Hi guys. Welcome back to the weekly segment that Mike and I do where we kind of check in and talk about some reader questions. Today I wanted to go over one of the ones that we got in our YouTube comments and just also wanted to highlight if you’re on YouTube and you’re watching on YouTube, make sure you leave a comment if you have any questions. That also helps the algorithm. Make sure you like it, subscribe, and you may be featured in another video like we’re doing today. But today’s comment is, Michael, you touched on something I’ve been trying to work on in analyzing myself. I noticed I have triggers while trading that are simply in the wrong place or at the wrong time. Not sure if you might have a suggestion on how to reprogram myself in that respect.
Pass. Let’s go to the next one. So look, reprogramming yourself isn’t going to happen overnight. Something might hit you like a lightning bolt in terms of getting insight, but behavior predicts where you end up and you have to do, there’s this fancy world called Praxis where it’s the marriage of belief with your behavior. So that’s why we always start on some of the consulting stuff with what’s your goal? And as soon as someone says, I want to make X amount of dollars per day, we’re like, either we can’t work with them because that’s really not a smart goal to have. You want to have a goal that’s in and around a process and that you focus on replicating the process. So I think I’ll borrow from Sue and the Art of War, which I do from time to time, just because you can’t really stress the importance of planning enough, and that is the victorious warrior first wins and then seeks battle.
So if you’re getting triggered throughout the day, what could that possibly be? Could it be that the instrument that your long is moving against you and so you’re either losing money or you’re giving back some unrealized gains and that triggers you emotionally to engage with the market when there’s no financial plan around what you’re actually doing or if it’s moving up and you’re not in, do you feel like you have to chase? Is that a trigger? I suppose it can be. Eventually this might even come from your subconscious. That’s why there’s not one little sentence that I can give you and have it wave my hand like Yoda and cure you from it because it comes from behavior. You have to go through it, you know yourself and calibrate your feelings with your actions, which is not theoretical, right? It’s something that you actually have to do.
At least I did. I don’t suspect it’s going to be easier for folks to intellectualize. It’s easy to read books from Marcus Aurelius and Stoicism and all that, but to actually do it, it doesn’t happen overnight from having read the book. You see what I’m saying? So that stuff is all interesting, but as far as I’m concerned, it’s not terribly practical as a one day fix because any type of a philosophy like that, it’s not just a one day type of a thing, it’s a way of life. So you kind of have to get into it and live it. And so when I think about traders and what would make them get triggered, it also kind of lends me to think that they’re traders, right? Because why other would you be watching the market every day? Two, if you knew what the expected value of a trade was and you knew that you’re going to lose 40 to 60% of the time and that ahead of time, why would that still bother you when you put on any one particular trade?
So you have these emotional expectations and they say expectations have built in disappointments. So you just have to take one trade after the other and not become emotionally connect, connected to any one particular outcome of that trade and detach, they say love with detachment, right? So you can love your process, but on any given trade, who cares how it goes. And so again, for beginners, I know this is blasphemous for many people, but I wouldn’t be watching everything tick by tick. And two, this happens a lot when people don’t look at the volatility of the instrument that they’re trading and they’re putting their stop into close, which means it’s within the boundaries of what a normal person would figure is acceptable in terms of noise, right? Because even if you look at the average true range of an instrument for stocks or commodity futures contract, it’s not really a directional indicator. It just says this is the typical personality of the instrument. So for example, if you’re trying to scalp on the big natural gas contract and you’re risking 5 cents because you don’t want to lose more than $500 on that contract, each penny is a hundred bucks, but the normal volatility is 17, it’s over 17. So you’re thought you’re talking about almost $1,800 of vol that goes with that contract. And if you’re trying to trade it within that number, you might get knocked out just because of noise.
So you have to be practical when you look at your trading and where you put your stops in. You see now there are ways, and I’ve read about folks and I know hope, folks who are kind of reading the news and they want to see, especially around some of these reports around the energies or the crush numbers and beans or earnings reports and stocks, and they go in and they put in a monster trade only giving a few ticks figuring that they’re going to time the market really, really well with the announcement as it would happen. And they only give a few ticks. Why? Well, because they’re trading the move huge. They’re expecting a lot of volatility in a certain direction, and so they put on a monster trade, but they don’t give it a whole lot of room to work against them because it’s a large position. That’s one way to do it. My style would be more to add small and then add to the winners over time.
So there’s the triggering of the chasing, there’s the triggering of having a contract move against you and then internalizing what the dollar loss is. If you convert that to percentages, then it shouldn’t really matter because every loss should largely be the same percentage of your account may call it whatever you’re comfortable with, maybe one half of 1% or quarter percent, whatever that might be. I would find it harder to do hard dollar stops because of the nature of the fact that you probably have open positions in your portfolio that are getting marked to the market with every trade in real time and the instrument that you’re get that’s triggering, you might be moving perhaps in a different direction. I think again, you should focus on your process more than the results of any one particular trade. Now, when you’re newer, easier said than done because you don’t have enough experience in trading to detach yourself necessarily from your system because you might still be going to the market and seeking some type of validation. Am I really a trader here? I know I’m doing some things that traders do. I’m adding and removing risk. But what is it that you’re looking for from your trading where you can validate yourself?
Because if it’s the result of any one particular trade, that’s going to be hard to live with because on any given day you’re going to get smacked in your head and it could affect your self-esteem or your sense of self-confidence or who you think you are in the world as a person. And so I try to stay out of the results of the trades and not look at the outcome. So I just basically focus on you have stops to enter and then you have stops to exit. I don’t call them stop losses, that’s bad as far as I’m concerned. So you have stops to enter, which we did another video on, you can go look it up and then you have stops to exit trades sometimes for a loss and sometimes to preserve unrealized gains.
But again, now you can meditate on that long before you even put trades on and say, okay, given the number of trades that I could put on, here is the deal. Here’s what I can expect to happen happened in the past from my back test so I can anticipate something similar happening going forward. So, and you can anticipate what’s going to happen going forward, where you’re going to lose 40 to 60% of the time on your trades. Why would you get upset about that if that’s what actually played out in real time, unless of there was a way for you to win by being a victim or seeking attention for all the wrong reasons. Maybe a person got used to bitching and belly aching and they liked all that kind of feedback from their peer group. I don’t find it particularly productive to complain because then I feel like I’ve surrendered all my power and I’m too powerful to complain about a situation. I’m going to find the solution. That’s what I do. But you have to have a certain type of emotional build for that. Not everyone has it, they can get it. But again, chapter two of the book is surrender. There’s a lot of things in life you can’t control, and the results from your trading is something you’re powerless over. All you can do is follow your rules and stay out of the results.
