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2022 ICT Mentorship - Ends Series Part 2 of 4
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2022 ICT Mentorship - Ends Series Part 2 of 4

Welcome to Part Two of the Series

Overview of the Series

  • This is part two of a four-part series titled "Ends," aimed at fostering a creative mindset for applying trading concepts in personal life.
  • The series encourages viewers to integrate their unique experiences and creativity into trading, emphasizing that it is a solo endeavor rather than a team effort.

Mindset and Practical Approach

  • The focus is on developing the right mindset and practical strategies for reading price charts, which will be elaborated upon in the final episode.
  • Viewers are encouraged to learn from past failures in trading, as this series aims to provide insights that can lead to better outcomes when approaching live markets.

Addressing Financial Challenges

  • Episode one discussed the problem of limited income from jobs, often referred to as "just over broke." The solution proposed in this episode is finding additional income sources through trading.
  • Emphasis is placed on changing one's perspective from feeling overwhelmed by financial limitations to believing in potential success ("I'm possible").

Understanding Income Limitations

Recap of Episode One

  • A recap highlights that many individuals face variable living expenses based on their lifestyle choices, impacting their financial situation significantly.
  • Personal anecdotes illustrate struggles with low income and reliance on check-cashing services due to lack of banking access during early career stages.

Static Income Sources

  • Employment income is described as static and limited; it depends solely on employer valuation and pay rates for specific skills or workloads. Additional overtime work may not be feasible for everyone due to time constraints.
  • The speaker shares personal experiences working multiple jobs, highlighting the physical toll it takes and suggesting that pursuing secondary job opportunities may not always be practical or sustainable.

Exploring Trading as an Income Source

Transitioning Mindsets

  • Many people inquire about how quickly they can start trading with real money; initial luck may occur but understanding market dynamics is crucial for long-term success.
  • Experiencing profitability with a live account can create a strong desire to continue pursuing trading as an income source, despite initial challenges faced by beginners who lack experience or knowledge about market behavior.

Business Owner Perspective

  • Adopting a business owner mentality can shift one's approach towards making money across various avenues, including trading.

Understanding Income Streams in Trading

The Importance of Employment Stability

  • Maintaining a job, even if trading is hit or miss, is crucial as it provides financial stability and prevents account blowouts.
  • Recognizing the reliance of family on your income can help manage impatience about leaving traditional employment for trading.

Exploring Additional Income Sources

  • Learning to read markets can lead to potential investment income, which can be categorized into various sub-categories.
  • Creating a corporate entity around yourself allows for multiple income streams that can enhance financial opportunities.

Building Financial Independence

  • Focus on building personal incorporation to eventually replace employment income without expecting immediate results.
  • Investing in oneself with a structured plan is essential; success requires patience and strategic action.

Managing Employment Income Wisely

  • Appreciate your current job and avoid frivolous spending; saving money will provide resources for learning tools.
  • Allocate funds towards effective study aids like note-taking tools rather than expensive courses to enhance learning efficiency.

Learning from Experience

  • The speaker shares 30 years of experience in trading, emphasizing the importance of learning from real-world successes and failures.
  • Many educators may not offer genuine mentorship if their primary focus is profit from selling courses; seek authentic guidance instead.

Investment Income Insights

  • Understanding market dynamics through education can lead to profitable trading but requires personal effort and comprehension.
  • Anticipating market events involves recognizing patterns over time, which are critical for successful trading strategies.

Navigating Risks in Trading

  • New traders often overlook the reality of losses; understanding this aspect is vital for long-term success in trading.
  • Real-world experiences differ significantly from demo accounts; emotional preparedness for losses is crucial when transitioning to live trading.

Tax Considerations

Understanding S Corporations and Investment Strategies

The Role of a Financial Advisor

  • The speaker clarifies that they are not a certified tax accountant but rather sharing insights as a friend to help others ask the right questions to professionals.

Benefits of S Corporations

  • An S Corporation allows for pass-through income, meaning business profits are taxed only once at the individual level, avoiding double taxation faced by C Corporations.
  • While S Corporations offer significant tax benefits, individual circumstances may affect their suitability; the discussion is primarily relevant to an American audience.

Investment Income and Tax Strategies

  • Investment income can be generated through speculative accounts or deferred tax vehicles like IRAs, Roth IRAs, and 401(k)s which allow for substantial retirement savings without annual taxation on gains.
  • Emphasis is placed on utilizing tax-deferred accounts for long-term growth through compounding interest rather than focusing on short-term trading profits.

