Mark will tell us, why it is important to avoid in trading, something to strive for in psychological terms, and describe the human component of price movement. I wish you pleasant reading and a successful trading week!
— Good morning, traders! Thank you, joining us today in a special issue WTV "Mind over market". I – Jared Levy, chief strategist at options on Wizetrade TV. To master the psychology of trading perfectly in the modern market not so easy. To achieve stable success in trading, requires advanced skills and a lot of discipline. Today mark Douglas will tell us, what to do, to achieve victory of the mind over market. Mark successfully trading since the eighties! He is the author of two books on the psychology of trading – "Zonal trading" and "the Disciplined trader", which are not mentioned here, on WTV. Welcome Mark, come to us today, to help our audience to achieve success! Mark! Good morning! How are you doing?
— Good morning, Jared, glad to be here! I hope, I would actually be able to do something to help the traders, we are now looking.
— Mark, last time we met was at Wize Fest, it was great! Very happy, you could make it today.
— Thank you!
— Let's start! Know, I am constantly confronted with this common phenomenon – people don't use his method on one hundred percent, can't fully unleash its potential. In other words, there is a negative correlation between the performance of the trader and the, what he could achieve, do not deviate it from its methodology. In your video you call this problem "gap in profits". I think, few traders understand this concept, could you tell more about it?
— This theme is great for, to begin our conversation! After all, it seems to me, stable profit – that, what our audience want to achieve most. All I want from the trading of such income, on which one could rely on. And, I guess, many of our viewers have realized on their own experience, to achieve stable income in trading is not an easy task.
— Yes, I think, many fall into this trap! People think, that trading is easy, because there is nothing difficult, to get profitable trade. And when it, once you start to think, so what just can be achieved and stable results.
Personally, it took me a lot of time, to understand, what a profitable trade and a stable income are two completely different things. And sometimes with one another does not involve!
— Yes, you want to say, between these two concepts is not visible due, right? Yes, it is a barrier, which is not so easy to overcome. Mainly because winning trades really – a common phenomenon. Moreover, in order, to get profitable trade, does not require any skills! If, of course, don't you think, the ability to click the mouse or tap on the touchpad is a skill. All, what you need is to put the cursor on the button BUY or SELL, click, and then to detect, the deal went into a plus. For such a development does not require any good reasons, Yes, actually no reason is not required! And this deal can bring a monstrous profit! And what skill there was involved? Absolutely no.
— Yes, and here at once the conclusion. If you make the profitable trades so easy, must be, and stable income, there is nothing difficult! Like you said, all, you need to click the mouse. And then people can get a profit of five to ten thousand dollars, and he immediately comes up with the idea, that it is possible to earn a living. And that's exactly what I've thought for a very long period of time, but how far is it from the truth!
— Yes, Yes, I also started with this. Many have quit paying jobs, because he thought, I can easily provide themselves with trading!
— Why is it so difficult to achieve stability? What is the main problem?
— Well, we, of course, we come to details, but generally speaking, then you want to develop these skills, which for most people is just too unusual.
— Mental skills.
— Yes, mental skills, right. As a rule, people assume, all, what you need for a stable income trading system, providing statistical advantage, giving the profitable signals. At the same time, few take into account, in order, to follow strictly these signals, you need to have a certain psychology.
— Possible example?
— Well, let's take a basketball player from high school. He goes to the gym and work out shots on two or three hours every day. He may well reach that level of skill, what will be able to throw in the ring for fifty balls in a row, it's real, isn't it?
— Yes, 've seen it before!
The problem is, that in certain circumstances he will not be able to score even two in a row! For example, he plays in the final match of NCAA Championship, his team is behind by one point, the rest of the game remained a few seconds, and he just committed a foul.
— Yes, this changes everything.
Right, in such circumstances, the chances, he will score at least one goal, will be negligible, unless he has certain mental skills. In this situation screwed up the most, and no matter, how severe was workout.
You mean, Mark, the main skill here is the ability to keep a positive attitude and focus on the process, in this example on throwing the ball, right? And in our case, obviously on the trading, on the following trading system.
