August 14, 2019

Find Your Trading Edge – Ep 20

Matt Zimberg and the founders of the Edgewonk Trading Journal discuss various topics ranging from trading psychology, methodologies and trading strategies.

Episode Transcript

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[00:00:02]

Welcome to the Optimus Futures Podcast. A place to learn from an industry insider with over 20 years of experience in commodity futures and options. Gain insight to the newest technology, platforms risk management, trading philosophy and advice about the current state of the futures and options markets. For futures trading platforms, deep discount trading commissions, overnight margins and instructional videos. Feel free to visit our website at Optimusfutures.com.

[00:00:32]

Please remember that this matter should be viewed as a solicitation to trade trading futures and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Optimus Futures LLC is not affiliated with, nor does it endorse any trading system, methodologies, newsletter or similar service. We urge you to conduct your own due diligence.

[00:00:32]

Now here’s your host. Founder and CEO of Optimus Futures, Matt Zimberg.

Matt Zimberg: [00:01:12]

Hey guys, it’s Matt Z from the Optimus Futures Show, today we have coffee with traders. So we have Moritz over here and we have Rolf. They came to us from Frankfurt, Germany. If you recall, we actually made an interview with Moritz. I think it was a month ago or so when you were still and where you did it live from Frankfurt. But they’re in the office now. It’s awesome. They created this product, which I think is the best on the political tool in the market for traders. I know that best is subjective, but I think from everything that I’ve seen, I have to just for legal disclaimers, It’s my opinion. I think it’s the best from what I’ve seen in software, and I’ve been in the industry for 20 years. It’s a great analytical tool. It allows you to input the numbers in a form of a spreadsheet. Right?

Rolf Schlotmann: [00:00:55]

So, yeah, it’s very similar. It does look or work like a spreadsheet, but its own self.

Moritz Czubatinski: [00:01:00]

It’s much sexier.

Matt Zimberg: [00:01:01]

Right! Exactly. Thank you. That’s why I always love hanging out with younger people. They always describe things better. But what it does is basically gives you an objective view of what you’re doing as a trader. It has ratios, it has graphs. It has times that you trade. And it really measures everything you do in an objective manner. Things that you cannot understand intuitively. We always, traders always think that they can trade, not put it in a journal or any analytical tool, and they think they become smarter out of it. But the reality is, it’s all numbers, it’s data and you have to put it in. So it’s EdgeWonk. I’m going to have a link to the product. They are in the video and underneath. And today’s questions are really oriented, are not so much about the software itself, but basically, you know, the things that are related to trading and their opinion and how they basically their opinion. What I’m really trying to say is that there is the software, but then there’s the method and how they build the software. So I want to talk about things that are outside of it, like what is consistency? What is the system? What is the method and all the things that around that. OK, so let’s start the first question that probably everybody wants to know. OK, so we’ll take takes turns Moritz will be first and Rolf will be second. OK, so what is your opinion is how do you actually get to consistency?

Moritz Czubatinski: [00:02:30]

All right, though, that’s a huge question. Obviously.

Matt Zimberg: [00:02:32]

That’s a hard question. I know its hard. No one smart and it’s individual too. So I get it.

Moritz Czubatinski: [00:02:38]

The short answer is: Process, process, process. And the long answer is it’s like trading doesn’t go like this. It always goes like this. Right. Like when you are climbing a mountain, you have to retract a little bit. Maybe that’s not the wrong way or the path is blocked. Then you move back, you try to find another road like this. So basically, if you are starting out as a trader and you want to have fastest possible way to consistency, then in my opinion, firstly, you need to have of course a trading system. And that could be as simple as, for example, just an example, break off the one 0 moving average, 50 moving average with a rejection of support systems on the daily chart. And then I tried to get in. That could be your whole trading system. Right? And then you have to see if that isn’t that you have to follow it for like 20, 30 trades and see how price behaves or all your entries. And then you can go from there and you input all that data into Edgewonk, obviously. Right. To get the numbers on how you are trading, ideas performs, and you can quickly find out what works and what doesn’t. But you have to follow this simple system first and get the data, because without the data that is inside of a trading system, you will never know what works and what doesn’t. That’s the fastest way to consistency. It’s still going to take you years, but it’s not going to take decades if you follow it this way.

Matt Zimberg: [00:04:11]

All right. OK.

Rolf Schlotmann: [00:04:14]

Yeah. One thing that I always like to say is context is that people always say, okay, how can I get consistent results? But I always say that you need to start with consistent actions, because the problem of most traders is that they just jump around. And then when they look at their trading data, when they see the mess, and then they will only see maybe the results are not what they expected. So you need to really step back and have consistency in your approach, even if in the beginning the results may not be perfect, but at least you can make sense of your data and then you can find patterns probably in your trading. What are the things that I repeatedly do wrong? What are not so good? What are my strengths? And then you can improve to things that don’t work so well. You can leverage the things that you are doing well. And over time, you can get to consistency, it’s a step by step process. That’s what I think. So consistency results starts with the consistency of the process always first.

