- Hey guys, Jared Wesley
here of Live Traders.
And it is that time of the week again.
It is lecture time.
This week's topic, guys, we
dig really deep into the mind,
the trader's mindset.
We're gonna talk about
the psychology of winning
and how you can become a better trader
by understanding your emotions,
understanding accountability, objectivity,
understanding your belief system.
Not playing the victim role
in any capacity in life,
but especially not in trading, okay?
It's a very, very powerful lecture, guys,
because we can sit here and
talk about charts all we want.
We can talk about bottoming
tails and topping tails
and pivots and wide range
bars and trade management,
all that stuff that sells, right?
All the charts is what everyone's after.
That's the sexy stuff, right?
That is not the stuff that makes money
at the end of the day.
The stuff that makes money at
the end of the day is between
the two ears, okay?
And most of you are not
doing a good enough job
of understanding yourself objectively,
and therefore you're playing
the role of a victim.
You're playing the role
of somebody who doesn't
want to admit the actual
things they're doing wrong.
That are costing you
lots and lots of money.
So today, we dig deep.
We go deep down into the rabbit hole.
Why?
Because if you can't look inside yourself,
you're never gonna be
able to affect change.
You're never gonna be able
to change your belief system.
You're never gonna understand
that emotions control thought,
not the other way around.
Emotions control thought,
but you have to be
mindful of those things.
So we're gonna dig really deep.
The lecture's a little bit longer,
maybe 10 minutes longer
than normal this week.
Honestly, I could have gone
two more hours on this topic,
but if you really wanna change,
and I mean really want
to be a better trader,
a better person, more
successful in trading,
more successful in life in general,
you must sit and listen to this lecture
because I think it's powerful
and I think it's important.
And again, it's the only path to success.
Charts are great.
Charts are one reason that
we can make money in trading
and get to a successful point,
but psychology, winning,
understanding a winner's attitude
and being objective and not being a victim
is far, far, far, far
more important, okay?
And I want you guys to
really pay attention.
Well, maybe watch it twice if you have to
because there's way too much victimization
going on out there.
Everybody is a victim
of something nowadays.
Stop it, stop the nonsense.
Take responsibility
for your actions, okay?
And then, and only then can
you move forward in life
and be successful.
So I hope you guys enjoy this video.
If you want a $1 14-day
trial into the chat room,
click the link in the description.
Also, if you like this video,
please click that Like button, man.
And also if you like the video,
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Smash that Subscribe button.
I'm Jared Wesley of Live
Traders, let's get to it.
(calm music)
This week's lecture topic is
The Psychology of Winning in Trading.
"Learn Thyself for Market Mastery."
I feel like the integrity lecture
a couple of few weeks back
addressed some of the psychological demons
that maybe traders have or possess.
But for some reason, after that lecture,
I feel like I got more
questions about psychology
than fewer questions.
So I thought it would
be maybe appropriate.
I didn't wanna wait too
long between these lectures
to do a lecture on psychology
and really dig deep, right?
Go next level so to speak.
So I will warn you that there
are a few charts in here,
but there are not that many.
There's a lot of text slides
and there's a lot of me
kind of going off on a tangent,
fireside chat style, if you will.
So if you are one of those
people that has to see charts,
today's lecture is not the best for you
even though there are
several in here, okay?
But before we get into the psychology,
we have to start every week,
we don't have to, but we do with,
when will the insanity stop?
When will it stop?
The answer is never because
you guys are human beings
and you will continually,
for the rest of your lives,
do stupid things.
I'm hoping to curb that,
to have fewer people do stupid things.
This week, I have two, and
I think they're doozies.
So I'm not gonna read this whole email,
but I'll just get to the crux of it.
So somebody here put $35,000
into their trading account
to avoid the pattern day
trading rule, which is fine.
I don't see any problem with that.
Then on January 13th, 2020, not that long,
they bought INPX and went
on (chuckles) to take a nap.
I don't make these up, okay?
Went on to take a nap 'cause
they just had a new baby.
They woke up an hour later
and their account was down $19,000.
"At that time, I wasn't sure
what a reverse split is.
"Then I let the money
sit, do some studying.
"By the time I got out of INPX,
"I lost $28,000 on a $35,000 account."
Okay, 28,000.
Also another reverse stock
split on CHK, I'm losing.
And this was, I don't
know, as of a week ago,
$7,000 unrealized.
Now, obviously, CHK bounced
significantly recently,
but that's not the point of this.
The point of this is
this person lost 28,000
of $35,000 in their account.
So that's about what,
80% of their account?
Somewhere in that neighborhood.
80% of your account.
One of these days, I don't
know when that day will come.
I might be old and gray by then.
You guys are gonna understand
that stop losses are important, all right?
Maybe not to be sarcastic.
I'm gonna go to backlash for saying this,
but stop losses matter.
Stop losses matter, okay?
In trading, they do.
This is no joke, guys.
80% of your account in two days?
Think about that.
How long did it take to make 35 grand?
And you were just willing
to piss it away in two days
because of stupidity.
It's not cool, all right?
And this is why this industry
gets such a bad rap at times
because people do foolish
things, all right?
It's not the industry, it's you,
which is leading into the topic
we're gonna talk about today, all right?
And this person admits, "I have no plan.
"I have no stop losses.
"I tried to learn to use stop losses,
"blah, blah, blah,
blah, blah, blah," okay?
Guys, do your homework.
Do some due diligence.
Learn this business properly.
I love it when people say,
"Yeah, I'll get the education
"after I start making money."
It's like, "Well, I hope
you're not a doctor."
Because it's like, "I'm
gonna operate on you
"before I learn how to be a doctor.
"Before I get an education,
"I'm gonna just experiment on you."
Not me I hope, but somebody else, okay?
Next, this one is worse
than the first one.
$103,000, 88.67% of their account, okay?
So again, you guys
still think stop losses,
you still think money
management is a joke, okay?
So GNUS, which is actually a
stock we had on the list today.
This person apparently is
in this stock at $9.80.
And I think what was GNUS today?
In the fives somewhere.
Wow, I don't know.
Is it fun losing 88.67% of your account?
Losing six figures, over a
hundred thousand dollars.
Guys, at this point, you're
just drinking the KoolAid,
just hopium.
There's no rhyme or reason to your trading
if you're willing to blow
88% of your trading account
on any trade, any trade.
You have no money management,
and you're just a pure gambler.
You should put yourself
into Gamblers Anonymous
and it's not a joke.
It's not haha, it's not funny, okay?
If you do this kind of stuff,
trading isn't the business for you.
That's like being an alcoholic
and working at a bar.
I mean, seriously, that's like literally
being an alcoholic and taking
a job at a bar, all right?
That's what some of you guys are doing.
So if you are a gambler,
this business isn't for you.
All right, I didn't say a
poker player or a professional.
I said a gambler because
this is real people
losing real money, okay?
You just don't want it to be you.
And most of this, not most, check.
All of this is just pure stupidity.
That's it.
There's nothing else to say about this
other than stupidity, okay?
