12 Years of Trading Knowledge in 2 Hours - Umar Ashraf

Welcome everyone back to Chart Fanatics, the Go to channel for all the very best strategy and concept breakdowns with the very best traders in the world. Talking which today we have a very, very special guest. He is a eight figure verified trader. The founder of Tradezella is the one and only Umar Ashra.

What is going on? Riz, my absolute pleasure, thank you for being here. Finally being on this show, I've been seeing it for such a long time and I'm like, you know what, this is the place to be. This is the place for every trader to come to get real raw education. And you know, just before we begin, I love what you're doing, I love what you're sharing the trading community, you know, with the other channel and then also with this channel. I think traders are not understanding how much free value and good value you're putting out. So I appreciate that a lot.

Thank you. And I appreciate you and I appreciate you being here. You know, today we're going to be doing a five step process from beginner trader, novice trader to expert trader. I don't think there's anyone better to be able to help us do that. And you know, again, very thankful for the kind words but where should we begin? Like where's the first step?

All right, cool. So what I want to do is I want to go through this like five step process. So it's like let's say 1, 2, 3, 4 and 5. And this five step process is there to help a trader go from basically someone that has no idea what he or she's doing to a point of getting to a comfortable consistency point of view. Right now when I get to this point, this point does not mean you start making so much money. It does not mean that you are a millionaire trader. It just means at this point you have a consistent, repeatable process where you know how much to, you know, increase bet size, you know what trade to take, you know what days to be aggressive, what days not to be aggressive. And you have a really system, system and dial down process. Right? That's the goal we want to get to. And this goal once again should not relate to a money goal. So before I go into like this five step process, there's a few truths I think traders must understand before they go onto this journey. And I'm going to go under the assumption that someone is starting today and they're like at this like stage zero, stage one of wanting to become a trader. And for me, anytime someone enters this stage and before they kind of go to the end, there are a few set of truths that they must accept and fully understand. And if they understand and accept that at this stage, it makes the next few stages a lot more easier.

Yes.

Right. So let me explain what those steps are or what those things are. First, this is for people, let's say, depending on wherever you are in your stage, even, I think if you're in, let's say, stage two or stage three or stage four or even stage five, I think most people in stage five or four understand these truths because I think without this, you kind of won't get it. So what is truth number one? Before you go on this journey of becoming a consistently profitable trader that has a system that is repeatable, that is understandable, that you can scale up or scale down as you want, the first thing is understanding when you're in this stage is trading is not easy. Right. And. And this, I know it's like, sounds very cliche and you hear it, you don't hear it. But I think understanding this truth is so important because I think most people that are on stage one and two go into like, oh, trading is going to be easy. I'm going to be this millionaire trader in day two, day three, day four. And I think knowing right here that, hey, this thing that I'm about to do is very hard. It's going to be extremely difficult. And accepting what you're walking into kind of makes it easy. Why? Because as you go through this journey and it gets harder and harder and harder, you start knowing, well, I know what I signed up for. I know this is going to be hard. I know what I was going to accept. But then if you go into this and you're like, well, when I go on Instagram or I go on these platforms and I see someone having this and having that and making so much money, why am I not able to do it? These processes get very, very hard for you. That's number one. Number two thing that we want to accept and we want to kind of really nail down is our goal in this whole process is not making money. This is not our go. We are not trying to make money. And I know it sounds crazy when people watch this, they're like, what do you mean? We're not trying to make money. We want to accept that. We do not want to track our progress here off the dollar sign. If we go into this process that I'm going to dive into and we start looking at the dollar sign and we're like, well, I'm in process three and I'm unprofitable it's not working. That's not the right metric. And I'll get into the metrics. So we're not looking at making money here. That is not our goal. If we do everything right in these stages properly, this dollar sign will come knocking on your door and it'll show up.

Yeah.

On its own without you even chasing it. Right. So we chase the process as we get better and better at the process and we get better at trading. This part comes on its own. Right.

Just the byproduct of the work and the focus on the right things.

Yes, yes. And then that. That just kind of creates, like, a mental shift. Right. I think. I think even me, when I first started trading, I went into, like, make. Wanting to make money, wanting to make money, wanting to make money. And then you set money goals, right? This year, I want to make this much money right? Where I started switching my goals to, like, this year, I want to be able to identify the good versus bad trades to take. This year, I want to be able to identify what trades I should increase risk or decrease risk. This year or this month, I want to get good at identifying this setup.

Yes.

Right. So when you start doing that, you start, you know, having this consistent element of, like, making money, which comes on its own. Right. The third thing is, in this whole process, we are only going to control the things we can control. The things that are in our control, we will focus on. So whatever we can control, we will put our focus in that we cannot control what is going to happen to the market. But what can we control? Right. That comes down to we can control our risk. Right? So it's like when I see traders in Stage 1, 2, 3, or any Stage right. That are like, oh, my God, I lost more money than I planned. Why? Like, it's just a simple concept. Why? It's something you can control. How much you put into a trade, you can control what trades you take. Your quality of trades that you take is something you can control. Right. Your setups that you execute on is something you can control. The days you trade is something you can control. Your emotional element also something you should be able to control. Right? So our job here is to control, focus on the things we can control. I cannot control what Trump's going to tweet. Right. So if I get into a trade and the trade goes the opposite way.

And it was because of this unknown variable that I had no control over, I have to let that go.

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But let's get back into this episode.

And then I think one of the last things is understanding this part, which is very important, is that in trading, there is no aha moment dressing like, like. So I've been trading for 1112 years now. I don't have that, like, at all. And what I mean by no aha moment is just because I've made money last year, just because I made money yesterday, that's just because I made money last month. I know. Does not equate to me automatically making money the next month. Yeah. So trading is a game. You have to show up every single day. You have to have a good process. You have to be able to adjust the process as needed. You have to be able to adjust to market conditions. And if you're able to do that, you will have the best chance of making money consistently. But if I go, oh, my God, I figured it out. And the reason I say that is because I noticed when traders go from stage one to stage two to stage three, in this stage, they have those periods of feeling that aha moment. And what happens is when they get to that moment of, you know, hey, I. I figured it out. Boom. They go down. Yeah, hey, I figured it out. Boom. Even for me, there's so many times where I'm like, oh, I figured it out, and, you know, I end up having a 20 drawdown, 15 drawdown in the trade or on my account. And it's when you realize, like, hey, I can start getting from stage A to 2 to 3, to 4 and 5. And even when I'm at stage 5, it doesn't mean I've made it. It just means now I have this process that I understand really deeply, and I have to control that process, and I have to keep focusing on that process, and I have to adjust it as the market starts adjusting. And I need to know where to apply, where to take a step back, and if I'm able to do that, this will show up.

Yeah, definitely. And you know what I really love about this? Especially the aha moment, because I think that that is What a lot of traders assume happens, there's like a click or light bulb moment where everything changes. We're not realizing that nothing changes. You just get better, as you say, on the focus element for sure. And you probably understand that it's not easy and you're probably not focused on the dollar amount. So as a combination of all of these things, as you say, the dollar amount sorts itself out and you accept there's no aha moment. So you recognize the focus of your performance, your process, your routines a lot of the time, sometimes outside of actual trading itself. So that you're prepared to be.

Yeah.

To be focused, but necessary.

Yeah, yeah. So, so I, that's, I think, accepting because for me, for I think six years, seven years, I've chased this aha moment.

I was like, why?

I get it. But then I lose it. I get it, then I lose it. I get it, then I lose it. And then, you know, I think in year six or seven, whatever it was, I, I sat down and I'm like, wait, there's never really this moment that we get. Right? And then the last thing, right, understanding this part now this applies to some people and it may not apply to some people depending on what stage you're at. But you have to understand.

Psychology in trading is overrated. Right. And like emotions are a thing. I'm not saying emotions aren't a thing. Right. But this is over rated. I write really bad. Emotions are really overrated. And the reason I say that is because your emotions are a battle for us to take when we get somewhere here. Right? It's like in stage three and four, that's where we start dealing with emotions before we get to emotions. And once again, I, I emphasize on this because I see traders in stage one or stage two and they go, I'm not profitable because I can't get my emotions in check. And I'm like, well, your emotions should not be in effect in stage one and two. This is when you're building up skills and when you're building up skills, your size shouldn't be large enough for it to impact your emotions. Yeah, right. So it's like when you're in stage one, two and partially shifting to three, this is where like your size, right, needs to be the least amount. So like how much you're risking, your capital amount, this is where it's like the least amount. And then it slowly starts picking up somewhere here. So the reason I say emotions are overrated, it applies a lot to stage one, two, three. But then obviously once you pass Those stages. This is one of the battles that we have to deal with which we'll get into these stages. But I think if you're in stage one, two, three, this should not be there.

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Now let's get back to the episode. Would you say that what the problem is is that people use it as a crutch?

Yes.

They use it as almost an excuse for why they're not performing well?

Yes.

Versus actually identifying like they don't have edge or they're oversizing or they're making these what you would call like novice mistakes, which is why it's down here at the sort of phase one and two. But a lot of the time people kind of trap themselves here because they'll just constantly point to psychology.

Yeah.

There's no one really can help with that because unless you start to really identify edge.

Yeah, so. So because it's easier to blame psychology. Right. It's easier to say, like, there's so many traders that I've come across, they'll say, you know, it's, I know how to trade, but it's my emotions. And I'm like, okay, what's your playbook? What's your strategy? Walk me through it. Has it been proven? Have you tested it enough? And they're like, no. Then how do you know it's your emotions? Because when I trade, I get this and I feel that and I'm like, yeah, so how about we work backwards? How about if you feel that and this is for anyone that feels that. So let's say this is strategy and let's say this is emotions. Your strategy needs to be focused first and your emotions. Or let's say capital needs to be low. Right. Not even here, it needs to be low. And then your capital picks up when your strategy becomes more repeatable. So capital needs to be minimum your position sizing. So, for example, if you're risking $50 a trade and let's say losing $50 a trade doesn't really bother you, it's going to allow you to operate your strategy a lot more effectively. Effectively. But now if, let's say losing 5k trade is going to like shift you up and down, you don't have a good trap. Even if you have the best strategy in the world, your emotions will hijack your process. And that's why capital placement and when to increase size and when to take certain trades becomes important here and not here. Because what we want to do here is we want to develop on stage one, two, and partially three. And then when we go from three to four, that's when we want to start adjusting size. This is like these stages and you know, I'll get into it in a bit, is like, this is where we start making money. This is where we start taking proper bed sizes. Here's where we build the foundation. And while we're building foundation, we don't want to have emotions, we don't want to make our life harder. So we reduce position sizing, we reduce risk. So this part does not hijack this process.

No I love that. I think from what I'm hearing as well, and just general observation is that a lot of the people in phase one and two are essentially trying to take things from the more expert stages and trying to apply them early on.

Yes.

Which isn't the right formula.

Yes. Yeah, yeah. And then that's where all of this not easy money's not our goal. Control the things you can control. There's no aha moment. Emotions, overrated, all kick into the final thing, which this whole process of 8 to 5 is a slow marathon.

Mm.

Right. That's the last thing I want to just touch on before we go into this trading is a marathon, it's not a sprint. And the reason I want to emphasize that on people is because everyone watching, and I want you guys to think about this for a second. If you've been trading for two years, you've been trading for three years. Even if you've been trading for a year, how many people that have been watching have rushed into trying to make money in three months? Have rushed into making money in six months. And what, what that does. Right. And I've seen this so many times and it like frustrates me. So I'll give you an example of like two traders that I've seen. Two types of traders. Right. There's trader one, let's say both of them started in 2021. Right. And this is trader two, also started in 2021. Right. Trader one, you know, rushes, the process goes back to zero. Rushes, the process goes back to zero. Rushes, the process goes back to zero. Rushes, the process goes back to zero. What happens here? They blow their account, they lose their funded account, something, whatever it is, and then they go back to zero and then they repeat the cycle.

