Master this crown jewel of trading to improve your profitability

Hey everybody, it’s Michael Martin. Hope you’re doing well. It’s Thanksgiving week here in America, so we’re going to be off on Thursday and Friday, so I’ll have episode today, obviously tomorrow, and then Wednesday I’ll be on with ganja. Thursday, Friday will be off. Then we’ll see you a week from today. Thanks for being here. Hope you’re doing well. Hope you’re reviewing your performance for 23, and it’s been choppy for sure. There’s been moments of no follow through, so I wouldn’t beat yourself up unless of course you like the feelings of beating yourself up and getting attention from everybody, then by all means do it, but be the best at it. If you’re going to beat yourself up, then go Mike Tyson on your ass, beat the living shit out of yourselves because that’s probably feeling good. I myself didn’t find I could get better doing that to myself, so I kind of stopped and just said, more will be revealed.
That’s kind of how I approach each day. Sometimes the information that you need or the solution that you want isn’t there, and so more will be revealed, and that requires you to have patience. A lot of folks don’t like to have patience. They don’t like having to be patient, so I want you to, for homework, you can investigate what are the feelings that you feel when you have to be patient because that ties into trading and it’s a huge, to me, it’s one of the three crown emotional crown jewels of trading is knowing that if your setup isn’t there, then you have to sit on your hands, the pro move as opposed to uptime or downtime or trying to find, again, 14 strategies to apply on one instrument. To me, that’s to desperation and it’s a coping mechanism. To me, it’s much better if you are much more promiscuous in your thought process and then extend your universe of instruments.
This might sound weird, but I think the worst thing that happened to retail traders is the micro and the mini ization of index futures. It certainly was good for the exchange, and it’s certainly good for pros because they can kind of feed on everybody, but I don’t know that it’s really served the public because just given them access to something doesn’t mean it’s in their best interest. And most of the folks who are struggling or who have failed and have written me, were in fact trade. I don’t even know what the tickers are. What is it? MEQ, and right then there’s the ein, and what they try to do is no matter what, because their accounts are too small, they spend all day trying to find an edge as opposed to developing an edge that they can deploy across many, many instruments. And so what ends up happening, and the point of the story today is to turn you into, give you a vibration of abundance.
Whenever I was struggling, I would always just say, you know what? I don’t accept this bullshit and I’m going to go focus on what it is to be great, and I didn’t know what that was, but along the lines of fake it till you make it and act as if that type of energy, even if it is momentarily bravado or machismo, it’s far more superior than to sit back and get a case of the poor me and why does this always happen to me? I believe words have power, and if that’s what you say to yourself, why does this always happen to me? What do you think is going to happen? You’re going to keep putting yourself in situations where you keep saying that. Why does this always happen to me?
There are trends everywhere. There’s emotional trends, right? That’s what the trend following folks don’t fully understand is that everyone’s running an emotional system. Even Bill Dunn, who’s now retired, spoke with me and talked about having emotions running through his body. The ability he had though, which was separate from his system, it was a personal character characteristic. A personal trait was to not let his emotions overcome his better judgment. But that’s something that’s true in life that you need to work on, not just if you’re going to work on trying to design mechanized trading rules, whether they be swing trading or high frequency trading or buying open and close kind of things in the market or trend following, it doesn’t matter to me. There’s no one way to design a system. There’s many systems. We have ’em all. So instead of thinking of being in the vibration of, I need to make enough in the marketplace, again, I think if that’s your mindset, that’s where you’re going to end up.