Now, before we get into the
main crux of the lecture,
there's one more quick
topic I wanna talk about.
I'll take like two minutes
to talk about this.
Three bar plays happen every single day.
I've been getting an
influx from people saying,
"Jared, what scanner are you using
"because I can't find three bar plays?
"I don't know where you're
seeing these three bar plays.
"They never happen, blah,
blah, blah, blah, blah."
This is just from today.
Just from today.
AAL, 15 minute, three bar play.
BA, 15 minute, three bar play, okay?
Next slide, just from today,
CCL, 15 minute, three bar play.
DAL, 15 minute, three bar play.
Now, some of you might be
saying, "Well, geez, Jared,
"DAL, AAL, they're all in the same sector.
"Of course, they're all
gonna look the same."
So we take it one step further.
One step further, PayPal,
not in that sector.
One minute, three bar play.
GES, we actually tried to check this today
if you guys recall and we got,
I say hammered by the uptick rule.
We didn't lose money.
We just didn't get
filled in the trade work.
Meaning there was a three bar
play here on the one minute.
So it's not just the airline sector today
or the cruise ship sector
or any of that stuff.
These things happen every day, okay?
It takes scanning and diligence.
Putting together a good gap list,
and then putting together
a thumbnail watch list
and actually watching your thumbnail list.
And then just after that,
it's just a game of waiting.
That's all it is, okay?
So scan, build a list,
put them on a thumbnail,
and then watch and wait.
Wait and watch, whatever
you wanna do, okay?
Six of these damn things
happened just today.
They happen everyday.
So I don't wanna get any
more emails about it.
I use dollar gainers and
dollar losers to scan,
and that's that, right?
That's that.
Okay, now, we're getting into the heart
of this discussion today.
And for some of you guys,
today's discussion is gonna be tough
because today's discussion
is going to dig deep
into why you may not
be a successful trader
and you're just not able yet or ready yet
to admit it to yourself, okay?
So we're gonna talk about
the psychology of winning,
belief systems.
Some of the slides, a couple of them,
you may have seen before,
but most of the slides
today are new, okay?
Most of today's slides are new, all right?
So belief systems, what you
believe has a dramatic effect
on your outlook in
trading and in life, okay?
This is factual, okay?
We're gonna also talk a little bit later
about how emotions override thought.
That's gonna come a little bit later,
how emotions override thought.
But what you believe has a dramatic impact
on how you view the world, okay?
And some of that is
what you've been taught.
So some of your beliefs actually
can be taught into you, okay?
That's a common problem
we have in society.
We have schools, we have
governments, we have parents.
We have people teaching negative
thoughts into people, okay?
I'll give you an example.
Some of you may have heard
this from a few months back,
but I was at a gas station, oh,
about six months ago now last year, okay?
The end of last year and I
was in the McLaren, okay?
And I'm getting gas and I see this kid.
He's like, "Wow, what a cool car?"
on the other side of the
gas station stall, okay?
And his father said to him,
"Don't look at that, son.
"Those types of cars are
only for rich people.
"You'll never have something like that."
This kid was probably
eight or nine years old.
Are you effing kidding me?
You're gonna tell an eight
or nine year old kid,
"Don't look at that.
"You'll never have that, son?"
How do you know what
that kid is capable of
or isn't capable of?
And you're gonna put that
thought into that kid
at that age?
That's a disgrace.
It's an absolute disgrace.
And I think it's systematic
in some ways of our society.
There's this hatred towards success now.
It used to be admirable to be
successful, but not anymore.
And why?
And I'm gonna get to
that on the next slide.
Why is there such hate?
Because it's how people view things, okay?
See, the rich see success as earned,
and they view their
opportunity as probable, okay?
The middle class see success as earned,
and they view their
opportunity as a possibility,
sometimes probable.
This isn't the issue.
The issue is down here at the bottom.
The poor see success as
won or innate, right?
And they view their
opportunity as trivial,
or in some cases, a possibility,
but not likely, not probable.
Basically to paraphrase this,
and I didn't come up with this by the way.
And I forgot to cite it.
So whoever came up with this, I apologize.
I completely forgot to cite this.
These are not my words, these
are somebody else's words.
But I agree with them, okay?
The poor basically looks
at their situation in life
and believes that rich
people are just lucky.
That's what they truly believe.
And anybody who's read the book,
"The Millionaire Next Door"
knows that statistically,
this is not true.
Over 80% of millionaires in
this country are self-made
and received almost nothing as
inheritance in this country.
Read the book, "The
Millionaire Next Door."
It's been out like 20
years, maybe more, okay?
So if you aren't successful
or maybe you were born
into a lower income home or household,
this doesn't mean,
there's a lot of class
mobility in this country
more than you think, okay?
So don't think because you
were born in a certain class
that you are destined to
be stuck in that class
because it's just not true.
It's just not true.
So the majority of people that fail,
they fail because they make poor choices
or have a poor outlook.
And some of, not always,
but some of that outlook has something
that's been taught into them.
And that's a challenge when you're young
if you have negative parents
or you're in an environment
that's negative.
It's hard sometimes to break through that.
Mindset is an incredibly
powerful thing in life.
And the problem with that
sometimes is when you're young,
you're impressionable and your
belief system can be altered
by people that you look
up to or respect, okay?
But you have to realize,
I don't care who you are.
You can do or be anything you want.
There's no question.
Some people start with a disadvantage.
Some people start their race further back.
That's unquestionable, that's undeniable.
But that doesn't mean that
you can't still be successful.
Well, might it be more challenging
for you in certain areas?
Yes, it might be.
But it still doesn't preclude
you from being successful.
Traders have this outlook.
I'm gonna circle this back
to trading in a second, okay?
A lot of traders come in with a specific
or certain belief system.
And because of that belief system,
they approach trading
in the wrong way, i.e.,
one belief system we see commonly is,
"Oh, I'm gonna get rich quick.
"I only have $3,000 to my name,
"but I'm gonna turn $542
into a hundred thousand
"in 10 days."
That belief is an inaccurate belief.
It's not based upon any
reality that we've ever seen.
So you come in with this idea
that's not based in reality,
so to speak.
And that hurts you because you prepare
for a much shorter period
of time to get to success.
You don't think that you need much money.
So basically, you come in what?
Over-hyped, underfunded, and
with unrealistic expectation.
So that belief is very harmful.
Just like telling a kid they're
not gonna be successful.
That's a harmful thing to tell somebody.
So that belief has a dramatic impact on
how you see the world.
In this case, how you see
the trading world, okay?
So now I wanna move on
to what I call victims.
We'll tie it all in.
It's all gonna come back, okay?
Now I wanna talk about victims
and the sky is blue, okay?
Victims and the sky is blue.
You're like, "What the
heck does that even mean?"
Okay, I read a really
good article years ago.
So probably about 10 years ago now.
And I'm stealing some of
this from that article.
But the general concept, you'll get here.
So in trading, we have a
lot of victims, don't we?
In life, we have a lot of "victims."