And don't worry about failures, about, that transaction may be unprofitable.
— It, that's what I'm now doing (both laugh)! Trying to keep the focus on the presentation and not be afraid, that'll ruin everything!
— You do a good job!
— So, Jared, maybe, we have a trading strategy, which tells us, what to do. Provides us with the potential to generate stable profit. But, as in the example with the basketball player, if we do not develop certain mental skills – unlikely, that we will be able to strictly adhere to the rules of the system, without making mistakes in trading. In other words, to concentrate on the process of trading, to do exactly, what you need to do, and just then, when you need, without hesitation, without a doubt, without fear. Understand, no matter, how good are the signals generates your method. To turn a individual winning trades in a steady income, requires the ability to perform or not to perform certain actions, and the method itself are we to not help. For example, trading strategy does not force us to follow Mani management. Or even if we opened a trade according to Mani management, the strategy will not be able to stop us, if we decide to push a little bit stop loss, which will lead to even greater losses. It all happened! Trading system will not stop us from moving the stop loss closer to the entry point. That often leads to, the market brings us from the position, and then it goes in the right direction. Strategy will not protect us from doubt, from late inputs. And from, to enter too early, without waiting for her signal. She won't help us and when we close a profitable trade too early, not allowing profits to grow. Or Vice versa, when we decide not to close the deal, and the price turns around and goes negative.
— Sure, many of those, who are we now looking, experienced something from this list! No doubt! We have, in Wize Trade, have your own indicators. And many of the audience had the opportunity to test them in practice and make sure, that they generate profitable signals. But the lights will not be able to generate a steady income, if traders will make these, Mark, psychological errors.
— Yes, that's what I want to say. All of the above me – the consequences of faith, assumptions, views, what method we use technical analysis can predict the future. And lack of understanding of, that trading system is not created for this! Methods, patterns allow us to obtain statistical advantage in a sequence of transactions. This leads to non-obvious, but a very strong psychological consequences. The results of the signals, which give methods of technical analysis, random and individual. In other words, it is impossible to predict, the signal will be profitable or unprofitable, like that, how long will the sequence of profits or losses.
— Not the most simple wording (both laugh)! But I understand! Sure, many of our viewers are experiencing the same problems, to learn this concept very difficult! But in order, to achieve stability, just need to accept the fact, what the outcome of trades is random. A very strange concept!
— Yes, that's what I mean. Understand, something, the sequence of events with an unpredictable outcome can bring stable results – it sounds, as paradox. But just think, in fact, this principle is used casinos for hundreds of years! Patterns, methods of technical analysis give a trader the edge over the market of the same kind, which have the casino. If the trader, of course, able to look at things from the right perspective. On the other hand, if the trader, using a method of technical analysis, will not be able to integrate into your trading this concept randomly the results of trades., it, no doubt, find, trading is one of the most disappointing, and then a maddening occupation of all, what he only had to face.
— Sure, disappointment has befallen many of our viewers! And, probably, few of them realized, the cause might be, what they do not realize, the key to sustainable results is the adoption of the randomness of the outcome of each individual transaction. To realize this is simply a must! But, I think, it is not easy.
— Yes, because we are discussing this concept! Know, disappointment is directly related to our expectations. In our case, traders expect from a trading system that, what she is simply not able to give them. Technical methods define patterns, based on human behavior. These patterns are repeated over and over again. The problem is, they do not make a profit in hundred percent of cases! I'm trying to say, I have this sequence of thoughts: there are patterns, they are repeated, therefore, this stability guarantee of stability of income. But among the patterns and profit no connection!
— That is, if the transaction was profitable, there will be no guarantee, what the next will bring the same profit, even if the pattern is repeated exactly.
— It! If one transaction was profitable, does this mean, what is profitable will be the following? Absolutely no! If one transaction was unprofitable, losing will be the following? Absolutely no!
— Yes, it's very interesting. Let's look at these concepts in more detail, at a basic level? Many traders every day use indicators Wize Trade. They get the same signals. You want to say, even if these signals are absolutely identical – the same formula, the same criteria...
