Everybody, it’s Michael Martin, thanks for being here Today. I want to talk about goal setting. I get lots of emails and questions about setting appropriate goals and are my goals good, right? Are they bonafide, are they achievable? Are they feasible? So I have a lot to say about that. And then as I’m looking here, I have all the episodes to this week kind of written out. I’m going to record ’em today and then drip ’em out. I don’t actually record every day. It’s not, that’s why I’ll have this shirt on this whole week. So I’m recording everything today. I also want to thank you all for writing in and leaving the comments. I, I harvest a lot of good data from that. And in fact, I can know at least at two episodes last week had come from either follow up on previous episodes or comments on them. So it gives me good information. So please, if you can leave a comment, like and subscribe, of course, cause I get good data on that too, and that helps me craft the episodes that I think are going to mean something to you. So also, don’t forget if you’ll check out the links below, I’m giving away the audiobook version of the Inner Voice of Trading, which you can get for free. I’ve been doing that for how many years now? I don’t know.
And I think it’ll be helpful for you. Can you get it for free? It’s like a 500 megabyte file. So it’ll take you some time to download it. But you can play it on your handheld, your smartphone or your notepad. It works anywhere. It’s just MP3 files. So basically any downloadable audio file. I stream most of my stuff anymore now. But anyway, I wanted to talk to you about goal setting because I had a lot of trouble setting goals. I hit all my goals, but the way I did it was a lot harder than the way I would do it today. So I think when I think about changing my life, because that’s what goals are for, to bring you into a state of existence, then that’s different from an earlier period of time. You can define what that period of time is. It could be last week, it could be last year, it could be last decade.
Doesn’t matter to me. It’s all bonafide. So my intentional work these days, because intentions, equal results. So I try to be hyper aware of what it is that I’m thinking and certainly what I’m feeling. There is no feeling that I’m unwilling to feel because as Ed and Michael taught me that all those feelings are trying to communicate with me. So I have to listen inwardly and see what they’re trying to communicate. Where can I break down old belief systems, things that I picked up from my environment, my sister and my parents and my friends, and any other part of that’s my nuclear family. And then other parts of extended family and friends. You pick these things up, you can pick them up subconsciously, but then it also can show up in your life. So we want to have goals so that we can constantly measure effectively our behavior, right?
Because we have thoughts that could be the ideation or the goal itself. The feelings are attached. How am I going to feel in executing this goal, in trying to achieve the goal, right? Because there’s going to be failure along the way. So how do I process the feelings around failure? Because that’s going to indicate certainly the relative strength of my, what’s the sticktuitiveness, right? My persistence, my determination, and then the actions. Because based on how badly I want to achieve what it is that I want to achieve, I’m going to have strong feelings about that. And I can actually manifest what I want in my life by feeling as if I’ve actually achieved the goal today, even though I actually haven’t taken the first step. So it’s very powerful stuff. And those feelings are actually what motivate you to take the action. It might mean picking up the phone, it might mean sending out emails.
It might mean tinkering with a trading system. There’s so many different moving parts and I’m not here to judge and tell you what your goal should be. I’m just here to help you achieve them. Cause I think the more clear you get on what it is that you want to achieve in your life, the closer you will be to actually achieving it. So I’ll give you an example, especially coming through January, we’re still in the end of March, early April, and people would start the New Year’s with having goals. I want to lose 10 pounds, I want to make more money. And when you think about that and it gets super deep, losing 10 pounds, don’t lose 10 pounds at a good weight for me right now. I don’t want to lose 10 pounds. It’s not a good look. But say that was a goal or you wanted to make an extra 10 K a month in your trading, for example, a hundred thousand a month.
Doesn’t matter to me what the number is. That’s just a number. And maybe there’s a good feeling that you can associate with having achieved that. That might be a milestone for you. If you’re making 50, 60, 70 K a month and you want it to ratchet it up a hundred to 50 to a hundred percent, then by all means go for it. But the thing if you’re just starting out that you might benefit more from is think about your goal in and of itself is not the end result of losing the 10 pounds. But think of it in terms of I want to have the right diet. Because if you have the diet, which is the process, you’ll get the result. You might not get it overnight. You don’t want to weigh yourself every day because it’s this not enough time to see any meaningful change. So think about attaching a goal to the process that you know can execute.
And that was the point of today’s episode, is that there are a lot of folks out there who say, I want to make an extra 10,000, extra a hundred thousand a month in my trading. And so for those folks, if they’re already making decent money, they probably already have that process. So now they can scale it maybe, right? Or they can add other instruments, or maybe they can better qualify the names that they have on their watch list and do it that way. Maybe they could learn to trade in the pre-market or the aftermarket. Again, doesn’t matter to me. There’s all million ways to do this business, but I have found I’ve done better when I didn’t just take some inanimate object, losing 10 pounds, make extra a hundred k, because that in and of itself is just a number. And so how do you get emotionally attached to that number?
