Carmine Rosato: 95% of Traders Fail For This ONE Reason | WOR Podcast EP.91

stop doing what 95 90% of Traders are doing right so if everybody's doing the same thing and everybody is very generic there will be no Edge there every single successful Trader that I know or I have talked [Music] to welcome everyone to the words of wisdom podcast we are back once again well now we're actually in New York and for the first time ever we've gotten off a plane and come into the studio and this obviously has to be for a very special guest which is none other than Carmine from investor traits thank you for being here man thank you for having me I know we uh we meant to like have a little coffee beforehand but the the traffic here in New York's a bit insane yeah I give you credit man 20 hours non-stop flying no sleep you didn't even get a coffee at Starbucks before this yeah I know it it would mess me up man that's I was saying to you it would mess up the flow but yeah no um unfortunately we had we missed our first flight you know um because it was a traffic accident and then and then we had to sit in the car for 3 hours then finally then when we got there we had to wait for 4 hours for the next flight um but that's This Is What It Takes we're here this is what it takes that's it we're here we're here we're going to make it happen that's it and now I'm going to go straight into it with you which is why trading I have family on Wall Street and I got introduced to trading back in 2016 back in economics class it wasn't so much trading it was more of like an economic stock market game and just the thought of the infinite possibilities that could come with the market and the freedom that it could bring I mean it's a no-brainer to get involved with it and then uh it all went from there I'm interested though cuz obviously say family on Wall Street didn't that put you out did they not tell you horror stories of of the pain and the suffering so it's funny they told me horror stories and everybody that comes to me and wants to learn how to trade friend wise that I know personally I always tell them that it's a big commitment because a lot of people think that it's just going to come easy and they're going to learn something and you know get rich quick and it's that's not the case at all so yeah there's a lot of horror stories and I'm sure we're going to get into it on this podcast the good the bad and um yeah it's it's a it's a crazy business but the possibilities are endless and knowing that the possibilities are endless I mean I don't know why anybody wouldn't want to work towards that you know from your journey then maybe obious observing a lot of Traders over your time as well have you seen that people have that commitment in them no not a lot of people have the commitment and that's probably why a lot of Traders fail is because they hop on the market one day the next day they're not on it there's no commitment there's no longevity in it they think they're going to get rich quick and the faster you come into this game is the quicker that you're going to leave this game definitely did did you have that yourself though because obviously you had the I guess the the positive of family on Wall Street with experience but did you still have that same mindset yourself absolutely when I first got into it I struggled severely just by wanting to get rich quick I wanted to see my position of $1,000 climb to $10,000 I wanted to be right on this one trade I wanted to make money fast and that was one attribute that probably set me back pretty pretty bad and you have to learn from it and I think everybody has to go through that and everybody will have that mentality because it's just human nature you want to be correct you want to make money you want to get rich quick and you want to change your life and have the freedom so I think it's normal for every single Trader to have that attribute towards them but the ones that make it in trading will get past that because they got through it how would you say you got past that then my journey in the first two years what I did was I had multiple accounts of $3,000 and each account of $3,000 slow F bled I was buying the market with no trading plan seeing it go up I was short the market just because I saw it going up there was times where I would hold on to losers because I wasn't I was afraid to be incorrect there was times where I would let my profit Target hit and I kept holding because I wanted it to run and run and run so after you go through these mistakes and after you go through these lessons you eventually learn from them and I think why a lot of people struggle is they go through the mistakes and they go through these failures but they don't reflect upon it or they don't take a lesson out of it they just cons consistently go through those failures without any reflection on it and the Brain loves habits so the more times you do something over and over and don't reflect on it or don't try to build upon that then your brain is so used to that that your brain just wants to keep doing that because it's so comfortable with it and that's why a lot of Traders make the same mistakes over and over I'm sure you felt the same way like how many times have you made a mistake and you kept making the same mistake over and over and you knew the mistake you were making but you kept making it definitely well I did that for like three three and a half years you know just the same same mistake same thing over and over a lot of pain you know a lot of money lost for no reason and um what was it for you in terms of that sort of Reflection Point then actually reflecting on those mistakes because for me it was a case where I made a big mistake and I really had to sit there and say okay either I change now or I quit did you ever have anything like that yeah well when I saw my accounts continuously deplete I knew I was doing something wrong I just didn't know and I couldn't pinpoint exactly what it is that I was doing wrong so I knew something had to change because it's insane if you keep doing the same thing over and over and you keep failing and you don't try to change it and a lot of people have these mistakes they make these mistakes but they think one day they're just going to wake up and automatically they're going to make money automatically they're going to be a better Trader and it does not work like that you have to put the work in and you have to reflect upon your losers how how long did it take you to start seeing that sort of consistency and that change in your trading 2 and a half to 3 years into my Trading I not going to call it that I got lucky in the market but I took some very big trades back in 2017 when blockchain was a big thing and all these cryptos were really slowly starting to get introduced with the market it was actually a stock ticket called long Fin lfi n um and that thing absolutely exploded one day and that was a very good um booster to my account that gave me a lot of cushion of my earlier mistakes and then I just built upon that because I knew now I had funds in my account that I didn't have that I lost and now I knew that if I kept doing those same mistakes over when I grew my account I knew it would just go down in value again if I did make those mistakes continuously over and over so you you had those mistakes so you had lost Capital you then had this big play that allowed you to make that Capital back and then some so you had that cushion and then that was the pivotal moment where it was like okay look I'm in this opportunity now where I'm actually up right and now I don't want to go backwards so I I I viewed it as I had like a baby and I wanted to protect my baby at all cost I messed up in my first couple trading accounts and I didn't want to give up my baby again now that I had some sort of protection or some sort of cushion that I could build upon that I knew I can grow it I didn't want to give that up so I did everything to protect that and by going within now a defensive mindset and understanding that I have to play defense and learn and reflect upon my earlier failures that's what kind of grew it now the growth wasn't exponential it didn't happen in a year but the consistency comes and when you have the consistency and you have the momentum that's when you're going to build and that's when you get that exponential growth that just continues to climb definitely I love that analogy as well in terms of like defense are you referring to more like the risk side really focusing on the risk yeah absolutely so I didn't have any risk parameters at all and I would say the aha moment or the the biggest influential change to my trading was understanding how important risk management is I did not have a risk management plan uh there was this one trade and I did a journey video on my YouTube and there's the exact chart of everything where I would see the market climb and it would exponentially climb it would Gap up it would