While it certainly is not the glamorous pathway to take, sometimes the best solution for problems is to take a step back and put yourself through unfavorable steps. I welcome back long time member Kainoa and he updates us on everything that has been occurring in his journey. As a small spoiler, he has had to make some tough decisions over the past couple of years that were not easy or enjoyable; however, as you will see, they have proven to be the wise actions to take. I really enjoyed this conversation as it does a great job of illustrating (and hopefully reassuring some of you) that there is no shame in hitting the pause button and reevaluating your current location in your trading journey. Hitting the pause button and “doing what needs to be done” is not always going to be rainbows and butterflies, but if you want success it’s what needs to be done.
Clay: This is The Stock Trading Reality Podcast, episode 266.
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 everyday normal people who are currently on their journey to trading success. This is your host, anyone live in San Diego because he wants to visit, ClayTrader.
Clay: Well, this fun fact is actually sort of ironic. The way it’s set up is I submit a big list to the voiceover guy and then he does him all at once. So at the time when I had done this list and this is actually the very last one on the list we sent over, I had not been to San Diego and that was definitely something that I wanted to do. But it was a big list. So in other words, this was submitted several months ago, but I’m happy to report at this point, no worries. I mean, I will not be needing to sleep on your couch. I will not be needing to mooch off of anything because I’ve actually been to San Diego within just actually the past couple of weeks.
Clay: I went out to visit a buddy out there and all I can really say is it lived up to the hype. Very, very nice. Although correct me if I’m wrong. This might just be my imagination and I get it. This is from a statistic standpoint, a data point, a sample size of one. But I’ve been out to San Jose too which is Northern California and I felt like Northern California just was less humid, I guess. I felt like I was sweating a little bit more in San Diego, but I just thought as a whole that California didn’t have any humidity at all. Like said, I could be totally wrong here. I don’t know California geography that much.
Clay: Now, don’t get me wrong. San Diego weather was fantastic. But as of right now through my experiences, I’d have to choose San Jose weather over San Diego. But again, full disclosure. I went totally different times of the year. I was in San Jose in September and I was in San Diego early March. So I’m sure that reflects on things too. But point being, I finally gotten out to San Diego and it really was nice. I was a little worried about the traffic. That’s the five. I think the five is out there and I definitely saw some backups. But my buddy I was staying with, he’s lived out there so he’s kind of got all the, “Well, if you go at this time, it’s not that as bad as if you go that other time.”
Clay: So there was never really any being stuck in traffic or anything like that but it was a great experience. So, yes, I have actually visited and this was kind of… I totally forgot I did this fun fact and I should probably move it up earlier before I had never visited, but hey, I have officially visited. As for our guest today, we were doing a welcome back episode with Kainoa who as I’ve said before, Kainoa has the best name. As far as the names I know, I can’t say that I know every single name within a community. But as far as I’m aware, Kainoa, coolest name of the community he was on. We discussed and we narrowed it down to right around, we’ll call it a year and a half-ish ago.
Clay: It’s been a long time and he’s had some hiccups, he’s had some headaches. But along that, because he shoots straight, he’s transparent. There’s a lot of little learning lessons. He’s doing much, much better now and we go down the rabbit hole of what does his life look like, how does he behave from kind of a money perspective. I just loved it because it really does show the whole true life aspect of trading and what a normal everyday trader is going to look like that you might pass next to on the street.
Clay: A little spoiler, it’s not going to be like what you would see on social media. But we go down all sorts of fun rabbit holes. There’s a lot of great benefit so it’s a conversation I’m very very confident you’ll get, at least for sure, one nugget of wisdom but probably get that much more. So let’s get on with Kainoa and get an update on his journey.
Clay: Kainoa, welcome back to the show.
Kainoa: Hey, Clay. How you doing?
Clay: I am doing very, very well. Now, we just spoke a few days ago. For listener’s sake, Kainoa was on our Tuesday night webinar which offers members the Trading Freedom Pathway program Tuesday nights or live webinars and sometimes we’ll have on fellow members to talk about their trading and Kainoa was just on. On that, it kind of dawned on me, wait a second. So I had to ask him when was the last time you were actually on the public podcast and he’s like, “I don’t know.” What did we decide? It hasn’t been over a year?
Kainoa: Yeah. I actually looked it up recently and I believe it was December or sometime near the end of 2018.
Kainoa: Yeah. That’s when it was published.
Clay: Okay. Well, regardless. I’m not a mathematical genius but we’re looking at well over a year and maybe even two years.
Clay: Okay. All right. Well, good. We have a lot to catch up on. Again, thank you for coming on Tuesday night by the way, insuring your trades. It sounds like people want you to come back so we can talk some more. But things have been going well for you, because even after that, you continued to… I’ll just let you speak for yourself, but I’m getting the impression that things are continuing to go well?
Kainoa: Yeah. Things are definitely going well. Last time we talked on our previous podcasts, I alluded to a lot of the emotional struggles I was having if you will when I was… After going through your courses and starting to trade, at the time, I felt like I still wasn’t necessarily ready because I was forcing trades due to my emotions and stuff. But since we’ve talked then, I’ve continued to have a lot of practice going through the archived webinars and watching live trade videos as well as still participating in the webinars you host every Tuesday. Now, I’m definitely doing a lot better. I feel like I found my niche if you will. So I’m happy where I’m at right now.
Clay: Remind me what did you start off trading? I know right now you’re doing stock, but way back when you were initially putting your money in the market, has it always been stock or did you start off in like options or something?
Kainoa: Yeah. So I initially started with options due to, I didn’t have $25,000 to avoid the PDT rule. So one of the things you suggested to avoid that was if you have a smaller account then start with trading options. So that’s what I initially started with.
Clay: And I’m not saying that you should change or anything, because like I said, you found your niche. But did you ever look into the micro futures at all because I know last time when you were getting started, the micro futures unfortunately didn’t even exist since they’re still a relatively new thing, but I mean since they’ve come out, did you ever look into them at all?
Kainoa: I have not. I’m aware that you have put together a course on YouTube, correct?
Clay: That is correct, yep.
Kainoa: An introductory course. I haven’t checked that out yet so no, I haven’t trade any of the micro futures.
Clay: Okay. I mean, there’s really no need for you to check it out. I was just curious because I know your buddy, Kevin is doing very-
Clay: I know. He’s doing very well with him and I didn’t know if you guys had…. Well, he’s moved. He’s in Texas now right?
