Your Trading Persona: Crafting Personalized Trading Strategies for Success

In this episode, Casey invites Lincoln Holbrook, a seasoned trading expert, to discuss the concept of personalized trading strategies. Lincoln introduces his unique approach, emphasizing the critical role of tailoring trading strategies to suit individual traders' personalities.

Key points...

1. Personalized Trading Strategies: The conversation centered around the significance of tailoring trading strategies to match individual traders' personalities. Lincoln emphasized the need to move away from one-size-fits-all approaches and instead focus on adapting methods to suit traders' unique characteristics.
2. Psychology of Trading: They delved deep into the psychology behind trading decisions, exploring how personality traits influence trading temperament. They discussed distinct trading personality types, highlighting their impact on decision-making and risk management.
3. Financial Stability and Wealth Creation: The discussion extended to the misconception around generating income versus achieving true wealth. Lincoln challenged the idea that higher income inherently leads to wealth, stressing the importance of effectively managing money to attain financial stability.

Connect with Lincoln Holbrook

• Webinar: https://webinar.trustedtradinginstitute.com/register
• YouTube:  https://www.youtube.com/channel/UCY0qytXcjiMy810srCeY3zA  
• Facebook:  https://www.facebook.com/profile.php?id=100092274503454
• LinkedIn: http://www.linkedin.com/in/lincolnholbrook
• Email: howtotrade@trustedtradinginstitute.com
• Take the 2-Question Survey!

Transcript

Casey (00:02.914)
Hey Lincoln, how are you doing today?

Lincoln Holbrook (00:04.99)
I'm great. Thank you. And thanks for having me on Casey.

Casey (00:07.838)
Oh, you're welcome. I'm very excited. So Lincoln, you have a very unique approach to trading the markets where you focus on each individual trader's personality to give them a strategy. And I want to dive into that and really unpack it because I think it's so unique and I think the potential is huge. And so before I do that, I want to kind of find out.

how you got into this trader personality thing and why you think it's so important.

Lincoln Holbrook (00:42.574)
Well, thanks for giving me some time. The answer to that question is I've been teaching people how to trade for 25 years. I've hired coaches and had them teach people how to trade. And cumulatively, I've probably me and my coaches have probably spoken to over 15000 people. And I realized that despite spending a great amount of money and massive, sincere effort to try to figure this out, most people failed as a trader.

And I wondered why, and I did a lot of research to figure out what is causing people to fail. And I realized one of the elements of research that I did, I ran into Michael Burry, he did a quote once about Warren Buffett. And he said, basically, the gist of it is Warren Buffett had every reason to just follow Ben Graham. Ben Graham was a successful investor. Warren Buffett learned from Ben Graham. But

Warren Buffett didn't trade exactly the way Ben Graham did. According to Michael Burry, he had to trade run. He said run his money by his rules. So he learned from Warren Buffett or from Benjamin Graham, but he had to personalize the approach to make it work for him. And that got me thinking. And I realized, you know what? Most people that are out there are kind of focused on a or they're offered one size fits all solutions, you know?

And I realized, wait a minute, we're not all the same kind of people. We do, we do different things. We think differently. We have a pre different ways of responding to pressure, you know, our emotional responses to pressure, our thought processes. So I did a lot of research and, and I just realized one size doesn't fit all for folks.

Casey (02:26.794)
Okay, now I agree with that. And when we see trading coaches or famous people like Warren Buffett, you know, Warren Buffett's really particular about his method, right? Because it's his method. And he will tell you that other methods are wrong. And I've heard a lot of other trading coaches will tell people in their education that trading specific methods are wrong. And I think that's pretty interesting.

Lincoln Holbrook (02:37.667)
Mm-hmm.

Casey (02:56.57)
But really, we should not try to pack one method with every person because everybody's different.

Lincoln Holbrook (03:03.798)
Well, I think they say that it's wrong because it's wrong for them. And they don't know how to make money in any other way, but what they're doing for them. But you'll notice that all these big and successful traders, they do it differently. Can they all be wrong?

Casey (03:21.938)
They're very different. They're very different, yeah.

