The Bible of Trend Following

Interview with Top Traders- Stock Market Gurus

Interview with Top Traders – What is the #1 Thing That is Absolutely Critical to a Trader’s Success?

Posted on May 21, 2015 by Rayner — No Comments ↓


Trading is tough.

There is much to learn with a lot of noise out there.

But what if you could skip the fluff and focus on what really matters?

In this post, I’ve interviewed 5 top traders and asked them What is the #1 thing that is absolutely critical to a trader ‘s success?

Jon Boorman – @JBoorman

I think more than anything it has to be discipline. Because as important as finding a suitable methodology, developing a strategy, sound risk management, and position sizing is, it will be for nothing if you don’t have the discipline to consistently execute it and follow your rules.

Discipline is an integral part of all trading, whether systematic or discretionary, day trading or buy-and-hold, across all asset classes. I don’t believe you can be consistently successful without it.

Andrew Abraham – @TrendFollower9

The #1 thing that is absolutely critical is risk control. Risk control based on risk per trade, risk control based on sector, risk control based on total portfolio.

You must know how much you can lose on a given trade, and the maximum loss to your entire portfolio at any one time. Only then can you take the necessary measures to manage these risks.

Almost equally important is correct trading psychology. Being able to accept trades that do not work. Staying focused and strong in the complete uncertainty of trading.

Because even the best trading system will have losing periods and this is when you need to remain discipline and continue executing your trades.

JB Marwood – @MarwoodJoe

A trader must have many different ingredients to be successful in trading, but what is absolutely critical is that you must love the type of trading you do.

Many people think they have a passion for trading but the reality of trading; watching charts, managing risk all day, is not as exciting as many believe. If you are a day trader then you must actively enjoy this process.

If not, you must find another form of trading (or profession) that suits your style. That might be swing trading, automated trading, systems trading, whatever. But what you must have is passion!

Mike Bellafiore – @MikeBellafiore

A growth mindset is the number one thing critical for a trader’s success.

I highly recommend the book, Mindset, by Carol Dweck, as an important read for traders/investors.

Trading edges come and go. The sustaining trader learns everyday so they can adapt when edges change. The elite trader maximizes their edge by trading it bigger and more often.

There is no destination for the trader. There is just the perpetual quest to become your best trader and that requires embracing a growth mindset.

Trader Steve – @UKtrendfollower

Controlling your own mindset is the most important. Why is this?

Because it is your mindset that controls everything else you do, in terms of trade selection, position size, risk management, when to enter and exit etc.

You may have a written trading plan that sets these things out, and that plan may well have been written objectively with a clear mind. You may even have back-tested or paper traded the method, with good results.

However, once you start trading with real money on the line, this is when controlling your mind comes into play. The mind can make you make irrational or emotive decisions, such as:

Override your stops;

Getting impatient and taking impulsive trades that do not meet your criteria;

Taking on revenge trades to make back money lost;

Override your risk control parameters, either on an individual trade or portfolio basis (the concept of portfolio heat)

In those instances, the carefully constructive trading plan is thrown out of the window.

Traders who have been successful over a long period of time know this, and resolves to eliminate these issues as far as possible.

Trend following brings it own issues – the basic premise is to cut losses and let profits run. And, as we have seen in trends such as crude oil, or EUR/USD over the last few months, no-one knows how big those trends can become.

There are no profit targets used, as these could limit your gains on a trade. So let’s split that down:

Cutting losses – a trader can have a solid trading plan, which includes his stop methodology. Yet a lot of traders think they can out-smart the market. An experienced trend follower will know that he will lose on the majority of his trades, so it is imperative that those losses are kept as small as possible.

Letting profits run – as your winning trades will come along less frequent that your losing trades, you need to capitalize when they do materialize. Therefore, your winning trades have to be bigger compared to your losing trades (in terms of R). You HAVE to let winning trades run, in order to achieve the positive expectancy that a solid trend following approach can give you.

Particularly after having a run of losing trades, a trader may get into a profitable position, and will close the trade for a small gain, for fear of the trade reversing and turning into another losing position. This is fatal for a trend follower.

Say you have gone short on crude oil a few months back, after having a run of say 10 losing trades. You went short at $90, and then closed the trade out when price was at $85. You would have felt good at that point, but I dare say you wouldn’t have felt so good when price then fell to $50, and your method would have kept you in the trade the whole way down..

