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To Master the Market, First Master a Method…
then Master Yourself
Dr. Kenneth Reid here. I’m a trading coach with a Ph.D. in Clinical Psychology. I’m also a walking encyclopedia of trading methods. I help active stock and futures traders solve both technical and mindset problems and achieve their financial goals.
Quick background. I’ve been a trading coach for 18 years, working with aspiring amateur and professional traders. I’m also a trader myself. For more than a decade, I was the Senior Editor and Head Trader / Portfolio Manager for a large financial newsletter.
Trading in public is difficult, but it’s not as challenging as trading one’s own account at home. When we trade alone, all sorts of unexpected issues arise.
However, a select few…the 4%… can take money out of the market at will. The difference is due to both technical and psychological factors.
So let’s start with three essential pointers.
The Hindsight Trap. Trading appears deceptively easy in hindsight. Hindsight seduces us into believing that markets are more predictable than they actually are, and therefore less risky. We then fail to adequately prepare for battle.
You are NOT Crazy. Most psychological issues that aspiring traders experience have their roots in a poor or unsuitable method. This is true even if you have spent thousands of dollars on that method. The fact that someone can trade that method profitably has no bearing on its suitability for YOU.
Temporary Trader PTSD. Most of my clients are successful professionals looking for a new career with more freedom and fewer headaches. They are dismayed and embarrassed to admit that after X number of years they have not been able to make sufficient progress. Along the way they have lost their confidence, which means they are trading defensively, “trading-not-to-lose.” They are hypervigilant, hyperfocused and somewhat tense and anxious. That’s “trading-induced PTSD” and it’s a vicious cycle.
For more information download my free 16-page report from the top of the sidebar detailing how the Top 4% of active traders make a living at the expense of the other 96%.
To review my Day Trading Coaching Program, click here.
METHOD AND MINDSET TOGETHER
A poor or unsuitable Method will undermine your Mindset. Similarly, a problematic Mindset will render even the very best Methods ineffective. When I work with coaching clients we evaluate both elements and fix where necessary.
Trading in the Zone, by Mark Douglas, is an excellent book on the psychology of trading. “The Zone” Mark refers to is a state of focused attention and self-control in which we are responsive, but not overly reactive; disciplined, but not rigid; vigilant, but not afraid. In sports psychology we call it “Flow.”
In order to find the Zone and maintain Flow when one is actually trading, a trader must master three skills.
1. REDUCE STRESS
Moderate levels of stress are stimulating, which makes trading less of a job and more of an adventure. If you exceed your “stress threshold,” however, you get into an overload state that triggers primal emotions and defensive/aggressive behaviors.
Stress mostly arises from an attempt to reduce/avoid losses. Ironically, our fear of losing or missing out will actually work against us and cause losses. This leads to a downward performance spiral into trading hell.
Read more about toxic stress here.
2. MAINTAIN A CONFIDENT MINDSET
Successful traders actively manage their mental attitude in order to maintain confidence in the face of uncertainty; discipline in the midst of randomness. Maintaining a confident mental attitude is a skill that can be learned.
Top athletes practice it. Top traders practice it. You can, too.
Even successful traders, however, are at risk of psychological wounding from a string of losses or a single large loss.
The good news is that there is a technology that can help clear the negative emotional residue from past losses. Click here to find out more.
3. MASTER YOUR DAY TRADING ‘EDGE’
Your trading ‘edge’ is the method (plan) that gives you an advantage in your trading beyond the odds of chance. Professionals day trade a defined plan, amateurs trade intuitively, instinctively and often impulsively.
Professional traders exploit amateurs who make trading decisions based on emotion.
If you do not carefully design and master your day trading edge to be both aggressive and defensive, your trading account will serve as a source of funds for professionals. As an active trader myself, I know what is needed to maintain an advantage in our fast-moving algorithmic markets and I specialize in helping traders sharpen their technical edge.
To review my Day Trading Coaching Program, click here.
HIGH RISK TRADERS
Some traders lack the discipline to follow a trading plan, even when they want to. These traders tend to be intelligent, creative and intuitive, but also inconsistent, disorganized and impulsive. They are High Risk Traders. Here is the true story of one High Risk Trader I worked with as a day trading coach. Let’s call him Art.
Art was a former executive at a well-known software company. He was smart, creative, confident, strong-willed, ambitious, hard-working and very dedicated. Nevertheless, despite his CEO-like personality, Art took his trading account from $1 million down to $100k in the year before he called me. How did this happen?
Clinical studies support the popular belief that men have difficulty asking for directions (I’m not kidding… we do have a stubborn streak.) Art was like that. As his strategies and tactics failed to achieve the desired results, Art never sought help. He remained entirely focused on the market, not on himself or his system. To recoup losses, he traded more frequently and averaged down on losing positions. He tried harder, not smarter.
His wife was worried about his trading, but Art always felt he was ‘on the verge of greatness’, even as his equity curve continued to plunge. Ironically, his self-confidence (masking his huge need to be right) actually worked against him. You are probably not as stubborn as Art, but your own psychology is certainly a key factor in your bottomline.
RISK OF RUIN
The Risk of Ruin defines the odds of reaching a point at which you are no longer mentally, emotionally or financially able to fund (or re-fund) your account. The risk increases exponentially for those day traders who:
- Enter too high for longs and too low for shorts;
- Can’t stay in a winning trade;
- Can’t take a loss in stride and keep losses small;
- Overtrade and “revenge” trade;
- Compulsively trade against the trend, and/or
- Can’t seem to learn from their mistakes.
These behaviors are warning signs that you are vulnerable. You can find out more by taking my Free Daytrader Risk Profile here. The Risk Profile will help you determine whether you have some of the psychological risk factors that can lead down this path. It is free of charge.
TO MASTER THE MARKET, MASTER YOURSELF
Whatever your level of intelligence, education or success in life, learning to day trade for a living is likely to be the most difficult challenge you have ever faced.
Your business skills may not help you because the day trading environment is completely different than the business environment. Moreover, you are likely to encounter certain things about yourself that you were not prepared to face before.
I’m a competitive tennis player. In his autobiography, Andre Agassi wrote, “For me, tennis is a vehicle to discover myself and push myself.” For many traders, trading serves the same purpose. (It does for me.) You may be driven to master trading because it holds the secret not only to your financial future, but to your own self-mastery.
Many of my coaching clients report that as their day trading improves, the quality of their life improves along with it. If you are this type of aspiring trader, passionate about succeeding, I can coach you to achieve your goals.
To review my Trader Coaching Program, click here.
IS IT TIME FOR A TRADING COACH?
Active trading can lead to life-changing success or endless frustration… feeling like you are on the verge of greatness but never getting there.
I have a Ph.D., but I’m not an “academic.” I trade stocks and futures everyday for my own account.
Whether you are you are an aspiring rookie, an experienced veteran who is stuck at break-even, or a successful professional day trader looking to sharpen your edge, let me help you reach your full trading potential.
Review my 14-Day Trading Psychology Coaching Program ($1997)
Review my Concierge 10-Week Trading Psychology Coaching Program with unlimited access ($4997)
Kenneth Reid, Ph.D