In this month’s Traders Talk, we’re chatting with Norman Hallett, CEO of Subconscious Training Corporation, the producer of The Disciplined Trader Program. Norman is a highly-regarded professional trader with more than three decades of successful trading experience. He’s devoted more than a decade to educating traders on how to become successful, with emphasis in the areas of trade psychology and the creation and utilization of solid trade programs. Norman shares his unique insight garnered from years of assisting thousands of traders worldwide in their quest for a discernible path to success in trading.
TEI: How’d you get your started in the business?
NH: I started in 1979 with a very small options firm that was selling privately held options out of the Mocatta Metals Corporation. This was before exchange-traded options came out during the 80’s. That gave me an understanding of commodities and their potential.
The first individuals I worked with back then were either buying or selling options and we were working with the premium. We bought call options in gold and silver. In January of 1980 the gold price reached $850 and silver shot up to $50 with the Hunt Brothers. All those people that I had sold $10,000 options to that had invested $10,000 to $20,000 suddenly had hundreds of thousands of dollars in capital in a matter of four to five weeks. I didn’t realize at the time that was a historic move that wouldn’t be seen for another decade or so. The potential of the market was indelibly etched in my mind.
Later I moved to Paine Webber, where I was hired to help increase their futures business… I eventually departed and became a commodity trading adviser and ran several million in my own program… I’ve spent the last decade primarily in the educational part.
TEI: What was the early lesson to come out of that time and experience?
NH: In the beginning you tend to want to add filters to your trading plan in order to define your trades… take fewer trades, but better trades.
What you wind up finding along the way is that too many filters causes a certain paralysis and a frustration which can lead you to taking trades that aren’t really qualified trade. I found that long-term successful trading is a matter of knowing yourself and then balancing what you know about yourself with what’s available in the market. I’ve learned that simple is good and complicated is bad…simplicity in trading is the key to successful-trading long term.
TEI: What made you realize the importance of focusing on the mental and emotional aspect?
NH: Well, I had been working with my own mental game for a couple of decades. I didn’t realize that what I was doing was really taking some of the things that my wife, one of the premiere hypnotist in the southeast United States, was doing with her clients… helping people with their lives. I came to understand that what you believe and hold predominant in your mind is where you’re going to head. If you don’t see a bright and successful future for yourself as a trader and keep that thought predominate in your mind, you won’t head in that direction. If you’re being controlled by fear of performance and constantly reminiscing on what went wrong with trading versus what’s gone right, your projection to the future will be clouded. The clearer you are on having a positive outcome in your trading, the more you do the things that will create that positive outcome.
TEI: You started to concentrate on the education part along the way. What was the genesis for doing so?
NH: A decade ago I decided to concentrate on the mental and emotional aspects of trading. This is what most traders ignore. No trader wants to say, “I’m the problem.” The answer to poor results in trading is always “l need a better system or a better way to analyze the market.” But those solutions never turn to you. That’s where I come in. During that time my wife actually came home one day and said she had worked with a stock broker that day that was having trouble with his trading. Suddenly it hit me right smack in the middle of the head…I’m living with the solution. Been married for 32 years and I realized my wife could really help me to translate what she does to help a lot of traders… It was the realization then that we we’re really living this and seeing it work for me that led to us taking that and making it available to everybody. At least that part of the training—the mental and emotional control. So in our program, we have a large section on really training your mind on the subconscious level.
TEI: Can you share some on mastering trade psychology and how you address it in your program?
NH: At that time I thought to myself there are not a whole lot of people in the area of trading psychology. Yes, there are authors…Mark Douglas, Van Tharp, Jake Bernstein who wrote “The Investor’s Quotient” and others. They all talk about the poor thoughts that come up and how you have to control them through having a solid trading plan. Although that’s true, that’s not the fast track for individuals in the mental control area. The fast track is to actually train your mind on a subconscious level so that you’re decision making, which is your conscious mind, is not dominated by negative thoughts about your trading or about you. Your subconscious mind holds your beliefs about what’s true for you. Your conscious mind makes decisions based on what those truths are.
