Transcript

Clay Trader: Hey, it’s Clay. Real quick before we get to the episode, I want to just bring to your attention one of the most common questions I get, and it’s a wise question. It’s something that makes sense to be asking. Hey, Clay, what is a good broker for a beginner? I want to trade stocks. What would you recommend? Ideally, if it’s got zero commissions, that would be we Webull. They are a fantastic platform. And what I like to apply is known as the platform HAT method, H-A-T. First off, the H. Does the platform give you the ability to hunt for stocks, to find good stocks? Webull absolutely does. The A, the analysis. Does a platform give you the ability to analyze whatever stocks you have hunted and found? And with Webull, it absolutely does.
Clay Trader: And then the T, take action. You can hunt out stocks, you can grown an analysis on them, but if you can’t actually take action and put everything into motion, well, then a platform is not going to do you very much good. But once again, Webull is very, very beneficial for allowing you to take action with whatever sort of stocks and then strategies you are looking to take advantage of. So are they the be all, end all? They’re not. There’s lots of good platforms out there. But when it comes to the quality of charts they give, when it comes to the zero dollar commissions and the ease at which you can sign up, they have a great app for your phone, I would say at least give them a try. So go to claytrader.com/webull, and you can learn more all about them. But let’s now get to the episode. This is The Stock Trading Reality Podcast, episode 311.
Speaker 2: 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. And this is your host, he’s shocked at how confusing tractor shopping can get, Clay Trader.
Clay Trader: All I can really say is I’m glad that I have brother-in-laws and resources around me that are all about that sort of stuff because I felt like I was learning how to trade again, so much information, so much of this, and we can combine that, but you should also consider these other things. Yeah, tractor shopping, there’s a lot that goes into it. There’s a lot that goes into a tractor. There’s a lot that makes a difference. And as a tractor person yourself, you’re probably sitting there like, “Clay, you’re not very smart. Are you?” And no, I am not. The Dunning-Kruger effect totally got me, the illusion of explanatory depth totally got me. I’m just one of these ignoramuses walking around, looking at tractors, saying, “Oh, yeah. If you want a tractor, you just go buy a tractor.”
Clay Trader: But no, there’s quite a bit that goes into it. And then you get into the world of attachments, which is kind of the current world that I’m in, and wow. Now why am I talking tractors? Why would I buy a tractor? Well, for those of you that are not aware, I recently, I guess it’s not really recent anymore, but a few months ago, several months ago, I made another, just from the real estate perspective, my real estate made an investment in 300 acres up in Northern Michigan. And part of that is, want to have some fun up at the property. So yeah, I was [inaudible 00:03:10], you need to get a tractor to manage this [inaudible 00:03:11]. I mean, it is 300 acres, Clay. It’s like, “Yeah, that’s probably a good point.” And again, I want to default to their wisdom because they have way more wisdom in the outdoors world, the land management world, than I do.
Clay Trader: And so started down the pathway of a tractor. Ended up getting a John Deere. But like I said, in my mind it’s like, “Oh, if you want a tractor, you can get a John Deere. You can get a Kubota. You can get a New Holland.” But no, even within each brand itself, there are so many different, well, this is a little bit different than that. But luckily with them, I had some good guidance and got myself just it feels like a big old toy. I mean, I feel like a kid in a sandbox, but the sandbox just happens to be the real world. But yeah, it truly was shocking at how confusing that can all get.
Clay Trader: Well, for our episode today, hopefully you saw from the title, it’s a solo, and want to bring about some science again that can help us out, and how to remain calm. Right? If there’s anything that traders can relate on, especially if you’ve used real money, now I’m not saying you can’t feel this if you’re doing a simulator trading or some sort of demo, practice trading, paper trading, whatever you want to call it. But there’s just this extra sense, there’s this feeling that comes along with using real money. And at the core, it is pressure. Right? There’s pressure that comes with it. And when you feel pressure, it’s easy to not become calm anymore. And that would not be good when you’re trying to trade consistently, trade successfully. Right? You want to remain calm, and as I was …
Clay Trader: Because I always try to put in some research for these episodes, thinking about what topic interests me, what topic might be something to look into. And it kind of just dawned on me, we’ve looked at many different avenues. But what about just remaining calm? Because from my personal experience, that’s bit me many times, not remaining calm. Right? You start to freak out. You start to just … And you don’t, at the core, like I said, if you boil it all down, it comes down to, hey, yeah, you had some pressure, and you just didn’t remain calm. And that caused a whole lot of unwanted issues. So I did some research in the world. And I wanted to try to do it from a scientific approach, the world of … In this world, we’re going to go to neuroscience. I can barely even pronounce the world.
