Some Things Never Change: Treating Trading as a Business
Many of us undertake the journey of trading with one thing in mind, money. It’s incredibly ironic, then, that in order to successfully trade for a living we are required to let go of the concept money as we know it. You have to be willing to lose nearly as much as you make and come out ahead despite the setbacks.
Loss is just part of it, the grief is bittersweet. On one hand you’ve done what you need to do, manage risk, but on the other hand you’re forced to put an almost religious faith into your process moving forward. You have to believe that the future is bright while you’re tormented every step of the way. In order to loosen your suffering, you have to learn to let go. You have to totally detach yourself and devalue the lifeblood of our society, money; it’s a skill, skills can be learned.
When nirvana is forced upon you, you resist. When you overindulge in nirvana, you lose meaning. There is a balance that affects both poles of the trading sphere, beginner and professional. That’s what I’ve come to discover and what this blog is going to explore pragmatically.
Up until this point, I’ve always been an advocate of treating trading as a business. I define this process as the ability to consistently pull money out of the market and successfully transfer that into a separate account that is no longer risk capital in your trading. This is the distinction, true profit, that separates an intentional trading business from a gluttonous trading business.
A gluttonous business intends to satiate it’s own needless desperation at all costs. You can smell the fear and greed permeating its walls and its despondency can be felt even if it managed to produce millions upon millions of trading PNL. Whether it’s your businesses fifth day or fifth year, it’s the same feedback loop: more.
It’s an unconscious chauffeur that takes you nowhere while seemingly in motion. You sense that you’re moving towards a destination but never arrive. Sometimes you feel as if you’re going 100 miles per hour, other times it’s as if you could not be moving any slower, frozen in time.
If you’re lucky one day you question the driver, “Where are we going?” and they reply, “I was waiting for you to say”.
Unfortunately many of us never stop to ask, we’re too busy daydreaming.
We look out the backseat window and fantasize about arriving to the party that everyone seems to be invited to. Everyone is invited, everyone! All you have to do is get on the bird app, details inside; It’s a celebration for those who’ve arrived.
Finally you know where you’re headed, you’re going to their place. Just thinking about it makes us excited, impatient, antsy. You’re willing to run a few red lights if you’ll shave off 5 or 10 minutes.
“I’m late” you tell the driver, “Everyone is already there, I need you to speed up”. The driver responds, “I’m doing my best, please bear with me”. You check the time and your blood pressure goes up. “Listen I need you to fucking go, I’m LATE”.
The driver accelerates, finally you’re feeling better. You’ll make it, you’re on time…
Skkkkkkkkkkkkkkkkkkkkkkkkkkrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
The driver slams the brakes as hard as he can.
BANGGGGGGGGGGG
You’re upside down and badly bleeding, but you remember that you can’t afford to be late. You tell the driver to handle it and quickly call a cab. As you get back on track you decide that it was worth it, you came all this way, you’re “making it”.
Up a long private driveway you finally pull up to this beautiful estate, step out and realize that there aren’t many people there. You stumble through the door and ask the first person you see “Where is everybody? I thought we were all supposed to be here by now?” and they respond, “I think most people going to be late, they usually are”.
To be honest I have no idea how or why I even decided to write that, I’m not entirely sure if it will mean anything to you.
For as long as I can recall, trading has always felt like a destination for me. It seemed like something that I was going to keep progressing towards and one day finally achieve freedom, if ever. I reasoned the steps it would take, adopted the culture and let it become me. I looked for help and stumbled across different philosophies that ultimately felt like wearing a suit that was a bit too big for me.
It wasn’t the first time that I felt that the destination and the rewards themselves were clear but the nuances were lacking.
As a first-generation pro-gamer, there were very few resources that I could grab onto. Not only were role models difficult to find, but it was even more difficult to pick their brains and understand what it was that made them successful. At best you could guess. Guess I did, however I realized at some point that sometimes people are actually naturals, I was not.
Things just took longer for me to understand and to develop skills and that the only way for me was to trail-blaze my own path.
In trading, trailblazing is something I’ve accomplished as a result of dire need. I needed a way to protect myself from being an idiot, I needed ways to beat the game when I didn’t trust myself. This is how I landed upon systematic thinking as a framework and solution.
Here is the real meat of the blog and I’m sorry it took this long to get there:
You must NEVER take the money for granted. You must be meticulous about managing your trading business as a means of extracting profits first and foremost.
What I want to talk about is two-pronged, one to reiterate and also modify previous best practices for intermediate traders and also to reveal my current framework for advanced traders as a result.
