Easy Money?

Easy Money: Where to get it?  Financial Markets or The Public Sector...?

Faceless Bureaucrat:  The fact that today I write as Faceless Bureaucrat rather than in my Bad Assed Trader ego should set your warning lights flashing regarding my blog title.  Where is this “easy” money?  In the financial markets or the public sector??

I don’t think it’s possible to make “easy” money as a trader, maybe there are exceptions to this but to me it seems to be a very tough job.  But thrilling nonetheless and I will blog more about my progress in a few days’ time.

Instead today Faceless Bureaucrat was bursting to speak about “easy” money in the NHS, bursting because in my 20+ years I have never known anything like it.

People think that NHS managers are getting a hard time under our Coalition Government.  They think that we’re losing our jobs in our thousands and that this must be naffing us off on a majorly large scale.  They couldn’t be further from the truth and I have to put it on record.

We’ve been through countless reorganisations before.  Personally I’ve been reorganised and forced to apply for my job or something similar in 1995, 2002, 2006 and again now.  Every time previously we’ve been told that redundancy is unlikely and it’s never felt anywhere near me – a very small number of people might get dropped but the ethos was generally that a similar volume and type of work still needs to be done, we’ll just be sitting in a different office under a different NHS organisational name doing something fairly similar.

We’d spend a whack of money and a chunk of time planning and executing the reorganisation, re-establishing everything and just have time to get our feet under the new table and proper systems and processes in place before it was time to play musical chairs again. The politicians keep the managers in jobs with their constant need for change when in reality they just want to be seen to be taking action, who else will actually make these "changes" happen?

The changes being proposed by this Government appeared radical at first (less so now, that’s for sure) but the really big difference was going to be the huge cuts in management numbers – something approaching 50% for those in the commissioning side of the NHS (as opposed to the providing side eg hospitals).

Fairly quickly it has become apparent that the Government and Department of Health were serious about “being seen” to cut these numbers.  So you will hear that thousands of NHS managers have lost their jobs. But in reality something much more interesting is going on behind the scenes.  Interesting and gob smacking, even for a seasoned NHS faceless bureaucrat such as I.

Managers who were relatively new to the NHS and not qualified for redundancy pay have taken one of two paths.  Most, like members of my old team at work, found themselves jobs in the private sector.  Every one of those that I know has found a job on better pay or conditions to their previous NHS job.  They were a talented bunch, now lost to the NHS.  They won’t be back to make that mistake again.  

A tiny number of the newbies have forgiven the NHS for threatening them with redundancy and are seeking other NHS employment – I don’t know as many of these and the outcomes are less certain. 

But most of the NHS managers I know have been in the service for more than 2 years and do qualify for a decent redundancy package (1 months’ pay for every year of service up to a maximum of 24 years).  People think NHS managers are a dull lot, risk averse, basically faceless bureaucrats just like me.  You’d be surprised at how sharp this lot are at spotting the “easy” money and taking it.

NHS managers know how to play the game and our head honcho, David Nicholson (NHS Chief Exec) told us in coded language that the booty was out.  He said “If you want to leave the NHS now is the time.   If you want to stay for the transition, there will be roles to do this and if you want to continue to work for the NHS there will be lots of opportunities in the new organisations.”

What he was telling us was that this time it’s different.  This time you can actually get a redundancy package, the Government want us off the books.  And yet, there will be opportunities in the future.  So if you want to take a redundancy package now is the time, and chances are you can get right back into NHS work after serving your mandatory month outside the NHS (required if you are to keep your big pay off).

And this is what I have been witnessing time and again.  Not the odd isolated incident but I’ve heard of numerous cases at all levels: national and local, particularly amongst the senior staff, NHS managers trousering massive redundancy packages (we’re talking £100k plus), spending a month on holiday and then coming back to their previous job in a private capacity or even employed by another NHS organisation, to do the very same work.  Amazing.

And what a deal.  The employee is happy as they’re still doing the same job and they’ve had a month off and a great big pay cheque.  The employer is happy as they haven’t lost the valued manager, their work still gets done and they didn’t have to pay the big cheque as it came from a central pot. 

It seems this Government are not so hot on housekeeping with the tax payer’s money after all.

And the really bizarre thing is that there’s a chance that cynical little me may also benefit in this way as already opportunities are starting to come forth for me, following my own impending redundancy, to continue working for the NHS in a private capacity doing work similar to my previous role/s.  I’d be mad to refuse, wouldn’t I?

More from Bad Assed trader shortly - still struggling to find any money, let alone the easy sort....

