A

TRADER’S
MANIFESTO
UNDERSTANDING MARKETS
AND TRADING PSYCHOLOGY

FIRST EDITION

RIZWAN MEMON | INFO@RIZINTERNATIONAL.COM

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Table Of Contents
Introduction ................................................................................................................................ 4
How To Use This Book .............................................................................................................. 5
Going Long – Going Short ......................................................................................................... 6
Support, Resistance, Trendlines & Breakouts ........................................................................... 8
The Trend Is Your Friend, Until It Isn’t ..................................................................................... 17
Risk Management .................................................................................................................... 21
The ‘Holy Grail’ Concepts Of Trading ...................................................................................... 22
Contextualizing Drawdowns .................................................................................................... 24
What Are Stop Loss And Trailing Stop Orders (Or Profit Stops)?............................................ 25
6 Traits Of Successful Traders ................................................................................................ 27
Max Loss Per Trade – Based On Account Values ................................................................... 28
The Four States Of Emotion – Greed, Fear, Hope & Regret ................................................... 29
The Psychology Of Trading & Investing .................................................................................. 33
Major Mistakes Beginners Make In Their Trading ................................................................... 36
Overcoming Trading Anxiety By Understanding the Causes and Process .............................. 39
The Problem Of “Not Wanting To Lose” When Trading And How To Overcome It .................. 44
Trading Psychology: 4 Trading Tips for Becoming Mentally Tough ......................................... 48
7 Statistics for Analyzing Your Trading System ....................................................................... 52
A No Nonsense Trading Strategy ............................................................................................ 56
How Your Purpose For Trading Affects Your Results .............................................................. 60
6 Steps To Achieving Success Swing Trading ........................................................................ 63
How to Use a Demo/Paper Trading Account to Improve Trading Performance ....................... 66
15 Biggest Mistakes Traders Make ......................................................................................... 70
Five Fatal Flaws Of Trading..................................................................................................... 78
Understanding Business Cycles and Economic Data .............................................................. 81
34 Axioms You Should Never Forget ...................................................................................... 96
Conclusion ............................................................................................................................... 99
Introduction

Hello! I’m Rizwan Memon and am honored and excited to have the opportunity to share with you the
knowledge and experience that I’ve gained throughout my trading career.

I’ve been trading my entire adult life (since the age of 16), and over the past decade have been fortunate
to be able to help thousands of people across the globe.

I founded Riz International with the sole purpose of democratizing personal finance, trading and
investing by making proven trading strategies and methods that stand the test of time accessible to
everyone.

Although Riz International has become a powerhouse in all things finance, the team and I will not rest
until everyone who wants to put in the effort to become a better trader and master their finances, has
a fair shot of stacking the odds in their favor.

In this book, you will learn about a vast array of trading, investing, and of course trading psychology
concepts that I have learned throughout my lifetime of participating in financial markets.

I have made the content as easy to understand as possible, so that you may easily begin implementing
what you learn. Upon completion, I will have succeeded if you’ve applied these crucial techniques to
improve your trading career.
How To Use This Book

The concepts and teachings in this book are meant to be as concise and actionable as possible. It is best
to go through the entire book without distraction as it will only hinder your understanding and
absorption of the material. With that said, there is no harm in going through specific parts and sections
that interest you the most and then moving on to the remaining ones. Each topic is standalone and
concise. You can click on the specific topic in the Table of Contents and you will be automatically taken
to the start of each topic. This way you can pick up and read from pretty much any point without feeling
like you are missing out on anything.

I highly recommended going through the material in this book more than once, as it can really help
solidify and cement the priceless information and knowledge within. Of course, it goes without saying
that you should use this book as your guide and compass for whenever you need to be pointed in the
right direction and/or if you would like a refresher on a specific topic. There are some parts that have
some overlap and share a few concepts but that is intentional, as they are crucial and meant to remind
you and further help with retention.

With that said, please keep in mind that this book is not a full-fledged trading course (for that you want
to take The Stock Trading Masterclass and The Options Trading Masterclass), instead it is meant to be
a resource that you can quickly and easily refer to.
Going Long – Going Short

When you want to get exposure to an underlying asset (stocks, options, futures etc.), you’ll have to
decide between going long or going short. This decision is supported by your thesis (your why) and how
bullish or bearish you feel about the direction that asset.

If you’re bullish, you think the market price will rise. You’ll subsequently take a long position by buying
the asset with the aim to sell at a higher price.

If you’re bearish, you believe that the stock will fall. Thus, you’ll take a short position by borrowing and
selling the underlying asset and buying it back at a lower price. Whether you go long (buy) or short (short
sell), you’ll make a profit if your prediction is correct. Similarly, you’ll incur a loss if the underlying asset
moves against your prediction.

The difference between a long position and a short position is the direction of the market assumption.
On one side, you have the choice of going long (buy) when your trading plan provides evidence that the
market price of an asset will rise. On the other side, you can go short (sell) when your strategy suggests
that it’ll fall.

Since these positions are juxtaposed, they offer traders and investors the opportunity to hedge against
any potential negative movements in the market. Hedging involves taking a position against your initial
prediction to reduce or limit the risk of loss. Note that it doesn’t prevent the risk of incurring loss entirely.
Here’s a brief comparison of how going long and going short differ:

Going Long Going Short

You buy an underlying asset You borrow (from the broker) and then short sell
an underlying asset
You make a profit if the underlying asset rises You make a profit if the underlying asset drops

Sell the asset when it’s at a higher price Buy the asset back at a lower price (underlying
asset it automatically returned to brokerage)

Below is an example of a profitable long and short trade (with stop loss and profit target levels in place).
Support, Resistance, Trendlines & Breakouts

Support and resistance are technical analysis concepts which form the foundation for many trading
strategies and other technical analysis methods. These concepts are often misunderstood, leading
people to take trades at inopportune times. Learn the basics of support and resistance, as well as
advanced concepts such as strong support and resistance and false breakouts.

Support Level Basics

Support levels are points where the price had a hard time pushing down through in the past. In other
words, a support level is a level where a price stops falling. Often support can be found at slightly
different levels. For example, the price moves down to $90 in the morning, later in the day it goes down
to $89.90 before moving higher. Then, near the end of the day the price touches $89.95 before moving
back up to close at $91.
Figure 1. Support Area on Daily Chart
In this example, 3 support levels are created, but together they form a support area. Support areas
are more significant than a single level because it shows the market tried several times to breakthrough
that region but couldn’t sustain it. In this case, the support area would be $89.90 to $90.00.

Figure 1 shows an example of a support area. Notice how the price moves to a similar area repeatedly
and appears to bounce off it. This is support because it shows buyers are willing to step in (or sellers
back off) at that price area and push the price back up.

Resistance Level Basics

Resistance levels mark areas where the price couldn’t push higher. In other words, a resistance level is
where a price stops rising. Resistance levels also form resistance areas. If a stock rises to $90 then
declines, rises to $90.10 then declines, rises to $90.05 and declines, the trader knows $90 to $90.10 is
providing resistance.
Figure 2. Resistance Area Daily Chart
Trading Resistance And Support Areas

Resistance and support levels are dynamic, meaning the price may edge past the old support resistance
level, only to reverse course shortly after. This new price is a new resistance or support level, but should
be coupled with old support and resistance levels in the same region to create a support or resistance
area.

Support and resistance can be used for both trading and analysis purposes. While support and resistance
are important, they are only important in the context of what is happening around these levels.
During an uptrend, traders may wish to buy near a support area. Since the trend is up the price has a
bias to move higher, so buying near a support area may provide a good entry point. Some people
erroneously assume that just because the price drops below a support level that they should go short. It
all depends on context. During an uptrend, the price may drop below a support level but that doesn’t
necessarily signal a short trade should be taken. It simply warns the price is making a deeper pullback. It
is more favorable to take trades by buying near support during uptrends than to take short trades during
an uptrend even if support breaks.

During a downtrend, prices have a bias to decline, so buying at support is not recommended. Rather,
look to short sell near resistance during a downtrend. As long as the downtrend is in effect, favor short
trades, even if the price edges above resistance.

Support and resistance aid in analysis. During an uptrend support and resistance rise. A failure to do so
doesn’t mean the trend is over, but could indicate the trend is in trouble. In this case, traders should
refrain from going long and shouldn’t go short until a downtrend is evident. The analysis is telling us
“Something may be changing here” so we sit on our hands and don’t take trades. Other times our
analysis will tell us “Things align. Take the trade!” This is the relationship between analysis and trading.
Our analysis tells us when it is ideal conditions for trading, and when it isn’t. If conditions aren’t ideal,
don’t trade.

During a downtrend, support and resistance levels occur at lower and lower price areas. A failure to
follow this pattern means the trend could be in trouble. When the trend is in doubt, avoid trades at
support and resistance levels until the trend direction (which gives our trades the bias we require) is
more evident again.
Support And Resistance Breakouts & False Breakouts

Support or resistance breakouts occur when the price moves through a support or resistance level/area.
For instance, if a stock has moved up to $100 repeatedly, but can’t break above that price, $100 is a
resistance level. When the price finally moves above $100 it’s a breakout. When the price moves to a
resistance or support level, but doesn’t break through, it’s called a test (the level was tested).

Figure 2 shows support and resistance areas followed by a breakout. The price breaks strongly through
support and continues to move lower, showing that support for the asset (at that support level) is no
longer there.

If the price moves quickly back the other way through the support/resistance zone it just broke out of,
it’s called a false breakout. If a stock is bumping up against resistance at $100, and then the stock moves
above that level, that’s a breakout. If it falls back below $100 shortly after and proceeds lower, that’s a
false breakout. The price failed to move in the breakout direction.

False breakouts can be a powerful trade signal. For example, if the trend is up and the price pulls back
and forms a triangle–or any price pattern where the price is bouncing off a support area repeatedly–
before the price moves higher there is often a false breakout. Since the trend is up, we can watch for a
false breakout to the downside, below support, followed by a sharp rally higher. We now have multiple
pieces of evidence telling us to go long: the uptrend and a support area that while slightly breached until
held (false breakout) and sent the price higher.

Here is an example. The stock below was in an overall uptrend, and then had a strong pullback where it
found support near between $50 and $49. In Nov. 2017 I actually bought this stock near support, with a
stop loss just below the support level. I was stopped out on that trade as the price dropped below
support. Because the strong uptrend that preceded the pullback, I was still expecting a move back to the
upside. When the price dropped below the support area (stopping me out) but then quickly rallied back
to the upside, I was comfortable buying again following the false breakout. The price rallied following
the false breakout and more than made up for the small prior loss.

This goes to show that we can’t know what is going to happen. During uptrends, I will often buy near
support. If a false breakout occurs, I may get stopped out initially, but am comfortable re-entering after
the false breakout if everything still looks good. A small loss means nothing if you make the money on
the next trade. That is why profits should always be larger than losses.
 Figure 3. False Breakout of Support During Uptrend

The same concepts apply to downtrends. The trend is down, and the price pulls back to the upside
bumping up a short-term resistance level. If the price breaks above the resistance level briefly, and then
quickly starts moving lower again, that is often a good signal to get short. The trend is down, and the
price tried to move higher but couldn’t.

Strength of Support and Resistance

The strength of support or resistance can also be determined by the strength of the price reaction off of
it. Any price area that causes a trend to reverse, is a strong support or resistance. When the price comes
back to test this area, we can expect that some support/resistance will be provided in the vicinity of the
reversal point. This doesn’t mean the price will always stop at that level again, but the area should be
given some respect by the trader.
 Figure 4. Strong Resistance Created by a Reversal

Strong support and resistance area can provide massive reward-to-risk trades. The resistance area in
figure 4, created at the far left of the chart, let us know to watch for short trades in that area the next
time the price visited that area. When the price does revisit the area, watch for bearish signals to enter
a short trade. In this case, the reward from the decline that followed was huge relative to the risk taken
(stop loss order placed above recent high). When we are wrong, and the price ends up moving through
the strong support/resistance level, the risk and loss are small. When we are right the reward and profit
are large.

Diagonal Support and Resistance (Trendlines)

There is also diagonal support and resistance levels. The lines or areas of support and resistance are
called trendlines. To create an uptrend trendline, connect the low points during an overall rise in price.
To create a downtrend trendline, connect the high points during the overall decline in prices. Trendlines
show where traders are stepping in to stop the price from rising or falling. The actual support/resistance
levels associated with a trendline are always changing since the trendline is sloped.
 Figure 3. Hourly Chart Uptrend

Trading with trendlines is almost the same as the support and resistance concepts discussed above.
During an uptrend, a rising trendline signals potential buy areas when the price revisits the trendline. I
wait for the price to near the trendline and then start to rise again before buying, in the case of an
uptrend. In the case of a downtrend, I will look to short once the price rises to the trendline and then
starts falling away from it again.

Trendlines, while useful, can also be a little tricky to interpret at times. We still need to watch for higher
price highs and lows during an uptrend, and lower price highs and lows in a downtrend. The price may
drop below a rising trendline but still be in an overall uptrend. Some people erroneously assume that
just because the price drops below a trendline the uptrend is over. Based on the support and resistance
discussion above, we know that an uptrend is only drawn into question if the price drops below an area
where the price found support in the past. If using trendlines, watch price action as well.
 Figure 5. False Reversal Signal from Trendline – Price Action Says Trend Is Still Up

During an uptrend, use a trendline if is providing a reasonable area to buy and the price is making higher
highs and lows. If the trendline doesn’t seem to align the price and hasn’t been providing good trade
areas, don’t use the trendline for trading purposes.

During a downtrend, use a trendline if it is isolating reasonable short trade areas while the price is making
lower highs and lows. If the trendline doesn’t align with the falling prices and hasn’t been isolating good
areas, don’t use the trendline for trade ideas.
Final Word On Support And Resistance
Support and resistance occur on all time frames. These levels are seen on one-minute charts, which may
only show a few hours of price action, daily charts, which show many months’ worth of data, and on
weekly chart which shows years’ worth of data.

When dealing with support and resistance, note the difference between trading and analysis. Analysis
helps us determine which trades to take, but just because we are analyzing all the time doesn’t mean
we should be trading all the time.

In uptrends, I like to buy near support, especially after a false breakout of support when the price starts
rising again. During downtrends, I like to short at resistance, especially after a false breakout and price
starts falling again.

Trendlines can also be used in trending markets, providing price areas to watch for trades. When using
trendlines, remember that price action is the most important thing, and a trendline is just a tool. Rely on
price action first and foremost, as it reveals when trendlines are useful and when they aren’t.
The Trend Is Your Friend, Until It Isn’t

Directional Movement

While picking tops and bottoms looks good in hindsight, it’s not the easiest task to achieve in reality.
Unfortunately, most stocks and other assets go through two distinct market cycles, the trending cycle
and the range bound cycle and overtime most stocks shift from a trending cycle and then into a long
range bound cycle before once again moving into a trending cycle once again. So when a trader picks a
market top there is a high likelihood that even if the trader was correct on the timing, the odds are
overwhelming that instead of the stock moving lower, the stock is more than likely going to move
sideways for long extended period of time.

Over the years I found that instead of trying to find trading methods to pick the highest high or the lowest
low, I ended up doing much better by trading in the direction of the major trend.

First, if the market is currently trending, the odds are higher that a trend will continue, at least for the
time being – or until it doesn’t, as eventually all trends to end eventually reverse. Moreover, the odds of
a strong move in the direction of the trend are much higher in a trending market than in choppy range
bound markets, so your profit potential compared to risk is going to be substantially higher over time if
you simply follow the major trend.

