RealVision Series with Peter Brandt Episode Four The Human Element

I have been a professional foreign exchange and futures trader dating back to 1975 at the Chicago Board of Trade I am a classical Chartist I've used

price charts to earn my living during all of these years and in the process have learned a lot of lessons some the hard way and it's really those lessons and that perspective of all of these

years trading that I'd like to bring to you I'm Peter Brandt I am a classical Chartist you my observation over 42 years of being a

trader from my own account in the commodity futures market is that there's really been very little emphasis in discussion placed on the human element of trading the human aspects of training

I think this is sad because the human aspects of trading plays such a big role in market speculation there's an old adage that if you really want to get to

know yourself as a person become a trader because you will get to know yourself you get to know the good the bad and the ugly they all come together

and so that's what I'd like to talk about today is all of those aspects of the human being of we as as as part of

humanity our character traits are emotions that come to bear during the process of being a market speculator it has been my observation since I first

started in the commodity business in the mid 1970 is that very little attention by authors and experts on TV and in books pay attention to the role that our

human motions play in the trading equation and I know for me it's been an enormous one I'm one of the biggest challenges I have as a trader is just

dealing with who and who I am as a as a person and applying that to the whole business market speculation there's an old adage that I learned early on in the

trading business and that is if you really want to know yourself all the good the bad the ugly the warts and all adjust to just become a trader and you'll quickly learn who you are as a

person and there's so much truth to that human character traits and emotions have such an enormous impact on the outcome

of of our trading activities just something that that very little attention is paid to and so that's really the subject of this video many

novice and aspiring traders are of the belief that the key to trading success can be found in something that I call trade identification or trade signaling

and I covered that subject in episode 3 and under the idea of chart analysis and technical analysis I would think and

it's been my observation that aspiring traders those people who are seeking out to try to figure out how they're gonna trade the markets spend 80% of their time 80% of their attention 80% of their

money buying books going to webinars signing up for services focused on trade identification which is basically just the idea of what market do I trade and

when and do I trade it now I know that for me I was there I can relate to that I think early in my trading career within the first four or five years one

of the hard lessons I had to learn what was that trade identification it's not the key to trading and then as a matter of fact trade identification

is really one of the least important components of the trading equation you have all probably heard of the word

edge or trading net jour been asked what is your trading edge all successful traders I have ever known as a trader and I've known many have a unique edge

unique to themselves what is an edge edge is usually a very small sometimes seemingly insignificant advantage that a

trader can exploit over and over and over again to gain a thin margin of advantage over the marketplace if I need

to better define an edge than that then the chances are that you don't have an edge in is something you need to do research on but all successful traders

have an edge I know my edge you know when I reflect back on my career as a trader what I recognized is that early

in my training career I thought trader identification was worthy edges that charting would provide me with the edge and as I can reflect back on a very long

period of time over 40 years of market speculation now I realize that trade identification again is one of the least

most important least important contributors to edge my trading edge as shown by the the pie chart that's on the

screen right now it really consists of four areas one area is risk management I at risk management is the biggest

contributor that I have to my trading edge managing emotions is a close second to be the most important contributor to

my overall edge the process by which I use to trade is is third and finally followed up by trade item vacation or

trade signaling as really the least important so this gives you kind of a pictorial view of how I view my own edge in training

so managing emotions I really identify as the second biggest contributor to my edge as a trader which means that it's a

real task for me as I believe it is foremost discretionary traders to to know themselves the reality is that as

discretionary traders I'm my own worst enemy toward my own success that it's my emotions and character faults that

attempt us to to rob me of the the effectiveness that I can be as a trader you know we've all heard that emotions

of fear or greed are the worst enemies of a trader and I wish that was the end of it fear and greed are just the start of the emotions that can that can

undercut a trader and their in their attempt to be successful I think the bottom line of trading is that

overcoming self is the key to success and as a trader I realized that my daily challenge my challenge each and every day is just to recognize ways that that

my emotions my my sense of anxiety and fear and greed and all of those other things attempt to sabotage what I'm going to be doing you let me try to identify some of the

battles that I feel that I have faced some I've had very significant victory over Zama it's still a challenge to me

