Transcription
All right, hello everyone. Good morning. Morning, morning. Thank you. I'd like to thank Hans and Ralph and the other leaders of the Northern California meetups for inviting me to speak, and Amy, of course. I'm happy to be here.
So, back in late 2019, at the last and final IBD Level Four Workshop in Santa Monica, I gave an autobiographical presentation on my personal journey as a trader over what, at the time, was my 25 years in trading. Basically, it's a very detailed, detailed account of the roller coaster ride I experienced in my personal trading from 1995 through 2019. It's called "A Trader's Journey." How many of you have seen it? Okay, most of you. Great.
I posted it on YouTube about a year ago, following one of my IBD Live appearances where it came up in conversation. And since it's gathered about 53,000 views, so it must have resonated with at least some traders and investors. In "A Trader's Journey," I speak of some of the massive runs I've experienced over extended periods of time, generally coinciding with strong secular bull markets, and some of the huge drawdowns that have followed these massive runs. I talk of the mistakes, mistakes made, and rules broken that led to those massive losses. The same mistakes I promised myself I would never repeat, and the same rules I promised myself I would never break again.
At the time I gave that presentation in late 2019, I was coming off a very painful and prolonged losing streak that lasted from March 2014 through August 2017, about three and a half years, that resulted in a massive drawdown of about 87%. That's something I had never experienced before leading up to that. And keep in mind, that was in a Roth IRA account, so I wasn't even using margin.
In late, um, in 2018, my wife and I decided that it was best to end our 27-year marriage. The stock market and my roller coaster performance wasn't the only reason, but it definitely played a part. I've learned over the years that while money doesn't solve all problems, it definitely greases the wheel wheels. I've seen the strongest relationships crack under the pressure of financial stress. Our assets were frozen in the second half of 2018 until the divorce was final, so I didn't really start the process of climbing out of my deep hole that I had dug for myself until 2019. So, "A Trader's Journey" ends at a possible new beginning for my personal trading account.
And since posting it, posting it, I've received hundreds of inquiries on whatever happened to me. Was I able to recover from that massive drawdown? If so, how did I do it? And of course, did I finally learn my lesson not to repeat the mistakes that have haunted me in the past? That's the focus of today.
Before we get started, I want to emphasize that "A Trader's Journey" was my own personal journey with my own personal money. It had nothing to do with the accounts I managed for the O'Neil organization. Likewise, everything I discuss today refers solely to my own personal accounts. This morning, we won't be discussing charts, technical analysis, trading strategies, or trading rules, or anything like that. I don't have a PowerPoint or any visuals, and it's not that that stuff isn't important. It must certainly, certainly is, and I know you're going to get a lot of that over the next two days. But that's not what separates the great traders from everyone else.
Think about it. We're all playing by roughly the same rules and have access to the same information. And yet, our trading results are so incredibly varied. How is it possible that so many people can play by the same rules with the same information, and yet only a small percentage of traders have truly incredible success? The only explanation is that there must be something different that separates the great from everyone else.
I remember the evening before I gave my "Trader's Journey" presentation at that Level Four workshop, and a group of us went out for dinner to celebrate Jim Roul's birthday. You know, Jim is a successful hedge fund manager who follows K. Slim. You've probably seen him on IBD Live and various interviews, and he, he attends, he used to attend all the workshops. Um, he puts out the Roul Report and so forth. Anyway, for his birthday, Jim asked each of us to go around the table and impart some wisdom or sage advice that we picked up over our years of trading. And I thought about it for a few minutes, and this is what I said: It's not enough to do a post-analysis to figure out what you're doing wrong, what rules you're breaking. What's much more difficult, and even paramount, is to figure out *why* you're breaking them.
"A Trader's Journey" was many things. It was a cautionary tale of what could happen if you lose your discipline and break the rules. It was a confessional of my strengths and weaknesses as a trader. The truth is, most people that know me as an O'Neil PM and have seen me speak at the various workshops over the years, inevitably put me on a pedestal and think that I'm just a money-printing machine that never loses much money. Nothing could be further from the truth.
