Licensed to Profit E-Book

Chris Shea

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 252

Veröffentlichungsjahr: 2012

Beschreibung

Chris Shea (aka the Market Coach) is an educator, counsellor and psychotherapist, who specialises in coaching clients to develop the psychological skills and drive to become independent, disciplined and successful traders and to sustain peak performance. This book is about preparing the reader to obtain a licence to trade, a vital step in the transformation to becoming profitable. The book also deals with some potential hurdles, especially with respect to the trader\'s mindset and ideas, which need to be overcome to allow efficient practice.

Leseprobe

Contents

About the author

Introduction

Chapter 1: Developing road sense: what’s trading all about?

Why trading is like driving a car

Processes rather than outcomes

How do markets pay you?

Speculation: betting on the future

The business of financial speculation

How do the financial markets compare with other businesses?

What are the special features of the business of speculation?

Why is it so difficult to win consistently?

Gamble, invest or trade for profit?

From buyer to vendor: the crucial next step

Personal requirements for success

Summary

Chapter 2: Road rules: performance standards

Case study: amateur to professional

Probability: the foundation of the business

Simulation of 50 trades: applying an edge to the probability distribution

Your success is important for you and society

Where amateurs flounder

Summary

Chapter 3: Road maps: optimising analysis

Why reliance on analysis alone can’t succeed

Why does the market map change?

Attempting to make uncertainty certain

Where are the high-probability, high-profit trades?

Scenario planning moment by moment

Summary

Chapter 4: Speed and traffic: psychological barriers and speed bumps

Oh, the anxiety!

Two killers: impulsiveness and hesitation

Fear and anxiety

Personality issues: needs and aptitude

Traders and investors: the Personality Needs Profile

You’ve got the personality: do you have the aptitude?

What holds ‘traders’ back?

What values are important for a successful trader?

Your hidden sub-personalities

Summary

Chapter 5: Driving processes and skills

Your trading behaviour car

Processes rather than outcomes

Summary

Chapter 6: L-plates: preparation for your trader’s licence test

Becoming consciously competent

The trading gymnasium: practise the verbs under instruction

Scenarios for the present moment

Feedback to improve your performance

Summary

Chapter 7: Your driving test: theory and practice

The theory examination

Checklist of skill performance

Practical test: achieving the benchmarks

Award of your licence

What if you don’t get your licence first time around?

Summary

Chapter 8: The journey forward: from P-plates to peak performance

A note of caution

A case study: how to improve

A model for progress

Making the extraordinary ordinary

Summary

Index

First published in 2007 by Wrightbooks an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in Berkeley LT 11.2/14 pt

© Chris Shea 2007

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Shea, Chris

Licensed to profit: by trading in financial markets.

Includes index.

ISBN 9780731406838 (pbk.).

1. Stocks. 2. Investments. 3. Speculation. I. Title.

332.6322

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Front cover © Corbis Corporation and John Kelly/Getty Images Wiley bicentennial logo: Richard J Pacifico

Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

About the author

Chris Shea is a trader, educator and psychotherapist who specialises in coaching those who want to become and stay successful in financial markets. He assists clients to sustain superior returns by helping them discover and use their own approach based on their unique personality and talent.

Chris has an established track record in coaching clients to develop the skills and drive to become independent, disciplined and very profitable traders. Coaching SuperTraders is his forte.

He is a founding shareholder of Automated Trading Solutions PL, and holds a bachelor of education and a master of science, as well as a diploma of professional counselling.

While based in Brisbane, Chris has private and institutional clients in all states of Australia, New Zealand, Los Angeles and Singapore.

Visit <www.themarketcoach.com> for more information.

Introduction

It’s generally believed that most people who intend to trade in financial markets don’t succeed. That is, most people do not profit from the financial markets. Rather, they forfeit part or all their trading capital, and then move on to other life projects with feelings of bitterness and betrayal about their market experience. The conventional wisdom is that about 70 per cent of market entrants end up in this category.

By my estimate, a further 20 per cent of traders have advanced to the extent that they are in what I call the ‘break-even rut’: their results are variable, neither consistently winning nor losing.

