014: Rande Howell discusses issues limiting trader performance, the impact of emotions, managing process not outcome and tips to improve trading performance.

Better System Trader, Episode 14. Welcome to the Better System Trader Podcast. This is Episode 14. I'm your host, Andrew Swanscott. This week's episode has come about as a direct result of an email I sent asking for your biggest trading challenge. We receive quite a few responses from traders experiencing issues with the psychological or emotional side of systematic trading. For example, how to handle losses, or fear of losses, struggling to pull the trigger, taking profits early, not exiting at stop levels, and generally not following the system due to fear or lack of confidence. I'm sure most of us have experienced these at some point in the past and perhaps in the future too, and they can have a large impact on trading results. So thank you to all those that shared your biggest trading challenge. I hope this episode and future episodes that cover other trading challenges really help to improve our trading results. If you haven't submitted your biggest trading challenge yet and would like to have a say in future episodes, you can do so by heading over to bettersystemtrader.com/mytrading. That's bettersystemtrader.com/mytrading or one word, and that'll redirect you to a short survey. The survey is only for simple questions, so it's really easy and will take you literally one to two minutes. You don't have to submit any personal details either, and I do read every single submission, so it's a great way to get involved and you may get an episode that covers exactly what you're looking for. Anyway, onto this week's guest who has more than 15 years of practice as a licensed therapist, also working for many years as a personal development coach teaching individuals how to affect positive change, peak performance, personal growth, and leadership potential. He has worked with countless traders helping them to improve their trading by regulating emotions and breaking out of life limiting patterns, which is really important in trading success. He is the author of three books and maintains both a counselling and personal development practice. In this episode, we discuss the most common issues limiting trader performance, the impacts of emotions on results, the importance of managing process, not outcome, and tips on improving our trading performance. So let's get to it. This week's guest is Randy Hell from Trader State of Mine. I hope you enjoy it. Hi Randy, thanks for joining us today. You're welcome. We can just start by providing us with a bit of your background on what you do now and how you got into that field. Well, I am, I consider myself to be a performance coach and it started out on serendipity. This was not my plan, is I am a licensed therapist in North Carolina and I got very bored with the therapeutic or clinical clients and I had branched into performance coaching and Charlotte North Carolina. We have lots and lots of bankers. We have a large banking center here and we also have lots and lots of golfers. And so I was very focused on performance with golf and with bankers. And then one day out of nowhere, a guy called me up and says, I'm having performance issues and I said, well, great, that's what I do when he showed up and he was a trader in a hedge fund and we started working and I didn't really any know that much about it. But I was fascinated because of the motivation, the little level of work. I would give homework and he devoured it and wanted more and more and more and I started realizing, wow, this guy is really phenomenal about it. He grew and he grew within six months. He was a very changed trader. And then he started referring people to me and one day my wife and I noticed that the major part of our business was traders and we started focusing on that. And that's how it came to be. It started out like I said, it was just an accidental encounter and it's grown to where, you know, I work on an international stage now and speak internationally. Who would have thought that it's been a great ride by the way? What I like about traders portfolio managers versus other self development type of groups is that in this profession, there is a black and white truth meter called the trading account or the benchmark. And it will cut through everything and fundamentally what you're doing if you accept the assumption that the trading account is telling you how effective the beliefs are that you used to interpret the markets and it's telling you in really rapid time, you see that, okay, now I have a bronchard that I can cut to the belief system that I'm trading with and that's the level that I actually work with. So it's been, it's been, to me, it's a wonderful group of people to work with and you cut all the BS out. That's what I like about this particular group of people. Right, so moving from sports psychology to trading, was that a difficult transition or there are a lot of similarities in the middle? The major thing is that they're all about preparation and stuff like that, but the thing about trading versus sports is that, first of all, the time frames are different is that in most sports, you have to be able to maintain a particular mind for short durations of time. Whereas in trading, you have to be able to maintain that mind for longer durations of time, which means it's actually harder in that respect. And the other thing is that you have to watch the physical arousal in sports. The physicality is part of overcoming and reaching victory. And you have to get the physical ness there. You have to get yourself pumped up and ready. If you do that in trading, you're going to cut your throat. And the other thing in trading is that you're no longer trying to control outcome. What you're doing is you realize that outcome cannot be controlled, control of outcome and there's a illusion. And what you're doing is you're focusing entirely on the process, the mind that you're bringing into the moment of performance. That's the only thing you can control. Those are the major differences. And it comes down to, again, it comes down to the management of emotion from a biological standpoint and then deciding what emotional cocktail you're going to produce to produce the mind that you're going to perform with. And outside of that, you stay in that performance mode rather than locking into the mode of thinking that you're going to control outcome. If you're looking at your P&L statement as you're trading, you're sunk. You're an outcome. You're not in process. You've already mentioned a couple, but what do you think is some of the most common issues you see that are impacting trader performance? Well, when it comes down to a particularly with experienced traders, usually they're at least at scratch where they're not losing money by the boatload. But initially, what you see is not taking the trades that you need to be taking. When you're a professional trader, you have to knock up the numbers. What you're doing is that when you have a balance that you're taking it. And you're still looking, and I was actually noticing that since some of your notes is that you're still having people with they said that pulling the trigger thing. You're still having problems at entry. But the major one that happens with professional traders is the fear of missing out profits, that scarcity thinking where they're taking profits earlier and they're not letting the profits ride. And basically, you're having to get in to get it that. That's the belief that you have to really get in. That's what I see mostly in the professional group, particularly that leaving just taking profits, do or all. All right. So if we can just talk a little bit about the first issue you mentioned, not taking trades or struggling to pull the trigger. What are some possible causes to that? Well, it all comes back to the fear of the unknown. Your body through evolution is wired to have a bias toward controlling outcome. And we're alive today. We're a dominant species. So you can't argue with the genetics of it. The problem is that trading is 180 degrees opposite to the evolutionary brain that