Unrealized gains don't just disappear

0:00Hey, everybody, it's Michael Martin. Thanks for being here. So my good friend Tina, who does a monster amount of commenting on the channel, shout out to Tina, also said something the other day about, last week actually, about learning to sit on profits. She said, with large caps, I used to sell for one to 3%. Next step was getting to 10%. Yes, that it was the first time holding to 12% should have held the things you spoke about to will perhaps change that seeing a 12% gain really happens probably from always selling too quickly. And I needed to heart that because I think if you look, you have a lot more larger winners in your portfolio than you probably know. What happens is you get too scared when you start making money that it's going to somehow go away. Along the lines of, for those the blind who wants could see kind of a deal. Now I can share with you, I've had plenty of trades that

1:00went up a quarter point or half a point and I gave it back. That to me is not the same as letting a winning trade become a losing trade because you have to operationally define that. If your goal is to make monster gains, then that has to be money that you're willing to risk in order to stay in the trade, especially if you're just putting on a starter unit. So that is not an overarching, absolutely universally true statement. Don't let a winning trade become a loser. Yes, of course, if you buy something at 20, it goes to 35 and your protective stop is at 18, you're not doing it right. That's different context. Every and all these trading statements have to have an enormous amount of context and not universally true. Again, if you're a scalper and you're risking 10 cents to make 40 cents, then for sure you have to act quickly because you're risk on risk off. But if you are a more of a longer term trader and you know you're going to build into the position over weeks, right? In that seminar, you could see I was holding the initial three

2:02purchases of the sugar for six weeks, right? So it all depends on your time frame and what kind of risk you're putting up because there's a certain amount of risk that's a margin of error, right? It's rounding errors at the beginning. And so you get to determine what that is for you. For me, if it's a half or quarter to a half a percent is a rounding error, I don't care about that because I'm just getting started. And in the sugar, you know, I was buying it at whatever, 910, and I kept buying it up through 12. That means the thing was up 20% and I was still buying. You see what I'm saying? So you might, if you're on a short term time frame, yes, you are risk on risk off. And that's OK. I got no problem with that. That's how you're built. And that's where you're having success. Or that's where you want to experiment for sure. But you have to remember the goal for me was to always amplify things. I wanted to make leaps and bounds.

3:02So I had to isolate, you know, as some of the market wizards guy guys would say, the only the A plus trades. If it wasn't A plus, I didn't put it on. Because I didn't want to be engaged with a lot of market activity with suboptimal opportunities, you know, you have to remember most markets aren't trending. And that's the trend followers right now. They get and killed. So you have to pick your spots, right? And so if you're putting on a starter unit that is like you're risking, you know, 1 1 1 1 1 1 1 1 1 1 1% of your capital, you the small moves up or down don't really move the needle. They're just starter positions, right? It's just like you don't go to a restaurant for a seven course meal and then write the Yelp review based on the bread and the water that comes at the beginning. So it all depends kind of like on how you see things. I think for short term traders, which would be scalpers, day traders, and probably even most swing

4:05traders, they're probably riscon risk off. They put on their waiting for their setup, their speed to the market is a huge asset for them. They put the risk on. And then what they're looking to do is to try to minimize the losses. They might adjust their protective stop. Then they're looking to scale out at some type of a ratio. They're making measurements. They might trail with a runner. But they put the optimum piece on first. I don't know too many scalpers who are adding. They could be out there. I just haven't seen a lot of them. And same thing with day traders. They kind of nail it, right? And then they offset some of the risk when they can maybe move their stop to break even. That's not uncommon to do in the options market either. But for my taste and preferences, I knew that I had the benefit, too. And this is just a natural thing, is that I was born with a cast iron stomach. I didn't mind the risk what scared me the most when I started

5:06was that I just didn't have a lot of money to lose. It wasn't that I was scared of the risk. But the risk of ruin, as it's called, was much bigger when you have a smaller account size. However, what goes with that, though, because you have a smaller account size, it's much easier to double 5K than it is to double 5 million. So you have to take the thick with the thin. But I think most of that all came from mindset, which I know you can adopt right now, because you can make up in your mind like, I'm going to do this. And this is how I'm going to do it. And I'm going to make up my mind to do it that way. I don't know when it's going to click. But as long as I persist and I stick with it, I'm going to figure it out my way. Because like I've said before, we're all very different from one another and how we do this in that our trading strategies, our emotional makeup, our temperament is as unique to one another as our fingerprints. And so there is no one particular way. You don't have to do it the way that I do it. Follow your favorite guru on the TV, right?

