point or another. We all need
toilet paper. We all need dishwasher tablets, and we all need hand soap. The
reason why they were in my shopping basket this week was because they
were on offer. Who can resist a 50% discount?
But a 50% discount in a supermarket is not the same thing as a 50%
discount in the financial markets. Many clients of City Index, the broker I
worked at for more than eight years, came face to face with this reality
during the financial crisis from 2007 to 2009.
In 2006, after having done very little for years, a stock called Northern
Rock went on a tear. It rallied 50% in months. There was no real interest
from City Index clients in the stock during the rally phase.
However, when it began to slide back down again afterwards, the interest
rose. It was as if Northern Rock had the same effect on investors that half-
price toilet paper has on shoppers in a supermarket.
Northern Rock became quite a lively traded stock. The more Northern Rock
fell in price, the more people got interested in the stock. At one point I
received a phone call on a Saturday morning at home. At this point
Northern Rock had slipped from 1200 pence down to around 500 pence.
The person on the other end of the phone was a stranger to me. He had
picked up my business card at one of the talks I had given on technical
analysis. He apologised for calling me so early on a Saturday morning, but
he and his friend had decided to invest in Northern Rock. They had decided
to get the opinion of a professional, just to double check whether it was a
good idea.
Apart from being rather annoyed at being woken up at 7 am on a Saturday
by a stranger, I was also annoyed with the question. At this point Northern
Rock was in freefall. I roughly said the following to the stranger:
Look, I don’t know what is going on with Northern Rock, but there is
something horribly wrong. Although the general market is declining
too, Northern Rock is declining much more.
What I am afraid of is that there is something amiss that we don’t
know about, and it has yet to be known to the market. It feels as if
someone somewhere knows something is horribly wrong, and they are
selling out while they can.
I told him that I had many clients who had said exactly what he was saying
now, but about Marconi five years earlier. Fortunes were lost by clients who
kept buying Marconi, even though it was falling and falling, because they
engaged in bargain hunting. It had been horrible to see the losses our most
valuable clients endured simply because they did not want to admit they
were on the wrong side of a bad share.
I said to him: “From a trader’s perspective, you are engaging in a very
dangerous activity. If you buy Northern Rock now, it will be very difficult
for you to have a meaningful stop-loss. You are essentially trying to catch
the falling knife. You talk as if Northern Rock is the only bank in the world
worth investing in.
“You talk about Northern Rock as if it couldn’t go bust. You talk about it as
if the fact that it is 200 years old means that things couldn’t get worse
before they get better. You even said it yourself: Northern Rock is too big to
fail. It means you are already to some extent aware of the danger here.” I
asked him if he remembered Barings Bank. He did.
“There is a second reason why I don’t think it’s a good idea you buy
Northern Rock,” I continued. “Let’s say you are fortunate enough to witness
a turnaround in the fortunes of Northern Rock. You will have trained your
mind to think that it is perfectly okay to buy into things that are falling. This
works perfectly in a supermarket. Toilet paper has a practical use. Soap has
a practical use, so when you are provided with an opportunity to purchase
these items at a 50% discount, you should do it.
“However, to believe that the financial markets offer discounts akin to what
you’re seeing in a supermarket is ludicrous. The financial markets are not a
supermarket with special offers.”
Eventually Northern Rock went bust. The British government had to
guarantee customers’ savings. That didn’t stop panic scenes as people
queued up to get their money out.
THINKING RIGHT
As you read this anecdote, you might think it could never happen to you.
Perhaps you are right. I am not going to suggest otherwise, but I would like
to ask you a simple question.
Imagine you have two investments, Investment A and Investment B. Each
investment had equal starting value of $100,000.
Investment A is doing well. It is up 50%.
Investment B on the other hand is not performing. It is down 50%.
You are now in a situation where you need $50,000. What do you do?
1. Close a third of Investment A to raise $50,000?
2. Close investment B to raise $50,000?
When I asked this question to a group of investors at a conference in
Copenhagen recently, the overwhelming majority opted for option 1. They
would close enough of investment A to raise the $50,000.
Why do you think that is? Why do you think people close the investment
that is doing well?
My theory is it all boils doing to how people react to taking a loss. Are they
able to take a loss and move on? Or are they so averse to taking a loss
because as long as the position is open, there is hope it will come good
again?
Of course, it is impossible to say exactly how you would react in this
situation, but I don’t have to rely on fictitious examples to get an answer. If
you recall the chapter where I spoke about the 43 million trades executed by
25,000 traders, you will remember that those traders lost more on their
losing trades than they won on their winning trades.
Emotionally, a loss is clearly felt much harder than a win. Otherwise, there
would be no reason for this anomaly. Human beings postpone making
decisions that will cause pain. It is the reason why we let losing trades run.
We want the instant gratification, but we want to delay the pain. Hope dies
last. As long as the losing position is open, there is hope.
THE JUNKIE AND THE CEO
I use an analogy to illustrate


a loss is clearly felt much harder than a win. Otherwise, there
would be no reason for this anomaly. Human beings postpone making
decisions that will cause pain. It is the reason why we let losing trades run.
We want the instant gratification, but we want to delay the pain. Hope dies
last. As long as the losing position is open, there is hope.
THE JUNKIE AND THE CEO
I use an analogy to illustrate the concept I have just explained: it is akin to
firing the CEO of a successful Fortune 500 company and betting your
money on the junkie turning his life around.
Crude? Yes. The junkie might turn his life around, but I think the odds of
the CEO continuing his successful run are higher than those of the junkie
turning a corner for the better.
That is why I am arguing that trading is so much more than technical
analysis. That is why I am arguing that we need to learn to handle losses a
lot better than the general population does, because they handle them very
poorly, and as a result they are generally unable to make money from
speculation.
CONTROL YOUR MIND – CONTROL
YOUR FUTURE
I am not a masochist. Nothing could be further from the truth. If I do tend to
dwell on pain, it is more a reflection of pain’s role in the context of trading
profitably. What I’m attempting to do is a difficult endeavour. I’m trying to
explain why 90% of all people fail in achieving their hopes and dreams
when it comes to trading.
When so many people commit the same mistakes over and over, there must
be a deeper meaning that has yet to be uncovered. Naturally I’m hoping that
by now you will have a much greater understanding of what it is that is
going wrong.
My own motto is: control your mind – control your future. Doing so
requires constant vigilance. You have to own your life. If you don’t own it,
you are not the boss. You have to take full responsibility for everything that
you do.
You must be the master of your own kingdom. You can’t walk through life
with your eyes half shut. You have to walk through life with your eyes fully
open. You have to know what you are getting into – be prepared. You have
to take possession of your life.
This is a thought process you have to constantly reaffirm. Our minds tend to
drift. There are so many distractions in life, so much superficial noise that
doesn’t bring substance but that our brains are attracted to nonetheless. The
brain would rather look at Facebook and YouTube than sit in quiet
contemplation.
The drifter brain needs to be controlled through daily vigilance, whether it
be through a mantra or meditation or whatever you decide suits you best. As
a famous doctor once said when asked what exercise is best for us humans:
“It’s the one you do”. It doesn’t matter whether you meditate or write a
diary or do whatever other practice you choose to centre yourself, so long
as you do it.
There needs to be a regular time in your day where you remind yourself of
your purpose, of who you are. The world is full of temptations that distort a
healthy self image. The temptations take us away from who we are by
telling us that who we are is not enough.
But you are enough.
Being a good trader really has little to do with tools and charts. It has a lot
to do with fighting our humanness. If you really want to trade the markets
using leverage, engaging in high-octane speculation, you have to learn to
desensitise your normal emotional response mechanism to fear, greed and
other delightful human reactions. You have to fight your humanness.
DISGUST
MANY YEARS AGO, when I was just a young man, I had a girlfriend. She was my
first real girlfriend, and I was her first real boyfriend. We were young, and
we were very much in love.
My girlfriend was a little round bodily, which I found very attractive. She,
however, did not like her body image, so she began to diet. She had dieted
before, but had always failed to sustain a weight loss plan. Now she was in
love, and her motivation shifted into another gear. The weight loss became
quite dramatic, and it led me and her family down a path that pains me to
write about.
Anorexia is a serious psychiatric disorder, but (and forgive me for using a
tragic story to illustrate a point about behavioural change) it is an
interesting motivational phenomenon.
We are hardwired to eat. We need no training to eat. Yet somehow this
hardwired pattern is overridden by a social motivation: the desire not to be
overweight. This force, this motivation, is so strong in patients with an
eating disorder that it proves to be impervious to both medical and
psychological treatment.
What is the basis for this powerful motivation? It isn’t chanting, and it isn’t
positive self-talk. As I understand it, my girlfriend was motivated by love,
but more importantly by disgust. She was disgusted by anything that looked
and felt fat and overweight. This force was so strong it could disrupt her
hardwired pattern of eating food.
As humans we are driven forward by forces. Those forces can be born out
of a desire to move away from something, or they can be born out of a
desire to move towards something. I happen to be a person who is primarily
motivated to move away from something.
I grew up in a wealthy part of Denmark, and I attended a school for the
well-to-do. Then my parents divorced, and I went from living in a big house
with an enormous garden to living in a one-bedroom flat, where my father
would sleep on a pull-out sofa bed in the living room.
I was a young boy at a time when all my school friends wore Levi’s denims
and Lacoste shirts. There was no money for that in my life, and it created a
sense of inferiority in me.
As soon as I was old enough, I started taking afterschool jobs in order to
earn money. What did I spend it on? You guessed it. Brand clothes.
I also became a prolific hoarder of money, a saver, if you like. I took great
pride in depositing my wage cheques in the bank and seeing my account
balance grow. I moved away from poverty.
In my belief system and in my experience, away-o

