Don’t be a drama queen

It occurs to me. Everyone wants to try to be immune from the emotional impact of making and losing money and trying to start your career and dealing with the uncertainty of all that. And the, maybe even the insecurity of having it. But man, if you go back and look at the folks, even like in market wizards, the first book you can see that they all went through some type of what I call hazing, some kind of emotional hazing. You know, Bruce Kovner was trading old crop, new crop spreads. I think in soybeans, which at the time were going limit up limit down. And when you’re, when you have a spread on your hedge, right, because you’re simultaneously long, two, two bean contracts of different months, right? So option traders would know that as a horizontal spread, we don’t really have strike prices in outright futures, but it would be like a calendar or a time spread.

And you’re looking to play the difference between those two instruments. And so knew earlier in his career, the broker was saying like, Hey man, this thing’s going into the moon. You’re losing all this money on your shorts. Why don’t you lift the short cover that, then you’ll be long. You’ll be off to the races. Of course, you know how this is going to end up. If you didn’t read the book, he covers the short and then the markets immediately goes limit down. So he’s no longer hedged and he’s getting blasted on his long. Right. So I think at the time that would’ve been limit up, would’ve been 30 cents in those days and then down. So it’s a 60 cents swing, which is $3,000 bucks a contract. So no, and he went on to make history, right? I mean, he went on to make history at Commodities Corporation.

Then he set up Caxton and then heI think he, he sold it to, well, he sold his stake to the existing employees and they earned them out or something like that. But you know, Michael Marcus who I know personally took Thorazine and kind of zombies out, like to deal with the, with the pressures and the intensity of it. And he too went on to probably the best ever.

So no, one’s really immune from all of that. So you want to celebrate that you’re at least in the game. Cause if you’re feeling those strong feelings something’s at stake, the key is to make sure that you’re doing really, really good behavior to not put yourself into the spot where you might need to take Thorazine, Percodan. You know, you don’t need to go on a regiment of Psilocybin every day or hit the Percy Sauce from 710 Labs. You know, you want to make sure that you could be lucid and act with a clear head and just realize that this is a game of probabilities. Every time you put on a trade it’s subject to probabilistic and outcomes and that you know, you’re going to lose you’re going to lose ahead of time. So just deal with it, understand that it’s not about accuracy. It’s about expectation.

In the movie “Trader,” I think Paul Tudor Jones and Peter took a 5% hit in one day. So again, and they went on and are still making history. At least Paul is doing everything that he’s doing both at tutor and with Robinhood Foundation, right. Which is given away $2 billion, forget what they’ve raised. They’ve given away 2 billion. So don’t beat yourself up because you’re a human being it’s part of the game. The key is to not sabotage yourself. You can learn from those lessons. To me, those are the most important lessons. Not that you know, what they made and how they did that. That’s all kind of relatively interesting, but that’s, to me like the gossipy part of the business, that’s like if the trading world had like fucking Us or People magazine, that’s the kind of stuff that would be in there.

You’re more interested in their emotional constitution, how they did the trades should not be terribly interesting. because everything that you want to know about trading, you can get for free on the internet, every type of trading strategy, someone’s done a video on it. I admit they might not all be good, but that information is out there for you to at least take a look at and then investigate. So be nice to yourself and just realize that that’s the whole game. And if you get away unscathed without taking a big financial hit, and if you get away unscathed without needing to take medication or otherwise you’re probably a step ahead of the game.

You might have your own battles to face, but no one is immune from it. There’s nothing that you can learn. In other words, and this isn’t something you probably haven’t already heard that “there are no external solutions to your internal problems.”

I’m going to say that again. “There are no external solutions to your internal problems.” There’s no book to read, right? There’s no book to read. That’s going to help you from the fear of losing money. Doesn’t work. You have to put the trades on and do it and feel what it feels like.