Yeah, for sure. I mean that, that’s a really big takeaway in a lot of things in life, right? It’s like learning how to not worry about the extraneous factors that you can’t control for. Just do it. You know, do best, like you said, put in your stops and make sure you have your own form of insurance policies and your own form of algorithms that you go through. But even in cycling and gaming and stuff, it’s like at the high level you have to just have to be on top of your mental game if you allow yourself to dig yourself deeper into a hole. We call that in gaming, we call it tilt queuing, and it’s horrible for your mental. It is the worst thing you can do for your mentality and going forward, it solves nothing. It makes your life much harder too. And one of the ways that I learned to combat that and not just continue to mindlessly play the game is understanding, okay, am I upset right now?
You have to ask yourself that a lot, especially in gaming. Am I upset right now? Is this a good idea? And then what I do in particular is I actually meditate on it, kind of like you said, I really do meditate in between things like, okay, if I’m upset, I need to realize that and I need to figure out how I can reset myself. I think that’s part of the reprogramming aspect. And I’m not sure if it applies necessarily the same way to trading, but I think understanding when you’re upset in general is typically a good thing. And then also developing a strategy post recognization saying, oh, I’m upset. What do I do from here? And coming up with that strategy?
Well, there you go. I mean, there’s a good example of how it’s not really about any one outcome. I can see where it comes from when you talked about going on tilt, people can do that all the time, but that’s because they’re in desperate. They’re in desperation at that point. And I think a person kind of knows when they’re acting out of desperation, that’s exactly the time you shouldn’t trade. You should truly really try to figure out what is it actually that you want your money to do for you? Most people are going to say, well, I want to grow my account, but there’s so much more to it. It’s not just the number. What are you willing to do? I was talking with somebody who has a pretty tight stop on their equity and said, I said to the person, look at that point, it tells me a couple of things is like you’re till you’re scared to lose money.
And if you’re trading from that fear, there’s a saying on trading that you’re trading with scared money and it’s hard to win when you’re trading what scared money. You have to put yourself in the mindset that whatever your grubstake is, you have to be ready, willing and able to lose it all. And until you do that, you are absolutely trading with scared money. And I find it super difficult. And I think that’s one of the reasons why the smaller accounts gravitate to doing the shorter term stuff because they feel like they’re more in control, which is a fallacy, but nonetheless, that’s a strong feeling that they have.
And so you can develop bad habits when you’re acting out of emotion because you’re not acting out of expected values and investment finance, you’re feeding an emotional need more than a financial need. And in most of the times you’re cauterizing really good trades before they’re actually should be cauterized. But I don’t come to the marketplace see saying, I need this win or I need this dollar value because of course the market’s not going to give it to you. So kind of dovetailing this into another question that someone asked about focusing on your process. The goal is, lemme see if I can find it. Hang on a second, I’m just going to have to do this.
Yeah, I’m just going to hold up my drink here so I know where to cut.
Yeah, so someone’s talked about focus and goals and this and that, and it’s like, look, you need to know what you want your money to do for you, right? Because then you know, can better draw the boundaries as to what it is that you want. That where until you have a clear vision again of what you want your money to do for you as a human being, what financial and emotional needs will be set. I think it’s hard for you to pick that target point in the future so you can find yourself doing almost anything during the day because you’re in desperation as opposed to saying and coming to the that you have a lot more power than you think you’re powerless over the markets, but you don’t. You’re not powerless over your own behavior. You have to claim it, you have to own it.
And you have to understand that we are in a paradigm of personal responsibility. And as soon as you accept yourself as your own savior, so to speak, you’re going to let the outside world affect your inner game. And that’s nothing but catastrophic. That doesn’t work in trading. If you’re going to be a person who reacts to what happens to the outside world as opposed to saying, here’s my goal, here’s what I’m willing to do. Here’s the expected value of my trade and all I need to do is replicate my process over and over, that’s a much more healthy outlook because then it’s not necessarily any one trade that you care about, it’s the process of putting on those trades because the process predicts your behavior, it is your behavior, and that predicts where you end up in life. So when I say the goal is the process, it’s really the result of the process.
But on any given day, all you can do is follow your process. So I don’t want to sound like I’m talking out of both side, both sides of my mouth, but as they say, thoughts, feelings, actions, you have to act as if you’re in possession of the very goal that you want to achieve because otherwise it’s very difficult to know how to kind of wing it, right? Because the goals that you should be setting for yourself are goals that you haven’t set before. So you don’t know how to do them. And I’m not talking about getting a pilot’s license. If you want to go get a pilot’s license, that’s a goal that you know how to get. You got to go to a regional airport where they give lessons, pay your fees, pass the physical and all that, put your hours in, pay the money and get the hours, maybe get instrument rated, whatever it is that you want to do. But that’s easy enough to do. The kind of goal that you want to really have that’s going to change your life should scare the living crap out of you. And if it doesn’t, you got the wrong goals.
Now, you can use also the Kelly criteria, which you can look it up right there, is Google’s great. Just type the question and you look it up yourself. If based on what you’re willing to risk and what you think you can make from an expected value standpoint, you can actually calculate the number of trades that you would have to put on to get where you want to go. So I’ll give you an example. There’s a couple of metrics that you want to look at. If you’re newer, right? You want to make sure that you’re not making 15 bucks an hour because that’s minimum wage, and maybe sitting at your desk is better, making 15 bucks that way than working at in and out burger or whatever. I’ve had odd jobs over the years, so I’m not being critical. But you don’t want to turn trading into blue collar despair because you can already do that in other parts of your life.
So don’t enroll trading in your garbage. So have a stretch goal that should intimidate you. It’s going to leave a mark, it’s going to hurt. You’re going to have to challenge yourself. Now, if you’re a person who’s got a bit of an ego, you want to keep your mouth shut, then because it soon start pontificating about what it is that you’re going to do, people are going to hold you to it. So the best way to kind of dip your toe into this space is to keep your mouth shut. And don’t brag as market’s going to humble and humiliate you anyway, so I’m telling you it will. So don’t open your mouth, set your goal, keep it close to the vest, but just realize if your goal is to say risk 50 bucks so that you could make a hundred bucks, perfect, that’s two to one.
Different traders have different ratios in terms of asymmetry that they want in their payoff. I remember reading a lot of folks just talking three r and one R is an example I use a lot in the teaching. I remember reading Paul Tudor Jones had a ratio of needed five to one X before he would even put the trade on. So I think it’s going to vary from person to person. But when you put the dollar signs to that and you calculate your expected value, you can calculate how many trades you’re going to need to put on in order to hit your goal. So if you find yourself in a spot where you’re just starting and your gains and losses are so small, you might have to put on 4,000 trades over the course of the year to hit the goal. In my mind’s, Zion, that’s not terribly practical.
