Hi guys. Welcome back to the segment that Mike and I do once weekly where we talk about comments and questions that you guys may have and go over and see if we can add anything onto it. Before we start today’s topic, I wanted to say make sure you guys like subscribe, click the notifications bell, all comments, help the algorithm and make sure you guys subscribe because you don’t want to miss a single video that we post to this channel. Not one,
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Not a single one. But today’s topic I wanted to talk about what are some of the biggest misconceptions about trading?
Yes, I mean, when you’ve been around for a while, you’ve, you see all the come commands. I think, and this comes in from someone who emailed me directly from the website, and admittedly it’s confusing for me. I think it was hard because there wasn’t access. So everyone has difficulty, but there wasn’t an online community there. I’ve talked about this till we’re blue in the face nowadays, there’s so much available. You don’t know who to trust, you don’t know who to rely on, and it can give you the illusion that you’re very, very far behind and that there’s a lot to know. But if you remember what I’ve been saying since we really started the daily show here is we really don’t get paid to know stuff. Anything that you need to know, you can Google or look it up. We get paid to execute. So I would very, very quickly don’t worry about studying and taking classes.
I wouldn’t worry about joining these membership sites or getting alerts. You have to eat your own cooking. So one misconception is that you need to be part of a community, maybe even eventually. To me, traders are leaders and they’re very, they’re lone wolves, they’re independent and they’re decisive. Very, very hard to make it as a trader long term if you have to rely on or wait for the phone to ring, so to speak. Figuratively speaking with advice as to where you should get long, the E mini, and I know it feels comforting, but that comfort, that comfort, it doesn’t really serve you long term. So as soon as you can get off the nipple, there’s a reason why you get weaned off of breastfeeding. You have to be independent, right? Sooner or later you got to get your own milk.
And it’s not to say anything bad about the people who run these. It’s not to say anything bad about the people who are also members that you might have a fun relationship, but when it comes to trading, you have to be your own boss. You have to gather your own berries in the nuts. And the more independent you can be, the more confident you’ll be. And as I’ve said before, I think the more confidence you have as an individual, even if you have average ability, you can do very, very well. And that’s true of anything, not just trading. So does that make sense?
Yeah, no, for sure. I was just thinking about one of the other things that you say a good amount, and it’s like there’s no substitute for actually trading, and that much is so true with a lot of things, but it’s like, yeah, sure the communities are great and you know, may make friends out of it and may even have some reassurance, but it’s like it could almost encourage you in a negative way where it’s like, oh, maybe I’m not going to make this decision. I’m going to contact my 5,000 buddies who are in this discord and say, Hey, what do you guys think? And then it’s like, is that really your own decision and it’s not? And how much did you learn from that, if anything at all?
And so where I’m going with this is that while we don’t get paid to know stuff, we get paid to execute. We also don’t get paid to think. And what I mean by that is thinking in many ways can become a form of procrastination. And that was for me too, because if I was thinking, I could say, man, I’m hard at work. I’m trying to design this model and what wasn’t I doing? I wasn’t inviting failure into my life, which is what teaches you how to trade. And so you need to embrace that, right? You have to embrace failure because it doesn’t say anything about how smart you are. And at the beginning that this is all space invaders, man, this is all Mrs. Pacman, your money at the beginning. You can’t hold onto it for dear life. It’s Lin’s blanket. You have to be ready, willing, and able to risk that because that’s your dry powder.
Yes, you can’t bet the ranch, but that’s really just your ammunition in the grand scheme of things. You also know that when you put money into a trading account, that’s not your savings account. So you have to take risk with discords and chat groups and this and that. What can end up happening is you get super comfortable logging in and go into your support group, but you can’t rely on them for trading ideas. I know some really, really smart people that are constantly here saying, is this a good price or whatever. And they’re two years into the thing. If that’s the case, the group’s failed you because sooner or later, yes, you can go there if there’s wisdom to impart or how to stuff, perfect, but then you got to move on because at that point what you have a subs is a subscription or what in marketing they call a continuity product.