Trend Cycles

One of the most important principles in technical analysis is the study of trends and one of the first things
that traders learn and often times forget is that there are different types of trends. For example, there
is a long-term trend, this is a trend that can last several months or even years, and this is the type of
trend you can easily identify on weekly charts and on daily charts that last several months.
You can see in the example below the long-term trend of symbol SMH, an ETF that tracks several large
semiconductor companies. The long-term trend gives you the fundamental picture because of the
extended time frame that you are viewing when you are using the longer timeframe.

Short Term Trend

The next type of trend is the short-term trend, which moves against or opposite of the primary trend. In
the example below can see symbol AAPL stock, notice the primary trend is moving upwards and the
short-term trend moving against the direction of the long-term trend.
Notice in the example above, that the short-term trend tends to resolve itself or ends up moving back
in the direction of the primary trend, this has to happen for the primary trend to continue building
momentum in the main direction, in this case upwards.

Lowest Risk Opportunity

And here is what you need to know, this is very important, the lowest risk opportunity for short term
trading or swing trading occurs at the point when the short-term trend connects back to the long-term
trend.
Look at the Apple chart above, and notice the areas that are highlighted, this is where the long-term
trend meets the short-term trend and professional traders consider this to be a low-risk entry
opportunity.

The reason why this is the case is because volatility is typically lower during periods when the stock is in
a counter trend. This is a period of time when the stock is pausing from a strong directional move and
there is only so much momentum that the stock can achieve before needing time to pause, this is just a
natural part of market’s cycle.

So, entering after a pause or a small correction in the trend gives you higher odds of success compared
to entering at a new price breakout level, where prices are extremely vulnerable to volatile pullbacks
that can cause your stop loss to trigger prematurely, thereby causing you to get stopped out before the
stock gets a chance to continue moving back in the direction of the primary trend.

I find that trading pullbacks or methods that trade against the short-term trend and in the direction of
the main trend or the primary trend to be the most effective methods of swing trading very short-term
price swings.
Risk Management

As is obvious, we cannot talk about risk management without talking about...you guessed it...risk! Your
risk on any given trade is the potential loss on a trade, defined as the difference between the entry price
and stop loss price, multiplied by how many shares of the stock you traded.

As a rule of thumb, there is no reason to risk more than 2% to 3% of your account (not to be confused
with position sizing) on a single trade (1% if you have a large account). The reason being, that even if you
lose 3% of your account on recurring trades one after another, you will still have enough capital to remain
in the game.

For example: hitting the 3% account max loss on a trade for a $20,000 account means you still have
$19,400 in capital. If you lose another trade at max loss, you still have $18,818 in capital left. If you
somehow hit your account max loss on the next trade again, you would still be left with $18,253.46. So
on and so forth.

By this calculation, you would have to hit your max loss time and time again to lose a significant portion
of your account. Mathematically it is impossible to reach a $0 account value using this principle. With
that said, one of your most important goals in trading should be to live to fight another day.

Let's look at a real-world example of a trade while utilizing some risk management:
If you risk 3% of a $20,000 account, you can risk up to $600 per trade. Assume we buy a $20 stock, place
a stop loss at $19 and a profit target at $22. Our trade risk is $1 for each share we own (entry price minus
stop loss, $20-$19). Therefore, let's say you buy 200 shares at $20/share. If the price drops to $19/share
and you exit at your stop loss, you lose $200 on the trade. If the price rallies to our price target of $22
then we make $400 on the trade.

Buying 200 shares at $20/share only uses $4,000 of your capital (200 x $20), so you still have $16,000 to
use on other trades. If you utilize leverage (margin account), which is often provided at 2:1, that means
you have $40,000 to work with (2 x $20,000). This leaves you $36,000 in “buying power” to make other
trades.

The principles above are guidelines and an example to give you a better understanding risk management.
The ‘Holy Grail’ Concepts Of Trading

• Trade to become a better trader first and foremost. Then you can think about the money.

• In short term trading, cut your losses and let your winners run.

• The goal is to win bigger and lose smaller.

• Try to have more winners than losers.

• Reduce exposures in positions that go against you and increase exposures in bets that are going
your way.

• Never go "all in" on a trade.

• For swing trading, diversify by having multiple open trades/positions.

• Decrease your position size per trade if you are on a losing streak.

• Don't fight the market.

• Have mental or hard stop losses (when day trading), and if possible, profit stops/trailing stops.

• Accept losing; it's part of the game.

• Avoid “hot”, "hype" and “meme” stocks.

• Focus on increasing your skill set and knowledge, not just on profits.

• Separate yourself from the profits and losses.

• Always have a plan for selling and buying.

• Don’t let pride and ego get in your way.

• Be greedy when others are fearful, be fearful when others are greedy. (Attributed to Warren
Buffett).

• When in doubt, stay out.

• Understand the direction of the broader market.

• Believe in the trade and the thesis. If you no longer do; exit the trade.

• Control your emotions; don't trade on emotions and/or fear. If you can't manage your emotions,
then you can't manage your money.

• Let the trade work, don't get shaken out of a trade at the slightest hiccup.

• Keep hitting singles if you must. Better than striking out trying to hit a home run.

• Consistency is king.

• Play the long game; Rome wasn't built in a day, and neither is sustainable wealth.

• Don't hold short positions too long in a rising market, as overall stocks move up in the long term
and shorting has theoretically unlimited risk.

• Position size correctly according to your account size

Contextualizing Drawdowns

Experienced traders and investors know that they MUST lose some trades to win some. This is inherently
a critical part of trading and as such, how you react to your drawdowns (trades going against you and in
an unrealized loss) and losing trades is crucial. The breakdown below will provide some context when
you eventually have that losing trade on your hands contextualize it so that you may remove emotion
from the equation.

The image below shows you the required gain (dark green) to BREAK EVEN from a drawdown/losing
trade (light grey) at certain points. You can see very clearly in this example that when you are losing
anything up to 10%, the gain required to break even is close to 1:1. It's when you get to that 20%
drawdown and beyond that the odds of a trading ending up profitable decrease. in fact, when you are
down 70% on a trade, you would need a whopping 233% gain from that point on the trade JUST to break
even.

As you can see, it is extremely important to eventually cut your losses. That does not mean you get
shaken out of your trades at the slightest sign of the trade not moving in your direction. Instead let the
trade work and monitor it along with any catalysts/events relating to it. It is only when the trade has
gone to your stop loss, or your thesis has changed that you should very much consider taking the loss
and accepting that even the best of the theses and trades cannot go your way each time.
What Are Stop Loss And Trailing Stop Orders
(Or Profit Stops)?

Online brokerages offer various types of orders that investors and traders can use to prevent significant
losses. The most used loss prevention order is a ‘stop-loss order’, but active traders should also consider
the trailing stop order. which is an auto adjusting order. When these tools are combined, they become
even more powerful.

Using a stop-loss order, the trader will fix the value based on the maximum loss he or she is willing to
absorb. Should the stock price drop (long position) or go above (short position) of a set value, then the
stop loss order turns into a market order and the position will be closed at the current market price,
which prevents any further losses (stop loss and trailing stop orders don’t work in premarket and after-
hours sessions).

A trailing stop order automatically shadows the price movement, following the stocks rising (long
position) or declining (short position) price. Over a period, the trailing stop will self-adjust, moving from
minimizing losses to protecting profits as the price reaches new highs. The trailing stop offers a clear
advantage over a regular stop-loss in that it is more flexible than a fixed stop loss order. It allows the
trader to continue protecting capital if the price drops, but as soon as the price increases, the trailing
feature (either expressed as a percentage or currency value) kicks in, allowing for an eventual protection
of profit while still reducing the risk to capital.

For example, if you bought a $10 stock, you could set the trailing value as a fixed percentage of 5% or a
fixed spread of say, 20 cents. Either way, the trailing stop will follow the price by the predefined amount.
The important thing to remember is that if the price drops below the trailing-stop value, the stop loss
will be triggered. So, setting a stop too close may cause you to get stopped out more quickly than you
hoped.

One of the greatest features of a trailing stop is that it allows you to specify the amount you are willing
to lose without limiting the amount of profit you will take. In addition, trailing stops can be used with
stocks, options and futures exchanges that support a traditional stop-loss order.
Workings Of A Trailing Stop

Consider the scenario below:

Purchase price = $10

Last price at time of setting trailing stop = $10.05
Trailing amount = 20 cents
Immediate effective stop-loss value = $9.85 ($10.05 – $0.20)

Let’s assume the price of the stock climbs to $10.97, your trailing-stop value will rise to $10.77 (current
price minus $0.20). If the price now drops to $10.90, your stop value will remain intact at $10.77. If the
price continues to drop, this time to $10.76, it will penetrate your stop level, immediately triggering a
market order. Your order would be submitted based on a last price of $10.76. Assuming the bid price
(someone willing to buy) was $10.75 at the time, the position would be closed at this point and price.
The net gain would be 75 cents per share.

During a temporary price dip, it's important that you don't reset your trailing stop. If you do, your
effective stop loss may end up lower than what you had bargained for. By the same token, reining in a
trailing stop loss is advisable when you see momentum peaking in the charts, especially when the stock
is hitting a new high.

Keeping with the example above, let’s say the price hits $10.80, a trader can tighten the trailing stop
from 20 cents to 11 cents. This allows for some flexibility in the stock's price movement while ensuring
that the stop is triggered before a substantial pullback can occur.

IMPORTANT: Please be careful with any stop loss orders that you have set during large market drops.
The trades we place could be fine but no matter how great a trade setup or company, it can still get
hammered simply because of a wide market selloff (which none of us can control or predict).

Hence why you should always be careful with hard stop losses. They can be helpful often, BUT during
market drops they can get you out of positions at the wrong time, just when it is prudent to hold tight
(assuming they are solid companies). Those that know me and my style, know that for swing trades and
longer-term investments (solid large cap companies), I do not set hard stop loss or trailing stop orders.
Instead, I exit in a purely discretionary fashion due to my experience.
6 Traits Of Successful Traders

I've seen traders succeed in very different markets, over different time frames, and with various different
styles and strategies. Here are common elements I've noticed among the most successful ones:

1) Capacity for Sustained Focus - Quite simply, the successful ones process more information and
sustain the search for unique information better than their peers. This enables them to see what others
do not.

2) Originality and Creativity - There is always something unique to the successful trader, and very often
it's looking at unique information or looking at common information in unique ways; either developed
themselves or taught by other trading veterans.

3) Learning From Mentors - There may be completely self-taught genius traders, but the best that I have
met have learned from other successful traders.

4) Emotional Resilience - Some traders bounce back from losses and setbacks better than others. The
successful ones actively learn from the setbacks, then move on. The less successful ones fail to learn
from their experience and often fail to move on.

5) Attention to Detail - In football, it's often the blocking and tackling that ultimately wins the game. In
basketball, it's running the plays and the defense. Less successful traders focus exclusively on "setups"
to get into trades. Successful traders develop rules and processes for sizing and managing positions to
maximize reward relative to risk.

6) Always Working on their Game - The intensity and consistency of the review process is very positively
correlated with success. Just as in sports, the successful traders review markets, review their
trading. They are studying "game film" to prepare for the next contest. They aren't focused on getting
rich; they're focused on getting better!

Quite simply, the best traders start with distinctive strengths and then cultivate those through rigorous
tracking of performance and learning. There is a winning process long before there are winning
outcomes, remember that.
Max Loss Per Trade – Based On Account Values

As we know by now, risk management is a critical part of being a successful trader and investor.

This table shows you how much capital you RISK LOSING per trade compared to your account value. This
should serve as your MAX LOSS/LINE IN THE SAND are in each trade where you exit.

I usually recommend people use 2% to 3% risk of account size (this applies to most people, not all) If you
have a smaller account than it is okay to use a 5% account risk per trade.

FOR STOCKS: You can use the table below to define your individual STOP LOSS levels in a trade.

FOR OPTIONS: You can use the table below to define the maximum amount you can take per trade
(assuming the entire contract/trade can go to $0)

Remember, everyone's risk tolerance is different, and it’s extremely important to find your individual
risk tolerance. Mine for example, is far beyond most as it is what works for me based on my experience
in the market (it helps that I have a tremendous tolerance for pain).

"Amateurs Anticipate Returns, Professionals Manage Risk"

The Four States Of Emotion – Greed, Fear,
Hope & Regret

There are four states of emotions that drive most individual decision making in any market in the world.
They are greed, fear, hope, and regret.

Since the stock market is made up of individual human beings who tend to act in similar manners, a
group is formed. It is only the group’s opinion that matters during a trend, but it is the individual trader’s
job to identify the subtle clues as to when a market is about to shift direction.

The clues are there, but they are subtle. An awareness and detailed understanding of these emotions is
what keeps the astute technical trader out of trouble by providing a means to identify individual
weaknesses. We shall now take a closer look at these emotions and provide examples of how they
influence a trader’s ability to consistently make money.

What Is Greed?

Greed is commonly defined as an excessive desire for money and wealth. In trading terminology, it can
specifically be defined as the desire for a trade to provide an immediate and unrealistic amount of profit.

When greed sets in, all a trader can focus on is how much money they have made and how much more
they could make by staying in the trade. However, there is a major fallacy with this type of reasoning. A
profit is not realized until a position is closed. Until then, the swing trader only has a potential profit (aka.
“Unrealized Profit”). Greed also frequently leads to ignoring sound risk management practices.

What Is Fear?

According to many market participants, "fear" is the emotion that traders and investors struggle with
more than the other three discussed in this write-up.

Fear is defined as a distressing emotion that is caused by a feeling of impending danger, which results in
a survival response. This holds true regardless of whether the threat is real or imagined.

Fear is probably the most powerful of all human emotions. When traders become afraid, they will sell a
position regardless of the price. Fear leads to panic, and panic leads to poor decision making. Fear is a
survival response. People have been known to jump out of building windows during market panics.
By contrast, no one has ever jumped off a building because of greed. It took the Dow Jones Industrial
Average from 1983 until 2007 (24 years) to rally from 1,000 to 14,200, but it only took two years to lose
half of its value (2007-2009). That’s a dramatic example of the power of fear.

Fear is a good emotion if it gets you out of a bad trade. If, for example, a stock pick hits its predetermined
stop price and the disciplined swing trader exits the trade, then the fear of losing an excessive amount
of money protects the stock trader from financial ruin. However, fear can work against a trader when
they don’t enter a quality setup because they have had a series of losing trades.

Just because a trader has lost money in the previous trades does not mean he should be fearful of
entering the next trade. That’s why we have trading plans. Trading systems are intended to take the
emotions out of trading. If you’re afraid to enter a quality setup, there’s no point in even trading.

When the market is in a state of panic or fear, the swing trader should never try to rationalize or come
up with excuses why they should not get out of their positions. During times of fear and panic, it is best
to focus on capital preservation. Listening to the news, the government, stock experts, or other guru’s
opinions is a waste of time. If the market (aka. “The group”) is in a state of panic, it is best to not fight
the trend. The group will always win. You don’t have enough money to hold the market up by yourself.

It’s simple…when institutional traders (banks, mutual funds, pension funds and hedge funds) decide to
dump their positions, the market will fall (and vice versa). When there is fear, steer clear! When in
doubt, get out! Truly understanding the power of fear is one of the key pieces of the puzzle to improving
your trading and investing.
What Is Hope?

Hope is a feeling of expectation and desire for a certain thing to happen. It’s an individual’s desire to
want or wish for a desired event to happen.

Hope may be the most dangerous of all human emotions when it comes to trading. Hope is what keeps
a trader in a losing trade after it has hit the stop. Greed and hope are what often prevent a trader from
taking profits on a winning trade. When a stock is going up, traders will often remain in the trade in the
“hope” of recouping past losses. Every swing trader hopes that a losing trade will somehow become a
winning trade, but stock markets are not a charity. This type of thinking is dangerous because the group
(stock market) could not care less about what you hope for or what is in your best interest. Rest assured,
when your thinking slips into hope mode, the market will punish you by taking your money.

WHAT IS REGRET?

Regret is defined as a feeling of sadness or disappointment over something that has happened or been
done, especially when it involves a loss or a missed opportunity.

The negative implications of this emotion are obvious. It is only natural for a stock trader to regret taking
on a losing trade or missing a winning trade. But what is important as a trader is not to hyper-focus on
losing trades or missed opportunities. If you lose money on a trade, then you should simply evaluate
what went wrong and move forward. Other than the lessons that can be gained from evaluating each
trade, there is no point in spending further time regretting the decision to enter the trade. It is also
human nature to feel regret when an opportunity is missed. If you miss a winning trade, then you must
move on to the next potential trading opportunity.

When technical traders allow regret to rule their thinking, they tend to “chase trades” in the hopes of
still being able to make money on the position by entering it well above the trigger price. The problem
with this thinking is that the reward/risk of the trade no longer meets the parameters of good trade
management. For instance, by entering a trade 1 point higher than the trigger, the potential reward may
be 1 point, but the potential loss may also be 1 point. This sets the reward/risk ratio at 1 to 1. Recall that
we prefer trades to have at least a 2 to 1 reward/risk ratio. However, if the trade had been entered as
per the defined plan, then the 2 to 1 reward/risk ratio would have been present. Successful and
profitable traders learn to discipline their mind to eliminate regretful thinking.
There we have it, a drill-down of the 4 key emotions every trader must be aware of. We are after all
human, and no matter how much experience or lack thereof you have in the markets, all of us at times
go through these emotions. The goal as a trader is not to try and shut down your emotions (impossible),
instead we should do our best to be aware of them and control them as best as possible.
The Psychology Of Trading & Investing

Contrary to common belief, in my opinion, understanding a trader and investor's own psychology is
significantly more important than educating oneself on trading techniques and learning how to read
financials.

'Buy low sell high' is the motto. As simple as it sounds, why do most people lose money trading or
investing?

There are four major mistakes that most beginners make:

1. Excessive Confidence

This stems from the idea that people think of themselves as special. They think they can 'crack the code'
in the stock market that 99.9% of people fail to, and eventually make a living trading and investing.
However, taking into consideration the fact that more people lose money in the market, this form of
wishful thinking is the same mentality as going into a casino feeling lucky. You may actually get lucky and
win big the first few times, but in the end, the house always wins.

2. Distorted Judgements

While simplicity is key, the approach most beginners make in trading and investing are too simplistic, to
the extend where it's hard to even call it a trading logic or reason to invest. They spot a few reoccurring
patterns within the market, and this is almost as if they discovered fire. It doesn't take long to realize
that the "pattern" they spotted was never based on any solid reasoning, or worse, wasn't even a pattern
at all in the first place.

3. Herd Behavior

The fundamentals of this are also deeply rooted in a gambling mindset. Beginners are attracted to the
idea of a single trade or investment that will make them a millionaire. However, they fail to realize that
there is no such thing. Trading and investing is nothing like winning the lottery. It's about making
consistent profits that compound throughout time. While people should definitely look for assets that
have high liquidity and some volatility, the get-rich-quick mentality drags irrational beginners into
overextended/overbought stocks that eventually drop drastically.
4. Risk Aversion

Risk aversion is a psychological trait embedded within all of mankind's DNA. Winning is fun, but we can't
tolerate losing. We tend to avoid risk, even when the potential reward is worth pursuing. As such, many
beginners take extremely small amounts of profits, in fear that they might close their position at a loss,
trading with a terrible risk reward ratio. In the long run, their willingness to not take any risks leads to
losses.

Depending on the price action, they also go through seven phases of psychological stages:

- Anxiety
- Interest
- Confidence
- Greed
- Doubt
- Concern
- Regret
As we can see in the chart example, there are price points at which beginners would buy during their
'confidence' phase and sell during their ’concern' phase. As a result, they would be losing money even
when the market moves in an upward trend.

Even when the market is at a clear uptrend, it goes through phases of impulse moves, and corrective
moves.

However, as beginners are swayed away by their emotions, they fail to recognize the overall trend,
resulting in them buying high and selling low.

Conclusion

The most important thing that beginners need to realize before they start trading or investing is that
human beings are emotional beings, and as a result, they are not different from the rest of the people
in the market. All successful traders and investors throughout history have had superb meta-cognition.
They understand their own psychology, as well as that of other participants in the market, allowing them
to make rational decisions with patience, rather than hasty decisions based on emotions.
Major Mistakes Beginners Make In Their Trading

As you know by now, trading/investing is NOTHING like what you saw in “The Wolf of Wall Street” or
what these social media trading gurus’ try and make people. You do not make a few trades while sipping
champagne on the beach of some tropical island.

Instead, if someone is a very dedicated trader, either trade full time (not recommended) or most
commonly part-time trader (best way to do it); they usually spend a couple hours or more throughout
the day managing their portfolio, scanning their watchlist and getting drip-fed ongoing market and
economic news until the market closes.

Once the market closes, they continue to read and absorb new and ever-changing information that can
lead to some sort of new insight and idea.

It shouldn’t be surprising to you that most people do not actually wish to be the above person because
of the time and effort it takes to become a better trader; so they resort to taking the easy way. Do not
end up being like one or any of the people below.

They Take Advice From Randoms Online

Anybody who spends their day posting on message boards and social media about a stock that will “go
to the moon” is not somebody you want to make your investment decisions based on. They usually are
trying to “pump” a stock (get as many people as possible to buy so the price goes up) by spreading
rumors and hype while claiming that they "got a scoop" or have “done their due diligence”. When all
they did was smash their face on the keyboard and cobble together a load of nonsense.

Most often than not, people you talk to on message boards are beginners themselves who have no idea
what they are doing and what they are talking about.

After combing through Reddit and various finance message boards for months, I decided to do an
experiment where I added the 100 “smartest” and most “experienced” people into a Facebook group to
see the trade ideas and thesis’ they would come up with amongst each other. I quickly realized that they
couldn’t even do the basics. In short, they were not only useless but a impediment if someone actually
listened to “picks”. Needless to say, it turned out to be a failure of an experiment, but it did prove to me
that the vast majority of people participating in the stock market are clueless and will remain so, unless
they become self-aware and actively seek the proper guidance and knowledge that is needed.
Case in point, on occasion I looked a few months later to see what they were talking about and it my
surprise (not) the conversations were typically regarding the same penny stocks from years ago that will
“rocket” any day now.

They Gamble

A big misconception amongst people that have never traded seriously is that the stock market is
gambling. It can be gambling if done wrong. However, so long as you have been taught correctly, do your
research, have a thesis, stick to your trading plan, and adhere to your risk management principles before
entering a trade; your odds of winning are a lot higher than chance.

They Listen to Talking Heads

Just because someone is on CNBC does not mean they know what they are talking about. A study by CXO
Advisory Group found that in the past decade, the “professionals” on T.V. were only right an average of
47% of the time. That is less than pure chance! Even the most notable clown on CNBC, Jim Cramer, has
an accuracy rating of about 47%. In fact, did you know he was on T.V. multiple times in 2008 telling
people to buy Bear Sterns stock just days before the stock price collapsed from $70 to $2, and ultimately
the company going bankrupt?

They Use Money They Cannot Afford To Lose

Even if you are the best trader/investor in the world, the stock market comes with risk. No matter how
"safe" or "guaranteed" it may seem. It does not get any simpler, don’t risk many you cannot lose and
don’t leverage without the proper guidance.

They Get FOMO (Fear Of Missing Out)

Also called “chasing”, is when you see a stock soaring higher and buy it hoping that the price will continue
to go higher. This is one of the main reasons many lose money in the beginning and is still something I
find even experienced traders have trouble with on occasion.
They Fight The Market

Admitting you are wrong is tough for a lot of people, understandably. However, the market is always
right in the long-run and if you try to fight the market with anything less than a few trillion dollars, you
will get crushed.

I battled with this for a long time. When I would be in a trade I never should have been in to begin with,
instead of rectifying my mistake and getting out, I would double down multiple times until I would lose
a substantial amount of money. When the journey (trade) itself starts on the wrong foot, do not be
surprised if you find yourself stumbling (losing money).

The only way you can have $1 million in your brokerage account while being arrogant enough that you
think you are smarter than the market, is if you start with $2 million in your brokerage
account.

They Think Technical Analysis is All They Need

If big news about a stock comes out, the technical are irreverent, so always keep watch for catalysts.
Shorting great companies and buying and investing in trash never works out in the long term, no matter
what the plethora of indicators, chart patterns and people on Reddit say.

They Lose Control Of Their Emotions

You are going to go through a ton of various emotions when trading, it’s understandable. However, losing
control of your emotions can lead to you making irrational decisions, which will cost you a lot of money.

Think of trading as a numbers and probabilities game rather than a money game. People work hard for
their money, which causes them to become emotionally attached to it. When people lose something,
they are emotionally attached to, their thought process becomes clouded and they don’t think in a logical
manner; causing them to make decisions that worsen the situation. To someone outside looking in, this
is akin to self-destructive behavior.
Overcoming Trading Anxiety By Understanding
the Causes and Process

Ever been afraid to pull the trigger on the trade, or felt afraid to trade altogether? It’s called trading
anxiety and it affects a lot of traders at some point. Having a healthy respect for the market is one thing,
but having fear related to our trading can cause big problems. Here are some of the symptoms, and how
to get over trading anxiety.

Trading anxiety affects many traders at some point in their career. It often affects new traders when
they start trading real money for the first time but can also cause problems for experienced traders. I
recall having it a few years back. I had a few days where I just couldn’t seem to do anything right. It was
like every trade was a grey area, and I was making the wrong decision. It got in my head, and for a few
weeks I remember having a real tough time getting into and staying in trades. Just like in life, things can
be going along magnificently…until they aren’t, and anxiety develops. A couple losing trades happen,
and then we start to fear more losing trades, which causes us to make mistakes or misinterpret
information, creating a downward spiral. This article looks at the causes of anxiety (when it occurs), so
you can understand where it comes from and the reasons for it.

How the anxiety is handled will be addressed next; there are three ways to handle anxiety, two of which
are destructive (often subtly) and lead to a cycle of anxiety, and one way that breaks the cycle of anxiety
and harnesses its power.

By understanding anxiety, and how you choose (or not choose) to handle it, will allow you to connect-
the-dots so you can manage your own trading anxiety when it appears. Not many trading examples will
be used; instead, after you have read this article just sit for a few minutes and allow the ideas to sink in.
Then explore how you can apply the concepts to your own trading and life situations.

The Causes of Trading Anxiety (and Anxiety in General)

Please note, I am not a psychologist. These are my views, largely derived from people whom I view as
smarter than myself on this subject. The article is aimed at people without mental biological issues–if
you feel your anxiety is biological in nature, or it is interfering with your life outside of trading, please
seek professional help.
There are only two causes of anxiety. While you may be able to think of many anxiety causing situations,
it’s very likely they all could fit under these two broad headings.

Loss

We feel anxiety over loss. Loss can be real, threatened or imagined. We lose a loved one and are anxious
about what we will do without them. We may imagine losing our job and feel anxious about where we
will live and how we’ll pay for food. We may be bullied, blackmailed or held at gunpoint where there is
a threat of financial or physical loss.

Often (but not always) loss is the result of something external, and therefore out of our control (side
note: suffering can be described as trying to control the uncontrollable–that which is outside ourselves
and beyond our control). A trader will lose some trades no matter how much they prepare, study and
research.

Therefore, anxiety will always exist, because there is always the possibility of real loss. But we can learn
how to channel it in a more constructive way. We can also learn to minimize imagined anxiety and
prepare ourselves to handle potential threats.

Lack of Confidence

If loss creates anxiety, then confidence is our belief in our ability to handle loss. Lack of confidence in
regard to being able to handle a loss creates more anxiety. If you lose your job, a lack of confidence in
your skills results in your mind focusing not only on the real job loss, but also on imagined and threatened
losses, such as losing your house, your spouse, your kids, your car…. the list goes on. A “fear of the
unknown” would also fall under this category, as fear of the unknown is simply anxiety about not feeling
adequate enough to handle whatever may be out there.

If you have confidence in your skills, losing your job isn’t such a bad thing. Yes, there is a real loss there,
and likely some anxiety, but you know you can find a new job and so don’t get caught in the cycle of
creating additional anxiety for yourself.

If you train yourself in self-defense or negotiation, you increase your confidence in these areas and
therefore will feel less anxious about things that threaten you with loss.

Confidence and lack of confidence are internal resources (or lack of). Therefore, unlike real losses,
confidence is within our ability to control.
Confidence is created by courageous acts–constructive decisions which are made even when a lot of
anxiety is present. How to be courageous is discussed below.

The 3 Avenues Of Trading Anxiety – Destructive Cycles And The Way Out

You have three choices/decisions for how to handle your anxiety. Two of these choices are destructive,
to you and potentially others. Only one choice gets you out of the destructive cycles which anxiety can
cause.

No Choice/Passiveness

In essence, this isn’t a decision at all. You are choosing inaction and allowing your anxiety to run your
life. It is a passive approach but is also very destructive–often subtly–over time.

By not making decision on how to handle your anxiety, and by taking a passive approach, you begin to
operate on autopilot which results in acting on impulse, and not on conscious thought (by not developing
or utilizing your decision and reasoning functions, your brain begins to operate off more basic drives,
such as “fight-or-flight”). Impulsive behavior leads to overeating, over-drinking, destructive habits,
overspending, not following a trading plan, etc. Usually, these things feel like they happen to you without
your control, and it is because no conscious decisions are being made in real-time to monitor and steer
behavior (monitoring behavior and thoughts in real-time takes practice, and requires you take an
“observing” perspective on your own mind, body, and actions).

This impulsive, passive, anxiety-driven behavior results in a cycle where there are likely escalating
feelings of loss as the ability to exercise control over life slowly disappears, and the lack of confidence in
our ability to do anything about it also grows. This usually results in an even greater attempt to ignore
the issues, which results in greater impulsiveness (because the real issues aren’t being handled) and the
cycle deepens.

By continuing to be passive, and not make conscious directive decisions, the cycle continues.

Decision – Masochism

Many people will choose to do something about their anxiety, but quite often in a destructive way. They
feel loss and a lack confidence, which creates a “poor me” mentality. Playing the victim, and expressing
hopelessness and helplessness are other ways to describe this action. This mentality is destructive
because it results in behavior that is based on a “scarcity” and “win-lose” actions (side not: scarcity is
the root of aggression, based on a belief that there is not enough, so you must forcefully take; this too
is destructive to others and you). While trading is a zero-sum game, if you approach it with an attitude
of “the market is abundant and has lots to offer” your results will be much better than thinking constantly
about how tough it is.

When choosing to act in a “poor me” fashion, a choice is made to make others (or the market) feel
responsible for losses and to lack confidence in one’s own life. A choice is made to play the victim where
the (often) underlying belief is that there are scarce resources and “I’m inadequate (lack confidence) to
get them, so if I continually show this in my behavior then maybe I will get some handouts.”