Yeah.

You go to 20, 25, they're still here.

Yeah.

But in this window of four years, they've had success, many successes. But those mini successes were not built on strong foundation. So it's like imagine building a 50 story building with no strong foundation. Anytime there's anything bad that happens, the building's going to collapse. Yeah. So what these traders do, and I'm confident that 60, 70, 80 of people watching are in this cycle. They don't have a strong base. Then trader number two, who builds a strong base, doesn't get this phase of hype or excitement or success until maybe year one or maybe like even year two or year three. And then this trader, obviously the path doesn't look like that, but the trajectory is a lot higher. Why? Because this person has spent such A long time in this, like, flat stage. Right. And in this flat stage, they develop themselves.

Yeah.

And then the hard part about this stage and the reason people have a hard time being here is you'll look at someone that you started trading with or someone that started the same time as you, and you're like, well, he or she made money today and I did not.

Yeah.

So I need to do what he or she's doing.

Well, what they don't know is just to kind of go off. Your point is that you're here in this flat stage, doing the right thing, focusing on your skill sets and building those skills. Let's say you're here in this moment. What you're seeing over here is this guy.

Yeah.

Here.

Yes.

Not knowing that a month later or two months later, he's here while you're still here building your skills. And then, like you say you're comparing to this person. I need to be doing that. And then you start making changes and start basically formulating this sort of journey, which you don't want to be doing. And like you said, though, rightly so, because I was in this journey, I remember. And, you know, so many traders that I've spoken to have been in that journey still in that journey. Yeah. And it's almost a trap because those moments, those peaks, just trick you into thinking you're doing the right thing.

Yeah. And I know people that are in that in four years. Right. I look at their stuff, I look at their stats, I look at their performance, and it's like, hey, you haven't been able to break out of this bubble. Like, you've made no progress. You feel like you've made progress, but you really haven't. But this person, like, I have an example of a trader that I know personally, Right. His name is Jay. Right. And I think he started trading in 2020 or 2021, and he was unprofitable for nine months, 10 months, 12 months. And I use him as an example really, like, all the time, because his journey was exactly this. Like, I think for nine months he was unprofitable. And, you know, when I say unprofitable, I don't mean, like, he's losing his life savings or anything. I'm just, you know, he's flat, he's losing some money, he's making some money. He's here for, like, nine months. Right. But he's read, like, if his account started here, he's like, under, but not massively. And I think it was 2021. His account starts, like, picking up, picking up, picking up, whatever. We're in 2025. And I think recently he had his first 100k trade. Wow. Right. This guy who was in this period for nine months, you know, and when he got out of the period after nine months, it wasn't that he started making a lot of money, but he, like, after nine months, it like, up, down, up, down, you know, good process, good systems. He had his first 100k a day on that day. Like. And the special thing about this day that I want to talk about, it's not that he made the 100ks. This day is repeatable. There is a process behind it. It's not by random. He can do it again. He had a 50k day, 70k day. This process h. This, this dollar value has a process behind it, right? It has a process behind it. Very different than this person also making 100k this day, 100k this day. But there's no process behind it. There's no systems there. There's nothing that can make it repeatable. And this person, even though, let's say it took them longer than in some people's eyes, he has something that he has a strong foundation on where he is in stage four to five. And he has a system he can repeat.

Yes.

This person does not.

Because even with this person making 100k down here, they're going to lose 100k.

Exactly.

Or lose more than 100k, you know. So then in the end, again, the danger of social media and danger of just being in the space is you'll see this, the making, you won't see this.

And there's a lot more of this and there's of that. Yeah, that's, that's all the part. All right, cool, cool. All right, let's dive into all of the stages and the steps and the cool part. Right. And this is something where, like, I can confidently, confidently say, I think if people give this. Follow those five principles, give it time, right. Apply the right strategies and, you know, figure out what the right strategies are for them, they'll have the highest probability at being profitable. Like, like, I'm so confident and I've seen it happen. But even people that are watching, out of like 10,000 people, let's say less than 50 people are going to actually do this.

Yeah.

But the ones that do do it, they'll have a, have a, have a good route. Here are some of the things I want to focus on all of these areas. Right. Minus the bad handwriting. Okay. So let's assume everyone isn't Novice, even if you're not in, you're in developing, you're in intermediate, you think you're in advance, you're in pro. Let's just start from the beginning. So there's elements that I think in every stage that are important, right? So it's like, for example, your risk. Your risk here to let's say developing. Let's say this is where it starts at zero. Developing. You go from like a one to two intermediates. When you start experimenting, you can maybe go from like 3 to 5. And then this is where kind of the scaling of risk becomes, like, the goal. This is where we focus on risk, right? This is where, like, the risk component becomes more important here. Risk is something we, like, nudge with. And I'll kind of get into. Get into that. This is where when you go to novice and developing intermediate, this is where, like, your knowledge of trading has to be focused on. So you're like, focus on this part of skills is the biggest focus point is here. Not that the focus point of developing skills goes down here, but it's like when you get to this range, you. Your skills should kind of be good. And what I mean by skills, I'm talking about, you know, you should be able to understand market dynamics. You should have playbooks, you should have setups. You should understand what moves the market. You should understand what days to trade, what days not to trade. You should have those levels of skills focused down there. Yeah, same thing with size. Your size in these kind of three stages stays the same.

Right? Up or down, not a lot. And same thing here. Your risk, you can start adjusting. This is where dynamic risk kicks in.

Right. And then experiment. Right. I think this is once again where you experiment the most. Yeah, right. And then this is where you have a good process. This is where you should be good. Okay. So it's just kind of putting. Where focus goes in, where focus doesn't go in. And then I think a little bit. I think another last one would probably be psychology. And I think psychology automatically plays a role with dynamic and plays a role with, you know, risk. So this is where these are like the two places where, if I was to pick where psychology comes in, right, it's here and here. So, like, you start making the gap from intermediate to here is like the first phase where you should have psychological gaps. You should have emotional, like, your emotions, where it should hijack your process or start to hijack it, Right? Not saying, like, that's what we want, but it should show up here. It should not show up in stage one, it should not show up in stage two. If your emotions show up in stage one or two, that means you're risking too much, your size is way too high than what you should be doing from a trader point of view. So in just looking at this kind of framework, stage one, stage two, stage three, your risk stays consistent. You're not having dynamic risk. And what do I mean by dynamic risk is you're not risking, like, you're not going in one trade, risking $100. And the A plus setup, you're going to say, well, now on this A plus setup, I will risk 300. Yeah. That dynamic element, you have to have enough screen time, you have to have enough skills to be able to increase that dynamic risk. And then once you start doing dynamic risk, that's where like, this part really comes in, the emotional element, right? I'm just going to put emotions, right. Emotions come in, and that's okay. That becomes like the next devil that we have to deal with. But we want to deal with this part first. And what is this part that we want to deal with? That's what I want to, like, focus on first. So once again, the whole framework here, you guys can just kind of understand it. Experiment in stage one, two, three. Three, we start leaning away. Like, three is typically, like the split part in most cases, right? The one and two is where we just start throwing stuff at the wall. We start getting a feel of the market, we start getting an understanding of what that is. And now I want to walk you guys through stage one to two. What you should be doing in stage one, what you should be doing in stage two, and how all of that should look. All right, so let's talk about stage one really quick. What everyone should be doing on this stage and what they want to kind of understand. Now, when you guys start, you know, remembering that, you won't know everything is fine. So let's say. Let's say. Let's call it stage one, right? Stage one, this is like novice traders, right?

Novice traders. Okay? So in stage one, this is where, once again, we know absolutely nothing. You want to go here with the blank state. If you go into the stage thinking this is the way how things are done, and you go in with a closed mind, it'll make things a little bit harder. Here's where we want to have the market we're trading, right? I think everyone getting into the market should know what they want to trade, right? So one thing I'm not the biggest fan of is, like, I think when people are in their developing stages, they go, I'm going to trade crypto and then I'm going to trade futures and I'm going to trade forex and then I'm going to trade options. And it's like, no, let's pick one market, let's understand that market and let's understand how we want to trade that. So for example, in this situation, let's just say we pick futures just for argument's sake, right?

Yeah.

I am trading, let's say Es, S, P 500 trading, NQ, right? That's what I want to trade. That's the market trading, let's say New York session, right? This is New York time. For anyone that is not familiar.

That'S the market I want to trade. So that makes things clear. Second thing is I want to start knowing, okay, how do I want to trade? Do I want to scalp, right? Do I want to like day trade? Do I want to hold trades, you know, from a couple of seconds to a couple of minutes, or do I want to hold trades longer than just a few seconds, two minutes, Right. So it's like understanding what type of approach I want to take. Right. And by the way, what you pick here is not concrete. So because you say you want to scalp, you might get into stage one and you might say, ah, actually I don't want to scalp anymore. It's not for me. I'm not really good on my feet. As quickly as possible. Yeah, I need something a little bit slower and that's okay. The idea here is, once again we can experiment on the stage. We can play around with the stage. That's that the next thing is you, you want to. There's two approaches, right. You can either paper, paper trade here, right. And, and this depends if you're completely new, you have no background or anything. Paper trade. Get familiar with trading, get familiar with the markets, get familiar with your platform. Buy stuff, sell stuff, whatever, if you're past that stuff, right. Which, which I think everyone should, you know, move on from at a certain point, you want to use real money and a very small amount. Right. Like start with, I don't know, $1,000 or 2, 2K or 3K. I don't think you should go in with more than that. Very small amount. Yeah, right. Put that capital into. To the market. And this is after the fact that you've paper traded, you've understood the market, you understood what works, what doesn't work, how the platform works, and you kind of have a good idea, then obviously do that. And then from there you want to start building a process. Right. And I'll kind of go into the process a little bit. The idea of a process here, guys, is you won't have everything perfect.

Yeah.

And I think this is what people forget is they think that the thing that they select early on is what they have to stick to. And that's why early on I recommended that in stage one, two and three, we have a lot of experimentation, and experimentation obviously starts going down afterwards. But we want to have a process that we can adjust here. And the reason we want to have a process and we want to have data tracking here is because we then know what our problem is.

Yes.

What people do is because they don't have a process and they don't have data tracking of their process when they get to, let's say, stage three. Right. They don't know what is making them do that. They don't know if it's a bad setup. They don't know if it's their selection of trades. They don't know if their size. They don't know if it's emotions. They have no idea. So they go back into this place again. So if we start building this from day one, which we'll build out together, and we start altering it based on how we want to trade, on what we want to do, it'll make our life a few a million times easier.

Right, let's take a break for a minute there, guys, because I want to tell you about our incredible sponsor, TradeZella. TradeZella is the number one trading tool in the entire trading industry. TradeZella allows you to become a more profitable trader, allows you to make immense progress as a trader, no matter if you're a beginner or an advanced level trader, because it makes journaling easy. It makes journaling something that is fun and enjoyable and something that is interactive. So no matter if you're a crypto trader, no matter if you're a futures trader, no matter if you're a forex trader, no matter if you're a stock trader, all you have to do is select your broker, your platform of choice, and connect it to Tradezella, and it will automatically sync your trades and pull all of that data onto the dashboard. Making journaling and finding your edge and adapting your edge so easy. In collaboration with TradeZella and Chart Fanatics specifically, we are actually getting the playbooks from the episodes that we're filming with these incredible verified traders and adding them as playbooks onto Tradezilla. So you can actually go on there and see the Rule sets already predefined, so make sure you check that out as well. Now you can actually get 10% off your monthly subscription using CF10 on Tradezilla right now. But more importantly, I would say CF20 for 20% off your yearly subscribe subscription with Tradezilla. The links for TradeZella are in the description below, so make sure you go check them out. UCF 20. Get 20% off your yearly subscription. Come a better trader today.

