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Practice Makes Perfect

by The MoleSeptember 1, 2016

Let me go on a limb here and flat out state that most of what you have ever learned about being a trader has been completely wrong and may actually be counter productive to you being successful. There I said it. An entire industry geared toward selling you expensive trading books and weekend seminars in exotic locations in essence has but one goal in mind: To separate hapless retail fools from their hard earned money. And a profitable business it is with a never ending line of suckers standing ready to take their turn. There is never a lack of people looking for easy solutions to complex challenges, which is an affliction which obviously extends far outside the trading domain.

Two Aspects Of Trading

All the things you learn from books or perhaps a weekend seminar (if you pick a good one) can essentially be summarized into the quantitative aspects of trading. This obviously covers a myriad of topics ranging from basic technical analysis, theories on market cycles, fundamental trading techniques, market related education (i.e. books on options, futures, forex trading, etc.), capital commitment guidelines (e.g. position sizing or delta neutrality), system trading rules, all the way to the simple mechanics of how to place and exit a trade. You can’t be a trader without knowing at least some of that stuff just like you can’t pass your driving test if you don’t know where to find the clutch. Well at least over here in Europe.

What all these have in common is that they are inherently teachable. No matter who you are, if you study them long enough you will be able to acquire the skill and apply it. However that still does not make you a successful trader. What is completely being ignored in the vast majority of trading books is the unteachable stuff – the qualitative aspects of trading. So what are those?

Van Tharp once stated that “successful trading is 40% risk control and 60% self-control. In turn the risk control portion is only half money management and one half market analysis. Thus market analysis is about 20% of successful trading. Yet most traders emphasize market analysis while avoiding self-control and de-emphasizing risk control. To become successful, traders need to invert their priorities.”

Understanding and dealing with one’s most pronounced cognitive biases for example is part of the qualitative aspects of trading (and there are many). Not pulling out of a winning campaign because of a news flash or market rumor you saw on the Interwebs is another. Closing out a losing trade exactly where you originally planned it despite the fact that you fervently believe the tape will soon be moving in your favor is the one that but a few seem to be able to master. I can talk about all these things until the cows come home and thus plant the seed in your mind, but I cannot possibly teach you this stuff. You yourself will have to acquire that the hard way – by doing.

Trading Is An Acquired Ability

Just as you cannot learn how to be play the piano from studying musical notes you simply cannot become a successful trader from reading books or via attending seminars. Sure you can pretend to be one for a while and tell all your friends about it but unless you’ve been able to be profitable three or more years in succession you are nothing but an amateur – maybe a talented one but an amateur nonetheless. So here’s the secret of how to become a successful trader, it’s the magic answer you’ve always been looking for:

The only path to becoming a successful trader is by trading.

And by that I mean trading with real money and doing it the right way over and over and over again. It means keeping a trading log and monitoring your daily performance and mistakes. It also means sharing your results with others and comparing notes whilst remaining open to criticism. Perhaps it involved finding a mentor or at least a trading buddy. And most importantly it means showing up for work every single day without exception, even if you feel like crap about a recent loss. Learning from mistakes and constantly aiming at improving one’s game. That’s what the pros do and they never stop learning and improving. But they don’t do it via books – they do it by doing.

It’s actually a lot easier with the piano or any other musical instrument because as soon as you hit the wrong note or your tempo is off your ears are going to notice (or not but let’s assume a modicum of talent here). As a financial blogger I’ve had the questionable privilege to repeatedly watch people maintain an auto-destruct course for months and years on end with the invariable end result. Which was that they either were forced to stop trading or the market did it for them.

Passion

The one thing I should point out and which became the theme for this post is passion. I think we all have heard the quote that if you do what you truly love then you will never work a day in your life. Do I always want to look at charts or put on trades? Hell no, but if anything my passion about being a trader has only increased in all the years of my pertinent pursuit. What once was but a hobby eventually turned into a profession and if I could go back in time I would not change a single thing. So here’s the second secret to being a trader:

You need to want to be a trader.

