Trading Less and Achieving More

[PristineTrading 10]

Many of you know that I have a back ground in Stock Car racing. The more I think about it, the more I see similarities that racing and trading the markets have in common. Particularly that they both require intense focus.

 

I was thinking back on my racing days and I remembered a statement that my crew chief made to me. That statement not only gave me the edge in racing but virtually in every other venture that I was a part of. Are you ready for that magic set of words? Well, I think it would be prudent for me to explain a few things first.

 

You see, in racing, you are rewarded for being fast, having cautious aggressiveness and being the most consistent; in addition, everything is measured in fractions of seconds.... In some cases the decisions you make, or don't make for that matter, could injure you or even worse, could be fatal. When you hear these words that I am going to share with you, it may not make sense at first but experienced individuals know how important this is. OKAY, are you ready?

 

My crew chief said to me, "Jeff, if you want to go fast you have to slow way down." Now you can just imagine the confusion on my face when I was told this. I think my exact response was, "Huh?" He went on to explain to me that to be fast, you need to slow down in the corners so that you can set up the car for the exit. Most people drive off in a corner and man handle the car and as a result, they have a poor exit. By simply rolling into the corner rather than driving 100% into the corner, you will have more momentum in the majority of the track, which is in the straight away. I finally began to understand this concept and since then, I have applied it to many things in my life.

 

So, here is the big question... How does this apply to trading the markets? Many people that are embarking on a new career want the experience of success," YESTERDAY"! They "rev up" their trading account and go full-speed into the corner not giving any consideration to consistency. They don't even know what their car has under the hood. They start buying and selling stocks as if they were selling tickets to a Broadway show. No strategy, no plan, just pure adrenalin and emotion.

 

Most new traders feel that if you are in the trading business, you should be trading; not sitting and waiting. Unfortunately, a very high percentage of new traders never make a proper exit off the corner. Man handling their trading eventually causes them to end up in the wall, and I don't mean Wall Street. If they would just learn how to roll into the corner (paper trade) and set their car up for the exit (proper education FIRST) they would learn how to pass the majority of people down the straight away.

 

I had a conversation once with racing legend Bill Elliot who has gone down in history as one of the most winning drivers on the NASCAR circuit. This is basically what he told me: "Jeff, if you were to paint a line around the track where your front tires are tracking, the goal would be to only focus on hitting your marks." He went on to say "Sloppiness or inconsistency of your line around the track is one of the most damaging things a racer can do."

 

That made so much sense to me the more I thought about it. So many people spend so much time looking for the better way around or a better system that they lose the peril and momentum of consistency. By the time they find their "line" (the Holy Grail that does not exist) they have already used up their equipment. You do not need to trade 20 or even 100 trades per day to be a trader. The professionals ARE NOT TRADING the majority of the time, they are just following their line (only taking their setups and not looking for the newest and "better way" to make a lot of money in the markets.)

 

The sooner you learn and understand that taking less trades with more consistent setups is really the only way to achieve financial rewards in day-trading, the sooner you will be on your way to consistent profits.

 

Jeff Yates

Contributing Editor

Interactive Trading Room Moderator

Gap, Intra-Day and Swing Trading Specialist

Instructor and Traders Coach

[TheRumpledOne 14]

" If they would just learn how to roll into the corner (paper trade) and set their car up for the exit (proper education FIRST) they would learn how to pass the majority of people down the straight away."

 

I agree in part, I have spent time on the track myself and understand the concept of "slow in/fast out" and "throwaway corners".

 

But paper trading isn't the same as "seat time".

 

Proper education is a matter of opinion when it comes to trading. I have been trading since the 1970s using paper charts and reading ticker tape. The traditional trading education is full of myths and concepts. Those who teach about reality are few and far between. That's why I get so much "heat" on trading forums because I expose the myths and concepts for what they are!

[Vince50 10]

Many of you know that I have a back ground in Stock Car racing. The more I think about it, the more I see similarities that racing and trading the markets have in common. Particularly that they both require intense focus.

