Hey everybody, it’s Michael Martin. Happy Thursday. So this was a big thing for me and that was learning how to time block effectively. It’s one thing to keep a list of your to-dos, which are different from goals, and then how do you place them throughout the day knowing that you do have to pay some attention to the markets, if nothing less than entering your orders and seeing if they get filled. And if they get filled, where do you put your protective stops? Or for those of you who add to your winners because you don’t buy your optimum position size at the beginning, how are you going to scale in and at what levels? So I had all that worked out. Then over studying that for months and months and months, I was able to isolate what was it that I did in my behavior, in my preparation that required a higher waiting. In other words, what was much more material in my behavior that led to my trading success rather than looking at things that might have felt good. And so what I found was that there was a lot of, I had macros written out on Lotus 1 23, which was the prevailing spreadsheet of the day. Trading simulators really didn’t exist and the whole cottage industry of coders and this and that didn’t exist either. So what I learned was that I was super sharp in the morning. I was like an early, early morning, late evening type of a person. But the late evening part became problematic because it was in and around time where I should be going to bed. And what I found was in studying my own behavior that when I was looking at computer screens after 10 o’clock at night, and we’ll talk to ganja about this, it does something to your energy and it actually makes you more awake. At least it did for me. And so I had a tough time winding down if I was doing a lot of market related stuff the night before, well, late night before. So I would do my preparation usually after dinner. I wasn’t much of a TV guy. I was in New York. I’d go to a lot of events, that’s for sure, because I was into the arts and New York culture, and that could mean everything from Broadway plays to off Broadway stuff. That was fun. I had family members in entertainment business. So we saw a lot of musicals, a lot of shows, saw a lot of ranger games at Madison Square Garden, saw a million concerts there, radio City musical. Then there was obviously taking out clients to relationship build and bond and all that kind Of, so you were out a lot. And what I would do is if I met those folks after work is I would come home and I would get my preparation done immediately. Now, the good thing is that if you’re looking at certain markets and how you buy stuff, or if you’re looking at a certain, looking for a certain pattern, one little look at the chart, you can kind of see are you even in the neighborhood or is that instrument even in the neighborhood of where you want to be? So a lot of times you’re just scrolling through stuff and it needs charts would need weeks or months actually to develop. So there were a lot of the ones that I didn’t have to look at until the weekend because I knew during the week that the charts were a disaster, for example. So then I would focus on, okay, what happened with the things that I am looking at? Because then even the smaller portion of that are the ones that you’re actually entering orders on. So there might be, say, 12 names on your to-do list. You might have three or four orders in. The other ones are still kind of close, but they’re not right there yet. They’re not at the price that they need to get to the pattern might need more time to develop. So those are kind of close and you have your eye on ’em, but they don’t warrant putting an order in yet. And then there’s everything else, which is the majority of the securities. So that goes for, at the time there was probably 60 traded commodities around the world. Obviously there are tens of thousands of stocks around the world, but in terms of liquid commodity futures, say there’s five dozen, there might be 12, one dozen on my list. And even of that, there might be only three or four names where you’re actually putting in an order, for example, for a directional trade. So I would just kind of have to review stuff because if you look at the same things every day, if someone said, okay, where’s may sugar trading? You kind of know where it is because you’re looking at it every day. Not necessarily in real time, but from looking at the chart and where you’re putting in your orders, right? Then for the other names, like say you had 12 names on your wishlist and you have four of them, you have orders on the floor, there’s another eight maybe with those, you’re going to put in alerts and say, okay, well alert me when it gets to this neighborhood. So now I’m going to rely on the technology so I don’t have to use all my brain power. But here’s the thing, I would double check my work in early morning for making sure that I didn’t have any errors. Because if I read in the wrong order and they execute it, there’s no problem with the execution. They executed it the way I told them to. So that’s on me. If I enter it on the screen and I fat finger something that’s also on me. So I wanted to make sure for the orders that I was entering on the phone executions that I had all the math and I’d still make mistakes. What was the biggest one? So in futures, they have this thing called first notice. Now, unlike options where the Owner of the option has control, especially when you think of it from the standpoint of being able to execute, there is no necessarily execution in commodity futures. Bulls want things to go up, bears want things to go down. But you also have this unique aspect of commodity futures that you don’t really see in stock so much, unless of course you introduce, say, pair trading or options. And that’s hedging. And so you can buy hedge and you can sell hedge selling hedges work. When you’re in the production of a physical commodity, you grow soybeans. So you’re along the physical. So to hedge, you’re going to sell futures. If you make tofu or if you crush beans and make vegetable oil, sometimes there’s certain vegetable oils that are a hundred percent soybean oil. So you get the soybeans, you crush ’em, you bake bean meal or 45% protein, and you get soybean oil, which can be used in foods and salad dressings and this and that. And so when you look at all of that.
So when the, lemme just get regather. My thoughts here. You would look at if someone sold futures, it’s because they were long. The physical. Now I’m long futures because I want to make money as a bull, but they’re someone who’s long the physical that’s actually selling the futures to me because they’re hedging. Maybe they think the price levels are right where they’re supposed to be. And at that point in time, you have to be concerned with the thing on the futures contracts calendar called first notice. And that brings into sharp, sharp relief the time when the shorts can deliver against the longs. So in futures, again, it’s the short seller who actually has the power in terms of delivery. Whereas in the options space, the people who buy the puts and calls can exercise them in futures. It’s the short sellers, especially those who are hedging that can deliver the physical to the long. And I would never commit to memory what that date was because you would figure like, here’s expiration and you would count backwards. Now it’s all available on the internet. You click the button and you can see it. But back in those days, the information wasn’t so proliferated around the system to know that stuff. The C B O T website didn’t exist. So it was harder to get that information. So I would be aware of where was the volume, where’s the open interest for sure. And that kind of helped me stay clean for most of the time. But I can’t tell you, it was probably half a dozen times a year, again, over hundreds or maybe thousands of trades I had six times a year it would happen that I’d call in an order. Jira would say, okay, just so you know, say it’s a Thursday. Okay Mike, I’ll put the order in. But just so you know, in case you didn’t know, first notice is Tuesday, Wednesday next week or something like that. And I’d be like, damn. So he’d say, do you want to still put in that order? And I’d be like, okay, let me, let’s cancel that order and I’ll go look at the next expiration. Sometimes it was May, if we were, was the May kay contract the next month not is not always June, it depends on the commodity. It might be July. So I would look at the next commodity chart, then expiration month. Sometimes the trade signal wasn’t there. So that would happen a lot. Well, it would happen enough that I wanted to study and learn what that stuff is. The good news is that the technolo technology kind of caught up and populated everything. So I kind of knew where I would want to start unwinding trades or not even put them on because of this thing called first notice. But what’s going on behind the scenes for me with all of this is that is the main takeaway for today is not to study first notice, who cares? It’s that the most important stuff in your day you should do first in the morning. That’s how you would prioritize. Talk a little bit about intention equals results and time blocking. And in the Time blocking space, you want to make sure that you are in fact putting the most important things that you should be doing for yourself in the earliest part of your day. Because you always want to make sure you can get done the most important things as days go on. And as time transpires throughout the day, you might have something happen to you in your business or in your personal life that throws a wrench in