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"The Trader's Coach"
16 years as a trading and life coach

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"Changing into the
Profession of Trading"
 
By Robin Dayne

Often I run across coaching clients that are looking to switch from their profession of many years to take on the challenges of a new trading career.

They get seduced by companies offering free workshops and lessons that promise an easy way to make enough money from trading or the quick fix to adding to ones finances that can produce enough to be able to make this enormous transition in life style and career. 

I am not saying that no one ever makes it but I am saying that many who attempt this are ill prepared and find out quickly that their dreams are met with emotions of uncertainty, fear and frustration that soon turn into a lack of confidence and crushed egos.

OK now that you have my opinion on the topic I will work to help those who have chosen this so they may have a chance of "getting it".

First when transitioning it's important to not depend on your trading cash to live for as least a year. YES one-year minimum and that's conservative, two is even better.

Here is the reason why. Trading is 90% emotional management and the companies that are selling their trading systems and methodologies are not telling you that. They are putting charts and indicators up on the screen and they show you how easy it is to make money because these are all predefined perfect trades.  They usually forget to tell you that your emotional baggage from the past will come up, or don't mentions and fears of losing money will come up or more that it's going to take TIME to learn and adjust.

Additionally, the last thing a trader should focus on as they start, is to have the additional pressure of having to make money to survive……..it can be the kiss of death, and all sorts of bad habits can come out of this emotional pressure.

This is not to say I have never seen anyone do it, but the percentages are slim unless they get instructions on how to attack the challenge and learn efficiently.

OK now that I have given you my lecture… lets see if I can give you some guidance to help this situation..….after all THAT'S my goal to protect you, forewarn you and most importantly prepare you. So I will give you some suggestions as if you are the potential trader who is still in a job making money and looking to change.

If you are going to be a trader than the first habit is to start by setting your standards for GOOD money management.  Knowing how much you need to live on "precisely" is critical. What do you need to make to pay the bills.

Break down all your expenses so you will know exactly what your monthly expenses are and I suggest you list them smallest to largest amounts (will explain why in a bit). Next figure out the total for 12 months and that is what you want put away to be safe so you are not pressured to make money to pay the bills. If you REALLY want to trade pressure free save 2 years of expenses, the more the better.

It's so hard to tell how long it will take anyone to get through the learning curve as each person's ability to grasp trading is so very different. So many ask me this question and honestly there is no one answer, because there are so many factors that come into play. The quality of instructions, which instructions, a person's personality and does it fit the market and the style they choose to trade.  How they manage their money and loses, what emotions will they deal with and control. Then add to that the ever changing market conditions and opportunities and you have to be the "Amazing Karnack" to be able to predict the answers.

OK, now that there is a cash reserve the goal is to get through the learning curve efficiently. Another error I find in new traders is that they are so excited to make money they neglect to track their trades.  Journaling, especially in the beginning of ones trading career sets in good disciplines, reduces the emotions of anxiousness and allows a trader time to fine-tune their strategies and methods till they get it right. Take the fist few months to nail down a great successful trading strategy and keep that focus as your main goal. The money will come later but if the strategy is not in place and the emotions take over you can put yourself at risk.

I will warn you that when you take the time to track each trade you WILL miss out on some good ones and you know what? That's OK, there will be MANY more to come. Do not get seduced by the cash you can make, which is so very tempting in the beginning. It is smarter to focus on gaining consistency, certainty and knowing you will make it, than losing and giving your money to Mr. Market who is laughing all the way to the bank as you emotionally unravel.

Because those new to trading haven't been made aware, that the lack of emotional control is the reason people fail they don't focus on emotions until it's too late and that's when my phone rings asking for help. I also know that even by warning you newbie's ahead of time you will not heed my words and will have to experience things for yourself before you believe me….that's OK too as long as you have the cash.

Next we have a plan we have a trading strategy and we are gathering data each day to fine-tune our trades. All is going well and we are starting to make some money too.

As this situation becomes solid next is to start slowly start building your profits setting your goals and making them each day. As profits come in, pick one or two of your smaller bills and pay them.  As more money starts to come in pay more bills till you are finally paying them all!…..and WOOWOO  you are almost there.

You should consider your goals to be paying for expenses, vacations, retirement, healthcare, and whatever is important to you in your future life.

