In this second installment of “The Intuitive Trader”, Walter and Darren unlock three doors to improving your trading psychology and why most trading forums give little importance to this. Darren tells us why most traders get the wrong evaluation of this one critical trading element.
And, why do the first $100 Million account look so different for many traders? You will also know two different authors and how their ideas contrast interesting trading concepts for you. More of this in this episode of 2Traders Podcast.
Download (Duration: 16:08 / 18.4 MB)
In this episode:
01:14 – one critical aspect
03:04 – points and rules
06:11 – chopping wood
08:33 – self-examination and Psychology
10:50 – execute flawlessly
12:18 – give up and walk away
14:16 – path to riches
Walter: …I can’t imagine being in that situation where you are so close, you’re right there and then you just give up and walk away. Just seems crazy to me but, I suppose, that’s the sort of standard experience…
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: Welcome back to the Two Traders Podcast. It’s Walter here and this is what you’re going to hear in Episode 93 of Two Traders — which is of course, Part Two of the Intuitive Trader. Why the first $100 Million account is so different for many traders — this has nothing to do with trading liquidity.
Three ways to improve your trading Psychology, we’ll talk about that. We’ll also talk about why most trading forums have this type of Psychology subsection on the forum and this is almost universal across the board on the internet, you’ll see this.
How you can tell what trading stage you’re in by looking at this one thing. And, Darren shows you why most traders are wrong about estimating this one critical aspect of your trading.
And finally, we’ll reveal to you two authors that you should definitely be aware of. If this highlights some of those interesting concepts regarding trading intuition for you, uou should definitely be aware of these two authors and will post these links for you, as well.
All of these and more in this Episode of the Two Traders Podcast.
…In theory, I think it’s psychological, it’s what you’re saying. Some traders, if they are compounding their account, they might get to a certain size where they’re just uncomfortable and a lot of traders — and I do this — is, can you look at the trade? Can you change your platform so that you don’t see the money fluctuations in your open positions? Instead, look at it from a sort of a pip point of view or points point of view so you’re not… You’re looking for, you’re playing this as a game and you’re just looking for how many points am I going to get out of this trade because there is that block for a lot of traders.
I know several traders that can build an account up to a certain level then they hit the rails, that’s it. They’ll run into a wall, they can’t get beyond a certain level so they have to keep doing the same thing over and over again. And, that maybe the case where if you’re trading a certain size or you’re managing money or something like that, there’s that mental block where you did really well when you’re trading your $20,000 account but all of a sudden, you’ve got the $6,000 or this 2 Million dollar account and the risk on each trade that 1% risk is enormous and each pip is worth a lot.
I think it helps if you can remove that, best of your ability, remove that money from the equation and don’t think about the trade in terms of what’s it worth now in money but rather the execution and focus on the points and the rules and the strategy itself.
I know it’s hard, it’s easy to say that, but I’ll never forget my friend, Colin. When he first started trading with the fund, they didn’t actually tell him how much he was trading but it worked out. He eventually learned that he was trading 750 Million and he was like, he said, “Every pip was a Ferrari,” or something like that.
It just messed with his head that he would trade these pips. It would take up and take down. The amount of money that was moving up and down was just blowing his mind. That is why they try to hide it from him.
It’s one of those things were I think where being aware of your ceiling too is an issue. Where is that come from? Do you have a ceiling? Is there a certain size account you’re comfortable trading with when it gets beyond that you don’t, you’re not comfortable? What’s the solution for that? Do you break it up in a multiple accounts? Do you build up an account to a certain amount and start all over again or do you work on those beliefs?
All of that comes into it, in this being self-aware. The novice traders thinks, “Oh! Well, I’d love to trade a $300 Million account.” That’s awesome but then once you get there, once you get to the point where you’re trading much more you thought you would, it changes it because you’re not looking at the same thing.
When you’re trading that system in forex tester, you’re looking at you’re trying to execute strategy and now that you’re trading all of these money, it becomes more about the money. I think that’s a big one for people where they just don’t get it.
Some traders are fine with that. They pull out the money every week or every month and then they start all over again with the same account balance and they do not compound. That’s cool. If that’s the way they want to approach that, that’s cool. They’re aware of that. They understand that that’s an issue for them.
It’s a tricky thing to get through if this is — I think a lot have this. We all have this ceiling that we’re comfortable. Going beyond that level is uncomfortable for a lot of traders and so to me, the question is why?
Darren: Are these issues because certain people just have the right psychological makeup before they start trading or is it a case of the people who deal with these issues best are basically put more time and study and basically worked on their Psychology? Or, is it just a natural? Some people are naturally more gifted in this element of trading?
Walter: I think that the vast majority of people run into a ceiling. Ninety nine point five percent of the people will run into a ceiling. Although I will allow that, I believe it could be cultural. What do I mean by that? There are some cultures where there’s this focus of just doing chopping wood, just doing the task. Focuses at the task at hand.
I think those cultures have an advantage when it comes to trading because that’s the key. I’ve said it before. I’m a strong believer in this idea of trading like it’s a game of strategy and not trading because you want to make enough money to buy a house.
These are the sorts of things where people get into trouble so, to me, I’ll agree with you. I’ll say which I think is where you’re getting at. Working on yourself is the key. Working on yourself, becoming self-aware using things that makes sense to you to uncover your issues and trying to create a better mindset for success, that’s the key. But, I will allow that. I suspect that in some cultures — and I’m talking about those cultures that have this approach of just focusing on the task at hand.