Surviving The Chop & Techniques for Transformation

Trading The Chop

Bad Assed Trader: One of the thrills of trading for me is the journey of discovery and personal growth involved.  It seems that apart from a few rare exceptions most traders do need to go through extensive transformation, particularly in understanding themselves, in order to succeed.  This seems to take at least a year.

My main concern is that I do not occupy myself with this learning as an academic exercise but have the courage to apply it to myself and make the changes necessary.  As Jeanne, one of my very best friends says: “IQ is nothing without I do” and it is vital I apply the theoretical understanding to myself, however torturous that may be.   I am lucky to have been allocated Emmanuel as my coach as his approach to trading and life in general is even more enthusiastic for enlightenment and self-knowledge than mine and he is without fail supportive, non-judgemental and inspirational.

Ed Seykota, one of the most successful traders ever clearly shares this view.  Given the theme of one of my recent blogs – the similarities and differences between learning to drive and learning to trade – I was delighted to read Ed’s words: “Psychology motivates the quality of analysis and puts it to use.  Psychology is the driver and analysis is the road map.”

The interesting thing about trading psychology is its subtlety and how prone we are to deny it.  The most accomplished traders have watched themselves and noted how they behave and the effect it has on their performance.  This is what I am seeking to learn and currently at the very beginning of what I know will be a painful but I hope transformative journey.

I am now working up a routine for doing a daily visualisation of different scenarios and how I will react in each one so that my subconscious is better aligned with my conscious in each eventuality.  For example, there will be days when I switch on the computer and my set-up is nearly there but not quite.  I know the sort of things that will tempt me to jump in prematurely, such as price action not sufficiently decisive (“fuffling”) and without sufficiently “sharp shoulders” to demonstrate a rejection of a low or high price.  So I visualise myself in this situation, being aware of the dangers and staying out until exactly the right conditions come into being.  Then and only then do I take the trade.  I set the stop loss and target and walk away.

Apparently the more detail and the more senses we use to reinforce the correct way to play the scenario the stronger and more reliably we train our brains.  I understand that the sense of smell is the most powerful at drawing up long term memories – we’ve all smelt something that evokes our childhood and been transported back to it in a way that looking at photographs cannot quite do.  So I’m training my brain to associate a particular smell (got to be a nice one!) with following my rules so that I only need to smell the smell to get into Rule Following Mind Set.  I’m using Polo mints for my associative smell as they are easily transportable and always available.

I am strengthening the visualisation and smell association with taste and as I have Polo mints at hand this seemed the best option.  I toyed with the idea of my favourite chocolate but, given I will be working on this visualisation a few times a day if I use chocolate for my taste association I’ll be the size of a house by the end of the week.  Low sugar Polo mints it is then.

I started this process last week and managed to follow my rules for all my trades and found it easier.  I’m starting to really feel more confident about my strategy.  The bizarre thing is that I didn’t win any of these trades and yet my confidence is even stronger.  I’ll explain why.

My strategy risks 20 pips to gain, usually, 40-100 pips.  I developed this strategy on a trending market and should have realised that it actually doesn’t work well when the market is chopping as it frequently does in between trends. 

The Euro and Pound, paired with the dollar, are the only currencies I trade at present and both have recently dropped down and beyond their 50 Moving Averages from uptrends.  Once price is below the 50MA on the daily chart I can’t take long trades anymore and so have been looking for short (sell) opportunities.  But the market’s been very indecisive about whether price should go back up over the 50MA or stay below, for both currency pairs.  It has bounced around, hanging onto the 50MA line and not really gone anywhere much – basically just chopped.  For over a week.

When I had a coaching session last week Emmanuel intelligently suggested that during the chopping I should take half my profit at 1%.  I thought he was right but there’s always a time lag for me between hearing and thinking something is right and actually behaving differently.  It seems I have to actually see the evidence before I make a change.  

Well, the market gave me the evidence to show that Emmanuel was right.  Almost all the trades I placed hit 1% - sometimes quite a bit more – but none of them went as far as my usual target.

So now I have sharpened up my rules.  Not changed them but tightened them.  Now I’ll apply a 1% take half profit target unless the charts are showing a well-established trend with clear cyclicity.

I’ve learnt an important lesson about the overall context that needs to be present for my strategy to work its best and this has given me even more confidence.

Plus I really need to act immediately on Emmanuel's wise words.

                                       Now where did I put those Polos.......

                                                    

    

                                                                                      

Self Sabotage & Breaking Lifetime Habits

Bad Assed Trader:  Last week I've had two days on another Forex Trading Bootcamp.  There's always plenty for me to learn - whether it's clarifying or reinforcing the basics, or most importantly for me right now, getting the psychology right.

