Transcript

Clay: This is The Stock Trading Reality Podcast, episode 261.
Announcer: This is The Stock Trading Reality Podcast, where you get to see the realistic side of a trader’s journey. Get inspired and stay motivated by every day, normal people who are currently on their journey to trading success. This is your host, one of his favorite new indicators is the volume-weighted average price, Clay Trader.
Clay: Now, I probably won’t say it right. But the VWAP, the VWAP, I’m not quite sure how you’re supposed to say it. But V-W-A-P is, as you just heard, the Volume Weighted Average Price. And it’s an indicator that I’ve been using now over the past several months. And I’m liking it quite a bit. Now I don’t want to across like this is … Hey, I just discovered this and maybe you … For me, it was a matter of ego in the sense of no I don’t need to add anything in. Yeah, I know a bunch of people talk about it. But no, I’m not going to use it and it was just … So public confession, I let the ego, the thinking that my unwillingness to maybe expand out a little bit.
Clay: Now it is a fine line because once you have a strategy that you’re confident in and that you believe works and all that, then you’ve got to be very careful. You don’t want to always be tweaking it and twisting and trying to adjust it because if it ain’t broke, don’t fix it. I mean it is a fine line, but there is also the line which I cross which is just being way too narrow minded, way too close minded to being open to maybe something else that could potentially be dropped in a place to help enhance and improve what’s already being done within the strategy in itself. And for me, the VWAP has worked out very nicely. Is it a holy grail? No. I don’t want to come across like hey listen, get the VWAP and all your troubles will be taken care of.
Clay: If only trading were that easy. But it’s certainly been a nice little compliment to what I’ve already been using on my charts and maybe you will find it beneficial. So I want to encourage maybe at least look into it. Check it out. Maybe you’ll think it’s total garbage and I would respect that because there’s no right or wrong way to trade. Plenty of indicators and such out there that you can use to form a build a strategy that works for you. But for me, like I said, I’ve been using the VWAP and it’s certainly one of my favorite new indicators that I have put into motion here.
Clay: As for our show, we’re bringing back a long, long time member as you’ll hear. We discover and I forgot about … Not about him because I know he’s been around a while, but I forgot how long he’s actually been around, but we were talking to Donald today. In the chat room, his alias is Speedster and if you’ve been a member really of any amount of time, he’s not active in the chat room like every single day, but he’s definitely pretty active in the chat room so if you’re somebody that’s been in that community, then I’m sure you’ve seen him swing by. And we go into … We get down to the weeds, and if you’re brand, brand new to the market, it may seem like we’re a bunch of crazy people just talking about what we’re talking about.
Clay: But I assure you, if anything, walk away from and take it up, okay, wow, yeah, there is a lot of thought. There is a lot of consideration. There is a lot of human psychology and considerations that really need to be talked through and thought about if you want to find good, consistent success. It’s not as easy as signing up for some hot stock pick service or hey get my special indicator or get me … Anything like that that you can see out there in the world of the internet and social media and all that. None of that.
Clay: You’re going to see just the nitty gritty details. So for those of you that have traded and maybe you’ve met some of the voices in your head when you’re money’s on the line, I’m sure you’re going to be able to relate to what we talk about and hopefully you can pull something from it. I’m confident you will because we go down and touch on quite a topics that are very common and we just talk through you. If you’ve never listened to the show, this is all unscripted. And especially when I have a member back. He’s already on the show once. But when I have people back, it’s just much more … Not really an interview, just a free flowing conversation. And we definitely have a good, solid free flowing conversation.
Clay: With that being said, let’s get an update from Donald and go down the rabbit hole of human emotion and human psychology. Donald, welcome back to the show. Now I was thinking … And I feel like this is either your third or fourth appearance but I’m not … You’ve for sure been on the show twice, right?
Speedster: It’s just been once.
Clay: No that’s not true. There’s no way that can be true. This is only your second time?
Speedster: Correct, yeah.
Clay: What’s your confidence on that? On a scale of one to 10. 10 being you know for sure, positive?
Speedster: I’m a hard 10.
Clay: Okay, well I stand … I could have sworn that you have been on here … Well, Donald what … Here’s what maybe is throwing me off. Because I’ve met you at … I know, I remember in Denver. And then you came to at least two meet ups. Yeah, didn’t you come to Nashville. What meet ups were you at?
Speedster: You’re on it. You’re close. Nashville was the first time we met at the Nashville meet up. And then, I can’t remember exactly when I did the podcast, but I know it was episode 77, is what I remember. But anyway, so we met up in Nashville. And then we also met up in the Colorado meet up.
Clay: Okay, yeah Denver I thought. And my wife still has nothing … Nice things to say about you and your wife. She was part of your little golfing pool that we were doing when we were doing Top Golf. So thank you again for being polite because my wife was surrounded by a bunch of traders and had no idea what was going on. But she’s like, “Oh yeah, they were fun.” So I appreciated that. But that’s got to be what’s throwing me off though. I feel like we know each other so much better than only have one podcast together. But it must be those meet and greets that you showed up to.
Clay: So all right, well episode 77 … That was a long time ago. And I like what you … First off, thank you very much for volunteering to be here. I appreciate that. Makes my life easier. But I thought … And I really respected the fact of you know what? I want to do this because I want to hold myself accountable and I want to just … I think this could help. And I can appreciate you doing what needs to be done to hold yourself accountable and I guess that’s maybe where we’ll start things off. But I don’t know. Let’s take a step back. Why don’t you walk to the best of your ability, because I get it. This was years ago. But where were you the first time we spoke. I mean what were you trading? What got you into the markets? Really give just a very summarized summary of where you’re at the first time we had our conversation.
Speedster: Sure. Do a little recap. As best I can. Well, as you recall, well you may not recall, but you didn’t have claytrader.com when I first met. Let me just jump back. I ran into a little money. I got in trading and I ultimately landed in I-Hub.
Clay: Bid lurker, right?
Speedster: That’s right.
Clay: Yeah, right. Now it’s coming back to me. Yeah, so bid … That’s right. You were probably one of the original 300 I would assume right or no?
Speedster: Right, yeah. I was.