If you just do it for the money, like 99% of the people who cut their teeth at it, then given enough practice, determination, and discipline you may indeed become profitable on a long term basis. Many have failed but there is a good number of people who are doing it on the side right now with respectable results. But if you want to be the Glenn Gould of trading, you’ve got to love it. You have to live and breathe being a trader. Embrace the challenge and the pain. It’s got to ooze out of your pores and no effort or sacrifice shall be too much to ask. If that is you then anything is possible. Passion when harnessed and managed by both the quantitative and qualitative aspects of trading has the potential to produce fortunes. And yes of course we all love the money.

And to get you going for the day here’s one juicy setup that’ll put a smile on your face:

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Public Service Announcement

Monday the 5th is Labor Day and as summer is coming to an end I decided to take Friday off and make it a long weekend. So this will be my last post until Tuesday morning. Enjoy the long weekend and I hope to see you back here next week bright eyed, bushy tailed, and ready for action. Practice makes perfect 😉


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Mattia Cattani

    That’s for me..maybe!! 😉
    Glad to be an inspiration due to lack of market points…;-)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Happy Month Begin.

    VIX,
    http://stockcharts.com/h-sc/ui?s=%24VIX&p=D&yr=0&mn=2&dy=0&id=p89804117565

    long bias if 14.75 exceeded. (maybe tomorrow..)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    I love the smell of blood for breakfast.

    take that – Bulls.

    http://wordinfo.info/words/images/eat-sanguivorous-cow-bat-C.jpg

  • Tomcat

    carnage

  • Yoda

    For you and anybody else. Welcome Mattia. This is the best place that I know for becoming a successful trader, and I certainly don’t claim to be one, but aspire to get better every single day thanks to Mole’s perseverance. The harder part IMO is the control of one own emotions (hope, arrogance, too much self-confidence, greed and fear) which are the trader’s worst enemies. Trade what you see and not what you believe in. Price is the most important indicator, the next one is Mole’s zero indicator (shameless plug), and the rest of MOMO indicators give you context and that’s about it. Set partial profit targets and stop losses. Pay attention to what the good Sr. Mole says, do not attempt to be on the other side of his trade and don’t take offence if he talks rough to you when you’ve messed up, and finally trade small until you are consistently profitable. Lastly, do not believe you can make a quick fortune trading. It is a slow process. Yes, once in a blue moon you can hit a jackpot if you are in luck but this would be a seldom event rather than the outcome of a successful trading strategy. Also stay away from VIX related instruments and leveraged (3X) ETFs if you intend to keep a trade for longer than a day. Decay is a biatch.Those are called widowmakers for a reason and are for experienced (and cold as f.) traders only. The most important thing is capital preservation, so if your trade plan is wrong, you have to make sure that your losses are automatically limited.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    no one is home, and it’s not even Friday.

    UUP, dollar turned.
    http://stockcharts.com/h-sc/ui?s=UUP&p=D&yr=1&mn=0&dy=0&id=p91295404575
    -GG

  • Yoda

    Zero needs to participate otherwise this could be another BTFD opportunity.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    This time is different LOL.

    but seriously, you are correct. You know my recent distrust of 10am ‘drops’.
    ps. I do not have a daily short indicator..yet.

  • jmoney3000

    Awesome post

  • Yoda

    The 50 d sma on SPX sits currently at 2151.52, that’s 7 handles away. I wouldn’t get carried away with shorts for the time being, especially with NFP tomorrow.

  • Jay Thomas

    “unless you’ve been able to be profitable three or more years in succession you are nothing but an amateur” Also recall the adage, “Never confuse a bull market for brains.”
    During the heydays of this bull market, I made money, but I was below average, and I knew that I was lucky to not actually lose money. I knew I had to learn. I think I am better than I was before, but I have only one (very) successful year. Still an amateur.

  • Tomcat

    Agreed, unless you see clear proof to the otherwise, stick to what has been working, which is non other than BTFD.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    I fell in love with trading in the mid 1980’s. And, even the account blowup in 1987 did not lessen that love. But, I was doing it all alone.

