How to Go Full-time Trading and Stay Profitable- Louise Bedford – Episode 071

Hello and welcome to the Consistent Profits podcast brought to you by Inside out trading and Brian McAvoy. Where the focus is on consistency because when you have the consistent part down, profits become easy. Hello and welcome to the Consistent Profits podcast. This is Brian McAvoy with Inside Out Trading. This week I got a special treat for you. This is an interview that I did as a collaboration with Louise Bedford of Talking Trading. And it's a real treat. It was a really fun conversation, very worthwhile, we covered a lot of ground and I'm sure you'll enjoy it this week. So here we go. Let's go check out the talk with me and louise. Cheers.

Brian McAvoy, welcome to the show. I'm so glad that we're going to discuss how to become a full time trader and stay that way. How have you been?

Oh, I've been doing great. I appreciate it. It's good to talk to you again. It has been a while.

Yeah, it really has. And this is such a pertinent topic. We are both trading coaches and to be able to discuss how we can make those habit changes required and get those habits to stick, it's so important. So let's kick off with what do you think are the main psychological pitfalls that full time traders face and how can they be avoided?

Well, probably the biggest mental pitfall really is a false confidence or overconfidence. I've seen that so many times and that that was my big thing because, you know, a lot of traders are most traders, I mean, if you look at the population as a whole, traders are generally above average intelligence wise just because, you know, that just happens to be where it works out. And you know, in order to be in a position to trade, you generally have to be fairly successful. And it's so easy for somebody who's fairly smart to look at trading and say, oh yeah, I get it, and to just kind of jump into it and just look at it as easier than it is and underestimate the challenge. And that's why I say false or overconfidence because they're not really paying the, the occupation the proper respect just because they don't understand yet. And even after they've been at it for a while, it's really easy to think, well, you know, I understand how trading works, so I kind of know all I need to know. I just need to figure out how to, you know, be consistent about it. And it's like, no, there's a bit more to it than that. And maybe another one that really is a Good question. What's your.

I think another one is the arrival fallacy where people think that I'll be happy when I do this insert, whatever could it be, have another baby when I finish school, when I get married, when I'm a full time trader, I'll be happy. And that I think is a really big psychological pitfall because people don't necessarily fix all of their problems just because they've fixed themselves financially. I think that can be a real difficulty. And some traders, after they've quit their main job because of that, they have an idealistic view about what full time trading will be and it can be a little bit of a thump back down to earth feeling after they've been there six months looking at their computer and not having much social interaction, not having a boss to put those KPIs up in front of them to say you need to achieve this and you need to do that. So that external motivation sometimes can be a driver for success when we're in our job, whereas when we're in a trading profession we intrinsically have to be motivated. And I think that can be a hurdle and a tripping point for some people. You would have seen that with some of your traders as well.

Oh yeah, yeah. And like you said, just being so isolated, I mean one and almost everybody I know recognizes this and it's true not only for traders but a lot of people, people who, you know, have, you know, jumped into the online world or you know, want to start their own business from home and they're working by themselves. It's you know, a one person company, the Self Management and you know, Staying Organized Self Leadership ran across a book, a couple books actually, two of them that I really liked and they were talking about how it's really important to learn how to lead yourself. If you want to be an entrepreneur or and of course traders are entrepreneurs, you're working for yourself. And so yeah, that, like I said, the self management, self leadership, that can be really tough for people. Especially if you've never started and run a business before. If you've just been an employee your entire life, you're used to that. Somebody else having already figured out a whole lot of the details and providing that organization and direction and structure for you and now you're having to figure it out on your own. So yeah, what you said was spot on.

Yeah, yeah. I think part of it comes down to planning as well. I love your take on how do you feel people should plan for that full time trading experience?

Oh yeah, well, you know, the Funny thing about that is, and it usually starts with just a few basic questions. The starting point, one of my favorite ones is have you even figured out what you, what you want to have for trading hours? There's so many people that jump into trading and it's like they think they have to fit, you know, their life and their trading to, you know, how they're going to be able to make money in the markets. And it's like, no, if you're going to do this for your occupation and you want to do it for the long term, figure out how you want to have the business as far as how you're going to fit it into your life, not the other way around. And so you just got to decide, what are my training hours? You know, what are they going to be? Am I going to be, you know. Yeah, full time, where I'm putting in 30, 40 hours a week, or am I going to be a couple hours a day, once a week? That kind of stuff. And even just that as a basic starting point, that can be tough for people to figure out. Yeah, it's super important.

