Transcript for:
Lecture on Trading Psychology by Mark Douglas

[Music] [Music] good morning traders thank you for joining us on this W TV special on putting your mind over the market I'm jarred levy chief options strategist here a wise trade TV and using psychology in today's market is not an easy thing to master it takes a lot of discipline and skill to become a consistent and successful trader here to talk to you about what you need to do in order to put your mind over the market is Mark Douglas mark has been a successful trader since the 80s and has written two books on trading psychology both trading in the zone and the disciplic trader you've heard me talk about them many times here o WTV and he is here today to help you become successful traders mark good morning how's it going good morning Jarrod glad to be here and I hope I can be of assistance to some of your traders who are viewing right now mark you know last time we were together was it wise best and a lot of fun I'm really excited you here with me today thanks so well let's get started first of all you know one of the things one of the main things one of the main issues that I see all the time is that people don't use their method to its full potential in other words there's a negative correlation between word that you want the trader ends up with and what he could have had if you just followed his methodology in your DVD program you refer to this is the profit gap this is a problem you refer to as the profit gap and I think it's one of the least understood concepts of trading can you address this a little bit its profit gap yeah that's actually a really good place to start because because I think that more than anything what your viewers want or what your customers want are consistent results they want to be able to produce an income that you know that they can rely on from their trading and I'm sure that that you know many of your viewers have already realized that that's getting a steady income is not such an easy task yeah and everyone seems to get trapped thinking that because trading is easy or because it's easy to find yourself in a winning trade which many people do right you know that they think it's also easy to become a consistent winner right and and you know it took a long time before it actually dawned on me that winning and being a consistent winner are two completely different animals two different things and in some ways there isn't even a relationship so between the two it almost seems like there's no relationship between the two so what you're saying right yeah that's a real hard mental buried or breakthrough mainly because you know it's so easy to find yourself in a winning trade and that in that it because winning actually requires no skill at all in other words unless you unless you consider that you know the being able to click a mouse button or you know tap a pad is a skill and and we don't have to have a reason or good reason or even actually any reason to put your cursor on the buyer cell button and then immediately find ourselves in a winning trade and it could be a monster of a winning trade and what did it take what explore what what kind of you know what kind of skills would it take to actually experience this absolutely not so be natural to take the leap from well if it's this easy to win it can't be that much harder to make a steady income like you said it's that easy to click the mouse arena sit there and make five or ten thousand dollars and it must be pretty darn easy for me to sit there and make a living out of this you know and that's what I thought for a long time but that is not the case no no and that's exactly how I started out - and I know I'm like not unlike a lot of other people who who are willing to let's say give up a real high-paying career to be a trader because they thought it couldn't be that hard so what makes consistency so challenging what's that what's the big hurdle there well we're gonna obviously we're gonna get into that but but at the most general level I'm gonna say that it requires learning the type of skills that people just simply aren't used to learning new mental skills yeah exactly in other words it requires mental skills most people assume that because they're technical method gives them a signal get it to get into a trade that if the method produces a high percentage of winners it will equate to a consistent income not taking into consideration that the proper execution of those signals requires mental skills gives you an example of this well take for an example you know a high school basketball player who you know he he'll he'll go in the gym and practice throwing his free throw maybe for even two or three hours a day it wouldn't be unusual for him to be able to hit fifty in a row what it I mean is that is that that that's you see that a lot of the realm of reality right ok so the problem is that could even hit two in a row if the circumstances were he was in the final game of the NCAA championship his team is down one point there's only a few seconds left on the clock and he was just fouled changed everything yeah under those circumstances without the appropriate mental skills he's hitting either one of those free throws is very unlikely and regardless of how well someone could do it in practice most people would choke so really the skills you're referring to what you're talking about mark is actually staying focused on the process staying positively focused on the process of self in this case of throwing the ball in our case obviously of training or following your method right and not being worried about blowing it about the consequences of what could happen if this trade goes wrong exactly right just like what I'm going through right now is in the process of this presentation and not blowing it anyway you know with training we may have a technical method telling us what to do and giving us the potential to generate consistent results but like the basketball player without developing the appropriate mental skills it's it's unlikely we'll be able to do what our method our training plan is indicating indicating without making a number of potential execution errors in other words to stay positively focused on the process of training by doing exactly what we need to do when we need to do it without hesitation or reservation or fear okay that's it you see you see no matter how good a technical method is of generating winning trades turning those winners into a consistent income requires the ability to do or not do some things that the method itself can't help us with for example our method can't force us to predefined the risk of getting into a trade or if we do predefined the risk our method can't force us to take the loss that ends up turning into a bigger loss and and you know that's happened everybody okay our method can't prevent us from moving a stop closer to our entry point where we get stopped out and the market trades back in our favor our method can't prevent us from hesitating and getting in too late or a method can't can't stop us from jumping the gun and getting in too soon with a signal to actually get in never really develops and our method can't stop us from getting out of a winning trade to soon and leave money on the table nor can it prevent us from letting a winning trade turn into a losing trade without having taking any profit I know that all of our traders have experienced these issues I know they have and I think really what you're saying is that the methodology and this methodology folks what we're talking about we say the word methodology is the wise trade software is the that's our method and it can give us winning trades we've seen I know all of you have had winning trades but it cannot give us consistent results if we're susceptible to making the kind of mental errors that you're talking about here okay exactly right yeah that's exactly what I'm saying and all the mental errors I just listed are the result of thinking as a result of thinking believing or assuming that our technical method is telling us what's going to happen next on a trade by trade basis and not understanding that technical methods aren't designed to do that technical methods and patterns are designed to put the odds of success in our favor over a series of trades it may not seem like it on the surface but there's some profound psychological implications here what this means is the outcome of the signals generated by any technical method on a trade by trade basis are unique and random in other words there's no way to know in advance what the outcome to any particular signal will be or what the sequence of winds or losses will be over a series of trades it's a mouthful you know we need to first of all know that many of our viewers out there are experiencing the same sort of thing okay and they're probably gonna have some trouble grasping this concept that by accepting the randomness of these outcomes they can produce consistent results that's that's an odd concept yeah that's but that's exactly what I'm saying Jared I know it's somewhat of a paradox to think that events that have a random outcome can produce a consistent result but think about it this is the principle that's been used by casinos for hundreds of years right technical methods and patterns will give the individual trader the same kind of advantage the casino has over the individual player if if the trader can think about it from the proper perspective on the other hand if a trader who has to say who has generated his signal from a technical method has learn to integrate this principle this randomness principle and his training regimen he'll undoubtedly find that training can be one of the most frustrating if not exasperating endeavors he's ever chosen to undertake you know and I know there are a lot of viewers out there who made the experiencing frustration in fact I know there are definitely viewers who are experiencing frustration but I'm not sure if they're making the connection that the reason because you know they don't believe in this random this principle where you can generate consistent returns by looking at the outcomes of their trades is random and unique they have to be able to view that as random and unique you know that that's I think the big issue no I know and that's that's why we're here explaining it right now you see the frustration comes from expecting from our expectations is from expecting something from our technical method it just can't do technical methods define and identify patterns and collective human behavior now the patterns definitely exist they repeat themselves over and over again the problem is the outcomes don't always correspond with the patterns on a trade by trade basis so what I'm saying is that yes we have patterns yes the end they and they repeat themselves over and over and our minds just naturally think we'll have a pattern that's consistent I should have an outcome that's consistent with the pattern and and that's not what I'm saying at all what I'm saying is that there doesn't have to be a relationship between the outcome and the pattern right so you know and if the last trade was a winner right it's trade even if the charts are the same even if we've got the same exact signal the same looking chart there's no guarantee that this trade is going to be the exact same as the past one exactly in other words this trade the trade I'm in right now could turn out to be a winner and and does that mean that that the next trade is gonna be a winner absolutely not this trade I'm in right now could end up being a loser and does that mean that that the next trade is going to be a loser no absolutely not this is interesting I mean I'm trying to for us up here you know the goal the main goal is obviously to take these concepts and reduce them down to the most simple of terms so you know let's again back up here for a second there are traders out there using wise trade every single day they're getting the same exact patterns okay but what you're saying is even though the specific criteria is being used to identify the pattern okay for each signal same criteria same right same same formula same everything you try don't look exactly the same everything right outcomes to each signal have no relationship to one another that's right that's exactly what I'm saying that there's a random distribution between wins and losses over any sequence of trades that you might look at and so you know and and and and again this is this is a very difficult concept to grasp but it's it's really the traders who have who have grasped at let's say and and learn how to think in what I call probabilities there are the ones that that don't experience the same kind of you know the same kind of emotional trauma that the typical trader does because they're expecting something that just just may not happen so for an example if if this trades a winner based on this particular trade I'm in right now based on the exact same criteria that you know or let's say I'm in a trade right now or I'm getting into a trade right now and the exact same same criteria exists in the market that did the last time I'm going to naturally expect it to be a winner if it was a winner the last time or I probably will naturally expect it to be a loser if it was a loser maybe the last time or or we had two or three losers in a row and this could be a source of frustration for trader oh absolutely in other words if yeah and that's exactly it is a source of frustration because if I'm expecting it to be a winner and it turns out to be a loser I'm gonna be frustrated not only gonna be frustrated I may I'm gonna be disappointed and I may even feel betrayed depending on how much you know how much kind of energy that I put into the idea that the Train is gonna be right well how do we get over I mean how does a trader take you know okay so I've got a lot