 Hey everyone, welcome back to the Trade Hacker Mindset. In this episode, we're gonna continue with our discussion on topics from the book, Trading in the Zone, by Mark Douglas. In this episode, we're gonna talk about consistent winners, consistent losers, and the boomers and busters. 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, so let's jump into our discussion of winners, losers, boomers, and busters. For most successful traders, it really takes a lot of time, sometimes more than others, before traders either throw in the towel or find out their true source of success. And depending on where you are in your trading journey, maybe you're at a point where you've managed to get just enough right about trading in to become commonly what's known as the boom and bust cycle. You know how to make money sometimes, but you're still subject to that euphoria and the self-sabotage that can really make you incur large losses from time to time. You know, we talked about it in our last episode about having a positive versus a negative attitude, and there are certainly traders who just right out of the gate start losing consistently. But there are a lot of people, a lot of students, a lot of new traders who are really tenacious about learning. They're tenacious students. They have a passion to learn about the markets. And in turn, this does create kind of a winning attitude about the markets. So in spite of a lot of difficulties that you can incur when you're trading, you eventually learn how to make money. But I wanna emphasize, this is on a limited basis. You haven't learned how to counteract this euphoria when you get on a winning streak or you haven't learned how to get out of this cycle of taking these large losses that just set you back in your trading. You know, I know I can remember when I was a new trader, there were a lot of times where I would have significant win streaks, where I would have multiple days in a row that were winning days. I would have multiple weeks, multiple months, but then eventually the self-sabotage would kick in and I might have a situation where within a period of a day or a week or a month, I would wipe out all the gains that I had built up to that point. In his book, Trading in the Zone, Mark Douglas says euphoria and self-sabotage are two powerful psychological forces that will have an extremely negative effect on your bottom line. Basically saying it's not uncommon for you to experience a boom in your trading followed by the inevitable bust. The thing to remember is that you don't typically experience this, until you've actually started winning. Because at this point, you're really unlikely to concern yourself with anything that might be a potential problem if you're winning, especially if you're experienced a sense of euphoria when you're on a real hot streak. You know, euphoria creates this sense of confidence that anything going wrong is almost inconceivable. It's actually when you're winning, it's when you're on these hot streaks, when you're in this state of euphoria that you're actually the most susceptible to making a mistake. And mistakes can come in a lot of different forms. They can come in over-trading, trading too much. And probably the most common is putting on positions that are too large for your account, too large for your personal risk tolerance level. Another mistake might be that it violates your rules. Maybe you've come up with this very rigid set of rules that you follow and you've been following it and you've been doing great, but then you veer off a little bit and you still win. And that's the issue. Once you veer out of your rules and you make a winning trade in your mind whether it's subconscious or consciously, you start getting into this rut of taking trades outside of your rules. And that's inevitably when you hit that situation where you incur large losses. You may even get to a situation in the state of euphoria where you actually think you're so in flow with the market that you are actually kind of in the market. You are the market. You are pushing the market. The problem is the market doesn't always agree with that. In fact, it doesn't agree at all. And when it decides to disagree, that's when you experience the real pain. And that's what I mean by experiencing boom followed by a bust. So Mark Douglas, he consulted and coached hedge funds, retail traders, institutional traders, individual traders, all across, I mean, thousands and thousands. And he put traders into really three classifications. One are the consistent winners that you have a steadily rising equity curve with relatively minor drawdowns. And this makes up about 10% of traders overall. The next group of traders are these consistent losers. And this is about 30 to 40% of active traders. They have illusions about the nature of trading. They're addicted to it kind of like in a gambling sense. It almost makes it virtually impossible for them to be winners. They have negative attitudes and everything that we've talked about in the last episode. And then the largest group of active traders fall into this boom and bust category that they've learned to make money, but you haven't really learned the trading skills and the mindset skills that have to be mastered in order to keep the money that you make. These are the traders where if they are actually even tracking their trades, well, their P&L equity curve looks like a roller coaster. So think back when you had your last major loss or if you haven't had one yet, pay attention to this if you incur a major loss. Did it come right after a state of euphoria or was it related to a situation of just self-sabotage? Because what you'll find is that major losses are usually a result of one or the other, euphoria or self-sabotage. Now, of course, every trader's different. Every trader has a different threshold for when this overconfidence or euphoria