In this episode Gary Portugal and Agnieszka have a discussion sparked by a tweet of a very seasoned investor and portfolio manager Jason Shapiro, who recently posted that not trading is actually a trade in itself. This thought brought the inspiration to talk about how to do nothing in trading. Many traders have difficulty staying away from the market and cannot resist the constant flow of opportunities. It is not easy to stay away from action, because we're programmed to think that we must act. Especially if we want to achieve our goals.
With decades of experience in trading and working for large financial institutions, we hear Gary share the valuable lessons he learned and his philosophy on doing nothing. One of the things he points out as a reason for the need to act is equating trading and having risk on, in the markets, with working hard. Almost as if not trading means cheating. It is key for every trader, especially if you trade for a living that you don't have to trade every day.
About Gary Portugal
Gary Portugal began his FX journey in New York in the 1980s as a spot G10 Market Maker, before specializing in European Monetary System currencies in the 90s. After the creation of the Euro in 1999, he transitioned to trading emerging market currencies and to developing a spot FX e-commerce business at a major financial institution in London. He then spent a decade at a proprietary trading group as a market-maker in emerging market currencies to various electronic currency networks. He now trades and invests independently across all asset classes.
Contact Agnieszka Wood | Ahead Coach:
- Website: aheadcoach.com
- Twitter: @Ahead_Coach
- YouTube: @aheadcoach
- Facebook: Agnieszka Wood
- Instagram: ahead.coach
- LinkedIn: Agnieszka Wood
Contact Gary Portugal:
—
Transcript
[00:00:00] - Agnieszka
I'm Agnieszka Wood and on today's show I am very excited to introduce my very special guest, Gary Portugal. And maybe you remember Gary already from previous episode. He was here a few weeks ago and we were talking about trading for a Living, which by the way, became so far our most popular episode. So if you haven't heard it yet, I highly recommend it. It's the Episode 3 Trading for a Living. Gary has been a professional trader for 35 years and he's still trading now, just not as a professional, but sort of because he's trading for a living. So not for anyone else, but for himself. And Gary is joining us today to talk about the topic that is really hot for every single trader. And it was very spontaneously sparked that conversation that I thought this will be so valuable for everyone. So let's start. And Gary, welcome to episode number twelve: How do you do nothing? Hi Gary, welcome to my podcast.
[00:01:15] - Gary
Hi Agnieszka, thank you so much for having me again. Pleasure to be with you. I guess I'll start by just saying what, as you mentioned, what would have sparked us to have a discussion today, which was a tweet by an investor, very seasoned investor, and portfolio manager by the name of Jason Shapiro, who he has a website that focuses on basically trying to find when markets become too crowded. So he basically measures extremes in market sentiment. Anyway, he recently posted a tweet in which he stated that, quote, unquote, not trading is actually a trade in itself. And when I saw that, it really resonated with me. And it also made me think of contacting you again because I thought it would make for a good topic of conversation. And the bit that he added to the tweet was he said it's better to miss a trade than to take a trade that you're not supposed to take and end up losing money on it. And again, that really resonated with me. I've thought that many times and in my own head, I mean probably hundreds, if not thousands of times over all the years I've been in the market.
[00:02:51] - Gary
And to see somebody actually put those words out in public on a tweet, it really woke me up.
[00:02:59] - Agnieszka
Basically, it's such a powerful thing to realize, right, that whether it's in trading or in life, really, that we don't always have to do something. I think this has a lot to do with having control, that we want to control things and that gives us this urge and need to act. And this is how we grow up, most of us anyway, that if you want to achieve something, you have to put a lot of efforts, you have to do a lot of doing in order to get somewhere, right, to become someone in trading that is bringing you in trouble.
[00:03:39] - Gary
Many times this feeling of the need to act as opposed to doing nothing, whereas sometimes like silence. Sometimes not acting actually is an action, but it goes against what we're taught. We're programmed to think that we must act, we must talk.
[00:03:57] - Agnieszka
Right?
[00:03:58] - Gary
We must not be silent. We must not fail to act.
[00:04:01] - Agnieszka
Right. Because how do you do nothing? How do you not act right? I always get that question from my students because in my program, I have this whole module about letting the control go and letting things happen. So basically letting it go. And then how do you let go of that control? Especially over things that you cannot control, like the market? So the question that I get is, but how do you do that? How do you do nothing? You don't. That's the whole point. You don't do anything. So you don't do doing. You just don't do it. Does that make sense? It's like, how do you do nothing? Like even your private life, you just sit there, you relax, and you let things happen for you. Right? You are more in that observer role, right? Yeah.
[00:05:02] - Gary
That's a really good way of phrasing it. I think there are times when it's perfectly okay to just watch as opposed to do. I think the time to do is when you have a very high level of confidence in something, whether it's trading or any other aspect of your life, when you have a high level of conviction. And if you don't, at a given moment in time have that high level of conviction, why pretend that you do? In other words, why trade on a daily basis when nobody's putting a gun to your head and forcing you to do that? And I think that we feel the need to, as you would say, act every day or trade every day. And I think that's one of the first things that anybody trying to trade either for a living or professionally whatever, has to address this concept and come to grips with.
[00:06:02] - Agnieszka
Right.
[00:06:02] - Gary
And try to accept that, no, you don't have to trade every day. That is not a rule. You're not going to get put in prison if you don't trade well, you.
[00:06:15] - Agnieszka
Put yourself in prison sort of because you put that pressure on yourself. And what if then there is no trade?
[00:06:23] - Gary
I think there are so many reasons that contribute to people feeling that need to trade every day. Almost as if maybe people feel that if they're not trading, they're cheating.
[00:06:37] - Agnieszka
Right?
