 Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the trade hacker mindset. All right, I wanna welcome Dr. Gary Dayton to the podcast. Gary is the founder and president of Peak Psychology, Inc. He has a doctorate in clinical psychology. He also authors the book called Trade Mindfully. Achieve your optimum trading performance with mindfulness and cutting edge psychology. Gary, welcome to the program and please tell the audience a little bit more about yourself. Hi, thanks, Steve. Thanks for that nice introduction. Well, Steve says I'm trained as a psychologist. I have a doctorate in clinical psychology and I worked with patients with all kinds of psychological and psychiatric disorders depression, anxiety, schizophrenia, addictive disorders. But I was also lucky, I think, to have been able to work with somebody who was a sports psychologist. He happened to be a professor at our university. He was a part-time fellow and he was a sports psychologist for some of the, you know, like the Cleveland Indians, Major League Baseball team, the Cavaliers and basketball teams, a serious sports psychologist. And I got to train with him for a couple of years in that and I was able to, and we actually worked with him on this, to take some of the sports psychology modeling and bring it into trading, which is what my book Trade Mindfully is about, also using mindfulness practices, which are really, really important. And on top of being a psychologist, I'm also a trader. I've been trading since 1998 or 1999 and trade what's known as the Wycoff method, which is just reading price action with volume and primarily a day trader. Although I traded pretty much all the different markets, my main focus is trading the SMP E-mini on a day-to-day basis. That's a little bit about me. And are you, that's great. Are you trading just first couple hours of the day? Are you kind of watching it all day long? What's your style or kind of how long are you trading it? Yeah, I like to be done by noon time if I can. So I usually get in about an hour before the US session opens. There's good trading in that, what I call the pre-market. And then the morning session is usually a good time for often for counter-trend moves or swings back and forth. We'll typically get one or two good swings in the morning. Now, if we get a good trend day going, one that opens on one side of the market and closes on the other, I'll hang around for the afternoon because those don't come up all that often and they can generally be pretty powerful and afternoons in the S&Ps and in most vehicles, we see trending action more frequently than we see in the morning. Right. And you mentioned Wyckoff method, you mentioned price action and volume. Do you have a specific time frame on your charts that you use or are you using multiple time frames? Oh, you gotta use multiple time frames. I will look at the daily, the hourly, the 240 minute or the four hour, the 15 minute and the five minute. On my screen is the hourly, 15 and five minute charts. Those are the primary ones that I look at. So you're utilizing higher time frames to get an idea of trend or direction and then you're executing based on the five minute, is that kind of a little bit? Yeah, I mean, you know, if you look at any daily chart of the S&Ps or any market for that matter, you will see, and I encourage folks to do this because it is eye-opening if you've never seen this before, you will see that almost every day that the current day is trading at or around yesterday's high or two day low or something along those lines. Yesterday's high is where the market stopped and two day low is where the sellers, where the buyers came in and overcame the sellers. So those are gonna be important levels and often have residual support and resistance characteristics, certainly the next day and sometimes for several days after that. So yeah, I'm really keyed into the higher time frame, support and resistance, how it's been trading. And that often informs me of how to trade the next day. Yeah, that's really interesting. I mean, in our day trading room, we don't trade the Wycoff method, I'm familiar with the high level concepts of that methodology, but we trade price action, we trade using volume, and we use previous days, high, low, open and close as some very key levels. So it's just kind of interesting how different methodologies can kind of tie together and obviously it's all part of the market structure. So that makes sense. Exactly, yeah, market structure. That's the king pin to any trading, I think is understanding structure. Very cool. Well, Gary, I wanna jump into some things that I think will be very beneficial to our audience. Obviously the name of this podcast is called the Trade Hacker Mindset. So it's all about the mindset around trading. And I know that you're big on that too, which is why I wanted you here. But you've come up with a seven part guide to mental trading skills. And this is something that's available on your website, but I'd love to hit on each of those seven because I think they're extremely important in helping people just have a routine, have a specific way that they go about creating the right mindset around trading. And so if you don't mind, let's jump into those. Starting with number one, which is how to prepare for the trading day. So talk a little bit about how you prepare for your trading day. Sure. Well, I separate my process, my trading process into three parts before, during, and after. You know, real sophisticated here. And this comes out of sports psychology. What we do before trading is we wanna prepare. We wanna prepare in a high quality way. What we do during trading is we wanna execute effectively. And after trading is over, we wanna assess how we did, how the market traded. So let's talk, and I keep them separate because it's useful. You don't wanna be looking for support and resistance in the middle of your trading day. You wanna know where that is and where that's located and be clear about that. Same thing, you don't wanna be, oh, why did that trade not work out in the middle of a trading day? That, you set that aside for later on after the trading is over, you can then with a clear mind take a look at that stuff. So bringing it back to preparation, so important, so important. We wanna have a clear process for preparing. And I split it up into two things, market and mental. And on the market, I'm assessing today's trading, looking to see if that's gonna inform me in any way what tomorrow might be. So for example, if we have a narrow range day, which we had a couple of days ago in the S&Ps after a rally up, it suggested that the buyers were tiring out. They shot their wads, so to speak. And we could potentially see a pullback because