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2 |1 |00:00:00,060 ~-~-> 00:00:08,820 |ICT: Okay, this is part four of the, if I could go back and tell myself what I know now series, this is a hypothetical conversation with my younger self.
3 |2 |00:00:13,679 ~-~-> 00:00:24,539 |Right? So you're looking at all your books and such, Michael, when you're preparing your way to get to financial freedom. And while you're practicing, and
4 |3 |00:00:24,569 ~-~-> 00:00:36,419 |the question is going to be is when do you leave demo trading, or at the time, when we first started, it was paper trading. So when am I ready for live funds,
5 |4 |00:00:36,929 ~-~-> 00:00:51,599 |it begins with proof of concept. proof of concept, you have to show minimum of six months consistency, managed to keep risk below 3%, maximum. And emotionally,
6 |5 |00:00:51,599 ~-~-> 00:00:53,069 |whether strings of losses.
7 |6 |00:00:58,799 ~-~-> 00:01:10,049 |So when to leave demo. First and foremost, you have to have proof of concept, you're gonna be doing a lot of things, you mean buying a lot of books. And I
8 |7 |00:01:10,049 ~-~-> 00:01:20,699 |wish I could tell you to save all that money. Because you're going to have over 2000 books, and less than a dozen of them were really worth the time reading. A
9 |8 |00:01:20,699 ~-~-> 00:01:29,189 |lot of it's gonna be regurgitated things. So you want to focus on the following things. If you do this, Michael, you're going to be able to fast track your way
10 |9 |00:01:29,759 ~-~-> 00:01:37,709 |to get through a lot of the hardships that you're that you will unknowingly enter yourself into and chase and pursue things that are going to lead to more
11 |10 |00:01:37,709 ~-~-> 00:01:53,549 |loss and confusion. The first thing you will be focusing on is seasonal tendencies. You want to ignore the things that Jake Bernstein talks about. The
12 |11 |00:01:55,019 ~-~-> 00:02:09,539 |more research group that puts out seasonal tendencies, this person has the best seasonal tendencies mrci.com is the website, you're going to find that if you
13 |12 |00:02:09,539 ~-~-> 00:02:22,049 |stick to that gentleman's seasonal tendencies, they're going to serve you exceptionally well. Quarterly shifts, you'll be looking for moves that move
14 |13 |00:02:22,049 ~-~-> 00:02:33,659 |every three to four months. Now, the markets always have some specific gyration. But focusing primarily on the major moves, that should transpire over the next
15 |14 |00:02:33,899 ~-~-> 00:02:48,539 |three to four months. If you focus there, you're going to find a lot of these mega trades. Monthly bias, try to formulate all of the things that you're doing
16 |15 |00:02:48,929 ~-~-> 00:02:59,429 |every single day to get in sync with the monthly bias. What is the monthly bias likely to do is it likely to trade higher? Is it likely to trade lower, focusing
17 |16 |00:02:59,429 ~-~-> 00:03:09,869 |within that particular bias within a specific quarterly shift with any specific seasonal tendency is going to give you the highest odds probability of success
18 |17 |00:03:10,439 ~-~-> 00:03:19,739 |than anything you're going to read in any books that you buy. So if I can grab you and shake you by the lapels, Michael, this is exactly what I would stress to
19 |18 |00:03:19,739 ~-~-> 00:03:33,179 |you. Because everything that you're doing prior to identifying This is creating the problem, all the frustrations, you're feeling all the I want to know where
20 |19 |00:03:33,179 ~-~-> 00:03:43,679 |it's going next. This is the three things that helps figure that out for you. But it's gonna be years before you discern that. But if I could convince you
21 |20 |00:03:43,679 ~-~-> 00:03:55,709 |right now, this is what I would tell you to do focus on these top three things. Once you have that determined, then you can focus on a weekly profile. Now, if
22 |21 |00:03:55,709 ~-~-> 00:04:07,829 |it's bullish, then you're expected to have a weekly profile that's bullish. At the time of recording, you're world renowned for knowing and teaching how the
23 |22 |00:04:07,829 ~-~-> 00:04:23,759 |weekly bias and weekly range is typically formed with the higher low form generally by Tuesday's long and open if not by Wednesday. So if you can focus on
24 |23 |00:04:23,759 ~-~-> 00:04:32,099 |that seasonal tendency that's bullish or bearish, and you're looking for that quarterly shift that's in line with that seasonal tendency. And you have
25 |24 |00:04:32,219 ~-~-> 00:04:44,939 |factored into what the monthly bias should be in concert with those two previous ideas. Your weekly profile should be in alignment as well. So you're not trying
26 |25 |00:04:44,939 ~-~-> 00:04:54,839 |to go against the underlying momentum, you're trying to get in sync with the institution order flow. Once you identify the seasonal tendency, and you're
27 |26 |00:04:54,839 ~-~-> 00:05:03,629 |focusing on a quarterly shift or a price swing that should transpire over the next three to four months. And your monthly bias is determined to be bullish or
28 |27 |00:05:03,629 ~-~-> 00:05:12,179 |bearish relative to those seasonal tendencies and next quarterly shift. And you're working with any weekly profile, it's bullish or bearish relative to the
29 |28 |00:05:12,179 ~-~-> 00:05:21,029 |idea of that, what monthly bias and quarterly shift and seasonal tendency, the daily template, that means what type of day are we going to have? Did we just
30 |29 |00:05:21,029 ~-~-> 00:05:29,759 |come off of a big range day, or series of big range days, because we're going to contract and go into small ranges. But if we do go into a smaller range, it's
31 |30 |00:05:29,759 ~-~-> 00:05:37,769 |going to be a short term event, that should lead to a large expansion in the direction of the monthly bias in the expectation of the quarterly shift that
32 |31 |00:05:37,769 ~-~-> 00:05:47,069 |you're looking for. And within alignment of the seasonal tendency, the daily template is basically your power three concept, where it's the open, high, low
33 |32 |00:05:47,069 ~-~-> 00:05:55,469 |and close formation of the daily bar, you're looking for accumulation, manipulation, and distribution.
