Evolution of a Trader
Well, hello, and welcome to The Evolution of a Trader. All right, my name is Robb Reinhold, and I’m the head trader here at Maverick Trading. I have been at Maverick Trading since 1998. I was one of Maverick’s first traders to walk in the door, and, you know what, I have to say that this topic, to me, is so awesome. It’s so interesting. Look, I love to talk the technicals of trading. I love to talk about the economics of trading. I love everything about trading. But that’s not where people fail. No one has ever failed at trading because they didn’t know how to read a chart. Learning how to read a chart is actually fairly easy. Again, I shouldn’t say it’s fairly easy. It takes some time, but everyone can get professional in charting.
People fail at trading because of the intangibles. I know that I started this process 22 years ago when I was just a young pup, and I had a baby girl on the way. I just went home and told my wife, who was seven months pregnant at the time, that I was going to be a trader. Bless my wife’s heart, she’s always believed in me, and she said, “All right.” She knew that I would go work eight jobs if I needed to, to support them, but she let me go and chase my dreams.
I’m going to give you a little bit of just history about me. I don’t want to make this about me; I want to make this about you. But I really want you to understand that I’ve been through the process. Because of my position at Maverick Trading as head trader, I have literally watched hundreds of people go through this process. I’ve gone through it. I’ve helped a lot of people go through it. I have seen when people succeed, and I’ve seen when people fail, and I really feel that I am one of the unique people in this world that has actually been able to be in the process of a large number of people as they actually went on to become a professional trader. So, again, this, to me, is one of the most important webinars that I could ever do. The irony is that most … not most people, but some people are going to say, boring, where’s the charts? Where’s the stuff? Where’s the technicals? All that can be learned. I really want to set you up for getting into this business correct.
So it’s titled Trading Success. Now I’m going to ask you the first question: What does that even mean? What does trading success even mean? Because my guess is that everyone has a different idea. When you hear the term professional trader, my guess is that your mind goes to the movies you’ve seen on TV, Gordon Gekko, Wolf of Wall Street, Ferraris, Lamborghinis and yachts. I’m going to tell you right here right now that’s not going to happen to you. Now, look, it might happen to you. You might be one of those, but it’s like the same thing if people go into Hollywood to become super famous. Not all of them are going to be wild stars. Some people are going to have supporting roles. Some people are going to just make a living in the community.
So I want everyone to, first of all, let’s not have this as the ultimate goal, because I think that’s setting yourself up for failure. This is going to happen to a very, very small percentage of you, a very small percentage. Out of a group of a thousand, there’s going to be a couple. Again, this is the bell curve. We do a lot of stuff with the bell curve at Maverick, and we always talk about how those outliers, they don’t happen very often, but when they do, they’re very, very special and very different. So I want you to get rid of that idea altogether.
I want you to really ask yourself, what are your goals from trading? Now 22 years, let me tell you what my goals were, and of course these things change over the years. But as I said, I had gone to junior college, and I don’t like to brag about it, but I did graduate from a junior college. Yes, I know, a round of applause. Look, it was a good experience. But I knew that I didn’t really want to go to college, and I was the only one in my family to not get a college degree. My poor father, one of his goals in life … His parents were Russian immigrants. He was an only child, and they all pitched in to get him his college degree. One of his goals was that all of his kids have college degrees. I have not yet, and probably never will, complete my four-year degree.
It’s funny because my dad bugged me for about the first 10 years trading, saying, “Hey, if this trading thing doesn’t work out, then you’re going to have to fall back on the college degree.” Finally my dad’s like, “Hey, can you help me with some of our money here?” So my goal was I didn’t really want to do the traditional job thing. I wanted to have freedom and flexibility. I wanted to be able to be home with my kids. I wanted to be a big part of my kids’ life and my family’s life. I wanted to travel, and I didn’t even have it in my mind that I wanted a Ferrari, and I don’t want a Ferrari. That’s not even close to what I want. I want things like stability, safety. I want to set my own hours. I want to control my own fate. That was my goal from trading.
So when we bring up this thing as trading success, let’s throw out all the pipe dreams. Let’s throw out all the BS, and let’s really focus on what do you want from trading. Now some of you are already trading. Some of you are already trading and doing well. Some of you are trading and losing. Some of you have never traded before. Everyone’s idea of success is going to be different. I’ve met some people that want to be a professional trader, and they want to do it as their only source of income. I’ve met some people that say, hey, you know what, I really like what I do, but I would love to make an extra $50,000 a year from trading. I’ve met some people that say, Robb, I just want to stop losing money. If I could just show my spouse that I made some money and didn’t lose money, I would be so much happier than where I am now. Again, for some of you who have never traded before, this is something you say, you know what, I would really love to get involved with this.
I think it’s very important, before you start at this … And some of you have already started, but I think it’s very important for everyone to stop and really think about what do you want from this, because what you want from this is going to control how you trade. Your personality’s going to control how you trade. So that’s why I really want to start out with this whole idea of success. To me, success is basically making money. I know there’s a whole lot of range in there, from making $1 to $100 to $1,000 to $10,000 a year, to $100,000 a year, to a million a year. I get it. But, to me, profitability is success. So let’s talk about the evolution of a professional trader, because that’s what this is all about.