But in trading, we have a lot of 'em.
What are some victim comments?
Okay?
Oh man, the market
maker screwed me, right?
They picked off my stop loss.
Oh, my broker saw the order
and they picked off my shares.
They stop-hunted me.
Oh, I knew it.
Of course, it's just Murphy's law
that the only trade that worked today
was the one trade that wasn't shortable.
It was hard to borrow.
Damn, my broker, it's my broker's fault
'cause that stock wasn't hard to borrow.
Oh, my internet went down
in the middle of a trade
for three seconds, can you believe it?
Three seconds, and it
caused me to miss that trade
and I didn't get filled.
Dammit, I hate Cox and Verizon.
Gosh, darn it, these damn companies.
Why don't you just say the sky is blue?
Why don't you just say,
"I didn't get that trade
"because the sky is blue?"
Why don't you just say
you lost on that trade
because the sky is blue?
Because if you're gonna blame something,
might as well just blame the sky.
I mean, why don't you just blame it
'cause your car has four tires?
Dammit, my car has four tires.
That's why I lost on that trade, okay?
Stop playing this role.
See, most novices are
extremely inconsistent.
They're not profitable, that's normal.
But what's not normal, and
what's really detrimental
to your growth as a trader
is blaming it on something
that you have no control over
or not taking responsibility for it, okay?
It's almost as if sometimes,
you know how they use
that phrase, "Misery loves company?"
It's almost as if people
love a pity party.
Feel bad for me.
Feel bad for me.
Nobody cares about you.
I'm gonna tell it one more time.
Nobody cares about you, okay?
When something bad happens to you,
you have a close circle of people
that genuinely care.
Everybody else goes, "Oh man,
"I'm sorry to hear about your dad.
"Hey man, what's for
lunch, what's for dinner?"
That's how quick they move on from it
because it doesn't affect them.
And when something bad happens to them,
you do the same thing back to them.
Let's just admit it.
It's true, okay?
Everybody is an NFL wide
receiver, me, me, me, me, me.
Me so me, you don't throw
me the ball enough, right?
That's what everybody is like in life.
That's human nature to
worry about yourself.
We're selfish and we're greedy
and just admit it, okay?
So you are free.
Bringing this back to trading,
you are free to take that
trade or not take that trade.
You chose to take that trade.
That trade didn't work.
Why it didn't work, we could
discuss that all day long.
Maybe it wasn't a good trade.
Maybe an HFT shook you out.
Maybe your platform went down.
Maybe, maybe, maybe,
any one of those things.
But you are still the
person who took the trade,
which means the responsibility
falls back on you.
Now, why is this important?
It's important because
understanding your actions, guys,
is gonna lead to awareness.
If you're not aware,
you can't change because
you don't even recognize
what's happening.
So in creating this awareness,
you're gonna be able to
recognize this victim mentality
that you're putting forth.
And it will hopefully lead you towards
the possibility of stopping it.
So it's only then when you have awareness
that you can be objective
in your self-analysis,
the problem is the victim mentality
is an easy way out for people, right?
The victim mentality is just so simple.
And it's what a lot of the
general public, it's what TV,
it's what politicians want you to believe.
"Oh, you're poor because of the system."
It's not the system, it's you.
This is America.
You didn't grow up in Syria
or Iran or Afghanistan.
This is United States of America.
And guess what?
The greatest meritocracy is
in America, the stock market.
Because the stock market
knows no race, no creed,
it knows nothing.
It doesn't even know
who's behind the computer.
It doesn't know who's
clicking that mouse button.
So it can't be after you
because it doesn't even know you, okay?
So when you realize that
you are 100% responsible
for your actions, you
should actually be relieved.
Why?
Think about this for a second.
Why should you be relieved?
You should be relieved
because when you accept
and take responsibility,
it means you're capable of change.
See, think about this for a second.
If you are truly a victim of something,
and there are sometimes victims in life,
but if you are truly 100% a
victim, what does that mean?
It means it's out of your control.
Might as well just pack up and move on.
Because if you're truly a victim,
you don't have any control.
So even if occasionally you
are the victim of something,
it's a terrible outlook to take
because it means you're
resided to that outcome
and it can never, ever, ever be changed.
Whereas if you accept
responsibility for your actions,
it allows you to make necessary change
because you're accepting
it was because of me
that this happened.
And therefore, if it's because
of me that this happened,
it's also because of me it can be changed.
But if you don't accept
that responsibility,
you're just "screwed."
So there's nothing productive
at all about being a victim.
Nothing whatsoever is
productive about being a victim.
Nothing.
So don't play that game.
There's just nothing good
that's gonna come from it.
If that's the way you wanna play,
might as well buy a shack and go move
to Montana like the Unabomber, okay?
Just go do it like Ted Kaczynski
because there's nothing
life has to offer you
if you're a victim.
That's it.
So stop complaining about market makers.
Stop complaining about
your lot in life, why?
Because that's your lot in life.
Where you were born, the
country you were born to,
the parents you were born under,
you don't have control over.
But you do have control over your future.
That doesn't mean it will be easy,
but you do have control over it, okay?
So get the victim mentality out, okay?
Guys, let's be honest
here on the trading terms.
If you really thought, "Oh,
that damn market maker,
"I knew he was gonna screw me."
If you really thought
he was gonna screw you,
well, why don't you just
put a buy order down
where your stop loss was, right?
If you knew they were gonna come in
and shake you out and go higher,
why don't you place a buy order down
by where the bottoming tail
was in the shakeout bar.
I mean, you knew what
was gonna happen, right?
You were a victim.
Well, you didn't because you didn't know
what was gonna happen, right?
So just admit it.
You didn't know, okay?
So stop.
Just seriously, stop the BS.
Accept responsibility
for your actions, okay?
Otherwise, just blame
it on the sky is blue
because otherwise, there's
nothing you could do about it.
Okay?
Now, let's move on to
another part of this.
Failure.
I'm sure there are examples,
but I don't know too many
people that are successful
that have never failed.
Again, there may be a few,
but the vast majority of
people that have achieved
any level of success in
life have usually failed
at something or failed
even at the current thing
that they're doing.
They just continue to do it
until they succeed in, right?
So when I look at failure,
failure in my opinion
is an extremely important part of success
because failure is useful unless
you play the victim, right?
But if you accept
responsibility for failure,
you're gonna learn a tremendous
amount about yourself.
About other people and about
how you can get ahead in life.
It's not fun, but it's
incredibly useful, okay?
So like I said, most
people who have succeeded
have also failed frequently
many times, okay?
So if you don't succeed, it
doesn't mean you're a failure.
It does not mean that.
So don't think that way.
Failure is a choice, right?
Because you chose those
actions that led to failure,
you can now make adjustments
that might lead to success.
And again, it sounds like such a cliche.
Failure is not final, it's not.
The day you give up, well, that's final.
But failure is very useful.
Losing trades are useful.
They don't feel good,
but they're useful, okay?
So you need to have the proper attitude
before you get into this so
that you can see it through.