So whoever’s running the discord is going to wake up and get 200 a month from 200 people and that’s their revenue stream. So that when you stay on with the membership, but ultimately you want to go there, make your money, learn what you need to learn and then move on. If you make enough contacts, you make enough relationships, you’ll always be able to share and kind of create your own little support group, but without having to pay the monthly fee, you see. So I would, and I’m saying this, having been in a rather well known men’s group right up in Incline Village, but we never about trading, it wasn’t about that. We were always talking about emotional intelligence and trader psychology so that we could grow as people. So we shared our feelings, believe it or not. So it was more of a men’s group than it was anything else, and it was remarkable process.
So that’s one big mess, misconception. Another one could be that you always need to have your money moving. I think that’s a fallacy, and I’ve studied this in my own behavior and I’ve studied it in the people that I’ve coached and I’ve listened and put my ears to the track for other to the railroad tracks and studied other people’s behavior because that’s really what you want to emulate is the behavior. And so there’s a theory out there, especially with smaller people, smaller accounts, excuse me, and especially people who are more shorter term like day traders, swing traders that they kind of constantly have to have their money moving. But I look at it this way and I’m not making any recommendations long or short. If you could look at their certain, so today is Wednesday, May 24th and already year to date, there are certain names that have doubled.
So my question to you is if your account hasn’t doubled by catching one of those big moves or having at least a good chunk of your account in that name or any of those names, it kind of disproves the fact that you kind of constantly have to keep your money in motion. Two, it’s physically exhausting. If you’re in a winning trade and you have to get out of it because you’re firm doesn’t let you carry risk home overnight, then you have to reinvent yourself the next day. And in the market environment that we’re in right now, not a lot of follow through. So it’s even harder to find winning names that can make you money than it is when markets are good. And it’s still not even easy necessarily in those markets either. A good friend of mine worked for a very popular, I would call them a discount brokerage firm.
They had very, very funny commercials and in the bull market between 95 and 2000 every three months they had to change out two thirds of their client base because even in the bull market, those folks didn’t have any technique and they’d get in feeling the burn of having missed a move right at the top only in time for the pullback, and they were actually losing money in a bull market. So you can’t believe everything that you hear. I think that’s a big misconception. I’m not going to say that it’s an outright lie because there’s probably, again, a very small, less than 1% of the population of traders who can actually keep their money moving the shortest term. Obviously being high frequency traders. But I’m talking about those where you’re not using computer code, little human ingenuity, discretionary chart readers. I don’t think you need to always keep your money moving.
If you’re in a good name and you have the right PO position sizing, you could let the instrument do the work as opposed to you are doing the work, let time and leverage, even if it’s cash paste, right, you’re paying in cash and not using anything under reg tea or day trading, buying power or in the futures markets there’s implied leverage. So you can’t because everything is levered. I don’t necessarily believe for a second that you have to do that. And I’ve had futures positions on for weeks in the same contract where it was, it looked like a buy and hold investment because the market was doing the heavy lifting For me, I want to make the most amount of money for doing absolutely nothing. That’s where my head’s at these days. I don’t want to do turn this into blue collar despair. This is not a nine to five job and it’s not a seven to seven job either.
If you’re putting that much money in, you better be pulling down 500 K a day. One way to kind of check that of course is look at your p and l and divide it by the number of hours that you’re putting in. And if you’re making minimum wage, you might run want, you might want to rethink things. Granted, I understand when you’re working for minimum wage, you’re an employee, you don’t own your own operations. So there might in stone, the key though is to be mindful of all your operations and measure stuff. So that to me is another huge misconception is that you constantly have to have your money in motion. That’s the fallacy. That’s absolutely not true. I know plenty of people like myself who can have even futures with the right position size and let those positions run and make you all that money. And sometimes I would, and I’ll be frank with you, there are times I would wake up and I’d be like, how am I making this money for doing no work? But as they say, intentions, equal results. That’s what I want to do. I don’t want to manage.
So while I have to manage my, even delegating the executions I call it into the trade desk and let them execute it for me, I don’t be sitting in front of a computer. There’s nothing fun about that. It’s not macho either with a bunch of monitors, you don’t need that. If you want that, great. But I’ve spent money on technology that became obsolete in six months and I started scratching my head, this is stupid, why would I do that? So those are a couple of misconceptions. Another one that you might not think of that’s maybe not in the world of misconceptions is that some of the best trading books are actually books that have nothing to do about trading, but everything to do with mindset, right? Because it gives you context, it gives you insight into your own behavior and behavior predicts where you end up.
