So I got some great feedback on some of last week’s episodes. And so I thought I would expand because a few folks thought they were missing the point. And so I thought, okay, well let me spell it out more. So the benefit of having a plan is that you’re on your way to becoming self-sufficient. There’s no trader that you’ve looked up to who doesn’t do things his or her own way. All right. Now the fundamental guys and gals might subscribe to certain services. They might read The Economist, they might read Barron’s, but they still just look at that as an input, the way that Picasso would look at blue paint during his blue period, right? So you still have to stand on your own two feet. I’m going to read some bullets to you.

The first one is to have a plan, your own plan. What are the criteria that you’re going to use? Are you going to buy breakouts or are you going to use the less responsive moving averages, for example, where it lags the entry, living without the television or input from anybody else – opinions don’t matter. You execute your plan. Then you learn from yourself, right? Because now you have the confidence in all the data points, they’re all uniquely yours. That’s a huge benefit. So then you don’t have to worry about any outside influences because you’ve done the smart thing and have eliminated them all before. You’ve even put the trade on. Now, before you go there, you can go and back test. And I know some of you are like, what do you mean by that? Well, backtesting means simulating what your trading rules would do with the security over a certain period of time.

There’s a few of them out, out there. [Admittedly, most of the retail ones are garbage so you’ll have to use an institutional one.] When you learn from yourself, not immediately, but over time, you learn to quiet your mind because when you have one set of rules, it’s just like you wake up in the morning, you put your trades on, you go about your day. And then you see what happens at the close. Or you have an alert service tell you when you’re filled so that to put your protective stop in, but this helps you not just make more money and stay out of these trades from an emotional standpoint, you, it saves you from having to sit in front of the screen all day, which is really you think you want to do that, but it’s really the last thing that you want to do if technology is as good as it is – and I believe it is – there’s no real need for you to sit and watch the screen all day. The security is going to go where it’s going to go, whether you’re watching or not. And most of you who don’t have a plan, you start looking at the screen, searching the internet for tickers. And now you’re going down a path that I don’t recommend because none of it’s yours. You just kind of feel like you want to participate in the industry and call yourself a trader. But this is, this is being a follower, not a leader.

So then you get to quiet your mind and then you look at the results and then you get to refine the plan. Where did things not work out? Was it your fault? Was it the market’s fault [bad timing]? Were you pushing when you really didn’t have any business doing so again…this happens when you sit in front of the screen. One day, I’m going to do an episode that’s probably going to take 45 minutes, which is nine times longer than any of these other episodes – to point out all the ways sitting in front of the screen all day hurts you more than it helps you. Now, some of the benefits of going through that, having a plan, no social media, no TV, executing your plan, learning from yourself, quieting your mind…

…so that you get to focus on what really works and then refining your plan. Repeating that process helps you become self-sufficient. It helps you build confidence, which you absolutely need, right? Even if you’re making 3% a year, you have to have confidence. If you don’t have confidence in yourself, it’s going to be very, very hard to win at anything in life, which is the next feature is that you can apply this to life because when you carve your own life out of stone, you realize you don’t need anyone or anything. You can make a plan for anything that you want to achieve in life and go and do it. That further adds to your sense of confidence and self sufficiency. So then you could teach it to your kids and future generations.

So this is the ultimate in becoming independent, good traders, aren’t followers. They don’t care what other people think. And neither should you. I know it seems like because there’s a prevalence or there’s access to everybody that you could want to reach through social media or by watching them on TV or subscribing to different channels or this and that from newsletters or Discords or private Twitter feeds, that just keeps you reliant on like other people. And I don’t think you want to be reliant on other people because that relationship reminds you of a drug dealer.

You can’t go to the market every day, waiting to be fed like a bird in the nest, waiting for the mama or the daddy bird to come and feed you. That’s no way to win long term by picking or trying to cherry pick ideas from other people. It’s not going to work. And at the end of that model you are frustrated. You’ve lost money. And now you’re bitter because you’ve worked really hard – but you really haven’t. You’ve just clicked a few buttons and got some people to send you some information.

So sorry for the slapping the head, but I’m trying to save you money. I’m trying to save you time. We don’t have as much time on planet earth that we think that we do. And you might as well be spending it doing it productively. If you want to do this, if not, no hard feelings, it’s not for everybody. Doesn’t mean that you’re a loser. It just means you’re going to find something else that’s a better fit for you given your makeup.