may start. For some traders, this streak is just a few trades in a row. It's looking at a very steadily rising equity curve or in some cases, even just one winning trade. But be aware, when euphoria takes hold, you're in deep trouble. And this is where self-awareness comes in and plays a huge role. Because when you're in a state of euphoria, you can't perceive the risk. In your mind, nothing can go wrong at this point. And if nothing can go wrong, then there's no need for rules. There's no need for boundaries. And so what happens many times is this is the point where you start putting on larger than normal trades. And inevitably, that's when the market slaps you the worst. As soon as you put on that position that's larger than normal, you're in big, big trouble. And when you finally get out of this trade, it's like your days, your disillusioned, you almost feel betrayed, you're like a deer in the headlights, and you kinda wonder, how did this happen? The biggest loss that I ever took as a trader, and this was years ago, this was probably about seven or eight years ago, I was trading oil futures. The CL contract, which is a pretty sizable contract. At the time I was trading an account, there was about $130,000. And I had been on a significant win streak. And I became very, very confident that oil was going to continue higher. And because of the state of euphoria that I was in, I loaded up on the number of contracts. And right at that point is when the market in oil turned to the downside. And everything in the news and everything that I was digesting and reading about the oil market was that oil was going up. And so I was not only from that, I was taking that information and it was fueling my confidence of my own personal perception of what was gonna happen in the market. And as the oil market started going down, not only did I start with a position that was larger than normal and really too large for my account, but as it went down, I continued to add more and more contracts. And what happened is within a matter of weeks, my account that was at $130,000 when I started that position, when I finally called uncle, when I finally closed out my oil position, my account was $15,000. I had lost $115,000 in a matter of weeks on one trade because of that state of euphoria because I got my position size too large. And I literally quit trading for six months after that because I was in this state of shock of, how did this happen? Playing the blame game on the market, on everything but myself. And actually that's one of the situations that actually got me started on the path of the trade hacker mindset, of mindset trading. And this was, like I said, seven or eight years ago. So it was a long time ago, but that's when I really started to realize that this was an internal issue. This was not the market's fault. This was not the, well, I mean, it was just a terrible strategy. I didn't have a strategy. I had no rules on that trade. But the only thing that caused that to happen was me. It was in my mind and the decisions that I made on that trade. I remember thinking, I'm never gonna trade oil again. It's oil's fault. Oil's to blame for this. It's definitely not me. This is, it's just the fact that I was trading oil, that was the problem. So now let's talk about self-sabotage because losses from self-sabotage can be just as bad, but they're typically a little bit more subtle in nature. They don't slap you across the face like euphoria does. You know, self-sabotage is an interesting one because I think a lot of times this comes from something that happened potentially in your past, your upbringing, your work ethic, something that happened in your childhood, some type of trauma potentially. And if there's a conflict of your mind about, you know, deserving that you should be successful, then it can create a conflict in your mental environment that's not aligned with your goals of becoming a successful trader. Obviously, if you get into this cycle of self-sabotage, you know, if you lose more money than you make, you're eventually going to fail. I can remember talking to a group of, they were a broker, futures broker, as well as they sold automated futures trading systems. And I remember specifically, one time they commented that when it comes to their customers, they kind of lived by the motto that all these, all their customers are temporary, they're terminal. And it's their job just to keep them happy until they're gone. So basically they're saying, hey, you know, these people are gonna blow out eventually, but it's just our job to, you know, make them feel good and make them feel like they're gonna be successful until they blow out their account and they're gone. They're just churning customers over and over and over. It pissed me off, it made me mad, but the reality is, they, you know, they're right. I mean, there were so many traders that have that self-sabotage or that mentality, and they know that they're just eventually gonna blow their account out. All they're there to do is collect fees from them until they do. And it's pretty obvious that if you lose more money than you make, you're eventually gonna fail. But what's not as obvious is that even if you win, you still may be in a cycle of eventually blowing out or eventually failing. Because if you haven't created that healthy mental framework, if you don't have that balance between confidence and restraint, confidence and following your rules, then you haven't learned how to recognize and compensate for the potential that you have this ability to self-destruct and you will do it sooner or later. And that's why it's so important to have this trade hacker mindset that we keep talking about what this whole podcast is about. So think about this, and we're still on topic of the boom and the bust type cycle. Trader, ask yourself this, if you could redo every losing trade