Part of Being a Successful Trader

For those of you who trade as part of a desk I’m sure you have heard expressions like these a thousand times:

“I can’t believe I missed that move in XYX. I was wating for that breakout for a week!”
“I got stopped out in ABC then it took off!”
“I missed getting hit on the bid by a penny then BS ran two points!”

I’m used to hearing the above on a daily basis. Traders to their detriment spend a lot of time harping on the money that they “should” have made. The question is what were they doing to make sure that they didn’t miss the trade or if they got in and were stopped out did they have a plan to get back in.

During our traders’ initial training period I give a lecture on focus. I talk about what it means to be focused as a professional trader. Professional traders who are focused don’t miss entries on stocks they’ve been following. They set an alert and when the alert is triggered they execute their trading strategy. They don’t come up with some excuse about how they were in another position at the time or they were eating their lunch or watching a video on you tube. They just execute.

Here are a few tips on how you can better execute on the opportunities presented each day:

1) Spend time each day visualizing how you traded a particular play. See yourself executing your trade as it occurred but also integrate into your visualization small adjustments you would make to improve your results. These adjustments should be based on observations you made at the time of the trade with respect to the price action of the stock. This exercise will give you more confidence the next time a similar set up occurs to pull the trigger and trade it with greater efficiency.

2) Spend time developing detailed trading plans for the stocks you intend to trade on a particular day. Then visualize executing the trades when the stock hits your price points. Visualize what the tape should look like in order to confirm your thesis. Also, visualize yourself hitting out of your position if it goes to a predetermined stop point or shows you something on the tape that warrants your exiting the position. See yourself taking profits and immediately determining where would be a good point to re-enter the position.

3) Get some rest. Without proper rest you will miss a huge percentage of your best setups.

4) Spend time each day reviewing charts of the top market stocks and top In Play stocks for the day. This will give you a sense of the most recent important support/resistance levels and will enhance your ability to execute when those stocks hit their important prices.

5) Be on the desk throughout the day. I’m a firm believer in taking a break mid-day and re-energizing for the close. But you also need to be aware that the best moves of the day sometimes occur between 11-12 o’clock. Check out the charts in FCX and AAPL from today.

We all know there are literally hundreds of little things that need to be done to become a consistently profitable trader. Please include these on your list of daily activities.

In the coming days and weeks you will see us devoting quite a bit of time to the idea of “skill development” for traders. It is our contention that most trader training emphasizes knowledge over skill. Dr. Steenbarger recently touched upon this topic in his blog. The vast majority of under performance of traders is a direct result of the lack of time spent building trading skills.

4 Comments on “Part of Being a Successful Trader”

  1. I’ve noticed that most training I’ve come across emphasizes finding trade entries. Active trade management – a critical skill – is rarely or ever discussed. So we put on trades and then sit there like deer in the headlights as we get stopped out. (And was the stop placed properly? Who knows, as that’s something else that’s rarely discussed.) Have enough “deer in the headlights” experiences and you tend to stop pulling the trigger….

  2. I’ve noticed that most training I’ve come across emphasizes finding trade entries. Active trade management – a critical skill – is rarely or ever discussed. So we put on trades and then sit there like deer in the headlights as we get stopped out. (And was the stop placed properly? Who knows, as that’s something else that’s rarely discussed.) Have enough “deer in the headlights” experiences and you tend to stop pulling the trigger….

Leave a Reply