Kainoa: He’s moved up to Boston.
Clay: I thought he was moving to Texas or is that somebody else?
Kainoa: I’m not sure.
Clay: I could have sworn he was moving like Austin, Texas or whatever. Maybe I’m confusing him with somebody. He’s an engineer though too right?
Kainoa: Yep. So me and him met where he used to work and where I still work down in Newport, Rhode Island. So we’re good buddies and we still keep in touch, so it’s all good.
Clay: And you’re sure he went to Boston.
Clay: Often, I’ll have to ask him in the chat room. I don’t know. Maybe it’s just somebody else, but I thought for sure he went down to Texas. But that’s neither here nor there. You never really looked into micro futures. I guess let’s kind of fill in the gap here because the last podcast you started with options and as you said, “Welcome to the club. You were making lots of decisions based on emotions and stuff like that.” Now, you’re all the way here. So I mean kind of fill the gap along the way. I know you did, as we talked but on Tuesday night, you stepped away from the markets for quite a while.
Clay: So hopefully that’ll come up because I think there will be some good talking points within that, that listeners can learn from. I’m not saying just go through every little detail, but in a broad sense or I guess as detailed as you want, fill in the gap kind of from where you were from the end of the last podcast to essentially where you’re at right now.
Kainoa: Yeah. So my ultimate goal has always been to scalp or quickly go in and out with stocks rather than options. And so that was my ultimate goal to be able to do that on a daily basis. So after I took some time away from the markets, I decided that I need to spend more time practicing and while I’m doing that I’m going to continue to save up capital from my job so that I can get to the point where I can have enough capital when I feel like I’m ready to trade to be able to utilize the strategy such as your strategy with the scalping with an account that was over $25,000.
Kainoa: That’s basically the high-level overview. So since we last talked, I took some time away, wanted to save money to have more capital, and then in the meantime just practiced a lot going through the archived webinars, practicing the the trades and the webinars so that I could feel more comfortable with my chart vision and stuff like that.
Clay: I think you pretty much answered it, but I was going to ask… So I went away on a practice and practice can take many different forms. But for you, practice was going through the archives of the webinars. I mean, were you doing anything else for that practice or was that mainly your key driving force? I guess dig a little deeper into your idea of practice. I get it, live webinars, but were you doing other things too?
Kainoa: Yes. So it’s primarily the webinars. So I tried to get into the habit and the routine of watching at least one hour card webinar a night throughout the week. I kind of picture it like football practice or batting practice. You have teams that practice every day to prepare for the game. So in my mind, I was trying to get in habit to practice consistently going through the webinars and while I’m doing the webinars, I have a little notebook that I write all my notes in.
Kainoa: As you ask questions, I will write down the answers as if I’m typing them in to the chat box to you and that really just helped me gauge a lot of the lessons that you offer or provide in each of the webinars. It helped solidify them in my mind. And then outside of the webinars, although I wasn’t trading, I would still keep my eyes on the market, look at charts throughout the day and paper trade. But that was basically the extent of it in terms of practicing.
Clay: With the archives, I like the analogy. It’s like a baseball practice. So really any sport you practice every day for you as an hour. Did you go through all them? I mean there’s a lot at this point. One a night, I mean you would have been chewing through those pretty quick.
Kainoa: Yeah. It’s not like it’s been perfect since we last talked. It’s not like I watched five webinars every single week since. There’s definitely been times where a week or two go by where I didn’t watch anything mainly just because either I just didn’t get around to it or busy traveling or work or such. But at this point, I had my notebook outside of me right now. The last archive I watch was episode 205. I’ve been going in order since episode one.
Clay: Okay. Well, that kind of cuts off my next question because I was curious if you’d ever overlapped and watched any of them again meaning you watch episode 10 and then, I don’t know, let’s just call it 10 months later, you’re back and watching it again. I was curious if there was any value. I couldn’t remember what actually happened in that previous one, but it sounds like you have not double watched any of them.
Kainoa: Nope. But it is kind of funny because I’ve caught up to the point where I am watching webinars that I previously participated in live.
Clay: Oh, okay. All right.
Kainoa: But what’s funny is I still don’t remember what happened. So I’m still writing down my entry and targets and stop-loss as if I didn’t watch the webinar to begin with. It’s funny because I’ll see you. You’ll be like, “Hey, let’s see what Kainoa was thinking.” Then I see you drag over my trade plan and it’ll essentially be almost the same thing or slightly different. It’s kind of funny when that happens.
Clay: I don’t know. I mean I never thought about that. So for listener’s sake. Some of the classes we do, we’ll put trade plans together and everybody is going to have different trade plans. So I’ll take a screenshot and at times just bring them over so everybody can see them and we’ll go through. But I never thought that if you were to go through it and don’t remember what you ever put anyways because it’s several months later than in your situation. You literally could cross-check okay, what was my trade plan then compared to what was my trade plan at this point. I wish I could say I was that clever to have designed it that way, but I never even really thought about that but that would kind of put a unique little twist on things.
Clay: That’s good feedback, very helpful. So thank you for sharing that. Did you read any books or anything? I know sometimes trading psychology book stuff like that can get relatively popular and I’m not saying there’s no value to it but were you reading any books on any sort of mindsets or psychology or anything like that?
Kainoa: I have read some books, but I read books more so in the very beginning of the journey. I know on your resources page, on your website you suggest some books to read such as Trading in the Zone. So I’ve read that. But since we last did the podcast, no, I haven’t read any trading books per se.
Clay: Okay. So I always like to ask that because there’s a lot of opinions. There’s a lot of ways people approach all that and some people are, “I’m a big believer in book.” Other people are like, “No, you just got to get out there and do it and just learn about the way your mind works when you have real money on the line.” I mean, there’s no right or wrong way to do it. Feel free to, if I’m jumping too far ahead, but on the webinar we talked about you had to take a step back and that’s when you switch from brokers and all that.
Clay: There was a certain event that caused you to just kind of decide to step back and say, “Let me revise the situation here.” So I mean can you talk about maybe what led up to that or just talk about how ever you best to think to talk about it? But do you know the event I’m talking about?