that was the result of recklessness, how much money would you have today? I mean, for me, it's a massive, massive number. I mean, when I was a new trader, I had a between the two emotional decision-making things that we talk about with trading, fear and greed. Greed has always been my Achilles heel. I really haven't had that issue of fear necessary. I mean, everybody has fear to some degree, but my issue was more of a greed and I was always of the mindset of I'm learning, I don't care, I'm just gonna put on trades. This is part of the learning process. I don't care if I make money. And I was completely reckless when I was a young trader. And if I look back to see how much money I would have based on the result of losing trades because I was reckless, it's an astronomical number for me. But the thing a lot of traders don't realize is that the market is not responsible for your recklessness, it's you. The market does not have anything to do with the errors that you make as a result of some internal conflict about deserving that money. Going back to my oil example, it had nothing to do with the fact that I was trading oil. It had to do with the decision-making, the trading decisions that I was making while trading that specific symbol. So while I wanted to swear off trading oil like oil was the reason why, once I realized that it was me, it opened up a whole new light in the world of trading. Because the market, it doesn't create your attitude. It doesn't create your state of mind. The market simply acts as a mirror and it reflects what's inside of you. If you change your attitude, you're gonna change your profits. And it works both ways. If you change your attitude to negative, it's gonna negatively affect your profits. If you change to have a winning attitude, your profits are gonna be positive. So what's the definition of a winning attitude? Mark Douglas says, the definition of a winning attitude is a positive expectation of your efforts with an acceptance that whatever result you get are a perfect reflection of your level of development and what you need to learn to do better. Let me repeat that because it's extremely important. The definition of a winning attitude is a positive expectation of your efforts with an acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better. I hope you write that down. I hope you internalize that. Write it down on a sticky note, post it on your computer because that is such a huge deal and it'll be a continual reminder as you're in the flow of trading. Think about this. Have you ever missed out on a trade? Either you didn't get filled and then price ran in the direction you thought it was going. Have you ever wondered why missing out on profits is often more painful than taking a loss? Part of the reason is because when you take a loss, there are a lot of ways in which you can shift that blame to the market and not accept any responsibility. But if you miss out on a trade, there's no one else to blame. It did what you knew it would do. You just didn't execute it. So there's no one else to blame except for you. You see, you're not responsible for what the market does or doesn't do, but you're responsible for everything else that results from your trading activities. And you're responsible for what you've learned as well as for everything you haven't learned yet that's waiting to be discovered by you. So I'm gonna continue to beat this dead horse that what it takes to be successful is a winning attitude. This is the key to your trading success. The problem that I see a lot with interacting with so many traders is that they think they already have a winning attitude when they actually don't. Or they kind of expect the market to develop this attitude for them by giving them winning trades. Once the market reacts and gives me my winning trades, then I'll have a winning attitude. But you and you alone are responsible for developing this winning attitude yourself. And I wanna emphasize over and over and over that understanding the markets, more market analysis is not the answer. Understanding the markets will give you potentially an edge to create some winning trades, but your edge won't make you a consistent winner if you don't have this winning attitude, period. Now you might be saying, yeah, but you can't be a successful trader unless you understand enough about the markets. So there's some truth to that. But once you understand a basics of the market, basics of a strategy, that's all you need. The rest is the winning attitude that makes the biggest difference. Going back to my example in the last episode, I mean, some of the worst traders out there are market analysts. People who know the most about the markets are still some of the worst traders. So if you wanna change your experience with the market, if you wanna change from fearful to confident, if you wanna change the results of your equity curve from a roller coaster to a steadily rising one, the first step is to embrace the responsibility. Stop expecting the market to give you anything or to do anything for you. If you make a commitment from this point on that it's all gonna be on you, that you're gonna take full responsibility, if you stop fighting the market, which basically means you're gonna stop fighting yourself, you will be absolutely amazed how quickly that you start getting a positive P&L. And taking a quote from Mark Douglas' book, taking responsibility is the cornerstone of a winning attitude. I hope this episode was helpful. If you want to join a group of like-minded traders, just go to community.navigationtrading.com. You can join the trade hacker community where you can meet and interact with like-minded traders. There's hundreds of traders in there sharing trade ideas, helping each other out with the main goal of helping each other become successful traders. We hope to see you on the inside. Take care.