Best of Trading Psychology · Part 1

Foreign.

Speculation and Risk.

This is the Chat With Traders podcast hosted by Aaron Fifield.

Hi Traders, and Welcome to episode 199. This here is another compilation episode. So just like the Best of Risk Management episodes from a few months back, except this time I've compiled some of the best clips on Trading Psychology. Again, I dug up way too much from the back catalogue of almost 200 episodes to pack into one episode. So this is only part one. A part two will follow shortly. Besides creating a Go to Trading Psychology resource, I hope this might also highlight some past episodes that you've not yet heard. So before each clip you'll hear I mention the episode number in case you want to go back and listen to the full interview. Plus, all episodes can be easily located in the show notes@chatwithtraders.com 199 now to get things started. This first clip is a gem from the very early days of Chat with Traders. It's taken from episode 8 and it's options madman Anand Sanghvi, aka Lucci Lucci has been on the podcast a couple times and given some of the large P and L swings he experience, it's always a treat to hear him talking psychology.

What are some of your best tips to sort of keep a handle on your emotions? Do you have any sort of advice on the subject that you wish someone shared with you when you're starting out?

Yeah. Yeah. And that's the thing. Like, you go through so many different emotional stages of your life, you know, so you got to remember, like, whatever, whatever environment that you have around you, that's what's going to influence your decisions and that's what's going to influence your emotions. So for example, when I was 23, 24, you know, I just had a, I just had a baby. You know, my thing was all about, you know, how do I, how do I make sure I got rent and all that kind of stuff covered every single day, you know, so, so when I went about trading, it was all about, okay, how do I make 4000amonth? How do I make 4000amonth? How do I make, you know, how do I make this, this kind of money a month? And I wasn't looking at the big picture. I was never looking at the big picture simply because, like, what my environment decided and, you know, decided how I was going to live, how I was going to make decisions, you know, so whatever you're going through at the time, you always have to be bigger than that. You know, you always have to take a step outside and look at what you're going through and realize that in trading, none of that shit matters. None of it matters. And it's so difficult to do this. It's so difficult to do this, to step away from having to make money, to step away from, you know, living. Living a certain lifestyle or requiring a certain lifestyle. It's so difficult to step away from all this stuff. And I would say the one most important thing that I wish somebody told me was that to not think about the money when I'm trading, you know. And again, you know, this is not something that you learn overnight, but it's something that if you have it in the back of your head when you're starting, you know, you're closer to the bigger picture than I was, you know, so it took me years to figure that out, you know, and it was all always about to. Your lifestyle, like trading can consume you and does consume a lot of people to the point where they don't leave their houses, you know, they don't go out, they don't talk to people, you know, they become very secluded and lonely and loners, you know, simply because, like, they're slaves to their P and L every single freaking day, you know, and that's all it's about. And that's not what it's about, you know, so living a healthy lifestyle and enjoying time with friends, whether you're down on your account or down on the year or you're up or whatever, having a life is so important to being on an even keel when you're sitting there in front of the computer, in front of the trading screen. So always thinking about that big picture, which again, most people stop thinking about it the second they have problems trading or the second they have problems in their environment that they have to deal with. And then subsequently those problems affect their trading decisions. And that's all it is. You know, most of the. Most of the bad decisions that you make are a direct result of your environment or youth. You projecting the problems that you're having in your environment or in your life onto the market, onto a market which doesn't give a shit about it. We're just talking pure probabilities. Market doesn't care if you got issues, you know, it doesn't give a damn. But you're going to project that onto the market simply because that's what's going.

On in your life.

That's what you're thinking about. You know, you're thinking about rent, you're thinking about this, you're thinking about, you know, how shitty your life is. Maybe at that time or how great your life is at that time, you know, you're thinking about all those things and you're projecting this onto a probability mechanism, a market which doesn't give a shit, you know, so that's, that's the biggest thing I can say, you know, Keep thinking about the big picture. Don't fall into the day to day, you know, hustle and bustle of the market all the time. Realize that the market not going anywhere, there's going to be money to make tomorrow, the next day, the next day, the day after that, you know, so, so don't, don't get too wrapped up in every tick of the markets, you.

Know, still tying in with that emotions and psychology sort of thing. How do you keep the confidence up to push on and pull the trigger after a run of losing trades?

This one's tough. This one's tough, man. It's tough. It's like, it's like, it's like taking a bad beat. It's always like taking a bad beat. It takes time. Everything is about time, you know, so let's say you get, you get, you get a run of bad cars or you get a couple shitty months where you take a bunch of losses. You know, it just takes time. It takes time for you to step back and realize what happened. And then it takes time for you to stop being depressed. Like, humans have this.

Innate sort of ability to. What is the word I'm thinking of? Self doubt or to beat themselves up, you know, after something bad happens. Like, humans always go through a period of time where they beat themselves up about it. They're like, dude, I shouldn't have done this. I shouldn't have done this. I shouldn't have done this, right? They kick themselves in their ass too hard and it takes a while to work out of that process and to start feeling more confident about yourself, to start feeling, you know, like you actually can do this. You know what I mean? I mean, during a period of bad losers, there's nothing in the world that feels, feels as bad. I mean, again, obviously there's worse situations everywhere, but, you know, it's a horrible feeling in the pit of your stomach. You're just like, dude, can I even do this anymore? And it takes time. It always takes time to come back out of that scenario. And that's again why it's so important to stay on that even keel, to continue to live your life and enjoy your life and to continue to have other things around you that you're motivated by as well. It can't just be about the markets all the time, you know, so that will help those, you know, those periods of self doubt and, you know, you're beating yourself up, depression and all that kind of stuff, you know, that will help making those periods a lot smaller so you can, you know, automatically bounce back and jump back into the game. You know, for me it's like, it's like two months or three months where I sort of like size down, I'm like, quiet, you know, and then finally once I get, once I get a couple of winners, I'm, you know, I'm ready to get back in there.

Next up, Jared tendler from episode 86. Jared is a mental game coach who works with world champion poker players, professional golfers and pool players, and traders too, with the aim to reduce negative and excessive emotion from decision making. And I understand that one issue that affects traders or poker players of all levels is something you refer to as tilt. Would you mind sort of describing what is tilt and how to recognize when you're actually, as you call it, on tilt?

Sure. So tilt.

There'S kind of a couple definitions for it. One was the definition that was there before I came into poker, which was tilt was pretty much any reason for you to play suboptimally, right? So you're making decisions that are less than what you would consider to be your best. And so upon studying, you know, poker players and their descriptions of tilts, you know, for several years, I really realized that, you know, 80 plus percent of their descriptions tended to be about them getting angry and making bad decisions. And so for me, tilt is just another word for saying anger. For a lot of poker players. They'll say, you know, tilt is anything, as I said, less than playing your best. But, but what if you're drunk? You know, what if you're tired, what if you're fearful? You know, all of those reasons are going to be, are going to need unique solutions to them. So, you know, anger is really the biggest one in trading. I would call the equivalent greed and fear and maybe to a lesser degree, you know, loss of discipline.