eBooks\Tom Hougaard - Best Loser Wins.pdf


f inferiority in me.
As soon as I was old enough, I started taking afterschool jobs in order to
earn money. What did I spend it on? You guessed it. Brand clothes.
I also became a prolific hoarder of money, a saver, if you like. I took great
pride in depositing my wage cheques in the bank and seeing my account
balance grow. I moved away from poverty.
In my belief system and in my experience, away-oriented goal setting is a
much stronger motivational force than towards-oriented, but I accept that
this is an individual preference. You can test for yourself where your
preference lies, using a simplistic scenario. What would compel you to lose
weight more: a picture of you in perfect shape or a picture of you where you
are obese?
I asked my circle of friends what they would prefer, and all agreed that they
would find the obese picture a stronger motivator than the perfect picture,
although a few did comment that they would probably still like to have
both. Fair point.
I believe that disgust is a much stronger emotion than joy or happiness. We
all have reasons to be happy every day, but we tend to forget that. However,
disgust is not something we are likely to forget.
You won’t forget the rotten milk you drank by mistake, nor will you forget
the client of yours who had such repugnant breath that you nearly threw up.
Ed Seykota once said that everybody gets what they want from the markets.
When I read that, I dismissed it. I wanted to win, but I wasn’t winning, so I
clearly wasn’t getting what I wanted. End of story.
It annoyed me that he had said that. The thought of never being able to trade
profitably consumed me. I had spent so much time studying, researching,
testing, formulating plans, calculating ratios that I really didn’t know what
more I could do.
If you look around in your life, you are likely to be able to find examples of
dramatic changes induced by disgust. What gets a person to finally commit
to a goal is reaching the point of disgust. I got disgusted with my trading
over a long period of time. The pattern was always the same:
1. Trade like a wizard.
2. Become over-confident.
3. Blow up the account.
I became so sick of it. Positive intentions, sticky notes with mantras on my
trading monitor, and self-help exercises don’t possess nearly the
motivational force of physical disgust with oneself.
If disgust can turn eating into a behaviour to be avoided, and if disgust can
turn an alcoholic’s drinking into a thing of the past, then disgust can also
turn you into the trader you would be proud of looking at in the mirror.
I am sorry if I have shocked you. Those of you who know me well will
probably be taken back by my extreme steps to ensure my pattern of
behaviour in the trading arena is exemplary.
I am not going back to the rollercoaster ride I was on in my early trading
days. I was so disgusted with the amount of money I lost. It was
embarrassing.
We are most apt to change a pattern once we become truly disgusted by it.
Would you continue to do business with someone who violated your trust
and stole money from you? No, you’d become so disgusted with such a
dishonest character that you would cut all ties with them.
Well, that person is you when your own patterns violate your contract with
yourself and cause you to lose money consistently. Once you become truly
disgusted with your own patterns, you’ll shun them altogether.
A trader is losing and continues to lose because he doesn’t want to change.
Change is hard work. I began plotting my trades on the chart when the day
was over. I put a marker where my entry was and where my exit was. It was
horrible. It was like incriminating yourself over and over. I was disgusted
with my recklessness.
I had to face up to the fact that I was actually an awful trader. I was like the
guy who could recite the entire technical analysis syllabus for the Master
Technician exam, but I could not stop myself from
1. Overtrading out of boredom.
2. Overtrading out of anger and a desire to get revenge.
3. Impatient trading – jumping the gun.
4. Trading against the trend – trying to catch the low of the day.
5. Fearful trading – by cutting my winners short out of fear the profit
would disappear.
6. Constantly averaging in lower and lower – i.e., adding to losing
trades.
ALCOHOL
When you are a successful trader, you make good money. My friend and
trader mentor Larry Pesavento instilled in me the passion for passing on.
Larry himself is an inspiring trader, but his passion for helping others is
equally admirable.
One project I support is to help people dealing with alcohol issues. I do so
by offering anyone who sincerely desires to quit drinking a book that helped
me truly understand the nature of the addiction trap.
I developed a drinking problem in the aftermath of a painful breakup. I
drank to forget. I was in love. I was a fool. She left me. I started drinking.
The problem was that I didn’t seem to be able to stop myself from drinking.
This carried on for many months. I could not stop myself from drinking, so
I sought out help. I remember vividly standing up at an Alcoholics
Anonymous (AA) meeting saying, “My name is Tom Hougaard. I am an
alcoholic.”
It was horrible, but at the same time it was relieving. I felt like a fraud. I felt
there was inconsistency in my life. I was outwardly a success. I had two
cars. One was a luxury SUV, the other an Audi R8. I lived in a nice part of
town, overlooking the sea. What did I have to be unhappy about? Well, for
one, I had no control over myself and my drinking.
Standing at an AA meeting is like being stripped naked for the whole world
to see. They see your fat ass, your tiny willy, your saggy boobs, your
cellulite, your scars, your spots, your pimples, your swellings, your bald
head and whatever bodily imperfections you can imagine. It is absolutely
everything you don’t want, and you have a hall full of eyes watching you.
But by the end of the exercise you realise the truth. You break yourself
down so that you can survi


e world
to see. They see your fat ass, your tiny willy, your saggy boobs, your
cellulite, your scars, your spots, your pimples, your swellings, your bald
head and whatever bodily imperfections you can imagine. It is absolutely
everything you don’t want, and you have a hall full of eyes watching you.
But by the end of the exercise you realise the truth. You break yourself
down so that you can survive, so that you can be reborn as the person that
you really want to be. A fresh start. Vanity thrown on the rubbish pile. Clean
canvas. Here I am. This is me.
The walls are ready to be decorated however you want. Exactly the same
model is used to train elite soldiers. They are pushed beyond their breaking
point. Then they are put back together again, stronger, wiser and with an
unshakable faith in their own strength, their own abilities and their
determination to get a job done – no matter what.
No one in their right mind enjoys exposing themselves like this. It is why
we get defensive. It is why we fight our corner. Our identity is being
questioned. Call it ego, call it identity, call it what you want, but no one
likes having their intelligence questioned. It is a lot less painful to continue
down the known path than to stop, evaluate, and turn around.
There is only a slight, nagging pain when you choose to continue down the
known path, and you can soothe your inner pain by reminding yourself that
you are not alone. There is power in numbers, even when everyone is
wrong. But you soon find yourself being disgusted by your own lack of
progress, your own inability to stop the behaviour that is troubling you.
Attending AA meetings was rock bottom for me. I evaluated. I got honest
with myself. The pain was relentless because everything was new, and I felt
naked, very alone and exposed.
And yet, that is power! There is power in being honest. There is power in
standing up and saying to the world and yourself: “This is who I am, and I
don’t like it! In fact I hate it. I am embarrassed by it, but it is what it is. It is
a clean slate. It is a fresh start. It is like a forest fire. It clears the debris.
New growth can start.”
I have not touched alcohol for six years and I know I never will. It wasn’t
the AA that finally helped me; it was healthy living advocate Jason Vale. I
have never met the man, but I want to thank him for setting my life on a
good path. I am certain that no one has bought more copies of his book
about alcohol dependency than I have. I send them to people all over the
world.
Jason describes better than anyone the trap of alcohol. Reading his book
helped me understand the nature of addiction on an entirely different level,
and I found it easy to stop drinking from day one!
You may ask what this has to do with trading. Rightly so. The answer is
simple: if you have some trading experience, and it is not turning out to be
how you want it to be, you have a choice. You can carry on, thinking that
things will change. I can tell you they won’t, but you will probably not
listen to me.
Or you can take my advice. You did after all make it all the way to this
section of the book, so maybe there is room for improvement. You can strip
yourself naked (metaphorically speaking), and get honest with yourself.
You can stop trading, and start reviewing. You can begin to understand what
it is you are consistently doing that causes you not to make money trading.
Take yourself apart, clean up the process, take on board my guidance for the
mental side of trading, put yourself back together again, fund a small
account and start with an entirely fresh mindset and approach.
THE DRIFTER MIND
HOW OUR MINDS work is fascinating. The brain can be our best friend or our
worst enemy. When I give talks in public, my own life mantra is written on
virtually every PowerPoint page of any presentation I give.
Control your mind – control your future.
You have to want to do what you do. You can live a life that is authentic to
your soul, or you can live the life you think people want you to live.
You can be authentic and own your life and take responsibility for
everything you do. If you don’t take ownership of your life, you are not the
boss. You have to take full responsibility for everything that you do.
Why would you live life any other way?
Why be subservient? You must be the master of your own kingdom. But
brace yourself. You will be forced to make many difficult decisions, and
you cannot count on your mind to back you up if your determination
wanders a little.
You can’t just walk through your life with your eyes half open. You have to
know where you are going. You have to take possession of your life. It
would be nice if you could rely on your friends and family, but when it
comes to your life’s journey, you are on your own. It is your responsibility.
Part of that journey, including your trading journey, is to discover your
weaknesses. You have to know where your mind lets you down. For the
vast majority of people in the world, this will include their mind’s tendency
to wander.
You see, all of us know what to do. All of us have the knowledge to do what
needs to be done, but the path from knowledge to action, where we
implement our knowledge, is elusive for many people in many areas of their
lives.
Your mind will drift. This is unfortunate but perfectly natural. The solution
is trivial, and it is powerful. You have to constantly reaffirm your purpose.
Whether you meditate or talk to yourself while you brush your teeth in the
morning, there needs to be some period in your day when you remember
your purpose. There must be a time to remind yourself where you want to
go, what you want to do.
One thing I can’t always rely on is my ability to act in my own best self-
interest. My mind needs constant guidance and direction. I don’t know why
that is, but it is. I suspect the majority of the population of the planet is put
together like I am. They just haven’t realised it yet, so they drift through
life, rather than taking charg


