Everybody happy Monday. Michael Martin, here it is a holiday week in America. So I think I’m going to end up having a short week, which means we’ll probably have episodes today, tomorrow, and Wednesday. And then we’ll pick it up the following Monday. It is Thanksgiving holiday on Thursday and it’s a big deal here. It’s kind of the beginning of holiday season.

So anyway, I have a few things though. I’m going to do some follow up this week just to kind of answer or re-answer some questions with some more data, if you will. But first I want to give a shout out to my friend Alice in the UK. Thank you for all the wonderful things that you’ve said about me in the show. It means a lot to me, more than you’ll know and keep listening. I hope to meet you one day.

Anyway, the question came in about reading books and this and that, and I’m definitely looking forward to some books that are coming out. But at the end of the day, for the newer trader, when you are learning your craft, you should be doing the trading. Even paper trading is better than not doing something. The key, again with paper trading is that you’re not really losing real money. So your emotions are not necessarily getting amplified the way they would when you have real risk going. And I have found, or I certainly have evidence from some people, that when you are in Discords and when you’re reading books, you’re doing things to avoid the feeling of the actual trading.

Now, that might not be true for everyone, I admit, but more times than not, when I’m speaking with folks who are just kind of starting out and they’re like, well, I got this book and when I’m done with this book, I have these three other books, and I’m like, wait a second, you ought take it easy with the books?

Read one book, take two or three ideas out of it or however many you have, and then put those ideas to work, backtest them, trade them, because there is no magic set up. There’s one or so that might really resonate with you, and that’s my experience. Most people aren’t trading seven different setups. They have one or two indicators that they look at, if any. I don’t use any myself, but other people do. I tend to think that the price kind of tells you everything that you need to know, and the indicators typically kind of confirm what you can already see in the price.

Some people need reassurances, not just in trading, but in life. And I think the best way to build one’s confidence is to actually do the trading, realizing that people typically have loss aversion and they’re risk averse and blah, blah, blah. So with all that, you have to realize that your initial grub stake in trading is really just points in the game. You can’t really take risk without losing some money and not take it personal. So I would put myself in the emotional standpoint or in the place that I could lose all this money and I’m still going to be okay. because if you try to avoid trading, you really rob yourself of the education because you only get the education, the real education as far as I’m concerned, from managing real risk. That’s where it all kind of happens. And I thought about that for a long time because I thought, well, maybe people shouldn’t trade until they know what they’re doing. But it’s a Catch-22 because you really don’t know what you’re doing until you go and you’re try and you do it right.

It’s like anything in life that comes from experience or that’s experiential. You can talk about sex all you want, but until you’ve gotten naked in bed with somebody, it’s a whole different ball of wax despite how much you’ve seen in television shows or how much erotica you might read. So same with trading. You have to get into the game, start managing some risk even with a small position size so that you can see and feel how you’re going to react to losing real money. Then you’ll find out also how do you feel about making money? Are you going to be one of these hair trigger guys who take your profits too soon? Or are you going to let the thing run and let the market do the work for you?

So if you find yourself in the spot where you’re looking for a new video channel, a new discord, a new book, a new course, you might really just be doing something to avoid the feeling of losing the money in the first place, which is really what’s holding you back, not the lack of information. Anyway, thanks for being here folks. Please consider subscribing. And if you haven’t already gotten a copy of the audiobook version of my book, The Inner Voice of Trading, you can get that at MartinKronicle at the top right corner.

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Hope you’re doing well. Hope you have a lot of fun plans for the weekend. Get your mind off the markets. So we talked about mental attitude and then journaling and then using certain language with yourself to try to tap into your subconscious. Because oftentimes you might be compelled to do certain things and you’re like, Why did I do that? You don’t have a really good answer for it. It could be because it’s coming from learned behavior that you picked up in your youth and you’ve learned to have this type of self talk with yourself, which doesn’t actually help you. Sometimes it’s from an overbearing parent, you couldn’t do anything right? I have a friend of mine in the northeast who’s kind of undoing a lot of that now because caused a lot of self doubt because he had a parent who was a little overbearing and always reminded him about how he could be doing things better.

And so when you feel hand pecked like that, you start to do it to yourself. And so be mindful of the self talk. You might even write that down and then investigate like, okay, where did that come from? Why do I speak to myself in a way that I wouldn’t let other people speak to me? Because when you come to the marketplace, and I didn’t certainly invent this, but I’m really good at understanding it. You might be playing things out that have nothing to do with trading, might not have anything even to do with making money, but it could be to try to either heal or to better understand the kind of things that you picked up from your nuclear family in the environment that you grew up in. So that can help a lot in your subconscious because when you go through that, if you have an overbearing parent for example, and you go over it day after day after day for whatever could be up to 18 years before you go to college or something like that, you have so much learned behavior around that that it kind of became in the background.