[00:06:38] - Gary
Or that if they're not trading, that they're not working hard enough. So people equate having risk on in the markets whether they're confident in that risk or not working hard. And that's not the case. You might be motivated, you might be doing as much research, as much preparation as you possibly can, but there's nothing in the market that strikes you as worth doing. There's no point in putting on risk, right? And by choosing to not risk, you're not cheating, you're not you're not failing to try. You're recognizing that there isn't a trade that makes sense, really makes sense for you to do. But I do think that we all get caught into this trap of thinking that you have to be trading every day, otherwise you're failing.
[00:07:29] - Agnieszka
And that's a big problem. That projecting that fact, whether you are working hard enough on who you are and your own self worth, because that is that connection that people a lot of times make. Like, if I'm there and I trade and I didn't make money, at least I feel like I've done everything I could. But that's false premise, because you have done basically everything that you have learned. That does not apply to trading just beater and putting hours in. Right. But it is not hours in necessarily placing trades. It could be hours of just watching the charts.
[00:08:16] - Gary
Exactly.
[00:08:17] - Agnieszka
The problem is that if you're sitting in front of the charts, the next thing you know is you start clicking the buttons. Yeah.
[00:08:25] - Gary
There's a tremendous temptation to try to immediately translate a thought or an idea that the chart gives you to immediate action.
[00:08:37] - Agnieszka
Right.
[00:08:37] - Gary
And as opposed to being more selective, because we probably all get loads of ideas over the course of a year. And looking at if you look at charts on a daily basis, I do, I do a run through of the charts every single day, without fail, sometimes twice. And you're always going to get hunches from that or ideas from that. But only some of those ideas, or maybe even a small percentage of them, are what I would call really actionable. Doesn't mean that you can't learn from them. You know what I mean? In other words, because the chart gives you an idea, it doesn't mean you necessarily have to do it immediately. It might mean that I see a process going on here. I see that silver may be bottoming. That doesn't mean that on Wednesday, July 5, you necessarily have to buy it. If you did buy it this morning, you'd be up some good money right now. But if you're looking at it thinking, god, this looks like in three months this is going to be could be a lot higher. Still doesn't mean you necessarily have to do the trade today. But it's on your radar now.
[00:09:44] - Agnieszka
Right?
[00:09:45] - Gary
Because it's on your radar, it doesn't mean you have to do it right away.
[00:09:48] - Agnieszka
Right.
[00:09:49] - Gary
I don't look at silver normally, it's not something I look at every day. So I don't just want to jump into it just because I happen to see something on the chart. I'd like to maybe play with it a bit, think about it a bit. That means that I might miss a little bit of the move, but I'd rather get into it when I feel like I'm ready to get into it as opposed to just, oh God, got to have this on now because I saw it on the chart and it looks great.
[00:10:13] - Agnieszka
It's just so interesting that in other areas of our life like imagine that you have some ideas about maybe buying something or maybe going somewhere, traveling somewhere or doing something, I don't know, building your own coffee table or something. Right. Do you also jump into all those ideas right away? Just start buying all the things that you are dreaming about and going all the places, booking your tickets you also don't do that. Right, that's a great point. Nobody's doing that.
[00:10:50] - Gary
Exactly. Can you imagine if you acted on every impulse that you had in your personal life, whatever about things you want to do to the house, with travel, with learning something new. I mean you'd drive yourself nuts.
[00:11:02] - Agnieszka
Totally.
[00:11:03] - Gary
You'd be doing 30 different things at once and you wouldn't achieve any of them.
[00:11:07] - Agnieszka
Exactly, yeah. Being selective, I think in life in general it's a pretty big virtue but it also gives you a certain peace and that is what gives you control. Right? Being selective, being in that position where you are actually making a choices. What is the best course of action for me at this particular moment? Not just because everything is moving and I'm going to jump into 100 positions because just everything is moving but thinking, okay, what makes me feel good to go into? I used jump on purpose because I always say if your head is telling you jump into something, you probably shouldn't do it because jumping by principle means very impulsive action. Right? Yes. Emotional. Yes, exactly.
[00:12:02] - Gary
Letting the emotion take over the process which I don't think is great and.
[00:12:09] - Agnieszka
It might be great if you can be spontaneous in your life but in trading in general yes. Not a very good idea.
[00:12:18] - Gary
I agree with that. See that's another I totally agree. That's another example of sometimes how trading can contradict the rest of your life. I agree with you. Spontaneity, generally speaking, is a good thing in life overall. But yeah, in trading it can be a real problem. Interesting to think about what makes selectivity hard for people? Why is it that people find it difficult to implement being selective? And I wonder if part of that might be that being selective means being able to accept that you could still get it wrong. Like if you're selective, that's not a guarantee that you're going to win, it might increase your chances of winning and then maybe people feel like, god, if I'm very selective and I don't get it right on those selective moments when I do take on risk, then God, I must really be a failure. But I would argue that that's not the case because if you're being selective and you get it wrong, you're probably going to have another chance. You'll have another chance to take risk.
[00:13:25] - Agnieszka
Right.
[00:13:26] - Gary
Whereas if you just take risk indiscriminately for 20 days in a row without being selective, you might run out of money, you might not live to fight another day, whereas with a selectivity you will live to fight another day. Yes, you might miss some trades that would have been winners by being selective, but I would argue that at least you live to fight another day if you choose to put a trade on and it doesn't work.
[00:13:55] - Agnieszka
One of the reasons why I think it is so difficult for people to be selective is because they don't have a very well specified object of their attention. Like what do they want? If I exactly know what I'm looking for, if I exactly know what it is that I want, I can be much more selective because I know the reason why am I selective? Right. If I don't know exactly what I'm looking for, how am I even going to do that selection? How am I going to say no to things that are not within the scope that brings me closer to what I want? And then the second part of it, I think, is patience.
[00:14:40] - Gary
Yes.
[00:14:40] - Agnieszka
And that has to do with how do you specify what is your expectations to get what you want and how soon, right?