34 |33 |00:05:59,430 ~-~-> 00:06:09,960 |You want to spend a lot of time studying time of day. One an open has specific characteristics that generally make the higher low of the day, not all the time.
35 |34 |00:06:09,990 ~-~-> 00:06:20,190 |But most of the time. New York is a continuation of whatever has transpired in London, unless you've reached a higher time frame level or key level that may
36 |35 |00:06:20,220 ~-~-> 00:06:32,310 |introduce a new york session market reversal profile on encloses typically, the opposite end of the daily range, or will be opposing the higher low formed in
37 |36 |00:06:32,490 ~-~-> 00:06:46,440 |London open. Focusing on a time of day, within all these specific studies are going to put you in the highest order of probability doesn't mean you're going
38 |37 |00:06:46,440 ~-~-> 00:06:57,270 |to not take losses you will. But sticking to this in this protocol, is going to lead to the longest stretch of consistency and continuity in your trading. And
39 |38 |00:06:57,270 ~-~-> 00:06:59,130 |you're ever going to find doing anything else.
40 |39 |00:07:06,870 ~-~-> 00:07:19,560 |Minimum six months consistency. Now, I understand you're excited. And you see there's a lot of things ahead of you, Michael. And you've made that plan of
41 |40 |00:07:19,560 ~-~-> 00:07:32,010 |retiring at 40. And newsflash, you get there. But try not to rush profits, there's going to be a transition, you don't know when it's going to occur. But
42 |41 |00:07:32,010 ~-~-> 00:07:41,700 |it is when you start trading the bond market, the bond market starts serving you very well. And then you discover that you can do far more per week than you
43 |42 |00:07:41,700 ~-~-> 00:07:58,740 |could with just one lot by using more money management. And the enticement is going to be get there quicker, get there quicker, and you discover the power of
44 |43 |00:07:58,740 ~-~-> 00:08:13,530 |compound interest. But you don't, at that time, understand the depth that it can take you down with. It's very powerful, but it's a double edged sword. So if I
45 |44 |00:08:13,530 ~-~-> 00:08:25,200 |could change your mind about something speaking to you now, you should do your best to try not to be profitable or rush profits. And what do I mean by that?
46 |45 |00:08:25,590 ~-~-> 00:08:33,810 |taking more trades than necessary and onwards your trade frequency, Michael, when you first start is going to be horrendous. There's going to be days where
47 |46 |00:08:33,810 ~-~-> 00:08:44,520 |you actually have taken 30 entries. And none of them are profitable. Because you're going back and forth, back and forth, thinking you're going to get the
48 |47 |00:08:44,520 ~-~-> 00:08:53,430 |right direction, right? And it's not going to work out for you. This is the reason why you have to work with the previous information where you work from a
49 |48 |00:08:53,430 ~-~-> 00:09:04,410 |macro perspective down. If you do that, you will also be more controlled over your decision making. And you won't be in a rush to make profits. rushing to
50 |49 |00:09:04,410 ~-~-> 00:09:12,720 |profit is the surest, fastest way to lose money. It doesn't feel like it, especially when you're buying all these books because all these books are
51 |50 |00:09:12,720 ~-~-> 00:09:21,390 |sugarcoating everything. They're over simplifying everything in giving you a false sense of security because of these indicators. And the indicators are not
52 |51 |00:09:21,390 ~-~-> 00:09:32,790 |the secret. Those indicators are just the red herring and the gimmick that that books using to sell. Keep them on the return as the focus. Now you're going to
53 |52 |00:09:32,790 ~-~-> 00:09:44,070 |be trading starting with commodities. And you're focusing on the dollar amount. How much can I make today? How much money can I make this week? And as soon as
54 |53 |00:09:44,070 ~-~-> 00:09:54,900 |you take that first loss for the month, this is when you go into a tailspin because you're in a hurry to get that back. You don't like taking losses, and I
55 |54 |00:09:54,900 ~-~-> 00:10:05,940 |want you to understand something 27 years from now You're going to be able to look back and count up an enormous amount of money that if you collectively add
56 |55 |00:10:05,940 ~-~-> 00:10:17,790 |it all up, all of your losses are enormous. And there is nothing wrong with that, because every trader loses. But you got to keep the focus on the monthly
57 |56 |00:10:17,790 ~-~-> 00:10:28,860 |return, it doesn't make a difference if you have three losing trading days out of the week, or you had no winning positive days for the week, but you come out
58 |57 |00:10:28,860 ~-~-> 00:10:40,230 |ahead on the monthly, if your monthly return is consistently higher than 1%, you're doing exceptionally well. It doesn't feel like it, it doesn't sound like
59 |58 |00:10:40,230 ~-~-> 00:10:49,470 |it, you think that everyone, that super elite is doing 500% per month, because that's the impression that these books that you're buying and wasting money on
60 |59 |00:10:49,470 ~-~-> 00:10:59,310 |Michael are giving you, they don't do that. They aren't making those types of returns. And you want to be able to focus primarily on what you've done over the
61 |60 |00:10:59,310 ~-~-> 00:11:09,360 |course of four weeks or so. And that result in that return is your goal. You're not trying to get an everyday percentage, you're not trying to get an every week
62 |61 |00:11:09,360 ~-~-> 00:11:19,350 |percentage, you're looking at how you close each month. And this month positive because if it's positive, that's better than a loss. If you continuously do that
