X\.left? It hasn't seen thirty-five since ten o'clock this morning! You
gonna buy it?"
"Westinffbouse! How many times did you ring on Westinghouse?"
"It's like a tortoise—slow and steady."
"Nope. Do nothing."
"That's an all-time high."
"Fedex at three-eighths—why not just buy twenty or twenty-five
thousand?"
"What's going on?"
"Some increased action activities. It's been hopping for the past
four or five days. I've been up anywhere between ten and twenty every
single day!"
"Listen, Alan, Alan—nineteen-nine on that. Protect me at one, bid
three-quarters for ten, and seal the rest in."
"Hey, Bob, Westinghouse—you bought the hundred at a quarter."
"Hewlett—Aetna—Global—Micron. ..."
It's 3:45 on a Monday afternoon. You're standing at your desk,
sleeves rolled to your elbows, jacket slung on the back of your chair.
You adjust your telephone headset as you watch the numbers flash
across your computer screens and listen to the orders flying back and
forth across the room.
How do you feel? Confident or nervous? Tense or just attentive?
Eager to make your final moves of the day, or worried about whether
they'll be the right ones?
What are you thinking about? Are you reliving this morning's
trades, or wondering what might turn up on the tape in the next few
minutes? Mulling over the latest research reports you read during the
weekend or looking forward to the Knicks game or movie tonight? Are
you mentally reviewing your daily goals or simply hoping for a couple
of last-minute moves that will make today's profit and loss (P&L) better
than Friday's?
Now imagine you're the trader who works a few desks away from
you. Pretend you're inside that trader's head, glancing over at you. How
would you describe the person he or she sees? As Lucky Louie, who happens
to be on a hot streak lately? As Loser Laurie, who is always trying to
rebound from bad decisions that often reduce profit percentages to single
digits? As Sad-Sack Sam, whose losses are likely to push him out of
the business before long? As Cautious Kelly, a trader who dislikes losses
so invariably sells too quickly? As just another Knicks fan or movie buff
in the room? Or as a consistent, even-tempered winner whose market
acumen is becoming legendary in the company?
If you see the winner, congratulations. You probably don't need my
advice. If you see one of the others, this book is for you.
"Trading to win" isn't just a catchy phrase. The most successful
traders are out to beat the market, not to avoid losing. While they may
have bad days, they keep striving to gain mastery over the trading
process. You can do it as well, but it takes a paradigm shift, one that
takes into account your capacity as a human being to alter your interpretation
of events.
Here's how it works.
Steps to Mastery
Most of us are governed by habits and self-limiting beliefs learned early
in life. If we are weekend athletes, we don't think we can become
Olympians. If we are traders, we don't think of ourselves as masters.
Thus we never do as well as we are able to. These patterns are compounded
by the uncertainty and unstable nature of the marketplace,
which tends to foster anxiety and the development of automatic behavior.
Such patterns also may lead traders to risk more to stay in a losing
trade than to put more money in a winning trade. In extreme instances,
gambling and superstitious behavior may be manifested. The master
trader trades from a perspective of rationality, knowledge, and skill—
not from an emotional or defensive perspective, not in order to feel
"complete" or "excited." To succeed at trading you have to be willing
to do things contrary to human nature. You need to hold on to or get
bigger in winning trades and get out of losing trades faster.
A major purpose of this book is to explore these patterns, so you
can expand your consciousness, encompassing the factors that affect
your trading and helping you maximize your capacity to trade. Thus,
you'll learn how to ride through anxiety by developing creative strategies
independent of your automatic beliefs and response patterns.
To become an Olympian in the trading business—in other words,
to become a master trader—means to harness the power of consciousness.
You can then change your thoughts, set new objectives and strategies
designed for realizing them, and become an observer of your own
thinking. You can master all the internal obstacles that arise when you
start moving to new levels of performance. By inventing new perspectives,
the master trader begins to see the market from new angles, transcending
the limits of biology and early life conditioning that limit
one's horizons. The master trader can then redesign and reinvent oneself
while taking full responsibility for his or her approach to trading.
The "Vision Thing"
As a trader, you start along this new path by choosing a specific financial
objective or "vision." Some people made fun of President Bush for
mentioning the "vision thing," but for a trader, a future vision is a way
for ordering information and defining experience so as to trade in terms
of specific results.
