Podcast – Episode 141 – How to Score a Knock Out (KO) In Your Trading
Picture this, you’re a prizefighter. A boxer. And your opponent is the reigning champion, large, strong, fast and deadly. If you win your payday could be huge. But if you lose, you might lose it all. Do you get in the ring? Well, if you’re a trader, you get in the ring every single day. So let’s talk about how not to get knocked out.
Hey there passive trader, how do you think about your trades, and your trading can make a huge difference if you’re going to be profitable or not. And I want to share about how I think about my trades. And I think that it’s going to help you as well, because I’ve shared this with my students. And they it was really, you know, a different paradigm shift for them. So I want to say, Okay, well, you know, people don’t don’t see it this way. So I want to I want to talk about this. All right. Now, trading is more of a mental game than anything else, of course, you got to know what you’re doing. But the mental aspect is what really separates new traders from professionals.
And I’ve always said that trading is about 90%, mental, and 10% skills so if you have not become consistently profitable yet, it might be that there are some skills that you’re missing. But there’s a really good chance that there’s the mental aspect is also holding you back. And it’s actually something we spend a lot of time on, on our coaching calls with our programs with our students. And it’s one of the reasons that we see people come into our programs that have been trading for a while, but they haven’t received or achieved the level of success that they desire, until they start working with us.
Because then you have a coach and the coach can look at what you’re doing and how you’re thinking and pointed out and be like, you know what, maybe if you change this, or you look at it a different way that he can make all the difference, right? It might be just that one thing that they’re probably doing that the coach understands this is what’s the problem. And once you fix that thing, boom, it automatically flips a switch, and then they become profitable really quickly. So that’s why in this episode, I want to talk about the mental game, and really how we think about our trading as a whole.
Because what I’ve seen is a lot of traders, they get bogged down in the minutia, they don’t really look at their trading as the big picture. Right, they don’t look at it from 10,000 feet above, and they’re there in the forest, you know, they’re looking at all the trees, and they can’t see the clearing, they can’t see the pasture, they can’t see the big picture.
And every single tree is a trade and all the trees and all the trades to them look the same. And they treat all the trades the same. So I want to talk a little bit about how I look at and think about my trading. Now to do so, we got to go back in time back to the future. No, back back to the past. Back to my youth when I was a little kid and I used to play this game called Mike Tyson’s Punch Out. Right, it’s on the Nintendo Entertainment System, which I think they make new ones now they don’t make the old ones anymore, but they make the little mini versions travel versions. So this game is still around people still play it. Now I spent hours days probably the hundreds of hours if I’m truthful on that game. And if you don’t know it’s a boxing game, you know, like the fighting. Boxing, you know, the one guy fighting another guy. And if you remember, Mike Tyson was the heavyweight champion of the world and nobody could really touch this guy. I mean, the guy was was a monster monster like crazy crazy guy, right? So it is really a great metaphor because Mike Tyson is the market.
Okay, truth of the matter is you cannot knock out Mike Tyson and you cannot knock out the market right? The market is just too big. So the market is Mike Tyson cannot come out and you’re just this little itty bitty guy right we’re just we’re just at home traders right? We’re just a little people. We’re not even like big prize provisional trade Wall Street guys that have billions of dollars like those guys, they go against the market they might win we’re just we’re just little guy right? Even in the game your name was Little Mac and if you look at the game you were like about this big when Mike Tyson was like about this big so he was like 10 times bigger than you the gay and your day was even Little Mac so what about positive encouragement right up late i Big Mac know this Little Mac tiller, you’re never gonna be able to knock him out. But you still want to win the match. Right? You still want to win the boxing fight. And the way that you do that is not by knockout.
But you do it by points. And you in order to win the fight. Basically that means that you’re going to be profitable for the year and you might be beat the market averages. So that is the goal. That is the overarching big picture. That’s what we’re looking at. We’re looking at, hey, I want to win the match, I want to be profitable. And I want to beat the averages. That’s my match. So in order to win the match, you have to win enough rounds. You get, each round is a month. Okay? So each match or fight has 12 different rounds. Now, you need to win more rounds than you lose, and you need to avoid getting knocked out. Right. So January through December, every every month is around, so we got 12 rounds in our match. So 12 Round bout, okay, and we’re going to win by two things, we’re going to get points. And if we get enough points, we win the round. If you win enough rounds, you can win the match, but you have to avoid getting knocked out. Okay, so when you are profitable for the month, guess what, you won the round, you win enough rounds, and you got a chance at winning this fight.
