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You Want to Be Told How to Trade, Don’t You?

This is a provocative article.

But I believe we all need to be honest with ourselves first and foremost, if any progress is to be made in life. In this light, after years in the retail trading space, I have come to believe that most people want to be told what to do.

I hear the same story all the time: I want to be free, I don’t want to have a boss, I want to be flexible and enjoy life, etc…but at the end of the day it all boils down to “tell me how to get what I want”, “show me the money”.

My experience has let me to believe that this same behavior is what compels people to buy self help books, buy diet books or exercise books or even books on wealth management. People “absorb” goals and objectives from peers, parents or society and then want to be told what to do with their time, money, and even lives.

If you want to trade well, you will need to abandon the sheepish way of thinking, and start to take initiative.

You Want A Recipe for Success, Don’t You!

Self-help books tend to be huge, in part because they tell people what to do. Personal finance books do the same thing. For example, some popular books tell people that they need to build a business that will produce cash while they sleep. Sounds like a great idea. But how many people are actually cut out to be a business owner? How many people have the time, the energy, the commitment to do the nitty gritty work necessary to get a business off the ground?

The reality, as many statistics point out, is that the vast majority of start-ups fail.

It’s the same thing for most people that want to lose weight. They buy a book, or join a course that tells them “exactly what to do”. But research shows that the majority of all people who participate in a diet program gain back any weight they have lost within three years.

The same goes for aspiring traders of course. Most brokers now disclose how over 70% of their clients lose money. Just like losing weight (and keeping it off) or starting up a business, getting your trading business off the ground is hard.

Naturally, most people turn to trading books, forums, websites, gurus, because they want a “recipe for successs”. Since failure rates are so high, they want to know a “sure way” of succeeding. Here are my own personal beleifs on why people want to be told what to do:

  • Relinquish control: by following orders, they don’t have to think. Thinking is hard. Making decisions is hard. So why not have someone give you orders to follow?

  • Relinquish accountability: by following orders, whether they succeed or fail is not their responsibility, is it? But trying to follow the easy route gets most people into trouble. Here is what typically happens:

  • No Follow-through: people just don’t remain on course. Sooner or later, the willpower dries up and the person drifts back into old habits. I told the story in a recent webinar about a trader that reached out to me for help. He was losing money and wanted to invert the trend. However, he was consistently falling back into his bad habits. Simply stated, if you aren’t personally motivated to change…or if you continue to hold onto previous beliefs…or if your ego just keeps you from admitting your mistakes, you just won’t follow-through.

  • No learning: by only following orders, there is no learning possibility to understand why certain step are required. There is usually even no interest in understanding why certain steps must be taken. And as a consequence, there is no learning. When people fail to reach their objectives, they simply throw in the towel, give all the responsibility to the “guru” or “recipe” they were following, and go look for a new recipe or a new guru that is better. This is one of the reasons why traders reach me after hopping from course to course, without getting anywhere.

Reality Check: There is No “One Size Fits All”

Sadly, in the markets my experience has led me to believe it is impossible to give someone a “take-away recipe” and expect them to actually survive for more than a short spell. I have mentored a fair amount of traders in the past six years. All mentoring students receive the same information: I transfer my own habits, best practices and technical tools.

However, during the process usually the students go astray now & then, and need to be coached to understand why they deviated, what beliefs led them to deviate, what would happen if they continue on this road, and then bring them back on course.

I have personally interacted with another industry veteran who, for a short season, attempted to teach aspiring traders what he did. He had the same experience and told me “they would take 2 trades as per the plan, and then go off on a tangent and never return“. My experiences are somewhat similar to the Turtles Experiment. Not everyone that was taught the method actually went on to become a good trader!

I’ve said it before: the traders that I have either mentored or coached, who are now on the path to receiving funding tranches through funding partners, all took matters into their own hands. As a Forex trader, you have the freedom and the necessity to make your own decisions. You operate in what is essentially an “unlimited environment”. This lack of restriction can be a double edged-sword. While you have the freedom to do as you please, this lack of structure can cause you to make mistakes. Instead, you need to build your own set of rules that guide your behavior in the markets.

Sadly, I wasn’t brough up to be a creative thinker…and you probably weren’t either! The current education system is all centered around being told exactly what to study and what to do in order to get good grades. In many jobs, being a good employee has to do with following guidelines set by the company and your manager. There is much conformity, and often little space for creativity. It’s no wonder Einstein was deemed a dunce! He just didn’t fit in. And so it goes that “A students” (good at playing by the rules) end up working for “C students” (the creative thinkers that become entrepreneurs) while B students end up working for the government.

We just aren’t trained to make bold decisions at an early age. We aren’t trained to accept loss and learn from it. We aren’t trained to take calculated risks. We are trained to execute, not to think.

