Trading Mantra
"In the Indian religions, a mantra is a sound, syllable, word, or group of words that are considered capable of "creating transformation". Their use and type varies according to the school and philosophy associated with the mantra. Other purposes have included religious ceremonies to accumulate wealth, avoid danger, or eliminate enemies" - from wikipedia
In other words, mantra is a sumof rules and thoughs that canhelp you to reach apsychological status otherwisevery hard to reach. Mantra canbe used to improve sport skillsor even to increase youraptitude to success. In trading discipline is 90% of the game.Many traders have their ownmantra, so a list of rules thatshould never be ignored.
A “trading mantra” will be a listof thoughs about trading thatyou know you can never affordto forget. You need to createyour own mantra, trying toabsorb it completely, reading itagain and again until you reacha perfect trading approach.
The method of "creatingtrasformation" consist inrepeating much time yourmantra periodically and/orbefore your trading session. The repeats of a phrase couldbe a very strongself-persuading method. Somestudies confirmed that thismedology increase learningcapacity. It could sound like a "new age" trading experience,but it's a very simple approachto increase your successchance. Here follow anexample of a “trading mantra”:
The author of this mantra knowthat these are the mostimportant things he need tocare while trading, so he isused to read it every time he’sgoing to start his daily tradingsession. That's the method. Ihave my personal tradingmantra, but I want to introduceyou one of the best mantra fortrader I’ve ever read… it's avery complete, I think it is a veryhelpful stuff. And I completelyagree with the point of view ofthe author.
THE 25 POINT MANTRA
By DOUGLAS E. ZALESKY
Although my formal academiceducation consists of abachelor’s degree in businessadministration from theUniversity of Denver, I neverconsidered myself to be anextremely gifted student. I haveno formal training in markettechnical analysis. I’m unable toeven set up a Fibonacci studyor Moving Average study on acharting package, let alone know how to trade with suchdata. I have no formal training in market fundamental analysis. I don’t understand theeconomic causal relationshipbetween the actions of theFederal Open MarketCommittee and Treasury bondprices or equity prices.
How, then, have I been able tosucceed, day after day, trading the markets for more than 20years? The answer is simple: I trade with discipline, and Irespect the market. When I’mwrong I get out immediately,and when I’m right, I don’t gettoo greedy. I’m content withsmall winners and I’m acceptingof small losers.
Just as I now mentor my tradingclients regarding performance, discipline and profit/lossmanagement, I was mentoredby one of the best traders everto set foot on the CBOT tradingfloor, David Goldberg. Davidwas a long-time spread scalperin the wheat pit and a principalof Goldberg Bros., at the timeone of the largest clearing firmsat the CBOT, CME and ChicagoBoard Options Exchange(CBOE). David taught me therules of trading discipline. Ilistened to his guidance andgradually, over time, becamemore and more successful. Thestudent has now become theteacher.
The most important type ofcontent is internal marketinformation (IMI). IMI simply istime and price information asdisseminated by theexchanges. After all, we allmake our trading decisions in the present tense based on time and price. In order to“scalp” the markets effectively,we must have the most live andup-to-date time and priceinformation seamlesslydelivered to our PCs through areliable execution platformand/or charting package.Without instantaneous time andprice information, we would be trading in the dark.
The second spoke ismechanics. Mechanics is howyou access the markets and themethodology that you employ toenter/exit your trades. You mustmaster mechanics before youcan enjoy any success as atrader. A simple keystroke errorcan result in a loss ofthousands of dollars. A tradercan ruin his entire day with aninadvertent
trade entry error.
Once you have mastered orderexecution, though, it is likeriding a bike. The process ofentering and exiting tradesbecomes seamless andmindless. Fast and efficienttrade execution, especially ifyou are trading with a scalpingmethodology, will enable you tohit a bid or take an offer beforeyour competitors do.Remember, the fastest survive.
The third and most importantspoke in the Wheel of Successis discipline. You must attaindiscipline if you ever hope toachieve any level of tradingsuccess. Trading discipline ispracticed 100 percent of the time, every trade, every day.
Review the following 25 Rulesof Trading Discipline. You mustcondition yourself to behavewith discipline over and overagain. Many of my traders andclients read through the rulesevery day (believe it or not)before the trading sessionbegins. It doesn’t take morethan three minutes to readthrough them. Think of theexercise as praying —reminding you how to conductyourself throughout the tradingsession.
#1 THE MARKET PAYS YOUTO BE DISCIPLINED.
Trading with discipline will putmore money in your pocket andtake less money out. The oneconstant truth concerning themarkets is that discipline =INCREASED PROFITS.