This once again creates a cycle. By continually dumping problems on others the masochist person is
creating a win-lose scenario, where they win (they get to vent and dump on others and hopefully get
some freebies…but never really get what they want) while the other person/market receives their
negativity. This is only short-term win-lose though, eventually it becomes lose-lose. Over the long-term,
help will become unavailable for those that don’t help themselves, because no one wants to be on the
losing side of a win-lose game all the time (because that too is destructive to allow ourselves to dumped
on continually)–there is no value there.

Such behavior results in a continued lack of confidence and possibly even greater loss as the perpetual
inability to take personal responsibility pushes others away, thus driving the cycle.

Decision – Courage – The Way Out

As mentioned earlier, we can’t get rid of all our anxiety in all areas of our life. It is a part of us, and a very
valuable part. When anxious about loss or lack of confidence, there is only one way to constructively
handle the situation–consciously choose to do the right thing even while feeling highly anxious.

“Doing the right thing” is doing what you know you should do, or what you have trained for; it may also
be having the courage to seek help or resources, or simply inwardly or outwardly admitting a problem.
Doing the right thing is striving for win-win action and behavior, where you don’t simply take from
others, but try to give back in some way.

Courage is not fool hardy though. It is not succumbing to every whim (that is passive).

Most of us read self-help books so we can decrease our anxiety so that we can then act courageously.
This is flawed. We need to do courage first, which in turn reduces our anxiety over time. A conscious
choice must be made to do the right thing, despite anxiety.
Being courageous while anxious increases confidence —> confidence increases our ability to handle
anxiety related to loss —> having the confidence to know we can handle most losses gives us more
confidence and inspires us to continually act courageously.

This is a positive and constructive cycle to be in.

Overcoming Trading Anxiety – Final Word

There has been little mention of actual “trading” anxiety in this article. This is on purpose; reflect on the
general concepts of anxiety above–the causes and your decisions in response to anxiety–and then
ponder how this can be utilized in relation to your trading anxiety. The main takeaways are that:

Losses will always occur, in trading and life. Therefore, anxiety will never completely go away, although
you can almost eradicate it in certain areas of your life by repeatedly making constructive decisions
despite the anxiety. Anxiety is beneficial, it alerts you to potential danger and can result in courageous
acts which build confidence and feel great. By developing confidence in different areas of your life the
amount of time and energy spent on imagined losses will greatly decrease, which in turn decreases the
overall sense of anxiety.

The only way to constructively handle anxiety is to do the right thing even when feeling anxious. Courage
is something we DO–it is not “try,” “should” or “will”–courage is a present state of action when required.

Hopefully, by understanding the causes of anxiety and destructive nature of the other options, you’ll
choose to do courage, even though you will be extremely anxious while doing it.

For example, if you have trouble sticking to your trading plan, decide to monitor your anxiety, to remain
present during the trade and stick with it even in the face of extreme emotion. Don’t back down, don’t
let impulsiveness to end the suffering take over. Stay the course, and after you are done you will have a
great sense of accomplishment (a slight boost in confidence). By doing this repeatedly, you’ll gain
confidence in what you are doing and know that you can handle any situation which may arise; your
anxiety levels decline, and you enter a constructive cycle of doing what you are supposed to.

This is, of course, assuming you have dedicated time, effort, and study to your trading plan in the first
place. By putting in this effort, you also gain confidence (it is a decisive and conscious act) that what
you’ve accomplished is of value…now you just need to gain the confidence to implement it (see
paragraph above). It’s a cycle, so put yourself in the right cycle, instead of a destructive one.
The Problem Of “Not Wanting To Lose” When
Trading And How To Overcome It

Trading not to lose is an issue almost every trader will face at some point in their trading career. Learn
why trading with fear can cause a host of problems, then learn how to better handle that fear so you are
making better trading decisions.

I was recently reading one of Doyle Brunson’s books–he’s a no limit hold ’em poker legend – where he
talks about this issue in the poker world. In order to be a great poker player, you need to be opportunity
seeking, and not afraid to put your money at risk when there are opportunities to exploit your edge.
Ultimately, great traders, athletes, poker players, or anyone at the top of their field, share one similar
trait: they aren’t afraid to lose. They go after it, have a killer instinct, and want to take every opportunity
they can to implement what they have practiced and studied.

Trading not to lose causes major problems for traders. Here’s what it is, why it’s problematic, and how
to get yourself into an opportunity seeking mindset.

Not Wanting To Lose When Trading Is Fear-Based

As traders, we want to respect the market, but not fear it. It’s neither our ally nor our enemy; it’s a
neutral sea of both potential and risk. Trading out of fear means we are too focused on the risk and are
unlikely to capitalize fully on the potential.

Trading not to lose, which is fear based, can cause the following symptoms (some or all) to develop:
You try to guess which of your trading signals are likely to be winners in an attempt to avoid the losing
trades. By skipping signals, you move away from your tested trading plan and strategies and randomize
your results. This is known as “trying to outwit” your trading plan.

Losses aren’t taken when the stop loss level is reached. The loss is allowed to run, resulting in bigger
losses than planned. Fear is a tricky thing in that it can cause us to get more of the very thing we are
trying to avoid. When we are afraid to take a loss–because we haven’t fully accepted that losses are a
natural and regular occurrence in trading – we may actually try to avoid taking losses and thus run our
accounts into the ground. This is an element of “loss aversion.” It’s important to understand, on a belief
level, that losses are part of trading. They can’t be avoided and trying to avoid them may actually cause
more damage.
Trades are not allowed to develop. Contrary to the problem above, the trader is afraid of any sort of loss,
or of a small winning trade turning into a loss. The trader knows the market gyrates back and forth, but
they are “jittery” and therefore don’t allow their winning trades to compensate them for the risk they
are taking. The trader continually gets out of trades at a small loss or profit even though their stop loss
is in no danger of being hit at that moment, and the price hasn’t reached their target.

In general, fear can cloud judgment. In real-time, the trader may be so afraid to lose they don’t even
see opportunities occurring. If you continually see trades (that you should have taken based on your
trading plan) only in hindsight, fear may be causing you to filter out information and cloud your
perception.

These are symptoms of trading not to lose. Trading not to lose is a product of focusing on whether we
win or whether we lose. But winning or losing shouldn’t be our focus.

As traders, it’s our job to come up with (or learn) strategies, develop a trading plan, and then rigorously
test that plan for profitability and our ability to personally implement the plan.

Once we have a plan, our goal is to trade according to that proven plan. The plan is researched, back
tested and/or traded in a demo account, and then traded live with small amounts of capital until the
plan is proven successful. Wins and losses take care of themselves. While we are trading, we can’t care
about wins and losses…we only care about following our plan and trading every valid opportunity our
trading plan gives us.

When we aren’t trading, that is when we can look at our wins, losses, profitability, and trading stats to
possibly make adjustments (if needed) to the plan. But this doesn’t occur during trading; while trading
and holding positions our focus is only implementing our plan.

This is easier said than done but understanding and accepting the following will help.
Believe in Probabilities

While winning is the ambition of traders, “not losing” ends up being the dominant factor that affects
trader’s decisions. This is because it is very easy to have knowledge of risk, but it is something entirely
different to believe you can overcome it. This requires an internal “belief” change, not just knowing that
a change is required.

In an effort to not lose the aforementioned symptoms develop, resulting in the trader losing their capital.
How can we change our mindset to help avert this?
Consider “the house” or casino in a game of blackjack. Each trade you make represents a hand of
blackjack. There is the house (a buyer or seller), and there is the gambler (a buyer or seller on the other
side of the trade). The difference between them is that the casino owner has a percentage edge over
the gambler. Disciplined traders also have an edge and can therefore be equated to the house or casino
owner.

While playing blackjack have you ever seen a casino owner run downstairs to stop a hand of blackjack
from occurring because he thinks he might lose on that hand? Never. Gambling regulations aside, casino
owners want as many hands as possible to be played because they know they have an edge on each
hand. Casino owners also know something else: each hand is independent of other hands. Anything can
happen on a single hand! The casino owner knows we can’t predict which hand is going to make the
house money and which is going to make the gambler money. All he knows is that each hand is
independent–in that anything can happen on a particular hand–and that he has an edge over many
hands.

Over a great many hands, the casino holds a 3.5% to 4.5% advantage, varying based on house rules.
While the casino may lose tons of hands, at the end of year they are likely to have made 3.5% to 4.5%
on all the bets placed at their blackjack tables. The more bets placed, the more the edge is exploited, the
more profit they make.

The bottom line is that traders need to adopt the “casino owner mindset,” realizing the result of each
trade is unpredictable and therefore every valid trade, within the context of the trading plan, must be
traded. Also, know that trades are independent of each other. While you may have a string of losses,
that doesn’t mean there is something wrong. Allow your edge to play out over many trades. Trust your
edge, as the casino does, that over the course of a week, month, and year your edge will produce a profit.
This assumes you have edge, which is why you need tested strategies.

No single trade matters to a pro trader. Whether it is a win or loss makes no difference. The only thing
that matters is exploiting the edge and taking valid trades, because over the long run all those losses and
wins will make the edge (profit) materialize. And the nice thing about trading is that traders can create
a much larger edge than the casino has.

Reading or understanding this analogy won’t create any change in behavior, it needs to be incorporated
into your belief structure for change to occur. Incorporate it into your belief structure by meditating on
the concepts, write down notes and your thoughts related to it, so that it begins to seep into your brain,
overtaking the current belief structures you have about the market which result in ‘trading not to lose’.
Put notes beside your computer, and continually remind yourself to adopt the “casino owner mindset,”
and all that it entails.

Final Word On Trading Not To Lose

Adopt the casino owner mindset. If you do so, you won’t care about whether you win or lose a trade.
You will be more open to seeking opportunities. If your system is proven, over many trades you know
you have an edge and profits will come. Take every valid signal you can, so your edge materializes. Think
of it this way: if you know you can win 60% of the time by guessing heads on a coin flip, you’d be trying
to get as many people to bet you as possible. The same goes for trading. If you know you win about 60%
(even 51% of the time, or 40% if you make more on your winners than you lose on your losers) of the
time you should be taking every valid trade you can so you can exploit your probabilistic edge. If you try
to figure out in advance which coin flips or trades will be winners and losers, you become the sucker.
Trading Psychology: 4 Trading Tips for
Becoming Mentally Tough

Trading stocks is hard and there are times where you just want to pull out all your hair! I know that
feeling because it comes from that notion that nothing can go right, and it seems like Mr. Market has
singled you out to humiliate and destroy you. I have been there! I have now traded for over 15 years at
the time of writing this, which accounts for my entire adult life and there have been so many times where
I have been frustrated by trading and even anguished at the sight of looking at a chart. All the while, the
art of successful trading, or the psychology of trading, per se, dictates that only the most mentally sound
individuals can handle trading in the stock market.

I have learned, over the years, to control my emotions and what I want to do here is to show you some
easy-to-implement lessons and tactics that you can implement into your trading, as well as provide you
with a free spreadsheet below that will better help with controlling those emotions.

At times the stock market may leave you feeling the below:

• Losing trades being too much to handle

• Closing out profitable or unprofitable trades due to fear or greed
• Trading because you fear missing out on a big move

The stock market will tax you mentally like no other profession can. But you see, it doesn’t have to be
that way. Throughout my trading career there have been days where, even after the market closes, its
influence still lingers strong. But I have learned how to keep the stress to a minimum because if you
don't, then no sum of money or profits is worth what you put yourself through.
So, to keep your stress of trading to a minimum and help you build that consistency, I have compiled a
list of trading tips that will allow for you to be mentally and psychologically strong in your trading
endeavors.

Mental Toughness + Trading Psychology

What can we do as traders to be sounder in our approach to trading so that we are not sabotaging our
pursuit at profitability and consistency? Below I have four trading tips that I am confident will make you
better equipped for handling the pressures of trading.
Some of these are extremely simple, while others require some practice and repetition. But in the end,
I am confident that you will be a better trader because of them. Once you gain that confidence and
experience, you can tweak and adjust the methods below.

Trading Psychology Tip #1: Don’t Dollar Watch

This has to be one of the worse habits among traders.
Not only is it a bad habit, but it is incredibly lazy!

When you are watching the dollar value of your trades and how profitable they are (or un-profitable for
that matter) you aren’t trading, you are just playing slots at a casino. Watching the dollar value of your
trade is not trading. It is not savvy, and it will cause your emotions to get the better of you.

We personalize our money. It is much easier to keep the emotions out of the trade if you eliminate the
need to look at the dollar value associated with the profit/loss of a trade.

That’s because when you look at a stock and you see that it is down $100, you say to yourself,

“I could’ve paid the water bill with that money!”

“That $400 could have bought me a new cell phone.”

“That grand I lost on the trade would have paid this month’s mortgage.”

When you start thinking like that, and it is easy to do, you are personalizing the trade and are no longer
focusing on the trade itself but the effects of the trade.

...And that will lead you to making an emotional decision.

Instead rely on your trading plan/thesis. That’s it. No more and no less.
Trading Psychology Tip #2. Don’t Trade Based On Your Performance For The
Day, Week Or The Month
Whether you should make another trade or refrain from making another trade should not hinge on
whether you are up or down on the month or by how much. You shouldn’t take on more risk, simply
because you are playing with the House’s money or feel the need to trade more, just to make up for the
losses so far on the week.

Instead, you should be trading because the market conditions and the trade opportunities at hand are
aligning themselves to provide you with a great trading opportunity.

How good or how bad you are doing on the day, week, or month should not dictate how or when you
should be trading.

Trading Psychology Tip #3: Use The Same Amount On Every Trade
Not everyone is going to agree with me on this one, and that is okay, but if you are struggling with the
mental side of trading, one thing that you can do to make it easier for you is to treat all trades the same.
Again, this is primarily for those looking to get their trading psychology and consistency in order.

For swing trading, I usually say to put between 5% to 10% of the capital (account value) on an individual
trade (this somewhat also depends on account size). This will take out the guesswork and make swings
in the stock price easier to manage while allowing you to have multiple trades open at a time.

Remember, keep things simple - all the time!

This will also keep you from doubling down on a trade or being overly confident on its prospects. Instead,
you’ll see it as just another trade.

The worst thing that you could do is be overzealous of a trading opportunity, put 50% of your capital
towards it and then find out that the trade dropped 10% in value and just wiped out the other 5 trades
at 10% portfolio allocation that gave you 10% in gains.
Trading Psychology Tip #4: Go For A Walk Or Step Away
Now because of where I live at the time of writing, it’s miserably cold 6 to 7 months of the year, so going
for a stroll around the block is out of the question for me. During the winter weather I will step away
from my computer (and phone) for a few minutes and tend to whatever needs doing around the house.
During the summer I usually take walks daily to clear my head and think things through in terms of
strategy and what is in the best interest of my trading and the positions that I currently have. If you can,
leave your cell phone on silent and walk distraction free - otherwise you might find your walk is just an
outdoor excursion of you staring down at your cellphone the whole time.

You’ll be amazed of what comes to mind when you step away from the markets for a few minutes. You’ll
also stimulate the brain some with exercise, which we can all agree, we probably can afford to do more
of.

Let’s Wrap Up!

There is a lot to speak of when it comes to trading psychology, but what I wanted to do here is not spend
so much time on the theoretical aspects of it, but to focus in on the application side that will allow you
to instantly become a better trader.

By applying these trading tips to your daily routine, you are going to find you are making much better
decisions and are of sound judgement when it comes to determining what trades are in your best
interest or whether you should hold on to that trade one more day.

