I'm not going to attempt to show you how to trade I'm going to attempt to show you how to think while you're trading and this will become very clear in a second by way of introduction my name is Tom who got and I come from a very unique vantage point in relation to you you see I started working in the city about 20 years ago and for the first decade of my career I sat and I watched you trade I must have watched a hundred million trades go over the tape in the ten years that I sat on a trading floor whilst I was managing and hedging positions depending on which direction you saw the market go up or down and it does provide you with a rather unique insight to watch 50,000 people trade over a decade you get a feel for how it is people are thinking when they are sat in front of their monitors at home or wherever they are in the world and you notice that people tend to make the same mistakes over and over and over and actually very few people are capable of making money consistently so as I left in February 2009 in the throes of the bear market I realized that actually trading had absolutely nothing to do with technical analysis fundamental analysis and there was it was it was difficult to begin with because no longer did you have a security blanket in the form of a monthly paycheck instead you were there man oh man oh in front of the screen the markets was your best friend or your worst enemy depending on the day and Here I am some 10 years later this year has been a good year I made a more than a million pounds this year last year I managed to lose nearly 90,000 on Christmas Day would you believe that it's one of the reasons why I am so grateful that CMC market is stopping me from trading on a on a thin train day and sadly it's a bit of a challenge would you believe it to be at a Christmas lunch and dinner this is I think you call this Boxing Day yes you see we Europeans we heathens we celebrate Christmas on the 24th while you wait a day or so and then you have your Boxing Day and there I was on Boxing Day in a celebratory moment whilst at the mean time I was I don't know if you recall what Dow Jones did on the Boxing Day last year it had its single biggest game ever it had fallen 500 points on Christmas Eve the move that I had captured absolutely every single tick off and on Boxing Day I had been long but as the MA as the Dow had risen five 600 points I thought it's probably about time to begin to short this I took my profit and I reverted short and the Dow rallied another 600 points to make it an 1100 point move day and me walking out of there going that was an expensive Christmas dinner fear is what stopping people from making money in the markets sure people are good at making money at times but the tendency is to make it lose it make it lose it I believe that the only reason why I am good at what I do is because of my relationship with fear I am what's called a high state trader some would call it an extremely high state trader at institutional size the average bet amongst CFD traders here in the United Kingdom is seven pounds a point my position here equates to 750 pounds a point in attacks it means that if - goes 20 30 points against me I am faced with a loss which would equate to the average annual salary of a worker here in the UK thus you need to have a rather special relationship with losing and you need to have a rather special relationship with winning as well and what I hope to do over the next two hours is to change the way that you look at trading now I could have come in here and I could have thrown all sorts of techniques at you Bollinger Bands Keltner channels moving averages crossover stochastics MACD RSI oh god I've spent countless hours studying it as I'm sure you have as well but I am sure that you also realized that actually no matter how good a grasp you get on technical analysis they are still those days where you simply refuse to take your loss where despite your best intentions you simply cannot get yourself to do the right thing so you may quite rightly ask do I get scared when I trade and I trade the size that I do of course I get scared but the narrative here is not that I am a fearless trader I'm not even a fearless person I am scared of losing loved ones I'm scared of sending my children out in the traffic I am in no shape or form any different than any other caring parent is if you put me out of the balcony over here and I stare over into the ground do I get a flutter or nerves sure but with practice comes experience now I'm actually a firm believer that practice does not make perfect and I would like to elaborate on that point a little bit later on in the presentation I'm also scared of making a complete Twitter of myself today I'm scared that you don't get the message I'm scared that you think this is ridiculous I came to hear about how he navigates the stock indices and I promise you I'll give you my rather unique insight into how I trade stock indices so if you are that way inclined where you prefer to just stick to the technical analysis I assure you you're not gonna walk out of here empty-handed either but the truth is that my relationship with fear has come to the point where I have these sensitivities no that's not right he sends it I tried so hard sometimes foreigners can struggle it with these words I have desensitized myself to certain levels of stimulus that you face when for example a car comes at you full speed I'm sure that if it was somehow possible to produce a brain scan while I was trading during particularly stressful situations such as Boxing Day last year you will find that my amygdala doesn't light up like a Christmas tree you will probably not even be able to discern that I am losing 90,000 pounds because I have blocked it out I can't block out fear in in many other aspects of my life if he put me in front of the television screen I watched Friday the 13th or I don't really watch much TV so I don't know what's scary these days but you know Freddy Krueger kind of style I'm sure I'm gonna sit with a pillow like everyone else does well probably you won't sit with a pillow but I will because I don't I take I don't take the the horror movies very well but when I'm faced with horror situations while I'm trading I seem to have developed an immunity to fear which enables me to make the right decisions when they need to be made whether that's because I've trained or whether I was born with it I don't know but the fact of the matter is that my father was a vacuum cleaner repairman and mother was a nurse so I don't think that I've come from a heritage of risk-takers so my argument is that if I can do this with a rather unique way of doing it then I believe you can as well but it boils down to that practice does not make perfect practice makes permanent and if you carry on practicing the wrong way you will merely establish a behavior pattern that doesn't serve you so what can I accomplish in two hours well look not that I in any shape or form will put myself in the League of these four gentlemen but it only took Steve Jobs 15 minutes to galvanize a departing class from Stanford University in 2015 to go out and connect the dots and not so much work from the point of view of the head but work with the heart and Martin Luther King it took him 17 minutes to create the fortitude for a generation and a segment of the American public that was suppressed hey one day it paved the way for him winning the Nobel Prize and I don't think I need to introduce another JFK no Winston Churchill at least not when I'm in the United Kingdom since the establishment of the rules by ESMA last year or was it the yep no it was last year in August September time last year we're all European Union brokers now had to curtail the amount of leverage that they gave to their clients we used to enjoy 200 to 1 now we only have 20 to 1 and another thing that then established was that every single broker had to put up on their website how many of their clients were losing clients that was a little bit like the cigarette companies being forced to put warnings on their cigarette packages and and and and show draconian photographs of people in hospital beds with emphysema and lung cancer and anything in between yet it didn't stop people from smoking and it certainly hasn't stopped the interest for trading either but the fact of the matter is that asthma has done us a favor may not have done us a favor about margin although there's many ways we can get around that if we really want margin you just think offshore and you'll get your two hundred to one if you wanted no they've