Clay Trader Podcast
STR 238: Stress Test Your Trading
I’m sure I’m not alone when I say it isn’t necessarily enjoyable to receive criticism of ideas, systems or strategies that you have put time and effort into. Criticism is part of life and in all actuality, should be embraced for all of us as traders. According to Ray Dalio (worth billions of dollars), you should view any type of criticism as an opportunity. Through my own personal experience in life and especially in trading, I can attest to the fact that what Ray Dalio says is definitely true in the real world. Criticism may not be pleasant, but it is a valuable opportunity when you have the right attitude and perspective about it.
Clay: This is the Stock Trading Reality Podcast, episode 238.
Announcer: This is the Stock Trading Reality Podcast where you get to see the realistic side of a trader’s journey, get inspired and stay motivated by every day normal people who are currently on their journey to trading success. And this is your host, a simple bucket and a shovel is all it takes for cost-effective parenting, Clay Trader.
Clay: Kids really are simple if you just let them be simple and so cost effective. You go to the aisle at any store and there’s toys and gadgets and all sorts of cool stuff and I mean, the technology that they’re putting in toys these days is pretty crazy. However, at the end of the day, kids are just so simple. Recently went camping with a bunch of friends and they all have kids and I swear the most common thing they would do, at least definitely for my kids is you’d look where’s… There they are sitting on the ground with a bucket, a shovel and digging holes in the dirt. Or just making a pile of the dirt or filling up the bucket of dirt and then pouring it out. Sometimes throwing dirt at each other, so that one had to be corrected.
Clay: But overall, just a simple way to go about it. And I guess this is probably a sign that maybe you’ve been trading for, I don’t know about too long, but you’ve been trading a long time is when everything somehow circles back to a trading analogy or you somehow equate it to trading. But for me, trading, it can just be like a shovel, bucket and dirt. Doesn’t need to be fancy, doesn’t need to be complicated, just keep it simple. So maybe that’s what’s missing from your trading strategy. Are you out there with some of the latest cool toys and gimmicks and technologies? Maybe you just need to pick up a shovel and a bucket, go find some dirt to dig into. Maybe that’s what you’re missing because sometimes it’s the simpler things in life that seem to go the farthest.
Clay: So for those of you that are maybe already parents, I’m sure you’ve noticed exactly what I’m talking about. Maybe if you’re thinking about becoming a parent there you go. I’m telling you, a 99 cent shoveling bucket or whatever they cost, two bucks, I don’t know. It can go a long way just providing your… especially if you get down and do it with them, your time is the most valuable asset as far as your kids are concerned. So there we go. There is my one little observation of I guess life as a parent. And then like I said in my mind at all somehow always circles back to trading in one way or the other. And while trading, sometimes simpler is just the best way to go. As for this episode hopefully you saw from the title, don’t have a guest but I want to talk about an article that I saw out there from somebody who I would argue it would be wise for us all to listen to.
Clay: Am I saying we have to agree with them? No, I would never say that you just blindly agree with anybody, but are there certain people you should listen to? Absolutely. And this is one of those people that I say it’s worth at least considering what they have to say. I did this several weeks ago and I had good feedback and I want to continue to do it whenever I see these sorts of articles and people that are worth listening to when they comment on things. If it can be applied to trading, then why not? Because sometimes, and we say it all the time, I mean listen to people that should be listened to. Remember there’s a big difference between blindly following just because it’s somebody, but at least hearing them out and considering what they have to say.
Clay: And that’s what I want to do here. And I think it is very valuable. And sure this article is not about trading per se. But if I never told you that it wasn’t about trading and I just started going through it, you could very easily assume, “Yeah, this article is about trading. Yeah. This article is about learning.” And then at the end if I kind of dropped the twist of, “And guess what? This article has nothing to do with trading.” You’d be like, “Well, but it’s still totally pertains to trading as a whole.” So this article comes from CNBC Make It, and the kind of backstory of why I want to do this is and I would assume that especially if you’re a longer time listener, maybe this is your first time listening and you’re still feeling me out this might not pertain to you. But if you are a longer time listener, I would assume that you’re already in this camp.
Clay: You don’t really need any convincing in regard to any of this. But maybe in the way it kind of acted for me was kind of seeing the different angles, seeing a couple of different vantage points about how all of this can play out. And especially for me as a former engineer as I’ll talk about, it’s kind of a neat way to look at it but a very valuable way. And like I said, this isn’t necessarily to persuade anybody. Maybe it is, but hopefully just to kind of reiterate that. Yeah, your line of thinking is, I don’t want to say the way it should be, but it kind of needs to be. And like I said, this is not my opinion right now. This is the opinion of somebody who’s a whole lot more successful than I am.