The next step is to commit to the vision. How? Promise the result,
which means devise a strategy consistent with the result and begin trad
ing in terms of it. Trading in terms of commitment should be distinguished
from trying to reach the goal to gain fulfillment. The distinction
is to use your future objective as a lens or template for making
trading decisions in the present, rather than as a target to reach.
Becoming a master requires you to recognize that you do have the
capacity to become an Olympian, to keep creating your life moment to
moment without being restricted by notions acquired early in life. Mastery
evolves as you let go of false beliefs about yourself and the markets.
Mastery allows you to uncover your hidden potential and the hidden
potential of the market, and begin to take action in line with your stated
objectives.
Mastery means to trade independently of assumptions you have
about yourself and all of the fixed ideas you have about what is possible.
Making decisions based on your willingness to commit to a future vision,
you begin to act in the next moment untrammeled by old, erroneous illusions.
Trading this way is not a onetime event; it is a continuous process
that must be constantly practiced.
As you do this you will begin to see that trading offers a succession
of moments in which you can choose how to behave. Once you block
out automatic beliefs, once you enter the next moment without regard
for what you or others think and feel, you tap into a new dimension of
power within yourself. You are more present with regard to the events
of your trading. You are in the moment.
This may be uncomfortable at first. You are, no doubt, accustomed
to functioning in habitual ways and even may define yourself in terms of
certain repetitive reactions. Initially, letting go of these habits may trigger
panic, anxiety, and fear of losing control. But gradually this process
will evolve into an increased capacity to tune into yourself and the market
during a trade as you learn to trade through the lens of your consciously
chosen objective.
The issue is not so much a question of working on yourself. Instead,
it's changing the way in which you relate to trading events, a method
that lets you take action via specific tasks or incremental steps that fit
your financial objective.
What happens is that you trade out of your consciously chosen vision
rather than in terms of self-limiting concepts of yourself learned
early in life. By taking on new challenges and acknowledging your potential
as it begins to surface, you begin to move towards mastery.
It might be hard to believe, but mastery is effortless. You trade in
terms of your vision by taking incremental steps consistent with it. You
do this with a serenity and focused attention that enables you to maintain
your concentration on the task before you, while keeping free of
distracting concerns. Focusing on the steps leading to specific results
gives you a sense of control over your actions, and liberates, rather than
drains, your energy and attention.
The master trader manages entry points and downside first before
trying to shoot for the maximum results. You play in terms of your
goals and consciously avoid blowing up. You recognize how you can
become frustrated by trading or doing too much. You continually track
yourself and focus on getting your basic score.
The master trader identifies his or her own inclinations, whether
they are to become too relaxed and complacent after successful trades
or to be too inclined to hold onto losers to balance successes. You learn
to get out of losers so as to reposition yourself to get back in if the market
reverses upward. You are also aware of any inclination to get comfortable
with profit and to be fearful of losing, which might lead you to
play smaller after succeeding.
The master trader puts much emphasis on controlling losses. When
you keep losses to a minimum by concentrating on ways of reducing
losses, you increase the chances of adhering to your strategies and hitting
your target numbers. This is important to do, not merely to provide
sufficient capital to continue to trade, but also because the
psychological effects of losing can hurt your motivation to win. Losses
can prompt gambling behavior or self-destructive trading, where the
trader throws caution to the winds and keeps looking to recover all the
losses in a few high-risk bets. Losses stay longer in memory than do the
satisfactory feelings associated with winning, and play a bigger part in
influencing traders to act defensively, to cover up, to compensate. Few
people do things to compensate for successes.
Because of the pain of loss, people are willing to take greater risks to
reduce that pain and to avert it than they are willing to do to maximize
their profitability. They are less motivated by profitability and success
than by aversion to loss, and therefore they are more likely to take highrisk
bets when they are at risk of losing.
This can be converted into a strategy for the successful trader who
has found a plateau and is reluctant to get bigger, finding comfort in
not being exposed to greater risk. Such a trader needs to find motivation
by associating massive pain with failure to grow, to utilize all one's
resources, and to properly navigate the realm of opportunity, and needs
to see the opportunities being missed, rather than to focus smugly on
victories.
Read More : Becoming a Master Trader
