ChatWithTraders Interview: Be More Selective With Your Trading To Become Profitable


Aaron: Traders, what's going on? I hope you've been having an awesome week. This episode is actually a first for Chat with Traders because I'm telling you I've actually run out of fingers and toes to count the number of emails I've received in the past month or so requesting an interview with a forex trader. Initially, I was avoiding this area because my knowledge on forex is pretty much nonexistent. To be honest, it's just something I've never really traded. But when I was introduced to this week's guest, I knew he would be a great fit to fill the demand of having a forex trader on the show.

Listen to the Interview

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Joel Kruger has been involved with foreign exchange since the very beginning of his career, in investment banking as a currency strategist. This was after he came to the realization that he just wasn't cut out for law school. But nowadays, Joel is in the trenches as a self-funded forex trader who has pushed on through many failures, and created a tremendous lifestyle for himself and his family. It's also worth mentioning, even if you're not a forex trader, Joel has a bunch of really good psychology tips that he shares throughout this interview. I also want to give a special thanks to the guys who submitted questions over Twitter for this interview. Joel does a great job of answering these, so keep listening, I'm sure you'll pick a lot up. Enjoy guys, speak to you soon.


Transcript of Interview

Aaron: Hey Joel.

Joel: Hey Aaron.

Aaron: How's your day going, man?

Joel: So far so good.

Aaron: Good stuff, good stuff. Thanks a lot for coming on.

Joel: Yeah, it's great. I'm glad to be on.

Aaron: Yeah, it's great to have you here. You're actually the first forex trader I've had on the show.

Joel: Ah, very exciting.

Aaron: Yeah, yeah. So, I've actually had a few listeners who have sort of reached out and say they'd like me to interview a few forex traders in the mix, so here we are.

Joel: Yeah, that's exciting. Ryan had heard some of your stuff and he was excited about trying to get us to connect, so I'm very glad to be the first FX trader, and have you had any exposure to the space a little bit, or ... ?

Aaron: Yes, I mean forex is definitely not my playing field, I've never taken a foreign exchange trade, so my knowledge in the field is a little bit limited.

Joel: Yeah.

Aaron: So what I did this morning is I posted a tweet and I said to, if anybody had any questions that they wanted answered around, you know, forex, because you were coming on the show.

Joel: Yeah.

Aaron: And we got a pretty good response, so we'll be sure to run through those.

Joel: Sounds good.

Aaron: All right well, let's get this underway by taking us back to very beginning of your career, so we're keen to hear how you got started.

Joel: So, I guess I had a bit of an unconventional start into the market. I sort of was going way back to my college years and I'm always surprised at how so many people have such a very strong idea of their direction out of university or college, and they know exactly what they're going to do. I had no idea what I was going to do, and so I defaulted to going to law school, and I had no intention of practicing law, I realized that very early on. Most lawyers realize that after a of couple years of practicing. I knew right away I didn't want to practice. But it was a few years to get a little bit of experience.

And then, out of law school I went into investment banking. I sort of got introduced to the world of finance, and I thought that this was an exciting thing, not knowing much about it. I was a history major in college, and I went to law school, but I started out in investment banking, working in an area called debt capital markets. And then when I was in banking, I got exposed to the different areas of banking, and one of those areas was... I remember one day I was working on a floor in the bank, working in this debt capital markets group, sort of behind the scenes, preparing deals, putting together books, and going out and trying to raise money for companies that needed loans to do deals. And I had to go downstairs to another floor and this was the trading floor, and I was like, "Why am I not down here? I mean, this is a lot more exciting, what the heck am I doing upstairs on this other floor?" And so that was my introduction to the trading floor.

And then I was exposed to the different groups and I was just immediately intrigued to the FX desk, and all that it had to offer and the fact that it was exposed to, you had this global macro desk that gave you exposure to different countries and the politics of different countries, the economies of different countries, and I just found it to be fascinating. So that's kind of how I got into FX, and from there it was just off to the races.

Aaron: Okay, so where you actually trading while you were working in investment banking?

Joel: Yeah, so I was working in investment banking, and then when I transitioned to an FX, it was not in the trading capacity, it was in a research and strategy capacity. A good portion of my career then was devoted to, working on the FX currency research and strategy side before, then, years later getting into the trading.

Aaron: Okay, right. So, at what sort of point did you decide to leave those firms and become a full-time trader, sort of playing with your own money, and what was sort of your motive behind that?