Clay Trader: But you know psychology, and I determined that, yeah, a lot of it has to do with, well, the human brain, of course. But then there is so many parts of the human brain that I’m not going to even pretend to be smart. I don’t know how to pronounce these words in different parts of the brain. And I already sound like a moron enough half the time on the podcast, so I’m not trying to add to the legend of Clay’s moronic-ness, but so I was like, “All right. I see this scientific study. I see this article. And they’re all saying the same things in different ways. But can I find something that maybe dumbs it down a little bit more for my education level, if you will, my understanding level, which is probably that of a child?” And finally found an article that I thought, “Hey, there we go.”
Clay Trader: It’s a list. It breaks down the list. It goes about it. And as a former engineer, I appreciate it in a very sequential, a very logical and step by step way. And I think this is going to be the backbone of what I use for the podcast. However, just to encourage you, if you have extra time, if you’re interested in learning more, there is a lot more in depth research out there about how this works and how the brain functions. And you are more than welcome if you want to pursue it more. But like I said, for the sake of the podcast and for the sake of trying to make it as clean as possible, and just for the sake of my own human brain and understanding capabilities, I just want to keep this really as straightforward as possible. And I say this now, I don’t think this will be a very long episode. I guess you’ll know because you’ll see the time.
Clay Trader: But the article’s not super long, but I know I tend to send myself down rabbit holes, and I’m just going to go with it though. But this comes from inc.com. I enjoy Inc, a good business type magazine and publication here. But the name of the article, Use Neuroscience to Remain Calm Under Pressure, and the subtitle, The Ability To Keep Your Wits in a Crisis Isn’t a Character Trait, so isn’t a character trait, it’s a skill that you can learn in minutes. So I’m going to twist this a little bit. First off, I’d have to disagree. At least in the trading world, I don’t know if you can learn this in minutes. Now I’m also aware, hey, when you’re writing an article, you’re trying to get people to click on it, so you want to have some sort of catchy type implication there. And yeah, wow, remaining calm under pressure and you can learn this in minutes. Yeah, all right, let’s do it.
Clay Trader: Like I said, it’s not a very big article. But as far as learning to do it and actually applying it and having success with it, for me at least, going to take a little bit more than a few minutes. But I will agree that I don’t think it’s a character trait. I think it’s something that can be learned. You just need to know what to learn, what to focus on. And again, this article I think does a good job of kind of focusing on those things. And for you long time listeners, I’m not patting myself on the back here, but I’ve kind of talked about all this in roundabout ways, but we’re just going to get a little bit more scientific here. But it’s kind of crazy how when you do something long enough and you just compound and collect all your experiences, you pretty much … I mean, it describes exactly what all these research reports and stuff that’s available out there all lead to and point to.
Clay Trader: But so to just pick up the article here, great leaders always seem to remain calm during situations that make mere mortals fall to pieces. Conventional wisdom says that the ability to remain calm is a character trait that most of us lack. Neuroscience, however, has recent revealed that remaining calm under pressure is not an inborn trait, but a skill that anybody can learn. Here’s how it’s done. So let’s just think, let’s just make sure real quick that this is applicable. I mean, remaining under pressure, whenever you put your money on the line, which is required in trading, there’s going to be … Let me take a step back. Assuming you care about that money, assuming you actually view that money with value, so if you inherited a billion dollars, you’re probably not going to really care to put $10,000, $20,000, $30,000, $40,000 into a trade.
Clay Trader: I mean, if you have a billion dollars, is that really pressure? I don’t think so. I mean, so like I said, assuming that you do care about the money that you’re putting to a trade, that does create pressure. And where’s this pressure coming from? Well, the fact that you could actually lose, again, which you value, you could lose which in the transaction, in that situation. So of course, there’s going to be pressure. Right? So that’s the context here. We’re looking at this all from a trading point of view. Of course, this article is not. But it can and should, I would argue, certainly be applied to trading.
Clay Trader: So again, remaining calm under pressure, so that would be a good thing for us. So number one, about how it’s done. Understand the biochemistry. Now I mentioned earlier that I wanted to try to avoid some of these words out there that, but not completely unavoidable, but it’s important. So just humor me, laugh at me, it’s okay. I’m not … Some of these words, speaking is not my forte really. It’s a struggle every single time, which goes to show, hey, just try something. I can barely talk, and here I am on a podcast. So just go out there, and I don’t care whatever you’re doing, just give it a try. Do it.
