Trading Psychology Tips With Tim Grittani


– Thank you all for being here,
and I say this every year, but I love meeting everybody in person. It’s so great to get out
from behind the screen names, and just see faces. And this event really
energizes me every year. Today I wanna talk to
everyone about two things that I get questions about quite a bit. Tracking setups, which I
think is a big edge for me. And also trading psychology tips. Because I think the mental side of trading is one of the biggest challenges. Before I get into that, there is one thing that I need
to talk to everyone about. And that is a person that
I call Nigerian Timbertoni. And I call him that, because
someone sent me a screen shot, of a Facebook Messenger conversation, where they were talking to
an account named Timbertoni, and it had my photo, and
the location was Nigeria. And this has been a big problem in the trading community lately. Where there is a scammer, or scammers, who are making fake accounts of myself, Tim Sykes, Dux, other big traders, and they’re reaching out to people trying to scam them out of money. Saying you could either wire me money, and I’ll trade your account for you, and I promise you X returns, or I’ll mentor you, and for mentoring you, just send me this money. And a lot of the times,
the key tip-off word here, is they say, send it to my Bitcoin wallet, which none of us will ever say. So, I just want to tell
everybody be really careful who you’re talking to. I don’t do any private social
media messaging at all. I mean, this happens on
Facebook, Instagram, Twitter. I don’t do any of that. I can’t speak for Dux, or
Sykes, or the other big traders, but I can tell you that
none of us will ever say, send us a private wire transfer. For any reason. If you are interested in our services, our products, any of that,
go to our main websites. But don’t ever send
Bitcoin or a wire transfer to someone’s personal account. I just really want to
make sure that nobody else gets scammed by that. So now that that is out of the way, I will get into tracking setups first. And tracking setups, let me just start from square one. What do I think about when
I want to track a new setup? The first thing I need, is
I need very clear criteria. What does the stock have to do to qualify under a specific setup? And I have names for my setups. Over-extended, gap down, multi-day breakout, parabolic short. You know, all of those
things have their own sets of very specific criteria. And I decided it would be
a good exercise to start tracking something that I had heard about pretty much my entire trading career that I’d never really
put numbers to before. The idea that if a stock has
a big, strong first green day, it’s likely to gap up the second day. I’ve never really looked
in depth into that, and I was curious what are the
odds that you get that gap up What are the odds that
it will be profitable? So let’s talk about the criteria
that I put out for that. And these are just my criteria. These aren’t right or wrong criteria, there just what I settled on. So, I only wanted to
do it for listed stock. There’s differences between
listed and OTC stocks, and I just decided that listed stocks are what I wanted to
track for this example. It had to be day one of the
move, that’s what I’m tracking. I don’t really want to look at
day two, day three, day four, because the further into the run it is, that probably changes the odds
as to whether it gaps or not. So for now, just day one. I wanted it to be very volatile. So, I set just 50%, just kind
of randomly picked that number I wanted it to be 50% or more on the day. And I want higher than normal volume. That one, you know, I don’t
have a strict criteria. Not like ten times or 20 times
normal, nothing like that. It’s just kind of, I
look at a daily chart, and I make a judgment call. Same thing for closing
near the high of the day. I don’t have a firm number for what near high of the day means. You know, if I was
forced to say something, I would say I want the
daily candle to have closed in the upper two-thirds
of the day’s range. And then also, under 15
dollars, because that’s just the price range I’m more comfortable with. So this chart here on the
right, is a pretty good example of what a good day one might look like. And the question was simple. What if I started buying
these right at the close, and sold right at the open the next day? You know whether it gaped up or down, I’m in right at the close,
I’m out right at the open. What would the results look like? And, this is a picture of the tracker. Just very basic information. This is kind of bare-bones for me. I’ve gone far more in
depth on other setups. But, it’s the date, the
ticker, the day of the day one, where did it open, what was
it’s high, what was it’s low, what was it’s close, how
much was it up on the day? And then the next day,
now, open, high, low close. And then, just I run some
formulas over on the right, there. To get some ideas of
either odds of the gap up, or just, you know, average
returns in certain situations. Now, in this specific
case, here are the results. At the time, I tracked 44
samples, when I made this slide, and it’s actually up to 47 now. And the, I’ll just say the current odds, because I remember this,
I’ve got 47 samples, 19 wins, 28 losses. So that’s about a 40% or 41% success rate. Now, that’s interesting. It’s less than a coin flip chance. So, let me just ask
everybody really quick. Let me see a show of hands here. How many of you would take this trade? 40% of working? How many of you would stay far away? How many of you need more information? There we go, that’s awesome. You guys, you guys did well. Yeah, more information
is the correct answer. Cause it’s the other side of the trade. Risk reward. So here are some more results. So like I said, it wins
40% or 41% of the time. Now, here’s where the
risk/reward comes into play. Let’s take those 18 or
19 winners I mentioned. If you had taken the trade,