Clay: So you’re famous. For listeners’ context sake, when I first started this whole thing back in 2013, I had no idea if it was going to work. So I’m like you know what? Let’s just do $99 bucks. See if anybody finds any value and yeah, people found value. And then after the first 300, I was like all right … Well, in order to make this actually sustainable, I need to do some re-arranging. But Donald was one of the first 300. So I mean … In my eyes, at least, you’re quite famous.
Clay: But sorry to cut you off, but it’s amazing how you said one thing. I’m like, “Wait a second.” And it all comes back just like that. But so there you go. There’s a little context. Donald’s been around since literally before the start. So which I very much appreciate.
Speedster: Yeah, I was basically following your newsletters. And I would be a bag holder on a particular sub-penny, and I’d see you drop some videos there. That’s basically where I found you. And it sparked my interest because I knew technical analysis was what resonated with me. Even though technically analysis in the penny world’s is what it is. But anyway, so that’s where I came across you. And then, like you said, well I was following your newsletter and then you offered the new program and I just thought, well the newsletter’s are worth that for a lifetime membership [inaudible 00:08:29]. So I signed up. And the rest is history. There’s a lot in between there.
Speedster: But, like I said, I was in penny … Basically flipping sub-pennies, triple O stuff. And just some luck but I had a little luck when the marijuana was hitting and popping but nothing majorly fool’s gold that really came up. I think I’ve had some fool’s gold later in my career that’s definitely caused me some problems. But we’ll get to that a little bit later. Let’s see.
Clay: And then you got into the options, right? That’s … I’m pretty sure you were maybe-
Speedster: Ultimately, I did.
Clay: Ultimately. Well, do you remember, were you doing options during our first conversation?
Speedster: I had been. I’m not sure for how long but-
Clay: Yeah, I was going to say, I feel like you were just getting start and venturing into the world of options which makes a whole lot more sense relative to … To listeners, when you compare options to penny stocks. I mean penny stocks, yes they move. Yes, there can be … I mean very, very big movements, but in the world of options, those very big movements, I’m not going to say happen every single day. But I mean to hear of an option making a huge move, it’s like okay yeah, that’s … I mean that’s not really out of the ordinary. It’s not really a talk of the town. It happens on a relatively routine basis so I’m assuming that’s probably why you moved into options. Was it just something more so where you got tired of watching paint dry in the world of penny stocks?
Speedster: That definitely got tiresome. All of a sudden one tick would come in … You’re like oh my gosh, especially if it was any volume to it. But yeah that was just not where I wanted to be, watching the paint dry.
Clay: Yeah. I remember that too. It’s like one tick is like honey do we have any fireworks? Let’s go shoot some off. I mean it’s finally running or just even watching the tape and seeing any orders at all show up. It’s like oh this is something … Nope, that was just an order or two. Just looking back, that’s probably all you can do is shake your head and laugh and be like if only I would have known. But yes, I think a lot of traders start off watching paint dry until they discover other areas of the market.
Clay: So I guess … And I’ll let us take you to wherever you want as far as where you want to pick things up or whatever. But like I said going back to my original point, you contacted me and you volunteered because you wanted to hold yourself accountable. So I mean I guess if you want to start accountable in what ways or what made you want to … What gave you that thought? But I guess just pick things up wherever you think it makes most sense.
Speedster: Okay.
Clay: But I mean what’s going on or what has happened that has led you to the point where you’re like let’s just … Let’s hold myself accountable. Because I’ve been seeing your results. You’ve been doing very well so I’m thinking it’s got to do with the fact of I’m on the path … I’m hustling, I’m grinding, I’m seeing success so I want to hold myself accountable. But I feel like there’s a lot between where you are know showing … I mean even today, what was it? You’re up like $350 bucks or something. Which is … Was that true?
Speedster: I’m there.
Clay: Did I see that in the chat room? $350.
Speedster: $316.
Clay: $316, okay.
Speedster: Yeah, for this morning’s little spa.
Clay: Nice. For listener’s take, the overall markets had a bit of a flush in this morning and Donald capitalized on the flush with $316 bucks. But anyway, now I’m sidetracking myself. So I guess picks things up, I mean I’ll let you … I’ll go down whatever rabbit holes you want to go down.
Speedster: Okay. Well, I’ll drop back a little bit just to shed more light on the transition in options and you’ve had people on here recently that I have the same reasons basically. Well, let me just back. One day I was watching one of our videos. And I saw how fluid the level twos were on an option. And coming from … Watching the paint dry on these sub-pennies. And seeing that, I was just like oh my gosh. It got me just salivating. And then on top of that, and I’m pretty much directional so I’m buying calls and puts. But the fact that I could short … If you’re going long, you’re only looking at half the opportunities out there. So that was very attractive to me.
Speedster: And not to mention you can trade the big board tickers that really tend to follow more chart patterns than any kind of … Any stock ever would, right? And then also the PDT, if I didn’t mention it. But I’ve a cash account. With cash account, there’s one day settlement. And that way I’m not limited on the amount of trades you got from the PDT rule.
Speedster: So anyway, those are the reasons … Main reasons why I got in the options. And not to mention that in the sub … The penny land world, ticks can go down to what? .0001 of a tick? Where options in whole pennies. So that was another reason.
Clay: The little things that you take for … That you probably don’t take for granted. Then if you’re like wait, what? But, like I said, I mean when you have a perspective of the triple zero ones, I mean it’s just the little things in life that make all the difference.
Speedster: For sure. So basically the last time we did the podcast, I had been doing options. Had some success. Also had some issues here and there as everyone does. It’s just part of the journey. But-
Clay: Well, what were some of those issues?
Speedster: Well, the typical stuff. I mean there’s always going to be the typical things like … Because in the world of options it’s … I’ll say it’s fluid and it’s a lot of gray. Meaning like picking your stop. Are you going to pick your stop off the underlying stock price chart? You going to pick the stop off the options chart? Or the options price? Are you just going to set a hard limit of this is my max loss per trade thing? Because as you know there’s a little more to options because you have the time factor, right?
Speedster: So that’s why it’s a little gray as far as … It’s a little bit of a learning curve with the options. Just trying to figure out what works for you and what works for your personality as well … You want to make easier on yourself so I had to figure out what kind of options I like? Time frames? My strategies. And I think once I … And that’s an ongoing thing, but you get to a point where you’ve got all the technicals mapped out. And I think I’ve done that for the most part. Today and more so last year, is where realized basically trading journey is really a journey of self mastery.
