What's up you guys? All right? So I'm wanting to do a little video here talking about overconfidence. I'm on three red days right now I've dug myself a little bit of a hole I've got another episode that I'm gonna do specifically on digging myself out of the hole and kind of my approach on how to you know how to kind of get back on the horse after losing 20 grand or whatever the case may be for you. but I want to talk a little bit about the overconfidence because I think that it's a big contributing factor in digging these holes that I often find myself in. So you know each day when I come in to trade I have a general goal of making money right? That's what we do this for.

We don't do this just I mean some people may find it I mean it is entertaining, but it. but really the goal is obviously to make. So each morning when I come in, my routine is pretty much the same I start the day looking at my scanners to see which stocks are already up pre market and which ones I think have the potential to continue moving up and I find that I am very I'm like such an optimist when it comes to the market I'm just I always look at things and I'm like I see the potential and it's great to see the potential and people in cars and fixer-upper houses, but sometimes in stocks. Seeing the potential is being a little bit biased and and not really seeing the reality which sometimes is that the stock is not very strong really or doesn't really have a good chance at doing what in an optimistic you know kind of perfect world it might do.

And yet I often trade with this kind of lens of optimism and overconfidence. For instance, today I took a trade on a stock and you know the stock was It had broken through the V whap and it was squeezing up so it was moving up quickly and I looked at it as it was breaking I think it was 675 and I was thinking if this thing breaks 675 next spot Six eighty, Eighty Five Ninety Seven dollars, rip up to seven ten high a day, squeeze through seven fifty like that's kind of what I was thinking in my mind and so as it starts to squeeze up as it starts to open up, I went ahead and jumped in at seventy-five it taps eighty and then drops all the way back down to six and you know becomes a really big false breakout. And as I was looking at it even just a few minutes later I was like man, why why did you take that trade you know that was why were you so confident that that was gonna work and I really concluded that I was being overconfident on that said that even though that tray that setup does work sometimes on this, on this particular instance and at that time of the day, and on this particular day, all of the sort of indicators were that it would fail, the market has not been particularly strong today. I'm read on.

I think four out of the six stocks I traded, we've seen more halts going down than going up and yet I hear I am being optimistic that this one's gonna buck that trend and just squeeze up now. I Think the challenge is that on the one hand, being overconfident and sometimes overly optimistic can pay off really well, and in a hot market on the right day, that same exact setup could work terrifically well and end up being a really big winner. So it's not like it's good to not be overconfident ever or to not be optimistic ever. and on the other extreme, to be really fearful and and pessimistic to assume that everything is going to fail I'm not sure and and I'm not.

I Don't mean this long versus short because you can be optimistic to the long side or the short side. you can be optimistic. The short seven Long's that you, you can, you can. You can be both ways on it.

I really mean more optimistic or pessimistic that the position that you're going to take whether it's long or short, that it'll work. And so if you're really pessimistic and fearful and I've met traders who are like this, you don't end up taking a lot of trades because you sit on the sidelines and you're afraid that yeah, it's not gonna work or oh man I don't want to take the risk I don't want to lose the money. It's probably going to fail and then inevitably you do end up missing out on some really great opportunities because you were too conservative. So ultimately, you know successes of traders is finding some middle ground in there.

But I think a lot of traders come into the market on the overconfident side of the spectrum. I Know that that I'm that way and that it's is reflecting in the very fact that out of 250 trading days or whatever there are in here I almost every single day and every single day I find something to trade I'm optimistic enough I'm almost every single day that I find something to trade and there's not a quality set ups every single day. I Mean there are on a lot of days, but not every single day and yet I am optimistic and they in there now. My, you know the kind of settings of my strategy and sort of the way I'm wired to be optimistic and at times overconfident.

How does it sort of tie back and in terms of my actual performance as a trader? And this is what's kind of interesting is that for me, being an overconfident and optimistic trader has made me profitable. I mean I do well And yet when you look at my metrics, what you'll see is that my average losers are actually a little bigger than my average winners. And it's because sometimes and it doesn't have to happen very many times, where to really screw up your your averages? Sometimes being overconfident and you know, optimistic about a stock is completely the wrong move and it ends up that I'm getting into a stock at a much much higher price than I should overconfident with way too much share size. and then in one trade I can lose $10,000 or $20,000 I mean I could take yeah I got a head Times have very big losses Now my accuracy just for the last month was about 71 percent, which is really solid.

Very happy with that. Finished was sixty six thousand dollars in profit. But my average losers? they were only about six hundred dollars versus nine hundred dollar average winners. But by the end of the month the average losers had doubled to eleven hundred dollars and the average winners were just under 900.

So my average losers doubled because in the last three days I had two six thousand dollar losses and one $9,000 loss. Just like that, my metrics for the entire month are, you know, screwed up because of those three days of being both overconfident and way too optimistic about setups that were overextended. And and I think the problem there with the overconfidence is that when you're overconfident, you're not. at least for me I'm not thinking about risk in the right ways.

