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I want to address a comment that came in on a video. The video was called How to Discover and Define Your Trading Edge, the comments from a man named James Sparks. I think if I read it right, great video got me thinking about how I want to quit after three years, and I won’t go through the details. You can read it yourself. It’s a very heartfelt message, and I appreciate the sharing. I appreciate where you are. I myself had found myself in this place 30 something years ago, and I know the level of despair and despondency that you might be in. The best thing to do, in my humble opinion, is just what you suggest, which is sit on your hands for a while. Think about what it is that you want out of your trading. The comment also, and this isn’t certainly to rub salt into the wound, but it also throws into sharp relief, my opinion of why you really don’t want to follow gurus for your trade selection.
You really have to learn how to do it on your own. If you talk to 10 people about whether NVDA is it a good buying opportunity or Bitcoin is right now, and you ask 10 people who are pros and who are well respected in the community, take me out of it. You’re probably going to get 10 answers and it becomes very, very difficult to trade using somebody else’s ideology. We’re not talking about Christianity or Judaism or Islam, right? We’re talking about a trading ideology that has to be congruent with who you are as a person. Makes sense? So he says, here, I trade futures and God is my witness. I see 10 setups of one strategy make money, and as soon as I take the trade, it loses. And so the important thing is, and again, go back to yesterday’s episode about why I don’t do the chart reading part is because for this very, very reason, and I couldn’t have predicted that this type of comment would’ve come in on the heels of yesterday’s video, and it’s just my opinion, you may feel very, very differently.

The two personality traits are persistence and determination. You really have to learn how to shave your own face, which is a way of saying from the ideation, how do you collect your list, your wishlist? How do you narrow that down to the point where you want to actually put in stop orders, right? You don’t want to act impulsively and buy and sell things at the market. And then really importantly, how do you manage the trade? What do you do once you’re in the trade? I’m going to guess that 90 a hundred percent of you go start looking at your p and l right away. And if it starts going against you, it’s a bad trade. If it starts making you money, it’s a good trade. And the truth is, if you’re following a rule or a set of rules or set up or even a mechanized trading system that has positive expected value, every trade is good, because you should only be trading when you can express your edge. We talked about that earlier the week. What is the edge? It’s when you put on a trade that comes from having a positive expected value in a very simple way of saying it. I know there can be more deep expressions. So as long as you put those setups and those trades on, every time you’re aware of them, there’s a good trade. The outcome in many ways is irrelevant. Why? Well, because you know where your protective stop is going to go and from having back tested or simulated and or using real trading results, the percent of time that you’re going to lose the frequency with which you’re going to lose and the average size of your loss, the magnitude. And so knowing that ahead of time, you become emotionally placated that any one particular trade doesn’t matter.
You also need to know that you’re going to stop focusing on the results of any one particular trade and think about how your winning trades actually grow your account balance, right? Because that’s the goal is to grow your wealth. If you’re going to do this, it’s not to say, I put down a thousand in margin and I sold my trade or got out of the winner for $2,500 gain, you could say, or even $2,000 and say, well, you’ve doubled your bet size. That’s not really relevant in the grand scheme of things because we don’t know making a $1,000 – what does that do to your overall account balance, right? If you’re trading a million dollars, it’s 1/10th of 1%, so it’s a rounding error. Who cares? Why would you get all lit up about that? And if you lost that amount of money, who cares?
Why would you get all lit up about that? So I look at this jiujitsu, how do you get a black belt? Well, it’s simple and easy at the same time. You got to put your guy on and get on the mat and go to class, and the hard part is you got to put the guy on on the mat and go to class every day. And so you need to start to think about this as a marathon. I suffered through four years of culturing the pearl, and I don’t want to say suffering because I knew I was onto something and every day I uncovered more data, mostly about myself because the market was going to be the market. Wheat was going to go where it was going to go, whether I was in it or not, whether I was watching it or not. It’s an independent instrument, and so I don’t get emotionally connected to things that I can’t control.
I don’t fall in love with women who I’ve never met and who I’ve never spoken with because that’s an infatuation. That’s a whole different emotional system that you’d be running. So same thing with trading. I can appreciate that there’s a whole host of people who can do things from high frequency trading to scalping for a minute or two to day trading, to swing trading, and then for the longer timeframes, I celebrate all of it, but I can’t come and say that one is better than the other definitively because so much it is tied to what one resonates the most with you. You may understand everything intellectually, but from a compatibility standpoint, it’s how does the ebb and flow of your capital when you’re running those particular models impact your emotional constitution? Because your ability to make money is really going to come down to your emotional ability to deal with the level of uncertainty that’s attached to any particular trading style.
I don’t think winners take care of themselves. So a lot of times when I would backtest, I would say, okay, who cares about what the compounded annual growth rate is and the Sortino ratio? What’s the drawdown and how long did it last? Because that’s what’s going to be the hardest part. That’s when you see people freak out and abandon their system. They go for broke. Why? Well, they can’t take the heat in the kitchen. So again, I’d love to go over charts and God knows we do that. There’s 150 hours worth of content behind the firewall. But to do that without marrying up the emotional and the psychological to play matchmaker that way wouldn’t make sense. So for James, it might make sense to sit on your hands, go back to paper trading and pick one strategy that really, really resonates with you. Then cut off everybody.
Don’t go to social media. Why would I care what Paul Tudor Jones thinks of Cocoa right now? Because I have to manage the risk here in Los Angeles. He’s a very smart guy, and you can look up to him. He’s given away over $2 billion through Robinhood Foundation and he’s a great human being, but I can’t trade with his risk management rules. Obviously, if he gave me an allocation, there are parameters, and I guess somebody in the firm or whoever the risk manager is that would come knocking on the door and say, here’s your VAR, and here’s what you can do all that notwithstanding, I’d still have to find a way to make my personality work within those constraints or those boundaries. I don’t want to say constraints. That makes it sound like there’s no upside, and you need to figure that out for yourself. So what are you willing to feel?