— Yes, all, even the situation in charts can be exactly the same!
— Yes, but the results of transactions, open at these signals, will have no respect.
Right! That's what I say. No matter, how long is the sample you take, profitable and losing trades it will random distribution. Again, not easy to assimilate this concept! But it's those traders, to do so, which, as I say, think in probabilities, these traders are spared from probabilities to emotional trauma, if I may say so. What is not insured typical traders, pending order, that may not happen. For example, one sees the market the same conditions, which last time brought him profit, waiting, what can earn this time. Or the same example, only losing trades, or even a string of losing trades.
— Protracted loss may exert great psychological pressure.
No doubt! That's exactly what happens. When I expect, that the transaction will be profitable, but it turns out the loss, I feel a huge disappointment. Maybe, even feel betrayed, deceived! After all I've put into it so hard, the deal simply has to be profitable!
— How to deal with it? Suppose, the trader did everything, what was required of him in technology, set up graphics, indicators, everything. Which end of him to take the psychology, how to acquire the necessary concepts? Or at least start to absorb them.
— Well, you should start with the basics, basic principles of financial markets. It, in our days people only trade via the Internet is, actually, a big problem. Because of this, there is a aloofness, the gap between the, what you want to do and the, what you participate in fact. Because the basis of markets is trade! Any price caused by the human opinion of it. This aspect must be taken into account! Human beliefs are the basis of the price movement. If you look at the very nature of trading, drop down to basic concepts, it will become clear, what all do the same. All strive to ensure, to buy low and sell high. Or sell high and buy low. We, traders, can earn only and nothing else. Is it possible to profit the other way, Jared?
— No, whichever market we took!
— Whichever market we took! So, in fact, all engaged in the same, right?
— All engaged in the same. So why the price is moving? The reason is, each has its own performance, what is expensive and what is cheap. What is the basis of technical analysis methods? You need to understand the answer to this question! If people understand it – understand the idea, why set the same criteria leads to random results. Many years ago people realized, there are certain breaking points. They reflected human behavior, faith in the fact, what if I buy...
Is a visual point?
— Not necessarily visual, but first they noticed just the same on the charts. In fact, this is candlestick patterns. Now, suppose, I want to get up in the purchase in any financial instrument. The price for it now 10. Why to buy? Because I believe, that the price will rise to 11. Or to 12. If I thought, that the price will fall to 9, would I buy? Of course, no, I would have waited. Right?
Means, the reason, why do I buy it at 10, lies in my belief. In other words, the basis of all of the price movements is the belief of the people in it, what will happen in the future.
— When you talked to yesterday, you said, we, as individual traders, does not have sufficient means, to move the market...
— Yes, so, but now it's important for us to understand, that all price movement is due to the beliefs of traders about the, what will happen in the future. How is moving the price? When I put order, I don't have enough volumes, to move the price. But, as a rule, typical traders their entire lives trading via the Internet and do not represent, how much is actually on the market are participants, who can really move the price. Moreover, with this purpose, they are included! Or, for example, the market may log a large group of traders, the total volume which will be enough, to cause price movement. But what price does? The following occurs: to the price has moved with 10 to 11, the market should not remain a single proposal 10. Similarly, so the price has risen to 12, market participants should buy all the proposals 11. In other words, you need to fulfill orders of all, who is trying to sell 11. And those, who thinks, that price will go to 11 or 12 – they do the opposite, what is required, to succeed. This is the critical point! They don't buy cheap, they buy expensive. Expensive relative to previous prices.
— How understanding, why the price is moving, help traders reach a new level? Knowledge of the operation of the market – the first step to ensure, to gain control?
— Yes! You need to understand, why the price is moving! Because, understand this, traders will become clear, in this movement fits their method of technical analysis. Based on what the work of these methods? No matter, what is visual pattern, moving average, indicators Wizetrade – it is based on a mathematical formula, which uses variables – the coordinates of time and price. Or, if you look otherwise, the beliefs of traders about the future. People found, attention! What, by using certain equations with variable price-time, you can identify patterns of collective behavior. This means, when in the market there is a certain set of criteria, it increases the likelihood, that market will come a lot of people, at a higher or lower price. These patterns – recurring events. But the problem is, what, even though they are repeated, they work out not in one hundred percent of cases, because, though mathematical criteria are absolutely equal...