we brought for survival. And survival, you're trying to control outcome. Out of that, you perpetuate species and stuff like that. The key is that drive for self-preservation in the short term gets in the way of the probability mindset that's required for trading. Probability, you know that you can do everything right and you can still lose. You do it anyway because you know, probability is on your side. The survival brain, the emotional brain is not going to, it's not going to, it's just not going to go that way. It's going to always, you know, it will generate hesitation. And by generating hesitation, it wins because you didn't get into risk. So to the emotional brain, that's victory. And it's going to wire it so that it becomes an even more insulated circuit and fires even faster. Your job, particularly in entry stuff, is to recognize that it's just not your biology and psychology. It's them working together. And you are by nature going to have a fear of the unknown and you're going to choose not to enter the unknown. And yet at the same time, you can't play the game of trading if you do that. And ultimately, you have to be able to calm the emotions down so that they're not hijacking the mind that you need. And you have to build mind that it is comfortable and engages uncertainty and the whole notion of the unknown. That's what you have to do. And I would talk more about that. So I'd be interested to know what type of strategies can we use to calm the emotions down? Well, first of all, you have to recognize that emotions, first of all, they're not optional. There's no such thing as freedom from emotion. There is freedom of emotion. And part of it is recognizing that emotions are biological. They are not psychological. But what happens is they take over psychology. And all thinking is emotional state dependent. So literally, the kind of thinking you're capable of is dependent upon the emotional state you're in at any particular moment in time. So if you grasp the very first thing is that emotions are biological. That means there is a biological signature to all emotion. And like fear, for instance, if you're audience, we here in America about entering the Fourth of July thing and nobody's trading, which is everybody's taking vacations. But tomorrow or Monday or whenever you do it, you start trading and you start watching yourself, put a mirror up. Just watch yourself. Or if you have the ability of putting a video feed on yourself, watch yourself. You will see, you will see your face tightening. You will see your body tightening. You will see yourself become fixated. And a number of the some of the people I was reading about in these notes used to me, it's very clear that the biology of fear is already there and they don't even recognize the biology's there. If you recognize that, what you can do is that fear and breathing, breathing is a particular kind of breathing that supports fear. It's very shallow. Are you halt breathing and the the shallowness is only with the top third and the long. What you're ultimately doing by shallow breathing is you're cutting off oxygen's oxygen supply into the brain so you can't think. And what you're simultaneously doing is you're getting the body prepared to run. And ultimately, so what you're doing initially, and this is something I teach in my courses, is that what you're doing is you're regulating the emotion by breath, because if you start breathing diaphragmatic, like bellows breathing, literally that style of breathing, of moving air into the belly and then into the chest is incompatible with the emotional state fear. It will disrupt the ability for fear to maintain itself. Then if you go in and you relax the muscles, what you're doing is you're also disrupting the arousal phase part of the emotional state of fear and you get a lot more control over the emotion, a lot more control. That's the beginning. The other element of it is what's happening in mind. The most dangerous thing that people do is they try to ignore the fear. What I do is I teach once you learn to manage the fear, you turn toward the fear. You're going to you're going to you look at the fear as your teacher, because as long as the fear is there, it's capable of an bushing mind, whether or not you like it or not, but turning toward it with the different set of skills, what you learn to do is you learn to reprogram the response to uncertainty that has been programmed in the fear response. That makes sense. Yeah, so I guess it may be difficult to identify by looking at your body to try and catch when those emotions start. Are there any tricks to being able to identify that early so you can react on it before it becomes a problem? Oh, God, yeah. In my work, I either have people with a mirror where they're training themselves to look and to check out what their face. This is Paul Ekman's work. This is defacial expressions, the decoding and stuff like that. Is what you're doing is you're teaching a person to check in to yourself and the video feed. I have a number of traders I work with that have video feeds where they're watching a video monitor and record themselves. You can catch the emotional state a long time before it happens. I also teach people, I will right now I'm training a guy who is moving from one level of sizing to the next level of sizing and he's having problems. What we've done is we put a heart monitor on him. And ultimately what we know is we know that his heart rate at rest is around 60 beats per minute. When he's sized up what he discovered is his heart rate was 80 beats per minute. Now what you're doing is you're looking at the acceleration of fear. It's what you're looking at on a physiological level and he's got this in real time. So now what he's doing is he's recognizing that as his heart rate goes up he knows that the fight flight response has been triggered. And so what he's doing with all the skills that he's taught he's teaching first with with biology the emotion he's calming the emotion down so that it's cooling back down to like 70 beats per minute. He's no longer triggering the fight flight response and the fear and the sense of like oh my god I'm gonna lose everything. What am I doing? Buh-buh-buh. That sense of powerlessness that happens. So that's a lot of the stuff. And again I anything that measures heart rate or heart rate variability or skin conductance in real time it's measuring the the genesis of an emotion as it's happening and it gives it gives a a trader a lot of head start particularly when in a training phase it's like what I just described is a training phase of moving a trader from one level to another level and of course there's going to be problems. Anytime you move from a homeostasis where your your body or your mind is used to something then you move it to another level. The body's not comfortable with that and it's going it's going to trigger to the fear of the unknown again because it's not comfortable at that level yet and you're just building the skills. So there's there's lots of things that can be done that the the major thing is without all the toys of you know heart rate monitors and video cameras and things like that you're still teaching yourself to monitor stress levels you know like I had one fun managers recognize that he has that that rapid foot syndrome where you know it just starts really cranking and you realize and he realized oh my god I'm beginning to understand once he got the connection oh my god that's a rousal of an emotion and he realized that better to catch it then then to when when the anxiety had kicked in and suddenly anxiety is going to cause you to think about the future pretty bleakly like oh my god bad things are going to happen in the future that's just anxiety controlling fog that's all it is and he's recognizing there are certain signals that my body is telling me that I look if I become observant of those signals I can catch the emotion a long time before it becomes damaging to the mind that I'm bringing to the moment of trading so there's lots of things that can be done about that right but what about a problem like patients perhaps a you know doing nothing when there are no good setups