Kainoa: So as I said the type of strategy that I want to continue doing is the scalping strategy where your initial entry point is at an overextended area on the chart and the idea is that once you get filled, you can quickly get back out if the price goes back in your favor, but if it doesn’t then because the charts overextended to begin with, you can build into a position and try to manage the trade from there. What happened was I was trading Tesla and I was using both the two-minute and five-minute chart and my initial entry was over extended to the two-minute chart, but after looking at it, after the trade, it was really in a fresh breakout territory according to the five-minute chart.
Kainoa: I would say in my logic a breakout on the five-minute chart is much more significant than a breakout on a two-minute chart or a lower timeframe chart. What happened was my initial entry on Tesla was like I said straight into a breakout, which I didn’t really see at the time. I got filled and then it started to go against me. At the time, I didn’t have too much practice still when it comes to having to build into a position. So I was building and I think my building was not spread out enough. What ultimately happened was my position became too big where I couldn’t continue building and the price kept going against me and it came to a point where, okay, I’m just going to put my stop loss at this point on the chart.
Kainoa: If it fills me there then I just got to get out. The way the strategy works is after building a big position like that, if you get stopped out while it’s still going against you, it’s going to be a significant loss. So when that happened, I just said I clearly still need to continue practicing this type of strategy via the webinar is your live trade videos, etc. So that’s why I decided to close that account and take some time off and keep practicing before I felt confident to trade again.
Clay: Maybe I misunderstood you, but let’s just make sure that you’re actually blaming the right thing. So you had made a comment of you didn’t space out your builds maybe far enough. I would contend that that was not the problem. Do you know what the true problem was?
Kainoa: Not setting a stop-loss.
Clay: No. Come on, Kainoa. Come on, man. Your entry point was the problem, right?
Kainoa: Right. It wasn’t at an overextended part enough.
Clay: Exactly. So once that is off, then it really doesn’t matter. I mean, now of course in hindsight, you could like, well, if I had added there and then I added there, of course you can make pretty much anything work out. But the reason why it became very difficult to maneuver was because like you said, your first entry point was not at any point when it was overextended. Is that right?
Clay: Okay. So do you see that that was the actual problem? Not anything else. Not the stop-loss, not a lot of build with enough space. The problem all began on your entry point.
Clay: Okay. I don’t want you to go out there and start to address the wrong problems there. Thank you for sharing that because this is what brings up a very big talking point and I can see listeners being like Clay, dude chill out. It’s just an entry point. That’s not that big of a deal. You can maneuver. That’s true, but as my favorite… And I’ve said this many times on the podcast, but I guess it doesn’t hold perfectly true to trading but in real estate there’s a saying out there, “You don’t make money when you sell. You make money when you buy because if you overpay for a deal, then you’re in a tough spot. With at least the strategy that I was talking about, if you don’t get in at the right spot, if you don’t get in within the right criteria for that entry point then everything else becomes, I’m not going to say impossible, but it’s going to become a very, very dangerous and a very, very risky trade.
Clay: So my point here is that in trading sometimes it’s just a little thing that needs to go wrong that can throw everything else off. Because you’re in trade and you have the entry point. You have the setup itself, and then you have the way you manage your trade and you have targets and you have stop losses. I mean you have all these different components so to think though that one little component could throw off everything, welcome to the tricky world of trading because that’s exactly what can happen. Let me ask you this, Kainoa, had you gotten in at your first entry point where you should have been in and maybe you’ve never done this, but would you have been okay?
Kainoa: Yeah. Actually I would have been okay ultimately if I let the trade play out.
Clay: No. I’m saying, let’s say that you had gotten in at your first entry point. Let’s say that you had gotten in under the certain criteria that you should have gotten in at, would you have been totally okay then?
Clay: Okay. So I mean of course even had you waited, you would have been okay with the trade where you ended up losing money but that’s all hindsight. I mean it would have been no problem at all had you waited for the proper entry point, right?
Kainoa: Yep. And one other thing I just want to mention too is as part of when I first was trying the strategy, I know after watching your videos there’s lots of canceled orders. The price will just come shy of what your initial entry point is and then you’ll cancel the order because at that point your order is no longer at an overextended point. One of the things I did was I never canceled that first initial order because it came up, came and just shot at me and at that point I should have canceled that and moved it further away. But I was stubborn at that time and left that order there thinking, “Oh, it’ll come back and then go back in my favor and it didn’t. So that was another aspect to it.
Clay: Let me ask you this. Had you been watching and waiting for it for quite a while?
Kainoa: I guess so.
Clay: I just asked because for me I know exactly… The way it usually plays out is “Okay, I identify so this looks good and okay, if it can get up to that point, I’ll put my order in. Then I’m watching and a minute goes by, nothing. Again, I’m watching and then I’m watching.” Before I know it, I’ve been watching in a few minutes. I’m getting tired here and then it goes up. It almost gets filled, but it goes back down and then I’m thinking, “Well, I’ve been sitting here for five minutes now. There’s no way I’m not just going to cancel this order because that’s a total waste of time.” Then you get filled, but at that point, so what you’re saying is well, you shouldn’t have been even in anymore.
Clay: My guess would be you probably maybe already having watched that for a while and maybe that… I don’t even know what the name of that voice would be called. Well, you’ve been spending this much time on it anyway so you need to get filled now and really their entry point has totally changed or something you shouldn’t be filled at. So I guess if anything, just be aware of that given that like I said we’re trading pretty similarly. Just be very careful. It’s very real where you’re all of a sudden you feel like a self-entitlement.
Clay: You feel entitled to the entry point because I’ve been watching this thing for this long so I’m entitled to the entry point now and I’m just going to wait until I get filled no matter really what goes on. Maybe you’ve experienced that, maybe you haven’t but I could see that maybe being a reason why when you should cancel an order, but you don’t… I mean for me at least I know that’s the voice that’s causing that. Have you been there before?
Kainoa: Yes. If you could see me, I’m nodding my head agreeing to you, yes.
Clay: Our minds are so weird. It’s like the market doesn’t care that you’ve been spending two minutes or three minutes, or four minutes, or five minutes or really for any strategy. If you’ve been watching something for… I mean, maybe as a swing trader you’re like, “Man, I’ve been track of this thing for a week now or for two weeks now. So I’m trading it now.” The market doesn’t care that you’ve spent all that time. You can’t let that entitled voice, whatever you want to name it, you just can’t let that screw you up because I can see that from any different angle.
