EBOOK
Four principles
for trading in
the zone
CMCMARKETS.COM
Master preparation and
strategy with insights from
15 of the top traders
1
INTRODUCTION
Parallels
between trading
and windsurfing
Keeping a cool head, sticking to a plan and trusting
your gut during unpredictable conditions are
important life skills. Whether it be windsurfing
in gusty waves or trading in uncertain times, the
same principles are necessary to stay ahead of
the storm and have a thrilling ride
This ebook comprises insights from some of the world’s top traders
interviewed on the Opto Sessions podcast, including chess master
and hedge fund adviser Adam Robinson; technical analyst and
volume-weighted average price expert Brian Shannon; chart
technician Chris Kimble; author of the Market Wizards series
Jack Schwager; co-founder of the Quantum Fund Jim Rogers;
and investment strategist Kiril Sokoloff, to name a few.
Tapping into their combined years of trading experience, the
following four chapters explore the need for focus, discipline, and
confidence to develop a unique trading approach. From perfecting
the craft of preparation and controlling your emotions, to honing a
sophisticated strategy and intuition, they examine how to stay on
course even when the waves are bearing down. Their knowledge
testifies that by mastering the craft of trading and finding your flow,
a trader can find an edge.
CMC Markets is an execution-only service provider. The material (whether or not it
states any opinions) is for general information purposes only, and does not take into
account your personal circumstances or objectives. Nothing in this material is (or
should be considered to be) financial, investment or other advice on which reliance
should be placed. No opinion given in the material constitutes a recommendation by
CMC Markets or the author that any particular investment, security, transaction or
investment strategy is suitable for any specific person.
2
CMC Markets does not endorse or offer opinion on the trading strategies used by the
author. Their trading strategies do not guarantee any return and CMC Markets shall
not be held responsible for any loss that you may incur, either directly or indirectly,
arising from any investment based on any information contained herein.
—Thomas Traversa
3
Weather conditions can be
unpredictable at the best of times,
which is why professional windsurfer
Thomas Traversa finds it crucial to
be prepared when chasing storms
CHAPTER 1
“I always start
from the place
I want to go”
PREPARATION
FIND YOUR FLOW
PREPARATION
Having a plan is an essential part of a
winning trading approach. Successful
traders make a habit of reviewing and
refining their approaches to suit
changing market conditions
KEY POINTS:
Cultivate patience
Identify personal strengths
Play the game
Develop a research style
Utilise drivers
Patience is a virtue
Much like riding waves, the market is a waiting game. Timing
is everything. Set a goal, rehearse, and practise discipline
until the right time to strike. “It’s about waiting for those
isolated trades to come along and having the patience not
to do anything until the right moment,” says Jack Schwager,
the author of the renowned book series Market Wizards,
where he interviews the world’s most influential traders.
The latest instalment of the series, Unknown Market
Wizards, highlights the calm strategy of so-called
unicorn trader Amrit Sall, whose patient approach has
returned an average 337% over 13 years. At the core
of his trading philosophy, the author explains, is that
patience coupled with extreme discipline can help Sall
to not get distracted by trades that aren’t yet profitable.
Pick an opening gambit
“It is about waiting for those
isolated trades to come
along and having the
patience not to do anything
until the right moment”
— Jack Schwager
Opto Sessions #35
4
Patience is also essential when thinking several
moves ahead. Adam Robinson, who is the founder of
Robinson Global Strategies, where he advises some
of the world’s leading hedge funds, has long advocated
the importance of this skill. “If you want an edge in the
market, you have to choose a system built around
your own idiosyncrasies and talents”, he tells Opto.
Also a US chess master, mentored by Bobby
Fischer in the lead up to the latter winning the world
championship, Robinson uses the game to explain
strategy. “Chess masters learn that there are certain
types of positions that they do better in. Some people
“Every trader needs a
system that is tailored to
their strengths. You learn
that over time”
—Adam Robinson Opto Sessions #53
like slow methodical games. Other people like games
with a lot of tactics. You learn to steer the game to those
situations.” Drawing a parallel with markets, he explains
that some traders may perform better in different asset
classes, strategies, market conditions or even timeframes.