#2 BE DISCIPLINED EVERYDAY, IN EVERY TRADE, ANDTHE MARKET WILL REWARDYOU. BUT DON’T CLAIM TOBE DISCIPLINED IF YOU ARENOT 100% OF THE TIME.
Being disciplined is of theutmost importance, but it’s not asometimes thing, like claimingyou quit a bad habit, such assmoking. If you claim to quitsmoking but you sneak acigarette every once in awhile,then you clearly have not quitsmoking. If you trade withdiscipline nine out of ten trades,then you can’t claim to be adisciplined trader. It is the oneundisciplined trade that willreally hurt your overallperformance for the day. Discipline must be practicedonEVERY TRADE.
#3 ALWAYS LOWER YOURTRADE SIZE WHEN YOU’RE TRADING POORLY.
All good traders follow this rule.Why continue to lose on fivelots (contracts) per trade whenyou could save yourself a lot ofmoney by lowering your tradesize down to one lot on yournext trade? If I have two losingtrades in a row, I always lowermy trade size down to one lot. Ifmy next two trades areprofitable, then I move my tradesize back up to my original lotsize.
It’s like a batter in baseball whohas struck out his last two timesat bat. The next time up he willchoke up on the bat, shortenhis swing and try to makecontact. Trading is the same:lower your trade size, try tomake a tick or two - - or evenscratch the trade - - and thenraise your trade size after twoconsecutive winning trades.
#4 NEVER TURN A WINNERINTO A LOSER.
We have all violated this rule.However, it should be our goalto try harder not to violate it in the future. What we are reallytalking about here is the greedfactor. The market hasrewarded you by moving in thedirection of your position,however, you are not satisfiedwith a small winner. Thus youhold onto the trade in hopes ofa larger gain, only to watch the market turn and move againstyou. Of course, inevitably younow hesitate and the tradefurther deteriorates into asubstantial loss.
There’s no need to be greedy.It’s only one trade. You’ll makemany more trades throughoutthe session and many morethroughout the next tradingsessions. Opportunity exists in the marketplace all of the time.Remember: No one tradeshould make or break yourperformance for the day. DON’T BE GREEDY.
#5 YOUR BIGGEST LOSERCAN’T EXCEED YOURBIGGEST WINNER.
Keep a trade log of all yourtrades throughout the session.If, for example, you know that, so far, your biggest winner on the day is five e-Mini S&Ppoints, then do not allow alosing trade to exceed thosefive points. If you do allow alose to exceed your biggestgain then, effectively, what youhave when you net out thebiggest winner and biggest lossis a net loss on the two trades.NOT GOOD.
#6 DEVELOP AMETHODOLOGY AND STICKWITH IT. DON’T CHANGEMETHODOLOGIES FROMDAY TO DAY.
I require my “students” toactually write down the specificmarket prerequisites (yoursetups) that must take place in order for them to make a trade. I don’t necessarily care whatthe methodology is, but I dowant them to make sure thatthey have a set of rules, marketsetups or price action that mustappear in order for them to takethe trade. You must have a game plan.
If you have a provenmethodology but it doesn’tseem to be working in a giventrading session, don’t go homethat night and try to deviseanother one. If yourmethodology works more thanon-half of the trading sessions,then STICK WITH IT.
#7 BE YOURSELF. DON’TTRY TO BE SOMEONE ELSE.
In all my years as a trader Inever traded more than a 50 loton any individual trade. Sure, Iwould have liked to be able totrade like colleagues in the pitwho were regularly trading 100 or 200 lots per trade. However, I didn’t possess the emotionalor psychological skill set totrade such a big size. That’s OK I knew that my comfort zonewas somewhere between 10and 20 lots per trade. Typically,if I traded more than 20 lots, Iwould “butcher” the trade.Emotionally I could not handlethat size. The trade wouldinevitably turn into a loserbecause I could not trade withthe same talent level that Ipossessed with 10 lots.
Learn to except your comfort zone as it relates to your tradesize. YOU ARE WHO YOUARE.
#8 YOU ALWAYS WANT TOCOME BACK AND PLAY THENEXT DAY.
Never put yourself in theprecarious position of losingmore money than you canafford. The worst feeling in theworld is wanting to trade andnot being able to do sobecause the equity in youraccount is too low and yourbrokerage firm will not allow youto continue unless you submitmore funds.
I require my students to placedaily downside limits on theirperformance. For example,your daily loss limit can neverexceed $500. Once you reachthe $500 loss limit, you mustturn your PC off and call it a day. YOU CAN ALWAYSCOME BACK TOMORROW.
#9 EARN THE RIGHT TOTRADE BIGGER.
Too many new traders thinkthat because they have$25,000 equity in their trading account that they somehowhave the right to trade five orten e-Mini S&P contracts. Thiscannot be further from the truth.If you can’t trade a one lotsuccessfully, what makes youthink that you have the right totrade a 10 lot?
