On the trading floor we used to refer to traders with puffed up false egos and shrinking account balances as swimmin' in da'Nile.
Working for the various institutional firms on the CBOT, and not trading our own money, I and most of my co-workers were essentially glorified clerks, and we certainly had our false egos too. But one thing we could all see clear as gin was the calm dignity that the heavy hitters displayed as they moved though the crowds. Guys like Tom Baldwin, and the late Charlie Dee, who traded thousands of contracts at a time as easily as I trade a handful of mini Pounds, and the big filling brokers who executed 100's of thousands of contracts for their clients, would come across as calm and even humble on occasion. I was once at a trading seminar here in Chicago where Tom Baldwin was speaking, and I asked him if he ever got over the fear of stepping out and getting hurt. Without hesitation he said, No. Never. He also went on to tell me that it's not about winning, it's about learning how to take small losses. He also told a story about getting clobbered one St. Patrick's Day and having to come up with $3 million in cash to cover his loss to be able to get back into the pit the next day.
Back then I had heard that trading was, at a minimum, 90% mental, but I didn't understand it until the Japanese bank I was clerking for laid off the lot of us, and I took my severance package and opened a trading account. Back then there was no real retail forex (off-exchange foreign currency futures and options) market, nor mini futures contracts other than the mini S&P 500s. My quotes and charts cost me $800 per month; we called in the orders by phone, and after putting that first trade on, I spent more time in the bathroom than in front of the screen. My trading decisions had very little to do with the method I was following then-- MarketProfile -- and everything to do with my fear of having to make a living trading a $6,000 account and living off my savings of another $8,000. I learned quickly that losing was painful, and that I was not mentally prepared to trade for a living. I wasn't swimmin' in the da'Nile; I was floundering in the North Sea, in winter time.
I did learn from that brief experience that losing was a part of trading. I was still years away from learning that mentally there should be no difference between a 100 pip winner and a 30 pip loser. Luckily a month into that trading experience the phone rang and it was a friend from the floor who had an arbitrage gig for me. Believe me, I grabbed the day job. Ever since then I give a lot of respect to anyone who has a trading account.
Over the years my own trading has improved, which is to say I've learned how to pull the trigger without hesitation, and how to take a small loss. It's not about making money, it's about not losing money. The biggest break-through was learning that my own threshold for pain is somewhere around 2% of my trading account. I've also learned to be very humble because without the help of my mentors I may not have gotten as far as I have.
In my position as a strategist/broker I talk with a lot of account holders, and too often, after I ask them how their trading is going, and they nervously laugh and tell me that theyâ€™re making a little money or holding their own, I start feeling like a therapist as I'm thinking, This guy is swimming' in da' Nile. He would feel so much better if he just came clean and admitted he's losing more then he's making and he's scared.
My recommendation, for beginners and veterans and everybody in-between, is at the end of every month to go back and review every trade you made. Re-live the why and the when of it, and write down the net effect at the end of that month. Regardless of whether it's a plus or a minus, circle that number and remember it. I'd tell you why I want you to do this, but most of you will not listen to me anyway, because I'm a broker.
John Jay Norris
Senior Market Strategist
Brewer Futures Group, LLC
200 South Michigan Ave., 21st Floor
Chicago, IL 60604
800-971-2154 Toll Free Number
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency and investors may lose all or more than their original investments, and the impact of such events is already factored into market prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer Investment Group, LLC or its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed.