In this interview I catch up with trader and blogger Tim Racette.
We discuss how Tim started his trading journey and Tim gives an honest recount of how long it took him to become a successful and confident trader.
Plus we talk about the fallacy of setting strict outcome goals the importance of having good habits, and using the principle of inversion to gain an edge.
Tim Racette is a full-time trader in the stock, options, and futures markets. Chicago-land native, competitive mountain bike racer, and graduate of Arizona State University, he blogs about his trading over at EminiMind.com.
Tim has been a speaker and presenter at the Traders Expo for the past 5 years and has been interviewed about his trading methods at TraderInterviews.com and The Money Show.
Winner of the 2012 Infinity Futures Trading Challenge, Tim has openly shared his methods and written a number of articles for various trading magazines including Active Trader and Stock, Futures and Options Magazine.
To read more about Tim and find out about his trading check out his blog EminiMind.com.
Houston: Alright, hi Tim. So….
Tim: How you doing Houston?
Houston: I’m doing awesome, thank you so much for taking the time to chat today
Tim: Yeah, happy to be here, thanks for inviting me on.
Houston:You bet. So,uhm just , why don’t we get started, before we get to deeper things, why don’t you introduce yourself, ah,to the audience and tell us, you know, what your background is and how you got started with trading. I know your background, we’ve talked about this just before we jumped on the call but I’d love to hear about it again.
Tim: Yeah, so I got started uhm, probably about eight or nine years ago and when I was younger, ah in college I had some friends ah with Dads that worked down on the Chicago Broad of Trade so, I had a little bit of exposure or the opportunity to go down to the trading pits and you know see what was going on and kinda be exposed to the trading world, as it was. And everytime we go down there, a lot of the guys uhm, in the pits would always say “oh you, know the pits are shrinking, you wanna, you wanna go to theah, go to the terminals and get on the computer and learn to, learn to trade with the ah computer versus being down in the pits. And so that’s, that’s basically what ah kinda guided us towards online screen trading….and we had uhm, we had also talked to other ah traders if you will, mentors uhm that, ah that had been training really since the eighties on the computer screen and they kind of gave us some assurance or some confidence to say, “Oh ok, this computer screen trading thing is uhm – you know, its sustainable and it’s here to stay”. Obviously these guys you know, made a strong living out of it so that kinda got us motivated to start and then I said yes cause I had a good buddy who we kind of came up in the trading process together and so I got my start ah just uhm kind of dabbling away myself in uhm, in the trading pits and then moving to the trading screen uhm just really, really helped ah to give me a foundationif you will for all the, you know years of learning and experimentation and everything that would come after that.
Houston: Yeah, And so in your journey you’ve been through so far, how is it different than what you expect it was going to be like? So, when you first saw the guys trading in the pits and you saw that there was an opportunity, the possibility that you could do it, you know trading electronically, has it kind of unfold the way you thought it was going to unfold or what have you seen along the way?
Tim: Man, you know, it’s really interesting when you’re looking back, everything seems so different, the perspective is so much different. When you’re, when you’re just starting out in a new project or a sport or a business venture, you know that, that ah naiveness is almost a virtue (Houston: yeah) because you don’t know what you don’t know so you’re only working with the information you have, and you know what’s around you at the time so going through the process we…you know, I was able to learn some really key elements of my trading right from the start. Things like, you know limiting my losses and kind of the whole risk side of things was kinda engrained in my brain right from the start. And so with that as my foundation, it really allowed me to experiment and work my way through you know, the ups and down and the just emotional tolls that occur. Uhmm…in a way that wasn’t completely, ah you know, catastrophic at any point. You know I never had a, had a giant account blow up and things like that; so starting with a strong foundation with a little bit of guidance in the right areas, I think was probably ah, the biggest benefit for me.
Houston: And so, what do you think that guidance did for you? So, was it material around how you saw the markets or the set ups you had of learning, what did you find most valuable around that guidance?
Tim:So, I really started with the mindset and the framework of “this is how you need approach thinking about trading” and, and, so coming in it from it a young, kind of fresh like approach and being ah, having a couple keys things engrained in my head right away, I think were the big benefits versus coming from ah let’s say in the business world as an executive in some company or I was a real estate agent or something where I had a lot of other conditioning in my brain or a certain way of thinking…
Tim: …That coming in with a fresh slate I was able to take a look at the markets without having any biases or other things already conditioned.
