In this episode of the Trading Justice Podcast, we are joined by Steve Burns (@SJosephBurns) for a conversation about trading. Steve is a trader, investor, educator and author. He’s spent the last 20 years studying the stock market and is now passing his knowledge on to others. We talk about how to survive and thrive as a trader as well as the proper mindset a beginner needs to do so. He wrote the book New Trader, Rich Trader as well as Rich Trader 2: Good Trades, Bad Trades. You will enjoy the interview and conversation.

Video Transcription

Tim Justice: OK, guys, welcome back to our feature presentation here, and today we’ve got a very special guest on we say that each and every time we have a guest. But I guess I really mean at this time, says Steve Burns. You know, Steve Burns is one of those types of traders that’s out there on social media in the public lexicon. He’s in my Twitter feed almost every single day as well. He he’s one of the best followers you ever gonna find at s. Joseph Byrnes on Twitter is here to join us to talk about trader psychology and teaching beginners and the whole business in general. Steve, how are you doing today?

Steve Burns: I’m doing great today. I’m glad you’re having me on.

Tim Justice: Yeah, there’s several things I want to get down to. In fact, we’ve got a lot of stuff I want to get here today. But number one is you love social media. You’re on Twitter all the time. Is that business strategy? Did you kind of just fall into it? Is it something that you just are naturally good at? Well, what got you so big on Twitter?

Steve Burns: It’s funny. I fell into that kind of story just as a hobby. You know, I enjoyed texting people. I thought it was pretty amazing. I text what the world is all kind of amazing communication platform. So I started as a hobby and it sort of merged, morphed into a platform where I’m going to have a bigger audience base and I enjoy sharing a stream of thoughts and sharing quality content. It’s become a game in itself. And I really enjoyed doing.

Tim Justice: And I’ll tell you. And if you’re out there, you’re listening to our interview right now, you know us trading justice. We’re pretty real, pretty direct. Just want to bring value. That’s what Steve does. One thing I love about the way you approach education in the financial markets, Steve, is that you’re very direct. It’s just value. Ninety nine percent of the time, you just talking about what you’re seeing in the markets or ideas that you’re having and bringing that kind of value into a feed like Twitter, I think is amazing. And we follow you over there at tackle trading on Twitter and you’re at. That’s Joseph Byrnes. I’d recommend everybody out there listening. Make sure you give Steve a follow. But today, I want to talk about the mindset that we can build into new traders. Because, Steve, one thing I find you particularly good at is teaching beginners and teaching the mindset that beginners need to hear. What is the number one challenge, somebody who just kind of walks into a trading class is going to have.

Steve Burns: Do you think they have trouble with the nature of uncertainty? They always think there’s some holding ground where they they don’t understand. It’s not 100 percent win rate. There’s no sport where you hit every half, every ball. You think every shot in basketball. You don’t score a touchdown every time. And people have some delusion that think it’s a really good trader can predict a non-existent future. I can give them 100 percent win rate, which is just absurd. It doesn’t happen in any industry. So I don’t want to think what happened in trading.

Tim Justice: Yeah, I think so uncertainly and then the lack of understanding when you do get inconsistent results. You know, as a veteran, you understand draw downs, you know, equity curves, the fact that we’re going to lose even good systems. Does it matter that you are at this, you’re going to go through periods where you lose money on any system? And I think beginners really struggle with that because they’ve not lived through it. Right. It’s a lack of context. They’ve not dealt with volatility in watching their accounts go down 4 or 5 percent and realizing that’s just a part of the business. So do you think data helps with this, Steve? Do you think? Just trying to show in the numbers, like how do you tackle that challenge?

Steve Burns: Yeah, I think they have to know the data on their system. Like you said, the analytics of the strategy, you know, whether it’s a bad past where you see what your average win rate will be, it’s much easier to trade when you know you’re going to win six times, lose four out of a pin trade sample and you lose a percent of your capital on your loser. You might make two or three percent on your winners. And that’s for the population to come from. It’s really important to have a full understanding of how their strategy, your system operates based on data. You know, the risk reward ratio, they know where they’re going to stop out and where their upside profit potential is as well. But a lot of em don’t even have the strategy to even know the data until they’re really they’re just swinging blind with their own opinions. And predictions are really going to be in trouble because there is no psychological cure for that uncertainty.

Tim Justice: Do you think that anybody can be good at this if they don’t like numbers?

Steve Burns: I think Richard Dennis tried to prove prevent anybody can be turned into a trader, but the traders were good at numbers. I mean, I think that a basic skill that you have to have an understanding, the mathematical I mean, everything, especially the winning system, understand the math of drawdowns and trying to come out of a draw down of the math of the best case now returns if you don’t have the language of math.