Now let's get back to the episode.

That'S essentially just a essential framework. Right. And then obviously when you have this, you want to have risk, I think risk less than 1% per account. Do even point 5% when you start out. What does that mean? That means if you're, if you have, let's say, $1,000 account, you're risking like, I don't know, what is 1%? I'm blank. 10. $10, right. You're risking $10 per trade. That doesn't mean you're investing $10. That means if you are wrong, you will lose $10. You can invest 2,000. You can invest 2,000, especially if you're trading futures. You'll have margin and so on. But if you're wrong, you lose $10. Maybe you lose $20, maybe, whatever the case is. So you can maybe go to, you know, micros, you don't have to trade es. You can maybe trade micros, you can start adjusting to have the least amount of risk possible. Now the problem here is people will say, well, Umar, how will I make money? Once again, going back to my point early on, we're not trying to make money. The reason we want to have the least amount of risk is because we do not want to. We want to be able to take the most amount of trades and be wrong and still be alive.

Yeah.

Because capital is the most important thing in the market. And without capital, we cannot trade.

Yeah.

So that's why this thing we have to protect. And while we're in stage one, two and a little bit of three, we want to risk the least amount. So if we're wrong, wrong, wrong, wrong, wrong, we can survive to see another day. That's why the idea of making money in these stages is not something we should focus on.

Definitely. And you know, just to go back to the left side here, the experimentation, I feel like is missing. There are people who experiment, but I think they will go into it through some sort of educational route or some YouTube video, whatever it may be, and they come across, let's say the market's chosen for Them, in a sense, the pair and the asset. The trade is chosen for them, the style is chosen for them because of, and again, it's not necessarily their fault, but it's actually going back to, as you said, understanding the expectation, knowing that it's not going to be easy. Once you actually have the correct expectation, then you can have the right mindset and do the right things versus if you don't. If you kind of allow yourself just to kind of find yourself into the trading industry and then just kind of following the same sort of journey that most people do, which we already pointed out, is that boom and bust constantly you just find yourself there. But if you want to make those changes, which I think is the whole purpose of this video here, is to go through these stages for you to really elevate and allow you to sort of really become more self aware, is that regardless of how you come in, you need to understand this element here. Yes. You know, the market you choose, you know, you might have come into it on fx, right? In the uk that's pretty much how most people come across trading effects. But you never know. You might come in and realize, okay, FX isn't that efficient. It's not really the most regulated and it's not really centralized. I want futures sounds better.

Okay.

And then from there you then pick your, the futures instrument, you then pick the style, then you pick your paper trade or have a smaller account. And that experimentation is so necessary to build your repetitions. But as you pointed out, like really, really minimize the risk is not about making money, it's about building your reps. Because I think if anything, a lot of people obviously, because they don't do this, yes, they blow up two, three times very early on. And that's kind of their expectation of trading versus if they've actually trained themselves to take losses, but maybe lose 10%. But that was over 20, 30, 40 trades. They've actually told themselves actually if I do this right, I can still be in the game. And I think that's a huge difference in mindset.

Yes. And, and that, to your point, is exactly what it is because you start, even though it's not money, that for some people it may not burn them, but you get familiar with this process, right? Like, hey, I'll lose 10, 10, 10 and then I'll have a trade, I'll make 30. Yeah, I'll lose a 5, 5, 5 and I'll have a trade, I'LL make 40. So those setups come and then you start knowing trade selection and setup selection and Then you're like, wow, if I have this process and I follow it long enough, I will make money.

Yeah.

Right. And I think doing that at stage one and two, and that's why the least amount of money, it's important because I see people in the stage, they're like, no, I don't really care about a thousand. I want to do more. I want to, like, feel it. And then they lose it. And then they do it again. They lose it, they do it again. And then it's like you get in this mindset of wanting to make that money back.

Yeah.

Which is like the worst place to be. And that's like, not where I think any trader should focus on.

That becomes like I call a revolving door.

Yeah.

You know, it just doesn't end because just as we had the illustration before with the 100k examples, that's exactly what happens. You'll be up and you'll. Let's say if overall in your journey, you've lost 20k.

Yeah.

And you're up 10 right now, the first thing that's going to go for your head is I just need to make 10 more and break even.

Yes.

And then you lose that 10. Now you're 30k down.

Yeah.

Right. And you just repeat that over and over.

Yeah. And something I want to add on to this is if someone is in stage three or four and I know they're like, I don't want to watch a stage one video. I think going back to the basics of stuff is very important because it allows you to rebuild up the foundation better. Right. So even for me, when my trading break, sometimes I go back mentally, stage one, I'm like, okay, like, what am I missing here? What am I doing wrong? Like, what do I need to do to, you know, refix this up? Is there something broken? Like, for example, with the Trump market now, market's very different. Getting adjusted to it requires a new approach, new process, new understanding of how to kind of, you know, set up game plans. Sometimes you can't have biases for the day because the bias can change. So. So going back to ground, ground, you know, stage one mentally, for a day or two and just building yourself back up, I think is also very important.

Definitely.

Cool. Cool. So, yeah, so that's, that's a little bit. Stage one, I'll go into the process. And then obviously, I think in stage one, like, what is the goal we're trying to do? Like, let me just put the goal, like the objective, the goal of stage one that we're trying to do is we're building our foundation, right? Fuck.

Foundation, right? I wrote it wrong. We're building our foundation, right? We're building our process and we're getting educated here, right? And there's two types of education, right? And I think early on we get like videos and like, you know, you want to buy something online, you watch this video and a lot of other videos on this channel, Books and whatever the case is, you can do that on education. And then I think the second one is like screen time. Yeah, yeah, right, Screen time. This is the most important education in the world. This is good to build the foundation. This is where it gets more and more. So the way this correlation works is early on, you know, your screen time starts high. I mean, your video education starts high and your video education goes down. Your screen time starts average and then your screen time goes up, right? So that's like where the correlation happens. So stage one, we are building a good foundation of learning. We want to know what we, what we need to learn. You know, market dynamics, what moves the market, you know, setups, technical stuff, whatever the case is getting all of that together to dive into our process, which we'll go into stage two in a bit right now. What does that process look like? And I think this is the important part before we go into stage two and stage two, I'll talk a little bit about setups and I'll talk about strategies and you know, how to kind of do that. But the process.

Is what we care about. So in trading, there's a few things that are not negotiables for us. There's things that we want to really understand and we want to really kind of identify, right? So there's pre market.

Right? Game plan.

So every day you guys go into a day, you should have the following session notes, right? You have your pre market game plan. So this is before you start trading your session, you have a game plan. There's like your actual trade notes. Let's call it live trading. Right? And then you have your post market analysis. Post market.

Analysis, right. So once again, you have a free market game plan, your live trading notes, and then you have your post market analysis. This is kind of like a little bit of manual work.

Yeah.

And then from this then you have like your trade data, Right. And I want to help you understand what that kind of looks like. So pre market game plan. So what do we want to do every day is before you go into any session, you want to have a game plan that approaches that particular session. So what would that game plan look like. So, for example, let's say tomorrow is Monday. I would say for Monday.

My game plan. I am watching es, right? As I'm watching. Actually, before I even go into es, when I go into my game plan, I'm looking at all the economic events, economic events that possibly have moved the market last week and are moving the market. So it's like last week and this week. And the reason I say last week is because I want to have this foundation of what moved the markets, what is the sentiment of the market and what is happening this week. Once again, guys, because we are in stage one, you will screw up really bad here. You will not get this right. You will have bad analysis. You would not. You will miss stuff. This is okay, this is why stage one, this is why this, like for me, a lot of times I've learned so much from just an economic point of view by observing the market, watching the market, taking notes on it, going back to it.

Yeah.

Then it's the game plan of like the setups and trades. Or for example, if you're watching. Yes. Right. Your game plan could be what is it you're watching with? Yes, I'm watching. These are my levels. This is maybe my bias with the S P500. If we break this level. This is the trade I'm looking for. This is like my key inflection points. Right. This is where my supply is, this is where my demand is. This is just kind of the framework for this particular name. Or it could be the market and you kind of go off that. So you make that whole pre market game plan. Once again, this is something that I think it's better to add more and then cut down than to like have nothing. Yeah. Because here you want to write your thoughts and your thoughts could also be something as like, I think the market is going to go up today because of this. That's okay. Yeah. And the reason that's okay is because when you write that on Monday and then you review it at the end of the day you're like, oh shit, I missed this.

Yes.

You go to Tuesday, you go back to Monday and you compare. You start looking at what you're missing here. You start going, well, my game plan was to do this in the US but I missed the economic event that was coming at 10am I was looking to trade this week, but Powell speaks on Wednesday. And typically I've noticed when Powell speaks, the market gets. Gets very flat. Yeah. Oh, wow. I start, you start noticing these clues and I can tell you these clues as much as possible. You can, you know, someone else can tell you, you can watch YouTube video and you'll have the foundation. But it's like when you write these things down and you observe them, they stick with you a lot more. Right. So for me, a lot of times like my trade selection and my day selection came a lot from those reps of like, oh well this week, you know, we have earnings coming up market when there's earnings season doesn't really move, but the names start moving after earnings.

Yeah.

So for example, Tesla has earnings. Right. Right now we're like currently, while we're shooting, this earnings season is going on.

Me, I'm not trading names around earnings season. I'm not looking a day or two after, maybe the day after, depending on the move and I start formulating trades then. Yeah, right. And that comes from having a plan, having your live trade notes and post market analysis, which I'll get into and adjusting this as per the sessions. Keep going because this will give you a lot of value of your thinking pattern. Like everyone here has their own way of processing data. Like this is a data, everyone connects it differently. The only way you'll know how you're connecting it and how you're connecting it, right or wrong, is by doing this repeated process over and over again, especially in stage one, two and three. And obviously we're going to continue this on all stages, but these stages where you will have the biggest learning.

Definitely. Because the one thing that really stands out to me, as you said, is writing it down. Not only do you sort of remember any sort of more deep learning, but also to assume that you're going to remember it just in your mind every single day. Like you might remember the first day maybe. Yeah, most of the time when once the market's alive and you're sat there, everything you planned out and thought in your head is gone. So like this process of actually creating a game plan, writing it down, it's you know, simple, simple step, but so powerful because once you have a collection of this, you'll be able to pick up on the fact that, okay, as you mentioned, economic event, you know, you missed it. But then my analysis was correct. Okay. Or economic event, I plan not to trade, I took a trade, I've taken it out.

Yes.

Once you start collecting these over time, especially in stage one, then you're, it's almost like not speeding up the journey, but at least it's doing the right steps for you to be able to review, keep a record of everything that's going on and that's what's going to build the reps. That's where your better decision making, your clearer decision making will come from versus what most people do. And I know I did it in the beginning as well. Is it just everything's in here and you think I remember you forget the trade you took in the morning sometimes if you are going overboard and that's just not good because then you have no reflection at all of what happened at the start. What was my actual plan?

Yes.

What was my actual thoughts? And same with the post market analysis. You know, if you're not doing that you just, you're never learning.

No, of course. And that's why I said this. This part is very like be open to making mistakes. This like we're experimenting here. Right. And I think for people that are, think they're on stage two and three, come back here again and, and experiment. Experiment of like getting this part right, getting the one, the floor right. Second, doing it consistently and then third finding things to take away from it. Right. And if you intentionally do that day after day one you will get very in tune with the market and two, you will find so many things out and you will learn more that will stick with you consistently.

Yeah.

Right. So that's, that's one then live trading notes. So this is something I think becomes like this is very powerful. So like there's a few ways to do this. One, you can screen record.

Yes.