rally there was a ton of volume coming into the market and I would simply short the market just because I saw it go up I would short 100 shares then add to that losing trade and keep adding and adding until I had no money left in my account so there was no absolutely no risk parameters involved with my trading in my first year and a half two years and then once I understood that you have to play defense and risk is the number one most important aspect to your Trading that you have to protect it because if you protect it you will grow it if you preserve your Capital you will grow that Capital if you do everything to manage that risk makes complete sense and now a lot of people struggle with that I remember that was basically one of the things I did where I just I would go into the mindset of like okay I need to risk one or 2% you know that's how I'm going to do it long term and then very quickly suddenly you're taking trades with no stop loss exactly and the risk is just completely open and then you're just blowing out accounts for fun um and it's not a good position to be in you know it's not as you say though it's so interesting how the mindset just kind of repeats the same negative traits over and over the brain loves habits and when you consistently repeat those negative habits you're never going to get in the habit of breaking those habits because you're continuously doing them over and over and your brain is so used to it that it's comfortable with it so that's why growth comes by doing things that you are uncomfortable with and you have to start doing things that you are not used to especially if you're in a place that you don't want to be you're in that place for a specific specific reason now for you to get out of that place you have to do something that you're not used to and that comes that growth comes from just being uncomfortable and loving to loving being uncomfortable knowing that the growth comes from the unknown yes no I love that and would you say the the process and something that's very interesting so it's not a case of like going from negative habits to positive habits it's actually negative habits to changing habits correct right the habit of changing habits to then obviously positive is that a process you went through yourself absolutely as soon as you start understanding that Capital preservation and understanding how risk management is so important because you have to think about this as Traders we never know if the market or if our trade is going to work out in our favor it's not known we know maybe probabilities are higher before entering that trade but we'll never know if the trade is actually going to work out or if we are going to make money on it so with that said and the only thing that we can control because we have zero control over the market we have no control over if it's going to go up down sideways we have zero control over the direction the only thing that we have control over is our emotions and our risk management where we could place our stop loss and you have to obey that by that stop loss and you're going to go through these negative habits of holding past your stop loss and I do think that every Trader will go through it and I think it's vital for you to actually go through it to actually change those habits because you're going to want to you know hit yourself in the head say okay I got to do something differently and I got to protect my Capital I got to manage my risk because that's the only way I'm going to grow my account no definitely no definitely and I think it's interesting because when you speak to Traders you try you don't want to put them down you don't want to put them off by saying you know oh this is what you're going to experience and you don't want to try and say like everyone has to go for it but I feel like everyone does you know they always will so maybe some slightly different than others but the the majority everyone goes through the same Journey almost I I think it's it's vital for every Trader to go through failure I think failure is necessary without success you're not going to even know failure so I think every Trader has to go through some sort of of failure whether it technically emotionally psychology it it doesn't matter what type of failure it is but I think you have to go through it to get through it and Traders that don't go through the failure that just get placed at success will have failure right around the corner because if you got placed at success the only way to go is down if you start by failing the only way to go is up especially if you learn from those failures so having a success right off the bat making a quick amount of money in a short amount of time without failing is probably the worst thing that a Trad could do because Essen you're getting placed at like the top of a m and once you're at the top of the M you can't keep climbing and the only way to go is down especially if you don't develop the positive habits that bring traders to success in terms of where you were before then before finding that consistency what would what did risk look like to you I had zero risk parameters I would simply enter a trade and I would feel butterflies in my stomach and again I think every Trader probably listening to this watching this is going through it or went through it where you would enter a trade you would feel butterflies in your stomach you'd start sweating you'd start feeling adrenaline pumping through your body you'd want the position to work out you want to be correct you want to prove to your friends and family you can make money you want to prove to yourself especially and then as soon as you get in that trade it starts working against you and you're like I don't want to be wrong and you hold past your stoploss you take a big loss and it detrimentally hurts your account and it also affects your mentality and you're done after that if your mentality is shot M it's very hard to keep climbing and what does it look like now then so the the transition every single trade that I take has a planned and managed risk parameter and my risk management my risk parameters always invalidates my trading thesis where I'm at currently in my trading I'm not so fond of believing in like risking 5% of your account 1% of your account for others I know they go through those systems and that's totally fine there's nothing against it but for me I just want to make sure at least my risk I'm only gonna lose two times less than my winners so I need to make sure my winners are at least two times greater than my losses before I enter a trade at least where I'm at in my trading right now that way I can put myself in the position that if I have let's just say a 60% win rate my risk management rules are putting me in a position to be profitable because you have to position yourself to be wrong as much as possible yet still could make money yeah no I love that and I think that's the best way to be cuz as you say there's unpredictability with the markets you can't predict what the Market's going to do you can try and have an edge of course to then put things into your favor but that's all you're doing is putting it in your favor but the thing you have control over is your risk so if you're planning for a strike rate where you actually lose more often for example but the risk reward and your risk parameters are keeping you profitable anyway then you're putting yourself into a position of success and you have to love to lose as weird as and and silly as that sounds you have to love to lose like the best winners will lose so you have to understand that losing is part of the game and the best losers can control that risk I'm not going to say I love losing but taking losses not only gives me a lesson that I can learn off of and I don't mind losing because I can manage that risk that I know if I hit my next setup or my next two setups I know that win is going to take care of that loss because I'm putting myself in the position to win and a lot of Traders don't do that would you say there's a process that you have to go through to learn how to lose it's time to make the biggest announcement we've ever made on the p you guys have been asking for it and we've finally done it we are launching the words of wisdom patreon as part of the patreon you are going to get every single week exclusive podcast episodes every single month I will be hosting live calls where you can ask your questions to me directly we will also be doing q&as with industry-leading Traders such as Umar ashra Omar AAG life of Paladin Jade cap effects and so many more I'll also be doing huge giveaways every single week for patreon members only and finally I have partnered with the top companies in the industry such as social Trader tools magic keys and trade Zella to bring you the biggest discounts saving you hundreds of dollars per month now I know that sounds like a lot and I know what you're thinking but it's just $15 a month it's