All right, well, let’s start with step number one, so step number one: Humbled by the market. Let’s talk about that, because this is pretty much the path that everyone goes down. Very few people, other than the people that went to an Ivy League college, were recruited by a Wall Street firm and were taken into the doors of a very elite organization. You pretty much had to get into the market like the rest of us did, where you were interested about trading. You read a few books, watched a few videos. You watched some TV shows about it, and you thought to yourself, oh, my gosh, I would love to do this for a living. I would love to travel all over the world and click some buttons and make money. Now, look, everyone wants to be a trader. I mean, I shouldn’t say everyone. My wife, she’s watched me do what I do for 22 years now, and she still has no desire to be a trader, so I can’t say everyone.
A quick story about my wife, and this is so funny. My first year or two of trading, I got really excited, and I really wanted her to do it with me. I thought, wouldn’t it be great if we did this as a husband and wife? But I couldn’t really get her interested, because she’s not motivated by money at all. I thought to myself, what motivates her? I thought, shopping. She does like to shop. So I set up an account in her name with 5,000 bucks and said, hey, look, whatever money you make in this account, you can spend. You can do whatever you want with it. This is your money, and I hope you do it. You just have to be part of it. She’s like, “Okay.” Well, a couple of weeks goes by, she hasn’t said a thing. I’m like, “Hey, do you want to do that?” Nah, we’ll always do it later.
One day we were in the mall shopping, and I said, “Oh, do you want to go into the Gap?” She says, “Oh, no, the Gap is so bad right now. They have the worst clothes. No one goes in there whatsoever.” So I said, “Great, let’s go home and short the Gap.” She looked at me like, what? A lot of people don’t know. Shorting is where you’re actually betting a stock goes down. So that day we went home. We sold the Gap short, and at the same time, she said, “I really like Target. I go there all the time. I go there to buy one thing; I buy 100 things.” So she went short Gap, long Target.
Fast-forward a couple of months, and she sold both. She got out of both positions. She got out of the Gap for a gain because it dropped. She got out of Target for a gain because it went up, and she had about $12,000. I had them cut a check to her, and she took that money, and she spent it. She spent it all. I thought to myself, oh, I’ve got her now. Weeks went by, nothing. I said, “Don’t you want to learn how to do that so you can do it again?” She’s like, “No, that’s what you’re for.” She said, “Look, I just want to be a mom.”
So I realized then that I was going to be the person doing it, but that’s how we all get into it. We get interested in trading. We love finance. We love the market, and so we open up a trading account. We go to E-Trade. We go to TD Ameritrade. We go to Schwab, wherever it is, and we open up a trading account. We have these delusions of grandeur, and we start trading. For most of us, we actually end up doing pretty good at first. We get pretty good, and we get kind of cocky, and then we lose it. Then you think to yourself, okay, I just made a couple of mistakes. So you go get some more money. You put it back in the account, and then you trade more aggressively because your whole goal was to get back the money you just lost, and then you lose it again.
Then the trader goes and says, oh, man, you know what, I need some software to fix the problem. You hear about software all the time. Oh, this thing blinks red. This thing does this. This thing gives you signals. This does this. Or I’m going to follow someone else’s trades. How about that? I sign up for a trade service. They find out that, once they buy that, they refund the account, and they lose again. This is pretty much how everyone gets into this business.
Now it looks like at first when you get into trading, you think, oh, okay, it’s not that hard. When you get into it, you realize it’s kind of ridiculous. I always have this as an analogy. This is a profession, and this is a hard profession. If you’re a doctor, there’s a path to become a doctor. If you’re a lawyer, there’s a path to become a lawyer. If you’re a police officer, there’s a path to become a police officer. If you want to cut someone’s hair, you have to go to school. You have to train. You have to cut hair on dummies, and then you have to cut hair on people that pay you $4, and you have to pass tests. You have to get a license to cut someone’s hair. But anyone with enough money to open up an account is allowed to go out there and trade. It’s no wonder that people fail. It’s the same thing as saying, hey, I really want to be a doctor, but I’m just going to do some surgeries first. I’m just going to do some surgeries just to get my feet wet. Let me just do some surgeries to figure out what I’m doing, and then I’ll start making money. Again, it doesn’t work like that. But for some reason, this one professional, trading, everyone thinks it works like that. It doesn’t work.
So I think everybody, almost everybody … Everyone has to go out there, try it first, get their butt kicked, and be humbled. I love to get people that are right at that point, because they’ve lost the ego. They’ve figured out, holy crap, this is a lot harder than I thought. I didn’t know what I didn’t know. That’s when someone is trainable and teachable. That is the moment right there where someone’s journey actually starts. Now the great thing is I’ve met people that didn’t have to go through step number one, and it’s awesome, because people that go through step number one, they develop bad habits. Sometimes it’s very difficult to break those bad habits. It’s much better for me to get a hold of someone who hasn’t developed any bad habits, because it’s much easier to train them. At this point, it’s all about study. Now realize that it’s study without trading. This is where it gets really awesome.