it's a narrow range day. A lot of consolidation happens. We could also see some trending conditions. So just starting off with assessing today's trading and thinking about how it's gonna play out tomorrow is very useful. As we talked about the higher timeframe, support and resistance on the daily charts, really, really important. Also, here's something that traders can do. You can actually get really good at this. Identify the location where you think that a trade will set up the next day in the morning or in the afternoon. And as I say, you can get pretty good at this. Getting to the point where you could identify three out of the five days each week where a trade is likely to set up. And when it does, you know, you're confident. You've pinned that point and you can take that with some confidence. And when you say set up, are you talking about where a market might reverse? Yeah, might come down to a level and have a climactic action or some sort of exhaustion move there and then rally off of that, or it might rally up and bump its head against resistance or it might go through and then come back to old, what was old resistance, ought to now be support, right? So those areas you can identify ahead of time. And knowing that you've got the landscape or as we were talking about a few moments ago, the structure of the market. And I think the structure of the market is the number one thing to understand about technical analysis and trading it. So that's sort of on the technical side, but there's also the mental side. And before you move on to the mental side, I've heard you say this before and you kind of touched on it. You said you don't want to be drawing these support and resistance and kind of figuring this out while you're trading. But I think you're a big advocate of even doing it, not even that morning before you start trading, but actually the night before. Oh yeah, well, generally my personal routine is to do that the night before, lay out, you know, see how the market traded, lay out the support and resistance. And then I'll come in, as I said, I come in usually an hour or so, hour and a half before the US opens, which is nine Eastern time. So I get into the, I get to my trading desk a little before eight o'clock in the morning. And what I do, I'm continuing my preparatory work at that point, I'm looking how the overnight is traded, looking for the overnight high and low usually gets set either in the Asian session or quite frequently in the European session. And those have meaning too, just like a daily high and low, those European and Asian session highs and lows are, so I update my charts with that. And after that's done, then I go on to the mental side. And the very first thing I do, I'll tell you three things that are very useful as part of my normal routine that anyone can adopt and use this with some effectiveness, because it's a good proven way of approaching the mental side of the market. First thing, number one is meditation. And I tend to do that for 20, 30 minutes in the morning and we can talk a little bit about meditation, if you like in some detail, but I consider it the probably the most potent mental technique that we have ever discovered and it was discovered almost 3000 years ago. So it's a very, very useful thing. Let's talk about that for just a minute because I think there are a lot of different theories around meditation. When you do it personally, I'm just curious how you do it. Are you really just trying to clear your mind of everything or are you actually trying to focus on something market specific or something totally different? No, no, none of the above. Okay, good. None of the above. So in just real rudimentary terms, mindfulness, most of the way it's practiced, there's a variety of different ways that it could be practiced, but most of the tried and true methods are focusing on the sensations of your breath, okay? So in other words, we take our attention and we place it or we put it towards the coolness coming in through the in-breath, warmness coming out, a little tickle feeling at the nostrils or maybe the belly rising and falling, the pressure as it expands and as the abdomen. So that's what we focus on. And what we find is very fascinating to me is that no matter, and you don't wanna try hard to do this, but no matter how hard you try to focus on the breath, your mind starts to go wandering about. There was a phenomenal study that was done by a guy up in Harvard when he was a graduate student. I forget his name now, but he created a telephone app. And on the app, it listed three things. It said, what are you doing? Are you focused on what you're doing? And are you happy? And he would randomly ping people throughout the day, whoever signed up for this. And last time I checked, which now is a couple of years ago, had over 650,000 data points. So incredibly robust, right? This is good, good, good solid research. Here's what he found. 49.7%, so 50% of the time. We're doing something, but our mind is not on what we're doing. It's off on something else. So what that says is, is that our mind is only randomly concentrated on the tasks, whatever the task at hand is that we're doing for reading a book or a magazine, for watching television, if we're preparing a meal, washing a dish, it's taking a trade setup. Doesn't matter. Half the time we're not focused on it, okay? So back to mindfulness. All mindfulness does is have us focus this form of mindfulness. You can get into more religious or spiritual kinds of things. That's not what I'm talking about here. I'm using it in a very practical, very pragmatic way that's useful for traders. We need to have incredibly good concentration, but we don't have it because we're human beings and the mind likes to go on walkabouts all the time. In fact, the neurologists call this the default mode of our brain's network. In other words, our brain is just kind of randomly bopping around, our thoughts are just kind of randomly bopping around in there. I'm glad you experienced that too. I thought maybe I was the only one, so good. And this is the other thing. We all experienced this. No one is immune from it because we're humans. So mindfulness teaches us that our thoughts really just kind of come and go on their own. Yeah, they can be triggered by events out in the environment but or even events inside the environment inside here that between your ears there, get an image or a thought and it will lead to other thoughts. But the point is, is that the thoughts come up and this is true with feelings too. You start to notice this by meditating. They're just coming and going as they are. And we don't have to buy into them. People tend to hold their thoughts really, really close in, they're kind