Trader Mindset

Setting personal goals in parallel with you trading goals can have a 1+1=3 type of payoff. For one, achieving personal goals can give you a boost of confidence and raise your self-esteem. I generally believe that it's impossible to do anything well if you lack confidence. Trading is a game of failure and learning to succeed in the face of low accuracy and high expected values can help you develop the mental stamina necessary to survive periods of time where you have no evidence of any trading skill. Two, having personal goals keeps your brain in a mode of "figure-out-ability" that is critical for trading success. Your trading tactics and methodology is going to come from much trial and error. When your brain is conditioned to figure things out, you're in a natural state of "curiosity leads to revelation leads to eventual solution." When I have had to come to the trading whiteboard "cold" so to speak, it took me much longer (days and weeks) to get my brain in gear to figure out a solution. Lastly, you'll meet new people along the way when you have similar interests. People tend to like and become friends with other people who share experiences. Maybe some of these people would be interested in learning about your trading process and hiring you to manage the money?

Position sizing has the most impact on your P&L, so make sure you get it right. In strongly trending markets, you can throw a dart to pick your entry and make a ton of cash. The position size is the part of your trading algo where the sword cuts both ways. It's also the part of your trading that goes to the core of any self-doubt you might have about your ability. Trade to big and bad news and bad luck can hurt you badly and destabilize you for weeks or months. Trade to small and never get anywhere for all your efforts (it's possible to trade too small and not have enough risk to meet your financial goals). In this episode, Michael Martin discusses several things to consider as you carve out your methodology for position sizing.

Some options trades require you to complete the structure in two steps. Whereas you don't want to "leg" into intra-commodity spreads, you might consider that a strategy for your butterfly or condor trades. Instead of putting on a long butterfly all at once, many traders we've worked with are buying call spreads, for example, and then after the market moves selling the call spread above it to complete the butterfly. This doesn't work 100% of the time, and sometimes you just offset the vertical spread. However, sometimes is does work and you can take advantage of the flexible nature of options to carve out your Reward to risk profiles.

Michael Martin discusses how it's appropriate for some traders to focus on one market or sector for professional purposes.

Both winning and losing streaks are "user-defined" so make sure you understand what your trading results are telling you. Here's one way to know.

You are powerless over the markets, regardless if you have 30 years of experience or only 30 days. Focus on your process, because you can't control the outcome. I believe you need to have positive intention about your trading as "intentions equal results." Your intention is closely related to your attitude and your attitude affects your judgment, judgment affects your behavior, and behavior predicts where you end up in life. You can't work backwards from losing money in one month and determine that you are not a good trader. You may have had bad luck or the markets might not be amenable to your trading rules. You may come to understand that your process needs tweaking to better suit the markets or your emotional makeup. That's what backtesting is for. If your results from trading in one month are "in model" then all you can do is study the variance between what orders your system generated and what orders you entered. The same can be said about winning months and good trading.

In this episode, Michael Martin has a frank discussion about what you need and what you don't need at the beginning of your career. In one sense, your job is to survive. That means going slowly and playing superior defense. Many traders keep a full-time job to make sure they can pay their bills before going solo.

Michael Martin discusses the "triumvirate" that every trader needs to succeed long-term trading the markets.

In this episode, a reader asks Michael Martin about some of the markets he's trading.

Most allocators know that you are powerless over the markets. But if you tell them the markets you trade, they'll have a good idea of where your performance should come from.