Beginner Blog Series - Craig Sanders - Heads or Tails?

Hello Traders.

After a brief pause in the beginner blog series last week - due to me having email issues! - we are back with Craig's 7th post.

I can still actually remember the email he references in this post coming into my inbox. And I am delighted he managed to figure a way through his issue!

I hope you're all having a great trading week.

James Orr

HEADS OR TAILS

I’ve been going over the whole of last year in my head and looking back over some of my past screenshots, showing some of my successful trades and some not so successful trades, also my diary notes and even diary scribbles.

I came across a few different scenarios and various struggles and have decided to pick one out randomly and go onto explain it in a little more depth as well as mention the ridiculous method I chose to use to overcome the problem at hand during that particular time and maybe it could be applied by someone going through difficulties after reading this post. Be warned it’s a tedious if not obvious activity I chose, yet effective and it worked for shifting my mind back to a healthy state and moved me forward to continue my trading today. Regardless of what it takes and how silly it may seem, it’s all about SURVIVAL (makes me feel better about myself anyway)

Prior to coming up with this method I’m about to explain, not to mention how insanely weird it actually felt doing as I recall and smile thinking back – “yes Craig you still did that, move on” …  The method was yet another outcome from my many experiences with different losing trades and different emotions.

So, back last year during this particular time above there was a period of me going well for over a few months or so, losers and winners but more importantly my equity was increasing overall. I actually still remember the feeling of joy, the feeling of maybe I’m different from the majority, a sense of individual success. I even recall contacting James via email and blurting out in words but trying to act calm and collected at the same time as though I wasn’t really fussed but really I was excited to say the least and wanted to talk to someone.

‘I’m Struggling to accept the same % for both months but it seems true to the decimal which is odd. I’ve checked my figures and they seem fine.

(This was me being over confident and explaining that both months were the same, + 6.7%)

Reading the above statement today makes me cringe! I guess it’s normal, I guess its natural when one is doing well to only but feel confident in one’s own ability! I actually wrote much more within the email, I guess it was just my way at the time to inform James of how well I was doing. Like showing a teacher how good and how fast you understood them in class! If only at that point then I could have foreseen how the following month would have played out and how my mindset took a dive for the worse, would I have felt differently and acted differently in my approach to the losses I was about to embark on.

The graph below is the result of the month following on from above.

It’s very clear to see the reversal in not only my trading results but also the reversal in my mindset. This all started off from a few losers stacking up on top of one another and eventually causing a shift in my thoughts, leading to negative outcomes, over and over again! The thing that made it even harder was the fact that I was well aware of the downwards staircase I was creating but yet felt like I couldn’t stop it. Obviously, I could have halted my trading and in some situations wish I had of done before continuing on. However, continuing on lead me to that activity I decided to then try.

So, it became apparent after looking back at my results and acknowledging I was doing something wrong somewhere. It was either my technical ability, my mindset skills or even both combined. I was hypnotized by my downward equity loss and feeling disgusted, yet It was an ongoing feeling of disappointment from the start of the losing month through till the end of the losing month.

Then came the realization that it was clear I was not correctly working in probabilities nor did I fully understand or better to say, was ignorant to what exactly working in probabilities fully entailed. I found this difficult to accept about myself at the time and I remember thinking... ‘You dickhead Craig’. It was clear I was placing so much emphasis and emotion on trying to be in control of each individual trade that I had completely forgotten what the meaning of probabilities fully meant! Sounds nuts hey? Somewhat stupid even? I know, I know, I guess I had got so caught up with feeling a success on demo for months on end previously with no emotion due to it not being real monies traded, to being over confident, then having a few good months transitioning over to a live account and then BOOM – REALTY CAUGHT UP WITH ME

I ended up reverted to YouTube and other endless sources of material based on mindset and thinking in probabilities and realized that in order to rectify these mistakes I had been making then I needed to fully understand and start acting in the correct manor or else trading could never really take off for me.

Then it came to me, super simple but damn was it affective! I needed something quick sharp and I knew it needed to be a repetitive process in order to drive it into my head as quickly as possible and for it to stay there and digest!

HEADS OR TAILS CRAIG?

I went shopping for a whiteboard, blue-tac and a whiteboard marker pen.

The whiteboard was placed on the wall straight in front of my trading desk, I would literally look up from my monitor and boom there was the whiteboard smack bang in my face.

On the whiteboard, I made 25 lines in a row which I then called my ‘sample size’. I then went and raided the coin jar for a dollar coin and began tossing the coin in my seat over and over.

I continued coin tossing and scribbling down on a tally chart on paper my results of how often heads or tails came out and in what sequence. I did this for 25 times and transferred the results onto my whiteboard each time. This would then complete my 25-sample size and show the random result of each outcome. I continued to do this whilst trading, my motive being I needed to sink the term ‘random outcome’ in my mind.

It was at the time, the only thing I could think of to try. Of course, I knew tossing an even sided coin each time would only ever show a random outcome each and every time. I knew this but I wanted to get it into my head so that if I had a ‘proven EDGE’ and then approached the charts with the correct mindset knowing I shouldn’t place any more emphasis on any one particular trade and that I should base my results on a number of trades, like a sample size of 25 trades for instance. Then over 25 trades, with a proven edge, would I then begin to see better results and have a better understanding of the workings of probabilities.

Trading as we all know, has random outcomes. It’s so easy to place so much emotion and control on any 1 particular trade no matter what we are taught from the beginning, which is where I believe many people run into difficulty.

I eventually over did the coin tossing and writing the random sequences down on paper, yet it instantly made me record each and every trade result on my whiteboard and within the 25-sample size. I would write either a W for Win or a L for Loss on each line until the 25 lines were complete with trades I had taken on the FTSE. I did this over and over again for weeks on end and my mindset shifted to the point where even though I would have 3 losers marked on my board after one another, I knew a winner or winners were only around the corner providing I trade my edge accurately!

The above method sounds a bit ‘simple’ I know, I’m the poor bugger who actually thought up the process for myself and would even hide the coin when my partner came home from work. The last thing I wanted to look like being sat at home each day was a mad man, tossing a coin and recording heads or tails on a whiteboard in his living room. Eventually I had to explain my madness to her but that’s a whole different story for another day.

So there it is, a simple method anyone can apply if they feel the need and are in what I call struggle city. Its just a learning curve like many others and everyone if persistent enough will find their way regardless in the end. The above clearly shows I had a mixture of issues I needed to sort out, from over confidence to a clear understanding of what it means to work and think in probabilities. Sometimes it’s the most basic of things we can get wrong depending on how we view or see something from the start.

Before finishing up with this post, I’d just like to mention that I also believe I ran into difficulty alongside the above issues by trying to ‘subjectively’ trade. Trying to subjectively trade and having the above confusion on probabilities running parallel with emotions and over confidence is a nightmare waiting to happen. Therefore, I’m a big believer that if anyone was to have the same issues or confusion as I did then it’s always worth reverting back to a mechanical approach of trading and ironing out the above prior to mastering the art of subjective trading!