Don't Quit

This is the fifth in a series of articles started September 25, 2006 entitled "Hate Losing?"

If you find yourself in a losing streak, taking a break seems like a good idea. You'll likely feel better by taking a holiday from trading.

However, if you are trading with a system which has proven profitable over the course of more than 50 trades in backtesting, the better course of action is to keep on trading with that system. If you quit, you'll likely miss out on the winning trades from that system which would offset the losing trades so that you end up with a net profit.

We'll chat again next week ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Losing Money

This is the fourth in a series of articles started September 25, 2006 entitled "Hate Losing?"

Money is what you lose in a losing trade. So what is money?

Money is an idea, a thought, and a belief created by a governmental body. It’s not anything physical like an arm or a leg.

“Paper money” is merely a physical representation of the metaphysical idea, thought or belief that money represents. Money today is usually a digit on a computer screen.

So when you lose money trading, you merely lost an idea, a thought, a belief. You didn’t lose an arm, or a leg, or something physical.

Have you lost ideas, thoughts and beliefs other than money? Do you get upset over losing those other types of ideas, thoughts and beliefs?

That’s a perspective of “money” that can enable you to cut your losses. Try it on to see if it helps.

We'll chat again soon ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Practice Living In the Present

If you feel terrible after getting out of a trade with a loss, try this.

Practice living in the present moment instead of the past.

If you just got out of a losing trade, you’re no longer in a losing trade. In the present moment you are not in a losing trade.

A moment ago you were in a losing trade but in your present moment situation you are not. Practice living in the present moment in terms of your trading. Practice a bit everyday until it becomes an automatic habit.

You only feel terrible about the losing trade when you live in the past, dwelling on the losing trade. Rejoice because at the present moment you are not in a losing trade.

One way to facilitate living in the present moment instead of the past (or the future) is to, from time to time throughout the day, notice how your body feels. Your body sensations are occurring in the present moment, not the past or the future. Concentrate on that as a “life line” to the present moment.

This advice is adapted from a philosophy that's been around for thousands of years. There’s a huge body of literature on it including Eckhart Tolle’s recent book The Power of Now.

Try living in the present moment. You might like it more than hating losses. That will enable you to cut your losses when you need to because hating losses keeps you in losing trades that get even worse.

We'll chat again soon ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Be 100% Right

This is the second in a series of articles started September 25, 2006 entitled "Hate Losing?"

Don't like losing? Then let yourself be 100% right all the time. To do that you have to view all trades as winning trades.

If you exit a trade and it increases your account balance, then you had a winning trade and you were right.

Also, when you SUCCEEDED in executing a stop loss on a trade that reduces your account balance, you were also right! You were right to execute that stop loss. Otherwise, your account balance would have been reduced by an even larger amount, possibly by an amount that disables you from further trading! Therefore, you were 100% right to get out of that position!

Yes, have it both ways. It certainly makes me feel better and enables me to trade more confidently knowing I’m ALWAYS 100% right.

We'll chat again soon ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Hate Losing?

“Cut your losses and let your winners run” is sometimes referred to as the “golden rule of trading”.

Trading coaches often advise that the road to success involve “loving your losses” or “making it OK to lose”.

But what if you’ve tried that and still hate losses or still believe losing is bad?

This week’s series of articles looks into this.

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Syringe or Crayons for Inoculation

This is the fifth of a series of articles this week that began with the September 18, 2006 article entitled "Inoculate Yourself Against Toxic People".

Here's a great way to inoculate yourself against the effects toxic people have on your trading. Use a syringe. No, not the kind you find in a medical doctor’s office. Instead, it’s one from the field of NLP Psychology.

Bring to mind a toxic person. Imagine you have a huge gigantic syringe filled with detoxifying solution. Imagine poking the toxic person in whatever body part you please. Imagine the toxic person being no longer having any toxic effect on your trading.

Another method involves crayons. Again, this is from the field of NLP Psychology.

Bring to mind a toxic person. Then use your crayons to “fix” the picture of the toxic person so that you have a different emotional response to him. For example, if the sight of toxic person makes you feel angry, use your crayons to clothe that person as a clown, complete with a red nose that honks when you squeeze it. If that change makes you feel like laughing instead of feeling like being angry, the change worked. If not, then make whatever change using the crayons that would result in you having a different emotional response to that toxic person.

...back on Monday

Copyright 2006 Raymond T. Lee. All rights reserved.
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Oral Inoculation

This is the fourth of a series of articles this week that began with the September 18, 2006 article entitled "Inoculate Yourself Against Toxic People”.

