Jack Larkin

8/11/2019 Jack Larkin

1/27

So you want to become a professional trader?

I wanted to start a thread and give a little back to the community here.

Most people lose when it comes to trading, and the average trader doesnt last more than 2

years. Past that, theres a gap between normal and proessional that many are conused

about, so Ive written a bit about what can help bridge that gap and become a proessionaltrader.

I currently work in the industry !at an e"uities irm and or mysel as an independenttrader,# and the ma$ority o my income comes rom trading in the markets. %hrough my

time interning through school, my work at the irm, and on my own, Ive surrounded myselwith traders o all types. I hope to pass on the things Ive learned and whats worked best

or me.

What you wont find here:

%rade calls.

%rade signals.

Investment suggestions. & ree lunch !no such thing.#

What I wont tolerate:

'esponses proving you didnt read the entire thread beore posting.

(on)constructive additions to the thread !post here i you want to contribute or

enhance whats already been written. *o not post inane nonsense. %he onlye+ception is i you want to post a thanks#

If you want to post in this thread:

-e polite and helpul to others. %hats it. (o laming.

I ended up writing out pages in word... so uploading this section by section and

ormatting might take a while. *on/t $ump the gun "uite yet and wait till it/s all posted.

%hanks

And PLEASE: I put a fair bit of work into this, don't just copy paste it around.. ifyou'd like to share it, at least link people to this thread so they can be eposed to

the foru! and !ay e"en si#n up.

!edit, also I kinda $ust wrote it all out without much proo reading... it should be "uitereadable but orgive any missing words or typos.#

)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))

Table of Contents:

Main Material !all on the irst page#0

1. 1o you want to become a proessional trader !Intro#

2. 3nderstanding the impact o trading on your emotions

3. Mind and 4eeping a 5ournal


2/27

4. Meditation and 6isuali7ation

5. Positive 1el *ialogue

6. 8leaning 8harts

7. 8are not about bad trades

8. 9osers &verage 9osers and :rinding it ;ut

9. Points not *ollars, *on/t %ake &dvice


3/27

?I I have seen a little urther it is by standing on the shoulders o :iants D Isaac (ewton!but this ideology stretches ar back, well beore his time.#

Most things youll read here have already been published by various authors or mentioned

rom various sources. Im not reinventing the wheel here when it comes to tradingpsychology. Instead, I aim to align select bits o ino that I eel showcase the acme o skill in

trading and do my best to right the path may traders are current on.

Beres the best partE were not even going to talk about trading itsel right now. (o, thats

going to be ar down the road rom here. 'ight now, we have a much greater challengeahead o us0 >e must undo thousands o years o instinct reinorced by your lies

e+perience that lead you to where you are as a human being right now.

>ith that said, Im going to ask you to do something i youre current trading live. I any o

the ollowing apply to you0

Fouve been trading in general or less than two years Four account e"uity is less than the net deposits made into the account

Fou have a drawdown on your account o greater than 2GH

Fouve been trading or more than a year, but have yet to achieve an annuali7ed

return o at least GH per year

Fou are rustrated with your current trading results or current strategy

Fou havent written out a trading plan or have but cant remember the last month

period where you didnt violate your own rules at least once

Fou are to 1%;P trading right now Fou will not trade again till you can prove to yourselthat youre ready. I you do not have the discipline to stop yoursel, you should seek out

your local :amblers &nonymous organi7ation and sign yoursel up.

In the meantime, dont worry about missed opportunities, the market will provide you withmany more. 9iterally an unlimited amount o opportunities will be ound, so dont sweat it.

>hats important now is that you limit the risk you can inlict on your own account whileyoure taking this time to relect and sort yoursel out. !(otice I didnt say limit the losses

'isky trades could go your way, but that would $ust reinorce bad habits, and as welldiscuss later in greater detail, all actions taken must be measured irst in the risk i

something goes wrong.#

1o as you can tell Ive casted a pretty broad net here? most people on these orums will allinto one o the conditions Ive listed.

!Put rankly, the average proessional trader, whos in the right mindset, wont be posting

very oten to online boards. %hey might have at some point, but its hard to constantly readthe ramblings o ine+perienced traders who believe the most inane things, so most end up

communicating with a smaller group o likeminded riends and ignore online public orumsaltogether. %here are a ew who still do it, and hats o to them, I respect anyone whos

willing to help others with their e+perience.#

(ow with your accounts disarmed lets get move on.


4/27

Understanding the impact of trading on your emotions, eercises to cope and

re!erse this, and the steps to be ta"en to help pre!ent relapses

I dont want to sound too harsh, so let me start by telling you something. Fou are normal.Fou are human, and theres a really, really high chance that you are normal. I you dress up

in all black and listen to death metal, you are normal. I you go skydiving every otherweekend and en$oy eating e+otic oods, you are normal. I youve ever elt ear, pain, $oy,

love, or euphoria, you are normal. %he average trader is normal. Its ;4 to be normal, but?

#ormal doesnt wor" in the mar"et$

%he market eeds o normal. %he market has to push people past their limits o pain, their

limits o ear, get them greedy then leece them or everything they have. %he marketthrives on slaughtering normal.

Its normal to eel an+ious about a winner and want to lock in proits. Its normal to not

want to accept a loss and keep the positions hoping it will reverse and go your way. Itsnormal to e+ecute riskier trades than youd normally put on to make up or past losses. Its

especially normal to overtrade and ignore the very rules you probably spent time coming upwith. %here are very well documented psychological reasons why this is normal and why we

are wired to act like this. -ut?

#ormal doesnt wor"$

;ver the last ew thousand years as our brains have adapted to our environment, wevepicked up instincts and pass them down over generations. Its common or great heights to

make people a little more aware o their surroundings and possibly a little an+ious about theprospect o alling. ;ther sensory input triggers ears in our brain that stick around

permanently, like how burning yoursel on a hot stove top causes you to be a little morecareul when cooking. ;ur e+periences in the market are no dierent, and whats worse, we

treat market risk with the same emotional ears as we treat death.

