MENTORING
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Horses for Courses.
If you are serious about trading for a living then you should seek out a Mentor that is suitable for you, your psychology, and your preferred area of methodology.
For exanple, there are Mentors about who are Swing Traders, Daytraders, Position Traders and all manner of hybrids. One will specialise in Elliot Wave, another in classical Technical Analysis, another in Fundamental Analysis another in Cycle Analysis and many more.
Yours truly does not use TA indicators having spent years developing an approach which is based on a combination of Numerical Analysis and reading Charts as a musician reads musical notation.
Then of course there are so many different markets and types of financial instrument you would not be wise to get mentored in Index trading if you want to trade Forex. The differences can be as distinct as mistakenly seeking the services of even the finest Optician when what you actually need is your teeth filled.
Why mentoring helps
Anybody can get lucky with the occasional trade but to make a consistent living as a Trader, for your own account, you need to develop a disciplined approach to your trading which embraces a technical methodology that is flexible enough to react to changing market conditions, which you have become skilled enough to define anew every day.
This alone though is not enough, for you also need to exercise the highest degree of control over your emotions and, last but not least, a mature and professional understanding of your own psychology is essential to the execution of actual trades. Only the fullness of that combination of elements can enable you to trade efficiently over and over again, forever. I do not know a single successful trader who has not found this to be so, and mentoring can steer you up the green and away from the bunker.
Theory and Reality
It is impractical and unviable to learn how to trade just from books or courses alone because it is only the actual act of trading for real which can embed into you the cut and thrust of the real life market conditions in which you have to operate, especially because it is your own money on the line which is what triggers the emotions which have to be eliminated in order to make rational and sensible trades.
It is known that of those who go into trading without appropriate knowledge, experience or help virtually none of them survive more than six months, because they have lost all their money and have nothing left to trade with.
Beware the Bull
The Individual seeking to seriously acquire the edge he or she needs to trade successfully has no shortage of seminars, courses, psychology events and so on to choose from. Some of the more expensive packages provide you with a great deal of technical knowledge which can be quickly bought, as opposed to acquired over years of time. However, many, if not most, of such events are really just a way of getting in front of you to sell you something, such as a computer program which promises the five minute walk to easy street, a broking service, a subscription to a web site offering you "tips", a marketeer's dream of collecting lots of ticket money at the door, or some other magic formula which promises you the quick and risk free road to buckets of money in a jiffy. Basically such people are not Mentors but Marketeers who are experts in "selling you the dream". They may seem cheaper than the cost of a good mentor but they cost you much more in the long run from the inevitable failure which ensues.
Therefore, if what you really need is to return home the next day much better able to implement improvements in your trading performance, than you were before you followed one of the above paths, great care is needed to assess which of these events, if any, can help you achieve that objective.
Aim for what you need not what you want
Particular attention should also be paid to how much theoretical information you are amassing, as opposed to how much practical knowledge you are gaining, for be assured that those of who us who actually do trade for a living only do so using the latter, and could never do so with the former.
Theoretical knowledge is often imparted upon you by characters who, no matter how clever or eloquent they are, or high profile in the papers, magazines or the web they may be, will often forget to mention to you that they do not actually trade themselves.
It is not necessaraily a suitcase full of "training Dvds" that you need if the person(s) selling them to you are not available to hold your hand. In real life trading, we have to have the necessary knowledge inside our head and be able to make split second decisions in markets which can move faster than a bullet.
A genuine Mentor does not need big offices sports cars and big talk, and instead of leading you to the end of a rainbow, will show you the reality of the business of Trading for a living, and guide you towards the mental, emotional and technical shape you need to be in to have any chance at all of making the grade.
Real life Trading
In trading, especially daytrading, in addition to being able to apply the highest standard of concentration you must learn to coordinate the various elements of trading simultaneously. These will include:-
1. Having the knowledge to develop an insight to interpret the apparent daily market conditions before each trading day begins, and planning an outline strategy which is appropriate, usually in solitude. There are no novice traders I have ever met who have any sense of measuring market conditions, nor any awareness of how this measurement needs to underpin their trading approach from day to day, nor any idea of how to measure it. Any good Mentor will therefore begin at that beginning.
2. Possessing and applying a reliable method to analyse the chart and numbers in front of you to identify tradable price points, and compute the correct level of stake to risk. Turning points and tradable price points are different, picking the former makes you an efficient Analyst, but only picking the latter can make you an efficient Trader.
3. Having the confidence to then pull the trigger quickly enough to capture the opportunity, and not close out the trade too quickly, from fear of loss.
4. Having both a workable technique and the personal discipline of exiting a trade either (a) for best profit or (b) for minimum loss, to generate income and\or preserve trading capital.
5. Eliminating all emotions while a trade is open, so that the mental and methodical approach is not overridden by the emotional state.