It’s like, well, you have to love the process through which you will achieve that you have to, the feeling of being on a diet. So that means you have to learn to the feelings of doing without the things that you would normally want to have if you’re trying to quit smoking. What does it feel like to not have that cigarette in the morning with your first cup of coffee? What does it feel like to not have the cigarette after the meal, after lunch, and especially dinner, then you could be vaping. It doesn’t matter to me how you get your nicotine. I’m just saying that in and of it is a ritual. You wake up, you have a cup of coffee, a cigarette, this and that. So I think in order to hit the goal of not smoking, yes, of course addict nicotine can be addicting, but you have to be in love with the process of quitting smoking.
What does that actually feel like day to day? Minute to minute? Cause if you’re crave a nicotine, it could drive you nuts, right? I’ve seen it happen. And if you want to make more money, you have to look at the process by which you’re making your money right now and how can you expand that? A good example, which I’ll talk about, I don’t know if it’s I’m going to do it tomorrow. The next day, are the limitations of limit orders. So if you’re trading with R and you’re risking one R and you know, take your winners at three R again, that’s great, congratulations. But then you have to figure out what the frequency, how many trades do you have to put on at that three to one ratio in order to make what you’re making? What’s your size? We talked about scaling last week. We’re probably going to do a follow up this week on scaling as well, because scaling as a discretionary chart reader, very, very different than if you were using trading blocks or mechanica or because those are the portfolio simulator trader engines that you could use to systematize your rules at the portfolio level.
And then I know, I think Ninja Trader has something, and I’m not making any judgment, but you can only test one name at a time. So you, there’s trade offs. So if you want to make more money, then you have to look at the process of how you’re currently making money. And that’s a little tricky because for the newer folks, if you’re not already, if you don’t already have a system then saying, I want to make 10 K on the year. If you’re just starting out and you got 20 K and you want to make 10,000 or 50% rate of return net of commissions and fees and trading losses, you might want to set a goal around having a process that you could follow day after day that has positive expected value. That would eventually, if you replicated that process day after day after day, yes you’re going to have losers.
But if the system has positive expected value, then it’s just a matter of time before you make that money. Then you could gear the leverage to say, okay, well of course you measure that by drawdown, right? What drawdown can you withstand? And then you put the model to work and you see what’s the Johnny McGorry with the results. Then you have to trust the system to work. We talked about system hopping and the detriment to changing gears. I think that was in the title of the video. You can go look it up. Like what happens when you change gears? Because you might run a fully system, automated system of trading rules and your five, six losers in a row, and then all of a sudden you get frustrated and you abandon those rules to try to say something else just in time to miss the next five trades, which might have all been winners to bring you back to break even.
And then some, for example. So when you think about setting goals, don’t come up with a number. Of course, that’s the fantasy. But then, and even if you do, I’m not going to fault you, but say, okay, well what’s the process that I need to follow? Sorry folks. I have, I’m overcoming a bit of a chess cold here, so I sound a little foggy. Hello little froggie. And so my voice is kind of cracking, but I don’t like to miss putting out content for you cause I know it’s very helpful for all of you watching. So think about the process that you would need to develop and then follow in spite of all your feelings to get to that number. Because the number, people look at the number and they’re like, oh, okay, I’m just going to follow this and I want to make 10 k because that’s my goal.
But you have to be emotionally connected to what it is that you’re doing. You have to love the process. And if you don’t love the process, it’s not going to be too long before you just abandon the whole thing altogether. So take the time to put together the process that you can follow so that you don’t beat yourself up. Because what happens, you set a goal, I want to lose 10 pounds by January 21st, you’ve already abandoned the process. And that could also trigger feelings of shame, a right of humiliation even within your self because you didn’t follow through. It could affect your self-esteem, right? So you want to think about putting together a process that you can follow day after day after day that again, that has positive expected value so that if you just stayed out of the results, because so many people that I hear from are results oriented and that can cause them a great deal of emotional discomfort and frustration and aggravation.
And there’s probably a million feelings that you could attach to it. But the thing is, is that you want to stay focused on the process and stay out of the results, focus on the process and stay out of the results. Too many people, especially if they’re day trading, they’re watching their p and l and if they make money, they figure that was a good day. If they lose money, it was a bad day. The reality is that they’re both good days. As long as you’re following your model and you take your losses where you’re supposed to take them, then those results are within model, as we would say they’re within model. So you on some level could anticipate the magnitude of your loss, the size of your average loss, and then also the frequency with which you win and lose. Then your biggest winners. So you can get all that data.
