Tips & Tricks in Trading
July 18th, 2019
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September 13th, 2018
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Today, what we're going to do is take a look at three different ways to scale into stocks. There are many more ways than just these three ways, but I want to show you three different ways to think about scaling into stocks or scaling out of stocks.
What scaling do?
The whole point behind this is to reduce your risk because you don't know if that stock is going to continue heading higher or continue heading lower. So, you break these things apart from your entry positions that way you hopefully have a better average.
The disadvantage is while if the stock continues heading higher into higher prices and it works in your favor, it would have been better to buy all your shares at the beginning because then you could get out sooner with a much larger profit.
But of course, in the other approaches, if the stock headed lower, it's good you didn't buy that many shares.
The linear approach is stacking things on a linear level.
Let's say stock increases. I'm going to go ahead and do this 500, 500, and 500.
What you could think about, as you start looking at things in this way, is you could almost break these apart in different trades. This first trade, you don't have to think about saying this is where my out position is. Instead, you could think of your early exit, your second exit, and your third exit.
So, you tie these together to your exits. You're staggering your exit positions as well. So, you could break it apart from that way as you start thinking about scaling.
One of the advantages to this is you have a linear amount at every single entry point, and everything's balanced. It's a right approach in one way because everything is working out okay to the upside and it's working out the same way to the downside.
This is the approach where you're testing the stock. When you're doing the increase method, you're checking to see that's not going to go higher. If it does well, you'll go ahead and add a little more. That's where you add in 500, and then you could go ahead and add in 800 if it continues and the stock proves to you that it's working out.
The advantage to this is you're looking at stock to prove itself to you.
The problem with this is all give-and-take. Not one is better than the other. It's just a give and takes.
The problem with this one with an increasing method is that you're already at way higher prices and you have a much more significant share amount at higher prices.
The advantage, of course, if you didn't have a lot of risk at the beginning. You didn't have to put up a lot of capital because if that thing started to go down, your loss would have been much smaller.
I could go huge at the beginning. Let's say 800 shares. Then I might go 500 shares next, and then a little bit less 200 at the end.
This is another different approach. You're decreasing your share amount, and this is good when you're relatively strong about the stock. You have a reasonably stable break out, but you don't want to put all your capital in at once.
The advantage of this, of course, is that I'm getting in on a stable position at the beginning. I can peel off and take shares off much sooner and so I have an excellent position at a lower level.
The disadvantage, of course, is if this thing started actually to roll over, it would create much more significant losses than it would if you did the 200 shares at the beginning.
If you're brand new to scaling and you're just trying things out, then I would say a good starting point makes this balanced approach.
This is more of a balance where you're even, that's our linear way. Where you're going in 500 shares, 500 shares, 500 shares, and staggering things, it allows you to peel off those things as you move up in strengths or downward.
The increase approach is excellent if you're testing a stock and the decreasing plan is when you feel right about the stock, and it's got a pretty strong breakout, but then you want to slowly get into it still through this different way of scaling.
If you're wondering how many times should you scale, the number of times I'd say for most people three to four times.
Once you start going into ten or twenty times, it starts to become irrelevant or not necessary or just more work than it's worth.
August 2nd, 2018
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Hey, this is Sasha and welcome to another episode of "Let's Talk Stocks."
In this week's episode, we're going to take a look at the Seven Reasons Smart People Fail at Trading.
If you're not doing well with your trades, if you're struggling at trading, and you still haven't traded very well throughout your career in trading and you believe you're also smart, intelligent -- you've gone through college, and you have an excellent degree, maybe you have a great job, so you believe you're smart and intelligent in that space but you're still struggling at trading, here are a few reasons may be that you might want to take a look at inside yourself so that way you can see how you can improve.
Thoughts ideas and concepts that will help you
Reason #1- You Got to Start at the Bottom
When a smart person comes out, and they go into trading, many of them don't want to start at the bottom because they feel they already have that knowledge. They believe that they already have that gap filled, so they want to start in the middle or a little bit higher up. Why would you want to start at the bottom starting at the beginning? It just stinks because well you got to start from scratch.
In the martial arts, we've had a rule, or you could say a Creed that we went through. Everybody works. Nothing is free. Everybody starts at the bottom. It doesn't matter if you were a black belt in another studio; you still start at the bottom of the new studio.