That’s the real central theme in that culture. I think those guys have an advantage, I do. And, perhaps, people from cultures where you grow up in an environment where your family gives you a lot of self-worth and tells you that you’re worth it. That is another thing that I suppose could probably help because a lot of what’s going on with traders is they feel that they’re not worth it.
They are not worthy of that much money or they’re not worthy of that much profit or they’re not worthy of trading an account that large so they self-destruct. That could be an element too, I suppose.
The only way of discovering those feeling is, like you say, work on yourself and work through it. Another really cool tool is to have a trading buddy that you talk to or record your trades. Record your thoughts of the trades or write them down like you do with your journal.
These are ways that you can get another perspective, whether writing it down, recording a video. You can use Jing, I’ll put a link in the shownotes for people. That’s a free tool where you can record videos and save them so that you can go back and look at your approach.
Having a trading buddy that you talk to every week, who can go over your trades, is another way to be accountable and for them to give their perspective and say, “Do you ever notice that whenever you do this, this seems to always happen to you?” These are the sorts of things I think can work for people.
Darren: Do you think this is the hard thing for people to do and grasp? This idea of self-examination and Psychology has been around for quite a long time and there’s a lot written about it but it is not popular.
Do you think this hard for people to believe in that it has as much effect as it does?
Walter: I think it depends on where you are coming from. I think in a place like United States — we have these people like Oprah or whatever — self-help religion, really. It’s well established in the culture but maybe in some place like South Africa it’s not that big of a deal. People don’t look at it. Maybe in Vietnam, it’s not part of the culture to look at it that way.
Darren: If you’ll look at the most popular trading forums, the Psychology section is always the smallest and always the least active. Why is that? Is it just because we’re generally lazy or is it because we’ve just go on belief that regardless of all the study, no matter what we know, people just prefer to believe that there is not that big of a deal. What’s going on there?
Walter: That is a great question. I’ve surveyed thousands of traders and I have these data and I asked them, what are you interested in? What you said fits perfectly with the data that I have. Not everyone is really interested in the Psychology but I have a theory.
My theory is that it’s something that comes up when you reach a certain level in your trading. In other words, focuses on the system when you first start trading and then later on, the focus shifts to you, into your Psychology. That is the later stage of development, that is my theory.
Traders interested in that are more advanced traders and they hit the point where they’re not so focused on the perfect pattern or the perfect exit or neither of that stuff. They are at that point where they realize that they can earn money if they execute their system flawlessly but they are not doing it for some reason. Something is getting in the way,. They’ve come to the conclusion that it is them. I think, they are right.
Darren: This is why all the studies suggest that it takes longer to become a successful trader than we believe because you don’t get to that point where you can put it all together with you as being part of the system, if you like.
I guess that’s what’s going on. Most people quit after a year, two or three years and they do not get to that stage where they can put the cherry on the cake.
Walter: It’s true. I think that’s part of it. It’s part of the deal. It’s almost like you know that guy — I don’t know if you’ve seen that movie “Into The Wild” where there was a bridge that would get him over that river just down the road. He wasn’t far from survival.
He literally had a way to get out of his situation. It was less than a mile away but he didn’t know. He didn’t realize that it was there for the taking but instead it was a tragic story. He died.
I suppose that’s the same thing. I mean, I believe you when you say that most traders give up or quit or whatever. I can’t imagine being in that situation where you are so close, you’re right there. You’re right there and then you just give up and walk away.
It just seems crazy to me but I suppose that’s the standard sort of experience and so I would say, that’s tragic. That’s tragic to be so close to want it so bad and be so close to your goal, to getting to where you want to be and just throw your hands up and say, “It didn’t work out. I am going to move on to flipping properties now or whatever.”
Darren: It’s like not being able to see and wait for the trees scenario. What you’ve said earlier about having a trading buddy, I think so many of us just trade even. We might be part of a trading group or something are really sort of deep examination of what’s happening with our own trading. It’s kind of paid over and people seem to resort to just post an entry and trade results rather than any sort of deep examination of how they’re trading and what they’re doing.
A lot of people would get a lot better if they have someone who they have physically in contact with once a week. They sat down and talk through the actual trades and that person is saying, “Well, you know what happened there. You should’ve hit TP there and you didn’t. What happened?” You’re kind of posting those difficult question that we probably don’t like to post ourselves where we don’t really do in a sort of an online media feed.
Walter: Absolutely, no doubt because the focus is on the system. Like, everything that you’re told in trading is about having this magic system and just this magic black box. The magic way to find the path to riches, everything is so focused on that.
It just seemed so obvious. It was such an easy thing. You press a few buttons and you’ll find your way. But, it turns out, that’s not really the story, is it? It’s about dealing with what you have inside your head, in getting over that first.
To wrap up, I would say, journaling — I know you’re a big fan of that — recording videos of your trades, having someone to talk to and sit down every week to go over this stuff, those are really important tools that you use.
I’ll also post some books down there if you guys are interested in the subconscious research. There’s an author that I’ve find fascinating. I think his work in this area is quite good and he has several books and CD’s and stuff like that. If you want to listen to them, that would be another resource. What about you, Darren? Any other thoughts on this?
Darren: I really like Michael Mauboussin. I really like his books because if you’re not really heavily into Psychology, he puts it over in a way that it’s really easy to take on and understand. I’d look for some of his books and there’s some Youtube videos out there as well.
Walter: Okay, great. We’ll link those up on the show notes too. Michael Mauboussin. Anything else?
Darren: That’s it for me, mate.
Walter: Okay, cool. Great! Thanks so much for your time, Darren. We’ll see you next time.
Darren: Okay, Walter. Nice talking again.