The remaining 10 per cent are the consistent winners. These market players have an edge that enables them to operate a highly profitable risk management business in financial markets.

In my professional life as a trading coach I have helped hundreds of traders all over the world to join the top 10 per cent. How do I do it? That’s what I’ve set out to explain in this book, taking a simple, step-by-step approach aimed at giving you all the tools you’ll need to become one of that 10 per cent.

Getting into the Zone — learning to drive

I call my clients who achieve outstanding profits ‘SuperTraders’, and I encourage all my clients to envision themselves as potential SuperTraders. SuperTraders operate in the ‘Peak Performance Zone’, achieving outstanding profits.

The Zone is the sweet spot that is experienced by top professionals in any field. Think of Tiger Woods winning a string of majors, an opera singer giving a virtuoso recital, or a surgeon doing open heart surgery.

The Zone is not an exclusive club. You will have experienced being in the Zone many times in your life. This is when you have practiced a skill so much that it becomes second nature, for example when you are driving your car. When you drive, you execute the actions required by the road conditions and the traffic (the information flow), moment by moment. When you drive your car well you are functioning flawlessly, beyond cognition. You don’t calculate the velocity difference or relative kinetic energy between you and the vehicle you are overtaking. You just do it. That’s the Zone.

Or, to put it another way, you are unconsciously working competently in a super-conscious state: the Zone. The term SuperTrader relates to working in a similar super-conscious state, this time in the trading environment.

Driving a car is far more dangerous than trading. Every time you take the car on the road you put your life at risk. But this does not inhibit good performance; rather it enhances it. It’s a must that you operate in the Zone without fear and anxiety but with the very positive expectation that you will achieve your destination.

To trade with consistent profitability it’s a must that you operate in exactly the same way: without fear and anxiety, but with positive expectations. Additionally, you must be up to responding intelligently, skilfully and spontaneously to the market ‘traffic’.

To achieve the consistency and trading success that being in the Zone affords, I ask my clients to look at all four elements of the Zone. Each is an attribute that you have. To operate in the Zone, you need to ensure that each of these four elements within you is functioning at a high level.

The first is physiological. Doesn’t it make sense that you will achieve better outcomes if your physiology allows you to operate in a powerful state of relaxed yet alert centeredness, rather than with adrenalin shock and the fight/flight impulse whenever you encounter stress?

The emotional element addresses the fear and anxiety associated with trading. You don’t know the future in a market; anything can happen. Fear and anxiety are natural emotions in this setting, but it’s important to be able to recognise these emotions and not allow yourself to be governed by them. Self-worth and knowing what you are doing go a long way to countering irrational fears. When you are feeling calmness, self-belief, and optimism, you will be functioning in the right emotional space to be in the Zone.

The Zone has an intellectual element. You have to know what you are doing. Are you gambling or running a profitable risk management business? Do you know that your trading strategy is resourceful and resilient enough to produce the outcomes you desire? Have you accessed the full repertoire of intellectual skills — believe it or not, there are eight or nine distinct skills — to improve your intellectual edge?

Action is the fourth and most important element of the Zone. You need to practise integrating your positive physiology and emotions with your strategy, so that you execute your trades intuitively and flawlessly. In practice, this means beginning initially with a small account size, performing deliberately and mechanically. With enough practice and appropriate feedback, you will develop the perception and precision to execute your strategy automatically. This takes time and perseverance — however the results are well and truly worth it.

Practice makes perfect

Research from the University of Sydney and the Westmead Hospital Brain Research Unit reveals that to fully learn a new skill, you will have to repeat the action up to 1000 times.

Think about when you first learned to drive a car. Remember how you mastered the four elements of the Zone over time, rather than all at once? At first you had to deliberately think: to start off in first gear, you need to let the clutch out a little, while simultaneously depressing the accelerator. When the car starts to move, then you let the clutch out quickly and entirely with more acceleration. It wasn’t that easy, right? And not only this, but you also had to be aware of other matters: Is the road ahead clear? What is the traffic behind you doing? What should your next manoeuvre be?

