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Adrian Reid:

Hi, Adrian Reid here for Enlightened Stock Trading, and today I can’t tell you how excited I am, because I’ve got a special guest, and I’m speaking today with Peter Castle, who is a longtime trader and a really cool guy who focuses on… He’s a systematic trader but also focuses on the psychological side of trading a lot more than what I do. So I’m keen to learn and keen to understand what drives him. So Peter, welcome. Thanks so much for being here.

Peter Castle:

Thanks, Adrian. That’s quite an introduction.

Adrian Reid:

Very good. We’ve spoken a couple of times over the years. I’d love for you to just give a little introduction to yourself and how long you’ve been trading and how you got into it, just for people who maybe haven’t come across you before.

Peter Castle:

Yeah, sure. I started part time trading in 1995, and the time I had another business, I had a smash repair business, because I have a background in the motor vehicle trade. And I traded for five years between 1995 and 2000 on a part time basis. But I just found that it was too difficult to do that, it wasn’t [inaudible 00:01:12] my goals and my aspirations, and it got to the point where I decided that I had to either stop trading and devote myself to my existing business, or get out of my business and devote myself to my new business, which was trading. And as I’m sure you say to a lot of your students, trading is a business, and I realized that I had to treat it like that.

So I took the plunge and sold the smash repair business and went full time trading in 2000. And I did what everybody else does, I think, when they first start trading. They read lots of books and they do a few courses and they probably discretionary trade and use technical analysis and use fundamental analysis, and everything else that they can possibly find. And then after a while they realize that they need a method [inaudible 00:02:08] system, and that was the huge turning point for me.

Adrian Reid:

Yeah, absolutely. Me too. I struggled for three years, when I first started working four hours a night, looking at charts, analyzing things, trying different methods, and then eventually implemented my first system, and it basically turned around on a dime for me, and I started making money, and it became a whole lot easier. So what was your first systematic approach? What did that look like and when did that come about?

Peter Castle:

It actually started through… Because I’d done so much studying work with technical analysis and just looking at thousands of charts, which I’m sure you have as well, I just started to notice that, if I had stuck to a really simple method, what I love to call a two-liner, you buy here and you sell there, buy at A and sell at B, and I just noticed that… I look at charts going back a few years or a few months, and I thought, “If I had just done that, I would’ve got a much better result.” And I think that was the turning point. So there was just a visual thing I noticed on the charts.

And then I moved into… I met some friends and some colleagues, I made friends and colleagues through trading, and going to lots of trading groups and clubs and presentations. And I met some people that were into systematic trading and had some computer software, and we formed a little R&D group, and we put our heads down for probably nearly two years actually, developed many systems. But even after doing all that work, after doing all that study, all that computer work and developing systems, there was another problem, which I’m sure you’re going to ask me about.

Adrian Reid:

Yeah. Tell us about the problem.

Peter Castle:

The problem was the psychological side of it. It was one thing to develop a system and have a great method that works, which is relatively easy to do once you get your head around the software, and you have a good teacher, someone like yourself, I’ll give you a [inaudible 00:04:26] Adrian. It’s relatively easy. But the hard bit then is actually applying it and sticking to it. Sticking to it and applying it. That’s the hard bit. And that’s where the psychological stuff comes in, and that’s when Zen turned up for me.

Adrian Reid:

Fantastic. I want to rewind just a little in the story, because there’s something that caught my attention, and that is, looking at the thousands of charts, you had the realization that, if I had just done this and bought here and sold there, bought here and sold there, I would’ve made more money, I would’ve been successful. I want to ask you about the psychological shift that you had to go through in making that realization. Because one of the things I observe that a lot of technical analysis style traders face is they’ve got to give up on their analysis and their prediction and go to the elegant simplicity, I call it, of a nice simple model that works. And that shift is often something that people fight. Did you find that there was some psychological challenge in relinquishing control to a simple set of rules for you?

Peter Castle:

Yes and no. I agree with what you said. I’ve had the same experience with my clients. Trading’s one of those things that unfortunately sometimes the more you know, the harder it is. And if you’ve been trained in technical analysis, and particularly if you’ve spent quite a few years and you’ve gone and done a course on it, and then you come across systematic trading, it is hard to let go.

