1 00:00:01,004 --> 00:00:03,716 Hello everyone, welcome to another episode of Line Your Own Pockets. 2 00:00:03,716 --> 00:00:10,182 So in the last episode, we talked a little bit about compounding and things like that when it came to back test. 3 00:00:10,182 --> 00:00:15,646 And uh, you know, Dave had a question from a viewer that I think kind of tied in perfectly. 4 00:00:15,646 --> 00:00:20,010 So we decided to do that this week about congratulations, you're making money. 5 00:00:20,010 --> 00:00:20,560 Good for you. 6 00:00:20,560 --> 00:00:23,903 Uh now what when it comes to withdrawing and things like that. 7 00:00:23,903 --> 00:00:29,928 So I don't know if you have the exact question to read or if you want to describe it a little bit more there and we'll we'll pop into it. 8 00:00:29,980 --> 00:00:32,211 Yeah, this is from Chris B. 9 00:00:32,211 --> 00:00:35,242 He's longtime list member. 10 00:00:35,322 --> 00:00:40,664 And it kind of warms my heart when I get a message like this, because this is, you know, people's success is why I do this. 11 00:00:40,664 --> 00:00:46,367 Um he said much of the podcast content is rightly focused on how to make money. 12 00:00:46,367 --> 00:00:50,848 Have you guys thought about talking about strategies for withdrawing winnings? 13 00:00:51,269 --> 00:00:55,811 Timing and amount are two things I'm curious about, but I'm sure there's lots more than those two. 14 00:00:55,811 --> 00:00:58,011 So yeah, you're right. 15 00:00:58,011 --> 00:00:59,632 Like this is 16 00:01:00,156 --> 00:01:02,577 uh a a good problem to have. 17 00:01:02,797 --> 00:01:19,945 It's um so I I really I really like getting messages like this just because I know that uh you know people that I work with I'm sort of you know trying to kind of select for people 18 00:01:19,945 --> 00:01:22,796 that I think will be successful or can be successful. 19 00:01:22,796 --> 00:01:27,538 So yeah, I I'm excited to talk about this. 20 00:01:28,716 --> 00:01:41,678 Yeah, and it's you know, again, good problem to have, but it's something I think is good to ignore until you need to was kind of my my takeaway is that, you know, it's like uh 21 00:01:41,678 --> 00:01:42,539 taxes. 22 00:01:42,539 --> 00:01:49,226 Okay, well step one, uh worry about making money and then step two, worry about paying taxes on that money. 23 00:01:49,226 --> 00:01:54,646 Uh the amount of times that I've had, you know, people come to me and or talk about it 24 00:01:54,826 --> 00:01:58,517 Should I open a an LLC or or something for my trading? 25 00:01:58,517 --> 00:02:02,528 Is it, you know, a better tax efficient way to do this or that and the other thing? 26 00:02:02,528 --> 00:02:08,970 Um, and I'm like, well, you know, and they're they're new traders and they're they don't really have a strategy or anything set out yet. 27 00:02:08,970 --> 00:02:11,290 I'm like, well, just don't worry about it. 28 00:02:11,290 --> 00:02:18,572 You know, don't go open up spend the money to open up a corporation and and hire the world's best trading accountant or whatever yet. 29 00:02:18,572 --> 00:02:21,767 Like it, you know, i if you have capital losses 30 00:02:21,767 --> 00:02:24,640 Only then you don't really need to worry too much about this. 31 00:02:24,640 --> 00:02:34,389 Um, but yeah, so if you're if you're new, it you know it's it's something to keep in the back of your mind, but don't worry too much about this uh from the jump. 32 00:02:34,389 --> 00:02:44,197 But hopefully, right, your goal is to get to a point where you have to worry about this, and that's when you start to say, Okay, well, I'm I'm at least successful enough that I 33 00:02:44,197 --> 00:02:48,681 have to I I have some profits and with to draw from. 34 00:02:48,786 --> 00:02:51,405 And first of all, congratulations, right? 35 00:02:51,405 --> 00:02:51,606 Yeah. 36 00:02:51,606 --> 00:02:55,709 But now it's it is a important conversation to have when you get to that point. 37 00:02:56,168 --> 00:02:56,528 Yeah. 38 00:02:56,528 --> 00:03:02,637 So th y this is classic premature optimization to be thinking about this ahead of, you know, when you have profits. 39 00:03:02,637 --> 00:03:05,120 Um I think 40 00:03:07,258 --> 00:03:13,014 I've I have used different or thought about this in in different ways over the years. 41 00:03:13,014 --> 00:03:19,228 So I think it'd be good to Fer first I wanna point out we are not financial advisors, so 42 00:03:19,228 --> 00:03:22,413 if you if you weren't gonna do that, I was gonna do that next, right? 43 00:03:22,413 --> 00:03:23,752 Like um 44 00:03:23,752 --> 00:03:26,915 not be taken as financial advice in any way. 45 00:03:26,915 --> 00:03:32,246 What I'd like to do though is share kind of how I have thought about it over the years. 46 00:03:32,246 --> 00:03:39,446 I've been in sort of different situations over the years that have um and I've thought about this in different ways. 47 00:03:39,446 --> 00:03:47,693 And then and thinking back on how I've thought about it, I think maybe there were some mistakes that I made, perhaps. 48 00:03:47,693 --> 00:03:50,595 And I'm not 100% sure about that the way I think about it now. 49 00:03:50,595 --> 00:03:51,275 And 50 00:03:52,031 --> 00:03:59,463 Probably wouldn't change anything if I went back, but if I was optimizing for something different, I would have made some different choices back then. 51 00:03:59,596 --> 00:04:10,030 Yeah, and just to expand on the disclaimer, it's it without, you know, really just being disclaimer is that it it's one hundred percent true that this is personal for uh 52 00:04:10,030 --> 00:04:10,980 absolutely everyone. 53 00:04:10,980 --> 00:04:19,354 And, you know, we we can talk about our experiences and things like this, but it's gonna be way different for, you know, uh a twenty year old with a five grand account and 54 00:04:19,354 --> 00:04:26,421 unlimited earning earnings potential in his life and a a seventy year old with a two million dollar account who doesn't have who's retired, right? 55 00:04:26,421 --> 00:04:27,977 It's gonna it's gonna be 56 00:04:28,231 --> 00:04:30,983 and every single individual thing in between there. 57 00:04:30,983 --> 00:04:39,117 Um, so just know that, you know, you gotta take everything you're gonna hear and then just kind of wrap your own personal experience and where you are and what your goals are and 58 00:04:39,117 --> 00:04:41,089 things like that uh into it as well. 59 00:04:41,089 --> 00:04:49,613 Because uh it is when it comes to things like this, you know, there there are some universal truths within trading. 60 00:04:49,613 --> 00:04:55,587 And and you know, there are some good practices and bad practices to strategy building and back testing and things like that. 61 00:04:55,587 --> 00:04:56,107 But 62 00:04:56,107 --> 00:05:02,517 When it comes to personal finances, uh, it is just the most personal thing, you know, that and health, right? 63 00:05:02,517 --> 00:05:04,510 This is the the two most personal things out there. 64 00:05:04,510 --> 00:05:07,604 So make sure whatever you're hearing, you're just filtering through that. 65 00:05:07,604 --> 00:05:11,580 Um, you know, that's good, but I'm in this situation, right? 66 00:05:11,580 --> 00:05:12,318 Type of thing. 67 00:05:12,318 --> 00:05:12,868 Yeah. 68 00:05:12,868 --> 00:05:20,274 And, you know, there are financial advisors out there that are really good at this and and uh that's what they do. 69 00:05:20,274 --> 00:05:29,120 And I in fact I have one, like why which might surprise some people, but I think you know, you only get one shot at life. 70 00:05:29,120 --> 00:05:38,667 So it's always good to have an expert sort of, you know, reinforce the way you're thinking or, you know, give you suggestions or poke holes in what you're doing. 