I want to follow up with this whole concept of learning a new skill around trading. And this applies to folks who are starting out and also some of the old dogs. I think it’s easy to understand things intellectually, but it’s hard to maybe pull them off as an endeavor. For example, around here in LA there’s about a dozen or so flight schools where you can learn to become a pilot. And I think a lot of people can understand what it takes to become a pilot and to become instrument rated and this and that, but that doesn’t mean necessarily that they can pull it off. Even if they have a flight simulator software program on their computer. You can understand how a surgeon can pull off surgery. It doesn’t mean that you can do it.
Obviously there’s a lot of schooling you have to go through. I think that’s true for a lot of things in life. You can understand intellectually how a lot of processes work, but until you understand the emotions that go within that process and how they’re going to affect you, chances are, you’re going to be in for a different type of education. I understand how different trading models work, but there’s only one that fits me based on my emotional makeup. So if you go back to, like I said, I guess it was the Wednesday lesson for two weeks ago yesterday, where we talked about the psychology of the preparation, what are the feelings that you have there? What are the ones that you don’t want to feel? What are the feelings around narrowing down your list? What are the ones that you don’t want to feel?
What are the feelings around your parameters for trade entry or adding the risk? What are your emotions in psychology around managing the risk and then taking winners off how do you handle all that? And then after the fact, how do you feel, or have psychology around the, the overall process on a macro level? So when you understand, you can understand intellectually any parts, any moving parts of a system. You have the selection process, the research, the screening, the trade selection, the trade entry, the trade management. Which means you put in your protective stop. And then as the thing moves in your favor, you adjust your stops higher. For example, maybe some of you will add to winners. That’s a different set of emotions in psychology. Then you have stop placement on winning trades. How much of the gains, the unrealized gains are you willing to risk in order to stay in the trade? Because it will be less than what you could take off in real time. And then after everything is said and done, how do you feel about the overall process? How do you feel about yourself? How do you feel about how you handled yourself?
And I think that’s the big dilemma in trading is that you can understand a whole bunch of things from an intellectual level, because you could see them, you can see the moving parts, you can see other people talk about them. You can see other people selling systems, but once you put the suit on how does it feel? Some of you might be really great at the research part, but very bad at the execution part. So what do those folks do? If they have passion for the markets? I don’t know. They go to Seeking Alpha, they go to start their own blogs. They start you know, telling you what levels are in on social media. Then there are people who are really bad at the analysis part, but they like the action. So they have no problem with the execution because they can barely wait to get in get in the game.
So it takes all shapes and sizes. And then as far as holding periods of concern you have the folks who really love the chase. In relationships, they get hot and heavy on the dating scene. And you know, there there’s all that excitement and lust that goes early on. But then after the second or third month, that things starts to turn flat and you know, you can see that happening in trading that there’s no follow through on the individual side. So you can look for those connections in your life because it’s an emotional model. And that’s what typically people follow, whether they’re conscious of it or not. So if you break down your own process, the way I showed you, because this is exactly what we teach to. You can uncover quite a bit of work.
Now I’ll admit this work is 10x harder than looking at some stupid chart about where you would get in. I mean, that’s why I say it’s not really about the chart. That’s what you can go to, but that’s the easy way out. The harder work is to know what your makeup is and how do you feel about all the moving parts? Because in order to be consistent with your behavior, you have to win and have a full understanding emotionally and psychologically about all those moving parts. And they all have to conjugate with you. They all have to work together in perfect combinations. So that’s why I’m not big on selling systems because I don’t think it’s fair to the end user. And if you heard my rant yesterday about the marketing to would-be day traders, I think it’s pretty much criminal. There’s no regulation. You could make a whole bunch of unsubstantiated claims. And then you could market if you’re on TV, a whole bunch of features of your platform, which in, when I see them, the rare times I have the TV on features, aren’t benefits, but they make you feel that if you don’t have these features, somehow you’re falling behind.
They use expressions like “advanced charting packages” or “up to the minute…” or “little known secrets” or “under the radar…And in this world with the power of computers, none of that is true. There is nothing that’s “under the radar.” Somebody somewhere has it. And it’s not just exclusive to like 10 or 12 people. So I find all of that stuff is laughable. The second part is, is that it’s not ethical to say that Ray Dalio or George Soros or loading up on these three penny stocks, because it’s not what they do. But it gets clicks and that’s the whole point. And then if I price the thing at $97, you’re like, “fuck, I’ll take that deal.” And then that’s the deal. The deal is to induce you to take out your credit card or your PayPal or your Venmo or whatever it is, you have to sign up for that.
Because then it doesn’t matter whether you win or not. Might be interesting to learn about some of these things intellectually, but again, pulling them off is a whole other ball of wax. So just keep that in mind before you feel compelled to spend your hard earned money on things that might be interesting intellectually, but might not be with anywhere in your universe or your ability to pull them off.
There are a million free videos that you could watch on YouTube. For example, there are a million free trading systems that you could already look up on the internet for free. So I would not be lazy. I would do my homework and save my money.
This is a computer generated transcript.
Click here to get your free copy of The Inner Voice of Trading audiobook.