Would like to add this by John Forman with his kind permission:

QUOTE

One of the biggest problems I see new traders struggle with is the mindset that somehow trading can be appraoched differently from other ventures or activities. This is something which either comes from too much focus on the prospects of profits and easy wealth building (greed, in short) or from just not considering that it is an activity which requires skill to do well.

In Enhancing Trader Performance, Brett Steenbarger talks about trading as a performance activity. He relates it closely to athletics, but you could very easily extend the metaphor to any other activity which takes time and effort to progress in skill. The point is that you cannot expect to just jump right in and be an expert. You must progress through stages of understanding, competence, and experience.

Trading is easy. I mean pointing and clicking to buy and sell is about at simple as it gets.

Playing guitar is easy too. Just pluck or strum. No one thinks they are going to pick up a guitar and become the next Jimi Hendrix, though. They know it takes hours and hours of practice to develop even a basic ability to play, nevermind getting to the point of having people pay to listen to you.

Why do people think that things are different in trading?

Good trading requires learning and practice – just like anything else you want to get good at. There are no quick solutions. Don’t expect them, and don’t let anyone lead you to believe that there are. UNQUOTE

http://www.theessentialsoftrading.com/Blog/index.php/2008/04/09/good-trading-doesnt-happen-overnight/

As we know, being good at any skill is 90% perspiration!

It is imperative that we as traders must have Visions & Trading Plans.

I would like to QUOTE Ray Barros ,also a great admirer of Ayn Rand: www.tradingsuccess.com/blog/ :

You’ll see the three ideas reflected in all that I do. Our trading philosophy forms one part of our VISION.

The other component is found in the rationale for a trading plan. We need a trading plan for two reasons:

1. Before entry: it tells us when the probabilities favour our trade
2. After entry: it tells us when the probabilities are no longer in our favour and we should quit a trade.

Both components are essential to our trading success. The key analytical insight to our success is found in the expectancy formula; the formula that tells us we can expect to make, on average, on each trade. Unless the sum is positive, we don’t have an edge i.e. we are doomed to fail in the long run. The most basic formulation of the formula finds its expression in:(Avg$Win x WinRate) – (Avg$Loss x Loss Rate) = Expected Trade Result

Where:

• Avg$Win = Total $ profits/Total number of Winning Trade
• WinRate = Total number of Winning Trades/Total Trades taken
• Avg$Loss = Total $ losses/Total number of Losing Trade
• LossRate = Total number of Losing Trades/Total Trades taken.

Most newbies focus on the Win and Loss Rate. But in my view, this is the more difficult part of the equation to control. Why this is so is best described by a story I heard about while learning Drummond Geometry (P&L Dot):

One day an ex-floor trader was told by an apprentice he had taken under his wing: ‘The 1-1 support WILL hold this decline”! The market was heading south towards what P&Lers called 1-1 support.

The ex-floor trader replied: “What are the probabilities?”

The apprentice said: “It WILL HOLD, I am certain!”

The ex-floor trader said not a word; instead, he picked up the phone and said: “Sell me 3000 Dec contracts at market”

Needless to say, the market went through the 1-1 support like knife through butter. “Remember this” said the ex-floor trader, “ we think in probabilities not certainties”.

This is a great tale. It tells us that the trading is in the realm of probabilities and as such the win/loss rate is less under our control than the Avg$Win and Avg$Loss. Both of these depend entirely on our decisions to enter and exit.

Notice that the formula explains why someone with a 90% win rate can still lose money. Let’s see why. Let’s say the Avg$Win is $10 and Avg$Loss is $100 and the win rate is 90%. The sum of the formula is:

($10 x .90) – ($100 x .10) =

(S9) – ($10) = -$1.00

So over the long term, over a large sample size, each trade we take will lose -$1.00.

Our VISION allows us to imagine a number of critical events:

1. What does a trade need to look like – what does it have to do after entry – for me to remain in a trade?
2. What does a trade need to look like for me to exit a trade?
3. What does a trade have to look like for me to stop and reverse?

