📚Technical Analysis of Stock Trends – Robert D Edwards, John Magee
🚶Richard W. Schabacker
📚A Theory of Cognitive Dissonance – Leon Festinger
🕸️Phantom of the Pit
🕸️tradertom.com
🚶Charlie DiFrancesca
🎬Floored(movie)
🚶Greg De Riba(S&P500 pit trader)
📚Trading in the Zone – Mark Douglas
🚶David Paul(mechanical engineer, retail trader)
🎬Floored (movie)
🚶Greg Riba(S&P pit trader)
🕸️The Taylor Trading Technique
🕸️bestloserwins.com
🕸️tradertom.com

💰Technical analysis does not make you a rich trader. It doesn’t even make you a good trader.

🔥☕ There is a saying that those who can, do. And those who can’t, teach.

Technical analysis is rather pointless unless it is combined with behavioral response training.

Trading is an insanely difficult profession, one that is beyond the apparent mental abilities of almost everybody, yet at the same time a profession that will reward you with wealth beyond your imagination, once you understand how this game really should be played.

The habits of losing traders:

Are you thinking like everyone else is thinking and approaching trading like everyone else is approaching trading? ⇒If so, you will have a problem.

💰For every hour you spend on technical analysis, you must set aside at least 25% of that time for what I call internal analysis. You need to know what your weaknesses are. You need to know what your strengths are.
⇒You need to know what you are good at, and you need to know what you are not good at.

💰I would rather give away some of my open profits than miss out on potentially even more profits.
⇒It is because of this philosophy that I am at times able to make 4~500 point gains. It is one or the other. I don’t think you can have the best of both worlds.

The main differences of losing traders with winning traders:

You can learn the basics of technical analysis over a weekend.

A chart expert does not equate to a trading expert.

When it comes to charts, less can be more.

💰Did you know that only 48% of all gaps get filled on the same trading day?

By the third trading day after the gap, 76% of gaps are filled.
⇒Don’t believe that all gaps get filled!

💭”I think you are trading yesterday’s experience. You haven’t wiped the mind-slate clean. You are not present. You are focused on the past.”
“You are in a state of imbalance because you are unable to shake the loss from yesterday. As a result, you are not judging the trade on its own merit, but on the merit of a past trade.”
“I understand it is a soothing thought to close the trade. However, we are not trading to break even. We are trading to make money.”

💭”On the spot I vanquished my anxiety by imagining the best outcome.”

A clever tool in the arsenal to destroy fear: if a nightmare taps you on the shoulder, do not turn around immediately expecting to be scared. Pause and expect more, exaggerate.
Be ready to be very afraid, to scream in terror. The more delirious your expectation, the safer you will be when you see that reality is much less horrifying than what you had envisioned. Now turn around. See? It was not that bad, and you’re already smiling.

Failure
🔑It is always my fault. I am good at making mistakes, so that I can learn from them.
⇒Failure is a friend in life; tell your mind that it is okay to fail.
⇒Own up to your errors and be done with it.
⇒Failure is one of our greatest learning tools.

Visualizing the worst-case scenario can make us appreciate objectively what we are trying to achieve. Facing our fears removes their power over us.

How bad do you want it? Is this journey for you? What is the alternative?

Why do 90% of people who trade lose money? They simply don’t work hard enough.

💰Charting didn’t make me money. Indicators never made me money. Ratios and bands never filled my bank account.

There is nothing wrong with trend lines, but they will not make you rich.
What will make you rich is how you think when you trade.
🔥If you think like everyone else, then your results will be like everyone else’s.

Don’t you want to make money? Don’t you want to separate yourself from the herd?
⇒Then realize that trading profitably has nothing to do with the instrument you use.

You must be patient with your trade entries. You must be patient with yourself.
⇒If you can bring those two qualities to the table, then the rest will solve itself in time.

We consciously need to stop the brain from jumping to conclusions.
→This is an important trait in trading, because we often see things that are literally not there.

💰Behavior modification is the single most important concept in trading.
⇒The ability to change one’s mind without causing a mental disequilibrium is the single most important ability for a trader.

💰Day traders can’t rely too much on the trend on the higher time frame because virtually anything can happen down on the 5 minute chart.

