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 traders 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 right 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
take really deep the lecture is a little
bit longer maybe ten minutes longer than
normal this week I honestly I could have
gone to more hours on this topic but if
you really want to change and I mean
really want to be a better traitor 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 six
this 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 really pay attention as
well maybe watch it twice if you have to
because there's way too much
victimization going on out there
everybody's 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
one-dollar 14 day trial into the
chatroom click the link in the
description also if you like this video
please click that like button man and
also if you liked the video click the
like button and subscribe write smash
that subscribe button I'm Jarrod Wesley
have live traders let's get to it
[Music]
[Applause]
[Music]
this week's lecture topic is the
psychology of winning in trading learn
by self for market mastery I feel like
the integrity lecture a couple few weeks
back addressed some of the psychological
demons that may be 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 want to 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 so 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 going
to 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 longer they bought I NP X and went
on to take a nap I don't make these up
okay
went on to take a nap because 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 InP X I lost 28,000 dollars on a
$35,000
count okay 28,000 also another reverse
stock split on chk I'm losing and this
was so I don't know as of a week ago
$7000 unrealized now obviously chk
bounced significantly recently but
that's not the point of this the point
of this is this person lost twenty eight
thousand of thirty five thousand dollars
in their account so that's about what
eighty percent of their account
somewhere in that neighborhood
eighty percent 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 get
a backlash for saying this but stop
losses matter stop losses matter okay in
trading they do this is no joke guys
eighty percent of your account in two
days think about that how long did it
take to make thirty five grand and you
were just willing to piss it away in two
days because of stupidity it's not cool
alright 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 alright 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
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 a
hundred and three thousand dollars
eighty eight point six seven percent of
their account okay
so again you guys still think stop
losses you still think money
management's a joke okay so G and us
which is actually a stock we had on the
list today this person apparently is in
this stock at nine dollars and eighty
cents and I think what was GN us today
in the
somewhere Wow I don't know is it fun
losing eighty-eight point six seven
percent of your account losing six
figures over a hundred thousand dollars
guys at this point you're just drinking
the kool-aid just hope iam there there's
no rhyme or reason to your trading if
you're willing to blow eighty eight
percent of your trading account on any
trade any trade you have no money
management you're just a pure gambler
you should put yourself into gamblers
anonymous and that'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 and working at a bar
I mean seriously that's like literally
being an alcoholic and taking a job at a
bar alright that's what some of you guys
are doing so if you are a gambler this
business isn't for you alright 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
know not most check all of this is just
pure stupidity that's it there's no if
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 want to
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 you're using because I can't
find three bar plays I don't know where
you're seeing these three bar plays they
never happen bla bla bla bla bla this is
just from today just from today a al 15
minute three bar play be a 15 minute
three bar play okay next slide just from
today si si el 15 minute three bar play
da el 15 minute three bar play now some
of you might be saying well cheese Jared
DAA da la al 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 Pay Pal not in that
sector 1 minute 3 bar play GES we
actually tried to take 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
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 you
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 want to do okay
six of these damn things happen just
today they happen every day so I don't
want to get any more emails about it I
use dollar attainers and dollar losers
to scan and that's that right that's
that okay now now we're going into the
heart of this discussion today and for
some of you guys today's discussion is
going to 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 in to 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 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 has earned and they
view their app of their opportunity as
probable okay
the middle-class see success says 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 who who's
ever came up with this I apologize I
completely forgot to cite this 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 has been out like 20 years
maybe more okay so if you are successful
or maybe you are 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 are 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 the race further back
that's unquestionable that's undeniable
but that doesn't mean that you can't
still be successful well it 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 eat one belief system
we see commonly is oh I'm gonna get rich
quick I only have three thousand dollars
to my name but I'm gonna turn five
hundred and forty-two dollars into a
hundred thousand and ten 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 X
so that belief is very harmful just like
telling a kid they're not going to 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
want to move on to what I call victims
we'll tie it all in it all it's all
gonna come back okay now I want to talk
about victims in the sky is blue okay
victims and the sky is blue you're like
what the heck does that even mean okay
I've read a really good article years
ago it's probably about 10 years ago now
and I'm stealing some of this from that
article but it 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 quote victims but in trading we
have a lot of water what are some victim
comments okay oh man the market maker
screwed me right they picked off my
stop-loss
all my broker saw the order and they
picked off my shares
they stopped 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 that wasn't short of
it was hard to borrow damn my broker
it's my brokers fault cuz that stock
wasn't hard to borrow all 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
train I didn't get filled damn it I hate
Cox and Verizon gosh darn it these these
damn companies everybody why don't you
just say the sky is blue why don't you
just say I didn't get that trade cuz 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
because 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
you they 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 no body
cares about you okay when something bad
happens to you you have a close circle
of people that genuinely care everybody
else goes ah 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's
an NFL wide receiver me me me me me me
so me you don't throw me the ball enough
right that's what that's what everybody
is like in life that's human nature to