Tim Justice: I think it’s almost impossible when you don’t have to have a P D and be a quant kind of algorithmic based trader. Come right out to M.I.T. working on Wall Street. That’s not what we’re trying to say. But you have to at least understand percentages. Mathematics, how compounding can become so powerful. The idea behind numbers. I’ve never understood that. I’ve heard that a few times in my career, Steve, being an educator and where all I don’t like math and I’m just thinking, how do you not like numbers? I tell that, but say lovely, I guess to each their own right.

Steve Burns: Go ahead. You don’t need a no no to know your wins and losses because you need to enjoy your wins, at least with math.

Tim Justice: Do you think it’s easier to teach people high probability systems where they’re going to be right a lot? Or is it easier to teach them systems where they’re going to be 50/50 but have, you know, good reward to risk ratios? Because I know there’s dynamically different models here. Right? You can go for those low delta, high probability theta systems or you can go out, learn how to day train swing trade and actually have to read a chart. But you’re not gonna be right all the time. Do you think most people like being right more or just want to make money?

Steve Burns: Well, I think most people do like to be right more. That’s why they don’t make money. I mean, not everyone I’ve seen, even the professionals to the people I’ve worked with. I mean, a 60 percent, 65 percent win rate is a great win rate for trading. And it’s the best psychological thing to be able to accept the small losses in the percentage of losses because anybody goes in winning a high probability system, they always tend to hold the losers to long increase the big losses because they want to be right so bad. You know, I just want to be right big and wrong small. So I don’t really have a big concern about being wrong a few times in a row or having a losing streak. I know I catch the big trend and that’s where the money comes from. That seems very dangerous. Psychological for someone to want a high win rate system, which is what I found personally.

Tim Justice: Yeah, I think you can get into trouble if you feel like you’ve got to be right out every time. Because then there’s something in the emotions behind why you need that to where you’re going to have a hard time managing it when you’re wrong, you know? And every system can turn against you. Correct.

Steve Burns: Yeah. And I don’t know any system, even high probability win rates if it was going to have losing streak. So it’s dangerous. 10 small wins, then a losing streak cause of the bigger drawn down. But if you had some big wins, offset it.

Tim Justice: Yeah, yeah, I agree with that. Know, I think I hear my brother Mark there in the background. Mark, you’re a big data guy. You love numbers and systems as well. I mean, now this whole idea behind math marked that probably is structure. Your inner nerd don’t at all.

Mark Justice: Are you kidding? I thought I was a mute. So you probably heard me grunting and what I was grunting get as high as it was like I was like beating myself up because like I like one of the things that drives me in life is be the best, be the best. And with trading, I associate that so often with being right. And so when Steve was talking about that, I was like, oh, you are so guilty of that. You’re so guilty of like wanting to be right more than wanting to make money. And so, like, it was just resonating with me internally there.

Tim Justice: Yeah, I think we all want to win, you know, and now if you define winning in the markets as having a positive. Curve and being in control of your risk. Who cares what the win loss rate is as long as your accounts are growing over time? And there’s so many different systems that can achieve that, Steve. But the process of taking a beginner who doesn’t know any of these terms, by the way, if somebody’s walking on the street and listen to our conversation right now, they’re gonna think trading is impossibly hard.Right. And I always feel like one of the challenges is building people up enough to make them realize they can learn how to trade and it can be life changing, but also beating them down enough to make them realize that it’s not a get rich quick thing and it’s not going to be easy. Right. So how do you confront that? How do you build people’s confidence to where they want to try this? But to make sure you remind them is going to take some time and you’ve got to learn these skill sets?

Steve Burns: Yeah, I think I try to focus on, you know, the system itself. Like what is their system? You know, what’s what can they expect to begin with? And especially starting with a view to making 20 percent a year recurrent, you’re among the greatest traders in the world. Even at the highest professional level, even George the George Soros and the Warren Buffet that are investors and traders, the best in the world, average about 20 percent a year over a long period of time. They have some great years. No intervening. Had some hundred percent years of a stock trader. It does happen over outliers, but for normal people, 20 percent of great annual return. And that really has to be sunk in to begin with. The depresses people. You know, I’ve had a few 40 percent year or 50 percent year myself over the last 25 years, but I took on risk to get that. And you have to the higher you want your returns, the more risk you will take on to get those returns and the drawdown will be bigger. It’s better to have a good control position sizing. Linda, in the days, rack up the equity curve slowly and ramp it up. But having reasonable expectations is the first step in that.