Matt Zimberg: [00:05:10]

Right. I agree. So people, they need to have something habitual that they keep on doing and doing and doing. And it’s boring and you keep on doing and doing and doing. Understood. Great. So now the second question is obviously people need structure. Right. So in your opinion, what is the challenge for people in people’s nature to get structure right? And how did they overcome it? So, you know, how do you structure your trading? Because a lot of people I did a video that actually the other day where people say, you know, I wish, I love trading because I could leave my job. I can have free time. Nobody tells me what to do. But then I tell them. But you’re going into an environment that requires more structure than what you had before. And now you have skin in the game on top of it that nobody write you a check. So you might hate your boss and you earned all this freedom. But the boss that you hate write you a check at the end of the day. So how in your opinion, do people get structure and then when they’re trading, you want to go first?

Rolf Schlotmann: [00:06:21]

Yeah. And I think there are two components to this question. First is that expectancy is behind all of the actions that people have. As you said, maybe they have a bit of expectations that are too unrealistic, maybe. And then obviously what happens is those unrealistic expectation, first of all, they drive to a trading behavior. They engage in trading behavior that is not optimal for their development. They just skip steps they look for shortcuts. And then at the end of the day, once they realize that expectations are not met, then it’s frustrating as well. So I think that’s one part of the of the equation. And the second part is what people overlook is that trading at the end of the day, it is just like having a job. It’s like being settled right where you run your own business. The end of the day. No one really cares about what you’re doing all day. And what I see many people do in a trading business quite generally when they’re self-employed is that they get very, very sloppy when nobody else is telling you what to do. It may sound like the freedom, but at the end of the day, no one tells you what to do. So you have to figure it out by yourself. So you will do things that don’t contribute to your success. You will do things that harm your success until you find out what you really need to do. And it’s a process. And again, you need to be habitual with it. You need to track what is working, what isn’t, and then step by step, increase the work. Come closer to what is the optimal environment. So, yeah. Second, try being a trainer sounds great. It is great if you get to the point where it’s actually will reap the rewards. But to get there is a tough and being completely reliant on yourself is often it can be very scary as well. When there’s no paycheck coming at the end of the month and then you need to put food on the table for the family, that’s kind of whole different game.

Matt Zimberg: [00:08:19]

So you have to prepare yourself way ahead of time. You know that you will have to sit there eight hours a day. You structure it right.

Rolf Schlotmann: [00:08:26]

You need to be serious about it and treat it as a business. As a job, right?

Rolf Schlotmann: [00:08:30]

Correct.

Moritz Czubatinski: [00:08:31]

I think I think people have these romantic imaginations.

Matt Zimberg: [00:08:35]

I like that word. You’re very good with words, Motitz.

Moritz Czubatinski: [00:08:39]

Thanks, I try my best. With trading, so when they quit their job, they think like they’re getting up in the morning, they jump into the pool or they go surfing and then they check the charts. And then the next thing they do is they make a million bucks and then they go for a great dinner. And that’s their whole life. That’s how they see themselves. That’s their picture of themselves when they quit their job. But actually, you can have that lifestyle. If you follow the process and that means a lot of discipline. And I had a lot of problems with that myself in the beginning.

Matt Zimberg: [00:09:11]

Please share with us.

Moritz Czubatinski: [00:09:13]

Yeah because I when I was a professional poker player, I the self-image of my idea that I had was that I was grinding. I was sitting at the tables eight hours a day and I felt great about it. And when I went into training, I thought so. OK. Now, I don’t have to look at the charts so much anymore. And it’s I would just make money. And ultimately it’s going to be super easy. Obviously, it was the complete opposite. It was really hard. And that’s when reality kicked in. And I saw that actually discipline is freedom and training. And that’s for me the important part, because when you follow a process, you check your charts during certain times of the day and you’re doing your journaling routine every day at the same time. And so that is like being the boss. And the market is also your boss because long an openness, long open. I have to be on the charts. That said, there’s no discussion. Right. But if I learn to follow this process and is routine, then I suddenly have a lot of free time on my hands as well. So discipline is freedom in trading.

Matt Zimberg: [00:10:21]

So when you play poker, just out of curiosity, you play physical or you played on the screen.

Moritz Czubatinski: [00:10:27]

Most like 95 percent was online.

Matt Zimberg: [00:10:31]

So you you’re already used to not interacting with people and just doing everything. Because a lot of the times, you know, if people want to come from a social gathering, that’s another thing, right? They come from people that talking to them and everything going on. They just have to do this all Day. And, you know, that’s exactly what the break, the structure, the get bored. They’re like, okay, I’ll trade, you know? I understand. That’s a good point. So I always tell people about structure, you know, almost like if people tell me about, you know, the freedom they don’t want to get from becoming a trader. One thing that I tell them, do me a favor, get up and walk in your room. Just do it. You know, a 360. Tell me how organized your room is. Right. And many times to say, well, it’s not organized. OK. So structure starts way before we even approach trading, right. Do you go to the gym? Do anything? Is there anything in your work that required structure? Right. So you can copy from one model to the next. Right. Because people think, oh, I’m going to walk into it. No, it starts way, way before, you know. So I think the best traders that I’ve met, you know, were people that had structure before, they didn’t have the idea of all its freedom, right? Actually, there were more hesitant than anything else, right? So, yeah.

