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Image rights by Stefan Sillmann & John O'Donnell.

Text comes from the book: “Trader skills: recognizing behavior, avoiding mistakes, improving trading” (2016), published by Münchener Verlagsgruppe (MVG), reprinted with the kind permission of the publisher.

Here writes for you:

Stefan Sillmann & John O'Donnell are traders and investment bankers. As an investment banker, Stefan Sillmann earned his living as an investment banker for almost 25 years trading and selling derivative products for interest rate and currency management in the most important trading centers in the world such as Frankfurt, London and also New York. His customers included international corporations, central banks from across Europe, regional savings banks and private investors. He and his team have been among the best in their industry for years, determined and awarded by the renowned Euromoney Magazine. For 10 years now, he has been accompanying executives and their employees from all industries in their daily challenging tasks as an independent coach and trainer. Since then, he has also supported countless young traders every year in their development on the trading floor. His work is characterized by practical and above all results-oriented content and measures. John O'Donnell has been a trader from the very beginning and has been active in the market for over 20 years. He worked for various international banks as a foreign exchange and fixed income trader and passed the exam as a stock trader on the Frankfurt Stock Exchange at an early age. From his own experience, the experience of fellow traders and dealing with private and institutional trading customers, he knows that both experienced market participants and newcomers tend to fall into the usual trading traps and lose money. From day one of his trading career he kept a trading diary for himself and repeatedly documented, analyzed and evaluated both his own behavior and that of his trading customers. This resulted in the Trade Analysis Diary (TAD), an electronic trading diary that has been helping him and all other traders every day for many years to operate more professionally and thus more successfully in the market.

Equities Stock market and finance: Trader skills for would-be investors

Anyone who wants to be successful on the stock exchange should have trader skills. But how do you best acquire them?

This is how financial coaching works

For a few years now we have been training and coaching people who are doing them
want to make money on the stock market. These traders all have something in common. she
want to make money quickly and easily. And it is precisely with this attitude that they come to us. You can imagine how big the disappointment was
is when you get that tooth pulled right at the beginning. In principle, it is also quick and easy, but only if you are very lucky and already
have a lot of money. Those who bet on luck lose theirs when trading
Money relatively quickly and / or have decided to play the lottery.
We have packed all of our experience into these trainings and coachings.

We thought of many things at first
Look “completely normal”, such as checking my “back-up system” in preparation for a morning trading day. They say it goes without saying! It is not. And since we are on our own
Speaking of experiences, we have at least tried at everything
to think. Even if you sometimes only see the second glance Sense one
recognizes a certain point on our checklists ...
All the points, strategies and ideas in the end only have the purpose of making mistakes
avoid. Because when we have learned one thing as traders, coaches and trainers,
then it is this: one mistake means loss. Very easily.
Not only when trading, by the way. I recently met one
entertain professional poker players, coaches and trainers. We exchanged our experiences on the subject of risk management. What are the similarities between poker and trading?

Gamer or Trader?

Lo and behold, we are not that far apart. Both activities are carried out by
on the outside called "gamble". But both activities have in reality
and from a professional point of view, nothing to do with gambling. In both cases it means: I cannot influence the market (or the cards) and I can
not manage at all, just myself.
In both cases there is something that "irritates" the participants. It's about too
to win! And as mentioned above, too many rely solely on it
on their luck. Or better yet, they blame their failure on failure
Happiness. In addition, both are supposedly easy to understand. Trading means "buying cheap - selling high". All right, is understood. Unfortunately, the implementation is not that easy, otherwise anyone could do it. In fact, as a trader, you have a 50/50 chance of being right with your decision at any moment. In the markets you only have two movements, stronger or weaker. That is why the temptation is so great to always start right away. A professional poker player also relies on probabilities and estimates
but by observing and analyzing his "market" before he acts.