Tim Justice: I always tell people get rich slow, you know, and 20 percent a year at 2 percent a month is an incredible return. You’re doing an amazing job. There’s no question about it. You can’t get there, by the way, with your skills. And if you’re running a small account out there, that can be a little frustrating because say, Steve, you’ve got 25 grand. 20 percent is five grand. So you’re like, well, Tim Justice, that doesn’t change my life, but it does change your life. If it’s repeatable and you do it over and over and over again and that phrase I use all the time, get rich. So I’m glad you bring up percentages, by the way, because again, with numbers, I think it’s important to talk numbers. Can a new trader in a couple of years of education get to a point where they’re they’re hitting 20 percent a year, Steve?

Steve Burns: Oh, yeah. Yeah, absolutely. I had 20 percent a year for a long time early on. Know, thanks to the Internet bubble and the great stock market in the 90s, you know, if you get a good process in place and you get some nice trends in the right areas of the market, you can get 20 percent. I mean, that’s not you know, I thought it was pretty normal when I was doing it. A lot of people were shocked when I talked to him about it. But I’ve had a lot of a great win streak with the year over year, 20 percent, 20 percent. So it’s very possible. But you have to manage your risk on your downside, because when the March 2000. Here are the two thousand hits. You have to be able to lock in your profits and know how to get to the sidelines. You need to lock in the profits. But you know, the unrealistic expectations always find so funny because of the crazy stuff you see online and with the trading do rules that clients step in and have a fancy sports cars and mansions. And Bernie Madoff, all he offered was a little bit over 1 percent a month consistently. He was able to milk billions and billions at the end of the market and people because they were gone for a 1 percent much return, that really shows you how hard the returns really are.

Tim Justice: Yeah, there’s no question, especially the bigger you get at institutional levels. It’s a lot harder to hit those big numbers. And I do think it’s important that we bring up that thing about the online environment. I see a lot of bullshit out there. I just do it and it drives me crazy because the market’s their life changing. You know, if you do them correctly and it’s not an instant fix and there’s no such thing as get rich quick. It takes hard work, dedication, skills, consistency. You’ve got to understand what the products are that you’re using. You gotta understand the math behind it and be willing and understand the risk that you’re taking on to get there. But all that being said, all those disclaimers which are accurate, the markets are amazing. And then you go online and I’m in the industry, Steve, and I see the garbage out there about, you know, sports cars and fancy mansions and travel and all over the world like Instagram stuff. And it just it makes me sick. I really hate that part of it. How do we fight that when we know we’re bringing value to people? But you’re in an industry that is kind of you know, it’s got that ugly side of it, too, don’t you think?

Steve Burns: Oh, absolutely. The first thing I do when people approach me for silliness, you know, trying to trade for living with your thousand dollars are what can you know, somebody who even friends and family, you know, I’ve got a few hundred dollars. What can you do with it? I can give it back to you and wish you well. You have to be properly. Capitalized to actively trade. You don’t have the capital that you need to probably be due to a long term trend following systems, you know, dollar cost averaging into A for one K or work in getting a match and building up your capital that way. I mean, active trading takes a large capital base to really begin, at least, you know, in the tens of thousands to really do it correctly.

Tim Justice: Yeah, I would agree with that. You know, and until you are properly capitalized, there’s really two simple things that any beginner can kind of wrap their head around and still get excited about the markets reinvesting your profit. So until you’ve got the big account, don’t pull any money out. If you need, leave it in there and reinvest it. And then number two, as I would continue to fund your account with maybe a couple hundred bucks from your paychecks, things like that. You’ve got to have a funding strategy and a reinvestment strategy when you’re working with an account. In my opinion, less than 50 k, you know, that’s kind of what I usually tell people because those are powerful things when done correctly, Steve. You make a little money reinvested, you put a little bit more money in there. It allows you to grow into the bigger accounts and into that longer term vision of what you want to achieve. Right.

Steve Burns: Yeah, I agree 100 percent with what you’re saying. That’s one idea. You don’t have to become financially independent overnight. But if, like you said, you started with a small capital base. I got it when I was young. I built it, compounded it, grew it. You did what I had to do. Like you said, did not have to touch it for a long time until I did become financially independent. It’s incredible what you can do. It’s possible. I mean, by March of 2000, I was 27 years old and not by my stock market account equaled by my house. Pay off was when I was 27 years old. I mean, I mean, after that, you’re hooked forever. You’re never going to not be happy. You say you can even pay a 30 year mortgage for 30 years or you can have a great bull market run over a nine year period. You know what happens when capital and once you get to a good amount of capital, which is what was my goal, was that you could really make some huge returns, 10 percent. No one to three hundred four on account is a nice return.

