Five Fatal Flaws of Trading

by Jeffrey Kennedy

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?

That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.

Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

Overnight Success

Many newer traders perceive, in spite of all they are told, that somehow they will be the exception; they will reach the pinnacle of trading consistency and profitability in a matter of months. Amazing.

Statistics will show that in all most all vocations, only 3% reach the level of expert – that is, they are performing at the height of efficiency and intellect.

The prevailing perception that somehow trading is a quick way to financial independence or a fall back position for a troubled economy is attracting wide-eyed newbies in droves. Missing in the message perpetuated by marketers of crap and get-rich-quick nonsense is the required investment in time. That is no mistake. Who would purchase a product that requires a commitment to learn or reveals there is actually work involved?

I get so many questions and requests for short-cuts, indicators, system rules, etc. Stop all ready. My reason is not that I do not want to share. The fact is, I could give you everything, but that would not help you at all. If you do not possess the commitment or desire to learn the skill of trading; even a robot will not help. You must understand that learning this skill and becoming successful at it will take time.

The next logical question is “How much time?” If you want to trade for a living, are exceptionally dedicated, and study your ass off, you can plan on about two years. What?! Many of you will take issue with that forecast, but I actually took a year off of what I really think. That’s really not very long if you have a college degree or have spent any time in the adult work force. It took me 7 years to achieve the level of professional trader – after being a professional in real estate development and telecom for over 30 years. The truth is, the time component will be unique to each trader, but the aspiration is the same – the sooner the better.

The challenge will not be learning the basics, manipulating a chart or reading price action. It will be the psychological challenges – the discipline, the trust and the confidence. Because of this, there is pretty much an 80/20 rule in effect. 80% will give up. 20% will stick it out and only a small percent of those will make it to consistency or to pro – the same as just about any other professional endeavor.

You may think I’m cynical, but I want to be clear about the reality of what you are getting yourself into. There is no doubt many of you are committed to learning – but you are not committed to changing; changing your mental approach and your psychology – that will be the downfall of so many. We all have the capacity; we just do not have the desire, the will, or the drive. You can always learn the technical aspects, but be aware that your psychology will exert the greatest toll. Focus on this the most.

This psychology is the missing component that is so often under-emphasized – usually only mentioned in a paragraph or two in most courses or online instruction. It is 90% of the skill trading and requires us to change our perceptions, our beliefs, and our truths.

This change you will first begin to sense, then feel and then understand. At first it will be difficult and uncomfortable – many of you are going through that now. After some time, it will transition toward pleasant, peaceful and humbling. You will be astounded at your confidence and resolve – relaxed intensity – an expert.

How to get there? Here’s a challenge – try to follow your rules and trade plan to the absolute for one week. Then two weeks, etc. Now you get it. This repetition will build consistent behavior, consistent action and a consistent psychological trading state.

As always, the time to start is NOW! . . . so get to work!

Rick

The 3 Biggest “Newbie” Mistakes

When “newbies” or new traders first begin to get involved in trading, they start scouring the internet forums, chat rooms and websites for information. Their first inclination is to get as much information they can for free – and that’s OK because there is a lot of solid information out there to build a good trading foundation. However, remember these are just the basics. Trading has many nuances required for success and consistency – just a few of which are a thorough understanding market structure, trading psychology and trade plan development (in addition to lots of practice and screen time.)

The typical perception is that people are getting rich with little or no effort; that, and trading is so simple that anyone can learn it in a minimum amount of time. These perceptions lead to common mistakes made by new traders over and over again. Here are the Big 3:

1. No Trade Plan – Most new traders assume a trade plan is just a set of rules to enter the market, place stops, and set profit targets. Not so. A good trade plan has been back tested thoroughly to provide statistics that will build the trader’s belief in the trading system and eliminate surprises and uncertainty. For example, knowing the average draw down, average losers in a row and average duration of the trades to profit targets will help eliminate the anxiousness and avoid the classic mistake of closing trades too early and staring at every tick with emotional schizophrenia. A trade plan is more than just a set of entries, stops and targets; it is the complete synopsis of your trading system’s performance and execution. That is why trade plan development is the most critical element in your success as a trader and a skill you must learn. (More on trade plan development in future posts.)