All right, I’m going to go into, again, what is just such an awesome book. Years ago, I got a hold of this book called Peak. Peak is by a gentleman named Anders Ericsson and, I think, Alexander Pool. This book was all about how do elite people get to be proficient. A lot of things like playing the piano, that we always hear about people that are gifted. They’re virtuosos. Can anyone learn how to play piano at a very proficient rate? Things like that. From the book, when you look at how people are trained in the professional business world, you find a tendency to focus on knowledge at the expense of skills. The main reasons are tradition and convenience. It’s much easier to present knowledge to a large group of people than it is to set up conditions under which individuals can develop skills through practice.
So what everyone does, and, again, they make their first mistake, is they go out, and they read. They got out, and they get books, and they read, and they read, and they read, and they study, and they read. Guess what. It doesn’t work, it doesn’t work. You have to train. This is training. So I highly recommend … Sorry, Robert Pool. I highly recommend … Go get the book. Look, I get no kickback. I have never met Anders Ericsson or Robert Pool, and we get no kickback whatsoever, but this is just a really great book. I’ve turned a lot of people on to this book, and they all tell me, okay, this really helped me in my trading, but this also helped me … I coach a soccer team. I also work with youth, and it’s such a great book about how to become really good at something.
Basically, they say the path professionals take is called purposeful practice. I believe it was Bear Bryant said that practice doesn’t make perfect, perfect practice makes perfect. In the book, it says, “True genius isn’t born. It’s a mere result of years of deliberate practice.” Now we have a saying at Maverick, and the saying is, “Traders are not born; traders are forged.” If you don’t know what the term forged mean, forged is when you put something through fire, through heat, through pressure. That fire, heat, and pressure literally changes whatever you put in. When it comes out after that process, it’s harder, and it’s better. No one is born as a professional trader. No one is born as a profitable trader. Every single one of us starts out as a losing trader. Traders are forged, and you’ve got to go through the process.
This is the process, and I think a lot of you are going to see, as we go through this, the process you’ve been going through is not effective because it’s not purposeful practice. Again, I highly recommend the book, Peak, because they talk about the four parts of mastering. Number one, clear specific goals. Two, focused during practice. Now think about that. How many of you have just gone out and traded and seen how it went. That’s how I started. It went well for a little bit, and then it went terrible, but focused, actually focused during practice. Pushed to achieve more, and feedback after every attempt.
Now in the book, one of the very first stories is that they were trying to see if mastery works. They took one of the people working on the book, and they had them memorize numbers. So they just called out numbers. Five, seven, twelve, thirty-three, twenty-two, fourteen. The average person can remember seven numbers in a row. So what they did, they set up a test where, every single day for a month, the person would come in and actually do this exercise. If they memorized seven the day before, they had to stay there until they got eight. Now that might have been five minutes. That might have been an hour. It might have been an hour and a half, but they made sure that they were focused. They went into a room. There was no sound. There was nothing distracting. That person was focused. Each time they got to one more number, they started the session at that next point, and then at eight, they had to get to above eight.
As you can see, pushed to achieve more. The only way to grow in skills is to go past your abilities. So they were pushed to achieve more, and then they were given feedback after every attempt. This is what you can do to help yourself get one more number tomorrow. They did this for 30 days. At the end of the 30 days, this person could memorize 36 numbers in a row. Again, phenomenal. Again, this is what the book, Peak, and Anders Ericsson found, is that you have to practice think that way. If you want to get better at something, you have to practice.
Now here’s the coolest thing, and I love this, and I’m going to geek out on you for a second. You may not find this interesting, but I remember playing sports growing up. My coaches always talked about muscle memory. Well, that’s kind of a stupid term, because a muscle doesn’t have a memory. A muscle is simply a muscle, and when you move your finger, your finger is simply … Your brain has sent a signal, and it travels down through the nerves, goes all the way down your arm and goes to your finger, and it tells the muscle to contract. That’s all that’s happening is you’re moving your finger. What muscle memory is, and they’ve now scientifically proven this, that if you were to do the same exercise over and over again, deliberately practicing, what happens is that the neurons actually thicken along that nerve pathway. So the pathway that that nerve signal’s going down to your finger, it will actually grow, and it will actually get a thicker filament that makes the signal go faster and more reliable. It’s literally changing your brain structure. Again, the book, Peak, I wish I had more time to go through it, but it talks about all the scientific proof that, when you do deliberate practice and deliberate study, you are actually changing your brain and your neural pathways, and you are getting better. But it only comes with deliberate practice.
Another story from the book, chess. Again, this was a big part of the book. They used chess to really find out what makes people great. What makes great chess players great? What makes good chess players just good? I love this study. They took a group of people that had never played chess before and broke them up into two groups. The first group played one game a year of chess every day for a year. The other group never played a game, but they studied chess moves. They studied past chess games and chess theory every day for a year. At the end of the year, the group that had played a game of chess, actually played the game, they were equivalent to a one-year chess player. They had the skills of someone who had been playing chess for a year. The group that had never played a game of chess, when they finally played a game of chess, they were the equivalent of a 10-year veteran. What was the difference? Deliberate practice.
So let’s go back to what most people do to get into the world of trading. We talked about it. They open up an account. They read some books, read some general knowledge, and they click some buttons. They think, if I just keep trading, if I just keep doing this, if I just keep reading this book, and if I just keep doing this, I’m going to get it eventually. Hopefully, you can see that that person will never get it eventually, never get it eventually, because they didn’t get the skills. They did the work. They did the exercise, but they didn’t get the skills.