Most importantly, though, and perhaps selfishly, "A Trader's Journey" was a necessary step in my own self-healing. Part of the therapeutic process to address some of my inner demons and discovering the "why" as to my pattern of breaking rules and suffering major drawdowns. You know, trading really shouldn't be as difficult as it is. The rules aren't that complicated. Honestly, if you just stuck to the three basic trading rules, you'd probably make a fortune over time: Simply trade in line with the market, don't fight the trend, cut your losses quickly, and let your winners run. How hard can that be?
Well, apparently for most people, the answer is, it can be very, very hard. And what's behind that? Why? Why is it so difficult to follow relatively clear, uncomplicated, time-tested rules of trading? Think about that for a minute. You know, when Hans contacted me several months ago about participating today, we talked a bit about our trading careers. I shared some of my difficulties I've had over the years. Um, you know, Hans hadn't yet seen "A Trader's Journey," and after he watched it, he wrote me a very lovely, appreciative note thanking me for posting it and sharing my experiences. And at the end of his note, he wrote something that really struck me and stuck with me for a long time. He said, "I was not aware how complete an incomplete trader you are." How complete an incomplete trader you are.
And I spent a lot of time thinking about that. It's true. True, I am an incomplete trader. All boom and busters are incomplete traders. Jesse Livermore was a boom and buster. One of my favorite books of all time, and certainly my favorite book on trading, is "Reminiscences of a Stock Operator," based on his life story. I was rereading parts of it recently and came across a paragraph I had highlighted and underlined. Livermore says, "I will tell you something curious. A stock speculator sometimes makes mistakes and knows that he is making them. And after he makes them, he will ask himself why he made them. And after thinking over it cold-bloodedly, a long time after the pain of punishment is over, he may learn how he came to make those mistakes and when, at what particular point of his trade, but not why." Livermore knew everything he needed to know about trading. He was brilliant. He made fortunes over his career. He was a natural. And yet, he blew up his account again and again. He never figured out why.
I sometimes think of myself as a modern-day Jesse Livermore, not that I've ever achieved anywhere near the wealth and success that he reached at certain points of his life, but there are similarities. So again, it's not enough to know the rules. It's not enough to know what rules you're breaking. You have to figure out *why* you're breaking them and address that.
The trading rules and strategies I wrote down 27 years ago, in December 1996, after I had just lost half my money, right out of the, right out of the starting gate with absolutely no clue what I was doing. Those rules still hold up today. And I find it so interesting, and honestly, a little sad, that when I review my trading journal entries after each drawdown that I've suffered over 27 years, it's the exact same rules I'm breaking. Literally, the entries I write down after every blow-up are the same entries as before. Nothing ever changes.
They say when you start trading at a relatively young age, you're lucky because you generally don't have much money. The fact is, nearly everyone loses at the beginning. It takes time to learn the rules, learn how to read a chart, learn how to analyze a company and its fundamentals, learn how to analyze the general market, and so forth. And it takes time to build a sense of intuition based on experience. Takes time. There's no getting around that. When I lost half my money in that first year of trading back in, in 1995-96, thankfully, it only amounted to $3,000. At the time, that was a lot of money to me. My latest blow-up has cost me tens of millions of dollars. Same mistakes, same rules broken, but the consequences are so much higher.
So, getting back to the "why" of it, and addressing Hans's comment, "I was not aware how complete of an incomplete trader you are." What I think, and this is just my opinion, is that all boom and busters, and to be honest, most people in general, are in a sense, incomplete. What do I mean by that? What do I mean by incomplete? I don't think it means that you're missing something. I don't think it, it means that you're missing a talent, or a trait, a skill, a characteristic. There are no perfect people. Everybody is lacking something. So, in a sense, all of us, all human beings are incomplete.
What I mean when I say incomplete is that the person in question *feels* incomplete. They feel like they have a deficit. They don't feel worthy. They don't feel deserving. They don't feel that they're enough, just as they are. In "A Trader's Journey," I referenced Brené Brown's TED Talk, "The Power of Vulnerability." What she found was that the difference between people living with a deep sense of worthiness versus those that really struggle for it was a, a sense of courage: the courage to be imperfect. These people were willing to let go of who they thought they should be in order to be who they are. In other words, they were comfortable in the ways in which they were incomplete. They came to terms with their imperfections and didn't feel the need to hide them or compensate for them. Simply, they felt that they were enough, just how they were.
