The Secret Mind Tricks of a Trading Legend
Summary
TLDRThe video script discusses the importance of developing the right mindset for successful trading. It emphasizes that normal thinking does not lead to profitable trading and shares personal experiences and lessons learned from the trading world. The speaker highlights the significance of understanding one's psychological weaknesses and the need to learn from failures. Drawing from examples like Rafael Nadal and Roger Federer, and referencing Rudyard Kipling's poem 'If—', the talk encourages humility in the face of both triumph and disaster. The speaker also challenges the common focus on technical analysis and advocates for deliberate practice, setting specific challenges to improve trading skills. The talk concludes with the idea that slow, consistent progress is better than no progress and motivates traders to think differently to break out of the 90% failure rate in trading.
Takeaways
- 📈 Develop a trading mindset: Focus on the mental and psychological aspects of trading, not just technical analysis.
- 🧠 Understand normal thinking's limitations: Recognize that typical thought patterns may not lead to profitable trading.
- 📉 Learn from losses: Embrace failure as a learning opportunity, similar to how Kobe Bryant approached his missed shots.
- 📚 Review past trades: Analyze old trades for valuable lessons, treating them as 'diamonds' for improvement.
- 🎯 Set specific challenges: Engage in deliberate practice by setting specific, challenging tasks to improve trading skills.
- 🧘♂️ Mindfulness and self-awareness: Be conscious of your behavior and thought processes to avoid self-sabotage.
- 🤔 Analyze psychological weaknesses: Spend time understanding your own psychological barriers to better trading.
- 📉 Accept uncertainty: Learn to tolerate and perhaps even celebrate the inherent uncertainty in trading.
- 🚫 Avoid complacency: Regularly remind yourself of past mistakes to prevent repeating them.
- 🏋️♂️ Maintain physical health: Ensure adequate sleep, exercise, and nutrition to support the energy required for deliberate practice.
- 📖 Continuous learning: Commit to a continuous process of learning and self-improvement, adapting strategies as you learn more about the market and yourself.
Q & A
What is the main theme of the talk?
-The main theme of the talk is about developing the right trading mindset and how to train oneself to become a better trader, emphasizing that normal thinking doesn't lead to profitable trading.
Why did the speaker believe that normal thinking doesn't lead to profitable trading?
-The speaker's belief stems from his experiences, starting 21 years ago at a brokerage where he encountered a client's flawed logic in trading based on perceived low stock prices, and from studies like the one by Rodriguez from FXCM that showed clients had a high success rate but still lost overall due to poor risk management.
What is the significance of the story about the client who owned pharmacies and his interaction with the speaker?
-The story illustrates the common mistake of buying stocks based on the misconception that a falling price equates to a 'cheap' buy. This was a pivotal moment for the speaker, highlighting the need for a better understanding of market analysis beyond superficial indicators.
What is the '10,000-hour rule' as mentioned by the speaker?
-The '10,000-hour rule' is a concept popularized by Malcolm Gladwell, suggesting that to achieve mastery in a field, one needs to practice for around 10,000 hours. However, the speaker emphasizes that it's not just the time spent but the deliberate and focused practice that leads to expertise.
How does the speaker suggest traders should approach their practice?
-The speaker suggests that traders should engage in 'deliberate practice', setting specific challenges for themselves to solve and learning from their mistakes. This approach helps build neural networks and leads to improvement in trading skills.
What is the importance of mindset in trading according to the speaker?
-The speaker emphasizes that mindset is crucial in trading, with a general consensus that it contributes to about 75 percent of successful trading. It's about being able to follow a strategy and learning from both wins and losses.
Why did the speaker consider the study by Rodriguez from FXCM significant?
-The study was significant because it analyzed the behavior of 25,000 clients over 15 months and 43 million trades, revealing that despite a high success rate in identifying winning trades, clients still lost overall due to their inability to manage losses effectively.
What is the role of self-awareness in becoming a successful trader?
-Self-awareness is key to understanding one's psychological weaknesses and improving trading behavior. The speaker argues that knowing oneself makes one a better trader and person, as it allows for the development of strategies to counteract natural tendencies that could lead to self-sabotage.
How does the speaker relate the poem 'If—' by Rudyard Kipling to trading?
-The speaker relates the poem 'If—' to trading by highlighting the importance of treating triumph and disaster with the same level of composure. This mindset helps traders maintain consistency and focus on their process, rather than being swayed by emotions from market outcomes.
What does the speaker mean by 'review and discover' in the context of trading?
-'Review and discover' refers to the practice of analyzing past trades to learn from both successes and failures. This process helps traders identify patterns and behaviors that need improvement and develop strategies to enhance their trading performance.
