Transcript

Clay: This is The Stock Trading Reality podcast, Episode 270.
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. And this is your host, LEGO Masters is a new favorite show of his, Clay Trader.
Clay: I mean, have you seen this show? It is crazy the things that these people can build from all age ranges, there’s women, there’s men, there’s older people, there’s younger people, age range across the spectrum and these people build some crazy, crazy stuff from LEGOs and it has really become a favorite show for our family. Family-friendly shows, when you get to a point in life in my case, four kids under the age of eight, you need some family-friendly entertainment and LEGO Masters accomplishes that. I’m pretty sure all kids like LEGOs, don’t they? What kid doesn’t like LEGOs? But they like them and now they like them even more. It’s a show where, it’s done airing now, but, I don’t know, in this day and age you can probably go and look in the archives of … I think it’s on FOX. So you can go to FOX.com, I’m assuming, and then look through their TV shows and watch the archived episodes of it. I would assume so at least, but I guess I don’t know that for sure.
Point being, if you’re looking for a family-friendly show I think LEGO Masters would be a great avenue to go because my oldest is eight, our youngest is three, but they’re all entertained. So a good little gamut there of ages that provides entertainment value for everybody, myself included, just for more of an amazement perspective. Now, for our episode today, hopefully you saw my title, Going Back To … And thank you so much for the feedback, I know a lot of you enjoy these ones, and I’m going to keep digging for stuff, I’m going to keep finding stuff. A lot of times I just stumble across these things and when there’s data, when there’s research, when there’s science behind it, and then it’s applicable to trading, I guess I just really struggle to see how it doesn’t pertain to this podcast when it’s all about The Stock Trading Reality podcast.
And sometimes these things, sure, it’s not necessarily somebody’s story, but this stuff is based in research, and the thing with research is you always have to remember there are, I guess I don’t know for sure, millions of dollars, but there is hefty amounts of money being put towards these salaries. If you think about, just from the framework of these professors that do this stuff, they’re not doing it out of their own pocket, they need to go and give a pitch to the universities. These universities need to say, “Okay, yeah, that sounds like it’s good enough,” and the universities, they don’t have a spigot of cash either. They have a limited amount of resources so they need to … They’re very aware of this, and they need to say, “Is this even worth putting money towards?” So even the fact that yeah, there’s lots of money that is put towards this stuff, but somebody also had to make the decision, “You know what? I think it’s actually even worth it in the first place to put money behind this.” And that’s what we have here with some interesting stuff on luck, and somebody went out there and studied luck.
Maybe you’ve connected the dots already. I mean, can you see … ? Have you ever heard it, maybe you felt it? I know I have, where you’re like, “Oh wow. I got lucky or I’m getting lucky.” Or you see it and look at somebody else, “Oh wow. They sure are unlucky.” Or, “That person’s the luckiest ever,” “Wow. How is that person always making all those trades? They’re just so lucky. They just keep making all that money.” Have you ever thought about that? Has that thought ever crossed your mind? So when I saw this article, which isn’t new, like I said, I don’t even remember how I stumbled across it. Honestly, I’ve been slacking off on this one just because there’s been so many other guests and stuff, but this is form 2017, and it comes from … I’m getting it on Business Insider, but a psychologist explains how lucky people differ from unlucky people.
So for me, like I said, as soon as you see luck, as soon as you see unlucky, most people think of … You go to the casino or something, but a lot of people think that the stock market is the casino, or any market is the casino, but for you long time listeners, you know that is just not the truth, and that’s why you’ve heard of a professional trader before, right? But you’ve never heard of a professional slot machine player. But point here being luck gets thrown into the market quite a bit, and especially trading. So I thought, “Oh, this has got to pertain.”
So what I want to do is just go through this article and then offer up a more recent news event that’s actually just happened as of the recording. Now by the time this release is public, this news event in regards to oil and just … Who knows? I’m assuming that by the time this goes public the oil fiasco will have calmed down here a little bit, but I guess I don’t know that for sure. Who knows? Maybe when this goes public, oil will be even worse than what’s going on right now, but as of right now, there’s the whole oil fiasco.
But what this person talks about … I mean, they compliment each other perfectly. So like I said, name of the article from Business Insider: A Psychologist Explains How Lucky People Differ From Unlucky People. “Conventional wisdom states that luck is a matter of chance, similar to rolling a pair of dice. Maybe someone you know seems to snatch up the best job opportunities. Your friends stumbled upon a great idea or acquire or manages a happy relationship,” or seems to always make profitable trades. Okay, I added that part into the article. It didn’t say that. But I could have said that and you would have probably believed me, because yeah, from our perspective, I’m sure you’ve had that thought, just like I have. “But what is it that makes some people luckier than others? Richard Wiseman a British psychology professor at the University of Hertfordshire has been studying how luck plays a role in our lives.” And I clicked … And I’ll click out of it again right here, but this study is very, very in depth. I’m by no means going through the study itself, but he calls it the luck factor, and it’s an article that’s public.
