The Mind of a Trader | Insights on Trading Psychology and Overcoming Setbacks | Charles Harris

[Music] Hey everyone, welcome back to the trailer podcast. I'm your host, Richard Moglen. Join us today is someone who I really enjoyed talking the markets with, Charles Harris, who is an experienced trader and a portfolio manager over at O'Neill Global Advisors. Uh, Charles, thank you so much for taking the time to speak with me here today and welcome.

It's a pleasure. Thank you, Richard. I appreciate it.

Yeah, and, uh, to dive right in, I'd love to just kind of start with my standard question, which is how do you first, basically, get interested in the markets and first start trading?

You know, I've always been fascinated by the markets, um, and I've just always had an interest in stocks. I had no clue what I was doing early on. I guess I got interested probably during, um, in high school. I used to watch, um, Wall Street Week with Louis Rukeyser on Friday evenings on public television. And then when I was at UCLA, you know, I had a small account of a few thousand bucks and I would, um, I remember I used to go to the UCLA library and scour through the old newspapers or just newspapers, but like, kind of current in some of the journals they had, just for like low PE stocks. And I was like, my only strategy was look for looking for low PE stocks. And I didn't really have any success. I mean, I think I kind of just held my own, uh, for years. And then I got a friend of mine, uh, when I was in college said, you know, you should put your money in Fidelity Magellan. You know, it goes up, you know, three percent a month, which is what it was doing. And I'm like, okay. So I, I put my money in literally like two months before the '87 crash, lost a third of my money right off the bat. And, um, and then I, you know, I really didn't trade with with any, um, kind of purpose or strategy until I joined O'Neill. And even then, it took me a couple of years to kind of figure out like what I was doing and and like what my approach should be for me and what would kind of fit my personality, right?

And, and how did you actually end up joining O'Neill? What was kind of the path to?

Okay, so at the time, I was working at a small, uh, real estate, um, consulting firm, and I wasn't loving it. And a cousin of mine was a Wall Street analyst, and he said, you know, you should get into, um, you know, you should be an analyst, you know, make tons of money. This is during the, uh, mid-90s, so the market was hopping. And what I was doing at the real estate firm is very, um, close to kind of stock analysis, but for real estate, right? So it's kind of a natural transition. But I didn't have an MBA, so it wasn't really easy to get my foot in the door. So I just went to the job boards and O'Neill was hiring for a research analyst. So I, um, I interviewed, I got hired. And I actually never thought I'd, I'd be, I just thought it was a stepping stone to being a like a sell-side analyst. But I kind of just, you know, all the resources were there and I started to trade and I got that bug. And I guess something good happened. And so, uh, I've been there ever since. So I've been there since '95. I'm one of the oldest employees there.

And did you know anything about William O'Neill before you joined, or is it kind of after you actually went there that you read the book and?

And, yeah, I knew nothing about O'Neill. I just, I just wanted to get my foot in the door and they were hiring. Uh, wasn't until I got there that I read the book and I had access to all our research and the charts and real-time quotes. And it was like, oh my God, like, you know, I used to come in on weekends and just screen for stocks and kind of, I guess, in a way, I kind of figured it out on my own because I've, my style's always been a little bit, um, kind of buying pullbacks and and looking for turnarounds. And it wasn't like I had to kind of get oriented toward buying breakouts and buying stocks and new highs. Like that was kind of a foreign concept for me, you know, when I started. I was coming off of, you know, low PE stocks, you know, so it, it was just a completely different mindset. But I've done, like, I would say my style takes into a kind of a lot of different strategies. It's not just buying breakouts. And I think in order to be successful in the market, um, you have to be, you have to be able to adapt to what's working. And if all you know how to do is buy breakouts, you know, there will be periods of time when you'll perform great, but there's going to be many times when your strategy, this isn't going to work. And it's just, in a way, it becomes too obvious. So you have to be adaptable. And, um, so I have lots of different things I do, honestly.

But yeah, no, that's great. And, uh, it was, I guess, a year and a half ago where you gave, like, a really great presentation talking about your pullback buying methods at our conference. Uh, so I'll kind of link that above, uh, right now and in the description if anybody wants to check that out. I'd highly recommend it. Um, and I wanted to kind of a little bit dive a little bit deeper into your time at O'Neill, um, and also kind of your performance during those, the 90s bull market. What were you kind of doing in your personal account? And, and how did you kind of get noticed by O'Neill to get picked to become a PM and then be a part of that nice move, uh, before obviously the bear market?

Yeah, so I didn't become a a PM, uh, until 2000. So actually, I became a PM three months after the bubble burst. So it wasn't really the most opportune time to start running money for the firm. But I started, so I joined the firm at the end of '95. My first, um, foray into the market was, um, pretty much because I had access to all this data and research and outside research. I pretty much just looked at, um, the broker reports and what brokers, you know, the analysts are recommending. And I, I said, I, you know, I was very swayed by this research and I thought, oh my God, like, it's a gold mine. And it took me about a year to figure out that they didn't have a very good track record and it was not a good strategy. And I lost money. I lost probably half my money in that year. And I had no money to begin with, and I started with a few thousand bucks. So anyway, it was, it was the beginning, end of '96. I wrote down kind of my rules and I wrote down really, um, I, I kind of did a deep dive into my own personality because I think you have to trade in line with your personality. There's everyone is like, I want to be like Bill O'Neill. Well, Bill was Bill, and not everyone can be like him. You know, he was, um, he won, he had, he was like ice cold veins. I mean, he could take the pressure, he could, he could handle concentration. He was very quick on the dime. He was very, very humble, very quick to realize when he was uncomfortable or wrong and reverse a position. I mean, not everyone has those skills. Some people just are a little more risk-averse. I mean, I'm not, but actually, I do trade with a lot of concentration and risk, but it's not for everyone and it doesn't always work. And I've certainly had my ups and downs in the market. But to answer your question, in, I, I started having success in '97 following more of, um, a swing trading approach. And I just determined to myself, I was a singles hitter. That's where my sweet spot was. And my goal was to hit singles and compound my money as quickly as I could. And that's what I did. And in '97 was my first big year. Now, mind you, we were in a bull market, so I can't take all the credit, but it was a very good trading environment. And my account was up about 700 percent in '97, followed by about another hundred percent in the first half of '98. And then we had our first bear market that I experienced, which was the Long-Term Capital blow-up and that little three-month, 30-plus percent pullback in the NASDAQ. And I lost about two-thirds of my money, not knowing how to handle a bear market. I just kept trading and kept losing. So, at that same time, I got my CFA designation and I started to look for another job. And thankfully, I didn't get another job because when the market turned in '98, um, after the Fed cutting rates, um, you know, we started, it really, the last leg of the bull market. And I had a huge, um, '99. I was up over a thousand percent in my personal account. And that was really when I started to make real money because again, I started with a very small base. So, you know, to turn a few thousand dollars into hundreds of thousands and then millions, you know, it takes time for that to happen. But we're in this crazy environment where things were happening. And that's when I got noticed by O'Neill. And really, the story behind that is, I never worried about being a PM. I never really even thought about it. My goal was just to make as much money as I could for myself because I knew that would give me the freedom to do what I want to do. And Mike Webster, who was a good friend of mine and was also in the research department, kept setting up these meetings with Bill to, you know, talk about how what he was trading and and compare notes. So one day, Bill came up to the research department and was giving us a pep talk to the research staff, basically on everyone should be involved in the market and learn, learn, and you know, have the potential to change your life. And then Mike went up to Bill and they were chatting. And I thought, you know what? I should get on his radar because he doesn't even know I exist. And so I went to my boss in the research department, told them that I was interested in being a PM if a position ever turned up. And at the time, we had to trade through the firm. We had a small, like, discount brokers that O'Neill owned. And, um, anyway, they looked at my results and Bill came in one day and sat next to me and took me to lunch and hired me.

