 Welcome back to the Trade Hacker Mindset. In this episode, I want to talk to you about trying to trade someone else's methodology. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right, so let's jump into this topic about trying to kind of force trade or force yourself to trade someone else's methodology. When it comes to trading, what new traders really fail to realize usually until they've been in the trading world for a while, is that they have to find the strategy and methodology that is the best fit for them, not necessarily someone else. Think about this. When we're talking about all the different ways to trade and there are a ton of different ways to trade, there are several components that you have to consider. Number one, you've got to consider the specific market or asset class that you're going to trade, right? Oil trades differently than gold. Gold trades differently than stocks. Individual stocks trade differently than an index. The personality of the market that you're trading needs to be a good fit with the personality of the person trading it, because some markets are just more volatile than others. Then from there, you've got to figure out, okay, what's your core strategy going to be? Some people gravitate towards trend trading. Some people gravitate towards premium selling. Some like to have more of a contrarian or a countertrend type of strategy. Some traders like to focus on just purely directional trades, whereas others like to do delta neutral or spreads or pairs trading. You know, somebody like me, I'm a very visual person and so I like to be able to, I like to look at charts. I like to look at the analyzed screen when I'm trading option spreads and get that visual representation of the strategy I'm trading. Then the third component you have to consider is the timeframe, right? Somebody who scalps and is in and out of trades in just a few minutes is completely different from somebody who even just is still a day trader, but holds positions longer intraday. It kind of be like the difference between somebody trading off of a two-minute chart versus somebody trading off of a 60-minute chart. It's a totally different mindset. Then take it a step further, somebody who's a day trader versus somebody who's a swing trader who holds positions over nights, holds position for days or weeks, and then you've got a long-term investor, somebody who is getting in something based on their analysis and they plan to hold this thing for months or possibly years. The timeframe that you look at or the timeframe that you analyze or the timeframe that you use, that's going to determine what you look at. The timeframe that you use is also going to determine how quickly you need to make decisions. If you're a day trader and you are trading off of a one-minute chart, you're literally focused and making decisions on the fly in real time very, very quickly. Whereas, if you're more of a swing trader or position trader, you could take the entire day to think about a position if you wanted because those types of positions may not move as much compared to what you're actually looking for in the big picture of that overall strategy. Part of the timeframe decision has to do with your risk tolerance for P&L swings. If you're a scalper and something goes against you by a couple ticks, you might be out. If you're a swing trader, you might let that thing fluctuate and have some pretty decent P&L swings on the way to your eventual profit target. These are completely different states of mind in your decision-making process, which brings us to the fourth component, which is basically having a decision-making or a framework for your decision-making. I know some traders who are purely discretionary and they trade based on their intuition. That's their decision-making process. Other traders pour over financial statements and documents for hours before making a decision. Some traders are purely mechanical. I would fall into this category where my trading methodology, my framework, my decision-making process, for the most part, is primarily rule-based. I always talk about with a lot of our strategies that it's 90% rules-based, 10% subjective. The reason I say that is because you still have to make decisions. We lay out the criteria. This is the criteria of when you get in. This is the criteria of when you get out. But there are some subjectivities involved. Like I said, about 10% of it is subjective, 90% rules-based. For example, we have one strategy that you typically get in with around a week to expiration. It is an overnight trade. It's a swing trade, but we're typically only in the trade for five or six days. We're getting in the trade and statistically we know, not only from trading it ourselves, but all the backtesting and vetting of the strategy that we've done, we know that the performance is about the same whether you get out with one day to expiration or zero days to expiration. When you come down, you're in this trade and you come down to that timeframe, now you need to make a decision. Do you get out with one day to expiration? Or is there a situation in certain environments that you might actually hold it for one more day, try to get some extra profit? That's the discretionary part. But the parameters overall are very strict and very laid out with just a small amount of subjectivity where you have to make a trading decision. You have to make assumptions about what you want to do with that position. What I've found over time, not only with myself, my own trading, but working with hundreds of traders over the years is that when traders find themselves in situations where they are not doing well, where they are stressed out, where things just aren't clicking, it typically has to do with the fact that they have gone outside of one of these components. Either they've gone outside of their framework of their decision-making process, they've gone outside of their normal timeframe, they've gone outside of their core strategy, or they've gone outside of the core asset class or specific market that they typically trade. It's no different than a hitter in baseball. I read this, I think it was Ted Williams, the great hitter, who had a, I read a book about him one time and it said, he divides the, and I may be getting this a little bit wrong so don't quote me on this, but he divides the plate or the strike zone into a bunch of different zones and then he went in, keep in mind there wasn't computers back then, he went in manually calculated what his batting average was for each zone of the overall strike zone. What he found is that I think it was like pitches that were low and away provided him with his lowest batting average of all the zones. Other pitches that were let's say were high and directly over the plate, this was his sweet spot and this is where his batting average