What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

And here is how I answered:

• 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
• 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule.
• 3. Study and work hard. Sounds so simple but we live in a very lazy society. It is extremely important to my success for me to continuously study the markets on a fundamental and technical level and learn from my successes and mistakes. If you think about it, we would all start at square one on every trade if we didn’t learn from past situations where we succeeded or failed. Applying the knowledge gained from past experiences allows me to properly analyze similar situations in the future with slightly greater odds of success (or at least I would like to think). Never stop learning is a phrase that I will never stop saying as it proves to be truer the older I get.

P.S. – Sorry for the lack of posts over the past few weeks as I have been in and out of town without much focus on the market. It’s better for me to be mostly in cash at this point in time due to the lack of opportunities crossing my screens. Regular posting will resume as soon as my schedule allows me to focus 110% on the market. I will look to post occasionally as long as I have something of value to add.

Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must accept and understand that the market is all in your head. It is you versus the other trader. If you don’t understand YOU, how will you ever understand other traders; thus taking advantage of market moves based on their mental state of mind and their underlying beliefs.

Many investors, both novice and experienced, drift from book to book to book and system to system to system, never understanding why they produce inconsistent profits. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Keep it simple.

Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.

Thousands of different systems work in the stock market so we can conclude that it is the user that ultimately fails because of lack of concentration and motivation to stay the course. Wall Street is not for drifters and most people can’t play the game profitably because they never sharpen their own mental skills while applying basic money management techniques. They focus on the wrong set of skills.

We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Working hard to become successful in the market is fine but understand that working smarter will always take you further.

Our goal as traders and investors is to understand the crowd and anticipate how they will act and react based on the thoughts we had, prior to focusuing on the proper skills, when we were just one of the sheep (waiting to be slaughtered)!

Focus on what is important and the success will follow.

Stop focusing on iffy stochastics, Bollinger bands, MACD, ADX, earnings releases and bogus news stories. Yes they can aid you to success but the main focus is on you!

Personally speaking, I require specific fundamentals, price, volume and basic daily and weekly charts to succeed but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.

I know I am getting all “Dr. Perruna” on you but it is true.

Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.

As Jesse Livermore said:

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”

Why? Because humans never change!

Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don’t focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.

Take this quick quiz and honestly determine if you are built to trade full time:

• Are you properly capitalized?
  I wouldn’t suggest anyone start to think about trading full time until they have at least six figures that can be used solely for trading. Living expenses must come from other income or saved funds. Without six figures (and the more then better), I suggest you continue to build your stake.
• Are you a successful part time trader?
  Why do you think you can succeed being a full time trader if you haven’t made money as a part time trader? Have you built your own stake to six figures trading part time? If so, you pass this question with flying colors.
• Have you developed a system that works?
  Does your system have a positive expectancy? Have you back tested the system (I don’t hold too much weight to this question)? Do you understand position sizing and do you implement it properly so you don’t blow-up with one or two trades?
• Does your system offer enough opportunity?
  Without opportunity (multiple trading signals per day/ week), you will not be able to achieve your system’s expectancy. A lack of opportunity may skew your results and turn your anticipated positive expectancy to a negative expectancy and cause you to go broke.
• Can you handle your emotions?
  How do you handle your emotions now with longer term positions or part time trading? Do you follow your rules, all the time? Will you have pressure to make money every month, week or day? Can you handle being alone (most cases) and staring at a computer for large portions of the day?
• Finally, do you have spouse or other influence that will interfere with your endeavor?
  A spouse, friend or family (member) can have a negative affect on your trading that may result in subconscious sabotage. Outside negative forces or nagging pressure people may lead you down a path that is not controllable because you are trying to prove something rather than “just trade” based on your acquired skills. Make sure the closest people in your life support you while making the move to full time trading.