Lincoln Holbrook (03:23.83)
They are, they're very different. Warren Buffett's right-hand man, Charlie Munger has talked a lot about the need for, to be, he calls it trading temperament, this idea of trading personality. And they also use the term, both he and Warren Buffett have used the term trading to being rational. And I call it rational with a capital R, rational traders. And that is that they have a set of rules.

And this is where most traders, most part-time traders kind of fall down. They don't really have a set of rules. Or if they do, they're incomplete rules. And let's, let me unpack that a little minute, a minute for a second. When I, when I say you have a set of trading rules, what I mean by that is you have a set of predictions that you've created in the marketplace, things that you expect to happen for whatever reason. Warren Buffett has a very specific method.

And that very specific method gives him the ability to make a prediction. He's going to buy companies or stocks at a low valuation. When they have a low valuation. Doesn't matter if there's blood in the streets. He's just going to focus on that. Um, and, and his, those, his ability to have that rule creates an expectation or a prediction, and then he's able to compare the actual results against his predicted results over time.

which reinforces his confidence. And that allows him to continue to stay rational with a capital R in his trading, continue to follow his rules. And I think a lot of part-time traders are much more haphazard in their approach to the marketplace.

Casey (05:06.198)
Yeah. Now, rational, it has to do with being trading, trading psychology. It has to do with logic. It has to do with the habit of building good habits, the ability to follow your rules, very difficult, I think maybe based on how you're raised, I think based on your personality, based on your life experience, it's easier, harder for some people, I know for me, for my personality, I'm an opportunity seeker, naturally.

And I love to go and find new opportunities. And so when I'm trading that bleeds over because I'm like, okay, well, I've got this set of rules here, but then there's this new thing over here, so I'm just going to go do this, you know, and, um, that gets, gets me every time. And so, um, how, how can we develop these systems or how did you develop different systems for different personalities? How about that?

Lincoln Holbrook (06:00.738)
That's a great question. And what I had to do first was identify the different rationalities, if you will. Right. That the different ways people will naturally approach the marketplace. And, you know, I kind of liken it to this concept that if you don't understand how you're wired, if you don't understand the kind of natural, um, instincts you have when it regard as regards to your trading.

You'll end up fighting a battle on two fronts. You kind of mentioned a little bit when you say you're an opportunity seeker. So you might have a set of rules, but it's tempting to break the rules. Cause you see an opportunity over there. That's a little bit outside of your rules. Well, we have these trading instincts and they bleed over into all aspects of our lives actually, uh, and, and those instincts that, that ties directly to our personality. And if we're, if we're trying to fight against our personality, meaning

We're conscious thinking, we say to ourselves, you know what? I just want to, I need to win more frequently than I lose because I'm just beat up and I lack confidence. And most people are biased to believe that you need to win more trades in order to be profitable. And so they really optimize for that, but naturally they're a risk taker, you know? They love the thrill and the adrenaline rush of risk. Well,

they're going to have a battle on two fronts. The first battle is with themselves and their natural instincts. They're gonna wanna constantly do something like an opportunity seeker might outside of their rules. But at the same time, they're also fighting a battle with a randomly moving market that's both unpredictable and uncontrollable. And so when you're fighting a battle on two fronts, I mean, that's a recipe for disaster.

Casey (07:51.026)
I agree. And that's where knowing your personality would be very helpful based off of the least amount of change that you have to do to be successful. Because you're going to have to change no matter what, right? In order to be successful in trading, you have to change certain things about yourself. And change is hard. That's why I think people fail so much is because they

Lincoln Holbrook (08:08.15)
Yeah.

Casey (08:19.546)
people fail at changing habits, right? And so you're gonna have to do that no matter what, even if you fit your personality. But I think fitting your strategy to fit your personality, maybe you have to change less.

Lincoln Holbrook (08:32.778)
Yes, that's absolutely true. Um, and you're right. The, a lot of times you can have the best system in the world, but if you don't, the behavioral issues, you know, you're still going to be dealing with, uh, behavioral habits. Um, I, I like to say that, uh, I always talk about the angle of repose. I don't know if you've heard that term before, but I think it's a physics term. If a rock starts rolling down a mountain, right? At some point that rock will stop rolling.

