Principles to Develop

Winning Trader’s Mindset

Trading is a fantastic teacher of life’s greatest lessons.
Allow the trading journey to shape you into the person you want to become.
What is our action plan?
1. Commit - commit to doing what you love
2. Be flexible - do not become attached to your trades
3. Focus on execution - trade the right strategy for the idea
4. Calculate your expectancy – the numbers need to make sense
5. Hold yourself accountable for your mistakes - this is the path to improvement
6. Do what works for you! - don’t be concerned with what others are doing
7. Establish a routine - it’s always best to over prepare
8. Determine your unfair advantage - we all have one, what’s yours?
9. Remain humble
10. Visualize what you want, then make it happen!
 “Baseball is 90 percent mental. The other half is physical.”
I believe trading is 90% mental; the other half is execution.
There’s no doubt execution is incredibly important,
but without the proper mindset, a trader lacks a foundation to build upon.

The goal of is to give you a specific action plan to help you develop into
winning traders. I’ll provide many examples from winning traders and
conclude with a list of action steps in hopes that one day you may join the
top ranks of the trading elite.
 1. FLEXIBILITY
(George Soros)

Hold no attachment to trades

George Soros has no emotional attachment to an idea. Focus on the here and now
When a trade is wrong he will just cut it, move on and do Quick decisive decision
something else. making is crucial.
We base our decisions on
Trading is a psychological game. Most people think that they’re the information in front of
playing against the market, but the market doesn’t care. us at the time of the trade.
You’re really playing against yourself.” Listen only to what the
market is telling you NOW.
Forget what you thought it
Intuition is gained from experience was telling you five
the quickest way I’ve found for developing a sound trading minutes ago.
intuition is to keep a log of market behavior. Remember the objective is
Write down what is happening in the market. not to prove you’re right,
Then write down what you think will or should happen as a but to hear the cash
result. register ring.
Once the outcome is revealed, compare your initial hypothesis.
2. IMPORTANCE OF IMPLEMENTATION
(Colm O’Shea)

Right strategy for the idea

When looking to express an idea in the markets, seek out the trade with the
least risk, greatest reward potential.

Draw a line in the sand

Start by deciding where the market would have to go.
This is where you place your stop.

Embrace uncertainty and risk

I accept that a trade will be a loser even before I enter the position.
That is, I’m accepting the worse possible scenario and I’m okay with it.

This keeps me focused and objective during the entire trading process.
 3. BELIEF IS IN NUMBERS
(Richard Dennis)

Genetic vs. Set of rules

A dispute between Richard Dennis and Bill Eckhardt leads to an experiment over the idea of whether great traders were born
or made.
*Dennis believed that he could teach people to become great traders.
*Eckhardt believed that genetics and aptitude were the determining factors.
In order to settle the matter, Dennis suggested they train some traders, giving them actual accounts to trade and see which
one of them were correct. The most profitable trader of the group, Curtis Faith found that the rules instructed by Dennis were
easy to follow because they were not only very precise, but provided answers for each of the decisions they were to make
while trading.
This made it easier to trade consistently because there was a set of rules which defined exactly what should be done.

Ignore individual trade outcomes

The best way to gauge our trading performance is not to look at the result from our last 1 or 2 trades; it’s to look collectively at
a group of say our last 20 trades. In this way, the outcome of each individual trade is masked.
This also helps us prevent past trades from influencing future decisions.

Calculate your expectancy

Expectancy is simply you projected return over a longer period of time.
Expressed (Avg $ W x Win %) – (Avg $ L x Loss %) – commission per trade.
 4. ACCEPT MISTAKES
Seek out opposing views
The better we understand the opposition, the better we can
understand who is on the other side of our trades and how
they might react. The great thing about being a trader is
that you can always do a much better job, no matter how
successful you are. Most people are busy trying to cover up
their mistakes. As a trader, you are forced to confront your
mistakes because the numbers don’t lie.
Collaborate on ideas
When an idea first pops into your head it seems fantastic,
but as you begin to discuss your idea with others, questions
arise that you may not have thought about at first.
Thinking through all these facets leads to the development
of a structurally sound idea.
(Ray Dalio)
Mistakes lead to improvement
Check your ego at the door and accept
that you will be wrong.
Mistakes provide the path to improvement
and ultimate success as it offers an
opportunity to learn from the error.
Whenever you make a significant mistake
in trading, write it down to serve as a
future reminder then change your trading
process based on this experience.
This is a process that produces discovery.
 5. FIND WHAT WORKS FOR YOU
Do as others do NOT Learn by doing
In order to achieve greatness we must get uncomfortable. There’s no substitute for experience.
As a trader, you can’t be afraid of going against the grain. If you do Go out and try something.
the same as others do, you can expect to be average. There can be If it doesn’t work for you, learn from
a lot of social pressures and questioning from family and friends. it and move on.
In order to live your life the way you want, you need to put
yourself in opportunistic situations.
Surround yourself with the people you want to be like who share Isolate yourself from negativity
your same moral beliefs. Surround yourself with people who
have a positive impact on your life.
Think about the opposite Learn from those who’ve come
Look at things from all angles and think about the opposite action. before you, taking bits and pieces,
In trading, think about who is on the other side of your trades and making them your own.
if you were that person, how you would react. Just because Get uncomfortable, don’t be afraid
everyone is buying gold, doesn’t mean you should too. The media to be different!
and the talking heads are often on the wrong side of the trade.
 6. OVER PREPARE
(Ed Seykota)