to remind yourself where you want to
go, what you want to do.
One thing I can’t always rely on is my ability to act in my own best self-
interest. My mind needs constant guidance and direction. I don’t know why
that is, but it is. I suspect the majority of the population of the planet is put
together like I am. They just haven’t realised it yet, so they drift through
life, rather than taking charge. This doesn’t mean they can’t be financially
successful, but wouldn’t it be nice to be both financially and spiritually
fulfilled? Your job after all is that thing that you do the most, outside of
sleeping.
I am a professional trader. I cannot afford to go into the trading ring without
being 100% mentally prepared. My profession is a mind game like nothing
else. If I want to win, I have to focus on what is important now. So Ed
Seykota was right, much to my chagrin. I did get what I deserved, because I
was only good at one part of the game. I was good at the technical part.
I don’t like this metaphor, but being good at the technical part of trading is
like being good at putting together a sniper rifle; what good does that do
you when you go into combat and you don’t know how to handle yourself?
I actively take control of my inner world. I have to give myself enough
confidence to reassure myself that I have enough to go out and kick ass in
the markets every day.
To make that challenge even more real, I post my trades for the world to
see. I have never consciously thought about why I do that, until someone
recently asked me. I realised that I do it because it keeps me accountable. It
keeps me focused.
I have been as lost as they come. I tell you that not to inspire you to get lost,
nor to evoke sympathy, nor to tell a tale of rags-to-riches, but to make sure
you understand that exposing your weaknesses will be a good thing.
Your mind is a tool. If you let it delude you into thinking all is well, you
will not get the success you want in trading or in life.
Losing and failing might be a knock to the ego, but it is rocket fuel for
growth. It sounds like I am trying to write a self-help manual for
procrastination, a bestselling inspirational book. But I am describing
honesty. When you are honest with yourself, in the company of yourself, or
on a podium in front of 40 alcoholics, or whatever the setting may be, you
just took a step that 99% of the population don’t ever contemplate taking.
You already started the journey to winning.
So, the journey starts with technical knowledge acquisition and continues
indefinitely with the constant evolution of both the technical and mental
training.
Technical training is part of my day-to-day job, but the mental part needs
more dedicated focus, otherwise it gets lost in the noise of the outside
world. I need dedicated time to give that brain of mine a workout.
I want to show you one of the mental warmup images that I go through
before the trading day starts. It gives me the visual evidence I need to act in
a manner that is aligned with what I am trying to achieve.
This example happened a while ago, but it could happen any day of the
week if I don’t mentally prepare myself. Figure 23 tells the tale in all its
glory.
Figure 23
I short a double top off the open. I am so certain that my research is right.
The market will fall.
I don’t have a problem with the first short position. I have a problem with
the four subsequent ones. I could even forgive myself for the last one,
because at least I am shorting weakness. This is unstructured and
undisciplined trading. I don’t care how certain I am of something
happening. If it isn’t happening, don’t pursue it as if it is. Showing you is so
embarrassing!
This is part of my preparation. It has been the most useful tool to build
mental stamina and discipline. It reminds me of everything that is weak in
me. It reminds me of how my mind, if left unchecked and untrained, will go
on a rampage to seek excitement and gratification.
One of the best ways to increase profits is to use goalsetting and
visualisations to align the conscious and subconscious with making profits.
I use fear to achieve my goals. I imagine trading a size which even in my
mind makes me uncomfortable.
I sit quietly in my bed or in my office. The world is quiet, and if it isn’t, I
stick a pair of earplugs in my ears. I imagine I am trading, and the market is
moving against me. I see myself cut the loss.
I imagine I bought the XYZ, and I see it going my way. I feel the brain
sending me signals to close the position to crystallise the profit. I see myself
doing nothing, as I continue to watch the profit increase and decrease.
I see a big profit turn into a small profit. I smile and accept it, and I move
on, telling myself it is okay. I place my brain under as much stress as I can
with imagined scenarios. I am long and the market is going my way, and a
sudden news story breaks the market.
I observe my fear shooting through the roof as my P&L turns into a
bloodbath. I see myself closing the positions and going in the opposite
direction. I see myself not getting unhinged just because the market is
moving against me.
I cannot guarantee that this approach will work for everyone. Perhaps you
think it is brilliant, or at least could be useful after a few personal tweaks. It
works for me because I learn visually. I get the message when I see it
visually. If you tell me not to trade against the trend, it will not mean any
more to me than when a cat meows. But show me a chart with my trades
plotted on, with me trading against the trend (better yet, show me
repeatedly), and I get the message.
This is my therapy. This is like seeing a psychologist every morning. I get
fired up. The therapist expands my mind and my horizon. The goal is to
remind myself of what behaviour I want to enact. It is about making
changes and keeping the changes.
So what makes me think this will work for you? Behaviour is patterned.
How we think, feel, and act has a pattern to it, and that patterning is w


essage.
This is my therapy. This is like seeing a psychologist every morning. I get
fired up. The therapist expands my mind and my horizon. The goal is to
remind myself of what behaviour I want to enact. It is about making
changes and keeping the changes.
So what makes me think this will work for you? Behaviour is patterned.
How we think, feel, and act has a pattern to it, and that patterning is what
makes us who we are. The sum total of our patterns is our personality.
Sometimes our patterns interfere with our goals and dreams in life. They
prevent us from being who we want to be or accomplishing what we want
to accomplish. We are sometimes our own worst enemy, and we seemingly
can’t stop ourselves when we are in the moment.
A person can know very well that they have anger issues, and yet be unable
to prevent themself from lashing out. Another might have eating issues, and
yet can’t exercise the needed restraint in the moment of eating.
A trader is fighting the trend all day and his account is suffering, but he
can’t stop himself. He is simply incapable of turning his position and trade
in the direction of the trend. Only afterwards is he disgusted with himself.
The purpose of my warm-up is not to take away everything that is bad in
our lives in one swift move. The purpose is not to guarantee I won’t mess
up. The purpose is to focus on what I want to achieve or become, while
being mindful of the things that will most certainly sabotage my goals.
The wonderful part is that I am almost certainly guaranteed success if I
avoid the failures. I was guaranteed success with my weight goal if I could
cut out all the Coca-Cola I drank. I just had to be mindful of that, and the
pounds began to come off. I didn’t have to do anything else.
I don’t have to be certain that my trade is going to work out. I just have to
be aware that my mind wants to do things that are not in my own best
interest. So, I don’t add to my losing trades. That in itself means I just need
to be mindful of the one variable I can control.
My action in the morning is about changing the patterns that do not serve
me. This started by observing another very successful trader and asking
myself what was holding me back from becoming him.
My technical abilities were just as good as his. I don’t think he was
financially much better off than I was, but he was seemingly fearless. How
could I become fearless in trading? Did I even want to be fearless?
I came to the conclusion that the trader I wanted to become was patient but
aggressive when the time was right. It was like Federer playing in the
Wimbledon final in 2007: he was patient until just the right moment, and
then played with focused aggression.
After that it was a question of reminding myself of that goal every day, and
several times a day if necessary. That is how habits are built: through
repetition.
As I grow wiser to the ways of life, I realise that there is a lot of truth to
John Lennon’s words, “Life is what happens to you while you’re busy
making other plans.” We become so engaged in our day-to-day life, with
responsibilities at work and home, that the big picture of our lives stays in
the background.
Day after day, year after year we busy ourselves with work and routines,
only to realise later in life that opportunities have passed us by. So, the first
question to address in a change process is: “What do you want to change?”
Or, stated otherwise: “How would you like your life to be different?”
My answer? I want to dedicate time to trading well, to combat my natural
inclinations that stand between me and successful trading. I want to prepare
my mind every morning through a series of meditations and visual
exercises.
To achieve this I will train my mind to act calmly through visualising
myself in difficult situations. I will focus on my breath. I will calmly put
myself through stressful situations to ensure I would react how I want to
react if the circumstances were real.
Making changes entails far more than simply engaging in positive thinking
or getting positive images in your head. I didn’t want positive images. I
wanted a portrait of the dire hell I would reside in if I didn’t change. This
may seem like a negative state of being, but it really isn’t. It is immensely
positive, albeit a rather tense way of getting what you want.
As the saying goes: “The end justifies the means.” I have turned
conventional thinking on its head. I do so because I know what compels me
more. Roses don’t compel me. Thorns compel me to action.
Consider the market itself. It is not so unlike us in its behaviour (because
we are the market). It climbs the wall of worry, but it slides down the slope
of hope. It might be a Wall Street saying, but it says a whole lot more about
humans than it says about the markets. All I have done is used fear and
disgust as my protagonist – my major motivator.
GETTING BACK IN THE GAME
I was surfing in a town outside Biarritz, France, in 1996. I was literally in
over my head. The waves were twice as big as anything I had ever handled
before. I tried to drop in a few times, but the waves were too fast, and the
lip was so steep.
Finally, I got myself positioned for a wave, but I was too far into the impact
zone, and instead of gliding into the energy path of the wave, it literally
knocked me out. I just remember everything going black. Luckily for me
someone spotted me and pulled me out of the water. Eight lives left.
I was back in the water that afternoon. I was too stupid and ignorant to
consider what had happened. Ignorance is bliss. It is only now that I can
appreciate my behaviour. Sure, you took a hit, but you are okay. Do you
want to sit on the beach and mope all day or do you want to get back in the
game?
Here’s an example illustrating the importance of getting back in the game.
I am writing this the day after a particularly challenging and volatile trading
session. It was one of those days that will stick in your my mind for reasons
that will shortly become a