Like chess, trading is a strategic game. Traders
need focus and discipline, and a method to come out
ahead. Nonetheless, success and fulfilment often
come by focusing on more than just returns.
Learn to play the game
When it comes to trading, Robinson references Winston
Churchill’s famous quote: “war is a game that is played with
a smile.” If you can’t smile, he adds, you may be overtraining,
or investing too much capital. “You must be playful… if you
can’t, then you’re fear based. And then you’re in trouble.”
Playful does not equate to frivolous – there may
be a lot at stake. Rather, traders may be rewarded by
viewing the markets as a game, or a puzzle. “I look at
this as a giant game of strategy,” says technical analysis
expert Chris Kimble, founder of Kimble Charting
Solutions. “For me, the market is a movie that never
ends. I am always fascinated for the next chapter.”
Treating the market as a game can help you to remain
objective and focused on goals. A trader that wants to buy
low and sell high will take extensive preparation to reliably
and consistently achieve this. “None of this is easy,” says
Jim Rogers, chairman of Beeland Interests
“Everybody has to
have their own style”
— Jim Rogers
Opto Sessions #6
The importance of
mental rehearsal
5
Mental imaging, which is when a trader
visualises the step-by-step process of
executing a trade, is another important
part of a successful research plan.
Schwager points out that the technique
was used by a trader who, “just like
an athlete will mentally think of every
turn and how they will handle it, [and]
Sall does the same thing in trading.”
and co-founder of Quantum Fund, which famously returned
4,200% over a decade. “I wish it were. You have to be
willing to do a lot of research and put the time in to learn.”
A unique research style
Although preparation is central to all trading journeys,
research strategies vary. “Everybody has to have their own
style,” affirms Rogers. “I knew some phenomenal shortterm traders on Wall Street [during the Iraq War] who did
not have to know if the war had come to an end or not [to
register profits].” He recalls that these traders focused on
leveraging their historical technical analysis to succeed;
“one of these traders barely knew what the companies
did, but he knew the symbols and trading patterns of
some 100 companies. And he traded them every day.”
In contrast, Schwager found that Amrit Sall used critical
self-evaluation to take preparedness to another level. “He
keeps rigorous logs on trades going back since he started,
some 13 years ago. What the circumstances were, what
his strategy was, what worked and what didn’t work. He
then categorises this information into different types of
situations, so whenever there is an event coming, he is
able to draw on past analogues to that type of situation.”
Follow the drivers
While some traders focus on micro-level factors affecting
the price of assets, others look at the bigger picture. Kiril
Sokoloff, chairman and founder of global investment strategy
and research firm 13D Research, says it’s important to
understand the impact of the macro-economy on markets.
“One of my strengths is [being able] to understand
what the key driver of things is,” he tells Opto. “For
example, if you look at inflation, since 1973 it’s been
driven by oil prices across the world. Oil prices are
probably by far the most interesting and most important
commodity, but are the hardest to analyse — it’s almost
impossible.” It’s about spotting the factors that drive
prices, Sokoloff explains. “Back in 2002, commodities
had been in a 20-year bear market. China was investing
massively in infrastructure, but the most interesting
[trade] to me was oil. We did a lot of work, and we were
right — it saw almost a seven-fold rise in six years.”
Sokoloff, who also co-founded the first pure Asian
hedge fund after identifying China’s standout potential,
warns there are many contrasting macro factors that
can influence an economy. But if you work out the most
dominant, you might reap the rewards. “Because there
are so many different factors and variables, you have to be
very humble,” he says. “It’s about identifying the one factor
that you think is the chief driver of the whole cycle.” 
“One of my
strengths is being
able to understand
what the key driver
of things is”
— Kiril Sokoloff
Opto Sessions #129
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6
76% of retail investor accounts lose money when spread betting and/or trading CFDs with this
provider. You should consider whether you can afford to take the high risk of losing your money.
