Day Traders & Their Trading Psychology Dr Barry Burns | Real Traders Webinar

up next we have with us about Larry burns dr. Barry burns you’ll added a Barry Bonds is the founder of a top dog training dot-com he’s a businessman with a business background which told to fold online as we study on the financial markets was for one purpose only when make profit center he’s been trading since age of eight I believe I believe that’s correct which he started with his father Patrick so I like about Charles merits play ready church okay man their behavioral to all kinds of interest you should I you lose the dealership spirit adage well thank you bikes are you know you’re having with your money well so no other than actual me act for whatever reason we’re doing markets is people’s actions they’re mine rester sell what they’re doing the mother monies into usual are dissenters justice so that’s beautiful what I like our church is nothing hard to attract do people take action because people tell you all kinds of stuff oh I we should buy here or this looks bullish or that looks bearish well did you buy are you in have you committed your money well no okay then thats meaningless to me what moves the markets is people’s actions they’re buying they’re selling their putting the money into the market so that’s what’s beautiful about charts is we blow through all of what they’re supposed to do all of what they say oh what the pundits are theorizing and church don’t just map people’s thoughts beliefs hopes or fears they map their commitments and it’s the commitments putting the money into the market is what really moves the market so if the nature of the market is the nature of people with the nature of people alright three interesting that the nature people is actually reflected in the charts so human beings are by nature goal-oriented and you know we were born and we have this instinct this very strong survival instinct that causes us to want to learn how to move to get mobile because if we don’t get mobile we can get eaten up by saber-toothed Tigers so I’m going back a few years here but that instinct is still there to get mobile is actually a survival instinct so that’s a very important first goal learning how to feed yourself very important important goal and then as we get older we have goals of learning which is also a survival instinct meeting someone from the opposite sex getting married having babies getting a job providing for ourselves moving up building security you know we have our lives are kind of set in a basic linear meta pattern and in trading we refer to these as trends now those trends as we move through life as human beings we don’t go straight from you know one goal to another in real life in real life it’s messier so as we move toward our goals we have setbacks and so we even have a phrase for this you know well I’m going three steps forward and two steps back that’s how life really works as we move toward our goals same thing with the markets same thing with the markets Marcus don’t go straight up or straight down they oscillate up and they oscillate down we have Wiggles sometimes people in life they just get stuck in the pursuit of their goals where they just completely get stymied and in trading call this consolidation where the market stops trending for a while human beings need a cycles we work and then we rest we work during the day we sleep at night well most people anyway depending on your shift we work during the week we take weekends off and rest in the market too has many different types of cycles but cycles are not um are not evenly patterned time it with regard to time this is where this study of cycles gets to be very challenging if it was you know a case where well the market goes up for five days and then comes down for three days goes up for five days go down for three days app trade it would be real easy to easy market has no interest in making trading easy for you at all in fact markets interest is to make treating hard for you why well again think of what the market is the market is the people it’s not some esoteric mysterious thing its people as we said so everybody is trying to make money for themselves meaning that they don’t want you to make money because you’re their competition so yes it’s it’s it’s against you meaning all the other traders are against you they’re trying to take the money out of your pocket and put it in

theirs so but human beings also we have these bigger cycles which are more irregular and so sometimes as human beings we get bored with just having a regular schedule and so like when I was in graduate school working my doctorate even on my master’s before that and get ready to write my thesis or a major essay her finals or midterms I would pull all-nighters and then you know I crash after that and I’d sleep for a week so these are called in the market we have expanding and contracting cycles some cycles last longer and some lasts for a shorter period of time so they’re not you’ve you know easily measured and human beings also was the other thing with nature of people well another thing is that we’re emotional we love we hate we overreact where we become passive aggressive and we are certainly not always logical and this is the nature behind bubbles market bubbles where as Greenspan said we get into these periods of your rational enthusiasm it’s your rational you know the whole thing with the the tulip market and the tulip a bubble even over tulips people will go through these same things so I with it more recently with the technology boom the real estate boom these were bubbles people lose their minds they lose perspective over the value of things that over react and I still remember the very top of this most recent real estate bubble all my friends relatives brothers in laws saying oh you gotta get into this thing it’s crazy it’s a whole new paradigm they said the same same with the technology bubble oh it’s this is a new paradigm things are different now fortunately and I’ve been treating for a long time so I told him that