Jul 22, 2020
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Ho, ho, ho, passive traders. It's Christmas in July, or whenever you are listening to this. Why? Because I have a gift for you. After over two years ... Two and a half, three years? I don't know how long it took, but it took a long time, well over two years. I finished my Passive Trading book. It has been published. It has been printed. It's on sale at Amazon. You can go pick it up right now for $20. Or I do have some copies that I want you to have for free. I want to give them to you. I want everybody to have this book.
I'm doing my part by giving them away, a limited number that I have that we got as part of the first run. All you have to do is go to passivetrading.com/freebook and you have all the details there. It is a printed book. We do have to ship it to you, so it will take a couple of days to get to you. It is passivetrading.com\freebook.
Now, the book is free. I will need you to cover the shipping and handling costs, if you don't mind that. And you'll get the free book in your mail very soon. People have been asking about the audio book or the ebook version. Those are also available there for a little bit extra. But if you get the free book, you can get those as well.
If you're ready to get started trading options, or investing the
right way, or making some extra money on the side, you got to get
this book. I mean, I call it Passive Trading: How to Make
Consistent Money From the Stock Market in Just a Few Hours a Day
for a reason, because that's what it is. And it delivers.
It's been on Amazon for a couple weeks now. We already have well over a dozen positive five star reviews. Everybody else that's read it has loved it. We're getting some video testimonials in that we're adding to the website, too. So, I just can't wait. I'm really excited. I think this is going to really make a big deal. So again, passivetrading.com/freebook. I don't know how long the books are going to last. And if you want one, please go get one. Pick it up right now. Just pay for shipping. We'll send it out to you.
Another announcement is that this show has been rated as one of the top trading podcasts! So we are super excited at that as well.
Trading scars. That's the type of this episode. What do you mean, Alan, by trading scars? What is a trading scar? Ooh, sounds dangerous. Well, when it comes to trading, we all lose money. There's nothing we can do about that. It happens on a regular basis, right? It's one of the things that happens. Like when you're playing football, you're going to get hurt. When you're trading, you're going to lose money. You're going to have a losing trade. Okay. Got it. Check.
But then, when it happens a lot, or when it happens unexpectedly, or when the loss is especially large, it can leave a scar. It can hurt. It can go deep. That cut can go very deep, and it's really hard to get rid of. It's hard to get over. I mean, it's not a physical scar, right? It's a mental scar. It's something that affects our psyche. And for some people, that affects them all the way down to their core. That's a scar, though, that nobody else can see. You're walking down the street, nobody knows you've lost money in the stock market. You could see it and you can feel it, but nobody else can.
And sure, there will be some people around you when you get your scar that will know that you got your scar, your family, your spouse, your kids, whatever, your friends if you tell them. They're going to see it. They're going to know you got it. But then, they're going to move on. You are going to carry that scar for a long time, and hopefully the scar will fade away. For some people, it doesn't.
Losing a lot of money can be very painful. And that's what
causes the scar, because we put a really, really big attachment to
money. And we put a really, really big attachment to winning, and
to being successful, and not failing. But normally, failing at
something is a good thing. It's great sometimes. It might not feel
like it at the time when you fail, but that is how we learn.
When I'm teaching my kids, my eight-year-old, he gets really mad every time he gets something wrong. He just like, "I can't do it, Daddy. I can't do it." It's like, "Yes, you can. You got the answer wrong. It's okay. That's why we're learning. We're learning that what we did didn't work, so now we have to try a different way. We can't just give up. We've got to keep going. We got to move forward."
So as you progress on your trading journey, you're going to build up these scars. Doesn't mean it's not going to hurt, but it's part of the game. You play the game, you're going to get hurt, and they're going to be scars as a history, as a memory, as a feeling that, hey, this happened. Don't forget.
Now, the saddest thing is when a scar impacts a trader so deeply that they give up. Or even worse, they lose confidence in themselves. They change. Their personality changes. The way they feel about themselves, the way they think about themselves, the way they see themselves changes.
And when I was learning how to trade, I met a fellow, a fellow trader, who was light years ahead of me. I mean, this guy was awesome. He was brilliant. I mean, he knew everything. He knew all the jargon. He knew all the trades. He was doing all these exotic strategies, and I couldn't even figure them out what he was doing. I had no clue what he was doing. He would explain stuff, and I'd be like, What?" It was like a two-year-old talking to a college student. That's what I was. Some of the things that he taught me I still don't understand. He was that brilliant.