Tim Justice: I’m pretty good with numbers. I did some quick math there. If you were twenty seven and two thousand, that means you were born in 73. Yeah, my brother. Mark’s age. Yea. Yeah, I’m I’m 40. I turned 40 this year. I’ve been in markets since 2005. I got very interested after I went through college. But you were telling me before we got on the show here today, you were interested even before you got out of high school. You got started in markets like 15, 16 year olds. All right.

Steve Burns: Well, I got I started research and I couldn’t have an actual account as a teen, but I remember distinctly a person brought around from the insurance insurance thing. I don’t know what it was pushing, but it was probably a whole life savings account form to show the compounding of capital over a 30, 40 year period. I remember sitting I was working in a shoe store part time in 1988 maybe. And I remember now looking at compound capital table going, my gosh, if I had this money, now I get this much money. And the return on that would be more about making sure that inspire me. At 60 years old, I’ll be able to start participating in the market as quickly as I could.

Tim Justice: No, and I think that’s a really powerful thing, quite frankly, Steve, is the idea of understanding the long term potential returns from investing. You know, I remember, you know, sitting some new traders down recently where I talked to them about this is what a hundred bucks is worth or this is what a thousand bucks is worth. And because when you’re a new trader with a smaller account, it can be deflating emotionally to realize you’re not going to make a living from this right away. But as a veteran trying to influence and also trying to inspire those people, I want him to understand the value of building these skill sets and that long term thinking is incredibly powerful when you adopt it and truly understand that compounding effect in the way that it works. You know, one thing that we work a lot on, you know, with our community is helping people build a daily routine and a process to trading. What is your personal daily routine in the markets? I mean, are you a morning guy? Do you get up early, can check the futures market? How do you approach it?

Steve Burns: Yeah, I look at futures when they open and not a minute, it’s just a lot of issues to gauge what’s going on. I use in the day signals almost exclusively now because I like the quality of life and I’m just trying to end the day with swing signals or trend trading signals. I don’t have to to the screen for seven and a half, eight hours a day. Look at all the different intraday noise. You know, the high frequency traders and out of those can go wild intraday. And my position sizing be pretty safe. I very rarely have any emergency stop losses, but the right position, sizing and looking at the volatility, what I’m trading. So I look at the open and see what’s going on, gauge it and then I go live my life. Then at the end of the day, I come back and in the last 30 last hour to 30 minutes, I’ll go you all my charts on my watch list and see if any signals are being triggered. So I’ll exit with profits if my targets are hit and they reverse my trailing stop as he and our stop losses. And I’ll exit at the end of the day. And I have got about a 20 item watch list, about 10 in reserve. So a lot of my trading is done in about 30 minutes a day.

Tim Justice: You know, if you’re a veteran and you’re listening. Think of the key words you just heard. You know, routine process, watch list, trend following, you know, triggers. I mean, these are things that you have to know how to do in your own system. And it sounds like being an end of day trader, us based trader. And, you know, going for that 50, 60 percent win rate. You’re probably a trend following trader. Steve, position trader, is that right?

Steve Burns: Yeah. I’ve morphed more into a swing trader in recent years because it’s been more swings and many long term trends overall. So we see a swing trader over. I haven’t had very many trades more than a few weeks from our market.

Tim Justice: While it’s interesting, you know, out of the four times day traders and swing trader position, trader and investor, what do you think is the easiest one to teach and which ones the most difficult?

Steve Burns: One investor is pretty simple overall. It can be very painful. During bear markets. But overall, just, you know, being an investor, I mean, that’s when I started out at trying to build capital on investing in tech mutual funds in the early 90s and thought know tech was where to be. And I just stumbled into it really by accident. So I returned some great returns as a tech investor. And in the early 90s and I have a ball, I think trend following me with, you know, shorter term trend following trend trading is a more colorful thing because you can get in and get out. You’re not silly to be drawdowns or bear markets.

Tim Justice: What do you think is the reason most people get into the business? Is it just greed making money every day? Do you think they’re getting in for income? What pulls people into the interest of the trading the markets?

Steve Burns: I think they all start thinking it’s easy money. They see the opportunity. Just their eyes glaze over with the opportunity and they think they can make a lot of money quickly and, you know, multiply their money. And that’s what drives people initially most.

Tim Justice: And what causes most of those people to fail within their first year?