Speedster: Once you figure out your technicals and your strategies and this and that, I quit looking at the next strategy or the next book or the next course, because I knew the problem was basically psychology and it was all in my head. And to give an example, look ready go get in trade. Have it mapped out of where I want to get in, where I want to get out, with my target and put my stop.
Speedster: What usually gets me is when a giant … An unexpected move goes against me like really quick and really hard and really fast. That’s where I just … I’m a deer in the headlights and get frozen and it’s just like why am I not hitting the button? I see it going past my stop, past the line and I’m just like … It’s when it moves against me real hard that all my planning goes out the window and the psychological stuff kicks in and the old mechanisms, the old habits surface themselves and that’s been my biggest Achilles heel as far as strong moves moving against me. And I just freeze and it’s just like why am I not getting out. I’m literally saying that to myself as I’m watching it go against me.
Clay: Are these moves that happen in the blink of an eye or is it a … So for example, let’s just say you get in and then there’s a slow, methodical move. And then all of a sudden it goes. Or is this … Are these situations where you get in and then literally within a minute all of a sudden the moves happens?
Speedster: It’s the quick moves that bring out the old habits where I can’t hit the button.
Clay: So quick relative to when you get into the trade?
Speedster: It could be right after I get into it. It could be later on. It’s just the unexpectedness of it jumping past my mental stop and then jumping past say my max loss for trade. Trade loss. And it’s just like … It’s really an ego thing, right? I don’t want to give it up. I don’t want to take that loss. And so, that’s been my biggest struggle since the last podcast. And I’ve worked at it. I know it’s a psychology thing. And I’m getting better. I put more effort into it. But I will have to come clean and tell you that I’m probably a lazy student. And I know there’s things that I should be doing as a … What a professional trader would be doing that I tend to … Not always do. Like let’s just pick journaling.
Clay: I was going to say what are some of these things that you know you should be doing … Or that maybe you have a guilty conscience about. So one of these are journaling. I mean … So yeah. First off, no judgments on my part. If anything, this is a great example of self-awareness and I suppose it’s a situation where okay, you can … You’re calling yourself out which is good and then hopefully you can make the decisions to take up what you know you should be doing. But so you don’t do journaling or anything like that?
Speedster: Well, I don’t do it consistently is what I’ll say. Usually what happens is end of the quarter, definitely at the end of the year, I always review all my trades and try to analyze what’s my loss size per trade and just try to tighten stuff up right? And realize … Pick out the weakness. And they always are these trades that I let get away from me. And they pretty much blow me up from time to time. So that’s been my focus. And so, one big step that I made was … It wasn’t really a journal per se, but I literally made a physical, in Excel, a trade set up sheet. Basically to have check boxes, right? And to help keep myself accountable. Because I tend to also jump in early when I really shouldn’t have no business jumping into a trade. So that’s another thing that gets me.
Speedster: But it all ties back to journaling and just keeping it … And I’ll journal for say maybe five, 10, seven or eight trades. I got a good handle on it. And I’ll quit journaling and I may do fine for a couple trades. And then the next thing I know, I hopped in where I really … It wasn’t an optimal trade. Its set up. I probably should never have jumped in. And so, I’ll do stupid things. And then, I’ll figure that out. And then I’m like okay, I’m going to start journaling again. But maybe you can help me because I want to … I know once you get to a point where everything is automatic, where I’m doing all the good things I should be doing like every time, then I know I can jump away from journaling.
Speedster: And because it’s second, it’s automatic. It’s when I start thinking is when it goes all to hell. And that’s why the journaling and the trade set up sheet is so important, I think, because that really takes all of the thinking out of it. You know what I mean? You really shouldn’t be thinking in the middle of a trade. And that’s usually where I have my mistakes.
Clay: Do you think you sometimes get in at the wrong spot even with some of your winning trades?
Speedster: Oh yeah, that’s for sure.
Clay: All right, well I ask that because a red flag in my mind would be like I define getting in at the wrong places only on my losing trades. And I would say not necessarily, I mean you could follow everything in your trade plan. You could follow all your rules and just because the market’s random. Just because there is no such thing as a guaranteed type set up. There’s no holy grail. Well then that doesn’t necessarily mean you got in at the wrong spot. Maybe that just means the market’s random and it didn’t quite work out. But it sounds like you’re saying no, no, no, there are definitely times where it ended up working out in my favor but I should have never gotten in at the spot that I did. So it sounds like … Well, I mean it’s just FOMA right? Fear of missing out. Sounds like that-
Speedster: For sure.
Clay: Yeah. And I … I mean I don’t know that it necessarily goes away. I mean I have no problem say I’ll … Okay, I’m getting in. And it’s like all right, well in hindsight. Now granted, even if it works out in my favor, it can be hard to see that. But like I said, I don’t know if that necessarily ever goes away just because I mean you’re a human being and it is what it is, but it sounds like … And correct me if I’m wrong, but you’ve been making progress and I would attribute the progress to you were well aware. I mean when you said, “Oh no, no, even on some of my winning trades, I know that I get in too early. Or I had gotten in too early.”
Clay: So it’s not like you’re lying to yourself. You’re being pretty self aware and I think the key really is just being self aware and if you do something stupid, admit it. And I’m not necessarily saying you have to get out of the trade immediately, but definitely hold strong with the stop losses. I mean do you think that you’re doing pretty good in that regard where … Let me put it this way, do you realize when you … It’s not the right spot to get into the trade at that time? Or is it more so in past reflection when you’re looking through the journal?
Speedster: It’s during the trade. It’s like-
Clay: Okay, well that’s good then.
Speedster: I like to play the open and it can get volatile and I like to let it … Get a few candles on the board before I do anything. But sometimes I hop in and boom it’s that next candle that I was like oh, it went against you and just sometimes … Sometimes you don’t judge the pull back. It’s going to pull back to here. Maybe the 20, but no, it’s going to go to the 50 kind of thing.
Clay: So what is your rule? Is the rule … Well first off what time frame are you using to really fine tune things?
Speedster: Sure. In the morning-
Clay: On the open, what timeframe are you mainly looking at?
Speedster: I’m trading off at two.
Clay: Okay. So you made the comment that you want to see a couple candles first, that’s the rule?