 

I was thinking back on my racing days and I remembered a statement that my crew chief made to me. That statement not only gave me the edge in racing but virtually in every other venture that I was a part of. Are you ready for that magic set of words? Well, I think it would be prudent for me to explain a few things first.

 

You see, in racing, you are rewarded for being fast, having cautious aggressiveness and being the most consistent; in addition, everything is measured in fractions of seconds.... In some cases the decisions you make, or don't make for that matter, could injure you or even worse, could be fatal. When you hear these words that I am going to share with you, it may not make sense at first but experienced individuals know how important this is. OKAY, are you ready?

 

My crew chief said to me, "Jeff, if you want to go fast you have to slow way down." Now you can just imagine the confusion on my face when I was told this. I think my exact response was, "Huh?" He went on to explain to me that to be fast, you need to slow down in the corners so that you can set up the car for the exit. Most people drive off in a corner and man handle the car and as a result, they have a poor exit. By simply rolling into the corner rather than driving 100% into the corner, you will have more momentum in the majority of the track, which is in the straight away. I finally began to understand this concept and since then, I have applied it to many things in my life.

 

So, here is the big question... How does this apply to trading the markets? Many people that are embarking on a new career want the experience of success," YESTERDAY"! They "rev up" their trading account and go full-speed into the corner not giving any consideration to consistency. They don't even know what their car has under the hood. They start buying and selling stocks as if they were selling tickets to a Broadway show. No strategy, no plan, just pure adrenalin and emotion.

 

Most new traders feel that if you are in the trading business, you should be trading; not sitting and waiting. Unfortunately, a very high percentage of new traders never make a proper exit off the corner. Man handling their trading eventually causes them to end up in the wall, and I don't mean Wall Street. If they would just learn how to roll into the corner (paper trade) and set their car up for the exit (proper education FIRST) they would learn how to pass the majority of people down the straight away.

 

I had a conversation once with racing legend Bill Elliot who has gone down in history as one of the most winning drivers on the NASCAR circuit. This is basically what he told me: "Jeff, if you were to paint a line around the track where your front tires are tracking, the goal would be to only focus on hitting your marks." He went on to say "Sloppiness or inconsistency of your line around the track is one of the most damaging things a racer can do."

 

That made so much sense to me the more I thought about it. So many people spend so much time looking for the better way around or a better system that they lose the peril and momentum of consistency. By the time they find their "line" (the Holy Grail that does not exist) they have already used up their equipment. You do not need to trade 20 or even 100 trades per day to be a trader. The professionals ARE NOT TRADING the majority of the time, they are just following their line (only taking their setups and not looking for the newest and "better way" to make a lot of money in the markets.)

 

The sooner you learn and understand that taking less trades with more consistent setups is really the only way to achieve financial rewards in day-trading, the sooner you will be on your way to consistent profits.

 

Jeff Yates

Contributing Editor

Interactive Trading Room Moderator

Gap, Intra-Day and Swing Trading Specialist

Instructor and Traders Coach

 

What you say has merit Jeff. But for guys like me who spend 2 years following a "successful: make that 2 successful traders/moderators in a trading room trying to get what they are doing, and then find that what they are doing doesnt have a positive expectancy anymore, you will either over trade to find out what the heck went wrong, or.....quit and just paper trade till you find out how to make a winning system again. I did both and sometimes that winning system can take years to come up with again. You know so many people talk about what kind of money you need to have as a starting bankroll in trading. No one talks about the bigger expense........the money you need to survive and pay your bills until you become a winner(at least on paper.) Now what I say should scare some guys but, when I started daytrading 5 years ago, I was on my way to be able to retire at 55. Now Im 53 and Im in worse shape now. Not from losing money, but from not trading and HAVING the discipline to paper trade. Well, paper trading doesn't pay the rent! Lately I've seen for the first time several articles all over the web with this title: Is every system destined to fail? I am now wondering that myself. Lets think, if in the bull run we have had these last 3 years which may not come again in another 15 years, if you cant make a living just being long stocks in today's bullish trend, maybe you never will. Sorry, reality sometimes hurts. Yet for me as a day trader the volatility we had in the 2003-2008 era was much better for me even though it wreaked havoc for most peoples accounts. Makes me think a republican in the white house is better for traders. Now I have people like my sister who dont even know what an ETF is, that are making a fortune in her 401k mutual funds and think buy and hold must be the magic way, while I sit on the sidelines paper trading. Its really frustrating. Anyone else going thru this? BTW....for swing traders who hold 2 days to 6 months, this market is like taking candy from a baby. Sadly, I switched from equities to Forex to take a break in the last year, and we all know forex has slowed to a crawl for day traders these last 2 months. I will also say this...the best and brightest traders from Market Wizards fame, 70% of them could not make a living in todays equity climate. It was a different world in the 90's. The markets were cycling differently. Anyone agree?

