Things are often harder than they look

So as we’re looking at how do you screen for names and make yourself a very independent person when you have the data based on your own actions, not things that were originated by other people, including their entries, what their watch list is, this and that. You get to understand the difference between skill versus luck based on your own actions. And that’s a very powerful place to come from because if you’re going to endeavor to do this for a decade or two decades, this is information that you absolutely need because it’s very, very likely that you can survive the very, very groups that you’re part of or otherwise they don’t last that long. They don’t go on forever. So what happens when it’s not there anymore? What are you going to do? Look for another one. So I’m speaking to the person that’s looking to grow their account from their own trading, but also maybe looking for allocations from other people.

And so that’s the lens that I look at the world through is would I give this person money based on what’s observable? You see, because the world has become completely bastardized and it’s, again, it’s because it’s highly unregulated. What people think of as prop trading is not even close to being prop trading. It’s all risk reversal. You’ve got to put in your money, you have to pay rent, you have all these expenses. That’s not prop trading, that’s brokerage. You see? So again, if you don’t have money, it doesn’t really matter. You can call it the color purple because you don’t care what it’s called. You just need the money to run because you’re broke and you don’t have the money. But if you’re going to do this long term, you need to have confidence in order to do anything. Well, you need confidence and there’s times when your confidence may be shot, but you can take solace in the fact that you have skill.

How are you going to know that you have skill or not? Well, you’re going to have to monitor your own behavior. That doesn’t mean getting a chart book from somebody and saying, I pick these names. How do you know which ones to pick? How do you know how much of it to have? What’s your entry? What’s your exit? You see, that’s why these services really don’t help you. My ethos here is along the Chinese proverb that you’ve probably heard and you kind of know it because you’re living it every day if you’re listening. And that it’s better to teach someone how to fish than to give them the fish. Well, if you’re subscribing to any type of a service where they’re giving you the fish, you’re going to have to debate me long and hard that you’re doing it because it’s saving you time.

My call on that is bullshit. And I know who’s listening, I know who’s subscribed to various services, but in all due respect, I say merde – bullshit. You can do that yourself. I think in a lot of cases the idea of convenience is really just a way of being self deceptive here. And I like to see people being independent because once you can learn how to rely on yourself and exclusively yourself, then you’re unstoppable. And I think in the end, that’s really where you want to be. That’s what at least I see on social media. “Dude, we running shit here.” All right, we’ll see. But I know traders, I know this community probably better than anybody and I know that the best folks have certain personality characteristics that transcend trading tactics. That’s the easy part.

No one really trades on fundamentals, even though they’re very, very important. So you have to learn, when you think of your craft of trading. what is it that you’re going to execute? What do you do with a certain pattern or setup that’s unique to you that you can pull off consistently that will help you create the alpha. So your goal is to achieve a basic education which you can also get by yourself, by just trading and not relying on other people. Measure the results and then make the changes if necessary. Trade small trade infrequently and do everything that you possibly can to preserve your capital. because playing superior defense is the name of the game.

You have to understand that the whole, especially in the day trading space, it seems that that whole industry is there to suck you of your capital by teaching you things that are wrong, that are not important and that get you to rely on other people ongoing, which is really good for them, but not necessarily good for you. And I have too many emails from too many people over too many years that say something to that effect. It usually starts with, “Dear Michael, thanks for all you do for the community. I just got wind of your show. Boy, do I wish I came across this show years ago…” or something along those lines. That’s how the majority of them start. So I feel like that’s the market feedback that I’m getting from the show. I have to share that with you because for folks who are newer in the space, again, they’re coming to the market with dollar signs in their eyes, believing the hype when the reality is, is that the majority of people fail for any number of reasons, most of which is that they’re just not compatible with the profession. Again, nothing personal doesn’t mean you’re a loser, but it’s very, very difficult business despite what claims you see other people making.

So I give you that as a moment of pause because I come from that type of background where I had to survive, I had to make it on my own. There wasn’t a community, there wasn’t any of that and I did it. I also know how hard it is to make money because I come from a working class background. And so I had to always, as they say, the carpenter measures twice in cuts once. Well, I had to measure eight times just as a default because I didn’t have a trust account, I didn’t have family connections, I didn’t have many of the things that other people have. I came from a small town in upstate New York and that was that where everybody was working class. And so I had to do a lot to get out of that environment because I knew if I didn’t get out of the environment, that the environment like everybody is going to have an enormous impact on me.