They tend to be the place, the words that traders use most often to describe their mental game issues. When I don't think that, that they're actually experiencing greed nor fear or a lack of discipline, that it's something more than that. But within poker, what I did was break down seven different types of tilt or seven different types of anger that would exist. One was running bad tilt, which meant, you know, players were losing for several days in a row. Sometimes Weeks or months, and they were just getting crazed as a result of it. And the, the solution to running bad tilt has to do with the understanding that emotion accumulates over time. Okay? The brain has a mechanism by which it can in essence, digest emotion, right? So you have a stressful day, you got angry one day, and so, you know, you go to bed, not in the greatest of moods, but you wake up the next morning, you feel fine, right? Nothing bothering you, you feel it's like a normal day. Where did the emotion go? Right? In essence, the brain has like a stomach that digests the emotion much like it would the actual stomach digests food. But what happens is when there's like a really emotional day, you know, or then, you know, you might go to bed and your sleep might even be disrupted in part because your brain is digesting all that. And then when you wake up the next morning, you know, you don't feel quite right. It's almost like an emotional hangover, so to speak. And so when you start that trading day or the poker player, you know, goes down and says to play poker again, you know, they're not starting with like a, like an empty cup in a sense, right? Their tilt threshold, their threshold by which the anger is going to affect their decision making has been lowered or their emotional level has already risen, however you want to think about it. And so in essence, it's going to take less tilt inducing stuff to get them pissed off to the point where they're going to make bad decisions. So dealing with that accumulated emotion becomes really, really important. And so for traders who have this particular issue, one of the best ways that you can start to break apart that accumulated emotion is to do some journaling is to write. And the writing, the purpose of it first and foremost is to get out of your head what those emotions are, right? You go have a couple beers at the end of the day, right? You're going to feel better, right? But are you going to actually get rid of the emotion? Probably not, right? So venting to other people has a way of getting the emotion out, but it's also not as productive. So keeping things inside is not a great thing. When you vent on paper, what you, what you do is you give yourself a record of the emotional reactions that are occurring. And that becomes helpful when you go back and look at it a day or two later and you see like, what the hell is going on here? Why am I getting so pissed off? And that's an important question to ask regardless of the mental game issue that you're Dealing with in particular, we're talking about tilt. Why is it that I'm getting so pissed off here? Is it because I just can't deal with losing this many days in a row? And so then you're able to start to solve things, but at a minimum, you can start to deal with running bad by just getting that emotion out and minimize the accumulation day by day so that you can give yourself a chance to kind of reset. The next type of tilt I talk about is called hate losing tilt. I should have actually called it competitive tilt in retrospect, because, you know, like traders, poker players, you're going to lose a lot.

And for people who are competitive, especially those who are athletes or were in any kind of forms of competition earlier in their life, they have more control in those other avenues. They've been more successful, and so they have more control over winning and losing. So not only do they hate losing, but now they've entered a profession where losing is built into the fabric of it, and it just pisses them off. There's no way around it, right? There's a lot of competition. Well, what you have to do there is have to really start to understand exactly what it is that you're competing for, and that's how you can start to correct it and reframe the nature of the competition. And so you can look at your goals as being something that you're competing for. Sometimes confidence or good feelings, emotions, you know you're competing for. And when you start to understand exactly what the nature of the competition is, you can start to round out some of the edges that will create those problems. Injustice, tilt, entitlement, tilt are two ones that I've mentioned already today. Mistake tilt, revenge tilt, kind of always a fun one. You know, in poker, that would be a particular player is just constantly beating you, or they say something or do something that kind of just annoys you and, and they. And then they beat you or a particular player who has just gotten the best of you, you know, time after time after time. And they, you know, now just hearing that person's name gets you pissed off. You know, as, as I mentioned, right. Trading is, is a little bit less personalized than poker is. But revenge trading definitely exists, you know, in, in a way of trying to get the market back for screwing you. Right? So it may be less about a, a person and more about getting the entire market back. And then the last one is called desperation Tilt. And this is where.

I would say there's a line drawn between a performance issue versus an actual Gambling problem. And this is a very important distinction to make for some traders and poker players to make. A performance issue means that what you're doing.

Actually, let me describe first. So desperation tilt basically means that when, when you are so desperate to recapture your lost your losses that you'll pretty much do anything, right, you're going to increase your bet sizing, you're going to enter trades that you have no, you're going to start placing bets in industries or in names that you don't even know anything about, right? It's, it becomes more pure gambling in a sense that desperation to win overrides all logic. And you do a lot of stupid shit that you're regretful of, you know, the next day or even later in that day. When it's a performance issue, you can handle those losses. You can handle all the dumb stuff you've done. When it's a gambling issue. Now you're betting with life savings, now you're betting with money that you borrowed from friends. Now your life is becoming impaired. And that's where you've got to really look in the mirror and say, do I actually have skill in this game or am I just a degenerate gambler? And fortunately, most of my clients have been in the former category where it's a performance issue and we are able to correct it. But if somebody has a gambling problem, like I mentioned, I refer them to somebody locally because that's not something that I work on.

Now I'd like to share with you what I think is a pretty fascinating segment from Michael Samuels on episode 165. Michael's an equities guy with a prop trading background who now predominantly trades news flow around mergers and acquisitions and other major events. Can you tell us a little bit about this situation with Qualcomm? And I can't remember who the other company you mentioned was. You know, you said this deal's kind of falling apart at the moment. I mean, how are you, how are you trading around that?

You know, one of the mistakes that I've made is the, I'll call it the cost of time being sunk in or time sunk cost. The more time that I put into something, the more money I invest in it, the more research I do with it, the harder it is for me to change my mind on it, if that makes any sense. So the short story in this Again, this is 19 months that I'm going to try to sum up in two minutes. The short story is Qualcomm tried to buy this company an XPI.

They needed nine different countries to approve this deal. Eight of the nine countries agreed and one country did not, and that was China.

What ended up happening was it got very wound up and wrapped up in all sorts of different international conflicts that are currently happening between the United States and China and Trump and the.

And Chairman Xi. And I have found myself at points, head spinning over this thing, and I've gone to drastic measures to try and gain an edge in this. And the only result has been that it just made me crazy. And if you want to, I can tell you about some of these drastic measures.

Sure. Yeah.

And again, you have to stay within the confines of legality.

There was a point in this story where the Wall Street Journal broke a story that said that Qualcomm executives were waiting for the 10, 4 from China to fly over there and finalize the deal.

So in my mind at that point, the signal that I wanted to see was the Qualcomm plane taking off from San Diego, California and going to China. And now there's various services that track these sort of private planes. But in this case, that wasn't possible. And the reason that wasn't possible was because Qualcomm themselves blocks the tail number on their plane. So the next thing that the only other option you have then at this point is. And again, this was a story that I had made up in my head was that the only way to track this plane is to physically be out there in San Diego and watch it take off. And so I literally just posted a. We have something called TaskRabbit. I don't know if you guys have.

That there, but we've got something similar. Yeah.

Okay, so I posted something on TaskRabbit. And the TaskRabbit post read something like, go to this airport and watch this plane take off and send me a video of it. And I got a response in about 15 seconds. And this woman who was just a mother of three, she would drop her kids off at school and she would go to the airport. And she sat there at the airport for me, day after day after day after day. She was probably there for like a week. And I had to deal with her. And the deal was this. I'm going to pay you this much a day, and if you get a video of this plane taking off, I'll give you this bonus money, this big bonus money. And she calls me a week later and she says, it's happening. And you're probably wondering, well, how did I know where the plane was going? That's the big question. They have this plane. How would I know? The thing is, you don't. But the way that. And again, I was making a lot of this up. Perhaps.

