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Rande Howell

Looking Good, But Still Inconsistent in the Heat of the Moment

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The "Group-Think" of Traders that Blinds Them to What Really Matters

 

Have you ever listened to groups of traders talking about trading? If you have, you’d think (particularly to yourself) that everybody was hitting homeruns and driving in runs. But that’s not the reality. The reality is that they all are covertly participating in a form of group-think called looking good to others.

 

Have you ever noticed that no one talks about the real task of producing sustainable, consistent income from their trading? Instead, they talk shop in a vacuum refusing to address what they are ultimately seeking. The one thing that is most important to the financial health and long term survival of a trader, they do not talk about. Their eye is not on the ball – their eye is being distracted by talking about the minutia of trading, saving face, and the self-deception of looking-good.

 

Meanwhile, another year goes by – and it’s January of another year already. Time is ticking by (do you hear it in your internal clock), chipping away at your capital (sometimes chomping) and your timeline (just how much time can you fritter away before you feel the financial noose tightening?). And, right there, hidden in plain sight, is the answer they you avoid acknowledging. This is the place where the vast majority of traders stay stuck – being blind to their blindness. And the cost of this blindness is their trading success.

 

Their trading performance keep giving the struggling traders feedback about their performances in the form of drawdowns from their trading accounts, underscoring the real problem they are avoiding in their trading -- them. Yet, despite all the evidence, the "wannabe" traders refuse to look within themselves for the source of their performance problems. Instead, they focus on solutions outside of the psychology of performance. That’s not nearly as uncomfortable as acknowledging there is a chink in their armor that allows them to maintain their looking-good even while their trading capital erodes or stays stagnant. And the clock keeps ticking as the trader maintains their self-deception.

 

Meanwhile, they stay where it is safe – they talk around trading as if they (the one who is actually doing the trading) were not a constituent part of their trading. They talk the details of trading and, listening to them, a by-stander might be led to believe that everybody is making money. But what you’ve got is a bunch of really good Monday-morning armchair quarterbacks talking about the game from a spectator’s vantage point rather than from actual performance.

 

Waking Up to the Problem and to the Solution

 

The real question for the life-blood of an evolving trader, “Are you making consistent money?”, is not asked. And, if you are not making consistent money, another question begs to be asked, “How do you diagnose the problem and fix it?”. Once a trader has learned technically how to do his/her business, these are questions that take you to the core of the issue.

 

There is really no risk in the moment of performance to a spectator’s game face – only his looking-good in the fantasy league of fellow retail traders. What you will notice is that traders talk the game of trading, but not their performance in the game of trading. It is so much more self-effacing to talk about the game of trading (as if they were fans of the game, rather than participants), rather than to evaluate their performance as a function of their competence as a trader.

 

This discomfort of evaluating personal performance is so ingrained into traders' thinking that they will avoid dealing with it as long as the capital they bring to trading will allow it - or until they have felt enough prolonged pain and discomfort that they come to the conclusion that they are the problem in their trading. (And they are also the solution to their trading performances.)

 

For most traders to wake up to this pivotal moment, a tremendous amount of time and money may have been squandered needlessly. So much short-term energy was focused on saving face by looking -good that the long-term development of the mind that can embrace and manage ambiguity without a sense of dread of being wrong was never embraced.

 

And this is what is required to become a consistently successful trader. Once this is recognized at a core level, it seems simple, until you realize that your biology and your psychological underpinning conspire against the development of this kind of mind. Your biology and the psychology that arises out of your brain’s survival adaptation to its environment is biased toward the self-preservation of the status quo, rather than developing a higher functioning human being.

 

What Got You Stuck in Performance Limbo in the First Place

 

The power of this primordial drive for self-preservation needs to be understood in a different context from a civilized conception of man’s recent history. The brain builds a self that is adapted to survive in a particular environment. It doesn't care if that self thrives in that environment or not. It cares that the self (the bio-cognitive system that you have been organized into) survives. To the ancient brain that self needs to survive until sexual maturity, prevailing in your environment, and perpetuating the species through your survival success.

 

All successful strategies for dealing with the challenges of survival are hardwired into neural-circuitry as they are learned. Once wired they become an automatic response in the organism’s bio-cognitive repertoire. This means that successful adaptations to survival situations become a reactive dance between the environment and the self.

 

This is called the stress response. And this adaptive response mechanism was essential to our ancestors where danger lurked constantly in their environment. That danger was biological and life threatening. And the stress response, being reactive in nature, allowed our ancestors to have a better chance at surviving in an environment loaded with saber-toothed tigers and other predators. The problem is that this biological system of stress responses was built for another time and another environment than the world that the trader now lives in.

