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The Inner Voice of Trading (Mic…举报

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Michael Martin recounts his own quest to become a successful trader, illuminating his journey with engaging trading episodes. Join Martin at his trading desk as he provides important insights into th

art and science of balancing thoughts and feelings—and catching the big one

ptg7041380ptg7041380PraiseforTheInnerVoiceofTrading“MichaelMartinhaswrittenaninsightfulbookforboththeexpertandnovice.Hiswritingstyleisenjoyable,andthecontentisunforgettable.”—AnthonyScaramucci,Founder,SkyBridgeCapital,andAuthorofGoodbyeGordonGekko“IlivebyMichaelMartin’swords.Thefirstchapterofmyinvestingbookwastitled‘TurnOfftheTV.’Now,withthesocialweb,findingstrategymentorsandlearningfasterareallpossible.Tradingisaskillyoucanlearn,andMartin’sbookisagreatreadforanytrader.”—HowardLindzon,Founder,StockTwits“InTheInnerVoiceofTrading,MichaelMartinrecountshisownquesttobecomeasuccessfultrader,illuminatinghisjourneywithengagingtradingepisodes.JoinMartinathistradingdeskasheprovidesimportantinsightsintotheartandscienceofbalancingthoughtsandfeelings—andcatchingthebigone.”—EdSeykota“Somepeopletradeandeitherdon’torcan’tteach;somepeopleteachandhavenevertraded;MichaelMartincanteachextremelywellandisanexperiencedtrader.Thisrarecomboisanecessitytothosewhowanttosucceedinthemarkets.Readandlearn!”—VictorSperandeo,Founder,AlphaFinancialTechnologies,LLC“TheInnerVoiceofTradingprovidesinsightsthatmayhelpbothdiscretionaryandsystematictradersadheretotheirextensivelyresearchedandtestedtradingprogramsandbebetterinsulatedfromtheiroccasionalemotional(fear,greed,pride,andsoon)temptationstodeviateintounchartedwaters.”—BillDunn,DUNNCapitalManagement“MichaelMartinprovidesatoolboxtofortifythemostimportantaspectofsuccessfultrading:thesixinchesbetweenyourears.Withfreshinsightsfrommanyofthemarket’sgreatesttraders,TheInnerVoiceofTradingwillputyouonthepathtoimprovingyourprofitsandlosses.”—JohnDelVecchio,PortfolioManager,AdvisorSharesActiveBearETF“Toomanynewanddevelopingtradersmovefromstrategytostrategyinthehopeofimprovingtheirunderperformance.InTheInnerVoiceofTrading,MichaelMartinhelpsusunderstandhowwefirstmustworkonourselvesbeforewecanbecomethetraderwewanttobe.Findaplaceinyourtradinglibraryforthislatestgifttothetradingcommunity.”—MikeBellafiore,Partner,SMBCapital,andAuthorofOneGoodTradeptg7041380Thispageintentionallyleftblankptg7041380TheInnerVoiceofTradingptg7041380Thispageintentionallyleftblankptg7041380TheInnerVoiceofTradingEliminatetheNoise,andProfitfromtheStrategiesThatAreRightforYouMichaelMartinptg7041380VicePresident,Publisher:TimMooreAssociatePublisherandDirectorofMarketing:AmyNeidlingerExecutiveEditor:JimBoydDevelopmentEditor:RussHallSeniorMarketingManager:JuliePhiferAssistantMarketingManager:MeganGraueCoverDesigner:AlanClementsManagingEditor:KristyHartProjectEditors:JessDeGabrieleandJovanaSanNicolas-ShirleyCopyEditor:KristaHansingEditorialServices,Inc.Proofreader:WaterCrestPublishing,Inc.SeniorIndexer:CherylLenserSeniorCompositor:GloriaSchurickManufacturingBuyer:DanUhrig2012byMichaelMartinPublishingasFTPressUpperSaddleRiver,NewJersey07458Thisbookissoldwiththeunderstandingthatneithertheauthornorthepublisherisengagedinrenderinglegal,accounting,orotherprofessionalservicesoradvicebypub-lishingthisbook.Eachindividualsituationisunique.Thus,iflegalorfinancialadviceorotherexpertassistanceisrequiredinaspecificsituation,theservicesofacompetentpro-fessionalshouldbesoughttoensurethatthesituationhasbeenevaluatedcarefullyandappropriately.Theauthorandthepublisherdisclaimanyliability,loss,orriskresultingdirectlyorindirectly,fromtheuseorapplicationofanyofthecontentsofthisbook.FTPressoffersexcellentdiscountsonthisbookwhenorderedinquantityforbulkpur-chasesorspecialsales.Formoreinformation,pleasecontactU.S.CorporateandGovernmentSales,1-800-382-3419,corpsales@pearsontechgroup.com.ForsalesoutsidetheU.S.,pleasecontactInternationalSalesatinternational@pearson.com.Companyandproductnamesmentionedhereinarethetrademarksorregisteredtrade-marksoftheirrespectiveowners.InnerVoiceofTradingisatrademarkofGothamCommodityCorporation.Allrightsreserved.Nopartofthisbookmaybereproduced,inanyformorbyanymeans,withoutpermissioninwritingfromthepublisher.PrintedintheUnitedStatesofAmericaFirstPrintingSeptember2011ISBN-10:0-13-261625-4ISBN-13:978-0-13-261625-6PearsonEducationLTD.PearsonEducationAustraliaPTY,Limited.PearsonEducationSingapore,Pte.Ltd.PearsonEducationNorthAsia,Ltd.PearsonEducationCanada,Ltd.PearsonEducatióndeMexico,S.A.deC.V.PearsonEducation—JapanPearsonEducationMalaysia,Pte.Ltd.LibraryofCongress-in-PublicationData:Martin,MichaelR.(MichaelRobert),1966-Theinnervoiceoftrading:eliminatethenoise,andprofitfromthesystemandstrate-giesthatarerightforyou/MichaelR.Martin.p.cm.ISBN-13:978-0-13-261625-6(hardcover:alk.paper)ISBN-10:0-13-261625-4(hardcover:alk.paper)1.Floortraders(Finance)—UnitedStates—Psychology.2.Futuresmarket—UnitedStates—Psychologicalaspects.3.Financialfutures—UnitedStates—Psychologicalaspects.4.Investments—Psychologicalaspects.I.Title.HG4621.M382011332.64’5—dc232011023680ptg7041380Dedicatedtomyparents,RobertJ.MartinandAnneM.Martinptg7041380TableofContentsChapter1:Introduction..................................1Chapter2:Surrender....................................17Chapter3:MyTuition....................................35Chapter4:TwoTraders’Paths......................53Chapter5:ConventionalWisdom/MarketTiming..........................................71Chapter6:EmotionalBlindSpots..................91Chapter7:YouAretheBlackBox..............105Chapter8:RelativeValueTrades................119Chapter9:TheAbundanceofLosses..........133Chapter10:BecominganEmotionalSpecialist..................................143Chapter11:ListentoYourInnerVoice........155Endnotes......................................................167Index............................................................175ptg7041380ForewordMichaelMartin’sbook,TheInnerVoiceofTrading,providesimportantinsightsabouttheartandscienceofbalancingthoughtsandfeelingsintrading.Traderstellwonderfulstoriesaboutmakingphenomenalprofitsbybeinginthezone,atonewiththemarkets,livinginthemomentofnow.Fromthere,tradingseemseffortless.Thetrick,then,istostayinthenow.Ifyougetimpatientorgreedyorfearful,youcanbreakthespellandwindupbackinthepastandfuture.Fightingyourfeelingscanbeanathematostayinginthemoment,hencetotradingprofitably.InTheInnerVoiceofTrading,Martinextendsthelitera-tureontheartandscienceofstayingclearandmaintainingmentalandemotionalbalance.Heusesexamplesfromhisowntradingandothers’toillustratehispoints—particularlytheimportanceoftimelysurrender.Tradersknowtheessentialprinciplesoftrading:rideyourwinners;cutyourlosers;manageyourrisk;usestops;sticktoyoursystemandignorethenews.Theseprinciplesworkwellintradingandinlifeingeneral—whenyoufollowthemcon-sistently.Manypeople,however,findthatfollowingrulesisnotalwaysawholelotoffun.Livingaprinciple-centriclifetakescharacter—lotsofit.Buyinghighs,sellinglows,andcollectingseeminglyendlessstringsofwhipsawsmaybringupunbearablyuncomfortablefeelings.Martindealsdirectlywiththeimportantcharacter-successconnectionandillustratesthetopicbywrappingitinaseriesofengagingtradingepisodes.OneofthepleasuresofmentoringtradersthroughmyTradingTribeisthatIgettomeet,interactwith,andshareexperienceswithbrightandwillingpeople—andtowatchptg7041380themgrowandprosper.AndthatbringsmetooneMr.MichaelMartinwho,manymoonsago,joinsmyTribe.AtfirstIseeaneast-coast,street-wisehyper-mensch,acrossbetweenacrustyoldcabbieandastand-upcomic.Asthegroupevolves,Iwitnesshisemergenceasabrotherwhocomestofeeldeeplyandlaughandwinceandcryandgrievealongwiththerestofusasweallstrugglewiththepersonalcalculusofourcareersandintimaterelationships.OverthecourseofourassociationIhavetheprivilegeofwitnessingasofteningofMichael—ashebecomesmoreporous,stronger,andmoreavailabletosharehisgiftswithothers.ReadingbetweenthelinesofInnerVoice,IfeelthatMichaelisstillverymuchamanofthepathandthatheisnowcomingintohisownasagenerousteacher,mentor,andwriter.Iseehimasabiginspirationforthenewcrop.ItismyhonortoacceptMichaelMartin’sinvitationtopenthisforwardtohisbook.Icongratulatehimforwritingit—andyouforreadingit.EdSeykotaAustin,Texasptg7041380AcknowledgmentsMichaelMarcus,EdSeykota,JorgenChristiansson,AaronBrown,PeterBorish,BillDunn,ErichSchiffmann,TomBasso,BKSIyengar,LindaRaschke,VictorSperandeo,MikeBellafiore,SteveSpencer,HelmutWeymar,LarryShover,JohnDelVecchio,WillowBay,MariaRusso,RichardSandor,CaroleBrookins.ThankYousMichaelJ.Rice,EleanorJohnson,HarrisSperling,Tony“FatTony”Tardino,PiaVarma,RichBlake,JJF,ManishJain,ScottKaminski,YasmineRyckebusch,ErinFitzPatrick,Liz,GabrielleandMarkLaMura,Stacy-MarieIshmael,MaryanneMartin,LucEamonMartin,LoyalSeamusMartin,TJO’Connor,KieranGaine,ShawnPatt,BryanKennyandMonicaSarang,JamesRobertAnthonyDurfey,DouglasMancino,PeterandHeatherFelix,GerardColagrossi,Mugsy,MelissaMooreandJerryToepke,CareyDoss,MikeHolwick,Joanna“J-Go”Grzeskowiak,AndrewHomsi,RichBurnes,MargaretRees,AmyGeffen,MaryannKelly,AlexLapostol,CalvinSlater,RichardHughes,WendyandJJMueller,BudArdell,SusanBursk,KarimCherif,JohnChristesen,JosephHankin,BertLiberi,Jr.,JamesLittle,ScottMcIntosh,MelissaBellandLeoSchmidt,AnaLaDou,SimonandMonnaMainwaring,NellyNyambi,LennyMo.Asfarasthepublishingofthisbookisconcerned,IoweaspecialthankyoutomyExecutiveEditorJimBoydwhobelievedinthevisionforthisbookfromtheget-go.Jimintro-ducedmetoRussHallaswellasuber-authorMichaelThomsettwhowereinstrumentalfortheirkeeninsightandsuggestions.IamgratefulforthestaggeringamountoftimethatJim,Russ,andMichaelspentreviewingtheevolvingmanuscript.ptg7041380AbouttheAuthorMichaelMartinhasbeenasuccessfultraderforover20years.He’sbeenteachingforthelast13ofthoseyearsthroughUCLAExtensionandtheNewYorkSocietyofSecurityAnalysts(NYSSA),amembersocietyoftheCFAInstitute.Duringthattime,healsoservedasAssociateEditoratTraderMonthly.HewasbornandraisedinNewYorkandnowlivesinLosAngeles.HecontributestoTheHuffingtonPost,TheBusinessInsider,andhisblogMartinKronicle.com.HehasalsobeenpublishedinBarron’s.Hisinterestintradingcommoditiesbeganasastudent,bothintheclassroomandatwork.Itwasduringarandomwork-studyprogramthathegotintroducedtocreatingsea-sonalmodelsforHeatingOilandNaturalGasforalargehedgerusingLotus123.ThatledtoworkingonWallStreetandtradingcommod-ityaccounts.Thecommissionsweregigantic,buthefiguredhecouldearnseveraltimesmorebyearninganincentivefee.Afteronly3yearsatabrokeragefirm,hestartedhisowncompany.AftermovingtoLosAngelesfromManhattan,hestartedhisownCTAandalsobeganteaching.AroundthattimehejoinedtheInclineVillageTradingTribeandflewfromLosAngelestoLakeTahoeformeetings.HealsoformedtheTradingTribeinLosAngeles,forwhichhewasChief.Coincidenceornot,hewasranked#1byAutumnGoldaroundthattime.HistradingcoursesareavailableonlineandcanbefoundatMartinKronicle.com.ptg70413801Chapter1Introductionptg7041380Likemanytraders,Ibecameveryinterestedintrad-ingprofessionallyafterIreadJackD.Schwager’sbookMarketWizards,acollectionofinterviewsthathe’dconductedwithmanysuccessfultradersandmoneymanagersatthetime,suchasJimRogers,PaulTudorJones,andMichaelMarcus.Luckilyforme,Iwasabletogettoknowandstudywithmanyofthetradersinterviewed.Afewofthem,suchasEdSeykota,becamementorsandfriendswhohadaprofoundimpactonmypsychologicaloutlookwhiletrading.AlotoftraderslovetheSeykotachapterinMarketWizardsandcanquotewhatmightbehismostfamousline:“Winorlose,everyonegetswhattheywantfromthemarket.”Tothisday,thatlinehitsfailingandmediocretradersrightintheirmostvulnerablespot:Ifatraderislosingconsistently,itisbydesign—itisthetrader’sgoal.ForSeykotaandhisstu-dents,intentionsequalresults.However,IthinkthatthemostrevealingthoughtinthechapterwasanotherofSeykota’squotes:“Thegoalforthetraderistodevelopasys-temwithwhichheiscompatible”—thatis,aharmonybetweenatrader’semotionalconstitutionandtradingtechnique.Inthiscase,asystemisasetofrulesfortrading:whattobuy,howmuchofittoown,whentogetin,andwhentogetout,eithertotakealossortocollectprofits.Theserulesareintellectualinnature—atleast,that’showtheylookfromtheoutside.2TheInnerVoiceofTrading“Thegoalforthetraderistodevelopasystemwithwhichheiscompatible”—thatis,ahar-monybetweenatrader’semo-tionalconstitu-tionandtradingtechnique.ptg7041380Lurkingbelowthesurfacearetheemotionalbuttonstheypushwhenthetraderemploysthem.Theintellec-tualaspectoftradingrulesarewhatmostaspiringtradersreachforwhilelearningthecraftbecausethey’vehadthatapproachingrainedinthemsincekindergarten.Unfortunately,mostaspiringtradersfindoutfartoolatethattheactoftradingis20%intellec-tualand80%psychological.Ihopetochangethatwiththisbook.WhenSeykotawasbeinginterviewed,hewasnotspeakingaboutrules“that[thetrader]canunderstandintellectuallyortechnically”—hewasn’tofferinga“howtotrade”proposition.Heinsteadreferredtorules“withwhich[thetrader]iscompatible,”anemotionalandself-awarenessproposition.Compatibilityequalsharmony.Incompatibilitybetweentraderandsystemisthesin-glegreatestreasonmosttradersdon’tsucceed,regard-lessoftradingstyle.Theyhavenoemotionalconnectiontotheirtradingrulesandmethodology.Theyknowtradingrulesfromatechnicalandintellectualstand-point,butnotfromapsychologicalorself-awarenessone.Notallofthisistheirfault,though:Oureduca-tionalsystemgenerallyisnotconcernedwithhowitsstudentsfeelaboutanything—there’snoroomforit.Thisrote,mechanicalmodelsetsupthetraderforfail-urebeforeheknowsthathewantstobeatrader.Admittedly,itcanbechallengingtoknowwhototurntoforthistypeofawakening.Inunfortunatecases,thetraderisnotself-awarebutcontinuestoseektheanswers.Ironically,theseanswerstosuccessfultradingarefoundwithinthetrader’sownmind.3Chapter1:Introductionptg7041380Totradesuccessfully,yourintellectandpsychologymustbejoinedatthehip.Likespousesinamarriage,bothintellectandself-awarenessevolve.Iftheself-awarespousechecksout,maintainingalastingmarriageisdif-ficult.Thesituationputsstressonbothspouses.Ifonepartnerneedstime“tofigureoutwhoheis,”atrialseparationisbest,tokeepthetraderfromvaporizingthecash.Atraderwithoutself-awarenessintradingislikeapilottryingtoflyaplanewithnonavigator.Tradingrulesareprovocativeandevocative,pushingandpullingatraderemotionally.