And I wanted more for myself. I wanted a different type of life. So anyway, I’ll end it here for today. Of course, I don’t have all the answers. I appreciate that you may have other opinions, but I feel like I have integrity with the community by speaking my truth and putting things out there that I know for a fact that you’re not hearing any place else on any type of media platform. And to be frank, that’s how I can live with myself, telling you honestly about my own experiences, the experiences of people who write in for me, and having a lot of integrity with that and speaking again, what I think is the truth. You might not like to hear it, but I’m not here to push an agenda. This is a hard business.

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The problem with Discords and chat rooms

So I’m always debating in my own brain the concept of community around trading. And I think for me, the way I define trading community is really just a group of traders. Who talk about the markets and maybe their experiences. What they don’t do is actually share trading ideas. On when to get in, when to get out. That’s something different. And so when I think about what people are paying for, like whether it’s newsletters or discords or chat rooms or stuff like that, my advice is to quit and not do it. Because trading is about being independent. It’s not about joining a Discord in the morning. And then I saw someone, I can’t mention the person’s name because I don’t want to betray their trust, but someone sent me a bunch of screen grabs from a Discord where people are paying good money and the questions were actually “Should I buy this instrument?”

Or “is now a good time to get in?” And I was appalled. I was like, that can’t be what it’s about. That’s not what they’re for. Discord is almost something that you use for client help. When you forget your passwords and you need a reset it or something like that to set up these kind of quasi slack or Microsoft Teams things means the folks that are involved are not really ready for trading. So that could be actually a good harbinger for you that if you feel you need or you want to join some type of group, it tells me that you’re not ready for an allocation or you’re not really ready to take risk. Because if you have to go try to decide things by committee, which is effectively what those are, you have all these people chiming in and giving you opinions about when and what and why and how you should trade.

That’s not what trading is. Traders are independent thinkers. They’re loners, they’re the lone wolfs out there. They do their own research, they eat their own cooking. They don’t have to rely on anybody else for anything. They don’t take their losses personally. They learn from them. They understand that there’s randomness. They understand that there’s good luck and bad luck, good timing and bad timing. And there’s self-sufficient. They’re not folks who congregate and try to do things by committee that’s not trading.

This is a week of where I’m blasting the folks who are trying to be service providers for you. But again, if they’re doing their job, they should make themselves obsolete. Not have these continuous subscription aspect where you just join and go on and on and on and on. Like that’s the whole concept that I don’t like about going to talk therapy. And people have been talk therapy for six years. I’m like, something’s not working. You can’t be that sick. You can’t have that many issues where you’re going weekly for six years. That’s too much, too much time. Now, I know that might sound critical, but if the therapist is doing their job, they should make themselves obsolete. There’s no reason for that.

I know some of you might feel differently, but the truth is, I just don’t care anymore. If you want to continue to do stupid things with your money, I can’t help you. All I can do is speak my truth based on what I know, because sooner or later you have to wean yourself off and going on and on and on with these things. Again, it just tells me you’re not in the right spot to get money if you have to rely on other people. And two, the best way to learn how to trade is to do trading. And you don’t need anyone else to witness it. You don’t need anyone else to participate in it. You don’t need reassurances from anybody. And again, if you feel like, well that’s not true, Mike, I need reassurance. Well, you’re not ready to trade. This is the kind of person who should be on a paper trading platform because then what you make or lose really won’t matter because it’s not real money. But you have to realize what’s playing out for you emotionally when you’re joining onto these things and you’re relying on other people. To me, it’s just a digital version of Jim Cramer’s Action Alerts. Or whatever new club he’s running.

You have to do your own research. You have to go eat your own cooking. Otherwise, you’re going to be second guessing, your second guessing yourself for as long as you’re involved in that platform. Now, it’s one thing to get some basic instruction, but then you have to move on. I’ll put that at maybe one to three months. But if you’re using it as a group to lean on, that’s not trading, that’s a whole other type of relationship. And you want to be, make sure that you’re the bird that gets pushed out of the nest first. If it’s chronic and it’s ongoing. There is coaching, obviously there is mentoring, but those are short term things. So measure your own activity and when you set your goals, put start dates and end dates and then stick to ’em. Because the best traders that I know aren’t involved in any of this stuff.

They’re doing their own work, they’re doing their own research. And it’s very empowering if you would embrace it that way.

