The best way to build confidence in your process is to do the same thing every day. If you try to come in and be scalper one day swing trader, another day long-term trend follower another day, you’re really all over the place. And I really look at those trading strategies, those potential setups as really religions, and so you can imagine trying to be Monday through Friday, a different religious person every day. It’s too confusing. You say the same thing about politics, right? So at the end of the day, your confidence is what’s going to carry the day and it’s going to help you with your belief system and your confidence and your entitlement, right? Again, and we’re not talking about entitlement issues, we’re talking about you doing the work. You playing Kobe Bryant in your own respective way, for example, putting in the hours and hours of practice because at that point when you’re doing more work than your peers, and we’re not just talking the quantity of work, we’re talking about the quality of work.
So we don’t want to sit there and spend 18 hour days bringing blue collar despair into a white collar job. You have to be efficient, right? And that might mean letting go of some closely held beliefs. Here’s one that makes a lot of sense to let go of. It’s always been a market of stocks for me more than a stock market, so I don’t care at the general direction of the overall market. Each instrument for me has always been its own market, whether it be Microsoft or long or short or Intel back in the day or A OLN, didn’t matter what the ticker was per se. I just never cared about the overall direction. Two, I didn’t come up with a thesis first, right? That’s investing. Traders don’t have the thesis. What you’re looking for is price, volume. You can look at open interest and start there.
It’s too much to go through here, and this is not a channel on how to trade as much as it is you looking at yourself and why do you do what you do? Because that’s 95 trading is, like I said, 75, 80% psychological and emotional, and I think 99% of it is your temperament and your personality. So the 1% is really the tactical. You all think like, well, I don’t know what I’m doing, so let me go the intellectual route. Where to me, and I’ve said it before, I’ll say it again, I’ll keep saying it, is that if you don’t know who you are, it doesn’t matter what you know about trading, it doesn’t matter what you know about anything for that matter, because who cares? Those are all data points and the ability or the prestige of being or having an encyclopedic mind or memory doesn’t matter anymore because anything that I need is a Google search away.
So I don’t care about what you know or what you can remember or what you can recall. It’s a circus trick at this point. It meant something back in the day before the internet. I think maybe having an understanding of history certainly can help you create models, but trading knowledge in and of itself really comes down to you being able to replicate the same thing day after day after day, and that’s what you take solace in. That’s what gives you the reassured, the reassured that you need. That’s what can validate you as a person is can you do the same basic boring bullshit every day? Most people cannot. They keep seeing big ticker moves like, oh, MSTR is moving. I got to find a way to be in that SCI is doing this. I got to be in that. And then you’ve got the fanboy in the AI space or crypto, and as an aside, the way you build your confidence is not sticking or going to those mummified names because if you ask anybody who’s been around the memes can change from 82 to 87 in that bull market, there were a group of names that were burgeoning.
Then you look at what happened from 95 to 2000 in the.com era, and it was like vertical net Siebel systems, CMGI, global crossing. Of course, we can’t forget JDS, Uniphase and everyone would talk about those names and these are the top 10 names that you need to have. They were on the magazine covers and a lot of people made a lot of money. But what they don’t tell you is that those same names are the ones where people lost the most amount of money to
Because without a trading plan, you’re being the moth to the flame. So the consistency comes from your confidence, which comes from you’re being consistent. They’re so closely related, it’s tough to see which one comes first, but if you can do the same boring thing day after day after day and not take flyers and just stay in your damn lane, that will build you your confidence. When you practice that and you replicate that day after day, then you can start to see, this is why I’m entitled to the richest. I have an other worldly sense of discipline, and when I lose, I keep a good attitude. I don’t get into all pissiness because I’ve had five losers in a row because ultimately going back to Monday’s episode, I believe I can do it. It’s just a matter of time. I’m not quite sure right now. But what I’m going to do is follow my process.
My process has positive expected value. The best thing I can do is follow every single trade. When the setup shows up, I can feel my feelings around fear. I’m speaking about you now and still take the right action. But Mike, what happens when I’m up a thousand percent perfect? Stick to your same position size. That’s how you control fear and greed is trade the same bed size risk unit, whatever you want to call it. There’s a million names for the same thing that will help you build your confidence in that. You don’t say, well, I really love this AI stuff, so I’m going to buy Nvidia on a pullback. Or I think just because it’s sold under eight 50, it’s not going to go down anymore. Or just because it’s in the pinch from anchored v Wap, I can make up my old ruse on the fly.