Houston: Yeah, that makes a lot of sense. But you’ve always been a competitive athlete, right I think I know now ([5:57] inaudible)………..
Tim: Yeah, that’s right uhm I’ve always been pretty active and competitive all my life and I race mountain bikes, I like to explore and get outside and go for hikes, and all that kind of stuff, pretty much anything outdoors but ah, yeah I think you know a competitive nature is good;
Tim: …maybe too much uhm competitiveness and having to win might be a little bit too much of competitive nature but for the most part that, you know that grit or that drive or whatever you wanna call it I think is really important to a trader.
Houston:Yeah, but professionally, if you felt like you’re new traderhow do you, how do you create that belief in yourself early on that if, you know you have a few bumps along the road, that you’re gonna be able to get through it? Do you think it’s the guidance that you got or your competitive background that allowed you to you know, to maintain and push or, what do you think you can attribute it to you know just your own personal ah…
Tim: Ah, yes and no. Uhm
Tim: It seems like you know, there’s so much information out there, you know. The good information is mixed in with the bad and you could read, you know ten different traders could read the same book or the same paragraphs and take out different bits of information from it.
Tim: Uhm, but I think, I think it’s important to realize that you know that this is, it’s the process that we’re going through and the markets are always gonna be there. So there’s no, like there’s no rush to get to a certain point at a certain date and time….uhm
Tim: You know I do, I do like goal setting but I found that when I set goals for you know, in six months or by, you know, December 31st 2005 I want my trading account to be at this this size…
Tim: And I wanna be trading this many contracts, those kind of goals they kinda just, I get to that point, and I get to that date and time rather and you know, if I wasn’t at the level that I wanted to I would feel um like, like I let myself down. And then that can kind of spiral into some bad habits so uhm, being patient with the process I think is beneficial along with actually placing of trades but the process of learning, experimenting ah you know going back to a paper trading account if we’re trying something new, that sort of thing..
Houston: Yeah, that such powerful advice because, you know I’ve seen that myself just in my trading work I think we have all been taught to have, to create these goals, these smart goals but they don’t always necssarily apply to trading. You know I know for myself that for many years I tried you know creating like daily goals where I had to hit a certain number of you know profits or hit a certain number of uh ticks in terms of profits and then I would shut it down but that I think is the end result was exactly the way you stated there. The days I didn’t hit the results that I wanted, it left me with a kind of that unmet feeling that I wasn’t uhm firing on all cylinders so …
Tim: Yeah, rather than trying to hit a certain number everyday, I kinda flipped it around and say well the days that are going really well and you know I have a lot of great setups and I’m taking trades to targets or I’m trailing my stocks and I’m having these great winning trades; on those days or weeks even I just continue to trade and then on days or periods of time where I’m not seeing set ups or I’m not taking a trade or its acting funny or just you know I’m getting a handful of stock outs or more losing trades than usual, then I’ll just shut it down and stop trading and uhm that kind of helps to smooth things out I suppose….
Houston: Yeah, See that’s kind of more performance objectives versus outcome objectives
Tim: Yeah, that’s a good way of putting it
Houston: Yeah…makes a lot of sense, So, take us back to what your trading looks like nowadays, you mentioned that before you kinda got in uhm trading stocks, what is the basket of instruments or uhm….or, yeah the stock you traded out in?
Tim: So, yeah, like you said, I got started out in swing trading stocks and then about two years after doing that I started incorporating futures because I like the idea of having very tight spreads, being able to get in and out and close out the position and not having anything on my mind overnight. And so now its swing trading stocks and those can be a variety…everything from the Apple, Google you know big name stocks to have, those that have larger volumes that are more active and uh…so there’s that component (Houston: Yeah) and the day trading is comprised of the ES, YM and the Euro for the most part. I traded in things like soy beans in the past and some of those other markets, gold – they kinda go in cycles so I traded them for a while and then I started to fall apart. Like the Euro of late has gotten really good and the set-ups, just look at the charts and it’s just set-ups after set-up and so….that kinda goes back to trading the markets, trade what you see don’t try to force things. You know there was a period of time where I just wasn’t trading the euro and just trading the ES a lot because the euro was kinda crumby so yeah, you being patient with the markets you have, I think if you are a day trader and your trading the futures markets, two markets is full way fine, you don’t have to trade fifty markets. One market is totally fine, you know picking one market, one time frame and you know one method is a great way to get started or at least master that one before moving on to others.