71 00:05:38,847 --> 00:05:40,478 So I always recommend that. 72 00:05:40,478 --> 00:05:44,539 yeah, let's let's have that be the first thing and stop there for a bit 'cause I do as well. 73 00:05:44,539 --> 00:05:46,330 And it shocks people as well. 74 00:05:46,330 --> 00:05:53,892 And they say, Oh, because a lot of people think that all financial advisors do is, you know, plug you into an index fund and and walk away. 75 00:05:53,892 --> 00:05:58,973 And certainly that it that can happen and that is the case. 76 00:05:58,973 --> 00:06:06,025 And to be honest, for most people who don't want to go down this road, it's probably the best thing for them. 77 00:06:06,519 --> 00:06:19,619 But a real good financial advisor is looking at uh everything holistically and kind of neutrally, and saying, you know, okay, this is the trading thing that you do, and and but, 78 00:06:19,619 --> 00:06:32,358 you know, here is your house and here is your job and here is your kids and here is your and is is looking at all of this in a very detached way and is doing that and might not 79 00:06:32,358 --> 00:06:33,369 even be. 80 00:06:33,469 --> 00:06:45,218 managing any of your finances, or maybe you give them some, you know, market structure, like just have me in this to keep myself safe from myself or something like that. 81 00:06:45,429 --> 00:06:54,986 but yeah, that's that's the main purpose I see as a financial planner is they're looking from like a tax point of view and they're looking at a uh you know kids retire or kids' 82 00:06:54,986 --> 00:06:58,219 college and retirement and and all these different things. 83 00:06:58,219 --> 00:07:00,021 There's a lot of good conversations to have. 84 00:07:00,021 --> 00:07:03,123 And that to me goes into just mentoring 85 00:07:03,123 --> 00:07:03,773 as a whole. 86 00:07:03,773 --> 00:07:10,929 Like I am one that I always, if I'm gonna enter a new thing, I do the baseline study myself. 87 00:07:10,929 --> 00:07:22,100 And then I I instantly look for someone to help me with kind of the mentoring side of things, even if I think I have a good grasp of it, for that detached point of view to kind 88 00:07:22,100 --> 00:07:29,682 of poke holes into, you know, maybe too much risk you're taking on one side or or uh maybe you're not spending enough on the other side. 89 00:07:29,682 --> 00:07:31,233 There's like listen, you're 90 00:07:31,373 --> 00:07:32,954 You know, I've I've been guilty of that. 91 00:07:32,954 --> 00:07:40,137 I've been a little bit too tight ass on on some things and it goes, Listen, here's your income, here's how much you got in the bank, why don't you live a little? 92 00:07:40,137 --> 00:07:48,381 Stuff like that I think is is there's a good use for that, even if you don't want them just to shove you in an index fund and and walk away. 93 00:07:48,585 --> 00:07:54,728 Yeah, I think I grew up pretty tight also and still have habits that way. 94 00:07:54,728 --> 00:07:55,489 And it yeah, right. 95 00:07:55,489 --> 00:07:55,989 It's good. 96 00:07:55,989 --> 00:08:10,256 Uh probably always will have that quality, but it is good to have uh somebody remind you of that or at least give you a forecast, you know, uh you know, sort of a strategic 97 00:08:10,256 --> 00:08:12,387 forecast based on your long term goals. 98 00:08:12,387 --> 00:08:16,539 Like all this is uh very valuable to have. 99 00:08:16,780 --> 00:08:17,864 And it allows you to 100 00:08:17,864 --> 00:08:20,406 Focus on what you want to focus on. 101 00:08:20,406 --> 00:08:26,510 So you don't want to you don't you know I I don't want to do my own taxes. 102 00:08:26,510 --> 00:08:27,370 I did this for a while. 103 00:08:27,370 --> 00:08:30,733 Like, well I don't I should not be spending my time doing taxes. 104 00:08:30,733 --> 00:08:34,064 Like I'll pay somebody else to do that and focus on other stuff. 105 00:08:34,064 --> 00:08:35,936 So I'm trying to sort of streamline everything. 106 00:08:35,936 --> 00:08:47,974 But yeah, I think um so so how do you uh how do you think about withdrawing winnings or your P and L 107 00:08:49,015 --> 00:08:59,876 and I can go back and t tell you how I have treated it over the years, but uh do you have any initial thoughts about how you've thought about it or uh how you handle it? 108 00:09:00,212 --> 00:09:12,011 I think I think the the simplest way to do it is whether or not you need the cash and then also whether or not you're getting uncomfortable with how much you're trading. 109 00:09:12,011 --> 00:09:15,023 Those are the two kind of levers I think that make the most sense. 110 00:09:15,023 --> 00:09:21,402 Well, so for example, right, you have a ten grand account, and you're young. 111 00:09:21,402 --> 00:09:23,199 Like you don't need the money. 112 00:09:23,199 --> 00:09:27,638 You shouldn't withdraw anything for any reason except to maybe help pay taxes or or 113 00:09:27,638 --> 00:09:28,488 Or something like that, right? 114 00:09:28,488 --> 00:09:32,621 You should probably be focused entirely uh on compounding, right? 115 00:09:32,621 --> 00:09:46,008 And that's it's all gonna eventually come down to that spectrum of um you know growing the account versus financing a life and where you want to exist on that spectrum. 116 00:09:46,008 --> 00:09:57,634 And that is the first kind of check that I would do is if you are confident in your continued results. 117 00:09:57,951 --> 00:10:03,754 Um, and you are still employed and right, everything's going fine from that point of view. 118 00:10:03,754 --> 00:10:17,002 I think it should kind of be kept as under key and and in there compounding as as long as possible until you start to come across like l liquidity constraints, or until you come 119 00:10:17,002 --> 00:10:19,883 across essentially um maybe just fear. 120 00:10:19,883 --> 00:10:25,566 You know, you've got so much money in this account, you you want to split it up somewhere else to make you feel better. 121 00:10:25,570 --> 00:10:34,827 That that is kind of like if we're to s if we're gonna start like down the road, I think that's where the s the start is, is that you're a young trader, you're someone who's new 122 00:10:34,827 --> 00:10:36,658 to this, you're just getting started. 123 00:10:36,658 --> 00:10:48,286 Well, I think the goal is to grow your account as large as fits whatever trading style you have first, and then start to worry about um kind of withdrawing after that. 124 00:10:48,286 --> 00:10:51,959 And then the big question I think you need to ask yourself is just the tax side of things. 125 00:10:51,959 --> 00:10:54,380 You know, you make you have your 126 00:10:55,148 --> 00:10:59,898 ten grand account, you make five grand that year on it, that's a great return. 127 00:10:59,898 --> 00:11:06,565 Do you take the money out to pay the taxes or do you just try to save that up from your income uh and and split it from there? 128 00:11:06,565 --> 00:11:06,775 Right. 129 00:11:06,775 --> 00:11:08,626 And that that's kind of I think the easiest. 130 00:11:08,626 --> 00:11:15,840 And then I think as we kind of go on later and later in life, it it's gonna change and it's gonna get kind of more complex as as you go. 131 00:11:16,348 --> 00:11:23,287 Yeah, I think um so yeah, I think you 132 00:11:25,116 --> 00:11:28,827 It's important to understand do you need the money? 133 00:11:28,827 --> 00:11:38,500 And that's from the very first trade I made, I made sure that I did not need the money that I was trading with. 134 00:11:38,960 --> 00:11:48,162 And I've always well for a long time I've had that stance and it gives you a lot of freedom. 135 00:11:48,162 --> 00:11:54,004 I mean, it's sort of like playing it on easy mode, because if you 136 00:11:54,453 --> 00:12:03,658 As soon as you convert over to needing that money for some reason or needing the income from it, that's a whole different mindset. 137 00:12:03,658 --> 00:12:11,542 And it's it it's it that can be, you know, for especially for me, like I'm a kind of a conservative with money. 138 00:12:11,542 --> 00:12:15,554 So that's a kind of a hard hurdle to go across. 139 00:12:15,554 --> 00:12:16,904 Like it changes the game. 140 00:12:16,904 --> 00:12:24,328 So I spent my entire career basically playing on easy mode. 141 00:12:24,745 --> 00:12:25,628 And 142 00:12:27,642 --> 00:12:29,833 It w that's good and bad. 143 00:12:32,035 --> 00:12:43,761 I would, you know, I I saved as much money as I could when I got out of college, enough to beat the, you know, the the pattern day trading rule, started trading. 144 00:12:45,842 --> 00:12:49,324 and from that point forward I was just trying to grow the account as big as I could. 145 00:12:49,324 --> 00:12:56,484 Um I it's a good it's a great situation to be in because 146 00:12:56,484 --> 00:13:00,226 You you can trade better if you don't need that money. 147 00:13:00,326 --> 00:13:05,879 And but even still then I would go through phases where I'm like, man, this money's getting really big. 148 00:13:05,879 --> 00:13:08,951 Uh I'm I'm trading much larger. 149 00:13:09,184 --> 00:13:12,883 I'm occasionally having some drawdowns with this, you know, at this size. 150 00:13:12,883 --> 00:13:15,985 So there's a whole mindset you have to go through. 151 00:13:15,985 --> 00:13:22,378 Um and so back to the original question, how do you withdraw winnings? 