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So I got an email from someone saying, “Hey, I am very, very frustrated. I have my list of securities and I’m going through my setups and da, da, da, da, da, and nothing is working” and this happens to a lot of folks when the market turns, they find that their strategy, although it’s profitable, the majority of the time, there are moments in the year when the market is not amenable or not cooperating. You think the market would have a common courtesy to work with you, but no, it has to be difficult.

See, the market is omniscient and all powerful omnipotent, I guess, is the word. And I remember at this moment in time, the phrase that speaks about Buddhism and how people are their cause of their own suffering. So anyway, I wrote him back and I said it’s hard to tell anything from what you’ve written, can you feed, can you fill me in a little bit more?

And he said, “Yeah, I’m looking at the SPY the QQQ and the, whatever it is the IWM, which is the ticker for the Russell 2000, they’re all ETFs.” Now you could trade futures on these too. And I said, I know what the problem is without even you saying anything else. And that is, those are very, very correlated. I mean, the there’s a 99% correlation between the QQQ and the SPY.

So if you can’t find the setup, that’s going to work for the EM or the SPY because all those markets are correlated. You’re likely to just move on to other instruments that are basically effectively the same flavor. So you have to look at asset classes that aren’t correlated. If you want to try to trade across all the seasons of the year right?

I know you might see videos of guys who have made a lot of money using one ticker, but that tells me one of two things. One is they got really, really lucky and they put the trades on when the timing was good – which is out of our control, but more power to them. Right? We’ll take good luck. I will too. The second one is that they might have been trading too big and got away with it to make all that money in a short window of time. And they were smart enough to sit on their hands before they gave it all back. And the third one was maybe something that they didn’t mention was that there was extended periods of time when things just didn’t work out. And there were dead spots in the trading year and hopefully they knew enough to sit on their hands or not throw good money after bad or this and that. So look, someone could make 200% trading in three months and not do anything for the rest of the year, call it nine months. Right. They don’t have to be like January, February – pick any three months. It could be April, may, June. They did very well.

And then every other month, but like January through March and then July through the end of the year, nothing happened, but they still made 200%. Like that’s how it might look. So just be careful that you have to look at the details of how everything unfolded. I don’t begrudge anybody there success, but there’s always more to the story just because you have monitors and, and real time quotes and fast hot keys and this and that, that doesn’t mean anything in terms of profitability. It might feel emotionally that you have more control, but that’s a mistake because I don’t think you have control. The best you can do is enter your trades. You know, using buy stops, maybe limits. If you’re trading size, if you’re trading one contract, don’t worry about limits. You know, you can take the slippage in the skid and if your account is too small, or if you, you say it another way, if you’re upset about slippage and skid, it might be that you’re underfunded.

So that’s just something you’re going to have to live with, because it’s not going to change for those of you who have larger accounts, you know? Yes, you can put in limits to, stop or eliminate some skid. But the trade is really, really good. The slippage is not going to cost you that much. So think, I think if you’re a very active trader you might want to take a look at that and study and just see what is the negative impact of trying to put on so many trades to your actual performance. Whereas if you sniper down or filtered them once or twice more you’d actually save a lot on commissions and the slippage. Most folks don’t want to do that, but anyway, we’re getting off topic. The key here is to choose names that are not correlated so that you can trade.

If that’s your, if your goal is to have action every day, then you have to look at a very promiscuous list of instruments in order to trade those markets. And that’s presuming that you’re long, only if you’re a short seller, then you can do that too. I would just advise like, again, go back to last week that you don’t have to trade every day. The markets will be here tomorrow. They’ll be here next week. They’ll be here next year. They’ll be here. So there’s really no reason to have any type of fear of missing out and the markets aren’t going anywhere. And the key is to control yourself anyway, things. Thanks for being here. I appreciate all the feedback. You can subscribe to the show we’re on Spotify, YouTube, all these different places. I don’t know again, why people listen to podcasts on YouTube? It’s beyond me, but I ain’t that bright in many ways. If you’d like a free copy of the audio book version of the Inner Voice of Trading, you can get that for free at MartinKronicle. Thanks for being here. Folks. I’ll see you tomorrow.

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So successful traders are those that can align their behavior with their belief system. And so the belief system then becomes of paramount importance. It’s like maximize profits, minimize losses, but also minimize potential lost opportunities. Right? Because you have to look at the opportunity cost of not taking the right action. You know, it kind of taken on from yesterday and the irrational fear of not keeping winning trades overnight or over the weekend. So all that adds up now, maybe you’re going to make 20% a year, but what would happen if you looked at carrying trades home overnight or over the weekend and you could turn that into 25, 30% per year, maybe for one year, it doesn’t matter. Maybe you don’t care about increasing your annual return by 50% mind you, you also don’t want to annualize returns because that’s a boogeyman.