But he did a big old study on it, and, like I said, that’s why I like this article, it’s more of the Cliff’s Notes version of it. So he did a big study of it, and I don’t know how you’d ever really get into wanting to study that, but it makes sense, kind of. Maybe one of those things that hide in plain site. What made you think you want to study luck? But he did, and I think when he gives you the results and when I go through the results, they’re pretty commonsensical, I don’t think I’m going to say anything that’s going to catch you off guard and have you say, “Wait, what? Whoa, I never saw that coming.” No, I’m pretty sure everything I say you’ll be like, “Well, that makes perfect sense. I can see why that would contribute to luck.” So I’m not proclaiming that any of this is going to blow your mind. My only point is that when people say things, when I say things, maybe when other guests that you’ve heard say things or have experienced things, well, it’s almost like, yeah, it’s all lining up as this science says it should. And it science always right? Well, no, I guess that’s the point of science, to experiment with things and fail. But I mean, like I said, when you see the outcomes it all makes sense.
And especially for somebody in my position where, yeah, I’ve listened to all the podcasts because I happen to be part of them, but these are common themes that I see over and over again, and even we’ve had recent guests … And we’ll have future guests that will really just mimic and shadow these common, underlying, themes here.
“But he wanted to see how chance opportunities come about and their impact on peoples lives. He began by examining the difference between self-professed lucky and unlucky people. Wiseman found that lucky people score significantly higher on extroversion. They smile twice as often and engage in more eye contact. Their sociability, Wiseman explains, helps them increase their likelihood of a lucky opportunity because they meet more people, connect better, and maintain relationships.”
“Unlucky people on the other hand, scored twice as high on neuroticism,” I think I’m saying that word right. “To see how anxiety affected people, subjects were asked to watch a moving dot in the center of a computer screen. As large dots unexpectedly flashed at the edge of the screen, almost all participants noticed these dots. To increase anxiousness, the experiment was repeated with another group who were offered a financial award to focus on the center dot.” Does that sound like anything that maybe we do as traders? Are there any financial awards that exists?
So, you separate the two studies here, the first study, both people, they noticed the big dots. However they classified things, they noticed that, yes, there is that dot in the center, so they’re watching a moving dot in the center, but then there would also be the large dots. But it wasn’t in the center, those large dots were on the edges of the screen. And as it said, almost all participants noticed these dots.
Now, contrast that with a financial award has been introduced into the equation here. More than a third missed the large dots on the edge of the screen that popped up. So it went from basically nobody missing them to now a third have missed that big dot. What was the difference? Well, the difference was there is a financial award introduced into the process.
So, as it goes on to say, “While anxiety helps us focus on a task, it also blinds us to other opportunities. As a result, unlucky miss out on prospects, because they’re too busy worrying about one thing. They develop tunnel vision in their career, missing viable job opportunities. Or, they might talk to a few select people at a social gathering, and then lose out on meeting other interesting people.”
“Lucky people, on the other hand, are open to new experiences. They are more willing to talk to new people, travel to new places, and try new things.” And you can call this a sales pitch, you can call this whatever you want. I really don’t care, because it is what it is. And I have yet even more scientifically, financially backed, proof that this stuff exists, but as weird as it sounds, please consider joining an online community, please consider joining … Let me take a step back. A paid for online community. I’m sorry, but being a part of Stocktwits or Twitter or Facebook, you get what you pay for, and that’s nothing. This is going to come back later about who you’re surrounding yourself with.
But the core point here is … And I’m not saying you have to join my paid community, but if you’re on the fence about somebody else’s do it. Do it. There is a reason why … And I should offer up the disclaimer, I am not saying, “Hey listen, if you join my chatroom, if you join the communities that all these members on the podcast themselves are a part of, you’re going to become rich, you’ll never do anything stupid.” I’m not saying that. My point is that what the data is suggesting is that when you’re open to things, when you actually step out of your comfort zone a little … Not even your comfort zone, but just if you surround yourself with other people, you can increase opportunities, you can increase perspectives, you can help yourself out “get more lucky”.
Yet if you’re isolated or, even do the exact opposite, surround yourself with a bunch of … Excuse my language, morons, then that can also be counter productive. But, to also be fair, at least you’re still stepping out there. Now, the world of the market and the world of really anything, if you step out there and you start to listen to people that you shouldn’t be listening to, well that can backfire too. But the idea here is if your game plan is, “I just want to go this all alone. I need to focus, I need to focus, I need to focus.” Yeah, that’s good, you do want to have focus, but when it becomes just the tunnel vision, you can miss out on a lot of things. And if you get too focused, like I said, it actually backfires against you.
