What is the role of trust in trading?
On previous episodes you may have heard me speak about why I believe confidence is the most important emotion to carry into trading.
Confidence is what allows you to have the convictions to do what needs to be done even when it’s uncomfortable.
In this week’s show I interview Ray Burchett.
Ray has well over 30 years of trading and trader training experience having spent time trading at the CME and running and owning a number trader development companies.
And in this show we delve deep into the topic of trader development.
Ultimately trust is something that must be earned.
That is a trust in one’s system, methods, decisions, and actions.
This is why seeking confidence without trust is impossible.
Here’s what you’ll hear on this episode:
On comparing traders to the Wile E. Coyote and the Roadrunner –
Unfortunately 99% of traders are the Coyote – they keep thinking they’re going to catch the Roadrunner but it’s never going to happen because they keep doing all the wrong things.
[05:29]Houston: Hi Ray, welcome to the show.
[05:30]Ray: Houston, thank you very much for having me.
[05:34]Houston: Yeah it is a real pleasure to have you on. So to kick things off let me just quickly introduce Ray Burchett and then I will ask Ray to perhaps give a bit of a background on his experience with the trading world and what he is doing nowadays, but first off a little about Ray. Ray practices as a CPA for Arthur Anderson for a number of years, then he spent a good twenty plus years trading as well as serving as a member at the CME and serving on a number of committees there and for the past thirty years he has also been a trader; and as well he has his hand in developing and training traders. He is a developer of a system around development called Intuitive Development Training method and that work really fascinates me, so what I really want to get into the call today with this – perhaps we can talk later on about your methods in terms of how you actually develop traders and this idea around building intuition, but why don’t we first start off from the beginning. So Ray, why don’t you quickly let us know, did I cover off your background there, did I miss anything?
[06:44]Ray: Pretty much it started at Anderson here in Chicago, I was with them for about nineteen months and two younger brothers that were already trading and they just had been trying to pull me in and I was resisting because I had gone through a pretty tough program in college and work hard to pass my CPA and was right where I wanted to be as far as working at Anderson and their small business audit tax and I was actually starting on my Masters in tax at DePaul and finally I just gave into their pressures and jumped all in on trading, I should say all in I was fortunate enough to be able to do tax and accounting work for some friends on the evenings and on weekends to pay my bills, but I jumped into trading and after about eighteen months I almost quit.
[07:48]Houston: And so your brothers already involved with that trading at the market, is that how you kind of got in there?
[07:55]Ray: And they were both pretty much off the charts right from the beginning and I think too intellectual if you will and after about eighteen months I had it, I told my dad I’ve got my CPA, I know I can get my teaching certificate, so I was going to teach accounting in high school and coach football; and he is like you never failed on anything, you probably need to take a different perspective why don’t you just step back and give yourself a chance to do that, so I did and that was really the start off. I didn’t know it was intuitive development at the time, but I was racking my brain trying to figure out why could I succeed at everything else and why was trading such a struggle and I am no stranger to hard work and anyway, I’m sure there are bunch of your listeners that are probably nodding their heads – yeah, I’m busting my butt and I’m getting nothing – and that’s how I felt, so I said I got to stop running into the wall, I have got to take a new approach and through that I realized that I was so locked in on figuring out if price was going up or down. I wasn’t doing what I needed to do with the foundational level to be able to have the awareness I needed to create a future vision of price movement and as a trader it is all about staying ahead of price movement, so that kind of gave me the shift I needed and got me into open air if you will and started to get a little bit better from there.
[09:43]Houston: So, is that you think a very common journey for most traders is they kind of struggle in the beginning and if they are willing to stick in there that they begin to do some deep examination and realize that maybe all the answers aren’t necessarily kind of outside the charts?
[10:06]Ray: There are so many traps if you will, that trader’s fall into and I get into this in my training, in fact it’s basically a good chunk of the first of four training sessions really helping traders understand all the stuff that is negatively impacting the development performance and we only have an hour for the interview here, so if I start get into all of that: number one, I don’t have the time to lay the foundation for it, number two I wouldn’t be able to give it justice and I will say here is a couple of quick things that I will comment on – number one is our ego telling us we can control things we can’t and all the things that keeps us from developing the perspective we need to be successful. The second thing is the trading proposition itself is highly seductive, so they are either going to go up or down, how hard can it be?
[11:11]Houston: Sounds simple.
[11:12]Ray: Right, it can buy or sell and then you have the arcade environment all this power created by technology. (Houston: right) I have got all of this now and I am a smart guy and I know how to use a computer and technology software, boom, boom, boom – got it all. All I got to do is just click, I will be stacking the cheese in no time and so that whole environment of sim trading that creates very significant learning gaps and bad habits too, so you put all of those things together and the deck is really stacked against the trader coming in and then the other piece on top of that is not really understanding who we are competing against, not knowing the enemy – the institution – the fair value, the central banks not understanding all of that and what a retail trader needs to do to compete against that, so you put all of that together that’s a lot of stuff and I guarantee you about 99.9% of the traders none of that ever cross any of their minds.
[12:21]Houston: They are probably wondering, has that really applied to me isn’t it just a buy and sell kind of thing, there are all these other players and all these other strategies – how do they even over lap and you are right it is going take a lot of time before that bakes in to the trading process.