Clay: It’s funny how the mind just wants to use any sort of justification as possible to get you to do something that you shouldn’t be doing when it starts to violate the rules of your criteria. But yes, you really nailed it. If you’re not canceling orders, multiple times every day, then you’re not doing the strategy right.
Kainoa: Yeah. I would say like probably 4/5. So I don’t know what the ratio is but by far the majority of my orders end up getting canceled.
Clay: Yep. And that’s what always makes me laugh on the YouTube videos and people are like, “You’re scared.” They’re implying all these things. To offer them some defense, I get it if you don’t understand that the logic of the strategy, if you don’t understand what needs to happen, how you need to behave. From that reference point, I mean yeah, it does look like what kind of strategy is this. All you do is cancel orders, cancel orders. I understand, but it’s also kind of a lesson. You probably shouldn’t comment on things when you don’t really understand them just because what you see doesn’t make it a reality.
Clay: I always laugh when people are like… I’m not going to use the language here because there could be kids in the car listening as you listen to this, but there’s some really good armchair, professional YouTube traders I like to hang out in the comment section and comment on things and it’s just like, “Okay. You clearly just have no idea what I’m actually trying to do here.” But like I said, we’ll cut him some slack. I know because it can appear that it’s a scared money type strategy where you’re always backing out before you should be. Certain things need to behave in certain ways in order for an entry point to make sense or else to your point, you can get yourself in a whole lot of trouble.
Clay: Now, to kind of go back. So you experienced that bad trade and you decided I need to step away in practice, because I thought this was a pretty interesting talking point. You were using Interactive Brokers during that, I don’t know what you want to call it, phase one before you took the break and then when you came back, I know you’re using a new broker. So just walk us through that whole thought process on what made you change, why you change from Interactive Brokers to who you’re using now.
Kainoa: Yeah. So the broker I’m using now, it’s the same one you use. It’s Lightspeed. I want to say one of the main factors I wanted to change was I think-
Clay: Actually, I’m going to be super rude here and interrupt you because-
Kainoa: That’s okay.
Clay: … it just dawned to me, who do you use for your charts?
Kainoa: Actually, I used to use TD Ameritrade but I am now using Lightspeed charts.
Clay: You’re using Lightspeed’s charts?
Clay: You like those things?
Kainoa: I like it.
Clay: You know what, I might… After I used it myself maybe I have to…
Kainoa: I’m a great fan.
Clay: I’ll have to open a chart. I did just download one of their newest versions. Maybe they redid them a lot, but that’s funny. Again, for listener’s sake, when you hear things, say, training is just personal preference. What’s the best platform? What’s the best broker? What’s the best chart? I don’t know because here is, I think Lightspeed charts, and this is exactly why I don’t use Lightspeed charts, I don’t like them at all. When I say I don’t like them, I’m not saying because they’re giving me false info, I just mean my eyes, I look at that, I’m saying that looks like garbage. I don’t like the way that looks. But here Kainoa is saying, “I use Lightspeed charts. Oh no, I like them.”
Clay: So that’s what personal preference is, is don’t let anybody ever tell you that, “Oh, no. They offer the best,” fill in the blank. No, because so much of this is just what your eyeballs enjoy compared to what somebody like. I mean clearly Kainoa is fine with them. I don’t like them. I’m intrigued. Now, I can’t believe he actually likes those things because I think they’re total garbage. But I’m not saying Kainoa should change. I’m just fascinated by that. So I’m sorry to interrupt but it’s just dawned to me that on the webinar on Tuesday, I never even asked you who you use for your charts. But interesting. I find that super fascinating. So all right. Anyway, so you use Lightspeed for your charts. And again, sorry to interrupt you there but I’ll let you now proceed.
Kainoa: You’re all good. I’ll just quickly explain why I decided to use Light speed charts instead of TD Ameritrade. So when I first opened the account and started trading, I had the TD Ameritrade charts open along with the Lightspeed order entry windows and Lightspeed’s level two window. But I noticed that Lightspeed appeared to be much more up-to-date and refreshing more frequently rather than TD Ameritrade’s charts which seemed more choppy and maybe updating every few seconds rather than live. Then I tried opening a Lightspeed chart and it was moving very… It was fluctuating very smoothly. I’ve really preferred that. So I started using their charts and it basically visually looks the same. I have all the same moving averages on there with the black background. They look very similar to the charts you use, but I’m happy with them. So those are the charts-
Clay: I’m looking at the charts right now and I had myself muted so I had to find out on my screen real quick where I had the unmute button. So I don’t mean to hang you there. I’m looking at them right now and you’re right, they’re very on the money with terms of what the price actually is which is important for a listener’s sake. I guess when this post, I’m sure the coronavirus will still be all over the news. But once the coronavirus stuff broke out in terms of just the news and everything and then the market started to crash and all that, a lot of providers including eSignal who I use who I pay a pretty penny for, everything was delayed.
Clay: You would be looking at the level twos and the price would be X and then you would look at the chart and the price would be Y. There would be a couple second difference and I get it a couple seconds. Who cares? But it’s silly. You want everything match up perfectly. So to see this, I can see. I mean, you’re right. What I don’t like is… So this seems too hard to operate like, “Okay, I want to zoom in. How do I zoom in on that? “You know what I mean?
Clay: Just little things like that. I suppose I could learn but maybe I’m just a chart snob. That could very well be my problem. I drink my charts with my pinky up. I don’t know. Maybe that’s the issue here. But I don’t know. Good for you. You’re saving yourself a whole lot of money. I have nothing but respect that you can make that work. I will give it to you though. They do move very in line with the price which is in this day and age right now, the current market environment where in, that is something that I think a lot of providers aren’t really offering. Anyways okay.
Clay: So you’re just using charts because you notice that they move very smoothly and thinkorswim, TOS seem to be a little bit delayed, which I will say in the chat room especially. Have you noticed that, I don’t know. A lot of people seem to just keep bringing up TOS and the fact that basically what you were just talking about, there seems to be delay. Have you noticed that in the chatroom or is it just me?
Kainoa: I have. They’re just kind of complaining, not in a bad way, but they’re saying, “Hey, what’s up with this? It seems delayed and stuff. So I have noticed that. And then back to the Lightspeed charts. One feature that I really like about it that I have enabled is I have it show where my entries are on the actual chart. It’ll show a little line of where that price that I have my entry at which is very helpful for me to visually see the candlestick approach to my entry and fill me, and then I can see where my exit point is on the chart too.
