I have been teaching professional traders to become better traders since 1987, both at well known institutions [JPMorgan Chase, Goldman Sachs and Commodities Corporation] and various Exchanges. Over the past 23 years of teaching professional traders, it's become pretty easy to classify what trading practices will drain a trading account:
Traders are people and they tend to share the same human strengths and weaknesses. I like to say technical analysis is 80 percent science and 20 percent art [though that 20 percent is quite large!] and in this case, I'd say that keeping your thoughts and emotions under control when you trade is much more than half the battle. I like to plan my trades before I enter them and write the plans on paper with a pen [writing the plans on excel spread sheets on my computer do not evoke the same feelings in me]; this allows me to have the plan in front of me and I can 'follow along' or 'paint by the numbers' as the trade unfolds. If I get anxious or if I walk out of the trading room and come back in and need to refresh my mind, the plan is there in front me: I simply look at the plan, find my place, and go back to executing the original plan. Plans, if you stick with them, take many of the emotions out of your trading.
We've all been taught to diversify our stock investments for safety-the appropriate saying is "Don't put all your eggs in one basket". But should traders follow this same advice or should they focus on one instrument? And if they trade more than one thing, how much of each do they trade? How do professional money managers measure and balance risk when they trade a portfolio of instruments?
This is the time of the year that many people make resolutions to lose weight, stop smoking, be better husbands or wives or parents-well, you get the idea. For those of you that are just learning to trade, or are early in your trading careers, I suggest you consider making a New Year's resolution to be a winning trader. But don't make that vow without knowing what it entails! It's not just saying the words or wanting to be a winning trader that makes it so. What do I mean? Read on.
Making Choices That Put You in a Position of Strength
One of the most interesting and fulfilling experiences I have had in my 30 year career as a professional trader, moneymanager and educator has been my work with the hundreds of professional traders at the Chicago Mercantile Exchange and Chicago Board of Trade trying to make the transition from being floor traders to 'off-floor' or 'screen traders.' For the past 2? years, I've been teaching half-day Market Map Seminars and then acting as mentor to many of these professionals. Some of them have 25 years trading experience and some of them are fairly inexperienced and want to start their career 'off floor'. But all of them want to be consistent winning traders.