[12:36]Ray: And the starting point – one of the things that, I guess the best way value that I give traders at the very beginning is I help them gain perspective – really develop a deeper understanding for the challenge and what is necessary to mean it as a trader; and it is a profession not get rich quick and it requires the same level of commitment as any other profession. Folks who think they are going to come in here and start making money after a couple weeks or couple months or even after a year is really delusional, I mean they are drowning in their own ego.
[13:18]Houston: Their expectations are way out of line, right?
[13:21]Ray: Well I tell my students- look you have to give yourself some time to understand the environment that you are in; then I can certainly accelerate that process, but there is no substitute for doing your own reflective work, coming to terms with this environment in your own way and then once you start to come to terms, now you can start figuring out – I shouldn’t say figuring out, but now we will start trusting ourselves, allowing ourselves to start to pay attention to things with a deeper level of commitment and then it takes time to go down that road, so you put those things together. In my mind you are looking at least a year of study and reflection and just call it calibration if you will to get to the point now where you can really be organize to start developing as a trader.
[14:22]Houston: That’s a deep work, that’s not like looking at a few things at night time, this is you talking a full year of development and not just….
[14:28]Ray: Well, it’s set up to be done part time, in other words I always tell people never quite your day job, so the way I setup my development is that there is on demand learning modules, there is basic and advance and they have access to that for a full year and then they have the ability to interact with me live online six out of seven days a week and so literally every morning they can come in the daily briefing and have Q & A and then every evening I send out the chart book and specific to the e-mini, that’s the learning S & P mini, that’s the learning example, so they can measure their assumptions against how the market performed and understand what they are doing right, what they are doing wrong – so that brings down anxiety, gets tem focused for the next day and then on Sunday evenings I do, I do a Sunday evening review where we can take a deeper dive on the functional stuff and that’s really a directional trading strategy that I teach as an example for how to compete against the institution, the high freq, the fair value, the central banks. So it allows someone to basically put the time in when they have going through the basic and advance training modules and then come in and do the daily briefing, do the chart book, come to the Sunday evening review and at the end of this week I just got all my stuff in LMS and I’m pretty excited about it, but what this does is, it allows me to house the recordings – the daily briefing and the Sunday evening review very easily- so literally folks get the benefit of all of this on their own schedule.
[16:23]Houston: Nice, so let’s backtrack a bit on this big idea that you shared and that’s about tying the components to developing as a trader; like you said you can’t really rush some of these things as there is a time element that takes a certain amount of time to actually integrate some of the components you talked about, so going back to your story – how long did it take you then to begin to turn it around, you said eighteen months you were kind of at a bad place? How long did it take to turn that situation around?
[16:53]Ray: After that eighteen months once I started understanding how I was working against myself I started getting pretty good traction very quickly; and then the relearning started kicking in about another twelve months after that, but to the point where I knew that I could support myself as a trader and I was able to let go of all the other tax and accounting work I was doing on the side.
[17:27]Houston: Did you find good mentorship or coaches in your brothers or anyone else at the exchange?
[17:31]Ray: Well, here’s the beauty of it and I got down there and I expected to have some insight and guidance, right. The insight and guidance was the only way this works is you got to figure it out on your own(Houston: wow) and I did get another good piece of advice, you have to be either a fundamental or a technical trader you can’t do both. So that was the advice.
[17:58]Houston: I thought your brothers would have helped you and carried you a bit.
[18:04]Ray: They couldn’t verbalize what they were doing.
[18:08]Houston: Wow, okay.
[18:09]Ray: Again, we come from a very athletic family and so they were able to internalize in their own way and that is where the connection is to intuitive development. What I really did was link high performance to intuitive function and took this out of the abstract if you will and made it very tangible and that’s why the training is so exciting for people, people go through it and start connecting the dots form and they are like wow, I should have known that, how comes no one else have done this, so it is pretty cool.
[18:46]Houston: And so how did you get into coaching traders? What was the transition, what was the motivation around that?
[18:55]Ray: In January of 97, the internet was, I could see starting to come main stream; in 92 I created my own data base – this was when you could buy trade station and so for what was going to cost me a three year commitment from Bloomberg and about $80,000, I ended up replicating for myself for about $14,000 with $245 a month data fee exchange fee to Future Source and so it was all landline back then and I had a PCMIA modem for my laptop, so I could literally mold them into my desktop and follow the markets anywhere – it was pretty cool.
[19:51]Houston: That was cutting edge.