Joel: Well, I remember, even going back to my elementary school years, I was always attracted to the markets and the idea of speculation, so that was what got my juices flowing. And so when I was exposed to the FX desk, and to this market, I was drawn to the idea of being able to speculate on markets that I knew that were very difficult, and that, probably one of the toughest things to do out there was trying to beat the market over time. And so I was drawn to that.

So when I got pulled into this market and into the world of trading, it was always because I had this idea of wanting to go off on my own. I knew that this was a very lucrative career, or could be, and there was intense challenge. I had come up in sports and so, I think that athletes find a lot of similarities between trading and sports, and so I wanted to sort of get to that point, but I knew that to jump right in, for me at that time, wasn't going to make sense. I wanted to sort of learn about the market a little bit, and cover the market, and sort of be able to sort of, you know, figure out who I was and what my methodologies and strategies were, what made sense to me. Because, and we can talk about this, but a lot of your trading is reflective of, or your approach to trading should be reflective of, your personality as a trader.

So, one strategy that might be good for me, I for example have developed a more of a counter trend type of a trading approach, and that's maybe good for my personality, maybe I'm a bit more of a "contrarian" in life and I sort of like to go against the grain, and so you need to find strategies that complement your personality. And so, that basically was a path for me to find out who I was before taking that, and saying, you know, "Okay, now I'm ready to get out there and put some real money to work."

Aaron: Yeah, okay, no that's really good. So, when you did make that transition, did you find it easier or harder than what you had sort of originally anticipated to trade your own money?

Joel: I think that's a great question, I think that there's no way that I'm going to stand here and tell you that once you jump into that water that ... maybe there were certain areas where I think it helped me a little bit, but you're never going to really learn or feel what it's like to be a trader until you actually, you know, step into those shoes. So, while I did have experience and an understanding of the market, as far as trading was concerned, you really only learn once you get your feet wet. And so, when I stepped in, there was a, still, a nice learning curve before finding my stride.

Aaron: Yeah, okay. I'm keen to hear about that learning curve, so what would you say were some of the difficulties you experienced early on?

Joel: I think the difficulty that I experienced early on that's something you need to figure out quickly, or sooner than later, that just surprisingly takes so long to, with trading, the thing about trading is that we make it more complicated than it is. And some of those things are just, we have this built-in sense of wanting to be right, intuitively we want to be right. And especially maybe coming from the strategy side, you get into the market and you have an idea, and you want that idea, you believe in that idea, and you take the position, and you're committed to that idea.

And so sometimes your stubbornness and inability to sort of understand that being wrong is a part of it is a tremendous obstacle and it can be destructive. And so that's something that you really need to get your ego in check, and with trading it's always this big paradox because to trade, you need to have a tremendous amount of self-confidence, and you need to be able to be decisive and make decisions, and almost have an arrogance about your opinion. But at the same time, you have to have a humility and be able to say, "Okay, this is not working out, I'm wrong, I need to move on to the next one."

And so these are things that, you know, I'm sure you've discussed with a lot of other traders that you've met, but the idea of sort of understanding how to take a loss is just, you know, there's nothing . . . I'd say that that's the biggest first step of getting on your way to trading is knowing how to take a loss. And for some reason, and just because of our nature, it takes a lot longer for us to, you know, for people to get over that. I don't know if you've heard this, but intuitively, traders are fearful in a winning position and they're hopeful in a losing position, this is the way that we're built-in, this is how we're wired. So if a position is going in our favor, we're fearful. We see the money and we want to take it.

And if a position is going against us, for some reason the way we're wired, we're hopeful. We want that position to work out and so it goes against us and it goes against us, and inevitably that leads to a path of disaster. And so, what you need to do as a trader is you need to be able to flip that around, you need to be hopeful in a winning position and fearful in a losing position. So that you see a position going your way, you don't want to take the money off the table, you want to let the position run. And if a position is going against you, you need to be fearful, you need to say, "I need to protect my capital and preserve my capital at all costs." And so, these are things that take, you know, for many people, take a lot of time. And the funny thing is that, you know, so many people spend too much time reading books and focusing on strategies and really, these are the obstacles that need to be handled first and if you overcome these, then you're 90% of the way there.

Aaron: Yeah, so that's sort of borderline on the psychology of trading, which I'm really keen to get into that a little bit more with you later in the interview. So, I think you have some good points to share on that. But how long would you say it was before you sort of found yourself to be consistently profitable with your trading?