Houston: (inaudible [12:45]) how do you know when to jump between contracts? So when do you say, there is so few opportunities here in the euro, we need to jump back into trading you know soybeans? What do you, is it kind of a gut feeling you get or do you log it and track and say yeah, looks like we can add to the set ups here. How do you get that feel for when you need to move over and try another instrument?
Tim: It’s really just a matter of going through every evening and you know, spending ten minutes to run through the day and look at the markets and if you can draw your setups and you see how things are jumping out at you and it’s just uh very obvious that hey we have a breakout or here we have a pull back and here look at this we just had a nice series of pullbacks over and over again, and there is a lot of opportunities there making themselves visible and that’s when I would know look to get more active in those markets.
Houston: Gotcha, okay… and so…
Tim: And there are some big things happening, ah we might have made a huge pull back and all of a sudden and now the ES is, you know we were six months of going down and now we’re starting to go up, you know a big change in either direction or volatility or some kind of larger markets, uhm, condition that changes those are usually good times to be active in the markets cause that’s when a lot of stuff’s happening.
Houston: Yea, (in audible [14:22]) there is some sort of catalyst, some type of abnormal things that happening that would actually prompt some better trading action, right?
Houston: That makes a lot of sense…. and so you always hear people talk about that, that trading edge so you need to have an edge in the markets. How do you define, you know that kind of generic sort of trading edge, you know, what do you, what’s in your head, what do you think of when people say trading edge? And what’s yours?
Tim: So one of the things I’ve, I’ve always done and this applies to other things beside trading but when you know, someone says something to you and then maybe a friend says something mean or says a joke or whatever, and you have an initial response, an initial thought comes in your head, I always try to pause for a second and think about the opposite uhm and there’s, I guess there are a lot of analogies I could use that uhm, might be well better kinda like the guys speeding down the highway or cut you off and you think oh, you know that jerk, but maybe he’s got pregnant wife in the car so rather than initially blasting your horn taking a second to think about the opposite. So that’s kind of the exercise that I do, that I use, and so as it applies to trading if I see something that looks super obvious I’d take a second and think about the opposite or what another trader might be looking at, you know, if I follow my chart in the morning and it’s you know, boom wow, look at this great long set up the market looks like its gonna take off higher. Just taking a second to think of well “okay, what about people, what about this market will make people want to get short” and that way, you know, you kind of at the very least have a couple of scenarios in your head mapped out but even in this world of computerized trading, the programs are still created by humans and so if I’m a human being and my human nature is wired in my brain to respond in a certain way, whether its fear, or hunger or some sort of initial response if I can just take a second to think about the opposite then that helps to kind of put yourself in the minority if you will instead of being just the masses, “oh the market is going down I gotta sell”, rather than taking a second pause and thinking about the opposite and maybe it an opportunity to buy or get long.
Houston: Yeah, that’s a great frame work, like you said it extends to a lot more than just trading right. That’s a great frame, thanks for sharing that.
Tim: Yeah, you know there’s so much stuff that I’ve learned from trading or read in books that don’t have anything to do with trading but I have applied it to my trading and you know stuff in your trading just applies so much to other areas in your life.
Houston: Yeah, but that’s so cool because you know how that works, where trading leads into my real life and it works the other way as well because my life leads into my trading; yup, so it’s very interesting. And I love to tell people, that in my journey anyways, I’ve really found that trading is really such an amazing self-development tool once I was actually willing to listen to what my trading results were telling me (in audible) then I was able to actually be honest and see for myself that what I was doing, what I was bringing to trading wasn’t working, um, then I was able to do the hard work to begin action to fix those things.
Tim: And trading is tough in that way because it’s not like you are climbing a staircase one step at a time and I suppose you know, there’s not a whole lot of sports or endeavors that are just constant one foot forward, one foot in front of the other, there’s always going to be setbacks. But more so in trading because of the just make sure you’re not going to win 100% of the time and going in with the mindset that I have to be right and what you will be doing is create more damage than good.
Houston: Yeah, yeah. The mindset that, the mindsets we bring to trading is so important than the need to be right or the need to prove that you are worthwhile or maybe that that you operate from a place of scarcity. The question that I have is, you know, I know that you have ran into this as well because you have talked to a lot of traders but I hear a lot of new traders come to me and ask am I really passionate about trading uhm and I really wanna do this full time uhm, and I wanna quit my job and I wanna do it right away, what’s your advice or guidance when you hear someone ask something like that question?
