New CityTrader Magazine #1 by dr Dariusz Swierk - HTML preview

EBOOK

 

Trading [Champions] share

 

their experience in a series

 

of in-depth interviews

 

80 DETAILED QUESTIONS

450 PAGES

 

www.ForexMarketMasters.com 028 NEW CITY TRADER

AI in Trading

 

[6] Hottest

 

Topics 029

 

In this article, you'll learn about six of the most - whether the authors express themselves critical and "hottest" elements that make up or positively or negatively about the future. are associated with AI today. In addition, you'll

learn the basics of the tools that will shape the When we analyze texts of reports and press future of trading. First in the biggest and statements, it turns out that all of the above wealthiest funds and then in smaller ones as elements can be a good indicator of future well. financial performance.

I invite you to take a journey into this near and SOCIAL MEDIA TEXTS far future of trading.

Already now, the analysis of posts in social

NLP media and online shops allows determining the

sentiment - the opinion about the company and

Natural Language Processing is the common its products, which usually precedes the name for many tools to analyze written and financial results. spoken text: company documents, press

articles, news, analysis, web pages, social media Sometimes it is also possible to find and analyze posts, company’s product reviews. the sentiment of different investor groups about

the company and its future which also affects

Advanced NLP software recognizes context up the share price. to about a thousand words. That's a lot, and

soon, there will be more. "THE STRIPPER THAT WILL CHANGE OUR

WORLD"

NLP allows you to analyze many features of text, N

such as: E The next gigantic step in the evolution of NLPW

- whether the text about a particular company IT millions of books, academic articles and other come from extracting written knowledge from C

Y

is positive or negative, texts and help create coherent theories of how RT

- whether it is clear and transparent or obscure DA the economy, or supply chains, works. ER

and convoluted, 030 NEW CITY TRADER

 

This development will give theoretical and practical Only one element of this sequence is automated

insights into the factors that affect the financial - the fifth. All the rest requires the use of specialists' performance of companies, industries and all relevant knowledge and experience. economic processes. Already today, we see the first

signs of the creation of such tools. Today, the real driving engine of AI is... the

specialists. And it will remain so for a long time to

SPOKEN TEXT come. "Real AI" is still very, very scarce.

NLP also covers spoken word analysis: statements Over time, each step will be done automatically. Only

from TV news, films, other video material, or telephone then will we see the true power of machine learning

conversations are automatically transcribed and and AI. We are at the beginning of this journey, the first

subject to the same analysis as written content. stage of evolution (and I believe there will be five).

Thanks to this, we now have access to knowledge I didn't want to start this thematic series by describing

about the level of Forex volume. The systems analyze ML tools. I preferred to show their current place in

the volume at major banks and brokers and traders' general. In the future, I will describe some Machine

volume over the phone. Until last year, data on this was Learning solutions and how they are used to create

not available in real-time. I will find out if anything has trading systems. I will also give examples of such

changed yet and write about it in future issues. I know systems so that you can form your own opinion about

that there were plans to provide this volume in real- them. time as well.

What is worth knowing is that despite the impressive

MACHINE LEARNING achievements of AI-related technology, this is just the

beginning of this revolution.

Machine learning is dozens of tools for machine

problem-solving. It will change everything we know.

But today is different than you might think. We are in We are only at the beginning of the AI revolution.

the first phase of the evolution of these tools. To It will change everything we know. understand this and to understand their potential, I will

give a practical example: how does solving a problem XAI OR EXPLAINABLE AI using machine learning tools look like:

It is currently probably the hottest topic in AI.

In simple terms:

Some ML tools are so complex that we don't know

1. the process consists of problem formulation and how the machine got the result, how it made the

preparation of a mathematical model (specialist), decision or the recommendation. 2. further collection and preparation of data

(specialist), We call them "black box" for short - it's dark inside, and

3. selection of one of the ML solutions (specialist), we don't know what's happening there. Nevertheless,

4. feeding the software with data (specialist), the math behind it is excellent, and the results are

5. data processing (software), often astounding. 6. finally, we have the interpretation of the obtained

result (specialist) - someone has to explain the result So, we have a result, but we don't know how it was

in non-mathematical terms. achieved. We don't know because the process leading

to the development is very complex and has many

steps. And if we don't understand "how it works", then

several problems arise. I will describe them for and Kullback - Leibler divergence for probability the case where we have a black-box that gives distributions (such mathematics can be used input and output signals: there) if he has no idea about it.