and gotten out for a win, in the cases where it did gap up, your average return on
those trades, is plus 29%. If it had been one way
where it didn’t work, you know, one of those
60% where it didn’t work, and you’re selling for
a loss the next morning right at the open, your
average loss is minus 13%. That’s about a 2.2 to one risk reward. So, risk reward is on your side, even though it’s less
than a coin-flip chance. So, you take all of those trades, you add them together, all of
the wins, all of the losses, across 47 samples, the
overall average return on every single one of those
trades, it says 4.2% here, but given the extra few
I tracked this week, it’s actually more like 5% now. So, average return over
47 trades, 5% gain, that is actually over
200% potential return. Now this assumes that you trade
the exact same dollar amount on every single of those trades. So, you can’t play one
huge and the other small. Because that’s gonna kind of
skew which way your gains go, depending on, you know, whether you were large
on the losers or not. But, this really is a setup that you might be surprised to hear, even though it has these
overall favorable numbers. I’d stay away from. I haven’t really traded this yet. And you might be wondering why? And this goes into trading
psychology a little bit for me. It’s hard for me to be in a setup where I only win 40% of the time, even if I know that long-term,
I’m gonna come out ahead. I kind of conditioned myself
to really value consistency. And I have more wins than losses. For me that helps me trade
with high confidence. It’s just who I am. You know, everyone’s different. So I’m not saying stay
away from this setup. It could be something that
you could keep a scope on the big picture and you
can handle psychologically. I just don’t think I can, and I think it’s a mental trap for me. So, I’ve avoided it so far. And, there’s one other thing I want to say about these results, is that
of course, this is past data. Past data doesn’t always
predict future results. The larger my sample size gets, the more confidence I’ll have. And just to put this into perspective, I’ve been tracking these
since about mid-May. So, since mid-May, I’ve had 47 examples that fit all of my criteria. So, just to got a little more
in depth on what I track, and how I track. I, you know, I really have
trouble telling people this, but, there is no right or wrong way. It all depends on the question
that you want to answer. And the data will help
you answer that question. You know, this very basic example here, I was saying that I was
only looking at just open, high, low, close for each of the two days, and that was about it. Now, it’s still possible for
me to refine this further. This is just step one
of my journey usually when I go into a spread sheet. There are a lot of tweaks
that I could make now. I could change my
threshold on percent gain. I could look and see if the
ones that are up 75% on the day, or 100% on the day, if those
tend to perform better. I could track additional information. I could take the float of every
single one of those stocks. And see if there’s any correlation between the lower the float, the
more likely it gaps up. So, you can always add more information. I’ve always liked to just cast
a wide net at first though. I cast the wide net, I go from there. And then I start to try to narrow it down and find ways to cut
out some of those losers and make it more consistent. One obstacle that a lot of people have is they say that I really
don’t understand Excel. I don’t know how to do the formulas. And my answer to that is
take an online Excel class. Because you can do that for very cheap. I recently discovered Udemy or Udemy, I’m still not totally
clear on how to say it, but that’s a website that has courses that span thousands of topics. And, they’re pretty good courses, you can see how well they’re reviewed, and even if they’re listed at a hundred or a hundred, fifty bucks like, no joke, they a different sale every single week. Like I can’t remember the last time I bought a course for
more than 12 dollars. So, it’s a very affordable,
very easy way to educate yourself on something that
could really help give you an edge in the market going forward. Spreadsheet tracking has
been huge to my success. The example I love to give of this, is back when I was first
getting started trading. And one of the setups
that I gravitated towards was multi-day breakouts. And multi-day breakouts,
I’ve had been watching all the video lessons, the DVDs,
and had the phrase drilled into my mind, resistance becomes support. So, for example, if I’m watching a stock break past one dollar on a
multi-day chart, it’s a break-out I expect that dollar
level to hold perfectly. I think, hey, resistance becomes support. So, as I’m trying to trade
break-outs with this mentality, and a lot of times, what
I noticed happening, was the stock would dip
back under that dollar mark. I’d stop out at 98 cents, 97 cents, I’d say, oh, this is failing,
support didn’t hold perfectly. And then an hour later, the
stock’s at a dollar, twenty. And I’d say, man, I got faked out. How did this happen? Like this was just a
really tricky break out. So, I started tracking them. I took the extra time on my own, and I put them all into a spread sheet, and I started to see the
pattern emerge on paper, which really helps me, that it was not at all uncommon for support to not perfectly hold. In many of these cases,
you would see the stock shake out just below the break out level, and then continue on as
if nothing had happened. And yeah, there were a few
breakouts that just didn’t work. But, I was able to see that too, and prepare myself to
set better risk levels. And I was off and running. That was a big part of what
helped to jump start my growth. I got to see the difference
between perception and reality. How I thought things should be
versus how they really were. And, that helped my start