of things right I've got my charts lined up I've done everything I was supposed to do how does the trader at least begin to accept these sorts of things or you know how do they begin to run a decision well here we have kind of have to get into the nuts or bolts the nuts and bolts of this of just exactly how the markets work because I think that one of one of the big problems one of the reasons why people have such a difficult time with this is because their initial exposure to the markets themselves is through electronics in other words there there's through electronics there's a real connect between what you're actually participating in and what's causing you know you to want to participate it in the first place in other words you know market started as exchanges and there were in and so when you trade you trade it at an exchange so you know that all prices are people generated events okay they are and see this is what people have to take into consideration everything happens because of what people believe there is oh look at the nature of trading and break it down to its simplest components what you have is everyone trying to do the same thing there is no possible way that any of us can make money as traders unless we can buy low and sell high or sell high and buy low is there is there any other way Jared no no what no in every market and every market so basically everyone's trying to do the same thing are they not yes everyone is doing the same things now the reason why we have price movement is because everyone has a different idea about what is high and what is low okay so now I exposed get exposed to a technical method now what is this technical method ooh and this is and this is the relationship that people need to grasp if they grasp this relationship then they can grasp this idea that that you know that you can take the same set of criteria and end up with random results and it's this it's like what people realized years ago is that you can apply you can take data points in other words data points meaning what you're doing is you're you're translating the human but you know the human behavior the human belief in if I'm gonna buy and visual what's that nor does it have to be visual but it's like it could be yeah it started off being visual well started out being chart patterns based on bar charts but but what you do is is that is that if I'm if I'm gonna if I'm gonna buy it's because at right now let's say the last price is 10 and I'm and I put in an order to buy something at 10 okay it's because I believe that the markets gonna go to 11 or it's gonna go to 12 certainly if I thought or I believed it was gonna go to 9 I would wait would I not okay so the reason why I'm buying at 10 is because that's what I believe in other words in other words you know a all price movement is based on people's belief about what's going to happen in the future now now you said to me in a conversation we had yesterday obviously we as individual traders are not large enough in our account to move the mark exactly so this is this is yeah this is the connection connection that people have to make is that is that since all price movement is based on people's conviction or belief about the future how do prices actually move for an example when you put in an order or I put in an order I don't I don't trade at a level where I can actually move prices but what the typical screen-based trader doesn't understand is that there are traders there are many there are thousands of traders out there who do move prices and that it is their intention to move prices or you can have a large group of traders coming into the market and then cause prices to move but what actually has to happen for prices to move is this is that if the last price of something is ten for the market actually moved to eleven all the offers have to be taken out meaning that or move to twelve all the offers at eleven have to be taken out so in other words people who are trying to sell at eleven they have to get their orders filled before it can get to twelve well for someone for someone to actually bid it to eleven or bid it to twelve they are doing the exact opposite this is really critical they are doing the exact opposite in that moment of what it takes to be successful they're not buying low they're buying high they're buying high relative to the last price and and or buying higher relative so how does understanding this concept how does understanding what moves the markets help our traders to take it to the next level how does I mean is this the first step for them getting control and understanding how the markets working yeah they definitely have to understand they have to understand how prices moved because when they understand how prices move then they'll understand how their technical method relates to this movement because what technical methods do whether it's a visual pattern or you know moving averages or any wive's trade or whatever you're using mathematical formulas okay you're taking data points in other words you're taking what people believe about the future transforming them or transposing them into a data point as a price a price over time okay or with volume there's yeah the freight there's any enough that's what it ends up being is a fresh cross but I'm talking about the actual mathematical formula that makes the fresh cross okay okay so there any number of variables that go into this equation now what people have found is that listen here what people have found is that using these data points into certain types of mathematical equations you can patterns in collective human behavior and what these patterns mean is this is that is that is that when the when this set of criteria okay is present in the market that there is simply a higher probability than not in other words there's a higher probability or what I'm gonna call an edge a higher probability of one thing happening over another that people that other people are actually going to come into the market and bid it higher from here or offer it lower from here there's just in other words when the pattern is present this collective pattern is present it will repeat itself but the problem is is that is that it repeats itself on a random basis because because even though the actual mathematical criteria is exactly correct or exactly the same you can't that doesn't mathematical miles can predict human being that's right mathematical models can't predict who the actual individuals who are going to come into the market and actually do it in other words it takes someone to do it when you put on a trade if you're not gonna make your trade a winner by bidding the market if you bought something by bidding the market you know using all of my money all your money if you bought something at ten you could you can actually wipe out all the offers and and bid it to eleven or bid it to 12 or bid it to thirteen now the prices at thirteen all the trades that you put on a ten are winners right but that's the bought at eleven and twelve yeah but while you're averaging up but the point is all the trades that you put on we're winners you actually made yourself a winner that's correct but what I'm saying is that when you don't trade at that level you we are actually obliged to other traders to come in to buy something at a worse price then that will then what we thought was low to make us winners so what you're saying is most of us out there are dependent upon someone else exactly move the market for us we're trying to identify that pattern obviously using the wise trade software to find those common entries but again it's a random event edge you said Jarrod when you put on a trade okay when you put on a trade do you know who now what we've done we've reduced the market down to these terms okay that it takes someone else to make us a winner right correct okay when you put on a trade you think about who that might be who might come into the market to actually make you a winner now of course ya know and and if it turns out to be a winning trade do you know who that who those traders were who that trader was that actually made you a winner no is there any way to know now there might be but it'd be pretty hard to find out right I mean you could make oh yeah when you go to the extreme go to the clearing firm you know the firm that clears the earth at you know the bottom line is you bottom line yeah exactly so what I'm saying is that is that when when you're when you're when the pattern presents itself like okay I have an edge here when the pattern presents itself we don't have any idea about of who is actually gonna come into the market to do this for us and so there's no point in analyzing there's no point in judging there's there's no point in in you know and trying to figure out whether it's going to work or not it would be like for an example if I said to you Jared I'm gonna give you a coin and this coin is weighted in a way where it's going to come up heads 70% of the time now just because it's just because I know I know mathematically and statistically that this pattern of coming up heads 70% of the time exists do is there still any way for me to know the actual sequence - heads heads the tails of course not it's an infinite well no I'm saying do I do I know the sequence in other words I'm gonna flip the coin a hundred times and statistically it's gonna come up heads seventy percent of the times I still don't know which which time is good heads but yeah which flips are gonna come up heads they say which flips it's not the times which ones in other words which you know will flip the coin once it comes up heads flip the coin twice it comes up heads the next one's tails the next one's tail the next one's tail in other words we can have streaks of heads or tails okay we could have we could have streaks in there the point that I'm making is that there is no way to know the actual sequence but at the end of the day we know we have 70% so what that does that that that that obligates us if we want to be able to trade our methodology in an effective fashion to be able to utilize this methodology in a way where we can extract the maximum amount of profit that it that makes available to us based on the pattern that it identifies we have to we have to do it in certain ways in other words we have to our mind has to be free to be able to execute these trades without making trading errors and the trading errors come from believing believing that that the because the pattern is present that it's going to give me a winning trade on this one this trade is going to be a winner you can't think that way No can't think that we can't think that's the way the typical trader right the typical trade of things I'm not gonna put this trade on unless I think it's gonna be a winner or why would I do it so excuse our expectations see it messes our expectation back up a couple seconds here there's some great stuff here marketing I hope our traders are getting all this you're basically saying this makes a whole lot of sense to me and I hope it's getting through to you guys we have a tool that gives us an edge whatever it is whatever that edge is two percent of three percent I don't know if we can know it's one more than this more than that maybe Mir with you what do you mean more that's a lot more than that it's far more than 50 percent well I was saying greater than 50 I was using so maybe fifty five six percent of the time let's just say thing is it doesn't even have to be fifty percent actually make consistent money that's what people can realize too that depending on on what that what the ratio is between what you have to risk to find out if a trader is gonna work and how much profit it generates when it does you don't even need a 50% win-loss ratio as a matter of fact I back in the 80s there are you know one of the most famous traders from the 80s are Richard Dennis on a percentage basis 95% of his trades were losers 95% but the 5% that were winners were monsters and he was able to take he was able to put on trades at at a ninety five percent loss ratio and make in at the most at one point and I think around 1987 or 1988 now 400 million dollars is that using his edge or his money management or a combination of all of it okay come and see one of the things he did too and then this is something something I ought to really qualify it with he would use orders to actually probe the market see there's one of the things I want I don't want to leave what we're doing right now but I'm gonna just kind of divert just for a moment and so that people understand that that that one of the first things to be a successful trader that you have to learn of the fact of finding a good edge meaning something that puts a pattern a collective pattern that that you're at your edge identifies that puts the odds in your favor that there's a higher probability of one thing happening over another once this pattern is present in the market is that you have to learn how to think in probabilities in other words you have to get your expectations you know aligned with the way the act the market actually exists and when when you do in other words when you when you learn kind of mental skills and you're able to execute your trades without without fear and without hesitation without analyzing or even well thinking for that matter cuz you don't need to think I'll give you an example a professional trader what what a professional trader thinks about when when there's an edge present is does he think about whether the edge is gonna work absolutely not he there's because because he knows he has learned there's no point there's no point in in in analyzing or judging or you know or or building a case for or against whether that trade is going to work because he understands a human component okay but what he does think about is he thinks about the risk how much do I have to risk how