And I think there’s aha moment, and for me the aha moment was, once I learned how backtest, you start to learn and you realize that trading’s about probability. It’s not about prediction. And I think the fault that a lot of technical analysts get into is that they think it’s predictive tool, and it is not. Technical analysis is not a predictive tool. It gives you an idea of what the probability will be. And I think the benefit, and I’ll say it again, that great aha moment you get from backtesting and using systems, is that you understand where the probability is in the market, and that’s the shift. Once you get that in your head, once you realize it’s not about prediction, it’s about probability, that’s the shift. And then that’s it, you solved. You solved [inaudible 00:07:01].

Adrian Reid:

Yeah. Interestingly, probability is a hugely important factor to understand in the markets. One of the things that I’ve found is that a lot of people don’t inherently have a great understanding of probabilities and how it works. I don’t know if it’s because it’s not taught well in school, or it doesn’t really come up in other areas of life. But how do you help people come to grips with how there’s quite different and uncertain outcomes, but the probabilities can help you navigate that? Psychologically, how do you get people to come to grips with that?

Peter Castle:

This is where I’m going to go into meditation and Zen, but it doesn’t have to be Zen. It can be any psychological modality that creates some flexibility in your thinking. Whether that’s Zen, or it’s walking the dog, or it’s going the gym regularly, or it’s running, or it’s meditation, or it’s prayer, whatever belief system you choose to adopt, with trading you need to create flexibility in your thinking, and realize that the markets are chaotic and unpredictable, but so is life. And trying to predict everything and trying to live with certainty is not going to work for you. It’s not going to work for you in your life, and it’s not going to work for you in trading.

And I think that a lot of my clients, and I’m sure yours too as well, they’re very well educated, or they come from technical backgrounds. We’ve got engineers and doctors and medical experts and computer scientists and so on, as well as tradespeople and people who are less educated. But particularly the people that already have a good education, and they’ve been driven in some sort of career, and they’re used to achieving by knowing and doing and being right and being driven. And with trading, that doesn’t work. I mean, you can be driven, you can work hard, which is essential, but this idea of being able to make things happen the way you want them to, like you do in other careers, it just doesn’t work with trading.

Adrian Reid:

Yeah. The need to be right is, I feel, one of the biggest barriers for traders’ success.

Peter Castle:

Yeah.

Adrian Reid:

It creates all sorts of conflict, psychological conflict and challenges, when you are not used to admitting that you’re wrong, or you might be wrong, or you just don’t know. How do you help people deal with that? Because being able to take a loss, being able to admit that that setup was right, now it’s wrong and I’ve got to get out, you’ve got to have that flexibility in thinking. So what’s your technique for helping with that or dealing with that?

Peter Castle:

I’m going to say it’s meditation.

Adrian Reid:

Okay, good. So what does that look like? How does that play out?

Peter Castle:

How does it look like? I think one of the best things to do, if you don’t want to embrace a formal type meditation where you’re actually sitting down for 10, 15, 20 minutes a day and just trying to relax and clear your mind of any negative thoughts, that’s one technique. But the other thing I say to my clients is that you’ve got to try… When you look at the market, you need to ask yourself a very, very important question. And that is, am I seeing what I want to happen, or am I seeing what is happening?

Adrian Reid:

How does one tell the difference?

Peter Castle:

For example, people who are resisting taking a stop. So they get a stop, they get a sell signal on their system or their chart, and they don’t want to believe it. They see it there and they don’t act on it. And I say to them, “You’re not really seeing the reality of what’s happening. [inaudible 00:11:21] The market’s the boss. It’s as simple as that. The market is the boss. If you listen to it, it’ll tell you what to do. It’s as simple as that. Why are you fighting it? Why are you fighting what the boss is telling you to do?” If the boss is saying sell, then you’re resisting that sell cause you don’t want to take the loss, and so you’re not really seeing what is actually happening, you’re seeing what you want to think and what you want to feel. You’re not seeing what’s happening. It’s as simple as that.