Paper trading have said it a million times, not going to work might help you learn how to enter orders on a particular trading platform, but it’s not going to help you feel better about losing money. Anyway, I don’t like to repeat myself cause I’ve already said everything I had to say about that. Please consider subscribing to the show, getting really good feedback from folks. And I also get the data about what you like, because I can see who’s listening to what type of episode. That’s very valuable for me so that this way I come up with good episodes that I know are going to resonate with you. That’s all I got for you today. Folks. Thanks for being here. I’ll see you tomorrow.

Subscribe to the show  

Click here to  get your free copy of The Inner Voice of Trading audiobook.

Having emotional integrity around your trading

So we got an email about the sign or a picture of Paul Tudor Jones with something behind him that says “Losers average losers.” And the question was can I expand on that? And you know, I don’t know that I can, but it’s worth probably having a discussion on from a psychological standpoint. If you understand the context it’s, it’s describing a situation where say someone buys a stock at 20 and it goes down to 16 and they buy more creating an, a lower average cost, right? If they bought equal amounts of at 20 and 16, they’d have an average cost of 18 – that’s losers averaging down, losing trades. That’s what the context is. Now I don’t go and call people losers because it’s not terribly nice.

And you know, I don’t like to hear that about myself, but I think it’s losing behavior, right? Because people aren’t necessarily losers. They’re just trying to figure out what’s the best way to do this for themselves. But at that moment in time, when they have the stock or whatever at 20, and so now it’s 16. It leads me to believe that that person doesn’t have a hard stop on their number to begin with, which is a big mistake. And so, as it’s pulled back again, this is for trading not investing, right? We’re not talking about buying blue chip stuff. When you’re 25 and holding it for 30 years, we’re talking about trading, right? So then you have this reluctance to put in the stop and you have this situation where you’re reluctant to take the loss because how it might make you feel, or it might make the person or the trader feel by being wrong.

And then they amplify the bad situation, which could become worse by adding more risk on at 16, of course, dropping the average price to 18. You know, which if we go from 16 to 18, you’re back to break even. But I think we’re demonstrating this as something not to do and put in your hard stop, get stopped out and be done with it, clear your mind, the minute it goes to 16, and you start thinking about adding more, I’ve done a show on this. We called it the “moron strategy” and you don’t want to be in that spot. You don’t really want to add to losers. So that’s why he’s saying losers, average losers, losing traders, add more risk to losing positions. So the better part to be is get stopped out, deal with your feelings on being stopped. And again, I’ll come back to back testing.

If you put a trade on and you don’t become emotionally invested in the outcome, because it’s just another’s trade, right? That’s all it is. It doesn’t matter what the ticker is. Doesn’t matter what the instrument is. It’s just one of hundreds or thousands of trades that you’re going to put on. So you learn the hard way to not become in love with any one particular trade. Doesn’t matter. The fundamentals, the market environment doesn’t matter. The chart pattern. Does it matter what you did in your last 10 trades, right? If you toss a coin it’s 50 50, right? So same thing with a trade, you have the expected value of a trade and you should know that going into it. I keep talking about back testing and knowing the data. If you know the data, it can set you free emotionally and you don’t want to be in a spot where you have to negotiate with yourself by doing like not putting in a stop or lifting your protective stop, or then being reluctant to take the loss where you should have.

And then even thinking about buying more, right? You want to buy strength, not by weakness. You don’t buy dips. I know other people feel differently, but you know, in this type of a market, how’s that working for you. So you don’t want to find yourself in that spot. because what happens is, in my opinion, you can test this. If the trade doesn’t start making you money right away get out of it even quicker. Don’t even wait for your protective stop to get hit. If your stop was at 18 and you start losing money the first day, offset it by the end of the day, because the best trades typically are going to make you money right away. There’s no reason to sit there and agonize, just get out of it. What do you care? You’re just using the ticker to ride the wave. There’ll be more.

