Hey folks, welcome back. So I want to pick up where we left off yesterday and talk about when do you know to bail and when do you know how to be persistent and determined and not quit? Because there’s a fine line there. I think if you’re trying to wing it and you’re not keeping track of your results, it might work against you. You might be quitting too soon. Case in point is I kept very detailed records of things that I was doing. I kept track of the hours that I was putting in on the days of the week, right? Cause I always thought that there might be a certain quality of my research and my preparation. I tend to do really great work on Sunday. Why is that? Well, I didn’t know what at the time, but I had the benefit of having the markets closed.
There wasn’t electronic trading. So I had time to decompress my brain, go out and do fun things, come back to the markets with a fresh mind. So that worked wonderous for me. I still do that to this day, Sunday night before I chill and kind of relax. I do know exactly how things are going to unfold on Monday. I very rarely take a shot on the fly. It doesn’t matter if someone tries to reach out, call me, ping me this and that. If it’s not already on my radar, I don’t jump into that situation. It’s just how I’m built. I learned the hard way that for my sense of security, my sense of confidence and my sense of being able to execute period over period is I need to have a plan. I need to show up with an action plan and what it is that I’m actually going to execute on.
So I know how much I’m going to have. I know where I want to. I know my levels. I know where I want to execute and then I have to follow through and actually enter the orders. Then if the orders get filled, I know where my protective stops are. I use protective stop. I don’t use stop loss cause I don’t like to repeat words that have to do with non-performance, right? So you might consider the same too. If you’re adjusting a protective stop up, you’re really taking profits. It’s not a loss, right? You might be giving back unrealized gains, but you could still get stopped and make a lot of money. So I try to be very careful on the language that I use with myself. Having said that, you might find that you do better work during the week. You might find that you do your best research and otherwise immediately after the close, what I tend to do, even still to this day, is do a little bit of a post-mortem and just look and say, okay, if I look and see the chart, for example, here’s what I did. I execute what I intended to do. Yes, that is the majority of the my score. Cause I have 35 years of experience. So there’s look at that again later this week with at an and involved in another topic.
So I set out with goals of what I need to achieve that particular day. Most of them are taxed, are tasks in that the order entry is there to help me preserve my capital because the job, number one for a trader is to play superior defense. Don’t ever lose sight of that. Whatever you don’t lose, you don’t have to earn back. And did I execute what I intended to execute? Because even if I lost money, I know over time over hundreds and thousands of trades, I’m going to come out ahead very handsomely. So I don’t take it personally on one particular day, if I didn’t put my orders in at the levels where the market was more responsive, I have that pretty much down. But we’re powerless over where the market’s going to go once we put the orders in. So the best we can do is put the damned orders on the floor and leave it at that.
You see, wherever the market goes afterwards, we can’t steer it. So that’s kind of how I’ve learned to grade myself and to think about did I execute the stuff that I wanted to execute? Again, I don’t have nine or 10 different trades. I have one style and that’s it. And that helps me also think very, very clearly. It also, I don’t have to wear headphones with the thing and listen to people all day. That would drive me berserk. I don’t want to hear people talking. I would actually tell them to please stop talking in my earpiece, which obviously wouldn’t go over. I don’t make for a good employee, as you can imagine. I like to do my own thing. As much as I like to help people. There’s probably a deep psychological reason why I’m doing this in a one way conversation.
I had to find out through trial and error also, what were the best asked classes. I didn’t want to trade 24 7, which with foreign exchange, it’s always kind of open and if you have a position, you would constantly need to adjust your stops. So you can’t just say, well, I’m going to trade the open and then be done because there’s the whole rest of the week basically. There’s not really a window of time when the thing isn’t open. And to do it otherwise would’ve meant that I would have to change my trading style, which I didn’t want to do. Because once you have a style, what you come to understand is that it’s really who you are. Your trading style is who you are. It’s your personality. So it’s very difficult to change that. Now again, over time, we’re going to talk about that later in the week. There are ways to make some adjustments, but it only comes with a massive amount of trial and error and practice. Just like anything else. Just like Kobe showing up and doing several hours extra of practice several times a day to outperform the competition, bleed in practice so that you don’t have to during the games.
You have to understand though, once you decide on a style, after lots of trial and error and being the judge and jury of your own behavior, every style is going to ebb and flow. It’s not going to work all the time. Periods of time when day traders go through losing streaks, there’s periods of time where position traders go through losing streaks. And it doesn’t matter what the asked class is, right? It’s very rare that you’re going to make money every day. And if you do count your blessings, nothing wrong with it. I accept it. There’s, I’ve been on some amazing winning streaks, but I don’t get too far ahead of myself and be like, well, this is how it’s going to be every day, because guess what? It’s not. So the trickier part, and what I want to get to is when do you know to try a different trading style or a different asset class?