What is the speaker's view on the common focus on technical analysis in trading education?
-The speaker believes that the common focus on technical analysis is misplaced. While it's important to understand the basics, the speaker argues that more emphasis should be on understanding psychological aspects and developing a robust mindset to handle the emotional challenges of trading.
Outlines
😀 Introduction to Trading Mindset
The speaker introduces the concept of a 'trading mindset' and discusses the importance of developing the right attitude for trading. They compare it to improving in tennis through practice and matches, and question how one improves as a trader. The talk delves into the idea that conventional thinking does not lead to profitable trading and shares the speaker's journey in understanding this, starting with an anecdote from 21 years ago at a brokerage firm.
📈 Trading Psychology and Behavior
This paragraph focuses on the behavioral aspect of trading. The speaker recounts experiences from their time at City Index, noting how clients often bet against the trend. They discuss the realization that technical analysis, while important, is not the sole key to successful trading. The speaker also criticizes the overemphasis on technical analysis in educational resources and historical approaches, such as W.D. Gann's methods, which they argue are outdated and misleading.
🤔 The Role of Mindfulness in Trading
The speaker emphasizes the importance of mindset in trading, suggesting that it accounts for 75% of successful trading. They question why, if mindset is so crucial, most people focus on technique. The speaker argues that most trading techniques have a success rate of only about 65%, yet 90% of people still lose. They advocate for a shift in focus towards understanding and addressing psychological weaknesses that lead to self-sabotage in trading.
💪 Learning from Failure
The speaker shares a personal trading experience, highlighting the importance of learning from failure. They discuss a specific trading pattern that led to a loss, and how they analyzed it to improve their trading strategy. The speaker uses the example of sportsman Kobe Bryant to illustrate the value of embracing failure as a learning opportunity. They stress the need for deliberate practice and setting specific challenges to improve trading skills.
🧠 Deliberate Practice and Improvement
The speaker expands on the concept of deliberate practice, referencing Malcolm Gladwell's 'Outliers' and the work of Anders Ericsson. They explain that to become an expert, one must engage in specific, challenging tasks that require problem-solving. The speaker shares personal examples of how they have applied this principle to their trading, such as developing strategies for trading on trend days and during specific market events like FOMC announcements.
📚 Reviewing Trades and Embracing Uncertainty
The speaker discusses the importance of reviewing past trades to learn from both successes and failures. They stress the need to ask specific questions and to be mindful of one's behavior, particularly in uncomfortable situations. The speaker also talks about the inevitability of uncertainty in trading and the importance of accepting and learning to navigate it. They share a personal anecdote about a significant loss to illustrate the importance of learning from mistakes.
🚀 From Novice to Strategic Trader
The speaker reflects on their personal growth as a trader, from being a novice who traded without a strategy to becoming a strategic trader with specific plans for different market conditions. They discuss the evolution of their trading approach, including how they now handle losses and wins, and the importance of setting specific exercises and reviewing them. The speaker encourages the audience to think differently and to take a unique path to success in trading.
📝 Conclusion and Future Support
In the concluding paragraph, the speaker expresses their commitment to supporting the audience's trading journey. They mention the idea of creating a study plan to guide the audience's learning process. The speaker looks forward to continuing the journey with the audience and wishes them a restful weekend, emphasizing their availability and desire for the audience's success.
Mindmap
Keywords
💡Trading Mindset
💡Technical Analysis
💡Behavioral Finance
💡Risk Management
💡Chart Analysis
💡Emotional Control
💡Practice and Deliberate Practice
💡Self-Sabotage
💡Market Trends
💡Loss Aversion
💡Review and Learn
Highlights
The importance of developing a trading mindset is emphasized, drawing parallels to how athletes train and improve.
The speaker's belief that normal thinking does not lead to profitable trading is introduced, with a personal anecdote from 21 years ago.
The story of a gentleman who owned pharmacies and his misguided belief in buying low-priced stocks as 'cheap' is shared.
A study by Rodriguez from FXCM is mentioned, revealing client behavior patterns and the paradox of high success rates but overall losses.
The observation that many traders bet against the trend is highlighted, showing a common psychological bias in trading.
The focus on technical analysis in trading education is critiqued, suggesting it may be misplaced.
The speaker discusses the historical context of trading techniques, referencing a course from 90 years ago by W.D. Gann.
The current advantages of trading in the modern era are outlined, including reduced spreads and increased knowledge sharing.
Despite increased information and tools, the high failure rate in trading is acknowledged, prompting a call for a different approach.
The idea that mindset is crucial for successful trading is presented, with an audience consensus placing it at 75% importance.
The paradox of most trading techniques having a success rate of only around 65% is discussed, questioning why there is a high loss rate.
