Today I want to talk about the secret mind trick of a proven eight figure trader. Please don’t tell me you fall for that bullshit. At any rate, there is something that you can do to put your thinking in order to help you improve your trading. That I use, and I’ve been using for my entire career, well, not my entire career, but I found out about this early on, the little not public secret that no one wants you to know that you could find only in the inner mind of the supermarket wizards, and that was when I put on a trade. Say you got a million bucks, you put on a trade risk, 1% you put on say, so that’s $10k, and the position goes up to $14,000. You might be like, okay, +$4k or $14k total, let’s make it $15k. So now I’m up half a percent.
What I don’t look at is the rate of return on the particular trade itself. I look at how it moves the account balance. So if I had $10,000 and I was up to say $12,500 on the trade, that’s only one fourth of 1% that moves the bottom line. So in my minds, at least the way I think, I don’t care about that, that’s not enough money. Now, I will share with you, given my upbringing in blue collar lifestyles, working class and having caddy golf bags, did landscaping weighted tables, comparing that money to what I used to do for a living when I worked at the mafia joint, I’d make $500 a weekend. That was a lot of money. It was cash and it was the early to mid eighties. That was a lot of money back then, but I can’t compare and contrast the two because they’re really two different qualities of money.
Same thing, caddy and golf bags in Westchester County, New York, that was hard earned money and it was meaningful for me at the time. So if I said, okay, lemme take that $2,500 that I have in unrealized gains based on this position, and I compare it back, some of those times it’d be like, man, this was a whole summer of work, or in certain circumstances, this was three times my starting salary on Wall Street. So what I do, and it’s not necessarily a secret mind trick, but when you start to think, not like, okay, if you put down a $1,000 and you have a trade that’s now worth $3,000, and that happens if you trade futures or options because the margins are smaller and you can amplify your cash quickly. I learned to change or affect my behavior in managing risk based upon what the position was doing for my overall account balance.
That was really the goal was to say, double or triple my account. Now you can say you can build a beach, one spec of sand at a time, but is that really what you want to do when you’re younger and you’re starting out? You need those emotional wins. You want to be validated and you can say, yes, I’m making money and it feels good. There’s two payoffs to every trade and you’re doing it. But what I learned the hard way is that sometimes I was in the right place at the right time, and what I thought was winning behavior was just good luck, which I’ll take because I have to take the bad luck too. So of course I’ll take the good luck, but I don’t want to take the good luck and think that I have skill when skill’s not there. That’s a delusion, right?
That’s why I was always very, very stayed and kind of stoic about things and didn’t get over my skis, if you will, because I knew pride’s a big banana peel and there was no sense because I remember how hard it was to lose. So yes, I felt a little relief when I would win, but I just didn’t know what added up. How did the win happen? What the hell was it that I did? That’s why I talked yesterday about what is your edge. It’s probably not the chart pattern, but it’s the way that you trade it. So you have to document it because your mind will put you into thinking all these different crazy things that are not really based in reality, but based on your emotional constitution and your psychology. So when you write down the data points, you can actually see stuff. They say a short list is better than a long memory, and I still do that even though I have a mind, like a trap.
I remember distinct conversations I had with people 50 years ago. But the thing is about your trading, you really need to look objectively at the data and then better yet, show it to somebody else who just knows the math. Show it to somebody, go to Upwork or Fiverr, maybe not Fiverr wouldn’t have it, but find somebody who knows mathematics and say, look at this data. What does it tell you? Maybe it costs you 50 bucks for an hour of their time to look at the data and have them harvest results and give you some feedback on it. The kind of stuff, I don’t hire the people because I know the math myself, but that’s where the simulation can help you, especially if you’re not looking at one name over two minute bars. I’m talking about making bigger money without having to do a lot of work because in all of that stuff, while I’m not poo-pooing, scalping, I also think in terms of Pareto efficiency, if you have to use time and money as an input to get a certain X output, how can you get that output by using less input?
