All my traders funded their own accounts because I believe that they are responsible for their own action. I merely facilitate and guide them, holding a small share in their account that they are comfortable with.
Here is a letter I have just written to a veteran trader of 20 years who have joined me 2 months ago, trading from home. He has been struggling with Electronic trading for the past few years.
Hi Bro,
You have done well in a quiet and very difficult December month for most traders. I have seen great improvement in your trades that comes mostly form the Simsci contract. Last week, you started to drift backward and seems to be struggling again.
From the recent statements, I observed that you are going back to arbitrage trading between CME NK and SGX NK to cover your losses in the Simsci. I'm surprised that you made money doing that with your slow trading platform and Internet speed. The risk/reward ration is about even but it's draining tremendous amount of your energy starring at the screens waiting for such opportunities.
We don't have the edge in arbitrage trading anymore, the Algos have taken over that role with their low latency, high frequency trading at a very much lower comm offered by the Exchanges. You are not going to grow and progress doing that at home, the stress will affect your health and in turn affect your concentration doing outright trading.
You are no longer young with the energy to compete with the Algos. Imagine yourself driving a old boneshaker along the express way at the speed of 50 km/hr while the rest are zooming past at double the speed or more. I definitely don't encourage such trading without the proper setup to compete on a level playing field. The reward for you effort is low. Focus instead on outright trading, losses is part of the game.
Refer to your trades last month and dissect them to understand why you have done well. But did you keep a trading journal?
Recently I challenged my brother too when he spoke about keeping a journal on his previous trades and strategies. I lost! He took the trouble reviewing his trades at the end of each day and record them for future reference so that he can improve on it. That's the biggest reason why he is now the most consistent trader and improving everyday. Can you still remember he was struggling together with you in the arcade through 2009?
95% of the traders do not keep a trading journal, my brother made that little extra effort.
Both of you are equally talented and intelligent, but he is now way ahead of you, why? I have great respect for you, a highly successful floor trader with plenty of guts. For traders who are not making it, I have only one word to describe their characteristic, "STUBBORN". They are all in denial with all sort of excuses, a drunkard will not admit that he is drunk.
Questions that I would like to ask you.
1. Do you keep a trading journal?
2. Can you justify your every trade? (Reasons for entering into a trade)
3. Do you have a stop loss before taking the trade?
4. Do you average on a bad trade?
5. Do you have a profit target?
6. Do you know the right time to trade?
7. Do you know which contract you are most comfortable with?
Being a veteran trader, you should have the answers to all of them, which is rather simple and straight forward. Keep repeating what you have done correctly. There is no compromise on discipline and following strict money management rules.
There is no option for you but to improve yourself, you must do it, you have to do it and I believe you can do it.
I hope change will take place in 2011 and I will come back to ask you the above questions again. Most important, challenge you to show me your journal.
Regards
No comments:
Post a Comment