Clay: And I have no say in that or no problem saying that. So the title of the article here again from CNBC and their Make It section, it’s called Why Billionaire Ray Dalio Loves Criticism and Says You Should Too. Billionaire. Again I would assume that he’s probably more successful than most people listening to this. I don’t know maybe now granted I get it. While the amount of money is not a direct correlation to how successful you are, I can see where we’re coming from. But can we all agree that if you have billions of dollars, you probably have a decent size approach. And Ray Dalio as far as I’m aware, he did not inherit the money. This is all built. And the other reason why I really think that it’s somebody that you should really listen to is he is the biggest hedge fund manager in the world.
Clay: And you stop and think about what a hedge fund is. A hedge fund is people giving you their money because they believe that you can grow it. So think about that. What sort of trust must you have? What sort of reputation must you have to have people give you millions upon millions of dollars to manage for them? If you’re looked at as a pure scumbag, nobody’s going to want to give you money. Once again, I realize I’m speaking in general. Sure. You could easily nitpick my argument and say, “Well, what about this and this.” But as a whole, this is somebody that I think is worth at least listening to. Not blindly following, but at least listening to. He manages billions of dollars, he’s worth $1 billion and he’s saying that he loves criticism. Interesting. So what does he have to say about criticism? So picking up with the article, criticism can be a tough thing to stomach, but according to Ray Daleo, founder of the world’s largest hedge fund, it’s not something to be shied away from.
Clay: In fact, it should be welcomed, says the billionaire investor. “I love it.” Bridgewater Associates, Dalio told CNBCs Christine Tan in a recent episode of Managing Asia. Why? Well, it offers an opportunity to stress test your ideas and improve your decisions. And this is what kind of caught me, I don’t want to say off guard, but came at me from an angle that I wasn’t really necessarily expecting in terms of improving your decisions. A lot of times, and I’m speaking for myself, you almost hear criticism is, “Well, that was stupid. So I can’t do that.” Or, “That puts an end to that.” And you almost look at criticism as it totally just smashes anything that you’re thinking of doing. But in this situation, it could be actually the total exact opposite. It could be used to improve your decisions.
Clay: So not just squash them, maybe it’s just, “Yeah, that’s good. But…” And then the but, if it can help improve your decision or improve your thought process, well then that’s actually a good thing. But also the whole stress test and stress tests are great. And this is what I referred to earlier about engineering. When I was an engineer back when I still used my degree, part of the process of being a process engineer is, well, you have a process that needs to spit out some sort of part, some sort of something, but you have to make sure that something is actually worthwhile. So how do you make sure that it’s worthwhile? We had to put it under a test. Because if you have let’s just say a block and a block all of a sudden chips at just the simple tap of a finger.
Clay: Well, sure it’s a block, but it’s not really that good of a block if it’s going to chip at the tap of a finger. So you need to put that under some sort of stress, hence a stress test. And all products, they’re going to have some sort of minimum saying, “You know what? This block needs to at least be able to be hit by a hammer before it starts to chip.” So if you’re hitting it with a feather and it chips, yeah, sure it’s a block, but it’s not a very good block. It’s not a very worthwhile block. And then when you take that and you look at it in terms of a critique, that’s really what a critique is. So to put this towards trading. What is your trading approach? What is your trading strategy?
Clay: How are you looking to maybe manage a trade? I mean there’s many avenues, but the point being that criticism. And when you put your ideas, put your strategies, put your approach to the market through a “stress test” via criticism, sure that may make things “chip”. That may be, “Okay, well yeah that’s a strategy, but the strategy is lacking here, here and there.” Again, as the article starts off saying criticism can be a tough thing to stomach. So I’m not sitting here saying that it’s going to be rainbows and butterflies and you’re going to feel fantastic getting criticism. But if it can help improve your decision or improve your process, improve what you’re trying to do, to me, that’s a great way to go about all of it. And I bring all this up and the reason why I wanted to talk about this, and once again, I’m not saying this is any of you, because if you’re a longer time listener, I’m sure you’re well onboard to that.
Clay: Yeah. You know what? Tough love works, iron sharpens iron, all that sort of stuff. But for me, I have first hand experience with people that they look at criticism as some sort of mistreatment. They look at criticism as the other person being a jerk and they don’t take it as a stress test. They don’t take it as a way to potentially improve their decisions. They pretty much take it and they pull out the victim card and say, “Hey, that wasn’t very nice. Hey, you’re a jerk. Hey, you’re just saying that because you know my situation, not because you want me to buy your course.” Or, “You’re just saying this because…” Because, insert some other self defense mechanism that… Of course, they’re not saying this is my self defense mechanism, but that’s what they’re doing.
