Behind The Market Curtain - Trading Lessons Learned From a Career of Wins and Losses

By Christopher Daniel

Get an unfiltered view from a seasoned trader on what truly moves price in the markets.

 

In Behind The Market Curtain, author Christopher Daniel shares invaluable principles obtained from navigating the markets over the past 10+ years. He brings a point of view that most novice traders are unaware of - until it's too late. He spotlights key trading fundamentals that are universal and timeless. The techniques found in this book, are designed to make you think deeper about price movements in a stock. As he pulls back the curtain on how the market truly operates, Christopher sheds light on the many challenges a trader will face on their path to profitability while providing solutions to these potential road blocks.

 

Above all else, discipline and the will to succeed are the keys to your trading success. For those ready to embark on this journey, this book will show you how it's done.

• Language: English
• Publisher: Christopher Daniel
• Release date: Dec 13, 2021
• ISBN: 9798201995133

Book preview

Contents

Introduction

Golden Nuggets

A Sun Tzu Inspired Trading Philosophy

The Journey

Consistent Discipline

Consistency in Trading and in Life

The 10,000 Hour Rule

Growing At Your Own Speed

Celebrate Every Milestone

Certainty in Your Trading Decisions – Not the Outcome

Fluidity

Grading Your Performance

Setting Consequences for Breaking Rules

Doing Your Own Thing

Why Do You Trade?

Walking Through Your Trading Door

Self Sufficient Traders

The Ultimate Trading Goal

Put In the Work

Stop Scoreboard Watching

Getting Better Every Single Day

What’s Taking So Long Anyway?

Building Off Results

The Art of Knowing, Is Knowing What to Ignore

Importance of a Support System

The Evolution of a Trader

Markets Are Shifting in More Ways Than   One

The Essentials

Patience – The Great Differentiator

Be Patient, They’ll Float By

Mastering the Art of Patiently Waiting

Know When to Put on Risk and When Not To

The Ability to Wait – Is Where the Money is Made

Money is Made in the Waiting

Game is Won in the Waiting

What’s The Rush?

Next Train Is Around the Corner

Trade Clean

It’s Chess, Not Checkers

Behavioral Market Changes

When it’s Time to Pivot

The Art of Doing Nothing

The Market Players and Their Games

Avoiding Market Traps

Motives Behind Financial Analysts

Manufactured Moves

The Market Maker Move

Avoiding The Dangling Carrot

Can’t Go Lower

Chaos Brings Opportunity

The Business of Spoofing

Why Analysts Reports Aren’t What They Appear to Be

Pump and Dump

Coincidental Moves in the Market

Sifting Through the Noise

Trading Process – The Snipers View

What’s Your Process?

What’s Your Routine?

Find Your Edge

What’s Your Edge?

Jack of All Trades, Master of None

Finding Your Trading Style

Find Your Frame

If You Fail to Plan, You Are Planning to Fail

Understanding the Why

Is Less Truly More?

Could Technology Get in Your Way?

If This, Then That

Set Risk – Focus on Possibilities

Following Your Trading Rules

Position Management

Averaging Down – The Quickest Way to Zero

Letting Losses Grow

Re-Entering a Stopped-Out Trade

Letting the Dust Settle

Process Over Profits

Chasing After Profits

Back To Basics

It’s Either in The Scope or It’s Not

Low Hanging Fruit

Stalk Your Stocks

Slow It Down, To Clear It Up

Stay in Your Trading Lane

Doing Your Own Thing

Removing The Trading Blinders

Staying Nimble Amongst a Sea of Uncertainty

Reevaluate

Sizing Up Responsibly

The Luxury of a Specialist

Why Are You Selling?

Trade Like a Casino, not a Gambler

Resisting Market Temptation

Fundamental Keys to Trading Success

Your Only Competition Is You

The Opponent Is You

Whose Game Are You Playing?

Controlling Your Trading Environment

Stay Calm

Mental Game

Psychological Endurance

Overthinking is a Dangerous Habit

Controlling Your Focus

Get Your Mind Right

How Strong Is Your Conviction?

Frame a Trade in the Positive

Emotional Intelligence

Mindset Isn’t Just Something, It’s Everything

Finding Your Tribe

Listening to Your Intuition

Disconnecting From Social Media

How Focused Is Your Focus?

Hesitation – What is it Telling You?

No Certainties in Trading, Only Probabilities

Don’t Dwell on The Loss

Fight or Flight

Randomness and Uncertainty

Trading on Tilt

Winning The Wrong Way

Knowing When to Say When

Regaining Your Trading Balance

Short-Term Memory

Where’s Your Spotlight?

Where’s Your Focus?