The trader who won’t take buy signals and the trader who won’t take sell signals and the trader who won’t follow the process is resisting. They’re just resisting the whole process. So they need to look within themselves, and use some of those modalities I mentioned before, and take a step back and look within themselves, and ask themselves the question, why am I resisting this process? [inaudible 00:12:23]

Adrian Reid:

You’ve done this with a lot of traders now. What are the most common root causes of that resistance, do you think?

Peter Castle:

That’s a really good question. I think it’s trauma from losses. I think that there’s a lot of clients and traders that have been through some really tough times, and they may have experienced a couple of crashes, if they’ve been through the GFC, or they got hit really hard during the recent COVID crash, and it’s hard to bounce back from some of those big losses.

The other thing that I think holds a lot of people back is years and years of just going sideways, and not actually producing any solid results, and their accounts just… Even in a strong upward market, if they’ve gone long for example, they still can’t make any money. And that’s a sign that, if you’ve got a good strong upward market, and you can’t make money, then there’s something wrong with your method. It’s as simple as that. And I think a lot of traders develop a really discouraged mindset really, after a while, and that’s where they have to really work on their mental state, and have to shift. And I advise those people to stop for a while, and stop trading all together, and basically go right back to the start and look at what they’re doing and how they’re doing it and what their process is and what they’re thinking, what their pattern of thinking is. You’ve got to really just start all over again. You’ve got to go back to school.

Adrian Reid:

Yeah. Great. Good one. I was having some interesting conversations with some of my members about trading plans, and their written trading plan, and one of the things that came up was, under what circumstances should I stop trading? So these are people who are trading systematically, they’re psychologically in control and doing well, but you need to pre-plan some things so that you don’t have to react in the moment emotionally. And so my guidance was to think about, what are the conditions under which you personally shouldn’t trade, so that you know what they are in advance, so that if they were to eventuate, you don’t have to make the decision when you’re compromised. So what are the conditions under which you would guide someone to not trade? What are the psychological triggers, what are the environmental triggers, that you would say, “You should stop taking new trades,” or, “You should get out the market entirely and go to cash”? Do you have any guidance about how traders should think about that?

Peter Castle:

If you have a good system, then often the system will take care of that for you. For example, if you’re a long trader, say you’re a trend trader, and you’re trading weekly, trend trading systems, and then the market will get you out based on what it’s doing, and then it’ll put you back in. So sometimes you’re having an enforced break whether you like or not. But I think too, there’s other signs. Before we hit the go button on this podcast, I was telling you about the last couple of weeks I’ve been very involved with my brother. He’s been very ill, and I’ve been running around going to the hospital and talking to doctors and talking to family members. It’s been a very stressful time. I haven’t traded through that last two weeks, because my mind just hasn’t been on the job.

And I know purely from experience that that is probably not the time for me to be trying to do two things at once, two particularly difficult things at once. Even though the majority of my trading is systematic, even that gets very difficult. If you’re under a lot of pressure from the external world outside of your trading, there’s nothing wrong with taking a break and resting your mind and then go back to it when you’re ready. And I think that’s one of the beauties of being a private trader, is that you can actually drop in and drop out of the market.

Adrian Reid:

Absolutely. You’re a trend… You have a lot of focus on trend following in your own trading. Is that… [inaudible 00:17:03]

Peter Castle:

Yes, I do. Yeah.

Adrian Reid:

So if you were to not trade for a while, how do you reconcile getting out of the market, going to cash, with the thought, concern, worry, that what if I missed the one trade that’s going to make my year? Because if you’re long term trend following, it can be one or two trades that really make your year. So how do you deal with that when you do take a break from the markets?