If you want to get a free copy of the audiobook version of my book, The Inner Voice Trading, where I talk about the things that I had to endure when I was doing things and learning the craft by myself. Mind you, just like I preach here you can get that. It seems funny to read some of these things, although they didn’t seem funny at the time. I wrote The Inner Voice Trading in 2011 I have the audio book version. So that allows me to give the audio book version away without charging for it. So yes, it’s a lot of missed income, but it’s the best way to serve the community. And so I want to finish by saying this.

If you are put off by what I said, then challenge yourself to think differently. Ask yourself these questions. Well, what if Michael’s right? Because who else is going to tell you? They have no incentive to tell you to quit the group and stop sending the money. So what happens is when you dive in head first to these types of things, you lose your objectivity.

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Don’t be stupid

So today’s episode is going to go under the chapter of a bit of a cliche saying, “don’t quit your day job.” I see a lot, like I said on social media, which for the most part, I’m on listen only mode where folks will say I have developed a system that you can follow that allows me to make $25,000 a week, only working 30 minutes in the morning, and it also allowed me to quit my job. Folks, that’s have to be the stupidest advice that I’ve ever heard in my life. Trading is hard. This stuff is not easy. There is no magic formula that allows you to just go turn on your computer, run somebody else’s model, that you have no emotional connection to do it for 30 minutes and not sit and utter worry that where’s your next paycheck coming from. If you think you’re going to do that and quit your job, frankly, you’re stupid.

And I don’t mean to even sound that way, but I kind of do. Like, don’t be gullible. Again, the professional copywriters are going to write things that they know are going to appeal to you. So on some level, let’s separate ourselves from it. Who in the name of Christ the King’s world, wouldn’t want that to be true. Especially if your job sucks, especially if you, you don’t you have to do what you have to do to pay your bills. Who wouldn’t want to find something that they could do for just half an hour in the morning and make a year’s salary across the a month? Of course everyone would love that. So why do you think they’re saying that to you?

What you want to do is call those companies and say, Okay, well what percentage of the people try to actually do this and don’t make it? Because I don’t care about one person. I don’t care about two people. I want to know how many people can actually do this, stick with it and make it work. Because my thesis is that trading requires a certain knack. And that knack isn’t going to come from you learning somebody else’s trading rules. That’s not a knack. That’s just the intellectual side. You need to be able to pull it off. You need to hope that that trading model resonates with you emotionally and psychologically, because if it doesn’t, it doesn’t matter if you understand it intellectually or not, you’re never going to be able to execute it. That’s why we have a lot of people who are super bright and can talk about chart patterns, but they can’t make money trading those very patterns because they don’t have what it takes. That’s the majority of the world. So before you write emails to me saying, “well, so and so did it?” well that’s great, but you’re not them. They’re not you either. But this takes a lot of work. It takes an enormous amount of, of failure and it takes a lot of learning from your mistakes.

It takes a lot of going through these things and not taking it personally. Realizing that mistakes are where and what and why, and how you learn so that you can modify your behavior into something that you can execute year after year after year. That’s what’s compelling. No one cares about making money for a week. That’s just a big old stroke. Whichever kind of stroke you want to interpret that as. But it, it’s that stroke, the crude one. So I’m here to help everybody, but you kind of have to learn how to help yourself. If I’m doing my job the right way with the show, I make myself obsolete. You shouldn’t have to listen to this every day because I’m not hawking something here.

The best solution for you is to figure out who you are and then marry that with a certain asset class and trading style. That’s the best setup that you’re going to have. Even with that though, if you can emotionally gel with what you’re doing and what I mean, what you know, excuse me, then you’re not going to make it as a trader because it’s the behavioral stuff that pays the bills. At the end of the day, knowing stuff doesn’t help you generate revenue, It’s your ability to execute. And just because someone else can execute, that doesn’t mean you can execute.

You see what I’m saying? So you have to be super careful because it’s your time and it’s your money and it’s your effort. And I tell you, the majority of the people piss away thousands and thousands of dollars, if not more, over many, many years of time. And they have nothing to show for it. You ought to know that going into it, that that’s part of the process and that’s likely a reality for the majority of you who want to endeavor to trade. If you’re working for dead money fees, management fees, you really don’t have to worry about stuff you asset allocate. You sit, sit it down, the people are going to pay you. If you have it set up the right way, the money will automatically be withdrawn from their account, swept into your account with no having to chase people for you know, money.

But if you actually want to learn to create the alpha, there’s a lot more to it than just trying to get somebody else’s system. And if it was so good, why are they telling you about it? Why wouldn’t they just trade it themselves and liquidate everything that they own? Turn that into cash and then amplify that cash, borrow money at low interest rates and then amplify that cash. You see what I mean? And I don’t begrudge anyone making a living here, but you have to remember, this is unregulated. People will say anything to get you to depart with your money tomorrow we’re going to talk and shed light on the various chat rooms and those platforms.

