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Interview with Joe DiNapoli - Part 3
** Trading Mindset ** Q. Equally, profits and losses can have a significant psychological impact on traders. How do you deal with them? My trading approach is geared to a very high percentage of winning trades. I therefore seldom feel the anguish of losses for any significant period of time. It all depends on your psychology. Some people can deal with a high percentage of losing trades so long as the bottom line is profitable. That’s not me. That’s why I employ leading indicators in my approach. It’s the only way that I know how to achieve a very high percentage of winning trades. Know yourself first and then acquire a trading approach that fits you. Most new traders are actually more comfortable with losses than profits because they’re more used to them. Q. Isabelle, 36 is a mother of two children and stays at home with them during the day. Her husband works full time and his salary meets all their financial obligations comfortably. Isabelle arranges an appointment with you to discuss trading – she has never traded before but knows you can help her get started with some initial guidance. What will be the 3 most important things you tell her in the appointment? Far from telling her anything, I would be asking her a lot. Things that have to do with her perceived financial security and that of her children. I’d ask about her risk tolerance and the time she would have to devote to such an enterprise. Given the situation you have outlined, it is more likely, that I would suggest an alternative way for her to make money than to embark on something as difficult as trading. Q. Jack, 58 is a very successful business owner who wants to start trading as he slowly moves into retirement and away from work. He has arranged a similar appointment to Isabelle – would your advice to him be identical to Isabelle’s or different? My questions would be similar. The problem with Isabelle, Jack or any other person, who is new, is that they’ve been told lies. They have been fed false advertising and their expectation of what they will get out of trading is totally unrealistic. My best clients are neither of these people. Rather they are someone who has been involved in the markets for two to five years. Someone who has been kicked around and learned the hard way just how difficult this game can be. I can teach this kind of person and this kind of person more importantly will appreciate what I have to offer. Q. Is trading as difficult as many people appear to make it seem? No, it is more difficult than that. It is counterintuitive and although it may be the best psychologist one can ever have unfortunately it is also the most expensive. Q. What are the 5 most important character traits of successful traders? Please feel free to briefly explain them. Patience Q. Trading can be a very solitary existence – especially in the early days when you are learning, and often feel as though you have no idea what you are doing. Do you find trading a lonely experience? Does this sit well with you? If not, how do you deal with the loneliness? Actually trading can be a lonely experience in fact to be good at it you need to have independence of thought. Unless you are in the business of teaching others, once you get to a certain point, you should stuff cotton baton in your ears and tape your mouth shut. Most people won’t listen to you anyway. Teaching my approach all over the world to deserving people keeps me from being lonely. For the average trader however I’d suggest they would be better served by buying a dog for company and stay clear of chat rooms. Q. What would be or has been your most significant weakness in trading? Have you learned to overcome it or do you continue to work on it? That’s easy. I require very high percentage of winning trades which cuts down on my overall trading. Don’t get the idea I sit back however. I might get between two and fourteen trades a day in the Emini but that’s on a five minute chart. I teach that loss of opportunity is preferable to loss of capital. The issue is getting that balance right. Do I try to force myself to trade more? No way… Certain personal preferences may be best left undisturbed if they are not all that damaging. Q. Assuming you are now consistently profitable, do you still have times when you experience self doubt over your ability to trade? If yes, how does this make you feel and how do you overcome it? No, I do not feel self doubt. I do however make mistakes - meaning I do not follow the trading plan. This is not purposeful - it is a screw up like forgetting to lower the landing gear. I punish myself in one way or another and move on. There are very good simple techniques one can employ in this regard and I teach these in my Private Seminars. I do not demand zero mistakes from myself. I’m not perfect and I realize it. Demanding perfection would cause too much stress and therefore be counterproductive to me personally and to my trading. I do not however knowingly make mistakes. If I did, I would not trade. Q. Ideally, we would like to be emotionless when we trade – we would certainly make more sound trading decisions more often. How do you control your emotions when assessing potential trading opportunities or open positions? Do you get very emotional at times? I rarely get emotional but emotions can be a good thing when they come from experience. They can for example make you feel uncomfortable when you are violating your trading plan. The best advice I can give I alluded to already – shut up about your profits and losses. Don’t tell your spouse. Have your statements delivered to a PO Box. Just trade. Stay away from the chat rooms and simply follow your plan or study and learn material that is worthwhile, so you can develop a good plan. Q. If you experience a large profitable trade, do you reward yourself in any way? No, not at all! Same with losses. I do however evaluate if I’m trading well… following my plan. Q. In your entire trading career, what are the biggest lessons you’ve learnt and how did you learn them? I’ve learned to know myself. Q. To finish off, if you were to start trading all over again now, what would you do differently to what you did originally? With the exception of driving myself too hard, I would do little differently. Given my situation I did about the best I could. I had to develop my trading methodology. No one taught Leading indicators back then. I had to develop them. I think I’ve done OK and I’ve helped a lot of people along the way. For a large part of my trading years I lived in California and had to get up early - very early as IMM currencies began at 5:20 AM and Equity markets opened soon there after. Lack of sleep ruined my health for a time. I moved east. First to Florida - now Thailand. I learned that sleep is more important than money. Now I get both!
Joe DiNapoli is a veteran trader with over 40 years of solid market trading experience. He is also a dogged and thorough researcher, an internationally recognized lecturer, and a widely acclaimed author. Joe, a registered C.T.A. for over 20 years, has taught his techniques in the major financial capitals of Europe, Asia, Russia, the Middle East, and South Africa as well as in the United States. His articles have appeared in a wide variety of technical publications worldwide. Return to the Index of Interviews ...
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