Hey everybody, it’s Michael Martin. Thanks for being here and thanks for subscribing. I appreciate everybody’s feedback and all the great wishes and it’s good to be here.
It’s good to have a routine. There’s a lot going on in the market that I think I can shed some light on that can help you perform better and or stop making decisions that aren’t in your financial best interest. I want to leave you today with something that I’ve that I picked up in a book by a guy named Alan Ace Greenberg who was chairman of Bear Stearns.
He’s since passed away. He they ran a very good proprietary trading desk. But when I read this concept it it really resonated with me because I like to think about things like how could I apply some of this wisdom to what I’m doing or what I’m advocating or what I’m teaching and he said something along the lines of if the market say you buy McDonald’s on a Tuesday bluest of blue chips, right? It could be AT&T whatever it might be.
Forget the example he used in the book, but I remember it being like it didn’t matter if it was a speculative name or even the bluest of blue chips. If you’re down say you bought a this particular blue chip stock at say 25 bucks and for your position sizing your stop was going to be I don’t know call it 23 his theory was don’t take losers home over the weekend, even if they’re blue chip. So you own McDonald’s if it’s down from where you bought it coming into Friday’s close it trades do not take losers home over the weekend and I thought about that like okay if your analysis was good and it was a blue chip name and I tend to give things you know a trade smaller at the beginning and give it a wide berth, but then I started to think about you know, the again the two sides trading there’s the emotional and psychological like when you have a loser that you take home Friday and I say loser not like loser something that’s just down down 25 cents down 50 cents something that’s well within your risk per at your defined risk parameters.
There’s a little thing that goes on in the back of your mind is the back of your mind. Now you open Monday. You’re like, okay, is this thing going to open strong or why why did it close weaker than when I got in during the week? Is my timing off was my analysis off.
So now you’re using brainpower on something that’s already not making you money and I have found that to be a wonderful thing to kind of shed my skin on and not have to worry about positions that have lost me money that could open lower come Monday. I only want to put my efforts and my thoughts to the things that are working out for me and I’ve always said like the trades that end up being your best trades will likely be the ones that started making you money right away along the lines of like the worst to fill the better of the trade. Why? Because there was a thousand other people who are trying to get inventory right around where you were and if those some of those people were institutions, they’re likely to support the trade in the aftermarket and also throughout the week because they’re probably just starting to build their position and you’re luckily lucky to be there at that time.
So you might be able to do yourself a little bit of favor and not fret, you know, especially if you have anxiety or you beat the hell out of yourself or I have, you know, you you’re not sure. You’re not you don’t have sure footing yet about what you’re doing in trading, even if it’s Bitcoin or something that you might idolize. Don’t fall in love with ideology.
Please. It’ll kill you. If you can puke out the losers, it does wonders for your P&L, but also your emotional P&L because now you don’t have to fret and say, okay, I’m down, you know, 25 cents.
Maybe I had a $1 stop. Suppose it opens a dollar lower again. You need to have an answer to that question that goes back to, you know, Tuesday’s episode.
So to me, I try to keep my head clear about all of that stuff. Now, if I’m trading an option, I kind of have a lot of time on my side. So I don’t kind of fret about that.
If I have an options position, that’s slightly down the proviso being that the option premium is mostly a debit trader in options. If that money goes to zero, it’s a paper cut for me. I am not.
And that’s why I’m, if I find the asymmetry, I get these monster payoffs, but my debit balance isn’t 5%, like a 5% risk unit. Like I was trading futures earlier in my career that has a, that’s different, everything. So, you know, when you think about what you’re doing in your portfolio, and if you look at the names that lost you money, you can go back and look at the charts and say, okay, let me see if what Mike’s saying would make any sense for me.
If I did buy something on a Tuesday and take it home on a, on a Friday, what, how did that trade end up? What’s the percentages of winners over losers, right? You might find some interesting information there too. And I’m just thinking about this right now. You might also be able to employ a time stop because if you bought something on like a Monday or a Tuesday and it didn’t work out by Friday.
Okay. So it stalled momentum wise, like what’s the point of holding it, right? Because it didn’t, it’s not moving in your favor. There’s only three things that can happen when you buy stock long, it goes up, go sideways, go down.
You only make money in one of those scenarios. The end is going sideways. You got opportunity costs.
It’s tying up your capital and buying power. Um, you know, and if it goes down, at least it gives you the courtesy of perhaps stopping you out on your initial protective stop, freeing up that cash for your next best idea. The point being is that you get to organize a hierarchy in your mind about not just your tactics, but your emotional constitution about everything that you’re trying to execute.
Right. But by knowing what your rules are. So this is the kind of stuff that we like to talk about here, because it seems to be the space in the middle that doesn’t get spoken about.
Everyone’s like, you got to use this tactic. You got to drive by X amount of DTE and options and this and that is all super interesting stuff. But how does that relate to you? Like, what is it that you want to do? You need to start your life from the inside out, not respond to the end, you know, be reactive and try to fit in what other people are doing.
You really need to know what you want to do first. What do you want your equity curve to look like? How do you want your days to unfold? Cause you get to plan all that. There’s a lot of great traders out there that I could never emulate and they could smoke me in terms of performance, but I, cause I can’t emulate their behavior.
Their days would have come across as too manic for me. And that’s not a bad thing. They’re not manic people.
I’m not saying it’s just, it’s frenetic. Frenetic is a better word. So I would lose in that race.
I would, and I would concede that because that’s not what I want to do. So you can’t be a little bit of everybody. Michael Marcus, rest his soul, would tell me these kinds of things.
And like, if you try to get the best thing of the four best traders that you know, you’re going to get the worst of, you’re going to get the worst results of all of them. So you really need to develop and carve it out of stone the way you want your days to unfold. And you know, you think you’re like, well, what the market’s not predictable, but your behavior is, right? So don’t lose sight of that fact is that it’s life on life’s terms for sure, but you get to determine, you know, as a speculator, you know, you have the right to not participate, which is a huge edge too.
Right? So anyway, it’s been a good week. I appreciate your feedback. Do you want to listen to something over the weekend? You can get a free copy of the audio book version of the inner voice trading, go to TraderMindset.com, get the free download.
Have a great weekend folks. And I’ll see you Monday.