6. Devising and implementing with total discipline a set of bespoke trading rules to calculate and manage, continuously, the state of financial risk.
7. Managing your trading fund using sound accounting practise.
Your own Psychology
It is important for you to understand and accept that Trading, for those who make the grade, is a business which on the plus side can be a viable alternative to orthodox employment and provide much spare time to boot but, on the negative side, for those who cannot make the grade, it can make you broke and\or give you a nervous breakdown.
You will often read or hear a lot about the psychology of the markets but in real life trading the most important psychology to be familiar with is your own, for you are an army of only one at your trading desk with no one to pick you up when you fall down and no one to pat you on the back when you get through the finishing line.
Therefore, do NOT attempt to become a Trader if you are, in a nutshell, not suited to it temperamentally, psychologically, emotionally, numerically etc., Remember that it is only the smallest percentage of the entire population who make the grade and some of the most intelligent and talented individuals on the planet have tried and failed.
Some examples of new trader psychology profiles include the following:-
PAPER
NOVICE TRADERS.
The lack of emotional involvement with the market by only paper trading
explains why so many individuals can win “competitions” with notional
money, but can never make a pound from real trading. Almost none of these
individuals ever go forwards into actual trading, as they become hobbyists
who are often to be found parading bulletin boards. This is often because
they are afraid of success. The psychology behind this is that success
has the power to change lives, and remove the individual from the routines
and certainties of their humdrum daily lives which, although trapping
them in the rat race, still provides them with a feeling of emotional
security, without which they are unable to feel safe. This is why so many
lottery jackpot winners crack up, and why such a small percentage of the
entire population take the plunge to work for themselves. Mentoring can
help the remaining minority of those who are willing to buck the trend
to cross a bridge into "becoming alive" from previously "just
existing".
THE ACTIVE NOVICE TRADER.
Novices who have been actively trading are of a different mould, because they realise that the only way to make money and design their own life is to stop being someone else's employee, and start working for themselves. And they get on with it. However, without the right method, mindset and emotional make up, they find themselves frustrated by a mixture of some success and some failure which nets out to an overall loss or a "going nowhere" scenario ("break even traders"). They become too close to the problem and too remote from the solution.
Struggling
to understand why they are not succeeding, they reach a point of self
torment from which only mentoring can help them escape the fog, emerge
to view clear blue sky, and avoid "washout". Washout is where
they themselves end up feeling physically, emotionally and mentally washed
out and, finally, financially washed out, without a second chance available.
THE ACADEMIC NOVICE TRADER.
Then there are those who, with great commitment, embark on an endless
overly academic study of market movements, as though they are sitting
their school exams. They find themselves encouraged by their observations
of moneymaking opportunities yet are unable to find either a consistently
reliable technique, or the confidence to act upon them and bag the booty
and are often found buried in a myriad of indicators from technical analysis.
These people are usually highly intelligent individuals. However, what
has happened here is that they have approached the market with a rigid
belief that reading Stockmarket movements is a pure scientific\mathematical
affair. This is wrong, for analysing markets is a science, but trading
them is an art! It was Einstein who said that imagination was greater
than knowledge, and without imagination the art part of trading cannot
be mastered. Everyone is born with imagination, but it has gradually been
beaten out of him or her by a Society system that likes to produce uniform
controllable outlooks, instead of true individuals.
What is needed is a "re-activation" of "their third eye";
to awaken that heightened state of awareness that has laid dormant for
many years. Frequently, academic novice traders will convince themselves
they have found a scientific formula for success, but then proceed to
lose all their money, before ending up harbouring regrets which frequently
lead to depression and trading self-sabotage.
THE NERVOUS NOVICE TRADER.
Most nervous novice traders I have encountered are also highly intelligent
people. Fear of risk is usually the reason why they are often reduced
to a nervous wreck, and especially so where they have no training in how
risk is something not to be feared, but to be managed. They will continuously
find every reason under the sun why they cannot get on and make trades,
they are basically waiting for "certainty" to come along, and
of course it never does.
All successful traders are in control of their emotions, and have a sense
of proportion in regard to real risk versus perceived risk. If your emotions
are controlling your trading, then you are simply not going to succeed.
The person with the intelligence needed to become a heart surgeon is not
going to do well in the operating theatre if his or her hands are shaking.
You see, the only cure for someone who is afraid to fly - is to fly! But
the confidence to fly cannot come from climbing into some old single engine
rust bucket controlled by a blind pilot.
An experienced hand is needed to guide this trader through the dark, and
safely out into the light. Self-confidence is the quality here which needs
to be motivated, and a series of excercises to develop a relaxed emotional
approach to trading.
THE IMPATIENT NOVICE TRADER.