 

- beyond simply allocating a small % of capital It is a fascinating problem. Important enough to the position, risk management becomes that we are preparing for publication a broader problematic; article on this topic: how to explain and help- we have little or no control over the position traders understand new tools, in particular (except for the exit); black-boxes. How to estimate risk, build- we don't get the most out of a tool we don't confidence, define a framework in which they 031 trust. And this is a problem when we have will feel safe with the new device. spent several million in its creation;

- we don't know if a given series of losses is Someone who has an easygoing boss already temporary because the market has changed, or thinks they can relax and not bother explaining maybe the system has stopped working for a the operating principle of their wonderful black given market. So it will only lose from now on. box. But, unfortunately, this is not the case

because other people on the horizon would like

And since the results are good, we will try to to know how it works. explain how it works in one way or another. The

problem of finding an explanation and There are several groups of such people. education for exploiting the potential of AI will

also run through the following issues. Those who want or need to know what's going

on inside

For a fund that employs traders, this problem is

as practical as it gets. The first would be the law regulators and the

courts. The Financial Supervisory Commission

A TRADER IN HIS SEVENTIES WOULD LIKE may want to know if, by any chance, the recent TO KNOW HOW MUCH MONEY CAN BE MADE large positions, as claimed by us placed by a ON A "BLACK BOX." "black box", are not an instance of insider

trading.

For example, let's take a trader who is 75 years

old, active and, on top of that, a co-owner of a If you have a similar idea of defending yourself in fund. And he would like to find out how "this court (from being accused of insider trading), new thing" works because it may be worth then know that it makes no sense. We may not increasing the capital that this "new toy" has to know what is inside, but the signal must appear use. again after simulating the conditions created by

the signal.

But how, without knowing what's going on

inside, define the trading framework? What risks Then we have the risk management to assume, a reasonable capital commitment, department, which would also like to know when difficulties arise, and what to do when how it works or at least what it resembles. All N they do? E they have left is to allocate a small amount ofW

Moreover, after all, we have to adapt to the ITY capital to the signal. C

boss's scope of knowledge and experience. A black box position is like a plane without RT

Thus, for example, we cannot start the lecture DA windows. We take off on command, fly with no ER

with the geometry of differentiable manifolds way to tell where we are and land on command. 032 NEW CITY TRADER

 

The only assurance of safety is the statistic that, for The topic is even more important because, for the vast

example, a position is profitable six times out of ten. majority of non-mathematicians, i.e. traders, portfolio

This value means that we have four hard landings per managers, C-level managers, practically every AI/ML

every ten take-offs. It is a moderately comfortable tool is a black box. For some reason, explanations

situation, although in some cases, it will suffice. such as dealing with a multidimensional,

differentiable manifold immersed in a vector space do

HAS THE SYSTEM ALREADY STOPPED WORKING? not help.

Now, we have something even less pleasant: if we do Virtually any AI/ML tool is a black box for most

not know the rules of decision making, we cannot be traders, portfolio managers, and C-level sure that a given series of losses is not the end of the managers. system because the market has changed and the

previous rules no longer work. Exaggerated? Maybe, Explainable AI fits into a broader trend - most people

but only a little. and traders have no idea what new tools do.

The use of various AI tools will only grow, including There is a great need to explain to users how AI/ML

black-boxes, and this has to be dealt with one way or tools work, what they provide, their limits of use and

another. The major funds already have some when they stop working. Education is vital because a

prescriptions for what to do. In future articles, I will fund's competitive advantage will soon be created at

describe them. the interface between the team and the tools, AI

systems.

Competitive advantage in the future will depend With the increasing number of data sources and on the so-called structural intelligence of the the complication of forecasting models, company. The largest funds are already working traditional ones will be replaced in a in this direction, although they can not name it considerable part or even entirely by AI/ML-so cleverly. We will also devote quite a few based models. articles to this in the future, which is one of this

magazine's goals. Soon, traditional forecasting models will

be replaced in colossal parts by AI/ML-

Competitive advantage in the future will based models. depend on the structural intelligence of the 033

company. The largest funds are already For a broader discussion of Alternative Data, see working in this direction, although they the separate article in this issue. cannot name it so cleverly.

VISUALIZATION

ALTERNATIVE DATA

It is easier for humans to look than to think.

ADs provide a better picture of a company's "Analysis" by sight developed long before situation, raw materials, currencies. It also abstract thinking. allows us to assess the "current state"

(nowcasting) of significant indicators. Those There is something severe behind this remark. It data make trading signals better, more precise, is much easier for us to understand a situation less risky and more profitable. when it is shown using images rather than just a

verbal description. Therefore, as much as

It is a revolution accompanying the AI revolution possible, use visual aids - graphics, pictures, and even preceding it. In my opinion, it is more diagrams, or charts to illustrate data, situations important today than AI, which is only in its early and processes. stages (despite many impressive achievements). In my opinion, through AD, Indeed, it is good practice to consider what goal funds can earn more and build their competitive we want to achieve, define the target group and advantage over others. identify which parts of the message will benefit

from such enhanced presentation. The same

ADs are not part of Artificial Intelligence. An applies to respecting the simplicity of the example of AD is credit card sales data. This data message, playing with colours and ensuring can be used to predict the financial maximum readability. performance of companies. If we have historical

data, then in the simplest case, to make Another good practice is to provide a forecasts, all we need is a spreadsheet! benchmark, or reference point, to which we

compare some quantity. Our mind performs

And when we are interested in more advanced better by observing the differences between indicators of future profitability, such as some benchmarks and the current indication. consumer spending patterns, brand loyalty, N

switching between products/brands, trending E An excellent practice is to make it easy for theW

created using Machine Learning can come into IT Thus, when preparing visual aids, try to help moods, competitors performance, models audience to understand the situation quickly. C

Y

play. them understand the situation as quickly as RT

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034 NEW CITY TRADER

 

possible – for example: whether we are in the realm of Now "normal" or have already gone beyond it.

