Trading was HARD Until I Learned These 3 SIMPLE Concepts transcript

[Music] I was not able to become a consistently profitable Trader until I understood these three concepts that I'm going to share with you in today's episode one of the things that's really frustrating about learning how to trade is that on the one hand it's very easy to get started you can set up an account on your phone or certainly of course on your computer you can set up your charts and your scanners and you can very easily press the buy and sell button and like a lot of beginner Traders I naively jumped into the market thinking that I would find success early on but in my first few years I was the statistic of another failing Trader I kept adding money into my account I would lose it I would add more and I would lose more now you might think that that's crazy why would anyone do that but if you've been trading for a while you know the experience I would have a few green days maybe even a few green weeks or even a green month and I would feel like I was starting to get it I was this close to turning the corner but then inevitably I would have another setback a spiral and I felt like I would take two steps forward and then it was like five steps back and while on the one hand I Was Defeated on the other hand every time I had a couple of steps forward I felt like I I was getting it all I need to do is have more days like this back to back and fewer of the big red days now there's also a blessing and a curse in the market you may have heard me say it before the curse of the market is that like me you could spend years sitting in front of your computer every single day showing up early trading the markets and not making even $10 a day consistent L and it's infuriating cuz you're not trying to get rich you're not trying to drive a Lamborghini or fly in a private jet you're just trying to make a little bit of money1 $20 a day and you can't even do that you feel humiliated you feel so discouraged and frustrated now here's the blessing of the market once you have a strategy that is consistent the only difference between making $10 a day and making a 100 or a th000 is increasing your share size but you won't make even $10 a day consistently until you have a strategy and a set of rules that you follow that you have the discipline to follow every single day now the first concept that I needed to understand in order to become a consistently profitable Trader was that there is no such thing as a strategy that is right 100% of the time I think for me when I came into trading I had a lot of fear I didn't have a lot of money I I was very attached to the money that I had I didn't feel like I could afford to lose it and it was money that I had gotten from my father when he passed away so I had a real emotional attachment to the money I wanted a sure thing I wanted to put my money into the market and you know pull profit out every single day and so I was looking for a strategy that would have basically no risk that would have no loss and unfortunately that's not realistic and so I fell into this habit where I would sort of learn the basics of one strategy sort of get a sense of oh this is this is how one strategy works I would take one trade and if I lost I was like that's it I'm never trading that again and that's a really bad way to approach it because let me just give you for example my strategy right now over the last8 years of trading roughly my accuracy is like 68% it's good it's not great I mean it could be better but 68% is kind of where I'm at so let's just say you sat down and traded my strategy and you took one trade well you'd have a 68% chance that that one trade would be a winner but you'd also have a 32% chance that that one trade would be a loser and it's very possible that that first trade just because of the luck of the draw would be a losing trade and it would be very easy for you to say oh this strategy is garbage it's junk I'm never trading that way again I'm going to just switch to something completely different and what you might end up doing in that moment is basically discounting and writing off a strategy that really does work but we'll have a certain percentage of the time where it just loses and that is okay in in fact and this is something that's really hard for a lot of beginner traders to get their mind around which I think is why so many beginner Traders fail losing is part of succeeding so what do I mean by that well if if I'm wrong 32% of the time is it really wrong to have those losses when in totality those losses are part of a strategy that produces millions of dollars of profit for me it doesn't feel like it is really wrong that's just the percentage of the time where I follow all of the rules but I don't come out with profit on that trade but the strategy is a winning strategy so for a lot of Traders we're looking at each individual trade and we want each individual trade to be a winning trade but that's a very narrow-minded way of looking at things it's tunnel vision and that's going to get you searching for what I would call the holy grail and it doesn't exist there is no strategist right 100% of time in fact the only traders in the market that make money every single day aren't Traders at all but they're the Brokers the broker dealers and I suppose even they occasionally will have a bad day where for whatever reason somehow The Firm loses money I mean we've heard of this happening so it's an illusion to think that there is a strategy out there that will be right 100% of the time which means a really important concept for you to grasp is that loss is not only okay it it is actually part of succeeding so