 

Unfortunately for the trader, the ancient brain (the emotional brain where all this stuff is wired), cannot distinguish between a biological threat and the psychological discomfort of uncertainty found in trading. And here is the kicker: When under stress, the brain is going to revert back to old familiar patterns learned long ago for the avoidance of pain. Remember, the emotional brain cannot tell the difference between biological threat (pain) and the psychological discomfort found in the management of uncertainty. The moment that the emotional brain perceives uncertainty (stress or the challenges of living life), it falls back to old familiar reactive patterns that have produced survival success in the brain's formative period.

 

This is what the trader perceives as falling apart in the moment of emotional uncertainty. And an emotional hijacking is triggered instinctively long before the thinking mind can begin to manage the uncertainty of a critical moment, unless the trader re-trains the body and mind to respond differently.

 

The Psychology of the Trader is Railroaded by Primitive Emotional Belief

 

This is where the bio-cognitive system that “you” are (responding instinctively to stress) and the deeply held beliefs about your capacity to manage uncertainty (that give rise to your trading psychology) conspire against you.

 

The Emotional Brain makes a decision and the Thinking Brain produces an explanation to support that decision, no matter how irrational. Your Emotional Brain on stress (managing the uncertainty in a moment of ambiguity in trading) reverts back to primitive stress responses learned long ago. And then, your Thinking Brain (rooted in beliefs learned in your family of origin, culture, and circumstance) demonstrates those beliefs under the stress of the moment.

 

If you are a human being that trades who tries to save face by “looking good” to the outside world, you are operating from a belief system rooted in a sense of inadequacy, not mattering, unworthiness, and/or powerlessness. And as long as you avoid engaging those beliefs head on, your Emotional Brain will continue to hijack your performance mind in the clutch. It will instinctually avoid the danger of not being able to survive in the environment in which it lives. Short term, this strategy works because it avoids the threat - and that is all the Emotional Brain is interested in. Long term, this biologically induced strategy keeps you, the trader, locked in the limbo world of perpetual mediocrity.

 

Toward a New Construction of the Self

 

When a trader learns that self-honesty is the most powerful tool he/she can possess, then the game of performance can change. There is no shame in being a fallible human being. It is our nature. It is also our nature to learn from mistakes. It is this openness to making and learning from mistakes that must be cultivated. Attempting to avoid mistakes simply keeps us stuck in old self-limiting patterns.

 

These patterns were successful solutions when certainty of survival was the driving force. But now, in the brave new world of trading, the trader has to step out of the old comfort zone that has become his prison. And now it is time to embrace self-honesty as a tool and reconstruct the mind that trades. It is your choice – stay stuck in old self-limiting patterns or intentionally and consciously grow new ones, adapted for the world of uncertainty found in trading.

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The "Group-Think" of Traders that Blinds Them to What Really Matters

 

Have you ever listened to groups of traders talking about trading? If you have, you’d think (particularly to yourself) that everybody was hitting homeruns and driving in runs. But that’s not the reality. ....................................................................................................................................................................................................................................................................

And now it is time to embrace self-honesty as a tool and reconstruct the mind that trades. It is your choice – stay stuck in old self-limiting patterns or intentionally and consciously grow new ones, adapted for the world of uncertainty found in trading.

 

I thought this was another of your very incisive pieces Rande. Thank you.

You have added more bite to to this one which may well account for the deafening silence from the assembled crowd.

 

perpetual mediocrity

 

This is a very catchy little truism.

 

Years ago (in another life) I had built up a staff of around 50-60 people and since I owned the Company, I took a particular interest in their well being and their incomes.

Occasionally, when someone was under performing I would have a quiet chat with them (not necessarily only about their job performance) and it always wound up with " you have perpetual potential, just make certain that you don't take it with you to the grave"

 

That little phrase could bat above it's weight and change attitudes overnight.

 

Regards

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I thought this was another of your very incisive pieces Rande. Thank you.

You have added more bite to to this one which may well account for the deafening silence from the assembled crowd.

 

perpetual mediocrity

 

This is a very catchy little truism.

 

Years ago (in another life) I had built up a staff of around 50-60 people and since I owned the Company, I took a particular interest in their well being and their incomes.

Occasionally, when someone was under performing I would have a quiet chat with them (not necessarily only about their job performance) and it always wound up with " you have perpetual potential, just make certain that you don't take it with you to the grave"

 

That little phrase could bat above it's weight and change attitudes overnight.

 

Regards

 

Hi Johnw

 

I find that there is a shift in trader's perception around the 5 year of trading (sometimes longer). When they have experienced the ups and downs of trading this long, they come to realize that maintaining a Marlboro Man attitude towards the supremacy of Rationalism is simply killing them slowly by maintaining it. I believe this is your perpetual mediocrity. And trading will expose this tragic flaw in their thinking if only they would look at their trading account as the barometer of the effectiveness of their beliefs that they are projecting onto the markets. But they insist on not listening to the facticity of their trading account -- and will continue to believe in their self deception until the money runs dry.

