Think Like A Trader Blog

Tuesday, 9 May 2017

T-Model Trader Interviews James Orr Part 4

Hello Traders.

Back again with the 4th part of T-Model Trader interviewing me. This interview is starting to draw to a close now, and there will only be one or two more posts. I hope you are all enjoying it.

James Orr

Question 11

About a month ago I had a week of no losses. It was the first time ever. I did contemplate over that following weekend that maybe it was time to upgrade the T-model to a T-bird (convertible of course) only to fall back into my normal yo-yo consistency again the following week (then thinking that I should be downgraded to the jackass instead).

In an earlier answer, you spoke about the two years of the trading plan development, of which the second year was about gaining that consistency. Once learnt, the "objective" side to the trading plan is, broadly speaking, understandable. However, there also exists the "context" side of it all.

On many occasions I have waited for the end of day review to see where it is I might have gone wrong in my trade selection, to find that you have simply skipped over what was my entry candle. I can only assume that I got the context completely wrong, given that it met the trading plan criteria. 

I find it challenging here to somehow encapsulate what it is that I am wanting  to ask as it feels so nebulous in quality.

So....I would like to start by asking you to truly explore your memory of that time period when you were gaining consistency. 
Were there qualities unfolding that you can now look back on and see as significant developments?
Was there an approach to the whole trading activity that you embodied during that time that you would now define as important?
Basically put, how did you get beyond this damn yo-yo reality?

James Orr

The run of winners! Usually followed by a euphoric feeling and also a whispering voice telling you, ‘That’s it. You’ve cracked this trading thing.’ That’s a very common situation and can be pretty damaging to beginners. There are a couple of points to go over here.

But firstly – if you are ever left wondering or confused, simply email me. I try to be as thorough as possible, but if you feel I have missed something just let me know and I can clear it up. It may be something very simple that you’re not picking up on, or it may be something I need to explain for you.

Ok, so for me at least, it didn’t really happen all at once. In fact, I didn’t even notice it happening at all to be honest. I was just so focused on the trading that I didn’t even pay attention to the overall results. There came a time when I had had such a sustained period of losing and feeling useless that I just wanted to make sure I was only taking the best trades possible.

I had been approaching the markets in the wrong manner. I had in my head that I needed to be able to make ten points per day for trading to be viable. That meant that I went looking for those points every day. If I had a day when I didn’t make them, I would think that I couldn’t become a trader. So, I was forcing trades and losing over and over again trying to fit the description of what I thought made a successful trader.

 Now I don’t remember the exact ‘eureka’ moment, I think it was just another of the many things I tried during that period. I would go on long walks after trading and try and figure out what the hell I was going to do and how I could improve and stop the metaphorical bleeding.

One of the main ways that happened was that I lifted the pressure off of myself. I removed the ‘targets’ for each day and I stopped looking for a certain return each month. I just focused on the trading. I only wanted to take the very best trades possible. It had to be perfect. If it didn’t line up, if it was even a maybe but a GOOD maybe, I skipped it. I also used an insanely tight money management system whereby if the trade wasn’t working out very quickly, I exited at break even, for a very small profit or a very small loss.

It was a stressful way to trade and I missed lots of winning trades, but it allowed me to follow a very strict rule set. Because I also wasn’t looking for anything from the markets, I didn’t mind if I had a day or two or even three where I had a run of break even trades. I just wanted to make sure what I was doing was correct. I knew the trading plan I had worked because I had tested it so thoroughly. So it just came down to me implementing it correctly.

After a while (months), I noticed that I was having profitable months. I then understood that what I was doing was working. I didn’t need a certain number of points per day, I didn’t need to force trades, I didn’t need to aim for something each week. I just had to be very selective and keep doing what I was doing.

Now, after a run of winners, there can be another issue. And that is that you start to loosen up your rules and also believe that you ‘can’t lose’. That is very common in casinos also and it is all down to emotion.

Because you have had a run of winners you think things like:

-       ‘Well, this one isn’t perfect. But I have built up a cushion of winners so I can afford to risk a loss on this one.’

And the market will happily oblige! And you may think that is fine, but all you’re doing is reinforcing that you don’t always need to be disciplined and follow your rules. So after the losses invariably come, hey ho, you don’t need to be so selective, you need to take slightly more risky trades in order to make some of this money back! You’ve already missed a couple of good moves by being strict, and you don’t want to keep doing that!

And here comes the yo-yo.

The best advice I can give is to keep a diary of your trades. Mark up every trade and be honest about it. It doesn’t matter if it’s a winner – was it a good trade in relation to what you are aiming to do? If not, and you see those trades creeping in, you absolutely need to address the issue.

Qusetion 12

There really is so much fantastic information in that last answer. I hope that others reading this are getting the same value as I am.

