How To Master Trading Discomfort To Improve Your Results.

Ministry of Silly Walks.  Cheese Shop.  Self-Defense Against Fresh Fruit.  Dead Parrot.  My Friend Earwax.  These are the names of four of the funniest and most irreverent sketches by Monthy Python, and one really bad idea I once had for a short film.

I have long posited the theory that there are only two types of people in this world; those that “get” Monty Python, and those that don’t.  Personally I love Monty Python, and although my favorite player is Michael Palin, John Cleese has traditionally been thought of as the “leader” of the troupe.

Recently I came across a video of Cleese giving a talk on the subject of how to be creative. It’s fascinating and a must watch for anyone who wants to learn how to get their creative juices flowing.

In the video Cleese tells a story from back in the day when the Pythons were trying to write sketches.  One of the other members of the group, who remains unnamed but whom Cleese felt was more talented than himself, always seemed to come up with less original and creative material than he did.

This puzzled Cleese, however after observing his colleague for a while,  it became apparent to him why this condition existed.  When the other member was faced with a problem in writing a sketch, as soon as he saw a solution he was inclined to take it, even though he knew it wasn’t perhaps the best or most original answer.

Cleese himself realized that the reason he was able to write better material than his more talented colleague was that when he came to a problem, instead of taking the “easy” route, he was able to stick with the problem longer and ultimately would find a better solution.

Simply put, Cleese was more comfortable with discomfort that his fellow Python.

It makes perfect sense of course.  The normal human reaction when faced with discomfort, no matter what kind, is to seek relief and do so as soon as possible.  This behavior is very common in trading, and the ability to make a friend of discomfort may help improve your bottom line results.

Causes of Trading Discomfort

Discomfort in trading usually comes in two forms and both have micro and macro causes.

Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.

This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.

Are you down big for the year in your trading account?  Are you in financial trouble in your regular life?  Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?

Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”

This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.

Or once again it could be a related to larger issue.  Are you the type of person that always needs to be in control in your life?  Do you have an obsession with always being “right?”  Is the world a place that would  be better off if it listened to your opinions DAMMIT?

Whatever the cause of the discomfort, in an attempt to end it as fast as possible, traders often make bad decisions that affect performance.

Effects Of Trading Discomfort

The list of things traders do because of discomfort is endless, but here are some of the more common ones;

Getting back into a trade too fast after a loss – Your pristine trading day is blemished by a loss after your first trade, but instead of waiting to find another suitable setup, you find yourself rushing back into a trade, because that is the only way to “get it back” and end the discomfort.

Closing a losing trade too soon –  A trade has gone against you, and you can’t stand that you are in the red.  Even though your stop has not been hit yet, you know it will be and you just want to cut your losses and end the pain, so you close the trade early.  Your pain is only increased when price reverses before your original stop and proceeds higher, into what would have been a profit.

Closing a winning trade too soon –  You have a profit.  You need a profit.  You want to bank that profit, even though price has not hit your target.  Every minute that profit is open there is a chance it can go away, and so you take it right where it is, only to see price continue higher, and higher, and higher throughout the rest of the trading day.

Holding a winning trade too long –  Price has hit your target, but you want more, because you need more.  You let it go, until it reverses and comes back down below your target. With every tick down you continue to hold the position because you wanted to close it out one tick higher.  Eventually it goes back to even, or worse, into a loss.

And the list goes on.  One thing that is important to remember about discomfort is that it can cause you to make bad decisions, but it can also cause you to make no decision by paralyzing your thought process.

How To Deal With Micro Discomfort

In order to master trading discomfort you have to reverse engineer the process of what causes it, and this starts with being brutally honest with yourself.  You have to know what makes you uncomfortable in trading.  It is a certain dollar size loss threshold?  It is holding a position past a certain amount of time?  It is an “ego” battle where you need to impose your will on a trade?

Once you can sincerely answer these types of questions, then you can start the process to solve or minimize the impact.

The issue of micro monetary discomfort is the “easiest” to work on, and it begins by taking some steps to remove yourself from the trade, distancing yourself from the discomfort.

That’s starts with making sure you have a trading methodology.  A methodology gives you an objective framework for your trading.  An objective framework gives your confidence. Confidence allows trust and trust brings comfort.

Another thing that can help is if you know that before you take a trade you will never lose more money than you are comfortable with.  That can be accomplished by using the “R” method to size your positions, one of the most important concepts in successful trading.