6:08And about the gurus, I want to say this, because people have a lot of judgment, which I think has to be addressed and kind of hammered down. I think I've mentioned this once before. But I grew up playing golf. I started choking up on my mom's clubs when I was very, very young, like seven years old. I eventually played down to like a three-handed cap. I catted it some of the best courses. I catted for club champs. I catted for pros or the pro. I catted for two of the club pros at Quaker Ridge. And there are people out there who have an enormous amount of insight on the inner workings of things. And they're really good teachers. They might not have the experience, though, that you're looking at. Not every great teacher has to be a market wizard. I know a lot of great teachers who don't really trade. They come from the psychology side of things, and they're good at explaining things. I know I've mentioned this once before, but I mentioned a few names out like Jim McClain,

7:09Jimmy Ballard, David Leadbetter, and Mark Harman. Like, these are all enormously great golf coaches. And to my understanding, I don't think any one of them has ever won a major tournament. I don't know if they've won any tournaments like or had tour cards, like they were teaching pros. But these are the people that are called upon by the best golfers in the world to help them with their game. So don't be a snob and think that somebody has to have some kind of special credential, because I don't think there are any. If you can get one little Iota of wisdom from this channel or from any other channel, take it and use it to your betterment. That's what it's there for. So be humble when you're in your learning process, because the folks who have experience can show you the ropes and put things into context so that you can help you

8:11get where you want to go. This show is for free. It's a labor of love that I promised I would do as I hit my success and my milestones because I felt that there was a type of intellectual greed when I was growing up. There was no community, there were no meetups, there was no internet, no social stuff. So it was hard to figure out like, who's even trying to be a prop trader? Because very inside business, it was a small community, there were a couple of firms doing it. Like David Shaw, there was a unit inside a Lehman, there was a unit inside a Goldman, Bear Stearns had very good prop trading, but you really needed to know people. And if you didn't know people getting intro to those people was impossible. And God knows I tried. Now it's a different world. Now you have people who have different levels of experience over longer periods of time. And the goal, they're forced to pass the wisdom forward

9:12so that you could go out and kind of do the success, at least from my perspective, and live the life that I've lived. Meaning that you at least had the opportunities to have the choices that I've had, which is outstanding. So be open-minded to try to learn from as many people as you possibly can, because so much of this stuff is really, really hard in that there's anybody out there who's willing to try to help you. You know, it was a good thing. It costs a lot of time, money, and effort to try to put wisdom out there, right? And it's all contextual. So there are probably a lot of things that I say that just don't resonate with you. And that's okay. You know, there are other people out there who might speak to you better than I do. But I'm coming from a good place. Even if I use stories from yesterday year, I use the stories from yesterday year because you probably might identify more with that part of the struggle, right? These days, I don't struggle because I'm not trying to swim upstream.

10:13I try to keep everything simple and keep moving forward that way. But one of the things that you can do, though, in order to get the less frequent 10 to 12% wins, if that's what you're thinking about, is to sit on your hands more. Don't spook so easy when you have gains. Like, don't be so quick to take them off. Let them grow, right? Because you don't know when you take a 4% winner off that it couldn't grow to 5, 6, 7, 8, 9, 10. Right? And if you don't let it get to 10, how's it gonna ever get to 20, right? So some of the got, you know, learn from what the guys were saying in the recent Market Wizards book is that they didn't impose their will on top of a trade. Right? I think there's one flaw, flaw or character defect, doesn't matter how you wanna call it. But one thing I think is prevalent in the marketplace and people would make a lot more money if they stop taking their winners too soon. That's the thing that's stunting your growth. Even though you're making money, the opportunity cost when you have a winner in the portfolio was like, let it go, let it grow up.