behaviour. Sure, you took a hit, but you are okay. Do you
want to sit on the beach and mope all day or do you want to get back in the
game?
Here’s an example illustrating the importance of getting back in the game.
I am writing this the day after a particularly challenging and volatile trading
session. It was one of those days that will stick in your my mind for reasons
that will shortly become apparent.
Over the last week oil has dictated the mood of the stock indices. Naturally,
I expected to see the same behaviour on Friday. The Dow started off with a
200-point rally at the open.
However, 30 minutes into the trading session, it seemed to lose momentum.
Oil on the other hand was in full-blown panic. I started shorting Dow,
expecting it to follow oil.
In Figure 24, Dow is on the left, and oil is on the right. Both are five-minute
charts, and both show the entirety of the trading session from about noon
until late evening.
Figure 24
I expected the Dow to follow oil, and it did, but not for long. It seemed to
pause, as if it suddenly had a mind of its own. By mid-afternoon oil had
dropped almost $2 – more than 5% – in little over an hour. The Dow,
however, wasn’t moving lower with it. It held. I took my Dow short
position off with a loss, and I reversed to long.
As soon as I had done that, the Dow dropped 50 points, and oil dropped
even lower. I began to wonder if I had simply been too quick to reverse my
position, and I decided to close my long position. By now I was convinced
the Dow had merely delayed its inevitable fall. I went short again. In
hindsight that turned out to be near the low of the day (after the open).
Just 15 minutes later the Dow made new highs for the day. I closed my
short position and scratched my head. I had gone short at the first low and I
had closed at the second high. I had gone long at the second high, and I had
closed at the second low. I had gone short at the second low, and I had just
stopped myself out at the new highs for the day.
I took a moment to reflect. Was I trading with a plan? Was I betting on a
relationship between oil and the Dow Index that might not be there
anymore?
Just then my best trader friend called, and we spoke briefly. I said to him,
“What does it mean when the Dow makes new highs on a Friday evening,
even though oil is plummeting?”
Saying it out loud helped me to get some perspective. It was the last day of
the month, which often brings aggressive buying or selling in the market.
Remember it was also a Friday, which has a tendency to bring about trend
days. I started buying, reluctantly. The market went higher. I bought some
more, careful to move the stop-loss up as the markets moved higher. I kept
an eye on oil. It was recovering nicely.
With 60 minutes to go (and no dinner), the Dow made a new high for the
day; and I know from my statistics that you should not short a market that
makes new highs for the day in the final hour.
By then I began to add more to my position. I was now betting on a classic
trend day finish. On those days the market closes right at the high tick of
the day.
It would have been easy to throw in the towel after the three failed attempts
to get on board a move in the market. The effect would have been the same
as stopping the game of throwing coins just because you have had three of a
kind in a row.
I hear about people who stop trading because they have three losing trades
in a row. That is a flawed approach if you understand the markets. If you
are ill, or you are weighed down by emotional circumstances, then you stop
trading. If you are otherwise able, you don’t stop trading just because you
have lost three times in a row.
As I type this, I look back at my trading before the Friday. I had lost on
every other day that week. It is rare, but I had four losing days in a row. I
don’t even remember when that last happened.
In the movie Floored, the trader Greg Riba puts it so elegantly, albeit in his
own way:
I swear to god that 99% still don’t get it. When they are winning, they
start betting less. Bet more. I mean, if there is one roll that you can
make a hundred thousand dollars on, let it ride. If you roll three sixes
in a row, let it ride. Let the winners ride.
Greg Riba should know. He was said to be one of the best S&P 500 futures
pit traders ever. Why do people bet less when they are winning and bet
more when they are losing?
Fear.
TRADING THROUGH A SLUMP
I HAVE A FRIEND who was suicidal because of the losses he sustained. He called
me to say that he was standing at a railroad bridge. I don’t think it was his
intention to end his life. I think he needed someone to talk to.
Some would argue that a chapter of this nature does not belong in a trading
book. I think people who have lost significant amounts of money will find it
reassuring that the focus isn’t one-sided.
Either way, while I have plenty of positive memories from my trading
career, I also have memories that can only be described as dark.
I had a friend called Adam. I no longer know of his whereabouts. He owes
me £20,000 – money I doubt I will ever see. Adam was a brilliant trader.
Absolutely brilliant. Until it all unravelled for him.
Adam and his brother worked on the factory floor for their father’s thriving
business. During the 1990s Adam became interested in trading. Over the
ensuing years he developed a system for trading stock indices using a 30-
minute chart. He told me it was inspired in part by George Taylor’s book
The Taylor Trading Technique.
It was a simple but very effective strategy. It required Adam to check the
charts every 30 minutes, and if the parameters were right he would execute
a trade. Otherwise he would leave it alone until the next 30-minute period
was up, at which point he would check the charts again.
Adam became so adept at trading the 30-minute chart that he soon made
much more money trading than he did managing his father’s factory. He
decided to sell his share of the factory to his brother and focus all his energy
o


if the parameters were right he would execute
a trade. Otherwise he would leave it alone until the next 30-minute period
was up, at which point he would check the charts again.
Adam became so adept at trading the 30-minute chart that he soon made
much more money trading than he did managing his father’s factory. He
decided to sell his share of the factory to his brother and focus all his energy
on trading. Adam did well. Really well.
I traded with Adam on many occasions in my house or online. He possessed
a supernatural patience. I have personally never seen a person stare at a
screen from the open of the US market to the close of the US market and
not trade once. Yet that was the norm for Adam if there was no signal.
Amazing patience.
I believe that Adam’s patience and pattern-reading ability made him the
supertrader that he was. He lived the life of the supertrader too. He ordered
a custom-built house. He travelled first class to exotic holiday destinations
with his loving wife and children.
However, all supertraders will go through bumpy terrain at some point or
another. It is not a question of if it will happen – because it will – but a
question of how badly it will affect them when it inevitably does.
For Adam the bumpy road caused him to lose everything. His trading
account, his wife and his house. I stepped in when Adam was living on the
streets in Manchester, suicidal and penniless. I did what I could – but Adam
didn’t want my help, and I lost contact with him.
It started with a bad loss, and it escalated into a complete blow-out. Adam
had seen a pattern on a Friday night, and he had gone maximum short the
market. At the close he was well in the money, and he decided to keep the
position over the weekend.
Unfortunately for Adam, this was the weekend when the American special
forces finally captured Saddam Hussein. The financial markets cheered at
the good news. I guess naïvely they thought that the Middle East powder
keg would settle down once Saddam had been captured. That Sunday night
the American markets opened limit up!
Limit up is a situation where the market is unable to move any higher until
the stock market opens at 9.30 am in New York. Adam was short, but he
was unable to close his short position because when the market is limit up
you can’t buy, which is what you need to do to close a short position.
Adam was awake when the phone call came. It was his futures broker.
Adam was informed of his options: deposit more money on the account or
risk being closed out once the future market came out of limit up. Adam
didn’t have any available capital. It was a long night and a long day until
the market finally opened at 2.30 am (Adam lived in the UK).
The market opened and stocks soared. The broker liquidated his position
because he was in breach of the margin requirement. The account had stood
at close to £750,000. Now there was only £400,000 on the account.
You may say that £400,000 is also a decent pot of money to trade with, but
something short circuited in his mind. He saw the market soar that day, and
he saw his position being liquidated. Unfortunately, he also saw how the
market came all the way back to his entry point.
You see, once the good news had been digested by the market, there was a
feeling that this probably wasn’t such great news after all. The Dow Index
came all the way back, giving up all the gains for the day.
Adam felt the broker had cheated him. He felt as if he had been forced to
liquidate. He felt that the broker had acted too hastily. He tried to complain,
but his claim was rejected.
He then tried to make up for the lost money through trading, but his head
wasn’t right. He began to second guess his system and double up on trades.
Then his builder demanded payment for his house. Adam had paid a
deposit, but now he couldn’t make full and final payment. He lost the
deposit and the house.
Adam was unable to stop his own downfall. So was his family. He began a
pattern of lying and withholding information for his own gain. The last time
I heard from Adam was when he cheated me out of a fair sum of money,
only to disappear. I haven’t seen him since.
Sadly, this is not an isolated story. I have had to cut short a business trip
while working in the London because my boss called me back to the office.
There was a client in our reception crying his eyes out because he had lost
£750,000 trading forex. He was afraid to go home and tell his wife about it.
He begged my boss to lend him money so that he could trade again and
hopefully make the money back.
You may think that this individual lacks the moral fortitude to trade. You
may even think less of him because of his apparent lack of dignity. What if I
were to tell you that he was a renowned surgeon in a prestigious private
London clinic?
Education means very little in this industry. It doesn’t matter where you
went to school or what your day job is. If you don’t know how to handle a
losing trade, and then a winning trade, you will not go very far in this arena.
It is for this reason that I tell people to spend less time on technical analysis
and more time on self-analysis.
Successful trading can mean just making a good living. I got a message
from a close friend of mine. He trades full time. He has been doing it for 15
years and, unlike so many other hopefuls, managed to make a success of it.
He has made himself a good living over the years.
I don’t know many traders who like to talk about what they earn from their
trading. When I spoke to my friend about it, he told me he had made about
the same as if he had a well-paid managerial job in the City. However, he
had no commute, and he had time to be there for his children when they
came home from school.
To me, my friend is an example of a person who made trading work for
him. He had not made himself rich in the process, but he had paid the bills,
put food on the table for his family, taken them on holidays, and bought a
nice family car.
There seems to be an inclinat