The concept of 'deliberate practice' as proposed by Anders Ericsson is introduced, emphasizing the need for specific challenges.
The speaker shares a personal example of learning from a failed trade and how it influenced a future successful trade.
The importance of reviewing old trades to learn from past mistakes is stressed, likening it to finding 'diamonds'.
The idea of setting specific, challenging tasks to improve trading skills is discussed, using the analogy of mastering ballet moves.
The speaker's personal trading evolution is detailed, from trading without a plan to developing specific strategies for different indices.
The concept of 'best user wins' is introduced, emphasizing the need to confront pain and learn from losses rather than celebrating wins.
The talk concludes with encouragement to think differently, set specific exercises, and review losing trades as a path to improvement.
Transcripts
[Music]
foreign
called the ideal trading mindset
the theme of the of the talk was how do
you develop the right kind of trading
mindset how do you train yourself is
that if I want to be a better tennis
player I go out and I practice
I play a lot of matches and I improve
but how do you get better as a Trader
that's what the presentation was also
about so I got the laser pointer here
just bear in mind I can't actually see
any of your comments
[Music]
so the
the argument here is that normal
thinking doesn't lead to profitable
trading I want to tell you why I believe
that how did I come to have that belief
system
it
well it started 21 years ago I was three
days into my new job at a brokerage
called Financial spreads and I was
invited to a company their best clients
of The Brokerage and the directors out
to a day on the race course on the
racehorses race courses it's a day out
uh called the Ascot I always know it as
the ladies are wearing funny hats and
the gentlemen are drinking champagne and
smoking cigars so there I was and the
CEO of the company he had introduced me
as their newest recruit and and then
this is the funny bit at least I think
it's funny he's saying he knows Charles
as if knowing about chart analysis was
some kind of novelty back then but it
was because back then 21 years ago the
the charging the trading platforms had
no charge when I worked at City index
there were no charts
so there I was and bought this executive
coach and I was introduced as the person
who knew about chart analysis
the first person to just sit down in
front of me was a gentleman who owed a
string of pharmacies up in north of
England and he said to me uh could you
please analyze this chart here
and I looked at it oh I remember it
and it was a
company called Marconi now what's
interesting about Marconi was that it
had been a bit of a darling in the Fuji
100 index but it had fallen from Grace
from a price of about 12 pounds 1200
Pence down to at this point when I spoke
to this gentleman uh was uh trading
around 300 Pence
the story of Marconi actually it is
eventually it went bust it went to zero
now but what's interesting here was that
this gentleman had bought a little bit
when it had retracted off the highs
because he was thinking it was getting
quite cheap then he added to his
position down here and then he added to
the position down here and here and here
and here because as he said this has got
to be the cheapest company I've ever
come across now at the time I wasn't
able to formulate my opinion as I was
later but essentially it was the first
time I ever came across an individual
who was not trading or investing uh on
the Merit of what he was seeing in the
market but what he was actually
believing and he had the misguided
notion that a a stock that had fallen a
low in price was cheap but as I said at
the time I wasn't able to verbalize what
I I know to be true today
it was to be a few years before I got my
next lesson about math psychology
it was the um it was a study that I
spoke about many times by now from
Rodriguez from fxcm who together with
his uh his staff at fxcm had analyzed 25
000 of their clients Behavior over a
15-month period where they executed 43
million trades in FX now what was
interesting about it was that the the
the outcome of this
actually revealed that their clients
were very good at the identifying
winning
very good at identifying
winning uh so we say trading setups but
the problem that they had was that when
they won so they weren't decent but they
lost a whole lot more than
than they won
and so even though they had a very high
success rate on their profitable trade
overall they were net losers
so at that point I had a I had been
exposed to the behavior of the clients
of City index and have become acutely
aware how frequent it was that people
would be betting against the the trend
on any given day so for example if the
Dow was marching up the page
clients would like to sell short and if
it was falling you could be absolutely
certain that they would want to try and
buy the Dow and sort of armed with that
knowledge I began a journey of shall we
say self-discovery I also became much
more mindful of what it was
that the Brokers all over the world were
doing to their clients
so for example any given broker this is
uh from pepper Stones uh web seminar
section of their educational on on their
educational area when you look at it
it's it's all about well how to read
candle jars how to identify trading
opportunities how to figure out gaps and
slippage and and how you can day trade
Forex and whilst there's absolutely a
place for this there is a place for
shall we say uh learning about the
basics of trading it it seems now that
we
we seem to have probably put the cart
before the horse and all the focus is
