Eternal Sunshine of the Spotless Trader's Mind

08/15/2013 10:00 am EST

Focus: TRADING

Rob Booker

Author, Man Vs. Market: Lessons from Trading on the Road

In this random buffet of topical treats, host Rob Booker, and producer Jason Pyles, answer questions posed by podcast listeners. Rob talks briefly about a few of Bradley Fried's 18 trading rules and discusses a personal rule of not trading while one is sick. Then, they discuss the incredible film Eternal Sunshine of the Spotless Mind and its profundity, baseball player Alex Rodriguez, and Jeff Bezos, both of whom had significant news coverage of late.

 
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Rob Booker: Well, hello Mr. Pyles.

Jason Pyles: Hey, Rob, how are you doing?

Rob Booker: I'm all right, I've been sick for the last 24 hours, so not so hot.

Jason Pyles: Oh, that's terrible, so it caught up with you, huh?

Rob Booker: Yeah, it finally caught up with me. You know, I've always wondered what they meant when they said it finally caught up with me, you know? I think it means that it was running after you and it caught you, and then it started beating you up.

Jason Pyles: Yes.

Rob Booker: Yeah, that made sense. When they say it caught up with you it wasn't like you forgot something somewhere. You know, like hey mister, did you drop your wallet?

Jason Pyles: That's right.

Rob Booker: When you get sick and it catches up with you, it's like a bunch of thugs running up behind you and then they beat the ever-loving crap out of you.

Jason Pyles: It feels that way, that's for sure.

Rob Booker: Oh man, so why don't we grab some mail if we have any. Do we have any mail?

Jason Pyles: Yeah, we do actually. I'm glad you asked about that. First of all, we had an FX Outlier ask us, he said when is Brad going to finish all 18 rules. I really enjoyed the chats about them.

Rob Booker: Well, we'll plan a webinar for TFL. Brad shared his complete rules first with the Japanese language version of TFL 365. That's a Japanese language version of a website that we run in the United States in English for traders. Jason, I guess we need to hop on, we need to get on that. We need to get right on that and do it right. He's got some really great rules in there too. You know what? Just for FX Outlier, I'm going to pull up his 18 rules. What do you think about that?

Jason Pyles: Oh, do it. I think this would be good.

Rob Booker: Will you sing us all a tune while I pull that up?

Jason Pyles: Well, sure. I'll sing Piano Man by Billy Joel.

Rob Booker: All right, number nine of Brad's rules: Once the trade is opened with risk management in place, walk away. Distancing yourself emotionally and physically from the trade gives our system the edge it needs to work. Keep your trading boring, that's another rule. I love that. 

Number 15: Don't weigh down your trading with the external expectations and desires. Wealth is the natural by-product 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 profit. I think that's something I'd like Brad to come on the program and talk about because there is a little bit of disagreement between Brad and I on that, but maybe not enough to make it really significant. Where Brad is saying, Jason, just keep Dorie from finding Nemo. Just keep swimming, just keep swimming. What do we do? We swim. We just keep swimming. You have a down day, you keep swimming. You keep planning your trades with the set system that has an edge. You keep depending on the rules. You don't let it side-track you. I believe in that. I believe the reason that we do that is that we have our eye on a result and that the reason someone like Brad is willing and able to stay with the process is because he doesn't want to screw up his trajectory toward a final result or a final goal. 

NEXT PAGE: Having a Goal Focuses You

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I do think that it can be really helpful to have a massive financial goal in place or a massive financial need. It can be helpful as long as having that goal drives you to focus on the process because process without a clear result that you really want becomes boring and you won't do it anymore. Process in the name of a goal or an outcome that you're really striving worth is worth doing. I don't know, it's a little bit of both. I would love to talk to Brad about that some time. Maybe we should have him back on the program.

Jason Pyles: Yeah, I think we should too, for sure. We also had a question, this is a really easy one. It's from Radislav, and he wrote, "Hi Jason, would you please let me know what is the music that you use in the podcast. It's really cool so I'd like to listen more. I've been playing saxophone for some time and given up under life's circumstances, this reminds of Larry Carlton with Mark Dalted. It's probably a sign of the musician's spirit not completely dead. Thank you very much in advance, Radislav. We actually purchased that tune. It's royalty-free music from musicbakery.com. The name of the track is Blues Band.

Rob Booker: Blues Band.

Jason Pyles: That's right, baby, Blues Band. Then Rob, here's one. There are lots of these that I think you're really going to like. We have one from our episode today about trading is not an ice-cream cone.

Rob Booker: Oh, yeah, that just came out today, right.

