Trading Psychology: Full Breakdown & Transcript

[00:02] different. I don't want to teach a strategy. I don't want to teach options. I don't want to teach adjustments. I want to tell you a story because this lesson probably had a bigger impact on my trading career than any strategy I'd

[00:14] ever learned. And it came from one of the worst periods of trading I've ever One of the biggest advantages I have is that I trade at SMB Capital. When things are going well, that's great. But when things are not going well, I have access

[00:29] to some incredible people. Mike, Steve, Seth, Jeff, Carlton, Dr. Steenbarger, What I'm about to share with you is something that these people helped me And looking back at it, it completely changed how I think about trading.

[00:45] Because the problem wasn't my strategy. The problem wasn't the market. The problem was me. Now, before I get into what happened, I want to give you some background. I've always been somebody who likes data.

[00:59] I spent a tremendous amount of time back testing, building dashboards, analyzing trades, reviewing statistics, looking at win rates, looking at drawdowns, looking at risk metrics, trying to understand what actually creates an edge. And if

[01:14] you'd follow me for any amount of time, you know I am consistently looking at analytics. I want proof. I want evidence. I want to know what works and what doesn't. So, when I build my trading plans, they

[01:28] weren't random. They were tested. They were researched. They had data behind them. But something started happening. I would take a trade, the trade would lose. And instead of saying, "Good job, you followed your plan."

[01:42] I would start asking myself, "Maybe there's something wrong with the plan." Now, at first, that sounds reasonable. You should always be evaluating your You should always be looking for ways to improve. But there's a huge difference

[01:56] between evaluating your plan after the market closes and questioning your plan And that's where I got myself into trouble. What started happening was this. I would have a trade, it would hit my stop.

[02:10] how it was designed. Exactly how I tested it. And then instead of accepting that loss, I would start trying to solve a problem I would think

[02:24] Maybe I should give it more room. Maybe I should size differently. longer. Maybe this trade is different. And every once in a while, I would do something that was completely outside of my tested

[02:39] And it would work. That was the problem. That was actually the beginning of the drawdown. Not the losses, not the wins, because when you lose while you're following your plan, that's normal.

[02:55] But when you win while breaking your plan, that is dangerous. Because now your brain starts telling a story. It starts saying, "See, the plan was wrong. You found something better. You figured it out. You outsmarted the

[03:10] system." And before you know it, you're no longer trading your proven process. You're trading ideas. You're trading opinions. You're trading emotions. You're trading things that have never been tested. And that is exactly what

[03:24] happened to me. I slowly started moving away from the successful. Not all at once. Just little pieces. A little adjustment here. A little exception here.

[03:37] A little creativity in the middle of a trade. And eventually, I wasn't really trading my plan anymore. I was trading something I was making up in real time. And I can tell you from experience, making up trades is one of the most

[03:52] making up trades is one of the most expensive things a trader can do. time to understand. The drawdown wasn't caused by my The strategy was doing exactly what it was supposed to do.

[04:06] The drawdown got larger because I stopped following the strategy. I turned a normal drawdown into a large drawdown. drawdown. And those are two very different things.

[04:18] Every strategy loses. Every strategy has drawdowns. Every strategy has periods where things don't work. That's part of trading. If your strategy never lost, nobody would take the other side of your trade.

[04:32] Losses are part of the business. The problem wasn't losing. The problem was what I did after I lost. And fortunately, somebody noticed. Seth pulled me aside. We had a conversation about what was really going

[04:46] Not what I was trading. Not what strategy I was using. What was going on in my head. That conversation led me to spend time with Dr. Steenbarger. We started talking about the psychology

[05:00] behind my decision-making. Why I felt I needed to change things. Why I struggled to trust the process during difficult periods. Why I was trying to solve problems while I was in the middle of trading.

[05:13] Then I had conversations with Jeff and Carlton. We talked about accountability, process, consistency, systems, how to build an environment where I could actually execute. And honestly, those conversations changed everything.

[05:28] something. Creativity belongs in planning. Discipline belongs in execution. I want to say that again. Creativity belongs in planning. Discipline belongs in execution.

[05:42] When you're back testing, be creative. When you're researching, be creative. don't curve fit. When you're building a strategy, be When you're building a strategy, be creative. But, the trade is on,

[05:56] your job changes. Your job no longer is to be creative. Your job is to execute. Follow the plan, manage risk, accept the outcome, and move on. That lesson alone

[06:08] Now, one of the biggest changes I made was in my journaling process. And this might sound simple, but it completely changed how I evaluate myself. At the end of every day, for every trade plan I run, I ask one

[06:23] question. Did I follow my plan? Yes or no, that's it. Not did I make money, not did I have a green day, not did I beat the market, did I follow my plan, yes or no.

[06:39] And what's interesting is today, I'm actually more afraid of writing a no than taking a loss. Because a loss doesn't necessarily mean I did anything wrong. A process violation does. A loss can be a

[06:52] perfectly executed trade. A process violation is something I chose to do. And that's a huge difference. Today, I understand that process is what creates consistency, not outcomes. Outcomes are random in the short term.

[07:07] Process is what matters. And that's what I focus on. Now, another thing that changed for me was during my weekly review process. journaling. [snorts] I know a lot of traders hate reviewing

[07:20] trades. I know a lot of traders think that's boring. I used to feel that way, But today, I look forward to it because that's where the improvement happens. The market is going to give you feedback every day. Your journal helps you

[07:35] understand that feedback. Your weekly review helps you identify patterns. Your data helps you identify weakness. Your process helps you fix them. And over time, that's how you get better.

[07:49] Not through some magical indicator, not through some magical strategy, through consistent improvement. Now, if you're watching this and you're currently in a drawdown, I want you to ask yourself a question.

[08:02] Is the drawdown coming from my strategy or is the drawdown coming from me? different problems. One requires strategy work. The other requires personal work. And for me, the biggest breakthroughs in my career

[08:18] didn't come from finding a new strategy. They came from becoming a better executor, a better risk manager, a better decision maker, a more disciplined trader.

[08:31] you. The market is always going to test your confidence. The market is always going to make you question your process. The question is whether you trust your work when that happens. Because that's

[08:44] what I learned during that drawdown. The traders who survive are not the traders who never lose. They are the traders who can lose, stay disciplined, and continue executing. They are the traders who can trust their research.

[08:57] They are the traders who can trust their process. They are the traders who understand that consistency beats creativity once the trade is on. And that ultimately is what helped me get out of that drawdown.

[09:10] Not a new strategy, not a new indicator, not a new setup, a better process, a better mindset, and a commitment to doing things I already knew I needed to That's one of the biggest lessons I learned in my trading career, and

[09:25] hopefully it helps you avoid making the same in yours. Now, if you'd like to learn three more options strategies that our pro traders use, including [snorts] the unique options trick that allows you to make money while you wait to buy

[09:38] to make money while you wait to buy stocks or ETFs at the price you want and the options income strategy that allows you to make consistent money whether the you to make consistent money whether the market goes up or down or sideways and

[09:50] how to make money on a stock or index trade even if you're wrong on the direction then click the link that's appearing right now at the top right-hand corner of your screen. That will open up the free workshop

[10:03] registration page in a new window so don't worry you won't lose this video or you can register directly for free at optionsclass.com.