Clay Trader: All right. So understand the biochemistry. The opposite of remaining calm is the state of fight of flight, a physiological, there we go, reaction that occurs in response to a perceived harmful event, attack, or threat to survival. So again, fight or flight kicks in whenever there’s a reaction to a, and the keyword here was perceived, perceived harmful event, attack, or threat to survival, which at the core, that’s good. Right? If your brain, if your eyes are like, “Wow, that seems to be a threat,” well, this fight or flight that kicks in, that’s going to kind of be what ideally keeps you alive. I mean, if you’re looking at a busy road, and there’s cars flying all over the place, and you don’t perceive any threat at all, and you just kind of go for it, that’s not going to end up well.
Clay Trader: If you’re walking through the bushes and a big lion jumps out, and you don’t perceive that as a threat, I don’t know if that’s going to work out for you. I don’t know if that’s going to be a very good plan of life. Your life probably will end relatively quickly if you don’t have that fight or flight. But for us as traders, as you’re going to see, this can be a problem. Welcome to the wonderful world, once again, of yet another example of why trading is very difficult, of why trading is such a mental challenge, because the way the brain works, it’s just not going to line up initially with trading. Right? Because in this situation, the perceived harmful event is what? It’s not our survival. It’s the survival of what? Well, that thing we value.
Clay Trader: We don’t want to see that thing we value not survive. And what is that thing we value? Our money. Right? Our hard earned money, our money that we view, and oh, wow, I worked hard for that, or I don’t want to lose that. Uh oh, this is now potentially in a situation where I could lose it, or in other words, it dies. Right? It’s a threat to survival, so not to you, but to something you value. But same thing, it brings about this same exact chemistry here, as we’re going to continue to learn about here. So the reaction starts when two segments of your brain called the amygdala interpret a situation as a threat. This perception causes your brain to secrete hormones that tell your nervous system to prepare your body to take drastic action. Your breath gets short. Your body floods your muscles with blood. Your peripheral vision goes away, and so forth.
Clay Trader: Another one, the typical one that I saw throughout all, your heart starts to beat faster. You start to get … You feel sweat forming, whether that palms, or pits, or … I don’t know. You start to feel sweat. You start to feel it. But the one thing, I couldn’t believe that it mentioned the heart rate. Right? But of course your breathing, your body, you can get tense, your peripheral vision, heartbeat, sweat, all that goes into play. But I find that … Why? Well, because again, your brain, the amygdala, assuming I’m probably not saying that right, but they interpret a situation as a threat. So as a trader, what is the threat? The threat is the potential that you lose what you value, that being your money. So because of this threat, the hormones start to go. So again, all biological process, the hormones start to flow to your nervous system. And all of a sudden, all right, let’s go. Start to prepare. Let’s go. Let’s go.
Clay Trader: And then these other things, the short breath, the heartbeat, your muscles are flooded with blood because if you’ve got to get ready to fight, let’s get some blood to those muscles. Your peripheral vision goes because you want to stay focused, laser focused on whatever that threat may be. And yeah, it goes on and that’s going to be what’s going on though. It’s just a hormone in your brain that’s telling your nervous system, “Let’s go. Let’s go.” As the article continues, since neither fight nor flight are appropriate in business situations, aka, let’s call this trading situations, your body never gets a release. Instead, your hyped up body tells your brain, “Yes, this is a real threat,” and you end up with your brain and body in a feedback loop, to put it in basic terms, you freak out. Right?
Clay Trader: There’s a word in there, I don’t know what that word even means. Props to the author. Nice vocabulary. But you freak out, in layman’s terms, you freak out. Because of this feedback loop, you are seeing a perceived threat, but because this isn’t actually a real threat, it doesn’t really go away, but therefore, your brain still sees it as a threat, but it doesn’t really go away because it’s actually not a perceived threat. And then like I said, the feedback loop occurs, and then you just ultimately freak out. In this state, chances are extremely high that you’ll either remain frozen in fear like a deer in headlights, or driven to release the pressure, you’ll say or do something stupid. Oh, does that sound familiar to you? To me, it does.
Clay Trader: You’re driven to release the pressure because you’re in this feedback loop and you want to get out of it. Your body is literally saying, “I’m starting to freak out. What is going on?” Now when I say freak out, I don’t mean you go bonkers, crazy. But there is this sense of, you are just so much pressure, so much pressure. Okay, I want this to be over. So you’ll, like I said, not for us, you’re not going to say anything, but you could definitely do something stupid. What would something stupid be in a trade? I don’t know. Selling too soon, selling too late, not selling, holding and hoping. There’s a whole list of stupid things you can do in a trade that’s not going to cause the trade, over a long time, that’s not going to cause a trade strategy to come out okay.