In order for you to understand what I’m talking about, you need to understand my system for “freezing R” and my thoughts surrounding wiring: https://twitter.com/search?q=Wire%20from%3Abrianleetrades&src=typed_query&f=top
It is a LOT of information but I think it is literally the best practice for a retail trader possible for many reasons, some of the reasons I’ll highlight here in the blog as well.
In essence, our business is built upon money and money management. We often think that realized gains are truly realized when in fact it’s completely and totally plausible for that risk capital to immediately be wiped out any day of the year.
Whether you’re day one or 10 years in, ultimately the risk you assume is higher than you think. Sometimes it’s not even in your control, sometimes the market or the market’s infrastructure becomes temporarily broken. Most of the time it is your fault and part of that fault is not being aware of black swan circumstances / exposing your entire portfolio to it simply by being greedy.
The greed that I am ascribing to this situation is when one maintains that their best course of action is to infinitely compound their gains into future profits in order to expedite their journey despite the fact that the money is relevant to their current needs.
In other words, many traders effectively bypass the entire purpose of the trading business and never consider taking payment because they feel it will slow them down unnecessarily.
My argument is that it is VERY necessary and despite knowing very successful traders who are leagues above me, I know in my heart that these systems are the reason I was even capable of becoming who I am today. These practices were meant to counter the fact that I was not a natural and because of their incredible effectiveness, I was inspired to share it with everyone who wanted to listen. The benefits were beyond measure and I will point some of those benefits out soon enough.
Context matters
Somehow I lost this critical piece of my trading when I “made it” during the best market conditions possible of 2020–2021. But before that point I was on the same path as everyone else, I just wanted to be a successful full-time trader. Success in my mind was pretty simple, make enough money to never worry about money.
While I was discovering what worked for me I came across some really foundational gems that set in motion the thought processes that I honestly believe are original in their current iteration. I know that it’s very likely that it’s unoriginal but it may as well be invisible because I was never exposed to it by any of the mentors/gurus that I looked up to.
Things like the max losses were really not relevant to the discussion years ago despite the fact that it was ALWAYS a resource. Possibly because the little niche we are part of is more focused on vanity or simply that the best of us are naturals. I find that many successful traders I knew at least displayed an extremely discretionary disposition and thus cannot truly teach their process.
I realized that I needed to look deeply and logically at the mechanisms by which I would succeed and explore the nuances that often go overlooked. It wasn’t about going from one thing to the next, but rather compounding my knowledge/wisdom of the ideas that resonated at my core.
Some people hate philosophy, some people hate nuance, some people hate discussing the details that bore them to death. I actually love it.
To me, nuance is where you can actually push to higher levels when you plateau in skill level at anything. We typically rise very quickly as we learn something new and eventually hit these walls that slow down progress. Naturally if you think about people who become the top 99.9% of anything, realistically every single extra piece of growth will be marginal and difficult to attain at some point. People who stare that challenge in the face and continue to attack are the ones who become the best of the best.
Back to being an aspiring trader.
I realized that in order to trade full-time as someone who could barely afford rent and simultaneously needed to grow their account, the solution was to impose a system of taking money out of the account and putting it towards my savings. This system was the freeze method where I was both pushing my limits and compounding, meanwhile I was buying the most precious resource in trading, or in life really, time.
Knowing that I was able to buy time became this liberating experience that also developed into a deep sense of inspiration and gratitude. I would excitedly check my bank account and revel in the growth, knowing that I was actually pulling money out of the market. I felt inspired by the sense of progress, I felt grateful for the money because I could see how it affects reality instead of sitting as a number in the account. Truly wild how we can interact with tens of thousands, hundreds of thousands or even millions of dollars both won and lost as a GAME.
This practice went on to serve me as I was able to successfully wire out 90% of the gains I ever made in the market which is a staggering amount compared to my expectations. These truly banked profits were never going back into the account and afforded me so many opportunities that I could’ve been robbed of when looking back simply due to greed, if I let it.
Everything about that process gave me the solace I needed to withstand intense pain, feel hope in the worst of times and also put this entire operation into perspective. I truly wish this for everyone who undergoes a serious trading journey for themselves.
At times I could go a month or two without making a single dollar and still execute as I needed to. At times I would think that I was the single biggest idiot in the world and wipe the slate clean the next day. At times I would serve as my own best friend by being compassionate and realistic about the money that I did effectively pull and what it represented, broadening my timeline to basically a lifetime if I so chose. Trading, being an infinite game, is dictated by this concept… one of the key advantages that you have direct control over through meticulous position sizing and understanding of risk of ruin.