I don't think there are a lot of people like that running around. If there are, I haven't met a lot of them. Is it just a coincidence that there aren't a lot of people out there living their life with a deep sense of worthiness, and there also aren't a lot of people out there who are consistent winners in the stock market? Market? I don't know. I think they're connected.
What I'll be talking about today is very personal. It's about me, my own weaknesses and deficits, why I have them, and what I'm doing to overcome them. You can think of this presentation as more a therapy session, or at least a window into my therapy sessions over the past several years. Some of you may be able to relate to my struggles, the challenges I faced, limits of my childhood and upbringing, and the arc of my trading career with all the ups and downs. Some of you may not get it. You won't understand. You won't be able to relate.
Now, I've been trading a long time, and what I know for certain is this: Almost all traders suffer from some psychological demons or limiting beliefs which keep them from reaching their full potential. Figuring out and dealing with your own inner demons takes time and deep reflection. I'm simply sharing my own experience, my own triggers, my own trauma, this at the root of what drives me in the decisions I make, which have up to this point prevented me from ultimately getting what I wanted.
But before we get there, let's talk about what happened after my divorce was final and I began my comeback. 2019. When the divorce was final and our assets were split, I was left with half of a very depleted account. Remember, at my lows in 2017, I had lost 87% of the money in that SEP IRA. I recovered some of it in the first half of 2018 before the account was frozen. So, the account was really down about 80% off the 2014 peak I had hit. In other words, at the beginning of 2019, I was starting back with about 10% of the assets I had previously had, and it was a non-margin account.
It's interesting, but as I was preparing for this weekend and reviewing all my old records, I had forgotten how bleak things seemed at the time. Literally, I was starting over again from a level I had initially reached back in August 2008. So, basically, 10 years of performance were wiped out completely. [Music] Wasted.
Albert Einstein claimed that compound interest was the eighth wonder of the world. I don't have to remind you that the power of compounding depends on both investment return and time invested. Large drawdowns are the enemy of compounding. It simply takes too long to recover from a devastating drawdown. So, that element of time is wasted. If you're a boom and buster who experiences large drawdowns over time, building great wealth in the market through compounding is just about impossible.
And not to sound too sympathetic, but besides my depleted trading account, coming out of a long-term marriage and learning how to navigate life as a single person for the first time isn't easy. So, it was a pretty tough time all around back in 2019. But I was figuring things out. The market was beginning to recover from that vicious 24% correction that occurred in the fourth quarter of 2018, and I was optimistic and eager to rebuild. I didn't know how long it would take, and I didn't have a timetable. I tried to focus on the road in front of me and not the final destination. Making a tenfold gain to get back to your old highs is a daunting task. It isn't going to happen overnight. It's best to simply focus on trading well, focusing on the process, and letting the results take care of themselves.
2019 turned out to be a pretty good year for me. That non-margin Roth account was up 71%. I made 332 trades. My hit rate was 69%, and my average holding period was nine trading days. Now, in addition to my Roth, I decided at that time to fund my margin account with a small amount of money, just $35,000. It had been years since I traded a taxable account. It's hard to build wealth when you're splitting the profits with Uncle Sam at the end of each year. But I came to terms with that. I felt that the ability to use margin would provide the opportunity to rebuild faster. My margin account was up 233% in 2019. I made 238 trades. My hit rate was 68%, and my average holding period was also nine trading days.
There really weren't any huge standout stocks. Twilio, Zscaler, Coupa Software, Pinduoduo were a few of my most profitable trades, and I came back to those stocks again and again. I was just consistently locking in small, fast gains ranging from the high single digits to around 20-25%, and there were a few outliers in the 50% range. I, I had gone back to my early swing trading days, taking fast profits and trying to compound my account as quickly as possible, focusing on monthly returns instead of annual returns.
2020. 2020 was a year of COVID. COVID was devastating on many levels, but it also offered a golden window of opportunity in the stock market for growth investors and for those who saw the opportunities. The rewards were huge. I had my biggest year ever in 2020. My margin account ended the year up nearly 1,1400%, beating out my internet bubble gain in 1999 of just over 1,000%. My hit rate was 72%. My average holding period again was nine trading days. I made 225 trades, and my average return, including both winners and losers, was 14%. Again, I was swing trading very, very actively, focusing on compounding my account as quickly as possible. 84% of my realized gains came from Tesla, which was up 700% in 2020. Other notable winners were Lemonade, Nio, UiPath, CrowdStrike, and Grow Generation.