anagerial job in the City. However, he
had no commute, and he had time to be there for his children when they
came home from school.
To me, my friend is an example of a person who made trading work for
him. He had not made himself rich in the process, but he had paid the bills,
put food on the table for his family, taken them on holidays, and bought a
nice family car.
There seems to be an inclination to describe trading as the venue for making
untold riches. Yes, the potential is always there, but with bigger reward
comes bigger risk. You can’t catch big fish in shallow waters.
However, my friend was tiring from the long hours, and he called me to
talk. He asked me if I had ever had enough of the endless hours of watching
the screens.
I immediately responded, “No, and if you feel like that, you have to stop
trading and take a break from it all.” We spoke for a while that night on the
phone.
He told me that now that the kids were older, they wanted to hang out with
friends rather than their old dad. His wife worked full time too. It meant he
was often alone in the house from early morning until later afternoon, and it
began to bother him.
I helped him get a few job interviews and he secured himself a job as a
broker in London, on account of his in-depth understanding of the markets
and his ability to understand what clients are going through in their trading.
A fairly innocent story, I am sure you would argue; so why am I telling you
about my friend? Well, I am telling you the story for several reasons.
The first reason is that trading can be a very lonely business. It has never
bothered me, but I have the deepest of sympathy for those who feel lonely
while trading. I am not sociable, don’t drink or smoke, can’t stand watching
a football match (that excludes me from a lot of male social activities) and
prefer my own company; but even I like to pick up the phone from time to
time and just shoot the breeze with a friend.
When I worked in the City, I would at times stick my head into my boss’s
office, who always had a minute to say hi and catch up on life. If you one
day decide to make a go of trading full time, you may experience a twinge
of sadness that you no longer have the odd chat with a work colleague.
I recommend that you take a week or two’s holiday and try full-time trading
before you hand in your notice to your boss and begin your full-time online
trading job. It will give you a taster of what your day will look like.
The second reason I told you the story about my friend is to make sure you
realise that a pause from trading is not the end of trading. The markets will
always be there.
My friend will no doubt be back to trading full-time one day. In the
meantime, he is enjoying a new life where he is helping others achieve what
they want from trading.
The third reason I am telling you this story is because I would love to see
you succeed, but I think it is important you understand that trading may not
offer you the rainbow you had hoped for. But does it have to?
Could it not just offer you a good income, where you are working on your
own terms and perhaps doing something that you find immensely
interesting? Does it have to result in owning a beachfront property in
Barbados?
Sure, if you get there, I am happy for you, and you should be proud of
yourself. However, if you don’t get there, but you still manage to pay your
bills and put money aside for the sweet things in life as if you were the
recipient of a monthly pay cheque, then to me you have done what the 99%
of the population do not dare to do.
They dare not take a chance on their dreams. If you can make a living from
it, be it a decent living or a great living, then you really are something out
of the ordinary.
And trust me when I say that once you understand trading better, you will
also come to understand what makes you work optimally in the trading
arena, and that is when being a trader gets really fun.
Eight months ago, I went through a tough time. It happened during the
month of May. I started strongly, and then the wheels started falling off. I
was up some £200,000 on the month, and it started to unravel.
It started with a loss of £33,000. Often when I have a bad day, I will come
roaring back the day after, but I didn’t. I lost another £9,000 the day after.
Then came the weekend – not a moment too soon.
Monday started where Friday had left off, in spite of all my preparation and
introspection over the weekend. I lost another £38,000. Before the week
was over, I had lost more than 50% of the gains for the month.
More disturbingly, I felt completely lost. I had no idea why I was losing. I
wasn’t tired. I was sleeping well. I had no emotional issues that occupied
my focus. I was just not performing.
I have endured hard times before. Progress has at times been slow. Setbacks
have been frequent. Setbacks are always lurking. My goal is to stay in the
game until I don’t want to spend all my waking mental energy on the
markets.
As you can perhaps gather, this is a deeply personal journey for me. It is
often a mentally draining journey, where I feel I am not making any
progress. What made it worse for me was that a really good friend of mine –
also a trader, and probably the best private trader the world has never heard
of – was having a great run.
We have always been brutally honest with each other. I think therein lies the
strength of our friendship. I will tell him point blank, “I am jealous of you. I
feel bad that I am jealous of you, because you are my closest friend, and I
would give you my last dollar, but right now I am shooting blanks. I am
haemorrhaging money.”
I told him I had a huge position on. It was literally the biggest position I
have ever carried. Each point was worth £4,000. That equates to 400 FTSE
futures contracts. I was so certain the FTSE would fall.
I have seen the pattern so many times: big fall off the open – two to three
bars of five-minute duration of rebound – and then new lows.
But it didn’t. Not th


blanks. I am
haemorrhaging money.”
I told him I had a huge position on. It was literally the biggest position I
have ever carried. Each point was worth £4,000. That equates to 400 FTSE
futures contracts. I was so certain the FTSE would fall.
I have seen the pattern so many times: big fall off the open – two to three
bars of five-minute duration of rebound – and then new lows.
But it didn’t. Not that day. It rallied. And he was long. I was short. It was
immensely painful. It took me to a place I didn’t want to visit. A place of
envy, resentment and despair.
“You know Tom, you are lucky.” My thoughts were interrupted by my
girlfriend. It was as if she knew what I was thinking. “Not everyone has
someone who is better than them, and who they stay up at night wondering
how to beat. Not everyone is Mozart versus Salieri. You should be happy.
So you lost. But what have you gained? Don’t you know that he feels the
same as you do? He desperately wants to beat you – for no other reason that
you bring out the best in each other.”
She carried on: “You know, my old professor Peele, I told you about him…
brilliant man. Do you know what made him brilliant? His colleague –
Professor Kyle – they were best friends and neither of them would ever
acknowledge that they were insanely jealous of each other, yet they were
the two most brilliant minds anyone could wish to learn from. You should
really count your blessings that you have someone who you so badly want
to beat. It is really not a curse. It is a blessing. What do you think would
happen if your idols stopped trading?”
If they stopped, I thought, who would I beat then? I always loved beating
my old high score, and I did today, in size; but she was right. I am not just
trading to make money; I am trading to push myself into those places where
I am not comfortable.
I was once in a restaurant in Porto Cristo, having dinner with my son. I
happened to look over my shoulder and I saw Rafa Nadal having a late
meal with his friends. It was great to witness a world-famous tennis star just
shooting the breeze with his old friends.
A few days later we visited his tennis academy. Rafa was training. It was
hot as Hell that day. He trained like his life depended on it. He was out
there pouring his heart out – in the blazing heat – just to get better.
Why do you think he was doing that? It is for the same reason that someone
like Matthew McConaughey – during his Oscar acceptance speech in 2014
– said, “There are three things that I need each day: one, I need something
to look up to; two, I need something to look forward to; three, I need
something to chase.”
I am writing this because I think being open about what drives us is healthy.
There will come a point in your career as a financial trader where you will
go through a slump. When it happens, it might serve you well to step back
and think deeply about why you are so drawn to this game.
And when it happens, I hope you will turn to these pages. I hope they will
remind you why you are doing what you are doing.
What my slump taught me was to slow down. If you do not slow down and
let the knowledge mature, then you will take a huge loss, which will dent
your confidence.
Not every trade is the World Cup final. Not every trading session is the final
exam of the final year, the culmination of four years of relentless studies.
Everyone has setbacks. Kobe. Rafa. Federer. You. Me.
And – all slumps end.
Slumps are inevitable. You are bearish and the market goes up. You are
bullish, the market goes down. It happens to us all. Every one of us.
Is there a key to escaping a slump? No.
Why should I throw old, worn clichés at you? Why should I tell you to stay
calm and work your way through it? Why don’t I just tell you that it is
horrible to go through, but it will end – if you persist?
I wrote this chapter over several weeks. When I started it, I was not in a
slump. Then the slump arrived, and I described it. As I type these words, I
have had a fantastic trading morning. Am I out of the slump? Who knows? I
do not know what I am doing differently to what I did when the slump set
in.
I am simply following the process I always follow. I am a process-oriented
trader. The markets determine the outcome. I have little control over that. I
have faith. I believe that my process will carry me through the highs and the
lows of trading.
EMBRACING FAILURE
THE LATE MARK Douglas argued that successful trading is a question of
accepting risk and thinking differently.
The Market Wizard trader Ed Seykota put it another way. “A losing trader
can do little to transform himself into a winning trader. A losing trader is not
going to want to transform himself. That’s the kind of thing winning traders
do.”
When I read that passage the first time, I was not mature enough to
understand its importance. When I started trading for myself, I began to
appreciate its depth and wisdom.
As I began trading bigger and bigger size, I realised that my journey from a
low-stakes trader to a high-stakes trader was not the result of evolution.
Sure, I got better the more I traded, but remember this: Practice does not
make perfect. It merely makes it permanent. Only through a dedicated
approach to practice, with a specific attention to finding your mistakes, will
you improve. Otherwise you just are just cementing your unprofitable
behaviour.
BECOMING A DIFFERENT PERSON
Being anxious and fearful is a reflection of an unknown situation. Through
exposure – over and over – our minds come to accept the new reality and
through that exposure become accustomed to it.
You think there is a hack that will all of a sudden take you from trading £10
a point to £100 a point? You think there is some book you can read, or some
course you can take, or a pill you can ingest that will take you from being
an average-stake trader to a high-stake trader?
Well, not quite. But there are certainly ways you can accelerate your
progress. It is a question of priority. I am not some hardcore monk with