Kainoa: Similar to how you do in your live trade video where you put a line saying, “Okay. The price comes in this area. This is where I start to make money. So I kind of get to visually see that having my Lightspeed charts tied with the Lightspeed account in general. Does that make sense?
Clay: It does. Does the line keep track of your average cost or are the lines just representing where your entry points were?
Kainoa: No. There is no line that shows the entry, the average cost.
Kainoa: I’ll have to look at the positions window to keep an eye on but other than that now I’ll just show where the entry and exits are. That would be helpful.
Clay: That would be helpful. I mean they’re not like some sort of fly-by-night operation. They’ve been around for years, but they’re also not a thinkorswim like a TD Ameritrade or a Schwab where when you call, I mean it’s a smaller shop. So I guess what I’m getting at here is might be worth even dropping them an email and suggestion being like, “Hey, for your next platform revision it might be worth having something like this that you could put on the chart.” Because I don’t realize that about Lightspeed charts, but I can see how that would definitely be helpful to see where the entry point. Can you do order entry? Can you click on a spot on the chart and then have that lock in some sort of order that you would put in a place?
Kainoa: I’m looking right now and I don’t see that. Not that I can see from here. Now, I know you can do that in TD Ameritrade, but I’m not seeing that right now.
Clay: Okay, yeah. I thought maybe you could, but I guess I really haven’t looked that deep into it. If they could somehow get some sort of average price line in there, that’d be pretty cool. At the end of the day, I’m glad you liked them. I’m glad you liked the charts. Maybe that is one of the further reasons why you switched over from them because I’m not going to say you didn’t give a good answer on the webinar, but I think you freak some people out because they’re like, “Wait, why do these change away from Interactive Brokers? I use Interactive Brokers. What’s wrong with them?”
Clay: You never really said that there’s anything wrong, you just made some comments about… There’s just some things that I liked about them. I think it would be fair to say that this whole discussion we just had about the charts probably played a big role from Lightspeed charts compared to Interactive Broker charts.
Kainoa: Yeah. Well, when I had Interactive Brokers I used TOS charts, but I think more so my reason for changing and it wasn’t anything against Interactive Brokers, but with this type of strategy, you’re putting in exit and entry orders really quickly. I felt as though that the execution in terms of Lightspeed was more fluid than it would be for order execution on Interactive Brokers. So that was another reason why I wanted to change over.
Clay: I do remember that. Again, Kainoa, neither of us are bad-mouthing Interactive Brokers. They offer a great platform. In fact many members use them. But to circle this back to the whole idea of when you hear people say, “A lot of it is just personal preference.” Here’s another just a good example of personal preference. Nobody’s wrong for using Interactive Brokers. Nobody is right for using Lightspeed. It’s just whatever you feel most comfortable with. But to bring it back to Lightspeed and I’m curious I think… I don’t know. This may be not what some people want to hear, but Lightspeed if you want to use their platform you do need to have $25,000 and I can understand.
Clay: I can see it’s like $25,000. “Geez, let me go look in my sock drawer. Nope it’s not there.” So I can see people seeing that $25,000 number, and it is, it’s a big number. However, you made the comment earlier about, “I want to do this strategy. I want to use that platform and those are the requirements, one of the requirements being you just got to have $25,000. I won’t go down the rabbit hole of government regulations and all that nonsense. So we won’t go there because that is whereas from a listeners point of view the pattern in day trading rule exists as just all it is, it’s a government regulation and the government determines that, “You know what, unless you have $25,000 we don’t trust you with your money. So therefore you cannot trade as much as you want from a day trading perspective, unless you have $25,000.”
Clay: Where did that number comes from, I have no idea. But some government official, they just came up with 25,000. They determined that apparently you’re not good with your own money. You don’t deserve to control your own money unless you have $25,000. But that’s where that number comes from. You said you had to save up for it. So I guess, how did you save up for it? I mean, I know you work, so clearly well, I want it to work. But I mean, were you cutting out expenses? Walk listeners through this from a personal finance angle about how you were able to save up and get up to that amount?
Clay: So I mean, I guess you don’t have to answer because it’s none of my business. What number did you start at? Did you start with like 5,000 then you had to work it up or… I guess walk us through the logistics. What did you do? How much did you save? How long did it take for you to get to that 25,000 number?
Kainoa: So when I first started trading I opened an account with Interactive Brokers. It was just over $10,000. And then I was making money slowly while trading initially and then I had a couple big losses where I ultimately decided, “Okay. I’m still kind of being a little emotional or just forcing trades. So I need to step back.” And then after that, I think when I did your Money with Clay podcast, I talked about how I paid off all my debt using the SLAB Money Method, and ever since then it’s been very, I don’t want to say easy, but it’s been easier to put money aside each month not having to have various bills to pay or to-
Clay: Wait a second. You mean being debt-free makes more money? It makes saving money easier. Is that what you’re saying?
Kainoa: Yeah. It’s unbelievable, right?
Clay: What a novel concept. Get rid of debt. Get rid of making other people rich and then all of a sudden you make that much more money. Interesting, interesting. So actually, I’m going to disagree. I want you to use the word easy because it really is easy to all of a sudden have more money when you don’t have debt because when you don’t have debt, when you don’t have a car payment and all these sorts of different payments, credit card payments and all these… When you don’t have to make those payments, guess what, that money gets to stay in your own pocket.
Clay: So when all that money all of a sudden gets to stay in your own pocket, you are totally right to say it is easy to make more money. It’s just basic math at that point. It’s not necessarily easy to get to the debt-free spot, but Kainoa you would agree that as somebody that is debt-free, anybody can become debt-free, right?
Clay: You don’t want to add any more to that. Just the one word? I mean, come on. I was looking for some sort of William Wallace speech on getting debt-free. I mean, come on, man.
Kainoa: It’s awesome. It felt great paying off all those loans and then each month, you just notice that your account is not diminishing so quickly. You’re saying, “Oh, well, I have a decent chunk of money I can put into my savings. So that’s what I was doing each month. And then really just I wasn’t necessarily [inaudible] to start trading again until I felt comfortable. But then ultimately I just got to the point recently where I opened my account with Lightspeed and I’ve been trading since.