2. System Jumping – There are an infinite amount of systems and indicators out there. Newbies are impatient. Their expectations are unreasonable. The tendency is to abandon a system after the first losing trade or add the next magic indicator that will produce overnight wealth. Trading is a long term endeavor; that is if you want to make lots of money and ultimately trade for a living. True, you will have to sort through a few systems to find one that conforms to your personality, however jumping from system to system will not get you further down the road. The challenge is to have the discipline to stick with a system and become an expert at using it. We recommend trading one pair on one time frame – and get really good at that. Back testing will prove whether or not your system has a positive expectancy (profitability over time.) Then trade the system and tweak it to your personality. You can then add other pairs or time frames after you achieve some consistency. Don’t rely on someone else to give you the end all, be all system. It is not out there. If fact, the system really doesn’t matter. It is your discipline to follow the rules that will make or break your account. So get comfortable with one system and work it. This will get you in the habit of following your rules, manipulating your platform efficiently and developing your trading mindset. Slow and steady will always win this race.

3. Live Trading Too Soon With Large Lots (Too much Risk)– New traders often think that with just a few hours of study and following someone else’s advice, they can enter the market and play with the pros. Putting your capital at risk without hours of practice is suicide. Most newbie mistakes can be attributed to aggressive trading, lack of platform dexterity, no rules of engagement or no clear, actionable trading plan. These are typical and often recoverable. The most egregious behavior while making these mistakes is doing so with huge risk (trading large lots.) This is like jumping out of a plane without a parachute. The consequences of this risky behavior will be a substantial loss of capital – unless you are independently wealthy all ready. If you do have money to burn, you will continue to re-load your account with new funds to convince yourself your past mistakes were a fluke. This should serve as a wakeup call to slow down. These mistakes can all be resolved by practice (in a demo account or live micro account) – not just any practice but “Perfect Practice” – that is, you must practice with the focus and intent you would use as if your income depended on your success in the market. If you had to make a living tomorrow as a trader, would you still exhibit such reckless behavior? No – you would calm down, get focused and work your plan. This mindset will be the starting point for consistent profitability and will make the transition into live trading with larger lots less stressful.

Needless to say, there are other challenges new (and old) traders must face; but the three described above are the most common for new traders.

The fact is, especially in trading, the anonymity afforded to those online leads to many false claims of success and perpetuates the perception that trading is a “no brainer.” These claims are often the appeal for new traders and the motivation for getting into the trading game. Once discovering that trading is not as easy as it looks, newbies are hit with the reality that many people in forums and chat rooms lie. In order to save embarrassment, they will do the same. But most important is that they will lie to themselves; clinging to the idea that they can somehow fake and/or grind out their way to trading success. This delusion will never lead to the desired goal of trading nirvana. The fact is that most forums and chat rooms are filled with losing traders – remember the often quoted stat that 90-95% of traders lose money.

The good news is we can break this cycle by making the commitment to learn the skill of trading and admit to ourselves there are no short cuts (Welcome to the 5-10%!) The best part of all is that the hard work literally pays off!

Rick

Most Current and Common FAQ

Traders,

I continue to receive a slew of common and redundant questions. So, rather than answer each one individually, I thought I might take the time to post the responses in this Article.

1. I have done my back testing, but still cannot “Pull the trigger” on a trade. I am still nervous and unsure. What am I doing wrong?

While back testing is the key to acquiring data and system performance, it is only half of the equation. It is forward testing that will build the belief and remove hesitation in execution. You have to practice implementing what your back testing data has revealed about your system’s performance. This practice is the only way to get you behaving efficiently and consistently. Remember, everything we have learned to do well has taken practice and repetition. Trading is no different. You will never duplicate your back testing results 100%, but you can achieve results within a few percentage points if you are focused and diligent during your practice.

2. What’s the deal with all of the trading psychology stuff?

Your personality is your best friend and worst enemy. Clearly you can see that trading is 10% mechanical and 90% psychological. The reason I focus so much on psychology is that there are inescapable biological issues in our brain that we need to re-train and work around to be a consistent trader. Because this is so prevalent in new and struggling traders, it must be addressed before one can realistically consider trading as a viable means of income. Would you not take the same approach to any other challenge, profession or opportunity that you expect to produce a high level of financial return? Acquiring any skill takes building belief, repetitive action and constant refinement to get to the level of expert (unconscious competence.) Trading is no different, so we need to use the same approach to master our own trading psychology.

3. I have been watching the Market Structure videos and have practiced identifying Support and Resistance. What do I do from there?