Lowering your net exposure to the market through wiring out will reduce your risk of ruin to near 0. Think about the implications of this… many times I find that people forsake this advantage and disappear from the game despite making a fortune in the markets. It’s happened many times and it will continue to happen where these individuals lose EVERYTHING. Their talent, their time, their work lost needlessly.
When I said that my idea of success was to never worry about money, that reality became true. I pushed limits that I thought were not possible and my experiences culminated in the feeling that I was above process and now it was time to take it to the NEXT NEXT level.
I stopped wiring out and decided that I had enough. I stacked my bank account to the point that another few wires was not going to move the needle enough compared to the fact that I could just use that capital to grow even more! I wanted to know what it was like to be filthy rich as a result of hard work but simultaneously was filthy rich and didn’t feel good enough. There’s always someone out there who will be a hundred times more successful than you so feeling successful can be a fleeting emotion when comparison is one of your metrics.
I conspired to pay my entire tax liability with one months gains, given the fact that we pay them in April and I already surpassed the liability in January of ’22, ONE month of trading.
I really believed that I was going to do this year over year and it was going to be insane.
Well reality struck when the market basically took a turn for the worst when my greed was exactly at it’s pinnacle. I pushed size where size was unreasonable and I wished for more when it wasn’t available. I needed more today because I wasn’t like them yet.
As I continued to compound and compound, I ended up losing what was considered reasonable for a max loss etc but it stung much MORE because it was exponentially built up and never curbed by profit taking.
I won huge and I lost huge and, in hindsight, I lost something so vital to my success in wiring out. I lost my reverence the money and the gratitude, I lost the inspiration of growing and nothing mattered except massive growth.
What I believed to be a gift, the ability to focus all of my capital in the markets and being financially secure, ended up being the biggest mental shift that transformed me into an ego-maniac.
The truth became clear after I was no longer able to find the liquidity to support my risk and I was no longer able to recover any of the normal losses I was taking due to a so-so market. I drew down my entire all-time PNL by 10% which seems like nothing, and it was, I was hit with another problem… taxes.
Taxes put into perspective for me that many of the banked profits that I held in reserve was actually liable and that Uncle Sam wanted an enormous sum. Sometimes people joke about taxes being like blowing up your account because it’s the single biggest loss you’ll take all year usually. I certainly felt like that.
I no longer really felt that I was 1000% secure as I initially projected. The reality was that I still was, I was not in any trouble and made a lot of great investments that were going to exactly as I had planned, the only issue is just how I felt… the emotions.
Like I said, I wired out 90% of my profits over the years and the trading account going into any sort of drawdown is totally normal. I was protected when I needed it by a system that I developed long ago and maintained until this point. That’s exactly what a well-thought out system is meant to do, protect you from yourself when you need it the most.
It would’ve taken a month or two to recover if there was any way to do it, but I couldn’t find a way so I was stuck compounded down as I usually do, feeling stinted and honestly pissed with myself that I could get blinded so much by greed.
See the original purpose of the “Freeze” method was to normalize risk in a way that you naturally experience every single level from $100 to $1000 to $10,000 etc. It was a truly logical response to growth and detailed exactly when/how/why to progress further. However, having hit ALL of the levels and going further beyond with my growth I no longer had any emotional tie to any of the levels.
I no longer felt there was a need to wire out, as my goal was to compound back as quickly as possible with 0 hangups! It took me a year and a half to come to this very realization that what I had left behind with my advancing self was the medicine that I needed to move forward and that it was actually extremely relevant to intermediate traders as well.
I actually have not made a single wire in 1 year and a half until this last month where I wired 3 times. I felt that I never needed to wire so “why bother, get compounded back and then push higher, let’s go back to work” I thought.
What I realized during this time is that I was constantly making great strides and then giving a decent amount back whenever the hot streaks ended as a result of compounding and that it was pretty normal really. I could feel great one day or week or month then the next month one totally normal lockout day felt like it erased too much.
I think a lot of people can relate to this.
While compounding itself up and down can provoke massive strides positively and curb losses by being sized up when performing well it and sizing down when losing, it still doesn’t necessarily provide the same emotional benefit as well as the important BUSINESS mentality.
I think we tend to look at these plateaus as minor setbacks and really live for the next advance. We want to see ourselves breakthrough and no longer identify with the risk we used to associate with and therefore lose our perception of value. What ends up happening if you’re truly in a situation where you can no longer progress, the interim feels like a monotonous slug-fest that neither yields banked profits nor satisfaction. All I could feel was that I wasn’t enough, not even against myself.