I demand that my studentsshow me a trading profit overthe course of ten consecutive trading days trading a one lotonly. When they have achieveda profitable ten-day period, inmy eyes, they have earned theright to trade a two lot for thenext ten trading sessions.
REMEMBER: if you are tradingpoorly two lots you must loweryour trade size down to a onelot.
#10 GET OUT OF YOURLOSERS.
You are not a “loser” becauseyou have a losing trade on. Youare, however, a loser if you donot get out of the losing trade once you recognize that the trade is no good. It’s amazing tome how accurate your gut is asa market indicator. If, in yourgut, you have the idea that the trade is no good then it’sprobably no good. Time to exit.
Every trader has losing tradesthroughout the session. Atypical trade day for meconsists of 33 percent losingtrades, 33 percent scratchesand 33 percent winners. I exitmy losers very quickly. Theydon’t cost me much. So,although I have either lost orscratched over two-thirds of mytrades for the day, I still gohome a WINNER.
#11 THE FIRST LOSS IS THEBEST LOSS.
Once you come to therealization that your trade is nogood it’s best to exitimmediately. “It’s never a loseruntil you get out” and “Not toworry, it’ll come back” are oftensaid to tongue in cheek, bytraders in the pit. Once thephrase is stated, it is anaffirmation that the traderrealizes that the trade is nogood, it is not coming back andit is timeTO EXIT.
#12 DON’T HOPE AND PRAY.IF YOU DO, YOU WILL LOSE.
When I was new andundisciplined trader, I can’t tellyou how many times that Iprayed to the “Bond God”. Myprayers were a plea to help me out of a less-than-pleasanttrade position. I would pry forsome divine intervention that, by the way, never materialized. I soon realized that praying tothe “Bond god” or any other“Futures god” was a wastedexercise. JUST GET OUT.
#13 DON’T WORRY ABOUTNEWS. IT’S HISTORY.
I have never understood why somany electronic traders listen toor watch CNBC, MSNBC,Bloomberg News or FNN all day long. The “talking heads” on these programs know verylittle about market dynamicsand market price action. Veryfew, if any, have ever eventraded a lot in any pit on anyexchange. Yet they claim to beexperts on everything.
Before becoming a “trading andmarkets expert”, the guy onCNBC reporting hourly from theBond Pit, was a phone clerk on the trading floor. Obviously thisqualifies him to be an expert!He, and others, can provide noutility to you. Treat it for what itreally is…entertainment.
The fact is: The reporting thatyou hear on the businessprograms is “old news”. Thestory has already beendissected and consumed by theprofessional market participantslong before the “news” hasbeen disseminated. Do nottrade off of the reporting. IT’STO LATE.
#14 DON’T SPECULATE. IFYOU DO, YOU WILL LOSE.
In all of the years I have been atrader and associated withtraders, I have never met asuccessful speculator. It isimpossible to speculate andconsistently print large winners. DON’T BE A SPECULATOR. BE A TRADER.
Short-term scalping of themarkets is the answer. Theprobability of a winning day or week is greatly increased if youtrade short term: small winnersand even smaller losses.
#15 LOVE TO LOSE MONEY.
This Rule is the one I get themost questions and feedbackon by traders from all over theworld. Traders ask, “What doyou mean to lose money. Areyou crazy?
No, I’m not crazy. What I meanis to accept the fact that you aregoing to have losing tradesthroughout the trading session.Get out of your losers quickly. Love to get out of your losersquickly. It will save you a lot oftrading capital and will makeyou a much better trader.
#16 IF YOUR TRADE IS NOTGOING ANYWHERE IN AGIVEN TIMEFRAME, IT’S TIME TO EXIT.
This rule relates to the theory ofcapital flow. It is trading capitalthat pushes the market one wayor another. An oversupply orimbalance of buy orders willpush the market up. Anoversupply of sell orders willpush the market lower.
When price stagnation ispresent (as typically happensmany times throughout the trading session), the marketand its participants are tellingus that, at the present time,they are happy or satisfied withthe prevailing bid and offer.
You don’t want to be in the market at these times. The market is not going anywhere. It is a waste of time, capital and emotional energy. It’s much better to wait for the market to heat up a little and then place your trade.
#17 NEVER TAKE A BIG LOSS. ONLY A BIG LOSS CAN HURT YOU.
Please review rules #5, #8, #10, #11, #15. If you follow any one of these rules you will never violate rule #17.
Big losses prevent you from having a winning day. They wipe out too many small winners that you have worked so hard to achieve. Big losses also “kill you” from a psychological and emotional standpoint. It takes a long time to get your confidence back after taking a big loss on a trade.
