The SECRET To Trading At Your Highest Potential | Steven Goldstein

I work with so many incredible traders, both in the retail space and the institutional space. Working with people inside investment banks, hedge funds, energy firms. Now what I do is performance coaching. I've had people say to me, "You changed my life, you changed my family's life." One thing that you've said previously, and I, I really like it actually, which is that is the secret, right? That's the secret. That's the secret.

I work with some incredible retail traders, and I honestly think they are amongst the best traders in the world. They literally eat what they kill; if they don't kill, they don't eat. As a very basic personal test, called the risk type compass, which is what I use, it identifies people by eight different types of risk taker. And, and what I've noticed over the years is that honestly, retail trading is one of the hardest jobs in the world. It's compared to being on the inside, being a bank trader. When people think of traders, they think they're the billionaires, the guys driving around with Lamborghinis, but most people are struggling to provide a living for their family. And it's not just traders; I see this in, in, in great performers in all fields for this work I do. I've studied a lot of high performers, and sort of my heroes are people like Michael Jordan, Muhammed Ali, Novak Djokovic. Because when you look at these guys, they [Music]

All the number one podcast in the trading space, the fastest growing, and that's thanks to every single one of [Music] you. Welcome everyone back to the Words of Wisdom Podcast. We are back once again and still the number one trading podcast in the world and the fastest growing, thanks to all of you and our incredible guests. Talking of which, what I just realized was that could my guest could take offense to what I just said because he is the co-host actually of the Alpha Mind podcast, which is a phenomenal podcast in its own right as well, and he is the author of Mastering the Mental Game of Trading, and he's been a professional trader for over 25 years and is now a performance coach for traders. And I'm so excited to speak to the one and only Steven Goldy.

Thank you. Great, and no offense taken at all, so I appreciate it. I know, but I know you've been running your podcast for a long time as well, very successfully. Spoken to some phenomenal traders too, uh, and having such a massive impact not only from the podcast side, from your book side, but also even just your tweets. Yeah, I see a lot of engagement there too. And well, Stephen, it's a pleasure to have you with us today.

It's a pleasure. Just to kick it off, um, simply in terms of 25 years first as a professional trader, yeah, what did that journey just briefly look like in terms of the trading side and then that transition to performance coach?

Yeah, it's, it's an interesting journey. Um, I worked in the bank side, which is probably very different to, um, to the experiences of many of your your uh, viewers and listeners, but um, it's probably useful for them to understand a little bit more about what happens, what I'd call on the inside of the market versus the outside. Um, so I worked for a number of banks, starting in 1986, although my first year trading was in, in '87, late '87, um, and I was, it was a Japanese bank. I was responsible for some forward for exchange, some interest rate trading, um, early interest rate derivatives trading. And, and really what you're doing is you're managing, um, you're managing a book where there's lots of different flows going in; there's flows from, from the offer, which often sort of, you know, we call it of money going out, loans have to be financed, money coming in, deposits, um, money being, um, put on account, and you're sitting there with all different periods and time frames going up to sort of, you know, a few years exposure, and then you have derivatives contracts around that which being used, you have to price as well, and you, you have to make. And it was the early days of those derivatives in the, uh, in the mid to late 1980s, and you use various other tools to hedge and or try and add extra value to that; you use futures, um, and again that was the early days of Futures Trading here in the UK in those years, and of course you have a foreign exchange component as well. So you run different books in different currencies, um, you have to be, you're quoting prices to clients who have some for exchange risk as well, um, so you're quoting that, and then you're managing, um, the other side of those quotes if they hit you, and uh, and you're left with a position, um, or they want access to the market, you're giving them access to the market. So if a client might want to borrow, um, I don't know, $100 million for two years or by dollar against Yen 50 million say, um, because they're positioning themselves, you have to go in the market and access that for them and then complete the order for them. Quite often you're left with a position or an exposure, and you're managing that really, and that's really how you learn trading. Um, of course, the idea is that you manage it and you make money doing it, so you're taking risk and you're positioning yourself proactively, um, and you might be taking naked risk, you might be taking risk, uh, against different products and different currencies which kind of hedge some of it, um, against the general direction of the market, but then you can add value on the relationships between those two different components. Um, and I did that for I'd say the best part of seven or eight years within the banking side, and then I moved to a propriety trading desk where I was no longer quoting clients or making markets for clients but was actually the risk taker, the person taking the risk, the person doing the positioning, um, and I did that for pretty much the rest of my career from there with a couple of little changes depending on the nature of the job, um, and that's what I did until 2010, um, when a career change happened, um, and I decided to start working as a coach. Um, it wasn't actually an immediate career change in that I was actually looking to go and work for a hedge fund, and I went back to my old coach for some advice on making that shift to working in a hedge fund, and he just sort of said, you know, off the top of his head, "Have you ever thought of doing coaching yourself, working with traders as a performance coach?" And I just fell in love with that idea, um, and decided there and then that's where I want to take my career. I thought I could carry on trading on the side, um, you can't really, you can't really two two different careers, um, I, I still, I've never stopped trading; I do it as a bit of a hobby on the side, but just in a, in a kind of very small minimal amount every now and then I go into the market, um, but now what I do is performance coaching, which is working with people inside investment banks, hedge funds, energy firms, also retail traders, private traders, prop traders, trying to help them sort of develop their performance, advance their performance, break past sort of ceiling in performance, and perhaps deal with the overall trauma of trading and markets and uncertainty more effectively and productively so that they, um, they actually generate higher returns.

What was it about trading originally that caught your eye? Like, why trading? It's one of the hardest industries, you know, to perform well in in the world. What was it?

