Iteration is your key to discovery

0:00Everybody, so as a follow up to yesterday's episode, I think, you know, trading is experiential. So one of the things that you can do to develop your own style is to actually iterate, right? You have to keep doing it. When I look at, you know, different trading styles and different types of painters, if you look at the early works of, say, Pablo Picasso or even, you know, Keith Herring, Jean-Michel Basquiat, and even Jackson Pollock, their early works looks nothing like what they became known for in many ways. You know, after Picasso went through his cubist, you know, area or career, if you will, or period is a better word, right? He has a very distinct style that you know, but if you look at his early work, right? It's very, very different stylistically, too, if you think about how much art he created

1:02in terms of drawing, painting, and sculpture, as great as he is, and I'm a big fan. I've seen a lot of his work. I was just in MoMA a couple of weeks ago in New York City, and I was looking at a girl in the mirror, which is as good as anything he's ever done. There's a lot of also Picasso in the Metropolitan Museum of Art on Fifth Avenue. He had to develop his own style through iteration, right? Jean-Michel probably is the closest one, but his themes and the way he expressed it kind of evolved. Keith was always a drawer. That's how I looked at Keith Herring. He was always a guy who really drew on Tarpilin with either a paintbrush or using a marker type of a deal. But I always looked at him as someone who really drew a lot, and his style evolved as well. If you look at his early work, it wasn't until he was even at SVA that he got his distinctive

2:06style. How did that happen? It's a massive amounts of iteration, and that iteration isn't a mistake. It's developmental, right? So although I kind of talked about this yesterday, today I want to talk about the emotional side of it like you have to be able to try and fail. So make sure you're not betting that much because it's the experience of doing this where you're going to find your own unique trading style. It's going to come that way. Trust me when I tell you like, you just have to start the process. Don't sweat the details, bet small. Because once you figure out the process with that grit and determination, that's where you're going to start to hit your stride. And then once you've done, I don't know, 20 to 50 trades, you can start to scale up a little bit and risk a little bit more. Then once you get that down, that becomes your money printing machine. That's your cash register. Then you can say, okay, let me see if there's a B setup that maybe is only going to have 30% accuracy, but a 3 to 1 payoff. Where I might not have the same type of bet size as my A setup or whatever my top setup,

3:10you can call it whatever you want. It doesn't matter if you use numbers or letters. But get in the habit of doing the practice. Now if money's tight for you and you don't have the money and you're working through one of these funding accounts or these funding trading challenges, I don't know what they're called anymore, I would encourage you to do as much paper trading as you possibly can. But take it seriously, like do your work the night before. Right because even though the list is going to change, it does something to your psychology. And I still do it. Right now as I'm recording this, it's 8, 10 at the evening. And I have to do these videos now because I just have so much going on. And if I don't put the time in now, they're not going to get done. So the iteration is what's key. What you're trying to do is marry and conjugate is a better word. Just like you're learning a foreign language, you're trying to conjugate your emotional constitution, which includes your emotional intelligence, your trading psychology with what you're trying to endeavor as a trader, which means what's the system or the setup

4:14that you're trying to trade. The one shortfall that happens for everybody who's trying to sell a system to you is that they don't take into account that even though you can look over their shoulder and watch them take 10K to 150 million, there's no guarantee that you're going to have the psychology to be able to pull that off even if you can watch them do it. So I don't sell trading rules. First of all, you can get most of them for free on the internet. You have to pay somebody three to five K for them. Right? The key part is to marry who you are as a person, right? Compatibility. You have to have that compatibility with what you're trying to do. That's where my success as a coach comes in is helping you remove things that are inefficient and add things that can amplify, right? It's chemistry. You have things that accelerate a chemical reaction or they act as buffers. That's what I do. I'm kind of an HGH kind of a deal for, you know, your trading. And that's why I create these videos because I believe this is the missing part to most

5:19training programs. And if they, here's the problem, right? If I just opened an ice cream shop and I said, I could probably do well if I just had chocolate or some variation of chocolate. But you know, there are some people who just don't like chocolate. Now we can never be friends, but just kidding. But they leave out a big part because if they said to you, let it listen, in order for you to become this type of a position trader, where you're going to add two or three or four risk units, be fully loaded and then take that risk home overnight and over the weekend, people be like, wait a second, I'm not ready for that. But that's a key component to those types of trading for those particular types of trading systems, you know, trend following systems, position trading type of models. They require you to take big risk overnight. You might not be ready for that. Even though the returns look compelling, trust me, when I tell you that risk and reward go together, but the risk isn't just the financial risk.