I imagine that probably wouldn't be a result of an emotional arouse or would it know what happens is in in patients in boredom it's what you're asking to do if you're if you're if you're developing yourself as professional trader and you get bored you need to be asking what is this conversation in my mind about boredom okay most likely what you're going to find is a is a conversation that assumes you need to be doing something to be doing something you know you need to be taking action you need to be making some things happen and that is an enormously dangerous attitude to fall into as a trader because you know as a trader you are waiting for the market to show you what it's willing to give you you're not making you're not making things happen it's it's a huge thing so patients is something that from my perspective is a practice and it's something that it's just not something that you go pick up off the bookshelf and say okay well I'm patient now know what happens is patients is a practice of again where you start with you start with managing the body of emotion then you go to mindfulness and then within the way I teach mindfulness what you're asking what is this conversation of urgency to act okay it's it's it's it's a it's a death to a trader and so you're saying okay there's the urgency that I know that I'm a type A I had that part of my type A and they I need to decide whether or not I want to be right or whether or not I want to be effective and a lot of people really when you're seeing urgency to act when you're seeing the board and what you're looking at is a guy trying to control outcome and it comes back to I need to step back I need to practice patients I need to calm myself down and I need to see what the market's telling me that's the 180 degree difference between the biology of the hunter the one who's out you know looking for something and making something happen and I'll tell you it's a good example Andrew is that if you take a look at the African lion and the way it hunts and if you take a look at the American Cougar and the way it hunts both are apex predators both are big hats okay the lion hunts an impact stalks and chases okay and they also have a lot of injury and they have coordinated attacks and they were very successful predator if you took that same big cat and put him into the American forest it's starve okay however the American Cougar is also a big cat and the way that Cougar hunts is that it will climb a tree it will climb a ledge and it will wait very patiently for the deer to walk into the setup and if you look at it if you looked at a Cougar hunting you would think that the cat was sleeping it's just hanging out not doing much anything yet they have an enormously high kill rate and they also have a they have a very low injury rate there but yet if you took the Cougar and put him into the Serengeti points he would be a very poor hunter what you're looking at is two different hunting strategies that have evolved those big cats can't help but be those hunting strategies you and I and traders we can design the mind that we're bringing into is you are not a stalking hunter and trading if you are you're going to be looking at you're trading account going down you are an ambush hunter like the Cougar and I have actually a number of traders who think symbolically in terms of Cougar as they trade because what they're doing is they're recognizing the patience is the work of trading and if you're getting bored you're falling out of an effective work mind for trading and that's something you need to look into the mind and you say who what's going on inside the committee of the mind that has me bored when this is the work of trading patience is the work of trading the to me it's a signal that the psychology has not gelled and you need to work you need to work on patience and again I work on patience all the time you know I have a tendency to want to make things happen yet I have to step back mindfulness I had to calm the body down get the urgency gone and allow things come to me that that's a practice it's something that you train to it's not something it's not an event that you have an alcohol moment and your patient for the rest of your life it is a practice that you establish and you maintain over time is the cost of being a professional trader so that's interesting so you're really reframing patience or doing nothing as being part of the action of trading yeah I mean you think about it is having a trader you know who make money by chasing trades okay and what happens is a trader gets bored suddenly all those squiggly lines they're staying on their charts suddenly they see entry points and you know when they're in a same mind they don't see they don't see the entry points when you have a patient mind it's much easier to see the squiggly line showing up to classical any highly effective setups and it just depends on what mind you're bringing into the moment of observation because Andrew the interesting thing about neurovology is that a neurovology what we would say is that you have never seen reality or as a trader would say you have never seen the markets what you have experienced is your brain taking the sensorial modalities and organizing a virtual representation of the reality out there okay and what you're doing is that you're using the trading account to say okay what happens is I have a benchmark that assesses the effectiveness of the virtual representation that I have of the markets that virtual representation is dependent upon the beliefs that you're projecting upon the markets and the current observer you are of the markets because in a neurovology and in quantum mechanics what you what you get very quickly is that all reality is observer generated and it goes back to the it goes back to the wanting to make things happen is that's observer generated suddenly you start seeing things that the market's not revealing to you you're you're you're rejecting that onto there and so if you use your trading account as basically as your best friend kind of a brutal best friend but what it's doing is it's brutally telling you exactly the quality of your belief systems and an impatient belief system in trading just simply doesn't have a pull it doesn't I had a place it has a place for professional traders to take advantage of people who are impatient you know it's yeah do it every day yeah right okay I think you may have already touched on this a little bit but you know we often see people who are successful in a corporate or business context get involved in trading expecting that their external success will translate into market success but yeah often you know find it a real struggle why do you think that is the the rules for success and the world out there the world of corporate or business are very very different in the rules of success in trading the rules of success in business is literally about action about taking effective action and pushing the piece pushing it and making things happen and why call that the alpha mentality and it is like I said it produces success in a lot of endeavors when you bring that alpha mentality into trading it's going to blow you up because the thing is is you do not control outcome you cannot make things happen it's kind of like you you can't make things happen you can let things happen and at some moment you discover that you never had a choice okay and until the alpha learns that he's cook I actually had a client a number of years ago that had been enormously successful in business I mean the guy literally when he graduated college he sold a bar business that he started in college for half a million dollars in US dollars and then you know as he moved up the scale he would he just proved his his acumen in business is was gosh it was great his brother was a trader and this guy looked at trading and says oh this is a business that is capital intensive well it just so happens I just sold a business cash I have a lot of money I have a lot of cash on hand I'm just going to learn this business and then I'm going to start applying cash to it three years later he wasn't profitable okay and with me he became profitable but what he did is