Via Clay Trader

I’m aware. The title of this episode may seem like clickbait. I mean, how could making $500 be attributed to ruining someone’s mind? It would seem that making money is a good thing; however, in this case it was the absolute worst result that could have happened. My guest, Jacob (“farmerj” in the chatroom), takes us through a very crazy journey that as one point reached him only being happy if he made $1,000 per day. How can someone reach this point? All I can say is the human mind is a crazy place and if you’re not aware of the games it can play with you, you are at risk. His journey has been a wild ride and I enjoyed hearing about every minute of it (and so will you!). Let’s get to it!


Clay: This is the Stock Trading Reality Podcast episode 250.
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, Captain Crunch French Toast is becoming his specialty, Clay Trader.
Clay: Come on over, come on over, I’d be happy to make you some of this Captain Crunch French Toast. I didn’t discover the recipe. It’s a total knock-off of one of my favorite places to eat in Baltimore, Blue Moon, so shout out to Blue Moon. If you are ever in Baltimore you have to go to Blue Moon and, at minimum, I realize they’re famous for their Captain Crunch French Toast but you have to get their cinnamon roll, it’s fantastic, but let’s get back to the Captain Crunch French Toast. That’s where I got it from and my kids love to make it with me.
Clay: I mean, let’s be real, whenever you can put even more sugar on something that’s got sugar already quite a bit a part of it, such as french toast, and all of a sudden you’re putting Captain Crunch … Things are fantastic. It’s a two part question. If you like french toast and you like Captain Crunch cereal then you’ve got to try them together. It’s fantastic.
Clay: Moderately, right? Eat in proportion, eat disciplined-ly because … Disciplined-ly? I don’t think that’s a word but that’s okay. Don’t eat it everyday or else you’re going to get diabetes and it’s not going to be a good situation long-term. Having it every now and then, there’s no harm in enjoying some sugar every now and then. Yeah, Captain Crunch French Toast, truly, truly a great combination and quickly becoming a specialty of mine with my kids and we all … If you do have kids it’s a great way to get involved in interacting with your kids and everybody has a good time.
Clay: As for our guest today, we have some great stuff. In fact, the title of this podcast, which you say, probably one of the … I mean, the context into which it comes up is really powerful and I’m not trying to be overly dramatic but when we get to that part of the discussion really just stop and think about what Jacob is saying, who is our guest, and what he really means by it because it is so so true and I get it, it’s bizarre. How can making money, how can making $500 have actually ruined his mind? How can that have created all kinds of problems? We go into that later on in the journey.
Clay: It really is, if you’ve never traded before … I get it. I could be a stranger to you, Jacob a stranger to you, but please just trust us. This is how the human mind works. This is the different traps and pitfalls that you can fall into if you’re not aware of it. That’s just one little nugget from this discussion that we had but Jacob walks us through a whole bunch of stuff and another little spoiler, how he got to the point of only being happy if he was going to make $1000 in a trade.
Clay: Think about that, “I’m only happy, my goal is to make $1000 in a trade.” How does somebody get to that point? How does the human mind even allow for that to happen? Again, that’s just another little nook and cranny, little golden nugget from this discussion. With that being said, we are going to talk with Jacob and for you inner circle members in the chat room he goes by Former Jay as his alias. Without further ado, let’s hear about Jacob and his pretty crazy journey so far.
Clay: Jacob, welcome to the show.
Jacob: Thank you. Good to be here.
Clay: I have … Well, first off, at first, Jacob thought I was some sort of mercenary kidnapper because we had a little technical difficulties. I guess the mic had my voice sounding like … I loved the way you explained it. Kind of like one of those murder mystery shows where I have to black out the person’s face and hide the person’s voice. I can only imagine what Jacob was thinking when he first logged on and heard me talking to him like whatever it sounded like.
Clay: One thing I know, though, he’s got a good personality because after we got things figured out [crosstalk 00:04:14]. I thought you were going to ask me for some sort of ransom. Good to know right from the get-go that … That actually was the perfect description of it.
Clay: Now my second kind of just before I forget, I know your alias in the chat room is Farmer, well, Farmer Jay I believe. Are you a farmer?
Jacob: I’m a part-time farmer now. I used to be full-time but now I just work on the family farm.
Clay: Okay. What do you farm?
Jacob: Oh, we have beef cows and corn and hay.
Clay: Nice. Where do you live at?
Jacob: Southwest Wisconsin.
Clay: Okay. Talking to a farmer from Wisconsin. Unfortunately, I can’t say you’re the first farmer but I’ve always kind of wondered when I’ve seen that screen name. I wonder if that’s a play on words or something or if he’s actually a farmer but you are a farmer.
Jacob: Yeah. It actually kind of worked out. I started doing … Our farm insurance guy passed away and I started doing insurance. That’s Bloomington Farmers so it kind of worked out that way too, but I had my farmer email way before then.
Clay: Nice. Nice. Yeah. It seems like all the pieces fell perfectly into place. All right. Well, now I’ve gotten as I’ve kind of pried into stuff, that’s really not my business so thank you for allowing me to pry.
Jacob: [inaudible 00:05:48].
Clay: Let’s hear about you … You never know. I don’t know. I don’t want you to show up and I don’t [inaudible] pitchfork and then want to … Was that farmer racist assuming that you’d show up with a pitchfork? Did I just offend you?
Jacob: Well, that’s kind of stereotypical. Yeah.
Clay: Okay.
Jacob: [crosstalk 00:06:08].
Clay: I don’t want to offend you. I realize in this day and age I might have just offended you with my assumptions. I’m glad we’re still …
Jacob: I’m offended that people get offended.
Clay: Yeah. Good. Good. I’m in that camp too. Anyways, we’ll move on from that. All right. Well, where did all of this start for you from the market perspective? Where did you first hear about the markets? What sorts of things played out that brought you to the point where you decided you wanted to get more active with it?
Jacob: Well, like a lot of people I had a class in high school and that was more investing, I guess you’d say, or … It wasn’t really in-depth or anything like that. I graduated from high school and I didn’t really do anything with the markets. Any extra money that I had I put into the farm, buying equipment and stuff like that.
Jacob: When I first started it was like ’08, ’09. I had a little extra money and I thought I should try investing or something. I opened up an E-Trade account. I think I put like $1500 in it. I had no idea what I was … I guess I was just buying and holding and hoping, that was my strategy. I just bought companies like Ford, companies that I knew of.
Clay: It sounds like it was just a situation of, “Hey, I’m relatively established. I have the farm and now because of the farming goals, the business goals, I have some money laying around. I should probably be wise with this money and I want to grow it some more and I remember about this stock market thing so I should probably invest it in the stock market.” Is that a fair …
Jacob: Yeah. Yup. I’ve always been a good saver, well, pretty good saver anyways. Above average I guess. I mean, I’ve always … I hate wasting money and I hate … I mean, I don’t know how to say it exactly but …
Clay: You’re frugal.
Jacob: Well, yeah, I guess and you’ve got to make your money work for you I guess is the best way to put it.
Clay: Right. Right. Yeah. Exactly. I argue that’s part of being frugal is frugal is just … You ask some people, “No, that means you’re a cheapskate.” Well, true but you’re quote unquote a cheapskate because you understand that if you have money leftover then you can take that money and grow even more money from it. Your motivations for being frugal I find in many situations are because those people just realize the benefits of actually having money leftover. That’s my take on it. I think that sounds like that’s kind of the mindset that you’re in is you want to have some money leftover so you can make it work for you.