things and precludes your being able to do what you want to do. And if on your schedule you had these really important things to do, it can create a big conflict and that could impact your life. It could impact your trading. Obviously force maur and random events happen. You can’t escape and they’re going to happen to everybody. But that’s why I feel like first thing in the morning, what do I do is largely exercise. That’s when I typically go do my cardio because it’s important to me and I want to get it in. Yes, I know you probably know by now that I study martial arts, but that’s largely anaerobic, right? It’s mostly position. It’s not even about muscle. I mean, you need some athleticism, but you need good technique is what you need. So I don’t need, yes, you need grapplers cardio for sure. But anyway, so I do my own cardio in the morning and then I’ll do my review. Obviously this is very early because I’m in la, just review my orders to make sure there’s no typos or again, I haven’t screwed up the first notice thing or this and that, and I do the review because then it doesn’t cascade, right? And because that’s the most important part of the trading is the risk management, is knowing that and double checking the position sizes, which I largely do unlike a spreadsheet, on a spreadsheet or through the simulator. But then, you know, want to just double check your math to make sure that you absolutely have stuff nailed down. So if you’re struggling with things, maybe what you can do then is isolate the things that you do during the day that you know or you can attribute your success to, and make sure that those are happening earlier in the day than later. Please like and subscribe to the show folks. I appreciate you being here. Keep the comments coming and I’ll see you tomorrow.
Hey guys. Welcome back to the weekly segment that Mike and I do where we go over topics, questions, and comments that you guys have, and see if we can give a little bit of insight on that. Today we have a question from the comments, and it says, being new to this game, I always wonder what are the avenues I should go deeper into? You say indicators are a no-no. Then what are you basing an entry on new, weekly or monthly high consolidation, low or high, et cetera. Before we get into that though, I wanted to say thank you guys for all the supports and for all the support. We really appreciate the comments. Make sure you guys like and subscribe. Click the notifications bell, all comments, help the algorithm, and you may have your questions answered in the next video, like today’s topic. Yeah, yeah, because it’s good feedback. If we’re saying something or I say something that’s not entirely clear or that would prompt a person to do follow up, then by all means let’s keep it as a, I’d like to think it as an ongoing dialogue with everybody. Kind of like a conversation. So the question was, what do I base my entries on? Yeah. Or something. Yeah. Oh, Right. So the thing about indicators, if you’re newer to the game, you don’t use indicators for bi signals or cell signals. What you would use an indicator for, and the only reason I say it this way is because I have a simulator that’s super expensive and I test the indicators against price, volume, open interest in this and that, and none of them is very, it’s not predictive. So I find that indicators are some things that newer traders go to because they don’t want to feel the uncertainty around trading. So they figure if they put indicators on top of their chart as well as looking for patterns, they’ll give them more sense of surety. But that doesn’t exist. So you just have to go to the source of what the issue is, which is to feel the uncertainty around putting on risk in your portfolio. So depending on a person’s timeframe, if they’re looking at intraday stuff at one minute bars, I’m probably not a lot of help for them other than to share with them that one minute bars are very random in terms of data. And two, if you’re looking for 5 cent moves, I think you should set your sites higher, right? Because some of the moves are very pronounced, and so I wouldn’t look at risking a penny to make 5 cents, which yes, I know is an asymmetric return. There’s so much more money on the table than trying to make nickels and dimes basically. And so that’s what I’ve advocated is that it’s hard enough, especially in this market, right? We’re in earning season, I don’t know about you, but we’ve been, we’re not dying, but it’s like debt losses by a million paper cuts. You know what I mean? There’s no follow through for the most part. Everything is down. People are scared. You still have to put your trades on, but nobody is immune. Now, when I get knocked out of a trade, as you know, I tend to add to my winners. I start small. I never put on my optimal position, which is just my style. Some of you, it’s risk on risk off. You’ve got your one R stop, you’ve got your say you’re two, you’re three, your four R, whatever that number is in terms of your upside. I do things very differently in that I anticipate moves that are more like 50 to a hundred dollars in stocks and several dollars for x, for example, in the commodity space. So with that in mind, I can take my time to scale in. I don’t always get it right in terms of anticipating the move, but at least, excuse me, I’m there. I’m there. And I oftentimes will have my optimal size on by the time that the thing actually moves. My intuition plays a big role in choosing both the instruments and the entry points. I’m following the crowd at a poker table, you can’t just play your cards, you have to play the people across the table from you. So there’s a lot of that. What’s the crowd doing right now? The tape seems a little heavy. People are spooked, but that’s just the nature of the market that we’re in right now. It’s not for always. It’s not forever. So I guess the question I put back to the person who wrote the question is what do you think the indicator was supposed to tell you? We know what the definition is. Anybody could look it up online of any particular indicator, but it doesn’t, to me, the indicators aren’t risk on risk off indicators. They’re just there to kind of confirm what you can already see in the price. So what you’d want to look for would be price movement, and then conjugate that with volume because institutions leave footprints. Good spot to start would be to go back and look at the show that I did with Brian Shannon. That would be a good type of a show to look at and talk about volume and how important that is at what price is. There’s a million ways I can go with this. Of course, whoever asked the question can go simulate themselves and just kind of see what’s the efficacy of the indicator that they’re looking at. But I think the main thing here is what I heard in the question is that indicators aren’t green light, red light. The price is right. You’re using the price to enter, not the indicator. The indicator, especially if it uses price as an input, can only really help you confirm what I think you can already see in the chart right now, if you’re using stocks, by all means, you want to look at something that is for sure valuable relative strength and what the measurement is of that, higher the better. But that just puts the stock on your radar. You don’t buy something because it hits 98 in terms of relative strength, for example. Same with a dx on the future side, you’re never going to see a strongly traded, excuse me, a strongly trending commodity that doesn’t have a high X rating. So waiting for some kind of pullback in a D X or some kind of upper threshold. It’s not the point. It just simply tells you the pulse of what’s going on in the market. So what you can do if you’re looking for more pronounced moves and you’re not doing shorter term things like I think day trading, intraday stuff, maybe even swing trading is know where you are in the weekly in the monthlys. Because in my opinion, when you’re looking at something like monthlys, the data are much less random. You’re dealing with every trading day in the month in one bar. So one or two aberrations on a particular day kind of get neutralized by all the other days. In other words, the data is much more meaningful. So if you can see something that looks like it’s going to start to break out on the weekly or the monthlys, now at least you know what you should be looking for in the dailies, and then you could sniper down, even though I don’t like looking at that, using that particular term, because it evokes certain things about needing for accuracy, which you don’t need relative accuracy, but you don’t have to be a scout sniper. So I think this is getting to the heart of the question, there’s a lot of ways to go with it. But ultimately, as I’ve said before, whatever you use, you have to make sure that you’re actually putting on trades because you’re not going to, sitting and ideating on potential trades by looking at indicators doesn’t really help you conjugate your emotional constitution with what’s going on in the marketplace and how you add or remove risk. I think if someone said something about a specific indicator, it would be better. There are a few that are measurements. I don’t look at them in indi as indicators like rsi. To me, that’s not an indicator. It’s just simply a measurement of stock’s strength compared to the overall market. Same with adx on futures. You can look at, again, objective things that you can use that will give you forced objectivity. I suppose if you look at the volume, the volume number is the volume. You can’t really negotiate it with it if you want it to understand, for example, what’s the daily volatility