he finally realized Randy I don't want to be the person that I have to be to be successful in trading and he he went back out and he bought another business and he built the business up and he's he's doing what he does but the the alpha mentality of making things happen of controlling outcome is the antithesis of what success and trading is is that is required were literally it's not so much passive I mean nobody has ever said an American Cougar is passive you know it's very patient but when it attacks it's it's a very dangerous attack and the same thing is is that the Cougar is waiting for the white tail deer to come into the setup for the ambush he's not stalking it the way success in the outside world generally generally gotten it's a very big difference and that's why the alpha alphas have a lot of difficulty and they need to decide whether or not they're willing to do some major rearranging of their psychology to become successful in trading and it's like I said this guy that I was telling you about he came to the moment where he saw what success was he started having success but he didn't like the patience he did my patience and he wanted the world around him he was controlled for he can he wanted to be able to do that and that's just not the way that's not the way of success in trading right so there are any other traits other than being a control freak that you think don't really align with being a successful trader yeah the opposite of the control freak is the perfectionist and what happens is those are the ones that dada dada of a thousand tiny cuts is that the perfectionist is looking not to be wrong and usually has done well by not being wrong or always being right and a corporate world or a business world and then get into trading and you know the the paradox of trading is you can do everything right and you can still be wrong it's all about probability and once you realize it's all about probability you realize you cannot control outcome by not making mistakes you you you let go of that and you control process and the other the other one that has a great difficulty in trading you know a lot of your engineers your airline pilots your medical doctors a lot of people where you're seeing that they have been trained not to make mistakes that that is they will intellectually in a theory know how to trade but they don't have the they don't have the emotional control of the right brain of the emotional brain to be able to use that knowledge under pressure and I call that applied knowledge is that and the last one is the impulsive type where they they they think they're going to get rich quick and they they want to make a lot of money and you know there you know there's that old joke and trading if you want to make a small fortune in trading start with a chart big fortune yeah and until until you grasp that you cannot be impulsive okay you cannot be impulsive you can't even though you want to make a lot of money that's an outcome goal and if you're allowing outcome goal goal to sway the mind that you bring into the moment of performance it's not going to work trading is literally you let go you let go of outcome goals and everything is oriented around performance goals actually one of your traders you know basically in the system she's using she was talking about taking the losses the key is all professional traders take losses and what they're doing is they're saying do I trust the system I have and do I have faith in my ability to deliver that system they're not looking at their P&L statement they know that if they manage performance they manage their performances in the trade execution they know that the money is going to is going to be there they they back tested it they have faith in that and the key is what you're doing you're staying very focused on how's my performance here there is actually a this is something that happened I was watching I really like hurtling the the race cul hurdles I tried in high school come a herdler and it just it was very ugly side but I gained I gained enormous amount of respect for how the the body and the mind had to be trained to hurdle and anyway I'm watching I'm watching the Olympics and this American guy comes on and all the announcers and journalists are talking about how he's going to win he's just the most favored he's the darling and blah blah blah blah blah blah all this stuff and they're just talking about him like as if he's already run the weapon well won the race well the athletes get down and you know these are really well trained athletes at that level and the truth is the American just blew past everybody and at the end of the end of the race you know he stood in their huffing and puffing trying to get his breath back and all the announcers are talking about how they knew this now that and the other and so they finally interviewed him while he was still you know catching his breath and they said what was it like what was it like what was it like and he's looking at him like what is what was it like with what were you thinking when you saw that you were going to win what were you thinking and the guy looked at the announcers and says you want to know what I was thinking and they literally said the world wants to know what you were thinking did you know you were going to say to world record did you know this did you knew and he says you you want to know what I was thinking and they said yes yes tell me what you were thinking tell me what you were feeling and he says I'll tell you then and he said one two three four one two three four one two three four one two three and I want you to see that the announcers were projecting outcome they were saying this is what he must be thinking and what he was doing is he was managing performance there is no doubt that a track coach has been working with that athlete for a number of years there's no doubt that one two three four one two three four is a very precise uh mi-mani for what the body and the mind need to be doing at any particular moment in time in a hurdle race there's no doubt that a really good sport psychologist has been working with this guy working with the same one two three four one two three four to main peak performance mind during that performance okay and and he is the law he is just not in he is not into the outcome goal he's not about winning the race he is about performing the race now later you know he gets on the podium and he gets his goal thing and he runs around he's jubilant he's really a fork and all that stuff and they're interviewing him and you know he's talking about how he and his team has set up these outcome goals eight nine ten years ago and how they were finally achieving them this bit of time you can see the outcome goals were there but in the moment of performance it was all process and that's really what the trader has to learn and it's a discipline it's something that if you want to become a professional trader you're just going to learn it and you realize that it's going to be a little bit of a struggle to move from the mind that you brought the trading to the mind that produces the the reliable extraction capital out of markets but it's it's all about processing trading and the speed of trading is so much faster than the speed of life that you don't have time for self-deception it's just right there it's like instant karma right so is there a particular stage in the trader journey where you see traders get the most value from performance coaching yeah the the it's when there is an experienced trader who can when they when they are trading in simulation they know how to trade okay they have the knowledge of trading the problem is is they can't they can't apply that trading to risk an uncertainty at that particular point of time they're very clear that there is no external holy grail they have the knowledge they just can't apply it under pressure of risk is at that moment that they know they've come to the thing is it's kind of like the pogo carton that by the way I have that carton and sitting right over on my wall and basically what happens is that it's called you know you realize that you are the problem you are the problem you are the solution