It just was there all the time. And you stop to notice it. It’s like after you put on a spritz of cologne or perfume after five minutes you’re like, Did I put on perfume? Everyone around you? It’s like, yeah, what did say one application per bottle for the love of God? And you’re like, Yeah, I’ve become kind of immune to it. You’ve become unaware of what everyone else can kind of see. It’s very difficult to do. So at the end of the day, if you write that stuff down, it can be very, very revealing. Maybe not right away, but over time you could say, Okay, I said this to myself today after I got out of a winning trade.

Is that or is that me replicating something that I picked up from my household when I was growing up? Especially a valuable to you if it’s negative talk, it could have been things like, why are you trading? It’s legalized gambling in, that’s like when you’re older, when you can look back to your youth. Did you do well at certain things but always get advice about how you could have done things better, faster, this and that, as opposed to just being loved and understood for who you are. I’m not saying that it’s easy to be a parent. Everyone reads What to expect when you’re expecting, which is the big book, and then after that there is no playbook. It’s completely winging it. You’re flying by the seat of your pants and you kind of have to make it up as you go. You try to be consistent if nothing else, but there’s really not a lot there that can help you.

And then you get into all this kind of political stuff in the family and so has certain opinions about how you should do stuff. And then especially with the in-laws. Both sides of the in-laws have ideas of where you should go, where you should live, how you should live, what you should do for a living, how you should raise the kid, how you should discipline the kid. And it’s like, listen, it’s my kid, I’ll figure it out. Thanks for the input. You have to draw boundaries that you might not have been able to draw when you were younger, but if you had that kind of meddling parent, which to me, look, I’m not saying something, but I am saying those are the worst people cause they think they’re loving you. I teach Jiujitsu class quite a bit and you can see some of the parents walking out with their kids and they’re super competitive parents.

They’re like the notorious baseball dad…” I’m spending all this money on hitting lessons and you can’t get the bat off your shoulder.” That doesn’t help the kid. It just humiliates them and that doesn’t make them want to, you know what I mean? It’s like the leader that want, Do you want the people to love you or to fear you? You’re not going to get the best out of people by intimidating them and brow beating them, so don’t do it to yourself. You are probably perfect just the way you were given everything that you could possibly know growing up.

And so it’s very tricky when that stuff to show shows up in your trading. You might be trying to demonstrate something or teach. Imagine if you were trading because you wanted to prove your parents wrong. Is there another way to do that without putting a lot of capital at risk when you perhaps don’t know what you’re doing? You see this stuff is crazy deep and it’s in your subconscious. So unless you put some time into really thinking about it, especially when you think about what emotional needs are being met here.

Are you trading because you’re giving a loved one or a parent the big middle finger that becomes expensive. It’s an expensive way to do it. But this is the beginning of how you can uncover what’s going on in your subconscious and why you might need that $150 win. Is it because you want to hang it on your refrigerator and get the gold star so that you can get your parents’ attention and their praise, for example? You can fill it in with whatever person and situation is going on in your life, but that’s kind of like the analogy.

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So there’s an old joke in the real estate market when you go in and looking at a spot with your husband or wife and what are the worst words you could possibly hear is “honey, I love this place” because then it’s not a function of negotiating for the price, it’s the person who’s emotionally invested and needs to get the house at almost any cost.

So there’s a kind of similar situation in trading when you’re in a position and it works against you and you hear or you say and you’re speaking with somebody or you’re kind of negotiating with yourself and you’re like, “well let’s wait and see.”

This expression is going to open you up to untold losses because if you’re in a spot where should be taking profits but you don’t want to because you’re afraid that thing’s going to rally in your face after you take the loss or get out flat or whatever it might be, realize like that’s an early indicator for losing a lot of money when you get into that space.

I would almost make that a rule. If you have this hair trigger response, which I know is a sensitive term for many guys and you find yourself, well it’s not really working out, it’s not losing me money or it’s not losing me a lot of money, I’m just going to “wait and see.” Now you’ve become an investor. And whereas I do believe trades can become investments, especially if they’re up. You don’t want losing trades to become investments. But I’ve held winning trades in the futures markets for six weeks or more. Same position. So I don’t want to hear anything about how you have to offset stuff at the end of the day. Yeah, I know some of these funding platforms force you to get out of trades, but for the most part, you’re going to be better off holding onto your winners in your own account for as long as you possibly can, because the market will do the work for you.

There was a time in, I think it was the March Sugar of 2006, that thing went parabolic and I had been buying it from 8, 9, 10, wrote it up to 14 and I didn’t get out of the trade late September. It was late September through October where I was adding and then I didn’t get out until early January and I got stopped on a piece because I was trailing my equity. And then several days later the up trend continued and I actually came in twice as much at the time it was trading at historic highs. But those instances are out there where you can just ride the thing for as long as possible.