If you believe toxic people cause you to enter or exit trades prematurely, belatedly, whimsically or recklessly, then consider this idea. William Eng, in Trading Rules: Strategies For Success, suggests “If you want to discuss your trades, do so only AFTER they are closed out and you have taken your profits or losses, but never before.”

Keeping your trading secret, at least while you have an open position, is a way to inoculate yourself against the damage toxic people can cause to your trading. So if you can’t avoid toxic people, get in the habit of avoiding talking about your trading while they are in your presence.

I'll be back tomorrow ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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You Got Spiritual Guidance

This is the third in a series of articles this week that began with the September 18, 2006 article entitled "Inoculate Yourself Against Toxic People”.

Here's some more inoculation against toxic people. It's a set of beliefs you can use to counteract the negativity that toxic people exude. This set of beliefs appears in Deepak Chopra's book Spontaneous Fulfillment of Desire and in some of his other books.

I have changed and adapted it for myself and you might want to edit it to fit yourself too.

"I have spiritual guidance, therefore I follow it instead of the opinions of other people (especially toxic ones).

I have spiritual guidance, therefore I know I am neither better nor worse than anyone else as a human being.

I have spiritual guidance, therefore I regard all life events, whether "good" or "bad", as entertainment."

The original version prescribed by Dr. Chopra was to look yourself in the eye with a mirror and say the following to yourself:

1. I am totally independent of the good or bad opinions of others.
2. I am beneath no one.
3. I am fearless in the face of any and all challenges.

continued tomorrow ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Shrinking To Please Others Is A Disservice To The World

This is the second of a series of articles this week that began with the September 18, 2006 article entitled "Inoculate Yourself Against Toxic People”.

Toxic people can pop up without warning even if you try to avoid them. Here’s some inoculation to overcome the toxicity, some advice sometimes attributed to Marianne Willamson and sometimes attributed to Nelson Mandela.

“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness, that most frightens us. We ask ourselves, who am I to be brilliant, gorgeous, talented, and fabulous? Actually, who are you not to be?

…Your playing small doesn’t serve the world. There’s nothing enlightened about shrinking so that other people won’t feel insecure around you...

And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.”

continued tomorrow ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Inoculate Yourself Against Toxic People

Previously, I wrote about how toxic people can cause you to lose money in trading. The strategy I wrote about was identifying toxic people and avoiding them. This week, I want to write about another strategy for preventing toxic people from causing you to lose money in trading.

To review the topic of toxic people, refer to my articles in this blog dated July 18, 2006 entitled “Profit By Skipping Out, 6” and July 19, 2006 entitled “Profit By Skipping Out, 7”.

In addition to avoiding toxic people, you can inoculate yourself so that toxic people do not impact you as much as they otherwise would. That’s what this week’s series of articles will be about. More specifically, this week I want to provide quotes from successful traders and other people that I have found helpful for inoculating myself against the detrimental effects of toxic people.

To start this series off, here’s a quote. “No person is your friend who … denies your right to grow” (Alice Walker in Voices of Struggle, Voices of Pride).

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Ph.D. = Pretty horrible Disaster

Today's article continues from yesterday's and is the fifth/final of the series started September 11, 2006 entitled "Back To School".

RICH & HAPPY
Super-author Robert Kiyosaki is a some-time trader and full-time financial guru. He’s best known for his book “Rich Dad, Poor Dad”. One of his many books is entitled “If You Want To Be Rich & Happy, Don't Go To School.” That is an overstatement as shown by the examples in this week's series of articles where Warren Buffet did “go to school”.

Based on the examples in this week's series of articles, you cannot validly conclude that school is totally useless for success in trading. The only valid conclusion the examples support is that in the trading industry Ph.D. means “Pretty horrible Disaster”. Alternatives are “Poor-house Destined” and “Plainly hazardous Daytrader”. However, the foregoing does not go so far as to suggest that MBA means “Money-less Bankrupt Analyst” or “Money-losing Business Analyst” or even that school is totally useless for success in trading.

I hope I don’t get any Pugnaciously humorless Diatribes by email about this article. Instead, readers are invited to email me Many Beneficial Anecdotes about educational courses that have helped them become better traders.

We'll chat again Monday ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Black-Scholes-Merton

Today's article continues from yesterday's and is the fourth of the series started September 11, 2006 entitled "Back To School".

GRAD SCHOOL
Super-educated Myron Scholes and Robert C. Merton both had Ph.D.’s and both got the Nobel Prize in Economics in 1997. But those super-educated Ph.D.’s were super-disasters as traders. They earned the distinction of creating one of the biggest financial disasters in recent history. They created a $4.6 billion loss at their hedge fund Long-Term Capital Management and went out of business after a few years of operation!