6:20It's the emotional stuff that you have to go through. And that's where I had the upheavals, was the emotional growth. When I knew like my capital was limited and you know, I had to take risk home overnight because that was the only choice that I had for that period of time. Like MJ wrote a comment the other day about, you know, the market environments, you know, whereas I had eighths and quarters, I had, you know, I could read the tape a lot better than you can today. But I also had high commissions. Nowadays you have no commissions, you have decimalization, so super tied spreads, but you have high frequency trading, quote stuffing, spoofing and all that other kind of bullshit that you have to deal with, right? So it doesn't matter when you learn to trade, there's going to always be something to overcome. Now guess what? Anybody including someone who's starting to trade for the very first time today and me, we're all facing the same in market environment.

7:23We all have those hurdles to have to overcome and to find a way to make money with the current environment. So over time by definition, you're going to have to figure this out. It's not going to go away and then it's going to change. Victor used to say like the markets are always trying to morph and to kill you to take your money, right? I interviewed, like I said, a good friend of mine, Jared Dillion, who wrote a new book called The Awesome Portfolios coming out on September 8th. He says, quote, in the book, the volatility makes people do stupid things with their money. So all of that stuff is universal. And I think it sticks with every particular trader over long periods of time. And you find new and improved ways to have to deal with those types of realities in the marketplace. And they're things that are omnipresent and they do change over time.

8:25They do evolve. They do get to a point where you're going to have to be aware of it. You'll be mindful of that. And then kind of change your position sizing to take into account what happens with volatility. But don't be afraid to take chances, right? You have to want to take risk. That's the key part to all of this stuff is that you have to want to take the risk. You want to have to take chances. You want to have to win at this game. It is a bit of a challenge. It's kind of you against everybody else. But I know like losing money or losing losing on a trade or being wrong with your analysis, right? It doesn't say anything about who you are as a person, right? It doesn't say anything about your level of intelligence or what have you. It just means that there might be one component to your trading that you need to focus on to sum it all up, right? Because when you think about what are the pieces that go into a trading, let's do this together

9:26off the top of our heads. You somehow have to screen, right? Now I tend to do all that the night before because I want the mental edge of knowing that I've done some preparation that gives me confidence. I might not use any of those names and the list might change by the time I wake up in the morning. But I go to bed at night saying, I've put the work in, I've made an intentional effort towards my trading career. I'll double check the list in the morning and I'll see if I can't add something else or maybe even remove something that looked good just the night before but things happened overnight. You see? So we have the screening part. Then we're like, okay, what's your risk unit? That should probably stay pretty consistent over time regardless of what happens. What's your entry rule or setup? Is it an opening range breakout? Is it a late bloomer kind of a thing? Do you trade the lunchtime breakout? Right? Or do you fade that move coming into the clothes like there's any number of things that you could trade across the hours of the day? Right?

