Hey everybody. Happy Thursday. Hoped you like the lesson yesterday with Gja. He’s, he’s a wicked piss at that guy. Super smart. All right, love the guy. So let’s talk on Tuesday. We talked about what happens with fear and we want to process the fear right away so that we don’t let that compound and really shut us down because again, behavior predicts where you end up. And if you shut yourself down because your emotional constitution has been running to the ground as well as your account, it’s awfully hard to dig out. And I can’t tell you there’s millions of people out there who are day trading, can’t figure it out. Draw their accounts down 50, 60, 70, 80% and what do they do? They have their account open, 80% draw down, and they’re sitting there like this and they’re stunned.
And it’s one of the big contentions that I have with the industry when people are marketing things in an unregulated space, promising people all the returns, how much money they’re making. I made $10,000 working only 30 minutes in the morning. So if you fall for that kind of stuff, right? Because there’s probably someone that can do it. But the point is, it’s not necessarily scalable, meaning you can’t necessarily, people can intellectually understand that process, but if you don’t have a feel for it, it’s like going on a nice date with somebody, with a really good looking person who might be successful, but there’s no chemistry. And that’s the compatibility that we’re talking about. Set up a million. We live in la. People exercise like eight hours a day. Everyone’s in shape cause it’s basically summer all the time. So everyone has a nutritionist. It’s the weirdest thing.
It’s not, don’t you know what good food is? You need to pay a nutritionist. Okay, well the world never sees to amaze me. I’ve got a trainer for weights, I got a trainer for cardio and I got a nutritionist. I actually know people who have this. I myself don’t. I have one teacher, he’s a jiu-jitsu teacher. Everything else I kind of do by my own. But I wanted to talk to you about growth and the greed part in that. I think what happens is people, one of the things that you can do to actually help combat the greed is to just, with the fear, process your feelings immediately when you start to make money, is it you or is it the market? The way I always think about it, and I’m a pretty well-read guy and I know everybody, I always figure it’s luck to be frank with you.
And I’ll say that in any, I don’t really interview for stuff anymore, but even if I’m speaking with clients or potential clients there, we make so much money in sugar, why did we do this and that? And a lot of times I’ll say, well, I’ll be very journalistic about it. Where, why and how I was smart or stupid enough to put in my buy stop to anticipate the move that got us in. I had no idea the magnitude of the move. But obviously even small moves with decent amount of leverage can mean decent rates of return, both from a percentage standpoint and cash. If I don’t really think in terms of cash signs, I think in percentages and luck we were in the right place at the right time. That’s kind of what trading is. Can you anticipate putting yourself in the right place at the right time to invite all that abundance to you? Are you worth it? Think about that. And that should hit you right in the gut. Do you actually think you’re worth it? Because a lot of people don’t. And a lot of people pride themselves on taking, I take a three R, soon I go three r, I take the trade off, not sitting around, not letting gains like that. Just sit around and I don’t get out of bed for three R To give you context, it’s not an ego thing, it’s just not worth my time.
To be frank, when I look at my life when I was younger, I might have felt differently, but as I’m sitting here right now in my fifties, it’s just not worth the time. But one thing that you can do that absolutely helped me think abundantly, kind of along the lines of Napoleon Hill, think and grow Rich. When you give money away, it kind of makes you think and tricks your mind into thinking that there’s more coming. You actually have to treat yourself too. Now. You don’t have to go out and buy my box or another, your 15th pair of Golden Goose sneakers. But in your planning and in your goal setting, one of the things that we do, especially with the institutional clients, and there’s different issues cause they have lifestyle concerns. They might have a mortgage or two, they might have a Rolls Royce payment, they might have kids in private schools from grade school to high school to private colleges, not I state schools. So a certain lifestyle that they’re used to. But one of the things that we do is we say, cause we have to practice this ourselves and we always eat our own cooking is w in your goal setting in what you it is that you want to achieve. And knowing that growth is probably a subset of just straight out greed is what do you do to treat yourself?
What do you do when you have or hit a certain milestone? One that you were anticipating because it was a goal. What do you do to treat yourself? You’d be surprised how virtually nobody has that built in. And I’m not talking about taking the family to Tahiti or the Maldives for a week or going to Dubai in first class on right Emirates, whatever you say it. My friends are all international, so they call me Martin Ahma, my Chinese clients mot you. Good trade, Ahmad, I love them all dearly. And in New York, it’s not uncommon. When I was growing up, we called each other by our last names. First of all, there was like 85 Michaels in my class, so that was necessary. You say Michael, and it’s like everyone turns around. So make sure when you have a goal and what’s the word that people use, the FU goal.
If you really smash, say you make 10% for the week, maybe that’s what you were expecting to do, but in fact you did 15. Don’t necessarily go out and blow a bunch of cash on a discretionary basis, but say to yourself at these various milestones, here’s what I’m going to do to celebrate my success. Because it’s not the dollar value that you’re celebrating, it’s your behavior that you needed to get there in the first place. That’s what you’re celebrating. And you deserve to pat yourself on the back. Nothing wrong with that. Maybe you want to go to one of these $400 a head sushi o kind of places to experience something. Maybe you’re going to, you are in New York and you’re going to take leave Friday after the close on a red eye and go to London for the weekend just to see a show on the West end.