even to this day but I think of terms as either character false or pure emotions it's sometimes hard to divide where the line one line starts on the other but

let me go through some character traits that I feel have some role in in in affecting negatively my training

performance one is compulsiveness another one would be being a worrier people who are worrier is that's not a good trait for for being a traitor you're always worried about what your

trades gonna do I know I tend to be a perfectionist and you know there's the old saying that sometimes perfection is the enemy of good and I can see that in

my own training is you tend to always want to have things be perfect and when you're a trader that things can always be perfect stubbornness people who are stubborn and that's a very dangerous

trait to have in the business of trading because that is a trait that can lead a trader and hanging on losses for way longer than they should be hung on to I

think another trait which can tend to work against the trader is being overconfident we've met traders who absolutely are overconfident and the trades that they have on and it's to

their own doom I think there's a flipside to that and that's being under confident I mean as traders we need to have some level of confidence so what we're gonna do is going to work we can't

be completely timid but there is there's a balance between being overconfident and under confident that the trader needs to try to achieve I think another trait that can affect

trading is the degree to which a person is it's too overly aggressive I've seen traders that are like Bulldogs I never know when to leave the ring and they come completely completely aggressive

and that aggressive nature of theirs can be reflected down and in the trading that they do another trait that I've seen in traders as they that they're overly possessive everything is

there every idea is there they're not willing to give credit for good ideas perhaps to some of the traders that are on their staff I've seen that with people who have run proprietary trading

firms another character trait which works against trading successes is being unfocused you know people who are just kind of scatterbrained it's their very

nature that they just don't stay on task on things it's not a good trait for a trader to have I think yet another trait which tends to work against the trader

is when they're closed minded they they are not open to new thinking about a problem they have a fixed idea in their mind as to how to resolve an issue and they're not really willing to think

about things outside of that I think one of the big ones is greed as we've all met people who are greedy they just want every last penny on the table and and as

a trader you have to give up some of that Creed I think for to to achieve success so when we think about character traits that work against us you know the list goes on add your own but we also

have to recognize that there are some really good character traits that we have to have to be successful as traitors and you know part of all of this both on the negative and positive side is knowing who we are as people

being honest with with ourselves as people some of the character traits that I think contribute to success I've seen I've seen it in so many traders over the years one of them is patience they have

the ability to wait things out they have ability to wait for their pitch so to speak they don't feel the urge to always be trading they can sit back and wait for for a particular set up to take

place without feeling the urge to be involved the I've seen people who are diligent they are extremely on task they

they are diligent to toot to a fault they have great attention to detail and and and they pay attention to the little things and sometimes it's the small

things that really have the big payout they're industrious good traders I've met are extremely industrious they know to work hard then what it's like to put in the extra hours

they know what it's like to really attack a task and to not quit until they've achieved what they're trying to

do of course trait that comes to mind among most traders I've met - our comm places they're very analytical they think through problems they don't they

don't come up with the first thing that comes into their mind that they're deep thinkers they they go deeper into a problem with trying to figure out things one thing that you might not think about

is creativity somebody who can look at a market and come up with an idea in the market or you say that's just absolutely crazy but they've thought through creatively if they've created lis come

up with what outcomes might be that you would not normally have expected for a particular market place then they think outside the box so to speak and another trade I've seen in good traders is

they're curious they want to know how something works they they they want to know how the market works they want to know a technical analysis it works they want to know what central bank's do

they're they're very curious and they want to learn what takes place and these are just I think some of the things that

tribute to successive traders and so it's just not all good character trick bad character traits but it's good character traits as well that a trader needs to manage their bad character

traits they need to learn how to accentuate their good character traits to accomplish the trading outcomes they want I want to talk just for a minute about how I overcome some of these things

because I'm subject to some of these emotional urges I know that I am compulsive to a fault if I let myself sit and stare at a computer screen all

day long I could talk myself out of a good trade and into a bad trade many times a day and so I recognized that about myself and what I have to do is a

trader then has managed that and I think the challenge if the traders find out ways that they can deal with some of these things for me this really means two things and the first is I avoid

daily contact with the computer screen I make it a habit to get my orders in at the beginning of the day and get away

from the market to avoid the the daily price changes and watching markets tick up and down and watching intraday charts and all of those things because that's

not where my strength is my strength is in looking at Church from a bigger picture and if I bog myself down into the markets in their day eventually my emotions are going to get the best of me

and I'm going to make a bad decision I you know and part of that is I limit the hours of the day that I allow myself to enter order it's that's called

discipline it's called a discipline to do the things that that I need to do to be as successful as I can be as a trader

for me that's rendering orders between 4 p.m. and 4:30 p.m.

p.m. and 4:30 p.m.