Micro control discomfort is also a relatively easier issue to deal with, but involves changing your perception a bit.

The first thing you have to drill into your head is that your will lose on more trades than you will win on.  It’s the nature of the game, and you have to learn it or you will fail at trading.

The next thing you need to do is get some context on your individual trades. Understand that you are just trading.  Sure it’s complex and mentally challenging, but you are sitting at a desk in front of a computer.  You can take a break, listen to music, drink a Coke; it’s not like you are tarring roofs in the hot sun or working in a coal mine. Getting some perspective can do wonders towards alleviating your trading discomfort.

Dealing With Macro Discomfort

Macro trading discomfort, both the monetary and the control type is much tougher to deal with.

From the monetary side, you once again have to ask yourself some tough questions. For example, are you well capitalized enough to be trading?  If paying your bills is solely dependent on your trading profits you must have enough of a bankroll to weather the inevitable losing streaks.  If you don’t have enough, perhaps it is time to rethink things.

One way to alleviate the stress of paying you bills with your profits is to create another revenue stream.  Are you a good stock picker?  Could you turn that into a paid subscription service that would help to smooth out your equity curve with trading? Maybe you should take a steady job and concentrate on swing trades that you can manage without being in front of your screen during the day?

Point is, whatever the reason for the macro monetary discomfort, you have to make real and serious changes, because the alternative is that your account will in all likelihood eventually implode.

Macro control issue are the absolute most difficult to deal with because they extend way beyond trading and can be as complex as your mommy not giving your enough love when you were a kid.

Although I have a reputation of being a bit of a smartass a times, I am totally serious and totally sincere in saying that if you have macro control issues, you really owe it to yourself to seek the services of a psychologist or psychiatrist.  Doing that can also provide the extra bonus of improving your life in general in addition to improving your trading.


The process of mastering your trading discomfort, no matter what kind, and no matter what scope, all starts with first acknowledging that discomfort.  Then from there you must identify what the causes are of the discomfort are by asking yourself some probing questions, and ultimately take concrete actions towards minimizing or eliminating it so as to not adversely effect your trading.

John Cleese – A Lecture On Creativity via YouTube

How To Day Trade With Less Than $25,000


This post has me in a bit of a conundrum.  I am writing about something that I am not totally on board with but recognize as a necessary evil; day trading with less than $25,000 in your account.

Day trading is definitely one of the hardest things that somebody can do, and the optimal way to do it is to have a well-capitalized account and some practical experience in riding the intraday lightning.  The obvious financial issue is that not everybody can afford to drop 25K+ into a trading account to get day trading privileges, and the experience issue ends up being a “chicken or the egg” scenario.

I know that some of you are shouting at your screens right now, and not just because a trade is going against you.  You’re yelling “Hey Poindexter, how about paper trading?”  Well, I don’t believe in paper trading, a point I made again in my recent post about finding a trading mentor.  My alternative is to trade small position size until your skill/equity level gets to the point where you can start to scale up.

That post prompted a lot of emails posing the question, “how can I get practice/experience day trading since I don’t have $25,000 to put in my account?”  This then is my answer to that question.

The Rolling Five Day Method:

This is the best and I believe safest method for day trading a sub-25K account.  You are allowed to do three-day trades during a rolling five-day period.  You won’t get 4x buying power, but you can use regular 2x margin for your trades.

I like and recommend this method most because it forces you to be more discriminating in your trading choices.  If you see a number of mediocre setups one day, you are more likely to pass on them and wait for more optimal ones on another day since your dry powder is limited.

The Split Brokerage Account:

So let’s say that you have only 10K to trade with, and you are dead set on day trading (…you know there are things called “swing trading” and “position trading” too).  You can split your funds in half and open two accounts with two different brokers.

By doing this you will effectively be able to do six day trades on a rolling five-day basis (once again only with 2x margin buying power), which should be more than enough for a beginning trader.

In the past this would be an awkward way to execute trades, but the ease with which you can now open accounts, transfer money, and trade online makes it definitely a viable option.

The Split Brokerage Account Wash Method:

Same set up as above but if you insist on having an almost unlimited ability to day trade a sub-25K account, this method will appeal to you.

For example, you take a long trade of 50 shares in XYZ in broker #1.  When you are ready to “close the position” you just sell short 50 shares of XYZ in broker #2, effectively making you flat.  You can then close each side out the next day, without using up any of your three day trades.

