Stock Trading Psychology: Why stock traders do not follow through and pull the trigger

Okay, welcome. So I'm here with Dr. Takanori Endo, a good friend of mine who's a clinical psychologist who lives in Tokyo, Japan. Now, Dr. Endo is also a trader with many years of trading experience and a global trainer and educator. So he travels all over the world. And I think, Taka, right now you're in London at a conference in London. A little bit about that. And then tell us a little bit about yourself as a trader and your background and why this is so interesting for you.

Okay. So right now I'm in London attending a Neuromarketing Business Science association conference. It's a world forum that happens once a year. My major is an academic. And one more thing to add to what Adrian is talking about is I used to be a statistics professor. So a statistics professor combined with my doctorate is in psychology. It was a best match if I wanted to do investment, where people's psychology moves the market. Where else should I go was stock trades and option trades. And I'm doing, in terms of doing FX currency exchange. I've been doing more than like 20 years in terms of stocks and option is. I have a.

It's.

It's the ninth year now. It's like nine years of experience.

Great.

Yeah, I was going to say so. So very few people have even one of those two advantages that you've got. The understanding of the statistics and the mathematics of the markets and the understanding of, you know, the psychology and what actually moves it. So what. What advantage does that give you as a trader when you pull those things together when you approach the markets?

It's very simple. It's a confidence of what I'm doing is correct. So it definitely gives me a confidence on what's gonna happen. Of course, you can't really predict the future, but highly high likelihood of what's going to happen and when you know how likely that you're gonna fail and how likely that you're gonna succeed. It's kind of comforting to use to actually do the trading.

Yeah, right, Absolutely. And one of the things I've found dealing with a lot of traders, particularly new traders starting out, is a lot of people have some resistance to even taking that first step. So, you know, okay, I want to make. I want to be free, I want to improve my life, I want to build some wealth, but yet they don't take that first critical step to actually go and learn something. So what holds people back? Why does that happen? And how can people get through that quickly and easily?

So it's a fear of failure if you want to keep it simple, it's a fear of failure. And about investment is one time one of my teacher told me this, so if there's a professional job that 70% of the time you'll fail, would you want to take that job? Right. And a lot of people say no. However, well, that is that job you just turned down is professional athlete in baseball. So if you had a 30% hit rate, you make millions in baseball. Right. And that's the truth about trade. There will be times that you will not like. Majority of times my trade goes sour, meaning it's the other direction that I believe. But it doesn't matter because when it goes to the other direction that I believe that it will go for, I make a huge profit. That cancels out all the failures. But people who have want to be perfectionist cannot be really into trades because there is no such thing as a perfect grade. If you're ever going to meet a trader that says, in my whole trading experience I got trading 100% of the time that guy is telling you bullshit. Because that can't happen for sure unless the person is like, yeah, I'm a trader, I never traded. Yes, I'm a trader, I did it once and it went good. And since then I never done it.

Yeah, look, people in my experience, people who haven't yet had a loss.

They'Re either avoiding or delaying the losses and making them, you know, potentially grow bigger and bigger and bigger. So eventually when the loss comes, they're going to blow up and lose everything, Right, Exactly.

If you want to lose money like this is the thing I experienced, I myself doing marketing consulting and business consulting, you will lose money at some point. But the intelligent people is to make sure that their loss is the minimal that they will get. And the small losses that you had in the first few times in the beginning will definitely pay back because that is experience.

Never, never try to just put all your money in one go and hope you pray. That's not how it works. Any profession, always have, always practice. So in the practice, are you going to willing to lose your little bit of your time, a little bit about your financial money that will give you total freedom and millions? Is a question.

Yeah. So for the people getting started who haven't yet taken that first step, the key thing is what I'm hearing is to be aware that what causes you to procrastinate or to delay is fear of failure. But failure is okay. And it's part of any profession. And this is a profession like any other.

