Turn Your Beliefs Around

Every Tuesday Chuck releases a new Trader Tip video on YouTube. This week we will discuss how examining beliefs that have the greatest emotional charge can give us great insight into ourselves and improve our trading performance.

You can read the episode transcript below or watch the video that follows.
If you have any questions, please reach out to us. We look forward to being a continued part of your trading education!

Alright, Trader Tip Tuesday, here we go. It’s not only trader Tip Tuesday, but it’s also a Turn around Tuesday. Turn around Tuesday’s a famous phrase in the trading industry where the high or the low typically goes in on Tuesdays. But today we’re gonna talk about in a different context. Today, we’re going to talk about it in turning our beliefs around. So we’re gonna get into some highly charged stuff here today. Some of you’re gonna get annoyed and upset, and if you get upset, that’s telling you something.

To be successful as a trader, it is important to examine our beliefs, to see if our beliefs are useful or not.
This is one of the greatest things I got from Dr. Tharpe. We want to examine our beliefs and not judge them as good or bad, but actually look at them to see if they’re useful or not. And one of our core objectives to be happy, to be successful as a trader, to have joy in our life, is to get rid of beliefs that are not useful, to get rid of beliefs that are limiting, and replace them with beliefs that are useful.

One interesting thing is the beliefs that we are most likely to defend, most likely to argue, and most likely to refuse to hear opposing views, are the beliefs that actually require the most examination. When we have strong emotional charges to a belief, there’s usually an underlying fear related to that belief. We’re protecting ourselves in some way. Going through belief examination helps us to determine why we have fear, and to determine whether that fear is warranted or not.

Opposing your strong emotional charges
An exercise I encourage you to do is to take a belief that you hold a strong emotional charge to and see if you can make the opposing argument. See if you can separate yourself, even if it’s just for a moment, if you could separate yourself. And you could look at it the other way. If you had to argue for the other side, what would you argue that would make sense to you? What would you debate that would make sense to you? So I’m gonna give you an example for me personally. I live in Chicago, and I saw Chicago when I first moved to Chicago in 1987. Chicago is an incredibly violent and dirty city. High murder rate, high pollution, height, and trash everywhere, panhandlers everywhere. This is gross. But over the next 20 years, the city dramatically changed. The city became safer, the city became cleaner. We went from a murder rate of about 900 to 1000 murders a year when I first moved to Chicago, to where we got down to the murder rate down in the low to hundreds. And the city transformed. The city became beautiful. Downtown completely changed, Lincoln Park completely changed the west side completely change the south side completely changed. So many areas of the city changed for the better. Now what’s happened in the last five, six years is the city has really started to deteriorate. And crime is massively increased. This bothers me. It bothers me to see a city I love so much start to become so violent, and so dirty. And so one of the things that I’ve noticed is that the city is really going soft on criminals. So why is that? This is not just in Chicago, this is all around the United States. But in Chicago specifically, why is this happening?

So this is a good example, I had a strong belief 2020 was a really hard year for me in terms of my beliefs.
Because a number of things that I always thought were going to happen that I told people we’re going to happen and they’re like, You’re crazy. It’s never going to happen. They happened. What am I referring to two massive riots. The riots In Chicago were actually much worse than reported in the media. There was a riot on Memorial Day of 2020, and another one in August. The one on Memorial Day of 2020 was really bad. That weekend, massive amounts of the city were destroyed billions of dollars of damage. You go through, up and down Michigan Avenue, up and down Oak Street, Wall, the loop, you’re talking about every window smashed, all the stores looted. Well, this brought up a lot of emotional charge for me. And then not only had all this happened, but nobody suffered any consequences for it. Everybody stole all kinds of stuff, and nothing happened. Okay, I have strong charge about this. So I step back and I look at it, and I go and say, Okay, what would be the argument I could make? If I’m going to make this argument? Let me do at least a little bit of research, to try and understand.

Why would our city, take criminals and just release them? Makes no sense to me? Well, when I started looking at it, some very interesting points came up. So a lot of people really don’t like the DA Kim Fox for the reasons I just mentioned. But what’s fascinating is, Chicago jails are massively overcrowded. And I’ve gone down on some Christian missionary work into into Cook County, the Cook County Prison, which is really like it’s not a Cook County Jail, it’s like a prison, it is a jail. But it’s massive. And so Cook County is overflowing. So one of the things that’s happening is that if somebody gets charged with a crime, it’s quite possible that if they can’t post bail, they’ll sit in Cook County for over a year, before they ever even go to trial. So what that means is, there’s potentially a lot of people who are innocent, that are in jail, it’s, it’s essentially like a prison sentence. Some of them if they were found guilty, would get one or two years in prison, and/or probation. But instead, they’re sitting in jail for a year even longer. So they’re like they’re getting a sentence, even though they’re innocent. So this is why a lot of people who commit crimes are being released. Now, certain aspects of my beliefs did not change as a result of this. I still believe that people need to be held accountable. I still believe there needs to be discipline and rules, but it gave me some compassion to look at the issue, and not only have compassion around the issue, but actually, could you actually think of a better solution, rather than lock them up, let them go, lock them up, let them go. There’s got to be a middle ground.