Position size to the point where you can withstand emotionally the daily swings. A good thing to do too is to get off of the machine. You don’t have to sit and watch it all day because that will induce you to do stupid things with your money. You think it’s putting you in control, but it actually works against you as far as having things work against you. It reminds me also to bring up the concept of time stops. If you put on a trade and you bought something at 25 and it’s sitting there for two days, it’s time to go because whatever you thought was the catalyst – presuming it’s a trade and not an investment – whatever you thought the catalyst was, it’s not working. And so you have to offset the trade that’ll save you a lot of money. It seems like you did a lot of work for nothing, but the main thing is to play superior defense, and that means to preserve your capital.

So if you find yourself in the mindset where you’re like, “Well, let’s wait and see how it goes,” you’re kind of delegating responsibility to some non-existent person in the future when you should be doing that. Taking action right now, especially if the thing is down. Good trades, meaning profitable trades start to make you money very, very soon right away because you’re buying with other buyers. And if that’s not happening, you have to look not necessarily at the price, but what are your criteria for entering and adding risk to your portfolio? So again, I find that very, very valuable. If you’re kind of lassez faire about something, you have to remember there’s money we’re talking about.

And if you’re going to be lassez faire and be like, Well, we just wait and see it. It seems to be a negotiating tactic that people use with themselves to kind of stop from doing what they should be doing, which is taking out sub-optimal trades out of their portfolio.

Anyway, keep all the questions coming, folks. I appreciate it. I don’t have all the answers. I only have those that I can speak to from my own subjective experience and if that helps you, then great. But I always appreciate the feedback and the new questions. Thanks for very, very much for being here, folks.

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It’s rainy season in Los Angeles. We live in a desert. We very rarely get precipitation from the sky. Oftentimes you might wake up and see that there’s moisture on the ground, but it’s very interesting here because most Angelenos learn to drive in what is effectively summertime for most people because the weather here is normally amenable.

I grew up in the northeast and so we had to learn to drive in four distinct seasons. That means dew on the road in the morning, it means black ice in the winter, roads that aren’t paved, roads that are paved, but not completely salted. Rain, wet leaves. So there’s a million different combinations. So you learn very quickly that it’s one thing to drive. It’s another thing to know how to handle a car. What happens when you go into a skid, for example. Typically you have to turn into the skid, let your foot off the accelerator. You don’t hit the brake, and you kind of steer your way out of it that way.

And it reminds me about journaling. We talked about journaling. I think it’s a very unique situation in trading. What I find when a lot of people journal is what they’re really doing is keeping a General Ledger. That means at 7:51 AM on Wednesday, I put on a trade XYZ at this position, at this price, yada yada. And then when you get offset for gains or losses, you enter that way. I think writing it in a form of a diary can certainly be helpful. I think if you, right, because now we’re speaking today about managing the trade on some level and what can you dissect from that experience? Put it down in writing because as they say, a short list is better than a long memory.

People tend to forget from day to day to day. So the things that I would include in the journal entry would be how did you feel putting on the trade? Were you excited about the prospect of making money? Did you have a great sense of anticipation? How can you describe emotionally the work that you did or didn’t do? Right? If you’re winging it, put that in there. If you’re shooting and taking a flyer, testing an idea, put that in there. So that this way, if you were a detective and this was all the data that you had from your investigation, what could you conclude from that? Because that’s the only way that you’re really going to grow, is by being your own teacher. In a lot of ways. You could talk about your expectations, as I like to say, and I certainly didn’t invent this. Expectations have built in disappointments.

But nonetheless, people do things with their money that you can’t really explain. You could talk about where did you originate the idea? Is it something that you did from the screening processes that I showed you? Or did you pick this idea up in social media or TV? So this way you get to track everything because then as you look at your p and l and you see the number of trades you can kind of reverse engineer where and how can you possibly develop a trading edge, if at all possible? You see? So this is very valuable information, but I would approach it journalistically as much as I would like a diary so that this way you have quantitative and qualitative information that you can go to school on yourself. Now, personally, I don’t know if you’re going to see anything valuable in a week. Maybe you can, but you want to think about doing this, Maybe writing for five minutes before the open when you’re about to start trading and adding risk.

And then at the end of the day, as a follow up, what was your beginning thoughts, your ex anti expectation versus your ex-post realization? What happened versus what you thought was going to happen? And then you can reconcile that because then when you can find out the variance, like what happened? Was it your behavior? Was it the market? And then how can you adjust your behavior to take into account the unforeseen, the numerous, unforeseen things that can occur? And remember, we make our money and lose our money mostly because of position sizing. So you don’t have to worry about your entries so much. I’ll say this as an aside, if you’re worried about 10 cents of slippage, your account is probably too small because that’s the cost of doing business.