Right. So like I screen record like I use loom and I screen record my session. Like I'll talk over it sometimes. Or second, something that also helps me is typing interest or writing like you can, you can write and like I'll give you an example of like how I write stuff and what I do. And like I'm telling you it's legit a game changer. It's like it helps more on like stage three when emotions start coming in. But the idea of writing is like I'll do like 5 minute check ins if I'm like in like drawdown and I'm really struggling but typically I'll do like 15 minute check ins. And what I mean by that is if I start trading at 9:30am yeah, right. At like 9:45. Right. I'll have like my first check in and like just set an alarm on your phone like go off every 15 minutes and like right. What do I see? What do I think? Hey, I'm looking at Tesla. Tesla looks like a good long above 252. I'm watching that. Or I could say hey, I'M in Tesla long here. This is why I'm long. My stop is here, right? And what that does is one, it allows you to see what your thinking process is when you're in the markets. Because a lot of times what you guys will see, you'll have a plan and then your actual trades differ from your plan and you'll go, whoa, what the hell? Why can I not follow a simple plan? And then second, you'll start seeing when you do your post market analysis, like, wow, why was I going long in Tesla? This has happened to me probably like four months ago. Like I took notes, I looked at it aftermarket and when I looked at this I go.

This makes absolutely no sense. Like why was I taking this side of the trade? And it's like when you are in this moment, you know, trading at times does get a little bit confusing. You do start overthinking, emotions do become a part of it. Like a lot of things happen here. And the, the idea of the post market analysis is one, you're looking at your pre market game plan. You're looking at what did you get? You're looking at your game plan for the day in terms of the trades and selection, what you were going to do, how you executed that, what your execution looked like, and then analyzing that at the end from a thought process point of view.

Yes.

Right. And then the other thing that goes into stage one and everything we're doing in stage one guys, this is something we're doing until stage five. This part doesn't stop. Like this is part of the process, right? It's like rules you set. And all that happens when you go from stage 1, 2, 3, 4, 5 is like these processes get more defined, they get more easier, they get repeatable. And this is what I was saying early on when you have this, the process becomes very repeatable. So going to rules, as I mentioned early, we want to control things we can control. So like some rules I have is like I don't like to trade past 11am Eastern time. So like that's when I end my training session. So that's like a rule I have. I think for everyone else starting too. I think if you're trading the US markets, I don't think you should sit in front of your computer for like 10 hours trying to trade. Especially early on. You guys early on will have more. You will not even early on. Later on you will learn more off the screen than on the screen consistently. If you spend three hours on the screen and you spend three hours off the screen Looking at what your thought process was, you'll learn more than sitting in front of a screen for six hours. Right. If you like.

That comes down to the fact that when they're on the screen, a lot of the time they want to, you know, they're not really clear anyway. There's a lot of chaos going.

Yeah.

A lot of the time they're probably again taking information from someone else.

So therefore it's kind of like influence, decision versus if you focused off the screen, you know, on your, your trading, their trading, their decisions, what they've done, what they control. Essentially, what you said earlier, that's why it has such a more profound impact on the trader because it's actually what's within their control. It's actually what they've done versus just what the market's done. Why the markets move sideways, why the market reacted to this area. This is much more important and powerful because this is directly your track record, if you will, your actions within the market.

Yeah, no, exactly. I think it comes down to one, I think after a certain period point, like the US market doesn't really move as fluidly. Right. Like typically after 11, 12, you know, action starts dying down. Second, I think you get, you know, mentally, we don't have, mostly we don't have the mental capacity to sit in front of a computer for four or five hours. Yeah, I make really high important choices over and over again and execute at a high level. So that execution quality after time goes down because our brains get tired. And then I think third is, you know, just, I think overall we don't need like, the idea of trading, in my opinion, is freedom. Right. Like that's why you want to do it. But if you're chained down to your screen for 10 hours and you're not really making any progress, it makes no sense.

Yes.

Right. So to me it's like, hey, if you have this rule of getting off by 11 or 12, let's say even 12, I think early on is fine. You kind of limit your trade selection. Also, if you, if you end until 4pm, what starts happening throughout the day? Mentally, if you're sitting in front of your computer for six hours and you don't take a trade, it's very easy to say, I've been here for six hours, I've been here for seven hours, I made zero dollars, let me take a trade. Right. It's the same concept of going to work and not getting paid. So it's like you're going to work and you don't get paid for Seven hours. So you, you trade trades that you start taking an hour, four, five, six, just it's easier for you to take them which lead to like over trading and bad trades.

Yeah, it does.

Yeah. Right. So, yeah. So there's rules. So like for example, 11:00am end, I think in stage one having like cutoff rules. I think another rule is like I need to be at my desk one hour before the market opens. Right. I think that just kind of keeps things consistent and you know, something to keep in mind. Everyone loves that trading. You don't have a boss, you don't have anyone looking over you. But that's also a really big con because I think most people need that structure.

Yeah.

So I think setting that structure up for yourself and following it is really important. And then I think the next one is like how much you're risking. Right. Hey, I'm risking, let's say I'm not allowed to lose no more than $50 per trade.

Yeah.

Following that and making that, especially in this stage, making that really consistent, making sure that you are doing stage one, stage two, stage three of your notes every single day. And like this could be just your basic rules.

Right.

This is it. I need to have a game plan. I need to be in front of my computer one hour before I need 11am I end risk. No more than $50 even. Trade count. I think early on, limit your trade count. Limit yourself to like maybe three max trades a day. No more than three.

Yeah.

I think what that does is I think when you limit yourself to a few trades, you're more cautious of like, well, I only have three trades today. Let me use them wisely. Right. And you know, the other flip side of this is like you'll hear traders say, well, what if you have a very good day and the market's moving and you should take 10, 12 trades? And I'm like, yeah, I agree to with that. But stage one, stage one.

Yeah.

That's not what we're focused on.

I love what you said there as well. In terms of traders are just by themselves.

Yeah.

You know, like traditional prop firms for example, or these professionals or even traders from the past, they were either in pits or if it's traditional prop firm, they have like trader pods, they have risk managers, like all these different facilities almost and you know, interactions before trader places of trade, you know, and it's just crazy how different that is. I think most traders, like the average viewer here doesn't even know that exists.

Yeah.

So all they know is that that sort of being alone is Not a problem. It's more so going back to one of the beginning points is understanding what you're signing up for. And really if you're going to do this right, you need to be your own risk manager, you need to be your own accountability, you need to be your own mentor, if you will. And that's hard. You know, people find that difficult. But that's why I think the way you've mapped this out is to facilitate a natural progression of having all those things for yourself.

Yeah, yeah, no, exactly. I think it comes down to that, you know, extremely important. And then in this stage, once again, our main goal is to have a process, have rules and, and get as much as learning as possible. Watch YouTube videos, read books, get a good understanding of the market you've selected and kind of, you know, just get really comfortable with the platform you're using. Getting really comfortable with, with trading overall. Here's. Once again, we're not trying to make money. We're not having these, you know, insanely complex approaches or strategies or none of that is just getting comfortable with the market with a good process and good rules. Right now we go to stage two. Right, so this is where you start hitting developing stage. Right? So once again, guys, this process, the rules, they stay. It's not, this is not stage contingent. It's not like, oh, we only do it in stage one. No, you do this forever. I've been trading for 10, 12, 11 years. I do this. The best trading floors in the world. All of them have a process, all of them have, have pre market notes, all of them have live trading notes, all of them have post market analysis. They, they have rules, they have all of these things. Even people that have making 30, 40, 50 million a year have processes in place. Right. So now let's go to stage two. So stage two is, this is where we start taking everything from stage one, right. And we start going to building strategies. So this is like, we're like developing, right, we're like a developing trader.

Yeah.

So strategy, slash, playbooks. Like the goal here is for us to build playbooks. So what should you have by now? What should you have? And like stage one typically is like two weeks to four weeks. It's not a long period. You're in.

Okay, right, yeah.

These are the stages that end up being long. So stage one, you're like two weeks to four weeks. It's a lot of experimentation. It's a lot of comfortability, it's a lot of just learning. Some people might be in it for two months. It Just depends on how well you can read the market. Right. And understand the market. Not even read the market, but understand the market. This stage is typically longer. I've seen the stage from like two to three months. Right. So like 60 to 90 days.

The simple goal here is now to start building our playbooks, building a strategy. So like we want to have an approach, right. And then the way this approach kicks in is if you have that healthy process that you built and you have healthy rules and you limit your risk amount and you, you know, know the right things you're doing on a day to day basis and you follow that for a month straight.

Yeah.

You go to stage two, if you didn't do that for a month straight, you're not mentally, you shouldn't go to stage to stay there. Right here we just want to build a playbook. So let's go a little bit into playbooks. Right. So.

Building this comes a lot down to the strategy, the approaches. I know there's like ict, smc, there's like order flow. There's like so many different ways to trade. And the one thing I want to say right away is there is no one way to trade. So I won't come on here and I won't say like, like I'm not, I'm not going to be that person that says I don't trade ict. But I want to say ICT is bad. We have Jade Cab who trades it.

Yeah.

And he had his two point whatever million payout.

It's crazy.

So like there's, there's, I don't want to say there's strategies that are bad. If, if the strategy you have is proven, it is tested and makes sense and all you have to do is scale up, go with that.

Yeah.

But get rid of the idea that, you know, I want to pick one strategy and that's the best strategy and this is the worst strategy. And also we don't want a strategy help. I think what happens is people don't have like you know, strategy shop. So for me like I trade with order flow. Right. I have a few different strategies and playbooks. Let's say I have like my opening drive.

Drive. I have my morning top setup.

And another video me and you can go really deep into is this whole order flow thing because I think a lot of people want, you know, if people are down. If you guys like give this a like or thumbs up or whatever.

If you subscribe now.

Yeah, hit subscribe now.

We can do like a whole like two hour thing on order flow because this Is like this probably a three hour video, I think. And then we can go into like deeper setups, right? But there's, there's approaches. So, so the idea that I'm trying to create here is like, you need to know what your approach to the market is, what your market understanding is, and then your setups come. Yes, I can have, let's say I talk about my morning setup and what I use in my morning setup is I use order flow as one of the tools or one of the approaches I have for reading the market. And you don't do that. But you're trying to take my playbook and you're trying to apply my playbook. And I see that happening, right? So it's like, even when you're seeing someone's playbook, someone's strategy, you have to understand what is the thesis of this playbook, what are they? What are they trying to understand? So for like order flow, like even eliminating this word, this is basically just the action between buyers and sellers. So I'm just looking at the auction to identify strength and weakness, and I'm looking at these setups to identify who is more in control and just simple theory. So when I go to, let's say, I don't know, ict, for example, what are they looking at? What is their basis, what is their approach? And then what are the playbooks or setups that come under here? Right? What is the playbook that comes under here? So it's like if you are watching someone's video on this channel, for example, which I think, by the way, is. I'm not even saying it because I'm biased, but actually I think this is probably the best YouTube channel out there. And I'll tell you why. Because I think you get to see people's playbooks and you get to see actual strategies, which honestly, like, genuinely is like insane. Like, like no joke. I think that's nuts.

I'm surprised you pulled out.