just 50 cents a day and with that you're going to get exclusive episodes live calls q&as giveaways and the discount that I have secured for you with the discounts I've secured I'm basically paying you to join learn from the best join the number one trading podcast in the world join the patreon the link is in the description below and I will see you in there absolutely you everybody that takes a loss knows how bad it feels there's nothing like sitting in front of your screens for 6 and a half hours a day let's just say taking a loss and then having a go deal with other aspects of life after you just lost in the market you feel like a loser you feel like you don't know what you're doing you feel like like that trading is not for you you want to just give up so by going through that you TR of you kind of get accustomed to the losses and you realize what you have to do in order to propel you forward we haven't talked too much about strategy so what sort of strategy are you implementing into the markets as well right so I'm a short-term Trader and uh day trader I like trading and buying and selling within the same day I don't like putting risk on overnight I would say it's very important to understand the personality of a Trader M to fit the type of style that you're looking to approach MH a Trader that is not very creative or a Trader that cannot process information very fast probably will not be successful as a day trader or a short-term Trader but a Trader that can you know sit at their desk all day long maybe not have to actively monitor their position maybe has a little bit of a timid or shy personality probably would be better at more as an investor or longer time frame participant Trader yeah so for me I like getting in and out in the same day and I would say I'm pretty creative and I'm a very good Problem Solver and for a short-term Trader I think that's a a necess a necessary skill to acquire because the market on a day time frame is going to throw different things at you it's essentially going to throw a rock at you and if you're sitting in the chair taking the Rocks right to your head and you're not sitting there trying to deflect them and try to avoid them you're just going to get ran over by the market you're going to get hit and your account's going to hurt so you have to be a very good Problem Solver critical thinker being very creative and adapting to certain market conditions to fit how you trade and for me I'm I'm a shortterm Trader definitely no it makes complete sense as well and I love what you mentioned there in terms of understanding your personality as well because I think a lot of people overlooked that I think a lot of people nowadays especially with the rise of social media and the amount of traders who are on social media people just look and they say oh copy paste exactly you know and I feel then they go copy paste but then it's not actually pting it's not working I'm not getting the same results yeah but it comes down to as you said they haven't reflected on their personality as a Traer TR so I love what you said there in terms of like are you a technical based Trader a fundamental Bas technical no fundamentals technical shortterm order flow price and price and volume price action um that's basically how I trade just using I I view the market as an auction so for me as a short-term Trader and this could even apply to long-term Traders is the stock market and looking at a physical Candlestick chart simply projects or projects the price of where it's currently trading at and where past where it traded at in the past so simply the market as an auction you have to view a Candlestick chart as an auction and the market simply moves up because of more aggressive participants entering the market and the market moves down because there are more aggressive sellers entering the market so you have to start viewing it as an auction and when you view it as an auction and understand that charts form because of buying and selling that's where a serious Edge could come in I don't believe much in patterns um because patterns themselves do not move the market but the type of buying and selling around the those patterns will move the market so I think it's very important to if you're a short-term Trader to gauge how the market reacts to certain levels of interest that you create a lot of people will create a level or create a trend line or create a specific support level or resistance level and say okay as soon as it comes up to that support level I'm going to buy the market or as soon as it breaks it I'm going to short the market but for me personally where I develop the edge and where I find the most success with is creating levels of interest and then gauging how the market reacts at that level of Interest via the order flow for example we come into a support level and again viewing it as an auction we come into a support level and there's tons of buying there absorbing all the aggressive selling it's a good indication that the market may want to reverse you know a lot higher so once I switched the market as not so much as a Candlestick chart but as an auction that's when a lot of things changed definitely and there's a couple points I want to pick up on there one of in terms of the absorption what does that mean what are you referring to when you're saying like Okay the sellers are being AB absorbed by the buyers or vice versa so imagine there being a ceiling or imagine there being a floor and how support and resistance actually forms like the true backbones of support and resistance is if there is a more passive participants at that level than aggressive participants so again the edge comes and why support and resistance actually forms is through a lack of activity meaning if there's more passive sellers at that level than aggressive participants the market will cause that cealing and the market will cause that floor so gauging how the market not only forms that level but also reacts to that level once it's tested is where the big Edge in my opinion for short-term trading comes in I love that I love that it makes sense to me so I'm Hing it Mak sense to everyone out there as well so absorption forms when there is aggressive participants actively hitting the offer or hitting the bid but despite all their effort of hitting the market aggressively someone is there passively on the opposing side of the market essentially absorbing all their orders causing that ceiling or causing that floor essentially if you have a bunch of buying near a resistance level and there's zero upside follow through at your resistance level it's a good indication the market may want to test lower prices because some seller is passively absorbing all those buyers a lot of Traders say there's more buyers than sellers at a level or there's more sellers than buyers but in the market an auction there could be no such thing as more buyers or sellers in the market every single transaction comes from a buyer and seller now there could be more aggressive participants than passive participants because that's how the market moves up and down but there's no such thing as more buyers than sellers in regards to like the patterns you mentioned right I find it very interesting because the way I view the patterns or whether it's even the fundamentals people try and talk about how is it that the technicals and the fundamentals even if it's something random like you know the geopolitical stuff that we're seeing at the moment but yet it lined up on the charts people started going oh how does that work but for me everything's a representation of what you're saying in terms of the auction like buyers and sellers right so even like the patterns for me the way I see it is that the patterns are just describing or a a picturesque if you will version of the emotions of the buyers and sellers exactly right is that would you say that's the same absolutely yeah absolutely and so the way I view the market again is essentially let's say you're in the market for a new car or a new house and the average price of a car or a house let's just call it $100,000 that's the average price of what people are buying a house at wouldn't you want to buy a house at $75,000 that maybe one house comes on the market you say oh it's a good deal at 75,000 let me try to buy it but as soon as the price goes down a lot of people are trying to get into the market at the same time the edge and where majority of reversals come from is when there is a lack of activity at a certain level causing the market to go attest opposing prices the market ESS is an advertising mechanism and it facilitates his trade So reading the charts like you said and understanding how it evolves around human psychology and human emotions being able to read that and and and being able to read the emotions of Traders again it will be where the edge is and you have to think about something too if 90 95% of Traders fail stop doing what 95 90% of