Trading Tips: Golden Nuggets from Brian talking with Jason E of Trading Ascension - Episode 049

Hello and welcome to the Consistent Profits podcast brought to you by Inside out trading and Brian McAvoy, where the focus is on consistency, because when you have the consistent part down, profits become easy.

So this week we've got a little bit of a different podcast for you. Instead of me interviewing somebody else, last week I talked with with Jason E. And it was a really fun interview and a lot of good stuff came out of it. A lot of nuggets, very, you know, a lot of useful, helpful things. And so instead of me interviewing somebody else this week, and no, I'm not just being egotistical about it, it actually was a good interview and I shared a lot of really helpful information. So this week it's Jason interviewing me. Now, it is just an audio, and so, you know, you can just put it on, let it play.

Cool.

So let's go ahead and jump into it.

Here's.

Here's my interview with Jason. Hope you enjoy it. Let's. Let's go and get to it.

Hello and welcome to another episode of the Trading Ascension podcast. I'm Jason E. And today I have a guest joining the show. We're going to absorb some trading wisdom from Brian McAvoy. Now, Brian, who resides in North Carolina, comes to us today with 25 years of trading experience and 18 years of coaching and mentoring traders. His company is Inside Out Trading. You can find them@insideouttrading.com you can also find Brian on LinkedIn, Facebook, YouTube, and of course, X, formerly known as Twitter. Stick around to the end. I'll make sure that everyone is squared away on those handles and we'll provide a little more information on some of the incredible resources that Brian has online. Now, Brian stands on the principle in life mission of, of helping traders fill the skill gap that makes trading so difficult. And Brian says once a trader is skilled up, they have the competence, confidence, and are better able to make money. Brian, welcome to the Trading Ascension podcast.

Hey, Jason, thanks for having me, man. Pleasure to be here.

Awesome. We're excited to dig into some of this, this information here, but I want to start at the beginning. You know, I see traders as superheroes, right? So I want to know your origin story. How did you find trading? How'd you get into the industry? Maybe what you were doing before you started trading the financial markets.