playing my breakouts with smarter risks. Sure I didn’t win on every break out, but I became far more
consistent with the setup, and it was a huge driving
force in my growth. So, I’m going to move on
to trading psychology now. Because a number that has
always just astounded me, is that 90% to 95% of traders lose. And that baffles me,
because trading should be a coin-flip thing, right? Like if you are looking
at it just statistically. You’d better trade, you
either win or you lose. And you do it over and over, like that should come out to 50% long run. So how is it that 90% to 95% blow up? What pauses that? I don’t think it’s the
patterns are too hard. I really don’t. Sure at first, you’re still learning. It takes time to recognize it. But that gets easier over time. And yet, you know, you still
have this huge blow-up rate. The markets, may be a bit rigged. They’re definitely is
a lot of manipulation. I’m not going to get
too in depth onto that. But, you know, despite that manipulation, I actually think that helps my odds. I think that, that helps makes the moves a little bit more predictable. You know, you just, you
kind of get a feel for how the manipulation works, and
you try to play along with it. And also, it’s not all
BS and paper traders. I mean, there are successful
day traders out there. So, it’s not just a bunch
of people faking it. So, why is it that so many fail? I am convinced it is the mental side and the psychological side. And no matter where you
are in your journey, that never goes away. You are always going to struggle with the psychological side of trading. Yes, the patterns become easier. Yes, trading over-all
can become a bit easier. Take a little bit less work
outside of market hours. But, you will never stop
having the internal battles. And keeping yourself in check is the most important thing you can do. So, what I’m going to talk to you about the rest of this speech
is, I’m gonna go through a lot of psychological mistakes
that I’ve had to deal with throughout my career, ways
that I’ve dealt with them, and I’m just gonna start
off with a few that are kind of geared towards beginners
that I especially remember when I was starting out. So the first one is the
follow the leader approach. I signed up to penny stocking silver when I first started
and I wanted to learn, I just wasn’t looking for
quick bucks, but on the side, I definitely wanted to follow
whatever Tim was doing. I went as far, when I was still studying and haven’t traded yet. I went as far as to track
all of Tim’s long trades and in Excel, see what
percent he had made or lost on those long trades, and
try to project it to my thousand dollar account,
and be like, okay if I just go all in every single pick of Tim’s, here’s the gains that I could of expected. And so I could make some quick money, and I can learn at the same
time, that’ll be great. You know, I think that, hey,
you know, Tim is the pro here, I’m the newbie, he knows what’s up, I should just follow him. And the reality of that situation was, I could never match prices. The penny stocks moved too fast. I’m not the only genius with that idea. And you usually have a bit
of an effective of a lot of people just trying to blindly chase, and that pushes the alert up way too fast. Also, you know, if you’re in the trade, waiting for that sell alert, and you have no idea
what to do on your own, you feel totally lost. There were a number of times
where I’d been in the trade super scared, just
waiting, is Tim gonna sell? Is Tim gonna sell? And even when Tim did sell, you know it takes time for him
to type out that sell alert. And talk about his
reasoning behind the trade. And again, there could be
a lot of price movement in that time between when Tim
sells, and when the alert hits so, I never could match prices, and this was just a way that you could slowly
bleed away your account. I really think that’s the main impact of trying to follow the leader. At the other side of it to, is that you don’t learn
to think for yourself. The idea of trade alerts is to learn the thinking behind the trade. What pattern are they seeing? That’s the question you want to answer. And how can I learn that pattern myself. But, blindly following just doesn’t work. So, solutions for this. Getting the discipline and the
recognition of this situation so that you never follow the alerts. You just try to learn from them instead. Another big problem
for me is the beginner. The fear of losing. I get questions about this
one a lot in webinars. People who feel like they
can see the pattern decently. And they’re just afraid
to pull the trigger. And believe me, I was there to. I would get so psyched
out, entering a trade. We’re talking like, I would be shaking. My heart would be racing. Like I was like, oh my God,
am I having a cardiac event? Like it was, it was
scary, it was really scary when I was first starting out. And, I mean, that is the one
side of a potential impact of being afraid to lose. That you just are gonna
miss a lot of trades because it’s just a really scary idea. The other potential impact
is that you can get yourself to take the trade, but if
it’s not going your way, you just won’t cut that loss. Because you don’t want to lose. You want to wait for that stock
to come back in your favor. You know, it’s going to be okay
eventually you tell yourself You know, you just try
to rationalize some way that you could get bailed
out of of this trade. So, what causes this fear? I think it’s a couple of different things. One is that you have
a really small account and you can’t afford to lose. I think that, you know,
this also ties into maybe, how much money you have saved up other than what’s in your account. And, I really like to tell
people that you’ve got to wait until you have enough
money in your account, that you don’t have to be
afraid for this reason. I always believe that
you should trade small when you’re first starting. But, if you are trading small,