Qualcomm has two planes. One is for short distances and one is for long distances.

I was tracking the big one and the big one took off. And she sent me a video of this. And of course, she sent me the video of this at like 3:45 on a Friday where I have 15 minutes to make up my mind of what I want to do with this situation. And that's the kind of stuff that can make you crazy because you think you have this piece of information that no one has. You think, well, what if it happens this weekend and I don't take advantage of it? So I had better do that now. Not only that, but I was so mentally wrapped up in this thing. I was so emotionally committed to it, like it was a person, this trade, that I wasn't thinking rationally. And of course, I ended up putting on a large position. The deal is still not happening. And, you know, it's probably taken a few years off my life just watching this situation unfold.

Right. Man, that's a crazy story.

Have you. Have you done things like that in the past? Like other situations where you've kind of done some, I don't know, stakeout, excessive due diligence? Yeah, yeah, let's call it that.

Nothing to that extreme.

Okay.

You know, nothing to that extreme. I mean, a lot of this job, in my opinion, is.

You could call it getting lucky. But you have to be on these conference calls. You have to be in the game. Don't be lazy. One of the best trades I ever had. I happened to be a bit lucky, but I happened to be on this Lumber Liquidators, which is sort of like a lumber supply company conference call in 2014 or 2015. And they happened to mention in the call at complete random that they were going to be on a show called 60 Minutes, which is an investigative journalism show, that Sunday.

It was like a grenade went off in the middle of this call. And one of the analysts. It was an earnings conference call. Suddenly, no one cares about the earnings. And they said, well, what's the deal? Why are you going to be on 60 Minutes? He said, well, I can't really describe the contents of it, but I will say this. I stand by the safety of our wood, which implies.

Oh, shit.

Well, the whole segment's going to be that the wood's not safe. And you probably had five to six minutes before this hit the Bloomberg wires and all the major news wires. And in trading, that's an eternity. Five or six minutes is an eternity. And it's. I did great in it. But you look back and you say, well, man, like, I could have done this or I could have done that. But I guess what I'm trying to say is one of the things to always remember is just don't sit on your hands. Like, get in there. Like, be on every call that you can get on. Like, just. Just be there.

So when you got that information, how did you actually build a trade around that? Did you just instantly go short the stock or was there something more to.

It in that situation? And again, I've replayed this in my head. Oh, I should have done this or I should have done that. At that point, the stock was trading for 69. You could have shorted it all you wanted down to, let's say.

There was unlimited amount of liquidity in this name till 65. At that point, I think it was still maybe down small on the day. Just so you know, on Monday after that segment, the stock opened at 30. So, you know, there's lots of things I could have done. You know, I could have bought puts that were going to expire the following Friday. And, you know, before the volume, the puts had exploded, there was lots of things I could have done. What I did was just sort the stock outright. Because in the moment, you know, when it's happening, you just think, what's the easiest way for me to get exposure?

This following clip was recorded at a live event which aired on episode 163 with the legend John Moulton, best known as Rambo, a nickname and reputation he earned while throwing around huge volume as a spread trader in the pits of the Sydney Futures Exchange. Let's go back to the point you made where you spoke about how it's important to lose. It sounds like you've got a few things you want to say about that, so let's hear it.

Well, it's just my observation, the last couple years of my life, that.

A.

Society in general doesn't really teach people how to lose. They teach you how to win. Winning is easy. Everybody knows how to win. You know, they see LeBron James win a basketball game, making the last shot. He knows how to win. He's a winner. Winning is easy. But is there anything in society that teaches you how to lose? Is there a course at university you take that says, hey, come take this course. We're going to teach you how to lose?

Engineering.

Engineering.

There is.

What?

There is one thing that will teach you how to lose. And that's organized sport. Because in organized sport you will lose. Okay? That's the only thing I can think of that teaches you how to lose. Other than that, you have to figure it out for yourself. You really do. And losing is in how you deal with. Losing is extremely important in trading because winning, I'm telling you, is easy. That's easy. It takes care of itself. The key to trading is learning and figuring out how to take a loss. And how you deal with that up here, do you hang on to it and let it bother you or do you release it and let it go?

All I can say is, is that you need to learn from the tr. When you're trading. You have to learn. And you can learn from them, from being correct and say I did that correct, and you learn from that. You can also learn from when you lose. And when you lose, you have to experience the loss, feel it, learn from it and spit it out and let it go and focus on the next trade. If you hang on to a loss too long, it will pollute you. It will not allow you to make the next trade. And you have to focus always on the next trade. The next trade is the most important trade in the world. Not the last trade or the trade before that or the trade before that. Just let the trades happen and focus on the now of trading.

Do you have the belief that each trade is individual of itself? Like there might be times where you're actually going through a rough period. Do you still treat every.

Why are you so negative? I'm not rough period.

Losing here is.

Yeah, that's true. I mean, yeah, yeah. The way I've always traded. I don't want to use the word high frequency because you guys have algorithms that are high frequency trading algorithms. And I'm more of a hands on trader. And what I'm always doing is I'm focusing on the next trade. I don't think about the trade before it. And, and I'm not analyzing the risk I just took with that previous trade. It's just a fucking trade. I don't care. You know, just put it in the books, let's get on to the next trade. And because I'm mainly a spread trader, so I'm buying here and I'm selling here. I'm trading 20 different things all the time on the bidding offer, blah, blah, blah. A lot of times I have no idea what I'm doing. I'm just trying to make good trades. And then, and then the market closes and I Go. I wonder what my position is. Let's try to look at that position calculator. I look at the position and go, whoa. Okay, I'll get that up on the chart. I'll get that up on the charts and see if that looks good. Oh, yeah, it looks good on the charts. I like that position. I might keep that for a day or two. You know, like.

What motivates me to make trades is, is when I'm looking at the markets is a lot of different things. It has to do with relative value.

It has to do, is there a buy program in the 10 years? Is there a sell program in the 10 years? Are these spreads reaching historical levels? Are we getting near expiration now? These spreads historically have a tendency to move a certain way, going to expiration. So there's a lot I'm thinking about when I'm making treads. But I don't dwell on what I've done. I never dwell on what I've done, ever.

When you're talking about learning how to lose, I mean, I know.

Who here has been trading, let's say less than.

Two years, who's been trading for more than 10. Whoo. Cool. Young crud. That's cool.

So I imagine especially for newer traders, that's a very strange concept to put forward. Yeah. Learning how to lose. How would you actually know if you've learned how to lose?

You stop doing it.

