Read The New Market Wizards: Conversations with America's Top Traders Online
Authors: Jack D. Schwager
Yes, based on how well they match the profiles of successful traders in regards to the areas just discussed: beliefs, perceptual filter, strategy, emotional-state management, and operating metaphors. On a less technical level, I can say that after years of studying traders, the best predictor of success is simply whether the person is improving with time and experience. Many traders unconsciously acknowledge their lack of progress by continually jumping from one system or methodology to another, never gaining true proficiency in any. As a result, these people end up with one year of experience six times instead of six years of experience. In contrast, the superior traders gravitate to a single approach—the specific approach is actually not important—and become extremely adept at it.
What is NLP’s view of the relationship between the conscious and unconscious minds?
The property of the conscious mind is to reflect on things. “Am I where I want to be?” “Is this a good trade?” In other words, it’s concerned with evaluation. It’s not the property of the conscious mind to change things. To offer you an analogy, when I lived in Colorado, I had a friend from the East visit me. One day, I suggested that we go horseback riding. We rented horses from a stable. I don’t know if you’ve ever rented horses from a stable, but the horses know the paths, and they also assess the experience of the rider when he gets on. I had a little experience; my friend had none.
We got on our horses, and they began to trot. Off in the distance, there was a line of trees in front of us. The closer we got to the trees, the faster the horses began to run. I knew exactly what was going on. The horses were planning to knock us off by running through the trees and then go back to the stables and take the rest of the day off. I ducked down as my horse and I went through the trees. Meanwhile, I heard this “thump” behind me. I pulled my horse around, and there was my friend lying on the ground, half a dozen yards before the trees.
“Are you OK?” I asked.
He was kind of embarrassed and said, “Yeah, I’m alright.”
“What happened?” I asked.
“The stupid horse was going to run into a tree, so I had to jump off,” he replied.
Now here is someone who has obviously mistaken horses for cars. The conscious mind is like the rider. It evaluates the direction the horse is going. If the horse, or the unconscious, is not going where we want it to go, it doesn’t mean that it’s bad, or not following instructions, or about to run into a tree. It means that the unconscious has its own programs and is running them the best it can based on all its history and habits just like that horse had the habit of knocking people off and going back to the stable.
With NLP, you can direct your conscious mind to notice when you’re not where you want to be. What’s more important, you can use NLP techniques to effectively introduce new patterns into your unconscious mind to bring about the changes you desire, instead of complaining or making up any one of a thousand reasons why you aren’t where you want to be in your life.
We talked earlier about taking the time to examine your goals—to make sure that they are indeed the goals you want and if they’re not, changing the direction of your efforts accordingly. Assuming a person has done that, do you have any advice on how to best transform those goals into a reality?
I can best answer that question by relating the experience of Gary Faris, an NLP trainer and colleague. Gary’s study of this very question grew out of a compelling personal experience. Gary is an avid runner. Several years ago, while running down a farm road in California, he was hit by a pick-up truck. His injuries were so severe that the emergency room doctors weren’t sure he would even live. When he survived after the first two of the six operations he would eventually undergo, the doctors said that the only reason he had made it was because he was in such good physical condition. They told him that he would never walk normally. and certainly never run again.
Over the next two years, Gary was in sports rehabilitation. He rebuilt his body, overcoming the pain. Today, he runs regularly and is the fittest trainer working for NLP Comprehensive [one of the first and foremost NLP training organizations’. Needless to say, the doctors were astounded. However, they were making their assessment based on the statistical evidence of similar cases. They didn’t realize that Gary Faris had made himself into an exceptional patient.
Right after his accident, Gary began studying sports injury rehabilitation. He searched for the core characteristics of those athletes who had gone through successful rehabilitation. He examined their mental attitudes. He found that six basic mental patterns characterized all these people.
First, these athletes used both motivating directions. In other words, they were both moving toward and away from consequences. In this way, these athletes were utilizing their maximum motivation.
Second, these athletes were absolutely dedicated to regaining full strength and health. This standard became their guiding goal. Anything less was unacceptable. In fact, many of them not only wanted to regain full strength and health, but they strived to get in even better shape than they were before their injuries. They knew their capabilities and wouldn’t accept anything less. These athletes knew they would succeed.
The third key element that these athletes had in common was that they approached their rehabilitation one step at a time. If you contemplate achieving a major project, such as overcoming a terrible injury, it’s intimidating to think of the entire task all at once. However, if you can take it in chunks, or individual steps, you’ll complete it. Each step becomes a new goal. For Gary, he had to survive before he could walk; he had to walk before he could run. Gary and the other athletes he studied derived great satisfaction from completing each step. Thus, they experienced succeeding at each of the milestones along the way to a major goal of full strength and health.