You’re going to make enough, but what is enough, right? This is where we get into what is your self-worth? Where’s your self-esteem at? I can assure you the folks I knew from commodities corporation had the self-esteem that they thought they were entitled to all of it. There was no such thing as enough. Enough is, again, it’s a coping mechanism where you feel like, well, I’ve got a piecemeal my way to success, and that’s not how my mind works. Once it clicked for me, I realized the world was mine, and from a trading standpoint, it was my kingdom. I was the king, so I had to set what the parameters were. It wasn’t kind of coming to the market with hat and hands out saying, this is what I would please, if you have any extra spare change, I’ll just take those small gains and I won’t make any big deal about it and be humble. I think you can seek abundance, which is different from greed

And have a very strong sense of self-esteem and demand from the world, the biggest gains possible. And so the whole thing is can you live with the uncertainty? So in my notes here, I have vibration of making enough rather than what you really want, and then learning to live with the uncertainty. So how can you do this because it doesn’t make sense to just blather something like that out there and not give you a, for instance, let’s just say that you have X amount of corpus in your account assets under management. I call it corpus. You can call it what you want. You’re going to risk one half of 1%. Don’t think in terms of dollars because you’ll always look at that number and be like, oh my God, my boyfriend or girlfriend is making 60 k. I just made 5,000 in the market on my million.
Now I’m going to call them up and say, I just basically made your month’s salary pre-tax, pre deduction in one trade. So when you look at it that way, contextually, you could be like, yeah, I suppose that’s a lot of money, but if you trading a million dollars and you just made five K, you’re up one half of 1%. It’s not really anything to write home about, certainly nothing to pick up the phone and start bragging about. So when you think about it in terms of percentages, it’s much more contextual to me. You might benefit from that. So let’s say that that’s what your R is. Your R is one half of 1%. So how do you stay in the winners and invite that abundance in? Because it’s all behavioral. The trades are there. The question is, are you going to participate in them so you can make that choice?
And it’s not that random. You can make that deliberate behavior. So if look at it this way, this is one way to do it. There’s probably others. This is just to give you context so that you understand where I’m coming from. Like I’ve said a million times, I don’t have all the answers. Yes I do. No, I don’t have all the answers. I know what I’ve lived through and I’m going to share with you experientially or what I went through from my own experience. I guess that’s the better way to say it. So you put on a trade and you have whatever, the number would be one half of 1%. So now the account goes up and that’s your R and you’re at the three R, right? That seems to be popular three to one. So you’re at three R unrealized gains though one way that you can invite greater gains, tactically speaking and still stay abundant, is if you are willing to risk one R on your original account balance in order to be in the trade, what’s the difference?
If you’re at three R and you’re still risking one R one half of 1%, so you put your stop in at two R, what is the difference? What changes? Because you go from trading your cash balance, say with no other positions and no unrealized gains, you just have cash or money market funds, and you risk one half of 1%. Then you find yourself from good luck, good timing or good analysis could be any combination of them. We’ll take ’em all. You’re up three R on the trade. So in that moment of time, if you looked at the trade and said, okay, if I was coming into finding another trade, those unrealized gains would be part of my account balance. My R would still be one half of 1%, it would be incrementally smaller. I’ve got my protective stop in. What’s the difference? What does that do to you when you have unrealized gains?
Because I think from the emails I get you panic, and I’m like, why would you panic when you’re in one of the most abundant states that you could be in when you’re a trader? What’s the point of panicking? Because when you panic, I believe I’m not a scientist, but psychologically, I think your fight or flight mechanism kicks in and then you induce a trade, which feels good in the moment because you relieve the emotional pressure, but financially you just cut your big toe off. Let’s leave it at that. So now you’re off balance. That’s why we have toes, right? Big pappy’s got big toes. So what I would do is to think and meditate on that and say, okay, maybe Mike has a point here. Why do I panic when I have unrealized gains? I have got my protective stop at two R. Worst case scenario is still going to get knocked out, making money, take it home overnight, take it home over the weekend, of course, and adjust my stop higher.
A handful of times it’ll definitely go up to four R, five R, maybe six R, in which case you’ll always get stopped at say three, four or five R respectively, and then you get used to that. That’s how you become comfortable when you’re uncomfortable is to put that R into perspective. Why is it different when you have your initial account balance and the corpus, whatever you trade in futures? I think you’re dealing with cash. There’s no money market, but what is the difference? Why would you look at those differently? If it’s the same R, why would you need to take it? What’s the fear that it’s going to go away? Where does that come from? Show me the science, because I think you’ve made it up in your brain. I don’t think you have the numbers to be frank, and I say that I know I sound like a big jerk, and I don’t mean to, but I know the numbers.