Clay: They’re protecting it because they don’t like that criticism. Once more I want to repeat, I’m not saying that it’s ever easy to hear criticism, but it is worthwhile. And I see it way too often where people are rubbed the wrong way and I’m speaking from personal experience again where you offer them up some sort of, “Well, I see why you’re doing that, but that’s just not very wise because of this.” But then, well they don’t like hearing that. They don’t like to hear that their decision may not be wise. But you know what? Sometimes, especially as traders, your decisions are wise. Your thought process is not very wise, it’s not very good. And if somebody can help point you another direction or just help improve your process or improve your decisions, I mean hopefully you can all see that’s a good thing.
Clay: And that’s why you know Ray Dalio, he “I love it”. So picking back up to the article here, it’s a realization Dalio came to the hard way. In 1982, he blindly predicted a stock market crash despite critique from his naysayers. That bet nearly lost Dalio his business, an experience he has described as painfully humbling, but it went on to define his future. “That was the best thing that ever happened to me.” Dalio said, “Next to my marriage and my kids.” So let’s think about this real quick because this is what again kind of caught me off guard. That one of the best things that ever happened to him. I mean literally right up there with his marriage and his kids was when he almost lost his business. But why? Because he learned a valuable lesson from that. He learned that the reason he almost lost his business was not because of the stock market or not because of his prediction.
Clay: Think about that. It was not because of his prediction. It was because he didn’t listen to the criticism he got. He didn’t listen to the people saying, “Hey, I see some holes in your logic. I see some downfalls here.” And he didn’t listen. So I want to repeat that again because there is way too often where people… And I am also guilty, so this is not me preaching to anybody like I’ve always had it figured out. But way too often as traders, we assign blame to things that don’t deserve the blame. We say, “Well this happened because of that.” But “that” is actually not the cost in this situation. It was not the outcome that caused Dalio to almost lose his business, right? It was not the outcome. It was the failure to listen to the criticisms that almost caused it.
Clay: Because all of that could have been avoided had he actually listened and considered the criticism. Not blindly followed, but at least listened and said, “You know what? Let me put my ego aside here. Maybe these people, maybe these “naysayers”, maybe they have some that they have some ground to stand on.” And like I said, that’s crazy that he put that experience. He put all of that, he put that lesson learned about, you know what? Criticism. I should’ve listened to the criticism, best thing that ever happened to him since his marriage and kids. And I want to just keep reiterating. This is not some random guy in the podcast waves me giving some sort of opinion. No, I’m quoting somebody that runs the biggest hedge fund in the world and he’s worth billions of dollars. And the biggest thing besides his marriage and his kids was learning to appreciate criticism.
Clay: So picking back up with the article, “It made me think, how do I know I’m right?” he continued, “That changed my approach to life. I wanted to find the smartest people I could who disagreed with me and understand their reasoning and to work things through.” That’s such good advice and I’m not perfect at it because yes, I don’t like criticism. I don’t like to hear things that… I’d much rather say, “Clay, you’re so good. Clay, you’re great. Clay, your business model is flawless.” Clay, this, that and the other. Perfection, my friend, that would be great. But I really do. I want to surround people and I want to find people that when it comes to trading that are better traders than I am or at least get them better or at least bring people in.
Clay: I have no problem saying that there have been people that have joined the community and they haven’t gone through the courses because I mean, they already know how to trade and they’re just looking for a team or a community to be a part of. And yeah, they’re definitely a better trader than I am. And I have no problem saying that it’s, it is what it is. But that’s what I want because then you can start to maybe find areas where you disagree with them or they disagree with you. And the thing about if I disagree with them and if you talk to them, that’s where you can learn things because maybe dare I say, you’re just wrong to be disagreeing with them. That’s always a possibility that I want to be fair, maybe you’re right to disagree with them. Maybe they’re actually wrong.
Clay: But the point is to go in there with an open mind and say, “You know what? I’m going to tell this person why I disagree with them but they’re going to come back with criticism about my thought process. But you know what? Maybe that’ll expose my thought process and make it stronger. Let’s stress test each other here.” And that’s the whole idea behind the community in and of itself is that… And we talk about it quite a bit, people show up and, “Well, I thought you guys were a bunch of jerks.” I thought this, I thought that. But at the end of the day, and many of those people that originally thought that, they have come to love the fact that no, actually it’s just kind of a stress testing environment. That’s what our chat room is about. That’s what I tried to structure it as because that’s what I want.
Clay: I don’t want me to sit there and just type and say random things and then have everybody be a yes man and be like, “Yes, that sounds good.” No, I like getting questioned. Sure. It can be annoying at times because like I said, nobody likes to get critiqued. It can be annoying to be critiqued, but I will always offer up my position. I will listen to other people’s positions and I’ve learned a whole lot about myself. I’ve learned a whole lot about the business. I mean the claytrade.com business, which started back in 2013 has been built on, I don’t necessarily want to say criticism, but it has been criticism. It’s been very constructive criticism. “Hey Clay, that was great, but…” and then you listen to the but. “Hey Clay, that was pretty good, but you could work on…” All right and then figure that out.