[00:14:51] - Gary
I think that's huge. Being able to both on a sort of a micro level and a macro level, both in terms of, say, a particular trade, like not demanding that you get your reward within 1 hour. I mean, it might be something that you have to sit with for a number of days, possibly even weeks, maybe even longer, to get the real, real reward of that trade. And then the more macro thing is in terms of judging how it's going and assessing that you need a number of trades that you can't expect that after three trades, even if you had won on two out of the three trades, let's say, you can't expect to have that make a life changing difference. It's going to take this is a process, I think. I mean, people might not want to hear this that acts out in years, not in days or weeks or even months, right? And you have to be prepared to look at it that way. That you're on a journey that over a period of years that if you work at it, if you stick to the process, if you learn to try to do less of the things that don't work and more of the things that do work, I think over a period of years, you are going to get the reward from that.
[00:16:13] - Gary
But you said, do people have the patience to wait for that? Do people have the patience to even wait for an individual trade to give them the reward that they might be able to get from it? Or are they just happy to say, oh God, that's an okay profit, I'll take it off. Meanwhile, maybe they could have made double the amount if they kept part of the position on but it's the lack of patience it's the wanting to solidify it right now, like the desire for the certainty. And maybe it's the desire for self praise to be able to say, yes, I made some money, I'm going to pat myself on the back.
[00:16:50] - Agnieszka
Yeah. Because of that self worth. Right. It says something about you, what you were able to achieve, and you want to do it sooner than later, especially if there was a long period of time where that wasn't the case when you were failing. So now you have this urge like, okay, I finally want to feel good.
[00:17:10] - Gary
Like the need for self validation, if you like, through a positive trading result.
[00:17:16] - Agnieszka
Yeah. And self validation through trading is kind of lost battle because you see the difference between how we get self validation from other from a job, for example, is not through money. We know we will get money if we do a good job. Right. And there's so many researchers done that actually money is not a good motivator. That pat on the shoulder from your boss is much more powerful than getting a raise because the money eventually will fade. The value of the money in trading, it is so difficult for people to disconnect it. They really see themselves valued depending on how much money they make.
[00:18:02] - Gary
I agree.
[00:18:03] - Agnieszka
And I see it many times that when you have big profits, you feel invincible. You'll feel like a king of a castle. Right. And it's like, oh my God, I made it. And then there is a one week where it's not going well. Then your whole world collapses. And that's such a if you cannot let that go, if you cannot let go of that connection, it's going to be very difficult to work like this the whole life. Do you want to feel like this right when you trade for living?
[00:18:48] - Gary
Yeah. If you require that dopamine hit every day. That is a problem. Because you could have a whole week, even if, let's say, you had a very good period where you had, let's say, two weeks where you did very well, and then you had a third week where you just really didn't have any ideas and you did very little. I think for some people, the risk is that they view the third week where they do very little as a failure.
[00:19:18] - Agnieszka
Right.
[00:19:19] - Gary
Because it's not that they lost money, but they feel a sense of failure because they didn't make money.
[00:19:25] - Agnieszka
Right.
[00:19:26] - Gary
And I think there's a big difference between not making and between actually losing. Once you lose money, you've got to recover that just to get back to break even. And I think sometimes people underestimate that that's easier said than done. It's very easy to say, oh, it's only a little bit, or it doesn't really matter. But if it if it starts to add up, you get to a point where you have a lot of work to do just to get back to flat. And that's why I think it's perfectly fine, whether it's following two bad weeks or two good weeks, to have a week where you just don't do much. If you don't really have something that warrants putting on risk for, you can't put on risk just to meet the daily expenses of trading or living expenses. I think that's something else, maybe that people have to bear in mind. I know that people will feel pressured. They'll think, okay, I've got utilities, I've got subscriptions to pay for, I've got charting systems, I've got brokerage, all this stuff. And if I don't make, then I'm not coming up the money to meet those expenses.
[00:20:44] - Gary
But if you think of it in those terms, I think you're putting additional pressure on yourself could lead to a bad outcome.
[00:20:53] - Agnieszka
Definitely. Because pressure in general, I mean, there is enough pressure in trading. Right. And putting pressure, financial pressure on yourself, it takes your focus away from the process.
[00:21:06] - Gary
Absolutely right.
[00:21:07] - Agnieszka
You cannot perform well when you are thinking about just the end result and whether you will make money or not. And it's just so interesting because that whole money part in trading, I think that's like the most tricky part. People forget that the focus can be not on trading for money, but just trading with money. There's such a big difference. Yes, we are trading with money that is the product of that business, but that doesn't mean that you need to focus on trading for money.
[00:21:41] - Gary
Yes.
[00:21:42] - Agnieszka
It just gets kind of meshed up together and people cannot take that separately because you see, in other businesses, a lot of times we do make decisions, okay, I'm going to work for this company because my values agree with that and the way I feel better about myself working for a company that protects the environment. Right. It says something about my value. So now when you are working in the market and you're working with money, that connection to that personal value is also made. That is what makes you value yourself based on the money you make. Because there is simply nothing more. You cannot say, oh, my trading company saved the world or saved the dolphins. Right. Now I feel better. No, you automatically connected to how much money I make. And can I feel better now because I did the good thing with my company? And you're absolutely right. That's the part that people forget and they need to remind themselves continuously, because if you keep thinking like that, it's going to be really hard to come back and actually focus on the process.
[00:23:03] - Gary
Yeah. I think there always has to be such a clear distinction between process versus the result, and that if you're following your process and it's a reasonable process, it's okay if you have a negative result, it's not a bad trade if you followed your process. Yes, it's a bad trade if you don't manage your risk properly. If you didn't execute your stop loss when the market reached that level, or if you knew you were putting the position on at a time when it probably was a bit too risky to do. So, like, you know, you're not going to want to have a position on into the FOMC meeting, so should you really be putting a trade on the night before the FOMC meeting? Because you know, the market's probably not going to move that much anyway. Even if you're right, things like this, are you following your process, number one? And number two, is the process good enough now? There's two different questions. I mean, I think following the process is absolutely fundamental. You have to do that. And then the other aspect is just evaluating the process over time. I mean, if something hasn't worked 27 out of 30 times, then fair enough.