Or you’re going to go to some of those Seville suit makers and get CustomMade shirts. Something kind of audacious, but it’s within the budget that you can set because you’ve already made the money. And if it’s your money, that’s great. It’s probably going to stay in your trading account. If it’s part of a two and 20 structure and that’s how you get paid or your prop trader and you get 50 50 split, 90 10 split. It doesn’t matter to me what the numbers are, but build in those things that you want to enjoy over time because that can also help you temper both fear and the greed. Because there’s been times where I’ve started the month off kind of rocky and brought myself into draw down, but then I recovered. Why? Well, I was smart enough to stick with my knitting and put the trades on, but the markets also turned, again, something I never could have predicted, but something I absolutely would’ve missed out on if I had a pity party.
And so, man, those are hard lessons to learn. Those are hard lessons to learn where you know, lose your confidence. So now if you say, well that’s great, Mike, that was back then, what do you do now? Well, the truth is, is that I’m very non, I’m apathetic by everything. I’ve got everything down to such a science. I have no outside feedback coming in. No, never have the TV on. And I have a nice TV mostly for baseball games. I watch baseball like 24 7. So even Twitter, Twitter’s really a platform for me to syndicate the show. A very listen only mode. Like a hundred percent of the time if someone says something nice, I’ll respond cause I appreciate them. Or if like Brian Shannon does something and he’s a good friend of mine, I’ll retweet it, right? Just because I’m a guy, I’m a bro, yo bro.
But that’s about it. StockTwits have enormous respect for the platform. It’s super helpful. I know Howard lends in personally, but I wouldn’t go to those places to reaffirm things that I already know myself because at the end it’s still probabilistic outcome. And what happens is I don’t want to put myself in a spot because of fear. Agreed. Where I have to go to the computer and start looking for all the, if I’m long X, y, Z, let me go out and look for all the other bullish, X, Y, Z articles to see if it supports and kind of calms my nerves, especially if I’m in a drawdown. So I think one of the things that you can do along the way, of course, like we said Tuesday, is process your feelings of fear right away because you don’t want those to compound. You don’t want your greed to compound either because that typically doesn’t end well sooner or later.
And I remember this happened towards the end of 99, early 2000, there were lots of guys, there were a group of Asian traders that I knew very, very well. And what they were doing was instead of directly speculating in any of anything that had four or five letters in the ticker I e Nasdaq, they were just going up five, 10 bucks a day because it was the internet and people wanted to be involved in this new economy. Brick and mortar didn’t matter. It was all about eyeballs and page views and everything works until, doesn’t work anymore. And they had gotten used to selling naked puts on these companies that were in gigantic. Now again, when you sell a credit or have a net credit puts or cost doesn’t matter, that’s usually your max gain if you stay in that same position. So for me, I never was a big option seller because I didn’t want to know what my max gain was the day that I put the trade on.
I always think unlimited upside. That’s how you get to have 10 20 R type of moves. Again, it’s a personality trade. I don’t necessarily think it’s better. I do think if you’re in a winning trade, you might consider letting it run longer. And we talked about some ways to increase selling everything at three R and then piecemealing your way out so that your average exit could be four R. We talked about that already. But you also want to process your feelings about greed right away because on some level, enough is enough. There’s people out there worth a billion dollars. Again, I don’t know what their lifestyle choices are, but like I used to say to somebody, what is the difference between one and 2 million? Well, it could be quite substantial because it’s not just a hundred percent difference. You could be dealing with a home, you could be dealing with a business.
It’s probably not cash at that level. So that can actually be a big magnitude. So then if you say, okay, well what’s the difference between five to 10 million? Well, it could be something similar, especially the growth of a company or the appreciation of real estate. But then when you get to the next point where you’re like, I don’t know what the number is, I’ll pick 50 after 50 million in net worth tangible assets that produce revenue, there’s not a whole lot in the world that you can’t do. Now of course, if you’re trying to collect Lear jets or private planes or you want a big exotic car collection, you can use that money up quickly. You can buy homes and have homes around the world and all that. But what I’m saying is if you took that money out and even did passive income, so say you got 5% on 50 million, that’s two and a half million dollars, that’s probably taxable on some way. You could do municipal securities from the state that you’re in and have completely tax free income.
There’s a lot you can do with two and a half million dollars in terms of surviving. You divide that by 12 months for the love of God. You got 200 K a month to live your life. There’s not a lot that you can’t do. So there’s a point where the money just kind of comes, but it doesn’t have this gigantic impact in your life. So you have to have a special sense of discipline because in a lot of ways, whether you make or lose money in the markets, it’s not going to affect your quality of life because you’ve already achieved something that only the top one 10th of 1% of people on planet earth can do.