Speedster: At least.
Clay: Okay, so the rule is at least two candles you want to see form?
Speedster: For sure.
Clay: So you are not trading it … And I’m just pressing because it sounds to me … And this is a great example because this is actually the importance of rules and a strategy. If you get in in the first four minutes, you have broken a rule to your strategy. Like that’s very cut and dried. I mean, but again, I’m commending you, that’s why you want to have rules to a strategy because once you have rules, it’s very easy to recognize oh I just broke the rule. So I mean right there from the get go, it sounds like you should not be doing anything at all and if you hop in during that first four minutes, you’ve broken a rule, you should probably just get right back out because now you are not following the rules of a system and if you’re not following the rules of a system, all you’re doing is gambling. And that’s not going to produce any sort of long lasting result.
Clay: So right there is a give me. If you’re in the first four minutes, Donald, you have broken the rule and you are now officially gambling, is that a fair statement.
Speedster: No, that’s … Agree.
Clay: So I mean maybe there’s some other things, but I mean just hearing you talk it sounds like there’s a very cut and dried identifier of when you’re getting good entry points and when you’re not. And even like you said, even if you get in in the first four minutes and it works out in your favor, okay technically speaking that’s just a rule break that ended up working in your favor, but there can be plenty of other rule breaks that won’t work out in your favor. So not to cut you off, but to me that’s, like you said, a very cut and dried way of … Do you have that box on your journal about first four minutes at least that you should not be into the trade?
Speedster: I do.
Clay: Okay, so there we go. So you can identify that. That’s a give me almost in terms of oh yeah, that was not a good entry point.
Speedster: Yeah, it’s … And that’s a hard rule. I’d prefer to let the first five minute candle close. And let me just say, it depends on the action, right? Because a lot of times in the first four or five minutes, if it’s going to make a bull pull, you usually see that. But you may not see that. So that’s a minimum yes. I need two too many candles to form, but it depends on the action, right? Because I may need to see more. I may wait for the five minute to close. Because I do have the five minute up on my same screen. And then I’m leading with the one minute.
Clay: Okay.
Speedster: And what I mean by that is I got spy up on the one minute as well and I also have the main indexes up on the one minute. Later in the day, I flip to twos but anyway.
Clay: Okay. But I mean at most is you have to no trades for at least four minutes, right?
Speedster: Yes.
Clay: So when you say, but it depends on the price action, that just means relative to whether or not you’re going to take a trade after four minutes? Or maybe you have to wait, let’s just say seven minutes?
Speedster: Yeah.
Clay: Okay. And I do know exactly what you mean because you’re right. Once that … Once you’re at five minutes, then the five minute candle only has one more minute before it’s done forming. And to your point, yes, in some situations, you’re like you know what? Unless something drastic happens, that’s going to be a bull pull or that’s going to be a bear bull. So that makes good sense in why four minutes does make sense because yeah, you only got one minute left for that five minute candle and then you can start to gauge things a little bit more. So I mean what other rules or what other things are you looking for within your set ups?
Speedster: Set up wise-
Clay: Maybe I derailed the conversation, what other things do you feel like you’re struggling with? I mean you’re getting in too early, but I mean let’s stay down this rabbit hole because I think there’s probably lots of listeners that can relate quite a bit. I know I can relate to what you’re saying.
Speedster: Yeah, I mean, just in general, around getting in too early. I have on my check sheet. Some of it I grade myself on, right? Like it’s not a hard thing. But I may give myself an A, B, or C if I … Did I wait for confirmation. Did I wait for a confirmation candle, right? Depending on the action that I’m seeing. Sometimes I do, sometimes I don’t. But I try to … When I do journal myself, I try to grade myself on some of those things. Confirmation candle is one of them, but it’s not a hard rule I’ll always do. But they generally do a better set up or a better entry or little bit better risk/reward. Let’s see.
Clay: Okay, so can I step in for a second?
Speedster: Sure.
Clay: So confirmation candle and I could have mis-heard. It wouldn’t be the first time in life, but confirmation candle is something you sometimes do. Is that fair?
Speedster: Yeah, and just to shed some light on it, I’m pretty much just trading spy options. 90% of the time. So a lot of different set ups will present itself, right? Because it’s I’m looking at one ticker. And it’ll vary depending on the day and what’s happen. So I’ve got certain set ups and certain patterns that I like. But in those pure candlestick action, I’ll play as well.
Clay: Okay I mean because what I heard was is yeah, sometimes I do confirmation candles, but when I do do the confirmation candles, usually those set ups work out pretty well. So in mind, I’m thinking okay well if confirmation candles usually work out quite well, then why not always do confirmation candles and make that a hard rule. But I guess what you’re saying is well because you’re only do spy, that’s not necessarily always going to be the case?
Speedster: Yeah, and that’s been part of my struggle I think. Because for the most part, I think a lot of people will just pick well okay, I’m playing bull flags or pennants or whatever. A particular pattern is I guess a way to put it, where I’ll play lots of different things. So I’m not … Because I’m just trading spy.
Clay: Not that makes sense. And you got to be a little bit more flexible within things. So now what are some … Unless you want to talk more about journaling, but you made the comment. It’s like … Well, I know there’s other things that I should be doing, but journaling one of them. Are there any other things that you almost have the guilty conscience about?
Speedster: The biggest thing goes back to the deer in the headlights and just honoring what I promised myself I’m going to do is … If I could knock that out, and limit my losses and not have these large losses, I’m going to be … That’s the goal. And that’s my only focus is execution on that. That’s my main focus. Because that’s what’s killing my account is these things that get away from me and just not honoring my stop loss.
Speedster: And I do … I will use a hard stop at times. But because of the fluidness of the options and spy itself sometimes. All of a sudden you can have a huge move and like the other day I thought, “Well, let me try with a stop on the underlying price.” And I generally would use a stop on the option price. But what I’ve found … Like the other day we had a volatility spike and all of a sudden, spy had one print like 50 cents down, right? Just all of a sudden a big old down print that had produced a huge tail, but the market didn’t go with it at all, right?