Clay: Just for listener’s sake, he said the SLAB Money Method. If you’re not familiar, I do offer an entire different site, moneywithclay.com. I also offer some courses there one of them being the SLAB Money Method. SLAB standing for Sleep Like A Baby, because when you’re debt-free, when you got your finances in order, then you can sleep peaceful every night and that’s in my mind at least what true wealth is. So that’s what Kainoa was referring to there. So if you’re interested, you can just go to moneywithclay.com and check that stuff out. You’re absolutely right though. When you don’t have all that money going out, your account just it doesn’t diminish. There’s just more cash all of a sudden sitting there.
Clay: But to your credit, you still have to make all those decisions to say, “No, I am going to get debt-free. Oh, look, I have all that money sitting here. Okay. Let’s go shopping.” No, you made the conscious decision and efforts to say no. I see that money sitting there. It’s calling my name to go buy that cool little gimmick over there to go… Let me ask this, and don’t lie. What smartphone do you have?
Kainoa: I have an iPhone.
Clay: Okay. What version?
Kainoa: It’s the 10S Max or 10 max. I bought it last year in February. So at the time it was the newest iPhone.
Clay: What was the previous version you had?
Kainoa: I had a 6S plus which is it just crap the bed.
Clay: Okay. So you went a long time before you upgraded.
Clay: Okay. What’s out right now, the 11? I think the 11 is the newest one, is that right?
Kainoa: I think so. I think so.
Clay: Regardless. I guess my point is there is a new iPhone that’s out since the 10 so you didn’t go out and buy the newest iPhone, right?
Kainoa: No. I don’t have any intention to. I’d like to keep this phone than I have now as long as I can.
Clay: And your history speaks for itself. If you went from the 6 whatever to the 10. At least four years if they come out with one every year, give or take.
Clay: What do you drive? A used car or brand new.
Kainoa: Well, I just bought a Lamborghini last week.
Clay: You started using my system, so of course you bought just one. You must not be doing it right if you only bought one you moron? Come on.
Kainoa: I drive a 2013 Subaru Outback. So I bought that used and painted it in full. It’s been a great car. It’s just super practical. Good for the northeast weather, so yeah I like that thing.
Clay: How many miles on it did it have when you bought it?
Kainoa: It had about 92 and now it has just over 110.
Clay: Nice, nice. I bring all this stuff up because I get it. The social media trader, the Instagram trader, the YouTube trader, they’re sitting on their fancy cars. They’re flying around the world in their private jets and they got all kinds of women in bikinis surrounded on them and their yacht. I get it. But in the real world of just trading like the average trader that you would probably see on the street and not know that they’re a trader. That’s what it’s all about.
Clay: He’s driving a used car. He wants to hang on to his iPhone for as long as he can. He had his last one before upgrading for at least four years, five years. There’s no shame in that is what I’m getting across. Just because what I what I see too often, and usually among the younger people, but people, they have the impression like, “Well, unless I’m living some sort of lifestyle that I see either on social media or in the Hollywood movies or something like that, I must not be doing something right. I must not be a very good trader. I must not insert blank of some sort of negative thought where… No. The most successful traders that are part of the group, I assure you would not know that they’re a successful trader if you saw them on the street.
Clay: They don’t have their private jet. They’re not driving around in some fancy car. I mean, I’m not saying that there’s anything wrong with that per se, but I mean Kainoa you would agree, I mean you know who the people… Like Dan for example or Hooch or the variety of other people. They’re not exactly flashy people. They’re just out there, normal people being wise with their money. A lot of them are very frugal such as yourself, such as I am. Have you noticed that really at the core, a true trader is about the exact opposite of what you would see portrayed on social media.
Kainoa: Yeah. You couldn’t summarize it better. And well said with those members you mentioned too. They’re just like that too.
Clay: If anything, like Hooch for example, he’ll post like, “Hey, everybody.” This could be a lie. I might be making this up, but I’m pretty sure at one point he was bragging about how he bought a vacuum for some sort of really, really good price because he did this that and the other to bring the price down compared to the normal price, but it was something completely, not stupid, because a vacuum is very practical, but I assure you, you’re not going to see on social media some trader sitting there with a vacuum going, “I’m living the life. That’s just not going to happen. But that’s just really kind of… I don’t even know how we got on this topic.
Clay: Oh, yeah. Your car and your phone. But my point is, if that is what you’re doing, that’s great. That’s actually the real life of trading. So don’t get caught up into all the fluff and all these impressions that social media and a lot of these sources are giving you because at the end of the day, a trader is just like you and I. If you’re sitting there saying, “Well, I only want it for the private jets and Lamborghinis and fancy cars.” I mean, okay, you can go for it, but that’s not true passion. That’s not what it’s going to take for you to be able to push yourself to this to really the spot that you need to be because you do have to… At the end of the day, when all the dust is settled, Kainoa, is it safe to say that you just enjoy this stuff in general anyways?
Kainoa: Yes, absolutely. I really do enjoy auction and the charts and the quote-unquote story play out if you will. I could sit here and watch the charts all day and I could see other people, the last thing they want to do is stare at a computer screen, looking at these charts. But I do like it. I do enjoy it.
Clay: That’s exactly it is, do you have to sit there and stare at charts all day long, and interpret the story. That’s not a requirement at all. But I mean there does need to be an aspect of you just finding this stuff interesting, you being intrigued by it. Am I saying that you have to be absolutely obsessed and want to do it 24/7? No, I’m not saying that. But you can’t just show up saying, “I saw some Facebook ad on my wall with some guy on the beach, on his phone making money with Robin Hood. I’m here to do that.” That’s just not how it works.
Clay: I get it from a sales and marketing perspective. That’s probably not smart to say, but those people, they’re just going to get burnout or else they’re going to be irritated because wait a second, it takes a whole lot more than what I showed up thinking it would. That’s not the reality of the situation.
Clay: If I were to sit next to you and look at your chart, I guess what would I see on your chart? What indicators are you using and all that? That’s part of the question is what sort of things are people looking at? So I’m sitting there next to you. I’m looking at your chart. What would I see?
Kainoa: Yeah. So basically my chart is simply the candlesticks, volume buyers, and then I have a 200 SMA, simple moving average, a 50 SMA, an 8 SMA and a 13 EMA which is exponential moving average. And then the VWAP, the volume weighted average price. And that’s all I use.
Clay: So there’s MACDs or there’s no Chaikin money flows or anything like that?