Peter Castle:

How I compensate that thought is that what if I… So that’s FOMO, isn’t it, really? The fear of missing out if you stop trading. And how I balance that out is by telling myself, yes, if I start trading again right here and now, I may miss the trade of the year, but I also may miss a market crash, and I may miss a really bad run for a couple of months. And so there’s no point in beating myself up about what might happen. I’ve learned very much [inaudible 00:18:04] trading’s to live in the present. I think that as a trader your focus needs to be on, not what will happen in the future, or what might happen, and certainly not what has happened. It’s about here and now. You work on what’s happening here and now, you do the best you can here and now. And if you’re, excuse the French, if you’re feeling like shit because you’ve got so much pressure coming in from somewhere else, don’t worry about it. Focus on what’s going on right here and now. Come back to the trade next week or next month.

Adrian Reid:

Good guidance. There’s a spectrum of feeling like crap, as you put it. And sometimes it’s obvious, you feel terrible, you’re under huge pressure, you’re emotionally compromised. It’s clear. If you could take an external perspective on it, it’s like wow, you really shouldn’t trade in that state. But then there’s a spectrum from there all the way back to, I’m feeling good. What are the triggers that traders should be aware of to notice that maybe I’m compromised?

Peter Castle:

That’s a really good question. I’ve got to think about that for a moment. I suppose it would be, if you’re not sticking to your system. As I said in my first book years, I regard the two most important things [inaudible 00:19:32] the systematic trading is, one, having the system, and two, being able to stick to it. And so if you’re not sticking to your system, you can have the best system… I’ve seen some of your systems, they’re terrific. So you can have the best system that’s been developed by a really bright person, but if you don’t utilize it and you don’t stick to it, it’s useless, it’s worthless.

Adrian Reid:

Yeah. Absolutely.

Peter Castle:

And if you’re not sticking to it, for whatever reason, that’s a red flag. So either the system doesn’t suit your personality, or you need to work on… You need some more self development with mindset or discipline or working on stuff like the fear of missing out or whatever it is. And that’s where the journaling comes in, and the constant introspection of how you’re feeling and what you’re thinking and talking to colleagues and talking to your trading coach. I think we just lost [inaudible 00:20:40] what happened then? We just lost the camera.

Adrian Reid:

I’ve still got you.

Peter Castle:

All right, I’m here. Okay. I’m back. My computer decided to give me an advertisement.

Adrian Reid:

Okay, cool. That’s really insightful stuff. There was a couple of things that jumped out at me there. The first one, which I really loved, was you said that if the system doesn’t fit you, basically it becomes hard to follow. How do you describe or how do you explain to a person how to fit a system to their personality? What are the dimensions of system and personality, and how would you match them together to get the right system for the right person?

Peter Castle:

What I do is I just start working with them. What I tend to do with clients is that I’ll give them three or four systems, and do some backtesting together. And I’ll say, “Here’s the win rate on this one, here’s the drawdown on that one.” Let’s just work on drawdown, because I think drawdown is probably the most challenging psychological issue with trading [inaudible 00:22:00] everything else aside, I think drawdown’s the hardest. So I’ll say to people… I ask them this question. I say to them, “If I took $10,000 out of your account today, would you be able to survive? Would you be able to keep paying the mortgage, keep paying rent, buy the food, send the kids to school, pay the car Rego, whatever else you need to do? If you lost that $10,000 out of your account now, are you able to function?”

And if the answer is yes, then I’ll say to them, “Is that going to really psychologically damage you? [inaudible 00:22:36] No-one wants to lose $10,000, but is that going to really knock you around to the point where you can’t function as a person, and it’s going to negatively affect your relationships?” And if the answer still is no, then I’ll say, “Okay, how do you feel about 20,000. Or how do you feel about 30,000?” Everyone’s got figure. Everyone will say, “I can probably cop 20,000.” But let’s go back to the 10. So they say, “I’m happy with $10,000.”

And then I say to them, “Okay. If we’re looking at a trend following system, and historically it had a 20% drawdown, so if you start with $50,000 and the system draws down 20%, that’s $10,000. So therefore let’s start trading with $50,000. Let’s start trading this trend trading system with $50,000, which has an historical drawdown of 20%. That means if the worst comes to the worst, you’re going to lose your 10 grand, but let’s start. Start trading it. Keep good records, test and measure, test and measure, test and measure, and come back in three months, six months, twelve months’ time, see how it’s going. Let’s make some tweaks, keep going. Keep going. Don’t stop.”