Yeah, no, I think, I think that's insane. But yeah, so it comes down to that. So I think the thing I'm trying to get into here, number one, is like, first you can't just have a, a naked playbook. You have to know, what concepts does this playbook represent? What concepts does this strategy represent that would make sense? Because you need to understand, like, if there's a morning tops set up, which I'll kind of explain in a bit, why does this go up or down? Right? And once you understand why it goes up or down or what is the reasoning we're looking For. And that derives from this or that derives from this or whatever that is. It gives you a better understanding. So that's why in stage two, as we're developing, we are trying to understand and this goes into, like, this concept of, like, patterns, right? Just to kind of take up some space just to make this up. It's like when people see patterns, right? It's like they'll say they'll see a pattern where it's like, oh, well, you know, I hate thinking about patterns, but let's say you have a head and shoulders. You have. You have a double top pattern, right? Or head and shoulders, right? Whatever pattern there is. And they're like, oh, well, you know, if we hit the top twice, that means the trade's going to go down. And it's like, no, I think that's very stupid to think about it from that approach. The approach to think about it is to understand, well, why did it reject here? What is going on here? What happened around here? What is the direction of sentiment? So, for example, if you take a trade, right, let's say this is all you see, but you take a trade that opens up really strong, pulls back, has strength here, continues, will you short that? Probably not. You'll probably assume that, hey, the transactions and the activity that's happening here is a lot stronger than there. It makes more sense to go long. It doesn't make sense to close your eyes and say, oh, it's a. It's a double top pattern. Let me go short. So that same concept of, like, questioning things and making it logical goes into your playbooks. And I think a lot of people that are even in stage three, or someone even in stage four, I don't think they question these things. And they go, oh, I saw a bull flag. So I went shorter, I went long. And I'm like, that's not a good enough reason to take a trade. Yeah, you need to give a reason of that bull flag. And you have to understand in playbooks and in market conditions, there's a lot of different stuff that play a role. Like if you have a day where there's a lot of fear in the market, or you have a week where there's a lot of fear or negative sentiment, right? Let's say the sentiment is negative, right? Negative sentiment. Typically, most setups that are going to work for that day or for that period are going to be on the downside. They're not going to be on the upside setups. So it's looking at. There's a sentiment that's what's driving the market. And that's what adds on to these playbooks or these kind of patterns that I think a lot of people talk about. And you have to be able to identify that with events. Now, if I see, let's say I see a really good setup happening, right? And this is where, you know, stage one kind of kicks in a little bit, and we have to combine it with stage two. If I see, like a really good setup and let's say Powell is speaking in two hours, I don't care how good that setup is. I'm not touching it personally. I. There's just too many unknowns there. I don't want to touch it. So that's where you start combining. You start having a playbook and then you start questioning it with understandings of like, okay, I have this good playbook. Yes, right. This is the market sentiment. This is what. Where the playbooks underlying concept makes sense. This is what this playbook makes sense to. This is what this playbook looks for. These are the things that need to make sense. And then that helps with, once again, trade selection day selection. You know, it helps you with dynamic risk. Once we get to that stage, you start knowing what days to increase size, reduce size. You start knowing what trades to increase size and reduce size on. You start knowing what trades to really execute on and what trades to kind of avoid. Right? So that's where the dynamical understanding of this is very, very important.

Now, I think it's so important because as you mentioned near the beginning there, if you just freestyle, then you're never going to learn. You're not going to understand where the mistakes are, what you're doing right, what you're doing wrong by having an actual playbook and being able to sort of differentiate your traits, because most people aren't going to just have one. They will have different factors. That means maybe different times, different market, wherever it may be, you're able then to collect the data and stats of that particular performance and then be able to understand maybe out of the free here, let's say like Morning Top, the opening drive order flow, maybe Trump's come in, the markets have changed. Suddenly opening drive isn't performing that well.

Yes.

You know, then to pause that bench, that focus on what maybe Morning Top is absolutely hammering great stats, great strike rate. Let's go focus on that.

Yeah, no, exactly. And I think when you have that kind of conceptual understanding, it makes it a lot more easier for you. Right? So that's why, for me, having those days and trade selections makes the most amount of sense for me. So, like now going into, let's say, a playbook, right? So this is where the developing thing is. And once again, we're still stage two and partly stage three is still experimenting. So it's like we can experiment here. So if we pick this, doesn't mean this is what we stick with forever. If we pick this, we want to continuously have this in the back of our minds. We want to ask this why question over and over again. Right.

Still, at this point, the money is not important.

Yeah, Money is not important. Right.

Make sure to add that in there.

Right. So the concept here is why, like, why? Like, for example, morning drive and simple, simple thing, right? Or let's say the morning top. What I'm looking for is, let's say the market closes here the day before, the next day we gap lower and we open. We open up in the first 10, 20, 30 minutes. I look for some weakness, and I look to short that on the downside. Now, if I show you that what I don't want people to do is I don't want people to go into this setup and anytime they see a similar action, they go and short it.

Yeah.

You want to understand the why? Okay, what differentiates a setup where the same thing happens, but what differentiates this moment to weak or strong, right? What showcases on give or take order flow? What showcases on price action? What showcases to me, right? What. What identifies as weak or what identifies as strong in those two scenarios? What are other economic or market events, right, that also play a big factor here? For example, let's say I take two setups, right? And let's say with the morning top set up, this setup is what makes sense. Market closes here the day before. Next day, it opens up lower, it picks up, it flats. And now we have the same thing from the day before. What's the difference between both? There's a lot of things that could be different ones. One, as mentioned, the strength of, let's say, the buyers and sellers that you could read an order flow. Maybe, let's say something on price action. Maybe on this one we do have a big economic event coming out. Maybe we do have Powell speaking. Maybe we have Trump speaking. Maybe there's something happening in the near future that this one I'm not really as comfortable as taking maybe to this one. This one I may be comfortable taking, even if the action on the tape or the action on price action looks relatively similar because I'm factoring this in. And the reason I bring these points in is because when you guys are developing your playbooks, there's very cool concept that comes in here. And this goes with everyone's playbook, right? So even if you're watching any of the playbook videos on this channel, go back and do this exercise. This will make things so much clearer for you. Because when you understand a strategy from a deep point and you can really understand the other elements that influence it or may influence it, you start having better execution. You start knowing like a lot of trades where even I have big size, I don't feel emotion. And the reason I don't feel emotion, not that I don't feel emotional. The time, there's days, I'm like a complete wreck, by the way, right? There's. But there's trades I trade and it's so flawless and my emotions to do not become a part of it because I understand the strategy or the playbook and the event so well and I'm comfortable. And the last thing I'm thinking about is losing money because I'm very comfortable in the trade. And if I'm wrong, I know what I'm going to lose. So the emotions don't hijack because I have a lot of reps and comfortability of understanding that playbook. So when you see someone explain a playbook and talk about something, what you should do is you can go back and you can backtested.

Yes.

So what, what's, what does, what does this concept mean? So, for example, going back to a morning top setup, let's just say let's make. Let's say, let's make rules for it. Okay, let's say we take this and this goes once again for every other playbook video you see, go back, spend time, because this time that you spend on it, it's going to help and improve your whole philosophy of that setup or philosophy of what is happening in that current period. So for this, what am I looking for? Let's say I'm looking for a gap down, right? Let's just make rules, right? This is my rules for this. I'm looking for a gap down. What does this mean? That the market opens lower than yesterday's close. So, for example, if, let's say yesterday market closed at, I don't know, 4,000, right? At 4pm today at 9:30am it opens up at, I don't know, 39, 80. It just opens up lower, right? That's what I want to see. I want to see a gap down. Second is this setup for me is usually within the first hour max. Maybe let's say five minutes to an hour. This is when I'm looking at this. I'm not looking at this two hours or three hours in. So I think having an idea of time is also very important to know when I'm looking for this. So when I do go back in time and I do test this, this is what I'm essentially looking for.

Yes.

Right. Second is, what is my entry criteria? What do I need to see? This is not really my entry criteria. This is more so like my trade setup or environment you need to see.

To get to that point.

Market gaps down. It gaps down lower than, you know, a key level. This is the time period I'm trading it in. So what is my entry criteria for this particular setup? I'm looking for a move on the upside, upside move. And I'm looking typically no follow through. Now, what does this mean? Right. This is, once again the whole why we want to keep asking why everything is why no follow through. This concept of no follow through essentially means that, you know, we'll see a move that goes up. The volume isn't as strong. You're not seeing a surge in volume, you're not seeing a surge in activity. And, you know, the, the conceptual understanding when you look at order flow and you kind of start understanding the tape is if price starts moving up and you're not seeing activity increase, a lot of times, it's typically not a lot of strong buyers behind it. There's not a lot of activity. There's not a lot of interest behind it that's driving price higher. So that's like the first thing I'd want to see of like, okay, there's no follow through. That's my first entry criteria. My second entry criteria is once there's no follow through, do we start seeing the action slow down? Do we start seeing a little bit selling pressure? So two things that I've seen is I'll see selling pressure kick in, right? It can be light, or I'll see activity slow down. And what do I mean by activity slow down? So sometimes I'll see, you know, we open up. We open up. Okay, maybe not the strongest or even if let's say we do open up a little bit strong, and then once we kind of start hitting this flat area, price gets flat. And once price gets flat around here, activity slows down. And what do I look for activity. When activity slows down, the tape slows down, we stop seeing aggressive buyers come in. There's no one aggressively, you know, filling the ask over and over again. The Same way we saw that there. Once that starts happening, if we are at, let's say, a key level, an inflection point, that's where we're moved into. For me, that's where I start looking for the short. This is a short trade. So for my morning top, I'm looking for a downside play. So that short play is what I look into. Now, for me to take this trade, my risk has to make sense.

Right. So, meaning, like, hey, if I take this trade, am I positioned accordingly, that if I'm wrong, I'm comfortable in what I lose? If I'm right, is there money for me to be made? If that makes sense, I'm good to go. Right now it's. Once again, there's a few things we have to think about here. And the reason I'm factoring these few things in is because I want people to understand how to think through playbooks and how to think through strategies. Right. What. What matters here. There's a few things. So there's recently, I think two weeks ago, from the time of shooting, there was a day that morning top set up like it kind of presented itself very similar. I didn't take it. And I'll tell you why I didn't take it, because for three, four days, the market's been selling off, selling off, selling off, selling off. And I was like, okay, I think right now the market is maybe overextended. I'm seeing something similar happen, but market's been so, like, we've been having big gap up days, big gap down days. And I'm like, last thing I want to do is be caught up in this, like, irregular activity. And I was like, I decide. I decided not to take it. And that day, what happened is we. This is where we closed the day before. We gapped down, we moved up, we moved down, and then we rallied up. Right. So that's where the selection of, like, economic events, selection of, you know, the last few days of what. What's happening, the market played a role because now. But now if we're selling off for four or five days, we're overextended.

Yeah.

Do I really want to take a short trade on an overextended day?

Yeah.

I'm like, ah, this. The trade looks good, but, like, I can live with missing this one out.

Yeah.

Is the. Is the idea not that I don't think it's gonna work. I'm okay with missing this one out. I'm okay with not putting. And even if I do take that trade and this Is where like stage three and four and kind of kick in with dynamic risk. My risk on this is not as aggressive.

Yeah, no. So like in that sense you're identifying factors that could remove certain attributes to the trade that you actually want to take. So rather than it being, say, let's say, you know, you've graded A plus, it's suddenly downgraded to an A. And therefore with discretion, you say, okay, I don't really feel this trade is the best one for me to take. I'm not willing to say risk. And again, being at stage two is an important factor to take on board. Because you need to build that.

Yes.

To really get to the point where money is. It never really matters in terms of like, we're focused on it, but that byproduct only comes from building those reps.