Know The Markets, But More Importantly Know Thyself

However, in the markets, you MUST think. You must test, study, observe and adjust. For example, I attempted to mentor a student years ago who was simply churning his account and getting nowhere. Having come to me for mentoring, I naturally transferred knowledge and had him follow my drills.

He was making progress during the sessions but after working together, when he went back to trading on his own, the old habits crept back in. The overtrading, the fear of missing out, the lack of objectivity…so we went back to the drawing board and went down a different route: I asked him to slow down. Instead of a higher frequency model, I suggested adapting the model to be lower frequency, monitoring daily charts only (basically), and not getting concerned with any of the intraday movements.

This solution curtailed the overtrading immediately, because it required patience. But also, having the trader use a good old fashioned excel sheet to take precise notes when backtesting trend conditions, setups, MFE, MAE, and other measures, going back years, he gained confidence and started “obtaining a feel” for the model.

Bottom line: you can’t fit a square peg into a round hole. So before you start trading with any model whatsoever, first seek to understand yourself, your strengths and your weaknesses. Dr. Steenbarger uses a neat exercize I quite like:

  • On a sheet of paper, draw 10 waves so you come out with 10 peaks and 10 troughs.

  • On the peaks, write down the 10 most fulfilling and meaningful moments of your life.

  • Then, write down what strengths and qualities were utilized or demonstrated during these moments.

  • On the troughs, write down the 10 worst moments of your life, that had no meaning and were extremely frustrating.

This little exercise will tell you a fair bit about yourself! What your strengths are, what your weaknesses are. What stimulates you and what you cannot tolerate. You will probably know what kind of trading model will suit you, based on the qualities you possess. You will then be in a better position to use our System Development Workshop for example, where we have over 15 videos with industry traders explaining how they view the markets. You will pick up the pieces that suit you, and with some guidance build your model.

Making Decisions is Difficult

Source: Principles by Ray Dalio

For a moment lets’ go back to the main question of this article: why do most people want to be told what to do with their time, money, and even lives?

I believe it is connected to various kinds of fear (failure, disappointment, looking bad on instragram…). Ultimately, making a decision is hard, when failure is an option. Despite Ray Dalio’s best efforts, most people can’t go through his wheel of progress because most people don’t see failure as a learning experience.

Of course, society makes things worse because there will always be someone watching…someone ready to laugh at your screw-ups and failures. So, people seek out “expert advice” and usually they don’t even want a mentor, someone who can help them make wise decisions. Too much hard work. Most times people just want a shepherd: someone to tell them where to go, what to do, how to think.

The sad fact is that in trading, as in life, you really have to roll your sleeves up and get to work if you want to accomplish anything. True story: a current trader came to me after having some kind of success, but he knew his trading was all over the place. He was trying to be a jack of all trades and his trading plan was made up of very different setups.

So, I told him to select the one he likes the most. Breakouts.

Next, we worked on identifying quality breakouts on his preferred timeframes.

Then, I asked him to go back and diligently study breakouts of this kind. He did, and came back with a way to simplify what he was doing previously.

Then, I asked him to demo trade this kind of breakout. He started trading and started playing some breakouts that really weren’t high quality. So I helped him get back on track. He continued his work.

After a week of work, he came back with some conclusions. He was gaining confidence and stripping things down the the bare essentials. We started working on managing the trades. Once again, I gave some suggestions and he had to work with them and find his niche.

He worked on it and came back with some good conclusions, and improved confidence. After roughly 3 months of work, this is the kind of trade he is now able to identify, execute and manage.

How is this possible? Because he rolled up his sleeves and kept good detailed records of his tests, and found what he felt was a good match for him. A good trader doesn’t think in terms of copy/paste, but in terms of tailor-made.

Over to You

I told you this would be a provocative post!

But then again, I don’t want you to be a sheep! I want you to take your life into your own hands and take accountability for your decisions.

So don’t try to copy the latest guru, the latest signal, or especially the latest Expert Advisor. First, learn more about yourself. Learn about your strengths and weaknesses. Start thinking about what YOUR priorities really are in life. Most people think “money…it’s all about money”. But as a coach I can tell you that’s not the case. There is something that you want to do if you had that money. What is it? Sometimes, by digging deeper, you will find that you already have what you thought you wanted – you were just clouded by the day-to-day noise. Or, you have a way of rearranging your life in order to get it.

Bottom line is that you learn about yourself FIRST. Then, you can come to the markets and look for something that suits you. Pick up bits & bobs and craft your own vessel that will allow you to navigate the financial markets in a way that makes sense to you.

Are you afraid of making a wrong decision and looking bad? Let me tell you this: nobody is perfect. I sure went through hell to get this far in my own trading, but I use that experience to help others because I understand how they feel. I have made an asset of out my failures, and have learned to call them “learning experiences”.

So my final invitation is thus: roll up your sleeves and start failing…start learning…start living!

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