So then what happens is 16 brings you 12 and that brings you 10. So now you’re, you’ve got more risk on right? In a, in a thing that never worked out. It didn’t show you any hope that it was going to work out and you added more because you were reluctant to take a small loss. Now you’re sitting in these two big positions at 10 bucks. You’re down on both substantially. You’re down 50% on your first piece. And now it’s like, I can’t possibly sell and lock in this loss. Right? So you see this play out. It’s almost like a, a human condition. And so you can avoid that by don’t putting in alerts. Don’t tell me about alerts alerts. Don’t manage your risk, right? You don’t want to have to do any thinking. You want to be able to say I bought the thing at 20. My stop is at 18 and that’s religion. There’s no negotiating at that point. Stop out your equity, right? If it goes up 24, 25, 26, nice trade. Put your stop in at 24. See what you’re willing to risk to stay in the trade and invest your gains into the stop and then be done with it. Market’s going to go where it’s going to go. You don’t need screen time is bullshit. That’s all I have. You can subscribe to us on YouTube you can subscribe on, Spotify, Stitcher, Apple, and Google podcasts.

Podcasts. We’re all over. You could also listen to us on Audible, if you have Alexa and this and that, that works too. And I’ve been giving away the audiobook version of the Inner Voice of Trading, which seems to be really helpful in these types of markets. You can get that at Martinkronicle top right corner. It’s free.

Subscribe to the show  

Click here to  get your free copy of The Inner Voice of Trading audiobook.

When you have a plan, opinions don’t matter

Hey everybody. It’s Michael Martin. Thank you for being here from time to time, which means a few times per week, I get a email from usually more than one person saying, Hey, I see hogs are inverted. How should I trade this? Or I’m thinking about getting long gold here. What do you think? Or any other ticker doesn’t have to be commodities or futures? And I typically don’t respond to those emails, not to be a jerk, but because I feel like what I advocate here is, is helping people stand on their own two feet without any outside assistance, because my psychology and emotional intelligence cannot help you manage risk with your own positions in trades or nor in, in investments.

And so I’m, my advocacy is to help you become an independent thinker and not rely on anybody, which is kind of why I say to bring a few episodes into sharp relief, stay off of social media, even though it’s fun. Just train yourself to stay off it. Right? Same thing with television. I try, I don’t make fun of Kramer. I use Jim Kramer because he’s a very well known guy. He’s also terribly brilliant. All right, you have to do your own research, but he’s super smart. He knows information on some three, 4,000 stocks off top of his head. That’s not something that a stupid person would be able to do. So when I mention him, it’s not to throw shade at him. It’s just to use him as an example. Cause I think most everybody who’s in this business is aware of who he is.

And so I can’t buy or sell anything because of what he’s doing. And if I do have an idea because I’m following a certain type of chart pattern or setup, right? I, I don’t want to put you in a spot where you should go looking for emotional support to see what everybody else is doing. That’s irrelevant. So if you feel insecure about what you’re about to endeavor, you might want to take a step back and say, okay, where’s this feeling coming from? Why do I need emotional support from people? I don’t even know because everything under the sun can be tested, right? And I don’t want think about it this way. Why would anyone delegate their research to me? It’s not the business that I’m in. So you can go get your own back testing software. It’s very, very affordable. The professional ones are whatever, maybe a thousand or more, but you know, you get what you pay for.

And if it’s important enough to you, then make the investment in the time of the money and the effort because it is a business and you ought love yourself enough to make that investment. You see? So this is where the coaching comes in because if you can’t find yourself to be able to do that, there’s probably some type of psychological issue or habit that you picked up over the years. That’s stopping you from being an independent thinker. So that can be fixed. It takes a while to do, but any of those types of psychological issues we’re pretty good at, in terms of the coaching, all that notwithstanding though, you really have to go out and plant the seeds, harvest your own names and put the trades on. You also need to know where to get out, right? That’s that’s how you start to have enormous success is to be an independent thinker.