Simply put, trading is filled with anxiety and emotion and the more of it you can eliminate from your
thought process, the better off you will be. Focusing in on the trigger points that cause you to fly off the
handle and the tactics you can employ to counter them, thereby keeping regret from being a central
component of your trading life, will no doubt, make you a better trader.
7 Statistics for Analyzing Your Trading System

Keep track of these seven trading statistics to spot strengths and weaknesses in your trading, and to keep
your trading on track. These statistics will vary over time, sometimes being better when market
conditions are favorable, and sometimes they will be worse when market conditions aren’t as favorable.
Monitoring the statistics gives us clues as to whether our trading plan needs to be adjusted. The statistics
also give us a wake-up call when we aren’t following our plan.

1. Win Rate
Win rate is how many trades we win out of how many trades we take. If we win 60 trades out of a 100,
the win rate is 60%. This statistic is not all that useful on its own, because it doesn’t account for how big
winning and losing trades are. A low win rate can still produce an overall profit if the winning trades are
very big compared to the losing trades. The Turtle traders were a good example of this. They had a low
win rate, but when they had winners, they were large.

If gains aren’t as big relative to losses, a win rate of 50% or higher is the goal. Short term traders often
strive for a win rate above 50% and winning trades that are at least slightly bigger than losers (more
about this in reward:risk below).

This trading metric is important once you develop a trading style and know approximately what number
this statistic should be. During your demo trading you may find that your best trading occurs when your
win rate is between 55% and 65% (just an example, will vary by trading plan). When you move out of
this range overall profitability drops (profitability is discussed later). Therefore, when your win rate
moves out of your range, whatever it may be, it lets you know that market conditions have changed, or
you are doing something different which may need to be corrected.

2. Reward:Risk
Reward-to-risk is a ratio that shows how big winning trades are relative to losing trades. For example,
many traders may strive to only take trades where they think they can make at least 1.5 times the risk
(1.5:1). For example, risking $100 with the expectation of making $150 or more. Other traders may strive
for a higher reward:risk, say to 2:1 or 3:1.

This statistic should be considered along with win rate. The lower the win rate, the higher the reward:risk
required to be profitable. With a higher win rate, the reward:risk doesn’t need to be as high for a system
to be profitable. Traders needs to find a balance between these two statistics in order to be profitable.
3. Expectancy
Trading expectancy is a statistic that combines the win rate and reward:risk ratio. It provides a dollar
figure for the expected profit or loss on each trade. Positive is good and shows that the trading system
is producing profitable results. A negative number indicates the strategy is, or will, lose money.
Expectancy is calculated as (% wins x average win size) – (% losses x average loss size).

Assume a trader wins 60% of their trades. They lose $100 on losing trades and make $150 on winning
trades (1.5:1 reward to risk).

(60% x 150) – (40% x $100) = 90 – 40 = $50. For every trade this trader takes, on average they can expect
to make $50. That may sound a bit weird, since we know the trader is losing $100 or making $150 on
each trade, but this statistic is giving us an average of all trades.

Assume another trader wins 70% of the time and makes $100, and on the 30% of losing trades they lose
on average $300.

(70% x $100) – (30% x $300) = $700 – $900 = -$200. This trader can expect to lose on average -$200 for
each trade they place. Even though the win rate looks good, the losses are too big and result in a losing
system (see more: What is Trading Expectancy and How It Works).

4. Maximum Consecutive Losses

Monitor how many losing trades you had a row, while still being profitable. This is important for
maintaining confidence during the rough patches. If your statistics show that you once had a 10-trade
losing streak, but were still profitable overall for the month, that can help you stick with your plan when
the next batch of losing trades comes.

This is why testing a system before using it is so important. With no testing, there is no reference point
for whether results are good or bad. For example, a profitable system may routinely have 4 or 5 losing
trades in a row, before a string of good ones. Without this knowledge, a trader may throw in the towel
after only a few losses, missing out on the upcoming profit. Each system and each trader is different.
Spend time in a demo account and learn the ebb and flow of winning and losing trades. This will help
keep track of when a system is operating properly, but just in a rough patch, or when it has gone off the
rails and needs to be adjusted.
5. Maximum Drawdown

Maximum drawdown is the biggest percentage drop in capital witnessed while using a system. It is
calculated as the difference between a high point in capital and a low point that occurs after. There is no
time restraint on this metric. For example, and if the trader deposits $10,000, goes up to $15,000, but
then starts losing money, they may drop to $8000. They make a bit back and go up to $11,000, but then
lose more and drop to $7,000. This trader’s maximum drawdown is continually increasing, and therefore
there is a big problem. Likely the issue can be found by analyzing the statistics above.

A profitable trader may have a bad period and go from $30,000 to $24,000, before recovering all the
losses and bringing the account back above $30,000. In this case, the trader’s drawdown was 20%. This
provides a frame of reference. The trader knows that as long as they are following their plan a 20% (give
or take a few percent) drawdown may occur, but is by no means the end of the world. As with maximum
consecutive losses, maximum drawdown provides a reference point for what size of losses are normal.

6. Number Of Trades
Number of trades is important because it determines how much money we make. Less or more trades
aren’t necessarily better, but we want the right number of trades for our trading system.

If we have a positive expectancy, we want to take as many valid trades as we can, because if we average
$100 per trade, the more trades we take the more money we make. Yet we want to watch our statistics,
because if we start taking more trades just for the sake of taking more trades (not valid ones, or low
quality ones) then our expectancy may start to plummet as our win rate and/or reward:risk drop.

As with all things in trading, there is a balance. Get over-zealous and it will probably hurt results. Not
being aggressive enough (skipping valid trades) means we are leaving money on the table, assuming the
strategy has a positive expectancy.

One thing is certain, if you have a negative expectancy, don’t take ANY trades with real money until you
work on your system and make it profitable. If you have a negative expectancy, the more trades you take
the quicker the account drops to $0.
7. Profitability
In trading, the desired result is to make money. Although, ironically, making money should NOT be our
goal. Our goal should be to simply follow our trading plan (assuming it has a positive expectancy),
because if we do that the money will follow.

Profitability is the return on starting capital in the account (for each term) over a month or year. Short-
term traders are often more concerned with their monthly return, but typically also calculate yearly
return.

Assume a trader starts with $10,000 and ends the month at $12,000. The return for that month is 20%.
The next month, the trader is starting with $12,000 and moves up to $13,000, or 8.3%. The next month
the trader starts with $13,000 and moves up to $15,500, or 19.2%. So far, this trader has an average
monthly return of 15.8% [(20 + 8.3 + 19.2)/3]. Substitute yearly figures to calculate yearly returns.

When profitability wanes, goes negative or we aren’t seeing the profitability we want, clues as to why
are revealed in the statistics above. If profitability is lacking, we may need to consider altering our
reward:risk by looking for trades with a higher profit potential. If our win rate is high, but we are still
losing money, we may need to reduce the size of our losses with stop loss orders or hold our winning
trades for a bigger profit.

There are several possible issues a trader can have, including psychological issues which prevent them
from following their plan, but most trading-specific issues can be highlighted by these statistics if the
time is taken to track and analyze them.
A No Nonsense Trading Strategy

I’ve spoken in the past about trading strategies and how they are as varied and unique as each and every
one of us on this planet. I thought I'd reiterate some overarching concepts and points to incorporate and
develop your trading strategy around.

1) Know Your Exit Before You Enter A Trade

Once you're in the trade, your emotions take over and you will tend to compound any mistakes. Recently
I spoke about prospect Theory with a client. Prospect Theory is a behavioral economic theory that people
become risk-averse when it comes to protecting gains and risk-seeking when it comes to recovering
losses. In other words, the natural instinct of people is the exact opposite of what it takes to be
successful. Most close their winners too early and hang onto their losers way too long. For the record, it
should be: Cut your losses, and let your winners run, to a point, anyway.

2) Don't Be A Pig

Everyone's (well maybe most have?) heard the expression, "Bulls make money, bears make money; pigs
get slaughtered." This refers to the greed factor. Have you ever watched a winning trade turn into a
loser? If you haven't, you've never traded. This happens because most of the time, the market covers
the same price territory repeatedly. If you get too greedy (piggy!), you'll watch many of your winners
die, along with your account.

3) Develop A System To Protect Profits

Once your trade is in profit, how are you protecting that? Do you move your stop-losses higher (also
known as a profit-stop)? At what point do you close your trades and take profits? Are you being a “piggy”
and just hoping for more and more? You should design a system that allows you to take at least partial
profits at specific points. As an example, when trading stocks or options, I have a mental percentage
profit/gain for the trade where I will close half or ¾ of my position for profit (depending on my position
size). I'm not suggesting this works for everyone, but it works well for me. The larger point is you need
some type of strategy that you can stick to with discipline. I recommend for beginner and intermediate
traders that trade a stock, option or really anything they don’t know like the back of their hand, to have
mental stop losses and profit targets in mind (unless you are daytrading, at which point hard stop losses
are a must.)
4) Protect Your Capital

As a trader, your capital is your life's blood. It's everything. If you have no capital, you are off the island.
There is no worse feeling than blowing up your trading account (from what I’ve been told – unlike many,
I’ve never blown up an account). Back in 2008, when I was starting out and very inexperienced at trading,
I over-extended myself into a position at exactly the wrong time, hint: the financial crisis and instead of
accepting what was happening in the market, I piled into the position further, hoping to "knock one out
of the park" when it was not prudent to do so and proceeded to be stuck in that position for a very long
time (it was a large cap blue chip stock so I didn’t need to worry too much). Luckily the markets did
eventually find a floor (March 2009) and started recovering from there. I eventually ended up making
money on that position, but it was a lesson early on too not go too large on any single position. If you're
taking excessive risks with your capital, you might be better served to diversify your positions and size
accordingly as you will find that living to fight another day is irreplaceable for a trader.

5) Discipline Must Exceed Conviction

Another tendency we all have is to "marry" our beliefs in life. This can be death for a trader. Maybe we
believe the market is due to fall because jobless claims came in showing that unemployment just hit
50%, and the Federal Reserve just announced that they're going to start holding public executions of
Investment Bankers, and the Prime Minister of Canada just gave the President of the United States of
America the finger (all of this is hypothetical, of course). The market doesn't care what you think should
happen, even when what you think makes complete sense. The market is often completely irrational,
because there are factors at play that have absolutely nothing to do with fundamentals. One has to
respect the price, and one has to be willing to exit a trade with discipline, even when one's conviction
says otherwise.

6) It's Not Prudent To "Bet The Farm" On One Trade

Unless you're the World's Greatest Market Timer (hint: you're not), it's usually a good idea to scale your
way into large trades and positions. If you take a large bet on one entry, you leave yourself no room to
be wrong and average down or up (depending on if you go long or short). You are also putting a ton of
psychological pressure on yourself if your position doesn't perform immediately. Keep the size of your
positions reasonable; don't put so much of your account into one trade that you can't recover. And as
I've said many times to my students: your first opponent as a trader, and the hardest opponent to beat,
is yourself.
7) There's No Such Thing As "Missing" A Move

How often have you missed a limit entry by some miniscule amount, and then kicked yourself as you
watched the trade you're not in move in the direction you thought it would? Or missed an exit by a small
amount, and then watched your profits start to vanish? It happens to all of us. Both situations have the
potential to charge your emotions, which makes you prone to mistakes.

It's human nature to hate feeling "left out" (FOMO anyone) and like we missed an opportunity. I believe
this somewhat immature emotion is a vestige of childhood. One of my first experiences of the fallacy of
"missed opportunity" came when I was eight years old: my friend got a new Razer Limited Edition
Scooter, and I too was told by my parents I would be getting one for my ninth birthday...but when my
birthday came around, my parents told me instead to wait till it got cheaper (alas, we were not that well
off). I remember getting quite upset at the time and telling my father that “I missed a chance to get a
limited-edition scooter and that now the opportunity was forever gone as they won’t make them
anymore". That's genuinely how I felt at the age of eight. My father, to his infinite wisdom and credit,
chuckled and said, “there will be many more limited editions, just you watch”. Needless to say, a few
weeks later that same limited-edition Razer scooter was still available but instead on sale - a second
chance at that "limited edition" opportunity. As an adult, I realize that considering attaining any object
or materialistic thing to be "once in a lifetime" opportunity is completely silly. The same goes for that
trade you just missed.

The market will still be there tomorrow, so why all the frustration over "missed opportunity"? I believe
the majority of it boils down to the desire for instant gratification. We start kicking ourselves over the
money we "could've" had right now if we'd made the trade. A trader can't afford to give any quarter to
this type of thinking. Trading is like everything else in life that's worth doing, it's not a sprint; it's a
marathon. Patience is after all virtue. The very human desire for instant gratification must be controlled
with discipline; and the self-indulgent poor-me emotion of "missing out" must also be controlled with
discipline. If you can't control your emotions, walk away from your computer (or put your phone down
if on your phone) and come back when you can, because otherwise you're going to make bad decisions
for your next trade.

In the long run, if you lack discipline, you may make some money trading and win the daily battle in the
market, but you will ultimately lose the war.
8) Trading Is War

Make no mistake, trading is a fight to the death -- not only against your own emotions, but against the
other market participants (financially, anyway). The Japanese have a saying, "business is war" and I
believe this absolutely applies to trading as well. You are the general, and your positions are your troops.

Are you deploying your troops at random, in a haphazard fashion? Are you "hoping" they can win, when
they are outnumbered by superior, better-equipped forces? Your enemy has done extensive
reconnaissance, developed a solid strategy, and deployed his/her troops accordingly. What's your
strategy to beat them? What's your plan for retreat if the battle is being lost? If you don't take it that
seriously, how can you hope to win against those who do?

I don’t want to romanticize it but every day that you trade, you are going to war in the market. It is your
job to come out of each battle with minimal damage (protecting capital) while making inroads on the
opposition (taking strategic positions that align with your trading style) with the hopes of coming out
ahead in the long term and winning the war (growing your account as well as your trading skills).

9) Don’t Put Your Neck And Capital On The Line Right Away

Don't send your troops off to get slaughtered while you try to figure out what you're doing. Paper/demo
trading is a great way to help develop and test trading strategies without it costing an arm and a leg to
do so – and without needing to sit by your computer armed with several bottles of vodka. Take it step
by step. This is a marathon, and the profits will come so long as you are willing to play the long game and
go through the process. I find that those that fail are trying to cut corners and expedite the journey in
order to “get ahead faster”.
How Your Purpose For Trading Affects Your
Results

As you know by now, trading is a complex process that is impacted by many variables. One of those
important factors is our purpose for trading. The reasons we trade affects our mindset, our performance,
and likely has a lot to do with our outlook on life overall. The lure of trading one’s own money, working
from home, wanting to get out of the 9 to 5 rat race, and making lots of money attracts all types of
people…after all, this is an alluring prospect!

Yet many begin to trade as a way to get rich quick, with the thinking that “If I could just make a million
dollars, then I can finally relax and sit on a beach somewhere….”

While trading can provide the resources and time to do things you enjoy, approaching any endeavor with
the expectation that it will allow you to “stop” or “quit” is unlikely to produce fruitful results. If your real
goal is to make some money and then stop, do you think you are really motivated to put in the work (A
LOT of work) to become successful in the first place?

In his book ‘The Way of the Superior Man’ David Deida opens with a powerful chapter, meant to cut
through the bullshit that we often feed ourselves about life. While the book is not aimed at traders,
trading the financial markets is a condensed version of life; tendencies, personality traits, and biases are
brought sharply into focus. Those who realize this, and are able to adjust their behavior, are likely to
succeed.

Stop Hoping for a Completion of Anything in Life

I’ll paraphrase what he says…

Most men and women make the error of thinking that one day it will be done. They think “If I can work
enough, then one day I can rest.” …Or “I’m only doing this now so that one day I can do what I really want
with my life.”