Tim: Well, it always starts with, what is the purpose for your trading and I have always looked at my trading as just a means to generate an income, to then invest that money into longer term vehicles; so if you’re, if you’re going to become a trader because you have to make money tomorrow, then it’s probably not a good venture for you. You probably won’t have the kind of success that that you want and you know I’ve seen both sides of the coin – having to succeed is such a strong mental state where..
Tim:…you know, honey I lost my job, we’ve got the kids, and if we don’t make something happen were gonna lose the mortgage, we’re gonna lose the house because we can’t pay the mortgage and so, you know, I believe that can be a good mental state – a lot can come from it. It can be super hard time that you can look back and end up being one of the life changing experiences but in trading there’s so much more involved that as you’re learning, you know, you have the mastering of your method and whether it’s something, incredibly simple, once you get the actual live money involved whether it’s one share of a stock or one contract, now you have the emotional side and putting those two together while you are under additional stress of having to pay bills late from your trading account
Tim:…at least at first that can really make the learning process a big struggle. And you know there is, the thing about trading is you can have a lot of wins, you know I remember ah putting on a lot of option trades in Chicago, then getting on a plane and flying out to Arizona, landing, pulling out my ah computer, and having you know huge gains from the morning because the markets just ripped and you know exiting out of the trade with a huge win. And, you know whether or not the win was because of something that I saw or analyzed or whether it was just a portion of it was luck. You know early on those were some of the experiences I had that might fool someone into thinking “oh this is great I just put on a trade, I go play golf you know, I get on a plane and fly to Bahamas and come back and I’ve got you know, I’m up $5000 or whatever..
Houston: Its money waiting for you….yeah
Tim: So there can be bad habits that’s formed by having a little bit of luck push you one way or another and you know that being said , that’s one reason why it is said trading is a little element of being in the right place at the right time and there is an element of “hey if you have a really good streak and you put all your eggs in one basket and made a million dollars and then pulled it out of the market and traded with a hundred thousand dollars of it, I mean that’s just one strategy and if it works for a few people that get it right at the right time uhm, but if you are looking at trading as just, you know, a means to develop some more income and kind of integrate into your life, maybe you do have a part time job. When I started trading I was working fulltime and then slowly transitioned into making you know trading my primary focus, so the stress of it I think is a big , or I think is a big deterrent for new traders.
Houston: Yeah, you can’t discount that, so maybe you can share your experience how long did it take before you felt, you know, you’re comfortable taking on trading as a full time venture, how long was that process?
Tim: So my process started with swing trading and then it wasn’t too long before I developed a rhythm of, of trading. I was just focusing on one style of trading basically buying strong stocks, hold backs and shorting lead stocks on rallies, and so it was a simple concept. So there weren’t a whole lot of moving parts so I didn’t have to spend a whole lot of time with I gotta wait till this lines up or that lines up with this chart or that chart. My time was spend on, OK I just put on my first stock trade and I’ve got 10 shares of Apple and it went up 5 cents you know, now I feel like I gotta sell, I feel like I can lock in my profits and a lot of that was the learning that I experienced and so probably the first year and a half, two years it was a lot of doing the same mechanical ah, elements like placing, placing a lot of trades, and just doing looking for the same set ups but learning about how I react to, well I’ve got 10 shares, now I’ve got 100 shares. Now, you know the markets are down, all five of my positions are down, how does that makes me feel uhm and then so, about a year and half two years I felt pretty comfortable trading the swing trading and so that started to, you know I felt like there were times and we talked about this earlier, but there are times when you are swing trading that you’ve got tons of set ups for a couple of days (inaudible) and the markets pull back and you see a bunch of long set long set ups. And then the next week or two, you might just be maintaining position and you might just be sitting on the trades and managing your stocks and there’s not a whole lot to do and so I kinda want to fill that void with day trading and I didn’t know a whole lot about it. I knew futures were kinda where it was at I would get in and get out really easily, never lose slippage and uhm you know fairly easy to maneuver, close your positions out and not have anything on your mind overnight…so that was appealing.