Today, automatization is one of the main topics

All key, critical processes should have some sort of because it takes the burden of routine activities and

graphic representation. It should allow for a quick responsibilities off the shoulders of traders. One of the

assessment of the situation, especially in unusual or main problems that traders complain about is

crises. So let’s say I give you a colour scheme, where excessive workload and information overload. green means everything is going well, orange –

attention required, and red – we have a critical The primary candidates for automation are routine

situation. Sound familiar? It should. activities that require no intellectual input. And over

time, more and more activities will be automated -

As AI matures, the amount of information and and more about that in a moment. complexity of systems (and portfolios) will only

increase. Therefore, using standardized metrics Suppose we have a great trader. Only some of his

within a company to illustrate key processes is activities add value, and he should focus on them. You

something worth developing as a valuable skill. can consider using supporting programs or someone

else to help with the remaining tasks.

Let me say it another way to emphasize the particular

importance of this topic - the ability to graphically What should not be automated are non-routine

present important processes for a company is a decisions, decisions in exceptional or critical

competence worth developing. It is worth discussing situations and those requiring synthetic expertise

what indicators to use, what types of graphs, what beyond the reach of AI tools. colours, and what schemes to facilitate and enhance

understanding, ability, and speed of decision making. Instead, you can automate the execution of decisions

in critical situations with confidence.

Visual communication is one of the essential elements

of building and consolidating a company's structural In an extreme situation, the trader only presses the

intelligence. appropriate key. A program then tries to escape from

the market as quickly as possible. It tries to use

The ability to present essential processes liquidity, reduce costs and minimize the negative

graphically is one of the keys to building and impact of the large order it exits. In nine out of ten

perpetuating a company's structural situations, it will do this better than the trader and, in intelligence. the case of substantial orders, in ten out of ten.

AUTOMATIZATION Automatization will expand to include more and more

activities, including non-routine ones, over time.

Automatization is the critical process underlying the

use of artificial intelligence. In the future

It involves gradually learning and automating more To understand what automatization in a fund will look

functions of human intelligence. The ultimate stage of like in the future, we must first learn the decision-

AI development in trading is full machine autonomy making process of a discrete trader or automated

with a level of perception, "thinking", decision-making system. far exceeding human capabilities in every aspect.

The decision-making process consists of all the

What does this mean for traders and funds now and in elements that lead from the initial analysis (what to

the future?

trade and where to trade it) through the choice In conclusion, it is worth repeating one of location, entry, position management, exit, to important thought: the AI revolution is just post-trade analysis. beginning. It will completely change our world

and ways of investing. This process is incredibly

There can, of course, be many more of these fascinating. The New City Trader was born out of steps if we take a more detailed approach (and a desire to share this fascination. the largest funds do).

ADDITIONAL COMMENT

Automatization here is about taking a single

element of the decision-making process and After the initial publication of the article, I got a 035 trying to refine it first (to find the best practices) fascinating question. So, instead of changing and then automate it. the article, I will answer it here.

It would also be beneficial to provide a feedback - What will be the systems that AI will trade? channel so that we and, in time, the AI system

can improve this element based on the The most exciting and efficient systems will be incoming and analyzed data. In short, we want those based on the decision-making processes the system to learn on its own. of the best traders. This statement will be valid

for the first phase. In the second, more

In short, we automate best practices at each advanced stage of AI development, they will be step and provide feedback so that the system joined by the systems that AI will find and test. learns and improves. There will be quite an extensive article about it.

There are already extensive developments in

On the other hand, entry automation may this area on big funds. involve breaking positions into smaller ones,

examining order structures above and below, The assumptions that AI will eliminate traders, creating and executing entry strategies to especially the best ones, are greatly minimize cost and adversarial price moves. exaggerated. At least for the next 10-12 years, Hiding positions and maximizing positions for they can remain calm, or not. the best signals may also be part of the

automation.

SUMMARY

We have discussed six of the "hottest" topics

currently occurring in the Artificial Intelligence

field. Two are sure to be the most important: XAI

and Alternative data.

The first - because it opens up a powerful new

trend of adjusting the latest tools to a trader's N

level of understanding. We already know that a EW

tells him nothing. The second - because it is ITY gradient descent on a differentiable manifold C

alternative data that gives traders and funds RT

their main competitive advantage today. DA

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036 NEW CITY TRADER

[Suicide] due to

 

heavy market losses

 

THE [STORY] THAT WASN'T THERE 037

 

This is the story about how a good friend of gets. At the meeting, Tom told me what mine lost over 700,000 in nine hours. happened.

