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MTrader Class - March 4, 2008



                            If you have any questions, feel free to email Ken Wolff or Shawn Wolff


MTrader Class (C) copyright MTrader 2008


[09:50] <gimmie>  Class Time !!!!!!
[09:50] <gimmie>  Ok... I wanted to talk to you about something....
[09:50] <dez> everything in Australia will kill you though
[09:51] <gimmie>  if I may
[09:51] <dez> of course
[09:51] <gimmie>  OK.. I often get emails.. from people who are interested in learning to trade...
[09:53] <gimmie>  I have been teaching and coaching traders for about 10 years now, and I see the same situations over and over. So when I meet someone who is just starting out, or giving it another try after some losses, and I learn something about their situation and who they are, I can usually pick out some red flags that I know are going to be challenging that person.
[09:54] <gimmie>  There are usually.. some common threads... that are stumbling blocks.. that affect a persons trading
[09:54] <gimmie>  So I thought I would share some of those with you... because I think some of you might be dealing with the same stumbling blocks
[09:56] <gimmie>  People usually start out with a few preconceived ideas about trading and life.
[09:56] <gimmie>  We are conditioned to believe things like..."hard work pays off", and the more intelligent you are, the more time and energy you put into things, the more successful you will be.
[09:57] <gimmie>  So when they start trading, one of the things that people generally believe is that they need to be armed with as much information as they can get their hands on.
[09:58] <gimmie>  They come in with encyclopedic knowledge of technical indicators, and believe that is going to give them an edge.
[09:59] <gimmie>  And even if they have lost in the past, they are usually very attached to the information they have gathered, a bit inflexible, a bit arrogant about opening themselves up to learning something from someone, a bit tentative to try something new.
[10:01] <gimmie>  They come in with the idea that they just need to find the right combination of methods and charts, to outsmart the market. They overload themselves with information, to the point where they cant make effective decisions. And they lose.
[10:01] <gimmie>  Why? Because no one can outsmart the market. No one.
[10:02] <gimmie>  And because.. the less information you are processing, the faster and more decisive you are going to be.
[10:02] <gimmie>  But the fact that.. no one can outsmart the market.. presents in itself a big problem for people....
[10:03] <gimmie>  This automatically programs failure into your trading. And that, is going to be your challenge.
[10:03] <gimmie>  How do you perceive failure?
[10:03] <gimmie>  Do you perceive a stop.. as a failure?
[10:04] <gimmie>  Most people do. Even if we logically try to imbed the fact that stops are our friends.. no one likes them.
[10:05] <gimmie>  How do you react when you are directly confronted with hope and fear?
[10:05] <gimmie>  Can you take a stop gracefully without a moment's hesitation, and ignore that small "failure", believing in your system and pressing forward even when you are feeling anxious and scared?
[10:05] <gimmie>  Or will you hesitate when your stop is hit?
[10:05] <gimmie>  Will you wait a bit too long and enter late, because you were scared of being wrong "yet again" and you wanted just a bit more confirmation?
[10:06] <gimmie>  Will you hold and hope and let greed take over when you have a winning trade, praying for the "big one", missing the exit, and riding it back down?
[10:06] <gimmie>  Will you then begin to doubt yourself?
[10:06] <gimmie>  Doubt your system?
[10:06] <gimmie>  Move on to the next method, searching for that non-existent holy grail of chart set-ups that will never be wrong, or at least make trading "easy", so you can avoid these uncomfortable feelings?
[10:07] <gimmie>  It is very very hard, when you believed in a decision so strongly you bet money on it, and you had so many hopes riding on that trade, to turn directly around, admit you were wrong, and take a small loss.
[10:07] <gimmie>  Can you cut off your own finger without flinching, to avoid the possibility of losing your hand?
[10:08] <gimmie>  And can you then turn right back around and enter the next trade with full conviction?
[10:08] <gimmie>  Believe me, how you deal with those emotions, is going to determine your ultimate success or failure at this, not how many technical indicators you have memorized.