    I had another experience last night when I attended a WordPress meetup group. As I sat and listened to a group of professional programmers each add knowledge to the whole room and help each person in the room advance their collective knowledge. It felt so precious. Reminded me of the 5 years that I spent as a scientific programmer back in 1966 to 1971. My first job out of college. Some projects required a team effort and I had such a Deja Vu experience last night.

    They also reminded me of this group as well. It felt wonderful. Thanks for the basics refresher today, Sir Mole III.

  • http://ibergamot.blogspot.com/ i Bergamot

    Thank you, Sir!
    This is absolutely beautiful :)

  • Tomcat

    While most of what GS says publicly can be considered rubbish, I don’t think they are too far off when they say that unless we have a print of 300k+ tomorrow, no way they can raise rates this Sep. To not mention the whole election in Nov and the political ramifications it may have if they do.

  • AboveTheNoise

    New to the community, but great post. The more I focus on improving my game, the more I enjoy trading. You can learn a lot about yourself if you just listen.

  • RonnieH

    Hey, does anyone know if there is an alert service that lets you know when a commodity hits a certain price or price range?

  • CandleStickEmUpper

    Most broker’s trading platforms have that feature. IB does.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    CornHolio!
    😉

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    distrust is healthy.
    ..aaaaaand there’s the hourly reversal.

    http://finviz.com/futures_charts.ashx?t=ES&p=h1

  • RonnieH

    thanks

  • http://evilspeculator.com Sir Mole III

    “ever confuse a bull market for brains.”

    Hehe – like that one…

  • http://evilspeculator.com Sir Mole III

    Participation today is resembling the mountainous regions of Holland….
    .

  • Mark Shinnick

    I stay biased because we are holding this general range, not defaulting down.
    In my lens, that infers something is “up”..or down…you know what I mean :)

  • Mark Shinnick

    Yeah…much of a whole generation …or two? has known relatively nothing else.

  • Mark Shinnick

    I had UUP resistance at around 24.92…this chart is pretty good :)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Yoda

    Big move up tomorrow?

  • Mark Shinnick

    Seems so; fair amount of coiling. Ultimately where the energy goes by EOD …no idea.

  • Yoda

    If history is any guide, bear meat should be served for lunch tomorrow.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    if 2175 is crossed. Yes.
    2175 was also support back on the 19th/22nd. EDIT: so it *could* be a hidden ceiling now.

    ..those two red candles on the 1st? it’s a vacuum zone. (it sucks)
    no edge.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • CandleStickEmUpper

    went long /CL 43.62 today

  • CandleStickEmUpper

    nicce pitchfork

  • Mark Shinnick

    My own game plan happens to be to sell the shit out of any up gap or other insanely sloped run-the-stops rally at my ES resistance areas and Vol support areas.

  • Yoda

    and some more today :)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    son of a biscuit!!
    {grumble grumble – hey, at least I call them like I see’s them}
    😉

    http://www.superquik.net/biscuit.jpg

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    well well, the crushing machine at open.

  • Tomcat

    yep, time to close PM miners L and look for other opportunities

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    There’s your gap.
    Get to it.
    currently 2183, hard to be bearish at this point!

  • Tomcat

    Good job, but I would take profits, because the trend is not your friend…

  • Mark Shinnick

    …just a little more upside then i’ll let em have it.

  • Tomcat

    It was Barry GG, always him…

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    +1 for Badger.

  • Tomcat

    The tide was so strong that even Hillary’s tweet couldn’t take biotech down…for now ofcourse

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    A refresher while we go into Q4 US elections.

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  • ridingwaves

    ok Mr. Officer

  • Mark Shinnick

    “objectionable” …ahh there’s the rub.

  • Billabong

    Surprised no one discussing big reversal in USD … DX +0.21 (Hammer) and USD/JPY +0.92

  • Billabong

    CL – Harami (IP) in the lower quadrant … currently begs for follow-through to the downside … If it holds, we’ll see what happens Tuesday morning.

  • Billabong

    Good decision … we can always come back next week.

  • Billabong

    Mercury Retrograde … chaos reigns. Plus it’s a US long weekend with markets closed on Monday. Positive bias today?

  • Yoda

    huh, why don’t you let your winner run?