• The Best of chrisperruna.com in 2007
• Investing in Honey, MEDIHONEY
  FYI Disclosure: I started to establish my position in Derma Sciences
• Chris Perruna Stocks in Review 2007

All text below quoted by Napoleon Hill from the book (list published in 1937):

Life’s greatest tragedy consists of men and women who earnestly try, and fail! The tragedy lies in the overwhelmingly large majority of people who fail, as compared to the few who succeed.

I have had the privilege of analyzing several thousand men and women, 98% of whom were classed as “failures.” There is something radically wrong with a civilization, and a system of education, which permit 98% of the people to go through life as failures. But I did not write this book for the purpose of moralizing on the rights and wrongs of the world; that would require a book a hundred times the size of this one.

My analysis work proved that there are thirty major reasons for failure, and thirteen major principles through which people accumulate fortunes. In this book, a description of the thirty major causes of failure will be given. As you go over the list, check yourself by it, point by point, for the purpose of discovering how many of these causes-of-failure stand between you and success. (This can and does apply to trading – trading for a living is a business)

1. UNFAVORABLE HEREDITARY BACKGROUND. There is but little, if anything, which can be done for people who are born with a deficiency in brain power. This philosophy offers but one method of bridging this weakness—through the aid of the Master Mind. Observe with profit, however, that this is the ONLY one of the thirty causes of failure which may not be easily corrected by any individual. (not sure if I agree with this one, especially at #1)
2. LACK OF A WELL-DEFINED PURPOSE IN LIFE. There is no hope of success for the person who does not have a central purpose, or definite goal at which to aim. Ninety-eight out of every hundred of those whom I have analyzed, had no such aim. Perhaps this was the…see #3
3. LACK OF AMBITION TO AIM ABOVE MEDIOCRITY. We offer no hope for the person who is so indifferent as not to want to get ahead in life, and who is not willing to pay the price.
4. INSUFFICIENT EDUCATION. This is a handicap which may be overcome with comparative ease. Experience has proven that the best-educated people are often those who are known as “self-made,” or self-educated. It takes more than a college degree to make one a person of education. Any person who is educated is one who has learned to get whatever he wants in life without violating the rights of others. Education consists, not so much of knowledge, but of knowledge effectively and persistently APPLIED. Men are paid, not merely for what they know, but more particularly for WHAT THEY DO WITH THAT WHICH THEY KNOW.
5. LACK OF SELF-DISCIPLINE. Discipline comes through self-control. This means that one must control all negative qualities. Before you can control conditions, you must first control yourself. Self-mastery is the hardest job you will ever tackle. If you do not conquer self, you will be conquered by self. You may see at one and the same time both your best friend and your greatest enemy, by stepping in front of a mirror.
6. ILL HEALTH. No person may enjoy outstanding success without good health. Many of the causes of ill health are subject to mastery and control. These, in the main are:
   a. Overeating of foods not conducive to health
   b. Wrong habits of thought; giving expression to negatives.
   c. Wrong use of, and over indulgence in sex. (really???? – lol)
   d. Lack of proper physical exercise
   e. An inadequate supply of fresh air, due to improper breathing.
7. UNFAVORABLE ENVIRONMENTAL INFLUENCES DURING CHILDHOOD. “As the twig is bent, so shall the tree grow.” Most people who have criminal tendencies acquire them as the result of bad environment, and improper associates during childhood.
8. PROCRASTINATION. This is one of the most common causes of failure. “Old Man Procrastination” stands within the shadow of every human being, waiting his opportunity to spoil one’s chances of success. Most of us go through life as failures, because we are waiting for the “time to be right” to start doing something worthwhile. Do not wait. The time will never be “just right.” Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.
9. LACK OF PERSISTENCE. Most of us are good “starters” but poor “finishers” of everything we begin. Moreover, people are prone to give up at the first signs of defeat. There is no substitute for PERSISTENCE. The person who makes PERSISTENCE his watch-word, discovers that “Old Man Failure” finally becomes tired, and makes his departure. Failure cannot cope with PERSISTENCE.
10. NEGATIVE PERSONALITY. There is no hope of success for the person who repels people through a negative personality. Success comes through the application of POWER, and power is attained through the cooperative efforts of other people. A negative personality will not induce cooperation.