63 |62 |00:11:19,350 ~-~-> 00:11:29,940 |you're going in the right direction. But trying not to rush profits. And try not to look beyond the scope of what your monthly return is. Invite the possibility
64 |63 |00:11:29,940 ~-~-> 00:11:41,970 |of being wrong. I understand obsessive compulsive disorder, we struggle with it and we still struggle with it in our 40s. But I want you to understand
65 |64 |00:11:41,970 ~-~-> 00:11:42,660 |something, Michael,
66 |65 |00:11:44,130 ~-~-> 00:11:55,320 |you are not going to be right 100% of the time. And early on the first couple years, you're spending time trying to perfect and eliminate the possibility of
67 |66 |00:11:55,320 ~-~-> 00:12:05,580 |you being wrong. And it's a farce don't do that you're going to waste time doing that. There is no perfect person, there's no perfect trader. And you still with
68 |67 |00:12:05,580 ~-~-> 00:12:14,190 |almost three decades of experience I'm speaking to you now, you are still not perfect, your exits aren't perfect, your entries aren't perfect all the time,
69 |68 |00:12:14,790 ~-~-> 00:12:25,140 |perfection is still going to evade you. But you do not need perfection. When you're wrong. Many times that's going to lead to a more profitable trade or
70 |69 |00:12:25,740 ~-~-> 00:12:34,260 |identifying that you're wrong and getting out and staying on the sidelines preserves your capital. by preserving your capital, you don't go into spending
71 |70 |00:12:34,950 ~-~-> 00:12:43,320 |your mental capital. And the mental capital is how much money you're really willing to lose. You may have $20,000 in that trading accounts. But you're
72 |71 |00:12:43,320 ~-~-> 00:12:54,840 |really not comfortable if you lost 5000 of it. So what are you really trading with $5,000, but to $20,000 is just lipstick, the extra 15,000 is padding you
73 |72 |00:12:54,840 ~-~-> 00:13:04,140 |hope you never go into. And as soon as you do, everything gets abandoned, the trade plan, methodology, all of that goes out the door risk management, trade
74 |73 |00:13:04,140 ~-~-> 00:13:15,960 |management, all of it tossed out because now you're emotional. And you can't act that way. Invite the possibility of being wrong, identify the characteristics
75 |74 |00:13:15,960 ~-~-> 00:13:27,930 |that leads to your trade idea being wrong, identify it before you even put the trade on. So in other words, what negates the idea what makes it most likely to
76 |75 |00:13:27,930 ~-~-> 00:13:39,690 |fail. If those trades show signatures of that occurring, do not hesitate to simply close the trade, preserve capital. If you do that, you will be on a fast
77 |76 |00:13:39,690 ~-~-> 00:13:50,880 |track to preserving your mental capacity, your willingness to stay studying even though you're not taking trades. If you don't do this, you're going to find
78 |77 |00:13:50,880 ~-~-> 00:14:03,210 |yourself going into the longest tailspin in terms of pursuing something that is eluding you because you're causing it. You're trying to be perfect, and it won't
79 |78 |00:14:03,240 ~-~-> 00:14:18,270 |exist, it won't happen, it won't happen, you're not going to be there that will always evade. Avoid chasing parabolic equity searches. I can recall many of the
80 |79 |00:14:18,270 ~-~-> 00:14:32,970 |things that we did. And there's some of those instances where it worked out in our favor. But most of the time it didn't. So avoiding parabolic equity surges
81 |80 |00:14:33,180 ~-~-> 00:14:41,370 |is one of the things that it's going to be very hard for you because the first one you get with Chicago Board of Trade wheat that sets the stage for you
82 |81 |00:14:41,370 ~-~-> 00:14:52,290 |thinking that you can do this every week. And it doesn't work that way. Avoid trying to allow your account to grow exponentially. With these parabolic equity
83 |82 |00:14:52,290 ~-~-> 00:15:04,710 |surges where you're getting 100 plus returns quickly. Try not to do that. because number one, you have to have the right market conditions, you have to
84 |83 |00:15:04,710 ~-~-> 00:15:14,370 |have everything on point your entry, your stop your trade management, your exits, there are so many things that have to line up for you to deliver with
85 |84 |00:15:14,400 ~-~-> 00:15:28,530 |Olympic level equity surges on a consistent basis. It's not realistic going into this. Now, it's going to eventually get to the point where you can see these
86 |85 |00:15:28,530 ~-~-> 00:15:37,920 |things and predict them. But it won't be in the first few years, you're going to make the mistake in believing that you're better than you really are far before
87 |86 |00:15:38,430 ~-~-> 00:15:50,550 |you really get on what it is you should be doing as a trader, reduce leverage when taking losses. Now, this is something that I can remember we did very
88 |87 |00:15:50,550 ~-~-> 00:16:02,310 |poorly, when we would take losses, you would increase the amount of contracts trying to recapture and get more equity back in the account. Because we didn't
89 |88 |00:16:02,310 ~-~-> 00:16:10,140 |like the way it felt when money was taken out. Not only did we not like the fact that we were wrong. But we didn't like the fact that we were wrong. And we were
90 |89 |00:16:10,440 ~-~-> 00:16:24,090 |robbed of equity. And we personified that and needed someone or something that we're going to get revenge on. And that I can look back and say that that was
91 |90 |00:16:24,180 ~-~-> 00:16:33,540 |90% of the biggest losses in the biggest and longest streaks of losing trades were linked to that very thing.