And I see it all the time. I experience it. I mean, it happens every week, really. I miss seeing something, I don’t see a great looking set up, I don’t see something that is moving stock wise or what have you. But I still make money from it. “Well geez, Clay, how do you get so lucky? I mean, you don’t see it, you don’t even notice the set up, yet you make money? Wow, you’re just so lucky.” Am I? Or is it because I happen to be in a community where somebody else that’s actually a quality trader, that actually knows what they’re looking for has spotted something, they alert me to it, and then I see it, and then I go trade it, and then I make money from it.
Whereas, I mean, on Stocktwits or one of these, yeah, people could be alerting you to things, but you don’t know anything about that person. I mean, do you really? But I’m getting ahead of myself. We’ll come back to that stuff later. And don’t worry, like I said, there’s more data that has just come out. I’m going to offer up a little spoiler to the tune of $300 million that shows that some of these echo chambers such as Stocktwits, you might want to consider a little bit more who you’re surrounding yourself with. So, not only from that perspective, which we’ll get to the $300 million, but also just from the, hey you know what, if you’re surrounded with quality people that’s how you get lucky, because all of a sudden there’s more opportunities out there, because, well, you can take notice of more things.
But I thought it was crazy how … Yeah, when there’s no financial, really, we’ll call it stress, because that’s what it is. As soon as you know there’s an award and there’s finances, that’s going to induce some stress because that’s an incentive you want. So, as soon as you want something, you care about it a little bit more, and when you care about something, that’s where stress comes from.
This may sound crude if you love ants, but I don’t feel any stress at all about walking outside and potentially stepping on an ant. I just don’t feel any stress. Why? Because I don’t care about if I step on an ant. I’m sorry if that offends. If that stresses you out, then please walk carefully. So I mean, that’s where stress comes from. It’s the source of care. And when you get too stressed out, anxious, right? That’s what anxiety is. Because now people are, “Oh, there’s a financial reward? Well, I care about that.” But beforehand, what? What did people care about? They got nothing to lose. “I don’t care. Whatever. Oh, there’s the dot. Yeah, oh, there’s another dot. Oh yeah, I see that dot on the edge.” Right? Does that make sense?
That’s why trading is hard, is because there’s anxiety because we do care about something. Not only do we care about … And here’s why it’s extra hard compared to what these people even focused on. I bet if they were introduced this variable, even more people would have missed the other dots. If they had said, “Listen, we’ll give you money, but if you miss the dot in the center, not only are you not going to get any money, you’re actually going to lose some money.” I bet it would go up from a third of people, to maybe even half or two-thirds. Right? And that’s what we, as traders, have to deal with. We have to deal with the anxiety of maybe just not making money, via missing out on something, but also maybe even losing it. So, that’s why you better show up and bring your A game, because trading is not going to be easy from a psychological standpoint, because it’s very easy to get too tunnel-visioned and get way too laser focused, and then you’re starting to miss things that are hiding in plain sight.
And that’s really … I mean, I always call it the power of avoidance, the profit of avoidance. You can make money by just noticing what you should be avoiding in the first place. But, in many cases, because of this, you get too tunnel-visioned, you’re not even noticing things that are sitting right there saying, “Yeah, you probably shouldn’t get in that trade,” but you’re just way too anxious about it. So I mean, I thought those studies were crazy, and I mean, I was tempted … But then I was what, this is 2007 … To try to find this guy’s email, be like, “Hey, did you ever think abut trying that experiment, but then adding in that next part about, ‘But you could also lose money.'” And I bet putting that much more stress on the process would manipulate those results, even more people getting the tunnel vision.
So, as it picks up here, now … So this is the next part of the article. And the subheader here is A Lucky Attitude Towards Life. “Wiseman conducted another experiment. This time he gave people a newspaper and asked them to count the number of photographs inside. Unlucky people took about two minutes to count the photographs. Lucky people took seconds.” So let me say that again. Unlucky people, two minutes, to count the photographs. Lucky people took seconds. “On the second page there was a large message that read, ‘Stop counting. There are 43 photographs in this newspaper.’ Unlucky people tended to miss the message, while lucky people spotted it right away. The self professed lucky people were simply more observant.”
So I mean, think abut that, are you good at observing? Are you an observant person? If anybody has traded before, if you have had success in trading, you know that observation is very, very required, is very, very powerful. And this is … “Okay, well, I get that Clay. Okay, how do I observe? Is there a way to observe things better than other ways?” Very good question. I mean, that’s a very logical question. I get it on the surface, and this is also the tricky part of trading, is you have all these soundbites. I just did one, right? “Hey, you got to be observant.” “Well, no kidding Clay, of course you got to be observant.” But when you stop and think, “Okay, that’s true. But what does that even mean? So I look at a stock price and if I notice it goes up, then I’m supposed to get in or … ?” What exactly am I supposed to be observing, and not only that, how do I observe it? And not only that, how do I observe it efficiently? How do I observe it, actually, wisely?
