Sometimes traders are like a fish that cannot see the fishbowl…. what?
In this episode of 2Traders Podcast, Walter and Darren talk about the psychology of cross-pollination and how critical this is to your evolution as a trader. They also share their most eye-opening interactions with other traders and how these actually helped them advance their own trading. Walter talks about his roots and what prompted him to try forex trading.
And, Walter answers probably one of the most frequently asked questions about him: why does he teach?
Download (Duration: 28:11 / 32.2 MB)
In this episode:
00:48 – own little corner
02:45 – one-way street
04:45 – slave labor
06:27 – ABC of trading
09:50 – fast forward
11:29 – Einstein’s secret
13:35 – other research domain
16:02 – a dead end
18:40 – Stochastic pop
20:34 – most glaring one
22:36 – powerful idea
23:45 – around the world
26:55 – exotic location
Darren: I think if you can change that, have a bit more of a humble mindset and view of yourself then, that helps massively as well…
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 to the Two Traders Podcast. You are listening to Walter Peters and I’ve got Darren on the line. Hello, Darren.
Darren: Good evening, Walter.
Walter: We’ve got this question which is I think probably in the back of many trader’s mind which is — essentially this, you decide it for yourself out there, I’ll decide for myself out there. The question is, if you are such a great trader, why aren’t you just go stand in your own little corner and make all these money all by yourself? Why share it? Why talk about trading, teach trading? Why do you do that? That’s the question.
Darren: Okay. Am I going first on this one?
Walter: No, I can go first. I am happy to be first.
Darren: Yeah, you go first.
Walter: Yeah, sure. So, first of all, couple of things. When I first started trading, there was one book about forex and it totally sucked. Later, I found out on my friend who met that guy, he didn’t even really trade.
I understand the question, I get it. Here is what I will tell you about what I’ve learned and this is only in the last two weeks, and this is directly because of the fact that I interact with traders everyday.
In the last two weeks, I’ve learned of an automated system that I never would’ve traded in my life, ever.
But, because a friend shared it with me, who was one of my first students and he’s been doing it for five years, trading the same automated system, it’s completely changed my approach in how I see trading and that’s a direct result from having, interacting with students.
Number two, I’ve met traders that have completely turn around some of my assumptions about trading through the mentoring process. I get emails almost everyday — and I can’t honestly say everyday — but almost everyday, certainly every week from traders who are like “Thank you so much. Blah, blah, blah.” “This is what happened when I started doing this and blah, blah, blah.” And, “simplify my charts” and stuff like that.
These are traders I didn’t even know but are just watching videos or stuff or they’ve read the book or whatever. It’s hard for me to sit here with a straight face and say, “Yeah, any trading guru who says take a look at this, try this. Maybe you should do this.” It’s not a one-way street at all and that is just not the way it works.
Now, one of the interesting things about it is when you worked with traders oftentimes — the really, really good ones — when they hit it, they won’t really say much. They’ll just go and they’ll take off.
Sometimes, if you ask them they’ll tell you what’s going on but sometimes they’ll say a formal goodbye and everything. I’ve got one of those two in the last two weeks which is great because that is part of the mentoring process.
Really ,what the mentoring process is — and I learned this in Psychology because it was fascinating. I didn’t know that this was true but, typically, what happens in a mentoring process is the end result, the goal, should be that the student believes. The student can do the skill better than the master and then the student cuts off the relationship. That is like the normal ending to the mentoring relationship.
I think some mentors might take offense to that but because I knew that, what happened going into it, it’s cool when people graduated and do things like that. I’ve had opportunities to trade with traders who I consider much better than me in terms of pure results and that’s all come from working with students.
I’ve met some awesome people around the world. I’ve visited a lot of traders and I find it really fun to not only give what I can — which by the way, for me the whole reason why I even started doing this was my broker called me up and said, “What are you doing?”
I explained it to him and he said, “Wow, that’s interesting. Do you want to do some webinars for my clients or whatever?” And I said, “Yeah” and it steamrolled from there. And he said, “Do you want to do a book? Do you want to do blog post for my website?” and stuff like that.
So, that’s how the whole thing started for me. It was like that and I have to admit, I do enjoy teaching because I had the bug when I was a graduate student in the United States.