of a particular instrument. You can objectively use say average true range, for example, and give you an idea of what the dollar swing is going to be on that instrument, especially if you’re doing things the way I do it, which is taking risk home overnight and over the weekend. So you want to have an idea, is it predictive? Not in the least, but it does give you an idea like a back test, what the general tone of things are, and that can help you with position sizing, right? The more volatile the name, the smaller the position, knowing if you have a fixed amount of your portfolio as a percentage of your assets under management, that you’re willing to risk on any one particular trade. The first thing you have to do is obviously figure out what number that is for you. Maybe on a hundred thousand account you’re risking say 200, 250 bucks, which would be one fourth of 1%. This way you could be wrong four times in a row and still have 99% of your capital. So it doesn’t destabilize you by putting on too much risk. You might be saying, well, Mike, that’s too small. I’m going to get knocked out. And the goal to me is to play superior defense. So I don’t feel like you need an indicator to help you with that because you can calculate your entry to your exit. Where’s your protective stop multiplied by the number of shares that you have. So buy 20 shares and risk $25 doesn’t matter to me, but I wouldn’t worry about the upside as I would focus on making sure you keep your losses small. And going back to the question, I don’t think there’s really any indicator that can tell you that the crash is coming. You can have an idea by looking at the tape and seeing is there any follow-through on the particular names. Obviously that’s something you’d be more concerned with, I think if you were short term trading. But only because I’ve tested everything under the sun to see if there was any efficacy. I have found that they were good for discretionary traders in helping you see if there’s actually a confirmation. So most of those in indicators will confirm something that you’re in already, but by the time you knew for sure you’d already missed the trade. You see what I’m saying? So indicators aren’t used for trade signals. They’re used to confirm them if you use them at all. I don’t use them. Interesting. I had a follow up question on that. You know, were talking about the market and how it’s kind of death by a thousand paper cuts right now. Yeah. And I know a lot of what you talk about is mindset based, and I find a lot of your information really valuable and applying it in a lot of different facets. But how do you shift your perspective and kind of change your paradigm when it’s a bad market? I know that’s not really an ideal term, but how do you change your mindset and stay positive through the whole thing? So that’s a great question. My mindset’s the same all the time, and I’ve got knocked out of my last six trades. That’s just the way that it works. And I don’t care. You have to put the risk on to be in the trades in the first place. But again, for my style, which is terribly small building into really big positions, I don’t mind whether I’m early or not because I’ve done it long enough to know that this is going to happen from time to time. Again, there’s no real damage to my equity because I trade super small at the beginning. Cause I’m looking for more pronounced moves. It’s not everyone’s style. I think where other folks would be getting out, taking their profits, I’m still looking to add more to get to my optimal position. So again, different strokes for different folks, I just realized that this isn’t a sprint, it’s a marathon. If I don’t, there are certain types of things in life, whether for poker tournaments or track meets where there are qualifying events. I’m already qualified, so I don’t need to qualify anything about myself and my behavior. I know what I’m doing. I know who I am both to myself. I know who I am to the community. I’m starting, obviously when I get more feedback, I learn even more about what I mean to the community. But to me, it’s like I, me, Brandon, I do the same thing basically every day. I know what’s on my wishlist. I know how to put in my orders, the things that I do for downtime. Like this past Sunday, I went to Grand la, and so the Basquiat installment, he’s one of my favorite artists, and I just zoned out and meditated there. I had seen a lot of his work in New York City when I was younger in New York. The drinking age was 18 at the time. And the driver’s licenses, interesting story because I used to see him in Warhol and Bianca Jagger and a boy, George. I’d see them. There was a club in Lower Manhattan on Hudson Street, I believe it was called The Area, and it was the funnest place to go. It was a freak show and it was quite eye-opening for a guy who was teenager. Anyway, there were no picture IDs that were laminated with pictures or whatever your driver’s license or what you would use as Id didn’t look terribly unlike what your car registration would look like, except the paper was green and it was a little smaller. And I’m not saying I did this, but a person could scratch out with a pin a digit because they were those computer kind of printout numbers. But a person could scratch off that ink and then get a big super fine black point. Again, I’m just telling you what I’ve heard other people do, right? In the new, I knew a guy and maybe exactly I, and then write in the new number to make you look as over age. I started shaving in eighth grade, so I looked a little older. So by the time I was like 15, 16, I could pass as 18. And so I’d have the id. Anyway, I was in these clubs and it was great to see the culture of what they did in their downtime because I actually learned what to do in my own downtime by watching other successful people like you can’t be on all the time. And I would seize Jean Michelle. I’d see Andy Warhol, not that we were buddies, I don’t think I said a single word to them, but they were out in that community because that’s in and around where they lived. And I spent a lot of time down there doing what young people do, going out for a drink, dancing, trying to meet women and this and that. And so that was probably one of the better clubs that I can remember. I’m not a big club guy, but back then that was what you did. And it was called Area and it was really good. I think there’s a book about it. They ran themed, the internal part of the club, they ran themes. So every time that you went to the club, it would be a whole other place. But anyway, we’re getting off topic. So I kind of do the same thing day after day for downtime. I train jiujitsu, I paint, I play guitar. I go for hikes once in a while, go to the beach or take day trips and go away for the weekend or do something like that. And that doesn’t really change regardless of what’s going on in the marketplace, because I don’t, I think we talked in Monday’s episode, I don’t personify my p and l. It is what it is. Just like I don’t wake up and see it’s overcast and get upset because it’s not a clear blue sky. It’s just the way things unfold. So I think last, excuse me, week, we talked about what traders do. I think in their downtime was I think that was what the title was. And so that’s what I would go back and look at that episode and find things that are interesting to you in your life that are fun, or things that can actually keep your mind off the market. I think especially right now if you’re struggling because things aren’t following through and momentum in many ways isn’t there, of course there’s probably five names that are out there, whatever that people are trading very well, more power to ’em. I’m just saying that market breadth, if you look at the overall market, some overhang here. So it’s a little tougher to be long these days, but you still have to just follow your system and put the trades on because you don’t know when it’s going to turn. You can’t predict it. So when I think about that happening, I’ve already made that adjustment decades ago, and I take it in stride. And in fact, I take solace in the fact that I trade small at the beginning because when I’m wrong six times, it literally isn’t even a rounding error as far as my equity is concerned. So I just don’t even care. I know that might sound like I don’t understand it. He’s losing money. Well, I’m not really losing money. I certainly didn’t make any. But again, the p and l part is, again, according to my style, it’s, it’s not even really a rounding error. So I kind of take it all in stride, but I built my rules to fit my personality, right? Cause I didn’t want to get all worked up. I didn’t want to be like, yeah, man, going to be president of the United States. Not that I ever want to do that because the things are good and then be down in selling and overcast in my brain because the markets aren’t amenable to my trading style. When I look, I think in the Monday’s episode, I said something, no, it wasn’t Monday’s episode, but it was last week. Maybe it was Monday’s episode. But I remember saying something like, I’m not struggling. It’s the market that’s struggling, right? Because I’m executing everything that I set out to execute, so there’s no struggle there. I put on the trades that I want it to be in. I put in my protective stops exactly where they should have been. So to me, there’s no struggle because I’m powerless over the results. And so why would I get all upset if I put on a trade and I lost money? What the hell did I think was going to happen in the beginning anyway? Even if you have coin tossed odds, right? Half the time, you’re going to be wrong. So why would I be upset if I know