Exactly, exactly. And then when you have this foundation, what it allows you to do is. Now I know what I'm looking for, right? So now I know, hey, I'm looking for the first five minutes to an hour and open. I'm looking at, let's say, I don't know, es, or I'm looking at Tesla or whatever it is. I can go back in time to, let's say the last three years and I can go through every single day, write out my game plan, spend time on like, hey, the market, gap down, first five minutes to one hour. Here's my entry criteria. Would I take the trade? No. Yes. No. Take that, build data around it. And now I maybe in three years I maybe got, I don't know, 50 trades. Now I have 50 trades. Some I made money, some I lost money that I can go through. I'm like, okay, let me go through this individually, let me spend time. This is where the time element kicks in, right. What this does is you can now you go back in time, you back test, you build your reps, you get familiar with the market, you get familiar with what's working, what's not working once you get really familiar with that. Now imagine what happens in real time of a trade that you've back tested for three years. I mean, a three year time period over and over again. You get so comfortable in seeing these moves that you know how to execute it, when to execute it, when it may work, when it may not work. And obviously not everything is going to be in the same environment, but you get more comfortable. And that's where, when you get this, any kind of strategy, the idea to go back in time and back, test it, play with it, have the strong understanding I think is, is, is something that every trader in stage two should be doing. Right. That's why you'll see like traders in stage four or five really don't back test it kind of have things down and they have the, they have enough experience and reps to do, to execute stuff. But I think when you're in stage two, like why not accelerate your learning curve and try it and you might try this and you might say it doesn't work, it doesn't make sense. Okay, go to another one, go to another one. But have the proper foundational understanding of what this strategy means. Like if I give you these rules, like your question should be what does this mean? It's essentially means we gap down, market is weak, market tries to make his first leg up. First leg up isn't being able to have any follow through. So that continuation of sell off happens. But the action is seen on market trying to push up. If market gaps down and it pushes down, we typically get that recovery. Yeah, I want to see the market trying a little bit and if it does try, you start flushing. There's also this other thing with like the morning top setup that I see, the market opens at 9:30am which is something I'll drop here. Sometimes the market doesn't really open at 9:30am why? It doesn't make sense, right?

It doesn't. Yeah, yeah.

So sometimes the market doesn't open at 9:30am I mean there's, what happens is so sometimes there's particular days that some orders need to get filled, really large orders. So those orders cannot get filled right on the open. So a lot of traders on the floor, a lot of, let's say institutions that need to kind of offload 2 million shares, 3 million shares, they're like, they'll sell it, send it to someone on the floor and they're like, I need to offload this in the open. They're not going to do it on the open. And they're like, we need to wait a little bit and you'll see action picks up. And then 9:37, 9:38, 941 is when they start offloading and then the price starts dumping. So when you see that happen, that's where that big sell pressure comes in from.

I got you. Okay.

So that's also something like.

I start looking into. So it's like when we do our Playbook video, I'll show you examples of that of like when it happened and how I, I've read that and there's times where I see that happen. And from like a dynamic risk risk point of view, I kid you not, I just all in all just like heavy and I, those are days I have high big trades. But these are like those anomalies of finding things in the market that you see consistently. And when you see it consistently enough, making money from the markets becomes a lot easier because it's like that one set up, one trade, you see it happen, it's repeated. But what's the difference of me making a thousand or 100,000? More size, going with more size.

That's right, yeah. So once you have the playbooks, the process and you build the reps.

Yes.

You start to really identify certain nuances, certain things that are a bit more unique. That's where your unique edge comes in which then builds your A star and A plus. And that's where the dynamic sizing starts to step in once you build those reps. Of course at this stage though, doing these processes are so important to be a well rounded trader and to build your confidence most of all. Because without that confidence you're never going to be able to handle size or be able to stay consistent because all it takes is a loss or a few losses to knock that confidence. If it's not built with the, as you said earlier with the, the diagram, you know, the strong foundation.

Yeah, yeah. So that's why it's like this is where I think traders need to spend a lot of time off the screen. That's what I was saying. Like they're more valuable of doing this and building data collection around these setups over and over again than to go back in time, sit in front of a screen for nine hours. The nine hours really going to show them any value. But if they start looking at this consistently, they're like, okay, this makes sense, that makes sense. I understand the good part, the bad part. And they start developing the playbook to start developing the strategy. And it's not just developing this, it's other stuff that we develop too. But this at this stage is like the key thing that we want to spend time on. And, and I've seen people get out of this in 30 days. Right. It just depends on how intentionally you can get reps in and how much you can absorb from getting those reps in. And I've seen people in this for like six months. So that's why two to three month time period. I think being in this period, developing your playbooks, combining your processes with your playbooks, when you find these processes, let's say morningtop, that to Set up your focus on applying it in the real market, executing it, taking that real data, combining with the back testing data and just kind of working through that for two to three months will give you a real strong foundation.

Definitely. No, definitely. And I think that's what a lot of traders. Well, a lot of traders skip stage one and two.

Yeah.

Altogether. A lot of traders don't like.

Fortunately. Sorry. That they'll be able to really hopefully reflect and just say, okay, now's a chance. Because it's not like the time periods are long, especially at stage one and two between those two, if you add them together, it's not a long time if you do the work.

Yeah. But the problem here so far is like it's not a long, but people go, well, I could take a trade in one month and I can make that money. Why would I do that? That's why in the beginning I went through those key points for you to accept. You can either go through that cyc cycle for five years or you can commit to this stage now and get out of the cycle in five years. That's on you. Most people go through cycle one naturally, but it's like get out of it as quickly as possible. Go to the stage.

Yeah. Recognize it, make changes. Yeah, yeah.

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Now let's get back to the episode, right?

Cool. So this is, this is mostly, you know, a lot of stage two is you know, applying, you know, it's, a lot of it is just developing, right? This is not, we're not scaling up, we're not really doing, we're, you know, looking at playbooks. We're back testing, we're taking, we're taking some real trades, right? We're making sure we can follow our rules, right? Like these things should be tackled here. Like if you have rules, you should follow them, right? You have your, you know, pre market game plan, you have your, you know, live game plan, you have your post market game plan. Like you're doing this on a day, you're doing your weekly recaps, you're doing your daily recaps, you have daily, you have weekly. Right? Now, while you're also doing this, something you want to do is you want to track all Your data, right? You want to track everything in terms of your trade. So, like, I'll give you an example.

Two good ways to track stuff is you want to track everything in R multiple, right? And I think once you build that mentality now, it makes things a lot easier. You want to look at trades from our point of view. So every trade that you look at, you don't want to look at, did I win or did I lose? Was it a win or was it a loss? You don't want to look at that. This is not something you want to look at. You want to look at R. So what does R in the simplest term mean? Is if you are taking a trade. And let's say you buy the trade at $10, right? Let's say you buy one share at 10. Now, before you buy the trade, you should know that, hey, if this trade goes to nine, I'm gonna exit, right? So that means if it goes to nine, I'm gonna lose $1. So every trade you go into, you should have that risk element combined. Now, if this trade, you lose $1, you lost negative 1R. Okay, let me rewrite that. You lost negative 1R.

Now, if this trade ends up going to $12, right? Because you made $2 and you were going to lose $1 if you were wrong. You had a 2 to 1 risk reward ratio, meaning you made $2, you risked one. So you had a 2R. Does that make sense?

100.

So it's just dividing the potential loss to what you made.

Yeah.

Right. Now, if you were gonna lose $1, but you end up losing $8, what do you think happens? What does your R go to?

You have a network.

0, negative 2R. Yeah, that is a problem. Now that's like, why'd I have a negative 2R? You shouldn't be losing more than negative 1R. Right? So when you go into this whole tracking element is one tracking from an R point of view, what are things you want to start tracking, right? Because now, now you start building this foundation of things that you start tracking. One, I think, is R in R. The second thing you want to start tracking, and this is something that I see people, you know, mess up as well, is how effective is your stop loss? Right? Like if. If you show me 30 trades and I ask you, well, how effective was your stop loss? You should have an answer for me. Where it's like, what do I mean by effective? Where it's like, if you buy a trade here and that's your stop, how many times does this happen?

Right? If that happens a lot, you stop, right? But now it's like, that's where you have to start knowing, like, is my stop too tight? Is my stop improving? Right? What is my drawdown per trade? How fast or slow am I going into drawdown? How fast or slow am I making money? Like, if I go into a trade, what starts happening is my entry, right? Too early, Is my entry too late.

Right? Like, what starts happening here is my exit too early is my exit too late. How many of these happen, right? What are the times I'm taking my trades in? My best trades, my worst trades, right? And because your emotions should not play a role here, because you're trading with the least amount of money, you should be able to experiment this with real money, right? Real money. Of like seeing these patterns, seeing, hey, or your stop loss hitting. How early are you taking your trades? Are you following your max loss rule? If you say you're going to lose $50, are you following that which you should? Like this. These are things like the rules thing. Like, the faster you're able to follow these things, the faster you'll be able to get out of the stage, right? If you can't follow this, never mentally go to the. Never go.

Yeah, yeah.

How fast, how effectively are you following this? Right? The times that you said you're going to trade your rules, is that being followed then? Like the setups that you said you're going to trade, right? Setups. Are you or your playbooks, are you executing them based on the follow rules, right? Then in terms of your findings, what are your findings, right? Findings in terms of like, hey, this is what I learned about the market. This is what I learned about market dynamic. This is what I learned moves the market, all of these things. And what you should do when you do your weekly review, you should put all of these things into a, into a document and you should write it out. Hey, this week, these are things I learned. I learned, like when Powell does talk, market does move. Oh. I learned when, you know, every first Friday of the month, we have job reports and market cares about job report. I learned that when Trump tweets, market goes crazy, right? Like, you start picking up on those things. And then you do that on a week to week basis to a month to month basis. You start noticing your problems and then your goals. You know, early on when I said goals are not money, your goals start shifting, right? Instead of it being money, it starts going, what are my goals? Right? Your goals start becoming, I have a bad R multiple, right? So my goal is to make my R multiple improve. How do I improve it? I have many trades where I lose more than negative 1R. What does that mean? That means I don't follow my stop loss.

Yes.

So I need to make sure I start following.

My stop. That's one of my goals for this week. I need to make sure I follow losing only $50 per trade. I realized that when I do make money, I immediately go into my second trade. So I rush my second trade. So this is where you start having those processes into this developing stage of like, okay, this is the problem. This is working. This is what's not working.

Was to your point earlier in terms of stage two or even stage one, but particularly sorry, stage two is, as we just mentioned, with Trump, for example, like you might have been trading last year and then coming into this year, the markets have changed and therefore you might have to come back to do this stage again, even if you've been at stage five, for example, for the last two, three years. Because the playbook might not be working, or you might need to start tweaking some of the R multiple, the risk, maybe amount or the ticker that you're trading, or reviewing the days and the times, et cetera. Because there's such a shift in the market.

Yes.

So, like, this is a unit, as you said earlier, a universal stage, but so integral. And it's not something that you do once, you know, it's something that you have to do to begin with to really build your stamina as a trader, your resilience as a trader, your confidence and your systems and your processes, your playbooks. But it is something that, if you've done it correctly one time, it's something you're going to lean on in the future as market conditions change, as you, you know, need to review your performance, potentially you might have had a bad quarter and you need to review that performance. And this is essentially where you're going to come back to.

Yeah. So that a lot of here is just developing this thing and like I said, the big thing here is just data collection. Right. And then once you have data collection and you start knowing the mistakes you're making, you start building your playbooks, you start making the mistakes and you start applying. It is where we start going to, like this, like, optimization, slash, intermediate stage. Right. This is where we start really applying and we start optimizing the things that we've done, which is like stage three. Right. This is where you should be an intermediate trader.

Yes.

Not making money, but you should have your playbooks Established, you should have back tested for, you know, good amount of time and you should have built a good foundation of the markets. You should have your rules and these rules will adjust as time goes on. And as you start saying, well, you know what, not until 11am Let me do it to 12, you might say, you know, instead of taking three trades, I'm going to take five. I tend to take more trades and I get one to two winning trades. You might adjust something with your process here. And this is all open. Like this is not something I want to be so opinionated on. But this is just a framework that you should follow. But by here you should have enough data of yourself.

Yeah.

Of the mistakes you make, of the things that you're doing good, the things that you're doing bad, such as your bad or multiple. You move up your stop too much, you don't follow your stop. For example, you don't follow your risk amount.

Maybe you choke your trade. And yeah, you may be mismanage.