Ah, now we’re talking. So of course you need to be observant. Of course lucky people are observant. But in trading, you need to actually be good at observing. How do you do that? I believe you should use technical charts. I am biased. Am I saying that technical charts are the only tool that you can use to help you become observant? No, that would be very misleading. There are other ways out there. Other people would say, “No, no. You got to look at the cash flow statements to be observant.” “No, no, no. You got to combine cash flow statements with income statements with this, that, and the other. And then you got to factor in the debt, and that’s how you become observant.” And that’s fine. Like I said, I don’t use fundamentals. Well, in my investing I do a little bit, but from a trading standpoint, I am just a technical trader. But think about what those two camps are debating. They’re debating mechanisms to observe. And what did we just say, or what does the science say about those people that are lucky? Well, they’re just more observant.
So the moral of the story here. How are you doing within your observing? Are you good at observing or does everything just seem to random to you. Because if everything seems so random, that means that you’re not doing a very good job of observing. And that’s fine, we all start off at that spot, but the question for you becomes I got to get better at observing. So may that is a source of your struggles, you just aren’t very good at it. Again, not to turn this into a sales pitch, but that’s what some of my training courses offer. I mean really, at the core, that’s what any training course, if it’s worth anything, is going to teach you do to. How to observe, right? Because that’s what trading is, you observe the right things, and when you observe the right things, you can start to make logical decisions and not just random decisions, which at that point is just gambling.
Now, just because you observe does not mean that you’re for sure going to make money, but at least it’s going to lead you to making rational decisions, logical decisions. So yeah, lucky people, they’re not only observant, but for trading we got to take that one step further. They know how to observe. They know which ways to do it, which ways to best accomplish that that fits within their scope of their own risk tolerance and all of that.
Let’s see. Let’s see what we got. So lucky people are also optimistic. They have positive expectations which lead to self-fulfilling prophecies. Even if things take a turn for the worse, they can spot the good in a situation. Unlucky people might see the same situation and only point out the negatives. Not only do positive expectations help people become happier, but they can also make the most of difficult situations. So again, that’s why I offered up the warning. Is that really shocking? I don’t think it’s shocking to hear that. “Oh really? Optimistic people are more lucky?” But this is important, because in trading, you can’t go down this rabbit hole. “I took a loss, that’s terrible. The market is rigged against me, it’s all against the little guy, it’s just manipulated. It’s some sort of external force.” You’re blaming everybody else. And why would you blame everybody else? That’s the core question. Why do people blame other people? Well, because they think that there’s something negative attached to it. And again, very, very fine line in the world of trading. Yeah well, of course there’s something negative to it in the world of trading because you lose money, but that’s where you’ve got to be optimistic about it.
Did you lose money because you were disciplined in a trade? Did you lose money because you followed, you observed in a wise way, you observed in a logical way, and you just lost money but you also understand that at the end of the day there’s no such thing as a holy grail trading system. I mean, part of trading is managing risk, and managing risk means that you’ve got to take loses. So you know what? Yeah, I did take a loss there, but that’s because it just didn’t work out, and that’s okay. That doesn’t mean I’m a bad trader, that doesn’t mean that it’s somebody else’s that I lost money. It’s my fault that I lost money, but I lost money because it just didn’t quite work out and nothing works out all of the time.
Let’s move on to the next one. I mean, that is where optimism needs to come into play. And when you take an optimistic route like that, well of course those people are going to be more lucky, right? They’re creating their own luck by just actually looking at the realism of the situation. Now if you’re just out there throwing darts and you’re saying, “Well, it just didn’t work out,” well, of course it didn’t work out, that would be optimism that’s going to give you false hope. Oh, but most people if they’re out there gambling and it didn’t work out, it’s, “Oh well, it was because of that,” or, “It was because of this.” Now if most people show up and they just know from the get go, “I’m here to have fun. Let it roll.” But there’s lots of people that get up, they think they’re taking it serious, and then they start blaming other people because in their mind, “Well, I was here being serious and it didn’t work out.” They go down all these sketchy pathways.
But that is way … I mean, obviously, this isn’t why the person organized this article, but I love how it first talked about observe. Because if you know you’re observing properly, if you know you’re observing the markets in a systematic and strategic way, then you should, please, I’m begging you, if that is you, then be optimistic. Don’t get all negative, don’t get all down on yourself. Don’t get all, “Oh … ” if you take a loss. That’s okay. Be optimistic about it. You know what? You took a loss, you managed risk, you still have an account, you didn’t blow it up. Move on. Smile. It’s okay, you did it the right way.
