Best tool to scale

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• 0:01Speaker 00

  How's it going? Happy Friday. So I was gonna talk about adding to winners, but I made a bold-faced lie to you because I don't want to talk about that. What I do want to talk about is something that's much more important, and we can get to adding to winners, which is a style, and it's a personality type, right? As much as anything else. You find that if you trade long enough, you realize that your trading is really a reflection of your personality. So don't be an asshole. I'm just kidding. So I get a lot of questions about, when should I scale up, right? Especially, it's a guy thing. I'm gonna trade bigger. And I think this patterned day trading rule, like taking out the 20, I think it's a mistake. I think, you know, and it's timed perfectly for like a market-type top, right?

• 0:44Speaker 00

  You gotta build trillion dollars in margin balance. Like, I don't know who's trading on margin today, but I ain't. So the thing that can help you know, or have some, because there's nothing that's certain. We're always dealing with probabilistic outcomes and uncertainty. That's what makes it fun. And that's what gives you the unlimited upside. If you went and took a job for 180K, that's good money. You could probably survive a long time on that. But every day's gonna look the same. There's no real shock to, you're not gonna wake up and have it be 500K. Your bonuses are probably gonna be a fraction or some percentage of what you're earning in salary. Nothing wrong with it. But most companies have like,

• 1:26Speaker 00

  they're like, okay, your payroll E6, so here's your salary and here's your bonus range. I'm like, what? That would never work for me. As you can imagine, I'm kind of a tough dog to keep on the porch. So at the end of the day, the thing that can give you insight on yourself, right? Because self-knowledge, to me, is probably more important than what you actually know about trading, is looking at your equity curve. What kind of drawdowns and pullbacks percentage-wise have you seen? Can you visualize over the days? And then kind of do it as a line chart and think about, okay, would I buy myself here? Am I breaking out? Or am I breaking down?

• 2:10Speaker 00

  And using that chart to say like, here's where I need to start cutting my positions. I need to cut my frequency. Or, man, my equity is going geometric. Now I need to press. That's the best way to tell. Look at your results. And I'm a visual learner, so I kind of need that myself. Certainly, I can hear things. I've been to a million lectures. I read books a lot. At the end of the day, to me, that's the most objective way is to just chart your progress or not. Because it's all good, right? There's nothing bad about an equity chart that has a negative slope. It just tells you that what you've been doing isn't working. Good, now you could eliminate that, right? That's what Chaco says. Good, might come down 50%. Good, now you know what not to do. You know, it isn't fun.

• 2:55Speaker 00

  We've all been there. So I think, you know, if I have any genuine response to that, it's more like you could learn, and that's the thrust of a lot of the videos and the content that I create, is I'm trying to get you to help you teach yourself. Yeah, and sure, if you're stuck, we can think about working together. But at the end of the day, I think a lot of this is kind of self-explanatory, where, first of all, if you need a psychologist, you're in the wrong business, right? Get out of trading. Two, it's not that sophisticated. Like, here's what I intended to do, right? Here's what happened. Here's my assessment. Was it me? Did I follow my rules, right? Did I renegotiate my stops because I was within 50 cents or I was going to get knocked out? And I'm blinded by the ideology of the story

• 3:39Speaker 00

  that I just got to stay in it because I don't want to miss out. I don't want to sell now at the bottom and have it rally in my face now that I opened my mouth about how much I love Bitcoin or whatever it might be, right? So that has nothing to do with trading. That's all about ego and all that nonsense, right? So just keep your mouth shut. Like, first of all, no one cares how smart you are. Certainly, the market doesn't. You know, I found that out a long time, and I was very well-educated. I'm like, man, I thought this should be an asset. But at the end of the day, it's like, if you're not a good person, who cares how smart you are, right? And then, two, like, what are you using all your brightness for? So I think your equity curve is the best governor, right? And you could think about it in terms of ranges.

• 4:24Speaker 00

  Like, okay, my equity ran up, and now I've kind of plateaued. Why is that? Am I doing something different? Or am I not quicker to change the asset class that I'm trading?

• 4:35Speaker 00

  Now, for some of you, you might have an A trade, a B setup, a C setup, a D setup. There's no way in hell. It's like dating four girls at the same time. I can barely handle one. I, I, so I don't think, if I can't see five to one, that's my A setup. If I don't see it, and like, why am I putting a trade on? What is it that I want? What's the outcome that I want? Do I want to be right? I've been right enough where I've gotten that, I've exercised that demon. Right? I've exercised that demon. I don't care about being right. I want to know that for the money that I'm putting up, that the odds are skewed in my favor, so that even if I become an idiot, which I could certainly do, and I win only one in five times, I'm still gonna, you know, make money.

• 5:19Speaker 00

  And although it won't be sharp, the slope of my equity curve should still be up. Right? So that's what I start, that's how my mind works. When I start to think like, should I scale up or should I scale down? It's mostly because people have small account sizes, and so they feel emasculated. So I would say, don't bring that bullshit into your trading. Fix that outside, right? You don't have to worry about that. Everyone started small. In fact, let me be humble here. I started with, well, it was 5K then, so it's 13K. That's what I started in today's dollars, 13K. Some of you watching might have leagues beyond that. That's just where it was at.

• 6:02Speaker 00

  I know, but I didn't have, you know, I didn't have a lot of debt, and I didn't buy shit I didn't need. And, you know, that kept me overall in a very financially sound space, right? So, you know, that, that's the Johnny McGory there. I think, you know, use your equity curve to kind of be your own coach and say, okay, would, would, if you looked at this equity curve of, say it was another trader, is this someone that you would allocate to? Or what advice would you give that person? Because if the thing's pointing down, that's not the time to scale up. You only press when things are good, and these are kind of hard markets, right? So, at any rate, I thank you for all your comments.

• 6:47Speaker 00

  Please keep the emails and comments coming. I'll try to get to everything as fast as possible. If you haven't already gotten a copy of the audiobook version of The Inner Voice of Trading, I'm giving it away for free. Go to tradermindset.com. Thanks very much for being here, folks. I'll see you Monday.