too and you realize that you're going to have to rebuild the mind and there's no there's no shame in recognizing the mind the mind that you so carefully crafted before you got in trading it's not effective in trading the real key is is that are you are you a lover are you a student of trading enough where you're going to you're willing to rebuild the mind to work in probability because that's the big shift and what they've assumed if they work hard if they're really good students they're going to acquire this knowledge and they're going to and they're going to come break traders and you realize no that's just not the way it works in trading you have to have knowledge you really do but you have to be able to apply that knowledge under pressure and it's at that moment that those are the traders that I like because they realize that you know they probably they're they're learning curve you know if you've been around this block before you know that 100,500,000 a couple million five million people has spent a lot of money getting their earning their degree in trading and when you come down to it and you realize okay it's the mind that I'm bringing into the moment that's the problem that's when you realize that's that's the trader that you're looking for it's the same thing in golf what you discover is that there are a lot of professional golfers on the circuit there's only about 10 money players in the game that and what you discover is that choking under pressure is that you're what you're looking for are you willing everybody in the PGA tour can drive everybody can put everybody can but it's what what you do and transform yourself under pressure that makes all the difference in the world I mean the guy the other day in this to put you know it was like a four foot put he's done that you know he's done that guy I know is how many thousands of times but under that moment you start going that's where I need help you'll see these professional golfers they'll be bringing sports psychologists along with them they just want to make sure that the process that they're using to to manage their being at any particular time is is not straining because you know the money counts now and they're they're doing that and that's what I like is I like to see a trader come to the moment where he realizes that the only the the cut the literally a lot of traders will say it's just right around the corner it's so close I can only see like and they recognize that oh my god I'm the barrier to my own success that's that's the trader I like working with they're they're you know they they have the knowledge they just don't have the emotional knowledge that because ultimately what you discover in this business is that emotions are making the mind that you're bringing to engage to markets with and you you there is no such thing as freedom from but the thing is once you grasp well what emotion is going to show up when I encounter uncertainty and if you leave it to fall programming it's not going to be pretty you have to rebuild that mind so that when you when you have a homey estasis is kind of like everything's just an even gale and the moment there's a disruption to homey estasis and emotion is going to show up uncertainty that they're literally the self-doubt of uncertainty the ambiguity is you're sitting there and also you realize that oh my god what mind am I bringing there most people will be bringing a mind that is going to avoid uncertainty okay and what you're looking for to build is a mind that engages uncertainty because within uncertainty is your money it's just that you have to rebuild it to work in probabilities rather than certain things so it's the it's the experienced trader who recognizing that has recognized that they're the obstacle to their success they prove themselves and they're and they're they have the they have the motivation they have the courage to say I want this enough so that I I am going to rebuild the mind that I bring into the moment a performance that's that's that's exciting to me right what about the experienced trader who is already you know profitable and and performing quite well what do they need to look out for to continue or extend operating at that peak the experienced trader that is basically extracting reasonable levels of capital the biggest the biggest concern for them is your for you if you remember a few years back uh jakey morgan in the whale is that they have evacuated six to eight billion dollars in the whale himself evacuated well over a billion these are really um the whale and the crew there were really good traders this uh nobody's defeating that what happened though with these guys and essentially seeing people are studying them at this time is that the risk manager on that unit got sick and she got very sick and for about three to four months she was not consistently at work and she also had a disease that affected uh mental functioning so she was not she was not a hundred percent on top of her traders not letting them have too much testosterone and during that time uh these guys were being studied is that there was uh there was a neurologist studying them and literally he would be taking stalava samples and recognizing and he was measuring cortisol anxiety or testosterone risk taking behavior uh and what he realized is that these guys had so much testosterone in them they were incapable of effective trading incapable okay yet he had administered self-assessment emotional tests and they would say I'm flatline now I don't even have an emotion they were so drunk with euphoria okay but they didn't see that they were in trouble and you see this when traders start reliable reliably uh taking capital out of the markets and they start saying hey yeah this isn't so bad hey I can do this they're beginning to feel good that feeling good moves from a humble confidence to an overconfidence subtly it's hard to catch it and that's where suddenly I see it with people who go through my coursework is that you know I lay out a process that allows them to get into a particular mind that trades very well and you develop rituals you develop processes that allow you to manage the mind that you bring to trading and you learn how to micromanage the mind during trading and what they'll do is they'll say hey man I've got I've got it down I've got it down and suddenly you start seeing them and they're overconfidence say well I don't need you know I can take shortcut I don't really need to do all this time and what you see is that overconfidence blinding them and you know suddenly they start having really bad days they start having bad months and you see that particularly fetch funds where they're working like crazy at first and they start having this place and then they blow over the gap and they cycle starts again but to the accomplished trader it euphoria is a far more greater demon than fear and your fear is good keeping you out of trades the the thing is the euphoria which by the way is a mixture of dopamine and testosterone is that that is the one that the experienced trader needs to be careful of is actually when I was speaking in China one time I said you know when you're trading basically you are not looking to have fear are euphoria you know basically what you are as you have discipline and partiality that's the emotional state you want thinking to come from and I actually had a trader say what are you telling me are you telling me that I shouldn't feel good while I'm trading I said exactly I want you I don't want you feeling good that is euphoria and it's going to distort thinking in the same way that fear will distort thinking we want you in discipline and partiality where it allows you to see in such a way that highly effectively manages probability okay if you have too much euphoria you're minimizing the amount of risk that you're putting on and I'm out okay man I'm on a roll and things are going to go on good forever now no no that's not true this is a game of probability but that's the main thing with really experienced traders that's the that's the big one okay okay so just before we move on to some listener questions I'd just like to ask you a question for the skeptics