and you’re still scared, because you just can’t
afford to take the loss, you’re going to be fighting an
uphill battle the whole way. And you’re going to
have a really hard time making rational decisions. So, I think that the best course of action is take that time to
study, to learn patterns, you know, still make the time useful, but wait to actually put
your hard-earned money on the line until you are rid of a major psychological hurdle, and you have a little
bit more to fall back on. The other thing that I think causes it, which is a little bit irrational, and I think I fell more into this camp, was just kind of being prideful, being afraid of being wrong. I knew that I was good at cutting
losses early in my career. I knew that I really wouldn’t take any major catastrophic loss, so that wasn’t where my
fear was coming from, and just for whatever reason,
and that’s just who I was. I was just afraid of being wrong. Like I had a lot of self worth and pride tied up in making a winning trade. I would feel like a failure if I didn’t. And, I wish that I had
like a quick fix for that. But really it just took time. You got to recognize that
it’s kind of irrational. Every trader is going to lose. I don’t have a slide for it this year, but the past couple speeches I’ve done, I would have had my profit
lead chart up there, and my win percentage. And in the last three or four years, every year my win percentage
drops a little bit. I think it went from 70% to 69% to 68%. So I mean, I’m probably
trading at about a 60 to 65% success rate over the past few years. And I’m still very profitable,
but cutting losses is a must. It is a huge part of
trading, because that way you don’t put yourself
in a blow up situation. So, I mean, just try not to
be afraid of being wrong. You have to accept that
you will lose sometimes. And if you’re trading small-size, there’s nothing to be scared of. Just give it some time, keep
kind of forcing yourself to take these trades with your small size, and that issue, it does
eventually resolve itself. It got easier for me with time,
and that was the main factor One last beginner thing,
is getting rich quick. A lot of people come in and they want to be millionaires tomorrow. And this is a marathon, not a sprint. You know what causes this, is
kind of the over confidence from how easy that video
lessons can make trading look. And also, what can quickly
decimate your account. Is if you take this over
confidence and it translates over into trying to trade really big. I really cringe when I
have the new students talking about the large
accounts they are trading. And I’m thinking to myself,
you’re only a month into this. Like don’t trade money that
will be really hard to recover in terms of real world money. It was such a big deal for
me that my first blow up was only 15 hundred dollars. Because I worked a
summer job at State Farm, I made four thousand dollars that summer. So in terms of real world money, that 15 hundred was no
problem to try again. Now, if I had been trading
ten thousand or 20 thousand, that would be a totally different story. I don’t think I would be up here today. So, no matter how confident you feel, no matter how much you
think you know early on. You’re gonna face things in the market that you haven’t seen before. We have these plays every year that I like to call the black swan events. Where you might see a pattern
that works 99 out of 100 times but the one time out of a
hundred that it doesn’t work, it just decimates people,
usually short sellers. Usually it’s the short sellers
that get in trouble on those. But, yeah, like, you mean, the first time you face
a black swan event, you don’t want that to
be ending your account. And you don’t want it
to be a huge account, especially if it does. So, early on, you have to assume, you know less than you think you do. And you have to trade small. Those I think are the two big fixes, to just put everything in perspective, and again, just remember, it
is a marathon, not a sprint. So now, some other more
general things that I think I would say that I struggled
with my entire career. And this is a big one, FOMO, which stands for Fear of Missing Out. So some impacts that you might face if you are trading with FOMO. You’re trying to trade everything. You’re trying to trade
outside of your niche. Setups that you are not
that comfortable with. You just want a piece of the action, you’re forcing stuff that
you don’t understand. And you’re going to get
terrible entries as a result. You’re going to get really
bad results a result. Because if you’re trading
things that aren’t your niche, you’re gonna get really,
really random results. What causes that? I think a big part of it, is social media, and the chatroom culture. It is very difficult to be
exposed to that every single day. And maybe you have one or two setups that you are very comfortable
with, very good at, and those setups are just aren’t there on any given market day. So, you’re having a slow
day, you’re in the chat room, or you’re on twitter, and
then you see someone posting about a big gain they made. Or on some random big runners,
and some people are saying, hey, I’m along this runner, this is great, it’s going straight up. And you start to get that itch. You’re like man, I’m sitting
here the most boring day in the world, and I’m
watching other people bank. And, that’s so hard to tune out. You kind of starting feeling like, I should be doing something too. And before you know it,
you’re in that random trade. You chased an entry. I have certainly been there. Just takes time, but you’ve got to learn to ignore that noise. It was difficult for me. My big turn around after my blow up, was that I cut out a lot of setups. I was focusing on my niche. I was trying to buy only new promotions, only buy multi-day breakouts. And I would go through those days. I would go two or three days in a row, without making a trade, because
my setup just wasn’t there. And I’m telling ya, it’s