And so if your goal here is to exact as much cash as you possibly can and not just make a living or make enough, making enough satisfies and emotional need because it’s all relative to your situation. So you have to supplant yourself and say, I’m sitting, I got George Sotos here and I got Dren Miller here. How am I going to feel about taking my big one half or 1% winner? Sure, right? If it’s your first month of trading, you have to go through that. But very quickly you need to realize that this is an industry where since you’re responsible for everything that you do and you’re responsible for everything that happens in your account, good or bad, you get to design it and architect it exactly the way you want. It might be the only reason, not the only reason, but it’s certainly a good reason of why you might even be listening or watching the show is because I dreamed those bigger dreams.
It was a mindset issue. The tactical part’s not terribly difficult. In fact, it’s the same. You add length to your portfolio, you put in your protective stop market goes up, you adjust your protective stop, so you cancel and replace. Okay, maybe that’s slightly different, but it’s all about babysitting a wishlist of stop orders. Here’s where I’m going to enter the market long. So I have those buy stops, not limits. I have buy stops above the market to add length at appropriate levels as soon as I get filled on any of those, and nowadays it’s so easy, you get filled, you can get a text message. I still get phone calls, but man, the technology, it makes it so much easier. So then when we have some time over this, the reason why I’m speaking about this is because there’s probably some slow times you’ll have Black Friday and Cyber Monday.
Don’t put more thought into holiday shopping than you do for your trading models because you deserve it. In my paradigm, if you’re willing to do the work, you might as well get paid and you might as well get paid as much as you possibly can for the risk that you’re willing to take. And that to me is a simple, simple exercise that can help you improve your trading by, I don’t even know. I know people write in, they say they’ve doubled their gains just by sitting on their hands, but you have to get used to feeling the feelings of uncertainty, dealing with the probabilistic outcomes of a trade, and then realizing that in the event that you put in a trade and the rare times it works against you in such a way that it goes to break even. Don’t be a bitch. It’s not the end of the world if you do thousands and thousands of trades. That’s going to happen, but it’s, it’s not worth forsaking all the gains on all the other trades that you make by sitting on your hands and taking them home overnight, taking them home over the weekend and adjusting your stop higher accordingly.
You see, it’s not worth it. So you’re making a mountain out of a mole hill and you’re afraid of a boogeyman that I can think of maybe three times over the last decade that that happened. And you’re like, oh, well, it’s just the way it goes. If you do enough trades, you got to understand that at least one thing that’s bad is going to happen to you. I was locked in live. It moves against me. It’s the way it goes. Doesn’t happen too frequently. And to be honest, it hasn’t happened since the instance I wrote about in the book. I think it was Mad Cow as I was in cattle and mad cow hit the tape. So it’s very rare, and I’m telling you, bigger gains in your portfolio are all about mindset. You need to invite them. You need to feel comfortable living with the uncertainty.
I’m going to talk about the three crown jewels. I just don’t feel like getting into it now because it’s a longer video and it requires examples, and I just don’t want to do a two hour video right now. I want to do tomorrow’s episode as soon as I hang up here so that I can be done for the week because I’m busy. Otherwise, I appreciate everybody being here. I see all the comments. I appreciate you all writing, and what I just explained was exactly how I learned to get comfortable with the feelings of being uncomfortable with the unpredictability of trading and the uncertainty or the fact that you’re dealing with I need to be accurate, and I love that feeling, but trading is probabilistic and I needed to make, I didn’t have a choice. I really couldn’t get by making small gains, so that was kind of a happy accident as the artist, late artist Bob Ross would say, there are no mistakes. There are only happy accidents. Anyway, I appreciate you being here. I hope you have fun plans set up for Thanksgiving later this week, and I’ll be back again tomorrow in a few minutes. You.