Jason Pyles: Yeah, this is from your buddy Scott, Fat Bee Trader, right? He said, "I totally agree with this. The only time I get myself into trouble is when I let my winners run." That's the only time he gets himself in any trouble. He says, "Stupid cliche, that rule is a sure-fire way to turn a one thousand dollar gain into a two thousand loss. When it comes to trading, quick is best, boring is second best. If it's too much fun, you may be doing something wrong. Talk to you soon, Scott."

Rob Booker: That's pretty cool. If it's too much fun, you may be doing something wrong. That makes me laugh. I think that's a funny statement. It's maybe not so true that if it's fun, it's maybe a bad idea. Jason, it's really, really easy to start going down a path where we think that we ought to be doing way more than what we are. The dissatisfaction that we have with our own performance is the greatest enemy to long-term success. 

That we start to say we're not making enough progress quickly enough especially in trading where we talk about having seven-year plans. What if you went seven months into a seven-year plan and you built up a 30% gain and then you gave back 25% of that gain, so you were down to a 5% gain. You would sit there and think all that for nothing and man I got to make it quicker. That's how we all get into trouble. We don't just keep plodding forward through the ups and downs. I think the microcosm of that problem is when we're in a single trade and we're just really going for some kind of extraordinary profit target; not something that it can do, but something we wish it would do.

Jason Pyles: Awesome, thank you, Rob. I'm just going to keep firing them at you if you don't care.

Rob Booker: Yeah, I don't care, yeah, bring them at me. I can take any question. Ask me anything. Ask me anything even trading not related because I'm high on a mix of Dayquil and Nyquil.

Jason Pyles: Okay, now you've provoked me. I'm going to go to this special since you said that. 

Rob Booker: All right, fine, that's fine. I just drank a mix of squeezed oranges and ginger and five cloves of garlic and a habanero pepper in my juicer.

Jason Pyles: Wow.

Rob Booker: Yeah, let me just tell you there is a tingling in my entire urinary tract system right now. It is extraordinary. You will temporarily forget that you're sick when you do that.

NEXT PAGE: Don't Trade When You're Sick

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Jason Pyles: That's hilarious. Okay.

Rob Booker: That was not medical advice, by the way.

Jason Pyles: Right. Disclaimer. This just made me laugh, I don't know why. It probably will make nobody else laugh. On episode 171, Chris Wright, "Why is my comment still awaiting moderation?" 

Rob Booker: Oh, man, that's hilarious.

Jason Pyles: That just cracked me up.

Rob Booker Why is your comment still awaiting moderation? That's hilarious. There's a lot of them into there actually. There's a story behind this, but there are two stories behind it. One is I answered someone's question on the podcast, a comment that they submit on the podcast, on the day they submitted it. They wrote back and replied, they say, "Yeah, thanks for the answer one year to the day that I posted it. Real nice turnaround time on the feedback." I realized that I was just moving through the comments, and I thought I was answering on the same day that he wrote it. It was a year later. I wrote back and I said, I don't remember what I said, but it wasn't pleasant. I feel bad that I said that now. The second one is, we get a lot of comments in there. I think it's overwhelming for me sometimes, Jason, so we need to do a better job. We'll go in there and approve every single comment on the podcast.

Jason Pyles: Okay, that sounds like a good plan. In speaking of news, here's one that's really new that you'll like. It's called TV and Trading. This is from Heath. He has a picture there with his email ID. He looks like a young man. He says, "Hi Rob and Jason, thought I'd give you a head's up on a TV show that you might not follow currently. I know you guys like some good series like the wire in Breaking BadSkins is about the misbehaving youth of the UK. In previous years, it has followed a mostly fresh group of college kids each year as they party their way through drugs, sex, and the club scene, etc. Anyhow, the latest season, number seven , has just started to air and some of the younger party people are all grown up. In episode one and two, we catch up with Effie as she decides to initiate a shortcut from her shy receptionist to the trading desk of a top hedge fund in the city of London with all the perks and temptations that come along with it. Great podcast. Cheers, Keith." That's funny, he signs Keith, the email says Heath. I'm confused. Anyway, he said, "PS, I included some screen shots." He actually has screen shots from the TV show, Skins.

Rob Booker: We should post those on the pod. I'm sure we can link to the show's page somewhere on the internet and show some pictures. I've heard of this show before, Jason, have you?

Jason Pyles: I have not actually.

Rob Booker:Yeah, I've heard of this. I'm going to check that out today. Being sick is a perfect time to be lazy because it comes prepackaged with a credible excuse for why you're not showing up for stuff. I'm all over that. When you say Skins, it sounds like it's a naughty.

