Hey everybody. Happy Friday. Hope you had a great week and you have fun plans for the weekend. It’s all vacation time. So folks are kind of in and out. Markets typically get slower from a volume standpoint in July and August. So today I want to finish the week by talking about discipline. If you look at the four things that I’ve mentioned that a trader needs to, regardless of their asset class that they trade, regardless of the timeframe with which they trade it. Also regarding, regardless of the holding period in terms of discipline, you can really bifurcate that term and look at it from several perspectives because you need to have discipline in order to do your preparation, and you need to have prep discipline while you’re in the trade. And so that kind of functionality changes, right? Because the discipline is about preparation at the beginning so that you kind of have a game plan what you’re doing.
That takes a lot of time and sometimes, especially if you in a losing streaks, sometimes you feel like you’re doing all this stuff for nothing and that’s just part of the game. It’s one of the reasons too why people eventually just fold up and go home is because it requires a lot of time just on the preparation side. Nevermind on the trade execution side, once you’re in the trade, so I guess you need discipline to enter your orders. You put your orders in either on the screen or you call the trading desk. Either way is legit. Everyone has their process that they’re comfortable with, but that too takes discipline. You got to be up, you got to be alert, you got to read your orders in. Then once the trade’s on and you have risk on, you need to have the discipline to manage the trade.
And that typically, for me anyway, starts and ends with managing stops. That’s basically all I do is I know where I want to add risk. I know where I know I’m going to remove risk with what we call a protective stop. I don’t use stop loss. I don’t like using that word because if you say it enough, it’s what you get. You get what you think about. So I say protective stop. Also, if you buy something at 20 and it goes to 30 and your stop is at 28, why would you call it a stop loss when you’re making $8 on 20? So that’s, you’re up 40% on the trade, I guess you’re stop giving back the unrealized gains. So I just always say protective stop. You can use the language that you feel is best, but I put my consciousness to all of these things cause I think words have power.
And then as the markets move in my favor, I adjust my stops. If I’m long, I adjust, my stops higher. If I’m going to add, I have stops above so that they add more risk to things that are already working. I also have to adjust. If I get filled on a second, third, fourth, fifth, 10th risk unit, I have to obviously adjust the quantity because my philosophy is when the party’s over, everyone has to go. I might scale in, but I don’t scale out. I puke the whole thing out at once. That’s just my style. I probably give it, for
Some of you, I would give the thing more room than you might be comfortable with to kind of know for sure that the move is dead. That’s come from experience knowing that while I was in moves, if I cauterize the risk too soon, there was still room to go. I know how to analyze the different stages and the bases within the stages, so I’m comfortable with that. But that all takes discipline. So you need to kind of operationally define when you think about having discipline, there’s really different levels of discipline that you need throughout the life of a trade. There’s the discipline on the prep side because how good your prep is is going to oftentimes dictate do you miss trades? Do you miss ’em? Just straight out, not because you were there and you watched it and you didn’t have the guts to put the thing on for one reason or another, and I’ve been there.
I’m not judging you, I’m judging you. No, I’m, I’m not judging you. But ones that just aren’t even on your radar and the things up and you’re like, wow, that was kind of like my setup. That’s my kind of thing and I’m not in it. So look at your discipline across the entire lifestyle lifespan of a trade from the prep through the intrade management, adjusting your stops for example. I don’t like to enter on market for anything. And then what do you do on your post-mortem? Do you have the discipline to go back and review your trades and kind of see how did you handle it? How could you improve your behavior? Because behavior predicts where you end up. So I appreciate everyone being here. It’s been a holiday week, so it’s a little thin across the board. I would like to say though that these are the types of things that I thought about when I was starting out that meant the world of difference to me over time.