💭”When I began taking trading very seriously, I would review my trades when the day was over. I would print out the chart and plot my trades onto it. I realized that some 8/10 trades were impulse trades. I began to become much more conscious of my trades. As I proceeded down that path, I became more and more profitable. The fewer impulse trades I had, the more money I made, and the more satisfaction I derived from my job.“

A significant factor to my trading success, going from being a loser trader to a winning trader, was the realization that there are no bargains in the financial markets.

Indicators like stochastic would suggest a market was overbought or oversold. Those are other words for cheap and expensive. It is for this reason I am no longer trading with any kind of technical indicators. My charts are 100% naked.

I came to realize, after years of suffering, that I had to change my relationship; not with the market, but with how I reacted to what the market did.

💰We have all read the axiom of ‘buy low and sell high’. I change that to ‘sell low and cover lower’ and ‘buy high and sell higher’.

💭”Look at your own life. You love to surf. You wait for waves, and you paddle into their energy flow, and you ride the wave. How is that any different to what we do as traders?
When you are out there, sitting outside the impact zone, waiting to paddle in, you don’t paddle when there are no waves. You are patient. When the right size wave builds up, you get ready. You are one with the sea. You roll with its flow. You surrender.”
⇒To succeed in markets, we must surrender.

What is your aim?
The simple answer should be to make money. In the past I was so preoccupied with what should happen. But to make money we must be focused on what is happening right here, right now.

💭”Good trading means combatting the emotions that make us human.” – Charlie DiFrancesca

💭”99% still don’t get it; when they win, they start betting less. Bet more!” – Greg De Riba

My trades need to flow from a point of freedom of expression. Trades conducted from a perspective of fear or greed will not lead to a good decision making.

The discipline to wait for the right entry, combined with the knowledge of past price behavior, will set you apart from the majority of traders.

💭”People are fearful when they should be hopeful, and they are hopeful when they should be fearful.”

💰Adding to winning trades is an absolute key trait of the successful trader.

💭”When you are in a winning position, instead of thinking where to get out, why don’t you think about where to get in more?” – David Paul

🔑☕The purpose of adding to winning trades is at its heart an attempt to fight your normal human behavior. In the beginning it is not about adding to your profitability. That will come later. The purpose is to stop you from taking half profits.
⇒By adding to the winning trade and thinking, “How can I make more when I am right?” rather than thinking “Where should I take profit?” you are building a new way of thinking about trading.

The normal thing to do is to close half your position and let the other half run.
→Why would you do that? Why would you have the market agree with you, but you only ride it with half a stake?
⇒That is what the 90% are doing, and I don’t want to do what the 90% are doing, no matter how logical it may seem. They are always wrong over time.

💰The outcome of one trade is random. The outcome of 100 trades is predictable. It is for this reason that our behavior needs to be the same for every trade we execute, whether we like it or not. By applying the same correct behavior to every trade, we are virtually guaranteed to be profitable.
What is the correct behavior? Well, why don’t we observe what everyone else is doing, and then do the opposite of what they are doing?

I have two fundamental arguments against taking half profits:

Risk:Reward
I don’t believe in the whole risk to reward argument.
I believe in defining my risk. I don’t believe in defining my reward.

When I am about to execute a trade, there is only one variable I have meaningful control: how many points will I risk on this trade?
→Anything else is pure guess work. How much I will make will depend on the market.

☕Losers spend their time thinking how much they will make, while winners spend their time thinking about how much they will lose.

💰I know from statistics that 48% of all gaps get filled on the same day they occur.

💰90% of daily highs and lows occur in the first hour and a half of the trading day.

💰On a gap day, the odds are higher of continuation than a reversal.

💰💭”In bull markets, resistance is often broken, and in bear markets support rarely holds.”
⇒You can replace bull markets with bull trends, and bear markets with bear trends.

💭”The pain of having missed out on a the rally towards the end of the day was greater than the pleasure from making back what I had lost earlier in the day.”

💰I define a trend day as a day when the market opens at the high or the low of the day, and closes at the low or the high of the day.

💰I have identified a handful of first hour patterns, which I believe are precursors for trend days. One of those patterns is a gap down after a gap up day, where the gap down is not filled within the first hour.