far am I gonna let the market go against this position to tell me that other traders are either gonna come into the market and make me a winner or not and he also has a plan for how he's going to take profits right but the typical trader was a typical trader do they don't have a plan too much they think about is this gonna be a winner is this gonna be done right from the exact opposite of the pursue so what the professional does is it and then once they make up their mind that's a winning trade they don't they don't predefined the risk do that and they also don't have a plan to take profits because they think it's gonna be way it's gonna want to talk about that running up on the break here but I want to talk about that on the other side but what you're saying is the bottom line is the professional sees the entry he sees the pattern whatever it is the edge enters him not thinking if I would a winner I'm going to lose but has a money management strategy in place knows exactly how much he wants to win or was willing to win how much he's willing to lose or risk right does he put a cap on the upside does he put a cap on as well it's a matter of how his assessment of how much potential there is in other words see the problem is on a winning trade we're we're obligated in a sense to to make these never-ending decisions as to you know what the risk to reward ratio is in other words as the markets going in my favor what's the risk of finding out that it's going to go further and that's why you know that's why so many professional traders or people who teach trading advocates scaling out of positions mark this is all great stuff we're gonna have to wind it up we got to go to a break guys there's not any time as I said for a break we'll be back with much more with Mark Douglas here with three minutes we'll see you soon here on W TV welcome back to the W TV special on putting your mind over the market I'm jarred levy mark Douglas has been talking about psychology in today's market mark let's continue with our conversation we left off with we were talking when we left about the flip of a coin and you said that you had a coin that was actually weighted on one side to give an example how about coin was weighted on one side and over a series of flips that coin had a 70% chance of in this case landing on heads right whereas in our software we give you the edge of maybe with our software you have a better chance of being right or having a winning trade if you get in on a certain pattern right you also talked about how it's the word right that's that's really critical here okay right it's right in other words in other words what what what people need to understand is that is that is how does believing in a random result effect your expectations because see what we don't want is we don't want to get into trading with the possibility of being disappointed or the possibility of being dissatisfied or being even betrayed because a lot of traders would feel that way they really feel betrayed and the problem is is that when that potential exists it has the effect of affecting the way that we see market information in detrimental ways because in other words we all of us have these mental pain avoidance mechanisms that affect our perception of information right so for an example if the markets if I'm in a losing trade and you know and and I and I you know I got into this trade thinking I was going to be right okay in other words I did all my evaluation I did all my analysis I did my work I built a case right you know it's like as the markets as the markets you know moving against me I'm going to have the tendency to focus on information that tells me that I'm right and ignore the information that tells me that the market is actually trending against me in other words I can I can identify a trend but I won't be able to identify that trend if I'm putting an inordinate amount of significance on the information that's telling me that I'm right as opposed to ignoring the information that's telling me that I'm wrong and seeing overall if we want to be consistent the principle that we need to keep in mind is that to be consistent we have to cut our losses and let our profits run we have to make more on our winning trades in what we lose on our losing trades and the problem is that if I'm susceptible to being disappointed or betrayed meaning get into a trade you know expecting it to do what I think it's gonna do that that I'm going to have this tendency to to distort market information that causes me to hang on to my losers and in a winning trade what will happen is that instead of letting a winner run you know markets don't go straight up in other words well I'm going to know in a in a in a long trade you know I would like the market to go straight up but they don't they go up and they come back in there each Cup and it's the retracements we focus on instead of the fact that the mark is still trending in our face so what's you're saying right now basically is I found a stock for instance that I love the stock just had a great news story the charts are the same as the other stocks I've traded but just for some particular reason I feel great about this stock don't know what it is but maybe they had some great news out and I feel that stock starts to go against me you know what based on the news that's out there based on this special feeling I have about this stock I continue to hold my loser I continue to hold my loser until this thing draws down against me and I'm in and I'm in a major losing position and I keep losing because I feel in my mind that I had some sort of special this stock was special is that what you refer to yeah I could be anything because I know traders do that yeah I know I did it could be any any any variable kind of information that people latch on to the thing that they have to understand is regardless of the reason that they got into a trade it doesn't regardless of the reason if other traders don't buy into that reason or if other traders don't have a have another reason to want to buy at a price that's worse than yours you bought the stock at ten someone's got to want to buy it at eleven someone's gonna want to buy it at twelve and buy it at thirteen and not only be able to buy it at eleven twelve and thirteen and fourteen they're gonna have to take out all the offers all the traders who think it's high in other words at eleven twelve and thirteen and so if these people aren't coming into the market to do that well then whatever reason you thought you had might not be so good and so that's why it's so critical to predefine your risk before you even get into a trade and that's why professional traders don't think about it any other way because they know it takes other people that that you know are my reason might be great but if someone else isn't buying into it what difference does make it doesn't matter because it's not a winning trade and so you know and so if we have the susceptibility to be disappointed it what it does it affects our perception of market information in a way that doesn't allow us that's how do we make ourselves not susceptible I mean how can my challenging yes by changing your perspective on this by really understanding for an example Jared you ever played a slot machine yes okay now I don't like it but isolated what I really don't like it doesn't matter okay that's good that you didn't like it because there might make the example even better okay okay you play a slot machine when when you put your money in the machine let's say there's a quarter machine okay you put your in the money in the machine you press the button and the pattern indicating that there's a payoff doesn't show up how do you feel well do you feel betrayed you people betrayed by the machine now why do you not feel betrayed by the machine it's just a random it's just no it's a random so in other words you went into it with the belief that you know that you're participating in an event with a random outcome right and as a result your expectations about the outcome we're in we're in perfect alignment with the event itself my expectation balloon or not was to lose I know it sounds crazy but I you know when I put the quarter in I thought you know what I'm probably gonna lose this quarter yeah exactly okay because that's so because you know the odds aren't exactly in your favor and and and what trading systems can do is actually put the odds in your favor in a way where we're we own the Machine believe it or not I mean this is this is the whole roll reverses if you learn to think about it correctly in other words if you understand that you know so for an example well let me backtrack a little bit and say that say that that most traders you know if you compare trading to a slot machine the difference would be that with a slot machine we can't play until we've accepted the risk in other words we actually have to put our take our money out of our pocket and put it in the machine or otherwise we can't play so that so that implies that we've accepted the risk because the degree to which we have not accepted the risk we wouldn't be able to put our money that is our loss the quarter is our loss that's the risk no that's not our loss that's just the risk the rest is how much we're willing to invest to find out if it's gonna work okay okay and then what we do is we wait for a pattern to show up and if the patterns you know a jackpot great if it's not then we might be willing to put another quarter in the machine to find out if it is the difference with trading and this is where people's people's mental idea of what this is all about gets gets messed up the difference with trading is that the pattern shows up in the market the pattern shows up first okay then what we have to do is put up our money meaning meaning how much am I willing to risk to find out if it's gonna work but most traders because they evaluate because they judge and because they analyzed they think that and build a case for the pattern being right they actually talked themselves out of believing that the risk even exists they might give lip service to the idea of putting into and putting a stop in the market like like some of those errors that I said in the beginning how many people put stops in the market and take them out and then you know and then let what would have been a small losing trade go into a big losing trade that's lip service you see that's that will okay i Monteux door and over again I got four stops in the market so I'm gonna do it but they haven't really accepted the risk every day every day yeah they haven't really truly accepted the risk because they don't want to be wrong and what they have to understand is that this is not a right or wrong game this has nothing to do trading a technical methodology or a technical pattern does not have anything to do with being right or wrong it's just it's just an odds game that's all it is in other words you get an edge that edge that says I've got the odds in my favor over a series of trades but you've got to be able to take every single trade because you don't know the sequence two wins and losses you gotta be able to identify what your risk is and that's simply how much am I willing to spend to find out if other traders are gonna come into this market and bid it higher than my price or offer it lower than my price if I sold that's all it means and then of course you have to have a money management plan for how to take consistent profits right which and there's another problem on it oh yeah but see the thing is like when you change your perspective when you change how you think about this okay it's like it's like I know there's a random outcome to these patterns and so I know it's not right or wrong and so what potential do I have to get disappointed no more potential than what you had to get disappointed by putting of a quarter in a slot machine er didn't come up with a jackpot right see that's this is a critical thing here Jarrod you got to be able to change the way you think this is what's the title this program behind over market okay gotta be able to change the way you think and how how does a trader do I mean what are the steps I mean you know tell it is there is there a obviously by reading your books by getting themselves immersed and your thinking is certainly a way to do that is there anything from this point forward a trader can begin to do or thoughts the traders can you know try to add to the repertoire to begin to think like a professional trader have that carefree state of mind and start to change the way that they view the markets in their risk is there is there an exercise there yeah there's a yeah absolutely I mean there's there's there's an exercise and trading in the zone exercises in and how to think like a professional trader and and basically all it really takes Jarrod is simply a sincere willingness to do it honest to god it's just you know it's just like anything else in our lives when we realize that there's that there's a particular goal that we have and you know and and there's a strong desire to achieve that goal then we're gonna take whatever steps we need to achieve it well whether those steps are trading in the zone or how to think like a professional trader or some other methodology that people are more comfortable with or whatever the point is is that is that if someone really you know really sets their mind any of us when we really set our mind at getting something what we'll get there we will get there but but the difference is like we started out in the beginning of the program the difference with this is that is that what we have to set our mind at is how to change our mind okay and and and that's why there's that's why there's so many people who who are so close to getting it but never really never really get beyond them know what why can't because people don't want to change