worry about yourself
we're selfish and we're greedy it just
admitted okay so you were 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 and 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 it's
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 no
Chi 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% of 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 quote 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 if there's just nothing
good that's gonna come from it if that's
the way you want to 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
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
revista mentality out okay guys let's be
honest here in 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 come in and shake you
out a little higher why don't you place
a buy order down by where the shakeout
bar the bottoming tail wasn't a shake up
bar I mean you knew it was gonna happen
right you're you were a victim well you
didn't because you didn't know it was
gonna happen right so just admit it you
didn't know okay so stop just seriously
stop the BS except for responsibility
for your actions okay otherwise just
blame it on the sky is blue because
otherwise it 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 succeeded right so what 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 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's 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 you don't 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 want to 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 at 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 is worth like 800 million
dollars is maybe fifteen 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 me and said am I
am I so lucky and then he goes off on
this called a tangent but off on the
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
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 ok with
that but don't judge somebody successful
or failure just by the cover ok 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 whether it's
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 a hundred and four
percent of their income that's a poor
choice that's a poor choice okay and I
don't want to hear it and I don't want
to get off on a tangent but I don't want
to 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 listened 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 you want to
be born in Haiti or Syria or Afghanistan
or Iran or a gazillion other countries
out there okay being born in United
States of America is privileged period
end of discussion let's move on all
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 weeks ago
with regard
- 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 because it
preys on our core beliefs ego bragging
rights self-worth we put a lot into
these things more more than we should to
be honest right we put a lot of stake in
the ego bragging rights your self-worth
because that's our core that's Austin 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
doesn't say anything about you doesn't
mean you're a bad person because you had
a losing trade if somebody says you're
me you can reflect and go well am I
really mean is that person somebody 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 because there's no way to
move forward without it alright so now I
want to get in 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's son if
you're Michael Jordan's son if you're
LeBron James's 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 going to go over a couple 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 training this is true
in life but in training 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 is unlike any other
business you've ever Trevor 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 is 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 it's
like The Wizard of Oz but that was
actually a person so that's a bad
analogy right the market just is it
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 alright 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
on an objective opinion about my trading
now granted this person sent me like two
three weeks worth of this girl 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 trailer 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 going oh [ __ ] I don't
have one of those get one okay
get one so this is one day and 11 traits
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 traits
I would agree Elevens kind of a lot
somebody says wow look at the risk it's
very erratic so the risk level is 98
dollars on the first trade the second
trades 171 165 then it jumps to 294 then
it drops to 144th and down to 70 so yes
Wow the risk level of this trader even
though it averages 155 individually on
trades it's all over the map says that's
the first thing we see okay the first
thing we say alright 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 one of
these first five columns okay what's
something else that you see on here all
right it to me it jumps out at me now
some of you it may not but 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 set up a breakout and a
climactic what is that one two three
four five six different Oh in a breakout
seven different patterns or you said it
sorry Vlad my apologies buddy
this person is 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
this sheet this is not an experienced
trader because 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 in 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 cuz I can't spend too
much more time in so I have a lot more
slides to get through I'm gonna scoot
all the way over to the end here is 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 want to 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 with the different types of trades
they take we found it out with the
inconsistency of risk now we're seeing
it again with how many different people
they're following ok next and last I
don't know if it's last but next is guys
look at this in 933 out 937 in 933 out
936 in 936 out 938 has the first the
first 4 or 5 trades are less than 5
minutes each
right then you have an 8-minute trade a
nine-minute trade a 13min 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 point three our breakeven
almost point to our so to me it looks
like this is a person that doesn't
follow a plan at all they have they
don't even have a single one our winner
on here there's not a single one our
winning trade there's not a single one
our losing trade this person's all over
the map right Oh 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 thirty to
fifty dollars 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 vert long trades of our 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 you 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
re-evaluating your tracking spreadsheet
okay and this is a different person you
saw this a couple 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
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 so while 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 constraint some
of you guys have jobs you can't be in
front of your computer all day you can't
you know 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
50 100 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 alright 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 treating 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 affecting
afflicting our society today the power
of emotion over thought do you ever have
a Twilight Zone conversation with
somebody ever have that it's what I call
the 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 hair to 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 is 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 stoploss 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 can 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 now why is this