So the evolution of a professional trader. Again, it starts with that intense study. Again, at Maverick Trading we do this, and, again, we’ve actually built our entire system around the books of the Outliers. We love the book, the Outliers, and it talks about 10,000 hours. We talk about how to speed that up, how to get better. We built it around the book of Peak. Basically, what we’ve done is we’ve broken down every single aspect of trading. Let’s just take something like order entry. You need to know how to put in an order. Great. We have our traders practice that over and over and over and over again until they are experts at putting in an order.
Then we move on to something like candlestick charts. We have our traders do exercises over and over and over again on specific candlestick charts to master those things. That’s what the book Peak basically says is that professionals take every single little thing and break it down into simple to master things, and they go one by one and master those. At the end of it, they’re professionals.
One of my favorite documentaries I’ve ever watched, it was an NFL documentary on J.J. Watt. J.J. Watt, if you don’t know, he’s amazing. He is a defensive tackle for the Houston Texans, and he is unbelievable. If you watch his training program, he spends one hour a day working on his first step, one step. He works an hour a day working on his first step, making sure he gets it exactly right. Can you imagine that kind of dedication? That’s why he’s the best. Then, after that, he has this wall built where he has lights that light up. Every time a light lights up, he has to touch it. Once he touches it, it goes off, and another light comes on. He does that for 30 minutes to work on his hand-eye coordination. It is unbelievable to watch that. When you see how he trains, you see, oh, my gosh, of course this guy’s the best; look how he trains.
That’s what you need to do in training. Stop reading books. Stop clicking buttons. That’s never going to work. You have to train to become a professional, just like a doctor or a dentist. I have a friend who’s a dentist. Again, I’m going to throw out dental terms that aren’t even close to right. But, again, you know that in dental school, they will have you work on the D12 molar … Again, I have no idea if that’s even a thing. I’m actually pretty sure it’s not because I totally made it up. But they’ll have classes on the D12 molar, how it works, and how to fix it. Then they’ll have labs where they have to go and actually fix that D12 molar. Then the next week they’re going to have on this tooth, and they’re going to have all the things. Again, that’s how you become a professional at it.
This whole idea of I’m going to watch some Fast Money on TV, I’m going to listen to Cramer, I’m going to follow someone’s trade alerts, and I’m going to make a whole bunch of money, it’s never going to work. It’s never going to work. You have to go through the system. You have to go through it. So perfecting your strategy, breaking it down into practices that you can do.
One of the things we do at Maverick is we require every single one of our traders to write and develop a trading plan. Basically, a trading plan is exactly what you’re going to do all the time. You’re going to think about situations that might happen. Let’s take what just happened in the market. The market just had a 10% pullback, a 10% correction. We haven’t had a correction since January of 2016. This correction, it sort of came out of nowhere, because all of the things that caused the correction, the market already knew three months ago, and the market kept going up. So the market said, oh, just be long, just be long. It’s going to be okay, and, all of a sudden, boom, market tanks. If you didn’t have a plan, you sat there like a deer in headlights, and you probably lost a good chunk of money.
Traders with a trading plan, they plan that out. We always talk about worst case scenario. What is the worst case scenario? Our software will literally show you what is the worst case scenario on your portfolio. Hey, I’ve got 20 trades going right now. Worst case scenario: What if the S&P drops 10%? What’s my worst case scenario? We plan for that to happen. We plan out what we’re going to do when that happens. Having a trading plan, I don’t even see how you can be successful at trading without it. So, again, if you’ve been trading for a while and you haven’t developed a trading plan and haven’t written it down and gone through it and tested it, you’re doing what all the amateurs do. They go out, and they click buttons and think they’re going to get it eventually.
Now, look, I’ve seen lots of cycles. In 1999, hey, there were a lot of people that made money trading. They lost it all in 2000. I’m definitely seeing … And one of the reasons why we’re having this webinar is that I know, in my own personal life, I’m starting to see a lot of people that had no interest in trading all of a sudden get interested in trading and say, Robb, hey, you’re a trader. I really want to get into trading. Now they didn’t want to get into trading three years ago, because the stock market was too risky, and it was too confusing, and it was rigged and all this stuff. Now they’re interested. I’m thinking, uh-oh, one of the signs of a market top is when the amateur finally gets interested, which is fine, because, for a professional, we don’t care if the market goes up or down. At Maverick, we’re market agnostic. If the market goes down, guess what, we’ll be on the short side. We’ll be on bearish trades. Again, we do a lot of options. We do a lot of Forex trading. It doesn’t matter. All right, sorry I’m getting way off the subject here.
Simulator trading: This is the greatest thing in the world. When I started out, I started out back in … I call it the stone ages of trading. There were three books about trading, and everyone on Wall Street said you can’t make money trading. The only way to make money is to buy and hold. When I told people I was a trader, they always kind of laughed at me and said, oh, are you gambling? I always got defensive. Now whenever someone asks me that, oh, isn’t that like gambling? I say, no, no, it’s not like gambling; it’s literally gambling. Now gambling has this negative connotation because most people that gamble lose. Gambling is simply playing odds. If you know how to play odds, it’s a good thing. If you don’t, it’s a bad thing.