Yeah, but you never think like that, do you? You, you, you hear, you know, when I was, I was what probably 20, 21, um, it was the 19, 1980s, it was the time of Wall Street, the movie, Trading Places; it was all of a sudden it was a really glamorous area, everyone was, you knew was going into it, um, everyone was saying, you know, "You can make truckloads of money," which always sounds attractive, um, and, and you know, you're naive, um, you don't really get it, you think, "I want to do this, I'll be good at it, you know, why not?" Um, and then you find, you know, you, you, you head toward WS that as a job or career, and then reality hits you once you're in it. And it was so interesting hearing the different components of the, the sort of banking side, the professional side, the inside as you say, yeah, you know, in comparison when you look at the outside, then, you know, all those different variables you have to manage on that inside, you know, as a trader there, but on the outside when it comes to retail traders, as you know, that it's very minimal in terms of what their tasks are in terms of managing, still a hard job, but in terms of what they're managing on all those different factors, it's much more just centralized and just focused on very specific things, you know, but yet even then there's struggles of course. And it was interesting to hear of course that you went to your coach at the time, and they, you know, suggested to you to become a coach. Was there some sort of indicating or factors that sort of led to them making that suggestion to you?

No, it was, you know, I'd worked with that coach 10 years earlier, um, that the work I did with him transformed my career; my career was struggling at the time; I was, you know, I'd lost my confidence, um, my edge had been dead, um, really kind of more due to some of the internal politics that happens when you work in a large organization, um, and I was at that point in my career I was kind of on a, a downward trajectory, thinking probably going to need a career change, find something else to do. Um, I worked with him, and that just completely changed almost who I was as well as how I was as a risk taker as a trader. And look back on my career now as the period before working with a coach and the period after working with a coach where my trading just took off into a whole new trajectory. Um, now I went back to him, like I say, you know, just after the financial crisis, there was a lot of changes in the industry, um, the bank which I worked at had been sold to another bank; they didn't need or didn't want propriety trading in their London office, so they're just sort of, you know, parted ways, and, um, I found myself looking for a job in the hedge fund world. I knew he had a lot of connections in the hedge fund world, so I, I, I went back to him with no other thought other than to carry on being a trader. Um, I love trading, if I was honest, you know, I was probably at the peak of my ability as a trader, so I, I didn't have any qualms about doing anything else, and he just literally planted that idea in my head, and I just fell in love with that idea of working as a coach, uh, um, and that was it from that moment; that was where I was going to, I was going to go. There were probably a few other calculations there that I perhaps never thought of at the time, but you know, I've been doing it 25 years; it's very stressful, um, as anyone sort of, you know, sort of listening or watching will know, and it only gets more stressful because actually the, the, the more you do it and the better you do it, the more risk you take, the more you engage with uncertainty, okay, and that is a stressful activity, um, so I think somewhere in there there was a calculation of, you know, how, how, you know, do I want to be taking that stress for the rest of my life, you know, so it was a kind of, there was a little bit of a trade-off there.

You think as well though, like having the experience yourself of what a performance coach could do and what it did for you essentially kind of made you feel like, "I want to be able to do that for others as well." I want to...

Yeah. Yeah, I always enjoyed, it was always part of me when I was working in places to kind of unofficially mentor some of the young traders, um, help others if I could, sort of be supportive of others, so I think it kind of tapped into that part of my nature as well.

Definitely. No, definitely; it's always a great thing I think in the end because that's the one thing trading kind of doesn't do on its own, is it? It doesn't really provide any service to anyone else, um, well, I guess if you're doing it for a job then it's providing the, the return I guess, but in terms of like having a positive impact on another individual, um, unlike performance or, or other areas of life, so it's always an amazing thing I think to be able to do that for other people.

Yeah, I mean, trading isn't an altruistic activity; we don't go in it to make the world a better place, yeah, um, but it is a great performance activity, you know, if a lot of people go into trading, love doing sport when they were young or love playing music when they were young, you know, that they had that kind of competitive nature to try and be the best they could at whatever they did, and I think that that, that, that attracts a lot of people into trading because of that performance element, that competitive element, um, that trying to be the best you can at what you do element, um, and in a sense that, you know, for me this is a chance to help people, and you know, I do get, you know, everyone, you know, when people think of traders they think of the, you know, the billionaires, guys driving around with Lamborghinis, but you know, most people are struggling to, you know, provide a living for their family, um, and for their children and to build a, a base. And a lot of people who come into trading come in, you know, a lot of people I've met never had any qualifications, you know, and they're trying to escape some sort of, you know, path of some of the people I work with, of poverty, and they've done really well, um, and in a way you're helping them, and you know, I've had people say to me, you know, "You changed my life, you changed your f my family's life, you know, you've changed my what life is like at home for me," you know, and, um, and that's a great feeling when I, when I have people say that.

What is it that, if there's anything that stands out to you from all the work that you've done, is there one very common trait or very common mistake that's being made, um, or something that you've identified has been a very common theme that you've had to, to almost treat or help coach people through? Is there one thing that stands out as a very common one that traders are facing?