Moritz Czubatinski: [00:11:45]

So Army pilots, they usually make great traders and there’s reason for it.

Matt Zimberg: [00:11:50]

You know, I, once spoke to a broker that raises managed futures money. And he told me one thing I’d rather have, managed futures is where a professional trades it for others. Right. So when he looks for good money managers, he says, I would always rather have a guy from the military than a wolf. Yeah. You know, because you could because you just discipline is in their blood. So. OK. So we covered that. Let’s talk about screen time a little bit. Ok. This is my question. I’m not talking about paper trading nonsense that people spend, you know, draw imaginary lines. But let’s talk about screen time when people actually now the trained. Now they have a skin in the game, you know. So first of all, how important do you think screen time is right for traders? How long do you think screen time should be there? And During the process of screen time and again, I know it’s your opinion and it will vary what stages did you go through as traders, like the first time you went to training, you know what the actual real screen time revealed to you? Of all the markets are more important about yourself, as traders, as people. Right. Talking about your risk tolerance, fears, you know, anxieties.

Moritz Czubatinski: [00:13:12]

For screen time. It is important, especially in the beginning. But studying is more important, just like I would say, if you are just starting out, a screen time to study time are like active trading to study time. Maybe like 20 percent screen time, 80 percent study time.

Matt Zimberg: [00:13:31]

So you trade live 20 percent of your time and you study what you did 80 percent of the time. All right.

Moritz Czubatinski: [00:13:39]

And I’ve kept that ratio throughout my whole career.

Matt Zimberg: [00:13:42]

You know what? I’ve been trading for a long time and I never anybody phrase it like that. That’s really good. So more analysis than action, right?

Rolf Schlotmann: [00:13:50]

Yeah.

Moritz Czubatinski: [00:13:50]

That’s my and my whole job as a trader is preparing for probable outcomes, a lot of the work I do now bears fruit because I do my analysis. I look at my charts and that’s the trade I want to take. And if that and that is true, I will take it and then some of the conditions are not met, I just don’t take the trade. And so a lot of the preparation work I’ve done never bears any fruit But obviously, that’s just because my process is structured in that way that I will miss a lot of for the trades I take. They are the absolutely perfect loss.

Matt Zimberg: [00:14:28]

I think you’ve come to you as a second nature because you played poker before and you understand the concept of variance. That you can have 30 bad hands and still come out ahead , right? Traders, they judge themselves, unfortunately, say it’s unfortunate because they don’t know that they do it because it’s instinctively to judge their ability based on every single trade. And I told them, listen, you can have a great trade, you know, doing all the wrong things or lose money and you did all the right things. So you can’t measure them off.

Rolf Schlotmann: [00:15:02]

One thing in this context, what I try to always tell people is that you say you want to trade for living, you want to make this your career. You can make this maybe the next 10, 20, 30 years. Just think about how many hundreds or thousands of trades you want to take. Then you and that some people that has put this one trade in perspective where you’re not freaking out. One loss and then gets off control and suddenly something really bad happens. So you really need to think in the big numbers and the variance. But when it comes to screen time, what I think is the practice is good, but only like the quote goes on in perfect practice makes perfect. Right. So it’s just like when you look at sports, for example, whatever football, soccer, the teams they have, their playing time, which is the trading time. But then they go to back to the pitch. They trained, they read, they analyze. And that’s really when you find your edge, when you become better and then you’re ready to play again, you’re ready for your trading. And guess what? It comes down to the trading style, obviously, if you are a trader, you have more chance where you are actively in front of the screen. But there will be huge blocks where there’s just nothing to do. You have done your trading work. You’ve put in your orders. You know, we searched your patterns. The training plans are done. And then you need to go back to the journal or whatever you do back testing. And that is not screen time. That is the practice time. And that’s when you get that, obviously. That’s to get the job of a trader. And that’s why you sharpen your edge. That’s where you find out what works well, what doesn’t work, where you find your patterns, maybe your one things that we can ask. You should always ask yourself as a trader, do you remember your last 10 trades?

Matt Zimberg: [00:16:39]

I think that’s an amazing point. So true. Oh, absolutely. It’s such a good point.

Rolf Schlotmann: [00:16:46]

And even you can bring it down to, maybe you remember your last trade, but the last five fade that it enjoys, it’s already difficult. And if you don’t remember your last five traits, then you have no way of actually knowing what is happening. But what are you doing? Actually, you forget instantly the mistakes that you did and patterns that keep repeating in your training. And that is such an easy, easy thing to improve. You don’t necessarily need like sophisticated journaling routine. Just start with collecting screenshots of your trades and you can go through them in a minute. At the end of each week. But you already had a much, much better idea of actually what you’re doing as a trader. And one thing is traders when they don’t see the results. It’s not like everything completely wrong, but they’re usually certain themes that they keep repeating this two or three mistakes. And if you see really that you can’t always keep doing those two things, I never would have changed those things than my trading performance would be maybe much better already. And this is such an easy thing to do. It doesn’t take a lot of work, but it can be a huge shift for your perspective.