 

I get traders write all the time who have burned through their capital and time (staunchly maintaining their Marlboro Man position) and only then wake up to the folly of their logic. And, of course, they want me to help them out in the spirit of charity to a newly awakened soul who has seen the light.

 

My work has been blessed by earnest traders recognizing that the belief system that they assess trading through is the missing piece to becoming a masterful trader. Meanwhile there is silence.

 

Have a prosperous year

Rande Howell

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Hi Johnw

 

I find that there is a shift in trader's perception around the 5 year of trading (sometimes longer). When they have experienced the ups and downs of trading this long, they come to realize that maintaining a Marlboro Man attitude towards the supremacy of Rationalism is simply killing them slowly by maintaining it. I believe this is your perpetual mediocrity. And trading will expose this tragic flaw in their thinking if only they would look at their trading account as the barometer of the effectiveness of their beliefs that they are projecting onto the markets. But they insist on not listening to the facticity of their trading account -- and will continue to believe in their self deception until the money runs dry.

 

I get traders write all the time who have burned through their capital and time (staunchly maintaining their Marlboro Man position) and only then wake up to the folly of their logic. And, of course, they want me to help them out in the spirit of charity to a newly awakened soul who has seen the light.

 

My work has been blessed by earnest traders recognizing that the belief system that they assess trading through is the missing piece to becoming a masterful trader. Meanwhile there is silence.

 

Have a prosperous year

Rande Howell

 

Thanks Rande,

 

There is a great deal of truth in the expression "all we have to work with is ourselves"

The part that is missing is "but first we must learn how we work"

 

2014 is going to be a most interesting year as we continue to borrow our way out of debt and throw rhetoric at the reasons why it is not working.

We are in BA for a few months and last Thursday the City temperature hit a humid 47.8C (118F) on the very day that the Central Bank gave up their futile efforts to defend the Peso.

 

The whole place is a shambles needless to say .... but as some Wit remarked "we know how to create a crisis and then how to survive it"

How is that for 'perpetual mediocrity' ...

 

Regards

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Hi Johnw

 

I find that there is a shift in trader's perception around the 5 year of trading (sometimes longer). When they have experienced the ups and downs of trading this long, they come to realize that maintaining a Marlboro Man attitude towards the supremacy of Rationalism is simply killing them slowly by maintaining it. I believe this is your perpetual mediocrity. And trading will expose this tragic flaw in their thinking if only they would look at their trading account as the barometer of the effectiveness of their beliefs that they are projecting onto the markets. But they insist on not listening to the facticity of their trading account -- and will continue to believe in their self deception until the money runs dry.

 

I get traders write all the time who have burned through their capital and time (staunchly maintaining their Marlboro Man position) and only then wake up to the folly of their logic. And, of course, they want me to help them out in the spirit of charity to a newly awakened soul who has seen the light.

 

My work has been blessed by earnest traders recognizing that the belief system that they assess trading through is the missing piece to becoming a masterful trader. Meanwhile there is silence.

 

Have a prosperous year

Rande Howell

 

Nice article .

 

I had an illusion that I could devise highly profitable and consistently profitable methods , hand them to some hired employees to follow and produce the profits.The staff did not make it work , the systems were highly profitable and week after week the systems would make pips , it was a holy grail system.Every week the staff would make mistakes in real time trading , instead of making 250 pips in a week , they would come out with minus 10.

 

There were many things I did not realize about the staff .

 

They needed to be right about every entry and exit , so trades would be entered late often making many winning trades into losing trades.We need comfort and need to be right , the staff would enter after the move was confirmed.

 

After a week of losses , or no progress on account , the staff walked out .The market conditions were bad , but their mistakes made it worse.The following week , the same system made 200 pips , but the staff had fled from losing.

 

Why do they make simple mistakes in real time?One closed a trade very early , second looked at 30 minute charts and entered , there were no system rules asking for exits or entries.One was short the u k 100 , balied out for 40 pips less , when he saw the dax rebounding higher , he needed comfort for protecting his profit .This was a stress response to protect his profit.

 

Another was long the dax , as soon as the red bar appeared , he ran for cover and closed a position for 10 pips , whereas the system following would give him 60 pips on that trade.The red bar appeared like a cat among the pigeons , thered bar was a cat that scared away the profits.The body gets the same jolt of adrenaline that readies it for fighting or fleeing, but the brain has calculated that at least for that moment, your best odds of survival come with cutting your profits ,running and protecting the account balance.

 

The need to be right , as being wrong about a trade , makes them feel uncomfortable.

The stress responses are to put on a reversal trade or add to losing positions to average down , to recoup account losses , even though the odds are against the trader.