Jason Pyles: Right.

Rob Booker: It sounds like it's naughty, which is not what I'm into when I'm sick. I can't even want Orange is the New Black when I'm not feeling well because I want to finish that series, but it's just too hard core for me. It's too much so I have to tone it down. I have to watch something happier and something comedic, which brings me to another point, Jason. You and I have podcasted when we're not feeling well to show up for work. I had a conversation with a trader recently who had a rule in place not to trade when she was sick. I think a lot of people have come across this idea one way or the other. They get sick. Their schedule dictates that they take trades so they sit down and trade at a certain time. I find that I'm terrible when I'm sick; just lately anyway. In times past, if I've been really tired, I've been better at picking trades. That's not the same as being sick.

NEXT PAGE: Why You Shouldn't Trade When Sick

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Jason Pyles: Yeah.

Rob Booker: And delusional. When you're sick, you put a trade on, and then you might not even remember that you took it or I don't know. It's a terrible time to trade, but see, people do this all the time where they fire up the old trading account and they have to make progress. Once again, back to Brad's rule; you know, focusing so much on what they want to have and not on the process. You have to do this only when your process can be perfect. Did you, you never told us. When you threw up during that podcast that you did, did that turn out to be a really good episode or a really crappy one?

Jason Pyles: No, it was a good episode. We just kept doing it. We just went right through it.

Rob Booker: I mean, some athletes, there are some great stories of playing through sickness, you know.

Jason Pyles: Like that Michael Jordan one that Scott told?

Rob Booker: Yeah, that's the only one we really know about though. I mean for every one of those, there are probably 20 stories of athletes completely screwing up royally because they played when they were sick.

Jason Pyles: Well, it's just remarkable of what your body can do if you know your mind decides that it needs to be done. It's just the way it is.

Rob Booker: Yeah, I had somebody tell me today that I just should rise above being sick. It was like I really don't feel like doing that.

Jason Pyles: Right.

Rob Booker: I feel like not rising anywhere.

Jason Pyles: What that person didn't know about you, Rob, is that when you get sick really bad, like your body has to stop you sometimes.

Rob Booker: Yeah, that's true.

Jason Pyles: It's like you have the plague or something. I remember one time you were texting me work-related stuff from the emergency room. It was, Rob, you have to rest.

Rob Booker: That's true. My body is what I call the Rob Booker physical margin call where my body margin calls my account and I'm like, it throws me down. It says your stop loss has now been hit. It is time for you to stop. I went to opening night of school for my kids here in Arizona a week and a half ago, and I probably picked up like 263,000 diseases that could kill all of humanity. Then, my daughter got sick, and of course, I love hugging my daughter and hanging out with her and watching Pink Panther cartoons with her. She got sick. She was sad, she had a fever, so I laid down next to her. We watched cartoons and we talked and we laughed. I knew the whole time, I knew what was going on, you know. I knew that I was exposing myself.

Jason Pyles: Yep.

Rob Booker: But I couldn't help myself, so just the way it is, right?

Jason Pyles: Yeah, you did the right thing. You're a good dad.

Rob Booker: Well, and yeah, she's doing fine now. It takes her 24 hours to overcome it. We'll see how long it takes me.

Jason Pyles: Okay Rob, I have something for you here. You're going to like this. We had a listener answer your question about gold.

Rob Booker: Okay.

Jason Pyles: This is from episode 171 when you guys were talking about how spikes in the FX market are caused.

Rob Booker: What do you mean, like isn't 171 into the future?

Jason Pyles: No, no, no, it's just a couple ago.

Rob Booker: Really? So that's like, wow I thought we got a letter like as a response to a podcast that we hadn't published yet. That would be the most awesome comment. If you're into writing comments and like writing the show, that would be awesome. Write us a comment on an episode we haven't don't yet. That would be fantastic.

Jason Pyles: Yes.

Rob Booker: Are we really over 170?

Jason Pyles: Yeah, just today we played out 173, episode 173 was today's show.

Rob Booker: Well, that's it, I'm done, I don't want to do anymore.

Jason Pyles: Well, this is 174 currently what we're doing.

Rob Booker: I said if I ever went to 173 I'd stop, but if I went passed that I'd have to get to 1,000.

NEXT PAGE: What Causes Opening Gaps in GLD

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Jason Pyles: Yep, that's what we have to do.

Rob Booker: Bummer, all right, bring it on.

Jason Pyles: Larry has answered you, he said, "Great podcast. Pretty sure the gapping in GLD has something to do with gold futures, spot gold, and arbitrage."

Rob Booker: Okay, arbitrage.