Speedster: You see those abnormal prints from time to time. And usually I’ll see it before a huge move … Like say I’m watching the five minute and I got my stop down there where I want it on my moving average and I had it in this stop on the underlying price. Well, it did the little … That print way down there. And right before the big move and I think I’d have that on my options, the stop on my options price, it was so quick, I don’t think it would have triggered but … So anyway. That’s one reason I don’t have a hard stop. Or if I do, I’ll put it in at like 50% of the option price. And that could be … That’s one of my max losses. It depends. I have a hard monetary value on my trades.
Clay: I mean I’m definitely with you in regards to there’s a time and place for everything. And mental stops, because of the reasons you … And this exists in just stocks, it’s not like it’s options. But sometimes you can just get these movements that it just spike in one direction or all of a sudden it’s surging. And then it just snaps back to where it was. And those are … I mean those are absolutely the worst things to get taken out on. So I mean sometimes you got to be almost a little flexible in your stop losses via mental stop because, I don’t know, is this thing actually a real move? Or is this just one of these things where the price, like you said Donald, gets a bizarre print where it goes some place. Then all of a sudden it’s … And this sometimes can be within several seconds. Sometimes it can be within like a minute. And all of a sudden, it’s okay well good. I’m glad I didn’t just freak out there because now everything’s right back to how it was and it’s looking like it might work out in my favor.
Clay: And but there are, like you said, other times where I would agree, where it is good to have a hard stop. And that is the nice thing about options. I suppose you could do it with stocks too. But with options, assuming you’re going long, is you have an exact amount that you know you could potentially lose. So you know what? I only want to lose 50%, you said, well that’s a pretty straightforward way to do that. And but I’m that’s definitely a good observation. That sometimes there are some crazy moves out there.
Speedster: Oh yeah.
Clay: So sorry go ahead.
Speedster: No, go ahead.
Clay: No, go for it. Go for it.
Speedster: I think I’m lost.
Clay: Okay, no, I am more than willing to pick up. I just wasn’t quite sure if you were going to drop some sort of Aristotlic type thought or if you’re about to go into Socrates mode. So all right, well I mean where are you right now? Are you doing well? Is your account growing? Or where do things stand at this point? Because it seems like … I mean nobody’s ever going to be a perfect trader and you’re very self aware, but I mean how are things right now? Or how have they been for … I guess the year wouldn’t necessarily be a great question because we’re only basically a month in. But I mean how are things currently going for you?
Speedster: I think they’re going pretty well. I did have a couple trades blow up on me at the beginning of the year. So I’m actually in the whole for the year at the moment. But mainly because just had … I should have been out at my max loss instead of being down 150. Was down, I don’t know, three or four hundred, and then the next day, did the same thing. The next thing I know I’m down seven or eight hundred bucks. And to be another year, where I’m just like oh my gosh.
Clay: Okay, and is this, when you say, blowing up against you, is this going back to what we talked about earlier where it moves quickly against you and then you’re telling yourself, I should be getting out. I should be getting out. Is that one of those situations?
Speedster: Yes, yes.
Clay: And did I hear that it happened basically two days in a row?
Speedster: Yes.
Clay: Well, I mean that actually makes perfect sense because the first one, okay. But I can see the second one where you’re like no, no, no. Now you have the no, not two days in a row voice that can show up, right? And that voice is a little bugger. Where it shows up and it’s like no, no, no, this is not happening to you two days in a row. And then it convinces you to continue to break rules. I think that’s one of the worst voices of them all. Is the no, no, no, not two in a row voice. And I mean not that it’s excusable, but I’m just saying I can’t say … And I’m sure you also had the voice show up … I mean for me it always shows up, no, no, no, it’s the start of a new year, don’t let … Don’t start the whole new year with a loss.
Clay: And so you have all those voices showing up and it’s … At the end of the day, it’s silly because it’s like who cares that it’s the beginning of the year? That’s really just an arbitrary point in time, right? It doesn’t really mean anything that it’s the start of a new year. That’s just … I mean a calendar. But those voices in your head, they will … At least in my head, they will grasp onto almost anything. But from there though, it’s … And what I’ve found and thank you for disclosing that. Because the thing about what Donald said is you should have been down 150 bucks but then it ended up turning into a $400 loss.
Speedster: Yeah.
Clay: And had you taken those losses as you should have, I would assume that you would be in the green on the year?
Speedster: Yes.
Clay: And I’m not trying to rub it in, I’m just trying to give listeners the context of … And this is why, again, Donald, nothing but respect. I appreciate you being candid and open is that is why, as difficult as it can be, just honor your stops. Honor your rules in the trade plan, because at the time yeah, it’s a bummer. At the time … Especially if it’s two days in a row, wow that is annoying. But here is Donald saying “Yeah, but had I just followed the rules, I’d be green right now.” Are you relatively close to getting back to green though?
Speedster: I think I’m getting there. I mean it’s a few hundred out but I’m not … And it’s been for … Don’t trade … Who cares, right? My goal is proper execution. I don’t care what my P & L says. I don’t really care if the trade’s a winner or loser. That’s what I’ve been focusing on. And that’s why it was so discouraging at the beginning of the year because I’d done my trade reviews for the year. I’m like okay, these losers are what’s kicking my butt. And so I’m like ready to go, right? And then as soon as this big move against me happens, it’s just like why are you not hitting the button as it drops? Now, why are you not getting out? Why are you not getting out? And it’s just like oh, but it’s going to go down to 200 on the five and then bounce.
Speedster: And it just is like … Anyway, it was just so discouraging because I was … I thought I was prepared for it. And that’s what gets me every time. As soon as I think I got a handle or boom, boom, I got this, that’s basically when I get slapped in the face. And deer in the headlights.
Clay: For either of those, did you get in within that first four minutes or were you … Did you still get in after the allotted amount of time that you should have?
Speedster: I really don’t get in before four minutes very often. It’s a hard rule. But it’s a not big kicker for me now. I actually think I broke it this morning. I think I got in as the second candle was about to close. But anyway.
Clay: Well, as the second candle is about to close. That means you got in at what? Three minutes and 57 seconds or something like that?