It's not that you don't get frustrated.
I'm not saying you're a robot.
You will be frustrated.
There are days you wanna put
your hand through the monitor.
It's okay, but what did you learn from it?
Okay, that's the key here.
Now, the next step to this is,
are you willing to do whatever
it takes to be successful?
So how hard and for how long
are you willing to fight?
The answer for most
people is not long enough.
Why do I say that?
Not long enough.
Well, just look at the statistics
of success in this country.
I mean, what is it?
The top 10% controls like 50%
of the wealth in this country?
That's not just all inheritance.
Get that out of your brain.
Look at the top five
wealthiest people in the world.
None of it was inherited.
None of it was inherited, okay?
So how hard and for how long
are you willing to fight?
What are you willing to give
up to get to that point, okay?
I can't remember the
gentleman's name, okay?
But I was reading about this
guy's worth like $800 million.
This was maybe 15 years ago now, okay?
And everybody says, "Man, you're so lucky.
"You're so lucky.
"You're so lucky," okay?
And he looked at them and said, "Am I?
"Am I so lucky?"
And then he goes off on this,
I don't call it a tangent,
but off on this spiel where he says,
"Okay, I'm gonna tell you
something about my life.
"And when I'm done, I want you to tell me
"if I'm still lucky.
"I work 90 hours a week.
"I've had a heart attack.
"I'm divorced.
"One of my children
doesn't talk to me anymore.
"But yes, I have a lot of money."
And he went on deeper than that.
He went on deeper than that, okay?
And then he asks at the end,
"Do you still think I'm lucky?"
"See, you judged me just by my net worth,
"but you didn't judge me
by my whole entire life.
"Meaning I gave up a
lot to have what I have
"and I made those decisions
and I'm okay with that.
"But don't judge somebody successful
"or a failure just by the cover, okay?"
So the point is, is not that
you need to get divorced
to be successful.
That's not the point.
So don't take it that way.
It's what are you willing to give up?
Because it will be a sacrifice.
Most successful people
have given up something
at some point in their life.
Whether it's time.
Whether it's spending time with
family, whatever it may be.
Sometimes it might be their health, okay?
But what are you willing to give up?
Again, back to that point,
the majority of people that
fail simply make poor choices
or have poor outlook.
That's a fact, they make poor choices.
The average American spends
104% of their income.
That's a poor choice.
That's a poor choice, okay?
And I don't wanna hear it
and I don't wanna get off on a tangent,
but I don't wanna hear it.
If you're born in America,
you are lucky and you have privilege.
You know that buzzword nowadays?
If you are born in the
United States of America
and everybody listening to
this isn't, you have privilege.
There are about three
billion people in this world
that are less fortunate than you,
even if you are dirt poor in America.
Even if you are in the poverty line,
there are about three
billion people in this world
that have less than you even
if you are poor in America.
Okay, being born here is
like winning the lottery.
I'm not saying it's easy to get ahead.
And some people start
way behind other people,
but compared to being
born in other places,
do you wanna be born in
Haiti or Syria or Afghanistan
or Iran or a gazillion other
countries out there, okay?
Being born in the United
States of America is privilege.
Period, end of discussion,
let's move on right now.
Trading is a psychological game, right?
Because this business
preys on our emotions.
Doing the right thing,
which we talked about
a couple of weeks ago
with regard to integrity,
is not so easy sometimes
because there's consequences
to doing the right thing, okay?
So one of the things or one of the reasons
that trading is so challenging
is 'cause it preys on our core beliefs.
Ego, bragging rights, self-worth.
We put a lot into these things
more than we should, to be honest, right?
We put a lot of stake
into ego, bragging rights,
or self-worth because that's our core.
That's us, and if somebody
insults you, you're like,
"Oh, you're insulting my ego.
"I have to respond in kind."
Okay?
So the most important commodity
you're ever gonna manage is perspective.
What did that person really mean?
And does it matter anyway?
What does a losing trade say about me?
Nothing.
Doesn't say anything about you.
It doesn't mean you're a bad person
'cause you had a losing trade.
If somebody says you're
mean, you can reflect and go,
"Well, am I really mean?
"Is that person somebody that
I should be listening to?"
So have perspective on things.
Okay, people are losing that these days.
They're losing perspective.
And in trading, you must have perspective
'cause there's no way to move
forward without it, all right?
So now, I wanna get into
a couple more things,
but before I do, here's
a quote by Mark Cain
I thought was interesting.
"The first step towards success is taken
"when you refuse to be a
captive of the environment
"in which you first find yourself."
Some of us find ourselves in
really crappy environments.
Some people are very fortunate.
It's probably more fortunate than most
if you're Bill Gates' son,
if you're Michael Jordan's son,
if you're LeBron James' kids.
You're probably in a fortunate position
more so than many other people, okay?
So don't be a prisoner
of circumstance though.
You can't change the
parents you were born to.
So don't worry about that.
Worry about what you can
change, which is what?
Your direction in life.
Now, certainly, it's more challenging
if you grew up with crappy parents
because they put crappy beliefs into you,
and that's not good.
And it might be more difficult,
but it doesn't mean it can't be done.
So don't think like that, all right?
So let's move on.
Considerations, and I'm
gonna bring this back
to me here in a second.
I'm gonna go over a couple
trades in a few minutes
and also a tracking spreadsheet
that's very telling for people, all right?
So you don't know until you know.
And I'm relating this to trading.
This is true in life, but in trading.
You don't know until you know,
which means there are many
things in trading that you can't
account for until they
happen to you, okay?
Trading's unlike any other
business you've ever tried.
The same rules don't always
apply in this business.
Bosses are generally a good thing.
You don't think so, but try not having one
and tell me how your trading is doing.
Be honest about it.
Ask yourself if there are
things you've done in trading
that there's no way you would have done
had you actually had a boss.
We all know it's true.
A boss wouldn't let you do those things.
They would restrict access
to your trading account
because you've proven you're
not responsible enough
to handle certain things, okay?
So yes, our plan is our boss.
But what happens when we break our plan?
Then who is our boss?
Meaning who's gonna put
down the consequence on you?
Who's gonna make you accountable?
The boss usually does,
but if you don't have
a boss, it's up to you.
Most people don't do a very good job
of keeping themselves accountable.
Bosses are good because
they keep you productive.
As much as you curse them
and don't like them at times,
a boss equals productivity to you, okay?
Why?
Because the threat of accountability.
It's that simple, okay?
Without the accountability,
you're not going anywhere.
So have a consequence system.
There's no scapegoat in this business.
The market does not
discriminate, it just is.
It's like like "The Wizard of Oz,"
but that was actually a person.
So that's a bad analogy, right?
The market just doesn't care who you are.
That's a beautiful
thing because that means
it's really truly up to you.
How beautiful is that in life?
Knowing it's truly up to you
and that nobody else is holding you back
from success in this business.
Now, I want you guys to take a
look at something, all right?
Take a look at this tracking spreadsheet.
This is older, okay?
This is probably like eight
years old, something like that.