So, if you’re making poor decisions in your trading, it’s likely because you’re holding a subconscious dominant pattern that’s not beneficial to your trading. For instance, as a trader you may think that trading is gambling. As a child you might have heard your parents talking about how trading is gambling. And then all of a sudden you wonder why you can’t pull the trigger on a trade. It’s not something that’s obvious, but if you look into it you can see that the problem is a subconscious pattern that’s not serving you as a trader. The great part is that you don’t really need to go to a psychiatrist or psychologist to delve into what the problem is…All you really need to do is create another subconscious set of neural nets that carry the right message:
- I have a valuable trading plan. I pull the trigger every time my trading plan gives me the signal.
- I believe in my trading plan.
- I’m a wise and disciplined trader.
- I do the things that a wise and disciplined trader does.
Those kinds of beliefs, if established in your subconscious mind, will have you making the right decisions. Your conscious mind will make decisions now based on these new dominant behaviors. And the way to get them to be dominant neural pathways is to just really relax and do a little self hypnosis—it’s very easy.
TEI: What do you consider the biggest impediments to successful trading?
NH: Based on the feedback we get in our training, a big one is focus. To remain focused and to eliminate distraction. Whether it’s CNBC, somebody walking into the room, self-created distractions where you step away from the screen, etc. Without focus you’re going to make mistakes. You tend to forgive yourself, but if you look back you’ll find they were all preventable. You need to follow and remain with that trade in a very focused manner. You must consider your trading a business and maintain disciplined focus.
Another area of great importance is patience—you need to be patient in your trading…wait for the setups to complete themselves. I find that a lot of traders jump the gun. Their trading plan says they make their move after the formation on the 10-minute bar is complete. But at the nine-minute point the market is moving up and they jump in to grab those points, since obviously the trade is going in the right direction. But of course, the market often corrects and the sought after formation never actually completes, leaving them stuck in a bad trade. Patience is a key virtue in trading. Patience to let the trade go if it’s not going to happen…to not take the trade. So you must be patient and wait for the A-plus trades—the high-probability trades. You need to identify those high-probability trades for yourself and then spend your time being patient for those to happen.
The third is keeping a positive expectancy. In other words, expecting success and envisioning yourself as a successful and valuable trader. Create some positive energy in the very beginning of your trading day, whether it’s doing some affirmations or some subconscious training. We actually offer Mastery Minute one-minute motivators for traders that can be downloaded to the iPhone. They provide a one minute pop of enthusiasm and positive energy right in the beginning of the day. Those are the three areas I would concentrate on as a trader who is struggling and looking for real and consistent change. Not another system or another Holy Grail.
TEI: What are the biggest mistakes you see traders consistently making and what should they focus on?
NH: I find that traders give up too easily. Also, it’s about maintaining a total program. It’s one thing to maintain a positive vision of the future as a successful trader, but it’s not going to have legs or be believable to you unless you’ve done the homework. You’ve got to have a solid trading plan and I find that too many traders don’t. Having a solid trading plan that you can believe in is something of extreme importance. Without such a plan you’re really not going to get any place. Along with the positive expectancy you need to concentrate on keeping things simple rather than complicated. And you have to spend your time focusing on your A-plus trades. You need to go back to your past trades and look for the setups and the exit strategies that resulted in your best success as a trader. Then have the patience to only trade those particular A-plus strategies.
This is important because you’ve already proven to yourself that you’ll win more if you stick to those strategies. If you stick to making the A-plus trades you’re making fewer trades, saving transactional costs and headaches, and you’re taking the more high-probability trades based on your own success and history. That’s the kind of structure that you need to create in order to ensure that when you’re envisioning your positive expectancy, it has roots that you can actually believe in. Then it’s a matter of training your mind to follow it…to execute the trade and then execute the exit strategy.
TEI: Your experience is that traders generally haven’t focused enough on trade psychology?
NH: I’m always asked the question of how many traders actually win and how many lose. When I’m in front of an audience I’ll always ask that question. I’ll get people yelling 99 percent, 90 percent, 80 percent… And they’re about right—studies have been done and the actual number is about 90 percent. Why is it that the vast majority is losing? I think there is a correlation between the vast majority paying little or no attention to trading psychology. Everybody needs to understand trading psychology, but nobody really wants to.