Clay: I will say that so far, so good. I mean, in hindsight, maybe you didn’t know exactly what you were doing but you didn’t start buying these random penny stock. You bought Ford. It sounds like you just bought companies that you were [inaudible] … Is there about to be a rabbit hole?
Jacob: That’s how we started out or that’s how I started out.
Clay: All right. Well, I guess all I’ll say is keep on going so where did it go from there?
Jacob: My first … I don’t know if it was my first but we have a local … Well, it’s a Wisconsin or state bank … It was called [inaudible 00:09:56]. It’s out of business now. That’s a little spoiler alert I guess. I think it was only in Wisconsin. I liked the bank. I banked there for a long time. Their stock had just gone down and so I bought some of that because I like the bank and I thought that’s good.
Jacob: They got caught up in the … That was during the housing crisis and they had a ton of bad loans and they eventually went bankrupt. I lost, I think it was around $600 or something like that. That was my first bad move I guess.
Jacob: Then after that …
Clay: I’m curious, though. I’m assuming you bought and then the price went down some more.
Jacob: Correct.
Clay: Did you buy more or did you just hold?
Jacob: Yeah. I actually bought more and I think the price went back up for a little while and I sold and I made some money on it and then it went back down and I bought some more. I don’t think it ever went back up.
Clay: Was this all going on in your quote unquote investing account? That was a $1500 amount?
Jacob: Yes. Yup. This is all in the same … It was all in the same account. Yeah.
Clay: Okay. When you say $600 and it’s … I realize the account may have grown a little bit. That was a pretty good chunk of that $1500 then?
Jacob: Yeah. I forget the exact amount but it was somewhere in that range.
Clay: Okay. It’s safe to assume the loss was, obviously not your entire account, but a good chunk of it?
Jacob: Correct. Yup.
Clay: Okay. [crosstalk 00:11:44].
Jacob: It went … Well, eventually it went … Go ahead.
Clay: No, no. Go for it.
Jacob: I was just going to say it went bankrupt and it went to completely zero. It was gone. I don’t know.
Clay: You had kind of a little ceremony for it and then … Where did you go from that point then?
Jacob: Well, that’s getting to be a long … I think after that I was trying to find … I don’t even remember where I found them at. I thought maybe I should buy cheaper stocks because then I could buy more shares and they would have to make a smaller move to make money. I don’t know if that makes sense.
Clay: That makes perfect sense. I mean, not to steal away from your originality in terms of your journey but we’ve heard that one quite a bit and, I mean, in your defense that is actually good logical sense. I mean, “Well, I don’t have a whole lot of money. Oh, so I can buy cheaper stocks and buy more shares and because they’re smaller priced stocks a movement is going to be bigger and because I can buy more shares, hey, that’ll be worth my time.”
Jacob: Right.
Clay: On the surface, that seems like it makes sense but as we’ve heard before, maybe we’ll hear again, maybe that wasn’t the right thought process to go through. All right. Where did you take it from that point?
Jacob: That’s right. I don’t even remember where I found them or how I found them or anything but I got into two penny stocks. I didn’t even know what penny stocks were other than they costed pennies. You know? I basically got into them and they maybe went up a little bit and I sold and they went back down and I got … It was basically the same story just on a smaller number to start with.
Clay: You don’t remember where you found these penny stocks from? Were they on message boards or social media?
Jacob: No. It wasn’t anything like that. I had to have found it somewhere on E-Trade or … I wasn’t a part of any message board. One was an oil and gas company.
Clay: Okay. Well, that would make sense too because I’m trying to remember. Was this still back in like ’08 ish time period?
Jacob: Yeah. ’08, ’09 something [crosstalk 00:14:30].
Clay: That’s when oil was really going bonkers too, wasn’t it? If I remember it I think oil was like well over $100 a … I mean, things are going crazy.
Jacob: Yeah. I think that was maybe a little bit later but not much.
Clay: Okay. I’m just trying to figure out how did you land on an oil and gas stock? I can see it under that context.
Jacob: To be honest, I don’t even remember how I found them.
Clay: Were you running scans through E-Trade?
Jacob: I really had no idea what I was doing.
Clay: Okay, so [crosstalk 00:15:01]. Again, I can see you running a scan …
Jacob: I was just holding it open. That’s [crosstalk 00:15:05].
Clay: I’m trying to give you, “Well, maybe running a scan for stocks under a dollar” but not even that?
Jacob: Maybe I could have … Maybe I could have done something like that. I really don’t remember.
Clay: In your defense, that is like … Wow. Time flies. Basically, 10, 11 years ago.
Jacob: Right.
Clay: Again, I can barely remember yesterday, let alone 11 years ago. I do understand. Regardless it sounds … Did you blow up your account or was it because … It sounds like you made money and then you lost money.
Jacob: Yeah. Those two trades basically were the rest of my account.
Clay: Oh. Okay. Now you all of a sudden had a ceremony for your account?
Jacob: Right. Yeah. I quit trading … I mean, I didn’t put any more money into it. I figured I could put my money into something else.
Clay: Again, I realize you may not remember but what was your thought process? What was your impression of the markets when you left? Did you know it was your fault? Were you blaming some external force? Do you have any recollection of what your impression of the markets were at that point in time when you decided to just stop trading?
Jacob: I don’t think I really blamed anybody. I just looked at it more as I was gambling or I don’t know exactly. I gambled and it didn’t work out.
Clay: Okay. Yeah. You weren’t necessarily blaming other people but you were just essentially blaming the thought, which is, “Well, this stuff is just totally random. I tried and it randomly didn’t work out for me.”
Jacob: Right.
Clay: It’s still my fault but it’s my fault in the sense of, “I just picked the wrong chance”? Is that pretty much how …
Jacob: I guess. Yeah.
Clay: Okay, which is what a lot of people do I think. They don’t necessarily blame other people or anything. They’re like, “Well, the stock market is just gambling because I saw other stocks that went up. I just happened to choose the wrong one.”
Jacob: Right.
Clay: “It is what it is. I don’t want to do that.” All right. I’m always curious what people’s impressions are after their first go around, especially in your case it sounds like you stepped away for a bit. How long did you step away? My first question. Then the followup question would be, “What eventually brought you back into the markets?”
Jacob: Well, I got married in 2012. We put, when we had … We put money into mutual funds and stuff like that. I didn’t really pay attention to the markets too much. Then in 2018 my wife … In January of ’18, my wife … She had just gotten pregnant. She came and told me she was pregnant. That was with our second child.
Jacob: She goes on, “I want to quit my job. I want to stay at home with the kids. I want to do all this stuff.” I’m like, “I’m not against any of that or anything like that but give me …” I mean, the kids are little now and … She does daycare. I didn’t say that but she does daycare. Just give me a couple years … We finally agreed on two years to give me a chance to figure out how to replace your income and stuff like that and get our house paid off.
Jacob: We agreed on two years and I knew there was … I mean, I don’t know if I should say I always knew but I know there’s ways people made money on the stock market and we’re starting to have a little extra cash to do stuff with. I went on the internet and I Googled stock market or whatever, trading or something like that.
