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00:00It's a very unfortunate thing about traders is what makes good traders one of the characteristics
00:14of good traders is that they are usually very overconfident people and this overconfidence
00:21is funnily enough an advantage because if they're realistic about their competence their
00:26ability they wouldn't trade and so you need if you're looking for prop traders you're looking
00:31for people who are characteristically overconfident they're quite you know delusional about how good
00:38they are but you need a person like that and I don't know if I'm allowed to say this anymore but
00:43this is why there aren't so many women in dealing rooms in proprietary dealing rooms because they're
00:49very rational people women and they're not delusional they aren't full of detestrone you know and things
00:55like that and you need people like that sort of savages because those are characteristically
01:01people who do do well in trading so women unfortunately are rational and and think things
01:08and weigh things up evenly and say this I've got no chance of making money in this so I won't do it
01:13whereas the traders yeah and they're much more of that and so they'll look for that characteristic
01:21um I I've uh I've been involved in a in um uh looking for proprietary traders for an institution
01:30trying to select proprietary traders the institution was an energy prop desk a proprietary trading desk
01:37trading in energy um and it was in Prague and um the problem with Prague is that um uh it's got quite a
01:45low um cost of living and traders don't earn much in in Prague and the boss guy was saying Trevor
01:53how do I get good traders because every time I get a good trader he goes to London and quadruples his
02:00salary so every time I find one he just he's off he's gone and um so we were thinking about this you
02:06know because it was his business to operate this proprietary uh house uh there and he got the capital
02:13but he needed the traders how do I get the traders now you and I would say it'd be lovely to work in
02:17Prague but you know these people are really just there for the money not to look at the sites um
02:23and um so we were thinking about it and say well how do we how do people find prop traders how do
02:30people like us find prop traders so they're usually a friend of one of the other traders they say I've got
02:37a good guy that I know who I think would be a good trader and they get invited to be or a Bloomberg
02:43person you know that comes through the office quite a lot and you know it's a very smart person uh that
02:49you know maybe we should hire him somebody from the mid office coming through you know uh we should
02:54promote them but we realize the pool of people that we're choosing that we're uh looking at is
03:01relatively limited uh pool now if you think of these really extraordinarily talented traders
03:07statistically most likely they're out there they're in here they're on the street they may never become
03:15traders you know why because they have no contact with any of these sort of people they may have
03:20nothing to do with it but they would be fantastic traders if they were in that environment so how do we
03:27find this so what we did we did it for three years was we advertised for traders and um in the in the
03:35newspaper in Prague and um and the the people did some tests and then 10 each year were selected
03:43and they came to the company for a week they were paid to come for the company and they were told
03:51that they would um um the prize was they would get a job as a prop trader with a very good incentive deal
04:00so one person uh from this group will get a job in the company so um they came on the first day
04:07uh they learned about the markets because so many of the people knew nothing about the markets at all
04:13and um uh and they sat with a trader next to a trader on the desk and if you buy here and
04:19you sell here and you multiply the number of points by this number of euros and that's you know told that
04:25those uh those things about it then um on on the second day they um uh were more exposed to this
04:35then on the third and fourth day um they were um i looked after them sorry the third day i looked
04:43after them and i taught them some technical analysis um for most of these people it was new to them
04:49and um uh i taught them if you you know if this line broke and you sold it that it should go down
04:55and what a good break looked like and a bad break looked like what a head and shoulders was i taught
05:00them a number of things now this was actually a setup for what was going to happen next and the next two
05:06days they um they were going to trade live in uh in five energy markets and and with speeded up
05:15data of two weeks of trading speeded up into into um two days also with news coming out as well so
05:24they were seeing the news coming and so it was actually speeded up trading it taking uh for two
05:29days when they traded uh they had to make a note um um uh before they could make an order change an order
05:39place a stop anything like that they had to say why they were doing what they were doing so we had a
05:44record of what was going through their mind um and so they then started uh to trade and um oh and
05:51the other thing was we gave each of them a million euros to trade with so even the ones that traded
05:57before had never traded on in that size before so it was and the idea is to make money with that