152 00:13:22,378 --> 00:13:25,596 For a long time, I didn't I I withdrew nothing. 153 00:13:25,596 --> 00:13:27,617 I was just growing my account. 154 00:13:30,259 --> 00:13:37,585 and recently though, I have started withdrawing money from the account. 155 00:13:37,585 --> 00:13:42,728 So and I've taken a very, very, very conservative approach with it. 156 00:13:42,728 --> 00:13:50,335 Um that we we can go into, but so so I I kind of look at it as easy mode and hard mode. 157 00:13:50,335 --> 00:13:53,776 You could and I see a lot of traders that I suspect 158 00:13:54,631 --> 00:13:56,443 Are playing on hard mode. 159 00:13:56,443 --> 00:13:57,844 They want a Ferrari. 160 00:13:57,844 --> 00:14:02,188 They want something that they think is going to make themselves happy. 161 00:14:03,250 --> 00:14:09,536 They start counting their money before they even like your uh like the example you gave. 162 00:14:10,001 --> 00:14:17,084 Uh just wait until that becomes a problem and then it'll become apparent what to do. 163 00:14:17,548 --> 00:14:18,378 Right. 164 00:14:18,379 --> 00:14:28,605 And it's it all comes to so I I brought up an example while you're talking 'cause this actually uh the it's weird how the brain works. 165 00:14:28,605 --> 00:14:32,518 This is this is a tweet from twenty twenty three that I remember reading. 166 00:14:32,518 --> 00:14:36,670 Uh and this is a gentleman we we should have him on at some point called the Chartist. 167 00:14:36,670 --> 00:14:38,962 He's a systematic trader out of Australia. 168 00:14:38,962 --> 00:14:42,644 Uh he's been doing this for for ages, right? 169 00:14:42,728 --> 00:14:47,162 Um, and he said, you know, I've I've always been against withdrawing funds from trading accounts. 170 00:14:47,162 --> 00:14:53,697 I remember when Trish, his wife, wanted a new fridge back around 1998, which we funded from the account. 171 00:14:53,697 --> 00:14:59,942 For years, I always kept updating her with the value of that fridge based on the compounded return of equities. 172 00:14:59,942 --> 00:15:05,076 So he has a chart and it's the value of the fridge they bought in 1998. 173 00:15:05,076 --> 00:15:12,430 And from 1998 till when this tweet was done in 2023, his accounts up uh 174 00:15:12,430 --> 00:15:15,672 2500% in in a compounded nature. 175 00:15:15,672 --> 00:15:23,908 So, you know, a couple thousand dollar fridge is now worth what's that tens of thousands or hundreds of thousands of dollars from that point. 176 00:15:23,908 --> 00:15:28,172 And that is, I think, probably the first way to look at any of it, right? 177 00:15:28,172 --> 00:15:38,890 If you are very much starting and you are saying, Okay, I want to buy this big expensive thing for my trading profits, or even I want to quit my my job and just trade for a 178 00:15:38,890 --> 00:15:39,710 living. 179 00:15:39,939 --> 00:15:49,407 Like you mentioned, hard that becomes so much harder because the person who doesn't and just keeps the capital in and keeps compounding the capital and growing their risk, you 180 00:15:49,407 --> 00:16:01,746 know, uh incrementally and slowly over time, ends up getting that, you know, that fridge is probably worth the value of a house now, um, based off the the compounding of of that 181 00:16:01,746 --> 00:16:02,657 return. 182 00:16:02,657 --> 00:16:08,918 So I think the first thing you always just need to ask yourself, just like anything, is how much do I need this thing that I'm 183 00:16:08,918 --> 00:16:09,828 I'm withdrawing from. 184 00:16:09,828 --> 00:16:13,202 And, you know, there might be times where you do. 185 00:16:13,202 --> 00:16:16,534 It might be a down payment for a house or or something like that. 186 00:16:16,534 --> 00:16:22,740 And you're saying, you know, this is probably not the best mathematical thing to do, but there's some level of safety that that gives you. 187 00:16:22,740 --> 00:16:29,115 Okay, I can pay less on my mortgage and um, you know, live a a more comfortable life kind of that way. 188 00:16:29,115 --> 00:16:37,822 But it's if it's for something like you mentioned, like Ferraris and stuff and and all of that, um, you know, I just think that that's 189 00:16:37,890 --> 00:16:48,936 That Ferrari, if you are trading well and you take it out early in your trading career, is going to be like a multi-million dollar, like t decamillion dollar Ferrari, if you had 190 00:16:48,936 --> 00:16:52,898 just let that money inside the account and and and let that go over time. 191 00:16:52,898 --> 00:17:05,205 So I think what we're both saying is that like step one is try to convince yourself not to ever withdraw uh early on, especially pretty much for any reason until you get to that 192 00:17:05,205 --> 00:17:06,966 point where that account is. 193 00:17:07,166 --> 00:17:10,688 so large that you're like, okay, I would be really uncomfortable. 194 00:17:10,688 --> 00:17:15,661 You know, maybe you're comfortable trading a million dollar account, but you're not comfortable trading a 10 million dollar account, right? 195 00:17:15,661 --> 00:17:18,873 Again, all obviously back to the great problems to have. 196 00:17:18,873 --> 00:17:29,650 Um, but you know, if you keep kneecapping your account when it hits 30K, it's gonna be way harder to get it to a million dollar account than somebody who just lets everything go and 197 00:17:29,650 --> 00:17:33,642 and lets everything exist inside that account as long as they physically can. 198 00:17:35,199 --> 00:17:41,009 Yeah, I think there's a difference between investing and trading for income. 199 00:17:41,009 --> 00:17:41,806 Um 200 00:17:41,806 --> 00:17:42,532 Mm. 201 00:17:44,553 --> 00:17:48,365 You know, I I don't think that much. 202 00:17:48,365 --> 00:17:53,416 I I think probably more about generating income than growing the account. 203 00:17:53,416 --> 00:17:55,899 And then here's here's the way I think about it. 204 00:17:57,620 --> 00:18:00,271 If there's money in that account, it is at risk. 205 00:18:00,491 --> 00:18:02,052 There's no question about it. 206 00:18:02,052 --> 00:18:03,552 It is at risk. 207 00:18:04,273 --> 00:18:14,257 And if you let that grow uh indefinitely, that bigger amount of money is at risk. 208 00:18:14,257 --> 00:18:23,601 So it's it's I don't think that that's I I would not be willing to do that because. 209 00:18:24,393 --> 00:18:27,116 Just because I know the that money is at risk. 210 00:18:27,116 --> 00:18:39,809 And so I think it becomes, you know, it compounds, but also the risk compounds, even if you may not realize it or may not think about it that way, your your entire account is 211 00:18:39,809 --> 00:18:43,763 technically at risk uh as you trade. 212 00:18:45,354 --> 00:18:52,769 Yeah, and and you know, I'm not saying never take anything out either, because again, some point we're getting hit by a bus, right? 213 00:18:52,769 --> 00:18:54,080 Or or or worse. 214 00:18:54,080 --> 00:19:02,796 So, you know, there'll be a moment where you're like, Man, I really should have bought um maybe not that needless um, you know, Lamborghini, but maybe I should have bought the 215 00:19:02,796 --> 00:19:06,749 higher trim SUV that I I wanted or, you know, something like that. 216 00:19:06,749 --> 00:19:10,762 Uh, but I'm I'm specifically talking about early on. 217 00:19:10,762 --> 00:19:13,213 So compounding is one of those things that 218 00:19:14,520 --> 00:19:19,553 There should be kind of, I think, a target that you reach and a level that you reach in your mind. 219 00:19:19,553 --> 00:19:26,577 For me, it's I have a number in my head and at that point I'm not going to compound anymore. 220 00:19:26,577 --> 00:19:33,931 And I think what you should to get to that number, it should be backing out some percentage return, is the way I thought about this. 221 00:19:33,931 --> 00:19:37,182 And I'm open to debate on this one as well. 222 00:19:37,182 --> 00:19:44,162 But like, let's say for example, you're like, okay, if I have uh a million dollar account. 223 00:19:44,162 --> 00:19:48,033 If I can make 10 to 20% a year, right? 224 00:19:48,033 --> 00:19:50,824 That's six figures a year worth of income. 225 00:19:50,824 --> 00:19:53,115 And that's a uh low risk. 226 00:19:53,115 --> 00:19:58,524 I'm not risking the boat to make, you know, 10% on uh a trading account, right? 227 00:19:58,524 --> 00:20:02,619 You can get 5% right now in in a a guaranteed yield. 