Hi guys, coming with a rather special blog post here, well quite similar to the one I did about my coaching session with Jared Tendler.
I was fortunate to spend an hour in a session with Pat Bailouni this Friday. Why was that special? Well, he’s a Demartini Facilitator that focuses on coaching traders / poker players (and others) how to overcome any mindset challenge they are currently faced with (as well as helping individuals to build their strategic plan.
As I keep saying here, whichever strategy you trade will be profitable if it has an edge, whichever strategy you trade doesn’t impact your trading results, rather it’s all about the application of your edge. If you screw with the process and don’t stick to your edge you’re not going to be profitable.
That’s where the mental game comes in.
That’s why I think getting coaching sessions with people that have experience in the mental game. It’s the one frontier where I can work on, but working with other people will make it a hell of a lot better.
I know I can improve my mental game. I also know, you can improve your mental game, whoever you are.
Anyway, now that we’ve talked about why I think it’s important I’ll dive into what we talked about in our conversation, if you’re interested in hearing more about what he does, feel free to reach out to him:
One of the challenges I am faced with is:
I know I am a competent trader, I’ve spent over five years studying the markets, the last two being full-time.
I know my trading has a positive edge.
However, I want that edge to show itself now, I want the opportunity to take trades.
That being said I don’t rush into trades, I stick to my trading plan, I’m really strict with that so it’s not a problem in itself. It still creates a willingness tho and some unease of not being in a trade.
It may be the idea of needing a salary, since I live on my returns, I need to make money every month, so when I’m not in a trade… It’s not ideal!
It creates the idea that winning trades are good and losing trades are bad.
Which is something, I’m guessing, a lot of people struggle with
Having a positive charge reaction to one isn’t bad in itself, it’s bad because that means the other one will have a negative charge.
As long as we look forward to winners, as soon as we fantasies about winning trades we’ll start dreading losses!
Every event is neutral – until we decide it isn’t.
- If, in our perception, it challenges our priorities we will label it bad
- If, in our perception, it supports our priorities we will label it good
It’s that simple.
Now I’m not going to say some events aren’t preferable, just not good. It brings back to a debate Greek philosophers had several millenniums ago.
To keep this article about trading rather than philosophy I’ll leave it at that 😀 otherwise we’ll probably go for hours!
What we need to remember is that:
Winning isn’t good – Losing isn’t bad.
If we are able to look at our wins as something that isn’t good or bad and our losses as something that isn’t bad or good then we’ll reach equilibrium.
The reason we want to change our mindset from winning is good and losing is bad to both are neither good nor bad is to ensure we stick to our plan.
If we thinking winning is good we will seek after winners and have FOMO (fear of missing out on the win) – this can pull us away from executing on our plan.
If we think losing is bad we will try and avoid losses – which is impossible in the markets. Again, taking us away from objectively executing on our plan.
The only way to truly execute on our edge (our plan) is to see winning & losing as neutral (i.e. not worry about the result) and just focus on executing on the process.
But if you see profitable trades as good and trades that result as a loss as bad you won’t go far. You need to look at trades that fit your plan as good, trades that don’t fit your plan as bad.
Winning or losing trades that fit your plan shouldn’t bother you. You should be neutral about the outcome, happy that you took a trade that fits your plan tho
Turning winning trades and losing trades into neutral trades
Now I wouldn’t be writing a blog post just for that without giving any tips – I’m a mean bugger but come on 🙂
This exercise I’m going to talk about can only happen when you know what is important for you, would it be money, time with family, tranquility, autonomy etc etc
Now when was your last loss that stung?
Once you know which pair / which trade it was try to go back to the moment of that loss
How in that moment & from that moment until now was it a benefit and service to you?
What did that loss bring to you that was positive?
For me the last loss brought me quite a few positive things.
1- It made me want to backtest a lot more
2- It made me stop thinking about it every hour of the day asking myself when it was going to reach my stop loss
3- I was able to do my ASR quite early in the week instead of waiting
4- I was happy I stuck to my trading plan and risk management, had I not, I would’ve lost a lot more
5- It made me consider a potential tweak to my trading – which I’ll of course have to backtest before implementing it
Now let’s try to find drawbacks to trades that reach profit target.
Try to get back in the moment of that winning trade, I’m going to share a few things it lead me to do that were drawbacks
1- It made me feel confident, proud of my ability, I felt as if I knew what the markets were doing
2- It made me wonder if I should start increasing my risk per trade
3- It reached profit target however went running for more so I still felt a “I could’ve banked more”
4- I started thinking about the money I just made rather than thinking in terms of probabilities, it made my following loss a lot more hurtful than it would’ve been otherwise
5- It made me want to take more trades since I just proved I could take winning trades
The aim here is to balance the trades that reach your profit target and those who don’t. They all have drawbacks and benefits
The aim is to make them feel neutral
It’s only when whatever happens isn’t positively or negatively charged that you’ll feel comfortable
Well, I think, I’m not there yet :0
I hope all of this was useful!
Feel free to check out Pat’s website and get in contact with him
He’ll definitely do a better job explaining this than me