The master of trading discipline, Norman Hallett, didn’t start off that way. His path to trading was interesting to say the least – from dance instructor to managing a Studio 54 nightclub Norman was first introduced to trading back in 1979 where he sold physical Gold and Silver options over the phone before joining the reputable Mocatta Metals firm where he became Vice President. Now day’s, Norman can be found at The Disciplined Trader where he teaches traders the ins and outs of dealing with the mental and emotional parts of trading.
In the show Norman opens up the door to his trading room and walks you through how he approaches the markets in a step by step fashion. Not only will you find out what Norman is trading, you’ll also learn the two strategies he uses to enter trades on a daily basis – including the candle stick patterns he looks for, the indicators he uses and the markets he trades. Norman leaves nothing to the imagination and it’s all just a click away…
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Biggest retail trader mistake
Paying little or no attention to the mental and emotional side of trading
Cam Hawkins: This is your chance to share more about you personally, and give the listeners more detail about your trading. What you’re trading, how you’re trading it and the kind of results you see. Over to you Norman.
- I’m married 34 years to a very famous hypnotist. She inspired me to help traders with mental and emotional issues.
- I’ve done a bunch of things starting from a degree in Math at the University of Cincinnati, then moved onto teaching dance, managed a Studio 54 nightclub and I’m now a serial entrepreneur who has a love for trading.
- I ended up in San Francisco at a Gold and Silver firm that sold options over the phone. I then joined another options firm where I became vice president.
- I trade mostly futures, for an hour a day, using 5 to 30 minuted bar charts. 30 minute charts will find me in a trade for maybe 3-4 hours.
- I’m mostly a scalper and hardly ever holds positions toward the end of the day
- I may stay in a trade on the S&P if it ends at the high of the week on a Friday. I’ll stay in for the open on Monday as this is a high probability statistic.
- I use candles a lot and believe the emotional part of candles, the interpretation built into a candle, reflects the emotions of the market. This works well with my background and respect for the mental and emotional parts of trading
- I use Fibonacci a lot and this makes sense to me given it’s a universal law
- I honor a trend and don’t resist trends
- These are the pillars I lean against when I trade
Cam Hawkins: Do you have any details on your wife and her Hypnosis career?
- Look up Tisha Hallett, she’s been on the cover of Hypnotist magazine at least once
- She’s responsible for the subconscious training at the Disciplined Trader
- I also have Golfing software which can be found at SelfHelpExpress.com
- Tisha has been very instrumental in my success
Cam Hawkins: Can you tell us more about the kind of results you see with your trading?
- Over the years I’ve learned to double my money in a year
- I’ve learned not to shoot for huge dollars or huge percentages
- To double your money in a year when you’re concentrating on the futures market is a realistic goal with the timeframes I get to trade
- Trading is a risk and it can be very emotional if you’re not in control – a lot like a business
- We’ll get into talking about framing your trading as a business and operating it as a business which is important to help ground yourself so you’re not flippant in what you’re doing
- I’ve had years where I’ve had 3 figure results, but right now I’m satisfied with doubling my money and that is my goal when I trade
Cam Hawkins: It’s good to hear you’re satisfied with just doubling your money as a lot of people are trying to quadruple, triple or get 100 times more that what they’ve invested, which may be the root of their trading issues.
For those listening for the first time, we’re about to enter a round I like to call “The Fundamentals”. This is where I’ll be asking Norman to tell us stories that will help you understand what makes him a successful trader.
So, go back in time now Norman and tell us what first attracted you to trading and talk us through that very first trade you took?
- I started working in San Francisco with one of those boiler rooms that traded options. I never got a paycheck from them.
- I carried out one of their rubber trees as that was the only payment I received when I walked in and found all the desks were gone
- I fell in love with Gold and Silver and that was why I was pretty good on the phone at the time
- I walked into another firm associated with the Mocatta Metals firm based in London
- I sold Gold and Silver options on the physical metals
- I became vice president and stayed with them for 7-8 years
- All we could do at the time was buy puts and buy calls – if you know anything about the market that’s not a good way to make money in the long term because you’re always fighting against the time premium
- The options I sold to people between Oct-Dec ‘79 for $5000 were worth up to $160,000 in a matter of weeks – I thought “Where have I been all this time? I can really help people!”
- Following this was another lesson around how people chose not to take profit through delusions of grandeur and only a handful ended up doubling or tripling their money and a few waited until the market came right back
- I learned a lot about human nature during that time
- I cannot, to this day, see anything but a lot of potential in the market
- I’m big on Tech stocks right now and you’re seeing the disruptive technologies dropping like dominoes, one at a time. So I spent a lot of time looking for those potentials in the market, like Gold and Silver were, way back then.