[PristineTrading 10]

" If they would just learn how to roll into the corner (paper trade) and set their car up for the exit (proper education FIRST) they would learn how to pass the majority of people down the straight away."

 

I agree in part, I have spent time on the track myself and understand the concept of "slow in/fast out" and "throwaway corners".

 

But paper trading isn't the same as "seat time".

 

Proper education is a matter of opinion when it comes to trading. I have been trading since the 1970s using paper charts and reading ticker tape. The traditional trading education is full of myths and concepts. Those who teach about reality are few and far between. That's why I get so much "heat" on trading forums because I expose the myths and concepts for what they are!

 

I agree to the concept "paper trading isn't the same as seat time" I firmly believe paper trading to long never brings the reality of real money to the table. Its the emotional side of trading that we have to work through. I believe paper trading should be done but at some point you need to get on the track and experience the real world as well. I would just start with small shares and slowly bring the emotion up to speed. In time, you will be running your own race.

 

-Jeff

[Vince50 10]

I agree to the concept "paper trading isn't the same as seat time" I firmly believe paper trading to long never brings the reality of real money to the table. Its the emotional side of trading that we have to work through. I believe paper trading should be done but at some point you need to get on the track and experience the real world as well. I would just start with small shares and slowly bring the emotion up to speed. In time, you will be running your own race.

 

-Jeff

 

I have traded both Forex and stocks in both sim mode and a real account. For me, there is no difference. If anything, it is slightly harder to keep my self control in a sim acct because I can always rationalize that if I just triple up for this one play, I can get even for the week and if not, it's only sim anyway. Also paper trading losses make me more upset than real losses because I cant trade for real until I am out of losses in sim. Also the nonsense I hear about slippage and bad executions in real compared to sim, almost never, I mean never happen to me. I use FXCM as my Forex Broker and I get faster executions in both sim and real than with any broker I've dealt with in stocks. Besides.......when you use a strategy that allows you to place stop entry orders only,and take profits at a limit, you can take your time, not get stressed, suffer little or no slippage and enjoy yourself more than if you do everything manually. In fact, one of my final lessons in becoming a winning day or even swing trader has been, if you can use a method that allows you to set it and forget it, you will have less stress and less regrets than any system where you manually just buy with a mouse click! That lesson was worth a fortune for me. I should start a trade room based just on that method of entry/exit and I would bet I could make 33% of my students profitable.

[MightyMouse 12]

I have traded both Forex and stocks in both sim mode and a real account. For me, there is no difference. If anything, it is slightly harder to keep my self control in a sim acct because I can always rationalize that if I just triple up for this one play, I can get even for the week and if not, it's only sim anyway. Also paper trading losses make me more upset than real losses because I cant trade for real until I am out of losses in sim. Also the nonsense I hear about slippage and bad executions in real compared to sim, almost never, I mean never happen to me. I use FXCM as my Forex Broker and I get faster executions in both sim and real than with any broker I've dealt with in stocks. Besides.......when you use a strategy that allows you to place stop entry orders only,and take profits at a limit, you can take your time, not get stressed, suffer little or no slippage and enjoy yourself more than if you do everything manually. In fact, one of my final lessons in becoming a winning day or even swing trader has been, if you can use a method that allows you to set it and forget it, you will have less stress and less regrets than any system where you manually just buy with a mouse click! That lesson was worth a fortune for me. I should start a trade room based just on that method of entry/exit and I would bet I could make 33% of my students profitable.