It’s a lot of work for small potatoes. One of the reasons why I advocate don’t necessarily sell your winners just because it’s the end of the day, you know, get paid a risk premium to have good risk in your account. How do you know if it’s good? Well, it’s going up as a simple rule of thumb. If it’s long and it’s going up, it seems to be a good risk. And you could also figure out ahead of time, what is the amount of money that you’re willing to risk in a winning trade or of the winning trades that you have in order to stay in the trades to let them grow to be even bigger winners. Because that too is learned behavior. You can learn to do it. If you’ve learned to cut your winners off at three R, you can learn to do it at four R, five R, six R, seven R and try it on for size. That’s the only way you’re going to learn. And I admit I’ve been, people are selling all kinds of crap on the internet. I don’t know anyone else who said that. The best trader teacher that you can have is you trading.
Even if you don’t know what you’re doing, buy one, share, learn from the process. Learn from being engaged. If are more sophisticated, trader, longer term, you have many, many years of experience and you’re already good and you want to get better, one of the things that you can do is learn to take haircuts on your capital so that this way when you’re really getting good, you’re not full of hubris. If that can be an issue and you start to feel feelings of invincibility, how do I know? Cause I’ve been there, I’ve had times when it was bad and I was only winning on two or three trades out of every 10. And in those types of ratios, list over what the market shows you, but you’re not really doing much more than break and even be and maybe plus 10, 12%, which you can get from passive buy and hold.
So then the question is, why are you doing all this work if you can’t outperform buy and hold? Because surrendering to the fact that you can’t create alpha, you can still get your money to grow and then free up all that time to go find something that you’d really be good at, which is part of life. There’s nothing wrong with that. Just because you’re a trader or not a trader doesn’t mean anything. But most people don’t talk about this. How do you fight off hubris? Well say that you are at 150 to 200% of your starting capital. Awesome. You’re doing well, you’re really lucky. You got good timing. I don’t know which it is. Could be all three. Of course, you tell everybody that you got skill because that’s probably what I would do too.
But in order to not get caught up in the hubris where then I’ve had other times in oh 5, 0 6 when China was buying all those commodities, six or seven out of 10 trades were winning and the winners didn’t, were more like three or four to one. They went also like 6, 7, 8 to one. So not only was the system more accurate because there was a deluge of capital coming into those markets, it was easy to take 10 cents at a copper over the course of a week. You could clip 60 bucks in gold, right? Sugar went from eight to 19, for example. So those markets were really good for the getting, but you can also get caught up in that. So one way to not get caught up in the hubris, if that’s also a trigger for you because it would be thematic in your life, is to say, okay, I’ve doubled my money.
I’m at 200%, but in order to kind of gauge my sense of hubris and my invincibility, I’m only going to trade 140% of my capital. So instead of saying I’ve doubled my money from say, 10 million to 20 million, I’m going to actually trade it only like it’s 14 million as opposed to saying I’m going to trade it like 30 million because that’s how you can get caught up. So you can get caught up two ways. Going back to being triggered and knowing what the goals are. The goal is to make sure you have small drawdowns. Obviously you have to be in it to win it, but you always have to make sure that you have really good risk adjusted returns. That’s the selling feature. It’s not that you’ve made 10 times your capital, because I find it hard to think that allocators are going to give you money if yes, you can double your money, but you have 60% draw down and a 10% chance of getting blown up and having total ruin, like no one’s going to ever give you money towards that because then you will lose all the money sooner or later.
If you trade long enough with those types of numbers, you’re going to really blast yourself. So I would develop a system that you’re compatible with and then replicate it and not worry about any one particular day because I know how these places work. They’re very political. If someone’s in a drawdown, you’re worried about the gossip. And that’s a failure on leadership when you think about it. There shouldn’t be gossip around. You should circle the wagons around the people who are in the drawdown, especially if they’re struggling and nurture them and love them as opposed to everyone not talking about the pink elephant that’s in the room because then it takes a special person to dig out of that hole.
So I mean, that’s what we encounter oftentimes with some of the institutional clients is that they don’t know who to trust because they know people are talking behind their back, which sucks. But that’s just human nature I suspect. But for better or for worse, I’m in Los Angeles. I’m not in New York, Chicago or London showing up at the local watering holes talking about who’s trading well and who’s struggling or who’s in drawdown. It’s all part of life. You trade long enough, you’re going to be in a drawdown. Doesn’t really say anything about who you are as a person. I know plenty of people who have been in very steep and protracted drawdowns, and that’s just their trading style and they learn to dig out. But I feel like if you’re getting triggered, there’s a deep emotional need that’s getting fulfilled by you actually getting triggered, allowing yourself to get triggered, and then going through that whole process, it meets some type of emotional need.
So you have to learn how to process those feelings, in my opinion, before you even put those trades on. I think it’s hard to do with a simulator, but I do think a simulator, meaning a simulator’s not going to cure you, but it can give you an idea of what you can expect if you put those trades on. So if you’re getting results and you’re in a draw down, but you’re still within the range of what you expected, you’re kind of in model. And so there’s nothing really to get upset about at that point unless you like getting upset. I don’t particularly like going off or flying off the handle because it doesn’t really serve me. It doesn’t help me get more creative. Anger is typically not a motivator for me.
I’m much more pragmatic at this stage. So I mean, it’s long-winded way of answering a few of the questions here. But the point being is that if you’re watching things tick by tick, your account’s probably too small or you’re trading something too big because there’s really no reason why you’d have to watch it tick by tick. Cause if you know what your price targets are, and even if you’re doing things like rookie traders are setting up their three R and their one R thing and you’re long, well, you could enter a sell limit above the market so that if it hits your three R number, you’re out and you put in your protective stop, one r below, and that’s that, and then the going to come to you or it’s not. There’s nothing really to get triggered. Just sit and let the market activity unfold. The best you can do is follow your rules because behavior predicts where you end up. If you keep getting triggered by stuff.
Look, if you have 30 years experience and you know how to read the tape, even in the a advent, advent of decimalization and the 8,000 algorithms that are running, then by all means read the tape and see where the day’s going. But for newer folks, I don’t think that’s something interesting to endeavor. You can certainly learn a lot about the markets and yourself in the process, but I think it’s awfully difficult to try to pull that off with limited experience because you don’t have a field yet, and it takes a long time. You might show promise, you might have good instincts and good intuition, but it still takes a lot longer than you think to develop a really, really good feel.
And just to touch on the process thing, part of the biggest thing about being a successful athlete and successful competitor, and I know this will for sure apply to trading, is having your process race morning. I did the same thing every race morning, the exact same thing. Every Saturday when I had a race, I’d wake up, I’d have a cup of coffee, I’d have eggs with rice. It was a six egg omelet with rice, I’d have a little bit of tri-tip with it, like three to four ounces, and then I’d go meet with my coach. We’d have our hour and a half of talking and prepping, and then for the last 10 minutes we did our strategy and that was it. Then I was ready to go, and throughout that process, I started to learn as I was developing it, how beneficial it was for me to do the same thing over and over again because you can’t predict how any one race is going to go you.