done us a favor because they've actually highlighted the true nature of trading you see if there's a hundred people in here and seventy five of them are losing has it showed here on the CM see market website well this is no longer a technical analysis issue you're not a losing trader because you are deficient in MACD and you're not running your your you're losing positions because you don't understand stochastics or moving averages this is not a technical analysis problem this is a human problem and the sooner that you accept that this is a human problem the sooner you can actually do something about it I thought that it would be the end of the sea of the industry when all the brokers had to put their this the winning stat in the losing stat up on their website but it hasn't because people know it people are aware of it but people think well this stat doesn't apply to me anymore than the warnings on the cigarette packages apply to me so when we're confronted with charts beed something the point here where I write here at that point you can buy via the market so to say I buy the market here well I'm buying it because we have a gap up and now we've traded sideways in what I consider to be an ABCD correction yeah I know my technical analysis the flip side is I could also say no actually I'm going to sell because if this was such a strong market it wouldn't have taken the buyers an hour and we also know that 48% of all gaps gets filled within the first three hours of trading and 78.6% of all gaps in the Dow Jones index gets filled within 72 hours or three trading days but it's really not so interesting to know whether this is a winning trade or losing trade maybe I'm right maybe I am wrong it really does depend on how many traders out there agrees with me and they back up my trade as well by being a buyers when I'm buying or being sellers as I am selling so since I have no knowledge of the future whenever people ask me where do you think gold is going where do you think so and so I'm going and saying do you know what come back to me next week my crystal ball is out for repair it's a four seed just way of telling people to stop bugging me but where I think the market is going because I am NOT Nostradamus I have absolutely no idea and anyone who says they think they think that the market is going this or that way is because they have a vested interest or a bias to Wars a direction or another and that's quite fair if you're a long Bitcoin of course you're going to say that the Bitcoin is gonna go up and you think it's going to go up you wouldn't say I think bitcoins going down and then your long Bitcoin so it's not that I am NOT forgiving towards people when they state that they think the market or is going to go up or down or Tesla's hit it this way or that way it's just that the opinion is biased from their own position so if my entry is a purely random and I'm a professional trader and you may think oh as a professional trader you may have a hit rate around the 80% than 90% oh no I most certainly do not have a hit rate in the eighties or in the 90s in fact you could even argue that I would have a better hit rate if I simply flipped the coin and then I applied money management so either way the sooner I accept that the nature of what I am doing is basically random the sooner I can begin to trade as trading should be done I hadn't seen that one coming and I certainly haven't seen that one coming either but that's the nature of the game that we are playing now do I think that Joss is the Holy Grail I like charts I could devour 1012 hours every single day a bit more in the weekend if you allow me to you know if there's no lawn to be Malone or Windows to be polished no I am quite happy to sitting devouring endless reams of stock charts that I analyze purely to train my mind but I'm also fully aware of the way my mind works and my mind is not my best friend when it comes to highly profitable trading so I don't believe for one second that Joss is a Holy Grail any and I think fundamental analysis is the Holy Grail see the problem here is ladies and gentlemen that we have a brain which is at best chaotic and at worst just our worst enemy and one of the little intricacies of our brains is that it has a tendency to see things that aren't there this is a phenomenon that in Latin is called apophenia now if I was going to translate apophenia into a common language it would be something along the lines of pattern isset e so when you think about the nature for example of indicators take some common known indicators like Fibonacci let's say that we look at some of the ratios of the preneur I'm going a little bit off-track here a little bit without any notes not that I really stick to the notes anyway when a market makes a 61% retracement some would argue that this is the ideal time to either buy or sell short depending on the direction and if that fails then there's also the 78.6% retracement and he'll why not throw the eighty-eight point six and 94.5% ratio so there's also there's always a ratio for the particular season however my argument is that if the market has already traded up to a 78 percent retracement surely if you sell short at seventy eight point six you're actually betting against the prevailing trend some would argue against me I'm not really so interested in what other people are thinking I am more interested in trying to explain to you that the majority of indicators a moment available to the majority of people yet considering that 75 to 80 percent maybe 90% of all people engaged and trading are losing maybe it's a time we have a real long hard look at what it is that we're actually doing when we are trading see the purpose of trading is for us to make money purpose is not to be right it's not to derive glorification through our efforts there is one single raw purpose to trading and it is to make as much money as possible and the way you do that is simply to begin to think different and I stated earlier that if 7580 90% of all people are losing traders we also have to assume that those 70 80 90 % are normal perfectly well functioning people within society who hold down jobs as well as everyone else does are intelligent well-spoken pay their taxes look after their children etc etc but they can't trade for shoot because they simply think like everyone else does ability to see things can be a thing of beauty but it can also be a curse and whilst it looks like a skeleton it is just a flower and it is just a faucet so there are those people who argue like Anning in that we don't really see things as they are we see things as we are what I call the deception chart is that our eyes will seek out that which confirms the facts that we are seeking to establish or to prove it gives us a bias of looking for things that we want to achieve rather than looking at things objectively now I don't know what children's games are here in the UK but in the US or in Denmark where I grew up as a child we will sometimes be given a one of these drawing books that had numbers and then just a blank page and our job was to connect the one with the two and the two with the free and so forth until a beautiful picture emerged of a tractor on a house on a very Christmas etcetera etc so it's not such a long stretch for us when we get engaged with technical analysis that we begin to connect one high with a secondary high and a third high and we extrapolate a line out in the future and we call that a trend line and when a trend line has been broken we get a signal is called a trend line break and it's a thing of beauty because hey it looks so easy when we are sitting doing our research and how many of us have not created four choose on paper by drawing the right kind of lines but as I said the deception of charts what we call a puffy Nia is playing a trick with us meaning that we will gladly omit this trend line break yet when we are trading it in real time all of a sudden we're seeing this trend line break and so we are surprised when this happens because during our research it looked like this there was a trend line break and their markets stormed higher and we were on board and now I'm trading it and it's not storming higher in fat is trading lower and lower in this case you actually do get Saved by the Bell unless your stop-loss was too tight but many a good strategies has been created on paper that are completely impossible to implement in real time mostly because if you're looking at the Dow Jones index from 2:30 in the afternoon till 9:00 o'clock at night there are 78 a five-minute bars and you need to be