In the latest installment of Pancakes and Pivots, we did something new.
Usually, we have a fixed discussion on a predetermined topic. Of course, the problem is that I speak year round for 7 hours a day, 5 days a week in the live webinar for members. So in that time, we are constantly talking about psychology, strategies, etc. And you guys who are in the live webinar see everything. You see my executions, the charts I’m looking at, all of that. So at the end of the week, there just aren’t many topics that we haven’t discussed already.
That’s why for this episode of Pancakes and Pivots I decided to have an open forum and let you guys ask your own questions. The notes from that Q&A are below. If you want to hear my full thoughts on any question you can reference the timestamps to skip ahead in the video at the bottom of the page.
[15:37] Q: Now that I’m a profitable trader, should I quit my job to trade full-time?
This is a question I’ve gotten a few times. My answer may not be what people expect or want to hear, but it’s no.
Steady income is simply a great thing to have. Unless you have the most soul-crushing job in the world, you’ll probably have better mental health with a steady income than you would if you ventured into the unknown everyday and left your fate up to the market gods.
It’s tempting to think that quitting your job wouldn’t impact your trading. But I think it does. When you’re doing well trading and you have other income, it makes it easier to maintain your emotional balance. You don’t need to trade. Instead, you can trade when you want to. You can wait for premium hands without feeling pressured to make money all the time. You can pass up the trades that you aren’t as confident about. That’s the advantage of stable income.
When you trade for a living, you’re putting a lot of pressure on yourself. Can you do it? Absolutely, you can. But will your life be better if you eliminate that source of stable income and make yourself – plus potentially your family – dependent on trading to pay all the bills? Probably not.
That’s just my 2 cents though. If you really want to give it a shot, then go for it. Just make sure you’ve thought it through and accounted for the potential change in your psychology.
[24:45] Q: I’m having a lot of success trading pivots. I’ve also been hearing a lot about cryptocurrencies lately. What are your thoughts on trading cryptos?
I don’t know anything about Bitcoin. I don’t know anything about other cryptos. I don’t know anything about options, or futures, or bonds. I don’t know anything about women. I don’t know anything about life. The few things that I do know are how to trade pivots, read market sentiment, and get from Point A to Point B.
The point is to say that you don’t need to be a jack of all trades. If you are having a lot of success trading stocks, why give that up to do something that you don’t know about?
You may just be really curious about crypto, in which case you should check out our articles on it here and here. If you are still interested after that, I’m sure there is content all over the web on how to do it. Of course, finding the good content is always tricky but it’s probably out there. However, if you want to get into crypto just for the money, I would really hesitate to go away from something that’s made you consistently profitable to venture into the unknown.
[30:27] Q: In the past, you’ve advised traders to risk 1% of their total capital per trade. Can I risk 2% or more?
Of course! Hell, you can risk 10% or 20% if you want to.
The important part of risk allocation is that you aren’t trading emotionally as a result of putting on too much size. You have to honestly assess what your max pain tolerance is. In other words, what’s the biggest loss that you can stand to take on a single trade? As long as you are consistently below that max pain threshold, you’re good. You won’t have the emotional baggage and stress that cause traders to make irrational decisions. Whatever that threshold is depends on you.
That being said, if you are a new trader then I would be more cautious. In the early stages of your trading career, longevity it the most important factor. Stick to 1% or 2% as a new trader. Once you’ve established yourself as being profitable for a while, you can play around with that amount more.
[36:52] Q: Why do you have so many lines on your charts?
Several years ago somebody in the live webinar said to me, “Dan, I understand the pivots and I see everybody having a lot of success with them. I get it, but it’s just not for me.” So I asked why and they responded, “There are too many lines on the charts. I don’t understand why they’re all there.”
So first, let me explain what all the lines are. I have Bollinger Bands, Linear Regression Lines, and Moving Averages (both EMA and SMA) for 5, 10, 20, 100, 150, and 200 days.
All of those lines represent levels of supply and demand. The PS60 is predicated on the notion that stocks trade from supply to supply and demand to demand. They don’t just stop randomly. In supply zones you have emotional buyers meeting technical sellers. In demand zones you have technical buyers meeting emotional sellers. All of those lines on the charts are what allow me to be a technical buyer and a technical seller. Without them, I no longer have the ability to confidently assess when stocks are going to stop.
[46:27] Q: I built my account from $3,000 to $30,000 and now I’m about to transition into trading full-time. What amount of money should I be reasonably expecting to make?
I understand the reason to ask this question, but I’m afraid there’s no good answer.
Trading simply is not a real business. The stock market is real, but trading is not a real business. If you’re a lawyer, you can say well I have this degree, I have this much experience, and I’m starting a job at a firm in this city — how much should I make? But trading isn’t like that.
The answer for you will depend on your risk tolerance, your strategies, your monthly bills, your lifestyle, etc. There are people who do very well with an account that size, but it’s not possible to say how well you should do without knowing a lot more information.
The great news here is that you’ve already built your account by 1000% from where you started. Which means that you already know how to make money trading. So if you’ve been making $100 a day, you are capable of doubling or tripling that in the near future. Just keep using the process that’s working for you and gradually increase your tier size.
That’s all for this week everybody. I hope you all have a happy and healthy turkey season.