92 |91 |00:16:36,090 ~-~-> 00:16:46,290 |If we would have just simply reduced the leverage. For instance, if we were trading 10 contracts of the Standard and Poor's futures contract, and we took a
93 |92 |00:16:46,290 ~-~-> 00:17:00,510 |loss of 2%. The next trade should be five lots. And if we take a loss there, next trade should be to lots and keep reducing until you make 50% of the
94 |93 |00:17:00,510 ~-~-> 00:17:12,120 |previous loss back, then you can go back up one scale in the money management and risk trade management. But if you don't do this, you're going to have a wild
95 |94 |00:17:12,150 ~-~-> 00:17:22,650 |roller coaster equity swings and many accounts being dusted. If you don't do this, you're not going to build in plateaus and your equity, there's going to be
96 |95 |00:17:22,650 ~-~-> 00:17:31,110 |a series of winning trades. And then what's going to eventually come that you don't like to admit, it's going to be a losing trade or two or three. And if you
97 |96 |00:17:31,110 ~-~-> 00:17:40,350 |keep risking the same amount, your equity drawdown is going to be notable and horrendous if you don't control yourself. So you want to reduce the leverage
98 |97 |00:17:40,380 ~-~-> 00:17:50,730 |after taking losses. Because then the inevitable is going to happen, you're gonna have a series of losses. But if you keep risking 2% 2% 2% 2%, it's going
99 |98 |00:17:50,730 ~-~-> 00:18:07,830 |to have greater impact on the drawdown that you suffer. And it's much more work on your part to recapture that. Be patient will draw down recovery. Losing still
100 |99 |00:18:07,830 ~-~-> 00:18:18,750 |sucks. When you get stopped out. It's not fun. But it's a business transaction, eventually, around late 20s, you're going to see it as just that, it still won't
101 |100 |00:18:18,750 ~-~-> 00:18:26,790 |feel good. And you'll hate that you have them. But you'll come to grips with a little bit. But be patient with drawdown recovery. In other words, don't rush to
102 |101 |00:18:26,790 ~-~-> 00:18:36,840 |get it back. If you have a day trade or two, that shows a net loss for the day, stop the next trading day, it's very easy to start building that back up and
103 |102 |00:18:36,840 ~-~-> 00:18:47,790 |don't try to get it back in one trade. You have made so many errors, I can tell you right now, at least three dozen of them. And they were all in soybeans.
104 |103 |00:18:48,540 ~-~-> 00:19:01,170 |Those trades ended up being parlayed into huge losses and to lost accounts. You killed two accounts. You don't see it yet. Oh, but it's coming, you will have
105 |104 |00:19:01,200 ~-~-> 00:19:14,460 |blown two futures accounts trading the soybean market because you're trying to get back your losses. And you get caught in a couple limit moves. And you can't
106 |105 |00:19:14,460 ~-~-> 00:19:27,780 |get out of those. And you end up suffering and blowing up the account. Because you are not being patient. You're not going to be patient and you suffer the
107 |106 |00:19:27,780 ~-~-> 00:19:41,310 |drawdown. And the recovery of it is not only timeline basis. In other words, there's no deadline that you have to meet to get that money back. Immediate is
108 |107 |00:19:41,310 ~-~-> 00:19:52,170 |what you feel like it has to be. But that's the trap. That's the trap. You have to avoid that. Michael, if you don't listen to me, you're going to find yourself
109 |108 |00:19:52,470 ~-~-> 00:20:03,390 |chasing loss after loss after loss and you're not going to be thinking clearly you're going to get even more insanely rate enraged, okay, it's what it's going
110 |109 |00:20:03,390 ~-~-> 00:20:14,010 |to become. Because you think that the brokers on the other side clicking buttons, just to get you. And I can tell you honestly, looking back, you were
111 |110 |00:20:14,010 ~-~-> 00:20:28,440 |just doing it wrong and doing it wrong a lot. And very frequently pursuing something that is very easily accepted, take the loss, go home for the day, and
112 |111 |00:20:28,440 ~-~-> 00:20:36,690 |see what happens tomorrow. If you don't do that, you're going to dust multiple accounts,
113 |112 |00:20:44,370 ~-~-> 00:20:59,100 |managed to keep risk below 3% maximum. Avoid large risk for large wins. Now, when you first start trading, you're gonna read a couple things in commodity
114 |113 |00:20:59,100 ~-~-> 00:21:09,600 |magazine. And it's gonna inspire you to trade with a little bit larger risk. And you're gonna pull out your calculator, and you're gonna be sitting at lunch
115 |114 |00:21:09,600 ~-~-> 00:21:22,350 |while at work. And you're gonna think if I take my account, and I risk 810 12% per trade, I can do this or that, in the time of the end of the month, if I do
116 |115 |00:21:22,350 ~-~-> 00:21:37,890 |that 12 months in a row, I'll be able to buy this or that. Don't do that. Avoid large risk, you're not going to be consistent in the beginning, you think you
117 |116 |00:21:37,890 ~-~-> 00:21:45,450 |are because the books that you bought, are telling you that it's just simply just do this, do that. And when the indicator says this, that's when you buy him
118 |117 |00:21:45,450 ~-~-> 00:21:57,810 |an indicator says this, you sell. And you're gonna find out very quickly that it doesn't work that way, it's not that easy. Expect to make velocity your edge.