And then the final part of the article, again, the subheader here: How To Increase Your Luck. “To see if unlucky people could turn their luck around, Wiseman enrolled his participants in his “luck” school, where he put people through a series of exercises to increase their luck. The results were astonishing. After one month of enrolling, 80% of people reported themselves as happier, more satisfied with their lives, and most importantly, luckier. The lucky ones became luckier.” So if you were already lucky, they even got luckier. And the unlucky turned lucky. They had been taught how to spot good opportunities, have a positive outlook, and make better decisions.
Hmm. I feel like couldn’t that maybe be what trading is all about? How to get lucky in trading? How to spot good opportunities? How to find a good trade? Have a positive outlook about it and a positive outlook as we just talked about. Hey, you took a loss, that’s okay. It was a good opportunity, it just didn’t quite work out, that’s all right. Keep on going.
And to make better decisions, that goes back to just being observant within the market. When you’re observant, when you know how to observe, when you know what you should be observing and what you should be ignoring, guess what? You can make better decisions. And when you can make better decisions, part of that is spotting those good opportunities, and when you can do all of that, and you understand that the market offers no guarantees, hey, you can still have a positive outlook on it.
Now to increase your luck you can practice what the “luck” school participants did. So first thing that they did, keep an open mind and pair of eyes. Worrying about obtaining the goal endlessly can unknowingly close you off to other possibilities. Having an open attitude and looking around for new opportunities can open you up to lucky chances.
Here, maybe what you just need … Maybe you do need to join a community. I’d love for you to join mine. But if you feel more comfortable with somebody else, then yeah, join it. Maybe that’s what you need. Just be open. Be open to things, keep your eyes open, look around.
Look on the positive side is number two. Focusing only on the negatives dampens your spirits and future expectations. When you go from complaining about scraping your knee to being grateful that it wasn’t any worse, it becomes easier to try new things. So this is beautiful. So scraping your knee, you take a loss. “Aw man, that’s terrible. I took a loss.” Now, of course it was controlled, it was disciplined, everything made sense, but [inaudible 00:27:18]. Or you could look at it as, think about the people that aren’t going scraping their knees. Their accounts are like their legs getting ripped off, or their whole body’s just evaporating, because their accounts are gone. Think about it. Compared to that, is your loss really that bad? A controlled loss where all it takes is a winning trade to potentially wipe away several losing trades? I mean, at the time of this recording, on the YouTube channel, there was just a video released where I had a member make a comment and show his screenshot and his results, and he was actually wrong 60% of the time. So in one day of his trading, he was wrong 60% of his trades. So let’s just say he took 10 trades, six of those was wrong. He lost money. But you know how much he made on the day? $500.
Think about that. 60% of the time he could have just, “Oh, woe is me, I took another loss. The markets are rigged against me.” No. He was like, “You know what? It happened. I kept it small, I kept it controlled, let’s see what else is out there.” So he was only right 40% of the time, yet he made $500. Just keep it on the positive side. Be optimistic.
And then the final thing, do something out of the ordinary this week. Routine can lead to ruts, whether it’s talking to the same people, eating the same food, or doing the same type of work. Stepping outside your boundary increases the likelihood of a lucky break. And again, maybe that lucky break is, “All right, I never really want to invest into a course that can teach me about trading,” or, “Never really wanted to invest into a internet chatroom. I’m supposed to chat with people in a chatroom. That’s kind of creepy, isn’t it?” Like I said, step out, step outside your boundary. Increase the likelihood. Especially for my community, it’s $99 for three months of access. To break that down, that’s $8.25 per week.
So I mean, it’s really a question of … Let’s just take a worst case. Let’s say that the community that I offer is just total garbage. Okay, you’re out $99. Is that really the end of the world? I say this with all due respect and all due compassion, if you lose $99 and that just ruins your life and that throws your personal finances into a tumble or a dumpster first, then, like I said, with all due respect, probably set trading aside right now and focus on your personal finances and getting those shored you and get those strengthened up. Because, like I said, I get that money doesn’t grow on trees, but if $100 is going to have that much of an impact on you, like I said, I’m not saying you can never do trading or never come back to the markets, but you got some other things to focus on first. So I mean, just give it a try. But again, if there’s somebody else, go with them. That’s totally cool. Maybe that’s how you get more lucky all of a sudden, you start to surround yourself with other people that are of your same mindset, iron sharpens iron.
And then to finish things off, many often attribute other people’s fortunes to good luck, while their own misfortune are the results of bad luck. And I can say I see that all the time, all the time. Half the time I’m getting blamed. As stupid as it sounds, when I do my video analysis, “Oh, it’s Clay’s fault. He’s bad luck.” I mean, think about what that means. If you’re not familiar, a little context real quick. I have a secondary YouTube channel where I’ll take a stock chart and I’ll just do a very quick, very surface deep, very basic analysis of that chart. And over the years, there have been people, because of confirmation bias, which is a whole nother things, where they’re like, “Oh, whenever Clay does a video it goes down.” Now, that’s not true at all, but in their mind, they only remember the times where it goes down. Why? Because they lose money. But if they make money, well, they’re not going to say, “Well, I made money because of Clay and his video chart.” No, they’re going to say, “I made money because I made a good decision.” But when they lose money, well they don’t want to say that, so it’s confirmation bias against the negative.