You don't lose as much, and you lose less frequently. And then you say to yourself, ah, maybe I'm getting this now. Okay, but you're gonna lose. So I, I don't dwell. Once again, I'm repeating myself. But I, I, I'm so focused on the next trade. This is real Zen, man. This is like living in the now and spitting out what's happened in the past. If you're Zen Buddhist, if any Zen Buddhist here, you'll make a fortune trading. So what you're trying to do here is you're trying to focus on the absolute moment of the price information that you're getting off the screen. And that's what you're focused on. And everything that's happened before that you can look at it later. But in an active market, when you're trading, you want to be focused on the now of the price action that you're looking at. And if you're dwelling on other things that have happened in the past, it's gonna, it's gonna keep you from, from doing that. It's as simple as that. As far as losing is concerned. I mean, you Know, like when do you really actually realize that you've lost money? Well, it's when you get your statement the next day and you look at the total equity at the bottom. You say, I lost money yesterday, but, but I don't, I don't do that. I've gone months and months without looking at my statement to see if I've made or lost any money. I've gone months with that. One of the things when I first started trading, like a lot of you guys are new traders, I had to keep track of how much money I was making on a daily basis. I used to go from Chicago on the Chicago Northwestern trade up to Lake Forest every day. It's about a 45 to an hour train ride, depending whether I'm taking the express train or not. And I'd sit down, I'd count every trade I made and figure out exactly how much money I made or lost on the day. I did that for a few years, right? So it's an evolutionary thing. When I first started trading, I really wanted to see how I was doing on a daily basis. Right. It was important to me. Then I realized after a period of time that it wasn't so important.

Then I got to a point where I said, actually, if I can completely divorce myself from money, I'm going to be a much better trader.

I know that's hard to do, but I'm telling you now, if you can, if you can get away from the money aspect of trading and just focus on the market and making good trades, you'll have, you'll be distracted by less things.

There you go.

I mean, I just, I'm at a point now, and I have been for about 15, 20 years, where I just don't care about the money. I, I get a monthly statement now I'll look at a monthly chart of where my equity's been and that's it. I don't look at daily statements.

I look at nothing.

I'm focused on my position and the trades I want to make. The trades I'm making.

What are some of the lessons? I know this is a really cliche sort of thing to say, but given someone like yourself who's been doing this for 40 years, I think it might be an interesting subject to go into. What are some of the lessons which you would like to pass on to a younger group of traders?

Believe in yourself. Self belief. Real big, real, real big. Don't quit and never lose all your money. It's like a poker game. You lose all your money, you have to leave the room go away. Come back when you have some more money. So, yeah, that's a very simplistic thing to say, but it's, it's really true. Stay in the game and really believe in yourself. It's, it's, it's a real balancing act between having too big of an ego and not having enough of an ego, you know, and you got to know yourself really well. You don't know what your strengths are and you have to know what your weaknesses are. And it's a real game of inner exploration up here. I find it interesting now we're all trading from screens. The screen's over there and I'm here. You want to externalize the experience of trading real easy. The screens over there and I'm here. But you shouldn't be doing that. You should be internalizing the experience of what you see on that screen into here, internalizing it. It's not you against the machine. The machine should be part of you, metaphorically. The one thing that I found about trading, and it's the greatest gift that trading ever gave me and has nothing to do with money. It has to do with freedom up here. I knew early in my life I wasn't the type of person who's going to be told what to do. I realized I was going to have to find something that I could do for myself. I wasn't very good at taking orders or working for somebody. And initially it was like, okay, to do that. I need to make some money on my own. I'll become a trader. Okay, down the track. And I made mistakes. I started, you know, when I first got some money, I started buying stupid things. Buying stupid things. Then I realized that owning physical possessions was just going to be a burden to someone like myself. I'm no good. Can't look after things. I don't know how to change the oil. I can't do this. I can't do that. Owning physical possessions is a complete burden. So I stopped doing that. And then a little bit further down the track, I realized that the greatest thing that trading was going to do for me was freeing up my mind, free me up.

Up here.

I can look at any situation in my life and treat it honestly and fairly without having to accept anybody else's dogma being shoved down my throat. And I like that. I love having freedom up here. It's a really beautiful feeling and I wouldn't trade it for the world. And that's, that's what money has done for me. It's enhanced my, my existence on a Lot of different levels and has nothing to do with fast cars, fast women, or any other nonsense. I was watching the golf over the weekend and they were at the Memorial Tournament in Ohio and Jack Nicklaus was there giving a little speech. And I wrote down what he said because I think golf is very similar to trading. So one sport that draws a lot of parallels to trading, and he said the following. He was talking about Hale Irwin, who was another golfer of his era who was just receiving a big prize. And he referred. He said, Hale Irwin is a great manager of himself and the course. The analogy here is that a golf course is like the market. When you tee off on the first tee, what are you up against? What are you up against? How are you going to swing the club? What are you thinking in your head? How am I going to play today? It's very internal, the course. How's the wind blowing? How fast are the greens? How thick is the rough? That's the marketplace. You can't.

You.

That's what you have to deal with. When a professional golfer tees off, he has to deal not only with himself, but the golf course. Every time you turn that machine on, you have to deal with yourself and you have to deal with the market. Very close parallels. Anyway, he said, hale Irwin's a great manager of himself and the course. And then he just said this to anybody wanted to hear it. He said, know who you are. Know your game. Play within yourself. I wrote it down because I.

This is just.

This is trading. This is trading. You know what I mean? And he said, believe in yourself. And I've already said that to you guys. Believe in yourself. And he. Another thing he said that I thought was very fascinating. You know, he's talking on the tv, he said, and he's the greatest golfer ever. You know, he's one. He's dominated the sport during his era. And he said, I never thought I was the best.

I never thought I was the best. He said, if I ever started thinking that way, I was absolutely destined to screw up, take a triple bogey, lose the tournament, not make the cut. So I never thought about being the best. To me, it was always the challenge to try to be the best. I thought that was interesting. I thought I'd pass that on to you guys.

Next are a few snippets from the two interviews I've done with Mike Balafury. See episodes 22 and 162. Mike is the co founder of S and B Capital, a proprietary trading firm in New York City. What were some of the Hurdles you had to cross, like things that you really struggled with early on, just edge.

You know, I think that lots of times people mistake psychology with a lack of edge. People think, oh, there's something wrong with me, there's something wrong with my mind. And. And I think a lot of times just people don't understand their edge and they don't have edge. And look, if you make a trade and there's no edge in the trade, of course you're going to get upset because you're going to probably lose money. Whereas if you're in a trade where you have edge and you make money.

You'Re not going to necessarily struggle with lots of the psychological issues because you're going to have made money. So I think that edge is hard, and I think people don't even understand how hard it really is. Great traders can barely be right more than 50% of the time and still be legendary traders.

Can we just go back and pick up on. I think it was the first part of that formula you described you mentioned about having a growth mindset. Can you go into that a little more? What does a growth mindset mean? What's that referring to?

So there's a really great book that we recommend traders read before they actually show up.

At our firm, and it was written by Carol Dweck, who is a professor, and she wrote this book called Mindset, and a really, really great book. And the book, essentially.

The hypothesis is that.

If you come into. I'll apply it to trading. If you come into trading and you think that.

Your talent and your talent alone is going to dictate how you do as a trader, that's called a fixed mindset. If you come into trading and think, well, how I'm doing right now is how I'm doing right now, but I can be better tomorrow, and if I do abc, then I can be a lot better then that's a growth mindset. And we found at our firm that the traders who have a growth mindset become.

Very, very successful traders. And a great example of that is, is at the end of the year, this year, we ask our traders to come up with their yearly goals. And in 2016, one of our traders.

Who I'm going to talk about their yearly goals in 2018 for this particular trader earned a green shirt. And at our firm, if you net $1 million in trading profits for a year, you get a green shirt.

It's a big honor to be able to hit this level. And in 2017, this trader earned a black shirt and a black shirt is when a trader nets $2 million.