So make sure that you build in things that you can do to celebrate your success along the way. Because what I have found in my own behavior is that when I did that, I didn’t feel like I was missing out so that I didn’t have to go act that out in the marketplace, right? Because that’s how it can, at least for me, might be different for you. If you don’t pat yourself on the back, even humbly along the process or along the timeframe of your winning streak, you could almost have a certain resentment and you don’t even know who you’re angry at. It’s like yourself. It’s like, okay, I’m working hard. I made all this money and no one appreciates me. Well, guess who? No one cares. So you have to take the time out. Maybe you’re going to go to Sedona or maybe you’re going to go to San, you can’t go to San Francisco, maybe go to Montreal in the summer and see some of the jazz fest to go to Quebec for the ice carnival in the winter.
Doesn’t matter to me. But what I’m saying is take the time to go celebrate your success for yourself, not so much because you’ve got the dollars and or the percent rate of return that your targeted or that your target goal was, which you either met or exceeded, but for the very fact that you were able to stick to your discipline, stick to your knitting. You were in a draw down, you came out of it or you know, took the trades as you should and you were in the right place at the right time, which is kind of what stops her for right. They’re supposed to get you in at the right place at the right time and celebrate that discipline that yielded the results. Why do you do that? Well, because when you think about it, who are you really trading against? In many ways, the fundamentals and the technicals on some level, you can take both out of the equation because all the money that you want to earn or have come into your accounts as trading gains or credits, you want more credits coming in than debits going out i e losses.
You’re really trading against another person and the ticker symbol that you’re using is just how you communicate with one another. So I always think just in Jiujitsu, the person who has the most techniques eventually going to win, just the way the world works. Why do you think I go every day? It’s a lot to learn. So just like trading, all the money I want to earn is already in someone’s account. Yes, I know the government’s printing or has printed money, they’re going to the electric chair, but at the end of the day, I’m trading against the next person’s discipline because we’re all going to have losses. So the question is, if we’re playing that game of chicken, I know where my uncle point is and I’m not going to waver from that. You see? So the way I kind of helped myself understand my needs for appreciation is I had to learn how to appreciate myself and realize what value I’m bringing to my clients and to myself because this is a skill you can teach other people.
Your other family members can learn this. And so it’s an ongoing asset, not unlike co Coca-Colas formula for Coke or the formula for the seasoning in Kentucky Fried Chicken, which are generally closely guarded secrets. I’m sure there are people out there who know exactly what the chemical compositions are. But again, just to conclude, I found myself feeling like, okay, I had reached the top of Mount Olympus and there was no one else there. There was no one waiting for me at the finish line to say, nice job here. You completed the gig, you set a good time for your age and your ability. So you have to do that yourself. It’s probably no shock when you think about it and that this is a lonely business. We kind of live and die by our own agility. We live and die by our own gut instincts. And a lot of times you have to go on instinct and go by the seat of your pants. So I would celebrate your success and have those milestones actually planned in so that this way you have something to look forward to. That’s modest. It doesn’t, like I say, you don’t have to go out and buy a new Rolls Royce or something more extravagant, but do something that’s meaningful for you that you can appreciate.
Part of the reason too is as I get older and you start to have friends start getting sick, or some of them pass away, some of them kill themselves, which is obviously sad. You kind of come to understand that your whole life cannot be in and around the markets. You have to live your life, right? There’s so much to do outside of the markets. And so doing all that stuff also helps me feel alive, you know what I’m saying? And that I can appreciate my life. So I build those things in again to say, okay, everything is related. The lifestyle choice of being a trader has a lot to do with, well, I guess it’s true of any of profession, but you want to definitely integrate your personal life with your professional life and make sure that if nothing else, your clients will celebrate your greatness by giving you two and 20, right? And they’re like, okay, now what? Because you’re on in Hollywood, they say you’re only as good as your last movie. Same thing in trading.
I’ve been in situations where I’ve had accounts double and then you’re in a drawdown and that’s all they want to talk about. Nevermind the fact that they started with 200%, $2 dollars, and that’s just the human nature. So no one’s going to appreciate you and they’re going to be like, yeah, what do you want? What do you want? I’m paying you 20% incentive fee. What more do you want? So keep this in mind when you’re building out your goal setting and your models in that, you want to make sure that you build in these beacons, if you will, that are congruent with your level of achievement where you can appreciate all your hard work. It’s really important to do that because it also helps with the burnout. Because when the next drawdown comes, you don’t want to be in a spot where you’re in a drawdown, then you grew your money, you’re up 60, 70%, then you’re in another 10% draw drawdown. You don’t want to become bitter. Cause ultimately it’s all your own fault. So I found it really, really important for the marathon of it to celebrate my wins in modest ways, at certain inflection points, not on a per trade basis. Never had a great day going out for beers tonight. It’s not what I do. But anyway, it’s a really important topic because it keeps things balanced and you want to stay, kind of have this homeostasis of your
Emotional constitution where the losses come in and they go off your back, like the water off of duck’s posterior, and you have to take the gains in stride too. It’s just the nature of markets. That’s what it is. You’re smart enough to put your trades on and be in the right place at the right time. You’re going to have drawdowns and you’re going to have winning seasons. You got to take both in stride. Thanks very much for being here, folks. I’ll see you tomorrow.
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