[00:24:37] - Gary
Then at that point I think you can say, all right, this isn't working. I either have to do less of it or stop doing it completely and analyze why. But if you're making money five out of ten times doing something, the other five out of ten times you're losing, that's not necessarily a bad thing. If you're following your process and the times when it's not working, you're quick to minimize the loss.
[00:25:05] - Agnieszka
That's fine.
[00:25:06] - Gary
But I think so often there's a temptation to look solely at the result and kind of undervalue the process. I mean, if you have put a trade on and managed the trade properly from start to finish, even if you haven't made money, it's not necessarily a bad trade because you lost money on that trade, right? If you put a trade on that was in clear violation of your process because you reacted to something emotionally and you happen to make money on that, that actually might be a bad trade even though the result is positive.
[00:25:44] - Agnieszka
And then you can start measuring, like, how many of the real bet trades are you making and how many times you made a good trade and it doesn't work because then you can start actually looking at yourself as a trader from a very different perspective. Right. I was really curious about what is your take on back testing, because I know that in general, it is being said that you need to have at least a sample of at least 250 trades. If you back test, what's your take on it?
[00:26:17] - Gary
It's funny that you mentioned it's almost like you read my mind, seriously, because I think it's good to give something a certain period of time. And maybe you could say maybe in test mode, if you like. You can either do that by just doing it on paper and not putting real money into it, or another way to do it is just take very small positions and try a method out. The problem with giving with real money, it's difficult to give something 250 times because if you get it wrong, 200 times you might run out of money, right? So I think at some point you have to place a limit on it. But I think it is really useful to, in your own way, come up with a method of back testing. Some people will do it in a very sort of traditional way with algorithms or software or whatever. Other people might choose to do it an old school way, just keeping a journal. I feel like I'm constantly doing that. I'm always doing that because market conditions change and things that work well in volatile environments might not work well in quieter environments and vice versa.
[00:27:40] - Gary
So to me, it's almost like as you're going through your trading, especially if something isn't working that well, I think it is good to sort of back test it at that point. Maybe stop doing it with real money. Do it on paper. If you want to continue doing it, do it in much smaller size. Keep track of it and be honest with yourself and say, okay, out of the last ten times, how many times has this worked? And if it's not working, try to identify why. Is there a reason why something that you think should work isn't working? What am I missing? What piece of the puzzle am I not taking into account? Is it simply that this strategy isn't appropriate to current market conditions? Or is it something else? Is there something that I'm completely overlooking that might prevent me from taking these sort of trades? I also think there's nothing wrong with using a back testing process to decide and say, you know what, I can't figure out why this isn't working. But the bottom line is it's not working, right? Whether I can figure out why or not almost isn't that important.
[00:28:54] - Gary
Fact is, it's not working for me and it's okay to stop doing it.
[00:29:00] - Agnieszka
And we are back to doing nothing. Because that's exactly the moment when you should stop and actually take a step back and start looking into how am I going to fix this problem? Right? Instead of doing more. Because that's the very first reaction. Something is not working. I'm just going to put more work into it until it's working. And that's where people start losing their accounts.
[00:29:27] - Gary
How about this? I mean, look at it this way. Almost like fear of doing nothing. In other words, if you stop doing what's not working, all right, then that's going to mean you're going to go through a period where you may have to do nothing until you find something that you feel will work. And I think people have discomfort with the uncertainty of that. In other words, what does that mean? Does that mean I can't trade for a week?
[00:29:53] - Agnieszka
Exactly.
[00:29:53] - Gary
Does that mean I have to stop trading for a month? I can't do that. I can't stop trading for a month. It's not only the bills that I have to pay. It's the psychology. Yes. It's almost like saying you can't have ice cream for a month, right? People don't want to hear that. And it's the fear of the unknown, the lack of certainty.
[00:30:13] - Agnieszka
I love what you said, fear of doing nothing. I think this is like a viable fear because it's like, you mean, I'm not going to trade, so I'm not going to make money. And then I say, yeah, but you're also not going to lose money.
[00:30:27] - Gary
And what does that do to your feeling of self worth if for a period of time you're doing nothing, are you then devaluing your self worth during that period when you're doing nothing? I mean, I think it's a mistake and sad if people do that, but I think that's what's happening totally.
[00:30:45] - Agnieszka
I think the need to be useful is so deeply ingrained in us. Like, I need to be useful.
[00:30:53] - Gary
Yes.
[00:30:53] - Agnieszka
And people forget that just by living, you are already useful because you are contributing to the society. Just by being there. You are useful, you have a role. And especially like if you have a family, there is always a role that you are fulfilling and for yourself too, because if you are doing nothing, you giving yourself rest. And that's very useful. Useful to your mental state, useful to your body taking rest. Right? So you actually letting a lot of processes that normally when you are going like crazy, trying to do a lot of things, trying to work, like machine and stressing yourself out about losing money, about have to have a trade now you're giving yourself that moment where your nervous system can actually finally recharge and recoup.
[00:31:52] - Gary
I think having the opportunity in periods where there's less obvious trades to do or where you don't have, where something isn't immediately hitting you that you should do in the market. I think people sometimes underestimate how valuable that could be in terms of just like making sure that you're taking advantage of that to exercise, to look at other aspects of your life that you may be neglecting slightly. That is an advantage of having that period where there are no great trades to try to do, right? Look at your diet, look at your exercise, your sleep, whereas when you're just wrapped up, I think in robotically trading, whether it's working or not, I think there's a tendency to neglect these other areas of your life yeah.
[00:32:46] - Agnieszka
Which are, by the way, having that opportunity to do that and having that freedom is the reason why people step into trading in the first place. So just start living it already, right? Don't wait until you make it because those parts, like the moments that you are taking off from trading when there is no opportunity actually helps you to achieve your goal much more than sitting there and over trading right, and accepting it. That this is part of this job will give you also more freedom, mental freedom and more. Feeling that you are actually making it. Right. I know there's this whole term to make it because it's not really like one point in time. If you want to trade for a living, start living a trader's life. And that involves not trading all the time.