Obviously you will incur some extra costs as you will have four commissionable events instead of two, as well as a bit of slippage depending on the width of the spread on the stock you are trading.  Because of this, I suggest you only use this method if you are trading with a per share commission set up.

If you are trading small (25-100 shares), you will most likely only incur a minimum ticket charge per side (usually $1.00) and the slippage costs, if any, will be negligible.  It’s a small price to pay for almost unlimited day trading ability with a sub-25K account.

One last note on the “Split Brokerage” options.  I highly doubt it, but it is possible that in the mounds of SEC regulations that exist, there might be some rules against trading two separate brokerage accounts in this related way, but if there is A) nobody is monitoring it, and B) really, what would the “penalty” be?  I think I can safely say that for all intents and purposes, this is completely allowable.

Prop Trading:

There are a number of prop trading firms out there that you can trade with, either on their floor or “virtually.”  These firms allow very small account minimums (often as low as $5,000) and you can trade with the firm’s capital which allows you full day trading buying power (sometimes more) and no day trading limit restrictions.  You also can usually trade with a micro commission structure.

Of course as you might guess, there is no such thing as a free lunch.  When trading with a prop firm you don’t get to keep 100% of your profits, you get a “payout” percentage that is based on a number of factors.  You also may have to do a minimum number of trades or pay a fee to use their platform.

I have never used a prop shop myself but know traders who have.  I have heard good and bad stories, so if you choose to go this route, make sure you fully investigate them and get some references before you commit.

Futures Trading:

There are no day trading restrictions on futures and since you are only required to put up a small percentage of your overall contract size, leverage is more than you will need.

That being said, if you are in any way thinking about trading gold ($GC_F), oil ($CL_F), wheat ($ZW_F), or basically anything other the E-mini’s, just send me 95% percent of your trading funds and ask your friend to slam your head in between your car door.  That you way you will end up with more money and still feel better that you would otherwise.

The S&P 500 E-mini ($ES_F) and the NASDAQ 100 E-mini ($NQ_F) are the ONLY futures contracts that a beginning trader should try to day trade.

Even so, it is still tough for a lightly capitalized trader to trade $EF_F as each point is equal to $50.00 ($12.50 per tick, four ticks to a point).  If you have a 5K account, only one point would equal 1% of risk capital which does not give you much room to be wrong.  You would probably want to have a minimum account size of 10K+ in order to effectively trade the $ES_F.

The $NQ_F is only $20.00 per point ($5.00 per tick, four ticks per point), but moves faster, farther, and more erratically than the $ES_F.  I have personally spent the last two years trading it, having 23 years previous equities trading experience, and I still find it challenging at times.

No matter how hard you want to day trade with a sub-25K account, be forewarned that futures are a very, very tough and specialized asset class, and only a small number of new traders will ever be consistently profitable with them.

Forex Trading:

Like futures, forex has no day trading restrictions and ample leverage for small account traders.  There has also been a proliferation of resources for learning about forex trading over the last few years.

One of the benefits of trading forex over futures is that you can have a minimum size position that better relates risk-wise with a small account.  As a beginning day trader you should stick will the most liquid crosses like the EUR/USD ($EURUSD).  If you trade the EUR/TRY (Euro against the Turkish Lira), once again, put head in car door……

Currencies have their own set of challenges.  They do not trade like equities, however many traders feel that they do more closely respect the “rules” of technical analysis. Fortunately, there are many great currency traders out there to learn from like my punk rock friend @CloudChartist, @Tradergav, and @faithmight.


So there you have it, how to get around the system, beat the “man,” and be a trading vandal.  Just make sure you always keep risk foremost in your mind so that you can graduate from this level of trading and make it to a fully funded day trading account.

How To Become A Better Trader In 30 Days Using StockTwits


Note: I get new stock ideas every day from the SPARK app. Download it free from iTunes.

The number one question I get asked by readers of my blog is “how can I become a better trader?”  My answer is usually “find a mentor.”  What I am going to show you in this post is how to find that person using StockTwits (and how that process in itself can make you a better trader).

How does a mentor make you a better trader?  Think of it this way, if you are trying to get better at golf, there are a number of different things that you can do to improve your game. Problem is, you may not know what those things are, nor where to start, or how to implement them.

If you had a teacher/mentor who could cut out the superfluous and focus you more on what’s important, your learning curve would shorten drastically.  Having a mentor will make you a better trader, and the process of finding a mentor will also make you a better trader as well.