they were freaking nuts and uh you know those who don’t know history are doomed to repeat it and so I just I waited and some of my very close friends they were buying right up at the top and I co and I’d had to advise i might say well i’m not i can’t tell you what to do but you know here’s historical precedent you might want to consider this and sure enough they bought right at the top and then they were foreclosed on just a few years later and of course they had to buy multiple properties because they were going to be multi-millionaire supposedly and then some of them went bankrupt well guess what i bought into the real estate market i waited while everybody else was going crazy in enthusiastic and i waited for the market to come crashing down then when it did then i bought then I then everyone thought I was crazy because they said Oh Real Estate’s no good anymore why are you buying now well that’s the way to make money so we’ve talked about mass psychology now let’s bring it down to ye you bring it down to me as individuals we’re trading as individuals most of us we’re not treating other people’s money or for a company maybe some of you are but for most of us were treating a real money and so we are dealing with yes the issue of mass psychology as we analyze the markets but then we deal with individual psychology as we manage ourselves and in the market as with pretty much everything in life will principal called Plato’s principle applies you might have heard of it as the 8020 rule and I’m some people say well it’s even worse than trading five percent of the people make ninety-five percent of the money I don’t know what the actual percentage is our I don’t know if anyone does but the bottom line is the vast minority of people make the vast majority of the money so um and the FCC is documented and puts it on their website that most people the vast majority of people i would even add lose money trading so that’s the fact that we all have to face when we decide to trade all right that’s an ominous fact as we make our decision so how do we respond to that fact well every one of us who participates in trading and decides to go ahead we think we’re different than the masses and otherwise we wouldn’t participate right if you thought you were part of the masses and you’re going to get their results well you know you would lose your money so then you wouldn’t trade so we’re going to moose trading all of us we think we’re different than the masses the bad news is everyone who trades thinks the same thing they think they’re different than the masses guess what that means therefore that you don’t think different than the masses after all you’re thinking exactly like them because just like them you think you’re going to be the exception everyone thinks they’re going to be the exception therefore you’re not the exception if you think you are going to be the exception I know that’s a little mind twister I get it

but here’s the issue you can use this to your advantage the Chinese in Chinese philosophy they call this an iron circle where as long as you stay within this framework or this paradigm of thinking you cannot get out of it you are stuck and that is true with trading for sure on now how do you get out of that then the Chinese say you must transcend the iron circle so I thought about that I’ve studied a lot of Chinese philosophy and all kinds of philosophy all over the world and as I thought about this i thought okay how do i transcend this how do I get out of this and so I came up with a little technique it’s kind of a basic biofeedback techniques not using the actual you know machinery and so forth of biofeedback but here’s how I did it here’s a practical exercise I’m going to give you and you may want to try this it’s up to you it’s its work okay I’m going to tell you right now of course trading is a profession and it takes work it’s not a get-rich-quick scheme so those who want to really succeed are going to have to put in a lot of time here this is something that helped me tremendously then you can do this and you can do it for free here’s what i did i attended a lot of the free live treating chat rooms where traders are actively communicating with each other now the key to this is that you wanna you don’t want to get into the chat rooms for this purpose for this purpose you don’t want to get into the chat rooms where there’s professional treaters who are helping you ok now tho those can be great you know for another purpose for example from learning from that Master trader then that’s great but for this exercise you don’t want that type of chat room you want the ones where there is a you know usually they’re free because there is no professional trader there and frankly it’s a bunch of losers all talking back and forth about what’s going on in the market live during market hours by the way when I say losers I don’t mean that in a derogatory sense I just mean it in a literal sense people who are losing money on a regular basis and what I would do is I would listen to all their comments and I would watch the charts they were trading in conjunction with their comments all right now remember the masses are wrong most of the time so what you’re hearing in those chat rooms is the inner dialogue and the behavior of the losers what they’re typing in or what they’re saying is their inner dialogue and then what they’re doing and you watch that on the chart is their behavior now do this for three to six months it takes a little time it takes repetition is the key and over that three to six months every day you’re listening to other comments and in conjunction with that you’re watching their charts and before long you’ll be able to do the reverse because what you’ll see is there’s many many pattern three typical patterns that come up between what people say and what happens and you look you’ll see for example I’ll just give you one concrete example to kind of put this in perspective so one of the patterns that I noticed was let’s say that the market was trending up and people would type in