These trading tips can help you get yourself in the best possible condition mentally to perform at a peak level. They aren't necessarily new, but they are critically important. So whether you have heard them or not, now's the time to employ them in your trading and your life. Both will improve consequently.

I probably did 15 seminars with Tom Basso (who was featured in The New Market Wizards by Jack Schwager) in the early 1990's. We also talked endlessly over foods and I interviewed Tom twice in my newsletter (back issues are available in http://www.iitm.com) During that time, 1 announcement that Tom always made was”I am a businessman first and a trader moment ” His businesslike approach was always the key to his success, and I'd love to explore that approach in detail in this month's suggestion.

Robert Kiyosaki and Sharon Lechter, in their book The CashFlow Quadrant® research four types of people. These types are separated by their own cash flow patterns. Individuals on the left side of the quadrant, the worker and the self-employed individual, work for money. Individuals on the ideal side of the quadrant - the business owner and the investor - have money working for them. The four quadrants are quite fascinating because they also perfectly describe various types of traders. The most prosperous traders are going to be on the ideal side of the quadrant. But this week I'm going to talk about the majority of traders, those on the left side of the quadrant. I'll save the ideal side until next week.

The Employee Trader functions for the machine. If you work in a job (which just happens to be trading) and get paid a salary to do this, then you are an employee trader. Kiyosaki does not really define the term”system” in his novel, despite having it extensively. But he provides many examples of progr. For instance, the Marine Corp has a system which allows soldiers to accomplish their aims with a minimum loss of lives. Soldiers either follow the machine or else they perish. Similarly, McDonald's Restaurants has many systems - for meals shipping, for greeting the consumer, for advertisements, for cooking french fries so they taste exactly the same in each branch, for processing burgers quickly, etc.. Each franchise operates on countless systems and it is why McDonald's is powerful. Employees either follow the system or 1) the franchise pops or 2) the employee is fired. Thus, do not forget that worker traders operate for systems - they do not necessarily comprehend the systems. I believe this really is a key to the reason they aren't necessarily good traders.

Bank traders, corporate traders, some mutual fund managers and even those who have work and just happen to trade on both sides are good examples of worker traders. These folks are motivated by safety and good benefits. Thus, a top bank trader might earn $50 million to the bank. But he does not make that cash. The bank gets the cash. This trader only requires a salary and probably gets a bonus for performing well.

Employee traders operate in Work. They get paid via a salary, which can be taxed before it is given to them. They operate in order to get paid, which is their primary motivation. They would love to get paid more by performing better quality work, but their principal thinking is that if I do”X” I'll get paid. For them, the”safety” of the wages and”benefits” are more significant than the”money”

I considered working together with the Forex traders of a large New York bank. The treasurer gave me a fantastic idea of exactly what I was in for when he made the following announcement:”I do not want any of our traders making over 20%. If they make over 20 percent, then they could lose over 20 percent. Moreover, they would want massive bonuses after which they would be making more money .” Even though this man was a key man in the bank, he was an employee and had an employee mentality.

I've generally noticed the worst traders that I use are Employee Traders. They have the least thought for what trading is all about and they generally make quite poor traders. Additional those who have an employee mentality and a complete time job (i.e., they are into safety and benefits), also make bad traders when they attempt to take action as an avoion. As an instance, most people believe stockbrokers to become traders. But, stockbrokers are really employees (to the extent they get a salary) who are paid to sell shares. They are self explanatory (see next egory) to the extent they rely on commissions.

When worker traders approach trading, they often bring the worker mentality into play. They want to be told what stocks to buy or exactly what the market will do. They are utilized to being told exactly what to do and they abhor making mistakes. Bank trading rooms, by way of instance, usually hold daily meetings where the workers are told exactly what they should be doing throughout the day. That's the worker mentality and it does not fit trading.

The Self-Employed Trader is the machine. This type of trader is someone who has stopped his/her job to become independent via trading. They don't want to have their earnings dependent upon other people. Instead, they wish to rely on their own hard work. They would like to control the problem and do it by themselves. Most of the traders that I work with usually have this sort of mentality toward trading.

The real time trader is very often a perfectionist. Everything needs to be perfect - they'll pay for nothing less. Hence, they need a perfect trading system and are constantly looking for something greater. They are also likely to be into optional trading because a mechanical system cannot do it as well as they could do it.

Most self explanatory traders are often off looking for supreme control - loing a Holy Grail system which perfectly predicts market bottoms and tops. The results are normally quite unsuccessful. If the self conscious trader is taught certain principles such as expectancy, trading for big R-multiples, and position sizing, they have a opportunity to become quite successful.

The powerful ones usually understand they have limited capital and so start to handle other people's cash. But when you start to do that, many different systems become involved aside from the trading system. The self-employed trader usually insists on doing everything himself and consequently runs into severe limitations of time, know-how, and fruion. The result is usually failure. Most people who try to become professional money managers approach it from the self-improvement mindset.

Are you currently in one of those quadrants? How about the folks advising you? Are they in one of those quadrants?

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Van K. Tharp, Ph.D..
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