Are you afraid to do your own research or do you even know how to, because that’s a solvable problem. You can learn how to do your own research, but then you have to have the confidence again in the emotional constitution to learn to rely on yourself. Can you do that? You said you’re 60 years old. Where have you learned to rely on yourself in other parts of your life? Can you borrow that feeling and use it in your trading if you’ve taken direction your whole life and kind of did what you were told? There’s something very studious about that and dutiful, but it’s not going to help you trade because traders are independent thinkers and they’re leaders. I’ve said before about Discords and Telegrams, they can be helpful for two or three months after which point you have to take what you’ve learned, make it your own, and then push your own bird out of the nest.
There’s no reason to be sucking on the nipple when you’re 14 years old, so to speak. Learn what you need to learn and move on. All of my coaching programs have a finite ending period. There’s no way or reason to go on and on and on and blather at the mouth. I don’t want that type of fandom. If I can do my job very, very well, I should be able to get the job done in a finite amount of time and guarantee the results and send you off on your own so that you can go win and take all the credit you’re going to have to anyway. If you win and you make money, that’s on you. If you lose money, that’s your responsibility too. I can’t blame anybody or anything for my trades and the trades that I put on. I have to live and I have to eat my own cook, and I guess is what I’m saying.
So there’s no real reason to get stuck here unless you’re spending too much time on social media looking for validation for the trades that you think you want to put on. So all of that’s curable. You just have to make the decision to do it and to learn to rely on yourself, which is also a teachable skill. That’s the first way to take responsibility, right? Because as traders, we live in a paradigm of personal responsibility. It’s all up to you. I wish you all the best. Thanks very much for being here.

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This channel is about trader psychology and the emotional intelligence it takes from you and from me. In order to be risk managers, that’s what traders are. We add inventory at a certain price. We need to protect our capital, and we need to know when to take winners. If it was just about the charting part, we wouldn’t really need 45 new books every month because all the charts that we’d ever need to learn have already been published and written about, and everybody would be off to smooth sailing. Unfortunately, that’s not the case. The biggest thing that undermines people and their trading is themselves. I had to learn that the hard way. I came from an Ivy League school thinking I knew a lot and that was going to parlay into me making my millions. Eventually it did, but not for the reasons that I thought. The idea here is that if you don’t know who you are, it really doesn’t matter what you know.
So the approach from this channel is to help you understand the trader and the trading psychology and the emotional intelligence so that you can learn about yourself. You’re the biggest asset of your trading, not chart pattern, not your account balance, not your trading style, nor the asset class. It all comes down to you and to me, as far as I can see, the amount of money that you can make really comes down to your ability to deal with the level of uncertainty that you’re willing to endure, and that’s an emotional decision. So I’m not here to preach what’s the best trading style. I’m not here to preach what the best asset class is. I’m not here to say that scalping is better or worse than any other type of trading. There’s probably one at least to start that’s really, really good for you, and then you can expand from there.
To me, it makes no sense whatsoever to sit around and to do chart review when 75 to 80% of trading is about the emotional and the psychological. Now, some of you might say, yeah, but Mike, I’ve never had any trouble with that. To me, that shows evidence that you were just born like me with the right temperament. You have the right emotional constitution to manage. Risk and losses don’t bother you intellectually or emotionally, and if you’re smart, you’re not taking large losses that would destabilize you from financially. You don’t want to lose half your capital so that you have to double your account balance to get back to break even. In my experience, those people are real gamblers and there’s a place for them, but the big thing about gambling is cash management. So I won’t get into that. So I don’t preach here what’s good or bad for you, but I feel from a karma standpoint, I’m doing God’s work in that.
I’m talking and speaking to you every day about the hardest part of trading, which is managing yourself. The math that you need to trade is really simple. It doesn’t get beyond fourth grade math, at least in the Empire State, the great state of New York, you can certainly make it more complicated. You could add a little algebra. You could look at base theorem, right? You could look at the mathematics of expectation. You could look at conditional probabilities, but even still, you can really cover all of that in high school. It doesn’t require a degree in differential equations or stochastic

Or ITOs, lema, right? You can make it that way if that’s who you are and go work at Citadel or what have you, or David Shaw or Renaissance, no problem. I support all of it, but for the do it yourself or who’s at home, who’s not at a trading desk and working, where you’re getting ongoing trading and you’re trying to figure this out on yourself, to me, you’re going about everything best backwards. And the way I like to think about it is this. You’re looking at all these different trading styles and asset classes to trade without putting any work on knowing who you are. So hear me out for a minute. I think if you know what makes you tick and you know why you want to trade and what you want out of trading, not just financially, but self-esteem, what do you want out of it for you, your person, right?
We operate on several levels. There’s a physical level, there’s a spiritual level, which could include religion, meditation, any of that. Maybe do unto others, be a good Christian, whatever that might be. And then there’s the intellectual, and so most people, their entry to trading is learning about the intellectual side. My whole thing is why don’t you learn about yourself first? Because once you know what makes you tick, it’s so much easier to pick the right asset class and the right holding period or the right level of leverage if that’s appropriate for you. Just as an aside, if you can’t trade cash and make money, you really have no business using leverage, right? Don’t worry about getting bigger, make sure you don’t get smaller. So I’d like to focus on this channel as a way of giving back. If you know my story when I started, there weren’t even the Blackberry two-way pagers.
There was no internet, there were no discords, and then anything that you might go to the internet for, whether you’re on a desktop, laptop, iPad, or mobile smartphone, it was who do you know as far as people and maybe reading books? And that was very limited. There’s only so how many times can you ask people who do you know who is a prop trader at Bear Stearns? Who do you know works at Renaissance? So you have to find a way to network. It was much bigger networking environment in that regard, and it was harder to reach people. Why? There was no way to text people. There was no email addresses. So what’d you do? Send the fax. You know what I’m saying? So at the end of the day, I always made a promise to God into the universe that said, if I had any success, I was going to help out anybody and everybody, and the majority of people who watch this channel, I’ll never get to know. I’ll never get to meet. And speaking about the traitor psychology and the emotional intelligence part to me is the most valuable part. It’s where people have the most struggles. How do I know? Well, I can just prove it by the number of emails and comments that I get. People say things like, man, I turned my 401k into a 1 0 1 K. I could have used your help way back when, or I wish I had come across your channel two years ago, or, I’m really

Grateful because I’m just starting out. I’m six months into it. I’ve been struggling quite a bit, but you give me a peace of mind and you help me understand that this is a marathon, not a sprint, and that I’m really trading much too aggressively, or I’m all over the place, or I don’t know what my goals are. This, to me, gives me solace that I’m actually on the path because I’m getting more and more of these types of comments. So I know the message is resonating with you. I could very easily sit and do chart analysis, but here’s the deal. I feel that it would be derelict to come and speak about a chart and then not talk about the traitor, emotional intelligence and the trader psychology part. Now, that part actually takes an enormous amount of time to go through. That’s why it’s behind the firewall in the course, because to go over one chart could take me two or three hours.