Steve Burns: Definitely. Definitely risk management position sizing. They go all in the way too big, especially if they’re doing options. How they’re doing. Penny stocks are they’re doing small, volatile small caps or pink sheet stocks and they just blow up.I mean, once you get 50 percent down, you have to double your money to get back to even if you can lose 50 percent. The odds are slim. You got to be able to double after such a long break. People mentally, emotionally.

Tim Justice: Yeah, I agree with that. I’ve seen it too many times. You know, you’ve got two types. You’ve got the people who rush right in and jump into the pool before check if there’s water in there. Right. They want to go long call long put and try to make a bunch of money right away. But then you’ve also got the trader who wants, you know, put a one hundred dollar trade on with even after years of experience because they’re so concerned about risk. I know the biggest problem, the probably the most risky person is the one who’s jumping in. You know, over position sizing, over leveraging. But I’ve also run into this as as a mentor traders who won’t jump in and take the risk at all. You know, when you have somebody in that situation, how do you deal with that?

Steve Burns: Yeah. That is an odd phenomenon that I’ve seen, too. Like you said, people read all my books, follow me for years and never put any money at risk. It’s like they don’t have the skill of taking on the risk and uncertainty. They look for a perfect system of perfect entry, perfect exits. You know, they critique everything. Why? Something may or may not work. They worry about losing money. And, you know, at some point you have to put everything away and put the risk on, because that’s really the skill of a trader is take as example of the uncertainty in putting capital at risk for the chance of a gain, because all the reward is based on the risk you’re willing to take. And that is a skill in itself.

Tim Justice: Yeah, I agree with that 100 percent. You know, in understanding expectations I think is so important in life. There’s no question when somebody starts this journey of learning how to trade the markets, how much time and work do you tell them it’s going to take to get good at it?

Steve Burns: I would say I always tell you about a year, if they’re really serious about it, put in a few hours a day, every day and a a year they can have all the basic understandings, have a system built for themselves, have the right position sizing signals. You start actively trading within a year if they’re really, really serious.

Tim Justice: Yeah, that’s kind of where my head’s at as well. I usually tell people. I mean, you can get your first live trade on within two days if you want to get funded, but that’s not going to make you a trader doing basic stock trades. You know, if you’re well disciplined and design and you go through a fast crash, maybe one to three months. Right. Cover calls, you know, some simple naked put stuff within six months. But to be a trader, I think you need a year of work, you know, at least a few hours a day, maybe 10 or 15 hours a week for a year is about right. Because most people do this. They’re working full time jobs, right?

Steve Burns: Oh, yeah. And that’s that’s another thing that they can’t. Day trading. They can’t look at their phone and work all day. You know, that’s another barrier. I mean, I know so many people who have trouble even getting the end of day trading when they’re working a full time job. But, you know, the barrier to entry so low, that’s why it’s so dangerous. You know, you can’t go out and play NBA basketball where you want to or, you know, go take a page from Major League Baseball. But you can trade against professionals. There’s just no barrier to entry. That’s what cost people so much money.

Tim Justice: Step on up and try to scalp the futures market. Here you go. And you can definitely get in there and trade against those all goes if you choose. Not very wise for most traders to do that. By the way, if you’re listening out there. Couple more things on talk to you about Steve. Always enjoy these kind of conversations with real traders out there. You’re from Tennessee. You know, deep in I’m from Utah, you know, Midwest kind of guys. Do you ever find the image of trading is very negative from a connotation from the people in your life? Do they ever kind of say like, oh, that’s that Wall Street stuff? Or do you find it’s more palatable here in 2019?

Steve Burns: I think my whole life I always looked at it a gamble. I’m just some wild gambler. I remember some people have come around, though, when I was young, when everybody didn’t see and I was saying, you know, keep building your capital. And when people are leaving jobs and you take a year for one case and I don’t destroy your capital, build it, you know, put it in another county, building it. And a lot of people have come around later, but everybody always, you know, dismissed me as a gambler. And how can I live that way? You know, I sell whiskey and all that stuff. They don’t understand. Like, I’m not gambling. I mean, they’re trying to be the casino. I’m taking the trade to the gamblers. You know, I’m operating with an edge. I’m not operating a gambler. Whenever I think casinos, a gambler, a casino is a business with an edge.

Tim Justice: Yeah, that’s exactly right. And you know, the thing about it is any real veteran trader understands about risk mitigation, you know, proper position sizing and keeping trades small enough to where it’s kind of boring. Most days. The markets shouldn’t be exciting. It shouldn’t be like a fireworks show where you’re watching your account capital go up and down 5 percent every day. I mean, that that’s not sustainable. You’re in a busted out of the entire thing and you’re good. Trading is more is kind of boring.