And when it stops rolling, there might still be downhill in front of it. But for some reason that the angle of the rock, the angle of the hill, the some obstacle stops it from rolling any further and it hits its angle of repose and it will stay in its angle of repose until acted upon by some outside force. Well, I think all people have an angle of repose and that angle of repose is a massive gravity well, you know, it's hard to escape that angle of repose.

whatever that is and wherever we are, there's only a very few people out there who become good at anything in life, who somehow naturally have this instinctual ability to break out of their angle of repose. The rest of us need to identify what our angle of repose is and then start building strategies and, and attitudes and thought processes that support our effort of breaking out of that and coaching is a big deal. You big part of that.

Lots of things are a big part of that, but understanding what is my trading personality and getting comfortable with the concepts there. And what we do that's unique is that within the trading personality, we can give you very specific predictions about things. So for example, one of the trading personalities that we have is win frequent. A win frequent trader, and this is completely provable. You can take random trades and prove this to yourself. In fact,

One of the things that we offer people is the ability to prove. We show them exactly how they can prove these concepts. But a win frequent style trader, they risk two, and that might be $200 to make one. So they might be risking $200 to make a hundred dollars, let's say. And within that range, right? Once you understand that, you know, a couple of things very specifically. Number one, you know, that your profits will be half the size of your losses.

Lincoln Holbrook (10:54.902)
You also know that your profits will come more frequently than your losses. In fact, they'll come twice as frequently as your losses, which means this is a low losing rate strategy, just baseline, right? And from there, you can understand, well, depending on the number of trades I take a year, I know how long my losing streaks are likely to be, how many losses I could have in close proximity, which means I know exactly how big my drawdowns are likely to be in my account.

which will help me decide or make decisions about how much do I actually risk on every trade. So there's a whole bunch of things you can learn about yourself and develop some specific predictions about your trading once you understand what your trading personality is.

Casey (11:38.742)
Now with the win frequently strategy, so you have a money management strategy tied in and is there an entry strategy tied in with that as well? And are your losses going to be bigger because you're losing more? Is it like you're winning 50 bucks and losing 100? Is it that kind of a scenario?

Lincoln Holbrook (11:57.674)
Yeah. So statistically, um, and this is, uh, an interesting thing. I don't know, um, if you've talked about this on your show before, but there's a lot of behavioral finance studies that have been done. And if you think about, if you were to, to open up your wallet, thinking you had 20 bucks in there, you were there to pay for, you know, pull up 20 bucks out to pay for something and the 20 bucks was gone. How much money do you need to make have, you know, to find somewhere in order to make up the feeling of loss from that?

unexpected lack of $20. And the answer to that question is most people are naturally wired to need twice as much. They need to find 40 bucks to get over emotionally, get over the $20 loss that they had. And that's a win frequent style of trade. They need to, or that's a win big, we call it win big style. They risk one, they lose one to make two. So subconsciously people are

Casey (12:50.625)
Okay.

Lincoln Holbrook (12:57.358)
because they are to need bigger wins. But consciously, most people are scared of losing at a high win rate. And so they are trying to optimize for a high win rate scenario. So statistically, if you set your stop loss, let's say the entry is 50 bucks, you set your stop loss at $5 lower, so $45. A win-frequence style would say, I'm going to set my stop loss twice as far away from the entry as my

profit target. So I'm going to lose $5 on my losses. I'm going to make $2.50 on all my profits. Well, you will win 67% of your trades doing that. And in a, and I've done tons of studies and I've had my students do studies and I've seen what they've done. They've reported back to me. So I'm, we're talking dozens of studies and each time you do that in a random market, you get about a 67% win rate.

Casey (13:27.705)
Right.

Casey (13:37.872)
Right.

Lincoln Holbrook (13:56.242)
And so that's a real thing. You can get predicted win rate out of a randomly moving market, just by setting your exits. But you need to know who you are. So you're setting the right exits so that your instincts are going to reinforce your decision-making, not take away from it or sabotage it.

Casey (14:13.698)
Now with that level of risk, and you know, so if you have a 67% winning percentage, what level of winning percentage do you need to be consistently profitable?

Lincoln Holbrook (14:16.514)
Mm-hmm.

Lincoln Holbrook (14:21.366)
Mm-hmm.