 

 

The task may be to instill a belief system about my method/system , it's odds and everything about this system .I am still struggling to find the right people who can follow systems and rules.What other problems am I going to encounter with staff?

 

Why is it most traders can not follow systems , even though they believe in the system and it's profitability?Why do traders freeze in the heat of the moment?What is the stress respnse Fight, Flight Or Freeze ?

 

Most trading problems are phsychological.

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Nice article .

 

I had an illusion that I could devise highly profitable and consistently profitable methods , hand them to some hired employees to follow and produce the profits.The staff did not make it work , the systems were highly profitable and week after week the systems would make pips , it was a holy grail system.Every week the staff would make mistakes in real time trading , instead of making 250 pips in a week , they would come out with minus 10.

 

There were many things I did not realize about the staff .

 

They needed to be right about every entry and exit , so trades would be entered late often making many winning trades into losing trades.We need comfort and need to be right , the staff would enter after the move was confirmed.

 

After a week of losses , or no progress on account , the staff walked out .The market conditions were bad , but their mistakes made it worse.The following week , the same system made 200 pips , but the staff had fled from losing.

 

Why do they make simple mistakes in real time?One closed a trade very early , second looked at 30 minute charts and entered , there were no system rules asking for exits or entries.One was short the u k 100 , balied out for 40 pips less , when he saw the dax rebounding higher , he needed comfort for protecting his profit .This was a stress response to protect his profit.

 

Another was long the dax , as soon as the red bar appeared , he ran for cover and closed a position for 10 pips , whereas the system following would give him 60 pips on that trade.The red bar appeared like a cat among the pigeons , thered bar was a cat that scared away the profits.The body gets the same jolt of adrenaline that readies it for fighting or fleeing, but the brain has calculated that at least for that moment, your best odds of survival come with cutting your profits ,running and protecting the account balance.

 

The need to be right , as being wrong about a trade , makes them feel uncomfortable.

The stress responses are to put on a reversal trade or add to losing positions to average down , to recoup account losses , even though the odds are against the trader.

 

 

The task may be to instill a belief system about my method/system , it's odds and everything about this system .I am still struggling to find the right people who can follow systems and rules.What other problems am I going to encounter with staff?

 

Why is it most traders can not follow systems , even though they believe in the system and it's profitability?Why do traders freeze in the heat of the moment?What is the stress respnse Fight, Flight Or Freeze ?

 

Most trading problems are phsychological.

 

 

What great hard earned observations and questions. I'll give you my responses.

 

Why is it most traders can not follow systems, even though they believe in the system and its profitability?

 

There is a difference between what a trader professes he believes (while not under pressure) and the beliefs that come out in the performance of execution in the heat of the moment. When under stress, people revert to more hardwired responses learned when the brain is laying downs its more primitive programs.

 

So, they are following a system. But its not the system they learned from you. That learning is hijacked under pressure and reverts back to an earlier problem solution based on short term survival interests rather than long term profits. I spend a good bit of time training traders to manage this aspect of performance.

 

Why do traders freeze in the heat of the moment?

 

Rational mind has been hijacked and they go back to primitive impulse when uncertainty (fear of death to the biological organism) is pressed upon them. The brain is wired to presume certainty and therefore determining outcome even when ambiguity is the rule. Jumping to a conclusion, even if its crazy, and being certain again is better than facing the uncertainty. This is your "got to be right" observation.

 

What is the stress response?

 

It is learned. Mostly the experience is over loading the perceptual map of the person and they experience powerlessness when the stress builds to distress. To avoid this, the person "has to be right" until that mindset is overwhelmed. Then they move into fear and panic. And they do the stupid things your traders did.

 

Finding the right people.

 

In your interview process, learn to observe your own biases regarding "what it takes to be successful". Most success mentality is about the urgency to take action, making things happen, and being in control. Once you see these traits in yourself, it is easier to see them in others. These traits may be useful in other endeavors, but they are dangerous in trading. Get people to tell stories about themselves and the way they faced challenges. The story of facing challenges will reveal much about the way they will trade. Conquering narratives would be a good indicator of someone you would not want to invest resources into to produce a successful trading mind. Trading mind is about comfort with uncertainty, not knowing, and letting go of the illusion of control.

 

Rande Howell

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Rande

 

How does the need not be wrong cause stress and lead to loss aversion behaviour ?Loss aversion is avoiding putting on trades and exiting good profitable trades in fear of losing trades?

 

Is there a connection between mindlessness and freezing due to stress responses ?

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What great hard earned observations and questions. I'll give you my responses.

 

Why is it most traders can not follow systems, even though they believe in the system and its profitability?

 

There is a difference between what a trader professes he believes (while not under pressure) and the beliefs that come out in the performance of execution in the heat of the moment. When under stress, people revert to more hardwired responses learned when the brain is laying downs its more primitive programs.

