Part Five:

Mindset-The Winning Edge

How to Think and Trade Like a Professional

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Disclaimer
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advisor nor a broker-dealer, financial or commodity trading advisor and makes no
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financial instruments.
All information and material provided herein is for information purposes only and should
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The authors assume no responsibility whatsoever for any losses experienced by anyone
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For more information, please refer to the Terms of Use on the website

[Link] Active Trading Masters Program 2

Active Trading to Win:
How to Think and Trade Like a Professional

Mentor Advice Discipline &

Success & Failure Commitment

Part Five:
Mindset

How to Improve Why Winners Focus

Feedback & Outcomes On the Process

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Goals
• Learn the mindset for winning trading
• Learn why you don’t need to predict the markets
next move to earn a consistent living
• How to think like a profitable trader.
• Recognizing fear in your trading
• Defining discipline for a trader
• Steps to peak performance

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Discipline Checklist: small decisions, big results
Develop or test a strategy/edge Game Plan the same time every
Commit to a strategy day; make it an appointment
Make rules Do not over trade
Follow rules Do not fight obvious order flow
Create a money management plan Wait for the entry signal
Follow your MM plan Do not chase price
Set daily loss limits and stick to Journal every day
them Hold winners with patience
Exit losers flawlessly Control emotions
Do not trade when your personal
life has big changes

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The winning mindset
• To have the winning mindset, you must be willing to be successful.
• To be a winner, you must learn what works and then have the
discipline to apply it consistently. Knowing what to do and doing it
is not the same thing, winners and profitable traders take planned
purposeful action.
• In order to be a winner, you must always take responsibility for the
outcome of every trade.
• You must be willing to make a commitment to think in terms of
results, not feelings of progress.
• To produce results, you must learn from every single trade.

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The profitable traders thought process.

• “I don’t need to know what’s going to happen next to

make money consistently.
• It is much more important to know what I am going to
do next, than it is to predict what is going to happen
next.”
• ** This of course assumes you have a written trading
plan that you understand and believe in.

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Trading to win: control
• When you are trading to win, you will never feel the market “must”
do something. If you are asking the market to do you a favor, get
out of the trade, you are now hoping and no longer have any
control over the outcome of the trade.
• Having the discipline to book a profit or loss without emotion is
what separates the average trader from the one who takes home a
check with consistency.
• When you are trading to win, you will move from one trade to the
next effortlessly.

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The effortless mindset
• Every trade should have the same mindset:
[Link] what is probably going to happen.
[Link] a scenario in place for if the trade moves in your favor or
against you.
[Link] the trade.
[Link] the market unfold.
[Link] what you said you would
[Link] at letter A again

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 Focused thoughts
• If you are ever in a trade that you are not confident about, ask
yourself this question: “If I did not have the position, would I want
it?” The best answer will always be the first one that comes to
mind.
• Being right and trading to make money is not the same thoughts
process.
• Eliminate thoughts of right or wrong based on profit or loss of the
trade.
• Ask yourself this question after every trade: “Would I take that
trade again?” If the answer comes back yes you are focusing on the
process and the structure of the trade. You are on the track to
success.

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Trading nervous or with fear
• New traders often get nervous when they are in a trade. They
think it is because they don’t know what’s going to happen next.
They are trading scared.
• When this happens, what you actually fear is one of two things:
1. You don’t know what you are going to do next under any
circumstance
2. You know what you should do but don’t trust yourself to do it.
• These thoughts usually stem from a desire to predict the next
move. No one can predict the market, stop trying right now.

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Focused thoughts for managing a trade

• Cut your losses and let your profits run: The proper thought
process- you are fearful your losses will get bigger and hopeful
your profits will grow.
• Cut your profits short and let your losses grow: The wrong (and
most common) thought process- you hope your loss will come
back and you are afraid your small profit will be taken away.
• It is crucial to pay attention to what you are focusing on when
you are managing a trade.

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What it takes to succeed as a trader/risk manager
• Understand your job is to monitor price action and volume to develop trade
scenarios, asses risk and manage leverage, your job is not predictions.
• It is absolutely imperative that you are disciplined and patient, both to wait for good
scenarios and while you are in a trade.
• Always remember that you can and should adjust risk (share size) while you are in a
trade. If a trade moves against you quickly there is no reason to sit in a losing position
with full size. It is much cheaper to get back in!
• Know what each trade could possibly look like in either direction before you enter.
• Be quick to take losses and slow to book profits.
• Understand you are placing trades based on what is probably going to happen, not
what is going to happen.
• You must be completely comfortable with the fact that losing trades are a big part of
the business.

