The Dimensions of a Successful Trading Entity

Many considerations go into creating and running a successful trading entity. We’ll look at the most popular which get the most attention, right through to the most important, which usually get the least attention.

Here is the list:

1. Entry signals
2. Risk management
3. Exit signals

4. Reliability
5. Reward to Risk
6. Opportunity
7. Capital management

8. Objectives
9. Familiarity with Markets
10. Resources
11. Mindset
12. Style
13. Management

Most, and by most I mean probably close to 80-90% look at number 1 and that is it! That is a startling reality, but a reality nonetheless. But there is a reason this happens. Most new traders are unaware that such a large number of traders ultimately fail in this business, and more importantly, this fact is well known by the very people who market trading in this way.

But enough of that, let’s look at some serious considerations you should make and the order in which you need to do it.

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The index futures trader…

I received an interesting email recently from a 11+ year experienced index futures trader who wanted to know if a particular program would enable him to take his trading to the next level.

At first I wasn’t sure which program he was referring to and also at what level he was trying to get to, let alone which level he was currently at.

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…But Why?

You may have heard the statement before; the biggest battles traders will face are within. If there was an explanation as to what these sorts of battles are it’s more than likely along the lines of overcoming bad habits, emotional issues, biases, beliefs and so on. But why are these so important to master, and why is it so hard to do so?

I’ll address why it is so important first, as a lot of traders believe that trading should not be so difficult in that if one set of rules works for trader ‘A’, they should work for trader ‘B’.

When a math teacher is attempting to teach a class the 12 times table, some students get it straight away, some take a bit of time, and some can’t grasp it at all. Now let’s just assume that it is important for children to learn the 12 times table, if some are grasping it straight away and some are not, then is it the method being used to teach it the reason some can’t grasp it? Well yes and no.

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..And Where You Fit In

We as humans have the ability to evolve intellectually and have done so at a rapid rate, but when it comes to emotions we have been unable to change in thousands of years. The saying “This time it will be different” is coming from the perspective of an intellectually evolved civilization, one that is somewhat aware of history, but emotionally has not changed at all to prevent it from repeating.

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Which one are you?

Some traders will go through system after system, teacher after teacher, wasting thousands of dollars not only in useless systems but in lost trades before they realize they’ve been approaching the markets from the wrong standpoint because they’ve been trying to trade the wrong type of system.

The two types of traders are the mechanical type trader and the discretionary type trader. Therefore, there are two types of trading systems, a mechanical system and a discretionary system. The difference between the two is quite large not only in the way the market and possible trades are analyzed but in the psychological make-up of the trader themselves.

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I have spent an awful lot of my personal time putting together a 69 minute video for traders that I believe will open the door to understanding how to trade successfully.

This video is a trading system I call the 4 T’s trading system, and in this video you’ll learn the trading system itself, the rules and how to trade it. It will also show you I apply leverage to it, but more importantly how to use leverage with the trading system to achieve a goal or objective.

However it doesn’t end there. By the time you have watched this movie, I believe you will be able to take any trading system, not just the 4 T’s system and use it to achieve your goals. If you already have what you believe is a work-able system but are unable to make it work, this may answer your problems.

If you do have any questions after watching the video I urge you to send them to me, via the question form link which you’ll also find on my blog. I plan on answering any questions regularly so do send them along.

It is quite long, so make yourself a cuppa and enjoy
http://financialmarketfisherman.com

To your success
Dean Whittingham

Your Exit Strategy Should Be A Function Of You and Your Trading Needs

In my last post I spoke about getting back to the basics of trading when you find yourself struggling. I also mentioned that it was not the complete picture and that an exit strategy is more a function of the trader themselves. In this post I explain why.

There are many ways to formulate an exit strategy. Other than an initial stop loss, which is there to get you out of a bad trade, exit strategies are used to achieve a goal. A lot of traders don’t understand this concept and therefore pay little attention to it, spending more of their time worrying about entries.

Those that do consider the exit strategy important may still place more importance on finding the exit strategy that proves to be the most rewarding when back-testing. Although this is important it is only half the picture. An exit strategy also needs to support you the trader and help you achieve your goals.

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1. Is there someone out there in the market trying to drive me broke? 2. Realistically, I think the question I would like to have answered is how the single largest volume trader of any instrument makes their bets on. TA or Fundamentals? I’d cry if it was Fundamentals since I’m a technician.

I here this question a lot; are the large players in the market fishing out the small guy, and maybe yes it does happen but this shouldn’t deter you or intimidate you either. The markets are still markets and that will never change. What one must remember is that if you enter a trade long and place a stop loss at a certain point you have done two things. You have told the market you feel this instrument is undervalued and will appreciate, and you have also told the market the price at which you are willing to sell your holding.

I feel this is where a lot of people get stop losses confused. If I purchase a house and then decide to sell it, I’m not placing a stop loss, but I am telling the market that at this price, I am willing to sell my house. A stop loss is no different. You are telling the market that at this price you are willing to sell and so if a buyer comes along who is willing to buy at the same price then so be it. All the broker is doing is fulfilling both of your wishes.

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I am dedicated and have discipline, is that enough to succeed? Also I have problems with exits, it’s not fear or greed it’s just when to exit.

If we look at the first question, the name of the game is definitely discipline. When the Turtle experiment occurred several decades ago only some of the team chosen was able to satisfy the founder’s targets. The rest failed and it was a simple matter of discipline, nothing else.

As cliché as this sounds nowadays, I think we need to make sure we don’t see trading as the fun filled theme park it can sometimes appear to be. If you get the results you want from trading, then you can go spend that money at a fun filled theme park. Trading is just a means to get there and I have never found the act of trading itself exciting, I have always found it boring (as opposed to analyzing which I find quite exciting).

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Laundromat?

I decided I wanted to buy a Laundromat. I had $50,000 to spend and wanted to ensure it met the following criteria. Firstly, it had to be in good condition, and in a location where it will still be a viable business in 10 years time. Secondly, and more importantly for my objectives, it had to be able to return me a return on investment of 20% per year, over the next 5 years, and require no more than 1 hour of my time a week.

After searching for a while, I found a Laundromat in good condition and in a very nice location for $40,000. The books suggested that it actually made more than 20% per annum, in fact closer to 45%, but at the same time, it involved around 15 hours per week. The owner was providing a laundry service that took her approximately 15 hours a week and she was pretty much running the service, organizing maintenance and emptying the machines of their cash in that 15 hours.

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