Traders are doing right so if everybody's doing the same thing and everybody is very generic there will be no Edge there every single successful Trader that I know or I have talked to has a unique aspect to their trading strategy there's being generic in the market will get you nowhere and a lot of people try to press these strategies that will win 100% of the time but if you come to somebody with a strategy that is unique that is different that I haven't heard of before I knew you I know you're legit and I know that you know what you're doing behind the markets and you're actually making money and definitely I love what you said there in terms of like majority of people losing but then the majority of people have the same habits you know and I feel like it kind of goes back to what we were saying earlier about people just being stuck in the same habits and uh I think a lot of people observe the same fact that you most people are doing this or most people are doing that but they'll still fall into that it's kind of like the herd mentality yeah know people just follow what everyone else is doing and then they they struggle with change they struggle to accept change or being uncomfortable as you mentioned earlier uh but it's necessary I would say and in terms of like um like s following through with that topic draw down you know this is one of the most uncomfortable things that a Trader will handle especially if they've overcome handling losses and being able to control their risk next up is handling draw down how's that been for yourself especially as you've you know scaled I guess account size as well and capital that you're trading with also yeah so two weeks ago from the time we're recording this podcast I went through a draw down there was just every day I was taking my setups they were my normal setups that I take that I make money on and they just simply were not working out and it definitely affects you mentally and it definitely questions you know I've been doing this for eight years now so even after these eight years it still questions your ability you're like I'm doing everything that I was doing last month but for some reason right now these past two weeks they're not working and it definitely will get to your head and it's we're all humans we cannot avoid emotions we can't escape them we have to go through them right but as you become more accustomed to them and more accustomed to the market and your strategy and your psychology and your emotions you know how you know you know when different conditions bring them upon you and you know how to get over them and you know different things you have to do to not think about them so much and that's where having something else other than the market is a very important aspect to your overall well-being in life in general because if you're sole passion is the market and your sole focus is the market and you have nothing outside of the market your draw Downs in the market are going to affect you outside of the market your p&l swings going up and down if you make money you're going to feel like you're on top of the world if you lose money you're going to feel like you're the worst Trader and you should quit so having something outside of the market for me personally is something that I'm currently trying to work on that when I do have draw Downs because they are normal it gives you that escape that you're not so focused on your p&l and how it affects your mood up or down and I would say majority of draw Downs occur not because of your strategy but because of the market conditions now a lot of Traders have to realize this and I would say this was probably another pivotal moment of mine um I would say probably year three into my trading was how important adaptability is you can use the same system over and over and a lot of Traders teach one single system that it's a one-sized fits-all that will work when the Market's uptrending when it's on low volatile conditions when the volatility is high and they preach this system with no influence to uh adapting to different market conditions trade trade volatility there's volatility I trade if the market trending so you have to have an aspect of adaptability and if you go through a draw down you have to figure out is it because of your emotions or is it because of your strategy now sometimes the strategy needs to be tweaked to make it fit those different market conditions and the only way you're going to learn that is actually trading in those market conditions it's not something that you can learn like in a book or watch a video you actually have to sit through those market conditions and be susceptible to the change and adapt to them it's not going to get placed in your lap and you have to actually physically feel it and and understand it for you to adapt it to your trading now marketing condition is so important and what's interesting about your journey is that you've traded no doubt through many different conditions one of which being the covid sort of Market time you know it's a very volatile across pretty much all the markets what was your experience obviously trading through that and then even transitioning to obviously now so that's a very good point because even for myself the whole Co Market was a was a new experience for me I started trading in 2016 so I never had a a a market drop and so so much fear in the market like we had with Co so that was all new to me and I'm still learning new things every single day about myself even about the market and having that open-mindedness to learn new things with new conditions will give you the tools needed for long-term success so back in the co Market I learned what lot of volatility meant I learned what a lot of fear was and I learned I'm not going to call it easy but how clear the market conditions were and how fast the market moved and how how fast your p&l SW uh swing could fluctuate on a daily basis a lot of traders made a lot of money back in Co and I can guarantee you 90 95% of them are not here to trade today because they most likely lost all of their money because they got rich quick it was an easy market and as soon as the market start started to recover they had no idea how to trade mhm what what allowed you to not be part of that 95% so when we bounced with Co I did have a hard time trading that it was new to me it was a random bounce we thought that the market was going to continue to go down we thought we were in a recession we thought that the world was ending so that bounce definitely caught me off guard I it was new to me I was I had to learn how to trade those conditions and that was you know a very strong bull market and after a few weeks you start to get used to it and you start to adapt to how those conditions trade and how you were going to succeed in those conditions because if you approach the market back in Co when it was just dropping every single day and it was quote unquote easy when we rallied you probably had no clue how to trade that market if you were going in there with the same mentality and adaptability is key yeah I feel like a lot of people obviously struggle with accepting the changeing conditions accepting their bias might have been wrong or their thought process might have been wrong and like in that scenario you know it could have been very easy it's easy for you to say now or for you in your position to be able to say okay I adapted after a few weeks and I changed Etc and I learned from it but most people won't find themselves in that position most people find themselves attached to their idea and unfortunately be doomed to repeat that process over and over or as you said majority of people ended up losing the capital that they may have made um what was it was there anything in particular that really shouts out to you that allowed you to be a bit more insightful be allowed you to be a bit more adaptable a bit more fluid with the market rather than being sort of just fixed in mindset the skilled challenge is finally here enjoy the lowest profit Targets in the industry through our skilled challenge which is only requiring a 6% profit Target Yes you heard that right not only that but enjoy 85% profit split as well as 125% Challenge free refund all part of the best product on the market you get to choose your draw down between eight or 10% through our toggle option so you choose how much draw down you would like take advantage of the skill challenge today well there's no growth when there's stagnant waters you know a fish can't live in water if it's stagnant if there's no movement to it so for you to change or for you to grow you have to move motion creates emotion and motion helps remove emotion in the markets so the biggest thing again is reflecting on the market conditions reflecting on how you trade in those conditions and most importantly reflecting on your emotions in those conditions because different conditions bring different emotional responses to different