11. LACK OF CONTROLLED SEXUAL URGE. (Again – not sure if this applies to my list) Sex energy is the most
    powerful of all the stimuli which move people into ACTION. Because it is the most powerful of the emotions, it must be controlled, through transmutation, and converted into other channels.
12. UNCONTROLLED DESIRE FOR “SOMETHING FOR NOTHING.” The gambling instinct drives millions of people to failure. Evidence of this may be found in a study of the Wall Street crash of ‘29, during which millions of people tried to make money by gambling on stock margins.
13. LACK OF A WELL DEFINED POWER OF DECISION. Men who succeed reach decisions promptly, and change them, if at all, very slowly. Men who fail, reach decisions, if at all, very slowly, and change them frequently, and quickly. Indecision and procrastination are twin brothers. Where one is found, the other may usually be found also. Kill off this pair before they completely “hog-tie” you to the treadmill of FAILURE.
14. ONE OR MORE OF THE 6 BASIC FEARS. Poverty, Criticism, Ill health, Jealousy, Old age, Death.
15. WRONG SELECTION OF A MATE IN MARRIAGE. This a most common cause of failure. The relationship of marriage brings people intimately into contact. Unless this relationship is harmonious, failure is likely to follow. Moreover, it will be a form of failure that is marked by misery and unhappiness, destroying all signs of AMBITION.
16. OVER-CAUTION. The person who takes no chances, generally has to take whatever is left when others are through choosing. Over-caution is as bad as under-caution. Both are extremes to be guarded against. Life itself is filled with the element of chance.
17. WRONG SELECTION OF ASSOCIATES IN BUSINESS. This is one of the most common causes of failure in business. In marketing personal services, one should use great care to select an employer who will be an inspiration, and who is, himself, intelligent and successful. We emulate those with whom we associate most closely. Pick an employer who is worth emulating.
18. SUPERSTITION AND PREJUDICE. Superstition is a form of fear. It is also a sign of ignorance. Men who succeed keep open minds and are afraid of nothing.
19. WRONG SELECTION OF A VOCATION. No man can succeed in a line of endeavor which he does not like. The most essential step in the marketing of personal services is that of selecting an occupation into which you can throw yourself wholeheartedly.
20. LACK OF CONCENTRATION OF EFFORT. The “jack-of-all-trades” seldom is good at any. Concentrate all of your efforts on one DEFINITE CHIEF AIM.
21. THE HABIT OF INDISCRIMINATE SPENDING. The spend-thrift cannot succeed, mainly because he stands eternally in FEAR OF POVERTY. Form the habit of systematic saving by putting aside a definite percentage of your income. Money in the bank gives one a very safe foundation of COURAGE when bargaining for the sale of personal services. Without money, one must take what one is offered, and be glad to get it.
22. LACK OF ENTHUSIASM. Without enthusiasm one cannot be convincing. Moreover, enthusiasm is contagious, and the person who has it, under control, is generally welcome in any group of people.
23. INTOLERANCE. The person with a “closed” mind on any subject seldom gets ahead. Intolerance means that one has stopped acquiring knowledge. The most damaging forms of intolerance are those connected with religious, racial, and political differences of opinion.
24. INTEMPERANCE. The most damaging forms of intemperance are connected with eating, strong drink, and sexual activities. Overindulgence in any of these is fatal to success.
25. INABILITY TO COOPERATE WITH OTHERS. More people lose their positions and their big opportunities in life, because of this fault, than for all other reasons combined. It is a fault which no well-informed business man, or leader will tolerate.
26. POSSESSION OF POWER THAT WAS NOT ACQUIRED THROUGH SELF EFFORT. (Sons and daughters of wealthy men, and others who inherit money which they did not earn). Power in the hands of one who did not acquire it gradually, is often fatal to success. QUICK RICHES are more dangerous than poverty.
27. INTENTIONAL DISHONESTY. There is no substitute for honesty. One may be temporarily dishonest by force of circumstances over which one has no control, without permanent damage. But, there is NO HOPE for the person who is dishonest by choice. Sooner or later, his deeds will catch up with him, and he will pay by loss of reputation, and perhaps even loss of liberty.
28. EGOTISM AND VANITY. These qualities serve as red lights which warn others to keep away. THEY ARE FATAL TO SUCCESS.
29. GUESSING INSTEAD OF THINKING. Most people are too indifferent or lazy to acquire FACTS with which to THINK ACCURATELY. They prefer to act on “opinions” created by guesswork or snap-judgments.
30. LACK OF CAPITAL. This is a common cause of failure among those who start out in business for the first time, without sufficient reserve of capital to absorb the shock of their mistakes, and to carry them over until they have established a REPUTATION.