Throughout the year, I was heavily deploying margin, and I was also adding funds to my account. I went to all cash on the last day of 2020 and locked in an eight-figure gain in my margin account. Probably wasn't the wisest move because I had to turn around and pay the tax man half my profits. In fact, that's the reason why I stopped trading a margin account in the first place after the internet bubble in the, in the late 1990s. I was frustrated with the tax situation at that time. I made the decision to focus on my wife's SEP IRA, and that's what I did from 2001 through the end of our marriage. In any event, I felt I had to lock in those gains in 2020 because I had more than fully recovered my net worth, and it had only taken two years. I could hardly believe it. When I started rebuilding, I thought it could take possibly 10 years or more to recover, but the market offered an opportunity, and I was able to seize it.
My Roth account also had a good year in 2020. It was up nearly 400%. My hit rate was 70%. My average holding period was 14 days, and my average return over 110 trades, with winners and losers, was 17%. And the best part was, I didn't have to pay Uncle Sam on those profits.
2021. In 2021, after a lot of consideration, I made a choice to change my trading style in my margin account. I decided to take a hybrid approach where I would focus on long-term capital gains in Tesla, which was my highest conviction stock that I planned to hold for a long secular move, and I would tactically swing trade my other stocks. There were two reasons for this change. First, of course, was the tax situation. Again, it's simply too difficult to build and compound wealth when you're sharing your profits with the government at the 50% rate. This tantou that having a 50% drawdown on the last day of each [Music] year.
But there was another reason why it changed how I approached Tesla. After analyzing my results in both my margin and Roth accounts, I realized that all that active trading during 2020 really didn't amount to much, if any, outperformance over simply holding the stock. Empirically, an analysis of my trading results revealed that I hadn't done such a great job of timing my buys and sells in Tesla. Timing the highs and lows in a stock's advance is extremely difficult to do on a consistent basis, and I'm known as a fairly proficient swing trader, and even I couldn't do it well. I often sold too early into strength during the advances, and I often bought back too early during the declines. So, I decided that swing trading Tesla and paying short-term capital gains wasn't worth it. My conviction was so high that it would be a huge winner over multiple years that I didn't want to risk losing my position and potentially missing out on a life-changing stock. Those don't come around too often.
Coming off such a huge year in 2020, I wasn't expecting 2021 to be a great year. The market just felt, just felt frothy. The COVID winners had run so far, so fast, and there was rampant speculation in the meme stocks, cryptocurrencies, EV stocks, and cannabis stocks. So, I figured it would be a consolidation year. And indeed, the more speculative areas of the market, represented by the ARK Innovation Fund, did peak in February of 2021.
Now, I started the year very strong. By mid-February 2021, my margin account was already, already up 66% over about 67 trades. My hit rate was 96%. Nearly every trade was profitable. I made good money in Desktop Metals, the Bitcoin Trust, Schrodinger, AMC, Moderna, Canopy Growth, among others. Similarly, my, similarly, my Roth account also started the year out strong. It was up 22% by mid-February over 43 trades. My hit rate was 95%. But once the speculative areas of the market peaked in February, it was tough sledding until later in the year when stocks like Tesla and Nvidia took off again, peaking with the market in mid-November 2021.
I ended 2021 with solid gains. My margin account finished the year up 186% with a total of 20, 163 trades. My hit rate was 78%. My average trade showed me a profit of 12%, and my average holding period was 11 days. Keep in mind that these figures are for closed trades only. I had significant unrealized gains in Tesla that I did not include in those figures. My dollar profits were significant, just about eight figures, but my realized gains are only a quarter of my net profits due to my new hybrid approach of holding Tesla for long-term capital gains. So, I was relatively successful in limiting my tax liability, and I was very, very happy with that. My Roth account also had a good year, closing up 58% with a hit rate of 81% over 58 trades. My average gain was 10% over an average holding period of 21 trading days.