After that successful week, my first trade of the following week was also a win. I can reflect back and see that my trading bravado was getting a little too trigger happy. Even though I was watching for this problem to arise, it did slip through my filters and some less than optimal trades were taken
in the following few days, which really weren't great set-ups. And so the yo-yo reappeared.

The part of your last answer that really strikes a nerve is about having to have a trade to feel like you are a trader. I have felt this aspect so strongly since day one. 
This has got me thinking about the nature of work broadly, and the nature of "trading" work. I have done a lot of work with my hands in the past.....building.....artwork and so on. So there is this aspect of "doing" which is easy to relate to in a work sense because it is so tangible.

Yet this sitting at the screen and not trading is in many ways the antithesis of that. It is requiring me 
to develop a whole new mind set of approach.

In turn, that got me thinking that trading really is an occupation unlike any other and requires quite a profound reprogramming of the values that are normally associated with work. To sit on ones hands and do nothing trading wise is so profoundly a big part of it all.

I don't really have a specific question here, more just a thinking out loud.
Your thoughts?

James Orr

It’s extremely difficult to keep that rigorous selectivity. The lazy, half-assed part of the mind is very sneaky and in a very strange way, determined to make itself heard and dominant. I try and stay away from the screen as much as possible to combat it. I set alarms. And then as the market approaches I make decisions – Ok, I need to see this and this for this trade to be valid. If I see this, it invalidates the trade. That way, I only need to glance at the chart and I already know what I am looking for. I find that if I just watch the market movements, my mind sees the movements of candles and starts to determines crazy things like ‘the sentiment of traders at the exchange due to the movement of the candle.’ It really is an interesting experience this trading. It teaches you so much about yourself and helps you become a lot stronger mentally.

I come from a building background and am very similar in that I am happiest when working with my hands. I was once told by my father that I am a ‘creator, not a destroyer.’ Although he probably doesn’t remember saying that, it really made me think about things.

Now, placing myself into the trading arena was very different. I used to feel like I had accomplished something when I had built something or came home from work physically exhausted. With trading that became impossible. I couldn’t throw myself at work. I just had to wait… and wait… and wait.

It really doesn’t help that most of us come to trading with a belief that it is exciting. Even when we do our testing and study, we don’t really process the fact that what we are looking at happens over months and years. When we sit down to trade live, we want it ‘now.’ That’s probably why a huge portion of beginners go straight for the one minute timeframe. I get asked about it all the time. And even when I say to them, it’s a bad idea, it’s extremely difficult and stressful to get right, I usually get brushed off in their replies. They want excitement, even if it shatters what they want to do.

I still sit and think to myself sometimes that I should be doing something productive and that I am being lazy. It has become easier over time, however it did take a good long while. Now, after I feel like that, I give myself a shake and remind myself that I love what I do and that the notion of work is not a solid state definition. I would be miserable sitting in an office all day working for someone else. And although building was great, it was also physically exhausting and the long hours often left me hating what I was doing.

Work is whatever you want it to be and never mind the rubbish that school rams down your throat. If you want to do something, then that is enough. You come first, and your happiness is paramount. The world will keep on turning just fine without you chained to a desk or working twelve hour days. If that isn’t for you, know that it doesn’t need to be for you. The only think you own is your mind and your life. Feed it whatever helps you through the journey with a smile on your face.

Qusestion 13

I have been thinking about your comments in regards to "staying away from the screen as much as possible". I feel that this statement is in many ways the other book end to the "bleeding eyes" where obviously you drowned yourself in that screen. So from the "bleeding eyes" it appears you have travelled the spectrum which now allows you to be more detached.

It reminds me of a comment by the legendary jazz saxophonist Charlie "Bird" Parker. When asked about how he was able to play with such freedom, he stated "learn your chops and then let it all go" (chops = music theory and technical ability). What I assume he means is that you have to immerse yourself totally in the given format in order to transcend it all.

I am interested in this "I only need to glance at the chart" comment. 
What I perceive from this sentence is a type of freedom, not only from the endless hours of chart watching that can take place, but more so from the internal debate that can arise from such intense reflection seeking to nail the markets next move.

I keep reading that paragraph and get such a wonderful sense of freedom and space.
Is that how you experience this stage now in comparison to the "bleeding eyes" time?

James Orr

I need to be careful in how I answer this. I have that robot voice from ‘Lost in Space’ looping around my head saying ‘Danger Will Robinson!’ The danger is that I hand over an answer that makes it seem like trading is easy for me and that it will become easy for everyone else also. That really isn’t the case.