of looking at the world through this maze of thinking that's going on. Meditation allows us to kind of separate ourselves from our thoughts, hold those thoughts out at arm's length so we can see them and evaluate them rather than just obeying them or going with them. So mindfulness is incredibly important to do that. It's like building, if you went to the gym and you wanted good biceps and a good chest, you'd have to be doing curls and push-up. What do they call those? The, the, the, uh, bench press. Yeah, presses, that's it. We'd have to be doing those, right? And we don't just go into the gym and say, oh, I'm fit now. We've got to spend a couple of months doing, it's the same thing with mindfulness. It's an exercise. And what we're doing is exercising a skill of concentration in the mind. I'm so excited that you brought that up. Sorry to interrupt. I'm so excited you brought that up because I literally just recently started my trying to create a meditation type practice. And I do it, I do it twice a day. And when I first started, because I've just, I've always felt like, man, I just, I can't, I'm not a good meditator. It's kind of how I put it. And so, but what I did is I, I found kind of a program that I, that I thought I could follow. And so what I did is when I first started, I started doing it for three minutes. And in pretty close to what you're saying is I just focus on my breath. And I did it for three minutes. And then every day I would try to, I would increase that by about 30 to 60 seconds. And so now, like I said, I haven't been doing this very long, but today I'm at 17 minutes. And I do that, I do that first thing in the morning once I get to the office before I start trading. And then I do it once either when I get home later or before I leave the office. And so I'm doing it 17 minutes twice a day. And it, it's amazing. And part of what, and the way I describe it is pretty similar to what you're saying is it creates space, right? It creates space with your thoughts. It creates space in your mind instead of just having it, you know, like you said, right up in front of your face. So couldn't, could not agree more. So sorry to interrupt. Please continue. This is a fun conversation. This is the way an interview ought to be, right? Just kind of flowing along here. Yeah, so mindfulness is a really useful thing. Now, if I'm working on something, this again, we're back now to the preparation, right? If I'm working on something, like let's say for example, that I've been getting into trades, no problem getting into them, but I'm getting in early, right? I have to sit through, you know, the chop and what have you. And sometimes I get stopped out. It's uncomfortable. And so I want a better entry technique. And so I might have researched that and I might have come up with one or two ideas on that and I tested it out and it looks, and it seems pretty good from back testing. So now I want to put that in play, right? So I'm going to rehearse that a little bit in my mind's eye before trading. And you don't have to do this long and it doesn't have to be, you know, some people think that they need to have super sharp mental images in their mind of, you don't need that at all. You just need a suggestion of it. So I would close my eyes. I'd do this for just a few minutes and I just, I'd remember what I'm all about here. I want to take good entries, right? And then I would, in my mind's eye, I might pick a trade that I traded yesterday or a couple of days ago and a good, I'd like it to be a successful trade, one that won. And so I'll just, in my mind's eye, I can see the price coming down and I wait for that entry and when that triggers, I can see myself, you know, hitting the mouse, you know, pressing for the button, for the order to go in. And then I step back a little bit and I, you know, I see myself setting the stop and all of that stuff that I normally do and then managing the trade to its conclusion. So I do a little rehearsal of that. That's a nice reinforcement of things that I'm working on, right? And then the last thing that I would suggest, especially if you're working on something like that, is to have a daily mission. And this again comes out of sports psychology, you know, baseball players or basketball players would be, okay, your mission today is to do X, right? Or maybe X and Y kind of thing. So to bring this back to trading, if I'm working on a good clean entry and not jumping in, you know, a little prematurely and waiting for that. So my daily mission might be a very short and it's good to keep these short brief sentences and only one or two, you don't wanna be working on multiple things at once. Just one or two things is fine. So my daily mission might be, be patient, wait for the trigger, right? So that is kind of reinforcing what I'm working on and I'm bringing it into my trading day in that way with a clear mind and a spacious mind. I'm just, I'm getting giddy over here about everything that you're saying. I coached my son's baseball team, he's 11. And one thing that we started doing last year was on our way to a baseball game or a tournament, I would have him close his eyes and he's a pitcher, pitching, hitting, and he plays center field. So I had him go through all three of those in his mind rehearsing. So say he was rehearsing his hitting, he would actually be up at bat, he would be visualizing the pitcher, he would see the ball come out of the pitcher's hand, he would hear the bat hitting the ball, he would watch it fly over the outfielder's head or if it was a, or if he was pitching, he would hear the ball hit his pitcher's mitt. He would just very visual and it was so amazing the level of his game, how it took off and you know, there's practice and there's a whole lot of things that go into it. But I still think that that rehearsal in his mind of being very visual with those different aspects of his game helped take his game to a new level. So I just, I love it. Yeah, absolutely. And that's a nice little story showing how this stuff does work and think about it on the flip side. If we don't do things like that and we just allow the mind to go off on its own and we listen to it and we, and as your, as your, it was your son that you were coaching, right? As your son noticed, he could hear the ball coming into the mitt, he could hear the crack of the bat, he could see it going over the top. It's the same thing. If we rehearse in that way, it becomes very powerful. But if we don't do that and we just allow the mind to go on on its own, we connect in with whatever the mind is saying, just the same way that your son connected in with hearing the ball hit the mitt and hearing the crack of the bat. It's this, we built, you know, it's as