The Journey of Making a Living as a Professional Trader

Wingz

Wingz

Why write a journal?

I'd like to start a journal here that will outline pretty much every thought and feeling that goes through my head as I work toward becoming consistently profitable. I'd like to cover the routines that I establish, the methods that work with and pretty much everything that I go through.

My motivations for doing so aren't for validation and acceptance by others but for myself and having something 'external' that I can look back on and be pushed to improve. By holding myself to high standards and being honest and public in my journal I hope that over time other people can add value or provide insights - and ultimately gain value from.

At the end of my trading journey I'd like to write a book about my experiences trading (another way of holding myself to a high standard) and hopefully my writing style will be improved and honed by posting here. If nothing else I'll develop a habit of continual self-reflection and awareness that will help me deal with the psychology of trading and steady continual improvement.

Previous trading experience

I'll be starting at a prop trading firm in a couple of weeks and trading Oil Calendar Spreads. I have previous experience at another firm trading the Bund/Bobl/Schatz FLY. I have also traded Commodity ETFS, Stocks and the DAX, but I'll get into all of that in more detail later on.


What to expect?

Daily or Weekly P/L
Insights
Chart Analysis
Detailed thoughts about trades
Anything I'm reading or learning from
Learning about my trading personality

I'll find an interesting way to structure things and try and write an 'article format' post once in a while as I learn and develop new things. But overall this journal will be a work in progress - hopefully improving as much as my trading! :D
 
i would be interested in following your posts. im new to trading and am trying to learn a trading strategy for the emini s&p market.
 
So I’ve just found a place to live 10 minutes from the trading floor (hell yeah) and I pretty much have a couple of weeks now to get everything sorted in my head before I start. Some of the topics I’ll cover will probably ramble a little and be unstructured but I’ll try to edit them down so they’re easier to read and so they’re clearer in my head.

Some of the topics I have an interest in and will write about:

• Nobody cares about your success
• Getting on the path to mastery
• Finding your trading personality
• Meditation and Trading
• Recommended reading to get you to the next level
• Having a balanced life
• Different styles of trading

Hopefully write a couple up in the next few hours
 
Quote from Wingz:

So I’ve just found a place to live 10 minutes from the trading floor (hell yeah) and I pretty much have a couple of weeks now to get everything sorted in my head before I start. Some of the topics I’ll cover will probably ramble a little and be unstructured but I’ll try to edit them down so they’re easier to read and so they’re clearer in my head.

Some of the topics I have an interest in and will write about:

• Nobody cares about your success
• Getting on the path to mastery
• Finding your trading personality
• Meditation and Trading
• Recommended reading to get you to the next level
• Having a balanced life
• Different styles of trading

Hopefully write a couple up in the next few hours
More...

A great trader once told me to never talk about trading. Verbalizing trades forces the brain into a bias towards the literal and trading is more abstract and dynamic than that.
 
Finding your Trading Personality

I’m sure you’ve probably heard that most traders mess with perfectly good systems or don’t trade them as they should. Even if they spend $2000 dollars on a system they still don’t follow all the rules correctly. Why is this?

Everyone has different risk appetites and feel different emotions when faced with the same market conditions, finding your trading personality is about choosing a strategy that has an edge and that you have the resilience and determination to stick to without screwing up. Are you the kind of person who is aggressive and likes to be correct? Are you the kind of trader that likes to read and research before taking action? – the best way to find out is to get out into the market on a simulator or with small size and see.

Finding the market to trade
  1. Stocks
  2. Bonds
  3. Options
  4. Equities
  5. Futures
    [/list=1]
    You’ll have to do a lot of research into each to find the best one for you.

    Determining your traders equation

    (chance of success*profit) – (chance of failure*loss) = positive = an edge

    The traders equation is a pretty simple concept that determines your edge. You need to balance your risk/reward ratio and your probability of making a winning or losing trade.

    As a guideline if you’re a scalper at the beginning you should have equal risk/reward and a probability of success greater than 50%, preferably around 60-70%.