I$! not kiddin# you here. %o#niti"e psycholo#y studies ha"e hi#hli#hted how thespecific fear center within our brain that relate to !ortal dan#er can also

tri##ered by financial risk and loss.

It makes sense i you think about it. &ll our lives weve had the same idea pounded into our

heads, without money wed be living a dismal e+istence illed with pain and suering. ;urparents raised us to do well and be successul so we wouldnt end up being bums on the

street. %he nightly news broadcast shows images o deadbeats and criminals who look

weathered and sickly as they are carted o to a lie sentence in $ail or stabbing someoneover a ew bucks in their wallet. %he entire history o inance, dating back to the early days

o barter and merchant trading to the modern times o >estern capitalism, have molded ourevolving brains to e"uate monetary ailure with death and pain.


5/27

So, is it any wonder why tradin# can be stressful&

%here are a lot o things your body does when stricken in panic and ear. >hen stressed,

and with an+ious mortal ear running through your system, your body will direct blood lowtoward muscle tissue and your cardio system. -e glad it does, or i youre ever aced with a

wild cougar !or insert dangerous animal here# while venturing too ar into the wildernessone day, youll be thanking your two eet and heart beat or making you run aster than

youve ever thought possible as you ee or saety. 3nortunately this doesnt help you toomuch when trading, and considering your body has to get the e+tra blood low rom

somewhere, places like your brain start to get a lack o much needed uel $ust as you needcritical thought the most. Fouve probably already e+perienced thisE ever eel $ust

completely ro7en as you watch a position move against you "uickly %his is why controlling

emotion and knowing your triggers actually matters.

Fou might be thinking0 Bow in the heck we are going to unwire our brains i most o this ispart o our genetic makeup %he answer isnt simple. %heres a air chance that you werentborn as part o the H o the population that can naturally ignore such emotions when

trading, but i you arent so lucky there is hope. Fou $ust have to spend time working onunderstanding yoursel, your emotional triggers, and how you can disassociate trading rom

emotion.

&s I mentioned rom the very start, being a proessional trader is a liestyle. &nd theoundation o this liestyle is going to be a daily regiment, discipline and ocus. I you cant

trust yoursel to ollow a daily routine !like very light e+ercise# then how can you e+pect totrust yoursel when your acing inancial risk and pumped ull o adrenaline as mortal ear

throbs in your mind

1o lets start working on ourselves, and Im talking about real basics here. >e M31% oruma solid oundation beore we can take on greater tasks. %hese steps alone wont be your key

to success, but they help build the oundation o discipline and will end up helping you tradein very indirect ways.

-ut theres good news0 Im not a health nut. Im #%T going to preach to you that anything

over a JH level body at is shameul. I honestly dont think you need to have a it, model,body to trade well. &ll that matters is you T&' to improve yoursel. &nd as you try, even i

its small steps at irst, youll notice improvements in many aspects o your lie, not $ust in

trading.

(re)day Warm Up:


6/27

Its great to your blood lowing. It increases the amount o o+ygen in your system and reallywakes you up i youre sleepy. -eore sitting at a computer to trade, go out or a "uick run

around the block, even K minutes o $ogging will get your heart rate up. >ere not talkingabout marathon training here. I you live in colder climates and running outside isnt as easy

at times o the year. :o to a discount store and pick up a skipping rope, theyre easily oneo the cheapest way o getting your blood lowing indoors you can ind.

I youre a coee drinker, have your irst cup -=


7/27

right and eeling good.

I you have any concerns, please consult a dietitian or your doctor beore making anydrastic changes.

& great resource or both light workouts and diet without all that crud commonly ound in

itness material is A%he L Bour -ody by %imothy


8/27

using it i you eel its bothersome to keep it up. 5ust keep it handy to get your thoughts outwhen you need to record them.

+editate:Meditation is probably one o the most helpul activities Ive ound to work or me when it

comes to trading. My ather converted to -uddhism not so long ago so the last time I visitedhim I spent "uite a bit o time at a temple and talking to monks. %his was my irst e+posure

to meditation and all I could think about ater my irst session was how this could help me

with my trading. I started gooling around and sure enough traders have been turning tomediation or "uite some time now. %he idea is to calm your body into a state o rela+ation

and ocus on a singular, simple thought at a time. *well on the thought or as long as ittakes to eel you have sorted it out. *o not deviate or spread your mind too thin, ocus onthat one thought till you are satisied with the completeness o your compilation. Ive

"uoted and linked the ollowing below as a starters guide to mediation0

Cuote0

1it comortable, start at the top o your head and rela+, eel your eyes sink and rela+,

your cheeks ne+t and your mouth. (e+t your neck and shoulders, eel the rela+ation traveldown your arms to your ingers. %hen rela+ your abdomen, do not suck it in anymore !I hold

mine in all day, I think most o us do# let it rela+, as you breath in it should ill like a beach

ball and as you e+hale it should collapse back in !'emember as you rela+ to keep the goodPosture#. 9astly rela+ your legs and eel the tension drain into the loor through your eet...

you may even eel yoursel sinking into the ground, this is good.

8lear your mind? it helps to ocus on your breath, watch it rom a distance as it travels intoyour body and ills your lungs and how it travels out... do not control it $ust watch it.

&ter about G)K breaths... when you can eel like an observer to your body, and have let

go o all the control you e+ert over it.

1tart to ocus in on the rustrations youre having and whats causing them. %hink about

things one issue at a time and try not to deviate. I your mind easily wonders rom sub$ectto sub$ect, go back to ocusing on your breaths till your mind is at ease again and repeat

the thought pattern o whats rustrating you.