119 |118 |00:21:59,700 ~-~-> 00:22:13,650 |After spending almost 20 years doing this, I can tell you, everyone still thinks that having a large r multiple, okay, or risk reward model is the secret. And
120 |119 |00:22:13,650 ~-~-> 00:22:25,080 |that's not the secret, the secret is velocity, doing something over and over and over again, that has an expected result that is high in probability and flipping
121 |120 |00:22:25,080 ~-~-> 00:22:41,670 |the equity, that's velocity, you will in your mid 30s, discover how you can take the same account balance. And while other traders and other methodology may be
122 |121 |00:22:41,670 ~-~-> 00:22:56,400 |focusing on trying to get 10 to one or more, you can do exceptionally well doing one to one two to one. Because you can use the lower timeframes that you don't
123 |122 |00:22:56,400 ~-~-> 00:23:09,060 |appreciate right now. But they are the same market with dozens of setups per day. But you're not in a position when you first start, did start doing those
124 |123 |00:23:09,060 ~-~-> 00:23:21,330 |types of trades. It's going to be a little bit of time before you understand that but velocity and turning over the equity without risking a lot. That beats
125 |124 |00:23:21,450 ~-~-> 00:23:34,230 |every race, it beats every trading contest, it beats every thing, period, because you're using the rate of turnover in the equity, because you're taking
126 |125 |00:23:34,260 ~-~-> 00:23:44,280 |more frequency. And you're looking at a result that is measurable. It's a repeating reoccurring pattern that forms every single day multiple times
127 |126 |00:23:44,280 ~-~-> 00:23:56,430 |intraday. So it's not that you want to take a larger risk to make bigger money, you want to take surgical strikes, and parlay the account up using velocity.
128 |127 |00:23:56,970 ~-~-> 00:24:09,330 |It's just the higher frequency trade of the same reoccurring pattern on a lower timeframe. And while other traders are waiting for their 10 to 121 30, to one,
129 |128 |00:24:10,740 ~-~-> 00:24:20,910 |that money can only make whatever the maximum are multiple is going to be for it. But within those long or higher timeframe price swings, you're going to be
130 |129 |00:24:20,910 ~-~-> 00:24:30,540 |in there, moving back and forth both directions, most of the money being allocated to the side of the marketplace, it's going to move in and still
131 |130 |00:24:30,540 ~-~-> 00:24:41,880 |trading counter trend intraday with less than the risk that you're using when you're trading in sync with the market. And you will destroy the 10 to 121 31
132 |131 |00:24:42,120 ~-~-> 00:24:51,330 |are multiple type trading models. It's simple math, but you're going to be distracted Michael, by all these books and all these things. They're going to
133 |132 |00:24:51,780 ~-~-> 00:24:59,670 |draw your attention away from the simplest of things. Is it going to go up? Is it going to go down? How far is going to go up? How far is it going to go down?
134 |133 |00:25:00,000 ~-~-> 00:25:10,860 |At what point is it incorrect, and I want to be out of the trade. Now, that same criteria just applied to a one minute or five minute chart, you can take that
135 |134 |00:25:10,860 ~-~-> 00:25:24,870 |same equity and flip it over and over and over and over again. within the span of, say, a weekly range, it takes five candles to form. You may have 30 to 40
136 |135 |00:25:24,870 ~-~-> 00:25:38,550 |trades for the course of the week, and they're all one minute setups. But if each one of those pay out 2% minimum, nothing's gonna keep up with that.
137 |136 |00:25:41,160 ~-~-> 00:25:43,230 |Consider the negatives of forcing setups.