Steve Burns: Oh, absolutely. You’re disappearing like a business. You’re betting on your trading day, not your trade. You know, no one trade. Every one trade should be just one of the next one hundred if you’re position sized correctly. But, you know, over the long term, I look back and I’ve done everything from day trading in know position trading is 20 trading controlled by everything. And all my best money was made in France. All my birth money was when I bought a great stock. A lot of things that you’re breaking out all time highs back in the past and you’re sitting on it for weeks and months on end. And that’s where a lot of my big returns came from. Not sitting in a computer for 7 1/2 hours a day trying to beat beat everybody for a few pennies or nickels in the day. I mean, I was looking for the for the big dollars, not the little nickels and dimes during the day trading.

Tim Justice: Yeah. Yeah. You know, there’s many, many different processes and mindsets, too, that some of my best months and some of my best conditions I’ve ever traded and I just stuck. They didn’t sell options, you know. But it’s also just based on a system I trade myself and that I love. I love selling naked puts on stocks. I’m willing to. All right. I love doing cover calls on long term equity that I hold in my account. Just picking up a little extra credit and cash flow and then that trend trading stuff is so easy when you understand it and your position well. Because think about how many of these stocks or industries have just been in juggernaut trends even in the last couple of years. You know, conservative products like rates where utilities that you could have just bought and held this year and they weren’t that hard of a trend to identify here, Steve. They’ve been juggernauts in a market where there’s uncertainty, defensive products grab attention and the markets break out to new highs. Let me ask you a question on that, though. How much of your analysis is based just on the chart versus based on economics and fundamentals?

Steve Burns: Probably. Ninety five percent is pure technical. The only thing I use really fundamentally is my stock watch list. I will use some fundamental filters to trade the best stocks on fundamentals need and then I will sell use some more speculative stocks because the Castle and Amazon were such a shocking moves over the past seven years without the fundamentals to back them up. But you know, I think I use fundamentals for is my watch with the stocks. Everything else is pure. And even then I use pure technicals to trade with.

Tim Justice: Yeah. Yeah. I think technicals are going to drive the price action and also entry points and all that kind of stuff. Fundamentals have become a little bit bigger role in the way I approach markets in the last couple of years. But at the end of the day, you’re not going to try to take it a signal. Know it’s just not going to happen.

Steve Burns: You’re not going to buy until you get to breakout where you get the moving averages confirming or whatever it might be. And there’s so many different variations of using those technicals. A couple of things I’ve got to get your take on here. It’s the back end of 2019 and we got big news happening in the Financial Markets Commission. Free young man. I mean, today, Ameritrade and Schwab and E-Trade this last week have come out and announced that commissions are pretty much going to be wiped out and gone down to zero as close as you can get it. They’re still gonna be some futures commissions and option commissions and most of them. But that’s big news for the market, for our industry, for the marketplace in general. Do you think it’s going to impact the way you approach trading?

Steve Burns: Hi. My mom had to make adjustments, you know, with the speed to make, markets have been continuously speeding up since the base crash. Discount broker, you know, drop the commissions. The trend was so much more solid back in the 70s and early 80s when they were full. Commission brokers were hundred dollars and try to trade once, not one time and inflation adjusted. That was a lot of money. So you didn’t see all the extreme volatility and reactions in both directions as you do nowadays. So I think as the commission and the barrier to entry gets lower, lower, that the market price action will get faster and faster and people have no trouble trading with volume in both directions. I think just goes feet of the market and if you’re a trend.

Tim Justice: Yeah, I think that that can happen as well. But it does reduce the barrier to entry on some strategies that maybe some smaller account traders had, you know, pay in stock commissions at 10 bucks for one hundred shares. Now it’s gone. So let’s say you are working with smaller accounts. You might not have to go into options to get the cheaper rate or the leverage. Maybe you can play stocks.

Steve Burns: Yeah, but funny about that is I’ve been trading almost commission free since 2007 2007 with Merrill Merrill Lynch Edge and Bank of America from 2007. Now they give me they give me one hundred free trade a month even before this happened because of my size of account I keep with them. So I’ve been trading almost commission free now for 12 years.

Tim Justice: Do you think it will affect the way you teach people at all?I don’t see anything really.I mean, I was asked this question myself recently and I didn’t have an answer to it. So I don’t see any real change in the way you approach markets.

Steve Burns: Do you just cut expenses for the small people, small people, and not have to worry about being eaten up so much by commission costs like they used to, but small accounts? I think it’s gonna to help small accounts be able to trade more actively. Look out the drawdown from the deterioration because of the commission expense.

