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The Trading Tribe

We didn’t talk about stocks or commodities in the Incline Village Trading Tribe. We didn’t talk about feelings either, except to get into the willingness to feel our feelings. Then it was “show me, don’t tell me.”

In fact, if someone wanted to blather their bullshit, I’d say “Whatever you do, don’t feel anything. Just keep talking.”

Finally, someone would “send” and get into showing us what it felt like to feel what they were feeling when they were at a trading inflection point. We can relate to the feeling, not to the drama that got someone into the feeling. That was the “story.” Not interested in your story.

This is why buying another person’s trading system or “proven” rules is a mishap waiting to happen as you may understand some/all of the trading rules, but that you can incorporate them into something that you can replicate is highly improbable.

Their rules are not backtested despite there working for some people. They are like a pair of jeans that will never fit right.

Our teachers and courses teach proven, backtested rules and include what the emotional tradeoffs are at each point. That’s how you calibrate rules that fit your personality. Someone very smart once said “the goal for the trader is to develop a set of rules with which s/he is compatible.” Compatibility means harmony.

Denying your feelings around trading and risk leaves you with a blind spot that will reveal itself just when you are most insecure about what you are doing.

If you are trading or are thinking about trading, you are the biggest trading indicator or overlay of your trading success. There are no external solutions for your internal issues. Junking up your charts with indicators or buying someone’s “system” won’t help you trade better.

See how we can help you learn to trade for long-term success.

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If you subscribe to get NYSE data, you literally get everything that trades there.

You’re not likely going to need all those names running through your simulator or backtesting software.

You can do this to any data feed. Reading headlines to get your trading ideas is amateurish. Be a pro instead.

I removed all the nonsense that I knew I didn’t want to be in. I called that process “raking the data.”

I removed the following from the data feed:

-stocks below $20 per share

-stocks above $100 per share

-shares with less than 1 million ADTV

-Preferred Stock

You can figure out what is best for you. What is left is what you will run through your simulator. This also helps you stay objective and can stop you from obsessing about one particular name.

Also, it’s fantastically hard at best to keep track of all the potential names to trade.

This process can help you stay open-minded.

Open you mind with Tony Saliba’s new trading book – it’s FREE

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Use equity pairs trades to stay in trades longer and put time on your side.

If you are trying to increase your holding time but are scared, you can buy one instrument long and sell another related instrument short against it.

Ideas to Test

Look at the strongest equity sectors from a relative strength standpoint. You’d buy the best name long and sell the worst short. You are looking for the long to outperform the short.

This is a relative value trade – one instrument will outperform the other. You give yourself more “outs” or more ways to win. This type of trading give you much more flexibility.

If the market crashes or corrects, the sting of the down move will be offset by the short position.

You have to test these ideas, but this is a creative way to get your testing ideas going.

Remember, making transactions is not trading.

Staying spread is staying alive. Get Tony Saliba’s new option trading book – FREE

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Human beings are emotional beings. We all have emotional systems. If you are not connected to your emotions, you are likely to see them emerge when you are under the pressure of trading.

The feelings you don’t want to feel have as much power over you as the ones you do want to feel. You’ll want to capture all of your emotional intelligence in your trading rules, else you will live with an unending variance between what you feel (emotionally) about your trading and what you “think” you know (intellectually).

A system is a set of rules that you can follow. After you get the system generated order, you have to enter the trade into your platform. That’s where the fun starts.

The Trading Tribe was set up by Ed Seykota to help traders understand the emotions that would derail one’s trading.

Scenario 1: you get a system-generated order, but you do not enter the trade.

Scenario 2: you have no orders for the particular day, but you enter an order on the fly.

In both scenarios, there is a variance between your trading system and your emotional system.

Befriend your emotions and make them allies not antagonists. They are trying to teach you something.

If you are the type of person who is constantly saying “That doesn’t make sense…” you will get great clarity on “that” if you look at the emotions that are driving the action.

Get out of the Trading Tribe hot seat, and get Tony Saliba’s new book – FREE

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Discretionary chart reading is problematic as you can’t backtest it and calculate the expected value of a trade.

Only trade set ups (the combination of entries, exits, and position sizes) that have positive mathematical expectation.

Get a simulator and backtest your trading ideas to find the expected value. The software I spoke about in an earlier episode will do the calculations for you.

Expected Value Formula

E = (Ave Win)(% Win)-(Ave Loss)(% Lose)

Roulette

2 Kings

Don’t blow you rent money on Roulette, get Tony Saliba’s new options book – FREE

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