Follow your creative hunches

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• 0:00Speaker 00

  Hey everybody, Michael Martin. So Tush Tush writes on the YouTube channel, "Michael, do you ever follow your hunches?" All the time, 100% all the time. What I do is, well, let me tell you why first, because you're going to always ask that. I'll tell you how I do it, but I'll tell you why first, because that's usually the first question. The reason why I follow it is because after doing this for going on for almost four decades, I realized that I have millions of observations from reading books and talking to people, trading, research, analysis, chart patterns, multiple timeframes.

• 0:41Speaker 00

  Uh-oh, look what we got here. So I can't underestimate the role of the subconscious in my experience as a human being. So I see a lot, I take in a lot, I memorize a lot, and what I don't know is that the computer in my mind, what is that figuring out for me that I don't have to laboriously do when I'm looking at charts over multiple timeframes, this, that, or the other thing? So I trust that as an instinct now. If you're just starting out, I'd go and treat that with kid gloves, meaning if you do do

• 1:26Speaker 00

  that, try to risk as little as possible. It is true that you could be on to something, but you, hunches could end up costing you money, and I think for beginners, it's better to work and go off of some specifics, meaning specific setups, and get those down, and then follow those in an unwavering kind of manner, so that you can develop the discipline. I've earned the right to kind of wander off the farm a little bit. I also do it in a very regimented way, where I trust my instincts, but what I do it with is I don't do it with any gigantic amount of capital that could do some everlasting

• 2:09Speaker 00

  damage to my account balance. You know, I've scaled a lot of money out of the accounts for various things and other investments over the years to set myself up, so that if some terrible thing happened in the market, I would be bulletproof. You have to do that, too. We can talk about that at another time. But it's important to develop your intuition and make sure that you separate it from your ego. You might be super bright, and there are a few of these people who can see things right away.

• 2:50Speaker 00

  It's very rare, but it's doable, and I'm not a career killer or a dream killer, so I would encourage you to try it, to check it out. The easiest way to do it, especially if you have like, some of these accounts, I think it's Thinkorswim, has a paper trading mode, where you can just click one of the tabs, and all of a sudden, you're no longer trading with real money, you could do paper trade. And I've mentioned before, and I know I'm not the only one to stress that, I don't think traders spend enough time in sim, meaning in simulation mode, paper trading, because the simulators when I started were terrible. They almost didn't exist, so you had to do everything by hand.

• 3:32Speaker 00

  So nowadays, you can do it with real-time data and keep track of how you think you would have done. I would be careful to not think like, "Oh, this is easy, I can see this, I can do this." Let down your guard. Remember from yesterday's episode, I think job number one, whether you're a hell-bent, an eight-digit speculator, trading, you know, single-week DTE options, you know, your main job is to play superior defense and take appropriate risks for the ideas at hand, right? Because really, all a setup is, is an idea, right? It's just, you have to remember, human beings make the charts, not the damn underlying company, right?

• 4:15Speaker 00

  So it's perception, so much of the chart is everybody's perception of what the company should be worth. That's why we were careful to say, when prices go down, it doesn't necessarily mean better value, because you can't say that that fact is true for everybody else who's looking at the chart. Those same people are making the chart, based on how they buy and sell, and the volume, the number of shares or contracts, right? So we like to think lower price means lower market cap, and you don't want to think like, "Oh, the market's pulled back 33%." That's enough. It's unreasonable for it to go down any further. Well, we don't know that ahead of time.

• 4:56Speaker 00

  So what you don't want to do is kind of think like, "What's reasonable?", because you could find out the hard way that the market has enormous buying and selling pressure that you couldn't fathom. Remember, doesn't matter how far the thing is pulled back, wherever you buy, you could always lose 100% of what you put up. So, two, we talked about this in another episode, I don't remember the exact title, but you can look it up. It's like, I think it's called "Don't Fall in Love with Ideology." You know, we don't want to get hung up in belief systems or other things, your strong feelings that you might have about AI or crypto.