Everybody that I know whether they coached or mentored me, or I read about them in books or met them over the years, they’re all very, very independent. They have their own thoughts. Now they might feed their brains. Some of them, if they’re into like global macro or this and that, and they might know about economics around the world, but ultimately that’s not what compels people. I don’t think to make, buy and sell decisions. because ultimately fundamentals can look okay on paper. But if something’s in a down trend, it’s awfully difficult to make money as a long-only investor or trader when things are in a down trend. And that goes for people who dollar cost average. Dollar cost averaging only works if the thing eventually resumes some type of an uptrend, otherwise yes, it’s true that your, if you put in the same amount of money, mathematically speaking, for example, your average cost will always be below the average price, which is kind of the point of it.

But again, if it doesn’t resume an uptrend, you’re not going to make any money. There’s not a panacea out there. Right? So I would like to just say that opinions don’t matter. Not mine, not anybody else’s when you put on risk, it’s between you and your higher power and there’s no better way to do it than to just do it. And then also calibrate the feelings. That’s why you put the trades on and don’t paper, trade paper, trade doesn’t mean anything. It helps you understand how to work the platform maybe with a dummy account. But if you’re not making and losing real money, you don’t feel the burn. And that’s the whole point of just doing it is so that you can feel the feelings and feel what you feel like when you’re managing real money. because that’s a huge part of being able to calibrate your system. Meaning you, you are the system, right? Your trading rules are just things that you adopt to accelerate the feelings that you want to feel or not feel. Some people like to put themselves in tough spots. So they reach out and bond with other people over boohooing. That’s not what I do. I don’t commiserate with people cause I know it can be fixed. So anyway, if you’re struggling with all of that, take some time out and figure out what you want to do or go to a back tester

And kind of see what the behavior would do over time because that can all be tested. You want to test monthly highs. Perfect. You can test that. You want to test multi-year highs. You could test that too. So just dig in and do the homework, the math and the, and the results will set you free. They’ll either tell you that this trade is not a profitable trade or yes, even though you’ll lose 4, 5, 6, 7 times out of 10, it’s a profitable trade. So at least, you know what the expected outcome is of that particular trade. And then you can calibrate that with your emotional constitution when you put it on and not everything will seem like a flyer because you don’t know what you’re doing. Right. So if you have the data, not the chart pattern, the data sets you free. Okay. So again, I appreciate everyone reaching out and it’s kind of flattering that anyone would care, but ultimately it’s a disservice to talk to you about opinions, about being bullish or bearish or otherwise. So anyway, thanks very much for being here. I will see you tomorrow.

Subscribe to the show  

Click here to  get your free copy of The Inner Voice of Trading audiobook.

Envision your success then go get it

Hi everybody. It’s Michael Martin. Thanks for being here. So I like to end the week on goals and stuff like that when I can. If you’re struggling, I got this I got an email about struggling and not having a, a clear picture. And so what we’re talking about here is, is you don’t have a vision for yourself. And my whole take is this is that if, if you can envision yourself succeeding in something, you really increase the odds of you actually getting that.

You just go to that spot. That’s your point B, right? So you can create, what’s called the vision board. Some of you have strong enough mental capacity to create those visions in your brain and then go act accordingly, but not everyone is built that way. So what you can do is go to staples and buy some poster board or some court board and buy some glue, like an Elmer’s glue stick whatever they call it anymore.

All right. And then I would go to wherever you would go like a Barnes & Noble or wherever your news stand and I’d buy whatever, a $100, $150 worth of magazines of the things that you’re interested in. It could be, cars could be sailing, could be vacations, could be real estate, could be haute couture, fancy clothes, that stuff, pictures of pretty people. And then also cut out pictures that you have on your phone with all those damn selfies that you have that show you the happiest as you’ve ever been. Now, print all that stuff out, cut it up with a, with an Exacto knife or scissors and glue it all up on your vision board and start to associate the finer things in life or the things that you have to experience life to the fullest and keep it in front of you.