%ry to think about the source o this rustration. >hats causing it >hat could be done toavoid it >hat are you doing now thats triggering it, can you stop that trigger easily 8an

you remove yoursel rom what triggers it

8ontinue this pattern or about 2G minutes. &t irst, this will be hard to ocus the entire time

!heck, i you get K solid minutes o ocused thought your irst attempt youre doing great,#

but with practice you will ind that meditation can help you really sort out lie troubles andget to the root o whats causing you grie.


9/27

2isuali3e:

;ne handy tool used by athletes is to visuali7e what your actions will be in a variety odierent scenarios.

*uring a meditation session, instead o ocusing in on one thought, instead visuali7e a trade

thats going or well or you. >here did you get in *o you eel conident >hen will you putyour stop to break even &re you going to let it ride

(ow visuali7e a horrible trade. ;ne that started moving against you ast as soon as you

pulled the trigger and got in? no matter what, its going two ticks against you or every tickback in your direction. -e calm, cut your loss, be happy its been cut early and not causing

you any more pain. =ven i the price moves in your direction ater you get out, be happythat you made the right choice to get out beore it potentially became a atal trade.

'epeat the horrible trade scenario in your mind, over and over? make the market move

erratically, but eel good about cutting your losses "uick.

%he idea is that when you ace a real trade that goes horribly wrong, youre $ust going to

rela+ and do what youve been practicing in your mind. Foull start to eel good aboutcutting losers early on your account, and eel more comortable letting your winners runinstead o taking them early.

(ositi!e self)dialogue:(ever talk down to yoursel i you make a mistake. (ever call yoursel stupid. %he action,

bad trade, etc, might have been dumb, but you arent. :et in the habit o positive sel)dialogue. 8ongratulate yoursel when you get through a day without violating one o your

trade rules or your acceptable risk. (o one else is going to do it or you, you most likelydont have a coach monitoring your every trade and your amily@riends might not

understand trading to the level that they can identiy when youre doing well !not in termso return, but in sticking to your rules and not being risky.#

'emind yoursel that its ok to screw up once in a while and its even more ok to correct

mistakes beore they get worse. Beck, i you over leverage yoursel on a trade, or let it runagainst you way too ar, close it out, and congratulate yoursel on doing the right thing

instead o punishing yoursel or the loss. %his is really important, as i you keep tellingyoursel youre stupid it will eventually prove to be true without ail.

Its ok to make a mistake. >ere human, It happens. 8halk it up to a learning e+perience,

write down what happened in your $ournal and what might have triggered the mistake.Meditate on how you will avoid it in the uture. Move on. *one.


10/27

(ow let/s look a little more directly at trading itsel0

Clean your charts$Messy charts, messy mind. Indicators are great i they are part o your

system, but i not, toss them out. ;ur mind does a great $ob at iltering out anything thatdoesnt support a positive outcome or us. Its $ust another way our mind deals with stress.

=ver been in a trade that doesnt start o so good and you immediately drop to a longer

timerame to see i its worth sticking around Feah, i the trade was wrong to begin with,

turning it into a longer term trade isnt going to save you. Its better to $ust to cut your lossand move on. ;r, ever get in a trade that goes bad only to reali7e that the indicator you had

right in ront o you clearly said not to e+ecute

8hart clutter can only serve to give us too much inormation. ;ur brain will simply ignore it

should the inormation cause us pain. Fes, well see it, but the indicators importance willbe dimmed in our unconscious, and ater the trade all we are let with is the eeling o being

silly or ignoring it.

1trip your charts down to $ust the price itsel. ;nly add a new indicator i its absolutelyre"uired.

Personally I dont trade with many indicators at all !I trade rom completely clean charts but

use 88I in some cases or a speciic strategy that involves it.# (early all o them are lagging

and can only tell you where price has been or what the dynamics o the market in therecent past. Fou must live in the moment as a trader, remember that, so while indicatorscan be useul, you shouldnt let them $ust add to the noise. %oo much noise, conlicting

signals, and youll end up in trading paralysis !eeling uncomortable being long, short oreven lat.#

Part o living in the moment as a trader is accepting that the market can and will do

anything it pleases despite what its done recently. %hink the =uro cant go any higher Itmight. %hink the 9oonie is overvalued It might be? or it might continue to chug along

gaining value. Indicators wont stop a currency, stock, or anything rom going anywhere.Beck, the euro has no idea what M&8* is, nor does it care, it ;(9F reacts to order low and

order low isnt only looking at M&8*.

>hen ever you get e+cited about some new whi7bang indicator that you don/t evenunderstand the math behind it yet want to sub$ect your hard earned capital to it/s wrath,

think o this0


11/27

*on/t be this dog.

Care not if a trade goes for or against you$

*; care about your long term account e"uity trend. &s I said beore, be in the moment, andyou cant do that i this one trade going bust means your account is cut in hal. I you stand

to lose KGH on a single trade, you cant help but care about the results o the trade, andthat will lead to very bad e+ecution decisions.

Foure going to have to break your trades down to a risk level that you can easily accept i

its a loss. %he idea !like we talked about in the visuali7ation segment o this article# is toeel good about cutting a loss beore it gets bad, regardless i what the market does ne+t.

I personally trade with a risk o G.KH to H ma+ at any given time in my account. 1ince Iusually only have one trade on at a time, this pretty much means I can walk away rom any

horrible trade with hardly a scratch on my account. Fou could suer K losses in a row andstill wake up the ne+t day and be a trader. %his is the key to the game, surviving and

preserving capital, i you trade risking the house each time !even with a NGHO win rate

proven system# eventually youll have no house.