“ShouldIgetinatthisprice?”“ShouldIbuysomeofthisstock?”“ShouldIgetouthereandtakealoss,orshouldIwaitforittocomeback?”Forme,thesearenotintellectualquestions—theyareemotional.Whatthetraderisfeelingatthetimeevokesthequestion.Thinkaboutwhatthetraderiscon-veyingemotionally,becauseit’srarelyaboutthemoney.4TheInnerVoiceofTradingIncompatibilitybetweentraderandsystemisthesinglegreatestreasonmosttradersdon’tsuc-ceed,regardlessoftradingstyle.Theyhavenoemotionalcon-nectiontotheirtradingrulesandmethodology.Theyknowtrad-ingrulesfromatechnicalandintellectualstand-point,butnotfromapsycholog-icalorself-awarenessone.ptg7041380Question:“ShouldIgetinatthisprice?Isnowagoodtimetobuy?”Emotionaltranslation:“IhavenoideawhatI’mdoing,butI’mgoingtodoitanyway.”Question:“ShouldIbuysomeofthisstock?”Emotionaltranslation:“Iwantinontheaction.Justtellmewhattodo,andI’lldoit—butmakeitquick.Havingsomuchcashispainful.”AccordingtoJasonZweig,1havingthepotentialforgainsismoreaddictivethanearningthegainsthem-selves.Question:“ShouldItakethelossnow,orwaitforittocomeback?”Emotionaltranslation:“Whatwilleveryonethink?IhaveanMBA,andallmyself-esteemisinvestedinhowsmartIthinkIam.Iamnotwillingtoriskthis.ThisiswhoIam.IfIwait,I’mtechnicallynotwrong.Icandefermyincorrectnessandmaintainmyself-esteemtoday.”Tradersarehumanbeingsfirst,soitfollowsthateverythingwedoispartofouroveralltendencytoseekpleasureandavoidpain.Bothareomnipresentfortradersandinvestorsalike.Ineachofthesehypotheticalquestions,clearlymoreisbeingconveyedthanthe“howto”partoftrading.Frankly,the“howto”istheeasypart.Whentheself-awarenesspartbetraysthe“howto”partbecausetradersdon’thavetheskilltofeelemo-tionsandunderstandwhattheyaresaying,onlytrouble5Chapter1:Introductionptg7041380cancomefromit.Ifyougetintothissituation,alongwithallthecolorfulemotionalknotsyou’llfeelinyourbody,you’llhaveablack-and-whiteversioninyourprofitandlossstate-ment.Atraderdoesn’tneedanotherper-sontoaskthesequestions,nortoanswerthem.Fortraderswholackharmonybetweentechniqueandself-awareness,thevoicetheyhearcomesfromthemostantagonisticpersonintheirlife:“Youshouldhavebecomeadoctor!Itoldyouthatthistradingnonsenseislegalizedgambling.”However,oncetheyachieveahar-monybetweentechnicalrulesandself-awareness,theydiscoveraninnercalmandasenseofconfidence.Whenthisoccurs,theyholdconversationswithwhatIcalltheirinnervoice.Thisistheonevoicethatthe“marketwizards”developedandlearnedtolistentoexclusively.Theheartandsoulofthisbookexaminestradingdecisionsfromanemotionalstandpointandhelpsyougaininsightintoyourbehavior.Intheprocess,youwillevolvefromlisteningtothecacophonyofconformistandconventionalwisdom,tospeakingwithandlisteningtoyourinnervoice.Thejourneyinvolvesgettingtoknowyourselfandincreasingyourlevelofself-awareness.Howmuchyoulearnaboutyourselfislimitedonlybywhichfeelingsyouarenotwillingtofeel.6TheInnerVoiceofTradingFortraderswholackharmonybetweentechniqueandself-awareness,thevoicetheyhearcomesfromthemostantagonisticp

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