At first, trading might seem easy since all you have to do really is open and fund a brokerage account to place a trade.  But anyone who’s been trading for any length of time quickly learns that there is way more to trading than just pressing a few buttons.

So it was my absolute pleasure when I got a chance to speak to Brian McAboy, who’s a trader as well as trading coach himself.

brick background

Brian McAboy previously worked as a mechanical engineer with a focus on quality control.  At one point in his career he was introduced to trading, and once he began trading his life would never be the same.

While finding his own groove in trading, he leveraged his quality engineering background to document his process and apply it to his own trading.  Several years after placing his very first trade, he found the opportunity to help other traders do the same thing and began coaching.

One thing that Brian emphasizes that you don’t hear much about from other trading coaches is the need to treat trading as a business, with a properly documented business plan.  Many intelligent people think that trading doesn’t need to be taken seriously like any other business might.  But in trading, whether or not you realize it, you need a plan and you need to follow your plan in order to be successful.

Brian was very generous with his time and spent about an hour speaking with me about many aspects of trading.  This interview is well worth your time to listen to.

Here’s what you’ll learn in this interview:

  • How long should it really take to find your footing in trading.
  • Why he discourages most people he talks to from trading if they’re not really ready to take it on as a business.
  • What are the distinguishing traits in people that separates those most likely to succeed in trading versus those who aren’t.
  • Why he loves to coach other traders.
  • Why most trading psychology stuff on the web is actually not helpful at all.
  • Why thoroughly documenting your system is the key to having 100% confidence in your trading.
  • How does someone know when they’ve found a trading manner that fits their personality
  • How he leveraged his engineering background to treat trading as a process
  • Why having a properly documented “quality manual” in your trading business that anyone can understand is how you truly develop consistency in your trading
  • What’s the one piece of advice he gives to traders starting out

Click here to listen or scroll down to download

Podcast Download

Where you can find Brian online: www.insideouttrading.com
Trading System Mastery: www.tradingsystemmastery.com
Trading as your Business: www.tradingasyourbusiness.com

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Just to reiterate, this is not investment advice.  I’m only sharing what I’m doing personally, which doesn’t mean you should invest or trade like I do.  Please read the disclaimer below.

It looks like the drawdown that I’m currently experiencing may be nearing its end.

July was actually a very profitable month for trend trading in a number of commodity markets. The strategy that I trade and the markets that I trade experienced strong trends during the month. I’ve recovered about half of the account equity I lost during the worst part of my current drawdown.

When I ran a Monte Carlo analysis, I realized that based on 3 and a half years of backtested and real trades, I was very close to reaching my risk of ruin point. Fortunately, my account has recovered a bit and I’m still able to trade the strategy that I know that, over the long term, is profitable.

I’m excited to give you an update on my trading performance for the month of July. I’m still in the red for the year, but because I have some peace of mind, I’m not overly worried about it.

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IMG_2234I never set out to be a trader. In fact, I went to school to for accounting and ultimately became a CPA. I was trying to subscribe to the adage (which is really a myth) of going to school and getting good grades so that I could get a safe secure job and live happily ever after.

Except it didn’t exactly go that way for me.

I landed my first job as an auditor and even before I started I was 100% sure I wouldn’t like it. And I didn’t.  I loved accounting in and of itself but while I was grateful for the opportunity and learned skills that would definitely be useful to other areas of my life (like trading), I knew in my heart that the lifestyle of an accountant wasn’t what I wanted.

I actually couldn’t stand the idea of another year as an auditor, so I went out and promptly landed another job, this time at a boutique hedge fund in New York City. At first this job was actually a lot more hands on and the work environment way less stuffy, but about 2 years in I realized that I was still completely unsatisfied, and I couldn’t figure out why.

Also having to show up for work at 7:30am every day was really starting to screw with my circadian rhythms and sleep. The chronic insomnia that ensued during this time is still something I struggle with to this day. So for the sake of my health and some other stuff, I started looking for yet another job hoping to find some satisfaction with my work.

I did find another job, this time at the world’s most prestigious investment bank. My new job was much more intriguing and the company was (and still is) really a world-class one. My colleagues were amazing and I was super grateful to have landed a gig at one of the world’s most prestigious companies. Yet I still had one problem:

I didn’t see a future for myself there. And not because of lack of opportunity, but because I was beginning to see that the career path I was following since graduating college wasn’t one I actually wanted.

