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Doug Hirschhorn has a Ph.D. in Sport Psychology, and was a Division I baseball player and former floor trader at the CBOT. Dr. Doug advises major financial institutions, multi-billion dollar hedge funds, trading and corporations. He is the co-author of The Trading Athlete and is a regular columnist (a.k.a. "Head Coach") for Trader Monthly Magazine.

I really enjoyed speaking with Dr. Doug about how he consults with professional traders. This is the second and final part of that interview.

Optionetics: What tips would you give new traders about how to overcome the fear of placing a trade/losing on a trade?

Doug:  Most traders make the mistake of thinking that they have to be "right" with a winning percentage over 80 percent in order to earn a living as a trader. Not true at all. People have to realize that even the best traders make money only about 53 percent of the time. So stop trying to be perfect. Just make smart trades and take smart losses.

Optionetics: Is there anything you can single out as the most important thing you would tell a trader to consider before placing a trade?

Doug: Calculate each trade''s expected value. What is the probability of it working and how much will you make vs. what is the probability of it not working and how much will you lose. If the reward outweighs the risk by at least 2:1, then you can put the trade on knowing you made an objective trading decision. This does not guarantee the trade will work (remember it is a 50-50 game) but if cut your losses and employ this objective strategy consistently then, over time, you will make money trading. It works for the Casinos.

Constantly ask yourself the following question, "If I had no position on, what would I do?" This simple exercise helps traders take the emotions and money out of their trading decisions and allows them to view their trades objectively. Traders have to remember that the market does not know how much they are up or down so the trader should not be focused on that either especially when making their trading decisions.

Optionetics: Which do you find most common in traders—over trading or under trading (and why)?

Doug:  This is a tough one but I would say it is overtrading because it is so easy to get involved in the market these days. Access is low cost and geography and information is no longer a barrier. Anyone and everyone from anywhere in the world can open an account and trade. The problem is the simplicity of getting involved gives a false psychological impression that the game is "easy" as well.

This is a painful lesson which traders learn early in the game and the frustrating part is coming to terms with the fact that something that looks so easy could actually be so hard to make money at. Learning how to trade is relatively easy and only takes a few months. The hard part is really learning how to think (objective) and act (disciplined) like a trader. Helping people achieve that is essentially what I do for a living.

Optionetics: How badly, do you think, money-focus affects otherwise good traders?

Doug: I would say it is easily the # 1 reason for failure in trading. It sounds simplistic but if traders could just see the numbers on the screen as points in a game as opposed to dollars or what I will refer to as "Tangifying" (the art of turning unrealized or realized P and L into tangible things like cars, mortgages, rent, etc.) then they would be able to turn their entire trading career around or take it to the next level. Almost every person in the world has a mental number in their head of what is "a lot of money."

The best traders I know think in terms of percentages. This helps them focus on making the right trades rather than how much was made or lost on the trade. Teaching this skill to successful traders is what allows me to help them take their game to the next level.

Optionetics: What is the best piece of advice you could give a novice trader in today''s markets?

Doug: Understand yourself first. Know what your natural strengths are and create a trader style that fits it. This takes a great deal of self awareness and self discovery but one tool I provide my clients with is my 18-step daily trading journal. It forces them to look more closely at what they are doing and how they are doing it. I then have them email it to me so I can give them daily feedback and keep them accountable. My website www.Tradingdr.com has more information about this for those that are interested.

Optionetics: Thanks, Dr. Doug, for speaking about your unique niche within the trading business with our Optionetics reading audience.

To read Parts I and II of this interview, please click here.

Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
Visit Jeff’s Forum
Listen to Jeff at www.ProfitStrategiesRadio.com

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