I mean, you could guess, but you know, have no control over a lot of these factors if somebody crashes in the first five minutes or whatever. So having that level of consistency in the morning really got me in the mental head space to kind of deal with any adversity, right? It’s like, all right, I had a great breakfast, I got to meet with my coach, hang out with my buddies. We talked strategy a little bit, and that was that, and that put me in a really clear and level state of mind where when I got onto the start line, I wasn’t jittery, my hands weren’t shaking, I was like ready to go. I wasn’t like thinking about the dude who I bumped into last race and how I could give him the elbow in a corner or something. It’s just about learning to deal with
No elbows in the corner, elbows to the jawbone. Dude, you got to be right
Here. I may have gotten a little bit
Better, and I’m Christian. I’m a Christian,
And it was just Easter, so we got to keep it Christian, for sure.
Next week I’m going to wear purple for Pentecost, okay, and I’ll button, first of all, there’s a special type of death people should feel when they button the top button and wear it like this.
Yeah, that’s
Special, dude.
Yeah, yeah. Look, there’s no doing that. If you’re Italian, if you button the top button and you’re Italian, you’re doing something wrong.
So what we’re talking about here is how important it is to have a process and trust the process because that’s when you can start having fun. Then you take solace in the fact that you’re addicted to your discipline. Not all the market activity, a
Hundred percent.
I don’t think it’s when people say, oh man, I’m a market junkie. I don’t think that’s a good thing. Actually, what you want to be able to do is put yourself in a spot where any given day is any given day. Monday is the same as Friday, is the same as Wednesday, and when you really get it down, here’s the beautiful thing. No one can tell whether I’m up a lot or whether I’m down a lot. Why? Because I’m just in the process, and that’s a good thing. Imagine if I was all brooding and stuff and pissed off because I was down. It’s childish. To me, it’s childish. At least I can explain my own behavior. If I was acting that way, I would say that acting like a petant teenager, and I’d say to myself, grow up.
And so I think a person’s mindset. That’s why I firmly believe that 80, 90% of this stuff is mindset. It’s not about let me review my charts and show you what I think’s going to happen. First of all, I don’t want that kind of traffic because then people start to follow up and say, Hey, are you still in that? Did you, did you add more? Like, I don’t want to develop that type of an audience. I’d rather say, go do it yourself. And when you run into problems, which are no doubt, psychological and mental, then come back to me because that’s the biggest part of the game. Even though I can’t sell it, right? I can sell you a system, and I’m smart enough as a writer that could come up with long form stuff with the video sales letter and get people to convert.
But the goal is to actually help people not sell shit on the internet. So that’s why this show is largely free. You can go take it and do what you want because you’re going to learn the most by doing it alone anyway, especially in trading. It’s not a group endeavor. Even if you’re at a prop trading firm, you are on despite what you think your resources are, because if you fail out, there’s about a million people who are going to take that seat. Despite the interview process and how hard it is. Most of that stuff is not predictable anyway. So if the firm is bragging about how hard their interview process is, call me because I’ll tell you how to crack the code. There’s whatever. I’m not going to get into calling someone’s girlfriend ugly. But most of that stuff is made up and it’s peacocking to make it sound like it’s exclusive or to make it sound like you’re interviewing for Amazon or for Google. One day we’ll talk about the interview process that I was went through on Wall Street.
Yeah, yeah, no, for sure. That’d be interesting. I think that’s a good place to kind of wrap up today too. We had a lot of good points, but I think one of the big takeaways is just develop your process and don’t treat it. Don’t go searching for that adrenaline hit or the dopamine hit. Just kind of do your process and trust that process and just go. With that said, guys, thank you so much for watching the video today. Make sure you like and subscribe, comment, and helps the algorithm. Press the notification bell and we will see you guys next time.
Thanks everybody. Thanks for being here.

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This is an automated transcript

Hi everybody, it’s Michael Martin. Thanks for being here. So got some follow up on a few things about indicators that I think I could tie into a couple of the videos. So again, this was a comment on I think Friday’s video, which was what do your indicators actually tell you? And the comment was about reducing the noise around your exits and your entries. Again, this could be a two hour discussion with people, especially when you’re dealing with the psychology of stuff. There are a few indicators that can help you and give you objective information that you still need to interpret in order to make a decision about adding or removing risk. And then maybe even how much of the risk to add or remove, right, if you’re initiating risk, if you’re offsetting risk, if you’re taking off winners in partial or in full. And so what are some of those indicators? Well, volume is a straight up number. It is what it is, and you can see what the average is and any particular day.
How does it compare to another day? Then you conjugate that with the price. As far as volatility, again, you can pick standard deviation, you can pick average true range. I would just pick one and use it consistently because again, at that point, the number is objective. It is what the 20 period attr on sugar. It is what it is. And no matter where you are on planet Earth, if you are looking at a daily chart and you put in the 20 day atr, you’re going to get the same number. So it’s not something that you have to kind of interpret. It does give you an idea though, about what the dollar volatility is. You can look at relative strength for stocks. You can look at fundamentals like earnings or what’s the cost of their debt, because interest rates have a lot to do with earnings.
So it’s hard to say whether it’s actual earnings or the cost of corporation’s money. You can really debate that because the interest rates definitely affect earnings. Earnings drive stocks. So I don’t really poo poo indicators, but what I always do is turn it back to the individual because that’s what I did in my own self-reflection, right? The way to become a world-class trader is to endlessly study yourself. Most people are going through chart books and this and that, and that’s great. You need to have a wishlist. But to me it’s like it doesn’t matter. What if you don’t know who you are? And by that I mean what makes you tick? Why do you do what you do, especially around money? And why do you do what you do that you’re conscious of? And then why do you do what you do? That’s in your subconscious
Around managing risk. So you have people who are complete risk, they stay in cash, they buy treasuries or certificates of deposit. Then you have risk lovers on the other end who might like the action more than anything. Who knows what kind of skill they have. And then somewhere in the middle, you have risk averse folks who are willing to take on risk if there’s an ample amount of reward. That’s also very subjective, right? Because you might think of yourself as risk averse, and on a scale of one to 10, that could be five, but for someone else, they might think that five is too conservative or maybe even too aggressive, but they still consider themselves risk averse for the way they understand risk. So in a long-winded way, the indicators, I realized early on that the more indicators I was overlaying on a particular chart didn’t necessarily help me understand how to make an entry or an exit better.