Tim Justice: Yeah. Next thing I wanted to ask you about is what your market opinion is right now. And obviously we know, you know and we don’t know the future. Right. We trade what with the information we have in front of us right now. We’re heading into Q4 where you’ve got trade war news headlines still dominating, just like they have been for the last 18 months. You’ve got a Federal Reserve that is now debating whether they should cut or hold, and they seem to be wanting to cut and just continue to to have quantitative easing forever. Feels like. And then you’ve got also got last year where the market crashed 25 percent. What is your expectation for the market this quarter and then into 2020?

Steve Burns: Yeah, you know, I’m like we talked about I will trade my technical signals right now. I’ve got I had a bunch of bullish debt buys into the oversold areas on the recent past opportunity moving average in a lot of individual stocks. But I believe just from, you know, for fun, you know, from a poker player perspective that the that there in China will have to make a deal with the US before the election. I don’t think they can take this pressure for that long period time. I think that will trigger a whole new leg up. If it happens, I think there’s a very high probability chance. I also think that the Fed will be forced to cut rates due to the manufacturing data coming back so poorly and the slowing growth of jobs, even though the job creation is still a great number, it’s slowing its trend. So I think the Fed pushed into a corner of the lower right hand kind side to make a deal and that kind of going to be very bullish.

Mark Justice: Steve, I have a question for you. All right. First of all, I’d love to listen to this. I’ve been on the edge of my seat, just proverbially, literally. All right. So you have this premise, this thought through logical premise. And you’ve said that you trade about 95 percent of the technicals like you’re pretty much a technician. So how do you how do you like how much does your opinion that you develop these like a thesis on what China will do? Influence. Does it influence the type of trades you’ll be looking to do? Or do you ever use them to actually help trigger in? Like, how do you use that thesis in your in your intelligence and your thought process and what’s going on in the world on the entry points of your traits?

Steve Burns: I don’t anymore.

Mark Justice: So you have this. That’s what I thought you would say.

Steve Burns: But I feel it’s a fun game to look at. Know, I enjoy the 2008 meltdown. Think all the four percent that year watching the show. But I was never taking any trade based on that. But he had learned not to follow my opinion. You know, whatever the price action takes me, whatever my signal say, I will follow them because I’ve got parameters that will measure the momentum, Amanda, and the speed of trends. And I will stay in the direction of the direction of least resistance is the direction I’ll stay in. But but it is fun to talk about spaceflight. But I wouldn’t ever risk money based on my opinions.

Tim Justice: Yeah, I think it’s one of the biggest risks out there. I’ve seen people who over the course of my career, some of the biggest meltdowns I’ve seen personal traders have is when they’re convinced of a world view that the economy is going to hell or the economy is going to run or it’s going to be good or bad or they hated Obama or they loved Obama or they hated Trump or they love Trump. And they’re so convinced the world view they end up trading their money based on their opinion and they just get caught on the wrong side of it.

Steve Burns: And the two best examples of that is the run off of the March 2009 lows after Obama came in. And everyone, like you said, had so many. And me, too. I thought, well, this isn’t gonna be good and it may not be one. The biggest market runs ever during his term. Getting back to where we started before 2008 and then also after Trump become president of Dow, futures crash a thousand points overnight and then they rally back, gap up and take off on a tear. I mean, there’s no way to tell anybody would know everything everybody’s going to do and react to price action. Price actually begets more price action. And no one has any idea what they’re composed of. Everyone’s gonna do it. I’d better just go with the panel later.

Tim Justice: This reminds me of the mindset Jesse Livermore talked about in the greatest trading book ever written reminiscences of a spike operator. Ray says opinions are often wrong. Mark are markets never are right. You know it. This is not a new thing with human beings. We’ve always thought we have a perspective. That is correct, but it’s not necessarily accurate. The market doesn’t care who you voted for. The market doesn’t care if you’re right, left or center. The market doesn’t care who won the football game yesterday. They care about money and the trends and the signals on the chart are what matters 

Steve Burns: the most is an equal opportunity to let you win or lose. Equal opportunity employer.

Tim Justice: What’s the best thing about getting people to know how to do this? I mean, what what gives you a lot of value? Where do you. Because you’re a teacher, you’re an educator, you’re a trader. You could just trade your own accounts, but you decide to teach people and write books and talk about the subject. You’re on Twitter every day. You clearly have a passion for teaching the content as well as investing and training for yourself. So what do you love the most about that?