that ahead of time, unless I’m a drama queen, which I’m not. There was probably times where I never really was a drama queen. I was frustrated, but I never liked what it looked like when other people became drama queens and kind of put on shows for everybody because it showed me that they lack discipline and internal control. And that just spins you out into, well, I guess that’s the expression you get spun out. And I never liked what that looked like. So I’ve made a promise to myself that I was never going to freak out. Certainly publicly, privately, I suppose you can be frustrated, but that’s just the way that the world works. And the way I balance that part out in my brain was that there were times in the mid 2000, in the mid two thousands, or the mid s for my friends in the uk and China was buying every commodity on planet Earth. And so it was fishing for bluefish in Long Island Sound. You could take a bait list, hook and throw it in the water and the fish will just bite it because that’s, they’re running hot. That’s the way that it works. And in those markets, we were pulling out 20 cent clips in copper, 50, $60 clips in gold. We were taking, again, five. Well, the sugar was more of a longer term trade, but everything was going berserk, and you were in the right place at the right time just by putting your orders in. So I look at the trades today in this week and last week is the same as that in that I can’t predict what’s going to happen. I don’t know who’s going to be buying what, and all I can do is put in my orders and stay out of the results. So again, I want you to detach from your p and l because it doesn’t mean if you’re losing money, it doesn’t mean you’re an idiot. It just means the market is not amenable to your particular trading style. What you do want to do is stick to your guns though. Don’t start trying to beat Paul Tuda Jones and trade seven different ways. If you’re just starting, even pros who have million, several million line of credit, stick to your knitting dance with the girl who brought you. Don’t start trying to do other stuff because the market sucks. Right now we’re like, well, I’m going to buy stuff and now I’m going to sell straddles or broken leg strategies and options. If that’s not your main Batten ball, then don’t get into it right now. What you should do is take five days off and go play golf in Puerto Rico or do something, go get the hell out of town because that’s going to help you not be stupid. And I’m always looking for crutches like that to say, okay, well, why is my, I kind of slang call it stinking thinking. It’s like, okay, I could sit here and be frustrated, but that doesn’t really serve me. So what do I get out of it? If we’re all pleasure seekers and I get frustrated, how can I use that emotion to help me? So I just look back at the charts and do a postmortem and say, okay, well what did I do if I did anything wrong? Where did it go wrong here? Because losing money isn’t necessarily a mistake, it’s just one of the potential outcomes of putting on a trade. So if that’s the case, what the hell are you getting upset about? I know where you get upset. It’s because you’re newer in the business and you haven’t been validated. And so you feel I’m, and I’m going to say you’re incorrect. You feel that winning trades validate you and that losing trades invalidate you, and that’s absolutely incorrect. What you want to look at is, did you put on the trades that you intended to put on? And if you did that and you entered your stops, not mental stops, but you put in your protective stops, that’s the best that you can do. And that’s your behavior. That’s what you should focus on, the outcome you’re powerless over. And to me, a trader is someone who manages risk. That’s what they do. They add risk and they remove risk. Now, granted, over time, you need to know, does your model have positive expected value? Can you actually make money doing that? Which if you haven’t simulated, which many people have in either because they don’t want to do it, they’re too lazy, it takes what they think too, too much time. And admittedly, it doesn’t necessarily predict anything. But in my experience, when you back test and you use very, very specific rules and the forced objectivity of using a trading simulator, models don’t typically turn on a dime and reverse. So if you have something with positive expected value, and the number is say over one, it might go from 1.2 to 1.1 or 1.2 to 1.3. But in my experience, when you back test a simple set of rules over 10, 20 years, 10 minimum 20 better, there’s an ebb and a flow that goes with it. I have never tested anything where it went from 1.5 expected value to minus 0.8. Now in short little windows of time, you can have just like coin tosses, right? If you toss the coin a million times, the probability of a head or tail coming up is 50%. Well, you can calculate over enough how many flips it would take if you wanted to see a run of say, 10 tails coming up at the same time. You can figure that out. And if you do enough trades, just by good luck, bad luck. You’re going to have winning streaks and losing streaks. But they don’t say anything as far as I’m concerned about you as a person or your trading ability. What I would look at if I was hiring people is what was their behavior? If they lost money, did they haircut their capital to trade smaller in order to better dig out of the drawdown, or did they increase their position sizes? Right? Because that to me is much more telling than the actual p and l itself. But people get all worked up in this, especially guys because they get insecure. They want to be able to say that they’re a profitable trader, but it takes a lot of time to get there. That’s why I think a lot of folks can’t make it in the business is because they just don’t have what it takes emotionally. And I don’t mean to sound that way or call someone’s girlfriend ugly, because it doesn’t mean they’re bad people. But if they’re thin skin, this is a business that’s going to beat your ass purple every day. And I’d be lying if I told you that wasn’t the case. So if you’re offended by stuff easily, if you’re, you know, wilt, or if you have strong opinions or you think that your feelings about politics and the rest of the world are facts, there’s some growing pains in ahead of you, right? Let’s talk about indicators, because this market doesn’t care who you are. Doesn’t care. If you went to Avon Old Farm and then Columbia got a cfa, you have an mba, you can have a quantitative degree in applied finance. No one cares. That’s all really for yourself, your own edification and my humble opinion, no one’s immune. And so if you know that coming into it that you have to accept that as possible outcomes. Again, going back to the question about indicators, there’s nothing that’s going to in, there’s no external solution for your internal issues, is what I’m trying to say in a long-winded way. So when you laying on indicators, to me, it tells you where your mindset is, is that you’re insecure and you don’t like uncertainty. But that’s where the money’s at, because risk and reward go together in life and in the markets. If you don’t take risks, you’re not going to have any growing pains. You’re not going to move yourself forward. If you don’t put on risk in your portfolio, you don’t give yourself the chance to win. So I’m not trying to be some kind of philosopher here, but I think that’s common sense in many ways. Does that risk and reward go together in life? And so the uncertainty part is how you get paid. The more the uncertainty, the more alpha you should be able to create. Obviously you need to know what you’re doing. You need to have expected values, and you can simulate that. There’s simulators that you can use for free. There are some that are better than others. The better ones, of course, come at a premium. And so you have to figure if this is going to be a business, is that an investment that you want to make? In my opinion, that answer is yes, but some people are like, nah, I don’t. It’s not worth it to me. So when I look at the emotional equation of that, it tells you more about the person too. They’d rather live with the uncertainty and then bitch and belly ache about it than actually going out buying the simulator, subscribing into a data feed and getting down to brass tax and doing some back testing to at least have an idea. So it tells me again, there are probably budget constraints. But then again, if you’re trading with 5k, you know, have to understand that that’s underfunded. You’re underfunded. There’s not a lot you can do with 5k, but by all means have added, I’m not going to be a dream killer for anybody, because no matter what your trading style is with, especially in futures, the margins can tie up a lot of cash very, very quickly. And obviously with stocks, you don’t have any day trading buying power. Not that you’d want to use that anyway, but I think simulation, look, pilots do simulation when they’re learning to fly. They put in hours, they get instrument rated. So you have to put your time in too. Just looking at charts and trying to trade a pattern because someone else has done it. What’s the expected value of that trade? That’s the question I would be asking more than is a certain chart pattern bullish or bearish? I’d want to know what’s in it for me? What’s my risk adjusted return? How much do I have to put up in order to make what? And what’s the frequency that that happens? So going back to the mindset, this already, I’ve had all those years and years and years of debating this in my brain and living through it in different types of market environments and watching things that I thought never could happen happen. But ultimately, somehow all of that filters down and affects your position sizing because that’s kind of, that to me, more dictates what you make and what you lose probably more. So it’s debatable, but I think that’s probably even more important than your exits or your entries. Yeah. Does that answer the question, you think? Yeah, no, I think you touched on a lot of really important points, and I kind of want to talk about some of them in potentially another episode in a longer form, specifically about the internal struggle because I have some thoughts on that as well. But I think that’s a good point to wrap today’s episode. Thank you guys for watching. We really appreciate all the support. Again, make sure you like, subscribe, press the notifications bell, please comment because we will answer your comments and questions in another video potentially if we think we have something to add to that. And yeah, thank you guys so much. Appreciate all the support. Thanks everyone.