-My dog Bob!

Enjoy the poem I found in the latest copy of Think and Grow Rich: The Original Version, Restored and Revised, it’s a favorite of Annie Lou Hill (Mrs. Napoleon Hill).

A few posts you may have missed that I made over the Holidays:

• The Best of chrisperruna.com in 2007
• Investing in Honey, MEDIHONEY
• Chris Perruna Stocks in Review 2007

Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must submit and understand that the market is all in your head. It is you versus the other guy or gal. If you don’t understand yourself, how will you ever understand other traders; therefore taking advantage of market moves based on their mental state of mind and their underlying beliefs.

Many investors, both novice and experienced, switch from book to book to book and system to system to system and never understand why they aren’t consistently profitable. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Follow this statement: Keep it Simple Stupid.

Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.

Thousands of different systems work in the stock market; it’s the user that ultimately fails because of lack of concentration and motivation to stay the course. It is hard work to play in Wall Street and not many people can hang because they never sharpen their own mental skills while applying basic money management techniques

We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Traders work, then they work hard and finally they work even harder to become successful in the market but understand that working smarter will always take you further.

Our goal as traders is to understand the crowd and anticipate how they will act based on thoughts you used to have when you were just one of the sheep!

Focus on what is important and the success will follow.

Stop focusing on stochastics, Bollinger bands, MACD, ADX, earnings releases and bullshit news stories. Yes they can aid you to success but the main focus is on you!

Personally, I need specific fundamentals, price, volume and basic daily and weekly charts but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.

I know I am getting all Dr. Perruna on you but it is true.

Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.

As Jesse Livermore said:

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”

Why? Because humans never change!

Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don’t focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.

I often here amateur investors talk about that the “best way” or “only way” to invest and argue why their way is better than everyone else’s. The passion and energy exuded by these novice investors is wonderful but they are missing the point completely. No one can say that options are better than stocks, commodities are better than options or forex is better than everything, etc… Each investor develops a system that is suited to their own personal character traits and they use a vehicle (stocks, options, forex, commodities, real estate, etc…) that can help them reach their goals.

Investors also debate systems within a market such as: trend trading, swing trading, scalping, shorting, day trading, buy and hold, fundamental trading, technical trading, Elliot wave theory, moving average crossovers, etc… They all work if the “person” understands the holy grail of trading. And that is being able to understand YOU and how your mind works.

However, it is not the system that makes one successful. It is YOU that makes the system work properly. What do I mean? Each individual must master their own personal psychological impacts on their trading results. You must work on YOU to become consistently successful! I recommend reading The Disciplined Trader by Mark Douglas if you would like to understand the psychological trader in you.

To say that one system or vehicle is the “way to go” is ignorant.

Pick up any Market Wizard book and read how these men and women made hundreds of millions in the markets using different systems. The only thing they all had in common was money management and risk management. That’s ALL! Every one of them traded in different ways and used different vehicles but they all watched their risk, calculated proper position sizing techniques and understood their system’s expectancy.

Money management, also termed as risk management is a major part of the holy grail of investing, NOT THE SYSTEM! Novice investors will eventually understand this after many years of trading (some quicker than others).