It doesn’t typically work out on average. All you can do is count on what you have in hand. Anyway, I think when I look at the traders who I’ve either worked with or in the trader that I became myself, I really wanted to challenge my belief system to know what was real. The feelings feel certainly very, very real when you’re going through ’em. But again, I come from the ethos that sometimes good financial decisions don’t feel good. And therein is the lesson for the day. And for the last couple of days is what are you doing to yourself? Because you’re avoiding certain feelings. That’s actually not working out in your favor. Say it another way. Suppose you’re making, I don’t know, 15, 20, 20 5%. You could increase that too, I don’t know. Let’s look at the math. If you took it and did like 36% a year up from say 25, you could increase your returns by 50%.

Now you’re doubling your money every two years as opposed to three years. So compound that out over 10, 15, 20 years and see what that does on a pretax basis to your overall net worth, because although it might not mean something for you any particular week or month or maybe even for a year because you look, if you made 25%, you made 25%. But if you could increase that by approximately 50% and get to 36% Rule of 72: 36 goes into 72 twice. Now you’re doubling your money every two years as opposed to three. So look at that and see how much it’s costing you because that’s real money. You see. And I think when you look at the data and you start looking at, you know, your performance, right, you can really see how much it adds up and then you can compound it accordingly. If you compounded that money over 10, 20 years or so, however long you can estimate that you’re going to trade.

It becomes super, he helpful to at least look at your habits. And some of those things that you’ve kind of taken on that don’t really have any basis in reality, but certainly feel good, right? Because there’s a in trading, you have ritual and you have routine. The ritual is the stuff that feels good, but doesn’t really do anything for your P & L. The routine is your rules, your system, this and that. So make sure when you’re looking at these things, you’re aware of your rituals… You wake up, you shower, shit, shave, make the coffee, put the TV on boot up your monitors. It’s all feel good stuff. None of it helps you make money. You could actually trade and not have caffeine and still do well. So the routine part is what’s compelling and that has to be measured in study all the time and should be reviewed.

I think mostly that’s what we suggest people do is look at their behavior and keep a journal of their daily activities. Not necessarily their trades, because oftentimes that’s useless, but look at your behavior because your behavior predicts where you end up anyway. Any thoughts on these things? Of course I’m open to emails and healthy debate. I look forward to getting them. I appreciate everyone who subscribes and sends in emails about the show – constructive criticism is good. Helps me get better as I’m doing this for free. And I wish you all a really great weekend and I’ll see you early next week.

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So today is going to be super brief and it’s going to be a provocative question. It’s geared and aimed at those of you who are offsetting winning positions at the end of the trading day during normal trading hours, whatever that’s called my thought is that your fear of losing might be several multiples, the feelings that you have of winning, right? So to avoid the pain, you do something that’s not financially in your best interest, which is to offset a winning trade. So imagine this scenario on the other side, every day, it’s very, very hard to find winning trade. So my ethos is to stay with the winners for as long as you can and position size it accordingly so that you can withstand any changes financially in the volatility of underlying instrument, there’s enough room to do one contract there’s enough room to do five shares.

My belief also is that looking at short time frames intra day, doesn’t give you any more control over the instrument than if you had delayed quotes and put in a protective stop. So imagine you’re in a winning trade and you’re up 2R, and you kept it overnight. And the thing opens very, very strongly in the direction that you have, like you own it, right? And it opens up big. So that now your gains are potentially 3, 4, 5R. Right. How does it feel to miss out on that? Is that painful too? And what would it feel like to miss out on that and to put on another one or two trades that day that are losers. So now you have the compounded effect of the opportunity cost of not being in a winning trade that you are already in, and then putting on two new trades that are losers.

I don’t know why people turn this into blue collar despair that lose you money. Because now you’re a loser on two fronts. I believe that that’s an irrational fear. And if you look at the data and you’re buying things that are in up trends, look at the data and see how they, how the opens are. Do they open up with you or against you? Because you can’t take anyone’s opinion on this in blind faith. You need to look at the data and not to sound like a priest, but the data’s going to set you free. You might be holding yourself back from greater success by having an irrational thought because you get this Johnny Cochran logic anyway, consider subscribing we’re all over the place. YouTube, Audible, Stitcher, Spotify is the big one. You can get your copy of the audiobook version of the Inner Voice of Trading at MartinKronicle for free. It’s on me. Thanks for being here. I’ll see you tomorrow.

