What if there was one simple principle that you could apply to your life right now and also to the charts that would dramatically change the course of your life for the better? Would you listen to a very short video like this? Yes, you would. And in this video, I’m going to share with you that one principle that you can apply not only to the charts but to your life, that I have done so about four and a half years ago that completely changed my life for the better. And what is that? It is the risk-reward type of mindset.
So on the charts, anytime you’re entering a trade or maybe you’re looking at a long-term you know position on bitcoin right here. Let’s say that we believe that this has a really good probability of going to $100,000 right, but there’s also the potential that it could go to 0. So, without even factoring in, you know the macroeconomics and the traction and the institutions and the regulation and all that to try to perceive the probability of going $100,000 versus 0, let’s just say that both of them kind of have equal probabilities. So, if we were to enter right in this zone what would the risk-reward ratio look like? And this is what it would look like. It would be risking this much downside so you could lose your entire investment to go to 0, or it could go to $100,000 which in this case would be a 4.92 risk reward ratio.
So, that’s why when people are talking about Bitcoin having a lot of upside they’re serious because it’s an asymmetric bet. I’m sure you’ve heard of that terminology. It’s because there is actually a pretty decent chance that this goes to $100,000 plus, all right, and the chance of it going to 0 is very little relative to how much infrastructures are built, the money put into mining, the current adoption rates over 100 million users, regulation, and countries using it.
But you know, public companies, insurance companies, go on for days, but the fact that you have right here, you’re pretty much risking $1 to potentially make $5, that is a very good risk reward ratio all right. And I will apply that to every facet of my life, and not just on every trade that I’m making because every day we have a incredible amount of decisions to make and a lot of them are actually more important than you even think because they can dramatically shift the way your entire life operates just by making one simple mistake.
So how do I translate this into my actual life? Every decision that I’m making now, I have this type of mindset. I say okay, well what am I risking if I say yes or no to this decision and then what is the reward that I would get if I did say yes or no to this decision. I’ll give you a few examples. One literally just happened: We were going through customs on the way home from a trip, trying to get on an escalator to go downstairs to then go get your baggage all right. And the family was in front of us, there’s a ton of people coming behind us. So the family gets onto the escalator. The mom, the dad, two kids and the third kid that was probably about 8, 9 years old didn’t get onto the escalator right away. And the dad was trying to grab her hand and bring her on and she didn’t grab his hand and kind of hesitated and then stood there and never got on and then she started to sob and cry a little bit. Meanwhile everyone’s looking back being like, okay well we all need to be on the escalator. The family is going down the escalator, everyone’s waiting to get on the escalator and I’m standing there, right next to the kid, so it’s a kid and then me right to the left, and everyone’s just staring at us. And I’m like, instantly, I’m like all right, how do I find a solution to this? It’s obviously not a huge deal for the kid to go on an escalator, their whole family’s on it. Let me just grab her and bring her onto the escalator with me, you know, a mentor or babysitter type person, to be in her life for a split 30 seconds to come down to the escalator. I’m sure her parents would be happy. But then I thought okay well, what is that going to solve? What’s the result of that? The result of that is saving that family and the people behind me probably 45 seconds. The dad could have just come right back up the stairs, helped the kid come down and then you know everyone wasted 45 seconds. Okay, not a big deal. And then I think about, okay, that’s what really probably should happen.
And meanwhile, I would be risking so that would be the reward of saving 45 seconds but what’s the risk? The risk is me picking up the child, the child slips out of my hands, hits her head on the escalator, her head explodes and Jeff gets sued for tens of millions of dollars, everyone consumes him and his life is now ruined. So, obviously that’s the absolute worst case scenario. But a lot of other things could have happened like, oh you know, you pick you grab the girl too hard and she got a bruise on her arm and now, you know, she’s crying and screaming and now you look like an idiot. There’s a lot of other snares that could have happened but when I factored in. What’s the worst thing that could happen and what’s the best thing that could happen if I said yes to this and actually try to help this random girl down the escalator? It did not make sense for me and I almost did it immediately just thinking okay let’s just go down the escalator, it’s not a big deal. But then I thought, okay what’s the risk of this? The risk far, far, far exceeded the reward in that scenario, so I said no. And what the dad ended up doing was running all the way back up the escalator and broke a sweat in doing so, grabbed the child, put her on the escalator and everyone wasted about 25 seconds, it wasn’t that big of a deal. And as I was going down the escalator, I’m like yep I’m very glad I think like this now because it’s probably saved me in so many other ways I can’t even imagine. Other ways, you know, like in a car like when I’m going down the street and I’m not gonna put my seatbelt on, then I ask myself what’s the risk and what’s the reward? Well, the risk is someone comes T-Bones me and I die and the reward is me not having you know two seconds of me grabbing the seat belt and putting the seat belt on. Okay, the same thing went in the first major way that I found this in my own life.
I was riding a motorcycle like 6 years ago. I used to ride crotch rockets and sometimes I wouldn’t wear helmets because it was a shorter trip and I knew I wasn’t going over 45 miles an hour. Same thing: what’s the reward? Okay, I don’t sweat as much, maybe I got more air and I look cooler to random people I don’t even know, but honestly, what’s the risk of that? Once again, dying, hitting my head, going to a coma, ruining my entire life so is that really a good risk-reward ratio?
And that’s the question that you should be asking yourself, in really programming yourself to operate as you’re going through life, especially as a Trader, as a business owner, but honestly just throughout life. Every decision you’re making has a risk and has a reward. So ask yourself, what is the risk-reward and does this risk-reward setup even make sense?
All right, hope this makes a lot of sense to you. Hope you start to implement this, because I can tell you when I started to do this, it has changed my life dramatically. Sometimes you find those people, you know, that always have bad luck happening to them, they keep breaking their arm and leg, they get in six car accidents, they keep you know getting sick, they keep doing all this stuff, and it’s because they’re not operating with this type of a mindset. They’re not thinking in the risk-reward type of a mindset when they’re making decisions. And if you start to just simply implement that, and the next level is even to go into opportunity cost, which I won’t go into because we don’t need to go into that much depth. But just operating that way, I can guarantee you you’re going to be in a better spot financially, spiritually, physically, mentally, if you literally start to program yourself to start thinking like that on every decision and especially the important decisions that you make. Thanks so much for watching, hope you got value.
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