In this episode of Two Traders Podcast, Darren and Walter focus on the different aspects of the trading game, re-examining your beliefs, why Walter’s traders have difficulty with over trading while Darren’s traders have difficulty pulling the trigger, and what you must keep in mind when trading Darren’s system.
Walter and Darren also talk about why how you find your profits with your system is entirely up to you.
Download (Duration: 16:58 /19.4 MB)
In this episode:
01:21 a really good point
02:57 different angle
05: 12 figuring out what you like
06:03 keep in mind
08:19 choosing trading strategies
11:04 seeds of doubt
14:20 adjusting your strategy
15:45 unspoken rule
We’re drawn into believing stuff so easily without really examining them deeply. [Click To Tweet].
If you want to squash the seeds of doubt, the best way to do it is to just do it. [Click To Tweet].
Be honest with yourself, see your mistakes, and try to correct them. [Click To Tweet].
Walter: The idea that you should be trading a certain amount of frequency probably is more related to your beliefs about trading and, potentially, even the approach that you take on your trading than in anything else…
Announcer: Two traders, Darren and Walter, pull back the curtain on profitable trading systems, consistent money management, and profitable psychological triggers. Welcome to the Two Traders Podcast.
Walter: In episode 43 of the Two Traders Podcast, Darren and Walter focus on different aspects of the trading game and talked about why this is. You’ll also hear why Walter’s traders have difficulty with overtrading while Darren’s traders have difficulty pulling the trigger. You’ll learn what you must keep in mind when trading Darren’s system and why how you find your profits with your system is entirely up to you.
You’ll also find out why you may not marry your dream girl and how do you know when to re-examine what you believe in in regards to your trading. Also, is there any proof with any trading systems? All these and more in episode 43 of the Two Traders Podcast.
…yeah, you bring up a really good point. It’s this idea that your traders who follow your system and have a hard time pulling the trigger. What’s happening is because of the basic structure of the system. It encourages a different way or, in a different way, it’s confronting.
Let me explain this in another wa. Because of the way I trade, and so much is in the emphasis on the setup, this leads to most traders looking for this setup and they just… “that looks good enough to me, I’ll take it.” That’s sort of thinking is overtrading. It encourages over trading in a way.
Most system is setup that way where “Look this is what the setup looks like, this is how you take it, and then you manage it like this, this is how you exit.” That’s normal. If you pick up a trading book, that’s what you’re going to see. If you pick up my trading book, that’s what you’re going to see. That’s the normal thing.
You’re approach is different because what you’re basically doing is you’re saying “no, it’s not really a setup. It’s just managing the ones that are winners essentially in the right way.” You take all of them and some of them are going to shake out and be good. You just want to make sure that those can be really, really good for you.
What that encourages is people become gun-shy because they say “Oh no! Here we go again.” You know what I mean? “Here’s another loser” or “is this going to be a loser?” or “I don’t know if I should take this one.”
What you’re saying is “look guys, you’ve got to take them all.” You take them all and some of them are going to shake out. It’s a very different approach. I can see why we’re coming at from different angles because I’m coming at from the “let’s analyze the chart and decide whether it’s a trade.”
You’re coming at it from the “Let’s take a trade and analyze whether it’s a winner.” basically. You know…
Darren: Exactly, yeah. I’m focusing on the exit and you’re focusing, I suppose, more on the entry. Every bar is a valid entry to trade in my system. Every time a bar closes, this is setup to enter.
Obviously, if you are already in a trade — if you’re on a trade long and then it set up triggers long — you don’t have to keep adding positions. Of course, though, you can do that. You can trade every bar then just banish the ones that wins.
My trading relies on price to move. If price consolidates, then that’s when you take the hits. I find the difficulty that most people have is if they’ve just had a winner and they’ve exit it and then they’ve got to reenter the market, they find that difficult. Likewise, if they had a loss or two losses on that chart ,then they’ve got to re enter on the next bar again and that’s when they fail. I suppose, you could say it’s loss of version.
Walter: Let’s say you have three losers in a row, in the back of your mind, don’t you think “well, I’m due now for a winner.” Is that something that comes into your thinking?