things like oh my gosh you know this is a trend it so far can’t go any farther so I’m shorting here and they would short ensure the market would come down just enough to fill their order and then turn around go back up and stop them out and then they would type in a few expletives and you knows I won’t repeat what they would say but it were upset obviously and the market would go up even higher and then they would say oh my gosh we’re in be various things over we just broke this or right up against this you know major Fibonacci cluster or were beyond the average true range you know way outside of that um you know this is historically unprecedented whatever and they just say that we were way beyond the beyond or this is an exhaustion pattern was another one they would say bottom line is they just kept thinking the trend was over was way to extend it so they would short again market would come down just enough to fill them turn right back up and stop them out again and that would happen like two three four five times in a row till finally they get disgusted and say oh my god that’s it this market is crazy it makes no sense um nobody can trade this today I’m going in playing golf and they leave the room why must have seen that same pattern have been a hundred times if I saw it once so what would happen is well then I could do the

reverse because of the tremendous repetition of certain patterns like that that’s just one pretty soon after six months of this I could do the opposite i could just look at the chart and i could tell you what the losers were saying what their inner dialogue was because i would see a powder in them say oh here’s this pattern i know exactly what the losers are thinking and that is a very very powerful insight to have and this is I was able to transcend that iron circle because I would learn what the masses are thinking and learn to think differently than the masses very interesting exercise yeah time consuming but let me tell you it’ll change your treating forever in market wizards fantastic book for classic book probably most of you already heard it probably many of you have read it if you haven’t please get it read it it’s it’s amazing Jack Swagger what he did was he interviewed some of the world’s most successful traders in search for a commonality that led to success for for others so again what he’s doing interviewing most the most successful traders in the world and trying to find out what do these people all have in common so is it an indicator is it some you know trading pattern price pattern wet here’s his conclusion that they all had a part um that they all had in common he says what set these traders apart most people think that winning in the markets has something to do with finding the secret formula he said the truth is that any common denominator among the traders I approached had more to do with attitude then approach so again it wasn’t so much techniques or indicators were praised patterns or any of that kind of stuff but it was more of the mental game he wrote he’s actually written quite a few of these books now but his follow-up book new market research he said we has met the enemy and it is us the famous quote from Walt Kelly’s cartoon strip Pogo would provide as fitting a one-line summation of the art of treating his any time and time again those who might interviewed for this book and his predecessor stressed the absolutely critical role of psychological elements and trading success when asked what was important to success the market wizards never talked about indicators or techniques but rather about such things as discipline emotional control patients and mental attitude toward losing the message is clear the key to winning in the markets is internal not external I agree with that one hundred percent so it’s obvious that to be a successful trader you need viable trading method with setups rules and plan that works in fact some people say well the psychology of trading is more important than the actual you know trading method I disagree with those people both are required first of all it’s both but it’s not a chicken and egg scenario to me it’s very clear that you first first must have a successful trading methodology because if you have an unsuccessful trading methodology that just doesn’t work mathematically then it doesn’t matter how much discipline you have the system doesn’t work so if you’re disciplined and following a faulty system well you’re still going to lose money so first comes the treating methodology get a successful one one that works then you apply discipline to that the problem is though that there’s many people who say gosh I’ve tried method after method after method and none of them work but what they’re not realizing is that there’s many traders who actually do have a valuable trading method but they don’t know it why don’t they know it because they’ve never tested the method divorced from their emotions so for this reason I highly recommend that you pay per trade actually we used to use the term paper trading now i really recommend people using an electronic simulator or demo account so that you can get used to actually executing those orders making the commitment getting fuel for doing that and do this for at least three to six months of successful trading it’s very important that I put in that caveat before you put it in a single real money trade on the line and again that trading must be done in real time not after the fact so again this gives additional benefits for helping you learn the timing of entries when you’re using the electronic simulator all right um okay I’ve got a little behind so I’m going to skip this slide and move forward I really when I get to some other things here um yeah there’s some good book here by the way I’d like to recommend to you John Patrick money management for