I couldn’t improve. My entries are exits by looking at indicators. I could adjust position size, but I don’t like to use trades like, oh, if I have strong conviction, because to me, conviction’s bias. And if you don’t have any experience, it’s like when I hear someone say that, it’s like, I know they’re kind of par. Don’t take this the wrong way, but they’re kind of parroting what they’ve heard somebody else say. Because if you have two years of experience, you don’t know what conviction is. To be frank, you don’t have enough experience. What is that number? Probably 10 years. You need to see several market cycles in order to have that type of a feel because two years is not long enough period of time. Despite your success, you have success. I celebrated if you’re struggling, I know what that’s like too. I celebrate that because now you’re getting closer and closer to what it is that’s going to work for you as a trading style.
But I realized that I was overlaying, and this is even within before I knew what I was doing. So I always talk about four, four and a half years before I kind of had a clue and I knew I could do things consistently. Again, consistency is about behavior. Behavior predicts where you end up. So you can look at all the chart patterns in the world, but which one can you trade and can you execute consistently? Which means where can you see the setup, put your rotor in, wait for the market to come to you. Your stops get triggered, you get put into the market, you’ve added risk. And then how can you learn to sit on your hands for as long as possible to let the winner run so that you could make as much money as possible for the risk that you already know that you’re willing to take? How do you know? Well, you’re already in the trade. So for me without, I don’t want to do how to too many how, how-to videos. There’s enough of that out there that you don’t need it from this channel. I had to figure out looking back and conjugating that with all the labor that I had done
To make some money and pay my bills, whether that was the landscaping company that I had and that I built to when I cadid golf bags to when I waited tables, I worked hard. And my sister and I have an enormous amount of grit. We have depression at our parents, so we know how to work hard. But the thing is, we had to learn how to work smartly. So every time I made a stupid mistake in the marketplace, I always would say to myself, not to be super hypercritical of myself, I would say, if this doesn’t work out, I know how to make money. It’s just super labor intensive and if I don’t go to work, I’m not going to get paid. And I had to remember how I felt when I had those types of jobs. And again, I was working hard. There was no problem.
But then the question became, okay, I need to figure this out because I want a different lifestyle. I want a different quality of life than I did if I was working nine to five or crazy hours, I wanted more liberty. So that was a motivating factor for me. And I learned quickly that I had to be willing to feel every feeling, even the ones that I thought I didn’t want to feel. Because all those feelings are trying to teach you something, especially when you’re learning to manage risk because you’re trying to figure out who you are as a risk manager, which is what traders are. And it occurred to me early on because I was like overlaying this, and then I was using chart things that don’t work, like point and figure charts. They’re not really that good. And you can see there’s studies on that.
You don’t have to take it from me and go through all that process. And I can’t tell you, you could sit and say, wow, I wasted so much time. But you could also say, I exhausted every possibility. So there’s a couple of ways to look at the same thing. If I’m negative and I’m a complainer and I’m mentally weak, I’m a weak human being, I could say, oh, complaining, complaining, complaining bitch and belly ache. But that’s not what successful people do. I just simply said, I covered all the bases and I had to see for myself what worked. So it wasn’t until, and it was an emotional and a psychological breakthrough to not use indicators because as I called them in the book, emotional bandaids, they were normally there because there was a feeling that I was unwilling to feel and I needed some type of reassurance that I couldn’t get from just looking at say, the chart and the volume in and of itself.
Again, those days, stocks traded in eighths, maybe sixteenths in certain circumstances, but mostly everything traded in eighths, and the spreads were who knows what, an eighth to a half, sometimes more in equity space and sometimes even more. And obviously sometimes option spreads were two bucks. And so until I got comfortable and ready, willing and able to feel all the feelings that I was feeling in and around managing risk, I learned to keep a journal of those just to, so that I’d be able to ideate like, okay, why am I in fear if I know my entry? And I’ve already calculated what my position size was before I even put the trade on, and I knew where my stop was, there’s really nothing to worry about because in those days, I didn’t know what my winning percentage was and what my average winner was. So I couldn’t have enough data to calculate the expected value of a trade.
And then I kept much better records probably a year into it, because again, don’t forget, there was no computers. Everything had to be done by hand. So every time you wanted to add something to your day, you had to think in terms of how many hours it was going to take. It wasn’t like point and click, and then you can do all this stuff. Now it’s much easier to keep track of all that data. So I don’t poo poo any indicator per se. I just don’t think that they tell you what they think they tell you. There’s nothing about them that’s terribly predictive. So therefore it doesn’t help you really add or remove risk from your portfolio. So again, we come back to how do you feel when you have to feel uncertainty? And I kept trying to exercise that muscle so that I would get that to like 15 on a scale of one to 10, 10 being the highest, I wanted to be so in control of my own behavior that there was no uncertainty, that I was willing to not experience because it’s just a trade and there’s going to be thousands of them.
So I don’t have to be worried about how any one particular trade works out, you see? And so that’s why it’s more like I’m not indicators as much as I’m saying that you need to know why you’re looking at the indicator. To me it’s because it fulfills an emotional need. Again, if you want to measure ATR so that you know and you eventually calculate the dollar vol, you kind of have to normalize the risks if you’re in the commodity space. Why? Well, because silver’s 5,000 ounces, gold is a hundred. Crude oil is a thousand, right? Sugar is 1,120, right? Or whatever they call it, 50 long tons. Cotton has a different multiplier. So you need to know what the average volatility is so that when you multiply it through on the notion of value or the contract size, you can kind of have an idea what the dollar ball is.
You don’t have to really worry about that on stocks because it’s just basically the share price. And that’s when my trading actually improved because I realized that I had to embrace the uncertainty. I had to know that I could just go into the marketplace on any given day, follow my rules. I’m largely powerless over the outcome. I can’t steer the market. I can’t steer the names that I’m in. And so when you look at indicators, look at your willingness to feel the uncertainty around managing risk, because to me, the more you’re willing to feel those feelings, it doesn’t mean you’re reckless.
That’s when your trading’s going to improve because you’re going to get a better understanding of what the risk is. You’re also going to get a better understanding of how you behave around risk. And that’s what trading is, knowing when to add and remove risk. And so the indicators to me, were just lagging indicators in that they, they told me stuff that I could already see on the chart or even in my p and l, right? Anyway, appreciate all the comments and all the feedback. Please like and subscribe to the channel. Leave a comment. You could message me privately. I don’t have to divulge anything. Happy to help you in this journey because I get to rehash all this stuff and remember, and that kind of helps me not make stupid mistakes even going forward, because anything can happen to anybody at any time. So thanks very much for being here. I’ll see you tomorrow.