  • Yoda

    CL looks bullish to me

  • Mark Shinnick

    UUP has been mentioned several times usually in support of short golds.

  • ridingwaves

    the NFP print changes my metals view, plus it never closed below 1309…..

  • Tomcat

    Good question, the only answer I can give is that I am already L gold, and trying to avoid “all eggs in one basket” type of thing…

  • Billabong

    A hedge?

  • Yoda

    Why don’t you set an automatic stop if the trade goes against you?

  • Mark Shinnick

    Only as a supportive justification to short the golds….at least that’s my own viewpoint.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Tomcat

    You mean a trailing stop? I had that, but maybe it was to “tight” because it hit.

  • Tomcat

    So now GS is changing their stance that the NFP print was good enough to hike in Sep…what a joke

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Flash, I know what is happening. All stock markets have been placed onto programmed auto pilot mode – and it is a secret. yes

    I did read a very interesting newsletter about the Swiss Central Bank investing heavily into our stock market companies – they own more shares in FB than the creator of FB. Which keeps the FB stock up. I did not know that central banks can own shares in individual companies??
    The Swiss are creating francs in order to purchase individual companies stock.

  • Mark Shinnick

    OK. What’s completely bizarre is ECB purchasing of corporate debt. Talk about picking market winners and losers! This is a situation gone completely mad.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Wow, is any of this stuff actually being done legally. I would not have believed that central banks could do this legally.

  • Yoda

    Yes I meant a trailing stop.

  • Yoda

    LOL

  • Billabong

    There’s chit chat out there; “Reuters Floats Disturbing Trial Balloon: “The ECB May Be Forced To Buy Stocks”.

    Transfering corporate debt to European taxpayers via stock bailout? Brexit just in time….

  • Billabong

    LOL – GC flat & SI +0.72 (4%) for the week.

  • Tomcat

    Draghi and our mistress are both from the same school of economics so no surprise that ECB/FED are consistent in their approach. except they are limited to their region’s laws and regulations i.e. ECB can’t print like Fed can.

  • Tomcat

    I am looking at this chart: http://stockcharts.com/h-sc/ui?s=%24WTIC&p=D&yr=1&mn=0&dy=0&id=p70498718324
    Which one are you looking at?

  • Billabong

    Fed has one more weapon with a fairly clean sheet — IMF and its SDRs

  • ridingwaves

    don’t bet against them…..take a close look…
    http://soberlook.com/2016/08/the-ecbs-corporate-bond-purchase.html

  • Yoda

    just the intraday chart

  • Tomcat

    “Pregnant Harami” ey, whatever that is, was not me…

  • Yoda

    And I am grateful to the Mole for pointing out the trade

  • Mark Shinnick

    Mercury Retrograde, Monkey Chinese year ..all that stuff all chaotically swirling-around …yet all we really still have is price :) Yeah, some positive bias but lets not count on anything.

  • http://evilspeculator.com Sir Mole III

    Glad I took this day off….

  • http://evilspeculator.com Sir Mole III

    I hope before I lay down to die I do get to see the day where all this fuckers get completely cleaned out – and I mean a kick in the nuts they do not ever recover from. It’s been eight years of market engineering and it has completely killed retail on all fronts. The top crew think they are going to keep this thing running for another decade or two, and heck, maybe they are right. But the tape is starting to look pretty frayed around the edges – just look at those intra-day sessions. Not a healthy market.

    If it’s any consolation – it will end one day. I’m just afraid they are going to drag us all with them into the abyss.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Ok, time for the long disturbing weekend Holiday.

    ..a parting chart of the Mickey House, it doesn’t look good.

    Cheers!

  • kudra

    Exited NUGT a day early. Had profit (after being in red) and didn’t want to roll dice with NFP. Seems so obvious now in hindsight. Have a good long weekend everyone.

  • Yoda

    XD

  • Ronebadger

    SO…it’s not a bellweather?

  • Billabong

    Four biggest fears in trading according to Mark Douglas:
    1. Fear of being wrong
    2. Fear of missing out
    3. Fear of losing money
    4. Fear of leaving money on the table