Steve Burns: Can enjoy, you know, people not going down the wrong road or losing a lot of money, other accounts. I mean, after most people come to me, after they’ve lost half of their trading account or blown up. It’s just sad to see people that, you know, they just want to, you know, participate in the markets and make money for their family or to try to seek financial independence from their job or get a passion about the game. And it’s just sad to see people go in the wrong path and go through so much pain with not understanding the math of the position, sizing and the risk or even just the reality of the math of what you’re trying to do. I mean, trying to trade for a living. We undercapitalized. You know, I have no idea what they’re doing, putting their family at risk of their home and rediscover it’s just bad.

Tim Justice: Yeah. Yeah. I think correcting some of that, you know, helping people actually achieve reasonable financial goals, getting on a process where they can do it forever. I mean, those are the things that I get a lot of value out of, too. And you’re right. I mean, sometimes we are having to kind of assess a bad situation and get people to start over. You know, one of the biggest challenges I’ve ever had as an educator is when people deal with extreme results before they get trained. Right. And I mean extreme on both sides. I remember a couple of times where I was mentoring some people who had made a lot of money. And Steve, I knew it because I’m an expert. They made a lot of money getting lucky and they made a lot of money in the short term. They ran their accounts way up. And I’ll never forget this one conversation I had with a woman. And I said, listen, you’re going to lose all your money eventually if you do it this way consistently. Mathematically, I know that. And she just giggled at me like, oh, you’re just being the old fuddy duddy. That’s a challenge, right? I mean, and then the other one is when they’ve had financial disaster, maybe they’ve, you know, over leveraged in do leveraged products and taken big draw downs and they know they want to trade, but they’ve gone through the crisis already and you’re trying to help them out of it. And it can be a tough haul on both regards. What do you think is more difficult getting somebody to back off of the greed when they’ve had it or getting somebody back up and running after they’ve had kind of financial disaster pick back up and running?

Steve Burns: Because, you know, not only do you have the risk of ruin financially with your money, but can the risk of a mental and emotional ruin. You know, you in person, you blow up your room and you don’t think you do it to make money. If you have your money, that’s not what you’re doing for. So that’s what caused probably 90 percent plus a trader to quit.

Tim Justice: Yeah. Yeah. I think it’s obviously a lot more difficult to bring people back up into a confident state and trading. Well, because then I mean, a lot of times what happens is when you start showing them what reasonable returns are they, they get deflated. And it doesn’t matter what your past experience is, the math is math. You know, it doesn’t matter if you lost 50 percent last year, you made 50 percent your targets. Moving forward should be based on sound principles and you’ve got to understand what the market can bear. And the only way you increase your rates of return into the astronomical levels is if you take too much risk on and you can do a lot easier returns with better strategies, in my opinion. You know, Steve, it’s been a pleasure talking to you here today. I can literally just sit and chat with you all day long. What’s one message you would want to give our audience out there? We’ve got traders from all over the country. We’ve got some from all over the world. And many of our team, you know, they’ve been with us for years. You know, we’ve been doing this podcast now five years and we’ve got a loyal audience out there. What’s something you’d like them to think about as we wrap up this interview is

Steve Burns:  the key to successful trading is not just our trading. You have a quantified trading system with a hedge if you believe in big picture, risk tolerance and risk and reward goals. And you can trade over the long term until you have that, it’s best not to not to begin.

Steve Burns:  So which means you’re going to have to embrace the numbers. I apologize about that. But numbers do matter. They talk about it. Oh, my gosh.

Mark Justice: Before you guys finish up, I just have to say, as a consumer of the last half hour of content, I could listen to YouTube guys talk all day long. Yeah, but the markets are going to close. So we’ve got to. Well, but seriously, like it like it was ABS. You guys just I loved that conversation. Holy cow. I loved it.

Tim Justice: I think there might be a correlation because, Mark, I know you also love numbers, so you might we might be talking right down your alley.

Mark Justice: We don’t know it. Like seriously this thing. Reza, I want to. I have never read listened to a podcast segment other than quality assurance. I’m going to listen to this one for my own personal enjoyment.

Tim Justice: You know, our podcast producer here, Steve, he’s never listened back to one of the episodes. I guess we’re just assuming they all I had to throw with the assurance just to make sure you guys know I was doing my job. I love it. I love it. Steve, thank you for being there. How many? How can people get in contact you? What are some social channels that you’d wanted to follow you on? Things like that.

Steve Burns: Twitter, the most popular one is. If Joseph Burns on Twitter and then a new trader, you. The letter U is my primary blog and Web site. And from there you can connect anything else that I have.

Tim Justice: Awesome. Awesome. We’ll have you on anytime here, Steve. Thanks for being here. Guys, we’re gonna be hungry after this break from Coach Mark.

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