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Some Thoughts on Discipline
• Discipline: the ability to follow • Discipline applies to:
your plan. 1. taking losses, booking profits
• If your plan has an edge, it is a
matter of following it to make 2. which stocks to trade, how
money. to manage risk in each stock
• This is easier said than done 3. when to be aggressive, when
because most traders trade not to trade.
from ego and emotions. 4. Managing hope, fear and
• The only reason not to take a greed
predefined loss is because you
are trading to prove your
5. Doing homework, being
analysis, instead of trading to prepared for the day
grow your capital.

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running your trading business
• All month you will be putting lines in the water so to speak, if the position
does not work out, you take small losses and small profits or a flat. If the
trades works out you will add to it and those are the trades that pay your
bills.
• You must place trades to learn, it's the only way to learn. You must place
trades to make money, you must get involved. Your #1 goal should be to
distinguish between a good trading day and a tough one. Your # 2 goal is
to learn how to manage a good trade.
• You will make consistent money because you are good, consistent traders
are good because they are prepared and disciplined, not because they
are lucky.

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Stress free way to profits
• We have taught and mentored thousands of traders over the last 15 years and over 90% of
those make the business much harder than it has to be.
• Unprofitable traders place trades and hope the market makes them money. If it doesn’t they
say “this doesn’t work.” They are not proactive while managing the trade.
• The consistently profitable traders that we have worked with over the years don’t care at all if
a trade doesn’t make money. They spend their entire trading day assessing market conditions
(strong/weak/flat) developing scenarios, placing a probability on the scenario based on the
assessment of conditions and then place a risk amount based on all of the above.
• There is NO “right or wrong” in the thought process. There is only “how likely” is this going to
follow through?
• Put on a trade and then reassess after the trade is placed. There is no stress because they are
managing risk and probability. They are not trading to prove themselves “right.”
• Relax when you are at your seat and constantly refocus your thoughts on the probabilities,
not the outcome.

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Trading Psychology

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Psychology
The most integral part of trading remains to be Psychology. You can know everything there is to know about stocks, sectors, the
market and level two trading, technical analysis but if your mind is not programmed properly, you will never be a good trader.

"ALWAYS LIVE TO PLAY ANOTHER DAY"

YOU DO THIS BY :

1) DISCIPLINE

2) HAVING A PROPER GAME PLAN

3) MONEY MANAGEMENT

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Committing to Success
 Control profits

 Make goals – Daily, weekly, monthly, yearly

 Scale down your goals to allow for down days (e.g. daily 500, weekly 2000, monthly 6000)

 Know your personal situation

 Do not compare yourself to others – each trader is different

 Make goals that suit you, your life, and your style

 Develop your own style

 Write down everything at the end of the day

 READ everything you can

 Learn from other traders

 Do not pass judgment on others’ trading styles

 Different styles work in different markets

 Be open to change

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Be Prepared for the Day Ahead
• Remember, you are responsible for hitting the keys
• Come into the office with a clear head
• Trade smaller or not at all when dealing personal issues
• Trade smaller if you are making a big purchase, or are having issues at home
• Your head should be totally clear to trade well
• Accept failure -not everyday will be great, don’t get too low
• Accept success -not everyday will be great, don’t get too high
• Be modest, remain humble

The market is unrelenting when teaching humility

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GENERAL TRADING RULES
• Do not let a winner turn into a loser
• Set trailing stops on all trades. Scale out while stocks are going in your favor.
Remember you can not go broke taking a profit!
• Do not chase stocks
• If you miss a move, do not irrationally chase the stock up or down. There are
plenty of opportunities in a day! Being patient is key.
• The bottom is 0
• It can always get worse. Stocks do not always come back. Cut your losses when
you can not take it anymore. Learn from your mistakes. Do not blow your stops
and then buy more to compensate.
• Do not panic --the worst thing you can do is panic. Do not be a deer in
headlights. If you are trading scared, it is because you have too many shares.
• No one play should be so bad that you can not hit out and move on.

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Disciplined TRADING RULES
• THE BEST TRADERS MAKE TRADES BASED ON RISK, NOT REWARD. What is the worst
case scenario? Do not anticipate profits!
• Cut your losses
• Set stops
• Don’t trade if you are not well financially/emotionally
• Do not have preconceived notions of what the market will do
• Traders are not bulls nor are we bears, we are opportunist
• Do not marry stocks
• A stock should simply be a vehicle for you to make money. They do not care about
you nor does the CEO nor the board of directors.
• There is a thin line between hope and fear in the market. We hope when we should
fear and we fear when we should hope. Manage your emotions.
• GO SLOW, make profits everyday, build an account and do not try to get rich quick.
Slow and steady wins the race, all the others are second place!
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ATTITUDES OF SUCCESSFUL TRADING
• DISCIPLINE: Sticking to a system & a set of rules that work for you
over the long term. Even when times are good & things are working in
your favor, do not try to get "lucky".
• TIMING: Timing in & out of positions even to save an fraction of a
dollar will add up to a lot of money that you save.
• AGGRESSIVENESS: Knowing when to act is key: A good trader knows
when to get into the market as well as when to get out.
• CONFIDENCE: Always maintaining a high level of conviction. You must
believe in your ability to be a successful trader at all times. Put all bad
trades behind you!!!

