I was in Athens (Greece) the first two days of the week looking at some property investment opportunities. The rest of the week I was back in the trading office in London. Spent a good chunk of this time working on strategy development for a 1H version of my K5 trading strategy. [This strategy is essentially a trend-following strategy, trying to pinpoint the time when price will resume with the trend, after pulling back and/or going sideways]. No live trading.
On a blog post two weeks ago I mentioned Jody Samuel’s Traders Pendulum book. Today, I thought I share how I am trying to apply the material from this book to my own trading. I will do that via a couple of blog posts
Habit 1 – The Right Motivations
It’s important to assess a person’s motivations for wanting to become a successful trader. Good (and common) reasons to become a trader include aspiring to financial independence, being one’s own boss, being flexible in terms of geographical location and time management, trading being an intellectual challenge.
Bad reasons to become a trader would include escaping from a previous situation that simply didn’t work out and pursuing a get-rich-quick dream with the trading venture.
My motivations for the trading business are in the right place.
Habit 2 & 3 – Business Plan & Goal-setting
Importance of compiling a business plan to help you carry on through the tough times and to give the trader guidance. IMHO, this would be difficult to do without the help of a good trading coach – there’s no way of knowing what realistic expectations are at the time. Nor is it possible for an aspiring trader to be aware of things that need to be completed along the way.
It’s generally also highly beneficial to carefully plan the creation of a trading operation, with the right expectation, getting requirements into place, and ideally implementing it in parallel to any existing ventures.
As it was, in my case, my return to full-time trading was ill-prepared and a lot of the time between Aug 2013 and March 2016 was not used productively. This is partly I had no (or have no) financial or time pressures because I took a decent amount of cash from my previous business ventures. Rather than continuing to run those ventures in parallel I effectively plunged into the trading operation, cutting off the revenue stream from two profitable ventures I was running at the time. With the benefit of hindsight, this has been a costly mistake for me.
I definitely need to improve on my business planning. Firstly, as to actual objectives that need to be achieved and carried out in the trading operation, and secondly, how the trading operation should run in the context of other business projects. At this point, I am in a much better place for being aware of what I need to accomplish in order to become a successful trader, so it’s more likely that I can draw up meaningful plans.
I also need to set concrete targets and timeframes. Yes, I can set ROI goals and then figure out how to achieve the goals. But, a more realistic approach would be to complete testing phases of planned trading strategies, and to use the testing results to estimate potential returns, and secondly to consider adding new strategies to provide enough theoretical returns in order to meet the ROI goals that I had set.
Doing this will make it more likely that I will achieve my goal of becoming a successful trader and will reduce the likelihood of me giving up along the way.
Habit 4 – Having a coach
There are numerous advantages to having a trading coach. Finding a good trading coach is not easy. Working with a trading coach will likely accelerate the coach’s progress. Jody Samuels outlines a large number of things that a coach can help with.
In my experience, finding a coach in the trading area is definitely a challenge. Paying for a education in trading is pretty much a minefield. In contrast, in my poker days, I received help and mentoring from top notch poker players for free!! [See my interview on Trade2Win for more details on that] And bear in mind, that many individuals searching for a trader are not qualified in assessing coaches either!
If using a coach, it’s important to know what you are expecting from the coach, to communicate this to the coach at the outset, and to regularly review whether the actual coaching is in line with expectations. Again, this might not be straight forward to do. Whether a coaching relationship fails or succeeds is most likely due to both the coach and the student.
Ideally the coach should have a good road map for getting an aspiring trader to where he wants to be.
It’s critical that the coach has a lot of trading experience and is a consistently profitable trader. The exception is if the coach is hired specifically for the psychological aspects of trading – in that case it would be great if the coach already has experience working with traders.
As I have often mentioned on my blog, I have used Paul Wallace for an extended period of time and he has significantly helped me in many aspects of trading, and has been very generous with his time and availability, and he is an active trader himself. You can view his extensive website here.
Having worked my way through this chapter, I realised that I will need to have a coach and have him/her actively involved in my trading project (more so than I have done in the past), and I will need to continue to have a coach on an ongoing basis. In my speed-skating days I used a coach consistently for four straight years and that helped tremendously.
Additional chapters to be discussed in next blog post(s) [hopefully in the next few days]:
- Habit 5 – Pursuing the trading style suited to one’s personality and lifestyle
- Habit 6 – Trading Strategy
- Habit 7 – Trade Planning & Trade Management
- Habit 8 – Measuring Performance
- Habit 9 – Emulating successful traders
- Habit 10 – Work/Play Balance