Or when are you actually just, you’re actually trading very, very well, but you’re losing money, right? Because most people who are starting out were like, well, I’m making money, therefore I conclude that I must be trading well. And that’s not the case. You could misplay everything. And I talked to Annie Duke about this a couple years ago when she was on for, I think it was how we decide, I can’t remember, but we talked about poker and how you can play a hand very, very well and still lose my randomness. You could also play the hand very poorly, stupidly and win. So you can infer because you’ve made money that you’re trading well, right? Because you have a process and then you have the outcome and you don’t want to be doing what we call resulting. So you have to study your process over hundreds and hundreds of trades. That might mean you’re putting a lot of capital at work that you might not be comfortable doing, but there’s really no other way to learn your craft. Yes. Again, you can back test to have an idea, but you’re not going to be able to calibrate your emotional constitution with what it is that you’re trying to do unless you’re risking real money and you can’t get that from a simulator.
So that’s the tricky part, and I don’t really know if I have a great answer for that because so much of it is, do you have faith in yourself? Are honest with yourself when you hear the story about how I was actually doing too much when I got started because I just jumped in. Cause I knew I was excited to start to live a very different life than the one I had lived up until that point. So I was like, sure, I’ll trade anything. And there’s nothing really wrong with that. I kept really, really good records, but I found out that my success came from removing stuff.
I removed foreign exchange, I removed options. Doesn’t say anything about those asset classes, but I needed to buy back my time, right? I’m going to talk to ganja about that tomorrow on a much deeper level with some questions that came in. And it wasn’t until I was able to absolutely focus on one thing and develop that and study my behavior concurrent with what the markets were doing. Was I in the trades that I should have been in? No. Why? Well, I was in a losing streak and I was reluctant to put my order in cause I was just tired of losing, right? Everyone goes through that right position sizing, very difficult to do. Why will? Cause we really don’t need any of the inventory. So we have to figure out what kind of inventory we’re going to have in our portfolio so that two things can happen at the same time.
One, it’ll add up towards hitting our financial goal, but two, if things go against us, it won’t put us in such a spot that’s, it becomes destabilizing emotionally or crippling financially, right? Because both of those happen. Sometimes they happen at the same time. You have to go through those lessons. What you don’t want to do is fool yourself into needing more books, more discords, more paid premium services that you have to pay for because you can’t buy your way out of your discomfort. It’s not going to happen. I’ve already been there myself. We talked about emotional band-aids and the indicators. Sooner or later, if you want financial freedom, you’re going to have to go through this hazing and feel feelings that you don’t want to feel. There’s really no other way around it. I can’t solve those problems for you. You have to do it yourself.
And the sooner you come to realize that you should be getting at it, because the sooner that you do it, the sooner you’re going to be able to draw some conclusions, right? And that sets you free. Remember the feelings that you don’t want, that you do want to feel are oftentimes on the other side of the ones that you don’t want to feel. Well, I got news for you. There’s no end around. You can’t take any shortcuts. You have to be in the game. You got to face it head on. So do a little bit at a time, but keep track of what it is that you’re doing. What are you thinking, right? Why did you put on certain trades? What made you think about that? Because that at the end of the day, becomes your playbook. It teaches you what not to do, but also what to do.
So then you amplify the things where you show skill, but it’s only from the attempts that you’re making that you’ll be able to harvest that data and those realizations sitting around and thinking about it isn’t going to help you. You cannot intellectualize this. There is no way to intellectualize your emotional constitution. You have to feel it. You have to. It’s experiential. Again, that’s why I say the only thing that you can do to really, if you really want to learn the trading, is to start doing it. But Mike, I don’t know what I’m doing. Well, guess what? No one does. But if you don’t start doing it, you’re not going to harvest the data that’s going to affect your behavior the most because the how to trade part is 15, 20% of it. The rest is psychology and emotions. Now you think it’s intellectual because you’re unsure of yourself.
You might not have confidence. I get that. But you only get the confidence from doing it. So you find yourself in this damn catch 22 where you’re trying to look for the intellectual or the academic solution to why you feel uncomfortable. And the answer is, you have to do it. You have to face and be with the discomfort. It isn’t going to kill you. So again, only risk what you can afford to lose. Realize that at the beginning, no one cares about your p and l, right? This is really for you to start taking some attempts to figure out what is the calculus that’s going to work for you longer term so that you can do this and go into where you want to live and the feelings that you want to feel for the rest of your life. Guess what? I got 35 years experience and I’m still morphing. I’ll talk about this with ganja tomorrow, but this has been a very make it and
Take it kind of marketplace. So I’ve had to act more like a day trader. I don’t like doing it, but I also got to make money because the market right now is not amenable to my particular trading style. And guess what? I could either bitch and belly ache about it or I could put my head down and make money, right? So it’s life on life’s terms. We’ll see you tomorrow with Ganja. Thanks for being here.
Click here to get your free copy of The Inner Voice of Trading audiobook.
This is an automated transcript