present for every single one of them or you might just miss that perfect trend line break that enables you to ride the market up or down so many things I believe of charts but many things I don't believe and I call this ignorance now intelligent people can be ignorant until they have been informed otherwise so there are things that I don't believe in I don't believe in soulmates I don't believe in horoscopes I certainly don't believe that the earth is flat and I most certainly categorically do not believe there is such a thing as the perfect system the perfect indicator the perfect chart pattern it simply does not exist so I think it's time that we embrace trading for what it really is trading for me is just a series of opportunities where I don't expect much but I know that I will place a stoploss which is in relation to how much I want to risk but the whole concept of risk versus reward is another thing that I would love to take a shotgun at and put it to death because when we talk about risk versus reward how do you know what your reward what is going to be well you have a crystal ball let me give you a concrete example I am trading the tax and I decide that I want to risk 20 points being the studious trader that I am I'm arguing you know what I'm going to risk 20 points and I'm hoping to make 40 points and in this event I'm actually right let's say I bought the the tax at at at 20 and it begins to rally 40 60 and it comes to 60 and I have now on paper made twice as much as I had risked what do you think happens when we get to 60 you think I'm just gonna say that's it I'm gonna take my profit hell no not the way I work and my mind gonna go well maybe you should just hold on a little bit longer maybe it's gonna go your way so the whole idea of presenting a reward target completely negates the idea of how profitable traders truly trade they don't set profit targets so my trading boils down to a very very simple philosophy and I believe that good traders truly profitable traders they have a philosophy that is very different to the 70 80 90 percent of traders and that's what I want to spend some time on but I know here I have an open position from my trading platform and I'm about seventy thousand pounds in profit if we move a couple of notes from that and our be seven hundred pounds in profit I absolutely categorically know that if I can do this you can do this and I didn't start trading this size I didn't arrive at the trading game with a with a you know a silver spoon in my mouth and a massive inherent is there isn't that much money in nursing and in back and climbing repair I had to fight my own way but through a very very focused and dedicated approach to trading I managed to build up to trading this trading size when I started trading I've had an account with CMC Markets my stake size was two pounds a point in three pounds a point then five pounds a point and every single time that I grew my trading size I felt that little flutter of nerves what I would like to help you answer today is what is your trading philosophy and is that trading philosophy actually aligned with your own best interest see and let me help you try and answer this question maybe just something for you to think about maybe not right now but if you want to make a lot of points in the market you can have two approaches you can risk a lot of points to make a lot of points or you can risk very little but then you need to be prepared for the possibility that you will be repeatedly wrong and at this point I would love to tell you the story about a colleague of mine in the industry a right old Nesta that I have a tremendous amount of respect for he managed a fund trading south-african shares on a one-minute chart yes it I didn't even know that you could run a hedge fund trading on on one-minute shot in South African shares but they deployed a strategy invented by Tom to mark called the tum tamaak sequential indicator you may have heard about it please don't ask me in depth questions about it because I am most certainly not an expert I have a rudimentary idea of what Tom to mark sequential indicator is about but I am NOT an expert however what I found incredibly refreshing ladies and gentlemen was that my friend was telling me you know what we had a hit rate that was around the 20s at times when we were on a good run we would have a hit rate around 30 35 % so for those of you who are not familiar with the percentages I'm talking about it means that they generally was right 20 times out of a hundred how would you feel about trading a system where you are wrong times out of a hundred does that sit easy with you aren't you more inclined to believe those glossy adverts whenever you google something those adverts I will promise you and ninety percent hit rate or a hundred percent hit rate or with this system you'll never lose who in their right mind would trade a system that is only right 20% of the time yet my friend did it and they were wildly successful to the point where they said this is it we are not younglings anymore we made enough money let's just take our spoils and bugger off to sunny shores we've done our job I asked him did it bother you they had a hit rate of 20% and said why would it the waiver that we traded this was that whenever the market didn't go in our favor immediately got out done while you're sitting there and your positions day after day hour after hour hoping wishing praying that the market is going to turn around not them it requires patience so I could have come here and I could have spent the next two hours going over one trading rule after another but I would like to take some comfort in me doing the right thing by quoting one of the best traders ever Richard Dennis at famed commodity trader who were the founder of the trading group called the turtle traders and he said and I quote we could post our trading rules on the front page of The Wall Street Journal and still people would not be able to make money from them so the best thing that I could do over the next two hours which is probably not a longer two hours bond more likely and an hour and a half is to hold a mirror up in front of you and if you want to fall asleep by all means fall asleep it's quite all right I can live with that I've had people fall asleep before no particular person intended for that comment in here I want to hold up a mirror ladies and gentlemen I want to show you who you really are not being personal but based on the experiences of a guy who spent every single day from 7:00 a.m. until 9 p.m. because I didn't have anything else to do watching you trade maybe not you personally but you as a whole 1214 hours every single trading day for a decade watching your mistakes watching you sitting there hoping praying that your position is gonna turn around moving your stop-loss further away so you don't get stopped out cutting your profits so soon because hey who can go broke taking a profit yeah you did you managed to go broke over and over because always snapping at the profit because you didn't understand fear you didn't understand what was going on in your minds and I'm not belittling me you knew and now I am NOT talking down to you I am genuinely trying to make you see trading from a very different perspective than you perhaps have addressed it from before it all starts with awareness every morning I go on the scale and I notice the trend a trend of I'm getting heavier and heavier and so I began I'm sure you people don't have that problem perfect as you are but we days you know we like our bacon and whatnot and I look down on the scale and going I'm a little heavier than I was last month and the month before so you know I do the typical approach you know like I try Atkins I try Fibonacci I try keto I try stochastics I try paleo I try Bollinger Bands I try calorie counting I try a weekend course am I getting through to you here I don't want to load your sleep either I love to make it entertaining but I actually have an important message that true profitable trading starts with an awareness of where you keep going wrong and so it happened that I signed up to this app it didn't cost the terrible a lot of money ten pounds for four months and in there I look what I eat and it's quite fun so it happened last week that I was presented with a steak now I don't eat meat very often you know when you hit that age of 50 and beyond you try to cut down your meeting your dairy because you want to live long and healthy and prosperous life but there it was and you can't say no when someone's made and and with a good steak comes