[19:54]Ray: Anyway as things progressed, I was in it as you will though I was in the pit all the time with very little screen trading. So I saw in 97 and I said you know these guys that are off the floor they are at such a disadvantage, they are not even aware of the latency, what they are seeing as quotes and what’s happening in the pit it can be literally points away – not ticks – but points and so I had this idea to start this company and I did, I cofounded it with a guy Steve Prasnewski that I was partners with called Local Knowledge and we formed it in January of 97 and then that summer when the Merck lost the competition for the Dow contract to the Board of Trade. That was a game changer, Bill Shepherd who is the Chair of the Technology Committee I happen to be fortunate enough to be on that committee with him, he create the e-mini as the answer and this is all very hush, hush, none of us knew any of this – I went on the Technology Committee after this all came out and that was a game changer and so it accelerated what we were doing at Local Knowledge and we started covering more and more markets and I had that company for seven years. We literally had the fastest feed in the business and we were direct co founders for the Merck on the board and in 2001 we had some internal things happen that was I guess a blessing in disguise and went to a new data partner and their technology was just unbelievable we were literally seconds faster than anyone else and the reason why: our new tech partner just sent the minimum amount of data, in other words if you are just trading the S& P that would be the only quote they would send you, where everybody else and us included when we were vendors were sending the whole pipe of data, so they were fast, very efficient, I mean that was literally three four seconds faster than Future Source and their technology basically got gobbled up by NASA and Homeland Security after 9/11 and they didn’t want to concern themselves with futures trading any more. (Houston: okay) So we went out of business and I stepped back and took everything
[22:34]Houston: Were you trading at this time as well, while you were running the company or you were just…?
[22:43]Ray: I was in the pit and doing Local Knowledge, it was absolutely crazy the amount of hours that I was working plus being a dad and it was absolutely nuts. So, anyway all of that morphed into 2005 I found a Archimedes Partners and commercialized Intuitive Development and then that is kind of taking on a life on its own I have trust, firsttrustonest.com which is my Intuitive Development for traders and then this pass year actually the relationships began in 2011 with Homeland Security, but this past spring I did a pilot for senior intelligent officer in eight states and that went very, very well and it led to the forming of Accelerated Intelligence LLC and so now we’ve got a whole other initiative going in the intelligence community and then also for business professionals and entrepreneurs, so…
[23:45]Houston: So it takes all the big macro concepts that you kind of researched and found worked in trading and now you have been able to apply those same big concepts across different domains. Is that right?
[23:58]Ray: The deeper I got into this stuff the more common the denominators kept validating themselves and so remember trading is just about decision making and so we’ve got to have the best information to make the best decisions and if we can organize that information in a very efficient way we can start accelerating our ability to make good decisions, now we get further and further ahead of price; so what I was able to do was really lock down the beliefs and behaviors that causes the filter process and apply information most effectively and in turn that accelerates everything else and so that is universal in application and getting more and more validation for it so (Houston: powerful) and so it all started, all of these things started to come together trying to figure out the best way to support development of all floor traders through Local Knowledge.
[25:05]Houston: Right and I’ve heard you speak in the past about the idea that you kind of need to have this kind of three legged stool. I think you call it having the functional parts down, psychological parts down, the practical pieces are down. Can you talk a little bit more about that in terms of the development of traders and why is that important?
[25:23]Ray: Sure and please everyone understand I am not a psychologist, I only use that word out of necessity, because everyone understands the psychological components is how we feel about something, how at peace we are with something if you will, a level of trust for ourselves and our environment; and so the three components functional obviously is our actual decision making within the market and the practical part of it is really the foundational stuff and how we are developing the awareness we need to make good decisions and the best way to understand all of this: I like to use the analogy of driving a car. When we are flying down the inner state 70-80mph in pretty good traffic right, we all have a future vision, in other words it is our awareness commitment to the rules of the road at a functional level plus all of our experience travelling and operating the vehicle, but at that deep foundational level everything is based on the rules of the road and that allows us to create expectations for how the traffic around us is going to behave in front, behind and to the sides so we can develop a future pattern if you will right. And so it is that awareness that we develop at the foundational level by trusting the rules of the road creating that future vision that drives our functional decisions about speed and the lane that we are going to be in, navigation if you will and so we are going along driving and we are unconsciously making all these foundational decisions creating a future expectation of traffic behavior of future pattern and that’s driving all of those unconscious functional decisions about speeding and navigation or doing all of this while we are having a conversation or listening to music or whatever right and out of nowhere we will take evasive action, avoid an accident, now we get that adrenaline rush as we become consciously aware of everything that just happened. But it all happened at a deep unconscious level when we recognize that the pattern has changed and so that triggered that functional adjustment that kept us safe, so that’s a powerful example of intuitive function happening that fast.
[28:22]Houston: So, you’re coming closer to system one and system two thinking is how to describe it there.
[28:26]Ray: Yeah. So I call foundational and functional, but most traders they are zooming down the highway at that functional level with no rules to the road, no ability to create future vision to have reasonable expectation for predicting the behavior of price, cause they never took the time to put in that foundation for a whole bunch of different reasons, their ego just have them accelerating into a bad wreck or their ignorance or laziness or however you want to put it. So that’s the legs of the stool is that practical is really the foundational, the psychological is a trust if you will and the functional is what we are actually doing when we interacting with the markets.
[29:17]Houston: And the way you develop traders, is there a priority in terms of the sequence in which you would develop a trader, is it really dependent on how that person showing up to trading?
