Trading Rules to Live By
07/04/2013 6:00 am EST
Your usual host, Rob Booker, was on the road while we were recording, so we asked Bradley Fried, CEO of Rob Booker Japan, to stand in as guest host. Brad talks about three of his 18 trading rules. In Rule No. 15, he addresses how placing expectations of wealth or solving financial problems with trading injects the process with emotion and disables it. This is the rule where Brad says to focus on process, not profits. Brad also discusses his Rule No. 14, which encourages you to make your trading an active and creative process, not a mechanical one. And Brad also tells us about Rule No. 18, which involves the practice of rewarding yourself.
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Jason Pyle: Hi, Brad.
Bradley Fried: Hey, Jason, how are you doing?
Jason Pyle: I'm going. It's been a long time, buddy. It's nice to talk to you again.
Bradley Fried: Yeah. How you been?
Jason Pyle: Oh, real good, thanks.
Bradley Fried: Good.
Jason Pyle: Well, this is going to be kind of a surprise for you maybe, because I was just talking to Rob.
Bradley Fried: Yeah.
Jason Pyle: And he asked me to call you and see if you'd be willing to host episode 162 of the Traders Podcast today. Are you up for that?
Bradley Fried: Yes, I can try my best.
Jason Pyle: You'll be a total pro. I'm really excited, and I told him that this would complete your overthrow of him.
Bradley Fried: Okay.
Jason Pyle: Okay, everybody. Well, listeners out there, you all know this man, he is very famous, especially around my house. He is the CEO of Rob Booker Japan. We welcome Mr. Bradley Fried.
Bradley Fried: Hi everybody. It's great to be here on the Traders Podcast.
Jason Pyle: So, Brad, real quick, I wanted to ask you something. Now, I know that you have this incredible trading system or at least you have a lot of rules that you use. How many rules are there in your masterpiece that you've created?
Bradley Fried: Well, you know, when Rob was making lessons for TFL 365, he came up with 18 trading rules, and I read through those and I thought about them, and I realized I had my own that are a little bit different from Rob's and I wanted, and I decided to write them down. I also have 18 rules.
Jason Pyle: Oh, excellent, so there must be something magical about that number 18.
Bradley Fried: Well, it's a good start. I think you can have too many or you can have too few, but 18 kind of forces you to boil it down to something that's usable.
Jason Pyle: Okay. Well, I have one here that I was really intrigued by and I wondered if I could ask you about it. Your rule number 15 reads "Don't weigh down your trading with external expectations and desires. Wealth is the natural byproduct of executing a well-designed trading process meticulously over time. Placing expectations of wealth or solving financial problems with trading injects the process with emotion and disables it. Focus on process, not profits." Now, could you tell us a little more about that?
NEXT PAGE: Remove Expectations & Emotions from Trading Process|pagebreak|
Bradley Fried: Yeah, well, this is, you know, this is the crux of the problem with trading. This is how we struggle with emotion because we trade to make money, but if you're focused on money when you trade, you lose money, and this is how you have to learn to see around the problem. What are the elements in your life that are causing you to focus on money that are preventing you from making basically very rational, very cold decisions about trading, and the big issue is, what are the people around you, what are their expectations and their needs? What is your financial situation? Are you bringing those to bear when you're trading? Are you feeling the pressure to make a trade or make a decision because your husband or wife wants you to make money or expects you to make money? Or maybe you don't have enough money to provide for your family and you're thinking that your trading is going to be a way to be able to do that. That's the wrong way to come to trading, and it doesn't lead to success.
Jason Pyle: Wow. Now, see that sounds really tricky, and I think when you said it's the crux of the problem, I would agree. Now, you know I'm not a trader, but from what you're describing here, how do you remove yourself from being affected by that worry or that pressure?
Bradley Fried: You have to create that foundation before you start to trade. I have had people come to me and tell me, I'm a single mother and I have three kids and I support them by my trading and I'm not doing well, can you please help me, because I depend on this to make a living, and the first thing I tell them is you need to go out and get a job. You need to take care of your basic financial situation, because your trading isn't going to be, isn't going to solve that crisis in your life and you're going to have to set the expectations of people around you before you do trading to let them know what the boundaries are, that this is not something that is going to provide a consistent cash flow, that you're learning, that you need to have basically a space where you can make decisions and do this trading apart from what they need from you.
Jason Pyle: Okay. And when you say in there focus on process and not profits, what can a trader do to really be analytical or zero in on his or her process?