gamblers money manager for gamblers I won’t go through this quote because of the time constraints and some other things I want to get to but that’s not a book about trading it’s a book about poker but what he talks about their in regards to the psychology of being a poker player applies very much to trading he’s a very colorful guy so it’s very humorous reading as well John Patrick money management for gamblers highly recommend that okay now let’s get down to these tekken to exercise that I wanted to share with you this is really really really really powerful I want to give you gas practical things to help with the psychology of trading so that’s why I wanted to make sure we get I gave you one exercise I’m going to give you another one so in your trading every day of the week um if you’re not trading well but you do have a successful trading methodology it’s most likely because you’re making mistakes mistakes for those of you who enjoy American football I love football football player myself i am from the beautiful city of detroit michigan one of the most lovely places you’ll ever see for those of you don’t know about each rate and being completely sick sarcastic they just went bankrupt yeah it’s not a nice place but anyway because of that even though I live in California now I don’t know I’m just a very very uh you know a sentimental person and so I continue to root for Detroit teams well the Detroit Lions have been a horrible football team this year they’re actually doing pretty good there at the top of their division they’ve got amazing players incredible some of the best players in the league and yet they’re struggling struggling to stay at the top of their division why well it’s because they make a lot of mistakes they turn the ball over too much exceptions fumbles and they Cal OTT of penalties they raped one of the worst teams for penalties so they’re defeating themselves even though they have these great players defeating themselves with penalties and turnovers and that’s what a lot of traders do they defeat themselves they have a great player in the sense of a great trading method they don’t even know because they’re making mistakes so I’ve created a little um a list here I call it the ten commandments of trading and again we don’t have time to read through all of these however I will send you a copy of this and these ten commandments of trading basically translate into the ten most common mistakes people make when they trade so send if you want a copy of this send me an email at Barry be Arry at top dog treating calm and I will be happy to send this over to you for free no charge just let me know you want the 10 commandments of trading or the 10 most common mistakes you can call it either one and we’ll attach it to an email and send it back to you okay and that’s a starting place for you now everyone has different mistakes or issues they deal with but that’s a good place to start because that came out of my research of following traders and seeing what the most common mistakes were among traders what am i 6 a verte sayings in trading is successful trading simply a matter of not making mistakes some people agree with that some don’t I just read an article of someone who totally disagreed with that and then you made some good points but again the point is once you have a good methodology this assumes that of course then it becomes an issue of not making mistakes I have found this to be very true in my own life as long as I don’t make mistakes I come out ahead I win the mistakes are referred to are those Ten Commandments now here’s the question then how do we in a practical sense how do we avoid making these mistakes okay so what I did and again I’ll be happy to send you guys a copy of this if you’d like just send me an email and send you the copy of this for free I use a trading log now everybody uses trading locks okay and that’s fine but most people just put in you know when they entered when they got out how much money they made ah that’s useless your broker can you know give you that every day so mine’s a little different when I do the keys to mine are okay yes I enter in all the data here as far as entries and exits into a fourth then in I have two important areas when is for notes the notes what I actually put in here is two things number one what was I thinking

when I took the trade and the second thing I put in what was I feeling when I first took the trade see we’re getting back to the beginning of the webinar now people trade based on their thoughts feelings beliefs and so forth so I want to analyze that in every single trade you know what am I thinking right now okay so it might be Oh this market so extended to the upside it can’t go any higher okay well if I wrote that right away I would say oh dang it I should not have taken this trade because that’s what losers think that’s losers inner dialogue was a feeling maybe I was feeling nervous where is really really confident or uncertain or hesitant or whatever or greedy I’m trying to make back some losses i had so i’m getting aggressive whatever it is whatever feeling i put there then over here this is the most important section in this yellow area here’s where I put my mistakes i refer back to that list of 10 and by the way that list is meant for you to customize again that’s just a starting point then you you might have some unique problems you have mistakes you make that aren’t down there so you add your own and here I list them Oh what mistake did I make on this trade see that’s one trade right there oh I got out too early i think i got i saw that it was up you know five dollars and i was so excited that I was making five dollars that i closed out my position okay so that’s getting out way too early um or it might be that I’m treating too frequently or I’m revenge treating or whatever until you list that here and here’s your second trade of the day there’s a third trade of the day or if your swing trading you know put it here too now here’s the key I’m going to be having a list of all the mistakes that I made and all my thoughts and feelings for every trade okay very important to document that what’s going on here there we go now this is my weekly treating log so at the end of the day from a date trader then I take