06:04million euros i filmed this and you can look on youtube actually if the number the name of the
06:10company is chez it's actually a government owned company funnily enough a czech owned energy company
06:17um and um and they have a proprietary uh desk which is very big to this day and um they and uh i filmed
06:27some of the people now those people in those two days i don't think one of them went to the toilet
06:33not one of them eight or anything like that it's just a picture of people fixed on the screen
06:39uh their concentration was incredible it says pictures of people's eyes uh on the screen and
06:45they traded now of of the 10 or 12 people that um we have though it was the last one there on youtube
06:51if you want to watch it um uh the probably half of them immediately gave up you know it was too
06:59difficult the size was too large they couldn't place orders significant orders they were doing
07:0450 lots you know but you can't make any money with 50 lots they had to trade in size um and they just
07:10weren't capable of it um uh and then some of them didn't do it you know lost money and uh and uh they
07:17lost all their money and there were there was a guy who was actually a trader and he was very unlucky
07:23because he was doing well and he turned um his million into sort of like 1.3 million or something
07:29like that until the afternoon of the second day and he blew the whole lot he you know he put it all on
07:34red if you like and he and he blew the lot it's a big shame for him but there were two other two of
07:40the group um um who who were real clear winners now one of them he put headphones on didn't talk to
07:49anybody and he was like a robot a zombie really uh trading and click click did wrote the notes and did
07:55all the trading and he went pretty smoothly um from one million to over three million in that time he
08:04did it and um it was not with too many bumps in the road uh too so this was spectacular uh uh guy this
08:12guy no experience in trading it was just let's say natural let's say that then there was another guy
08:20who's um indian guy that um had uh went up uh a bit and then lost a bit and then went up quite
08:29nicely at the end but ended in the i think with 1.7 million so not at all as good as the other guy
08:35and a bit more up and down as he went went along but he was different he wandered around he talked to
08:40people um you know he's more chilled sort of guy really and um so when i was leaving at the end of
08:46the week uh the boss guy uh said who who do you think we should employ and i said well there's a
08:53clear winner um but i actually preferred the indian guy i think the guy that he's a better trader in my
08:59uh opinion as it happens they did employ that guy and um he um and it was because the other guy they
09:08felt was very dangerous because he was a loner and and uh people like that will often they are the
09:14also characteristically the kind of people who will blow out uh they will they're too concentrated
09:20their um overconfidence is extreme uh they will hide losses they will you know they have a high
09:27propensity to blow out and whereas this guy being more um social and that sort of thing would have
09:33would have worked better with the team and and would have if he'd got into trouble would have told
09:38people and things like that rather than hide it which the other guy would be most likely to do
09:42because he had no friends um there so um um so they did employ that guy and i can tell you that
09:47guy's still there now and he's our chief dealer and and he's uh and that was he was found on the street
09:53now this is just to tell you what's the difference between these sort of people and us that's a hard
09:59brutal uh um process to go through but it was ordinary people you know we were looking for and you know
10:08we're looking for those special things that people have so what are these special things they are
10:14things like overconfidence is is is a good thing but overconfidence brings with it that danger of
10:19um blowout as well overconfident people uh they characteristically um i've known a few
10:27i've got two friends here in front of me old old timers like myself if i forgive me saying that
10:34but i think we can say that um and um you know been around for a bit and um i've known two
10:40really really good traders i've known a few more than that but two in particular i remember very much
10:44and um um uh one was called stainless and the other was was uh what was he called anyways a name
10:53like stainless but both of them because it was never their fault
10:56oh teflon so there was teflon and stainless and the reason was you know whenever they lost money
11:05they say why were you talking to me look what you made me do i've lost money on the phone rang or the
11:10bloomberg went down or anything except i lost money you know because they couldn't their confidence was
11:15so high in themselves that it couldn't possibly be their fault now those those the danger of those
11:21sort of people of course is that they can they can blow out and if you think of all the rogue
11:26traders that you know of like uh nick leeson kivel um and uh who other ones that you uh you you know
11:35of these famous ones that even brought down institutions big ones um none of them were trying
11:41to steal money from the institution or anything like that it was all to do with um trying to hide
11:47a trade you know uh leeson for example you know at the very beginning you know if he'd put his hands