Jacob: Anyways, your site popped up first so I clicked on that. I watched a ton of videos. Then in I think the beginning of February I opened up a paper trading account with Think Or Swim with [inaudible 00:19:50]. I paper traded for about two months. I think I made like $2000 or $3000 a month for those two months.
Clay: What were you doing exactly? Paper trading but were you swing trading? Were you day trading? What did you think you were doing at the time? Now sounds like not much of anything but at the time what did you actually think your “strategy” was?
Jacob: Well, my strategy looking back was … My strategy was basically buy something and when it went down buy some more and when it goes back up you sell it.
Clay: Buy low, sell high. What a stupid question on my part. I mean, okay.
Jacob: That was my strategy. It worked out because, well, for one reason, in your paper account you have so much money that … Well, as long as you don’t buy a ton. I mean, I didn’t buy a whole bunch all at once. You have a big account so you can keep buying as it goes lower. As long as it rebounds [crosstalk 00:21:06].
Clay: Let me ask you this, because there’s definitely a valuable learning lesson here. When you were practicing did you know how much money you would actually be starting off with when you went with real money?
Jacob: No. Well, I knew it wasn’t going to be that much.
Clay: Okay. The lesson here for you listeners, and it’s not like Jacob is the first to do this, tons of people do it, but the first question that you need to ask yourself in order to actually practice wisely, I mean, there’s a whole lot more than goes into it but just at a very basic surface deep level, question number one, how much money am I going to have when I actually start trading with real money?
Clay: As soon as you answer that question you then go and change whatever simulator, demo account, whatever you want to call it, you need to make sure that you only have that amount in your account because, as Jacob was saying, he was “practicing” with way more money than he would actually have, which is really the equivalent of, “Hey, you know what? I’m practicing the game of hockey.” Oh, yeah? You’re practicing it? “Yeah.” Show me what you’re doing. Then all of a sudden you pull out a tennis racquet or something.
Clay: Sure, you’re practicing the game of hockey but you’re not actually practicing it very well if you’re using a tennis racquet because that’s not what you’re going to actually use in a real hockey game. That’s just, like you said, there’s a lot more that goes into it to practice wisely but just at a starting spot make sure you’re at least using the amount of money you’re going to use when you go live with an actual …
Clay: Before you go, “Pfft. That’s obvious”, trust me, I see it all the time. I hear it all the time. “Oh, man. I was making so much money” and people show screenshots and they’re buying 5000 shares. The first question I always ask is, “Are you going to be able to buy 5000 shares of Apple?” Which is trading for $200. “Well, no.” Well, then those results don’t mean anything because you’re practicing in an environment that’s not going to be the reality of the matter when you actually get started.
Clay: Thank you for being that up, Jacob. That’s a lesson that we’ve talked about many times before but it’s one of those that it’s always nice to bring up every now and then because it’s pretty much … Would you agree as someone that’s done it [crosstalk 00:23:05].
Jacob: I’ve done it before.
Clay: It’s really a total waste of time because it’s literally … You’re not really giving yourself any sense of realism. At the end of the day at the core, I mean, would you agree it was just a total waste of time?
Jacob: Yeah. Pretty much.
Clay: You’re doing this, you’re making $2000 to $3000 just buying low, buying more, and then like, “Okay, now I’ll sell.” You’re making $2000 to $3000. Pick it up from there.
Jacob: I thought I was a natural at it.
Clay: You thought you were a prodigy, huh?
Jacob: Yup. Yup. In March, I put I think it was $2500 or something into the account to go live. Of course, you get whatever, 500 free trades, for opening up an account. I quickly figured out that I was not going to ever use that number of trades because of the PDT rule.
Clay: What did you do about the PDT … I’m assuming you didn’t even know about the PDT rule while you were practicing?
Jacob: No. No. I didn’t know. I don’t know how I missed that one of your videos or I didn’t … I don’t know. I didn’t know about it or I didn’t remember it or I don’t know. I didn’t realize it.
Clay: Let me ask you this, you answering this, maybe you’ll explain what the PDT rule is because I can see what you’re saying. “Okay, I’m new. I don’t know what the PDT rule is.” How did you find out about the PDT rule?
Jacob: Well, on the screen it tells you how many day trades you have. You have three day trades in five days unless your account is over $25,000.
Clay: As a listener, the PDT rule, you can’t get around it. It’s $25,000 you need to have and a margin account and then you can trade in and out of stocks as many times as you want but if you don’t have that, well, then you need to or I should say you can only make three day trades, again, a day trade being defined as you buy and sell a stock in the same day but you can only do that three times over a five day rolling period. I do have videos on the channel that explain more.
Clay: Also, I would encourage you to go back and listen to last week’s episode because we talk all about a newer way around that within the futures market and more particularly the micro futures market so there are some new things that have come along since this time …
Clay: In Jacob’s defense, this was not an option he could have even chosen back then but now with the micro futures there are ways around this pattern day trading rule but to bring this kind of back on task you realized that, “Uh oh. I have this pattern day trading rule I have to worry about.” What was the solution or what did you do from that point?
Jacob: Well, I just tried doing more swing trades because that’s basically all I could do. I really tried to buy something and then sell it the next day. That was my … Or maybe a couple of days later.
Clay: What kind of stocks were you buying?
Jacob: Well, some of it was just stocks I knew again, Target, Ford, GM, well, I don’t know if I bought Amazon at that time because that was pretty expensive. Just stocks that I knew of basically.
Jacob: My one plan, my first plan I guess, I had free trades so I didn’t have any commissions or anything like that. I thought if I could just make $20 a trade on 500 trades that’s $10,000 but I quickly realized that wasn’t going to happen. I didn’t do too bad because when I got to $20 I’d not necessarily sell out but I’d put it in a stop loss or something. I was guaranteed my $20.
Jacob: I didn’t do too bad to start with in the month of March. Then trying to think … At some point … Well, the other thing that I did, my other plan, or the other way I found stocks was TOS … I think twice a day, once at nine or 10 in the morning, and then once at one or two in the afternoon they come out with a list of stocks that made 52 week high and a 52 week low.
Jacob: My idea was buy stocks that made that low and [crosstalk 00:28:34].
Clay: All right. You’re bottom fishing then?
Jacob: Well, I was. Yeah. Yup. [crosstalk 00:28:44]. That made sense to me.
Clay: I can see how that makes sense in general. “Oh, this company just went to a new low. Everything has got to go back up at some point.” Maybe it’s not the exact bottom but at least it is like a 52 week low, I can see in a general sense how that could potentially make sense.
Jacob: Well, in farming, I guess some of it … When the corn price is low that doesn’t mean that it’s going to go back up obviously but it usually does or it starts … It can go back up. In farming, corn never goes to zero like it can in stocks. That’s a major difference.
Clay: That does make really … That makes actually from your perspective I can see that because, “I guess I suppose corn could go to zero if all of a sudden it becomes as commonplace as dirt”, yes, in a realistic sense corn is not going to go to zero so that does make sense on how you could almost let those lines blur together that a stock could potentially go to zero.
Jacob: Well, I didn’t think about it in terms of that so much because I wasn’t used to a commodity going to zero. It might be really dirt cheap or something like that but it never goes away so to speak.