Joel: For me, it took many years. I mean, I would say for me, it took I'd say five to six years before I was feeling comfortable with my trading, and a lot of that had to do with developing a methodology that made sense, an approach to market that made sense, and just sort of fine tuning my strategy and what I was comfortable with and getting to know the markets that I was looking at. So it took me, I'd say, about, you know, there were a couple of years where I struggled and I'd say into my third year things started to come together a little bit and then by five years out for me was when I started to, I guess, start to really feel like I was, you know, you never want to be too comfortable, that's for sure, and I don't want to say that I'm comfortable to this day because the market will knock anybody down, but I guess as comfortable as I can be at this point. It took into my fifth year, I'd say.

For some reason, people feel like they can jump into trading and be making money within a couple of months. But people need to understand that this requires a tremendous amount of commitment and devotion like any other profession that you want to be involved in, and that it requires the same amount of passion and interest and so these things, you're never going to jump into, you know, you don't jump in, and you're not performing surgery on the first day you go to medical school. And so these things take time, like anything else, and people need to understand that. And it's a process, and if you have the passion and you're committed to it, then you'll get there, but it takes time like anything else, and people seem to forget that, given the instant gratification part of the business, but it's something that shouldn't be overlooked.

Aaron: That's a really valid point, so thanks for adding that in. I mean, I agree with you 100% on that. So, let's run through some of these questions from the listeners. We've got one here and it's from John, and he says, "Were you successful in equities or futures?" So I think what he's asking here is, had you traded in other markets before, actually zooming in on forex, and did you see any success in these areas?

Joel: I had not. My first exposure outside of a retirement fund and trading in that capacity, which wasn't really trading it was just sort of long-term investing, my first exposure to the world of trading was through the FX market. And for me, that was where, you know, I come from a background where I didn't come from a finance background, and so the first market that I got my hands on was where my focus was, so there was no experience on the equity side for me or on the commodities side, it was right into the world of FX.

Aaron: Yeah, right, okay, cool. So, he's got another question here and that is, I think this is a really good one, so in your view, what are the different dynamics and forces that separate FX markets from other instruments?

Joel: That's a good question. And so I love FX, and you learn to discover this as you get into the market. The beautiful thing about FX from a trading standpoint is that there's no bigger market in the world. And so, when you want to trade a market, you're looking for two major things when you're trading a market, you want to see liquidity and you want to see volatility. So you want to see the market as deep, and you want to see that it moves quite a bit. And so these are two things that a large market is going to give you.

And so FX is the largest market in the world and so when you're trading it, it gives you certain advantages. For example, you look at in other markets you get gapping, so a market will close at a certain time one day and then open up at a different time the next day, and whenever it opens and you see there's a large gap in the price. In equities you have earnings and things that come out pre-market and so with those types of trades, when you're trading those markets, there's a lot more of that, so there's a lot more of sort of, "I'm in a position but I'm stressing overnight, 'cause the markets closed, about what's going to happen, earnings."

And with FX, the market that never closes, so you open in Asia or New Zealand, you open up on Sunday and the market closes on the New York close on Friday, so you're always there, you always can see what's going on, the market's always trading. And so even though you have these events that are coming up that could inspire volatility, the market is so deep that you're not getting these penny-stock-like moves, and you're able to be there ahead of it.

And the other great thing about FX that I find extremely attractive is how accessible it is and how available it is at all times. So it's just a fantastic market in that you can be anywhere in the world and basically from the same hours, if you want to work from 8:00 a.m. to 5:00 p.m., you can do that anywhere in the world and trade FX. Obviously you're trading different markets depending on where you are in the world, but no matter where you are and what you're doing, you always can sort of, provided it's not the weekend or Christmas or New Year's, you're always looking at the market. So those are, I think those are the key standouts for me.

Aaron: Okay, that's really well said. So those were sort of mainly benefits in the favor of forex. Would you say there are any disadvantages to it?

Joel: Yeah, I mean, one of the biggest disadvantages is not really not a function of FX, the biggest disadvantage is more regulation-side. And so FX, or forex, gets a bad name. Not because of the market itself, people get confused. It's more because of the lack of regulation in the market and the amount of leverage that retail traders are given and they're afforded. And that's a big problem, because when you ask somebody to step into a game where they have no experience and they need to put so little up on the table and they're basically margining all that up and their 100:1 or 200:1 or even, people are crazy that brokerages have had to now come down to 50:1, but that's crazy.