—Thomas Traversa
7
When Traversa is riding a wave,
he’s also surfing a powerful set
of emotions that require control,
understanding and discipline
CHAPTER 2
“When you feel
it is the right
moment, just go”
PSYCHOLOGY
FIND YOUR FLOW
PSYCHOLOGY
Markets don’t always act logically, which
is why a trader’s thinking is one of the
most crucial factors to acheiving alpha.
It defines their decision-making abilities,
talents, experiences and risk-tolerance
KEY POINTS:
Stay on your own course
Riding out volatile conditions
Emotional capital
Learning when to act
Having confidence and conviction
“If you are always looking for
things that are reasonably
priced, it gives you a
natural contrarian slant”
— Lyn Alden
Opto Sessions #56
8
Be your own person
“This is an individual sport,” author Brian Shannon,
who has been a swing trader for over 30
years, describes trading in the markets. “Some
people think it’s a team sport and you want a
network of people, but I tend to get distracted
by other peoples’ opinions.” With numerous
books on the subject, including Technical
Analysis Using Multiple Time Frames, he adds that, over
the years he has learned to trust his own analysis of
the market and maintained a focus on discipline. “That
allows me to be in this business as long as I have.”
Following a strategy requires the self-belief to
shut out external noise. Even contrarian traders
must identify the precise moment to take action. Lyn
Alden, who provides equity research and investment
strategies through her company Lyn Alden Investment
Strategy, leans towards a contrarian approach.
However, she cautions that, “it’s not knee-jerk”.
“There are certain times when the consensus makes
sense and you want to ride those long-term trends,” she
tells Opto. Explaining where the individualised strategy
comes into play, she says “there are certain turning
points or certain extremes where it's important to take a
step back and maybe start looking in the other direction”.
The key, adds Alden, is to follow your own instincts
about when to follow the herd and when to cut loose.
“You don’t start out with
wisdom as a trader.
Wisdom is gained”
— Peter Brandt
Opto Sessions #30
On the one hand, we have capital drawdowns, which
“can be defined in terms of depth and length,” says Peter
Brandt, who founded proprietary trading firm Factor over
40 years ago. Just as importantly, he adds, “there are also
emotional drawdowns. In some ways, a big emotional
drawdown can be more severe and take a longer period of
time to climb out of than if you get hit hard on a bad position”.
Brandt, who also wrote Diary of a Professional
Commodity Trader, tells Opto, “there have been a lot
of trades I would have very high expectations for, and
they were big disappointments. Early in my career I
spent too much time thinking about them. They dragged
me down.” Over time he came to the realisation that,
“markets do not take me personally – why should I take
my losses personally? It’s a psychology of trading
that probably would have helped me early on.”
Safeguard your emotions
Understanding sentimental assets
Even beginner traders quickly learn that discipline,
pragmatism, and composure are vital in the market.
This means not becoming over-confident when
things go well, and understanding and contextualising
your own emotions when the waves get rough.
Just how a windsurfer taps into impulses to ride a particular
wave, emotional intelligence entails understanding the
collective state of mind. This emotion not only fluctuates in
different situations, but also with different asset classes.
Mish Schneider, co-founder and director of trading
education at MarketGauge, finds that trading certain
assets conjures different feelings. “Trading stocks
has an emotional component to it of course, because
this is about people. Trading commodities also has an
incredibly emotional component to it because these
are raw materials – things we need to live.” Unlike
bonds and treasuries, trading physical assets can
be a much different experience. Indeed, even when
using leverage, the emotional stakes are far higher.
Schneider, whose 40 years of experience
have included 13 years as one of a handful of
female members of several New York Commodity
Exchanges in the World Trade Centre, elaborates
that, “nobody needs Facebook to live, but we do
need food and basic raw materials for our homes.”
won’t work’. Don’t worry about being wrong, and be
resilient enough to get back up and reinvent yourself.”