Clay: Right. Yeah. I fully agree. The only way a commodity would potentially in theory go away is for just something to occur where it’s, let’s just say, “Oh, wow. Corn causes cancer and you’re going to die in two days.” Okay, [crosstalk] corn is going to zero at that point.
Jacob: Right.
Clay: Right. Yeah. In your sense, you’re right. A commodity is not just going to go to zero. I can see that creeping its way into your thought process with stocks. I guess how did this, in trading terminology, bottom fishing, how did that work out for you?
Jacob: Not too good. I mean, it worked sometimes and then it didn’t work out. It took me a long time, as I’ll tell later, it took me a long time to figure that out. Unfortunately.
Clay: How long were you actually doing this where … Let me ask it this way. What eventually kind of made the light bulb go on, “Oh, maybe this isn’t actually what I should be doing?” I’ll let you fill in any spaces between there that you think is applicable.
Jacob: Can we come back to that?
Clay: Sure. Yup. Absolutely. Whatever you think will flow the nicest.
Jacob: Yeah. I told myself I wasn’t going to get involved in any penny stocks. I don’t know why I did but eventually I think it was in April … In my defense, I found this penny stock and every so often it would make a big run up and I waited until it started to move and I bought I think like 200 shares or …
Jacob: It wasn’t very much. I did make some money on it but as soon as it came back down I bought right back into it because I was, “I made money and it’s going to go back up.” It, of course, didn’t. I mean, well, I ended up sitting there holding it for probably a month or two. I finally just got out of it. Of course, a couple weeks after … I still watched it just for fun. Of course, a couple weeks after I got out of it it made its run up.
Clay: Of course, it did. Like usual. I know the feeling.
Jacob: Then in June I bought some … We were going out to Colorado, my wife’s brother was doing an Iron Man I think it was in Boulder. Anyways, that was the 12th of June or something. I bought some CBS stock. I bought 100 shares of CBS stock before … I think I bought it on Monday or Tuesday and we were leaving on Wednesday.
Jacob: We were driving across Iowa or Nebraska and it was like noon and we stopped for gas and I pulled out my phone and I checked the markets. My 100 shares were up a dollar. I was up $100. I think at that point that was the most I had ever made. I sold it right there on my phone. That moment really got me … I don’t know if you call it hooked or what. Since I started I always liked the markets but that day … I mean, the fact that you could make money while on vacation on your phone in the middle of nowhere was just … That amazed me I guess.
Clay: As it really should because when you stop and think about it that is crazy. I mean, the stock market or really just the financial markets combined with technology these days combined with the internet it is a very crazy thing when you actually just stop and reflect on it.
Jacob: Yup. You know, throughout the rest of the week at night I would check my phone just to see what the markets did. I didn’t have any open positions. Of course, CBS like every day it went up a dollar or two dollars. I think by the end of the week I think it was up by $5 but that’s how it goes sometimes.
Jacob: Then my first major disaster I guess you call it had … Anyway, did you hear of MoviePass?
Clay: Oh, no. HMNY. Oh no.
Jacob: That’s right.
Clay: A disaster might be an understatement. Okay. Oh, brother. All right. Here we go. Buckle up.
Jacob: I thought it was a really good idea. I mean, not that I go to a ton of movies but I don’t know. I just thought the concept was a very great concept. I don’t know how deep you want to go into it but I thought there was lots of different things they could do to change their business plan to make it work but anyways they never did any of it that I can tell. [crosstalk] free trade [crosstalk 00:36:10]. Yeah. Go ahead.
Clay: What I think sunk them was the fact that … Real quick, listeners. MoviePass was the company that for a per month price you could see as many movies as you wanted at a theater. As a listener, you might be thinking, “Oh, you mean like?” Now you’re thinking about some other service that these movie theaters offer.
Clay: In my opinion, that’s the exact reason why they failed because all of a sudden the movie chains were like, “Hey, why don’t we just do this ourselves because we’re the movie theater anyways so why don’t we just offer the exact same program?”
Clay: Then that’s what all these theaters started doing. Like I said, I know in AMC the theaters that are around us that we usually go to before every movie they’re always offering and advertising their … Which was basically the MoviePass knock-off. Exactly what MoviePass was doing and they just totally knocked it off. In my opinion, I think that’s what ultimately sunk HMNY. Do you think something else sunk them? What were your thoughts on … You mention they could have done some other things. What were these other things that you thought they could have done?
Jacob: Well, for one, not have … I guess they did try some of it but I think it was too little, too late. It was obviously ridiculously too cheap. You know, maybe the theaters wouldn’t negotiate with them but I would think you could get some cheaper tickets. We’re sending X amount of people to your theater. Can we get 50% off your tickets or get 10% of the concessions or … I don’t know if they tried those things or not but it seems like you could work out a deal or something like that.
Clay: Yeah. In my mind, it still goes in the theater. Why even would they? “We don’t even need you, we’ll just offer …”
Jacob: Maybe that’s true. They tried and they said no.
Clay: Yeah. “We’re just going to rip you off. We’re going to do the exact same program so we don’t even need you anymore. See you later.”
Jacob: The price was …
Clay: It was cheap. It was really cheap.
Jacob: Yeah. It was like two movies in a month.
Clay: Right.
Jacob: Whatever. Anyways, I still had free trades at this point and so I figured it was going to be going down. I bought like 10 shares at $1.50 or something like that. It was just ridiculously … It was like $15 or something. As it kept going down I’d buy a little bit more and a little bit more but it just kept going … It never came back up. I ended up selling for 25 cents.
Clay: Oh, whoa.
Jacob: I think I had like 400 shares at 25 cents.
Clay: I mean, right now I’m pretty sure it’s trading for below a penny. To know that you sold for at least 25 cents.
Jacob: Oh, yeah.
Clay: Well done.
Jacob: I had been down that road before and I knew what was … It was going to triple zero at some point.
Clay: Yeah. I don’t know what it’s trading at now but I’m pretty sure the last time I saw it it was down below a penny. I still remember the producer of the show IT Nate, as we call him in the community, I think he [inaudible] at like 85 cents and he’s like, “I think I might just buy some because why not? It was at some way higher price and now it’s at 85 cents. Maybe I’ll buy a few hundred dollars worth just to see what happens.” He never did and he’s happy now that he never did because it literally [crosstalk 00:40:05].
Jacob: Oh, man. This is [crosstalk 00:40:06].
Clay: Jacob is not exaggerating. The stock literally just went from $15 to $10 to $7.50 to $5 to a dollar to below a dollar to 10 cents to below a penny. I mean, it was literally just a bleed, bleed, bleed.
Jacob: Right. Yup.
Clay: Well, that occurred. What was your game plan after that experience?
Jacob: Well, as dumb as it sounds now but I didn’t change it, I really didn’t change any … I kept looking for those stocks that had been going down and I guess hoping that they’d go back up. I think I got out some time in July of MoviePass and in August I told myself, “Okay, I’m going to be patient and I’m not going to do any trades …” I think I was out of free trades in August if I remember right. I was like, “Be patient. You’ve only got three day trades in a week. You can’t waste them.”
Jacob: I did really well in August. I think I made like $500 in August. I actually didn’t trade the last couple days of August because I had done so well and I was like, “I don’t want to ruin my month.” I didn’t even trade. Then I don’t know if it was the first trading day in September or the first couple days, I forget exactly when, but Lumber Land had just went way down. I had bought into that and it went down some more and I bought some more and it actually started to go back up and I think at one point I was only down like $50 and I knew I should have got out of it and I didn’t. From there on it just kept going down.