The fourth key element related to the way in which these recovering athletes perceived time. They were in the moment. In other words, they succeeded because they focused on the present. If, instead, they had focused too far into the future, it would have been easier to fall into a negative orientation by questioning whether they would achieve their ultimate objective.
The fifth element of their positive mental attitude was involvement. The more the athlete helped himself—even doing something as simple as placing ice on an inflamed area—the more complete and faster the recovery. When you participate, you feel you can influence what’s going on, and that makes you more determined and aggressive.
The sixth and final key element was related to how the athletes judged their individual performance and progress. People have a natural tendency to compare themselves and their actions with others. This type of thinking begins at an early age and becomes more ingrained as we become adults. It is critical that recovering athletes not fall into this mental habit. Because of their injuries, they would compare poorly and would likely become discouraged. The successful athletes looked solely at their own progress. They made self-to-self comparisons. They asked themselves questions like, “How far have I progressed since last week, or last month?”
Incidentally, teaching kids to make self-to-self comparisons is one of the greatest gifts parents can give them. Let them know that in any endeavor they engage in, there will always be some people who are better and others who are worse. What is important is our own progress. By adopting this mental attitude, it’s possible to look at other people’s accomplishments as inspiration and models of excellence as opposed to targets of envy.
When these six elements are combined, they create a compulsion to succeed. In subsequent research, I found that these six core characteristics provided the basis of any positive mental attitude. Whether I looked at athletes, entrepreneurs, or executives, the more confident their mental attitude, the more they used these same six elements.
You have become heavily involved in both NLP and trading. Do you see any similarities between these two endeavors?
Trading and NLP are like mirrors of each other. Trading is concerned with market patterns, and NLP is concerned with the patterns of the mind. Both deal with tangible, not theoretical, results. Traders are judged by their results—the money in their trading accounts—not the beauty or intricacy of their market theories. NLP practitioners are judged by their results—clients quickly achieving the changes they are seeking in their lives—not the originality or insights of NLP theories about how the brain works. NLP seeks to model human excellence, and trading is an activity in which excellence is required for success, since only a small minority can win. I have been drawn to NLP and trading because I like the emphasis they both place on real-world results and excellence.
Does NLP work? My personal view on this question matters little because it would represent only a sample of one. There is certainly a tremendous amount of anecdotal evidence supporting the efficacy of NLP techniques. However, rigorous, double-blind scientific tests are in short supply. No doubt the paucity of hard scientific experimental evidence is due to the extreme difficulty of measuring the results of NLP, which deal largely with feelings and beliefs. However, one of the hallmarks of NLP is that it virtually guarantees quick results. Therefore, if you try NLP in one of its forms (books, tapes, seminars, or one-on-one sessions), you should be able to make a fairly quick determination of whether the approach has any validity for you.
The broader questions of NLP’s merits aside, I did find certain aspects of Faulkner’s message compelling. First, I found the concept of mission a highly useful mental construct for focusing goals and intensifying motivation. My listening to Faulkner’s tapes coincided with a surge in my personal efforts to further a commodity trading advisory venture and significant progress in that regard. I also think there is a great deal of merit to Faulkner’s list of the six key steps in achievement:
The above elements have important implications and applications to trading. As one example, the stress on self-involvement would imply that it is unlikely for people to succeed at trading by completely relying on someone else’s system. As another, the focus on self-to-self comparisons implies that traders should judge their progress based on their own past performance, not the performance of other traders.
The image that Faulkner paints of a successful trader is in stark contrast to popular perceptions. Most people probably think of great traders as the Evil Knievels of the financial world—individuals willing to take great risks, drawn to their calling by the adrenalin-charged excitement. According to Faulkner, nothing could be further from the truth. Successful traders have learned to avoid risk, not seek it. Moreover, very few of them trade for excitement. On the contrary, based on Faulkner’s observations, one of the hallmarks of successful traders is their ability to maintain a calm, detached emotional state while trading. They may get excitement in their lives, but it’s not from trading.
Many of Faulkner’s comments have relevance to more than just trading. Most people could probably benefit from the advice given by Faulkner and NLP to explore what success means for them. The one comment I found particularly striking concerned his conversations with hundreds of elderly patients: “Not one of these people said they truly regretted anything they had actually done. What they regretted was what they hadn’t done.”
I
first learned of Robert Krausz through a letter in
Club
3000—a publication that consists largely of letters written by subscribers who share an interest in trading. The trader who wrote the letter described how a set of subliminal tapes he had purchased from Robert Krausz, a member of the British Hypnotist Examiners Council, had improved his trading immensely. I was intrigued.