And so, if I give you $10,000 to trade and you're taking a million dollar position, well, one move in the market is going to wipe out your account. So that's not reflective, or it's not a function of the FX market, but it's a function of the leverage that's afforded to the trader, and that's been the killer and that's what caused so many problems. It's brokers taking advantage of and preying on the new trader that comes in, that doesn't know what he's doing. A lot of them are misguided and they think they have that conceal mentality and the leverage lets them take advantage of that. If I told you that FX now only had maximum 3:1 or 4:1 leverage, well, it wouldn't be the same market, it wouldn't have the same attention, and it would be no different than any other market. You'd be putting your position down, you'd take a $100,000 position, and you'd have to put up $100,000 or $50,000 to trade that position.

And so a movement of 1% or 2% really means 1% or 2% of your entire equity. So you take a $100,000 position, you put $100,000 up like you would in the stock market, and the market goes against you 1% and you lose $1,000. So that's the biggest problem, is the leverage. So if traders could just, I can't stress enough, the biggest thing that I can recommend to anybody that's listening, that's starting out, is instead of taking 10 years to keep blowing up and trying to figure this out or taking one year to blow up your entire account and walk away, take six months or a year and trade your account unleveraged.

So whatever you put into that account, if you put $10,000 into the account, your position sizes should be $10,000 position sizes, so that if the market moves against you 1% or 2%, that's how much of your equity you're losing. And if you do that, then you'll be way ahead of the game.

Aaron: Yeah, those are really valid points. So we've got another question here, and that came through from Brad, and he's asking, "What time frames are you working on, and how do you handle high volatility around news?" So pretty much two separate questions there.

Joel: All right, so the first question, the timeframe. So I consider myself to be a short-term trader, but I'm certainly not a high-frequency trader. I'm short-term in the sense that I'll take a couple positions a week and I'll sort of sit on them. I tend to focus in on, really the four major timeframes for me are hourly, daily, weekly, and monthly. I don't generally look at anything shorter timeframe than hourly. And for my positions, I tend to sort of start with the bigger picture, so I'll look at a monthly and a weekly and a daily chart, and I'll try to get the bigger picture to determine what my views are.

And I consider myself to be techno-fundamental, so I try to sort of look at everything and I have a fundamental view. So if I feel that right now the euro has broke into a fresh 11-year low against the dollar, trading down below 110, I feel fundamentally, you know, clearly the trend fundamentally has been in the dollar's favor given the fed's impending rate rise and the differentials between the central banks, between the fed and the rest of the world, fundamentally the dollar has been benefiting tremendously. But maybe fundamentally I believe that today's employment report out of the U.S., there's risk that it might come in lower than expected, so maybe I believe that maybe there's a risk for the dollar to come off.

So that sort of starts there, and I look at the chart and I see that the euro is dramatically overextended on the monthly chart and on the weekly chart and on the daily chart. So now I understand this big picture and then now, intraday, I start to look at the hourly chart. And once I see the hourly chart is sort of looking at a point where I feel there's a good entry, so I try to isolate my entries based on the short timeframe, but I formulate my ideas on the larger timeframes. I don't tend to look at anything below an hourly chart or shorter timeframe than an hourly chart.

Aaron: Okay. How do you handle high volatility around news?

Joel: So with this, I would recommend, personally I think whatever you do you need to be consistent. So people always ask me these questions, do I trade around news, do I not trade around news? If you have a strategy that is sort of purely technical, but you have to deal with these things, then I think the best thing to do is to sort of commit one way or the other. You say, "Okay, there's a big news event today, and I have this strategy that tells me to buy, and I don't know what to do because there's this news event." I think you need to decide whether you're going to not trade around large news events, or you are going to, and then just let it be.

And so, as long as you're consistent you'll, again it goes back to psychology, you need to make sure that your head is on right. So if you're consistent, now you'll know that you'll benefit just as much from the strategy in those times as you will not benefit from it. But at least you'll know that you sort of eliminated that doubt in your mind. I personally don't, I'll trade at any time with exception of course, but I actually welcome the volatility from the fundamental event risk. I welcome it because it's just an opportunity to sort of act as a trigger for the trade that I'm expecting. So if technically I think there's going to be a rebound in the euro today maybe, I'm excited about the non-farm payroll number in the U.S. because that could be that spark that gets that volatility going. So for me, I trade no matter what. But my recommendation to the fellow who asked is just to try and be consistent. So if you want to trade news, if you want to trade around news, then be consistent and always trade around news. And if not, then don't.

Aaron: Okay. That's really great. So yeah, thanks for sharing on that. And another question here came in from Glenn and he's asking more specifically around, "What do you look at for entries and exits?"