strong and as powerful as that. So we don't wanna do this randomly. We wanna have it structured for ourselves so that we do build skills. That's the important thing. Yeah. I agree. Not only are you training your mind and directing your mind at what you want to do so it doesn't direct it, direct you to do something that you don't want, but it also, you can, you almost are tricking the mind, that your mind doesn't know the difference between your mental reps and actually doing it in real life. And so it's like, it's like he's, he's getting a lot more reps in just by visualizing it. Similar that he doesn't practice, right? Yeah. One of the strongest methodologies that we have in psychology is known as exposure. This was developed with people with post-traumatic stress disorder, mostly combat veterans coming out of Vietnam and the other wars that we fought. And just being totally anxious and, you know, hardly able to function in a day-to-day life. And I'm blanking on what I was gonna say. What was I gonna say here? Ha, I got lost. Sorry about that. There we go. There's the mind for you. That's right. Your mind took over and then, you know, you weren't controlling it, it just controlled you, right? Yeah, I do remember. So, you know, the mind is really great at problem solving. You know, if we were, I don't know, stuck on a road, this is in my book. If we ran out of gas and there was no town or gas station and this cell phone was out and we look in the back, we grab out the flashlight from the glove box and we look in the back and we see a pen and we notice that the fuel is leaking out of the fuel stop. Well, we can take that pen and break it apart and slip it in between the, you know, the fuel line and solve the problem that way. The mind is really good for that. We don't even need those. We don't need the pen or the gas line or we can figure it out in our head. We can see it in our head without having to be there. Very powerful, right? But the flip side of that is that that can be used against you because it is, we do believe what we're imagining in our head. We do believe what we're thinking. We do it uncritically. We don't question it. And because of that, it creates all kinds of problems in trading, all kinds of problems. And mindfulness, as I say, is the number one thing to begin to see this and to begin to have a different relationship with your thoughts and your feelings. We can't change thoughts, right? We can't say I'm not gonna have that thought because we will, it just pops up. I've been doing psychology since almost 30 years now and I've never met a single person who can control their thoughts or control their emotions consistently. Never met a single person who could do that, you know? And if that's the case, then we need to, you know, the idea that we need to be robotic and not have emotions and not pay attention to our, that's nuts. That's gonna create all kinds of problems for us. We need a different relationship with our thoughts and our feelings. And that's why starting to learn to hold them out here at arm's length is so important. That's amazing. I could just talk for an hour on this topic alone. But let's jump on. Let's move on to part two of your seven part series, your seven part guide. Okay. Part two is plan your trade and trade your plan. We've all heard that as traders but tell us what that means from your perspective. So what do I think about that? You need a good process in trading. I kind of alluded to it earlier when I was talking about the process of high quality preparation. And I have a little routine there that I follow. But your trading plan is also really your process. It details the markets you're gonna trade, the timeframes, the setups and so on and so forth, right? And it sets us up for focusing on a process of trading. What we're thinking about trading, we're really operating in a probabilistic field, right? Every trade setup that we have has a probability of winning but it also has a certain probability of losing. A good trade setup might have 60% winners and 40% losers. And many traders, especially novice traders, they want every trade to be a winner. And that's just not possible. There's a paradox, if you will, in this. And that is that when we put on a trade, any individual trade, we never know if it's gonna be a winner or a loser. But over a large number of trades, if we have a 60% edge of winning and it produces some number of points on average, then that edge should play out over that large number of trades. But when we're thinking about outcomes, right? As opposed to process, that's where we start to get stuck on the wrong side of this paradox. We want every trade to be a winning trade rather than 60, 40 kind of thing or 65, 35, something like that. When we do that, we're just thinking about we want wins, we want wins, we want wins. We let that process go. We forget about our trade plan. We forget about setting a stop maybe, or maybe we move a stop away because we don't wanna take a loss, right? Or maybe we didn't set a stop and now we're averaging down as the market's coming against us. We're adding to our position because we figure, oh yeah, if we, you know, as soon as this thing pulls back, I can get out at break even. All of those things, that's all outcome thinking that's not your trading plan, right? That's not your trading plan. Your plan is your process and you wanna be true to that, not be focused on outcomes but be focused on the probabilities of your trade setup and trying to get that as high up there as you can within reason. So when I look at trading plan, you know, a lot of traders either don't have one, novice traders or new traders either don't have one or wrote one and then put it on the shelf. It really needs to be a living, breathing document because those losses that we had, what we ought to do with those, and this also should be part of your plan and should be part of your process. You should be looking at those at the end of the day and saying and figuring out why did this trade fail? Why didn't it work out? Was it market conditions that weren't favorable for this? Now some trades are great when the market is trending but not so great when it's in consolidation, right? So was it market conditions or maybe price action or something there that maybe I can learn something about this trade and I can improve my probabilities by doing so, right? But most traders or many traders, I shouldn't say most, many traders have a bad habit of wanting to sweep their losses under the rug. I don't want to look at them, just get them away from me kind of thing. I can't see them. And the reason is because it brings regurgitates really bad feelings that they had when they were in the trade and if they were following