42 Market Observations For A Trader
Updated: Jun 22, 2020
42 questions/observations that a trader should answer with confidence.
I’ve read more self-help books than I can count, and I have tried every short cut known to man and believed in every easy way out possible. I now know there is no easy path to worthwhile things. The process separates the successful from the unsuccessful. Action is more important than anything else in life and in trading. Just decide, who you are going to be, how you are going to get there and what it is going to take. DECIDE. Do not fall for the illusion of over-preparation. When you are ready you are ready. The nerves never go away, the stress is always present.
Trading just like life, victory always goes to the prepared, over the course of a career. And that is how trading should be viewed a career which is in a constant state of growth. Commit to process in trading and in life. The results will shock you.
Hold yourself completely accountable and set a standard for yourself. Turn pro and never look back. Sacrifice comfort for progress the results will shock you.
1) Do you really want to trade? Why?
Yes, I do. The financial markets fascinate me, they give information that the masses have no desire to conceptualize or care about. I thoroughly enjoy the challenge of personal discipline, self-reliance and accountability that being a full-time trader represents. I enjoy the empirical way of seeing progress and being able to look at failure as a necessity not an adversary.
2) What is the driving factor behind your trading?
Simply put it is discipline. Having the discipline to act and having the discipline to sit. I know firsthand what undisciplined trading looks like and the pain associated with it. Trading offers a limitless variety of ways to express oneself in the market. However, it is discipline that can lead to a consistently profitable career; not an indicator, or a chart pattern or a market newsletter or moving average. Discipline is the only way to free your mind from the anchoring feelings of fear, loss, and doubt. Discipline without a doubt is what drives me daily as a trader and a human.
3) Does your trading method match your personality?
I am a professional futures trader. I trade/ES S&P 500 Futures, /NQ Nasdaq 100 Futures, and /RTY Russell 2000 on 15 min-chart. It matches my personality because I am feedback oriented needing to know if I am going in the right direction, what if any adjustments I need to make to my trading and personal life as they are complete mirrors of each other. It also is a pursuit without a finish, day-trading offers unlimited opportunities to improve, no matter how good or profitable and disciplined you become. From a technical perspective day-trading also lets me define and accept risk on every individual trade, every trading day of the year. I get to see the market play out on a technical basis every day and pick and choose where I want to be involved. I utilize swing trading to be involved in longer-term moves (multi day).
4) Do you have an edge?
Yes, I do, first I have proven to myself that I can win on substantially more than half of all trades placed. With a sample size of over 300 trades my win rate is well over 70%. However, my real edge is discipline. Establishing mindfulness in the forefront of all my trades, allows me to completely accept risk and accept market conditions for what they are not what I want them to be. This keeps me in an objective state of mind, that allows me to simplify my trading process and not be a reactionary emotional trader but instead a mindful trader. Mindfulness and Discipline that is my edge. And it can stand the test of time, unlike any indicator, chart pattern or signal those are external edges and must be changed and modified.
5) What is your method?
I am a pure price action intraday trader that looks for mean reversion and trend resumption trades with a minimum 1RRR (risk reward ratio). I do utilize SMAs/EMAs (simple/exponential moving averages) to establish trends and signals. I construct buy/sell zones of interest during my analysis. This allows to identify and place high probability price action set-ups on the 15-minute price chart. I never risk more than 3% of equity on any single trade. My method keeps trading simple emotionless and mechanical. I trade 1 market.
6) How did you develop this method?
Looking at thousands of price charts both Intraday and daily, and finally grasping the importance of risk acceptance. It all starts with accepting risk and matching your level of risk acceptance with the proper market, timeframe and trading style. By forward testing in live markets on over 300 trades and back testing on thousands, I was able to conclude price action is the most precise way to trade futures intraday. It required much more personal development than technical development. Incorporating meditation and much healthier and sustainable eating habits, eliminating overconsumption of alcohol and other time-wasting activities, went a long way in cultivating my price action trading strategy. It also showed me the importance of a whole mind concept. A disciplined mind and an undisciplined mind cannot exist in the same space it can’t be done. The development was really expedited due to the use of real money in the futures markets. I was able to see my emotional make-up and the negative effect emotions can have on a sound trading system. So, system development and personal development went hand in hand, understanding one cannot exist without the other. Once I effectively established entry and exit parameters and correctly identifying signal bars and accepting risk. It freed up mental space to focus on price action analysis, which I do with a top-down approach and Identify critical support and resistance zones. Then I wait for a signal bar buy/sell. I then buy above the highs of the signal bar by one tick on a buy stop or I sell below the lows of the signal bar by one tick on a stop. Through trading live money, I was able to identify the importance of trading my absolute smallest at the beginning of trades. I was always scale into winners and my losses are always contained to 1R or smaller. I also established the US Index Futures market are the market I trade and it allows me to not concern myself with other factors of different markets.