Plus in trading profits for the year. And so a trader was very successful in 2016 and got even better in 2017. And when he sat down to come up with his yearly goals for 2017, he said, bigger picture. I'm also thinking about making the incremental steps to be a $10 million a year trader.

That's what he wants to be. And so he's not settling for being a blackshirt trader. He is.

Starting to think about the things that he needs to do and starting to do the work that he needs to do to hit that next level in his development. That's somebody who has a growth mindset.

Do you find that most people in trading naturally have what you would call a growth mindset?

No, absolutely not.

Really?

Yeah, I definitely think.

There are a lot of traders that have a growth mindset. But no, I don't think everyone has a growth mindset. I also think while it's preferable that people.

Have a growth mindset, people, there are traders that are so talented that the fact that they don't have a growth mindset but also doesn't stop them.

But it's highly preferable getting to a seven figure trader. How much of it is a mindset factor. I know we spoke about having a growth mindset earlier and that probably ties into this, but do you think that some people, they want to make a million dollars? Like they can say that, but psychologically perhaps doubt their own ability or it seems too far beyond the realm of possibility. If that's the case, how do you overcome that?

So I've written about this in the past. I call it small wins. And so you don't want to think about going from zero to a million dollars. You want to think about going from zero to being able to make $1,500 in a month. I actually would take a step back. When you first start trading, a very common step is you lose too much money. And a real step in progress is to lose less. It's a real step in progress. And a real step in progress is to trade flat. And a real step in progress is to make $1,500. And so after you make $1,500, you set the next goal. Maybe I want to make $4,000 in a month, and then maybe I want to make $10,000 in a month. And so you want to be thinking about what are the things you need to do to get to that next realistic step in your development. And it is a process we find on our desk that it takes until year three before traders are going to make substantial P and L. And you want to come into this game being realistic about your learning curve. You can make some money in year one and you can make good money in year two. But what we're seeing at our desk, guys have all these resources. They get to work with Dr. Steenbarger, they get the best technology in the prop space, both on the front end side. And you know, you can't use our technology unless you trade at our firm and on the automated side and you get all the coaching and all the mentoring and plenty of capital to use at the firm and it's still, and you have these experienced traders who you can learn from and watch them trade in real time and it still takes some time to get good at it and you get the firm backing to make sure you can support yourself through those years, but it still takes some time. So.

I don't think about trying to go from.

You know, the one yard line to across the, from, from the 20 yard line to all the way across the field to the other team's goal line. I think about how do I go from the 20 to 30, how do I get from the 30 to the 40, do I get to the third and, and just keep plugging away and catch, put your head down and keep working. And it's easy to get from the 20 yard line to the 30 yard line.

It's really almost impossible to go from the 20 yard line to scoring a touchdown.

So that's what, that's what our guys, that's what our guys are doing. And you know that example that I used with one of our top traders who wants to be a $10 million a year trader, he was a seven figure trader two years ago. Before that he went from a zero to a 4,000. I remember pushing him when he was about a eight to ten thousand dollars a month trader. I remember pushing him and challenging him to make $30,000 in a month and getting him to commit to that. And I remember him then, and then doing that. And then he got to the point where he netted a million dollars and, and he got to the point where he netted over 2 million and now he's pushing himself to make even more. But he's taking those incremental steps and to be a $10 million a year trader, he knows he has to take these incremental steps and so focus on those incremental steps that you need to take to get to that next level.

Coming up now a clip from episode 174 with Nishant Porbandawalla. Nish is a proprietary trader at Kirchner Trading Group in Austin, Texas. Now, this clip is an awesome comeback story, and it plays in perfectly with the psychological challenges associated with trading.

You know, the story I was telling you that, you know, I should tell everyone is the story in 2014.

And it was a great year for me to start with. I was up. I was up, you know, I think I was up 300,000 in the first three months.

It was a great start of the year and I was really happy. I was having my first child and my wife was like, oh, we need to buy a stroller. I said, yeah, buy the best stroller. And I was like, when you buy this and buy the best, listen, it's going to be a good year. Looks great. And then I was playing an imbalance trade just like I normally do. But for some reason I didn't get my closing print on it. So I was in 10,000Amgen Amgn and I was shot 10,000Amgen, which I was supposed to cover at the close. And I just. Something happened and I couldn't cover it. And.

Sorry. Yeah, and I couldn't cover it. And while I was trying to get out post market.

Ackman came and said that he wants to buy the stock for 150 or $140 a.

And the stock was trading that time at about 90 bucks. And so even it took me less than, I think in 30 seconds, I was down 300,000 in the stock.

Yeah, it was crazy. I was just sitting at home and trading and basically I lost everything I made for that year.

And I mean, just the loss itself was really hard psychologically. I just had a child, you know, it was just. I think it was 15 days after that. And I just couldn't believe what happened. You know, I was still in a daze. I think when I came down, I thought of quitting trading because I was like, I don't know if I could ever come back from a loss that big or, you know, how long would it take? You know, it was just like, you know, you know, my whole life was like coming in front of me and, you know, I was just like, I don't know what to do at that moment. It was. It was. It was tough time. I was pretty much in tears. I called my old coach and he kind of told me. He's like, no, just stick in there. Just don't worry about it. Just.

Just hang in there. And I was like, okay, fine. You know what this is the reason I started trading, is because I love trading and for the passion of trading, because this is what I would do every day of my life if I had a chance. I would work on weekends if there was a shot of trading on weekends. So I said, you know what? Let's just go back to the love of trading and forget everything else. And I started.

Trying to make a small comeback. I think I remember the next month, I lost $15,000 because I was just not there mentally. Then slowly, I think I started making. I think made like $5,000 and $10,000 and $7,000. 10,000. Kind of slowly, slowly, slowly started chipping in on that loss. And then I think in about three or four months, I found out my father had cancer, so I had to go back to India. So I went three or four times to India, and I was like, dude, what else can the world throw at me?

Now?

It's like this loss. I just had a child, my first child, my father.

So he passed away in December, and by that time, I was still flying in and out of Austin to Bombay. So I didn't have enough time to even trade properly.

I was still so much happening at that moment. So I kind of. I think by the end of the year, I think this loss happened in April, and by December, I think I had. I had covered about half my loss. I was down still 150 for the year. Didn't make a paycheck, nothing. And then comes 2015. So.

I think it was 24th or 21st or 21st of August. 21st of August is. 21st of August is when.

I finished my loss of 150,000. So that's when I covered all my losses. And then 24th is when the Flash Crash happened.

All right, okay.

So you can imagine the emotions that I was going through at that moment in life because I had this crazy loss. Took me about a year and a half to recover, and I just recovered about three days before the biggest day in my life.

That's crazy, man. There's like a. Yeah, there's something. There's something to that story. Like, you know, you were. You were very close to giving up, but, you know, 12 months later, you had this massive win on the Flash Crash, which is like, just makes your whole career pretty much.

Yeah.