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You know, it almost goes down to a common thing rather being, it's about our humanity; we often struggle with who we are, um, we face, um, it's almost like human, the human condition, you know, we, we, a lot of people doubt themselves, a lot of people put themselves down, a lot of people beat themselves up, um, a lot of people might have past traumas being replayed in their daily life in their trading, um, is really, you know, we have trouble, might have trouble relating to the world around us, to, to the other people which we sort of, you know, we, we, we repeat those patterns with the market, um, and you know, we, we judge ourselves too harshly, um, it's all those same features which are part of life, um, which, which get magnified in trading. So you know, even people I've met who, who tried trading weren't able to make a career of it or establish themselves or ran out of time, you know, it takes a lot longer than people think to reach the level where you can become sustainably, um, I suppose income providing, uh, from trade, from trading. And I, so most people just run out of time with that, but they, they tell me that they found out so much about themselves by going through that experience because it, it kind of exposes you almost on a daily basis to your core self, to who you are, to how you are, and to how you almost, how to you relate to yourself. And so much of my book is, is talking about how we, you know, sort of, you can see so many challenges and issues with that relationship you have with yourself, between your ego and who you are, and how that plays out in your behaviors in the market.

Is there a key difference that you would say that you work with because do you work with many beginner traders, that people are quite new?

I, I, I normally draw a line at about two to three years, and I start working with people after that, okay? Because in my experience, you need to learn the basics; you need to learn sort of the fundamentals of trading, you know, call it trading 101, yeah, um, so to speak, you know, there's no point working with a performance coach until so you first understand the basics of the market, the basics of price action, the basics of the drivers of the market, um, th those pure technical aspects, um, what it is you need to do, you know, s of what your system or method is going to be, um, and then it's, it's after that where you start to work with a performance coach or performance coaches or people mentors, um, who can then help you refine that into a process that actually starts to deliver. And a lot of people go through different iterations of their trading in those early years, um, they try something, it doesn't work, they try something else, it doesn't work, they market that they're not comfortable with; it's not right for them, but they find another market that is, um, and so many people are hopping around trying to find themselves in those first few years, and to me it's just, I don't think it's a good use of their time, money, energy, effort in those early years investing in a coach.

Of course, no, that makes complete sense. And as you said, in terms of processes, what is it that you would specifically look when, when identifying a trade? Let's say a trader has come to you, they, they've passed that 101 stage, um, let's say they even have a profitable edge, you know, that has data, but they can't perform, like they're just struggling to actually perform well in the markets with that edge, what would you then start to try and look or ask questions about to start to identify the where to start looking at improving performance?

Okay, so, so I kind of first want to know who they are, what their story is, what's taken them to where they are, what's made them the person they are, what their outlook on life is, what their kind of beliefs are. I would have done some psychometric profiling by then to sort of, which gives me more of a sense of, of their nature, uh, and some of the sort of behaviors that I'm likely to see from that person compared to somebody else. Are they trading the right style and product? So whilst I'm not judging them, I'm trying to just make sure there's an alignment between the way they're trading, the way they're doing it, and how and who they are, uh, and I'm starting to understand their process and their, their philosophy. Everyone has to have a trading philosophy, you know, tell you have a trading philosophy to how to engage with risk, how to engage with markets, how you bring yourself to it, um, how to manage risk, um, you're never, you're just going to be all over the place. So as that starts to form and take shape, I then want to understand what a person's, um, risk philosophy or risk process is and then look into it with them and understand who they are and what part of their world as well is coming into it and impacting them. You know, most people are certain; it doesn't take long to find a process that potentially has a profitable edge, um, I think most processes, when executed well, will produce a profitable edge, um, so there's exceptions, I mean, there will be certain types of trading which I don't think a person should be doing, and I will let them know that, you know, for example, if you're trying to trade like a person on the inside and you're on the outside, you know, you have no edge, you know, if you're on the outside, you really need to be using a setup approach, um, you know, have a specific style, but then what is happening for them, you know, can they not, you know, a lot of very common thing is to put on low risk when they're right and high risk when they're wrong, you know, or, or to take profit too quickly or, or to hesitate because of fear, and you know, and then only put on what they consider the really high confidence trades which are usually the lowest payout traits, um, and then avoid avid putting on a, a low confidence trade which is actually the one with the best payout, um, so there's this kind of, you know, I almost call it what's happening at the what-if stage; that's the point where you get the signal or you get the, um, you, you've, you've seen the idea, you've got a plan, you know what you want to do, and then just before you hit go or press, you know, enter, you hesitate for a little bit, "What if this goes wrong? What if, what if it goes right? Haven't got enough? What if I put too much on? What if I put too little on? You know, what if I don't do it and the person down there makes loads of money doing it? You know, what if they make a lot more than..." All the what-ifs start coming in, and all the doubts start playing out at that point, and that is where the disaster normally happens at that point eventually, but there, there are different elements all the way along which could be throwing us out. Is someone which is very common, more outcome focused than they process focused, so what the process that delivers, but you start looking at the outcome and taking your head there, you're going to immediately corrupt your process; that's your ego coming into the trading, um, are what is your risk management like? You know, I meet some people that are taking crazy risks, and I'm like, "You're just, you're not trading, you're gambling," um, and I, I have actually pushed back with some people who come to me for that where I actually tried...

To find a little bit about how they work before I work with them. Yeah. And I'll say, look, at the moment your risk management is so bad there's nothing I can do with you to make you better. Come back to me when you've got your risk management right, your sizing structure, responses from that. Uh, I actually return money. I actually return money to people in some cases, but no, usually they go, yeah, I think you're right, thank you for that. You know, I don't want them wasting their money with a coach, of course, when they're using a method or process that is not going to work. MH. And that's an opinion from me, but yeah, you.