I don’t know if you know how it works in the United States. Maybe it’s the same over there in the UK but, essentially, they use slave labor, Darren. They use some graduate students to do the teaching in a lot of courses in the universities because they’re cheap.
Instead of hiring a professor to do it, they have graduate students and I did it and I totally suck the first year. Like stunk it up awful bad and slowly learned how to teach, get a little bit better at it, I think, as we went.
You’ve got these evaluations so you’ll know what the students think about you at the end of the year. It’s too bad when they do evaluation earlier on so you’ll know that you stink but, anyway, I have to admit it’s fun for me to teach as well.
It’s opened up a lot of opportunities. I’d completely changed my trading in many ways because of the things, the ideas. So, it’s a cross-pollination process and I never claim to be the best trader anyway.
So, that’s all up. That’s my take on it. I’d be really interested to hear sort of what you have to say about this. I know this is on the back of a lot of trader’s mind. Why are you doing this? What’s going on? What is this all about? What’s your deal?
Darren: I agree with you on nearly all of that, Walter ,and I think often the question comes from a point of view that trading is solely about money. I think that is wrong, for a start, because if you’re going to do something as a career and long term, if it’s purely about money, there’s very few people with this sort of personality that can enjoy that and maintain it.
Also, there’s this assumption that when you mentor or teach or maybe run a website, then you’re saying this is ABC of trading and it will generate this amount of profit and this is the way to do it and every other way is wrong.
It’s not necessarily always about a strategy or such. It can often be about a different point of view of how to approach the markets. It could be a different way of looking at trading that you’re sharing with people and then the idea being that then within that group, people will go off in tangents using that core idea and develop strategies from that.
I think any good trading method will have different ways to apply it. You can have a scalping version but you can have more of a swing way of trading it. For me, personally, it is more about saying this is a different way to look at making profit from the movement of price.
I am not really going out there and saying to people this is what you have to do on this pair, in this way. That is how you manage your entries. I don’t really want to do that because we both know, most people know that is very difficult to do because very few strategies are simply A, B and C.
There’s a certain amount of discretion in there and I much prefer to have a broad way of looking at the market and then getting together with mainly experienced. It doesn’t have to be experienced traders. I think new traders, as well.
It’s more about nurturing the idea and seeing where people can take it. From that process, I’ve certainly learned probably as much as anyone who I’ve been sharing my ideas with so I am with you on that. It is a two-way street, definitely.
Also, I am really strong on this thing about it not being all about money. I don’t want to just be a trader and get rich. I want a bit more to my life than that. And also, me personally, I’d feel slightly uncomfortable if my only income and my only way of making money was to be a trader because I also know that you can do really well for a long time.
A lot of traders who’s been around for years and years, they’ve had periods where they’ve done really well and periods where they’ve given money back and then how to evolve and perhaps change their strategies or diversify their strategies.
To be so narrow-minded, I don’t think in this sort of field is advantageous. I am very much more for sharing ideas and working with a light-minded group.
Walter: That’s interesting. Here is a question for you. Given what you’ve said about that, what do you think is likely to happen? Like say, you’ve got two traders. Hypothetically, we’ve got one trader who trades maybe 6 hours a week. That is his trading time that he’s set aside.
However, he divides it up. He’s got 6 hours and he trades and then he’s also like, plays polo or something. He is really into polo and maybe has a side business related to polo. I didn’t even know how you’d make money renting horses or something.
Anyway, and then you’ve got another guy. This guy, he trades 60 hours a week and that’s all he thinks about. That’s all he does. Fast forward ten years — and for those of you that are too young to know what fast forward means — do you remember the old cassette tapes, Darren?
Darren: Yeah. I do, unfortunately.
Walter: Me too. I remember 8-track. We used to have an 8-track in our car.
Darren: Cassettes are really back in vogue now, mate.
Walter: Really? Are they?
Walter: Oh, that’s awesome! I’m sitting on a bunch of money. Anyway, fast forward to ten years, who would you rather be? I’m asking you, Darren. Would you rather be the guy who has a really strong outside interest, who doesn’t do, who doesn’t spend every waking hour looking at the charts, trading? Or, the guy who’s just totally jump in with both feet and… Ten years later, who would you rather be?