I mean, then you're like, okay, at least, you know, now you have enough money to, you know, to survive in trading. Because, you know, I mean, if you don't have money in the bank, it's just so hard to trade the way you want to trade. So I always tell people, like, listen, get a second job, do whatever you want, but keep some money in the bank so that you have that confidence. You're psychologically. You're strong, and you don't rely only on trading income because for a while, it's so hard. Trading is such a hard thing because psychologically, mentally, everything, it can screw you up pretty badly. And for me, it was like, that was it. I mean, for me, it was like that whole 15, 16 months ordeal ended up with the high of my life, you know, so you learn a lot from all that, because I'm like, you know, I mean, I was pretty much in tears after that. After that big, big day in 2015, I called my wife, and I'm just like, you know, what a circle this has been and what it's taught me, you know? And, you know, I mean, I had some big days before that. I remember, like, my. My first big day, I think, was In, I think 2, 7. I think 2007. It was a big day because I made like. I think I made a hundred thousand dollars in one day. And I told all my friends, guys, we're gonna party tonight.

Yeah, I mean, listen, I was like, 20, 24, 25. I was like, dude, this is like, dude, who makes 100k in a day? This is like epic, you know, second year to trading. Forget second year. Never see that kind of money in my life. So I'm like, listen, party, guys. Let's go out and let's drink. So I go, got everyone to a restaurant, just ordered champagne, this, you know, whatever people want to order. I said, order, guys. Obviously, we're all drunk and this and that. I think I spent like a. I think $1,200 that night, just, you know, buying drinks for all my friends. And then, you know, my biggest loss is obviously in 2014 when I lost 300,000. And I'm just like, you know, obviously your friends are there for you, but, you know, no one is giving you the thousand dollars back when you want it.

So, yeah, it doesn't work. Yeah.

So you kind of learn in life that, listen, let's not celebrate the lows, let's not celebrate the highs, and let's not, you know, frown about the lows. You know, everything will come when the time is correct. Just work hard and, you know, have the passion for trading, which I think is the number one thing for a trader. If you have the passion, you'll do well. The money will come automatically. And I've always believed in that. So, so when I had this big day also, I didn't celebrate. I just went home and I said, you know, to my wife, I said, let's have a drink. And that's it.

I'll now play a part from episode 169 featuring Jack Ma. Jack is a proprietary futures trader and head of Minta Capital. While he trades government bonds around contract expiry time, he mostly trades Australian bank bills, working structures across the yield curve.

Earlier I was talking about psychology in terms of, you know, believing in.

Sort of the uncertainty, right, that anything can happen. You kind of got to believe that now because if you do believe it, then you're not going to be stubborn when it happens. You're like, okay, fine, that was a, it was a 95, 5% trade. The 5% happened, fuck it, it happened, right? And then you can, you're at peace with it now. I would say the next step is, you know, you should reward yourself in a way that's consistent in, in how, how you sort of want to. How, where you want your psychology to be, right? For example, you don't want to be just jumping for joy when you make money and going to a deep depression in the corner when you lose money, right? Because if you're rewarding yourself based on the money amount of money you've made, it's actually better to reward yourself based on the quality of the trade.

Because that will make your actions and your psychology consistent with where you're trying to be, right? You don't want to be the guy who just celebrates making money. You want to celebrate making good trade. If that means losing less money, you need to celebrate it. Whereas if you make money on a shit trade, that's where it's really dangerous.

So how do you differentiate between the two? Because that can be quite difficult.

I've got a good one. It's been so long that I don't think the firm will care anymore. But I never told anyone this earlier, right? So, for example, WE Trade Tier 1 Australian domestic data, right? We try to jump right on that for a second. So when I first started, and I'll probably about five months in, there was one time where we were all waiting for the unemployment figure, the largest figure in Australia right now. You don't want to go into that winning outright. It's crazy. And back then it would gap 10 points each way, and that's huge. Seeing that most trades you're trying to make one or two.

I apparently I jumped in right when I thought the data was out.

So the market gapped three prices down. Right. And I was like, oh, it's out, we're going down.

You're already in.

Oh no, I wasn't in yet.

Right.

So I'm waiting for the figure to come out and then the market, this is all within like seconds obviously, right. The market moved, gapped three prices down. I got yep, it's out. So I went and sold and then it paused for what seemed like an intern. It was only probably another second because it was a bit weird. I was a wiser paused and then it collapsed like there's no tomorrow. Right.

It class so much I didn't know what price I got in. I had to go check because my Dom was refreshing so fast I couldn't even see the price. Now I was lucky because I was right. So I made 10 ticks in an instant trade.

Right.

Like it was probably a second. What actually happened is I placed a 10 grand 5050 bet.

Right.

That's a shit trade that I made money on.

Yeah, okay. Yeah.

So obviously there's very clear ones and I thought I should because it's funny, I mean they'll hear about it now in the firm. But if that went the other way, I might not be here talking to you anymore.

To be really honest, man, that's crazy. Yeah. You're very lucky that went in your favor.

Absolutely. To this day I recognize that there's two things in my career could have end my career. I'm just so. It takes a little luck to get to not get completely crushed. But that being said, I've also had a lot of bad luck. I just don't remember those because these are the better stories.

But that's it as well. Like you do also have a lot of bad luck as a trader or it seems like you have a lot of bad luck that when you do have some good luck, it's worth enjoying it.

Yeah.

No.

Why not? You know, I couldn't tell anyone that story because I figured they might looked unfavorably. But I'm pretty sure it's fine now.

Well, let's hope so because a lot of people are soon to hear it.

What about in examples where it's not so obvious just on like sort of day to day trading?

Yeah, I would say that probably rule number one. And obviously I assume the people who's going to take advice from this are relatively new to trading. Right. Is not following your plan. Right. Because in the beginning I would hope that is gospel. You know, if you have a plan, you know, where are you entering or what needs to Happen for you to enter a trade and then you know, where are you taking profit, where are you taking the puke.

And why and for whatever, anything this happened. Right. All of these should, should have been planned out before you enter a trade. Now if you entered a trade and you don't follow that plan, that's a shit trade. It doesn't matter how much money you've just made right.

Now. The reason I say is because in the beginning it's more often than not that mid trade decisions are usually not good ones. Whether you're under the pump. And a typical example would be you get into what would seem like a short term trade and it's starting to come close to your stop. Yeah. But on a bigger timeframe, this looks all right. So this, now it's turned into a long term trade. Now no one changes a short term trade into a long term trade when they're winning. Right. It will get to your take profile. Great. Happy days. I made money Trade workout. You only do that when it's completely going against you. So that's a really good example. Like you don't in the beginning, you don't really want to be changing your plan. Now if your plan is crap, and that's fine, you know, then you still need to follow that through because discipline is really important as well. Having that discipline to follow your plan. Then when the trade's over, you're not in the heat of the moment anymore. You can objectively assess your plan. Maybe it was flawed, but that's fine. This is why you're here. You're learning, you know, it's not about making money in the beginning anyway.

Yeah. And as we're kind of on the topic of psychology here, I did want to ask you, how do you deal with periods where you're perhaps underperforming and not doing as well as you'd expect to be doing?

From a P and L point of view or from a.

From a. Yeah, I guess we could sort of talk about both, but yeah, mostly from a P and L point of view. Like, let's say you're just on a bad run and.

Yeah.

I mean, I don't know, you know, what your bad runs in the past have looked like. But let's just say, you know, there's been two months go by and you've, you know, you're not really up.

Yeah. Oh, no, that's. Yeah, I think.

