When you strip away your emotions on the subject and look at your situation with cold hard analysis, there are really only two main variables:

1. Are you using a profitable trading system?

In other words is your trading method giving you entry and exit signals which if executed correctly lead to profit, in the balance of trades. Do you know your trading system’s expectancy?

You would be amazed at how many traders can’t answer this question. For many traders in their first few years of trading, the market has such an aura of mystery about it, and there are so many details in terms of charting, order entry, brokers etc. that they forget to ask the most obvious of questions. Don’t be one of these traders! Don’t be willing to go out and risk your hard earned money on hope. You wouldn’t drive your car somewhere unless you had a reasonable certainty that it was going to get you where you wanted to go. You wouldn’t eat food unless you were reasonably certain that it wouldn’t make you sick. So why trade without knowing what to expect from your trading system?

If you want to gamble, surely it would be more fun to go and bet on a sports game? Despite what some may say, serious trading is not gambling. The profitable trader knows exactly what to expect from his system over time. He won’t be able to tell you if his next trade will be profitable, but over a week or month he should be able to tell you with reasonable accuracy his trading system’s expectancy.

So test your system, either using the back testing functionality of your charting package, or by paper trading it over an extended period. Knowing the expectancy of your trading system is your foundation, without it you have NOTHING! Really, NOTHING! Without knowing your trading method’s expectancy you are building a house on sand.

This first step is really a gate keeper. If your trading method is not profitable there is no point in going any further.

2. Execution

Once you know for certain that your trading method has is (or has the expectancy to be) profitable, the only other variable is executing it correctly. Yes, you may be saying “duh!”, that’s really obvious. But when you boil your trading down to these two simple variables – when you know what to expect from your system – then you can place 100% undivided focus on mastering your ability to execute your trading system.

The mistake that many traders make is focusing on the wrong thing. Your job isn’t being the trading system! Its not to decide which trades look promising. That’s the job of your system or method. You should have a set of rules which tell you this, which you follow. Unless you are incredibly experienced or have psychic powers, don’t do discretionary trading. Don’t get lost in price movement and make up the rules as you go along.

Your job, your only job, is to sit patiently and wait for your system or method to indicate that its time to enter – and then with great focus, you execute the trade as planned, and you get out again either at the predetermined profit targets, or when your stop loss gets triggered.

I know this seems really basic, but remember that 99% of traders fail because they either don’t have a profitable system, or because even with a profitable system they don’t follow it. Taking trades not indicated by the system, second guessing the system and not taking trades given, hesitating and getting in late, anticipating and getting in early – these are all commonplace. They all boil down to a lack of faith in the system, and not having a burning focus on accurate execution.

Where does mindset fit in here? Focus on staying focused – on execution. Make it a meditation. The more you develop the ability to step back from price movement and watch the market dispassionately – waiting for a signal to trade, the easier it will be to master your emotions. The easier it will be to witness the fluctuations of your emotions without getting sucked in to them – and allowing them to throw you off your game.

Mental Prep

1. Harness the power of intention

As you become more and more focused as a trader and as you learn to clear your emotions the power of your intention will become stronger and stronger. Begin the day by setting the intention that you will be successful, that you will be profitable, and that you will be safe. If possible visualize it, or feel that it will happen.

If any feelings or thoughts come up contrary to that intention (e.g. I lost yesterday perhaps I’ll lose today) go straight to the next point and clear that thought/feeling.

2. Clear limiting thoughts and emotions

Did anything happen yesterday or on previous trading days that is bothering you? Anything happening in your personal life that may be affecting your state of mind? Any recurring thoughts or feelings that come up during the trading day?

Read my blog post about emotional clearing – learn Core Transformation and clear that crapola out. And for any of you hardcore guys out there that are thinking this might be a bit touchy feely, I suggest you look at this in purely financial terms. Learning these techniques will help you get the success you want. And nobody needs to know!

3. Brain power

Make sure that you have exercised and eaten properly so that your mind is clear and fresh. Have the right snacks at hand so that you can keep your blood sugar balanced, so that you mind stays fresh and optimally focused.

