My interview with Mercedes

Mercedes has been trading for 9 years, she is also the Author of The Buddhist Trader and has a website http://www.throughhappiness.com where she teaches people how to achieve their trading goals through happiness.

Here is my interview with Mercedes (I am the bolded words she is the non-bolded words.)

I always loved the markets. I trained at a bank and my most enjoyable time was the time spent at the stock exchange during my training. After my divorce nine years ago I decided to start trading because I had a stock portfolio and figured that I could improve my returns with short term trading.

What type of trading would you say is your expertise? Day, swing, trend, long term etc. Why do you like that kind of trading?

My preferred method is trading off the 60 min chart. This also allows me to do other things instead of being glued to the screen all the time. I am very good at seeing the bigger picture but find it difficult to stay in positions for days and weeks, yet scalping to my mind is immensely tedious.

What where your highest and lowest points as a trader?

Let’s start with the lowest point. When I had my first futures trading account I accidentally placed a trade, trading the big S& P contract. I did not realize that I was trading two big contracts instead of the mini until the next day when my account showed a substantial loss. I called my broker for advice and he recommended that I stayed in the trade. Things went from bad to worse. I managed to lose 40% of my trading account with one trade following stupid advice from a so called expert.

My happiest experience was when after a long period of thinking that I could not trade and probably would never trade again I woke up one morning and knew I had to go back into trading because this is where my real love is and always has been.

Suddenly I could trade. It still amazes me when I see how much clarity I now have looking at the markets. This does not mean that I don’t make mistakes, of course I do. There is always room for improvement. But the point is that I managed to reconnect with the thing I am most at home with after I did a ton of personal development work expanding myself awareness.

Would you like to share any trading stories?

There are many, this one is perhaps most poignant of learning a trading style true to one’s nature. I have worked with many professional traders each having their own very strong ideas of what I should do to become a master trader. One of my professional trader friends always trades off the 1 minute chart and insisted that I must learn to trade off the 1 minute chart too if I wanted to become a proper trader, a “pro” as he put it. He advised that I should trade the currencies to learn to scalp. Dutifully I opened up an FX account. In the mornings, I would be sitting in my bed with my laptop at 6.00 am in the morning looking at 1 minute charts hoping to catch the early morning moves of the European opening.

This exercise was an exercise against my nature. I do not like getting up that early and I hated trading the one minute chart. Not to mention that I do not like the way the price of currencies jitters about.

It really was quite funny when we compared entries and exits each day. My professional friend would be in and out three or four times while I was still in the same trade, normally agonizing. I developed a distinct dislike for the one minute chart and three minute charts during that time. It is so against my philosophy of life. I am a farmer by nature and not so much of a hunter gatherer.

But while it lasted I did everything to convince myself that I would become a scalper.

One day I was invited to a party with lots of professional FX traders in the city. Most of them are as mad as hatters and drink like fish. At some point we were singing. “I am a scalper, I am a scalper I am the world’s very best scalper.” I can still remember the tune now. Well, I never was and never will be a professional scalper but that’s okay.

If you could start all over again would you have changed anything? And if so can you please explain?

If I could start over I would handle trading in a very different way. For starters I would follow my own advice which I gave in my book The Buddhist Trader, which is: “Work on your psychology first.” Most new traders fail because they have unresolved psychological issues which confuse their view of the market.

I would never again entrust my money with a broker. I lost a ton of money through following bad advice. I do not want to bad mouth all brokers. There are naturally good ones out there. Unfortunately, I have not come across many. Most have no idea about proper risk management, nor about market cycles and timing. Had I had the confidence to just do my own thing right from the beginning of my trading career, I would have lost money for sure early on but probably only 10% or 20% of what I ended up losing in the early days of my trading.

Your new eBook the Buddhist trader goes into detail about how to use Buddhism to help traders, how has Buddhism effect your trading?

What do you give more weight to, fundamentals or technicals?

Technicals. I pay no attention to fundamentals. I believe they cloud my vision of what I see in the charts. Technicals give advance warning before the fundamentals confirm. In true Buddhist fashion I also prefer the objectivity of technichals. Long short, overbought or oversold. It is all the same. All that matters is that I am on the right side of the trade and technicals provide clearer signals.

When and how did you start incorporating Buddhism into your trading?

Did you have a mentor to help you? And if so how have they added to your success?

I met several well known and successful traders. Jake Bernstein helped me a lot with my trading, in particular understanding the nature of cycles. A friend of mine is a hedge fund manager and trader. Paul taught me Elliott wave which I use a lot in longer term analysis. Understanding different time frames and knowing what time frame to use is a huge help when trading and I learned that from Paul. He also taught me about tenacity and that one never gives up even when one has a losing streak.

Many people look up to giants such as Warren Buffet and Jessie Livermore to inspire them and help them keeps going when times get rough. Did/Do you look up to anyone?

I model myself on people like Jake and Paul. It is good to have people who one can look up to. It keeps one on course. And since you mentioned Warren Buffet, I think he is the archetype of what being happy as a human being is all about. Happiness comes before success, be it trading or whatever. Being happy means that you are yourself and do not feel the need to fit into the straight jacket of convention. I love to see how totally unaffected Warren Buffet is by his success. This is a sign of quite an advanced individual. He does not identify with his success but just with himself as a human being.

I also follow Genpo Roshi who is a Zen Master. Genpo Roshi has made Buddhist principles accessible and put them into context in today’s world. I love his humbleness and the calm empathy he displays. Genpo Roshi once said that it is harder to be a decent human being than becoming enlightened. He is a wonderful example of a decent human being. Humbleness is so important, no matter how successful one is, one is after all only a human being with human with the good and the negative sides. Remembering that in trading as well as in life is very useful and keeps one level headed.

What would you tell someone who is just getting into the stock market?

Start small. Don’t bet all your capital on a market move. Never ever operate without a predefined stop loss. It does not matter whether it is in your mind or in place physically, as long as you stick to it. This advice goes for investors too. If a broker tells you that you do not need stop losses find one that believes in setting stops. Particularly in the present market environment stops are imperative.

Never have all your eggs in one basket. If you are trading shares, make sure that you spread them over different sectors which react differently in different market cycles. It is no good having your portfolio full of different bank stocks for example. They will all behave in the general direction of the trend of the sector.

Learn as much as you can about the workings of the universe, because you will understand how the markets work when you understand universal laws. Work on yourself. Personal development is a journey, just like life. It does not stop once you read a book or two but is an ongoing process. Learn about trading every day. You become what you think and what you do each day. Subscribe to a good technical analysis service, one that stays out of political commentary and just analyses the markets. And finally develop your own trading system, having the right psychological mind set will help you to do that.

Are there any last words you would like to say?

Accept that losing is part of the game of trading. There is no system that is a 100 percent profitable. The markets are constantly moving, just like life. The character of today’s market is different from, last year or 5 years ago. Every day is different and there are no guarantees just probabilities. Once you can accept your losses without getting emotional you are on the way to becoming a good trader. After all, wanting to win all the time is like insisting that a coin only has the side with the heads.