moves in the market you know back when covid happened and there was insane price drops everybody's emotions were through the roofs and they were overleveraging into positions and actually making money then once the volatility died down they were still entering the market with over leverage size not realizing the volatility is dying down not realizing we're bouncing we're uptrending and a a lot of those guys lost money pretty fast they made it's interesting you say that actually because they've picked up the Habit then of essentially being rewarded for making bad moves so therefore once that reward is ended they're still making the same bad moves which then causes unfortunately the end of their trading career or at least for that trading period how often have you noticed actually that you know in terms of conditions let's say you take a losing streak like you mentioned two weeks ago you had that bit of draw down you know in the past have you found that when you may have had that draw down You' actually then say okay I'm going to take a break you know and then I'm going to come back in you could be a month could be two months whatever it may be and then people find themselves in that cycle you know where they're they're not actually putting in the time to feel uncomfortable and to learn and to go through the that cycle of that those market conditions instead they kind of skip it right and then they come back and they might be in favorable conditions to what they used to they get a nice good period once the draw down starts again they do the same thing they just take a step away and they just repeat that that same cycle versus having to actually sit through and experience those different market conditions how those changes are made and you know what the p&l looks like what the edge looks like what the specific little changes may be um to actually be profitable during those different conditions yeah and again relating back to the aspect of getting placed at the top of the mountain or having success handed to you a lot of Traders back in those times where let's just call it easy market conditions got placed at success and it was just handed to them so they had no idea how to actually earn that suc uccess m a big part of that is the adaptability like you said about taking breaks after a draw down taking a month off I personally do not believe in that because the only way that you can learn is by immersing yourself in the market conditions now maybe not take a break from the screens not turn your computer on for a month or two I don't believe in that but maybe take a break from actually putting your live money at risk in the market because the only way you're going to adapt is by being in the middle of the battlefield and the only way you're going to be able to deflect the Rocks the market thr grows at you is by actually moving so being able to sit in those different market conditions even if your real hard-earned money is not at risk will still offer valuable lessons that once you build that confidence that say okay I have to change how I trade here the market conditions may be ranging now we may be uptrending let me figure out how the market will respond to the core aspect of my trading strategy so I believe that having one strategy in the market is not the right approach if we have the core strategy we can Branch upon those cores so if the core Foundation of a house could be built upon we can added many different things but the core of a of a the core Foundation of a house will always be the same but we can build upon that house to different rooms different Avenues and make it different so the core for me what I have the most success with is simply just price and volume and viewing the market as an auction and you can Branch to different strategies off of that to fit different market conditions even then like the the branches that then built on that or the variants if you will are just very slight so it's not a case where it's like you know there's a whole different strategy on this side for this conditions and a whole different strategy on this side like one's day trading one's swing trading or or One's price and volume and another one's break and retest by you know completely two separate things instead is it could be just like the risk to reward might be different for this condition versus this one or the way that I manage risk is a slightly different or maybe a certain type of Confluence is used for that condition because it's a pattern that I've recognized is that in terms of patent recognition is that something that's been very important to make these decisions absolutely absolutely so again like the core Foundation of a house will always be the same and in your trading strategy the core Foundation of your strategy will be the same but in low volatile conditions having a tighter stop loss will not make any sense versus volatile conditions lowering your position size widening your stop loss will give that trade room to breathe and the adaptability aspect to this is Traders will look for that one- siiz fits all strategy where their risk parameters are the same not putting any influence on the market conditions that their stop loss on volatile conditions might be two points and then low volatile conditions might be two points and it's the same not putting any emphasis on the conditions and your entry signals your Confluence your risk parameters and how you trade have to be different depending on each market condition and the only way you're going to learn about specific market conditions is by having screen time and experience you canot not learn the certain aspect of trading that comes with intuition and comes with feel a lot of Traders say you shouldn't trade on intuition you shouldn't trade on feel but there's an aspect of trading that can only be developed through your screen time and experience you can read all the books you want you can watch all the videos that you want but the best educator will be your screen time and be your experience that will be the greatest lessons that you'll ever learn definitely and do you feel like most people skip that absolutely they want to get placed at the top of the mountain they want success handed to them and they're going to have it come next to them when the next trade they take in the market is probably not going to be a good one or if they take one good trade and they feel euphoric the next trade they take is not going to be good you know they'll always be testing exactly you'll always be tested and you have to get tested and your success is a component of how you handle those failures I want to talk about in terms of like scaling you know like scaling through your journey obviously managing more and more Capital right in terms of your positioning obviously in I'm from like more the FX world and in the FX world we have like a a huge separation between majority of people in the industry right now are using they're not even they call they called they were referred to a prop firms they're essentially evaluation companies uh so essentially funding companies right so a lot of people getting funded accounts um versus their personal accounts or investor Capital whatever it may be what's the position on on your side obviously in your trading so I've never traded uh in evaluation prop firm account to be honest with you I'm not I can't really speak on it because I'm not educated enough in it I really don't have I don't want to speak on something that I'm not educated on um so yeah I trade my own capital and a lot of people go the prop firm route because their own capital is not at risk I'm not too sure about that because I feel like you have to risk your own Capital to really feel the emotional aspect to it and I feel like if I was on a a prop firm eval account I'm not going to have that emotional connection and I think a a really good lesson in the market is having an emotional attachment to the money and realizing what will do to your emotions and how it affects your in your decisions when you're connected to your the the funds in your account and you know how hard you worked for the money that's in your trading account and you know how much money is at risk you're going to trade differently versus money that is paper or on eval from a prop firm in terms of your uh the scaling then how have you handled that because as you said when you're putting in your own Capital you know you work hard for that Capital you're putting that in maybe you're even compounding the capital how how have you handled obviously the the amount scaling over time and managing the new risk the new take profits the new stop loss you know in terms of the monetary size how have you handled that that's a good question so everybody's going to be different and I do want to say that in the market there's no correct approach to approaching the market there's no correct strategy I can really only speak for what I do and what I have success