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Habits
• STOCK SELECTION: Stick with the groups and the better trading stocks. Get to
know which one's they are.
• TAKING LOSES: Getting out of non-winners: Learn to take your loses properly &
get out of stocks when the market makes it' s move & your stock can't react.
• WILLING TO LEARN: Be willing to learn and change: This is one of the hardest
things to do. People have the bad habit of sticking to things that don't work
because they can't break bad habits. As a result , people get stubborn & good
traders are never stubborn.
• GAMBLING: Gambling -vs- Calculated risk: 90% of the public enter stocks as a
straight gamble. They do not have a valid reason to enter positions. A successful
trader has a valid reason (VOLUME, RELATIVE STRENGTH, & TREND OF MARKET)
and always knows his profit goal & maximum lose potential.

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Celebrating Your GOALS
The end of the year is a time to reflect. This is the only time that it
is healthy to look back as a trader. Begin by identifying your
achievements.
Examples:
• I am not afraid to trade aggressively
• I know when to cut back
• I know to sell my loses before my winners
• I found a love I never knew I had for the business
There are many positives that we achieve throughout a trading year. It is of
the utmost importance that we do not over look our achievements &
developments. It is also important to now focus on the year ahead.

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Future GOALS
HOW CAN I IMPROVE MYSELF AS A TRADER?
We need to individually establish a set of GOALS that we will focus on
throughout the new year. (Each trader knows his strengths & weaknesses)
Make a list of 3 GOALS you need to improve on. (It is important that you don't
make $ goals) Ex. I want to make $300,000 this year. All this does is distract you
from paying attention to detail.
GOOD GOALS, FOR EXAMPLE ARE:
• I won't chase stocks
• I won't short stocks that are green for the day I will not think about the
money
• I won't come into work with preconceived notions I will cut my loses
• I will not be afraid of holding a winner

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COMMON TRAITS
OF GOOD TRADERS
 PLAYING THE VOLATILE STOCKS: They play the stocks that are active & in play & do not nm to
play the other stocks in the group if the stocks are doing nothing "HOPING" that they will
eventually move with the active stocks in the group. ( Always play leader stocks - vs lagging
stocks)
 OFFENSIVE TRADING / PLAY TO WIN: A lot of mediocre traders play defensively in order not to
lose focusing their energies on "breaking even" instead of trying to make money. There are
times however that you should play defensively for example in choppy or non-trending
markets.
 LOSERS & NON-WINNERS: They stick to their rules & disciplines & they get out of losers
quickly & out of stocks that do nothing when the market makes a move.
 NUMBER OF POSITIONS: They trade their maximum number of positions when market
conditions warrant it.
 GROUPS: They play groups when the entire group fits the criteria.
 ANTICIPATION-VS-CONFIRMATION: They try to anticipate a move in a stock without waiting
for market confirmation. They time into positions properly.

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TRADING JOURNAL
• Read the past 3 day’s journal entries, write down the main points and
observations:
• Trading rules: Do you know them cold? Did you follow them?
• Major world events, current events, news: Were you aware of them?
• Today’s trading motto: “I will…”
• Morning game plan, stocks to watch, what’s in the news, good levels, entry
points:
• Evaluate the morning game plan. (How did I react to each trade? What
could I have done better, different? How did things really play out? Did I
stick to my plan?):
• What did I do well today?

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TRADING JOURNAL
• What could I have done better today (specifically):
• List trades that are working/not working. What type of market are we in? What
markets are in play?
• Additional thoughts/comments/observations about the market and myself
today:
• On a scale of 1 to 10, what was my level of focus today?
• I am a better trader today than I was yesterday because…
• Daily trading lessons learned:
• Which trades/stocks/lists/plays should I pay attention to tomorrow?
• My goal for tomorrow is:

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TIPS TO GET BACK ON TRACK
• Realize that you are not going to make back the money you lost
during your slump in a day or 2.
• Therefore you most important goal is to regain your confidence, NOT
make all your money back.
• How you regain your confidence????? By lowering you share
amounts, taking less risk, smaller moves in stocks, scalp more trades
and HIT OUT of losing trades.
• Get back to basics that made you successful ONE DAY at a time.
Having just one up day followed by another.