If the trader were to act in the same way, he would first have to analyze his personal behavior, then his market, and then list his options so that he can finally make a decision. We learnt,
that a large part of the losses that traders make in the market are not due to a lack of luck, but to inappropriate personal behavior.
The essence of these thoughts and experiences is that in both poker and poker
In trading, only those who actually win are those who, on the one hand, make their own mistakes
minimized and, on the other hand, performing more good and thus profitable actions.
How does it work and how do you get there? It's actually very simple: you
analyze your own behavior in certain situations. How did i
behave myself What did i think What did i feel where does ... come from
this feeling? This analysis should lead to a self-diagnosis that you
Provides clarity about certain thought patterns and the associated emotional life. And of course what the consequences are for
Your trading surrender. Motto: danger recognized - danger averted!
This is not witchcraft, nor have we created anything new. Every professional
regularly reviews his own behavior with the aim of improving himself.

How to acquire trading skills

No matter where you look, business, sports, medicine, aviation, fire services, disaster control. Professionals all have one thing in common: They constantly check and optimize their own behavior and train their skills every day in order to become better.
And that is exactly the case for trading. The traders who have been in the market for a long time
are looking again and again to see how they can improve. Here is just a small example from forex trading. Electronic
Trading systems introduced. Until then you could rely on your hearing and be
Feeling abandoned. Because business was done over the phone and over loudspeakers with brokers from all over the world. We stopped at the noise level though
something moving in the market. We felt the tension in the silence shortly before the announcement of important labor market data. And then the market exploded. All
shouted confused, nobody really knew where the market was right now,
and real market makers put prices at which they bought at the same time
and sold to provide liquidity to the market.
Then the machines came and we heard less and less. We looked at that
Screen and watched the numbers move. One important factor, namely hearing and the emotions associated with it, was simply turned off.

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What have we done? The chart technique, which until then had been treated rather negatively and was given a smile by many, came more into focus.
We have tried again and again to market the market using certain parameters
read. AND we had to learn all the feelings that were previously an important factor
and indicators were to be ignored or controlled. We have positions
Taken "from the gut" and learned to manage it with the head.
We want to clarify and explain this process. We want to create a work that should facilitate the entry into professional action. And we want to offer seasoned professionals the opportunity to
to question whether there is still anything they can do to improve their behavior.
Because at the very highest level, in the end the one who makes the fewest mistakes "wins" ...
One more thing: We will write here in the customary you-form
and also use the male version. We are of course addressing both genders. We also use a relatively simple and
understandable style of speech, as is customary with traders. So please do not expect highly scientific formulations, but rather an open and clear form of communication. When it says "WE" I always mean us,

Checklist for wannabe traders: Understand your own behavior

Are you or would you like to be or become a trader? Then you should first learn to assess yourself correctly.

  • You are a beginner, professionally or institutionally active, private, gamer
  • You are active in all asset classes: foreign exchange, interest rates, commodities, securities,
    Bonds, stocks, derivatives, options, certificates, etc.
  • You are a short- and medium-term investor who would like to get an overview of your personal investment behavior
  • You are an investor who occasionally wants to take advantage of market characteristics with short-term positions
  • You are an investor who wants to follow another »guru« (social trading) and first checks what exactly this guru is doing and how he is doing it
  • You are an investor who wants to compare the "gurus" with one another.
  • You are an investor who wants to or has to monitor the activities and behavior of your "investments" and, if necessary, intervene.
  • You are a controller who wants a general understanding of markets and wants to learn more about traders' behavior and their trading decisions
  • You are a trader who oversees the individual risk and money management of traders.
  • You are someone interested in psychology in financial markets (behavioral finance)
  • You are someone who wants to understand the consequences of this for personal trading behavior
  • You are someone looking for solutions to optimize this trading behavior

We want to give impulses and stimulate thought, how
You can optimize your individual trading style and what you pay attention to
should. Every trading strategy, as good as it may be, is at some point - from which one
Whatever the reason - no longer applicable or feasible. The markets change
conditions change, you change.
We want you as a trader to keep your mental flexibility and ideally not to go into the »I have
always made that way «expires.