So sometimes, like I told you when we first met the Jiujitsu first, one of the ethos for Jiujitsu for me wasn’t because I wanted to become some big black belt. It was more because I wanted to exercise my discipline muscle from another angle because from the trading side, I had already gotten it down, but I was always looking for ways to test myself, to make a commitment to do something that was arduous, that was also hurts. You get bas, you basically get beat up, not bullied, but it’s hard on the body. It’s stressful, it’s not terribly aerobic, but it’s a mental chess game between you and your opponent. And when your opponent knows more technique or they have more experience, you’re going to lose. You’re going to get submitted and have to tap out. So it keeps your ego in check. So there’s all these things.
And just to mention a couple, a good one is called the Diamond Cutter is a great book. And also if you’re feeling sorry for yourself, you could go read Maya Angelou’s biography that she wrote when she was 40. I know why the Caged Bird sings because really when you think about it, when you’re trading, you’re on your way. You might not feel like it, but you don’t really know struggle the way some other people know struggle. So I always try to say, okay, struggle. It’s part of it. I just embrace it and say, tomorrow’s another day. I’m never going to let one day define my career, at least to the downside. I’m going to take my small losses and I’m going to move on. And there’s probably a whole list of other books that you could read for context like that so that you can understand your own situation, celebrate the fact that you’re struggling and that you’re persisting because that’s one of the four crown jewels that you need as far as I’m concerned. To make it, you need a good attitude, you need discipline, you need persistence and determination. So all of that stuff adds up to your success. Even though if you can’t see it right now, if you do it day after day after day, you’re eventually going to hit your goal intentions equal results.
Yeah, it’s funny you say that about the best books for trading, not have anything to do with trading. When I was cycling a lot and I was racing, one of the best books that I ever read that kind of motivated me to work harder was to Helen back by Auie Murphy. He’s the most decorated us soldier in history. And just reading his story and seeing what he went through, the progression from his life in a good amount of ways, it kind of motivated me to say, okay, look, you’ve done a lot of different things already in life and people tell you you’re crazy for switching from here to there and all over there. But it’s like this guy’s done so much in his life. He went from being a cotton picker as a boy to lying, forging documents and then going into the military and then becoming a Hollywood movie star. He did so many things in life and that kind of inspired me after all that he went through. Why can’t I do that
A hundred percent? And the world is, I don’t want to say litter cause that’s a bad word, but look at Colin Powell. The guy grew up in the South Bronx when they referred to that police precinct there as Fort Apache and he ended up Secretary of the State. Like you are not defined by your situation, whatever, wherever you are, that it’s just a chapter of a book that’s on in the process of being written. You don’t know what the ending’s going to be like. Your life is a jazz song that there’s a certain type of a structure, but whatever happens, happens. And you can even see that if you listen to probably one of the best records ever by Miles Davis actually by any artist ever is, especially in jazz though. It’s a 19 58, 59 rec. 58 was milestones 59 is called Kind of Blue. And there’s a song on there, I think it’s probably one of the most beautiful songs ever written called Flamenco Sketches.
And the six people on that record eventually went on to be Titans, but All Miles did was put out four or five different modes and he set the tone with the opening line eyes on top of that. And you’re saying to myself, oh my God, there’s no sheet music written here. They just knew what the chords were, so to speak, the modes as he referred to them and they just played over it, right? Paul Chambers was on standup based, he’s passed. He passed away at a young age at 38 from tuberculosis. You had Bill Evans on piano. He was amazing in his own. And then of course the great Jimmy Cobb, who was the last of them to die, was as the drummer. He passed away a few years ago, at least he was 90 years old. But that record is like you’re listening to six people on a team who are listening.