Well, this goes way back in time, before the days of the Internet. Actually, I got introduced to trading back in the mid-90s. There was a guy who actually got a lot of people introduced to trading by the name of Ken Roberts, and he had this excellent mail campaign, like through the snail mail, and it was a letter talking about, you know, the greatest business ever. And he was talking about futures trading and great book. And you know, of course he had, you know, the charting company set up that, you know, so you could go ahead and get started trading if you wanted to. And, and I didn't at the time, but I got the, I got the bug planted. And after a few years, I did finally want to go ahead and start, start placing trades. And as, you know, trading, it just sounds so cool. And the, you know, the, the fact that, you know, you can have, you know, a mobile business, you can trade wherever you want, you can trade, you know, whatever hours you want around the world. And, and I like all that kind of stuff. The freedoms that you can enjoy with trading. It has a lot of allure. And yeah, I got hooked just like most everybody else does. It can be a great business when it's going well. And personally, probably the hardest thing out of all of it was when I finally faced my wife and told her what had happened because she was, you know, she was encouraging, she was supportive and, you know, she believed in me and all this stuff, and I just totally blew it. And I told her and she was, she was pretty devastated. I mean, I almost lost my marriage over it. Fortunately, I didn't. We made it through that. But I wasn't done with trading because it's like, I know I can make this work. I've jumped into a lot of stuff. I mean, one of the things they loved about me at Johnson Controls was I was really good at being able to jumping in the middle of a fire, whether I was familiar with what was going on or not. But I was really good at being thrown into a fire and getting my arms around it, get it under control, and then they'd grab me and throw me into the next fire. And most of what I did for the first few years with that company out of school, I had neither the experience nor the education for. I was just really good at figuring stuff out. And so the fact that trading kicked my butt the way it did, it's like, no, I'm not just going to walk away beaten. And so I was talking with a friend of mine one day after I had taken a little bit of a break, and she said to me, it's like, well, Brian, you know, with the way you're explaining things to me, it's like, you know, you were really good at your job and, you know, making everything work, you know, at the plant and you know, especially as the quality manager, your plant runs really well. She goes, why don't you figure out a way to take what you're doing at the plant in your job and apply it to your trading? And I was like, wow, that makes total sense, because. And the more I thought about it, it's like this. Oh, my God. And I did it, and it worked amazingly well. But the thing is, the cool thing about quality assurance, because, I mean, consistent performance, consistent results is like the big challenge for everybody in trade. But what a lot of traders don't realize, and I didn't realize until that light bulb went off for me, is all businesses struggle with consistency. I mean, think about it. If you got a say, you got a, you know, a company with 100 or a thousand people in it, you can't have everybody running or, you know, running around doing whatever they feel like and however they feel like it. You have to. You have to have consistency or your costs just kill you. And so consistency has been a big deal. And that's why quality assurance became a whole industry in and of itself back in the 70s, because there were so many businesses that were just struggling, you know, the inconsistencies and in their business were killing their profits. And so, like, Japan is a great example. One of my favorite stories is how the Japanese car companies back in the 70s, you know, everybody, you know, they thought Datsun. You know, back then it was Datsun before it was Nissan. But you had Honda and Datsun and Mitsubishi and Toyota, and they were cute, cheap little cars, and everybody liked them because they were cute and they got good mileage, but they were crappy little cars. It's like if they make it to 100,000 miles, amazing. And even if they do, they're probably going to rust out and the body's going to fall off of them at about 80,000 miles. And they were cute, cheap little cars. And the Japanese just got really tired of having that reputation, and they were struggling to make money. And so they hired Edward Deming to come over there. He was a quality guru and an engineer, and they hired him to come over there, and he taught him and really founded the whole industry of quality assurance. But he taught him about process control and how by investing, you know, in good materials and in good equipment and good design and training your employees and focusing on the process, how all these things, they might have costs up front, but by having, you know, good materials to work with and trained people in a solid, steady process and getting that consistency and, like I said, just good process control, is so profitable because you eliminate so many other huge costs. And so, like, the foundation of quality assurance is consistent output. And it's cool because everybody's heard of quality control. You know, where, if you ever worked in manufacturing, it's like, you know, where you're making whatever widgets and they go down the line and you have inspectors standing on a line picking off bad product, hoping to, you know, hopefully keeping it from getting out the door. That was quality control. Well, quality assurance is a complete change of mind. Quality assurance says no. We're going to focus on the process and make sure that the process is so stable that we know we're making good product. And we just have to check it every now and then downstream just for some feedback, just, you know, in case we need to adjust the process. But otherwise, we can just focus on the process and we know what we're doing. And so. And it's not just with machine. Until that light bulb went off for me, is all businesses struggle with consistency. I mean, think about if you got to say you got a, you know, a company with 100 or a thousand people in it, you can't have everybody running or, you know, running around doing whatever they feel like and however they feel like it. You have to. You have to have consistency or your costs just kill you. And so consistency has been a big deal. And that's why quality assurance became a whole industry in and of itself back in the 70s, because there were so many businesses that were just struggling. You know, the inconsistencies in their business were killing their profits. And so, like, Japan is a great example. One of my favorite stories is how the Japanese car companies back in the 70s, you know, everybody, you know, they thought Datsun. You know, back then it was Datsun. Before it was Nissan. We had Honda and Datsun and Mitsubishi and Toyota. And they were cute, cheap little cars. And everybody liked them because they were cute and they got good mileage, but they were crappy little cars. It's like if they make it to 100,000 miles, amazing. And even if they do, they're probably going to rust out. The body's going to fall off of them at about 80,000 miles. And they were cute, cheap little cars. And the Japanese just got really tired of having that reputation, and they were struggling to make money. And so they hired Edward Deming to come over there. He was a quality guru and an engineer, and they hired him to come over there and he taught him and really founded the whole industry of quality assurance. But he taught him about, you know, process Control and how by investing, you know, in good materials and in good equipment and good design and training your employees and focusing on the process, how all these things, they, they might have costs up front, but by having, you know, good materials to work with and trained people in a solid, steady process and getting that consistency and like I said, just good process control is so profitable because you eliminate so many other huge costs. And so, like, the foundation of quality assurance is consistent output. And it's cool because everybody's heard of quality control. You know, where, if you ever worked in manufacturing, it's like, you know, where you're making whatever widgets and they go down the line and you have inspectors standing on a line picking off bad product, hoping to, you know, hopefully keeping it from getting out the door. That was quality control. Well, quality assurance is a complete change of mind. Quality assurance says no. We're going to focus on the process and make sure that the process is so stable that we know we're making good products and we just have to check it every now and then downstream just for some feedback, you know, in case we need to adjust the process. But otherwise we can just focus on the process and we know what we're doing. And so. And it's not just with machines, it's with people too, though. It's like, how do you take an activity with that might be performed by 100 people in your company? How do we take that activity and make it so that everybody's doing it the best way to do it according to best practices, and everybody's doing it and they're doing it right consistently across all the people and over time and maybe even across locations and stuff. And so that's really, like I said, the foundation of quality. It's like, how do we take an activity and make it super consistent so we know that we're getting good output out of it? And when I applied what I had been doing in my quality stuff to my trading, it was like, man, oh my God, now it's so easy and it's so settled down and I'm not stressed about, you know, am I going to make money this month or not? And it's just. It's like, this is how you actually get a handle on trading, because you get it dialed in, what you're doing, and then you make it so consistent that you know what they. What to expect from it. Realistically, not, hopefully. And it's so anyway, long, you know, that's the long version of my origin story. But it's, it's so cool. Because so many people think, you know, I've got a good strategy, I just can't seem to stick to it. And so the problem must be me. And they're thinking they've got some psychological issue. And when I first started other traders, it was like, you know, I'm talking to these people and it's like, you don't have psychological issues, you have lack of training issues. You're trying to do a job you're not prepared for, and so no wonder it's rough. So let's, let's take this process. Let me teach you this. You know what, what I use to settle my trading down, and I teach it to them and they're like, cool. And they get settled down and they're calm and their psychological issues fall away. They stop hesitating, they stop chasing trades and they're making money and it's like. And it turns into an experience very like, you know, their regular job. And same for everybody else. And that's one of the best things about it, is you don't have to fight with the psychological issues to try to figure out what's wrong with you. It's like, no, you just take care of the competence part of it and everything gets easy from that point, especially the psychology of it. Wow.

