Mark Douglas - MIND OVER MARKET (Full length Interview)

member 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 option strategist you're 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 training psychology both trading in the zone and the disciplic trader you've heard me talk about them many times here on W TV 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 marking it last time we were together was it wise fest and had a lot of fun I'm really excited you here with me today thanks so 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 were the truth of 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 is the problem you refer to is the profit gap and I think it's one of the least understood concepts of trading can you address this a little bit this 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 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 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 relationships between the town it almost seems like there's no relationship between the two yeah so what you're saying right yeah that's a real hard mental barrier to break through mainly because you know we 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 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 it take to actually experience this absolutely not yet so be natural 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 is that easy to click the mouse for me to sit there and make 5 or 10 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 unlike 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 I thought it couldn't be that hard so what makes consistency so challenging but what's that what's the big hurdle there well we're gonna obviously going to get into that but but at the most general level I'm going to say that it requires learning the type of skills that people just simply aren't used to learning dentists dental skills exactly in others it requires mental skills most people assume that because they're technical method gives them a signal get 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 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 50 in a row with it I mean is that is that that that's you see that a lot of the realm of reality right okay so the problem is that could even hit two in a row if the circumstances were he was 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 itself 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 that's your case yes they focus on the process of this presentation and not blowing it are you doing it anyway you know with Jamie 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 trading by doing exactly what we need to do when we need to do it without hesitation 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 to everybody okay our method can't prevent us from moving a stop closer to our entry point where we get stopped out in 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 too 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 that this 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 - any particular signal will be or what the sequence of wins or losses will be over a series of trades - math for and I understand what you're saying I think 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 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 hasn't learned to integrate this principle this randomness principle and his trading regimen he will undoubtedly find that training can be one of the most frustrating if not exasperated 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 randomness 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 that's that's why we're here explaining it right now you see the frustration comes from expecting from our expectations it's 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 a 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 so you know and if the last trade was a winner right this 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 going to 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 the chart 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 I 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 it let's say and and learn how to think in what I call probabilities they're 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 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 losses in a row this could be a source of frustration for trade oh absolutely in other words if yeah and that's exactly what happens trade 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 feel betrayed depending on how much you know how much kind of energy that I put into the idea that this that the trade is gonna be right well how do we get over it I mean how does a trader take you know okay so I've got all the 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 well here we have kind of have to get into the nuts of 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's through electronics there's a real disconnect 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 traded at an exchange so you know that all prices are people generated events okay they are it 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 now 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 expose get exposed to a technical method now what is this technical method do 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 going to buy and visual what's that noise it have to be visual but it's like it could be it started out being visual 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 going to buy it's because at right now let's say the last price is 10 and I put in an order to buy something at 10 ok it's because I believe that the market is going to go to 11 or it's going to go to 12 certainly if I thought or I believed it was go to nine I would wait would I not correct so the reason why I'm buying at ten 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 accounts to move the mark exactly in that 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 10 for the market actually moved to 11 all the offers have to be taken out meaning that or move to 12 all the offers at 11 have to be taken out so in other words people who are trying to sell at 11 they have to get their orders filled before can get to 12 well for someone for someone to actually bid it to 11 or bid it to 12 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 then or buying higher relative the last hat is understanding this concept how does endure standing what moves the markets help our traders to take it to 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 move 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 or you know moving averages or any wise 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 a yeah afraid there's no there's any enough that's what it ends up being is a fresh cross when I'm talking about the actual mathematical formula that makes the fresh cross okay okay so there are 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 find 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 is a higher probability or what I'm going to 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 mat that Mouse 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 going to make your trade a winner by bidding the market if you bought something by bidding the market you know using all of my money you know 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 twelve admitted to thirteen now the prices at thirteen all the trades that you put on a ten are winners right that's the one at eleven and twelve yeah but while you're averaging up at 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 we 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 without any edge you said in our fair Jerrod when you put on a trade okay when you put on a trade do you know who now we've done we reduce 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 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 