Some time ago, a fellow trader called me. Let's For several months he had been observing a name him Tom. He traded occasionally and was prominent trader who was able to grow his the president of a small company by day. We account ten times in one month. At some point, arranged to meet. It seemed like a friendly he decided it wasn't hard, deposited about 30k conversation. But, unfortunately, there was no and traded for a month. He took over 670K out indication of what I was about to hear. of the market by placing 19 positions. Last night

he decided he was going to try to make it two

- You know, I actually have one more thing on my million. He was hoping that there would be a mind -Tom said haltingly.- Last week I lost over move that would allow that to happen. half a million on the market.

He sat down around 2 am and put up three

I'll admit I was surprised. I knew he made money positions. Each was over 40 lots. A few minutes in the market, but I didn't think he traded that before eleven the next day, they were all much. But, of course, losing such an amount for automatically closed at a loss. The account was an occasional trader is no small thing. wiped clean to zero. As he told me later, these

entries were outside the system.

Therefore, before talking with him, I repeated 23

ways of dealing with losses (collected from To my surprise, Tom did not seem at all various sources, including a group of the best concerned about the loss! traders in the world whom I had interviewed in

the past). Iquestioned him at length about the incident,

looking for any signs of trauma or any remnants

I was anxiously awaiting the meeting. I met of a demanding experience. I found nothing. traders with significant losses before, but I have There wasn't even a dip in his mood! On the not encountered such a situation yet. A loss of contrary, he was in his usual, good mood. It was N this magnitude, more so in about 9 hours, can E bizarre.W

situations where people were on the verge of IT Intrigued, I began to inquire as to why he was seriously shake the psyche. I have seen C

Y

suicide; others were unable to sit down to the unconcerned about such a loss! I was sure it RT

market for months. Still, others are haunted by DA mattered to him. It must have! True, he was the ER

remorse for years. So the issue is as serious as it company's president, but he didn't make that 038 NEW CITY TRADER

 

much money in it to blow through 700,000 in one response to challenging experiences may be due to a

evening. different perception of the situation, a different value

system, or a different value scale.

Tom answered something that gave me food for

thought for a long time and that I want to share with The story described is an example of how different

you: traders approach markets and money differently. How

you think about money determines how your psyche

- This is virtual money. As long as you don't withdraw it, reacts to profits and losses and thus the mental strain.

anything can happen to it. It's a virtual entity. It can As long as Tom treats trading as a numbers game, he

disappear as quickly as it appeared. It's only when you will be confident of the outcome. Neither profit nor

have it in your bank account that it becomes real, but loss will shake him. until you do, it's just a row of numbers. That's how I've

always approached the markets. It's just numbers, I will certainly talk more about this in other articles

nothing concrete. because mental toughness is a little known topic. Yet,

it is one of the pillars of success not only in trading but

Here he surprised me again. I encountered this everywhere! approach for the first time. For all the traders I had

worked with so far, money mattered. Always. In the following article, I will tell you about a particular

system (actually, it is not so much a system as a way of

The depth of what Tom told me then didn't come to trading). It was popularized by a trader who

me until a few months later. In a nutshell, I can systematically made results similar to the one

describe it in the following way: described in Tom's story. For example, last year, this

trader paid 97k to a broker and, in 8 days, made over a

Each of us has some image of the importance of million. money in our lives. We bring that image to the

marketplace. A significant loss (as well as a big gain,

I've had that happen) can throw a person off-balance

for days, years or permanently.

The essence of the problem is that the loss causes

pain. This pain can be almost physical and can last

for weeks or even months.

Some traders go through months of hell because of

losses. On top of that, there are additional severe and

unpleasant issues, such as judgment from the

environment and family.

I knew that the best traders are very tough and

mentally resilient. It is one of the secrets to longevity

in the market and the huge fortunes they build.

Mental toughness is something I have studied for

many years. In the case of top traders, it is

outstanding.

Here I have come to understand that mental

toughness has many forms. For example, the lack of

[8] Good Reasons

 

 

Traders should

 

train others 039

 

This article is the result of a conversation I had with a trader whom I like and respect. He didn't like Linda Bradford Raschke's new training. Similar arguments often come up in conversations - "why is Linda training when she can make (more) money in the markets?"

As it turns out, there are at least eight good reasons why good traders should train.

REASON #1 - GOOD SYSTEMS TAUGHT BY PROFESSIONALS ARE VERY VALUABLE.

Knowing that I am the author of a book containing interviews with great traders, many traders ask me to recommend some good system. These are both beginners and experienced traders who would like to learn something new.

The fastest way to learn a new system is to work under the guidance of an experienced trader who trades it all the time and can share his analysis and entries. This is an ideal situation and the fastest way for adults to acquire skills.

Independent work is usually a few years of struggling with relatively simple things. Sometimes it is several years. It's more efficient and faster to pay someone who has it all N

figured out, has the system figured out, and can teach you EW

biology on our own. Instead, one uses already prepared ITY something good. None of us learns physics, mathematics, C

knowledge, tools and teachers. RT

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Good systems are valuable, taught by experienced traders- precious. But, unfortunately, there are plenty of worthless systems on the market.