And if being an accountant wasn’t what I actually wanted, then what did I want?

This question took me a really long time to answer and that answer didn’t exactly fall out of the sky.

Also around this time, I had started to eat a vegan diet and I was absolutely loving it. I started imagining myself teaching people how to cook amazing vegan food that you wouldn’t even notice was vegan (for all my meat-loving friends out there).

I thought about becoming a registered dietician, but the idea of going back to school (I hated school) was actually worse than continuing to do what I was currently doing.

Then I did some Googling and discovered an awesome health coach training program, one that didn’t require me sitting in a classroom and was focused on the more holistic side of nutrition. So I signed up and decided that I found my new career path.

There were also other things happening in my personal life. I had recently gone on a trip to New Zealand and developed a long distance relationship with a man from Australia, and I was seriously contemplating and ultimately decided to move to Australia (from New Jersey, USA) to give our relationship a real chance. I had no desire whatsoever to work for anyone else ever again, so I was very keen on making my career transition as smooth as possible.

Then the 6 months before I made the move turned out to be the most painful of my entire life. I lost both of my parents during that time, packed up all their stuff and mine, and even moved their dog, Sammy, with me to Australia. (For the purpose of this post I’m really understating everything that happened).

When I finally got to Australia I was flat-out depleted. But I finally had the space in my life to just be left alone for awhile, something I’d been starving for for years.

Mostly I felt lost because I realized in the midst of all that drama that I actually didn’t really want to be a health coach. It was an amazing program to go through and an awesome path for some, but what I honestly wanted more than anything was greater freedom and space with my time.

And I also wanted to build a legacy that would have a life beyond just me. I’m forever grateful that my parents left me a gift when they passed on, and I wanted to use this gift to set me and my own budding family up for life, and for generations to come.

I had no idea how I was going to do this. I had always been into investing and finance, in fact that’s why I studied accounting and worked in finance in the first place. But aside from learning to invest in mutual funds, neither my schooling or career taught me anything about investing.

Around when I first got to Australia, my boyfriend (now fiancé) asked me if I’d ever read the book “Rich Dad Poor Dad” by Robert Kiyosaki. I actually had never heard of it. He then got it for me from the library thinking I would like it.

I did, and it’s still the most thought provoking book I’ve ever read in my life. It really opened my mind up about investing (and how ignorant I really was about it).

I became consumed with creating financial freedom for myself. I was reading one Rich Dad book in particular that set me on my path to becoming a trader. In it Kiyosaki gave an example of how you could buy a “put” option as insurance against a stock going down in price. How if a stock’s price goes down and you own a put option, it’s like having insurance on a house. Basically, you can protect your investment (even in the stock market).

This was an eye opener for me. Having spent 5 years working in the finance industry, I was appalled that this was the first time I ever heard of anything that could protect stock market investments against losses. I was dying to learn more.

I started Googling about options and I found a wonderful site about options trading. I was hungry to learn how to trade and smart enough to know that I couldn’t possibly learn to trade effectively on my own, so I hired this man as my first trading coach. Investing in his course was easily some of the best money I’ve ever spent.

I went through the course and began paper trading. Though one major mistake I made was being overzealous and jumping into trading with real money much too soon, as well as not having my own psychology handled, which is what I’m sharing with you on this site.

I did so-so my first year of active trading. I had some losses and some gains, then some losses that wiped out those gains.

Like I said, I didn’t exactly have my psychology handled.

When my mentor first explained to me about the proper trader’s mindset, I couldn’t exactly relate to what he was trying to tell me. I just wanted to jump into the markets and make money (which is the exact same mistake 99% of new traders make).

It took me a full year of watching my trading account and emotions yo-yo that I finally stopped to consider what he was trying to teach me.

And I realized that there was so much more to trading than just dollars and cents. That learning this skill was going to become the biggest personal development exercise I’ve ever endeavored.

So where do I see this blog going from here? I can honestly say that trading has taught me a lot about myself, that it’s pushed me to confront things about myself I didn’t necessarily want to look at, and it’s taught me a great deal about humility. I’m aiming to show you my journey as it unfolds, and to be 100% transparent about my progress. You won’t see me bragging about 200% returns yet not telling you about my drawdowns or bad periods. I’ll be showing you the good and bad times, the bumps, the bruises, and of course, the victories.

I’m happy to offer up any insights or lightbulb moments I have. If you have any questions or tidbits that you want to know more about, leave a comment below.