I’ll do, I’ll do a video on how to, a deep dive on expected values because that’s really what makes the world run in terms of trading is understanding the math behind it. So you have, in your goal setting, you might want to investigate something like base theorem or expected probabilities. What’s the probability of event B given the known probability of event A and then expected values or mathematics of expectation where you’re winning and losing percentages. Then you also know the size of the size of your average winners and losers and you can figure out expected values and whether or not you should follow that model. And so that’s what I think newer traders and more sophisticated traders alike should focus on is when they think about goal setting or things that they want to achieve, think about the process, not necessarily the result. And that’ll help you get your mind going around, what is it?
What is it that you need to do each and every day to get to that end point? And I do this for the consulting clients. If you’re here at point A now and point B is the end result of this process that you want to follow, what would it look like if you went beyond to say point C? Because in my way of thinking, cause I’m very resourceful and I know everybody, I can actually have, here I am today in point A, point B could be the goal that I’m working on achieving. And then what am I going to do once I get to point B? What not only what is my life going to look like, but what can I do resourcefully at point B, having achieved that goal, what other pieces can I put together to take it to the next step? So while I don’t have the goal beyond my goal necessarily set in stone, oftentimes that third second goal can pull me through the first one that I want to hit using the letters that I had. The seagull can pull me through the big, the point B, or at least get me going in that trajectory. It’s never as going to look as clean in practicality, right? In practice, when you execute the way you could very eloquently say it or write it out clearly on a piece of paper, shit happens. So here’s my thought on that. The process by which you go to achieve the goal can be amended or it can change, but don’t change the goal.
Change the process to write the ship. If you get a little bit off course, adjust the process, but don’t change the goal that you want to achieve. Don’t quit on yourself. This is a hard business and you have to have an enormous amount of staying power. And if it was easy, everyone would be doing it and not. The way I survive is I just keep things super simple. I can’t get distracted with the new curve ball of the day. I know there are people who are a lot brighter than me. They have different, I’m good at math, but the type of math that I need to do it I do is far below what anyone who had a degree in quantitative finance, I don’t need any of that. Excuse me. So I understand differential equations and all that, but I don’t need it to do what I do. If you grew up in New York state like I did, anything that I use is not beyond ninth grade math. Maybe a little bit of statistics. So I don’t know where statistics might show up in high school for you, but most of the math can be done with algebra
And it’s very basic stuff. So as you set your goals,
Take the extra step and say, okay, here’s this number. Why did I arbitrarily pick out a hundred k? I want to make a hundred K more a month. Maybe you do, maybe you don’t. But what is it that you need to do in your process to manifest that? Because without the process, nothing’s going to happen. You’re going to have point A and point B, but there’s no line straight or otherwise or crooked to get there because you don’t have the process. So I would absolutely focus on the process to get where you want it to go. More will be revealed, but I can share with you this, if you don’t take action, it’s not going to come and kick you in the ass. You got to go get it. So you have to invite failure. And a lot of really, really smart people, the folks that I went to school with, they’re not used to being wrong because they’re so bright as students anyway.
So if you are one of these folks that I grew up with in my classmates were terribly bright, how do you process the feelings around failure? Because they can stall you or derail you. So you have to account for that things. It’s not like they’re going badly, but they might not go as smoothly as you hoped. But that’s the whole point of journey is not necessarily to arrive. You’re going to learn a lot about yourself, impress yourself. If you run and have a 10 million line of credit at tutor, for example, how can you go to your risk manager and say, I want 20% more. What does that look like? How’s that conversation go down?
Or any other type of, maybe you’re at a prop trading firm and you want more, want more capital or buying power. Many places use different, I call it credit because it effectively is a line of credit from the assets at the firm. Anyway, those are my thoughts. It’s a longer episode than I typically do. But goal setting to me after having, I think I said that one of the most important trades, yes, discipline is important, but I think attitude. If you have discipline, but a pissy attitude, then your discipline’s going to get subverted. You have to have a good attitude and then you have to have a goal. But the goal has to be based on a process. Please like and subscribe to the show. I’ll be back tomorrow and the rest of this week with some more episodes. Please like and subscribe. Send me some comments, feedback. I don’t have all the answers. I just have my own very subjective experience that I’m happy to share with you. And I appreciate you all being here very much. Thanks. Thanks so much. I’ll see you.
Click here to get your free copy of The Inner Voice of Trading audiobook.
This is an automated transcript