 

Losing in sim bothers you more? That is purely gold. I can't wait to see what you post next. Hopefully, you do not grow up first.

[Vince50 10]

Losing in sim bothers you more? That is purely gold. I can't wait to see what you post next. Hopefully, you do not grow up first.

 

Only those over age 45 or 50 could understand the wisdom. You see, when you lose in sim, you are losing "time" which is a far, far greater commodity than money. (Unless you are blowing up huge accounts.) When I suffer a loss in a live account it means I still have the confidence I am in a winning system or I would not be in live mode! When you are still young and foolish(as 95% of us are) you put money and winning always first. So you wind up the sucker. You wind up giving away many years of your time to get someone else's money. The wise man is happy to give a lot of his money with no guarantees, so he will have so many more years to know how to earn,enjoy and accumulate more of it over his life time. Didnt Uncle Walter teach you the old saw, when 2 men meet, and one has a lot of money and one has a lot of time, the younger man winds up with the older mans amount of time, and the older man winds up with the others money!

 

When you are 50, most of us would gladly empty our bank account to be 21 again. But no one who is 21 and poor would take the wealthy mans account and be 50 years old. This is just the warm-up,son. It gets a lot, lot more painful as you head towards 60. Spirituality is not for everyone.

[MightyMouse 12]

Only those over age 45 or 50 could understand the wisdom. You see, when you lose in sim, you are losing "time" which is a far, far greater commodity than money. (Unless you are blowing up huge accounts.) When I suffer a loss in a live account it means I still have the confidence I am in a winning system or I would not be in live mode! When you are still young and foolish(as 95% of us are) you put money and winning always first. So you wind up the sucker. You wind up giving away many years of your time to get someone else's money. The wise man is happy to give a lot of his money with no guarantees, so he will have so many more years to know how to earn,enjoy and accumulate more of it over his life time. Didnt Uncle Walter teach you the old saw, when 2 men meet, and one has a lot of money and one has a lot of time, the younger man winds up with the older mans amount of time, and the older man winds up with the others money!

 

When you are 50, most of us would gladly empty our bank account to be 21 again. But no one who is 21 and poor would take the wealthy mans account and be 50 years old. This is just the warm-up,son. It gets a lot, lot more painful as you head towards 60. Spirituality is not for everyone.

 

Interesting response. I am over both age 45 and 50. I personally have no desire to be 21 or 26 again. I am only interested in what tomorrow brings.

 

I hate losing live, do not trade sim, but if I did trade sim, I honestly would not care if I lost. Time is very valuable, but in the market money is king. Your success in the market is measured directly by how much money you have made and not by how much time you have saved.

 

Spirituality is for those who have more time than things to do with their time. If you are concerned about wasting time, you shouldn't concern yourself with spirituality.

[steve46 12]

So with regard to trading less....for me the concept is valid....now how you implement it is really where the rubber meets the road...

 

For me, it is a relatively easy to work it out....I know in advance where entries are likely to occur, also I keep good records and finally I know what my system is likely to produce per each time period....that is due primarily to the fact that I have done my homework, in contrast to the majority of folks who seek out chat rooms, advisories, and other resources where the primary service is to tell them when to buy and when to sell....YOU SEE?

 

So there are a couple of things to say about this thread...first as with most of the things Pristine reprentatives post, the basic premise is valid....the real question is can they provide some practical alternative, and will there be enough demand from the populace...

 

Frankly I doubt it....and I think the folks at pristine know that....they are here for other reasons.

 

As I've said before they ask good questions....and suggest valid concepts but never provide much substance after that......in other words its a promotional article....nothing wrong with that.

 

There's a simple way to trade less (and more efficiently)....but you have to be willing to do the work....I'll be showing students how to do this after I show them how to identify high probability entries...first things first.

Edited October 29, 2012 by steve46