Price re-tests areas of support and resistance repeatedly and as a result we are looking for price to get stuck or hung up and continue with the trend and/or possibly reverse momentum as the trend is exhausted. These levels, along with your trade plan, create potential trade set ups. After labeling key levels, put S/R in context with current price and see in the near term and long term where price might gravitate based on its current direction. Look at your trading time frame and notice candle patterns, candle color and oscillator behavior. Based on your rules, prepare for a valid signal based on these potential set ups created at areas of Market structure.

4. How do you know to stay out of trades even when you may get a valid signal?

For the most part, I stay out of trades on valid signals if the pairs providing the valid signal were not showing potential on the higher time frames in that day’s top down analysis. If there is volatility occurring because of news, I will revisit a previously ignored pair. I am looking for set-ups on higher time frames and corresponding entries on my trading time frame. That will eliminate lots of the noise and brain clutter when looking at multiple pairs. I simply commit to patterns, set-ups and price action that I easily recognize and can act upon. I will miss many winning trades. I don’t care. The important thing is that the trades I do take meet my rule set and therefore the majority of them are winners.

5. What is the secret to a high winning trade percentage?  

You will notice two key elements of my trading style. I do not over trade. I only have two intraday trades open at any given time. Once committed to a pair and trade, I wait for the trade to play out. These two techniques alone reduce my number of losing trades dramatically. I will increase lot size to increase profit size, but I am not interested in trading for trading’s sake. I trade for profit and profit alone. As a result, I am very selective, conservative and patient and have fewer losing trades. I also stick with things within my areas of expertise that I can easily recognize and act upon.

6. Where can I learn your trading system rules and strategy/trade plan?

You can’t. The thing most traders do not understand is that you must make the trading system and trade plan your own. Just as no two people are alike, no two people will trade alike. I am showing you trades and giving you the processes I use to execute them. Your process and system will differ, if ever so slightly from mine, because your back testing will be different and your forward testing will be different. I have all but published my rules and trade plan via the videos I produce. I will not formally publish them because if I do, and when they do not work out for the traders that can’t implement them or do the required work, I will l have to deal with the fallout from their negligence or incompetence and I simply do not have the time.

7. What do you mean by “break above, close above” when you are describing price action?

For a key level or price to be irrelevant or lose its relevance in the context of the time frame you are observing, price not only must break above (exceed a previous key level,) but it must close at a price higher the previous level. This is a clear sign that the collective participants are no longer captive to the previous high price level. When broken by a higher close, we can look to the next key level of price (support/resistance) for a potential re-test.

8. Do you use Pivots and can you direct me on how to use them?

I do not use Pivots but they are widely used just like Fibs. I feel it is a matter of preference as statistically they can be comparable to Fibs. I do not feel they offer any better advantage and provide more clutter to my charts. That is just my opinion. Peter Bain is the guru of pivot point trading and I’m sure you can find his training material on the web.

9. Can you recommend a good broker?

Due to constraints in the U.S., I am using currently using Forex.com. I have no other relationship with them other than as an account holder.

10. I have been looking at your trade videos and my Synergy APB candles and price action do not look the same as yours. Do you have a proprietary Synergy APB indicator?

No. I use the standard Heiken Ashi indicator that is supplied with the MT4 platform. I do not use Synergy APB candles.

11. There are so many different TDI indicators on Forex Factory. Which one do you use?

I use the very basic/original TDI indicator. You may download it from the FAQ section on the blog from question 4.

12. Why can’t I join your Skype or contact you on Facebook or LinkedIn?

I reserve Skype for only very close business contacts and a very small group of private clients. Skype is a distraction when trading and those in my list have a clear protocol and rules for usage that minimizes the distraction. We use Skype purely for business use and not as a typical “social” media tool. Facebook . . . where do I begin? Frankly, I do not have any interest or time to maintain a Facebook page because I am not that important and don’t want to entertain or share the mundane. I have the blog that is specific to traders that are serious about making money and that is about as far as I want to go in terms of being “out there.” For that same reason, I am not interested in building a network on LinkedIn. When I initially started the blog, it was recommended by a friend to join Facebook and LinkedIn. So far, they have only added to the 100+ spams I must delete everyday when I check the blog. The blog affords me plenty of exposure and interaction with the people I want to be around and by virtue of the subject matter, keeps the rest away. Old fashioned email is and will always be the best way to contact me.