So one of the greatest things that you have were all these wonderful tools, simulator trading. At Maverick Trading, we have several different simulators for traders to practice their charting skills. Now the great thing about a simulator is that, when you are demo trading, it takes a long time. So, again, if you are going to make a trade and the trade lasts for two weeks, you can get one trade experience in two weeks. You’ll never get up to the 10,000 hours that Gladwell says you need in order to be successful. Now, of course, 10,000 hours is just a round number, but you need to get experience. You need to train. That’s too slow of trading.
So simulators basically make it to where you can get … Our traders can make 100 trades in an hour on a simulator. That is so much experience. They can go and make options trades over the last three years. They can go back at any time in history, go back to three years, put together an options trade, and see how it turned out within seconds. This is how you practice. You perfect your strategy one by one. You build your plan. You go and practice it on a simulator, because it’s too slow to do that in a demo account. Demo trading is just too slow. You need to spend a lot of time on simulators. Well, once you get that down, now is the time to get into demo trading and allocation of a plan in the live market. You put everything together.
Now here is something that a lot of people found out. Demo trading is a lot easier than real trading. Raise your hand if you found that out. Raise your hand if you found out that you were a Superman or Superwoman on the demo account, and then you found out that, when you got into the market, it was a little bit different. That is how it works, but that’s the process. Hopefully you can see that all of this happened, and all of this should happen before you even risked any more. Now, of course, almost everyone has anyone go out and do this. Everyone has to think I’m smart, everyone else is dumb. I can do this. I can be a doctor with no training, no anything. But, look, if you haven’t had to do that, that’s awesome. At this point, you really shouldn’t have any money at all at risk. It’s the same thing as a doctor. A doctor should never be doing surgery until they’re qualified. That is reckless to do surgery when you’re a first year med student. It’s ridiculous, but people do that all the time. Once you finally do it, this is where you start to trade.
Now this is where I usually burst people’s bubble, because all of that I went through was a lot of work, intense study, breaking it down piece by piece, mastering every little bit, developing a trading plan, practice in simulator and demo accounts. You practice until you’re making money on those. Then you get into the live market condition with real money, and you’ll probably break even or make a little bit of money.
All right, now look, again, this is where I burst everyone’s bubble. They say, are you serious? Look, no one is born as a professional trader. Everyone is born as a losing trader. The fact that we’re human, we’re going to lose at trading. Everyone has to go through the process where you go from a losing trader to a break even trader. Now whenever people say, oh, Robb, I’m only breaking even my first month, I’m going to say, okay, do you realize that that puts you in the top 15% of all people that have tried this? That’s awesome. It’s all part of the process. The great thing is that, at that point, traders can see it. They’ve put in the work. They’ve put in the effort. They can see, wow, you know what, this is actually working out, but it might not be making as much money as I want.
Again, here is why, and we’re going to get into what I think is the most important part of trading. It is that, at this point, the trader is no longer focusing on the money. They’re no longer focusing on the mansion with a Lamborghini or the lifestyle. Now it’s to a point of just I want to be profitable. That’s it. All I want to do is be profitable. That’s it. Following the rules becomes more important than making the money, following the system. Now this is where, at Maverick, we always say look at the numbers. Every single trader should know their numbers. All of our traders, we have them journal. We have them track their trades. At any time, they should be able to say, okay, this is my win/loss for the last month. This is my risk/reward ratio. This is my Sharpe ratio. This is my drawdown over the past year. Once you know your numbers, that’s when your trading correctly, because anyone can make or lose money on one trade.
One of my favorite speeches to give is what I call my 10-trade analogy. Now every one of you who go out to make a trade, let’s say you make 10 trades. Now here’s the irony: Every single one of these 10 trades you make, you’re only going to make it because you’re absolutely convinced it’s a good one. Think about that. You’re convinced. You wouldn’t make the trade if you didn’t think it was a good one. So out of these 10, you think all 10 are going to be good. The problem is they’re not. You’re going to have some losers in there.
Now one of my favorite stories to tell people is, my first year of trading, if you were to ask me, Robb, do you think you can be right on every single trade? I’d say of course not. That’s ridiculous. No one can be right on every single trade. What about the trade you’re in right now? Oh, yeah, I’m going to be right on this one for sure, for sure. Does everyone see how ridiculous that is? Yes, no one can be right on all of them, but this one I’m in right now, I know for a fact it’s got a great cup and handle. It’s breaking out to new highs. Guess what, you don’t know.
So out of these 10, you’re only going to have a percent that make money. Out of these 10, let’s say you have three to four that are bad. You have one that’s god awful. You have three to four that are okay, and you have one that’s amazing. Look, your results are most likely going to be distributed amongst the bell curve, where most of your trades are going to be decent winners, decent gainers. You’re going to have some that actually went up pretty big, and you’re going to have one or two that were absolutely fantastic or the worst trade you’ve ever made. This is a guarantee. No matter what system you’re using, you’re going to have these tails. As a professional trader, your job is to cut off that tail, again, risk management. We preach risk management all the time. But realize, out of these 10 trades, you’re going to lose some.
So when you start to become a professional trader, you stop looking at trades individually. You stop looking at your daily P&L. You stop looking at your weekly P&L, and you just look at your numbers. What are my numbers? What’s my win/loss? What’s my risk/reward ratio? What are my numbers? Once you can get to that point, you’re looking at trading the right way. If you’re still making trade by trade by trade, you’re gambling, you’re totally gambling. So, again, once you get your numbers, then it’s all just making adjustments, making adjustments to the plan, taking a look at your numbers. I want a little bit higher risk/reward ratio. How can I do that? You make some adjustments, and then you implement the changes. This is the process.
