Within you without you

So I want to talk today about hubris. You know, hubris is something that can pop up after you’ve had a winning streak or after you’ve avoided losses, whatever it is that makes you think really, really good thoughts. And I can remember this happening to me early on when I had put some trades on, I made some money, probably a few of them in a row. And I started to believe like, okay, now that’s evidence that I’ve made it. And when hubris kicks in like that, you can lose your discipline and drop your guard. And when that happens and the markets change on you, it’s a complete 180 because all of a sudden you’re making money. You’re feeling good about yourself. And then the markets turn on you and you’re like, what the hell just happened?

And whatever your daily loss number goes out the window. And that one loss could end up being like your weekly or your monthly max loss. And of course I blame myself for all of that. That’s part of it. You know, remember I said a million times that I’m responsible for everything that happens. I live in a paradigm of personal responsibility and you know, that means when bad things happen, it’s my fault. When good things happen, it could be good luck or good timing. Maybe it’s good analysis. Won’t know that for quite some time. Because in the short run, everything is really, really random. So what happens is over time, you realize that all of those feelings that you want to go towards can oftentimes betray you.

So this can, this is good wisdom for those of you that are trading in a simulator, paper trading in that whatever you think is happening to you just realize that the evidence of success could still be just good luck. And I don’t mean to pee on your parade at all. But in the short run you just don’t know, you say, well, Michael, I’ve been doing this for four months. That’s still not that long a time. You could have caught the bull market in NASDAQ and being fully invested in internet names from ’95 to 2000. And for some of you anyway, it might have just, you might have just been in the right place at the right time. Some of you might just have really good instincts. I don’t know. I can’t really tell, but you want to just always stay very, very grounded and realize that if you are making money awesome, but don’t look into it. Don’t try to infer that you’re good.

Enjoy it for sure. But the minute you let your guard down, it never works out in your favor. It always ends up hurting you. You see, what else could happen is you start taking flyers. A flyer is an example of a trade that you really have no business being in. Something catches your eye. You’ve got four or five winners, maybe you’re up 10% or a number percentage wise that’s very material for you. And now all of a sudden you’re like “I’ve got this.” And then you start trading everything under the sun and things that you really shouldn’t have and that you don’t have any business being in. And so again, when you start making money or even when you start losing money, the goal for you is to stick to your discipline. That’s where you want your feelings to come from. How does it feel to be you when you can be disciplined because you’ll have winning streaks and you’ll have losing streaks.

My experience though, the minute you let your guard down, things can get “Fugly” fast, and that can erase a lot of hard work. It could also annul many days, weeks and months of times when you did have great levels of discipline. So the thing about discipline, it’s not for a day or a week, it has to be consistent. And it’s in the consistency of you executing your discipline that you have solace and that’s where your good feelings come from. You don’t want to tie your emotions to making and losing money because losing money doesn’t mean you’re a frigging loser and making money. Doesn’t mean you’re onto anything in the short run. You don’t know. So detach your feelings and your emotional responses from making and losing money. Because it says nothing about your ability. It says nothing about your intelligence. Of course, if you’re trading without stops and you get blasted and yeah, you’re an idiot.

I mean, what do you want me to say? You have to put in protective stops and I don’t want to hear anything about, well, I just don’t want to get stopped. You know, I’m not trading that much. You need to get into the habit of having good habits and putting in protective stops because they will keep more money in your account and what you don’t lose. You don’t have to earn back. You see, anyway, I got a couple of emails and pings this week about those types of things. So that’s kind of like a summary answer to a few a few comments and responses this week. Remember the trading psychology part of this and your emotional intelligence is really the name of the game.

The how-to stuff…I would never pay for it. And two, get to know yourself. I know it’s tempting to want to buy into some of these hyped up things. My goodness it doesn’t make sense to buy into somebody’s program when they’re 24 years old and they had three months of success, they don’t have enough meat on the bone. They don’t have enough years of experience to be thick-skinned. There’s no such thing as a secret pattern. There’s no such thing as an undiscovered pattern. There’s nothing that’s “under the radar.” So just be careful, the solutions that you need are not technical. And if you, if you’re soft on the technical stuff, there are plenty of videos for free that you can get on YouTube.

This is a computer generated transcript.

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