Clay: Always easy to hear? No. But is it valuable? Yeah, absolutely. The same with trading. When you come to the chat room, or not necessarily our chat room, but any chat room, I hope that any community that you are part of, and this is why I would argue you should be a part of a community, because if you are just in an echo chamber with yourself, how are you ever going to stress test yourself? How are you ever going to stress test your ideas? Stress test your strategies if you’re just sitting there by yourself? I mean, yeah, I’m going to do that. Nice little echo right back to yourself. All right, let’s do it. But if you can say, “I’m going to do that.” And then you have people coming back and disagreeing with you, sure, not pleasant. But you know what?
Clay: It’s a stress test. Maybe there is something that you’re missing. Maybe there’s something that you haven’t considered that you should be, or who knows maybe you’re going to get reinforced. Yeah. Hey, that sounds logical to me and that’s the idea, but this is also where it can be obviously anywhere in life because this is not talking about trading. But if you’re going to ask questions, if you’re going to seek advice, then you better be ready, you better be willing to hear something that you don’t want to hear. Way too often, again, I’m guilty of this in the past, you ask a question, you seek advice and I mean, really you don’t want advice, really you don’t want any sort of answer, you just want to hear what you’re already planning on doing. That way you can feel better about it. But if you don’t hear what you want to hear, “Well then that person’s a jerk.” Or, “That person doesn’t know what they’re talking about. I’m going to go find somebody else.”
Clay: And you just keep going on and on until you find somebody that will just pat you on the head and be like, “Yeah, that sounds good.” And, “Okay, there we go. See, now I feel better because they confirmed my decision.” Even though maybe previous two or three people are like, “Did you think about this, that or the other?” But of course you just ignore all that. I’ve been there before, the human mind is a crazy place, but it’s very hard to actually build a trading strategy. It’s very hard to build a trading anything. Even just your expectations going in. So putting strategies ahead, what actually is possible with the markets? What actually is possible from a trading perspective? If I’m trading this way and I have this amount of capital, what can happen from there?
Clay: And unfortunately in many situations you get out there and people will paint such a beautiful picture. And don’t get me wrong, yes, there’s all sorts of upside from trading and all that. But also somebody needs to kind of smack you upside the face and say, “Hey, that’s great. You’re dreaming big, I’m not here to crush your dreams, but I am here to keep your dreams on a realistic path. And you have quite a few gaps in that path, I get it.” Yeah, sure that exists. What you see there does exist. But what that person’s not telling you is, what about this, this and that thing over there? Well, you’re a jerk. Well, this person says so, I’m going to go with that person that says it’s a lot easier. That’s fine. But the problem is you got to be worried. Are people even stress testing you?
Clay: That’s a huge sign of, does somebody want to work with you? Does the community care about you or are they just telling you whatever you want to hear because they just really don’t care? I assure you, the community customer service answering people on YouTube could be so much easier if I just agreed with what everybody said, never put up a… I mean, I could so easily make it where nobody’s ever called me a jerk before. But I mean, believe it or not, I actually do want to see people succeed. So I’m going to tell people I’m going to stress test their ideas. I’m going to give them things that they should be thinking about. And now, like I said, 90% of the time, “Hey, thanks. I appreciate that. I never thought that before, but thank you.” But every now and then, and I mean I have a whole segment on it with ClayTrader mail, which is on the YouTube channel every Wednesday it comes out of people just… sometimes they just flip out.
Clay: They absolutely flip out. Could I be a little softer at times? Yeah, I probably could, but I just grew up playing sports, I blew up. I grew up with coaches that they were going to critique you and they critiqued you because well, they thought you could do it. They knew you could do it. And I’m pretty sure I’ve said this before but I say it all the time on our podcast because sometimes I’ll get on people’s cases. But as my football coach has always said, “Listen, the minute we stop yelling at you, the minute we stop critiquing you, that’s the minute you should start worrying because that means we’ve given up on you because we just don’t think you can do it anymore.” I mean when you just look at it from a, would you critique, would you get on the case of a two year old child who can’t read?
Clay: No, of course you want to critique that. You would be known as just a moron savage. Who is going to get on the case of a two year old that can’t read? Why? Because well you understand that unless they’re like Albert Einstein, that two year olds probably not going to be able to read. So you always got to keep in mind of that. If you are receiving some sort of pushback, if you are receiving some sort of a nay-saying, some sort of, as you may perceive it negative, feedback, you know what? At least they care enough to not just tell you what you want to hear. And that’s kind of the trick I try to use because as I’ve said a million times, and I’ll probably say a million more times, getting criticism, not exactly enjoyable, but you know what?