Bradley Fried: It really starts with not just your trading rules or your system, but the process by which you implement that system. For example, you get a system and you back test it, that's one of the things Rob talks about a lot, so that you can master the mechanics of the trade, but then once you, once you start to live trade it, you need to keep a trade journal, and you need to be asking questions. You need to have an active process of looking at how that system behaves in the market and unexpected things that happen, and think of things you want to change or what if I did this, how would that impact my system, and then you go back and you back test again, and the things that work you'll implement and then add to your system or make changes, and refine it over time, and by doing this you're focused on a process of implementing a set of decision rules on the market that includes your risk control, your testing, your rules for your system, everything, and when you focus on this and you do it well and you're following your rules, you're not getting emotional, you're just focused on making the system happen the same way every time as planned, the profits are a natural byproduct. You don't have to think about them, they'll come automatically.
Jason Pyle: So this isn't something that somebody can get in a hurry about, then, because it sounds like it takes a little bit of patience and really it's, like you said, it's over time, but I mean, if someone would try to pinpoint you, though, Brad, like what, how long do you think it takes to really nail down a process to where it's functioning well?
NEXT PAGE: Rule #14—Make Your Trading an Active & Creative Process|pagebreak|
Bradley Fried: I mean, the process itself, you can create this iterative process I talked about fairly quickly and start to put it together. The problem is the discipline and the problem is creating the emotional state and the state of your relationships and your finances so that you put everything together in a way to where you have space to do this both emotionally, mentally, and within the context of your, of your personal relationships, and it's, that can take time. It took me two years really to put this all together and there was a lot of pressure that I was feeling from my significant other to, to make money. Not necessarily that she was putting that on me, but that I wanted to do for her and I felt like I had to be successful at trading to do that, and it absolutely just roiled what I was trying to do every time, you know. When I'd lose a trade it was like I wasn't just losing a trade, I wasn't preparing for the next one, instead I'd somehow let her down, and you bring that kind of psychology into your trading, your emotions around trading, you can't be a good trader.
Jason Pyle: In speaking of process, I see in your rule 14, that one says "Make your trading an active and creative process, not a mechanical one. Find the depth and complexity of even the most seemingly simple trading system to attain mastery. Record observations to test in your journal as you document your trades, and test those observations in an iterative cycle." So it rings with what you've been talking about so far, and I like in here how you said you make it a creative process. I remember we had some TFL 365 lessons about creative trading. Can you talk about how creativity factors into your trading?
Bradley Fried: Yeah, I get, I get it, a lot of people that they're in a rush, they come in, they become TFL members, they start to study. They study a system and they do the testing, and then they come back to me and say, you know, I did, I tested five years of data and I haven't made any money, and because they expect just to be able to take the rules and follow and trade every single set up they see mechanically and a profit to come out, and that's part of it. I mean, you do have to master the mechanics of the system, but the other part is creative. You have to be looking, building your intuition creatively about, when does this work, when does it not, what are the things that aren't in the rules that will show you that it's a good trade or a bad trade, and maybe those things that you've identified through your own observations will become part of your rules for trading that system that aren't in the original system.
You really, you're not just blindly taking a set, you're not a computer program, you're not just looking at a set of conditions and saying if A happens, I'm going to do B until C happens, then I'll do D. It's not, trading isn't like that. What you're doing is you have a basic system, a pattern you've identified and a series of rules for managing taking trades around this pattern where you have a positive expectation of profit, but you're trying to be creative about observing what's happening when you use this, when you use these rules, and then in that creative observation process you're going to find things, new things to test and new improvements which are going to make you a better trader and which are going to make your system even better.
NEXT PAGE: Rule #18—Reward Yourself|pagebreak|
Jason Pyle: Our guest today, just for listeners who are just tuning in late which Rob and I have always thought was a funny thing to say on a podcast, but this is our good buddy Bradley Fried. He is the CEO of Rob Booker Japan, and I've been told the best traveling companion you could possibly have for cross-country trips.
So Brad, what do you want to talk about? I want to turn it over to you because I don't want to feel like affecting or cramping any of your style. What would you like to talk to the listeners about?
Bradley Fried: I just want to talk about, I mean, it is a rule and it's my final rule, it's rule number 18, and I'll just read it to you and then I'll comment on it, but it's, reward yourself. Get in the habit of listening to and valuing the voice of your desires by making their fulfillment a priority. Pay yourself first when you have a trading profit by fulfilling one of your desires.