Make a winning habit
“Commodities
are traded very
emotionally”
— Mish Schneider
Opto Sessions #20
Finding resilience
9
The ability to recover emotionally from a challenging day
in the market is crucial to preserve confidence – and
to avoid yesterday’s waves from adversely affecting
you. Resilience is not only about getting back on the
board. It’s also about having the confidence to stick
with your gameplan. This, in itself, is an edge.
Mark Yusko has managed almost $2bn in discretionary
and non-discretionary assets as CEO and chief investment
officer of Morgan Creek Capital Management, which he
founded nearly 20 years ago. Humility is a key part of the
learning experience, he considers: “I separate humility
from confidence and conviction. I have strong opinions, but
they’re loosely held because I believe I have the humility to
say, ‘I was wrong, and I’m going to move on and try again.’”
On the ability to try again and follow a gameplan, Yusko
adds, “another edge is resilience. The ability to go from
failure to failure with increasing enthusiasm. As Thomas
Edison said, ‘I never failed, I just found 10,000 ways that
Having confidence in your own ability – understanding
whether losses are merely blips or if you should adjust
your strategy – is key to charting your path through the
waves. “Realise that if you have been losing for three weeks,
it might take a month to get it back. That is part of trading.
Do not look at it one trade at a time, look at it as ‘I'm building
back on my process of winning’,” says Brian Shannon.
The 2010 founder of AlphaTrends, an online
community that provides swing trading analysis and
education, tells Opto that keeping strong conviction
is important to sticking to a plan. “If it's been a week
where you’re just bleeding, examine what you’re doing:
‘am I trying to buy dips, rather than wait for evidence
that buyers are coming back?’ Slow down, trade
smaller share sizes and then start to add size.” 
A traders state of mind
Learning when to act, and when to
stay on the same course or make an
adjustment is vital in trading. As is
learning to weather volatile conditions.
A successful trader understands
psychology, in terms of both their own
behaviour and collective behaviour.
Understanding whether the herd’s
move is the result of a well-judged
decision or due to being carried along
on impulse is a vital trading tool
“Resilience is the
ability to go from
failure to failure
with increasing
enthusiasm”
— Mark Yusko
Opto Sessions #59
—Thomas Traversa
10
Controlling the wind, while balancing
himself on a wave, Traversa requires
different techniques for varying
weather patterns and conditions
CHAPTER 3
“Nowadays
we all want
to pretend
we control
everything”
STRATEGY
FIND YOUR FLOW
STRATEGY
What do you want to achieve in trading?
For the best chance of succeding in the
markets, look at your financial goals and
personal strengths to help formulate a
market beating framework that is both
adaptable and concise
KEY POINTS:
The precision of price
Cut through the noise
Markets are uncontrollable
“I want to be aware of
potential catalysts for
a stock, like earnings,
or for the market, like
a jobs report”
— Brian Shannon
Opto Sessions #11
11
Get a feel for the market
Just as the world’s top windsurfer, whose standout
talent, preparation, and experience can’t control
the weather, a trader can’t tame the wild swings
of financial markets. Shannon argues that market
sentiment makes technical indicators more important
than fundamentals in short-term trading.
Nevertheless, he underscores the necessity of
remaining aware of potential contextual opportunities
and risks. “I want to be aware of potential catalysts
for a stock, like earnings, or for the market, like a jobs
report”, he says, explaining that this enables him to
manage risk or maintain a cash position until the
appropriate time. Because the market is so unpredictable,
Shannon argues that price is the greatest indicator.
In a similar vein, so-called 50 Pips, an anonymous trader
who specialises in price action, suggests to Opto that, “price
is really all you need”. He explains, “indicators can add
layers of granularity, but if you don’t really understand what
you’re looking at [in a chart], everything else is far harder”.
Remain calm and carry on
Regardless of the metrics prioritised by an individual’s
trading strategy, the market will always pose a degree
of unpredictability. To find success amid these
conditions, it’s pivotal that traders remain in control of
their psychological state and follow their gameplan.
Chess player Robinson believes this is one of
trading’s greatest challenges. “Trading is a difficult human
endeavour, in the sense you have to control your thinking
“People spend far
too little time trying
to understand
what price is
telling them”
— 50 Pips
Opto Sessions #5
Sentiment
moves markets
Legendary investor Warren Buffett,
the founder of Berkshire Hathaway,
once said: “In the long term, [the
market] weighs all the fundamental
factors that come into play. But in
the short term, it is emotional, it is
a vote. It moves around quickly”.
and your emotions,” he says. He references martial
artist Bruce Lee’s quote that, “one of the best lessons
you can learn in life is to master how to remain calm”.
“Don’t get despondent when trades move against you,
and don’t get too excited when they are moving in your favour.
Be detached. If it doesn’t work out, that is okay. No system
will work [every time]. It’s always a matter of probabilities.”
“Do not get despondent
when trades move against
you, and do not get too
excited when they are
moving in your favour”
— Adam Robinson
Opto Sessions #53
Weather anomalies are not uncommon
No matter how well a trader follows their system and
remains calm, they’re always at the mercy of a power
greater than themselves. “I fundamentally believe that I
know absolutely nothing,” says Keith McCullough, founder
and CEO of investment research and online financial media
company Hedgeye, “and that the market knows most things”.
Adapting to ever-evolving
market movements
“It is my job to catch
up to the market and
stay with the market”
— Keith McCullough
Opto Sessions #82
12
The best traders leverage their
edge by researching, knowing and
understanding their strengths and
their ideal conditions – and then
choosing their trades carefully.
That way they know that when their
big chance comes along, they are
ready to strike.
McCullough, who has managed money at The Carlyle
Group’s hedge fund, Magnetar Capital, Falconhenge
Partners, and Dawson-Herman Capital Management,
opts for a multi-factor and multi-duration model to
forecast market activity. “Multi-factor is real-time price,
volume, volatility, and the volatility of volatility. That
model is my signal,” he explains. “I run it not just on one
duration, but on [multi-duration]: the immediate-term
trade duration, three weeks or less; the intermediateterm trend duration, which is three months or more; and
then long-term, tail-risk duration, which to me is inside
of three years.” This helps the contributing editor at
Bloomberg Television read the waves of the market. 
—Thomas Traversa
13
Sometimes it’s an instinctive feeling that
Traversa gets, which tells him it’s the
time to go. There isn’t any conscious
reasoning, it just takes trust
CHAPTER 4
“It is not about
going against the
current. It is about
finding a way to
play with it”
INTUITION
FIND YOUR FLOW
INTUITION
Maintaining a unique trading edge does
not require outsmarting everyone else
in the markets and diverging from the
pack. It takes knowing your advantages
and shortcomings
Maintain a unique edge
Outsmarting the professionals
Track your progress
Find a distinctive flow
Critically assess
An authentic advantage
As a trader you do need to find your individual flow,
your own trading zone. Hedge fund manager turned
podcast host, Ted Seides, says that each trader’s “own
authentic competitive advantage” is their best source
of finding ‘alpha’. “What is it that you do well, that you
know about, that other people don’t know as much?”
Seides, who headed his own multi-billion-dollar
hedge fund, Protégé Partners, for over a decade, and
whose podcast Capital Allocators has been downloaded
over 10 million times, adds, “you can be yourself and
get the outcomes that you desire, by figuring out what
that is and how you can pursue that in the markets”.
Leverage retail’s technical edge
“Some people are
wired in a certain
way that have
made them truly
exceptional investors”
— Ted Seides
Opto Sessions #126
14
It may be a challenge for retail traders to outgun resourceheavy institutions. Nonetheless, individuals can excel if they
pick the right strategy in the right conditions. “Where retail
traders can benefit is understanding what they know well
and their individual competitive advantage, and then trying
to figure out a way to express that within their portfolio” says
Seides, rather than being required to answer to boards
and other stakeholders as an institutional investor.
