This article is a review of FuturesTrader71‘s paid Webinar #3: Beyond The Technicals: Inside a Winning Traders Mind.
His 3rd webinar is the longest at 102 minutes. And unlike the last 2, this one has really nothing to do with Volume Profile whatsoever, but rather the psychology of a winning trader. While he doesn’t state it directly, the books he has listed on his website indicate that he has studied the work by Brett Steenbarger (His website at http://traderfeed.blogspot.ca/ is fantastic and highly recommended reading for traders).
He starts off the webinar with a poll question: The single most important market principle to a consistent trader is… His answer was “Thinking in probabilities”. He reasoning for this is that we are generally wired to have expectations about what outcome should happen if we do something, which can be devastating for people learning to trade because sometimes you do everything right, and the market still takes your money. This is because while you can see the people that are currently trading and what the market is doing, there are a set of people who have not yet entered the market, and can do so at any time and in any direction they wish. Therefore it is important to have a mindset where you think in probabilities and know that for any single trade, you have a 50-50 chance of winning.
Next, we starts talking about trading mistakes and the most common mistakes that traders make, including waiting too long to take a setup, taking profits too quickly, emotional trading, etc. Many of these mistakes are due to the wiring we have from birth, which has us think in terms of cause and effect (If I paid this amount of money, then I will get a pizza or if I study really hard, then I will get an A on the exam). Trading is not very conducive to this style of thinking because there is no guarantee due to the unknown force of people who can enter the market at any time. Thus it is extremely important that a trader knows without a doubt that the outcome of the next trade cannot be known, regardless of how much information you have, how many indicators you have pointing in your direction, how many experts agree with you, etc.
FT71 then discusses how our natural psychology is not really suited for trading, as we are naturally wired to let our losing trades run, and cut our winners short; a losing combination for trading. We naturally look to avoid pain and so when our trade is losing, we tend to let in run and hope for it to come back to breakeven so we don’t have to feel the pain of having a losing trade. Correspondingly, we cut our winning trades short so we can have that winning feeling without the risk of it turning into a losing trade, but which in turn gives us a small win when we could have had a much larger win.
He starts to introduce money management through his “coin flip” exercise which is essentially a random entry and then you adjust your position size and your exit accordingly which can show you can be profitable or breakeven with random entries. The point being that risk control and money management are the key aspects to improving the outcome of your trading, and that because of our natural psychology, a more mechanical approach to the markets will improve your chances of success.
He then touches on the topics of the emotional bank account, find an edge and trade it mechanically, keep a trading log and then review it, and the role of intuition in trading. He closes with a great quote from Brett Steenbarger: You control how you trade; The market controls how or when you get paid.
Overall, I thought this webinar was fantastic. I think that these topics are the most important for a successful trader, but so often they are passed over. Most of this information is presented in way I haven’t seen before so I really appreciated that. And he also really got me thinking about aligning with my emotions, rather than fighting them, and using a more mechanical approach to trading (especially exiting a trade after you’ve put it on). I also really liked the idea of the belief of not knowing the outcome of any one trade, as it is so easy to be seduced into thinking you know it all, and thus this trading is going to be a winner.
The video is the most expensive one. And you can buy 2 of Brett Steenbarger’s books for the same price. But I haven’t seen anything quite like this before and I like the way FT71 presents it, so I think it is worth it.