Hey everybody, it’s Michael Martin. Thank you for being here. So, got a comment.
Actually it was via email, but it was a comment on the video via email. It talked about, you know, you seem to be harping, right, that’s an interesting word, harping, about preparation all the time. You know, can I do my preparation in the morning? And I’m like, absolutely you can.
I know a lot of guys that that’s in fact what they do, because they’re day traders and they’re scalpers. They don’t know what they’re going to be doing the night before. I mean, that wouldn’t work for me.
I’d have a thousand panic attacks to not have some level of preparation done. And I’ll tell you an interesting story about that in a moment. I think in my humble opinion, and it might differ from trader to trader, that preparation itself leads to confidence.
Because you have a plan. Now, it could be flawed. It could be just evolving.
You might not know who you are as a trader, but you have to start somewhere, right? This was one of my strengths was like, okay, well, I know how to run a business, so I know how to plan what my day is going to look like. Now, the execution part might be completely scattered from what I thought was going to have happen. But the thing is, like I’ve said, behavior predicts where you end up in life.
It’s okay to not be able to predict certain things, but I think you need to have a plan or some level of preparation kind of coming into the day. So what’s one thing that you could know, even if you’re a mad scalper or a day trader? Well, you could look at your equity curve and then reconsider what the best risk unit should be for you for this particular week or a couple of days. That’s something that you can meditate on and get comfortable with ahead of time, right? Especially if you’re in a bit of a losing streak, like what have you done in the last four trades? Maybe you want to cut your position size just as a gesture of humility and get back in the groove, or wait for the market to get back in a sense that, in a way that’s, like I’ve said, amenable to how you trade so that you don’t take bigger losses, because it could be evidence that the market has turned, or the nature of the market is changing right under your feet.
So that to me, that kind of preparation can be done. Two, I think with earnings, you can certainly create a list of the names that you’re interested in that have upcoming announcements, right? And know, is it going to be the morning of, or is it going to be after the close? And then what are you going to do positions-wise coming into that? Me, myself, I am not typically somebody who puts a lot of risk on within, say, two weeks of earnings. Unless the chart just looks like a perfect kind of setup, maybe, but it’s just, to me, it creates a gamble.
Now, of course, you can backtest all these types of things if that would make you more comfortable. In my experience, most people aren’t doing the backtest. And I talked about that yesterday in about echoes of 2000 and thinking like the preparation doesn’t matter because everything in the sector that I like is going up, so I can just, it’s like fishing for blue fish in Long Island Sound.
The things, when they’re hungry, they’ll bite a hook with no bait on it. And so there are moments like that when trading is like that where you kind of can’t miss, but you still have to have the clarity of thought to know like that’s an interesting moment of time, but it doesn’t last forever. And then you need to know when it’s time to pardon the expression, fish or cut bait.
So I think the key point to when I harp on, harping isn’t like nagging people. I’m just saying the more prepared you are, I think the greater success you could possibly have because you’re ready for whatever happens, right? And that can be prepared to have your watch list. Like for the earnings announcements that are coming up, you can kind of see how is the stock behaving coming up to the actual day.
That to me is a form of preparation, you see? So there’s a way to kind of trade earnings season, the pre-announcement and then the post-announcement part. To me, that’s all goes towards preparation. Like know your markets, know your setups, know what you’re doing and understand the probabilities that you’re dealing with, potentials for upgrades and downgrades or other announcements that might come from the company.
I can remember having stock and sitting there thinking like, hey, I own really blue chip names and we’re coming into earnings and like two to four weeks before the earnings, the company kind of pre-releases and says, we’re not gonna make it. We’re not gonna make our numbers this month. Now you could say that that’s a great gesture of openness, but man, like what can you do to prepare for something like that? So these are the types of things that are like surprise attacks that you don’t know what the company’s gonna do.