Nobody wants to admit that they are the problem. So I wind up seeing people all the time that have already blown out two or three accounts. They realize that they’ve got to do something different or get out of trading. I’m always thrilled when somebody just starting to trade comes to me—I really feel that they’ve done it right. But it’s a rarity… The fact is you don’t have to experience the pain in order to get to the profit.
TEI: What’s your advice for the person that’s been at it a while, but continues to struggle to turn the corner and achieve profitability?
NH: At some point the frustrated trader has to draw a line in the sand and say this is either going to work for me or it’s not going to work for me. They should focus on their experience. They have to find a way to stay positive—to develop a positive frame of mind so that they’re not doubtful moving forward with their trading plan. They need a trading plan that recognizes the need for daily affirmation right in the beginning…something to pump them up…not falsely, but something that gives them real confidence on a daily basis… Over the course of time a good trading plan will result in a positive outcome. You must have a responsible trading plan that’s been back-tested, has great money management elements, good risk rewards and so on.
You also need to simplify and have the patience to wait for the A-plus trades. If you trade less, but more effectively, I think you’re going to find that all of your past experiences will feed very well into knowing what a good trading plan is for you… We didn’t talk much about this, but it’s important to look into who you are and the kind of personality that you are. You need to have a trading plan that fits who you are. Focus on those pillars in your structure and you’re going to be more successful.
One other key element not focused on enough is having clarity of your exit strategy. This is really where you should be spending the majority of your time. Not on your entrance, but your exit strategy. That’s where I come in mostly. The majority of traders will spend most of their time and focus on entering correctly and then looking for a place to pull profits or exit and take a loss. You’ve got to have an exit strategy that is a little more sophisticated than that.
TEI: Let’s finish it up with your best parting advice.
NH: We’ve covered most of the points. I would again emphasize the idea of identifying you’re A-plus trades based on your own experiences in trading…not just back testing. Your experiences are a sum total of what happened in the market and your response to what happened. So if you’re noticing that something happened in the market and your response to it resulted in a positive trade 70 percent of the time, and the risk reward was very good, then that should become your A-plus trade. Have the patience to stick to those set-ups…you’re much better off taking the higher-percentage risk in high-probability trades versus spreading your risk over lower-probability trades. So be patient and concentrate on the high-probability trades.
The other key point is not to be afraid to train your mind. You’re in control of your mind. What do you put in your mind by looking at CNBC every day…you’re putting in the fears and the emotions of the market, which isn’t necessary a good thing. Everything in the market, including the emotions, is in the chart. All the emotions and other things that can affect us are irrelevant, because they’re already considered in the last price that was traded in that market. So analyze the chart and trade what you see. Stay in control with the positive expectation of your future, keep a very tight risk-management policy, specifically define your exit points and you’re going to see your fortunes turn from negative to positive—from struggle to success. Keep control of what you can control and ignore the things that you cannot control. It’s really as simple as that.
Norman Hallett, CEO, STC
Norman has created a series of FREE “Mastery Minutes,” one minute-motivators for traders, to help you avoid big trading losses and increase profits.
Download them here: FREE “Mastery Minutes”
Norman Hallett is the co-founder and CEO of Subconscious Training Corporation (STC), headquartered in Parkland, Florida. STC develops state-of-the-art mental training software for a wide variety of areas, ranging from business to sports to business skills to trading.
The company’s core concentration is the training of Traders through its 6-week online “The Disciplined Trader Intensive Program”.
After having spent time with Paine Webber as a stock broker, Mr. Hallett has developed numerous successful startup companies, including the CTA investment firm of Hallett Commodities, Inc., and the Introducing Broker operation, NCH Commodities, Inc. Mr. Hallett holds a BA in Mathematics from the University of Cincinnati.
His high-profile style resulted in him being a frequent guest of the Financial News Network and culminated in his popular radio talk show, “Risky Business”, which had a strong 5-year run.
His concise ebook, “Mental Fitness for Traders”, went viral and has been downloaded by over 100,000 traders worldwide.
The Disciplined Trader Trading And Support Program has tightened up the trading discipline of thousands of traders from 16 different countries.