Valuable Lessons from the Days of My Youth

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Disclaimer: I’m not telling you how to parent. This is what worked for me.

I grew up under a prudent and wise father. I believe that many of my experiences as a youth have a profound effect on how I handle my life journey as an adult. I have found that the guidance I received as a youth, have helped to define my trading character.

We were a family of eight kids (same parents) and our parents ran a lean operation on one income. While I am mindful of the generations of change, I wouldn’t replace how I was raised in a blue collar town, with anything.

We were taught to appreciate the value of money. We learned about the process by which money was acquired, retained and managed. We were not given money for any reason. We did not receive “allowance” of any kind. My dad, being an operations engineer at Ford Motor Company ran his house as though it was one of his manufacturing plants. Keep costs low, operate efficiently, start from the bottom and engage in a process to become highly productive.

When I say we didn’t receive money for anything, I mean it. Nothing! It is positively one of the best actions my parents took on us as children. We wore hand-me-down sports equipment (and still played well and made all-star teams) and clothing. When I’d finish a hockey game and meet one of my parents in the lobby, afterwards, the question of buying a food or drink item was not even raised, because I knew the answer; “Wait until we get home.” Besides, the quality of food available at the concessions is downright unhealthy. On another note of observation… We’d carry our own equipment out to the car, including the hockey stick! Surprisingly, the hockey equipment is not heavier, today. In fact it’s lighter! Wow! The kid needs free hands to eat a deep fried wiener and 32oz. Coke with 120grams of sugar. OK, that was a side comment.

For a child, which I once was, when there is something you really want, but can’t have, the event turns into the worst day of your life. With no vision of the future, life can’t possibly ever be worse than your circumstances concerning what you want on that day. It is literally the end of the world if you can’t have it. As a kid, I was a fast runner. I could run away from kids older than me. Ring a doorbell and run away faster than the others in the group. Even run away from the police and leave my pals in the dust. So, I asked my mom if I could join a local track and field club, which was about 6miles from home. My mom was already well beyond her means (no helper) to drive her kids to their activities, all over the city, and simply could not take on more. Perhaps I kicked and screamed a little, which my mom would have ignored while attending to a higher level drama, but once I got over that emotional outburst without any physical success, I sought and pursued my only alternative. I rode my bike (which I paid for) to the track practices four nights a week. As another side note, there were no sidewalks and I didn’t wear a helmet, nor did I carry money to buy a treat, although I did have a job, because my dad required us to do so in the summer months, from about age 12.

Growing up, there was one thing we could never be seen doing. Can you guess what that might be? If we were caught in the act, surely the voice of authority would come down hard and there would be consequences. The one thing we were not allowed to (be caught) doing was… nothing. The penalty was harsh. If we were caught doing nothing, then we’d be given “something” to do, which was probably a chore we made effort to avoid with hope that another prospect would be chosen.

At infancy, we were taught the responsibility of doing work for a reward of financial compensation. We were taught to “do things right the first time and take pride in your work.” If we wanted a larger asset, such as a bicycle, we were taught how to find a job to earn the money to finance the dream. So, we learned job prospecting, knocking on doors, presentation skills, negotiation and execution of the plan. We were kids! As a side note, lemonade stands are a horrible business model. By having invested ownership in the dream bike, or “must have thing,” there was higher assurance we would take responsibility over asset, by learning how to fix the flat tires, tighten spokes, adjust gears, etc. Every summer, we had to use Comet, water and an old toothbrush to scrub the rust from between every spoke in the wheel. It wasn’t about shiny rims, it was an exercise in ownership, responsibility, discipline, commitment and appreciation.

Playing sports. My apologies to the readers not interested in sport. My attitude was apparent. I wanted to win the game and I believed that if the coach also wanted to win, he should have me in the game as much as possible and at the most important position on the field. OK, so this attitude may have led to disappointment, which I had to learn to deal with.

In our developmental years, I can’t even imagine playing in a game where there would be no win/loss outcome, as we see today. It completely alters the opportunity for psychological development. The idea is to have fun? Yes, winning is fun! Yes, losing is no fun! Learning the concept of, and experiencing, winning and losing is critical to our psychological tenacity. As a comparison, what are the emotional differences between trading an account that has no outcome versus trading an account where winning or losing bear material consequences? The consequences of W/L outcome of a trade will impact your emotional state. This can become a challenge if you have not developed the ability to accept the emotional impact of outcomes weighed on opposite ends of the spectrum. I assure you, my bobsledding career was saturated with challenges and disappointments that had to be overcome. We know that developing our psychological ability to adapt productively to an endless range of experiences is best acquired in the challenges we take on as a youth, consistent with other areas of physical and emotional development.