Jacob: As it went down I would buy a little bit more and then buy a little bit more and buy a little bit more. Eventually, I ended up pulling that for I think it was all the way to November. I think at one point I had 1200 shares and I was down about $2500.
Clay: That seems like a lot for your account size.
Jacob: Well, I had been putting money in all along every month or maybe not every month but most months. We paid our house off in July so I had a little extra after that.
Clay: Regardless, though, $2500 is not a small chunk of change.
Jacob: Well, right. No. I forget how much it was at that point but it was probably, I don’t know, a third or maybe I had … I don’t know if I had $10,000 in my account at that point. I forget exactly.
Jacob: Anyways, it was like the end of November, about a year ago. I was sitting there. I was down about $4000 for the year, $4500 for the year. I was down about $2225 on this one account. I was sitting there thinking, “You know, this isn’t working very well.”
Jacob: At first, I was kind of joking with myself and I’d go, “You should have bought when you sold and sold when you bought and you would be up $4000 if you did the exact opposite you’d be up $4000 instead of down $4000. That got me thinking, “Well, maybe I should do the opposite of what I’m doing. Instead of buying companies that go way down I should be buying companies that go way up”, which I had heard that before but it never had clicked until that moment.
Jacob: You know, I was thinking, “What company just goes up and up and up?” The first one I thought of was Amazon. I would literally buy one share of Amazon and I would wait … I mean, I kind of knew support resistance and stuff like that so I would try to buy what I thought was a good spot to buy and I would just wait for it to go up and it usually did. If it went down I was okay with that because I would buy another share or two and I figured at some point it’s going to go back up. [crosstalk 00:45:56].
Clay: You kept doing what you’ve always been doing this whole journey long?
Jacob: Pretty much, yeah.
Clay: Buy if it goes down, buy some more because it’ll go back up. I’m sensing a common theme here.
Jacob: Pretty much.
Clay: All right. Well, it is Amazon. Everything has always got to go back up, especially Amazon.
Jacob: Amazon is an upward trend. You know? [crosstalk 00:46:23].
Clay: True. That’s the only difference.
Jacob: [crosstalk 00:46:25].
Clay: The one difference but the overall philosophy is the environment is different in which you’re doing the exact same thing.
Jacob: Correct.
Clay: I don’t know. Well, maybe this was the Holy Grail. The only problem was the environment to which you are deploying your buying strategy, I mean, the [inaudible] trend. Was this the Holy Grail for you?
Jacob: Well, it worked. It mostly worked. It worked better than what I was doing. I made money on it. Shortly after that there was a stock that I had traded before and I guess I could have … Anyways, I had a story about that but I didn’t …
Jacob: There’s a stock I had traded before and I had seen it bounce off different levels of support and resistance. I made a trade. I planned where I thought it was going to go to and I bought 500 shares, which was all I could buy at the time. I think it was like a $30 or something like that. That doesn’t matter.
Jacob: I told myself, “It’s either going to come down to this level and bounce back up or …” I put the stop loss in, 10 cents below where I bought it, and my plan was to get out 40 cents above. That’s where I thought it was going to go to. That trade, it worked out perfectly. I don’t think it hardly went a penny or two below where I bought and it turned right around and went right back up and I sold that 40 cents. I made $200 on it.
Jacob: That trade really … I just remember thinking, “That’s how you’re supposed to trade.” I don’t know how to explain it but that trade … I mean, just seeing that trade work made everything else, charts, made sense to me. I don’t know how to explain it other than that.
Jacob: I just did that same thing … Well, mostly just did that same trade over and over again. I mean, it’s on … If I tell people [crosstalk 00:49:18].
Clay: Is this the strategy you’re using present day now?
Jacob: Yeah.
Clay: Okay.
Jacob: I don’t know if you want me to tell it or say it or what … It’s really simple and people will be like … I have this feeling people would be like, “That’s not really a strategy.”
Clay: I may be one of them.
Jacob: [crosstalk 00:49:42]. It works for me.
Clay: I may be a little skeptical but, I don’t know, what is this strategy? Right now my understanding is you find a stock that’s in an up trend and if it goes down you buy and then if it goes down some more …
Jacob: No. This is completely different than that.
Clay: Oh, okay. Then what is the strategy right now then?
Jacob: Well, basically, the five minute 200 SMA. I basically plan all my trades around that, whether shorting or going long.
Clay: Okay. The 200 SMA five minute chart. You just base everything on that and … Let me ask you this.
Jacob: Well, I shouldn’t say everything. That’s where I start at and then if there’s other levels of resistance or support then [crosstalk 00:50:43].
Clay: There’s a question here that I can ask that’s going to reveal whether or not this strategy is actually a strategy or not and whether or not it’s viable but just as a reference point because I know you’re part of the ClayTrader University. When did you actually join that?
Jacob: In May of this year.
Clay: Okay. May of this year. You’ve been a member for right around seven months. Okay. Just for a reference point for me. My question to you is have you ever lost with this strategy?
Jacob: Yeah. Well, yeah.
Clay: You have had losing trades with this strategy?
Jacob: Yeah.
Clay: Okay.
Jacob: Everything is going to have losing [crosstalk 00:51:26].
Clay: Well, no, no, no. Just bear with me here. I like your replies. It’s like, “Well, what a stupid question that was.” Well, good. I think we’re on the right path if this is actual strategy. Yes, because nothing is perfect. The strategy has had losing trades. My next question would be, okay, well, when these losing trades happen, when these losses happen as part of your strategy do they wipe away all of your gains or are these losses smaller relative to your gains or, better put, has your account been growing over this time where you have had losing trades?
Jacob: Well, I kind of got a … I had a few other things that … I’ll answer that in a few minutes I guess. Is that okay?
Clay: Yup. Yup.
Jacob: Around the same time as I did that trade I had a few other light bulb moments. Some of it I’m sure is luck or whatever you want to call it, fool’s gold, but a lot of my trades and I never [inaudible] so I shouldn’t … I mean, I can’t prove it or anything but a lot of my trades were green at one time and either it wasn’t enough, I didn’t think it was enough, or I wanted more or whatever, but I never locked in any gains.
Jacob: You know, I thought, “Well, a lot of my trades have been green, whether I should have gotten out of them before or not. You know?” I started … As soon as I would get in the green I would lock in, like if I was up … I think I did $30. If I was up $30 then I would lock in my gains. That helped my win percentage quite a bit because, like I said, quite a few of my trades, whether I was holding them too long or not, or maybe my plan wasn’t the greatest but they do come back.
Jacob: I did that and then another thing I did … I knew I had the problem of when a trade went against me I would just … I had a hard time getting out of it. You know? I would look at the daily chart or longer charts and I would ask myself, “If you bought this stock and it went against you would you hold it? Would you hold this stock for a week or two weeks?” If I answered no then I usually wouldn’t trade it or I would be very aggressive in getting out. As soon as I got in the green I would be getting … I’d be locking in my profits because I knew if it went against me I didn’t want to be holding it. What was your question? I forget now.
Clay: So you have had losing trades as part of this strategy?
Jacob: Yeah. Yeah.
Clay: Okay. From a big picture perspective, this strategy is still causing your account to grow?