Sure experiment, but do it with a minimal size, trade it with one share because the point at that point isn’t to make or lose money, it’s to try it on for size to see if the idea works absent a back tester. You can do it a lot quickly, more quickly and cheaper with a back tester. You could also do it when markets are closed so you can make good use of your time. So the thing for me about confidence came from I was unrelenting in my work ethic and what I needed to do is stop worrying about learning stuff and start to think about the execution in the application. That’s why I say, and it might make sense now that we don’t get paid to know things. We get paid to execute. Can you create alpha? It’s yes or no. It’s not. Maybe it’s not. Sometimes it’s net net of all your trades. Can you create alpha?
And if you can’t, I would suggest extending your holding period. Most of you are probably trying to trade on the short side of things, not short selling, but on the short term timeframes. And that’s where the struggle is because the data are more random and no one tells you despite selling you telegrams and discords and other trading systems and this and that, that that’s the hardest thing to do when you don’t have any discipline because you don’t have any experience, which comes from putting a lot of time in and they don’t tell you that you need to have a phenomenal feel. Doesn’t matter if they’re saying this is the biggest traders at X, Y, Z companies are scalpers. Well, it’s very difficult to scalp with $10 million because of depth of market. If you want to try it, good luck. But at the end of the day, if you’re a newer person in the game and you hear these stories in an unregulated market, there’s no one consumer report that stands up and says you’re making a misleading statement or you’re leaving some material information out.
What’s material information? Well, I always think about the prudent man rule as it’s called an investing. Is the information material enough that a prudent person would use that to make a better decision? And the answer is yes, meaning that I can’t sell you a trading system if the caveat is you need to be born with a phenomenal sense of timing or you need to put so many years in because it’s not going to come in two months after you’ve bought the fucking system that you need to develop a feel, which only a small of the people can do. If I said that as a disclaimer, guess what? No one’s going to join my telegram. No one’s going to join my private Twitter feed because I can’t sell it.
So part of developing your confidence is to not fall victim to kons because I’m not saying that it’s snake oil, but in an unregulated market, people will tell you anything and everything doesn’t matter what trading style it is. I’ve seen it from scalping through Trent following stuff. The claims are rather outrageous. Even still, if you went up and got up at four in the morning and shot 300 free throws, free throws like Kobe did and then came back and did another shoot around, it still doesn’t mean that you’re going to be able to do it, but it will infuse you with confidence to it. Even go out and try. Who knows how good you can be? All you can do is try. That’s my humble opinion on things like that. You won’t know until you try. These people were motivated, these athletes to be the best, so they figured they had to put in the work. But again, there’s a qualitative aspect to it as well. It’s not just grunt work.
And so when I was thinking about how did I build my confidence and how did I know I didn’t look at my p and l? I know that’s probably crazy. How else are you keeping score? The thing is, day after day after day, an individual day, so say I was trading and trying to develop my craft over four years, there’s a thousand trading days that’s much more reasonable to look at that much data. I can’t look at five days and draw any conclusions because there’s so much going on in the world, and I wasn’t smart enough even having gone to an Ivy League school to be able to wrap my arms around some global macro themes or nevermind the themes themselves, but which one was in play on that particular day or week.
When you don’t have the experience, it’s very hard for you to draw those conclusions. And so what happens is you become very hard on yourself and you become discouraged because you’re digging too deep into stuff. You’re looking at random data, intraday data, random news headlines, and trying to draw big conclusions about your ability. The people that suffer the most are the people who already come to the market with an enormous amount of self-doubt, and that typically comes from, again, your household where you grew up. So for me, I would say do everything you can to build your confidence, because even if you have average intelligence, a confident person is someone who I know is going to hit their goals. I’ve seen it happen. When I went to Wall Street, there were people who came from enormous family wealth and all they did was lose money, and they had a great advantage in that they had assets to manage. They didn’t have to worry about that part, but they were also very, very comfortable. They were already rich, so they didn’t have the drive and everyone’s like, oh, put my arm on. He’s going to be a huge star, which was politics again, which why I hate politics because you don’t want that person to leave and go to another firm.
So I could see that very, very clearly early on. That was the level of ass kissing was just disgusting.
And then you take the person, I think it was Gordon Gecko who said, give the people who are poor broke starving, this and that. They have a good work ethic, they’ll figure it out. And so I knew people who I knew a guy, I won’t mention his name. He was a paper salesman at a time. Again, when there was, you did a door to door and he’d put a ream of paper like reams, what is it? 500 sheets he’d put. Then they come in a box, there’s probably four or five reams in the box. He’d put it up on his shoulder in East New York, which is a very tough section in Brooklyn and walk from business to business and sell paper. And I was like, that guy’s going to kill it, because he knows his work ethic. He knows how hard it was.