Moreover, price action trader 50 Pips suggests that
retail traders are better positioned to compete on technical
analysis than on the fundamentals. In the case of technical
analysis, both types of investors have the same chart and
“the indicators are the same for everybody”, he explains. In
contrast, when it comes to fundamental analysis, institutional
investors could have “teams of 50 people, or people with
“You learn what you
do well by trying
different things”
— Adam Robinson
Opto Sessions #53
hundreds of millions of dollars with computers far smarter
than you” all trying to identify opportunity and risk.
Indeed, Brandt, author of Diary of a Professional
Commodity Trader, agrees that being a ‘classical chartist’
helped his trading career take off. “It gave me a mechanism
for determining the timing of trades – when I get in and
where I get in. I think more importantly, it defined for
me where my risks were.” He cautions, however, that
an individualised approach is essential. “Charting is
probably not for everybody, but it is for people who think
in a certain way, who want to make sense of markets
and have some sense of the order of markets”.
Review your performance
One of the best ways to find a flow is to keep a detailed
record of past trades, to help review why things went right
or wrong. Robinson tells Opto, “when you enter a trade, it’s
very important that you be able to articulate to yourself why
you are entering the trade,” adding that it is crucial to have
an entry and exit condition before entering the position.
“You could write one paragraph, ‘I am entering this trade
because it is oversold, and there is evidence of buying in the
sector. I am going to enter at $51.50 on a buy stop and I will
exit with a 10% trailing stop loss.’” He explains that logging
these trades will help you identify what works for you and
refine your system going forwards. “Let’s say your sell stop
is hit on day two. Now you want to do a post-mortem. We
need to do that after every trade, win or lose. What did I do
right? What did I do wrong?” Learning methodically about
yourself, says Robinson, will give you the edge you seek.
Trust your instincts
15
An edge is a unique set of strengths that are characterised
by individuality. While a trader might categorise themselves
as following one general strategy or another, it can be
dangerous to blindly follow a strategy for its own sake.
“I usually invest in something that is ignored and cheap
and struggling,” says Beeland Interests Chairman, Rogers,
adding that this inherently aligns with the definition of
contrarian investing. However, he reiterates that this is not
for the sake of following a contrarian strategy. “I’m buying
the cheap, bankrupt company because I think it’s going
to be a good investment. I’m not sitting around saying, ‘I'm
going to be a contrarian.’ I’m looking for opportunities.”
For example, Dr Jeff Ross, founder of healthcareand technology-centred hedge fund Vailshire Capital
Management, recommends that traders seeking to
hedge during a bear market consider increasing their
cash position. “Most people feel the need to be 100%
invested all of the time. You don’t. One very wise move is
to increase your cash position, and wait until the smoke
settles and the dust clears, then jump back in.” More
advanced traders with the required trading privileges, the
former radiologist adds, could consider shorting equities
with a bearish momentum, or exercising put options.
“Just increasing your
cash position makes
a massive difference”
— Jeff Ross
Opto Sessions #125
Play to your strengths and weaknesses
An edge is only effective by knowing what it is, when,
and how to use it, and understanding its limitations.
“My edge is probably a combination of data and
risk management,” JC Parets, founder and
chief market strategist at technical analysis
research platform All Star Charts, tells Opto.
He reiterates the importance of being selfaware for risk management: “I want to know what
is going to prove me wrong”. Expanding on this,
Parets explains, “a lot of lessons that I have learned
the hard way keep me disciplined in terms of risk
management and understanding to check my ego
at the door. It’s very easy to say that, but [it’s harder]
to put that into practice and be disciplined.” 
“I’m not worried about
how high an asset
can go. I want to
know what is going
to prove me wrong”
— JC Parets
Opto Sessions #16
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16
76% of retail investor accounts lose money when spread betting and/or trading CFDs with this
provider. You should consider whether you can afford to take the high risk of losing your money.