Kainoa: Nope. No Bollinger Bands. I used to use Bollinger Bands on the TOS charts and quite frankly, I didn’t know how to add the Bollinger Bands on these Lightspeed charts. But I’m actually more comfortable not having them there anyway. So I like the way the charts look now.
Clay: Bollinger Bands, they’re definitely one of those sticky situations because honestly I can’t think of anything that is like no, that’s just totally… They’re totally worthless. I think the one critique I would give of them is people fall too easily into the, I don’t know if trap is the right word. But the very dangerous impression. There I’ll go with the very dangerous impression that, well, the price is outside of that Bollinger Band and I understand how Bollinger Band works. That means it’s overextended, and because it’s overextended well, it needs to pull back within the Bollinger Bands.
Clay: And people get this overly simplistic view of the markets where, “Oh, look. It’s going up and it’s outside of the Bollinger Band. It’s time to short because it’s overextended. But what can happen is well, just because it’s above the upper Bollinger Band, it doesn’t mean it can’t stay up above it or down below it for really crazy amounts of time. Again, the tool can be very useful, but it does open up those pitfalls of almost making things seem too easy.
Clay: I probably did it when I got started too. I still see it. We’re like, “Well, my strategy is if it’s below the lower Bollinger Band, I’m buying.” I know why that’s your strategy because I understand what the Bollinger Band is and what the rule states in regards to it. There’s a little bit more to it than just… Trading unfortunately, there’s a little bit more involved in that. Losses before I forget about that. I know. Actually, I’m trying to think. So I know on that Tuesday, you had a really good day. But I feel like on the very next day, didn’t you have a loss?
Clay: Okay. So my question is, I mean how are you doing with losses more so from the mental perspective. Does it drive you up the wall? Or you just moved on from them? I guess everybody is different in that regard. Some people loss is not a big deal. Other people are really just, “Ugh!” It drives them nuts. So I guess walk us through from a mental standpoint because that’s really what it always boils down to is a mental battle. But how do you deal with losses?
Kainoa: At this point, by no means, I don’t want to come off as overconfident. I’m aware of that. I just try to remain humble and realize I still have a lot of progress to make. But I am more confident in the strategy overall. If I do occur a loss, it’s not as detrimental to my day or mood as it used to be. In terms of managing it too, I’m just accepting like okay and the markets not necessarily giving me what I would like so I’m going to have to be flexible and start lightening the load in this area where it’s going to come out to a small loss.
Kainoa: So I feel like personally, I’m handling the losses a lot easier and I’m more willing to manage the trade to have it come out to be a small loss rather than sort of be stubborn and let it become a much bigger loss than it has to be. Does that answer your question?
Clay: That’s really good and as far as I know, the strategy you’re doing. That’s a big part of it is if thing just don’t seem to really be going your way and if things just don’t seem to be operating the way that… And there’s some gut instincts that comes into this, so I mean unfortunately there’s no black-and-white way to say, “Oh, wow. Because of this you need to behave like that.” But the way Kainoa answered to which I fully agree is if you’re just getting that feel, if what you’re seeing isn’t what you’re normally used to seeing or what you want to be seen, and you know that you can just…
Clay: If I just behave in this manner, that’s it’s probably going to make it a losing trade or it is going to make it a losing trade, but it’ll be very manageable. That’s a big step in the right direction, because I think it was Wednesday, the day after the webinar Kainoa posted, I don’t know. What was it? You made, I want to say like $800 on ZM was it or BA?
Kainoa: Yeah. So I saw the morning, it was like a $52 loss on ZM, which was just a losing trade. It was similar to how we walked through the example in the previous night’s webinar. Then I was doing well on BA and then finished the day just continuing trading BA and made more than that. I guess, the moral of the lesson is the initial loss I was taking on ZM was I would consider controlled and manageable. As you like to say, I didn’t have to necessarily trade like a superhero to cover those losses out there.
Clay: That is definitely the key is… Thank you for bringing it up. This is just for the strategy, Kainoa. In any strategy, you’re like, “All right. I just took a loss and oh, wow. In order for me to kind of make back that loss, I’m going to have to really trade. I don’t have to impress myself the way I trade.” That’s not really where you want to be as a trader. You don’t want to be in a situation where you have to basically trade the best ever, trade like a flat-out superhero in order to get back the losses.
Clay: If that’s the position you find yourself in, then within the context of your strategy, whatever that is, it was probably an uncontrolled loss. It was probably a loss that shouldn’t have been taken in the first place. So that’s always kind of the first indicator in terms of if you’re struggling with the question. I don’t know. Was that loss controlled? Was that loss… If you’re going to, sure. Just ask, well, compared to the way you need to trade to regain that, how does it look?
Clay: To Kainoa’s point, he didn’t have to trade that well. He had to trade very average to have made back the gain. So when he did make back the gain, it’s almost one of those situations was like it will, “That’s not that impressive because you didn’t have to put on your superhero cape to make those gains back.” But that’s what we want. When you recover your losses, you want it to be in a situation where it’s kind of just, “Yeah, who really cares? That’s not that impressive.” And that’s what Kainoa had. That’s definitely a great indicator of where your lost management and stuff like that stand. Did you want to add something?
Kainoa: Yeah. In the following day after that, I also had another loss but that was more due to as I’m continuing to get familiar with the interface itself on Lightspeed, I just had a few fat finger trades and entries where for instance, right now I’m doing 200 share lots and so I initially… I got filled and I thought I got completely filled but I only got filled with 100 shares and then I put my cover order that was still at 200 shares. And then when I got out there, I was long or short 100 shares I wasn’t aware of.
Kainoa: Then I kind of was flipping back and forth trying to get out of the position that in combination from a previous trade or so, I was trying to CEO mode or I was following up the price with the stop-loss, and then ultimately got out and then trade afterwards. I’m putting in stop orders and set limit orders, which is just my fault not double-checking what I’m doing. But that was where another loss occurred was really just sort of misinputting my orders.
Clay: Yeah. The logistical errors where… I mean, they’re your fault but they’re not only the strategy’s fault because you just flat out put in wrong numbers or put in wrong share sizes or this, that or the other, which I like those ones because I love when I can be like, “Well, at least it wasn’t just a fatal flaw in the strategy that makes me have to question is this even a good strategy? It’s just flat-out, “No, you’re an idiot. You pressed the wrong buttons or you didn’t double-check something or you thought this but it was actually that about some sort of order entry.” So I like those ones because ones strictly are totally your fault and you don’t have to plan the strategy at all.