How to continuously improve your strategy

Nor is it about changing your strategies after every failed trade
To throw "over the heap". We want you to keep your trades and / or
Your strategy in detail and based on predetermined criteria
checked and only then optimized if necessary.
Henry Ford once said: "Whoever does what he can do, always stays that
what it already is! «A little transformed and interpreted for our business
this means: »Who always does the same thing shouldn't be surprised if
he always gets the same results. "

The financial markets ensure every day that this wisdom is special
Gets meaning. Even if it is always the wish of traders,
Investors and investors is to "understand" the markets at least once, so there
it is always only in retrospect, during the analysis, a plausible explanation for a
certain movement. One of my first bosses once had the astute one
Joke: "You are always smarter afterwards!" At the end of the day
However, despite all the best wishes, it remains the same: »You are only as good as
Your last trade. "
This wisdom is especially true in the financial markets, because there is probably no other market in which changes or makes so much money so quickly
can be lost.

The trading colors game

Let's start with a little exercise - it's also the cover picture, by the way. It should help playfully, yet
to learn more about you. Or you ask those around you
who have already played a "game" with you. When playing it shows a lot
often the true character of a personality. Especially when you
is losing. That's why we want to start with this little one right away
Start the "self-experiment".
Back then, as young traders, we were cautious about the topic with this game
Trading introduced. Our bosses wanted to know what goals we are pursuing
and how we implement strategy and tactics in a playful atmosphere.
The conclusions that were then drawn behind closed doors gave indications of possible areas of application on a trading floor. However
we didn't know that at first. We should just "play".

And this is how the game works

Imagine you have a capital of 10.000 euros, that is your "play money".
You decide how much you bet per round. Whether 100 or 10.000, plays
not a role at first. Please don't think too much here, be spontaneous because it
It's only a game.

Our playground is the market, and this is represented here by colored playing figures or cards. We have the classic little ones at the time
Figures from Mensch-an-an-dich-nicht used. Each figure represents one
negative or positive multiplier that corresponds to a specific market change. We play with five colors and there are thirteen in total
Characters. The division of colors and the number of figures per color are
listed in the table below. In the third column you can also see the respective positive or negative change in the capital employed (KE)


Capital investment: EUR 1.000
Alternative 1: A figure of the color "beige" is drawn, which corresponds to a change of +2 times the capital employed (KE). Your new total capital is 12.000 euros.
Alternative 2: A figure of the color »green« is drawn, which corresponds to a change of –2 times the capital employed (KE). Your new total capital
amounts to 8.000 euros.

The sample table is almost self-explanatory, but we want to make sure that the "principles" of our game are really clear.
In the first round you wagered an amount of 2.000 euros. Turns green
drawn, which corresponds to a change of –2 times the capital employed
(KE), i.e. a loss of 4.000 euros. Your new principal (total)
is only 6.000 euros. Now be a little more careful and put in that
next round only 1.000 euros. Black is drawn. +1 times the stake
of 1.000 euros corresponds to a change of 0. Your capital is retained. In the next round you bet 1.000 euros again, beige is drawn.
+2 times the capital employed corresponds to a profit of 2.000 euros. Your new total capital is now 8.000 euros. Become brave, you bet for that
next »trade« again 2.000 euros. The color yellow corresponds to a loss
of -5 times your capital employed (KE), i.e. 10.000 euros. Since you only have 8.000
Euros, your broker (bank) is now requesting an additional payment in
Amount of 2.000 euros. Ergo, you are ready for today's trading day (FFT =
finished for today).

Anyone who thinks now that you couldn't lose more than your total capital is only partly true. Today many brokers offer their customers
With a so-called lever, that means x times your share capital to act in the markets. We refer to this in our technical jargon as
"Leverage". Quite often you will find this when trading forex. It allows
You to trade larger and more "attractive" amounts. Mostly a fallacy and
really only for real professionals with at least ten years of trading experience.

Start the game

Let's start with the Trading Colors Game. Now you should take a position. Bet an amount (between 1 and 10.000) based on your "market expectation". Which color do you think will be drawn first? After you
If you have wagered your amount, a color is drawn blindly and purely at random (on
End of each chapter and between the checklists). In our game we go
assume that there are no good forecasts about the market development, but rather
just probabilities of what color could be drawn. From our
In fact, it comes closest to the real market!
Now lead you independently and responsibly during the "game"
Trading Diary. Professionals also refer to this as a dealer relay. Aim, you should
Keep an eye on your position at all times. Multiply your bet by the amount drawn
Color and now enter the "data" in your trading diary. As soon as the
Line is completed, put the next amount.

