Clockwork 71's Psychology Thread

Thanks for the note.

I hope they don't delete this...the truth about forums and online Forex sites.

One of the biggest things that a lot of the newer traders will struggle with are based upon one word: truth.

(One of the biggest problems with this thread is that a lot of the very people that would benefit from this thread won't read it. The new trader spends far too much time looking for the magic bullet, not the reality of how you become profitable. The psychological part of the game isn't as 'sexy.')

What I mean by 'truth' is the truth about trading. The truth about trading is that a lot of people are full of shit. Let me ask you something: WHY in the hell do you think I know anything? My post count? The fact that I am an analyst for a living? The simple fact that you are reading me on the net? What does that mean? The reality is that a lot of really well respected people out there have never actually made money in the markets themselves. You would be STUNNED at the people I personally know that haven't made money, but are 'legends' in the trading world.

That being said, there are some things to consider here: The first thing is that nobody will care about your trading more than you. I cannot stress that enough. You would be stunned at the amount of random messages that I get by people that are begging for some kind of help. Quite often, they are in deep trading trouble, and think I have the solution. The solution is of course money management. The problem is that by the time they reach out to me, they are already 80 percent down or some other such nonsense. (In all reality, even if they did reach out earlier, they wouldn't listen. They are looking to become overnight millionaires.)

Here are some very real things that you should think about:

 

1. ANYONE can post ANYTHING on the net about the markets. A lot of the 'analysis' you read is done by the equivalent to an 'Indian sweat shop' at something like $3 an article. Don't believe me? Search the site upwork for Forex articles. That being said, I charge a lot more, but I am lucky enough to have established myself a long time ago.
2. Almost everyone is looking to sell you something. Your broker, your 'mentor', your educator, etc. I even sell signals - but its more of a hobby. It literally is something like 0.25% of my salary if that. This is why I offer a free week. About half stay. A lot of them will either catch me on a bad week, or are simply looking for freebies.
3. A lot of the 'trades' that you see on forums are on demo. One of the biggest tells is when the order number is long. Also, a lot of demo trades are shown in Trading View and other free platforms on the net. Whenever I see Trading View charts, I assume they aren't actually trading that instrument. (In fairness to the analysts out there, you aren't supposed to be traders - or like me, you are asked to use them for a website, etc.) This is true when someone is talking about their trades - they are lying. This was rampant during that ridiculous 'crypto craze.'
4. If you have a small account, you are NEVER going to get rich. Period, end of story. I know a lot of you won't like that, but think about it: If you have a $1,000 account (The average size of a Forex account in the US.) and get a 500% return - it's $5,000 when you are done. That is an incredible amount of return. If you are more like a professional trader, you will probably do something more like 25%, which brings you up to $1,250. Oh, and that's for the year. Going back to the 500% return, you need to be a great trader, and highly leveraged. That is asking a lot. Those types of moves require very dangerous actions.
5. Some of the dumbest people I know are good traders. Ego is a funny thing. A lot of people get into this market thinking that they are pretty smart, so therefore it makes sense that they should do well. However, they don't understand that the act of trading is quite simple. If the market is rising, you should only be a buyer. Far too many people try to 'out think' the market. One of the biggest 'revelations' I ever made was something that started when my ex-wife said: "If the market is going up, why would you sell? Can't you just try it again later if you are wrong?" She is a nurse. She has never traded a day in her life. I was too busy trying to be a millionaire to understand something so simple. If you are trying to do a 'counter-trend system', you are trying to pick up pennies in front of a bulldozer. With that, technical analysis is only a way to confirm what you already know about a market. (For example, if we are in an uptrend, and then you get a strong signal to buy after a pullback - you have confirmation. Is it perfect? No, but that's life.)
6. You make some of your best trades by not trading. If you realize that your mental state is shit, you hopefully know enough to stay out of the market. Unfortunately, some of you will do things like ask total strangers in a forum 'What is the Euro going to do?' Really? Is the person you are writing to able to see the future or something? You are inviting someone to wreck your account with their egotistical bullshit.
7. Something that can cause an issue with your trading is reading too much. He is the thing: If a market is going higher or lower, why does it matter what the reason is. I have said this a million times: It's not the WHY that matters, but the WHAT. If the market is rising and you are a seller, you will know how wrong you are quickly. If you are wrong, you can either argue the point, or be profitable. How do you be profitable? Follow the market. It doesn't matter if you are 'right', its better to be 'profitable.'
8. Analysts are hired to provide a 'value added service' to a broker. The idea is that you see value in trading at broker X, and perhaps even continue to come back to the site. Given enough time, you will deposit money in that account. You will probably also deposit more. You might even take some trades based upon the article someone like me writes. The thing is that I try to give good analysis, but the broker knows you will over leverage your position, and therefore if I am wrong - your money will be collected by them. I am wrong sometimes. It's called being a trader/analyst.