One thing you mentioned in terms of uh, you know, sort of getting a personality traits and seeing if their system matches up. Yeah. CU. That's something that um came up recently on a podcast, and I found it fascinating because I think it is so true and overlooked quite often. Yeah, is um what what is it that you'll be looking at? So as an example, that was given to me, they said if a particular, it was an interesting example because it was more a personality test. I'm not sure if it's the same sort of thing, yeah, but they were saying that this particular Trader is really good at video games, for example, fast-paced video games, and therefore scalping in terms of Personality would suit that person. Yeah, it might not be video games as the example you use, but what is it that you're identifying and how do you associate to a particular strategy as an example?

Okay, well, I I do I do as a very basic um personality test called the RIS typ Compass, which is what I use. It's one of two that I use, um, and it it identifies people by eight different sort of types of risk taker, uh, but where there's a nth one, there's what we call the AEL one, which is where you sit in the middle when you're not you're not strong form of any type. And and what I've noticed over the years is that people in different segments of this this this um tool, which represent different personality characteristics, the ones who do really well in each segment certain seem to have a philosophy to risk that's very similar. And if if they're in a segment that doesn't align with, in other words, if they're they're trading the wrong way for them, they really struggle. So um, an example of it, you know, sort of there's a type you called intense, which is the the description you set of a really good fast Trader. Um, they're really good at going in and out trading with a lot of passion, very intuitively that they're looking at the market, they're focusing on it, but they almost have a kind of they're brilliant scap, as is one way of looking at it. They're also great momentum Traders. Um, they're very fast, very reactive, they can very quickly sort of look at something and you know, hit hit go sort of thing without thinking, even you know, without even knowing the story, identify patterns, their pattern recognition abilities are off off the scale. Okay.

Um, and then we've got an opposite type to them called calm, very cool, very collected, very confident. Um, the other people are little often they're very edgy, they're on they're living on their edges. Okay, living off their nerves. This opposite type, the calm confident type, very reassured, very laidback, um, very optimistic, they're very good at they're not very good at the fast trading, they're almost too laid back for it. It's hard for them to tune into that sort of trading, um, and when I've met them they haven't done well at that sort of trading if they've been in that space. But when they step back and they sort of have a form of trading that's a little bit more distant, call it a portfolio management style where you know you you've you you sort of take a big picture look at it and you can look with a bit more distance and you're not phased by some of the noise, the moment-to-moment noise, so you're best off working maybe on a portfolio of products or a style that is you know, has a little bit more distance from the market, looks at relationships in a slightly longer term sense, doesn't get knocked out by that noise. And I have quite a lot of people do that. They often trade options, they often run option portfolios, um, or they might trade um uh again a collection, a basket of products that's that's there's value in you know, just constantly managing the basket. Uh, one individual I know who does that, he's he's got an options portfolio to hedge fund, and it is just extraordinary, you know, it's just he kind of models everything, um, and when anything misaligns with the model it kind of takes the other side of it, and it seems to it just reverts nearly all the time, and every now and then there's a blowout, but it's comfortable with that because he's expecting it, he's muddled that. Okay, but he just not very good at that short-term uh style of trading, it just wouldn't suit him. But that's why it's important to identify that.

So have you ever, well, I'm sure you have, but if if there was someone who was trading the opposite really to their style, what was that process like or some, you know, where you've had to advise them to maybe look to change change sty, and have they then seen the results of that? Is it? I saw a fascinating example a number of years ago. Um, there was someone I was working with at a bank, and he he started on the spot font exchange TK, which is you know, in a bank that was that would be a very fast short-term trading style where you really are sort of scalping, you're quoting clients, you're getting in an out of risk very quickly in large size. Um, he was the opposite to that, and he struggled for a number of years on that desk, and eventually they suggested to him, you know, why don't you trade for exchange options? So he now started trading foreign exchange options, but he's still trying to trade it in the same style as a Sparr exchange Trader. And when I said to him, you know, you're just using the wrong style for your product, I understand why because you've learned from those people, that's what you think the right way to do this is, you've almost got to unlearn and relearn from some option Traders how to do this. And he did that, and he took a completely different approach to trading, and after that he became very very successful with it, but it was working in a style and approach and a philosophy and a process which really aligned with you know, who he was and his outlook on you know, how to deal with risk and uncertainty.

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It's better to align it to your. Well, you can change your philosophy, you can evolve your philosophy. That was an example, someone who evolved his philosophy. His philosophy was that he should trade like these guys that he started with, yeah, but it was wrong for his personality, and and then it was wrong for the product, yeah, that he was trading. So he went to the right product, but he still had the wrong philosophy, but it was the right product for his personality. Now he had to find a philosophy which is you know, a process, a way of doing everything, an Outlook the line with both you know, the product and the process. And and after that it just because what happens is if you're not aligned, you're struggle to hold risk, you're struggle to stick with it, you you things just won't work out, and you lose confidence, and you know, you become sort of ridom yourself down when everything sort of becomes you know, aligned. And I often sort of use an example my hand up of having these different elements to how you are, and the more unal they are, the much harder it is to back yourself and trust yourself. And as these sort of starts come into line, and that often happens over time as well, that's when you start to build greater self-confidence, greater belief in yourself, you trust yourself with the market, you trust yourself taking risk, you trust yourself sitting with uncertainty, you trust yourself sitting with a position instead of just taking the profit because you feel it's going to go wrong. You you you realize the reason why you're running this and you've got a plan for it, and you have to stay with it. Um, so things start to fall into place as that starts to develop. That is a process of time as well, and and you know, it does some people like we say run out of money, patience, um, support, you know, you have to have the support of your family sometimes, your wife if you're married or your girlfriend, you know, your backer, you know, so so you may just not um, it may not just happen cuz it's kind of you know, there's a lot of luck happening here, and I do like people to think that you know, if they don't succeed at trading it's not just because they weren't good enough, lack you know, they just not stumbled across the right process yet for them. Um, it's why I do encourage retail traders to try and keep another income going if they can or have another income during those early years and to think of the early years as the learning years, not the earning years. You know, then once you do start to you know, develop your process and product, and I I work with some incredible retail Traders, and I honestly think they are you know, amongst the best traders in the world because they they they literally eat what they kill. If they don't kill, they don't eat. Um, it's not that it's not that basic, but it is in the long term. Yeah. And I know that they they move from different careers and different jobs, and there was a kind of gradual gradual letting go of those jobs and moving into it, and then there was a point where they got right, I'm going in, this is what I'm doing now, and you have to take that leap, and that's the point, but until you get to that point, it's if you can have another income, another source of income, a backer, um, someone who can make sure that you're not becoming outcome focused, that you know you're not taking trades just because you need to go out and buy yeah, you know, some some bread that night for your family. True.