228 00:20:02,619 --> 00:20:11,062 I think that kind of backwards thinking uh kind of helps with getting to that goal of the account size that you need. 229 00:20:11,062 --> 00:20:13,943 And that that is going to be individual to 230 00:20:14,041 --> 00:20:23,507 you know, the amount of money the person wants to to make from their trading, the uh, you know, the uh skill or or the systems in which they're trading that they think they can 231 00:20:23,507 --> 00:20:26,559 generate some amount of profit from it or something like that. 232 00:20:26,559 --> 00:20:36,074 But I think if you start from this is the end goal, which I think for everyone it should be the end goal, should have an account large enough that you can just, you know, very 233 00:20:36,074 --> 00:20:40,909 modestly live off it forever, um, then you you 234 00:20:40,909 --> 00:20:42,230 you work backwards from that. 235 00:20:42,230 --> 00:20:43,140 Like what do I want to make? 236 00:20:43,140 --> 00:20:44,251 You want to make 200 grand a year? 237 00:20:44,251 --> 00:20:44,521 Okay. 238 00:20:44,521 --> 00:20:45,842 Well, can you make 20% a year? 239 00:20:45,842 --> 00:20:46,072 Okay. 240 00:20:46,072 --> 00:20:47,743 Well then you need a million dollars. 241 00:20:47,743 --> 00:20:59,209 And you can, you can, I think, math it out in a way that will help, again, still talking about these early days, keep you on track to get to that that point. 242 00:20:59,209 --> 00:21:02,811 Because now it's just not a nebulous, I'm going let it grow forever. 243 00:21:02,811 --> 00:21:06,473 It is I have this goal in mind to generate this amount of money. 244 00:21:06,473 --> 00:21:09,144 And I think, you know, this return is possible. 245 00:21:09,144 --> 00:21:10,795 Therefore it needs to get to this amount. 246 00:21:10,795 --> 00:21:19,638 And that I think that helps kind of keep people on the straight and narrow and then also gets them to like a big sigh of relief when they get to that point 'cause you had a goal 247 00:21:19,638 --> 00:21:21,801 and you achieved the goal and good for you. 248 00:21:21,875 --> 00:21:22,725 Yeah. 249 00:21:23,446 --> 00:21:32,591 Yeah, I think I I'd take it a step further and the way I think about it is what makes me happy? 250 00:21:33,025 --> 00:21:36,953 I I I want to optimize for happiness and fun. 251 00:21:37,614 --> 00:21:48,820 And money has some part of that maybe, but uh I don't think it should be the most important it's not the most important thing in my life. 252 00:21:49,220 --> 00:21:50,060 And 253 00:21:51,626 --> 00:22:00,429 But obviously you need money, some amount of money to fund freedom or fund fun and happiness. 254 00:22:00,570 --> 00:22:08,473 So but b but you can also live your life not requiring a whole lot of money. 255 00:22:08,613 --> 00:22:10,534 Like there's two sides to this ledger. 256 00:22:10,534 --> 00:22:16,436 You don't need you and you you shouldn't need to have a whole lot of money to be happy. 257 00:22:16,436 --> 00:22:18,846 And if you if you feel like you do, then 258 00:22:19,797 --> 00:22:26,619 I don't know, you should you should probably rethink about rethink what you're you know, what mate what re truly does make you happy. 259 00:22:26,767 --> 00:22:30,829 Well, and I I like your your mention of uh the ledger there, right? 260 00:22:30,829 --> 00:22:42,994 Because that's what that's kind of I think what I was very poorly trying to get at is that it's gonna be, you know, dude with six kids in Manhattan versus single man in, I don't 261 00:22:42,994 --> 00:22:43,834 know, Ohio. 262 00:22:43,834 --> 00:22:47,385 Is that my name name and that is like a cheaper to live place? 263 00:22:47,385 --> 00:22:51,497 Uh i it's gonna be a different it's gonna be a completely different story. 264 00:22:51,497 --> 00:22:54,999 Like I'm in, you know, middle of nowhere Canada. 265 00:22:54,999 --> 00:22:56,415 So I don't need 266 00:22:56,415 --> 00:23:00,579 a a crap ton in order to to finance and whatever. 267 00:23:00,579 --> 00:23:05,983 So that's why I think understanding that part of your ledger is like super important. 268 00:23:05,983 --> 00:23:14,720 It's like, okay, what is the amount that I need in order to, depending on like, you know, I'm in my house and tons of equity in the house. 269 00:23:14,720 --> 00:23:16,732 So I'm super comfortable there. 270 00:23:16,732 --> 00:23:19,244 Like, you know, where are you in that expense side of things? 271 00:23:19,244 --> 00:23:22,107 And then where are you in the the profit side of things? 272 00:23:22,107 --> 00:23:25,389 The only thing that I would say is that make sure that you are 273 00:23:25,593 --> 00:23:29,065 Dramatically undershooting what you expect to make off the account. 274 00:23:29,065 --> 00:23:42,470 And not to uh diminish your skills or anything, but it's like if you develop something like the reason I use like a 10%, because it should be a fairly achievable overtime, um, 275 00:23:42,470 --> 00:23:45,992 you know, hopeful r return from trading. 276 00:23:45,992 --> 00:23:54,155 And then you can kind of treat anything above and beyond that as bonus, which is I think another way to think about it that I want to talk about next is that. 277 00:23:54,158 --> 00:24:03,550 You know, if it's to the point where you have to be like top performing absolutely all the time to make your expenses, I think you're gonna you're screwing yourself, right? 278 00:24:03,550 --> 00:24:08,362 Because you're gonna your your systems are gonna underperform sometimes. 279 00:24:08,362 --> 00:24:14,053 You are gonna break down, you're gonna, you know, get mental problems and family problems and and you know, whatever. 280 00:24:14,053 --> 00:24:16,134 So I don't think you need to be going full tilt. 281 00:24:16,134 --> 00:24:20,335 So I would say, you know, this is the life you wanna leave and this is how much it's gonna cost. 282 00:24:20,335 --> 00:24:21,337 And the account. 283 00:24:21,337 --> 00:24:29,330 that you need in order to fund that has to be so much larger that a s tiny amount of return will pay for that. 284 00:24:29,330 --> 00:24:36,603 And then anything else is okay, I get to, you know, get the nicer thing and the, you know, the time off or the the whatever after that. 285 00:24:36,603 --> 00:24:41,599 But um yeah, understanding that cost part of the ledger I think is is step one for sure. 286 00:24:41,599 --> 00:24:51,516 Yeah, and I think I think there's probably a lot of traders out there where the best return they can get on their money is reducing their expenses. 287 00:24:52,097 --> 00:24:54,970 Live with a reduced uh expenses. 288 00:24:54,970 --> 00:25:00,263 So I remember there was there was a guy that we you and I used to work with, Dave. 289 00:25:00,945 --> 00:25:03,626 He he liked to cook. 290 00:25:04,087 --> 00:25:05,528 I like to cook. 291 00:25:06,149 --> 00:25:06,877 But 292 00:25:06,877 --> 00:25:08,879 We talked about what to optimize on. 293 00:25:08,879 --> 00:25:12,883 I was optimizing on something completely different in my cooking than he was. 294 00:25:12,883 --> 00:25:17,666 So he would have he would make some really awesome, you know, extravagant meals. 295 00:25:18,167 --> 00:25:27,335 Where I would the way I like to cook is I'm optimizing for the ratio of taste to cost. 296 00:25:27,976 --> 00:25:31,359 So I'm trying to get that as as big as possible. 297 00:25:31,359 --> 00:25:33,847 And I just have make it sort of a game with myself. 298 00:25:33,847 --> 00:25:40,255 Yeah, give me good steak, not a a good T bone instead of like a something I can't pronounce steak. 299 00:25:40,255 --> 00:25:41,055 Yeah. 300 00:25:41,239 --> 00:25:47,580 so I I think it's you know, people are different, people have different preferences. 301 00:25:48,640 --> 00:26:02,433 and I sort of make it a game with myself to to go through life thinking about this way and you know, probably thinking about it in too micro decisions uh or you know, too many micro 302 00:26:02,433 --> 00:26:05,371 decisions about, you know, what's the what's gonna make me happy here. 303 00:26:05,371 --> 00:26:06,744 I'll probably think about that too much. 304 00:26:06,744 --> 00:26:09,305 Um but 305 00:26:09,481 --> 00:26:11,042 think it's a good way to go through life. 306 00:26:11,042 --> 00:26:19,921 I think I like I'm I I always I always feel like I'm sorta playing on easy mode and I won I like that, right? 307 00:26:19,921 --> 00:26:20,771 Um 308 00:26:20,771 --> 00:26:25,851 Well and I I think another part of that too is how much do you hate your job? 309 00:26:25,851 --> 00:26:27,707 I I think is is a big part of it. 310 00:26:27,707 --> 00:26:39,627 And this is I I think can affect this in a lot of ways in more ways than people initially think because so I was I was listening to this one youtuber, he's like one of these 311 00:26:39,627 --> 00:26:41,539 personal finance guys or or something, right? 