Personally, I value and utilized the experiences of my youth as a platform for success as an adult. Many of the ventures were voluntary, and many were enforced (involuntary; I did not enjoy them) through parenting that was right, for me. Not realizing it at the time, taking on difficult challenges that develop a mental process to attack fear would serve in my future of Olympic competition. Furthermore, I have adapted this process to refine my trading and risk models. The foundation of my trading mindset can be fully credited to my experiences as a youth.

I believe that every individual has a winner living within them. I believe that every individual has engaged in a process to achieve a high level of proficiency at some specific skill. While we possess the skill and understanding, some may not be consciously aware of how to connect the process to a new challenge, like trading. As you reflect on the development of your higher competencies, think deeply and realistically about the foundation upon which your expertise emerged. I am confident that if you take the same approach to trading, success will emerge. We put our workshop attendees and Pro Traders Club members through a very detailed process to develop their trading skills and it works. I have countless emails validating the process oriented approach to developing your trading skills.

Other Notes from My Youth..

  • We traveled from Ontario to British Columbia (via USA) with two parents and eight kids in a van pulling a fold out camper. A 3000km trip with ten people in a van and we camped! We never stayed in hotels or ate at restaurants.
  • If I wanted to play sports in high school I would miss my ride so i had to hitchhike home. I played sports year round.
  • When we worked around the house, we worked for free.
  • Job examples: Paper route, lawn mowing, working in corn fields, priming tobacco, tool and dye factories, maintenance (sweeping floors) in a auto body shop.
  • A piece of candy was an occasional privilege.
  • We slept 2, 3 and even 4 to a room. We shared one shower with 4 kids in high school and others near in age.
  • If we complained about something inconsequential, my dad would reply… “get tough.”

House rules: “Everyone plays or no-one plays.” “If you start a game you have to finish it.”I wouldn’t change anything. I’m thankful that these lessons were the foundation to my sport achievements and now define my trading approach.

Process Thinking and Your FX Trading

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We are in a constant state of process. Everyone has realized a goal driven period through which they have engaged in a series of (neg/pos) experiences and produced a positive result.

We typically refer to a series of experiences connected to a desired outcome as “a process” when the time duration does not fall within our expected period. The fact is, there is a higher probability of a positive outcome when the process is well planned and endured.  What is not so obvious, particularly in real time, are the finite details involved in the process of which most are not consciously aware. It is the details that are critical to the success of the process. The more conscious one becomes of the finer details, the more proficient they will be with each task involved in the process.

You don’t know what you don’t know… what you don’t know contains experience and information that will increase your level of success when the process comes to completion. In trading, what you don’t know represents risk. Ask any aspiring trader who loaded up an account 6 months after first reading the word “forex,” then reflected on the action a year later.

I believe everyone has experienced a successful process that resulted in achievement. I believe everyone has a template for success. I do not believe that everyone recognizes the factors contributing to their success. Thus, they have difficulty converting what they already understand about process, and its foundation for success, into trading development.

When pursuing a new venture in an unfamiliar domain (trading?), the new experiences in the process (exploration) are the finite elements that can draw on your resources, challenge your psyche and pound you into a state of frustration (copy me systems, etc.) and discourage you from your goal.  –please refer to “Developing Traders Model” video in the free member’s area.

Everyone has intensely experienced “the process,” whether you are aware of it, or not. Some have engaged in a process inspired by a goal. While others may use a natural gift and move in the direction of where they are skilled, which puts them into a process, by default.

There is a long term performance differentiation between winners and not winners by the effort one makes to become process conscious and process oriented. As life goes, we are in a constant state of process in one area of our lives or another. The differentiation is in favor of the individual who, when engaged in a process toward a defined goal, is aware it IS a process and understands deeply how each element contributes to the whole. The winner is conscious of what is happening around them as they relate internalized experiences and wisdom to what is happening in real time and how to prepare for the future.  The winner makes an intentional effort to deeply understand each constituent part and how the part contributes to the achievement of the goal, or solution to the problem. Over time, process becomes a model that brings structure to progress. Once one becomes aware of the fundamentals of process, it can be applied, and cross applied, to almost any endeavor. I was an athlete in my previous career. After years in Track and Field, and 14 years in bobsledding, the mental and physical process became a well tooled machine. When I turned to trading in 1998, I applied a structured development process, learned from sport, to my passion in trading.