Yeah, it's a really good point because we need to think in terms of decades instead of just, you know, hours and minutes ahead. And that planning can be a difficult process. The other thing I think that people don't plan for is when they're at a job, a lot of their insurances are considered and their income protection and things like whether you even have somebody to take over your role when you have a few sick days as a job employee compared to as a trader. If you have an extended period of time unwell, who knows where your trades are buried, who knows where the bodies are buried. You need to have somebody who knows all of your systems so that if you don't have auto stops, you have somebody that is aware. I do think that's something that people underestimate. So make sure that you've got a will in place, your power of attorney. Make sure that if you're unwell for any extended period of time that you're not taken away because you just couldn't get out of those positions. Somebody needs to know. And it ideally would be somebody quite close to you so you felt that you could share those details rather than just an accountant. Because if it's somebody at a distance, they may not even realize that you're under the weather. And the other thing I think on that somewhat scary topic is that we have to plan so that when we are older we may totally lose it cognitively that we need to set as many things, as many things in place on autopilot that we can so that it's a simple system, it can be executed well and it depends on the time of life and, and where you're at, of course. But I think if we are taking this very holistic view as to what it takes to be a full time trader and stay that way, we do have to consider these aspects. What else should people think about in the countdown to becoming a full time trader?

Confidence really I'd say is like probably the biggest one with trading. And I love it is from, from a psychological aspect. I know there's some people out there that say, you know, trading is going to be an emotional thing, there's no way around it. And I've even heard some guys say, you know, every time you click the button, you know, the button to enter a trade, it's like taking a shot of heroin or whatever. No, it does not have to be some wild. Right. Well what cracks me up is like I said, a lot of, a lot of people, at least in my experience, a lot of people are getting into trading are professionals, you know, the business owners, engineers, doctors, project managers. I don't know why, I've run across a lot of project managers over the last couple of years. But the thing is, and I'll talk to them and I'll say, okay, so, well, and project managers, perfect example. It's like, so you're handling all these projects at this company and you got all these responsibilities and, but you go to work and you just do your job, right? Like, well, yeah, I'm like. And, but if you were like somebody just off the street that had no experience at this, no training or anything, it would probably be pretty rough and very stressful, right? Oh yeah, like, well, trading's no different. If you have the competence and you've developed that competence and you know you're good and you have the same, that, that same level of matching the skill to the challenge. Trading really emotionally should be no different than any other job. Cause I can guarantee you that your job as a project manager is probably way more complex than trading. And you deal with that just fine because you have the proper training and skill level and confidence to go into it and just deal with it. And it's not, it's like, it's not this big emotional ride. But if you're not skilled up, yeah, it's gonna be rough, it's gonna be stressful, it's gonna be an emotional experience because you're not adequate, adequately equipped and so that's really why competence is really where you wanna focus. And when you achieve that competence and that skill level, that's when things get easy and your emotions calm down because you know how to properly respond to everything. You know what to do and you know that you know what you what to do. So that makes all the difference in the world. From, from my perspective, that's like the number one thing for traders to focus on is get good at this. Because when you get good and you have that skill level, your confidence will come naturally and that by itself will fend off so many of the fears and second guessing and all the, so many of the other issues that most traders face. But you have to focus on developing yourself. Like I said, getting good at this.

Yeah, yeah. And I do think part of getting good at this when we're looking at consistent returns is to learn to trade more than one market. So rather than just focusing on say US equities, because US equities may not always be going up, maybe you need to have three. So something that is capable of taking you through different market universes, different market cycles, even different time frames so that if not all markets are going up and you've got one that's going down, that you know how to trade that and you know how to make money from that. Generally, I find people chase that shiny object. They try to get 15 different instruments, 30 different time frames, and that isn't the thing either. I think the magic number is 3. Most people can handle a number of instruments that it's controllable and they don't get too confused. They're not sure whether they should be barracking for that thing. If it's going up or down. They know which direction they need it to be going in. And the other aspect, with that confidence that you're talking about as well, Brian, I always suggest with my traders that before they jump into full time trading, that they bank their primary source of income for one year and live off their trading income. Because what that will do is give them that visceral knowledge that they are a trader, they're living from their trading income and that banking of the primary source of income that adds to their trading equity. So that will never be a bad idea to delay your jump, to delay that, telling your boss to shove it until you've actually got the skills and, and that deep knowledge that you can do this. Your thoughts?