[10:09] <gimmie>  When someone is telling me their story...
[10:09] <gimmie>  and we all have our stories.. our own situations.. our lives.. and insecurities.. and people that depend on us.. and past failures.. and dreams...
[10:10] <gimmie>  When someone is sharing that with me... I gotta be honest and say.. that there a few common red flags that stick out.. that I know are going to create challenges for that person
[10:11] <gimmie>  I will tell you a few... in no particular order...
[10:11] <gimmie>  1. Previous heavy losses.
[10:13] <gimmie>  It is usually painfully clear to the person.. that they dont know what they are doing... and they desperately need to regroup.
[10:13] <gimmie>  The situation is very complicated though usually [10:14] <gimmie>  It is actually easy to make up lost money.... but first you have to make up the lost confidence.. and thats the hard part
[10:16] <gimmie>  They feel vulnerable... feel like losers.. they dont trust their decisions anymore.. they are scared...
[10:16] <gimmie>  and they are usually in a panic to make the money back immediately... make the problem go away overnight...
[10:16] <gimmie>  the money left so quickly.. so I can make it back quickly too
[10:16] <gimmie>  just make the problem disappear..
[10:17] <gimmie>  because the personal turmoil.. is so great
[10:18] <gimmie>  So they arent usually happy about the idea of taking small careful slow steps to make the money back... and build back their confidence slowly
[10:19] <gimmie>  because theres often an underlying arrogance... I do know what I am doing... I was making a lot of money 3 years ago... this was just a couple bad decisions that "got away from me"
[10:19] <gimmie>  forget the fact that 3/4 of my portfolio is gone
[10:19] <gimmie>  I have experience.. I know what Im doing
[10:20] <gimmie>  So they often talk a good talk.. and sound very capable
[10:20] <gimmie>  you wont find out until later.. that they are still blowing stops.. even after all the losses
[10:21] <gimmie>  So I find that... people who have taken large losses... unless they are prepared to humble themselves.. and really start over...realistically
[10:21] <gimmie>  its a very difficult situation to turn around
[10:22] <gimmie>  because the reasons why they are in the situation they are in... arent going to change that easily.. without a lot of soul searching
[10:23] <gimmie>  2. People that have emotional attachments to the money they are trading
[10:24] <gimmie>  I have seen situations like...
[10:24] <gimmie>  an inheritance.. where it was the mothers life savings.. and the person had no job.. this was all they had
[10:24] <gimmie>  a severance pay.. when they have no job.. and only that lump sum
[10:25] <gimmie>  people that have saved a very long time.. scrimped and finally trade
[10:26] <gimmie>  Fear of losing your nest egg... is going to work against you.
[10:26] <gimmie>  The fear will follow you into every trade.
[10:26] <gimmie>  Be aware of that, and try to see money as a tool.
[10:27] <gimmie>  You need to concentrate on making good decisions, and following criteria, and oddly enough.. forget the money
[10:27] <gimmie>  The only way to make money, is to forget the money
[10:28] <gimmie>  Focus on the game.. the challenge.. of making good trades.. of following your plan
[10:28] <gimmie>  If you can do that, and ignore the money, the money will take care of itself.
[10:29] <gimmie>  3. People that have read 500 trading books
[10:29] <gimmie>  Its easier to teach someone that doesnt know what a stock is.. than it is to teach someone that thinks they know it all.. before they have ever made their first trade
[10:30] <ted> I DO know it all !
[10:30] <gimmie>  You need to focus... and less is often more...
[10:30] <gimmie>  uh oh
[10:32] <gimmie>  if someone just simplifies... and uses the simplified version of the catman system... and takes things at face value... they can usually get up and trading.. and on their way to getting consistent.. within a reasonable amount of time
[10:33] <gimmie>  when they start complicating things though...
[10:33] <gimmie>  when I hear these three words... "but what about..."... I cringe
[10:34] <gimmie>  they always want to add stuff that they read about
[10:34] <gimmie>  and it makes things so complicated.. its no wonder they freeze when they are looking for an entry
[10:35] <gimmie>  then they moan about not being consistent.. or it doesnt work... the system doesnt work for me...
