Vitamins for Your Soul, Part II

Giving vitamins to your soul might not have a direct, noticeable effect on your bottom line. However, these vitamins could prevent a disaster and they certainly will make you a lighter and happier person. Lighter and happier people usually make better traders and investors.

Last week I talked about the first vitamin, focusing on the moment. This week I want to cover a fun vitamin, laughing.

Spend Some Time Laughing

Norman Cousin's believed that he cured himself of cancer using laughter therapy. He found lots and lots of funny things and just spent the day laughing and enjoying himself. The effect of changing his outlook to one of humor seemed to have immense healing effects on his body. However, there is no need to wait until you have some serious disease to practice taking vitamins for the soul. You might even want to look at his book, Anatomy of an Illness.

I enjoy jokes and will laugh when something is funny, but I have not made a conscious effort to bring more laughter into my life. So that's something I want to practice more of for the next month. Here are some suggestions for how to do that.

Find some movies that are really funny and watch them. Better yet, invite some friends over and watch them. There's only one rule for how to watch them, laugh as much as you can. If something is a little bit funny, force yourself to laugh out loud. It's actually not that hard. And it's contagious.

Here are some interesting examples depending upon your sense of humor: Porkys and American Pie usually crack me up and my wife thinks I'm sick to laugh at that sort of humor. However, there are many classics; old Abbott and Costello movies, old Marx Brothers movies, some of the Charlie Chaplin silent movies, or how about modern comedians such as John Candy movies (i.e., Uncle Buck); Bill Murray (Ghostbusters, Caddyshack); Eddie Murphy (The Nutty Professor, Dr. Doolittle); or some of the National Lampoon movies (i.e., Christmas Vacation, Animal House).

Try looking at movies like Porky's and Porky's II, or American Pie and American Pie II. The humor is a bit raunchy, but sometimes that can be the funniest.

Also save your Internet jokes. You probably have friends who get lots of Internet jokes and would be happy to send them to you. I personally have at least four people who send me jokes all the time. And I actually save them. But that means that I can read through my old files any time I like. And some of the stuff is really funny. So get your friends to start sending you jokes (and you send them jokes as well) and save your collection. Memorize them and tell them often. You'll find that when other people laugh at your joke collection, you'll laugh with them. Even though you know the joke and the punch line isn't a surprise, you'll get immense joy and fun out of telling the jokes to others.

Let me give you an example that I still remember. About ten years ago, one of my friends told a joke at dinner, having to do with the three biggest lies that a cowboy tells.

Those lies were.

1. My truck is paid for.
2. I won this belt buckle at the rodeo. And
3. I was just helping the sheep over the fence.

When my wife, who had just arrived from overseas and wasn't used to American humor, heard the joke, she didn't get the last one at all. And the process of explaining it to her put everyone at the table in stitches. I don't even think the joke is that funny, but it's one I'll always remember because of my wife's reaction when it was being explained. So telling jokes to others can really brighten up your soul. Practice it.

A healthy soul is a happy soul and it experiences qualities of joy, laughter, and lightness. This doesn't mean that you must avoid looking at the suffering that occurs all around us, but it does mean that you avoid letting that suffering steal your joy over the many blessings that God presents to us all around. The opposite of joy is not necessarily sorrow - it's unbelief in the true nature of your soul or in the essence of God.

Many of us as adults have to relearn how to laugh, and that starts with a slight desire to do so. One of the amazing things about my wife is her amazing laughter. She can laugh at almost everything. And I almost never hear her talking on the phone without hearing many bursts of laughter. It's one of the many reasons I'm so attracted to her. But the real secret of laughter is to just do it. If something is the least bit funny, try laughing at it - even if it seems like you are forcing it at first. It becomes catching once you start.

Read something funny before you go to sleep each night. Get a collection of cartoon books or joke books and have them by your bedside. When something strikes you as the least bit funny, laugh out loud. You'll find it is contagious and the material becomes funnier and funnier.

Lastly, you'll find that young children are much less inhibited about laughing than most adults are. Thus, spend time with some kids and see what they think is funny. Go watch that movie or cartoon with them. And laugh when they laugh.

So here's your assignment with laughter this month: Find something to laugh about each night before you go to sleep. In addition, watch a funny movie at least once each week this month. Enjoy it and have fun.