not easy to block that out. Seeing other people in the
chat room making money, and feeling like you’re
missing an opportunity. But the most important thing in trading is focusing on yourself. That’s not what you’re trying to do. You’re not trying to nail that setup. You’re trying to focus on
the two that you’re good at. The two that you’re consistent at. That’s your goal. So, there’s absolutely nothing
wrong with missing something. There are so many different
sectors in the market. There are so many different types of stocks that you can trade. There’s just no way you can do it all. Every single successful trader I know does things differently. So don’t try to be somebody else. Don’t try to bank on the ticker just because somebody else
is banking on that ticker. You need to focus on where you’re good, and you need to stick to it. Self comparison. This goes along with what I
talked about a little bit. Early in my career, when I
was starting to be consistent. I was starting to get good. I would have nice day. For me at the time, a nice day was two, three hundred dollars. And I’d feel good about myself. I would go onto Twitter
at the end of the day. And I would see a couple
of the top traders, posting that they made three
thousand, or five thousand. And sometimes it would be
on the same tickers as me. And it’s really hard not to look at that, and to feel like you
should have done more. Or feel inadequate. And, I mean, again, it goes back to you have to just focus on yourself. Where you are in your journey. I don’t want to focus on
how I profited compared to Dux, who always trades
ten times the size I do. I want to focus on how I
profited compared to the last time I tried to play that setup, or the last few times I
tried to play that setup. You’re looking for self growth. You’re not looking for
how you compare to others. Everybody’s journey is different. You’re not gonna have the same learning curve as somebody else. You’re not gonna be profitable at the same rate as somebody else. And I know that we want a benchmark. We want something to compare ourselves to. To tell us how we’re doing. But that’s not realistic in trading. Everybody is so different. And everybody really trades
with their own personality. So, all you can do is just try to take a step forward every week. I wouldn’t even say every day. Because different days have
different opportunities. It’s hard to look at it
on that small of a scale. I’ve always thought in terms of weeks. And not even so much that I
want every week to be more profitable than the week before, but just that I want
to come out of a week, and look at that week as a whole, and feel like, I made fewer
mistakes than last week. Or you know, the setups
that I had this week, to take advantage of, no
matter how many or how few, I wanna feel like I traded them well. So, it is self-reflection
you need to go for. And again, like be happy
for the other traders, who post the big gains, sure. But don’t hold yourself to that standard. You know, just take one
step forward every week, in your own journey, and you’ll get there before you know it. Boredom trading. I go through this one a lot, too. You know, it’s, you’ll notice I’m saying, like I haven’t solved a lot of these. I can tell you what will help, but I’m still far from perfect. And boredom trading, I mean, potential impact is pretty obvious, but you forced dumb trades. You do something just because you’re looking for a little bit of action. What causes it, is slow market conditions. Or you know, chasing productivity,
is what I like to say. You know you, it’s hard to
sit at a computer all day, you feel like you should be making money, you feel like you should
be doing something. And if you’re not, it’s hard to feel like
you’re being productive. You feel like it’s a wasted day. But, don’t underestimate the
value of that screen time. The days early in my career, where I would go two or three in a row without making a trade, I
was still in front of it. I still made myself watch
some of these tickers, and how they acted, and how
they performed at certain points in the pattern,
and that’s valuable. It’s valuable just to sit there and watch. So, no, you’re not wasting a
day, you’re not wasting time. Sometimes the best thing you
can do is not make a trade. And I think it gets a little bit harder even when you get later
into your trading career, and you get a little bit more of an ego. Because you get used to making
a certain amount of money, and when those slow weeks come around, you say, whoa, what happened? I’m not that profitable this week. And then you really want
to make something happen. That’s the mental trap I
fall into lately, at least. And, it aways turns into,
instead of taking my A+ setups, or my B setups, I really
take a C or D setup, something that I don’t trade that often, that I’m really not that comfortable with, and I just sort of grab it, and say, okay, I hope this works out. And I would say, overall in those trades, I definitely am in the red. So, potential solutions
for that, self reflection. You just got to look
inwards, and ask yourself, why am I taking this trade? And really get to the root of it. You’ve got to be very disciplined. And again, it’s not easy,
but, it takes a long time and a lot of work, but you
can start to recognize it. You also have to have
realistic expectations. You can’t expect to make
the same amount of money every day, every week, every month. The market is going to
have it’s ups and downs. We have times where the
market is absolutely insane, and I have more plays than I can handle. We have times where I just
want to go back to bed. I mean, I have really struggled
the last couple of months, because of over-trading
specifically, I think. The weak stocks have
been going kind of crazy, but in all the other
sectors in small cap land, there haven’t been too
many parabolic runners. And that is led to me taking