[10:36] <gimmie>  the point is not to become the best trader in the world.. and the catman system is the holy grail...
[10:36] <gimmie>  the point is.. to learn some kind of system where you can make money.. and once you are making little bits of money... and getting better... THEN... by all means.. go to town adding whatever oddball indicators you find are enhancing things for you
[10:37] <gimmie>  you need to dig in.. thats the point.. instead of him hawing around.. expecting perfection
[10:39] <gimmie>  4. People that have people depending on them...
[10:39] <gimmie>  The guilt... of trying to learn to trade.. rather than going out and getting a job and supporting your family...
[10:39] <gimmie>  The guilt.. of watching your wife go to work.. while you sit at home in your slippers in front of the computer... [10:40] <gimmie>  especially.. as the male.. provider...
[10:40] <gimmie>  is going to eat you up...
[10:40] <gimmie>  and follow you into every trade
[10:41] <gimmie>  So either you go into this.. really prepared.. with an income saved for the next year.. and a supportive family that understands what you are doing
[10:41] <gimmie>  or
[10:41] <gimmie>  go get a job.. and trade part time
[10:41] <gimmie>  because the pressure.. in my experience from watching a lot of people... is too much
[10:42] <gimmie>  Im not sexist either.. but it works for women... doesnt work for men
[10:42] <gimmie>  so do what you need to do.. to relieve the guilt
[10:43] <dez> tequila?
[10:43] <gimmie>  lol
[10:43] <gimmie>  5. People that love to analyse
[10:43] <dez> sorry couldn't help it
[10:44] <gimmie>  IT people.. technical people.. engineers.. people that have been self employed and successful
[10:45] <gimmie>  anyone that writes to me and says something like.... I have done a what/if spreadsheet with all my costs.. and figure I have a .029% average gain on every trade.. if I just... blah blah
[10:45] <dez> lol
[10:46] <gimmie>  they love formulas.. and things to be exact...
[10:46] <gimmie>  and they want exact rules to follow..
[10:46] <gimmie>  and they tend to be a bit... forgive me.. inflexible..
[10:46] <gimmie>  and thats hard for them to see outside the box
[10:46] <jbland> I'm in a box?
[10:47] <gimmie>  so it bugs them to death when their trades arent 100%
[10:47] <jbland> what
[10:47] <dez> anal? is that you're looking for?
[10:47] <gimmie>  they think.. there must be some trick.. or some formula.. if I just figure it out
[10:47] <dez> what
[10:47] <jbland> sounds like me very often
[10:47] <gimmie>  What I tell them is....
[10:47] <gimmie>  You are very organized, and that is great. But don’t forget that things don’t always work out exactly as we plan them. Trading is more like fishing. You have to wait for your set ups, and accept whatever the market brings you. Sometimes you get a bite, and sometimes you don’t.
[10:48] <gimmie>  It cant be planned down to the penny. And we are all humans, not computers. It is hard to factor emotions and moods into a spreadsheet analysis.
[10:49] <gimmie>  There are a lot of other red flags that I run into...
[10:49] <gimmie>  unrealistic expectations
[10:49] <gimmie>  drug or alcohol abuse
[10:50] <gimmie>  debt.. or difficult situation...any pressures to make a lot of money fast...
[10:50] <gimmie>  But those are five that come up a lot....
[10:50] <gimmie>  I think I am done for now :-)
[10:50] <dez> drug use comes up alot?
[10:50] <gimmie>  Any questions ?
[10:50] <dez> yikes!
[10:51] <gimmie>  I have had that come up.. yeah..
[10:51] <catman>  diddleydingdangdong good class!!
[10:51] <gimmie>  like.. an addiction to pain pills.. can obviously alter your judgement
[10:51] <gimmie>  thanks !
[10:51] <dez> it's cat's secret
[10:52] <raynice> very good class gimmie..thank you

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