[00:33:45] - Gary
Exactly. I think there's a big element of thought, just pains me of ego in this. In other words, being able to actually say I don't know which way the market's going to go today.
[00:33:57] - Agnieszka
Right.
[00:33:58] - Gary
I can make a good case for it to go either direction. Honestly don't know. But I think ego prevents a lot of traders from saying that to themselves because the thought process is that oh, I'm supposed to always know where the market is going to go every day. Well, maybe if you're working in a bank as a market maker, that's what sort of drilled into you. But if you are a professional trader or somebody trying to trade for a living or whatever, and you're not working for large financial institution, it's impossible to pretend to know where the market is going to go every day. But the ego, I think, makes us feel like oh, if I don't know where it's going, then I must be stupid, right? I must be thick if I can't predict where it's going.
[00:34:44] - Agnieszka
Yeah, I'm supposed to know.
[00:34:46] - Gary
Exactly. Bingo. That's a great way to put it. I'm supposed to know and if I don't know, I'm a loser. Yeah, how silly is that?
[00:34:55] - Agnieszka
I know.
[00:34:55] - Gary
I think it's so important to be able to admit and say, you know what, I can't call it here, I really can't call it. But I think people have a hard time being able to look themselves in a mirror and admit that to themselves. Nothing wrong with it, to not know where it's going to go.
[00:35:12] - Agnieszka
It's part of letting that control go.
[00:35:14] - Gary
Exactly.
[00:35:14] - Agnieszka
Accepting that you don't control the market and all you can do is just follow it, defining the direction. It's nothing set in stone because it might go your way, the way you think it's going to go for a while and then it might going to turn around. So are you now right or are you wrong?
[00:35:33] - Gary
Exactly. If you were right for 3 hours and then it starts to reverse, are you then wrong if you've still held the position right as opposed to if you were right for just 14 hours straight? Exactly right.
[00:35:51] - Agnieszka
Yeah.
[00:35:52] - Gary
It is a moment in time.
[00:35:54] - Agnieszka
Funny thing is that or maybe actually it's not really funny, it's pretty sad that the ego will always pick up the side of trying to criticize you. So even if you were right for 3 hours, it will know to turn around the story to tell you that you were not good enough and you haven't done the proper job to identify the direction of the market.
[00:36:17] - Gary
And that's negative feedback, it's negative self talk and this type of thing I think is to be avoided like the plague. It's really counterproductive. But I think, as you say, I think it's unfortunately, it's kind of like human nature in a way. But it's something that we have to try to fight to try to counter because it's going to hold a traitor back having that sort of tendency to always be self critical, right.
[00:36:51] - Agnieszka
One of the reasons why people like to be always busy is because the moment that you are not that you are doing nothing and you actually sit there and observe, that's where all the thoughts are suddenly visible and all the thoughts are coming into your head. When you are busy, it's much easier to push them away, right. Because you're just doing something, right? So you're not that focused on your head. And that's most of the time where people start doing and doing and doing and doing thinking. This is actually helping me. The thing is with the thoughts is we cannot release them if we don't let them. Like if we don't acknowledge that they are there, we are just pushing them away. That's resisting and they're still there, it's just that we don't want to see them. I like to compare thoughts to the clouds and they're just passing by through your head, right. Your brain is that tool we have that kind of reads the thoughts. So if this thought is coming up, it doesn't mean you have to do something with it, you have to hang on to it. You can just look it as a cloud, it's passing by and it's up to you what you do with that.
[00:38:12] - Agnieszka
But if you are pushing it away when it's coming, it didn't go away, you just put the block in front of it and say, no, not now. So this thought is kind of circling around and waiting for you to release it. So don't be afraid to do nothing and to let those thoughts come, even if you don't like those thoughts. But you will at least have this experience that you don't have to do anything with the thoughts and that you are not the thoughts that's I think the biggest part of it. You are not your thoughts.
[00:38:48] - Gary
I agree with that. You mentioned talking about being busy or the concept of being busy. I wonder if sometimes people fear never being busy again. In other words, it's the fear of like oh, if I'm not busy now, does this mean that I might never be busy again? And it gets back to the which of course is irrational. But it's that fear. It's almost like the fear that there will never be a good trade again. As if this is it, I got stopped out, I took a loss and God, it's going to be six months before I see another.
[00:39:25] - Agnieszka
And again, it's not rational, right, because 2 seconds later you're in another trade.
[00:39:31] - Gary
Exactly. I mean, the power of fear, I think, can't be underestimated and unfortunately, like the negative power of fear that if we don't manage it well, it can really lead us down terrible rabbit holes. Something else I just wanted to touch on before about just this whole concept of doing nothing is that there's a difference between failing to take a trade that you should take. In other words, your process says that you should take it, and for whatever reason, you choose not to. You get cold feet, you get nervous, and you decide not to take it. So you do nothing. That's different than consciously choosing to do nothing because you don't see any value in the market. You don't see any good trades to do.
[00:40:24] - Agnieszka
That's a very good point.
[00:40:26] - Gary
When we talk about doing nothing, we need to distinguish between doing nothing as a conscious choice, that's process driven, or doing nothing as a result of not following your process.
[00:40:40] - Agnieszka
Right.
[00:40:41] - Gary
Two totally different scenarios there.
[00:40:44] - Agnieszka
So how do you do nothing? What do you do? Do you do something when you do nothing?
