Hey this is Sasha Evdakov and welcome to another episode of let’s talk stocks.
In this episode, I’d like to really concentrate on what your focus should be when trading. What should be your focus when you get in the trade, what should be your focus when you’re choosing a stock. What should be your focus when you are in it, when you’re actually in the position. What should be your focus when you get out of the trade.
Many traders focus on the wrong thing
I find that many traders, especially at the beginning, they focus on the wrong thing, when they’re getting in the trade, when they are in the trade, when they’re getting out of the trade, or taking profits, or exiting that trade.
The focus is incorrect. And when the focus is incorrect, you get different results. You get results that are unexpected or results that you really don’t want, and it’s a simple thing that your focus is wrong.
Just because it’s simple, it doesn’t mean It’s easy to change that focus. Sometimes it is because all you need to do is just be aware of “wow, my focus is in the wrong spot, I need to change my focus, I need to point it in another direction”.
For those of you that are lucky enough that are able to just shift from one side of the focus and focus to another direction and everything seems to work out great then, by all means this will be a great lesson for you to see that awareness.
For other people maybe you see and understand that that’s where should be your focus, but there’s going to be a lot of learning that still goes with it. There’s going to be a lot of homework you have to do, there’s going to be a lot of studying that you have to do. So some things that you have to push yourself to see thing a little bit differently to get outside of your box, as they say, or get outside of yourself and see yourself from that third person perspective, the observing ego also known as.
If you can see yourself from that outside point of view, then that will be a good thing. But for many people, it is difficult.
What I want to do is shed some light about your focus, maybe by learning this and learning about the focus muscle, where it should be pointed to in trading, it might help you see things a little bit clearer, and that way you might be able to get the appropriate steps to continue deepening the learning from here.
Starting the race at the right point
This is just a starting point to get you to the right starting line, rather than getting you to the wrong starting line. So if you have a long bunch of starting points in a race and you don’t show up to the wrong place to run the race.
Instead, let’s just get you started in the right approach, in the right place, and then you can do the homework to continue running the race and continue finishing the race.
When you focus on something, it grows
In order to illustrate this example or illustrate the concept of focus, really if you stand back and look at where the focus takes you, it’s typically the things that you focus on, grow.
If I’m focusing on something, like let’s say, this is you and you’re looking at something, and typically the thing that you focus on, this is the thing that grows and stands into something big or beautiful.
Typically the things that you focus on grow. This is what naturally happens. So if I focus on growing a plant, I focus on watering it consistently, then it’s going to grow.
Except for money
But unfortunately, with money, it’s a little bit differently. With money, the thing that you focus on, does not grow. So if I focus on money, money doesn’t necessarily grow. And that is because money is an exchange, it’s kind of a middle thing, it’s a weird thing that really has been created in order to use for our modern society.
If I focus on money, if I focus on building, building, building, and growing money, it doesn’t necessarily grow.
And you might be thinking, yes it does, because if I focus on money, and I go to work, then I make more money. But that’s not necessarily the case.
The reason you’re making more money at your job or at your work is because you’re adding value to that end user, to that employer, or to the customers.
If we break this down now and we get into the financial side of things, let’s just take a look at any regular business. If you take a look at any business, and we’ll just say that this is your business right here.
If you focus money, money will not grow, if you focus on money within your business. Even if you don’t have a business, just pretend you have a business, or pretend you’re working for a business, or make up a business, let’s say a roofing business, any kind of business, or even in the business that I also have by selling educational and informational products as well.
So if we’re in this business and we have a business and we just focus on money, money does not grow.
What should you focus on in order to grow a business?
What does make this business grow? What makes this business move and grow to the upside?
The only way that this business will continue to grow and continue to grow and stack higher and higher and make it bigger and bigger, the only way that it’ll grow is if I continue to focus on other things that are a result and bring the effect of money.
Let’s just say that this is now our bigger business, so in this business, the things that make this business grow that eventually lead to money is if I focus on the customer. Also, if you focus on the product, by having a great product, your business will grow, and therefor, the end result will be money. You can focus also on things like marketing.