And that's great. And so before we move on, because there's a lot to unpack there, I just want to talk a little bit more about some of those overlaps from your corporate work. I'm super interested in the skill sets that we bring to trailer trading. And not a lot of skills are transferable, but it sounds like quality assurance as opposed to, you know, quality control was something that really gave a foundation for your trading. So process control you mentioned. Of course, there's systems where as traders, you're trading by yourself, so there's really no good people aspect. But can you elaborate on some of the quality assurance factors that led to you being a successful trader?

Oh, yeah. Well, and actually, I'm glad you mentioned systems because they're. Well, system is just one of the terms in trading. There's so many words in the trading space that get thrown around and they're oftentimes confused or they're misused, and system really is one of them. A lot of people think, if I have a strategy, I have a system. And now again, this comes from the quality perspective. Just because you have a strategy doesn't mean you have a system. Your strategy is how you're, how you intend to get in and out of the markets and make money. For example, you know, maybe, you know, with a moving average crossover, you know, want to see the moving average cross? You know, then I'll get in when the price gets to a certain point, place my entry and price, place my stop and my profit target. And that's your strategy. What your system is, how you're going to do that, how you're going to execute that strategy consistently 500 or a thousand times. And they are not necessarily the same. Usually they're not. And there's, like I said, there's a big distinction. A lot of people will say, oh yeah, I got a system. It's like, what is it? Well, you know, it's like, you know, get in at the beginning of the trend and I'll get out at, you know, at the end of it. It's like, no, that's your strategy. How are you going to repeat that, you know, 100 times so that you do it consistently and you know, what, what to expect. And it actually gets to a point where it's so repeatable that it's measurable. And that's one of the big things again, coming from quality. It's like, okay, first thing we have to do before we worry about any kind of is it profitable or not? First thing we have to do is establish that consistency. Because if your process is all over the place, doesn't matter if you're running a machine or you're, you know, it's with people, if the process is all over the place, you're going to get inconsistent results, period. It's just by the nature of it, because, because you don't have that consistency. But once you get that consistency now, now you can adjust it and make it more profitable. And that really, that's the, that's the goal with trading is, you know, everybody says, I want consistent profits, you want to, you want consistent profits so that you can, you know, kind of look ahead and say, I know what to expect. And that really is the whole point.