 

So, they are following a system. But its not the system they learned from you. That learning is hijacked under pressure and reverts back to an earlier problem solution based on short term survival interests rather than long term profits. I spend a good bit of time training traders to manage this aspect of performance.

 

Why do traders freeze in the heat of the moment?

 

Rational mind has been hijacked and they go back to primitive impulse when uncertainty (fear of death to the biological organism) is pressed upon them. The brain is wired to presume certainty and therefore determining outcome even when ambiguity is the rule. Jumping to a conclusion, even if its crazy, and being certain again is better than facing the uncertainty. This is your "got to be right" observation.

 

What is the stress response?

 

It is learned. Mostly the experience is over loading the perceptual map of the person and they experience powerlessness when the stress builds to distress. To avoid this, the person "has to be right" until that mindset is overwhelmed. Then they move into fear and panic. And they do the stupid things your traders did.

 

Finding the right people.

 

In your interview process, learn to observe your own biases regarding "what it takes to be successful". Most success mentality is about the urgency to take action, making things happen, and being in control. Once you see these traits in yourself, it is easier to see them in others. These traits may be useful in other endeavors, but they are dangerous in trading. Get people to tell stories about themselves and the way they faced challenges. The story of facing challenges will reveal much about the way they will trade. Conquering narratives would be a good indicator of someone you would not want to invest resources into to produce a successful trading mind. Trading mind is about comfort with uncertainty, not knowing, and letting go of the illusion of control.

 

Rande Howell

 

This is gut feeling , ik a trader's job was split between three jobs , they would perform much better .They would be given a system to follow.The whole trading job can be made more mechnaical , and freed from phsychological issues or with less emotional and phsychological constraints. The solution would be to have a researcher/analyst for looking for entry ,the second person would be a trade input person and the thirs person would manage the trades and exits.They would follow fixed rules for each of the functions ,without any attachment to the outcome of the trade.

 

 

What do u think of this idea and what problems will they create in executing the trades?

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This is gut feeling , ik a trader's job was split between three jobs , they would perform much better .They would be given a system to follow.The whole trading job can be made more mechnaical , and freed from phsychological issues or with less emotional and phsychological constraints. The solution would be to have a researcher/analyst for looking for entry ,the second person would be a trade input person and the thirs person would manage the trades and exits.They would follow fixed rules for each of the functions ,without any attachment to the outcome of the trade.

 

 

What do u think of this idea and what problems will they create in executing the trades?

 

Great in theory, but putting it into practice with real live human being that don't know and appreciate that under pressure, they will revert back to much more primitive reactive patterns, could prove difficult.

 

This approach is basically used in the professional investing industry. Analysts make recommendations, portfolio managers make entry decisions, traders are given their orders. Then portfolio manages the position until they give orders to the trader to exit the position. They generally are looking at a 2 month horizon in these cases. In China, the average hold time is a mere 2 weeks -- swing trading. Still, the person assuming the risk, sweats. It's very common for the fund manager to manage his positions for the short term to keep his clients and his job, rather than think in the long term. That human thing, confronted by uncertainty, just doesn't care about how rational or impartial you like to believe you are. That's why Emotional Finance is a growing field in the highly competitive field of the investment industry.

 

What I hear from trader trainers I work with in their trading rooms is that the trader/trainer calls the trade that he himself is taking out to his audience. They are supposed to enter. The master himself is entering, so why shouldn't they? 60% don't. They report, "I just missed that one."

 

Really frustrating for the trader/trainer. The same thing happens on trade management. They see the teacher managing the trading, using his rules and understanding of market structure. The students still wiggle emotionally and get out of the trade early.

 

I would love to see how you organize this. What I hear is that you are breaking the risk adversity down into digestible chunks for a group of people to deal with collectively rather than all of it being on one's person's back. Let me know.

 

Rande Howell

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You anylysis and response in the previos reponse in post 6 is is very good and accurate.It happens in real time , they close trades if they have doubts , even if system rules forbid closure of trades.

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You anylysis and response in the previos reponse in post 6 is is very good and accurate.It happens in real time , they close trades if they have doubts , even if system rules forbid closure of trades.

 

That is where training for and exposure to the heat in these moments really has to be a real consideration in the maturation of a non-performing trader to a profitable trader. It takes some work, but it can be done. There a whole part of my training that is focused on this particular aspect.

 

Rande Howell

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Great in theory, but putting it into practice with real live human being that don't know and appreciate that under pressure, they will revert back to much more primitive reactive patterns, could prove difficult.