Importance of Roth IRAs

  • Roth IRAs provide unique advantages such as tax-free growth and withdrawals, making them an attractive option for investors looking to maximize their returns over time.
  • A self-directed Roth IRA allows individuals to make investment decisions directly while deferring taxes, enhancing the potential for compound growth.

Managing Expectations in Investing

  • The speaker reflects on past investment trends and cautions against chasing immediate wealth; instead, they advocate for a modular approach to investing—addressing one financial obligation at a time.
  • It’s important to defer gratification in investments and focus on maximizing contributions within tax-deferred vehicles like IRAs.

Structuring Business Income with LLCs

  • Establishing an LLC can protect personal liability while providing privacy regarding ownership of assets such as real estate investments.

How to Turn Impossible Financial Goals into Reality

Setting Financial Targets

  • The speaker emphasizes the importance of having a financial target, suggesting that individuals should aim to earn at least two times their monthly expenses for a sustainable financial future.
  • A minimum commitment of one year is recommended for achieving this goal, with an emphasis on saving $100,000 as a realistic target.

The Learning Curve in Trading

  • Many young individuals approach mentors seeking quick trading success but often lack patience during the learning process.
  • Even after understanding trading models and price action, there is a tendency to rush into quitting jobs for an unrealistic lifestyle without proper experience.

Realistic Expectations in Trading

  • The speaker critiques those who promote trading as an easy path to wealth while not managing their own income effectively.
  • Unrealistic expectations are highlighted; aspiring traders must commit to at least one year of learning before expecting significant results.

Understanding Income Streams

  • Employment income should be maintained until individuals can consistently earn double their monthly expenses.
  • Saving money is crucial to avoid cash starvation and debt accumulation while transitioning from employment.

Investment Income Strategies

  • Investment income can come from speculative accounts or long-term tax-deferred IRAs, which focus on wealth building rather than immediate spending.
  • Individuals are encouraged to roll over existing retirement accounts into self-directed IRAs for better control over investments.

Generating Business Income through Trading Knowledge

  • Once proficient in trading, individuals can create business opportunities by offering trade analysis or calls via platforms like YouTube.

Trading and Income Streams: Insights from Mentorship

The Reality of Trading Efforts

  • Trading requires significant effort, concentration, and hard work; it is not an easy path. The speaker acknowledges that not everyone will succeed in trading but encourages exploration of other interests.

Signal Services and Market Analysis

  • The speaker discusses the appeal of running signal services due to their potential for easy income, which many from mentorship groups find attractive.
  • To successfully run a signal service, one must be consistent in market analysis, accurately predicting market movements and key levels where reactions may occur.

Authenticity in Growth

  • Emphasizing authenticity, the speaker suggests that being genuine about limitations and weaknesses can foster organic growth in a trading community.
  • Offering free trial periods for signals can help build trust; allowing potential clients to test services before committing financially is crucial.

Financial Control through Self-Direction

  • By investing in oneself and managing personal finances through self-directed IRAs, individuals gain control over their investments rather than relying on money managers who may lack accountability.
  • Many people express dissatisfaction with money managers who take credit during market upswings but offer little guidance during downturns. Taking control allows for more informed investment decisions.

Building Additional Income Streams

  • Starting a YouTube channel can serve as an additional income stream; however, initial earnings may be low until sufficient subscribers are gained to monetize content effectively.
  • The speaker shares personal experiences with YouTube revenue, noting fluctuations in earnings based on video output and audience engagement over time.

Is Advertising on YouTube Ethical?

The Value of Community and Business Strategy

  • The speaker believes that advertising on platforms like YouTube is acceptable if one provides genuine value to the community through worthwhile services.
  • They emphasize a low-overhead business model, avoiding expenses related to advertising or salespeople, relying instead on organic sharing from satisfied customers.

Accessibility of Information

  • The speaker aims to make educational content practical for everyday individuals, empowering them to apply knowledge in their personal lives without excuses for failure.
  • They address concerns from individuals in impoverished nations, suggesting that those with fewer resources can still leverage skills and strategies effectively.

Revenue Streams Beyond Ads

  • Discussion about affiliate program revenue highlights opportunities for partnerships with brokerage firms; however, the speaker declines such offers due to personal principles.
  • Despite receiving lucrative partnership proposals, they choose not to engage in promotional activities that do not align with their values.

Ethical Considerations in Content Creation

  • The speaker expresses frustration over others taking their concepts without credit but encourages those trained by them to share their experiences openly.
  • They clarify that there’s nothing wrong with offering market analysis or trading signals as long as proper credit is given and ethical practices are followed.