[00:40:51] - Gary
I think the way I look at it is this. I mean, for a start, the charting helps. Making sure that, especially in quiet times, that I do a really solid run through of all the markets that I look at, across asset classes, and I don't look at 100 or anything like that. I probably bet maybe 20 instruments in total that I look at. But I look at them on different time frames, like quarterly, monthly, weekly, daily, four, hourly, just to get a sense going back in time about what the bigger picture is and then taking it all the way up to what's going on right now. And I always feel that when I'm doing that, even if the market's quiet, I don't have any active trading ideas that I'm kind of getting prepared. In other words, it's like doing my stretching. In other words, it's getting me ready for when something does happen. Either a level is reached or a level is broken, or doing this sort of preparation. The other thing is more like fundamental research, like just listening to podcasts, reading research, not everything. Again, being selective about it, finding things that I find help me, like commentators that make me think of things that maybe I overlook sometimes, making sure that I understand what's going on in the market.
[00:42:22] - Gary
And I think that quiet market, when you're not actively trading, it's a wonderful time to do that, right? You can maybe read something with a bit more attention. You can maybe listen to a podcast or webinar and not be distracted. You can be a bit more fully focused on it. So basically, long winded answer to your question, how do I do it? How do I do nothing? I try to increase my knowledge base whilst I'm waiting for my next trade idea to come. Just keep increasing the knowledge base, what I know about what's going on, even try to improve my understanding of things like why yield curves get inverted and what that means and why if an inverted yield curve means a recession, well, how come we're not in a recession now? Where's the recession, right? Just trying to improve a little bit each day in terms of overall market knowledge that might help me in terms of putting on positions and looking at that as a win. In other words, not saying, oh shit, I haven't done any trades today, or I traded in a flat or a little bit, lost a little bit.
[00:43:35] - Gary
Not looking at that as like a defeat saying, hang on a second, I might have learned something today. I might have picked up some knowledge or a way of looking at the market that might help me going forward. And another thing I would add that I haven't mentioned so far is the human behavior aspect of this, which is where, frankly, people like you come in, like, hang on a minute, there is this human behavior component to this. What am I doing? Am I helping myself get the best out of myself, often trading and otherwise and kind of allocating some time to that, like listening to podcasts from people like yourself and questioning and taking a little bit of time to say, okay, am I doing things that are making it myself more productive or less productive? And if not, what needs to change?
[00:44:28] - Agnieszka
Right? And that is actually a really great way to give that feeling to yourself of I am growing as a trader, right? Yes, because you increase your knowledge as a trader. So you grow as a person, as a trader without connecting it to the end result of how much money I made. Because knowledge has so much more value than the nominal value of the money you make. Because if you are really growing as a trader, your account will follow, especially if you do that in the time where you should not be trading, right? Because now you're spending really actually the time that you have allocated to trading on something that's very valuable. And I think when you are in that moment where you are not trading and you start journaling your thoughts, your emotions, what is going through your head, what is going through your stomach, what feelings do you get, what urges, what fears. If you start writing that down, you will start discovering patterns that are pushing you to take trades that you shouldn't be taking, that you will start noticing how you talk to yourself and that will give you that different perspective of, oh, okay, is this really what I'm doing to myself?
[00:46:00] - Agnieszka
Because you might start noticing some ruminating thoughts and noticing that it is actually most of them are not true, that they are not in line who you are, but they do make you feel bad about yourself. So that's a very great suggestions and ways for the listeners to implement into their trading. So thank you for that, Gary.
[00:46:24] - Gary
You're welcome. I think yeah, just trying to have a mindset of growth and having confidence that over time that will yield rewards versus what I would call a mindset of desperation and lack of patience, where you're looking for it to just happen the day before yesterday. And I think you and I, the last time we had this discussion, it's no different than a human relationship.
[00:46:53] - Agnieszka
Right.
[00:46:53] - Gary
The same thing, if you're approaching it from a mindset of it has to happen right now with desperation, I would say that by default, it's not going to happen. You're going to prevent it from happening. And I think it's hard for people sometimes to accept that.
[00:47:11] - Agnieszka
And you know, the reason why that happens is and a lot of people don't see it because when you push something, you put so much force to it that you push it away from you.
[00:47:26] - Gary
Exactly. I totally agree with that. And it gets back to what we began the conversation with, where this sense that we are programmed from a young age to think that action equaled good.
[00:47:39] - Agnieszka
Right.
[00:47:40] - Gary
Taking action equals being proactive. You know what I mean? We're taught that sitting still is not a good thing. I think that, unfortunately, that affects people's trading, and it all affect their human relationships. Try too hard to make it happen as opposed to allowing it to happen. That can get you into trouble.
[00:48:06] - Agnieszka
Totally.
[00:48:07.] - Gary
But again, that comes from having faith in the process over time. In other words, not being desperate to see the result immediately. I mean, I've watched different type of podcasts on trading, psychology and human behavior, and I can't tell you how many times when I hear seasoned veterans talk, they talk about making progress over a period of years. It's very rare that I hear somebody talk about their history, either recent history or further back, where they just say, oh yeah, it all happened in three months. Within 90 days, I was a genius. Generally speaking, people define their progression and getting to a stage where they felt confident and confident in years. Not like one or two, like three, four, five all the time I hear this, but I think particularly in the world that we live in, we live in a one click world where information is transmitted in a nanosecond over social media and whatever. So our expectations of time and our expectations of processes have sped up enormously. We can't compute something taking two, three, four. We can't compute that we want to see it now.
[00:49:32] - Agnieszka
Right.
[00:49:33] - Gary
And I think that's more the case in 2023 than ever. And it's a function of technology, and we have to all learn to come to grips with that psychologically.
[00:49:44] - Agnieszka
It's interesting that you said it, because recently I spoke to one of the traders and we were talking about his readiness to go over to trading for a living. And the discussion went on not necessarily the technicalities of trading or how well you can trade, but it is more how ready mentally you are to make that step. How ready you are to actually acknowledge that you will have to take responsibility for every single action you do. You will have to take responsibility for exist in that moment of insecurity and also perform in that environment. Right. Not knowing if you are going to bring money this month, that's a huge step, mental step that you have to make because you might be for three months consistent and then get this idea, okay, now I can trade for a living. But then you step over and suddenly things are going completely different than they were before, just because mentally you cannot handle that pressure. And I think it definitely takes long time to make that switch. To become aware of it is one. But then to accept it and be willing to practice it, because it's a matter of building emotional immunity to stress, to risk, first of all.