312 00:26:41,539 --> 00:26:44,130 I've always got something in the background when I'm working. 313 00:26:44,130 --> 00:26:48,822 And he used to be a doctor and he was like I hated being a doctor. 314 00:26:48,822 --> 00:26:50,285 He was in the um 315 00:26:50,975 --> 00:26:51,835 He's in the UK. 316 00:26:51,835 --> 00:26:53,277 He's I hate it being a doctor. 317 00:26:53,277 --> 00:26:58,860 And then he became like a really big successful YouTuber, like millions of subscribers, probably making a ton of money. 318 00:26:58,941 --> 00:27:02,443 And at that point, he was still a doctor, just part-time. 319 00:27:02,443 --> 00:27:06,845 And he's like, Now I love it because I don't need to do it. 320 00:27:06,845 --> 00:27:09,028 It's way more interesting. 321 00:27:09,028 --> 00:27:16,223 And also, I can tell people to go screw themselves if if they're, you know, a boss is being mean. 322 00:27:16,223 --> 00:27:19,257 Another example I'll give is I I worked at Canadian Tire. 323 00:27:19,257 --> 00:27:20,717 You you're an American, you don't know what it is. 324 00:27:20,717 --> 00:27:24,498 It's like a I don't know, like Walmart hardware type store or whatever. 325 00:27:24,498 --> 00:27:28,970 I worked there many, many years when I was in university and all of that. 326 00:27:29,250 --> 00:27:35,792 And one of the managers there was an ex, he was like the chief of police for a while, uh, where we live, like really high up. 327 00:27:35,792 --> 00:27:40,323 Um, and you know, I'm sixteen year old kid and I'm like, Well, so you should have a good pension. 328 00:27:40,323 --> 00:27:41,453 He's like, yeah. 329 00:27:42,353 --> 00:27:46,575 and you know, he always drove a nice car or whatever, and it's like you're not making any money here. 330 00:27:46,575 --> 00:27:47,211 I'm like, What are you doing? 331 00:27:47,211 --> 00:27:48,365 He's like, One. 332 00:27:49,349 --> 00:27:50,710 get away from my wife. 333 00:27:50,710 --> 00:27:53,483 It's like, two, I I kind of like the extra money. 334 00:27:53,483 --> 00:28:02,140 And he's like, and mainly because uh it's fun, because if a customer really pisses me off, I'll tell him to go pound sand because I don't need to be here. 335 00:28:02,140 --> 00:28:13,441 And I I think that's another way to look at it, where um for myself, you know, the the analysis work I do and and showing up on different, you know, broadcasts and all this kind 336 00:28:13,441 --> 00:28:15,232 of stuff, I do enjoy that. 337 00:28:15,360 --> 00:28:19,660 writing my newsletter and and helping out traders, all of this I enjoy. 338 00:28:19,660 --> 00:28:25,324 Uh, so I don't feel the need to stop doing it, I think ever. 339 00:28:26,185 --> 00:28:36,129 but I don't have to do it, I don't have to be like a a a dog at it and like and sell and like hit everyone with promotional emails every 30 seconds to try to you know, drum up 340 00:28:36,129 --> 00:28:37,169 sales or whatever. 341 00:28:37,169 --> 00:28:40,030 And so it's kind of this self, I guess, feeding cycle. 342 00:28:40,030 --> 00:28:44,624 So if you have a job that you kind of like and then you get successful 343 00:28:44,624 --> 00:28:52,026 Trading, especially us as systematic traders who don't necessarily need to spend the whole day staring at the screen, I think it kind of feeds off itself. 344 00:28:52,026 --> 00:28:58,908 So, like a programmer, if you kind of like programming, and right now you're working as a full-time programmer, I look at it as like a scale. 345 00:28:58,908 --> 00:29:03,850 The better you get at trading, the less you should potentially program. 346 00:29:03,850 --> 00:29:10,892 But maybe you go from working at a company where your boss is a a dick or whatever, and then you start. 347 00:29:11,150 --> 00:29:14,882 like consulting and doing like really cool projects that you weren't able to do before. 348 00:29:14,882 --> 00:29:22,605 But now you've got the money and the income from um consulting or in and doing these cool programming tasks or whatever. 349 00:29:22,605 --> 00:29:26,527 And you have the more sporadic income, I guess, from trading. 350 00:29:26,527 --> 00:29:35,370 And as one grows, kind of the other shrinks and you're able to balance it based off of whichever one of these is doing the best or interesting you at the time. 351 00:29:35,370 --> 00:29:38,482 And that is, I think, like super easy mode on both sides. 352 00:29:38,482 --> 00:29:39,726 Cause you don't need 353 00:29:39,726 --> 00:29:47,673 As long as you've scheduled your life correctly and one of those incomes is enough, then you've got your income and your bonus income. 354 00:29:47,673 --> 00:29:52,226 And it might flip back and forth, whichever one is making you more at any given time. 355 00:29:52,487 --> 00:30:02,395 But I think what happens is you end up enjoying more, both of them more, because the drawdowns in trading hurt you less because you have this other income that's making that's 356 00:30:02,395 --> 00:30:03,016 making up for it. 357 00:30:03,016 --> 00:30:05,077 So you don't need that side of things. 358 00:30:05,077 --> 00:30:08,368 And then you also like whatever your job is more. 359 00:30:08,368 --> 00:30:10,971 Because you don't necessarily need the job either. 360 00:30:10,971 --> 00:30:14,864 So it gives that kind of freedom of I get to work on things that are interesting to me. 361 00:30:14,864 --> 00:30:18,668 I get to, you know, I I'm I don't have to put up with the dickhead boss like that type. 362 00:30:18,668 --> 00:30:29,559 So I the way I that's the way I think I'll always be doing trading and something else because I think both of those things I like more because both of those things, you know, 363 00:30:29,559 --> 00:30:30,320 feed off each other. 364 00:30:30,320 --> 00:30:32,563 If if I explain that in a way that makes sense at all. 365 00:30:32,563 --> 00:30:34,190 Yeah, I think that's a great way to put it. 366 00:30:34,190 --> 00:30:38,510 I've never h heard it put quite that way, but that is kind of the way I feel too. 367 00:30:38,510 --> 00:30:39,869 I always felt like 368 00:30:42,357 --> 00:30:42,597 I don't know. 369 00:30:42,597 --> 00:30:45,489 I feel like I am pretty motivated. 370 00:30:45,489 --> 00:30:51,562 I think I have a kind of a capacity for hard work that other people probab may not have. 371 00:30:51,562 --> 00:30:58,046 And I've always felt like I can do three things really well at a given moment in my life. 372 00:30:58,046 --> 00:31:06,911 So but if I get more than that, I I I start dropping packets, is what I call it in the networking term. 373 00:31:06,911 --> 00:31:10,573 But um yeah, so so here's 374 00:31:12,633 --> 00:31:23,701 I've recently I have, you know, when I quit trade ideas, I went from I like I had a pretty steady income there. 375 00:31:23,701 --> 00:31:26,613 And now it's there's it goes up and down, right? 376 00:31:26,613 --> 00:31:29,254 So that that's a big psychological shift. 377 00:31:29,254 --> 00:31:33,727 And I've come up with a system to sort of cushion that. 378 00:31:33,727 --> 00:31:42,126 And um because, you know, like I said, my whole upbringing, my my dad was like very conservative with money and 379 00:31:42,126 --> 00:31:45,148 And he always had a steady salary. 380 00:31:45,148 --> 00:31:49,300 So um it's it's a it's a bit foreign. 381 00:31:49,300 --> 00:31:51,831 It was it took some getting used to. 382 00:31:52,372 --> 00:32:10,781 So what I do now is I I I take a small salary from my trading income, pull that over to the checking account that that covers all the expenses, and but I also 383 00:32:11,241 --> 00:32:15,946 will take half of my earnings and put it in the tax account. 384 00:32:16,147 --> 00:32:17,728 Half of gross. 385 00:32:18,450 --> 00:32:19,451 Okay? 386 00:32:20,172 --> 00:32:20,792 So 387 00:32:20,792 --> 00:32:25,727 you're in like an awful tax thing, you're overpaying the crap out of that, right? 388 00:32:25,727 --> 00:32:26,988 Okay. 389 00:32:26,988 --> 00:32:28,999 to I want that to be the case. 390 00:32:28,999 --> 00:32:31,260 I want to set this money aside. 391 00:32:31,260 --> 00:32:34,602 I want to feel like I'm kind of living like a pauper. 392 00:32:34,602 --> 00:32:41,846 I need you know, I need to keep an eye on expenses and you know, I want to have that mindset, even though I don't really need to. 393 00:32:42,827 --> 00:32:44,818 And then that money collects. 