Darren: Very much so. What runs through in my mind at that point is I know that my systems work if I keep taking the entries. There’s an element on the exit as well. I need to make decisions on the exit but, essentially, if I keep taking the entry then my system keeps making profit. I’m basing that on my life trading as much as my background.
Walter: That’s right. That’s fascinating. When you present someone with this approach, what is it?
Like, if I were to come for you and say “Darren, show me how you trade. I want to see how, I want to do it like you do it.” This is the way to go.
Like you say, Darren, it’s so true. When we’re new, I was no different from any other trader when we first get into trading. Really, what we’re trying to do is like when you first get into dating.
You’re just figuring out what you like and you find “well, I really like girls who are pretty intelligent. I just can’t get with a bimbo or whatever it is.” You figure out what you like. Then in the end, you really know what you like and you know who you want to marry or whatever.
It’s the same with trading. You’re trying all these different systems, you’re figuring out what works. You’ll see who makes sense, what they have to say, and you maybe pay attention to them. Maybe you pay attention for a little while and then you leave, find somebody else.
In the end, you really need to settle on something that makes sense to you that fits your beliefs. That’s what you’re going to stick with.
If I were to come to for you, Darren, and say “Alright, show me what you do,” what would you caution me against? What would you say “Walter look, you can do this but you have to keep in mind: x, y, and z.” What would that be?
Darren: You have to keep in mind that you’re going to lose half of your trades. You have to keep in mind that you’re going to have to make a decision about how you want to exit your trades. You’re going to decide whether you’re going to hold your trades for longer, get bigger wins, accepts more losses or you’re going to scalp your exit so you’re going to take small wins but, your losses are going to absorb more of those wins when they come.
I warned against not being decided on how you want to, what exit strategy you want to use as well. On the point about… the point you made about dating, here’s — well I think differently. We might decide: do we like intelligent brunettes?
Generally, at the end of the day, most of us don’t get a lot of choice. I think a lot of people settle for it like the only woman who’ll take him, as well. We might believe that we’re picking the woman that we want when we’re dating. I don’t think that’s probably the facts of the matter.
Walter: You bring up a good point, what psychology has found with that. One thing that I remember, a study where they found that typically what happens is the men — like in the heterosexual relationship — the men get married when they’re ready to get married. It just happens to be the woman who’s there, who they’re with. And the women get married when they find the guy who ticks all the boxes.
In a way, they’re kind of always ready to get married. I know that’s a bit of a generalization. It’s not true on all women but, in a way, they’re kind of looking for the perfect guy. They’re just looking enough for the boxes to be ticked before those “yeah, I’ll marry this guy.”
Whereas, the men are just kind of like at that stage in life, “Yeah. Okay, I’ll get married now,” and there’s sort of suffering.
Essentially, what you’re saying is you’re agreeing with that research on the men’s side of things.
Darren: Well, yeah. When people pick trading strategies as well, they might see something that appeals. It might just be the first thing that they stumble upon and then convince themselves that “Yeah, yeah. I really believe in this. This is the way I should be trading.”
I wonder whether people are doing it back to front and rather than what we should all be doing, really. It’s just like I’m looking at the charts and say “well, if I’ll have to make a system from scratch, how would I trade this?”
Unfortunately, we already know about trendlines, support and resistance, price action because we read about them. That blurs the picture and leads people to convince themselves that: “yeah, this is how I trade. This is the sort of a trader I am” rather than just playing with it.
If you probably add a bunch of kids and sat them in front of the charts and tell them it’s a game and explain that price just goes up and down and you need to make money by the end of the day, you probably have some really interesting course strategy come out of that.
We’re drawn into believing stuff so easily without really examining it deeply.
Walter: Yeah, absolutely. It’s sort of the idea that, let’s say if I were to give you a Bible and just say “look, read this book” and you’re a nine year old kid and you can read but you have no context.
Then, if I were to ask you after you’ve read your Bible, tell me what you read. What you’ll hear in terms of the book report on that Bible would be completely different to the forty five year old who’s been raised in a church and knows all about the Word of God. It’s a totally different approach, isn’t it?
Darren: Yeah. That causes a lot of problems for traders and I do say with people who get my thing and they perhaps been trading very technically for a long time. If it doesn’t really suit you, do it the particular way you’re trading. At some point, you’re going to say to yourself “okay. Well, maybe I need to re-examine all of these things that I’m believing.”