So this way, every action that you take, you have to look at the judge and jury on your vision board, looking back at you saying, “are you really going to put on this idiot trade of 30,000 shares of this dog shit stock? Is that really how you’re going to meet your financial goals so that all these things on your vision board are going to come true?” And for those of you with big money, 8, 9, 10 figures, maybe it’s all the phone calls that you’re not making. That’s stunting your growth. You’re not asking prospects for the business because you’re big enough and your quality of life, isn’t going to change all that much. So you don’t ask them the tough questions. I would never let someone make that decision for me. It’s just not going to work. I’d always pick up the phone and force them to answer the question, because I don’t want maybes.

I don’t want these open ended questions, right? So maybe for you, it’s your own private jet, maybe it’s six vacations a year of several weeks where you’re traveling the world, maybe it’s buying and selling other companies. In addition to what it is that you’re doing or joining your clients side by side in private equity deals in, in operating companies, this and that, maybe it’s putting up a family tree with yourself, your kids, your grandkids, and then their kids who aren’t even born yet. Of course. And you set up and you’re thinking in terms of a dynasty, when you can visualize it, it becomes that much more real. And if it’s that much more real, it can have that much more of an emotional impact on your behavior. Day after day. Now I did this 30 something years ago and people thought I was insane.

But to a name I hit all my goals. Doesn’t mean you have to do it that way, but whatever it takes to motivate you to stick to the plan so that every day you’re making best practices. Even if you lose money, your goal is to follow a set of rules with which you’re compatible that have positive, expected value. That means there are days you’re going to walk away where you lose money, but if you followed your rules and you lost money, are you a loser? Because my take is when you’re shooting from the hip, that’s not winning behavior. That’s just feeling like you need to participate because there’s action. And there’s something moving somewhere. Well, my take is you should have known that ahead of time. You should have an idea of what’s going to go. And if there’s a surprise announcement, that’s not your trade anyway. So don’t worry about it.

I think so much of trading failure can be avoided because if you don’t have clarity and they don’t have a vision for what it is that they want. The answers for you are not searching social media or being in chat rooms or whatever these new things are. Discords, it’s not the way to do it. The trading techniques out there are so simple and they’re so easy. What you need to do is spend time focusing on who you are, who you are as a person. What is it that you want for your life? How do you want that to evolve? When you have that much more clarity on stuff, you have big emotional motivation to pull you in the right direction. When you sit there and say like, oh, it’s gotta be a magic formula, magic chart pattern.

You’re really way off base. Because it’s so not about charts and it’s not lower time frames that don’t measure up with monthly’s and weekly’s so spend some time this weekend and next week or however long it takes you. There’s no rules here on figuring out what it is that you want. What do you think that you want the money to do for you? If you had a monetary goal, what is that money going to do for you? Because the money, if you say, oh, I want to make a thousand a day, a thousand week thousand a month. Doesn’t matter to me what the number is. It’s not relevant. How’s that money going to serve you because to me, I’m going to call you on it. I think it’s a bullshit way to go setting goals.

It’s just like saying in January that you want to lose 15 pounds, why do you want to lose 15? Why limit that? Why? Why not say 30? Why not say that you want to get to 7% body fat because the numbers are number irrelevant.

It’s what it’s going to do for you emotionally and psychologically. That’s what’s compelling. All right, folks, please consider subscribing. We’re all over the place. YouTube, Spotify, Stitcher, Apple, and Google podcast. We’re on as well. So you can listen to us through your Alexa. And if you haven’t already gotten a copy of the audio book, version of my book, the Inner Voice of Trading, you can get it for free at the site MartinKronicle for free top right corner. Have a great weekend folks. I will see you on Monday.

Subscribe to the show  

Click here to  get your free copy of The Inner Voice of Trading audiobook.