💰Friday is notorious for producing lasting trends, often leading to trend days, especially on Fridays at the beginning or end of the month.

💰I will place my stop loss where I would want to get into the market, but in the other direction.

I have a philosophy to trading that means I am prepared to sacrifice profits in order to discover how big the profit can get. →If you don’t have that philosophy, you will never discover how big the profit can get.
⇒If you always think of potential targets, using technical analysis, you are most likely just talking your way out of a good trade.

When the market is trending, and I am on board the trend with a position, I hope that the market will close that night at its strongest/weakest for the day.
💰→It happens on at least 20% of all trading days in stock indices.

☕I have seen a lot of trading systems, but none of them had an acceptable success ratio of predicting tops or bottoms.

💰Buy high, sell higher; sell low, buy back lower.

💰Trying to find the low can be a costly affair.

My own motto is: 🔥”Control your mind; control your future.”
⇒Doing so requires constant vigilance. You have to own your life. If you don’t own it, you are not the boss. You have to take full responsibility for everything that you do.

It doesn’t matter whether you meditate or write a diary or do whatever other practice you choose to center yourself, so long as you do it.
⇒There needs to be a regular time in your day where you remind yourself of your purpose, of who you are.

In my belief system and in my experience, away-oriented goal setting is a much stronger motivational force than towards-oriented, but I accept that this is an individual preference. You can test for yourself where your preference lies, using a simplistic lies, using a simplistic scenario. What would compel you to lose weight more: a picture of you in perfect shape or a picture of you where you are obese?

Would you continue to do business with someone who violated your trust and stole money from you? →No, you’d become so disgusted with such a dishonest character that you would cut all ties with them.
⇒🔥Well, that person is you when your own patterns violate your contract with yourself and cause you to lose money constantly.
⇒Once you become truly disgusted with your own patterns, you’ll shun them altogether.
A trader is losing and continues to lose because he doesn’t want to change.
Change is hard work.

You break yourself down so that you can survive, so that you can be reborn as the person that you really want to be. A fresh start. Vanity thrown on the rubbish pile. Clean canvas. Here I am. This is me.
⇒Exactly the same model is used to train elite soldier. They are pushed beyond their breaking point. Then they are put back together again, stronger, wise, and with an unshakable faith in their own strength, their own abilities and their determination to get a job done, no matter what.

If you have some trading experience, and it is not turning out to be how you want it to be, you have a choice:
→You can carry on, thinking that things will change. I can tell you they won’t, but you will probably not listen to me.
→Or, you can strip yourself naked, and get honest with yourself. You can stop trading, and start reviewing. You can begin to understand what it is you are consistently doing that causes you not to make money trading.
⇒Take yourself apart, clean up the process, take on board my guidance for the mental side of trading, put yourself back together again, fund a small account and start with an entire fresh mindset and approach.

You have to want to do what you do.
You can live a life that is authentic to your soul, or you can live the life you think people want you to live.
You can be authentic and own your life and take responsibility for everything you do.

Whether you meditate or talk to yourself while you brush your teeth in the morning, there needs to be some period in your day when you remember your purpose.
⇒There must be a time to remind yourself where you want to go, what you want to do.

🔑The journey starts with technical knowledge acquisition and continues indefinitely with the constant evolution of both the technical and mental training.

The first question to address in a change process is: “What do you want to change?” “How would you like your life to be different?”
🔑My answer: I want to dedicate time to trading well, to combat my natural inclinations that stand between me and successful trading. I want to prepare my mind every morning through a series of meditations and visual exercises.
To achieve this I will train my mind to act calmly through visualizing myself in difficult situations. I will focus on my breath. I will calmly put myself through stressful situations to ensure I would react how I want to react if the circumstances were real.

💰The last day of the month often brings aggressive buying or selling in the market.

💰Friday has a tendency to bring about trend days.

💰You should not short a market that makes new highs for the day in the final hour.

I hear about people who stop trading because they have three losing trades in a row. That is a flawed approach if you understand the markets. (PN: Also if you understand the law of averages.)→If you are otherwise able, you don’t stop trading just because you have lost three times in a row.