all that information and I summarize it in one row the date here’s what the number of wins I had the number of losses i had that day my total profits that they total dollar amount of losses my average dollar win my average dollar loss per trade then don’t forget to add in your commissions and then here’s my net profit or loss for the day and then over here is percentage of account the win or the loss i had that day how much of my account based on the percentage of the total amount i’m account that i win or lose then here we put in the number of mistakes I made then this is really key my net profit and loss if I didn’t make any mistakes and then here a list the specific mistakes so if I got out of trade too soon say three times that day i’ll just list it once but then i’ll put three next to it got out of trades too soon three times and I list them here now two key things here number one because you’ve translated this or transfer this over to a weekly log here’s day one two three four and five and i’ll start to see a patterns which you not totally aware of unless you write it down so i’ll see how many times i get out of a tree too soon I might have a general idea before this that they do that but then when I start seeing it and I say well I did it three times this day five times that day four times this day six times that day three times that day holy mackerel this is a mirror this piece of paper is actually a mirror holding up to your patterns you’re bad trading patterns and it’s right in front of your face and all of a sudden you realize I got a problem it’s almost like the first step in a a you know you’ve got to acknowledge you have a problem but unless you rate it down and you see it in writing you’re not fully aware of how big of a problem you have also yeah we got the list of 10 mistakes but not all 10 of those maybe our problems for you you’ll find out which ones are a problem for you on how often they affect your trading and then you look at this column and this is the one that is the wake-up call this is the one that motivates you see people say yeah but how do we get motivated to change this column because now you say okay you take on your your results profit your loss and you go back and you take out all the losses you had on trades where you made mistakes and you subtract that subtracts is where you made mistakes and you find out how much money you would have made this day this day this day this day this and then at the end of the week what

often happens with students that I’ve worked with this is they find out oh my gosh if I didn’t make any mistakes I’m already a profitable trader I’d already be making money and it blows their mind but it also excites them because then they say wow that’s cool man hey I’m a profitable trader if I just eliminate these mistakes and that motivates them very very powerful tool again does it take some effort does it say take some time absolutely it does of course it does but treating is a business it’s a profession and like any other profession you got to put effort and time and energy into it and most people are not willing to do this and there’s a famous saying one of my famous or favorite famous sayings about success is successful people do with unsuccessful people are on willing to do and so that’s what is true here with that chatroom exercise with this exercise takes time takes effort most people are not willing to do it successful people do with unsuccessful people are unwilling to do so that’s what I have for you today I wanted to give you know against practical exercises there will really help you in your psychology of trading as i said i’m not selling you guys anything today but i do have a free five day video correspondence course and um maybe you guys at um real treaters there can you type in the link for this I know you have a special link for it um through the real traitors yeah it’s there Barry it’s a real traitors webinar com / top dog well there you go that’s easy great thank you so you go there and you can pick up for free this five day video correspondence course that’s my gift to you today no obligation or anything like that it’s five days of videos you get a new video each day for the next monday starting today and this course is actually called how to succeed of trading by breaking every rule you were ever taught it teaches you very heterodox approaches to treating why some of the classic orthodox things you’ve been taught don’t work and then what does where the flip side of that is of course they don’t teach you it doesn’t work but what does or how people are miss reading technical analysis and things like that and then at the end of each one we have an interactive quiz so you can actually review the lesson your quiz done it to see if you’re ready to run get instant answers and oh last thing on day four of the five day video course i give you one of my favorite treat setups um and again this is one that I used to only sell but you guys are getting it for free it’s called the rubberband trade it’s so good every time it sets up I always always trade it to this day and you get the rules that the filters everything rubber band trait that’s on the fourth video so um that’s great well I’m out of time so I don’t have time for Q&A but if you do have any questions my emails there at the top Barry of top trading calm would love to answer any questions you have feel free to send me an email don’t be shy I love talking with traders so I’m happy to do that and I hope you got something out of this I enjoyed being here and again thanks to the great people here at real traders for sponsoring this event and bringing in so many wonderful wonderful speakers I’m really enjoying this and I hope you are too so thanks everybody Thank You Barry special thanks goes to bury for uh you know always being a great contributor to real traitors webinar you can also check out Barry on our podcast real traitors webinars podcast and make sure you check out berries on Barry’s offer which you could do again at real traitors webinar com / top dog