REASON #2 - AS A TRADER, YOU UNDERSTAND THE MARKETS AND YOUR SYSTEM BETTER.

Teaching others also gives you a better understanding of your system. What makes up the market advantage gives you a better understanding of what makes the best entries different from the rest. It also enhances your understanding of market situations, technical, macro, fundamentals, and other factors. Finally, teaching others also improves your adaptation to market changes.

Over the years, I have told good traders to start training others if they want to get even better. And I have heard from virtually every one of them afterwards that it was an excellent idea. It developed them as traders. It gave a new perspective and helped eliminate weak points.

When training others, you have to answer many questions that your students will ask you. Often fundamental questions. Many of them will force you to re-think (and improve) your analysis and decision-making process.

You will not ask these questions yourself; they will never arise in your mind. So instead, it's the students who will force you to have an even better, more profound understanding of what's really behind your decisions.

These findings are very, very important.

What market factors do you pay attention to and why? In what order do you analyze them (and why in that order)? What does each of these factors do for you? For example, why do you join the market in some places and not enter in others despite the signal? And so on.

By explaining things (including basic things that you would never go back to on your own), you will take your understanding of the system to another level.

In turn, when you analyze your student's inputs together -you have an additional perspective on what you would or would not do in a given situation. Thus, this process is yet

another step in better understanding your best signals on them. Such cooperation is very approach to the markets. convenient and relieves each of these traders.

 

When I interviewed a trading legend and great You don't have to go through dozens of charts teacher, Joe Ross, I asked him what he learned every day looking for opportunities. Some of from his students. His answer somewhat this work will be done by someone else. surprised me:- My students taught me what not to do in the markets. REASON #5 - SATISFACTION AND LEGACY

By teaching others, you can better see changes People get much satisfaction in life from helping 041 in the markets and be better prepared for others. Teaching trading can undoubtedly have different courses of action. a significant impact on the lives of others. It's an

opportunity to expand your influence, circle of

Having devoted time to teaching others, traders friends and sometimes an opportunity to pass often simplify their systems by focusing only on on your values and worldview. the best situations and entries. And this directly

translates into concrete financial benefits. Many older people cite helping others and

positively impacting someone's life as their

"My students have taught me what not to primary sources of satisfaction and fulfilling life. do in the markets." - Joe Ross Money and possessions are not as important as

such interaction.

REASON #3 - POSITION STRENGTHENING

We are social beings.

I see this, particularly in stocks and contracts.

After opening a position, many trading teachers REASON #6 - EXERCISING SOCIAL SKILLS send information about it to their students and AND A PRESCRIPTION FOR LONELINESS followers. Their entries strengthen the position

of the teacher. Trading, especially as a profession, is a lonely

profession. It is a profession that many outside

It does not matter much for smaller groups, but the professional circle admire, but virtually no some traders have many funds among their one understands. followers, which is important.

Those closest to them don't understand. As a

A lot of cash follows a trader's trade. Such a result, the trader is left alone with the problems situation is beneficial to all interested parties, he encounters. What's more, trying to talk about even in the most liquid companies. trading with your family can end badly. Often,

you end up with a bad reputation in your

REASON #4 - PENETRATION OF OTHER immediate and extended family or the loss of MARKETS OR PORTFOLIO EXPANSION friends and colleagues. Again, this is usually due THANKS TO FOLLOWERS to a lack of understanding of the specifics of the

trade. N

Sometimes, thought-provoking signals come EW

penetrated other markets independently. Other IT family meeting, when asked how he was doing from students who have learned the system and Such was the case of a trader, who, during a C

Y

than the one where the teacher is active. This on the market, answered frankly that two days RT

creates a group of traders who can observe DA earlier, he had lost 70 thousand. For him, it was ER

many markets simultaneously and pick only the not much, less than 2% of his capital. But the 042 NEW CITY TRADER

 

way his family members saw it, the amount exceeded their annual earnings. From their point of view, such a loss was a drama.

During the following months, they urged his wife to leave him. After all, he is a madman and a loser. When that didn't happen - months of asking for money to buy a car, a new house, carry out renovations, and various other ideas came. "After all, it's better to spend that money on something tangible than to lose it!"

Suddenly, friends he hadn't seen for a quarter of a century began to appear!

Such reactions are to be reckoned with.

Teaching others is a cure for loneliness because no one close to you understands what the trader is doing. Sometimes it is a recipe for maintaining mental balance, and sometimes it is a recipe for exercising social skills, which fade with time. Simply put - you have someone to talk to.

REASON #7 - FORCED BY THE BIGGEST CLIENTS/ INVESTORS

If a trader works in a big bank or fund and is good, then the biggest clients/investors require him to prepare his successor. Or even several. For many very big clients, this is often one of the critical factors in choosing a fund: the existence of a formalized and smoothly functioning succession.

The reason is prosaic - they want the fund to have stable performance and when the time comes, for the generational change to occur without damaging their returns.