You know when I mean it's like it's like anything else, but it's It's kind of the other side of being overconfident that you might not initially think of is risk-taking If you're the person walking on like the edge of a cliff like the Grand Canyon or something like that and you're really confident, maybe overconfident, you're like oh, this is fine. like I'm gonna be totally okay and you know you could obviously end up taking a risk that's really not worth taking it and following right I mean that would be it would be terrible, but that overconfidence could lead to falling. Sometimes you see people taking selfies at the edge of mountains and you're like overconfident and then in invert and perhaps risk-taking Because the thing with the risk-taking is that whenever I have the fifteen or twenty thousand dollar red days, you know those were never the result of me saying you know what today I feel like I can afford to take twenty thousand dollars in Frisco no I don't I don't come in saying today's a day where I'd be okay if I lose twenty. Great! What happens is I'm overconfident and I end up taking a trade with way too much share size I don't come in sang I'm willing to risk this much it's I get overconfident and then I just all of a sudden I'm like oh my god now now I've got to clean up the mess.

Sometimes a beginner driver can be overconfident, right? You know, Maybe a fifteen-year-old trying to make a youtube video and drive? Maybe that's a little overconfident for that for for someone with their learner's permit. A good thing that YouTube wasn't around and I was 15 years old at least I don't think it was I don't know what YouTube was invented. But so back to the sort of topic here. how do I So the thing that I kind of struggle with the times is on days like today I feel really defeated because I feel like man.

You know, what? what the heck, you know what's wrong. What's the matter with you sitting here, down, you're right. On the day it feels like just such a deflating feeling, it feels like it's you know I cuz when I step back I'm like man I just I was so overconfident I took way too much risk and now I've got this hole that I'm gonna have to dig myself out of and it makes me question my strategy a little bit. You know it makes me kind of ask myself.

you know it makes me feel like I can't completely trust myself when I trade because occasionally I get myself into these higher risk positions at the same time on the days where I'm up twenty twenty-five thousand which so far has been my best day in the last like two months. $25,000 in the green I Don't really sit there questioning my strategy, you know I'm like nice work. that's awesome. $25,000 in one day get a pat on the back even if I was overconfident even if I was super aggressive.

the reward is that you're green and really green. so it's only a really on the red days that I end up. you know, kind of question the strategy. but of course I would say that you really need in a lot of ways to be able to to be okay with with the kind of worst-case scenario sometimes financial advisors and say things like you know, my clients never call me when they've made money.

They call me. You know, when they've had a really bad month, when the markets down, you know, ten percent. So if the market dropped 10 percent and you were 100 percent invest in the market and your life savings or your 401k retirement account dropped by 10 percent, would you be able to handle that or would you be panicking because we'd be panicking, then you probably shouldn't be fully invested in the market. You should be diversified down into bonds and stuff like that.

So when the market drops 10 percent, at least you've got you're not. Your beta is not a one-to-one so you know similar. I Suppose with trading is that if you can't handle a day where you could potentially lose fifteen or twenty thousand dollars, then you probably shouldn't be trading with ten thousand share positions. And you probably shouldn't be trading.

You know, super low flow momentum stocks that are spiking up one hundred two hundred three hundred percent in one day. So you have to kind of adopt a strategy that fits within your risk tolerance. I mean ultimately, that it's it really is true. And I think that for me, the strategy that I had you know it obviously it pays really well.

Would I like in a perfect world to be able to make the same amount of money, but just be averaging two thousand a day instead of having three ten thousand dollar days, three Red $7,500 days, and then three more Red $10,000 days, or green $10,000 days? Sure, but I haven't found the ability to have a strategy or or to trade in a way that is kind of that consistent. And maybe that's you know, a flaw in my strategy. but it's and maybe it's something to strive for finding more balance. But those big green days don't come without taking risk.

If I didn't take those risks, then I wouldn't have the big Reed days. Of course the red days would taper as well, but then at the end of the day, where would I be? Would I make less money? and I think that I would. and I'll tell you that as an example of this, I had a 56 consecutive day green streak from I Want to say 2016 into 2017 I think that's when it was. it was a while ago, but during that green streak I didn't actually make a lot of money because I was so fixated on being consistent in being green that if I was up, even just.

it's kind of a pretty little pharmacy in here. If I was up even just like $150 on the day, I would say now if that said, I'm throwing in the towel I'm done I don't want to push my luck and so I was so I was becoming so risk adverse that really wasn't trading enough. Whereas when I'm not fixated and worried about having a red day or whatever you know, a green streak, consecutive green day type of thing. I trade much more I trade much better I'm more aggressive when the time is right I'm not afraid of loss I'm just really focused on being aggressive so it's just kind of interesting.

and you know again, this is just an episode I wanted to make for you guys sharing my thoughts. There's no right or wrong answer. it's really what's what feels right for you. And the ups are great.

You know it's that quote from that Johnny Depp movie. When you're up, you never feel like you're gonna be down. and when you're down, you never feel you're gonna be up again. Then trading is like that.

A lot. it's you Know it's just the way it sometimes seems to be. The ups are certainly great, and the downs? They're not fun, But as long as you're able to mitigate them and you make more than you lose on average and you're not profitable, you're doing something most people can't do and you should be proud of yourself for that. We can always strive to be better, but if you're green, you're You're doing really well.

So that's the first goal. Get green and then try to get a little more green. Alright, that's it for me. I Hope this has been interesting for you guys I Will see you for our next recap and stay tuned for the special episode on how to take yourself out of a $25,000 back trading.

Check out some build links in my description and if you have questions, ask them in the comments I Personally respond to every question posted on my channel. Don't forget to subscribe.