You want to see my chart analysis, I’ll show you, but it’s not something that I can do on this channel here. I just don’t have the time. So I would suggest you go through the playlist that I created for you called the Top videos, that those seem to resonate very, very deeply over a very long period of time with the folks who’ve come by and watched the videos and especially the subscribers. So you can do a lot of homework and you could look at each of these videos as a lesson unto yourself, free of charge. I’m more than happy to try to create these videos for you every day to the extent that I have the time to do it. Of course, I batch process ’em. I don’t do ’em every day. I do ’em in batches. It’s the only way I can afford the time to do it, and I don’t ask for anything.
I don’t even ask you to subscribe. I wrote a book many years ago. It was published in 2011 by FT Press / Financial Times called “The Inner Voice of Trading,” and it’s really a book of failure. It’s not a how to trade book as it is a memoir of what I had to go through, which is very congruent to what you might be going through right now. The book has 4.5 / 5.0 stars on Amazon, and I give away the audiobook version. I own that one. The description, the link is in the description. You can get it for free and you can see where there’s parallels. Eventually, I did have to learn how to trade, but as I’ve said before on this show, the best teacher for you is you actually doing it and learning it on the way, that’s really the best way to learn how to trade.
I can help people accelerate their learning curve, but that requires an enormous amount of time. The best part of it is you can do it online for sure, but it’s self-study. I’m not involved. The group mastermind is ongoing, and that gets me into your face. So there’s no place to hide, and that’s where I start to guarantee the results, because as long as you’re willing to do the work and then share with me what it is that you’re working on, then we have something that we can grow from. But you have to be accountable. You have to be ready, willing, and able to do the work.

The 1-1 is even better because now it’s private. It’s just the two of us, and we can rock and roll, but that’s where I can get into the deeper dive. It makes no sense for me to talk to you about how to make you with certain men or women that you might be attracted to, when ultimately, it comes down to chemistry, and I have no way of knowing that any of my chart analysis, if I just did the chart analysis, if any of that would resonate with you. You might understand it intellectually, but I don’t want that blood on my hands. There’s enough people doing chart analysis that you don’t need to see it from me every day because if you lose money, I don’t want that blood on my hands because it’s too easy to lose money even in good markets. So without knowing who you are, this is kind of a know your customer kind of a thing. I don’t want to get into that or even do chart analysis because it could be construed as a trade recommendation even if I’m in the trade. Since I don’t know who you are, I don’t know what your financial means are.
I don’t know if you have dependents. I don’t know if you’re a household with more than one income. I don’t know how old you are, and I don’t know what you’ve set aside for retirement. By the way, do not use your retirement funds to trade if you don’t know what you’re doing, you can thank me in 10 years. So not knowing any of those particulars, which meet MSRB Rule G-19, and New York Stock Exchange Rule 405, “Know Your Customer” rules. It’s irresponsible for me to sit here and do chart analysis without doing 4x as much work to talk about the psychological and the emotional. And although you might be ready, willing, and able to be, “no, Mike, it’s just fine. Just do it.” I get to draw the boundaries, and not to sound this way, but yes, I’m sitting at the head of the table, and this is the way I prefer to do it.
The only way I would bring someone into that type of an audience is if I knew what the environment was and I had a better way of understanding who that person was, and I could speak to knowing more about the person. That would be very, very responsible. Why? Well, most of the people who are doing the chart analysis have a Discord, a Telegram, or they’re selling some type of course on chart analysis, and that’s not the business that I’m in. I do do the consulting, but it’s more on the personal coaching side to help you find a system with which you’re compatible.

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Best loser wins. What the hell does that even mean? How are you supposed to make money if you’re focusing on losing? Well, I think there’s a lot to be said with that. For one, just in the human condition, you want to be a graceful loser, I suppose, but in the trading world, your gains only look like gains to the extent that you keep your losses small, right? That was in the first few pages of the Inner Voice of Trading. By the way, if you’re new to the show, thank you very much for being here. I’m Michael Martin. I’m a Trader and Speculator based in Los Angeles trading stocks, futures and options. I wrote “The Inner Voice of Trading” in 2011. I give the audio book version away. You can see it in the description of most of these videos. You can get it for free. The book itself has 4.5/5.0 stars at Amazon, so I’m told I don’t really look at that stuff.
Egos and pride’s a big banana peel. But I realized when I was first starting that I find myself in some of these winning trades, but it was my reluctance to take small losses that really wiped out the profits. So I might find myself, and I gave the example I think where I was like I had a bunch of trades on. Some were plus 25%, others were minus 25%, and so the equity in the account didn’t do anything. We talked about that yesterday, is like when you look at what you’re making on a per trade basis, how does that move the needle on the account? Because that to me is the number that you’re trying to grow, not necessarily sit there and punch the air. You’re nailing a trade for a small bit of capital. And so that’s when I really learned the importance of needing to offset the losses very, very quickly.
The problem for me was that, and this is not really a problem, it’s a wink wink and the equity side, because I was trading like blue chip equities and commodity futures, which is really what I started to focus on. The problem I had with stocks is that I knew the names. I had patronized the establishments, if you will. I had bought their gooder services, so I knew the company, so it kind of gave me a bias. I was like, man, I’ve been to Wendy’s quick service restaurant, and the guy was still alive doing those commercials. I knew everything that I was connected to, and that gave me a subtle emotional connection because I had a familiarity.