Adrian Reid:

Brilliant. I love the combination of the dollar tolerance and the percentage to determine appropriate account size. One of the things that I’ve found is that, when someone has been burnt a few times, it’s pretty hard to get them to pull the trigger and start again. Because then it’s the fear of, what if I have losses again? What if I get stopped out? What if, what if, what if, what if. And that first launch is probably one of the hardest bits, I would say. What is your guidance for a trader who wants to start, has a system, has seen the backtest results, knows intellectually that it’s worked in the past and it’s a good stable system, but is just having trouble taking that leap and getting started with real money? What would you prescribe in that situation?

Peter Castle:

There’s two pieces of advice. You can’t trade with scared money. And you know what I mean by scared money. Money you’re scared to lose. So you can’t trade with scared money, and the smaller the amount of capital it is, the less scared you’ll be. So you’ve just got to come… In your own mind, you have to reach a figure that you’re not going to be scared to trade.

Adrian Reid:

Yeah. Brilliant. Love that. You can’t trade with scared money is definitely a soundbite to remember. Awesome. So at a point in a trader’s journey, there’s always a drawdown that is bigger than every other drawdown they’ve encountered before. Because your drawdowns, if you trade long enough, you’re always going to have a bigger drawdown in the future than maybe what you had in the past, and it may take several lifetimes, but the concept I’m getting at is, your biggest drawdown is ahead of you. How do you continue to trade calmly when you’re scared of losing money, and you know the biggest drawdown is ahead of you? What’s the recipe or the prescription again for staying present, following the rules, sticking to the plan, when that fear starts to come up?

Peter Castle:

That’s really difficult. I think that’s probably one of the greatest challenges that traders have. I think what you’re saying is, you start a $100,000 account, and 20% drawdown is $20,000, and it gets up to… You work really hard at it for five or six years, and it gets up to $500,000, and a 20% drawdown is now $100,000. And no-one wants to lose a $100,000. So again, it really comes back to how you look at it and mindset and detaching from that money. You’ve got to set it up in such a way that… My advice to those clients is, set that account up separate from other things in your life. You’ve got to set it up technically and fundamentally and psychologically so that it’s detached from you. It’s got nothing to do with your other income or your other life. It’s got to be removed.

It’s interesting that people… Every day we trade, every week we trade, the market’s an auction. So from the time it opens at 10:00 to the time it closes at 4:00 in Australia, it’s a six hour auction. And we can participate in that auction for every minute of those six hours if we want to. And we can even pick up our mobile phone, and we can look at our phone, and we can put trades on on our phone, and we can constantly check our portfolio. That’s like… Imagine if our house that we live in went up for auction every day.

Adrian Reid:

Every minute of the day.

Peter Castle:

Every minute of the day. Because in our minds, we’ve got this figure in our head that our house is worth, and let’s say… I live on the central coast of New South Wales, so [inaudible 00:28:12] worth about $900,000. So every day [inaudible 00:28:17] my house, it’s worth $900,000, and tomorrow it’s worth $900,000, and next week and next month it’s worth $900,000. It’s not going up for auction every day, and you don’t think about it, because you can’t do that. You can’t look at it. But with trading, you can. You can look at the value of your portfolio all the time. And it will send you crazy if you do that.

Adrian Reid:

How often should traders look at the value of their portfolio?

Peter Castle:

That depends on what timeframe they’re trading. If they’re trading a daily system, they have to look at it every day. If they’re trading a weekly system where it has weekly buy and sell rules, then why look at it through the week? Look at it on Friday night or Saturday morning. And you would know as well as I do that some monthly systems have spectacular returns, but it’s really difficult to not look at those trades through the month.

Adrian Reid:

[inaudible 00:29:17]

Peter Castle:

[inaudible 00:29:17] But just getting onto those monthly systems, I’ve got some clients that I’ve taught ten years ago, and some of my most successful clients are the ones that adopted monthly systems and have stuck with them all that time, and they’ve made more money than anyone else. Because they’ve learned to put it aside and stick to the rules. They’re pretty good at detaching from it. They get on with the rest of their life, do what they have to do, and they just treat it like a job. They just go and they do what they have to do, then they shut it down.