Yes, Definitely there are some profession that failures are looked down upon. Like very strictly for example, in my field of clinical originally I was in forensics. Sometimes we do negotiation with hostage situation. Come on, you can't fail at that. Real, real practice, right? In the real life. Because if you fail, it means somebody's gonna die. You can't fail. So what we do is in the scene that it's not seen, like it's from movies and drama, TV dramas, people say that all the perfect world happening, but in the background of the scene, we, we are practicing so many times of the negotiations, so many role plays so many times till that moment comes that when we actually need to do it, yes, we will succeed in the same way I was taught to. There's paper trades. You don't put your own money and make sure you do that a lot of times until you actually have the confidence to get on the market. Well, some people keep on practicing forever and when they're having good to hit ratio, they never go into the market. That's the second problem, right?

So assuming someone gets past this first stage and actually start their learning journey, the next challenge that I see a lot of people falling victim to is say you invest in a program. You know, I've got the enlightened stock trader certification program. There's lots of other training programs out there. But often a new trader will launch into one of these with gusto. You know, get into it for the first few weeks or the first few modules. But then, you know, the interest wanes and they sort of end up getting distracted by the next shiny object or whatever it is. They get busy in their life and they don't follow through, they don't complete and so the value is lost. So why does that happen? And again, what can, what can they do to avoid it?

Okay, so we are both got trained by Rich dad advisor. So we know one of the success and Rich dad world is focus. Follow one course until success. And many successful people do that and unsuccessful people don't. And the reason behind it is they're one. From a psychological perspective, it's their motivation is geared by fear. So fear starts off any behavior. So when you're fearful that oh, I might continue this lifestyle, I got to be working all the time, I got to be stressed out. I might burn out from this current job situation. I want to become an investor, okay? That's the only way out. That's the freedom I want. And if not that, I got to just burn out. Okay? That's based on fear. So they go out of it. But something that allows to continue is the motivation of the future. A lot of people forget why are you doing the trade for? Why. Why did you anyway start what future do you want? And they don't motivate their self. Look into the, the future of what lifestyle you'll get by investing your time and money and your effort now will pay off so much later on. But the brain can't. Brain is not that smart to really like every day without being. Being minded. Yeah. Reminded you're like there's no way that brain will be like yeah, I'm doing this for the beautiful future. I want to. So what I did when I started my trade, I always had a goal of how much I wanted to make or how much I want to make. Plus not only the monetary value, but why do I want that? Right. What do I want to use that money for? That was really planned out. So I was looking at that. I still remember I had the paper by the screen. So to make sure that I remind myself why am I doing this for? And it was a good thing. Not because I'm fearful about it, but it's something to go towards. So that's probably the thing. And encouragement from your environment is another thing.

Yeah. So what I'm, what I'm hearing is that to get started that fear motivation that away from motivation is important because that makes you want to change your circumstances. But once you've started moving, you know, there's only so much away from motivation can do. And you need a big goal, you need something you want to move towards, you know, objective to attain, not something to avoid. Is that right?

Exactly. Exactly. Great. Okay. Exactly.

And so how do people. What is the most powerful way that you know of creating that vision that towards kind of goal motivation and reminding yourself each day because like you said, you, your brain can't remember it. You need to show it. So how do you do that?

So once there's different ways of doing it, visualizing it every morning, looking at it.

Telling people what your dreams are to other people. Because a lot of people. Because it's the same thing as fear of failure. You tell people the dream and if you don't get it, then you're a failure.

Right.

So, so plus once you put, you put the word out there, you need to actually take action. So there's a responsibility. So our brain naturally don't tell dreams to people, especially people it matters the most. So for example, for me, if I told my dream to my wife and probably my older sister, it's A done deal, like, if they know it, I need to. There's people in your life that there's definitely. When you tell them that you're going to do it, it's a done deal. So everyone needs to figure out who that person is, tell you, talk about your dream, what you want to get. And regardless of the trading, just talk about your dreams. And a trading is a method that gets you there. And definitely stock trading will be a method of your first step, definitely for freedom, that you know how people think, how to read the market. Because you know what, End of the day, all I learned from the trading is still applicable and business applicable. And real estate, same thing.