So, if someone ever tells you that their “system” is better than yours, turn away and run and run fast because they don’t know what the hell they are talking about.

Here are some examples supporting this idea from the Market Wizard books:

• Michael Marcus turned $30,000 into $80 million trading futures
• Michael Steinhardt ran a fund that averaged 30% annual return over 21 years trading stocks
• Tom Baldwin started with $25,000 and eventually traded $2 billion a day in T-bond futures on the floor or in the pit.
• Paul Tudor Jones ran funds that averaged triple digit returns for five consecutive years trading multiple markets
• Ed Seykota realized an astounding 250,000% return over 16 years (yes that says 250,000%) managing accounts trading in the futures markets – possibly the best trader of our time
• Bill Lipschutz traded currencies with a staring account of $12,000 (started out as an architect – very motivating for me since I started the same way).

The list can go on forever but the point remains the same; they all traded different markets with unique systems from different locations (the floor, an office or their home in the mountains) but they all had one major factor in common: money management and risk management.

Just about every market wizard refers to position sizing as a major part of the “holy grail” of trading. Van Tharp (also featured in Market Wizards) coined the phase in the first edition of his book but he only realized that money management was the holy grail after studying and speaking with hundreds, if not thousands of very successful traders. Tharp’s Book, Trade Your Way to Financial Freedom, is a must read if you would like to understand position sizing and expectancy and learn more about understanding “you”.

Many of these tapes I am referring to were recorded more than 50 years ago but they are as relevant as anything today and certainly more genuine than the so-called guru’s of modern personal-success literature.

I am not speaking about the audio CD of the book Think and Grow Rich but rather the actual recording of the lectures that Hill held around the country while rising to and after achieving prominence.

If I had to recommend one set of tapes, it would have to be Your Right to be Rich which includes inspiring lectures by Hill himself.

In these rare recordings on CD you will hear a complete and thorough exposition of Napoleon Hill’s philosophy as you listen to him interpret and amplify the 17 universal principles of success. These lectures are designed to motivate you and teach you the goals and strategies that will carry you to new heights of personal success. Before there was The Secret, Napoleon Hill was the father of success around the world.

The lectures in this audio, recorded in the 1950s, are fascinating glimpses into his steadfast, somewhat authoritarian, and eminently relevant teachings. Though his speaking style often has an overly aggressive quality, there’s something magical about hearing it. We are handed many gifts, Hill says, many opportunities for meaning, but we can tap into them only when we connect with the guiding force that put them there. We do this by dedicating ourselves to a single purpose in life, and paying daily attention to programming our subconscious minds. This is a seminal work on the basics of personal motivation.

For those of you that are not familiar with Hill’s work, I can tell you that he personally studied some of the most successful businessmen and leaders of his time, including but not limited to Andrew Carnegie, Thomas Edison, Alexander Graham Bell, George Eastman, Henry Ford, Elmer Gates, John D. Rockefeller, Charles M. Schwab, F.W. Woolworth, William Wrigley Jr., John Wanamaker, William Jennings Bryan, Theodore Roosevelt, William H. Taft, Woodrow Wilson, Charles Allen Ward and Jennings Randolph.

By listening and understanding the keys to success, you can achieve a level of mental self-mastery that will enable you consistently to:

• Overcome fears to reach your achievements
• Maintain self-discipline and self-confidence
• Develop strong personal initiative
• Focus your thoughts into clear plans of action
• Mental skills needed to meet the challenge of transforming your ideas into realized accomplishments.
• Discover proven strategies for bouncing back from failure.
• Manage your time effectively.
• Inspire others to work with you.

These teachings and recordings have helped with all aspects of my life including trading, business, marriage, personal relationships and my own emotional and mental makeup.

For further reading on Hill, please visit his wonderful page over at Wikipedia:
Napoleon Hill Biography

“Whatever the mind of man can conceive and believe, it can achieve.” – Napoleon Hill