Here's a re-cap of points to consider when transitioning from one career to trading:

1) Set aside enough cash to get through your learning curve and establish trading consistence

2) Start journaling immediately and take the time to analyze each trade good and bad

3) When tracking trades track the good ones and bad ones.

· Good ones tracked allow you to know what's working and to repeat them

· Bad ones are for modifying and figuring out what has to be changed in your trading.

4) When profitable start to pay some bills with the trading profits and expand till all bills are being taken care of monthly by your trading

5) Create a growth plan that will create a great new future for you

If you are emotionally stuck do not hesitate to get help.  In the meantime, 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.

Gold and the stock market continue to trade within a tight range this week. While the long term trend for both stocks and metals are up, and the charts look bullish I am not buying at this level because the market is over bought. 

Chasing prices higher especially after a run this large is not the right move in my opinion. I did mention last week that we could see stocks continue to grind higher going into earning season which is about 2 weeks away still. I think that could happen, and if the same thing happens which we saw last January with great earnings (which I think we will see again) then watch out for another drop.

In short, if earning are good which they have been and everyone is expecting the same this April, then the typical Buy on Rumor (pre-earnings rally) which is what we have now, and Sell on the Good News in April then all the suckers thinking the market should rally will provide some liquidity for the smart money to sell at a premium.

That being said, if the earning are not good, then people will sell on that news also because the market is just waiting for news to sell… It's the exact same situation as last time, that's how I am feeling about it.

Trading Bottoms in the Broad Market

The past few months I have been really focusing on buying dips in the broad market after I see a mini 3 wave correction. I use a mix between price patterns, volume, market sentiment, and market internals and of course years of watching how the market moves and evolves during times of economic expansion and contractions. This is represented on the chart below as the purple line.

This chart below shows one of my custom indicators which have successfully timed intermediate market bottoms 1-2 days before everything started to rally higher. This is one of the reasons we bought into the selling on Feb 5^th and again on Feb 25^th using ETF's.

Because this is a new etf trading strategy and type of trading signal to be used in a bull market I still have to fin tune it a little more because I want to be sure we don't get shaken out of positions to early which is what happened to a couple ETF's we got into Feb 5^th. . Read More

March 31, 2010 is a Key Date for the U.S. Economy & Stock market
March 31st, 2010

Investors should take notice that March 31, 2010 is a key date for the global financial markets for three reasons:

March 31^st marks the end of the quarter for all mutual funds, hedge funds, professional money managers and any other financial institution who manage money. Since the S&P 500 advanced by approximately 5% for the quarter I suspect that a lot of window dressing has been going on for the last two weeks and that the window dressing activities pushed the markets higher.  Window dressing generally occurs at the end of each quarter (3/31, 6/30, 9/30 and 12/31) because those investment managers who underperformed during the first two and a half months of a quarter scramble to acquire the shares of the companies that performed best during the quarter.  Read More

More of The Same Old Same Old?
April 4th, 2010

The U.S. employment numbers that came out today and overall were very good. The private sector growth was positive as were the previous revisions. However, the underemployment rate rose to records for people looking for jobs. Structural problems remain a strong headwind. Nevertheless, I believe investors and traders will likely focus on the positives meaning the markets should continue to move higher over the near term baring any sharp rise in interest rates. 

Next week traders will face a rather large $84 billion government bond offering. The 10-year traded up to 3.94% after the jobs report. It remains to be seen how the bond market reacts after the poor auction results of the previous week. 

In last week's newsletter I mentioned that any weakness prior to an expected good jobs number should be bought given the high expectations for a very good jobs number. While the expected EOQ markup left a bit to be desired from a short term trading perspective, the normal sell off was right on time after 2:00 Wednesday (see trade thoughts for EOM and EOQ in The Definitive Trading Bible).

The OEX 535W calls traded as low as $1.20 near the close Wednesday and traded as high as $5.00 early Thursday morning. I was unable to send an Alert Email for this trade setup as both of my internet systems went down after 3:00 Wednesday. However, there was another call buy setup after 2:30 Thursday afternoon. I did send an Alert Email but the market went straight up into the close. The 535Ws went from a low of $0.70 to $3.30. This happens every week. 

BTIM, our shining star, rose above $7.80 where stock could have been sold and repurchased under $7.00. BTIM is almost as good as a past favorite Huntsman. Our overall NET trading strategies are as good as it gets in today's market. Read More

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