It’s very difficult because there’s so little in trading with regards to strategy that is okay. This combination of technical elements together is going to work. There’s no like definitive proof on any of it. There’s always an element of discretion in it, if you like.
That’s always so in that little seed of doubt in there. You need to get to that place where the way you’re trading, those seeds of doubt are completely gone. When you get to that feeling, then you know you find your thing.
Walter: Absolutely. If I were to ask you — I know what I would say — if you want to squash the seeds of doubt and you’ve got these seeds of doubt, how do you do that? There’s a couple of different ways that I would say “this is how you might approach this”. I know they’re probably going to be different from yours.
Let’s say, someone came to me and said “Look, Walter, I want to squash the seeds of doubt. I want to make that I’m rock solid on how I approach the markets and how I trade.”
Well, I would say there’s a couple of different ways that you could do. One is, you can go deep in the forex tester and you can test this stuff out. It’s not going to prove to you that in the future it’s going to work but, given the data that we have here, it can go over the last twelve years and you can trade the system and see how it would’ve worked out. That’s number one.
Number two, you can get a demo account and you can get a demo account, you can trade the system so that you’re trading at real time you didn’t have any hindsight bias. You don’t know that there was — for example, in forex tester, you know that there was a GFC in 2008. You know there’s going to be a lot of runners there at the end of the year.
That’s a different approach when you’re trading demo. You don’t know what is going to happen in the future.
Then finally, I would say get a tiny account. Get a small account. If you’ve got fifty thousand EUR to trade, give five hundred EUR put in an account, trade it live and see what happens to that account. See how much confidence you can get when that turns into two thousand EUR.
These are the things that I would say to somebody. If you really want to squash the seeds of doubt, the best way to do it is to just do it. To me, it makes sense to take this training wheel approach. Start with a little bit, then you go backtest your live, then you go forex test, so forth.
That’s my bias. It’s a process that you can follow to squash those seeds of doubt. Other people might say, “Just follow me son. Come over here. Watch how I do it. Watch the doubt melt away.”
I don’t know if that’s really the way to do it. Doing it yourself is probably the better way but I’ve been encouraged by what you could help people with. What would you say? How would you encourage people say “look, this is how you squash the seeds of doubt.
Darren: I would say I agree with what you say about testing, kind of understanding how your system works in the market. One of the key things is you need to get brutally honest with yourself about why what were you doing already is not working and why you’ve got those seeds of doubt.
They’re probably coming because you’re making the same mistake over, and over again rather than adjusting so you’re not drawn into your mistakes, if you like. They try and persevere on and battle against it.
If you examine exactly why the systems isn’t working for you by looking at your past trades and the data from your trades and then adjusting your strategy to that, you can get to that place where you’re not dating the systems so much.
For example, let’s say you’re trading support and resistance and you’re trading for three/one, risk/reward. You should be making money based on what the charts have been doing but you’re still not making money or trading water.
It might be that, say, you’re closing your trades too early or you’re moving your stopper too early. Those kind of things you kind of mind blanks those out you’re actually doing that.
It’s only when you get really honest with yourself and see where you’re making the mistakes then you can start to correct them. It might be that you’re most suited to aiming for smaller win but you try to force yourself to be a trader who holds on to this trade.
You have to look at yourself and see what are the common mistakes you’re making. If you can remove those, then it can make a big difference.
Walter: Absolutely. A lot of those things you can trace back in your life, to other areas of your life I think to find those repeating patterns. We’ve talked about that before but absolutely, yeah.
Darren: Again, number one of the unspoken rules that you’ve gotten is you’re not allowed to change things too often and it’s really bad to change things.
If you’re consistent and you’re successful, then it’s different. If you’re struggling, then change something. Try something different this week, try a different exit strategy, try a different stop placement, and the week after, try something else as well. Feel your trading as much as be so academic and technical about it.
Walter: That’s a great advice. Alright, Darren, we’re ready to wrap it up here. What we’ve basically come to here is that the idea that you should be trading a certain amount of frequency, probably, is more related to your beliefs about trading and potentially, even the approach that you take your trading than anything else.
Darren: Yeah, completely. Personality.
Walter: Alright. Thanks for your time, Darren. See you next time.
Darren: Cheers, Walter!