Lincoln Holbrook (14:27.826)
Oh, that's a great question. And that ties into the concept of trading edge. You know, most people, when I ask them, what's a trading edge, they kind of fumble around. So let me ask your audience, think about this. What is your trading edge? What is a trading edge? You know, people will say, well, it's the guru that I follow. It's my trading experience. It's I have a golden gut. You know, they have all these things.

Casey (14:51.563)
I have five monitors.

Lincoln Holbrook (14:56.03)
It's knowing all the stuff all the time. It's whatever it is, right? But really a trading edge is if you're set up to win 67% of the time, but you have some sort of an entry mechanism that gets you to win 72 or 3% of the time, then you have 67 from 72 as a 5% trading edge. So now you know exactly what that is. And we don't really specifically teach people an entry mechanism.

We work with whatever entry mechanism they already have. So they might already have an alert service. They might already have some screener or scanner that they like, whatever. And we just help them systematize that as your entry mechanism. And then all the rest of the story that they need to know relating to, is this even a strategy that they should be following based on their trading personality too, are they implementing it in the right way for them? Are they running their money?

by their rules and that's very important that they know how to do that.

Casey (15:58.278)
Okay, so with that 67% win rate that you're talking about with the win frequent, that really is essentially a break even strategy though, right? Until you apply the edge. So then you have to find the edge. And what is, and since you're not, if you're working with someone, you're not really telling them what the edge is, how do they discover what their edge is and how do they discover an edge?

Lincoln Holbrook (16:03.021)
Mm-hmm.

Lincoln Holbrook (16:10.085)
That's correct.

Lincoln Holbrook (16:25.71)
That's a great question. A lot of traders that we work with already feel like they have something that's giving them an edge, say it's an alert service and they start going through our process and they start following along and they realize, well, wait a minute, that's not giving me the edge that I expected that it would. But now they're able to have this more positive conversation with themselves about what's really going on, which is very helpful. And then we start, we provide tools where they can start to find their own edge. So.

A lot of times there's also a mismatch. They'll have an alert service and they realize, man, I'm only getting two trades a month with this service or a couple of trades a week. I need to increase my trading frequency. I want to do more trading. You know, all of a sudden they have a different trading is fun again, you know, all of a sudden. And, and so they, um, they do have to spend some time thinking about, well, how can I increase my trade ideas? And an entry mechanism is just getting yourself a similar.

a steady stream of similar trade setups. Really, that's all it is, right? And so, you know, you can, if it's going to be some sort of technical analysis or top down analysis, fundamental analysis, value analysis, there's all kinds of ways to do that. And we have classes and coursework that talk that, that give people some very specific edge. We call them edge techniques, um, that they can follow that might appeal to their

trading personality that might best fit their trading personality.

Casey (17:57.758)
So that's good. That's a step-by-step process. It's learning to walk, learning to crawl, learning to walk, learning to run. It seems like traders want to start running and it's not gonna work. You just gotta put one step before the other and slowly make progress.

Lincoln Holbrook (18:01.331)
Mm-hmm.

Lincoln Holbrook (18:19.582)
Man, I love that you said that. I always say, you know, when people start coming, when they come over to us and start learning all these new concepts, I say, look, you are a toddler just learning how to walk and your alert services and CNBC and whatever else you've been doing in the past. They're kind of like bullies, you know, they don't mean to be, but they're going to run past you. And that just the past, you know, just the fact that they're running around you is going to cause you to fall over. And so I love how you said, just focus on

one step at a time and you're within your own world now. You don't, you have an abdicated responsibility for your financial future to somebody else or some, you know, you're starting to within yourself develop the confidence that you need to look at this in the right way and to start taking ownership of it. And that's really the only way to achieve financial freedom. Nobody else will help you run your money in a way where you'll be able to achieve real financial freedom.

But you can once you learn these concepts that we teach.

Casey (19:22.01)
Yeah, and financial freedom is the goal and trading is a vehicle to make some money. But real financial freedom comes from the big picture, from understanding how to even manage your own personal finances. Because, you know, the numbers are saying that if 98% of the people that win the lottery are broke two years later, it's because they don't understand how to manage money. They don't understand, you know, that you've got to spend less than what you make.

Lincoln Holbrook (19:47.878)
Mm-hmm. Yep.