I like to call successful red days days where I may lose money but where I followed all of the rules of my strategy I respected my Max loss on my trades I stopped out when the trade was no longer working I didn't get stubborn burn I didn't average down I didn't hold my losers hoping they would turn around and I didn't following a loss start gambling with my account by jumping from stock to stock to stock hoping that maybe one would make a big move and when you do that you generally are abandoning the criteria that your strategy has set forth for the type of stock that you should be trading so when I think about all the Traders I've known who have failed I'm thinking about and remembering a lot of traders who stumbled upon a strategy that may have been very good but they gave up on it they didn't see it through they didn't trade it for 100 trades and to see what's my total profitability over 100 trades and you know what even if they had let's just say that their profitability over 100 trades maybe for me is 68% but for them was only 50% is that because the strategy doesn't work or is that because they not have not yet mastered the Nuance of the strategy Traders are so quick to abandon in a strategy that doesn't produce profit and to run to something else but these are traders who are flip-flopping they flip from long to short they flip from large caps to small caps to Futures to Forex to cryptocurrency they're just jumping around the market it's almost chasing your tail and I understand where you come from when you're doing that because I did the same thing you're searching for profit you're searching for certainty and you're afraid of loss and if what you're doing is causing loss you don't want to stick through it but I want to encourage you to think about this most Traders lose money we know that that's a fact what are the successful Traders doing the successful Traders find a strategy and they stick with the strategy so you've got to really get comfortable with mastering one strategy I like to say that in trading and no pun intended you don't want to be a jack of all trades and a master of none being a jack of all trades means you know you're so so at a lot of things you're not going to make money in this incredibly competitive and aggressive stock market if you can't be a master of one strategy but if you can Master just one strategy and you find that you can be consistent with that one strategy that can be enough to start making that $10 a day and then once you're doing that you go from 10 to 20 to 50 to 100 to 200 to 500 and so on and then that's when you can start venturing into adding strategy 2 strategy three strategy 4 so for me I would say that my strategy at large is momentum trading I'm a trend-based Trader I don't try to fight the trend I trade with the trend but within that strategy at large are number of subsets of strategies times of day that I trade many of you have heard me talking about my Gap and go strategy where I'm trading stocks that are gapping up but I also have subsets of different patterns that I focus on and each have different degrees of profitability and success and so there are times when the Market's colder that I'm going to say some of those strategies not worth trading and there's other times when the Market's really hot where I'm going to you know sort of fold them back in say I should be trading all of these so as a beginner it starts with just one and having the conviction to stick with that strategy comes from the second important concept so the second important concept is the realization that most people who try to day trade lose money so we have to do a few things with this information first of all we have to understand why they lose doesn't it make sense that if 90% of Traders fail that we should try to understand the mistakes they're making so we don't make the same mistakes I know I want to learn from the mistakes people made ahead of me I want to avoid falling into those same traps you know it it just that's common sense I think it is for me at least so on the one hand I want to think about and try to understand why so many Traders fail now I'm in a unique position where I have people that are sending me messages all day long on in YouTube comments or sending me emails and so I have a really good sense of the reason that Traders fail and the mistakes that they make I'm going to share a few of those here with you right now one of the first mistakes that most beginner Traders make is that they are trading without a strategy they have an absence of a actual strategy so in other words they're doing what I did as a beginner which is a little bit of trial and error a little bit of this a little bit of that kind of jumping from strategy to strategy but they're not even really strategies they're just trading maybe AMC or trading a little GameStop or trading a little Tesla or Nvidia they might be trading kind of the hot stock or the hypee in the market but really it's sort of a buy and let's see what happens type of strategy if you fall into the camp of traders that is currently trading without strategy you should know that that is a leading cause of failure the second leading cause of failure is that a Trader has a strategy but they don't have the discipline to follow the rules of the strategy which I know feels crazy you've got the road map right in front of you all you have to do is follow it and yet what we've learned is that the emotions they're gener erated when we experience the gains and the losses of trading are so great that it's easy to deviate from our predetermined roadmap plan or strategy and so one of the reasons that a lot of these Traders will