And you get these points. To win the round, you don’t have enough points. You get these points by making small hits, small base hits, right? We’re just jabbing, jabbing, punching, jabbing, punching, blocking, jabbing, jabbing, punching, punching, maybe maybe a cross, maybe maybe an uppercut if you get lucky, right? These are all the trades that we put on. As passive traders, we’re trying to hit singles and doubles. We’re not looking for grand slams, we’re not looking for knockout punches. Because even if you hit Mike Tyson, with what you think is a knockout punch is not going to knock him down. And he’s going to knock you off bases of balance. And if he hits you with one of his big punches, you’re gonna go down, you’re gonna be in a hospital, it’s gonna be over game set, match or whatever TKO not even TKO just want one hit, boom, you’re done. Right? So that’s what we’re trying to avoid. Hopefully, you’re not getting knocked out completely if you do get hit. And maybe you can, you know, dust yourself off and get back in the ring and be like, yeah, we’re pulling me out a, pull me out, right.
But a lot of traders, they don’t understand this concept. And so they get knocked out. And they might not even be able to get back in, it’s over. They give up trading because it’s too painful. They can’t handle it. They’re knockout becomes permanent. And they are knocked out of trading for good. So we want to make sure that you do not get knocked out. That’s the biggest thing when you’re fighting Mike Tyson. Okay, and how do you not get knocked out? Well, he’s going to be temperamental, he’s going to be crazy. He’s gonna get all excited and come at you like crazy every once in a while. You avoid that by using a trick. Now, in the game, you had to know the tricks. Okay. So the trick with Mike Tyson was that, you know, you hit him and you hit him and you hit him and you hit him. And all of a sudden, he makes a little move. It’s a tell. And when you see him make that move. It basically tells you Okay, now he’s coming.
He’s about to get ready. He’s about to come at you with his big, big uppercut, to knock you out. And it comes super fast. It’s like, you know, split seconds, I usually the move Oh, no, get out of the way. Because boom, if you don’t, you’re gone. So as soon as he starts making that move, you gotta get out of the way. You can’t be in the way because, boom, you’re on the floor, right? So you gotta get other way. And if you do, then you can start hitting them again, boom, boom, boom, and it is like starts over. That’s kind of what the market does, right? It’s kind of like the stock market does. Markets make big wish moves up higher, wish down higher, either up or down? And then it gets tired. So here’s another metaphor for you. Right? We’re talking about boxing and as the market but how about the market is like an elephant. So when an elephant is mad and stampedes. That’s my elephant noise.
It starts running around. And then you of course, you don’t want to get in front of an elephant when it’s damp eating and is running around. But eventually, the market, the elephant gets tired. You know, it starts panting, it gets tired. I don’t want to run around anymore. And then it stops and maybe a standstill or you know the market goes starts going up and down a little bit or you just find a bottom and find the top and it just calms down a little bit right. I’m sure you’ve seen this with the market. We have periods with like high volatility, and then things calmed down and you think, Oh, it might be over. Sometimes it is. Sometimes the market gets jazzed up again. It comes at you again. And so that’s what Mike Tyson used to do. He would try to knock you out. Right? And then he would calm down And then he would let you hit him a few more times.
And then you’re trying to score as many points as you can, before he dressed, it knocks you off again, and then you get out of the way again. And then if you do that enough times, you can actually win. So you got actually beat Mike Tyson. Now, truth be told, I don’t know what actually happens at the end of the game, because I was never able to beat Mike Tyson. But I know that I’ve been through several years of trading where I have come out ahead, and I have won the match. Right. And it’s, it’s a phenomenal feeling, you know, to show my guns here, my little want to be guns. In me, it’s such an amazing feeling to be able to know that look, I can go into the market. And I can just extract money, and I can be self confident. And I can know that I can take care of my family, you have that confidence in yourself that, hey, look, I can go into the market anytime I want, and just take money out, right?
But the trick is to manage the trades properly. So you have to know when you should be punching. And when to get out of the way. We cannot control the market. But we can avoid the uppercuts. And this is how you do it. So you don’t look at every single trade as an individual event. Right now, when you’re taking notes, and you’re looking and you do the analyzing. They’re like all different things, right? It’s like, well, this trade this trade this trade, but don’t look at them, as all individual events, they are all part of something bigger, you won’t win on every trade. So don’t try. Yeah, that’s right, I’m telling you did not try to make money, okay, you’re not going to win on every trade, don’t try. Remember, your goal is to win the round, not land, every punch, there’s gonna be punches where you miss, there’s going to be punches when you try to hit him, and instead he hits you instead, and you’re going to have a loss. That’s okay. Because if you try to make money on every single trade, well, you’re gonna go crazy, right? And it’s gonna be too stressful. Plus, it’s not possible. So you look at every round as an event every month that you’re trading is an event.