Vitamins for Your Soul, Part I

Giving vitamins to your soul might not have a direct, noticeable effect on your bottom line. However, these vitamins could prevent a disaster and they certainly will make you a lighter and happier person. Lighter and happier people usually make better traders and investors.

Several years ago, I began the year with a resolution to do a lot of spiritual work. I was planning on doing a lot of meditation during January and February. I had a one-week spiritual retreat planned. In essence, this was the year to nurture my soul. Instead, what happened was that I spent December through February taking antibiotics for a bug that was resistant to antibiotics, yet seemed to turn into chronic bronchitis or pneumonia if you didn't do something about it. It was awful. It took all the energy out of me and the last thing I wanted to do was a set of spiritual exercises or meditations.

I believe in taking full responsibility for what happens to me. In most situations, I can explain exactly how I managed to create what happens, but not for the first few months of that year. I honestly had no idea how I went from wanting to do spiritual work to going through physical exhaustion, but I did.

Anyway, during that time I still had a strong urge to do things that might give my soul a charge - to feed it and nurture it. At the same time, I've really had no idea how to do that - until this weekend when I found a book called "Vitamins for the Soul."1 The book was just what I needed, but more importantly, it has helped me classify soul enrichment activities. As a result, I plan to focus the next tips on soul enrichment. Some of these activities I'm very strong in, but many of them are areas I've totally neglected. And over the next set of articles, I'm going to cover a new "vitamin" each time. They'll help your soul and anything that helps you lighten up will help your trading. This week's topic is to focus on the moment.

Focus on the Moment

Mark Twain used to say, "I've had many fears in my life, most of which never happened." Lately I've noticed that I've had many worries, most of which never happen. Nevertheless, I can spend a lot of time being concerned about them. Yet, the simplest solution is to concentrate on the opposite: what are your blessings, right now?

Here are some interesting exercises you could do, just to concentrate on the wonders of this moment. It's summer now. Spend some time outside and really stretch your senses. For example, smell the flowers. Take in the smells and just enjoy them. Close your eyes and listen to the sounds of nature. Hear the birds. Listen for the wind. What other animals do you hear? Take in the wonder of it all. Or go to some magnificent place and just take in the scenery. What do you see? Look everywhere and take it all into your soul. Notice the magnificence of the moment.

I can remember a six-month period when I used to meditate outside. I went for a 20-minute walk into the woods where there was a park bench. I sat on the park bench and practiced various meditation techniques. I played with my energy. I went inside and noticed the silence. I watched my breath and used various mantras. However, during that phase of my life, I spent very little time noticing the magnificence of everything around me. And this is what we are talking about here. Notice the magnificence of the moment. Take it all in and give thanks to God for all of these wonders you can experience. Just enjoy them.

Everything you think about is in the past. Even if you are feeling excruciating pain, what you are actually experiencing happened milliseconds ago. It's not what happens now. Everything you think about everything you worry about is all in the past. When you release that and concentrate on the now, you'll find that everything is beautiful and peaceful. It's only our thoughts, based upon our interpretations of what happened in the past that cause upset and struggle. When you realize this for yourself I believe that you'll have an enormous breakthrough in understanding who you really are.

This month take 15 minutes each day to enjoy the magnificence of the moment. Find something beautiful and just take in the sights, sounds, smells, etc. Notice how wonderful it all is and spend the full 15 minutes taking it in. And when you are finished, give thanks. Notice what this does for your soul, how you feel and ultimately your trading. You'll be surprised! So just try it.

Breathing Exercises

If you think about the essentials of life, the body can live without food for at least a month. You can do without water for several days, but you can only do without air for a few minutes. Air is absolutely essential for life, so why not promote it.

Many of the ancient meditation techniques involve the breath and it is not without good reason. Dr. Harry Goldbatt found that rat cells deprived of oxygen easily developed malignancies while normal cells did not. Athletes, who get much more oxygen, only have a cancer rate that is 1/7th the rate of the average American.

Furthermore, lymphologist, Jack Shields, has shown that deep diaphragmatic breath is the most effective way to stimulate and clean the lymphatic system and actually stimulates the immune system. Deep breathing actually multiples the rate at which the body eliminates toxins.

I'd like to extend this information one more step and suggest that healthy breathing, enough to stimulate the immune system, not only prevents disease, but it actually improves performance. As a result, I'd like to suggest you do the following exercise.