Jacob: Yes.
Clay: Or when you do take a loss … Right now I hear it as this …
Jacob: It was usually a … That was I did not … I only had small … Yeah. I really only had small losses because I was … If it went too far against me then I would just refuse to get out almost. You know? I don’t know how to explain it or I don’t know if anybody else has been through that. It’s like once it gets so far gone it’s … I don’t know. [crosstalk 00:55:28].
Clay: That’s when you would take your loss?
Jacob: No. If I didn’t get out … I would try getting out really early because if it got too big on me then I would just not get out.
Clay: Oh, so you would get out before you would even get to that point?
Jacob: Right, because I knew if I didn’t do that then I would just sit there and hold it.
Clay: Okay. I guess my question is how do you determine when you’re supposed to get out?
Jacob: Well, I was doing if it went … I didn’t have an exact set of rules but it was $50, $100. You know, if it went over $100 I was probably not going to get out. I had to keep it under $100.
Clay: Okay. Your risk management, essentially, you don’t want to take a loss bigger than $100. Okay. That makes sense. I guess in that situation if you’re looking to lock in gains at $30 this just needs to be a strategy that wins more than what it loses?
Jacob: Right.
Clay: You need to have a high … Right now with the service I’m risking about $100 to make $30, which can work assuming you have a very high win rate strategy and it sounds like it’s a very high win rate strategy?
Jacob: Well, for me, it … Yeah.
Clay: I’m not doubting you. I just wanted to make sure I understand the strategy because that’s the only way that you can overcome that discrepancy is if you’re taking profits at $30 yet you’re risking $100 ish going in then you better be winning more than you’re losing or else your account is going to zero.
Jacob: That’s just where I would … I would try … Not every profit was only $30. That was my minimum.
Clay: Oh, okay. Well, that’s different. Okay. Then that’s shifting things around. You had mentioned that $30 number.
Jacob: Sorry.
Clay: Okay.
Jacob: No. That’s where I’d put my stop loss in.
Clay: Okay.
Jacob: If it came back against me I wasn’t going to … I was going to get $30 [crosstalk 00:57:27].
Clay: Oh, okay. All right. Well, that’s much different. It sounded like when you say you’re locking in your profits that you were just [inaudible] yourself from the trade. That makes much more sense. If your bare minimum is $30 then, like you said, you could definitely be getting even more than $30. All right. Well, no, this actually then … At the end of the day this is what matters is you’ve taken losses and those losses have not wiped away all your gains, those losses have not wiped away 80% of your gains. The strategy is to work in … Yeah. I understand that.
Clay: First, it just seemed like you’re taking your $30 and then holding and waiting but, no, that makes a huge difference. That’s where I would move my stop loss up to $30 because I’d want $30 at minimum.
Jacob: Right.
Clay: That changes things quite a bit better. All right. Well, that makes sense.
Jacob: Sometimes it would come back and stop you out and then take off [crosstalk 00:58:20].
Clay: Right. Welcome to …
Jacob: I was okay with that because I made … That was a good trade to me. Even though [crosstalk 00:58:30].
Clay: Well, a good trade is when you can sit there and be like, “Worst case scenario, I’m making $30.” Those are some very stress-less situations to be in.
Jacob: That’s what I was thinking. That was my mindset at that … In December, I think I made like $800 in the month of December. In January, by January, I had enough money to be over the PDT and in January I purchased the inner circle. January, I just kept right on cruising, doing what I … The inner circle helped quite a bit in finding stocks that I wanted to trade.
Jacob: In January, I think I made like $2000 or so. In February, I think I averaged like $200 a day. I think I made close to $4000 in February. That brought me … I think I was in the green for … From the time I started to then I finally got in the green and I thought I had climbed the mountain so to speak of the trading. I thought I had it figured out.
Jacob: Then the first week of March one day, I think it was on a Monday, or Monday and Tuesday I did my normal … I don’t know how much detail you want but sometimes I’d make my $200. That was kind of my goal. I guess I didn’t state that in the beginning but that was kind of my goal was $200 a day. Some days I would get my $200 and I’d just quit. I’d just go do something else because I have other stuff to do anyways.
Jacob: On Monday and Tuesday I made my normal $200, sometimes I would make $300, sometimes I would only make $100 but I made my normal trades. Then on Wednesday I thought I was ready to up my … I was doing fairly small position sizes, like maybe 100 shares at the most, at a time. I’d buy 100 shares and I might do that, get up to 300 shares or something like that.
Clay: [inaudible 01:01:36]. I’m kind of confused. I thought what we were just talking about, the strategy, is the strategy that you’re using current day like right now? Has something changed? What are you doing right now? My question is … Looking up at the time we’re going on an hour. What is your current trading strategy? I thought that’s what …
Jacob: I’m back to doing what I was doing when I was doing good. As you’ll see [crosstalk 01:01:59].
Clay: You’re back to doing what worked?
Jacob: Correct. Yup.
Clay: Okay.
Jacob: Don’t ask me why but [crosstalk 01:02:07].
Clay: Is that where you were headed telling us what took you away from that strategy?
Jacob: Yeah. Yeah. Yup.
Clay: Okay. I am curious. What pulled you away from … I just wanted to make sure that we’re …
Jacob: I’m sorry if I’m [crosstalk 01:02:18].
Clay: No, no, no. You’re totally fine. Now it all makes sense. You were telling us what worked, which is what you are doing right now, but you’re filling in the gap [inaudible] saying, “But I actually got distracted from that strategy.”
Jacob: Yeah.
Clay: I get it now. That’s where you are right now. What exactly distracted you?
Jacob: I was trading Roku and I thought I should be trading 500 shares at a time, which was a bad idea. On Wednesday, it went up and I shorted it and I took a quick 20 cents, I made $100, and it went up some more and I shorted it and I took another quick 20 cents and I did that several times. I had my first $500 … I made $500 that day. I thought I had arrived, like, “I got this.”
Jacob: On Thursday, Thursday was like the perfect trading day. I don’t know how to explain it other than I could do no wrong. I didn’t have any big trades but every trade I made $50 or $100 and I ended up making $700 that day. On Friday, I did like one trade and I think I made like close to $2000 that week, which that just blew me away.
Jacob: The next week I was trading Roku again and the day before I had shorted 100 shares. I forget what it was but for some reason I thought it was going to go down. I shorted 100 shares and I woke up and it was down $2. I was up $200 and at one point it was down $3. I thought, “Oh, man. This is going to go down. This is going to open up and it’s just going to drop.”
Jacob: As soon as it opened I shorted 500 shares and in about a minute I was up about $700 or $800. I forget. But it went down like a dollar in the first minute. I didn’t take any profit because I thought it was going to go down $3 or $4. You know?
Jacob: It started going back up and I shorted another 500 shares. I forget where exactly but it kept going past that. The five minute 200 period was … It started going up and I was like, “That’s my last chance.” I shorted … Well, I could only short another 400 shares because I was out of money.
Jacob: It hung around the 200 for probably 10 or 15 minutes and at this point I was down like $3000 on the trade. I was not mentally prepared to see that … I was just not … Everything I had just made the last month was basically gone.
Jacob: It eventually went back down and I got out. I made my $300 … I got to the point where I was like, “I just want to be back to where I was when I started the day.” I eventually got back to $300 and I got out. It, of course, kept going down and I watched it go down and go down and go down.