When I was bobsledding, prior to a race, we had a spectrum of factors to weigh precisely into how we were going to execute. Each factor is more comprehensively understood when put through a series of structured experiences and testing (like trading). The ultimate defining moment to draw conclusions would be a race environment when all the tools and experiences are being collectively optimized. On the world cup tour, each week we would arrive at a venue five days before competition. I knew, to the finest detail, exactly how I was going to proceed through the training sessions in preparation for the race. If the plan was clear at the start of the week, then I had a greater capacity to adapt and adjust to any environmental changes or surprises, which can be expected at every race.

The importance of doing everything within your control to have every detail prepared does not apply simply to the functional component (equipment, athlete preparation, etc.), but more importantly to the ultimate control center…. The Psyche! At the start of each world cup week, I needed to have my mind in a specific state as it pertained to the task at hand. The process started from the conclusion of the previous race. My mind would immediately shift to the next race and I knew, exactly, in what state of mind I needed to be throughout the entire preparation period. Among the web of complexities, I needed to be prepared to deal with any matter. The night before the race, I had to be absolutely clear in how I would execute at race time. I would fall asleep thinking about the finest details, the rhythm of the track, speeds, G-forces and violent transitions, so while I slept, my subconscious would sort out any loose ends and reveal them to me in the morning. My first thought in the morning was to mentally connect with the task. There is a discipline in avoiding thoughts of outcome expectancy. Outcome expectancy blocks your mental capacity to see everything clearly and uses up vital mental energy. Once you start thinking about outcome, there is an emotional and physical shift that will fully compromise the performance.

If I was not nervous/simulated/focused enough, I knew what I had to do to move into the proper state of mind. If I was too nervous/anxious, I knew how to realign my thoughts to reduce anxiety levels back into a balanced state. After spending a lifetime in sport, I knew exactly what to do to bring my mind into an optimal state to be most effective in executing the task at hand. We could be traveling 140+ k/h and pulling 5-G’s, yet my world was in slow motion. Only an intimate knowledge internalized from experiences would give me the ability to be in a complex environment in slow motion (trading?). Once the process has been established at the highest level, I simply repeated the process every race. Each race contributed to the refinement of the process and more intimate understanding of the details in the success formula.

Structure a development plan that targets specific parameters of the market and internalize the behaviors and patterns, be it price action or fundamentals. The same applies regardless of how you see the market. Only through well planned experiences does a growth process occur. Experiences establish reference points that become new parameters. One experience builds on another. Large sample sizes of experience will develop the trader within you and draw out your trading personality and independent thinker, because you will own your trading. This is the goal of Pro Traders Club. To understand the market so intimately, it will play out in slow motion. Your trade selection and trade management will be in slow motion, because you will have lived through the scenario so many times.

Hopefully, while reading this analogy, you’re thinking of its application to trading. There are no shortcuts. You can’t copy what somebody else does. You need to engage in the development process yourself. You need a development plan, from which evolves a trading plan. Almost everyone does it backwards, at first. The sooner you switch, the sooner you will be on a progressive road. One of the biggest deceptions in the industry is the preaching of the “trading plan” as though it’s something you pick up off the internet and start trading.  A trading plan does not come out of thin air. A trading plan cannot be copied. A trading plan is a slowly evolving structure that is a byproduct of a clearly defined development plan that is in forward process. A trading plan starts at ground zero and, evolves slowly with hard work, through engagement in structured and defined experiences, collection of empirical data, and maturity of ones psyche as it relates to trading. Structured experiences aid in internalizing the market behavior so the trader develops within you. With process and experience, the trader lives inside you and you draw on it when the appropriate time calls. Done properly, the trader within cannot be taken away. It lives in you, just as experiences from other areas of your life. It’s a process.

When you pursue a diligent process oriented approach to studying price action, it is you and the market. It is you that interacts with price and pick up its behaviors under various conditions. By nature, as all your experiences are between you and the market, your mind uniquely connects with market behavior in a way that only you know. You develop and intimacy with the market you cannot explain to others. You connect with patterns that you have identified or validated all on your own. Here is the climax of it all…  by nature of the process, your unique psychological profile has now connected with the market that is defined on your own terms. You have now accumulated a collection of experiences that make you true, an integral part and place in the market. You are now an INDEPENDENT THINKER!   This is the goal. This is when your trading accelerates. This is when you look back and realize you can’t be someone else. That the trader within you has been born, but you had to work hard to bring it out.

We have all been through process. Process can be made a template for success when properly understood. The effort should be made in understanding the process of previous experiences to convert and customized the model to achieve a new goal. Use your existing success and convert the process to trading. You will win. You already know how!