chips and what comes with chips well mayonnaise of course over you ladies and gentlemen here in the United Kingdom vinegar if it was fish and chips and vinegar till your lips were blue but we Danes we like our mayonnaise and so I took a good old wall abomination - the door the chips but when they came to registration time what we call the day of reckoning I added 350 calories for the chips and then this harmless little looking wallop of mayonnaise handsomely dashed on top of the chips was another 300 calories and I looked at it and I became aware that that little misstep if you call it that had added 750 calories to my daily intake and considering I'm trying to keep myself to 20 100 calories I'm thinking did I was it really worth it was it worth to eat a third of your daily intake on a couple of chips on some mayonnaise and the answer is no but it started with an awareness so the next time I had chips I said yeah no mayonnaise for me thank you very much I think that's something nicer than mayonnaise the same goes with trading so let's take a trip down memory lane about trading you see when I started trading you are enjoying the tax and the footsie and currencies at extremely tight spreads back then when I traded do you know what the spread wasn't the Dow in today you know you can trade the Dow at a 1:1 on a half point spread do you know how much I had to pay in spread in 2000-2001 when we started trading that in any takers eight points someone has done their homework yes in today you paid an eight-point spread can you imagine trying to make a living trading the dow with an eight-point spread in today and if you wanted a quarterly contract you had to pay a 16 point spread and you're a dollar which is today trading I don't know what CMC's spread it was well it's probably about at point five point six they're about back then we paid free pull four points to get into euro dollar and dollar yen was a five point I mean this was this was you yo you're thinking Holy Smoke how did you how did you not blow up a measly we did blow up immediately because we paid all our money away in commission and spread but not only that we don't have access to what you have access today I heard I think his name is aired he was talking about that we see him seeing markets you have pattern recognition programs you will have news you'll have level to data you will have extremely tight spreads we didn't even have any of that I spoke to an old colleague of mine who I used to work with in city index and we discussed when this city index actually get their charting packets and we agreed it was probably around 2005 that we actually got a fully working charting package yeah can you imagine trading with a broker today that doesn't have a charting package no of course not yet even though that you have far better spreads you have access to news you have access to data you have access to pattern recognition programs that tells you it's a double trouble double pardon or head and shoulders and a wedge and a pennant at such an apply even though that you have access to way more information in any shape of form can you trade no you're losing as disastrously as we did 20 years ago and so with the greatest of respect to CMC market but you're not going to become the trader you want just because your relationship manager at CMC Markets is a great guy a girl nor are you going to become a trait great trader because the CMC market platform is great and award-winning I don't care it's NASA themselves that has decided the trading platform won't make a blind bit of difference to your long-term results until you learn to think differently so what's normal behavior when you get into trading oh let's do some let's do one of those weekend courses with one of those gurus you know oh he talked so elegantly and he's really good-looking and his smile is from here to here I want a bit of that surely he must know no one could be that good-looking and not know what they're talking about I'm gonna learn about candlesticks I'm gonna learn about RSI MACD RSI Oh have you heard about that Bollinger Band it is amazing that's that Fibonacci thing a ratio for every season 38 percent fifty percent sixty one percent seventy eight point six percent eighty eight point four you ever heard about the secret ratio of ninety four point six it's just between you and I and 2,000 pounds of your money thank you very much unfortunately it's still not going to make you a penny am i annoying you now are you bored are you thinking I'm what technical analysis I don't want to be told that I am rubbish at this but you are statistically speaking you are doing what everyone else is doing and if you continue to do so you're just going to continue with the inevitable and I would like to give you an opportunity to get off that path and start thinking differently see this book here it's called the Bible of technical analysis not the King James Bible for Christians but the Bible for technical analysis Richard as are written by Edwards and McGee were Edwards and McGee traders ladies and gentlemen were Edwards and McGee traders no they were not trade us there were journalists more than a million copies of this book has been sold normal leads to broke following what the brokers are saying not their advice and the brokers they're well-meaning they want you to do well why does a broker want you to do well will hail the bed you do the more you're gonna trade the more you're gonna trade the more Commission you're gonna place its logic of course the brokers want you to do well CMC included I'm not knocking CMC but CMC are not traders I choose not traders City Index not trading King Capital not traders they are not the ones where you should be getting your guidance from sure by all means learn about technical analysis but technical analysis have never made anyone anything you're not going to get rich from trading by learning technical analysis in short your problem is not that you don't know enough about technical analysis will you trust me on this that you don't need any more technical analysis you need a serious review of how you think when you're trading so let's try with that my argument is that if 80 90 percent of people are losing when they're trading CFDs this is not a pro core problem this is a human problem and particularly I think I mentioned it before I believe that those 80 90 percent are perfectly rational people intelligent good-looking smiling good mums good dad's good students good everything they're just rubbish traders because they haven't learned to think properly they haven't learned to deal with fear so what I would like to do what I would like to propose is if everyone's normal please show me what not normal looks like please show me what a 10% trader or 1% trailer looks like and I suppose that's why I'm invited tonight so here's a normal person according to Google how does a normal person think well if you ask Rodriguez from fxcm the program he did a research on 25,000 of their traders who had executed 43 million trades over a 15 month period here's the shocker those 43 million trades hmm actually had more winning trades than losing trades yeah the FX see the fxcm traders they were good traders they had a hit rate of 62% that's not bad the problem is that when they won they won on average 48 points and this is all trading currencies but when they lost they lost 82 points you see if this had been an analysis of my trades or your trades and we could say well you probably had a bad week or a bad month but when you investigate 25,000 people and their behavior it's no longer bad luck that's a sample space that is worthy of an investigation and if it had been a couple of trades 10 trades 100 trades you can argue well it's a small sample space but 43 million trades of which the majority of them were executed in Eurodollar one of the most liquid instruments globally that's a pattern I am proud to say that I have written a book that will be published next year I received an email back from the publisher to say it's excellent well that's good news Ashley a word of warning to those of you who like to write a book writing a book for me was an incredibly cathartic exercise I had something that was just boiling up inside me like musubi oh and it just exploded down on paper and I just wrote and wrote and wrote for two months before I knew it I'd written 60,000 words and 200 pages but they never tell you those publishers that writing a book is actually only half the battle then comes the editing it and then you have to do this and that and before you know you're beginning to