Clay Trader: If you are constantly in the sort of feedback loop, and then you are ultimately seeking to get out of the pressure, then yes, of course, you’re going to. And it’s not like you’re irrational. It’s not that you’re stupid. Now yes, you may do stupid things, but it’s not because you’re stupid. It’s because you’re literally a human being, and you literally have chemicals. You have what was the chemical again? I can’t remember what it was. The hormones. You have these hormones being secreted to your nervous system. And your nervous system therefore is causing your body to … I mean, think about it. It is what it is. I mean, it does not mean that you don’t know what you’re doing. It does not mean that you’re not working hard enough. It just means that, hey, you’re a human and this is what naturally happens from a biological process.
Clay Trader: So because of that, this is too much pressure. I feel like I’m going … I just, let me get out of this. Let me release. I like how it says, “Driven to release the pressure,” and then you get out. And then of course, the first one was you either do something to release the pressure, or you’re just going to remain frozen in fear, like a deer in the headlights. I’ve been there. You’re in a trade, you think something, and then boom. What just happened? And you freeze. I can only speak for myself, but I’ve talked with a lot of people here. And I’ve heard many deer in the headlights stories. But you literally freeze and you don’t do anything. And you just almost stare at that loss, and it gets bigger and bigger. But you’re almost paralyzed, and you just don’t do anything.
Clay Trader: So that’s two ends of the spectrum, and everything in between. You’re, “Whoa,” or else, “I can’t take it. Let me just … ” And you do something stupid. So that’s the context here. That’s what’s going on from the biochemistry in your brain and in your body. So number two here, label the emotions. Now around here, if you’re familiar, usually we refer to the emotions as kind of the voices in our head. Right? As soon as you put money on the line, you’re going to have all sorts of voices that show up that start to talk to you and start to tell you. We know as we get more and more educated, as we’re doing right now, obviously, these voices are created from biochemistry in your brain and your body. But for laymen, such as myself, I like to just call them the voices. But now this is saying, “Hey, label the emotions.”
Clay Trader: To calm yourself and remain calm, you need to interpret that feedback loop. So again, the feedback loop, we’ve talked about. So how do we remain calm? Well, we need to start to interpret that. We now know what’s going on, so let’s figure out how we can interpret that. As explained above, the fight or flight reaction begins in the amygdala, which is where your brain processes memory, interprets emotions, and makes what are often inappropriately called gut decisions. Hey, have you ever made a gut decision? Well, that’s the part of the brain that it’s coming from. It’s now understood that you can reduce fight or flight signals from your amygdala if you assign names or labels to the emotions that you’re experiencing at the time.
Clay Trader: As John [Prilet 00:20:07], a pioneer in using neuroscience and leadership training says, “Reflecting on your feelings and labeling them may assist in calming the amygdala, allowing you to move out of the fight or flight mode and free up energy, allowing you to think more clearly about the issue at hand, rather than worrying.” Doesn’t that sound like something that would be beneficial to trading? To think more clearly about the issue at hand, to think more clearly about the trade that you’re thinking about making, that you’ve already made, that you’re in, that you’re managing, rather than worrying. Yeah, I think that would be great. And I also found, and I never really thought about this, but [inaudible 00:20:45] about, and free up energy, which is true because it is hard to think clearly if all of your energy is literally in this feedback loop of fight or flight, fight or flight, fight or flight.
Clay Trader: Yeah, that’s true. No wonder why it’s hard to think clear at times if you’re just stuck in this feedback loop, but I would agree. And again, what is this? Label the emotions. Think back, reflect. And I get it, especially for us guys, we don’t want to talk about our feelings. We don’t want to reflect on our feelings. But trade journaling, that is another benefit that I would say is a very, very huge benefit of it, is a part of a trade journal, documenting your trades. How are you feeling? What do you think led you to feel this way? And when you start to label how you’re feeling, when you get in touch with your feelings, then you can start to label those emotions, which I know I’ve talked about many times in the past, done videos on it, how you kind of want to just give your emotions, give your feelings names. And you’re like, “Oh, I know you. I know you and I know what you’re trying to do.”