hack that will all of a sudden take you from trading £10
a point to £100 a point? You think there is some book you can read, or some
course you can take, or a pill you can ingest that will take you from being
an average-stake trader to a high-stake trader?
Well, not quite. But there are certainly ways you can accelerate your
progress. It is a question of priority. I am not some hardcore monk with no
life and a never-ending commitment to pushing myself into those cold, dark
corners where I dance with uncertainty until my emotions are stunted and I
essentially become a psychopath with no fear.
But I am committed. I want to explore my weaknesses. I am reasonably
attuned to my mind and body, and I know that left to my own devices I can
quickly spiral into self-destructive behaviour.
I had a painful breakup with a loved one, and I turned to food and alcohol.
Sure, I think we all do things like that. Even Bridget Jones (I love movies)
ate her way through a tub of ice cream in one sitting when she was dumped
by the love of her life.
But you move on. You get off the sofa. You turn off the TV and throw the
ice cream bucket in the bin, and you say, “Okay, so I made a mistake. I will
own it.”
How you feel about failure will to a very large degree define your growth
and the trajectory of virtually every aspect of your life. You may want to
close the book and think about that for a while. It is quite frightening how
deep that sentence is.
A significant part of your success as a trader is correlated to your
relationship with failing. If you see failure as the endgame, then you won’t
make it as a trader. I have colleagues who will stop trading if they have
three losing trades in a row. What kind of attitude is that? You think Kobe
Bryant – the absolute superman of basketball – had that attitude? You think
during a game he would make three misses and then ask the coach to be
replaced by someone else?
KOBE BRYANT – THE BIGGEST
FAILURE
While we are on the topic of Kobe Bryant, I want to tell you a story about
him, which I read in a paper – sadly after Kobe passed away in a tragic
accident.
After the accident, most obituaries focused on Bryant’s amazing
achievements and trophies won, but Andy Bull from the Guardian wrote
about Kobe Bryant from a different vantage point.
The headline of the article sums it up well: “Bryant’s success story began
with working to conquer the fear of failure.”
It seems Kobe Bryant intuitively knew that, in order to be a great player, he
needed to conquer his fear of failing. The article goes on to tell the story of
a game in May 1997. It was Kobe’s first season for the LA Lakers, his
rookie season. He made four crucial errors inside five minutes, which some
say cost his team the game.
That night, the story goes, Bryant stayed up shooting hoops privately and
alone. He was still at it when the sun came up. I know this feels a little
sugar-sweet; it has a David versus Goliath feel to it. But there is more to
this than meets the eye.
On the surface, it reads that Kobe Bryant was beaten in that game and he
followed it with a punishing all-night session. To me the story tells of a man
who night-after-night confronted his fear of failure by repeatedly trying. He
became used to sometimes failing temporarily, and yet he kept at it.
Bull concludes by saying, “He missed more shots than any other player in
history. Bryant was willing to encounter failure in every game he played.”
It is not the first story I have read about an all-American great, someone
who confronted the fear of being wrong, in order to be proven right. Babe
Ruth, the American baseball player, held home run records for decades. At
the same time, he went by the nickname King of Strikeouts. If the term itself
doesn’t give it away, let me explain: a home run is great; a strikeout is the
very opposite.
I found the story resonated with traders all over the world who seek out
systems and strategies aimed at eliminating losing trades.
As I write this on a quiet trading day on 1 June 2020, I look over my trading
statistics for the month of May. I made a total of 1,513 points. Yet out of the
137 trades I executed, I lost on 66 of them, won on 53 of them, and broke
even on 18 of them (where stop-loss was moved to entry point).
If I gauged my success according to some of the hyped-up system sellers on
the internet who promise a 95% (or better) hit rate on trades, I am an abject
failure. I mean, I was less than 50/50 in May.
Yet, somehow, I still managed to make a decent return for the month. How
do you explain that? The answer is found in the erroneous belief that the
more winning trades you have, the better a trader you are. That is plainly
and simply wrong.
One of the popular clichés in the trading world is that you can’t go broke
taking a profit. Oh, hell yes you can. If you are unable to let your profits
run, you will never make money trading. While basketball and trading
differ on this point, if I were afraid to lose, I would never have had a
profitable month.
STATISTICS DO NOT MAKE SENSE
We know that 90% of traders lose. We also know from the FX trading
sample of 25,000 traders that most trading accounts have more winning
trades than losing trades. This does not make sense. How can we reconcile
those two facts?
The answer is found if you read between the lines of the story of Kobe
Bryant. If you are in a losing position, you are essentially wrong. However,
unlike a shot in a basketball game, where you immediately know when you
are right or wrong, in trading there is always the hope that the trade will
come back in your favour.
Hope is what keeps people in trades long after they should have closed
them. As the saying goes, hope dies last. So true, and so detrimental to
traders. How do I deal with hope and fear in my trading?
I tend to only feel hope when I am in a trade. I hope my position will come
good. I hope the market will move in my favour.
Fear, however, is felt in more situations. I can feel fear when I am in a trade.


s what keeps people in trades long after they should have closed
them. As the saying goes, hope dies last. So true, and so detrimental to
traders. How do I deal with hope and fear in my trading?
I tend to only feel hope when I am in a trade. I hope my position will come
good. I hope the market will move in my favour.
Fear, however, is felt in more situations. I can feel fear when I am in a trade.
But I can also feel fear when I am not in a trade. That is a subtle but
important distinction between hope and fear.
Hope tends to be reserved for the activity of being in the trade, while fear
manifests itself both when I am in a trade and when I am not in a trade. I
can be fearful that the market will move ahead without me, or I can be
afraid that I have closed my position too soon – which could also rightly be
classified as regret.
While I intend to write in much more depth about my trading regime at the
end of the book, I will describe my approach briefly now.
I deal with fear when I am in a trade by having an exit strategy. I have a
stop-loss, which defines the size of my loss. I have accepted this loss before
I started the trading day. It is part of my trading plan.
I will have mentally prepared in the morning, ahead of the trading day. I
will have sat quietly, contemplating what I am about to do. I will have
subjected my mind to images of me losing. I will have calmed my mind,
when it experienced these imagined losses, so as to negotiate away any
feelings of anxiety and regret, as well as desires to get revenge and get
even.
I will have dealt with hope by accepting that my stop-loss will define my
exit. Maybe I will win. Maybe I will not win. Before the trading day started
I will have gone through mental exercises that saw me enter the market,
observe the market move against me, negotiate with my fear brain and the
impulse urges it sent to my conscious awareness.
By the start of the trading day I will already have seen myself win and lose,
add to positions, and patiently wait for the right setup. By the time the bell
rings, opening the market for trading, I am mentally warmed up. I am ready
to fail without losing my composure.
MY COMPETITIVE SON
I have a fascination with reading about the lives of high-performance
soldiers. I love reading about the trials and tribulations of the SAS and
Navy Seals. My son shares this interest. In particular, we are fascinated with
the free-diving part of the training.
One of the obstacles that these elite warriors have to pass is the 50-metre
underwater free-dive. Do you think there is a shortcut to diving 50 metres
under water?
Take it from someone who has swum 46 metres under water, there is no
shortcut. I practised and practised while on holiday with my son. There
happened to a 50-metre swimming pool in the complex we were staying at.
Being the competitive spirits that both my son and I are, he set out first on
our initial attempt. He made it a little less than halfway. Now I had a goal,
and I made it almost to the halfway line. I beat him by an inch or two.
We spoke about how we could get better, and we agreed that we needed to
focus more on our preparation before the swim. So next we sat on the edge
of the pool, and we focused on filling our lungs with oxygen and
oxygenating our bodies.
Gradually we got better and better. Then we realised that if we swam less
frantically while underwater, we would expend less oxygen. Our focus
shifted to staying calm and taking rhythmic strokes.
By the end of the seven-day holiday, I came within a few strokes of 50
metres. My son was a metre or two behind me. Passing this test is one of
the major stumbling blocks for aspiring Navy Seals. I am not saying that
my son or I are Navy Seal material, but I am saying that there is no way you
are going to swim 50 metres under water without relentless practice.
We worked on it. Then we evaluated our process. We didn’t actually focus
on the outcome at all. We just did everything we could to make the process
as efficient as possible. Does that remind you of something? If you have a
goal that you want to make X amount of money a day, or a certain amount
of pips or points, you might be sabotaging your chances of making a lot of
money. You are outcome-oriented. You would benefit immensely from
shifting your focus to being process orientated.
BEST LOSER WINS
THE TIME HAS come to get more specific. We can skirt around the issue forever,
or we can decide to get our hands dirty and get down to the business of
creating a finely tuned trading mind.
What you become in life is dependent on the decisions you make and how
you react to decisions made on your behalf.
At Stanford University, Steve Jobs, standing at the podium in front of the
class of 2005, gave the new graduates their commencement speech – advice
on how to live life. It went something like this:
Remembering that you’re going to die is the best way I know to avoid
the trap of thinking you have something to lose. You are already naked.
There is no reason not to follow your heart.
Few can walk the walk when money is on the line. The main contributor to
not having the life you want is fear. Most play this game called life safely
within the boundaries they set while growing up, boundaries built by
avoiding pain and anxiety.
I am often asked if I know the secret to becoming a good trader. I think
many novices believe that I know some really good trading setups. They’re
not entirely wrong; yes, I know some great setups, but they still only work –
at best – about 70% of the time. I am still wrong 30 times out of 100.
I am not where I am in the trading world because of my IQ. I’ll tell you that
immediately. I am here because of my relationship with pain. Our brains
hate the idea of losing something that is valuable to us. The brain will
abandon all rational thought and make some really poor decisions trying to
avoid losing something that has value.
I am a profitable trader. Is that because I possess superior charting abilities?
No. Of c