Matt Zimberg: [00:17:56]

So two things. One. First of all, all the mistakes. That’s why you guys should use Edgewonk, because you can see the patterns of your mistakes and not just guessing based on intuition. Yeah, but what you said is such a key point because, you know, in my experience and you know, look, I’ll be very honest. Being a futures broker is hard, right? Because it’s a struggle for customers. We know that it’s very hard to create consistency. But one thing that customers in this is you touched on it. You know that they change methods all the time. Right. And don’t bring the mistakes that they’ve done and don’t think about the mistakes that they’ve done to the new system. Right. So their biggest asset, their biggest learning asset, which was the mistakes that have done. They don’t carry it forward. Yeah. And then a few years they might and I jump in sometimes they don’t even the same with change methods. Sometimes a change in asset class. They’ll go from stocks to futures to forex to options, but they make the same mistakes everywhere. They didn’t make a conscious effort, you know, to learn from their mistakes. So I agree with real screen time, you know, count your mistakes. That’s your biggest asset, right? That’s a great point.

Rolf Schlotmann: [00:19:10]

And I just I read the book from there was a Navy SEAL guy, David Goggins, very interesting when it comes to discipline. And he said, oh, I’m sorry. He said, too, that people always say you just leverage on your strengths and then the weaknesses are not that big of a deal. But what happens is that you cannot tiptoe around in life to just avoid the weaknesses. You just have to factor that face to weaknesses and then you can improve them and then everything will become much easier. So you don’t try to see OK. I thought what if he was this moving average last trade and I could have made more money I should have done this. Then you changed going forward. That’s when you come into this loop of system hopping. But you just say, okay, this didn’t work. Why didn’t it work? And then you try to find ways how to improve it. And also one thing is that it’s usually not a lot of tools that you use. The trader is usually always the weakest link in all of this trading business.

Moritz Czubatinski: [00:20:06]

Now, that’s the worst of all. I think that for me, the analogy already works that trading is a performance sport, that’s just the way is. If you look at Floyd Mayweather, like some people say all his hourly rate was ridiculous because he made like 20 million dollars per hour. If you look at all his fights, but obviously his fights were just like maybe 2 percent of all the work he ever put into it.

Matt Zimberg: [00:20:29]

Right. Right. That’s a good point.

Moritz Czubatinski: [00:20:31]

That’s how you should see training as well.

Matt Zimberg: [00:20:33]

That’s a good point. It’s like an iceberg right. It’s like the asset is really underneath. It’s not what you see. Yes, that’s a good point. So, OK, let’s talk about, you know, we’ve covered this, OK? So let’s talk about discipline. Right. So traders, I only see human DNA is not built for trading, right? It’s like our intuition is not built for it. The reason for this is just my opinion is that now we’re trying to figure out, you know, how a whole group of people behave so not as opposed to like sitting in poker. And you try to read six people or five people. Now you’re reading thousands and thousands of people. Right. And it’s really, really hard to guess. So the discipline part have you know, it’s just all of a sudden there’s a sort of subconscious, you don’t know it’s like people discipline, discipline, discipline, discipline. And they’re like, forget it, you know? And then just say, look, I’m going to lose 500 dollars a day. That’s all. I’m going to lose 500, 500, 500 and then lose it. And then they just go nuts. So I’m always interested in knowing other people’s input. Now I have my own opinions, Of course. You know, and I always say, listen, you just have to do it. But how, in your opinion, people should develop discipline? You know what? Let me rephrase the question, What do they actually miss, in your opinion, about discipline? Right. What does that do? That element of discipline that you think they miss and they don’t think about, like how do you think majority of people that, you know, humans part as a trainer or discussed with them? What was their ideal discipline? What should it be, in your opinion?

Moritz Czubatinski: [00:22:15]

I think life for me, the biggest challenge and I think for a lot a lot of people that challenge let them develop and discipline was fear and anxiety, because if you develop discipline and you develop a process and you do everything exactly as you should and you still lose money, then the shit really hits the fan because that’s what people are afraid of. I gave it everything. I gave it my best and I’m still losing money. And that’s what they are really scared of. And that’s why they don’t even do anything in the beginning to stop with, because that’s much easier to say. Like, OK, I’m still losing money. But actually, last week when I was trading, I was a little bit drunk and I didn’t do my post process and so on. So, they can always find a reason for losing money. Right. But if they give it everything and they are still losing money, that’s really scary. And that’s what I think people have a really hard time developing discipline in the first place.

Matt Zimberg: [00:23:12]

I see, I see.