Of course, there is also another reason, which is not spoken about loudly. None of us is immortal. A car accident or an aeroplane crash can happen, leaving a void in place of a good trader.

Training others is a skill to learn when working in a large fund.

I have spent over ten years in the consulting and For the buyer, it is often a perfect opportunity. adult learning industry. I will describe in the But, unfortunately, the preparation and future what a good development program for refinement of a good system can take several new traders should look like, how to get the years and cost tens, sometimes hundreds of "newbie" to stable profits as quickly as possible. thousands of dollars. As a result, in large funds,

even a few million, their systems seldom find

Currently, the school model prevails, which is their way to the retail market. almost entirely unsuitable for adult education—

no wonder the results are poor. Over time, we will prepare a catalogue of

exciting systems and strategies worth learning 043

"Succession is a guarantee for the largest clients to expand your understanding of the markets. that profits will not disappear after the departure

of the best traders." "You pay the teachers, or you pay the markets

with losses. Usually, the losses are much higher

REASON #8 - AN ADDITIONAL SOURCE OF than the cost of training." INCOME

IN UPCOMING ISSUES:

Especially useful if the trader has a good

reputation and is good at what he does. - How a good training and mentoring program

for new traders should be conducted;

Now and then, some traders need a change—a

change of atmosphere or just a rest from their - What elements to pay special attention to for profession. A good training program is students to get good results as quickly as something new and exciting. It's an opportunity possible. For example, here are a bunch of to grow - a chance. It's getting to know new misunderstandings and problems that have people, their stories, their ways of investing. relatively simple solutions;

It is also a source of potentially good income for - What are the reasons why training has a good the trader. Let's count - video training for $1000 and bad reputation. What can be done to make purchased by 1000 people equals a million— them the best; earnings from outside the market, with minimal

risk. - Which trainings "sell themselves";

With the excellent organization of the sales These few simple rules allow you to increase team, the whole thing can be done without the your system's profitability almost immediately. trader. Meanwhile, he can enjoy the shade of a Yet, almost everyone forgets about them, while palm tree or sail on a yacht in the Caribbean. they should be the basis of every system and

training.

For the client, paying $1000 (or several

thousand) saves him time and money, which he

would have spent learning the markets by trial N

and error. EW

You pay the teachers, or you pay the markets ITYC

with losses. Usually, the losses are much higher RT

than the training costs. DA

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044 NEW CITY TRADER

 

The Most [IMPORTANT]

 

Problems That Lead

 

to Losses

 

- "I suffered a series of severe losses, and to this day, I Other stories end even worse. Much worse. Investors still can't get it together." In this quote, my investor lose assets (sometimes not their own), embezzle friend described a difficult period he was going company money, lose their homes (bank loan against through. Life events had made him more stressed collateral). Some fall into alcoholism and drugs or than usual, and, to make matters worse, a series of even develop psychological problems. Those who losses had occurred. As a result, he was unable to carry emotional issues into the family lead to return to the market. Instead, he sat in front of the breakups and suffering. computer, looked at the signals, and could not open a

trade. In other cases, symptoms of post-traumatic stress

disorder appear, which can last for years, turning life

During a later conversation, he took out a thick binder into hell. In many of the situations described, further full of colourful printouts from the market. trading can be forgotten.

- If I had joined the market today, I would have made a The issue of losses and reactions to them is severe, significant amount of money. I analyze the last few especially since there are no good sources of solutions weeks and see how much I would already have in my that would be able to stop the problem or reverse it at account. My wife laughs at me for becoming a demo all. investor. She has already accepted that I sit in front of

the screen for hours and do not trade. WHAT DO THE BEST INVESTORS DO

DIFFERENTLY?

This story has a reasonably neutral ending. The

standard of living and family remained intact. The To tackle the problem a few years ago, I started asking investor was left with ample capital to live myself questions while researching top investors. How comfortably, dating back to his days as a small do they cope with losses, what methods do they use, consulting company owner and CEO. However, the what has allowed them to survive so long without inability to return to the market is a disaster for many adverse side effects? Long-term and systematic gains investors, forcing them to look for another income are certainly some guarantee that these people can source. cope.

045

 

 

And How to [Deal] With Them

 

While researching the best traders, we of the month, they will come out on top discovered several reasons. First, some of them nonetheless. reached the top due to the different approaches

to the system and the way they trade. In Thirdly, the fundamental uncertainty of what contrast, others use unusual psychological the market will do means that they do not risk a techniques in their work. fraction of their account, hence the high margin

of safety. Thanks to it, they will be able to " trade

Let's start with the "system" part back" many times. If they risk more (sometimes

much more), they know very well why it is worth

According to the research, the best traders it. They do not make decisions on the spur of approach the system and its results entirely the moment. The opportunities they hunt for differently. are excellent indeed.

