Trader Mindset

When bad news hits the tape everything is correlated and it always works against you. You have to be careful that parts or segments of your portfolio don't become "one big trade." Study the correlation risk between instruments and modify your position sizes in your trading system and portfolio accordingly. Since instruments can behave similarly, you can inadvertently end up with the financial effect of over 100% of the risk you think you have. This will cut your vol and smooth out your equity curve. Two Free Offers: Tony Saliba's Options Playbook Inner Voice of Trading Audiobook

Consistency is the key to your success as a trader. You might have to learn to deal with the monotony in order to do so. New York Yankee Closer Mariano Rivera had one pitch that he relied on - a cut fastball - and although the opposing teams knew the pitch was coming, he was very effective at what he did. Rivera has the most Saves in the history of MLB. You can reduce your activity to what creates alpha and trade set ups that have positive expected value. Be economic in your activity b/c you'll also need to conserve your energy. It's a marathon, not a sprint. Do one thing very well, create alpha, and keep losses small and you'll have a long career. Get your free copy of the Inner Voice of Trading Audiobook.

Inner Voice of Trading Audiobook - FREE You have to conjugate your feelings with what it is you think you know about trading. If they don't "feel" good, you won't take the signals and you'll spend a great deal of time second-guessing yourself. When you do that, it's emotional not intellectual. You are insecure or lack confidence in what you do. This book discusses how I failed my way to success so to speak in sometimes painful detail. Persistence and determination have a great deal to do with your success in trading, and in most things in your life. For a limited time, get the audiobook for free - no coupon codes. Foreword by Ed Seykota.

A purchase of 5,000 calls could be part of a synthetic options position. Why would it be bullish if the trader actually sold 500,000 shares short and used the calls to hedge? You can use Tony Saliba's option trading simulator to backtest your ideas. Become a student and get immediate access. Get Tony's most recent book for Free.

Don't cauterize your winners. Let them run. Position size your trades so that you can stay with them as long as possible. You can trade smaller if the vol is bothering you. Then backtest to see how the results would have played out. You can blend two or more systems to smooth out your trading curve. Adjust your positions by conjugating them with the ATR. Trade smaller with higher vol instruments and larger with lower vol instruments. Always risk the same amount per trade. Make sure you are taking on enough risk to meet your financial goals. You can haircut your equity when you are in a drawdown. Trading using tiers for position sizes is amateurish as you inadvertently trade larger or smaller than what your optimal risk should be. Optimal risk per trade can be calculated from backtesting. Trade with consistent position sizing so that you are only risking the same percentage for each instrument. One or two percent per trade is extremely aggressive in today's world. Think more along the lines of .1 to .2% per trade.

Mastering patience in trading is key. The podcast emphasizes using stop orders instead of chasing the market, allowing it to come to you. Emotions play a significant role, and it's crucial to trust your trading system. Risk management is highlighted, with protective stops being essential. Interestingly, the best trades may be the ones you don’t take. The discussion also touches on the unpredictability of the market, questioning the reliability of technical analysis and price targets.

Success in trading hinges on timing as much as on strategies. Aligning your trading methods with market conditions is crucial for profitability. It's essential to minimize errors by crafting a personalized system that emphasizes communication and simplicity. The importance of persistence and discipline can't be overstated for long-term success. Additionally, understanding that the trading year doesn’t start on January 1 opens up new perspectives on timing your trades.

Maintaining a healthy mind and body is crucial for trading success. Just like a marathon, long-term trading requires stamina and balance. Sleep, diet, and mental health play significant roles in achieving resilience. Don’t hesitate to take a mental health day to recharge. It’s all about nurturing yourself to thrive in the demanding world of trading.

You are responsible for all your success and failure. That type of integrity will need to manifest in how you handle money - your money and your client money - your investments and your trades. Until you backtest, you don't know your numbers. You need to know the expected value of a trade. You need to know what the probability is of your risk of ruin. You can't get this without a simulator or backtesting software. If you have talked yourself into the Johnny Cochran logic of "If it doesn't fit, you must acquit," (no basis in law) you have sold yourself on an outcome that is not based on 100% integrity and is not a 360 degree outlook. Your success as a trader will come from your knowledge of yourself - what you know, what you think, and how you feel. You have to own everything you do and that includes all the results of the trades you take and the ones you don't.

The sum total of all your trading activity will accumulate in your track record. You can be successful and be making a great deal of money right now, but you still might not be a good fit for a particular allocator. I know a few traders with 20+ years who cannot get big allocations in today's environment b/c their results are too volatile. These traders have their own models and have been trading the same asset class in mostly the same manner for 2 decades. Allocators are looking for very low daily vol today. Your daily volatility will increase due to market forces as well as the relative strength of your attachment to your rules. You have to do your own simulations, backtesting, and research. This is an ongoing process. Markets will evolve - so will you and your model will need to keep pace also. And you thought that you can buy someone else's trading rules and make a career?