Rolf Schlotmann: [00:23:12]

Yeah, I think it’s an interesting point because discipline is like this catch phrase. But I think I ask always because there’s so many so much underneath this you need to ask yourself or OK, why it’s not you suddenly wake up at the same time every day you make your bed every night in the same way. You go and sit in front of the computer the same day that the same time. That’s not going to make you a better trader. It’s always something underneath. And you read only to find out. And I think that’s when really, of course, you know, you just structure that. That’s the given. But that’s not going to make you necessarily the best trader. You need to really find out what is it that you’re not good at. For example, people have the problem of missing trades. Then they say, oh, I should be more disciplined. Then I would make my trading plans and I will miss fewer traders. But what I’ve seen is that missing trades and that’s just an example. There could be many other ways how people do not have the resources that they want. Is that missing trades, there are two reasons usually. First of all, they are that fear. Fear is a big driver. And even though we know we don’t fear why out of fear that when you work your way out of fear, the fear of losing, obviously they are scared that they don’t know their system at all. They don’t have a process. So, they don’t actually know what they’re doing. So even though you might have a discipline, you might have discipline, your systems not really mapped out. And certainty, clarity perhaps helps overcome fear. And people say, OK, I want to trade on fear. How do I do this? I just want to be I want to trade without emotions. That’s what I’ve been talking a lot about this lately. Trading without emotions. I think it’s a wrong approach because you can use your emotions to your advantage at the same time. Ask yourself why you are fearful and then find out why it is. Maybe you don’t have a good process, but maybe it’s also because you don’t know your system or you have wrong expectations that you’re not meeting your expectations, and then you can attack the problem at the root, really, and you can do that with everything really. If you’re scared to pull a trigger, for example, that’s another thing. Discipline would maybe help you identify more trades and what help you journal your trades, but you really need you need to get to the root of why am I scared to pull a trigger? Am I scared of losing money? And then ask yourself, I’m scared of losing money, maybe wrong expectations or whatever. Maybe you’re in a losing streak and then you need to get to the root. So, there’s always underneath something. Discipline is important. But if you go, you always need to ask yourself. Why is this happening and why is this happening?

Matt Zimberg: [00:25:52]

Right. So, what I’m understanding, you know, about discipline from, you know, is that discipline has to be developed over time. And it’s really a conscious effort to understand the subconscious of what really drives your actions because lack of discipline, you know, people think that lack of discipline is always loss of funds, but it’s not always that lack of discipline. Sometimes when your method tells you to get in and you don’t get it right. So sometimes, you know, I had a conversation a long time ago with an accountant, customer and he had an issue. And, you know, he was like, everything lines up and I can’t get in and I said to him, listen, maybe because of your profession, you know, because in the profession of accounting, it’s, you know, debit credit. Everything always aligns in trading. You know, it doesn’t. There is no guarantees and it doesn’t always align. Right. And he started thinking about that. And then I started realizing that, you know, people are really not thinking consciously about their weaknesses. Look where it’s coming from. You know, why am I doing this? So, it’s always a conscious effort to not only read yourself technically, but also understanding yourself from a psychological realm. Right. So, you guys have those are excellent points.

Rolf Schlotmann: [00:27:05]

By the way, in this context, I talked to a trader way back and he has a job and he traded at the site and any yet amazing trading results. And he quit his job and his results went completely 180 degrees. And then I talked him a little bit. And then he said that maybe his idea was that, OK, suddenly there’s all this pressure from being only trading and at the same time, he was missing the social component that you set. And then I said, okay, why not take a half time job and trade half time? And ever since then, it has completely changed. He’s more happier. His trading is better. And so, you need to ask yourself, what is actually. Because it’s not liked a cookie cutter advice that you can follow because humans are all different. You’re driven by different emotions, goals, whatever you like. And then once you find it out, then once you actually ask, you’ve become conscious, then you can make better decisions.

Matt Zimberg: [00:27:55]

Right. I actually recommend for most people not to become full time traders. I told them if you have a job and you have security, you don’t have this fear from the market. You’ll have better days. You’ll have good days. But if you essentially anything you’re trying to leverage the futures or forex, you know, it has to be risk capital. Now, Clearly, if you’re a professional and become better and better, you can put more money into it. But I always tell them if you have a job and you’re making good money and you can have a schedule where you trade in the morning like 7-9, the E-Mini S&P or you can trade at night. The liquidity in the Asian currencies or the mini Nikkei in Osaka. Right. You can do that. So, I understand that it will have a major impact, you know, on its lack of fear. You know, it’s analytical and I really think that the spirit. You know, if you approach things depressed, but if you lose money, money and you’re depressed, it’s very, very hard to snap out of it and think straight. Right. But when you have a job and things don’t work out, then you still have income coming in. You know what? You can potentially recover from that, you know, I shouldn’t call it depression because, you know, it’s not clinical depression, but it just sadness that you lose money that you can put yourself first to become the trail because saying you myself, I still have income still coming in. Right. That’s makes us all a bit better. The spirit, the human spirit. It feels better.

Rolf Schlotmann: [00:29:24]

Some people you can, some people do like their jobs or if you don’t like your job, you can replace it with something that you like and then trading supplementary income. And then overall, you feel much, much better because trading has this amazing role in your life where suddenly you see the actual why are you doing this so you can maybe have a job you don’t like. Many people don’t have that, unfortunately, but many people have passions that they don’t want to get into because they think it doesn’t pay the bills. But if you combine to give train on the one side where you can trade and make good results and you can have somebody else that you’re doing part time, you do not need to earn a lot of money, but it all supplemented other each other. You will feel much better as a person yourself. And that’s what feedback and your trading in how you approach your passion. And that’s I think that’s a very, very cool approach to life.

Moritz Czubatinski: [00:30:14]

If your whole self-worth is derived from your trading results, you are in a really tough spot.