Timing

4. Know when you are going to trade

You may say “How do I know when I am going to trade ahead of time?”. In response I’d say, “if your trading system doesn’t tell you when you are going to be trading ahead of time, then you are missing out on a huge advantage”. As you’ll see from the various posts on cycle trading I am convinced that time is as important a factor in determining entries as price. This is why I use a combination of cycles and harmonics in addition to regular technical analysis to determine entries.

Adopting this trading methodology was the single biggest contributing factor for me in becoming a consistently profitable trader, because I can calmly prepare for the times that I am going to trade and I can relax my focus during the times when I know I should be on the sidelines.

Practical Details

5. Are there any economic numbers being released today?

Know exactly what time they are and watch out if you are trading around these times as there may be some dramatic fluctuations in price movement. Unless your strategy specifically includes trading these numbers, many traders prefer to sit on the sidelines until the numbers shake themselves out.

6. Any significant business or world news today that may affect the markets?

Days when companies release earnings or when there are other significant events, make the market jumpy. You need to be forewarned so that you can decide either to sit out, or to be extra vigilant.

7. What happened in the markets overnight?

Same idea as point 4.

Discipline

8. Review your discipline committments

If you are someone that has problem over-trading or pulling the trigger, or if you have challenges following your system, make a list of discipline committments. List out those things that you commit to in terms trading discipline. e.g. I will only take trades on signals that my system gives me. Go through them before the trading day begins and refresh your resolution.

I had a lot of trouble with over trading in the early days. As I got absorbed in the market action it was like becoming hypnotized, my discipline went out the window. I actually had to set an alarm clock to go off and every 30 mins I would re-read my discipline committments to force myself to snap out of it, and refocus on following my trading rules.

9. Review you trades from yesterday and your trading journal

Reviewing you trades from yesterday is a great way to refine your skills and learn more about your strengths and weaknesses. If you had a day where you were able to execute your trades flawlessly based on your system (whether or not they ended up being profitable) you can consolidate the confidence that brings. If you had a day that left an emotional mark because of losses or mistakes you can go back to point 2 and clear them.

If you found that you were unable to execute your trades effectively its another opportunity to revisit your trading rules, your discipline committments, and refresh your intention that today you will trade your system.

Opening

10. Give thanks

Give thanks to your self, and to whatever power of the universe that you respect for the opportunity to trade – which is nothing more than an opportunity to master yourself.

The state of gratitude is a great inner state to approach the day. It buoys your optimism and invites to you the circumstances for success.

As the French say “Bon courage” – and have a safe and profitable day!

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Not only that but it’s a steal at the price – and risk free for 30 days. What I really like about Adam and the team at MarketClub is that they are genuine. In Adam’s words:

If I had a brother or a sister, I would want to share this market proven logical approach with them …

Why?

Because I know it works.

So why am I sharing this information with you, someone I am not related to, and don’t know personally?

Here’s the reason.

I am tired and frustrated by seeing individuals getting ripped off with all these get rich quick systems that look great on paper, but fail miserably in the real world.

Call it my personal crusade to help others become better investors and traders. I have just finished a new video on the logic that I want to share with you to kick off this crusade. You can watch it here with my complements.

Enjoy,

Adam Hewison President,

INO.com (MarketClub)

I’m not sure how obvious this is to you at this point, so excuse me if I’m hammering you over the head with it:

The biggest single mistake that beginning and losing traders make is…

to place much too much importance on their methodology and much too little importance on money management and mindset.

I strongly believe that this misunderstanding was the greatest contributing factor to me being a losing trader, and it was only when I finally got it that things began to change . When I lost money I always redoubled my efforts at practicing trading my method. I thought "if I can only trade my method properly, I"ll be fine". What I didn’t understand is that in live conditions there are so many "other factors" in play that if you don’t have the mindest and the money management, you will repeatedly be thrown off in your ability to execute your method.

What’s suprising, and its true for many losing traders, is that we’ve heard it said many times, and yet we persistently disregard it. I know that for myself, for at least the first 5 years of trading, I believed that method was the magic and that the other two were ‘add ons’.