have a strategy but fail to follow it is because they did not lay a solid foundation by first trading in a simulator you've got to trade in a simulator and you've got to practice the strategy that you're learning because by trading in a simulator Ator you build a track record a track record creates a sense of confidence and of achievement so let's just say for example you're a beginner Trader like me when I got started I had a little bit of beginner's luck not much and then I started losing money I'd have a couple more steps forward and then another five steps back two steps forward five steps back and this was what it was like for me except it was with real money so first of all having this experience in a simulator takes so much pressure off because it's not real you know it there's disappointment and frustration because you're spending time learning how to do this thing but at least you're not losing real money so you go through this experience in the simulator but then you go through what is a very important part of the learning curve which is you go initially from losing money to break even being a break even Trader is really important this is phase one phase one this is phase two phase two of being a break even Trader means that you're starting to understand how to make money but you know every couple of days or weeks or whatever it is you give back what you made it would be easy to discredit phase 2 as not being anything different from phase one you're still not making money but not losing money is actually a huge milestone you're holding your head above water you're treading water and the difference right here between going sideways and beginning to pull away and make progress ultimately is simply having those big red days a little less often they happen they're a little fewer and further between and that for most people is the difference between going sideways and being profitable one of uh my students who's got uh I think it's say 500k badge right now he said something really interesting that there wasn't for him a very specific turning point in his career it was just he said I I started sucking just a little bit less I started having big terrible red days just a little less often and all of a sudden it was like between the red days he would start to have just slightly longer periods of success still had a red day but then just slightly longer periods of success and that right there is where you go into phase three and you're starting to be consistently profitable now this is still happening in the simulator so having phase three in the simulator now it gives you a track record where you've got actual metrics that back up the strategy that you're trading so what you do after having at least I generally would say 6 weeks of consistent profitability in a simulator that's when you flip the switch and you go live with real money and when you you go live with real money you start with really small size five shares 10 shares just tiny size and what you have to do is prove that you can maintain those same metrics and you literally start just with that goal of $10 a day but now it's real money if you have The Misfortune that on your first day with real money you lose you have a track record that you can go back to and that is your source of confidence this is the track record of this is how much I've made I know what I'm doing okay so today was a red day but that's all right so the biggest mistake the beginner Traders make is that rather than setting a solid foundation like this they just jump in naively with real money and I made that same mistake and I want you to know that it's never too late to take a step back and switch to the simulator put your real money account on the Shelf just for a little while humor me do it for a week do it for a month just practice in the simulator see if you can produce the metrics of profitability because if I'm going to be honest if you can't make money consistently in a simulator you really don't have any business putting real money on the line I wish I had understood that when I got started I understand it now so if you want to avoid being part of the 90% of traders who lose money don't trade with real money until you've got a track record of profitability in the simulator so now that you've laid a solid foundation by trading in a simulator before going live when you do go live you are more likely to have the discipline to follow the rules of the strategy because you have all of this data that supports why you need to to follow these rules you may still have the emotional impulse after a loss to deviate from your plan but when you look back at all your metrics you know that when you follow your rules you do well and when you trade with real money but with really small size the emotions are so much smaller than when you trade with big size so what most Traders do who end up finding success is when they transition to real money they're trading with small size and they're slowly increasing size they're doing is because it allows them to go through the process of conditioning themselves to the experience of having loss it's emotional conditioning so you have losses but they're small with 10 shares so the stakes are low okay I lost $3 today it's no big deal I'm not stressing and then the next week they go up to 20 shares then they go up to 50 then they go up to 100 and naturally the profits will get bigger as they're doing that and the losses will get bigger but it's a lot easier to slowly condition yourself up to experience 100 $200 $500 losses that just come out on day one and suddenly be down 500 bucks in 3 minutes when a beginner Trader does that that's the