Darren: Obviously, me personally, I’m quite… The word is a “neophyte” where it means that you like the new and you like change. So, if I did one thing, it wouldn’t really work for me. Also, we did in a previous webinar — long time ago — we did a thing about when they study it, study the people that became geniuses and they found that the people who really excel tend to have much broader interest and broader knowledge.
So, the best Mathematician didn’t weren’t just interested in Math. They were interested in other things. You could also argue that the person with interest outside of trading has put him in a position to be more successful as well.
Walter: Right. That was Einstein’s secret thing because he really likes the ladies, didn’t he? That’s what I’ve heard. I do not know if it’s true but that is what I’ve heard about Einstein.
I remember that episode. You run a really good point. I wasn’t aware of that research but it makes sense. I mean, I guess it’s obvious that you’ve kind of setting up the straw but I suppose my only point would be these guys… For the listener, maybe when you’re new to trading, it can really suck you in and envelop your whole life.
I think the long haul, if you look at the big picture, look at the long term point of view, you’re probably going to be better off being a little bit more balanced, as Darren said, and that’s probably going to help you too.
One of the things that I found fascinating about sort of being in academia for so long — because I’ve essentially been in academia for 8 years or something like that, 8 or 9 years. What I found fascinating and I just couldn’t get it was that you would have these people — so these are really smart Professor — and they’re doing this research, devoting their lives to writing these studies up and writing them in journals that nobody ever reads but that’s their life and it’s really important to them.
What I found fascinating was how often there would be some idea in another field or even just somebody in the same field but in a different division. For example, in Psychology, we have people, say in Developmental Psychology which is how people change over time, different stages of life and things like that. It’s not necessarily just children but developmental could be the whole life span.
And then we have Neuroscientist who look at the brain and look at what’s going on in the brain. A lot of times, there were issues that would come up that the Developmental Psychologist will look at one way and then Neuroscientist will look at it completely in a different way.
These people would literally cross each other in the hallways and they weren’t aware of how valuable the ideas were from the other sort of research domain. You know what I mean?
The reason why I bring this up is because that’s what happens. I think it’s exactly what you’re talking about before from the previous episode which is sometimes what it takes is just a slightly different angle, approaching it from a slightly different angle.
That is what you get when you have other traders, when you’re interacting with other traders, when you see them and I think you’re basically touching on that point too. Which is even if you don’t have a community of traders that you belong to — which I think you should but if you don’t — at least find one trader that you can talk to every week and bounce ideas off of and see it from their point of view.
Present stats and ideas and things to another trader because if you don’t do that, then you’re probably not going to see those really obvious ideas that the professors don’t see when they walked by each other in the hallways.
They are not aware. Some of them are, some of them are making effort to learn about what is going on and what other people are doing in the same department. But, other people don’t and they do not reap the benefits of seeing it from another theoretical viewpoints.
I think that is really a critical part of this and it’s underrated. The fact that you can get so much out with interacting with other traders. It doesn’t have to be the focus of your trading. It can just be a little side dish. It can be a side dish but it can really add value to your trading and how you see things. So, I think it’s pretty cool.
Darren: Yeah. And, those good ideas, they often come from people involved in different fields, don’t they? If you’ve got all the top technical analysts together in a room, they’re not going to come up anything new.
You need that new input and you’ve got to go to it with the right mindset that just because somebody has perhaps got less trading knowledge or experience, doesn’t mean that they’re going to have a bad… It doesn’t mean that they’re not going to come up with a good idea.
I think that it’s the whole mindset of being open-minded and that there is just so many ways to approach this. If you’re just going to follow all of the rules that everyone agrees on that it’s written in all of the books, you’ll just find yourself in a bit of a dead end.
It’s really difficult to do that as well. It is really difficult to listen to people who’ve got ideas that jive with one element of your approach and honestly look at those ideas with an open mind.
I found it all the time that when I make real improvements with my trading, it’s where I take something that I’m being a 100% this-is the-way-to-do-it. I just keep on, you know, “This person keeps saying to me about this other way of doing it. I’ve got to look at it”
I’ve often made real improvements to my trading by doing that and it took me a long time to get there. I think a lot of us are quite well-educated and perhaps we think we are smarter than we are and it’s very easy to get into that trap of being, thinking we’re a lot better than we are and it should be easy for us. If you can change that, have a bit more of a humble mindset and view of yourself then, that helps massively as well.