But, then he got cocky. He got arrogant. He didn't take precautions, and he screwed up. And It wasn't just a little, tiny screw up. It wasn't like, "Oh, yeah, he had a bad losing year. He lost when he should've won." No. He blew up big time, and he lost it all. Total account blow out. Zero. Gone. Lost all of his money.
But then, more importantly than that, he lost his confidence. And because of that, every attempt that he made to build his account back up failed. He just couldn't get that winning touch again. Didn't matter what he knew, didn't matter how much experience he had, he couldn't get the winning touch back. He couldn't get back on his feet. That caused him to be depressed.
He looked at himself as a trader. That was his identity. But, he was no longer a successful trader. Now he was just an average, or below average, or loser trader because he wasn't making any money. So, he went into a cycle of self-destruction. He started doing crazy things. He started using and abusing. Eventually, he ended up in rehab. Thankfully, he got out, and he's better now. But, that scar hurt deep.
Recently, he reached out to me, and we got to talk. He's a great guy. He's trying to get back into trading now, and he is looking for somebody to stake him. Basically, what that means is he's looking for someone to give him the money to trade so that he can split the profits with them. It's kind of like a hedge fund, but the person who puts up the money gets more of the profits.
Now, as a rule, I don't do that. But when I was talking to him, I realized that I was talking to somebody different than who I knew before. He wasn't the same person. He used to be full of energy, and charisma, and super charming. Now he's just boring, blah, no energy, no confidence. If he was the same as before, most likely he probably would have talked me into giving him some money. That's how powerful he was before. Even if I didn't want to, he'd probably talk me into it.
But, his scars were still there, and they were limiting his confidence. They were limiting what he was asking for. He never even asked me. That's how scared he was. Before, he had no problems being brash and cocky. But now, he was bringing up ... He's like, "Oh, hey, I'm looking for somebody that can stake me. Do you know anybody? I'm doing really well? I got some records and dah, dah, dah. I got this new strategy I've come up with that's working really well. Blah, blah, blah." And I'm like, "Oh, good luck to you." He never even asked me to stake him once, even though I knew that is exactly why he called me. But, he didn't have the confidence to ask for the sale to go for it.
But, that's my point. He was never able to overcome the scar. The thing is that only he could see it. I had forgotten about it. I had forgotten that he blew up. I remember that he was in rehab. That's the thing I remembered. But because the scar was there, and he knew about it, and he thought it was there, he acted differently. Maybe he thought that I still remembered what happened or maybe he thought that I cared. To be honest, what bothered me more was that he spiraled out of control. That was the concern to me when I was thinking about, "Hey, should I stake this guy or not?" Even though he hasn't asked me, I was thinking about it because I knew how good he was in the past.
But, my concern was not that he blew up. I didn't even remember that. My concern was that I remember that he spiraled out of control. And to me, that was a bigger issue of not giving him money.
I felt bad about it, that he's spiraled out of control, but not
that he lost money. Because hey, everybody screws up. Everybody
loses money, Some people more than others, some people bigger than
others, right? Go big or go home. He went big, and he had to go
home. So, I guess he did pay. He did both.
But, we all get the chance to get back in.
And that's what I love about trading. You always have the chance
to get back in. You lose a bunch of money, you learn from it. See
what you did wrong. Save up more money. Get back in the ring. It's
not rocket science. You can figure it out. Just got to get back in
the ring. That's the wonderful thing about trading.
The only limitations are the ones that we set for ourselves. The only thing holding us back is ourselves and in our brain. Physically, it doesn't matter. There's nothing physically stopping you from trading. There is no discrimination in trading. There are no limitations. Doesn't matter who you are, what race, what nationality, what gender, what political party, where you live. None of that matters, how much you make, where you went to school, or even if you went to school. Nobody cares. If you have any learning disabilities or handicaps, no. You can still do this.
Trading is just trading. It's open to everybody. And you can screw up as much as you want, too. You can blow up your account a hundred times, and you can still get back in the ring.
They're not going to stop you. In fact, they're going to encourage you because they want to take your money.
I was thinking about this episode. I realized that I have scars that I have not overcome either. It's not easy. Now, personally, I refuse to trade for anybody else. I don't want the headache, at least that's what I tell myself. People in the past, friend ...