trading world because of my IQ. I’ll tell you that
immediately. I am here because of my relationship with pain. Our brains
hate the idea of losing something that is valuable to us. The brain will
abandon all rational thought and make some really poor decisions trying to
avoid losing something that has value.
I am a profitable trader. Is that because I possess superior charting abilities?
No. Of course not. There are many brilliant chartists who can’t trade.
Is it because I have a superior system? No, there are many great systems but
most will still only have a 60% strike rate.
Is it because I have friends in high places that feed me insider information?
No. Did you not read my book? I am socially reclusive, and I certainly do
not have friends in high places.
I have no secrets. I have no special abilities, with the possible exception of
one. Do you want to know why I am so good at trading?
I am exceptionally good at losing. When speculating in financial markets,
the best loser wins. Don’t underestimate these four words.
Though it may go against the conditioning that life and the modern world
have programmed you with, success in financial market speculation is not
about being the best, coming first, or winning.
Instead, it’s about losing. Your relationship with fear and adversity will to a
very high degree define your life.
And that’s why I win. I win because I’m really good at losing. In trading,
unlike life, it’s the best loser that wins. Do you think a dentist, or a doctor
would be in business if they had a 60% win rate? Of course not. But a trader
can thrive and prosper on that kind of success rate – as long as they are
prepared for it. Most are not.
MANY ARE CALLED…
Trading attracts many people who shouldn’t be traders. They are led to
believe that trading is easy. Maybe a broker is tempting them; I’m sure
you’ve seen the broker advertisements where a calm, confident actor
knowingly pressing buttons in front of a bedazzling array of screens, then
walks away victorious with a confident smirk.
If you look at the trading industry, we are led to believe it is all about the
tools. Hang on – do you think I can play tennis like Roger Federer just
because I have a Wilson Pro tennis racket?
It’s an illusion. How do I know? Because, for years, I was an insider
working at one of the largest financial market brokers in London.
Why do so many people lose? Statistically speaking, it should be
impossible for so many people to lose. If the market is random – and most
of the time, market movement is indeed random – why do 90% of clients
consistently lose a 50:50 bet?
The answer is as simple as it is complex. It isn’t the market-beating them.
They are beating themselves. I wasn’t always a successful trader either. To
become successful, I had to break down the barrier that separates the many
from the few, in a business where there is no instruction manual, and where
the lesson comes after the test.
It didn’t take me long as a broker to notice our clients’ trading behaviour.
As a group, traders are predictable. Or, more accurately, their outcome is
predictable, because everyone is doing the same thing.
I watched thousands of traders execute millions of trades. Their behaviour
became predictable, almost as if they were connected together in one hive
mind. Week after week, month after month, year in, year out, when they
were making a loss they hoped the market would give them back their
losses, yet when they were making a profit they feared the market would
take it away.
They were fearful when they should have been hopeful. They were hopeful
when, in fact, they should have been fearful.
These human experiences helped make me the trader I am today. Watching
them struggle, I realised they were searching in the wrong place.
The answer they were so desperate to find is not found in the external. It’s
not found in the software, or in any of the tools. Instead, I realised, the
answer is to be found inside the self.
TUNING MY MIND
In the silence of the early morning, I’m in my office, preparing for the day’s
trading. It is a minimalistic office. Depending on where I am, there are
either two or four screens. That is it. There are no special monitors or water-
cooled PCs.
My secret ingredient is a couple of files on my hard drive. There is my
PowerPoint presentation on one screen. There is a Microsoft Word
document on another.
The PowerPoint file is my cue. At game time, before I begin to trade, it’s
time to become someone else. In the movie Gladiator, why does Maximus
Decimus Meridius rub dirt on his hands before combat?
It’s a ritual.
He must immunise himself before battle, to feel nothing, to become an
instrument of death, indestructible, so that he can survive another day.
Rubbing dirt on his hands is his ritual of leaving his old self behind. Every
day from 5 am until 9 pm, even late into the night, I am battling myself.
Trading is a battle of the self.
The PowerPoint file contains old trades, mistakes, triumphs, inspirations,
and warnings visually arranged to prepare me for the day ahead.
I need to become something else; otherwise, I will not make money. This is
why trading looks simple when looked at from the outside, but it’s not easy
because trading successfully goes counter to virtually every piece of DNA
stored in your body.
In the 1960s, neuroscientist Paul MacLean proposed the human brain has
evolved with three areas of function: the reptile brain, the limbic brain, and
the neocortex.
So, who’s really in charge when you are trading?
It’s your reptile brain, your base self, that’s really in charge. When you are
startled, and you react, perhaps you detect a wobble in your stomach, a
vibration in the lower back – that’s your reptile mind preparing you for
survival, triggering a fight-or-flight response.
Will you run, or will you fight? Your subconscious reptile mind has only
one function, and that is to protect you. It does this whether you want it to
or not.
And this is a problem, because to be successf


e
startled, and you react, perhaps you detect a wobble in your stomach, a
vibration in the lower back – that’s your reptile mind preparing you for
survival, triggering a fight-or-flight response.
Will you run, or will you fight? Your subconscious reptile mind has only
one function, and that is to protect you. It does this whether you want it to
or not.
And this is a problem, because to be successful as a trader you need to be
very good at losing. This means constant conflict with your built-in
subconscious protection system.
A system that protected you from death as a caveman guarantees you’ll not
survive as a trader – unless you can learn to overcome it. And overcoming it
begins with accepting pain.
One exercise I use in the morning is closing my eyes and playing out a
scenario. I imagine I lose a large amount of money. I will often use an
amount that has some significance to me, such as the cost of my last car, or
the cost of my son’s college tuition, or the size of a memorable loss.
Say for the sake of the argument that I have opted to meditate on losing
£78,000. I will see myself losing the amount. I will let it sit there – in my
consciousness. I will let it take hold. I will imagine what I will not be able
to buy because of the loss. I will make it as emotionally vivid as I can.
Now I will turn the table. I will now imagine that I am winning the same
amount. I will imagine that I am winning the £78,000. What will happen is
that my emotional response system will not allow me to feel a reciprocal
sense of joy to the misery I felt earlier.
Neurobiology has shown we experience a financial loss 250% more
intensely than an equivalent financial gain. After going through this
exercise of feeling pain and then not feeling pleasure, I then swap back to
feeling the loss again.
The purpose of the exercise is to align my feelings of gain and loss. In truth,
I don’t really want to feel anything – I have found that if I get overly happy
about a win, I tend to get overly sad about a loss. I don’t want that.
I am not a dentist who has a win rate of 99.99%. I am a bloody trader, who
has to live with being wrong around 50% of the time. It is exhausting to feel
joy and pain many times a day. I prefer not to feel anything at all, rather
than going through that emotional roller coaster.
I win. Move on.
I lose. Move on.
By adopting this attitude and by warming up my subconscious mind, I am
able to flow in and out of winning and losing trades, day in and day out,
without it affecting my strategy.
Pain is inevitable to some degree in life. Someone lets you down, you feel
pain. Someone hurts you emotionally or physically, you feel pain.
In life, outside of trading, one way to deal with the pain is to talk to
someone. As the saying goes, a problem shared is a problem halved.
Why a painful experience feels less potent after we have shared it with a
friend I don’t know. Maybe the act of verbalising the disappointment puts
the problem into a healthier perspective.
Either way, you feel better, and the pain subsides.
But when I’m trading, while the majority look to run away and rid
themselves of pain, I do the opposite. I run towards it. I embrace it. I don’t
want to share my pain. I want to hold on to it. I need it.
Whether you are new to trading and speculation, or you have years of
experience, you should give this question some serious thought:
If you want to be a success in a field where 90% or more fail, how do you
think you should approach this task?
Trading looks easy on the outside, but in reality it’s much more challenging
than people expect – because we are hardwired to do the opposite of what
we should be doing. This is why 90 out of every 100 people end up losing.
The road to consistency, success, and enlightenment in trading begins in the
last place you’d ever think to look. Inside yourself.
THE KEY
So, here it is. What follows is the key that will unlock the door to your
success, the key to breaking down the barrier between the life you want and
the life you are leading now.
If you want to succeed in an endeavour where 90% are failing, you have
two choices. You can study the large 90% losing group and do the opposite
of what they do, or you can replicate what the 10% do.
If you are not as successful as you want to be, sooner or later you need to
change your behaviour. It doesn’t matter if you’ve been trading
unsuccessfully for three months or 30 years, you are much closer to success
than you realise.
The 90% fail because they interpret the pain messages received
automatically from our reptile brain without any modification.
You need to learn to recode your brain’s messages when pain comes
knocking. Instead of reacting and running away, a small group of consistent
traders, the 10%, hold fast and run towards the danger – not away from it.
The 10% succeed because they have learned to flip the switch.
FLIP THE SWITCH
This will feel very uncomfortable, but it is a discomfort you must accept
and embrace if you want to succeed in the game of financial speculation. It
is the reason why trading looks simple but is not easy.
The paradox of trading is this: by doing what the 90% cannot do, you will
become successful. In other words, I expect to be uncomfortable. I expect
my trading to cause me anxiety. I am waiting for it.
I can sum it up in a few sentences:
1. I assume I am wrong – until proven otherwise.
2. I expect to be uncomfortable.
3. I add when I am right.
4. I never add when I am wrong.
ASSUME YOU ARE WRONG
Remember, I’ve watched thousands of traders execute millions of trades,
and I noticed when most traders enter into a position they assume they are
right. In a business where 90% of people fail, your recoding process begins
by flipping that switch.
I will assume that I will quickly have to get rid of a losing trade. My
confidence in this action is not centred around my ability to select the right
setup. That is what the 90% will do.
Instead, my confidence is centred around trusting I will get rid of