Yeah, absolutely. Okay, cool. So the essence of that then is to find the accountability partners or the people that, once they're aware of what I'm trying to achieve, what new traders are trying to trade, my clients are trying to achieve, once they're aware of that, it's, it's a, it's like an accountability trap. It's like, well, I've told, I've told this person I'm in. You know, I have to live up to that.

Exactly. And one thing that you must believe is there's a way, there's a way to win in the game. Right? Right. And because people around you all probably lost money or know somebody who lost money in the stock trade, they're not going to be the positive people that, oh, you're doing stock trade, good for you. They won't talk in that terms. So you want to make sure that environment, it kind of supports you with, okay, your dream is awesome and your method that you use is totally awesome. That kind of environment is very. It's a necessary environment for you to keep going.

Right. So how do you create that environment either for yourself or when you're dealing with, you know, clients in other circumstances as well? Like what. What is a good method for creating that environment that does ensure success?

If I'm correct, how did I keep my motivation up? Is that.

Yeah, right. I mean, or how would you encourage other people to keep their motivation up with an environment? Like, how do you create that environment? If you're, you know, traders are alone, Right. We're at home, there's minimal human contact. How do you get community?

So what? For me, I was part of a trading community.

Right.

So once a week we go to this coffee shop, we sit around, we talk about our own trades face to face. And we also did it online. My wife, who does she not only trades, but she's an investor, she has her investing girls community. Right. And it gives shares idea. Of course there's times that it's shitty shitty trading option and sometimes there's amazing trading opportunity so you get hit and miss. But the whole point is to keep us ourselves engaged with other people sharing ideas and until, until we put it out there and we get feedback from others, our brain doesn't take it as reality. That's as Adrian says we are if we are doing alone and it's me and myself and my story and a whole whole time it's not a reality. You, you never feel like you are a trader and engaging with traders and talking about it, your, your belief of who you are slowly becomes a trader. Once that sits in and you, you now you define yourself as trader. That one part of it is who you engage with. I, I'm a doctor. We didn't become a doctor. I didn't become a doctor when I got a doctorate degree. Actually I became a doctor when I joined the doctoral program and I started hanging around with doctors because I start to think that way and I understand what doctor was about.

Brilliant.

Okay cool.

So in my, in my program the way I teach is a combination of multiple mediums. Right. So yeah, the enlightened stock trading certification program has you know, online video exercises games where people can go and do the learning, the cerebral stuff. Then there's also group coaching where they get together online in a forum like this, you know, online video. Everyone can see and talk to each other and then it's sharing, questioning, debate, getting that input from other people and then there's the online community. So you know, what I'm hearing is to be successful you actually need to engage in those things, the community aspects, not just the cerebral learning.

Yes. Well, if everybody would act based on what you know, the world will be a little bit of a peaceful and more wealthy place. The reality is that's not the case because we want feedback. We don't know. We need to get confirmation. We need to get acknowledgement. For my community that I was joining, we always talked about pre trade meaning before we do the trade what was, what were we going to be trading about and reason why and people gave feedback. That's a good idea. That's or say though that's shitty way of reading your chart and, and get a good feedback. Right. So if you believe on they was a shitty way of you know, chart reading or you missed on something, you say okay, and you will potentially not do a trade that it would be a miserable failure. Right. If you got a feedback before that and then the post trade was I got a win, you know, I made the money. Then people say good job, it was their first win. You know, it's good to celebrate because that keeps the motivation. If you did lose money, you say, well I lost money, but. But everybody says so what did you learn? And you get the feedback too. So you never make the same damn mistake either way. You know, you must talk pre trade and post trade in order to be successful as a trader. That's how. I don't know if there's other ways of becoming a great trader other than you have like a IQ of 260 or something.

And sadly most of us don't.

So I don't mean it.

What would you say to those people who join a program like mine, the Enlightened Stock Trader Certification Program and they're resistant or hesitant to engaging in that community aspect because, you know, maybe they feel like, you know, they don't know enough yet or maybe they just want to get through more of the work first and so they're credible or something. Because I hear a lot of this over and over again and sometimes it's hard to pull people into the community.