394 00:32:44,818 --> 00:32:53,683 Um and at the end of the year, I I pay myself like what I'm trying to what I'm trying to do is maximize the amount of bonus I can pay myself. 395 00:32:54,298 --> 00:32:55,950 So you're like four savings. 396 00:32:55,950 --> 00:33:02,405 So at the end of the year when the government says you owe this and you have double that inside your account, you go, good. 397 00:33:02,405 --> 00:33:06,990 It's like found it's like when you find twenty dollars in your pants pocket kind of thing. 398 00:33:06,990 --> 00:33:07,970 Yeah. 399 00:33:08,030 --> 00:33:12,691 And that keeps me, you know, that keeps my spending reined in. 400 00:33:12,691 --> 00:33:24,418 You know, I never really I always I want to apply pressure to myself because as as my life goes on and my account gets bigger, I you know, I've passed the number I had in mind many 401 00:33:24,418 --> 00:33:25,249 years ago. 402 00:33:25,249 --> 00:33:27,659 So I've sort of moved the goalpost. 403 00:33:28,560 --> 00:33:28,975 And 404 00:33:28,975 --> 00:33:29,556 always do. 405 00:33:29,556 --> 00:33:30,589 You always do. 406 00:33:30,589 --> 00:33:30,919 Right. 407 00:33:30,919 --> 00:33:33,394 I I think I've passed my number three times. 408 00:33:33,535 --> 00:33:34,658 I think, yeah. 409 00:33:34,658 --> 00:33:35,698 You just keep doing. 410 00:33:35,698 --> 00:33:40,341 I I do think I'm pretty good at like applying pressure, like real pressure to myself. 411 00:33:40,341 --> 00:33:54,866 I f I I feel like you know, it's an emergency and I I when when something's going wrong or a strategy is you know needs some work, I really feel I feel it deeply and and I think I 412 00:33:54,986 --> 00:34:01,791 have some systems in place to do that, even though like if if none of this worked out, like I could retire right now. 413 00:34:01,791 --> 00:34:02,994 But I want that pressure. 414 00:34:02,994 --> 00:34:05,819 I want to feel that pressure because it's motivating. 415 00:34:06,928 --> 00:34:08,479 Well, and so a couple things. 416 00:34:08,479 --> 00:34:14,214 A, I think that links in back to my thing of like how how much do you like the things that you're doing, right? 417 00:34:14,214 --> 00:34:18,893 Like if you hate it if you hate trading, then yeah, you get to the number and you stop, right? 418 00:34:18,893 --> 00:34:26,904 You get enough that you could throw into T bills that are making what five and a half percent right now, and you you know, wave your hands and you sail off and good for you, 419 00:34:26,904 --> 00:34:27,985 sail off into the sunset. 420 00:34:27,985 --> 00:34:37,122 Um, I generally don't find that ever happens in trading because I think just the the guy who got to the number. 421 00:34:37,316 --> 00:34:39,608 didn't get to the number because he really wanted to get to the number. 422 00:34:39,608 --> 00:34:41,279 He got to the number because he loved trading. 423 00:34:41,279 --> 00:34:51,198 And so that person never stops, even if you hear these stories of uh these market wizard guys turning, you know, 50k into a hundred million and they're still trading. 424 00:34:51,198 --> 00:34:52,402 It's like, well, why? 425 00:34:52,402 --> 00:34:52,990 Right. 426 00:34:52,990 --> 00:34:54,751 It's 'cause you like doing it, right? 427 00:34:54,751 --> 00:35:05,178 And um that uh so the but the other comment I wanted to make about the constant withdrawals, I think that is a motivating 428 00:35:05,178 --> 00:35:11,950 That's a really good motivating factor as well if you're pulling out money anyway, regardless of what happens in the market. 429 00:35:11,950 --> 00:35:17,315 Cause I think the default way that people think about it is okay, they they use like a high watermark system. 430 00:35:17,315 --> 00:35:23,197 I have this number, and then every time I get above that number, I withdraw to get back to that number. 431 00:35:23,518 --> 00:35:34,104 And then I think mathematically, that's probably correct because you know, then in drawdowns, you're not withdrawing in drawdowns making your drawdowns deeper and and harder 432 00:35:34,104 --> 00:35:35,374 to recover from. 433 00:35:35,561 --> 00:35:41,195 Um, but it does do kind of what you mentioned, where it doesn't apply that much pressure. 434 00:35:41,195 --> 00:35:50,591 Where if, you know, you're down in your account that month, and then you're still gonna withdraw from your account that month, that would feel gross to do. 435 00:35:50,591 --> 00:36:00,417 It would like feel hard to do, which I think would really give you a kick in the ass to say, well, that didn't feel nice to be down hypothetical numbers, but I'm down 10 grand 436 00:36:00,417 --> 00:36:04,680 this month, but I still had to pull 10 grand out in order to make my expenses. 437 00:36:04,708 --> 00:36:07,009 So now I'm down 20 grand and that really sucks. 438 00:36:07,009 --> 00:36:15,995 And I think that would be, yeah, be a really good kick in the ass to say, okay, you gotta fix this so that your your next withdrawal, hopefully you're back at whatever kind of high 439 00:36:15,995 --> 00:36:16,896 watermark you have. 440 00:36:16,896 --> 00:36:21,159 But um if you I I could see both sides, right? 441 00:36:21,159 --> 00:36:29,904 It's one of those mathematical correct versus like the guy who sets his clocks like three minutes early, so he always thinks he's late and then shows up on time. 442 00:36:29,916 --> 00:36:30,238 Yeah. 443 00:36:30,238 --> 00:36:31,601 that's what the other one feels like. 444 00:36:31,601 --> 00:36:37,576 It's like a little you're hacking yourself to try to keep yourself on your toes all the time, which I don't think there's anything wrong. 445 00:36:37,929 --> 00:36:43,483 Yeah, so so there's another concept that comes from the prop trading space. 446 00:36:43,483 --> 00:36:46,308 I l work with a lot of prop trading guys. 447 00:36:47,152 --> 00:36:47,992 And 448 00:36:49,715 --> 00:36:56,951 You know, it's it's a little bit different there because you're not trading your own money, you're trading somebody else's money, and you're sharing the profits. 449 00:36:56,951 --> 00:37:13,034 So it becomes pretty important to think about that and to think about how you manage those uh profits and the money you're getting from that if you want to have a smooth uh income 450 00:37:13,034 --> 00:37:13,944 stream. 451 00:37:14,165 --> 00:37:15,045 So 452 00:37:16,891 --> 00:37:34,216 One thing that you can do is create what's called a risk bank where you let some profits pile up in the firm, and then you say, Okay, only uh above that am I going to take 453 00:37:34,216 --> 00:37:34,767 withdrawal. 454 00:37:34,767 --> 00:37:38,059 So that'll take a little bit of time to build that risk bank. 455 00:37:38,240 --> 00:37:44,348 But then, in theory, you can take the same amount of money out of it or 456 00:37:44,348 --> 00:37:50,140 or have some flexibility with getting paid even on months where maybe you don't make money. 457 00:37:51,241 --> 00:38:02,165 So it's an important and it can be really, it can be very, very psychologically important for trading to have that in place. 458 00:38:02,266 --> 00:38:05,538 It can really unlock a different way of trading. 459 00:38:05,538 --> 00:38:10,729 I mean think about if you're a prop firm and you're you're trading with a prop firm, you lose money, 460 00:38:11,529 --> 00:38:16,810 Not only do you not get paid, you have to make that back before you will get paid in the future. 461 00:38:17,251 --> 00:38:22,412 And it can change how you trade given those incentives. 462 00:38:22,612 --> 00:38:32,935 And a risk bank having the flexibility to pull, to, to know that, okay, if I don't make money this month, I'm still going to get paid with the way I've designed things. 463 00:38:33,116 --> 00:38:38,307 That can really be, that can really unlock some better trading in what you're doing. 464 00:38:39,508 --> 00:38:42,759 Yeah, 'cause you're kind of double underwater, right? 465 00:38:42,759 --> 00:38:51,351 You're underwater in your account, but then you're also probably underwater in in maybe debt and things, taking out debts, uh, you know, short going on a line of credit to pay 466 00:38:51,351 --> 00:38:54,392 off, um, you know, certain things as well. 467 00:38:54,392 --> 00:39:04,085 And it it's kind of similar to the high water mark system where you pick a number and you say, Okay, anything above that account, I'm I'm withdrawing and doesn't necessarily mean 468 00:39:04,085 --> 00:39:05,625 you withdraw for life expense. 