That single trade would have covered a whole bunch of losses and made your year, and the fact that you didn’t profit from that trend was purely as a result of a lack of mind control.

So, once you have a basic method that demonstrates a positive expectancy (be it trend following or any other approach) with good risk control, then from that point it comes down 100% to controlling your mindset.


In essence, the #1 thing that is absolutely critical to a trader’s success are your risk management, psychology and passion.

So, what do you think is absolutely critical to a trader’s success?

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How to Avoid Choppy Stock Market Periods

There is a simple answer on How to Avoid Choppy Stock Market Periods..You can’t!!!
You have to keep on plugging away in the stock market….However using a combination of moving averages and % moves to the up and down you can stay on the right side of the stock market…

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New Stock Market Leaders – Will the Rally Continue?? $CYBR $SKX $PANW

Been a choppy market. Many prior leaders have failed…however a new crop seem to be surfacing….
I am personally watching the below..however this is not a shopping list…nor are they recommended. Do your own homework…It is very easy to lose money when trading High Growth Stocks


Past performance is not indicative of future performance

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Are We Headed for a Stock Market Crash? $TWTR $LKND $HAR

Many of the leading stocks are getting clobbered. Marc Faber came out with the statement he believes the stock market will fall 40%!!!!!

All one has to do is look at twitter, Linkedin or Harman. I am not a bear nor a bull. I am a trend follower. I see alot of distribution days. I see a Chinese Stock market bubble…Tremendous amount of Margin debt…I see too much confidence and bullishness…all of this combining to an aged bull market.

No one knows the future…this bull market can continue and run to new highs. The key is not to have an opinion…but rather rules that can be followed without emotion. This is what I try to teach my students.

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Reversals and Failures in Leading High Growth Stocks $TWTR $ATHM $AAPL $QQQ

Many of the leading stocks and high growth stocks from a trend following perspective are failing. I look to combine both technical and fundamental aspects to identify leading stocks and high growth stocks….We currently have 7 Distribution days which is not healthy and now many leaders failing!

Could this be the beginning of the eventual reversal in the stock market?

Educational only

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Looking for Trend Following Break Outs $SYNA $ATHM $CRTO $SWKS $CYBR

Been a tough market with many breakouts not working…For this week…I am looking at the following….This is strictly educational in order to learn how to trend follow leading high growth stocks. Many of these type of trades will not work and money can be lost. Trade at your own discretion.
No recommendations.






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Nasdaq Reaches 15 year High Is it Safe to Invest Now? $QQQ $QLD

I had this question posed to me several times yesterday. As I am not a registered investment advisor rather a mentor for trend following, I discuss trend following rules. More so I teach my students to be their own Guru. Learn to trust themselves and to make decisions and even more importantly accept the outcome.

Trading is tough…there is never really a safe time. The only known is the unknown. However with Trend following rules one put themselves in the position to potentially benefit.

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Cyber Stocks and Security Stocks Breakout Trend Following $QQQ $CYBR $PANW

Alot of trading and trend following is common sense. Peter Lynch would take his children to the mall and see what they were looking for. In this case the cyber thieves are going to the mall to steal our credit cards and cause mayhem. Cyber stocks have been big profit centers and have been trending strongly…

Learn how to trend follow…

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Setting up Your Trading Screen with Trend following Indicators

I strongly believe less is more when it comes to setting up your trading screen with trend following indicators. I do not have very much on my screen as you see in this trend following video.

Exponential moving averages-Metastock Experts and volume trading indicators. That is it…

Less is more with trend following indicators.

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Weekend Stock Review $CYBR $TWTR $QQQ $SPY

The stock market sold off very hard on Friday..or in more descriptive terms…

The market really got creamed!!!

The SP 500 is now back below the 50 day moving average while the QQQ is slightly above. Due to large volume another distribution day was added. No one knows if the sell off will continue or we will bounce back like we have in so many cases. The key is caution and prudence. One must trade with a plan as well trade with an open mind. Be prepared for a sell off if it occurs as well as to trade positions if the market heals itself and rallies.

One must believe anything can happen!

Every weekend I make a short watch list and ready list. The below examples are a combination of fundamental and technical. I am not suggesting these stocks rather go study them for educational purposes…




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