Just recently, somebody came up to me, a partner in another business. He goes, "Hey, why don't we just take the income out of this business? We got some money sitting in that business." He said, "Why don't we just take it out, give it to you, and you trade it?" And I said, "No, I don't trade for other people. Sorry. I don't want the headache."
Is it really about the headache? I mean, it's just one more account. I have plenty accounts. We can even probably have it mirror one of my other accounts. So whatever I do in one account automatically happens in the other one. I wouldn't have to do anything. It wouldn't be a headache at all.
I think the real reason I say no is that scar. I can lose money for myself. If I lose money, I'm going to be okay. I can sleep. I can deal with it. But if I lose money for somebody else, if I lose somebody else's money, I won't be able to sleep at night. That's the wrong way to think about it. If I think like that, then for sure I'm going to lose their money. If I go in in advance thinking, "Oh my God, I'm going to lose him money.
How am I going to lose? What am I going to do? Oh, no. I'm going to lose." I'm going to go in thinking about the worst outcome. That's what's going to happen.
If I did not have a scar, I probably would be a lot more boastful telling everybody that I could trade for them. And who knows, I would probably have my own fund making a lot more money than I am now by trading for other people. So if that's the route I wanted to take, I could have. But right now, that route is not open for me because mentally I am not able to do that, and I think it's because of my scar. It's because of when I lost money when I was starting out.
I had a big, big letdown when I first started. Now, I've never traded money for anybody else, so I don't have that particular scar. But when I was trading for myself, I lost a big amount, and I knew exactly how it felt. I don't think I've ever recovered from that particular scar.
So although at this day in my life, at this stage, I don't want to trade for other people. I don't need to. I don't need the extra return, the cash. I still need to work on dealing with the scar, though. That's besides the point. Even though the thing is there, the ability I can trade for other people, but I don't want to. I don't need to anymore. Earlier, a few years ago, yeah, the money would have been really nice.
Doing the same trades I'm already doing for myself, doing it for other people, the income from that, the percentage of the profits from that would have been really nice because you can ... If you have a $50,000 account, you can only make so much money. Even if you double it, you're only making 50,000. But if you've got somebody with a million dollar account that you're trading, and you double that million dollars to 2 million, and you get 20% of that, that's 200,000 compared to the 50 that I made for myself. And I could do both at the same time. So yeah, if you're trading for other people, you can make a lot more money a lot faster. But, I couldn't. I never got my mind around it. Does that make sense? Because of the scar.
And it's funny. Because lately, I have been seeing people post on Facebook about how they have trades that have made 100, 200, 5% gains. That's great for them. 500%, that's amazing. I'm happy for them. But, then they start giving advice, and they start posting about how wonderful they are. The thing is, those people, they don't have any scars yet, but they're coming. Believe me, the scars are coming. So if you're sitting there and this is your first crack at trading and you're making a 100, 200% on the trade, hey, wonderful for you, but be careful you don't give it back, because you're going to give it back. And the scar, you're going to get your scar. It's like a badge of honor. How many scars do you have?
Every time we have a huge run up in the markets, we always have these types of fools. I say fool in a endearing way. I'm not trying to put you down if this is happening to you. I'm just telling you, you don't know what you don't know. But, that's what they are. They're still fools, and they're going to get schooled by the markets.
Now in 1999, before the .com crash, 1999, everything, all the
stalks were running away. Tech, Nasdaq, QQQ, every day, 10, 15, 20%
higher. There were a lot of fools because everybody was making
money in tech stocks. Everybody was making money in tech stocks.
Doesn't matter what you know, what you don't know. You can make
money. Just buy it. It going to go up.
There was a guy I remember. We used to see him a lot. He was my father's friend. He kept telling my dad, every time he would see him, tell, "Hey, man, you're not invested yet? Man, you got to buy these stalks, man. I just bought AOL." That was his favorite one, AOL. "Oh, man, I just made this much money on AOL. Oh, I just made this much money." Every time we would see him, "Man, why haven't you bought yet? Why haven't you bought yet?" It was great to see him so excited, and happy, and making money. And at that time, we didn't have two nickels to rub together, so it's not like we were going to be investing. But, it sure felt like, man, if we could even borrow the money and put some money into these stocks, man, we could make a lot of money just like this guy.
Then, there was the crash. Then, I have never heard that man
speak of stocks ever again. I see him. At that time, we used to
live in Miami. Now we live in Houston. His family have moved to
Houston as well, and we see him from time to time. Never mentioned
stocks ever, ever again. His scar's just too deep.