These are actually the main things that will grow that business. So we have customer which is really the people, you focus on people then this will actually grow our business.
Because with the people, the people that you hire, the people that you’re dealing with, interacting with, you’re providing a good service, then that helps grow the business.
If you focus on a product, creating a great product that solves a problem, that saves people time, money, energy, makes their life easier, again, this grows the business and then it creates an effect over here where you get money.
And then finally, if you focus on marketing, and what is really marketing? It’s the communication of value, it’s communicating what it is that someone is going to get, receive, how they’re going to get it, it’s communicating what that product or service can do for them, or what that business can do for them.
The end goal or the end result for the marketing is also that communication of that product or that service and what they’re going to get, it’s communication of value, and by having good marketing, communicating what your product can do for them, that in the end will build your business, and the end result, the effect is money.
But if you simply just jump, and let’s just say you jump and try to focus on money right away, you can’t really do that. A business doesn’t grow by thinking about money.
If you look at any major business, like a car auto shop, if you look at a grocery store, they don’t grow their business by thinking about money, they grow their business by focusing on the customer, by focusing on the product, by focusing on marketing.
It’s not that they focus on money, and then their business grows and then people will come and buy their stuff, they don’t focus on money they focus on the products that they have. The products that you’re going to buy at the store, the services that you’re going to get. So that’s how a business grows.
The stock market is different
In the stock market world, it’s a little weird in the sense that we’re dealing with money because our product in part is money, so it makes it really confusing, how is it that we grow money, but yet we still have to deal with money. So how do we grow money, but we’re dealing with money.
It’s a really interesting dynamic, because you don’t have a person specifically, you don’t have a person or a customer that you’re dealing with, you don’t really have specific product that you can physically hold when you’re talking about stock shares or company shares, it’s all intangible really, so you don’t really get to see it that this is a phone and it’s worth a lot, or this is an orange or a pineapple, so there’s no real specific product.
Yes, you do have a product, stock shares, or it could be an option contract or whatever. And you don’t really have marketing, you’re not promoting anything to anyone.
Don’t focus on money
So your focus is going to be something different, and this is where many people get confused and they end up focusing on the wrong thing. So they end up focusing on this money, the end gold, the end effect, but the return on this is really poor. Meaning the return by focusing on this is not going to be the right result, so when you focus on this, on money, the end result in a business, you get a failing business.
You’ve probably heard of a lot of different entrepreneurs out there that failed, simply because they’re looking for a get rich quick scheme. Or simply because they’re looking to get rich quick, or just get rich and that’s all they focus on. Building wealth, building wealth, but they don’t focus on the customer, they don’t focus on the product, they don’t focus on the marketing, or simply growth tasks, anything that really will grow your company.
They won’t focus on that. They focus on wealth, rich, “how can I become a millionaire?” Those are the things that they’re focusing on, those are the videos they’re watching, those are the article they’re reading.
They’re not reading about how to make the customer satisfaction better, how to make that product better, and how to communicate value better, so that’s why things fail.
What should you focus on when trading stocks?
When you talk about the stock market, the same issues apply, so let’s take a look at the stock market and how the focus needs to shift a little bit when it comes to trading.
When I used to trade stocks back at the beginning, when I just was getting started, I used to think about a stock, and when I looked at the stock, I was always looking for what’s going to be the hottest stock.
What’s going to be the hottest stock that I can find that’s going to move the quickest, the fastest in the shortest amount of time? That’s typically what I always looked at, and that’s what I look at right now as well.
Things may change in the future, depending on the strategy, but for the time being, let’s say I was looking at a stock, looking to see which is the hottest stock, and then I’m looking at how much money or profit I can make.
This was my old way of thinking, so I’m always looking for the fancy stuff, the stuff that will move a whole bunch, and also how much money can I really make?
And those are the stocks I’m picking; it’s based on what’s my end result, what’s my effect.
That’s what I used to do, and this really was not a consistent strategy, so sometimes I would make some money, other times I would lose some money, sometimes I would get into scratch trade, where you barely make some money, or you lose just a little bit, so maybe $50 up or $50 down.