So for me, it’s about the time. If you have nothing but time and you’re starting out, you’re probably happy to be sitting at a trading desk or in front of a bunch of monitors that do it. For me, we have different taste in women. I just don’t care about that. But if it matters for you, then I’m happy because ultimately, if you win, even if it has nothing to do with this channel, I’m happy for you. I want the abundance to be spread. I think this is a great industry. You can make a lot of money. You can affect your family. You can certainly give away a lot of money as well and help other people out, which you should always consider. But in order to grow your account, you really need to see sizable chunks. And when you think about it, it’s kind of a truism, but you don’t really need to see 45 different big moves across the year in order to have an immediate and a gigantic impact on your overall equity.
You just need to see two or three moves, be positioned accordingly, and then try to stay with that move for as long as you possibly can stomach it. Now, I talk about adjusting stops and all this and that for whatever reason, some of you like to kind of jab and jab and jab and jab, and I’m like, I’m not really looking for jabs. I’m looking for more significant knockout style punches. Now, some of you are going to, yeah, Mike, it’s hard to find 5R. Here’s the old psychological test that people do. Get out in your car, jump on the freeway, and then notice all the Toyota Prius is out there. And what you’re going to find when you come back in is you’re going to be like, man, they’re all over the place. Now, if I give you another exercise for the following week, go out on the street and find all the Teslas that you can find. All of a sudden you’re going to notice them all over the place. So from my mind’s eye, if you know that you can see winning trades and you can go back and study the charts of the seven, the magnificent seven or the darlings, you can look at Coco, you can see all of those things. How hard was it to actually get into that winning trade and then actually sit on your hands?
What was it emotionally about that winning trade that you couldn’t handle that you had to get out of when you did, which was presumably before the end of the day? Now, I know Coco’s a little different. I understand that the margin went from whatever it was, $6,000 to $20,000 now, if I looked at my account, and so I know that’s a little different. I have the money, you might not, so that’s kind of unfair. But those are extenuating circumstances. Most of the time you’re not going to see that where the exchange has to take into account a whole bunch of things to keep integrity of the marketplace there. So they boost the margin to make sure that people don’t get hurt. You could say it’s not fair, but it is what it is. But look to see for all your trading, when we do the mastermind, for example, in the program, the first thing we do is establish clear goals, and I never let someone say, well, I want to make 50% rate of return for the upcoming year. What does that even mean? What does that mean? Why would that be the goal? Why not pick 250%? What’s the difference? You’re just picking a number out of a hat. What are you trying to be reasonable?
So we talk about process. What’s the process that you can follow that will put you in the ballpark or at least on the path to get the returns that you want? Because the behavior predicts where you end up saying that you want to quit smoking or quit drinking or want to lose 15 pounds or want to get a blue belt in Jiu Jitsu or whatever. Those aren’t really, to me, they’re not real goals because you’re putting yourself in a spot where you can envision yourself in the future having physical things that you don’t have now and after you’ve bought enough of the physical things from having made the money that you made either in your career or your trading, you realize the toys don’t make you happy.
If you don’t have a lot of friends and you’ve made a lot of money and you got your place in the Dakota building at 72nd and Central Park West and you got yourself your new Ferrari, you still don’t have any friends and the people who would want to snug up to you, snuggle up to you because you had a new Ferrari or a place in the Dakota are probably not necessarily worth having as friends, but you can be your own judge and jury on that. So we talk about the process that you can follow because it’s the day in. It’s the day out that really predicts where you end up, right? Thoughts, feelings, actions, your actions or the behavior. The behavior predicts where you end up. When people ask me about my promotions in Jiujitsu, they’re like, how’d you get blue belt? How’d you get purple?