with and what works for me so where I'm at my trading right now is I'm at a consistent threshold of profits and the biggest thing that I'm working on is getting past that threshold and scaling my profits even further where they where I'm at right now the problem is as soon as I scale up I trade a little differently because I know I have more money at risk now so that's that emotional barrier that you have to get through now in terms of scaling up let's just say you start with a small account of $500 I'm not too sure in the Forex world what do they call contracts or like position sizing we have like lot sizes lot sizes so let's call it lot size because in the Futures Market it's the same thing so what I recommend everybody doing and I'm not too sure how the monetary aspect of a lot sizes depending on the instrument but what I recommend doing is for beginners to start with small size one to three lots no matter what your account size is a million dollars in your account $100,000 in your account $1,000 in your account start small you have to prove your concept Works once you have the proven concept then you can scale it up so what I recommend everybody doing especially those in the invest trade community and this is the approach I would I would tell myself going back to eight years is start M don't let your ego do the trading I don't care if you have $20,000 saved up that you just got gifted to you don't trade with that $20,000 start with one to three contracts be consistent prove your concept Works prove you can manage your emotions prove you can manage your risk and prove you have a strategy that you can consistently repeat repeatability is so key you have to be able to repeat one to three contracts for at least a minimum of three months once you're consistent with that and I don't really care how much you grow your account all I care is if you're consistent let's just call it $100 profits as long as you're consistent $100 profits and when you have your your red days which are going to be normal they're at least a maximum of $50 so 50 or less meaning you're risking two to one once you could do that for at least three months then I think it's it's the right approach to scale up now you're at 1 to three contracts lot size maybe go 5 to 10 and then see if your emotions change from 5 to 10 if they don't change and now you're making a consistent $500 a day and losses are $200 $250 now you Pro you can manage your risk you can control your emotions now scale up even further in trading it's not working harder it's simply working smarter and the only way we can work smart is prove our concept works and a lot of Traders don't have a proven concept and they go in with their full account size full port it and lose it all and then then it me it messes them up mentally and once you're messed up mentally it's very hard to correct those negative issues definitely Li said to undo do negative habits is much harder than just to focus really and put the time and effort into building the positive ones correct yes getting yourself out of the hole is is a very difficult thing to do there's ways around it um there there's a good tool that I use it's like an error cost calculator so essentially what you do is that if you made a mistake let's just say it was it was an emotional mistake you had fomo or you held past your stop loss or you held on to the trade too long have an an Excel file or a sheet that calculates how much money you lost or calculates an opportunity cost that you missed and if you review that every week or review that every month you're going to sit there and review that and if you reflect upon it and you really take it to the heart you're going to see how much money that you missed out on or you lost because of your stupid mistakes or your errors and that's like a good way to get yourself out of the hole because you're going to wake up and say okay if I don't change my trading account is not going to go up a lot of people don't do the work to see that reality whether they have a tool or whether they need need to do the calculations themselves I think they don't end up realizing the reality of what their original plan or their original Edge they may have said out actually provides and so therefore they trick themselves into thinking that oh it doesn't work when in reality maybe the first one or maybe two trades were with that edge with the plan and then the next three or four weren't um and in that three or four that weren't there was one or two that did fit the plan that you didn't take and you know it's so easy for the numbers to be lost right and the true reflection of The Edge that you truly set out for in the beginning because usually what I've seen in terms of a pattern is let's say a weekend takes place on the weekend they did a forecast they they reviewed the previous week they planned their week ahead Monday comes and they took the first trade with the plan you know with the direction they've set out and then maybe by late Monday maybe going into Tuesday they've taken some other idea because something happened in the market and then by the end of the week if they actually reflected which most people don't but if they did they would realize their original plan actually took place but because they allowed their emotions to get the better of them and just being a bit too much in the moment which is interesting because it's probably benefits to being in the moment as well um but just being too much in the moment they kind of just forgot the bigger picture forgot the work and the the vision they had and then um they find themselves just like questioning oh that that that edge doesn't work let me try a new one I see a lot of Traders they take one trade and it works out they take another trade it doesn't work out then they start questioning their strategy or start questioning their Edge and the word Edge is is a little complicated because Edge is really making the market static and the market is not static meaning like I like I said it's it's constantly changing so by you referring to you have one single edge that could be true but edges are different depending on the market conditions so by you saying you have an edge really says that the markets are static the markets are not static the markets are constantly changing and the markets are constantly evolving and the the best Traders and the ones who don't get left behind with the market are the ones that could adapt with it and like you said you plan over the weekend how you're going to trade the following week Monday comes you take that good setup Tuesday you deviate away from your plan for some odd reason right then Wednesday comes you go back to your original plan and it's just a big cycle of back and forth does this Edge work and is my strategy valid or not they take one losing trade and they kind of invalidate their trading plan or invalidate how they are looking to strategize with the market and the way I look at it is you can't go off of one trade like if I take one losing trade on Monday I'm not changing how I trade on Tuesday if I take one if I take a losing trade on Monday and Tuesday on Wednesday I'm not changing how I trade I'm doing the same thing over and over because I know it's what works out for me now there's going to be a day or there's going to be a week and I call it like the middle week or the week that you really have to do the most amount of work of when the condition conditions change and you're going to start to know when that happens when what you're doing that previously worked out for you still will work out but you have to tweak it a little bit to fit those conditions there's like a there's a week or a couple days that you're going to start to notice that and that's again where those draw Downs come from two weeks ago when I took that draw down I had to tweak a little simple thing with my trading and that simple tweak made a complete difference and the past week complet traded completely different and it was a very successful week just by tweaking a minor thing to my strategy what's interesting when I CU I very briefly looked over obviously some of the content you put out I think observing your stories as well and the thing I loved to see which was you the way that you will post about your trades I don't know if it's in a community or just in your general um something that you have disc private Discord Community yeah so like you will post your trade ideas but the trade idea won't just be like I'm buying at this level I'm selling here or here's my stop loss no it be this is what I'm looking for okay and this is what why I'm looking looking for it if price does this then I'm going to look for this and it's like a it's kind of like a flowchart if then statements I think it's very important to come up with if then statements and a couple things that I do want to Branch off into here is that a lot of Traders follow alerts or signals and by me saying this open in the trading