Its easy to walk away rom a G.KH loss. 8lick, done, order closed, moving on. Fou dont

want to get tied up in a bad trade with GH drawdown on your account while good setupsare passing you by since your capital is tied into the cruddy trade. %hink you cant makemuch risking only G.KH a trade I you let a good trade run, you can easily get KOH return

!i not more.# %hat kind o return given the risk is the most holy grail like thing youll evercome near that wont burn your account to the ground.


12/27

4osers a!erage losers:

'epeat that to yoursel. 9osers average losers %here is only one time you should averageinto a position, and thats when your total risk is well below what your ma+ acceptable risk

is allowed to be, and youve planned it out beorehand that you will be averaging in? otherthan that, $ust take the loss. Fou need to build a good habit o taking losses !notice I keep

harping on this I%1 8'I%I8&9# and averaging in doesnt help build it. &veraging in is theopposite o taking a loss, it $ust allows the market to hurt you more, and now every tick is

more painul. I it goes your way, sure youll be out without taking a loss, but the bad habito averaging will be strengthened !you must break it# and or every K times it works, it $ust

takes once to knock your account down considerably.

&veraging in to avoid losses has been tossed around by the investment community asdollar cost averaging or "uite some time now... but you are (;% an investor, you are a

trader, leave the dollar cost averaging or an inde+ investor who will systematically put thesame amount o money away in the inde+ every month or the ne+t G years till they retire.

&veraging a loser is not, and will never be, a tool in your toolbo+ as a proessional trader.

I you ind it hard to stop averaging in the moment !knowing what to do and doing it are

two dierent things when youre stressed out in a bad trade, see the part about mortalear,# go back to the meditation section and spend time thinking about what causes you toaverage in? what pain are you avoiding >hat greater pain has it caused

%his is Paul %udor 5ones, he/s one o my idols, he keeps a sign above his desk to remind him

about averaging losers0

.rind it out:&s I mentioned beore, what matters is your e"uity curve over many trades, not the results


13/27

o an individual trade alone. Foure going to have to e+pose yoursel to the markets "uite abit, even i its only an hour a day, it has to be consistent. %heres a theory behind becoming

an e+pert in any given talent or sub$ect, G,GGG hours spent working at it? you need to putthe time in to become good. (ot $ust become good, but to prove you werent $ust riding

some luck and actually can start depending on your trading results. &nyone can have agreat year trading, I know people whove returned QGGOH on their accounts over the year

!and some within a month,# but not all o them keep it )K years out. >ere ocusing ontrading as a proessional, not to be a one hit wonder, this is your career and like any career

it takes time to build and become good. *o not e+pect money overnight, do e+pect to putthe hours in, and i success comes around youll know its something you can count on. Its

like in music, you want to be the band that makes GO platinum albums and lives o theroyalties o their hard work, not the luke overproduced band that has one hit and ades

"uickly into memory.

I you ever get yoursel into a trade where the position going against you means tomorrowyou wake up and start looking or another $ob, then get out, no matter how painul it is, and

be thankul that tomorrow youre still a trader.

%here is a pla"ue on the wall above a door at the 8M= that reads0

%hink about that. !image credits to my man -en rom %raders&udio, he/s in the relection#

(oints, not dollars:

;ne thing you can do to help with cutting losses is remove the dollar signs rom your view.1top looking at your accounts P@9, or it can only be a source o bad inluence. Four time as

a trader is to be spent living in the moment, in the current trade, thats it. &s a ore+ trader,

you will be aiming to make pips, not dollars. !


14/27

is now ticks and points.# %he idea here is to remove the ability o seeing your accounts P@9or any one trades P@9 rom aecting your trading e+ecution.

In M%L, switch the P@9 to points by right clicking on your %erminal window near where it

shows open orders. %his isnt perect, since below it still shows total account P@9, but its astart. Im working on inding modiications to M%L that will cover it all up and only show the

net pips in open trades !i you have a suggestion, post it.#

&nd lastly !or now#.....

#e!er ta"e ad!ice from friendly strangers$ %heres no ree candy, that white,unmarked, van is only going to be pain.

Put simply, no one wakes up in the morning and says aloud Im going to make someone

else rich today

%hese online orums are great or sharing ideas, building out systems and bouncing ideas

around? -ut do not get in the habit o letting others think or you. %his relates back to the"uirky games our brain plays on us. >e are wired to be tribal, communal, and think as agroup. It eels more comortable doing something i others are doing it, but as most o our

parents would say as we grew up i everyone was $umping o a bridge would you do ittoo %hink or yoursel, and i youre tempted to shadow trade someone since they posted a

new shiny screenshot o a hour =3'@31* chart in their $ournal, 1%;P '=&*I(: %B=I'5;3'(&9

*otake advice rom people who are interested in teaching you Ahow to trade, not

Awhat@when to trade. Many people teach others as a way to horn in on their own skills!mysel included# but you seldom will see these types giving out trading signals as well.

(ever pay or a signal service. Fou arent a trader !or proessional# when you do, youre $ustindirectly letting someone else trade your money and think or you and paying or theprivilege o it. %his is not the way to become successul.

)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))

Tying it all together5

'emember how I asked you to stop trading earlier on

I you/ve read this ar, cool, I/d like you to really try what I/ve suggested i you haven/t

already and see i it improves your trading over the coming months. 'eally give it a shot,

I/m not suggesting anything risky, you can only stand to improve yoursel by ollowing it.

%ake a ew days to work on your body, your mind, and your diet. >rite your thoughts downin your $ournal. &nd when you eel at ease, put on your irst trade as a renewed and

rereshed individual on their way to becoming a proessional.

I you notice, I didn/t give you some ool)proo system or plan to ollow to be a proessional.%here/s no one)si7ed)its all method o becoming consistently proitable. Fou are going to

have to ind the right system that its your uni"ue personality. &ll this thread is about is


15/27

providing you with some common skills and the base oundation behind building good habitsand managing some o the natural ways we humans goo up.. the rest is up to you to work

out, because I don/t think I/ve ever met two proessional traders who are e+actly the same.