the way they think it's that simple people don't like changing how can people get to the carefree state of mind that you talk about thereby changing the way that they think they've got it they've got to eliminate the potential to think that the markets going to disappoint them they've got to eliminate the potential to think that the markets going to disappoint them and the way they eliminate that by 10 - the potential is by understanding that trading is not about being right or wrong it's a probability game if you're trading technically now I don't want to confuse people but I got to say something else is that is that traders do you know a half by the way keep know is is that there are there are stages of development in other words and I think I started to talk about this in the last segment is that there are stages of development that that we start out learning these fundamental skills like learning how to think in probabilities so that the market doesn't have this potential to cause us to feel emotional pain we did everything we could we had our edge it didn't work out right and that's all that it is when you put on a trade and it doesn't work all it really all it really means all it really means is this is that is that some of the traders didn't come into the market that had the same belief that you had or the same conviction that you had about this market and doing whatever it is he thought I was gonna do that's all it is it's nothing more than that but you have to learn to walk away it you have to learn to walk away I mean let's put it this way how good do you think the average person is at predicting other people's behavior in someone else's behavior not people aren't that good at predicting other people's behavior or even their own behavior for that matter what am I doing this for you know and so how good are they gonna be at predicting collective human behavior now these the methodologies that that that we have access to these mathematical formulas do that for us right if you but you have to understand that that there's no possible way that these mathematical formulas can predict it can predict the outcome of of these patterns on a trade by trade basis only on a series of trades in other words what they're really saying is that I have the odds so so when I get a signal when I get a signal for my methodology at the very fundamental most fundamental level what this is telling me right is that fresh cross is that fresh cross I have there's a higher problem there's there's a hyper let's say I there's they the odds are in my favor the odds are in my favor that's somebody that somebody is going to come into the market this is what the pattern means the odds are in my favor that somebody is going to come into the bar and bid it higher from here if I bought or offer it lower from here if I sold that's that's all it's saying now they're either gonna come with or not and so as a result I don't look at this as being a right or wrong I look at this as how how much distance am I gonna give the market to move away from my entry point to tell me that that they're either gonna come or they're not and any further is not worth the money of finding us not worth the cost of finding out means you talk about stop losses you talk about stop losses and management in your in your DV absolutely but not in - but not like very specific not not not not the kind of specifics that you know like like if you're using if you're in a half an hour timeframe you know how much of the traders decision yeah but it the trader depended upon their trade style is going to adjust their stops according to their account size according to the risk tolerance etc what you do I think is give people an understanding in the basis of where they should be placing their risk or how much not from a dollar perspective but maybe from a oh man yeah in other words you know and so that so that they're gonna yes you're from a mental perspectives that they can adjust their trading style in a way that conforms to where they're at in terms of their their their ability to take the risk when one exercise be for a trader to begin testing out the bus in other words take a hundred hour loss see how you feel if you're able to take a hundred dollar loss and walk away and not fret too much about it not let it stress out your the rest of your trading day and not think about it maybe then you could say okay I'm willing to trade a more volatile stock and move to something like a 200 or 300 dollar loss etc is that an exercise you think would be better absolutely yeah absolutely I mean in other and that's what I suggest the people you know all the time social you know was doing coaching it's like and and and when i was when i was doing coaching on an active basis i mean i was coaching some some pretty pretty substantial money managers and you know they'd get into a situation where they're on a you know a pretty good losing streak and often it required that they actually go back to a risk level that you know they hadn't meaning that if they were trading you know ten thousand or a hundred thousand shares or willing to take you know a half a million dollars or a million dollar hit on a trade you know to get back to where they felt more in sync with the market that they may had to go they may have had to go back to only trading a thousand shares and see and when you're working in a in a corporate situation like that you know with other traders that's often a hard thing to do but that's exactly what they needed to do I suggest the people that that I mean look at it this way paper trading okay paper a lot of a lot of people who teach trading say that you know there's no point in someone paper trading because there's there's oftentimes a huge difference between the results they'll experience paper trading and and what they'll experience when they realize I'm online yeah because no real money on the line in other words in other words I'm sure they're probably a substantial number of viewers out there who can make consistent money consistent money by looking their methodology and paper trading and then they then they start doing real trading and everything changes okay well and so a lot of teachers have said well there's no point in paper trading because you know there's there's no correlation between the results well that's not really true because what what paper trading what paper trading can do for people is very bit very beneficial one it's a graphic demonstration graphic demonstration of the gap that exists in terms of mental skills that they need to acquire in other words in other words it's it's a good way to get familiarized familiarize yourself with your trading platform it's a good way to really get confident with your methodology but more so it is a graphic representation of the mental skills that you don't have that you don't ask an interesting concept yeah so in other words how does Pete how does someone convince themselves that they need those mental skills look at your look at your paper trading in relationship to your real trading now if there's and a lot of this even if people have learned to think in probabilities which is what we've been talking about pretty pretty much this whole time even if people learn to think in probabilities it doesn't mean that they can really still accept the loss because because because the way our minds think in other words in other words if if I'm if I have to take a loss on this trade it could have the tendency to tap me into all the accumulative kind of negative pain of every time I've had to take a loss in my life and it just doesn't mean in trading it could mean you know pets or whatever you know people and that sort of thing or jobs and so it because our minds have this tendencies to associate the it can make it difficult to accept the loss so a lot of times what people would have to do and and they also would find difficult to do because a lot of times people get into trading because they want to impress their friends or their family like I'm a trader but that what they might have to do is that is that when they graduate from paper trading they might just you know the amount of risk tolerance they have might only be just ten shares and risking a buck on those ten shares anything well what's the point of that well the point of that is that you know when you can trade those ten shares flawlessly based on whatever your methodology says and do it without any fear or if you really make those trades into pay I mean then maybe those trades in the bender then you can go to and then then go to 20 shares and see how that feels then you go to 30 and gradually work your way up and people aren't willing to gradually work their way up this is the content that we've never even talked about I've never actually heard it put this way mark I I have to be honest with you where you look at your paper trading account as almost your goal if you will almost like this is where I could be from a state from a carefree state absolutely it's perfect this is where I could be if I had that carefree state of mind if I had the mental skills that allowed me to do exactly what I need to do without reservation without hesitation without fear that's the way that we can and that's you know and and that's basically what we're getting at how do we use the methodology that we have and the capability and the potential of that methodology to its maximum you need the mental skills to do it you you made reference before both wives fest and earlier we talked about some of that some pain pain in your life and a lot of our traders right now feeling some pain with what's been happening in the markets the past couple of weeks mark is there there's a person have to experience this a total drawdown in their account a total loss in their account where their accounts almost wiped out or is totally wiped out for them to make that change in their mind I mean does that does that have to happen does it does it have to be traumatic like that for him to realize oh I've got to change something or and I'm saying this and obviously it can be done without that but have you found that predominantly out there you know in the people you've taught over the years have people had to experience a high level of trauma before they can actually make the change or can someone just a normal course of every day with a little bit of dedication actually you know I'm not trying to be rhetorical I really what a serious answer because there's people out there right now that I'm sure thinking the same thing do I have to lose my whole account does this have to happen for me too you're insane right now are you Jared I'm good yeah you mean like the gutter principle yeah is that what you're referring mostly in the gutter prison I don't think the gutter principle no words how much in the gutter D have to be before you're willing to say I'll do anything as a matter of fact you getting this kind of bring something up is that when I was when I was actively coaching my coaching client l basically fell into two broad categories one was with traders who were already successful who were already consistent and what they wanted were you know they wanted fine-tuning okay they wanted creative ways of fine-tuning fine-tuning themselves so that they could actually increase their you know increase the amount of money that they make over over a year whatever and then you had the other group was was was there literally in the emotional gutter okay they're so exasperated they're so frustrated because of the potential that they it's so obvious what the potential is and yet there seems to be these these invisible barriers that keep them from getting into that getting into that potential that that there they come to me saying I'll do anything oh and and that's you know now everyone has different tolerances of pain before they get for the big if to the point where they say I'll do anything and mean it that's the whole thing they gotta mean it mark we were wrapping up the show we have a couple of minutes now there was a couple points on any wanted to make before we end up this show and guys just say you know neck show we're gonna open up two phone calls and emails so if you want to start lining up your emails or your phone calls do that now mark a couple of minutes to go in in this arena I mean is there anything any message you can give to our traders that are any final thoughts maybe some a mantra no just basically just just to kind of you know sum up what we've been talking about that that if you know if consistent results are your objective you know then then you're gonna have to learn how to think like a professional trader because that's that's what they do they make consistent result that's why that's why they're pros that's why people give them their money to manage that's why they have jobs that were they actually trade for a living because of didn't make consistent results they wouldn't keep their jobs and so to do that you have to you have to you have to learn to change the way you think about trading in a way where it doesn't doesn't cause you to have this potential to think that you're going to be disappointed or betrayed or put you into a state of emotional pain it's like it's like getting to that carefree State of Mind and once you get to that once you shift your perspective everything changes it's not about being right or wrong and when you really understand that and and then you go through the process of learning how to accept the risk of losing then everything about your everything about your training will change so when the pattern presents themselves you trade them you try you don't think about things like don't think there's nothing to think about when you trade within your means except the risk and how you gonna take problems but I'm saying the pattern itself when the patter presents itself there's absolutely nothing