Stop Obsessing Over Trading PNL (the bobblehead concept)

hello everyone i'm lance breitstein and i will be presenting for smb capital what i call the bobble head concept [Music] so really the bobble head concept is a fundamental visualization idea that helps you focus on what matters and helps you forget about what doesn't and back when i was running an office one common refrain you would always hear me say is like hey guys how about we stop comparing p l's and start focusing on moving our bobble head higher so what does that actually mean well let's see so most traders the way they think about things is with the daily p l obsession were you green on the day where you read on the day what did everyone else put up and the issue with obsessing over p l is a couple things first of all it's demotivating if you have a bad day you think you did something wrong you think you failed or you think uh you know you weren't a successful trader but that's not necessarily true especially in a game as probabilistic as trading so often your actual performance has nothing to do with whether you were red or green and that's just simply the way the market happened to unfold that day the other thing with obsessing over p l is it doesn't normalize for the opportunity set is a 10k day good well i don't know if it was a very difficult tricky trappy day and everybody else was negative and you did 10k yeah maybe you you traded very very well but if you put up 10k and this was one of the biggest days of the year and everybody else put up 100k then maybe you didn't perform so well so p l really doesn't tell the whole story anyways and regarding that trading is so probabilistic negative days really are an inevitability it's something we all must learn to accept as part of the job and so many people might say like oh how do you deal with down streaks how do you get through this but that is just a core fundamental part of this job we will deal with negative days and the other paradox too if we focus on our p l is the bigger the trader you are the bigger your negative days become so if you ask any top trader at any firm who has the biggest negative days it's probably them but that doesn't mean they're doing anything wrong it doesn't mean anything right it's just not the appropriate indicator then much like one of my favorites james clear of atomic habits would say p l is a metric that is a lagging indicator it does not speak to what you're currently doing to improve which will then have an impact on your future p l and all you really need to be concerned with is the future not the present or the past in an ideal world what we really want is to focus on our expected value and to obsess with this and this alone and the way i do this is that bobblehead concept so if you take a chart where on one axis it's your daily expected value and on the other it's time over time all you want to do is steadily increase your little bobble head and imagine your head shifting higher so maybe if you're a trainee your expected value each day might be negative 50 bucks but after a couple months maybe even six months who knows uh you reach that breakeven point where on the average day you're now a positive trader in fact you're approaching consistently positive and from there you try and grow and grow and grow improving not just the number of days you're green but also the size of them and so really what you want to think about is each day how can i make it so that my time in front of that computer at that desk is worth more and more and more so that on average i'm putting up higher p l and so really if you think about it all that matters with your p l is what's your expected value each day and what this does is it makes you agnostic to the actual um daily performance or the opportunity set it doesn't matter if the market was tough it doesn't matter if the market was easy it doesn't matter if you have a good day or a bad day no matter what you're able to win the day so what i mean by that is so many people if you have a p l obsession you might have a negative day and with that negative day you might say i'm out of here i'm frustrated i'm going to go to the bar or i'm going to go to the gym or i'm going to do whatever i can to avoid coming face to face with what was failure today or at least what your p l says is failure but if instead your obsession is on the expected value of what you could be doing better you view that way way differently instead you say to yourself how can i improve how could i have made more p l how could i have lost less what could i have changed how could i have spotted more opportunities and so what this mindset really does is is many things and i think mindset coach ben crowe who uh was the coach of one of the best female tennis players in the world says it says it best there's two expectations that are kind of killing performances all over the world in fact they're probably killing the world one is expectations of outcome which you can't control and the other one is expectations of others which you also can't control and focusing on something you can't control but wanting to control it is the definition of anxiety or stress or pressure or worry so the process is about accepting the things you can't control and letting them go and getting them out of your psychology and focusing your attention back on the only thing you can control which is how hard you train and your intention and also the words that represent the best version of you and she she can accept the things she can't control and have confidence in herself that's the only expectations she can put on herself the goal her goals and her dreams and she's spoken publicly about her goals and her dreams and she's put that out in the universe and she's going after them as hard as she can ryan that's just