Casey (19:50.399)
Same kind of concepts in trading you've got to learn.

Lincoln Holbrook (19:53.55)
That's exactly right. I always, when I talk about this, I just say, look, where does financial freedom come from? And most people I think are structured in our culture to think, well, I have direct control over how much money I can make in my career. And so they spend a lot of time, a lot of effort, a lot of money on education, optimizing for wage size, let's call it, right?

Casey (20:19.314)
for income, they want more money, yeah. And that's a good thing.

Lincoln Holbrook (20:21.378)
That's right. Because they, they kind of think that more money translates to, you know, more wealth and what they don't yet understand is that is the, there's two, really there's two parts of the, uh, the wealth creation cycle, right? One of them is income generation, but by far the biggest most impactful side of that is making your money go to work at a high enough rate.

Casey (20:27.814)
Right.

Lincoln Holbrook (20:47.758)
And if you just focus, but the problem with that is there's, there's an investment, and there's no direct control over the outcome, you know? And so people are taking everything that they learned to optimize for their income generation and trying to apply those same tactics into putting your money to work and they're realizing this isn't working. I don't know why I'm giving you a lot of these dingy texts, but they're, they're realizing this is not working.

Right. I can't exercise direct control over my outcomes of these trading, whatever. Right. And, and so they, they flail around and I've had a lot of people use that term. I feel like I'm flailing around in the marketplace going nowhere. I just talked to a guy the other day, like two days ago, he says, I feel like I've been, um, I was just about before I met you, I'd been trading on and off for 20 years.

Casey (21:27.064)
Right.

Lincoln Holbrook (21:47.558)
I was just about ready to just give up because it feels like a gamble and it feels like the markets are rigged against me, you know? And I think a lot of people get to that point because they don't have a systematic process. I always ask, if you don't approach the market in a consistent way, how can you hope to achieve consistent results? You know? But most people can't approach the market in a consistent way because they haven't yet learned to run their money.

by their rules. They don't even know how to set up the rules. They don't even know what they're looking at. And that's why trading personality is the cornerstone for everything else that we teach. It's knowing who you are first and then adding to that. Well, what's my entry mechanism? What kind of an edge do I have? What's my frequency? You know, how many trades can I take both because of the time I have and the money that I have? You know, all of these things need to be decided by the person and it needs to be personalized and customized.

for your circumstance or you won't be able to follow it. You won't have the confidence to follow it during a losing streak.

Casey (22:53.015)
Yeah. Do you have a test or something like that, that you help people discover their personalities?

Lincoln Holbrook (23:02.678)
We do. It's just a simple two question quiz. Yeah, it takes like two minutes.

Casey (23:08.082)
Two questions, I can even do that. You could literally pick my trade. You can just determine my trading personality in two questions. Wow, are they like full page answers? Ha ha ha.

Lincoln Holbrook (23:18.602)
Yeah.

Lincoln Holbrook (23:23.494)
Nope. They're just, it's a, you just select out of four choices, two questions, four choice. So it's just multiple choice.

Casey (23:28.126)
Okay, so there's four so there's a lot of combos so that's like four so there's like a bunch of different options there With the two yeah

Lincoln Holbrook (23:35.554)
That's correct. There's five different trading styles. And depending on how you answer question one and question two, that comes together to help us determine if you're, if you think you need to make more money per trade, or if you need to win more of your trades and it's okay making less money per trade, just as long as you win most of your trades.

Casey (23:54.666)
Okay, well tell me about the five personality styles. I bet people listening can probably pick them out just from listening without even taking the test.

Lincoln Holbrook (24:04.014)
Okay, that's great. So we have a win frequent, we call it win frequent extreme. And those are people who need to win better than 75% of the time. So they really are optimizing for a high, high win rate. They risk three to make one, and then they have to have some other trading mechanism, trading entry mechanism to get a trading edge on top of that. These people will generally focus on

strategies that allow them to win most of the time, like option selling strategies are just they're priced in such a way that they win most of the time. They might be grabbed. They might gravitate to those kind of strategies. We have win frequent, which is a less extreme version, but they still want to win about 67% of the time they risk to make one these guys will, will stay focused on again, a higher win rate. Um, and then we have just win, which is when.