Speedster: It was stretching it. But the one minutes on the market were leading me to my decision to do it. So it wasn’t just-
Clay: No, I know what you mean. Because, for example, if I’m like well I want to see if this candle to be a woof. And whatever time frame it is … Let’s just say it’s a two minute candle and a woof. If you’re not sure, that’s just one of the candlesticks we talk about in the program. But let me … A hammer candle. There we go. A hammer candle is more universally known. So if I’m like wow … I got to give this candle enough time to see if it’s going to be a hammer. I mean for me, technically speaking, if it’s on a two minute candle or chart for example and it’s a minute and 50 seconds or a minute and 45 seconds. And I can sit there and be like, “You know what? I’m about 95% sure this is going to be a hammer.” Then at that point, yeah. I would just jump in. Even though okay well you technically broke the rule, you said you wanted to see the candle close?
Clay: That’s true. But there is also that area where it becomes abundantly clear that the candle that you want to see actually form is highly, highly likely to form just the way you want to see it form. So I mean you’re absolutely right. In that regard, there is some give and take. It’s not like oh wow, this is for sure going to be the candle. But nope. Got to wait seven more seconds, six, five. And then sometimes I mean you can get left in the dust so I’m all with you there on that. You still there, Donald?
Speedster: Yep.
Clay: Okay, sorry. I didn’t know if you cut off or not. Well, all right. So you’re battling back. And to me it sounds like … It’s not an issue of you can’t read charts or you can’t do any of that sort of stuff. It sounds like … And I suppose I mean you’ve already brought this back but it’s all up in your mind. It’s all psychology. And way back at the start, you made the comment about how you’ve been working on it and all of that. And I mean how have you been working on the mental battle? Which is still a mental battle as it always is for all traders. But I mean over the … I mean did you read any books?
Clay: Or were you doing anything specifically that just helped you realize that? It sounds like your problem is just, like you said, the ego and the fact that it’s, I don’t know, it sounds like the biggest hurdle. And correct me if I’m wrong, it’s almost like you equate a losing trade which means a bad trade. And a bad trade means that you’re a bad trader. Is that … Does it sound reasonable that that maybe could be where this ego thing is coming from because you want to succeed and you’re associating a losing trade automatically meaning you’re a bad trader and not succeeding?
Speedster: I don’t know if I’m associating it with a bad trader label, but I know my ego doesn’t want to lose the money. Or take the loss. I mean so-
Clay: But not from a monetary standpoint, right? Like you said, you’re not playing with amounts of money where if you take the loss then uh oh, the gas bill doesn’t get paid, right? I mean … And this will sound bad. But I know you’re not going to … You don’t mean it in the way that it could sound. But you don’t care about the money, right? If the money goes up in flames, you don’t care in the sense of that doesn’t affect my normal day to day living. Is that accurate?
Speedster: Yeah, that’s right.
Clay: Okay, so then we’ve eliminated the reason that you don’t want to take a loss is because of oh crap, I really need that money. It’s totally, like you said, an ego thing. So but what’s the ego then? If you’re not … I mean what is driving the ego? Because it’s not like the ego of I got to be right because I need that money to pay the bills. It’s just a matter of what? Like you think that if you take a loss, fill in the blank? If you take a loss then what? Because it doesn’t matter from a budget perspective.
Speedster: It’s … The ego just didn’t want to take the hit, I think. And-
Clay: But what does the hit represent? I guess is what I’m getting at.
Speedster: I think the … I guess it’s a loss.
Clay: So what does a loss represent though? Because monetarily speaking, the loss doesn’t matter.
Speedster: To me, I guess, it’s because I’m not following the proper execution. And I put myself in that position, right? And like I’m okay with a planned loss. It’s just when it moves against me way quicker than I can get out and then all of a sudden, I’m well beyond my planned loss. That’s when that ego’s like I can’t take that. I just can’t hit the button. And I think it’s just a … I don’t know, wanting to be right. Because I see a properly executed trade as a right trade, as a proper trade, right? It’s when … It’s the execution that’s … I know I’m a loser when that happens and I get out and I’ve exceeded my stop and my max loss limit.
Clay: How often are these trades happening where they just shoot against you in fast amounts of time? Is this like … Because I’m asking because you made an interesting comment … Well, the plan losses that just go however, then it is what it is. Let me ask it this way. Why are … I mean is there a way what you can plan for these fast moves? Like is there a way that you can … Go into trade where you expect the fast move to happen? And if it does, who cares, you planned for it. And if it doesn’t, hey that’s great, it didn’t happen. I mean is there a way that within your strategy that you can just go into and say all right, let’s just say that a fast move happens. And then plan for it based on that premise. Is that possible within what you’re looking to accomplish?
Speedster: I’ve tried to account for it by just having a larger stop. Just putting in a hard stop. But it’s much larger than my planned limit so I struggle with that. I don’t know.
Clay: So okay which I would say that’s a very valid, and that’s where I would start. But my question is how often are these moves happening though? Because it sounds like they should not be happening that often. Where something just all of a sudden boom against you. I mean to me mathematically, if they happen rare then okay yeah, sure. You’re taking a little bit bigger of a loss than you should, but it’s very rare anyways. So yeah, it’ll bite me every now and then, but I’m within the grand scheme of things. Because it’s rare, it’ll … It’s not going to make a difference. So I guess that … In my mind, that’s a key variable here in this equation is … I don’t know, it’s a bit confusing how often is this stuff happening to you where you get these movements?
Speedster: I mean I would say watching the spy, at least once a week, there’s generally some kind of market moving stuff midday, right? Or different stuff gets released. And I usually track all that. Not that I track it. But that’s part of the routine in the morning of okay, what’s getting released today and when? So I just note those times. But there’s still unexpected stuff happens right? A Trump tweet drops.
Clay: Yeah, but that’s rare. That’s still rare. That’s not once a week. That’s just … I mean a Trump tweet, you can’t blame big losses on a Trump tweet. I mean you got to be able to have that factoring in at least somehow where … I mean I get what you’re saying the spy can just move. But I’m almost picturing where you get in all of a sudden, like some sort of algo thing happens where it just jumps. But it doesn’t … I don’t know. To me, it seems like once a week, I mean that’s rare, but it’s not like super rare. But I mean Trump’s not out there influencing the market that often, right?
Speedster: It comes and goes. You know.
Clay: Right. But I mean, let me ask this? When are these losses happening? Is this afternoon trading?
Speedster: I think it’s a mix. I know at times … I try to do the open and get my money made if you will. And then, look for stuff later in the day to play in the afternoon maybe. But some weeks, I’ll be knocking out the opens and tanking on the afternoons. Or vice versa.
