Transcription
Imagine this. You just closed a trade and it worked. That's great. You made money and you feel good about it. Job well done in the green.
But what if I told you that trade, that trade was trash? It was terrible. And yet that big loss that you took yesterday, remember the one that was just making you feel awful about yourself for the rest of the session that actually bled into today's? That I might say was actually one of the best trades that you have made in the entire month.
See, the problem is most of you are trading or judging your trades by one thing and one thing only: the results. Green good and red bad. But hey, that is not how the best traders evaluate how they're doing. It's not even close.
By the end of this video, I'm going to give you a framework for breaking down every single trade that you take at a level that most people cannot even comprehend. So that, that way, regardless of your P&L, you can be honest and tell yourself and know whether or not you're actually trading well or trading like a piece of crap.
And by the way, I'm James. I've been trading for over 13 years. My whole goal with this channel is to get newer to intermediate traders profitable faster through unique mindset and psychology stuff that you probably haven't heard elsewhere. And if you hang around to the end of this video, I will include a, uh, pretty wild trading story from my old days that really helps hammer home the point of this whole concept.
So, let me dial this in for you. Right, you take a trade, it wins. Oh, sweet, sweet validation. And then you move right on. And then you take another trade. It was a loss and there it comes. There comes that familiar frustration. Maybe you journal it, maybe you don't. Whatever. You just move on.
Weeks and months pass. And your entire assessment as a trader is built on this cycle of win equals good, loss equals bad, over and over. But look, like here's the problem with that. A winning trade can absolutely be riddled with mistakes. Maybe you entered the position late and you chased the move, or you got emotional and sized up more than usual. Maybe you held past that take profit target because you just feel like this trade has more to give me and it, it worked out anyway. That is not a good trade. That is luck in this game that involves a little hint of randomness. But guess what? Luck does not compound on itself over time. It does not have a dependable factor.
On the other hand, you could have a super buttoned-up thesis, clean entry right where you planned, using the exact size that you wanted to allocate to this trade. And your stop loss, it never moved and it was put exactly where you thought invalidation would occur. And right before that trade actually went so far in your favor, it was a random wick down by some entity selling. And you lost money. But that was not a bad trade. In fact, that was a great trade that just happened to not work out.
Can you spot the massive difference in those two scenarios? If you cannot see the difference between those two opportunities, you are constructing an entire trading identity around the wrong information.
And by the way, let me tell you a little story about how this idea kind of sat with me in the first place. A buddy of mine was telling me about a college wrestling coach named Cal Sanderson who coaches Penn State University. And first of all, this dude was a savage. When he wrestled in college at Iowa State, he went, now hear me out, 159 and 0 with four national championships. That's 159 and 0 with four national championships. Oh, and by the way, he then went on to win a gold medal at Athens in the Olympics. And then he moved on after that to become a collegiate coach. And when he eventually joined Penn State in 2009 until he's still there now, he has won 13 out of 16 national championships as a coach. This dude just straight wins an insane level of domination, probably of any sport, of any individual.
So, I, I thought, this guy's won so much. How does he help his college wrestlers deal with losing? And the answer actually got me thinking about this whole video. He told me Sanderson would take a wrestler that was fresh off a loss and take them individually and go watch the entire match over in the film room. And they would go down, break it down to a very granular level of detail. And then they would split things into two different buckets. You would have micro wins and micro losses.
The micro wins in the match were all the things that the wrestler was doing well. It's all those small things that he was doing right, even during a losing match. The little things that he was executing well that would help reinforce and cultivate that self-belief, that confidence, and to be able to restore that idea that, hey, I really do have an edge in what I'm doing here. The micro losses are where there was a small leak, a small blunder, if you will. Maybe a position was slightly off and they lost their balance. Maybe it was a late reaction to some sort of counterattack and that decision cost them points that they couldn't recover from. Those micro losses became exact targets for them to work on and to prepare for the next match with.
So, if you notice, it didn't leave the wrestler with some vague feeling of like, oh, I suck or I just lost. I'm going to chalk it up. No, it's specifics. It's details. Actionable things. So, I just kind of put two and two together that that's exactly what we should be doing with all of our trades.
So, let's talk about how we could do that right now. So, after a trade or after a session, instead of just checking out and logging off, let's go ahead and think back through some of these things. And let's start with a setup. Like, what was your mindset and approach going into the trade you took? Was your thesis built from a clear-minded, compartmentalized place? Or were you just being influenced by the results that you've had that day, the previous day, or the week? Were you trading this idea on your own merit, or were you compensating for something?
Now, let's move on to the entry. Was it where you wanted it to be? Did you rush it? Did you chase a move? Or did you hesitate and not pull the trigger? Why? If you can admit that your entry somehow did not go according to plan, what changed and why do you think that happened? Remember, all of these seemingly inconsequential things? Those are the true things that compound over time.