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Hey everybody, it’s Michael Martin. Thanks for being here. I appreciate all the feedback that you give me on the channel, in the emails and the comments. I think we’re growing at a good pace here. I appreciate the feedback very much. Gives me an idea of what you like. You know what you don’t like. Well, you know like everything but that you like certain things more than others. I got a nice comment from Bill and he asked, I’m going to read it, says, Michael, you touched on something. This was for the video, how I analyzed my trades, and I’m reading the comment here. It says, Michael, you touched on something I’ve been trying to work on and analyzing myself. I noticed I have triggers while trading that are simply in the wrong place or at the wrong time. Not sure if you might have a suggestion on how to reprogram myself in that respect.
Well, we consult to this and it’s a minimum three month program. So I don’t think I can give you a fortune kick, fortune cookie kind of statement that you can use. What you can do is take a journal and write down some things and then analyze the whole scene as if you’re a reporter for a newspaper or maybe even a detective. If you’re getting triggered, my guess is you’re watching the market tick by tick. So the question I have for you is why do you do that? What do you think you’re going to be able to get in process if you’re looking at all these charts or something like that, or your positions in real time? To me that’s like the worst thing that you can do because it could induce you, especially if you don’t have a lot of experience. It can induce you to do things that are not in your financial best interest.
But what might feel good in the short run. So it’s a super complicated question. I always start, well, what was your goal? What is it that you want your money to do for you? Because typically you can’t break that down to say, one minute bars or 15 second segments in the marketplace. You know, have to be able to conjugate what it is that you’re doing during the day with what your longer term goal is. Is it to grow your account? Is it to build up so much equity in the account that at a specific time in the future you can convert that to treasury bills and get 5% for doing no work and have a lot of passive income? Real estate doesn’t matter to me what it is, but typically when you don’t have a clear goal about what it is that you want to do, you can find yourself getting triggered like you are two, you might be internalizing that winning and losing somehow is a reflection of who you are as a person.
And that’s not the case. Really. Smart people lose money and really smart people who are super talented and who are even legends in this business, me have drawdowns, prot, protracted drawdowns that last for months and can go into the double digits. So I always find it amazing that people take losses so hard. I didn’t take losses hard to the extent that I knew I was on the path to finding out what would work for me. The only way to do it was trading with real money. And while I lost consistently, it told me what wasn’t working. So I didn’t look at it, it was tuition. I was looking at it like, okay, this process is steering me because I have to take some attempts to figure out what it is that I’m trying to do. Where’s my edge? Where’s my alpha? And you can only get that by doing.
So if you are getting triggered and it’s hurting you financially, then consider trading smaller. I do want to say something out loud. I know it’s going to piss a few people off. If you’re watching things tick by tick, I’m going to guess more than half the time. Probably 80, 90% is your account is underfunded. And that’s a tough spot to be in because in my view, you’re always going to be trading with scared money. Because look, if you have 5K and I know how hard it was to develop my own first to trade, you have to become a saver, which is the act of not consuming, then find a way to put that into an account. Then you have the account funded and it seems like it’s all the money in the world to you, but you have to be ready, willing, and able to risk all of that to figure out who you are.
You have a relationship with the market cause market’s a live-in breathing mechanism. And lastly, cause I don’t want to blather on and on about it because it does, there’s too many answers to this question. I don’t know who taught you the rules of money or finance and I don’t know who was entrepreneurial or not in your nuclear family or in your environment that you saw all the time. So just by being witness to all of that, somehow you were taught the rules of money and taking chances. You might have also been instilled about education and all this and that, and you ought to go get a job. And this is legalized gambling. I don’t know if there’s any of those biases or bigoted comments that come out of people’s mouths when they don’t know their sn from a hole in the ground, but they seem to have a pop popular opinions about what it is that you should be doing with your time, money, and your effort. Only the answer to that. So like I said, it gets steep. You might have had a overbearing parent who you can hear in the back of your mind when you’re doing all these trades and that’s affecting your self-esteem or how you feel when you’re losing money. It could also put you in a spot where you’re taking profits too soon. So I know a handful of people, and I mean a handful, not a lot, who are consistently profitable by trading in the short run. They have a knack.
The majority of people are going to have a very difficult time trying to do that in day trade because trading pushes your buttons.
If you have a fight or flight mechanism, it’s primal, right? We’re not built to take these risks on, I got lucky I was born this way, but it still took me over four years to figure out what it is that I could do. So I would look at your p and l, figure out the expected value of a trade stick with one ethos, one pattern or one trading style so that you can behave consistently because behavior predicts where you end up in life. So if you’re all over the place, as I like to say, you’ve heard me say it on the show, you’re going to get all over the place kind of results. And it’s very difficult to go to school on yourself and say, well, how do I make any sense out of this? Right? So it’s a super deep question. It’s hard to answer it just with one answer because any number of things could be working.
What I have found in for the hedge fund guys that we consult to that a lot of times it’s in their subconscious and you really need to develop, it’s what I call self-talk. Your inner voice. What is that? And who is that person? Is that, are you and your behavior kind of converging away from your inner voice? Or are you going towards it? Right? Because the smartest people on planet Earth, whether they’re traders or not, and they’re super successful, they have a very strong inner voice, they have very strong and powerful self-talk that propels them to move forward knowing that they have to take chances and they’re going to fail. Some of these people are going to fail publicly. I think Richard Branson just scuttled the company. He’s probably one of the most successful business people that you could ever read about. So does that mean he’s a failure?
No, doesn’t mean anything. So at any rate, long answer to it, what seems like a simple question, but the truth is, is that any of these triggers that you have, it’s hard to know how you were taught that because it’s behavioral, right? So you have to really look at who’s bugging me Anyway, I’m not answering the call. But anyway, that’s all I have for you. Please like and subscribe, keep the comments coming in. I really appreciate everything that you do for the channel cause I learn a lot about myself. I don’t have all the answers, but it’s really good stuff. Thank you.

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Hey everybody, it’s Michael Martin. Thanks for being here. So get some good questions about, I’m got a few questions. I’m going to come marry into one answer because unknowingly the folks who asked the questions didn’t know that some of the answers to these second and third questions would all kind of tie up. So the good thing is I can kind of marry ’em together and the question was in and around like, Hey, you know, poo poo, most indicators, why is that? So I’ll answer that one first, and it’s mostly because of my emotional constitution. I found that most indicators aren’t predictive. They only kind of tell you what you can already see with your own eye. And I emotionally don’t need, I can see my equity and I’ve adjusted my trading behavior to, based on what I’ve witnessed on my own behavior, which I can’t deny.
It’s the truth, but I don’t need the reassurance of the confirmation aspect of the indicators to tell me what I can already see my equity’s up. I don’t know what else I need to see to make me feel good about that. And obviously if I didn’t have good luck, good timing and a good analysis, the equity wouldn’t be up. It’d be some other reason. And I already made that adjustment, which I think we spoke about maybe Monday on not getting into my optimal size. In my initial foray on that trade, I didn’t put my optimal size on in one fell swoop. I kind of step into the water and I weighed my way into a bigger spot and then I can stay where I want to be if the market behavior which I’m powerless over unfolds the way I need it to. And if not, I get stopped.