[29:28]Ray: There has been absolute sequence to it, but the sequence is universal in application; in other words I start out helping people to really understand the depths of the trading challenge, what it takes to meet it, in other words the risks and threats to their development performance then I take them through a process that lets them become acutely aware of their current state within that contacts and that gives a developmental base line. And then we start moving forward from there in a very orderly fashion and so the way we go forward through practical familiar examples that really raise awareness for the power of intuitive performance and I extend that into their personal experiences to make it tangible (Houston: yeah) and then identify the elements of cause intuitive function to occur the core believe drive in there development and then in the third session we get into the behaviors that best support the development of those elements, we begin to learn how to build that internal engine that optimizes decision making and execution and again, that engine is what is creating that foundational awareness that we need to make the best decisions of the functional level, so it is integrating the foundational and functional stuff to optimize decision making and execution. And then in the last session we get into practical application, how to add horse power to that engine, how to maintain it, how to really stay in the process, it’s going to make the most out of our time and effort and then they are encouraged to repeat the training cycle multiple times, because the first time through it’s mixed emotions – they’re really excited about what is possible and they are aggravated that nobody told them this stuff before. They miss a lot, not because they want to it just happens so then get through it a second time, now they can have a much better understanding for what they are in for, what they want to pay attention to and then they really start to connect with things that are tangible rather than the third time through they likely consciously the benefits of been ahead of price and so they just want to go deeper and deeper and the interesting thing is, the further along someone has been in trading, I’ve worked with a lot of experienced traders – the more they want to come back and go through and I have had gentleman come from Dubai, another from Hong Kong a couple weeks ago another guy was very successful before he started working with me, he’d gone through it cycled through it four times he came to Chicago to do it with me live a fifth time, so that’s the beauty of this, I am just teaching folks a process. It is not like one and done, now they have this system that they can use to keep elevating their awareness and become more and more effective.
[32:33]Houston: Nice, and what are your thoughts on that psychological piece? Do you believe that the trader has to have some ups and downs before they can begin to develop that side of their trading or is it something they can develop right away while they are in sim where they haven’t been burnt yet?
[32:56]Ray: For the record I hate the word psychological. I am going to substitute the word trust for psychological. (Houston: I like that, okay. So we have to trust ourselves if we are going to be independent thinkers right. Independent thought taps into our creativity and imagination and then that starts integrating our skills, knowledge and experience so we can create that future vision. Go back to driving the car, we have to trust ourselves to follow the rules of the road, we have to trust everyone else is going to follow the rules of the road right and we have to trust a whole bunch of other things too, but without that trust, no one is backing out of the drive way. So in trading, in my mind so many people jump in without ever realizing that they don’t have that foundational trust that they need to support their functional decision making, so they just crush themselves from the very beginning and so to your point – just step back and pick any profession engineering, medicine, accounting, law, even music or sport l mean look how much time and effort it takes an athlete to go out and compete just at a high amateur level, let alone at a professional level or for a doctor or for and engineer or for a lawyer right. It takes a chunk of time and a very targeted development path and then a great support system around that, well most traders did not put plenty of that in place and so that is what I do for them.
[34:56]Houston: This seems like to me then trust and confidence is very tightly interwoven right?
[35:04]Ray: They are everything, if you talk to any successful trader and I am sure you have, they will consistently share the same observation that they can never be too patient waiting for market alignment and too consistent in their execution. Does that sound familiar?
[35:33]Ray: Okay, lets understand, it takes a lot of energy to be patient, right; and the energy to be patient only comes from one place – trusting ourselves, trusting our process and trusting our future vision. We have great conviction for what we anticipate the market to do and what it’s is going to look like and what it’s going to trigger. It’s a heck of a lot easier to wait for it (Houston: right) and when we have great conviction for our strategy when we do get that alignment it’s a heck of a lot easier to consistently execute; so that comes from that foundational trust – there’s no substitute for trust, there just isn’t.
[36:18]Houston: And so traders who feel like they have to chase price or they beat themselves up if they are unable to comply with their trade plan – it all goes back to trust; they don’t really believe or have that foundational understanding to….
[36:32]Ray: The foundation just isn’t there so they’ve got to step back and they have to be willing to do what’s necessary to put that foundation in and that’s what I do to them.
[36:47]Houston: And so is there ways to work on these elements outside of trading so that you can bring those elements into your trading or is it something you have to work on only inside the domain of trading?
[36:58]Ray: No, it’s universal, in other words it’s the same core beliefs and key behaviors that develop the awareness we need to make the best decisions we need in everything that we do. (Houston: Yeah) in other words, there’s not a Doctor and Jekyll thing going on in genuine professionals – they are the same person (Houston: right) and this is sad because we have had all of this cultural messaging that we can be two different people – I can go to work and be absolutely ruthless and somehow I going to come home and be a loving husband and father (Houston: right) – it doesn’t work that way.
[37:40]Houston: There’s disconnect there.
[37:42]Ray: Right and the most successful folks get it at that foundational level; they have such conviction, it just keeps them on an even keel in everything that they do and that’s what makes them an easy target for other people because they are so jealous of that person being on an even keel – people will attack them instead of wanting to change to do what’s necessary to compete with them in a similar manner.
[38:16]Houston: And so what are some of the habits of peak performers? What are they embodying or bringing into trading or what are those key habits that you notice in traders who are accelerating or exceeding and achieving?
[38:32]Ray: Well, number one – they have a highly efficient process; in other words, they know the information that matters most and they know how to get through it most effectively and apply it and then the second is – they’ve got a very active curiosity. They are like a five year old – always asking why, except they have the discipline to stay after it and find the answers and then the third thing that I would say is that they just are driven to take themselves to a deeper place of understanding for what they know already works. In other words, just more and more information and validation of why these core behaviors are causing us to filter processes and apply information so effectively; why are they always leading us to the work that matters most, preparing us to do it best, why are they the engine if you will that are driving me to the best financial development curve?