They all have chops out the wazo, but when you’re a musician, you sit and you listen. So you can learn a lot from that in and around your trading by listening to yourself, document stuff, measure your performance because everyone’s going to get smoked. I wrote a book about getting smoked. It’s called The Voice of Trading. And I had some monster wins there. The book was written in 2011. There’s not a mention of the Monster Sugar trade I had where I can’t even tell you how I had more than half my money in sugar margin and it went from eight to like 21. But you don’t l I diagramming that trade isn’t going to help you be better because you can’t identify it with that when you’re just starting out. I could create videos on that and get millions of views. I could probably build a how-to course around it, but who is that benefiting?
I’d rather talk to you about the struggles that we’ve had or that I had to go through because that’s what you’re probably going through if you’re just starting out. And even if you’re more established, the market’s the same for everybody. What differentiates one trader from another is his or her behavior. We’re all looking at the same sugar contract. We’re all looking at the same Nvidia stock. There’s only one class of stock as far as I know. So the best you can do is and how you behave under certain circumstances, especially the arduous ones, because you have to stay cool. You got to chill.
Yeah. So I mean there’s probably a bunch more misconceptions. I don’t like hearing the sound of my own voice. Everyone says do longer content, do longer content. But it’s like if I could make my point in a very effective and efficient manner, I don’t want to say repeat myself using 45 different examples. Cause I think you got it. I don’t think you need lots of monitors and have spent lots of money on hardware. I don’t think you need to. If you want to sign up for alerts so that you can learn the howto, get that under your belt, but give yourself a diet. Say I’m doing this for two or three months and then I’m going to move on because in my opinion, if you want howto, there’s a million howto things out there already for free on this channel, on YouTube for example. But to me there’s too much of that.
There’s not enough on the psychological and the emotional and that’s why you behave the way you do. It’s because of the emotions and the psychology. And if you don’t believe me, well then just document your behavior and try to figure out why. Because if you disagree with me, I’ll take on any debate. There’s no problem with that. I don’t have all the answers. But I tend to think that if you’re not aware of why you do what you do, it’s because your subconscious is running the show because everybody on planet Earth has an emotional model that seeking pleasure or avoiding pain.
Yeah, for sure. I think one of the things that you just touched on a little bit was limiting. Limiting certain things in a timeframe only have alerts for two months or three months. And it’s like that to me is probably one of the most important tools for progressing at anything. It’s like if you know what your training wheels are, how long you need to have ’em for, or at least set a timeframe. And it’s like, okay, when you get there, say, all right, well look, I was a little bit off. Maybe I need another week or another two weeks or whatever. And really take some notes on what’s going on and really try and ask the why. Ask a lot of more questions so you can kind of benefit from that. And then also say potentially, oh, I don’t need ’em anymore at all a month before my date. So whatever I’ve learned enough, I’m moving on. And then set your next timeframe. I want this by, I want to do this in this amount of time. Just set goals and have limits on training wheels.
They say goals are dreams with deadlines. So you want to say them in the present tense. You don’t want to say stuff like, I’m going to be a successful trader because when that’s in the non-existent future, you can behave like that right now. So you have to be, I don’t want to say you don’t have to be brutally hard. You don’t have to say this is a seal stuff that’s an exaggeration. Trading is a great personal challenge. Everyone meets it and finds a certain facet about it. Maybe more difficult than the next person. Some folks might be great at entries, they might suck at exits. We talk to one listener or viewer now cause we’re on YouTube, we’re still on the other channels too, by the way. So you don’t have to be here on YouTube, definitely trying to grow the channel. But G Gaja still puts up things on Spotify and Stitcher and Apple. If you know it’s hard for you to watch videos while you’re driving, for example, that’s a skill unto itself.
But make sure that you’re accountable. You can’t delegate your risk management to another person. And that’s kind of what the discords and these chat things set up is that you want to rely on us. And that might be true for a small window of time, you see. But after that you have to, like I said, go on a diet of your mind, learn what you can learn and then move on. Because for the most part, you shouldn’t need a support group. You’re just getting started. If trading is so stressful so soon that you need a psychologist, I would say you’re in the wrong business. Find something that’s less stressful or that doesn’t push your buttons or take some time off to learn who you are so that you don’t find yourself doing things that sabotage your behavior or sabotage your account. Now it’s a lot different if you’re a 10 year pro and you’ve got a lot at stake and you like to have an accountability coach, but if you need a therapist because of your trading, to me, it’s not worth it. You want to have a quality life above and beyond just my personal opinion.