Jason Pyles: Arbitrage, he said, "GLD readjusts for the overnight movement in the gold price when it opens, hence the gap."

Rob Booker: Oh yeah, that makes sense. So the GLD for those of you that don't know is the ETF. It essentially trades like a stock and it mimics the direction of gold so you can buy this stock exchange traded ETF for some cases way more easily than you can buy spot or futures, really, gold; no rollovers and all that kind of stuff. However, the ETF shuts down for trading overnight so while gold is still moving, the ETF is not moving so it has to catch up with it in the morning. That does explain, Jason, why there are so many gaps in the GLD ETF. I know a lot of people out there trade options on GLD or on the SPY, and that's another ETF that mimics the movement of the S&P 500. That would explain the gaps. Those gaps really get to me. I don't know. I guess you just get accustomed or used to whatever is out there, right?

Jason Pyles: Hmmm, hmmm, yep. He used to have a science teacher who would always say adaptation or extinction, Rob.

Rob Booker: Ohhhh, I just watched that movie Adaption starring Nicholas Cage, by the way.

Jason Pyles: Oh, that's one of my favorite. That's in my top 10 all-time favorite I think. I mean it sits up there.

Rob Booker: Yeah, it's a good movie. That's a great movie. I also watched the Eternal Sunshine of the Spotless Mind. Did you see that movie?

Jason Pyles: Oh, yeah, oh yeah.

Rob Booker: Wow, wow.  I really, I liked that movie. I rarely see a movie twice. I would probably watch that movie another time.

Jason Pyles: Well, yeah. It's one of those that really lends itself to multiple viewings. I remember when that film ended, I felt a disquieting of the soul. It resonated like a bell to a hollow clock tower. It was amazing.

Rob Booker: Yeah.

Jason Pyles: It really affected me.

Rob Booker: Yeah, well I'm with you. Hey, that's awesome. I went to dinner last night and I was meeting people. I love meeting new people. I was talking to somebody, and I said do you like movies? They were like yeah, I like movies. I said man, I just watched Eternal Sunshine of the Spotless Mind, and their mouth just dropped open. They were like, holy moley. They were like unbelievable movie, favorite movie of all time and they were just totally excited about it. I loved it because I've been talking so much about how we recreate our own memories and how our memories of the way things happen affects the way that we do things in the future. That movie was a clear presentation of your actions and your activities now are heavily influenced by the experiences that you've had especially the ones that you've had that are really emotional. By recreating those experiences or replaying the experiences that are positive or changing, the experiences that have been negative like replaying them in your mind, but actually twisting them so that they're not the same as they used to be can have a somewhat substantial effect on your ability to accomplish goals in your life. Although it sounds a little weird and to some people sounds outright insane, it's what I've done for a long time in my life to overcome difficult experiences and actually use those difficult experiences to my advantage. That movie really helped to drive home the point that without your experiences, you change your behavior. I mean you change everything. When in this movie they go through this experience of forgetting these things that happen, Jason. They're able to reflect on the same experience done over in a different light.

NEXT PAGE: Distance Yourself from Negative Experiences

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Jason Pyles: Yeah.

Rob Booker: I think it's really true about trading is that when we distance ourselves from the really negative things that we've done in trading and the stupid comment that we learn more from our failure that we do from our successes, which is just idiotic. You can learn a lot about failure from studying your failures; that's absolutely true. It will consume you in a way that is far more substantial and consequential than studying your successes. It's not true that you can learn more useful stuff from your failures than your successes. That movie really reminded me of that, that they were better off without these memories of what had gone so terribly wrong. Without those memories to burden them down or with the willingness that they had to forget those things, they were able to entertain a brighter future. 

I think that's so true about trading that we get so consumed and wrapped up by the things that didn't go as well as might have hoped and we hold a grudge against a currency pair or a stock or a person or a broker or a situation or a money manager or whatever. These memories of failure just consume us and we are taught that we're supposed to learn from our failures, so we study them and we mark them up and we highlight them and we refer back to them. We just get really good at identifying what is a failure, and we get really good at repeating it. To the contrary, you could make the assumption that if you were to try something different, you would get a different result so that was really true of watching that movie. Jason, something really struck me and has stayed with me and I can't seem to shake it.

Jason Pyles: Yeah, yeah, and that's exactly how that movie affected me and a lot of people that I have talked to as well. I would go so far, Rob, as to say I think if people are passionate about anything in their life whether it's trading or whatever, it is that they want to really ponder on, I think there are some neat little parallels that they could draw from that movie. It's currently streaming on Netflix, if anybody wants to check out Eternal Sunshine of the Spotless Mind.