was the highest. There was certain zones in the strike zone where Ted Williams, one of the greatest hitters of all time, was just a mediocre hitter, but there were others where he was just absolutely at the top of his game. So you want to kind of think of your different components of how you trade, you want to think of that as your sweet spot. That is the area that you need to focus in, that's your wheelhouse and so not only do you need to use that to focus on where you need to focus on placing trades, but you need to also understand the areas in that zone where you need to stay away from, where you need to not place trades or if you just can't help yourself, you're going to really dial down your position size. I got a question in our community from a member the other day and it was a great question. If we're trading based on statistics and probabilities, which is what we do at navigation trading, doesn't it make sense just to use the same position size on every trade? And my answer was this, actually no, it does not. And the example I used is, let's say we're selling premium. Well, it's statistically proven that if you sell premium when implied volatility is higher, not only you collect more credit, so you have more profit to get, but the probabilities still play out, but the average winner is so much larger, which really skews your overall profits to trade to selling premium when implied volatility is high on the symbol of the options that you're trading. So if you find yourself in this environment, is this the time where you should scale up your position size, use more allocation of your capital, or use less? The answer is, and what I've been doing for the last 15 plus years, I've been trading over 20, but options really about 15 is really utilizing more capital in those periods of high implied volatility. And there's a huge benefit to doing that. So finding your sweet spot, only swinging at the good pitches means that you still want to stay active in the market. You still have to step up there to the plate. You still have to take the pitches, but some you don't swing at. And sometimes you do, and maybe you do get a hit, but those need to be a very low number of trades that you take if you are trading outside of those components, if you're trading outside of your sweet spot, if you're trading outside of your wheelhouse, or just don't do it at all. You have the decision-making power to make the decisions for when and how you trade. You don't control the markets. You don't control your performance. You control when you enter and exit trades. And that's got to be this sweet spot that we've been talking about. I was talking to a guy who was a floor trader back in the 90s on the Chicago Board of Options. And originally he trade in the equity markets. And I think it was the S&P pit, if I'm not mistaken, and then was an Uber successful trader. And then he went over and moved out of the S&P pit and decided to go trade in the bond pit. And I can't remember exactly what variation, what bond duration, or whatever it was. But the bottom line is he absolutely got his clock cleaned in the bond market. Whereas he was one of the most successful pit traders in the S&P 500 index that he traded. And so obviously after about, I think it was nine months he said, he decided he's going to go back to what he knows. He's going to go back to his sweet spot because it's a totally different market. So you have to be aware of which one is the best fit for you and really hone in, really focus on that. If you've been keeping a trading journal, which we talk about all the time, you are going to start to know. Because if you're a new trader, you might be thinking, well, that's great. But how do I know which market is the best fit for me? I don't even know what half the markets are. And so what you have to do is you have to start paper trading. You have to start watching the markets move. You have to start and then incrementally start trading very small position size and documenting and journaling the whole way. And what's going to happen is eventually you are going to find your niche. Eventually you are going to find that sweet spot. And that's what you're going to be able to focus on. Now, keep in mind there, there's nothing wrong with expanding your sweet spot. There's nothing wrong on, you know, focusing on areas that you are not as good at and becoming better at those as well because I believe they'll help you become a better, well-rounded overall trader. For example, I day trade and I swing trade. I trade stocks and futures and I trade options. But my core competency, my core focus is on swing trading option spreads. And because I know that, and I've been doing this a long time, because I know that, that is where 90% of my allocation of capital goes. Okay? I use a much smaller allocation when I day trade. I use a much smaller allocation for, you know, some of these outer strategies that I still work in. But my absolute core sweet spot is using option spreads for swing trades that I'm typically in for several days to a couple of weeks. But it hasn't always been that way. I've been trading for 22 years and it took me a long time to figure that out. And so that kind of ratio of capital allocation, that's really only been going on for about 10 years, I would say. You know, even when I started trading options, I was still doing some other things until I really started to realize, okay, I'm making a lot of money over here, but not so much over here. I mean, that was my first clue, right? I'm a slow learner, but you know, kind of duh, right? I mean, that's how that works. And so I finally figured it out and that's where that, and that's why that is so much of a big focus of mine in my own personal trading. So if you're in this area of trying to figure this out, here's what I would ask you to do. Take out a sheet and if you're tracking your profitability, which hopefully you are of the different strategies you trade, list those out. And then track that profitability, use a spreadsheet, write it on a piece of note paper. I don't care what you do, but write those out and start to track those and you'll start to gravitate and see which one becomes your sweet spot. And once you start to figure that out, start to get away from the ones that aren't performing well, or you don't feel comfortable trading or whatever it is, and really start to allocate more, if not all of your focus just on those core competencies. I hope this was helpful. If you want to be part of the navigation trading community, just go to community.navigationtrading.com. We have hundreds of traders interacting on a daily basis, not only about mindset stuff, but sharing trade ideas with the sole purpose of helping each other become better traders. I look forward to seeing you on the inside and I'll see you in the next episode.