11:54up and said i've messed up um it's terrible that's it so what would have been the worst thing that
12:01would have happened to him he'd have got sacked that afternoon he'd have been hired because he was a
12:06great trader and anybody would have had him so i mean he but instead he hid it and he covered it and
12:12and uh eventually brought down bearings bank and i believe it's the anniversary of that uh this week
12:17isn't it um of the collapse of bearings bank and um and so you know these are characteristics of
12:23those sort of people they go hand in hand with successful traders they're prone uh to that kind
12:28of thing they tend to be um uh they tend to be um uh they tend to be not very sociable uh kind of
12:36people um they're uh awkward a little bit awkward with other people um they're you know maybe autistic
12:44or something like that um but successful uh traders i've known people like that where i worked with
12:51an office once was an american he had his own office you know he was a big trader and he had his own
12:56office and he had on his desk he was from texas a revolver okay this was in london yeah nobody thought
13:02he mounted uh you know he had a revolver on his desk and um one day we saw him on the top of his
13:09desk shouting his head off and he shot the gun and he had bullets in it into the ceiling we thought
13:15there were no bullets in the gun you know they're a bit mad some of these traders but uh typically
13:21they are the successful ones are not like that they tend to be people that are quite um calm and
13:28uh and trading has become to them a process and i think this is something i can share with you and
13:35you can do yourself the closer you get to this the better trader you're going to be um what you what
13:42um you want to do is to make trading itself a easy thing to do so it's no stress on you how do you do
13:51that you think ahead okay and so that when you when you decide on the trade let's say you've got a
13:57trend line okay there's a nice established trend line four points on it gentle angle nice long trend
14:05line whatever long is to you all morning or a month or whatever long is to you but there is very
14:11defined clear trend line now we're coming to tackle it for the fifth time as a trader speculative trader
14:19proprietary trader you know one of two things is going to about to happen it's either going to hold
14:24or break if it holds it'll probably bounce make the fifth point and with the trend the demand is
14:30continuing to exert itself and will carry on higher probably to a new high or it's going to break and
14:36you know nothing there's no law that it has to go on forever and so it uh it's uh highly possible
14:41it's going to break but it's going to happen now so you've got that on your side to know that there's
14:46a trade here to be made so let's say that uh it's uh come to the line it's uh the little candles have
14:54got smaller as it approaches the line the bodies are small so it's losing momentum power there bollinger
15:01bands and and narrowing a bit there's nothing no oomph in the market and then you have a nice white
15:06candle there at the at the uptrend line now to many of us there it would be and you'd say the line is
15:14quite light to hold here the nice thing about that is if it follows through i buy it and i've got a very
15:20obvious place to place a stop just below the low of that recent um test of the line so here's a nice
15:28trade if it goes well we we we could actually swing to a new high because it's a zigzagging pattern
15:34maybe there's another zig on the way the risk reward on that um could be five to one eight to one
15:41something like that a really beautiful ratio for you it's a good trade there there now so i'm i'm
15:47going to say that if the market opens higher tomorrow on the next bar or in the next five minutes
15:53whatever it is i'm going to buy i'll place the stop immediately below there but of course i could
15:59get stopped into that and then it could flop down and break down couldn't it now if it broke down
16:06um actually i think the move that would follow that would be bigger than the move up if it went up so
16:12you know odd sort of way i'd rather it broke down than it broke up so what i'm going to do is i'll play
16:18if i had an order to buy one if it followed through on this from this white candle and instead
16:23of uh placing a stop below i'll place an order to sell three so one i'll go long off let's say i am
16:31long now i'm getting stopped out of one but i'm selling double short at that point so if it is does
16:38break the trend line and falls i think it will fall hard and fast from that point i'll make back the
16:44little loss i've made very very quickly i've got double uh position double sized position on it and
16:50i think it's a better uh trade then i just place the orders or i that is what i'm going to do stop
16:58thinking and then just do it now that is the secret to a long life then it's a process you just this
17:06happens i've stopped in get long it goes up a little bit then it flops down breaks through the
17:10lower cell three and i follow it uh down i know exactly what i'm doing so it's like playing chess
17:16you're always thinking ahead of things and the more you can do that the easier it will be and um
17:23so the less you're having to think when you can't really think when the pnl is going up and down
17:29particularly if it's going down your profit your uh your blotter's going you know your equity is going