7) How hard do you work to develop skill?
I know firsthand the importance of daily routines and have seen what happens when I diverge from my routines. Daily preparation, execution and review are necessary parts of success but more importantly they are crucial in having purpose and meaning. Habits can build art or create a toxic wasteland. And the only real way of sustainable growth is complete commitment to mastery. If you see a weakness or a negative habit you must change it. That plays a pivotal role in the development of my skills as a trader. I review all my trades daily. I also log every price bar in real time with open, high, low, and close. And log any notable price action intraday. The substitute for hard work does not exist. Hours and hours of system development and personal development have gone into turning myself into a profitable Futures trader.
8) How do you create effortless trading?
Through mindfulness and a process-oriented approach. I understand the dangers of emotional suppression and I understand these dangers because I have tried and failed on numerous occasions to suppress emotions while trading and throughout my life. The key to creating an environment where you effortlessly do high value trading actions, is to create an environment where you effortlessly do high value actions. That is SELF-DISCIPLINE. Not in self-help way, “I am doing x so I can get y”. I am talking about a complete commitment to process over results. Complete surrender of outcomes, and only concerning yourself with the day to day, hour by hour, minute by minute process. To have effortless trading it must co-exist with effortless living and something can only be effortless if it’s a habit. So, form habits that reflect the person and trader you want to be, and the effortless effort will present itself. Fear doubt hesitation are all just things that erode confidence and the effortless mindset, but they cannot overcome the strength of powerful habits.
9) What is your risk management procedure?
I fully accept the risk of 3 percent on any individual trade never to exceed that amount.
I fully accept the risk of 6 percent daily maximum drawdown never to exceed it.
I fully accept the risk of 18 percent maximum monthly drawdown never to exceed it.
I plot out my maximum position size for the month before each month begins.
I completely understand the absolute necessity of risk management, so I hold myself accountable to it and never violate it.
10) Do you have a trading plan?
Yes, I created a trading plan with a 5-Min execution chart. I build an intraday trading plan every night and build a trading thesis of the daily chart every weekend. My intraday trading plan includes all important levels which I am interested in the market, as well as pertinent economic data and current volatility levels. As well as a criterion for being either long or short the market. And what intraday market types I look to avoid. My daily time frame chart breakdown on weekends takes in full market breadth and historical data and establishes a long-term trend.
11) What type of discipline do you have in life and trading?
This took me a long type to accept and even a longer time to acknowledge, that I can’t work around it. Quite simply you either are disciplined or you aren’t disciplined. A disciplined mind and an undisciplined mind cannot exist in the same space it can’t be done. To really become the trader and person I want to be. I must become it. It cannot be a disciplined action every other day or waking up early some days or meditating some days or putting on the uncomfortable trade occasionally. It must be a full embodiment and transformation into the person you want to be with no exceptions and no excuses. That is what makes trading a beautiful game it requires total immersion if you want to tap into the best trader inside of you and the best person inside of you. I have disciplined my behavior by removing things that waste time and energy those things are alcohol, mass media, time wasting websites, toxic people, undisciplined diet, erratic sleep behavior. This increases my intrinsic focus and allows me to accept and embrace my new reality of process orientation which is a lifelong journey.
12) Do you accept responsibility for your trading?
I now understand that you cannot have any real success or freedom in life or trading without the ability to hold yourself accountable for your actions and behavior. So not only is it vital that I accept without any excuses the outcomes of my actions, this is the only real way to get positive outcomes. If I do not accept the responsibility for my trades; how could I accept the rewards? Because they wouldn’t be my trades. So, I take great comfort in fully accepting the risk and outcomes of my trades and understand this is a positive not a negative. All data is good data in trading if I am responsible for making it. I can learn from mistakes and see what I am good at.
13) Do you accept the independent nature of this profession?
One of the things I love most about trading is its autonomy and independence. It truly is one of the last great frontiers in capitalism. I love the independence because it allows me to grow my mind and go into the arena as an independent thinker. Freeing myself from the slave/master paradox that a mind can fall victim to. Trading offers complete independence but also requires complete responsibility. No excuses, no blame game. Complete self-reliance and self-discipline.
14) Are you confident enough to be a winner?
I can say confidently yes, not because of some home-run trade or some holy grail indicator. But because I finally understand the process over profit/loss mindset. Confidence is bred from my routine of being prepared every day to take on and analyze the markets objectively, fully dedicating myself to high value actions that put me in the best position to grow as a trader. Money and profits are just a result of a sound and disciplined process with a defined edge. Finally accepting the process gives me supreme confidence to be a winning disciplined trader over the long-term.
15) Have you accepted loss?
