Welcome to this week’s Enlightened Trader Newsletter. We are still in a tightly ranging market this week – very little going on at the index level. The S&P500, ASX 200, TSX Composite, Hang Seng and Bitcoin are all still hugging their 200-day moving averages closely with no clear direction… It is not even exciting enough to post a picture of the indices.
The most important thing for us to do when the markets are boring like this is to make sure we don’t take our eye off our trading. Just because it is boring at a market level doesn’t mean your individual trades can’t move in your favour or against you by a lot. Look at the chart of the percentage moves in all 500 of the stocks in the S&P500 index over the last 5 trading days:
The most positive move was 16% while the largest drop was 30.5%. So the message I want to share with you today is even if the market as a whole is boring as hell, and even if your account is not going anywhere, we ABSOLUTELY CANNOT AFFORD TO BE COMPLACENT!
If you are a trader then be a trader…. all the time!
Too many lose interest in their accounts when they are not really moving. The trouble is this is exactly the time we need to be paying the most attention to it because there can be mistakes and sudden moves that seem to come out of nowhere.
Please don’t fall into the trap of being a fair weather trader… if you want to make money long-term, you need to step up to the plate every day, even if the market is not doing anything!
Trading Tip of the Week
The markets have a way of needling traders constantly. There is always uncertainty about what is going to happen and a lot of variability in the results we get day to day and week to week.
The trouble is as humans, most of us want some level of certainty… especially when it comes to our money and investments. One of the (few) great things about having a job is the regular paycheck. We know that if we turn up to work and don’t get fired then we will get our paycheck.
But trading is different.
We can turn up and do everything right and still lose money, and we can do the wrong things and still make money.
So in the short term (and yes as humans we generally have a huge recency bias and so focus on the most recent results), our returns from trading do nothing to satisfy our need for certainty because it is largely random in the short term.
So how do we get certainty when it comes to our trading?
The answer is to separate the PROCESS of trading from the RESULTS of trading in our minds, and our tracking.
We can generate certainty in our trading by doing the right things every single day. For a systematic trader, this includes:
- Updating our data
- Running our backtest to generate signals
- Placing our trades (buys and sells) at the right time
- Recording trades in our trade log
- Writing in our trading journal
We can generate certainty in our process by doing these things every day. We can even score ourselves by tracking how many of these things we do and how many days between mistakes.
What we can’t do is get certainty by looking at our account balance every day because the account balance is not closely coupled with doing the right things each day… the relationship between “doing the right things” and “growth in account balance” is a longer-term relationship and should only be viewed as such.
Traders coming to the markets hoping to “just make an extra $5000 per month” will face extreme frustrations, whereas traders coming to the markets to “learn to be a great trader and build wealth over time” will find it extremely rewarding.
Trying to force consistency out of the markets is a frustrating battle, so instead focus on what we as traders can control – our daily habits and actions.
Student of the Week
My student of the week is Iain.
Iain joined The Trader Success System on the 1st of May and has just been blasting through the online learning material. I love it when my students get focused and really build momentum in their learning. Iain has been asking questions, consistently studying the material and taking action… That is what gets results!
Well done Iain – keep up the momentum, I just love it.
News from EST
This week I gave one of our awesome EST Coaches an advance copy of my new book called “Wisdom from the Masters of Systematic Trading” which contains timeless trading wisdom from over 20 legendary traders in the areas of:
- Learning to Trade
- Trading Plan
- Risk Management
- Trading Strategy
- Trading Systems
- Trading Psychology
This is what he said:
“Wow! I am thoroughly impressed with this book mate!! It is an amazing concept, very well thought out and executed, you can tell you have put a lot of thought and effort into it and I think it will be very well received, and valuable to new and seasoned traders alike!!!”
Needless to say, I was pretty thrilled with that and am looking forward to getting it up on the Kindle store really soon.
I actually got the final draft in Kindle format on my phone this week and it looks great… just a little formatting to resolve and it will be ready to launch.
Watch this space and I will let you know when it is available.
I am still looking for a few more writers for the EST website – I have been on a writing frenzy recently and there is a lot more to do. So if you know a bit about trading and would be keen to write / research under my guidance, please send me a message and let me know.
Are you ready?
If you are ready to finally take control of your trading and want to discuss whether the Trader Success System Mentorship / The Trader Success System Online Program / System Trader Launchpad is best for you, send me a message with the word CHOOSE and we can schedule some time to talk and determine if you are a good fit for the program and which option is best for you.
Hope to hear from you soon!
Founder, Enlightened Stock Trading