The error is to think that eventually things will be different in some fundamental way. They won’t. It never
ends…. (New traders often think this; that somehow after a few months or even years of study, trading
will become “easy”. Wrong! The market will relentlessly test you, poke at your insecurities and
weaknesses, and find new ways to challenge you. It doesn’t end; you choose to love the challenge, or you
eventually quit out of frustration. That’s it.) …Don’t believe the myth of “one day everything will be
different.” Do what you love to do, ...Spend at least one hour a day doing whatever you simply love to
do, despite the daily duties that seem to constrain you. However, be forewarned: you may discover that
you don’t, or can’t, do it; that in fact, your fantasy of your future life is simply a fantasy.
Most postponements are excuses for a lack of creative discipline. Limited money and family obligations
have never stopped any determined individual from doing what they really wanted to do. All making
excuses does is provide a justification for the person who is not really up to the creative challenge in the
first place.” - David Deida, The Way of the Superior Man

This is not to say that changing our circumstances is easy or simple. It simply means that we must commit
each and every day (not just when we feel like it) to doing what we want to accomplish and achieve, no
matter the odds.

The lesson here is that if you come to the markets solely to make money, you’re cheating yourself. Every
successful trader I know loves to trade, or at least loves the processes and challenge of trading. It gets
them up in the morning with excited for what the day may bring. They, and I, spent months and years
practicing and studying the markets because we wanted to do it…with no financial reward at the
beginning for an extended period of time. The financial rewards came later, as a byproduct of dedicating
ourselves to a craft.

I do know a few people who don’t love trading, but they love something else enough (maybe traveling,
writing, painting, etc.) that they are willing to see trading as a career that provides the freedom for them
to pursue those other interests as well, and therefore they dedicate themselves to market study
wholeheartedly. This passion fuels them to spend hours honing their skill, finding flaws in their methods,
and exposing hidden internal biases.
I love trading, but I also love that I can sit on the patio or do other things during the afternoon when the
markets are quiet. While I like making money in markets, my passion for the art form that is trading is
strong. The market is relentless, so I need to be relentless, continually looking for better ways of doing
things.

Your starting goal may be money, but if it never evolves to more than that, what you came to the markets
searching for is likely to elude you. I’ve been saying since day one that you can’t think about the money
when trading; you have to think about your strategy. If you think about money while trading, you’ll likely
make poor decisions. Focus instead on trading alongside a strong and quality community while
implementing your trading plan meticulously. Focus on the process of trading well and you will find that
there is satisfaction in the process, regardless of whether you made money on a trade or not.

Have other passions and goals, but if you decide to trade, dedicate the time that it requires. Don’t try to
get rich quick, just so you can stop; such an approach will result in only wasting more of the time you
could have spent perusing something that really interests you.

Trading mindset isn’t just about trading, it is a mindset about life itself.
6 STEPS TO ACHIEVING SUCCESS SWING
TRADING

There are plenty of ways to make money in the financial markets, one of those methods is swing trading.
What is that you ask? Think of it as the perfect type of trading for those who have a full-time job and
simply cannot watch and monitor every tick of movement in the markets. It is not only a great balance
between "buy and hold" investing and “in and out” day trading but can often also yield better returns
over time while decreasing your long-term carry risk. Swing trading also frees up capital more often than
buying and holding as you can move in and out of different stocks according to your thesis. Unlike when
day trading, you won’t have to worry about the PDT (Pattern Day Trader) Rule (only applies to accounts
opened in USA) which limits those with less than $25,000 in capital in a margin account from actively
trading in and out of a single stock multiple times within a span of a week.

1. Increase Your Knowledge

I cannot stress enough the importance of education and knowledge when it comes to trading today’s
financial markets before putting your hard-earned money on the line. You wouldn’t go skydiving and
jump out of an airplane without proper instruction than why jump into the markets without the right
strategies and methods? Trading is like any other committed profession and/or business. Doctors and
lawyers spend years learning and training before going out and doing it for real. Just like them, traders
should look to learn the ins and outs of the markets from credible individuals so that they may protect
their capital and cut their learning curve drastically. Most successful traders spend months studying and
practicing before they put any money on the line. In order to get a handle on what is going on in the
stock market, you must have a thorough understanding of technical and fundamental analysis so that
you may analyze and thus trade the right stocks.

2. Create A Trading Plan

A trading plan is crucial to trading success irrespective of the type of trading and investing you do. As
mentioned above, swing trading is very popular because of its potential to capture large percentage
returns over a short time frame with a relatively small time commitment (compared to day trading). In
order to be disciplined and focused, a defined trading plan tells you the types of strategies and methods
you will use, the industries and sectors you will participate in, the different types of indicators and
patterns you will watch for, and the baseline fundamentals that you will vet and screen stocks for. Having
a specific and detailed trading plan outline all this for you keeps you on track no matter what situation
you are in.
3. Find The Right Trading Community

Creating a solid trading plan is a great start, but being part of a community of traders with similar goals
and style to yours is an immense compliment to your success. There is absolutely no reason to do this
on your own, and like many things in life, interacting and doing it along side others can be not only more
enjoyable but also more profitable. Unfortunately, in the trading education space, there are numerous
people out there that lead people astray by posting fake trading results and outright lies. It’s why when
you find a genuine and high-quality community, it can change the way you approach markets (for the
better) completely.

4. Practice With A Demo Account

Now that you have the knowledge foundation, it is time to actually start trading. The amazing part of
today’s markets is that you can access delayed price data (15 to 20 minutes only) and have a
demo/simulated trading account with demo or “paper” money to practice your trades with. This helps
you test and refine a strategy all while keeping your capital safe. There is no requirement to jump
headfirst into trading with real capital. Abstain from using your money until you are comfortable with
how to place trades, use your trading platform (or phone app) with ease and have an understanding of
the variables that can affect stocks prices and the market as a whole.
5. Keep Track Of Your Trades

In order to find your edge, you must keep track of and log all of your trades. You should keep track of all
purchases and sales of any given stock as well as to why you bought and/or sold it. Keep cracking away
at the demo trading and logging trades till you can achieve some form of short term consistency,
preferably a few weeks. Once you're profitable in the simulator, you can switch to live capital.
Remember, trading with fake money is not indicative of your live trading and real money results as there
is now time, money, and emotions involved. With that said, do not get too comfortable with demo
trading that you perpetually get stuck placing pretend trades only. You will eventually have to make the
leap and do it for real.

6. Trade Live With Small Size

Now that you have defined your style and trading methods while achieving some form of success on
paper trading, it is time to start trading with real money. As stated prior, trading with your real hard
earned capital is completely different from demo trading because there now real money and real risk
involved in the mix. Sadly, many people who find success in the simulator do not see the same results
with real capital. This is why it is extremely important to trade with smaller positions until you have your
bearings and have gotten a feel of what it’s like to have real money on the line. Your short to medium
term goal should be to chalk up some wins and profits – the amount of profit you make is not the only
important part. Starting out, you should be very selective with the trades you take and if you implement
the strategies we teach, you will know what type of high-probability setups you should jump on. While
doing this for a few months, try and define a certain industry or sector that you like or are interested in.
This sector and industry will be your focus. As you continue your run of successful trades, you want to
gradually build your skill sets and identification of various setups. You can then slowly increase your
position sizes for trades that you are more confident in.

Remember, when it comes to trading, you are your own boss, so you get to decide what you do and
when you do it. Do not forget to constantly absorb new information and enjoy the lifelong journey that
is trading in the stock market.
How to Use a Demo/Paper Trading Account to
Improve Trading Performance

Becoming a successful trader and investor involves practice, lots of practice. Demo accounts allow us to
practice without risking real capital. Learn the pros and cons of demo accounts, and how to get the most
out of the experience so it actually benefits you when you start trading and investing with real money.
If your trading journey is just starting, or even if you are an experienced trader trying out a new strategy,
a demo account is your best friend. If you’re brand new, the demo account allows you try out strategies,
see what works, and spot your personal strengths and weaknesses. If you already have some strategies
you’ve created or learned, the demo account gives you the opportunity to practice that strategy, fine-
tune it, make it second-nature, and assess the strategy’s profitability.

Demo trading uses real market prices, but instead of placing real trades, your trades are simulated so no
actual money changes hands. Demo accounts are free to use, offered by many brokers, and are a good
way to see how various markets and assets move, practice capitalizing on those moves, and develop
strategies.

The Goal of Demo Trading

The goal of demo trading isn’t to make as much “paper” money as possible. Interestingly, that shouldn’t
even be our goal with live trading!

The goal of making money isn’t specific enough. Making money requires a methodical trading approach
and a well laid out trading plan. Your only goal in demo trading is to create such a plan and then follow
it. Following a plan is success, because a plan produces repeatable results. Follow a plan and if over
several months you’ve made a profit, likely you can continue to produce profits. Random demo trades,
which by chance produce a profit, are not repeatable.

When you open a demo account make it your goal to create a plan and follow it. That way you know if
the plan works. If it doesn’t you can rule that strategy out and focus on something else.

Following a plan isn’t easy. Our minds will want to place trades which aren’t part of our plan or skip
trades that are. Our mind may want to hold onto losing trades, letting them mount, or cut profits and
losses too quickly. All these errors are caused by emotion. We can’t get rid of emotion, but we can learn
how to control our emotions and do the right thing.
 The added benefit of demo trading is that we get to work on our discipline in a no-risk environment. As
long as we continually only take the trades we are supposed to, we are building our discipline muscles.
Discipline only increases by being disciplined. There are no short-cuts.

Some traders view the demo account as a playground because there is no risk. They take big risks, make
trades that aren’t part of a strategy, and follow their impulses instead of a method. When this occurs
the demo account loses its effectiveness. The demo account is only effective if you treat it with respect
and only take the trades that align with your trading plan. Do this, and you set yourself up well for the
eventual switch to live trading once you are consistently profitable in the demo account.

The Demo Account Should Mirror Your Circumstances

Eventually, you’ll want to take your winning strategy from the demo account to a live account and make
real money. To feel confident that what worked in the demo account will work in the real world, try to
make the demo account experience as real as possible.

• When trading a demo account think of it as real. It’s fake money, but if you wouldn’t try a certain tactic
with real money, don’t try it with play money. Stay disciplined. Play money or not, this is your practice
ground. Don’t practice bad habits. Only practice building good habits.

• Your demo account should reflect the monetary value of what your real account will be. If you have
$10,000 saved for day trading, your demo account should also start out with $10,000. Don’t trade a
$1,000,000 demo account if you only have $10,000 for live trading (if you can’t adjust the starting
amount then simply utilize a realistic number you would use for real trading). Trading the former will not
properly prepare you for trading the latter.
Differences Between Demo and Live Trading
Your demo trading may go fantastic, pulling in loads of money, yet often demo account conditions are
more favorable than live market conditions. If you account for the following factors, which reduce
profitability, is your demo method still likely going to viable in the real world? If the method isn’t going
to be profitable in live conditions, focus your time on something that will be.

Fear: In live trading there’s fear, in demo trading there isn’t. Make the demo experience as real as
possible. Pretend the money is real. Fear distorts our perceptions and can cause us to question our
trading plan, skip trade signals, take trades we shouldn’t, get out of trades too early, or let losses mount.
Condition yourself for this in the demo account, and it’ll play less of a role in your live trading. Risking
2% to 5% of account capital on each trade will also help keep anxiety at bay once you start live trading.

Slippage: In demo trading, you usually get the price you want. Your entries and stop loss orders fill at
the price you specify. In the real market that doesn’t always happen. Market orders may fill at a different
price than expected (slippage) and stop loss orders are especially susceptible to slippage when the price
is moving quickly against you. Assume that some losses will be bigger than anticipated. Is the demo
strategy still profitable?

Position size: Usually in a demo account you’ll receive the position size you request, no matter what it
is. If you want 2000 shares of a fast-moving stock, you get 2000 shares. That may not always be possible
in the live market. In the live market your orders affect how other traders act. You may only get 100, 300
or 900 shares because other traders want in too, leaving you with a smaller position on “good” trades
that are quickly moving in your favor. Unfortunately, you’ll get the full 2000, or whatever amount you
wanted, if the price is moving against you. “Partial fills” greatly affect profitability.
Platforms/Websites for Demo Trading

There are many platforms and even brokerages that allow paper trading and many are free.

Here are a few you can set up (click links):

TradingView – Web based platform (and an app) and arguably one of the best out there

WeBull – A top-tier brokerage with ZERO commission trading as well as the ability to paper trade, all for
free and no cost.

TD Ameritrade – This US based brokerage allows individuals to open a paper trading account and use
their Think or Swim platform for 60 days free if you do not have an account there. If you are a brokerage
customer, then you can also paper trade without any limitations.

MarketWatch – A leading stocks and financial news website which also has the capability to have your
own stock simulator “game” account.

Final Word on Demo Trading

Treat a demo account like a real account. What you do here determines your future success. Get into
good habits, like following a plan, setting up the account to mirror your circumstances, and training
yourself on the software. Imagine how fear will affect you when real money is on the line, and push
through it, sticking to your plan. Account for slippage and partials fills. The more precise you make your
demo trading, the easier it’ll be to transition those precise methods into the live market and start making
real money.
15 BIGGEST MISTAKES TRADERS MAKE

When participating in the financial markets in any form, whether as a trader and/or investor, mistakes
are going to be inevitable; especially when you are new and getting a handle on the vast number of
intricacies of the global markets. These crucial setbacks can and will at some point dampen your morale,
your capital, and even your pride. Yet this is all vital part of the process of becoming a experienced trader
and investor. Each and every trader I interacted with has gone through this and they have all come out
on the other side as not only better and more humble traders, but also individuals as well. As they say,
adversity builds character.

I've come to realize through my experience with mentoring and teaching thousands of people, is that all
human beings must learn certain things the hard way, despite how many times they are told to do or
not to do something. For example, regardless of how often I tell people not to over leverage their trades
or take excessive risk beyond their risk tolerance, they still seem to do it. The fact of the matter is that
pain is one of the best teachers and that you tend to learn best from such experiences. This is why the
human brain feels more sorrow and pain from a negative experience than it feels happiness and joy from
a positive one. The next time you have a large losing trade, try and be self-aware as to the emotions you
are feeling and going through, you will come to the realization that the losing trading has become
ingrained in your mind and chances are you will not forget it anytime soon.

The remarks I’ve made above is precisely why trader and investor education is essential in today’s fast
moving markets. I am a proponent of making sure that people face their pain, learn their lessons, and
don't make those same mistakes twice.

With that said, here is my list of 15 critical mistakes that traders and investors should avoid at all costs.
1) Lacking Confidence In Themselves

You will not be successful in any aspect of your life without having unwavering confidence and faith in
yourself and your ability to make things happen. Everyone fails at some point in time, but the biggest
failures are those that jump in to start but never see things through till the end. They have a chronic lack
of belief in their ability to see things through and complete the task. This inherent problem is one of the
biggest reasons why people fail so miserably and never bounce back. By definition this is a mindset and
attitude problem and must be addressed first and foremost. Tell yourself every time you get in front of
your trading platform (or in any other aspect of life for that matter), that you WILL NOT stop until you
have achieved your desired result. There is no contingency plan on the path to success.