That makes a lot of sense. And so one thing there, before we get too far away from one of the last things you said as far as a system from this perspective, is the act of improving part of that system as well, is that included in the system? The act of, you know, the, I guess that would be the quality control part. The act of improving and making a better outcome, is that part of the system or you see that as something separate in the trading process?

Well, as far as making a system better, there. Well, there are two stages to having a system. You have the, the initial Part where, you know, you're just saying, this is my idea and, you know, this is how I'm going to deploy this strategy into the markets. So I'm going to take it to the markets and trade with it. So that has a process all by itself. And then once you, you know, once you're trading with it. Yeah, as far as, you know, if there's a change in the, you know, maybe the marketplace or, you know, there's a big change in economic mood that affects the way your, you know, your system performs and you want to make adjustments to the, to your system once you already have it in place and it's been. Already been fully deployed. But kind of like just like with a business, you go through a startup phase there, or there's a cycle or a process for launching a business, there's a certain process to properly deploy a trading strategy that a lot of people ignore. Like I said, what the common mistake that a lot of traders make is, you know, they'll, they'll hear about something, you know, on a podcast or, you know, YouTube video, and they're like, oh, that's a cool sounding strategy. And so they'll just take it and immediately go start trading with it because, you know, they watch some guy trade it for a day or a week or whatever, and, and then, you know, they try it and they don't make money with it. And then they're like, oh, the guys just, you know, he's a scammer. It must be lying. And the thing is, there's, there's a certain process to it. And the first thing you got to do is, you know, just plain, you know, again, establish that consistency. Just, you know, have a good process to start with. And that's where my part of, where my quality background came into place or came into play was being able to define a process. One of Deming's famous quotes is, if you don't, if you can't define what you're doing as a process, then you don't know what you're doing. And he was speaking to the business world then. But it applies totally with traders. I've had a lot of people come to me and they're like, yeah, here's my system I'm looking at. It's like, dude, you might as well just say buy low. You know, buy low, sell high. Because that's about as clear as your system is. It's like, sure, if you can do that consistently, you know, you're gonna make money. But it's like, it's so it's so vague what you've got here. I mean, so clarity is one of the first things that you got to do. Clarity, yeah. Huge. Seriously, you'd be amazed how many trades. Well, even just plain having a proper understanding of what you're working with. A lot of traders are working with indicators or strategies that they honestly don't fully understand. They'll be working with indicators and they, they honestly don't know what that indicator is truly telling them and what it's not. They just, you know, they've seen it used and it's like, oh, okay, so you know, when it gets up here, then I do this or it gets down there and I do that. But they don't know how to look at it and actually understand it. And then when it's not performing, then they don't know what to do. Then they're just kind of playing with stuff. So the very first thing, and I tell this to every trader, is first thing you want to do is make sure as like a core skill. Just make sure you know all the words that you're using and you're hearing in, you know, whoever you're reading and you're following. Don't let misunderstood words pass you by. If you're, you know, if you're placing puts and calls, make sure you know what the heck they are. I had this one gal, she calls me up one day, she'd been, her main strategy was options and she was buying calls and selling puts and she honestly didn't even know what she was doing. She couldn't explain it to me what a put was, anything after what it was. She's like, I don't know, I just click the buttons. I'm like serious. And that, that was her answer. And I want, you know, I didn't give her a hard time about it, just the, the, you know, where she had learned to trade. It was some three day weekend boot camp that she signed, signed up for the local hotel and you know, they sold everybody on this thing and it's like, sure, come in and trade and we'll sit you down. And you know, here, yeah. When it gets up there, you click this button and when it goes over there, you click that button. And they were just taught, you know, to be a little robotic monkey. And it's like, no, you can't just do that with people. If you're going to put money at risk, you need to understand what you're working with. And that starts with understanding how the markets work, how your platform works. And just the words if you know, if you don't know, I mean. And a lot of words get very confused. I can ask 10 different people, you know, how do you define a trend? You know, so that, you know, say they're trend followers? It's like, okay, how do you define a trend? I can get 10 different answers, same thing with words like support and resistance, you know, zone or area, or, you know, close and near and all that kind of all those subjective words. If that's part of your rules, you are, you're by nature building inconsistency into your result.

