Hi everybody, it’s Tuesday. Thanks for being here. So someone left a comment, creative advance, and it was on the video how your report card changes over time. And so I thought what I would do is give another a little bit of more 2 cents on this part of it in that when you’re starting out and you have a style, you don’t want to abandon that style because you have success, so you kind of cling onto it. The thing is, is that in the short run, you don’t know if you’re lucky or if you’re good. So the analogy that I like to use is you think about how marketers and companies buy traffic on the internet in the form of advertising to drive traffic to say a landing page. Whenever you go to even Amazon, whatever you see at Amazon, it ain’t random. It’s designed to get you to use the card that you have on file.
So they make everything one by click shopping, everything is super convenient because they want your money. So what typically will happen is they’ll try to do, make an offer a go or a service and they’ll have create a landing page and then they’ll do a variation and then they’ll do what they call AB testing. So maybe they’re going to spend 10,000 bucks a day on advertising, they’re going to drive traffic to those landing pages. The software will vary which landing page gets shown 50 50, right? So you don’t know the audience. You’re targeting a demographic and age group, maybe a gender, this and that. So then you look at the conversions after a week or two, maybe a month. It all depends on the company and how big the tickets are, meaning what’s the cost of the good or service. And they look at the results and they say, okay, over a longer period of time, this one converted 70% better and say it’s number A, letter A.
So then that becomes what we call the control, and what they’ll do is they’ll sit typically say, okay, well A outperformed B like three to one. So A becomes the control now, but because we still don’t know what’s the optimal one, we’re going to start creating a C version, another iteration. So now they’ll make some changes and some not a lot because then you don’t know what actually is working. So they’ll make maybe one or two tweaks could oftentimes be the headline. Sometimes it’s the color of the buy button and they’ll say, let’s split it 90 10, we’re going to send 90% of the traffic to the control. We’ll send 10 to the variation and let that run for X amount of time. Again, could be a couple weeks, could be a month, and see how it does. Now if C outperforms even with less traffic, because what you’re looking for is the percent conversions, they’ll switch it and they’ll say, okay, this one is now the control.
Let’s see if we can iterate and create one better. So the analogy here is that for your trading, if you do, again, it’s harder to do if you don’t have a lot of money in your account. Again, which is why a lot of folks can’t study with me because the fees are sometimes a good would be a good chunk as a percentage of their accounts at least for the one-on-one. The you want to think, stick with your knitting and do the trading that you can do with what you think is a success and just keep playing that out because you need more time to see that it works. That process in and of itself will help you gain confidence, which is important to being a successful trader. You see, then what you can do is run with a smaller part of your capital, some of these experiments, because until you actually do it, you just don’t know.
You know, don’t want to fall in love with the first woman you meet kind of a deal. You want to see what’s out there. You don’t know until you meet a lot of people. So I do think that’s tricky. I admit it’s, it might be easier said than done, but I do think the benefit of the way I did it, which has been very well documented, it’s in my damn book and I talk about it here, is I actually went to Wall Street and said, I’ve got nothing to lose. It’s just money. I’m going to trade everything. And on some level there was a little genius in that because I got a little taste of everything. It was like one of those kind of a la carte menus where you get tapas and you order a little bit of everything, maybe go family style and you share is I got to fail quickly even though it certainly didn’t feel like anything was happening all that quickly except a lot of work that I was putting in, but without beating a dead horse, the trying to trade the interbank foreign exchange and trying to trade, trying to trade all of it all at once, I got an actual after the fact or what Emmanuel KT would say, a posterior I knowledge because I actually did it.
I didn’t the theorize and say, oh, interbank is not for me without even trying. I actually did it and tried to see how it fit and that helped quite a bit because then I could see in the data where was I showing consistency? Where did I have a bit of a knack? Where did I express an edge so then I could reallocate my time? Which is huge, right? Because we only have a finite amount of time. It’s kind of like one of the only things that you can control, and then I eliminated options and that freed up more times that I could do even better research on the things that I was successful at, right? Then I finally narrowed it down and for the time being for a couple years I put stocks on the side and I just stuck to futures, commodity futures. So you might want to put yourself a similar scenario using or going to school on me and saying, I’m doing this one particular thing well or I’m lucky, but I am getting results. I have to investigate that further. Then do that with like 75% of your trading capital and then with the other 25% test new ideas, just to be honest with yourself because if you’re going to do this for 20 years, honestly, what do you care about the first year? The first year is all laboratory experimentation anyway, don’t put too much importance on it. The thing is to gain the experience and to do it.
I find when I speak with people on the phone, they overthink things and I don’t know why that is. I think it’s a guy thing. I think it’s a fear of loss. It’s a fear of getting castrated. I think it’s a fear of what it’s going to look like to other people. I have no rational understanding of it, but I think it holds people back. There could be a lot more successful people if they just reached into their front pocket, gave a squeeze and started doing it because losing money in trading doesn’t say anything about you as a human being. You know what I mean? Nothing at all. But at any rate, that’s how I would try to divide and conquer when you’re starting out and experiment because you might be pleasantly surprised that you actually have a knack at one thing that you haven’t tried yet.
You might be little disappointed, admittedly to that one thing that you’re making money on. Peter Boris and I used to joke about the guy who bought Google at the I P o and held it for two years and said he was up thinking that he was a trader and there’s no real trading involved. It’s good investment I suppose, but the point being is like you have to constantly experiment. Furthermore, and I’ll leave you with this, even when you get to be my age in literal age and also years of experience, even if you get to Victor’s age, you still need to experiment. Why? Well, because the market’s always changing. The environment’s always kind of morphing, so there are little tweaks that you need to make, and that’s true. Whether you are doing for whatever reason, penny stocking long or short, or whether you buy any, try to do anyone’s swing trading, shorter term type of deal, we’ll call it between one and five day holds or position trading more like me or trend following. All of those strategies kind of have to be adjusted, you know what I mean? To take into account what’s going on in the marketplace and you only get that from constant iteration and constant testing, so that should kind of become part of your new vernacular in that once you
Even get a set of rules with which you’re compatible, you kind of constantly have to stress test them because that work is never really done. No one really talks about that because you can’t make money. I can’t sell that, but that’s what the pros are doing. That’s what we constantly do all the time back here say, okay, what if we tweak this? What if we tweak that? What does that look like? There’s nothing to be afraid of. It’s discovery. You should be excited about trying to figure out what the data can show you. Okay, please and subscribe. I’ll be here tomorrow with GaN Ginu and we’ll have a really good chat and I’ll look forward to seeing you then. Take care.
Click here to get your free copy of The Inner Voice of Trading audiobook.
This is an automated transcript