Yeah, that's awesome. Yeah, it was awesome. It was, it was really awesome. And I started out as really an analyst to support the portfolio managers. And after about six months, he, uh, started me off with a small account. And, um, I've been doing it ever since. Yeah, and I love it.

Yeah, that's fantastic. And, uh, I actually want to circle back to what you said about experiencing your first bear market because I think a lot of traders right now are maybe in that same boat. So what were kind of the lessons that you learned from that bear market? And maybe also, obviously, the 2001 bear market, uh, that you kind of take with you today, that you think people watching, maybe this is their first bear market, or, you know, maybe their second, you know, could benefit from?

I'm also, to be honest with you, I've learned the lessons, but I keep relearning the same lessons. And so, and I think that might be a message to to the viewers of this podcast, is that, um, you know, I've had a quite a roller coaster career, and even this past year has been a literally a disaster in my account, which I didn't think I would have to revisit these same lessons that I seem to have to learn every so often. So I think it's okay that, you know, uh, repetition might be what's required to kind of evolve and grow. So if, so this, I guess the message to the viewers is, if you've experienced, um, a market downturn and maybe made some mistakes, and maybe it's not your first time, it's okay. You know, the market will always be there, and, you know, we can strive to be better. So, the really, the main lesson, Richard, is to trade in line with the market. And it's really the Ammon can Slim, it's, don't think you're smart enough to trade, to make money in a going against a trend. So if you're a long trader, which I am, I, I rarely short, uh, you're not gonna make money on the long side in a bear market. This is your hit ratio is going to be terrible. For everyone that you, you hit, that you're up on, you're probably gonna have three or four that you're down on, and you're gonna net lose money. And as you lose money, you're gonna lose confidence. And confidence is key to trading. You cannot trade well without being confident. So I think really the main lesson from the downtrends and the bear markets is to have the kind of the foresight and the patience to just sit out, or or maybe try shorting if you have that ability. I mean, for me, um, I think you're imprinted with how you first made money. So I made money in a bull market. I'm always thinking of buying. It doesn't even occur to me to short until it's kind of like late in the game. And people who made their money shorting at the beginning are always looking for shorts. You know, it's just, I think it's a natural tendency. Livermore said, it's not the bull side or the bear side, it's the right side. So I think they're truly great traders have the flexibility to go long and short and have no bias. But honestly, I'm not one of them. I mean, I've made almost all my money on the long side. And so did Bill, by the way. So, and given that markets over the long term do have a tendency to move up more than down, um, I think it's okay to be that way. But, uh, it's really key to sidestep those periods of time when the window simply isn't open for making money. So I think that's the main, the main thing is trade in line with the trend. And when you are trading well, and you're maybe this in in a couple of great stocks that are doing well, there is that tendency to take your eye off the market because you're just focusing on your stocks. And so I think it's important to kind of have a routine where you actually are looking at the indices, you know, every day and really analyzing them and trying to determine, you know, are we extended? Are we, is there distribution in the market? Are we trading above, you know, the moving averages? And all that stuff. So Mike Webster has once said to me, or said maybe was in an interview, but, you know, we worked closely together for years. Nothing good ever happens below the 21-day moving average. And it's so true. If you just look at the 21-day moving average and put that on a chart of the NASDAQ, when you're trading below it, uh, you're not gonna, you're not gonna make money. This is so trade in line with the trend is really the most important thing. And then, you know, by doing so, the odds are in your favor.

Yeah, I think that's that's super important. And coming back to your experience at O'Neill, uh, what was it like working with Bill? And also, what were some of the key lessons that, uh, he kind of passed on to you, uh, as you worked with him as a PM?

Well, working with Bill was amazing. And and Bill and I, um, shared an office for a while, together, which was really a dream come true to to really get to know him on a really, like, a deep level. Like I felt like we really, um, like he was really a mentor, yeah, in many ways. And I guess what I would say, the things about Bill that were so unusual was, one, he was very humble, um, and very, um, no one worked harder than Bill at the firm. I mean, it's his company, but he worked, he was just relentless how hard he worked. And he was always trying to make improvements to the newspaper, to IBD, and just, yeah, really hard worker. And I think most importantly, he was optimistic. And also, in a way, very forgiving, because he would let you make your own mistakes and, of course, uh, you know, let you figure it out. I mean, eventually, you had to figure it out, or there would be some issues. But he never really told you what to do. He just let you kind of figure it out. And I remember, [Music] in 90, not '90, in 2007, I was having a tough year. Was it, there were a few things that were really working, and I, I didn't have positions in them. Like Crocs, obviously, your Crocs had a big move. And maybe Apple was having a big move. And somehow I was, I was struggling that year. And it wasn't until, um, August, September, we had a a run, and I had a huge run in two months. I was up nearly 100%. And everything was clicking for me. And I had a whole, like, thesis that we have the year was going to end well. The year we ended up peaking in the first week of November. But I was planning on playing it out toward December. And I had a whole plan. And the market peaked and started to go down. I started losing money in the firm, like really quick and and big. And I remember I was, um, I had like, it's like my fourth day down in a row. And I was losing a lot of money. I mean, it was up 100%. Next thing you know, I was up 60%. Well, that's a 20% pullback in like four days. Yeah. And I, the phone rang, and I saw, I was at home, actually, and Bill's, I could see Bill O'Neill. I'm like, oh my God. So, you know, I answered the phone. And Bill, this is totally cool and chill. And he said, hey, just want to make sure you're paying attention, you know, that you're around and you're looking at your portfolio. And, you know, give me your thoughts. So, you know, and again, I was down a lot and off the top. And I explained my whole thesis and what I was doing and what I was planning and how I was positioned. And, and he just said, okay. He said, one way or another, you'll learn an important lesson. And that was it. And then the next day, again, I was down, and I just went to cash. And I was in cash for a while, for months after that. But yeah, he let you kind of, he, he really trusted. I can't speak for everyone, but he really trusted me and let me do what I was gonna do. And never told me, he never said to sell something or to buy something. He just wanted to know that you were thinking and that you had a plan. So I think it's hard, like, it's, it's harder to, um, trust someone with your money. And he, um, especially for someone as capable of Bill, knowing that he could do it all on his own, he didn't really need everyone to manage his money. He could, he could do it himself. But he really did trust the PMs. Um, and I think, yeah, and one, I always appreciated that. But yeah, it was, it was, I think it's hard to do. And he was able to do it. Yeah.

And, and do you, is there anything that he kind of said to you that really stands out in your mind of like, changing how you thought about the market or thought about trading or thought about managing risk, or, uh, just kind of a memorable moment or conversation that you had with him that, you know, had a really important lesson that really changed, changed kind of how you view things?