Clay Trader: And I realize there’s always a little irony because the catchphrase on the site, trade without emotion. But the fact of the matter is, emotion will always be there. The goal here is to recognize that emotion. So as a trader, it is perfectly okay, it does not make you a bad trader if you feel emotion, if you feel some sort of desire to fill in the blank. It is okay. You will always have emotions. But the key, the trick, is: Can you identify that emotion and realize what’s going on? And as I say, I name the emotions, I know what’s going. I’m like, “Oh, I know you. You’ve shown up before. And you show up in this, that, and the other situation.” And when you show up, I need to do this in order to fight you back. But when you realize what’s going on, when you again label those emotions, as this article says, you’re going to be like, “Okay. All right.” You’re going to start to get that grasp, or as this person says, “Get the grasp,” meaning you’re going to be able to free up energy to think more clearly about whatever the issue is at hand. And for us as traders, like he said, the actual trade.
Clay Trader: So label the emotions, but in order to do that, well, you’ve first got to be able to identify the emotions. And in order to be able to identify those emotions, unfortunately, you’ve got to just sit there, reflect on it, think about it, and trade journaling can be a great way for that. Number three, now we’re getting a little bit more actual physical. Slow your breathing. Now that you’ve interpreted the brain part of the feedback loop, you interrupt the body part of the loop by consciously breathing slow and deeply. Count from one to 10 as you inhale, and then count from one to 10 as you exhale. So let’s think about this. We first need to address the mental side of things, what’s going on in the brain, and that’s where you label the emotions.
Clay Trader: But you still got all the body stuff going on. Right? You got the heartbeat, and you’ve got the sweat, you’ve got the muscles tightening up, peripheral vision goes away. So how do you address that? What’s the solution to that problem? Again, slow your breathing. These deep breaths bring more oxygen into your lungs and then into your bloodstream, which is the exact opposite effect of the fight or flight reaction. You’re telling your body and brain that it’s no longer necessary to increase the intensity of your fight or flight reaction. Makes sense, right? In any sort of true, true fight or flight situation, again, I’ll use the lion, if I’m staring down a lion, I’m pretty sure that I’m not going to be able to be like, “Woo,” I don’t think I’m going to be able to breathe calmly. I think I would probably be in some sort of fight or flight mode. Right?
Clay Trader: But if you can, which you can, because at the end of the day, a trade is not a life or death situation. It can feel that way for the reasons discussed because what you value is at threat of potentially dying, going away. But that doesn’t mean that it’s actually threatening your life. So you do have the ability, despite whatever you think, to do this, slow your breathing and take these deep breaths, which again is going to help you by telling your body, oh, all right. This is not as bad as what we perceived it to be. And then you’re going to be able to calm down physically, which would make it that much more easier mentally to, again, to steal the quote from the above person, think more clearly.
Clay Trader: So to pick back up with the article, according to Esther Sternberg, a physician and researcher at the National Institute of Mental Health, quoted an npr.com article, slow, deep breathing negates the fight or flight reaction by stimulating the opposing parasympathetic reaction, the one that calms us down. So you’re literally just fighting your body by telling your body it’s okay. But you obviously don’t tell your body, “Hey, body. You’re okay.” You do it by breathing slowly because if you breathe slowly, hey, apparently this is not as bad as we thought it was because all of a sudden, our lungs are getting more oxygen because there’s deep breaths, they’re short, or they’re nice slow breaths. All right, let’s chill out a little bit. Our perception was potentially wrong. And then four is relabel your emotions. So again, step two was label the emotions because in order to do anything, you need to first label them. Right?
Clay Trader: So now that you have them labeled, let’s kick that up another notch and let’s relabel them. And this is something that I don’t know if I’ve done this, I don’t know if I’ve really ever talked about this, but I think it’s fantastic. It’s true. It’s a reframing of your mind. Now I’ve done it in many ways, such as using the word can’t. Oh, man, that’s such a terrible word. But you replace the word can’t with how, oh man, that literally can change your life. That literally can change so many situations, to just one word, to relabel can’t, relabel can’t with how. I mean, that’s a life changer type rewiring of your brain to just do that. But here, we have to relabel your emotions. But again, and this is why I love the process, in order to actually relabel your emotions, of course, you’ve got to label them first, which comes with step number two.
Clay Trader: So at this point, you’ve interrupted the feedback loop at two levels. In this step, you eliminate the emotional impetus that created the fight or flight response. So now we’re just trying to flat out get rid of it, be proactive against it, and just not even allow it to show up in the first place. Go through the list of emotions that you identified in step two and assign them labels that are positive rather than negative, huge thing, huge thing. I mean, let’s focus on the positivity rather than the negative. So for example, and I mean, all these words can 100% be applied … I guess I can’t say that because I don’t know your situation, so this is all anecdotal.