the process and not averaging down or moving their stops and what have you, they wouldn't feel such uncomfortable feelings. But adopting a probabilistic mindset, understanding that your plan is your process and when you do have losing trades, use that process to figure out how to improve your trading results and your trade setups and your overall skills at reading the market for market conditions. So the plan, I think the plan is really crucial. People who don't trade with it without, people who trade without a plan generally don't do as well as people who do trade with a plan. And I personally had to take it to even one step further. What I would find is, I had my plan, I would evaluate it at the end of the day or after I was done trading. And invariably there were things that I was like, why did I do that, that kind of thing? And so I actually, what helped me even take that even one step further was, and I still do it every single day today to make sure that I don't get off track is I have an Apple watch and there's a little timer on there and every 30 minutes it goes off. It vibrates. And so what do I, so I have a very specific thing at every 30 minutes, I take a couple deep breaths. I tell myself either out loud or at least in my mind that my goal is to follow my trading plan. My goal is the process. My goal is not to make money. My goal is not the outcome. My goal is the plan. So it's right in line with what you're saying. But to me, if I only, and this is just me, but if I only waited till after I was done trading, I would still find myself making these stupid mistakes over and over and over. And so for me, I have to have an even more frequent reminder to make sure I am following the process. Right. That's really good in a number of ways. But basically what you're doing is as you are evaluating yourself as you go along and you say, you know, I can't do this at the end of the day. That's too, too long. And I, and I'm vulnerable to doing it again, maybe multiple times before the end of the day occurs. So I really need to do it, you know, every 30 minutes or so, that's, that's terrific. You've figured out a pattern in your own performance. Right. And you figured out a way to deal with it. You've understood that it was limiting you in some way. And so you said, okay, how can I overcome this? Well, if I do this, then that's a step towards overcoming it. And you learn how to, you know, as you go forward, you learn how to add other things to it. And suddenly what was a limit for you no longer is. And that's how we do, that's trading psychology in a nutshell, right there. Very cool. It's very cool. An example of it, yeah. All right. So part three is sharpen your trading performance edge by maintaining a trading journal. I talk about this. My community is probably sick about me talking about trading journals, but it's that important. Talk about trading journals. Oh yeah. It really is. They're so useful. So when I think about a trading journal, certainly there's the, how many wins that I have and how much money did I make or lose and how many points or pips and all that sort of stuff. There's that part, but I'll focus on the more mental side of it, the more psychological side of it. And you know, it doesn't have to be real sophisticated. Just get a notebook and use that or if you wanna type it into the computer, that's good too. It's helpful to print out charts from time to time and mark up charts and include those in your journal. But really, it comes down to three questions. What did I do well today? Where did I fall short? And what can I do about it, right? We wanna know what we do well because that's what we can rely on. If we're really good at, I don't know, holding a trade to its profit target, which a lot of folks have difficulty doing, but let's say we're good at that. That we know that we can bank on that. We know we can rely on that. We don't have to think too much about how to deal with, you know, as prices moving up and it starts ticking against us. What we do with that, that's not our issue. We're strong in that department. We don't have to worry about that. So that's important to know. Your own personal, this is your personal awareness of where you are strong and where you have limits. Notice I don't say weak because most of the time, we don't really have weaknesses. We just come right up to our limitation. And if we get caught in emotional hijacking when we're so full of fear and we're making mistake after mistake after mistake in our trading and it costs us money and all of that, it's not a weakness for us. It's actually every human being experiences this and every trader has experienced this and many continue to experience this and they're not flawed. They're not psychologically disordered or psychiatrically compromised or anything like that. They're just stuck in an unhelpful way of operating. So we don't wanna be, you know, don't say, oh, I've got a weakness and I can never overcome it. We wanna know what those limitations are and we wanna know two things about those limitations. Is this really impacting my trading? Right, if I'm not good at holding a position, then that's something that I wanna change, right? If it's something that I can avoid like a particular trade setup that occurs maybe in a certain kind of market condition. And I know when that market condition shows up, I don't wanna make this trade. Well, I can avoid that. I don't have to work on making that trade better. I can just forget about that totally. It's always easier to avoid something if we can. Rather than to change it. But when we have a limitation and we recognize it as an important limitation that's limiting our performance in trading, then we wanna work on that. We wanna think about just as you did in that example that you talked about, Steve, just take one or two steps in the direction of solving that issue for yourself. How do I strengthen that? How do I overcome this? And just start working on that and develop a routine for it. You can imagine it in your pre-trading routine. You can have a mission statement about it and all of that. And that will give you some momentum to work towards that. Yeah, that's excellent. I think in fact, I just did a recent podcast episode about this where I talked about keeping a mindset journal. And it doesn't need to be a separate deal. Like you said, it doesn't have to be complicated. It could be a notepad. It could be an Excel spreadsheet. It could be whatever you want. But we always, your methodology, trading price action and volume and the methodology, market structure, you've found patterns in the market that give you an edge, right? And so the idea of when you're keeping your trading journal, not just to keep your time you got