13. Can I have a job with your company?

I do not have a “company” per se. It is just me and a few support teams I hire as needed. I made a conscious effort to remove myself from the “rat race” because of previously having many employees, being responsible for the livelihood of hundreds of people, and having to deal with the lack of personal responsibility that pervades the human population. I am at an age and place where I just want to pick and choose how I spend every minute of my time without the trappings and travails of the rest of the world (or more employees.) Thank you for asking. Learn how to trade and you won’t want or need a job!

Rick

SPECIAL REPORT – The 3 Greatest Enemies of Success

Hey Traders,

Just wanted to let you all know that I appreciate your participation and continued support.

I have been working on a lot of great information in response to your emails and questions. Soon there will be other ways we can interact. You’ll want to stay connected to the blog for announcements about future plans and processes – all to benefit new and struggling traders.

I’ve attached this killer Special Report about The 3 Greatest Enemies of Success.

You don’t want to miss this great read! Brian Tracy is awesome!

Here’s the link to the Special Report:

Pro Trader Network SPECIAL REPORT – The 3 Greatest Enemies of Success

Talk to you soon.

Rick

Stats, Poker, Cars & Ammo

One of the philosophies that began to change my trading results was introduced to me by one of my mentors. This philosophy made perfect sense to me and like everything else I do, it was based on . . . you guessed it . . . back testing. The crux of the philosophy is simply not to rely on hunches, or feelings or even just plain old experience as to where to place stops and profit targets, position sizing, etc. It was based on the use of empirical data, or statistics. The statistics are based on the back testing results for what I have determined to be a valid set up.

I looked at every signal, determined the most profitable trades, observed how the indicators behaved during those trades, calculated averages of stops, profit targets, winners, losers, etc., etc., This is how I developed my trading plan and subsequent rules to build a case for entering the market. I don’t like to guess when I have money on the line and I like the odds to be in my favor.

Many traders use the standard 10 pips above swings for stops and are all over the map for profit targets. You may notice over time that “head fakes” up or down usually target these areas to take out these stops. I don’t know if there are such things as stop hunters, I just know it happens quite frequently. I got tired of being stopped out only to have the market roll back over in the direction of my trade and as I sat frozen, not knowing if I should re-enter, when to re-enter, where to re-enter or how to control my emotions. I just got used to another loss and swore I’d never do it again. (And of course I did it again – over and over!)

The other big problem I had in my early trading experience was that I got so nervous and excited when I was actually in profit. I always closed a trade way too early, only to watch the market move another 100-300 pips in the direction of my trade. I froze again . . . do I re-enter and chase the trade? What are my exit rules if I do? Where are my stops if I do? I also had to figure out where to place my profit targets consistently so that I could relieve myself of the anxiety of staring at my computer for hours on end watching each tick that may go against my position.

The result of this behavior and these actions was that I became programmed to expect a loss.

It’s just like the Las Vegas visitor that budgets $500 for gambling losses before actually gambling. And sure enough, when returning from a trip to Vegas, inevitably the question comes up “Did you gamble? . . .  did you win or lose?” And the answer is almost always the same “I budgeted $500 and when I lost it, I stopped gambling . . but I had fun.” Losing is fun? We will do anything to justify the result and the result always reveals our underlying intent. If you expect to lose, you will. No one in the general public ever really studies gambling statistics. That’s why most people lose and they expect to lose. They know they have not done the work or have the knowledge to prove they really can win or should expect to win. There are very successful gamblers. They analyze stats, apply a rule set, increase their edge and as a result, expect to win.

From 2003 – 2006 I was doing a lot of business in Vegas and poker was getting popular on TV. I liked playing cards in general and poker in particular. I started studying and reading about odds, stats, etc. I played 3 days a week at the Mirage for 8-12 hour stretches. Knowledge, patience, control, confidence and rules. Once these improved, so did my winnings. Every time I sat down, I now expected to win. It changed my entire focus and attitude. Yes I lost some hands, but I made other players pay to beat me. I became a formidable player and this became clear after a few hands when I would sit down to play. I would start with $100 in chips and within one month was winning an average of $600 per session. That was not that much money to risk or to win, but it was the consistency that was my goal. I also knew that for my level of knowledge, to ramp up to the higher limit tables, I could easily be outmatched by players with a higher tolerance for risk, more experience and more knowledge. I knew I had to pay my dues before advancing to that level.