called living what ben's talking about there is you can't allow these external measures or the external expectations to affect your performance all you can focus on is what you can control each day so now here's one of the best parts about this mindset shift what people don't realize is on those losing days especially those really really really bad days if you lost 150k in a day or more or any big rip for you you might think it was an awful day but if you truly internalize this mindset what you eventually realize is this is a great thing for you this is an opportunity because the market just revealed a flaw in your system and a flaw in your training that you can now fix and when you are able to learn and take lessons and fix those issues these opportunities actually provide the best times for you to increase the expected value of your bobble head so let's say there's a market that punishes over trading and due to these losses you learn how to counteract in that how to be more disciplined and more selective those losses are actually increasing your long-term p l it's making you more adaptable across markets it's making you a more resilient trader it's making you a more mentally robust trader and it really allows you to keep the big picture in mind right we don't want to focus on our p l over the next day the next two days the next five days we want to focus on the next five years or the 10-year game and what this allows you to do is progress every single day and raise your expected value with the big picture in mind really as counterintuitive as it seems your lifetime p l is only two variables one what's your average daily expected value and two the number of days traded and if you really truly focus on just increasing your bobble head each day you're maximizing the expected value of your time in that seat but you're also doing it in a much more sustainable manner you're removing your frustrations you're minimizing your stresses and you're focusing on the journey and process rather than having to live with the ups and downs that are designated or dictated by a p l swing and so what does this mean in practical applications it means that as as i chimed at the beginning of this uh video i would always say hey guys let's stop comparing p l and let's go back to moving our bobble head higher so much time after the close is spent asking oh what did you put up or what did you make in or what did you do this and it's not about that p l right it's really about what can i learn from what you did today or what can i learn about the opportunities and the more time we can move away from asking or caring about p l and more about what we can learn the more effective we'll become and again like i said this minimizes psychological stress it can always be so defeating and so depressing when you take some big rip but what if instead we just said this is an opportunity that's going to make me better in the long run why because i don't care about the here and now i care about where i'm going to be in five years or ten years from now because this is going to be part of the process to become the best version of myself nano one of the traders here i have been helping out as he's recently experienced his first major drawdown and in the last monthly meeting he said something that was just so so important to me he recognized how this process was helping him to become a more robust more diversified trader and even cooler than that was he learned about stoicism this was a topic that i love to learn about and i think it makes you a better person it makes you stronger not just in training but in all areas of life so regardless of you know whether it takes him a day a week a month this is something that's giving him skill sets to succeed for the rest of his life additionally when you focus solely on the process and your expected value it allows you to remove limiting beliefs because there are times when like if you're focusing solely on the p l of others or yourself it is nothing to do with what your true potentials uh could be and i remember when bella like told me you know lance like you you have a lot of talent and sometimes if you're comparing p l solely to those around you you're never allowing yourself to separate from the pack and really be uh the maximum of your potential and it's so true because all i needed to do was just focus on getting better every single day and that's exactly what i did so some final thoughts one quote from mariko yugeta who is a female marathoner who uh ended up doing family kids and everything during uh her younger days she became the world record setting female after age 50. and a quote that stuck with me was it's a waste of time to think about days gone by what's important is to hear now in the future how can you improve yourself in the days to come and this encapsulates everything about the bobble head concept the more you can remove yourself from obsessing over your p l the more you can focus on what matters getting better each and every single day and viewing adversity as an opportunity to get better not for now but for the five ten and years and the lifetime ahead of you and then we can get the f to work on getting better hey go ahead and click our subscribe button so you don't miss any of the videos they're producing for you and the trading community and please take the time to add your feedback in the comments section for what videos you'd like for us to produce next and what you found helpful from this video from all of us at smb train and trade well

Channel: SMB Capital

Views: 50,030

Keywords: stock market, day trading, smb capital, trading, investing, markets, wall street, stock trading, options trading, options income, economics, finance

Id: qPBxdaPA2l0

Length: 11min 14sec (674 seconds)

Published: Tue May 03 2022