a lot of boardroom trades in the weak stocks and chewing myself up. Since the start of August, I
felt like I haven’t traded well And this is to blame. One thing that I could’ve done,
that I wish that I had done, is just left the computer. Even if it is that early
point in your career, and you do want that screen time. If you’re having trouble
with the discipline of not pushing buttons, just walk away. Go do something fun for a couple of hours. I mean, mid-day lull, we all
heard about the mid-day lull. There’s nothing wrong with going
out and just getting lunch. So, give yourself a chance
to separate from it. These are the little
things I think can help. Swinging for the fences,
wanting the big home run trade. This could lead to
horrible, horrible losses. Or it could lead to a situation
where you enter a good trade you got a nice winner,
and you just get greedy. You want more, you want
it to be a huge win. And the next thing you
know, that win is a loss. And that is a psychological gut punch. Also just inconsistency. If you’re trying to hit
a home run every trade, you’re probably gonna hit
a home run here and there, but you’re gonna lose on the vast majority of the rest of your trades. So, the mental causes of
this, chasing the big gain. And that usually happens to me in during the times of
boredom trading actually. Where there’s not much
going on in the market, I’m having a slow week,
and I just want a big win to pull myself out of that slow week. Also, I think earlier in you career, it could be you trying to
grow your account fast. And again, can’t rush it;
marathon, not a sprint. I did not get to where I am by having a few big winners here and there. I got here through consistency. Lots of singles, the singles add up. I remember specifically
playing the new promotions. And the new promotions that
helped grow my account. I would say about 75%, 80% of them, would run for multiple days. And they would go, two,
three, four hundred percent, something ridiculous and wild like that. I was always out in ten minutes. I would buy right upon announcement, I would sell into the predictable spike, and that was it for me. And those added up fast. And sometimes, I would
feel bad, that yeah, I sold this stock at 20 cents, and it went to a dollar two weeks later. But then, there would be the other plays. The ones where they
announce the new promotion, it goes up about 20%, 30%,
in the first ten minutes, and then by the end of
the day, it’s down 80%. And they totally just sold
into it and crushed it. I avoided all of those. There was some, there was
some major promotion traps I saw during my first year at trading. And I never got burned by a single one. Because I value consistency
over the home run. I wanted to just be
consistent, gain confidence, make a profit, that’s what mattered. I didn’t need to hit a
grand slam every day. I just needed to be
consistently profitable, cause that was my goal. I wanted to be self-sufficient. I wanted to be able to be
able to be out on my own. I just wanted to make a
decent living from trading. I wasn’t trying to hit
a home run every day, and be a millionaire as fast as possible. That honestly, was never a
goal of mine from the start. Revenge trading. I go through this one
from time to time also. This especially happened
to me after my Lake lost, 290 thousand dollars, where you just take a gut punch of a loss. Everyone’s gonna go through that. I mean, there’s no
avoiding it in your career. Your gonna take some
losses that really hurt. And, it throws you for a loop mentally. And, you just wanna make that back. You feel so bad. And so for Lake, what happened to me, was I started trading the other setups after Lake had played
out, that I was seeing. And I was trading them with
about five times my normal size. I was really going after it, because I was like, I’m just gonna, I’m just gonna smash this trade, and undo this damage as
quickly as I possibly can. And I think the first trade I made after my 290 thousand dollar
loss with that really big size, I think I made about 60 thousand dollars, and then I made another one like that, and I lost about 70 or 75. And, I mean, Lake was my
worst loss at 290 thousand, I think that 70 or 75
thousand dollar loss, it was definitely a top
five or top ten loss at that point in my career, and it happened within a few days. And it was just because I was pushing, I was not trading like myself. And, I don’t necessarily think
that every time immediately after a big loss, you
would fall into revenge. For me, it’s more after the plays over. So, I have no problem now
at this point in my career of taking some big losses on
the way up of a parabolic short if you know, as long as I am cutting them, just be playing larger than normal, but, if the tank day comes and goes, and I miss that main play
that I’m waiting for, that’s when I would slip
into revenge trading. That’s when I would say,
wow, the plays over, I totally screwed it up,
I gotta get this back. So, there’s a certain amount of time I can keep my head in the game, but if I blow it at the end of the play, then I totally fall into this. So, the solution, I mean, again, you should be really self-aware
of what you are doing. You noticed I’m repeating that a lot, but it’s just so important. You really have to be
in-tuned with your inner self. And figuring out what’s
going on in your own head. But, a lot of times that
doesn’t help me with this one. This is one of the most gut
punch things for me as a trader. So I have to take time
off, I have to walk away. And usually it’s a week, two
weeks, something like that. And it always helps. Every single time, I just
get that time to calm down, and relax, and have some
time away from the market, and I come back, and I’m
no longer in revenge mode. If you play poker, you would
compare it to going on tilt. You just need some time away,
and then once you get back, you’re back to your
rational state of mind, and you just get back to doing