[39:40]Houston: Nice. That’s powerful and so the flip the script then and look at the traders who aren’t where they want to be; what are the common blind spots, where are they getting hung up? Is it around – you mentioned expectations earlier – that’s obviously one of the big ones; what else have you noticed?
[40:01]Ray: Well, another big one is their ego. They can’t get past the fact that they can benefit from guidance that they need to step back and they can’t understand that they don’t know it all and I guess my best visual is – if you remember the cartoon “The Coyote and the Roadrunner”; unfortunately about 99% of traders are the coyote . They just keep crashing and burning, they think that they’re going to catch the roadrunner – it’s never ever going to happen because they keep doing all the wrong things.
[40:50]Houston: Yeah, you see traders bring this element of doing right; they think if I just work hard enough I’m a doer and im used to working really hard and in jobs and profession, I’ve been very successful – I just need to do more; you’ve kind of shared with us a already that, that’s not necessarily the path that’s going to take you to the next level..
[40:14]Ray: Jesse Livermore – Reminiscences of a Stock Operator, great book it’s really the only one that I’ve ever remembered about trading that stuck out for me; I forgot the exact quote but I think it is “the earning is in the waiting” and that’s when I believe the hallmark of a genuine professional trader that has such awareness for the market and understanding for the mechanics, such clarity is going to give them that advantage in the market and they know if they don’t wait for it they are slitting their own wrist. So, in reality we’re going to spend over 90% of our time waiting for the market to align with what we want to do (Houston: yeah) and it’s tough because we want to watch the market and all these people are always trading; and why shouldn’t I be in there, I could have just sold them and bought them here and done that and made money but I’ve got to get in. And so it just sucks people in but this is what we sort through in the trading – there are so many things that have to be balanced out: strengths, weaknesses, personality, risk tolerance. All of these things, we’ve got to find what the sweet spot is for us and then we’ve got to leverage the hell out of it. (Houston: yeah) Remember we only have to learn how to do one thing and if we can consistently do that one thing and that one thing gives us five chances a month and we can leverage the hell out of it, I think we’re all going to be pretty happy as traders.
[42:59]Houston: I love that idea.
[43:01]Ray: And so, through the advancement training and teaching this directional training strategy, I help traders find out how to learn one thing and then develop the ability to wait for it and leverage the heck out of it.
[43:18]Houston: And so as it relates to trading, you talked about the ES contract and that’s a difficult contract especially for new traders as that contract is probably one of the deepest contracts in the world and has the best of the best in that pool and it’s definitely a deep of players there, it seems like that contract – I don’t want to get too deep into baseball – there is something about the way that contract moves , you can give us a historical context if you want to share that but it seems that that contract is very good at playing with people’s emotions and like you said there tempting people to do things when they are not ready to do it or when they should not be doing it.
[44:06]Ray: Right. Well that’s why less is more and that’s why my advanced training is so powerful because I teach folks what to look for and show them the conditions that they have to come into play to dramatically improve their probability for success and certainly limit their exposure to risk; and so once they get through basic training in the foundation and then the advanced training and the practical application of that intuitive development process or the technical analysis strategy formation and trade execution, so they see how that future vision is being created and all the awareness that comes with that and the trust and the energy that allows us to wait for these things and consistently wait to execute. And so it washes all the way through and it starts coming together – I make it real for them and what is actually happening and if they give themselves a long enough time period to see this and develop trust; in other words, I can tell folks a whole bunch of stuff but unless e can internalize it and validate it on our own terms, it has no staying power. (Houston: yeah) It’s like my eighth grade teacher always said – you either want to do the work or you don’t and if you want to do the work, I can help you but if you don’t nobody can help you.
[45:40]Houston: So true. And so, where does this element of an edge come in? So in mind, when you talk to traders and they have an edge, is it- aside from talking about just systems that have positive expectancies but what else can people play to kind of get some of their edges that’s going to make them unique and run at their best?
[46:07]Ray: Well, let’s understand what an edge is – it is the developing awareness that causes us to buy or sell before everybody else. And so that edge comes from that ability to be locked in on the information that’s most relevant and to process it most effectively and so that’s what the intuitive development process does. To me the edge is priceless and the edge that genuine professionals have they just consistently achieve ad sustain deeper levels of awareness giving the ability to see and do before others; and so when we learn to formally develop and support intuitive function, now we can start creating that edge for ourselves.
[46:58]Houston: And how much more has this become important as the days of HFTs and we more and more HFTs players in the market and more and more traders are becoming automated; it just seems that this element of having your decision making process really locked down and tuned in, in your opinion is there still going to be a place for the discretionary trader, in the next little while?
[47:25]Ray: Absolutely. Let’s understand the high freq guys of, we call it the arms race if you will, it’s come down to a refinement of technology and so in advance training it really gets into creating awareness for the conditions that the high freq guys really like to participate under. So, we let them have those places; there’s plenty of opportunity to compete where they are not going to be highly incentivized to participate so we just take them out of the equation (Houston: yeah) and those guys are trading for a tick and the retail guys are not going to see trading for a tick.