Clay: Why are you even bothering with the afternoons if you make your money in the morning? What are you bored at work?
Speedster: No, I just-
Clay: Are you sure?
Speedster: I like to be-
Clay: I find myself trading in the afternoons quite a bit because I’m not necessarily trading, but scanning the markets. And I’m looking at everything and this is garbage, what am I doing? Oh I guess I’m bored right now. I mean you’re not alone if you find yourself trading in the afternoon because you’re bored. I mean I … I’m still tempted by that. But to me, and that’s why I had to ask about the time thing is I fully agree. The crazy movements. The weird stuff definitely happens and can happen a whole lot often in the afternoon when the volume’s not that active. And it really doesn’t. It could be something almost silly, but that can cause a spike in the … When the volume’s much lower in the afternoon.
Clay: So I bet, my wager is this, if you were to go back and look at the time of trades, I think the ones that really spike against you … I’m not going to say every single one but I bet a lot of them are happening in the afternoon when volume drops off quite a bit and things just get choppy. I mean that’s the definition of choppy is you’re going to get chopped up for basically what you’ve described is you just getting chopped to pieces. I mean so I would … Just listening and you can take my two cents but it sounds like you’re doing very well in the morning. So be a 90 minute trader. Be like you know what? I got myself 90 minutes. Now if it takes a little more than that, that’s fine. But I’m going to trade the most volume of the day. And then after that, it is what it is. I mean it’s not like you need the money. You have a full time job. So I mean why even trade in the afternoon?
Speedster: Well sometimes opportunities present themselves.
Clay: Yeah, the opportunity to get chopped up.
Speedster: Well, sometimes there is plenty valid opportunities, right?
Clay: I don’t know. Give me a valid opportunity in the afternoon?
Speedster: Okay. There’s typically a sell off or a bunch of buying the last hour and 30 minutes, 15 minutes right? Sometimes I’ll just wait. I do better at the waiting and waiting for the trade in the afternoon though for the set up. But I do more hopping too early in the mornings. I mean in generally speaking. But I just look for that and if it’s obvious, or if to me it’s obvious, something like that happened. I like to play these … The shorter moves that happen more often. You know what I mean? The more probable moves. And if they present themselves the last hour, I’m going to hop in.
Clay: And I mean that’s fine. It’s hard to really have a discussion without knowing exactly when these … I don’t know what we want to deem them, these top trades that all of a sudden who up and get you. I mean I’d be curious though. And that is a data point from a time perspective, when exactly are these taking place? And I don’t know. That might be something to consider is I get … I’m not refuting that you can’t have a good looking set up, but there’s more behind the looks of a set up. There’s the fact that you have the calendar context. Or the time context. And if it’s the afternoon, like penny stocks, that set up can all of a sudden go kapoof against you real quick because yeah that looks … I mean I can find set ups that look good that average 10,000 shares a day. I mean but that doesn’t mean that the set ups are actually good just because there’s not that much volume. But so that’s just … I mean that’s … But I don’t know. I could be totally wrong.
Clay: Maybe you’re like, “No, actually Clay, all my rare or all my big choppy trades happen in the morning session.” And in that situation, I don’t know, maybe you should be trading in the afternoon. But have you ever looked at that though to try to gauge when’s what?
Speedster: Yeah. I mean I try to be aware of closing candles. The 15 minutes can close in the 30, then the hourly, and then obviously during the day. You never know right? It could be very choppy. Sometimes though if we’re trending, you may get a pause, but we have had some days where we just take three legs down, right? All day. Over the course of the day.
Clay: How do you do letting your winners win? Because that … You’re actually making a very valid point is yes. You can also get, as you just described, some legs down. And you can get some nice trends. I can’t refute that. You’re absolutely right. But that’s a two sided coin is okay, well that implies that you’re really getting a nice move in your favor. So that’s why I asked well how are you doing letting winners win? Or are you just cutting yourself short? Cutting short … Not short from the … You know what I mean. Are you hopping out too soon?
Speedster: Well, I think I do pretty good job of hitting my targets, like mitigating my targets. That’s probably one of my greater strengths. Now I don’t always let them ride and catch every leg because sometimes it’s like, okay, I got to go back to working. To a meeting. Or do some real work kind of thing. So sometimes I’ll get out, but I’ve … Either candlestick action in certain key areas. I’m just … I’m [inaudible 00:54:51] but I’m playing by feel, right? My mitigation. But I do have my targets mapped out and I’m just watching the candlestick action and that tells me if I get out or stay in as well as other things.
Speedster: The overall contact, the markets, and what else is happening that day and just what stuff looking like. If I think we’re going to continue down or up. Continue, if you will. I don’t know if I really answered that.
Clay: No, you did. It’s … Because I guess my point is if you have those ones that go bonkers against you, theoretically, I would think you have some that go in your favor. I mean if they can snap up against you. And every now and then, you should have them snap down in your favor and but the key with that is well are you actually taking advantage of those times where they snap in your favor? And if you are, well then over the long haul, then that should at least equal itself out where then the strategy can still work and you don’t have all these big steps back. But putting all that aside, it’s not really a matter of the big moves, it’s just a matter of you getting out when you should be getting out when a big move happens.
Clay: I mean we’ve already discussed but the one loss should have been 150 and turned out to be 400 or whatever. So it’s … And I’m not saying that you were blaming external forces but it’s not the move that is getting you, it’s just your lack of wanting to acknowledge the fact that you need to get out.
Speedster: I go back to the undisciplined trader habits. And that’s … I told myself this year I’m born again. I am no longer the novice trader. I need to do professional trader habits. And that’s helped me keep my awareness on doing what I’m supposed to be doing, right? At least that’s how I tell myself.
Clay: It sounds just like you’re angry that a big move is going against you. So out of the anger, you’re like no I’m not going to get out here because it’s going to go back in my favor or … I don’t know. I just … I mean if you went in expecting 150 dollar loss, I mean would that help at all? Or I’m just trying to … How can we overcome this hurdle here for you where you just … It sounds like to me you’re angry at the move. You’re angry that it’s behaving in a certain way against you. And because it’s a fast move, you feel like you’re somehow … And sure, I get it. It blows through your area. But okay, well then take … Instead of having it be a $150 loss, just take the $200 loss instead of having it go to $400. I mean do you feel like you’re angry that it’s acting the way it is? Or are you just … Is it just … I mean because I get that you say oh I’m just like a deer in the headlights.
Clay: But that’s not really … I get if you’re a new trader, I’ll buy the oh I was like a deer in the headlights. No, it’s not like you’ve never seen this before. So you being shocked that something shoots up against you, I don’t know if I’m buying that reasoning. I think it’s more of a … I think you’re just angry that it behaved in the way it did. So you’re … That anger is manifesting itself in you not wanting to take the loss. Because I mean Donald, like you said, you’ve been around since the start. You’re not a deer in headlights. You know the market can be crazy.
Speedster: Knowing and doing are two different things. Being self aware and actually doing that. I think that’s … You talking about angry. I don’t think I’m angry at the move or the market. Because I know that is irrelevant. The market doesn’t care if I’m mad or not. But I get mad at myself that I didn’t get out. If that makes sense. And then after that, it’s just like oh my gosh. And then I’m the deer in the headlights. But it’s just when I don’t do what I’m supposed to do, I’m just like I’m mad at myself more so than … Just to clarify your point on being angry. And I do get mad, but I’m pretty sure it’s just me not doing what I know I should be doing. It’s like why am I not doing this. But anyway.
Clay: No this a good talk. And I mean there’s lots of ways. But to circle this all the way back to where we are, it’s really just a matter of being self aware and you were very self aware, this was a very … We probably got in the weeds a little bit, but that’s good. That’s why I like this show … We have sometimes where it’s more broader. Sometimes we’re getting down into the weeds and the weeds can be a very beneficial place so I think this … And I have no idea if you had a bunch of other stuff to talk about. But we’re basically at an hour now. So worst case, you can always come back, but we’ll wrap things up. Unless did you want to make any other comment or point or anything? I mean I don’t want to cut you off if you had something else that would make Aristotle quiver in his boots.
Speedster: I don’t know if I have anything that profound, but I’m not making excuses for myself but I wish you’d have been around before I got started because I wouldn’t have got so ingrained in some of these bad mental habits that I have. And I also just wanted to shout out to some of the guys in the inner circle chat room. You’ve had some people on that I’m envy of because they’re not the lazy student like I am. They’re getting on here and a lot of them have military backgrounds which is great. They instill discipline in them and I thank them for their service as well.
Speedster: But they’re knocking it out and they’re doing the stuff that … They’re doing stuff I should have been doing to make those good habits in them. I really like seeing those people and but again, I’m envious of them because I’m not doing that so I’m trying to be like these newer people actually that are … They’re doing what they’re supposed to be doing the proper way. And I think they’ll never fight these bad habits. You know what I mean? They’ll knock them out in their early days.
Clay: That’s what I always … People are like, I don’t know, Clay, am I too new for this stuff? It’s like no, I assure you, being brand new with a clean slate, that is the best … Now assuming, of course, you’re going to approach this in a structured way because yeah. Bad habits, they can be conquered, but this whole … I mean this whole conversation just shows the bad habits where yeah. They’re out there. They exist. But when you start, like Donald was saying, with a totally clean slate, I mean that still doesn’t make anything guaranteed, but it’ll at least make some things a whole lot more less headache inducing. I don’t know what term I’m looking for, but that is definitely a good point.
Clay: You’ve been around long enough and I think maybe a little bit of it is you have a part time … Or not a part job. You have a full time job. So it’s not like you don’t have the motivation of all right. Let’s keep on driving and driving and driving because it’s not like you’re going to be living under a bridge or anything like that. So I don’t know. Sometimes I feel like … I think you’re being a little too hard on yourself. I don’t think you’re necessarily a lazy trader. I just think you hold yourself to a very high standard which is good. But yeah. It sounds like there’s some things. I mean if you feel like journaling would be better then yeah. You might as well just hop on the journaling bus and get more consistent with it.
Clay: But like I said, at the end of the day, the one beneficial or the big beneficial attribute you have going on is self awareness and that’s just such a big part of the battle. So I mean from that point of view, props for that.
Speedster: Sure.
Clay: So are you feeling good, Donald? Does it feel like you got everything off your chest that you wanted to get off?
Speedster: Yeah. I think it was good.
Clay: If so, then I can wrap this up. But like I said, I mean if you want to go down another rabbit hole, we can go down another rabbit hole, or but that’s your call.
Speedster: There’s always rabbit holes to go down.
Clay: That is true. That is a valid point is at what point do you stop and say … Well, we’ll just cut it off here. I think from a listener’s standpoint, we have a good core underlying theme of self awareness and how when you’re self aware, it can lead you to have conversations like we had here. To help figure things out. But at the end of the day, I mean you know how to trade, it’s just the emotions. But like I said, yeah, you just get out when you’re supposed to get out. And the account will grow. I mean you’ve already fought back quite a bit in one month from where you were. So I would say the momentum is in your direction.
Clay: But hey, Donald, I appreciate you taking some time out of your day, hanging out, being candid, just sharing your journey, not trying to show up like you got it all figured out or you’re the greatest thing since sliced bread so … And again, thank you for volunteering to be here.
Speedster: Sure, thanks for having me. It’s always good. Hopefully, some people learned some stuff.
Clay: Well, if they didn’t learn anything then they weren’t listening, because there was a lot of good stuff. Now if you’re brand, brand new, the learning lesson would be maybe sure you didn’t maybe recognize a lot of what was being talked about but just realize that yeah. Trading is more than signing for hot stock picks or some sort of signals or hey can you tell me when to buy and sell. No, there’s a little bit more that goes into trading because of the human psychology mark. So if you’re brand new, then yeah. This is exactly how that works.
Clay: So thank you again, Donald. Now for you listeners out there before we wrap things up first off if you’re listening on iTunes or any of the other podcast players, Spotify, make sure to subscribe so you know when new content comes out. And also, especially on iTunes, if you could leave us a rating. And in particular a written review, that goes a long way and would really help us out. And I would really appreciate it. Or if you’re listening at claytrader.com on the Show Notes page, there’s a little live chat box there. So feel free to reach out with questions, comments, suggestions. We love to hear from people that listen to the show. And any feedback or suggestions would be highly appreciated. So thank you again, Donald. Thank you again to all of you as listeners. We will see you back next week.
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