because I'm sure there's skeptics out there that think trading psychology is some type of voodoo or fluffy concept that doesn't really mean anything how would you respond to to those type of questions well the first thing is are they extracting capital reliably out of the markets or not okay if they are it's a different thing if they're not extracting capital then I consider them just to be blind as bats and I don't really see any reason even address them there's no reason for me to waste perfectly good breath on a close mind for people who happen to have been born and won the genetics lottery and had the right mind basically what happens is that in there what you're looking at is you're asking as you evolve as a as a trader how have you grown to be able to manage mine and most traders I've run into what happens they recognize an evolution then they and they're actually they don't understand why other traders just don't have this mind off the shelf and you know for them I'm going well good for you you'll see a lot of those as trader trainers and they get just absolutely mystified by as they train people they don't understand why they're having problems but the other people you know what you're looking at is going well are you satisfied with your performance if you're satisfied with your performance and you recognize that the building of emotion creates the mind then you know what you're looking at is tell me about your performance and if your performance is at a particular level that allows you to to poo poo it then I'm okay with that you know that's not from you know I just don't know I most traders I know who perform on a on a really an expert level they're fairly humble because they know that if they do not maintain the humbleness when in market is that the markets will the markets will humble them again so I don't see that I I find what I find is just like in the golf world you can say sports psychology doesn't matter but when you start seeing that there's very few people who can who can play golf in the clutch and until you master the the basically the breakdowns in the clutch that's all psychology so Andrew I have on a weekly basis I will have people write me and they will say Randy I wish I had listened to you I can no longer afford you but I've blown I've run through this stuff and I believe strongly that I had everything together and what I realized that I didn't have was you know the basically the emotional alchemy together to create mind trade so my view is I don't feel like preaching to people who haven't got it yet I don't need to the the markets will the markets will teach them and my hope is that they still have capital left when they finally wake up and come to their senses so I don't know if that makes sense to you or not yeah sure all right thanks Randy so I'd just like to go to a couple of quick reader questions now or sorry listen to questions the first one is from Craig he asks do you have any mental exercises that we should be doing before the market opens and during the trading session what is a good one for letting profits run at present I visualise both a stopout and also a successful trailing stop exit and it's better than nothing do you have anything better for this particular problem well Craig first of all I train that so this is a more complex but I can tell you this on a pre I believe that it's highly dangerous for you to sit up in front of your screens populate your charts with whatever mind that shows up is that I actually teach a process where part of it's very simple it's been going on for a long time is that it starts where you wake up what you're doing is you're scanning your body for tension and people who work with me know that tension actually is a rousal of an emotion and you better catch it nail before it erupts and becomes a feeling state where the chemistry in the body people I work with will have a process they go through where they are both breathing common the body and then they will be practicing mindfulness and I teach process that's different than a lot of Eastern forms of mindfulness is that I'm teaching people to step back and watch thought and recognise that you and your thinking you and your beliefs are not same is that all the mind is is a particular organization that basically emotional programs have organized you into and the default programming is not who you are it's just it's the one that happened before you knew what was going on what in mindfulness you're stepping back and you're you're observing and you're observing far both what I would call the empowered elements itself that allow that allow you to maintain discipline and impartiality but you're also you're also intentionally observing for your fear and what you're doing is you're turning toward that fear and you're coming down you're not ignoring the fear because that fear if you turn away from it it will bite you so the first thing is you're turning toward that and you're calming it down and self-soothing is a big element and I have I have other language in other ways of identifying these elements of discipline and partiality courage and self-soothing in my work but what you're doing is you're finding these elements and you're maintaining this what I call sobriety of mind sobriety of emotion you're doing that before you start trading every every star athlete has pre rehearsal they they have a mind they're getting into before performance then what I also do is I know that that particular mind state is good from anywhere far as much as 45 minutes to as little as 20 or 30 seconds if you happen to be an alpha that likes to chase trades that would be the 20 to 30 second what you're doing is you're saying okay where are the areas that I generally have problems in trading and what you're doing you're saying instead of trying to ignore those areas I am going to stop step back and I'm going to prepare the mind for that moment before I enter it rather than hoping like hell that something doesn't happen this time now to your question of letting profits run is that if you were to go to my website right now there is a there's an article called the micro management of psychology where I break the trading cycle down into nine functions whether none these nine processes and in my work what I discover is that people who are having profits having problems taking profits you know they're taking too early they think that's where I have the problem if I only can conquer that problem right there then I'm going to be okay and I do have techniques for that but I the caution I have is a lot of people are looking for techniques where I'm looking at changing the whole perceptual map of the mind that's a big thing actually what I find is that most people who have trade management problems the problem actually happens at water fill there is a enormous shift in American football we have what is known as an offensive coordinator running the offense and they're looking for opportunity and you have a defensive coordinator who is basically defending turf they think very differently from one another and a very common problem that I see is a person will get into entry the water will fill but they do not move from offensive thinking to defensive thinking if you if you are at order fill if you you need to be observing yourself and again this is something where I do with video and things like that but when you start seeing yourself you will see you will see yourself fixated on a screen you will see your heart rate beginning to pulse you will see you know you'll see that you're not breathing you have already you have already started the clock for mismanaging taking your profits too early okay but let's just say you got past that and you're in this position is that what I will do is I will train people I will train people once they understand my system and can actually use it I will train people saying okay say if you're using and you guys are using a system where you're supposed to just let things go but it's say if you're using indicators or if you're looking if you're looking at a target and you know this is what my target is and what you're doing is you're saying okay they're very momma that that thing