How to get a second chance at a trade

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• 0:01Speaker 00

  What's up, party people? So yeah, Rover went away. Actually, she's sitting right over here. I needed more space and I don't have enough wall space to

• 0:11Speaker 00

  have things dry. The oil takes a long time to dry, even if it gets dry on the top. Anyway,

• 0:19Speaker 00

  today's story is about, you know, your preparation. We talked about simulation and we talked about having a plan. If you miss it, but just like with painting, like the painting starts before any color hits the substrate. In this case, this is paper.

• 0:36Speaker 00

  I have canvases too, they're pain in the ass.

• 0:40Speaker 00

  So when you think about like what it is that you're trying to achieve, when you think about, okay, I have my, my pre breakout strategy. I have my pre-market strategy. You want to ideate in your brain what it is that you're trying to achieve with your trading first and foremost, and then put yourself in that energy of actually having that result, even when you don't know your backside from a hole in the ground. That's going to carry the day. The reason I, you know, did very well in trading and, you know, I'm not taking the same types of risks that I'm, you know, I'm a little older. I'm not taking the same type of risk. I don't have the same, I don't have the same thing to prove. Now I have my energies, you know, set in other areas as well. You know, like painting, for example.

• 1:25Speaker 00

  But at the end of the day, you know, you have to start somewhere and I started with my mindset set on, you know, making it. And I think what I meant by, when I said that to myself, like I'm going to make it, it comes down to seeing myself live a life that's very different from the one that I'm living. And the one that I was living at that period of time was one where there wasn't a lot of extra money. It was basically month to month. So, you know, after I paid my student loans and I'd,

• 1:56Speaker 00

  that was about a thousand a month. And then I had, you know, rent. I knew I needed like two to 500 to put into my trading account. If for no other reason to cover all the commissions that I had to pay to get in and out of trades. I didn't want the commissions to, you know, I didn't want to churn my account to nothing, but I knew I had to protect my capital and that meant paying the commissions, which at the time were insult to injury. So I said, okay, I just resigned myself to say, if I don't trade, I'm not going to learn. We didn't have simulators.

• 2:28Speaker 00

  So I want you to think about this when you start to think about how in the name of God, are you going to pull this off? Before you even start the simulator, just think like, okay, this is the beginning for me. If I put the effort in, I know I will get the results. I don't know when they're coming, but I have to do the work. It's improbable that good things are going to happen. Probably like trying to win the lottery. The odds are just so far against you. Yes, somebody has to win, but at the end of the day, it's just not possible to think about the level of success. And even in that game, success is not about a skill, right? It's randomness. So you want to get out of randomness and have a very robust set of rules that you know you could execute day after day after day.

• 3:13Speaker 00

  And knowing also that there's some days, there's no trades. Now I see the same, I go into YouTube and I see the same videos that you do. Guys like, there was a guy, is it Mighty Trader? Mighty something? He was on my good friend Alex, Be The Trader. Um, he was talking about,

• 3:33Speaker 00

  you know, overcoming, you know, difficulties and do, you know, sometimes making hundreds of trades a day. You know, I, I don't have it in me to do that kind, that much activity, but you find something that's compatible with who you are as a person, right? Two, if you are a scalper, it's entirely possible when you're looking at, because I think some of these places like, doesn't Trading View, they have like 10 second bars or something like this? 10 second bars. I mean, it's not time and sales, but it might as well be, right? So those, those are good people to watch if you want to see how, you know, the other half lives. And there's another reason why the simulation can help you because the shorter timeframe,

• 4:16Speaker 00

  the data that you're looking at, the more random it is. So you can get out of randomness when you start to see how the prices behave at bigger timeframes at higher, you know, key inflection points like new 52 week highs. So if you see something, say the 52 week high is $40, you can go down to one minute bars or 10 second bars and see what's the behavior look like at those prices. Look at depth of market, look at your level two and see, okay, does it look like people are stepping up to acquire more here? Do people have lots of, you know, shorting errors, they, uh, short, short sale orders that they want to put in to fade the move to the breakout to the upside?

• 5:02Speaker 00

  Right? Cause it might be a very violent process there. Of course you could also watch the volume and kind of see like, okay, what kind of size is coming in? Admittedly, when we were starting, it was a lot easier to, to read the tape because you had the scroll and you had the level two and you know, you could see size and there were only eight ways to chop up a dollar. Now with decimalization and 10 thousandths of a cent, it's very difficult to kind of see. You can develop it, but it's, it is very, I think it's harder today. So my, my hat's off to you if you can do it in today's environment.

