The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Joe Fahmy has guided his hedge fund to outperformance over the past 13 quarters. He has been sharing his trading skills to a novice to intermediate traders based on his 16 years of trading.

This is our their attempt at creating bite size, easy to understand, bullet points for traders. The prior posts are here and here.

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After 10,0000+ plus hours of trading, thinking and analyzing what you do, you come to recognize some measurable improvement. This is the point where you have matured as a trader. It also means you are at the point where you are consistently earning a living as a trader. Reaching this level of achievement should be the goal of every trader.

What are the signs that you are no longer a newbie? When you . . .

1) Are Self Reliant: When you stop asking other people: “What do you think of the market?” While I respect the opinions of my colleagues, I DO NOT rely on them. I prefer to do my own homework, research and analysis. I LET THE MARKET tell me if I’m right or wrong.

The ultimate goal for traders is to make confident decisions on your own and trade with complete independence. You should not have to rely on the opinions of others because you should have conviction in your OWN ideas.

2) Stop Celebrating Winners: When you stop feeling the need to pound your chest every time you make 30 cents on a stock. (It is the flip side  of not getting depressed over every loss). Recognize what you did correctly and move on to the next trade.

The great Pittsburgh Steelers coach Chuck Noll used to say, after you score a touchdown there’s no need to start dancing. Simply hand the ball to the referee, head back to the bench and “Act like you’ve been there before!”

Same thing goes for the stock market. Don’t act like you’ve never had success trading before.

3) Let the Trades Come to You:  When you stop feeling the need to trade every day and you get over the “fear of missing out.” This is the downfall of most traders.

It took me a while to shift my focus from worrying about “missing out” to playing great defense. Once I did this, I noticed an increase in my confidence level as a trader. Keep in mind, there will ALWAYS be opportunities and it’s okay if you miss a few.

4) Feel No Need to Brag: Those traders who compulsively tell everyone about every winner are over compensating for their insecurities. It is a sign of lack of confidence. When you make a good trade or a good call on the market, and you don’t feel the need to remind everyone — its because that is what is supposed to happen.

The key is to be consistent and to separate your ego from your trading. If you are doing a good job, people will notice.

5) Loss Management: When you learn to cut losses without hesitation. No one likes to lose, but cutting losses is part of the game. I have studied the best traders throughout history and they all have the same number one rule: CUT YOUR LOSSES! Learn to accept when you are wrong and move on!

Maturing as a trader involves discipline, focus and the ability to make decisions. How do you get to this point? Make decisions and learn from them! I openly admit that I have made TONS of mistakes in the market, and I still make mistakes EVERY DAY. Thankfully, I’ve learned from them and now try my best to minimize those mistakes. The key is to MAKE a decision without worrying that you might be wrong. As long as you learn from it, you can correct it the next time. Again, just make the decision! Who knows, it might end up being a good one.

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Fahmy holds seminars for active traders who want to improve their returns.   Readers of the Big Picture who are interested will get a $500 discount on the full day event. Go to TradingBigWinners.com and enter the promotional code: “bigpicture500” for the New York (3/3) seminars. Barry Ritholtz will be discussing trader psychology and cognitive errors at this seminar.