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Interview with Michael Milligan - Part 3
** Trading Mindset ** Q. Equally, profits and losses can have a significant psychological impact on traders. How do you deal with them? I learned a long time ago that these trades do not know each other. I analyze everything I do to see why it did or did not work. I try to learn from my past experiences then I move on. In sports you learn to stay in the moment and not to beat yourself up. I never get to high nor do I get to low. 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? 1. YOU WILL LOSE MONEY! Does the thought of being wrong in a trade bother you? If it does this is not for you. 2. No matter how much money you have trade like you only have $10,000. There is a learning curve. If after you get thru this time period and you still have your $10,000 then you were successful 3. Treat this like a business. Leave your emotions at the door. Your emotions will lose you more money then anything else. 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? Yes!! Q. Is trading as difficult as many people appear to make it seem? Trading is not difficult. What is difficult is the discipline and commitment that trading requires. Q. What are the 5 most important character traits of successful traders? Please feel free to briefly explain them. 1. Discipline- the ability to sick to your plan and strategy. 2. Vision – the ability to see what is there, not what you want it to be. 3. Eliminate the Noise – everyone has an opinion. Traders have to learn how not to trade by consensus. 4. Critique – the ability critique your strengths and weaknesses. I try to always use my strengths and develop my weaknesses. 5. Open minded – realizing that you do not know it all and you have to be a student of your craft. 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? I believe trading is a lonely experience. I believe that over time you can develop trading buddies, but only after you have defined who you are and how you trade. If you have too many buddies early in your trading career you will find yourself trading their ideas and ways instead of your own. As a trader you must identify who and what you are. 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? My biggest weakness is losing interest in the markets. I am at a point in my career that I pretty much know what the outcome is going to be and making money is not the goal any more. The goal is to be intellectually challenged. 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? I do not experience self doubt. I have a process for trading. I know that if I do A, B & C; then the outcome is going to be either D or F. No guess work or second doubts. 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 learned a long time ago to ask myself if I am doing this trade out of emotion or logic. If the answer comes back out of emotions, then I re-evaluate the trade. There have been times when I have left the office and trades because emotions were too high. In my experiences this usually is at its worst when I have a significant profit in a trade. Q. If you experience a large profitable trade, do you reward yourself in any way? Not major. I might treat myself to a nice meal or something for the kids. I am always guarding myself against extreme highs and lows. The nature of our business is that we make and lose money. Q. In your entire trading career, what are the biggest lessons you’ve learnt and how did you learn them? I found that my biggest losses usually came after my biggest winners. I tended to get a little cocky and also take more risk. I guess I am older and wiser. Q. To finish off, if you were to start trading all over again now, what would you do differently to what you did originally? I cannot say that I would do anything differently. I believe that every thing in life is a lesson. I have learned more from my mistakes then my winners. The whole experience has been wonderful and I am still learning.
Michael G. Milligan, CTA, is the founder of Quantified Systems, a futures research firm. Mike is also a finance professor at California State University Fullerton. Prior to teaching, Mike work on Wall Street for twenty years. He founded a private equity hedge fund, Charter Court Corporation, where he was head trader. Mike was head of research for EDX and Associates, a market maker for options on the Pacific Stock Exchange. Return to the Index of Interviews ...
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