&nd o course0 .%%* 4UC05

The (ositi!e +ental 6raming of #on)+onetary .oals

Bumans love positive eedback. Positive eedback lets us know were doing something

right.

3nortunately though our mind can work against us in how we set goals i want to become abra7illionare through trading ore+. Its all in how we break goals down to smaller chunks sowe can get that positive eedback along the way? and it works against i we dont

understand what triggers negative mental states as we make e+ecution decisions intrading.

%he logical and analytical side o our psyche will lead us to breaking down any large goal

into smaller steps, though this we gain a sense o accomplishment as progress is made. Ithis thought doesnt come naturally to us, weve probably learned to do it rom one o many

bits o advice on time management picked up while we were attending school or at work?or heck, any pro$ect management course@book@etc? would have beat this into our heads

many times over.

1o i youre like the average trader out there, youve probably set a ractional goal on a dailyor weekly bases that gives you something to work toward? GH per month, G pips per

day, GG pips per week, etc.. .etc? >ere probably all guilty o it, and I know I made thatmistake when I irst started trading with spreadsheets making daily proit pro$ections.. I I

could only make KH a day Id be a bra7illionare in no time

1o i youve done this, youre normal and thats ine, but what do I say about normal in themarkets

#ormal doesn7t wor"5

-y setting monetary goals youre really $ust giving yoursel additional pressure and priming

your mind to give in to all the normal human tendencies that will cause traders to haveseverely reduced returns or even ail in the long run.


16/27

o pips each, you could capture G pips o net proit per day easily. %o achieve this, youvecreated a system that waits or a speciic signal beore entering a trade.

;ne day, you dont get a clean signal all day long. Foure rustrated because the market isnt

acting in a way your system can proit rom?. Foure worried you wont make your goal, soyou take a not)so)clear signal thats not "uite within your system but you eel its close

enough to $ustiy the risk. ;r, worse yet, you did have a good signal, but it was a loser, andnow your brain is in revenge mode where youre looking or any cruddy signal possible to

take so you can make back the loss and grab your net o G pips in the process? themonetary goal has become a negative psychological inluence, despite you creating it with

all the best intentions.

=ven i the not)so)clean signal or the revenge trade work out, youve violated your risktolerance within your system and shited the statistical e+pected outcome. ;ver time, youll

have trades taken like this that dont work and the losses will sting on an emotional level!since they weren/t within your plan and you werent truly prepared to deal with them# as

well as sting your e"uity curve.

In the case o the revenge trade, this might even compound and youll end up taking yet

another crappy signal $ust to make back the two losses and get ahead !or $ust break even.#%he cycle would continue till you snap out o it and reali7e your losses or the day, inallyreach your goal o G pips despite risking many times more than your acceptable risk limit

to get there !negative e+pectancy trading,# or bust out your account all over a ailed G piptrade.hat ri#ht there has to be the worst feelin# as a trader, not the loss, but

reali(in# you blew an account throu#h e!otional tradin# o"er a s!all )* pip initialtrade tar#et.

!In another section, I will e+pand on revenge trading in general and how to cope with a loss

so as to avoid the revenge cycle.#

(ow, goals are still an important part o trading, and I dont want to give the impression all

goals in general are bad. >hat matters is setting the right kind o goal that will actually helpyou with consistency and discipline, and raming the goal in a way that works to overcomeour natural tendencies that hold us back rom becoming proessional traders.

8nter: The #%#)+onetary .oals

I you remember rom my section oAPoints not *ollars, I talk about removing monetarygains@losses and losses rom your view so they cant aect your e+ecution decisions. I do

suggest only viewing pips, but in conte+t I mean as it relates to an individual trade and your


17/27

trading system !which is built around targets and stops set in pips ater all.#

Bere were going to take the idea o removing R)signs rom our view to the ne+t level byremoving them rom our longer term planning and shorter term goals as well.

9ets say you are trying to be a career trader0

Instead o thinking I want to make RGGk 31* a year trading, lets approach this romwhat you truly want? I want financial independence$

(otice how theres no mention o trading in there Fou want to be inancially independent,

that can happen through trading, but it can also happen though sitting on your hands duringtimes that your trading style will only hurt you !dierent types o markets.# -eing lat is

$ust as valid o a position as being long or short ater all.

'emoving the yearly income goal also removes the pressure to perorm a little each month.%he best trader I know at my oice will happily sit on his hands or trading with ne+t to no

si7e or nearly a year without eeling pressured. I he doesnt have an edge !that is, i his

systems arent good or the current type o market# he doesnt risk, that simple. >hen histype o trading becomes in avor, -&M, the guy can turn out GO years o an average

workers income within a ew months. Bis goal is to be inancially independent, not make agiven amount each year, and that allows him to be happy to sit all day long watching themarkets or months at a time not doing anything o signiicance with his capital because

risking outside o his edge@plan violates the goal o being inancially independent.

(ow, i weve cut away the tangible R)sign rom our longer term goal, how do we break itdown into smaller, easy to achieve, goals that we can aim or on a daily or weekly basis >e

still want that short term gratiication ater all and it can be a really good thing to getpositive eedback day)to)day as you trade !so long as its ramed correctly.#

1o lets take the longer term goal o being inancially independent and see what

components o said goal can be e+tracted0 >ell, someone whos inancially independent sure

isnt letting the market have its way with their capital, so theyve probably set strict stopsand dont leave themselves e+posed to greater losses by trading without stops or doing sillythings like doubling down, averaging losers, or over)leveraging? so we got the basis o a

ew short term goals right there0

I didnt put my capital at risk beyond whats acceptable in my trade plan today.

I didnt lose more than +H on my bad trades today. &nd I didnt lose more than +H

o my total capital should it have been a bad day. !1ub + or your acceptable risk, I

suggest G.KH)H or individual trades and LH or the daily ma+.#

I didnt over)leverage today.