Tim: So I started day trading and immediately cracked on a trade and you know plus one tick, plus two ticks, minus one tick and I was just making all of these trades and just racking up tons of commission; so after maybe two or three months of doing that it was like “ok, you know even though I might feel that I have started to master my swing trading portion, I gotta take a step back… now jump on the practice account really mastering the methodology for day trading; and for me it was just a matter of adapting my swing trading that I was using daily charts to a smaller time frame so that’s what I spent probably the next year or so, six months to a year kind of getting to know the ES, the YM and adapt my swing trading method and when you are using a simple theory or a simple concept its gonna be easier to adapt to other markets; if you’ve got a million moving parts which has to do with this market specifically it makes it hard to adapt so I think that was a benefit. And then so now going on maybe three years going on three and a half years and there was probably another from when I started day trading it was probably a good year and a half two years before I felt like I had a pretty good handle on day trading and part of that is because you see so many different market conditions over the course of a year and even you know five years you might start trading, things are going great, you’re trading your practice account and it’s just winner after winner, and then you immediately go live a month later and now the market changes because we’ve been in a sideways market and that’s what was working for your strategy; now you’re trading real money and the market’s going up and now your strategy is not working.
So, going through, I always like to wait until I get some sort of a rocky period when I’m swing trading before I go live because at least when I was learning a new method, if everything is going great and then you go live you really haven’t gone through any tough times or any you know changes that you might need to account for….
Houston: That makes a lot of sense
Tim: Yeah, for me it’s a five year process or so to really feel like, to really feel relaxed and confident in my trading and a big part of that was just you know, growing my savings in my longer term, growing my net worth, my financial security at the same time as I was trading you know I started with a full time job and transitioned slowly. So it wasn’t like Ok, I had $5 to my name and I’m gonna start trading or I’ve got a thousand dollars (Houston: you’re gonna double or triple that ) yeah I’m gonna put a thousand dollars into my trading account and make hundred thousand. So having, having a pretty simply, I wouldn’t say uhm you know I’m not living college dorm life but I don’t, I don’t ah, I’m not big on stuff. I’m fairly minimalist aside from my computer, my computers and my way too many bikes and that sort of stuff…you know I don’t really have a lot of stuff, I don’t have a lot of expenses that would just build and build and then you just end up with ten thousand dollars a month in expenses. So kinda just combining the real life stuff with “ok I’ve got enough in the bank to make it through the next six months or a year or whatever” that kind of just frees my mind to be able to just trade and focus on the trading and the methodology and not necessarily ok I have to make a trade today because I’ve got a mortgage due at the end of the week.
Houston: Yeah, yeah. I get the sense that you spend a lot of time, sounds like you spend a lot of time ([31:15] inaudible) you know your level of emotions and you know how, what thoughts coming in your mind. I think in the past I’ve heard you talked about how important it is to have that observer mindset. Can you talk about that?
Tim: Yeah, I definitely feel like with any endeavors a mindset is where the winning is and a book every trader should read is called The Power of Habit
Houston: Yeah, I’ve read that…
Tim: It’s fantastic because it talks about our habits, how we can become aware of habits and how we can change those habits and, so when you understand the process of how to create a habit then you start to become more aware of what youre doing on a daily basis and you might catch yourself as you’re about to bite your nails or you’re about make an impulse trade or things like that and there’s a lot of good examples of Olympic athletes and business people that use these habits and even you know drug addicts and things that have changed their habits and it really all starts with becoming aware of what you’re doing, where you’re at, what your mental state is and yeah, kind of like you said pulling yourself aside almost picture yourself sitting in front of a trading screen and you’re in a heated trade or you’re in a heated state of mind and you’re flustered or your excited and picture you know yourself, another version of yourself standing and looking over your shoulders saying just stay calm, be patient, remember we talked about this , you journaled about this last night. It kind of sounds a little bit you know silly but it’s just being able to be aware of your thoughts and your emotions.
Houston: Yes, that’s the catch to it ….sounds like a ([33:18] inaudible)
Tim: You can’t really pull a switch and all of sudden not being emotional or not have thoughts but kind of almost a meditation or yoga philosophy where “ok I have a thought, I made note of it and I’ll come back to it later”.
Houston: Yeah, so do you do any meditation or yoga?
Tim: Yeah, I do yoga uhm,
Houston: (question inaudible [33:48])
Tim: Uhm, I think so, probably the most, the biggest benefit to my trading is my riding, because it gets me away from the screen. I can’t tell you the number of times I’ve been out on a ride or I’ve been on a hike and I put the pieces of the puzzle together, I’ve had the breakthrough idea, I’ve had the uh the thought of “oh I should try that when I get back or “Oh I’ve been thinking about something there at the screen, you leave and that’s when things kinda clicks so that’s one of the”… (Houston: isn’t that amazing) …biggest component
Houston: It’s amazing…(inaudible [34:26]) people always say you have the best ideas in the shower or like you said when you are going for a walk or a hike…it is so, so true.