🔥Education means very little in this industry.
→It doesn’t matter where you went to school or what your day job is.
⇒If you don’t know how to handle a losing trade, and then a winning trade, you will not go very far in this arena.
⇒It is for this reason that I tell people to spend less time on technical analysis and more time on self-analysis.

💭My son and I have a fascination with reading the lives of high-performance soldiers. I love reading about the trials and tribulations of the SAS and Navy Seals. In particular we are fascinated with the free-diving part of the training. One day, there happened to be a 50 meter swimming pool in the holiday complex we were staying at. Being the competitive spirits that both my son and I are, we set out to dive.
We didn’t actually focus on the outcome at all. We just did everything we could to make the process as efficient as possible.
If you have a goal that you want to make x amount of money a day, or a certain amount of pips or points, you might be sabotaging your chances of making a lot of money. You are outcome-oriented. You would benefit immensely from shifting your focus to being process oriented.

What you become in life is dependent on the decisions you make and how you react to decisions made on your behalf.

💭”Remember that you’re doing to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.” – Steve Jobs

I am not where I am in the trading world because of my IQ.
I am here because of my relationship with pain.

Do you want to know why I am so good at trading?
⇒I am exceptionally good at losing.
When speculating in financial markets, the best loser wins.

The reptile brain is a system that protected you from death as a caveman guarantees you’ll not survive as a trader; unless you can learn to overcome it. And overcoming it begins with accepting pain.

🔑💡One exercise I use in the morning is closing my eyes and playing out a scenario. I imagine I lose a large amount of money. I will often use an amount that has some significance to me, such as the cost of my last car, or the cost of my son’s college tuition, or the size of a memorable loss.
I will see myself losing the amount. I will let it sit there in my consciousness. I will let it take hold. I will imagine what I will not be able to buy because of the loss. I will make it as emotionally vivid as I can.
Now I will turn the table. I will now imagine that I am winning the same amount. I will imagine that I am winning the $78,000. What will happen is that my emotional response system will not allow me to feel a reciprocal sense of joy to the misery I felt earlier.
Neurobiology has shown we experience a financial loss 250% more intensely than an equivalent financial gain. After going through this exercise of feeling pain and then not feeling pleasure, I then swap back to feeling the loss again.
The purpose of the exercise is to align my feelings of gain and loss. In truth, I don’t really want to feel anything; I have found that if I get overly happy about a win, I tend to get overly sad about a loss. I don’t want that.
I am not a dentist who has a win rate of 99.99%. I am a bloody trader, who has to live with being wrong around 50% of the time. It is exhausting to feel joy and pain many times a day. I prefer not to feel anything at all, rather than going through that emotional roller coaster.
I win. Move on.
I lose. Move on.
By adopting this attitude and by warming up my subconscious mind, I am able to flow in and out of winning and losing trades, day in and day out, without it affecting my strategy.

💰The road to consistency, success, and enlightenment in trading begins in the last place you’d ever think to look. Inside yourself.

If you want to succeed in an endeavor where 90% are failing, you have two choices.

If you are not as successful as you want to be, sooner or later you need to change your behavior. It doesn’t matter if you’ve been trading unsuccessfully for three months or 30 years, you are much closer to success than you realize.

You need to learn to recode your brain’s messages when pain comes knocking. Instead of reacting and running away, a small group of consistent traders, the 10%, hold fast and run towards the danger, not away from it.
⇒The 10% succeed because they have learned to flip the switch.

When most traders enter into a position they assume they are right. In a business where 90% of people fail, your recoding process begins by flipping that switch.
💰⇒I will assume that I will quickly have to get rid of a losing trade.

My mind knows I want to be big when I am right, and I want to be small when I am wrong.

Emotions kill trading accounts. It isn’t the lack of knowledge that’s stopping you from winning big.
It’s the way you handle yourself when you are in a trade.

I spent a decade observing traders lose money. They were intelligent people who often had great hit ratios, but they couldn’t lose well.

In trading, unlike life, the best loser wins.

🔥Information on its own has no power over us. It is our belief system and the energy we give to the information that decide its potency.

