Episode 260: Trading Mistakes Are Never About Trading

by robbooker on June 4, 2014

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Your host Rob Booker opens Episode 260 of The Traders Podcast by discussing a hot-button current events topic about a rescued POW. This leads to Rob asking what is our obligation — as a community of fellow traders — toward other traders who don’t do well. Rob talks about the benefit (or lack thereof) of piling more negativity on top of a trader who already suffers from regrets. Instead, in this episode, you’ll hear Rob give a prescription for more positivity. He also says trading mistakes are never about trading.

And Rob poses a question at the end of this episode that we’d like to hear your comments on: Can someone learn to trade in absolute silence (or in a vacuum — without any outside guidance)? Let us know in the comments, please. Thanks for listening.

Links from this episode:

The Man Behind the Mic — Jason Pyles

Rob Booker.com

RobBooker.com/mail

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Rob on Twitter: @RobBooker

The Traders Podcast on Twitter: @TradersPodcast

TFL365.com

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Trader Interviews.com

{ 3 comments… read them below or add one }

Dave of London June 4, 2014 at 2:49 pm

Great stuff.
Need to split the shows between two categories : Informational and Meandering (but thoroughly enjoyable twaddle about everything from current movies to politics, religion, sex and personal prejudices)
Excellent stuff !!!

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Brian F. June 5, 2014 at 6:50 pm

Can someone learn to trade in absolute silence? (or in a vacuum — without any outside guidance?)

No, no way, nope, not a chance.

How? Through luck? Through the friggin Force? It’s not going to happen through intuition or logic, because trading isn’t always logical, it sometimes counter intuitive, conditional, and completely foreign to the primate brain. How are you going to learn how to trade in a vacuum?

Although isolating yourself from other traders and news can make you a better trader, an issue discussed in Nicholas Darvos’ How I Made $2,000,000 in the Stock Market, you first have to become a trader. That means LEARNING HOW TO DO THINGS THE WAY MOST PEOPLE DON’T DO THINGS.

A trader is a risk manager in a probability based business. Human minds don’t think in terms of probability, they live in the here and now. Our human nature urges us to over value individual trades, struggle to turn losers into winners, to take small profits, and basically do everything that doesn’t work.

You CAN isolate yourself and experience blind luck initially, but being unaware of risk won’t prevent it from catching up with you. This has been one very hard day, so I’ll try to be concise.

Position sizing lies at the heart of good trading. The appropriate sized position is always smaller than human intuition appreciates. You simply cannot survive this sport without understanding money management, sizing appropriately, controlling leverage, instituting good drawdown rules, and journaling so that you,

a) even know what you are doing, and
b) can plot the long range effects of what you do and plan accordingly.

The reality of operating in a probability based sport is your perception of reality is your enemy. Your memory of the day to day experiences in the trenches is definitely not the reality you’ll face at the end of the year.

The only good thing about trading in an absolute vacuum, is nobody can hear your screams.

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Brian F. June 5, 2014 at 7:18 pm

I wrote this early in the day, before I was tired, and angry, and well, old. It comes from the heart. It’s an important topic to me. I think we make three different types of mistakes as traders: the basic human mistakes all humans make regardless of skill or experience; the process related mistakes we make that can be anticipated and prevented; and the repeated mistakes we make because we are basically delusional creatures that REFUSE to accept reality, and are willfully blind to our failings.

A Tale of Two Podcasters.

It was the best of casts, it was the worst of casts (LOL). Unfortunately, unscripted discussions can sometimes range too far, mix issues, and confuse new traders. Yes, it’s important to provide emotional support to traders when they are down, but not at the cost of helping them. Trading can be an addictive and self destructive endeavor. People who treat, for example, alcoholics or drug addicts, know that these afflicted people and their families can go for years, making excuses and ignoring “the elephant in the room.” As a trader, you don’t have years and multiple fortunes to waste. So the proper support for a losing trader is to give him what he needs.

Sometimes a losing trader needs hand holding, and sometimes he needs a bitch slap. That can confuse people about your motivations. I fell afoul of this in the past when people thought I was using too much stick and not enough carrot, but when I hear how a trader made money over a long period of time, only to repeatedly give it all back in a few big losses, and that trader STILL expressed the opinion that all he needed was a new system and service to pick winners, I knew I was dealing with someone in denial about their money management problems. A lot of people out there are fixated on offense. Sure, they make money, it’s just that they give it all back. Most of them are in denial, searching for a holy grail rather than facing reality. Self esteem won’t help these traders, only reality will. You don’t trade to “win,” you trade to make, and keep, money.

First things first, right Jason? The first thing a trader in denial needs is not a self esteem injection, just the opposite, they need humility. People in denial don’t need abuse, but they do need a mirror and a come-to-Jesus speech about how ugly their life will be without real change, because otherwise they are going to keep right on losing. In such situations, the self esteem stuff has to come second. This is the reality of coaching, any type of coaching. Vince Lombardi didn’t take the Packers to the Superbowl by unnecessarily breaking down his player’s self esteem, but he also wasn’t known as a touchy feeling guy who was afraid to address real problems head on.

If all this seems cruel, at least it’s not unnecessarily cruel. I remember a great trader telling me “The market doesn’t give an “F” about you.” That’s sound advice Rob. A trader has to man up because trading IS cruel. Trading reflects our strengths, our weaknesses, our whole human condition and then it magnifies it. All your dreams, your joys, and your sorrows are more intense in trading. Yes, trading is cruel, so we keep things as positive as we can, but you still have to take care of business.

I’ll close out another long winded post by saying thank you Rob and Jason. It’s very difficult to stay positive when you are bailing out so many holes in the hull and simultaneously trying to get a mental grasp on what’s going on in this business. I think you’ve definitely got it right. You HAVE TO BELIEVE IN YOURSELF. You have to give yourself the time to assimilate how this works and put it into perspective. Keep things as positive as you can, quantify what needs to be improved, and improve it without emotional baggage.

YOU ARE NOT STUPID BECAUSE YOU MAKE MISTAKES TRADING. Everyone makes mistakes, and it is statistically IMPOSSIBLE for everyone to be stupid, so STFU and realize we all do it. Get over yourself and make money. Your mistakes have NOTHING to say about your intelligence. But repeating those mistakes, over and over again? That IS stupid.

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