There is almost a Dickensian quality to Robert Krausz’s life story. His early childhood years were spent in a ghetto in Hungary during World War II. At the age of eight, he and a friend escaped from a forced march to a death camp, bolting for the woods in opposite directions during a moment in which the guards were distracted. Having no place else to go, he made his way back to the ghetto, where he stayed until the end of the war. Krausz spent the years after the war in a succession of orphanages, finally ending up in an orphanage in South Africa. There he met a diamond magnate who took a liking to him. The wealthy industrialist began coming to the orphanage on Sundays to take Robert out on excursions—starting a relationship that ended in adoption. In this way, the orphan who had survived the horrors of war found a new life as a son of one of South Africa’s wealthiest men.
Krausz’s wartime experience made him an avid supporter of Israel. As he grew older, he became more and more committed to Israel’s survival. Troubled by the implied hypocrisy of convincing other young South African Jews to emigrate and join the Israeli armed forces while staying put himself, he eventually followed his own advice. Despite the protests of his father, whom he loved and respected, he joined the Israeli armed forces, serving as a paratrooper during the 1956 war with Egypt. The socialist undertone of the Israeli economy troubled Krausz, however, and he eventually emigrated to Great Britain.
In London, Krausz’s artistic inclinations led to a career as a dress designer. He eventually developed his own line of clothes during the heyday of Carnaby Street and the Beatles era. Krausz’s business subsequently expanded to include the design of fabric patterns and clothes for overseas manufacturers and the importation of the finished products back into the United Kingdom. In connection with this business, Krausz traveled very extensively throughout the Far East over a number of years. Although the business prospered, Krausz’s increasing fascination with trading led to another major career change. In early 1988, he gave up his business and emigrated to the United States to begin a new endeavor as a full-time trader.
Krausz declined to comment on his specific results as a trader other than to say that he has done well enough to “earn a very comfortable living.” When he discusses trading as a career, Krausz becomes animated. “This is the best business in the world!” he emphatically pro-claims. “There is no other profession that is so black and white; you’re either right or wrong.” (As he says this, I am struck by what he is wearing—black slacks and a white shirt.) “Trading also appeals to me because you’re totally dependent on your own talents and abilities.”
I met Krausz at his Fort Lauderdale home. He is an openly friendly man. He insisted on personally picking me up at the airport and enthusiastically invited me to spend the night at the guest cottage adjoining his house.
My conversations with Krausz progressed through various stages throughout the day. Krausz speaks with a distinct South African accent (which, to the untrained American ear, would commonly be mistaken for a British accent), a factor that adds further color to his retelling of past experiences. We began our talks sitting on the patio, looking out onto the waterway and tropical forest preserve that borders the rear of his property—a most extraordinary backyard. The chill of a seasonally cool Florida winter day eventually drove us inside, and we continued the interview in Krausz’s office. The office, which Krausz shares with his wife, a well-known financial astrologer, runs the width of the house, with the windows on one side facing the ocean and the windows on the other side overlooking the waterway and preserve; the Krauszes divide the office along the lines of their preferred views.
One can see that Krausz is a serious chartist, as a drafting table in his office is covered with three-by-two-foot charts that Krausz manually maintains. Unlike conventional charts, which use vertical bars to represent each day or time interval, Krausz’s charts use price bars of varying widths as part of a methodology called Symmetrics, which is based on the assumed symmetry of price and time and was invented by Joe Rondinone, one of W.D. Gann’s first students.
The interview was temporarily halted for a lengthy dinner break. If Krausz is as good a trader as he is a Hungarian cook, he will become a very wealthy man.
You have mentioned that you consider being a trader an essential qualification as a hypnotherapist specializing in helping traders. Which came first, the trading or the training in hypnosis?
The trading was the catalyst that led me to hypnosis. My first exposure to trading came during the record-setting 1979–80 bull market in gold. At the time, I thought that I was trading. Of course, it was not trading; it was just childish nonsense.
How did you first get involved in trading?
During that 1979 bull market, every two or three days the
Financial Times
carried another article bearing the banner “New Highs in Gold” or some other very similar headline. These repeated stories made an impression on me. I also had a friend who was involved in the gold market and making a great deal of money trading. We went out for dinner one evening, and he talked to me at length about the gold market. He considered himself a great expert. Of course, I later found out that he knew absolutely nothing about trading. He said to me, “Robert, you’re a fool. You work from 7
A.M
. to 7
P.M
. every day, six days a week. I’m making more money working only a few hours a day. Who’s better off?”
He gave me the name of his broker, and I opened up an account. Then the greatest tragedy happened: My first trade was an absolute winner. My second trade was also a winner. My third trade was breakeven. My fourth trade was another winner. On my fifth trade, I gave it all back. Then on my sixth trade, I lost more money than I had made in all my previous winning trades put together. The market had turned, and I lost a considerable amount of money—much more than the account-starting equity.
In other words, you were meeting margin calls along the way.
Exactly. I kept putting more and more money into the account. I kept on thinking, “The market is going to turn. The market is going to turn.” Of course, it never turned.
When did you finally give up the ship?