Oh, absolutely. Oh yeah, yeah, totally agree. You know, one, one of my favorite, on that note, one of my favorite conversations that I had and this, this was years ago, but I was talking with a gal and she asked me, she goes, you know, hey Brian, how, how does, how do you know when you've made it as a trader? And so we were talking and my thought initially was, well, you know, you've made it as a trader. Cause see, most people, you know, if you ask them, they'll be like, oh, you know, when you're profitable for six months or a year. And it was funny because I'm like, well, but I know some traders, they've been profitable for a while, but there's still a nervous wreck going to the markets every. And so I kind of in, in talking with her about it. It's like, well, so really it's not necessarily getting profitable as your benchmark for having made it as a trader. It's really when you've, you've gotten good enough that you can go to the markets every day and you know that you're okay, you can trade without that anxiety. That's when you know you've made it. And what's really cool is, and this over the last few years, it's like just become more and more to the forefront. It's like really, that shouldn't be your end goal. If you're wanting to trade with real money, that really needs to be a point you want to get to early on as possible. Preferably to a certain degree. You want to get to that point before you start trading with real money. You want to, you want to skill up enough that you're not just jumping into it knowing nothing. You want to skill up a bit first. And that way before you start trading with real money, you've developed some skill, some skill and some confidence. And you're going into it already with that confidence before you start risking money. Not, you know, someday I'll get to that point. It's like, no, you actually want to get there fairly early if you're going to be risking money with it, especially any significant money.

Yeah, yeah. And that's where a trading plan comes into play as well. I know both of us are very keen on having that written trading plan. With your engineering background, I mean, that specificity, that structured thought that I know has translated into your own trading. What role do you feel risk management plays in maintaining a full time trader's livelihood?

Oh, it's, it's everything. Because trading, the funny thing about trading, and again, one of the other parallels to business in general is it's not a finite game. It's not like you're just trading for this year and you're going to get to the end of the year and decide if you've won or not. It's like, no, this is an infinite game and your objective is to stay in the game. You, regardless of whether it's an up year or down year, you want to stay in the game. And so it's a whole different perspective and especially on what you do. And like you said in your planning and everything is, you know, and this is where again, so many businesses, they get short sighted because, because they're trying to make this quarter or this month look good. And so they make short sighted decisions that you're thinking, no, I'm in the long game, I'm playing the infinite game. I don't know how long I want to be a trader. I just want to make sure I stay in the game. So you make different decisions and that all falls back to risk management. How am I going to manage my risk so that I survive and stay in the game? And yeah, risk management is huge. And the funny thing is risk management goes on at all, all kinds of different levels. It's not just on the per trade basis. A lot of people, you know, say risk management. It's like, yeah, I got risk management, you know, yeah, I, I, I, you know, I, I don't trade any bigger trades than 2% of my account. It's like, no risk management. There's way more to it than just how much are you risking on this trade. So yeah, great topic. And it's like one of the most vital things to your trading. I mean, because if you don't survive, you don't trade.

Yeah, it's so true. I love that longer term view. It is the concept that you're evaluating every trade on a continuum as well. I remember when I interviewed Tom Barso, one of the market wizards, he said each trade is just one among thousands. So you do your best you can on each trade, but then you look at the data over a larger period to give you an idea whether you're performing or not. The other risk management tool I think people need to look out for is what are their personal emotional warning signs that things are not going well. Because sometimes in the market what can happen is your results can be taking off and they can hold. But then if emotionally you're starting to struggle, eventually your results will catch up with your own attitude. So I do think that's where we need psychological skills such as keeping a morning journal and making sure we do have support around us, making sure that we have somebody Who's a little bit further ahead than us that can perhaps shine a light into our blind spots. Maybe a mentor, somebody that you can actually be naked in front of and say, look, here are my results. What am I doing wrong? And what do you think I need to improve on on a regular basis, like a checkup every so often to make sure that we're on track and to identify not only system issues, but also emotional issues if there's something there in our thinking that we need to correct before we get, you know, caught up with that and before the results actually start to display issues. Yeah. Is this something you believe as well? Fine.