So we have a lot of good things planned coming up. We have topics out the wazoo that we can develop. Some of them are good for the Monday, Tuesday, Thursday, Friday episodes where I can just bang them out by myself if they need more time, I’m willing to go longer. There’s things that are a lot better to do with ganja here because he’s a pro in his own and he’s lived a very rich life for a young man. And so there’s a lot of good stuff that can come from the conversation that I wouldn’t think about if I was doing this subject matter by myself. Just like I said during the other four shows during the week, there might be a chance, depending on how the audience responds to add a second window. We’re actually both extremely busy. But I made a promise, you have to remember why this whole thing started, right?
Because it certainly ain’t for the money being that it’s free in that when I started, I found that there was a level of what I kind of coined a phrase, intellectual greed. There wasn’t any mobile technology and this and that. So it was really from reading books and then knowing people, I only knew a handful of people. And the newer folks that I met who were becoming acquaintances were oftentimes very reticent to want to offer any help even if you took out for a steak and some beers after work or had tickets to a Yankee game because those jobs were very coveted and they always felt like you’re only as good as your last trade. And in some of those positions you only had three months to make it happen. And if you didn’t make it happen, there was someone else who was ready, willing and able.
And those folks had witnessed that. So some of those proprietary trading firms, there’s like a revolving door. You don’t have a long window of time, you see. And so I think they were in fear. They operated from a fear-based situation as opposed to I’m going to put abundance out into the universe. Anybody watching? I guess the analogy would be like here, if I can put out abundance from all of my experience for anybody, most of whom I’ll never know or never see and they can benefit, I don’t need those people specifically to pay me back. This is once I put it out into the universe, I know the universe is going to reciprocate. I don’t necessarily care where it’s coming from. And that’s the ethos that is still true to this day is because I felt the burn that I was trustworthy. I’ve never been arrested.
I’ve got perfect credit. I got a good record with D M V. It’s hard to prove that to people when they don’t know you see? And so all I needed was a break and those were hard to come by. But again, persistence and determination, having a good attitude, not taking no for an answer, and then following George Bernard Shaw’s advice, George Bernard Shaw who said that people who are winners are successful. They look for the circumstances that they think that they need to succeed. And if they can’t find them, then they create their own. And that’s what I had to do. I had rejection letter after rejection letter from these bigger firms. It was very different. In a lot of these trading prop firms right now are more like trading arcades. You need your own money. So it’s not really prop trading. There was, if you went to D David Shaw haw or say Bear Stearns, where you’d have a desk, you’d have your resources and you’d have firm money without having to put up your own money and they would educate you and they would pay you a draw, right?
So it’s not prop trading today isn’t what it was. I know they call it prop trading, but I’m kind of puritanical about it. It’s a very different business model. And the risk reversal is on the trader. It’s not on the firm. The firm’s not really taking chances per se. So another misconception, I suppose, I didn’t mean to kind of bring it up that way, but if you’re true to your goal, I think you’ll hit your goal. But I don’t think you need a lot of the things that people think are trying to talk you into. You might feel insecure, so you want to remove that insecurity. What I would try to do is say like, well, what is the insecurity trying to teach you? What is it saying about who you are right here, right now? And what does that mean next week? Because is ins, some people are insecure all the time, but I find that it’s very difficult to make progress because you get what you think about.
And if all you think about are your insecurities, I think you’re going to get more insecurities. And if you start to rely on these groups, and it feels the worst thing that that can happen to you is that you join a discord and you become comfortable. You want to become uncomfortable so that you move on and do your own homework, you eat your own cooking and you rely on yourself. Cause once you can do that, I’ve said it increases your confidence. And then again, in my humble opinion, I’ve just seen it too many times. Some, there was a person that I know, I can’t mention his name, but he lived in East New York and he was a paper salesman. And in July, August in New York in a suit, he’d be carrying reams of different types of paper on his shoulder walking into businesses and selling paper.