Yeah, you mismanage trades. Maybe like, like by, by this point, like when you go to stage three, like you should know your biggest problems. Yeah, right. Like you should have enough data and good data. Right. That's why the one before is data collection. And if you have good data on your processes and on your behaviors, you should be able to know how to fix the problem. Because if you don't have good data and you don't have good stuff, you won't know what problems to.

Yeah, yeah. Cause I think every trader ends up having their own pattern, like negative patterns and positive. But the ones obviously we need to focus on to reduce down obviously the negatives. And it could be a whole different things. Normally I think there's reoccurring themes with individual traders. For one person, they might be choking the trade. Another trader might be cutting off profit too early, too much volume too early. Another trader might be oversizing. It's very unique. And that's the problem though, because then if you don't do the data collection properly. Yes. You can try and remember like you probably do that mistake and be like, I've done this before. But the data can. Maybe when your data collection is done properly, there may be other correlating factors.

Yes.

You know, like it might be bad sleep, for example. It might be that there was some sort of market movement the day before and then the next day, if you're trying to follow your plan as normal, doesn't perform right. Or the market movement the day before has then caused you to be a bit more Emotional coming into this day. So you make a mistake and that's why that data collection is there because. Yes. To pick up on maybe like, hey, I keep oversizing, for example. Yeah, that might be something you remember here, but the knock on effect of why you've done that isn't something that you're going to constantly be able to collect.

Yeah. And then having that once again, good data collection allows you to go into your problems, allows you to tackle your problems. And once again, by this point you should know all of those problems, you should have solutions for them and you should start implementing the solutions. Right. And by now like stage three, beginning, like there's the beginning of stage three and then ending before you go to stage four, here's where you know the problems and before you even go into stage four, you should be able to execute your playbooks well. You should be able to have a good foundation of your playbooks. You should be able to have good trade selection. You should know all your problems and you should be able to tackle them. Yeah, you're not going to solve all your problems, but the idea should look like problem fixed, problem fixed, problem fixed, problem fixed. So it's like every time you have a problem, you have this process of a identifying the problem because you have good data collection, knowing what the problem is on a deep level and knowing how to fix it.

Yeah.

And keeping a weight. That a way of tracking that you're fixing it. Like, hey, my process is like something that happened with me early on is I used to be so biased in my pre market game plan that I used to miss the real good trades because I was so biased on one side. I never used to have enough space to allow myself to be flexible. I was like, oh, I think the market's going to go down today. So I'm looking for shorts. Market starts rallying, I'm not taking longs, I'm still shorting. Yeah, that was the problem I had. And the way I found that problem out is by doing this process where hey, I become so biased. Right. And that bias blocks me from taking any other trades. So going into this week I need to unblock the bias. Going into this month I need to unblock the bias and I need to be more flexible and solving some problems like this don't happen in one day. This could take weeks, if not months.

Yeah.

Right.

Identifying and then actually addressing that.

Yes.

Do you feel like it's important to address a specific problem one at a time or is it something that you should, if you've identified, let's say two or three. You should still attack all two, Three of them.

I, I think you can tackle. They're typically in the different spaces. Right. So if like one is like, they're.

Not all at the same time.

Yeah. One is biased. Second is like, my risk is off. I can control my risk moving forward too. But it's like the problem here isn't, you know, there's three problems here. One is identifying problems. So it's like if you identify problems, you're already like ahead of 60% of people. Because I don't think people can identify problems. Well, then it's how do you tackle them? Like, what is your approach? Like, okay, if you're biased, what do you do then? Third is doing it. This is like problem people. Like, there's so many traders that'll tell you this is my problem.

Yeah.

Okay. What are you doing to do that? I don't know. Every time I hit the same thing. So it's like you need to have that plan and then you need to implement that plan. Yeah. This is the whole, like the whole stage three is that.

And give the time to do it.

Yes. And, like do this six months, three months, two months.

Money.

Yeah.

It doesn't matter.

Exactly.

Because again, you know, just off the last point, but this one in particular, the money will come as a buyer because this is literally the part where it starts to form. Because if you then are fixing these problems and these mistakes and spending the time to do so.

Yes.

This will then sort itself out.

This is where you'll start seeing some progression and whatnot. But that's still not the goal. The goal here starts coming into like stage 400, right?

Yeah.

So now this is where we start going to stage four. And once again, you don't. You go into these places when you get comfortable. There's no, like, I, I don't want to put a hard time limit on it, but I also don't want to put a hard kind of pause on it either. I think this is one of those things you navigate through on your own as time starts going on. Right. So once we get stage three out of the way, we've optimized, we've understood our problems and we start tackling our problems and you should be able to tackle them. And all of these problems should be trackable in terms of problem solved. Problem solved, problem solved. And until you get that healthy feel of doing that repeatedly, you don't go into stage four. Stage four is. This is where we start playing the size up game. Right. This is where you start hitting the advanced level. This could be six months later. This could be a year later, right? Does all dependent on you, right? This is where this guy comes in.

Emotions. This is where he is, like, right there.

Yeah, I can imagine, right?

He starts hijacking everything, makes everything a complete mess, a complete nonsense, right? So here it comes down to knowing how to take dynamic risk, right? I think it's knowing how to increase risk and how to be risk on and how to be risk off, right? This is, like, very important. So once again, stage four, people are not in this. Like, even if it takes you a year to get here, that's okay. I would rather people take a year to get here than, like.

You know, like, get to a point of, like, doing it too fast, sizing up, blowing their account. So, like, you're a healthy time now. There's some things that you go through here. Okay? So this is one stage that I know many traders are stuck at. Like, I know traders that are profitable, they make money, but they're like, every time I size up, I kind of get stuck on making more money or I get stuck on getting to the next stage. And there's kind of a process. Like, even for me, like, I'm still trying to size up. I've sized up. I'm still trying to size up. You always go through, like, when you get to four, you're always in, like, four and five. You're always in four and five. You're always in four or five, Right. Five is like, you start cruising, and then when you're ready to size back up, you go into four. Right? So for me, at this particular stage, it's identifying a few things. And one thing is this part plays a big role. It steps in in every single category. You have to start learning what your emotional triggers are.

Interest.

Yeah, right. What every.

Every trade is have unique ones.

Every trader, I think, has unique ones, right? Like, some people, like, your ego gets in the way. Some people, you know, they don't like. This also gets limited more. If your stage three is done good, this gets eliminated more. This still pops up because, like, naturally, we don't want to lose money, right? We as humans do not want to be in a place where we lose money, where we're wrong, where we look stupid, Especially on a larger scale. Also on a larger scale is whenever you have more money involved, you feel the burn.

Yeah, yeah, Right.

Way more. And two, three times of this is really bad. So here's where you start having new rules for risk, right? So, like, some rules I have. If I have a big trade on the Open, my second trade, I usually size down, all right? I'm more focused on my size on the second trade, where I'm more cautious. So what I used to do early on is I would have a big trade on the Open, and my second trade is a second bigger trade, and then I would lose it. All right? So it's like knowing what to do during big trades, knowing what to do during bad trades. Right. There's like. And these bad trades and good trades become more. More important because there's more capital behind it. So it's like, typically I would have a bad trade. It's like, shit, I risked 30 or 40 grand on a trade. If I take a second trade, for me to make that back, I need another big trade.

Yeah.

Do I need to go big trade again? Like, how do I dynamically play with my risk at this point? Right.

Because that's. It becomes a problem, like a formula thing. Because if you then downsize and that one wins.

Yes.

It might not covered.

Yes. So that's where you know, knowing where to size up. Right. And it's a lot like. For people that played poker, it's a lot like poker, right? Like, you'll have hands that are really good, and then just because you had. You think you had a good hand and it didn't work out, doesn't mean the next one, when you don't have a good hand, you go all in again.

Yeah.

So now it's like the trigger point becomes important because you need to know, well, I need to be patient. Right. And there's this thing of sizing up. It's like this automatic mental law that happens the moment you say, I'm ready to size up. Right. Moment, like, I'm ready. You get very blinded by trades. Every trade looks good.

Yeah.

Right. And then when you go into the trade, you're like, shit, every trade is not good. Right. So when you. When you're in this mind mindset of sizing up, a lot of it is going into like, okay, just because I can size up doesn't mean I should size up. So it's very similar to poker. Just because you can go all in doesn't mean you should go in on every hand. Right. So there needs to be rules here and how you do it. Right. So it's like a staircase. Right. So if, let's say you're risking $100 a trade, you can't go and risk one care trade.

Yeah. Because too much of a.

There's a 10 to 1 ratio there.

Yeah.

So now you have to be right 10 times to recoup that. So I usually say like 20 to 30% is a good starting point maybe.

So if you're doing 100 or that 121 like you.

Because the thing with sizing up, it's not like you don't just wake up and you size up. Like, like I want to size up and like I want to take bigger trades on my day trades. And I want to, instead of risking like 50k, 60k, I want to go risk 200k, 300k. But I can't do that on one trade because if I go into a trade tomorrow and I risk 300k, my normal wrist size of 30 to 50k is not going to catch up to that. Especially if I'm in drawdown, like, it'll put me in this really bad, bad stage. So for me it's like, okay, well, if I'm starting off, if I am risking, let's say 50k, I can maybe go to 70, I can maybe go to 90. Right. And 90 even double sometimes. But depending on the hand, depending on what the hand is presented on that setup, I'll start adjusting my risk. And also sizing up also goes into a little bit of, you know, your percentage increase. Yeah, right. Like what that percentage increase is. Right. Like I said, I think it should be 20, 30%. There's also your how you've been trading. Right? Like historically or not even historically, kind of the compounding. Yes.

You know, if you, let's say you've done 50k trade, you've already won one. Now you do a 2030 increase, you win that one.

Yes.

Then you can do another 20, 30% increase.

Again, there's. Yeah, there's like this whole thing with it. Right. Because there's this element of like, what is your. Recently. How. How have you been trading recently? And if, like recently I'm not in drawdown, fine. I have the card to increase my risk when I see a good setup. But if I'm in drawdown, you know, in stage four and stage four, stage five is a little bit different. But in stage four, if you're in drawdown, like, you're not at expert level with risk. Yeah, right. We're in stage five. You should be an expert level with risk, where even if you're in drawdown, you should be able to say, I'm in drawdown. But I see a good handle me going. And that's what like professional traders do. But at this stage, because you're not at the professional level. If you're in drawdown, like, you're like, card to risk should be cut down. Yeah. Some. Some other rules that I have that I think works really well for people is you can take one to two max trades a month with increased risk. So it's like this special card that you have that you're like, I can only use it twice this month. Do I use it on this hand?

Yeah.

That gives you very selective. Yeah. So it helps you a lot in the early, early points in stage four to be very selective on the good trades. Right. And then it also depends on markets. What's the market condition? If you can read the market condition and you're getting a good flow with the market share. Size of play with size. But it's like when Trump came into office, markets shifted, people blew accounts, everything went up and down. Should you size up around that time? Probably not. This is when you should be on, like, the left side of the spectrum of sizing up your game or sizing up, you know, your position. You should be a little bit more cautious. So that's where the markets matter. How you've been trading matters and then how well you increase. So now if you increase 20, 30, you stay at 20 to 30 for, like, two months.

Yeah.

And then if you have one to two trades, you can increase 20, 30%, then you have maybe one where you can increase 50%. So it becomes very selective of when you do it. And you. This part's really important because.

The biggest problem I see here with people is I think when they know they can size up, they do it either too early or they get mentally blocked out on what trades they should size up on.

It's kind of hope they fail to pull the trigger.

And another thing, maybe too much as well. Do you think it happens too much in a bad trade? So I'll give you an example. And this has happened with me, right. Like countless times. Like countless times. Right. I take a trade, I make money. I. I go normal size. Okay. Take another trade. I make money normal size.