Clay: At least there’s a sign of care there. There is a sign of love. In fact, I would argue that’s the truest form of love. If an alcoholic comes up to you, “Can I get another beer?” “Yeah. Here you go. Take another beer.” Well, sure I mean from that perspective they’re going to think you’re the nicest person ever, an alcoholic and you just gave him another beer. But if you really care about and love that person, are you going to give him that beer? No. Is it going to be easy to get denied the beer? No, but I mean at least that person actually cares about you by not giving it to them. And that’s what I really want to encourage you to go through of course life. But in trading, and this is if you work with me, I mean I’m talking for all educators out there or really even if you’re seeking free advice from somebody, they may not come back and you may not hear what you want to hear and that’s okay.
Clay: That doesn’t mean you’re stupid. It may mean you have a stupid idea, but it doesn’t mean that you’re stupid because when you’re new… Think about it. It’s okay to have stupid ideas because you don’t know what a stupid idea is. You’re new. The only thing that’s stupid is if you play the victim, “Well that wasn’t very nice, jerk.” And then you don’t even listen to them and you keep doing the actual stupid idea. That is what makes you stupid. You having a stupid idea does not make you stupid. You have the excuse card of, well, when I’m new and I don’t know what I don’t know, that includes what would be something stupid to do. But the minute you hear that something’s stupid and you just toss it to the side, well now all of a sudden, sorry you are being stupid.
Clay: Because remember, why did you ask that person? This is what I always have to ask people is they ask me for my advice, which means I’m not saying they think I’m perfect, but they must see some sort of value in me if they are asking me for advice. And then as soon as I give it, all of a sudden I’m the jerk. It’s like, “Well, then if I’m a jerk, why did you even ask a jerk for advice in the first place?” So don’t let that contradiction slip into your thought process where all of a sudden the person that you thought would offer you value did offer you value, but because it wasn’t what you wanted to hear or because maybe it hurt your feelings, all of a sudden that person is just a jerk and not qualified to give it.
Clay: Because that just tells you that you’re an idiot because, well, if they’re not qualified to give you advice, why did you even ask in the first place? So from a logic perspective, all this is a very slippery slope. And I just want to remind you, and the goal here is to just try to make learning as easy as possible. And you know what? Of course, I would love for you to choose my program to learn from. But even if you don’t, even if you choose the free education route, as disastrous as that has the potential to be, you know what? Be prepared. Seek out criticism, embrace criticism and don’t even really look at it as criticism. Look at it as that stress test. That’s such a great word because that’s what it is. You’re trying to beat up your strategy, you’re trying to beat up the block and the block has got to be able to withstand some force.
Clay: Your strategy, your approach, your rules. They need to be able to maintain, they need to be able to withhold, again some beating up because the market’s a pretty rough place. So I kind of went more, let’s see, where was I here? Yes, that was the best thing that… So again, it all goes back to… it made me think, how do I know I’m right? So how do you know I’m right? How do I know this strategy makes sense? How do I know I should be behaving in this manner as a trader? Is that the right way? Ask but be willing to realize that the feedback you get may not be the best thing that you want to hear. So let’s see. Let’s pick him back up there. In the years that followed, the entrepreneur did just that and made feedback a central tenant of his business.
Clay: Indeed, it’s a culture for which Bridgewater Associates has become famous. Under a philosophy Dalio dubs idea mediocracy, staff are expected to openly give and receive feedback, good and bad, regardless of their level or position. That includes too himself, he said. “Anybody I’m working with always has the right to question anything. The right to their opinion,” says Dalio. I can’t say that I got this from him, but that is really my community business model wrapped up, is I want the community to be fun. I want it to be worthwhile, but my definition of worthwhile is if you show up and you’re talking in a way that really exposes that either you don’t know what you’re talking about or maybe you have some big old holes in your logic, then you’re going to get called out. And again, you can look at it as, “Well, that wasn’t very nice to call me out.”
Clay: Or you can look at it as somebody offering up a stress test to you. And some people, they show up, they get mad, they leave and they never come back because we’re just all a bunch of jerks. Their ideas, their plans, they get stress tested, they don’t like it. They don’t like to see that maybe there’s some flaws in their logic and they leave. Other people show up and they take it as it’s intended. It’s not intended to call you a moron. Yes. Again, the idea may be moronic but that’s okay. If you’re new, you don’t know what moronic is. So just no big deal. No judgments. We all did stupid things. I was probably one of the biggest morons out there. It’s not a big deal, but you got to listen to it.