Now look at the middle of the trade while you were in it. You know, was your mind clear as the trade was playing out? Was the price movement starting to affect your thinking? Was it starting to shapeshift your story? Did you start adjusting that plan at all? Did you move your stops? Did you change it to break even? Did you move it above? Did you move it down? Did you shift your price target up, down, leave it the same? Did you add or take away from your position? Were you worried? Were you overconfident? Were you zoned in the entire time or distracted by other things? If you did manage to stick to your plan the entire way, what do you think actually held you there? Got it? Okay.
Now, let's move to the exit. When you actually got out of the trade, was it what you aimed for? Or maybe you exited the trade early just to help deal with some of the nerves you had? Maybe you got greedy and overstayed your welcome. Or maybe you gave back a chunk of that profit you had before actually being feeling like you were forced to close it ultimately. Did the exit come from your process or was it just from a reactive emotional side? And honestly, guys, sometimes it's funny that you'll end up winning on this side of things. You'll end up winning more than expected and completely do it on accident. But that's worth examining too, because ultimately, if you don't know why you won something, that is going to be hard to replicate over time.
I'm going to take a quick moment to explain to you a funny trade I had back during the COVID era in the Italian bond market. So I was trading futures again. It was during the heat of COVID and everything was crazy. I was extremely tired. I was full of adrenaline pretty much every session. And I noticed something out of the corner of my eye in the FBTP futures. And mind you, I had not touched this market in weeks, but I had every single market up. I was watching as much as I possibly could. I looked, I saw something and I shorted. The problem is I had not even taken a breath and I had not thought to check the settings of that particular asset class. And if you're not aware of that, just clicking in at market in a highly volatile, highly illiquid product can cause some issues, even if it is instinctual. And before you know it, I was short much more than I expected. I was overexposed and my entry was just so sloppy and fast that it took me a while to kind of realize what was happening in the moment. And once I did realize that, right before I could adjust my size to a more normal, comfortable position for me, the market got swept, like I mean crazy gap swept lower in my favor by some random, random entity. I was thrown on sides in my trade like hundreds of ticks for the full position that I never ever would have had in that case normally. And once I kind of came to realize what had just happened and the dust kind of settled, I clicked out of that entire position as quickly as possible. And it resulted in a massive win.
But as I look back and think about it, everything about that trade was just kind of gross. I mean, and it even came down to like the settings of the software I was using. My mind during that trade was completely oblivious. I hadn't really been in tune with that market in the first place. And even my exit was scared and and rushed. I didn't take a moment to think. And finding like a micro win in here. There was a positive thing and that was that I did see something. Something felt like a short in this moment was the right thing to do. I likely did feel something in there. Some sort of weakness or level of support breaking or whatever it may have been. But if we're being honest, just as easily could somebody have come in there and swept the book completely the other way, resulting in me having way too much size on in an illiquid book that got put against me, and I would have taken a huge loss that probably would have taken me out for the day. So yeah, like when I think about that trade, there were tons of micro losses that I can pull out and figure out how to use in the future. But if somebody had just watched that trade with no context at all, uh, to the naked eye would have looked like one of the more epic trades that I've ever taken.
So anyways, that's just a fun anecdote, but you know, once you've worked all the way through this stuff, you'll start to understand the micro wins and the micro losses in every single trade that you're taking. Maybe you lost money, but that entry you had, oh, that is exactly how you like entering a trade. And maybe your sizing was perfect and it made you have a clear head, but your stop got triggered and it was invalidated. That's three micro wins in a winning trade. That's a trade that you should feel great about. That's process that's repeatable and trustworthy.
Contrast that by winning but entering a position late, doubling the size that you're in it because you felt behind and holding past your profit target only to get bailed out by some green candle that fills you. That's three micro losses bucketed inside of a winning trade. Keep doing that, keep noticing, and it will all catch up to you.
This is how you stop letting P&L reign supreme over you. And over time, this will change everything. You are now not going to let it all just come down to wins and losses. It's all now about quality. You are building real self-awareness. And you'll start to see those patterns where you're consistently leaking edge in most of the trades that you're taking and where you're consistently executing things well. That information will actually make you a better trader.
So, stop judging them by individual results. Start breaking down trades layer by layer. Setup, entry, middle, exit. Look for the micro wins and losses hidden within. If you commit to this for at least a while, or maybe forever, you'll have a better answer to the question, am I a good trader? Am I consistently winning? Am I profitable?
Okay, so that's food for thought. Thank you for watching. Please like and subscribe if you want. Uh, my Discord has been growing. You should join it. There is a paid smaller group where we talk a little bit more intimately and do private calls and I do some market overviews. Or there's a very large free community where you can come and chat about all of this stuff all day for whatever you are interested in. Remember, this is not financial advice, just educational purposes only. I'll catch you guys in the next video. See you later.