 

Some traders had egos , they wanted to put on trades by themselves , they felt inferior low self esteem , at giving out signals to others and not trading themselves.They had their own selfish benefits to look at , which was to be a trader , rather than to provide signals for other traders

 

This approach is basically used in the professional investing industry. Analysts make recommendations, portfolio managers make entry decisions, traders are given their orders. Then portfolio manages the position until they give orders to the trader to exit the position. They generally are looking at a 2 month horizon in these cases. In China, the average hold time is a mere 2 weeks -- swing trading. Still, the person assuming the risk, sweats. It's very common for the fund manager to manage his positions for the short term to keep his clients and his job, rather than think in the long term. That human thing, confronted by uncertainty, just doesn't care about how rational or impartial you like to believe you are. That's why Emotional Finance is a growing field in the highly competitive field of the investment industry.

 

The hired traders would get into trades they feel would produce results , they would only put on trades they felt they would be right about and make small quick profits , they would not run their profits.After a small profit , they would look for reasons to exit , and they certainly would exit to keep their jobs , as opposed to running the profits of several hundred points

 

What I hear from trader trainers I work with in their trading rooms is that the trader/trainer calls the trade that he himself is taking out to his audience. They are supposed to enter. The master himself is entering, so why shouldn't they? 60% don't. They report, "I just missed that one."

 

They don't enter trades and miss trades due to hidden beliefs that are contrary to trades , emotions , mood , fear self esteem after a string of losses and a dozen other reasons

 

Really frustrating for the trader/trainer. The same thing happens on trade management. They see the teacher managing the trading, using his rules and understanding of market structure. The students still wiggle emotionally and get out of the trade early.

 

I would love to see how you organize this. What I hear is that you are breaking the risk adversity down into digestible chunks for a group of people to deal with collectively rather than all of it being on one's person's back. Let me know.

 

I tried to ask them to do the jobs of analyst , trade input and trade manager , but they wanted to do all three jobs at same time.

 

Rande Howell

 

The traders are still under performing .There are not willing to accept a solution to their under performance. .These traders suffer from immaturity, lack of adequate mental skills , impatience , emotions including greed , fear , revenge , desires for profit , frustration , rage ,nervousness ,excitement , gambling addiction , impulsive and impatience stress , depression , reactive patterns ,the need to be right , selfish objectives , ego , narcissistic personality and other personality disorders , fixed mindset issues , loss aversion tactics and profit protecting further trade aversion issues.

 

The problem is we are dealing with human beings and their 9 inches between the ears .After firing a few traders , they all claimed they were better traders or now run profitable strategies for themselves , the real truth is in your first post , they are still looking for jobs , they can not admit failure or poor performance or under performance..They are all great traders , but they were still fired .

 

There is shame in being a fallible human being , they do not want to be told about their mistakes , mistakes which are losing more points than they make overall.

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That is where training for and exposure to the heat in these moments really has to be a real consideration in the maturation of a non-performing trader to a profitable trader. It takes some work, but it can be done. There a whole part of my training that is focused on this particular aspect.

 

Rande Howell

 

Training them for and exposure to the heat of the moments , is in my view a 1 to 3 year training under a mentor in live market conditions .I managed to make a novice into a profitable trader , that took 1 year .After 1 year he is not a very skilled trader , the success depends on the room to train the mind ,either that is young growth mindset that is willing to learn or a fixed experience and learned mindset than knows it all and can not absorb or change , The cost of this one on one training , for 1 whole year is far greater than the $45k charged for super trader programs.

 

What is the time required to retrain a mind to be consistently profitable ?This depends on the level of skill required. , that is mental and technical skills.What kind of mindset is easily trainable ?

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Training them for and exposure to the heat of the moments , is in my view a 1 to 3 year training under a mentor in live market conditions .I managed to make a novice into a profitable trader , that took 1 year .After 1 year he is not a very skilled trader , the success depends on the room to train the mind ,either that is young growth mindset that is willing to learn or a fixed experience and learned mindset than knows it all and can not absorb or change , The cost of this one on one training , for 1 whole year is far greater than the $45k charged for super trader programs.

 

What is the time required to retrain a mind to be consistently profitable ?This depends on the level of skill required. , that is mental and technical skills.What kind of mindset is easily trainable ?

 

This is really an interesting experience you are describing here. Right now, my thinking is that the problem is really about the need to shift from a deterministic mindset where outcome controlled is attempted to probability based mindset (game theory) where the only thing that can be controlled is the mind that is brought into the moment of uncertainty.

 

It is difficult to train. Not because the material is all that difficult, but because the human is so resistant to changing belief pattern. Even though we now know Descartes and Newton had enormous limitations in their theories, in the deterministic paradigm the organism feels a false sense of control that feeds into the brain's tendency toward self-deception. This trumps long term thinking every time. In the probability paradigm (though more honest) triggers the vulnerability of the fear of the unknown.-- and its short term consequences predicted by brain's survival circuitry. It is learning how to accept and work with the vulnerability of the moment -- before outcome is known -- that the trader has to master to be successful.