what worked for you before. You’ve had time to reflect on the mistake, you’ve had time to
figure out how to fix it, and just get back to business as usual, and try not to repeat that mistake again. Addiction. This is one that I
definitely struggle with. Trading is very, very addictive. And the impact of addicted
trading, definitely over trading, because you just want
that adrenaline rush, and also you just miss out on life. This isn’t something I’ve been
reflecting on a lot lately. Because I spend Monday to
Friday in front of my screen, from about eight to five every day. And then I’m checking
my phone after hours. I feel like I can’t turn
myself away from it. And especially at this point in my career, I don’t like that. I want to be able to
separate a little bit more. I want to be able to take
a more passive approach to the markets, maybe find a
few more longer term setups. And what caused it for me? Again, because I love the adrenaline rush. And you want to be productive. You want to feel like you’re
in front of the screen, doing all you can to be
successful at trading, and also FOMO, that’s a big
problem for me, too, with this. Is, if it’s a slow day, its mid-day, and it might be time to walk away. I’m afraid what if there’s a play, while I’m down at the pool,
or while I’m away at lunch. I’m so scared of missing something. And some solutions for this, are you just have to force yourself away. If you notice yourself
over-trading every single day, recognize that pattern within yourself. Force yourself to step
away from the screen. Also, if you have friends,
family, or a significant other who can drag you away,
that is even better. My wife, Donna, watches me trade a lot. She’s around every day. And she’s developed a sixth
sense for this kind of stuff. I can’t tell you how many
mornings Donna has said to me, I don’t think you should trade today. And I say, oh, you don’t know
what you are talking about. And then, I’ll lose money. It happens almost every single time. So, I really do need to
learn to listen to her. But, I mean, when we were
down in Puerto Rico together, those mid-day lulls, where we would go down
to the pool together, just get some time away from the screen. So helpful, just so helpful. So, if you’re not gaining anything from that screen time
of watching the pattern, just pull yourself away for a little bit. You know, it’s okay, you don’t
have to be productive 24/7. You just don’t want to be in a position where you are forcing things, because you will chew yourself up. Distracted trading. This is one that I experienced
for the first time last year. And the potential impact
of distracted trading, is big losses. And what causes distracted
trading, is negative life events. Things outside of the
market beyond your control. For some people, it can be
the death of a loved one. It could be, you know, someone is sick. Could be some kind of natural disaster. And that’s what it was for me. It was around this time last year when Hurricane Maria hit Puerto Rico. And I, I knew that the
condo that we lived in, was going to, probably be in
very bad shape after that. It was like a total
communications black out, out of Puerto Rico for
the couple of months, or a couple of weeks following that. And, I just kind of threw
myself into the market. I really just wanted
to distract myself from that negative thing going on, and have something to feel good about. And September had gotten off
to a decent start of the month. And I had just for whatever
reason, decided, you know, this is the month that
I think I’ll size up. I’ll trade bigger, and I wanna try to have my best month ever. Because I’m already off to a good start, I haven’t had my best month
in a really long time, like this is a good time
for it, let’s do it. So, I started pushing my size. And, again, I’m just
trying to distract myself from all these negative feelings about the stuff going on outside of the market. And, I took a string of losses. I took about a hundred
thousand dollar loss in Himani. I remember talking about that one at the conference last year, up here, when it was down
to like four dollars. And, I took a much larger
short than normal on it. I think I shorted it about seven. And I wound up cutting it
at ten, lost about 100K. And I had a lot of other
trades like that too. I think MMKD was another one. Where it had a day, where,
it gaped up big or something, and I threw a ton of size at it, short. And it stopped me out, and
I lost 30k or 40k there. And I did this on about three
or four different tickers. Where I just decimated myself. And September was one of my worse months in a long, long time, in fact. I gave back all of my
beginning of the month gains, and then some. And it was just because I was searching for something to feel good about. And I was really in no
state of mind to trade. I’ve heard about this
with other traders, too. I know it’s not just me. I’ve heard of people who, you know, find out they got a sick
kid, or something like that. And, just get absolutely destroyed in the ensuing month or two. So, if you can’t come to the market with a clear state of mind, if
you’re looking for the market to fix how you feel about something, you shouldn’t be there at all. It’s okay to step away during those times. Again, I know you want to feel productive. I know you feel like you
should be in front of it. This is supposed to be your job. But, if you just gonna
do more damage than good, don’t be there. Main issue, stubbornness. It took me a long, long time
to work through this one. Potential impacts, big
losses, end of trading career. And what causes it? Not wanting to admit defeat. Or your current loss just feels big. What I mean by this, is
sometimes we sort of accidentally find ourselves in a situation, where maybe we size into
something a little too big. And it hits the point of our stop loss. And we know, that, hey, it’s
time to get out of this. Like the chart is not right. But you look at that number