- I learned how traders can be out of control even when they are right about their feelings of potential
- It’s like a horizon, you shoot for the horizon and as you get closer you move it out and you never reach it
- I think people have to be satisfied with the first pops in a market which is why I’m big on taking partial profits along the way
- I learned to trade opposite to the retail trading that was going on right in front of me
- When people were resistant to take profit on the trade floor that was when I’d be motivated to take profit because the 92% of losing traders are being controlled by their emotions not what the chart is telling them or their original conclusions when they first put on the trade
- Either way, fundamental traders can actually make some money. I’ve seen it but they also move that horizon out and refuse to end the story where they originally wanted to
- It reminds me of time when I was working at AXA and I received a number of shares with no risk to my capital
- Within 2 weeks of buying them they went up 800%
- I had to leave AXA to claim them, which happened about a month later, and I held onto the shares expecting them to keep rising and they dropped back to less than where I entered.
- About 12 years later I was still waiting for them to reach the lofty hights of 800% return, of which they never did. So I sold them for a small profit.
- There’s a lesson in there for you listeners – take your profit while you can
Now Norman, let’s go back to a dark time in your trading career, a point where you hit rock bottom, a trade that kept you awake for a week, an account that you blew in a matter of days or even minutes. We want to hear that story.
- It was during a time I was running this options trading firm and things were going well
- I would start the beginning of the day by motivating the troops and give them the recommendations so they didn’t have to think about what to buy and sell
- The rest of the day I would watch all my good work and feel pretty invincible. I’d traded up to $100,000 over a couple of years with the $20-30,000 I had started with.
- I glanced at a chart and went with feeling – I got away from everything I knew was right because money was coming in and I was feeling good.
- I handed an S&P ticket in for my trade and the guy at the window said “You’re ticket is rejected” – right in front of all the people at work who looked up to me
- My account didn’t have enough equity in it to handle one S&P position
- That was the moment where I thought “This has got to change”
- I then check through my monthly statements, which I hadn’t been doing
- I then drew a line in the sand and said “From here on in I’m doing it the right way”. That’s when it all started very well for me.
- From here on in I’ve been committed to being disciplined.
Cam Hawkins: Right, let’s flip this 180 now. Can you talk us through that specific time when everything fell into place. Your big “ah-ha” moment. That point in time you started to become a successful trader – What did you do differently? Who did you learn from? That sort of story…
- I set out on my own as I was a pretty good sale trainer but I ended up making $20-30,000 a year, so changed my focus onto trading because of my history in the markets
- It was the early 90’s and that’s when I dedicated my life to trading
- The big “Ah-ha” moment was concentrating on trading because I had all the skills and knowledge, it was just a case of applying the focus
Cam Hawkins: Ok. Here’s the last question in this round. What’s been your proudest “moment” since you became a successful trader?
- Traders want independence and financial freedom
- When you get on a consistent road with trading you start thinking about building a legacy
- My parents passed away when I was 19/20 years old and my mother in-law was like my mother
- I was at the Buick dealer in Ventura, California and told my wife to let her mother know where to pick up the car I just brought her with cash
- What I was able to do there due to my success in trading, that was big
Cam Hawkins: Now it’s time for the part of the show I like to call “The Technicals”. I’ll run through 12 quick fire questions to help you listeners understand what it takes to become a successful trader. Are you ready Norman?
Ok. How long did it take you to go from trading newbie to consistently profitable trader?
- 15 years
Cam Hawkins: What’s your mental approach to trading and what special techniques do you use to keep your emotions in check?
- 2 things, I view my trading as a business – sometimes I had a 20% year and others a 120% year but I wanted to keep that at a 80-100% level.
- One way I was able to reach that consistency more often was to view my trading as a business, i.e. view losses as costs and your gains as profit.
- I’m religious about subconscious trading, using my mind to keep me grounded
Cam Hawkins: Do you have a success quote you can share; one that resonates with you personally?
- “I’d rather be out of a trade wishing I was in than in a trade wishing I was out”
- I looked up who said that and couldn’t find anyone so I’m going to take responsibility for that one
- In actual fact I’ve just come out with a book called “Inspirational quotes from the Disciplined Trader” (me). It’s taken from the 4 minute drills that I’ve done over the years.
Cam Hawkins: What’s your recommended “must read” trading book?
- That’s an easy one because everyone needs structure. That would be “Trading is a business” by Joe Ross
- Joe is close to 75-80 years old, everybody should have this book
Cam Hawkins: What are your views on automated trading systems, e.g. trading robots?
- Don’t like it. Another expression is “If you give a man a fish he’ll eat for a day, if you teach a man to fish he’ll eat forever” and I think that’s very important for trading.
- If I’m going to lose I want to be responsible for it, I don’t want R2D2 to lose it for me
Cam Hawkins: What trading related internet resource, like bloomberg.com, do you always use?
- I don’t use a lot, I kind of stay away from them but I do pay for “The Motley Fool”. They’re a bunch of really smart guys. They are very very good at the Tech analysis.