 

I saw this in trainings I was giving on Wall St. earlier this week. They know their is a high probability of loss on any given trade or position in a given day, but they are taught to win at any cost. They are rewarded and punished based on this criterion. One particular group is taught to believe that they must win every trade. There is also a very high burn out rate or attrition rate in this firm. They also know that if they are right 48% of the time, they will be wealthy. And if they hit 52%, they will become a legend.

 

Yet, they cling to the short term need to win every time -- or create a narrative projecting blame and responsibility outside of the self.

 

Hey, if we can have discussion like this, I'll start publishing here again.

 

Rande Howell

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Great in theory, but putting it into practice with real live human being that don't know and appreciate that under pressure, they will revert back to much more primitive reactive patterns, could prove difficult.

 

 

Rande Howell

 

No matter what you do with traders , what instructions you give them i.e breathing exercises , meditation , they revert to their primitive subconscious self.

 

Traders revert to their subconscious learned methods , in times of uncertainty ,stress and pressure .A system we provide will not be followed by traders , under the influence of emotions , they will usually revert to their natural subconscious instincts , in times of uncertainty , ambiguity , stress , duress or chaos in the market.

 

A trader with a subconscious mind which is programmed for a single professional trading method IS LIKELY TO SUCEED .This is because their mindset and subconscious will revert to all learned methods simultaneously and mix up parts of many different methods .Imagine putting all the animals in one cage in a zoo , this is a similar process to mixing many systems /methods together , it will inevitably lead to disaster and the trader will inevitably mess up.

 

You also have the fallacy of training traders in multiple methods , it will lead to disaster.It is hard because , we as humans are not very efficient processors of information. YOU NEED A RIGID FIXED SYSTEM IN EACH TRADER;S MINDSET.

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This is really an interesting experience you are describing here. Right now, my thinking is that the problem is really about the need to shift from a deterministic mindset where outcome controlled is attempted to probability based mindset (game theory) where the only thing that can be controlled is the mind that is brought into the moment of uncertainty.

 

Controlling the mind has it's benefits and flaws , they will avoid a lot of poor trades but they will miss many really good opportunities , tick by tick assault on the trader's judgement will frustrate the trader and will suck him into being his own true self with the hardwired problems of the human brain in trading

 

It is difficult to train. Not because the material is all that difficult, but because the human is so resistant to changing belief pattern. Even though we now know Descartes and Newton had enormous limitations in their theories, in the deterministic paradigm the organism feels a false sense of control that feeds into the brain's tendency toward self-deception.

 

Find an unbiased technical analyst with the sole job of being a technical analyst .His reward is based on technical analysis , not the outcome of the trade or the account balance.Give him bonuses based on his analysis and give him a highly profitable system with a 80% hit rate to provide analysis on

 

This trumps long term thinking every time. In the probability paradigm (though more honest) triggers the vulnerability of the fear of the unknown.-- and its short term consequences predicted by brain's survival circuitry. It is learning how to accept and work with the vulnerability of the moment -- before outcome is known -- that the trader has to master to be successful.

 

You do not need this trader character , but a analysis directed system follower .He will input trades and exit based on system rules.Don't hire anyone intelligent , just a moron who follows systems unquestionably. Get rid of the trade.The system follower will input the trades , based on analyst recommendations.All the problems of the trader and his under performance are gone , because this character has no place in trading profitably

 

I saw this in trainings I was giving on Wall St. earlier this week. They know their is a high probability of loss on any given trade or position in a given day, but they are taught to win at any cost. They are rewarded and punished based on this criterion. One particular group is taught to believe that they must win every trade. There is also a very high burn out rate or attrition rate in this firm. They also know that if they are right 48% of the time, they will be wealthy. And if they hit 52%, they will become a legend.

 

 

This is crazy . A good analyst/technical analyst will give good trading signals , they don't cost more than a $200 per week and a good system input executioner does not cost more than $200 per week

 

Yet, they cling to the short term need to win every time -- or create a narrative projecting blame and responsibility outside of the self.

 

This is a probability game , it can be applied profitably with the use of a system designer and a trading phsychologist

 

Hey, if we can have discussion like this, I'll start publishing here again.

 

Rande Howell

 

Trading is very simple , 10 % is the system 90 % is the 9 inches between the ears.Give me a growth mindset , a system following technical analyst and a dumb system follower , and I will make them into a 500% a year team (with a 5% draw down).Your job is to eliminate the self from each trading related decision , you have to eliminate emotions , ego , stress , personalities and subconscious primitive minds from trading.

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Trading is very simple , 10 % is the system 90 % is the 9 inches between the ears.Give me a growth mindset , a system following technical analyst and a dumb system follower , and I will make them into a 500% a year team (with a 5% draw down).Your job is to eliminate the self from each trading related decision , you have to eliminate emotions , ego , stress , personalities and subconscious primitive minds from trading.

