Hey everybody, it’s Michael Martin. Thanks for being here. So I’ve already gotten some good feedback from yesterday’s video on process and goals, and it’s very difficult to stop thinking about the results of your trading and focus on the process. Why is that? Well, think about it. When you go to school since kindergarten, you’re graded on correctness. You’re graded on accuracy. And so even your conscious and your subconscious mind are so geared up for that. You know that you have a paper due, read the book, write the paper, do the first draft, do the amendments, have someone proofread it, whatever your process was. But you were always doing that for the grade. No one ever, I can’t recall having anyone really teach me how to study. And that was different from my sons. But when I went to school, it was more like you were supposed to know, read the book, what was the book supposed to tell you?
But it’s much more scientific these days. Nowadays you have a process to be a student. So they are of course concerned with the results because they want to get good grades, the students. But at the end of the day, being a student and being in that hierarchy of needing to get the good grade so that you could pass your overall grade and get graduate to the next level all the way through high school and then through college, if you go there, it’s, it conditions you to think about the result. Now, some people don’t care necessarily about the results cause they just want to get through and they want to get it done. So they do the bottom line behavior that they know they can get away with to get through it. Now, if you do that in your trading, you’ll certainly, you’ll make a little money, you’ll lose a little money, but you’re not going to have a really good career because the people who really smash it in this business obsess in many ways.
They’re looking for nuances. And when you trade and you look for the results, you can internalize it and start to think that you lost money because you suck. And that’s not always the case. The market is in and of itself as a living and breathing mechanism. So you’re going to evolve. And so is the market. So think about it like how you’re in a relationship. If you do something for your partner and you don’t get the result that you want, do you throw a temper tantrum because you didn’t evoke the response from your partner that you wanted? Or did you just do it because you wanted to do it out of the goodness of your heart because it made you feel good?
And I’m not Dr. Ruth, you know what I mean? But I’m saying is that you can micromanage yourself and brow beat yourself to the point where you start to second guess yourself quite a bit. So the question came in from somebody who is it? I don’t know their name doesn’t matter to me, but they went under productivity and they wanted to know what can I do to change from a results-based mind to a process-based mind? And I think you actually have both at the same time. It’s just your focus goes towards the result of the day. Now for day traders, they look at the day’s work. For folks who have longer time holding periods, they might understand that the results might not. They might show up in clusters. You might make money one or two days out of the week, and that will offset all your losses and commissions and slippage and skit and then some.
So I think one way you can change your mindset is to think again, how do you be a good student to eventually get the grade? You have to focus on the process. For me, I went to a school where we had to read books and write papers, and that was a pain in the ass because reading I could read pretty quickly, but it still was very time consuming. Read a book, write a paper about what it was about or what did you think the author was trying to get across about this XYZ theory or read two books, then compare and contrast them. And so for me, writing, writing is easy, but writing well is fantastically difficult. And I don’t even consider myself that great a writer takes a lot of time. What I was good at though, cause I could type with 10 fingers, was to get my ideas out on paper and then reshape them.
So I made my money in the edits, not in the first drafts. There were kids that I went to school with who could just puke out really good stuff on the first draft and kind of go with it. At least that’s what they said. But I think it’s interesting, and for some context, I think it was Vladimir Nabokov who said, A writer is someone for whom writing is more difficult than it is for other people. And if you’ve ever had to write something and make it super clear and instructive, you might know what I’m talking about. So what I would do is if I was a student of trading, and I guess I still am on some level, I would say, here are my systematic rules, or here are the chart patterns, right? Cause if you trade a system, it’s just you hit the button, you get your orders, you enter the orders of the market comes to you, and it doesn’t. And if you make or lose money, everything is parameterized out. It’s mostly for the chart readers, which is probably 98% of the people out there. What’s your process for screening? What charts, what specific and sole chart pattern are you looking for? Because if you’re one of these people who are trying to trade 15 chart patterns, I think you’re going to have a hard time, especially if you’re just starting out.
So focus on one thing and learn to do it very, very well. That in and of itself is a process. So at the end of the day, you
Can say to yourself, did I win the day? It has nothing to do with making money because you’re powerless over the results. All you can do is focus on your process and hone that process so that you can repeat it, hone it so that it’s very economic, so that you can go Pareto. They talk about the 80 20 rule, but they also talk about Pareto efficiency. So if you need five units of work and 10 units of time and you get X, Y, Z output, how can you decrease those inputs to get the same output? Or how can you maximize the inputs that you’re going to put in terms of time and money to get even better results? So think about, excuse me, what can you repeat? What can you repeat every day? Whereby at the end of the day, after the trading, regardless of the p and l, you followed your rules because that’s really the best you can do.
And I can remember being angry from trading and losing money because I wanted the validation. I wanted the validation to be able to say to myself that I was getting and putting points on the board for all the work that I knew I was doing. And I think I’d expressed once before how much I actually had to eliminate in order to become successful. I had to get rid of interbank Forex, I had to get rid of options. I was making money in stocks, but I was much better at commodity futures. So I had to trim and take a bit of a haircut in the short term on my stocks knowing that I was going to come back and focus my process and learning commodities. And that was really a godsend because commodity traders really have to appreciate and manage the risk. And when you go from commodities to stocks, you have a very strong sense of how to manage risk because of the leverage involved.
So that was just one of these little hidden blessings that you can’t really anticipate until you’ve been through it. But I would absolutely make sure that you think about what is your daily process, write out the steps, and then if you did get a signal that you put the trade on, and if you followed that all the way through, then to me you were true to your goals, you put the trade on, that’s the best you can do. Whether it goes up or down or whatever, you’re powerless over that. So put in your protective stop. I don’t say the guy talks about the guy or the gal talks about stop loss. I don’t use that type of language. Cause I say protective stop because there’s three ways you can use stops. And I want to always coach my brain to think in abundance. So if you keep saying losses and losses, I think you tend to manifest the things that you think about. And so I just think about a protective stop to protect my capital, whether I make money, because I can use a stop to make money and I can use a stop to minimize my losses.
So maybe what you do is you write out what the steps are in and of itself, that’d be great homework because then you have to show yourself that you have absolute clarity about what it is that you’re doing it, what you’re doing. Now, if you have several chart patterns and you can’t get clear on what your process is around one chart pattern, then you need to stop trading immediately. Because if you are not clear, how the hell are you going to ever raise money from other people? Or if you’re going to become like Sybil, she had what, 17 personalities, what are you going to be a Jew on Monday, a Christian on Tuesday, a Muslim on Wednesday? You can’t jump around.
So focus on one thing and then execute on it and get consistent and then call me in three months. Because you can’t do that for a week and be like, yeah man, I got it. It’s just not practical. It’s not enough time. So focus on one thing, focus on the process. Stick with executing that process day after day after day. Keep your losses small. Only lose what you can afford to risk and measure the results for sure. But grade yourself not on your p and l, but on your ability to check the box. Did you follow each of these steps all day long for that one pattern? Because if you can’t do it for one pattern, there’s, there’s no chance in God’s green earth that you’re going to be able to do it across five different chart patterns. Right? It’s just not practical. Anyway, please, I can subscribe. I appreciate the feedback, FEAS. Appreciate the comments too. I don’t have all the answers. It’s, it’s good to hear from everybody. I appreciate the feedback and let me know what you think. I’ll see you tomorrow.
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