Yesterday we looked at how taking control of your emotions is essential to success in trading. Rising above the base emotions of fear and greed, and instead, making trading decisions based on strategy and logic, is the only way to have consistent success in the markets.

As I hinted in the previous post, this isn’t something we do naturally, but it can be learnt.

Actually, “learnt” might not be the right word. What we’re really talking about is training our mind.

A MENTAL GYM

If we want to take control of our mind, so that we can more easily make decisions based on logic. then we need to give ourselves a mental workout.

When you want to train and hone your body, you go to the gym and do exercise. The same goes for the mind. With the right training and exercises, it’s possible to hone your mental abilities, and sharpen your mind.

Of course, these aren’t physical exercises you do in a gym, instead they are mental exercises you do in your head.

So what kind of exercises are we talking about here? Should we all be doing Brain Training on Nindentos? Well, not quite. Those kind of mental gymnastics are fine for improving the logical side of the brain, but we’re talking about getting the logical side and the emotional side to work better together. We want to calm that battle that is forever being waged in our heads. If we can get both sides of our brains working in harmony, then we’re really getting somewhere.

What kind of exercise can do that? Meditation!

BEAR WITH ME!

Ok, I probably just lost about 90% of the people reading this when I said that. But bear with me, because believe me, this is absolutely one of the biggest secrets to my success as a trader.

MR SPOCK

I first learnt this from one of my personal trading mentors. I used to watch in awe as he would sit there and calmly hit the buy and sell buttons, and take the losses with the same lack of emotion as he took the biggest profits you can imagine. Nothing phased him, ever. Imagine Mr Spock from Star Trek day trading, and you have some idea of what this guy was like.

The trader, I’ll call him Mr P because he doesn’t like publicity, was quite open about his meditation. In fact, he used to meditate for one hour a day, every day, before the markets opened. He swore blind that it was the reason he was so profitable.

I wasn’t convinced, but I figured that in the quest for profitability, anything was worth a try.

ANOTHER WAY

Learning meditation is in itself, fairly easy. But getting good at it, as I discovered, takes a lot of time and practice. And getting into a habit (which is absolutely key to making it work), takes discipline.

And herein lies the problem - we’ve already established that a lack of discipline is one of the things we need meditation to help us overcome! It’s a catch-22…

Much like we need structure to succeed in trading, so too can a structured approach help in meditation. I’m naturally a very lazy person, so anything that gives me structure, and makes something easy to do, is a godsend for me. Some time ago I was lucky enough to be introduced to a private system for structured meditation. Because I wasn’t required to think about it, or put in any effort, it suited me down to the ground!

And that’s what really turned round my trading. This structured approach to meditation gave me a way to take control of my own head. It calmed the battle between emotion and logic. I don’t claim to know exactly how it works, but it really does. When I finish my daily meditation, it feels like when you come out of a wonderful deep relaxing sleep. My head is crystal clear, my thoughts are laser sharp and focussed, and my emotions are completely under my control.

When I sit down to trade, it’s almost like I’m running on auto-pilot. I know my strategy inside out, and so I calmly click those buy and sell buttons when the chart tells me to. Sometimes, after a particularly deep meditation, I feel almost like I’m someone else, watching me trade!

HEAD STUFF - SORTED

Now here’s the reason I have chosen to share this insight with you at this time. The private structured program I used, has never been publicly available, it was only ever possible to get it via personal introduction. All that is changing next week.

I’ll tell you more about the program tomorrow, but first let me say something really important. Obviously I’m going to recommend you get this program when it’s released, I mean, it turned me from a so-so trader into a highly profitable one. But even if you decide to completely ignore me, please do think about what I’ve said about meditation and “head stuff”.

Getting my head in the right place was absolutely crucial to my success, and I’ve never talked about that openly before because most people aren’t ready to hear that meditation is a key to successful trading. Charts and stuff are so much more interesting, right? So feel free to ignore my email tomorrow, when I’ll tell you more about the program I use. But please do think about the advice I’ve shared thus far. There are many many methods for meditating and “head stuff”, and I believe that trying any of them can only make you a better trader.