But at that point, it’s just a function then of figuring out how much of the unrealized gains am I willing to keep at risk in order to stay in that Now optimal size, you see, some of you might be like, you’re doing it all wrong, you idiot, you don’t know what you’re doing. Why is that? Well, because if you looked at the dollar value of what I might be willing to risk in order to stay into the trade, that very well, very well might be the spot where you’re in fact taking profits. So my behavior might look like madness to you, but it’s not what’s better, it’s just better for you. So we talk about attitude, you talk about your approach, you talk about your market feel, you talk about how you create your alpha and how do you do what it is that you do to make your money knowing that you got to sleep at night.
So most of those indicators, I can’t think of one that I really would say recommend. You’d want to put this on the chart. Yes, you can use atr, but that’s really just to give you an objective measurement of what the vol is over any say 20 day period of time. And you can use that uniformly across all the instruments so that it’s a forced sense of objectivity. You’re not kind of guessing. It is what it is. The calculations are clear on how you can do it. And ATR been around since 1978, so it’s not necessarily new, but again, when you look at the history of markets, it’s not really that old
Either. Having said that, I’m going to have a good buddy of mine, his name’s Brian Shannon, you probably know him. I’ve known him I think probably 20 years by now. He just wrote a great book and I’m going to have him on the show and we’re going to speak about indicators using his AV W, which is what the book is about. And we’re also going to probably have a strong conversation on volume because volume can tell you a lot depending on where you are at the chart, right? So we’re going to talk about when actually when is an increase in volume good? When is an increase in volume bad? When you conjugated with the chart, what happens if volume is contracting and the charts going up and all these different combinations, you can’t do it verbally, right? You have to see the video of it and see the chart.
And what we’re getting at, and there’s probably a good discussion that we’re going to have using real life examples and examples from his book about looking at price and volume because the two institutions leave footprints and as what you probably consider yourself as a smaller speculator, it’s important to know what the institutions are doing because they’ve got the money and if they turn the light switch on and you’re nimble enough, you could be the mouse that’s tapped dancing between the feet of the elephant, you see? And that’s good. So when you see enormous amounts of buying pressure coming into a marketplace like that and you have a position on, and the institutions are just getting warmed up because they have so much money, it doesn’t make sense for some of these places to have 25, 50,000 share positions because it’s not going to move the needle if the stock doubled or tripled, it wouldn’t move the needle.
You see, that’s why a lot of these bigger hedge funds and CTAs don’t trade some of the softs because the volume and the open interest just isn’t there. And if they bought the whole market a who’s left to sell to, that’s the whole other question. But how does that serve you right now? Again, you can do in commodities, they have something that’s completely foreign to the equity space where you call cash and carry trades. So you look at the carry charges from one expiration to the next, and you might be able to, if you have the money to say buy back in the day, the commodities corporation guys did an example of this using pork bellies, which don’t trade anymore because they could buy the futures and stand for delivery and then sell them in the physical market and make more of a spread. So they bought physical, sold the futures against it, and they would basically, so it’s a cash market trade in the physical business at that point. You’re not just trading futures. So they’re all these different ways that you can make money based on the spreads and what the margins are and based on where the volumes are, but also based on if you have a certain amount of volume, you definitely want to know meaning, excuse me, vol, I misspoke. If you know what your optimal position size is, you
Need to know what the average volume is for that particular instrument because you don’t want to be the whale. There’s no nothing to brag about. If the things trading a hundred thousand shares and you got 20,000 shares, that’s problematic, right? Because if everyone heads for the door at the same time and you got a lot of inventory, you’re going to find it hard to get out of that position without an enormous amount of slippage in skid, which makes a losing trade even worse. So be mindful of all of that. I know that’s a lot to think about. Trust me, when I tell you make enough mistakes, it becomes second nature because you’re like, man, that was stupid. Not doing that again, makes no mistake. Make no mistake about it. I’ve lived it so I’m not immune. Having said that, volume’s important. And so to me, if you understand the volume of the, the volatility of the instrument and how that movement can affect you based on the number of shares that you have or the number of standardized contracts that you have, you can kind of understand what the volatility to your portfolio is going to be.
And that’s an important thing because you want to be able to be in winning trades, let them be volatile and still sleep at night and not have any hair trigger response on your trades. Because if the move’s going to be 50 bucks and you took $12 out of it, that to me is something I would reprimand a trader on because you can’t feel good about taking only say, one fourth of the move. Now granted, there’s certain circumstances where that night that might not necessarily be the case, but over hundreds and hundreds of trades, it makes no sense to me to get into a winning trade at theorize that trade and then watch the bigger make, see the thing move three times your gain in the same direction when you’re already in the winning trade. So Brian and I are going to talk also about staying power and how to position size so that you can take the risk home with you.
I’m not trying to convert anybody, but I do know if people talk about risk and reward, you are not going to get paid if you don’t have the risk in the portfolio. So if you have a trade that’s working in your favor, you might as well stay with it, at least to some degree. My thing is to be in a winning trade and then to add to that winner, some people would look at where I’m getting in and getting out and then being like, all right, well, not where I’m getting in and out. Some people might look at where I’m adding to my second, third, fourth, fifth, sixth unit. They might be like, that’s where I’m taking profits, especially if they have that one R to three R kind of a deal that I’ve spoken about. You risk one R, whatever that percentage that is, if it gets to three R, you take all their part of the trade off, that’s awesome. If you take all of it off, I can tell you right now with a hundred percent certainty, you’re never going to have a five or a 10 hour winner unless of course you have a name
And you wake up and there’s a takeover. But you can’t run a trading business based on guessing what instruments you’re trading and where, when or what and why and how takeovers could happen. You can look at unusual option activity to kind of see, but even then it’s kind of hard to figure out why were people doing what they do. That’s the big mystery. So any rate coming up on 10 minutes, don’t want to blather along here, but we’re going to have a fairly substantial discussion on volume coming up. And to me, if you look at the upward trend, you can measure volatility somehow so that you can know what the optimal position size is and optimal doesn’t have to be all in one day, but then you understand how volume works. To me, that’s about 95% of what you need to know. Then you do this more and more and you develop a feel.
As I said, I think last Wednesday when we talked about the sudden passing of Michael Marcus, you want to kind of understand how other people are going to behave. And that would probably go onto the chapter called Market Feel, where a lot of it’s just on based on an innate ability that you have that’s not necessarily attached to some type of an indicator. Sometimes you hear people say, yeah, the tape’s heavy, right? That’s kind of what they’re getting at. It’s not just that things are down, it also takes into account the sentiment. It also takes into account if small or intraday rallies, what are they met with to sellers show up to beat it down, do they have any staying power? So that would be very, very helpful. So I wouldn’t necessarily worry about chart patterns or indicators. I would take a look and see who cares about the name at key inflection points on the chart.