Joel: Okay. So for me, I use . . . so exits is the hardest part for traders to . . . well exit when you say, stop loss I'm assuming, is the hardest part for a trader to initially overcome and to get over, being able to take a loss. But it's so easy to do. So from strategically, it's very easy to say, "Okay, I'm looking at this market and if it doesn't work out, I'm going to get out here." That's very easy to do. And so taking a loss or understanding that if I lose more than 1% of my equity or whatever it is that you do, that's the easy part.

The hard part is the, and I'm still learning to this day, is the risk management once you're making money in a trade. But specifically I use two indicators, as a contrarian I like to use two indicators. One is called RSI, relative strength index, which is well-known across all markets, which gauges how the market's performing relative to recent price action. And it's an oscillator which basically means that the indicator goes from 0 to 100, anything when the indicator is showing above 70 is considered to be technically overbought, while anything the indicator shows below 30 is considered to be technically oversold. So that's sort of a starting point for me. So I'll only look at markets really on both extremes I go well above 70, I look at only, and well below 30, but that's where I start to look for entries, sort of when an RSI shows that the market's deviating from its mean and the market's sort of moving a little bit out of control, that's when I first sort of get that light goes on.

I also use something called ATR, which is average true range, it's an indicator that many know but a lot don't, and for some reason it's not used as much and I think it's a very easy to use indicator, very simple. There's nothing to it, and it's so valuable. And it basically just tells you, based on the last several days, what the average range of the market that you're looking at is. So if for the euro, if it's 100 points a day, or 100 pips, you know that that's the average range a day. So when you're in the middle of it and something's going on and the market shoots up 100 points, from high to low within the middle of the day, well you can at least find comfort in the probability that, okay, the market's already now matched its average daily range, so maybe it's not going to move much more.

So these are tools that help give you confidence and so these two things I use to help with my entries and my exists as well. So for example, I might use an RSI to tell me that the market's oversold and it looks like it's bottoming here and so I might use that to get in, you know, looking at a high or low I might use that as an entry. And then maybe I'll use the ATR for an exit, knowing that okay, I got in, now the market's moved to its average range high for the day, it's moved within that range, so I'll use that as an idea to exit the position. But generally speaking from a risk-reward standpoint, you always want to be at more than 1:1 risk-reward. A lot of people will tell you 3:1, 4:1, it depends on your strategy, but you should always be thinking, "I want to make more than I'm risking."

Aaron: Yeah, no doubt, no doubt. So Joel, we've got another question here that's come in, and I think that a few people sort of probably shared this viewpoint, and this guy says, "We know forex is where fortunes are made, but in most cases lost. In truth, is forex best left to the pros?" What's your take on this one?

Joel: You know, my take on this goes right back to that question we talked about when we talked about the disadvantage of FX. It really is nothing to do . . . there's no better market in the world to trade than the FX market, the problem is that when you open up a market to people that are just getting in and you give them excessive leverage, that is why these people are having hard times. So certainly engage in the FX market.

When you trade, you need liquidity and you need volatility. And these markets are open all the time and they're efficient and there's no more efficient market than the FX market, so it's a fantastic market to trade. The problem is, is that people just get sucked in, and they're a victim to the leverage, and they don't know what's going on and they don't understand. If you would just make sure that your account is, ask your broker or make sure to set your settings at leverage of maximum 5:1, then you'll be fine. And you'll find that it's no different than any other market except for the fact that you might have a little more volatility, which is great, which is giving you opportunity.

Aaron: Okay, cool. That's really good. So we'll take one more listener's question. And that's from Phil, and his question's pretty much around, "Do you have sort of like a daily routine that you follow each day before getting ready for the market?"

Joel: Yeah, so yeah. I mean, I tend to follow a routine. I never really left the research side, that's still a part of me and it's a great part of my process so I recommend it to everybody. I basically get up in the morning, and I scan, I'm not going to lie, I am constantly watching the market. I find myself getting up in the middle of the night, not because I'm stressed about the market but just because I'm excited about it. I have my monitor next to my bed, I have my rates so I check. But when I get up, I generally take a quick look and see what's going on, and then I start the process of scanning through the markets and looking for where I think there might be opportunities, but not looking to force anything.

And then, I have a process of writing. So for me, it's a wonderful process, I try to sort of get out and formulate my ideas, not necessarily about a trade, but just what I'm thinking that day, how I'm feeling that day, what I think about the market. And it allows to maybe take on a little bit more of an objective approach or it's maybe a bit of a therapeutic process, and it helps me because I find that one of the big problems with traders is also that traders are too impulsive. And so, if you're able to sort of pen down your ideas or pen down what you're thinking, then it keeps you honest. So for me, it's about going through that process and sort of figuring out what it is that I'm thinking and sort of keeping myself, allowing myself to stick to that.