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Just to reiterate, this is not investment advice.  I’m only sharing what I’m doing personally, which doesn’t mean you should invest or trade like I do.  Please read the disclaimer below.

If you use any kind of trend following strategy, when trading futures, you’re going to have drawdowns.  There’s no question about it and no way around it (and anyone who tells you otherwise is probably lying through their teeth).

Having said that, if you understand and have faith in your long-term edge, you know that you have to keep trading through a drawdown.  The ability to handle yourself and your trading through a drawdown is what truly makes or breaks you as a trader.

In fact, the one thing that all the Market Wizards have in common is their ability to handle drawdowns, because when the bad period is over, you will more than make up for your losses.

But do you know that you’ll survive and handle your maximum drawdown when you’re trading?  Because you will have drawdowns, and the one critical thing you have to have is enough capital to keep trading.

I talk about this is in my latest video, and I have a link below to this awesome tool I found to help you understand your biggest risk in trading – which is running out of capital.

As promised, here is the link to the Monte Carlo Simulation I found that I used in the video.

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Just to reiterate, this is not investment advice.  I’m only sharing what I’m doing personally, which doesn’t mean you should invest or trade like I do.  Please read the disclaimer below.

In the midst of the current trading drawdown that I’m experiencing, I’ve been spending a lot of time learning more about the appropriate mindset of a trader as well as really investigating my own psychology.

The more I’ve learned, the more I realize that successful trading is just a mental battle with yourself.  And to be successful at trading, you have to think completely differently to what is generally taught in society.

Successful trading is completely counterintuitive, and without fully understanding the dynamics of market participants as well as really taking stock of your own psychology, it will be very challenging to develop the traits necessary to be successful at it.

I just finished reading Trading in the Zone by Mark Douglas, and he does a beautiful job of describing the individual trader’s psychology as well as the psychological attributes an individual can have that may make them successful in society, but that those qualities are the same qualities that may make them horrible traders.

He talks about learning to think in terms of probabilities.  Basically, there’s no way to know whether one individual trade is going to be a winner or a loser.  But over a large series of trades, overall results become much more predictable.

One thing he talked about that really resonated with me is the part of human nature that wants to be right.  And why this desire to be right interferes with trading successfully.

If you follow most trend traders or read anything about them it may surprise most newbies to learn that successful traders (the ones who are successful over a long period of time) actually have more losing than winning trades, yet they still profit over the long-term (even when going through nasty drawdown periods).

In Trading in the Zone, Mark Douglas writes:

“There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”

This is where the counterintuitive part comes in and what most newer traders don’t take the time to really understand.  Losing trades, for most people, trigger emotional pain.  Maybe it’s the emotional pain of getting wrong answers on a test and losing points as a result.  We’re conditioned by society to have a high win rate, because if we don’t we’re all a bunch of failures, right?

I’ve thought alot about this lately in relation to the way I was brought up.  Up until I got to university, I was always among the top students in my class and got among the highest grades – but not the highest.  I graduated 2nd in my class from high school – in fact, I never once topped my class in any quarter, no matter how much I tried.  There were always some tests where I got enough wrong answers to put me in 2nd, not 1st.  Don’t get me wrong – at this stage in my life I could care less about high school, but I can still remember how trying and not being able to beat the top person in my class even once was a blow to my ego.

You go to school and get programmed that the best students get the best grades because they get the most answers right on tests.  The students with the lowest scores get labeled as failures.

If you’re reading this right now and you happen to be a new trader who’s ever been an achiever, having a low win rate in trading is going to bring up a lot of the same emotions you felt whenever you missed at something.  A string of 10 losing trades in a row may bring up the emotional pain of getting bad grades or whatever other trigger.

So when you get to trading and discover that you can be highly profitable without a high win rate, it’s going to sound strange. You’re still going to want a high win rate on trades because psychologically, it’s what you understand and what feels good.

Let me be the one to share with you that the markets may be the one place where the having a high win rate won’t put you ahead of the class.

Focus on thoroughly understanding your trading strategy, whatever it is, if you truly want to be successful at trading.  Learn to think in terms of probabilities.  For all you know, your next 10 trades might be total losers, or they might be monstrously profitable.  Trying to be right in the markets is the undoing of most new traders.

Focus on managing your risk so that no one trade will wipe you out.  Trading is not like school, you won’t win any prizes for trying to be right all the time.

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