50% of the time. We have win big, they will risk one to make two, and then win big extreme, risk three to make, risk one to make three.

Casey (25:13.07)
So most of these personalities are based off of different winning percentages that people will be comfortable with.

Lincoln Holbrook (25:20.022)
That's correct. Yep.

Casey (25:22.347)
Okay, wow.

Lincoln Holbrook (25:25.182)
And it's interesting, some people I've done this, I've asked this question of lots of people and they'll, they'll look at that and they'll say, man, I've been trading when frequent, but this came back as when big and they'll think about it for a minute and they'll say, actually, you know what, I actually am wind big. And then they'll realize, Whoa, you know, some sub the subconscious now becomes conscious. And they're like, wow, I need to think about, you know, that kind of helps them rethink what they're really doing and how they're achieving, you know, results in the market.

Casey (25:54.034)
You know, a lot of that could have been something their guru is a win frequent guy, and so they've been following him. That's not really their style. They, I think another part of that, and I, you might help people with his is based off of, uh, how much time do you like to trade? Cause I know that like rent, when frequent guys might spend more time looking at the chart, like if they're going to take more trades during a day, a day trader type personality versus somebody who's going to look at a weekly chart and hold it for.

Lincoln Holbrook (26:03.561)
Mm-hmm.

Lincoln Holbrook (26:22.838)
Mm-hmm. That's correct. And you'll find that a lot of these gurus that you might be buying alert services from, they optimize for when frequent, in other words, a higher win rate because they know that's what sells. Most people are biased to believe they need a high win rate. That's right. Yeah. I, I know a guy, I know a guru who's out there selling a

Casey (26:23.346)
for a period of time.

Casey (26:36.438)
It looks good. It's like, hey, how would you like to win 80% of your trades? Yeah, sign me up. I want to do that. Ha ha ha.

Lincoln Holbrook (26:47.102)
services for an option buying service, right? He's buying options one to two months out. So fairly short-term options. And he structures the trades risk two to make one, even though they're, it's like, you would think it has to be the opposite cause he's buying options, short-term options, but he's optimizing for a higher win rate. And that's, um,

You just need to have those conscious thoughts within yourself to know, you know, have that conversation with yourself. Most people have a inter trading narrative that's very negative because they have vague expectations. They don't really know how to think concretely about things. They don't know how to get specific. And by learning what your trading personality is, and we'll send you, you take the two question quiz, we'll send you an email with your results and a whole big long description of what

exactly that means and the expectations associated with it. So you can start having better conversations with yourself. And then we'll send you some stuff that you can prove all of this, everything I'm saying to yourself using a chart game, we call it, and, and allow yourself to just go through the effort of just doing the proof, take random entries and see that you're getting the win rate that we predicted you would.

Casey (28:00.454)
Right, yes, and then you can work on your edge and you'll help them do it. That's beautiful. Okay, well, Lincoln, tell people how to get access to this test so they can find out their trader personality.

Lincoln Holbrook (28:05.731)
That's right. That's exactly right.

Lincoln Holbrook (28:15.562)
Well, okay. It's a go to our website, trusted trading institute.com and then it's slash trading personality. So trusted trading institute.com slash trading personality. And then that'll be the landing page where you get on for the, um, to start the first of two questions.

Casey (28:38.414)
Very easy. It doesn't take long to take the test. You find out a ton about yourself and you'll learn about those personalities. Uh, as cause Lincoln will follow up with an email, explain about how that works. So I recommend everybody that's listening, try that out, see where you're at. You might know, or you might be wrong. You might think that, you know, so go check it out. I am as soon as we're done with this, I'm going to go find out what my trader personality is. I'm going to make a guess publicly.

that I'm a win big. I'm just gonna guess that, but we'll see. I'll follow up in another episode and tell you what my results were. But Lincoln, thanks a lot for being on the show. Really appreciated. Great conversation about trading personality.

Lincoln Holbrook (29:13.646)
Mm-hmm.

Lincoln Holbrook (29:16.95)
I love it.

Lincoln Holbrook (29:23.286)
Well, thank you for having me again. I really do appreciate this opportunity.

Casey (29:28.074)
Alright, we'll talk soon.

Lincoln Holbrook (29:30.53)
All right. Thanks, Casey.