At least once each day, take ten deep breaths. Breathe in the following manner: Inhale for five seconds, starting the breath deep in your abdomen with your diaphragm. Now hold that breath for the count of twenty seconds to help it fully oxygenate your blood and activate your lymphatic system. Lastly, breathe out for a count of ten seconds.

If this exercise is too strenuous, then use a smaller number in the ratio 1:4:2. In other words, you hold for four times as long as you inhale. Try this exercise twice a day for the next month and make a note of how you feel.

Chances are that, if you commit to it, that you'll find yourself becoming a littler clearer, a little more open, and a little more receptive to what is really happening. And if that happens, even if you are only slightly aware of it, then you should notice a difference in your trading. However, all of this does assume that you are following my other tips in this series.

10 Key Questions on Measuring Your Trading Progress and Success

At some point in nearly everyone's trading timelines, they wonder how their trading successes (or failures) compare with those of other traders. Wondering just how well you stack up to other traders in the industry is a natural curiosity and a human psychological tendency. However, actually knowing the success or failure rates of others doesn't do a lot to move you farther down the road of where you want to be regarding trading success.

Most traders also wonder about the success rates of the "professional" traders - the ones who make their living solely by the profits they generate from trading. I will provide you with an answer to this question at the end of this feature.

Below are 10 questions regarding measuring your own trading progress and success. These questions should help you determine where you stand in this challenging field of endeavor.

1. What is trading "success?" This is a most basic question. Most would agree that ultimate trading success is defined as being profitable at trading - making more money than you lose. There are other secondary factors that also define success in trading, such as finding a "balance" between trading and other life activities. But it's being profitable at trading that is the benchmark of defining success.
2. What is trading "progress?" Beginning traders should not expect to have immediate and ultimate success trading futures, stocks or FOREX markets. What they can expect in the early going is to make steady progress through gaining knowledge and experience. Even veteran successful traders continue to make trading progress. Achieving and maintaining trading success requires continual progress - namely continuing to seek out trading and market knowledge. Traders who truly enjoy the "progress" and process of trading do have a significant trading edge over those who do not enjoy learning and gaining experience.
3. At what point in my trading timeline should I expect trading "success?" Trading success (winning trades) can come right away - even for the beginning traders. What is less likely for the inexperienced traders is sustained trading success. Beginners can even run into a "hot streak" that skews the overall reality of trading. Immediate (and likely fleeting) success for a beginning futures trader can do longer-term psychological harm - if he or she does not fully recognize and understand the hard work and perseverance required on the road to trading success. Many times I get questions from less-experienced traders that go something like this: "I've been trading two years and I've only been able to about break even." My reply to them is, "Hey, you should not be too discouraged with those results. Many traders don't have that kind of success in the early going."
4. How long will it take to go from being a less-experienced trader to an experienced and hopefully successful trader? Determining a precise timeline at which trading success will arrive will vary greatly among traders. Some beginning traders will spend nearly full time coming up to speed. Others may spend an hour or two a week on the subject. There is no right answer on how much time to spend studying trading and markets. I have many readers who are taking up trading in retirement. I have a few that have taken up trading over the age of 80 years. One is never too young or too old to learn about markets and trading. A general rule would be for a beginning trader not to expect sustained trading success within a few months. More likely is a timeframe of a few years to achieve sustained trading success. Now you see why money management is so important in futures trading. You have to survive before you can succeed!
5. When should I "throw in the towel" and admit that trading is not for me? There is no one right answer to this question. If trading is making you miserable and creating other bad habits (kicking the dog), then it's time to quit - or at least take an extended break. If you do not have the financial resources to trade futures, then you should not participate. Futures trading should be conducted only with money a trader can stand to lose, without impacting other more important obligations, such as grocery and rent money. It is important to point out that the beginning futures traders who "flame out" first are usually the ones who did not have the financial resources to trade futures in the first place.
6. How many trading losers should I absorb before I change my trading plan of action?

This is a real tough one to answer. Again, there is no single right answer. However, if you believe you have a well-founded and thoroughly researched trading plan of action, don't abandon it just because you are on a losing streak. All traders have winning and losing streaks. That's a part of trading. Traders enjoy the winning streaks and do not enjoy the losing streaks. But during the losing streaks they forge ahead, knowing that their plan of action is still solid. Trading plans can certainly be tweaked, such as trading fewer contracts or trading less frequently during a losing streak. For most traders, a complete overhaul of one's trading plan is probably a last resort that merits much consideration.