Becoming efficient enough to make a living from trading is something comparable
to learning how to drive again, insofar as it is one thing to learn how
to steer the car, another to change gear, another to keep your eye on
the road and analyse the road signs, other traffic etc., but quite another
to concentrate on all of them at the same time. Now that you can drive,
it all seems very straightforward, but when you were first learning, it
needed time, study, practise and learning from mistakes. You could have
achieved this on your own, eventually, but it would have been a lot quicker
to have had some lessons from a driving instructor. However, there are
many who have passed their driving test who are still lousy drivers, and
some of them are dangerous drivers.
In trading, these people trade recklessly, without knowing why they have
entered a trade, other than some pie-eyed theory which they have either
been sold, or have concocted from a set of beliefs that have no foundation.
They are impatient to earn money, but have not found the time or inclination
to learn how to do so first.
THE LOTTERY NOVICE TRADER.
Millions of individuals are comfortable to play the lottery because a
£1 ticket is no risk, and a jackpot win is a huge reward. The fact that
the odds of such a win are poorer than the odds of being struck by a meteorite
does not seem to put them off. There is nothing really wrong with that,
until this individual brings that philosophy into the trading arena.
All too often, I encounter the person who dogmatically believes he or
she can earn a huge annual income by investing large amounts of money
into a trading desk but perhaps only a hundred pounds or so into their
trading fund. You don't need a huge amount to get started, but it is important
not to arrange things the wrong way around, unless you are a long-term
investor who does not need to earn a living from trading.
These people are invariably so risk-averse that they make Scrooge look
like a gambler. Mentoring teaches you the correct structure of your business,
if you wish to have a real prospect of succeeding as a Trader, by lowering
sights at the jackpot and increasing the stake in proportion to obtainable
reward or, in other words, how to use money to make money, which is the
only way to do it properly.
A typical lottery novice trader will say that he or she can only afford a tiny amount to trade with, and is unwilling to save up enough money to trade properly, or is unwilling to draw cash against his assets to have a sensible amount to work with.
He or she wants all the big annual income that can come from trading,
but virtually none of the risk. He or she will always find "reasons"
why, one day, they will trade properly, but that day never actually comes.
What mentoring can do for this person is to jerk them into reality, and
teach them the difference between having a dream which is always going
to be a dream, and doing what is necessary to make that dream come true.
THE FRUSTRATED NOVICE TRADER.
Frustration is one of the many types of emotion which can suffocate even
the best efforts at efficient trading. The frustrated novice trader is
usually an individual who understands and agrees with everything I have
said in the preceding paragraphs, and has already attended courses, seminars,
training etc., but has returned to his or her trading desk to find, quite
simply, that what they have been taught, or sold, just does not work.
This person is a well meaning, well-intentioned, intelligent, diligent
and determined individual who is to be admired for effort and tenacity.
They will possess magnificent personal characteristics such as perseverance,
courage and the will to succeed Unfortunately, they are losing money hand
over fist, and have been slow to accept that the methodology they have
been taught or sold is balderdash. This makes them feel bad because their
ego is bruised by feeling duped. It is difficult for them to want to pay
a Mentor a fee, as they feel they have already paid enough money out to
others, and they want any new Mentors to put everything right, at their
expense, while the bad guys live in the luxury they have obtained by duping
the novice with their Moses like charisma and fancy marketing ploys.
In addition to this, the Mentor has the hard task of trying to undo what
they have learned before being able to teach them what they should be
learning. Nonetheless, this kind of person, IF they can let go of the
rubbish they have learned, is likely to move quite quickly to the state
of successful trader after mentoring.
By consistently trading badly, they have at least mastered consistency.
Reversing the flaws in their approach leads them to consistently trading
efficiently instead. However, they have to learn to "slow down"
as their frustration will have brought them to the end of their tether,
and they will be in too much of a hurry to make good the failure they
have so far experienced. They need to "write off" their bad
experience to date (like a bad trade) and move on. NOTHING they have learned,
however useless, is wasted, for they have learned many ways of how NOT
to trade.
THE TECHNICAL NOVICE TRADER.
It is a common error on the part of "technical" novice traders
to presume that a technical or mechanical method alone is all that is
required to profit from daily price movements in a financial instrument.
Mentoring can teach them that it is not the method which needs to be mechanical,
but the actual physical execution of trades.
A technical method must actually be dynamic in nature, to be able to bend
with the variable flow of price movement. Mentoring steers you towards
an appropriate mindset to achieve that, and teaches you to separate one
from the other, yet employ both at the same time.
THE FUNDAMENTAL NOVICE TRADER.
The "fundamental" novice trader is a learned and thinking individual
who is not too lazy to study the papers, the accounts, and the commentaries
on individual company shares and their parent Indices.
The error they pursue is a failure to distinguish between the very different
concepts of trading and investment. Clearly, if you are going to commit
significant amounts of your money for a very long time into the shares
of a company, or its parent Index, you want to know about fundamental
elements such as the balance sheet, earnings per share, percentage of
yield, make up of Directorships and so on. However, this is of no use
whatever to the short term trader, let alone the daytrader. They are different
goals which rely on different approaches.