I think that in life in general, when you want to do something, there's no better way of being to sort of follow through than telling yourself repeatedly that you're going to do that, and reminding yourself repeatedly that you're going to do that, because it becomes you, and you can't prevent that from happening. So if you want to take a trip to Hawaii and this what you're committed to, then get that picture up, talk about it everyday, and the more you do it, the more it sort of becomes a reality. And that's very important in life as it is in trading. So you need to be able to get that out. So for me, it's about putting things down on paper and writing them.

And then the biggest, this might be a surprise to a lot of you, but the biggest luxury that you have when you're trading on your own is something that's really necessary, and something that people that are trading professionally at banks and hedge funds don't have, is the ability to walk away. So a lot of time during the day, I'm completely away from the market, I'm completely removed. And I have my alerts set up, which is critical to me, I get them by my phone if something's moving, otherwise I just sort of step away. I look into other things that I'm doing in life, and if the market comes to me that's great, then it comes to me. But don't force your positions, let the market come to you. So a lot of the day is just going around, going for a run, doing some shopping, looking at other things, I do some consulting work, and waiting for the market to come to me. And so that's pretty much it as far as my routine is concerned.

Aaron: That's really cool. So now is probably a good point to sort of roll into more of the psychology of trading. And I believe you recently spoke with, I hope I pronounce this right, a psychotherapist about how to reduce trading stress, so what were some of the best pointers you took away from this?

Joel: Yeah, I mean I think that it's, again, there's nothing more important than psychology when you're trading. So again, I can't stress enough, I find that too many people focus in on going out and buying books on what strategies to take, and what risk management they should apply, without really understanding that intuitively, if you just look at a chart and you sort of pick out what you think's going to go on, just start like that, and don't worry as much about that side. I'm not saying that's not important, but you need to have a sound mind, and you need to have a healthy mind, and if you feel good about yourself and you feel confident, then that is what is going to help you along the way. And so that's the most important thing.

So some of the takeaways from this were just, a lot of this when you're trading unfortunately, a lot of what trading brings is there's this world of this mentality of being impulsive and this conceal mentality where I want to win and I want to make a lot of money. And so you need to figure out who you are and what your motivations are when you get into this. And so if your motivations are right and you want to be in this for the long term, and you realize this is not an overnight thing, that's what is going to help your processes.

So I guess the biggest takeaway is really understanding yourself, knowing who you are, and knowing what your limitations are and what risks there are to your own personality, what things might cause you trouble, and being able know how to handle those things in life. Not in trading but in life, knowing that if you're an impulsive person, try to figure out tips that might help you be less impulsive. If you find that you're taking too big risks, well there's obviously something inherent in you, built into your personality that is making you want to do that, and that extends to the way you are in life. So it's understanding who you are as a person, and trying to have some sort of a mechanism that you set up to sort of explore within and understand how you're going to overcome those setbacks in your personality. And then once you understand and have a strategy with that in life, and then you approach the markets, you'll find that it makes a world of difference.

So it's really just figuring out who you are as a person in life, and figuring out what your drawbacks and limitations are, who you are as a person, and then working on those things and bettering yourself as a person, and then that will help in your trading. So if that helps at all, I hope that makes sense.

Aaron: Yeah, definitely, that's great. So, how do you handle a run of losing trades, and what would you suggest to other traders who might find this hard to deal with?

Joel: So the first thing I would ask, and we keep going back to this, is the first thing you need to make sure of is it's a lot easier to swallow a round of losing trades that are with little leverage than it is with a round of losing trades where you're leveraged up at 100:1. So that's the first thing. So that's easier said, you know, just make sure that you're not trading on excessive leverage because if you're doing that, then three or four losses is going to be life threatening as far as your trading is concerned, as career is concerned, versus three or four losses where you're unleveraged and taking a 1% hit on each, or 2% hit on each trade. So that's the first thing.

The second thing is, again this all ties into the psychology of trading, you need to understand that that's a part of the process, you're gonna go through periods where you're going to take hits on trades, and so if you understand and you believe and you know that this is a part of the process that these periods, just like if you have a regular job or another job, you're going to have bad weeks. And that's going to happen, you're going to go into the office and you're going to have stretches where things are you know, you're not hitting it, you're not on your game. And that's fine when you're in another job, which many of you are out there, you know that you have these period, but you don't get too down. You know that you're having a bad day or a bad week, but you know also confidently that things are going to turn around in the next week and you don't even stress about it because you know that, you have that confidence.