now on technical analysis as if this is
going to make us better
so the
so I became much more mindful of that
even though Brokers meant well and
Educators met well all their focus was
on the wrong thing this is not new I
mean this goes back this chart here is
from uh 90 years ago and it's from a
course that a gentleman called W.D Gan
sold and back then I think it cost the
the equivalent of a of the annual salary
of a typical worker and there's so many
lines and so many dates and he he sold
his courses through the The Narrative of
of
an America that to some extent was
religious he sold his courses on the
premise that he had found a code in the
Bible and what's so puzzling is that
even now in many many years later you
still have people who who Brave on about
how great Gan is and how much money uh
they are able or could make from knowing
about fractals of eighth and 2 8 and 5 8
and the Moon is gone retrograde Mercury
and Venus is up Uranus and so forth and
it is is actually frightening that there
are still people able to sell this
[ __ ] but they are because it is
appealing to a part of our brain that
goes well if it sounds complicated it
must be it must be worthwhile uh
learning about
now when you look at how far we have
come over the last
20 years from when I started trading it
is mind-boggling how much more
advantages it is today compared to say
uh
20 25 years ago when we day traded the
Dow 25 years ago we were paying an eight
point spread in the Dow that meant that
if you bought the Dow it had to move
eight points in your favor before you
were a break even so spreads have come
down significantly knowledge sharing
like what we're doing in telegram right
now is at an all-time high it's never
been so readily available
Mark is a practically trading at your
disposal 24 hours a day you have charts
you have a chart on your mobile phones
historical back testing is is available
to us and through and through we have
never been as informed about trading as
we are today yet when all that is said
and done we're still operating with a
failure rate of around 76 to 80 percent
and as I jokingly said if that was a
dentist school that had a 76 failure
rate you would have to question the
teachers methodologies
yet and and say this was a a school
where you're contemplating sending your
your your daughter or your son one
second
okay
and and evidence of if this was a school
where you're contemplating sending your
your child your boy your girl and they
had a failure rate around in the in the
70s and 80s you wouldn't send them there
you go now it has that has to be another
way and what I am proposing is what is
the other way because if normal thinking
and normal behavior doesn't lead to
profitable trading the obvious question
begs what does
so I wrote a book as you know which
isn't a book about technical analysis
but it's all about how we as Traders go
about trading which is the wrong way
around
so there's a little audience question
time
how important is the right mindset in
trading and this was a question that
Steve Ward asked at the Symposium early
on this year and it was an interesting
question because people sort of started
to chip up well I think successful
trading is a 90 strategy and 10 mindset
and other people saying well it's
important to have the right strategy but
it's also important to be able to follow
the strategy and that comes down to
mindset so by General consensus we sort
of landed at the 75 percent that that
that's the that's how important mindset
is
so if mindset is so truly important and
we can't actually make our way to uh to
profit through the use of techniques
alone
then it does back the question well why
why is everyone focusing on technique
see most trading techniques will at best
have a 65 chance of success so a little
more than a coin flip charts of 50 50.
but if that's the case why do 90 of
people lose
ninety percent of people don't lose on a
coin flip game
so when you when you travel the the
internet and you forget yourself with
bulletin boards and newsletters and and
the likes
you will be subjected to the uh to the
how
of trading the how do I use a moving
average how do I use candlesticks how do
I trade the Dow how do I trade the the
Dax the footsie and so forth all the
focus is on techniques it could be
product knowledge it could be uh it
could be knowledge about money
management
Etc which all important things but
there's absolutely no focus on what are
you going to do when you're just about
to self-sabotage for the up team time
how do I deal with uh not taking the
trades when a fundamentally know I
should be taking them how do I
take a loss when I simply can't get
myself to do it how do I execute a a
trade that I that I I know I really
should be executing
and so
what I wanted this web seminar to be
about and the one in London is why do we
focus all our mental energy on
strategies and entries when in reality
you should spend time on analyzing your
psychological weaknesses what's your
weak gain
so the foundation of successful trading
to me is technique is
has there has to be a foundation of a
cold technique but why don't you master
that technique of course you can improve
but I think it's much more important
that you actually begin to learn about
your weaknesses which come down to your
behavior and your process
so I argue that Getting to Know Yourself
makes you a better Trader makes you a
better person but it also makes you a
better Trader and I'll give you an
example of this so here's the footstep
and uh
we are seeing a market rallying but
right down here where the laser point it
is right now we are witnessing the the
market has made a low below the highest
bar of the day
so the highest part of the day is this