11:16You know, the analogy I would make there is like, you go and you start a garden in the spring, you till it, you put fertilizer, you plant the seeds, you got the netting, you pull the weeds, and then the tomato plant start flowering and then you pull them. Like you're just getting started. And to me, it's like, yes, if you wanna work like a dog for your money, then by all means, you can definitely do it. But there's other ways to making money that are legit. And the old school guys that I learned from which are still doing the same things today, they're buying starter pieces, adding to them and they're letting the market do the heavy lifting. Doesn't matter what regime it is, trends persist once they start going, you just have to wait for them and be patient and not force things. So that's something that's absolutely doable but you have to have the mindset for that. You know, you can't be worried about giving back piece of your gains in order to stay in the trades to make more money. You have to live with that uncertainty and then be completely comfortable saying,

12:16yes, I might be up 5%, but I'm only gonna take it off at a three or 4% winner. There's nothing wrong with that. If your goal is to catch a 10% winner, like that goes with the territory, there's nothing wrong with that. There's no upper threshold that says up. When it gets here, I am out. I am OWT out. Because that's the only way I can feel good about myself. So I ask you to challenge everything that you've heard. The whole thing, like don't let a winner become a loser, that needs some context, right? Because I do that all the time. And it's not to say that I don't know what I'm doing. It's just for my style of trading, there might be a lot of noise around the original signal that I don't spook on. Because I know I'm looking to add, you know what I'm saying? So those initial gains, I don't care about them. I don't care. It's better for me, yes, if it makes money

13:18and it starts moving in the direction if I'm long. But then I'm like, okay, do I add based on percentage mover? Am I gonna wait for it to kind of create a base or some kind of structure and let me to add? And then, you know, if it's the same, you know, obviously if I buy something at 10 and then another one at 12, I have a break even at 11. And I could manage the risk according to that 11, if you will. But if I come back and get knocked out of break even, I don't fall to pieces over that because I'm just getting started in for my style of trading like that's gonna happen. It's gonna, that's the way that it works. And that's the price that I pay for less frequent wins. You might be making and taking it as in that, but you might not have the larger sized gains because you make it and take it, but you have a higher frequency of wins. So that's why I'm saying like it's really up to you, like how do you wanna do this? Do you wanna have smaller, more frequent wins or less frequent larger wins? Because you can't tell or know for sure

14:18that when you're doing it your way and taking smaller, consistent, maybe higher frequency wins, you have no way of saying that that's the definitive end of the move. You've just made up in your mind that's the way you wanna do it. I wanna scalp and sell at the first two minute bar closing below a 9 minute EMA. That's your conscious decision, but that is not predictive that the move can eventually go further even if it goes down to 180 R below the 9 EMA and then recovers towards the end of the day. By then you're gone, you've made your money, you've had your win. Awesome, I support that. But that action that you're affecting does not indicative or predictive of what the market can do going forward. It's just your style for managing risk. I have a different emotional constitution where I might use that same starter position that you have but live through a dirty diaper a little longer if it comes back on me and because I'm looking to add, the benefit for me is that if I do sit through that

15:19I'm taking paper cuts as losses and I don't even sweat that. So anyway, I appreciate all your feedback. I appreciate the comments, keep them coming. If you're stuck on something, reach out. There's a link in the description. I'll point you in the right direction. We're all in this together. There's no one right way. The goal is to find something that you can dig and that you can have compatibility with. It's a lot like dating. A lot of good looking people out there but why are you with the person that you're with? It's probably because you have good chemistry. You need to find that same type of thing in your trading. All right, I appreciate everybody being here of Great Weekend. I'll see you, is Monday a holiday? Maybe I won't, if there's a holiday coming up I'm not gonna do, because you won't be here. I'll just do one the following day. Have a great holiday weekend. Take care.