Clay: And I love to know, and that makes me feel… because sometimes I’ve questioned, I don’t know, is the community a little too rough? And don’t get me wrong, we are a very friendly group. It’s not like if you show up, you get thrown under the coals and everybody’s jumping down your throat. No, but if you show up and you make a comment that suggests, I don’t know, “Is your risk control okay? It sounds…” You’re going to be quite, “Hey have you considered this? Because it sounds like your risk control may be way off.” And sometimes we were like, “No, I meant that.” And everybody’s like, “Okay, that’s cool.” And then everybody just goes on. Other times we’re like, “Wait, what? No I’m not using a stop loss.” And then you’re going to get a bunch of people that are like, “Wait a second, you should probably tap the brakes.”
Clay: And that really rubs people the wrong way, “Wait, don’t, you don’t know me. You’re telling me to stop trading right now.” Yeah, I am. Because you failed a massive stress test. If you are not using stop losses, that stress test is a massive failure. Again, that’s cool. If you’re new, that’s all right. Now you know about stop losses and you need to start to factor them in your trading process. So I don’t want to come across like it’s a savage environment, but this is essentially, and I really do like idea mediocracy. Because I don’t want trading strategy mediocracy I don’t want any of that to be in. I want people to get good, honest feedback, good, honest criticism. And that’s what you’re going to get. So if you are looking to improve, if you are looking to have the truth thrown your way, if you’re looking to have your ideas, have your strategies stress tested then you would fit in very well.
Clay: If you are somebody that only wants to hear what you think is right and you only want positive reinforcement all the time, then I have no problem saying you’re probably not going to be a good fit. Just like you wouldn’t definitely not be a good fit for Bridgewater Associates, who again runs the biggest hedge fund in the world. So if you’re running the biggest hedge fund in the world, if you’re running the biggest anything in the world, I’m not saying this is flawless logic, but I think it’s rational logic to assume. You know what? They’re probably doing quite a few things right, if you get to being the biggest of anything. And so to know that this is their culture of, “Hey, it’s all about feedback.” And this includes me. That’s why I love if I go in there and say something stupid I’ve been questioned many times before.
Clay: Most times I explain and I’m like, “Okay, I see. All right. I get things.” But other times it’s like, “Yeah, you know what? You’re probably right.” Maybe for example, “Maybe volume was a little sketchy on that one. I stand corrected.” That probably wasn’t the best alert given this, that and the other. And, “Sure, it’s crap.” All right. They got the best of me, but who cares? I got better, they helped me get better. I will try to help them get better, iron sharpens iron. All right. And that’s the idea here. So again, and I’m not patting myself on the back here, but that does actually make me feel pretty good that the whole culture, the whole atmosphere of the biggest hedge one in the world is something that I’m trying to replicate and pretty good at it.
Clay: Now it’s not like the community just started, it’s kind of taken on a life of its own. And you know, is it perfect? No. Do sometimes people may be going a little overboard in either direction? Sure. Sometimes I’m like, “Wait a second. That was not a very good stress test. You could have said this than the other to stress test it much better.” So, I mean, it goes both ways. I’m not saying anything’s perfect, but knowing the general framework, and really that’s how you get better. And you got to just try to stress test things and try to improve your decisions. Let’s see. So picking back, “Anybody I’m working with always has the right to question anything. The right to their opinion,” said Dalio. “The alternative of letting criticism fester away unspoken is no use to anyone,” he said.
Clay: “When people keep bad thoughts held in their minds and they don’t put them on the table, it’s very inefficient and it’s very unproductive,” he said. That’s so true especially in trading. I mean, think about it. Let’s do this. Let’s say you have a strategy. Let’s say you have a system. Let’s say that you have some sort of approach to the market and you bring it to the table and there are some issues, but all those issues, they’re just not addressed. That is really to use his words, inefficient for your strategy. That is very unproductive for your strategy. What is very unproductive? What is very efficient? Not having somebody correct those glaring issues. What’s another word for correct those glaring issues? Critique your strategy, offer up you some criticism. There’s nothing wrong with criticism. Please learn to love it. Criticism is a total opportunity. An opportunity at what? To make your strategy efficient, to make your strategy productive.
Clay: You would be totally justified to be like, “What a bunch of jerks.” My strategy had a bunch of little flaws in it that was causing it to be inefficient and unproductive and nobody told me. What a bunch… And I’d say you’re right, that is that kind of jerks. I mean, they didn’t correct him, but you can’t be one of these people that has an inefficient and unproductive strategy and then when people point out how to make it efficient and how to make it productive, “That wasn’t nice. These bunch of jerks. You’re just saying that because you want me to pay for your course. You’re just saying that because this, that…” No, I’m just saying it because I mean I have a lot of experience or somebody else has a lot of experience. That person has done it before.