I had a specific cutoff point. I was a 50 percent shareholder in a garment business, and I wanted to be absolutely certain that my losses would not endanger the business. When I reached my maximum loss point, I got out. The experience proved to be a substantial financial loss, but even more important, it was a tremendous infliction of pain to my ego. I was a reasonably successful businessman who up to that point had never failed in any venture. I couldn’t believe how stupid I had been.
While you were trading, were you making your own decisions, or was your broker giving you advice?
Oh, my broker was very “helpful” in advising me on the trades. I later found out that he knew less than I did. But I’ve always taken responsibility for my actions, and this experience was no exception.
What ultimately happened to your friend who enticed you to trade the gold market?
He never gave up the belief. The man eventually went totally broke.
Did you continue to agonize over your mistake after you were out of the market?
I found out a long time ago that one of the most damaging things a person can do is to harp on past mistakes. If you’re constantly repeating to yourself, “I shouldn’t have done that,” it’s like a cartwheel going over the same tracks. Eventually, the negative message gets so embedded in your psyche that it becomes very difficult to change your course of action.
At that point, I decided that either I was going to figure out what makes the market tick, or I was going to wipe my mouth, smile, walk away, and never trade another contract for as long as I lived. Since I’m not the type of person to walk away from a challenge, I chose the former course of action.
At the time, my business required me to travel extensively to remote regions in the Far East. Since there were few diversions in these areas, I had lots of free time. I used this time to do a great deal of reading on the markets. I also began to follow the gold market on a daily basis. I went so far as to have my partner telex me the daily open, high, low, and close in gold. My library grew and grew, as I was wolfing down every new book that came out on technical analysis. One of the books I read was alluringly titled
How To Make Money in the Commodity Markets—and Lots of It!
by Charles Drummond. I found that Drummond traveled down a different track from everyone else. The book espoused a unique methodology called point-and-line charting. It made sense to me, and I purchased Drummond’s second book, which delved more deeply into the subject.
I then began trading again, using this point-and-line methodology. However, I found that I was hesitating in taking trades. The fear of loss had arrived. By this time, I had started communicating with Drummond, initially with questions regarding his techniques. He always graciously responded to my inquiries. In one of my telexes to Drummond, I mentioned my dilemma of being unable to make trades. Drummond telexed back, “You’re experiencing what is known as the ‘freeze,’ which is purely a psychological problem.”
Around this time, I had a chance meeting with an acquaintance who ran a large public company. He seemed to be very depressed, and I asked him what was wrong. He told me that he was getting a divorce and his business was doing very poorly. Three weeks later, I bumped into this same individual at a local restaurant. He was talking, laughing, and altogether quite jovial. I was quite curious about his sudden transformation. The next day over lunch, he told me how he had gone to a hypnotherapist and his life was now back on track. I got the number of this hypnotherapist and went to see him with the specific intent of seeking help with my trading problem.
For my first session, I brought along a copy of Drummond’s book. He flipped through it and exclaimed, “My god, it’s Japanese!” That was his idea of a joke. Of course, he had no concept of trading.
Did his lack of familiarity with trading act as an impediment, or did the hypnosis help anyway?
Yes, it helped. My trading quickly went to breakeven, which for me was quite an accomplishment. I was still experiencing some slight hesitation in taking trades, but the “freeze” was gone. I was so impressed by hypnotherapy that I sought out information on getting trained as a hypnotist myself. I found there was a group called the British Hypnotist Examiners Council [BHEC] that offered courses, which taught the techniques. I took the beginner’s course.
How long was this course?
It was given over two weekends.
And that’s all it takes to become a qualified practitioner?
No, of course not. The course teaches you only the basic techniques, which are actually quite simple. Over the next year, I spent about one day a week observing one of the instructors, John Cross, in his practice. After a while, John allowed me to work with some of his clients under his observation. I then took an advanced course, given by BHEC. At the end of all of this, I took the BHEC qualification exam.
Tell me about your first client.
He was a student who came to me for help in improving his grades. I was quite nervous, but, fortunately, he was an easily hypnotizable subject.
What percentage of the population is hypnotizable?
About 85 percent. Contrary to popular belief, intelligent and creative people are the most easy to hypnotize.
Are you saying that as much as 85 percent of the population can be influenced under hypnosis to change their beliefs and behavior?
providing you don’t ask them to do anything that they wouldn’t do in a normal waking state.
How then do nightclub hypnotists get people to make fools of themselves on stage?
The trick is that people who volunteer to go up on stage are the type of individuals who like to perform in public. Typically, they are people who want to show off—closet showbiz types who missed their calling. Hypnosis merely brings out these natural inclinations by bypassing the behavioral controls enforced by the conscious mind. It’s virtually impossible to get a naturally shy person to do silly things on stage.
How can you tell whether a person is really hypnotized or merely following instructions to please the hypnotist?