I didnt revenge trade today, or i I did, I "uickly identiied it and took mysel out o

the market. I did (;% let it stand to see what happens.

I didnt over)trade today.

&ter each day, go over this list !or the list you created o non)monetary or pip related#goals# and do something positive i you can check each one o. 'eward yoursel. >atch a

movie you wanted to see, or maybe get a glass o wine@beer@etc to celebrate ! glass, letskeep it in moderation.# %his direct reward system is going to combine with one thing that

will really give you some gratiication, your e"uity curve. I youre in a drawdown, it will helplimit the impact o the bad trades, i youre doing well, your e"uity curve will start to smooth

right out and look like a steady gradual increase.


18/27

Fou want a result that looks like this0

!-%>, this is a logarithmic balance by R growth chart e+ample, (;% an e"uity by H growthchart which would have a much higher incline on the curve and look more impressive. %he

point is to show consistent non)compounding gains as it relates to the sub$ect.#

his is the eact #ratification, in the ri#ht fra!e of !ind, that$s sustainable andcontributes to beco!in# financially independent.

Fou will eel good not only or rewarding yoursel and ollowing your rules@goals, but youll

have an e"uity curve that gives you direct eedback o doing well. Most new traders e"uitycurves are like mountain peaks, $agged and volatile, you cant truly tell how well youre

doing i youre $ust 2) days away rom dropping LGH o your account. >orse yet, how willyour e"uity curve ever tell you somethings wrong with your system i by the time you

reali7e it your account is only @rd o its ormer value

!In a uture segment, Ill be talking a lot more about monitoring e"uity curves and payingclose attention to statistical evidence ound within your trading history.#

>e can build on this, and e+tend the goals over a weekly basis0

I e+ecuted over NGH o my trades this week without violating my risk rules

!remember, were human and mistakes happen, dont punish yoursel twice or

making a mistake, but do correct the mistake instantly when you reali7e youvemade it.# !(;%=0 the H should change depending on how many trades your system

does per week, so or a scalper who trades G)G times a day like mysel, mypercentage is NQH.. but i you only trade G times a week on average then N@G is a

good goal so NGH would due.#

My drawdown periods over multiple days !it happens to even the best traders# were

limited and in line with my acceptable risk.

>hen the market wasnt going to work or my system, I didnt trade.

I you can check these o !or any other weekly non)monetary goals youve written or


19/27

yoursel# at the end o the week, reward yoursel. It can be anything, like your avoritechocolate bar that you always eel guilty eating since youre trying to cut out sweets.. but

reward yoursel.

*on7t punish yourself, "eep it positi!e, and reward yourself when it7s deser!ed:

9astly, rerain rom rewarding actions@treats to make yoursel eel better ater a bad day.%his would be like hitting the bars ater a bad day... Fou want to avoid such actions to

smooth over bad moods as they generally only build up dependence on such things !usingalcohol as a crutch that later bleeds into alcoholism or e+ample.#

I you did violate such rules, reer back to the e+ercise and mediation section rom beore,

but do not reinorce it by treating yoursel.

Im not telling you to punish yoursel ater a bad day or do something negative, you can stillbe positive and do positive things !e+ercise, seriously this helps on bad days a lot, and i

youre the worst trader in the world at least youll be really it and healthy,# but dont

reward yoursel with treats@drinks@etc i you want to associate said rewards with positiveperormance.

%his might sound restrictive, but think o training your unconscious mind like training ananimalE i you eed your pet treats ater it takes a dump on your e+pensive rug, as well as

when it does a trick or behaves well, its not going to stop dumping on your rug.

!I youre a social drinker or instance, then it might be a good idea to use something elsethan a glass o wine or beer as a reward, since youll be in environments that include

drinking i youve met your goals or not. Maybe have a pi77a night at the end o the week:o on a nature hike -reak out the u77y pink hand)cus with your signiicant other -e

creative here, youre going to know what best rewards yoursel and what you think wouldbe a good it.#

%n Support and .uidance for Tribal +inds

; the many dierent emotions and instincts wired into our brains, our natural tendency to

be tribal !both socially and proessionally# has to be one o the more interesting barriers to

successul trading.

;ur minds are both awesome and la7y. >e can invent and be creative, but we also seek the

approval o others and wish to Abelong in a group. %his is where a lot o new traders get intosome serious hot water without reali7ing that the comort ound in collective thought will

hold them back rom the goals they seek.

%his isnt to say acting tribal is entirely a bad thing. In act, there are ways we can tap intothis instinct so that it becomes a positive, so this ne+t section aims to break down how to

ocus on the positives while cutting out the negatives aspects o tribal thinking.


20/27

%o be clear, when I say Atribal I do not "uite mean primitive, or degraded? Im using tribal

in this section as a reerence to the social)communal and cooperative makeup o ourpsyche, be it the instincts weve been instilled with genetically, or the social abric impressed

upon us in our early years? I use the word tribal because I want to highlight where theseinstincts originated rom and where they had the most use, back in our tribal days.

%housands o years ago, humans needed to be tribal in small communities to survive, asalone we oten died o, but as groups we could hunt bigger game and lourish.

In todays world, however, our society is structured in a way that we, as individuals, can be

much more independent. >e still have our instincts, and they play a part in our social circlesand relationships, but as ar as survival goes they arent e+actly as depended upon

anymore.

6irst up, where our tribal mind can fail us as traders:

The non)traders influence

>hen you approach the people close to you about the little trading business you have goingon the side !or as a ull time career option,# youre going to get a wide variety o

responses.

Four riends and amily will have only the best intentions with whatever advice they give you!hopeully,# so dont ault them trying to be apart o your lie. 3nortunately, theres a good

chance these people will be pretty disinterested in the world o trading and inancial markets!or at best their understanding stops at the mutual und they bought or their retirement

account,# so soon youll be bombarded with words o advice without much o a oundation

behind them.