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It occurs to me. Everyone wants to try to be immune from the emotional impact of making and losing money and trying to start your career and dealing with the uncertainty of all that. And the, maybe even the insecurity of having it. But man, if you go back and look at the folks, even like in market wizards, the first book you can see that they all went through some type of what I call hazing, some kind of emotional hazing. You know, Bruce Kovner was trading old crop, new crop spreads. I think in soybeans, which at the time were going limit up limit down. And when you’re, when you have a spread on your hedge, right, because you’re simultaneously long, two, two bean contracts of different months, right? So option traders would know that as a horizontal spread, we don’t really have strike prices in outright futures, but it would be like a calendar or a time spread.

And you’re looking to play the difference between those two instruments. And so knew earlier in his career, the broker was saying like, Hey man, this thing’s going into the moon. You’re losing all this money on your shorts. Why don’t you lift the short cover that, then you’ll be long. You’ll be off to the races. Of course, you know how this is going to end up. If you didn’t read the book, he covers the short and then the markets immediately goes limit down. So he’s no longer hedged and he’s getting blasted on his long. Right. So I think at the time that would’ve been limit up, would’ve been 30 cents in those days and then down. So it’s a 60 cents swing, which is $3,000 bucks a contract. So no, and he went on to make history, right? I mean, he went on to make history at Commodities Corporation.

Then he set up Caxton and then heI think he, he sold it to, well, he sold his stake to the existing employees and they earned them out or something like that. But you know, Michael Marcus who I know personally took Thorazine and kind of zombies out, like to deal with the, with the pressures and the intensity of it. And he too went on to probably the best ever.

So no, one’s really immune from all of that. So you want to celebrate that you’re at least in the game. Cause if you’re feeling those strong feelings something’s at stake, the key is to make sure that you’re doing really, really good behavior to not put yourself into the spot where you might need to take Thorazine, Percodan. You know, you don’t need to go on a regiment of Psilocybin every day or hit the Percy Sauce from 710 Labs. You know, you want to make sure that you could be lucid and act with a clear head and just realize that this is a game of probabilities. Every time you put on a trade it’s subject to probabilistic and outcomes and that you know, you’re going to lose you’re going to lose ahead of time. So just deal with it, understand that it’s not about accuracy. It’s about expectation.

In the movie “Trader,” I think Paul Tudor Jones and Peter took a 5% hit in one day. So again, and they went on and are still making history. At least Paul is doing everything that he’s doing both at tutor and with Robinhood Foundation, right. Which is given away $2 billion, forget what they’ve raised. They’ve given away 2 billion. So don’t beat yourself up because you’re a human being it’s part of the game. The key is to not sabotage yourself. You can learn from those lessons. To me, those are the most important lessons. Not that you know, what they made and how they did that. That’s all kind of relatively interesting, but that’s, to me like the gossipy part of the business, that’s like if the trading world had like fucking Us or People magazine, that’s the kind of stuff that would be in there.

You’re more interested in their emotional constitution, how they did the trades should not be terribly interesting. because everything that you want to know about trading, you can get for free on the internet, every type of trading strategy, someone’s done a video on it. I admit they might not all be good, but that information is out there for you to at least take a look at and then investigate. So be nice to yourself and just realize that that’s the whole game. And if you get away unscathed without taking a big financial hit, and if you get away unscathed without needing to take medication or otherwise you’re probably a step ahead of the game.

You might have your own battles to face, but no one is immune from it. There’s nothing that you can learn. In other words, and this isn’t something you probably haven’t already heard that “there are no external solutions to your internal problems.”

I’m going to say that again. “There are no external solutions to your internal problems.” There’s no book to read, right? There’s no book to read. That’s going to help you from the fear of losing money. Doesn’t work. You have to put the trades on and do it and feel what it feels like.

Paper trading have said it a million times, not going to work might help you learn how to enter orders on a particular trading platform, but it’s not going to help you feel better about losing money. Anyway, I don’t like to repeat myself cause I’ve already said everything I had to say about that. Please consider subscribing to the show, getting really good feedback from folks. And I also get the data about what you like, because I can see who’s listening to what type of episode. That’s very valuable for me so that this way I come up with good episodes that I know are going to resonate with you. That’s all I got for you today. Folks. Thanks for being here. I’ll see you tomorrow.

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