Adrian Reid:

Yeah, absolutely. Yeah. Do what you have to do and shut it down, is the key. And look when you have to look in order to make a decision. One of my huge realizations, you’ll love this. When I started being… When I found success with trading, I had implemented my first system, and my daily analysis and effort went from about four hours to about 20 to 30 minutes, because I was just running the system. And as my account grew, I found myself doing more and more and more to justify the money I was making, because I ended up making quite a lot of money with very little effort, but it didn’t feel right. It felt like I wasn’t working hard enough. So I was adding all of these extra things, and my stress levels in my trading went up. And when I realized this was happening, I took a big step back and looked at what I was actually doing, and pared it right down to the things, the actions I had to take, in order to make the decisions I had to make. And trading became stress free again, and easy, and high return for effort.

And so my philosophy now is, you should only look at something if it is required to make a decision at that time for your trading, according to your system. And so there’s no news, there’s no reading of The Economist, there’s no looking at websites or social media or any of that. I don’t worry about what the company does. I don’t worry about anything apart from, did I get a signal? And if I got that signal, can I actually execute the trade? And observing my stress levels as I went through that journey was fascinating. And realizing that I had this bias that said I have to work hard because I’m making money, and then letting that go made trading a whole lot easier.

Peter Castle:

Yeah. It’s a big moment, I think. And I’m constantly monitoring, even now after all these years I’ve been experienced, I constantly monitor what I do, how I do it, what I read, why am I reading this? You’re getting up and [inaudible 00:32:16] your mailbox in the morning, and you like me have probably got dozens and hundreds of emails in there. And it’s so tempting to read the latest article from The Economist or read someone’s opinion or get distracted by a YouTube video, something about the Chinese economy. But you need to stop and ask yourself, is this really benefiting me, what I’m doing? Is this is helping my trading? And nine times out of ten, the answer is no, it’s not. It’s not helping me whatsoever.

Dr. Alexander Elder, who wrote to my latest book, The Zen Trader, I had this conversation with him many years ago. And Dr. Elder, he’s a psychiatrist by profession, and he had a client coming to him with exactly the same problem that you just discussed. This guy had become successful in the markets, and he was doing nowhere near the amount of work that he used to do, to make the amount of money he now makes. And he was really struggling with that. He couldn’t justify to himself why he was making this money from doing not much. And he had to completely change his mindset. And Dr Elder said to him, “You’ve actually achieved what you wanted, and now you’re not happy.” And so it’s amazing how we do have to constantly be looking at how we’re thinking, and what we’re doing. And like I said earlier, it’s that constant introspection of [inaudible 00:33:49] not just this system, but how your mind’s working and how you’re thinking.

Adrian Reid:

Yeah, absolutely. I want to talk about the new book, but there’s one question that jumped out at me that I want to dive into first, because you’ve mentioned journaling and monitoring and so on a few times. Do you have a method of journaling to make sure that it’s complete, and you get all of the thoughts and the concerns out? Or is it more just a free flowing activity that you do to let anything related to your trading and mental state come out onto the paper? How do you it?

Peter Castle:

For me it’s pretty free flowing, but then that’s just my personality. You’ve always got your trading records and obviously your systems to fall back on for more technical analysis or more technical review. For me, my journaling is just more or less how I’m feeling and what’s happening for me at the time. And by reviewing that over the years, that’s how I’ve learned to know when to pull away. For example, the last couple weeks, I know that these sorts of family situations push me to the edge, and I know I need to back away a bit. And that’s come from journaling and my observations. And just doing stupid things. I’m a bit… This might surprise you, but I can be impulsive in my trading, even though I’m a systematic trader. I can see something, something will pop up for me, and I’ll think, “Wow, look at that. That was great.” And before I know it, I’ve [inaudible 00:35:25]. “Oh my God, what did I do that for?” So even after all these years, I still do it.

Adrian Reid:

We’re never cured of our humanity, you know.