in and the P&L and all that stuff, but also to have a heavy emphasis on the mental state or the mindfulness of the trades that you are in is because we have emotional, we have mental patterns. And if you can identify the kind of exactly what you're saying if you can identify those patterns of yourself then that's gonna create an edge as well. So I think that's so powerful because so many, especially newer traders they focus on the strategy or they focus on the indicator they're using or whatever it is. And it's the mental part and the mental patterns that you continue to do well or not do well that can actually make the biggest difference. Yep, absolutely. One client I have, I work with some traders one-on-one on their mental game. So one comes to mind. He, pretty good trader can put together 18, 19, 20 days in a row of profitability, right? Day trading, he's trading one of the, I guess the NASDAQ, the NQ, the NAS 100 futures. So he can put that together, but then he gives it all back in one or two days. I've done that a couple of times. Yeah, and so this is a pattern that comes about and he discovered this by maintaining a journal. And, you know, don't just write down in a journal. You've got to review it every so often too periodically. I like to kind of review the week or often a month is a good time to go back and review what you wrote in your journal and look for patterns like this. But anyway, he found a pattern. He found this pattern. And what it was was he was feeling so good about himself. Hey, I put together 20 days in a row. I'm on a roll here, I'm hot. He feels invincible and he starts letting his guard down. Well, you know, it doesn't quite meet my criteria, but I'm doing so good. It's okay. Or the better one is I hear this a lot from other traders. More than this, just this fellow has. This is a very common pattern. Trader will say, well, now I made so much money on those other trades. I'm playing with house money. Ooh, that's a, yeah, so it's okay to. That just made my whole body tense up when you said that, because I, yeah, I've heard that many times. So we actually have a term in psychology for this. It's called moral licensing. It has to do with the recency effect where recent events kind of weigh heavily on our cognitive, on our thinking and they influence our behavior and our actions. Well, moral licensing is exactly that, where we've had good positive results in the recent past and we're feeling really good. In fact, we're feeling invincible. We're feeling so good. And that causes us to let our guard down and to not be vigilant and to take unqualified trades and to do bad things. And then, you know, we lose the money that we made and we get caught in that kind of a cycle unless we break out of it. So yeah, that's an interesting way to use the journal. Very useful way to use the journal. Great. All right, part four of your seven-part guide, trading with your mind in the moment. What do you mean by that? Well, this is where mindfulness really, really comes into play because we can, I'll give you a good example. I'll bet every trader's had this experience and this is like a strong emotional experience. So we get into a trade. Let's say we get into a long trade and we have a profit objective of, I don't know, eight, 10 points to the north of us. And we've got maybe two or three points in the trade profitable and it starts ticking against us. Maybe a half a point, a point, summer's around there. And the mind starts kicking in. Oh, Gary, you better take that trade off. You want to book that. You don't want to have losses here. That's never happened to me. No, never, right? And I probably would fight it a little bit. Now I'm starting to live and die on every tick, every up and down tick, right? And it starts to pull back. Maybe it goes a point and a quarter or a point and a half. And now my mind is screaming at me, get out of the damn trade, hurry up, right? And so I exit. And what happens? I feel good. I feel relief. All that pressure that I was feeling is now off of me. But then what happens? Most of the time, or many times, the trade pulls back a little bit and then pushes on up and goes right up to our eight or 10 point profit target, right? Now, what's the mind telling us this time? Well, if it's, if your mind is like my mind, here's what my mind would be saying. Gary, you idiot, what are you doing that again for? Are you stupid or what? Are you never going to learn this? You're never going to, you ought to just forget this stuff. You're never going to be a trader, right? Common experience. We all have had this multiple times, but we never ask an important question. And that question is, so which mind was right? Was it the mind telling us to get out of the trade a few moments ago, or is it the mind now yelling at us, chastising us for doing exactly what it told us to do a few moments ago? Right? Right? And you can apply this to, you know, just about jumping into trades. Oh, the market's going to take off. You better get in. You're going to have so many profits you're going to miss out on those profits. So you jump in, the market goes down, stops you out. What an idiot, are you never going to learn? The thing we never do is ask that question. Well, this is about the mind being in the moment, being in the present moment is being able to, again, not buying into, not seeing the world through these thoughts like I'm going to have a loss. I better get out, hurry up, or you idiot, why did you do that? That's this, we got to bring these out here. And that's what I mean by being in the present moment to recognize those thoughts just as thoughts even though they're tinged with emotion, charged with emotion, even though they sound true, even though we believe them, we have to learn to hold them lightly, to hold them lightly. Otherwise, we're going to just be whipsawed back and forth, back and forth, back and forth by whatever whim the mind is conjuring up at the moment. So that's what I mean by being, having your mind in the moment. So which one was right? They're both wrong. That's the thing, right? Neither one is right. They're both wrong. You should have stayed in and they shouldn't be yelling at you for doing what it told you to do. That fear and greed, they're powerful. Butt heads a lot. Yeah, and it really comes down to, I think Mark Douglas said this who wrote an excellent book, by the way. He was not a psychologist, but he was a very good trader and he was very interested in psychology and learned a lot about it and wrote pretty cogently, I thought, and pretty clearly in his book. But he said that very clearly too. That was, you know, most of our emotions, we have fear, greed and hope. Really it's fear, the fear of missing out, the fear