enter into a position they assume they are
right. In a business where 90% of people fail, your recoding process begins
by flipping that switch.
I will assume that I will quickly have to get rid of a losing trade. My
confidence in this action is not centred around my ability to select the right
setup. That is what the 90% will do.
Instead, my confidence is centred around trusting I will get rid of a trade
that is not performing. I trust myself to know that if this trade does not work
out, there will be another one coming shortly.
Do you see how I have flipped the switch on my thinking? I am thinking
differently to the 90%. I will assume I am wrong until the market proves me
right.
Flip the switch!
When the 90% of traders execute trades, they experience emotions, which
originate from their pain centre. Now it’s only a question of time before
their emotionally driven pain threshold centre sends them a false signal,
causing them to lose. It is a never-ending rollercoaster ride of
disappointment, lost money and pain.
When I trade, I assume I am wrong. I enter a trade, and the trade moves in
my favour. I am trading my account size or the available profit – I am
trading the market because I understand the size of my profit is irrelevant to
the market.
I know my P&L has no influence on the market. I know that my brain’s
automatic pain receptor will kick in causing an inbuilt safety reflex to
register pain.
I am subject to the same built-in automatic pain receptor as everyone else,
but the difference lies in how I handle the pain. Instead of giving in to it,
instead of being ruled by my emotional responses, I have flipped the switch.
I have trained myself to expect the pain.
I am aware of the pain. It is there. It is real, but I accept it. I have
encountered it in training over and over. It no longer acts as a debilitating
force in my life. I have trained the fear of out my decision making.
EXPECT TO BE UNCOMFORTABLE
How can you have a good time while you are uncomfortable? Logic will
say it is not possible. Well, for starters, I think all humans come alive when
we strive. We toil in the garden, we work out, we study for an exam. I think
it is perfectly possible to be uncomfortable while enjoying a challenging
process. As a trading position grows in profit, instead of giving into the fear
it will be taken away from me, I flip the switch, using my mental warm-up,
my training exercises and visualisation of trend days where the market just
goes higher and higher all day.
I flip the switch in my mind from negative mental imagery to positive
mental imagery. I see myself riding this monster momentum wave. I see
myself being at the forefront of every tick higher.
The 90% will focus on what they want to avoid. I focus on what I want to
achieve. The 90% give in to their fears. I expect my fears to come in
abundance, and I have a plan for counteracting them. I see a different
image.
And when I am losing?
Well, I already expected to lose anyway, so the market disagreeing with my
trade will not be associated with pain or fear. I expected it. I have accepted
my loss already.
I don’t entertain the idea of compounding my mistake by adding to my
losing position. I have trained that trait out of my mind. It doesn’t even
enter my mind anymore. My mind knows I want to be big when I am right,
and I want to be small when I am wrong.
Emotions kill trading accounts. It isn’t the lack of knowledge that’s
stopping you from winning big. It’s the way you handle yourself when you
are in a trade.
I spent a decade observing traders lose money. They were intelligent people
who often had great hit ratios, but they couldn’t lose well.
After reading this far, if you remember only one thing, remember this: in
trading, unlike life, the best loser wins.
THE IDEAL MINDSET
THERE IS AN ideal way to think as a trader. There is an ideal mindset – one that
is flexible to the extreme. It does not care about winning. It does not care
about losing. It is a carefree state of mind, but it still acts in your best
interest.
The ideal trading mindset has no fear. If you are alarmed by this statement,
then pause for a second. The ideal mindset may have no fear, but the ideal
mindset is still acting in your best interest. The ideal mindset might be
fearless, but it is not reckless.
Fear plays a significant role in explaining why people lose the game of
trading. This fear can manifest itself in several ways. It can be the fear of
not being in the market and missing a good move. It can be the fear of
staying in the market for too long and seeing the open profits disappear.
Can you acquire an ideal mindset? Yes. Without a doubt. You may have to
grow into it. You may have to begin a period of significant introspection
and get to know thyself. I will discuss how to get to know yourself as a
trader shortly.
The ideal trader mindset does exist, and you can train yourself towards this
state of thinking and believing. When you arrive at this state, it means you
are able to perceive information from the markets without feeling
threatened or fearful.
Does it mean you will never lose? No. You will have losing trades just like
everyone else. However, the ideal trading mindset is as at peace with losing
trades, as it is with winning trades. Neither will impact your ability to
unemotionally and dispassionately perceive market information in a non-
threatening frame of mind. Your emotional state will stay in balance.
Every trader has experienced periods of being in the zone, of being balmed
by the soothing feeling of the ideal mindset. It often happens when certain
circumstances are present. For me personally, I experience that sense of
calm whenever I am trading while on holiday.
One story stands out. I was on holiday for 14 days, and I traded every day
from my holiday home. I was totally at peace, trading only when the market
really spoke to me. Otherwise, I was at the pool relaxing in the sun.
When I returned to the trading floor, my boss came out and said, “So


stances are present. For me personally, I experience that sense of
calm whenever I am trading while on holiday.
One story stands out. I was on holiday for 14 days, and I traded every day
from my holiday home. I was totally at peace, trading only when the market
really spoke to me. Otherwise, I was at the pool relaxing in the sun.
When I returned to the trading floor, my boss came out and said, “Someone
is on fire!” and clapped. Fourteen days later I had given away all my
holiday profits. I remember the story so vividly because it happened to be
one of the catalysts that led me to seek a deeper understanding of myself as
a trader.
HARD-CODED DNA
The ideal mindset does exist, but few traders have it consistently. When we
do not operate from a frame of mind of the ideal mindset, we are afraid of
something. This fear is a manifestation of a lack of trust. We do not trust
ourselves to do what we have to do without hesitation, without reservation
or internal conflict or argument.
Our mind is the problem. Our mind’s core objective is to keep us alive and
avoid pain. We are automatically wired to think in a way that keeps us alive.
This thought pattern is hard-coded into our DNA. It might keep us alive, but
it makes trading difficult.
The very thing that keeps us alive is the very thing that makes trading an
incredibly difficult proposition, until you have learned how to counter your
hard-coding.
The issues we face largely fall into two categories:
1. We associate this moment with another moment, whether we are
conscious of it or not.
2. We have a mind wired to avoid pain.
We have learned to associate in order to benefit from experiences.
Association (connecting past moments with the present moment) and pain
avoidance do not go hand in hand with trading.
Why do I say this? Why do I say that association and pain avoidance are
detrimental to profitable trading? I say so because in trading each moment
is unique, and anything can happen. Trading is the equivalent of a coin-flip
game. Since the win ratio of many professional traders – including myself –
is not far from 50/50, the coin-flip analogy is even more appropriate than
you might think.
If you play a game of heads and tails, you are probably not too concerned
about the outcome. Over time it will play itself out quite predictably. You
will win 50%. You will lose 50%. If you developed a system where you lost
a unit on your losses, and you made 1.5 units on your wins, you have
yourself a good business.
Trading is just like that in many respects. You don’t judge your system on
the merit of one trade. You judge it over many trades. We do so because
even a game of heads and tails will show an uneven distribution, even if the
outcome over 100 flips is 50/50. As my friend David Paul once said, “There
is randomness in the outcome of one, but there is order in the outcome of
100.” He was talking about the coin-flip scenario.
I once flipped a coin 100 times, and I wrote down the result on a piece of
paper. I witnessed 15 heads in a row. At one point I stopped and looked at
the coin, as if to see whether there were obvious flaws to it. There weren’t.
If you had 15 losing trades in a row, I imagine your mental state would
suffer. If you had 15 winning trades in a row, you may feel invincible.
The market will do what the market will do. It doesn’t care about you or
your position. It doesn’t care if you are in the market or on the side-lines. If
you have 15 winners in a row, it doesn’t care. If you have 15 losers in a row,
it doesn’t care.
You can’t make the argument that just because you have lost on a trade you
are now closer to winning. By doing so, you are doing exactly what we
need to learn not to do. Every moment is unique. Just because you had 15
heads in a row does not mean the odds of a head are less on the 16th throw.
They are still 50/50.
Why? Because there is complete randomness in the outcome of one. That is
another way of saying that every moment is unique. However, over time the
law of averages will come into play, and over 100 throws, you will
experience 50 heads and 50 tails.
However, while you may understand this academically, and even logically,
there is a good chance you will not understand this emotionally, especially
if you just had 15 winners or 15 losers in a row. Therein lies the difference
between the trained mind and the untrained mind. I will steadily guide you
towards the trained mind, so that you do not succumb to fear.
PERCEIVING INFORMATION
Information on its own has no power over us. It is our belief system and the
energy we give to the information that decide its potency. If you receive an
email from an unknown person saying, “You are a dead man,” the chances
are your emotional reaction will be very different than if you received an
email saying, “Du er en død mand.”
The message is the same. One is in English, the other Danish. On its own,
the sentence is merely a construct of letters put together. Once it is decoded
by the brain, it is assigned an emotional charge. The sentence is
meaningless. It is how we interpret the sentence that causes the emotional
response.
So, imagine a mindset where you can perceive the market information
purely from an opportunistic point of view. You are not threatened by the
information. You are not thinking, “Oh God, why am I not in this move?”
You are not thinking, “Why am I in this move?” You merely observe and
decide from a frame of mind that sees opportunities. It does not see threats.
The market moves up and down in ticks all day. They form patterns, which
we trade on. These ticks up and down are just ticks. If you have a position
on, however, these ticks take on a life and meaning of their own. They
validate you, or they diminish you. That is not how you want to trade. That
is not an ideal mindset.
FOCUS AND ATTRACT
What we focus on is what we attract. I believe in that, so it is true for me.
The fear we experience causes us to focus on the object of our fear so that
we end up creating th