 

Can't eliminate emotions, mind, or self from trading mind. Except if you are dead. If you've figured out a way to eliminate emotions as part of an organism's dance with the environment, I'm sure neuro-science would be very interested. But you can become the designer of the emotions and mind that you bring into the moment. It's not the absence of emotion that is possible -- it is the management of what emotions are showing up responding to the uncertainty of the unknown. This is what creates the quality of the mind in the midst of the performance.

 

Rande Howell

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Oilfx why not place an add

 

Wanted - 30 babies for a trading experiment.

Come back in 30 years to see if it worked. (you might become a rich parent)

 

.....................

Rande - was the firm on wall st you visited a market maker or HFT with the aim to win on every trade - or simply trying to instill a competitive and darwinistic mindset.....which I dont think works well when day trading (unless it about gaming others and being competitive and fighting others for the edge of HFT or market making)?

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Oilfx why not place an add

 

Wanted - 30 babies for a trading experiment.

Come back in 30 years to see if it worked. (you might become a rich parent)

 

.....................

Rande - was the firm on wall st you visited a market maker or HFT with the aim to win on every trade - or simply trying to instill a competitive and darwinistic mindset.....which I dont think works well when day trading (unless it about gaming others and being competitive and fighting others for the edge of HFT or market making)?

 

Babies learn better than old dogs , they would make much superior traders .It is easier to rewire fresh minds than old dog's or try to change old dogs who will resist change.

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Oilfx why not place an add

 

Wanted - 30 babies for a trading experiment.

Come back in 30 years to see if it worked. (you might become a rich parent)

 

.....................

Rande - was the firm on wall st you visited a market maker or HFT with the aim to win on every trade - or simply trying to instill a competitive and darwinistic mindset.....which I dont think works well when day trading (unless it about gaming others and being competitive and fighting others for the edge of HFT or market making)?

 

The firm is highly competitive and is known on Wall St to recruit traders and pm's with a take no prisoners, dog-eat-dog attitude that is the backbone of the firm. They also behave this way internally. This was the first time they had allowed a peak performance guy to train personnel. They also have a high burn out rate even for Wall St. The head trader was not open to my message, but the portfolio managers were. The pm's stay around a lot longer.

 

This firm was over the edge, but all the firms I did training for held an attitude that they expected to win ever day. It was so different from the trainings I've done in Asia and Europe, where there was an acknowledgment that that notion is not workable. It was just striking to me that there could be so much difference between cultures. The Americans were much more like the Chinese than the other financial cultures I worked with in this must win attitude. I've never worked with Australian financial firms so I have no basis to compare there.

 

Rande

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Interesting distinction between PM and traders.....

there is certainly a lot of difference between those who make portfolio decisions, those who execute for PMs (I dont count this as trading though many pretend it is), those who trade for a firms capital, those who trade for themselves, those who invest for themselves, market makers and HFT who take an edge, or other 'traders' who have an inbuilt edge either via order flow, high fees etc.

 

As for Oz - been a while since I was back there working so it might be different in some firms now however, there was all sorts (relaxed, aggressive etc) , idiots, dreamers, realists, managers who had unrealistic expectations....usually not as aggressive as maybe Wall st as most Americans in NY can come across as pretty agro normally compared to some. Part of the winner takes all Americans have maybe (too many generalisations I know):doh:

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Guest OILFXPRO

 

This firm was over the edge, but all the firms I did training for held an attitude that they expected to win ever day. It was so different from the trainings I've done in Asia and Europe, where there was an acknowledgment that that notion is not workable.

 

Rande

 

Could you not convince them their "win every day attitude" is counterproductive to consistent profitability?

 

I have read a lot of your articles and seen videos and books .They are quite good .Thanks for coming across our path.

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Could you not convince them their "win every day attitude" is counterproductive to consistent profitability?

 

I have read a lot of your articles and seen videos and books .They are quite good .Thanks for coming across our path.

 

There entire compensation package is built around short term success or failure. Consistently profitable traders do not get the same bonuses are the home run hitters, though they out perform them in the longer term. It like they know they need to think long term, but the entire culture is stacked to act in the short term. Traders and pm's burn out early so you see young people in these positions. It's a self selecting breed. John Coats, a nuero-scientist who studies the financial markets, has studied and written about this extensively.

 

Currently I'm brought in for 2 hour trainings. I see a mix of traders, portfolio managers, and fund managers. It is the fund managers and portfolio managers that are most open to my message.

 

Thank you for your kind remarks. Trading is a remarkable laboratory for me. The process of trading cuts to the bone like in no other endeavor I've seen. The trading account is a pure measure of the beliefs that the trader is projecting upon the markets. Self honesty is required for the building of long term success.

 

Rande

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