Yeah.

What would you say to them?

Well, there's no, no such thing as a dumb question question when it comes to. Unless you suddenly talk about your cat or something.

As long as it has to do with your, the theme of the group. There's no such thing as dumb question because the question that you just asked probably helped like two other people that was had the same damn question or similar question. And second of all, yes.

Like it or not, we will go towards online community more in this near coming future. This is just one type of online community that you will be joining and there will be much more to come if you want to be successful. Right. That's just. World is becoming flat, as one of the books said. It's not really flat, it just means we're so global on the Internet space that you just need to get used to it. And we never got trained in how to use online community. That's true. Right. Nobody is. So it's a great place to start off. I would recommend you already, you're already joining probably these people who are listening to this recording. You're already in a great community. Use it, ask questions, you know, ask if somebody posts, I'm going to trade this or you, I got a result like this and there are some questions like why did you want it to trade that? What was the thing that you made a decision on how do you trade like that? Those kind of things? Ask questions. Because people, when you ask questions, it opens up a conversation and it's just conversation that needs to be opened up.

Yeah. And look, the number of times I've, I've learned something or got a really great distinction from either asking or being asked questions. It's, it's the only way to get step changes in thinking. You know, you can't. I don't believe that, that I can sit here at my desk researching my trading and have an epiphany. There has to be some external stimulus to kind of jolt the thinking a little bit to create that magic. I believe truly the best way to do that is with community.

Yes. There's a funny story.

Historically speaking, why did Industrial revolution happen? What's the question? And the reason why behind that is when Industrial revolution happened a few years before that there was this place called coffee shops started to show up in Europe. And before that, people used to drink alcohol as a way, method of way to get some level of liquid because everything was polluted. Now we have coffee. You went from downer to a stimulant and people were more brighter and what they did was they start to talk in coffee shop, getting great ideas. That's how revolution, Industrial revolution started. Same idea. You just need to talk. So maybe it's a good idea that, I don't know, have a cup of coffee or tea and engage in a social media interaction and you will. It's a habit.

Yeah.

It's not only about trading. This is a habit of successful learning, successful.

Person. I guess it's a habit of being more social. And regardless of what, whatever the platform is, you can't just be a. I'm a, I'm originally not a person person, like a human person. Like I, I'm a researcher.

Yeah.

But look at this. I, I'm talking on Adrian, on zoom, having conversation. And it's natural part of my business. I like, my personal preference is being a laboratory testing on rats.

And mouses. But, you know, that's a preference of if I want to be lazy, bummed, that's what I do. If I wanted to create more impact to the world, create more better living for my family, have a successful life and freedom. I needed to do things that I wasn't trained to do. I need to change my bad habits. And it's all trading, it's all about habit. And I could guarantee one thing that.

I'm grateful for, Adrian, is that when I did the trading, I wasn't in like such program. Didn't fucking exist. I just needed to look for a community. And.

There were communities that were sketchy, man. At the end of the day, they would like try to sell you on stocks that like penny stocks and shitty stocks. And you're like Ludin to. It's almost similar to like a bad meeting with mlm, like MLM business offer.

The sad thing is those groups are still out there. I mean, you know, there's so many.

You know, skanky groups that are just about, you know, pumping up, you know, tiny little stocks. You know, everyone talking their own book so that, you know, pushes this, pushes up the trades that they're already in and you know, so finding the right community. And that's why, that's why I formed the community around the Enlightened Stock Trading certification program. Because I wanted my students who are being trained all the same way, going on the same journey to be able to interact on a regular weekly basis so they can get past that.

Well, maybe.

One time. My wife tends to have a great opportunity of investment all the time.

It's crazy because I taught her how to trade. She never lost money until this point. It's. It's ridiculous, right? You don't happen that often. But one time we had a bad offer that it was. It's a scam offer that happened and I was grateful for her because she never seen a bad offer. In a similar way. Maybe one thing that I could recommend to people that's in Adrian, your group and people are listening to this right now. You is go out there and go to those shitty community like meeting of so called I am a Trader AKA listen to it. They talk about how much they lost that week and they're proud about it and there's no resolution or learning to it. They just talk about how shitty they are and that's there's bad community out there. Once you have a bad community experience, maybe you will have more gratitude towards the current community.