Why you need to use stops not alerts

Hey everybody. It’s Michael Martin. Thanks for being here. So today I want to talk about what I mean by not sitting in front of the screen all day. And that is the pros have a plan. They know exactly what they’re going to do and how they’re going to execute. Doesn’t mean they’re going to get ’em all right. That’s for damn sure. But you have to go into the day with the confidence of knowing what you’re going to execute. You can’t figure that out on the fly. That’s why so many people lose money, I think is because they’re going on gut shots when they really don’t have that muscle really evolved yet. They’re too new. Now, if you listen to folks who are trying to run these day trading chat rooms, they’d make it sound like everything that you’re doing is wrong.

If you’re new to the game, I don’t think you should be spending the day sitting in front of the computer. I think you should work after hours when the market’s closed and it will reduce your urge to do stupid things. Have a plan, know what you want to try, even if you don’t have any experience, put the trades on and then go away. Also with that is this other thing that’s drives me nuts. And that is don’t put in your stops because they’re going to get run market makers, this and that. That’s a fallacy market makers. Aren’t looking if your stock is going down and you’re long only, and you put a protective sales stop below the market. Why in the name of God’s green earth would a market maker want to buy something that’s going down? Think about that for a minute. So that whole like, “oh, they’re going to run the stops…” What, who, who wants to have inventory of a stock that’s going down?

So again, you listen to these people and I think you’re getting bad advice. Hopefully I can hit enough of these issues here so you can hear the truth. Yeah, sure. If you are new to the business and you have to keep your computer on some people and they have enough orders, put an alert in when the security is like whatever 50 cents within 50 cents of where the stop is. But man, if you have a $5 stop in and the thing is down $4.50 against you, what are you waiting for? Right? Because the good trades make you money right away. That’s my experience. You’re buying with the buying momentum. Other buyers are jumping in. Then over time they tend to support their positions. If you buy something and you start losing money, you’ve got bad timing. That’s what that’s called. And after a few ticks get out, but it’s, it’s not logical to not want to put in protective stops because you think someone wants to run you and force you to take a loss.

I look at this two ways. One, if the thing’s going down and you have a stop, that’s good thing. You should celebrate that because limiting your losses is the name of the game. You’re going to be wrong 6, 7 times out of 10. And so you’re going to want to make sure those, those stops get hit. And when they do you celebrate them, you love those stops. You really should fall in love with them because they’re the sentry to your equity. They’re standing guard saying “Once the security goes past this price, we’re getting out” and that’s it. There’s no negotiating. So I would encourage you to do that more than enter alerts, right? If you do phone executions, maybe you put in alerts, right? Cause you have 10,000 shares and you don’t want to put that up on the screen. So you’re picking up the phone and you’re calling your trades that way, asking someone to work in order. My guess is the newer folks aren’t doing that.

And the newer folks with less than $10k, shouldn’t be having thousands of shares of an order, because that means you’re buying dog shit, penny stocks, which you shouldn’t be doing either. So I, I don’t know who started these types of rules, but they’re not based on anything that’s smart from a business standpoint. And those rules don’t really serve you if you’re overseas and you’re not looking and regular trading hours for you is nighttime or 3:00 PM where you are living. And they run into the, to the late evening. I would still put in your protective stops, because this way, if you fall asleep or the day doesn’t unfold the way you want it to, the last thing you want to do is be stuck in a situation in your personal life with young kids and know that you don’t have protective stops in.

So I, I think that information is a disservice to you because it goes against the grain of really smart people and how they run their money. Right? Again, all these little things add up to why I think you should stay out of chat rooms. You have amateurs out here trying to give professional advice and they don’t know their ass end from a hole in the ground. Anyway, that’s coming from a friend of mine in Southern Spain, wanted to reach out and say hi. That’s all I have for you today. Folks, I’ll see you tomorrow.

Subscribe to the show  

Click here to  get your free copy of The Inner Voice of Trading audiobook.