Mindset Shift Towards Investment

  • Emphasizing the importance of understanding market dynamics, the speaker advocates for a shift from consumerism towards investing wisely and managing risks effectively.
  • They stress the need for individuals to take control of their investments rather than relying solely on traditional retirement accounts which limit flexibility.

Long-Term Wealth Building Strategies

  • The discussion includes compounding returns over time as a strategy for wealth accumulation, encouraging viewers to focus on skill development rather than immediate gratification.

Partnerships in Trading

The Demand for Skilled Partners

  • There is a significant demand for partners with trading skills, as many individuals are willing to invest substantial amounts of money in partnerships.
  • Offers can range from 60/40 to 70/30 splits, indicating the potential for large financial investments (seven to eight figures).

Managing Other People's Money

  • To manage others' funds legally, one must obtain proper accreditation (e.g., Series 3, Series 7) and establish limited partnerships.
  • Legal agreements should outline partnership limitations and parameters for trading accounts.

Funded Accounts as an Alternative

  • The concept of funded accounts is gaining traction; they allow traders to access larger capital without significant personal investment.
  • Funded accounts can provide leverage that may not be available through personal retail accounts.

Risk Management Strategies

  • Using a funded account minimizes risk compared to investing large sums into a personal trading account.
  • A small initial investment can secure a funded account through proprietary firms, reducing the emotional burden associated with trading.

Creating Sustainable Income Streams

Long-Term Profitability Mindset

  • Emphasizing a business mindset in trading fosters longevity and profitability rather than impulsive decision-making based on high leverage.

Diversifying Income Sources

  • Establishing multiple income streams allows traders to approach their retail accounts without the pressure of immediate financial needs.

Emotional Stability in Trading

  • Having diverse income sources reduces anxiety about losses, enabling more disciplined and objective trading decisions.

Conclusion: Business Approach to Trading

Understanding Entrepreneurial Mindset

The Importance of Objective Decision-Making in Real Estate

  • The speaker reflects on a recent property they liked but refused to pay the asking price, emphasizing a disciplined approach to spending.
  • A younger version of the speaker would have impulsively accepted a counteroffer, highlighting growth in financial decision-making over time.
  • The speaker chose not to buy the house at full asking price, reinforcing that purchases must make financial sense.
  • They discuss past impulsiveness due to being "new money," stressing the importance of money management and avoiding premium payments without justification.
  • Emphasizing self-mastery, the speaker encourages viewers to adopt an objective mindset in trading for better emotional control.

Patience and Skill Development in Trading

  • Growth in wisdom allows for greater patience; traders should wait for fair value rather than feeling pressured by time constraints.
  • Mastery over oneself leads to improved trading outcomes; honing skills is essential for long-term success and wealth generation.

Financial Management Strategies

Credit Card Debt Awareness

  • The speaker acknowledges common debts like credit card debt and aims to address its implications on financial health.

Business Incorporation Benefits

  • Adopting a business mindset can streamline expenses through a dedicated credit card for business-related costs, aiding accounting processes.
  • Business owners can benefit from tax deferment strategies unavailable to regular employees, allowing higher contributions into retirement accounts.

Trader Status Tax Treatment

  • Traders may qualify for special tax treatments that provide advantages over retail traders; understanding these benefits is crucial for maximizing profits.
  • Maintaining trader status requires meeting specific criteria; consulting with a CPA is recommended for personalized advice on tax strategies.

Long-Term Wealth Building

  • Emphasis on long-term investments versus short-term capital gains taxes highlights strategic planning necessary for wealth accumulation.

Understanding Business Expenses and Tax Benefits

Long-Term vs. Short-Term Capital Gains

  • The discussion begins with the distinction between long-term capital gains tax, which is lower than short-term capital gains tax, emphasizing the importance of consulting a CPA for detailed advice.

Vehicle Ownership and Tax Deductions

  • The speaker shares personal experience with owning a 2019 Corvette as a company lease, highlighting the enjoyment derived from driving it while benefiting from tax deductions.
  • Emphasizes that business owners can write off vehicle expenses, unlike employees who cannot deduct car-related costs when commuting to work.
  • Discusses how being a public figure allows for certain image-related expenses to be written off, including luxury cars that may not seem practical otherwise.

Leasing vs. Purchasing Vehicles

  • Explains that even after leasing a car, purchasing it still qualifies as a company vehicle eligible for depreciation benefits.
  • Highlights that lease payments on company cars are fully tax-deductible, contrasting this with employees who cannot write off their car payments.