If you trade options, you may be familiar with the "Black-Scholes" option pricing model. Myron Scholes and Robert C. Merton were two of the creators of that model. If you're using that model in your option trading, beware that the creators of it got disastrous results.

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Warren Buffet

Today's article continues from yesterday's and is the third of the series started September 11, 2006 entitled "Back To School".

Super-investor Warren Buffet got Masters degree from Columbia University. His biographies often mention that he took a course taught by Benjamin Graham called Security Analysis. The theme of the course was to regard investments as buying/selling businesses where day-to-day price fluctuations of a company’s stock are instances of either under or over valuation. Other courses he had to take to graduate are seldom or not at all mentioned in his biographies. The implication seems to be that only one out of many courses during his years at university were relevant to profits in financial markets.

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Vic Sperandeo

Today's article is part of the series started September 11, 2006 entitled "Back To School".

Continuing from yesterday...

HIGH SCHOOL GRAD
Super-trader Vic Sperandeo graduated from high school but not university. He became a super-successful trader without much “schooling”. He made huge amounts of money trading his own as well as other people’s money. He was one of the outstanding traders featured in the book The New Market Wizards. Additionally, he’s the author of books about trading and economic theory.

continued tomorrow ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Back To School

Earlier this month was back-to-school time.

What has school got to do with profitable trading? Let’s take a look at three levels of schooling.

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Hurricane/Flooding Trade Signal

This article continues from yesterday's (September 7, 2006 "Rough & Crude Hurricane/Flood Trade").

ESSENTIAL TRADE SIGNAL

Has your local governmental authority established a warning system about Hurricanes and Flooding ("H.F")? If so, do you know what it is? If you don’t know, find out immediately how that warning signal will be delivered. That’s a trading signal you don’t want to miss!

ENABLE YOURSELF TO RESUME TRADING

You’ll likely be emotionally and psychologically disabled from trading profitably due to the H.F. so take a holiday away from trading (one or more weeks). During your holiday from trading, do things to restore yourself so that you are psychologically fit to trade. Those things could take up an entire book. One idea is to reinforce your Winning Trigger as described in my August 9, 2006 article “Winning Streaks on Demand” published at Trader Daily magazine.

Back next week ...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Rough & Crude Hurricane/Flood Trade

This article continues from yesterday's (September 06, 2006
"Protect Capital & Preserve Data When H.F. Imminent")

PREPARE YOUR PHYSICAL FACILITIES

Looting is likely to occur during and after the Hurricane/Flood ("H.F.). Don’t risk having your computer data stolen by identity thieves during the looting in your absence.

You’ll likely have to abandon your desktop computer during the H.F. So take the hard drive out of it before you leave. It’s very easy. Just take off the largest one or two screws on the back of the CPU. That releases the side panel which in turn releases the front panel. Then locate the hard drive, a box about 6 inches x 4 inches. Undo the clasp or screw that holds it in place. Then pull it out and detach the 2 or 3 cables from it.

You won’t be able to carry copies of your brokerage statements with you during the H.F. evacuation. So don’t leave copies around for identity thieves. After saving at least 2 digital copies of your brokerage statements as described in yesterday's article, shred all the hard copies except for the most recent one. Keep the most recent one in a sealed plastic bag in your physical possession. You might need the original to prove ownership and to prove the account balance as of the date of that statement.

PRESERVE YOUR TRADING RESOURCES

Do you have several shelves filled with books and literature about trading and investing? There’s no way you can save them all. Just save the ones you refer to at least once a month and the ones that are hard/impossible to replace. Limit the number to not more than what you can carry in one hand. Copyright laws prohibit making digital copies of books so govern yourself accordingly. Seal books in a plastic bag, taping the opening shut with duct or masking tape. You can also seal the books you leave behind and put them in a plastic container in case they survive both the H.F. and the looting that usually accompanies the H.F.

GET CASH

The Red Cross article mentioned in the article Septmeber 5 ,2006 ("Hurricanes & Flooding") about preparing emergency supplies says to get a “small amount of traveler’s checks or cash and a few rolls of quarters”. I think that’s not sufficient. You should have at least one month’s worth of cash to buy stuff like food, water, blankets, supplies, “protection” money for extortionists, and so on for your whole family. That could be several thousand dollars.

The cash should be in small denominations for reasons described in yesterday's article.