A few quick codicils first…

What is a mentor?

Unless you are a new hire in the trading department at Goldman Sachs or your uncle is Paul Tudor Jones, you are going to have to redefine what you consider a “mentor” to be. Having a veteran trader sit down with you and walk you through his collected knowledge while sipping brandy by the fireplace is not going to happen.

We live in a different time where the one on one mentor/protégé relationship rarely exists in that form.  If you have it, consider yourself extremely lucky.  However the rest of us can still use the power of social media to find someone who is a guide.  Someone with experience in trading that you can have a two-way interaction with on a semi-regular basis.  And in fact, it doesn’t even matter if your “mentor” actually knows they are being a mentor.

This is the context in which I use the term “mentor.”

Reasonable expectations.

There is no substitute for time and experience, and I am not saying that you will all of a sudden be able to quit your job and trade for a living after completing this process. What I am saying is that if you do follow this process, whether novice, intermediate, or experienced trader, you will be a better trader by the time you are finished.  And you may come away with not only a mentor, but a friend as well.

Time frame.

Is 30 days really enough time to find a mentor and/or make you a better trader?   The optimal way to do this would be to expand each 1-week phase to a couple of weeks, or a month, and if you have the time and patience, I recommend it.  However,  I think if this process is done in a focused and methodical way and if you put in enough hours working at it every day, 30 days is enough time to make an impact.

So don’t be in a rush to go through this process.  You may be tempted to cut the time frames down, but don’t.  Take your time and do this right.  I would also suggest, especially if you are a beginning trader, that you don’t trade during the first three-week time period. Focus on this project solely during that time in order to get the most out of it.  You have the rest of your life to crush the markets.

Week 1 – Watch, Filter, and Follow

Your goal in the first week is to find 7-10 candidates on StockTwits that you would like as potential mentors.  There are a number of ways you can find them.

  • Watch the “Recommended” stream.  These people have been handpicked by StockTwits for being “smart, generous, and adding value to the community.”
  • Ask questions regarding quality follows via direct message of users you know and trust.  (More on this later).
  • Keep an eye out for the “#FF” designation in messages on Fridays.  These indicate suggestions of quality follows.
  • Check out the StockTwits blog network and monitor the author’s streams.

You also want to filter by asset class.  If you trade exclusively Forex, at least for this process, try to focus only on the currency streams.  Same goes if you trade exclusively options, futures, or equities.

You could even refine the process more.  If you only stick to trading big cap tech stocks, monitor the streams of companies like Apple ($AAPL), Google ($GOOG), and the like to see who the “axe” is in those type of names.

These are just suggestions for the filtering process; the point is, use whatever method you prefer to cull some top candidates.

This first week is the most critical, and once again a reminder of why you want to use the full-time period to find candidates.  You want to find someone who not only knows what they are doing, but has the right tone and temperament to be a mentor, and you will need as much time as possible in order to get the best “feel” for those people.

Once you have your candidates selected, if you are not already, make sure to follow them.

Week 2 – Analyze

This week is all about analyzing the 7-10 mentor candidates that came out of the first week’s filtering process.

If you are able to be at your computer during the trading day, then you can analyze them in real-time, however, this is not crucial.  If you have a day job and can only do your analysis at night, it will work just as well.

By clicking on the name of a candidate you will see their specific stream with all the messages they put out during the day, each with a timestamp.

Start with the first message of the day and follow along with what that user does during the course of the day.  Look at what type of information are they giving out.  It is timely? Is it insightful?  Does it add value?  Is it the type of information that fits in your trading style?

If someone is sending out messages about fundamental analysis and macroeconomic trends, even though they may be a quality follow, if you are day trading, they probably won’t work as a mentor for you.

If they are calling out live trade entries and exits, match them up with charts from the day. Look at the style of trading they are doing.  Are they entering on a breakout or pullback? Are they exiting at chart based targets or loss of a trendline?

The list of things to examine is endless, but the ultimate goal again is to see if their style fits with yours.  If you are more comfortable with swing trading, it won’t do you any good to have a scalper as a mentor.

If they have a blog put it into a reader and then go back through a few months worth of posts to find out what they are all about.

You are looking to find users that have a compatible style, a methodological approach, and are profitable.

(One note on this: even the best trader can have a losing month, let alone a losing week, so makes sure that the user you are analyzing is at least using good risk/reward techniques.  If they are a net loser during this week, but obeyed their risk criteria, this should not automatically rule them out as a candidate).