Jacob: I was like, well, now that it went down I was thinking that maybe it would go back up. I started buying Roku 500 shares, which [inaudible 01:06:54]. It kept going down. I bought 500 more. It kept going down. I bought 500 more and I found myself in almost the exact same spot. I was down about $3000 again for the second time that day.
Jacob: Roku started building this cliff and I don’t know how long … It felt like an hour. I don’t know. Or maybe two … I sat there and watched it put this cliff in and I knew it was going to go down but I could not … I was like, “Get out and short it. It’s going to go down. Reverse your position” but I couldn’t do it. Admitting you’re wrong or whatever … That’s one of my major problems.
Jacob: It finally broke the cliff and in about, I don’t know, two, four minutes, five minutes, I was down $5000. I eventually got out and I reversed my position. I shorted 1500 shares and it would go down and then it would make a little reverse and I’d sell practically, or cover I guess you’d just say, but I would cover practically at the top of that reverse and then it would start going down again and I would buy back in or short it back.
Jacob: It went down a whole bunch that day. Eventually, by one o’clock or 1:30 or so, I was only down $800 for the day.
Clay: Wow. This is a wild day.
Jacob: Yeah. Well, at this point I could only buy 1000 shares because I never knew this before but at some point you use up all … I mean, the amount of money you can borrow goes down. I didn’t know that before.
Clay: Yeah. Yeah. On wild days like that, absolutely.
Jacob: Yeah. I learned that that day but anyways I had 1000 shares and I had to go someplace for work. Well, I should have put in a trail stop or at least just a stop loss or something but I was frustrated and I just got out of it. I mean, I was up on that particular trade a couple hundred bucks and I just got out of it.
Jacob: By the end of the day, Roku had gone down another dollar or $1.50 or something and if I … Of course, hindsight, but if I had left that I could have been green on the day.
Clay: Well, I think you probably shouldn’t even have been trading at all after the … To think that you just kept trading and trading and trading that’s … Man, that is … The human mind is a crazy place.
Jacob: Yeah. I forget how many shares I traded that day but it was way too many.
Clay: You ultimately closed the day down $800?
Jacob: Yup. Yup.
Clay: Okay. Then that was the moment that eventually turned you back into saying, “You know what? I need to stick with what I had been doing previously that was working”?
Jacob: No. No. Unfortunately not. Well, I always blame that trade but the more I think about it I blame the next trade and I’ll get to that in just a second. I don’t know how many people trade Roku or pay attention to it but it was on a day … I thought that was going to go down $4 or $5 that day and it ended up going down $10 that day. I reviewed my trade at the end of the day or in the evening and I had an average … At the beginning of the day I had an average of like $67 or $68 a share and it went down to like $60 a share. It was just … That’s what the markets can do to you psychologically. I was just not ready to see those numbers and stuff like that. You know, I could have made $10,000 that day just by doing nothing really. Just by holding that for the whole day.
Clay: Well, yeah, we could all do a lot in hindsight, like you said.
Jacob: Right. I know. I know.
Clay: Should have, could have, would have. I know what you mean when you’re like, “Man, if I would have just fill in the blank I would have had fill in the other blank” and usually the second blank is a large amount of money.
Jacob: Well, just not watched my screen.
Clay: Yeah. No. That’s so true. Like you said, you were wrong but you were wrong in a good way. You thought it would only go down $5 but it ended up going down $10. All right. Go ahead.
Jacob: About a week later I was trading Roku again and it went up and I shorted it, I was still on my 500 shares kick, and I shorted it and it went against me and I sold another 500 shares and it went against me and I sold another 500 shares. I was maxed out again and I was down … I think I was down $2000 or $3000 again.
Jacob: Obviously I was frustrated. It was like 11:30 or 11 o’clock or something. I got up from the computer and I went out to the farm because I was … I didn’t put any stop loss in there or I didn’t do anything. I was just mad or frustrated or whatever. I went out to the farm. It’s about a 15 minute drive.
Jacob: I checked my phone when I got out there and it basically hadn’t done anything. I talked to my dad and my brother and did some stuff on the farm. I went in for lunch and after lunch, like 12:30, I checked my phone. I was only down like $500. At first, I thought maybe it was a misprint or something or some glitch or whatever but Roku had just tanked at like … Afternoon it just started dropping like a rock.
Jacob: Eventually, I made $1000 that day. That trade really … I used to blame the losing trade for my problems but that winning trade the more I think about it, the more I think that trade is the problem. That made me think like, “This is just gambling and this is just luck.” I knew I had really not done anything … Anybody could have done what I did. You know? If it goes up, you short it and if it goes down, you buy it and then it goes back … That’s not … Anybody can do that and that’s just luck. You know?
Clay: Yeah, especially when you walk away with no stop loss.
Jacob: Yup.
Clay: That could have been totally … You could have checked your phone and the exact opposite could have been true.
Jacob: Exactly. Ever since then … I can’t explain why or I don’t know why but I basically … The only way I could explain it is I was trying to make $1000 every trade. Don’t ask me why. As you can imagine, that didn’t go very well.
Clay: That is not hard to imagine at all.
Jacob: Yeah. You’ve probably heard that before.
Clay: No, actually, you are the first person that says, “I want to make $1000 per trade.”
Jacob: Minimum.
Clay: Congratulations. You are in a league of your own. That’s quite the ambitions you had there.
Jacob: Well, I had done it once so I should be able to do [crosstalk 01:16:10].
Clay: Yeah. Why not? Go big or go home.
Jacob: Yeah. Basically, that’s what I started doing. I was going to hit a home run every single time. I struck out way too many times. You know, I would make $500 and then I’d lose $1000 and then I’d make $1000 and then I’d lose $2000 and then I’d make $500 and then I’d lose $2000. It was …
Clay: Unsustainable I think is probably the best way of looking at it and then eventually I’m assuming you were just like, “You know what? I need to go back to what was actually working”?
Jacob: Well, unfortunately, that took me a long time to do that. In April, don’t ask me why because I have no idea why, but by April I was under the … I couldn’t day trade anymore. Honestly, it was either quit or figure out what … I don’t know. That losing trade made me doubt … Made me lose all confidence in what I did know I guess is the only thing I can say. I didn’t know what I knew … I didn’t know if I knew what I knew was right or wrong or …
Jacob: In May, that was when you were changing the prices on the CTUs so it was basically either quit or buy that. By that point, I was like $2000? I can lose that in a day easy so what’s the worst that can happen? I don’t gain … If I don’t gain anything I didn’t really … It’s worth a shot. You know?
Jacob: I purchased CTU and I wasn’t … I mean, I did trade every once in a while. I didn’t trade too much all summer but still I was … I don’t know. I just didn’t do very good trading. I was still trying to make too much. I mean, I would have good trades and I would … Overall, I was still losing money.
Jacob: Well, I didn’t really start trading again until zero commissions, when they did zero commissions then I started … I put some money back into the account to get over PTD and I started trading again but I was just doing really … I would buy 10 shares of whatever. I mean, I was just doing really small positions because, well, one just to build my confidence and … Yeah. I’m just now starting to go back up to 100 shares at a time, which …
Clay: But you’re doing the strategy which we talked about earlier?
Jacob: Yeah. I went back … Yup. Yup.
Clay: Okay.
