Most people go through life making the same mistakes at age 60 that they made at age 20. It’s astounding and even discouraging, but unfortunately, it’s true. And some people structure their lives so they can succeed in one area while acting out internal conflicts in another area.
In Episode 565 of The Traders Podcast, your hosts Rob Booker and the producer Jason Pyles explore the pitfall of self-destruction and how many traders get caught in this downward spiral. Rob says that 75 percent of experienced traders are struggling with self-destructiveness. Join us to learn how to escape the self-destruction cycle!
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Links for this episode:
Subscribe to Rob’s YouTube channel here: https://youtube.com/robbooker
Rob on Twitter: @RobBooker
The Traders Podcast on Twitter: @TradersPodcast
Jason’s movie podcasts:
http://moviepodcast.network/ – A group of eight movie-related podcasts covering new movie releases and many genres: sci-fi, horror, western, etc.
Full Episode Transcript:
Rob Booker: Mr. Pyles.
Jason Pyles: Hey, Rob. Good morning.
Rob Booker: How are you?
Jason Pyles: Oh, I’m great. How are you?
Rob Booker: I’m good but I have a really important question for you.
Jason Pyles: Okay. I’m ready for it.
Rob Booker: I need your advice for our listeners.
Jason Pyles: Okay. I’ll do my best.
Rob Booker: I’m going to share with you a problem that most traders have, and then I’m going to ask your opinion about it. Then I’d like to read a quote from one of my favorite trading books I ever read.
Jason Pyles: Okay. Excellent.
Rob Booker: How do people control or contain their self-destructiveness? In your experience, is that even a real thing?
Jason Pyles: Oh, yeah. Yeah, absolutely. In fact I think that a lot of people go through phases so you don’t even have to characteristically be a self-destructive person. Sometimes you just go into a phase of this. All kidding aside, sometimes you might buy a bag of Oreos and feel like you’re going to destroy yourself that night. But, anyways, let me see here.
Rob Booker: Well, I feel like going out and buying that bag of Oreos when you know that it’s going to cause some health problems, or immediate problems, or whatever is kind of like in those horror movies when someone looks under the bed.
Jason Pyles: Yes. It’s like-
Rob Booker: You feel like they’re better off not looking under the bed.
Jason Pyles: Why are you doing that? What’s wrong with you?
Rob Booker: But, we don’t often think that it’s that way because fulfilling a desire is like a first order consequence, meaning I’m hungry for Cookie Crisp cereal. I’ll go get the Cookie Crisp cereal. Now, I have it. Now, I fulfilled the basis first order desire and then there’s all kinds of second and third order consequences that are now tripped up because of that. Self-destructiveness is trading what you want most for what you can have right now.
Jason Pyles: That’s right. What you mentioned there, Cookie Crisp, is a great example because that’s among Maslow’s hierarchy of needs. Yes, it’s an excellent example.
Rob Booker: What is it? It’s video game time, texting your friends on an iPhone. The highest need is having Cookie Crisp cereal?
Jason Pyles: For sure. At least it is for me. That’s been my experience.
Rob Booker: Maslow’s hierarchy of needs.
Jason Pyles: Right? Doesn’t it come down to if one wanted to try to contain this, this self-destructive thing, doesn’t it come down to, as you’re talking about here, priorities? If you were to try to make a list of what is most important to you and then start doing that reverse engineering that we do, it’s like how can I get that thing that’s most important to me? Is that unreasonable, Rob, for someone to do?
Rob Booker: No, it’s not unreasonable and it brings up the point that … Let’s say that one achieves the discipline necessary to strive only for what they want most and can put off what they want today. The question then becomes does that person even know to what end they should apply that discipline? Great. Now, you only want what is most important. What are you going to with all that discipline? And a lot of people then just flail because you still have to have a plan. You still have to know what’s going to work. But, I think that’s the easier side of the problem. I think the harder part of the problem is even just getting to the point where we get out of our own way. As traders, Jason, what they’ll do is a trader … The equivalent of getting a box of Cookie Crisp cereal and sitting on the couch and eating the entire box, the equivalent is sitting down in front of the computer and then breaking one’s rule about trade size.