So but one thing you mentioned earlier which I thought was fascinating was the wh ifs. That's a lot of the time it comes down to those what if moments. Yeah. So what work do you do or or processes do you put in place in those moments for Traders? How do you stop that what if mentality and again focusing on the process rather than like this could happen, that could happen? Yeah. Again again, do you know do you know what it's it's really an investigation. Um, in the book in my bookm in the mental gameer trading, um, there is a framework, a model which runs all the way through the book. It's called the process performance process cycle. Um, is something I developed, um, or I evolved at least from a particular form of psychotherapy that I studied, and it it's it's just a way of looking at everything you're doing as a process, every single trade, collection of Trades, how you approach the job, um, and the idea is you have to stay and be true to that process, but often we we deviate from the process. Um, we we form what I would call suboptimal Process Cycles which become you know, sort of Loops, self-defeating Loops, self-defeating spirals, the death spiral, the dreaded Traders death spiral. Um, so I kind of unpick with people how they're trading against that, um, and you know, even seasoned experience Traders with Decades of experience, we would go through it and and try and use that to try and understand what's going on. Now it might be a one-off situation or it might be a permanent permanent situation. Um, and I'll give you an example of that that happened recently with someone um, who may or may not be watching this, but I will therefore not say any names, but he's a brilliant Trader, he's a crypto Trader, um, he's one of the best that I've ever worked with or come across, and he he would be someone who would probably fit into that category of the very composed C type. Okay, and those people rarely affected by fear, fear doesn't get in the way because they they they're sort of taking a step back and um, so he and I've worked with him for about four years now, and he asked me if I could just put in a quick coaching session with him because he's he's struggling. Um, booked it in and I sat down and you know, we go through what's happening, and he said he's he's gripped by fear, you know, which is a great big flag for me because that's really alien, you know, everyone has fear, but he doesn't normally let it get in the way, but now this has got in the way, and he can barely trade. Um, so we we sort of unpicked what was happening, and in this particular case, he he' exited a position just before it absolutely flew and took off, and you know, it was a particular token which kind of exploded upwards, and he'd been running it for a while and kind of lost his nerve with it, took it off, and then we're sitting there full of regret and that become fear and you know, so I had to understand what happened here, you know, something outside his normal process has occurred here, and and we dug into it and I said, you know, can you tell me about how you got into this trade, what was happening, and he said, well, you know, said I' I'd been speaking to someone who I really respect, and he said you got to own this token, and you know, I'd already dismissed that token, I didn't like the story behind it and Etc, um, but when I spoke to this guy and you know, I thought with this guy's someone who I can really respect, maybe I should put it on. Now that is not how he works, he doesn't put it on just based on somebody else's recommendation ever. And and I I know him well enough to say well that's not how you normally choose choose a trade. Um, he said no, he said in fact about couple of months earlier he' done his own very thorough research on this this particular um crypto token cryptocoin, and he didn't like he didn't like it, it wasn't something he wanted to be part of, you know, didn't take his boxes for his process, you know, he said it may go up, it may not go up, but it's not something that is part of like you know, so I said to him, so I said did you if you'd have not bought it on his recommendation and then seen it saw would that have upset you, would that have thrown you out? He said no, not at all because it would have been my choice, I didn't like the story behind it, the fact that it took off as neither here nor there, I decided there and then not to own it. It was the fact that I' bought it on somebody else's recommendation, there was a problem. And what it meant was that when when when something starts going against you or not working out, which it did for about four weeks after he bought it, you lose faith in it very quickly because it's not part of your process, it's not you don't know the reason to you know, everyone has the the sort of period of Doubt, is this going to work, should I stay with it, should I not? When you don't have a strong story or reason behind it, you very quickly give up on it, and that's what happened to him. So it wasn't the getting out that was the problem, it was the getting in, he should never have gone in on it, he deviated from his process, and then once we uncovered that sort of unpicking that trade against the process cycle he was okay. Okay, now I get it, fe's gone, and he's back trading and he's fight after that cuz now he understood it, he understood what had gone on for him. Um, that happened at that moment, you know, he deviated for some reason at that moment of entry on that trade.