    If you like to make money on swings then you’re going to have a lower risk/reward ratio, probably at least twice or more reward. But you will pay for this by having a lower chance of success, probably less than 50%, around 40% or lower.

    When you first get started it’s probably better to go for trades with at least 60% success of moving X ticks up rather than down (given you go long). That was the case for me anyway, I found that if I focused on trades with a lower chance of success then I cherry picked them and missed the big moves.
    My personal style prefers the swings more but I do scalp most of my positions with half or a third of my size to pay for some of my losses. I like the big swings though, but to force myself to take most setups I have the scalp component in there too.

    Finding your trading style/method

    Outrights
    Spreads
    Price Action
    Systems trading
    Technical analysis
    Trends, Ranges, Reversals
    Algorithmic trading
    Fundamentals
    Value trading
    Market profile
    Momentum trading

    This list seems pretty pointless, there are lots of lists out there but the only way you’re going to get any insight into how you might like to trade is by researching methods, I only want to try and point you in a few potential directions. There is no best way – only your way.
    If you’re getting started, this isn’t the route I started out on but it’s the one I ended up on – read everything you can about price action - basic trendlines, channels, swing highs/lows, moving averages. Most of the indicators are derivatives of price action and I feel they take me away from understanding the dynamics that are really going on in the market. I think learning about price action is a great foundation that can only help. Then move onto indicators to get a broader picture and choose what resonates well.

    Timeframe

    Pick your timeframe, I’ll focus this journal on daytrading but there are lots of timeframes to hold a trade – see which works best for you.

    Conclusion

    I’d recommend drawing out a mindmap and begin to research different markets, see how much margin you need, read about leverage, see the opening times and try to look at some charts. Even Youtube has a few really good videos of guys putting on trades and talking through them.

    After that you need to see what your personality would prefer in terms of the traders equation. You will not have a 90% success rate and have a reward that’s 3 times your risk with consistency – edges are fleeting. Decide what’s best for you – it’s probably going to take a lot of time and trial and error. Don’t get stuck in the trap of looking for the best indicators, just study the basics and take the first step.

    Get a brief overview of some of the different styles and go deeper into the ones you like the most. Then become a mono-manical obsessive freak and build your own strategy that fits you, following Bruce Lee’s strategy of taking what works best and discarding the rest.

    As I develop my own strategy once I start I'll let you know the process I go through. With Oil Calendar spreads I assume most of it will be range trading, reading the orderflow and price action with some breakouts and measured moves. I might use an oscillator or market profile. There will probably also be some fundamental plays, spreading back months with the overreaction of the front month after some news. But I'm not sure - I'll see how it goes.
 
Quote from Lights:

A great trader once told me to never talk about trading. Verbalizing trades forces the brain into a bias towards the literal and trading is more abstract and dynamic than that.
More...

I agree.

I think once you get to a certain level trading goes from 'unconscious incompetence' to 'conscious incompetence' to 'conscious competence' to 'unconscious competence'. I'm not on a level on unconscious competence yet - where trading is very dynamic and abstract. I think writing things out might help me transition though, if it doesn't I'll stop.

When I write things out I find my brain stops having incessant thoughts 'verbalizing' those things to myself. That way I can be more in the moment in front of the screens and look at trading as something thats dynamic, ready to think in more abstract probabilities.
 
I had always looked at meditation as some kind of spiritually enlightened practice performed by monks in caves. Even if they were blissfully happy in a state of constant ecstasy and peace – they were still in a damn cave! Not living life or even having sex, not experiencing the fun and amazing things in the world. Turns out after a little digging deeper I was wrong.


So how does this relate to trading?

Let me start with my definition of meditation. Meditation is letting things be, it is allowing thoughts to happen without judgements or attachments, it is being present, in the moment.

