Hosted By
Robin Dayne
"The Trader's Coach"
18 years as a trading and life coach

NEW! Just released
An S&P Trading Tool
"LT Traders- Key Number Tool"
Boost ANY trading strategy
While Increasing Trade
Accuracy!
Take a FREE 10-day Trial
Experience the Power
for Yourself!
Visit: www.LTtrader.com
Also see YOUtube videos

"A Trader's " Dollar Threshold"
 
By Robin Dayne

There has been this strange re-occurrence that I have seen over the 18 years of coaching common to many traders that I felt I should discuss and make you aware of.

I don't have a clinical term for it, I just call it the "Dollar Threshold" and it can happen at anytime in one's trading career. It has no boundaries and is not isolated to less experienced traders. This same situation has happened with traders having many years of experience and even at high levels of trading experience.

So "what is it?" It's when a trader hits a dollar amount in profitability and the game seems to change. Like a glass ceiling they can't get through. Their trading goes off for no apparent reason and even sometimes it feels like self-sabotage in each trade. There are many losses one after another, all as a result of hitting this mysterious level of profitability. Usually it's a higher dollar amount than was ever reached before.

Let me give you an example to make this clearer. Joe was a business man (names have been changed to protect the innocent) who built a successful company and than was bought out for millions of dollars.  More money than Joe had ever seen before.

Next he decided to get into trading and began to learn and trade with an account of 50k. He did really well and worked the account up to 80k in a very short time, a born trader. Then he experienced many losing trades bringing the account down to 30K. A big loss for anyone but Joe now had millions and so he refunded the account back up to 50K and started trading again.

After a month or so the same thing happened he worked the account up to 80K and it was bizarre, again the losing streak hit with over trading and increasing size and losing again working the account back down to 30 K. Again Joe refunded the account back up to 50K.

That's when he called me.  Our conversation went something like this: "I really need your help please, I don't know what's happening. I know I can trade well I worked the account up to 80k two times but each time I get there something weird happens and I lose and go back down to 30K, refund and start all over again.  What is wrong with me? I feel like I am going crazy"

Joe had hit his dollar threshold, which is clearly 80K. Maybe when Joe worked for himself that's the amount he paid himself. It is a number that he has locked in his mind and one his mind reacts strongly to.

Joe is NOT unique. I have had many traders new and experienced run into the same pattern with the only difference being their personal "dollar threshold" being different. This number causes the down turn and change in their trading. Sometimes its 30k, or 150k or 1M but whatever the amount for the individual the same thing happens they just can't seem to breakthrough their personal "dollar threshold".

First let's look at why this happens and then let's discuss what a trader can do to fix it. My belief is that when this happens the trader is hitting the dollar amount that he placed on himself as "his value" or what he is worth.  It may have nothing to do with the reality of the situation it's just what he feels he's worth in his sub-conscience.  So when they get to that amount and attempt to go higher their brain says no we shouldn't go there, we don't deserve it and so lets get back to reality and lose so we get back to where we should be and the losing streak happens.

Sometimes it can be reinforced from a religious belief that making money is a bad thing and for bad people because it's greedy. Years of conditioning put the thought into the sub-conscience and the brain reacts on it. It appears to be a comfort level that the brain seems to seek and when the dollar amount comes near it gets uncomfortable.

But there is good news it CAN be managed and the number can be stretched to bigger and bigger levels of success.

First, I also believe that traders are very special people because they all have the potential to make great wealth.  That with that wealth they can first help themselves second their families and third their communities. They can give back greatly and make a difference. Most that I know that have achieved this level of success, do give back and have done some amazing things but you very rarely hear about them, just know they are there.

So first is to switch to the belief that making money is OK. Remember repetition is the mother of skill and to put a new belief in the mind, so you do it by, reading something over and over till the mind finally it will accept it. Take one piece of paper and fill in the blank: It's great to make money because. …. Fill the page one answer per line and re-read it daily.

Now once that's done we have to work on the trading. One way I have found that works great is what we did with Joe's situation. You see the 50K was also an important level for Joe. It was level that he felt comfortable with but also one where his trading was became disciplined. 

So I told Joe when he gets the account back up to 80K he should remove 30K and put it somewhere else. Maybe in another trading account or savings account, any place but the account he was trading in.

After 2 months I received a call from Joe and could tell in his voice he was thrilled. He said: Guess what? I made 63k this month and I took out 30K and 33k and put it into my saving account and I am starting again. That technique really works, I don't understand it but I will keep doing it. He also asked me if his dollar threshold will ever get bigger. I said it already has …….you have stretched it now 3k when you transferred the 33k, he said Oh yeah, I did.

With time the threshold expands and gets bigger as the trader gains more confidence and the brain starts to recognize it's OK when it moves beyond the threshold number.

All too often, as traders, we think of our greatest goals in trading, hitting the million dollar mark and when we actually get close to it the brain starts to back off.

I had a high-end trader who had this happen and his dollar threshold was 700k he wanted to get to the million but was stuck at the 700k.  Finally with some adjustments he too broke through and his new number now is 3M as he has hit 2.5M at the last update.