Hey everybody, it’s Michael Martin. Thanks for being here. So as a corollary, t yesterday, I always think about these things after I hit stop record. There were things that I did when I was kind of in the struggle, and again, it wasn’t really a struggle. I just incorporated losing money as struggling, which wasn’t really the case once I gained a different type of maturity. Anyway, the one thing that I did do, which was a mistake, was I started taking flyers. Why was that? Well, I don’t exactly remember why, cause it was over 30 years ago. But when things aren’t working, you can put yourself in a sense of desperation, where you’re going to try anything just to alleviate the pain. Heck, you’ll take a small a hundred dollars win, right? Because it’s points on the board. It isn’t much, but it’s points on the board. And so my advice is don’t take flyers, right? Well, that’s not the advice. The advice is if you do your preparation the right way, you can start to avoid some of these hair trigger responses that are meant to make you feel good. Admittedly, that’s what we do it for. We’re pleasure seekers, right? So I just had to say, okay, well, taking flyers without any preparation, I’m not at that skill level where I can do it. Some treaters can. I don’t think you’re born that way. I do think that you can develop that over time though. So my rule to myself at the time was, and this might help you, is when you do your preparation, you’ll have your wishlist, whatever you want to call it, potential orders, this and that, or where you’re going to put your stops. And my rule was, if it’s not on that document, then it doesn’t trade, which at the beginning was probably harder to do. But after literally a week, I remember feeling relieved because now I gave myself, gave myself a healthy boundary to say, I can’t be watching C N N F N or whatever the show was at the time. CN BBC hadn’t really hit its its groove. I’m not sure if it ever did, but there’s certain parts of it that are pretty good. I suppose I don’t really watch financial tv doesn’t help me trade better, but I can remember letting that type of behavior creep into how I was doing things because I wasn’t desperate, but I definitely wanted a win. I needed to put points on the board. It’s like, how can you explain it? You’re a starting pitcher and you’re losing seven nothing, but you still have six strikeouts. You have something that you could walk away with. So I wanted to have that, something to walk away with for the day because otherwise I was losing money. So I drew boundaries around my behavior and said, okay, I am going to Do exhaustive research. I do it the night before. I know some of you, especially on the shorter term, are doing stuff in the morning. We’re going to talk about that tomorrow and why I don’t think you want to do that. But at any rate, I drew boundaries with my behavior and I didn’t have all the theories then that I do now about human behavior in and around managing risk, especially myself, because I used myself as the Guinea pig. Everything I speak about largely comes out of my own experience. And the questions are really prompts, right? Because the answers are coming from my actual past, a lot of it, which was not, it wasn’t productive in that particular moment, but when you add it all up, it means something because I kept fighting my way through until I finally succeeded. So I would not let a TV story or an analyst upgrade or an earnings upgrade or take over rumors. I would never let anything on the outside overwhelm my sensibility of good risk management. So I would prepare everything the night before and say, okay, here’s where I’m going to start to get interested and start to add risk for the way I was trading. Then obviously things have evolved quite a bit, but the point being is that I want to not let bad behavior creep into what I believe to be good behavior. Because again, I always knew that behavior predicts where you end up. You have to be in the game, you have to be in the action. And so I would write these very detailed order buck slips for all the trades that I wanted, and I would go through that motion deliberately, even though it was probably overkill because I wanted to reinforce it was the repetition of doing that reinforced. So I literally went to the printer and I had this heavy gauge paper printed up in these buck slips. They were probably two and a half, three inches wide and probably five inches long. And I would have the date, the ticker, the month. If it was a futures contract, the price, what was the quantity? Most all those orders were stops. So I didn’t have to all put all the other qualifiers, time enforce good till, cancel, all that stuff. That was not the case when I would write that out on the buck slip. And so then I would enter my orders. A lot of them were phoned in, some of them were on the screen, although I didn’t like doing that as much because if you made an error, it was your fault on execution. Whereas if you call the order in to the trader, some of you might not have account size that are big enough account sizes that are big enough yet for that. But I did, and that was a good, that was it. You know, get what you pay for. You’re paying a premium for that type of service. But for me it was very important because I knew trading errors can happen all too easily, easily. So then when I would call those orders in, I would put the day and the time, obviously the date was already there, but I’d put the time in that the order was placed in, and then who do I speak with on the desk? So I’d kind of timestamp my own thing. Then they’d say, okay, read it back to me. They’d read the order back to me and I’d say, okay, well what’s your tick your ticket number on your desk? Cause it might have been like the first trade of the day could have been the seventh trade of the day for me. And he’d say, okay, it’s ticket one 19. So I’d write ticket one 19 on it as well, and then I would just hold it there and it would replicate that for as many orders as I would have to put in. So then closing bell would come for the various markets because they all don’t close at four o’clock east and stock market does. But futures markets, depending on the market, they all have different closing bells, so to speak. So then at the end of the day, I would call up the desk and I’d go through, I’d do what was called a checkout, and I’d go through all the orders that I had entered and say, okay, is there anything done on ticket 1 19, 1 21, 21, anything like that? Nothing done. Those orders were all good for the day, and so nothing was done. Those orders are there for canceled. But this, although it might seem like it’s overkill, made a moat around my own behavior because now I developed a process that was also super disciplined or more disciplined than I had coming in to that period of time where I was struggling. Now obviously, I went through a lot of buck slips because every time if I put in 3, 4, 5 orders on any given day, again, remember stocks traded in eighths, there was no internet, there was nothing wireless. So everything was phone talking to people. I developed a routine that I was able to practice day after day after day, and that reinforced discipline. So then when I’d, someone would come by and say, oh, it looks like the corn spreads are moving or this, that, or the other thing. And I’d be like, okay, well that’s not my trade. You can trade it and it might make you a lot of money, but just like you have a personality, you have a certain trade, it’s your trading style. So people would come up and say, I’m in this trade or this, that or the other thing, and I’d be great. And they’re like, are you in it? And I was like, no, it’s not my trade. So that’s where I didn’t give my per sense, give myself permission to mis trades. But I also realized that each person has his or her their own trading style. And so I need to stick to my trading style and not feel bad about missing out on things that other people might be in because their style was different, you see? So I encourage them to keep doing what they’re doing. I congratulate them on their success, but I wouldn’t look at big moves necessarily as things that I missed if it wasn’t my setup or what I was or my following my rules. So that was really, really important as far as preparation was concerned. And then I just continued to study my own behavior over time so that I could correct myself. So you have to measure everything. And even though I have a mind, like a trap, it was better for me to write stuff down because I would remember more of the salient points over the course of sure, if it’s Friday, I can still remember