How’d you get your brown belt? It’s very simple. It’s simple and hard at the same time. The simple part of it is that just got to go to class, put the gi on every day, get on the mat. The hard part is you got to go to the gym, you got to put the gi on. You got to get on the mat every day. So it’s easy to do one day. It might even be easy to do for some of you for a month, but try doing it six days a week for six, seven years when most of the time you lose and you get beat up. You look at my face. So at the end of the day, when I think about the trading stuff, I was always clear about the fact that I was a broke ass bitch and I didn’t have enough money in that. No one cared about five, $6,000 account. No one in my office where I worked would want to take that account and help that person. So I really thought about it from the 360 degree view. It’s like I’m on my own. It really on your own, no matter who says they’re going to try to help you, you’re on your own,
And there wasn’t enough money in the account to earn commissions and fees to make it worthwhile. Anyone wanting to give me any time, people are basically self-centered. They’re only going to help you to the extent that there’s something in it for them, right? So that’s why, another reason why I did this show most of the time, I mean, I’m not going to know the majority of people who ever watched this show or listened to the audio version through another podcasting platform such as Spotify. So for my activity and for my behavior and for what I wanted out of it, I learned to not care about the small tips I wanted the tables that were going to drop. Like I said, when I worked at the Mafia joint in Westchester, I knew who the bigger players were because I knew who the owners were and when they came in, I knew who they were.
I played stupid, but I smothered their table. I even paid off the bus boys, I’ll have to tell you the story one day to basically run the other tables because I knew not mentioning any names who the namesakes were, and I knew that if I gave them good behavior, because a lot of the money that was coming, it wasn’t. It was cash. It was never declared. So when they went out to dinner, it was big bottles of wine, Dom Perignon, champagne. There was no expense that they couldn’t afford at that point. Kind of what they did is they lived it up. So if I had 10 or 12 people twice a night on a Friday, Saturday, those tips were monster and they were huge. They helped me get through school. But at the end of the day, going back to the trading part, you need to know what you’re doing it for.
I’m not doing it for the small emotional wins. There’s a lot of times where I might be up, say, one fourth of 1% and I’ll have my stop at break even, but I’ll be looking to add more and guess what happens, and it happened last week. The market reverse is down and I get knocked out. So what did look like one fourth of 1% unrealized gain goes to zero, but I will do that all the time. That’s one of the things, hallmarks of my own trading that I do very, very frequently is I’ll invest the gains into my stop is how I explain it, because then it’s a bit of a free roll. Now, if I added all that money up at the end of the year, it might add to another 5%. Who knows? But at the end of the day, I don’t care about that.
I don’t care if I have 40% for on the year or 45%. I don’t care if I have 150 or 155%. You see what I’m saying? Emotionally, I’ve let go of that. I’m trying to find and position myself into the spots where I think there will be bigger moves. I don’t know that there’ll be bigger moves. I don’t know that the three R is going to go to five R, but I’m open to the possibility and I position myself accordingly. You have to deal with the uncertainty. You can’t predict it. Stop trying to think you can. That’s the problem with especially guys, is that they’re insecure and they want certainty. They’re very demanding. Think about it. You want to come to the trading desk and you want validation. You want security, and you want to know shit. You want to be able to predict the future.
You’re in the wrong business. I don’t even know where you could find that. Can’t find it. I don’t even know where you would be able to find all that. So I think it’s very unreasonable. So that’s why that we do that in the mastermind anyway, in week one is to recalibrate the system. What do you think you’re entitled to? Well, you’re entitled to the results that you get from the behavior that you’re willing to take. No one’s given you shit and you have to do it on your own. I can help you. I can steer you, I guess in the one-On-one, it’s a little bit more, I can do a little bit more work paying for my time. But in the Mastermind, it’s more of a mentoring, guiding hand kind of a deal where you still have to do all the work, and if you’re not willing to do the work, don’t look at me.
I’m not going to build it for you. You’ve got to do it yourself. But if you want to make more money, in my opinion, the secret trading hack of proven eight figure traders that they don’t want you to know is think about the gains that you have on any one particular trade and see what it’s doing to your bottom line. You don’t want to sit there making nickels and dimes. If your goal especially is to grow 50 to a hundred percent per year. You have to figure out what that is. The good news is if you go back to yesterday’s episode and you know what the expected value of a trade is, you’ll be able to calculate how many trades that you need to put on in order to get the percent and the dollar value of what your goal is. So it changes your thinking. You’re like, wow, I’m too narrow minded here. I’m sitting here trying to make day trade for 150 bucks, and I have this as a financial goal. Mathematically, it’s never going to happen because there’s just not enough trades in the universe of the instruments that I’m looking at.