You know, I think there, there's probably many, many conversations like that. But I think, hmm, the thing I would take the most from Bill is that there are periods of time when, you know, we were trading during a bear market where there were extended periods of time where we couldn't make money and we weren't trading. And it's discouraging. And, you know, during these periods of time, you, you know, you start to dig a hole for yourself. And you've got to, as a portfolio manager, uh, eventually fill that hole before you get paid. So, you know, that can take time if you're digging a big hole. And so Bill was just always optimistic and said, look, you're, what do you think, you're always going to be moving up the whole time without any drawdowns or setbacks? I mean, it's a normal course of action to have kind of ups and downs as you're trading. It's not, it's not just a ride up. Um, you know, we want to try to manage our risk and manage our drawdowns. But basically, he was always optimistic that the market will give you those opportunities to come back. And you just have to be patient and ready for them. And I remember, um, one other period, I was, you can't remember what what the time frame was, but I was just off my game. And normally we trade in a very concentrated way. So if I ever had more than like eight positions in the firm, it'd be very unusual. And even if I'm like fully invested on margin, I mean, we're pretty concentrated. And because I was just not connecting with the ball, I ended up with like 20 positions, which I never have 20 positions. And he called me and said, what are you doing with so many positions? Like, why do you have so many positions? And I said, well, I can't, you know, figure out where the leadership is. I'm having trouble connecting. And he just said, you know what? Go back to the basics. Um, you know, it's okay that you, you struck out a few times, but just go back to the basics. He, he always used like baseball analogies. He was very into baseball. And like, you know, go back to the rules of, you know, how to hit, how to swing, um, how to wait for the right pitch, wait for that fat pitch. And go back to the basics, but don't change your style. And don't, you know, take on a bunch of little positions just trying anything. Just kind of go back to the basics. So, you know, that, I would say that that is a super important lesson because we are all going to experience losing streaks and periods when we're just not, um, where we're just not trading well. And the thing to do in those periods of time are to really stop trading, do a post-analysis of, you know, what are you doing wrong? Are you, are you chasing stocks? Is your timing off? Are you breaking certain rules? And then come back small. You don't want to come back in a big way trying to make your money back quick. Start small, start connecting, start putting on a few winning trades. And it's amazing how your confidence will, um, bounce right back with a few winning trades. Um, so usually, you know, when you're coming back from a losing streak, the objective isn't really to make money so much as it is to get your confidence back because again, confidence is key if you're going to make money trading.

Yeah, and I've got, I've got plenty of questions. I know a key subject that we want to talk about is trading psychology, and we're definitely going to cover that. I just got a few more kind of background stuff here. Um, I, I know that, uh, you, Mike, and also Ross were kind of tasked with building a model book of kind of that '90s bull market period. I wanted to hear about kind of what that experience was like from your perspective, and also if you learned anything really important about, you know, finding winners from from that experience.

So, yeah, I was tasked with, um, a few model books over, really, since I started at the firm as a PM. Um, I put together a few model books with Ross and then particularly with with Mike, um, covering all of the 2000s and and actually all the way up to just the current period. In fact, we just kind of finished working on that. And, um, you know, the, I think the whole point of the model books is that history repeats. And there are, you know, every market cycle has its winners. Those winners are usually not the same as they were in the prior period. So one, it's it's kind of an optimistic thing to realize that there's always going to be new leadership and new winners if you're open to that possibility and and focus on finding them. Um, yeah, in every market cycle, you're gonna have your winners. And, um, I think, you know, I've always created, in a way, my own model books just with the stocks that I trade. So I might have my own folders and my own notebooks of my best trades and marked up where I bought and where I sold because sometimes, so it was really critical. I think this can maybe even help the audience is sometimes you will lose your way and you'll think, or at least it's like for me, I'll think, how did I make so much money? Like, like what did I do right back in this time frame? Like, I don't, like, somehow sometimes when you're off, like, you, you think, well, how did I do it? Like, well, I don't even remember, like, what I did. Is it not working now? And I'll go back and I'll look at those periods of time where I had great success. And usually they're, um, attributable to a very small number of stocks. So I would say maybe five to 10 stocks a year is where I make 90% of my money. And I'll have these stocks and I'll look at, okay, well, what did I do? Where did I buy it? Where did I sell it? And then I'll put them up on a bulletin board so I can actually look at, like, okay, one, I've done it. Two, this is what they look like. And interestingly, they always look the same. The stocks that I buy coming out of some kind of consolidation, whether it's a stock breaking out to new highs or maybe kind of a turnaround stock that's kind of turned the corner after a downtrend and it's now trading above its moving averages and everything's kind of starting to trend back up. But in one way or another, they're all stocks that are in uptrends in markets that are usually trending up. And again, if you just stay in phase with the market and kind of, um, not fight what you know, what the market's telling you, and just be open to, you know, when something's working, it's working, you just, you do it, you don't question it. Um, you can do really well. So, yeah, I think like the point of the model books and and just maybe keeping a notebook of your own winners is, um, to see like how did you make money in the past, and it will work again, you know. So I think I think that's really what I've gotten out of the model books is history repeats. You kind of just want to look for the same types of things, growth companies that you can have conviction in, that are trending up, and that abide by the moving averages. And when they peak, they peak, and they're out of favor, and you move on to the next one.

And, uh, if you're able and willing, I'm sure a lot of people would love to see, you know, a chart markup from from the past if you could post that on Twitter. I think people would really dig that if you're able to.

Uh, yeah, I could do that.

Yeah. And, um, this is always kind of my favorite question to ask, and it's kind of about routine. So I love to hear, what does a kind of day in the life of a portfolio manager look like? What do you kind of do on a day-to-day basis to track the market, enter positions, or manage positions if you need to, and just set yourself up for success while trading?

That's a good question. Um, so I do most of my screening after the market. So I don't, you know, being here on the West Coast, see, I don't want to wake up at four in the morning. I have a 6 a.m. meeting every morning for some portfolios that I run in the firm. But really, it's, um, I come prepared with a list of stocks. So like I can, you know, I'm kind of old school, but I mean, like that, like I wasn't prepared for this, but like I have, you know, I write down the stocks that that I like that I'm looking at, um, ones that I'm, you know, maybe more timely. I circle on here. In fact, so usually what I'll do is I'll write down, um, stocks that that I'm interested in, and this is based on screening. Um, and I'll, I don't know if you could read this page, but it's divided into different columns. So the stocks that are in uptrends, stocks that are breaking out of bases, stocks that are pulling back that are already in uptrends, stocks that are forming bases, and then turnaround stocks. So these would be ones that have come off a lot, but might be turning up, right? And I'll, I'll keep this list of stocks. Sometimes things will fall off the list, things will come on the list. And I will, um, put alerts on them in in, um, in Panarray, or you can do the Marcus Smith, or even in my, um, uh, the platform I use to to follow my stocks. You know, all the tickers, you know, I put alerts on, alerted when things go off. And, um, yeah, and that's my basic process with regard to, um, screening. I don't screen every day. I think you, there's people can overscreen. I mean, the truth of the matter is, if you're looking for a stock breaking out, you'll be able to find one every day. And that doesn't mean you should, you should trade it or buy it. My personal opinion is, I mean, I've been a swing trader my whole life. So for me, the sweet spot's always been a holding period somewhere between two to three weeks on the on the fast, you know, on the short side, and two to three months on the longer side. It's usually I'm somewhere in there. But that being said, and maybe we could talk about this later, but I have changed my personal style for my own accounts, could be more long-term oriented. And everyone knows I've had a position in Tesla for a long time, which has been excruciating over this past year. Um, people like, well, what, what'd you do with Tesla? So in my non-margin account, I have not sold a single share of it. And my, I've said my objective is, you know, five to 10 years. I'm gonna hold it for five to 10 years because I think, um, it could be a stock that ends up like Apple. But the truth is, even Apple had periods where it fell over 60% in the 2008 period. It had a couple of drawdowns in the 40 range, a number in the 30 range. And so it's, um, you know, I was actually just looking at this when I was, um, kind of thinking about what I might talk about with you, is, you know, there was a period in 2005 when I was had all of my personal money in Apple. And Apple, I don't know if you would call this, but Apple started its major move in 2004. The first quarter of 2004 is when we kind of first identified it, and that's when it really started its big run. And this is years before the iPhone was, um, even conceived. This is during the iPod days and iTunes just came out. I think. Yeah, yeah. And so Apple started this huge move, and, you know, we all made a lot of money in Apple, uh, in that early timeframe. And and over the years, but Apple has been up almost 450 fold from that period to its peak of last year. And I certainly didn't make 450 fold in Apple. And so I think having gone through that experience and never having enough conviction to kind of hold Apple and really try to get, um, more than just like a triple-digit move in it, but like truly a gigantic, life-changing move, like I think that's where real wealth is built. And in some of the longer term, being being right in a big way is where the real wealth is made, right? Um, I've done really well swing trading, but if you look at, you know, the richest investors in the world, most of them, I think, made their money being right in a big way over a longer period of time. So I think Tesla might be my opportunity, or at least I thought it was, and I don't want to mess it up. So I've just, you know, I'm still up on it, um, from 2020, you know, up several fold. But it was a, it was a brutal year, Richard, down 65% in 2022. Was was rough. So, um, in any event, um, so my style has changed a lot in my own, with my own personal money, to some extent, but, uh, talking about my routine though for the firm, which is, you know, obviously different and much more active, yeah. Um, I, I screen about once a week for new merchandise. So don't, I screen when I need to screen because I think there's, um, too much emphasis placed on screening and technicals and not enough work done on fundamentals and really trying to trace something you have conviction in that can actually become something. There's nothing wrong with short-term trading and just trading off a chart, but I think that the real money is in knowing what you have and actually having something that can be like a model book, a model book type stock. And that's what Bill, you know, Bill's Chasm is really oriented toward finding the next leaders. And and these are leaders that will have runs for in a minimum of six months to maybe a year and a half, somewhere in there is like a sweet spot, um, or longer if you're willing to sit through through bases. So I screen about once a week. Um, I usually screen on the weekends. Oftentimes, what I'll do is simply look at all the industry groups and look at the ones that are improving and moving up the ranks. And then within those groups, really look at every single stock in there and try to find the best merchandise. You always want to, you know, look for the leader, not the laggard. So, you know, those are ways that I find stocks. And I do have a preference for, um, I've always made my money in technology, retail, and medical related. So those are kind of those growth categories. I have never made money in an energy stock. And I'm not saying it, you can't, but it's like oil energy was the place to be last year. But I'm really looking for kind of those innovative companies that have that I believe have the potential to kind of change the world. And that's why I have, you know, why I've been trading in Tesla in such a big way, because I think they're levered to, um, all of the big growth trends that are going to play out in this next decade and longer. Um, so anyway, I don't know if that answered that question or not.