I think. And I read this in one of these books. I can't remember what it was. It says, success is perishable mastery Is not. Might have been like a book called the Trading Athlete or something. I find it really important, right. Because, you know, we value ourselves and this could even go to day to day life, right. On something. You pride yourself in something, right? You know, whether it's your job, your money, whatever your looks could be anything, right? How well you dance now.

Now if you, if you, you know, if you value yourself based on something that's perishable because you think it's not, but you know, it can. Like any physical thing is perishable, whether it's. Yeah, it's a. If it's your house, it's your money, it's to be honestly your girlfriend or something, right. Then when that perishes, you're gonna. You're gonna be in a deep state of distress or whatever it is, right? So I guess I've always looked at myself and prided. Sorry, proud. How do you say it?

Yeah, yeah.

What's the right word there?

I don't know. Right. I'll try to pride myself in it. Yeah.

Is it. I think that's the right way.

So pride myself. Yeah, let's go with it. Pride myself in my abilities, right. And both the ability to climb out of holes, like, you know, P and L holes, as well as that. Well, okay, I've had to, you know, some bad runs. If I. If I look at it and go, was it really. Am I really doing the wrong thing? And that's why I asked you to clarify that question. If I'm doing the right things by my edge, and I've assessed that there's nothing wrong with my trades. It's just that I've taken on two months of 80, 20 trades and they've given me two months of 20% outcomes, then that actually doesn't really affect me as much. I get really annoyed myself when I do the wrong things, the wrong traits. So. So therefore I'm like, okay, I've lost some money or whatnot, but I'm still the same trader. Therefore I can still hold sort of my head up high and go into it again and just go, that was the 20%. Whereas if I was pride myself in my account, then maybe not so much after that too. So I think that's how I deal with it from a psychology point of view. I really focus on sort of what I can control, which is my skill and how I trade, not the market.

Next up, a short clip from my interview with Tom Sosnoff, which was episode 87. Tom is a former trader. He's also the guy who co founded thinkorswim and then sold it to TD Ameritrade before going on to launch the tastytrade network. Pretty much I'm just throwing this clip in the mix because it's an opposing view. And Tom's reaction when asked about psychology is kind of hilarious. One of the things that a lot of traders are very much into, and some even say that it's, you know, maybe 90% of the challenge, is trading psychology. I understand you feel very differently about this. Can you give us.

Trading psychology is 100% bullshit.

It's.

People like to, we're enablers. Our society is, you know, we've created a society of enablers and so we make people feel good about their inept financial abilities, their lack of know how. It's not because they don't have the right, you know, trader psychology or they're not seeing the right trader psychologist. It's because. And most of the people that are trader psychologists that I've ever run across would have zero value in my world. This is not a, you know, right brain, left brain type thing. The reason people aren't successful is, is because they don't take the time and the commitment to be successful. That's all it is. And I'm tired of enabling people and trying to make everybody feel good. When the industry is conflicted by the true sense. This industry makes money by managing other people's money and by selling people money and by selling fear. And the only way to get around that and to change that culture is to develop the know how yourself. And 99% of the people are unwilling to develop that know how. So the idea that there is some trader psychology out there, it's complete bullshit.

But I mean, even operating like a mechanical strategy or being very quantitative in your approach, do you think that there is a certain degree of psychology even though it's not nowhere near 90%? Do you think that there's a small part of it that that does come down to your psychology?

No, I think it's mechanics. It's like anything else. It's almost like breathing. I think there's a, I mean, listen, if you're talking about ego, that's fine because, you know, everybody has egos. If you're talking about, you know, risk taking and things, I don't consider that part of your, quote, psychology. I consider that all part of your mechanics. Now if you want to, if you want to consider psychology, mechanics, then sure, but I don't. And I think this is.

Is a game that, you know, that comes down to mechanics. You said before you didn't play blackjack. I don't believe blackjack is a game that has, there's a psychological element to blackjack, just like I don't even believe there's a psychological element to, you know, to any card game, even poker or, you know, or craps or anything else. I mean, I know people argue that there isn't poker, but if you ever watch poker players, most of them play by the book. And when you're playing any other kind of game, it is straight by the book.

And now we're starting to see even sports has become a game of mechanics. We used to say, oh, this head coach or this manager is a genius because he pulled the right string or made the right move at this time. And the reality right now is everything is becoming part of saber metrics and statistics. And of course it's going to go that way because 95% of the time that's going to win every time. So no, I'm poo poohing the whole psychology aspect to it. And I'm suggesting that it's a lack of know how, it's a lack of desire. And until we get people willing to take on that intellectual challenge, you know, we'll, we'll, we'll give ourselves a crutch and call it psychology to take us.

Out here in concluding the best of trading psychology, part one is Dan Shapiro and this segment comes from episode 32. Having come up as a prop trader in New York City, Dan now trades independently and with a focus on high beta names. He's also encountered a fair share of setbacks during his career. So you can really appreciate the rawness when he speaks on Psychology Matters. We've talked about how you lost money, you know, throughout that two year period in quite depth. So let's talk about how you go through losing periods these days. Sure, they're not quite as dramatic as two years at a time, but you still go through losing periods. I mean, everyone does. So how do you stay in, I don't know, good spirits? How do you keep your head up through losing periods? And how do you break out of that?

Yeah, that's a great question, Aaron. As we previously discussed, I get tons of emails all the time and they're never, they're never asking me, well, what do you think about this chart again? What do I think about. A chart is irrelevant. The question always is how do you make it through, man? How do you do it? How do you mentally stay afloat? And there's a great answer to that. Number one. And here's my advice. Number one, guys, turn off your P and L. Turn it off. Turn it off.

I don't even know what my P and L box is on my platform. Turn it off. And the reason why you have to turn off your P and L is, number one, this whole business is.