This is the number one way that it’s done. A trader will sit down and they’ll be ready to have a perfectly normal trading experience and session. Let’s say that they’re just looking at bitcoin and they’re just ready to buy some bitcoin and they’re going to long bitcoin, which we’re going to talk about in our next episode, and then they just get so excited about how right they’re going to be that they just think, “This is a chance of a lifetime. I can always close this immediately like I can always stop eating the Cookie Crisp anytime I want. I’ll just get the entire box out. I won’t portion it out in the same way that I’m not going to have somebody supervise me eating. I’m just going to do this myself.”
The next thing you know they’re trading a much larger trade size. The trade goes against them and they get into this negotiation. I’ll just have one more Cookie Crisp and then I’m closing the box or whatever. They say, “I’ll just let it go a little bit further but then I’m cutting it off.” And, then it comes back a little bit and you’re like, “Oh, it came back a little bit. Oh. Well, see, I made the right decision in the first place. I think I’ll hold on for a bit.” Then it even comes really close to the original entry of the trade and they’re like, “Well, this is great. Now, I made the right thing. I’m not going to close it now. Why close it now? Everything is actually going in the direction that it should have gone.” Then it drops even further against than it went the first go round and now they’re in this just … They go into a self-denial, or they just close the charts, or they just … Now, there’s a monster living under the bed and now there’s a real problem.
Jason Pyles: What strikes me about this, Rob, if somebody is new to trading or new listening to The Traders Podcast, they might think, “Oh. Okay. This must be a problem that beginners have.” But, honestly, I think this is even more characteristic of veteran traders like people who’ve been doing this and “should know better” and I say should know better in quotes because this is a very difficult challenge.
Rob Booker: It’s funny you say that because there are … Let’s just divide traders arbitrarily, not arbitrarily, but let’s just for the purpose of this episode divide traders into three categories. Category one, brand new and reasonably successful because they’re brand new, small percentage of traders, and I would say brand new traders represent … Let’s just even say that it represents 15% of the total universe of people that are attempting to trade. And then on the far end, opposite end of the spectrum, there are veteran experienced traders having success and we’ll go on the high end and we’ll say that’s 10%.
Now, there’s a 25% made up from 15% of just absolute beginners experiencing all the thrills and the highs and seeing the chart for the first time and entering their first trades and experiencing success and then following the rules because at the beginning, you follow the rules and you get the right to be creative after you’ve learned to follow the rules and your platform. Then there’s the experienced traders making money and that’s another 10%. There’s this middle ground. Imagine this big middle section of traders. 75% of all traders are experienced traders who are struggling with self-destructiveness, all of them.
Jason Pyles: Wow.
Rob Booker: I’m sure that this episode resonates with almost every listener, almost every person listening.
Jason Pyles: Well, let me ask you a question about that, Rob. Because as people know, I’m not a trader but I can see parallels in my life with this kind of thing. Is it a matter of pride, I mean I don’t want to say pride, but we just think we can handle it. What is that? We just think, “Oh, I’m different from everybody else. I’m above this. I can handle this.” I don’t know.
Rob Booker: Yeah, right. Well, let’s read a section from Alexander Elder’s book Trading for a Living, which is the book that didn’t start it all with me. It was Thomas Dorsey’s Point and Figure Charting that started it all for me. This book, Trading for a Living by Alexander Elder, was the first book that I bought when I opened my first trading account. Page 27, “Controlling self-destructiveness. Most people go through life making the same mistakes at 60 that they made at 20. Others structure their lives to succeed in one area while acting out internal conflicts in another.” That is so true, Jason.
Jason Pyles: Yes.