#18 MAKE A LITTLE BIT EVERYDAY. DIG YOUR DITCHES. DON’T FILL THEM IN.
When I was a young bond trader, my goal everyday was to make 10 bond tics. A tic is $31.25, so if I made 10 tics on the day, I would be up $312.50.
It may not sound like a lot of money to you, but it was surely was to me. My mentor, David Goldberg, told me that if I could make 10 bond tics every trading day of the year, at the end of the year I would be up $72,500 in my trading account. Not bad for a 23-year old kid in 1982.
It is amazing how quickly your trading account will build up over time just by making a little bit every day. If you are a new e-Mini S&P trader try to make just 5 or 6 points per day. If you can do that you’ll have that $72,000 at the end of the year.
#19 HIT SINGLES NOT HOME RUNS.
Just as I don’t know of any successful speculators, I don’t know of any trader who goes into a trade expecting to hit a home run and then actually having it happen. You should never approach a trade with the idea that it’s going to be a huge winner. Sometimes they turn out that way, but the times that I have hit a home run on a position is definitely luck, not skill.
My intent on the trade was to produce a small winner but, because I had the trade on, and at the same time (as luck would have it) the Fed unexpectedly entered the market, I unwittingly had a huge winner. This probably has happened to me less than five times in 20 years.
#20 CONSISTENCY BUILDS CONFIDENCE AND CONTROL.
How nice is it to be able to turn on your PC in the morning knowing that if you play by the Rules, trade with discipline and stick to your methodology, the probability of a successful day is high.
I’ve had years where I could count on one hand the number of losing days that I had. Don’t you think that this consistency allowed me to be extremely confident? I knew that I was going to make money on any given day. Why would I think otherwise? Making a little bit everyday (Rules #18 and #19) will allow you to trade throughout the trading session with confidence and control.
Remember rule #9: If you make a little bit every day, then you have earned the right to trade bigger. Thus, by following the RULES OF DISCIPLINE, your “little bit” can soon turn into much more profitable days.
#21 LEARN TO SWEAT OUT (SCALE OUT) YOU’RE WINNERS.
The net effect of scaling out of your winners will be an increased average win per trade while keeping your losses to your pre-defined risk parameters.
You should never scale out of your losers. If your trade size is more than a one lot and your trade is a loser, you must exit the entire position en masse. If your trade size is more than a one lot and your trade is a winner, it is best to exit one-half of your position at your first price target.
If you trade with protective stop-loss orders, you should amend the order to reflect the change in trade size (remember you have exited one-half of your position) and raise or lower the stop price, depending on whether it’s a long or short position, to your original initiating trade entry price. You now are essentially “playing with the house’s money”. You can’t lose on the remaining position, and that’s obviously a fantastic position in which to put yourself. Place a limit order a few tics above or below the market, depending on your position, SIT BACK AND RELAX.
#22 MAKE THE SAME TYPE OF TRADES OVER AND OVER AGAIN – BE A BRICKLAYER.
A bricklayer shows up for work every day of his working life and executes with the same methodology – brick by brick by brick.
The same consistency applies to traders, as well. Please review Rules #6 and #20. I have not changed my trading methodology and execution strategy in 20 years. I guess I’m the bricklayer.
#23 DON’T OVER-ANALYZE. DON’T PROCRASTINATE. DON’T HESITATE. IF YOU DO, YOU WILL LOSE.
I can’t tell you how many times traders have come into my office terribly depressed because they “knew” the market was going one way or another; however, they failed to put a position on. When I ask them why they did not put the trade on, their responses are always the same: they did not want to chase the market. They were waiting to be filled at the absolute best possible price (and never got filled), or only two out of three of their market indicators were present and they were waiting on the third.
The net result of all this procrastination and hesitation is the trader was correct in deducing market direction but his profit on the trade was zero. We don’t get paid in this business unless we put the trade on. Don’t over-analyze the trade. Place the trade then manage it. If you’re wrong, get out. But you’ll never be right unless you actually make the trade.
#24 ALL TRADERS ARE CREATED EQUAL IN THE EYES OF THE MARKET.
We all start out the day the same. We all start out at zero. Once the bell rings and trading begins, it’s how we conduct ourselves from a behavioral standpoint that will dictate whether or not we will make money on the day. If you follow the 25 RULES, you should do well. If you do not, you will do poorly.
#25 IT’S THE MARKET ITSELF THAT WIELDS THE ULTIMATE SCALE OF JUSTICE.
The market moves wherever it wants to go. It does not care about you or me. It does not play favorites. It does not discriminate. It does not intentionally harm any one individual. The market is always right.
You must learn to respect the market. The market will mercilessly punish you if you do not play by the RULES. Learn to condition yourself to play by the 25 Rules of Trading Discipline and you will be rewarded.
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