of how much you’ll be down if you close that trade, and that just does not sound good to you. And a switch just kind
of flips in your mind. Where you say, you know what, I’m just wait for the market
to hopefully fix this. Maybe I’ll get up, you know what, for me it happens a lot when I’m short. So I say maybe I’ll get a pull back that I can cover into
and lessen the damage. But yeah, just that switch/flip
moment, where you know, maybe a five thousand
dollar loss feels bad, and you’re like, well ten
thousand is gonna feel just as bad so why not just give us
a chance to work out. Also, I hear the excuse
a lot, I got stuck. There’s only one time you
maybe you would get stuck. And that’s if, you’re
in something overnight, and they release surprise news. There’s not a lot you
can do in that situation. That might happen from time to time. But, getting stuck is not my
stop/loss is come and gone, I’ve chosen not to cover,
and now I’m down a lot, and I just don’t want to. You always have the choice
to push that button. You always have the choice to get out. Like I said, I went through
this for a long time. I took my 290 thousand dollar loss on Lake because of stubbornness
and because of fighting it, and trying to fix it,
and that loss sucked. And I said to myself, okay,
well, I just took that loss, I’ve learned my lesson, that
will never happen again. And six months later, I
lost 180 thousand on KBMD. And I said, okay, well
I’m a little surprised this happened again,
but I got it this time. Won’t happen, again,
and three months later I lost 105 thousand on CANF. And every time, it was the same mistakes. I would get stubborn, and I would fight. And here’s how I dug myself
out of that mental hole. This was not a one day fix. Even three six-figure losses
couldn’t fix this for me. So, how did I fix it? I held myself accountable,
I made a spread sheet, after reading a trading psychology
book, a hundred and one, or what is it, Trading in the zone? Yeah? I’m blanking on it– Daily Trading Coach, that’s it! Daily Trading Coach, a hundred
and one lessons to being your own trading psychologist,
that’s the book I read. Brett Steenbarger. Very, very good read. And it gave me the idea
for this spread sheet. To track my losses. Not every single time I lost, but every single time I made a mistake. And I forced myself to size way down. To sizes that were smaller than anything I had traded in a couple of years. And that was not easy. It was hard to see some prime setups, and playing what felt like puny size, but I knew I had to fix my discipline. So every month, I would
go through the month, I would tally my mistakes,
and at the end of the month, if I felt like I did a good job, I could increase my size a
little bit the next month. But if I felt like I did a bad job, my size had the stay the
same, or go back down. This was about a ten or
11 month process for me. And if any of you have seen
this on my YouTube channel, you would just search
Timbertoni to find my channel, I chronicled these months. At the end of every month, I
would do a recap of my month, mistakes I had made, how
I felt like I performed, how I felt like I could do better, and like I said, this
was not a one day fix. This was months of work. But eventually I got my size
back to where it used to be, even larger, and I had completely killed the stubbornness bug in my
system, I broke the bad habit. Now, yes, I still take
large losses sometimes, and that’s really due more to mistake, if I tried something too large. TLRY gave me fits over the last two weeks. I probably took about six or
seven 30 thousand dollar losses on that stock, it chewed me up good. But the key on that one, was
as bad as those losses felt, every single time my stop hit, I was out. I never went on the ride. And that thing went to
three hundred dollars. I was trying to short it as early as 80. Can you imagine if I had about
a 800 or 900 thousand dollar position on that, at 80 dollars, and I rode that to three hundred? That would have been, I mean,
a mind blowing record loss. So, thank God, I don’t
get stubborn any more. And, hey, if you struggle with that, I really recommend doing something to hold yourself accountable. Maybe it’s tracking on a
spreadsheet like I did, I don’t know, but be
ready for a long journey, and really, really having
to work towards it. Because, this is the main
thing that takes out traders. Could be a beginner trader,
be a veteran trader. I’ve seen all levels of
trader get hit by this, and again, it just takes that
one play out of a hundred, that really rare one, that
thing you’ve never seen before, where you didn’t cut a
loss, and it destroyed you. Don’t ever put yourself in that position. So, some concluding
thoughts on the psychology. Emotional side of trading,
it never goes away. Some of these issues, they
will get easier with time. But don’t expect to
wake up one day and say, Oh, I solved trading, this is
the easiest thing in the world Because that’s not going to happen, that’s not a realistic expectation. It’s a daily battle. You have to look inwards, you have to hold yourself accountable. You have to reflect on why
you’re doing what you do. At the end of every day
just take five minutes. It doesn’t have to be right
after the market closes, it could be that night before bed. Think about your trades, think
about the actions you took. See if you can think about mistakes you’ve made during the day. And again, not every loss is a mistake. A mistake is not cutting a loss. A mistake is playing too big. But sometimes setups just don’t work. So don’t kick yourself
because you took a loss, kick yourself because
you’ve made a mistake, and try to fix it. If you hold yourself accountable, if you track the stuff on a spreadsheet, if you strive for better every month, I think you can slowly start
to overcome these issues, or at least greatly
improve them one by one. Thank you, guys. (applause)
(upbeat music)

Leave a Reply

Your email address will not be published. Required fields are marked *