I think it's so easy for us, as we become adults and we have relationships and families and whatnot, that we get used to, very used to very quickly putting other people first, thinking about what do I need to be doing for somebody else, and that natural voice, which we should have which is our own desires for what we want to do, becomes squelched out. It becomes so de-prioritized that we can't even hear it anymore, and it's very hard to remain motivated as a trader and remain focused and be able to maintain that discipline and implement a process and do all those things if you don't feel that you're somehow being rewarded by that process, and it's not a selfish thing. It's part of nurturing yourself and nurturing your ability to have the strength and the focus and the motivation to be successful.
So I think rule 18 is perhaps the most important thing, that you need to learn to hear the voice of your own inner desires and you need to make the focus of when you succeed at doing this process, when you succeed at building a space for yourself to be successful at trading, and in doing all the things you need to do, be able to identify the things that you want from it, and give yourself a small reward. It doesn't have to be a huge thing. You know, you can be taking care of everybody else, but take care of yourself first, but it's like if you're in an airplane and you lose oxygen and the masks drop down. You put yours on first and then you put the mask on your child.
Jason Pyle: Yes, yes.
Bradley Fried: It's the same thing with trading.
Jason Pyle: That's cool, I love that example actually. That is great, and plus, this would probably really help with, you know, burnout or getting discouraged or getting frustrated, right. I mean, if you're seeing some kind of benefit for yourself, then that can kind of buoy you up, right?
Bradley Fried: Yeah, I mean, it could, it could be something as small as take yourself out to a movie, which I love to do, and I know you do too.
Jason Pyle: Yes, sir. Yes, sir.
Bradley Fried: Or it could be taking a small trip with yourself or just doing something, buying yourself a new bike. It could be just the smallest thing, but if you see tangible results every time you do something good, you're naturally conditioning yourself to feel positive about your future success, that you can create.
Jason Pyle: So, Brad, just curious, how can the listeners learn more about your 18 rules? Is there somewhere they can find these, or how do they go about that?
NEXT PAGE: Brad's 18 Rules of Trading|pagebreak|
Bradley Fried: I'm working with Rob to make these available on TFL 365, so if you go to TFL365.com you can find the 18 rules and a lot of other great information about learning how to trade and trading for a living.
Jason Pyle: I've had a hand in producing some of those episodes and I really think they're fun. I just wanted you to know, Brad, I enjoy those videos that you guys made from the road. It was hilarious, and you did such a good job because I know that Rob is, he's a really fun guy, and you never really know what direction he's going to come from.
Bradley Fried: Right.
Jason Pyle: And you just, you just were totally with him, and I wondered, since you were on the Trade for a Living tour, and you had that seat right beside the man himself, could you tell the listeners something important that you learned from going on that trip with Rob? It could be about Rob or about trading, in general, or even about yourself.
Bradley Fried: You know, Rob is, is an extremely creative person, and I just learned something I've known about Rob for a long time, and it's, it's something I had to really embrace about him is you never know what to expect, and you should just clear the slate, not have any pre-conceptions about what you're going to be doing the next minute or the next day or anything, and just be ready for opportunity and be ready for fun and be ready for something really creative that's going to come along, and it's something that I've embraced in my own life and it's made my life richer, and I'm very thankful I met Rob and that I had the chance to go on the tour with him.
Jason Pyle: Yeah, yeah, like hosting this podcast for example.
Bradley Fried: Oh, yeah, who would have known, who would have thought.
Jason Pyle: Yeah, when you woke up today you didn't know you'd be the host of the Traders Podcast, but that's awesome.
Bradley Fried: Here we are.
Jason Pyle: Well, we're grateful to have you on here. Our guest today is Bradley Fried. He is the CEO of Rob Booker Japan, and actually I shouldn't even say he's the guest. He is the, he is the special guest host in charge here of the Traders Podcast. If they want to find you on Twitter, like I looked up your Twitter and it's in Japanese, and I know you have tons of Japanese followers who you work with as well.
Bradley Fried: Yes.
Jason Pyle: What's the best way for people to follow you?
Bradley Fried: The only thing I have to follow would be my Twitter which is @robbookerjapan, and I occasionally do post things in English. I've primarily been posting things in Japanese to our TFL customers in Japan, but by all means follow and there will be some English stuff there as well for everybody.
Jason Pyle: Okay. Well, we appreciate your time, Brad. Thanks for pinch hitting today. Rob is traveling and he is out of phone service and he said, you know, Brad can handle this, he is, he'll be excellent, said just give him a call, so thanks for doing that.
Bradley Fried: Awesome. Well, thanks very much, Jason Pyle. Have a great day.
Jason Pyle: Yes, sir, and we thank you all for listening to the Traders Podcast.