The way I learned it was in school if you study for something and you get a good grade, who gets the credit? Well you do. You studied hard, you remembered things. That’s you! Good job. If you get a bad grade, whose fault is it? “The teacher put all these questions on the test that they never covered in class. It’s the teacher’s fault. We never learned about that. Why is that? No, they were all … ” You know what I mean? That’s confirmation bias. Same exact thing here.
But my point is that people go down that rabbit hole, and then they start, “Well, it’s all bad luck because of that. Because, well, Clay’s video charts are bad luck.” Think about though, how hopeless that is. Think about how pessimistic that is. If you’re blaming something else then you’re not the problem, and if you’re not the problem, then unfortunately, you’re not the solution. But if you are the problem, if you admit that you’re the problem, well then you are the solution, you can actually improve it. You can get, dare I say, lucky. You can go from unlucky to lucky.
I don’t think I could really argue against you if you came at me with, “Clay, do you really think that this university,” what was it? Hertfordshire? “Do you really think they needed to spend money to figure this stuff out? Isn’t this stuff common sense?” And you know what? Maybe it is, maybe all this stuff just hides in plain sight, but, like I said, the data is there, and I’m about to show you some more data that apparently this stuff is not common sense.
And to finish off the article, “You can always do something to build upon what you have. When you open yourself to new places, practice gratitude, and step outside your routine, you might find yourself getting lucky.” So to bring this all back to, not necessarily joining a community, but just step outside your bounds, yes, surround yourself with quality people, yes. But you want to be very, very careful about who you’re surrounding yourself with. And then this also combines … I’m not saying you necessarily have to listen to it, but back on episode 238 I did one of these, and I talked about … And the title of that one was Stress Test Your Trading. And it that, pretty much in a nutshell, Ray Dalio, if you’re not familiar he runes the biggest hedge fund in the world, billions upon billions of dollars. And his whole thing is, “Listen. If I have an idea, I want people that I trust,” and his quote was, “To tear it apart.” I mean think about that. That’s savage. “I have an idea. Here’s my idea, people. Tear it apart. Rip it to shreds.”
Why do you think he’s doing it? Do you think Ray Dalio, with that sort of attitude, is a lucky or unlucky person? Well, considering he’s worth billions of dollars, I would say, “he is lucky”. But think about it, I think you can see where I’m going with this, I would say he’s probably doing pretty good at creating his own luck, isn’t he? I mean, that’s brilliant. You come up with an idea, but before you put that idea into motion, let’s have some worthwhile people pull it apart. Or in other words, “Ah, that looks good Ray, there, but what about this? Did you factor in that? Oh, Ray, that doesn’t make any sense at all, you should really reassess that.” He wants people to do that. He’s not, “You jerk, you hater! You little … ” No, he’s asking for criticism. He’s acting … Like I said, the quote from the article, when I did that was, he wants people to “tear” it apart. That is savage. That is a savage attitude. And yet he’s worth billions of dollars. “Oh, well he just got lucky.” No, he got lucky because he actually has created luck for himself by just putting little attitudes like that through his life, right? “Here is an idea, tear it apart.”
So where am I going with all this? Well, I would argue that these people are unlucky, yes. But I would also argue that they could have been lucky by just simply doing what Ray Dalio says. Hey, have an idea, and have other people rip it apart. But this goes back all the way back to the caveat there, is who is Ray Dalio having rip his things apart? Or as he calls it also, stress testing his idea? Who is he having it put under stress? People he trusts, people he knows that know what they’re doing. Not random people on social media, not random people on Stocktwits. He’s not putting himself in an echo chamber of people that are just going to say, “Oh yeah, that sounds good.”
So what do I mean? What’s the point of all this. Well, this just came out, like I said, within a few days. So April 23rd is when this came out. I’m actually recording this on … Well, you know what? Let me look at the calendar, because I know exactly when this is going to go live. So this is going live on May 18th. So yeah, like I said, a few weeks ago, in late April, this article came out, and this has to do with oil, and if you follow the headlines, hopefully you remember, or like I said earlier, maybe it’s still going on, maybe its gotten worse. But oil has been all over the place, the price per barrel actually went negative because of the futures market and all that. But here it says, the name of the article that just came out: Short Sellers May Nearly $300 Million Betting Against Retail Investors’ Favorite Oil Fund.