• 5:34Speaker 00

  I appreciate everybody's brain power, and I always try to approach the markets that, you know, I'm an idiot, what am I going to know? But what I've lived through, and like, what a lot of people have lived through from, say, 1995 to 2000, was that the world of investing was a very, very different place. Technology as an asset class has now arrived on Plymouth Rock. Before that, there wasn't much technology, there was IBM, and then maybe going back, there was like, what was then called Apple Computer, which basically had one machine. The Clone Wars hadn't even started yet.

• 6:18Speaker 00

  So when you think about the history of trading, this technology stuff is really new. It's 25 years old, for the most part, maybe 30 years, which probably seems like a long time, but it's relatively new in the grand scheme of things, right? So much so that you very rarely, everyone's always talking about opportunity, because they have to make your trading screens look like a Vegas slot machine. If you didn't think there was opportunity, you'd never take chances, right? Very rarely do you have people talking about blue-chip stocks anymore, right? Even the Dow components. When do they get mentioned? Earnings season. So this gives me a flashing yellow light on people's perceptions out there.

• 7:00Speaker 00

  Now, you might consider something similar, and that's why, you know, when someone says, "Hey, do you ever follow your hunches?", you know, I absolutely do. I don't, I don't, what I don't do is size up, thinking that I'm on to something. I trust my instincts, and I honor that by putting some risk on, because it could be the beginning of something that I hadn't thought about doing myself, right? So I know that the question comes up, and it says, you know, "Trade your system, not your feelings," but I think a good system developer is going to code rules and trade chart patterns that take your feelings into account. It's very difficult to suppress your feelings, right?

• 7:45Speaker 00

  Psychology books are full of issues of people trying to suppress their feelings with food or sex, or alcohol, or drugs, or this and that. So I would encourage you to honor your feelings, just have really good risk management, because it's okay to be scared, but not so much that you don't put on any risk, because then you could have too little risk, and you'll never hit your financial goals. In our coaching, one of the first things that we talk about is, what is the goal? What do you want your money to do for you? I'm not the type of trader who wants to show up and be like, "Well, I'm just going to take this trade, I'll take this trade, and then whatever the market gives me, I'll deal with that." It was much more intentional, like, I needed to grow my money fivefold when I started, because I had no breathing room, right?

• 8:27Speaker 00

  I had 5K back in the day, which is like 13,000 now, and so I needed to get some breathing room. So I needed to find a few things that could really haul ass and move and get me to a spot where, again, I had a buffer, so that if I did take a loss, it wouldn't put me out of business. So, you know, the goal is to develop your instincts, but then also put your, you know, make sure that your trading rules take into account, you know, also your sense of greed, right? If you trade too big, you might be in for a big banana peel, in that the market goes the other way first and knocks you out before you're going to catch the big move.

• 9:12Speaker 00

  So how you think and how you feel, to me, are two different things, obviously, but when you feel that your inner voice is whispering to you, you want to consider what that could mean. So give yourself a shot, believe in yourself, but do it in a way that would limit the damage in the event that, you know, you were looking at a cloud pattern that was going to be gone in, say, 30 seconds. I don't think there's anything wrong with that. However, they say a short list is better than a good, long memory, and I've got all my notebooks close to make sure I can jot down my ideas and then keep track of when

• 9:56Speaker 00

  am I taking those kind of flyers, if you will, and putting like, what did I see, what did I think was going to happen, where did it come from, why? I try to be as detailed as possible, so that this way, in a month, when I don't even remember putting on the damn trade, I can go back and say, "Okay, this is the second or the third time." If I have a lot of content that I've written down at that moment of time, I might be able to model something and say, "Huh." You know, maybe it's looking at stocks two months before earnings announcements, there's a certain type of behavior that you pick up, it's totally doable, and now with AI, you can have the computer actually help you make sense of all of that. Anyway, if you're new here, please like and subscribe.

• 10:37Speaker 00

  If you go to TraderMindset.com, you can get a free copy of the Inner Voice Trading audiobook. Thanks for everything, and I'll see you tomorrow.