Rob Booker: Yeah, that's definitely worth it. This episode has been the Eternal Sunshine of the Spotless Trader's Mind, and Jason as always, it's a pleasure to hang out with you and talk to you. You follow much popular culture news or anything like that?

Jason Pyles: Yeah, I've decided recently I'm going to be starting to do that more.

Rob Booker: Because lately in the news, Alex Rodriguez of the New York Yankees has been in the news.

Jason Pyles: Hmmm, hmmm.

Rob Booker: Speaking about our past dictates our future, there was an article that I read in the New York Times yesterday from George Vescey. I don't know if I'm pronouncing his name right. He's a veteran reporter in the baseball world. He writes about how Alex Rodriguez grew up without a father. His father, when he was 9 years old actually just walked out, walked away, left, abandoned, I mean never came back.

Jason Pyles: Wow.

Rob Booker: Alex has been a deeply troubled individual for the rest of all time. That memory has affected just about everything that he has done or been through. Today, he was among 13 players suspended by major league baseball for violating the league's anti-doping rules. He was banned 211 games so starting now and through the 2014 season, which is the longest suspension levied by the league for a doping violation. He was actually risking a lifetime ban and had intimidated witnesses and essentially just made about any mistake you could ever make. When you read this article in the New York Times, Jason, you can see how the memories of something that went wrong can consume you and turn you into this other person. Whereas, there are plenty of major league baseball players with broken homes and problems in their past and don't have $275 million contracts. There are plenty of them that don't dope and that don't cheat. 

NEXT PAGE: We Are a Product of Our Constant Thoughts

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Rob Booker: It just reminds me, Jason, we are a product of what we agree to think about constantly. It's just a warning out there to the listeners of the podcast. What you think about constantly becomes familiar to you and what becomes familiar to you becomes easily accessible, and what is easily accessible becomes what you get a lot of. It's like living upstairs, you know working upstairs from a Chinese deli, right Jason? What do you have for lunch most days? You have Chinese deli most days.

Jason Pyles: That's right. I like that.

Rob Booker: Anyway, I just feel for Alex Rodriguez. I don't care for him much on the field, but off the field as a human I feel for, I just feel for people who fall into the trap. You know, fall into that dark hole and can't get out of it. It really pains me to see someone struggle so mightily with those kinds of memories and those kinds of problems and those kinds of issues. It really strikes me as a lesson to us all that what consumes us is just drove him. You can see so many different examples of this, Jason. I'll end it there. I mean I don't mean to get too wrapped up in that, but that's big news lately in the world of baseball for sure.

Jason Pyles: Yeah, sure.

Rob Booker: What would you do if you had 211 podcasts suspension? What would you do?

Jason Pyles: Start a different podcast. I'd just start a new podcast.

Rob Booker: Did you hear the other news? Jeff Bezos, the founder and CEO and major shareholder in Amazon.com bought, Jason, the Washington Post newspaper.

Jason Pyles: Oh wow.

Rob Booker: Yeah. He bought it. He bought the Washington Post for $250 million. It does not include their digital assets or their websites.

Jason Pyles: Yeah.

Rob Booker: It includes the newspaper's websites, but it does not include some of their digital properties. He bought the newspaper and I thought this quote. I've said a lot of nice things about Jeff Bezos over time, but there is one quote in there that I wanted to reflect on really quickly and you can see if I can pull it up really fast.

Jason Pyles: Okay, no problem.

Rob Booker: Here we go. The family released a quote that said, "Bezos has proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post."

Jason Pyles :Nice, wow.

Rob Booker: I just think that that is the highest compliment that someone in business can be made of someone in business, proven technology and business genius, a long-term approach and personal decency. You know what, Jason? You've got all three of those things.

You've got podcast-related proven technology and business genius. You've got a long-term approach. You don't quit. You've got a lot of personal decency. I just thought you might be uniquely qualified to own a newspaper also.

Jason Pyles: Well, thank you. I hope so one day. Well, the first thing I would do is employ a movie critic, think.

Rob Booker: Start a podcast.

Jason Pyles: That's right.

Rob Booker: The first thing I would do is start a podcast.  All right, Jason, you're in the middle of a deserted island. What do you do? I start a podcast. All right, Jason, you're tied to a train track and a train is coming, what do you do? I start a podcast.

Jason Pyles: What else would you do?

Rob Booker: That's just great. Well, Jason, have a super afternoon and thanks for living to episode 174. I'm Rob Booker on behalf of Jason the producer. You're listening to the Trader's Podcast.

For more podcasts from Rob Booker, visit Traderspodcast.com. You can also follow him on Twitter @traderspodcast.

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