Epilogue

Trading the market is like no other experience youve ever had. Its as challenging as driving a taxi in Katmandu. There you have adults, children, buses, taxis, bicycles, dogs, cows, and yaks all moving in a semi-chaotic manner, yet getting where they want to go. Just when you think you know whats going to happen next, someone accidentally hits a cow and all hell breaks loose. To a Westerner, the entire "system" is both amazing and nerve-wracking. To the locals, its part of their daily routine. Likewise, the financial market is so dynamic and competitive that just when you think you know whats going to happen next, it doesnt. This places strong demands on any trading strategy.

To help you improve as a trader, I prepared a collection of one-liners, some extracted from this book and some from other accomplished traders. There are 31 of them; one for each day of the longest month. I like to read one each morning and contemplate how my techniques can be further improved:

1. If you want profits, you must become better than the crowd. Its that simple and its that difficult.

2. Resist the temptation to purchase prebuilt trading systems. Thats what the crowd does.

3. Read many books on various aspects of trading. Theres no point in reinventing the wheel.

4. Buy a good charting program, especially one that lets you devise and test your own strategies.

5. Look for patterns that stack the odds in your favor. If you dont have an edge, dont trade.

6Consider using fundamentals to find your "prey," and technicals to get in and out. (Good tools for evaluating stocks both fundamentally and technically are available at http: www.VectorVest.com.)

7. Determine what and when to trade yourself; dont ask others. The public is generally wrong.

8. If the trading style does not suit you psychologically, replace it. Theres no need to fan your fears.

9. Keep your strategy simple and test the crap out of it. Literally. Crappy rules will cost you.

Epilogue 341

10. Backtesting doesnt guarantee winners, but it sure picks out losers.

11. A backtested system over-optimized to perfection is almost surely useless.

12. Paper trading lets you test, without emotional involvement, your strategies on lots of markets.

/Trade with a simulated broker to test everything, including your timing and ability to handle stress. (A good simulated broker is available at http: www.auditrack.com.)

14. Its better to capture half a trend with low risk than bottoms and tops with high risk.

15. Exchanges are imperfect, and unlike online trading, human brokers can help resolve discrepancies.

16. Treat your broker with respect and he will go the extra mile to get your or-/-s ders filled.

Ill/A novice should start slowly, trade end of day, in small lots, and in medium volatility markets.

18. Never assume your trades and stops were executed. Get confirmation.

19. Control losses by managing your risk with stops and appropriate trade size.

20. Only trade what you are willing to lose; otherwise your risk analysis will be distorted.

21. Limit your loss on any trade. Dont be afraid to cut loose from a sinking ship.

22. Be constant. After a few good trades, youll want to begin doubling your exposure. Dont.

23. Faithfully follow your fully tested strategy, unless you really know what you are doing.

24. Internalize the way your system works and note when and how discretionary intervention would help.

25. The market is always changing and so should you. Endeavor to keep ahead with better strategies.

26. Stay in top physical shape. Youll feel, think, trade, and handle stress better.

27. Believe you deserve to win. The market will punish self-doubters.

28. Being "in the zone" means your mind is confident, alert, calm, eager for engagement, and automatic.

29. Intuitive, discretionary trading requires you to be "in the zone." When not, dont trade.

30. To control your emotions, meditate. It is simple, free, and has worked for thousands of years.

31. Its you against "them." Make friends or else the loneliness of trading may get to you.

Epilogue

Final Words

All fired up? Im now going to offer a word or two of caution.

Nothing can ensure that your strategy will make profits in the future. You can only hope that your strategy will work almost as well into the future as it did in the past. If you are a novice and want to trade because you need the money, forget it. Youre lost before you even begin. If you dont have the right mental makeup, life as a trader will be miserable.

On the other hand, if you accept the challenge, it can be intellectually and financially rewarding. Because your experiences and beliefs in life are unique, your path to the top will also be unique. A book, conference, audio tape, or any other tutorial course that works for someone else may not work for you. Just as with any other worthwhile endeavor, you will have to put in your time and pay your dues to develop the necessary skills. You cant just buy them.

Your challenge will be to see what works for you. Youll discover that no one system works all of the time. So, to progress, you will have to start slowly and push yourself into the unknown to gain an understanding of both the market and yourself. It will be scary and exciting to strike out on your own, confront your own demons, and discover more of who you are. Youll also learn to weight, analyze, compromise, and underneath it all, develop an appreciation that without risk, theres no reward.

Now,. . . roll up your sleeves and get to work!