Now during this whole process, like I said, the trader is most likely to be break even or slightly profitable. This is where they’re going to find the real secret to trading. It’s all about psychology. Because once someone goes through this process, they’ve spent the time. They’ve developed their system. They know what they need to do. They’ve written it down. They’ve practiced it. They have a little bit of confidence. But what happens is one out of every 10 trades, they’re going to blow it. One out of 10 trades, they’re going to be, oh, I didn’t follow my rules. I love, again, getting people to this point, because this point, they’re right on the cusp. They’re right on the cusp. What they need to understand is, at this point, it’s all about psychology.
Now I’ve always said it take someone three to six months to learn the Xs and Os of trading. Again, I say three to six months. Obviously, it’s just a total number of hours, but three to six months to get what I call the Xs and Os. Basically, practice, study, and develop your trading plan. After that, it’s all about psychology. What happens is, because we’re human, we’re going to fall into pitfalls. One of the very first things we do with our traders is, when we bring them in, they take a trading psychology test where they answer trading questions of what they would do and how they would react. It gives them a personality score.
Now, look, it’s basically the Myers-Briggs test. So, again, if you know your Myers-Briggs test score, if you told me, hey, you know what, I’m an ENTP … By the way, that’s what I am. I’m an ENTP. I can automatically tell you your strengths and weaknesses as a trader. If you say, Robb, I’m an ENTP and I’ve been trading for three years, I can tell you all the mistakes you’ve made already. Why? Because that’s your personality. You are bound to make those mistakes.
Now I remember going through this process, and I was getting pretty decent at trading, but I will still making a few mistakes. Those mistakes were costing me to be mildly profitable to majorly profitable. I would just tell myself, you idiot, just be more disciplined. Raise your hand if you’ve told that to yourself before: You idiot, why did you do that? You know you shouldn’t have done that. Just be more disciplined. So you get your mean face on. You be like, I’m never going to do that again. I’m going to be more disciplined. What do you do? You do it again. You beat yourself up. You say, you idiot. I remember when I finally realized, oh, my gosh, I’m going to do this all the time. I can’t control this. All of a sudden, I realized this was part of who I was, and I had to learn how to make it in spite of this, because I realized I wasn’t going to change it.
So, again, I am an ENTP. E stands for extrovert. Now if you are an extrovert, I can already tell you that you are going to overtrade, most likely. That’s going to be one of your issues, overtrading. That was definitely one of my issues, and I would have a very good couple of trades, and I’d make a good pile of money. Then, out of boredom mostly, I would keep trading and give away some of that profit. I told myself, Robb, you idiot, stop doing that. You’re smarter than that. You know you shouldn’t do that. Just don’t make any more trades this week. You hit your target and more. What did I do? I kept trading. I couldn’t control it.
When I finally realized, oh, my gosh, I can control this, I thought to myself, okay, how can I fix this? At the time, I had a token. I had to put in a code every time I could get into my account. So I gave me wife my token after I hit my target. I’d be like, “Do not give me this token. No matter what I say, do not give me this. You have to promise me.” She’s like, “Okay, I promise.”
Now the first time, of course, a day later, I’m like, “Hey, I really need that token.” She’s like, “You told me not to give it to you.” I’m like, “Yeah, but I just need to check something.” So she gives it to me. I go make some trades, lost my profit. I’m like, “Why did you give it to me?” She’s like, “You were very convincing.” So I had to tell my wife, “Do not give this to me,” and I would go to her, and she wouldn’t give it to me. Now, look, that’s pathetic. I admit that is completely pathetic, but I realized that I did not have the discipline to manage it. Before, I was just beating myself up, but I realized, oh, my gosh.
Now here’s the great thing, is at a certain point in time, I didn’t need to give her the token anymore, because I had learned it. I had mastered it. I had done it enough times it had become a habit. Again, we talk a lot about this with our traders, and this is one of the things that I think there’s a lot of books out there, a lot of great books on trading, but there’s not many great books on the psychology of trading. This is real world stuff. How do you not make the mistakes that cost you to be profitable? You’ve already tried discipline. You’ve already tried software. You’ve already tried some books, but you still keep doing it. How do you re-loose and eliminate those mistakes? Well, first of all, admit you’re going to make them. Then develop systems, just like I did, my pathetic give it to your wife system, to not do it.
Another one of my problems was that I had a hard time sometimes with position management. I would let one get away from me too far. I fixed that by getting into option spreads. I love option spreads. Oh, my gosh, option spreads … Again, it’s so silly. I love to show people this. I wish I had more time. But, again, let’s say you buy a stock at 50 and you put in a stop at 49. All right, a stop order, if you don’t know, is an order that automatically gets you out. As soon as the price hits 49 or lower, it gets you out. So one of the big problems with stops is that people use them, and it sounds good on paper, and then what happens is the stock goes down. It hits 49, goes all the way down to 48 … Or, actually, it goes down to 48.98, as most of you know. It goes down to 48.98, stops you out, and then rebounds and goes back up to 53, just where you thought it was.