It wasn’t long before I began to apply this mindset from poker toward my approach to the market. The subsequent lessons from my mentor to use statistics began to fill in the gaps. Compiling the data, using the same rules for analysis, applying the same rules to my trade parameters . . . I soon began to develop some consistent profitability. The great transformation was now every time I placed a trade I expected it to be profitable – my back testing stats proved the odds were in my favor.

That is ultimately where your mind must be. It will never be there until you develop the belief in your trading system by proving it will produce a profit over time.

Every time you turn they key in your car, you expect it to start. Why? Because historically it has proven time and time again that it will. When it does not, you are surprised. But, you know with a high degree of confidence that with some regular maintenance, it will continue to start over and over again.

Just like a trading system with a positive expectancy. You expect it to win, but know that occasionally it will not and that perhaps tweaks are required. Again, over time, you know it will produce a profit. Without back testing, it’s like crossing your fingers every time you turn the key, maybe the car will start or maybe it won’t. Most of us could never accept that level of uncertainty, yet traders do it every day multiple times.

If you do not have this backtesting data, this ammunition at your disposal, you are doomed to lose the gunfight. You will always be shooting blanks against traders firing back with nukes – those that follow their plan and rules without deviation  – those that have done the work, paid their dues and rely on the fact that you won’t. My mentor summarized my experiences after I shared with him how much I had lost trading and how much I had spent on crap before I finally got it – he simply said “Welcome to the Machine.”

Rick

Goals for the New Year

Do you want to be a Top Performer in the coming year?

What attributes are required to become part of the elite, the fortunate – a successful and confident trader that can take control of your financial destiny? Here are a few of the most common traits I’ve run across when I meet and talk to the pros. How do you rate? Think about your approach in the coming year and keep these things in mind.

Brain Power – these are the raw materials and building blocks of your potential. You don’t have to be a genius, or anything near a 4.0 student for that matter, but you have to be able to analyze, formulate and implement. How quickly can you grasp a concept and take action? How easily are you defeated? Can you adapt? What challenges have you overcome to accomplish something meaningful? How have you applied your abilities to a task to innovate, overcome or increase the odds in your favor? These are all important as you approach the markets and work through your trade plan development. Pros are always willing to learn and admit their mistakes. They know trading is a process and skill that must be learned just like any other.

Values – Even if you are brilliant, if you lack integrity and empathy you are doomed to fail. Are you inspired or jealous? Do you take credit or give it away? You must have an awareness of others and be honest, show compassion, and be respectful and decent. Having a purpose and the desire to make a difference can take you to places very few are able or willing to go. Pros know that helping others helps them; that giving is a prerequisite of receiving and that selfishness and greed are the enemies of success.

Passion – You need a fire burning deep within you that creates a passion and enthusiasm. Either you have it or it eludes you. Your spirit and energy are infectious – both positive and negative. Are you helping or hurting; an optimist or pessimist? You need a sense of urgency, but without doubt or panic. Do you ignite the passion of others or suck the life out of them? Can you motivate others to attempt the impossible and achieve beyond their own limiting beliefs? Can you do the same for yourself? Pros are passionate – always doing their best to be a positive influence with a strong commitment to improve the trading profession.

Work ethic – What have you sacrificed to perform at the highest level of excellence? Are you a procrastinator or do you get the job done now with focus and diligence? Most people settle for average because it is the path of least resistance. Your work ethic is not just something you adopt to earn a living, but it can actually define the outcomes in your life. Where you are right now is the direct result of your energy and effort. Could you do more and be more? What are you waiting for? You must be willing to do what it takes in spite of obstacles and challenges. Pros know trading takes time and effort. They never give up and know that persistence beats resistance.

Experience – This simply comes with time – with paying your dues and paying attention to someone that has done it before. It’s interesting that experience can be gained exclusive of the other attributes previously mentioned. No one can give you more intellect, better values, passion or a stronger work ethic. That is why those are all so self-important. But they can give you experience by providing an opportunity to learn; or sharing from their own experiences. Pros try to shorten the learning curve of others through encouragement, advice and patience. Get out of your own way and listen to them.

So . . . you want to be a pro? . . . a successful trader? Figure out where your strengths and weaknesses are when thinking about the above. What are you doing to get there? How are you interacting or behaving every day to set a standard that can be appreciated and respected by others?