Oh, yeah, yeah. Feedback, the outside perspective. Yeah, that's. That's one thing. And I love stressing it with people is, you know, in all of us as human beings. And I love telling people. It's like when my first year of trading, I was making all kinds of mistakes, but the thing is, I was kind of trying to train myself, and I was my own limitation because I didn't know what I didn't know, and I couldn't see what I couldn't see. And so when you mentioned blind spots, minute code, it's like, yeah, absolutely. We all, as human beings, we have blind spots. And so work with somebody who understands, you know, the situation that we're dealing with. They understand trading and they can see the. The stuff that we can't see and give us that feedback and hopefully, you know, some helpful advice. Yeah, that's huge. Huge. Especially when you're trying to learn to have that outside perspective and the. And the external experience of somebody that's gone before you. Oh, yeah, that's massive.

And I think that's as well why both of us run our podcasts. My podcast being Talking Trading, and this is a simulcast with your podcast, the Consistent Profits podcast, that continuous learning and pushing in the good information so that the information that is doubt or concern or fear gradually becomes less and less in our brain. You have to keep on pushing that good stuff into the top of the funnel. I'd love to hear your thoughts about that continuous learning aspect and why adaptation as a trader is so important.

Well, probably the one. One of the other things that I've learned over just recent years that I found extremely useful and it's absolutely applicable to trading is as you. As you go through life, and especially as a trader, you're becoming a new person all the time. You're not going to be the same person a year from now that you are today, and you're not the same person now that you were a year ago. And so if you're staying in, you know, constant learning mode, you're always looking to grow and develop and expand your, you know, your, your thinking, your abilities, your awarenesses, your perspectives, all that kind of stuff. That way you're making sure that, yeah, a year from now you're going to be better off than you are now and you're going to be a more competent, more capable trader, be able to trade with more confidence and be able to deal with situations and the changes that may occur. Maybe, you know, there'll be physical changes with you, emotional changes with you, changes in your lifestyle, your family or whatever, you know, changes in your life, changes in the trading world. You never know what's going to, you never know what's going to go on with that. They change the rules from time to time, got new markets again, introduced or new instruments. And so yeah, it's, it's always been a very dynamic and evolving environment and, you know, trading world. But yeah, just as a person, if nothing else, even if trading stayed the same, just the fact that you're going through life, yeah, you want to constantly be growing, you want to be better off a year from now than you are now. And that takes effort and that requires learning and seeking it out. So, yeah, really, really cool perspective that you bring up there. But yeah, just, you know, recognizing that, yeah, as a person, I'm not going to be the same person a year from now that I am now, five years from now, probably going to be a very different person. I mean, I'll still be who I am, but yeah, I'm not going to be the same person I am today. So am I just going to get there by default or am I going to put some effort into it and say, well, you know, I want to, I want to affect who I'm going to be. And continuous learning is the best way to do that. Nothing else. It makes for a lot better conversation when you meet people or you're hanging out with your friends because you got new stuff to talk about and you learn cool stuff. So it just makes conversation more fun.

It is so true. And there is a study that suggests that we are quite detached from our future financial self. We dump that future self in it. We go, ah, they'll cope with it. Whereas if you can actually imagine yourself older, you can imagine yourself even with a filter. They've shown fidelity around a beautiful study on this, that if they use one of those filters, like those Instagram filters to age people up by 10 years and show them in real time speaking to themselves as if they were older, that those are the people who actually did better with making decisions so that they don't dump that future self in it. They make more responsible decisions. That person becomes a true person in their mind. And you can even see it in MRI studies that if you actually show yourself as aged and you're shown a picture of that, the MRI studies show that you connected as the same person. Whereas if you're imagining yourself older, you're thinking that it is actually a separate person. That's why we don't make good decisions now for the person that exists in the future, because we think of that person as a separate person, which is scary interesting. Yeah. Yeah. I'd love to hear your thoughts as well, Brian, because I know you deal with a lot of traders through your podcast and through your coaching as well. What are some of the warning signs that a trader as a full time trader is not going to make it?

Hmm. Signs. They're not going to make it. Now there's, there's kind of two takes on that. You got one where you get a full time trader who hasn't quite turned the corner yet. They're, they're aspiring to have some success, but they haven't achieved it yet. And then you got some who've been at it for a while and, and, and had some courage of success. So on the traders that are aspiring, really, the, I would say the, the, the warning signs are, are you tracking your results and, and monitoring.