Follow your passion

Winners don’t just work harder than everybody else.
At some point they fall in love with their craft to the point where they want to do little
else, it becomes their life.

Luck favors the prepared mind Think like a chess player

No one is perfect, especially in trading, but
preparation pays.
It’s essential to know more than the other
players in the game. You’ve heard the saying
the rich get richer, well the lucky also get
luckier. To increase your luck, you must
adequately prepare for the day ahead.
The trader who shows up better prepared
will be the one with the greatest chance of
coming out ahead.
Always be thinking 2 steps ahead.
Don’t think about what the market’s going to do; you
have absolutely no control over that.
Focus instead on those things you want least to happen
and on what your response will be.
Never stop learning
The worst thing we can do is to stop learning.
In order to evolve as a consistently profitable trader you
must constantly be on the lookout for opportunities
 7. VISUALIZE
(Jesse Livermore)

Attitude influences behavior

Donald Trump is another example.
Believe in yourself
He believe that he build back up from scratch.
His mental attitude and belief gave him the confidence to
Greatness starts
achieve greatness. from within.
Mental practice Envision your ideal self
One reason Tiger Woods was such a great golfer is not Before you fall asleep each night, take
necessarily the hours spent at the range, but time spent off moment to envision your ideal self. Close
the course using a combination of visualization techniques your eyes for a moment…
and internal biofeedback. What does your ideal self look like?
He said “instead of spending hours on the practice field What are you wearing?
right before a tournament, he pictures how he wants to How do you carry yourself down the street?
swing the club, creating a mental image of himself that he Approach others? Make decisions?
is then able to relate to the movement of his body and What things surround you?
transfer to his golf swing.” What people surround you?
8. EVALUATE YOURSELF BASED ON YOUR GOALS
(William Eckhardt)

Don’t compare yourself to others

This principle goes far beyond trading.
There is absolutely no reason to compare your situation to that of others.

Draw your own conclusions

The average man doesn’t wish to be told that it is a bull or a bear market.
What he desires is to be told specifically which particular stock to buy or sell.
He wants to get something for nothing.
He does not wish to work. He doesn’t even wish to have to think.”

Set personalized metrics

We each live in our own reality with our own beliefs.
Winners compare themselves to their own goals, not to the achievements of others.
 9. ESTABLISH A ROUTINE
(Martin “Buzzy” Schwartz)

Focus on what you CAN control

Create a solid foundation
You have more power over your trade
Dedication and discipline are the foundation of success,
outcomes than you might think.
hands down. A consistent routine develops habits that
While no one can control the market
transform into subconscious behaviors.
itself, you can control your actions
Champion trader Martin “Buzzy” Schwartz wakes up 6:45AM,
and reactions. You can control your
asleep at 10:30AM.
risk exposure.
“For a period of time I used to run a split sleep schedule,
Schedule meditation, walks, and
sleeping for a few hours waking up to trade the Euro open and
exercise
then returning to bed before the NYSE open.Over time it took its
I’m a big believer in having balance in
toll on the body, especially with racing mountain bikes.
life. Think time is incredibly powerful.
What it did teach me however, is the importance of adhering to
When you’re in a rhythm you feel
a routine, day in and day out.“
great.
 10. BE HUMBLE
(Paul Tudor Jones)

Use positive self talk

Studies show positive self talk has a strong impact on your actions so it’s
important to talk to yourself in a positive way. As I said before it is our Always question yourself
attitudes that influence our behavior. As Paul Tudor Jones puts it,
“don’t be a hero. Don’t have an ego.
Give back Always questions yourself and your
I’m not alone when I say that it is better to give than to receive. ability. Don’t ever feel that you are
I’ve had the privilege to learn from some exceptionally great traders who very good. The second you do, you
were doing their part to give back what they had learned. I’m a strong are dead.”
believer in giving back anyway I can.

Feeling invincible is a death trap

If you’re not careful the market will take from you in an instant that which you worked longest and hardest to
obtain. When you’re experiencing a string of winners and feel like you are untouchable that’s precisely when
you should be the most cautious.
 Put some thought into these principles and
incorporate them into as many aspects of your
life as you can.

I wish you the best of luck in your trading!