Clay Trader: But from my experience, from the hundreds of interviews I’ve done now at this point in the podcast, of other traders I’ve talked with, I can say with confidence that although not a scientific statistically based study, I’ve heard this come up time and time again, and hey, you know what, at the end of the day, let’s just see if you can relate to any of these. Fear, frustration, worry, dread, flustered, alarmed, pressured. So those are the negative emotions, but check out the relabeled of these. So fear, relabel that as anticipation, which is so true. Right? If you’re in a trade, and you start to feel fear, no, actually what you’re feeling is the anticipation. You’re anticipating what you believe is going to happen, so you don’t have to be fearful. That’s you anticipating.
Clay Trader: Hey, you know what, I have this trade planned. I love this setup. I know it’s a high probability setup. So why be fearful? But that’s also what circles back to why you need to know what you’re doing, why you need to have a valid strategy, why you need to know what a high probability setup is, because to be quite frank, you should be fearful if you are out in the markets acting like a degenerate gambler, playing. Hey, you know what, I just started learning about trading two weeks ago, now I’m using real money. In that situation, that’s fear. And it should be fear because your body full well knows you have no idea what you’re doing.
Clay Trader: Now sometimes you’re not even fearful because you’re so ignorant that you don’t even know to be fearful, but in many situations, you should be fearful. And that is welcome to another gray area of why trading can be so difficult, because it’s a valid question. Should I be fearful? Or should I be actually anticipating because I know what I’m doing? I know this is a great setup. It’s worked. I know it’s consistent. But so I don’t need to be fear, I’m not feeling fear right now. I’m feeling anticipation because what I believe has the most likely outcome to happen, I’m just anticipating it and waiting for it to happen. But yes, in some situations, dare I say in many situations, especially if you’re a beginner, and I’m well aware. Again, another cruel trick of the markets, you can be a beginner, you can be doing a bunch of dumb stuff, but yet the market will still pay you. That’s the hardest part. The market rewards bad behavior, so it’s more than logical for you to think, “Why would I be fearful? I’m a beginner, but I’m making all this money. I’m clearly doing it right.”
Clay Trader: Hey, that logic sequence is more than logical. Why would you think that you’re doing something wrong if you’re making more money? Hey, that’s how the market suckers you in. So yes, in many situations, it should actually be fear because you don’t know what you’re doing. But again, going now through here, this all assumes that you do have a valid strategy, that you do have a way to go approach to the markets that’s not that of a gambler, that’s not that of, hey, this is a casino. No, this is from a businesslike perspective. Trading, if you’re new here, then you haven’t heard it. If you’ve been listening to episode after episode, I’m sure you’ve heard it come up time and time again, trading should be treated as a business, assuming you want to have success. If you’re just to have fun, want to treat it as a casino, that’s fine. You’re probably not feeling any of these because who cares, it’s just money that you’re looking to burn.
Clay Trader: But the assumption being, you want to be good at this. You want to create this as a stream of income and be consistent, not perfect, but consistent, then yeah, you’re going to want to take this serious, and you’re going to want to figure things out. So moving from here forward, this all implies, like I said, that you want to take it serious, that you have worked hard, you’ve studied, whether or not that means you’ve invested to a class, or a program, or you’ve done it some other way. But this implies that, you know what, I’m good. I’m just still struggling with the emotions every now and then under that premise, so I’m definitely talking to those people. And I know a lot of students in my program are listening to this. I’m talking to you right now.
Clay Trader: I’m talking to you, and I can say that with confidence because I know what my program offers. I’m not saying that other programs can’t put you in that situation too. Right? I’m not going to say that my class is the only good one out there. I’m not saying that. I can only say that, well, I know what my class offers because I put it together. So I can say with full confidence and authority, and am now talking to you for sure, going through the class. If you’ve gone through other classes, then I very well could be talking to you also. But like I said, if you just got started, nothing wrong with that. We’re all beginners. Probably, you should be fearful. So fear, look at as anticipation.
Clay Trader: Frustration, look at as desire. I love that one because think about it, if you’re not frustrated, that tells me you don’t really care. If I, I don’t know, this will sound bad because it makes it seems like I don’t care about money, or that I’m ungrateful. But if a penny falls out of my pocket, am I really going to be super frustrated about it? If I at the end of the day am like, “Wow, I lost a … A penny fell out of my pocket,” that’s probably not going to cause my frustration, if any, because I really don’t care about a penny. But when you do feel frustration, what is that actually? That’s a desire. Right? That is a desire that you are trying to do something, and you’re just frustrated with yourself that you’re not quite able to do it to the best of your ability. But the desire is there. So wipe away frustration, that is actually a desire.