Internalize Experiences

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Trading is a way of life that can saturate our existence. We live the all consuming market and our positions. Everywhere I go, I relate my observations, experiences and insights to my trading life. Years of trading experiences develop an intuition, an insight into processes, decision making, human behavior, pattern recognition, emotional drivers and more. The value of an experience lies behind what is seen. The foundation of wisdom lies within the internalization of the profound elements of the experience, which are unique and personal. When an experience is internalized, it becomes core to understanding, and assimilating, future experiences at a deeper level. To say that we learn from experience is a shallow perspective. Our aim is to train ourselves to routinely find the relevant value in the experience and use that information for future reference in all areas of our lives. The internalization of an experience should become an automatic process that relates to previous experiences and refines our comprehension of the present within a structured framework.

Sport was the medium through which I learned process thinking and internalization. It is a repetitive physical and mental process that becomes further refined with every experience. The learning can happen naturally, or be accelerated when you build reference points upon which to grow. Reaching the highest level in your field of play will require some work and deeper understanding of how you are likely to respond to unforeseen and spontaneous circumstances. The “natural athlete” will adapt comfortably, just as one with an exceptional aptitude in mathematics can solve complex formulas more easily.

What is unique about trading, is that with whatever skills you have been personally gifted, one can work with such gifts to develop a structured approach to succeeding as a trader. Some are more natural and have the ability to convert previous experiences into the new space, while others require more discovery in certain areas.

I recently attended the entirety of the London Olympic Summer Games. I watched a minimum of three live events a day, and some days, as many as six events . My favorite events were gymnastics, weightlifting and athletics (track and field). Prior to my bobsledding career, I was on the Canadian track and field team in decathlon, and for both sports, we would do Olympic weightlifting as a training component, so I understand the events and can relate to
the athlete experiences at a deeper level. For those of you not interested in sport, I apologize if I’m boring you. Be it sport, or whatever your area of interest, the endeavor requires a process of development that pushes one through your fears and beyond your limits. If you are not challenging your fears, intellectual and/or physical capacity, then you are probably not achieving progress in your field of interest and growing.

As I observed athletes and competitions in all sports, I was most interested in how the athletes responded to circumstances that challenged their mental tenacity. I would watch their body language and their eyes. I saw a weightlifter give away a gold medal getting caught in their competitors game (yes, there is strategy in weightlifting). A pole vaulter had control of a competition when his competitors made surprise clearances, then he came back for the win. I saw the Brazilian volleyball team change their game after being ahead two games and match
point for the win, and end up with a silver. Five athletes were pushed beyond their personal best in a race that saw the men’s 800m world record destroyed. In the men’s gymnastics all around, the Japanese boy who only had to finish his final routine on the pommel horse without major error, had fallen, giving up a medal and ended up fourth. He’s been to major world competitions, world championships, and been successful, in the past. He has performed the routine hundreds of times without fault. Unique circumstances that bring out victory or defeat. One can be victorious, and still lose. Trading is like this. One can competently and successfully manage a
trade (risk), while it results as a loss.

Prior to the 100m sprint final, I saw an interview with a former world leader in the event. He was asked if he gets nervous. He replied; “I think about what I have to do to run a perfect race. How I’m going to come out of the blocks. Reaction time to the gun. The timing of the transitions in the race.” Notice he is not thinking about his competitors or whether he will win or lose, rather the task at hand. If a bobsledder or skier thinks about outcome over execution of the task, they could face severe injury (as I did) or early death (as I nearly did), as seen in this video .

This crash occurred one year before my first Olympic games, many years ago. The track, at the foot of the Matterhorn (Italy/Switzerland), was removed from world cup circuit, due to its extremely high risk.

I receive a few emails a month with Pro Traders Club members sharing their positive progress. The stories are fantastic. Per email below, long time PTC member Vittorio, from Singapore, has been to a few workshops, and a guest speaker on one occasion.

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Good Morning Chris,

i imagine you’re still in London, enjoying life (as all good hedge fund managers should do…).

I have just passed my interview with a hedge fund manager and I am looking forward to start working with them from the 1st of September.

This is something i have been dreaming about for years and i like to thank you as your training has been critical in building my results and confidence to achieve this goal of mine.

Thank you again and i look forward to our next catch-up,

with kind regards

Vittorio

Congrats, Vittorio! This is fantastic news! It is rare that I openly share the stories of traders coming to fruition, but we hope it serves as inspiration to all. Vitorrio has diligently followed the path of successful traders.