Mathematical models can't predict people's behavior!
Right! Model can't say for sure, coming into the market those people, usually included in similar conditions! They can't get them! In other words, that pattern worked, need, someone to come in market. If you buy by 10 and satisfy all sell orders at this price, it will jump to 11, and then to 12, 13. And get, that all your trades will be a plus. We can say, you are doing yourself a winner. But we are not traded on such level, we will not be able to satisfy all applications! We need to wait for the guys with volumes, that purchase and pushed the price up. That is, those, who is going to enter at the worst price, what we, but large volumes of.
Most of us depend on those, who moves the market. To determine entry point, we're trying to identify patterns of behavior. But, again, this is an event with a random outcome.
— Yes, we in simple terms explained the work of the financial markets to earn, we need big players. Jared, you think about that, who will enter the market, to ensure you profit, when you open a trade?
— No, of course, no.
And, if the transaction is closed with profit, do you think, who was the player, which pushed the market in your direction?
— Is it possible somehow to know for sure?
— (laughs) No!
— Can, somehow it is possible, but it is very difficult! So, when appears on the chart any pattern, we know, the odds are on our side. But we have no idea, who will enter the market, who will move him in our direction. So, it makes no sense to analyze, talk, to speculate, the pattern will work or not. For example, Jared, I'll give you a skewed coin, which 70% cases will fall heads up. We have a mathematical and statistical basis of to put, that pattern works 70% cases. Do we have the ability to predict the sequence of deposition heads and tails?
— Of course, no!
— Yes, if you toss a coin a hundred times, I will get eagle in 70% cases. But it is impossible to predict, what will fall out next time. Maybe, eagle, eagle, tails, tails, tails Can be long sequences of only eagles or tails. These sequences are impossible to predict, but we do not need, after all, we have the advantage in 70%. And if we want to trade effectively, we should learn from this pattern, the maximum possible profit, which is only available with this advantage. You need to create a trading system and following it strictly. And to open and to accompany the transaction, without making mistakes, we need to have a pure mind. The basis of the error lies the conviction, what if the pattern is profitable, he would have to bring profit in every transaction.
— Can't think!
— Yes, not! But that's typical traders and talk. They think: "What's the point to open a trade, if it does not bring profits?". This approach leads to unreasonable expectations.
— Mark, let's wait a second. It, what do you tell, it is very important, and I want to make sure, that our viewers understood everything. You say, we have any tool, giving us the advantage. No matter, what is the value, even two or three percent...
— No, much more! More 50%!
— Yes, I mean, two or three percent more than fifty!
And, okay, understand!
— 55, 56%!
Although, actually, it is important to understand, for stable income, not necessarily win more than half of the cases! It all depends on, what amount of money you are risking, to enter a trade and learn, whether it will bring you a certain amount of profit. Know, one of the most famous traders of the eighties, Richard Dennis, it 95% losing trades! 95%! But those 5%, that turned out to be profitable, were real monsters. And 95% losing trades he has managed to earn in 1987, whether in 1988 year 400 millions of dollars.
— How he got there, thanks to overweight? Mani management? Or combinations thereof?
— Combination of all this. He also used an interesting method, I also mastered. He used the order for "sensing" markets. Want to deviate from our topic, just for a second. Of course, in trade the required margin, any pattern of collective behavior, that turns the odds in your favor. But it is important to understand, in order, to become a successful trader, the most important is the ability to think in probabilities. Your expectations should not go beyond the, that can provide you with the market. Master this mental skill – and can make transactions without fear, doubt, and even without further thoughts... by the Way, no need to think too much! When a professional trader, that has the advantage, he does, will work out the pattern? Of course, no! Because he's already learned, it makes no sense. It does not analyze, not says, not looking for evidence, that the transaction will be profitable. Because he understands the human element! Thinking about a professional trader, so it's about the risk. Than he is willing to risk? How far he will let the price go against his position? When it is clear, that those people, which was to move the market, not included? Besides, he laid out a plan, how it will capture profits. What does a typical trader?