It's brought home to me the fact that by breaking my rules recently I have been committing a typical trader sin - self sabotage.  There's no way of avoiding that reality, it is a fact.  I broke my rules and I had sworn not to - that's self sabotage, plain and simple.

The question I have to answer is...why?  Why do it?

Yes there's an element of my personality - being adaptable and exploiting opportunities (which aren't actually there but you imagine they are) but to say that's all it is is fooling myself in the same way those people who answer the question in interviews "What are your weaknesses?" with the reply "I'm a perfectionist" are trying to fool the interviewer.  Come on.  There's more to it than that.  Dig a bit deeper and face up to reality.  Otherwise you're just in chronic denial.

But why might traders (and why might I) self sabotage?

I did a bit of research to understand this better.  It seems that self sabotage is something inevitably experienced by pretty much all traders as it's deeply rooted in our sub conscious brains and is about beliefs and habits.  If we've never been successful traders then we don't yet really and deeply believe we can be and this comes out in our trading.  This means that to succeed we almost all (there are always one or two exceptions) have to go through a transformational process.

As Ed Seykota says in "Market Wizards": “A losing trader can do little to transform himself into a winning trader.  A losing trader is not going to want to transform himself.  That’s the kind of thing winning traders do.”

This is no doubt one of the reasons why 90% of traders fail - it is tough transforming oneself, it means taking a long hard look at yourself and rooting out certain strong and deeply held beliefs, behaviours and attitudes.

Youtube is always a good source of information and if you type in "trading self sabotage" many pearls of wisdom present themselves.  There's an interview with Brett N Steenbarger who wrote a book recommended to me at the boot camp: "The Daily Trading Coach" and he talks about the main psychological problems traders face which amount to self sabotage:

1.        Trading Addiction - this made me smile when I heard him say it – given that it was the title of my last blog (sheer coincidence).  On hearing this I initially felt shame that I had fallen prey to the typical trading sin, one of the biggest two according to Steenbarger, but then I realised that I didn’t just fall for this sin, I recognised it, identified and reflected long and hard afterwards on how I felt, why I did it and how I can recognise again if I start to get into that mode. 

     There is definitely a feeling of control which one loses when one starts breaking one’s rules.  This happens when you fall for trading addiction.  You can persuade yourself that you are still in control but it’s an illusion you have created to keep your rational brain quiet whilst your ratty brain takes over.  If you pause and feel for a moment you will know that deep down you are not actually using your full control.  

      Steenbarger talks about addiction to the thrills and excitement of trading rather than being patient and waiting for your set up.  To me, that basically boils down to whether you actually have full control over yourself.  Again I reflect on my own personality and how I have thrilled over the years at breaking rules or “letting go” – usually in the form of binge drinking as a student.  But I am not someone without strength and determination and I can, if I really believe in something, be disciplined.  I have lots of evidence to support this so this is the strength I now must liberate and harness for my trading.

2.       Impulsivity – which traders often call “over trading”.  When we’ve lost money or are feeling frustrated because the market conditions are not right then we find trades to make.  It is so true.  I think this is again where the self-control comes into play big time.  Many traders talk about how hard it is to stay out and when trends start to change (as Euro and cable just have) we get our fingers burned because we loosen our rules in order to get into trades which then of course don’t work because the trend is changing – which is what the market is telling us by not allowing our rules to be met.

 Self-sabotage reflects self-limiting beliefs and is powered by the sub conscious.  So if I sabotaged myself then something in my subconscious believes I’m not capable of or worth succeeding at trading.  I have to face this fact.

So what does one do to overcome this self limiting belief, to exorcise it?  There’s plenty of advice on Youtube and in books like the one I’m reading now “Ask and it is Given” by Esther and Jerry Hicks.  They basically boil down to various techniques to reprogramme your subconscious to steer you into success.  

The subconscious gets its information from the conscious part of the brain and cannot differentiate between things that the conscious brain tells it which are actually happening or things that the conscious brain tells it because it is rehearsing what it wants to happen. 

The way I imagine this is as if you had someone driving your car who was blind and you were sitting in the passenger seat giving instructions to this blind driver to make sure they drove your car safely and well.  The driver doesn’t know whether what you are describing is actually there or not but they have to believe you because they can’t see for themselves.  So if you want the driver to go slower than he’s inclined to drive you might tell him that the traffic is heavy – even when it isn’t – and this will make him slow down.  Tell him that the road is clear and straight and he's doing well and he'll probably motor forward fearlessly.