Cam Hawkins: What’s your preferred trading strategy?
- Scalping, I use to think of it as trend following, but I guess I’m a scalper.
- I don’t hold overnight. Sometime if I do go on vacation I’ll work off a daily chart and put some stops in and let it be… but I’m a scalper.
Cam Hawkins: If you could leave our listeners with one piece of advice what would it be?
- Don’t underestimate the importance of mental and emotional fitness in your trading, in fact emphasize it
- Ray Barros who runs at least a billion plus, journals an hour a day. That’s how important he feels working with your mental and emotional issues are.
Cam Hawkins: What’s the biggest mistake most retail traders make?
- Paying little or no attention to the mental and emotional side of trading
Cam Hawkins: If you’re not a MetaTrader fan, what’s your preferred trading platform and why?
- I respect Metatrader, but I use Trade Station. They’ve been around for 30 years and I’ve always used them.
- They also have great support.
Cam Hawkins: Question 11. What does your typical trading day look like?
- I trade an hour – two/three hours a day, depending on what I find in whatever length bar. I have 4 pages of charts each page has 6 charts on the page and they’re my favorite markets.
- I have the Emini S&P which is a big market of mine, I trade the greens a lot, I’ll trade gold, crude and copper.
- And then some of the pages have some of my favorite Tech stocks that I trade.
- And so what I do is I glance through those charts and look for the setups that I like.
- I have 3 basic strategies that I use.
- I look for $300-$400 profit per trade. At those times I’m taking $150-$200 risk.
- I’m looking for A+ trades
- I’m mostly sitting there waiting for an A+ trade to uncover itself
- So, a trade that has one of the primary setups that I like, has the risk/reward that I like, and I’ve taken that combination before and had success personally with that setup.
Cam Hawkins: And finally, what broker do you use?
- I trade through Trade Station and a small account through Options Express for longer term Stock trades.
Cam Hawkins: Now we’re into the part of the show where myself and my members “The Mastermind” put your knowledge and experience to the test. So Norman, are you ready to take on the challenge?
Perfect! For those not in the know, my Mastermind community are working towards creating a profitable trading system. If you’re not in the Mastermind yet, just jump on 52traders.com and join today while it’s free.
So, Norman, today your task is this:
We’d like you to help us find a high probability entry point for our trading system. We already have a market to focus on (namely the S&P500), and we’re looking for specific standard indicators, candlestick formations, market events, those sorts of things… So Norman, to help us pinpoint high probability setups for our trading system what “3 golden nuggets” can you share with us today?
- I’ll take them from the 3 basic trading plans that I’ve run most recently
- The hammer and shooting star formation, depending on if you’re looking at an uptrend or a downtrend
- That reversal signal, a hammer or a shooting star and the engulfing pattern
- So those two formations, the hammer/shooting star and the bearish/bullish engulfing patterns are my two basic trigger point for everything I run.
- They’re very high probability
- You’ve got a hammer, you’ve got tails that show you traders that are being hung out in a reversal position so they’re going to need to cover at some point as the market continues in the reversed direction as indicated by these two price formations. Those people are going to have to run for cover as they continue to lose their money.
- I look for Bollinger Band (BB) reversal points. I wait for a BB process to expand and as the market moves up one of these sides and breaks above or below one of the BB’s and then reverses back into middle of the bands with one of those signals, e.g. the hammer, shooting star, bearish or bullish engulfing pattern, then I go with that reversal signal because then you’re dealing with an oversold or overbought market and I find that reaction or snap back a very high probability and I use the midpoint of the tunnel is a good initial target
- 2nd nugget – Trends are important. Going with the trend is the way big money makes money. I look for reversals back to the trend, ideally at a Fibonacci number.
- If you have an established trend with higher highs and lower lows and then a corrective action you’re always wondering if it’s a new trend in the opposite direction or just a reaction/pullback in an existing trend
- You don’t have to assume a whole lot if in the pull back the reversal back to the trend is indicated by a hammer or a shooting star or an engulfing pattern and then waiting for completion of those patterns and then jumping in, into the direction of the trend in the next bar. That’s a pretty high probability thing.
- I’m very big into taking partial profits along the way. I do it to help my mental state.
- It’s a very high probability that during the life of the next bar, after entry, or at the completion of that bar, will give me a small profit or sometimes a big profit. Whatever it is I take it in that first bar. Half the position or a third of the position. I take something out. I put it in my pocket, I’m feeling empowered, I’m running a successful business. I always put on multiple positions so I know I can do that.
Before we wrap up what’s the best way for traders to get hold of you?
- Go to TheDisciplinedTrader.com
- Just opt in for anything, we have a lot of free things
- Anyone who responds to any of these emails will come directly to me. I’m only interested in working with people willing to take their trading discipline seriously. Opting in is the first sign.
- Don’t forget to check out my new book “Inspirational quotes from the Disciplined Trader”