to think about that is going to general way I'm not sure you can know yes there's no way you can know what the outcome is gonna be mark we do have another hour like I said so we've got plenty more time to go one last thing I wanted to ask you real quick we've used this board edge a couple of times right a lot of our traders are not familiar with this word edge I've used it on the floor edge to us was basically having a spread in there in other words if we had an option it was worth a buck the ability to buy for ninety cents or sell it for a dollar ten how do you define edge just it's just simply just an edge is just a higher probability of one thing happening over another that's all just just a higher probability of one thing happening over another but keep in mind that within the context of what we've been talking about it's a higher probability happening over another over a series of trades and a series okay so in other words you know like for example what I do is I teach people to think to trade in sample sizes right so that that instead of saying themselves I'm gonna take the next trade I'm gonna take the next 20 trades right I'm gonna keep myself in the game I keep myself in the game and see what happens over the next 20 trades and then if I get the kind of results that I like I'll take another 20 if I don't I'll tweak my methodology so that I get better results mark it's been great we'll see you back to come minutes guys it is time for a break we want you to get your questions in for mark you can give us a call at one eight six six WTV wise that's one eight six six nine eight eight nine four nine three or you could send us an email to trader at wise trade tv.com when we come back we will answer your questions and talk more about psychology in today's markets we'll see you back here in five minutes and Jared are still here and ready to answer your questions you can give us a call at one eight six six WTV wise that's one eight six six nine eight eight nine four nine three or you can email us to trader a twice trade tv.com guys mark that was a great show I loved all the information you gave everyone Thank You Susan thank you so much for being here and I know it wise fest everybody was thrilled to actually get to meet you and see you in person so it's a it's a special pleasure to have you as a special on Deputy Vee thank you different for me I've never been on live TV before so this is well you're doing a great job Thanks well you know guys we have lots of callers and emails to no surprise so why don't we get right to the phones because we have a call from Brandon and Massachusetts good morning Brandon it's not really too much of a question it's mainly I'm uh I'm a complete clean slate I learned how to trade through wise trade you didn't know anything before and I just thought you guys want a perspective of not knowing anything and your analogies they use we're great it really made me understand what's going on and what I just want you to comment and what I've taken from it these are things that I've gotten what why is treaty not guaranteed because prices are determined on predictions of what other people will do and technology can record what other people have done in the past I cannot predict what people will do in the future right to a point yeah no they can predict what people will do in the future but just not on a just not on a trade by trade basis in other words you're gonna get it's it's like I'm going to go back to the coin if if you what what wise trade or technical methodologies do is give you a weighted coin where if I've got a coin that says that 70% of the time that you flip this coin it's going to come up heads then that's what your technology is what your tech not your your technical methodology does it gives you that that whatever percentage edge it just means that on each individual trade which is what the tendency that most people have to do is they try to figure out if this train is going to work not if the next not what what's my percentage of wins two losses over the next 20 trades or the next ten trades or the next hundred trades edge edge that's good right there okay Brandon well thank you for calling on that we have another caller it's miss amber and California good morning amber amber Thank You Susan mark thank you so much for being here thank you your book trading in the zone I read it cover to cover I love it I think it's neurolinguistics for trading and for traders and I loved what you said about scaling out of positions that made so much sense to me there are little bits and pieces in that book you know that a lot of people don't it's not just you know blanket psychology I mean there's so many little little intricacies in that book that'll help you with your individual training if you if you if you pick them out and talk about scaling out where did you know where it occurred to me the scale out was was back when I first started trading well not exactly I first started trading but I was working at Merrill Lynch at the Chicago Board of Trade as a retail broker by the way and and I and I used to keep meticulous records and I would analyze my trades and I found that and I found that that rarely that I get into a trade where it just stopped me out immediately in other words where the market never gave me anything in other words I get into a trade let's say I bought at 10 and next thing you know prices at 9 it never never went to 11 okay so that was maybe 1 out of 10 times that that would happen and then and then I saw that that you know that there are certain percentage of my trades where it went if I bought at 10 it would go to 12 or go to 13 and then go back through my entry point and stop me out at you know let's say six or seven so it actually gave me something but I didn't take it because I was looking for something more and so what I did is I analyzed my trades in this way and put them into categories in terms of the percentage times that it would go on my favour and relationship to win it didn't and and found that I could I could best I could give myself consistent results if I if I started scaling out in other words I would take a part of my position off at a very small amount you know let's say you know I'm just just to make it easy guy trade a lot of silver and gold back then but but just to make it easy where I would take a first third of my position off at let's say three or four cents and silver and note that would do is is that would not only make me a winner from a psychological perspective if you really want to look at this you know psychologically what you want to do is you want to create a belief you actually want to create this belief inside of you that I am a consistent winner and what will happen is that when that when that belief gets integrated into your mental you know as part of into into your mental environment as part of your identity is as long as of course the steps that go into making I am a consistent winner are are consistent with that belief in other words it becomes a part of your identity and just you need use function out of that belief in a way that you don't have to think about it anymore increases your confidence this is right not increases it's just who you are so in other words if I want to if I want to actually believe that I'm a consistent winner then I have to then I have to do something that creates that so by taking off at least a third of my position with with a small amount what that would do is that would that would reduce my risk so if the market did go back and stop me out it wasn't stopping me out of my whole position and and you know but if it didn't then of course I had I had a spot where the next third came off and then then then a predetermined spot where the next third came off and now the problem with with do it with with scaling out that a lot of people have is that if they get into a monster trade there their attention yeah the loss potential of you know like if I had the whole thing on I just made so much money but again it's like it's it's what's your objective if your objective is to get those monster trades then it's going to be inconsistent with producing consistent results so you have to be clear about what it is you're trying to accomplish you know I really like that mark because there are a couple of things you said that I really like and one is setting yourself up for success and it's sort of like what you do with your children when they're smaller you want to reinforce the positive things that they're doing correctly because then they know you know what I can do this and so by taking those smaller those profits as they're coming you do have that mental state absolutely it's really critical it's really important I think it's one of the most once people get some of the some of the fundamental skills out of the way it is one of it is probably the most important thing they can do for themselves is what I call take money as the market makes it available have a plan for taking the money as the market makes it available because we don't know how far it's gonna go on I do something called kibbles and bits where I just you know it I could just try and grab five and ten cents I know that with my trading from what I've done the past and based on tool that I'm using it's very easy for me to grab 10 20 cents out of each of my options now if the option costs $2 or $3 you know that could be 30 percent or 10 percent of my on my trade depending upon the cost of the option so little bits and pieces just trying to eke out small wins and that again it stills confidence makes me feel good of my dreams absolutely well we have another caller on the line it is Lee and Ohio good morning Lee all right you know I talk to you when I was down at Weis fest and a lot of things that you were that you were talking about you know I was telling people and teaching people but once I talked to you in the way that you really some some things up it just really just brought it even to light even more for me now one thing that has did it made me trade so much from a carefree state day too much of a carry state of mind I was asking mark if there could be too much of a carefree state of mind and it really it took me I mean the only thing that I don't play is earnings and it took me ten I mean you was just talking about it yesterday it took me to the mindset that I don't care what the market is doing if I see the charts is right I'm getting in period I don't even think about nothing else and it's so funny when the market went down I lost some money and a couple my friends called me it was like you should make it back you know and that was my mindset and it's just funny that when you get that mindset you don't just think you don't even think about nothing else yeah it's important for you still to have a plan carefree state of mind I mean is that's more now what you do talk about is something called euphoric triage yes before yeah that's difficult it could be something here with give me an element of that with me you want me to cover that or yes you know all of us let's put it this way we talked about expectations in the first segment it's like you know when an expectation is simply you know a mental representation of what some future moment in the environment is gonna look like sound like feel like tastes like err or smell like okay in other words if the environment if I believe that the environments going to be a certain way the outside environment is a certain way based on my mental representation if it shows up that way if it shows up exactly that way how do I feel well universally how this is this is a characteristic that runs through all cultures this is a universal human characteristic how do I feel thanks you got me you just feel good right yeah good yeah could there could be a range of really positive emotions okay that in and this is this is universal and that's by the same token the degree to which the environment does not conform to our expectations how do we feel a whole a whole range you know like if I brought it before disappointment dissatisfied betrayed whatever okay usually its extremes like omnipotence and total failure well the thing is it is that all of us have this potential to to flip into a euphoric state of mind and the aforex state of mind is one where for whatever reason whatever expectations we had let's say the environment showed up in a way that far exceeded what we thought and it's just like we're as high as a kite and what happens is that these these chemicals get in you know chemicals get released in our in our mind in our body and and the problem with the amoeba for you for genuinely your Forex state of mind can be like heaven literally like heaven on earth and the problem as traders when we're in a euphoric state of mind is that in a state of mind of heaven on earth it is impossible for us to conceive that anything could go wrong anything stops come off possible the exact increase and so yeah and I've worked with so many traders and I can say that that I work with traders who who have say their threshold for you for here was one winning trade ok you know maybe a string of four or five winning trades or two or three winners and a big monster or whatever but the point is is that is that there's a there's a state at which we can operate at normal confidence in which in which we can we can do all the things stay in the process of trading meaning that you know we're objectively we're objectively executing our edges we're pre defining our risk we're cutting our losses we have a plan for you know taking profits on a consistent basis and then when you flip into the state of euphoria all that changes because absolutely nothing can go wrong and as traders that's one of the most dangerous places to be because because even though you may perceive that nothing can go wrong the market may not agree with you and that's when we have