138 |137 |00:25:45,570 ~-~-> 00:25:54,270 |Your impatience Michael in the beginning, because the first trade you put on, you lose 50% of your equity, and your trading options, and you didn't fully
139 |138 |00:25:54,270 ~-~-> 00:26:04,500 |understand what you're doing. And option trading is not just simply being right on the marketplace, you have to beat the time decay as well. You'll learn about
140 |139 |00:26:04,500 ~-~-> 00:26:13,080 |that later on with some pain. But consider the negatives of forcing the setups because you're going to try to force it, you're going to have a level that you
141 |140 |00:26:13,080 ~-~-> 00:26:26,760 |want to be buying it but you are impatient, and you're going to try to buy it ahead of time. And that is a problem. Because you aren't very versed in proper
142 |141 |00:26:26,760 ~-~-> 00:26:37,350 |stock placement in the beginning, Michael, you're going to have your stock too tight, because you don't want to risk a lot of money. But you are risking 5% on
143 |142 |00:26:37,350 ~-~-> 00:26:47,880 |the trade. And that's too much, you're risking way too much. But you're forcing the entry, sooner then should be taken. And it is done at a time where you're
144 |143 |00:26:47,880 ~-~-> 00:26:58,530 |using the maximum amount of leverage which strangles the trade because you had to have a very short, tight stop in a trade that you entered too soon, before
145 |144 |00:26:58,530 ~-~-> 00:27:10,500 |the level you want to buy in. So when you're doing that, you're convincing yourself that you're going to be right, in ignoring all of the things that
146 |145 |00:27:10,500 ~-~-> 00:27:21,930 |you're doing wrong, that is inviting failure. You have to consider the negatives of it. What is the impact of that? Number one, you're teaching yourself that not
147 |146 |00:27:21,930 ~-~-> 00:27:34,770 |following the rules is okay. That trading ahead of the level before it's made a touch or a retest to it? That that's normal. That's something you should be
148 |147 |00:27:34,770 ~-~-> 00:27:44,010 |doing when it doesn't fit within the model. If you've identified a level and you want to buy at that level, why are you buying before the levels hit? Because
149 |148 |00:27:44,040 ~-~-> 00:27:50,580 |you're forcing the trade, you're impatient you want to get in because you're afraid that you're going to miss the move, it might not hit your level? Well,
150 |149 |00:27:50,580 ~-~-> 00:28:09,120 |guess what? So what there's going to be 10s of 1000s of trades in your career, and you're not going to miss the big moneymaker. Because of not getting in
151 |150 |00:28:09,150 ~-~-> 00:28:20,310 |early. Getting in early is always always I can tell you now looking back has always been an error. Always, it never works out in our favor. So don't do it.
152 |151 |00:28:23,880 ~-~-> 00:28:35,820 |Taking partials is the best thing you will ever do. And I will say it again. Taking partials is the best thing that you're ever going to do, Michael, the
153 |152 |00:28:35,820 ~-~-> 00:28:48,390 |biggest hurdle in your development is being comfortable with holding to trade. You're going to struggle with that. It's going to cause anxiety, you're going to
154 |153 |00:28:48,390 ~-~-> 00:28:54,270 |have heart palpitations, you're going to have shortness of breath, you're going to feel like you're going to faint a couple times you're going to vomit a couple
155 |154 |00:28:54,270 ~-~-> 00:29:06,270 |of times, because some of the trades that you're in in the s&p are huge. And this the smallest little tick is making you go nuts. wait around for it, it
156 |155 |00:29:06,270 ~-~-> 00:29:21,360 |happens. But taking partials off, while the trade is developing. Number one, it feels good to take something off. It feels good. And it feels like you're doing
157 |156 |00:29:21,360 ~-~-> 00:29:32,970 |something because even when you're in a trade, it's winning, you're going to find that it is like holding on to a motorcycle at 200 plus miles an hour. It's
158 |157 |00:29:32,970 ~-~-> 00:29:44,010 |an incredible rush. But you also want to ride the end sometimes quickly. And when you get in a trade and it's moving in your favor. You want to get there
159 |158 |00:29:44,070 ~-~-> 00:29:50,250 |quick. You wanted to get there and get you out of the trade and profit because you don't like the discomfort of not knowing if it's going to hit your target.
160 |159 |00:29:51,150 ~-~-> 00:30:00,960 |So the way you're going to best deal with that and have the ability to hold on to the trade longer into fruition or to get stopped out Because that's part of
161 |160 |00:30:00,960 ~-~-> 00:30:12,750 |the plan, too. You have to take something off. So if the trade moves 10 points in your favor, take 10 points off with something, even if it's one contract or
162 |161 |00:30:12,750 ~-~-> 00:30:23,700 |one lot, take something off, it feels good. It's that cookie that reward. When it moves a little bit more, take something off again. And you're gonna find by
163 |162 |00:30:23,700 ~-~-> 00:30:36,330 |doing that, it helps alleviate the pain and uncertainty of holding on to that trade until it gets to your profit objective. Taking partials reduces risk,
164 |163 |00:30:36,390 ~-~-> 00:30:37,170 |while pain,
165 |164 |00:30:39,750 ~-~-> 00:30:46,230 |you're going to worry in the beginning about getting stopped out all the time. And you're going to do a lot of acrobatics. With your your stop loss, you're
166 |165 |00:30:46,230 ~-~-> 00:30:53,310 |going to move it back when you think it's dropping against you, or raise it up when it's rising back up towards your stop. And you're going to drive yourself
167 |166 |00:30:53,310 ~-~-> 00:31:01,560 |crazy doing that you have to commit to whatever your stop is going to be based on sound money management and risk. And once the trade starts moving in your