1. How can I keep myself motivated on the winding road to trading success? Traders who enjoy the entire process of trading don't really need a lot of motivational help because they are already fascinated by what they are reading and learning. But during a losing streak or some other "dry spell" in trading - when morale can slip - it is prudent to read some trading books that are based less on specific methodologies and more on trading psychology. Attending trading seminars is a great way for a trader to become reinvigorated. (And it's also a great value to those already invigorated!) You not only will gain fresh trading and market knowledge, but you also will get to see and speak with the seminar lecturers as well as traders who are in the same position as you.
2. How much should I listen to other traders when trying to evaluate my own trading progress or my own trading plan? It is good to have a trading partner or "buddies" with whom to share your ideas and to discuss markets and trading. The learning curve improves when a trader has another trader or traders with similar experience with whom to share ideas. It is also beneficial to have an experienced mentor to help guide you through the "rough waters" that all traders experience at times. But at some point, most traders do want to be more or less autonomous in their decision-making. As many traders gain more experience, knowledge and confidence, they will use outside influences as "second opinions" to reinforce or provide another angle to their own sound opinions. Many traders also have full-time "day jobs" and need outside sources to help save them time and to keep track of what's going on in all the markets.
3. What is the average success rate of the "professional" trader? I have not seen any "official" studies of the percentage of winning trades of the average professional trader. However, it is generally agreed upon by many in our industry that the better professional traders have a winning percentage of around 4 out of every10 trades - or a 40% winning percentage. Breaking this down even further, it is estimated that half of the winning trades are only small winners and not much better than break-even. Thus, it can be loosely extrapolated that most of the professional futures traders make most of their money on one or two trades out of every 10. This only underscores the importance of sound money management in futures trading - namely cutting losses short and letting winners run.

Why Having a Mission Statement Behind Your Trading is so Critical to Your Success as a Trader II

As I mentioned last week, as a trader, you need a mission statement. Last week I suggested several mission statements. We also made the assumption that you had a mission to produce an infinite wealth stream for yourself within the next five years and then looked at how various projects fit into that mission. Some projects were critical to the mission, while others were simply a distraction.

If the project is mission critical, then you need to allocate human and capital resources to it. Let's make the assumption that your idea does seem to be mission critical. Let's say that your mission is to open a hedge fund with a target of at least $250 million under management and some friends are asking you to manage their money. In order to have large amounts of money under management, you need to produce above average returns with very little risk. For example, a system that would help you achieve this mission would be one that would earn 15-25% each year with no more than one or two losing months each year. If you have such a system in place, then accepting client money would probably be useful. If you don't have such a system in place, then client money would probably be a major distraction. Let's say you have the system in place, and you decide to accept money.

Your next step is to determine the human and capital resources that you need to allocate before you undertake the step of accepting client money. What else do you need to have in place before you accept client money? First, you need to have accounting systems in place. If you don't have them, then you need to find 1) someone to help you with your accounting and 2) put a system in place to report to clients. This amounts to allocating either human or capital resources to your objective.

Second, you also need to have systems in place for dealing with client inquiries (including new clients). How will you market to clients? How will you deal with clients who want information about their accounts or about your trading? Again, since you have decided that accepting client money is mission critical, you need to allocate human and capital resources to putting these systems in place.

Next you need a timeline for the project. If you decide that the project is mission critical and have allocated resources to it, you then need a timeline for the completion of the project. Without such a timeline, you could go on forever with the project.

Lastly, you need a feedback and monitoring process for the project. This process will keep you on track and prevent wasting resources. Thus, when you allocate resources to a project that is mission-critical for your trading business, have a way to monitor its progress. How will you know that resources are being properly spent? How will you know that progress is satisfactory? If someone else is involved, how will you know that they are doing a good job? These are key tasks to perform if your trading business is to accomplish its mission.

Fear Factor: The Impact of Trading With "Sacred Money"

I am not a big casino gambler, but I have been at the venues in Las Vegas and Atlantic City, as well as in other casinos worldwide. I have observed a myriad of gamblers at the poker, black jack, roulette and craps tables. An interesting characteristic among gamblers is exhibited to me time and time again. It is this: The gamblers who appear to have money they can afford to lose usually are the ones who can win. The gamblers who appear to be using their rent or grocery money (or what I call "scared money"), and really should not be gambling, are usually the ones who lose.