And so we need to issue new instructions to our blind driver, our subconscious, so that it will drive us in the way we wish.  The techniques to do this are to see yourself as the new person that you are aiming to be – the successful trader – to picture this in detail and imagine scenarios and how you will be reacting in them.  You repeat this daily and train your subconscious to automatically react the right way in a given situation.  

Apparently after four weeks you start to notice a difference and after six months the skill becomes automatic – the programming has happened.  It is about getting the right information into your long term memory where it is embedded and can be drawn on easily despite stressful conditions (just as how we slam on the brake automatically to avoid collision when driving – without even thinking).

My coach Emmanuel said at the bootcamp "The mind is like a wild animal, you have to train it"

Even Wild Animals Can Be Trained

So for my image today I've chosen to represent my learning as a cheetah mother with her cubs.  The cheetah is definitely a wild animal - like our minds - but they can be trained (usually by their mother) and they can be a source of inspiration for traders. The cheetah mother will wait for exactly her hunting "set up" before she takes the risk of exerting the considerable amount of energy necessary to hunt and kill her prey.  Her set up includes waiting for a young or otherwise compromised (eg injured) animal to stray slightly from their herd before pouncing.

Cheetah mother knows that to hunt and kill uses a great deal of her energy and this is only replaced by eating the kill.  Our trading capital is our energy and only replaced by a win.  She survives by waiting for the highest probability set up and then confidently going for the kill.  

I'm now embarking on a thorough training programme for my sub conscious.  I'm going to try something even more comprehensive than many of the techniques suggested - more detail about this and how it's working in my next blog.

                         

Trading Addiction

Bad Assed Trader:  This week I found myself drawn into The Dark Place.  It probably wasn't the first time I had visited but it was the first time I recognised being there.

Everyone knows that gambling can be addictive.  Let's be honest, trading is closely related to gambling in many respects.  We are spreadbetting - the clue is in the name and the fact that we are not taxed on our profit.  Research has shown that when animals are given random rewards (they press a lever and sometimes get food treats, but not always and without any pattern) they become addicted to the action which brings the reward.  They will carry on pressing the lever until they drop in the hope of the reward.  This is different to being trained to do something and always getting a reward when you get it right.  In these circumstances the animal soon stops the activity once the reward no longer appears.

I found this out from "Trading in the Zone" in which Mark Douglas observes that the same is true with gambling - an addiction to random rewards.  He speculates that traders are prone to the same problem as there is so much that is random about the market.

Fortunately I don't have an addictive personality naturally.  I've never been addicted to anything and don't intend to start now. But I think that if I am completely honest on Wednesday I paid a visit to trading addiction.  This is how it happened.

My past week was one of my worst in terms of percentage loss.  Thankfully as I'm only trading on about 20% of my account the actual loss is small but I am disappointed in my performance and have been reflecting on what happened and why ever since.  Most importantly, how can I prevent this happening again?

I knew I was "vulnerable" after having such a good week previously and had felt that as I had concluded April up rather than down on my account I was starting to get the hang of things.  I tried to be guarded and extra vigilant as a result but it seems the ratty part of my brain (see last blog) decided to fight back.

I was trading on bank holiday Monday and could have got off to a good start if I'd just stuck to my usual rules but as it was a bank holiday I had less confidence in my usual "put the stop loss on and a reasonable target and walk away" approach.  I don't have a rule about trading on bank holidays and so I thought I'd trade but watch carefully.

If I had done my usual I'd have made over 3% on the Euro (EUR USD).  It did hit 1% quite quickly but my target was at 3.1% and when price action started chopping 3 hours after entry I was kicking myself for not just setting a 1% "bank holiday special" target and I moved my stop loss up to break even and got stopped out.  It then went up to my target over the next few hours.

By mid afternoon I saw my set up on cable (GBP USD) and took the trade.  Unfortunately I was by now not at all clear about what my bank holiday trading rules were and thought I should revert to my usual rules and just set the target and stop loss and go.  But on reflection this was a heroic move on my part, how often does cable move 48 pips after 3pm on a bank holiday?  Not last week anyway.  If I had set the target at 1% (20 pips) I'd have had it in the bag.  Instead I was 1% down due to cable moving up a bit but not enough and then dropping back down.

I think this then set the tone for the rest of the week.  I had missed the chance to make 4% and instead lost 1%, I'm sure my ratty brain was determined to get me into trades to regain the loss.

I jumped in with unusual haste on Tuesday on both currency pairs on trades that only just met my rules but were a bit early in the morning and lost another 2% and then realised later that my exact set up occurred on the Euro at lunchtime and if I hadn't been at work I could have made 4% on that.