And so I had to let go of that and just say, I got to just look at the numbers. I just have to look at the numbers. And if I buy something at 10 and it goes down a dollar, I wasn’t really buying $10 stocks. But the analogy is like if I’m going to stop and say at 10%, if the thing is off 10% from where I bought it, I have to trade it. I don’t care how blue chip of a blue chip it is, it’s got to go. And I showed in the book anyway how if I had just kept all my losses at 10% from the entry price and I let the winners go over the same period of time, my portfolio would’ve been up 3 or 4% and I couldn’t even demonstrate that I had skill at that point. It was just a function of keeping the losses small.
So you can go a long way with that, and that’s the key, especially when you’re learning. You don’t know where your skill is. You can’t define your trading edge. We talked about that Monday. You have to look at the math. The math will tell you where the expected value is, and that can help you pan for the gold and say, okay, let me further isolate these types of trades. What am I really good at? I might really love options. I love all the sophistication of it and all the moving parts. But if you’re only making 10% on your equity where your stock trading is making 21%, you got to go where the love is, right? You can be an options enthusiast and still watch all the options. There’s certainly plenty of them.
So I had to look deep within myself and say, okay, I have to learn how to be a good loser because it’s letting those losses become bigger than they should. That’s robbing me from the winners that I would get, even if those winners were from good luck or good timing, because at the beginning, I didn’t know any analysis whatsoever. I didn’t really have analysis. I thought I did. But at the beginning, what you think is analysis isn’t necessarily analysis, but you do it anyway. You don’t know what you’re doing and you do have to put in your hours, and that’s why you learn to appreciate money is because you’re putting the time in. So learning to be a good loser means letting go of all the hard work and the hours. For me, it was hours I was putting in hours and hours and hours of studying charts, reading fundamental analysis, asking other people their opinion on stuff, because at the beginning I didn’t know and I was hungry enough to have the humility to ask for help.
So the thing is that I could have decided on my own from day one is that there’s an uncle point. If I put on a trade, doesn’t matter what the instrument is, I have to let it go. And I suppose I’m thinking it’s just hitting me right now. That was one of the reasons why I let go of trading options and interbank foreign exchange early on is because I didn’t know what I was doing. I didn’t have any clues as to where I could go. My own analysis wasn’t helping me, and I felt at the time, I had exhausted all the resources that were most immediate to me in and around trading those instruments. I didn’t need a loss leader on my business. I had plenty of those from other areas. So I said, I could always come back to them. They’re not going away.
Options aren’t going to go away. Although at the time, they were still kind of new. When you think about it now, it’s a gigantic industry, but if you think about the of not over the counter options like what Victor Speria was trading when he was younger, I’m just talking about exchange listed options. When I started in the business, they weren’t very old. It wasn’t that big of an industry at the time, but I was like, okay, I’m going to put that aside. I can come back to it. Let me focus on where I am getting results. Again, whether it was based on good luck or good timing, I couldn’t tell, but I needed to go again where the love was and then isolate the winners from there. And then I think what I did was, which was a little trickier
From a business building standpoint, because you got to remember, I was inside the wirehouse. There were far more people, like 20:1 who were ready, willing and able to have a discussion about a stock, but there weren’t that many people who were up on commodity futures. Never mind how do you trade them. Nevermind the fact that you needed, I think I remember mentioning this in one of the shows, like you had to really prove an enormous amount of financial wherewithal if you were going to open up a futures trading account at that time, and you needed roughly $125,000 liquid in the account with a net worth that I’m sure was $500k to a million dollars. So there were all these litmus tests that you had to go through. So I made it a lot harder on myself to focus on that type of business because it was much more stringent to open up an account. Now, anyone who could fog a mirror can basically open up an online futures account, which I don’t necessarily think is a good thing, but so be it. I’m libertarian probably at the end of the day. So it’s buyer beware. If you go put and fund the account and try to trade it and lose all your money, you have some responsibility in that. Being naive doesn’t make the other side culpable, but you have to figure out why did they take the big, when I started, the S&P 500 contract was in fact $500. It wasn’t $50. And what do I mean by that? It was $500 a point. The margin was $40,000 a contract, which meant it was clearly institutional. It wasn’t a retail product. And so you have to understand that the business, although it makes you think that it’s doing you a favor by chopping the contract into 1/10th, which is what it is, which is why the e-mini a full point is 50 bucks.
It’s 1/10th of what it used to be when I started. I don’t necessarily think that’s a good thing. Sure, they can say that it’s the most popular contract. It’s the most heavily traded. That’s true. But I also remember that in ’82 to ’87, a lot of people lost money and it was a raging bull market. I also know from ’95 to 2000 for all the money that was made, people got killed. Interestingly enough, if you look at ’95 to 2000, what were the darlings of those days? Because the darlings changed. They become meme-ified. Well, you had CMGI and Vertical Net, Siebel Systems, Global Crossing, and people made a killing in those, but those were also the same names where people lost the most money. So you’re going to see that with the Magnificent 7 too. If you don’t have a strategy, if you don’t know what your trading edge is like we talked about Monday, Monday, you’re just in the trying to surf the waves that you have no idea how to surf. So what everyone else might be making money with, you’re going to be losing because you don’t know what you’re doing or you’re doing. What I’m talking about today is you didn’t learn how to be a good loser.
If MSTR and Smart Micro and Bitcoin and cocoa and all the darlings of the day are on the news every day, it fills the bias and makes you feel like you’re a loser. If you’re not in those trades because everyone else is making money, obviously, you’re not going to have a guy come on tv. “Hey, I’m Mike Martin. My expertise is tax loss carry forwards. If you have too much abundance in your life, give me your money because I’ll lose it without even trying. I’m a natural. You just tank your account, no problem. It’s like, I don’t even need to try. I can just subvert your capital and your family and ruin your life. And that’s why I’m on the show here today.” Talk about the other side of it. What a boner killer, right? No one’s going to want to have that on tv. All they do is parade somebody who’s had some success.
We talked about that. I won’t bother you with the details, but it’s lopsided. It’s not there to really serve you, and I don’t mean to be cynical, but you have to kind of see it for what it is. And one thing that you can do is to say, okay, I might understand. So at this point in my career, I understand the commodities markets. I’ve lived them. I am the commodity markets. I know the fundamentals, I know the players. I know the people on the physical side. There’s no information that I can’t get, and that helps me out quite a bit, but it helps me avoid situations that I otherwise might get into because now I have better information. But the single best thing that you can do that everybody can do to help their trading is to keep their losses small. The problem is that people get emotionally invested in the outcome of these things, or they see a $200 move on MicroStrategy and they’re like, oh my God, I couldn’t even get $5 out of it.