The market moves up and down in ticks all day. They form patterns, which we trade on. These ticks up and down are just ticks. If you have a position on, however, these ticks take on a life and meaning of their own. They validate you, or they diminish you. That is not how you want to trade. That is not an ideal mindset.

💭“A friend of mine wanted to improve his surfing, so he hired a friend to video him for a few hours during a surf session. He watched himself surf and he was able to identify his issues. He needed to strengthen his core muscles and he needed to trust his wave selection rather than being half committed, as he often was on many waves.
In a similar way, I decided I needed to relive my trades to truly figure out what my problem was. So, I downloaded my trading results into an Excel spreadsheet and went to work. I meticulously went through the trades. I split my trades up into many different categories, with many of them appearing in more than one category. There were trades I held for days. There were trades I held for seconds. There were trades I executed in the mornings. There were trades I executed in the afternoons and evenings.
I recommend you read my assessment of my own trading, and you repeat it on your own trading. It is a vital step in understanding who you are and how you interact with the markets. Once you have done that, you will create what I call the The Book of Truths.
Above all, be honest with yourself. The courage to be honest with yourself is its own reward.

I took a very time-consuming decision to put all of my trades on the relevant charts. I created a powerpoint containing every trade to give me visual imagery of my performance. This is the Book of Truths.
💰🔑💡⇒I will argue that this process stood as the single most beneficial practical exercise in enhancing my performance.
⇒When I started the process of visually recalling my old trades, my old hurts, my old successes, I felt an empowering surge to replicate what I was good at and avoid what I was bad it. I immediately began to trade differently. I immediately saw measurable improvements in my trading. The results were immediate, even if I had to get used to the new way of thinking. I made more money. I became much more trusting of the markets. I trusted that I would be given an opportunity to make money every day. As odd as it sounds, I began to trade less, and I started to make more money.

💰One truth I came to face to face with was less is more.

🔥Your prime objective is not to make money.
💰⇒Your prime objective is to follow the strategy you have developed.
⇒More importantly, your prime objective is to follow the process you have designed for yourself. If you follow the process, the outcome will take care of itself.
⇒I don’t set goals. I just focus on my process. I am a process-oriented trader. I don’t think being overtly goal oriented will help you achieve your goals.

The Book of Truths will give you up-close, face-to-face time with your own shortcomings. It made me realize what my faults were. I also started plotting my good trades. I felt it was necessary not just to remind myself of the behavior I wanted to avoid. I should also remind myself of the behavior I wanted to strive towards.

My review of my trades revealed that I didn’t trust myself or the markets.
⇒Profitable trading requires trust.
If you don’t believe it can happen, you should not even start.
If you don’t trust, then you will not make money. Therefore, before you start trading again, you have to work on your beliefs about yourself and the markets.

💰💡You have to trust that you already have all the tools you need to make a living from trading.

My technical savvy was not matched by an emotional maturity, because I had not spent time working on that side of my game.

You need to trust that you already have all that you need. Otherwise, you will not bridge the gap between what you know you can achieve and what you are achieving. You need to believe. The belief comes from doing.

It was a common occurrence during trend days to witness clients continuously try to find the low of the day.
On those days our clients lost the most.
⇒PN: Don’t try to catch the high or low.

🔑💡I breath in for 7 seconds, and I breath out for 11.
⇒Through the use of breathing exercises I have been able to increase my attention span significantly.

Once I am calm, I see myself trading the absolute biggest stake size I am allowed by my broker. I see the market move against me, and I visualize my P&L go deeply into negative. I feel my pulse elevate, and I focus on calming it down. I repeat this process over and over.
I see myself riding a trend higher and higher. I see my P&L grow larger and larger. I am waiting for my mind to tell me to take profit. Then I stop the tape and flip the switch. I calm my mind down, and I see myself looking at my P&L dispassionately. I calm my breath until I am able to simply observe my profit grow larger and larger as I trend with the market, higher and higher. The goal is simply to be, to be an unemotional observer of the market. The goal is to act without fear, without hope, without anything but an objective assessment of the price action.

I often tell my children this: 🔥Do what you have to do, so that you can do what you want to do. I tell them to make up their minds what they want but think very long and hard about it first. If you say you want something, and then you do nothing about it, then you can be damn certain there is a misalignment between your conscious and your subconscious.