important it's important because this
manifests itself frequently in treating
right you're rational man that stops a
little bit extended I'm not gonna take
it let's move on to the next stop oh wow
look at this three bar play it looks
great blah blah blah that's rational
thought as soon as you get into it
something happens news report comes out
whatever it is an emotion creeps in an
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 exit it
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 for 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 target so I need to
get out
so the question when 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 a motion
does to us and a lot of that emotion
also comes back to what we believed when
we started so I'm gonna relate this to
yesterday okay yesterday in trading
alright 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 ripped 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 pink broke over 426 and
immediately pulled back look at it on
the left on the one-minute chart right
over and me they put 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 insofar
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 bad break
so it came back and came all 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 it
got
for 26 30 23 right at 4:26 27 I sold 100
shares of this because of emotion it
over ran 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
dollars to be exact okay because this
thing ultimately went on to hit target
and that target was four dollars in
those hundred shares times four dollars
is 400 bucks so it happens to every
party 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 did the same thing on another trade
okay Lulu yesterday we got in this thing
taking a little bit of a sell setup
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 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
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 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 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 the end of the day I
made money on Lulu and I should have
lost money 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 Luther 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 basically saying I'm
aware that I'm acting or I'm being I'm
being emotional right now so how can i
by understanding or through
understanding how could I not give into
those emotions right so when emotions
triggered there's a disruption of a
familiar established pattern please
don't PM me in the middle of a lecture
I'm not going to 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
down and you know what was the end of
that North Atlantic Squad is the only
thing he can afford okay anyway you guys
get the point if you see in 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 a 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 what was one
of the things the Tiger Woods his father
did to him when he was younger
yelling his backswing clapping his
backswing have people or a radio or
whatever play during his backs and why
so he 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 may be
shooting over par which means not being
the best player in the world
his father understood that so we 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 you I got to move on all right so
I'm hoping to end this in the next five
or ten minutes but we can't throw about
six slides for that this is gonna be
good pre contemplation contemplation
preparation determination action will
our 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 yes your
parents to death to get them off your
back 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 yes 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 you
want to make that change this is called
maturity right you're slowly maturing
you're recognizing there is 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 changed 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 traitor 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 me 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
stoploss and it hurts you to the tune of
say minus 20 or 30 percent 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 alright alright
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 kool-aid don't just
have hope iam okay now I want to 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 I want 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 five dollars
on a 15 dollar calculator but they
wouldn't drive the same distance to save
five dollars on one hundred and twenty
five dollar coat perceived value
potentially maybe it's perceived value
but five dollars is still five dollars
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 give it a choice between getting
a thousand dollars there's a one hundred
percent chance you get a thousand bucks
somebody's
here you can have $1,000 or you can 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 of 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 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 fifty
percent 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 to 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 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 so seventy here's a quick
study Richard Thaler students were told
to assume assume they'd won $30.00
meaning you just won 30 bucks I just
gave you 30 bucks they were offered a
coin flip in which they could win nine
dollars or lose nine dollars which
basically means what you have a 50-50
chance of having 39 dollars or
twenty-one dollars right
you already got thirty 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 9 if you lose you at 30
minus 9 is 21 70% of the students opted
to flip the coin 70% however however
when students were offered $30 for
certain verses a coin flip in which they
got 39 dollars or twenty-one dollars
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 chosen
chose to do it when they had 230 in
their pocket but not and you're sitting
there going well you're gonna get 21 or
39 anyway why do 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 two
are all or nothing unball tells you guys
every day two are 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 two are 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 all they crushed earnings I
know it's gonna work
Oh have you seen the new product they
came out it's killer the stocks just
ready to blast off it's so extended it
has to pull back I'm gonna short it of
course it's cut
dude it's up $40 today it's got to 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 got to skip some slides and end
this it comes down to this the more
objectively and accurately you couldn't
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 out
without the process and trust me you'll
never get to that outcome that youth
that you want to get to by being a
victim not assessing yourself and not
fully appreciating and respecting the
impact that emotions play on trader 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 ok 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 markets 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 a
greatest meritocracy in the country in
the world so is 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
acknowledgments of your pluses minuses
failures successes take them all put
them in a bucket own them and then move
forward ok 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 2 more hours on this easily
alright there's there's a lot of things
I glanced over or shortened up because
of the time constraints alright so I
hope that you guys enjoyed that lecture
we'll get back at it again next week
take care guys to get more great
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