Walter: I think that the thing that you’ve just said that really resonates with me is this idea of doing things like everyone else does. That is why I think it’s weird that people go and get certified for trading things.
I understand why they need to do it but it’s weird to me that you can go and take a course and sit for a license and they’ll say, “Okay, now you’re a certified Technical Analyst” or whatever.
To me, the underlying assumptions of that is that means everybody, when they look at the charts, every body should really understand this is how you read Stochastics or whatever.
That’s just weird to me. It’s like that idea came from somebody who’s not a trader. One of the real life eye-opening things for me that I read early on was… There’s this book called — I probably haven’t read it in ten years but I still have it and this book is called — I think, it’s called “The Compleat Day Trader.”
The Complete Trader or The Compleat Day Trader — I’ll put a link in the shownotes for you guys — but, you know what he said? Jake Bernstein was his name, who wrote it and he said, “When the market goes over…” So, I was looking at Stochastics at the time.
What happens is a lot of people will see if it’s oversold, then they’ll buy and if it’s overbought, then they’ll sell on the Stochastic because it’s an oscillator. It oscillates up and down and it breaks down when the market is trending in a strong direction. But, what he would do is he would actually do the opposite.
Soon as the market got to overbought, he would buy because what he noticed is there is often still a really strong — he called it the “Stochastic pop” and the market would pop in the direction that it has been going and go a little bit farther.
So, he’s just trying to get that little extra move that the market often made and he did that when everyone else is scrambling to sell. I found that fascinating. I thought that’s really clever. I tested it and it worked.
It worked much better when the market was breaking down and out of a sideways range but it still could work. I understood the logic behind it and everything. I thought that was really interesting but I can guarantee you if you were to sit for some sort of trading certification, that is not what they would teach you.
They would teach you that, “Okay, that’s oversold so you buy.” All that sort of thing. That is why I think it’s weird. It’s just so weird to me that everyone needs to get in a box and learn the same thing and came, “Now you’re a trader”. That’s weird.
Darren: Yeah. And, if you look at the facts that the majority are losing, you don’t want to be in the majority. It’s the same moving average where people say, “Well, I used the 200 period moving average because everyone looks at it”.
Well, I’d be thinking I’ll use the 172 period then because nobody is looking at that. I want to be the 1%, not the 99% looking at the 200. It’s just these assumptions that those elements, there’s difference. It’s much more subtle in that.
Walter: Yeah, I’m with you on that. I just want to ask you a question. What is the one thing that you can say it happen from your interaction with traders and working with traders? You can say, “Wow, I’m really glad that I learned that”?
Is there one thing that stands out for you? That you’ll say, “Wow, that’s amazing. I am so glad that I learned that and I don’t know if I would’ve learned that had I been in my own little corner, reading my books and all on my own. I’ll probably would’ve not run into that.”
Darren: I’d say two things. One, the most glaring one is that everybody makes the same mistakes regardless of the experience and background and how they’ve come to trading. Everybody tends to make the same mistakes.
So, for me, it was looking at those mistakes and thinking. “Right, forget about everything else, the technicals. Let’s deal with those mistakes. Take those obvious mistakes out of my trading first.”That was the first one.
As an example, closing trades too early. It became obvious to me that if everybody has got this mistake, the majority were losing. This is a big issue and if you can sort that out, that should make a big difference to your results. So, that was the first one.
The second one, basically, talking with you and you continually going on about your different opinion on second position size. I ignored it for about a year and then I looked at it and it’s improved my trading. Those are the two things.
Walter: That’s funny, that’s cool. I have two that I like that I’ll point out too. One of them has basically come from your ideas which is that you don’t really need to spend a whole lot of time over-thinking the reason why you’re getting into a trade.
That doesn’t have to be the focus so that’s a really strong idea which I believe is the core of your trading, at least as I understand it which is, “Look, you’re overthinking it, you don’t need to overthink the entry”.
The other one is that I was aware of this idea ten years ago and I understood 10% of it but now, working with students, I’ve learned that you really can advance your account quickly if you just make sure that you’re adding to your winners.