I have fully accepted loss. Only through the pain of avoiding loss have I understood the importance of accepting that losses are part of the game. And losses are the only true way to establish your edge and grow as a trader. There is no way around losses and no way to avoid losses. Fully accepting losses allows me to objectively view markets without the overbearing emotions of fear and anxiety. Accepting loss was a pivotal point and one of the most important moments for me as a trader.
16) Do you understand the importance of self-awareness?
Self-awareness is key for long-term trading. It helps remove ego from trading and helps remove helplessness. Self-awareness has completely transformed my trading and my life. I am not a genius when something works out, and I am also not a complete professional and personal failure when a trade or set-up doesn’t work out. Self-awareness has allowed me to turn my analysis inward. I can accept that the shortcomings I have are opportunities to improve something internally. Self-awareness is at the core of my trading and life and is my biggest edge as a trader and a person.
17) Do you know the dangers of advice?
Advice is very destructive to confidence and ones on ability to read the market. It will only create doubt and remove confidence. Develop a trading philosophy and a trading system and trade it accordingly. Depend on yourself and build a trading style that is interlinked with your personality.
18) Do you understand the power of patience?
Patience eliminates some of the biggest trading demons; it eliminates front-running trades, it eliminates boredom trading. It turns doing nothing into a powerful trading indicator. The power doing nothing has a positive impact on the intraday trading mindset as well as the long-term growth of a trading account. Patience is paramount for successful trading and a healthy frame of mind.
19) Do you know the importance of sitting?
This is two-fold, one sitting and not taking sub-optimal trades is a great habit. Two sitting and just forming objective opinions about the price-action can lead to the best trades of the day. Therefore, learning how and sticking to just sitting can transform intraday trading results.
20) Why is the development of low-risk ideas important?
Low-risk ideas first and foremost, allow you as a trader to express your trading thesis and system often, giving you as a trader more useful information about sustains and improves. This is also a great way to incorporate home-run trades into a trading philosophy, without having to strikeout when you are wrong because of the low risk nature of the trade. An example of this would be “Buy the VIX below $13.00, placing a stop-order below $12.00 and sell order above $19.00”. This is a 6RR trade, but it is so limited to the downside and very cyclical. Low-risk trades also further drive home the point of always defining risk.
21) Why would you vary bet size?
As a trading career progresses and grows it is vital to understand when to press an edge or advantage in a trade. And is plainly important to know when you are out of sync with the market and trade smaller. This can be important in growing and preserving trading capital; so, you are the most aggressive trader when you are ahead, and you are at your most cautious when you are not trading optimal. It creates mental flexibility, and helps you stay in a process orientation and not panic when you are losing and be overjoyed or overconfident when you are up.
22) Why scale in and out of trades?
A philosophy I now apply to all my trades is “trade your smallest when you are wrong and trade your largest when you are right”. The highest probability you have in being wrong in a trade is right after you put it on. So that is when I want to be my absolute smallest. Since I am a futures trader that means a 1-lot is put on. I have learned from painful account drawdowns, allowing the market to show you it is going to move your direction is a lot better than you guessing and having HOPE that the market moves your direction, trading small allows you to objectively find out. This also will help you plan directional trades a lot better. And the biggest advantage to scaling into winners and not starting positions in full size at the beginning is you are following 2 of the golden rules of trading effortlessly! “LET YOUR WINNERS RUN” and “NEVER ADD TO A LOSER”. You will also consistently have larger winners than losers because you are at your absolute smallest at the initial move of the trade. This is something I took almost two years to cultivate and truly accept but it puts me at peace with outcomes of individual trades and really limits my downside.
23) Why you should focus on validity over exactness?
Calling exact tops and bottoms and reversals is an intoxicating feeling, but detrimental to consistent trading success, especially if it is not even defined in a trading plan. It is much more effective to establish zones of interest and wrong points on charts, if that coincides with a major top/bottom or reversal area than great. But hunting tops or bottoms and counter-trend home-run trades are not effective and a painful way to blow-up a trading account.
24) Do you concern yourself with the opinions of others?
I struggled with this as a new trader greatly. I needed validation or invalidation of individual trades and trading ideas. This only changed once I realized, that being wrong, and losses are inevitable. Knowing this showed me I must build my on-trading plan. I must place my own trades. I must fully accept the risk and outcome of every trade. Trading independence is two-sided understanding this made me stop looking for advice, support and validation.
25) Do you understand the importance of action?
Acting does two powerful things for trading. First it creates confidence in the simple act of reading a market and clicking buy/sell. Second and the most important it gives you information about your trading system good or bad. So, acting when a set-up is present is a very high value trading action, and reinforces all the positive trading emotions that promote growth.
26) Being in part of the right trade is better than better than being in all the wrong trade.