bar that we're seeing here
and we have now closed below the low of
the highest bar and especially when this
is this is in the context of a double
Top This is a reliable sell signal so
I'm selling short right here in the
footsie and you know it is what it is
maybe it'll go well maybe it won't
and then what happens is that the market
then makes a
push above at which point I'm going oh
this is not looking good but then it
comes all the way back down again at
which point I'm thinking ah it's all
good it's going to go back down to the
lows again
but then what happens all the subsequent
bars actually it must just pause for a
second because I think this is important
so what you're seeing here is Rafa Nadal
and Roger Federer headed out to Center
Court for one of their epic battles
could have been the one in 2007. could
have been the one in 2008 but it's not
actually those two I wanted to look at
what I want you to look at is this
foreign
from a
an author called Rudy Kipling and the
poem is called if
if you can meet with Triumph and
disaster and treat those two imposters
just the same
then you shall be a success if you can
do that he wrote it to his son or sons
and what I took away from that is what
he was trying to tell his star
his chances you know go through life
with a degree of humility don't be too
excited when you win and don't get too
despondent when you lose because those
are just emotions and those emotions are
just
ah like a Candle in the Wind it's not
sustainable but what is sustainable is
how you go about your daily life and
your process
and so the The Imposter of success or
Triumph has the cause of disaster well
they're just emotions but they will
detract you from the real journey which
is the Journey of being able to follow a
process
so when we move on to this and we see
here that the the foot see over the
ensuing two bars are making a high above
that candle which we saw here I am
beginning to think I'm not in the wrong
I'm not in the right position and I get
stopped out
and
I can stop out here at the at above the
the highest higher of the day okay tough
luck another tree but that's not quite
how I see it the way I see it is what
can I learn from this is that a lesson
that I have missed here
should I do should I have done something
different
so when I highlight what's going over
here up here what I pay close attention
to
is this candle here
this long handle here because the market
had turned had closed below the low or
the highest bar which to me was a sell
signal then we get a push higher which
goes all the way back down here and in
in my book this Market should have
continued lower but it didn't instead it
rallied and I began to go through the
days and the weeks and the months and
the years before that going hey is this
something that happens frequently
because if it is I want to know about it
this is something that I want to learn
from now learning from failure is
something that very few people engage in
but my role model is a gentleman called
Kobe Bryant I am in awe of Kobe and rest
in peace when Kobe Bryant Kobe Bryant
died earlier uh he was the attention of
many journalists all over the world and
they were talking about how an amazing
uh
a basketball player he was for the
Lakers they were talking about all the
records that he broke how many times he
makes the the uh the MBA et cetera Etc
but it took a journalist from The
Guardian newspaper called Andy Paul and
he was talking about a different Venture
he was addressing Kobe Bryant from a
different vantage point he was
addressing it from his failure rate she
turned out that Kobe Bryant he racked up
14 481 missed shots during his career
well over more than a thousand in the
second player on the list and so the
journalist concluded that actually
Bryant's success story began with
working to conquer the fear the fear of
failure you see in this previous trade
that I just executed it was so easy to
just dismiss it as oh well nothing to
learn it was just another losing trade
but I saw it differently and I I believe
that that's a mindset thing that much of
our progress as a species and as
individuals comes from our setbacks that
we learn from our setbacks therefore our
relationship with setbacks is highly
correlated with our position in the food
chain both in society and within the
hierarchy of our work within the
hierarchy of employment maybe uh on our
social status do we treat setbacks as
just that a step back with no lesson or
do we learn what is needed to be learned
if anything did we appear a little wiser
the next time a similar situation
appears so when I look at this setup
here as as benign as it may appear to
you it actually turns out that this is
something that happened quite frequently
market closed below pry bars low and it
looked as if oh it's going to fail here
and then it masked higher I I get a
market that it's close to close and
perfectly low pry bars low it looks as
if we're headed lower and boom high
again Market makes a retracement of
three or four bars closes below probably
low and up here it looks as if Market is
headed back down again because we've got
to push higher and then we close it all
the way down and yet the market somehow
managed to find the strength so I began
to think no there's something I need to
learn here and I went through years and
years of this particular pattern just
looking for this particular pattern so
that I may be 100 prepared for it the
next time it was to happen and then I've
just used a couple of more examples of
this and then something really
interesting happened
I was trading the ftse in an evening not
long ago yeah in uh in November and I
executed two trades in the footsie at
300 pounds a point at 7 362.