Both: Talking together
Houston: Sorry, go ahead
Tim: As an athlete, if youre gonna, if it comes down to the game winning free throw or a basket or youre Michael Jordan you’re going to want to instill the habits early on and visualize by making you know a hundred free throws a day or a thousand free throws a day and then adding all the distractions while you’re practicing and visualize so that when it comes time to perform uhm, youre, you stay calm.
Houston: Yeah. And its sound like you’ve spent a great deal of time thinking about this …….., what do you, what do you do personally to get the best of your trading performances, is there some sort of a ritual or practice or habits that you have developed to get yourself primed and ready when you have to, you know start trading or take action?
Tim: Yeah I think routine is really important not so much because you’ve forgotten your trading set ups or your rules every night but going through the process you know all of those small wins or those little steps that Ok I wake up, I brush my teeth, or I grab a cup of coffee, I read the paper, I take the dog for a walk. All those little things kinda helps the trader to get into the right mindset just like sometimes I go through a certain song might trigger a thought or experience that you’ve had. I used to listen to classical music while I’m trading or while I’m working during the day and that kind of gets my mind in a calm state. So having some sort of routine, uhm, having your goals written out or just having a bit of affirmations or something written down that kind of gets you rhythm throughout the day or at the start of your day can kind of turn the throttle so that by the time you start to trade you’re calm, you’ve done this fifty times because you if can create as much framework as you can you know the market is going to be the curveball
Tim..so you have everything kind of mapped out kind of how your morning is gonna go then it can help with patience and discipline because the only moving parts is the market, you know you’re looking at a certain set up or you’re looking for something to happen (Houston: right) and you know exactly what you’re looking for or the time window that you’re looking for it.. now it’s just a matter of waiting for it.
Houston: (inaudible [37:20]) taking yourself out of the equation, the only unknown is the market. I like that. Yeah, that’s very, very well put, yeah I like that a lot. And so, how do you de-stress, what do you do if you’ve had a good day or even a bad day and you’re like ah, I’ve got to get outta here, what do you do to let off some steam and really (inaudible [37:44])stress?
Tim: So, to me…I remember first kind of having some and when I was going up in contract size, you know you had bigger winners but there were also bigger losers and it’s time to get yourself to the point where ok I had a winning trade, great, I’m moving on to the next thing; I’ve had a losing trade, great – I’m moving on to the next one and so instead of having a winning day and going out and celebrating that kind of sets you up for oh well now I have a losing day I’m gonna go lock myself in my room and cry (Houston: laughs) versus having that routine where “Ok, here’s my, this is my trading block and after that regardless of whether I made money or lost money today now the markets are closed and I’m gonna go for my bike ride or you know go read a book or go for a walk, or play softball or whatever it is that you enjoy outside of trading”.
Tim: keeping that routine alive or keeping your life alive around trading is, I mean that’s the most important part.
Houston: Mmm. I think that ties right into, I know that the, you’re a big advocate around designing your lifestyle, just kind of you know building your trading to fit your life. So in that way, what kind of hours do you usually keep as it pertains to trading? Do you have a set schedule that you try to keep on a, you know, weekly basis that youre always gonna be in front of the screens and active?
Tim: Yeah, so now I’m really just focused on the first two hours or so of the trading day and that allows me to both day trade and manage any swing trading positions that I need to be putting on or take a look at. When I first started it was, you know 12, 14, 16 hour days, I was in front of the screen all day long and then I would wake up and or I would go to sleep and wake up for the European session and it just got to be too much. There are certainly, if you are a newer trader I would, my biggest advise I suppose to the question of how much time do I need to spend (Houston: yeah) when you’re in front of the screen you gotta be focused and then get away from the screen. So rather than sit there all afternoon, I would keep, I have excel charts that blocked out every thirty minutes and I would record all of my trades and after 6 months I’d start to see wow all the trades I’m making in the afternoon like most of them and certainly on net were just losing trades. I wasn’t profitable in the afternoon; sure I had some winning trades but on average the day would be clouded by “oh I’m bored I’m gonna place a trade or I’ve been sitting here all day and I haven’t made a trade so I’m gonna close out or I’m gonna make a trade”
Tim: So, focusing and if you’ve got you know a family or a job it’s more important so I would say focus on a small time window during the day and it can a whole two hours and then give yourself 30 minutes to an hour in the evening while the markets are closed cause that’s when you gonna be more objective to either look through your watch list or you know print out the ah, the ES or the YM charts for the day and go through and mark the set ups or draw on the trends and having this sort of exercise in the evening is probably more important than sitting in front of the screen. You can certainly trade in a small amount of time but it’s the learning process that takes the most amount of time. All of that comes outside of the actual market being open
Houston: Market hours, yeah so, (inaudible [41:57]) right now, do you just trade those two hours per day or do you also do stuff during the afternoon session?