this tendency to violate money management principles where if we're a thousand share trader we'll put 10,000 shares on you know what mortgage is the house or whatever because the trade just absolutely there's no possible way it could be a loser and in these situations what happens is that when we've got 10 times the amount of exposure then that we're used to then all it takes is just just a tiny tiny little bit that the market can come against our position just a tiny bit and it can it can it can we can go from the state of euphoria to a state of terror instantaneously because of what you just said you were a thousand chair trader who now committed 10,000 shares to this trade because you've written you this euphoric state well when the thing flipped down your loss is now way outside of what you call the norm a big loss it doesn't have to be it could just be the fact that nothing could go wrong and so therefore you know it's like it does get just it just shatters it shatters a state of euphoria so that we go from heaven virtually to mental hell instantaneously and it puts us in a state of mind freeze where we just can't even get out of the trade and we just sort of just sort of watching the market take our money away and not able to do anything about it until something snaps inside of us and we get out so that mid zone you kind of want to stay in there yeah you want to stay in normal confidence and what I was picking up about Lee was that he may not be violating money management principle but when he realized that he could trade from a carefree state of mind he was kind of doing many trades just he just didn't have a did he might not have been planning all these trades out and just going from you know instead of doing if he was a thousand lot trader or a thousand share trader instead of doing 10,000 thousand shares if he was just trading one or two mark as he's trading 20 okay you know so we have an email from Edie the filly pip Colette collector he said did most of the knowledge that you're sharing today come to you from your mentor or mentors or from practical experience how long of a period of time did it take you to trade without fear from the time you started trading with real money thank you again for the benefit of your knowledge and expertise first part of the question is how I learned from and and how long did you trade I started doing I started writing the disciplined trader in 1982 there wasn't really there 9 back in 1982 there weren't that many trading books of yeah from your own experience this is all for my experiences yeah as a matter of fact it had to do with with you know losing everything that I owned as a trainer and and at the same time having a time being in a situation where I was at Merrill Lynch you know where I was observing you know not only other brokers in the office but but the behavior of my customers their customers having having relationships with floor traders noticing these these these common themes of errors that we're all making and then when I when I ended up losing everything that I owned that I didn't I was in a state of mind where I didn't have anything else to lose other than maybe my job because you know Merrill Lynch would have known the situation I'm sure they would have fired me but but they didn't and so I was able to not trade anymore because they didn't have any more and have any money but at least I still had access to the markets I still had access to being a trader and and when people really genuinely tap out they don't get the train anymore because they'll have the financial resources to do it so I was in I was in kind of a unique situation where where one I and this I can't I can't well I could probably explain it but I'm not gonna do it here in that I just knew that site that training was psychological right from the very start I just it was just it just made sense to me that just said it wasn't technical as much as psychological so is it because of your observation of not only what was happening to you but everybody around you then you had bottomed out yes so you you got rid of the fear yes I had journal yes I had extensive journal work that I that I did and so so in in 1982 you know when I came to these realizations about myself and about trading and when I didn't have anything more to lose everything about my training changed because because it was like the fear dissipated and it's like I started making consistent money for my customers because I was I was doing the same things but I was doing it from a different perspective and and not making the error so the second part of his question referred to the time it took you to get over your fear and you think it was more or you say it was more like almost yeah I was it was a distant tainted not maybe an instantaneous realization but it was because of these experiences right and so what I started doing is is developing the material that and ended up in the discipline trader what what I didn't anticipate because I never I never grew up aspiring to be a writer or thought that I would be is that I mean having very much of a traitor's mentality back then I would say you know okay this is gonna take me six or eight months to do this a dinner of taking me almost eight years and and it was it was tapping basically where this insight comes from was I tapped him to create a process what I what I mean is I specifically stayed away from any other material that had anything to do with even psychology or trading there wasn't really in on trading psychology anyway except for one book Jake Bernstein's investors quotient that came out in 1980 but otherwise I specifically stayed away from it because I realized if you ask yourself questions from from a sincere space of being open to any answer that comes you'd get any answer that comes and so I was really developing this material as as I was going along very good well we have another caller on the line good morning Keith how are you good morning Keith I'm great what question do you have for Marc the question I have for Marc is this you're speaking of you know learning to get into that carefree state of mind starting small he said you know example 10 shares to gain that consistency when would you then increase it I mean you know 70% 80% then increase what would give you a guideline or would you go by a psychological guideline that's my question it's just another thank you I go by a psychological guideline in other words when you can trade 10 shares perfectly Nolan you can set up a trading plan and execute that plan when I when I mean perfectly I literally mean not just execute the plan perfectly but execute it without any conflicting or competing thoughts about what you need to do and when you need to do it in other words it wouldn't even occur to you to make a trading error and then what you do is you move up to the next level and see and see how well you do is P&L an equation here profit loss is that an equation and then well not necessarily I mean you know you can do an exercise like that and not and not even take profit loss into consideration that in other words there are many times I've set up for people you know trading exercises that really didn't take into consideration how much profit they might have it was following the play with that loss and just keep moving forward exactly in other words how well can you follow the plan and then if you can follow the plan without any conflicting or competing thoughts to do other than what you set out to do then you up your size and if you're and if you're real comfortable right off the bat you can up your size even more but if you find you're not comfortable and you're and you and you and you find yourself you know making trading errors or even thinking about making trading errors then stay at that level until that doesn't happen anymore that's great advice thank you for that we have another caller Frank is the first time calling in thank you for doing that Frank what can we do for you Frank are you there these are good questions by the way that people are giving us it's totally okay I don't think we have Frank on the line so let me go to one of our emails this is a it says since you cannot know that a trade will be a winner when you enter it for the same reason can I assume that a profit target is the same psychology assuming that the next tick after I exit trade after reaching my pre assigned target profit will be a Down tick is the same false assumption as when I enter the trade thinking of the next tick will be an uptick that I must wait for the market to tell me that the trade is over so it's kind of the reverse yes there's no way to know how far mark is gonna go in your favor they're just you just have to pick these predetermine spots and or if you don't pick predetermine spots then then use some sort of an indicator like another fresh cross or a trailing stop to get you out of your to get you out of your trades very good okay our next email is from Hal in Pennsylvania and he says hi Jared mark and Susan on behalf of all the wise traders I want to thank you for this great opportunity to listen to mark the question I have for Mark is over the years have you found that a day trader can be as successful as a swing trader or long-term trader provided stops are in place and a good trading plan is in place doesn't it really how you how you categorize the way people trade is virtually it isn't even relevant in other words there it depends on how you think about your trading and and what you're what you're most comfortable with so I would I would think that your trading style has to fit your personality and your time alignment that's right yeah so a day trader who's got got their mind right is gonna be just as successful as a swing trader who's got their mind right and and a swing trader who doesn't won't be any more successful than a day trader who doesn't so what George you touched on something that earlier when I was watching the program I thought we would ask mark if somebody is new to trading and they watch wise trade TV and they see that we have all different trade styles and we even have all different markets a common question we get is how do I determine you know what trade style is suitable for me and how do you think that from a psychological standpoint not necessarily you know maybe they can spend all day at the computer they have time to do that but for who they are how do you help determine what type of trader is more suitable for their personality hmm that's a good question and it's really kind of tough one to answer to you probably have to meet the person yeah for me I mean it's it's it's all it's like even when you do personal consultations it's like what I really what I realize is that is that you can't put you can't put people into into categories or you know a pigeonhole them into into certain boxes that everyone's mental ecology is unique and you have to respond to that kind of uniqueness so how a person goes about determining you know what trading style is is most appropriate for them would pretty much be based on what they're attracted to in other words you know even for me for an example for many years I mean I learned why learn to trade as a swing trader because we didn't have access back in the late 70s and early 80s we didn't have access to market information there weren't all these platforms and you know in computer I me because personal computer hadn't been invented yet so would you know what we had to do is we had to call our broker for the high low and close and keep our own bar charts so the day trade was absolutely it was absolutely impossible a day trade away from the market not being on the floor however and so because that's the way I know how to trade you know years later it's like you know I'm kind of losing interest in trading and the reason why is because I don't have the Toleration to sit in front of the screen all day long to wait for two or three trades right my my my my nature is that you know I want to be active and I'm gonna sit in front of the screen I want to trade so basically I had to come to the realization for myself that you know what even though yes I know how to swing trade successfully I got to learn how to day trade successfully or otherwise I won't do it at all so you know so anyway if you think about somebody that likes to go skydiving you know dry fast cars and they're really always wanting kind of that high adrenaline position trading thing would probably very boring that's right absolutely so kind of take a look at yourself like that that's right okay let's get our next caller it's Doug and California thanks for calling in Doug what a question do you have for mark well first mark thanks for being there and I had a comment and then a question which is that I read your books I thought you wife s and I've seen the DVD all the DVDs and they were wonderful and life-changing and and and great so I just wanted to thank you very much about that thanks I think I need one more thing which is I needed to get smacked mark does that for a small fee Google and I you know I knew the iPhone there's gonna be a big deal and I knew that Google wouldn't be making a hardware phone on basically I was really arrogant and it took those things cratering credit to really hit home that my my knowledge was nothing it was worthless and it's just exactly what you've been saying and I had the theoretical knowledge but now I got it for real so I'm making some big changes and I you just it's just a life your mark anyway my question is you don't have any like lotion first for sitting skulls and oh really skull but anyway other than the hard way to to get through these lessons that I guess most traders seem to need to get through nothing has to be hard it's just a truly it I've learned that nothing has to be hard it's just it's just a matter of how strong your desire is in other words if you can and this