So remember, retail investors, I’m assuming, are 99% of the listeners, maybe 100%. I highly doubt anybody on Wall Street is listening to this, but I very well could be wrong. But in other words, the evil people Ray Dalio type people, the lucky people, made $300 million betting against us as retail traders. That’s what short selling is. If you’re brand new, quick recap, shorting, going short, being a short, shorting a stock, means you want the value, you want the price to go down. If it goes down, you make money. Totally a bizarre concept the first time you hear it, but that’s what going short is. So that’s why I say these people bet against. They wanted to see this oil fund go down in value, and they make money that way.
So again, the big, evil, people … Evil people on Wall Street, made $300 betting against retail investors’ oil fund. Now I’m not going to go through all this, but they’ve made lots of money. What was the number? Ultimately … Okay, $286. So the exact number looks like it’s $286 as of right now. So who are these people? Who are the retail? What’s going on? And the moral of the story, I won’t go through the article here, but USO, ticker symbol U-S-O, called the United States Oil Fund, basically you have all these people that are saying and they’re using this logic. “Wow, oil is really low right now. Wow. I think oil will not stay that low for very long, so I’m going to go invest in oil, so I’m going to buy USO, because it’s called the U.S. Oil Fund.” Okay? That was their logic. “Oil is low, I don’t think it’s going to stay low, so I want to invest in oil and wait for it to come back up, so I’m going to get involved, I’m going to invest in the USO.”
But here is the problem. The USO, and I’m not going to get into the fine details, but the way it’s structured, and I should note this is all publicly disclosed, it’s not like the fund misled anybody or said one thing and then was doing something else. I mean, it’s all disclosed, say this is how it operates, and they’re using futures contracts and stuff like that. But like I said, I’m not going to get into the weeds here, but the core point is that the USO doesn’t really track the spot price of oil. So just because you have this thought process of, “Well I want to get involved in oil,” the USO is not really the way you would want to do it. Now, on the surface, yeah, it might seem that way.
So who are these people that are doing this? Well, from the article right here, “USO was the most bought name Tuesday on … ” Can you name the broker? Name a broker for me, take a guess. Where do you think USO was the most bought name? So, the most bought name right now. If you said Robinhood, good job. So on Robinhood, a free stock trading app that has attracted roughly 10 million, mostly millennial users. By Wednesday, it was up among the top 30 most held names on Robinhood. Insane. And then on SoFi Invest, another trading platform used mostly by traders under 40, USO was “by far” the highest volume security on Tuesday and Wednesday.
So in other words, you have all these people that are using this thought process. And again, I’m not calling the thought process stupid. I’m not calling it stupid at all. It seems like that is a good thought process. If you believe that oil is just way too low, and this is all crazy, and there’s no way oil will stay this low and it’s going to come back up in price, so I want to get involved in oil, so I want to buy USO. It’s called the U.S. Oil Fund. That’s all logical.
But what did we just talk about in regards to luck and unlucky? Had these people … Most of them … I don’t know, if you’re being honest, maybe you’re listening to me … I guess, if you’re one of these people you already probably turned it off. “No, Clay, you’re a scumbag. You sell courses, you sell a community. You’re a greedy savage, you’re terrible. No, I’m not going to pay for that. I can get it for free on Stocktwits, I can get it for free on Twitter. I can get it for free on … ” Insert blank of free thing out there. “No way, Clay. You are a scumbag.” Like I said, those people probably already turned this off. But you know those are the people that are out there. Okay, fine, go and do it. They’re on Stocktwits. “Hey, I’m getting USO. Yeah, go USO! I want oil. Yeah, oil [inaudible 00:41:12].” And you have this echo chamber filled with people that don’t know what they’re doing.
And of course, “Oh yeah, yeah, so I am making a good decision.” That’s … [inaudible 00:41:23]. But remember, who does Ray Dalio have tear his stuff apart? Well people that he knows know what they’re doing. Right? But let’s contract this with, “You know what? Clay, I joined your group, here’s what I’m thinking,” and had that come up in the group, yeah, that person would have been like, “Do you realize … ?” And they would have gotten constructive criticism. They would have said, “You know, actually, that’s not how it all works. I get it. I see where you’re coming from, you’re not stupid, but hey, you’re asking for your idea to be stress tested, you want positive feedback? Don’t do that.” So what happens to that person? Well, they don’t get slaughtered like all these new people just got slaughtered. So they got what? They got lucky. How did they get lucky? Well because they stress test their idea. How did they stress test their idea? Because they were open minded, right? They stepped outside of their boundaries, they actually joined a community of people that know what they’re doing, and they got lucky. They avoided the slaughter. And this has been a total slaughter house.
And I can’t stand when people … They’re, “Well, taking advantage of retail … ” No! They didn’t take advantage. People took advantage of themselves by being just too close minded. And yeah, I’m getting a little bit fired up here, but this is a prime example of, “Oh, the victim card.” Nobody’s a victim card. Now, I’d be totally sympathetic, I would understand if the USO and the people that created it were misleading the public. Stating one thing in their prospectus, but then doing something totally different. But no, they said how they operated, they explained how it actually works. But no, you got people out there that, “Okay, let’s just do that.”