Clay Trader: Worry, replace that with a concern. You don’t want to worry about stuff, but you do want to be concerned from a tradings [inaudible 00:33:44], in a risk managed way. Right? You want to be concerned about risk. Do you want to be worried about risk? Well, no, because then you’ll never do anything. You’ll never take any risk if you worried about it. But if you’re concerned about it, well then, hey, that’s going to force you to, all right, well, let’s actually plan for it. Let’s figure out how to manage it. Let’s figure out how to control it. Have we ever talked about risk control around here? I’m not sure. I don’t know. Maybe not.
Clay Trader: Dread, replace that with caution. Again, same exact thing as worry. You’re not dreading risk. You’re not dreading anything, but you do want to be cautious about it. So let’s be cautious. There is great value in being cautious. If you’re dreading, dreading crossing the street, you’ll probably never cross the street. But if you’re cautious about it, all right, let’s be cautious. How can I be cautious about this in a smart way? And I’m not going to be worried about it, but I’m concerned about it. So what can I do here? Oh, why don’t I try looking both ways? Okay. All right, let’s get on with it.
Clay Trader: Flustered, replace that with excited. And that’s a little sketchy because yes, in trading, it’s good to be excited, but you don’t want to be too excited. So this one, when it comes to trading that is, a little sketchy right there because I don’t know if I would agree with excited. But although from just a practical perspective, yeah, absolutely. If you’re flustered about something, at the core, you’re actually excited because something is ideally going your way. Alarmed, make that curious. I like that one. If you’re feeling alarmed about something, well, no, you’re not actually alarmed. You’re just more so curious. Okay. What’s going on here? And I relate to this one in trades all the time. Right? It can be very easy to feel alarmed if you identify a setup that you like, that you know that’s a high probability setup, that you know that whatever outcome is most likely to happen, it starts to not happen. Did I miss something here?
Clay Trader: So again, think about it, you’re not alarmed. But you’ve just gotten kind of curious, making sure. Oh, no, just because for example, if you buy a stock and it starts to go down, that doesn’t mean that it’s all of a sudden something’s wrong. I mean, as long as it … Now of course, if it plummets or something like that, that’s different. But just because you buy it at $50, and all of a sudden, it’s at $49.75 for example, no pricing goes straight up. So you don’t want to be alarmed about it, but yeah, be a little curious. Okay. Am I sure I’m seeing things right? So be curious.
Clay Trader: Pressured, relabel that as courted. And I like that too because, hey, you know what, if somebody’s courting you, that means okay, yeah, that’s a good situation to be in. And that’s definitely a much more positive situation than being negative. So then as the article wraps up, when you relabel your emotions you are using controllable parts of your brain to convince your amygdala that this is not a fight or flight situation, but instead, a stay aware and watchful situation, or even a sit back and enjoy situation. Does that not sound like how trading should be? Stay aware and watchful. That’s it, stay aware, be aware, be ready, be watchful. And then in some situations, especially when you get a trade that goes in your way, and you want to let the trade work for you and maximize those gains, then yeah, sit back, enjoy. Right?
Clay Trader: Sometimes it’s hard to just sit back and enjoy because you want to get too antsy, and I struggle with this, I think all traders always struggle with this, but you get out of the trade too soon. And then the trade would’ve still kept going in your favor that much more, and you would’ve made that much more money. So when the trade gets to a point where it’s like, “Yeah, it’s time to just sit back and enjoy,” that’s something else that you’re actively doing. And I love how … How are you doing it? Well, you’re doing it because you’re using controllable parts of your brain. So using and relabeling these emotions, you are controlling that. Right? Therefore, it’s a controllable part of your brain. And that’s what’s going to convince your amygdala, okay, yeah. All right, this is not fight or flight. Okay, yeah. Yeah, there’s no need to get, be alarmed. I mean, be curious. There’s no reason. Why are you … No, that’s a desire. Hey, I got some concern.
Clay Trader: So again, anticipation, desire, concern, caution, excited, curious, courted. That is such a different list compared to fear, frustration, worry, dread, flustered, alarmed, pressured. Such a different list. As you continue to breathe slowly and deeply while holding the relabeled emotions in your mind, notice the speed at which your heart is beating. You will find that it gradually returns to a normal pace, you’ve regained calmness. So there you go. Twofold, relabel these emotions. Tell them in your mind. Repeat these emotions. All those positive ones, anticipation, desire, I’m just being cautious, I’m a little concerned, but that’s much different than worrying. I’m curious here. As you breathe slowly, and it’s going to calm that fight or flight, and my definition will ultimately calm you.