Matt Zimberg: [00:30:19]

Yes. Amazing going. Absolutely. Absolutely.

Rolf Schlotmann: [00:30:23]

Especially in trading where you don’t even you might put in or your best and you will do whatever it takes but put in so much work. And so, you can’t control the outcome. So, this is also one thing. It’s very, very tough on the people where you’re used. OK, you do your job, you get money, and after months.

Moritz Czubatinski: [00:30:42]

Or you don’t and you still get paid.

Rolf Schlotmann: [00:30:43]

Yeah. And if you do a good job, maybe you get promoted one day. But in trading, there’s no guarantee. You might put in. So much work. You might be the best disciplined trader, but don’t let your market just ahead a time doesn’t agree with your system.

Matt Zimberg: [00:30:55]

The key is to approach it as a business. What people get; they get obsessed with the markets. You know, it’s like it’s like some sort of an obsession of I want to be, you know, instead of saying, look, it’s a business. I have to investigate. I have to investigate how do good traders trade what they have done. Did I read enough books by people with skin in the game to understand the psychology of trading everything else, not just jump into the pool. It just like. And I think this is where the disappointment comes, right? Just the go from one to 10, you know, instead of the steps.

Rolf Schlotmann: [00:31:29]

Expectations as I said, yeah. That’s a big thing.

Matt Zimberg: [00:31:31]

OK, so let’s go to some other questions that I wrote down here, OK? Let’s talk, ok, I’ll ask this after let’s talk about this, OK? Let’s make a definition of a method. What components does a method have? From your perspective, what should have, you know, entry exit was management. You know what else? You know what else? Maybe nothing else or maybe that’s just who should be kept simple.

Moritz Czubatinski: [00:31:59]

You can like basically, So I trade five strategies right now and every strategy I can put on half a page of paper and just like that. That’s a good point. Entry and exit criteria. That’s it.

Matt Zimberg: [00:32:12]

They both told me a trader Can define the strategy in one sentence sometimes.

Moritz Czubatinski: [00:32:17]

Yes. Absolutely. And that’s just my entry exit and trade management. And also, my risk management. And then, of course, the whole process comes after that when do I scan and for trades, which markets do I scan for trades? How do I do my post and pre analysis and so on? And that’s the much bigger part. So that should all be in your plan as a trader, also, what do you want to achieve with your trading? What’s your why? For example, where do you want to be in five years? Those are all important things to have basically put down on paper. So, it’s out of the back of your head and you know what you are doing because when you are trading, you need 100 percent mental clarity. You need to know what you are doing, why you are doing it and when you’re doing it. But as far as simple trading setups, that’s one page for me.

Matt Zimberg: [00:33:10]

I see. And what I first of all, I have to ask, why do you have five systems?

Moritz Czubatinski: [00:33:15]

Well, let’s put it this way. I started with one set up. And so basically in these five systems, I trade they all revolve around one single strategy. So, I started trading the strategy and I tried to get in with a better risk reward ratio with a better win rate. So, I started going down lower and timeframes. And then I just come up one set up around my core set up that I could trade. So, I was basically going short. And during the day, I was scalping around my core position. That second set up and then those first set-ups I was just like I discovered that a lot of my setups got in a little bit late. So, I wanted to get in early. But again, with a plan and with certain conditions. So basically, what I do is I try to capture the whole move and I try to get in with as many positions as I can as long as that trend is going. And that’s what my strategy revolves around.

Matt Zimberg: [00:34:14]

So, again, you don’t get to give your opinion a method?

Rolf Schlotmann: [00:34:17]

The most important thing I think in this question is that the problem traders have is that they define it as a system with an entry signal and then that’s it. So, people say, OK, I’m using a moving average crossover, whatever, and it doesn’t work. But that is, that’s a very, very narrow-minded view on a system because, yeah, it’s important. But if you look at your trade, the people don’t spend enough time looking beyond exit. What if their attention is spent on how to get a better exit or entry? But if you look, for example, in the outcome of a trade defined by the exit, not by the entry necessarily. So, you need to pay attention to how you exit your trades. And then it comes down to, OK, an exit can be a negative or positive. So how do you cut your losses in an optimal way? How do you let your winners right? So, look beyond the entry and also try to build a holistic system. How you play stops, how do place targets, how to meet, how you manage your trades and that’s already something that you can start out with them to create a more solid approach. But don’t just start by looking at entry methods. That’s I think that people get along and then they get around the system up and look good.

DISCLAIMER: The placement of contingent orders by you or broker, or trading advisor, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.

Matt Zimberg: [00:35:34]

But I’m going to now we’re going to go to the second question. So now people, you know, didn’t really define it, could potentially define their method the wrong way just based on the injury and then destroyed the system hopping process. You’re going from this to this to this to that. Right. When in fact, they’re applying the same mistake in every single method. Right. That has been your experience.