First, their systems are well prepared and Fourthly, they know the efficiency of their tested, mainly due to many years of experience system and the maximum sequence of losses in the market. Being well prepared means less that can happen to them. Understanding the stress, less intense psychological reactions "worst possible variant" is reassuring; being during the game, more resistance to mentally prepared, we can better withstand a unfavourable course of events, conviction or series of losses. For beginners or unprepared knowledge that despite difficulties and losses, traders, the element of surprise increases the everything will end well. reaction force. Subsequent losses only increase

the reaction force.

Secondly- they perceive the purpose of the N

system and the result of a single order E Fifth , while being with a position on the market,W

different from others. They know that the IT they do not treat it as "money". "Think about differently. Here the traders are fundamentally traders do not think about its size. Therefore, C

Y

outcome of a single order is unknown. points, not money" - as one billionaire trader RT

Therefore they do not get attached to it. They DA says. ER

also know from experience that, e.g. at the end 046 NEW CITY TRADER

 

Some psychological recommendations The area of "glass ceiling" problems is still relatively

unknown. However, according to research and

In addition to the different approach in the "system" observation, traders require therapy or techniques to

layer, we found several differences of psychological familiarize themselves with higher profit and loss

nature between the best and the group of others. The levels. This need arises from psychological reactions,

following recommendations are based on them. which occur naturally and block reaching higher

financial levels.

Each of us has our own "pain threshold" for losses, i.e.

the level at which we begin to feel them as painful. It For a large number of traders, even with good trading

is a good idea to set your "pain threshold" daily, systems, achieving the higher level of profits they

weekly, and monthly and never exceed it. The pain dream of is impossible for this very reason. So sooner

threshold is mainly based on the level of cash we are or later (and the better the system, the sooner), they

used to. will reach a level of capital at which they feel

uncomfortable and severe stress and discomfort

THE "GLASS CEILING", OR THE SIZE OF A begin to set in. POSITION, BEGINS TO CAUSE STRESS, EVEN TO

MULTI-MILLIONAIRE TRADERS. TOXIC HOPE AND THE DESIRE TO WIN BACK

There is another problem connected with this area. In studying how losses occur and accumulate, I have

There are situations when traders reach a certain level developed some additional tips. First, for the sake of

of capital and are not able to go further. I call this effect your financial security, it is a good idea to treat the

the "glass ceiling" effect. urge to bounce back and the greed that prompts you

to increase your positions as two very toxic feelings.

A very experienced trader, a multi-millionaire, once Hope ("that the market will turn around") works

told me he feels very uncomfortable with position similarly. sizes (i.e. possible loss) above half a million dollars.

His solution - he doesn't go beyond that size. He even Some of the surveyed traders have developed an

tries to stay firmly below so that he can sleep well. interesting coping mechanism. As soon as these

feelings arise, they leave the platform and do

Another currency trader told me he could not break something else while waiting for the market to

through a specific account size for several years. He recover. Other experienced traders, at the very

quickly achieved a good result (let's say it was 100,000) beginning of the day - ask themselves whether, for

and took five times as long to build another hundred. some reason, they feel compelled to trade. This

It cost him so much effort that he finally decided to pressure may be because of losses or not feeling

stick with an account size under 100k and specialize in euphoric after previous gains (which induces

what he does best - driving to 100k. carelessness).

I've encountered situations where the mental shock It is worth knowing that recovery from difficult

was caused by a loss but by a significant profit made experiences is possible, but it requires an individual

on a single day (400% of the account on massive traffic approach. For example, suppose the loss was not very

after a terrorist attack). The breakdown resulted from a severe. In that case, you could use methods for

substantial breakthrough of the "glass ceiling" and the retracting memories, reframing their meaning, or

created trauma. Therefore the trader could not return something of a lighter calibre. This exercise allows

to the market even with the smallest position. This you to get back into the market fairly quickly without

state of suspension lasted over a month until he adverse effects. underwent therapy.

I will describe one such method in the next issue

of New City Trader. After an emotional shock, it

allowed a trader who was utterly broken down

mentally and unable to return to the market to

"get it together" in a few hours. This experience

was one of my interesting ones, especially since

the effect was almost immediate and the

problem never returned.

047

SUMMARY

Summing up the research results, we can say

that one of the investors' goals should be taking

care of their mental comfort during the game for

several reasons.

Firstly, our decisions are better, and naturally,

"zonation" can occur - the best mental state

supporting investors.

Secondly, we have a better picture of the

situation, not disturbed by impatience, euphoria or emotional pressure of any kind.

Thirdly, suppose we feel good in our workplace.

In that case, we are happy to return to it, thus

avoiding the situation in which we feel

compelled and angry when sitting down to

analyze. Of course, in the long run, it may make

us hate our job. But, there's no need for that.

After all, we're trying to make money on the

market to increase the quality of our lives, not to

decrease it, aren't we?

Fourthly, the issues of psychology and comfort

in investing are more and more researched, and

there are more and more effective solutions.

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048 NEW CITY TRADER

 

A Convoy of [Gold] and

 

Platinum That Was

 

Robbed by...

 

s’ Accident Robbery of a precious metals convoy from which neither gold nor platinum is lost, but something else entirely.

