Bullet points. Hard facts only on where traders struggle and steps to fix
Hard facts only on:
where traders struggle
and steps to fix
A bullet point summary of last week's podcast appearance.
👇
Can't go to university and get a degree in trading.
Right knowledge needs you to get around the right people. If you trade at a professional firm, it's made clear you'll likely be unprofitable in your first 9 months.
The longer route is starting as a stock broker. Years into it you can run your book of clients you trade for.
Me > stock broking > trading for wholesale clients > professional trading firm.
Being around experienced traders fast-tracks your learning. It exposes you to habits, specialised skills, and trading unique situations where you have edge. What we today call playbook or A+ trades.
Some are reluctant to accept a 12-month development path because it's "too long". But the stock broking firm had 6500 self-directed traders. I saw first-hand the majority lose year after year after year. Taking 12 months to develop is the express track compared to losing year after year after year.
I use the same approach to guiding traders that occurs in professional firms. You learn by emulating experience and skill combined with regular guidance and feedback.
But I prefer working with traders who've got first-hand trading experience. Because the pain they've experienced teaches them:
walk away, or
do the development
Most traders misdiagnose trading problems as psychology or money management related. But it's lack of edge that's the real problem - due to the lack of understanding around it. Edge is the root cause of 90% of trading problems.
a trade that produces profits over a meaningful sample size is said to have edge.
Edge isn't discussed openly (firm traders sign NDA's) leading to broad misunderstanding. To use a card game analogy - you don't show your opponents your hand.
The benefit of intraday trading is arriving at meaningful sample sizes quickly. It's also a skill and experience fast track. It's why successful longer-term traders built their skills through intraday trading.
What edge isn't - when you have a range of trades that produce an overall positive outcome. No way of knowing what contributed to edge across different trades.
You can see why traders specialise in a handful of trades they take over and over. There's a saying, "not all movement is opportunity."
The market operates like pokie machines. Enticing you to place trades by appealing to your cognitive "flaws".
Specialising in a handful of trades is how you sidestep these traps.
There's a common misunderstanding in trading A+/playbook trades - to watch and wait for it and enter the trade. But there needs to be a catalyst for the move to occur.
Two examples:
A counter move occurs in the market you trade when XYZ market opens. Not an elaborate idea - so not a large payer (but a paying trade nonetheless).
China COVID restrictions = hefty sell-offs. Talk of lifting restrictions will boost the economy. A move up in markets, even if short-lived, is likely. But difficulties of investing in China mean traders look to express the trade via a proxy market. Look for the idea, followed by the proxy market to move in tandem. The idea has more legs to it so pays more than the first idea.
When you approach markets in this way, you're moving away from how the crowd trades. The crowd is a net loser so you're taking steps to operate outside them.
But no trading "a move". There are infinite ways markets can move from one price to another. Some would stop you out over and over unless you abandon risk management.
Playbook trades have an edge with healthy risk to reward. So only if the market aligns with a known behaviour do you trade it.
The best intraday traders have win rates in the 50s percentile.
So the key to playbook trades is not that "they win". Instead, it's when you're wrong; it's a paper cut.
I define the trading process as engaging in the market without getting hurt. You can deal with small paper-cut losses. It's losing a limb that's hard to come back from.
Why do traders give back a large part of winnings? It's due to recency bias. It's the idea that the recent results will continue. Playbook trades help you avoid this problem by only taking "with edge" trades.
Playbooking helps you see over large sample sizes that winning is not important. It's the best way to cultivate the notion of indifference so you can surrender to the market. It takes continual work to do this because it's unnatural.
You'll sometimes hear traders say trading is all in the mind. Unless you have an edge and the skills to execute it, no level of psychology will stop you losing money.
Only very advanced traders who've mastered the practical aspect will say trading is all in the mind. That's all they have left to work at.
Harmful beliefs:
What's your definition of a trader?
If it's someone who buys and sells, if you're not buying and selling, you feel you're not doing your job properly. You'll take trades purely to feel you are doing the right thing.
The definition of trading is not "buying and selling".
What does a good day look like?
"A good day for me inludes making several mistakes".
"A good day for me includes missing a few moves."
Above are realistic outcomes for top performers. Expecting better than this is harmful.
Market's in charge (Boss)
The notion of surrender is turning up daily and sticking with your process. Some days pay and others are a grind. But only by always turning up do you experience the big paying days.
A two-year struggle
An area I struggled with was adding to trades/scaling up my trading. It took 2 years of suffering to get to what I now define as either:
Inner city driving - congested price movement so there is no adding to trades as moves don't open up and,
open road driving - the road between two major cities where there's no traffic, no stop-starts. The ideal market behaviour to use the market's money to scale up trades.
Think of trading as a business like any other business
If you own a coffee shop, just because you see the clothing store next door doing well, you don't start putting up racks of clothing to sell in your coffee shop. Stay out of the way of other traders' businesses.
Listen to the full interview at
And what exactly are the skills that give you a competitive advantage?
👉 only guidance in industry skills outside professional firms
Angry?
Resentful?
Frustrated?
Or similar?
Are you NOT okay with NOT being your best trader?