point right there where they start to spiral they go off the rails and next thing you know they're down 3,000 $4,000 $5,000 on the day and the account is gone on day one now as part of this second concept of understanding that 90% of Traders fail we of course want to avoid making the mistakes that all of those Traders make but on the other hand we don't want to just think about the losers we also want to think about the winners what are the 10% Traders doing who are making money that's working for them what's their strategy in fact we want to learn everything we possibly can about traders who are making money consistently because ultimately if you think about it if you were doing everything that they were doing and you had the same disposition you had the same aptitudes you had you know everything was exactly the same you would expect that you would perform well that you wouldn't be a losing Trader and so there's always a gap between what the incredibly Elite Traders are doing and what you're doing and even for me I'm not at the level of other Traders there's still a gap so there's always gaps between Traders but if you can understand sort of the anatomy of what those Traders are doing what their strategy is what the rules are that they follow and what you're doing right now then you can kind of create a list of how to get from A to B so one of the things that I really encourage is for you guys to learn from traders who are proven profitable I will put a link in the description for this video where you can download my small account strategy as a PDF you can learn the rules I follow now if you don't like my strategy you don't have to trade it practice it in a simulator but I just encourage you to learn from someone who's actually proven profitable you can see my audited broker statements are on my website so if you're curious about my profitability it's right there for everyone to see but this is unfortunately when it comes to the day and age of social media a problem where there's a lot of people that talk a big game but they don't have Broker statements to back it up so just make sure if you're going to spend the time learning a strategy from someone whether it's futures or Forex or options or whatever it is that that person that you're learning from is proven profitable if you've done that then you know that they are part of the 10% right without a doubt they're part of the 10% who succeed if the strategy for you is a good match for your risk tolerance for your account size for what you're trying to achieve and you feel like this is someone that you can learn from they're being transparent they want to help you learn then that's someone that you want get really focused in on what are they doing what time a day are they trading how are they choosing what to trade why are they buying where they're buying why are they selling where they're selling if you can really dissect all of that that's going to put you in a really good position that's part of laying a solid foundation now the third concept that I needed to understand before I was able to find success as a Trader is that there is no such thing as a technical indicator that's right 100% at the time just like in concept one there's no such thing as a strategy that's right 100% time the same is true with technical indicators in fact I spent my early years on a hunt for what I called the Holy Grail I felt like Indiana Jones I was looking for this perfect technical indicator that would always be right it would give me the Buy Signal it would give me the sell signal all I had to do was blindly follow it and the reason that I needed that indicator was because I didn't trust myself now that's very interesting I didn't trust myself and it makes sense I shouldn't have trusted myself I didn't have a track record of of success in the simulator I didn't have metrics data historical data to back up that I knew what I was doing I wasn't learning from someone who was proven profitable I was shooting from the hip so it makes sense that I was insecure and that I was searching for the Holy Grail of technical indicators but I've seen a lot of you guys post charts where you've got a million indicators on the chart and so I want to help you kind of understand something that what's more important than indicators what's more important than reading an indicator is your ability to read understand and predict sentiment in the market and this is what I've gotten so good at as a trend based Trader I understand when people are really excited when there's a lot of enthusiasm in the market when we've got something like GameStop or AMC or we've got Nvidia or Tesla I'm happy to trade those when everyone's hyped up about them and everyone is trading it and it's going higher and higher but I need to be able to know when to get while the Going's good and how to not overstay my welcome now if you look at my charts right now you'll see that I I really do have very simple charts I have Candlestick charts simple Japanese Candlestick charts and the indicators that I have I'll just write them down here so you know these are my indicators I I use um EMAs exponential moving averages I use the 9 the 20 and the 200 they're all EMAs that's it those are my indicators that I use on all time frames for moving average averages I use volume weighted average price vwap so number one our EMAs number two is vwap number three I use macd now macd is an oscillator and so when I say oscillator what I mean is that uh it actually oscillates it goes up and down as you can see right here so this is the macd down here at the bottom and it oscillates between a positive and negative right positive and negative