Narrowing Your Focus

Stay In the Moment

Rinse and Repeat

The Intuition Behind Trading Clarity

The Mind of the Other Side

Understanding The Other Side

To Trade or Not to Trade

Withstanding The Storm

Conclusion

The Art of War

About the Author

With double-digit years navigating the financial markets, Christopher Daniel splits his time mentoring other traders, while managing his own trading career. As an avid writer, he also enjoys contributing his market insight on various financial blogs. His discipline cultivated as a trader, can be seen throughout other facets of his life; most notably, health, fitness and meditation. 

INTRODUCTION

Golden Nuggets

This book is a collection of trading nuggets compiled from years of navigating the market waters. I wanted to put this together to help those along their trading journey, as this path will be one of the most difficult paths to navigate in a person’s life. It will bring out your natural strengths and spotlight your weaknesses.

There will be plenty of obstacles along the way to consistency that will test your will to succeed, so expect the road to get bumpy.

Throughout this book, you’ll notice a recurring theme, between your trading process and psychology; as they are the foundation of consistent success in this business. The content focuses on the mental aspect of this business, not the general information found elsewhere. I’m not talking about basic chart patterns; this book goes much deeper than that.

Before you begin, you must understand one thing;  trading is a serious business and those who succeed – play for keeps.

A Sun Tzu Inspired Trading Philosophy

Sun Tzu was a Chinese general, philosopher and military strategist. His book, The Art of War, is the most influential strategy text in all of East Asia. He may have died in 500 B.C., but his philosophy stands true today as much as it did when he walked the earth. Lessons from his teachings can be directly translated to all fields, from business to sports. 

The financial markets are undeniably a battle field. It is a constant fight between buyers and sellers, both jockeying for position around supply and demand.

Understanding the mind of your opponent on the other side of your trade will give you a psychological advantage in defeating them.

Make no mistake about it, trading is war.

You can easily learn the basics of trading anywhere, but successful trading is far beyond that. As you have read, mental strength and a psychological approach to trading is what profitability is based on.

The following is a strategic approach to trading based on the philosophy of Sun Tzu’s, The Art of War. Take this philosophy and make it your own.

Every battle is won before it is ever fought. - Sun Tzu

This is by far the most relevant to a successful trading career. Before you put on any position, you must have a crystal-clear plan mapped out from A-to-Z. Taking that a step further, unless the opportunity is A+ (a perfect set-up) then there is no reason to take the trade. Anything short of an A+ set-up and the level of probability dissipates. Room for a loss should be kept to a minimum; therefore, before deploying your capital in the market, make sure your probability of winning the battle is far in your favor.

If you know the enemy and know yourself you need not fear the results of a hundred battles. – Sun Tzu

Trading is a numbers game. Even taking only A+ set-ups, you will still encounter losses; it’s just the cost of doing business. The absolute best trading set-ups aren’t 100% accurate. However, over time the wins will far exceed the losses. Therefore, there is no need to worry about taking a loss when you only put on A+ trades. You’ll lose a few battles, but will win the war.

Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win. – Sun Tzu

You will see a pattern in the philosophy behind Sun Tzu’s preparation. War is won psychologically, not physically. It’s not whether you’re stronger than your opponent, it’s whether you’re smarter than your opponent. Successful trading is about proper preparation before the market opens. Struggling traders are unprepared and come to the market just looking for the hot stock. Professionals prey on these novice traders and easily defeat them during battle in the markets.

Victory comes from finding opportunities in problems. - Sun Tzu

There are problems all over the markets in which an astute trader can capitalize on; key is you must know where to look. Whether it’s deep in a company’s fundamentals or a negative catalyst, victory is yours when you’re able to uncover the hidden opportunity. Successful trading is about doing what the other man isn’t.

In the midst of chaos, there is also opportunity. – Sun Tzu

I love a market selloff. When a stock begins to rapidly drop in price, emotions fill the market with chaotic investors/traders without a crystal-clear plan, which inevitably pushes prices even lower. This type of panic selling presents a buying opportunity once the emotional selling has subsided. The opportunity lies in the waiting and once the optimal time has arrived, it’s time to attack.

The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand. – Sun Tzu

Proper preparation alleviates most errors. If this, then that. If this occurs, then you will do that. If this does not occur, then you do nothing. Trading is a numbers game based on odds. By calculating the odds of a trade and putting probabilities in your favor before the market opens, when your mind is calm and clear, odds of winning the battle lean far in your favor.

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.  – Sun Tzu

As a trader, you can have the best strategy the market has ever seen, but if you lack the conviction to execute the position, the strategy becomes useless. Trading psychology far trumps any skill required in trading. Controlling your mind in order to perform your strategy is paramount. On the flip side, gunslingers (traders that approach the market in a ‘let’s see what happens mentality’, will find themselves easily defeated by the traders that execute with laser precision.

All memetic warfare is based on deception. – Sun Tzu

The deception being orchestrated in the markets is the basis behind capital being exchanged from account to account. From market makers pushing prices past levels in order to gather shares for a more advantageous entry to an analyst posting an upgrade/downgrade in order to influence a trading decision, deception is all around. Key is to know what is true and what is false.