Tim: Yeah, I stop in the afternoon; I don’t trade the European open anymore. There’s a good time to trade but it just became too hard with you know training and bike racing and travelling and stuff like that. So now it’s just I make it the first two hours today and ah you know if there’s nothing going on or if the markets get really bizarre and there’s no swing trading set ups or there’s nothing that Im seeing on the ES I’ll go days or periods of time when I don’t make trades and that it’s ok to have, you know, days of no trade because you wanna be there for the good time and if you get sucked into a week of just making crap trades youre down on a month and your gonna make that back up and that’s not a good mental state to be in . So, it’s totally ok to not make a trade today uhm and you don’t have to make 50 trades and you just have to be patient and make trades that follow your beliefs and your systems and your methodology and even the methodology doesn’t have to be super crazy. You know, like I said the swing trading for me was just a matter of buying strong stocks on hold backs…that makes total sense to me and when I look at the charts I can identify strong stocks pretty easily by the trends or a stock that’s making 52 week highs and so those kind of obvious things or things that resonate with you personally are the best vehicles to follow or to pursue because there’s so much stuff out there in terms of indicators and studies and this person’s strategy and that person’s strategy. It’s great to get ideas and things like that but at the end of the day you have to believe in what youre trading and how you’re trading and the best way to do that is to modify or create your own strategy if you will.
Houston: Yeah, so many good nuggets there man, just so many good nuggets that you’ve shared there uhm, we’re getting near to the end of our time so let me ask you just a few more quick questions before we wrap thing up. Number one, if you were to start it all over again today, would you do it the same way that you did or would you change anything?
Tim: That’s a tough question. I gotta say that, I mean today, I’m happier than I was a year ago and I think I can go back and for the most part say “am I better off now than I was 12 months ago” and if you can keep doing that then you really can’t regret things that you’ve done. I mean, there’s been, been challenges but you know for the most part I’ve been able to live a pretty stress free life and you know in that Im not being been chased by wild lions or (Houston: laughs), I’ve got a roof over my head and that kind of stuff so that I had so uhm yeah you can get caught up, well I can’t, because I’m more of a thinker than, you know extroverted talk about my problems with a whole bunch a people and so you can get down on yourselves sometimes for all kinds of reasons but if at the end of the day you know those experiences make you who you are today so, yeah, I don’t think I would there’s nothing that stands out in particular to say if I didn’t make that trade or if I made that trade because (Houston: yeah) at the end of the day one trade isn’t going to make you it could certainly break you but uhm you know it’s a long process and I guess life in general is a process so I’m pretty happy with how things have progressed and certainly at the time looking forward wow, why did this happen to me or how I am supposed to get out of this mess but then you look back on it and you say “oh wow you know what it ended working out really great, I ended up meeting this person who introduced me to that person” and man when you start thinking about some of that stuff it’s like it gets pretty mind blowing sometimes.
Houston: That’s so true (inaudible [46:44]) on your hard targets
Houston …then you often find out there’s a lot more in there than just those hard times
Houston: So, another question, so uhm, what would you say to a trader right now who’s struggling? So, what advice would you give them you know if they are just having a hard time with trading and they’re thinking about giving it up?