I have found that most pros worth their salt have it all together and fit nicely into the attributes I’ve described. If I meet one that does not, I do not invest any time at all in what they say or do – whether they are making money or not. Money is a big motivator, but not the end-all.

My suggestion is to start setting standards for yourself and others that will get you where you want and need to be. Do not compromise. You’ll find things will begin to change for the positive and fall into place.

Always remember you reap what you sow and deserve what you accept.

Want more and do more for yourself and others.

Rick

To Tell the Truth

As you know I am a great believer in repetition as the Mother of Skill, so for several months you will see many Articles and Training Videos again. Please take the time to review them. The lessons can be universally applied.

I am going to take a few lines in this Article to get a few things off my chest . . .

One of the most difficult things we have to come to terms with as human beings, let alone as traders, is to be honest about our current situation. Once we can do that, then comes acknowledgment, acceptance (responsibility), and then hopefully a course correction.

Something I’ve come to know in my journey as a trader is that the industry follows a typical series of revelations – enthusiasm, reality, and finally, skepticism.

Enthusiasm is the discovery of trading, the markets, and the potential income that will provide an alternative or perhaps permanent source of income in the recent troubled economic times.

Reality is in the realization that trading is not as easy as it first appears and can test every fiber of your patience, emotions and confidence.

And then comes skepticism. After having falling victim to the marketers and their products full of unfulfilled promises, you become very guarded and suspicious.

I have participated in all three to the most extreme degrees.

The fact that these three conditions are still in full force was never more evident when I recently had a 2-Day Live Workshop and at the end, pitched a beginning traders course for what I though was a ridiculously low price. My naïveté was, based on the cost of my own trading education, about $25,000 in courses and materials, trying to actually reduce the cost to the ridiculous (to cover production costs and web broadcast access.) I thought it would be better received.

After pouring my heart out for two nights and sharing what I though was some pretty good information for free, the minute I revealed there was a course and it cost money – I could here many minds slam shut. I never fancied myself a good salesman, but I figured that all of the incredible information I have shared for free would lend me some degree of integrity. I guess the new model now is that your value as an educator is correlated to the amount of free stuff you give away. Never mind that your true intent is to sincerely help those from wasting the same amount of time you did to on crap and nonsense. You would think that my content and record would speak for themselves. I have provided ten years worth of education and everything you really need to know about this business on this blog for FREE. Real stuff you won’t find anywhere else. And yes, I have benefitted in that it has also helped me stay sharp and on top of my game. I have since revisited my approach and have some thoughts about where I went wrong in my presentation. Corrections will definitely be made for the future, but I will never apologize for offering awesome and powerful content at a killer price.

Most importantly, as skeptical as I had become in my own trading experience, I still had to realize that I was not getting the results I wanted and needed. I had to overcome that skepticism, that pain, and take some risks that would eventually lead to my ultimate goal to be professional trader. It wasn’t easy, but floundering and being frustrated was worse, and thankfully, I was able to find my own Holy Grail.

I’m learning as I go – both as a pro and an educator and honestly I am starting to realize that doing what I think is right may only be right for me – and that’s OK – I don’t need the money and have nothing to prove, so I can live with the apprehension and skepticism – but can you?

What I’m having a hard time with is . . . if you can’t spend less than $200.00 on a professional, collegiate level trading course that will transform your trading and make you completely independent on all of the other crap put there, how are you ever going to trade a full lot and be 30 pips drawn down? This is an inescapable fact of trading – you have to take risks!

What’s more amazing is I get a steady stream of emails everyday requesting still more for free. “Can you send me your indicators?” . . . which I have paid to have programmed specifically for me and my trade systems – please stop asking. “Can you give me a money management system and outline all of the steps to overcome my trading psychology challenges?” . . . seriously? “Can give me everything so that I do not have to invest any time, money or risk anything to be rich?” You would be surprised at how brazen people are! It sounds like I’m complaining – but I’m not – I’m actually very thankful. This is the mindset of the plethora of Losers that are paying me every time they enter the market – and the reality is you can’t help everybody.

Here’s the gist – if you have visions of ever making it in this business and can’t get passed the fact that, in one way or another, you’re going to have to pay . . . either for crap, risky behavior or an education, it’s going to be a long, hard road.

At the very least, you’ll need to invest some time thinking about that.

