So today I want to follow along from yesterday’s episode. We talked about belief, right? You have to believe that you can actually achieve your goal. Goal setting’s important to me, it’s the beacon. It’s both what pushes you and pulls you to where your point B is, right? If you want your life to be different from where it is today, it’s behavioral. But in order to execute that behavior, because behavior predicts where you end up, you first need to come up with the idea. To me, that’s a goal. And the goal should scare the shit out of you. There’s no point in saying, I need to get a new Ferrari, or I need to buy another monitor, you know, can do that. The goal is to change your life. The goal is to utilize all your skills that starts your belief system, that it has to be possible.
Then you have to think willingness and ableness are, you probably have all the ability that need. The question then becomes are you willing to do the work? And that’s important. It’s really, really important. Were you the type of student that just said, fuck it, I’m going to go to class and wing it, or did you actually care? Right? Because that’ll tell you a lot about your temperament and your makeup, and I’m not judging you per se, but if I was an allocator, which I’m not, that type of person wouldn’t turn me on. There’s nothing exciting about that person who wants to just bullshit their way through life. I’m looking for overachievers because that excites me to be around them. It doesn’t matter what field they’re in at all.
So here’s the thing, while I don’t like entitlement issues, people who think that they deserve shit just because of who they are intentionally, if you are doing the work, then you are entitled to the rewards that go with it. So that’s why the coaching that I do is I think invaluable because it puts you in that mindset that this isn’t something where you have to live in blue collar despair or you have to be a starving artist in order to deserve it by virtue of the fact that the resources that are out in the world that you might want to acquire or bring into your own sphere are out. There is enough of a magnet for me to tell you that you deserve it. You’re entitled to it. You don’t need to ask anyone’s permission.
And this follows in with the belief, right? If you follow sports, right? The majority of this crowd is male. So I don’t want to just talk about sports because the women tune out. But if you look at the folks who were like legends in their space, they all talk about having a work ethic that was otherworldly, which is me, because that’s all I knew how to do. So when I hear about the late Kobe Bryant going to shoot 300 free throws at three, four o’clock in the morning, then at six o’clock doing the ice bath, having breakfast, going out and doing more, and then having four hours of practice in, I’m like, yeah, that’s what I’ve been doing for the last 36 years. So while it’s impressive to hear that I’ve been living that myself because I was too stupid to know anything else, I knew I had to put the time in.
Nothing was going to come to me just because I thought I deserved it. I had to do the work. So when Kobe was out playing, when Michael Jordan was playing, when Wayne Gretzky was playing, when a younger Mike Tyson was preparing, he’s up at four o’clock in Catskill, New York, running 10, 20 miles at four in the morning. You have to be willing to do the thing that the other people aren’t doing. While they’re focused and looking at short-term timeframes, thinking that they’re going to find their edge there, you’re probably looking at the data. You’re understanding because you’re doing your research and understanding that you don’t want to buy weakness. You don’t want to get trapped by or sell short inside trading zones. To me, you’re doing the work and once you put in those hours, it should build your confidence because now you have something to fall back on when you know that there’s winning and losing streaks. You don’t have to internalize that because you know what the numbers are. You know what your data is, and if you don’t, well, you have to wing it because if you don’t take the chances, you’re not going to get anywhere. There’s no sense of certainty that I can give you. We live in a probabilistic world.
If you are a person who needs reassurance, there’s going to be tough business for you. You’re going to have to work on where that feeling comes from. Why do you have self-doubt? Did you have an overbearing parent? And I don’t mean to bring that up. I don’t know your parents, I can’t judge them, but we’re products of our environment, and that typically comes down to whoever was in your nuclear family, which is usually a mom, your father, brother, sister. Some cultures, it might be a grandparent aunt or an uncle too. So I don’t have any judgment, but you need to go back and find out where Adam met Eve and where did you get that? Could you never do anything right? Are all these people full of conventional wisdom? So you’re entitled to that money. You need to change your mindset around money because the financial abundance isn’t going to come and kick you square in the ass just because you’re looking at chart books or you’re part of a Discord.
Again, take what you want, feed your brain, but then you need to move on. Just had a long conversation with someone who’s in the mastermind but was having a little bit of, not a struggle, but needed a breakthrough. So I said, look, I’ll just send you the zoom. We’ll get on a call. We’ll go outside the boundaries. I’ll do it for free and we’ll talk about it like you overthink things. At the end of the day, when you put the work in, it should build the confidence that you are entitled to the work, to the abundance that you’re seeking, right? If you practice hard, you get to go play in the game. If you win or lose, you get to reevaluate shore up some things. I don’t like to focus on improving weaknesses, though. If you have a weakness, let it go. Focus on building your strengths. You need to change your mindset around money. You don’t have to go through living hell in order to get to some nirvana in your trading. You’re entitled to it right now. If you follow smart rules around managing risk, you have to also understand that the expected value, if you stick with what your trading rules are, the expected value of a trade isn’t going to change. And that each trade that you put on is like that independent coin toss. It’s not predictive of what’s going to happen next. So you have to let go of resulting and saying to yourself, well, I put this trade on.