Don’t let that get you hung up. If you’re trying to trade for $10 or $15 in gains for stocks and several points for futures, a few ticks here and there isn’t going to be a material percentage of what’s on the table, you see. Anyway, that’s how I would approach journaling. If you have a phone, you can use your microphone and record it, then you can go to a transcription service if that’s better for you. If you don’t know how to type or if you don’t sitting writing into a notebook or some other people, they can’t even read their own handwriting.

But that can be very, very helpful. You can also write down what was happening in the world. What did the market do overall? You see what was going on in the world? What are some of the macro factors that are going on for your trading? All that can help because when you read it back weeks and weeks later, you can kind of see patterns from reading all of your notes that you’ve kept along the way. And that might help you ideate a new process or help you hone an existing process to be closer to one that serves you right? Because at the end of the day, you want to have something (a trading plan) that’s compatible with you financially and emotionally.

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Hey there. Happy Tuesday mo fo’s. So part of going on tilt can be avoided. If you think of the following, as I’ve mentioned before, every trade has two payoffs. The financial payoff and the emotional payoff. Now, when those things diverge and you don’t get the financial payoff, the emotional one can send you over the edge. So when you think about putting on trades, this can go into your position sizing algorithm because we really entries people like to talk about sniper your entries and whatever, and let me share with you folks that is f*cking bullsh*t. Entries are mildly important.

What’s really important is your position sizing. That’s really when you make or lose it. If you have a big position or a small move in the underlying and you’ve made a lot of money, that should actually be a warning sign that you got away with something. Think of the opposite. If you have a really big position and it moves sharply against you, there’s nothing you can do. You’re already done at that point. Sitting there and hoping for it to come back just means you’re going to lose more money, pull out more hair. So you have to have a position size that makes sense for you so that if there’s a sharp move for you, either way you’re balanced, don’t do trading for the action.

That’s why people trade too big is cause they want to see gigantic swings. I was working with a pretty well known guy who was trading options years and years and years ago, eventually blew up because he couldn’t stop trading too big a size. He loved to see the whipsaws and he had gotten away with it for quite some time, but then he blew up and they had to liquidate the fund because they went below the 50% puke point. Sometimes people can’t be helped.

So when you think about your position size, trade small, you could always add to your winners. And then when you choose your protective stop, it has to be at a spot when it has to be set up in a spot where you can protect your capital, but where you can also protect your emotional constitution. If you put your stop way below support and the things broken out and your up five points and the trading range was three points and you still have your original stop eight points from the current market value, what are you trying to say to yourself? Oh, I don’t want to get stopped.

Well, what happens if you give back all your gains? Can’t you adjust your stop and trail it because you’re powerless over what goes on in the marketplace? Even if you don’t want some of those outcomes to occur, it’s not up to you. It’s not up to me either. So you can avoid going on tilt if you think of your protective stops as also being emotional stops. If you get knocked out of the trade, you’ll be financially okay, but will you be emotionally okay? So in other words, if you see a big 10 point move from your entry, but you’re only keeping three bucks of it, something’s wrong there with your trading tactics. You see you’re not doing enough to protect your capital probably because you don’t want to get knocked out of the trade in the first place. But again, that that’s the difference between a pro and an amateur.

Professionals realize that you’re running effectively a system, even if you’re a discretionary trader looking at charts and even if you’re a full on, purely systematic trader, that’s still discretionary because you get to pick the rules. So you need to pick those stops that help you preserve your mental capital because the last thing you want to do is try to go do research at night when you’ve gotten seen gigantic whipsaws in your capital, very little of which you’ve actually kept for yourself in terms of realized gains. It absolutely affects your research because now you’re looking for the grand slam and the home runs and it perpetuates. It does not end well. I know – I’ve been there. Takes a lot of effort to not be an idiot.

What else happens now? You start going to the internet and looking at articles that support your position or this and that, or justify what you want to do. Even if you kind of know deep down, it’s not the right thing to do. So that’s why trading is so difficult, I think, because all of these things are running in the back of trader’s mind and you think it’s just about making money, but oftentimes it’s on a much deeper level.

That’s why in the training stuff that we do, we absolutely force you to uncover what’s going on in the subconscious because that oftentimes is what’s running the show, whether you realize it or not. Reach out via email if you’d like to know more.

Anyway, I appreciate you being here, folks. Go to MartinKronicle and get your free copy of The Inner Voice of Trading audiobook and please consider subscribing to whatever platform you’re on. I appreciate you all very much, and I will see you tomorrow.

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