But the idea is if that’s not your, then it’s not really a missed opportunity. You have no business being in there in the first place, you see, so when you learn to become a good loser, all you’re really saying is you’re not a loser. It’s not losing behavior, it’s actually winning behavior because keeping your losses smaller is part of the game that’s winning behavior. Let your winners run. That’s winning behavior. Cut your losers short. That’s winning behavior, employing a times stop. Whereas if you looked at putting on a trade and normally that you see the thing move within a certain period of time and it doesn’t happen, the momentum may have stalled, in which case you can just get out of the trade for just a few ticks. So it won’t be big losses or big gains, but you’ll just remove that risk because in my experience, if the momentum stalls right when you get into a trade, to me, sooner or later, it will work against you.
So I never ever give it that opportunity. That’s called a times stop. So learn to be a good loser, not because you happy about taking losers or you are a loser. That’s not what that implies at all. Being a good loser really just means you’re going to be the century on your account balance. You have to learn how to preserve your capital, and that means knowing how to offset those trades that aren’t working out for you right away. Again, I’ll go back to Alan “Ace” Greenberg, who would say, who was running the prop desk at Bear Stearns was one of the best prop trading outfits in the history of Wall Street.
He didn’t care how blue chip it was. If the trade itself was losing money, not even at the maximum spot where it would get stopped, you don’t take losers home over the weekend. What you do during the week, at least for their trading desk was one thing, but even he said if it was McDonald’s or at and t, if the position was down, even three eights, they never took losers home. And I think that’s one of the reasons why they did so well trading is that they never emphasized their losers. And that does wonders for your emotional constitution too, because now you’re not sitting there putting any effort into that. Again, Pareto efficiency. You don’t want to spend your time babysitting, losing positions, get them the f*ck out of your portfolio, focus on what’s winning. How can you add to your winners? The conversation should be constantly going back to what’s working, how can you get more of it? How can you take your unrealized gains, adjust your stops, invest your gains into your protective stops, and then let the winners run.

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Today I want to talk about the secret mind trick of a proven eight figure trader. Please don’t tell me you fall for that bullshit. At any rate, there is something that you can do to put your thinking in order to help you improve your trading. That I use, and I’ve been using for my entire career, well, not my entire career, but I found out about this early on, the little not public secret that no one wants you to know that you could find only in the inner mind of the supermarket wizards, and that was when I put on a trade. Say you got a million bucks, you put on a trade risk, 1% you put on say, so that’s $10k, and the position goes up to $14,000. You might be like, okay, +$4k or $14k total, let’s make it $15k. So now I’m up half a percent.
What I don’t look at is the rate of return on the particular trade itself. I look at how it moves the account balance. So if I had $10,000 and I was up to say $12,500 on the trade, that’s only one fourth of 1% that moves the bottom line. So in my minds, at least the way I think, I don’t care about that, that’s not enough money. Now, I will share with you, given my upbringing in blue collar lifestyles, working class and having caddy golf bags, did landscaping weighted tables, comparing that money to what I used to do for a living when I worked at the mafia joint, I’d make $500 a weekend. That was a lot of money. It was cash and it was the early to mid eighties. That was a lot of money back then, but I can’t compare and contrast the two because they’re really two different qualities of money.
Same thing, caddy and golf bags in Westchester County, New York, that was hard earned money and it was meaningful for me at the time. So if I said, okay, lemme take that $2,500 that I have in unrealized gains based on this position, and I compare it back, some of those times it’d be like, man, this was a whole summer of work, or in certain circumstances, this was three times my starting salary on Wall Street. So what I do, and it’s not necessarily a secret mind trick, but when you start to think, not like, okay, if you put down a $1,000 and you have a trade that’s now worth $3,000, and that happens if you trade futures or options because the margins are smaller and you can amplify your cash quickly. I learned to change or affect my behavior in managing risk based upon what the position was doing for my overall account balance.
That was really the goal was to say, double or triple my account. Now you can say you can build a beach, one spec of sand at a time, but is that really what you want to do when you’re younger and you’re starting out? You need those emotional wins. You want to be validated and you can say, yes, I’m making money and it feels good. There’s two payoffs to every trade and you’re doing it. But what I learned the hard way is that sometimes I was in the right place at the right time, and what I thought was winning behavior was just good luck, which I’ll take because I have to take the bad luck too. So of course I’ll take the good luck, but I don’t want to take the good luck and think that I have skill when skill’s not there. That’s a delusion, right?
That’s why I was always very, very stayed and kind of stoic about things and didn’t get over my skis, if you will, because I knew pride’s a big banana peel and there was no sense because I remember how hard it was to lose. So yes, I felt a little relief when I would win, but I just didn’t know what added up. How did the win happen? What the hell was it that I did? That’s why I talked yesterday about what is your edge. It’s probably not the chart pattern, but it’s the way that you trade it. So you have to document it because your mind will put you into thinking all these different crazy things that are not really based in reality, but based on your emotional constitution and your psychology. So when you write down the data points, you can actually see stuff. They say a short list is better than a long memory, and I still do that even though I have a mind, like a trap.
I remember distinct conversations I had with people 50 years ago. But the thing is about your trading, you really need to look objectively at the data and then better yet, show it to somebody else who just knows the math. Show it to somebody, go to Upwork or Fiverr, maybe not Fiverr wouldn’t have it, but find somebody who knows mathematics and say, look at this data. What does it tell you? Maybe it costs you 50 bucks for an hour of their time to look at the data and have them harvest results and give you some feedback on it. The kind of stuff, I don’t hire the people because I know the math myself, but that’s where the simulation can help you, especially if you’re not looking at one name over two minute bars. I’m talking about making bigger money without having to do a lot of work because in all of that stuff, while I’m not poo-pooing, scalping, I also think in terms of Pareto efficiency, if you have to use time and money as an input to get a certain X output, how can you get that output by using less input?