Clay Trader: While this technique does take a little practice, it’s well worth the effort because this skill will both make you a more effective leader, trader, and vastly increase your ability to enjoy the natural ebb and flow of pressure in your workplace, the stock market, forex market, crypto market, options market. Don’t be surprised though if your team starts referring to you in private as our fearless leader. Trust me, they mean it as a compliment. And that’s what you’ve got to be. You need to be a fearless trader. Now fearless trader does not mean you’re reckless. Right? Because we still have those words, concern and caution. So the whole diamond hands, the whole Wall Street bets thing that’s out there, I get it. It’s a bunch of probably kids that … But that’s not what real trading is. Real trading is fearless, but fearless with an underlying component of concern, of cautious, of caution, which again is so much different than worry and dread.
Clay Trader: And at the end of the day, one other thing that’s going to make this helpful and I already talked about it, but in order to stay calm, in order to be able to use all these words, then you need to have some sort of grounding [inaudible 00:40:04]. Right? You need to have some sort of launch pad. You need to have some sort of reference point that you can build from, that you can operate from when it comes to implementing all these tricks. And if you’re just out there, and you feel like all this stuff seems so random, I feel overwhelmed, not by the trade, but just overwhelmed by the amount of information out there.
Clay Trader: And again, you’re going to have to be honest with yourself. If you are just out there and the market feels random, the market almost feels rigged against you, the market feels like I can’t just do anything right, like the market’s out to get me. If that’s your feeling, if you just feel overwhelmed, if you feel that everything’s random, then you’ve got to first build some sort of fortress that you can attack from, because if you’re going to attack this problem of not remaining calm, well, that implies that you actually have something that you can refer back to.
Clay Trader: And I already talked about this, but it all goes back to that fear versus anticipation. In many situations, you should be fearful. You should be fearful of the feeling of randomness because, oh, man, so much on YouTube, so much on social media, so much on the internet, I mean, so much everywhere. You should be fearful of that. That’s good. That’s a good thing to be fearful of because you’re recognizing, yeah, this is just overwhelming me. You should be fearful of being overwhelmed. Right? If you feel overwhelmed with something, then that’s a situation that could very well not end well, so yeah, you’re going to want to be fearful of that. But once you get that strategy, once you start to figure stuff out, once you start to fine tune and learn how to actually trade, and trading is a little bit more. I know how to buy and sell a stock on my online broker. That’s not trading. Okay?
Clay Trader: That’s not trading at all. That’s like saying because you know the alphabet, you’re a world class philosopher. That’s a little bit more to it than that. Just because you know what a support and a resistance and a moving average and a candlestick is, just because you know what the MACD is and the RSI is, does not mean that you actually know how to trade. That’s called reading the chart. Trading is actually applying the chart in a risk management and risk controlled focused way. Big, big differences there. So I mean, that’s up to you. And like I said, if you do have all that, then you know what, I want you to start to use this process. I want you to relabel those emotions, identify them, of course.
Clay Trader: And I think this is a great way, and I thought it was fantastic on some tricks and suggestions to remain calm. So I hope you enjoyed this episode. And on that note, I’m always looking for suggestions for future episodes like this, solo ones. So if you have anything, please reach out to me. And before I go, couple requests on my part. First off, if you enjoy these, please subscribe on iTunes, Spotify, any of the other podcast players. Especially on iTunes, if you could leave us a rating, that goes a super long way, and I really do appreciate it. And especially if you leave us a written review, even better, but if all you got time for is ideally a five star review on iTunes. Thank you very much in advance. I really do sincerely appreciate that. And if you want to reach out to me personally, hit me up, clay@claytrader.com, or on the website, claytrader.com.
Clay Trader: In the bottom right hand corner on the show notes page, there’s a little chat bot, so just click on that. Just request to speak to a human, and that’ll eventually get you in touch with me. I love to hear from listeners. Nothing better than somebody, than a conversation that starts off with, “Hey, I listen to the podcast, and … ” And then whether that’s a suggestion, some constructive criticism, anything, I like to hear from you as listeners. So thank you for hanging out. Get out there, start to remain calm. Consider implementing this four step process, and I’m confident you will be very, very pleased with the results.
Speaker 2: This has been The Stock Trading Reality Podcast. Thanks for taking the time to hang out. To learn more about Clay and the Clay Trader community, including the trading team, premium training and more, visit claytrader.com.