Developing the Mindset of a Successful Trader

By Cam White
Note: Please make sure to read the Disclaimer at the bottom of this blog

Why is it that some traders are successful, while so many others fail? What are the personality traits of traders who consistently make money and what are the habits of traders who constantly struggle? As my journey back into the markets continues, it is becoming more apparent to me what separates successful traders from those who consistently blow out their accounts.

A key part of becoming a successful trader is having the humility to be patient, invest in education and to become a student of the markets. Over the past 6 weeks, I have registered for over two dozen free webinars hosted by TradingPub. The speakers on these webinars cover a multitude of topics on trading the markets, and they all have different trading plans. But the one thing they all have in common is that they made plenty of trading mistakes before they learned how to become consistently successful.

Getting your mind and body prepared for success is a key component to successful trading. Benjamin Lee, founder of Think Trade Think,  kicked off a marathon 16-hour Trade-A-Thon hosted by TradingPub with an excellent presentation which spelled out the most common trading mistakes and why they happen. He talked about the personality traits of struggling traders versus winning traders. If you are new to trading the markets or if you're struggling, this presentation is worth its weight in gold.

When I sat through this presentation, Benjamin clearly pointed out some of the rookie mistakes that I am making, like overtrading and getting out of trades too early. The presentation also provided a road map for psychologically becoming a better trader.

Successful traders have a sense of calm and confidence about them.They have a defined trading plan and time-tested rules that they follow. They don't trade with great frequency, but they know a good trade when they see it. Unsuccessful traders are nervous wrecks who throw money at the markets, over-trade, revenge trade, act on"hot tips" and bleed out their accounts.

The more I immerse myself in education, the more relaxed and confident I am becoming as a newbie trader. New concepts are tested conservatively in simulation, and trading logs are being kept, charting successes and failures, profit and loss, and risk/reward analysis. If a strategy plays out well in test, then it is deployed into my live trading plan.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Week 3 Diary - Five Rules I've Learned About Trading the Markets

By Cam White
Note: Please make sure to read the Disclaimer at the bottom of this blog

As I enter my third week of trading the markets, I've discovered that I have some pretty decent trading instincts, but there is a wealth of information I still need to learn. My plans are to treat trading the markets like a business, and not as a hobby. Here are the top 5 things I have learned thus far:

Rule #1 - Understanding My Appetite for Risk

Trading the markets must be only done with risk capital. Simply defined, risk capital is money you can afford to lose without impacting your lifestyle. It's putting that little bit of extra money outside of savings and retirement funds to work for you. Risk capital is different for everyone, so for the purposes of this blog, I'm going to assume I had a garage sale, found some money in an old, dormant account, and raised $1,000.

Now, what do I do with this risk capital? If I roll the dice and invest it all on one trade, the stress would make my brain explode. If I invested half of that amount, my heart would be racing. But if I trade 5-10 percent of my account, I am relatively calm about the decision. If I have a successful trade, I have grown my little account incrementally. If I lose less than 5-10 percent of my account on a trade, it's disappointing but not emotionally devastating. The bottom line is that I need to adjust my appetite for risk on any trade so I can accept gains and losses without getting emotional one way or the other.

Rule #2 - Invest in Education

I learn by doing research, reading books and through osmosis. Almost every weekday morning, I tune into the a free online Trading Room hosted by Infinity Futures. At 7am (Central Time) Ray Burchett talks about the overnight markets, economic news, and his views on the current state of the markets, focusing primarily on the S&P 500 futures markets. From 8-11, Rollie White trades the markets live with his own money, focusing on 6 key markets he likes to trade. Together, there is over 35 years of trading experience between these 2 speakers. As I tune into the Trading Room, I learn from their experience, and I always pick up new and useful information that I can test and apply to my trading plan. Both Rollie and Ray also take questions from listeners and are happy to answer them. While I am listening to the trading room, I scan the morning news on the markets from Investing.com, Bloomberg, CNBC and a couple of other sites.

I also learn by attending webinars. Part of my new job with TradingPub is to help schedule speakers for free weekly webinars hosted by the site. These speakers talk to every aspect of trading the markets, whether it's stocks, bonds, futures, options, Forex or other trading instruments. As I sit in  on these webinars, I take notes and learn from every webinar. There are so many different approaches and strategies for trading the markets, and every successful strategy has its merits. Finally, I use the internet to research topics I am fuzzy about, and I am reading "The Complete Guide to Day Trading", by Markus Heitkoetter which is an excellent primer for the newbie trader.