Do you feel like a large part of uh, you know, the work that you do can come down to almost identifying where the trader has made a mistake, but they just don't see the mistake, they don't either they're not aware of the mistake or they don't see it as a mistake, and a large part of it is then giving them the accountability they need to own that mistake, own that decision to then be able to be more observant of in the future, one kind of dissolve it so that as you said that it was he was he then built this fear, so moving into next trades he's got this fear, he's got this fear, but then suddenly now way he understands what happened with that trade, understand where the mistake was, the fear dissipates thereafter? Yeah, that's a particular example that was an aberration, that was almost like a one-off for him. Okay. Okay. Normally with people there's a repeat set of patterns. Yes. So I'm looking for Flags, I'm looking for what is happening regularly. Okay. And then I go deeper inside to understand you know, what is what is causing you to make these decisions, what is happening for you, you know, what is the noise inside your head, where's that coming from. Um, you know, a lot of people are caught in a bit of a this sort of battle with themselves, trapped, they get into a bad period, and they start to doubt themselves, and their confidence goes, and they become really clumsy with their trading, and then they want to move on to Quick wins, and they start becoming outcome focused. So that's that's a much bigger challenge when you become outcome focused. Okay. That's your ego has immediately come into your trading, you're no longer following a process. So in a way that one example was an example of of him becoming outcome focused, which is unusual for him, it's an aberration, um, but it happened, and everyone does it, no one is perfect, we all slip, we all have our moments, you can't be perfect. Um, so so for him that was a one off, but if I saw that happening a lot, you know, with a person, we have to understand what is happening here, why are you outcome focused, what what aspect, and it's really just getting them onto process, can we get them back to process, process, and if they can't stay on process, why not, what is the story going back further that is happening there, you know, what is you know, some people might have an insecurity, some people might not yet be comfortable with the uncertainty that goes with Jing, why not. Um, you know, we have so many fractures in our life going backwards, you know, I always remember one of my one of my early clients, and this is one of my favorite stories, and he was a he was a bank Trader, um, and he his his boss came to me, and I knew his boss, I'd worked with his boss, I'd coached his boss, and he said, look, could you work with this guy? He's really good, he's been doing the job about 15 years, he's a regular guy on the desk, but he never makes the big money, but the ideas he has, well, they're brilliant, his read on the market is brilliant. Okay, but for some reason he just can't seem to get past his ceiling of making X. Mhm. Um, and I don't know what it is, could you work with him? So I started working with this guy, we had a lot of conversations over many months, and I could hear something happening within the conversation that he was having with himself, it was coming out in the conversation with me, and it was along the lines of you know, this guy was working-class background, working-class parents, um, had got to his position through the back office and the middle office rather than through University and you know, sort of that route, and uh, you know, he kind of surpassed himself in life expectations already, and you know, I remember him telling me a story, he had a great idea on a particular trade, he shared it with his colleagues, and all his colleagues made a lot more money than him on the trade, and I was asking him, you know, why why did you just put such small size on and take your profit so quickly compared to your colleagues, and he just went, look, you I work with guys here, some of them are got phds, some of them to Harvard and Oxford, and he just went, I'm not as good as those guys, he guys, you know, so it was kind of that conversation was like I don't quite deserve it as much as those guys, that was my interpretation of it, and I'm just saying to him, can I tell you something? You you've come through a much harder route, you know, they had success on a plate for them, you know, they come from wealthy families, went to the best schools, you know, had a kind of culture in their family of hard work and being driven, and you know, the chances are they were going to succeed in whatever they did because life was laid on a plate for them, whereas you you've made it to sit on the same desks as these guys, and you know, you deserve it more. And I I wasn't just trying to say that to sort of you know, blow smoke sort of blow smoke up his backs side, I was trying to make him realize how far he'd come and and why he was now holding himself back back cuz it was like he was holding on for his job, yeah, you know, this could all go wrong. So he had a kind of defensive personally defensive mentality, which is another big part of you know, what I'm trying to find out with people, they be not not are they strategically defensive, are they personally defensive, and he was personally defensive, and when I just made that clear to him that was all he needed, things suddenly fell into place, and he just broke through this ceiling in terms of performance, and he's now the head of trading a large large Bank foreign exchange, head of trading foreign exchange for everywhere apart from the Americas, and it's a great story, and you know, just sort of watching him grow personally, and again that was when you know, you see someone who's a really good guy, yeah, you know, and you know it's great for his family, his kids.

And everything, um, but it can come from just looking inward at yourself, you know, and um, you know that is, you know, we all do that. We all look outwards; we all look at—we don't look at oursel—we look at ourselves in the market. And actually, you know, we start looking inwards. And just to give a small plug to my podcast, the episode we got like going Live this week is with Jason Shapiro. Oh yeah, and it's called, you know, “Look inwards, not outwards”—that was his words he used in there. Um, and uh, you know, that this job—that is so true about this job. Once you start to look at yourself, once you start to become aware of who you are and how you're doing it, and you start to make sense of that, it just can absolutely power you forward.

It's interesting you mentioned Jason there actually, because uh, you know, similar to the topic we were talking about, personality-wise matching your trading, he's like—you can see that just from his personality, from how he talks, his style of trading—just one like for like. Yeah. Um, he he is quite a contrarian individual.

Yeah, he is. Yeah, no, I love that. And um, one one thing I wanted to ask was, as an example, just—I'm trying to think of an example that let's say the average retail Trader maybe faces that we could maybe try and identify—just look at—I know it might be difficult because we don't have the personality and strategy—but for example, let's say a Trader, you know, they they've got a particular strategy, but they' and they've, you know, worked hard to make it into a process and Edge. Yeah, they perform well for a month, let's say, right? Then they take two free losses doing the same thing. We took two free losses; that then pushes them onto tilt, and then they make the drastic mistake of blowing up that account. Yeah, and that's something they've done already, and I'm taking this from personal experience—they've done that already for like, you know, three or four times. Each time they do it, they take a big break, and then they just go back and do basically the same thing over and over again. If you were like looking at that, and I know obviously you'd probably need more detail, but just looking at that, where would you start to go, okay, you need to start focusing on this or looking at this, or why is this happening? What, you know, what questions would you ask of them to try and start and identify and sort of try and put a stop to that process taking place over and over? Yeah, it's—do you know—honestly, retail trading is one of the hardest jobs in the world. It's compared to being on the inside, being a bank Trader, and you know, you really are alone; you really are on your own, and you have no one to sort of help you in those moments. What one of the things I had in a in a bank as a Trader was, you know, various times in my career when, you know, when I might be in a—so or bidding myself up or just doing stupid stuff—you had a colleague, just to turn around, a good friend, and just sort of say something. And you know, you don't have that. Um, so you know, I do try and encourage retail Traders to talk, maybe form a group with other people, just talk things out. Um, you know, it's—and you know, just just that ability to sort of step back and see what you're doing because you get lost in your head—it it's so, you know, it is such a difficult world.