So, before we get to 2022, let me summarize these first three years of my comeback. 2019 through 2021. My margin account was up a compounded 13,944% over three years. That's a 140-fold move. Besides taking out millions and millions to pay taxes, I took out several million to buy a new home for cash. I took out more money to remodel it and buy furniture. I put money aside for private school, college tuition, and so forth. My Roth account was also at a new high. It was up a cumulative 1200% over those three years, equivalent to a 13-fold gain. I was in very, very good shape. I had never been richer. I was feeling really good about myself. I was confident, I was optimistic. Life was good as we entered 2022.
But in hindsight, there were indications, hints, that I was near the end of my run. I just wasn't in a headspace where I could be aware of them. For one thing, I was dreaming big. While there was still a ways to go, I saw a clear path to a net worth in the nine figures, just two or three years away. I started to think about starting a philanthropic foundation, and I was thinking about the causes I'd support. I was thinking about where I'd put my vacation homes. I had a new beautiful girlfriend. I had an awesome new house on a lake. For the first time in my life, I actually thought of myself as fairly wealthy.
But perhaps the most telling warning morning sign was that I started doing the strangest thing. On big updrafts in the market, I'd take out my iPhone and start taking pictures of my spreadsheet on my computer screen showing how much money my account was up. And, you know, it was crazy. I couldn't believe how much money I was making. Seven-figure days were no longer a novelty. In a short span of just three years, everything had changed for me. And that boom was simply intoxicating. I felt powerful, confident, adored, cherished, and loved all at the same time. I was getting everything I needed and wanted. My plate was full.
2022. 2022 started out with a bang. Tesla gapped up 13.5% to a near new high of just under $400 per share on the first day. I had my biggest trading day of my career on the first day of 2022, making $5 million across my accounts. I checked my photos. I took 50 screenshots of my computer. Exactly 50. That was my peak day.
We all know, in hindsight, that the market peaked one and a half months earlier in November 2021 and went through a brutal corrective phase that took the Nasdaq down 38% to its lows. But the damage to individual growth stocks was much, much worse. Shopify down 87%, Netflix down 77%, Nvidia down 69%, Zoom down 90%, Meta down 77%. I simply wasn't prepared for that type of bear market. I didn't see it coming, and I had a hard time believing it was happening. I relied heavily on my secondary market indicators that flashed oversold levels and excessive levels of bearishness all the way down. Besides that, I was using Apple as a precedent for Tesla. The similarities between the two companies were striking, and I thought I had a pretty good roadmap for what I could expect the stock to do over its 20-year run. Apple's largest decline off a prior high had been 62%, which happened during the 2008 financial crisis when the world was literally falling apart. I felt quite certain that that was unlikely to happen to Tesla with its leading position across multiple high-end growth markets and a constant stream of positive catalysts. I didn't think it could fall anywhere near that much.
But I was wrong. And the stock came down lower and lower through the entirety of 2022 in three brutal waves down. At its low, the stock had fallen 75% off its peak. I had no contingency plan for that. You recall that I had changed my trading style as it applied to Tesla. I was holding it for long-term capital gains. I had huge unrealized gains from the prior year. In hindsight, I probably should have remembered Bill O'Neil's sage advice: "If your stock is going down and you don't sell it, you may not have any taxes to pay at all." I had no plans to sell it, and I was resolute in my plan to hold it for the long term. And that's exactly what I did. I stuck to the plan.
The problem, of course, is this tricky thing called math. Mathematically, if you're trading on full margin and your stock falls 50%, then you're completely wiped out. Tesla ultimately fell 75%, so I was forced to sell on the way down to meet margin calls. There's a saying: "Never answer a margin call. Just let the stock be taken away." Turns out, that's pretty good advice. It took me a long time to concede. I did so reluctantly. I didn't want to. I wanted to stick to the plan. I had built my Tesla position of up to 115,000 shares across my accounts, and I didn't want to part with any of it. So, initially, I met margin calls by adding funds to my account.
Now, when you're an active trader with a large account who's constantly on full margin, your brokerage is going to show you a lot of grace, or maybe it's more accurate to say they're going to give you a lot of rope to hang yourself. After all, they want to keep their best customers happy and invested. When I no longer had enough funds to add to my account, or simply didn't have the nerve to do so, they gave me the option of hedging my position by buying out-of-the-money short-term options, put options. And I was happy to do it. It allowed me to retain my position at a small relative cost, relative to the size of my account, and I thought this was a great, great short-term solution because every week I was certain the stock would stop going down. It had already fallen, fallen far further than I ever imagined. The story was intact, and the future was bright and only getting better. It was only a matter of time before everyone else saw what I was seeing.