17:34down um it's very hard to think uh clearly uh when when that's happening there's chemicals in your
17:40brain that will stop you thinking clearly will stop you um doing things you're normally good at
17:46well okay that's a that is a fact of the functioning of the brain if you want to see a youtube video of
17:55me not being able to think clearly under stress there is one there and it was um i uh i was attending
18:03um i was it was suggested i attended a course on um trading psychology and um i thought i don't need
18:12that you know um i've been around for a while you know i know these you know it doesn't worry me
18:17anymore taking losses and that kind of thing and a friend of mine who'd suggested it said no you
18:22should do it it's a really really good course and uh you'll learn even even you will learn from it
18:27and i thought you know what can i learn from that i went to the course and i was wrong yeah i did learn
18:33from it but one of the things was the guy who was presenting the course he um he said i need a
18:39volunteer he knew who i was a reluctant participant he said i'd like you to uh come and and come up
18:46put me in a chair put some elect um some things on me which was a cardio electrocardiogram and
18:52everybody could see my heart rate my pulse rate um um and my temperature as well and and also two
19:00chemicals in my brain which i can't remember what they're called these and one is a chemical which
19:04is secreted when you're uh to help you think logically and clearly does anybody know the
19:10the two chemicals i'm talking about and then the other one is the flight and fear uh what are they
19:16called
19:16dolfamine is one yes it's not adrenaline cortisone cortisone it is yeah so what it is is they they
19:29work against each other and so that um if you're thinking clearly and the other um they fight flight and
19:36uh fight uh chemical will suppress the clear thinking this is why we lash out and things like
19:43that happens when when we're under uh stress now he he said to me while i'm talking i would like to
19:49you to answer some simple um arithmetic uh questions mental arithmetic questions there was a big room like
19:55this i was sitting in front of these people i didn't want to look stupid and you know what's 49
19:59divided by 7 and you could see on the screen you know everything going up a little bit so i didn't
20:04want to get it wrong none of them were particularly difficult but i was trying to uh concentrate and
20:09on making sure i didn't make any mistakes he carried on talking then then he suddenly said unexpectedly
20:15he said i forgot to mention to you trevor that i'm going to ask you to sing us all a song
20:20uh would you like to think about what song you're going to sing us and you could see on the screen
20:26a terror come uh as uh as i was asked to do this and i still remember and you can see it if you look
20:34on the youtube the question he asked me at that point was what was 21 divided by 7 and uh my answer
20:41was 21 divided by 7 3 it was like that took me that long to think of it i couldn't think clearly
20:49because the uh fight and flight chemical was suppressing the logical chemical now when you think
20:55about this and how it relates to trading this is how often people do things stupid things like
21:00pulling stops or doubling up or all those kind of crazy things or freezing with fear pretending they
21:07haven't got the position uh that kind of thing uh you know that happens because of this chemical
21:12reaction in your brain and it's something you're normally good at you know normally you're very good
21:17at this you play stops you just do it and that and then all of a sudden you change in character
21:21and it's to do with this and he he then said the end of the story was that how do you control this
21:27and he said we borrow something from yoga for this um we uh uh what i'd like you to do trevor oh he
21:34said to me first he said uh by the way that was a joke and uh but you could see on the screen that i
21:40was still in shock you know everything hadn't gone back to normal i was like that about it and he said
21:46um uh it was so how do we get back into control so he said we'll do that uh using yoga uh borrowing
21:55from yoga we'll do it through breathing and he said i want you to breathe out for five hold it for two
22:00and then breathe in again and that's a bit longer than normal a bit uncomfortable would be for you
22:06and i did that and you could see on the screen within about 15 seconds everything was back
22:11to normal so i could take control of my terror and and uh control myself there and i to this day of
22:19course i get surprised and shocked and things happen i know i mustn't do anything in that period
22:25until i've regained control of this really super computer which has gone out of control and i'm
22:31liable to do something that i normally can do pretty well wrongly at that time so these are things
22:38which you learned and uh you know uh these are things which will make you separate you from
22:44other people and here i am i must say that you know i was do uh i thought i knew everything as
22:49even young and old people do you know and there it was i learned something i learned a lot from that guy
22:55actually i'd uh i sort of read about that kind of stuff but uh i'd never really been shown it
23:00uh before it's when you see it that it really means something to you
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