And if you are worried that some of the people you are considering may not actually be trading, read my post “When You Catch Somebody Faking It.”

You also want to take into account if they are already interacting with people and if so, how they do it.  The best trader in the world can’t be a good mentor if he communicates with people badly.  Throw those users out as potential candidates, as well as any whose style doesn’t fit yours.

Week 3 – Ask and Interact

Now that you have refined your candidate list down even more, it’s time to “break the ice” and interact with them.  Let me expand on this a bit.

It is important to emphasize that StockTwits is a free service and the people who post on it do not charge a fee.  Some of them are also full-time traders, meaning that trading is only way they make their living.  Even if they are not full-time trader, people have lives outside of trading, and may have limited time to respond to every tweet addressed to them.

So to best improve your chances of a reply when reaching out to a user;

  • Be polite and respectful
  • Do not take an entitlement attitude
  • Don’t challenge them i.e. “Why did you make that trade if the market was dropping?”
  • Don’t freak out if they take a while to respond.
  • Don’t just say “hey will you be my mentor.”
  • Don’t bombard them.
  • Try to approach them when less busy i.e. outside market hours.

You are looking for a relationship, not a one night stand, and you have to remember that you are trying to interact with someone and benefit from their knowledge; knowledge that may have taken them 10 or 20 years to learn trading through the school of hard knocks.

That knowledge  is like gold to a trader and they are under no obligation to share it.  The way you make initial contact will set the tone going forward, so here are some examples of how best to do it.

Ask a question about a successful trade they made.

“That was a nice trade on $BIDU.  Can I ask how you determined the entry?”

If you see a something of value that they tweeted, retweet it with a comment.

“Finally it makes sense to me.  Thanks for the insight! RT@bclund – How To Explain Short Selling To Your Mother

Or bring some value to them.

“@bclund I saw you said Steve Cohen was your favorite trader.  Here’s a cool article he wrote”

The best thing you can do is just be “real” and approach them in an honest and sincere way; like you would anyone you wanted to start a relationship with.

After the first two weeks, you should have a pretty good idea as to who is more open to continued interaction.  But if somebody is not interested in communicating don’t be upset or bitter, just let it go, and move on.  Being a mentor is not for everyone.

Week 4 – Implement

At this point, if you have done this process right, you should have found at least one person that you can call a nascent mentor. Now it’s time to put what you have learned through this process into action.

The purpose of this week is to take the applicable parts of what you have learned and incorporate them into your trading, NOT TO COPY YOUR MENTORS TRADES OR METHODOLOGY.

If you have never traded before, this is the week to begin.  Start by using very small positions and to try to craft a trading methodology using your mentor’s trading as a guide.  Do not paper trade!  You can read why in “Thoughts On Paper Trading.”

If you are an intermediate or experienced trader, you will take this week to refine your trading methodology with some of the ideas and techniques you have gleaned, once again, using positions that are smaller than your normal size.

Assuming that week 3 went well, this is where you will also want to give your mentor some (positive) feedback about how what you have learned from them is working out.

Review break.

Yes, I know that four weeks is only 28 days, and that is why you will spend the last two days of this process reviewing everything that you have done from day one.  You will hopefully have a sense of accomplishment, not only in what you achieved towards bettering yourself as a trader, but also in actively starting the process of engaging with your mentor (or mentors).

Continuing the process.

As you may have guessed, this is the just the beginning of an ongoing process.  From here your goal is to continue to engage your mentor, broaden your interaction, and improve your trading.

You should continually be on the lookout for quality traders on the streams, and when you find them, repeat the process that got you your first mentors.  Before you know it, you will have a group of people who can both passively and actively help you to become a better trader.

Then at some point the process reverses itself and you may find yourself in the role of potential mentor.  If that happens, do whatever you can to help those that were once in your shoes.  Post into the streams, write a trading blog, suggest quality follows to others, or if you think you are up to it, mentor somebody who needs the help.

…and don’t forget to subscribe to a quality blog about the markets, trading, and life.  By the way, what bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Subscribe for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.

What Watching Tiger Woods Can Teach You About Trading

Most people don’t know that Tiger Woods’ name is actually “Eldrick.”  Eldrick Tont Woods to be exact.  We all have just been calling him by his nickname, Tiger.  His other nicknames include; El Tigre.  The Woodster.  The “T” Wood.  Wood-a-licious. And in certain gentleman’s club’s in the South Florida area, “The Big Wood.”