But no, it definitely does. And I really, to being on the Pacific coast, not wanting to wake up, you know, super early. And, you know, you may have already touched on on many of these, but I was wondering if there were kind of any aha moments or key turning points in your trading career where you really kind of made a single shift or a few shifts, and you feel like it really made a significant difference in your performance and how you view the market?

Well, I'm sure there's been many aha moments, but I mean, just to repeat what I said before, I've had to repeat most of my aha moments because I, I seem to, um, you know, I keep a trading journal, and I usually, I only write in the journal when I've had a tough time in the market. No one likes to write in their journal when things are great. Like it was time, yeah, you're just enjoying the moment. And the funny thing is, when I look at my journal and I look at what I wrote in all these previous time frames, I'm always writing the exact same thing I wrote before. So in a way, like, I know the lessons, it's just, um, I tend to keep repeating them. So, um, again, I, I think the, the main things I've learned, and I think you learn, I learned more from my failures than from my successes, in a way. But one is, um, really being careful of, um, you know, when you're on a tremendous winning streak, there's this tendency to, um, take your eye off the ball and start to, in a way, almost daydream and extrapolate where you're going to be, you know, based on your last, you know, how you've been doing in the last three months, six months. And when you do that, you, your focus only becomes on the upside, you're gonna, you're gonna gather, as opposed to the potential downside that you're not even looking for. And, you know, I think that's what happened to me, uh, in 2022. You know, with Tesla, you know, I was coming off, you know, 2020 was my biggest year ever as a trader, even bigger than the internet bubble. So, you know, my margin account was up like almost 1400 percent. And then in 2021, I was up almost another 200%. So that's like a 41-fold move, 42-fold move in two years. So when, you know, I was suddenly thinking like, okay, I have it, I figured it out. I have the right stock. And I was only looking where I was going. I was not looking down below. And I honestly did not, um, ever conceive that Tesla could fall 76% off its high. So I'm still astonished by it. And so I think one, one aha moment, which is very recent, which is kind of a new aha for me, is if you're going to try to play out a long-term secular move, you better not do it with any margin because you will not survive the potential drawdowns that are inevitable in in every leader. So, um, I've been very open about this. I got my margin call last summer. And, you know, I lost a tremendous amount of money, you know, in my margin account, um, just having too much exposure in Tesla and other kind of growth stocks, I mean, in a bear market. So I think, um, really being cognizant of your, your risk and having a line in the sand where you say to yourself, below this level, I'm done, no matter what, it's really important. And I kind of do that on, it's like people say, like, do you put in hard stops or mental stops? And I just always put in mental stops. But the problem with a mental stop is sometimes you keep changing it. So it's really important to have a hard stop in there when you, um, when your results start to get away from you, and maybe your psychology starts to change, and maybe start to make excuses, and it can happen to anybody, that you almost have to put in that hard stop just to protect yourself from yourself. And so, you know, I, I listen to, you know, there are some like great traders like Bill, never made excuses. Bill, I've seen him turn on a dime. He could be so bullish, one thing happens, boom, thing is sold out. And I'm like, wow, how did he, how did he do that? And then maybe the next day or two, things reverse again, and he, he goes back in. So he was incredibly flexible. Um, you know, I, I listen to to guys like Mark Minervini, so disciplined, like that guy will never blow up or never have issues, um, on the downside because he's simply so disciplined and pays so much attention to risk management. So I think that's probably the area that for me, um, maybe part, that's where I get in trouble. And maybe that's part of the reason why when I'm on and when I'm making money, I usually do do better than most because I'm more aggressive than most. But it cuts both ways. So I think, you know, to be a consistent winner, you have to manage your drawdowns because large drawdowns are the kind of the enemy of compounding. And compounding is really the secret to building great wealth. So you need to, you need to have your risk controls in. And if I have any aha moments, and said, I need to do a better job with that. And they're the enemy to confidence as well. They really take that away. Mental capital.

Yeah, 100%. Yeah. Um, yeah, drawdowns hurt on many levels. And I want to dive deeper into that because I, I really do want to focus on trade psychology. So, so first things first, taking it kind of a general perspective, how important do you think it is for traders to work on their trading psychology, work on that emotional awareness, and just focus not only, you know, technical analysis, fundamental analysis, but also on that side of trading as well?

Well, Richard, I think is the most important thing is your mindset and being aware of your psychology and just, you know, kind of how humans act this behaviorally. You know, we, we all have common, we're kind of all afflicted by the same things. And I, I think mindset is really what separates the greats from everyone else. I mean, I think technical analysis, I think anyone can learn. Uh, you can go to some workshops, read some books, and really, a lot of it is this experience and just staring at charts and looking at charts and researching. But I don't find that particularly difficult to overcome. I think anyone can learn the fundamentals. Anyone can learn the technicals. But not everyone can. Some people just aren't cut out for trading. And everyone wants to do it, and it looks so simple. And the truth is, it is simple. All you have to do is press a button to buy and sell. I mean, anyone can actually do it. But not that many people, I think, can do it really well. And I think it's because a lot of people just aren't cut out for, um, the swings. I mean, it is quite emotional when you're looking at your net worth change, uh, on a per second, you know, basis. Um, I think that it's, uh, it's, it's an emotional thing. So I mean, it doesn't affect me that much as far as, um, I mean, Tim for good and bad. I mean, when I'm making money, I'm, I'm happy, but it's, I'm like, I'm like used to it. And as your account grows, you just become accustomed to larger numbers. Yeah. Um, and on the downside too. I mean, in a way, I wish I was a little more tuned emotionally because when I'm losing money, unfortunately, I could, I could take, I could sustain a lot of pain. And I read somewhere in a trading psychology book that great traders don't accept pain. There's no reason to really. So if you're following rules, why would you want to accept pain? You know, so why would you want to put yourself in that position? I guess for me, because I'm trying to play out some longer-term moves, I'm willing to accept some drawdowns. But you do need a way of limiting them. And I think it's really critical to, if you can keep your account within, I'm going to say 20% of an all-time high at all times, then I think you're probably doing well if you're an aggressive trader that uses leverage. Yep. But once you start to fall more than that, you know, 30, 40% off your peak, again, it wears on you mentally in your psychology. And it, um, and it just, you start to to ruin the whole compounding thing because you, you ruin the time it takes to get back. So, so anyway, I think mindset is is really critical. And, um, taking responsibility for your trades is really important too. I think a lot of people will blame the market or even, even when people know that I've had a tough year, and the retort I usually get is like, oh, well, everyone had a bad year, it's a bear market, you know, it's not your fault. Yeah, yeah. It is. I didn't have to be in that market. I didn't have to make those trading decisions. So I think taking responsibility, having a mindset, um, that