Peter Castle:

What was that?

Adrian Reid:

We’re never cured of our humanity.

Peter Castle:

No. No, that’s right. That’s right. So there’s a little bit of disclosure for you. But those things happen less and less and less. [inaudible 00:35:58]

Adrian Reid:

The more you journal, the less those things happen, right?

Peter Castle:

Yeah. And what’s interesting about those little incidents is, they’re always emotionally connected. So there’ll be something going on in another part of your life or in your mind that’s actually created that little incident, every time.

Adrian Reid:

Yep. Yep. Absolutely. And I think that’s why journaling becomes so important, because I find it brings to my awareness some of those things that are going on, and how they’re making me feel about the markets and about my trading. So a critical activity. Tell me about the book. What drives you to write, and what does it give you in terms of your clarity and thinking when you’ve produced this latest work?

Peter Castle:

Like I said a while back, my big philosophy of trading is, A, you’ve got to have a system [inaudible 00:36:56] trade, and B, you’ve got to stick to it. And so the first book I wrote in 2016 was just describing a very simple trend trading system, but then the next challenge is being able to stick to it. And that’s where the psychology side of it comes in. And I’ve always been really interested in Zen, and I’ve taken that to a pretty high level. And I’ve done [inaudible 00:37:23] Australia overseas, and I’m ordained in a Japanese Zen order. So for me, I just became fascinated with the mindset of traders and what makes traders tick, and why some succeed and why others don’t. So the book is primarily about why we do… What’s going on in our heads? Why is it so difficult for us to take those buy signals? Why is it so difficult to take the sell signals? Why don’t we stick to a system? What’s going on inside our minds when all that stuff’s going on. So that’s what the book’s about.

And there’s quite a bit of neuroscience in there. My partner is a clinical psychologist, and so she contributes to the book as well. So if you’re not interested in the Zen side of it, there’s that other more western clinical side of it as well. So it was just something for me that I was really passionate about. The whole process of doing it really helped my own trading. It took me two years to write. So examining my own processes, examining my thoughts, going back over all my wins and losses and my traumatic experiences in the market. I’ve been through a lot of market volatility in the Iraq war and the GFC, and of course lately COVID, and all those really volatile times when things come out of the blue and your account gets smashed by more than what you would’ve wanted, and you just pick yourself up and dust yourself off and keep going. And why do I do that? How do I do it? Why do I even want to do it? So it’s just a big psychological delve into what’s going on with traders and why we do what we do.

Adrian Reid:

Yeah. Great. Love it. So the book is called The Zen Trader, and if someone was to read it, and just sit down maybe for the weekend and write a bunch of notes and study, what would be the two or three messages or takeaways that you’d really hope they walk away with?

Peter Castle:

The primary message in the book is that you have to let go. You can’t control it. And the more you work on, A, process, and B, accepting that you don’t know the answer… We know that we can use this incredible technology to create trading systems. We know that we can learn about probability and where the probabilities in the market lie. But also with trading, there’s a huge don’t know. We really don’t know what is going to happen. We don’t know if our system that shows a long term return of 30% per annum next year will give us 50% or will give us 10%. And so it’s accepting a lot of that stuff that we don’t know and trusting in the process and letting go of the outcome. That’s pretty much it. It’s trusting in the process, letting go of the outcome. If you can do that, you’ll be a absolutely killer trader.

Adrian Reid:

Good. And tactically, what would be your top tips for letting go of the outcome? How would you help someone do that?

Peter Castle:

Look at the market less.

Adrian Reid:

Nice. Love that. Good.

Peter Castle:

Look at the market less. If you’re trading a weekly system and you’re trading weekly buy and sell signals, why are you even looking at it through the week, when there’s no need to?

Adrian Reid:

Brilliant. Yeah. Love it. Brilliant. Thank you so much.

Peter Castle:

Less is more.

Adrian Reid:

Yeah. Absolutely right. How do you feel then about the world’s obsession with day trading and short term trading and all that? You know you’ve seen great success with students on monthly systems, for instance, but yet the vast majority of new traders come in at the very short term end. Do you have a feeling about that, as a Zen coach? Is it too hard to succeed at that end?