is one of the reasons why I'm even here in the first place is that if it's if I can say something that makes this connection between where you're at right now and where you'd like to be you know more tangible then the let's say the enthusiasm you might generate to get there will be enough to cause you to focus on whatever it is that you need to do to get there in other words to take the you know to break to take your goal or your objective break it down or create a process for yourself you break the process down to a smallest incremental steps and then just take one step at a time so it doesn't have to be hard but you just have to really want to do it and that one thing has to be genuine you can't give lifts or lip service to that desire it has to be genuine and and really and this is and this is really good that I mean this is this is really the secret so when I say it's genuine what that means is that whatever you need will come into your life I guarantee you that what if your desire is genuine whatever you need will come into your life and that's because we have the power within us that's right to bring it out that's right okay right we have another caller it's rich in California hi rich morning mark is all done here is good hey Mark I wanna thank you but you've really made a big difference in the way I trade - and one of the things I found was that it forced me to create a worksheet that I follow so I could follow 20 trades at a time and I really am following your system to the tee some of the things that I've found that it's done for me is it's it's made me see my mistakes because they're on paper it's also helped me stay very consistent and what I'm finding from the consistency is once I get through a certain amount of trades and I go back and I and another they have a record of each trade I look and see what consistently was going wrong what was consistently going right they then make adjustments for my next 20 trades the other thing I'm finding now that I'm why are you becoming very profitable is that I could actually get into what some other people would consider more risky trades because I'm staying consistent with my stops and my strategy it's not a risky trade to me because I know those stops are gonna take me out and it takes the emotion out of it right perfect thank you forever yeah you're welcome rich I thank you for calling and sharing that with us it's like it's like one of the things that you're realizing is that when you take a consistent approach which most people don't have they actually have a random approach and don't know it but when you take a consistent approach you you're learning what works and what doesn't and you become your ability to be able to assess that whereas with people they're taking a random approach they don't know ever learn what works and what doesn't because they're using an unlimited number of variables to generate a trade in other words when they get into a trade when they get a signal and they start building a case one way or the other need to take the trade or not take the trade all that all the let's say the rationale that you're using to build that case or to take it or not take it is are these unlimited variables that they're adding into the equation which prevents them from ever learning what works or what doesn't and correcting the proper thing I mean yeah you can't tweak a variable if you don't variable right I think it's wonderful that rich called in we have a stack of emails and a huge number of them are not questions for you they are thanking you because they have read your book they've watched your DVD and they are on their way to you know making better trade so that's wonderful well thanks we have an email here from Roger in Toronto and he says I like to thank wise trade TV the wise trade TV team and mark for this wonderful enlightening session timing is perfect now I'm in the state of disappointment because of big losses my question is how a strong and carefree mind which is a consistent state of mind can analyze the randomness to create the consistency what do I have to give up to change my way of thinking there's that question again boy analyzing I have to read that question can I see that yeah it's my question hit right there Jared he's referring to accepting randomness to create consistency how strong I was trying and carefree mind which is you know I can't analyze the randomness here first of all is there you kind of break that question down you're not analyzing the randomness for one thing you're not analysing at all what you're doing is you're you're buying or developing a methodology that just finds patterns and collective human behavior so the idea that you have to analyze anything is is probably where the problem is you're not analyzing randomness all you're doing is accept accept you're accepting the fact that the outcome to the path is random and that's probably the best I could do without talking to me the market is a random event the tool gives you edge accepting that you don't have you know just like Doug's example you may be a software engineer who worked for Apple for many years and you may feel that Apple in this particular situation because of the way that I feel about it because of my experience therefore Apple is bound to work out you after us it's totally random and each individual event that takes place is random and that specific event in that moment in time is not any special the one before it absolutely to give you it here kind of lab right on that just this you were down on the floor okay and and and when I was in Chicago doing consulting work I had a lot of you know a lot of floor trader clients and friends of those guys did yeah absolutely he had a good time quite a world has changed a lot now but anyway it's like so I would be why would be trading from a monitor and and and I traded support and resistance and all support is is that it's it's a previous swing high or swinging you know it's more to swing low and so we just as a swing high where when you look at when you when you look at what happened it's like when the market stops at a particular price it means there wasn't anybody there wasn't anybody in the world at that point that was willing to bid it one tick higher or offer it and on a low one tick lower now when it when it reaches that point again you have to ask yourself is is there going to be is there enough momentum here is there enough conviction in the market for someone to actually bid it past that price and you know and that's the that's the kind of assessment that let's say that you make when you when you're training from a subjective point of view not uh not on what I call a mechanical point of view when you're learning how to how to think in probabilities but but just to make the example is that is that when market when the market would come up to resistance or down to support basically all you're looking for is pretty much the same people that supported the price the last time or chances are they're gonna come back in the market cuz they made money the last time they bought they absorbed all the all the sell orders with enough conviction to rally the market and so they made money chances are they're gonna do it again you trade it and chances are doing it and trade it until it doesn't work anymore but the point is is that because I the reason why I understood that is because I actually knew the traders who did it just like on the floor could see in here not only did I see it on the charges but I talked to him later on that day they were the ones that did it and there were times for an example when when I'm thinking okay I wonder if so-and-so was gonna do this and that and and the trade didn't work support failed because guess what they were at lunch very good okay we have an email from Christopher in California he says I look at a lot of trades and don't get in then I get frustrated because the price that I could have gotten in at would have created a winner for me this happens all the time yet I still hesitate to get in any recommendations well I don't want I don't know if that that person should be paper trading at least I mean they can't tell me that they can't get in paper trading I mean that would be very unusual I'm not saying it's not impossible but you know but at least paper trading they should be practicing getting in and then when they're real comfortable with their ability to do this you know just if the trade did trade one chair I use the term trading air before that's a trading error not getting in that's right absolutely it's not yeah that's your signal you don't get it right yeah so so trade it paper trade it until you can do it really comfortably and then and then if it you know and then go to one chair well you know that's something that we talk about at Global tech we have clients that get the software and but they forever paper trade right and it's like come on just go in do a trade you know buy 10 shares do anything just make a real trade and immediately get out of it just so you have the experience of making a real trade right get your mind over it it's gonna be okay okay well we have another caller on the line it's mark in New York hello mark hi how you doing today hey Mark hey thanks for calling it what do you have for a mark here I have a couple of questions and comments um walk first of all I love both your books trading in the zone and the discipline trader they've helped me tremendously and what I've done is consistently looking for about 15 pips trading the Forex and I've calculated that with two lots or too many lots or whatever creating over a period of two months that I could double my account if I do that consistently four days a week so and I've been playing with with small amounts of money and staying on track with that so that that mental game has really helped me to to not just always be looking at the computer 24 hours a day seeing what's out there it's looking for one particular trade at a specific time of day right I have a question for you in relation to your background I have extensive training in NLP and hypnosis and other related fields and you seem to talk a lot in the same language have you studied NLP or hypnosis at all no not really when I first started developing this material back in and except 1982 I think NLP was just beginning and I don't know exactly when it started but but I did look into NLP at the time but at that time it wasn't really very evolved like it is like I'm sure it is now in that NLP back in the early 80s was used mostly as a kind of mental manipulative technique for salespeople and yeah really and it really didn't appeal to me and and and when I made up my mind that it didn't appeal to me I just I just didn't go back to it ever again so and as far as hypnosis is concerned I mean I've used I've used self-hypnosis for myself in terms of you know making my own self-hypnosis tapes and and you know putting certain affirmations on the tape and listening to it over and over again but I don't have a like an educational background in hypnosis if that's what you're asking he was swinging its clock and guys we have an interesting email this is from Susan in Houston and she says hi everybody you are all so great my question to mark is that I have been trading about seven years I traded early on and learned a lot of what you're saying by trial and error I have spent several years learning about the market thinking I could be perfect and get through this with no pain if I did I have taught my daughter how to trade and she's making thousands I sit here and I have this wall and I don't trade I want to desperately I can see all the trades and know what to do I guess I need courage somewhere I went wrong for me what would you say to me thanks in advance somewhere you weren't wrong for me she taught her daughter how to trade successfully she knows what she's doing but she just can't change no I would say it's her it's probably so much of a perfectionist that it would make it extremely difficult people who have a tendency to be extremely you know oriented towards perfection would find it very difficult to trade because you have to you really have to think of probabilities and and a probabilistic mindset is almost the exact opposite of a perfectionist mindset and so what she's gonna be looking is that even though she sees the signals and she sees what her daughter does and her daughter's being successful out of the fact the fact is when you get right down to it she wants every single trade to work so maybe maybe accept the fear go just accept the fact that that you know it's alright if it doesn't work right you know that's it's all right if it doesn't conform to your expectation and that's what she has to change okay Susan I hope that helps we have Wayne on the line in Maryland good morning Wayne hi how you doing the really good session I was just listening to it the last hour and a half and I just wanted to add something which I agree with mark a thousand percent on trade in psychology the consistency's factor that you're doing something consistent and if it goes against you you have to know that it's normal like the normal cycles and patterns of a stock and if you're getting into a good stock that goes against you you shouldn't really panic because it went down like for instance what's happening with Apple nowadays it's going through its normal pattern because it went up so much and to answer that what could help some people's fears is by doing other measures buying a protective put or active trade in other stocks to bring in money while they're watching that I think let me actually I want to ask a question on the hills of your quest in Wayne if normal patterns and cycles okay well first of all you know what is normal but a normal you know average trading range of a stock what Wayne saying is different I think basically what you the point that you