-e polite, but do your best to turn the volume down on incoming advice rom this category

o people. 9ike I said, they mean well, so dont get lustered with them over it. *ont tellthem they are wrong, dont correct them, $ust reali7e that they care enough about you to

e+press their concerns or give and opinion. 1o thank them, but move on "uickly to othersub$ects.

%here is one e+ception to this group o people !riends and amily# who youll have to both

listen and communicate in detail with about trading, and Ill talk about them when I go over

the positive side o being tribal.99

6ellow traders and eperts infulence;utside o your riends and amily, new traders will oten lock in droves to market

commentators and e+perts. It makes sense, i you want to do something well you ollow thee+perts. -ut tell me, even i the e+pert is talented, do you know anyone who made it into

proessional basketball by watching (-& games

%his is assuming the Ae+pert is even hal good. Most arent good at all and try building abusiness around trading signals or market calls because thats the only way they can make

a decent living in this business.

>hats worse, non)proessional trades will oten see their accounts die by an Ae+perts


21/27

recommendation because the e+ternal inluence o the e+pert makes taking a loss so verymuch harder than it has to be. I you got a tip rom an Ae+pert, taking a loss isnt $ust you

admitting you were wrong, but saying the e+pert was wrong too, and youve already put thee+pert in your mind as a more e+perienced trader that you respect enough to ollow so this

creates a huge internal conlict to deal with.

&t this point, you might be saying to yoursel0;h, but I totally dont watch 8(-8, or listen to these so)called e+perts at all.. I dont have

this problem'eally =ver watch a webinar that talks about a new trading system =ver dive into the

interactive trading orum and read through the last K pages on =3'@31* $ust to see whatother traders are doing =ver read through another traders $ournal and drool at their

charts

:uess what Fouve $ust created a serious unconscious bias and you might not even reali7eit. I a hand ull o traders you generally respect all go long on a given trade, and you sit

down to do your own chart analysis telling yoursel youll make your own decision, guess

what direction youll likely trade =ven i you go short, do you not think youll be a tad bitmore uncomortable doing so

;nce again, theres nothing wrong with wanting to be tribal, being included, eelingconident since so many others are with you? its normal. -ut remember what I say

bout normal?

1ome o you might have this down pat so ar, you might ignore other traders sentiments,

calls, and charts entirely. Fou might put on a trade only ater taking a cold, hard, un)biasedlook at your own analysis. %his is all good, but your tribal mind isnt done with you $ust yet

=ver get into a losing trade and peek at what other traders are doing to see i you shouldclose it out or not =ver let their inluence turn a trade into an investment Feah, thats

the tribal mind going at you again.

%rading in general, especially i youre in a drawdown or in a losing trade, is uncomortable.%his is why, in an earlier section, I talked about limiting your risk to something you dont

care about losing so i you e+perience a stop out you arent emotionally aected. I you careabout a single loss, youre most likely going to give in to e+ternal inluences, and ne+t thing

you know youre looking or reasons to say in the trade hoping it will turn around instead o$ust cutting the loss short? looking around or people trading in your direction, or thinking

this trader took the same trade as me and hes an e+pert will only give your emotionalside reason to let the loser keep hurting you.

I will say this now, i you want to stop being held back rom trading on a proessional level

and gain better consistency through your own hard work, you M31% let go o e+ternalinluences all together and instead rely on yoursel or all trade decisions. %urn o 8(-8,

stop browsing online orums or trade ideas, stop spending time in trading chat roomswhere people yell out calls to ollow? etc?

If you cant rely on yourself and yourself alone to ma"e a return in the mar"et,

then youre not really a professional, youre 1ust indirectly sub1ecting your capitalto other peoples trade ideas$

(Though by all means keep using online forums to talk about trading, Im saying to cut out

the sections of the forum that might give you a bias and without question stop shadowtrading people online I personally dont post or read the Interactive Trading forum here,


22/27

nor do I read through journals unless its the weekend and Im curious about peoplesthoughts in the past that cant possibly affect my trades since they already happened!

*o you want to "now some real life eamples of why its good to turn off our

tribal)communal instincts:

I you read the biographies o a ew ultra)successul people !e+amples in technology0 :ates,*ell, 5obs, etc.. in inance0 1oros, -ogle, long list here..# youll ind that most didnt care

about what others thought o them. %hey did what they thought was best, or what theyen$oyed, despite the world only giving them riction. Put simply, most ultra)successul

people are, to some degree, eccentric or odd.

%ake :ates or e+ample, the guy dropped out o Barvard to start his company. I he wentout and asked or advice rom the schools academic advisors, his amily, his riends, etc?

theyd have told him to stay in Barvard and inish irst. :ates didnt, he hated to lose anddidnt want to miss out by being even a year late to the game. >as it the right choice

Probably not, but then again I cant argue with the empire he built.

SSSSSSSSSSSSSSSSSS

%", I thin" I!e beaten this dead horse enough$ #ow for the upside:

"#hats that$ Theres an upside to tribal%communal thinking$ I almost forgot after so muchabout the negatives&

'8S5 There is5

Foure going to need support. %rading, i youre doing it right, is lonely. Most o your close

riends or people you grew up with arent going to be traders so its hard or them to relatewith you when youre talking about work at a social gathering.. its still healthy to eel

included and part o a community ater all.

1tart using places like these orums as a constructive and positive place to share ideas and

talk about trading in general. 1tart keeping your $ournal !remember the $ournal I asked you

to start earlier# online so others can relate with you. 8onnect with people who are like)minded in a way that doesnt involve bouncing trade ideas o each other but instead

ocuses on the substance that is trading itsel.