Sometimes you’d make a little, sometimes you’d lose a little, anyways, the strategy was not consistent. So it was a little bit all over the place, because I’m looking for the hot stocks, and this is what I typically get when I get questions that are beginner questions.
When people ask me, how to find the hot stock? What is the tip or trick to finding great stocks?
When I hear things like this, this typically tells me they’re a beginner, they’re still at the beginning stages and there’s nothing wrong with that, you’re still learning, but your mentality is still focused on hot stocks, what’s the tip what’s the trick? What’s a system to find the hot stocks?
This typically is again, a little bit more of an advanced beginner question, but it’s still thinking about the hotness of a stock, or which stock is moving, other times you might get things like, “do you think that this stock x, y, z is a good stock?”
They’ll ask me specific recommendations, and again, this goes back to really a tip, when you think about it. All these things are still a beginner related question. And a beginner mindset and a beginner thinking.
And I say that because there have been some very good questions that have been asked that get sent to me by email or even on YouTube.
But most of the times, many of the questions are more beginner questions, and that’s just because there’s just more people always starting out at the base, and again, there’s nothing wrong with that, I’m not criticizing your question, I’m just simply saying that this is the mindset that typically most people are in when they’re getting started, and this is the mindset that typically is where a lot of people fail, because they’re thinking about it in terms of “what’s hot? what’s moving? what’s the trick? what’s the tip? and which stock do you think is going to be doing well? do you think this stock has reached the bottom?”
Develop a strategy
That’s typically the overall mindset for a just getting started point, or not really concentrating on the right thing, the focus is wrong. At least I don’t believe it to be the appropriate focus, because you could do this, and your focus might be on the hot stocks, and maybe you’re consistent at winning, if you have developed a system or strategy that works for you, and then you have consistency at picking the hot stocks, but then “hot”, really needs to be more defined.
You really have to define that a little bit more on what’s hot and why you’re picking those hot stocks? So this would have to go into a little bit different, this is a little too vague
The appropriate focus
What are more of an advanced mentality? Or what kind of mentality is something that is a little bit the appropriate focus? The focus that actually to me says “wow, this person understands it, this person gets it” And they’re understanding the business side of things.
Because again, this is still a business, when you look at it in terms of a business, this is growing funds, growing money, in a way that does it through the stock market, does it through the stock exchange, through risk management.
The questions that are typically more advanced questions that I get, or typically when I see and say “this person has it”, are questions something like, if they’re looking for a stock, again, let’s just say you’re at the beginning, you’re looking at stocks right here, and then now, they’re looking, and the questions that they ask that they’re focused, let’s say this is the focus, so as we start drawing this down right here.
Risk and money management
Their focus, typically when they’re looking at it right here, is more about, what’s the risk? How do you manage risk in the market? What do you do if you get in trouble? What do you do if things go against you? How is it that you protect your profits?
I’m still saying the word profits, but really it’s about protection, about getting in trouble, what’s the risk? How do you manage your money? How do you manage the capital? Because this business is about managing capital. Managing your risk. What do you do when you get in trouble?
This is what you’re focused on, or you should be focused on, if you’re looking to have the appropriate mindset to get that end result for your money or the consistency.
You can see the two different approaches, at least at a baseline level, I’m just giving you a vague example right here, where they’re just going and talking about, asking about hot stocks, tips, “give me some tricks, give me some ways to pick some stocks, or ways to play some hot stocks, what do you think?” That’s just kind of a bullet approach.
Whereas this is looking at the risk, “what if things go wrong? What if I get in trouble? What do I do to protect my stock if it goes against me? What do I do to protect my position? What do I do to manage my position better?”
What the business is about
So when you focus on this, when you focus on risk management, this business is a risk management business, it’s a capital appreciation business; it’s a business where you have to learn to manage money. You don’t focus on money, you learn to manage it, that’s the business, that’s the core of the business.
If we look at a product business, and let’s just pretend that this is a cellphone, so we have a cellphone. So in a cellphone business, if you’re selling cellphones, right here, the business there is a product business.