Now this, to me, is what I call the worst trade in the world. Why do I call it the worst trade in the world? Losing money when you’re right. You were right that the stock went from 50 to 53 in your timeframe, but you lost money. Again, I call that the worst trade in the world. With an option, you basically … Again, this is going to be a very simplified option example. But you could buy a $50 call for $1. You could let this thing go down to 40. You can only lose a dollar, same as if you had your stock. If this thing comes back and runs back up to 53 within your timeframe, you’re profitable. Stops, it doesn’t matter anymore. Again, one of the things, again, I was having a hard time keeping my stop all the time. So what did I do? I change systems, went to option spreads, and, again, it’s awesome. Now I have no problem with discipline where I totally did before.
This is where, again, we work with our traders to make sure that, hey, how do you get over that hurdle? You’ve tried discipline. You’ve tried books. You’ve tried softwares. No, it all is about psychology. So what we like to do here at Maverick, again, goals, limits of risk, advancements. Personal accountability is a huge thing. One of the things I highly recommend to everybody is to publish all of your trades. If you know someone that’s trading, publish them. Say, hey, these are the trades, and just share your account. These are the trades I’m in. Why? Because if you know people are watching you, you do it better. It’s when you’re all by yourself, no one’s watching, your spouse don’t know about it, no one knows; that’s when you screw it up, and because there’s no personal accountability. If there was someone there watching you, you wouldn’t have done it. We all have been there. That’s just what happens. So to have someone watching over you is huge. Again, I highly recommend get a risk manager to watch over your trading. They reach out. Hey, you’ve got too much risk on right now. Have you thought about what if the market goes down 5%? Again, adjust your systems here.
The ultimate goal is perfect trading. Now, again, perfect trading does not mean that you make money on every trade. That’s ridiculous. Perfect trading only means that you followed your system and plan every single time without deviation. You had your psychology under control, even when the markets go crazy like they’ve gone over the last couple of weeks. You’ve had your plan.
One of our lead traders worked with one of our newer traders, and the newer trader was distraught because, over the past month, they had been leaning mostly bullish, and the market whips on them, and it got them. They had lost 70% of their trades. They had a 70% loss, 30% win. They were down .2% in their account, and they were very distraught. He just laughed and said, “That’s awesome.” When you’re on the wrong side of the market and it goes against you and you have … Again, he had a 1.9 reward to risk ratio. That’s awesome. That’s awesome. He didn’t make money, but it was perfect trading. He weathered the storm based on his plan, and when the market turns, it’ll go ahead be profitable.
So, again, let’s wrap this all up. I hope that you’ve taken everything I’ve said and really put this into your life, because I know that everyone in here is at a different stage. When I started this, I was 22 years old. I’m so happy that I was born … First of all, I was born at a time and place where I could do this. I was one of the first generation that could even trade for themselves. If you’re older, it just wasn’t available to you, but I’m so happy that I learned this at a young age, because my life is completely different than my parent’s life. I’ve been able to travel the world. I was able to stay at home with my kids almost all the time. I’ve been able to, again, use trading as a great way to support my lifestyle, the lifestyle that I wanted.
But becoming professional, it took work, and I want to just stress that, is that this takes work. If this is something you say, hey, you know what, I may want to get into it … Again, if you’ve never traded before, you’re kind of like, hey, I don’t know if I really want to do this, I’m going to say go do some thinking. Ask yourself if you’re willing to pay the price before you even start, because there’s a lot of people on this webinar that have already started, and they’ve already paid a lot of money to the market. They still don’t quite have what it needs to be profitable. If you don’t learn one way, you’re going to learn the other way. The market will take your money. The problem is, the market never teaches you what to do; it just tells you what not to do. So if you haven’t started before, I’d say really think about it. Really give yourself a realistic timeline. I tell people, look, yes, you can make money right away. But if you’re looking to make a living at trading, I would say give yourself two to four years, two to four years as a window.
If you’ve already started the process and you’ve already done some trading, you’ve got some bad habits to break. You know that, and I know that. But, again, ask yourself if you’re willing to go back and pay the price, again, of starting at the beginning, because I’ve met a lot of people that say, oh, Robb, you know what, I know what I’m doing. I’ve been trading for five years. Let me see your statements. Well, I haven’t been profitable in the last two years, but I know what I’m doing. I know what I’m doing. I just need capital because I lost all mine. That’s the most difficult person, because they’re not humble enough. They aren’t willing to go back and go through the process that’s required to become successful. They just want the success. All they want is the money in the end. Well, guess what, you don’t get the money in the end until you go through the process. So, again, focus on the trading plan. Focus on the practice, and focus on the psychology. The money is an end result.
It’s like anything you do in life. If you say to yourself, hey, I’m overweight, I need to lose 20 pounds, you don’t get to lose 20 pounds first. No, you have to go to the gym and bust your butt and sweat your guts out, and there’s days that you don’t want to go, and you have to eat disgusting salads. I know, some of you like salads, whatever. But you have to eat disgusting salads, and you have to eat food that you don’t like, and you’re going to be hungry, and you’re going to be craving. Look, I get that. But it is an absolute guarantee that, if you pay the price, you go to the gym every day, you burn more calories than you put in your body, you eat the right things, you lose weight. You get to your ultimate goal.