What you're trying to do is -- you're looking at trading, and if you're trying to approach it with hey I'll be able to go ahead and trade fifty thousand dollars right away, that may not be the case because you got to start at the bottom. Start at the bottom with the amount of capital you're trading. Start at the bottom with the number of contracts or shares you're trading. Start at the bottom from learning technical analysis, money management, your emotions, your psychology. It all starts at the bottom. You need to have that beginner mindset to be able to evolve and move forward.
A lot of intelligent people don't want to do that. What they want to do is they want to start somewhere in the middle, or hey I already know this stuff I already learned about economics in school. Why do I have to start there? Why do I have to trade a thousand dollars when I have three hundred thousand dollars in my bank account? Why do I need to do that? Why can't I just put it right to start actively trading?
That's one of the reasons why they fail -- because they have that overconfidence in their trades and their abilities and they don't want to start at the bottom.
Reason #2 - They Stop Learning
Again, if you believe you're smart. You think you're intelligent. You probably also think you don't need to continue learning, you already have a lot of knowledge, you have a lot of education, you don't want to continue to learn and educate yourself.
If you take a look at some of the more wealthy people -- like for example Bill Gates -- they read one hour every single day at least to continue to grow and evolve and to see a different perspective.
That's about five hours every single week that they're doing, just spending on at least reading and bettering themselves.
You could do this in other areas of life. But if you stop learning, if you stop educating yourself, all of a sudden, you're going to have a little bit of trouble when it comes to trading and a lot of smart people that get into trading, they do this as well.
As they don't want to continue to learn and evolve, you might learn how to trade let's say on the technicals and now all of a sudden hey well I don't want to continue and learn more about options hey. Or I don't want to stay and learn more about Iron Condors or Calendars or whatever the case may be. You find your spot, and you're trying to stick in that spot, and you don't want to continue, to move forward when in fact just going a little bit, a little bit ahead will help improve your trading.
I'm not saying you need to read every single book out there or watch every only video course out there. But to continue to improve and grow a little bit at a time will help you stay involved and a lot of smart people. They don't want to do this, especially the ones that fail within their trades.
So, keep an eye out for that.
Reason #3 - Learning Trap and Playing it Safe
The other approach to this is sometimes smart people they get into the learning trap where all they want to do is learn, learn, learn, learn, learn. They don't put on trades because they're good at learning. They're good at educating themselves. They got smart, somehow, for a reason because they are learning. This is where you get that learning trap.
When you have that learning trap, you're playing it safe because you don't want to put on trades. You want to learn everything possible. You want to learn everything that you need to know before you put on trades. So, you don't lose money.
This can also be a little bit of a problem because now you're spending everything on just learning, learning, learning without building that experience, and putting on real trades. You're trading a little bit conservatively before you even get into trades. You're not also putting on any trades; you're playing it safe.
That's another trap that many smart people get into.
Reason #4 - you try to outsmart the experience
What do I mean by this?
Well, if you're a smart, intelligent person, what happens if you want to do something better than what somebody showed you. You want to do something more comfortable. You want something a lot more simple for you because you already have a lot of this knowledge and experience from your past. You've been successful in the past, so you try to go above it to outsmart the experience part.
Meaning, you don't have any experience trading yet, but you get into this trading business. You're trying to be smart at it. You're trying to be intelligent, witty. You're trying to finesse your way through and make trades successful trades and profitable trades, but unfortunately the problem is -- is you still need to gain experience in trading. Instead, what you try to do is use your intelligence muscle or your brain, your mindsets to proceed and move forward when, in fact, what you need to do is build that experience.
What happens is, with smart people, you're trying to outsmart gaining that experience.
Ultimately, what you need to do is put on trades and get that experience rather than just trying to be smart about it and move your way through it by thinking you know it all.
Reason #5 - Ego Driven
I find that with a lot of smart people that I run into that have a hard head, they are ego driven. This creates failures within their trade, within their trading.
When you look at this ego driven mindset, it's what they're always thinking -- they know better. They don't admit to their faults, which is another primary reason. They don't agree to their mistakes of what's the problem. They always want to push it, and they want to do it even better. They got to do it better.