[48:13]Houston: Yeah, and so you think that the discretionary trader has a lot of opportunities left in the electronic trading space, or do we need to all move towards a semi-automated or fully automated type of approach?
[48:32]Ray: Here’s what happen; when we go to a semi-automated or fully automated approach, what we’re doing is we’re really abdicating decision making to technology, right; we’ve created a set of parameters and now we have to rely on a machine to recognize when those parameters are aligned and to execute and to execute according to some rules, right. (Houston: right, yeah) But we need to understand a whole bunch of stuff – trading is an incredibly dynamic environment and the shelf life of a trading strategy is constantly being fine tuned and there’s always new strategies being created – it’s very, very dynamic and if we aren’t immersed in what’s going on in the market on a daily basis then we’re not going to have the awareness to adjust; and so once we abdicate, there’s no incentive to do the work, if we’re not doing the work we become obsolete (Houston: right) so I show people how to do the work very efficiently and the more efficient we become the bigger the picture we see and the further ahead we get of price the more energy we have because of the trust that is built through all of this work – the more energy we have to patiently wait for the set ups that can get us the highest probability; and that same trust, that same energy is going to give a conviction to consistently execute.
[50:04]Houston: And then that’s, you know you can turn that around once you’ve dialed in you can turn and still decide to go semi-automated or automated but you have to stay in the game otherwise you become obsolete.
[50:18]Ray: Well, it’s – again the beauty of this is that when we understand it so well, we don’t need automation; in other words, we understand what we want to do and how we’re going to do it with just all of energies available to be external to recognize when to enter and exit (Houston: yeah) and there’s plenty of liquidity and o when these things come along, if we want to buy we’re just going to buy and if we want to sell, we’re just going to sell. We’re not worried about getting in at a precise tick because that’s not what we’re going to have so we change expectations, we understand the conditions that are most supportive of our success – we wait for those – and we don’t need a machine to execute those.
[51:11]Houston: Yeah, and it’s interesting because I’ve seen a lot of traders that are looking into automated systems or semi-automated systems and in a way their motivation for looking at those methods is because they don’t have a certain level of trust in themselves; they want to outsource that to a machine so that they don’t risk feeling vulnerable or they don’t risk feeling some of the ways that they don’t like to feel when they don’t have a proper amount of confidence in your trade system or methodology, so that makes a lot of sense.
[51:43]Ray: Yeah, nobody should trade – I have a golden rule that I teach my customers and it’s very simply this: we only want to turn our screens and we only want to give ourselves the opportunity to participate in the market when we are certain and confident of the strategy confident in our ability to wait for market alignment; and again, we know what, we know why and we know how all our energies available to develop awareness for the when. And so what I do every morning in the daily briefing – I share we go from global all the way down to that directional trading strategy if it’s being played out, if it’s being set up and just keep verbal wise seeing that it’s allowing me be certain, confident and committed and the triggers that I am anticipating. And they just see daily reinforcement – you know we may not get a directional trading strategy for two or three weeks and then they come and on top of each other; we have one late in the day on Friday and we got one yesterday morning – so two days in a row. I haven’t looked at the markets today but over the course of a year, I stopped counting in the first week in June and obviously it’s different all the time but by the first week in June, we’d had already thirty-three or thirty-four of these directional trading opportunities in basically five months time; and sometimes we can get a whole bunch in a month and sometimes we get a few but when you see how consistently these things play out and the risk reward around them and the advantage of how consistently they give us advantage over the institution of higher freq to fair value, the Central Bank understanding why that’s all there – the easier and easier it becomes to wait for these.
[53:37]Houston: Right, yeah. And so we’ve spoken about energy already and I know you’ve spoken about the relationship between energy and anxiety – can you talk a little about that relationship?
[53:48]Ray: Well, sure they move – they move inversely to each other; when anxiety is high energy is low and if we can just keep pushing anxiety down energy is going to stay up high and so one of the big things that I teach in the training is just how to stay in control; in other words what we need to do whenever we feel anxiety present to take back control and keep ourselves plugged in into the intuitive development process. So the bottom line is we want to replace anxiety and frustration with certainty, confidence and commitment; distraction and conflict with information and knowledge flow and knowledge transfer and so that’s what the intuitive development process does because of the alignment it’s creating.
[54:34]Houston: And the energy – is that physical energy or mental energy that you’re talking about or is it just kind of the patterns of what it means to be confident and have trust and…
[54:44]Ray: That energy comes from trust, in other words being in the intuitive development process we can draw straight lines to why we are best supporting out development performance. In other words, we don’t hear these little voices telling us we should be doing this or that (Houston: Don’t do this, do that) all that goes away and we are just locked in on stuff that is going to best support our development performance. We see the foundation, we see the structure; we understand why that is going to best support our development process and we are all in and we are totally committed and we become if you will consumed by the dynamics of the moment and that’s what intuitive function is – if there is something athletically that you really enjoy doing or musically, a hobby or whatever – once we get into something we get consumed by it and then when we get pulled out of it we just have no conscious recollection of the passing of time, right.
[55:52]Houston: Right, that’s a beautiful state of flow.