I am not trying to get you to quit trading. Quite the contrary, as I think trading is one of the greatest endeavors that I have undertaken. I have gained so much by trading it is impossible to put into perspective. The gains made in my personal life are immense, as the psychology of trading makes a lot of other things seem like child's play. Beyond that, I have a career in the markets now, and get to work from home, not only as an analyst, but also as a prop trader. However, I am not rich - and quite possibly never will be. I am comfortable, and doing whatever the hell I want as well. It doesn't matter, I am happy - and a lot of that comes down to the opportunities that FX trading opened up to me.

Quite frankly, I could go on about this stuff for ages, as there are millions of things I have popping into my mind. Educators.....yeah I have been one. Most don't trade live, or at least aren't good enough to do it and make money. I am talking about some of the biggest ones in the market as well. It's truly amazing to me.

Chris

There is a reason so many shops in NYC hire Division I athletes.

You may or may not know this, but one of the most common things that a lot of professional traders will have between each other is that they quite often were Division I athletes in college. While most people will write it off as "bro culture", or a simple continuation of frat life, the reality is that there is a big reason for this. It isn't something so obvious. However, if you are an ex high performance athlete, you understand a lot of things that the average person doesn't.

The average person only thinks they know what it takes to be successful. If they already knew, then why in the hell are there so many self-help gurus out there? It is because most people have no idea what it takes to be truly successful in any endeavor, let alone in trading, which I contend is one of the most difficult things to conquer. In fact, it is so hard to conquer, that you can't do it. There are simply far too many variables to have it 'figured out.' Take a look at Jesse Livermore. He went broke at least three times that I can think of.

The athlete on the other hand already knows that the game is won before it begins. This is true in trading as well. For example, lets say you play ice hockey. If you practice ten time a week, and the guys on the other team practice once, who do you think will be favored in any contest? Of course it will be you. Does this mean that the other team can't beat you? No, but I contend that over a series of games, the stats will certainly come out in your favor. This is where the average person gets it wrong, they think they can just show up and make it. They aren't at the proverbial rink doing sprints on the ice at 4 am like the Division I athlete will do. There is a reason they are playing for Penn State while you may have never played past high school. They wanted it more. They put in the work. Even when there isn't any limelight or potential profit in the short-term. They understand that it is all a long-term process.

Another advantage that these athletes have over you is at least in theory, they understand disappointment. They have lost in a championship game. They have been beaten in public. They have failed spectacularly in a crowd. The average person rarely faces this in their life. Sure, there will be a few examples, but the athlete drops the ball in front of 40,000 on Saturday. Think about what kind of mental toll that has on a person. Now adjust that to the idea of having a losing day. The theory is that the athlete at least can accept that it takes hard work. That there are going to be bad days. They don't over trade to make it all back, or for that matter 'revenge trade.' (This is all theory of course, but you can see the way it can be thought of that way.)

Most traders simply won't work at this. Can you be profitable? Yes, you can be. Are you willing to put in all that work? It isn't fucking easy to say the least. I have seen very tough guys reduced to tears at times. This isn't a fun game at times. However, if you love it - then the work isn't a big issue. There have been days where I wanted to walk into traffic because I behaved so poorly with my trading. Why do you think that there are risk officers in firms? The owners understand that a simple lack of discipline or a flash of anger can wipe out a lot of money. Because of this, they try to stack the desk with the best potential traders possible.

So the next time you hear about yet another douchebag lacrosse player from Yale getting a 'cushy' trading desk job, understand that he is out hustling you when it comes to the work. He understands that the reward takes work. Do you?

Chris

Yes, I am an idiot.

I’m the first to admit it, I’m a complete idiot. However, I think most people are. If you are a trader, you’re a special kind of idiot. Let’s take today as an example.

I have been a bit quiet in this thread as of late, because I started trading for a proprietary desk. This is difficult to say the least, but what it does do is put a lot of restrictions on what you do. The idea of a risk manager watching everything you do might seem a bit daunting, but I will tell you that it has actually improved my trading overall. How do I know this? Because I am trading a market that I don’t have anywhere near as much experience in when compared to currencies.

I’ve been trading Forex since 2006. I have been trading futures for about one year. Don’t get me wrong, I have dabbled here and there but the last year has been much more strenuous, and if I were to be completely honest, I am probably a futures trader with about six months experience. In other words, I’m a relatively new trader although I do have the benefit of the lot of screen time when it comes to watching price action. At the end of the day, futures markets are like Forex markets on speed and cocaine combined. It moves extraordinarily fast.

Leaving all that behind, today I had what I thought was a horrific day. It wasn’t the fact that it was a losing day, it wasn’t that I blew up either. My total loss for the day was 1.1% by the time I closed out. Now let’s put this in perspective. Most days for me in this account are gains. In fact, I am probably positive about 85% of the time. That being said, I typically gain about 0.25% or possibly even the 0.5% a day. I am extraordinarily proud of this, because over time it will add up. This is especially true considering that the account is much larger than what I could trade for myself. I’m not one of these self-proclaimed gurus that preaches that they are extraordinarily rich. I was raised by a single mother who was a secretary. I wasn’t born into wealth, and I drank a lot in my 20s and 30s. I wouldn’t change a thing, it’s just that I’m not rich. It is because of that that I have started to trade for other people. It’s very difficult to find an extra $200,000 laying around to get involved in trading. In fact, I’ve been fortunate enough that I don’t even bother trading my own money anymore in any market.