regret you ever wrote the damn thing but the titles and the cells is telling a lot about my mindset normal is a loser show me pain do you have a trading philosophy everyone's a chart expert everyone knows charge to be continued in March next year I've been told so on the face of it I was interviewed by CNN in 2005 and they wanted to know how do your traders your clients trade and I said well the problem with and at that point I'd only worked there five years I have another five years of experience since then god is horrible to look at yourself fifteen years ago anything oh geez I wish I look like that people love to find the low in a pear trend people love to find the top in a bull trend there were people when I walked in here saying when do you think the crash is coming what crash I don't know if there's a crash coming what crystal ball is it that you're looking at because I just see a market that keeps making all-time highs sure let's talk about a crash if the market is in a downtrend let's not talk about a crash when the market is sitting at its all-time high people think every reaction in a trend is the beginning of a new trend I would be sitting there night after night watching the market fall or rise and our client sure as hell the moment the market just ticked in the other direction by a little bit they would pile on as if the trend had now changed so my argument here is that people are generally fearful when they're hopeful and they're hopeful when they're fearful and I will explain that momentarily now what is normal behavior I am letting my losses run why am i doing that what am I telling myself well I'm telling myself that I hope that this market is going to turn around but the real reason is I would like to avoid pain we have a brain which is millions of years old and it has one primary function that is to keep you alive at all cost and by the way also love to make sure that you never experience any pain some people in particular psychologists refer to this as the ego it wants to make sure that you maintain your ego preservation your state of mind where everything is rosy and good so you'll do anything to avoid pain not you but this thing up here and it doesn't matter what scenario I throw at you I'm letting my loss run because the indicates says so or the Fibonacci says so but actually you want to avoid pain I'm taking my profits because hey you can't go broke from taking a profit still it's still you avoiding pain why well because you hate the idea that the market is going to take back some of your profits in a moment I'm going to show you one of my chart after the fact not with I bought here I sold here but how much I made and how much I lost I am winning so I'm reducing my stake size why would you do that well because I want to take it easy now nope you want to avoid pain you can't bear the fact that you made 400 pounds for the day and God forbid that those 400 pounds would disappear let me ask you a different question that's gonna come out here on the floor for a second because I'm tired of standing there imagine that you made a thousand pounds on the day versus you lost a thousand pounds on the day who is most likely to carry on trading the person that had made a thousand pounds or the person that have lost a thousand pounds the person who has lost a thousand pounds is far more likely to carry on trading because God forbid that he carries on that pain into the night and he will do anything to get rid of that pain but when he's made a thousand pounds he'll do anything to protect that because it feels so good to have made a thousand pounds so I don't want to jinx it I could carry on and on and on I think you should see it for yourself you're more than welcome ladies and gentlemen to have a copy of this presentation more than welcome if it can help you then you can have it now I've been told that I have 5-10 mins left before you have a well-deserved break and some food so let's carry on this for the next 10 minutes or so you'll be happy to know that I'm on slide 48 out of 157 it it doesn't bode well for the second half does it did you have plans on going home then you may want to call the people at home saying might be a little late people are fearful when they're hopeful and they are hopeful when they should be fearful what do I mean by that imagine you are sat in a position that is making you the m4 mentioned a thousand pounds you're no longer hoping that that thousand pounds is gonna turn into two thousand pounds or or three thousand pounds now you are fearful that thousand pounds is gonna be taken from you and if you are losing a thousand pounds you're most likely gonna sit there thinking wouldn't it be great if this position turned around you're not you're not fearful that that position is gonna get even worse you're hopeful that is going to turn around and if you want to have a fighting chance of making the markets your ATM machine and there's not a sales pitch as bit I'm a cliche I admit that but if you want to have a fighting chance of making them markets the place where you take money out on a fairly regular basis you need to turn this around how are you gonna turn around while I have my own ideas so let's take a look at not so normal let's take a look at how I operate and people who are what we call the 1% Rolla and talking about me which is something I not that good at doing I prefer to throw the attention some some some truly great traders one in particular is someone who I wish I could have met but he's no longer with us his name was Charlie D an excellent book called Charlie D the legendary bond trader is something you can buy through Wiley here he says the time you know you've become a good trader is that day you're able to win by holding on to a winning position and rather than taking half profits you're adding to your winning position rather than beginning to think where should I get out you're beginning to think how can I get deeper in how can I commit more he says and he is a floor broker sorry a floor trader at Chicago Board of Trade he says there are many people in here in the pit that have traded for a long time who have never added to a winning position have any of you ever added to a losing trade sure we have of course we've added you know you bought a 20 and then it goes down to 10 you're thinking it looked good at 20 it looks even better at 10 but how many of us have bought a 20 and then bought more at 30 and bought more at 40 and bought more and 50 now the the raised hands are becoming few and far between sure there will be people who have done it an and good on you but it's very difficult emotionally to add to a winning trade it's a lot easier to add to a losing trade because hey you feel like you're getting a balk and you feel like you're buying something which is cheap and hey we when we started learning about trading what were we told we were told by low and sell high quite possibly the most expensive piece of advice ever dished out in the history of mankind because every single time I fought low it always went lower and every single time I tried it too short high it always seemed to know that I was in and it would go even higher now I prefer to buy high and sell even higher and I sure do like to sell short low and cover even lower so Charlie Dee goes on to say that it's in our human nature to want to cut our winnings you bought a 16 you can get out of seven get me out I'll take that profit that's just human nature that's who we are so he says if you want to be really good at this you need to accept that everything you do when you're profitable Hertz it feels uncomfortable if you're on a position and it doesn't feel uncomfortable you're probably not betting big enough I want to repeat that when you're a good trader everything you do hurts and I'm not talking about a smack on the hand kind of hurts or smack in the bottom kind of hurt but you know if it doesn't feel uncomfortable you're probably not pressing the position big enough there's a snapshot from at open trade this is equating to being a hundred thousand pounds in profit this is not the result of normal thinking see what i'm doing here is see if i can navigate this gizmo let's just stand over here my first entry the market is trading at a hundred and thirty-five twenty-five thousand hundred and thirty five but my first entry was at twenty five thousand four hundred fifty-eight but as the market fall i keep adding to my winning position what do most people do when they are in a winning position now i know the answer because i sat and watched this for ten years when you're in