After all trades are done, how are you going to end the day? Were your "paper trades" successful? Or were you "finished for today" after the sixth move? What can you learn from this? Certainly that
You cannot rule the market. Nobody can turn a few pages to see how the market will be in two days, or two hours, or
sometimes in two minutes. You can only control yourself!
Your actions and your thinking.
Based on your behavior in this game you can draw pretty good conclusions
draw how you would behave in an emergency and with real money. It
provides information about your personality. It shows you how to use the
Avoid the subject of »risk« and »money«. How you act when you're on the winning side and how you react when things don't go well.

What does the game say about you?

If you are now thinking, “Well, it was just a game that sees reality
everything looks very different ... «, shows our experience from many coachings and
Trainings that this is not the case. In most cases there is more truth behind the playful behavior than the player would like to admit to himself.
However, the greater the awareness of how strongly your personality traits influence your decision-making.

There are different personalities and their individual characteristics that influence trading behavior.
It is our aim that you know where your personal pitfalls are from the start
can lie. If you know this before, at least you'll be out
these reasons can rule out trading losses. As I said, the market
You can't influence just yourself. We know ourselves how annoying
it is when, after a loss, you know exactly what mistake you made
have. It is even worse not to have learned anything from this mistake and him
to do a second time.
With the help of your diary, you will (hopefully) make each mistake only once!

Lose more money than you have?

The question arises as to whether you can lose more with just one trade than you have in your trading account ...
I have a very good example here from January 2015:
The customer of a forex broker has 30.000 euros as trading capital on a
Trading account deposited. According to the agreement with the broker, he is allowed to work with a
Take leverage on 100 forex positions. He could actually have a position
received in the equivalent of 3.000.000 euros.
Let us assume that he did not bet everything, but bought with a trading capital of 10.000 euros and a leverage of 100 euros against Swiss francs (CHF) at a rate of 1,2100. That means he has through the
Leverage a nominal amount of 1.000.000 euros (100 * 10.000) bought and
1.210.000 CHF sold. His goal: a short-term rise in the EUR / CHF rate
and thus a nice price gain.

In order to minimize a possible loss, the customer has to give his broker a
Order placed to close the position at a price of 1,1990 (Stop / Loss),
the EUR / CHF rate should trade at 1,1990 or lower. He minimizes with it
his risk of loss to 11.000 CHF (1.000.000 * a loss of 0,0110 CHF
Pips), roughly equivalent to a loss of around 9.200 euros. His profit
the customer takes at a rate of 1,2350, which corresponds to a profit of
25.000 CHF. But now something extraordinary happened on the market in January 2015,
and the exchange rate of the euro against the Swiss franc collapsed inexorably. In this case, the SNB decided to change the EUR / CHF rate in the future
no longer support at 1,2000. Since they have been doing this for many years
had done and thus (almost) everyone expected that this would continue in the future
Fall, it literally got the market off the beaten track. Everyone
Market participant who had a long position in EUR / CHF tried to close out this position. Suddenly there were only sellers and nobody
who would have been willing to act as a buyer. Since nobody knew
how low the EUR / CHF exchange rate can fall in the end, it first plummeted into the abyss.

The broker mentioned above was of course unable to determine the position of his client
Close out the desired rate (1,1990). The next really tradable course
was only near the daily low, at 0,8750. Here the broker found a buyer and finally closed the position. The 1.000.000 euros used
were now only worth CHF 875.000, which corresponds to a loss of CHF 335.000. These correspond to the current new course level
335.000 CHF, in turn, a value of just over 382.000 euros (loss). Of the
Broker informed his client of this trading loss and asked for the account to be balanced.
But since the customer has "only" paid 30.000 euros into his trading account
had, the broker now asked for a "margin" in the amount of something over
300.000 euros to balance the account again ...
Angry or Harakiri? Now just imagine if this customer had with the
traded a whole 30.000 euros and a leverage of 100. Heard rumored
one of such trades in the market and some brokers that are badly in trouble
got because their customers could not afford these horrific additional payments.

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