And then you look at the entire match the entire year as an event. And that’s how you save yourself. You look at the big picture, the eyes are always on the big picture. The eyes are always I don’t, are always I want to win the match. Not I want to land this punch, right? So I look at all my trades as a group as a collective. So if I’ve already made money in a month on four or five trades, and then I got this one tray that might be losing money, I asked myself, What do I want to do? You know, What are my chances that I can make this trade work? Do I even want to mess around with it? There are some times when I don’t? Or do I just want to get out and be done with the month and win the round. Now remember, we call this passive trading, right? So I want to do as little work as possible. So if I put on trades, and they’re doing great by themselves, and I can get out perfect, but then I put on a trade and it starts not behaving, it starts making me do work, like watching it and analyzing it and trying to adjust it. I don’t want to do the work.
So if I’ve already made positive trades on one side, then I have this one one trade not acting properly, I’m going to take a look and say, Okay, how much money have I made so far? How much money am I down on this one? What happens if I try to get back? You know, what’s the difference? What is a percentage? Like? How am I going to be up? And if it’s not worth it, which most of the time it’s not, I’m just gonna get out of that trade. I’ll be done for the month, and I won the round. Geez. Right. That’s the most important part, winning the round. So if you win the round, and the next and the next, eventually you can win the match.
But if you start messing around and playing with every single trade that’s going bad, and you try to adjust your way out of it, or you don’t do anything at all, because you’re like, oh, no, he’s gonna turn around, you let her run all over you, you get that there’s a chance you’re gonna get hit by the uppercut. Not only do you lose the round, but there’s a good chance you’re gonna get knocked out so badly that the whole match is over. Right? Even if you don’t get knocked out completely, you get knocked down three times it’s TKO, right? technical knockout.
You don’t want that either. Not only the match, but in this case, your entire boxing career. Your trading career could be over if you take a big enough loss, and we don’t want that. So we don’t want you losing all your money or suffering the one large knockout loss, right? everybody complains, and when it comes to trading and selling options, they’re like, Oh, I win, win win, but then I give it all back. That’s what we’r talking about. How do we avoid that? So you go into every single month, and every round with the goal of just getting enough hits to be profitable. And if you don’t win that month, no problem. It’s a long match. You got 11 more rounds to fight, right? Big picture, big picture, think of the big picture. So let’s say it’s the first trade for the month, okay, and it’s going bad, nothing, man, first trade, and I’m already going bad. But then you think about it, you know, like, I got several more trades I’m going to do this month, do I really need to fight this one.
Or maybe I just get out and take a loss because I can make it up on the next ones. Because my goal is to win the round, right? You can do that. Or let’s say you’ve already been successful on several trades for the month, then you definitely don’t want to have one loser, take it all back, you don’t want to give back all your gains all your work, right? That’s the biggest gut punch you can get is if you’ve already made several trades, you’ve already put in the work, you’ve already made money, you’re positive on it. And then you got one trade that you try to mess with, or you try to adjust or play with it. And it just causes you to have a large loss, and you give it all back that you made, and maybe even more, that feels horrible. And you don’t want to do that because you want to win the match. Right? The big picture. That’s the whole point. That’s the goal. That is how I think about my trade.
So every single trade is not a life and death situation, you’re gonna have 1000s and 1000s of trades over your career, and you’re not going to win on all of them, not even close to all of them. Or we don’t even want to why bothered, we don’t want that stress. So you don’t need to worry about it. Don’t let your losing trades cost you the round. And get this, you don’t even have to win every round either, right? That’s where it gets really, really big picture. And there’s one more step that gets even bigger picture. You don’t have to win every match, either. Right every year doesn’t have to be super profitable, there are going to be years when you lose money, sometimes we just can’t help it, there’s nothing we can do. The market is a market, it’s going to it’s going to hit us and you’re gonna take it you gotta take losses, you just have to make sure you don’t get knocked out so that you can come back and fight the next fight. Right. And with passive trading, you’re going to win enough rounds, sometimes it just happens automatically, because the stats statistics are in our favor, right? You’re just going to win it, you’re going to win loss arounds, and you will win enough matches so that overall your boxing career will be a very successful and will be a very lucrative one. Over time. I keep saying this over time the math just works out, play the trades properly, and you’ll win in the long run. So there you have it folks, proof that kids do learn from video games.
So if this was helpful, I would love you if you could do me a favor, please subscribe and comment so that more folks can find our content. You know, so we can spread the word about passive trading and help more people and it means a lot to me as well. So until next time, trade with the odds in your favor. And watch out for Mike Tyson’s uppercuts.
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