It's the same thing with trading, I mean, you're going to go through these periods and you need to be able to be positioned right so that you don't take huge hits on each trade, but other than that you just understand that that's a part of the process. And I think that that helps tremendously with that. Now I will say one other thing. People try to quantify how they should trade and what strategies they take, there are a couple of rules, the best things that I've applied in a qualitative way, not quantitatively, is if you just say, "I'm going to make sure that I love every trade that I take. Love, not like but love every trade that I take." You'll find that that's an amazing risk management tool.

Because there's so many trades that you'll take where you just like them, you say, "Okay, this looks good, I'm going to take it, I kind of want action and I want to get in, so I like it so I'm going to take it," and then it doesn't work out. But what happens when you do that is, when you take trades that you like, you find that you're taking them a lot more often, right? And you find that when they don't work out, you're kicking yourself. You're saying, "Why did I take that trade?" But if you take a trade that you love, then they come around less frequently, which is great, because they still come around a lot. And when they don't work out, okay, when they don't work out, you're not looking back and saying, "Ah, maybe I shouldn't have taken that." You know that you should have taken the trade and that it just didn't work out because that's the way the markets are. So that's I think a very big secret for me, it's helped me a lot in my process, where I don't force anything, and I only take trades that I know that if they don't work out, that I'm not going to regret.

Aaron: Yeah, that's great, I really like that one. And I read this, this kind of leads into it, and I read this on your site and I think it would be great if you could expand on it just a little bit. And that was a line that read, "Failure is a stop on the path to success." So, would you like to share with us sort of the importance of understanding this statement?

Joel: Yeah, so that comes from, I believe, you're pulling something from one of my favorite quotes, it's from a Bob Dylan song. But basically the path to success is rooted in failure. And, you know, you need to understand that. And so it's like when you look at the world of sex and glamour and supermodels, people get this supermodel idea where right away, you look at a supermodel and you're like, "This is what my idea of a woman, the perfect woman is." And when you look closer, you realize that's not reality, that that's not life, that's not the way things are.

And so, things don't just happen, there's maybe the lottery ticket person or the super brilliant person who hits his stride right away. But, certainly from my point of view, that didn't happen. And things take time, and there's a lot of failure along the way, and failure in a good way. You can't learn without failing. And if you're afraid to fail, then you're not going to be able to succeed. And failure is such a harsh word, there should be another word for failure in a positive way, but it's just a part of the process. And if you can't fail, then you're not going to learn where the mistakes are and how to correct them. And it's so important to be able to go through the process and say, "I know that I'm not good at this, I'm probably not going to succeed right away." And if you have that then it just all of a sudden it opens you up to success, if you're willing to embrace that.

And not only that, but I'd like to think that the harder you struggle, the more you can sort of look back and say, "Wow, look what I went through." And you can feel better about your achievements and feel better about yourself as a person, that you worked really hard. I mean, who wants something that's going to come easy in life? We all say we do, but is there anything to that? I mean, what kind of person are you if things just go your way all the time? You're not interesting, and you probably develop a pretty warped perspective of the world around you, it's just not fun. So we need to struggle.

And it's certainly been a part of my process and something that I embrace and you come through so much stronger from the losses than you do the wins. If you can get through that other side of a loss, I know many of you out there have probably traded and you've blown up your account, but that's fine, that's good, that's part of the process. If you can get through that and get up and say, "Okay, I screwed up and I made a mistake but that's fine, that was supposed to happen." Then you're going to come out so much stronger.

Aaron: Yeah, that's a great piece of advice right there. All right Joel, this sort of brings us towards the end of the interview, but I mean it's been awesome having you on. So before we go, we'll just go to the closing bill, which is just a short lot of questions that I ask to all the guests, so the first one would be, is there any piece of advice that has really stuck with you ever since you originally read it or perhaps even heard it?

Joel: You know, I think the best piece of advice that I've had over the years is just to keep it simple. I think that if you keep it simple and you don't overwhelm yourself, you know, people are always asking me about, "When should I take profit, when should I get in a position, if I'm within 5% of my profit, should I take the profit, or should I wait?" You need to trust yourself and you need to keep it simple. A lot of the problems that traders have are not on anything complicated, they're simple, silly things. So if you keep your strategies simple and you focus on the psychology and just understanding what it is that you have within your capacity, you'll be fine. So just don't try to over-complicate things, simplicity is genius, and keep it simple, and you'll be fine.

Aaron: Okay, great, I like it. Knowing everything you do now, would you have done anything different come day one again?