now what's interesting about it was that
it looked to me as if the market was
double topped trending lower and this is
just a retracement
but then what occurred to me was as I
had executed the trade it occurred to me
hang on what is this thing that I'm
seeing right here
and it turns out that that's the exact
same pattern that I had done so much
research on and it just slipped onto the
radar and I saw it and I go wow I
shouldn't be I shouldn't be short here
at all I should be long
this is a mistake to be short here had I
not done those hundreds of hours of
research and this to this pattern that
lesson may have slipped me
but instead I took my loss lost about
four and a half thousand pounds five
thousand pounds and it was in the trade
for only three minutes or so and then I
very quickly reversed long now I know
what you're thinking saying yeah anybody
can say that so I'd like to prove it to
you here's my track record here's the
the trade here you see I'm jump trading
and this is 70 buying it 300 another 300
another 300 another 300 another 200
something about about 11 1200 pounds a
point now not all of the trades are held
all the way but eventually the market
did grind up and the best trades were
the one that I executed near the highest
of the day I didn't make back everything
that I had lost but I made 90 back of
what I lost and I came out of that
trading session thinking thank you Kobe
Bryant thank you for teaching the lesson
of setbacks because had I not been
inspired by you and had I not done the
word on this particular pattern because
I was annoyed that I'd lost
back then I would never have gotten a
lesson and I hadn't gotten the lesson
well I may have been inclined to hold on
to this trade a lot longer than I should
but I didn't I took the loss I moved on
and while this is not entirely a success
story in that sense that I made
everything back well
I made
most of it back and that to me seems
like a victory and also an enforcement
of reinforcement of the right kind of
behavior
so Solutions as I call part one is
review and discover
review your old trades because in there
lies an acre of diamonds
invaluable lessons for you to learn from
but it leaves me something different it
leads me something to the next point and
that is is it even possible to practice
Trading
what I call the liver practice and it
turns out that I have found a way and
I'd like to discuss that with you the
person you're seeing over here to the
left lady could you shut the [ __ ] up
someone else is trying to work or you're
Yip yapping away
yeah
be respectful
this person that you're seeing here is a
gentleman called Malcolm Gladwell he
wrote a book called outlier yeah [ __ ]
off he wrote a book called outlier
and
outlier uh suggested that if we do
something for ten thousand hours we are
going to be experts
it's essentially what's it's different
the difference between average
performers and and high performers is
that they have practice a whole lot
longer than the average performers and I
read that and I probably swallowed it
hook line and singer but there was
something about it that didn't resonate
with me and I based that on my own
driving I have been driving for I don't
know 30 years and then I was invited on
on my birthday to a race course where I
put myself into one of those performance
cars I think it was a Mercedes-Benz GT s
version
and I had a driver who basically said
you know do this do that so I was
driving and I realized that while I
think of myself as a pretty good driver
as I'm raising down the the motorway the
Autobahn yeah
actually that's not driving that's just
cruising straight ahead if you want to
improve you've really got to give your
mind a challenge to solve because the
challenge for for a mind is not there if
you're just doing what you always do and
it reminds me of and let me just go to
this one here
I was watching Wimbledon a while ago and
there was a commentator
who was uh hasn't comment on one of the
tennis players and he said no well you
know practice makes perfect and then Tim
Hinman who's a bit of a legend within
the the English trading is the English
tennis community he said no no no
practice does not make perfect practice
makes permanent
what does make perfect is perfect
practice which was something Vince
Lombardi was asking he's a a an American
uh football coach who gained an
incredible notoriety for his performance
than what he was able to bring out in
his players so we go back to Malcolm
Gladwell and the German to the writer
Malcolm Blackwell is actually the
architect of the research
uh and his name is Anders Erickson he's
a Swedish researcher who works at
American University and he was the
original proponent of the 10 000 hour
rule
but as he stated in an interview look I
never said
that if you practice something for ten
thousand hours you become an expert what
you need to do is you need to create
what are called what I call deliberate
practice and the way to create
deliberate practice for example in the
context of trading is that you set
yourself a specific challenge because
your brain is a it's a problem solving
uh mechanism and if you just say I'm
just going to start a charge you're not
going to learn anything because your
mind is just going to glance over but
it's always glanced over but if you say
to yourself I am going to find out all
the single times that the ftse makes
that pattern that I just showed you and
then I'm going to document I'm catalog
it and then the next time I see it I'm
going to trade it and so what Anders
Erickson basically said was that the
people that he had researched the
violence the parents the athletes they
only become experts because their
coaches had set them specific
challenging uh tasks that they had to
solve so it wasn't just a question of
doing the same serve over and over it's
instead it was about doing the same
serve trying to land it in a
particularly challenging part of the of
the court for example or that your your
fingers had to learn a very specific
deliberate sequence to play the violin
that's how you improve by actually
tasking yourself with a very very