Jacob: Amazingly, it’s working.
Clay: That’s pretty crazy, huh? I do understand why it would take you so long to get back to it. Like you said, and that was an interesting comment, you didn’t know if what you knew was actually what you should know or, better said, when you don’t know what you don’t know … You don’t really know if the stuff that you do know is the stuff that you should actually be knowing. Is this actually real? Is it legitimate? Is this fool’s gold? Welcome to the wonderful world of free information and random information and random results and …
Clay: People wonder why trading is so hard but it sounds like after you kind of made that investment in ClayTrader University, not that that all of a sudden fixed everything but it …
Jacob: No. It wasn’t like a magic pill. I was kind of disappointed.
Clay: Yeah. I know I advertise it as a magic pill but we’ll just … Here, just say that it’s a magic pill and I’ll pay you something extra afterwards.
Jacob: Yeah. You didn’t have anything in there like where to buy and when to sell.
Clay: I know. We’ll just stick with the story that it’s a magic pill and all you have to do is pay me once every month and money will rain down from the sky but that was fascinating, though, how you found a reference point and you’re like, “Wait a second. What I was doing was actually worthwhile so let me get back to it” and, like you just said, it is actually working.
Jacob: Yes.
Clay: For those of you listening like, “What’s he doing?” Think back. Remember the five minute and then we had that whole discussion about that $30. That is what he is doing now but looking at the time, Jacob, we are in extended … We are in overtime right now.
Jacob: Yeah. I know.
Clay: We’ll bring you back and we’ll hear how this thing continues to go but I do want to ask the last couple questions here. Time machine, and if you had the time machine and it could go back to the start of all this, what would be the one bit of advice that you would give yourself?
Jacob: Well, don’t try to hit a home run … I mean, I did really well … I don’t know.
Clay: You don’t know what to tell yourself?
Jacob: I wish I had never made $500 in a day.
Clay: That’s a fair point. Actually, that’s quite powerful because that is where things start for a lot of people, myself included. You make a certain amount of money and then from there you get this false sense of … I don’t want to say arrogance because that’s not the right word. You get this false sense of confidence.
Jacob: You just think you should be able to do it every day.
Clay: Yes. Exactly. This inflated sense of what you should really be focused on, all of a sudden you are focused on, “Well, yeah. I should be able to do this every day” and then all of a sudden $500 is, “Now I want $1000 a day.”
Jacob: That trade where I made $1000 … Well, even the days where I made $500, $600, $700 that changed my mindset from, “That was a good trade” because [crosstalk 01:23:05].
Clay: Right. Your reference point gets …
Jacob: It didn’t have anything to do with … Was it actually a good trade? Was it a good plan or did you just get lucky?
Clay: Right. You liked the results the trade produced but was it actually good habits that produced those results? For many cases, no, it’s not good habits that produce the results that you deem good.
Jacob: Right. There was lots of days when I made $50 and I was happy because I followed my plan and whatever. You know, that trade changed my mindset [crosstalk 01:23:41].
Clay: That’s powerful stuff because that’s exactly …
Jacob: It took several months for me to get it back unfortunately.
Clay: No. You’re absolutely right. All it takes is one trade and, as bizarre as it sounds, one big winning trade totally mushed and molded his mindset to something that now in hindsight, which is the whole idea of this show, he realized, “No, that was like the worst thing that could have happened to me.” I like that answer a lot. “I wish I never would have made $500 in one trade.” I don’t know. I might have to try and squeeze that into the episode title because that’s a great quote. There’s power in that because you’re absolutely right, the way how that just totally changed things around. Great answer.
Clay: I’m really looking forward to these answers now but so in Wisconsin, other than farming, what do you like to do when it’s time for the movies? What’s your favorite movie?
Jacob: Star Wars.
Clay: My kids would love you. They are in such a … We finally showed them the ones from the ’70s and they are just … I think they know more about Star Wars than I [crosstalk 01:24:35].
Jacob: Those are the best ones. Star Wars and John Wayne.
Clay: There you go. The classics. Absolute classics. What about food? What do you like to eat across the little miniature pond there in Wisconsin? Since we’re basically neighbors, given I’m in Michigan.
Jacob: Yup. Yup. I guess a good hamburger.
Clay: You really can’t [crosstalk 01:24:59]. I mean, that’s just pure America right there. A hamburger.
Jacob: Yup.
Clay: It’s hard to go wrong, especially when there’s so many choices that you can actually put on a hamburger itself too.
Jacob: Exactly.
Clay: It’s limitless as far as how I’m concerned. I mean, an egg, some onions, avocado. Don’t even get me started. Then final question here, three words and what would these three words be that you would use to associate with a successful trader?
Jacob: Can I have a little saying?
Clay: Oh, yeah. Absolutely. Yeah. Go for it.
Jacob: My grandfather was an engineer and his department … He made electric motors. His department had a saying and it goes, “Prior planning prevents pitiful performance.”
Clay: Prior planning prevents pitiful performance.
Jacob: Yeah.
Clay: That’s more than three words but you know what? Validated. That’s okay because that’s a great saying.
Jacob: Yeah. If you have a good plan in trading you probably won’t have a pitiful performance. You know?
Clay: As long as you don’t define your performance as having a losing trade because losing trades happen and you know what? Actually to circle back, a pitiful performance in Jacob’s case was making that $500 for all the reasons just discussed. That was actually a pitiful performance even though he won and made money because in the long-term repercussions of that.
Jacob: Right.
Clay: Well, Jacob, [crosstalk 01:26:33], this has been … Yeah. No. Exactly. This has been a good time. We’re going to have to have you back. You have some great insights into … I love the line, “I wish I would have never made $500.” I think it’s going to be … The title is going to be [crosstalk] he wishes or the negative effects of making … It’s going to be something that has to do with the $500 because that’s a great quote and it’s intriguing but it’s intriguing for all the right reasons.
Jacob: I honestly believe if I had never done that I would still be making my $200 to $300 a day or $100, $200 a day for this whole year and instead I’ve lost thousands.
Clay: Wow. You’re right because it was that that all of a sudden just transformed your mindset in a way that you didn’t want it.
Jacob: Yeah.
Clay: You’ve told me some good stuff. Well, Jacob, I did want to also thank you. You volunteered to be here. I really do thank you for that. That makes my life so much easier when I’m trying to put these together. I appreciate you coming on here just shooting straight, being transparent, and sharing your ups and downs but it sounds like you’re back on the up now going back to what worked and, like you said earlier, surprisingly, what worked before is all of a sudden working again. Keep that up and we’ll have to have you back and get an update. Thank you again, Jacob, for hanging out.
Jacob: All right. Yup. Thank you.
Clay: For you listeners out there before you go, final few things, first off, if you are listening at ClayTrader dot com or any of the other podcast locations, whether that be iTunes or Spotify then just leave us a rating and that really helps us out, especially on iTunes if you could leave us a written review that helps us out quite a bit and we really do appreciate that. Any sort of support in that way would greatly, greatly be appreciated and I thank you in advance for that.
Clay: Thank you again to all of you listeners. Thank you to Jacob. We will see you all back next week.
Announcer: This has been the Stock Trading Reality Podcast. Thanks for taking the time to hang out. To learn more about Clay and the ClayTrader community, including the trading team, premium trading and more, visit ClayTrader dot com.

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