So I know the ultimate goal is to … Maybe it is to have a mansion. Maybe it is to be in a yacht, whatever. It doesn’t matter what that is; you have to pay the price. So that’s really what I wanted to share with you on this webinar, was that, if you’re willing to pay the price, the money comes. Don’t focus on the money. Focus to trading correctly. Focus on practice. Focus on building your numbers. Have someone personally accountable that’s looking over you to help you through it. Make sure you’re willing to pay the price.
Now here’s a great thing. Just like the example of losing weight, I know that if you pay the price, you get your goal. That’s how life works. Now I’ve learned that it doesn’t always happen how we think it’s going to happen. My process to become a trader had some bumps in it that I did not think about. In 1999, I lost 80% of my account because I was totally convinced that the dot-com craze was going to crash in the fall of 1999. Well, I was right. I was just a little early, a little cocky, blew my risk management, and it cost me. I was devastated. I’ve cried. I remember trading brought me to tears. It’s brought me to tears before. I seriously considered I’m going to give up, I can’t do this. But I knew it was what I wanted to do. I knew it.
So I had to go get a side job. I borrowed some money, made up the money I borrowed in four months, paid it back. Looking back on it, that was a really rough time in my life. I was a new father, all this pressure on me. But looking back on it, I realized I had to go through that in order to know I never want to go through that again. It stinks. I wish I could wave a magic wand and wave you all through the process, but the process is the process. But the beautiful thing is, if you get through the process and you get to the end, it’s all fantastic. It’s all fantastic.
Now, again, thank you for joining me. If you don’t have information about Maverick Trading, hopefully, again, you were invited to this webinar because you’ve had interest in Maverick Trading at some point in your life. We have two separate divisions. We have options and equities and Forex, so MaverickTrading.com is our options and equities division. MaverickFX is our Forex division.
If you don’t know what proprietary trading is, proprietary trading is when a firm brings somebody in, trains them, and provides them trading capital. So, basically, our traders go through a process. We call it our qualification process where they go through. They pass tests. They build a trading plan, and they practice just like we talked about today. They practice on simulators. They meet with their coaches after their simulators. They do demo trading. They meet with their coach after that. We do everything that I just outlined here at Maverick. At the end of that process, we have capital for our traders to trade, and we enter into a 70/30 split at first, and, after a while, they can go up to 80/20 split, where the trader keeps 70%, the firm keeps 30%. So it’s in our best interest to train you well to produce profits, because we’re going to get that in the end of the profit splits. One of the things we’d like to offer to you for joining us is, basically, we’re inviting you to join us on our trading room or FX room.
So I’m going to leave it either up to you or you to talk with one of our recruiters about which division is best for you. I always like to say the options is like slow and steady wins the race. I love options. I love what you can do with them. Our Forex division is a little bit faster, more aggressive, so based on your personality, based on your age and your experience, you may gravitate towards one or the other.
But every single Sunday and also every single Wednesday … But I’m going to invite you to the Sunday session … we gear up for battle Sunday night. So our options and equities division, we gear up for battle at 9:00 p.m. Eastern Time Sunday night. We talk about the week coming up. We go over strategy. We go over some stocks we’re looking at, some setups, possible positions we look at. Then, again, we meet again on Wednesday to update that when we see the markets change. We do that for equities and options at 9:00 p.m., and then we do our FX group at 10:15 p.m. Eastern Time. So, again, we meet to get ready as a firm, all together, sharing ideas to get ready for the week ahead. I’d love to have you join us for that.
We also want to extend a seven-day free trial to our members area. So I highly recommend, jump into the members area. Again, take some tests. See what you know about trading. If you think you are a hotshot, go take some of our tests. Let’s see what you know. Take the trader personality test. Find out what your strengths and weaknesses are. I already see a couple of people ask questions. Hey, what do you think about my personality? Well, go take the test. Go listen to my video. I’m the voice in the video. I’ll tell you what I think about your personality. It’s not that good. I’m just kidding. That was kind of mean.
Look, here’s the thing I’ve found about your personality. Your strengths are also your weaknesses. Again, I’m stubborn. I’m stubborn, yes. My wife will tell you that. That’s been a great thing in my life. It’s allowed me to not quit when I wanted to back in 1999. But it also allows me to not quit on trades, and, again, it’s why I got myself in the problem I did in 1999, because I didn’t want to quit. I didn’t want to take the loss. So take the trader personality test, see where you are.
If you want to apply for a trading position, we are looking for traders. Again, just go to MaverickFX.com for Forex. Click the apply now button. Go to MaverickTrading.com. Click the apply button for options and equities. All right, thank you very, very much for joining me.
Again, this was not a technical session. I really love to teach the technical aspect of trading, but this is so much more important. You can learn the technicals. There’s books. There’s programs. There’s stuff out there. But if you don’t understand how to take trading, that is a very expensive hobby, and turn it into an actual profession, I guarantee you the market will take your money. The market’s going to take your money. That’s just how it works. So, like I said, if you’re going to do trading, I highly recommend you do it the right way. If you’re already trading, I say go ahead and stop. Go back through the process. Really learn, really practice, really perfect it. Develop a trading plan. You’re going to see much better results. Thank you very, very much for joining me, and have a great rest of your night or afternoon or evening. Bye.