The direct benefit to trading I have experienced is that once a thought that diverges from my trading plan comes into my head or my mind starts coming up with rationalisations to add to a position or get out of one (basically any negative psychological affects that impact my decisions) … I just allow, allow, allow those thoughts to flow past me like water under a bridge. I therefore limit emotional mind rationalisations from interfering with my trading plan. On a surface level anyway – there’s probably a lot more going on deeper that I’m unaware of yet.


What do you need to do?

I have only started meditation recently but I’m already feeling the impacts throughout my life and all it took was a few minutes a day and a commitment to meditate every day.

Meditation is easier than you think and the best book to get started that I’d recommend is ‘8 Minute Meditation by Victor Davish. There’s a different meditation technique each week over 8 weeks for 8 minutes a day.

The first one is simply ‘following your breathing’, focus on an anchor point where you feel your breath the most and practise allowing your thoughts to flow through your mind without hooking on to them by focusing back on your breathing anchor point. It’s definitely something that you should keep an open mind to and if nothing else give the exercise a shot for 8 minutes. If it doesn’t help you in trading it will definitely add to other areas of your life.

Influences

The Power of Now – Eckhart Tolle
The Inner Voice of Trading – Michael Martin
8 Minute Meditation – Victor Davish
The Psychology of Trading - Brett Steenbarger

Has anyone else meditated or have any thoughts on the subject?
 
Meditation and Trading

I had always looked at meditation as some kind of spiritually enlightened practice performed by monks in caves. Even if they were blissfully happy in a state of constant ecstasy and peace – they were still in a damn cave! Not living life or even having sex, not experiencing the fun and amazing things in the world. Turns out after a little digging deeper I was wrong.


So how does this relate to trading?

Let me start with my definition of meditation. Meditation is letting things be, it is allowing thoughts to happen without judgements or attachments, it is being present, in the moment.

The direct benefit to trading I have experienced is that once a thought that diverges from my trading plan comes into my head or my mind starts coming up with rationalisations to add to a position or get out of one (basically any negative psychological affects that impact my decisions) … I just allow, allow, allow those thoughts to flow past me like water under a bridge. I therefore limit emotional mind rationalisations from interfering with my trading plan. On a surface level anyway – there’s probably a lot more going on deeper that I’m unaware of yet.


What do you need to do?

I have only started meditation recently but I’m already feeling the impacts throughout my life and all it took was a few minutes a day and a commitment to meditate every day.

Meditation is easier than you think and the best book to get started that I’d recommend is ‘8 Minute Meditation by Victor Davish. There’s a different meditation technique each week over 8 weeks for 8 minutes a day.

The first one is simply ‘following your breathing’, focus on an anchor point where you feel your breath the most and practise allowing your thoughts to flow through your mind without hooking on to them by focusing back on your breathing anchor point. It’s definitely something that you should keep an open mind to and if nothing else give the exercise a shot for 8 minutes. If it doesn’t help you in trading it will definitely add to other areas of your life.

Influences


The Power of Now – Eckhart Tolle
The Inner Voice of Trading – Michael Martin
8 Minute Meditation – Victor Davish
The Psychology of Trading - Brett Steenbarger


Has anyone else meditated or have any thoughts on the subject?
 
Quote from Lights:

A great trader once told me to never talk about trading. Verbalizing trades forces the brain into a bias towards the literal and trading is more abstract and dynamic than that.
More...

Sorry Lights just getting used to posting in these forums - I'll try and recreate the reply I made.

I agree.

I've read that when you go through the process of mastering something you transition from 'unconscious incompetence' to 'conscious incompetence' to 'conscious competence' 'to unconscious competence'. The great trader you talk about was probably unconsciously competent in his trades, but it takes a while to get there - I doubt he would have said the same thing from his very first trade. I think it takes years of 'soul-searching' and experience to come up with personal useful wisdom like that.

Verbalizing my thought process helps me get those incessant thoughts out of my head and allows me to be more present and able to adapt to the dynamic and abstract nature of the markets, dealing with probabilities.

I hope one day to become unconsciously competent but in order to get there I need to make some more mistakes, gain some more reference experiences and verbalize the journey.
 
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