Because you have to remember, if it took me for something years to really hone my craft and it takes you a year, you’re still way ahead of where I was from a time constraint. Now I’m pretty successful guy. So you have to also be practical that unless you’re born with God-given skill and most people aren’t, you have an enormous amount of work to do and everyone’s talking about their winners and they’re survivors. But very few people will go on Twitter who are successful at say real estate sales and said, yeah, I worked for 5, 6, 7 years trying to make it as a trader and here’s my story because there’s nothing in it for them. The losers don’t show up, and I’m not saying that they’re losers as people, but they were losing traders for one reason or another. They don’t come back and tell their story. What are they going to do with it? Sell more real estate. Probably not. So you have to be careful who you’re listening to. Short term success is short term success. It doesn’t really speak to making it in the long run, in the short run. You have to be completely and very, very honest with yourself as to determine where your success is coming from. And I said, we’ll, we’ll speak ganja and I will do a lesson maybe next week about the episode
I did this time last week where I was saying, really look yourself in the eye and say, are you made cut out for this? Because there’s so much, so many answers that you want to, questions that you’re not going to find out until you actually do it. Meaning like you succeed and you can circle the wagons, and I wish there was a better answer for you. I wish it was academic where you could go study, be taught the principles of algebra, right? Then take the algebra and use it as a tool for calculus. But this is really experiential. You can learn all the academic stuff that you want, but until you try it on for size and see how it feels, it really doesn’t mean much intellectually. The intellectual value is very, very small. Yet that’s what people can sell you, right? We talked about that earlier this week I think on Monday was save your Money because you can probably try and take experimentation on any asset class in any timeframe and risk small bits of capital to see how it feels.
You’ll figure out the intellectual stuff after. I’ve always said, and I’m pretty sure it was in the book, if you don’t know who you are as a person, it doesn’t matter what you know because you’re not going to know what to do with it. You don’t know what makes you tick, and the industry has things bass backwards basically because they can’t sell you this, right? They can sell you my favorite advanced charting packages. They can sell you discords because they know the numbers. They’ve ab tested, they’re like, people pay 150 bucks a month for cable. They’ll pay 79 bucks for my discord.
There’s a whole game to it, you see? And when you start to be, I’m not saying be skeptical for the sake of being skeptical, but when you understand how marketing works and how this business is largely unregulated, there’s a whole industry of trading and it’s not about you making money. How can I separate you from your money? And I’m not talking about trading losses. It’s about subscriptions to papers. It’s about subscriptions to newsletters and discords, access to charting packages. The list goes on, and if there’s a clever language hook that they can use from a song that they can repeat, they can get you to feel that somehow you’re inadequate if you don’t have access to what they’re providing. Even though what they’re providing could be just raw data, which is data data’s data. It doesn’t mean that it’s valuable. It could be noise for all. And I know from God basically that I’m saving the world millions of dollars. I’m not spending it on all the bullshit that they don’t need. The best thing that you can do, and I’ll leave you with this, is to actually just try to do what you endeavor to do. Don’t worry about what it looks like. You’re going to feel like an idiot. I know because I do it all the time, but that’s what that feeling is when you know that you’re taking the right chances, because you can’t win if you don’t do it,
And thinking about it isn’t going to help you manifest it. You have to take the actions you see, and that’s true for the institutional folks that we consult to. That’s true for ourselves and the money that we are running. And it’s true for aspiring day traders. The best you can do is actually try it and do it, because that’s going to teach you more about the experience than reading about it or watching other people do it, which probably comes as no surprise to you that that’s true for in most things in life, what you fear, right? Probably isn’t as bad once you get there. So be bold because it’s your life, you know what I’m saying? Like carve it out of stone, carve it out, and manifest it exactly as the way that you want it, but you have to take action. Thinking about it isn’t going to help you. Any coach worth their salt is going to say that. Anyway, I, I’ll have more for you next week. Ganja will be here again Wednesday. Appreciate, please like and subscribe and click the little bell thingy. No, there’s no Lambos. You don’t need one and two, why would you have something like that with that would depreciate 50% within the first nine months? You want to lease assets like that, don’t buy ’em. Anyway, I appreciate y’all very much. Please keep the comments and everything coming and I’ll see you next week.
Click here to get your free copy of The Inner Voice of Trading audiobook.
This is an automated transcript