what I did Monday very vividly. But as months and months would go by, it was harder to have that kind of recall on the minutiae. So I would write out detailed notes, not as to why I was in the trade, because that’s more of a fundamental type of a thing. For those of you who keep index cards and fundamentals are definitely important. But I think without, let me put it to you this way, I’ve taught CFAs and even they can’t get it right? So don’t sit back thinking you’re Mario Gelli because you’re probably not. And if Mario, you’re watching, thanks for being here. So I would just kind of say, okay, now here are my rules. I’m actually going to write them out. Why do you do that? Because it’s a pain in the ass, right? It’s just so much easier to click the mouse or fill in a spreadsheet thing or do this and that, and it’s all digital. But to actually take pen and paper, and this is just one. Here’s another notebook, here’s another one, this one. So I have notebooks for different things, plus my mouse pad is one of these thing that Jocko gave me this thing when I saw him in San Diego. So look, I want to help you develop the discipline so that you can study your own behavior. I know brokerage firms and other places alike are not going to talk about this because they can’t monetize it. They want to sell you advanced charting packages, right? Because that’s intellectual. And if you’re feeling like you’re lacking, you’re like, I could just buy my way out of this. But it’s not like you’re at the poker table and you can buy your way out of a bluff, meaning you get everyone else to fold and you win. So I think you want to make sure that you focus on things that can help you enhance your discipline. And even if it’s extra work, to me that’s a good thing because then the way I looked at it psychologically for myself, I would never betray my own rules for the mere fact that I was putting in all this extra work and I didn’t want all that work to go for nothing. I knew that there was going to be evolution, and I knew that I was making certain attempts that would seem like it was wasted time, wasted efforts, maybe wasted even money. But like I said, your trading is going to be the best teacher to you than anything else that’s out there. You know what I’m saying? So most of the folks that we consult to when we do that outside of our own trading is they’re already good. They already know how to trade, they just want to refine stuff, and that’s usually behavioral. So at any rate, these questions are really good. They’re really deep. There’s no simple answer to, I’m just writing some notes here so I don’t forget. There’s no real simple answer to a lot of these things because it all comes down to you studying your own behavior, you’re studying my behavior might be good from a role model standpoint. They say model people who are successful, this and that, and that definitely does work. But when you’re talking about trading, it’s so unique because of all the factors that go into it, especially your psychology and your emotional makeup. That’s what makes this so unique is that it’s hard to replicate somebody else’s emotional constitution if that’s not part of your emotional makeup. You see what I’m saying? So the fact that I wanted to sell you a trading system or what have you, to me it’s very random whether or not you can actually use it and stick to it because each trading system like a human being, has its own personality as well. And so it’s like I talked about setting people up here in LA basically, everyone’s really good looking because they’re all in shape. It’s summer, basically 12, it was cold, it’s 50 degrees Fahrenheit, so it’s basically summer all the time. So people are always training and working out and hiking and swimming and doing things and being active. And it’s also, we’ve got the Hollywood thing. So the culture is based on how do you look, feel, and all this and that. And so when I think about trading systems and workout regimens, they’re all very, very different from one person to the next. You see? And if I introduced two people who had similar things on a blind date on a Friday or whatever, and then I talked to them Monday and they were like, Hey, how’d the date go? And they were like, eh. And I’m like, what happened? And they’re like, well, there’s no chemistry. So you’re going to have two very, very good looking people who are successful and in shape and they go out on a date and the thing falls flat. Not because either one of them suck or the people are losers or whatever. It’s just because there’s no chemistry. When I talk about compatibility between traitor and his or her, their rules or trading, I use that kind of stuff the same. Similarly, because I do think folks who have a strong sense of discipline can actually do things on a discretionary basis and replicate that over and over and over again. And it is a fact kind of a system, even though they’re kind of figuring things out largely the day of or the day before. So your goal is to have chemistry with what you’re doing and the best thing to do is to kind of do a lot of different things to see what you like. It’s tasting many things off the menu. I had, I mentioned that in a previous episode, so go easy on yourself. But I would definitely put the extra effort more into the discipline. And if that means doing extra work to make sure that you’re not leaving anything uncovered, then that’s the type of work you have to put into the show. I mean, you get out of it what you put in. Most of the time you’re going to find that eliminating things is probably a good thing and keeping it super, super simple. That’s one thing I learned for sure over the years. Anyway, appreciate all the feedback and the comments and the emails. Please keep ’em coming. If the show resonates with you on any level, please consider liking and subscribing because I get some good data. I can see actually for those of you who are newer, I can see who subs, how many subscribers I’m getting on a per video basis, and that helps me understand what shows and what messages really resonate with the audience, right? So I appreciate that feedback cause I don’t want to spend a lot of time recording stuff that won’t resonate with you or what have you, and taking up your time. I also don’t want to sit and record stuff and waste my time, even though it might be somewhat interesting, if it doesn’t help you move along the path faster than it’s a waste of time. Anyway, thanks very much for being here, folks. I’ll see you tomorrow.
Hey everybody, it’s Michael Martin. Thanks for being here. So today’s episode’s going to be on the following topic. Don’t personify your p and l. What do I mean by that? Well, I get lots of emails from folks who don’t comment on the channel, which is fine. I’ll take it anyway, get it? He said, Mike, I’m struggling. I’m not making any money. Every trade I put on is a loser. And I started to think about when I was coming up and then even after I had attained great trading and financial success. And it’s hard not to when you’re starting anyway, not to get sucked into your p and l, reflecting what your mood is and vice versa. So if a trader’s down and not making money, they can be sell in or depressed. If they are making money, they could feel like everything’s going great and they just won an Academy award. But the truth is, if I were talking to you on the phone, I’d say, are you struggling? Or is it the market? Is the market struggling? Because as long as you have, you know, write out your trades what’s on your wishlist and you put in the orders that you want to put in, there’s no guarantee that they’re going to work out in the first place. So I take it that when you’re losing money, you probably feel bad, and that’s the struggle that you speak about. But the truth is, if you’ve put on all the trades that you wanted to put on, then I don’t see it really as a struggle. I see it as the market not being amenable to your particular trading style, specifically with the names that you were putting in the portfolio. So it’s very difficult to separate that when you’re younger and newer because you need trading gains to validate what it is that you’re doing and who you are. You don’t need a PhD to talk about this stuff either, right? You just need real life experience. So you feel like, man, I’m, I’m really stuck and I’m struggling, but I feel like you have to treat this market as if it’s almost not an alcoholic. But if you had done the 12 steps of Al-Anon, it would probably make a lot more sense to you because you can’t predict what the market’s going to do, and the market is going to probably seem erratic a lot. And you don’t want to tie up how you feel based on how the market’s doing. If all you can do is stay true to whatever your discretionary trading rules are. If you’re a chart reader, for example, or you’re your systematized set of trading rules that you might do with a computer and everything in between, one’s not better than the other. It’s just which is the best fit for you. To me, that’s really the best you can do. And you can still give yourself very high grades, yes, over the long haul, you have to be profitable, profitable, but I don’t feel like profitability makes you a good trader or not. You have to have a good attitude. You have to be coachable. You need to have discipline and persistence, and then the best you can do is put your trades on whatever happens. Once you add the risk to the portfolio is kind of out of your control, the next step would be to put in protective stops. Or if you’re making money to figure out where are you going to remove the risk, right? Or some of it we talked about staying in your winners longer