revolves around confidence, uh, and and no hesitation. Because if you hesitate and question yourself or question your edge, you're not gonna do well. Um, and a lot of people have a tendency to hesitate and wait. And, you know, instead of acting at the buy point, they'll do more research, or they'll wait for more buying volume to come in until it looks more obvious. And you always feel better when something looks more obvious, but really, what you're doing is adding risk to the trade.

So, um, trading without hesitation, um, being aware of when you are maybe becoming exuberant, uh, and that's something another thing I have trouble with. And when you are doing really, really well and you're in that kind of intoxicating moment, it's hard to think that you'll ever lose money again. You know, it's, you just forget, like you forget the losing streaks. You're just looking up above and having the foresight to kind of know that, okay, I'm getting a little bit out of hand here and taking money out of the market.

This is, I guess, another important lesson I've learned. Is is really important. And Livermore talked about this too, in Reminisce of a Stock Operator. When you're on a winning streak, it's okay to pull money out of the market and leave it out of the market. I think that's part of self-care. And I, I mean, I did do that to some extent. You know, when I was making all that money, I, you know, I bought a new house, I paid cash for it, I fixed it up. I mean, thankfully, I, I live with no debt. And but I wish I would have pulled out more so that, you know, there's no reason for me to ever worry about money again. But having sustained some of these losses, I do kind of worry about it. So there's no reason for that.

So taking care of yourself, pulling money out of the market when things are, are a little bit too good, and realizing that really incredible outperformance usually isn't sustainable. Um, it will end. And so, um, kind of just being aware of that is really important. And are there any specific, you know, techniques or ways that you're trying to be a little bit more aware of when you're getting towards that over exuberance, that overconfidence where you might start to realize, you know, start to let things slip a little bit? Is there anything you're kind of working on? More journaling? Kind of mapping your emotions a little bit like that, so you're kind of more aware of it earlier so you can take those steps that you need to to, yeah, yourself?

Well, I've tried so many different things, Richard. I, I actually programmed little, um, pop-ups in my Excel sheet. So like, if I'm on a, um, if I fall a certain percentage off my high, I'll get an alert like, uh, you know, raise cash or get off margin or, you know, I have these messages to myself. But the truth is, is I usually ignore them or don't act on them the way I should. Um, so I mean, I am, uh, absolutely committed to, um, taking more money out of the market in my next run and just leaving it out and just having it in a bank account. And I've always been oriented toward maximizing my net worth. And so every penny I have, I'm trading because that's where I, I can make the most money. And having a lot of money in a bank account just doesn't make sense to me because it's like putting it under the mattress. But in those tough times, it actually is, um, important to, to be able to, you know, not be stressed out. I mean, if you're stressed out about making your daily bread in the market, you're probably not going to do too well. I mean, you have to be loose and and be able to take risks. And if everything is riding on a trade, it, I think it's too much risk.

So I think, um, as you are having success, pulling money out of the market is not all of it, but just, you know, pulling out little bits here and there can, I think, add to your success as a trader because you won't be so worried about, um, having to perform, uh, perfectly well because, uh, you know, the market trading, it is, you know, something where are we always standing with uncertainty? Yeah, there's no certainty in the market. We, we don't know, uh, which trade will be a winner or loser. You know, all we can have confidence in is that if we have an edge, uh, and we're in the right environment, then you'll be a winner over a longer period of time. So I think focusing on the process of trading is really more important than focusing on any individual result of a trade. So this, you know, kind of stick to the process. But, um, yeah, I don't know that that's what I have to say on that one.

Yeah, that's good. And getting back to that a little bit, um, is there anything you do, whether it's exercises, maybe it's something you say to yourself, or just something as a part of your routine to help, you know, at the beginning of each trading day, you kind of set yourself up by trying to be calm, you know, kind of limiting that stress and managing that stress in a way that you can perform and make decisions clearly, um, that aren't impacted by outside emotions or or things outside of your process?

Yeah, that's a good question. You know, over the years, I, I've tried different things. Um, I've tried meditation, which I don't do well. My mind is always racing. I should get back to that though. Um, I've tried yoga. I exercise every day regularly. Um, and I have at times, um, written an affirmation, uh, that I would start my day out with to kind of put me in the right time frame or not, I mean, that time frame mindset. And, uh, I've gotten away from that, to be honest with you. I mean, I have it, but I don't, um, I don't always look at it because, like I said, usually we only rely on those things when we're in a, in a, when we're struggling. When things are working for us and we're, we're making money, we usually already are in a positive mindset and we're acting, um, in a confident way without hesitation. It's when we fall out of that, when we kind of fall out of the zone, is when you, um, you need a way to get back in the zone.

So I think it's important to do all that to kind of keep you humble and keep you aware because I think the way we get out of the zone is, um, success kind of breeds complacency and, um, relaxing your discipline. And that's how you fall out of the zone. Is when you start to break the rules. And does it deviate from what you're doing, uh, your results are gonna, you know, diminish and slowly but surely you'll lose money and lose confidence. And that's the cycle that we're kind of all honest traders. So the goal is to stay for as long as you can in the zone, trading well and consistently making money. And I think that the best active traders can do that. And it's almost like habit now for them. I think that's how it was for Bill. Um, I think for most people though, we struggle with that kind of, um, you know, that that cycle of, we're doing it right, we're making money, we started to relax our rules, we lose money, and we, we keep replaying that that circle a bit. So, um, but the market's always there. I think the, the thing to remember is there's always a new winner on its way. There's an ocean of possibilities. And it's really, as long as you're in the right mindset and, um, and working hard and and searching, the opportunity is always going to be there. It's not like you've missed your window, you know? So that's the beautiful thing about trading is if you're there and you still have your capital, there's always the ability to kind of, um, to come back if you've had a drawdown and hopefully to just, um, to build wealth and and not suffer the drawdowns, you know, and improve on that and move toward becoming a consistent winner with relatively minor drawdowns as opposed to the boom and the busters, which I have a tendency to be a little bit more in that category because when I make it, I make a lot, but I always give back a lot more than I should. So yeah, always for everybody.

And, um, a common issue I see especially on Twitter is people are always kind of anxious about, you know, missing the big move. And even during this bear market, throughout it, really, you know, this rally, this is the start of the new bull. This is the start of the bull. Each one. And then it fails. Um, do you have any thoughts or, uh, insights on how people can kind of overcome, uh, the FOMO, the fear of missing out, and just kind of accept that what's gonna happen is going to happen, and that if you're positioned properly, you'll be there to take advantage of it?