You’re selling products to a customer and you’re giving them a benefit. So that’s kind of the business of that cellphone business. You’re going step by step, you have a product business that’s tied to a customer in which case you’re giving them a benefit.
With the stock market, you’re really in a risk management business, where you’re watching for stock appreciation and in case you get in trouble, you need to manage your money correctly, so that you can grow your money, so that you can, in the end, grow that account, so then your account grows your money. So that’s kind of the business you’re in.
Whereas here, you’re creating a product, it’s a good product, and then you tie it into a customer that you’re trying to solve that problem that they have to give them a better benefit.
Here you’re focused on risk, on trouble, protecting, managing, so that your account is profitable and continues to grow.
And if you’re the type of person that’s focuses on the hot stocks, that’s focused on tips and tricks, that’s focused on a system, basically you’re looking for something that’s moving right now, that’s hot, and you’re not focused on risk, trouble, protection, managing. Then you’re focused on the wrong thing, in my perspective and in my view.
You can still do ok in terms of trading in the markets, if you’re focused on the hot stocks, but you need to the define what the hot stocks are, you need to define what does “hot” mean to you? What does a hot stock mean?
If I say “give me a hot stock”, what does that mean? Who knows what that means? We don’t know what that means.
Because it could mean a stock that’s I the news, that’s pretty hot, right? It’s in the news, there’s a lot of celebrities in the news and they’re pretty hot.
But it could also mean a stock that’s appreciating in value time and time again. So I could say, “this person is hot because their mind is sexy, they’ve wrote ten books, that’s hot to another person”.
We have a different view of what “hot” is, and everybody can look at it completely different, so you need to then clearly define what does “hot” mean? Is it a momentum trade? Is it earnings? Is it based on news? Is it based on the technicals? Based on support and resistance? What does that mean?
And that’s the only way that you will get it, if you define what “hot” means, and you can find a strategy to properly picking the stock.
Take half off
But in the end, you still have to know what to do if you get in trouble, you still have to know what to do when the risk comes around that quarter, and what to do to protect your position, because it’s going to happen. How do you manage your money? How do you manage that capital?
And it’s one of the reasons why I always say take half off. If you have 500 shares, and that stock goes up $2, that’s $1000 profit right there, so take half off, which would be $500, take half off, and then the rest, at least you’re profitable even if it goes back to the original position, you’re out and you’re profitable with $500.
That’s food money, grocery money and most people live in this world on less than $5 a day. So think about that for a minute. What is your focus when you’re trading? Are you the person that’s focused on the hot stocks, the tips, the tricks?
Or are you the person that’s creating a strategy, a system to manage your risk? To manage what to do when you get in trouble, to work on protecting your capital and managing your money.
Focus on the right thing or you’ll fail
Because that’s what this business is about, and if you’re not focused on the appropriate thing in the business that you’re in, then you’re going to have failure. You’re setting yourself up for failure.
It’ not that you can’t do it and you can’t be successful, but the odds are against you, the odds aren’t in your favor if you’re focused in the wrong thing.
You might just happen to hit it by luck, or just have a nice winning streak in a bull market, because if you’re in a bull market, you can close your eyes, pick stocks and they all go up, you don’t have to think about it, so you might just have a luck streak for a year or two, but in order to survive in the industry through bad times and good times, you need to focus on the appropriate things in that business.
In this business, in the stock market, stock trading, stock investing, it’s about what to do with the risk, when you get in trouble, to protect your stock, protect your account and manage your positions.
If you’re in a regular business, just a side tip and a bonus tip, you need to be focusing on your product, your customers, your marketing, and adding value to them. That’s what you need to do.
Focusing on the right things is critical, and if you’re focused constantly on the money, the end result, the Jet Ski you can buy, the fancy watch you can wear, the cool car you can drive, you’re not going to set yourself up for success. Not at least in the stock market.
Focus on the right things, focus on the appropriate things and that’s where things will continue to grow, that’s where things will continue to evolve, and you’ll continue to evolve not only your life, but your family’s life and other people’s lives around you.