• 5:36Speaker 00

  But before any of that happens, I want you to, you know, kind of as Steve and Covey would say, begin with the end in mind and start thinking about like, the ecology of what I'm going to do has a lot to do with my success too. Do I want to be, I don't want to say manic because that's kind of condescending, but do I see myself as a very, very active trader risking nickels to make quarters? Nothing wrong with that. It's a five to one payoff. Or is your life set up where you have to get up early, do some stuff in the pre-market because you've got young kids, you also has a half a job, even if you're working from home? It's not practical to think that you can put in, you know, a nine 30 to four o'clock Eastern kind of day of trading. You see what I'm saying?

• 6:16Speaker 00

  So, you know, envision how you want to carve out your day and envision the types of things that you want to spend your time on. I tend to rely on managing a book of stop orders and then using alerts strategically like I spoke about this week to kind of tell me when things are in the neighborhood.

• 6:35Speaker 00

  Cause sometimes it's like when someone pitches you on something, it's like, you know, I didn't think about that. It's an interesting thing. I don't want to say no, but I need more time. I need more information. So, you know, I'm just going to think about it right now. And it might be like moving your house, you know, or when a recruiter calls you and says, hey, if you came over to this firm, you could make 50K more and you'd have a bigger title. You would do X, Y, Z. You might be very comfortable. It might be difficult to move. You might have emotional things going on there.

• 7:06Speaker 00

  So, so it's that kind of situation. So break up your day in a way that you think is going to be conducive to your success. Cause there's, if, you know, if you give me 10 different traders and put them in a room, and I've done this, I've spoken to hundreds of traders, you know, everyone is completely different. Even if they say they're scalpers, they all do it differently. So the goal is for you to find the way, if you want to scalp, what's the best way to scalp for you? Again, go to yesterday's episode and think about the simulator. You can get a lot done.

• 7:40Speaker 00

  You know, especially when you think about missing a trade. I wanted to talk about this again, which I know I talked about on Wednesday. There are times when you don't have, something happens and it's a surprise attack. A news headline comes out.

• 7:55Speaker 00

  Some company initiates coverage on a stock that no one heard about it and it rips. You didn't, you didn't have it on your radar for whatever reason. And it looks like, hey, this actually looks like something that I should be in. It's got the right price. It's the, it's the right kind of catalyst. But there wasn't enough time because you're not like some, there's algorithms that's, that read the headlines and automatically run orders to the market based on keywords. Hard to compete with that, right? It's not really trading as much as it is algorithmic, kind of closer to high frequency trading. Now I'm not saying you can't do it, but in the instances where something like that happens, what you can do is do the playback and say, okay, the thing ripped and now look what happened. It wasn't on my radar, right?

• 8:39Speaker 00

  Cause that was one thing I meant to say on Wednesday. It's like, what happens if you, you know, cause I only talked about the stuff that were on your screens that you didn't take action on quickly enough. Well, what happens if it's not on your screen, but you later come to understand it? You don't want to find yourself chasing there either. So again, you could look at those continuation patterns. And like I said, if you need to get involved intra-day, you could look at the nine period EMA. If you're following something off the daily or the weekly, you know, look more like at the 10 day simple moving average, right? Let it consolidate. Oftentimes in stage two uptrends, you'll see something produce four or five bases, right? Before it kind of gets tired and it might roll over and creates different.

• 9:24Speaker 00

  Sometimes it's difficult to know like what's a base and what's, you know, stage three. I don't think you know stage three until you see stage four happening and the price starting to make lower lows. It's a little, it's a little trickier, but the thing is, is that if that's a strong emotion for you, that's where you can go into the simulator and say, hey, I want to take a look at this chart after the fact and say, let me take a look and see if I did miss a trade, but I knew that there was a lot of action. There was 5X volume, right? Printed. So now there's, there's a footprint, institutional footprint. Where's a good play to, a good way to catch up and get into the name, even if I have to pay higher prices, because at that point it's still a lower risk entry. Right?

• 10:09Speaker 00

  You don't want to buy it at the top, so it might have to pull back. That pullback might, if, you know, if today's, today's not Monday, it's Friday, but say this happens on a Monday, the pullback that you're looking for might not happen until Wednesday and it still might be $2 or $3 higher there. So you have to understand that sometimes the lowest risk entry might be at a higher price. That was a, that was a big learning moment for me. Anyway, great week. I appreciate all your comments. Please, you know, suggest topics if, if I'm not covering them intuitively. I wish you all the best and I'll see you next week.