This realisation that I was now 3% down instead of a possible 9% up if I'd played my trades correctly (and not been at work) was not helpful to my psychology.  Ratty brain was kicking in and I was then failing to give due weight to the signs which showed that the Euro and cable were both about to retrace and not tradeable according to my rules.

By Wednesday ratty brain was keen.  I then changed one of my rules ("change" being my self-fooling version of "broke") and decided this would then allow me to trade cable all day - 7 consecutive trades with 7 consecutive losses.  How embarrassing to have to confess to that.  And to add insult to injury the Euro fell into something close to my set up but would have required a rule break to enter so I held back and then watched it shoot up over 100 pips - 60 of which my target setting rules would have allowed me to take: another missed 3%, albeit legitimately.

You'd have thought I'd have called it quits that week but I still ploughed on on Thursday morning with another couple of trades - both stopped out.  So the end result of this week is - Mum please look away now - 11 losing trades on the trot.  Oh dear.

The bizarre thing is that throughout this whole episode I did not feel any pain.  I thought I might be masking it or planning my way out of it (see earlier April blogs with pain in the title) but I looked and there was none.  What I did feel was that I had been drawn into this pit of addiction briefly - during the process of repeatedly taking those 7 trades on Wednesday.  I really must have been, given that with my current strategy and rules I'm only planning to place 2-3 trades a week.

Oh I have been a fool.  You know when you watch a film about a hero/heroine and things always get really bad for them at one point in the film, everything seems lost and you wonder how they will make a comeback?  I like to think I have now reached that low point.

I thought I had before but now I really hope I have.

Reading "Market Wizards" taught me that many traders have to suffer a big loss before they really truly learn why they have to be disciplined.  I feel I have suffered this big loss and am sharing with you, my blog readers, to help me to get to grips with it.  It's so easy to just skirt over these things and keep trading rather than really look into what you are thinking and feeling at the time and being honest about that.

So why no pain?  Because I kept thinking about what I was learning from the experience.  I kept feeling that this was something I had to go through in order to come out the other end and really know why my rules have to be my rules and that I can no longer adapt them to suit the situation of the day.  But if you've been reading my blog for any time you'll no doubt be thinking "Why on Earth is it taking her so long to learn? Why doesn't she just bloody well stick to the rules?".  I have asked myself the same question more than once.

I have reflected on my personality to understand my inclination to behave in this daft manner when I know in theory that discipline and sticking to rules is what it's all about.  I realise that one of my character traits which has enabled me to succeed in faceless bureaucracy is my flexibility and adaptability to the current events.  Working in the NHS means continual change and to survive in change you have to keep adapting, be flexible, spot the opportunities of the moment and exploit them.  I'm ashamed to admit this has become my speciality.

This trait is rooted deeply.  As the third of four siblings I learnt as a child that life was easier adapting to others than expecting to set the direction, you're just not that high up in the pecking order to have a chance of calling the shots.

I discussed these issues with Younger Daughter Now Taking Confessions and our analysis took us to the conclusion that people's characters do seem to fall fairly easily into the four "elements" of earth, air, water and fire and that mine is clearly water.  I go with the flow.  I am flexible, adapt to barriers and respond to other elements.  This is not ideal for trading.

So what with my ratty brain and my watery personality how am I to make a success of trading?  Is there any hope for me?

I believe so.  Once again I have had to unpick more aspects of my personality, see them, name them and take action to reshape them to work for me in this mission.

When I first joined the NHS as a graduate management trainee I went through a gruelling and comprehensive two day assessment centre during which I had to complete numerous challenges under constant scrutiny by senior managers.  At the end I was interviewed by a very senior manager who, I was told later, had summed me up with the words "She has potential.  Needs harnessing."  I have to say I was none too chuffed with this slightly insulting comment after I'd beaten off nearly 200 competitors to get onto the scheme, I thought it made me sound like a horse.

But part of the reason it naffed me off was because I knew there was an element of truth in it.  And I know that only I really have the power to harness me.  The NHS never managed it over the 20 years I've been with it.

I have come to realise that my inclination is to exploit any gaps in my rules if allowed in any way.  I also realise that unless I fully understand and buy into the meaning of rules I find it virtually impossible to follow them, my natural whim is to break them and carve my own river bed.

I have spent today setting out in words of one syllable exactly what my rules are and, more importantly, WHY.  So that there can be no doubt and no room for flexibility.  No more changing the rules.

And I know I must shift into a different mode when I am trading - no longer fluid water, adaptable and flexible.  I cannot change the fact that deep down I am as water but I can find the power of water and use it.  There are times when even water can be still, strong and rigid, stubborn even (just ask my Mum)...

Ice: Bad Assed Trader must become the Ice Queen