Fear & Da’Nile
By Jay Norris
This article is a re-print from Jan ‘09, originally published in Dec’ of ‘07
On the trading floor we used to refer to traders w/ puffed up false egos and shrinking account balances as “Swimmin’ in da’Nile”.
Working for the various institutional firms on the CBoT we certainly had our false egos too. But one thing we could all see clear as gin was the calm dignity that the heavy hitters displayed as they moved though the crowds. Guys like Tom Baldwin, and the late Charlie D, who traded thousands of contracts at a time as easily as I trade a handful of mini pounds, and the big filling brokers who executed 100’s of thousands of contracts for their clients, would come across as calm and even humble on occasion. I was once at a trading seminar in the Sheraton on the river here in Chicago where Tom Baldwin was speaking, and I asked him if he ever got over the fear of stepping out and getting hurt. Without hesitation he said, “No. Never”. He also went on to tell me it’s not about winning it’s about learning how to take small losses. He also told a story about getting clobbered one St Patrick’s day and having to come up with 3 million in cash to cover his loss to be able to get back into the pit the next day.
Back then I had heard that trading was, at minimum, 90% mental, but I didn’t understand it until the Japanese bank I was clerking for laid the lot of us off, and I took my severance package and opened a trading account. Back then there was no real retail forex market, nor mini futures contracts other then the mini spoos. My quotes and charts cost me $800 per month, we called in the orders by phone, and after putting that first trade on, I spent more time in the bathroom then in front of the screen. My trading decisions had very little to do with the method I was following then– MarketProfile — and everything to do w/ my fear of having to make a living trading a $6,000 account and living of my savings of another $8,000. I learned quickly that losing was painful, and that I was not mentally prepared to trade for a living. I wasn’t just swimmin’ in the da’Nile, I was floundering in the North Sea, in winter time.
I did learn from that brief experience that losing was a part of trading. I was still years away from learning that mentally there should be no difference between a 100 pip winner and a 30 pip loser. Luckily a month into that trading experience the phone rang and it was a friend from the floor who had an arbitrage gig for me. I grabbed the day job like a beggar grabs a buck. Ever since then I give anyone who has a trading account plenty of respect.
Over the years my own trading has improved, which is to say I’ve learned how to pull the trigger without hesitation, and how to take a small loss. It’s not about making money, it’s about not losing money. The biggest break thru was learning that my own threshold for pain is somewhere around 2% of my trading account. I’ve also learned to be very humble because without the help of my mentors I may not have gotten as far as I have.
In my position as a strategist I talk with a lot of account holders, and too often, after I ask them how their trading is going, and they nervously laugh and tell me their making “a little money” or “holding their own” I start feeling like a therapist as I’m thinking “This guy is swimming’ in da’Nile…He would feel so much better off if he just came clean and admitted he’s losing more money then he’s making and he’s scared”.
My recommendation for beginners and veterans and everybody in between is at the end of every month go back and review every trade you made. Re-live the why and the when of it, and write down the net effect at the end of that month. Regardless of whether it’s a plus or minus, circle that number and remember it. I’d tell you why I want you to do this, but most of you will not listen to me anyway…
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009, and a host of The Daily Forex Report on ForexTV.com.
To become a free member of Trading University and be notified of coming educational initiatives go to: TRADING UNIVERSITY REGISTRATION
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.