of being wrong, the fear of leaving money on the table and there's one other fear, fear of loss, right? And hope is just, hoping we're not gonna have to book that fearful loss that we're having and greed is just the fear of really missing out or leaving money on the table. It's all about fear as I see it, yeah? Yeah, I could probably recite trading in the zone, word for word, I've read it so many times. So yeah, great stuff. An excellent book, it's a really, it's the one book outside of my own that I recommend to other traders as a really good trading psych book. I think it's excellent and it was really well written. Yeah, agreed. All right, part five, mentally parking losses and errors. What do you mean by that? Well, it's a good skill to develop mental parking. If we were in a nine to five job in a corporation somewhere in suburbia, say, and we had to drive to get there, we'd get in our car in the morning, drive to the office, park it in the parking lot or the car park or garage, whatever. And we'd lock it up probably and go into the office. Wouldn't think about it the whole day, right? We didn't drag the car into the office and keep it right next to the desk. Oh, there's my nice car there. We don't need to do that. We can leave it in the, and when we're ready to go home at five or six o'clock at night, remember this is a corporate job that we all tried to leave, right? Or trying to leave. The car is still there for us and we get in, we can use it and do that. So that's the concept of mental parking. When we have a loss, the best thing to do is to write it down, you know, write in your journal a three point or a four point loss or whatever it was at this time. And you just close the book on it and you park it to later, until later, okay? Now's not the time to deal with it. We do that after trading is over. Same thing with other distractions. We were talking about preparation earlier. Let's say we had a fight with our partner or our spouse and this happens with a lot of traders. They bring it into trading, not consciously maybe, but they bring it into trading. They're still thinking about what they want to say to their wife or their husband or their partner and how much they're wrong. And if they only saw things their way, it would be so much better, right? They're still fighting that fight. They haven't parked it. And then what normally happens on something like that when we're distracted that way, it affects our trading. And you take poor trades or we don't, you know, I'm angry now at my spouse and now I take that out on the market. It's easy for us to do. So mental parking is something that, we see it in sport all the time. I'm a big tennis fan and I would watch Roger Federer when he made an error, an unforced error, right? Made a foolish play. He'd call the ball boy over and get a ball from them and he kinda look at the ball, he gaze at it and then he'd take his racket and he'd hit it across, you know, down court and hit it away. You'll often see a pitcher in a baseball mound. If he threw a ball, if he threw a bad ball, an errant ball, you'll see him kinda look down to the ground and grind his foot into the dirt. Well, he's mentally placing just like Federer was mentally placing his error on that tennis ball and then hitting it away. The pitcher is placing it down in the dirt and then rubbing his foot into it to grind it away, right? That's mental parking. The basic idea is that any distraction that we have, we want to recognize it. And if it's an important distraction, like if it's an argument with somebody important to us or if it's a loss that we had that we wanna take a look at later, we can jot it down, close the cover, park it and then deal with it later. That's the idea behind mental parking. I love the way that you phrase that as parking. Because what we're not doing, because if you park your car in a garage, you're going back to get it, right? You're not throwing it out, right? So there's a big difference between taking something and ignoring it and putting it, sweeping it under the rug until it builds up a big pile of whatever. And so there's a big difference between ignoring it and parking it. I'm parking it. Because you're always going back to get your car in the parking lot. You're always going back to it. It's just taking it, compartmentalizing it for later, right? Later, exactly. It's not going away. You still will deal with it. But at the moment, this is not the time to be dealing with that. We have other things to do. I've got trading to deal with. I've got to identify and execute trades. That's my job at the moment. And I can't have distractions. That's where mental parking comes in. Excellent, I love that. I've never heard it explained that way. I love that. Part six of seven, attending to the trading process, not results. We kind of touched on this before, but hit on that again. Yeah, it was a really good, it was an unpublished study that was done some cognitive psychologists a while ago. And they talked about this. And one of the things they said is that when you have a winning trade and you've followed your process, well, that's expected, right? We would expect a win to come most of the time or a majority of the time when we followed our plan and when we followed our process. When we have a losing trade and we followed our process, that was too bad. It's just part of the probability curve. It's just bad luck, right? We weren't lucky, we were unlucky here. And so that's following the process. When we don't have a process and we have a winning trade, well, gee, anybody can put a trade on. And if it goes in your direction, great. That's a winning, that's just dumb luck. If you're not following a process and you have a winning trade, you're trading basically randomly and you just had a positive random outcome. That's just dumb luck. When you're not following a process and you have a losing trade that's justified, you should have that, that's expected. That's poetic justice if you want. So when we think about a process, we have winning trades and we have losing trades. When we follow a process, that's the expected. That's what we are expecting from that process. There are times, however, when it doesn't work out, we accept that because that's just, we were just unlucky there. And it's part of the trade setup as it is. If we're not following a process, even if we have a win, that's just dumb luck. And most of the time we're gonna get nicked, we're gonna have losses and that is deserved for not following a process. So that's kind of process in a nutshell. And I think the other thing that I see with traders who don't have a process is when they have winning trades, especially if it's multiple in a row or if it's a big one, then they're