This is the second testimonial from one of Ray’s STC mentor students . Such contributions will go a long way to enlighten those who may have bought NOT and find it hard to follow. Training and education go hand in hand as evident from Tom and Anthony.-ANA
PLEASE READ ON:
Like Tom, I am a STC graduate (July 07) and I read his contribution with interest as I know Tom and a bit about his journey. My trader education has been very different to Tom’s. As I reflect on my journey, I thought I would talk about my experiences with Ray and what I believe to be truly mind blowing – trading psychology.
First off, let me quickly talk about the title of this piece. I feel daring using the words ‘trading success’ in the presence of Ray Barros who is extremely successful. If I think about just how much progress I have made since STC, then I can consider using the above words with pride.
Secondly, with Ray’s hip dilemma he has asked some of his friends to write in his blog whilst he is laid up. I am not too sure which is the real reason. Is it to keep his readers occupied whilst he convalesces or was it to give him the encouragement to get up and continue his blog before we lower his incredible standard too far?
I wish Ray a speedy recovery, not to mention desperately waiting for him to recommence his blog.
What was it about Ray and STC?
The reason I came to Ray was because I had tried to learn by reading numerous trading books, attending small cheaper courses and joining the local Technical Analyst Association. The philosophy at the time was that new traders lose money for about 2 years and then realise that education is essential and this leads to another couple of years of not losing but also not making money, and then you achieve a level of learning and experience where you start to make money from your trading. Well I was making some money but certainly not enough. In fact, I could have done better by leaving it in the bank!
I had become an Indicator Junkie and was mixing up bits and pieces of methods and losing myself in different timeframes.
The STC method
The STC method is a very robust one where I use a discretionary approach.
‘The Nature of Trends’ pretty much covers the Barros Swing approach to defining the trend, will it continue or change, and where are we in that trend. This gives me the strategy, and then I look for Low Risk Entries. This involves a setup (chart pattern), at a zone with an entry trigger and an initial stop (both price and time).
A risk assessment is done on every trade and must exceed 2:1 before considering taking the trade.
One of the keys to success for me is creating scenarios of what the market may do and setting my benchmarks for those scenarios. I tended to take a very myopic view (Ray’s observation) regarding my analysis and positions.
Once in the trade I manage the position with the Rule of Three.
I also use the Ray Wave as a risk management tool.
Did I forget to mention that I didn’t have a trade plan? Ray insists not only on a trade plan, but a vision and a business plan as well! I am still working on those.
More importantly, I think even Ray would agree with me that it is not the method that will guarantee success; it is all the other things.
Dare I repeat the words trading psychology?
Ray insists on using a psyche journal to record your trades and your feelings about the market, your entry, your exit. It is because your feelings or emotions are like built up internal energy which will come out eventually, and sometimes the emotional energy when unaddressed, will cause you to take unplanned trades. That is either entries or exits that deviate from your plan. Before striking that Buy/Sell button ,you should ask yourself, is this part of my plan or are my emotions controlling the finger pushing the mouse button.
Ray emphasizes keeping your Psyche and equity journals up to date. Then regularly analyse and review both journals for evidence of unsuccessful and successful trading habits.
It was this psyche stuff that made the biggest difference to my trading. Not the method, not the money management, but the psychology. Alexander Elder likens it to a three- legged stool – method, money management and psychology. Take away any one leg and you will fall over.
Ray introduced me to Denise Shull at “Trader Psyches”. Denise says ‘emotions trump intellect’. We can’t control the emotions; we can control our actions. Denise helps you identify your repetition compulsions (Freud) or what Denise calls ‘Echoes of Perception’. An untruth you pick up as a child and carry through into adult life. That echo will affect the things that you try to achieve. These are usually along the lines of ‘not feeling good enough’. My echo was that I feel like ‘I don’t know’. Now that may seem silly, as I have 2 university degrees and have been reasonably successful in my profession.
Given that the markets are an environment of uncertainty and low predictability, my ‘I don’t know’ echo was really in its element. The funny thing is that I spent a lot of years searching for the perfect method when it was my ‘echo of perception’ that was interfering with my success.
Thanks to Denise and Ray, I can sit confidently on the three -legged stool. I now have tactics to deal with my echo and I am proud to announce that my trading is improving.
I guess my message here is don’t write off trading psychology – often it is not the method that lets traders down, it may be a lot closer home.
ANA aka IDKIT