— The typical trader no plan! He thinks mostly about, if you can work a deal or not.
— It! His behavior is opposite to the behavior of a professional. Moreover, deciding, the deal will be profitable, trader-the lover does not think about the risks. And take profits too, after all, what's the difference, still will be a plus!
— Sorry, we need to take a break! To sum up your words, when the professional sees a pattern, giving him the advantage, he does not think, whether he is profitable or unprofitable. He has a good money management, he knows, on how much profit he can expect and how much are you willing to lose. Professionals limit the profit?..
— Well, there is not limitations, but, as far as his asset at risk. In winning the deal have no end to determine the ratio of risk to profit. If the market goes in my direction, what will have to take the risk, to learn, whether he will go even further? That is why many traders are professional traders and mentors recommend the use of a phased exit from the position.
Right, right. Mark, this is all very interesting, but we need to take a break! People, we will discuss with mark many more interesting, so what are waiting for you immediately, on WTV, in three minutes!
— Welcome back, in a special edition of WTV about the fact, how to achieve victory of the mind over market. I – Jared Levy. Mark Douglas spoke to us about the psychology of trading in today's markets. Mark, let's continue our conversation! We were just discussing an example with asymmetric coin, which gives 70% chances, what will happen to the eagle, and compare it with indicators and systems, giving us an advantage in trade, increased chance, the deal will work, will bring a profit, direction will be correct.
— The word "right" here is critical!
It is important to understand, as it is faith in the randomness affects our expectations. Nobody wants to engage in such trading, in which a high probability to survive the disappointment, frustration or even feeling, if you were betrayed. It is these feelings and I feel many traders! The existence of such a probability has a negative impact on our perception of market information. Every person has a mechanism of avoidance of pain. It affects our thinking. For example, I convinced myself, that the transaction will be profitable. I open a position and price goes against me. In this situation, I will look for information, which would confirm my point, and to ignore the, which shows, what trend develops in the opposite direction. Even though I know how to determine the trend, my perception will not allow me to do this, because I instinctively listen only to that information, which confirms my point. Not the one, which shows, I'm wrong.
To achieve sustainable results, it is necessary to cut losses and allow profits to grow. We should earn positive transactions more, what we lose in sub-zero. The problem is, what if I get emotional frustration, dissatisfaction, if I wait for, the deal will go exactly there, where I'm counting, this means, that I am susceptible to the tendency to distort market information. So, I'm going to cling to their losing trades. And if the deal will go in plus, instead, to let your profit grow... you Know, markets don't go straight. I would be only too happy, but it does not happen, they constantly roll back, outline levels...
— That is, for example, I found some action, in which just fell in love. Maybe, from the point of view of technical analysis, they are not much different from other, but those came out good news. Or I for some other reason, sure, they will go up. I open a position, the price goes against me, but I'm not getting out of the deal, because I am sure, that they continue to grow. Maybe, the news, maybe, because of some special feeling, intuition. And in the end I find myself in a huge disadvantage. And it continues to grow, and the reason only, I decided, if these stock – special. In this case?
— Well, Yes, but it could be anything. Any information, for which you can hang on. You have to understand – it doesn't matter, why you open a trade! You should follow other traders, purchase at a worse price, what is your. For example, if you buy by 10, someone must want to buy 11, 12, 13. And not just to want to buy, other traders should be quite a lot, to satisfy your shopping all sales traders, who believe, that is the maximum. What would be the reason to open the position have not been, if the market does not enter other players is not a good reason. It is therefore necessary to consider the risks to open trade, and that is why the professionals do that and nothing else! Because they know, I can't cope without other players. Maybe, the signal I and stunning, but some sense of it, if the market is there is no one to move? The transaction will result in the loss! If we can not trade, without negative emotions, we will not be able to cut losses.
— But how do you become less susceptible to the emotions?