Joel: Ooh, looking back if I had, perhaps . . . these questions are always difficult because you look at your life and you sort of try to look back and say that this is how . . . I guess I would have, if I could do anything differently, I would have not gone to law school I guess and just gotten right into the market right away and got maybe a bit of an earlier jump on trading. But you never know what it is that you're going to do until you figure it out, so I can't feel too bad about that.

And maybe getting in and not wanting to, if I could go back, not wanting to sort of feel rushed about needing to succeed. I think that's a big problem for traders that are younger and they're starting out. You feel you need to hit your stride quickly and maybe because I came over from the strategy side I felt that I needed to accelerate that process and get there quicker or I deserved to, and maybe I was trading a little bit more aggressively. So one of the things that I . . . so I was maybe using a little bit more leverage than I should have. So I guess one of the things for my people that I've said over the last couple of years is I posed something called the un-leveraged challenge which is specifically for FX, given the leverage that people are afforded, is to take one year like I had talked about a little bit earlier, take one year and forget about making money, don't focus on the dollars and cents. Focus on the percentages and trying to succeed, and don't worry about the money.

And so open up a small account of a few thousand dollars or even a few hundred dollars you could do, and you know you need to feel like you have skin in the game but open up a small account and trade that account unleveraged for one year. Give yourself one year where you are completely removing yourself from the idea that you're going to hit it out of the park, and make a ton of money. Forget about that. Just try and focus on and enjoy the process of trading without the money, worrying about the money and the losses and the wins, and just focusing in and say, "If I can trade unleveraged for one year and generate 10% returns, or even in my first year if I can generate positive returns, then I will know that, going forward, that if I leverage myself up," because you can in this market, a wonderful thing about FX is that you can leverage yourself up tremendously, that you could scale yourself up so you don't have to worry about that. So do that for one year, and then you'll find that you'll be on your path to success much quicker.

Aaron: Good one. I'm just going to throw another question in there, and when it all boils down, what would you say motivates you to trade? Would it be the money, the lifestyle, the freedom, what would you put it down to?

Joel: I think if I'm going to be completely honest, at the end of the day for me, it's the challenge of it, it's the challenge. It's knowing that so many people fail at this, knowing that it's been this impossible obstacle for so many people to overcome. And knowing that the rewards, if you can get it right, are so tremendous. And so that is, I think, it's just getting up every day and knowing that you're trying to tackle something that is just so difficult for so many people.

And it's like, I'm never going to be a professional athlete I just, I never will be. I don't have the build or the skill to be a professional athlete. But with this, I know that if I dedicate myself and I devote myself to trying to overcome these things that are, again a lot of them are rooted in psychology, and they're simple but yet they're so difficult, if I can overcome these things then I can get to a level, just like anybody else out there that's sort of succeeding in this business. And so the idea that I know that with this I can reach that highest level, and I have the capability of doing so and yet it's so difficult and challenging, is probably at the top of the list.

Obviously the lifestyle is tremendous. If you can do it, then having that time to be able to sort of focus on other things and not having a boss above you that is stressing you out about things is tremendous. But at the end of the day for me it's just being attracted to that challenge of something, and speculating something where it's so exciting and it's so difficult, is I guess what draws me the most.

Aaron: All right, that's great. I mean, Joel, this has been awesome having you on and I really appreciate you going in to so much depth in the answers, it's been really good. So before we go, do want to share with listeners where they can find out more about you?

Joel: Sure, I mean, if anybody wants to reach out, I have a blog that I write on everyday, it's called JKonFX, J-K-O-N-F-X. Come over and check us out and all the information's there and always feel free to reach out to me. I love engaging with traders and anything I can do to help. I always try to get back to people as soon as I can. And that's another great thing about this market, it's a global market, and probably one of the best parts of my career is when you're trading you FX you meet so many people from around the world and it's just, that's amazing. I mean, you get to meet people from Australia and New Zealand and South Africa and South America and Asia, and so it's just been amazing. So reach out, come over to the blog if you want, and I'm happy to help you in any way I can.

Aaron: Awesome, I appreciate that Joel. Are you also on Twitter?

Joel: Oh, I am, yes, I'm @joelkruger on Twitter, so feel free to come over and check me out there as well.

Aaron: Awesome, all right, WELL all those links will be in the show notes at chatwithtraders.com as per usual.

Joel: Thanks Aaron, it's great, it's great, I really appreciated being on, and it was a pleasure.

Aaron: Not a problem. All right, thanks a lot Joel. Let's keep in touch and we'll speak soon.

Joel: Okay. Have a good one out there, take care.


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