Um, one one of the—there was a retail Trader I worked with; he's—I won't say where he is because it might reveal who he is a bit—but he's a fantastic retail Trader. But a couple of years ago, he suffered a big loss; he dropped about 25% of his personal wealth on one one trade. Wow. And um, it was a sort of trade where that can happen, okay. Um, and he was in a he was in a dreadful state, and uh, you know, he couldn't get back on—his mind was messed up. And um, you know, and I I said, “Look, you got to take a bit of time away; it's just there's no point—you coming in front of the screen; you're not going to make money at this moment.” You know, this guy was brilliant; honestly, he really is one of those great Traders. But I said, “You you need to manage your your state; you will be fine, but take a little bit of distance; don't trade; go away for a little bit; maybe have some time out, and then come back when you're ready.” Um, and I remember him doing that. He actually took himself off to a retreat for about a week—no phones allowed, nothing allowed—and he came back, and he thought he's ready to start again, and he said, “I'm ready to start.” This was the beginning of April, and he said, “My goal now is just to make kind of half my money back that I lost by the end of the year, if things go well.” And he made all his money back by the end of May. I mean, it it was brilliant. You know, this guy was a demon when it—he was just in the right head space now, but he had a brilliant process. And the other thing was, get back to your process; don't go outside your process; your process works; you're good at it, okay. Um, just get back to it; trust your process; don't—you know, one of the things I say to every Trader is, is “next thousand trades,” okay.

Yeah, your process—depending on how it works—you might have an 80% hit rate, but you take a big bath on, you know, one in every two—in every 10—but overall you've got a mathematical formula which produces returns. Or you might be the other way; you might have a 10% hit rate, but make a lot more money on the 10% than the collective 90%. Um, those are kind of the two polar opposites, but they both work; both are really mentally challenging in their own different ways. One is where you have the huge bath on the other one, and sort of trying to not take that personally. Um, and the other one is that you have to be really patient and wait a long time for those wins, and you might get two or three losses come along together, and that can be really sort of knock you out your stride. And the other one that you may go far more than one in every 10—you know that there is no random distribution of of when the wins come along. Um, and and you have to and you have to remind yourself that it's not the next trade or the next 10 trades that matter; if you have a process, it's the next thousand trades, and that should play out profitably over a thousand trades. Um, you can have periods where it just draws down, and then suddenly it takes off. Um, and I think there's a great example of that in—if you've ever read the the the the way of the turtle—there's a story in that where Curtis Faith explains how um somebody asked him after he left the project a number of years later—there was a sort of 10-year period where he couldn't reveal the system—and then a friend of his said, “Could you tell me about the system?” And I think he was a Coco Trader. Um, and he told him the system, and uh, the guy's, “Great, I'm just going to trade the system and make a lot of money.” And then about a year later, he spoke to his friend to say, “How's it going?” And he actually tracked Coco on the system in the meantime to see how it did, and it did pretty well on the system, but the guy just said, “No, it didn't work; it didn't work in the Coco Market.” Um, and he said, you know, there was a point where I just realized this doesn't work, and it was—he looked at that point and said—just happened to be a point where it had 18 losses in a row; they were all very small losses—you can't—and then the 19th pulled half the money back; then there was a couple of losses; then the 21st took it into profit. That that is the problem with whatever your system is—you have to understand the way it works. One of the issues I have with people who do back tests is I always say, “Don't just do the mathematics on the back test; actually go back and walk yourself through that back test; what would it feel like to be a Trader? Take yourself to the periods where it wasn't working for a long time; just imagine yourself going—could you stay with it?” You know, I I created a system years ago, um, back in my early trading days, and it was a it was a brilliant system; it made a lot of money on aggregate, but it had huge drawdowns and and huge draw-ups, but you wouldn't take the profit; you had to sit with it whilst it gave it back, and I just knew that I could never trade that system; it didn't suit—that's an example of—personality didn't suit my personality; I could never sit with that; the people who were backing me could never sit with it. Um, you know, they'd be forcing me to cut things all over the place or to take profits, which straight away corrupt the system. Um, so so it's it's really important to to think about these things and understand your process and understand the inside of your process.

In terms of process, like if you were to define that, what does that—what does that look like? The process—the risk process is everything that goes into your trading: you know, your your analysis, how you analyze the market, how you research the market, how you formulate ideas from that analysis and research, how you structure that into a potential trade, um, how you plan the trade, how you set up the trade, what your contingencies are, what your risk sizing structure is, um, and then your execution process—how you manage the trade, how you escalate, um, you know, sort of de-escalate the trade, exit the trade, and then how you recover. We mustn't forget that we are the biggest part of our process, so how we manage ourselves—this is why if you use a process that doesn't align with you, you're going to end up fighting yourself—how you recover, then how you start getting prepared for the next one—all these aspects are your risk process. Um, and you know, it's every single one of them is going to be unique, as unique as your own DNA.