Somebody sent this to me and they said,
"Jared, take a look at this
"and see if there's anything
"that you can tell me about my trading.
"I want a second opinion,
"an objective opinion about my trading."
Now, granted, this person sent me
like two, three weeks worth of this crap.
I picked out one day, okay?
I picked out one day.
But what I want us to do here
is to take a look at this
and break it down.
So basically, what does this
log tell us about this trader?
Because this is a trade
tracking spreadsheet.
Wink, wink, I know you all use
a trade tracking spreadsheet, don't you?
Yes, we do, Jared,
because keeping statistics
is very important to success.
You know, like every business
and every sports team does.
Half of you right now are going, "Oh shit,
"I don't have one of those."
Get one, okay?
Get one.
So this is one day and
11 trades, all right?
So what are some of the things we look?
We can start on the left and
move to the right if you want.
I mean, it's an easy way to do it.
So one person says, "Wow,
that's a lot of trades."
I would agree, 11 is kind of a lot.
Somebody says, "Wow, look at the risk.
"It's very erratic."
So the risk level is
$98 on the first trade.
The second trade is 171,
165, then it jumps to 294.
Then it drops to 144 then down to 70.
So yes, wow, the risk
level of this trader,
even though an average is
155 individually on trades,
it's all over the map.
So that's the first thing we see, okay?
The first thing we see, all right?
What's the next thing that we see on here?
Now, again, it's possible
this could be an experienced trader.
I'll give you a hint.
It's to the left of the risk.
It's somewhere in one of these
first five columns, okay?
What's something else
that you see on here?
All right, to me, it jumps out at me.
Now, to some of you, it may not,
and it also depends on
the level of experience
of this trader, okay?
I don't think anybody has it yet.
Trade type.
Trade type.
Look how many different trades we have.
We have a two-minute
high, a three bar play,
a breakdown, a buy setup, a
breakout, and a climactic.
What is that?
One, two, three, four,
five, six different,
oh, and a breakout.
Seven different patterns.
Well, you said it, sorry Fled.
My apologies, buddy.
This person is trading.
There's way too many
tools in this toolbox.
Now, again, if you're
an experienced trader,
then you can have a lot
of tools in your toolbox.
But clearly, by looking
at the rest of the sheet,
this is not an experienced trader
'cause they wouldn't
be doing these things.
So this is a newer trader
with too much distraction.
There's just too many
damn trade types in here.
I always tell you guys,
pick one or two types of trades, right?
One or two, master one or two things.
Don't be a jack of all
trades and a master of none.
This person is taking too many
different types of trades.
Okay?
So that's issue number two.
Issue number one was the risk level
was scattered all over the map.
Now, I'm gonna scoot 'cause I can't spend
too much more time on this.
I have a lot more slides to get through.
I wanna scoot all the
way over to the end here,
the last three columns.
Mod stands for moderator, following Jared,
following me, following
Jeff, following themselves.
So this person is following
a lot of different people.
Well, again, it's certainly possible.
It's possible that all three
people, Jared, me, and Jeff,
whatever you wanna call it, okay?
Have the same trading style,
but it's unlikely, isn't it?
So why would they be copying
so many different people?
Well, because they're scattered.
We found that out the different
types of trades they take.
We found that out with
the inconsistency of risk.
Now we're seeing it again
with how many different people
they're following, okay?
Next and last, I don't know if it's last,
but next is, guys, look at this.
In 9.33, out 9.37.
In 9.33, out 9.36.
In 9.36, out 9.38.
Guys, the first four or five trades
are less than five minutes each, right?
Then you have an eight-minute
trade, a nine-minute trade,
a 13-minute trade.
I mean, this person looks really, really
what I would call skittish, right?
Jittery, this is a jitterbug.
So they're in and out, in and out.
Now, it's certainly
possible this trade stopped,
but it didn't.
They lost 0.3R.
Break even on most, 0.2R.
So to me, it looks like this is a person
that doesn't follow a plan at all.
They don't even have a
single 1R winner on here.
There's not a single 1R winning trade.
There's not a single 1R losing trade.
This person's all over the map, right?
All over the map.
So my point in showing you this is
you can learn a lot from your trading,
which means a lot from your
personality and belief system
by looking at a trade
tracking spreadsheet.
And digging deep into it,
you're gonna see patterns.
And I'm not talking about chart patterns.
Patterns in yourself.
This person's all over.
They took 11 trades in just over an hour.
In and out, in and out, in and out
frequently in the first
10 minutes of the day.
Tons of different types of trades,
risk level all over the
place, inconsistent.
And they made 29 bucks after 11 trades.
Now granted, the trade fees are high here,
but keep in mind, this
was a long time ago.
See, you guys that are newer
traders, you don't remember.
In fact, anyone who traded in the 90s,
you were paying $30 to $50 each way.
You guys are spoiled
and you don't even realize
how spoiled you are.
It's like being born in America,
you take it for granted, okay?
This is what trade fees were back then.
Not for everybody, but for
a lot of traders, okay?
So this person's all over the map.
So what might these stats lead to?
Trading plan adjustments,
a shift in emphasis.
Long trades versus short trades.
Maybe you're better on
one side than the other.
Maybe the time of day isn't
conducive to your trading.
Maybe you don't do well
between 9:30 and 9:45, okay?
Might have to refine your management.
Basically guys, by taking a look
at your tracking spreadsheet,
it's telling you what's
working and what's not working.
But many of you aren't
tracking your trades.
And if you are tracking your trades,
you're not going back and reevaluating
your tracking spreadsheet, okay?
And this is a different person.
You saw this a couple of weeks ago,
but it comes down to that integrity.
Difference between following your plan
and not following your plan can be very,
very, very costly, okay?
Very, very, very costly.
Now, let's move on.
What do we need to consider
when we talk about belief
systems in trading?
Well, we need to acknowledge first
what some of those belief systems are,
which means what type of
personality do we have, right?
Who are we?
Now, I understand you're gonna come into
this business thinking you're something.
Let the results tell
you who you really are.
I'm gonna repeat that
because it's profound
and you don't think so.
You're gonna come into
this business thinking
you're a certain way or
a certain type of person,
but let the tracking spreadsheet
and let your results prove
to you who you really are.
That person I just showed you
on that tracking spreadsheet,
they might wait for hours
for a ride at Disney World.
So they're patient.
But in trading, they're clearly jittery.
Well, in trading is
all that matters to you
when you're trading.
So recognize the fact that you're jittery
and build a trading plan that's conducive
to that type of personality style.
Time constraints, some
of you guys have jobs.
You can't be in front of
your computer all day.
You have to work.
So build a plan, build a style,
build a management around
your time constraints,
your capital restraints.
Not everybody has 30, 50,
a hundred grand or more.
Some of you have three,
five, 10,000 bucks.
You're gonna have to treat certain things
a little differently maybe
with the number of trades
you take, all right?
Or scaling your risk much
slower because of it.
And then intangibles, what you
might be good at or bad at.
Maybe you're technically savvy.