And so it goes. You continuously practise the new skills of driving under instruction until you present for your driving test. If you prove that you are competent against a standard set of criteria in a driving test then you’ll receive your driver’s licence. If you fail the test you can have another go, until eventually you pass.

It’s not until you have your licence that you can really perfect your new skills through the experience of driving on your own, in different road conditions and situations. In other words, your licence proves you are ‘consciously competent’; you can then advance with continual practice to the unconscious driving Zone.

Learning to drive a car is a much more complex and dangerous activity than learning to trade. Yet almost all who want to learn to drive succeed in their aim. It begs the question: If 99 per cent of learners can learn to drive a car well enough to gain their licence, then why is it that only 10 per cent of people succeed at trading?

The answer lies in the fact that most who attempt to trade never actually learn the skills of trading under instruction. Most never secure their licence to trade profitably. They expect the impossible: to start in the Zone.

Let me give you an example to illustrate my point. A heart surgeon does not start out doing open heart surgery at the beginning of her career. First she must study and be tested to receive a licence to be a doctor. As she advances from intern to resident to registrar to consultant in her area, her talent and skills develop. After years of study and examination, she can perform as surgeon. Years of practice and discipline have allowed her to perform confidently, consistently and flawlessly in the Zone. Rest assured her patients are thankful that she has achieved the heart surgery Zone. Yet most novice traders expect to acquire the heart surgeon income without even obtaining the initial trading licence.

I’ll put it another way. Would you allow a first-time driver to go onto a busy six-lane freeway alone without first obtaining a licence? Your answer is obviously ‘no’.

Yet this is what most novices do in trading. To extend the metaphor, the novice trader goes to the showroom where the software or systems salesperson sells the dream of freedom and persuades the novice to exchange hard-won capital for a shiny new trading car. The trader is given some analysis (let’s call it a road map) and is then expected to drive it away without practising any trading skills or securing the licence to drive. Little wonder that most people crash their trading car — and their dreams — before they develop the expertise to drive.

Whether you’re a novice needing the basics or you’re stuck in the break-even rut, this book aims to help you move on and into the Zone.

Preparing to obtain your licence to trade is a vital step in your transformation to becoming profitable and remaining permanently in the Zone. This book aims to fill the gap that your software and trading platform can’t provide. Its purpose is to enable you to take advantage of analytical techniques that present high probability set-ups.

In this book I’ll give you the trading ‘road’ rules and explain why you need to stick to these rules for safety. Licensed to Profit presents you with the full repertoire of skills needed to drive (and get the most out of) your trading ‘car’.

Licensed to Profit teaches you the necessity of practising these skills so you can become a competent, profitable trader.

I’ll also deal with some potential hurdles, especially with respect to your own negative self-talk, which needs to be overcome to allow efficient practice. Finally I’ll present your driving licence test. It sets out the standard set of criteria that you must achieve before you can be awarded your trading licence.

Once you have your trading licence you will have confirmed that you are at the threshold of the top 10 per cent. From then on you have the choice to successfully drive your trading car to wherever you will, if you are prepared to work towards it and the SuperTrader Zone. I’m not saying it’s easy — just like learning to drive, it requires hard work — and of course you are risking the possibility of failure. But in my opinion if you have made the effort to learn to drive a car well then you can make the same effort to learn to trade well, and profitably — if it is your will and passion.

Can you secure your trading licence, progress to the trading Peak Performance Zone and reap the consequent rewards? I think so, if you are committed to practice and improvement. In trading, as with all walks of life, the Peak Performance Zone enables ordinary people to achieve extraordinary outcomes.

Your licence to trade positions you for success

Chapter 1

Developing road sense: what’s trading all about?

Everyone who attempts to drive a car expects to succeed at it. From an early age, each of us has witnessed competent driving skills, watching family members and others on the roads. It’s just part of our social context. What we observe as a youngster is that driving is a continuous process of awareness and actions which require focus and purpose. And so before we learn to drive ourselves, we already have a model of what driving is all about.