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Another shiny new object

So I got some feedback on the funding accounts and you know, look, these things seem to be kind of new and they are proliferating. We’ll kind of see we need more data to kind of see how they survive. As most traders lose money, you have to expect that there might be, I don’t know, I’m going to guess somewhere between less than 1% and maybe as much as 5% of those funded traders will actually go on to make money, at least for some period of time before they crap out. Maybe a handful, and I really mean a specific number, not even a percentage of them will be able to do it consistently. I think there’s going to be an enormous amount of churn in those funding accounts. I do feel that some of you, some folks will take advantage of the luck of being in the right place at the right time and hopefully make everyone some money.

But what really concerns me the most is the trading claims. And you just have to be careful because if I take a hundred people and endowed them with say, $50k to trade every week, there’ll be, maybe even every day there’ll be someone who has a winning trade that I can go online and hype and say, Look what Johnny from Wicomico County did in Maryland today. He made $1,700 bucks today. Now it doesn’t count all the other people who you can’t see that blew up, that quit, that went on tilt. So they have to be replaced. The next day comes around and they’ll be, Oh, here’s Wendy. She’s from Kalamazoo, Michigan, and she made $23,000 last week. Boom. So what you’d want to consider if you were going to really judge any of these companies in terms of the funding and the success is more of a longitudinal study. Come back and look at the same people, not just the fact that there’s any number of say, 50 testimonials. What happened to all those 50 people over a longer period of time. Because that’s kind of when you can kind of pan for the gold and maybe differentiate between luck versus skill. In the short run we’re lucky there’s a lot of randomness. Ego will dictate, Well, I’m good. Well, of course for a mainly male audience, of course they’re going to say that they’re good because that’s, that’s what they want to say.

But you have to be careful when you’re listening to folks make pronouncements and claims in an unregulated market is, it’s very, very difficult to ascertain the truth. Again, just like in the lottery, people will win, but the majority of people over longer periods of time are going to do nothing but lose. So in other words, don’t get your hopes up because at the end of the day, despite what the marketing says, right, and it’s legit, those people probably did exactly what they said they did. But what are they going to do next week? What they going to do next month? What are they going to do over the second half of the year? You see? Because on any given day I can harvest a winner and say, Look what so and so did. You can do that too. You see? So you have to be very careful and not get too, too in front of yourself here, two out in front of your skis, I mean, and go hook, line and sinker.

Be very measured in your actions. You really can’t trust anyone or anything. So you always have to say, okay, if you’re immediately falling in love with an idea, what you should say to yourself is, Okay, well where is my blind spot? Because they will say things that you want to be true. That’s the whole point of marketing and copywriting is they would come up with language that they know scientifically is going to appeal to you on either an intellectual, emotional, or a spiritual level. Sometimes a combination of those three. I know about this stuff so be very, very careful. It’s not that they’re, what they’re doing is illegal, but there’s half truths going on and you’re not always hearing the full story. They’re not going to lead with the people that fail and blow up, which would be where the real education could come from, as in don’t do what these people did. Okay? I’ll have more. I’m sure as the episode ages, there’ll be more folks writing in and give you some more feedback, which I’m happy to do.

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Focus on one thing and excel at it

So I got another email about someone being very, very frustrated saying, “Mike, nothing that I’m doing is working, and I feel like I have to change gears.” And so my thoughts on it are this, if you’re ready to throw in the towel on the asset class that you’re trading, it’s likely that the markets are bad, and it’s likely that what your style is is just not suitable for the type of market you’re trading. Now, I don’t really advocate jumping from one asset class to the next because the best traders all right, are survivors.

From a statistical standpoint, what adds to the frustration is that here’s a person who went out and bought somebody else’s system because they believed the marketing that they could trade that way too, or so and so made so much money that they could quit their job.

It’s not practical to really think that way, and I don’t want to sound like a cliche, but if what you’re trying to endeavor in the markets isn’t working, sitting on your hands and taking a time out is probably a smart thing. And before you even start trading another asset class, I would sit back and watch that market and see how would your existing rules that you’re working play out on the new market. How else are you going to develop a feel? Because the best traders have a knack. There is no special magical rule. A breakout trade for Paul Tudor Jones is the same for me. It’s the same for you. That’s, that’s just the way it works. So it’s popular now to talk about patterns that people have witnessed, and they’re coming up with their own proprietary names as if those patterns never existed before.