Thanks for letting me vent.

All the best.

Rick

P.S. For those of you that have participated in the Live Workshops, asked great questions, and signed up for the course, I sincerely appreciate your trust and confidence. You will not regret your decision.

No Time to Kill

If you’ve read my articles and follow this blog, you’ve often seen/heard me say the time to get engaged in your trading future is NOW! Time is passing us by and we can never get it back.

I have a favorite song I play in the Live Sessions that emphasizes this point and thought I would share the lyrics with you.

It is written and sung by one of my favorite Country Artists Clint Black.

No Time to Kill

There’s no time to kill between the cradle and the grave
Father Time still takes a toll on every minute that you save
Legal tender’s never gonna change the number on your days
The highest cost of livin’s dyin’, that’s one everybody pays
So have it spent before you get the bill, there’s no time to kill

If we’d known ten years ago today would be ten years from now
Would we spend tomorrow’s yesterdays and make it last somehow
Or lead the cheers in someone else’s game and never learn to play
And see the rules of thumb are all the same that measure every day
The grass is green on both sides of the hill, there’s no time to kill

No time to kill, even I’ve said it, and probably always will
But I can look ahead and see that time ain’t standin’ still
No time to kill but time to change the kind of hurry I’ve been in
And quit this work and worry lookin’ back at where I’ve been
If you don’t look ahead nobody will, there’s no time to kill

If we had an hour glass to watch each one go by
Or a bell to mark each one to pass, we’d see just how they fly
Would we escalate the value to be worth its weight in gold
Or would we never know the fortunes that we had ’til we grow old
And do we just keep killin’ time until there’s no time to kill

No time to kill, even I’ve said it and probably always will
But I can look ahead and see that time ain’t standin’ still
No time to kill but time to change the kind of hurry I’ve been in
And quit this work and worry lookin’ back at where I’ve been
If you don’t look ahead nobody will, there’s no time to kill

No time to kill.

The point is simply to get serious, do the work and make the commitment toward your trading success.

There is no time to waste.

Rick

Total Disconnect

I wanted to re-share a string of emails I received and responded to a few years ago. I shared these with the traders in the first PTN Excel Course Live Session as well. These emails are really not that unique. What is unusual is that they are all from the same trader. My goal in sharing is to make you further aware of the state of the trading product industry and the general mindset of the majority of traders – the 90-95%. Those of you that know me are keenly aware that I first try to empathize as I have had many similar let downs and break downs early in my trading journey. However, I was much more humble and did not try to telegraph my impatience as is quite common in many of the emails I receive. I think this trader is somewhat askew in his/her perceptions and expectations, but I’ll let you be the judge. See if you can identify with this trader’s situation/apprehension and my impatience. This is not to criticize or disparage anyone, but more to emphasize that I make this information readily available for FREE for those willing to take a few minutes to explore the website and review the workshop and course preview material. Maybe I am unclear with this person and I take seriously any feedback as I am always looking for areas where I can improve. Rick

My responses are in Bold, my commentary in Italics.

Rick – Can I please get straight to the point?
– do you tell me your entry, stop and profit rules?
– do you discuss your technical analysis?

Your impatience tells me you are not interested in learning the skill of trading. I don’t give away rules. That won’t help you trade. I also do not provide trading signals like that of a signal service.

I’m certainly not impatient however nothing in the videos is new to me. This information is not new to me. I’m more interested in understanding your set up etc.
What exactly is in the excel course?

(The material in the videos is not new to him/her? Then why are they not trading successfully? Furthermore, clearly this trader has not listened much to what I have said or presented. This question comes after he/she has watched the Trading Workshop Videos and has not figured out that there is an entire course preview and trade system preview.)

Watch the preview. There is a link at the bottom of the Workshop videos.

Thanks Rick. This will be my last email. I promise.
Please specify whether you discuss trading strategies such as entry, stop and taking profit?
After listening to your videos, I feel it’s more of background information about fx trading which is great but I’m not looking for this.
Please correct me if I’m wrong.

The course includes two trading systems where you must still perform the back testing. They have entry signals and stops, but you have determine profits. It also includes advanced pattern trading.

Ok thank you very much.

( . . . a few days later . . . )

What is the best price you can sell the excel course for?

I have priced this course ridiculously affordably and the content is worth 100 times the cost, so the best price is the current price.