2) Falling For Fakes, Gimmicks and Marketers

Too many people jump into the markets after seeing a “trader” on social media flaunting their cash and
material possessions when it reality they have become enamored by a potential fantasy lifestyle. They
fail to realize that the person they just saw is in fact a social media marketer selling them on a potential
lifestyle. I would not be surprised if for every genuine trader out there, there are 10,000 fakes pretending
to be something they are not. I cannot possibly tell you how many times I’ve had people tell me time
and time again that once they really started to get a grasp on how things work in the markets and the
dedication, patience, and tenacity it takes to become a successful trader that only then did they realize
that the person they had seen on social media was misleading them. This is why I stress getting a genuine
mentor and teacher that skips the fluff and shows you the reality of things, whether it be the good or
the bad. This is why getting not only educated but educated the right way by the right people is
imperative to your success. Hopping on a bandwagon and falling for marketing gimmicks can do lasting
harm.

3) Not Having A Legitimate And Experienced Mentor

Many traders make the mistake of learning from someone who is not even trading successfully
themselves or yielding consistent returns. If you learn the wrong way and from the wrong people,
especially when starting out, your foundation is going to be shaky and broken. You will eventually have
to unlearn everything and rebuild from the bottom up just like when building a house. This can end up
costing you a lot of time and loads of headaches. Find and vet the person you learn from and once you
have established their credibility, take and act on their advice but be sure to not blindly follow. The goal
is for you to learn and build your skillset and not simply be an order taker.
4) Giving Up Too Quickly

Persistence is one of the most common traits that successful people possess and yet it is something of a
rarity amongst many traders. I get messages on social media from people all the time who are ready to
quit the second things don't go their way. They expect every trade they place to turn profitable and get
them paid from the moment they take it, irrespective of the fact that the markets do not operate that
way and that the trader simply could have taken what could very well be the definition of a bad trade.
Pushing through when times are tough such as dealing with big trading losses is absolutely paramount.
I cannot stress this enough.

5) Not Keeping Losses Small (On Short Term Trades)

Every trader should have a loss threshold percentage set in their mind. To be specific, this is the
maximum amount a trader can lose as a proportion to his or her total account size. For example, if trader
Joe has a total account value of $20,000 and buys $5,000 worth of XYZ Company stock and has set a limit
of not losing more than 2% of their account value (in any single trade), then that would mean Joe would
exit his position in the stock the moment he is losing $400 in that trade ($20,000 x 2% = $400). Or to put
it another way, if the $5,000 long trade (buying XYZ Company) goes south and reaches a value of $4,600,
then Joe would take close the trade and take the loss.

You may be wondering what the reason is behind cutting the trade and taking a loss, after all, isn’t not
losing money in trading part of the plan? The goal of a daytrader (someone who closes positions in the
same trading day) and a short-term swing trader (someone with a very mechanical entry and exit process
who holds a position open for a few days or few weeks maximum) is to stay in ring and live to fight
another day. A 2% loss in account value loss is much more recoverable than a 50% or 60% loss. To put
things in perspective as to how damaging a large drawdown can be, if you lost 50% of your account value,
you would need a 100% return (double your account) just to break even.

6) Chasing Stocks Too High

Far too many traders get stuck in the herd mentality and end up chasing a stock up or down, often
forgetting that if you want uncommon results you have to be willing to use unconventional methods. It
is true that following and trading the trend works, but it is important to exercise caution when prices
seem to be too far gone from fundamentals. Often times if you are noticing a stock that has already
moved up let’s say 30% this month, statistically speaking it has become overextended and you have
missed the boat. Naïve and inexperienced traders do this, and the likelihood is that the institutions are
selling their shares to them and locking in their profits, while the beginner gets left holding the bag. You
would be surprised how big a factor statistics play in trading and it is important to not blindly follow the
herd with the fear of missing out. Too many traders get sucked into the herd behavior and end up chasing
a stock when it's at the top, just to get crushed when the selling begins. Ride the trends, but don't be
what I call a "prawn (shrimp)." This is someone who chases the top and bottom feeds on stocks at the
lows that have no hope of recovering

7) Bad Position Sizing (When Swing Trading & Investing)

There is no simpler way to say this – PLEASE DO NOT TAKE POSTIONS THAT ARE FAR TOO BIG FOR YOUR
ACCOUNT! There have been far too many traders (and former traders) who blew up their accounts
because they went “all in” on a surefire trade only for it to go against them and wiping out most if not
all their capital. Entering a single trade with say 25% of your total capital/account value is a horrible idea.
No matter how good the setup and entry looks. I get it, you really want to make the max possible amount
you can on the trade by putting as much weight behind the trade, but you do not want to be in the
position where that weight pushing back at you and overwhelms you by giving you the max possible loss
if you are wrong. To keep things simple, avoid taking trades larger than 10% of your account depending
on your account size.

8) Overtrading/Trading Out Of Boredom

When the markets are silent and dreary it can seem like time is at a standstill as you watch nothing
happen tick by tick. In moments like those it’s easy to get into a trade that was forced out of boredom.
At any given time you have three options when trading and investing in stocks, either you buy, sell or do
nothing at all. Traders are well aware of the buying and selling but seldom realize how important not
taking a trade and waiting can really be. Remember, every time you take a trade you are taking a risk of
capital. Look for opportunities and high probability setups and trade your plan. If you really are bored
and the markets seem to be quiet, you are better off getting some fresh air or doing whatever else you
like. After all trading for the sake of trading isn’t trading at all.

9) Failing To Control Their Emotions

It is easy to throw out quotes and statements like “90% of trading is in the mind” and “If you cannot
control your emotions you cannot control your money” as stated by legendary investor Warren Buffet
and leaving it at that. But doing so would be a disservice to the fact that we as human beings are
emotional creatures and that is inherently what makes us human. This is why I think it is more important
to be AWARE of our emotional state and the thoughts, fears and objections that run free within our
minds at any given moment than simply trying to control it. Only when we are consciously aware of
something, can we then get a handle on controlling it. Sure we all get consumed by emotions like fear,
anxiety etc. at some point in time when trading, but so long as you can look at what is in front of you
logically then there is nothing to worry about. That is the essence of being a discretionary trader. Seeing
through the emotional blindfold and trading a solid strategy and plan. I often recommend traders to be
active by playing sports, going for a jog, doing yoga, or whatever else floats your boat. The reason is that
getting some fresh air and a change of pace can calm the body and mind and provide some perspective.
It’s easy to get too absorbed in price charts, market news, order flow and all manner of things and lose
sight of the bigger picture.

10) Not Letting Their Trades Work

Depending on the type of trader and investor you are, your initial holding period for each of your trades
will vary. It can range from a few minutes if you are a day trader all the way to a few months (even years)
if you are a long-term investor. Needless to say, holding periods vary by a wide margin. Yet one of the
major systemic problems I see amongst traders and investors alike is that they do not let the trade work.
They often underestimate the time it takes for collective market to confirm their thesis.

For example, a swing trader does his due diligence and establishes a thesis that XYZ Company, which is
a solid blue-chip stock sold off unnecessarily and goes long (buys the stock). Let’s assume that the stock
does not go up immediately or even in the next day, in fact it goes down a couple percent from the time
of entry. The common misconception is you should cut your losses quickly – which although true, in this
case it goes directly against the trader’s thesis and would essentially be chalked up as an unnecessary
loss without confirmation might I add.

You would be surprised how many times I’ve taken a trade only for trade to move immediately against
me as if some market deity is just waiting till I got in before turning the tide. If I closed every trade as
soon as it went against me, I would not be where I am in life and here writing this. You must be vigilant
and aware that a stock can retrace downwards initially only to come back and move up with more
strength than before. In this strong move upwards is where the profits are made. Now had a trader been
scared, lacked conviction in their thesis and exited prematurely, he would have not only taken a loss but
also missed out on the profits.
11) Listening To Talking Heads

Most talking heads on social media and TV are just out to further their own agendas and make money in
the process, even if that means feeding you worthless and inaccurate information. The biggest value I
find is simply being informed about macroeconomic events, economic news and datasets, and specific
financials for the stocks and companies you trade. Let’s assume you trade the US Markets – you would
keep an eye on:

• The benchmark interest rate

• Government and Economic policy
• Inflation Rates
• Monthly employment data
• Manufacturing and trade data
• Financial news for companies and sectors you follow
• Earnings projections and releases for companies you follow
• Analyst consensus ratings for companies you follow (do not solely rely on any single analyst
rating, instead use a consensus to confirm your thesis)

And a host of other information you could keep an eye on. Remember, do not fall for speculative and
sensational posts as most, if not all of it is just noise and can negatively impact your trading and account.

12) Revenge Trading

When trades you are placing are consistently going against you, it can become frustrating. That is why
out of sheer frustration and anger, some traders continue to try and carve out a “win” by taking trades
they simply shouldn’t; almost as if they are trying to “get the last laugh”. This is self-destructive behavior
combined with a lack of emotional control. Every trader I’ve encountered who has done this, has
eventually ended up losing more money than they had been before their screw up. If you are having
trouble trading a specific stock or setup, it is best to step away and get some clarity. I would even go as
far as to say that you should not place any more trades that day. I would really take that time to do
something else and start fresh the next day.
14) Being Afraid Of Volatility

There are far too many traders that see the word “Volatility” as a bad word. Fund manager Bill Miller
has been quoted as saying “volatility is the price you pay for performance”, and I could not agree with
him more. Without any form of volatility at play within stock/equity prices, you simply would not be able
to make money. It is very important to understand that traders and investors need some form of
volatility to make money. We take calculated and intelligent risks so that our risk-reward ratio matches
up with our capital, time horizon and trading style.

13) Not Knowing How To Read Financial Statements

Financial statements can seem overwhelming and confusing; especially for those new to them.
Understanding the differences between the Balance Sheet, Income Statement, Cash Flow Statement,
10q’s and 10k’s (earnings statements) is crucial as a do-it-yourself long term investor, yet is less
important when day trading or trading for the short term. I am a big believer in trading solid companies
when having a long thesis as there is a built-in margin of safety, meaning in a worst-case scenario, you
are still trading a company that has an intrinsic (tangible and intangible) value and is not bound to go
bust.

I don’t know about you, but I do not like pouring through financial statements as a hobby, so I take up
the opportunity to extract vital information about a company through the various financial
metrics/ratios and earnings numbers. A few examples being – the Current Ratio, P/E Ratio, EPS, Net
Profit Margins, Net Profit/Loss and a few others.

EPS, or earnings per share numbers are very important as they break down how much a company is
making for each share outstanding and is a measure of profitability and growth. When assessing
earnings, I look at important basics such as whether revenues, profits, and expenses increased or
decreased year-over-year and if they beat analyst consensus projections. The infamous ‘earnings season’
– a span of a few weeks where majority of the companies listed on the stock market release their
earnings for the most recent quarter/year depending on their corporate fiscal year, is a time of increased
volatility as well as opportunity, as often times companies that meet or beat their earnings
estimates/expectations usually rally higher and the companies that disappoint by missing and not
meeting their earnings guidelines fall lower.
15) Trading Actively With Money They Can’t Afford To Lose

When someone is actively trading using capital that they need in a few days, weeks or even months, they
are depending on things to go their way. This can be a tremendous burden and add even more pressure
to the high stakes environment that is the financial markets. Trading with an expectation of making an
‘X’ amount of money is dangerous and can lead to a massive degradation in the performance of a
portfolio as well as the traders mindset. When someone simply cannot afford to lose or are reliant on
having a set amount of money by a given date, they will be prone to trading solely on emotion and thus
making bad decisions as that very goal they have will turn out to be their downfall. Instead of jumping
the gun and prematurely entering the market, make sure you are in the financial position to take risks
with your money. I often recommend people start with an amount they are comfortable with (not mean
all the money they have) as they can always contribute more as they see fit. With that said, if you are
looking to invest in great companies for the long-term, then it’s not a bad idea to keep contributing to
your investment account and averaging into the solid companies, so long as you do not need the money
in the near future.
Five Fatal Flaws Of Trading

It is said that close to 90% of all traders lose money as a net result. The remaining ten percent manage
to either break even and/or turn a profit. Of that 10%, a miniscule amount is able to be consistently
profitable.

So how do they do it? That’s an age-old question. While there is no magic formula, here are what I believe
to be five major flaws that stop most traders from being consistently successful.

The Five Common Trading Mistakes

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes
reaches into your trading account and takes out money. It doesn’t seem to matter how many screens
you have, or how many indicators you use. You just can’t seem to prevent that invisible hand from
depleting your trading account.

Which brings us to the question: Why do traders lose? Or maybe we should ask, “How do you stop the
Hand?” Whether you are a seasoned professional or just thinking about opening your first trading
account, the ability to stop the Hand is proportional to how well you understand and overcome the Five
Fatal Flaws Of Trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc
with your trading account.

Fatal Flaw No. 1 — Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology,
which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t
work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to
know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the
trend.

How to overcome this fatal flaw? Write down your methodology. Define in writing what your analytical
tools are and, more importantly, how you use them. It doesn’t matter whether you use a bevy of
indicators or chart patterns. What does matter is that you actually take the effort to define it (i.e., what
constitutes a buy, a sell, your trailing stop and instructions on exiting a position).
Fatal Flaw No. 2 — Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the
discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you
view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then
you have either not identified your methodology or you lack the discipline to follow the methodology
you have identified. The formula for success is to consistently apply a proven methodology. So the best
advice I can give you to overcome a lack of discipline is to define a trading methodology that works best
for you and follow it religiously.

Fatal Flaw No. 3 — Unrealistic Expectations

I must confess, nothing makes me angrier than those social media and Google ads that say something
like, “…$5,000 in XYZ Company can give you returns of over $40,000…” Advertisements like this are a
disservice to the financial industry (and financial education industry) as a whole and end up costing
uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw:
Unrealistic Expectations.
Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult
to do it without taking above-average risk. So what is a realistic return to shoot for in your first year as a
trader — 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal
for every trader their first year out should be not to lose money. In other words, shoot for a 0% return
your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals
may not be flashy but they are realistic, and if you can learn to live with them — and achieve them —
you will fend off the Hand I mentioned earlier.

Fatal Flaw No. 4 — Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where,
but I once read that markets trend only 20% of the time, and, from my experience, I would say that this
is an accurate statement. So think about it, the other 80% of the time the markets are not trending in
one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good
trading opportunities. For example, if you’re a multi-year buy and hold investor, there are typically only
a handful of compelling opportunities in a market during any given year. Similarly, if you are a swing
trader, there are only two or three high-quality trade setups in a given week, or if day trading there may
only be one, maybe two great opportunities each day.
All too often, because trading is inherently exciting (and anything involving money usually is exciting),
it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade
setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind
yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing
an opportunity today, because there will be another one tomorrow, next week and next month…I
promise.

Fatal Flaw No. 5 — Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves
more than just a few paragraphs, because money management encompasses risk/reward analysis,
probability of success and failure, protective stops and so much more. Even so, I would like to address
the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3%
of their portfolio (for trades, not investments). If we apply this rule to ourselves, then for every $5,000
we have in our short-term trading account, we can risk losing only $50 – $150 on any given trade (does
not apply to investing). I believe that many traders begin to trade without sufficient capital in their
trading account, and that doesn’t even address the position size that they trade.

If you have a small trading account, then trade small. You can accomplish this by trading fewer
shares/contracts. Bottom line, on your way to becoming a consistently successful trader, you must
realize that one key is longevity. If your risk on any given position is relatively small, then you can weather
the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers,
you’re out altogether.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work…damn hard. There is a saying “Trading is the hardest way
possible to make easy money” and if anyone leads you to believe otherwise, run the other way, and fast.
But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one
feels after a few solid and profitable trades is absolutely priceless.