469 00:39:05,625 --> 00:39:08,736 Like one of the things that I do is above a high water amount 470 00:39:08,802 --> 00:39:15,897 I withdraw, I do make taxes if Canadian government, if you're listening, I always put the money away for taxes. 471 00:39:15,897 --> 00:39:25,203 Um, and then I I split what's left into like what I think of non correlated investments and then expenses as well. 472 00:39:25,203 --> 00:39:32,408 'Cause I think that's the other thing to to look at is that, you know, right now we're kind of looking at as all or none, right? 473 00:39:32,408 --> 00:39:38,612 Am I withdrawing for life expenses or am I am I withdrawing for or am I leaving in for compounding? 474 00:39:38,901 --> 00:39:48,578 but I could see a world where there's that third option where you do, for example, you know, the bonds that are paying a high yield right now, maybe you get to the point where 475 00:39:48,578 --> 00:39:58,134 you don't need the money, but yet you're also running against liquidity limits and fear, I guess, of the size of the account you have. 476 00:39:58,695 --> 00:40:06,200 And I don't think there's anything wrong with then moving that into S P five hundred ETF or a a bond or 477 00:40:06,360 --> 00:40:15,757 REITs or you know, any number again, not financial advisors, any number of things that are separate and passive, and maybe not even forever, but maybe until your confidence 478 00:40:15,757 --> 00:40:16,238 improves. 479 00:40:16,238 --> 00:40:19,260 And this came from a conversation I had with a trader who's done the same thing. 480 00:40:19,260 --> 00:40:22,643 He's like, I am, you know, he was a very successful trader. 481 00:40:22,643 --> 00:40:24,060 He's like, I'm doing fine. 482 00:40:24,060 --> 00:40:25,395 I don't really need the money. 483 00:40:25,395 --> 00:40:28,177 I'm just getting so nervous on the size of my account. 484 00:40:28,177 --> 00:40:32,140 And that's what I told him was like, you know, bonds are yielding five and a half percent right now. 485 00:40:32,380 --> 00:40:36,403 and he's like, Yeah, but he's like, eventually I want to be able to size up to deal with that size. 486 00:40:36,403 --> 00:40:40,466 Like, okay, until then, bonds are yielding five and a half percent right now. 487 00:40:40,466 --> 00:40:43,648 Like, you don't it doesn't have to be a an all or none thing. 488 00:40:43,648 --> 00:40:50,113 You can move some out for to regain that level of comfort and then move it back in. 489 00:40:50,113 --> 00:40:59,599 And what this gentleman ended up doing, which I thought was always interesting, is he withdraws when his account is above a high water mark. 490 00:40:59,972 --> 00:41:05,435 you know, take some out for living expendance, invest some in, you know, high yield savings or bonds or whatever. 491 00:41:05,435 --> 00:41:08,617 And then does the opposite in in tough times. 492 00:41:08,617 --> 00:41:17,181 So he he will put his account back up into a high watermark if he has spare investments dealing with on the other side. 493 00:41:17,181 --> 00:41:25,886 And that's actually worked out really well for him because he never really feels that clawback need that you were talking about as well. 494 00:41:25,886 --> 00:41:29,572 He does he has a bank over there and he's like every time I do it, 495 00:41:29,572 --> 00:41:31,994 He's like, I really try to mentally punish myself. 496 00:41:31,994 --> 00:41:37,057 Like, I try to like really, you know, be hard on myself for a little bit while I'm doing it. 497 00:41:37,057 --> 00:41:38,678 Cause I have to see it as a failure. 498 00:41:38,678 --> 00:41:43,242 I can't see it as like hitting the reset on the paper trading account and going back up. 499 00:41:43,242 --> 00:41:48,625 But having, you know, that kind of back and forth, I think, is another way to look at it as well. 500 00:41:48,625 --> 00:41:58,736 Where especially if your drawdown you think is just normal fluctuation in your system, it might be good to say, well, let me just top it up so that I'm not. 501 00:41:58,736 --> 00:42:06,300 I'm I'm not reducing my buying power or reducing my trade size or my risk allocation um because I'm underwater. 502 00:42:06,300 --> 00:42:12,363 I'm just taking from this kind of reservoir I guess I have of over here of of extra cash to deal with. 503 00:42:12,853 --> 00:42:28,686 Yeah, and I think thinking about your one's mindset of uh how they think about money, how they you know, your financial situation, you know, how much you need that steady income, 504 00:42:29,488 --> 00:42:39,876 and having creating a system around that, I think can really it can unlock different strategies that you're not really you can't consider now. 505 00:42:40,137 --> 00:42:40,947 And 506 00:42:41,269 --> 00:42:44,291 That's to have that flexibility is important. 507 00:42:44,291 --> 00:42:59,240 I know that, you know, since I've since I left Trade Ideas, just because of the fluctuations, I realize that I'm tending toward more stable, more high win rate 508 00:42:59,240 --> 00:42:59,860 strategies. 509 00:42:59,860 --> 00:43:02,902 I can sort of see myself going that way. 510 00:43:03,322 --> 00:43:04,102 and 511 00:43:08,937 --> 00:43:13,971 I think if I had a different incentive structure, I would be thinking about other strategies. 512 00:43:13,971 --> 00:43:22,917 So and I s you see this especially in the prop space, because there's no concept of growing my account bigger so I can trade bigger. 513 00:43:22,917 --> 00:43:26,670 It's all like how well you do and they're gonna give you more buying power. 514 00:43:26,670 --> 00:43:28,331 So you earn that over time. 515 00:43:28,331 --> 00:43:32,494 And if if you're in a drawdown, they'll take it away quickly. 516 00:43:32,494 --> 00:43:35,926 So uh that creates a whole different structure. 517 00:43:35,926 --> 00:43:37,737 So a lot of times with 518 00:43:38,069 --> 00:43:49,904 Prop traders, they tend toward higher win rate strategies and they're they sort of ignore stuff that is gonna put them or give them some down months where they don't get paid. 519 00:43:49,904 --> 00:43:51,525 And yeah, it's understandable. 520 00:43:52,484 --> 00:44:04,423 Well, and I, you know, that's a that's another good place to go as well, where the the the prop space is it's a different question entirely because one of the main benefits to it, 521 00:44:04,423 --> 00:44:11,929 and there's, you know, pros and cons all throughout, but it's one of the rare places that you'll be able to do both if things are working. 522 00:44:11,929 --> 00:44:15,242 You'll be able to grow the account and withdraw the money. 523 00:44:15,242 --> 00:44:19,525 And, you know, when I talk to people both the prop space, I think that is the number one 524 00:44:19,759 --> 00:44:27,646 Benefit of it is that, you know, if you are can performing consistently, but like you mentioned, you have to have that consistency. 525 00:44:27,646 --> 00:44:30,788 That's because it's their money, that's the thing they value more than anything. 526 00:44:30,788 --> 00:44:35,462 Uh, having that consistency means gravitating towards those high win rate strategies. 527 00:44:35,462 --> 00:44:45,861 And I think that's also the benefit of kind of what I was talking about with this gentleman with other investments or other accounts for different kinds of trading, is you 528 00:44:45,861 --> 00:44:48,495 know, you and me both know this one. 529 00:44:48,495 --> 00:45:00,085 And at least follow on Twitter this one um small caps trader who you know is a systematic guy and he's just been up in arms about he's gotten his account to a certain point and now 530 00:45:00,085 --> 00:45:07,852 he's terrified with all these crazy small caps, you know, gapping up and and disappearing and and doing all this crazy stuff that he's gonna blow up. 531 00:45:07,852 --> 00:45:13,146 And he's you know, the argument I've always made to him is okay, why not both? 532 00:45:13,146 --> 00:45:15,828 Like what he's I'm just gonna go trade large caps from now on. 533 00:45:15,828 --> 00:45:16,919 It's like okay. 534 00:45:17,115 --> 00:45:28,578 But why not, you know, you why not reduce your position size in the small caps back to where it was when you felt comfortable doing it, and then have another another strategy 535 00:45:28,578 --> 00:45:29,088 over here. 536 00:45:29,088 --> 00:45:41,742 So that's a that's another way I I think people should think about think about it is that, you know, say you are like that, you're trading something very volatile when you started 537 00:45:41,742 --> 00:45:47,193 with a 25k account, you're able to do really well and the account's worth way, way more than that now. 538 00:45:47,278 --> 00:45:51,501 And you're starting to get nervous with that volatility that that strategy gave you. 539 00:45:51,501 --> 00:45:55,443 Maybe the solution isn't withdrawing anything, it is just another strategy. 