specific sort of behavior in order to
uncover a new behavior and what in turn
that does is build neural networks Now
ladies and gentlemen now perhaps you
understand why I like to get my sleep
and why I make sure that I exercise and
I eat well because this kind of behavior
takes an inordinate amount of energy
living consciously takes an ordin amount
of energy and so what ericksonfaces said
was you know Malcolm uh Gladwell you got
it wrong it's not about of doing
something for ten thousand hours it's
about doing it deliberately
and truly truly challenging yourself now
how can we do that as code when we don't
have coaches and I remember my my ex who
was an Exquisite Ballerina she was
teaching me about the Swan Lake and
within the Swan Lake which has been
dazzled uh audiences for you know for
for decades she's talking about that
there's a there's a there's a sequence
called the the Foote it's a 32 uh spins
on your foot without putting the other
foot down and it's this constant
Balancing Act without getting dizzy and
she said look you don't go in and you
start balancing you don't start
balancing for 32 footsteps you do them
one little bit at a time and you build
up a big picture until you can begin to
uh to actually do this flat-footed and
then once you've done a flat footed then
you begin to go up on your toe for one
or two and you go back down there and
then two three and four and so forth and
that this this particular sequence in
the Swan Lake has been the bane of
ballerinas for more than a century and
those who have mastered it they didn't
just go in and go yeah I'll just keep
practicing it no they set themselves
small deliberate tasks and then salted
one piece of the parcel at the time so I
have split my trading training into
different categories
and I must admit I've also split many
other things in my life into different
kind of categories so I'll call the
first one specific Improvement and so
the specific specific Improvement is say
I I feel that I wasn't good at trading
Trend dating days so I found all the
trend days I could find that happened on
a Friday for example and I began to make
notes on well how am I going to trade
these on a Friday how do you actually
trade a strongly trending day especially
when it's a positive day which seemed to
be my achilles how do you do it how
would you actually go about doing that
navigating around your fears of being of
of being the one that is buying the high
ticket of the day
and going through these exercises day by
day by day hundreds of them I was able
to actually come up with strategies then
enable to say you know what I am going
to do this and the way I'm going to do
it is by you know fill in the blanks
because I don't want to deprive you of
your own research let's take another
example let's take fomc trading not so
long ago we had the earth form C and I
served you an 80-point winner which took
us about a minute and a half and bang
but what you don't know that there was
hundreds of hours of research gone into
that particular sequence of events on
that particular day I had taken every
fomc event that I could find over the
last 10 years and I had meticulously
gone through every single one of them
finding out how do you successfully
trade fomc and I came up with a a
trading pattern that I call the ruler
for again I'm not going to deprive you
of your own research but the rule of
four has been something that you have
been subjected to
probably without even knowing it you
just heard me say we're shorting the tax
here or we shorten the Dow here or
whatever it may be
but going through every single one of
these fomc's I found a way to
successfully navigate this particular
and oftentimes very difficult Market to
trade that was my mind being tasked with
a very specific exercise being how do
you trade fomc when you look at the
school run same story how do you trade
the tax successfully in the morning and
was not everything that I do is turned
into gold for example I I chart the uh
the S P 500 against the uh the tide in
the Hudson river which turned out to be
an absolute third
it just does go to show that I set my
mind a specific task and then I went
about to solve it
now what I also need to remind my brain
of is don't be complacent because you
know what you have a tendency to do the
wrong thing at the wrong time so I need
to show my mind my brain what can go
wrong if I don't excel in the right kind
of behavior so what you're seeing me
doing here a while ago
nine years to be exact I went along with
that the ftse at 6064. and then I bought
some more at 56 and the market went down
and I bought some more 35 and I bought
again at 30 at 25 and then in the end I
closed the whole thing and I lost 17 000
pounds do you think that's good Trading
Harold
it's awful trading and that is the point
that I need to remind my brain of
periodically
because you have to be the master of
your own kingdom but you also need to
acknowledge that your mind has at its
core function to enable you to forget
pain it has its core it wants to protect
you against pain it means that it will
protect you against remembering the
losses because hey that's painful so I
am going to do the exact opposite by
saying [ __ ] you brain I need you to
remember how badly you can act when
you're under stress so don't you ever
dare add into a losing position but
what's the opposite of of adding to a
losing position what's the very opposite
Behavior it is to add to a winning
position and that's why we're doing it
it is not just that we make more when
it's going well it is also that we are
counteracting the very things that our
brain has a tendency to do to us and I
don't want that
uh this is a stupid example so but it
goes the same I bought one of those
smart watches only cost me 20 quid
because I don't need anything else but I
need to know how quickly can I run 10
kilometers how quickly can I walk five
kilometers am I improving and why am I
just cruising so everything in my life
that I I know of I'm just trying to
improve because that's what I get a bus
out of ladies and gentlemen
mental Improvement I call it the book of