Okay, well, you know what? That’s why Ray Dalio is a billionaire. Because he does not operate that way. His mind does not operate in fashion. He comes up with ideas, but then he wants people to stress test them. And had those people done that, like I said, they would have been, “Hey, no, no, no, no. I understand why you think that way, but that’s not what you would actually want to do if you want to capitalized on your little thesis there,” and those people would have gotten lucky. And now you have all these people “I’m just so unlucky … “, “Aw, those people, they got so unlucky.” No, they really didn’t. They did not get unlucky. They just were investing into something that is a trading vehicle. It is meant for trading.
So, just keep that in mind. I mean, the USO, I get it. I keep an eye on it for a general idea of oil. That’s not what it actually … If you want to get involved the way these people, that’s just not how you do it, and it all could have been avoided by going through what that psychologist study said, right? You don’t want to get too narrow minded. You don’t want tunnel vision, tunnel vision, tunnel vision. And these people, it caused them to miss out on something that could have been avoided. And that’s why I say there is profit in avoidance. There can be great, great gain when you just simply know what to avoid in the first place. And that’s one of the … The video hasn’t come out … Oh, it will be out by now, by the time this goes public, but a lot of people always miss that the biggest way to make money in the market is via Benjamin Franklin method. A penny saved is a penny earned.
I mean, if you can save and avoid losing money, that’s the same as keeping that money in your pocket, which is the same as basically making money. And most people … They always forget about that. And rightfully so. Hey, I’m in the market to make market, that’s true. And you do have to put your money in the market to make money. Bt if you put your money in the situations that shouldn’t even be there, that could have been avoided, that you should have noticed should be avoided, well, that’s what the majority of trading is, right? When people are saying, “Just be patient,” be patient. Don’t force a trade. That means avoid losing money in the first place. Don’t do anything that’s stupid that could have been avoided. Because you don’t want to lose money, especially if losing money, you could have just walked around the little pit that’s in the ground anyways.
But it all ties back to being observant. Who are you surrounding yourself with? You got to be a lucky person. But if I did my job right, as I wrap things up, hopefully you see that luck is, by no means, what you would think of luck. “Well, they’re just lucky.” No, it’s self created luck. Now yes, every now and then you go, “Well, you’re lucky because you won the lottery.” Okay, fine. That is definitely totally luck. But in the sense that we’re going through it, I am very confident that you have the power, you have the ability, to either become luckier or actually go from unlucky to lucky. I’m not saying it’s easy, I’m not saying it’s always comfortable, I’m not saying that you might not have to step out, whether that be from your financial comfort zone and actually maybe invest into a community or invest into a training program. Maybe you have to do something else. I don’t know what form that’s going to take, so I’m not saying it’s going to be easy, but it’s totally, totally doable. Because everything we went through is not rocket science.
Earlier I made the comment, “Yeah, you could probably argue that this university wasted a bunch of money for this stuff to be study with their results,” because I sit here and say, “Well yeah, that does make sense. I can’t say I’m shocked by that,” and I don’t think anything I said was shocking to you either. But the good news is, okay, none of this was complicated. It may be a little uncomfortable, but it’s totally doable.
So hopefully, you got something out of this one. I always enjoy these ones because … I get it, I’ll be the first to admit, especially throughout the podcast, I’ll give my opinion. And it is just opinions. But at least in this situation, I have quite a bit of scientifically researched and funded data to back all this stuff up, so I feel a little bit better about it, but as always, I hope you enjoy these, I hope you got something from it.
Before you go, if you are listening on iTunes or any of the other podcast players, especially on iTunes … Well first of, subscribe please. But then second, on iTunes, if you could leave us a rating, that really helps us out, goes a long way, or better yet, on iTunes, if you could leave us a written review, that really helps out, and I really do greatly appreciate it. If you’re listening at claytrader.com, then in the bottom right hand corner, there’s a little chat box right there, so feel free to reach out there. Now, it is a bot at first, but if you ask to speak with a human, then yeah, you can reach out to us. Comments, questions, suggestions. Love to hear from people. Always, always enjoyable when somebody starts off one of those conversations with, “Hey I listened to the podcast, and then they go into it.” I mean, I’m open to criticism, right? [inaudible 00:48:03] you’re terrible.” Okay, well, that’s criticism, but please, constructive criticism, right? I’m up for a stress test. Ray Dalio’s attitude towards the world makes a lot of sense to me, so I’m open for feedback. So if you just want to give me some feedback, that’s great too. Would love to hear from you.
But all in all, get out there, and get, either, like I said, get luckier, or it’s time to change from unlucky to lucky. You can definitely do it.
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