Let's say you have $500,000 in your bank account. What's the point of trading if you can't make fifty thousand dollars every single week. You see those things where it's often your puffs to say hey well I got to make it work, and I got to make more money.
That's how they go about with their ego, and that creates failures because you're putting on large trades. You don't have that beginner mindset, putting on these big trades that you're not ready for, that you don't have the experience for. That ego driven mindset can create a lot of problems and big-time losses. So be very careful with that if you're in that bracket.
Reason #6 - Not Admitting Mistakes
If you have that ego-driven mentality, you're probably not admitting mistakes.
Many people in general, it's not just smart people but many people in general in the regular world, they don't want to admit to their mistakes. They want to push it somewhere else. Hey, well, it wasn't my fault into the car accident. It wasn't my issue. They ran into me.
It wasn't my fault that I lost a lot of money. The market just moved down, when in reality is you decided to take that investment or that trade. You could have put it into other things like real estate coins or put the money under the mattress.
It is up to you. Yes, you cannot control the market but still hey if you messed up something, let's say you hit the trigger button and it went into the wrong stock or the wrong order type, well that's your mistake.
Yes, maybe the icons were a little too small. Yes, maybe your mouse wasn't working but the person who is trading at higher levels, what they'll say is yes there was a relevant technical issue but it's my fault, it's my issue. Whereas somebody who's got this problem reason number six not admitting their mistakes. They'll say -- well, it was the mouse, it wasn't my fault.
It's a different mindset as you can see that you're trying to put the blame somewhere else and not take responsibilities.
So be very careful here because this is a common issue for just about anything. You do whether it's business, whether its life in general, not admitting mistakes can create a lot of trouble. I find that this is one of the main things that separates a successful trader from my failing trader. If you can recognize I made a mistake well what can you do to correct it or hey if you acknowledge that this is where the problem is and what are you going to do to fix it, that can help you go a long way and take you to another level.
I'd say this is huge for most traders.
Reason #7 - Linear Thinking
I find that linear thinking is a problem more for people in technical areas.
Think of this as the engineer thinking. I don't mean to harp on engineers. I don't mean to put them in a segment or a category, but what I'm saying is that when you think linearly, you're feeling so robotic and systematically. That the trades don't have any flexibility or fluidity.
Think of this as a beginner baby tree. When you have a baby tree, and you're starting to grow, well that growth can go in a lot of different ways. You can even put a little stick to shift the growth. Or look at bonsais, you can tweak and manipulate them a little bit to train them to grow in a specific smaller zone or area.
The same thing with trees and bushes. You can guide them in which way you want to grow and train them.
When you have this linear thinking, what typically happens is you're going with a systematic approach and with an old tree which is where the linear thinking happens. It's tough to start bending that tree one way or the other.
So with a person who thinks linearly -- which happens with some brilliant people --, they want to do it this way. It's very mathematical. It's very systematic. And the process has no wiggle room. They're always looking for the reason of well why did my stock go down.
Sometimes you don't have to have a reason — people just panics. People were emotional. It's not linear mathematical or systematic thing why a particular stock sold off at times. Sometimes it's just because of people panicked. Sometimes it's because that's what they wanted to do or they felt unsafe whatever the case may be. It's now become more emotional and not linear.
If you're continually looking for the causes of how to do something systematically, how do I put on a trade, how many shares do I need. If you're creating things in an excel file where it tells me the exact number of shares that I need to put on and my percentage of risk, that's all fine and dandy. It's good to create a system and approach to trading. But remember, trading is two parts -- part of it is science, and part of it is art.
You have that combination that you need to work through. You need to understand the science or the linear part of it, and then you also need to see the art form behind it where you can get more creative with the risks that you put on or the risk levels that you go in within your portfolio.
So be very careful with that, especially if you're in a technical degree like engineering computer science programming, those kinds of things. I find those people struggle a little bit more because they want to approach that trading as far as A plus B equals C, and then I want to repeat that process millions of times.
Instead, look at learning the baseline and then adjusting it to environmental conditions. Just like when you're driving on the road and conditions will change. You might need to make adjustments. Sometimes, you need to go a little slower. Sometimes, you can go a little quicker. Sometimes, you need to avoid things on the road, so you need to be a bit more flexible as you continue to drive your portfolio forward.