Decide for yourself if you need weapons to protect your cash, yourself and your entourage. Hey, if you think NYMEX crude oil traders are crude or that CBOT rough rice traders are rough, wait ‘till you try to trade your way around hoodlums you’ll meet in a lawless H.F. disaster.

continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Protect Capital & Preserve Data When H.F. Imminent

This article continues from yesterday's (September 5, 2006 "Hurricanes & Flooding").

PROTECT THE CAPITAL IN YOUR ACCOUNT

Close out all trading positions. Ask your broker to send the cash to your bank account. Don’t leave the cash in your brokerage account.

You may have forgotten or may have never read your Brokerage Account Agreement. It says that you have a specific time length (sometimes 24 hours, sometimes 30 days) within which to notify your own broker in writing about any mistakes in any account statement that it sends you. If you miss the deadline, the statement is deemed correct.

If your broker sends you statements every business day (TradeStation does that), then your Brokerage Agreement might result in you having only 1 day to file notice of objection to any mistakes in it.

What if during a H.F. you are unable to access the internet for the purpose of examining statements from your broker? And what if your broker mistakenly attributes losing trades to your account while you were so disabled? Your brokerage agreement would provide that the mistake is deemed correct. If the mistake is adverse, you’ll have lost money.

You don’t want to have to get into litigation with your broker to recover your cash. You’ll be too busy suing your insurer over what H.F. damage is covered by your insurance.

Account agreements at banks usually give you a longer period of time than at brokers within which to file a written protest against mistakes in an account statement. Also, my guess is that politicians would expect to get more political mileage out helping an “ordinary bank customer” get money back from a “savings account” than helping a “greedy trader” get money out of a brokerage account. Therefore, you have a better fighting chance against your bank than against your broker.

If you trade an instrument that has a deadline (e.g. options or futures), closing out your position safeguards you from missing that deadline and the loss of money that would result from missing it due to the H.F.

Get enough cash in small bills, like $20 or less, to cover a month of living expenses. You’ll need cash to buy food, water and other things during and after the H.F. During a H.F., vendors cannot and will not accept credit cards. They will also refuse to accept large bills for fear of getting counterfeit money. My experience is that they only accept small bills, like $20’s or less.

PRESERVE YOUR DATA

Use a scanner to make digital copies of all your paper records. You can get a scanner with an automatic sheet feeder for about $100. First, put a digital copy onto a CD/DVD disk and keep the disk in your physical possession if you have to evacuate. Second, upload a copy to an internet archive. Yahoo has a free one . So does MediaMax

Similarly save onto disks and upload to the internet the digital copy of your Trading Business Plan, Trading Journal, Account Ledgers, Trading Platform configuration, Computer Programs, and any other computer resources you use in your trading.

Make digital copies of all other documents proving ownership of your non-trading assets too (like your house/condo). Save and upload them as described above. Then, seal the originals in a water tight plastic bag, taping the opening shut with duct or masking tape. Keep these in your physical possession if you have to evacuate.

More tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Hurricanes & Flooding

Hurricanes and Flooding (“H.F.”) are prominent in the news right now. Does your Trading Business Plan include a chapter on Preparing to Survive H.F? That's something necessary regardless of the instrument you trade (e.g. emini futures, stocks, bonds, options, etc.)

I searched the internet for articles that would help traders like yourself prepare for H.F. I did not find any specifically on point for traders. However, there were many articles of general interest. For example, the Red Cross has an excellent article describing what emergency supplies to assemble and how to assemble them into a water-tight barrel.

The Red Cross also has a good article that comes close to what financial traders need. It deals in general with steps you should take to protect your finances during a disaster.

But I did not find any articles specifically relevant to helping traders prepare for H.F.

Assuming you’re prepared in general to survive H.F., the next few articles in this blog contains some things to do specifically in relation to your trading when H.F. is imminent in your neighborhood.

If you’re an independent trader without any dependents, you can evacuate before the crowds. Just move temporarily to another part of the country where there is no imminent H.F.

Moving away immediately is not practical if you’re married with a spouse who has a “real job” and kids in school. They likely will resist moving. So here’s what you can do in addition to the general advice from the Red Cross if H.F. is imminent in your neighborhood.

Continued tomorrow...

Copyright 2006 Raymond T. Lee. All rights reserved.
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Quit Trading Until Tuesday

Today, expect traders in the USA to quit early because Monday September 4, 2006 is a holiday. So shut down for the long weekend, run a defrag program on your trading, and return refreshed on Tuesday...

Copyright 2006 Raymond T. Lee. All rights reserved.
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