[55:55]Ray: Right, well that’s what intuitive function is – because we are completely consumed, there’s no friction. (Houston: yeah) It’s like we’re off in another dimension – all of our best is just flowing out of us (Houston: yeah) and integrating skill knowledge is mostly sufficient as a value creator; and so that’s where we want to be.
[56:19]Houston: As we are turning off the levels of kind of soft criticism and awareness we are then able to tap into that deeper level of intuition and that’s kind of based on experience.
[56:28]Ray: Well, instead of turning off, just think about stepping back from whatever perspective you have that’s driving your development performance and be willing to say you know what I’m willing to step back from this – there’s probably a whole bunch of pieces I’ll be able to pull in, in a little bit but let me understand how to put this foundation in place so everything I start bringing back in is going to snap in like a Lego and there’s not going to be a wobble. (Houston: yeah). In other words, I’m going to be rock solid.
[57:05] Houston: And so let’s talk about the intuitive development process, you’ve been kind of dropping bits and pieces of it; maybe you can walk us through that and I guess what’s the ultimate outcome – is it to begin to tap into our intuition and to use that in our decision making process or is there more to it than that?
[57:25]Ray: Well, let’s get clear on the difference between intuition and instinct, okay. (Houston: Sure) intuition – intuitive function is the unconscious application of the learned and developed skill knowledge and experience; it’s our creativity and imagination integrating our skill, knowledge and experience in a way that causes us to frequently realize and expand out potential – it’s a product of all our good work. Okay, it’s learned and developed; intuitive function drives proactive behavior – it drives a revolution. It creates that future vision. (Houston: Yeah) Instinctive behavior is the unconscious application of the behavior shared by species necessary to its survival; in other words, we instinctively know not to jump off the cliff. If I were to take an Aborigine from the Outback no interaction with civilization at all – never seen an automobile, let alone drive in one – if you somehow get them to sit behind the wheel of the car; he wouldn’t have any intuition and any developed skill knowledge experience to be able to drive the car. So two different things – so now understanding that intuition is learned and developed – doesn’t it make sense that if we understood the foundation, the best supported intuitive development from that place that’s going to start dramatically improve our ability for success. So we put in that foundation and here’s the thing all professionals are intuitive to some degree; the most successful consistently achieve a deeper intuitive state – the scientific word for it is alpha – our brain cycles at different speeds but we want to get deeper and deeper into alpha. And so intuitive development is very tangible, I mean we’re not getting out oils or incense or wind chimes or chanting or anything like that at all – it has nothing to do with my training. This has nothing to do with my training, it’s just nuts and bolt stuff that allow us to develop the understanding and the awareness to create that balance and trust at the foundational level that have to be in place to support intuitive function that triggers peak performance and in turn causes us to realize and keep expanding our potential.
[01:00:20]Houston: And I really like that distinction between intuition and instinct; I think that’s the first time for the day and I really like that a lot – it makes it very, very clear that one is like a survival mechanism and the other is like you said of a deeper form. I realize the distinction…
[01:00:27]Ray: Right, striving our evolution.
[01:00:30]Houston: Yeah, absolutely. Is there any kind of practices that you can share with people where they can begin to start to get deeper in terms of developing that layer of intuition? Or is it just a matter of lots and lots or repetition, good habits – what are your thoughts around that?
[01:00:56]Ray: I’m sure people put a lot of thought into it, over months or years they’ll find a path – that’s what it took me and there’s a very precise path that I go through in the training to just take away a whole bunch of crud in a short period of time to get to that developmental baseline (Houston: yeah) and then the biggest part of this is just to learn to receive things in a new way – really opening up our heart so that we get into our mind and go forward. So let’s understand – change is hard, it’s disruptive and it demands accountability and even simple things like – I always give the example, I was a quarterback from the JV Varsity, my sophomore to junior year; the coach had say said “Ray, if you don’t stop padding the football, youre not going to play quarterback, its slowing down your release, your telegraph, your passing “and I wanted to play quarterback and it took me about three weeks to break that habit and I worked really hard throwing a couple hundred footballs every day; and that’s what it took to break that bad muscle memory, okay. Well, most folks can’t get pass the read out to cause the bad muscle memory to break but f they get past that and that’s if they want to do the work to develop the level of awareness and commit to the accountability to achieve that and do something about it, then they can have reasonable expectations for working through the intuitive development process. But most folks don’t even realize they have a bad habit that they have to get rid of (Houston: true) and this goes into so much cultural messaging about entitlement mentality and everything else and really help people understand how buying into that has just blown a big hole into their boat.
[01:02:14]Houston: Yeah, especially as it pertains to trading that doesn’t serve you?
[01:02:18]Ray: It doesn’t serve us in anything (Houston: true); let’s understand what really makes us attractive to each other – its creativity. I mean, we’re having this conversation because you’re attracted to the creativity of what I have to offer in trader development and it’s the same thing – professionally, we’re attracted to each other because of creativity and then that attraction fosters collaboration and then we have innovation – there’s great energy , we get to a better place. (Houston: yeah) Well what happens is a s soon s we believe we don’t have to improve that we don’t have to change, now we become opinionated – there’s no attraction in someone who believes they know it all.
[01:04:13]Houston: Yeah, they’re just defensive, you’re trying to defend what you know – what you think is right.