I’ve decided to share with you one of the biggest “secrets” to my success in trading…

ONLY TWO THINGS

I’ve spoken before about how you need two things to be a profitable trader:

1. A clearly defined strategy to trade.
2. The discipline to trade it properly.

The first thing, the strategy, always gets all the attention. I’ve covered it at length in both my “How to make more…” report, where I talk about the trading triangle of stock selection, entry, and exit. And of course, my Day Trading Freedom books and videos go into even more detail.

But that’s not what I want to talk about here.

Instead, I want to talk about number 2. The discipline to trade properly. The ability to control your emotions, to be able to pull the trigger when the strategy tells you to - even when that means taking a loss. What I call “the head stuff” - because it’s all about controlling what goes on in your head.

HEAD STUFF

This is the bit that hardly ever gets talked about in trading books. Perhaps that’s because it’s not as sexy or exciting as looking at lots of profitable charts.

Perhaps it’s because it’s something that’s little understood by most traders. Those who get it, usually do so naturally, and those that don’t are left to fend for themselves.

Whatever the reason, the point is this: Getting your head in the right place is absolutely essential to success in any form of trading.

As Charles Ellis puts it, “If you can’t control your emotions, being in the market is like walking into a heated area wearing a backpack full of explosives.”

WHO’S IN CONTROL?

Have you ever sat in front of a chart, and known that you should hit the buy or sell button, but for whatever reason, you couldn’t do it? Maybe because it meant taking a loss, and even though you knew that the loss might get bigger, you hung on anyway “just in case” it came back to you?

Or maybe because it meant taking a risk on a trade, and you were afraid of losing the profit you had already made on a previous trade?

There’s no shame in this “trigger trouble”. It happens to us all, and the thing is, it’s not our fault!

You see, it’s the way our brains are physically wired up that causes us this kind of problem. Our brains are basically split into two parts - logical and emotional. Those two parts are constantly doing battle, each one vying for control of our actions.

Back when we were all living in caves, hunting, and being hunted, our emotional responses were essential to survival. Basic fear and greed are what got us out of the caves each morning to go hunting, and got us back in there when we were under threat.

But although we’ve evolved into sophisticated creatures, with the capacity for logical and structured thought, those old base emotional responses are still there, hard-wired into our brains.

So you cannot help but have this battle in your head every time you’re about to pull the trigger on your trading screen. Logic says “Do it!”, but emotion says “Are you sure about this?”

The trick is to get logic to win each time, and to win quickly. Only when trading decisions are based on logic and clear strategy, instead of fear and greed, can you hope to be consistently profitable.

CONTROL YOURSELF!

Of course, controlling your emotions and letting logic win is one of those things that’s a lot easier said than done! If it was that easy, we’d all do it and there wouldn’t be a problem. Yet clearly there is.

Fortunately, there is a solution. You can train yourself to control your mind. I first learnt how to do this about seven years ago, and the effect on my trading was profound.

This post has already got longer than I intended, so I’ll stop here, and continue tomorrow, when I’ll tell you how you can take control of your mind, your emotions, and your trading.

We certainly live in extraordinary times. The markets are just getting more and more profitable. This last couple of weeks has been really exceptional, I don’t think there has ever been a better time to be a day trader.

After the last few ‘long only’ videos, I’m back to normal today. As it happens, all of today’s trades ended up being shorts. YHOO looked good for a long at one point, but the entry never confirmed.

Many have asked me about shorting and what we can and can’t short. Essentially the temporary ban applies only to financial stocks, but your broker should carry a full list. The banks made some amazing moves today, but alas they cannot be shorted. Still, there was enough action in the non-financial stocks…

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Here we go again, another day, another crisis, and the mainstream media are having a field day.

No wonder I’m getting flooded with emails all asking basically the same question: “is it over for day trading?”.

In a word - no! In fact, it’s rarely been so good. Volatility = opportunity, and right now we have more than our fair share.

I’ve recorded a special video (below) which explains why these are good times for day traders. I hope you find it useful.

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Today’s video is short and sweet. Well, kind of, except there’s no “short”. As with the previous video, I’m on a mission to prove that even with temporary shorting restrictions in place, we can make a profit.