Nothing sums up this up better than this “I am waiting on a pullback to get long/short.” This is a negative trading emotion. Acknowledging that the market is moving in a direction and then not entering the market in that direction, creates; hope, hesitation, and fear of missing out (FOMO). If an intraday or long-term trend is established identify where the trend would be invalidated and enter the market with the correct risk parameters. Outsmarting a trend is a dangerous expensive game.
27) Profit amount is more important than win total.
This is a hard concept to accept as human nature thinks in win/loss. As a trader you need to think about “how much do you make when you win? And how much do you lose on losses?” It’s not about eliminating the win/loss mindset. It is about understanding that expectancy is much more important to long-term success. This is helpful also once you grasp as a trader, that risk management and a defined edge are imperative in any trading style. Expectancy is the best way to determine if you have both of those. And can help build a long-term RRR (risk reward ratio) that is sustainable.
28) Do you hold loyalty to positions?
I understand that I will be wrong. And understand that no matter how good I am at reading a price chart, or trading in general. I will have losing trades, no possible way to avoid loss. As Mark Douglass said “To whatever degree you have not accepted the risk of trading, is the same degree you will try to avoid risk. Trying to avoid something that is unavoidable will have disastrous effects on your trading.” Holding a position past a wrong point or a risk acceptance point, will flood the mind with negative trading emotions, hope, fear, confusion, and indecision.
29) What is your method for reducing risk in the market?
Scaling into trades is how I always keep my risk at 1R. A market must show me it wants to go in my direction before I add size to a trade. And I only add size once my initial entry stop has been moved to break-even. This always keeps my risk in the market to 1R.
30) Hope is a Four-letter word.
Hope destroys everything that a trader needs to be and remain profitable. Hoping a trade works out is a dangerous reason to enter the market and is a dangerous reason to stay in the market. It will cause a trader to abandon trading rules, to abandon trading plan and abandon risk management, which is a sure-fire way to blow-up a trading account. Hope will distort market information and create a strong directional market bias, that is based on whatever side of the market you are on. Accepting risk of every individual trade as well as the profession of trading is the only way to keep hope out of your trades.
31) Why is comfort bad in trading?
The best trades are where risk is. Comfort avoids risk. Simple and succinct. Be uncomfortable and accept risk of every trade and the trading profession.
32) Are you adequately capitalized?
I did not believe in this, until I fully grasped what risk is. Risking no more than 3 percent per -trade I understand that and can say I have adequate risk capital to appropriately trade the market without hesitation or reservations.
33) When being wrong is right
If in a situation where a stop out seems imminent, then the market reverses and moves in your favor. This is usually an example of when you can press an edge. As the market is presenting opportunity that you probably are unaware of in your analysis. This is how trusting trading intuition and keeping an open mind, allows you to receive information that the market presents. Because that is all the market is information. It can neither hurt nor help. It offers information that you respond to and act on.
34) Being open-minded is being open to opportunity.
The market offers information that is it. An open mind can effectively decipher and comprehend this information and place high probability trades.
35) This is not a casino, a hobby, or a thrill.
Trading is a profession. And only professional traders with a professional mindset win long-term in the markets. Professionals show up every day. Professionals do the uncomfortable. Professionals utilize mindfulness. Professionals accept risk. Professionals completely commit to the process of improvement. Professional traders never stop improving.
36) Do not ride the emotional roller-coaster.
Do not over-invest emotional capital or financial capital in any one trade. Commit to 22,500. Knowing the outcome of individual trades is impossible. Don’t fall for the trap of knowing the unknowable. Do not suppress emotions or feelings that come while trading, let them come embrace them, be mindful of them. And then act in the best interest of your long-term trading career.
37) Stress Kills
Literally, it also kills creativity and open-mindedness. Address stress with meditation, exercise and a healthy diet. Remember discipline equals freedom.
38) Listen to the good trader inside of you.
Do not be afraid of the little voice in your head, it might know something that you don’t.
39) What do you love?
I love the financial markets. I love the process, the morning opens, the ticks, the mental chess, the up days, the down days, the constant improvement. I know without a doubt being a trader is what I am supposed to be doing with my life, it is my why.
40) Focus on the process
Goals, success, riches are all great. The process, the meticulous nature of improvement and analyzing my progress and shortcomings. Understanding the nature of improvement and doing the uncomfortable thing. The power of preparation and routines. All the success of trading only comes when you stop pursuing the successes of trading and commit to the process of trading. The journey in trading is the destination.
41) You really can do it.
Prices are not random. You can change your life. It really is possible to be a consistently profitable trader. Remember that on your journey. IT IS POSSIBLE.
42) Do What You Love, Love What You Do.
Do not lose love while on your journey. Always keep perspective in life and in trading.
Answer these questions for yourself. And learn from yourself. You are the guru that you seek.