To me, that is such a powerful idea because so many people are focusing on the win rate. How do I get my win rate out of this and that when really what I think they should be focusing on, at least — not everyone but many traders — is on answering the question, “how do I get more out of my winning trades?” rather than “how do I get more winning trades?”
You should ask yourself how do I eat more out of my winners and that basically it boils down to adding to your winners. When you’re on your winner, really take advantage of it. Those are the two and you don’t necessarily have to add more risk when you do that. That is the other part of it which is the real kicker.
For me, those are the things that I would say are probably really stand out and it’s fun. I mean, I think it’s fun to have, to know that if you’re in another country, there’s a trader there that would open and say, “Come on over, let’s talk and hang out at my place. I’ll show you around” or whatever. You can do that.
When you are part of a trading community, you can do that. You can go to different places and meet traders and stuff. There’s so many places around the world where I could go and literally say to one of the traders that I know, “Hey, I’m in your city. Do you want to hang out?” or whatever.
That is a cool thing because growing up, I never thought I would get a passport. I was a typical American. I was really introverted. Two things have opened up my world. One is surfing, which part of surfing is travelling to different waves and things like that. But, the other part of it was trading and opening me up to different ideas, from people in different countries and stuff.
I really find it fascinating how my life has gone. If you would ask me when I was 10 or 12 or teeny, I would probably have saidI probably stay where I’m at, not go very far. It’s pretty good here” you know what I mean?
That’s what I would have said but instead, surfing and trading have opened my world so it’s been pretty cool.
Darren: I think at 10, I was already adamant that I was going to leave where I was.
Darren: Yeah, I was the opposite. I wanted to get away, I want to move.
Walter: See? It’s interesting. It’s like the fish, you can’t see the fishbowl. Where I grew up in California, every one talks about how great it is. It’s almost like you get brainwashed, like this is the greatest.
Darren: I’ve noticed that a lot with Americans. I think they’ve gotten that culture where it’s drummed into you to say, “Look, America is great. We’ve got everything here” And you have, really, and so why do you want to get a passport and fly to another country?
I’ve noticed other traders I know from New York who really leave America. I’ve always try to get to come to Thailand saying, “Come to Thailand, we’ll hang out. You’ll love it. It’ll blow your mind”. I might get on the key West or something.
Walter: That’s funny. It’s so true/ You get this, you get drummed into your head that you live in the greatest place. Why would you ever leave? In fact, just the other day, I saw someone post a picture on Facebook from back where I’m from and then I was like it’s tough living here, sort of thing and blah, blah, look how beautiful it is. This is why I never leave. And for me, travelling opened up.
I wouldn’t have moved to Australia if it wasn’t for trading. The reason why I moved to Australia was because I wanted to see the London open and I didn’t like waking up at 1 am every night to do that. It’s fascinating.
Darren: I find out about trading when I was travelling. If I haven’t gone travelling, I wouldn’t have seen someone trading and ask him about it. I was in that environment where you’re being sociable and talking to people. Going out to strangers and chatting to them and finding out what they’re doing, I wouldn’t have done that.
Walter: That’s fascinating. Maybe in the next episode, we can talk about how you’ve gone into it because I don’t know that story, Darren, and that is interesting. I’d be interested in hearing into how you’ve bumped into a trader in some exotic location and you’re like, “Oh, what are you doing on that computer?” or whatever. I think that would be interesting. I think it’s time probably to wrap up this one up.
Walter: So, any closing thoughts? I just think it’s important, guys, to know that you could get a lot out of interacting with other traders. However you decide to do that, even if it’s just getting one trading buddy, doesn’t have to be a whole community.
I think the cross-pollination of ideas is really critical. Well, it’s critical on Science, it’s critical on your development, it’s critical on trading and you just won’t get outside the fishbowl if you don’t do that. It could be a really fruitful area for you.
Darren: Excellent podcast today, mate! I think it really strikes to the core of how you can make improvements to how you can actually get better at trading. Just the ideas, the things that we’ve got from working with other traders, there’s enough in that to build a lot of systems in itself. Great podcast tonight.
Walter: Cool. We’ll see you next time, Darren. Thanks for your time.
Darren: Cheers, Walter!