Rolf Schlotmann: [00:35:58]

Yes, definitely. Yes. And also, one thing is that they are not even aware of what they’re doing wrong. Probably. So as I said, you don’t need you. Maybe you should have it, but you don’t need Edgewonk in the first place. What is really, really good approach is just on every trade you take. Take a screenshot of entry and exit. File it away at the end of each week, every month. Come back to it and just look through it. And the more similar your trades look like. Usually that’s a very good indication of how consistent you are in your approach. But if you see that every little, every single screenshot looks completely different, then you should be a very, very big red flag and warning signal that something is. Not going right, because what it means is that your entry might be different. Your stop loss approach might be different. Take profit might be different. And then you cannot make sense of the data that you get. And I might say you might say “Ok I’m losing money”, but you can never find out why. If everything is all over the place. So try to have more consistency and then it comes down to the sample size Thinking at least do this for 20 30 trades. You don’t need to do this for the next 10 years, but at least follow it for the next two or three weeks. 20 or 30 trades and you will get already a much, much better idea of where your big problems are. And then you can build it around it.

Matt Zimberg: [00:37:20]

I want to go back to something you guys discussed before, actually you touched on it, so I’ll start with the you. About emotions for a minute. You said you can use your emotions in a positive way. Can you elaborate on that a moment?

Rolf Schlotmann: [00:37:33]

Yes. This is a I think it’s important, and especially in today’s world, we have lost the ability to be self conscious because what is means is that we need to be able to spend time with ourselves and especially with the phone these days, whenever, wherever you are, whenever there is just 1 free second you put on your phone and you just do the same thing. You open Facebook for hundreds of time every day and people get really, really. I’ve expanded lately. My headphones broke and I was just I couldn’t do anything. I was just left with myself. And it was kind of weird because you’re not you’re not used to it anymore. The boredom has been, Boredom has been completely eliminated. But this also means that we have completely lost the connection to ourselves. So when we were traders are trading, they always say, I want to trade with without emotions. But I don’t think that’s why I don’t think it’s necessary. It’s also not probably possible because as humans, emotions are what drives us. And that can be important. And once you once you get to a point where you can actually recognize your emotions before they take over your self, and then you unless we act reactive mode where you just get into a charts, you lose a trade, then everything is completely you go blank. That is where I’m trading with emotions can actually be very, very productive. When you leave, I realize the key. I’m feeling a little bit aroused. And then you need to ask yourself, why is this happening? And then you see, OK, this trade set up is coming. It’s almost there. It’s not quite there. I lost my last two trades, so I want to get back. And that is really where you need to ask yourself what is actually happening? What am I able to do and why am I doing this? And you can then you can see it. Is it fear? Is it excitement? Do I want to get back? Do I want to recover from my losses. And that’s how you can use how you can use emotions.

Matt Zimberg: [00:39:26]

Consciousness, right? Being conscious of your thought process.

Moritz Czubatinski: [00:39:29]

What you need to do before you can even do that, you need to be aware of yourself. Absolutely. You need to realize that what you are doing right now is not really yourself. You have to realize like there is someone else controlling my mind right now. And obviously meditation helps a lot. With that, let you just become self aware. But another thing that really helped me was, for example, in Japan and train conductors before they do something. They say it out loud and they point with the finger like, okay, now I’m going to close the doors and I’m going to drive out of the station. Stuff like that. And that’s how they reduce the stakes by 80 or 90 percent or so below. Yeah, just by being very conscious about what you do. And that’s what helped me a lot in trading was that I simply sat in front of my computer and I was talking out loud everything that I did and everything that I was thinking and I was listening to myself. And that’s what’s helped me a lot to become self-aware.

Matt Zimberg: [00:40:31]

You know, a process that I go through, I always ask myself, is it me or is it my brain that is pushing me right now? You know, is it me or is it my brain? You know who’s in control right now? Whenever I feel something right. And it’s hard to tell sometimes. It’s really hard to tell because you think it’s you with loss of control sometimes because of DNA. Right. Something way stronger than you, right?

Rolf Schlotmann: [00:40:55]

That’s the one thing. I read the book from Magnus Carlsen was the number one chess player in the world. And he said, when you looks at a board, he knows after a few seconds what he’s going to do. But he still takes 5, 10, 20, sometimes more minutes to just think about what he’s about to do. And if this gut feel is actually if it’s driven by emotions or is this really the right decision, and for traders one thing that can have a lot is just when you’re about to do something, just at least step back for a few minutes, take your finger off the mouse and think about it. Is this really what you should be doing? And we all know that, we know often what we should be doing, but we don’t do it. Because we reason ourselves into something that is not as good for us.

Moritz Czubatinski: [00:41:44]

You know, you can you can also imagine, like yourself or a person that is the perfect trader standing behind you and looking at you. And he is judging you like, what the hell are you doing right now? Something that helps as well. Yeah, well, I have some mind tricks.

Matt Zimberg: [00:42:00]

Listen, everything helps. OK. So we spoke about that. You know we are near the last question. So the question is what trading emotion costs traders the most? You know? What do you think cost traders? Where do they really lose control of things? You know, what is that one time that you know? Or is that the chain of events that leads them to that, you know?

Moritz Czubatinski: [00:42:29]

If I had to pinpoint one emotion it would be greed. It always boils down to greed, in my opinion. That’s what makes you do the really stupid stuff.