hits black you know it's been bouncing around all this kind of stuff and you know it's twirling around most likely you have not managed that psychology then so suddenly when you start seeing there's a little bit of profit you're already taking it you have to step back even there but when you get to the blank what you're doing is you are training yourself to take a pause to step back and to reorganize the psychology right there you know it's not so much visualizing the stop or the target what you're doing is you're saying what I need to be doing is I need to be turning toward the fear and calming it down I'm it and what it seems maybe it seems counterintuitive that I'm going to focus on the positive over here and I'm going to look at my I'm going to look at my target I'm going to I'm going to visualize that well you're ignoring the biology of fear staring you in the face if you do not if you do not manage that fear calm that fear down and it would be I call it self soothing self-compassion unless you do that the fear is going to hijack thinking anyway there there's no way around there is no such thing as freedom from emotion however with awareness you can come in you can start saying I need to train myself I need to train myself of that specific moment and I actually had a person here in your notes work with a trading psychologist for a number of years about basically at this particular incremental moment I'm going dear God I've never worked with person for more than two years this guy's like four or six years a good solid problem this is something once you understand the dynamics of the way the brain works your brain literally to a neural scientist is a community of rival pro emotional programs that has organized you into a self that can survive in an environment and that would be taking your profits when you finally get them because it's scarce to be thinking okay that that would be default programming your mind becomes like a trading committee where these programs now are no longer electrical activity electrical behavior in the brain they are they are now thoughts with voice in your mind and what you're doing is you're experiencing the inner struggle between these programs when you're staying stay in there stay out you know that's the inner struggle and I have a way of defining that inner struggle to the so that you're able to name the parts of itself and you discover very quickly that that's the ticket I'll give you a really good example I worked with the guy who for 30 years flew an enormously large cargo jet for the US Air Force it's called C5 and I like to call them a flying football field you can just they're giant aircraft it took a team of men to fly that aircraft and this guy said you know something I grew up in the Air Force I did all this stuff I assumed I I had discipline I assumed that I had confidence but what I discovered when I started trading is that it all went away and I finally discovered the Air Force had built a team externally where all these elements were there all these elements of the self necessary for performance they were there what I had to realize is that when I started trading is that I had to recreate that team internally okay rather than depending on it externally and in that he recognized that his mind really was a fractal of the outer world too and he realized he could build that internal team that could manage when it popped up that fear of missing out of profit it could manage that but he was also anticipating that was going to happen and was able to calm the fear down so that he was back with the probability-based mind now I don't know if that answers your question the way you want it but that's the way I teach the way that I use it is that it's just not techniques are you know they're just techniques you know ultimately what you're having to do is you're having to recognize the nature of brain and the nature of mind and using that understanding to rebuild the mind that you bring into uncertainty that's what you've got to do it's not it's not just technique driven yet at the same time if you look at my programs they're very technique driven but fundamentally what you're getting at is you are reorganizing these emotional programs and the meaning of those programs into a very different mind and you turn toward the fear okay you turn toward the fear and you approach that fear with compassion and interestingly what most traders don't grasp is that the antidote to fear is not courage it is compassion compassion is a you know beating yourself up has never made a better trainer but compassion comes to that thing everything down it comes that fearful heart of yourself down so that it's not scared to make a mistake it's not scared of what might happen is that it knows that it has a place it knows that biological threat is not there this is psychological discomfort and that we can man it we have tools and skills they have managed to psychological discomfort and the amygdala the part that's actually hijacking you begins to trust the higher brain function of the neocortex that's when you have a professional trader and that's when you that's when you transform the mind from scarcity thinking into probability thinking I don't think of it as prosperity thinking I think of it as probability thinking prosperity thinking is too for my standpoint has too much euphoria and it's going to blow you up I know that's a lot that may not be the answer that you were seeking my friend but ultimately part of it's technique part of it is no you have to reorganize the mind and that's not going to be done by technique that's going to be done by turning toward the fear and learning from the fear right that's a great response thanks Randy just one last question you've already touched on a little bit but I think it's quite a common issue so I'd like to just raise it again it's handling drawdowns or periods of you know strings of losing trades etc so the question from NETS she's been trading for quite a while now she has a system with positive expectancy and she's seen back test results in the drawdown she's currently in is quite normal for the strategy she just wants to know are there any techniques or to help her continue taking the trades even when she's being beaten up by the market yeah first of all you go back to the emotional regulation stuff we said in the beginning is that you have to be able to regulate the biology of the emotion that's your breathing that's the tension that's the first thing otherwise you don't have a way to break the emotion and it keeps building and building and building that's the first thing the second thing is do you have trust in your system okay and then do you have faith in yourself that's ultimately what it comes down to and this is the major distinction and I actually like the way she's saying this is that we all your biology and your psychology will always want to control outcome it will always want to have a short term survival strategy that allows me to I win this time I win a professional trader has enough faith in their system so that they know that as long as I am bringing the performance okay to the process as long as I'm controlling the mind that I bring into the moment of execution when I do that what I know is that the money will take care of itself through bad times and good what I ask of you is this is that what you're seeing is a short term you're looking at the biology of short term focus of survival and what you're doing is you literally are going to have to practice the probability-based mind of saying you know ultimately when in my training what I do is I ask the person is this a method mistake no I would take I would take that trade again it met my criterion ago is that a psychological mistake what did fear show up the grandiosity did you for you show up no no I managed straight then what we're saying is this is just simply landing on the wrong side of probability and you would take the same trade over and over again you are this is actually the act of trading and this is where you really truly have to bring compassion because it is your legitimate suffering okay and what you're doing is you are compassionately bringing that