[00:51:23] - Agnieszka
Right, and making sure that you are building that immunity in stages and not immediately take a huge risk and lose a lot of money and hurt yourself because now you are even further away from where you wanted to be. So yeah, it definitely takes time.
[00:51:39] - Gary
What a great phrase, emotional immunity. I love that desire for certainty. That's something I think people need to try to conquer. Like what you were just saying, accepting that, okay, you've had a couple of good weeks or good months, but that doesn't necessarily mean that the next month is going to be a successful month. I mean, take for example, summer month. Summer trading is very different from the rest of the year. There are some people who struggle with it and there are some people actually do quite well with it, right? So that's a perfect example where you could have a period where you do well and then because of that you think, oh, okay, I'm entitled to this. The plane is up in the air and there's never going to be any turbulence.
[00:52:28] - Agnieszka
That's a great comparison.
[00:52:32] - Gary
September, October comes around and the character of markets changes a bit and all of a sudden you're finding it harder to make money. And you thought that you had the ability to cope with the uncertainty down pat and then you realized that you didn't. So you're right. Accepting the permanence of uncertainty is different from you actually being able to implement that day after day, week after week. It's one thing to think it, it's another thing to actually do it right and not get crushed when it's going well and all of a sudden it stops going well.
[00:53:16] - Agnieszka
Yeah. And I think the one measure of it is how easily are you of your piece when you lose, right. If you are still in a stage where you feel bad about yourself when you are losing, then you are really far away going full time trading, because then you're definitely not immune to losses. Right. You are not immune to your result. And if you have that, it's going to be constant up and down and you will just wear yourself out emotionally. So there are different stages where you can notice, okay, I'm actually not being influenced whether I had a green or red day and I can just go and have my dinner and still enjoy the rest of my day. I can go a step further. Right. But if you want to go from A to immediately to Z and to make that switch and say, yeah, you know what, I've been trading now for two years, I think I'm ready, without making that journey, because it is a journey. And some people maybe make it faster, maybe they are emotionally, I don't know, more prepared for depending on what they live through in their life and how they release their emotions.
[00:54:38] - Agnieszka
I know that some people, they are much easier accepting what's happening and letting it go easier. I like to compare it to growing a plant. There is only so much you can do. You can give it water, you can give it good dirt, you can fertilize it, give it sunlight, but then you have to wait.
[00:54:59] - Gary
Exactly.
[00:55:00] - Agnieszka
It will not make any sense if you stand on top of it and scream to it to grow faster.
[00:55:05] - Gary
Exactly.
[00:55:06] - Agnieszka
It's not going to happen. So that's the same with trading. You can do all the things in your favor, but then the process has to take over and you have to give.
[00:55:18] - Gary
Yeah, there needs to be a passage of time. And this has come up in some podcasts that I've seen over the years where people think that they can condense. That like in reading a book where everything makes sense, the concepts make sense, and you've read the book and say, you know what, I'm going to implement this and really make sense. The implementation takes time. And the implementation doesn't happen just in the week or two weeks that it takes to read the book. It's about everything that happens afterwards.
[00:55:58] - Agnieszka
Right.
[00:55:59] - Gary
And as you said, there's no set formula. Some people need more time than others. But no matter how naturally it comes for everybody, even people who have a natural skill in trading, I think that it's a process. And it isn't a process that's completed just by reading a good book.
[00:56:18] - Agnieszka
No, totally.
[00:56:19] - Gary
That's like just 1% of the process.
[00:56:22] - Agnieszka
Right.
[00:56:23] - Gary
I mean, that's just kind of like the trail map that maybe points you in the direction of where you're going. That's just the beginning. I think people's expectation sometimes is that, okay, if I watch some webinars, read some books, that's it, I'm done, it's going to happen. But until you actually trade yourself and work on applying all this, it's in the application of the concepts, I think, to your own situation, your own set of circumstances. That's where the progress is made. Not just in reading about discipline, reading about controlling your emotions.
[00:57:04] - Agnieszka
Right.
[00:57:05] - Gary
You have to do it in real time and experience the ups and downs from that and try to learn from the downs in particular.
[00:57:15] - Agnieszka
Yeah, because it will always come back to you as a person who you are and how easily can you act in your best interest.
[00:57:26] - Gary
I've heard one trader in the market describe trades as sort of like capsules of information that he's being given after there's a winner or a loser, that there's something to be learned from. In every situation. Did I follow my process? If it didn't work, why didn't it work? Things like that. So there's something yeah. Obviously, none of us wants to have a lot of consecutive losing trades. But when you have losing trades, there is information begotten from that that can potentially help you avoid that in the future, whether it means that you have to change your strategy or maybe take a look at your process and look at it as something that can be learned from, rather than just saying, I lost money on this trade, therefore I'm a loser.
[00:58:25] - Agnieszka
Right. And the interesting reaction to that is when that happens, instead of looking at that particular mistake or at that particular period going through the process, going through what you were thinking and how did you act to the impulses from the market? Many traders skip that part and they go to YouTube and start watching just kind of some random webinar about how to trade. Right. Or some other strategy. I'm like, but wait a minute. The real lesson is there. You already paid for it because you took a losing trade, so you paid money for it, and now you go and start watching some random thing. That's not what you're going to learn about what just happened. You might learn something different, but not what you just pay for.
[00:59:13] - Gary
Yeah, that's where getting back to what you mentioned before, that's kind of where back testing comes in and observing what happens and almost observing, okay, why didn't I not see? Why did I not foresee what happened in the market? Or why was I unable to recognize it in a more timely fashion and actually learning from it?