By changing the view of the market! Through awareness... For example, Jared, you sit at the slot machine...
Okay. I don't like that, but okay (laughs)!
— It does not matter, like it or not. Though, probably, well, what you are not happy with, this will make the example even more revealing (laughs)! Now, you sit at the slot machine. Throw a quarter in it, but lose. What do you feel? Feel cheated?
— No, no (laughs)!
Because the result is random!
Oh, random! That is, you realize, that participate in the, the outcome of which is due to the random factor.
And, as a result, your expectations do not go beyond the limits of the possible variants of development of events.
— Well, believe it or not, but I am expecting a loss. Feeding the machine a quarter, I have been with him said goodbye!
— Yes, so be it, after all, the odds are not in your favor! In trading the situation is the opposite, trading strategy, just the same, give you the chance to win, as if it is you – the slot machine. Believe it or not, but if you can achieve the correct perception, the roles will be swapped! In General, if we compare trading with a game machine, there is such a difference – we can't play the, not taking risks. Game will not start, if we don't get out money from her purse and will not give them slot machine. It means, we took the risks, after all, if we don't accept them, then the money will not give.
— The quarter is our planned loss.
— No, not a loss, it risk. This is the sum, we are ready to invest, to learn, the deal will bring a profit or not. Then we're waiting for a pattern on the screen of the machine. Jackpot – excellent, no – so no, possible, we venture another quarter. Here there is a large discrepancy with trading, great which confuses our mind. In the financial markets first, there is a pattern! The money we give it to you later, when solved, how much are we willing to take the risk, to check, whether it will work or not. But most traders conduct analysis to identify profitable pattern, collect all the arguments "for". And because of this they convince themselves that, that risk doesn't exist. Even if they say, what you need to put stop losses, it is just empty words. Or they can put them, and then to push. Even though they know, what is the use of the foot must, but I can not take risk.
— Yes, every day I see examples of such behavior!
— Yes, they are not able to take the risk, because I don't want to be wrong. They need to realize, the goal of this game is not that, to prove his innocence! Patterns, methodology, trading system, all this is not predicting the future! It only increases your chances of winning, your advantage on the course. And you need to take absolutely every transaction on the system, because it is impossible to accurately predict, in what order will go profit and loss. Need to learn how to identify risks. Simply put – count, how much you willing to spend, to learn, coming into the market and pushed the price other traders. That is what is the risk, and nothing more! But, of course, for the stability results we need and the plan for money management.
Change your thinking, your view of the market, take the idea, the outcome of the transaction can be any. The point is not that, you are right or not. So, there is no reason to be disappointed! Similarly, as there is no reason to be disappointed, when the machine eats your quarter and does not show the jackpot. This is the critical point, Jared, you need to be able to change your thinking! What was the title of issue, "mind over market" (both laugh)? Need to change your thinking!
— How to achieve this, what are the basic steps? Clear, you need to read your books, to instill your way of thinking. But where to start, are there any specific actions, which will help to adopt the mindset of professional traders, to get rid of negative emotions, start gradually to change their attitude to markets and risk. Are there any exercises?
— Yes, of course, I described them in his book "Zonal trading" and in the video course "How To Think Like a Professional Trader". But in a nutshell, all, what you need, Jared is a sincere intention. Honestly! As in everything in our lives. If we strive for some goal, have a strong desire to achieve, it will take all the necessary steps, to do this. No matter, what are these steps, they are described in the book, video series or some other source, if we set your mind to it, in order to achieve something, we will get there. True, the goal we have is unusual – we have to set your mind to it, to change your mind! This difficulty. Many come close, but I can not overcome this barrier...
— What is the problem?
— , what people don't want to change your way of thinking! Just like that. People don't like change!
— But how to achieve a carefree state of mind?
— Changing your mind (Jared laughs)! You need to protect yourself from any possible disappointments in trade. This can be achieved, realizing, in trading, no matter, whether you lost or won the deal. If you use technical analysis, it is a game of probabilities. I hope, I have not accidentally introduced viewers astray. There are stages of development of a trader. We start with mastering basic skills, with the ability to think in probabilities, to reduce the impact of frustration on our mood.