The fundamental novice trader is not a trader at all, but an investor
in disguise. Mentoring can help them find which camp they belong to, and
help them transform from one to the other, if they want to. However, these
two sides of the coin are not mutually exclusive. This is because there
is no reason at all why you cannot earn your living from trading, and
then move excess income into long term investment.
THE TOMORROW NOVICE TRADER.
The tomorrow novice trader is an individual always of substantial ability,
but is in a combined state of personal denial and laziness. This is because
he or she will already be earning a living from something, perhaps a job
or a small business, but is aware, whether instinctively or factually
that "the writing is on the wall". I.e. He or she believes that
what brings in the bacon at the moment is, at some stage in the near future,
very likely to come to an end, and an escape plan is needed.
The idea of trading for a living provides a perfect idea, a perfect plan
for what is to be the route to take after the current income reaches an
end. Unfortunately, this individual is just dreaming, for he or she is
always finding an excuse why he cannot do something today instead of why
he can. He or she belongs to that fraternity who follow the maxim of "why
put something off until tomorrow, when it can be put off forever".
He or she is generally miserly in nature, and on the one hand unwilling
to leave the present job or business until its gravestone is ready, and
is unwilling to dive into trading for a living unless or until the "certainty
of success" and the "absence of financial risk" comes along,
in a package topped off with a blue ribbon and a certificate of guarantee.
This person expects the Mentor to be available on the National Health
Service, and wants a guarantee of eternal financial life before laying
out a penny and will often even be so mixed up as to ask about a pension
plan.
THE GAMBLER NOVICE TRADER.
The gambler novice trader is a gambler. So far, his gambling on trades
has lost, lost and lost again.
He or she knows that there is a difference between gambling and trading,
because the latter measures probability, whereas the former ignores it.
The gambler is, by nature, a fatalist. This is because it is much more
comfortable and easy to transfer responsibility to the gods than to take
it on board and be responsible for the outcome of reckless trading.
Occasionally, the gambler will get lucky, and make a large sum. This however
is always followed by an even larger loss.
However, he or she actually has some very special qualities, including
courage, no fear of risk, and active imagination. Indeed, the gambler
has many of the qualities of a good trader except one; he or she has no
decent method or self-discipline. Mentoring can change that, and make
the best of the good qualities and help eliminate the poor ones, to turn
this individual into one of the most efficient and successful traders
possible. However, this is only if the individual is prepared to listen
and be taught.
THE BLAME EVERYONE ELSE NOVICE TRADER.
The blame everyone else novice trader is an individual with great analytical
ability, and considerable natural ability to approach tasks in a very
mechanical fashion. He or she is quite proud of their emotional detachment
from others, and is unlikely to relate either to the pain or problems
of others, and not ever to express his or her own emotions.
For them, trading is a black and white affair, which could work, but doesn't,
because there is a fault with the teacher, the method or the operation,
it can never be the fault of him or her. This person has a very nice side
to them, but you have to discover it and draw it out, for it will not
be willingly offered. They have ALL the innate ability and intelligence
to be an awesome trader, but their cold manner and lack of warmth and
imagination causes them to fail to see the methodology, and they find
reasons why they can make no money this way because everyone they talk
to is selling them a white elephant.
Invariably, this person feels unloved in their personal life, unrecognised
for their superior intelligence, and unconvinced that anything less than
the holy grail itself can justify them taking risks by trading for a living.
Paradoxically however, they state that it is their absolute mission to
become a trader.
Mentoring these people does not require the teaching of the elements of good trading, because until they are made to feel better about themselves in a personal way, they will just deny it works and blame everyone else. However, make no bones about it, if they can be brought around to a different mindset, they make for awesome mechanical traders who would be hard to beat even by the best. Mentoring here starts with a battle with the mindset, and if it is won, we are talking star quality trader, but if it is lost, then so is the teaching.
Definition of Mentoring
Personal Mentoring is a one to one relationship, based on one of the oldest forms of human development, which can save years of learning the hard way.
Webster’s New collegiate Dictionary, 1979, Interviews of General Population, 1993A, describes a mentoring relationship as one which can take on differing aspects for different students, from role model, confidante, nurturer, guidance and wisdom provider, partner, friend, helper, guru, tutor, coach, trusted counselor and teacher.
Courage, commitment and firm truth are what is brought to each mentoring relationship. The same level of courage and truth must also come from the student.
There are some good Mentors out there, who instead of trying to sell you things, will concentrate on helping you become skillful in the part science\part art of short term trading and daytrading.
The ultimate goal is to avoid ending up, as most do, in the Traders' Graveyard and, instead, become empowered not with confidence in the Mentor, but in yourself.
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