10:26Then once you're in the trade, you need to have a trade management rule. Okay? When do you adjust your protective stop up? Because there's a couple of parts in the trade management. It's like, okay, I have my risk unit. Is it my risk on risk off? Do I always put on like what's an optimal unit and then remove it? Or do I put on a smaller risk unit and then look to both raise my protective stop up but then add another smaller piece of risk and kind of pyramid and add to my winners as the instrument starts to advance kind of like as a starter piece. Right? And then how do I adjust my stops throughout the day? How do I, where do I put my stop O in overnight? That kind of a deal. How much risk do I take home? What's reasonable for my capital base? You see? And then as it becomes time, when do I know that there's a reversal when the move is definitively over? Right? There's another, there's a number of ways that you can look at reversals. Now the intraday players are looking at, you know, a close on the one, two or three minute

11:27bar, say below a nine minute EMA. But for longer term players, the 90 MA doesn't even show up on their screen. It's much, much more structural in terms of looking at the daily bar. Does it, the thing consistently make intraday new highs and close in the top half of the candle? Right? Because even though there might be dips and doodles throughout the day, there's still a campaign going on. And I think for all of us, one of the things that we can benefit from is knowing that, look, we're going to be the mice trying to tap dance in between the feet of the elephants, who are the elephants, who are those are the big institutions who might find the right to find themselves under, under capitalized in certain names when the good fundamentals come out. So our job then is to get as fully loaded as we possibly can in front of those people because that's when they all start to buy, there could be hundreds of ETFs or mutual funds and or hedge funds that need to acquire tens of millions of shares. And all that buying of those tens of millions of shares is going to be the win that they

12:28put in your sales that are going to help pay you. So you can think about this philosophically, do you want to wait to see if that happens like just for one day and then make it and take it and look to try to replicate that the next day or do you understand that when these institutions go on a buying spree, they're not just going shopping for one day. It might take all of them two to four weeks to get their buying situated to their optimum levels in which case you can have a peace on for quite a while. Right? And if you go back to the last market wizard's book, some of these guys were, I think it's the sweetest guy. He has, I think it's more of a finished name, but Christian, he was trailing with a 10 or 20 day, 20 day, a moving average to use that as his exit. So if that scares you, go back to Monday's lesson and find a way to do the thing that you don't want to do, take risk home overnight because you can take one share home overnight.

13:29You might think that it doesn't make any sense because it's a masculating, but to me, it's more important to build that muscle because now it's a skill that you have. That's a huge asset that's another arrow in your quiver. And once you get there, you can scale it and get comfortable with five shares. Right? Because no one cares what the number is. It's only what's right for you. Love yourself through the process, but do it, do it and fall in love with that. Don't love with the suck because that's, you know, like Jocco says, Jocco something's not working. What do you say? Good. It's perfect. You're going to grow. You're going to grow as a person. Be creative. Figure it out. See, I know you can do it. Right? I know you can do it because I came out of nowhere as a working class, a dog. And I made this happen for myself just simply because I could see myself doing it. And I could envision myself being a success. And that vision, even when I had no evidence that I would be a success, is really what

14:29carried the day. I was like, listen, as long as I don't quit, I come back tomorrow. I'm still in the game. Rule number one, I can't blow up. So that was a real concern. But it was the persistence. It's like, I'm going to figure this out. And if it takes me a hundred years and having water drip on the stone to crack the thing in half, like that's what I'm going to do. I don't necessarily care when I'm a success. And I don't necessarily care how it happens. I just know it's coming. And I have to persist. I can't quit. So I had to put on bed sizes that I know I could withstand and know that I could, you know, stick with over a longer period of time. And I know that you can do that too. I know it's hard to believe like, if I can do it, you can do it. That's kind of an empty thing. But when you think about the calculus to it all, it started with the simple fact that I had a belief in myself. I believe that I could do it. And that's something that you could make your mind up on right now. Just believe that you can do it. It doesn't matter how it happens or when it happens. That's all your mind-deafing with yourself.

15:31You don't need to know that. You just have to have faith that this is figure-outable. There's too many people that are timing the market. There are too many people who are great scalpers. There are too many people who are great swing traders. So you just have to find the one that's most compatible for your makeup and where you are psychologically right now. That doesn't mean you're going to be pigeon-told there because you can grow as a person and you probably will. You might have capital constraints. That's just right now. It doesn't mean forever. So love yourself through it and just remember if it sucks, good. Keep rocking. Keep pushing because you only lose when you quit. So don't quit on yourself. You got this. All right? Happy Thursday, everybody. I'll see you tomorrow.