Community does not is not favorable to a lot of people but the reality of it is Trading alerts and trading signals will push you back in your trading and it's not giving you that push forward to have success in the market if you need to cck that buy andell button for you you're never going to be successful and you're never going to be able to do this for the long so the worst thing that any beginner Trader or any struggling Trader could do is follow somebody's buy or sell alert the reason why somebody's posting that buy or sell alert number one is probably to pump up that instrument or number two they need to look like they are correct to fund their sub money I think it's a fair statement to make because a lot of people get into trading to say that they want to be professional but that's not the professional way to go about it uh and at the end of the day we all know that to be a professional Trader to be a successful Trader you have to think for yourself you need to as they say a man on an island in terms the best analysis will always be your own analysis and I live by that statement because I followed a lot of people in my first two years and I was simply buying and sell I I was I fell victim to that I was following alerts and following signals and again my account was depleting and you're never going to be successful by following somebody is buying or selling at a specific level they probably need you to buy or sell so the stock price could go up so they could make money on it and they probably can't make money if it wasn't for them pumping up whatever instrument they're looking to trade and I trade a liquid name and I'm sure a lot of people trade like Forex is pretty liquid so there's no pumping up Forex that much um but you know there's there I don't believe in alerts and I don't believe in signals and that's how I've really structured especially my community and I respect any other community that does that is give valid logic behind why you're talking about something yeah right if 95% of Traders fail don't do what the 95% of Traders do and what do 95% of Traders do it's it's very obvious and you could just open up a simple Candlestick chart trading book or you can go flip Open YouTube and see what 95% of Traders do and again the uniqueness will speak volumes for itself and the uniqueness in a strategy or the uniqueness in a community will speak volumes in itself and if somebody's generic or doing the same thing that everybody else is doing there's not going to be any growth to that or there's not going to be any valuable lessons think about this think about you have a pizza shop and somebody down the street opens up another pizza shop you got two pizza shops right next to each other one is very successful and one is not very successful if the one guy that has success in his pizza shop he's probably doing something unique or generic not generic you know he's probably offering a good product you have a guy that just opened up a pizza shop down the street his pizza is probably generic to every other pizza shop that you have in town and this is with any successful business this is with any successful product this is with even trading in itself uniqueness will get you far and being able to adapt and be creative enough that you can switch to the different conditions and switch to the the demands of the market will get you far no I couldn't agree more I couldn't agree more and in terms of the consistency as well like just being consistent you know sticking through the process rather than just uh you know stopping at the first hurdle or putting in the F first 30 days and slowing down or 60 days and then slowing down and that's the usual habit like we're as of as recording this we're approaching New Year's and that's what's going to happen you know people one they're not putting in work now because they're saying okay let me wait till January 1st and when the January 1st comes along they'll put in 30 days or 60 days Sprint and then they'll just fall off for the rest of the year um so consistency on top of everything you listed there is is very important and it's exactly what you said there in terms of that uniqueness you know and I think going back to obviously what the community aspect you know breaking down your trades in such a way and then being able to actually follow through with the explanation of of what you're looking for why you're looking for it if this then happens what you're then looking for next to then be able to actually execute a trade and then same with the execution though of it doesn't stop there it continues and it's very rare to see that I would say on my side anyway ien I haven't seen that too often where someone's actually breaking down a trade as you say with the logic um you what is your thought process with that is it something that maybe was missing from your journey right and therefore you want to provide that missing Gap let's take a break for a minute there guys cuz I want to tell you about the best trading tool on the market trade Zella the reason why trade Zella is the number one trading tool that every Trader needs is because you can do back testing automated journaling trade replay in-depth analytics and so much more and the greatest part about trade Zella is that it's all automated all you have to do is connect your mt4 and mt5 it will pull all your data onto the dashboard you can add playbooks you can just add notes you can add images from your trades and you can get the insights that is necessary for you to progress as a Trader now trade Zella is for absolutely everyone whether you're a crypto Trader whether you're a Forex Trader whether you trade prop firms it is for absolutely everyone and that is why thousands of Traders have signed up using my link here through the podcast make sure you use the code RZ 10 for 10% off your monthly subscription or W for 20% off your yearly subscription link is in the description below and let's get back to the episode absolutely so like I said like following alerts or following signals there's no lesson to it hey buy here or hey sell here why why are you buying there or why are you selling here so having a thought process is how you were going to learn I essentially am just myself I keep it real I keep it to how I trade there's no like phony aspect to it because how I trade is how I come across everybody that watches looks at my plans watches my videos it's how I trade and essentially it's my own personal Journal so there's how I trade is what exactly you see and the plans in having the thought process is something that I did not have I think you're going to learn a valuable lesson even if you don't take the trade and you had no real skin in the game for it I think there's going to be a valuable lesson of you understanding why I said this and why I was watching that because you can reverse engineer it if you were to study every successful person or every successful Trader you can reverse engineer how they trade and no one's going to specifically explicit explicitly tell you how they trade right no one's going to say hey buy here or hey sell here but you can reverse engineer their thought process and you can reverse engineer their system their strategy their levels and that is how you're going to be able to develop and conform it to your own Edge there's no copy and paste with alerts there's copy and paste with providing my thoughts and levels there's no copy and paste to that it's essentially developing what's going on in my head so you can develop and create it uniquely and creatively to your own strategy or your own system and the Beautiful Thing of the market is the Limitless amount of opportunities and the Limitless amount of outcomes the market can provide and again going back to that unique example you have to be unique to stand out right and in the market a unique strategy will make money and when I talk about being unique it's not like doing something completely opposite of everybody that's not the approach that I'm I want to come off at it's just doing things that Traders don't do and that actually makes me think about this somebody recently asked me like how do you know if buyers and sellers are in control MH I'm I'm sure like a lot of people may have asked you like how do you know if buyers or sellers are in control yeah and I think that's the wrong approach to the market I think learning who is going to be be in the most pain in the market will be where a very valid Edge comes into play understanding if buyers or sellers are in control is valid and is true but I think a very powerful Edge is understanding where a lot of Traders are going to be screwed because where there is pain there is gain if everybody is buying a specific level the chances of that level working and the chances of the market coming and going in your favor will be very slim if everybody is buying or selling at that specific level 95% of Traders fail if 95% of people are buying there the odds of