I felt that I deserved to be who I was and where I was. I reasoned through the accomplishments that I achieved and the milestones I breached, my ego took complete control.
This resulted in one of the most humbling and confusing periods of my career thus far, all because of this mental shift.
On a side note, I once spoke with a trader around this time that I sincerely admire very much, someone who is a master of their craft and, by all accounts, a titan of industry. He made a remark that struck me kind of deeply which is a simple question, “Why would you wire out and not compound the capital even more?”. I honestly knew why in my heart but it made me think that I had been foolish. I really do feel foolish sometimes when great traders have processes that contradict my view and when it happens I really have a bad habit of leaning into their truth over my own. That has stuck with me for a very long time… lack of self-confidence at times. My goals have always been to trust myself to the core, an ongoing journey of self-discovery that is constantly assaulted by social media/people I respect. It’s my duty to simultaneously be open to change and to be completely true to myself. I hope that you realize nobody will know exactly what you need except for you, there are many ways to approach problems and to play to your exceptional traits.
I want to say that the question of why is a very personal question to each individual. Some people would be happy with a million, a few million, others 100’s of millions… it’s endless. What’s important is what you want to sacrifice for, that’s what a lot of it is… how much did you sacrifice and if it was worth it for you.
To me, I was living the success of not having to worry about money. Going from having no worries to having the thoughts creep back in was one of the most humbling experiences I’ve ever faced. Highs to lows and it was all because I wasn’t prepared for it. I didn’t have an idea of how I would approach treating trading as a business past the point of needing money. I totally devalued the risks that I was taking and treating it as cannon fodder in a war against my goals. I stopped recognizing the value, lost connection with it, lost respect for it, lost gratitude.
The solution is both for traders intermediate and advanced alike. I reckoned that my system of freezing was bulletproof while I was undergoing my journey and that it was about as good as it needed to be to share with others. It was something that I perfected through experience and felt was robust. The only problem was that it never scaled to the point where you no longer have the same constraints, when you’re lucky and have the ability to finally utilize money anyway you want. I never anticipated the psychological aspects of it and I foolishly never anticipated that there could be times when you quite literally go nowhere for prolonged periods of time.
I was ALWAYS growing, I was always pushing new boundaries and never felt like it was more than a month or two away. Having experienced one of the sickest streaks of progress to the exact opposite whereby 2022 felt like 7 months of chop, it felt like I was never going to catch the wind with my sails despite feeling like I was performing well. I’m sure all strategies have eras where they fall out of favor for an indefinite amount of time and this was the case for me, first time really and a great learning experience for the future.
A trader came out to dinner with me and we started talking about this very topic. I was sharing how I started to realize that I was reincorporating these practices but with a unique twist. I shared how very important I felt it was for me and that I lost a significant advantage that I had over the market as a result.
This might be the most important part of the entire blog so read it carefully.
When you decide to wire out of the market you are robust to the natural ebbs and flows of hot and cold. The rule, as it stands, is as follows: Whenever I experience an outlier profit day I will wire out 50% of the profits no questions asked. It doesn’t matter if it happens every single day of the week or if it happens 0 times for the month. This type of system is designed to capsize the damage that inevitably follows hot streaks and the subsequent compounded risk that impacts you so unfavorably when you’re open to awful days where you get maxed out on everything. You still grow your account however you now simultaneously bank the profits which, by their very outlier nature, represent meaningful profits in their own right.
Consistently allowing you to act without considerations such as… “well what if I want to keep the ball rolling” or “I’m the best, I’m such a good trader, let’s go”. We all know that these types of emotions usually lead to the very next larger loss. I will admit that there were many weeks in the past where I compounded HARD and made a lot of money but the reality is that a little bit more gain will marginally affect your life whereas the outlier banked profits actually provide extreme benefits such as psychological clarity and thus trading clear and effectively, performance is the most important factor in executing edges. As you can see, growing my capital only led me to become an egoist, someone who doesn’t see the forest for the trees. I didn’t see the value of the money any longer, I became stressed when all of the work I put into trading was meant to dissipate the stress. That is the panacea to all of this… treating trading as a business.
This advantage that YOU control entirely allows you to beat the market in ways that are not just winning. It lets you beat it by being a loser too. The market is going to try and destroy you from the inside… the doubts, the greed, the fear, the feeling of not being good enough no matter what you do. Do yourself a massive favor and learn from my story, realize that you can break the cycle and create the ideal environment for being a professional trader.