But week after week, the stock continued to fall, and I would have to buy a new lot of put options in order to hedge my position. Not only was I paying margin interest in the six figures, but I was spending tens of thousands of dollars on short-term put options that perpetually closed out of the money and were worthless by week's end. I know what you're thinking: "The guy lost his mind." You're not wrong. We'll get to that shortly.
If I've learned through this experience, anything through this experience is this: If you're going to try to hold a high-conviction stock that you believe to be a true market leader over a long period of time, it's best not to do it on margin. Had I not raised cash and taken some defensive measures, I most certainly would have completely wiped out my margin account. I nearly did. I guess I've always had this deep fear of completely blowing up and losing it all. Deep down, I know my propensity to get carried away and take on too much risk. After all, it has happened before. Inevitably, at some point, I start to pull money out of the market to protect myself, or more accurately, to protect myself from myself. That's what I did when things started heading south after the internet bubble burst in 2000. I panicked and started frantically wiring money out of my account. What I got out was saved. What I kept in was lost. Of course, I never actually believe I'm going to lose. I'm just terrified at being known as that brilliant trader with so much potential who lost it all. Jesse Livermore, Victor Niederhoffer, the guys running Long-Term Capital Management, there's a lot of them, and I don't want to be a member of that club.
In the end, I took out enough money to pay taxes, cover tuition, and put some money aside for a rainy day, and so I could sleep at night. Although, truth be told, I don't sleep that well, and I haven't for a long time. I turned an eight-figure account into a six-figure account, and those two zeros represented a lot of money, and more precious time wasted building up my wealth.
Okay, we're going to start a therapy session now. Let's talk about the "why." Why do I keep making the same mistakes again and again? Why am I, why am I up here today telling you the same story I told four years ago? I'll be honest with you, it is frustrating. I thought I had beaten my issues. I thought I had figured it out and was over and beyond this, but apparently, I'm [Music] not.
In late 2019, when I was coming off my previous blow-up and presented "A Trader's Journey," I shared some of the revelations I gained through therapy and I talked about why it happened. I told you I sabotaged my success because, because deep down, I didn't deserve it. I didn't feel worthy. How I felt on the inside didn't match with how I was doing on the outside. When you have that type of incongruence, there are two paths you can take. The preferred approach, of course, is to change your mindset, change how you feel about yourself, get some therapy, and enjoy the success you so richly deserve. The second approach is to squander your success, become reckless, take on too much risk, make poor decisions, dig in your heels, and insist that you're right. Sadly, that's the course I took. All of these are sabotaging actions. It's rule-breaking. It's how you blow up. Eventually, it brings you to the exact same place where your internal environment, how you feel on the inside, becomes aligned with your external reality. And of course, all of this is happening unconsciously. Your sense of awareness is dulled, and even if you do have a vague awareness, you're simply not sober enough to make a different decision.
So, in "A Trader's Journey," I made the connection that more money equals more value. More money equals more self-worth. I made the link that if I feel less, that goes away when I make more. But making that connection wasn't enough. Knowing something on an intellectual level, understanding it conceptually, is different from experiencing it, from feeling it. I had to go deeper, deeper than just intellectualizing that I trade aggressively and ultimately get reckless because I'm searching for value. I had to make the subtle shift away from whether or not I deserve my trading success and focus on the need for value, the need for worthiness being bottomless. Really touching, "Am I good enough?" Not as a trader, but as a person. Shift into the pain, the intensity, the sadness, the loss. Connecting the boom to the feeling of not feeling good enough, and how much I needed that. The lengths I would go to, did go to, in order to not feel as bad as I felt. Trying to touch a level of deficit, and what I risked, what I gained, what I lost, because that feeling is so devastating.