 

er I worked in consulting for many years. Undoubtedly, one of the advantages of this profession is that you get to know people from very different backgrounds. Over time, one of my favourite activities became collecting the strangest or enlightening stories that happened to my interviewees. If you have an interesting story to tell - let me know. We will be happy to publish it. We guarantee anonymity. And for the best stories - we expect prizes in the form of valuable training. The story we will start this series with was told by a trader dealing in

 

ad precious metals. The story concerns a certain large copper smelter. As a by-product, small amounts of precious metals such as gold, silver and platinum are produced. They are formed into thick rods and transported to the central bank in the capital from time to time. Our story begins on the day of the convoy when bars worth millions tories Tr are loaded into a van. Right from the start, many problems arise. The transport must have two drivers and must be guarded by a S security guard. However, there is no room for the guard in the cab. There are only two seats for the drivers. Also, the guard cannot ride in the cargo compartment because it is not designed for

transporting people. Regulations prohibit it And we probably would never have heard about because it is dangerous, inconvenient and this story if it weren't for a particular event at the simply unreasonable. end of the trip.

 

Our group, two drivers and a guard began to The drivers stop in front of a store just a few wonder how to solve the problem. hundred meters from the central bank in the

capital. They have decided to do a little

- The escort has to be there when we arrive at the shopping, they are hungry and would like bank. They have to see him. Otherwise, we will be something to drink. punished. 049

At this time, someone breaks into the van. But,

At the same time, there is no room for him in the no, he does not take any of the bars of gold, van. silver or platinum worth millions. Instead, he

takes the gun lying on top.

They take time weighing different options. One

possibility is that the escort will go by train. Yes, The police question the drivers and the guard at by train. It is some kind of a solution. length about the details. They make them

repeat them several times as they couldn't

Unfortunately, there is another problem - this believe the story either. time on the railroad. The regulations do not

allow the escort to be armed on the train. He is

neither a policeman nor a soldier, and only they

are allowed to carry weapons on the train.

The situation seems hopeless.

After lengthy discussions, it seems that the only

reasonable option is the train. The only thing is

that the guard must be unarmed. But he has to

be on the spot with the weapon. That is the law.

Protection without weapons is no protection

with the cargo worth millions!

After another moment of deliberation, they find

a solution. They decide that the guard will take

the train and leave his weapons in a van. Simple!

As they agreed, so they did. The guard took off

his gun belt and put it on the metal bars.

The van with the weapons, gold, silver and N

platinum worth several million dollars went to EW

firearms. ITY the capital. And the escort took the train without C

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WHAT [WORKS]?

 

Learn From

 

The Most [Successful]

 

Forex Market Masters

 

Would you like to know the "secrets" of the best understanding of how they trade, how they think and

traders and investors? Would you like to find out how how they make decisions. did they get to the level of tens or hundreds of thou-

sands of dollars earnings a month? Some of them Besides, I asked a group of traders: what the most

even more.… dangerous problems they encountered on their way?

We got a response from 1683 people! Then, we care-

I wanted. fully studied everything...

Would you like to know what problems they faced in As a result, we chose 6 the most common, most de-

the way and how did they solve them? How did they structive problems that traders face. Next, we presen-

deal with the stress, the loss, the frustration, the re- ted how market champions deal with these key is-

luctance of the family? How did they learn and create sues. We have developed over 1000 pages of

the systems? What worked for them and what didn’t? materials! Only concretes. There was no time or

space for anything else.

I have been researching such problems and solutions

for the past 15 years. I spent hundreds of hours talking We have described these problems, their causes and

with the best of the best traders. I gained a detailed serious consequences. In a few cases, it turned out

that traders knowledge coming only from trading experience is insufficient! This was the case with is- Se

 

sues related to stress in trading. One of the masters pointed out that he applied the Navy Seals solution lf

to stress management.

This is how the "Lessons from Masters" training was born...

 

In a shell, topics we covered: [A

STRESS: Stress Busting techniques. These are the same methods used by Trading Champions, SWAT

 

cops and Spec-Op soldiers! d]

DYSCIPLINE: How can you quickly build up the

iron discipline?

LOSSES: The champions became the best thanks You can find

to... "loss control" - learn it as quickly as possible! all the [details] here: SYSTEM: How to learn good system as fast as pos-

sible? LessonsFromMasters.com

EMOTIONS AND FEAR: How successfully will you take control of your fear and strongest emotions?

ANSWER: Over 100 answers for the most pressing questions from traders.

052 NEW CITY TRADER

053

 

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NEWCITYTRADER.COM | MAGAZINE@NEWCITYTRADER.COM

LONDON FOREX TRADERS ASSOCIATION | LFTA.ORG

 

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THE CONTENT PRESENTED HERE IS A PRIVATE OPINIONS OF THE AUTHORS AND DO NOT RT

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CONSTITUTE INVESTMENT RECOMMENDATIONS. ALL THE INFORMATION ARE PUBLISHED DE

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IN GOOD FAITH AND FOR GENERAL INFORMATION PURPOSE ONLY.