Maybe you're really, I don't know,
quick to make decisions, right?
Intangibles.
See, the thing is, and you guys
have seen this slide, okay?
There is no Holy Grail, okay?
There is none.
The Holy Grail is understanding
who is really trading.
And to do that, you
have to be accountable.
You have to be objective,
and you can't ever be a victim, all right?
Because you can't make
change when you're a victim.
We talked about that.
So the Holy Grail is knowing thyself.
Understanding yourself
and making adjustments
within that self.
It's not that you can't
grow and get better,
but you first have to
recognize your strengths
and weaknesses.
So that means there is
not a singular Holy Grail.
The Holy Grail is understanding yourself
and then building a plan that's conducive
to success around yourself, okay?
Now, this is a big one.
This is a big one.
And this is something that's afflicting,
and I use the word not effecting,
afflicting our society today.
The power of emotion over thought.
You ever have a "Twilight Zone"
conversation with somebody?
Ever have that?
It's what I call a "Twilight
Zone" conversation.
What that is is something
is so far off kilter,
so ridiculous you just sit there
and you're stunned in amazement.
It happens frequently actually.
And yet, there are people that believe
what they're telling you.
Not everyone's just trying
to pull your leg, right?
I mean, (laughs) I have
them several times a week.
Yeah, I'm seeing a lot of those right now
in society at large, okay?
Like people that believe
the country's better
with no police.
There are some people
who truly believe that.
To me, that's a "Twilight
Zone" conversation.
This happens in trading as well.
Particularly when people
try to justify something
that's absolutely insane
like not taking a stop loss.
Like somehow thinking that's better
or winning on a horrible trade,
and then thinking because they made money,
it's the right thing to do.
Now, this brings us back to emotion.
Emotions lead your thoughts, okay?
Emotions lead your thoughts.
Emotions are a biological
reaction to things, okay?
So my point I'm simply making is
you can be a rational thinking person,
but something dramatic could happen to you
and it turns you into an emotional being.
Let me explain.
You're a normal person.
You're not doing anything crazy.
And all of a sudden,
something terrible happens
to a family member, okay?
Maybe they get in a car accident.
You immediately become emotional.
At that moment in time somebody
tells you what happened,
you've lost rational thought
and emotions have taken over.
Why is this important?
It's important because
this manifests itself
frequently in trading, right?
You're rational.
Man, that stock's a little bit extended.
I'm not gonna take it.
Let's move on to the next stock.
Oh, wow, look at this three bar play.
It looks great.
Blah, blah, blah, blah, blah.
That's rational thought.
Soon as you get into it,
something happens.
News report comes out, whatever it is,
and emotion creeps in.
And emotion then begins to take
over your rational thought.
And you entered that trade
using rational thought,
but you're about to
exit it using emotions.
I repeat it.
You entered that trade
using rational thought.
That's good.
But you exited using emotions.
This is a problem, okay?
Now, fear can be useful, right?
So fear sometimes will
keep us out of a bad trade.
Remember I always tell
you guys look reasons
not to take a trade, all right?
But in trading, fear
is usually very costly.
I'm getting out because I don't think
it's gonna hit targets,
so I need to get out.
So the question you wanna ask yourself is,
is your fear of loss stronger
than your hope for gain?
Because you cannot avoid fear.
It's just part of life.
Fear can be productive.
It's why you look both ways
when you cross the street, fear.
That's a good fear, okay?
But in trading, fear manifests itself
usually in a negative way, okay?
So you have to approach it.
You can't ignore it.
You have to look at it and go,
"Right now, I am fearful right now.
"And because I am fearful in this trade,
"I am going to step away from
this desk and take a walk
"because I know by staying here,
"I'm going to do something bad."
It's the same reason
alcoholics stay away from bars.
You should be fearful of that.
Stay away from it.
It's not a good environment for you, okay?
You have to acknowledge it
because you can't hide from it.
You have to accept it.
But the power of emotion in trading is,
"Oh my goodness, it's phenomenal."
And phenomenal not in a good way.
I mean, it's incredible
what emotion does to us.
And a lot of that emotion also comes back
to what we believe when we started.
So I'm gonna relate
this to yesterday, okay?
Yesterday in trading, all right?
So this is a trade I took
yesterday on Netflix, all right?
You guys in the chat room,
remember you were here.
Wide bar, narrow bar, rip.
Now, is that a perfect three bar play?
No, but we're not here to
discuss that at the moment.
We're here to discuss the
fact that I took this trade
right around 426.
I had to stop around 424.
And you see that little break right there,
that topping tail break?
See it?
Then broke over 426 and
immediately pulled back.
Look at it on the left
on the one minute chart.
Right over, immediately pulled.
Bad break, emotions took over.
What happened?
Because of the bad break,
and good three bar plays
usually hit and run,
there's nothing wrong with feeling that.
There's nothing wrong with
saying it's a bad break.
There's nothing wrong with that
in so far as you don't react to it.
That's the key.
You can acknowledge the bad break,
but you can't react to the bad break
because my trading plan, well,
it doesn't have a line in there
to react to the bed break.
So it came back and came,
oh, about three quarters
of the way back down to the stop, okay?
So what did I do?
When it got back to break even,
I sold part of my position
and you can see it right there.
Netflix, I bought 300 shares right there.
I got filled at 426.23.
Right at 426.27, I sold 100 shares of this
because of emotion.
It overran my logical thought.
Now, did I have reason to be concerned?
Yeah, a topping tail is
reason to be concerned,
but there's nothing in my trading plan
that allows me to do anything about it.
So I should not have
reacted to it, but I did.
But I did, and ultimately,
it cost me a lot of money on this trade,
about $400 to be exact, okay (chuckles)?
Because this thing ultimately
went on to hit target
and that target was $4,
and those hundred shares
times $4 is 400 bucks.
So it happens to everybody.
The question is, how frequently
does it happen to you?
If it happens to you once every 50 trades,
30, 40, 50 trades, not a big deal.
If it happens to you once
every two or three trades,
it's a problem.
And I did the same thing
on another trade, okay?
LULU, yesterday, we got
in this thing taking
a little bit of a self
set up right here, okay?
We were concerned about the 309 area.
But we got in at 310, stop, 311, okay?
And this happens.
Guys, this bottoming tail, by
the way, means higher prices.
Period.
There's nothing wrong with admitting that
because that's what it represents.
And we talked about going
long at 311 on this, right?
But that's not the topic
of conversation right now.
The topic of conversation is, to be fair,
short traders should be concerned
about this bottoming tail,
but, and this is the key, if
your plan says to stay in it,
then you freaking stay in it.
You can change your plan
tonight or this weekend,
but you can't change your
plan in the middle of a trade.
You can't do that.
So if I see this bottoming tail,
and there's no rule in my
plan that says, "Get out."
I can't get out because
it's not in my plan.
I can change the rule later,
not in the middle of the trade.
So you don't change your rules
on the fly due to emotions.
I did, right?
I did, and it saved me.
Now, why am I bringing
these two trades up?
