Facts,
Topics & Aspects To "Successful Trading"
1. 95% of all Futures, Stock and Options traders are long
term losers
2. The 5% that win will earn the money the 95% lose since
futures trading is a zero sum game
3. You must master three disciplines to achieve long-term
successful speculation: a. Trading methodology (long or short-term,
technical versus fundamental analysis, type of trading system,
etc); b. Psychological discipline (controlling emotions of
fear, greed and anxiety); c. Money management (risk reword
decision analysis for each trading opportunity - when, where,
why and how to bet on a particular event)
All three disciplines are necessary, but not sufficient individually
- only all three combined are necessary and sufficient to
achieve success.
You must develop a trading personality which integrates all
three disciplines to achieve long-term success in speculation.
If you do not, you will fail.
4. 95% of futures traders concentrate on trading methodology
and ignore disciplines two and three. If you only focus on
trading methodology, you will eventually fail in speculation.
The only question is when you will fail, not if.
5. Psychological problems are caused mainly by uncertainty
. . . which creates fear, greed and anxiety.
6. Uncertainty can be significantly reduced if the trader
has information and knowledge which creates certainty rather
than uncertainty. Certainty reduces fear of the unknown, greed,
anxiety, and creates confidence and success.
7. 95% of traders are totally disorganized as to analyzing
their trading results . . . and have no concept of how to
organize their profitable and unprofitable trades.
Practical organization of trading results is a primary prerequisite
in mastering the money management discipline.
8. Brokers' statements provide absolutely no value or practical
use in mastering the three disciplines.
9. To master the money management discipline, the trader
requires information which is: a. timely; b. accurate and;
c. practical. All three tests are necessary and sufficient.
Each individual test is necessary but not sufficient.
10. Futures trading is just like running a business. If you
do not approach trading in the manner of a successful business,
(such as IBM, Sony or Apple Computers) you will. Probably
fail in the long run.
11. All three disciplines are inter-linked. If you make progress
in one of the three areas, the other two areas will automatically
improve.
12. 95% of all traders play as customers in a casino and
not as the casino.
13. You must play as the casino and not as a customer to
achieve long-term successful speculation.
14. The customer in the casino will always lose and the casino
will always win in the long run.
15. Long-term success can only be achieved by playing a game
with a positive expectation - (or playing a negative expectation
game which you expect to become positive - a more risky technique)
16. The best approach is to play a game where you have a
positive expectation and make small bets (playing as the casino).
The 5% of traders who succeed fall into this category.
The worst case is to play a negative expectation game and
make large bets . . . Most of the 95% traders who fail are
in this category.
17. Before you make your first trade, you must establish
your risk profile approach towards trading (conservative,
moderate, aggressive). You must know who you are. This risk
profile will determine your approach to the risk./reward decision
making process.
18. Before you make your first trade, you must establish
monthly, quarterly and annual goals for each profit center.
These goals should be both operating and financial goals.
19. Nearly every trader who is successful was a consistent
and/or heavy loser when he/she first began trading (paying
their dues), losing significant amounts of capital in the
process. This is a situation which stems from the fact that
traders focus on the trading methodology and ignore the other
two disciplines.
Losing significant amounts of capital can be avoided if the
trader is making a sincere effort to integrate the 3 disciplines
into his/her personality.
20. 95% of traders do not know where they have been, where
they are or where they are going in their trading. They operate
like a plane in a fog trying to fly with no instruments. They
are disorganized, uncertain, anxious, fearful and eventually
are forced out of the speculation game. If you emulate this
95% group of individuals, you will wind up equally frustrated
and you will eventually fail.
21. The more you trade (daytrading), the more sophisticated
your money-management discipline has to be.
22. The less you trade (long-term positions based on fundamental
analysis), the less sophisticated your money-management discipline
can be.
23. You should classify any contemplated trade into one of
the following five categories before putting on a position:
a. Entrance into congestion
b. A trade within a congestion
c. A breakout from a congestion area
d. A trend run
e. Trend reversal
24. The trader will have difficulty in formulating a successful
and intelligent risk/reward (entry/exit) plan unless the trade
is properly categorized before the trade is taken. The risk/reward
parameters are different for each of the five types of trades.
25. Having timely, practical and correct information of trading
results instantly available enables the trader to make rapid,
unemotional and informed trading decisions.
Trading will then be less victimized by emotions and instead
become more "scientific," unemotional and mechanical.
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