a winning position what do you do I mean humor me here take half profit nip a little bit more move the stop-loss down so it it's almost meaningless to have a stop loss because you're going to be stopped out by the slightest movement in the other direction people are great at taking half profits they're just not great at taking half losses we love to take a bit of a profit home because it feels good it feels like we're doing the right thing why on why on earth would I risk losing some of my open profits you can't go broke taking a profit that's what this the books are telling me now the amount of time that I have had ten or twenty thousand pound open profit positions that will then turn into a Cyril a countless my trading philosophy ladies and gentlemen my trading philosophy is that I will never get out at the maximum profit potential ever and that is the only reason why I am still running this position not actually that would be disaster stuff are still running it because thousand twenty nine thousand but in this case where did I get out did I get out at their absolute maximum profit potential no ice most certainly did not now it's come to the point where I probably need to take a break so I think I'd like to do that with this slide here and then we all carry on after the break the mental foundation for profitable trading is are you prepared to do what the ninety percent on not doing and of course the answers yeah of course I'm prepared to do that I'll do anything for profit but actually you don't really fully understand what is required it takes a lot of introspection which I'll cover in the second half but I'm aware of my worst habits I am aware of my weaknesses and I have a routine to counteract those I am constantly pushing myself you never get to trade 100 200 300 pounds a point unless you constantly push the envelope there are some people in here who are well past 50 years old including myself now interesting story to set you off for for your dinner I assume most people in here have a driver's license and I assume that many people in here have driven for many years and we all consider ourselves good drivers and I thought I was a good driver I mean I've been driving since I was 17 which is a miracle because you're not allowed in 10 much to drive until you're 18 don't ask me how but that's the fact and now I'm 50 and so I've been trained I'm sorry I've been trying I've been driving for what 32 years 33 years and then a friend of mine decided he wanted to give me a present for my birthday he was one of those red little days where you go out on a racecourse you could have been any red letter could have been anything but this was you get to drive from very fast cars and then I realized just how bad a driver I am because when it really is a matter of putting what are you saying England pedal to the metal of yeah is that is that the right saying when you really do press that accelerator and you're not just driving straight ahead down the m6 but you have twists and turns that's when you know how bad a driver you truly are so we can do something for 30 years without actually be particularly good at it and you can continue down this path of trading for the next 30 years but there is an enormous Lehigh probability that you're never going to fulfill your maximum potential unless you begin to shall I say stop staring so much of the chart and begin to cultivate a very different mind let me give you an idea of the kind of technical analysis that I deploy I think I think the odds are high you'll never have heard of that kind of technical analysis so let me give you a sample of the kind of preparation I do a head of a trading day say for the sake of the argument that it is Sunday night and I'm preparing for trading on Monday or even I'm set preparing for trading on Monday I have developed a technical analysis that I called scenario analysis scenario analysis is something I invented myself I have never heard anyone discuss it talk it use it let me give you an idea of what I mean by scenario analysis imagine the scenario in the Dow Jones index I could have been anything that I have researched say the scenario is Friday's trading was unable to trade above the highs on Thursday so as you observe over the weekend how did the market trade on Friday versus how was it trading on Thursday and if during Friday the Dow was unable to get above the highest point that we saw on Thursday it has severe ramifications for what you can expect on the Monday my research suggests that there is a 95% chance that during Monday the Dow will trade down to the lows seen on Friday and in most cases will trade lower now what is that statistics based on this is based on manual analysis of the Dow Jones on charts spelling back from 2008 until 2019 off the top of my head over the last year there has been 24 occurrences where I before I went into the trading session on Monday could observe that the Dow was unable during Friday's trading session to trade above the highs of Thursday and out of those 24 occurrences in 21 of those 24 curses the market traded below the lows of the Friday now is that data crunching is it technical analysis I don't know call it what you want but when I go into the trading session on a Monday I know technical analysis on par with how you know technical analysis I know the patterns I know the trend lines I know the ratios I know the day's high the week's high they slow the week low but armed with the knowledge of how the market has tended to react based on what has happened in what I call the scenario analysis I am in a position to place myself in the market and hopefully taking advantage and if I am being run into one of those free times when it didn't work well then the stop-loss will take care of the rest the framework that I operate with you see I've accepted with every inch of my being every DNA that I have absolutely no idea if the next trade will be the best trade of my life or if it'll be a small loss no idea perhaps it's the moment now where I tell you that every single time that I go into a trade I will go for the jocular I will go in thinking this is going to be an amazing trade and I will want to squeeze it for every point that I can get out of it I always get quite annoyed and disappointed when I get stopped out and it turns out to be a nothing I know with every fiber of my body that if I'm not disciplined and prepared mentally I can experience what I experienced during the flash crash of 2010 where I on paper was technically broke all the money that I have made over the last decade of trading were eventually wiped from existence and the only reason by the grace of God or whoever else was looking after me that day the brokers automated stop system didn't kick in and those of you who remember that day and some of us remember very vividly you'll know that the flash crash actually only lasted a few seconds the really really bad part of it it was still pretty bad but it recovered relatively quickly followed down by another attempt and then we started climbing up till near breakeven and on paper I was wiped but when all was said and done I had lost 2,000 pounds and I assure you ladies and gentlemen that was the happiest 2,000 pounds I have ever lost I'm not a fortune-teller meaning I don't go into the trading day thinking I know what's going to happen and I get quite annoyed when I speak to my friends and colleagues you know they're great people but it annoys me when people say oh I was headed for 30,000 I know it so well then put the position on but don't ball me with it I want to have a complete free mind I don't want to be told what you think because they will sway me I want to have a blank canvas when I trade because I know that in order for me to avoid being like the 90 percent I need to think completely the opposite of the 90 percent and then 90 percent they're engaged with targets oh that I was gonna go here and then it's gonna go here and Elliot wave analysis perpetuates those things that I don't want to do that here's another piece of advice for you you know that the vast majority of people when they make money they'll have a tendency to reduce their trading size because they want to avoid the pain of losing some of their gains and I swear to God 99% of the trading population just doesn't get it when I win I don't bet mess I bet more the more I win the high I bet see you can think of this in two ways you can say well I like to think like the 10% or you can turn it on his head and say I'd like to not think like the 90% and so you almost can do a self analysis and say well how is