So for me, it’s about the time. If you have nothing but time and you’re starting out, you’re probably happy to be sitting at a trading desk or in front of a bunch of monitors that do it. For me, we have different taste in women. I just don’t care about that. But if it matters for you, then I’m happy because ultimately, if you win, even if it has nothing to do with this channel, I’m happy for you. I want the abundance to be spread. I think this is a great industry. You can make a lot of money. You can affect your family. You can certainly give away a lot of money as well and help other people out, which you should always consider. But in order to grow your account, you really need to see sizable chunks. And when you think about it, it’s kind of a truism, but you don’t really need to see 45 different big moves across the year in order to have an immediate and a gigantic impact on your overall equity.
You just need to see two or three moves, be positioned accordingly, and then try to stay with that move for as long as you possibly can stomach it. Now, I talk about adjusting stops and all this and that for whatever reason, some of you like to kind of jab and jab and jab and jab, and I’m like, I’m not really looking for jabs. I’m looking for more significant knockout style punches. Now, some of you are going to, yeah, Mike, it’s hard to find 5R. Here’s the old psychological test that people do. Get out in your car, jump on the freeway, and then notice all the Toyota Prius is out there. And what you’re going to find when you come back in is you’re going to be like, man, they’re all over the place. Now, if I give you another exercise for the following week, go out on the street and find all the Teslas that you can find. All of a sudden you’re going to notice them all over the place. So from my mind’s eye, if you know that you can see winning trades and you can go back and study the charts of the seven, the magnificent seven or the darlings, you can look at Coco, you can see all of those things. How hard was it to actually get into that winning trade and then actually sit on your hands?
What was it emotionally about that winning trade that you couldn’t handle that you had to get out of when you did, which was presumably before the end of the day? Now, I know Coco’s a little different. I understand that the margin went from whatever it was, $6,000 to $20,000 now, if I looked at my account, and so I know that’s a little different. I have the money, you might not, so that’s kind of unfair. But those are extenuating circumstances. Most of the time you’re not going to see that where the exchange has to take into account a whole bunch of things to keep integrity of the marketplace there. So they boost the margin to make sure that people don’t get hurt. You could say it’s not fair, but it is what it is. But look to see for all your trading, when we do the mastermind, for example, in the program, the first thing we do is establish clear goals, and I never let someone say, well, I want to make 50% rate of return for the upcoming year. What does that even mean? What does that mean? Why would that be the goal? Why not pick 250%? What’s the difference? You’re just picking a number out of a hat. What are you trying to be reasonable?
So we talk about process. What’s the process that you can follow that will put you in the ballpark or at least on the path to get the returns that you want? Because the behavior predicts where you end up saying that you want to quit smoking or quit drinking or want to lose 15 pounds or want to get a blue belt in Jiu Jitsu or whatever. Those aren’t really, to me, they’re not real goals because you’re putting yourself in a spot where you can envision yourself in the future having physical things that you don’t have now and after you’ve bought enough of the physical things from having made the money that you made either in your career or your trading, you realize the toys don’t make you happy.
If you don’t have a lot of friends and you’ve made a lot of money and you got your place in the Dakota building at 72nd and Central Park West and you got yourself your new Ferrari, you still don’t have any friends and the people who would want to snug up to you, snuggle up to you because you had a new Ferrari or a place in the Dakota are probably not necessarily worth having as friends, but you can be your own judge and jury on that. So we talk about the process that you can follow because it’s the day in. It’s the day out that really predicts where you end up, right? Thoughts, feelings, actions, your actions or the behavior. The behavior predicts where you end up. When people ask me about my promotions in Jiujitsu, they’re like, how’d you get blue belt? How’d you get purple?
How’d you get your brown belt? It’s very simple. It’s simple and hard at the same time. The simple part of it is that just got to go to class, put the gi on every day, get on the mat. The hard part is you got to go to the gym, you got to put the gi on. You got to get on the mat every day. So it’s easy to do one day. It might even be easy to do for some of you for a month, but try doing it six days a week for six, seven years when most of the time you lose and you get beat up. You look at my face. So at the end of the day, when I think about the trading stuff, I was always clear about the fact that I was a broke ass bitch and I didn’t have enough money in that. No one cared about five, $6,000 account. No one in my office where I worked would want to take that account and help that person. So I really thought about it from the 360 degree view. It’s like I’m on my own. It really on your own, no matter who says they’re going to try to help you, you’re on your own,
And there wasn’t enough money in the account to earn commissions and fees to make it worthwhile. Anyone wanting to give me any time, people are basically self-centered. They’re only going to help you to the extent that there’s something in it for them, right? So that’s why, another reason why I did this show most of the time, I mean, I’m not going to know the majority of people who ever watched this show or listened to the audio version through another podcasting platform such as Spotify. So for my activity and for my behavior and for what I wanted out of it, I learned to not care about the small tips I wanted the tables that were going to drop. Like I said, when I worked at the Mafia joint in Westchester, I knew who the bigger players were because I knew who the owners were and when they came in, I knew who they were.
I played stupid, but I smothered their table. I even paid off the bus boys, I’ll have to tell you the story one day to basically run the other tables because I knew not mentioning any names who the namesakes were, and I knew that if I gave them good behavior, because a lot of the money that was coming, it wasn’t. It was cash. It was never declared. So when they went out to dinner, it was big bottles of wine, Dom Perignon, champagne. There was no expense that they couldn’t afford at that point. Kind of what they did is they lived it up. So if I had 10 or 12 people twice a night on a Friday, Saturday, those tips were monster and they were huge. They helped me get through school. But at the end of the day, going back to the trading part, you need to know what you’re doing it for.
I’m not doing it for the small emotional wins. There’s a lot of times where I might be up, say, one fourth of 1% and I’ll have my stop at break even, but I’ll be looking to add more and guess what happens, and it happened last week. The market reverse is down and I get knocked out. So what did look like one fourth of 1% unrealized gain goes to zero, but I will do that all the time. That’s one of the things, hallmarks of my own trading that I do very, very frequently is I’ll invest the gains into my stop is how I explain it, because then it’s a bit of a free roll. Now, if I added all that money up at the end of the year, it might add to another 5%. Who knows? But at the end of the day, I don’t care about that.