Why'd I go normal size in these trades? I'm such an idiot. Why didn't I go more size than this?

Yeah.

You know what? Next trade, I'm gonna go more size.

Yeah.

Go in here. My emotions block that. More size, I lose money. Yeah. Similar pattern. The way you break that pattern up is every trade or every hand is new.

Just because you made money on this trade doesn't mean the next setup is good. There's this thing that we have, and this is where emotions hijack. Emotions hijack. Just because I had a good setup yesterday does not mean I'm going to have a good setup tomorrow. And does that make that setup better or worse? That's a new setup, new market, new everything. There's also an element of, like, your confidence level because emotions comes in. So let's say your confidence here is like, let's say this is a confidence chart. And during this trade, it's here. During this trade, it naturally goes here. During that trade, it naturally goes here. And when it's here is when you lose money.

Yes.

Right. So knowing, like, that's where when you're sizing up this emotional meter or emotion meter kind of gets broken.

Is there anything you do to sort of help do the reset, you know, in these moments, you know, whether it's routine based or whether it's journaling based or anything like that?

Yeah. So I think for me, like I said, the daily journaling is very important. Like, I have daily journals where I'll say, you know, yesterday's session yesterday, I missed two trades. And because I missed two trades, I know there's a little bit FOMO that exists because I missed this big day and I, you know, didn't execute on it. So I need to be a little bit cautious. And when I look at trades, just as a note, look at it from a fresh point of view. Right. And don't factor in what I lost in yesterday. So I think those reminders help. Something else that I do is if I'm on a really good hot streak, which is something I haven't broken out of yet.

There are times where I take time off during hot streaks because I've had periods in the past where I've been on like a two, three week hot streak. And a week later I gave it all back. Yeah, like, just like not even a week, two days, I give it back. It's just naturally your excitement level and your confidence level goes up and up and you get blinded. And as you get more and more blinded, you start taking these stupid trades over and over again, and it just kind of ultimately kills your performance. So for me, it's like if I go on this, like, crazy good trick, I'll either step away or I'll size down a little bit and I'll let myself reset. Right. And I think when I let myself reset, it just allows me to get a lot more comfortable with the overall environment.

It's kind of like this chart you marked out here, you know, at these moments, both on the positive and negative you know, let's say you've had a really hot streak. You're still in your heightened.

Yes.

If you had a really bad streak is heightened. And that's those heightened moments is where the mistakes come in. And you know, it's so like the filters are down and the critical thinking are down. So by taking that break here, it allows those emotions to come down before that takes place, before that crash and.

Burn, you know, and that's the main goal of here, right. In stage four. And this is, this is something you'll be in maybe a year or two years itself, just being in this. Yeah. Like you can be in this stage for a really, really long time. Like I think even being here for two years, three. So I know traders that have been trading for five years, they're still in.

The stage at this stage. You're making money.

Yeah, yeah. You should be making money is the thing.

It's not like you're. But it's just stage five is where.

Yeah.

Because the thing is stage five is where everyone's goal is. But they just, they don't understand the, all the stages we've gone through so far. They just don't, they kind of skip over that.

Yeah.

And the thing is, goes back to your first point, you know, on stage one or not before stage one, when we were just mapping out expectations, having that expectation. Yeah. I speak to so many traders whose goal is to be an eight or nine figure trader, but they have no idea in terms of what it takes. Thankfully we're mapping out here, but that's. It always makes me so intrigued in their mindset is that if you have a goal, surely you should know what it's going to take. Right. Versus just assuming. You just keep trading.

Yeah.

And one day you get there. Exactly.

And I think having that roadmap and understanding that is important. And the main key takeaway at this stage, Right. And this stage is something like you never fully graduate from stage four. You go from stage four to stage five and then you go back to stage four whenever you want to size up. And like, like even for me, like I'm gonna go back in stage four as I want to size up and then when I get to stage five, I'm in that comfortable size and comfortable risk proportional element of like what I'm risking, what I'm, you know, taking on and so on. But the main key takeaways on this size is like knowing what that increase sizes for you. Right. So number one is like knowing, hey, where do I increase size and what that Max size looks like.

Yeah.

Right. So it's like the max size. And then I think the other thing is just knowing this emotional meter of yours. Yeah. Knowing when you get to the top. Knowing when you get to the bottom because you have the low points. Like, I have days where I have low points and I want to like, take every trade to make that back. And it's like, sometimes it's not even the money element of making it back. It's just.

It's performance. It's.

You get this performance thing of like, why did I lose money? Why did I take this stupid trade? Like, why am I such an idiot?

And you want to wipe the slate clean.

Yeah. And that's not typically the best place to be.

100%.

Right.

We have to press reset.

Yeah. And here you have to find your things to, to. To. To do it. Like, like one thing I like that works for me is just walking away. Yeah. Like, it. Like I, I don't. I don't have the emotional control. And this is me being honest where if I have a bad four trades and you tell me to sit in front of my computer for five hours and don't take a trade, I would not better myself to not take a trade. I know I would end up taking a trade. It's just something I know I'm going to do. So the way I avoid it is I just walk away. I don't need to be in front of my computer at that point. I know I'll end up taking a trade and I've done it countless times. So for me to restrict it is. I'm not going to fight the urge to not take the trade. I just won't be in front of my computer. Computer. Why do I need to be in front of my computer? So that's where the rules and the guidelines and the things you need to do, you know, kind of help to, to facilitate this process.

Yeah, definitely.

Yeah. So this, I think, I think if most people make it till here, I think they're good, in my opinion. I think this is like a healthy place to be in. I think, I think it's like stage four and five, right. Where.

Because I think there will be some traders where they stay at stage four. Right. They don't go to stage five. And that's. There's nothing wrong with that. Right?

Yeah.

It's about your goal and expectation.

Like, like, this is where I think. Yeah, this is where I think the healthy spot is. Right. I think like in or down here. And I think. I think here is like Whenever you want to tap into, like, you have your comfortable size, you have your processes. Like, at this point is like, let's say your max risk is 10K. Your average risk is 5K. You have your five, three to five setups. You know, you're good at understanding your emotional triggers. Right. You have a process. Right. You can identify setups, you can identify markets. You know when to trade, when not to trade. Right. You're like, I know when to trade. I know when not to trade. You can repeatedly use this process, this framework, and you can adjust. Right. So a lot of times people that are even, you know, here as well, but here you're. You're kind of in the battle area of, like, increasing and decreasing size. But I think at this point is where you have this process during this whole time where you can repeatedly make money. You can repeatedly adjust to market conditions. You can know when to take time off, you can know when to be aggressive. You start having this, this. I do think, you know, most times you'll hit maybe three years, maybe five years for some people. Depends on what. Whatever it is. But I think this is where you can get to. And these, these timeframes all depend on how quick you learn, how much time you're putting in, how intentional you are, you know, your learning curve.

All of these different stuff. Like, for me, honestly, I probably didn't get here until, like, year eight. Yeah, I probably didn't get to till year eight. And the main key takeaway from here, what you should feel in this, and this is what, once again, when I got to year eight, is I can do this again. I have, you know, and, you know, going back to the aha moment that I was saying before, is that you always chase this aha moment, but there's never aha moment, but there's more. More. So, like a process and ingredients of knowing I can do it again. I know that if I stick to this long enough, and I know if I follow this process, I will eventually figure it out.

Yeah.

So it's like even going with this new Trump market that I see a lot of people struggling with. Yeah. If this was me in like, 2016, I would say, oh, my God, am I going to make money this year? Am I going to do well? How am I going to deal with this? But I think now, being in 11, 12 years, I'm like, okay, well, I've seen this market change countless times. It's not the first time, and it's not the last time. Understand when the market shifts, this is how I need to approach it. Exactly what I need to do.

That's the thing. So like you, you can see the clear differences of those traders who have been through some market shifts before, like yourself versus this is the first time. Yeah, right, the first time. Sort of traders are panicking and sort of emotional and making mistakes. Kind of confused.

Yes.

You know, will kind of put their projection onto the market of like, this is crazy, you know, this is, is it always going to be like this, et cetera. They don't know how to adapt versus the ones who have been through the market conditions. They understand.

Right.

They understand that, okay, maybe they're not going to actively start trading just because they understand what's going on. It's more so that they just know to either step back, to reposition, reconfigure, pause, whatever it may be. And that's where that experience comes in. And that's, as you said, there isn't an aha moment. But when you understand the power of process, the power of data, the power of these decisions and these minute details, that's kind of your aha moment, you know. But it's not a one thing and it's not something that click. I mean, that's the thing. Everyone's looking for a light bulb moment where it's like, whoa, I know now. And then from this day onwards it's easy, you know, and that's the difference. And I think this really is highlighted, these five stages especially. I'm glad actually we went into really, really big detail in stage one and two because that's where I think majority of the audience probably are. But their goal is to get to 4 and 5 and if anything, you get to see that 4 and 5 isn't like really about this huge monumental changes. It's actually the step one, two and three.

Exactly.

And then it's just little tweaks then for four and five to really take you to a new level, you know?

Yeah. And like I said, the simple thing here is just you have this like four or five step process that you can do very fluidly in stage five.

Yeah.

And no matter what issues and problems you go through, you can always, you know, go through it and then hit profit. Go through it, hit profit, go through a hit profit. And it's like if you can't do that, you have issues in stage one, two and three and you've not spent enough time. And time is important here because I think what people don't get with time is you can't skip any of these because you need to go through in market shift, you need to go through when you know you're on drawdown. Like, like I always ask people traders, they're like, oh, I've been trading for one year. And I'm like, have you been in drawdown? They're like, no, not yet. I'm like, okay, well we'll talk again when you enjoy because I want to see. When you're in drawdown, I want to see how you react to that. I want to see. Oh, you've been trading for one year. Oh, shit. You've been trading such an easy market, like during Biden's administration. I think the market wasn't hard personally. Right. I think it was a very easy trending market for the most part, not all the time. So it's like if someone traded in a certain time period, I don't think they have the experience yet. And now those same people that are like, no, I've got it.

Yeah.

I know people that blew their accounts the last quarter, right. They got ultimately destroyed. I know people that couldn't execute a trade because what happened last quarter is the market sentiment switched so much in a short period of time that people could not adjust to it. Yeah. And that's where like people that are in stage five or you know, on a higher stage, they have the time limit of like, they have the experience of time, which is important to know. Like, I've seen this before, I know how to do it. I've been through a drawdown, I know how to handle a drawdown. I've been through, you know, taking a big bet where everything looked right and it went against me, but it didn't destroy my confidence because I understand the market is, you know, market switches and markets always. Right. So those things, like this is why I say like, this is like a three to five year process. Even though it took me eight, but I do think it took me eight because I wasted a lot of time on stupid stuff. Right.

You didn't get the, to have this sort of insight, right?

It was that and I, I do think there's a lot of great things out there of like understanding what a proper playbook is, how a proper playbook is set. Same thing. That's what I was saying with this channel. Like when I looked at this channel initially, I was like, holy. I look at this from like the 18 year old Umar that's starting out and looking at like seeing everyone's playbooks and I can have an opinion on, oh, that makes sense. That doesn't make sense. Seeing that is like, holy. Shit that expedites your learning curve so much instead of going through this. And then when you have a framework and you apply those things in the framework, I think it cuts your learning curve and point to profitability by 50%. Yeah.

Yeah, I love that. Well Umar, thank you again. I'm sure we could have kept going and we definitely have to sit down and do you know the order flow and one playbook at least. But everyone at home, drop a comment of your biggest takeaway from this episode. I know there was so much. Any questions you have for myself or maybe Umar, just drop them in the comments below. Links for Umar will be in the description below as well. Hit subscribe Other episodes are on screen. This has been Chart Fanatics. Take care.