And that person became a traitor and he just smashed it. He just killed it. Why? Well, because he wasn’t overthinking on stuff. He found a set of rules that worked for him and he just amplified that over and over and over and stuck with one thing. And again, you take a person, and I don’t even think he had average intelligence to be honest with you, but he was committed. He knew one thing and he could put the blinders on and go down that path. He wouldn’t know anything about macroeconomics. He wouldn’t know anything about even basic economic theory that you could get in your econ 1 0 1, but the guy found a set of rules that worked for him as a discretionary chart reader and he never looked back.
Two, I know lots of traders who trade many different styles. Some of them are short term day traders and they’re so short, they just trade the open or the close or they wait for the first hour to pass and they trade from seven 30 to 10 eastern time. I mean California time. So 10 30 to say 12, and then that’s it. I know successful swing traders, I know position traders, I know pure, systematic people. There isn’t one way to make the most money. Another misconception. So you might hear from marketing people that there’s a conspiracy out there and the world is out to get you. The world of trading wants you to win because the more assets that you have, the more commissions and clearing fees that they can make. It doesn’t make sense to me to think that there’s any broker dealer introducing broker futures commission merchant or any member exchange member that wants to see new people come into the business so that they can steal their money and put you out of business.
There has to be a winner and a loser, but at the end of the day, it’s massively expensive. If the world of trading has to replace the participants year over year over year. So that’s another misconception. There’s no conspiracy. What there is is a lack of discipline. What there is is a lack of accountability. That’s true. It’s hard to get clients if you tell them that they don’t have discipline though you want to be the pied Piper, that’s great. That’s a marketing thing. I don’t fall for that. So, and around that too, I can’t say that position traders make the most money because that might be self-serving. But in the same breath, I can assure you that the day traders don’t make the most money either. That doesn’t fit the dialogue of the marketers because I know people of all different shapes and size are smashing it.
What you want to be concerned with is what’s the best risk for you to take, and then what are the risk adjusted returns? You can’t compare commodities corporation to tutor investments, for example, because a different business model. So you can’t say the guys who were making 10 to 20 times their capital was better than when tutor doubled their money very, very early in their career. It’s a different business model. Each did very, very well based upon the rules that they had in order to run their businesses. So I’m not saying to be an activist and challenge everything, but just realize the source of where the information’s coming from. A lot of times you see, so ask really good questions, and if you don’t have anyone to ask the question of, shoot it over to me, I’m not going to throw shade in anybody because it’s not my spirituality.
You know what I mean? But I can give you objective answers for the most part. I know the business models that are out there for trading and how people can make money. My biggest concern is that I want to help you find the best one, the one that’s most suitable for you, for the risk that you’re willing to take as soon as possible. So this show, yes, it’s a way of giving back, but what I’m trying to do, if you haven’t figured it out already, is help you accelerate your own learning curve by you studying yourself, because I want you to be independent. Everyone that I mentioned in those different asset classes and in those different holding periods, there’s one thing that’s true of all of them is that they eat their own cooking, they do their own work, and they eat their own cooking. And if they have a support group, it’s super casual, it’s casual, it’s like they’re professional friends. That’s it. If I can think of more, maybe we can do a second episode, but again, I don’t like running long in the tooth here because I know you have other things to do. Learning about yourself.
What do you think?
Yeah, I’m not, not sure I have anything on that. I mean, we’ve already touched on a lot of really good stuff today, and I think if we think of anything else after this, then we can always add onto it on a separate episode or the same episode.
Okay,
So
Thanks for being ganja me. Let us know because again, the last thing I want to do is waste your time, even if the shows are short. I want to try to stick and keep the conversation going on some of the themes that we have so that you can get the best education that you possibly can learn about yourself and then go off and kill it
A hundred percent. With that said, guys, thank you so much for tuning into today’s episode. We really appreciate it. Make sure you guys like subscribe, click the notifications, be all comments, help the algorithm. And yeah, if you guys have any questions, leave ’em in the comments. We’d love to maybe answer them, add onto it, potentially make a separate video on it. And yeah, thank you guys again, and we will see you in the next one.
Thanks everyone. See you tomorrow.
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