On average losing traders spend about 70-80% of their effort on practicing and refining their methodology and only 20-30% devoted to the other two.

The reality of successful trading is that it is approximately 80% about mindset and money management and only 20% about method . You can have a completely crap method that loses 50% of the time, and yet as long as you have the right money management and the right mindset you can still be profitable overall.

So if you get one thing as a result of reading this entire blog I would wish this for you – don’t blow this statement off, it’s key to your success.

Money Management and Mindset are much more important to your success than your method.

Can you imagine someone that wants to take up racecar driving competitively. They’ve been told by the experts that the three things they need to focus on at the beginning of their career are – getting a fast car, learning defensive driving skills so that they can stay the course, and a tough mind.

However the person puts all their effort and attention into getting the fastest car. They are convinced that this is what will make them most competitive, only they discover that each time they go out to race they spin off the track. Its only after this happens for the 10th time that they begin to understand why defensive driving and mindset are also important. If you don’t have the ability to stay on the track, what is the use of a fast car?

So here’s something to think about. How much time are you giving to the three pillars of trading? Do you need to make an adjustment and give more time to money management and particularly to developing your mindset?

Next blog post: How clear are you about your trading methodology?

Here’s the evaluation…

• A methodology or system that is consistently profitable and that you can trade consistently profitably.
• A practical system for risk/money management to protect you from yourself, that you follow as though your life depends on it, and that has an over-ride for the days you don’t.
• A willingness to be honest with yourself about the areas of trading performance where you need to improve.
• A willingness to examine your own beliefs (for example about whether you’ll make it as a profitable trader) and change them where necessary.
• The willingness and ability to study, practice and implement new discipline habits.
• Enough money in your trading account to get over the hump (probably about $20,000)

This blog is about doing, finding, getting all these things (except the last one!)

I expect by now you’ve realized that it’s going to be bloody hard work. So.. you’ve got a decision to make. You’ve got to decide whether you can make the commitment.

There’s no shame in deciding that you can’t – perhaps the time’s not right, perhaps you have other responsibilities, perhaps your family won’t support you etc. But if you are going to do it – you’ve got to REALLY MAKE THE COMMITMENT. Its going to take everything you can throw at it, and then some.

So before you go any further, take stock, re-read the points above and decide whether you’re willing to give it a shot.

Are you in or are you out?

Next blog post: How do you measure up? Use this free self-evaluation to identify your trading strengths and weaknesses

I’d been trading on and off since 1999. I’d burned through my account twice ($30,000) on the learning curve and this third time around I’d been absolutely determined to make it work. For a year I’d worked my balls off preparing. Working nights to save money, studying, and trading on the simulator during market hours, honing my method.

This time I’d been really careful, and I thought I’d learned from my mistakes. I was 100% confident in my method – that day in day out it could make a profit. I’d been conservative and realistic in practicing, trying to get as close as possible to real coniditions.

I didn’t have a lot of money, I’d already blown my wife and I’s savings, but I’d put together $12,000 and I thought, given my careful preparation that this was comfortable. In mid October 2002 I was ready and I began trading again…

By January, three months later on the day you first joined me, I had $3000 left in my account -I’d just lost another $1000 in one day. I was completely out of control, trading like a mad man, all signs of discipline out of the window. I was filled with panic, anxiety and pain. My wife was so mad with me -that I’d lost all the money again- she packed her bags and left me. It was an all time low.

The challenge of the struggling trader

A struggling trader has a unique cross to bear. Not only the challenge of learning a profession that requires skill and self mastery, but also what feels like the almost insurmountable challenge of staying positive, of overcoming the painful emotions of loss and failure that haunt our present decisions, unless we deal with them effectively.

This blog

I decided to write this blog based on my experience, and in brotherhood with traders that are going through similar experiences — that have a great determination to succeed but that are hurting from the learning process. Its not too late. There are specific things that you can do, step by step, to turn your trading around. I did it. Five years later I’m a reformed trader. My wife came back, and I’m consistently profitable. Good luck, and keep the faith! You can do it!

Next blog post: What’s it going to take to become profitable?