so that you could increase the expected value of a trade. And we talked about how you could possibly maybe scale out of the trade starting at three R, then another third at four R, and then the last third at five R. It’s just something to experiment with and go from there because at that time, it’s like a shopping order or going to Amazon. You’re filling in the fields, you’re entering your orders, and then the best thing you can do is walk away. You can’t control the outcome. So I think if you interpret or see this overall process from say, a 10,000 foot view, it should be a lot easier for you on your psychology in as much that the struggle is kind of made up right now, where can there be shades of gray hair? Well, look, if you’re in a 20% drawdown, that might be weighing upon you as well. But some of the best traders ever have had drawdowns of at least 20%. So I wouldn’t freak out about it in as much as it’s something that you have to live through and it’s something that you have to, the most important thing in my mind’s eye is to not start to over trade and not start trading larger. You actually want to go the other way, because in a drawdown, I understand it’s frustrating and you don’t know there’s a lot of unknowns. So with the drawdown, and this is kind of ties into the question, you’re in the drawdown, and it’s not only you’re not making money on the individual trades, you don’t know when you’re dealing with the uncertainty of the upcoming trade and the uncertainty of how long is it going to take you to dig out of the draw down. So honestly, what I would do, or if I could speak to my 20 year old self is I’d say that’s all irrelevant. You can only focus on the ever-evolving moment of right now, put on your trades, put in your stops, and do the best you can that way, because behavior predicts where you end up. Now, I admit that that might seem a little easier said than done when you’re just starting out, but I think those of you who’ve been around for quite a while and are used to managing risk that drawdowns come and drawdowns go. So you just have to dig out and stick to your method, stick to your knitting, right? That’s really what’s going to happen. That’s going to give you the fastest results the minute you start internalizing the thing and start feeling bad because you’re down. To me, that adds gasoline to the fire because it’s hard to do anything. Well, when you’re coming out of a, I don’t want to say a pissy attitude, but when you’re not em emotionally at your best, we talk about having, you know, have a fight with a loved one or a close friend or your partner and you know, hear the expression of emotional hangover. So when you come to the markets every day like that in that kind of emotional hangover, you know, kind of feel a little bit beat up, that might be a good time to flatten out the accounts. And if it’s a Thursday, come back Monday with a fresh head, go take a long weekend somewhere. Get away. Because grinding, I haven’t seen grinding really work. Putting pressure on yourself when things are already challenging is a very difficult place to trade from. And trading is, it’s not necessarily hard, but it takes an enormous amount of focus and clarity on every day, and you really have to be at your best. If for no other reason that you want to make sure that entering your orders, your stops to get in and get out is an easy process. You don’t want to have to fret over it or second guess yourself. And when you’re in an emotional spot where you feel like you’re struggling, you get what you think about. So the struggle kind of persists, and you don’t want to give it that kind of power. You want to stay in control all the time, always managing risk, adding and removing accordingly based on your recipe. And that’s really the best you can do. They say focus on the process and stay out of the results. I know for newer folks, it’s kind of trying because you might not have put a lot of success points on the board, so you don’t have any after the fact kind of success from an experiential standpoint to back yourself on, and that becomes a real challenge for some people because they need the validation. But anyway, I don’t want to blather on. I feel like you want to make sure that whatever your p and l is, you want to be mindful of it. But the key to doing this very, very well for a long period of time is to stick to your knitting and to make sure that on any given day, the best you can do is put your trades on, enter your orders. All right? You want some additional information on this. We talked about position sizing in another episode, and you can go back. It’s not uncommon for traders When they’re in a draw down or they anticipate that a bigger one’s coming to trade smaller, maybe trade not as frequently. So go back and watch that. In the meantime, folks, don’t forget, I’ve been given away the audiobook version of my book, the Inner Voice Trading. You could get it one of the links below, and if anything on the show is resonated with you, please leave a comment, like and subscribe. Click the bell so you can get alerted when we do new videos. I appreciate everybody being in here. Keep the comments coming and I’ll see you tomorrow.
Hi everybody, it’s Michael Martin. How are you doing? Happy Friday. So I should have mentioned the books that I read when I was younger, cause I know someone’s going to ask and I kind of record these the same day largely cause I need to batch produce them, otherwise they don’t get done and I’m just too busy. So I just finished recording Thursday’s episodes like a couple minutes ago. I, I’m like stupid me. Why didn’t I mention the books? Cause again, there wasn’t any online community. There wasn’t any Zoom meetings or teams or Slack. There were no discords because the internet didn’t exist the best that the next big technological ad advancement were. Those little beepers where the thing would go off and people would look whose number is that? And they’d have all the codes. Seven seventy seven was call home or whatever and they at least spy codes. But when I didn’t know what I was doing, I did need to become edified. But I want to caution you on that, that you only need a little education. You don’t want to be an ongoing student in so many ways because ultimately learning new things doesn’t mean a whole lot until you actually put real money to work. So there were three books that really shaped me as I was kind of coming out of not knowing what I was doing to becoming moderately profitable on the how-to side. Of course there was Jack Sch Swagger’s Complete Guide to the Futures Markets. There was also a great book. It was pretty big book actually called The Futures Game. Who Wins, who Loses and Why By Richard Tools and Frank Jones. And that had trading systems and spreads and all this kind of stuff, which when you don’t know it exists, it’s because you’re like, oh, look at this other way people can make money. But here’s the problem. All that stuff is like if some of you might be parents, you have kids, kid says, dad, I’m thirsty. I’m like, okay, go look in the fridge. What happens? They open the door and they stand there for 45 minutes. Why? Because you got milk, juice, water, you got diet soda, you know, got a whole host of stuff and they’re full of indecision. They’re thirsty, but there’s too many choices. So likewise with trading, really it doesn’t make sense to learn something intellectual. In my humble opinion, you might feel differently if you’re stuck in trading and you’re going to fill your brain with 45 different new trading solutions. I think that’s a disservice because just like the kid who was thirsty at the refrigerator, which is right over there, you freeze because now you don’t know what to do. And I’ve said it before, I’ll say it again. The best teacher that you can get for trading is your actual trading. That’s the best way to learn it, is to just do it. But you’re Like, Mike, I don’t know what I’m doing. Well, and neither did Jeff Bezos when he set up Amazon. He didn’t know his ass from a hole in the ground. He just had a vision. So what’s your vision? Can you envision yourself doing this right? Can you look somebody in the eye, practice this in the mirror and say that you’re a profitable trader even if you’re not, because it changes your psychology. The other book I read of course was Market Wizards. It was actually such a profound, that book changed everything for me because I could see successful traders now as human beings. And I actually have, because you noticed that I have a bookcase next to me. I actually have a whole bunch of books. I have the Ketner book there. Anyway, I have two copies of Market Wizards. This was the hard cover that I kept at home as a reference. And this was the, you can see it’s all yellowed and dogeared. This is the one that I would carry. I carried a it around with me and I would read it on the train. I’d read it we’re going up the escalator. It really had a profound effect on me because it let me know that these people were human. And they eventually became, they were quite well known, those folks back then. But obviously their legend has grown. But the stories in market wizards, let me believe or led me to believe that they were human and they were not exempt from being stupid. And if you look at any of them, there’s always a bunch of stories of humility where they had to pay some form of tuition, mostly because they either weren’t connected to their overall strategy at a hundred percent, or their emotional constitution shook them to make financial decisions. That ended up not being great. Even the great and now retired. Bruce Covner had a soybean spread on and he lifted a