Because in one trade, it hurt me.
And in one trade, it saved me.
And then on this particular
day, it ended up being a wash.
But here's the problem.
Being a wash is bad.
It's bad because it
justifies my negative action.
At the end of the day,
I made money on LULU
and I should have lost money.
At the end of the day, I
cost myself money on Netflix.
I made money on it, but I
should have made $400 more.
But the money I made on
LULU made up for that
and it was a wash.
So I didn't feel the
pain of breaking my plan.
And you need that pain to change, okay?
So I'm well aware of what
I did and I am hopeful
I won't make that mistake again.
Or if I do, it'll be a
long time before I do.
But it's usually better to not
be rewarded for bad action.
And this is one of the problems
that a lot of traders have.
They sometimes get rewarded
for doing the wrong thing,
and therefore, they justify it.
It's a problem, okay?
Now, mindfulness, which we've
talked about in this slide
is in professional trading strategies.
And I've done this slide in
another YouTube video before.
Mindfulness is the capacity
to be aware of your thoughts,
beliefs, and biases in real time.
Because emotion does not follow thought.
Emotion comes before thought.
Emotions are largely reactionary,
but being mindful will help you to what?
Control emotion.
You can't eliminate it, but
the recognition of emotion
is basically called mindfulness.
So basically saying, "I'm
aware that I'm acting
"or I'm being, I'm being
emotional right now."
By understanding or through understanding,
how can I not give in to
those emotions, right?
So when emotion is triggered,
there's a disruption of a
familiar established pattern.
Please don't PM me in
the middle of a lecture.
I'm not gonna get to it, all right?
So it's a disruption of a
familiar established pattern.
You're having a good day.
You're having a good day.
You're having a good day.
Boom, little Johnny was in a car accident.
Your whole world's turned upside down.
It's a disruption of
an established pattern.
And that leads to stress,
which leads to fear,
which leads to bad decision making,
which leads to improper trading,
which leads to lost money.
Do you see the tail end
of the effect of that?
It's like that scene in
"Good Will Hunting," right?
Where he goes (chuckles) down,
and what was the end of that?
North Atlantic scrod is the
only thing he can afford.
Okay (laughs)?
Anyway, you guys get the point
if you've seen the movie.
One disruption in the
pattern has a domino effect.
So if we can nip it,
nip it in the bud early
and say, "I'm not gonna
let this affect me.
"I'm mindful of what is happening."
Guess what you do.
You have less stress, less fear,
and you won't make bad decisions.
I am not here to tell you
it's easy because it is not.
But you need to make
considerations for it.
You need to be mindful
and then get better at
and get better at controlling it.
What was one of the things
that Tiger Woods' father
did to him when he was younger?
Yelling his backswing,
clapping his backswing,
have people or a radio or whatever play
during his backswing.
Why?
So it wouldn't disrupt his concentration
because the disruption
of that familiar pattern
leads to what?
Stress, which leads to a bad golf swing,
which leads to a bad golf shot,
which leads to what?
Maybe shooting over par,
which means not being
best player in the world.
His father understood that.
So he tried to what?
Prepare him for it.
We have to do the same thing, okay?
We have to do the same thing, all right?
I'm getting really behind here,
I gotta move on, all right?
So I'm hoping to end this in
the next five or 10 minutes,
but we (laughter) gotta get through
about six slides for that.
This is gonna be good.
Pre-contemplation, contemplation,
preparation/determination,
action/willpower,
maintenance, relapse.
This is the process you're
going to go through, okay?
Not yet acknowledging there's a problem.
This sometimes could be confused
for a victim mentality at times, okay?
We all go through this
at some point in life.
And the best analogy I can give you
is your parents telling
you something at 16
and you yes them to death.
Yeah, yeah, yeah, I know, mom.
You haven't really
acknowledged there's a problem.
You just yessed your parents to death
to get them off your back.
And your parents told
you that because it came
from a position of experience.
"Don't do that, I know where it leads."
Right?
And you yessed them to death.
That's what I consider this.
It's not the same thing,
but it's similar, okay?
And then the contemplation
is acknowledging
there's a problem.
But you're not really sure if
you wanna make that change.
This is called maturity, right?
You're slowly maturing.
You're recognizing there's an issue,
but you're not ready to
make the change, okay?
And then finally as we say,
the pain becomes so great
you're ready to make the change.
But that still isn't
making the change yet.
It's like acknowledging
there needs to be change,
but you're not ready to make it.
The first step is saying,
"No, everything's good.
"I'm not an alcoholic,
everything's fine," right?
"I'm not a bad trader.
"I take my stop losses,"
even though you don't, okay?
And then you recognize
maybe I'm not as good
as I thought I was, okay?
And then after you recognize,
"Maybe I'm not as good
as I thought I was,"
now you're saying,
"You know, I need to
do something about it."
But you still haven't done
anything about it yet.
And then the action is
doing something about it,
changing your behavior,
and then maintaining
that changed behavior and then relapsing.
Guys, is this not trading in a nutshell?
It absolutely is because we all relapse.
The question is, how bad is the relapse?
Is that relapse an egregious relapse
where you don't take a stop loss
and it hurts you to the tune
of say minus 20% or 30%?
Or is that relapse like I
did on a trade yesterday?
Man, I got out too soon,
but it's not the worst thing in the world.
It doesn't happen that often, right?
Maintenance is challenging.
People, places, and things
is what they tell you, right?
When you're a drug addict or an alcoholic,
people, places and things.
Trading is no different.
Have a trading buddy to help
you maintain that willpower
to help you maintain
positive correct action.
Accountability is important.
Consequence is good.
It keeps us on the straight and narrow.
I think we can all agree
without consequence in life
in general, we would do some
pretty bad things, okay?
We can't just believe
we're all good by nature.
We're not, okay?
We're not, all right?
All right.
"Optimism means expecting the best,
"but confidence means knowing
how to handle the worst.
"Never enter a trade if
you're merely optimistic."
Basically it's saying, "Don't
just drink the KoolAid.
"Don't just have hopium, okay?"
Now, I wanna go over one last thing
and I'm gonna have to end
it on these couple things
even though I may not
get to all the slides,
but it is what it is.
I found this fascinating.
I read this study about 10 years ago
with Kahneman and Tversky.
So there's a couple pieces to this,
but it's just to get you
to think for a second.
It's just to get you to think, okay?
So they're researching and
investigating apparent anomalies
and contradictions in
human behavior, okay?
So here's a couple talking
about risk aversion
versus risk-seeking behavior.
So for example, some people might drive
all the way across town to
save $5 on a $15 calculator,
but they wouldn't drive the same distance
to save $5 on a $125 coat.
Perceived value potentially.
Maybe it's perceived value,
but $5 is still $5, right?
That's a smaller example
of the bigger picture here.
All right?
So they're working in demonstrating
that people's attitude
towards risk concerning gain is different
than their attitude concerning losses.
I'll repeat that.
Your attitude concerning
gains is different
than your attitude concerning losses,
especially as it relates to risk, okay?