[01:04:17]Ray: Absolutely, and this is why this politically correct stuff is so detrimental because it basically says I’m entitled to believe whatever I want and nobody can judge me. And I always tell people – think about the folks you have the most respect for – what happens when you have a disagreement; the first thing they do is that they get really quiet because they’re running an internal inventory to see where they screwed up – they look internally first – and then they look at us and they want to engage because they really want to understand the disconnect but that’s what happens with genuine professionals – folks that we really trust. But the messaging out there is – if you and I have a disagreement, right – I can tell you it doesn’t concern you, you wouldn’t understand, it’s already been decided, I can say hey let’s talk about that later or if any of those fail I can just start personally attacking you. (Houston: right) That’s the environment out there today – to a T – except for the genuine professional and what I do is I help people to become that person that they want to be. I believe in our heart of hearts, all of us want to be our very best – we want to be genuine and that’s really the essence of intuitive development that path to being genuine having that great foundational trust if you will and then that generates the energy we need to think independently and all that other good stuff can happen.
[01:05:58]Houston: That’s beautiful and it just ties back to – we talked about the training at the beginning – there’s no Dr. Jekyll/Mr. Hyde thing, right? We’re integrated so if we try to play this game where I will show up this way in “real life” and then this way in my trading that’s not going to happen; that’s a game that maybe a schizophrenic can play but no one else can play that game.
[01:06:24]Ray: There’s no fulfillment in it; this is the other thing that people forget about that happiness comes from professional and personal fulfillment (Houston: right) and that fulfillment comes from doing the work, developing the awareness to make those judgments, to make those creative, co-operative innovators – we’ve got to do the work and there is great joy in doing the work and that’s why the absolutes are so powerful because they empower us to do most of the work effectively and in turn create the highest probability we’re going to experience that professional and personal fulfillment with great frequency.
[01:07:02]Houston: Yeah and that’s such a higher magnitude of being at the end of the day and you kind of come from the highest state so that’s beautiful.
[01:07:12]Ray: Well, all the messaging discourages us from getting there because let’s keep in mind that the media’s the most powerful user of technology and just look at our smart phone even when we go to the gas station now the flat panels are up there pitching us while we’re pumping gas, right. (Houston: right) And media understands, it a heck of a lot easier to get someone to buy a product or service or adopt a political or social belief with the means of their advertisers if the audience is overwhelmed, well one less thing I have to worry about. The last thing they want to do is to have to sell to an independent thinker – they say no an independent thinker already has good understanding of what they need and why and where they’re going and how they’re going to get there so they’re tuning out all of that message to even begin with. So, it’s in their best interest to discourage a responsible conduct that’s why this entitlement mentality is just foisted on us 24/7 and I really bring that out and people are blown away, once I raise their level of awareness because the more we think we are entitled to privilege without obligation the less likely we are to do the work to add responsibility to meet those obligations. And all the joys in doing the work and all the power – trust come from doing the work.
[1:08:46]Houston: Yeah; but we just want to shortcut that and receive the benefit.
[1:08:52]Ray: And we’re told we’re entitled to it.
[1:08:57]Houston: Right, you don’t have to do anything, you just need to buy this thing and you’ll be happy.
[1:09:00]Ray: Vote for me and you’ll be all set.
[1:09:03]Houston: Yeah, exactly. Now we’re running a little bit long now so maybe I’ll just shoot some fast questions your way (Ray: Sure) as we begin to wrap things up. But number one: I speak to a lot of traders who’ve been trading for a while and they’re doing okay but they’ve crossed over the learning gap – that’s first little hump – but now how do they go from kind of good to great? It seems they kind of stumble backwards sometimes and taking two steps forward and maybe three steps back – do you have any ideas as to where a person of that place on their journey, what could they do to take it to the next level?
[1:09:46]Ray: Absolutely, just the more tangible understanding we have of our process the more we can commit to it and the more certain and confident we become then we will have that much more energy to develop awareness. So that’s why this training is so powerful because it takes someone that’s already having success and it really helps them to understand what’s driving that , now they can just trust themselves that much more, commit to it that much more deeply and they’ve got that much more energy to get further ahead of the market, further ahead of price.
[1:10:24]Houston: And so definitely linked to Ray’s development process, his program so if you go to the page for this episode, you can see a link there, you can read more about it – it’s pretty deep and I know Ray shared some of it today but certainly not on a deep level. But Ray, where’s the best place people can contact you, of follow you or stay engaged with you? What’s the best medium or place they can go to check you out?
[1:10:47]Ray: My website is trust1st – so trust, the numeral one, ST dot com – trust1st.com.
[1:10:58]Houston: Awesome; so Ray it was a lot of fun talking to you today – there’s so many insights here. I want to ask the audience and I usually do this at the end of each show: what’s the one biggest idea or insight that you got from the podcast. I’d love to hear from you and share with us what was the one thing you heard today that kind of caught your ear that you say that’s applies to my situation, to my trading, that’s something that I need to think more deeply about. So let us know, go to the show page – as usual you can find the show notes, the transcript and all these resources we talked about today on the website – that’s thetradingedge.org/episode 17. Ray, it was a lot of fun talking today, I hope we get the chance to talk again sometime soon.
www.trust1st.com – Ray’s website
Ray presenting the Intuitive Development for Traders Process
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