Yeah, okay. And and really understanding it and adhering to it and and, you know, refining it at times—you know, that that's your risk process; it's the whole thing put together. Do you feel like if you were to try and visualize it, would it be like a flow diagram? So it's like if—but you know—so it's like constant—the process is strict in it—in in its process—I don't know—for it—yeah, everything's planned out. Yeah, but it's—this is where I talk about setup Traders, people from home—that's what you want to be doing. If you're on the inside working as a market maker, you know, you're running risk all the time, so you can't really do that. Yeah, you know, you're not always choosing where you get to put the risk on because, you know, um, or or you are are, you know, just running a large portfolio of risks, so it's a different game; you're going to be doing it differently. But if you're if you're a retail Trader working from home, it's a setup approach, you know, it's finding and establishing, um, you know, is it—you know, might be technical analysis based, might be fundamental based, it might be a a blend, it might be a strict system where if it crosses over a certain level you buy, maybe you take 50% off, you stay—whatever it is—it you know, you you have to have—you know, some people I know only trade up to the first 15 minutes of the day, but they spent, yeah, hours preparing for that first 15 minutes. So if you're doing it that way, um, some people I know just trade the open and the close, you know, but there's a huge amount of work that goes into that and a huge amount of, you know, sort of modeling and looking back and looking forward and then making sure that they've got everything right for that open and then accepting it and then looking back and reviewing it afterwards. So there are so many different ways of doing this job—that's—I think that's the beauty and the curse, right? That's how I always say it: it's like it's an amazing thing because it means you're not stuck in a box when it comes to trading and how to do it, but equally it's so bad for people because then it's like, “What do I do? I can do everything; I can, you know, chip to change all the time”—you know, that's a disaster.

Yeah, yeah, exactly. Yeah. Um, one thing that you've said previously is—and I I really like it actually—is “the best Traders let go of failure and Triumph alike; they move on and return to their process.” That is the secret, right? That's the secret. That's the secret. When I when I meet great Traders, highly successful Traders, it's their ability to let go—to let go of the bad outcomes, also to let go of their own their own um hang-ups, their own uh insecurities, their own fears, their own—to let go of their ego more than anything else. Yeah. Um, they all come together to to to—willing to be vulnerable—to to let go of the things that hold them back. You know, I I work with so many incredible Traders, both you know in the retail space and the institutional space. Um, and it's not just Traders; I see this in in in great performers in all fields. Mh. Um, you know, for this work I do, I've studied a lot of high performers, and sort of my heroes are people like, you know, Michael Jordan, Muhammad Ali, you know, uh, Djokovic. Because when you look at these guys, they all have the same attitude and mindset—to let go—and you hear it in what they talk about; you know, you hear the way they talk about things, and that letting go is what allows them to be completely present and stay present, yeah, to their job. Because this job—you must be present; you must be present to your process; you might be—you must be present to why you're doing it—your purpose, okay. Um, you must be present to that process cycle to stay on it; you know, you might have something screaming at you saying, “This is the best play ever,” but it doesn't fit your process.

Yeah, definitely. You don't take it. Well, I think that kind of leans on this other thing that you said, which is “strong beliefs loosely held.” That's the Mantra of the best Traders.

Yeah, that's Peter Brown. That's from—

Oh, Peter Brown. Oh, sorry. Oh, I'm seeing him—

Oh, really? Oh, he's brilliant. Strong opinions, weakly held. Yeah, and they said they can evaluate their beliefs without letting them define them, which is similar—I just—you mentioning Michael Jordan, um, for example, like if he lost one game and he then took all that, you know, the belief of that loss, but then also took that baggage into the next game, he's not going to be, you know, performing as he should be, and more than likely isn't going to perform well versus, as you said, being present to the process for the next one.

Yeah, there there's a clip in—Have you seen The Last Dance?

I haven't—probably—I've seen that partially.

Okay. I would say to anyone, you know, if you want to understand performance, you know, watch that whole series, The Last Dance. It was brilliant. Um, in the last episode, there's an interview with um a journalist, um, I think his name was Mike Vance, and he was talking about Jordan, and he said, you know, you know, Jordan could—what made him better than anyone else wasn't he could jump harder than them, run faster than them, shoot a basketball better than them; it was that he could be completely present, and that was the separator. And that meant that when it came to taking a shot, whereas a lot of other players would think, “What happens if I miss that? What if moment?” Yeah, he wouldn't let that affect the way he took the shot; it was all about the process; there was no what-ifs. And that is trading, and that is being present, and that's why it's important. And no one is perfect in it—this is the important thing—you know, even to me, the very very best are I would say round about seven out of 10 of it—that's how hard it is to be present. Say most people are about two out of 10; even really great Traders that I meet, I'll classify them as around five out of 10.

Interesting. You know, it's just these elites get to seven periodically—not always consistently. Um, and that's good enough to just be better than everyone else. You know, that is that is the difference.

I love that. I love that. And I thank you for your time today. If anyone's wondering, that alarm is our our queue—you know, Stephen's got a very busy day ahead—so I really appreciate your time, and I appreciate you being here with us today, and hopefully we'll do something in the future.

Yeah, I'd love—I'd really love to. I'd love to. No, those were great questions, and uh, I can see you've really done your homework.

We're trying. We're trying. But everyone, the links for Stephen will be in the description below, so make sure you check those out. Drop a comment with your biggest takeaway from today's episode. Other episodes will be on screen, and until next time everyone, take care.