Kainoa: Yeah. Fortunately, everything was still manageably controllable. So I was still able to get myself out of the hole and end the day on a decent day for me, personally. So I was happy with that.
Clay: Are you aiming for specific amounts every day? I guess, what is your philosophy towards, I don’t want to say what do you consider successful day, but I mean, do you have some sort of, “I want to make this amount or what are you looking to try to accomplish?” Maybe not even every day. Maybe you’re just somebody that’s saying, “No, I look at more things from just a weak perspective, not a day by day, but a week by week.” I mean, how do you walk through that part of your overall strategy?
Kainoa: Yeah. So my old goal is to be self-employed as I’ve talked about in the previous podcasts. I don’t want to keep the job that I currently have. I really like to work for myself from home and then get into real estate as another form of investing. But right now, I’m shooting for, if I end the day with $500, I’m happy with that. If I could average that amount throughout the week/month, as you say $500 a day keeps the day job away. I would consider that a good day.
Clay: I like that. So you had some bigger picture goals. But I’ve always had the impression, it doesn’t sound like you’re rushing into anything though right. You’re just kind of taking it as let’s just see what happens. Yeah, I have these broader term goals, but it’s not like this needs to happen by. Let’s just say by the end of the year or anything like that.
Kainoa: Yeah. In terms of actually executing the strategy, I’m not necessarily… I feel like a much more disciplined and relaxed to let the market give me what’s willing to give me. So for instance, right now, I’m up 168 bucks. But I’m not going to go into forcing anything because, “Okay, I need to get to 500 bucks right now before I end the day.” Does that answer your question?
Clay: Yeah, it does and that’s very wise because that’s exactly why I don’t like numerical goals such as, “Well, I need to make X amount because you could be 25 bucks short of X amount.” Now, all of a sudden, you’re like, “Well, because I still need to make that X amount, let’s go find another trade.” And then before you know it, you’re forced into trade. Just for the sake of trying to make $25 and you’re certain to bend rules within your strategy. Then all of a sudden, because it’s not really a good trade and you shouldn’t never been in the first place, now you’re down $50 or $100 or you do something really stupid and you look back and say, “I can’t believe I did all that just because I was $25 short of whatever the number is.”
Clay: So I’m glad that you just take it a more of a, “You know what, just I got to take what the market gives me and if I don’t quite hit a number that I would ideally like to hit, what does it mean?” I got to keep on forcing stuff out there because that’s where at least from my perspective, I get in the most trouble is when I’m out there trying to force a trade. Just for the sake of some arbitrary number which is why I don’t believe in the trading goals in terms of assigning numerical values to every day because it opens up a human psyche to too many pitfalls in terms of thinking that you need to get to that number, and if you don’t, “Well then it actually wasn’t that good of a day because it didn’t hit your goal.” It’s just opens up so many doors of nonsense which we’ve talked about time and time again on the podcast.
Kainoa: That’s perfectly said. For me, just my main focus is just sticking to the rules and the disciplines of the strategy itself. I have faith that as long as I execute according to the rules then the byproduct which is the money, that will produce what I need.
Clay: Well said. I think that’s a good way unless you add something else that you wanted to talk on, but we’re basically approaching an hour here, but that seems like a good way to end right on that thought. So are you good? Do you need anything else out of your system? Did you want to bring up any other talking points?
Kainoa: No, I’m good. One thing is right now with everyone being in quarantine, with the virus and stuff, I’m very happy that it’s allowed me to… I telework from home now and I’m going to be for the next foreseeable future, which is allowing me to be at home and have access to my desktop when the markets open and trade throughout the day. I’m very happy for this opportunity. I’m going to take advantage of it because it’s allowed me to consistently practice and trade like I want to.
Clay: I’m not saying it’s a universal thing, but there’s a lot of people out there that I feel like they’re not really taking advantage of the time that they’ve given to them via the very bizarre, the very historically unique circumstances that we all find ourselves in. I fully agree with that point is… I’m not saying you go out there and you start trading with real money, but just, I mean, I get it. Netflix, what is it? I think, Ozark was just released on Netflix season three or whatever at least at the time of this recording. So that’s just so tempting. I’m not saying you can’t watch an episode or two, but I mean don’t sit there and binge watch it when there’s lots of other things out there that you could be using your time with and ideally making some things better for yourselves.
Clay: I fully agree there. So well, Kainoa, man, don’t let this slip through my fingers. I don’t know how you escaped the webinar… Or not the webinar, the podcast requirement even though it’s not really a requirement for almost two years. I mean, you’ve always been around so I guess shame on me for… I just thought you’d been on more recently, but thank you for not making this difficult. I asked him like, “Oh, yeah, sure. Let me know.” You always make life easier as a guest where I don’t have to run around and try to use Jedi mind tricks on people to get them to show up. So thank you very much for being willing to be here.
Kainoa: Yeah, man. I appreciate your time. As I always say, I really, really appreciate all the content you offer and the community that you offer. It’s helping me along with a lot of other people. So I really appreciate it, and you’re a great mentor. Thanks for all that you provided?
Clay: Well, cheers, man and you’re welcome. I appreciate your hard work. I appreciate the guy driving the car over a hundred thousand miles, he’s got an old iPhone. That’s the good stuff right there. That’s the stuff that gets me fired up because that’s the true life of what it takes to actually get ahead. So well done to you in that regard for sure.
Clay: So before you go as listeners, final few things. First off, if you’re listening at iTunes or any other podcast players, then be sure to subscribe. Especially on iTunes, if you could leave us a rating that goes a long way. A written review really helps us out and I would really appreciate that. But above everything else, just a simple review or a five-star rating per… Hopefully you decide to use the five-star on iTunes would really help us out.
Clay: If you’re listening at claytrader.com on the show notes page, then just hit… There’s a little chat box. You can click on that and just let us know that, “Hey, I listened to the podcast.” So comments, questions, suggestions. I’d love to hear from people that start off their message to us with, “Hey, I listen to the podcast.” So it’s always fun to hear from you as listeners. I’m always looking for suggestions. Criticism, it’s just got to be constructive. “You suck.” Okay, that doesn’t really help me out. But I mean if you want to offer up any sort of constructive criticism, I’m always up for that also. Thank you to Kainoa, thank you as listeners, and we’ll see you all back next week.
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