Rolf Schlotmann: [00:42:40] But as it comes often from expectations, I think, the expectation management, we touched upon it so many times. You can always bring it up. I think that’s a big one.

Moritz Czubatinski: [00:42:48]

Sure expectation and then and also ego like, okay, I’ve lost two times on gold, so I’m going to try to get it all back from gold. Like it gets personal. So yeah, ego is a huge part obviously.

Matt Zimberg: [00:43:01]

They say never get the angry. Right? That’s how they get angry and they say they’re going to make more money back. Oh, anger and trading is not that they lose their mind and they throw off the computers. Is it just it’s internal, it’s just a click. It’s just anger is it’s a millisecond of a click. Right. I always say what I find traders, you know, one of the biggest obstacle is really their imagination. You know, I think stop imagining prices. You know, if the crude is trading at sixty dollars. You know, and you went long, don’t start imagining trading at 60.50 or 70 or in just you’re making 10000 in a trade because now with this, you just really have to absorb out there. You know what the market is doing and what it’s telling you from the minute you enter. Right. Because when it didn’t doesn’t meet the expectations, that’s when they start messing up. Right. It’s a blow. It’s got to go back it in the past. So. All right. So the last thing that we’ll do. Let’s talk about Edgewonk. Can you share with us what’s the, you know, next step for Edgewonk in terms of analytics? Because I know you guys are making a lot of effort to listen to your customers. Right. They’re asking you for features. Tell us where are we, where are you guys bringing in the product next? If you can share.

Rolf Schlotmann: [00:44:16]

So, yeah, we haven’t never talked about this publicly, but that’s coming out. Edgewonk has been a progression that we started with a Excel spreadsheet. Then we had, we gave it to traders. They gave us feedback. We turned it into a real software you have on your computer. And now the next step is going to be a Web based Edgewonk 3. It is still A few months down the road.

Moritz Czubatinski: [00:44:38]

The beta is coming soon.

Rolf Schlotmann: [00:44:38]

Yeah, the beta is soon. So that will be very interesting. And Edgewonk, it started from the idea of, OK, what do we want to have as traders?

Moritz Czubatinski: [00:44:50]

What did we have in our journal. Actually.

Rolf Schlotmann: [00:44:52]

 Yeah. We met I had a journal. I come I have a very big finance background. So everything I do, I track anyway. And in my trading, I had the same approach to everything I did was tracked in an Excel spreadsheet and I met Moritz and in in poker everybody was tracking their activity as well. And then I take a look, I took a look at his thing. He took a look at my thing. We both our really, really big excel nerds. So that’s a we talked about this for weeks and weeks and weeks. Then we combine our stuff. That’s how that’s what how Edgewonk started. Yeah. And that’s then we got the feedback of hundreds and thousands of traders. And now you have what’s Edgewonk. Yeah.

Matt Zimberg: [00:45:28]

I think the best products in the world came because people really wanted first to improve their life. You know with that thing. They weren’t thinking about selling it, right? They thought, well, how do we improve with myself? And it turned out to be the most productive tool. So this is also something new to me. So you brought the numbers from poker. You had it from finance. You combine it together and you both became traders. Wow, that’s amazing. OK, well, listen, I’m looking forward to it. Definitely the world is going web. So I think business wise is the right decision, you know, to do it. I think it’s less and less downloadable. Right. I just, I always tell, you know, everybody I wish everything I did was Web based. I didn’t have to download things, you know, about to burn my computer every day from Outlook and Microsoft, you know, it’s the worst product in the world. I don’t know how they even publicly trade it, I swear, the worst thing in the world. And you know what? I’m actually very proud of your generation. You know, your generation, actually, the millennials brought such good products to the market. You know, when I started trading with those, I was a broker already, licensed close to 20 years ago. Right. So people used to get, you know, charts of home, literally, and they would get charts at home. You know, market is moving and they’re sitting here with the charts. You know, they call me. The market is already here. And they’re trying to steal here. Right. And it was mail, but I can’t say that the innovation of products was the same like today. We didn’t have it. Most of the business belonged to, you know, as I can say, old farts, you know. And so now I’m just amazed at your generation that everybody’s just so self-taught. People went online, studied excel. We even have young customers who actually programmed like through an API, C sharp, C++, fixed API on their own. It started just on their own, on the Internet. So I’m really excited from your generation what you guys bring. So thank you for your time. It’s really been awesome. T

Moritz Czubatinski: [00:47:30]

Thank you for having us.

Rolf Schlotmann: [00:47:31]

Yeah. Thank you for having us.

Matt Zimberg: [00:47:31]

You know, of course, guys, check out Edgewonk.com. Please click the like button and we’ll see on the next episode. Best of luck. Take care. Bye.

[00:48:55] Thank you for listening to the Optimus Futures Podcast. Subscribe to our podcast on iTunes, Sound Cloud, and Google Play. You can also find us on YouTube, Facebook, Twitter and Google Plus all under the username Optimus Futures. If you have any questions feel free to send us an email to support@opimusfutures.com or give us a call directly at 561-367-8686 or Toll free at 1-800-771-6748. Once again thank you for listening to the Optimus Futures Podcast.

[00:49:30]

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