After his performance during the last few years his nickname though should probably be “Chernobyl.”

Unless you are really into practicing Schadenfreude, watching Tiger Woods melt down in the Masters over the weekend was pretty painful.

Here you have perhaps the greatest player ever to walk the links; so dominant at one point in his career that major championship sites like Augusta National actually began “Tiger-proofing” their courses by adding yardage to their tees in order to slow him down.  And now he is turning into the butt of too many jokes to mention.

As a trader, the take away from watching Woods implode is to understand that trading, just like golf, is mostly mental.

[Note from Brian’s inner dialogue:

Really Brian?  That is the brilliant conclusion you came up with for this post?  That trading is a mental game?  Great, maybe next you will tell us that water is wet and the sky is blue.  If people wanted simplistic crap like that they could read any of a hundred other blogs or Alexander Elder’s books.  You better friggin’ dazzle us with something else here pretty quick.]

Okay, I get it.  Saying that Tiger is off his mental game is obvious, and the comparison to trading too easy.  But what isn’t so easy to understand is exactly why Tiger cracked.

This is a guy who was on national TV hitting golf balls at age two with Bob Hope.  A guy whose father drilled golf into him throughout his youth with the intensity of the Green Beret he was.  Yet that didn’t crack Tiger.

He played for Stanford and at age 20 became the first golfer to win three consecutive amateur titles, but nothing in that process phased him one bit.

He went pro, signed massive endorsement deals, was covered by every major sports outlet, and became the fasted golfer ever to reach the #1 ranking, and yet his game never faltered.

He went up against the legends of golf and proceeded to destroy them and the courses he played on.  Along the way he got married, which could mess up anybody’s head, but not Tiger’s.  Having two kids was a drop in the mental bucket for him.  And even while banging every stripper and porn star he could get his hands on, his mastery of the game never lapsed.

And then one night his wife found out about his affairs, and his game has never been the same.  But I don’t think it is because his wife found out about the affairs, I think that it is because of the publicity, that the world found out that Tiger Woods was out of control.

Tiger Woods bought his own press.  He believed in his own infallibility; not just on the golf course, but in life.  And having the public know that he was not 100% in control at all times was more than he could bear, and he snapped.

If only he had learned from Kevin Costner’s character in the seminal golf move “Tin Cup.”

Roy ‘Tin Cup’ McAvoy: The critical opening phrase of this poem will always be the grip. Which the hands unite to form a single unit by the simple overlap of the little finger. Lowly and slowly the clubhead is led back. Pulled into position not by the hands, but by the body which turns away from the target shifting weight to the right side without shifting balance. Tempo is everything; perfection unobtainable as the body coils down at the top of the swing. Theres a slight hesitation. A little nod to the gods. 

Dr. Molly Griswold: A, a nod to the gods? 

Roy ‘Tin Cup’ McAvoy: Yeah, to the gods. That he is fallible. That perfection is unobtainable. And now the weight begins shifting back to the left pulled by the powers inside the earth. It’s alive, this swing! A living sculpture and down through contact, always down, striking the ball crisply, with character. A tuning fork goes off in your heart and your balls. Such a pure feeling is the well-struck golf shot. Now the follow through to finish. Always on line. The reverse C of the Golden Bear! The steel workers’ power and brawn of Carl Sandburg’s. Arnold Palmer! 

A nod to the gods.  A surrendering of ones ego in admission that we are fallible and perfection unobtainable.  Tiger’s failure to understand, acknowledge, and accept that concept is what wrapped him so tight, that when the illusion was shattered, his game collapsed and may never recover.

The goal in trading is to make money, not to be a perfect trader.  The real take away from watching Tiger Woods is to learn that in the markets, just like in life, ego kills. Pridefulness kills. Vanity kills.  Self-importance kills.  Self-delusion kills.

As traders we lose on trades.  We sell to soon.  We miss an entry.  We top tick a move. And we have losing streaks.  We are the definition of fallible; every one of us.  And thinking otherwise is the kiss of death.

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Don’t forget to subscribe for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.

The 10 Commandments Of Trading

I’ve had a number of new traders over the last few months ask me what tips I can give them, so I thought I would take the opportunity here on Easter to both answer them and be blasphemous.  These are by no means the only “commandments” of trading, and if you have some suggestions, please feel free to list them in the comments section.