I cadd golf bags. I had a bag on each shoulder, which was different from Cadian for a PGA pro where there was a club minimum. Some of these people had 21 clubs in their bag. They had sometimes two or three dozen balls plus a pair of shoes. I’d rather carry you on my back for 18 holes than some of these golfers who mind you weren’t that good. Some of them we used to say, well, you see the whole course because they’d be left rough, right? Rough, left, rough, right, rough. And so if the course was par 72, if you counted all the lost balls, they’d shoot one 40. Anyway, the point being is that you can do a lot to build your own confidence by not being your own or your own worst enemy or even a bad enemy. It doesn’t have to be the worst enemy.
You just have to type a think about, be mindful, be mindful of the things that you’re actually practicing. And if what you’re doing is trying to look and see random data, intraday, but you’re not getting the results, why don’t you change? You have to have the courage. Chapter two of my book is surrender. There’s nothing wrong with making a pivot. It doesn’t mean that you’ve lost because the idiot who doesn’t know what he or she is doing, and I include myself at the top of that list, at least when I was starting, if the best you can do is just learn to keep your losses small, your way ahead of 90% of the people, most new traders don’t have any sense of risk management. And so my whole thing is not to sound sarcastic or snarky is just be a philanthropist because you’re giving your money away. You might as well direct it to a place that is meaningful for you. There’s nothing wrong with surrender. That’s part of the pivot. And if you’re not seeing what other people are seeing in the short term and you still want to struggle, answer me that question. What is it that you think is going to be different, right? Thursday or Friday? Tomorrow or Friday,
What is it that you’re not getting? What is it? How come you’re not developing the field that you were promised that you would get if you followed somebody else’s rules or you were part of their discord? So in order to build self-confidence in that regard, you have to step away and try something different. It might be different from what you want to do, but if you’re not showing any skill in that space, then you have to pivot If you want to be a trader, otherwise, you’re feeding some kind of emotional need and being a martyr.
Martyrs go down in history, but not for the reasons that you want, right? If that’s what your goal is, if your goal is to be a martyr because you want the attention, there’s plenty of those people, plenty of failed traders, you won’t see ’em show up in social media, but they’ve littered the streets for ages. You’re stepping over the bodies. They can’t peacock on it, certainly can’t sell your courses, but at the end of the day, be mindful of your own behavior because that’s what you’re in control of, and you have to be very suspicious of everything that you see and hear.
I try to speak with a lot of candle here because I don’t like to see people getting taken advantage of because I know they have the best intentions, but ultimately, it is eventually up to you. If someone got the best of you once, okay, burn me once, burn me twice, kind of a deal. But you have to pivot. If your goal is to actually make it and things are not working for you, you’re going to be that much further from building any confidence because you’re listening to too many gurus. You see, you are the guru, you are the asset. It’s not the trading pattern, it’s not the timeframe within which you speak. Some people have a way with words, some people don’t like me, but at any rate, I wish you the best. The whole channel here is to get you to think introspectively about why you do what you do.
Sometimes it comes from your subconscious. Maybe you’re trying to prove something to somebody. All that matters is what is it to you? And I know I told you the story about keeping the rejection letters. I actually think they were thrown out. I don’t have them, but I remember getting them, and that just was fuel for that stage of my life. Now, I don’t have any regrets because everything worked out. God has a plan for everybody. And so I feel like if you can build your confidence, then that’s when you can actually become unstoppable. It doesn’t even really matter what you want to do in life at that point, because a confident person’s going to at least have the faith in themselves to go out and try and iterate. And that’s when things get exciting because that’s when you begin to go into your little Petri dish of trading experimentation to figure out what’s going to work.
And that’s what I mean by there has to be a certain level of promiscuity in your approach. Because until you really know who you are, you don’t know what’s going to be best for you. I do know that if you’re struggling in the short run, you can invite a lot of success by extending your holding period, perhaps even trading smaller. Why do I say that? Well, on a simple back of the napkin methodology, I know people who have bought the s and p and held it without having any exit strategy. They have an open-ended strategy and they make money.
So when you start to think about adding risk, but then saying, I need to offset that risk within a super short period of time, you see the exit strategy becomes the problem on some level. To me, that would be common sense. Now, I was immune from that because it was too expensive for me to scalp or day trade when I was starting out. Given that bid esque spreads were 25 cents and that stocks traded in eighths, I was looking at if I was trading Wendy’s quick service restaurant at $20 and I had 50 cents, what’s 50 cents as part of $20? What is that? 2.5%? Just as a break even. So it made it too punitive for me. I don’t want to go through all that, but when you can build your confidence, to me, that’s when you get to the point where then, well, I’m doing the work. I’m acting consistently. The consistency is going to get me the results that I want. And that stems from my belief that I’m entitled to all the abundance in the world, which is not greed, it’s just financial abundance. And I believe that I can do anything because I can act consistently. If you like this video, check out this one.