540 00:45:55,443 --> 00:46:07,320 So you have the crazy volatile strategy that you are sizing now appropriately to your comfort level, and you're implementing new strategies with different assets that have, you 541 00:46:07,320 --> 00:46:11,672 know, different hold times and and are in less risky instruments. 542 00:46:11,672 --> 00:46:13,101 And by 543 00:46:13,101 --> 00:46:14,892 splitting that out, you've done a couple things. 544 00:46:14,892 --> 00:46:17,983 You've brought your comfort level back to a place that's fine. 545 00:46:17,983 --> 00:46:25,136 And by trading more strategies, you've probably as you find you smooth out your equity rec curve over time. 546 00:46:25,136 --> 00:46:28,347 Um so sometimes it's not a in or out thing. 547 00:46:28,347 --> 00:46:35,170 It's are you all in or too far in on not just one strategy, but even one asset type, right? 548 00:46:35,170 --> 00:46:42,265 Am I am I only trading like the the biggest gap or craziest Chinese scam pump and dump today? 549 00:46:42,265 --> 00:46:50,519 Or maybe should I just, you know, split that out into other things and that that helps with the comfort level as well and then helps with the smoothing out of the equity return. 550 00:46:50,889 --> 00:46:51,789 Yeah. 551 00:46:52,070 --> 00:46:53,190 Yeah. 552 00:46:54,091 --> 00:47:00,235 I'd be remiss not to plug our previous episode that we did on buying power. 553 00:47:00,235 --> 00:47:03,897 Like is how buy running out of buying power is a good thing. 554 00:47:03,897 --> 00:47:05,473 You should be running out of buying power. 555 00:47:05,473 --> 00:47:11,501 And if you're not running out of buying power, then you should take some money out of your account because that is at risk. 556 00:47:11,501 --> 00:47:12,401 Right. 557 00:47:12,742 --> 00:47:16,394 So yeah, go back and risk listen to that episode. 558 00:47:16,394 --> 00:47:17,745 It's been a while since we've done that. 559 00:47:17,745 --> 00:47:18,233 Um 560 00:47:18,233 --> 00:47:19,974 It it's funny just on on that note. 561 00:47:19,974 --> 00:47:28,196 I have uh an AI now and one of the things it does, it helps me with like support for Stats Edge for for my business and everything. 562 00:47:28,196 --> 00:47:32,728 Um and it keeps flagging periodically the emails that I get. 563 00:47:32,728 --> 00:47:36,479 I've got IB and then I've got this other broker, well simple. 564 00:47:36,679 --> 00:47:41,140 that's like a Robin Hood thing where I do some other it's like my play account and it keeps pinging me. 565 00:47:41,140 --> 00:47:43,141 It says, You got a margin call. 566 00:47:43,383 --> 00:47:47,686 And and it's like it's like the the robot scared, and it's like you should deal with this right away. 567 00:47:47,686 --> 00:47:48,617 How are you gonna deal with this? 568 00:47:48,617 --> 00:47:51,329 And I'm like it's like it's that's good. 569 00:47:51,329 --> 00:47:56,934 Like I almost want to send the robot the transcript of the of the podcast episode we did. 570 00:47:56,934 --> 00:48:00,977 And so then maybe it maybe it starts going, Yeah, you got a margin call. 571 00:48:00,977 --> 00:48:01,617 Good for you. 572 00:48:01,617 --> 00:48:06,672 Um, but yeah, I just thought that was a funny aside because I'm looking down, I'm seeing the bot, and it's going through the emails. 573 00:48:06,672 --> 00:48:07,512 you got a margin call. 574 00:48:07,512 --> 00:48:12,626 Well, I bought a bunch of core weave yesterday and it's down 10% today, but it's good, you know. 575 00:48:12,810 --> 00:48:18,364 Um yeah, it's uh buying power management is definitely a part of it as well, right? 576 00:48:18,364 --> 00:48:25,018 I think the do I withdraw or don't I withdraw, I think first has to be answered with do you need the money? 577 00:48:25,119 --> 00:48:28,481 And are you tapped out of ideas is an another way. 578 00:48:28,481 --> 00:48:35,576 Like, do you think there's easy ways you can expand into um to get over that miscomfort kind of hump as well. 579 00:48:37,363 --> 00:48:38,233 Yep. 580 00:48:39,334 --> 00:48:43,925 yeah, I think we've covered covered all the data points that I wanted to get through. 581 00:48:43,925 --> 00:48:52,207 Uh well, I'll I'll follow up with Chris after this episode goes live and see if he has any thoughts on it or has any further questions. 582 00:48:52,207 --> 00:48:57,959 But um Yeah, it's I think it's a topic that you don't hear a lot of people talking about. 583 00:48:57,959 --> 00:49:04,961 Um but yeah, I think it's important to think about and the this you know, we're all systematic thinkers. 584 00:49:05,493 --> 00:49:16,411 Creating a system for this can create the right incentives in yourself to do the things you want to do and the things you can do with trading. 585 00:49:16,804 --> 00:49:17,184 Right. 586 00:49:17,184 --> 00:49:25,000 And you know, if you're going to be systematic about your trading, why not develop a system so that you don't have to think about this either? 587 00:49:25,000 --> 00:49:30,073 And that's um I I think kind of a huge takeaway from this. 588 00:49:30,073 --> 00:49:38,108 Like we talked about different systems like high watermark trading and and you know, the way that Dave's doing, but um I think at the end of the day this shouldn't have to be 589 00:49:38,108 --> 00:49:44,133 another another decision that you you have to make. 590 00:49:44,133 --> 00:49:46,385 It should be automatic in some way. 591 00:49:46,385 --> 00:49:57,337 you're withdrawing X amount a week or a month automatically, or when your account hits a certain value, you're withdrawing or or and think of the good times and the bad and then 592 00:49:57,518 --> 00:50:01,979 kind of put that on autopilot and only touch it periodically. 593 00:50:01,979 --> 00:50:13,351 Because I think just like we mentioned, if you're uh impulsively doing something with money, period, even if it's not trading, then it's you're probably not gonna look back and 594 00:50:13,351 --> 00:50:15,822 say, I'm really glad I made that super 595 00:50:15,887 --> 00:50:19,257 um impulsive decision with my f with my finances. 596 00:50:20,105 --> 00:50:29,290 Yeah, and th and like I said, a lot of traders, uh the highest value return they can get is probably reducing their expenses. 597 00:50:29,451 --> 00:50:39,137 So th think about that first and and think if you know, the the stuff that's going out the door every month, how much of that's really making me happy? 598 00:50:39,137 --> 00:50:40,858 Is there some adjustments I can make there? 599 00:50:40,858 --> 00:50:44,160 Like like I haven't had a car in over a decade. 600 00:50:44,160 --> 00:50:46,651 I ride my bike everywhere just 'cause I love it and 601 00:50:47,406 --> 00:50:49,421 And of course it's way cheaper, way more efficient. 602 00:50:49,421 --> 00:50:50,143 It's awesome. 603 00:50:50,143 --> 00:50:52,544 you spring that one at the end of the episode. 604 00:50:52,544 --> 00:50:55,287 I feel like that's something we got to talk about maybe in the next one. 605 00:50:55,287 --> 00:50:57,729 Jeez, maybe it's because of where I live. 606 00:50:57,729 --> 00:51:00,836 I can't there's nowhere I can get without a car. 607 00:51:00,836 --> 00:51:03,533 It's just not uh not a possible thing. 608 00:51:03,533 --> 00:51:10,589 But yeah, we'll I think we'll leave people with that because that's something that I feel is gonna come up a little later at some point. 609 00:51:10,589 --> 00:51:19,206 But um yeah, so again, if if if you've gotten to this point anyway, just give yourself a pat in the back where if that's your worry. 610 00:51:19,206 --> 00:51:21,688 That you're how do I withdraw my money? 611 00:51:21,688 --> 00:51:21,938 Right. 612 00:51:21,938 --> 00:51:28,875 Give yourself a little pat in the back and just know that you're you're miles ahead of 90% of of the traders that exist out there. 613 00:51:28,875 --> 00:51:31,897 But hopefully this helped you out in some way. 614 00:51:31,897 --> 00:51:39,704 And again, we always read the comments and everything down below if you guys got any ideas or suggestions on on ways to systematize that. 615 00:51:39,704 --> 00:51:42,256 But as always, I'm Michael Noss. 616 00:51:42,262 --> 00:51:43,204 And I'm Dave May. 617 00:51:43,204 --> 00:51:45,809 Talk to you next week on Line Your Own Pockets.