After I started to wire again, even if it paled into comparison to the past, I realized that the motivations I felt and the inspiration and ALL of the positive feelings that I associate with passionate trading resurfaced. It was as if it was always there and I was just not letting it in. I felt so disconnected and tired all of the time while grinding it out before. Now I feel like I am trading the absolute best I’ve ever traded and not only that, but I feel so connected to the value of the money and feel passionate about trading.
I enjoy trading, for a long time I stopped enjoying it. I did it because there was no reason not to do it… it was like picking up money off the floor as long as you woke up. Today I realize that there is an element of luck and you can become luckier if you’re enjoying the process… it builds resilience. If you ever feel like you hate trading then it’s a signal to take some breaks or slow down, look what got you here… what are your best practices? What makes you actually feel like you’re in peak form?
Back to my dinner friend, he was like many of you guys. He had a smaller account and told me that he fell into a period of drawdown that he just recovered, he was feeling good but he hadn’t wired out at all because of the freezing was still at the same break point he set before the drawdown. This is where the inherent flaw hit me in the head and I knew that I had to modify my thoughts and it’s nuances for everyone.
I was no different than him. I am no different than you and therefore this system has to be simultaneously worthy of any stage you encounter as a trader and any environment. The fact that he had won some, lost some gone back and forth and done this for a period of time without taking money out is the single biggest failure point to me.
It makes sense that you “should” have ZERO reason to wire out at all when you haven’t grown your account to where you’re happy. It’s perfectly logical to want to wait until it makes sense for you but I’ve always been kind of against this. I’ve seen so many desperate traders who want to fast track their progress, allured by the equity curve sims pronouncing massive returns if fully compounded but that is so besides the point of trading. Trading is an exercise in playing the infinite game. You can make so much money trading that you should not be in any rush to get to the point I reached, it feels like everything circles back to enjoying process… not thinking about how much money you’re going to make… it isn’t about that at all, the more you need it the more likely you’ll fail.
The nature of trading is that you will sometimes have good wins and also have bad losses but the critical piece here is that even when you’re chopping around and not able to progress, you’ll STILL pull money out of the market on account of good days!
Those desperate traders tend to experience BIG blowups without ever having drawn a dime. They set lofty goals like hitting 100k THEN wiring out when they literally started with 30k and wiped out 30–50k in a few shitty trades. They seek the freedom that they think trading allows them without the MECHANISM by which you can achieve freedom… which is BUYING TIME. You forsake the process and you get bit, that is the truth.
The truth to me is that you can ALWAYS treat trading as a business. I understand reinvesting in your startup and trying to expand as fast as possible but when you realize that businesses almost always fail because they run out of cash and founders end up taking 0 paychecks even when they actually do what they created the business to do… it’s honestly sad.
Even if you repeatedly up the ante and reinvest continuously you can STILL lose it all some day, that’s the reality.
IMO, no matter what level you are at you should wire out outlier gains. Set it reasonably like.. it’s not meant to be everyday or every other week… everyone has their own sense of outlier but DEFINE IT. For me it’s like 10R+ so far, it might change I don’t know yet. But I never want to see anyone say it’s something so illogical and unreachable like 20R or something, you will NEVER wire out and maybe that’s what you want… we all get we want out of the market, Ed Seykota said as much. Do NOT compare your outlier day with someone else's, it’s totally personal, figure out what makes sense for you.
If you want to make money and you want to treat this as a business, as MOST people should, given the fact that most people will not the reach being the top 1%… you need to be doing this.
So in summary, while you freeze and compound risk… seek to wire out outlier days… benefit from the rewards of your hard work and luck, buy yourself time and spend some of that money. Spending it really helps to develop a sense of meaning and purpose as well as respect/gratitude which are both key ingredients to a happy life and passionate trading imo.
I really do believe this to be one of the most powerful tools that I’ve ever utilized and continue to utilize.
Consider other options to build wealth such as investments, the impact of taxes and the general clarity associated with financial confidence as a result of growing your risk-off capital. Trading is way too stressful to be fully exposed in one vehicle. Passive investments sometimes are tax deductible and also produce income or appreciating assets that are less busy as day-trading is. I used to be naive and believe that trading was going to be the one be-all-end-all solution, that it was going to take care of everything on it’s own. It definitely can but you’re still working as hard as a dog for it. If you can find ways to let your money work for you, you’ll be able to take much needed periods of rest and relaxation as well as enjoy your time and the fruits of your labor, this is a richer life in my opinion.
The point of all of this is freedom to do what you want, when you want, how you want and without hesitation. This life is yours to live, do it for you, I promise it will be worth it.
I wrote this article in 5 hours of total writing without pause so I hope you enjoyed this latest update.
Best,