That’s categorically false, so don’t fall victim to that either. There is no magical news, new chart pattern. So what you can do again, is go to a simulator and see if you can look over longer timeframes, minimum timeframe, daily, and see how your idea would’ve worked if you changed asset classes by asset class, I mean, go from stocks to futures or futures to forex or from both of those back to equities like, doesn’t matter to me. And see if your rules would’ve made money first. You never want to act out of emotion because you’re frustrated, because when that frustration starts to compound, it just makes your financial problems much worse. And the money, I’m guessing, is hard enough to come up with in the first place. So absolutely, take your time and go slowly, because it doesn’t, even if you had like a winning, a winning trade or a winning week, it doesn’t signify anything.

It might feel better than a losing week, but you don’t know in the short run, whether it’s skill or luck, of course, you want to think that you’re onto something. And these are the types of markets, and this is why I bring this up now, where you really learn who you are. They’re terribly revealing because they’re going to push your buttons in so many ways. There’s going to be surprise announcements and things are going to move, and you’re not going to be in those trades, and that’s going to be frustrating. You’re going to put your money in other trades, they’re going to lose money, and that’s going to be frustrating. I’m not going to review the lesson on frustration where you willingly invite frustration because you don’t want the spency, but there is a point where everything that you touch can turn into pewter and not the gold that you’re seeking. And that’s just the way that it goes.

So when you find yourself in that spot, I can assure you the markets will go on and on like this for a long time, a lot more, for a lot longer than you can bear emotionally. And so it’s, you deserve a lot of credit if you want to go try another asset class. But again, forget about trying to win back your losses. That’s not the goal here. The goal is to find a set of rules with which you’re compatible, that you can trade period after period day after day, year after year. You see, And if you haven’t had success in the short run since you’re starting, it’s okay to take your time. Don’t take good money and put it to work because you’re angry or frustrated, in my opinion, you’re going to lose it all. And then you’re going to be stuck watching the game from the sidelines.

This is the type of market where this happens. And you could read about it in Market Wizards. There’s plenty of guys who did this very mistake, they were able to recover but at the end of the day, they still had to go through some very, very painful lessons. And so if that’s where you are right now, going to consider that part of your hazing and your pledging, so to speak, to get into the fraternity of traders. You have to know how to survive this. It’s a huge part of trading, is learning how to survive shitty markets. It’s a skill that you’re going to need to use for a long time, so you might as well learn it now. And that means you have to be mature. That means you have to be patient. And that’s hard for some folks when they don’t have enough experience because they want to get into it, they want to be validated, they want to be able to say that they’re profitable traders, and that might happen for you over time. For a lot of people, it never happens because they don’t have what it takes. And I hate to say it that way, but again, the money that you have is hard earned and it’s hard to come into that kind of money and hold onto it.

And I definitely think, again, the best traders are the ones who have a knack and they’re able to execute and pull things off. While I do believe that anyone could understand trading from an intellectual standpoint, I do not believe anyone or everyone can do it you, and that that doesn’t mean yes, of course you could take some money, put it into a margin account, you trade Reg T and stocks and all that. You can do that. But what I’m talking about is having lasting success — 10, 20 years, anyone could fund an account and start whipping money around. But at the end of the day, it’s like, can you do it for a longer period of time and be able to rely on yourself? That’s what I’m talking about. Those people are very, very rare. So before you get all hopped up and you’re angry about how things are going and trades that you’re missing, just understand that that’s the majority of how it works for people.

That happens much more frequently than what you see in social media. And so if that’s where your head is at emotionally, I have never seen a single instance where someone was in a bad spot emotionally, whether they were frustrated or demoralized or what have you, and then come back and then all of a sudden become a profitable trader who the light goes off. And that’s how it happens. It takes a long time, it takes months and years, okay? So make sure your expectations are practical because if not, you could end up spending a long time refunding your account. And again, it’s like, I don’t mean to sound this way, but I feel like in this case, most people would be better off if they just dollar cost averaged into an S&P 500 mutual fund and then found something else that they’d be really, really good at.

Because understanding the trading from an intellectual standpoint is something that you can do and learn forever and still never have the ability to pull it off. So do a lot of thinking this weekend if you find yourself in that spot and be honest with yourself, because it doesn’t mean that you suck, and it doesn’t mean that you’re a failure, it just means that there’s another calling for you that’s better for you, it’s a better fit.

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