now is there any way to know now there might be but it'd be pretty hard to find out right I mean you get Mego yo you could go yeah we go to go to the clearing firm you know the firm that clears there that you know the bottom line is 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 going to 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 going to 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 the heads heads the tales of course not it's an infinite well no I'm saying do I do I know the sequence in other words I'm going to flip the coin 100 times and statistically it's going to come up heads 70% of the times I still don't know which which time is gonna come pads but yeah which flips are going to come up heads they say which flips it's not the times which ones in other words which you know we flip the coin once it comes up hands flip the coin twice it comes up heads and excellence 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 makes available to us based on the path 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 you can't think that we can't think that's the way the typical trader right the typical trader thinks I'm not going to put this trade on unless I think it's going to be a winner or why would I do it so an excuse our expectation see it messes our expectation let's back up a couple seconds here there's some great stuff here marking 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 what if that edge is 2% of 3% I don't know if we can know it's a lot more than this more than that maybe more with you what do you mean more there's a lot more than that it's far more than 50% well I've seen greater than 50 I was using hedges the finest I see yeah so maybe fifty five six percent time let's say thing is it doesn't even have to be 50 percent actually make consistent money that's what people can realize too that depending on what that what the ratio is between what you have to risk to find out if a trade is going to 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 a ninety five percent loss ratio and make at the most at one point and I think around 1987 or 1988 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 - and then this is something something I ought to really qualify 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 going to 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 your your edge identifies it puts the odds in your favor if 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 these 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 because you don't need to think I'll give you an example a professional trader whatwhat a professional trader thinks about when when there's an edge present is does he think about whether the edge is going to 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 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 going to let the market go against this position to tell me that other traders are either going to 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 so the typical trader was a typical trader do they don't have a plan or they think about the trade too much they think about is this going to be a winner is this gonna be a lie from the exact opposite of the person what the professional does is basically and then once they make up their mind that's a winning trade they don't they don't predefined their risk do that right and they also don't have a plan to take profits because they think we think anyway it's gonna go on I 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 in 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 a risk right I got this he does he put a cap on the upside does he put a cap on as well is that it's not a matter of goal up it's a matter of how his assessment of how much potential there is in other words it see the problem is on a winning trade where 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 advocate scaling out of positions mark this is all great stuff we're going to have to wind it up we got to go to a break guys it's already time as I said for a break we'll be back with much more with Mark Douglas here in 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 you gave 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 and 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 toward 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 with 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 so for an example if the markets if I'm in a losing trade and uh 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 the case right you know it's like as a 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 see an 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 is that if I'm susceptible to being disappointed or betrayed me get into a trade you know expecting it to do what I think it's going to 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 I'm gonna you 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 their cup and in its 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 the stock I continue to hold my loser I continue to hold my loser until this thing draws down against me 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're you refer to it when it won't be yeah it 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 something's going to 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 your hand might not be so good and so that's why it's so critical to predefine your risk before you even get into a tray 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 it affects our perception of market information in a way that doesn't allow us to how do we make ourselves not susceptible and 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 I feel eight it you know what a reveal like it doesn't matter okay that's good that you didn't like it because it might make the example even better okay okay you play a slot machine when uh when you put your money in the machine let's say is 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 yeah well they 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 outcome okay 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 this sounds crazy but I you know when I put the quarter in I thought you know what I'm probably to 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 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 going to work okay okay and then what we do is we wait for a pattern to show up 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 going to work but most traders because they evaluate because they judge because they analyze they think that and build a case for the pattern being right they actually talk 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 well ok been told over 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 it 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 got to 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 going to 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 in there's another problem on it oh yeah but see the 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 a quarter in a slot machine or 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 the what's the title this program mine over market okay got to be able to change the way you think and how does a trader do I mean what are the steps I mean you know talent is there is there a obviously by reading your books by getting themselves immersed in your thinking it's certainly a way to do that is there anything from this point forward a trader can begin to do or thoughts the trader 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 that yeah there's a way out 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 Jared 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 going to 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 of the 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 with the shuttle 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 