('nd please, always conduct yourself in a constructive and positive fashion when you postonline or partake in any anonymous means of communication if you cant keep cool talking

to other traders how will you ever epect to keep cool during a bad trade$ It all comes backto discipline, and keeping control over your emotions is something you need to eercise at

all times if you ever want to count on it when you need it as you trade!

99=arlier in this section I said there was one e+ception to the amily@riends rule. ;ne othe single most important people you should converse with about your trading is your

spouse or partner. %hey might not have much o an understanding but they, o all people,


23/27

need to support you emotionally and they cant begin to do this i they dont understande+actly what you do.

%his might not be easy, as Ive dated a ew people in the past that only see lashing

numbers and the chance o risk, but sit down with your spouse and teach them the basics.%hey dont have to become a trader, and thats not what Im suggesting, but give them the

very basic oundation o whats going on and how youre making money.

Fou need to be able to communicate your rustrations, and your $oys, when it comes totrading. &s much as theyll be happy or you when you do well, i they have no conte+t and

are unable to relate they wont understand e+actly what that success means or you. ;r, iyoure having a bad week, they wont truly grasp why youre not in a great mood !beyond

any losses# and may even start to resent you or being a dark cloud around them.

)ommunication here is key here

%hey are your better hal, so keep them included, since down the line when you need to

convince them its ok youre "uitting your day $ob to trade ull time, or when you need tomake any ma$or inancial decision as it relates to trading proessionally their understanding

will pay o.

See" out mentors

&s we want to avoid letting outside inluences aect our trades, we do want to take in sometypes o outside inluences that aid our development as a trader.

%heres a key thing here to keep in mind, you want to look or people who teach you how to

conduct yoursel as a trader, not ones that tell you what to trade, teach speciic systems, orgive trade calls.

%his is a give a man a ish vs. teach a man to ish type comparison. I you want to developyoursel as a trader youll need to look or the ollowing in a mentor0

& ocus on consistency regardless o the strategy

&bility to ob$ectively look at any strategy, not $ust preach about their own method,

since a proessional career trader is adaptable to dierent strategies in dierent

markets and understands that not everyone thinks the way they do

&bility to tell you whats not working and what you need to stop

&bility to talk about their own mistakes and their own trading record without buing

out the scratches? =6='F trader makes mistakes, its how they survive theirmistakes and learn rom them that matters.

&bility to walk you through liestyle e+ercises and theory e+ercises that will help build

skills used in trading. Mental walkthroughs, number games, probability theory, etc?

I cant stress this enough0 I the potential mentor only wants to teach their system anddoesnt think anything else works, stay away. I they only want to eed you trade calls, '3(

away. %his isnt about letting them inluence you in such ways.

Ta"ing on students

*ont stop thereE you didnt make it this ar without learning a thing or two.


24/27

share what you know. Im not saying you need to give away your edge, but a lot oproessional traders horn in on their skills by teaching others. Fou really reinorce the

lessons youve learned over the years i you reteach said lesson to other people.

+If you$re still new to tradin#, this part won$t uite apply to you, it$s foreperienced traders tryin# to better their perfor!ance and focus their skills. -ou

can still do it as a new trader, e"en a newbie, but please keep in !ind the li!its ofyour eperience and know when to refer to other resources when faced withuestions that are out of your reach.

'emind anyone learning rom you that you wontgive them trade calls, and you wontsuggest trades. I they only want you to give them trade ideas then youre not really

teaching them and they $ust want someone to make trade choices so they dont have to.&void these types o Astudents. Foull get lack or it, some might even suggest you wont

give trade calls because you arent proitable, but ignore them and remember where theyare coming rom !a place where they cant make their own decision or want someone else to

trade or them.# Fou didnt sign up to make them rich through your trade choices, the only

person whos going to make them proitable is themselves, youre $ust in this to progressyoursel as a trader , nothing more. I they cant deal with this, they are better o signing

up to a signal service and blowing their retirement savings chasing penny stock.

%ribal minds, once tamed and used properly, can be an asset. 'ecognise why you want to

seek outside validation in your trading choices and why it will only hold you back. >orktoward being a completely independent trader. 1hare this mentality with other. Four account

balance will thank you in G years.

9ast time I will post anything about this sub$ect...

& simple google search on the random entry methods and coin toss methods return many

results, and yes, as n mentioned a ew o them don/t show proper proo or only rely on

anecdotal evidence, but you gotta dig a little deeper.

%he idea behind this thread is to get people started and point them in the right direction so

they can achieve great things on their own. I ind hand holding rustrating since teachingpeople that aren/t receptive to new ideas $ust becomes a shoving match... which a lot o

recent posts have become.

&nother reason I asked people to search out sources is a lot o e+amples come rom otherorums and I didn/t want to link to rd party sites that compete with


25/27

-ut anyway$$$ to put an end to this:

;n 2an Tharp0 Bis e+act system around trading on randomness involved a trailing stop at

+ the recent volatility. %his ensured that bad trades not only got stopped out "uick, but iyou happen to catch a runner that/s going or you and the market slows down, you/d bestopped out even aster so as to capture as much o the move as possible. Be mentioned in

two o his books he got the system to work and be proitable over longer periods o timeand based his work o a utures trader named %om -asso !yes, the same amous trader

who spends time sitting on the board o hedge unds and the (


26/27

much I personally nick name it *irty Mc8hops.

The significance here isn7t 1ust that it was slightly profitable o!er ;; years$$$ butthat the profit also co!ered off an a!erage spread of


27/27

that thread is started, this has gone so ar o topic in over)e+plaining a simple logice+ercise that I/m convinced that anyone reading it has lost the point by now and is too

caught up in the details to actually have learned anything.. and that/s sad$

Date post:	02-Jun-2018
Category:	Documents
Upload:	athos8000
View:	251 times
Download:	0 times

Jack Larkin

Documents