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TIPS TO GET BACK ON TRACK Pt. 2
• Its so much easier to make money and have a positive average by
lowering your share amount and SELECTIVELY double down when you
need to.
• After you have ONE up day, you try then to develop an up day streak,
Green everyday, it doesn't matter how much it is. Imagine your
monthly report all green with all positive days, no matter how big or
how small. GREEN .... GREEN .... GREEN ....
• After the first up day NEVER change your approach. NEVER think
about how much money you lost when you were in your slump&
NEVER try to make back all your losses in one day by changing your
style, "stepping it up" or doing something outside you comfort level.

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TIPS TO GET BACK ON TRACK Pt. 3
• By creating an up day streak, your confidence will be through the roof
and you will have taken the necessary steps to:
• Get yourself out of your slump
• Make it to the next level and continue your trading career
• A few reminders:
• You have to learn how to get out of a loser and buy lower.
• Be very IMPATIENT with your losing trades.
• Why continue to ride losers down from 100 to down 300 to down 500 to
down 1 k? Does that make any sense?
• Set a downside limit to all trades, stay focused, take profits, relax, and get
back on track!

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THE A-B-C's of Disciplined Trader
AAn Outstanding trader controls losses- know when to get small and
know when to stop
BBe Yourself and develop a style that is appropriate for you - learn all
you can from other traders and pick and choose what works for you
C Control profits by formulating a game plan- set realistic goals. Protect
your profits once you have achieved your desired results for the day
DDefine your risks- know specifically how much you are willing to lose
and develop a plan should you reach that number

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Costly Day Trading Mistakes
1 Lack of a Trading Plan
• Many day traders fail because they trade "on the fly", without the benefit
of any pre-determined trading plan.
• It is absolutely critical to have a complete, well-thought out plan of action
before entering any trade. This includes the number of shares you will buy
and at what price, the price at which you will sell the shares (if they go up)
and the price at which you will sell the shares (if they go down) to cut your
losses.
• You should also decide, as part of your plan, how long you will hold the
shares if the price fails to move at all, and at what price you may wish to
add to or reduce your position.
• Once you develop a plan, stick to it and do not change it solely as a result
of your emotions. Discipline is a vital key to day trading success!

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Expensive Day Trading Mistakes
2 Failure to Control Emotions
It is highly unlikely that you will become a successful day trader if you allow your emotions to control your trading decisions. The
most destructive emotions leading to poor trading decisions are greed, fear and pride.

Greed tends to keep a trader from closing out a position when a reasonable profit has already been made, in the hope that the
stock price will go even higher. Staying in the market for too long (hoping for a huge windfall) is a strategy that backfires more
often than not. Greed also tends to result in rash or impulsive trades.

Fear will have traders selling existing positions too soon or avoid buying a stock that should be bought. In other word, fear leads to
trading decisions becoming "paralyzed".

Pride tends to keep a trader in a losing position for too long because of reluctance to admit that the original trading decision may
not have been the right one.

If you trade using the discipline that a good trading plan is designed to foster, keeping your emotions from unduly influencing your
trading decisions will be easier to achieve.

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Blow up Your Account Trading Mistakes
3 Failure to Accept and Limit Losses
Another major contributing reason to day trading failure is the
reluctance of many traders to exit from a losing position. Many
traders hold on to losing positions for far too long, in the hope that
the share price will recover.
Even worse is the practice of adding to a losing position so as to
"average down". This is a recipe for disaster. It is essential to limit
(and accept) losses in advance, in accordance with your trading plan,
by pre-determining your exit point if the stock price moves against
you. Stop-loss orders provide a convenient method of doing this.

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Lazy Trading Mistakes
4 Lack of Commitment
Day traders who are unwilling to:
Make a serious commitment of time and effort to study and monitor
the markets,
Engage in training and education so as to enable them to learn about
technical analysis, new trading systems and methods, order routing
software, etc., will almost always fail.

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How to Improve: Feedback
• Your #1 obstacle to success will be not paying attention and tracking
what works and what doesn’t
• This will lead you to years of “feeling close” when you are really just
learning how to not lose money better! (trust me)
• Day-by-day you want to track your discipline, month-by-month you
want to track your results (maybe quarterly)
• Rules and a trading plan lead to discipline. Discipline leads to gaining
experience to make better decisions.
• Honest feedback speeds up your learning curve.
• Find a trading mentor you respect and pay for their time.

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Why Winners Focus on the Process
• We trade for what happens AFTER we enter, but we can’t control the
price action we are anticipating…
• We trade to “win” but that places our focus on the outcome, not the
steps to make it happen…

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