the by changing the way that they think they've got it they've got to eliminate the potential to think that the market is going to disappoint them they've got to eliminate the potential to think that the market is going to disappoint them and the way they eliminate that by 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 I got to say something else is that is that traders do not know a half by the way keeping we do oh I got that long I got oh no 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 doing whatever it is he thought I was going to do that's all it is it's nothing more than that and you have to learn to walk away it has 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 okay it's a find themselves doing things that they want what am i doing this for you know and and so how good are they going to 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 what you have to understand and 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 a hyper let's say I there's a 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 odds are in my favor that somebody is going to come into the market 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 these are going to 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 much distance am I going to give the market to move away from my entry point to tell me that that they're either going to come or they're not and do any further is not worth the money of finding out not worth the cost of finding out that's all it means you talk about stop losses you talk about stop losses and management in your in your DVD absolutely but not in - but not like a 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 time frame 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 moment yeah in other words into it you know and so that so that they can address your four-momentum 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 boss in other words take $100 loss see how you feel if you were able to take $100 loss and walk away and not fret too much about it not let it stress out your the rest of your trading day and I think about it maybe then you could say okay well they trade a more volatile stock and move to something like a 200 or 300 dollar loss etc is that an exercise you think we better lutely absolutely another answer 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 have 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 papé a lot of a lot of people who teach trading say that you know there's no point in in someone paper trading because there's there's oftentimes a huge difference between the results will 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 their methodology 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 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 adds an interesting concept yeah so in other words how does Pete how does someone convince themselves that they need those mental skills look at you look at your paper trading in relationships your real training now if if 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 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 of my life and it just doesn't mean a trading it could mean you know pets or what it you know people and that sort of thing or jobs and so it because our minds have this tendencies to associate 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 training 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 be able to make those trades in a page I mean then maybe those trades in the bender then you can go to and then you go to 20 shares and see how that feels then you go to 30 and gradually work your way up and people are willing to gradually work their way up this is a concept that we've never even talked about I've never actually heard it put this way mark I have to be honest with you where you look at your paper trading account as kind of almost your goal if you will almost like this is where I could be if I was raining from a state from a carefree 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 made reference before both wives fest and earlier we talked about some Yvette's and 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 them 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 dedication actually you know I'm not try to be rhetorical I really want a serious answer because there's people out there right now but I'm sure thinking the same thing do I have to lose my whole account does this have to happen for me to make her well your pain right now are you jerk I'm good I've been out of pocket I'll just yeah well you mean like the gutter principle yeah is I was a referral a the gutter przygoda figure the gutter principle no word how much in the gutter D had to be before you're willing to say I'll do anything as a matter of fact to get 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 uh one was with traders who were already successful who were already consistent and what they wanted were uh 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 creasing 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 in that getting into that potential that that there they come to me saying I'll do anything I'll and and that's you know now everyone has different tolerances of pain before they get to the begin to the point where they say I'll do anything and mean it and be sedated let me I think that's the whole thing they gotta mean it mark we were wrapping up the show we've a couple of minutes now there was a couple points any one of the make before we end up this show and guys just say you know next show we're going to 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 or any final thoughts maybe some a mantra some 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 going to 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 if they 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 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 the Year nominations like don't think there's nothing to think about you trade within you mean accept the risk and I have a problem I'm saying the pattern itself when the pattern presents itself there's absolutely nothing to think about that in general we're not sure you can know yes there's no way you can know what the outcomes going to 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 word 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 as a close the phone just it is 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 going to take the next trade I'm going to take the next 20 trades right I'm going to 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 can send us an email to traitor 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 you know this is kind of a maybe a long drawn-out introduction to the fact that what we're talking about here is that you guys have a really wonderful trading methodology where there is an enormous amount of potential for you to be able to make a consistent income from being able to take full advantage of the potential that this trading methodology offers you but I would say that there's probably it wouldn't be unfair for me to say it wouldn't be unfair for me to say that there's probably what I'm going to call the profit gap the gap between the potential and your bottom line results this is the potential this is your bottom line results most people think that when they realize that this gap exists that somehow learning more about the markets is what's going to fill it and what you're here today to learn is that that is categorically not the case you have to learn more about yourself and how you interact with your trading platform and the market to be able to fill this gap there are psychological skills involved you

Channel: Stelios Stylianou

Views: 673,246

Keywords: Mark, Douglas, Video, MIND, OVER, MARKET, Full, length, Interview

Id: GhKJ9P3agRc

Length: 53min 33sec (3213 seconds)

Published: Mon May 14 2012