I don’t care if I have 40% for on the year or 45%. I don’t care if I have 150 or 155%. You see what I’m saying? Emotionally, I’ve let go of that. I’m trying to find and position myself into the spots where I think there will be bigger moves. I don’t know that there’ll be bigger moves. I don’t know that the three R is going to go to five R, but I’m open to the possibility and I position myself accordingly. You have to deal with the uncertainty. You can’t predict it. Stop trying to think you can. That’s the problem with especially guys, is that they’re insecure and they want certainty. They’re very demanding. Think about it. You want to come to the trading desk and you want validation. You want security, and you want to know shit. You want to be able to predict the future.
You’re in the wrong business. I don’t even know where you could find that. Can’t find it. I don’t even know where you would be able to find all that. So I think it’s very unreasonable. So that’s why that we do that in the mastermind anyway, in week one is to recalibrate the system. What do you think you’re entitled to? Well, you’re entitled to the results that you get from the behavior that you’re willing to take. No one’s given you shit and you have to do it on your own. I can help you. I can steer you, I guess in the one-On-one, it’s a little bit more, I can do a little bit more work paying for my time. But in the Mastermind, it’s more of a mentoring, guiding hand kind of a deal where you still have to do all the work, and if you’re not willing to do the work, don’t look at me.
I’m not going to build it for you. You’ve got to do it yourself. But if you want to make more money, in my opinion, the secret trading hack of proven eight figure traders that they don’t want you to know is think about the gains that you have on any one particular trade and see what it’s doing to your bottom line. You don’t want to sit there making nickels and dimes. If your goal especially is to grow 50 to a hundred percent per year. You have to figure out what that is. The good news is if you go back to yesterday’s episode and you know what the expected value of a trade is, you’ll be able to calculate how many trades that you need to put on in order to get the percent and the dollar value of what your goal is. So it changes your thinking. You’re like, wow, I’m too narrow minded here. I’m sitting here trying to make day trade for 150 bucks, and I have this as a financial goal. Mathematically, it’s never going to happen because there’s just not enough trades in the universe of the instruments that I’m looking at.

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After all the books and courses and the experimentation, sooner or later, you have to get down to brass tacks and define what your trading edge is. Now the problem is, is that if you ask 10 people, even at the pro level like where I’m at, what’s your trading edge? Half the time they can’t even tell you. So I’m going to give you a simple explanation. You have to experiment, right? So I don’t want to talk out of both sides of my mouth, and that means you’re not really expecting to win or build a career on this particular aspect of your trading. You’re trying to put it on for size. So when I was learning how to trade, I realized there are all these different chart patterns, but what made them all unique was that every trader who was trading them would trade them a different way.
So I started to understand a little bit more about the nature of trading is that it’s not necessarily the chart pattern, but it’s how you trade the chart pattern because you can show head and shoulders or cup and handles to some people and they screw it up, which is hard to imagine, but they do. So I realized there was a little more to trading than meets the eye, that it wasn’t just a book of chart patterns because look, if head and shoulders down represented one thing or head and shoulders up meant another thing. How come there weren’t more people making money if the damn charts were so obvious? That’s the big pink elephant in the room is like if these charts are in fact bullish, how can people trade them and still lose money? Because losing is what losing does. So the simplest way to understand it is to segment your trading by pattern probably and then figure out what the expected value is because at the beginning you might not know or recognize or be able to understand what it is that you actually bring to the table.
In the world of trading, it’s hard to see the fire sometimes when you’re standing right on top of it. So it might make sense for you to just look at the math and say, okay, I might like this one particular pattern better, but this is the one where I’m actually getting the results. If you look at the data, you’d be surprised what you might find. It’s true, and it’s happened with me plenty of times, which is why I started to look at the data, look at the results, look at the math. What was my frequency of winning? What was my frequency of losing on certain setups? And again, I use mostly data, not chart patterns, but at the end of the day, they all work. They all can work. Lemme say it that way. The key to having the trading edge though is knowing that you can make money if you have the patience, which is a mental part of it, to sit on your hands and wait for that setup to show up.
Where you can get sidetracked is if you’re looking at one instrument because your account is small and you’d only have so much margin. You might find yourself forcing trades that you have no business being in because you’re watching the market move. It’s not your setup, but you have to be involved anyway. You can’t take the emotional pain of not participating. You see what I’m saying? So that’s one of the reasons why I poo poo small accounts is because you want to be in the game. You’re the sixth man on the basketball team and you can’t wait to get in the game, but when you’re underfunded, you’re the small banana in the crowd, and that’s just the way it goes. So you have to have an extreme amount of patience to be able to sit on your hands and wait for that setup to show up.
Otherwise, you’re satisfying emotional needs, not necessarily a financial one. Now, I’ll be the first one to admit that it feels good to make a winning trade, at least it was at the beginning of my career. At these days, I don’t really care emotionally about the outcome of any one particular trade. We’re going to talk a little bit about that tomorrow in the secret mind trick that I use because if you don’t put the word secret or millionaire or eight figure in the fucking title of the YouTube video, no one’s going to watch it. So I got to start doing that, right? Obviously, my videos suck because I don’t say the secret trading tactics of a proven eight figure trader. Go ahead, buddy. Good luck to you. At the end of the day, the mental game is the most important part of it, right? Plus half of these people, the deal joke is how do you make a million in commodities? Well, you start with 2 million, so I don’t trust anybody with titles like that, but you can do and figure out what’s best for you. I’m not here to preach I, so in the simplest definition, check out the expected value of a trade. It’s easy. You’ve got the math, you keep a trade ledger, you should keep that anyway, just to keep a diary of what it is that you’re doing so that you can put your behavior down and keep track of that over time. The importance of a chart pattern in and around that.