The reason today was a horrific day is that I have somebody mentioned that the S&P 500 was shooting higher and making all-time highs again. This was because Vice President Mike Pence said some quote about not parading China because it appears that things are looking good for the conversation between the Americans and the Chinese. Being a moron, I took a position out. At this point I was up about 0.33% for the day and willing to stay out of the market at that point. Needless to say, the market went against me and I ended up taking a much bigger loss than I anticipated.

I also wasn’t paying attention and at 1:30 PM I had a gold position that got absolutely crushed due to traders closing out their positions for the week. Next thing I know, I’m down yet again. Total loss for the day was 1.1%, and I thought for sure I was going to hear from the risk manager. What surprised me is that I didn’t, until I called him. He explained to me that I just lost 1.1% but was up about 3.5% over the last several weeks and he didn’t understand why I was upset. I told him this scenario, and told him “Basically, I’m an idiot.” His response was, “Yes you are, but it’s my job to keep you out of trouble.” It put a lot of things in perspective as I was laughing.

The point in this post is that no matter how long you’ve been trading, you will make stupid mistakes. The idea is to make them hurt as little as possible. My loss for the day will probably equal two of my better trading days for the month being wiped out. That hurts, and it certainly is upsetting, but not because of the money rather because of the unnecessary mistakes that I made.

The main take away from this post is that we will make dumb moves. I know some truly stupid professional traders that handle eight figure accounts. How they get out of the house every morning with their pants on is truly a question for the ages. That being said, they have risk managers and they understand what they should and should not do. Trading really isn’t that difficult, as I have proven more than once. It’s behaving yourself and keeping your ego/stupidity in check is what makes the difference.

If anybody is an example of how easy trading can be, it’s me. Most people don’t know this, but my background is a painting contractor, not some type of economics degree. In fact, when I first started trading I had no idea that you could even trade money. 12+ years later here I am.

Remember, when you stumble you need to get back up. However, it’s up to you as to how far you stumble. Today it cost me 1.1% and a bit of ego. At the end of the day, all I have to do is trade the way I have been trading over the last several months, and a couple of days will go by and I will have recouped those losses. In the heat of the moment though, sometimes that’s difficult to remember. That’s too bad, because remembering that keep you out of the lot of emotional damage and potential financial damage as well.

Chris

This was really helpful. Very well written. I'll definitely read the thread again soon.

Thank you

Hey clockwork71,

Its been five years that I have been reading your posts and every time you have been great. It seems you are not that active on posting stuffs nowadays and its understandably too as you are now trading for a proprietary desk. I have some questions if you can answer those it will be really helpful. You have always been dead honest so I hope you will continue to do so. Here are my questions:

i) I have been trading from past 7 years and been profitable from past 3. The next step which I am trying to incorporate in my trading is that rather than trading whole day from trading 15 minutes charts up to 4 Hour, I think its high time I let trades run and enjoy life now as I have accomplished what I always wanted to after 4 utter years of failure. I always wanted to be "someone who earns money when he sits in order to trade". I never like to call myself successful even after three years of profitable trading as its all psychological and I never ever want to let my guard down plus learning never stops. But what am I asking you is that in your "Silent Service thread" you always recommended having a life and enjoying things but what happened that after all the years you are now taking a job and trading
for a firm?

Yes it might be your personal decision and you might not want to answer but I have always looked upon your thread and James16 as the way to project the future for new traders. Like now I am understating why you guys were trying to educate new traders despite being your self successful. Why someone wants to go out and enjoy things even if he knows that sitting in front of the computer for few hours will earn him solid hard cash!!!

I just want to know what is the trajectory after being a successful trader? Is it to trade big account which firm offers or just getting by trading our moderate accounts and enjoy life?

ii) What is the difference between trading for a firm compared to your own account? Is there any unwanted psychological pressure when someone above is constantly monitoring our trades/decisions? Do they ask constant questions? Yes its one of my let's say desire to test myself, if I can earn the same amount of sum that in other people's word are"unrealistic" % which I am accumulating right now? I have always been amazed by the fact that 25% is considered as great or even outstanding in the Wall Street while we risking 1.5% per trade, with all MM in place, can earn much much higher ROI. I know compounding takes effect and with big money people take less risk but I am asking if we only think in percentage terms, 1.5% risk is 1.5% risk in any corner of the world. Can you please enlighten me as you always have.

P.S. Yes I have read your thread plus James16 public thread as well. It took me about 1 and 1/2 years to make note of all yours and his stuffs and I read for about 10 hours a day even on weekends in the year 2015/16. I would like to say thank you for all you have given back

Btw I am again going through your Silent Service thread from beginning as I now want to incorporate higher TF trades in my arsenal.