Clay: That person has also done it before. And guess what? Both of those people got the same results. So again, is it guaranteed? Not necessarily since there’s no guarantees. But is it highly likely that if you keep doing what these other two people have done, you’re going to get the same result or a very similar result? Yeah, I think that logic is pretty sound. So that is the power, that is how you get efficiency. That is how you get productivity. You got to be willing to open yourself up to criticism. I mean, that’s good stuff. And like I said, it’s not easy and I think I’m pretty good at it now, but this article really just hammered home that, “You know what Clay? Yeah, you do on criticism and you just keep going. You keep offering it up.”
Clay: And I mean, that’s kind of part of my job with claytrade.com I’m a coach, teacher, whatever you want to call me, mentor. So yes, I’m going to offer that up. That’s what people are paying me to do. And let’s face it, by the time you get to paying me, I take that back. I’ve had a couple people that have joined and then I offer them up and I’ve gotten emails just lecturing me, Hey, this, that and the other. But to be fair, and I can’t remember the last time that’s happened, but I mean, a lot’s happened. It’s been six years since I’ve started this thing. But point being, the most part, once people get on board, they’re all good with it, but there’s nooks and crannies. And that’s why I thought, you know what? This article is so good especially in this…
Clay: And I’m not turning this into a life, but in this society, can we all agree that sometimes people wave, “That wasn’t very nice. That was very mean.” And to be fair, yeah, some situations it’s like, “All right, that was just mean. That was just not good. That was definitely mistreating that person. There is no doubt about it.” But in many situations, that’s, “Come on. They’re offering you up some criticism.” Yeah, I get it hurts your feelings, but that’s going to make your thought more efficient. That’s going to make your thought more productive. So we’re definitely living in a society now where there’s again, in some situations it’s black and white. I’m not denying that, but there’s lots of gray area where constructive criticism gets masked as, “Well that was very mean.” Or, “That was very insensitive.” And it’s like, no. I mean iron sharpens iron.
Clay: I’m trying to stress test your idea here. So be open to the stress test and to finish this up, let’s have a totally open communication. If you want an organization to be really successful, so I’m going to replace that word. If you want a trading strategy to be really successful, this is the key to Bridgewater success. Or in other words, this is the key to a trader’s success. Then you want a real idea mediocracy. So real idea. That’s the idea. Or that’s the point here. Then that is all what you need to be focused on is, you know what, if you want to be successful, you got to get actually real ideas. You got to stay away from the whole mediocracy thing. Again, just going back to the alcoholic. Yeah. Okay. The alcoholic is going to think you’re the greatest person ever because you hand them a beer when they clearly don’t need anymore.
Clay: But if you want to actually get better you don’t need that beer and the person that’s not giving you that beer is trying to help you out. So I hope ideally you’re already on board or you’re like, “Yeah, no, thanks Clay.” That’s good. And so from that point of view, I haven’t told you anything new, from my point of view, it wasn’t new to me. But it’s always good. It’s good to hear from people way more successful, people that you respect. And it’s always good, especially somebody like me that loves analogies. I mean if you’re new to the podcast, as you go through the interviews, you’ll hear quite a few analogies. Especially if you go through the courses I offer you, you’ll hear plenty of analogies. But as somebody that loves analogies, I love this whole idea of a stress test.
Clay: That’s such a good way to look at criticism. Because criticism, it’s got a bad connotation, but if I say, “Hey, no.” I’m stress testing your idea. That actually sounds pretty good from a little marketing spin. That sounds great actually, “Hey, let me stress test your idea.” Instead of, “Let me critique your idea.” Because I feel like… myself too. If someone’s like, “Let me critique your idea.” It’s almost like you put on the boxing gloves and you’re like, “All right, let’s go. I’m going to fight back.” But if somebody was like, “Hey Clay, let me stress test your idea.” I’m like, “Yeah, I get a stress test.” I was an engineer once, stress tests are important. You want to make sure that whatever it is, is worthwhile because you could have a block. But if that block, like I said, starts to chip because the feather hits it, that’s not a very good block.
Clay: You could have a trading strategy, but just because you have a strategy with some rules, that doesn’t mean those rules are good. That doesn’t mean those rules make any sense. That doesn’t mean that’s the order the rules should even be in. I mean, so yeah, stress tests. So I’m not going to try to take this now after this episode airs so I can better explain myself because right now if I go on my community and I’m like, “Hey I’m going to stress test your idea.” People are like, “What are you talking about?” But now after this goes public, I can just link people to this episode. But this is what I’m going to try to kind of… not necessarily add in because it’s already existed, but just this whole idea of, “Hey, I’m going to put your strategy, I’m going to put your comment through a stress test here. Have you considered this, that and the other?”
Clay: And hopefully people are a little bit more open to that rather than, “Hey, I have some critiques and the critiques are these.” Because when I hear critique, like I said, I’m putting in the mouth guard, I’m putting on the boxing gloves and I’m like, “All right.” And I’ve tried to get much better at that, but I don’t know. There’s something about that word critique that all of a sudden… maybe I’m alone in that, I don’t know. But it almost makes the hairs on the back of your neck stand up and it’s kind of like it’s go time. So get out there, seek criticism, accept criticism, realize that if somebody is calling your idea stupid, that’s okay. Especially in trading. When you are new and you don’t know what you don’t know, part of not knowing is you don’t know what’s stupid.