To get to that point, though, you must first break the fingers of the Hand that is holding you back and
stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve
outlined, you won’t be caught red-handed stealing from your own account.
Understanding Business Cycles and Economic
Data

Business cycles are fascinating. Driven by human nature, business cycles go through phases of expansion
and contraction displaying similar patterns over and over again. Let’s explore the stages of a traditional
business cycle and what to look out for at each phase.

There are five stages of the business cycle - the recovery, the expansion, and the recession: with the
trough the peak being phases within the broader cycle. Just like it is hard to pinpoint the top and bottom
of the stock market, it is extremely difficult to pinpoint the trough and peak of a business cycle. Instead
of trying to focus on the extreme ends of the cycle, we are going to explore the typical happenings at
the stages of recovery, expansion, and recession.

Recovery
To begin our tour of the business cycle let’s start with the recovery. The charge into the recovery phase
is led by consumer purchases of durable goods. Consumers begin making purchases of durable goods
that were primarily delayed during the previous recession. Sales of durable goods pick up quickly, giving
businesses indication a turn in the economy is occurring. Companies focus on rebuilding inventory levels
to meet demand and keep their inventory to sales ratio at a constant. Due to low interest rates,
residential construction begins to take off. Although businesses are willing to invest heavily in inventory
levels, their caution to the validity of the recovery leaves them hesitant to hire new employees. Firms
match labor needs by paying overtime as it is a cheaper alternative than hiring new and permanent
employees. For this reason, unemployment rates stay relatively consistent at high levels. Towards the
later portion of a recovery demand in borrowing is in full force creating the need to raise interest rates.

Expansion

Once a recovery meets full momentum, it blossoms into economic expansion. At this point, consumer
purchases of durable goods slow from hyper-growth to reasonable levels as most postponed orders have
been filled. Seeing sales stabilize, businesses voluntary investment in inventory declines to match
demand. Confidence in the economy leads businesses to invest in plant and equipment. Overall business
fixed investments rise rapidly during this phase. Firms have grown tired of paying expensive overtime,
and with confidence, the good economy is here to stay they begin hiring more workers. Unemployment
drops meaning more people are employed. As more people are employed, firms move closer to fulfilling
their industrial capacity. As less workers are available to fill jobs, businesses raise wages to become more
competitive among employers. More money to spend pushes general price levels up.
Towards the end of an expansion stage firms reach a point where the labor they added has diminishing
returns. Less effective returns on labor translates to a decline in the marginal productivity of labor. Asset
prices reach high levels compared to their historical cost of earnings. Sensing an overheating economy,
central banks raise interest rates. Higher interest rates make borrowing and available credit much more
difficult to obtain.
Recession

High interest rates take out residential construction first. Consumers can’t borrow and begin to pull back
on purchases of homes and other durable goods. Businesses take notice of consumers reduced spending
and decide to cut their inventory levels. Less in inventory means less need for production. Businesses no
longer need to meet growth demands and pull back on fixed investments. As the recession lingers, firms
stay afloat by laying off employees thus increasing the unemployment rate. Less money to spend leads
to a dip in the GDP.

Each cycle is different; incorporating new components that defy historical assumptions. However, the
general theme is noticeable and easy to identify. One of the big reasons we don’t see identical business
cycles is due to structural changes to the country.
Structural Changes in Business Cycles

Using the United States as an example, over its history, business cycles have evolved in response to the
nation’s structural changes. As the concentration of employment shifted from manufacturers and other
cyclical industries to less cyclically sensitive trades, the overall US economy became more resistant to
fluctuations. Another trend that has shaped the volatility of business cycles is government spending. At
the start of the 20th century, government spending was only 6.9% of overall GDP. Today the estimated
government spending for 2018 will be 35.8% of overall GDP. Governments tend to be less cyclical than
private industries and keep their spending (and employment) rather consistent during various stages of
the business cycle.

Policy

Policy is another area that has shaped how business cycles play out. The United States has used various
formats of policy to weather downturns in the economy. Some policies are automatic stabilizers that
have existed for years. Other policies can be implemented at discretion when the time is needed.

Unemployment Act - Unemployment insurance is countercyclical. Payments flow outward at an

increasing rate during recessions putting more funds in circulation. During good times, more people are
employed leading to more taxes collected on worker earnings.

Agricultural Price Supports - Agricultural price supports were created as another counter-cyclical
measure. When a downturn hits the economy, the safety net of prices on farm commodities kicks in
making it still economically feasible to grow food.
Progressive Income Tax - As income levels drop, so do tax receivables. However, a progressive structure
allows households to keep a larger percentage of their income compared to the decline in their income
level. A progressive income tax is intended to keep more funds in the hands of individuals to reduce
overall hardship. More income in the hands of individuals creates less dependency on the government
and more funds to fuel the recovery.

Public Projects - Public projects have been used throughout the countries history to boost jobs when the
private sector could not. A well thought out government works project will typically consist of producing
useful infrastructure projects that private firms would find unprofitable. Creating these jobs pumps
money back into the economy by employing individuals who would be absent from making an income.

Monetary Policy - Monetary policy consists of actions by the central bank. The central bank can print
money and control interest rates to throttle or stimulate the economy depending on what they view as
needed at the time.

Fiscal Policy - Fiscal policy refers to what the government spends and collects via taxes.

Finding the Data

Keeping with the United States as the example, data to map out a business cycle is conveniently available
through government sites (you can find your individual countries via its respective government site).
There are a few things to consider when looking at reported economic data. First, most of the reported
data will have future revisions, meaning what you are looking at can vary at a later date. Adjustments
and revisions typically occur because of delays in survey responses. Another consideration about
economic data is the variance in which it is released. Some data is released monthly, while other data is
released quarterly. Let’s dive into what indicators are available to map what is happening in the stages
of the cycles we reviewed.
Durable Goods Orders

While most economic indicators report on what has happened, Durable Goods Orders project more of
what will occur in the future. Over 3,500 manufacturers across 89 industries are surveyed to compile
this indicator. If companies are receiving orders (defined by a legally binding agreement to purchase a
product for immediate or future delivery), you can bet factories will stay open, people will remain
employed, and the economic machine will keep moving forward. It is this reasoning as to why market
sensitivity can be extremely high when this indicator is released.

Released: Monthly
https://www.census.gov/manufacturing/m3/index.html
Business Inventory

Total Business Inventory represents the number of goods that manufacturers, retailers, and wholesalers
keep in stock. An important factor is understanding the Inventory to Sales ratio (I/S). Each industry is
different but generally speaking, a business wants to keep a healthy amount of inventory to service
customer demand. The trick is to walk that line without leaving too much inventory unused that would
result in a cashflow squeeze. Historically businesses have held an average 1.45 months’ worth of goods.
When this number is below the 1.45 average and businesses are optimistic about the economy, firms
boost inventory orders. As the I/S ratio exceeds the 1.45 average, businesses will ease off inventory
orders until demand picks back up.

Released: Monthly
https://www.census.gov/mtis/index.html
Interest Rates

Interest rates are available all the time and are very much worth monitoring. There are three
components of interest rates that you should keep an eye on.

10 Year Yield - The 10-year yield is one of the most important numbers in finance for the mere reason
that essentially all interest rates are set with a premium adjustment to this number. Everything from car
loans, to mortgages, to student loans and credit cards can be related back to the 10-year yield.

10 Year Minus 3 Month Yield - The spread between the 10-year and the 3-month can serve as a good
indicator as to the possibility of a slowdown in the economy. As short-term interest rates rise, the spread
between the long-term and short-term narrows. Historically as it moves into negative territory the likely
hood of a recession increases.
Overall Yield Curve - An inverted yield curve is notorious for showing up around a recession. It’s not
always the case but more likely the rule than the exception. Short-term interest rates have fully risen
above long-term interest rates creating the inverted shape.
Residential Construction

To monitor residential construction, the Census Bureau tracks two individual numbers, building permits,
and housing starts. Housing starts follow how many new residential real estate projects broke ground
the previous month. Building permits are required in over 95% of US localities giving a proper
interpretation of future construction. Housing has a very strong multiplier effect throughout the
economy. As residential construction increases, so does the need for steel, wood, electricity, glass,
plastic, wiring, piping, and concrete. Housing construction also increases jobs, creating an estimated 2.5
full-time jobs for every one house under construction. Once a home is complete, the need for furniture,
carpet, electronics, and appliances all drives sales in those sectors of the economy.
Released: Monthly
https://www.census.gov/construction/nrc/index.html
Unemployment Rate

Unemployment is perhaps one of the most important indicators of the economy. More jobs lead the way
to more spending and more income to the government via taxes. It is a straightforward indicator that is
popularly covered and discussed.
Released: Monthly
https://stats.bls.gov/news.release/empsit.toc.htm
Business Fixed Investment

To monitor business fixed investment, you will want to use the “Net Domestic Investment: Private:
Domestic Business index.” This index is very specific focusing on capital investment in tangible assets
such as buildings, machinery, equipment, and vehicles within the US and by private firms only.
Released: Quarterly
https://fred.stlouisfed.org/series/W790RC1Q027SBEA
Industrial Capacity

Industrial capacity is an extremely difficult metric to compile accurately. The ability to pinpoint the exact
amount an industry can produce (known as available capacity) can be quite difficult because firms are
growing and shrinking on an ongoing basis. Regardless, this indicator will give you a rough idea of what
capacity the economy is producing compared to its hypothetical capabilities.
Released: Monthly
https://fred.stlouisfed.org/series/TCU
Wages

Wages can be found on the Employer Costs for Employee Compensation report that was also used for
monitoring overtime pay. The difference in your analysis this time is monitoring total wages and salaries
as opposed to just the component of overtime and premium pay.
Released: Monthly
https://www.bls.gov/news.release/ecec.toc.htm
Price Levels

Price levels are monitored via the Consumer Price Index (CPI). This indicator is highly important as it
indicates inflation levels. Inflation effects investments, labor costs, fiscal policy and other dynamics that
drive the economy.
Released: Monthly
https://www.bls.gov/cpi/

Having a good understanding of business cycles and the economic data that drives these cycles will help
you cast realistic expectations for specific trades, investments, and your broader portfolio. Whether you
are entering a position in hopes of capturing short term profits or looking to invest in large corporations,
it is very important to understand where the business cycle the country is in and its economic data.
34 Axioms You Should Never Forget

1. Saying "I'll be greedy when others are fearful" is easier than actually doing it.

2. When most people say they want to be a millionaire, what they really mean is "I want to spend $1
million," which is literally the opposite of being a millionaire.

3. "In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true
for wrestling, chess, and investing. Beginners should focus on avoiding mistakes, experts on making great
moves." - Erik Falkenstein

4. Wealth is relative. If Jeff Bezos woke up with Oprah's money, he'd jump out the window.

5. Dean Williams once noted that "Expertise is great, but it has a bad side effect: It tends to create the
inability to accept new ideas." Some of the world's best investors have no formal backgrounds in finance
-- which helps them tremendously.

6. Investor Ralph Wagoner once explained how markets work, recalled by Bill Bernstein: "He likens the
market to an excitable dog on a very long leash in New York City, darting randomly in every direction.
The dog's owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum.
At any one moment, there is no predicting which way the pooch will lurch. But in the long run, you know
he's heading northeast at an average speed of three miles per hour. What is astonishing is that almost
all of the market players, big and small, seem to have their eye on the dog, and not the owner."

7. Bill Seidman once said, "You never know what the American public is going to do, but you know that
they will do it all at once." Change is as rapid as it is unpredictable.

8. Napoleon's definition of a military genius was, "the man who can do the average thing when all those
around him are going crazy." Same goes in trading and investing.

9. Investors anchor to the idea that a fair price for a stock must be more than they paid for it. It's one of
the most common, and dangerous, biases that exists. "People do not get what they want or what they
expect from the markets; they get what they deserve," writes Bill Bonner.

10. Billionaire Hedge Fund Manager Ray Dalio once said, "The more you think you know, the more
closed-minded you'll be." Repeat this line to yourself the next time you're certain of something.
11. During recessions, elections, and Federal Reserve policy meetings, people become unshakably
certain about things they know very little about.

12. Scott Adams writes, "A person with a flexible schedule and average resources will be happier than a
rich person who has everything except a flexible schedule. Step one in your search for happiness is to
continually work toward having control of your schedule."

13. "The big money is not in the buying or the selling, but in the sitting," - Jesse Livermore.

14. The S&P 500 gained 27% in 2009 -- a phenomenal year. Yet 66% of investors thought it fell that year,
according to a survey by Franklin Templeton. Perception and reality can be miles apart.

15. Our memories of financial history seem to extend about a decade back. "Time heals all wounds," the
saying goes. It also erases many important lessons.

16. There is a strong correlation between knowledge and humility. The best investors realize how little
they know.

17. Not a single person in the world knows what the market will do in the short run.

18. Most people would be better off if they stopped obsessing about Congress, the Federal Reserve, and
the president, and focused on their own financial mismanagement.

19. The more someone is on TV, the less likely his or her predictions are to come true. (University of
California, Berkeley psychologist Phil Tetlock has data on this). Jim Cramer be damned.

20. When you think you have a great idea, go out of your way to talk with someone who disagrees with
it. At worst, you continue to disagree with them. More often, you'll gain valuable perspective. Fight
confirmation bias like the plague.

21. Bill Bonner says there are two ways to think about what money buys. There's the standard of living,
which can be measured in dollars, and there's the quality of your life, which can't be measured at all.

22. If you're going to try to predict the future -- whether it's where the market is heading, or what the
economy is going to do, or whether you'll be promoted -- think in terms of probabilities, not certainties.
Death and taxes, as they say, are the only exceptions to this rule.

23. “Focus on not getting beat by the market before you think about trying to beat it” – Morgan Housel
24. Study successful investors, and you'll notice a common denominator: they are masters of
psychology. They can't control the market, but they have complete control over the gray matter between
their ears.

25. In finance textbooks, "risk" is defined as short-term volatility. In the real world, risk is earning low
returns, which is often caused by trying to avoid short-term volatility.

26. Cognitive psychologists have a theory called "backfiring." When presented with information that
goes against your viewpoints, you not only reject challengers, but double down on your view. Voters
often view the candidate they support more favorably after the candidate is attacked by the other party.
In investing, shareholders of companies facing heavy criticism often become die-hard supporters for
reasons totally unrelated to the company's performance.

27. Two things make an economy grow: population growth and productivity growth. Everything else is a
function of one of those two drivers.

28. There will be seven to 10 recessions over the next 50 years. Don't act surprised when they come.

29. The president has much less influence over the economy than people think.

30. However much money you think you'll need for retirement, double it. Now you're closer to reality.

31. "Do nothing" are the two most powerful -- and underused -- words in investing. The urge to act has
transferred an inconceivable amount of wealth from those that do not understand this to those that do.

32. The single most important investment question you need to ask yourself is, "How long am I investing
for?" How you answer it can change your perspective on everything.

33. How long you stay invested for will likely be the single most important factor determining how well
you do at investing.

34. You can control your portfolio allocation, your own education, who you listen to, what you read,
what evidence you pay attention to, and how you respond to certain events. You cannot control what
the Fed does, laws Congress sets, the next jobs report, or whether a company will beat earnings
estimates. Focus on the former; try to ignore the latter.
 Conclusion

Thank you for reading this book and I hope the concepts taught within have proven to be valuable and
helpful. The concepts and trainings in this book stand the test of time and highly I recommend keeping
it handy and referring to it anytime you need a refresher.

I appreciate your ongoing support of Riz International and look forward to being there for you
throughout your trading and investing journey.

If you have any feedback on the book or require any assistance, feel free to send me an email at
info@rizinternational.com. I will personally get back to you.

To your success,

Rizwan Memon, Founder & President

Riz International