a genius, right? It was them. It was their knowledge or their research or their analysis that created that win. And when they lose, it was somebody else's fault or it was the market's fault or it was the stock's fault or whatever. So yeah, I mean, you can get it even if you don't think about those things consciously on a subconscious level, sometimes that creeps into your mind, but when you have the process, it's hard for that to happen because it's a process. Because it's a process, right? And a process, when we're talking about a probabilistic field like trading, that's all you've got. If you don't follow the process, you don't let your edge play out. Whatever edge you've got in your trade setups, that's not gonna play out if you're not following a process because if you get a winning trade, that's just dumb luck. And most of the time you're not gonna have a winning trade and that's what you expect. You have to have a process, you have to follow that process for the probabilities to be realized. Absolutely. All right, Gary, number seven of seven, reviewing the day for self-improvement. Talk about that. Yeah, we kind of touched on this a little bit. And this, and sorry to cut you off, and this ties into the last thing that I wanted to talk to you about anyway is one of the other documents or tools that you have on your site is the Trader's Performance Assessment. And I think that's what you're just getting right. It's really four basic questions and I think that's where you were going. Right, right. What were my strong points today? What were my limitations today? What can I learn about myself and my trading and my performance, my trading performance? A lot of times traders don't realize that they're in control of their performance, right? They think that they put on a trade and they're not really part of the process any longer. They're totally in it and it's really how are you performing? You know, you can take a trade setup that has a certain edge to it and you can give it to two different people and you can give them the same market data, in fact, and tell them to trade and trade only that trade setup and they're gonna have different results and it's based on their performance, how they're performing with that particular trade setup. So we wanna pay attention to that and we wanna be looking for patterns as we've talked about so far in this conversation about things like having a multiple number of wins or good outsized wins and then letting our guard down and giving it back or giving a portion of it back. Those kinds of patterns are really useful. Those are the things that we can learn about ourselves when we practice using a journal, when we do this constructive self-assessment at the end of the trading day or if you're a swing trader at the end of the week or the end of the trade, whatever. And then what can you do with what you've learned? And I like to set up what we call SMART goals, S-M-A-R-T, specific, measurable, attainable, relevant and time bound. So if I was, for example, let's use the example of getting in the trade too early and not waiting for a good trigger. So now I've done my research and I've got a good trigger, right? A good entry trigger and that's what I'm gonna focus on. So I'm gonna set up a SMART goal. I'm gonna make it very specific and measurable, attainable, relevant and timeframe or time bound. So I'm gonna say over the next two weeks, for example, I'm gonna take 70% of my entry trigger for every trade that sets up, right? And that's my SMART goal. It's very specific. I can measure it. Usually we measure, did I do it? Did I not do it? Is it attainable? I gave myself a kind of a psychological outer cover. I just did myself, you know, 70%. I don't have to have 100%. I'm not looking for perfection. I'm looking for momentum, right? To start pulling myself in a given direction. It's certainly relevant to my trading because if I can get a good entry, then I've reduced my stress and I've reduced some losses and I've time bound it. Over the next two weeks, I'm gonna do this on every trade. So that's kind of a, we don't have a lot of time to talk in an hour's interview about this stuff, unfortunately. But that's kind of a preview about how I would work with somebody using their, using those questions and they discover something in their performance that they're not doing that they wanna improve on. It's a limit that's relevant to their trading. And if they changed it, it would improve their trading. And the way I would do it is I'd set up a specific kind of goal called the smart goal and I'd set it up in that specific way so that we don't have to hit perfection but we wanna gain momentum in that direction. Wow, that's great stuff. Man, I love, love, love this conversation. I love your whole approach. I love everything you're talking about here. It's so much in line with what I believe, what I feel, how I operate and how I talk to our folks as well. So, Gary, I really enjoy the conversation. To be conscious of your time, we'll go ahead and end it here. But anything else you wanna tell the trade hacker community before we say goodbye? Just focus on the mental side. Look, trading is really difficult. You're up against the best players in the world. Some of the best and brightest in the world are operating in the markets day to day. And you're working against them. So, you really wanna focus on the mental side. It's not so much the technical. I mean, even Mark Douglas said this. I can, if you send me your e, a letter I think at the time that he wrote his book. But if you send me a letter, I'll send you a trade setup that has a good edge to it. You can, it's not so much the technical side. There's probably a million ways to trade the market if not more and they can all be workable and valuable and usable and profitable, right? It's not so much that. It's what's going on in here between the ears. And it's pretty huge, it's vast, but we can also start to work with it and start to learn about the mind and how it works and how not to be obedient to it all the time, which is what gets people into so much trouble. So, that would be my message is focus a lot on the mental side and trade well, yeah. Well, great stuff. If anyone wants to learn more about Gary and kind of stuff he's doing, tradingpsychologyedge.com is his website, the seven part guide to mental trading skills that we just went over today. You can get access to that in a seven day email series along with the Traders Performance Assessment Document. So with that, Gary, we'll say goodbye. Thank you so much for being on the show and maybe we can do it again in the future. Oh, I'd love to. This was a great, great time. I really appreciate it, Steve, thanks a lot. Take care. Bye bye now.