Rule #3 -  Always Test Strategies in Demo Mode. Never Try a New Idea in a Live Account

If trading was easy, everyone would do it and make money hand over fist. From my experience thus far, the most important thing for a newbie trader to learn is when a market is truly trending upward, downward or sideways. Once I have identified the direction of the market, then I need to develop tested trading strategies for each scenario. Practicing on a simulator allows me to test market entry and exit strategies, and gives me an opportunity to chart my results without risking real money. I am learning not go live with a trading strategy until I have demonstrated a consistent track record of success. One expert recommends testing a strategy no less than 40 times before going live. I think that's pretty sage advice.

Almost every trading platform allows you to trade in demo mode. From my previous blog posts, I have mentioned that I have started my trading journey on Nadex, primarily because of it's low entry cost. Nadex has an extensive library of free educational webinars for account holders, plus a demo account funded with $25,000 in play money. I have learned only to make tested trading strategies in my live account. I have made a few mistakes trading untested theories live, and paid the price. Lesson learned.

Rule #4 - Keep a Journal of Every Trade

To me, it is critically important to  log every trade I make, both in demo mode and in my live trading account. I keep a spreadsheet and record the following information:

- Date of the trade

- Time of day I executed the trade. Time of day I exited the trade.
- Which underlying  market did I trade?  Indices, commodities, currencies?
- How many contracts did I trade?

- How much money did I have at risk? Was it in line with my risk strategy?
- Profit or loss? Did I make the right decision, stay in too long, or did I exit too early?
- What was my strategy on that trade? Why was my trade successful or not?

Reviewing my journal is a key part of my learning process. While remembering good trades is gratifying, I'm especially focused on my losses. What did I do wrong? When I go back and review what happened, I can usually spot a rookie mistake. Maybe the market really wasn't moving in the direction I thought it was. Maybe there just wasn't enough volume in the market, and I got whipsawed by a fast market reversal. Losing happens to every trader, and every loss can become a teachable moment.

Rule #5 - Take Emotions Out of Trading and Treat it Like a Business

One of the most common mistakes a newbie trader can make is revenge trading. I thought I had the perfect trade and lost. I immediately sought revenge and placed a trade in attempt to win my money back. That's an emotional trade, and it has no place in my business plan. Other mistakes include making trades based on tips from experts. Even the experts lose, and that's a trade rooted in emotional insecurity. Finally, some days aren't good trading days. If the markets aren't behaving to my plan, then I need to learn to stay in demo mode or just walk away from trading that day.

Going back to Rule #1, if I am completely comfortable with the money I have at risk, then trading should be a non-emotional experience. It's a simple business rule of applying money you are comfortable with risking to a tested strategy with a reasonably high probability of success.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Nadex Demo Results, Trade of the Week

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

But First, Why Trade the Markets Now?
By Cam White

Do you remember the days when you could put money into a savings account or CD and actually see interest accruing in your monthly statements? Those days are gone, at least for now. If you go to Bankrate.com, you can easily check the interest rates for banks across the country, and it's not pretty. Major Banks are paying .01 percent interest on savings. One Year CD rates are 1.1 percent. Heck, the 2014 rate of inflation is 2.1 percent. So if you have money passively earning interest in savings, you're actually losing money when you adjust for inflation. To me, it's like a leaky faucet that needs to be fixed.

I learned about Nadex while attending a one hour webinar hosted by TradingPub, a site that offers free education for trading the financial markets. For those who are unfamiliar with Nadex, it is the North American Derivatives Exchange. What I like about Nadex is that it is simple to understand, doesn't require a huge investment to get started, and it's Federally regulated (CFTC). A Nadex account can be funded for as little as $100.

My Experience Opening a Free 2-Week Nadex Demo Account

Getting started with a Nadex demo account was a simple, straightforward process. All I had to do was supply my name, email and telephone number, and the demo account was created.

Once I launched my demo account, I had complete access to the Nadex trading platform, funded with $25,000 in play money. I had the ability to use Nadex to trade Binary Options and Spreads on all of the major indices, major commodities and many currency pairs. I chose to keep things simple, and to focus on trading binary options. As I mentioned in my last blog post, binary options are a simple "yes" or "no" proposition. You're either right, and in the money, or you're wrong and out of the money. I will give you a more detailed example of placing a binary option order in my Trade of the Week below.

The Nadex Trading Platform. Image Courtesy of TradingPub

During my two week free demo period, I made 26 trades mostly in the S&P 500, Crude Oil and Gold markets. Almost all of my trades were made between 8am and 11am EDT. I did place one trade at night on the Japanese Nikkei market. Although I had access to $25,000 in play money, I treated the demo like it was a live account funded with $1,000.  For most of the demo period, I would trade 1 contract per trade. By the end of the first week of the demo, my account was in positive territory, and that trend continued into my second week. On my last day of the two week demo, I tried trading 3-5 contracts per trade. I exceeded my daily profit target, and was comfortable with the additional risk I was taking.