So let me answer focusing on two separate aspects:
1)    Yes, trading does give me an unrivalled sense of freedom. Especially in comparison to the period where I was spending upward of 12 hours per day learning and staring at the computer. I don’t do that any more. I don’t allow myself to.

And there’s a huge amount of freedom in that I can be anywhere I want when I am trading. In fact, next week I am on holiday. I have hired a villa and I really want to be lying on my lilo in the pool with a beer in the little cup holder, the sun overhead and the laptop propped on my lap. I want to take a trade that way just because I think it would be fun and a good way to remind myself that no matter how hard things can seem at times, I really do have it good. My girlfriend doesn’t know about the trade yet (that’s technically work and I promised the holiday is a work free zone!).

There’s also the freedom of time. I am not chained to a desk. If I don’t want to work then I don’t need to. And on good days, like today, I was finished by 9:30am. On a Monday morning. I mean, how can anyone really complain about work when that can happen?

It amazes me when I see people trading and they sit all day every day at the charts. They need to try and trade everything they see and make as much money as they can. You may as well be working twelve hours per day for an investment bank. You can’t be happy staring at a computer all day every day. It reminds me of something Bob Marley said, although I can’t remember it verbatim – ‘Money is numbers and numbers never end. If you tie happiness to money your search for happiness will never end.’

2)    However, on the other side of the coin, I don’t want that freedom to be construed as easy in the sense that I have ‘risen above it’.

You bet your ass I still get doubts when entering a trade. I have the stress of being in the trade as well, certain that I am on for a loser. When the losses do come, I get frustrated. Any trader who tells you otherwise is a liar.

The only difference is that I don’t let those things control me. So I may have the doubts about the trade entry, but those doubts wont stop me pulling the trigger if everything is lining up with what I am looking for. When in the trade, if it starts moving against me, I may have that sense of panic, but I am able to somewhat detach from it and I will only react when I see definite pre-determined exit signals. And after a losing trade, I get annoyed, but I don’t let that pull me into emotional trading and snowball the losses. I just walk away.

So I am a lot freer than when I was in the ‘bleeding eyes’ stage, and in fact than at any other time of my working life, but that freedom is not a walk in the park.

Question 14

I have been rereading and reflecting upon many of your answers so far and four words come to mind. They are what I would call the "D" words....Determination......Dispassion......Discrimination......Discipline. 

I see that each of these words are so very active in the process of becoming a successful trader and there is no hierarchical order as such, as they are all active at all times.

Determination is pretty straight forward, as it is that aspect that drives each of us to achieve a goal in mind.
Dispassion is that quality which, as you stated, prevents getting tangled in the euphoria of wins and the trauma of losses. It is that middle position that remains in equilibrium.
Discrimination is that aspect that can sit on the hands and allow for less than optimal trades to pass. It is the filtering system that traders need to learn in order to succeed. I would suggest that in developing this quality will go a long way to managing the "time" problems that seems so prevalent, which in turn leads to impatience. (I think the word "Discernment" also fits here too).
Discipline is in many ways the binding force that holds everything together. Without this quality then there is no structure in which to follow when the going gets tough.

They are in combination a great force. They are in combination also very challenging to consistently adhere too. I would sense that as learning traders, we will have a variety of emphasis in these four, where one or two will be doing okay, whilst the others are diminished or lacking.

If we use these four terms as "global" qualities, which did you find the most challenging to adhere to in those couple of developing years?
And again....your thoughts on these qualities in general as they play out in those developing years as a learning trader?

James Orr

I would say I struggled with Dispassion, Discrimination and Discipline the most. Determination was never really an issue. I knew what I wanted to do and it was only very rarely that I ever genuinely considered walking away.

I would go through the ‘yo-yo’ as you described it earlier. There would be runs of winners and then the cocky self-assured attitude would appear and everything would very quickly go down the drain. I would start detailed trading diaries and then ignore after a week when that run of winners came once again.

It really was two steps forward, 1.99 steps backward.

In the end it all came down to discipline. If you focus on only one thing, make sure that it is discipline. That is the best advice I can give. Because with discipline, everything else starts to fall into place.

Develop silly rules, punishments and rewards to make sure you follow exactly what it is you’re supposed to be doing. Become accountable to people – literally tell your partner to keep track of what you’re doing. If you start messing up, then they change your broker password and don’t give you access for a couple of days. Practice with the smallest position sizes possible and force yourself to stay there until you have two perfect months – and I don’t mean huge profits. I mean no mistakes. Even if you have an average month but you did everything correctly, then that is a perfect month.

You’re developing an ability to handle uncertainty and brush off losses. More than anything you need to be able to handle the losing trades. Any schmuck can call themselves a trader when things are going well. But it’s through the losses that you really find out if you’ve got what it takes. And if at present you don’t have what it takes… find out a way to develop the skills!

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