You may ask, "How can you tell who is gambling with scared money and who is not?" Facial expressions, reactions to losing bets and to winning bets, and other "body language" are dead giveaways to me.

The "scared-money" phenomenon I see in casino gambling can be applied to futures trading. Those traders who are using grocery and rent money in their brokerage account and "must win" on their next trade, or else they will be forced out, have a huge emotional burden to carry. That burden certainly affects their trading psychology and ultimately their trading success.

The most common reason for scared-money trading in the futures markets is undercapitalization or being over-leveraged. A person with a $20,000 trading account should not be trading full-size S&P 500 futures contracts. A couple of moderate daily price moves against an S&P trader with an account this size could find him getting a margin call from his broker.

So, what factors determine whether a trader is trading with "scared money?" Is there a certain income or savings level a person must attain to not trade with scared money? Does one have to be wealthy to trade futures successfully? The answer is: There is no single right answer. It depends on the individual trader.

I hearken back to the all-important "psychology of trading" with an example. A person with a modest income and a prudent money-management plan can trade futures and do so without using scared money. He or she can trade options (buying them, not selling them), or trade smaller-sized contracts offered at the Chicago Board of Trade, or even trade regular-size contracts such as soybean oil, where the "tick size" is relatively small in dollar amount. In fact, I submit that a good percentage of speculative futures traders worldwide fall into the above category.

Conversely, a so-called wealthy person with a higher income and/or savings can still trade scared money. If the better-capitalized trader holds his purse-strings too tight and cannot accept the fact that even the best professional futures traders in the world can and do have losing trades, then he, too, is trading "scared money." I think we all know of at least one wealthy Scrooge who totes his money sack on his back and doesn't even tip the waitresses or bartenders. Certainly, individuals like that are not good candidates for successful futures traders.

Fear Factor: The Impact of Trading With "Sacred Money"

I am not a big casino gambler, but I have been at the venues in Las Vegas and Atlantic City, as well as in other casinos worldwide. I have observed a myriad of gamblers at the poker, black jack, roulette and craps tables. An interesting characteristic among gamblers is exhibited to me time and time again. It is this: The gamblers who appear to have money they can afford to lose usually are the ones who can win. The gamblers who appear to be using their rent or grocery money (or what I call "scared money"), and really should not be gambling, are usually the ones who lose.

You may ask, "How can you tell who is gambling with scared money and who is not?" Facial expressions, reactions to losing bets and to winning bets, and other "body language" are dead giveaways to me.

The "scared-money" phenomenon I see in casino gambling can be applied to futures trading. Those traders who are using grocery and rent money in their brokerage account and "must win" on their next trade, or else they will be forced out, have a huge emotional burden to carry. That burden certainly affects their trading psychology and ultimately their trading success.

The most common reason for scared-money trading in the futures markets is undercapitalization or being over-leveraged. A person with a $20,000 trading account should not be trading full-size S&P 500 futures contracts. A couple of moderate daily price moves against an S&P trader with an account this size could find him getting a margin call from his broker.

So, what factors determine whether a trader is trading with "scared money?" Is there a certain income or savings level a person must attain to not trade with scared money? Does one have to be wealthy to trade futures successfully? The answer is: There is no single right answer. It depends on the individual trader.

I hearken back to the all-important "psychology of trading" with an example. A person with a modest income and a prudent money-management plan can trade futures and do so without using scared money. He or she can trade options (buying them, not selling them), or trade smaller-sized contracts offered at the Chicago Board of Trade, or even trade regular-size contracts such as soybean oil, where the "tick size" is relatively small in dollar amount. In fact, I submit that a good percentage of speculative futures traders worldwide fall into the above category.

Conversely, a so-called wealthy person with a higher income and/or savings can still trade scared money. If the better-capitalized trader holds his purse-strings too tight and cannot accept the fact that even the best professional futures traders in the world can and do have losing trades, then he, too, is trading "scared money." I think we all know of at least one wealthy Scrooge who totes his money sack on his back and doesn't even tip the waitresses or bartenders. Certainly, individuals like that are not good candidates for successful futures traders.