Trader Quote #31
“Common Sense is Not common practice” Rhonda Scharf
==== This is a great quote for all the traders reading. I guess, it is an adaptation of Voltaire’s classical quote “Common sense is not so common”. We as traders all know about the typical themes such as: risk management, lot assignment, technical analysis , fundamental analysis stop loss, limit orders, probabilities etc etc. and we are all well-aware that these are very important elements for successful trading, so the question is: Why is this common knowledge not a common practice in our trading overall? Why are there periods of time where we follow our rules by the book and then we go totally off-course?
Don’t feel bad if you have experienced this episode, I have passed through it and any serious trader who has been long enough in this business has lived it. The key is to not repeat it, right?
Knowing is not the same as doing! hahaha! there are many examples: Everybody knows how to lose weight but it is not the same as to always go too the gym and have a balanced diet etc etc. A typical trader knows that he must follow a risk protocol, stop orders but does he constantly execute it?
Doing takes time! Traders always ask me, why can’t I follow my rules all the time? I simply reply, habits take time to develop. Just as bad habits in trading seem to be “faster” to learn, “good” trading habits take time, a long time (but its worth it 🙂 ). It takes many repetitions documentation, learning from mistakes to progressively train ourselves to follow our book of rules!
Start by staring! If you are having problems following your own trading rules, my suggestion would be to first have a set of simple rules you understand and can execute (daily, weekly, monthly) with the appropriate risk management rules. If you don’t have any, investigate, learn, test and share your questions with the trader community to help you polish them,
The most important constant should be the constancy in Something! Common sense is not common practice, let your rules be common practice!
Please feel free to share your comments, experiences or doubts! Best of Luck in your trading and always use stops! Cheers, Dimitri =====
Trader Quote # 30
“More men have become great through practice than by nature.”– Democritus (460 BC – 370 BC)
==== This ancient saying is still a very valid one today for traders. I choose this quote as a reminder to all the traders who have been in this business for a long time. As experienced participants of the markets I have noticed that ‘practice’ becomes a less important priority as time passes by. It could be very natural to think that ‘to practice’ is something necesarry in the early stages of a trader and as we become more expierenced we can think that this rutine could have less importance.
Practice or as I like to call ‘simulation’ should be a constant routine of a trader during all the stages of their career. Many traders fall into the ‘trap’ of using their live accounts as practice mechanism. Our live account should only be used with our most tested strategies and tools. On the side lines we should continue to practice with demo account and test new ideas, setups, strategies. Currently, I trade my live accounts and have 5 demo accounts running for different simulations purposes. This has been very helpfull for my overall business.
Remember to never underestimate the importance of practicing even if you have been doing this for a very long time. Best of luck in your trading & always use stops! Dimitri Feria ====
Trader Quote # 29
“People focus too little on opportunities and too much on their problems” Sir John Templeton
==== People or in this context us, traders , fall into this trap or can, eventually. Where our problems can have a greater negative yield than the lessons learned and the value it has for the future ahead of us. Although Mr. Templetons quote is a clear and simple one, we as traders must not underestimate its deeper lesson.
To analyse Mr. Templetons quote with a little more detail, we can say that we have a number of trading situations occurring on a daily, weekly , monthly , yearly, life basis.
Call it, Markets go up , go down, our positions are positive or positions got stopped out, our account increased 23% or account decreased 9%, stretching out this logic, there are an infinite variants given in any trading day , year or decade.
The problem lies in that our trading results, our morality “kicks in” and starts obsessively “tagging” or “cataloging” all these different occurrences into a limit criteria: “bad”, “good” or even ” so so” .
“That was a great trade, I knew that was gonna happen all along the way”, “I lost money, how stupid of me…” if you know what I mean.
This “moral” system of registering our “lived” occurrences does not, in any way, add value to our trading operations in the future of this trading business. Let me explain why…
A great example i like to use is the following. Lets imagine a horrible sequence of bad trades, i mean “nightmarish” bad, money losing events, Ok, my question to you is who would you feel about this experience? Is it a problem or an opportunity for you? How do you normally process this experience?
Lets go to the obvious process, its ” horrible”, under-performing crappy (I’m being polite and generous), in reality you would say a large list of rude words in accordance to your performance. Don’t worry I have been there, but lets go to the lesson you must learn today.
Imagine lr permit yourself to exclude the moral “categorizations” or “tags” of your results (performance), try it!, I know its hard to do it this away, but if you do then , we are only ultimately left only with occurrences,in other words, a sequence of events, its just that. Our homework lies in focusing on what “experiences we can capitalize?”, what we can document?, what worked?, what didn’t work?, what can we improve?, what can we implement?, what can we learn?, what can we document?, what we can exploit?.
Remember it is a “muscle” of untagging “morality” and you must exercise it as a professional trader.
The truth is:
Its very, but very easy to complain or celebrate our trading performance. The fantastic results and the “sucky” ones.
The high-performance training lesson of today is to amplify the outcome of any occurrence “good or ” bad”. Using Risk management, if we have a streak of losing trades, the question is , what can we capitalize from this learning for our future trading?
Events occur, name it “good” or “bad” the question is, how are you going to use these experiences for the future which, at the end of day, is the only thing that’s coming! Good luck trading, as always use risk management and stop-losses. Dimitri Feria ====
Trader Quote #28
“The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder
==== Money is secondary? What the hell? Is Alexander joking?
Well, if we take some time and analyse this quote, Mr Elder has a very important point to make. How can good trades be better than money ? Why are we indoctrinated to think that money is the primary goal?
Don’t worry I was subject to this way of thinking for a long time but realized it has huge fundamental issues. The problem is that anyone can have a great trade, a lucky trade, a momentum trade, but the question is, can you replicate this performance in the future in the long term?
I repeat, can you replicate this trade in 10 years time?
Lets think soccer, is it more important to score a goal every match or to have a system of playing the game to have high probability of scoring opportunities?
Do you prefer to have one perfect trade or many high probability trades?
If you are in this for the long term, focusing on making the highest probability trades possible is a more sustainable way for a future success. If you spend time in analyzing your entries, exits, risk management on a consistent level, you have a higher probability of achieving your goal.
Its not about the the Result, its about the process. Good Luck Trading! Dimitri Feria ====
Trader Quote #27
“We know that the random element in the market represents at least 40 to 60 percent activity. Therefore, it’s not logical to look at every tick or to think that every tick or every chart formation has meaning. They don’t. There are too many traders trying to look at the markets from too stringent an analytical viewpoint. Most of what happens in the markets is meaningless. Why try to interpret every little movement, every little reversal, every little tick? In trying to do too much, they’re actually paying too much attention to the market. You have to keep a distance from the market. Only then will you have the psychological resources to let your profits ride. You won’t be looking at every tick and interpreting it in a fearful way.” Jake Bernstein
==== This is a much longer quote than what I usually post but Jake has a very strong argument. I remember (now I laugh about it, back then I suffered it !) when I began trading I would pay attention to every tick, every reversal and any news and boy how stressful and unproductive that was!
I totally agree with Jake that doing more analysis on every tick does not translate to more trading results. Most of it is Noise Noise Noise and that can be very distracting and has a heavy impact in your psychological and execution aspect.
Look at the Forest first then the tree is a ancient saying but its a trap that many traders fall into (including myself). Understanding this ideology, with time, I have made my trading system & analysis much more practical and more long term oriented. This has given me more time and tranquility to do other important things in life and not be glued to my trading screen or mobile live quotes!
Stick to the bigger picture and do not focus on every tick (noise) and be careful not to become a MARKETHOLIC ! Good luck trading, always use stops , DImitri Feria ===