Additional Write-Off Opportunities

  • Lists various vehicle-related expenses (oil changes, tire replacements, rental cars) that can be deducted by business owners but not by regular employees.
  • Shares insights on how rising gas prices do not affect him financially due to his ability to write off fuel costs as business expenses.

Overall Financial Strategy

  • The speaker emphasizes the advantage of writing off all vehicle costs to reduce taxable income instead of paying higher taxes.

Utilities and Healthcare Deductions

  • Discusses how incorporating oneself allows for utility bills like cell phones to be fully deductible compared to individual taxpayers who bear these costs without relief.

Health Insurance Considerations

  • Addresses concerns about health insurance costs for self-employed individuals and encourages planning for profitability in business ventures.

Salary Structure and Retirement Contributions

  • Describes his salary structure through an LLC allowing significant contributions into an IRA which are also tax-deductible.

Wealth Management Philosophy

  • Conveys a mindset focused on long-term wealth accumulation rather than immediate lavish spending or appearances on social media platforms like Instagram.

Tax Strategies for Vehicle Leases and Business Expenses

Benefits of Leasing Vehicles

  • The speaker emphasizes the tax benefits of leasing vehicles, stating that it allows for a 100% write-off as an employee cannot deduct such costs.
  • They argue that individuals earning income through investments or businesses can pay less in taxes compared to those with traditional jobs.

Tax Deductions on Meals

  • The speaker discusses the temporary 100% write-off for restaurant meals available in 2021 and 2022, contrasting it with personal dining expenses that are not deductible.
  • They highlight how business-related meals, like discussions about team building at restaurants, qualify for deductions under specific conditions.

Understanding Write-Offs

  • A detailed example is provided where spending $350 on a business meal results in a full deduction if it's related to business discussions.
  • The speaker notes that prior to 2021, only 50% of meal expenses were deductible, emphasizing the financial advantage of current regulations.

Personal Spending vs. Business Expenses

  • The discussion shifts to personal preferences in dining and how having an LLC provides advantages in writing off expenses related to clothing and other purchases.
  • They explain that maintaining a YouTube channel allows them to justify clothing purchases as business expenses.

Mindset Towards Trading and Income Streams

  • The speaker stresses the importance of operating with a business mindset when engaging in trading rather than focusing solely on personal gains.
  • They advocate for creating multiple streams of income to alleviate pressure and enhance confidence in investment decisions.

Long-Term Financial Goals

  • Emphasizing realistic expectations, they share their goal of retiring early by making informed financial choices without succumbing to impulsive trading behaviors.

Understanding the Challenges of Trading

Personal Responsibility in Trading Success

  • The speaker emphasizes that the time it takes to succeed in trading varies for each individual, and personal struggles must be addressed to overcome obstacles.
  • Acknowledges that the common issue among unsuccessful traders is internal; they often wrestle with impulsivity or impatience rather than external factors like market conditions.

Misconceptions About Trading Strategies

  • Warns against combining different trading strategies (e.g., Elliott Wave and Harmonic patterns), as this can lead to unrealistic expectations and subpar results.
  • Encourages a shift in mindset from seeking quick fixes (like specific order blocks or fair value gaps) to understanding deeper principles of trading.

Financial Mindset and Business Approach

  • Discusses the importance of viewing expenses, such as tax preparation costs, through a business lens; these can be written off, reducing taxable income.
  • Highlights that having multiple income streams allows for better financial management and lower tax burdens, contrasting this with a retail trader's mindset.

Developing a Business-Oriented Mindset

  • Stresses the need for a mature approach to trading, advising against treating it like gambling. Traders should adopt a business mindset instead.
  • Suggests taking time away from trading to develop this mindset by evaluating monthly expenses and eliminating unnecessary costs.

Overcoming Debt and Building Income Streams

  • Shares personal experience with credit card debt and bankruptcy, emphasizing the importance of creating income streams to manage debt effectively.
  • Mentions potential revenue sources like signal services or affiliate marketing once an online presence grows, encouraging viewers not to judge others' paths.

Empowerment Through Practical Knowledge

  • Critiques judgmental attitudes within social media communities regarding others' success while advocating for empowerment through shared knowledge.
  • Expresses commitment to providing practical advice on running trading as a business rather than focusing solely on wealth accumulation.

Future Guidance on Trading Strategy Development

  • Promises upcoming content aimed at helping viewers formulate actionable plans based on their understanding of trading principles.
Playlists: "Ends..." Series
Video description

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.