That's right. So the final, the final area that I think really holds people back in the process, there's many, many mental challenges that hold people back. But just in the process, we've already covered taking the first step, we've covered, once you get started, why people stop. And we've covered, you know, how to kind of get. Get past that point with community and so on. The last area that I see people fail to progress is when they have a system, when they have a set of rules and it's all tested, it's ready to go, but they can't pull the trigger.

Take that first trade, they don't follow through and actually launch the career. What holds people back from that final step? They've done the testing, they've got the rules, they've, you know, they should have some level of confidence because they've done back testing, they've followed the program, they theoretically ready to go, but just can't pull the trigger.

Well, I would say congratulations, that's your first step to the freedom. And in us there's a training platform called sync or swim, right? And it's T H I N K but it sounds like sink or swim, right? So once you go, you need to. What it is, is your. It's great. Your unconscious mind knows what's coming because once you pull the trigger, there's no going back. And your, your unconscious or subconscious or non conscious, whatever words you wanted to choose, your brain will hold back to your comfort zone, which is right now, here and now. Regardless of. It's funny because I used to do forensic stuff too and people who are in domestic violence situation, the wife that's being beaten up, sometimes it's the husband that's being beaten up. But they don't get out of the marriage because at least that pain they know, right? At least that bad situation they're comfortable because they know that it's bad. Even though they feel like they're gonna be killed at some point. And I'm sure the, the students, you have a lot of them, a lot of you that's listening, your spirit was dying as you were working and, and you know it. But your dying spirit is comfortable because you're used to it. And sadly, right? And when you start off this new career as a trader, it's such an unknown world. So your unconscious mind will. Will dodge evade unknown over possible deaths. Alright? And you must know this and it's not that bad. Seriously, it's not that bad. People, people who you hear about stories about the worst case scenario, what if, right? Your brain goes, what if before you pull the trigger. What if, what if, what if. But that, what if it's not going to happen. What if I lose all my savings and my life expenditure or more than that because I leverage so much if I become a trader. I'm sure you haven't been taught to do that. Not if you've done my program exactly.

Watch.

What was it? Watch. Wolf of Wall Street. Oh yeah, right. If you're, if you're one of those past literally really passive investor, one day you get a phone call and you get to loot into you get sold into this sales talk of investing your money on a shitty stockhold that if you do that, then yes, your life savings will be gone. If you signed up for 401k, Ross, IRA, RRA, you know, any type of savings account kind of stuff the government has set, mutual fund shit, then yes, you will lose money. Because broker, if you trust broker, you'll be broke is all. You know the joke that we always say, traders are not brokers. You are going to be a trader. We are traders, so we, we know. Plus on top of that, we know how much we are going to lose. Right? You should know how much you're going to lose. Absolutely. Because that's how you set the trade and how much you are potentially going to gain. Or more than that. Right. That point. Or more. Right.

But here's the problem. We go to school for 13, 14 years. 12 years, whatever it is, right. And we're trained, it's ingrained in us to get the right answer to not be wrong. One of the number one keys to success in trading is to know when you're wrong and cut your loss and get out. Take the loss, take the mistake before it gets big. Right? But we've had so much time, so much conditioning to ingrain us that we have to be right.

Yes.

How do, how do we get past that? I mean, I know I get past it by just applying a trading system and just following the system. And I judge my being right by did I follow my system, not did I make money that day or that week or did I win on that trade. So that's my method. But what would you suggest?

