My journey to trading success and why the mental game is everything. And introducing, "Norman's Law."

I have been trading for 35 years. I've been a member of four exchanges, a floor trader, prop trader for a major international bank, commodity trading advisor, trader for a major hedge fund and all around money manager.

With all this experience I can tell you positively, unequivocally, that the secret to successful trading is mental. One hundred percent mental. No systems, no charts, no quants, no algorithms...just mental. Once you understand that; once you can master the YOU in trading, you can trade pretty much continuously with uninterrupted profitability.

So why don't people do it?


The main answer is because they're not aware that it's mental. They think it's "system" based or, information based or that you have to be a great analyst and know how to forecast the future.

First, let me just say right off the bat that no one can forecast the future with any long-term consistency. I am a pretty good analyst and I get things right most of the time, but I also get enough stuff wrong to wipe me out financially at least several times per year. If my trading were based solely upon my forecasts or my knowledge of economics or even MMT for that matter (MMT does give me an advantage, but by itself it is not enough), I'd be wiped out. And I was wiped out in my career plenty of times.

So you can forget the forecasting part. If it's not coupled with the right mental game, it's not going to pull you through.

How about information? Won't really good information make it happen, after all, we see these Wall Street "cheats" making millions, even billions off inside information all the time? Some get caught and pay the price by spending time locked up, but many sneak by under the radar and continue to play their little game.

The reality is that most insider traders don't make much money at all. They might make on the few genuine nuggets of inside information they get once in a blue moon (most "inside" info is junk), but then they'll piss it away on their regular, non-inside trading activity. How do I know? Because I saw it first hand when I was a floor trader. And you can see it nowadays as well. Furthermore, even if you have good, reliable, inside information you still have to have the mental game down to ride that position through all its inevitable swings and gyrations. George Soros made a billion dollars shorting the pound not because he knew that Britain would pull out of the ERM (which he did), but because he had the confidence and trust in himself to bet big beforehand and hold that position while all the turmoil started to unfold.

Since most people are not professional economists (not that it matters) or have access to inside information they search for systems to help them trade. Things like technical analysis, quantitative analysis, charts, the phases of the moon, Astrology, even High Frequency Trading, all fall under the banner of "systems."

The irony is, many systems are really nothing more than sets of crude behavioral rules. Their effectiveness, if any, lies in the fact that they help to eliminate certain types of self defeating behaviors that bring on the lack of success and loss. I am talking about behaviors such as lack of discipline, emotional trading, inner conflict, stress, lack of patience, lack of trust, etc.

These systems may work for a time, however, they are constantly exposed to the mental and emotional weaknesses of the designer. The system designer himself could end up sabotaging the system because the designer's own mental state may not aligned with the ultimate goal of being successul. (If it were, he or she wouldn't need a system!!)

Think of the millions of dollars some firms are spending now on developing high frequency trading algorithms and implementing them when they are really nothing more than glorified trading rules.

Take for example Spread Networks' multi-hundred million dollar investment to build a tunnel from Chicago to NY to shave 3 milliseconds off the round trip communication time with the NYSE. Pardon me, but it's fucking absurd. A bunch of idiots posing as very smart, high tech wizards.

Personally, I don't need to spend millions to "game" a penny in front of your order a million times a day. I think this type of trading is ridiculous and furthermore I am absolutely certain I can bury Spread Networks when it comes to performance (on a percentage basis) and I need to do nothing more than give a cursory check of the Forex market from time to time using a basic internet connection (at $49 per month), which leaves me with plenty of free time to do the things I like to do like go to the gym or, spend time with my kids.

Having said that I now postulate Norman's Law. (Remember this because I predict it will become widely quoted one day and you can say you heard it here first.)

Norman's Law states that the amount of money you spend on trading systems is directly proportionate to how fucked up, neurotic or, action-obsessed you are.

That describes the Spread Networks' guys to a tee and all the other financial "hot shots" who think they're so very smart and above the rest of us.

So where does this leave us?

The good news is that the behavioral aspect or, what I like to call the "Mental Game" is something you can learn. It's also teachable and I know this because a) I learned it and; b) I have been teaching it.

News flash!!!!

I am a highly emotional and passionate person. This may be a good thing as it might make me an interesting or "colorful" guy, however, it is DEATH when it comes to trading. I lost for years and years and years until I figured out that it was ME and not the market or my analysis that was causing me to lose. Then it took years more to realize that just being aware of the fact that I was my own worst enemy did nothing to change the behavior. I had to figure out a way to do that.

In the end what I came up with were a set of rules and exercises and a level of "mental conditioning" that changed change the self-sabotaginng behavior and turned it around into behavior that brought success and confidence and profits.

I did that. And that means you can do that, too. It's THE MAIN THING that I teach in my course and it is by far the most valuable thing you will ever learn.