it working is going to be slim right definitely so you have to put yourself in the position of the opposing side of the market and for me my Edge comes where there is pain where there is trap Traders where there's that absorption yeah and understanding the pain aspect it's a zero sum game so you know it's it's kind of messed up to say like I'm I'm looking for other people's pain but in the market that's where the the most amount of gain will come from definitely no well it's like they say um you know when be what is the word what be um what it be greedy when others are fearful and fearful when others areedy right yeah so it's it's essentially the principle that everyone kind of learns near the beginning of their journey and it's the truth though and um you know what's interesting though is kind of going back to the orderflow side of our conversation in terms of the orderflow then do you use it in line with the technicals absolutely or other way around do you have the technicals then the order flow my order flow confirms my technicals okay yes I if I were to be trading without order flow I feel like I'm trading blind and I just can't do it um especially the way I trade and the order flow validates My Level My Level tells me where and my order flow tells me why and I need where and why to put a trade on that's my equation and without order flow I'm simply entering the market blindly because I can't gauge what's going on behind the scenes again the candles simp simply represent where price currently is trading at and where price was trading at before you need to know what's going on behind those candles could it be a lack of passive participants that's simply driving the market higher is the rally getting done on lack of offers and the chances of that happening if there's lack of offers in the market that might mean that that rally has a high odd of it failing so again looking behind the candles is very important and again I'm in the Forex Community a lot of them use like uh time frames like four 4our charts I use that myself I'm I it's very powerful however I really don't believe in a time frame of the market MH I I use 4H hour charts hourly 90minut charts Etc 5 minute 15 minute charts I believe in that but I don't believe in using a time frame to validate my tradeit because what does a f minute chart tell me about what's going on with buyers and sellers Wix form resistance like I mentioned earlier how support and resistance forms that forms because of the order flow the order flow left a footprint M and the footprint is the impression the market makes and that footprint gets represented by the candlesticks so usually why Wix form is um responsive participants entering the market and how continuation forms large drops or large rallies is initiative participants entering the market and again reading the order flow for me personally gives that edge there's no time frame of orderflow orderflow is simply a component of the now MH and I think not only technically but emotionally let's dive into the power of the now because this is a very important aspect that completely changed not only my life but also how I trade so let's talk about technically first The Power of Now and understanding the market will give you everything you need to know in the current present moment what it's telling you right now will give you the information you need to put a trade on or it will give you the information to tell you not to put a trade on so for me personally waiting for like confirmation on a 15minute chart or waiting for confirmation on a 5minute chart doesn't give me information on the now if the market just rejected a a supply level and we start selling off and I wait for a f- minute candle to close for me waiting for a time frame to confirm that setup might get me in way too late but if I use the order flow and I use the power of the now and read the orders coming in right now I can get in I'm not going to say before that move but as the move is happening and that's where a lot of the edge will come in is getting in if you're in a position and you're longing the market you want it to go up and you're buying it you want to make sure other people are buying after you but with orderflow you can put yourself in the position to get in as soon as you see the buying occur in the now and if you use a Candlestick chart it might be too late and if it's too late it's going to skew your risk of reward and it's going to put you're in the position to be correct more often than you lose now the second aspect to this is the Power of Now emotionally MH a lot of Traders can solve 95% of their psychological problems if they focus on the now if they focus if they remove their focus of the past past mistakes that they made past trades they took past emotional barriers that they had to overcome they forget about that it's the past it occurred you don't want it back if they ignore the future meaning you cannot predict the outcome of the market you don't know what it's going to do next you don't want it you don't even want to know what it does next right that's the future it's non-existent it's unknown we can't get that aspect all we have is now if you put your attention to the now and you put your attention to your and you watch yourself think and you put yourself in that position right now forgetting the past and not worrying about the future 95% of your emotional problems will be solved in simple terms no it's true because most people either live in the past or they're fearful of the future um versus as you say like the way I see it is like the past brought you to where you are now and then what you do now takes you to the Future exactly so like being you know uh sort of reflective on the past doesn't serve you in any way and then worrying about the future doesn't serve you anyway because it's all happening now as well I love that and um we're kind of coming towards the end of the podcast what I like to do is like quickfire questions so I want to ask you actually go after going through your journey and obviously being where you are today what would your thoughts in terms of the statement of trading being easy would you say trading is easy trading is not easy trading is a performance-based skill and anything that has to do with a high power or high attribute or high success you have to perform very high and for you to per form very high it's not going to be very easy you have to go through certain aspects that a lot of failing people are not willing to sacrifice or go through so no trading is not easy it gets easier but it's not easy because not only do you have to perform well you also have to control your emotions and what would be your top three tips to Traders out there where let's say they're in the position where they not got that consistency yet what would be your top three things for them to get that consistency start small you you have to prove the concept of your one pizza store working out before you can open up up your second store M the first store is not working you don't have a proof of concept and your trading business is not working out don't scale up so start small until you can prove consistency once you can scale up now it's about repeatability can you repeat your process daily if you can repeat that over and over and adapt to different marketing conditions and you're creative with it that will Propel you forward and the most important aspect to it is you're not always going to be correct so put your in the position to win-win meaning when you are wrong your losses are accepted that you can view it as a win not only a win that you protected your loss but it's a win because you took that loss and learned something from that loss so if you put yourself in the position to win-win in the market you're putting yourself in the position to grow your account and have a lot of success I love it I'm sure we could have done this for even longer we'll have to do a part two sometime as well we got to do it again definitely definitely well everyone thank you for tuning in make sure you drop a comment with your biggest lesson and takeaway from this episode the links for Carmine will be in the description below so make sure you check it out he's got some incredible content out there as well and as always make sure you hit subscribe and until next time everyone take [Music] care

Channel: Words of Rizdom

Views: 91,160

Keywords: Words of Rizdom, forex trading, forex trader, day trading, day trader, forex podcast, trading podcast, SMC Trading, ICT Trading, Rizdom Podcast, podcast, ict, trading, forex, umar ashraf, wor, prop firm, ftmo, best prop firms, prop firms, dr andrew aziz, humbled trader, trading for beginners, how to day trade, live trading, trading strategies, options trading, carmine rosato, options trader, stock market, options trading for beginners, carmine, investitrade, Futures Trading

Id: W4rIQpOu2WA

Length: 63min 6sec (3786 seconds)

Published: Fri Dec 29 2023