Tim: I would say stop, take a break and, go read something; probably not the newspaper but some book, it doesn’t have to be trading related at all but even if it’s just ten minutes of reading or 10 minutes a day of reading – that does so much for your brain to realign things or spark ideas and its ok to take a break and often times I’ve gone on a trip or for whatever reason I’ve had to take a break from trading. You know, life happens family stuff comes up and when you come back from those breaks, at least, I’ve feel just recharged and invigorated and just ready to go and maybe I see things a little bit differently and as I get older my patience seems to get a little better ah, at least so yeah, taking a trip or at least taking a break every quarter or six months I think is really good. So especially if youre, if youre struggling time kind of like a training analogy: you could train, train, train until you are burnt out or you could schedule breaks that keep you hungry for you know the next big event. That’s kinda what I do with my trading, taking breaks here and there and in the summer I’m travelling a lot so uhm yeah, it keeps you fresh and keeps your performance
Houston: So that’s how youre gonna get better performance for yourself and not demanding that you just show up every day and (inaudible)
Tim: Yeah, keep focusing and when youre in front of the screen youre gonna focus and when youre not, youre not consumed by trading. If youre with youre family and kids, you’re with your family and kids and you mind isn’t off somewhere else in the world
Houston: Exactly…you don’t have some small part of your brain multitasking and trying to figure out this next trade..
Tim: Yeah, yeah, that’s tough for me … I’m a big multi-tasker constantly thinking about the past or the future and I forget about oh yeah the present is right here
Houston: So just two last questions, so number one, we talked about books, what is, what are your top recommended books – trading or otherwise for traders?
Tim: Uhm, I like The Market Wizard Series, there’s a lot of good nuggets in there for different kinds of traders and I think those are pretty applicable to a lot of different people even non traders and then the two other books I really like are Pitbull by (inaudible [49:42])……….and then one that’s not super common, it has a silly title it’s called How I made Two million dollars in the Stock Market by Nicolas Darvas.
Houston: Nick Darvas
Tim: Yeah, It’s little bit more of a story and so is Pitbull, it’s a kind of the story that talks about how these traders went through their process and at least those kind of books resonated with me a lot more than some of the more analytical and technical books. So I think those are good and even if you are not a day trader, reading a book like Pitbull I think you can gain a lot from it too
Houston: And also that book you mentioned earlier, The power of Habit, I think it’s by Charles Duhigg
Tim: Oh yeah …(inaudible) who the author was but there’s so many good books that are not necessarily in the trading category that might be about success or ….or whatever else they are about uhm, can certainly help too?
Houston: So one last question before we shut things down, so where can people find out more about you Tim and is there anything else you wanna share with our audience today.
Tim: Uhm, actually yes, so on the topic of like reading things or listening to podcasts, uhm one good tip I got: was sit down and start listening and if in the first ten minutes youre not really getting anything out of it, its ok to close the book or you know turn off the podcast and go to something that is more interesting to you rather than just downloading a podcast and going episode by episode, picking out “ok what do I need to learn right now” or “what would benefit me the most right now” and going to that thing I think helps to continue the learning process and keep the excitement motivational wise rather than being super methodical and “Ok I’m just gonna sit here and read this entire book and even if I don’t get anything out of it”, I mean there’s something for determination but instead of going through you know consuming ah consuming information, it’s helpful because there’s so much stuff out there now, you know you can’t get through it all but if people want to learn more about me you can go to my blog its eminimind.com. Emini like the E mini futures and mind like your brain “E-Mini-Mind’.
Houston: Yeah, definitely recommend Tim’s site, there’s tons of good blog articles as well as resources so be sure to check him out. Alright Tim, thank you so much for your time man, I really appreciate it we’ve gotta catch up again soon.
Tim: Hey you bet, thanks for having me Houston; I really appreciate it
Houston: You bet man, take care
Tim: Same to you
Houston: Bye now
The Big Ideas
- The fallacy of daily P&L goal setting
- The power of setting performance objectives vs. outcome objectives
- Tim’s trading edge – The power of inversion
- The importance of physical activity to manage stress
- The importance of not feeling the need to trade
- Tim’s advice to would be traders who want to want to become full-time traders
- Tim shares his journey to becoming a full-time trader
- The power of good habits and routines
- The value of taking breaks from trading, especially if you’re struggling
- Tim shares a tip around how to keep reading interesting and motivating
Leave Us Your Feedback
Comment and Share
Please consider rating the podcast with 5 stars and leaving a one- or two-sentence review in iTunes or on Stitcher. This helps tremendously in bringing the podcast to the attention of others.
You can tell your friends on Twitter about our podcast by simply clicking this link and sharing the tweet you’ll find at the other end.
And, by all means, if you know someone you think would benefit, please spread the word by using the share buttons below and up top.
Finally, thanks for listening and tell us below, what was your greatest takeaway from this interview?