In 2017, when Bitcoin got to $20,000 each, there were fools tripping all over themselves trying to prove which one of them was the bigger fool. You probably remember this. Every party you would go to, whether it was a wedding, a birthday party, a get-together, a picnic, whatever, a barbecue, whatever it was, all the guys were standing by themselves talking about Bitcoin and the women are on the other side talking about something else. It was crazy.
There was one night, one day, we went from a kid's birthday party to a picnic thing to a dinner at night. And at all three parties, the only thing all the guys were talking about was a Bitcoin. That's it? Bitcoin. Bitcoin. Bitcoin. Bitcoin. How many do you own? How many do you own? What'd you do? Oh, I got this coin. Oh, I bought this coin. That's all it was. Greater fools.
There was a fellow who they did a news report on. He had a wife with three kids, three young children all under the age of 10. These guys were so fooled up into Bitcoin they sold everything they owned. They sold their house. They sold their cars. They sold all their possessions.
They took all of their savings, everything they owned. They bought Bitcoin, and they were living in a tent. Literally. They had a laptop, and they were doing an interview on TV from the laptop, and they were being interviewed on the laptop. They lived in a tent on a beach somewhere. I don't know. It was a national park or I don't know where they were. But, they literally lived in the tent. They sold everything to buy Bitcoin.
Now, Bitcoin, who knows what's going to happen with it. But I
would say, yes, that fellow was a fool and his wife was a fool. And
because of them, the kids are suffering. I don't know whatever
happened to them, but I can bet you that that guy has a scar bigger
than his body. I hope not. I hope he realized his error, got over
it, and got back to work and became normal, and realized that, hey,
I still need to keep working. I need to have a roof over my head
and food for my kids to eat. I can't just put everything I have in
Bitcoin. Hopefully he won't make that mistake again.
But, what these fools, not only him but all the other fools, what they don't understand is that everything runs in cycles. Good times, they're here for a while. Then, bad times come, and they're here for a while. Then, good times come back. You just have to know that the cycle will change. And it's like that in everything. I've talked about it earlier another podcast where I like to call it waves. The waves, you get a high. You get a low tide. Then, you get a high tide, and you get a low tide. It's just waves. The waves keep coming. This too shall pass. If you're dealing with something bad right now in your life, this too will pass. If you're dealing with ... If you're on top of the world right now, well, be careful because bad times are coming.
My wife, uncle. She's got an uncle. A couple of years ago, he got into trading. He didn't want to tell me about it for some reason. Okay. No worries. He would talk to my wife, though. They chatted on the phone every day. He would be calling her. He'd be telling her what he was doing, the trades he made, how much money he made, all that stuff because she was interested. I mean, he's her favorite uncle, and she loved to talk about it. I had taught her enough about trading so she understood. He didn't have anybody else to talk trading with, so he would call her up.
One day, the calls just stopped. No reason. No rhyme. None. Just call just stopped, and she didn't even notice. Much later, we found out that he lost the entire amount. He blew up. Big fights in the family, husband and wife, killing each other, screaming each other. I mean, when you lose money, it's not just your money. It's also the family money. And if you have a spouse and there's a fight, that could be a big scar right there. The more emotion you put on something, the deeper the scar. So, losing money is one thing. How you feel about it, how other people make you feel about it, how you make other people feel about it, that increases the intensity of the scar.
But just last month, when we got together with this uncle again, he mentioned he's back trading. He's up $40,000 so far in 2020. So in the first half of the year, he's already up $40,000. Now, he doesn't have a lot of money to play with, so I'm assuming he's up at least 100% or more. And now his son who's just out of college, he's trading, too. He told me he's bought a lot of airlines, and cruise stocks, and all of these go-go bet names, gambler, speculator names. And I think I've seen this movie before. Hopefully uncle learned his lesson last time and he doesn't make the same mistakes, but I have a feeling that history's going to repeat itself.
So if you have a losing trade, good. Get used to it. More are coming. Learn from them. Learn how to deal with the scars so they don't faze you. And as the kid say, scars are sexy. Chicks dig scars, dude. It means you do stuff. It means you take chances, that you live. You're alive.
So, don't let the scar ruin things for you. Realize that you have the scar. Find out what you did wrong, focus on what you did right while avoiding your mistakes. Eventually, the scars will become a memory and fade away, at least that's what I hope for you. Trade with the odds in my favor, folks. Take care.
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