I lost money. I put three trades on. They all lost money. That has nothing to do with what the fourth trade is going to do because on each trade, the expected value is the same thing. So if that’s your setup, it’s in your best interest to put that trade on. Now, you might be able to build your confidence if you spend time back testing, because then you can see over the last 10 or 20 years how that would’ve worked. What did the losing streaks look like? Then you might be able to say, okay, well maybe if my instrument is below a three or a five day simple moving average, I don’t put the trade on. I use that as a filter for risk on risk off. Allah, my good friend Brian Shannon, he uses anchored vwp for a lot of things. However, if the instrument is below the five day, that’s a go no go model for him. You can steal from that and see if it works for you. But make no mistake, the belief system that we spoke about yesterday and your mindset that you’re entitled to win.
You can’t be a victim in this business. It will chew you up and spit you out. It’s like a great white shark. The first bite is the kill to bleed out the prey. The next one, they just come back and feed after they watch the body of the seal floating in the water. That’s what you are. You don’t want to be the body of that seal just sitting there. You have to do the work. And of course the work is the work on yourself. The trading rules are not that sophisticated. On some level, you could say, if it’s not going up, don’t buy it in the first place. If you stick to some basic tenants, you can improve your p and l. Mind you, I don’t advocate looking at your p and l to internalize if you’re doing well or not. You judge yourself by, are you following your discipline? Focus on your process, not the results. Because over time, you’re going to have streaks that are winning. You’re going to have streaks that are losing, and it says nothing about your intelligence. You don’t to be above average intelligence. Part of the conversation with my friend yesterday, I’ll call him Thomas, it’s not his name, was that when you’re too smart, you can find 45 different reasons to put the trade on and adjust as many to not put the trade on because you can see all the possibilities and what happens is that actually shuts you down. So you have to actually simplify things to several steps. A good book for this, if you like, I’m almost reluctant to mention books though, because you could spend your life reading books. The key is to learn and put the information to use. I don’t like the idea of reading books to fill your brain with stuff that’s not necessary for trading. The book is called “Simple Heuristics that Make Us Smart,” and in the book, I think it’s the book, I haven’t read it several times.
They talked about when someone would come to the hospital complaining of shortness of breath and chest pains, they had to figure out was the person in or about to go into cardiac arrest. And I think they had, again, I might have the story, I have the story, but I don’t know if it’s the book, but it’s the tenet of the book that matters. And it’s to simplify. They used to go through, I think the story goes like 12 different measurements to see if the person was in fact either in cardiac arrest or having heart attack. Now, when you’re in that space, and I know a little bit about it, the time is of the essence.
And so in order to administer these 12 tests, it would take more time. That was very valuable time that could help the person survive it or avoid it by using blood thinners or this and that. So what they did was is they said, okay, well what of these measurements can we use that actually have high predictive value for this illness? And I think they reduced it to two or three measurements that they could get done within 90 seconds, saving an enormous amount of time and getting the sick person the treatment that they needed much quicker. And the accuracy rate was amazing. So whereas you had 12 measurements, they might’ve had 95% efficacy. They were able to cut it down to three measurements and have similar results. So when you think about your trading, if you’re super intellectual, you need to let go and let God. There’s too much information out there that doesn’t necessarily help you with signal. You see? But you want reassurance because you’re used to that. That’s your culture. That’s the culture of you, is to probably be the smartest person at whatever table that you’re sitting at. But that doesn’t help you with
Trading. We no longer need to have an encyclopedic knowledge. Sure, if you want to go on TV and tell stories and impress people because you’re an asset gatherer, that’s one thing, but that’s part of the currency of being a marketer. A trader doesn’t care about that. They don’t care about nosebleed valuations. It’s bullshit price, earnings, multiple. No one cares. That’s investor language. We don’t use that in trading. You need to understand that when you put that work in. Your job is to minimize and make your model as simple as possible. And if you can’t describe it in three sentences, it’s probably too sophisticated. And if you’re just starting out, you don’t need to have seven different setups. Pick one and excel at it, own it. Reduce it to as few steps as possible. This way you don’t anyway. You’re entitled to all the abundance that you seek. You don’t need to ask permission. You don’t need to put in a certain amount of time as a grunt. There is no bootcamp. That’s all language that you’re bringing in from other cultures. That’s not necessary here. We’ll talk more about it this week.