So one of the things we see in society today is sides are becoming more and more polarized, and more and more hateful of one another. It’s very easy to get into this. So when we examine beliefs, we actually are able to look at the other side. And by doing so we actually can start to come to a common ground. This exercise gives different perspectives different understanding, and oftentimes compassion.

Now, let me show you. Here’s a chart. You can look at this chart and you take a minute many of your technicians look at this chart and tell me what you think. What do you see? So let me show you another view of this chart. And look at this chart. This is actually the same chart, just flipped the first version, the charts upside down. Second version, it’s correct. This chart is of the Australian dollar with weekly bars. Now, what’s interesting is we could have a very different perspective, just by turning the chart upside down. There’s a lot of traders over the years. The first technical classes I took was at the Illinois Institute of Technology and there was a trader, a technician who came in and taught about technical analysis. He talked about sometimes what he do is he just take the chart and throw it across the room on the floor and he’d look at it and he would walk around in a circle around the chart and look at it and see to give him a different view of what’s going on, different perspective. So this is actually useful trading.

Let me share some examples. So one of the teachers I’ve learned from and studied under was a trader named Charles Drummond and Drummond was brilliant. One of the things that Drummond used to do is he would teach his students, and then whatever trade the student wanted to make, let’s say that you wanted to buy Australian dollar, Charles would say “you want to buy it? Okay, I’ll sell it to you. I’ll take the other side”. So here, you’ve done all this work to research a pattern, you have confidence and conviction of your pattern. And you’re going to step out by and Drummond said, Okay, I will take the other side. Now, for Drummond to do this one, he didn’t have attachments, we as traders tend to have attachments to our trades, which is not a good thing. We need to be able to step back and see our trades for what they are. So Drummond was masterful at not being attached. And then the second thing he had was outstanding monitoring skills. So if he wasn’t short than he would monitor what he was seeing, and he might flip and get long, pretty quickly, but he would start short, he would monitor and then he would use his monitoring skills to flip the position, no attachments, and superior monitoring skills. So I thought this is really interesting. And Drummond did a lot of putting himself in different environments, and making himself take different trades. So he went through a phase where he was a big trend follower, and then he went through a phase where he’s a big trend fader, and he went through a phase where he was a congestion trader, and he learned so much by trading these different styles.

I have gone through the exact same thing in myself.
I’ve pushed myself to trade in every environment, and make myself think about how do I trade in this environment. Now, this leads me to the next point. So for you, when you have patterns that you trade or systems that you trade, one of the things that I encourage you to do, a phenomenal exercise, is take your best patterns, take your best systems, and run a study in which every time the setup occurs, fade your setup, and go the other way. Just test it and see what happens. I did this with one of my best patterns, I did my best pattern, it was so interesting, was out of my research came an amazing pattern that does the opposite. That fades my best pattern. Now there’s subtleties in them. They’re not purely opposite. But the subtleties make the difference between when the trend following trade works, and when the trend fading trade works. So by doing this research, a couple of things happened, I came up with a fantastic pattern. I have students who trade this fade pattern as their bread and butter pattern. They love it, you’re selling high when everybody wants to get long, you’re buying low and everybody wants to get short. And the market reverts. And the trade works really well. So I have students who love this pattern.

I discovered that pattern, and it made money trading a pattern, but the other thing it did is it made my best pattern better.
Because I understood my best pattern now in a nuanced way that I did not understand before. That made it even better. So I got two patterns out of it. And my original pattern was even better. This could only happen because I was willing to do the opposite, to step back from my beliefs and re examine them. So I encourage you to go through this exercise, you will be surprised at what you learn. You might find an unbelievable pattern of just doing the opposite of something you’ve done for a long time. So one of my partners that we do research on, one of the things he added was we do a test. For every time we make a trade if we did the opposite, and it shows a strong move in the opposite direction we tag that, and we go study it. And often times what we find is that the trades that we think might be the best going one direction, let’s say we’re going long in a trend, ended up being phenomenal trades on the trend fade in the other direction. And this work does that.

I encourage you, one to step back and examine your beliefs, the beliefs that you are the most fired up about, the beliefs you defend the most. Go into them. What is causing your fear? If you’re not scared, if you’re not fearful, you’re not threatened. One of my favorite analogies is that if a two year old comes up and says “I’m gonna kick your ass, I’m so angry with you. You’re in big trouble.” Oh my gosh, you look at a two year old and you laugh your ass off. Why? Because the two year old is no threat to you. It’s cute. You put it on a video, you post it on Facebook, it ends up an America’s Funniest Home Videos. Here’s this two year old scream, he’s gonna kick your ass. It’s ah ha ha, that is so funny. But if somebody walks up to you is 6’7 and 260 pounds and a black belt in multiple martial arts. You’re going to feel differently because it’s about fear.

Get clear about what is causing your fear.
Can you change what’s causing your fear? Can you adopt a set of beliefs in which you don’t live by fear you live by love and abundance? Going through this exercise can be transformational for you. Then take the same idea. Take it into your trading, take it into your patterns and your systems and check them. Do it with your entries do it with your exits. See if by flipping your view if you can come up with a better result. You will be absolutely surprised at what happens when you go through this.

So that’s our tip for trader Tip Tuesday / Turn around Tuesday. And I’ll see you next week. Have a great week.
– Chuck Whitman