[00:59:43] - Agnieszka
Right. Things are happening for us and not to us. That's how I like to look at things, whether it's in life or in trading everything what happens. It's a feedback. It's a feedback. It's some information that we are receiving. And if we don't use that, we will get another lesson. That's just my very personal belief that if I don't get a message, if I don't learn from the experience, I will probably get an experience that the universe will give me and say, okay, I assume you haven't noticed the lesson I just gave you. Let me make it more clear. And the experience would be just much.
[01:00:27] - Gary
Stronger spot on I so agree with that. If you're not willing to at least acknowledge the feedback that the market's giving you, then you're setting yourself up for a problem. You have to listen to the message. Not to say that you necessarily have to change everything all the time and just on the basis of one or two bad trades, but if you're being given a message, I agree with you, it's important to heed that and not discard that and not just say that, oh, the market's wrong. They just don't see it the way I'm seeing it. Yeah. I think that's so important to when you're given a message, acknowledge it, not need to repeat the same mistakes over and over. Getting back to what you just said about watching YouTube videos, this sort of thing, I think it's really important for people to make knowledge their own. In other words, rather than just watch something and say that, I'm going to duplicate what this person's doing is to find a way of making it your own. And that might mean only implementing parts of what you've heard rather than the whole thing.
[01:01:44] - Agnieszka
Right.
[01:01:45] - Gary
In the end, it has to work for you. In other words, nobody can create a master plan of trading for you. You ultimately have to do that. You can get some knowledge, you can perhaps get some guidance, but in the end, you ultimately have to make it your own. And I think sometimes there's a tendency for people to think that, well, if I just follow rigidly to a T what this so successful person is doing that I'm going to succeed, and I don't agree with that. I think you have to, in the end, come up with your own sauce if you like your own recipe.
[01:02:22] - Agnieszka
Right.
[01:02:22] - Gary
You can take guidance from people, whether it's people dealing with trading, psychology, human behavior, technical analysis, but you ultimately have to make your own dinner.
[01:02:33] - Agnieszka
Yeah. Because that's where the confidence will come from. You have to understand it on a deeper level. You have to understand what you're doing and why you're doing it. And that is also the part that requires time, because when you just start trading and someone will tell you, yeah, you have to make it your own, you don't even know where to start. Right. It kind of all starts clicking and making sense and becoming yours while you're doing it. Because now you start understanding, oh, this style doesn't suit me. This I don't really understand. Yeah, I put all these lines on my charts now I don't see the candles. You have to kind of give it time and give effort to understand what's yours, who you are as a trader, because you are forming yourself as a sort of a new person right. In life, just like every actor has its own character, you're becoming a trader with your own character and your own strengths and the way that you will be expressing yourself in the market.
[01:03:39] - Gary
Absolutely.
[01:03:40] - Agnieszka
I think that this was such a great discussion. Is there anything that you would like to add?
[01:03:48] - Gary
Give you one final thought that relates to what we started with this whole idea that actually that doing nothing is okay. We all are familiar with the word FOMO, but I think there's a particular type of FOMO that really gets people and can lead to them having difficulty just doing nothing. And that's the fear of not being involved when a market absolutely takes off and rockets right nvidia did not that long ago, especially when it's something that might not be logical, that might not be a lot of sense. And I think being able to deal with those feelings is important, because if you don't deal well with those feelings, I think it can be very costly if you act on the fear of, like, oh, God, I'm going to feel like such an idiot if this market goes to the moon and I haven't managed to catch that move. I don't think it's necessarily so much people fearing an intraday move. Of course we don't like missing an opportunity to make money intraday. But I think where people are particularly sensitive, seeing a market just move big over a number of days or weeks and then feeling like an idiot for not having caught that and then maybe doing something afterwards that they shouldn't be doing to make up for it when they would have been better off doing nothing.
[01:05:33] - Gary
In other words, accepting that you can miss big moves, it's not a crime.
[01:05:40] - Agnieszka
It doesn't mean there will be more.
[01:05:43] - Gary
But if in response to missing a major move, you break down emotionally as opposed to doing nothing when you should be doing nothing, you're then going to set yourself further behind. So, yeah, my closing message would be don't let extreme FOMO sabotage your emotions and bear in mind that there are situations, many situations, where doing nothing is actually the rational choice.
[01:06:13] - Agnieszka
Right.
[01:06:13] - Gary
And the right choice. The right trade.
[01:06:16] - Agnieszka
The right trade. That's very well. Very well said. Well, that brings us to the end of this episode and thank you so much, Gary, for joining us and for this conversation. I think it was very inspiring and I love talking with you and exchange the ideas, especially with your experience as a professional trader and now trading for yourself for so many years. I think it is just so valuable to hear your thoughts because a lot of times we look at traders that have been trading for many years and we think they don't struggle with anything, that it is also easy cake for them. And I think this is so good to hear from you that it is basically for everyone challenging and it takes time and you just have to give it time, give yourself fair chance to succeed.
[01:07:10] - Gary
Thank you so much for having me. Pleasure talking about all these things you came up. With a lot of really good ideas and you kind of spurred me on to think of some other things. So very wonderful hour or however long it was.
[01:07:29] - Agnieszka
Nice. Very nice. Well, I hope that this will help traders who are listening to gain some perspective and also have some compassion for themselves because it is really so important that we are taking care of ourselves, give ourselves love and compassion. Even though trading might be the harsh job of trading money and very hard market environment. But it is all really about yourself and how you treat yourself, how you take care of yourself so that you actually can come back every day and perform on the highest level possible. So thank you so much for listening to the podcast and if you enjoy my show, please rate it and review it on Apple podcasts and be sure sure to subscribe so you can come back for a real life conversation in the next episode. Until then, this is Agnieszka Wood from Ahead Coach. And don't forget, you too can realize your dream without losing yourself and your confidence in the process.
____________________________________
✉ Contact me: launchyourlife@aheadcoach.com
____________________________________
▶️ My website: https://www.aheadcoach.com/
▶️ Twitter: https://twitter.com/Ahead_Coach
▶️ Facebook: https://www.facebook.com/agnieszkawoodpage/