168 |167 |00:31:01,560 ~-~-> 00:31:11,910 |favor, take partials off. By doing that not only does it fund you as the trader, but it also reduces the risk. Because every time you take something off, you're
169 |168 |00:31:11,910 ~-~-> 00:31:20,880 |reducing the exposure that your account in your in your mental capital will withstand. So you have to constantly manage not only the trade, but you have to
170 |169 |00:31:20,880 ~-~-> 00:31:31,980 |manage the trader. And it's expectation, your expectation is you put the trade on because you want to be profitable. So what's the best thing that you can do
171 |170 |00:31:32,010 ~-~-> 00:31:41,640 |as a trader, when the trades in profit, take something off, don't be fearful and don't allow greed to say, Oh, I have to hold on for everything. It's all or
172 |171 |00:31:41,640 ~-~-> 00:31:48,930 |nothing. Because I'm going to tell you, Michael, when you do that, the first couple years, you're going to be in some trades. For instance, coffee, you're
173 |172 |00:31:48,930 ~-~-> 00:32:01,740 |going to be holding on to a coffee trade, that's going to move a lot. It's going to move a lot. And $35,000 turns into an $8,000 loss, because you wanted to get
174 |173 |00:32:01,740 ~-~-> 00:32:13,530 |your full target. You have to listen, you have to listen to this. If you don't do these things, Michael, you're going to regret it. Taking partials is the best
175 |174 |00:32:13,530 ~-~-> 00:32:29,130 |thing you're ever going to do. And taking partials reduces risk while paying you ignore unprofitable traders advice on risk. If someone that you read, if someone
176 |175 |00:32:29,130 ~-~-> 00:32:41,100 |that you listen to says anything against what's being said to you right here, I would put a million dollars on them not being a profitable trader. Chances are
177 |176 |00:32:41,130 ~-~-> 00:32:54,120 |they have no idea what it is to be consistent, they probably had hit and miss type results. But consistent. Long term trading results come by way of funding
178 |177 |00:32:54,300 ~-~-> 00:33:04,590 |the positions and funding the trader, or as we say it today, pay the trader. If you don't do those things, there's nothing guaranteed Michael that your trade is
179 |178 |00:33:04,590 ~-~-> 00:33:16,320 |going to hit your target. There's absolutely nothing guaranteeing that and the volatility in today's world, which at the time of this recording, we've seen
180 |179 |00:33:16,320 ~-~-> 00:33:29,190 |some pretty dramatic volatility and your trades, every time you put on one, there's no guarantee that you're going to hit your objective. So you have to get
181 |180 |00:33:29,190 ~-~-> 00:33:39,750 |to the point where you trust yourself and you don't rely on other people's advice about risk because their advice about your risk is free to them. There's
182 |181 |00:33:39,750 ~-~-> 00:33:52,080 |no exposure, and the advice they're giving you probably isn't sound. So stick to what I'm telling you here, commit to it and own it. Your losses are your losses,
183 |182 |00:33:52,350 ~-~-> 00:33:57,150 |your wins are your wins. No one else can take credit for it. And you shouldn't try to share credit.
184 |183 |00:34:05,700 ~-~-> 00:34:20,010 |Whether a series of consecutive losses. Taking losses is normal Michael, it doesn't feel good. It sucks. But unfortunately, there's simply no way around it.
185 |184 |00:34:20,580 ~-~-> 00:34:30,750 |Every trader loses money. Every trader suffers drawdown professional traders manage how much and they understand they don't know how long it's gonna take
186 |185 |00:34:30,750 ~-~-> 00:34:45,060 |before it turns to equity around in other words, the recovery you will lose fortunes. Expect the pain. The faster you can accept this Michael and warm up to
187 |186 |00:34:45,060 ~-~-> 00:34:54,870 |the idea that imperfection is normal. It's absolutely normal. And there's going to be books that you're going to buy. It's going to sound like it's the best
188 |187 |00:34:54,870 ~-~-> 00:35:03,240 |book in the world. You're going to buy courses and it's going to sound like you're going to get riches on told, this isn't a follow on to your account, all
189 |188 |00:35:03,240 ~-~-> 00:35:14,220 |of that stuff is nonsense, you're going to lose money, and you're going to have losing streaks. And the amount of money if we could total all up and look back,
190 |189 |00:35:14,460 ~-~-> 00:35:25,710 |it's enormous. But it didn't kill you. It didn't take you out of the game, it did not defeat you, it beats you up a couple times pretty bad, and your ego is
191 |190 |00:35:25,710 ~-~-> 00:35:39,090 |bruised for? Well. Truth be told, I still feel a little pain from it. But you're going to have to accept the fact that losing streaks do occur. Now, it's been a
192 |191 |00:35:39,090 ~-~-> 00:35:48,720 |long time since I had 10 losses in a row. But you're going to have those. And there's nothing wrong with it, because it helps you number one respect risk.
193 |192 |00:35:49,290 ~-~-> 00:36:01,260 |Because no one is exempt from being wrong, I still get it wrong. And you're going to get it wrong a lot in the beginning, prepare for that. Multiple losses
194 |193 |00:36:01,320 ~-~-> 00:36:12,450 |does not prove it is broken. Your trading method is not decided in terms of effectiveness. If you have a series of losing trades, a series of losing trades
195 |194 |00:36:12,450 ~-~-> 00:36:22,440 |is something that every trading methodology will eventually will eventually plague every methodology. There's there is not one single trader that has not
196 |195 |00:36:22,950 ~-~-> 00:36:32,820 |endured this, it's a normal thing. But when you experience it, and you have to endure it, it feels like it's only you right, Michael, but it's not just you.