Sorry to keep asking these questions. Please understand that I have spent a lot of money on systems in the past.
Can I please confirm that once I study these strategies that I would be able to start making money? What is the win/loss ratio, rate of return?
Will there be any other systems after that which I would need to purchase?
Again sorry to be repetitive and I’m not trying to be disrespectful. I just sick if paying for systems that don’t perform.
Thanks

(I can totally empathize with this.)

I cannot guarantee anything. You want certainty and that does not exist.
You have seen my blog, you have seen my workshop and you have gotten a preview of the course.
If that’s not enough for you to make a decision, let me help you – don’t get the course.
I have hundreds of traders emailing me every week telling me how much my blog and course materials have transformed their trading.
What I do is open their eyes to what it takes to be successful; they are the ones doing the hard work and getting the results.
It’s about your commitment and willingness to make the necessary changes to be successful.
My course can help, but it will not make you a winner if you are looking for someone else to be responsible for your success,.
It’s all up to you.
Good Luck.

Thanks Rick. I am willing to put all effort and back testing. I have been doing this for the past 10 years. But what I won’t be able to do is create my own system.
Will you be giving this to us? That is the set up entry and what to look out for?

(This said it all to me – doing this for over ten years and displaying this state of mind? This was not a good sign.)

Yes

Also, will there be unlimited use to the excel course or is it restricted after certain time.
Is there anyone in Australia who has used this?

Yes and yes

Last question, I promise. How long does it usually take to master the strategy?
Also is there a forum available to ask questions if I get stuck with any terminology.
I am really interested in purchasing the program.

It varies per individual. My best clients/students are up and running independently in 60 days, some take 90-120 days, some longer and some never do anything. To be safe, plan for at least 2 years before you can honestly consider trading for a living. I occasionally do live sessions where we discuss clients’ questions, but I can always be reached by email.

There was a question in your FAQ
“What are your rules for entry, stops and targets? The blog is designed for you to learn what professional traders do for consistency and profitability through analysis and execution along with the psychology required. It is not similar to a chat room or forum where indicators and trading systems are given away. My rules and trade plan are designed for my trading personality and experience level. You must formulate your own rules and trade plan, do your own back testing and practice diligently so you can execute YOUR trade plan efficiently. Knowing my rules and plan will not improve your trading.”
What do you mean by: you must develop your own rules and trade plan?
How is the different to giving me your entry, stop and exit level?

(Here is where I simply lost it. After all of the information on the blog, in the workshop and in the course preview materials, this person can’t seem to understand my message – processes are the key to individualizing your own trading system and trading personality. This is the only way to establish your independence.)

No two traders trade the same. You will impose your own biases on any trading system, no matter what I tell you. You do not have the experience or discipline to trade the way I do, so it is a waste of time to tell you how I trade. Seems to me like you need to subscribe to a trade signal service. They can give you entries, stops and targets. Just Google it.
I teach people the skill of trading, not just how to trade. I show how pros trade and how to develop a system that best fits the individual by sharing two trading systems.
It’s all been explained and laid out. I am not one to try and convincing anyone. My work is all over the internet.
This will be my last response. I have many other traders that are decisive and committed that are having great success.

( . . . after some thought a few minutes later . . . )

I must encourage you to not buy the course. I fear that you simply might be too impatient and time consuming for me. I sincerely cannot engage with traders that initially indicate they will be too high maintenance.
I simply do not have the time.

I wasn’t asking you questions to convince me Rick. You weren’t very clear in your emails compared to what you have stated online. I wanted to simply clarify whether you teach trade signals rather than what fx is all about. I have spent years learning various topics including pivot highs and lows, money management, how to trade daily, weekly and intraday etc but what I was looking for is simply trade signals (entry, stop loss, profit targets etc). You obviously don’t do this or interested in sharing this information with me so I will not bother you again.

High maintenance!!!! Wow how arrogant. People are plain stupid to even give you the time of the day. How negative. I wouldn’t like to be associated with someone like you anyway.

Maybe I was too abrupt, but I can see the writing on the wall here. I mentioned everything I could about my trading philosophy and material I do and do not provide, but felt I got nowhere with this person. I don’t think I am arrogant. I state quite often that I struggled for many years. But, I did realize I had to get out of my own way. This exchange took place over the course of two weeks, and frankly I thought it was pretty generous of me to take the time to respond to each question.