it that I tend to think it doesn't matter whether you trade currencies or commodities it doesn't matter whether you're a scalper an intraday trader or an investor I participate in a radio program in Denmark where we're each year given 250,000 Danish Kroners which is roughly 25,000 pounds and our job there's three of us our job is to grow that money to as much as we can and we get to keep this but if we lose well then the competition of the people who run the competition and they're the one that takes the loss it's a it's a rather favorable set off some would even say there's an element of moral hazard in there however I see it slightly differently I see it is is whether when I trade in this competition which I had won four years out of five and the year that I lost was actually this year is that when I'm in a position I don't sit and congratulate myself that it's going well if I am in a position be it in a sum share and there we all with trading physical shares or ETFs if I'm in a winning position I don't sit and congratulate myself no I want to get that position bigger and bigger and yes there have been many times when I've been in a position is going well and then the market takes an unexpected turn as it does and all of a sudden this winning position of 5,000 pounds because we're not trading with leverage so it's it's relatively small amount so the the years that I've wanted it's because I've grown the account by 10 15 20 percent so we're not talking about 200 percent gains in a year but it's because I have compounded in my positions so when I am am in a winning position I don't think like the 90 percent I don't sit there and think when should I get out what should I get out oh oh did you see that the market just turned down a little bit I better get out now no I keep thinking how the hell can i press this position so I can make even more you see I want to tell you what I consider a very interesting story by one of the Great's I'm not one of the Great's of trading he's one of the Great's of trading his name is Richard Dennis he's already been mentioned once tonight and now he's gonna get another mention but it's not what he says but it's what people say about him you see Richard Dennis he was a soya bean pit trader and they say about him that while everyone else was engaged in reading the crop reports by the US Commission Agricultural Commission Richard Dennis instead he said I don't care about what the crop reports are going to be you see you were far more likely to find him with a publication on the death instinct or Eros and Thanatos than you would about whether the crop reports were going to be good or bad because richard denna's realized that once the news is out the news is out but how you react afterwards we'll make the humongous difference between you being a winning trader and a losing trader now I say it and you think yeah is that Dane who's coming over here he bought blah blah blah he's giving it the old lippy lippy but when one of the best traders in the world says it perhaps then it has a little bit of validity maybe then you'll sit up and pay attention because these are not my words these are the words of one of the all-time legends of trading he says a little bit less technical analysis and a little bit more introspection in what the hell is going on in your mind and it doesn't matter as I said before whether you're trading a five-minute shot of you are an investor if you have bought onto a stock which is of Drona why contemplate where you're going to get out why not add a little bit to the position why not make the position a little bit bigger why because you're afraid then that what the market has given you is gonna take away well hasn't that happened to all of us you see adding to winning positions is one of the best antidotes to do to what the 90% are consistently doing the 90% love to add to their losing trades why well hey if it was a good purchase at 50 then it's got to be even better purchase at 40 isn't it because hey we all love a good bargain how many of you go down to the shoe market on a Saturday morning and thinking oh my dear Lord filets on offer chicken is on offer even tonight let's say that your man are you gonna go out for a bit of food after this if it wasn't good enough here you go do you know what that that restaurant over there they got two pieces for the price of one what let's go over there if you had the choice between buying a pizza that was twice as expensive today and it was yesterday are you gonna go for that no you're not you would prefer the half-price pizza because that's the way that we are put together we prefer things where we feel we are getting a bargain but what's perverse about the industry that we are trying to make a living in is that it makes more sense to buy something today because today it's more expensive than it was yesterday that's called a trend but none of us like to buy a share today at five pounds if it was four pound 50 yesterday but you love buying a share at 4 pounds if it was yesterday was 4 pound 50 because you feel like I'm getting a bargain here but the sad truth is that the financial markets is not a supermarket it doesn't work like that if it's cheap in a supermarket by all means you got my blessing to load up if you want but please don't load up because something in the financial markets is cheaper today than it was yesterday because that's just not the way that it works and for 10 years I sat and watched people do exactly that for 10 years I had to suffer the audacity of watching people buying the Dow all the way down and down and down and down and down Weibull because they were living under the illusion that if it was good yesterday is got to be even better today it's that really who you want to be I don't think you do and he certainly didn't he was infamous for adding to his winning positions infamous I'm gonna go off script for a second here and I tell you a good story you see he hired traders he had a dispute he had a dispute with one of his colleagues called William Eckhart William Eckert he's a professor in mathematics brilliant trader brilliant mind and they had this bet trading know you're born a trader you can't teach trading now you're born a trader you're not a traitor and I don't know which one of them said no it can be taught and said right let's bet let's find out let's hire some traders and settle this bet once and for all we are gonna get some people in we're gonna train them in our money management and our entry techniques and the techniques they had that are very complicated extremely complicated that's sarcasm by the way their entry technique was if the market trades at its highest for the last twenty days then that's your buy signal yeah that it doesn't get simpler than that does it ie if the market sits at its highest for the last twenty days by and if the market sit at his lowest for last twenty days sell short so they got the ten people in and I happen to get to know one of them Russell was a world-class backgammon player and that's why he got hired Richard and will Mecca they thought well guys like that they were no statistics they'll know odds and I happen to get to know Rosslyn when he was in London and he said do you know what the worst thing about being a turtle trader was it was that you were not allowed to take your profit you could be long soya beans or wheat and it would be climbing climbing and climbing and climbing and you'll be making $1,000,000 to million-dollar ten million dollar 20 million dollar 30 million dollar but you are not allowed to guess where the top was and it was unbearable you sat there and that money was burning a hole in your pocket you were just not allowed because what Richard Dennis advocated was that out of a hundred traits you execute ninety seven of them are gonna be yeah but free of them are gonna be catching and you never know which one of the hundreds it is so you just had to sit there on your bottom sit on your hands and I swear to you he says the hardest thing in the world is to sit on your hands and just let the market do what the market does and in the end he bowed out he just couldn't hack that way of trading anymore now would you agree with me that there was nothing on paper there was nothing difficult about the entry system there was nothing difficult about adding to the winning positions they had a mathematical formula ladies and gentlemen you can look that formula up on Google if you want to it's not a secret anymore but the system still works it's efficient it's just very difficult to trade not because it's difficult to