Yeah, um, well, are you talking with regard to the beginning of a new bull market, or just like an individual stock that starts to kind of catch? Yeah, either or. You know, the next, the next big leader, or, or just the start of, of the next move upwards. Yeah, I mean, I guess for me, because I'm usually oriented toward buying pullbacks and selling FOMO, in a way, um, it's easier for me not to get kind of carried away and, and, um, kind of chase stocks. Chasing is, uh, you know, really, um, a huge risk. And so I get it. I mean, everyone wants to be part of the new hot thing. But almost always, the stock that gets away from you will give you another proper entry point if you're patient. So I'd say you can have pretty much have confidence in that. Sometimes, and I like how, um, Dave Ryan calls these, um, his mental health buys. I've heard him talk about on IBD Live. Like, sometimes maybe a stock has gotten away from you and you just really want it, but you know it's not a proper buy entry point. You can just take a real minor position in it, just so that it's in your portfolio and in front of you. Yeah, and you're kind of paying attention to it. So I think there's nothing wrong with doing that. I think that makes a lot of sense, actually. And, you know, sometimes something will take off and it should be bought, you know, so, um, not because everyone else is buying it, but it kind of will give you, like, I was a little bit late to Tesla when it broke out in 2019 and early 2020. Um, I had kind of given up on it because, you know, I got chopped up so much in 2015 and 2016 and 2017. I went in that like five-year consolidation period and I was kind of like done with it. Like I just couldn't make money in the stock. It wasn't, um, it wasn't trending. And when it finally took off, I just started trading it fast. And like, I, you know, I take a few points out of it. It just kept going higher. And I'm like, wait, wait, maybe, maybe this is it now. Maybe it finally is time. And so it, you know, I kind of did a lot of research and kind of got my conviction up. And that's how I, I kind of started to trade it in a more, kind of patient, larger, uh, way. But, um, yeah, I think, uh, traders should just realize that stocks are going to get away from you. When they do, focus on something else. Put it on a watch list. And then wait for a pullback or another entry. Um, it's, um, you know, tantalizing to kind of swim toward the shiny object, you know, and there's always going to be one. And there's always going to be an, you know, one the next day. So, uh, you know, the, in a good market, there's enough breadth to find other winners. And if, um, yeah, if something gets away from you, just put it on a list and and wait for it to come to you. That you'll always be more successful when the stocks come back to you as opposed to you chasing it.

Yeah, great. And we've talked about how important this is. Is there anything that you do to to work on keeping your confidence up there and and boosted, uh, and also at the same time, you know, keeping that discipline high so you're making sure you're following your rules, um, and honoring your system?

Yeah, well, again, I'm, that's probably my weakest spot. Is is relaxing my discipline when I'm on a huge run. And, you know, I keep a folder of all my rules and it's probably something I should maybe re-read more often. You always think that, you know, when you're doing exceptionally well, like maybe you figured something out or you're doing something different and that's why things are working for you. It's usually not the case. Um, so I think just being aware of, um, you know, I think some very basic things can really keep you out of trouble. One is, um, kind of having a self-awareness when you are making too much money. Uh, and like, no one should be up 40-fold in two years. Like that's too much, even for someone who's great. That's too much. And the truth is, I think one reason why I tweeted about this, why I think Tesla came down so much, was just simply too many people made too much money in it. And the market is not going to reward that kind of greed if you have no sell discipline. And so I think it's a lot of this, you know, it's fallen by two-thirds last quarter. I think it was really a long process of people capitulating and getting margin calls and just over leverage and over concentration. So having an awareness of when really you made too much money and you should kind of thank the market, take some money out. I don't know, buy a house or do whatever you're gonna do. But kind of realizing that no one is that good. Um, having that line in the sand so to protect yourself from yourself. Because that, that's really what you're talking about is maintaining your discipline and maintaining your confidence, right? Is, um, you want to protect yourself from overconfidence. And it's very easy to become overconfident when you have exceptional results in it, in a short period of time. Um, not, uh, yeah, basically just being aware when things are too good to be true and acting on it. And realizing that, you know, we have a tendency when we're trading, you know, the money in our account, like it fluctuates a lot, but it doesn't feel like real money. Because normally, you know, I, I go shopping and it's like, you want to buy a pair of jeans and it's $200. I'm like, ah, it's too much. I want to, I'm looking for something cheaper on sale. But I could lose $200,000 in the market in a day and like, all right, well, that's just like a normal day. My stock went down. So traders are weird like that. You know, we, we treat money differently. The money that's in the market, we treat differently with a different mindset than we normally would outside the market. So I think it's important that the cognizant of the fact that it is real money. You know, and it's, could be life-changing. And so to really appreciate that and not take it for granted and be careful, uh, and thoughtful with your trades and with your drawdowns. So, um, again, like having a line in the sand, being aware of when the momentum shifts. And like when I'm trading well and I keep a spreadsheet of all my trades in real time, I, I might have blocks and blocks of, you know, 50, 100 trades almost in a row. They're all winning trades. And then I'll start to get blocks of losing trades. And I'll have, you know, loss, loss, loss, loss. And something is shifting when that happens. Usually that's the beginning of a top in the market, or maybe I'm just completely get out of sync somehow. But almost always my own trading account will tell me when things are, are getting bad and I'm out of sync. And really paying attention to that, being aware of it, and acting on it. Not just saying, okay, so I've had a few losing trades, no big deal. Um, really taking note and realizing, okay, what is shifting and why am I losing money? And then making a decision to, to take some action on that.

Yeah, for sure. Um, and I just want to say, you know, you made, uh, you gave an excellent presentation, which was uploaded to YouTube, "A Trader's Journey," which, which we'll link below as well. Uh, you know, I've watched that more than a few times. I think every trader should watch that, just because, you know, a lot of people can relate to that and find it very helpful. Um, you, you've picked yourself back up and, and kind of refocused and been able to come back so many times during your career, um, which has been fantastic. What, what kind of goes through your mind at those turning points and allows you to, you know, perform again and, uh, you know, and get back to trading it at your best?

Yeah, well, I guess because I've had, my career has been a bit of a roller coaster. And I, I don't know that I put myself in the consistent winners category because my drawdowns are just, they're just too big for that, to be honest with you. So, um, I, I really want to strive to improve on that, just for myself, you know. When I first had, when I had my first blow-up in '98, which I, you know, during that little Long-Term Capital Management bear market, and I lost two-thirds of my money, I thought, well, maybe it's a fluke that I made the money in the first place. Maybe I just got lucky. And, you know, we were in a good market. And I, I didn't really know whether it was me or just the market, or maybe just luck. Um, but now that I've, um, you know, consistently made, done pretty well over a long period of time, and, uh, and have have had some major drawdowns along the way and have been able to recover, I do have a, um, kind of a deep level of confidence that I, I can do it. It's just a matter of trying, you know, hopefully not experiencing those drawdowns again, because no one wants to come back again. Um, so I guess I haven't, I do have like a, kind of an inner belief in myself, simply because I've done it so many times that I, I know I'll do it again. I don't know how long it'll take. But, um, from that, from the drawdown I suffered, that I discussed in that Trader's Journey, I never dreamed that I'd make it back so quickly and, and go much, much further in such a short period of time. So in a way, that was a, in a way, a great message that if you're in the right thing, in the right market, of course, you know, post-COVID, the opportunities were exceptional, right? In Tesla and Zoom and Spotify and, not Spotify, um, Shopify, and all those stocks that, you know, were huge coveted winners. So we weren't a very special environment. But, you know, I, I think having a, not just a belief in yourself, but really realizing that there are always going to be exceptional opportunities in the market, um, in individual stocks, and every cycle has them. The model books have proven that out. And if you're looking for them and you're in the right place at the right time, uh, you can get a hold of them and really make life-changing trades, uh, that will really impact your life. You know, you don't need a lot of them too. You don't need to buy 50 different huge winners. You just need a few big winners and string them together to really make a life-changing amount of money and really put you in a different place. So, um, so I, so, you know, just having done this now for so many years, I know that the opportunities always be there. I know that as bad as these bear markets can be, they're always followed by bull markets and new opportunities. And in a way, like I look at this past year, which again, was a terrible year for me personally, but I go, well, Jesus, it's pretty much the worst market I think I've ever been in. And the growth category has been so decimated, particularly kind of the speculative growth category. Um, I think it's just a huge reset. And the truth is, in my opinion, growth and innovation isn't going out of style. It's gonna actually, I think, come back stronger than ever. I think there's, you know, EVs, AI, biotech, genetics. I mean, there's so much, we're on the cusp of so much innovation and life-changing, um, life-changing innovations that I think they're going to be amazing winners in these categories if we're looking for them. And again, this, this past, uh, year, year and a half has been, I think, a huge reset in these categories. And so I think, I mean, my eyes are wide open and I'm looking for them. And when the environment changes, and me, you know, maybe we're at the beginning of this, you know, I, I don't know whether the market's bottomed or not, but I think that the devastation and the growth categories has been as bad as I've ever seen it, you know, since the dot-com bubble. So, um, so it's been pretty bad. But that this will lead us to new opportunities. And I think if this, be optimistic and have your, your, um, cutting your eyes open, and this is going to be great opportunities going forward in the future. I don't know exactly when they start, but they could be starting now.