Okay, you know what, I'm glad you said that last part, because I want to elaborate on building inconsistency into it. You're hitting on clarity. And it's something that me personally was a game changer once I understood how much clarity and how in depth I could be with understanding. When I did research on it, Brian, the only thing that I could find was research on the harmful effects of ambiguity to the human brain and how it's a lot more difficult to be confident, to deploy a strategy when you have ambiguity. So based on what you just said, what are some of the benefits of clarity? And why would a trader listening. Because that example you gave, hey, I just hit the button that says put or call. It's, it's rampant. I see it a lot. What are some of the benefits of clarity? Why should a trader seek clarity in their craft?

Well, again, kind of going back to the basics of it, you know, you're, you're following. Let's step back and again, conceptual things, you know, with words and making sure that, you know, you've got a useful context for it. A couple of questions that I like asking traders, and I'll go and ask you, it's like, okay, what is trading? In like 10 words or less, what is trading?

I would say the exchange of goods and services in a, in a marketplace.

Okay, fair enough. And a lot of times I'll get an answer similar to that. Yeah, it's buying and selling securities for profit, or we're using our edge. And so the next question is, what is a trading system?

So I define a trading system as the entire business process. So that includes a trading strategy which moves into a trading plan. And then the system is adding to that plan a way to do what you mentioned earlier, like the quality control and the quality assurance. So the full circle, how I get into the trade, all the way to how I analyze that trade once it's complete at the end of the week, is how we kind of define the trading system here.

Oh, okay, okay. And, and that's a very, that's a perfectly valid perspective. A lot of times when I ask traders, you know, what is a trading system, they'll say, well, you know, it's my rules or it's my rules and my indicators and they're looking at a more focused scope than you are. But again, you know, it's, it is a valid perspective, but from a, you know, a process perspective and being able to repeat it over and over again. Again, from kind of a quality assurance standpoint, first of all, trading is in its essence, it's a decision making process. Okay. All we're doing when we're trading is we're taking in information, we evaluate it against certain criteria and then we make decisions based on that, you know, whatever comes out of that evaluation and then we move to the next decision point. But it's, it really is just a series of decisions we're making based on available information. It's not a physical activity aside from clicking buttons or put, you know, playing on our keyboard. Other than that, it's, it's a mental activity of a series of making decisions. And that's what trading is in its essence in a trading system rather than, you know, looking at as indicators and, you know, rules. Again, those are valid perspectives, but from a useful perspective, it's what you do. Your system is what you do when you trade. It's those series of steps that you play that you go through as you're going through the decision making process.

Okay.

And the reason you want clarity on it and the reason so many traders get bunched up and they get really just hacked off when they buy a system from somebody else and it doesn't work or it's difficult to trade or, you know, the results are totally different from what, you know, the, the guy that sold it to him got. The reason they're frustrated is because without, without the clarity, again, it's not repeatable. And so again, if you're trying to do something over and over again. All right, here's a perfect example. When I was in the plant where I worked, now the last one was in South Carolina. I had worked a couple different plants while I was with the company. The last one was in South Carolina and the plant manager, he was real big on quality and he says, you know, we're going to do things. This is going to be world class place. We're going to, Everybody's going to do things according to best practices and everything's going to be documented so that we so everybody's doing the job, right? And so he's got. In each of the departments, he's got, you know, the kind of the technical gurus, you know, writing all the work instructions and procedures for everything. And. And so, you know.