I'm going to give you a little glimpse into what's going on inside my head, what drives me at times, and how I came to be this way. It's pretty personal stuff. It can be a little abstract. Again, some of you will be able to relate. Perhaps you grew up in a similar family dynamic or environment. Some of you won't relate. What I'm learning about myself in therapy is that I'm hardwired to believe that I have to perform in order to feel loved, valued, valued, and secure. I have to be the fastest, the prettiest, the smartest, the richest, the coolest, the fittest, the best trader, have the nicest house. It's probably no surprise to you that I grew up in a family with parents where, despite best intentions, the level of attunement I needed versus the level of attunement I got was lacking. It was less than what I needed. And don't get me wrong, my parents were amazing people. I love them very much, and they loved me. They did the best that they could, but they had their own difficult upbringings and stuff to deal with. My grandfather, and my father's side, died when my father was just eight, so he basically grew up without a dad. They were uprooted throughout his childhood because his mom, my grandmother, was a seamstress and couldn't financially support the family. My mother grew up in India in a family of children, of nine, nine children, one of nine children. They had their own struggles. For much of my childhood, my father, who was a labor economist, had trouble finding steady employment. Eventually, my mother had to get a job as a secretary to help financially. So, my parents had their own baggage, they had their own stresses. It's no surprise that they were overwhelmed and couldn't give me enough of what I needed, enough of earnestly feeling, felt, feeling heard, feeling, feeling seen, feeling connected. I didn't get that, at least not enough of it. It's called attachment trauma. It's like you're not attached or connected to anything, and to a child, this is life-threatening. So, I learned at a very young age what I had to do to feel safe, to feel loved, to feel valued. It wasn't enough just to be me. I became the perfect kid, the well-behaved, polite, straight-A, high-achiever, best student, teacher's pet. That part of me that didn't get to experience unconditional love and validation in childhood still believes that all of that is still coming, is a form of transaction. I have to do something, be something. And that little kid is still in there. He's a part of me. He's not all of me, but he's a part. And that part of me works extraordinarily hard to feel good enough.
I'm curious, how many of you guys have a number in mind? A dollar figure that if you get to, you'll reach your destination, you'll be satisfied? Okay, maybe half the hands went [Music] up. Have any of you reached it, and are you satisfied? No. No hands went up. I had a level of mind where I thought I'd be happy and satisfied. You know what happened when I got there? Nothing changed inside. I felt the same. So, I just ratcheted up the level, set a higher goal, and I just kept doing that again and again. It was never enough. It's like a bucket with no bottom. No matter how much you fill it, you feel a sense of emptiness. It's a fantasy that you'll hit a destination where you can just exhale, and you will feel like you're enough and worthy of someone's love and attention, where you can just receive all that goodwill without working so hard for it.
When I was making all that money and taking pictures of my screen, I just kept going and going. It was like an itch I couldn't scratch. I couldn't feel satiated. The link was wired so hard that I'd be worth more if I made more, and that belief grounded me and kept me going. I couldn't even consider another course of action. I wasn't sober enough to make conscious choices and say, "This is enough. I'm going to take some out and safeguard it and play with the rest." I lost my footing because a bigger goal wasn't really about making money. The bigger goal was to scratch the itch that if I made more millions, it would be enough. I would be enough. And I think for men, in particular, it can be difficult because society, more money has meant more value. My therapist pointed out to me that pretty girlfriends and lots of money are my two big [Music] issues, and those are both social constructs. And that's what I come into therapy with: the search for more. For needing more implies that what you have isn't enough. I'm simply not used to feeling the feeling of being enough and feeling secure without performing and working so hard for it. And somehow, I doubt I'm alone.
I remember telling my therapist that I thought it was sad that I felt this way, that I was like that, and she said, "It's incredibly sad for the child you once were who felt that way. It's less sad now because we can name it, we can do something about it. We can parent our inner child. We can learn to soothe and attend to him." The truth is, we all want to be held in goodwill. We all want to be well-liked. We all want to feel valued. We need it. But we're not always going to get it. When we don't, it's not a life-threatening situation. It is to the child who's completely dependent, but not to the adult. And the thing is, nobody feels a sense of worthiness, of belonging, of value all the time. We're human beings. Things are going to happen to us all day that trigger us, that stir up uncomfortable feelings, that hurt us, that cause fear and sadness. We all have moments when we feel that we are worth less, and there is sadness there. It's okay. We can manage it. We can ground ourselves. We can tolerate it. We can pause and attend to those wounds instead of just going faster and faster, going into hyper-trading mode, taking on more risk, thinking that our problems will be solved if we just keep making more, thinking that more money will soothe us and make us feel more worthy.