So here’s just over an hours trading for you, condensed into under 5 minutes of video, and only taking long positions:

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Ok, so they’ve gone and banned short selling, temporarily, and for financial stocks only. By the way some of the press has reacted, you’d think it was the end of the world!

I like to short, and it’s an annoyance than this perfectly acceptable practice (IMHO) has been suspended. But guess what? We can still make plenty of profit without going short.

I never normally trade Fridays, I like my long weekends. But because this week has been so packed with opportunity, and particularly because I wanted to prove a point about the short selling ban not being a problem, I traded today and recorded the results. Do you think I was able to make any money taking only long trades? Find out in the video:

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The BBC are calling today ‘Meltdown Monday’. The Wall Street Journal say the market has been ’shaken to it’s core’. Harvey Walsh says, another great opportunity packed day for day traders everywhere!

Don’t get me wrong, the news over the past few days has far reaching consequences for the markets, pension plans, jobs, etc. I truly feel for those who have lost their job.

But this site is about day trading, and days like this are, frankly, profit opportunities not to be missed.

The early part of the session was so full of action, unfortunately I didn’t have time to manage recording a video and trade at the same time However, after the first hour or so when things slowed down a little, I was able to record some trades for you - the video is below.

I imagine that the afternoon session is going to offer lots of great trading opportunities as well, indeed this is likely to be a week of rich pickings for anyone who trades intraday. I hope you too can profit from the silver lining of this current could…

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I had an email recently, from someone who had been watching one of my videos and wanted to know why I had closed a trade when I did, instead of letting it run on all day. I wanted to post my reply here, because this raises a few important points. As a bit of background, the trade in question was one I entered relatively late in the morning, and only whilst waiting for a different trade to come to an end. The trade was a short and I made a tidy profit. By the end of the day, the stock had fallen lower so there was clearly more profit to be had. Here’s my reply:

There are three angles to this. The first is that you have to have a clear objective for your trading. For me, I trade because it gives me more free time (not money) than a day job. So my objective is to be out of the market as soon after 11am as I can, so the rest of the day is mine. On that basis, I’m not looking to enter new trades as late in the day as I did yesterday - I only took that because it was staring me in the face, and I had a few minutes to kill as I waited for the others to finish up.

Of course if your personal objective is to make as much money as possible, then you may well want to hold much longer. For me though, time spent with my family or doing stuff I enjoy is more valuable than time spent in front of a screen for a few extra dollars in the bank.

The second angle is the trade strategy itself. I haven’t looked at aapl [the stock] since I closed that trade, so I don’t know how it went, but I’m guessing it probably wasn’t a smooth ride down to that low. It’s easy to look at any chart after the fact and say you should have stayed in. But when you’re in the trade, you have to exit based on the prevailing conditions. Now aapl yesterday is an exception for the reasons I mention above, but in general, many of the stocks I exit go on to make new lows or highs later on. However, my exit is still valid because at that particular time, I have an exit signal. In other words, you have to have a strict set of rules and always trade within them.

Which brings me to the third angle. You absolutely cannot get every bit of potential profit out of every potential trade. You can only be watching so many charts at one time, so you will miss other trades. That’s part of the business. By the same token, you cannot get every cent out of every move. This is where so many traders get it wrong - they believe they must be in at the very start of a move, and out right at the end. But that’s nigh on impossible. It’s much much easier to take the “easy middle bit” of a move. Get in and out with room to spare. A few of those will, in the long run, net you more profit than trying to pick absolute tops and bottoms.

Taking a loss is part of trading, and missing out on potential profit is also part of the business. It’s too easy to look back at missed profits, but we rarely look back at missed losses. For every exit I take where the stock continues and would have made me more profit, there’s an exit that if I hadn’t taken, would have turned my trade into a loss.

As the institutional traders start trickling back into their banks, volume is picking up and there are ever more great trades just waiting to be had.

Here’s my selection for today.

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As I wrote yesterday, August is a quiet month indeed. Much of the “big money” is on vacation, leaving little volume, and less action.

But this is the stock market, and there’s always something to trade! It might take longer to see a decent return, but there are trades to be had nonetheless as todays video shows.

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