Standard Time that is my hours for entering an order I also do some entering of orders between about 5 and 6 o'clock a.m. in the morning but those

o'clock a.m. in the morning but those are times in which the markets aren't sitting and changing and prices aren't going up and down those are low periods or times the markets are closed and so I

attempt to enter all my orders when market hours are not taking place to avoid the emotional pole of reacting to split-second things that I see in the

computer screen I also have the fear of missing trades I hate missing trades I hate seeing and thinking well this market is going to do such-and-such and

it does and I get it and say wasn't aboard you know that drives me crazy but I found some things to help deal with that for one

thing you know I'm great at beating myself up and it's important for me to look back and to remind myself and go

through a checklist I have a good checklist that I say okay these are the things that I need to do to catch a train part of that is being disciplined enough to put it in the order I said

part of that is an order entry thing also in terms of missing trades I just recognize I have a rule that if I try a trade twice and I'm wrong I go shopping

somewhere else that means that I will miss a trade but a lot of this deals with you know your mental makeup and in how you approach the game and the frame of reference that you have and so even

though I have a fear of missing trades I've come to the point in my trading career where I accept that I will have it I will there will be situations where

I'm going to miss a trade I'm gonna need to learn to live with it and in terms of beating myself up it's easy to beat yourself up over a mist rate but sometimes it's easier to beat yourself

up then then it should be and you have to remind yourself what are the reasons I did trade and if they were right reasons for trading or right reasons for missing a trade ball and so be it know

another thing that I broke up I recognized about myself is that I'm very risk adverse I'm probably much more risk

adverse than I should be I I don't like sometimes taking risk and so I have to force myself sometimes to take more risk

on than I really should I know that being risk adverse I run the risk of being gun-shy that if I'm wrong at two or three trades in a row I'm being

gunned I can become gun-shy so I have to force myself to enter trades at the the size level I do and to do that I use a

grid there's a grid that that I have and it starts out at a certain BET level and then I can adjust it so I tried to use systematic

and logical thinking as a means for me to kind of overcome my emotional tendency to avoid risk by and to do so to go about very systematically

determining the size that I'll put on in a trade it's my daily challenge to recognize the ways in which my emotions and character faults tend to sabotage

everything I'm doing and that requires me to be absolutely self honest and transparent which is quite frankly not an easy thing to do it's not easy to

recognize and fully admit to our own character faults in ways that we we tend to negatively impact our trading a buts

important thing to do and we I know that I need to recognize those areas that tend to throw me off my game and in many

ways we find out who our own worst enemy is and I know that I have certainly met mine let me end by just summarizing two

things I've already probably rehashed a number of times here and the first is that you know we manage we manage our

emotions we manage our character traits we don't have overcome emotions you know this to this point in my career I've traded more than 40 years I still can be

fearful I still can be greedy I can still have self-doubt these are things that I'm still subject to the question is am I gonna let him rule my

life am I gonna let him dictate my training and so we never really overcome some of these things we need to manage these things that's that's the name of the game and I I think the second thing

is that this is it's a never-ending battle dealing with who we are as people dealing with the fact that as individuals we we have things about

ourselves that work against our success is not something that we're gonna we're gonna have that battle today and not have it the rest of our lives it's a never-ending battle it's something that

discretionary traders need to do with every day so you know we're just a word of encouragement on that just keep plugging along so anyway that's what I

have to say about the whole business of human emotions and as applies to trading and thanks for watching

charting is an interesting thing if you get in a room ten different Chartists then show them a chart you're gonna get about 15 different opinions and charting

is a craft I'm a craftsman as a Chartist trading is a business it is a dead serious business you