The only way to do that is to conjugate it with volume, and we’re going to talk about that with my good buddy, Brian Shannon, and look at his book. I don’t have any financial interest in his courses or in selling the book. I’m just doing it because he’s a buddy of mine. And yes, we’re friends, so it’s probably going to be a friendly chat. He’s a very talented guy. You could see him. Alpha Trends website is alpha trends.net, and he’s all over social media accordingly. So hope that helps a lot more to talk about. Looking forward to it. Please like and subscribe to the channel, and please send me any constructive criticism of what you’d like to see or what you’d like me to talk on about. If you disagree with something that I’ve said, please let me know too, because usually that’s, that happens when I don’t give enough context, right? And if I want your opinion, I’ll give it to you. No, just kidding. Just kidding. I appreciate y’all being in here. I appreciate how you’re helping grow the channel, and I’ll see you next time.

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Hi everybody. Michael Martin. Thanks for being here. So question came in about how did I analyze the data right from Monday’s episode about my being wrong and then figuring out the wrongness was because I was early to a trade that eventually worked out, right? I say early means wrong because I don’t know at that moment in time if the name’s going to go up. So the best I can do is manage risk in the here and the now. I don’t get to manage risk using what I think is going to happen next week. I have to look at largely the price right now, you see? But so then the analysis comes down. Yes, I kept very accurate records, but you can also think about it from base theory, more conditional probabilities. What’s the probability of event B? If we can observe the probability of event A, so I knew what my overall losing percentage was, and I don’t have positions that jump through stops and this and that.
So my largest loss and my average loss are the same thing. Why was because you take them religiously. So there wouldn’t be, if I was risking two bucks, I wouldn’t have a $10 loser. I would just stop everything at two bucks. And so that’s both your biggest loss and your average loss. And so you want to watch that in your own behavior and see if you break your rules, does it tend to benefit you? Because in the short run, it might feel good emotionally to take that risk to try to earn your money back. It’s typically something people do at the wrong time when they’re losing money. The time to trade bigger, or maybe more frequently is when you’re in a crazy winning streak because then the market is saying, we are absolutely amenable to your trading style. Again, the emotional benefit of trading smaller at the beginning for me was that if I got stopped out on any one particular day, it wasn’t a big deal. And it doesn’t mean I don’t care about the money, especially when it’s other people’s money, but I would rather lose less money much more frequently, right, than lose a lot of money as frequently. So you can look at conditional probabilities and say, again, it helps to do it with a simulator. If you’re good with spreadsheets, then by all means, but you can think of again, what they consider conditional probabilities. It’s in the world of statistics, but it doesn’t get beyond say, using algebra, which I presume most of.
Again, what is the probability of event B happening, right? Given the known probability of event A, which you can observe. So the event A for me was trading and using my optimal position size on the initial entry, I found out that yes, I could make money, but then I have to conjugate a few other things. I am going to have a larger drawdown, both in magnitude and
Duration to recover. So I’m saying, okay, finances can be defined many, many ways. Applied microeconomics, you could say it’s the time value of money. If I’m going to see a 50% mover, I don’t want to see that if I’m trading 70 cent dollars. Do you see what I’m saying? I would rather start and have close to my highest equity point to see that move if I’m in a big draw down and then the move comes in, right? I talked about what happens in, if you sold a house for half a million dollars and you put the money to work on October 1st, 1987 versus it clearing escrow on November 1st, 87, it’s the same trade that’s the same liquidity, but there was a big event that happened in between, and that’s a 28 whatever percent haircut on your capital if you were just doing the market stuff, at least by the Dow.
So you don’t have to go berserk on the math, but you do have to analyze your own behavior. If you want some private stuff, then shoot over an email. But please just ask one question. I don’t need the backstory, just ask the question. If I need more information, I’ll ask you. But when you send me a block of email with no spaces and stuff like that to be, I’m telling you now it’s tldr, I’m not going to read it. I don’t have the time for it. Because in order to understand the backstory, you’re kind of making the miss miss the assumption that I need all the background to understand what your issue is today, which typically means you’re dealing with some form of regret.
How do I know I’ve been there? So I don’t need the reasons why you feel regret. I just need you to answer the question. If I need more context, I’ll get it from you, but you can shoot that over because studying your own behavior to me is the quickest way to get to success because only why you do stuff the way that you do it. That’s alpha. You just want alpha to be positive though, not negative. So by all means, think about conditional probabilities. Think about the emotional payoffs. How could you trade maybe and make as much money but doing it slightly differently than you’re doing it today? For me, that meant cutting my initial position sizes to a point where I could afford to be early and wrong in the way I look at that word and still have some of those trades come back and work and work out for me as opposed to being super prudent.
Kudos to me for getting stopped out. Granted was in a big drawdown, but it could have been much worse if I didn’t stop it. You see, if I didn’t stop my equity at that point. So be kind to yourself and learn from yourself because it’s improvement, it’s progress, not perfection. And in trading, I don’t know too many people that didn’t have to go through the rigmaroles of paying some form of tuition. And it’s not just financial, it’s emotional tuition. Cause you don’t know what you’re doing that makes you feel insecure. That could hit your self-esteem, at least it did for me. And so you have persistence and determination and, and to me, when you add persistence and determination, what you’re really speaking about is a person’s resiliency, attitude, and resiliency, right? Resiliency. If you don’t have it, you get pissy because you’re losing money. You can really shut yourself down and end up.
You don’t want to be your own worst enemy is what I’m trying to say at the end of the day. So you can study your own behavior and see what works for you. Otherwise, market’s hard enough. You don’t want to beat yourself up, take your punches from the market because guess what? You don’t have a choice. So it appreciate, again, the questions. They’re all pretty good. They get me thinking on things of where, especially on the margin to equity one, there was a time where I thought that was actually much more material. And it happens a lot when you’re speaking with institutional allocators. They’re like, what’s your daily? What’s your margin to equity? And I personally think that’s a stupid metric. Daily vol might matter because they’re looking at you as maybe one of many, many traders that they have or portfolio managers in their stall or at their horse ranch, so to speak.
So they need to make sure that everyone plays nice in the sandbox and that they’re not actually adding extra risk by adding you among the people that they allocate to. So that might make sense, but again, if someone starts talking margin to equity rules, it doesn’t really make a lot of sense. You really have to look at the results and you have to look at drawdowns. Anyway, please like and subscribe. I’ll keep trying to come up with good stuff that meets your needs that’s also very timely based on what’s going on in the market. And I’ll absolutely respond to all the questions that you send via email or through the comments themselves. Thanks for being here, folks. I’ll see you tomorrow.

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