Peter Castle:

It’s very difficult to succeed, because the more you shorten your timeframe, the more difficult it is, and the better you’ve got to be. It’s as simple as that. Being a short term trader, you’re competing at the absolute top end, and not many of us have that ability. Some do, but not many have that ability. And I think the obsession with the short term trading is just a reflection of the world that we live in, that’s all. Particularly the younger traders, I’m thinking of people in their 20s and 30s, and obviously… I read recently that the average age of a cryptocurrency trader was 36. And I would think that most of those people in their 20s and 30s have grown up in a world of… I mean, I’m a boomer, I’m 62, so it’s a very different world for me, and I didn’t grown up with that fast paced technology and that need for instant gratification. And I think that’s part of what’s going for those younger traders.

Adrian Reid:

Yeah. Absolutely.

Peter Castle:

So for a younger trader to adopt, say, something like a weekly trading system, that’s a huge mind shift for them, and they would find it really challenging, and they do find it really challenging.

Adrian Reid:

Yeah. Would you have any hints for people like that, who are trying to come to grips with that longer term time horizon? How would you suggest they do it?

Peter Castle:

Again, I’m going to come back to examining their own thoughts and their goals and aspirations. And if they’re not prepared to accept a boomer’s advice of chilling out and learning how to meditate, it seems a bit extreme, they can go to the other side and they can just look at the numbers. Just look at the probability, look at the numbers, and look at how few people actually succeed in that short term trading. And hopefully they listen to some of the older heads that are in the trading game, and those people will say to them, the probability of you succeeding in the market is not with those short term systems. It’s with probably the medium or longer term systems.

Adrian Reid:

Yeah. Absolutely right. We’re very consistent on that, which is part of the reason why I love talking to you, so thank you for reinforcing the message [inaudible 00:44:43] and certainly at least daily charts make a huge difference compared to looking intraday. Peter, thanks so much for this. I really enjoyed speaking with you. If someone wants to get in touch with you… Obviously they should buy the book, The Zen Trader. I’ll put a link underneath this video so people can get that. But if someone wants to get in touch with you and talk more, how would they do that?

Peter Castle:

They can just google The Zen Trader, and that will obviously come up. It’s for sale on Amazon, and audiobook… It’s in three formats, hard copy, digital, and audible. Or they can go to Easy Share Trading Systems. But in saying that, I’m not actually doing a lot of system development work at the moment. I’m working more with clients on a psychological level, and [inaudible 00:45:34] my partner Cynthia is now on board with the business with her clinical psychology background, which has been a great asset to me and to clients as well. So [inaudible 00:45:47] it’s the psychological aspect that people are struggling with more.

Adrian Reid:

Yeah, absolutely. And who should reach out to you for help one on one with the psychological side of trading? Who can you help most, and who do you really enjoy working with?

Peter Castle:

What I find is that most of my clients… I don’t attract beginners. I tend to attract people that have been trading for some time, and they may well have a great knowledge or a good knowledge of system trading and trading already, but they’re struggling with certain aspects of their trading, and it’s always psychological. So that tends to be my clientele. And over the years, I’ve gone that way. You flow with what the market gives you. Now, I can see [inaudible 00:46:39] the work you do, you do great work for the system development and trading, and it’s fantastic what you provide the public, and I started doing that, but over the years my work has more gone sideways into the mindset stuff. So it’s been a pleasure to work with you, Adrian, and get to know you the last couple years, and we’ve had some great conversations.

Adrian Reid:

Yeah. Brilliant. All right. Peter, thanks so much again. Everyone, if you haven’t read the book, go buy The Zen Trader, absolutely worthwhile. And if you’re interested in help on the psychological side of trading, then Peter is your guy for that. So again, Peter, thanks so much for spending some time with me. If anyone has any questions for me or for Peter about the trading psychology side, post them below this video, wherever you’re watching it, and we’ll help you out. And Peter, thanks again. Look forward to working with you on an ongoing basis in the future. Bye for now.