and what you're doing is you're saying to the amygdala or what I would call the orphan what you're doing is saying we're doing everything right we have positive expectancy we can do this I need I need to turn toward you I need to hold you I need to take you with me the amygdala will learn over time to trust higher brain function if if you recognize that you have to soothe fear goes understand it doesn't the amygdala will never be able to separate biological threat from psychological discomfort that's what you have to do it literally you're saying amygdala or orphan as I would use the language this is psychological discomfort I've taken a loss okay we have positive expectancy we're going to breathe through this and if you don't resist that fear what you discover like with a panic attack if you use breathing and relaxation technology what you're doing is realizing the panic the panic attack lasts for about 20 minutes if you resist it you feel like you're having a heart attack and have to go the emergency room so it's the same thing is that you're saying I understand it we've taken a loss and there's going to be a period here and we're going to show you we're going to show you that we can be adults we have a heart brain function and we're going to show you that this thing's going to have positive expectancy and when it turns around and starts going the other way don't go yet be yet be say orphan amygdala do you notice that now we're just simply landing on the different side of probability we're landing on the side of probability that we would furbay on all the time but the truth is we can only we can only control our performance and what you'll notice a period of four or five months is that as you do that the amygdala will start calming down and it's no longer doing that hijacking business and you'll leave it to have a better state of mind because you know ultimately you should be in a place where you'd simply go in next next I'm controlling the one thing that I can control the mind that I'm bringing into performance and that's literally what the professional trader is doing but it takes work I know that I've seen I see lots of traders you take some broad eons and you take some hits and you know it you need to talk to yourself and you need to be talking to yourself from a higher self rather than oh my god what's happening oh shit oh shit oh shit you need to control the internal dialogue rather than the default dialogue going on inside your head that takes some training there so but that's how you do it right and so for traders who have other questions what's the best way that they can get in touch with you my website um the easiest thing is uh that's WWW traders state of mind all one word with two s's and on my website you'll discover is that it is a content rich site uh gobs and gobs with free articles gobs and gobs with free videos um with free ebook and I would encourage that to good start uh and my book mindful trading is available on my website I discovered a long time ago that you know uh I'm not going to give all the money away from book to publish your art Amazon so uh it's just crazy um but anyway um if you want to get to know more about my work as uh get my get my book and if you're from Australia please do not order the uh the paper the uh printed version please do not shipping costs uh you know it's just like uh oh gosh but the the major thing is that what I want people to do is in the book I lay I lay out a process that takes traders who are bull in china shops then do not know while they're blowing themselves up they know how to trade and they're just blowing themselves up to where you you have the evolved mind of a professional trader at the end and you're seeing through their eyes you're seeing that that evolution and what's behind that evolution uh that's where most people start and they start looking then they start looking at my the self-study um I don't want to say why people get that I um basically for a couple hundred bucks more you can join one of my group courses that has all the recordings and all that kind of gets I just lots and lots of stuff and you just never attend classes we get we get a lot of folks uh particularly from Singapore and um Hong Kong and uh Australia who will join my group courses and they never show up I mean I'm doing it 430 in the afternoon New York time so you know you know I understand whether or not but what they do is they have uh they have all the they have the lectures they have the processing they have all that stuff and now and they have the virtual classroom and they can study it at their own will um and my individual course um is for people who are really serious about trading it's for people who are capital as well enough to recognize that um you know they have left 35 hundred dollars on the table or blown 35 hundred dollars numerous times and it's enormously comprehensive and if you in the individual course I'm getting into this micro management stuff and the movement from um you know from one level of contracts to another level and you know we're working on it's highly personalized and highly comprehensive and there's stuff in it that are just simply not in the group course so it's all over the place but it starts with go to the website um and check out the book as well I was looking at that the other day and there's so much um great content in there so loads of um things for people to read and to apply to their own trading so thanks so much for sharing your knowledge with us today Randy um it has been fun yeah I've really enjoyed it so I highly recommend everyone go to Randy's website I'll have a link to that in the show notes and go and check out his books and courses as well he's got some excellent resources up there so um Randy thanks again for your time today really appreciate it Andrew it's been a lot of fun and I guess you can go to sleep uh and I'm I'm fully awake now so life is good yeah well enjoy your day thank you take care thanks Randy bye bye great chat with Randy wasn't it I found it really interesting that emotions are biological not psychological if you monitor your body as you're trading you'll notice little cues like the rapid tapping of your foot jaw clenching rapid breath etc so this could mean that your mindset is entering into a stage where you're not thinking clearly Randy's tip was to be observant of the signals your body is telling you before they impact your trading and another one was um proper breathing will disrupt the ability for fear to maintain itself he also had a number of great stories I really like the story of the herdler who had who was asked what he was thinking when he realized he was going to win his race his response was 1 2 3 4 1 2 3 4 which really shows his focus was purely on the process rather than the outcome this is also how a trader should approach trading because the only thing we can control is the process we cannot control the outcome there are loads more great points Randy raised to that but those were two of my favourites anyway don't forget to check the show notes on the website where we have additional information and links to Randy's book his free book and some additional videos the show notes are available at bettersystemtrader.com/14 so go check it out also a big thank you to everyone that submitted questions for Randy this week if you'd like to submit a question for future guests make sure you're on the better system trader mailing list and I'll send you an email when the next opportunity arises plus don't forget if you haven't submitted your biggest trading challenge go to bettersystemtrader.com/mytrading and so the four simple questions and we'll use that to drive future episodes anyway that's it for this week I hope you enjoyed the chat with Randy and you've picked up some valuable tips to improving your trading performance thanks for listening to the better system trader podcast catch you next week thanks for listening to the better system trader podcast the next step is to head over to bettersystemtrader.com for more expert tips practical advice and exclusive content catch us next time for even more great ways to improve your trading here on better system trader