197 |196 |00:36:33,480 ~-~-> 00:36:42,180 |Truth is, everyone has it. But the problem is, the people online and the people you read about in their books aren't not really honest with you, they're going
198 |197 |00:36:42,180 ~-~-> 00:36:50,340 |to tell you nothing about their losses, they're not going to say anything about losing money, they're only going to focus on the sweet sugary coated chapters of
199 |198 |00:36:50,340 ~-~-> 00:37:03,090 |their books, that says this is what I got rich with, and you can to stick to the method and risk reduction. When you have your first string of losses, Michael,
200 |199 |00:37:03,090 ~-~-> 00:37:11,130 |you're going to want to skip around and try something new. And that's the reason why you bought all those books because you were looking for the Holy Grail. And
201 |200 |00:37:11,130 ~-~-> 00:37:20,160 |the problem with that is every time you went to a new system, it starts off with modest wins, and you fall in love with it, you think you figured it out, and
202 |201 |00:37:20,160 ~-~-> 00:37:28,350 |then it goes into a tailspin. And you do things the same way that I've outlined in our discussion here. And you'll lose track of what you're doing, and lose
203 |202 |00:37:28,350 ~-~-> 00:37:40,920 |control of yourself. And you enter into a series of losing trades. Your first impulse is to abandon that method and go to something else. And the problem with
204 |203 |00:37:40,920 ~-~-> 00:37:52,770 |that is is you do this dozens of times. Now if I could grab you by the lapels and shake you again, it's simply this stop bouncing around, focus with one thing
205 |204 |00:37:52,770 ~-~-> 00:38:01,740 |in mind, work with a higher timeframe bias, work off of one key level, work off of one market and stay on one side of the marketplace until proven obviously,
206 |205 |00:38:01,740 ~-~-> 00:38:13,110 |that you're on the wrong side. If you manage your risk, don't force the trades and your patient, that alone can be profitable. But you have to stick with the
207 |206 |00:38:13,110 ~-~-> 00:38:25,200 |method. And if you don't reduce the risk, when you take losses, you won't have the ability to stay with the method. The method, eventually it takes six years
208 |207 |00:38:25,200 ~-~-> 00:38:35,640 |for you to figure it out. By the way, six years, you figure out exactly who you are as a trader. And it feels like a lifetime. It feels like you're never going
209 |208 |00:38:35,640 ~-~-> 00:38:48,510 |to get it Michael, I know I know how it feels. And I wish I could go back and just tell you to your face. Suck it up. Just take it because everything changes
210 |209 |00:38:48,540 ~-~-> 00:38:59,220 |in your sixth year, everything changes, it becomes easier, it becomes far less stressful to put the trade on you know exactly what you're looking for, you know
211 |210 |00:38:59,220 ~-~-> 00:39:01,500 |where your stop should be, you had to manage to stop,
212 |211 |00:39:01,680 ~-~-> 00:39:11,970 |you're not over leveraging your account. You're not forcing trades. You grow into yourself and the sixth year. But prior to that sixth year, you're like a
213 |212 |00:39:11,970 ~-~-> 00:39:22,290 |wild cowboy in his gun slang, and you're not fearful of anything. You take on risks that's much larger than you should you trade more times than you should.
214 |213 |00:39:22,500 ~-~-> 00:39:33,570 |And when you have severe drawdown, it doesn't bother you. And that's a problem. You weren't afraid to do anything. And you weren't afraid to get into the
215 |214 |00:39:33,570 ~-~-> 00:39:45,750 |marketplace with huge leverage where one trade could wipe out the account. That's nonsense. And you don't need to do that to do well. But you have to stick
216 |215 |00:39:45,750 ~-~-> 00:39:58,320 |to a method that's very consistent. That will have losses and you manage your risk. You will be correct more than you're incorrect. It doesn't feel like it
217 |216 |00:39:58,320 ~-~-> 00:40:10,560 |now Michael, but you will be And the only way that happens is sticking to the method. sticking to the method, working from the macro down to the micro, and
218 |217 |00:40:10,560 ~-~-> 00:40:20,940 |being willing to admit that you're wrong, and either taking the loss and going home for the day, or changing direction. And in the beginning, it's best if you
219 |218 |00:40:20,940 ~-~-> 00:40:30,900 |just take my advice right now, Michael, and just get out of the marketplace and try not to do the reversal. Because we lose a lot of mind doing that too. Don't
220 |219 |00:40:30,900 ~-~-> 00:40:39,570 |look for others to measure against. You're going to look at other people, other traders, other authors. And you're gonna try to say that you want to be like
221 |220 |00:40:39,570 ~-~-> 00:40:56,760 |them. And everyone else should not be a measuring stick to you. Because to have that stunts, your growth, you're saying that, that person's accomplishments and
222 |221 |00:40:56,790 ~-~-> 00:41:11,400 |accolades. You want them? Why? Focus on the ones that you're going to do yourself, the ones that you are going to achieve those successes and those
223 |222 |00:41:11,400 ~-~-> 00:41:20,700 |failures, because they're stories that are going to be significant and meaningful to you. And should anyone sit down with you that has any interest in
224 |223 |00:41:20,700 ~-~-> 00:41:32,640 |the marketplace. They're going to be very interested to hear what you have to say. You have so many adventures ahead of you, Michael. But so much of the pain
225 |224 |00:41:33,030 ~-~-> 00:41:47,520 |that we endure, was 120% avoidable. So hopefully, you've taken my advice here. And we're going to work towards trying to eliminate some of the pain that we
226 |225 |00:41:47,520 ~-~-> 00:41:58,320 |endure. I can tell you as an older man, I'd greatly appreciate it if you would. And those of you that were listening. I hope this was also very beneficial and
227 |226 |00:41:58,320 ~-~-> 00:42:02,700 |profitable for your learning and development. Until next time, I wish you good luck and good trading.