right here and this is a really good way of visually picturing Trend so the reason I like it is because it helps me have that kind of um that that double check or that gut check of I think that we're still trending up but let me just check the macd so when I pull up the macd that'll show me very clearly when the trend is Shifting so this is a spot right here where macd crossed over I see that crossover and I recognize okay it's time to step back now if you want to learn more about how I use macd I have separate videos exclusively going into depth of how to use macd in your trading why I use it on the time frames I use it on so on so forth but I really try to keep my indicator simple so I've got my EMAs my vwap my macd and then number four of course um volume bars and I suppose number five you could just say is um the candlesticks themselves I don't know if you would say that's really an indicator but I'll just I'll throw it on there so this is what my charts consist of and that's it so the thing that's really important is that I'm able to see the pattern and the shapes that the candlesticks are creating so for me this is like the most important thing are the actual shapes of the candles because what I understand is that each of these shapes communicate sentiment a lot of beginner Traders struggle with this it's understandable why you struggle with it because learning to read candlesticks and becoming an an expert becoming Pro proficient um at reading Candlestick charts is like learning another language the reason is it's like a visual language where the different shap of the candlesticks that we see each of these candlesticks they communicate sentiment about the market so I'll just do this um in this color but I know very clearly that each of these different Candlestick shapes have different meaning so when I see these in different um you know of course on different charts I understand each one of these and the context behind this candle of what it means so it takes time to be able to learn the subtle language of the markets but for me I don't want to I don't want to allowed my ability to see the candlesticks by putting on a ton of indicators what I really want to be able to do is focus on understanding Trend as momentum Trader I like to buy stocks that are moving higher and I don't like like to trade stocks that are going down I'm not a short seller so I focus on trading stocks that are moving up which means we know that stocks no stock goes straight up like this stocks will climb up and then they'll pull back then they'll climb up and they'll pull back and they'll climb up and they'll pull back and so this is a trending stock so when I'm seeing this right here I need to be able to differentiate that this is a place to buy it's a pullback and it's not the beginning of a reversal back down now my indicators will help me with this but the individual shape of the candlesticks combined with looking at the the the volume bars right here these ultimately are what's telling me whether this is a place that I should be buying for the next leg up or I should be selling now I have another episode um that I've taught called the only cick pattern that you'll ever need this is a great class for those who haven't already watched it where I go into detail about these very specific patterns that I trade during a period of trending price action but ultimately that third concept that I really needed to understand is that indicators are not the end all Beall what I really need to get good at is reading sentiment to be able to predict what the collective you know community of Traders are looking at each day what they're liking is the sentiment strong wrong are people buying is it exuberant or is there fear in the market once you get really good at taking that temperature in the market and understanding when people are buying and when there's excitement versus when people are hesitating and it's slow that's when things really start to connect and I I like to say that for me one of my skills is learning how to lean in and sort of double down when the market is hot and then quickly take my foot off the gas when it starts to cool off some people think that a Trader if you've got historical data well that data tells you these are your metrics these are your analytics you should just always trade with the exact same position size every single day rain or shine no matter what and I would argue that's a bad idea because in a really hot Market doesn't it feel like this is the time if there were ever a time to take more risk to be more aggressive to trade more frequently and on the flip side during a time when the Market's really cold when the Market's really poor isn't that a time to ease off the throttle to cool down to take some risk off the table but that subtle Touch of knowing when to lean in and knowing when to ease off that's something that takes time so experience or educated intuition there's no way to earn it other than sitting here in the chair every single day so for me ultimately it took years before I became consistently profitable but I don't think it would have happened if I wasn't able to fully understand the three concepts I've shared with you today I hope learning them will help you in your trading and as always I encourage you to download my small account strategy PDF and if you want to keep learning from me make sure you hit that Thumbs Up And subscribe the channel for more episodes about trading strategy just like this as always I'll remind you that trading is risky my results aren't typical so manage your risk take it slow and please practice in a simulator before you put real money on the line [Music]