Yeah, absolutely. And, you know, going back to those themes that you're kind of looking for, what do you kind of use on the fundamental side of things to judge that potential? If you're looking at an individual stock within those themes, what would kind of spark your interest and make you say, hey, I should really look dive deeper into this company, learn more about the story, uh, and because this could, you know, be an X model book stock, true market leader with some of those big kind of secular categories, or just things based on papers I've read or reading like the, um, the research from the Arc funds? You know, they do a lot of research into these kind of new innovative areas. You know, one of the, um, one of the pieces of research that got me, it really helped me build my conviction in Tesla and in the categories that they're levered to, was based on a Tony Seba presentation that anyone can find on YouTube. Um, he's kind of a, I guess, like a futurist in a way. And he, uh, did a, a talk on the transition to electric vehicles and energy storage and, and clean energy, like solar, sustainable energy, and how they're all kind of coming together at the same time. And I think any, everyone should watch it. I mean, it's so compelling. And it wasn't really until I saw that, and that was actually, um, referred to me or recommended to me by, um, Jim Robile, um, actually at our last Level Four Masters Workshop. We were at dinner and he said, you know, you have to, you have to watch this. And I did. And thank God I did, actually. Um, so, yeah, I mean, I get it. I, so I get my research from different places. But, but, uh, yeah, I mean, I'll, any, I'll, um, anything I can get a hold of, I'll read it. There's a, there's a really, um, great guy on, um, on his YouTube channel name, uh, Dave Lee. It's called Dave Leon Investing. And he does a lot of, he's a big, um, holder of Tesla shares. And he might own some SpaceX too. But he has a lot of guests on his channel who they do deep dives on kind of AI, like innovative technologies, kind of new things that are happening, um, crypto, blockchain technology, all, you know, things that are kind of up and coming that I find really interesting. And you can really get a lot of information from the kind of specialists in these areas. But I try to take really more of a big picture view of it. Like Bill never got typically too much into the weeds, you know, he, Bill was more of kind of like a big thinker, like what's the trend, what's happening? It's usually, it isn't necessary to understand every little detail about what's happening. Is it, we all know that AI is going to change the world, right? I mean, you can look at that new ChatGPT and it's incredible what, what this little platform can put out. So you can just imagine how it's going to change things, uh, in our world in the next decades. So I think, okay, I know AI is going to be huge. And so my first thought is, what companies are levered to that? And what's going to come out of of AI is going to be, you know, it's going to improve our decision making. It's, um, going to lead to, um, you know, having robots, autonomous cars, you know, so I want to think of the companies that are levered to, to, to that, you know, Microsoft is going to be one, Nvidia is going to be one, maybe AMD, Tesla is going to be one. And there's going to be lots of other ones. And there's probably going to be a whole slew of IPOs as well that we have any companies we haven't even heard of. But yeah, that's what I do. You know, all know that biotech and, um, gene sequencing and, and personalized medicine on a genetic level is going to be life-changing. So while companies are levered to that, I mean, these are the companies that are going to probably cure cancer and rare diseases that, that have, um, you know, that that affect people that have never, we've never had a good, um, you know, way to treat. So, you know, there's some incredible things that are coming our way. And I think it's a lot sooner than people think. And so, yeah, I mean, I, I have these kind of big picture ideas of, um, things that are gonna really affect society and our whole world. And just try to focus in on what are some of the companies that are playing in those areas that have a leadership positions and, and can really, uh, lever the opportunities. So that's kind of what I try to do on, like, a bigger picture basis. And I think that that's, in a way, kind of new for me over the past few years, really since I saw that Tony Seba, um, uh, YouTube presentation, because ordinarily I was being more oriented as a swing trader, I'm just looking for stocks that are set up to trade without really, you know, if, if you're going to do short-term trading, you don't need that much conviction because you're not in the stock for too long. I think. But, you know, with this new orientation toward a little bit more of a longer hold and try to build wealth and something that in companies that really are changing the world, um, you know, I've kind of changed my orientation. And if you're going to succeed in that, you better build some conviction and know what you're trading. So, um, so a little bit different than what I've done in the past, but hopefully the results will, will work for me.

Yeah, fantastic. And, um, I wanted to ask this question because I think it's really interesting to hear people's different responses. Um, how do you personally define risk when trading or investing? And what are the steps that you take to manage that risk?

Again, it's probably the one in the weaker areas of my trading. Is I, I'm, uh, s M's take on too much risk, or I'm willing to suffer through too much of a drawdown. But I think the important thing is when you're buying a stock, any stock, you should, you should have an expectation of what should happen. You shouldn't never just buy a stock. Like I would never buy a stock without consulting the chart. Right? And I know, you know, there's a whole slew of, you know, not people that probably follow you and follow IBD and follow Bill, but, you know, I think most investors aren't looking at any charts. They're just buying a stock, you know, without knowing what the chart looks like. And so when, when you're buying off a chart, the whole purpose of the chart is two purposes. One is hopefully, if you're experienced in chart reading, you can pick up clues that can give you an edge. So it, you know, you can maybe pick up clues that the stock is under accumulation, um, that maybe it's, um, that there's been capitulation at a bottom and new money's come into it. And these are like clues you can find in the chart. So hopefully it's a way of putting the odds in your favor. But more importantly, it gives you an expectation of what's normal. So if you know that, you know, if you follow Can Slim and the different chart patterns and you know where there's support levels, you know, if a stock breaks out over that area, then how it should play out because you have a notebook and you have a model book and you know how winners act and behave. So if the stock violates your expectations, right there, that's all you need to know that there's something wrong. You don't need to consult the fundamentals or figure out, well, but I really liked it and I researched it and I think big things are happening. If it's not acting right, then you can reverse your position and just kind of admit defeat. Doesn't mean you can't get back in there. But I think that's an important way to manage risk is really managing your expectations and what is normal for a stock. So always paying attention to the charts. Uh, and then of course, there's always, you know, the important, um, you know, having a line in the sand, like how much is too much? You know, Bill has the seven to eight percent loss. I mean, and a lot of people cut their losses a lot sooner than that. Um, I think you can't get too cute. I think, you know, especially in in an environment that's not forgiving, you'll get chopped up all the time doing that. And if you're taking a little longer term view, I mean, I will, I'll take losses that are bigger than seven or eight percent. And maybe I shouldn't. But, um, usually I think that sometimes it's a little bit too, that's a little too narrow sometimes depending on what you're in and and the environment. But, but yeah, you don't want to lose too much on any one trade, particularly if you're a swing trader or a shorter term trader. And yeah, just basing it on expectations of what's normal and what should happen.