By visualizing the answers to these questions allows me to exit trades BEFORE my stop is hit. The technique allowed me to return 46.64 on capital (ROI) for 2007 an average dollar profit per trade of US$181.00.

UNQUOTE

This is the refrain from all good educators on trading well, and we can take it from Bob Prechter who won a championship in US in 1984, who advocated :

• Have a method to trade.
• Have the discipline to follow your method.
• Get real trading experience, instead of only trading on paper.
• Have the mental fortitude to accept the fact that losses are part of the game.
• Have the mental fortitude to accept huge gains.

• Find a good mentor

• In this excerpt from the book, Prechter’s Perspective, Bob Prechter discusses how sitting at the elbow of a professional trader can make all the difference in learning the trade of trading.
  *****
  Excerpted from Prechter’s Perspective, revised 2004- QUOTE
  

• • Question: Has any specific trading experience decreased your trading success?

  Bob Prechter:Yes. My first trade in 1973 was wildly successful, and I was hardly wrong in my first six years at it. Then I had a big trading loss in 1979, and that taught me more than the wins. The best way to develop an optimal state of mind for trading is to fail a few times first and understand why it happened. When you start, you’re better off speculating with small amounts of real money. Using larger amounts of money will bankrupt you early, which, while an excellent lesson, is rather painful. If you want to be a trader, it is good to start young. Then when you lose your first two bundles, you can gain some wisdom and rebound.
• 
  
• • Q.: It sounds painful. Is there any way at least to reduce the hard knocks?

  Bob Prechter:There is one shortcut to obtaining experience, and that is to find a mentor.

• ---

  • Q.: Did you have a mentor?
  Bob Prechter:In 1979, I sat with a professional trader for about a year. The most important thing he taught me was to keep trades small relative to your capital. It reduces the emotional factor.
• • Q.: How would one select a mentor?
  Bob Prechter: The best way to select one is to find a person who is doing exactly what you would like to do for a living, then get to know him well enough to ask if he will tutor you or at least let you watch while he works. Locate someone who has proved himself over the years to be a successful trader or investor, and go visit him. Listen to him. Sit down with him, if possible, for six months. Watch what he does. More important, watch what he doesn’t do. Finding a guy who knows what he is doing is the bet lesson you could ever have. You will undoubtedly find that he is very friendly as well, since his runaway ego of yesteryear, which undoubtedly got him involved in the markets in the first place, has long since been humbled, matured by the experience of trading. He will usually welcome the opportunity to tell you what he knows.
• UNQUOTE

There have been  scoops all over Wall Street that  within a prop shop of high-frequency traders, a saliva test for hormones showed a relationship between feelings of confidence, success and the levels of various hormones – testosterone in particular.

Quote

Unquote

Last year I wrote in STC/Wilki about the start of this buzz.

CROSS-REF STC/WILKI:

Submitted by anatrader on Sat, 10/13/2007 – 19:49. at Wilki/ST:

This is a bizarre allegation that one of the top bosses at SAC chided traders for being too aggressive and should take female hormone pills to become more effeminate in trading style to score in their trading pitches.

Dr Brett certainly would not recommend this solution.

Here is what I added at TraderFeed:

The bizarre case of female hormone therapy is also hilarious.

If less aggressive trading style is a good trading pitch, why are there not many top female traders?

To which Dr Brett said:

Hi AnaTrader,

Perhaps testosterone is associated with risk taking, for better and for worse…

Brett

8:09 PM

Before you open an account with an online broker, here are some points to consider:

• Do they have very tight spreads?
• Do they re-quote making trading difficult especially during ‘news’ events?
• Do they have any slippage on stop-loss orders?
  
• Do they have an intuitive platform ?
  
• and one of the lower interest charges?
• Do due diligence on online brokers first.

PROTECTION:

CFDs are not protected by the Futures Legislation (in any country).

• To take advantage of the protection, you should create a Futures account, CFD account and FX account.
• Deposit in the Futures account and fund your positions in CFDs etc through the Futures deposits.
• This way only your Margins in Non-Futures are at risk.

Taking these steps will minimize your risks with online brokers.