So anything is possible and we all have the opportunity to do some amazing things just be aware that the "dollar threshold" exists and be aware that it can be changed with a simple trick of the mind-set.

Remember: The mind doesn't distinguish between what's real or not real it ONLY knows what you tell it.  Good things IN will translate into good things OUT.  Be careful of what you think.

So until next time ……..great trading!

Disclaimer/Nondisclosure 

ALL the information in the Robin Dayne Newsletter is for educational purposes only and is the sole property of Robin Dayne Inc. (RDI) and may not be duplicated, recorded or reproduced in any way and includes: verbal, print, e-mail, or any media vehicle without the written permission of RDI.

Its been a great week for traders who have been watching gold and the indexed become more and more overbought on the intraday charts waiting to take advantage of the reversal which unfolded today.

I have been talking about this move for several weeks just waiting for the market to reach the tipping point and today was the first day of possibly a larger correction.

Below are two videos showing today's price action. The first video is the calm before the storm.

The second video shows the calm after the first thunder head passed over the market.

Video #1 - Morning Gold & SP500 Intraday Analysis and Setups:

Video #2 - Afternoon Trading Opportunity:

Read More

Market Shows Signs of Interim Peak
April 16th, 2010

Markets move in large wave swing patterns based on the stretches and swings of investor optimism to pessimism.  These are known as Elliott Wave Patterns as theorized by R.N. Elliott in the 1920's and 1930's.  I became a student of his work in 2001 amidst the market mess, and after a few years became a convert that markets move largely on crowd behavioral patterns.

With the above said, I look for clearly defined wave patterns if discernible to help me with clues as to where we are in the market bear or bull cycles  Besides the chart patterns themselves, you can review Investor Sentiment ratings, Consumer Confidence numbers, and other data to help figure out which direction the crowd is leaning, and if that rubber band is being stretched too far both on the optimistic or pessimistic side.

Reviewing the recent wave patterns and investor sentiment surveys were certainly telling me we were in the home stretch after 13 months of bullish movements in the indices.  13 is a Fibonacci number by the way, and crowds also tend to behave within Fibonacci sequence patterns both during corrections and rallies.  Here is some evidence I'm looking at for a decent corrective pattern to likely unfold over the intermediate time frame.

1.  Investor Sentiment-  Bulls in the latest April 13th survey were running hot at 52% vs just 19% for Bears.  This 2.8 to 1 ratio was the highest since July and October 07.  The % of Bears is similarly at the same extreme lows seen in Jul/Oct 07 tops, and the summer of 2009 interim highs.

1a.  VIX or the volatility index levels were at extremes for complacency, another sign of impending tops.

1b.  Fibonacci re-tracements of 61% would be at 1233 on the SP 500 index from the Oct 07 highs to March 09 lows.  We were within 1% or so of that figure and pretty close.  The Nasdaq hit a 78% retracement level this week, also a typical topping point in a wave structure. Read More

Goldman Trumps Froth & Fluff
April 16th, 2010

I have been watching the market and had been preparing something to write on the Froth and Fluff in the market.  That Goldman Sachs is being sued by the U.S. Securities & Exchange Commission with civil fraud trumps those concerns. 

However, let me first comment on the Froth and Fluff because the major U.S. stock market indices have continued to advance and have now gotten back to their September 2008 pre Lehman levels or 18 month highs but are still off significantly from 2007 all time highs.  This is despite the fact that the confidence of small business owners remains at all time lows (most new jobs are created by small businesses) and the number of home mortgage foreclosures continue to set all time new monthly records.

The froth in the market has been the sharp advances of the lower priced financials such as Citigroup (NYSE:C) and especially Ambac (NYSE:ABK) whose shares have risen six fold from about $.50 to as high as over $3.00 in the last two weeks alone.  The fluff is the reporting of better than expected first quarter earnings by banks and financial companies such as J.P. Morgan, whose results were based on their reduction of loan loss reserves and increasing proprietary trading profits instead of an increase in actual loan demand.

Additionally the volatility index (Symbol:VIX) which gauges the differences in volatility and complacency hit its lowest point since July of 2007 indicating an extreme in market complacency that had only been reached just months before the Dow and S&P 500 hit their all time highs.  Investors should pay a lot of attention to the VIX which increased by over 14% alone today because a sharp increase in volatility at the same time the stock market has hit a 18 month high means that the roller coaster is on its way back down.

Froth and fluff aside the SEC's action against Goldman will put a big crimp in the market because its only a tip of the iceberg on the bad news that is coming regarding the packaging and selling of mortgage backed securities by all of the broker dealers.  The next shoe to drop for Goldman will likely be the filing of a criminal law suit by New York's Attorney General, Andrew Cuomo and the filing of hundreds of civil actions by those investors who actually purchased the securities.  Given the distaste that the politicians and voting public have for Goldman investors should expect a long drawn out legal battle in which Goldman will likely have to settle for tens of billions of dollars. The bottom line is that it will be very difficult for a U.S. stcok market, which has been steadily increasing on steadily decreasing volume to act well.  For market historians the SEC v. Goldman Sachs law suit will likely prove to be a watershed event which signaled a bear market top.  I continue to suggest that investors remain in 80% cash.  Read More