Clay: So if you’re doing something stupid that doesn’t make you stupid, that just makes you new. It only makes you stupid is if somebody tells you it’s stupid and then you keep doing it, now you’re stupid. So don’t let somebody suggest… No, I’m not saying somebody’s going to call you stupid, but if somebody does call the idea stupid or implies that, “Yeah, that’s not a very good idea at all.” Just realize you do actually have a valid excuse and as somebody that is not a fan of excuses at all, when you are brand new and if you’re doing something or thinking something that is stupid because you just simply truly in your heart of hearts, don’t know that it’s stupid, that’s okay. That does not make you stupid. It just makes you new. So get out there, seek that criticism, be willing to take it and also be willing to offer it up.
Clay: I mean, if there’s somebody that you care about, sometimes you got to put them through a stress test. You got to put their actions, whether that be in trading or life, through a stress test, because stress tests, as he says, they’re going to help improve decisions. They’re going to help for trading, improve trading strategies, improve trading rules, and that’s the name of the game from a trading perspective. If you want to get consistent, you need to have a strategy that’s been stress tested. You need to have a strategy that’s been thought through and if I can turn this into a miniature sales pitch, I will. That is one of the great benefits about being part of a community and not a sales pitch, necessarily for my community. If you think that somebody else’s community would be better for you, that’s cool too. I wish you all the best, but the point being, it can be very dangerous to just sit there and play that, “I’m going trading totally alone and I’m going to do it.”
Clay: I’m not saying it’s impossible, but when you put yourself in an echo chamber with no possibility to truly stress test yourself, it’s a risky territory. I don’t know about you, but when I proofread my own writings for some reason, I still always miss stuff. I don’t know why, but as soon as I let somebody else proofread something, there’s a bunch of things that I somehow missed. Same is true for trading, is if you put yourself in a echo chamber, sure. You can say, “No. I’m going to be realistic, I’m going to stress test my own strategies, I’m going to stress test everything.” But there’s just something different about getting other people’s feedback. Other people’s applications of a stress test and all of a sudden you start seeing things that you just have missed over and over again.
Clay: And like I said, I think that’s just the way our brains are wired. Because the best example I can think of is, going back to that, you write a paper or something, you read through it, you proofread it and you think it’s flawless and then somebody else goes through it and there’s red ink all over the place. So just something to consider. I’d love for it to be my… Yeah, it’s a network, my community. But if it’s somebody else’s, that’s great too, but highly consider it because there is great value, there is great opportunity in getting and receiving criticism. I guess getting and receiving there, they’re one in the same. Getting and receiving and then also offering up criticism because when you’re offering up criticism, you can have the ability to maybe what you’re offering has some flaws in it.
Clay: So it truly is iron sharpens iron and you don’t want to be in an echo chamber. You want to be surrounded with other pieces of iron. So, that’s all I have here. Hopefully you got some benefit from it, but yeah, Ray Dalio, billionaire world’s largest hedge fund to know that their whole business model and that their whole kind of culture is based around criticism and stress test. I’m all for it. Now before I go a final few things. First off, if you listen to this on iTunes, a big request for me, please leave us a rating and especially if you have extra time, if you could leave us a written review, that really helps out and goes a long way. And I sincerely do appreciate it. So even if you never spend a dime at all on courses or the services I offer, that’s totally fine.
Clay: But if you get value out of these than like I said, a very straightforward and very quick way that you could just “show your appreciation” or whatever is to leave a rating and leave some feedback and that would be great. If you are listing at claytrader.com on the show notes page. Then in the bottom right hand portion of the screen, there’s a little chat box there and that is a live chat box that’ll go to myself or Nate. If you’d like to talk with me just specifically say, “Hey, I want to talk with Clay.” And it may not be right away, but if you leave your email then I always assume it’s not the weekend or a holiday, I try to get back to everybody within 12 hours. Or if I’m at my computer then there you go. I’ll talk with you live right there on the chat box, but I’m all for questions, comments, criticisms, offer me up a stress test.
Clay: I would love to get a stress test from you if you think that’s something… If you can offer me a stress test that can improve another area of either the business or the podcast itself. Hey, I’m all for it. I’m not going to promise I’ll listen. But Hey, I appreciate you and I thank you for showing the care to at least throw a stress test my way. So I’m all for it. But that is all I have. So thank you for hanging out and I look forward to being back with you next week with getting back to our normal format of having a guest and hearing about their journey. Everybody take care. See you back next week.
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