leg, went limit up to limit down, lost a lot of money. Now those are good lessons to learn because they help you calibrate your own system. The late great Michael Marcus was taken, I think Thorazine or something because his feelings were so strong, you learn not to chase Paul. Tuda Jones was in the cotton ring and he put on a big trade when the thing was range-bound and he paid a price. So no one’s exempt. So if you’re feeling like you’re doing these types of things, we’ll join the club. It’s a good thing because you have to try, you have to invite failure, but sooner or later you have to pick something that works for you. Then once you make money with that, then you can kind of hone it. I know there’s a sharp pencil out there who can back test something and probably find an indicator that might improve your accuracy a little bit. But I haven’t found indicators being predictive. They only tell you what you already know after the fact, as far as I can tell. So the whole thing of I want to learn more, I don’t think you can. No, how’s the saying go? It’s very difficult to intellectualize strong emotional feelings. Even if you have a big aha moment that people talk about, you still have to put the trades on because until you know what it feels like, right, you’re kind of guessing. You can’t theorize, you can’t. And humans suck at prediction. So don’t even start with me like, oh yeah, this would be a good fit. You don’t know. You don’t know until you put real money at risk. Now, I know some trading firms out there when they’re starting people off, they only give them a small line of credit, which I think is smart. But they also don’t let you lose a whole lot. And the point of that is be, I think it’s a step better than paper trading because you have real money on the line. But two, it helps you conjugate who you are as a person, your emotional constitution with you know how to do. To me, if you come from the intellectual side, it’s kind of easy to learn the how-tos of trading. You’re a, in some way, shape or form. You’re adding risk and you’re removing risk. It’s really not that sophisticated. The harder part is finding the methodology that works best for you. And that’s why I found Market Wizards very much the first one. Anyway, I know there’s been a million more. The second one Victor’s in it. The first one has all the guys that I know in Commodities Corporation and this and that. And so I feel you can learn something from everybody, don’t get me wrong. But I only needed to read the first version of Market Wizards, the very first one to help me understand that these are human beings and I’m really no different than they were on some level, even though they were much more established than me, except what came out of out in 89 ish. So that’s a long time ago. And so I had to go into the laboratory and I think that’s how you should look at your desk and your phone and your hot keys or whatever. It’s not necessarily a cash register, it’s a laboratory to experiment. Now you can put on trades and risk five to 10 bucks. You don’t have to risk a lot. The key is to get into the game and to get a feel, because that feel can help you improve your profitability as well. So go easy on the, I got to buy more books, I have to go buy more courses, I have to do this and that. It might all be interesting and you might be really enthusiastic about being in the business, trying the business, but even if you know, have a 10 million line of credit at a big fund in Connecticut, I don’t want to mention any names, you know, still it’s about your emotional intelligence. The how-to part is not that difficult. If you’re in and you’re trading the energy sector, you know, can experiment by putting on a few small trades just to see how it feels. You might be able to do that in your personal account depending on what your firm’s compliance is. But ultimately all that how-to stuff is fine in paper. But the hardest part is the stuff that I talk about on this show, which is the emotional part of the business. Some people refer to it as trader psychology. I think of it more as emotional intelligence for the individual. You could debate it. That doesn’t really, I don’t know that there’s a winner. You can call it really what you want. But sooner or later you have to take whatever you think resonates with you intellectually and put it to work in the marketplace and see how it works. Even if you’re back testing when you have trading blocks or mechanica, some of the higher end professional prosumer style trading simulators that allow you to test at the portfolio level. Or I have clients who have their own proprietary stuff that was coded in-house by people so they could test anything under the sun. That’s all good because it gives you an idea of is there a positive expected value? Or at least was there one. If you look back over the history of whatever, you’re back testing five, 10, you probably do minimum of 10 years, twenties even better. The reason why you want to do more than 10 is here we are in 2023. Well, by the time you see this, it’ll be Friday, 10 years ago was 2013. Well, in 2013 you’re in the aftermath of oh 7, 0 8. So if you’re going to try to sniper, make sure that you’re back testing through some of the more arduous periods of time to see how your trades would’ve done because it’s hard to make money. There were periods of time that were very distinct. Bear markets where, you know what? 66 to 68, I know some of you don’t care, go back that far, but market got cut in half and we’re talking the s and p, we’re not talking about the semiconductor in index or whatever that nonsense is. So to me, the more objective that you can be, the more wisdom that you get because there’s no otherwise, there’s no, in this, I’m speaking for myself. If I was doing that type of a back test and I was kind of looking at timeframes that made my trading look good, no, there wouldn’t be any integrity in those numbers. And I’m very hard on myself. I’m always asking questions, where’s my blind spot? Where am I wrong? What am I missing here? So those are the types of questions that I ask the folks who helped me come along. It wasn’t about specific trades. It’d be like, okay, what am I missing here? What do the old timers know from experience that I don’t seek? Cause I don’t have the experience. So let that sink in that you probably know enough already to be not just as successful as you are, but perhaps even more successful. And it’s not going to come down to learning more tricks to be. It’s to better understand who you are and how do you feel about taking chances? How do you feel around the possibility of uncertain outcomes, right? Because now you’re dealing also with magnitude and duration. Magnitude and duration. Of course, we can talk about drawdowns because you need to keep your losses small. If you’re watching this on Friday, you could steal a rule from Ace Greenberg, which I use all the time. And that is, if something’s down that I edited during the week and it’s down, even if it hasn’t hit my stop, I just take it off the screen. Because good trades tend to make your money right away. You can use that to improve your trading. But the goal is to develop a system with which you’re compatible. That to me is the most important saying ever. And that compatibility means it’s ongoing, right? Because when you have what you do as a trader, okay, you’re going to evolve as a human being. And so when you look at, going back to my last point, magnitude in duration, that’s both for draw down and for winning streaks. And winning streaks can be just as destabilizing as losing streaks. I’ll cover that on another episode, maybe Monday. But because that’s a big conversation. But nothing is going to help you succeed in trading more than experience. So that means putting on trades. They don’t have to be big whopper trades because don’t, don’t forget, if you’re looking to try to put on a, I think people call them hero trades or career making trades. Career making trades. If they go against you could also be career ending trades, right? Because they go together. Those are perfect compliments you see. So at any rate, please consider leaving a comment. I like the feedback, it helps me grow. Come up with better ideas. Don’t want to waste your time, don’t want to waste mine either. And then the show is for free. Please consider liking and subscribing to the channel. That helps me as well. Makes me feel good that the show is resonating with people, even if they don’t leave comments on specific things. And while you’re at it, if you’d like, there’s a link below in the description where you can get a free copy of the audio book version of my book, The Inner Voice Trading. You can get it for free. Actually have, that’s it here. Inner Voice Trading Forward by Ed seko, published by Ft Press. I got an old picture, an old one. Why do you still use it? Someone had asked me that and I didn’t answer, but I should obviously, since I’ve shaved my head. So this picture was taken by a friend of mine who since passed away. His name was Michael. He died of als, Lou Gehrig’s disease. So it’s of emotional for me to remove the shot cause he was a good friend of mine. So I keep it there kind of as a memorial to him. I should probably update it though, because I can still love him and his memory and change the picture so that it looks more like what I look like now. That picture was taken probably in 2010. But any rate, folks, I hope you have a great, I hope you had a great week of trading and the earnings are upon us. Make sure that you bet the right amounts and that you keep your bet size consistent and I’ll see you on Monday. Thanks very much for being here.