Know yourself– Understand what style fits your personality.  Can you hold a position for a few days or only a few hours?  Are you okay with larger draw downs or can you only take small ones? Are you more comfortable trading pullbacks or breakouts? Most importantly, don’t try to use a style that doesn’t “fit” your personality.

Educate yourself – But don’t over educate yourself or fall into the trap of reading to many biographical trading books.  They may be entertaining, but you will learn little about the current state of trading.  Stick to my  “Holy Trinity” of books “How To Make Money In Stocks” by O’Neil, “The Disciplined Trader” by Mark Douglas, and “The StockTwits Edge” by Howard Lindzon.  The rest you can learn from online trading communities and blogs.

Find a mentor – It’s never been easier to find a mentor, even if it is a virtual one.  I can’t emphasize how crucial this is because being able to interact with a seasoned trader on a regular basis will shorten your learning curve like nothing else.  And don’t be averse to using a paid mentor via a trading service.  The $50-$100 bucks a month you will pay may save you thousands.

Develop a methodology – Analyzing your trading success by outcome is a dangerous game.  If you go to Las Vegas, put your life saving on “red” and win, it was still a bad move, because over time you will eventually hit “black” which will wipe you out.  You have to develop a risk based methodology that over time is successful and then evaluate your trading by how well you follow that methodology.

Use the right tools – You don’t need four monitors and a quad-core water-cooled processor to trade stocks.  You do need a decent computer, solid broadband connection, and a good broker.  As far as I am concerned, there is no need to look past Interactive Brokers.  A solid data/charting service is a must as well and my choice is Esignal.

Turn off CNBC – There is absolutely nothing you need from CNBC anymore. Quotes, breaking news, whatever, it can all be found through a thousand other more focused outlets.  CNBC is really not for trading news, it is for financial news in general. At least turn the sound down.  And of course everything I say about them is 100% wrong if they would like to have me as a guest.

Remove your emotions – Understand that you will lose on more trades than you will win on; that is just part of the game.  If you are the type that always has to be “right” you are going to have a hard time becoming a successful trader.  The market is perpetual, it continues on no matter what you think about it with no knowledge that you exist.

Cut your losses – It’s pretty simple.  You will not make it in the markets if you can’t cut your losses.  You have to be confident in yourself as a trader to know there are an infinite amount of opportunities in the markets and that you can capitalize on them. That gives you the ability to let the losers go.

Trade less make more – Be picky about your trade setups and only take the best ones.  The goal is to take the least amount  of trades needed as over time even the best traders will lose on more trades than they win on.

Only trade liquidity – Illiquid and low float stocks are death unless you are an experienced trader.  Trading them is a specific type of style that is hard to learn and even harder to master; stick with stocks that trade at least 1 million shares a day on a 30 day average.  Liquidity is not limited to stocks but can apply to markets as a whole. Options expiration, holiday weeks, and lazy summer months often have low liquidity where the mechanics of the markets come into play and make clean trade setups a rarity.

The Most Critical Type Of Losers To Cut.

I’d wish you good luck but you wouldn’t know what to do with it if you got it.  And to answer your question, pal: why am I here? I came here because Mitch and Murray asked me to, they asked me for a favor. I said, the real favor, follow my advice and fire your fucking ass because a loser is a loser.  

– Alec Baldwin in “Glengarry Glen Ross”

I saw something happen in a trading room this past week that gave me mental wood.

This is a popular trading room full of great content and a ton of seasoned traders who communicate via chat.  At some point a new member, let’s call her “annoyingtrader,” entered the room.  Right off the bat she started complaining that she couldn’t hear the live audio commentary that was going on.

The trader who runs this room politely pointed out where the “live mic” button was, and how the volume slider worked.  But that wasn’t working for annoyingtrader and she kept complaining that she couldn’t hear the audio.

At this point a few of the regulars in the room started to join in, trying to guide her in how to get the audio on. But once again, she kept complaining that she wasn’t hearing anything and that “something must be wrong with the chat room controls.”

“Look annoyingtrader, we have 300 traders in this room who are having no problem hearing the audio, so my guess is that you are dealing with user error,” was the still convivial, but increasingly frustrated answer from the lead trader.

I got distracted from the chat stream for a moment at this point, but still had the audio on in the room. Apparently “annoying” was now getting into it with the chat room administrator, berating him repeatedly without any acknowledgement of his efforts to help her.