The greatest victory is that which requires no battle. – Sun Tzu

This is what I like to call, clean trading. The type of trade that works immediately without ever testing a stop level. You don’t have to fight for price, your trade executes and the position is immediately in the money. In fact, when a trade doesn’t proceed this way, take a step back and re-evaluate the position; you can always exit and get back in when the move occurs.

Opportunities multiply as they are seized. – Sun Tzu

Trading in the zone. When your trading begins to flow and you’re in a rhythm with the markets, opportunities begin to present themselves in a much clearer fashion. In fact, when you take the time to become an expert at your A+ set-ups, you’ll begin seeing the right side of the chart. This is the unprinted side, the future, if you will. This is trading in the zone.

The quality of decision is like the well-timed swoop of a falcon which enables it to strike and destroy its victim. – Sun Tzu

The quality of your trading is directly correlated to your process. When you have taken the time to derive a crystal-clear process and plan of attack, there’s no hesitation in execution; you just strike and put on the position. Like a lion stalking its prey or a sniper patiently waiting for the enemy to come into his scope; the more laser focused your trade plan is, the higher the quality position you will have to execute.

It is more important to out-think your enemy, than to outfight him – Sun Tzu

Market makers look for novice traders to prey on. They will push prices through obvious stop levels to take out orders and accumulate needed shares before reversing in the opposite direction. Don’t fight the losing battle, think like they think and patiently wait for the real move to occur.

Move swift as the Wind and closely-formed as the Wood. Attack like the Fire and be still as the Mountain. – Sun Tzu

Patiently wait; you chase, you die. When the optimal trade opportunity presents itself, you must attack without hesitation. All your preparation is done ahead of time, all you must do is execute and execute swiftly. But until an optimal opportunity presents itself, you must patiently wait still. Trading should actually be called, waiting.

He will win who knows when to fight and when not to fight. – Sun Tzu

Cash is a position. Just because the market is open, doesn’t mean your capital should be deployed. A position should only be on when conditions are optimal to your particular strategy; whatever that may be. If all conditions aren’t aligned with what you do and the way you trade, then it’s in your best interest to be in all cash. Know when to fight and when not to fight.

Sweat more during peace: bleed less during war. – Sun Tzu

All the hard work is done before the market is open. When your mind is at peace, you’re able to clearly cultivate a strategic plan of attack. As a trader, your job is to come to the market prepared and ready for battle. It’s imperative to have a clear trade plan set and ready to deploy once the opportunity presents itself. All this planning cannot be done during market hours, as emotions may influence decisions. Take the time outside normal market hours to derive a strategic trade plan while your mind is at peace.

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. – Sun Tzu

Find your own edge. Everyone sees the same charts. Everyone sees the same set-ups forming. To consistently grow as a trader, you must  do what the others aren’t doing. Take what everyone else sees and make it your own. Cultivate a strategy around the obvious and build an edge that puts you ahead of other market participants.

The opportunity of defeating the enemy is provided by the enemy himself. – Sun Tzu

Let the trend clearly form by Smart Money. They will show you their hand by the footprints left on the charts and tape. From orchestrated selloffs that trigger emotions for a more advantageous entry, to false breakouts that catch market chasers before the bottom falls out; Smart Money will provide all the opportunity needed to extract capital from the markets.

Who wishes to fight must first count the cost – Sun Tzu

Set predetermined risk controls for each position you plan to take. A trader does not go into the markets blindly, unless they’re looking for a short-lived career. You must strictly manage the risk associated with each and every single position. Know exactly, to the penny, where you will exit if your position goes against you. By properly managing your risk, you allow yourself the opportunity to ‘keep a seat at the table.’

Sometimes we need to lose the small battle in order to win the war. - Sun Tzu

Cut your losses quickly. We learn much more from our losses than we do our wins. By cutting losses quickly, you allow yourself to learn from your mistakes without the size effecting your overall account. Taking losses is a part of trading, there is no avoiding it; it’s how you handle the losses that will dictate your future in this business. Losing small will give you the opportunity to win big.

Knowing the enemy enables you to take the offensive, knowing yourself enables you to stand on the defensive. - Sun Tzu

Think like they think; think like a market maker. When you put yourself in the mind of the market maker, you cannot be fooled by their manipulative ways. If you avoid the obvious levels of risk, then you can avoid being taken out of the market prematurely. If you attack the markets solely based on your own knowledge and not the intention of your enemy, you will be trading a position where the odds are stacked against you.

Using order to deal with the disorderly, using calm to deal with the clamorous, is mastering the heart. - Sun Tzu

Remain calm during the markets where emotions are everywhere. Of course, this is easier said than done. The best way to remain calm during a trading session is