🔑💡🔥☕The idea of deciding what you want can undo a lifetime of negative energy surrounding your beliefs and your belief system.

🔥I don’t believe anyone ever achieved anything spectacular without putting in a massive amount of effort. I know I put in the effort. I know that everything I do on a daily basis is the result of grit and determination. I am not talented. I am hard working. I am not gifted. I am determined. I am not lucky. I am persistent.

My friend Dr. David Paul gave me an exercise: execute 20 trades as the signals appear.
One by one, you take every trade signal as it comes. The purpose of the exercise is not actually to make money. You will probably break even, and that is fine. The purpose of the exercise is to smoke out your internal conflicts and your unresolved emotions.
⇒If you can execute 20 trades without any kind of conflict, you are trading from a carefree and fearless frame of mind.
⇒How do you know when you are successful? When you can trade without any conflicting or competing thoughts. The results are not important during the exercise. This is a process exercise. You may have to repeat the 20 trades over and over until you come to a point where you find that you are firing off trades without fear, without hesitation, without connecting this moment with a past moment, and you accept the outcome dispassionately. When you arrive there, you really have arrived!

As traders we need to work towards being as dispassionate about our trading.
The more we work on this, the better we will trade.

How do you trade dispassionately? How do you disassociate yourself from feeling anything when are you trading? Well, that is what my exercises take care of.
If you want to be able to receive information from the market, without feeling threatened, it will not happen by itself. I believe working on what you think and how you respond and evaluate your responses will improve your trading in measures you would struggle to appreciate right now.

My trust in the markets and in myself supports my patience. My patience that a setup will materialize feeds my confidence. My confidence that I will win dictates my inner dialogue. My inner dialogue what I tell myself while I am trading supports my process-oriented mindset.

💰I know that if I forget all about winning, and I focus on the process, I will win.

It took my almost a decade to figure out that process is everything.
⇒Trust the process.

I trust. The research underpins the trust. The trust supports the patience. The patience is underpinned by the mental exercises, and it nourishes my confidence. My internal dialogue is driven by a process-oriented mindset, fueled by my confidence.
I focus on what I can control – my mindset, my risk approach – and I let the market do what it wants to do. Whatever it does, does not fuel the fearful side of my mind. That has been trained away. I am not afraid of the market. The only thing I am afraid of is that I do something stupid in the market. As I trust myself, this does not happen.
I trust that I have the skills to make money, and I trust that the market will give me opportunities to make money. This trust has been nurtured and strengthened by my intense study of market charts for the time period I desire to trade. The trust is further strengthened by continuous dedication to my vocational skillset.

My patience flows from my trust in the market and in myself. I have built an emotional connection between trust and patience. I trust the setups will come, if I am patient. If I am patient, I will win. Winning means more than anything else to me. If I am not patient, I will not win. I will do anything to win. Therefore, the trust overrides any emotional impatience that may arise in my mind, because I trust that if I miss this signal, there will be another one coming.
My confidence comes from continuously working on my game.
I don’t learn technical analysis once. I learn all the time. Some markets move. Some markets are dead. Some markets require larger stops. Some require you to trade with orders because they move so fast. The markets are forever changing, and I change with them. My inner dialogue stems from the trust and the patience and the confidence. Of course, yours truly has bad trading days. I just don’t let it bother me. I am grounded in this moment. I focus on the process. That is all I can do. I can’t dictate to the market what it must do.
I must be like water, and flow. I must flow with the market. I don’t fight the market. I flow with the market. “Just flow“, I tell myself.

I never expect to be comfortable when trading. If I am comfortable, I know I am not pushing the boundaries of what I am capable of. I know that to get the best out of myself I need to be a little uncomfortable. PN: This is literally the definition of deliberate practice.

💰Your path to becoming a profitable traders lies not in better understanding the markets, but in better understanding your mind.
⇒Your mind and how you operate it will dictate the level of success you have as a trader.

Personal note: One thing we need to remind ourselves when it comes to any tool, strategy, indicator, etc: If any of those were able to result in consistent profitability, it would have been codified and everyone would be using them. In the end, trading is discretionary. It is up to your personal judgement. Each person’s interpretation will be different and unique.