I then looked back at the chat session and saw the following message;

…The admin has kicked out [annoyingtrader] from the chat room Msg 6349…

At this point the lead trader got on the mic and said roughly this…

“So annoyingtrader could not get with the program here.  In addition to that she kept giving the admin crap, and basically we kicked her out of the room, cancelled her membership, and refunded her money. And that’s it…she’s done. Folks, I don’t charge $59.00 a month to make me rich.  I have this service because I like interacting with good people and I like building up a community.  

Look, I trade serious size in this room and if you think that paying the subscription fee gives you the right to come in here, disrupt everyone in an aggressive way, and then to berate the admin who is just trying to fix something for you that you can’t seem to understand yourself…well then you are wrong.  

It is a privilege, not a right to be in this room.  You come in here with a good attitude and let people help you, you can ask whatever you want.  But you come in here with some kinda of entitlement attitude….well your just not going to last.”

Damn Straight….!!!

I honestly have to say I don’t remember this entitlement attitude being as pervasive in the past as it is today. I supposed technology and social media have caused more people to act like they are owed something.  But where it gets really odd is when they complain about content that they are getting 100% free and that is not solicitous.

For example, last week I did a post entitled, “The Greatest  Myth About Trading.”  It dealt with how the average person thinks that trading is inherently risky, and I laid out the case as to why I thought that was not true.

I received a lot of great feedback from traders on the streams and in the comments section of my blog.  But then I got a response that stopped me cold.

via mortongould

trying to benchmark risk is a fool’s game as it’s all relative …I don’t see your point at all….and please, learn to edit as well….now I see why you like altucher..cheers!

I have what I like to call a “dick meter” in my head.  It looks like a tachometer, ranging from 1-10, with the dial getting increasingly redder the closer it gets to 10.  The meter was now “on” as I re-read this comment, breaking it down to try to get the real meaning.

“Trying to benchmark risk is a fool’s game it’s all relative.”

Okay, so he disagrees with my post; hey that is what an open forum is about. Everybody is free to differ and I never censor comments, even negative ones.  Calling it a “fool’s game” bristles a bit because the implication is, that since I was in fact trying to benchmark risk in the post, that I am in essence a fool.  Not sure why Mort had to use an ad hominem attack, but no big deal. Dick meter at “2” or “normal.”

“I don’t see your point at all”

No point at all Mortimer?  So in that whole post, even if you didn’t agree with it, you couldn’t a least see the point I was trying to make?  Am I that bad at communication or are you just a retard?  Hypothetical question of course.  Dick meter now “4” or “slightly intrusive.”

“and please, learn to edit as well.”

Well he does have a point there.  I mean my original response to this was going to be, “I know that I am often verbose on this blog, but it is part of my style and character, and people seem to respond to it in a generally positive way.”  But instead I’ll just edit it down to “go pound sand Morty!”  Now we are spiking up to “6” and the “annoying” range.

“now I see why you like altucher.”

Where do I go with this?  Because I am too verbose, that is why I like James Altucher, who by implication is too verbose as well?  Does this mean that if I see the light and follow Mortimer’s rules of blogging, that I can learn to edit, correct the errors of my past, and no longer enjoy that windbag Altucher?  Definitely in the red here at an “8” or “self-entitled.”


Okay…sounds good. Fuck you too!  “Full dick” has been achieved as we are maxed at “10”.

Mind you, I no longer sweat “Mortons” as they are only an annoyance, like a fly that you swat away.

They are the guys that constantly bad mouth someone on Twitter instead of just hitting the “unfollow” button.  They flit around to blog sites and trading communities that give them info, insight, education, entertainment, and actionable ideas for free; and then shit all over them.

My blog’s tagline has always been “guaranteed to change your life, or your money back,” which I used partly because I thought it was funny and partly as a defensive move to hopefully pre-empt any of the ungrateful on the blogospheres from taking a shot at me.

The tagline is changing soon to better reflect the direction this blog has been going in the last few months, and because I don’t worry about guys like Morton anymore.

Even though I won’t block or erase their comments, it is just so easy now to cut these losers mentally and move on.  Or write a post about it.

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(Note: If you are new to my blog, I post about all sorts of things.  Sometimes it involves something extremely personal, like creating a 30K baby or my Monster Trades.  Other times it deals with hot ex-porn stars who trade stocks.  And sometimes it’s about how to avoid “suicide”.  But a good place to start is The Best of bclund.  If you like what you read, please tell a friend.  If you don’t, please tell two friends.)