All emotion versus reality, right? The more you're emotionally committed to a trade, the more chances than not you're going to completely mistrate it, and everything you do in this trade is wrong. And then everything is going to happen after the trade is over is probably gonna make you angrier and angrier, because eventually the trade will probably work out your way, okay? So the first thing to do is turn off your P and L. Okay? Number one. And here's kind of relevant advice here. Also, you want to turn off your P and L, because if you're having a good day, and I hear this all the time, Dan, I have a $30,000 account, okay? What should be my goal for the day? And my answer to that is, your goal for the day is to make it to the next day, okay? Which has nothing to do with your P and L. And what happens is when you're trading, you're trading well, okay? If you look at your P and L and you say yourself, well, my goal is a thousand bucks for the day, okay? You hit your goal within the first hour or so, and then I know a lot of traders, they'll shut off. They'll shut off their day for. They'll shut off their day, right? They'll completely shut off the day, and they'll leave. Here's the problem. The day that you can make their thousand, two thousand, three thousand, five grand, whatever it is, whatever interval you trade, whatever tier size you trade the day, you can make that money really, really quickly. You don't realize it, but you're playing a premium hand. You're playing the kings, you're playing the jacks, you're playing the aces, you're playing the queens, okay? So that day is turning out to be a premium hand. And what you're doing is you're taking a pair of aces and you're putting in a bet of 50 bucks. That's basically what you're doing. And you're telling the guy that's playing against you, I'm all in for 50 bucks. And once you hit that pot, you say to yourself, okay, I'm done for the day. So you're losing out on a premium hand. Every professional trader will tell you, what we're looking for is Premium, we're looking for those pocket aces. The day that you can make 2, 3, 4, 5 grand for the first 30 minutes, 45 minutes, you're in a very, very bullish scenario playing a premium hand. So the last thing you want to do is say to yourself, well, I'm up a grand for the day, I'm done. And you don't realize that one grand could turn into 3,000, could turn into 6,000, could turn into 10,000. Because you're riding that euphoric hand, you're riding those pocket aces. And I don't care how, you know, how misguided you are, everybody eventually plays pocket aces. And the most important part is if you remove the P and L box, those pocket aces really turn out to something. On the way down, it's even more important to turn off your P and L. I already know on my tier size, on my tier size. And let's just use any, let's just use a thousand share lots, just make it easier. I already understand if I'm putting on a trade and the stock goes a dollar against me, I know mentally, I mean, I know I could do the math. Put on 1000 shares down a point, you're down a grand. Okay? But mentally, if you see it, visually, if you see it, that thousand turns into 100, might as well turn into 100,000. Because your next trade, you don't want to get down 1200, you don't want to get down 1500. So what you're going to do is you're going to trade the P, L and not trade the setup. Okay? So you could be looking at a five star setup. A stock comes out of a two month range, comes out, you know, takes 20, 30 cents, spike comes back into your, you know, turn, comes back into your entry, goes down 10, 15 cents, you're already down a grand, you're mentally already distraught. You sell the position at 10, 15 cent loss. Next thing you know, 35 seconds later, the stock's at the highs of the day. So you're mentally already destroyed. You're done, you're done. Once you're trading your P and L instead of the setup, you might as well wrap it up for the day because nothing good is ever going to happen when you're trading the P and L. And the more deeper and deeper you get into the day, the more erratic mistakes you're doing, the more eager you are, the more, if you're a man, the more testosterone levels are rising, okay? And all you're doing is committing further and further into emotionally Protecting your P and L and not trading the setup the proper way. So that's my, kind of my first tip. Everybody goes through slumps, okay? Everybody goes through slumps. I had a week.

Two months ago, okay, Two months ago, I went from having one of my top three biggest weeks the prior week to just not getting anything going. I mean, I went through Monday through Thursday. I couldn't make a dime. I wasn't really losing any money. I just couldn't make a dime. Everything was wrong. Everything was wrong. Stocks were snapping back out of, breaking down, out of bottom channels on shorts. Stocks were getting rejected on longs. There was reload sellers on my longs. There were reload buyers on my shorts. Just nothing went right. Nothing went right. And I sat there, I sat there a couple days. I started laughing. Eventually you start laughing. You can't take this business, you can't take this business to heart. You can't think that this is. Every bad thing is pointed at you. You'll go through these horrific times that you can't get anything going. You'll go through these horrific times. Like perfect example, last year, about a year ago, I don't know if any listeners remember, there was a huge run into the clothes on these ag stocks, these Potash and Intrepid Potash and all these stupid things. And I took Intrepid Potash overnight and the whole group was like, down 25% the next day. The next day. I mean, I was like, what? Wait, wait, you tell me. There's no specific company news and I'm down four bucks on this trade, which is insane. And mentally I was like, well, I could try to make this money back today. Okay, let me see what the market gives me today. Okay, let me see. Because I've learned long enough, the revenge trade does not work, okay? Anytime you have any type of raw emotion going into a trade, you're going to mess it up. Okay? So what I learned a long time ago is there's not one event, bad event in your trading career that should be able to take you out of your game.

Things happen all the time. Stocks get downgraded, bad FDA news. I try not to trade a lot of biotech, especially overnight, because they blow up all the time. But the most important part of everything is I understand the highs and lows of this business because what I went through.

After 9, 11. So for me, when I go on a really big hot streak, I'm not impressed because I expect to make money. Obviously, every trade that I put on, I feel like I'm going To make money. I feel there's certain days I can walk on water, and then there's days I can't get anything going. You know what I mean? And those days, you just say to yourself, you know what? It just wasn't meant to be. You don't need to keep on piling oppositions. I could figure out within the first 30 minutes if I'm going to have value in the day. So if I'm rolling the first couple of trades, what's the point of me keep on piling it on, right? Because it escalates. It escalates very, very quickly. You could go from being down three grand to be down eight grand. Eight grand turns into 14, 14 turns into 21. What's the point? Cut yourself off. Understand, you're not getting a premium hand. Emotionally, there's nothing you can do. You can't cry your money back to you.

But the most important part, when you go through a slump, okay, just realize that sometimes the easiest thing to do is just take a step back, Take a step back. Just watch the market, watch the order flow. Sometimes order flow won't translate into what's going on on the surface. It just won't. Because order flow most of the time will not be organic, okay? And that's where social media, a lot of these people tout and hype these stocks for everybody to jump in, all that stuff. So you got to just take a step back and just say, hey, look, it's just my day. Maybe it's not my two days. But you know what? I know what I need. I know what I want. And until I get those premium hands, there's no point to do it. The problem a lot of traders have is just they can't accept defeat, okay? And there's a bigger. You know, there's a big. There's a big picture there, okay? And you go back into the theory of war, right? There's plenty of battles that are lost, right? Plenty of battles. Battles are lost all the time. The most important thing is to win the war. So I could lose a battle, right? I could fight with Tesla, and there's a reload seller sitting there at the top of the range, and the guy won't let go. The guy won't let go. And you know what? I'll figure that part out. Once it breaks the range, I'll get out. I'll take my loss. But I'm not going to lose the war on one trade. And I see it all the time that many traders are so fixated about being right Instead of fixated about trading properly. And that snowballs into day after day after day until they realize, you know what? This is just not for me. And the saddest part about the whole trading cycle is people will, most people will never trade up to their potential because they won't give themselves a chance to playing those premium hands. And they take everything to heart and they believe that everything they do is the result of bad things. Just everything bad. Somebody just has this evil eye on you. And the reality is, you know what? The market most of the times won't give you what you want. Most of the times it won't celebrate your existence. All the market wants to do is take your money and take your confidence. Because remember, however, I could go on, and this is a very important point, I could go on a run three weeks in a row, right? Three weeks in a row, have a magnificent run. And this is how fragile us traders are. You can go two days without making money and you've completely lost your confidence. Think about that. Think about how many times traders have done that. You could go on a three week run doing the same thing every day. Every day, Every day. Every day you lose money two days in a row, you start questioning everything you did for your whole career, okay? And I say this all the time, you don't lose your confidence. It gets transferred to another trader, okay? It gets transferred to another trader, okay? Because you can't lose something that is obviously shown you promise or prosperity in the past. You're just a product of what's happening in the moment. And just sometimes we can't control what we see in the markets. And so instead of snowballing it, letting it go out 2, 3, 5 days, take a step back, do something nice for yourself. Get a massage, okay? Go to the beach, go to the pool, go to the sauna, do something nice for yourself, okay? And when you clear your head, you come back. Just watch the order flow. Is it telling you the same thing that it told you two weeks ago? Is it telling you the same thing, hell, that it told you two days ago? What's different about this tape today that was indifferent from a week ago. Okay? And little by little, when you take the step back, you finally kind of see it. In a weird way, you kind of see it. And once you see it, you can start making adjustments. And remember, at the end of the day, everything we do is all adjustments. It's one big adjustment.

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