Yeah, that's great. And, uh, you know, you've quoted Livermore a few times during this interview, which I love. So I wanted to hear if you have any kind of favorite trading quotes. They don't have to be from from Livermore or another trader, they could just be other, you know, random quotes that also relate to the market. But, uh, yeah, I'd love to hear a few that you have, uh, off the top of your head.

Well, I think everyone should read Reminisce of a Stock Operator. Um, that's, you know, of course, Bill's book is awesome, but Reminisce was more of a novel. And that, there's so much of wisdom, like kind of psychology wisdom in that book. And tracing out Livermore's life, and he's had a number of quotes that I love in that book, um, that really ring true. I mean, I've highlighted that whole book and I've read it numerous times. Um, one is, "Men that can both sit tight, who can both be right and sit tight, are uncommon. It's a big swing that makes big money for you." So that's kind of, you know, I've been relying on that with my Tesla hold. That, um, you know, I remember Bill wrote in a number of the model books, in like the, he would handwrite like his own notes based on studying the models, just to be patient and to let a stock play out. Um, another Livermore quote would be, "The real money is not in the individual fluctuations, but in the main movements." So I think it's easy to get too cute and overtrade a stock based on little, um, you know, daily fluctuations and kind of take your eye off the point that if you've done your homework and you're in a, in a, in a true uptrend, if you have the right merchandise, you can make a manifold gain in a stock. Even though it's going to be, um, tempting to take, you know, 20 or 30% out of a stock in a short period of time, you know, don't take your eye off on, on, you know, the true, um, uh, you know, support, I'm looking for Richard, the true trend, that the, like the true potential, the true potential that can be reached in a stock, right? Um, so those are a couple of my favorite ones. There's another, it's not, I don't know if it's the quote necessarily, but well, I guess it's a quote. I don't know, I'm gonna misquote it. But Livermore said, um, taking a loss, like I'm never bothered by taking a loss. It's not taking the loss that, um, causes damage to your pocketbook, into your psyche, or to your heart, or something. I was something like that. But it's like holding on to a loser is what kills you. It's taking on. When I take a loss, I literally forget about the trade the next day. Like there's, it's once it's out of there, you've done what you had to do and you can move forward. It's when you know you should take the loss and you just, your ego prevents you from doing so, that really weighs on you because you know you're violating a rule, you know you're, you're not doing what a good trader should do. So in a way, you're almost like feeling bad about yourself to begin with. It's like it really, like adds to like weakness. Whereas, um, you know, as I said, focus on the process and just realize that taking losses is part of the con, this is the cost of doing business as a trader. It's going to happen all the time. 40% of your trades would probably be losers, um, over the long term. Um, that's a lot. 40 is a lot. So you better get used to being wrong and taking the loss and and realizing that taking a small loss is actually a good trade. Yeah, um, as even if you lose money, it's a good trade. And there's many ways to have winning trades that are bad trades by getting lucky or taking a, taking a bad risk. And so being able to differentiate the two is really important. Um, and also read The Dark, read Darvis. If you ever need to pick me up, read How I Made Two Million Dollars in the Stock Market. That's a great book, um, a great story of a guy who, uh, also had many failures off the bat and kind of figured it out. And, um, very optimistic book. And the bottom line is, I think in the right market environment, you can make a fortune if you're ready and positioned and have confidence. So just have to be patient and wait.

Perfect. And outside the ones that you already mentioned, uh, kind of what are your favorite trading books that you feel can really have an impact on a new trader?

You know, I always, I tend to just reread the same books to balance with you. Bill's book, of course, Reminisce, the Darvis book, Trading in the Zone by Mark Douglas, I think is a good one. I, I actually have that one on tape too. Sometimes I'll, when I'm off my game, I'll just listen to it when I'm taking a walk or something. Um, God, I've got a lot of books here. Market Wizards, yeah, right. I mean, I've got all the Market Wizards books. Pitbull, it's a great book. Um, and I've got so many of them. Trading to Win, Way of the Turtle, I thought was pretty good. So yeah, there's a lot of good books. But but I think you just need a few. There's just a few great ones in my opinion. Bill's book, Reminisce, and the Darvis book, I think are my three favorite. I have the Mark Minervini book as well. Um, I think he's very sound. I've never met the guy, but I guess we kind of run in the same circles because he's on IBD Live and I'm on sometimes IBD Live. And I know he's a friend of Dave Ryan. And I always see why he tweets and I think it is always very sound advice. So it's probably a great book. Yep, yep, I'd agree. I read it yet, actually, but but I haven't, I bought it. Yeah.

Great. And, um, I always like to kind of wrap it up with one last question. What kind of general advice do you have for, uh, traders who maybe they're just starting out, or maybe they're more experienced, maybe this was their first major bear market that they've been through? What general advice would you have to kind of inspire them and to push them to, you know, become the best traders that they can be?

I think I'd say that it's the experience with most traders, most people who start trading, experience failure at some point in their journey. Many of the greatest traders have had blow-ups earlier in their careers, and the best ones are able to overcome them and come back and learn from their, learn their lessons, and come back stronger. So it's normal. It's normal to have setbacks. So, um, kind of don't reject them, just learn from them. And realize that again, the market is always going to be there for your next run if you're ready. So, um, I think that should be comforting to know that there's not like you missed your opportunity. There's always going to be a new opportunity. Um, it, very few people have success right off the bat. And if they do have success right off the bat, um, it doesn't mean that they have a mindset that they kind of figured it out. A lot of times you're in the right place at the right time. And it takes time to realize, you know, it takes the bear market to kind of show you your weaknesses. And if you're ready to, to kind of act in the way you have to when conditions are bad, and that means, you know, pulling back, protecting yourself, protecting your account, protecting your psyche, um, and and taking losses, you know, when you have success right off the bat, you're, you're not battle tested. So to realize that, you know, there's going to be setbacks, it's going to be tough markets, you can't always outperform in every market, um, and and wait for your spots, wait for your fat pitches. And if you're patient and ready, you should always kind of keep your eye on the ball, keep keep your eye on the markets, um, and I always have a watch list ready, kind of pay attention. It doesn't mean you have to be invested, but you have to be involved enough to know what's going on. You never want to be caught unprepared. That, you know, anyone can do it. I mean, I don't, you don't have to be a genius to be a great trader. I think you have to have some smarts, but I think more important than that is common sense and discipline and hard work will take you further than raw intelligence. So I think, you know, having it all is great, but honestly, just working hard, sticking to it, and maintaining discipline is, uh, over time will lead you to good results. I really believe that.

Yeah, perfect. Charles, thank you so much for taking the time. And I know a lot of people appreciate your honesty and, and talking through your experiences. Um, thank you so much for, for taking the time to be here. I'm sure everybody watching enjoyed it immensely. Um, where can people reach out to you or find you, uh, if they want to learn more about you or your system? I'll definitely like the Trader's Journey down below because I think that's a valuable resource. But is there any where else where people can connect with you?

I mean, I'm on, I'm on Twitter. I don't, I don't tweet frequently, but I, I'm on there every so often. Um, people can kind of find me there. I've got that Trader's Journey posted on YouTube. Um, and I'm on IBD Live, occasionally. Sometimes I, I do a some podcasts for IBD, but, um, yeah, pretty, pretty much if that's where you can find me, it's on Twitter.

Yeah, perfect. Well, thanks again for your time. Uh, to everybody watching, I hope you guys enjoyed this. If you did, please go ahead and leave a like down below. Subscribe to the channel as well for more great interviews. I like to swim with Charles, uh, and we'll see you guys in future videos. Take care. Thank you.