"We did everything, I could, has achieved a majority, but the deal turned out to be unprofitable. Working on!"
— It! So be it! When you get a losing trade, all, what this means in the market is not entered by other traders, share your opinion. That's all! Nothing more!
— You need to accept and move on.
— Yes, to move on! Let's look at it from another point of view. What do you think, if you take the average person off the street, how he will be good at predicting others ' behavior? Must be, not particularly! As a rule, people are not very good at it, Yes there, even their own behavior can predict not all!
— (laughs) No doubt!
— A common phenomenon – people notice, making something, and wonders, and, actually, why?.. Now, to predict collective behavior – no easy task. But our methodology, our mathematical formulas are doing it for us! But it is important to understand, they are not designed, to predict the results of each specific transaction. Only the overall result of a series of transactions! They just give us the advantage, increased chances to win. When I get signals for their strategy, what this means at the most basic level? That is a high probability, that someone will enter the market and move the price up! Well, or down, if the sell signal. Market participants may enter, and can and not enter. And here the question is not the rightness or wrongness of. The question here is how far the price should go against my position, to know for sure, the participants in the market are not included. And at what point I would be unprofitable to wait for them.
— In your video you describe the nuances of money management, placing stop losses?
— Of course, but I avoid specifics. There are no tips like "if you are trading on M30, then you need to do here so..."
— Yes, of course, traders have to make their own decisions, starting from their trading style, Deposit, risk tolerance and so on. But you, must be, show, where exactly should you place the foot?
— Of course. I try to teach traders to define the risks, while the exact values they have calculated themselves, based on my trading style.
How about this approach, for example, the trader determines his trading some level of risk, and then analyzes their feelings, when loss gets. Say, the trader is losing a hundred dollars and listen to yourself. And if a loss of this size does not lead to any problems, stress, it, so, you can go on more volatile stocks, to set foot on 200, 300 $ . Is it worth to do so?
— Of course, of course! That's what I recommend. When I was actively engaged in coaching, my pupils went very serious control. Happened, they got into the situation, when the losses came, one after another, and they felt the need to return to those levels of risk, they had previously. For example, they could trade positions in ten thousand, a hundred thousand shares risk in half, a million dollars. But felt, for comfortable trading they need to reduce the risks, to feel the synchronicity with the market. And, happened, they had to return to trading positions in thousands of shares! It is very difficult, when you work in a Corporation, working together with other traders. But they just had to do it.
Or here, for example, trade on paper (demo account). Many say, it makes no sense, because the difference in sensation and results between such trade and trade real money huge. Sure, among our spectators there are many, which showed good, stable results "on paper", but as soon as they go to real money, how everything changed! Because many say, in such a trade makes no sense, that its results cannot be relied upon, after all, when at stake is not placed with real money, think differently. This is not entirely true, trading "on paper" has certain advantages. First, such trading can be quite to demonstrate the trader, how many skills he lacks. It will open up in terminal, in your trading strategy, but, the most important thing, it will show, what psychological skills you are missing.
— Interesting idea!
— Yes. How to convince the person, he needs to tighten psychology? Give him to trade on demo, and in the real world, and compare the results! Even if the trader will learn to think probabilities, as we talked about it all the time, it can still experience problems with adoption loss. Negative transactions can be a source emotional pain, and this pain will eventually accumulate. Not just for trading, but also because any loss in life, financial and other. The fact, what to our minds is difficult to accept the loss. Often people begin to engage in trading, because I want to impress friends, family. But, turning to trade with real money, they can detect, the degree of their risk tolerance allows them to trade in more than a dozen stock, losing only one dollar in every transaction. They think, what is the point of all this? The meaning of this, we should seek to sell those ten shares exclusively! Perfectly abide by the rules of the system, to trade without the slightest fear. And sooner or later you will be able to try to switch to twenty shares, and then thirty. To progress little by little! But, as a rule, new traders not particularly thrilled with this approach.
