Weak Trading Goals Are Why You Abandon Your Trading Rules

Talk to me, goose. A famous line from Top Gun anyway, it’s actually actually the name of someone who left a comment. Talk to me, goose five 50 on the video. What is your flight plan from a bit back when was that? About two weeks ago. You always seem to have nuggets of information that stick with me and others. I’m sure the challenge oftentimes can be the lack of sticktoitiveness before we see results. I find that the incredible indicator appears to be the solution when in fact something like support and resistance was the answer all along. I’m rambling, but I just wanted to say nice work, keeping us informed. Thank you. Talk to me Goose five 50, appreciate you being here and subscribing. It means a lot to me. I like to try to keep as much of a relationship with everybody as I can, even though it’s kind of through the cyber land here.
What is your flight plan? So we’ve been speaking all week about mental toughness basically, and understanding our behavior from a conscious and subconscious standpoint. And when I think of sticktoitiveness, it has to do with the relative strength, right? That’s what sticktoitiveness is to me. It’s R s i. It’s whatever other type of indicator that you look at for relative strength and the emotional connection that I actually have to my goals. You see, you are dealing with a situation in trading where the outcomes are probabilistic. And so I had a great chat with my friend Carter the other day on Thursday. I was driving in the car, which is kind of what we do here in la and we were talking about processing feelings around trades and how do you know? And the answer is you don’t really know. You only know up to the point of the expected value of your trade.
So for an example, if you want to put some math here, say that your rules, whether you’re following discretionary chart reading rules or whether you’ve crunched data like I do, or whether you use a trading simulator where you’re pumping information into a trading engine and it’s giving you backtested results, that’s certainly another way. Or whether you’re just going on hunches, like there’s all legitimate ways to do it. And let’s say that whatever your process is, you are accurate 40% of the time and that your winners are three times the size of your loser. So you can calculate the math in your head and figure out that you have positive expected value and that you should be following those rules accordingly. Now, there’s probably a few other things to say, but for simplicity’s sake, let’s just start with that. Your average winner is three times the size of your average loser and you have 40% accuracy in terms of your correctness. So the first thing you want to consider is becoming emotionally comfortable with being correct, right? If you have that academic thing where
You’re to being super bright, you were a great student, you have to calibrate your system to become a new you, which goes back, I think to Monday and Tuesday’s episodes of this week that I had to do for myself. I was a pretty good student. I went to Ivy League school, but you have to figure out that when you have 40% accuracy in any other type of lifestyle, that’s failure. There’s no ever passing grade where 40% even because you don’t get graded on a curve here, you see, so 40% is epic failure basically from an accuracy standpoint. If the goal is accuracy, 40% isn’t close to success. Even if you doubled that, you’re still a B minus kind of student. You see what I’m saying? Some people are fine coasting at B minus. I myself am not. So you have to recalibrate your emotional constitution to become comfortable with 40% accuracy, fully understanding that and justifying it by saying, well, for sure I’m not winning a hundred percent of the time I thought I would when I went to the street, but because my winners are so much larger than my losers, I’m still able to make money and I take solace in the overall process with of course the big proviso being that I’m going to take small consistent losses, paper cuts, small attrition of your capital, your equity goes up, small attrition of losses, you make some money, small attrition of losses, and you also learn to trade your equity curve.
You don’t become emotionally invested in the outcome of any one particular trade because it doesn’t really matter for you which one you’re in. I could go on and on about this past week or actually last week because you’re listening to this video now, which was recorded last week today for me, which was last week for you now, and you never really know what’s going to work. I had four or five trades on and one, two, I had 1, 2, 3 that lost me small bits of capital and I think so I either had four or five trades on, I can’t remember coming into this week, which was last week for you, and I lost on all of them. And the one big one was I was short Nvidia and that paid for all the losers. And then some, my account was up, equity was up not substantially, but up a couple hundred basis points for the week. And that’s coming from a guy who’s a pro who knows what he’s doing. The number of losses that you have, you have to let go of that, it’s irrelevant. There’re es in the poker game. You have to pay to see the cards. That’s the way that it goes. And so do I care about the losses? No, because my account’s
Up. So I don’t have any emotional investment in the outcome of any one particular trade. I know the outcome of any number of them is probabilistic to begin with. So I surrender, right? That’s chapter two of the book. I surrender to that. I don’t care which one works to the extent that at least one of them does work, right? Again, I’m also not offsetting at three R and all that kind of stuff. I want to let the winners run. I want to surf that wave for as long as I possibly can. So I guess the question I would ask you is like, well, what evidence do you need? What evidence is there? Hint, there isn’t any. You only will know it after the fact. So then of course you can do a postmortem and then kind of again, conjugate, what was your anti expectation versus your ex-post realization?
What did you think was going to happen versus what did happen? Now, if you know the probabilities, you can start to calculate what’s the probability of you having a streak, either a winning streak or a losing streak, because probabilities are odds, right? You can convert them back and forth. So now you can kind of again, go back to your emotional system, look at your subconscious and say, if these are the numbers, either actual or via a back test, I can emotionally get comfortable with this system before I’ve put on a single trade with live money because I know what the numbers are. And if you’ve looked over many, many instruments and the model is therefore robust, the rules are simple, they’re not data mining or cherry picking, and you’re using 10 plus 10 to 20 years worth of data, you can kind of take solace that if that model stops working, it’s not going to stop working the day that you decide to use it.
You see those models can change and your trading has to evolve because the markets evolve whether you like it or not. But in my experience, models don’t typically go from having positive expected value to all of a sudden not having positive expected value overnight. There is an asterisk of course in oh 7, 0 8. The government said you can’t short bank stocks. So if that was an integral part of your system that might’ve disrupted things, but that’s because of faulty government regulation that disrupts the market. So all of these things can be learned behaviors that you can really work on ahead of time because again, what’s the goal? Is the goal to be accurate and take the W or is the goal to make money? And if you want to make money and bigger money in a shorter amount of time, in my opinion, you need to have a longer holding period where the winner is many, many multiples the size of your loser. And that again, kind of speaks to this whole question of intentions, equal results, what’s happening in your subconscious? That could be what’s really managing your system, you see? And so you want to
Be super mindful of all of that stuff. This isn’t easy. A lot of folks don’t want to look at this because it’s easier not to, right? Personal growth comes at a bit of an emotional expense because you have to look at yourself in the mirror and say, I’ve been doing this the way I’ve been doing it and it doesn’t serve me anymore, and I need to shed that skin. I need to change and it has to start with me and it’s doable and I did it by myself. If you want some help, reach out. There’s probably a few places where you can get some help and you could still do it yourself. That’s what I did. And so that’s really all I have. I hope this week has been valuable for you. I try to think thematically because a lot of times it’s hard to just say thing that’s say one thing or one day of material that’s definitive.
There’s lots of angles to this. It’s multifaceted and psychology and emotional intelligence is a complicated subject matter, especially when we’re all taught from our environments how to behave. We have to be very mindful of our behavior and what our motivations are. So I hope that this week has shed some light on everything for you. Please like and subscribe, go to Martin Chronicle, get your free copy of The Inner Voice Trading. It can help you and in better describe the journey that I went through. It’s not a book on how to trade. It’s more of a memoir of what I had to go through and how I did it and what I thought with a lot of great feedback from some of the best traders that have ever lived, including Eds Coda, Micah Marcus, bill Dunn, who’s now retired, Victor sios in there. There’s a lot of great wisdom. You can get the audio book version for free because I own the rights to it and I can give it away. Anyway, I hope you all have a great weekend and I’ll see you Monday.

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