So here's the example.
Given a choice between
getting a thousand dollars.
There's a 100% chance
you get a thousand bucks.
Somebody is just gonna say, "Here,
"you can have a thousand dollars
"or you could flip a coin for 2,500 bucks.
"I'll give you the thousand now,
"or we can flip a coin
and I'll give you 2,500
"if heads comes up."
Okay?
Even though the expectation
is a loss, right?
$1,250, you should flip
the coin, all right?
People found 50%, right?
A lot of people found they'll
take the thousand dollars
with certainty, okay?
They'll take the thousand
dollars with certainty.
The vast majority of people
took the thousand bucks, okay?
See, and look at, you guys.
Give me the thousand
bucks and some of you go,
"Oh, I know the odds,
I'll take the coin-flip."
The vast majority of people
took the thousand dollars, okay?
But now we flip it.
Now you have a hundred percent chance
of losing a thousand dollars,
a hundred percent chance of
losing a thousand dollars
or a 50 percent chance, okay?
I just misread that completely, didn't I?
They found the same people when confronted
with a certain loss of a
thousand versus a 50% chance
of no loss or a $2,500 loss
chose the riskier alternative.
Think about it for a second.
So you did the exact opposite
with making money versus losing money.
You took the guaranteed thousand,
but you were willing to flip the coin
when you knew you were gonna
lose a thousand for sure.
Think about what I just did there.
That doesn't make any logical sense.
So that's called risk-seeking behavior,
and it shows the what?
The asymmetry of human choices.
We don't make logical
decisions all of the time.
I know, newsflash, we don't
always make logical decisions.
Just, you know, ask any
married man, all right?
About their spouse, I'll wait.
I'm gonna get in trouble for saying that.
Anyway, the point is
depending on what is to gain
or to lose changes how we view things
not necessarily based on logic.
I'll repeat, depending on
whether we're going to win
or going to lose changes
how we view something,
but not always based on logic, all right?
So a lot of us have risk-seeking behavior.
We just don't think about it
depending on the position
we're being put in.
Okay, one more, one more, all right?
Here's a quick study.
Richard Thaler, students
were told to assume,
assume they'd won $30 meaning
you just won 30 bucks.
I just gave you 30 bucks.
They were offered a coin-flip
in which they could win $9
or lose $9, which basically means what?
You have a 50/50 chance of
having $39 or $21, right?
You already got 30 bucks.
I've given that to you.
Now, you're gonna flip a coin.
If you get heads, you get 39 bucks.
You get 30 plus nine.
If you lose, you get 30 minus nine is 21.
70% of the students
opted to flip the coin.
70%.
However, however, when
students were offered $30
for certain versus a coin-flip
in which they got $39
or $21, only 43% chose it.
Can you explain to me what the difference
is between those, the answer?
Absolutely positively nothing, right?
I mean, there's really
no difference there.
There's a small difference there,
but it's in theory the same thing, right?
Optics, exactly right.
Well said, the optics of it,
but almost not quite twice as many people,
80% more people chose to do it
when they had the 30 in
their pocket, but not.
And you're sitting there going, "Well,
"you're gonna get 21 or 39 anyway."
Why didn't the same
number of people do it?
It's very fascinating, isn't it?
So the problems of
interpreting human behavior
in the face of risk has to do with what?
The problem of people making decisions,
and this is important,
on the basis of subjective
assessments of probabilities,
which may be quite
different from the objective
or true probability.
I'm gonna wrap this all
the way back to trading.
It's just a coin-flip
doing 2R all or nothing.
Anmol tells you guys every
day, 2R all or nothing.
I'm just flipping coins, guys.
I'm just flipping coins.
That's an objective
viewpoint of his probability,
but some of you have a
subjective assessment of it.
So you get out before 2R.
You raise your stop loss or do whatever
you're not supposed to be doing
because of the optics of it,
the viewpoint you had.
How many trades, guys, have
you taken on pure subjectivity?
It looks strong, it has to go higher.
Oh, they crushed earnings,
I know it's gonna work.
Oh, have you seen the new
product they came out?
It's killer, the stock's
just ready to blast off.
It's so extended, it has to pull back.
I'm gonna short it.
Dude, it's up $40 today,
it's gotta pull back.
I'm gonna add more shares on the way down
because the fundamentals are just so good.
You know damn well you've
done some of these things.
Subjective assessments of probabilities.
Purely subjective
assessments of probabilities.
Not the objective or true probability.
That creeps into your
trading way too often, okay?
So comes down to this,
and then I gotta skip
some slides and end this.
It comes down to this.
The more objectively and
accurately you can define yourself,
the more recognition and honesty you have
with regard to how emotions
creep into your business,
your belief system about this business.
Being a victim or not being a victim.
The more objectively you can define that,
the higher and greater odds of success
that you're gonna have, okay?
Because at least by being
honest, you can address it.
If you're not honest,
you're not willing to
address the situation,
which means you can't change the situation
until you objectively address
what's really happening, okay?
So accepting and
understanding your strengths
and weaknesses is key.
It doesn't mean you
can't improve upon them,
but you have to accept them.
Remember, the end of the day,
the outcome goal is not as
important as the process goal.
The process is what leads to the outcome.
You never get to the
outcome without the process.
And trust me, you'll
never get to that outcome
that you wanna get to by being a victim,
not assessing yourself,
and not fully appreciating
and respecting the impact that emotions
play on traders, okay?
How can you combat some of this?
Track your trades, review those.
Review the statistics.
Have a trading buddy review them.
Have somebody that's completely objective
take a look at your trades.
Also, have a consequence system.
There has to be some
level of accountability
to all of this, all right?
There just has to be, okay?
Nope, not gonna go there.
Nope, not gonna go there, no time.
All right, here it is, and
this is the last slide.
Guys, the man in the mirror,
the woman in the mirror,
the person in the mirror is the answer
to all of your successes
and failures, that's it.
The market is an equal
opportunity lender so to speak.
Thus, the outcome is completely up to you.
There's nothing else you
can blame it on, period.
You can't blame it on society.
You can't blame it on economic status.
You can't blame it on culture.
You can't blame it on race.
You can't blame it on anything.
The market just is.
Just is.
It's the greatest meritocracy
in the country, in the world.
So it's equal opportunity for everybody.
The outcome is purely up to you.
Don't be a victim.
Don't play that role.
If you do, you're not going
anywhere in life in general,
but specifically in trading.
Along those lines, make
the acknowledgements
of your pluses, minuses,
failures, successes.
Take them all, put them in a bucket,
own them, and then move forward, okay?
So that'll do it for this week's lecture.
I went a bit past, like 10
minutes past what I normally do.
I told you there's not many slides in it.
So I hope I kept your attention
for that period of time, guys.
Honestly, I could have gone
two more hours on this easily.
All right?
There's a lot of things I
glanced over or shortened up
because of the time
constraints, all right?
So I hope that you guys
enjoyed that lecture.
We'll get back at it again next week.
Take care, guys.
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