Rob Booker: A lot of successful people in business or life or their career will come into trading, and they’ll be completely disciplined and successful in their business in other life and then they’ll just go bananas in the world of trading. “Very few people grow out of their problems. You need to be aware of your tendency to sabotage yourself. Stop blaming your loses on bad luck or on others and take responsibility for the results. Keep a diary with reasons for entering and exiting your trades. Look for repetitive patterns of success and failure. Those who do not learn from the past are condemned to repeat it.”
Now, I don’t agree with everything he’s saying but this wakes me up. This is a call to action and this next part is where I’m going. You need a psychological safety net the way mountain climbers need their survival gear and then that just shocks me back into consciousness. Living in the middle 75% of experienced but unsuccessful traders as I have done at times in the past, dip back into that world, it reminds me how important it is to have a safety net in the same way a mountain climber has survival gear.
Just like you said, we have this go it alone mentality. It’s so brilliant what you said that we want to climb without a safety net because that gratifies our vanity and it makes us feel stronger, more capable and it’s embarrassing. It’s one thing to be a climber and have a safety net. As a trader, what I would say is if trading were climbing, what I would want isn’t a safety net. I would want a whole bunch of motherly type of women giving me sandwiches and I’d want multicolored lines stretching all over the mountain, and I’d want soothing music playing to keep me calm. I would just be like that. You have to go overboard on how embarrassing it would be for someone to see how much help you are allowing yourself to get.
There’s 10% of successful veteran traders. They’re not like John Wayne out on the open plane drinking coffee grounds straight with no water, shooting themselves in the foot if a snake bites them. That is not the image of the successful veteran trader. The image of the successful veteran trader is someone who is surrounded by people who fire them from trading inside of an institution if they break their money management rules or someone who has a group of people who they depend upon to keep them straight and keep them because they know what it was like to feel like you’re trying to go it alone.
The image of the lone cowboy out there getting it all done, or cowgirl, or whatever, getting it all done and going it alone and facing danger on their own and looking under the bed by themselves without calling their friend, those people are the failures. Those are the ones not doing well.
Jason Pyles: That’s right. Watch any horror film and people always go off by themselves and those people die. [inaudible 00:12:17].
Rob Booker: And a group of teenage kids are excited to go do disgusting things to each other and drugs in the woods and they split up.
Jason Pyles: Yeah, exactly.
Rob Booker: Then they get killed off one by one.
Jason Pyles: Yup, that’s how it happens. Yes.
Rob Booker: All right. Anyway, I just wanted to bring it up and I think people are smart enough and mature enough that are traders that they know the things they need to place around them. Other people, they need to be transparent about their performance with someone they trust. They need to have written rules for money management. They need to keep, I wouldn’t say a diary about every single trade, but you need to keep a record of and a recording of the mistakes, the big mistakes that those are the ones you want to just sear those into your memory that you never want to repeat that again.
Jason Pyles: Yes.
Rob Booker: Any other thoughts that you would have for someone out there seeking to cure their self-destructiveness?
Jason Pyles: Yeah. Honestly, for me, I’m a rewards-based motivated type of person. Once you slate out what your objective is, then I would think of some sort of reward that would I guess encourage me to get to that next goal before I bail out and crash and burn. There’s got to be a caret for me personally to help me get through and stay disciplined.
Rob Booker: I really appreciate what you’ve said. That deserves some more conversation at some point in time on the podcast.
Jason Pyles: Thanks. Let’s do that.
Rob Booker: All right. When we come back, friends, we’re going to talk about bitcoin in our next episode and we’re going to reach deep into the mailbag if we have some and we’re going to hear from you, the listeners. I always love that kind of stuff. Jason, while they’re waiting for the next Traders Podcast to come out, let’s just say what other podcasts might they want to listen to?
Jason Pyles: Well, let’s see. If they like movies, if you want to learn more about horror movies and people who go off by themselves and get killed, then you have horrormoviepodcast.com. Then if you just like new movies of all genres, moviepodcastweekly.com.
Rob Booker: Excellent. I’m Rob Booker. That’s Jason Pyles, the producer, and you’ve been listening to The Traders Podcast.