My method is one of my trading teacher said to me, do 100 trades right on paper, see your hit rate and unless your hit rate is not good, you never go and trade. I didn't listen to him and I went into trade right away and I lost money, obviously. And then after that I actually did practice more. Practice is a point. And I made sure what my hit ratios was. And once I, I'm very logical in that sense. Once that was done, I knew as long as. So in a way the practice, this, when I did the practice, the system was in my body, right? If I did that much practice, it's in my body, I could close my, not close my eyes, but I could like almost automatically go through the whole process where to push, what to do, you know, there's no mistake of oh, I forgot to press that or I forgot to calculate that. At that point I was like, and you're done. And after that you already set the stop loss and all that. The computer would take care of it. Come on.

You know. Yeah. It's not that hard after that. Okay. Is. It's a lot about, you know, being outside your comfort zone. Fear of failure, all of those sorts of things. But if you simulate, if you practice, if you repeat enough, it becomes part of you. It becomes in your comfort zone.

Yeah.

You know, if I, if I added up how many losing trades I'd taken.

Yeah.

Over the last 15 years. I mean most people would, would seriously fall off their chair. But it really is for me now it's place the trade, place the stop loss. Wait. And if it gets hit, the stop loss gets hit, the stop loss gets hit, the stop loss gets. It's like, okay, next.

Exactly. It's.

Too much. What is it? It's too much emotion attached to the trade.

Right?

I would say, yeah, it's for me, I'm an investor. So it's just more like. It's just how it is. Right.

Acceptance.

Acceptance. We don't. I never seen. At least if it's professional, you probably will see some of them, but majority of professional baseball player, professional football player, professional whatever, athletes. I never seen them go like, shit, I missed that one shot. Right?

No, it's not about the one shot.

Yeah. It's always. They turn it around, they refresh their mind and alright, next one. And they move as they practice. And I'm sure people who's listening to this would say, to this thought, it would have been more easier as I know it. That's one of the little voice, right. The unconscious mind saying, and I got to tell you the truth, there's no such thing as easy money because easy money will go out easily out of your pocket. That's for sure. Because you have put your time in it, you put your practice in it. That's why you are allowed to grab onto that wealth that you put your effort in it. And if there's anybody who said.

It'S going to be just, you know, all the machines will take care of it or you know, in an hour you'll be good at it and it will make tons of money. Not going to happen. Not going to happen. Legally, ethically, morally, not going to happen.

No, absolutely, absolutely.

I know that's. That's what the brain is saying.

Yeah. So the one.

The one.

I guess the distinction for me is that when someone is not pulling the trigger, they're not taking action. It's fear and concern around that one trade, that first trade or that second Trade or what is going to happen when I pull the trigger this time. Yeah, but in reality, successful trading is not about one trade. It's about the process you follow. Would you agree?

Yeah, it's a process. It's the bulk. The bulk, yes, it's a bulk of the game. Yeah.

And so my students trade systematically. Right. So they've got.

Rules that tell if this and this and this happens, then buy. If this or this happens, then sell. Right. So it's. There's no emotion. So success is not about one trade or two trades or 10 trades. It's about the many hundreds of trades you make over your year or over your career. And following that process. Well, and I guess when you think about it like that, it takes the pressure off each individual trade because you can reward yourself by following the process. And the wins or losses don't matter that much.

Yes, I, earlier on and the training that I gave to my wife, she said, like now she actually lost some of the money on some of the trades. And I said, I said, good for you because you followed your rule. That's more important than not following the rule.

The success always come from being able to follow rules.

Absolutely. Great. Look, that's been fantastic. Dr. Endo, any final thoughts or words of wisdom that you would want someone to hear before we wrap up?

The thing is this. In the beginning, your wins may look small, but once it gets to a certain point, it becomes exponential. By following the rules, you will see yourself a totally different result that it was totally not imaginable a year ago. Year later, you'll be standing in the different location, in a different position, making a different amount of money that you did not imagine by just following the rules. But your brain is not capable of imagining that. So you just need to have the faith into the system and follow it and just wait. Give yourself a year. It's got to be a totally different place. A lot of times when I do trades as an investor, there's no way that I could imagine who or how or what I will become in a year.

Great. Dr. Endo, thanks so much for your time. I really appreciate it. Look forward to speaking again soon.

Yes, thank you, Adrian.

Thanks so much.

Bye.