understand but because sitting on your it's very difficult would you agree with me young man very difficult to do nothing in the face of a winning position or you want to tinker a little bit with it or maybe take a little bit of profit but leaving a winning position alone that's why trading is difficult you're not difficult to understand people not Jean stochastics and all these things no fighting our natural urges is what makes difficult is what makes trading difficult and he knew it and that's why he spent all his mental resources on handling that side of trading because he thought you know what it can't be that hard the markets moving higher I need to buy it oh we had a little bet before this show started on how many times I would trip over this that was number two so this might be a little bit new age for you and I appreciate that but I make sure to the best of my ability that I look after myself make sure I'm rested have a strong body I also have a belief that you can't have a standard attitude about money and do well in this business it is absolutely no good if I'm in a winning position and I'm beginning to think you know what I just lost the same as buying a new car or as my ex-wife would say you just lost me 1,500 pairs of Loper tank it's a shoe well I didn't know what it was until I was told or even worse if you take your profit now you can buy so and so and so and so it is a death sentence to a good position to begin to equate your open profit to what you can yes that you can buy for it so how do you become friends with those fears that we have those uncomfortable feelings that we have well I'm gonna show you a picture now and I'm just going to let that sit for 30 seconds I'm about time it and I want you to imagine you're there are you okay with that it's not a horrible picture imagine that's you can you feel that in your stomach there you are oh yeah that's vertical that that's not film trick that's that's not trick photography that's real that is Alex Hannon clang ill cap in Yosemite National Park I don't know how you feel about it but looking at those pictures is part of my preparation and then the next step in my preparation and this is preparation I do in the morning and if I have the choice between looking at charts preparing you know doing my ratios all these things or I just have time for mental analysis mental analysis wins 100 out of 100 and the way I do it this is an example of a trade sheet for me I'm gonna come out here just to explain what you're seeing here is the believe it's that Dax during the day I can very quickly and you know what kinda mean I must be the Dow because it's in the 23,000 what you're seeing here are my profits and losses during the day so there's some - 25 thousand pounds - ten thousand pounds plus fifty seven thousand pounds plus twenty thousand pounds plus twenty thousand pounds so there's some whopping profits and there's some whopping losses but more interestingly was is this one here for example is I was plus twenty thousand pounds but I only made eight thousand pounds out of it so I have a print house where I live that have taken of these and if I have been allowed to show you my laptop you will see that I have a PowerPoint presentation with approximately thirteen hundred slides all of those slides show my past trades with handwritten notes that I've then scanned so I got a print house to then print those trades off in in I think you call it a free sighs so I will select twenty thirty of those slides it's a rather large pile I can choose from so I'll just take twenty or thirty of these in the morning as I mentioned prepare and I'll remind myself what it is that I'm trying to achieve and my sour that I only got eight thousand pounds out of a position no because that's part and parcel of the game I need to remind my mind in the morning ahead of game of the of the trading game starting that it is perfectly okay to see a big profit turn into a small profit because how else are you gonna get an even bigger profit and you might think I'm never gonna trade 200 pounds a point of three hundred pounds of corn I did this when I was trading five pounds of oil and if I hadn't done it trading five pounds of point I would have never gotten to six pounds a point and seven pounds a point and so forth it's not the size the number of ditches that you're trading is about trading the right way and ladies and gentleman do you now understand why this has got nothing to do with technical analysis well technical analysis is an inferior way of getting money out of the market and mind be all end all it is paramount to think the right way because otherwise you're going to be emotionally robbed of your greatest opportunity and my preparation it's not like an expensive course that I had to take or a book that I had to read or anything like that no young man it was just him it was basically just printing it out and be accountable so trying to avoid it next time just like the mayonnaise so next time you offer me a portion of chips sure I'll take the chips but I'll probably hold the mayonnaise because I don't want to add another 300 calories because I'd like to spend them on something else like ice cream which is better than mayonnaise in my book and I spend just as much time mentally preparing myself incidentally the gentleman climbing this wall here Alex Hannon when he climbed El Cap first of all the feat is captured in a movie called free solar which won an Oscar for Best Documentary by national Geographics just watching it is worse than watching Friday the 13th times 10 I mean this is fear on a entirely different scale but what I find incredibly interesting is his preparation sure he did his push-ups and sit-ups and all of these things climbing but he spent two years preparing for it going over it planning the routes but his mental preparation was as thorough as his physical preparation because you know what now is not a good time to be in doubt now is not a good time to think whether you left the stove on now this is a world-class example of someone being in the present here right now and when I am in big positions the worst thing that I can begin to do is to entertain the idea of hey who God if you take your profit now you can wipe that loss you have from yesterday what has yesterday got to do with today do you follow me this idea of an emotional reset well I don't play for emotional reset yesterday's trade has got nothing to do with today's trade you've never done it of course but other people lesser mortals they've been in a position where they've closed the position purely because it would reset the account you have a 10,000 pound accounting you lost 2,000 pounds and now you're plus 2,000 pounds I'm just gonna take their profit because now I'm back to break even of course not you guys but other people so my argument is that all of those people that lose they have really good at chart analysis and they don't lose because they're not good at chart analysis it's because there's so much more to trading than a head and shoulder pattern let's take a look behind the curtain what's going on I brought this picture in here because I thought it was really stylish I love that poacher picture and the villain was Danish we're quite proud of that normally you're not overly proud that the villain is dated but he was and we thought he made a fantastic villain you know like Goldfinger like that kind of but when you look at it it also epitomizes what trading is about there's money on the table and as they say in the movie when you're playing poker you're not playing your cards you're playing the man opposite you so there are days when I look like this and you are raking in the money and then there's days when I look like this despite my mental preparation things are just not going my way and you are bleeding now I hear people who will stop trading because they've had free losing trades in a row or five losing trades in a row I never entertained that thought because then what you're really saying is that the trades are interconnected that somehow those free trades are connected and that will have an influence on the fourth sure if I have a throbbing migraine then that's a good argument for stopping trading or if there's a gas leak in their environment and you can smell gas and that's the reason why you have free losing trade by all means stop trading but otherwise if you're following your strategy and you're doing everything right why on earth would you stop trading it's a mental mindset thing so I live and die by I must control my mind otherwise I can't control my future