And when you think you’re like, man, I think they’re gonna beat earnings this period. To me, that’s kind of hokey. I don’t think people have the sense of understanding that they actually do to predict where the earnings are gonna come in.
It’s guesswork, it’s hunches, I get it. You can kind of trust them, but you have to cut your position sizes in such a way that, don’t become overconfident, I guess, is what I’m talking about. The goal about preparation is to have you examine what actually exists, like what has actually gone down.
And it marries your behavior and your equity curve. So if you have your business plan written and you’ve got your equity curve, you’re in a really good spot to know like what you have to do day after day after day. And you can kind of learn to teach yourself what all those things and how those attributes, what’s the key, like in marketing, they call it a key performance indicator.
What is a key KPI that actually helps you drive your own revenue, your own P&L, right? So this is what I did, because again, I didn’t have any other resources, so it had to be kind of lean and mean. Nowadays, there’s so much out there, it can be a distraction. You don’t know what to follow, right? It’s like what Steve Martin said about study and philosophy in college.
He’s like, you could study all these philosophies and understand someone else’s just enough to screw your own philosophy up for the rest of your life. So you kind of have to design it with you in mind in such a way that it works also for what your day looks like. Like if you’re trying to trade, but also work a job, whether it’s at an office or it’s remotely, you might only have a certain window.
You might have a certain window of time that you have to make everything work. So to me, I would kind of prepare for that window. Some of you might be getting up and trading the early market into the open, especially if you’re in California, because the stock market, there’s a pre-market that starts at like five-ish or something, six, and then it rock and rolls and opens.
The opening bell is technically at 6.30. There’s futures that open beforehand, but if you know that you have to be at your desk by 8, 8.30, nine o’clock Pacific time, so you have this window of time in the morning, I think you can get a lot of preparation the night before and kind of see like, okay, how are the markets acting if I’m trading stock indices? What am I gonna do if the market continues to weaken and blah, blah, blah? So I just think at the end of the day, the more you can prepare for, the more you’ll be ready to take an action that’s best suited for you, right? Some things you’re gonna have to learn on the fly for sure, but when I was most prepared, it also didn’t psych me out. I’m like, okay, if the stock goes to here, here’s what I’m gonna do. If it goes over here, here’s what I’m gonna do.
If it goes over here, here’s where I’m gonna add. If it goes way up over here, here’s where I’m gonna sell a certain percent, up to 100% of my inventory to manage the risk, even taking into account the expenses, which at the early part of my career were very, very expensive. So I just like the idea of preparedness and the preparedness leading to confidence because here’s what I’ve learned from having been a manager on Wall Street and having been a financial advisor on Wall Street and having been a trader and a money manager is that if you take a person with just average intelligence, but you can infuse that person with confidence, they’re gonna achieve great things in their lives.
Their achievements might not mean big, big achievements to everybody, but the most important thing is that it’s big for you. Then you get to grow from there and kind of say, okay, that was my first goal, which was a big stretch goal for me. It scared me and now I know I hit it.
Now I have to set my next goal that I don’t even know how I’m gonna do it, which is kind of the whole point. Your goals have to be things that you don’t know how to do. Otherwise, what’s the point of it? It’s not a goal.
You know how to go buy stuff. You know how to acquire cars. You know how to buy new fancy shoes and sneakers.
That’s not really goals. Those are tasks. Anyway, those are my thoughts on it.
It’s why I do it because I don’t know, as I sit here, I don’t know who’s watching and what resources you have. I don’t know what, some of you might have great ability, others, then the rest of you might be tinkerers and it’s gonna take you a while grinding it out. So I’m like, okay, if you can be prepared, it’ll lead to higher confidence.
Higher confidence across the board is gonna be great for the community because everyone’s gonna do better. When you have confidence in yourself, you kind of become unstoppable, which is really the whole point of why I keep saying be prepared, okay? That’s the heart of the matter. It’s a great question, great topic.
Thank you very much and I’ll see you tomorrow.
