong. The market was not doing what I believed it should do, but what I believed didn't matter. So I went along with the market, not with my convictions. That is a big part of my success over the years. Go with what works....very simple, but sometimes very difficult to accept.