Notice this story is about a trader who has gone through the process of development into an independent thinking trader with a high level of proficiency in the FX space. This takes time and effort.

Note this is NOT a story about a trader who is trying to copy and follow a “system,” of another trader and made a few pips today or this week following the promoted “system.”

Traders who achieve success did not do so by copying “systems.” For more details on a framework for success, see our free video series in the chrislori.com free members area titled, “Essential Qualities of Successful FX Traders.”

It is the success of our members that motivates me to share knowledge and insights, when possible.

Low FX Volatility Ideal for Price Action Models

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I keep reading reports about how little money can be made in FX in the current low volatility environment. The media goes on about how volatility is at historic lows and “nobody” is making money. While I respect that long term positions are going nowhere and cost of carry is a squeeze, intra-day price action has been risk friendly and profitable, with our model.

When reading a public commentary on any matter, one must consider the source and the context. In trading, if one were to place all the trading approaches on one continuum, the spectrum would be virtually endless. We know that every individual actively trading in the market will bring a different thought process and history of experiences to the table. So when somebody writes an article about how the low volatility makes profits unachievable, it is coming from one persons (and only one) perspective and has no merit. Therefore, by virtue of the media, any person who has not realized gains will feel justified by the public comments written by bank analysts or FX journalists. Then one feels compelled to share the justification that matches their own experiences, further, which sends the rationalization widespread. This is the character and fruit of media concerning anything published. We need to read between the lines and discern the truth/reality for ourselves.
A large contributor to success in trading is to use your resources wisely. Filter the information in alignment with the parameters you have tested and established for yourself. I tell traders the same as I have told many athletes, your greatest weapon on the road to success is the depth of understanding of one’s self. Most people cannot see themselves beyond their current limited perception of themselves. Therefore, they are resistant to input in the form of guidance. Now there is a difference between guidance and dictation. Guidance is assisting one in seeing their world more clearly to enable prudent decisions (not making decisions for them) in the process of growth. Dictation, in this case, would imply one is giving specific directives as to what actions to take. Meanwhile, the dictator cannot possibly fully comprehend the web of complexities that make up the individual in question. A mentor, on the other hand, can offer a balanced approach discerning proper guidance, information and direction that the individual can customize.

When I first began to study FX in 1998, I went through the natural process of exploring the different ways one can analyze and trade the market. It quickly became clear to me that I would be in a most adaptable position if I were to study price behaviors and find consistencies, I would be more empowered, given my psychological profile, to adapt to changes in volatility. My curiosity was about my level of vulnerability should the market dynamics (volatility) change. When trading with a substantiated price action based model, there are specific times and market conditions that we find favorable to trade, likewise, there are specific times we avoid being drawn in.

Market volatility is continually changing, through long term economic cycles, crisis, FED money pumping, Intra-month, Intra-week, intra-day, at specific hours. We have refined enough insight that we can even identify distinct changes within the minutes of the hour. Through our observation of patterned price behaviors, we remain consistent in our trading opportunities regardless of sentiment, macro drivers and other unanticipated changes in market trading conditions.  We can literally identify changes in volatility across the spectrum in real time and make the appropriate decisions in the moment. The advantage to understanding price behavior is that it is consistent over time. One is not forced to continually change mathematical parameters to keep up with the unpredictable shifts in volatility.  Some experienced professional traders certainly have the skills to successfully apply mathematical models. However, it can be very difficult for the developing or aspiring trader who does not have the aptitude to refine the parameters in a transitory market.

In summary;

  • Read between the lines.
  • Your understanding of yourself is your secret weapon – explore and challenge yourself to grow.  The more you know, the more your grow.
  • Don’t try to copy your mentor.  Let the mentor guide you through a growth process.
  • Price action based models are highly and consistently profitable in any market environment.

I’ve pasted a quote from a previous blog. I thought it was worth the reminder:

“Trading is a way of life that can saturate our existence. We live the all-consuming market and our positions. Everywhere I go, I relate my observations, experiences and insights to my trading life. Years of trading experiences develop an intuition, an insight into processes, decision making, human behavior, pattern recognition, emotional drivers and more. The value of an experience lies behind what is seen. The foundation of wisdom lies within the internalization of the profound elements of the experience, which are unique and personal. When an experience is internalized, it becomes core to understanding, and assimilating, future experiences at a deeper level. To say that we learn from experience is a shallow perspective. Our aim is to train ourselves to routinely find the relevant value in the experience and use that information for future reference in all areas of our lives. The internalization of an experience should become an automatic process that relates to previous experiences and refines our comprehension of the present within a structured framework.”