hork and you see Jack Nicholson in here
he's like from the shiny
anyway my book of horror and I'm
actually taking this from someone who
gave me these uh it's not my own not all
of them
but it's just a a this is what I have a
tendency to do and I want to be reminded
before the trading day start not to act
in the wrong way I want to act in the
right way
so solution part two for me is uh posing
specific questions and enabled me to
develop a much Sharper Edge in my
trading because I'm not embracing every
single aspect of the game not every
single aspect what's the point in
analyzing the ftse in
a
trading between 12 o'clock until three
o'clock if you're only trading in the
morning it has to be specific to your
particular circumstances
in furthermore you also have to
acknowledge
and embed in your psyche that there is
no amount of math there's no amount of
indicators there's no amount of anything
that can get you out of having to
experience uncertainty so if you want to
trade consistently without the swings in
confidence then you have to learn to
accept and tolerate and perhaps even
learn to celebrate the feeling of
uncertainty by doing the very things
that you don't like to do become mindful
of the things that you don't like to do
just like in an example imagine you're
going to a public toilet and there's
tenor urinals you're most likely going
to if it's all empty you're probably
going to find that you want to gravitate
towards peeing at the one that is at the
furthest left or the furthest right so
force yourself to pee right in the
middle yeah it probably means that
someone can stand right next to you but
it is that those little things
that will enable you to living a life
out of side of your comfort zone as it
ain't as it sounds but your behavior if
you become mindful of it will present so
many opportunities for you to learn
about what exactly makes you tick and
what exactly makes you run away
so the reason why I broke best lose of
wins was as much for myself as for
anyone else
and the chapters in best user win
reflects that that charts are only a
part of a successful Trader's Arsenal
and the curse of patents is not every
pattern is 100 successful because we
have a tendency to see what we want to
see and if we don't set on my specific
exercises from a charging point of view
will most likely not improve
we also need to learn to fight our
humanness and act on the very things we
don't like to act on and only by being
mindful of them and having a process a
review process will you actually be able
to achieve that
and maybe you need to drive yourself
into disgust before you actually change
your behavior
so back when I was a kitty or youngling
there was a movie with Emilio Estevez
called that was then and this is now by
Hinton it was a a movie adaptation of
his novel
so when I look at how I did trade I
trade a small I was scared I traded tax
without knowing what I was doing
traded a dow with no strategy
I won a little very often and then I
lost a lot once or twice I suffered from
the supermarket mentality so when the
Dow was falling I would be buying and
buying and buying
I traded without a real plan I
celebrated wins and I extrapolated how
much money I was going to make if I
continued making money like this and I
ignored the losing trades but let's look
at how I am today
I trade [ __ ] huge and that's not my
line that's a broker that called me and
he says if you insist on trading [ __ ]
huge size you can't trade at such tight
spreads so a change broker and that's
another story and I'm not scared when I
trade big I've developed index specific
strategies so I know when I can trade
the NASDAQ I know and I can trade the
tax and then when I can trade the foot
so
I trade The Tao and I'm very respectful
like a surfer headed out to a raging
ocean because I know I can give quickly
and I know it can take quickly
and I also know I lose often but my wins
are bigger and I don't have an
impressive win-loss ratio
but
when
I do smell a wheat Market
I smell blood and I will add and I'll
add
or like the NASDAQ trade that we did a
few days ago
to me that had all the Hallmarks of all
the research I've done and I was
expecting new highs for the day and we
kept pushing and pushing and pushing and
we turned a losing day into a big
winning day
so I trade with a plan specific to the
instrument and the time of the day
and when I and I win I don't look too
deeply into it but I do look
and when I am losing I'm trying to
figure out what could I have done
differently
was there something I did wrong here
so what I want to say is that slow
practice is better than no progress
remember that
stay positive and don't give up because
if you really want this all you have to
do is to think differently than to
everyone else
you are not the 90 you're the 10 why
well because I'm training you I'm
guiding you and I'm telling you what to
do and what that do is you start with
you beginning to set yourself specific
exercises you solve them you review your
losing trades you don't necessarily
celebrate big time when you win and you
care less you don't care less when you
lose so you confront the pain head on
that's how we progress
anyway
that was the last slide
I don't know if this uh will work but I
really wanted to give it the talk how it
was meant to be
that was nice
it was nice to be able to give the talk
how I wanted to even though there was
staff around me or people around me
so now
I can
I guess I can wish you a
a lovely weekend
love you lots
and remember I am here for you
and I want you to succeed
I want you to do well
so today I'm at a lady after the tour
who came up to me
and as I was talking to her it occurred
to me
that
what I should really do was to write a
study plan
you know what books to buy
what things to study
I think that would be beneficial for you
so I started scripting notes it'll take
a while of course
but uh
like everything and I hope that we have
a long journey ahead of us together
with that in mind
would you take care now
stay safe
and have a restful weekend
I'll see you Monday
thank you for being here bye-bye
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