I am enough, just as I am. You are enough, just as you are. There is no need to prove anything to anybody. So, I've been in therapy now for a while, a few years. I'm untangling a lot of stuff. Some of it I'm just coming to understand. It's a process. It takes some time, and frankly, a lot of work. I'm learning to become more aware and building a skill set for dealing with my feelings, but it's not complete. I'm still a work in progress.
So, why am I here today? I was talking to my daughter the other day, and she asked me why I was giving this presentation. Why was I sharing something so personal? What was I getting out of it? I guess one reason, reason is to let you know that I'm not perfect. Nowhere near perfect. I make so many mistakes, and I'm not just talking about trading. The things I deal with affect other areas of my life as well. But today, we're talking about trading. Notwithstanding a few blow-ups, I've done okay for myself in the markets. So, I guess one message is that you don't have to be perfect to be successful. That said, to build truly great wealth over time, you need to harness the power of compounding, and if you're a boom and buster, the odds are simply stacked against you of achieving your goals in the stock market. This is a, this is a fact. It's simple math. For those of you that struggle with that, I'm hoping my story will resonate with some of you, and perhaps you'll gain some insights they may, that may help you break your own cycle. I intend on breaking mine. I don't plan on this happening again. I will not let this happen again.
The other reason I'm sharing this is more selfish. I'm a boom and buster, and the only way I know of solving this riddle is to share my experience, open myself up, expose myself, and take a deep look inside and be accepted for who I am, flaws and all. Is the ultimate paradox? My therapist was explaining, "In order to touch extraordinary, you have to be genuinely ordinary. You have to show your flawed and ordinary self in order to feel the power that happens between people when you're accepted in the ordinary."
So, some parting words. The stock market is tough enough without us being our own worst enemy. If you're going to have a long-term career as a trader, you have to be resilient. You're going to make a lot of mistakes along the way. Some of those mistakes will be tactical, and others will be based on your own inner demons. I know many of you focus, maybe even hyperfocus, on technical analysis, fundamental analysis, running screens, analyzing the general market, assessing secondary indicators, and the like, as a way of gaining an edge in the market. And there's nothing wrong with that. All of that is important, and even essential to be successful. What's far more important, however, and unfortunately far more difficult, is to deal with your inner demons, your mindset, and your limiting beliefs. Because if you don't have the psychology down, you likely won't make it in the first place. And if you do, you likely won't keep it, no matter how skilled a trader you are. If you're haunted by deeper issues of worthiness and value, or perhaps something else, you likely won't have consistent and outstanding success until you deal with it. And I think that's particularly the case for boom busters.
I've repeated several times today, it's simply not enough to know the rules. The rules of trading are easy. Is following them this hard? Doing a post-analysis is a great start to discover what you're doing wrong, but what's truly required is dealing with the underlying question of *why*. That's the hard work. I've spent several years now dealing with my issues, as you know, that are rooted in my childhood. I've spent most of my life thinking and operating in a certain way. It's been part of my neurology for over 50 years. For the most part, it served me well. After all, I'm pretty high-functioning, and by most standards, I've done pretty well. But ultimately, my issues have kept me from getting what I really want. It takes time, patience, and hard work to deal with these old wounds. Intellectualizing isn't enough. Reading a book isn't enough. Journaling isn't enough. Attending a workshop isn't enough. It requires deep self-reflection and self-awareness. If you have these wounds or others, be compassionate and give yourself some grace. Separating your trading results from your ego, from your sense of worthiness, isn't easy. I haven't done a good job with it thus far. I'm on the right path, but obviously, I have a ways to go.
So, in closing, I guess there are two messages I'd like you to take home. First, if you have children, love them unconditionally. Celebrate who they are. Second, there is no amount of money that can satisfy your sense of of worthiness. Net worth does not equal self-worth. We're all unique and special. There's nothing we have to do, nothing we have to be, to be worthy of love and belonging. We are enough, just as we are. When we can feel that way on the inside, we won't be apt to take actions that don't serve our interests. We won't put up defenses to protect ourselves from feeling hurt and pain. We won't break rules in the market to protect our egos.
As for me, my goal is that the next time I'm up here, there will be a different ending to my story. I have a long road ahead to get back to my highs. I'll take it day by day, remaining sober and grounded as I make progress, and for the first time, hold on to it when I arrive. Thank [Applause] you.