— Mark, never heard, anyone considered this issue from that point of view! That a demo account can serve as a clear demonstration of the, what man can achieve, if you can maintain the perfect mental attitude.
— Of course, it perfectly fits! "That's what I can achieve, if you develop the necessary psychological skills in order, to do just that, what you need to do, without a doubt, without hesitation, without fear". A demo account allows you to learn, what can be achieved, if we expand the potential of the trading system to the max. But if you want these results on a real account, you will need to develop your psychology.
— Wize Fest earlier you talked about the loss, faced by many traders. I think, the last couple of weeks brought many problems to those, who traded. Mark, do you think, does a trader need to in the process of becoming to experience huge losses, possible, even a complete draining of the Deposit, so in my head something clicked., to person came, something needs to change? That is, of course, I understand, I don't have to... But you have been teaching for many years, how often have you been faced with the situation, the trader simply could not grasp the importance of some aspects and change trade for the better, without losing a substantial percentage of the Deposit? Or you can cope without it, enough to have a great sense of dedication? Know, the question is rhetorical, but I'd really like to hear a serious answer (laughs)! After all, sure, right now someone is wondering, really it was impossible to do without draining the Deposit.
— Jared, you, also now in the drawdown?..
— (both laugh) No, I recently traded!
— Are you asking about the principle "bottom"?
— Yes! But tell us, what is the principle.
— Well, everything is simple, this is when a man sinks so deep, he is ready on all, anything, just to float. Then I remember the time, when I was actively engaged in coaching. All my clientele can be divided into two categories. First – traders, who have already achieved stable success. They enrolled me in classes, to hone skills, to increase their income. Another category – just those, which reached the bottom. They have experienced great frustration, sometimes even anger. Because he knew, what is the potential of the bears trading. But they like repeatedly bumping into invisible barriers, could not succeed! Here they just came to me, saying, "I'm ready for anything". Of course, everyone has their own level of pain tolerance, your level, on which the person understands, that is ready for anything, and seriously means it. That's the whole point, you need to be sincere!
— Mark, in a few minutes we have will be taken away! People, the next issue we will begin with the answers to your questions, so call us, write on e-mail! Mark, we have a couple of minutes left. Is there anything, what you would like to share, any advice, concluding remarks? Maybe, some kind of mantra (both laugh)?
— No, but you could sum it up all, what we discussed! If your goal is consistent results, you need to learn to think, as professional traders. Because that's what they do – show stable results! That's why they are pros. That's why investors give them money in management, that's why their job is to trade. After all, without stable results on the job, they would not long resist. To achieve this, need to change your way of thinking so, to exclude the possibility of trading feelings of annoyance, disappointment, emotional pain, feelings, if you cheated. Need to reach a carefree state of mind! Change your point of view – and everything will change. No matter, brought to an isolated transaction the profit or not. Accept it, accept the risk of loss, and your trading will change dramatically.
— There is a pattern. it! Without fear, without a doubt...
— Yes, no need to think, just trade! Well, of course, you need to think about risks and take profit (Jared laughs), but I'm talking about patterns. You receive the pattern with nothing to reflect! You still will not be able to predict, profit or loss, he will turn.
— Mark, ahead of us one time issue, so we will have time to discuss! But at the end of this issue I would like to ask one more short question. We used the term "overweight". Some of the viewers are not aware, what is this concept. I met him, when I worked in the stock room – there we called advantage of the situation, which had the advantage on the price difference, for example, we had the option, which cost a dollar apiece, and we had the opportunity to buy it for ninety cents or sell for a dollar ten. But how do you define this concept?
— The advantage is just when in any situation the probability of a single event exceeds the probability of the other, that's all! In the context of our conversation – this is a high probability to win, and not to lose, but not in one transaction, and in their series. I'm trying to instill in their students the ability to think not single transactions, and large groups. Not "I will reveal the deal", and "I'll open the twenty-transactions".
— "I'm going to watch, to stay in the game"!
— Yes, I will be in the game next twenty transactions! And if I like the results – I'll take twenty. And if not – tweak their methodology so, to get better results!
— Mark, it was great! I'll see you later!
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