make is you have to be willing to stop yourself how that have a stop-loss in place I don't want to trigger to think okay this is a normal movement for a stock therefore I'll just let it go down outside of my stop-loss outside of what I thought because that's normal for the stock itself in other words if a stock is has a certain volatility factor and you can't tolerate that volatility factor you probably should be trading that stock right does that make sense absolutely anything that anything that causes you to to other thing that causes you to let's say experienced market information being potentially painful will take you out of an objective state of mind now as long as he's an objective state of mind and he's making an objective assessments as to what the possibilities are and he's still looking at it from a perspective of you know what there's there's a catastrophic loss in other words there's a level at which no matter what I think I'm not going to tolerate being in this trade if Apple trades beyond this level then then he's fine he's making what I call subjective decisions in other words you can you can trade mechanically you can trace objectively and subjectively would be analogy would be people who who play Texas Hold'em for an example when you start playing poker what you're doing is you're playing your hand and you're not really because you're learning you're not really paying attention to what possibly other people are doing but actually you'll eventually evolve to the point where you'll play your hand in combination with what you learn about the way other poker players at the table are behaving in other words there tells and then you'll get to the point where you can actually not even have to look at your cards you're just going to play the players you can evolve as a trader to actually trade in a way where you can trade subjectively by asking yourself several if/then questions and determine pretty much what people are thinking in a way where you can make these objective assessments about what the potential is for them for a particular stock or commodity or whatever to do what it's going to do but at the same time you always have in mind you know what does the market have to do to tell me that that whatever I think isn't working got your basic objective criteria and once you become more advanced you can use this subjective mind that's right to influence right but I would not suggest people get into subjective training until they've got this mechanical part down pat right absolutely they've got otherwise they're just going to get really screwed up yeah absolutely okay well we have another caller on the line it's Kevin in Florida and this is your first time calling thanks for calling in Kevin hi Susan how are you watching Y straight its first time caller so I'm a little bit nervous hi welcome I like to say hi to Jared and mr. Douglas question I have is that you know I've been trading since November of last year paper trading and then I went live trade in October I was listening to mark and I've been reading his book disciplined trader the question I have for me you think he said that don't think on your trades the problem I've been having is that you seem like you have so much information wise trade and then I'm watching CNN on my TV I have a laptop which I'm watching my trading company trading my stock and it just seems like it's overwhelming and he come out with just that simple things don't think when you trade but you're getting all bombarded from claimer on CNN and you just don't know where to go is there any way where you can just like settle your mind down to where you can just go to one area and take information I don't know if you enjoy you know I understand exactly what you're saying you're right it's overwhelming and it's completely unnecessary why is trade and wise trade TV no no no no what I'm saying is is is that is that pick whatever edge you're going to trade and and and do not expose yourself to all the extraneous information surrounding it it isn't necessary the edge is either going to work or it's not in if it's a is going to work a higher percentage of time that it's not and all the other information that you think that you need is not necessary and what I say don't think I'm not saying don't think about the risk don't don't think in other words I'm saying yes think about what what how much it's gonna cost to find out that trades gonna work think about a profit you know a way to take profits but as far as the relationship about what you need to think about when that edge appears is that there's nothing to think about there's nothing to consider there's nothing to evaluate there's nothing to analyze some of the most successful I'm gonna chime in here some of the most successful traders that I found were very very simple and straight forward to the point they'd one tool they act on intent right all the guys that are making money I can tell you that I remember specifically there was this one guy naka mention anything walk into his office he had Bloomberg bar charts right all these 50 million screens going on he's analyzing pick a nice even dollars and the guy's driving around a 1982 Honda this is 1998 he's got a 1982 Honda and he you know he's and what you drive doesn't mean anything about you know what come on er making but the guy just couldn't make a buck right and he would commit all of his money towards these these types of tools that cost thousands of dollars a month I just couldn't make a decision because it was just an overload for him well I know that a lot of people that are new to why straight and watching wise trade TV I mean we talk you know a little bit about you know be aware if the stock you're about to trade has some news story on it that could affect if it's earnings or you know some big drug announcement but for the most part keep it simple yeah okay interrupt you just for a second so because what you're bringing up is really important what you do is you take that news story and factor it into how much you're gonna risk right doctor it into where you set your stop very good okay we have another caller it's Molly in California good morning Molly good morning come on Jared mark Houston do you have for us okay well first I want to tell you thank you to wise trade TV for bringing mark on the show because it's like really helped me a lot my question has to do with what he was first talking about are you there okay he was talking about what a pro sees he said a pro seizes entry if you could just go back over just what else the pro does after he sees his entry what does he do I got the part where you said he has a money plan but what else does he do he acts really that's pretty simple when a professional trader when his edge appears he doesn't think about whether the edge is gonna work or not but what he just think about is how much is it gonna cost him to find out if the trades gonna work in other words he assesses the risk puts the appropriate stops on the market and develops a plan for how he's gonna take his profits if the market if the trade rules in his favor does that does that help sure you're saying he actually goes in put his stops in place pearls put their stops in place by the way that there are people you know for example I often don't put stops in the market I just wait for the market to come to my price and I just get out I don't I don't know you don't I just don't have to put it because I know I'm not gonna violate that principle at the person yeah that's a pretty that yeah well that's me in other words I know there's no possible way I'm gonna violate the issue so sometimes I'll put a stop in the market sometimes I won't oftentimes I don't it doesn't matter if I'm sitting at the screen I won't bother doing it you're a traitor well yeah absolutely you really are like the discipline oh yeah literally okay well we have a good email from Bruce and it says a wonderful show I find myself making a few trade successfully and then I have a larger losing trade sometimes it is caused by sudden market move on the opening which I am hoping that that market will come down to my entry are even worse where I had my original stop-loss this has been very disappointing over the years my wife and friends think I'm the most intelligent investor and yet I've never had a profitable year trading and I've been trading and trying to learn how to be profitable for over thirty years please help and yes I'll do anything you know what I'm you're gonna have to I would have to read that I don't have to I'm not sure if I followed all of so one of one of the tools are what one of the techniques that I recommend if you've if you've had a series of a series of winds and they take the Rosses is to take your winds you've had in your paper trading account let's let's say you're very consistent in making a dollar and don't let your losers exceed what you've the maximum of you and way to go anymore okay first of all Intuit to address this email I find myself making a few trades successfully and then I have a larger losing trade sometimes it's caused by sudden market move on the opening which I'm hoping that the market will come down okay now first of all there's something we we didn't have time to address and weary Lord even have a lot of time to do it now but I'm gonna bring it up and that's and that's consistency just isn't a function of learning how to think in probabilities in other words it isn't learning you know to train your mind to understand and believe that there's a random outcome to these consistent patterns there's also other other factors involved and that's and that's what I call self sabotaging beliefs where you know not everyone not know what's another word we don't grow up with this unlimited capacity of self the self evaluation in other words how much money am I really worth or or or or the in in and what can end up happening is that there could be a self evaluation issue so in other words if we if we end up making money as a trading we might not feel we deserve the money for some reason and then make a trading air which in this case he's saying on the opening which I then hope the market okay you shouldn't be hoping anything you should be you should have it should have his risk already predefined and in the market and the market either conforms to the pattern or not but the thing is is that it isn't just a matter of self valuation there are a lot of things that we learn when we grow up that are that are completely inconsistent with or in conflict with making money as a trader and if we're not and if we're not aware that that these other mental components can come into play in other words like for example there are traders that I've worked with who have really strong religious beliefs that even though they might not consciously remember and when when they're in their middle ages let's in the middle age that they were taught that you know anything that even remotely looks like gambling is is bad and evil okay and here they're attracted to trading and then they learned when they were kids that you know that that's making certain or making money where you're not providing a service for somebody okay in other words you know where you're not providing providing some sort of service yeah yeah exactly we're trading is basically you know you're going in the market and just making money based on your assessment to determine who the markers gonna go off or down that that money isn't made legitimately therefore not deserved and so we are susceptible to making a training error that gives it back and so it consciously yes I'm consciously right so what end up so what we also have to do is we have to learn how to to be consistent learn how to identify when these kind of these kind of self sabotaging beliefs are acting on our consciousness causing us to compel us to make a training error and if we're not trading in a consistent manner in the first place it's almost gonna be impossible to recognize this did you see you see the connection here it'd be impossible to recognize that it isn't my methodology that's causing me a problem anymore it's the fact that I'm making these errors because I have these self sabotaging beliefs absolutely we don't mark we just have a few more minutes and I have to read this one email if you'll allow me this is from pip pip per a Kerry in Canada and she says good morning I just had to send a note to say thank you very much to mr. Douglas I just finished trading in the zone last night and I'm totally overwhelmed I have learned so much I'm having difficulty putting into words how much I have gained from investing the time to truly study his book I was challenged in many areas of my life as mr. Douglas shared his unique insight it shined a light on several areas I was struggling with fear this book has started a process that I sense will change my life I am now excited about trying new things letting go of discouragement and switching negative energy to positive energy thoughts about the past experiences that were choking my ability to move forward I know it will take me time to apply this to my trading but I'm actually excited not petrified I want to encourage anyone who is considering purchasing the book or the training set the amount of information the life lessons and the passion with which it is presented has the potential to bring on trance Meishan mr. Douglas thank you when a training has brought about revelation in my life god bless you thanks for doing this program today we are so fortunate to you and WTV for providing this valuable training thank you very much for that email I would like to have a copy you may have wrong thank you that's right so you know it is really powerful and you know mark and and Jared you guys are have been training in the deepest of the trading pits and you know how hard it can be to get your mind set right thanks great well god