Opening a Live Nadex Account

I got a call from an account representative for Nadex. He was very professional and low-key. He asked me about my experience practicing with Nadex, reminded me that an account could be funded for as little as $100 and that the application process was simple and straightforward. He was right. I went online filled out the application and funded my account with $500 in less than five minutes. Now I can trade live, and my demo account has been extended indefinitely. This is important to me, because I'm a newbie trader and I like to test and validate trading strategies in demo mode before I go live. I also appreciated that my account rep called me within hours of opening my account to let me know everything was set up, and to see if I had any questions.

Nadex Trade of the Week

The daily chart for gold on 6/27/2014. Chart courtesy of Investing.com

On Friday, June 27, I noticed that the price of gold had dropped to 1,314 in overnight trading. Gold futures had been testing 1,320 several days in a row and had already climbed over 3016 when the market opened at 8am EDT. Gold has a tendency to run in the opposite direction of the S&P 500 which trended downward at market open. Looking at Nadex, I took a look at some of the binary options trades available to me. The proposition that I chose to trade in my demo account was: Gold (Aug) >1314.0 (1:30PM) 

Trade Details: 
Contract: Gold (Aug) >1314.0 (1:30PM) 
Expiration: Fri Jun 27 13:30:00 EDT 2014 
Direction: BUY 
Quantity: 5 
Price: 73.50

Note: Exchange trading and expiration fees have been excluded

In this trade, I was predicting that the price of gold would be greater than 1314.0 by 1:30PM EDT, when the markets close. I bought 5 contracts at $73.50. So, I put  $367.50 at risk to make $132.50 at contract expiration. Gold prices climbed throughout the morning, and spent most of the day trading in a tight range between 1317-1320, well above my contract. If gold prices started to fall toward 1314, I could have sold my contracts for a smaller profit or to minimize losses. Fortunately, as the chart above shows, my trade was never threatened, and it was a nice way to end the week.

You will find a wealth of free trading webinars on Nadex.com and TradingPub.com. As we go into July, I will sign up for at least 8 free webinars hosted by Nadex and TradingPub so I can continue to learn as I trade on the Nadex platform.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Getting Started with Nadex Binary Options

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

You've Got to Start Somewhere
By Cam White

As a newbie trader, I know I have a lot to learn. I also know I'm going to make a ton of rookie mistakes. Fortunately, I record what I do, analyze my trades, and have a knack for not repeating the same mistakes over and over again. There is so much to learn, but I refuse to get caught up in analysis paralysis. My personality is geared toward strapping on a crash helmet, keeping my eyes wide open and learning as I go. I learn by absorbing information and applying it as I go. This mindset will help me develop a trading plan and set the rules that will govern my future trades.

Fortunately, I have a lot of resources at my fingertips, and so do you if you know where to look. The folks at TradingPub are constantly publishing webinars, ebooks, articles and papers from top industry experts. Most of the information they share is absolutely free, or available at minimal cost. When I got involved with TradingPub, I got exposed to Nadex, a relatively new exchange. I sat in on a one-hour webinar on Nadex, and it made perfect sense to me as a newbie investor.

Why Nadex Binary Options?

Image courtesy of TradingPub.com

There are several reasons why I like Nadex. First, it fits my budget. A Nadex account can be opened for as little as $100, although it is probably prudent to fund the account with $500-$1,000.  I don't have the risk capital to fund accounts in the futures markets ($5,000) or the stock market ($25,000). I am not opposed to risk, but I am careful about where and how I invest, and don't like to gamble. Here are the top reasons why I like Nadex:

• Free 2 Week Trial: You can take a test-drive with Nadex with $25,000 of play money. You can trade in a demo environment without spending a dime of your own money. See if it's right for you. That's where I am right now. One week in the books, one week to go.
• Defined Risk & Reward: When you place a trade with Nadex, you know exactly what your maximum profit or loss will be. Nadex tells you that before you place a trade. Each trade contract is in in $100 increments. There are absolutely no worries of a trade running away from you.