I have mixed emotions about chart patterns. Again, because you can look at ’em, you can study ’em. I know that there are guys on Twitter who pump out this, I call it nonsense, right? Because when I look at it, it’s like it’s filler content really. It’s like the rue that you put in gravy. It doesn’t really help anybody because then they’re looking at the chart and they’re like, damn, is that a head and shoulders? I guess you could look at it that way, but the thing is over here and it’s too small and it’s this and that, and it’s like, so I have mixed emotions about chart patterns being fail safes, like being definitively bullish when I know, and I’ve witnessed plenty of people losing money trying to buy things long when they should trade less frequently, I guess is what I’m saying, and I know that’s the hard part. You have to figure out what is it is that you’re doing, why do you do what you do? And

That’s the part that no one really talks about. I try to speak about it as much as you can because I know that’s what’s going through your brain when you’re sitting there in front of your desk like, okay, I see this thing. I got my account set up. I got all my charts, and so-and-so’s telling me this is a bullish pattern. I’m seeing all these tweets and blog posts and other social media mentions of everybody’s favorite darling stock. I’m not participating in that, and then you’re so confused, you don’t even know what to do. So I would, again, keep it super simple. Pick one, pick one, and then trade it because it is going to be your uniqueness. That’s the alpha of the trading. If beta, it represents the market. The alpha is what you bring to the table above and beyond what someone could do if they just did buy and hold.
So I would think the best thing for you to do is to experiment knowing that it’s not necessarily about building a track record from that point, but it’s about trying to get a feel so that as you execute the trades, you can figure out is this a trade setup for you? I know plenty of people who don’t trade cupping handles, for example, even though it seems to be popular and why? Well, it’s just like, why did you pick the partner that you’re with? This is probably good chemistry, right? So there’s no definitive right answer for all of this, right? You can buy, heck, I’ve been given a million books on technical analysis. Frankly, I find it exhausting. It’s like there’s just too much to know, and I can’t take each one of those data points, if you will, and turn that into the proverbial fortune.
You really need to pick one or two things that you’re really, really good at, and then take solace in that and execute that day after day after day. And so if you have positive expected value, I would say then therein is your definable edge. Start with the expected value, right? There’s a video on this YouTube channel on how to calculate it. It’s pretty simple stuff. It’s not that sophisticated, but it does show you the evidence that for that particular setup or chart pattern or whatever it is that you’re using to enter adding risk and then removing the risk, that net net of all your activity, you’re actually making money, including the fact that you might not win as much. I mean, you might not win as frequently as you lose, but your winners are many multiples the size of your losers. So that this way over time, over hundreds and hundreds of trades, you know that you are now the casino.
That’s your trading edge. That’ll help you be able to define what you’re trading trading edge is for you, because you can’t just say, well, I’m trading cup and handles, or I’m trading 1, 2, 3 reversals, or I’m fading two B reversals. That’s all great, and I’ve done them all myself. But you have to go back and then look at the math and see which of these proved profitable for you over many, many, many, many trades. It’s a mistake to think like you did one thing once or twice that you’re onto something. You could certainly give it attention and try and try your hand at it. Especially trying it across many instruments is probably the biggest test. Now, you’re very robust. You don’t want to find yourself day trading or trying to scalp on one instrument, on one pattern, because in the short run, you’re not going to know if you were just in the right place at the right time.
The ego wants you to be like, yes, I’ve made it. I’ve conquered the world, and I’ve had those feelings, but there’s not enough scientific evidence to prove that that wouldn’t hold water in. I wouldn’t allocate money to you. You had a good week. It’s not enough time. You’re thinking about years, right? The money’s hard enough to come up with in the first place, so you really want to make sure, even if you’re back testing, I say minimum 10 years across any 60 different instruments minimum. Now, the problem with that though is that there’s still problems. There’s lots of problems. One is that you don’t include oh 7 0 8, when we had all that subprime morass emphasis on the second syllable, right? You’d missed nine 11. You don’t know two. Then if you look at the data, we always have survivorship bias to have to think about why.
Well, if you look at what happened in that period of time over, I’ll just think about a few things. From the last 30 years, you had companies go under, companies go broke. Well, guess what? If you type in the ticker ENE, which was for Enron, it doesn’t come up. You can’t see the data. Why? Well, you can’t trade it. So the folks who are the data providers are figuring, why would we even put that in the dataset if it’s gone for good, right? So you have everything that failed, right? You have Bear Stearns, which was BS, C, that’s the out, LEH for Lehman. That’s out. Then you have the companies that did get taken over, like when the banks were hot and glass Tiga was appeared and everyone was accumulating. The bigger companies were accumulating the smaller banks. You had First Tennessee, you had Bank Boston.
They don’t show up either. If you type in BKB, which I know I’ve mentioned before on the show, that doesn’t show up. FTEN, which was First Tennessee. That doesn’t show up, and they were good companies, but still all you can see are the survivors. Now, they might’ve been rolled up into other successful companies, so you have to follow other tickers. But the point I’m saying is that if you go back in time, 30 years, when all those tickers were alive and kicking and you had a trading model or you were trading setups, you’d want to know ahead of time if your thought process or your methodology would have put you in those trades, especially long trades in the companies that went bust long trades where the companies got taken over. Maybe you have a knack for that, but you would never know it if that data’s not included.
So of course, it’s a pain in the ass. You have to go actually buy that data and add it into your data pool. You can get it. But as I suspect, not to sound like a party pooper, most people are too lazy to do it, or they’re too cheap to spend the money, or they’re like, Mike, I’m in trades for two minutes, so what do I care? You’re right. What do you care? But I don’t want to be sitting in front of the screen all day long waiting for that two minute window. I can say that after 36 years, my time is worth more. I’d rather be painting. I’d rather be watching. I’d have MLB tv. I’d rather be watching and baseball games than scalping, but that’s just where I am in my career. You can do what you think is best, but at any rate, in order to define your trading edge, you’d want to look at the data, not necessarily the chart pattern, and say, okay, this is my savior.
The savior is your behavior around the event itself. Because again, if those chart patterns were definitively bullish or definitively bearish, we wouldn’t need any more books. You wouldn’t need to have a CMT because the evidence would be there In the book, this is definitively bullish. This is definitively bearish. This is how you definitively put on spread trades with options, futures of payers, trades in equities, and that would be, it wouldn’t need. It would be so definitive and so crushing from an argument standpoint that there wouldn’t need to be anything. You wouldn’t need this channel. But at any rate, so look at the math, calculate the expected value, and then you can reverse engineer it and say, okay, this is how I define my trading edge. It might be different. It might be better than mine. I hope it is. Then you’ll have a really great career. Anyway, if you like this video, check out this one.