• Nadex Binary Options are a simple "Yes" or "No" Proposition: You're either right or you're wrong. No fuzzy gray areas. Let me give an example. Last week, the lowest price for Crude Oil was $105.45 per barrel. Most of the week it traded around $106. I looked at the price movement of oil in the morning, and as it started climbing north of $106, I placed the following trade:
  
  1 contract: Crude Oil (Aug) >105.50 (2:30PM)
  
  What am I doing here? I placed a trade that the cost of Crude Oil would settle above $105.50 by 2:30 when the crude oil markets close that day. Since prices hadn't fallen below $105.45 all week, and the market was moving higher than $106, I felt pretty comfortable with the trade. The trade put $83.50 at risk to make $16.50. Remember,the value of all Nadex binary contracts is $100.  Generally speaking, the more certain the trade is, the higher the cost and lower the potential profit, per contract. The market closed above $106 that day, and my trade settled with a gross profit of $16.50, less $1.80 in fees. Once again, Nadex is a "yes" or "no" proposition. If the price of crude oil had fallen below $105.50 at contract expiration on my trade above, I would have lost $83.50, and a $.90 trade fee.
• Low Fees and no Middlemen: Nadex charges $.90 to place a trade and settle it at close. Fees are capped at $1.80 per round trip, per contract traded. Fees are also capped at a maximum of $9.00 each way if you trade more than 10 contracts on a trade. When you trade with Nadex you're dealing directly with an exchange, and not through a broker.
• You Can Get Out of your Trade Early: Once you have placed your trade,  Nadex will let you know exactly how it's performing. If the market is moving comfortably in your favor, you can choose to do nothing and let it ride. That's what I did with the trade above. If the market starts turning against you, then you also have the option to at least get out with a little profit, or you can minimize your losses before the contract expires.
• Nadex is a Federally Regulated Exchange: Nadex is federally regulated by the CFTC. It is based in the United States (Chicago), and is only available to legal residents of the United States.

So, How did I Do in my First Week Trading Nadex Binary Options in Demo-Mode?

I'm not going to lie. My first trade was just plain bone-headed. I had just gotten access to my Nadex demo account last Friday, and I was like a kid with a new toy and $25,000 in play money burning a hole in my pocket. It was in the middle of the trading day. I picked a trade too high and lost $59 when my contract expired. The trade was almost successful, but I still lost. Remember, with Nadex binary options, you’re either in-the-money and you profit, or out-of-the-money and you lose. I made the wrong trade for all of the wrong reasons. My brother broke down my trade, and pointed out the [multiple] flaws in my trading decision.

But experience is a great teacher. I was much better prepared on Monday, placed 8 trades throughout the week, and ended in-the-money on them all. I held most of my contracts through expiration last week, but closed a few trades early when I sensed the market was working against me. My conservative strategy is bearing fruit and I am definitely in positive territory. I will test my trading strategy with Nadex one more week. If I get the same results, then I will be comfortable going live with my own money.

Where can I get more information on Nadex?

• TradingPub offers free monthly webinars on trading Nadex Binary Options and Nadex Bull Spreads (still learning about Bull Spreads). Visit TradingPub and make sure to sign up for notifications of free webinars. The TradingPub website is www.tradingpub.com.
• Nadex.com will give you a wealth of information on trading Nadex Binary Options and Bull Spreads. They do a great job of explaining their services, and you will know if Nadex is right for you. Their website is www.nadex.com

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into the markets. I will use it to journal my trading plan, share successes and failures, and I will use it as a vehicle to communicate upcoming webinars that will be available free of charge. Every trader should have a plan, and this blog will be used to communicate a wealth of trading plans and strategies. To avoid spam, I am not leaving this blog open to comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

My Trading Journey Begins

Important Note: Please make sure to read the Disclaimer at the bottom of this blog

Getting Back Into the Markets
By Cam White

Years ago, I dabbled in trading equities. I would buy my favorite stocks low and sell high. For the most part, my simple plan worked nicely, and I made some pretty impressive returns. I stopped investing in the stock market when my wife and I opened up a small comfort shoe store in 2003. Over the following 10 years, we fought hard to keep our business growing in the face of a growing recession. We finally threw in the towel in 2012, when we realized that in spite of our best efforts, we were losing a lot money. The experience was exhausting, but we learned a wealth of information on how to help people suffering from foot, leg and back pain with the right footwear.

While we were struggling to keep our business afloat, my brother was quietly making money trading the markets. He took extensive trading education courses and built a sound, tested methodology for analyzing the financial markets and making informed trading decisions. In May, we took a road trip from Austin to Mobile, Alabama and spent a week visiting the offices of TradingPub, a provider of free education on trading the financial markets. We were blown away by their professionalism, their services and their mission. So we joined the TradingPub team. I am now responsible for helping to book speakers, and I'm getting exposed to the best free education on trading the financial markets from some of the best educators in the industry.  If you are looking for a wealth of free information on investing, TradingPub is a site you should subscribe to and  bookmark.

The Purpose of this Blog

The Inquisitive Trader will be used  to share my experiences as an investor getting back into the markets. I will use it to journal my trading plan, share successes and failures, and I will use it as a vehicle to communicate upcoming webinars that will be available free of charge. Every trader should have a plan, and this blog will be used to communicate a wealth of trading plans and strategies. To avoid spam, I am not leaving this blog open to comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.