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Auction Market Theory Trader Reveals How Markets Actually Work (Must Watch) — Transcript

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0:00If you are a day trader, your trading
0:02day is already going to be decided win
0:04or lose before you've even pushed the
0:06button on that first trade. Your chances
0:08of succeeding as a trader are almost
0:10zero. From a technical perspective, this
0:13is where I spend so much of my time.
0:16Now, I have this belief that this guy is
0:18an ex-prop trader and worldclass
0:21performance coach. He was head-hunted by
0:23the world famous trader Andy Creger.
0:26What does edge really mean to you?
0:28>> Edge is not a setup. Edge is not even a
0:30strategy. An edge is if you're trading,
0:33your entire strategy revolves around
0:35chart patterns that lead to a breakout.
0:37Sometimes those breakouts are going to
0:39run and run and run. You're going to
0:41have a massive day. Other times, it's
0:42going to feel like the market is out to
0:44get you and every breakout you buy is
0:46going to fail. Why is that? The answer
0:48to that question is ultimately going to
0:50be found in
0:51>> tune in to deep dive into the trading
0:54mind at the deeper levels to understand
0:57how to become an elite trader. Prop firm
1:00trading is not like trading real
1:02capital. It's almost not the same thing.
1:04And I I made this joke a couple of
1:06times. Just because you play Call of
1:07Duty doesn't make you a real soldier.
1:09The difference from going semi-pro at
1:11that prop firm to to truly the big
1:13leagues with a trader like Andy didn't
1:15improve my ability to read a chart. It's
1:18not like he taught me some secret trend
1:20line technique that nobody else knows
1:21about. It was all about Emmery doesn't
1:24hold back on his opinions on exactly
1:26what it takes to be a successful
1:28profitable trader. All this and more on
1:31this special episode on words of wisdom.
1:35Emry, it's a pleasure to have you with
1:37us today. I've I've come all the way to
1:39Toronto to come and see you and uh thank
1:41you for hosting us here. I want to get
1:43straight into it. And we were just
1:44speaking before we started in regards to
1:47a misconception that the majority have
1:49when it comes to their understanding of
1:51what trading really is and what trading
1:53really means.
1:55So what does trading really mean?
1:58>> So let me start off by saying what I
2:00think what trading really isn't. You
2:02know, and by the way, it's great to be
2:03here with you, too. This is something
2:05that drives me up the wall and and it's
2:08not out of a frustration at the retail
2:11crowd. Let me be clear. I I think it's
2:13it's a frustration at the fact that
2:16nobody has said anything better or
2:18different. Not consistently at least. A
2:21lot of people believe that good trading
2:24comes down to picking a level, finding a
2:26setup, getting an entry with a tight
2:28stop-loss, shooting for massive reward
2:30to risk ratios, and being right more
2:32often than you're wrong in in broad
2:33strokes. Now, that that's a very
2:36directional view of the market. And I'm
2:38not saying that good trading doesn't
2:40have some of those elements in it, but
2:42that's not what trading really is about.
2:45When we're talking about trading, to me,
2:48that is a switch that flips immediately
2:50in my mind. I'm not always a trader. I'm
2:53not always a market analyst. I'm both of
2:55those things at varying points in time.
2:58But when we're talking specifically
2:59about trading, that's when you cross the
3:02proverbial Rubicon. You pass that point
3:05of no return where you're allocating
3:07risk to the market and you're managing
3:10that risk to an exit. Right? So when
3:13we're talking about trading, the
3:15activity of trading, what we're really
3:17talking about is participation in an
3:19auction. Another way to put it is we're
3:22participating in a negotiation.
3:24And this auction is not a single player
3:27game. It's a multi-player game. And if
3:30you understand what those different
3:32players want to accomplish, what their
3:33incentives are, and most importantly,
3:35what their constraints are, then you are
3:38able to then participate in that
3:40negotiation, in that auction on your own
3:43terms, and to navigate it more
3:45successfully than you would without. So
3:47for me, good trading is understanding
3:50that foundational principle. And and
3:53most traders don't. And and like I said,
3:55it's not their fault if you don't have
3:58the background, the experience if you
4:00haven't had those conversations about
4:02trying to fill a a trading idea over a
4:06series of days or even weeks because the
4:08position size is such that you can't do
4:10it all at once. There's no way that you
4:12would know what I'm talking about and
4:13it's not anyone's fault. Would you say
4:16that having this understanding of
4:18trading is necessary because then you
4:21have a strong foundation to build your
4:24trading upon?
4:25>> I think it is absolutely critical. I I
4:28think without that understanding, your
4:30chances of succeeding as a trader are
4:33almost zero. So what would you say about
4:36the people who don't have that
4:37understanding and yet are showing some
4:40kind of results whether it's online or
4:42getting results whether it's using
4:44proverbs for example.
4:45>> So I I think you know that's an
4:47interesting question. I think that
4:49getting those results is a fantastic
4:52thing and it doesn't take away from
4:53those results at all. My question is the
4:56longevity. So when I used to work at a
4:59prop firm, there was a trader who had an
5:02incredible hot streak and they were
5:04trading options on individual stocks at
5:07the time and they found a strategy that
5:09seemed to work without fail almost every
5:12week and they were getting really solid
5:15payouts from that prop firm for quite
5:17some time and then it was like almost
5:19overnight something just snapped and
5:21broke and that same strategy started
5:24bleeding P&L instead of making it and
5:27the equity curve tanked. The trader
5:30flamed out and I have no idea what
5:33they're up to now, but they're not, as
5:34far as I know, they they they're still
5:36not trading at that same prop firm. And
5:39that was a trader with great results,
5:41but the longevity wasn't there for
5:43whatever reason. And I think that if
5:45that trader had a better understanding
5:49of what trading really is about, how to
5:52identify whether they have a rock-solid
5:54edge or not, uh, and how to identify
5:56whether that edge is degrading and maybe
5:58is no longer there, then they would have
6:00been able to pivot and adapt. Now, with
6:03today's prop firm environment, which
6:05starts off in a simulated environment
6:07for a lot of traders, while I do think
6:09they're trading in a sense, I think what
6:12they're really doing is playing a
6:14different game with a different set of
6:15rules. And I believe the key, just my
6:18opinion, this is uh coming from someone
6:20who has never placed a simulated profit
6:23in their life. Uh maybe maybe my opinion
6:28won't matter so much to you guys who are
6:29getting all these crazy payouts, but my
6:31belief is that you're playing a game
6:33with a different set of incentives and
6:35that's a very different game to trading
6:37in the real market. Now that's not a
6:40good or a bad thing to me. That's just
6:42an objective reality. how I would trade
6:45a prop firm today is very different from
6:47how it would trade my personal account
6:49because the rules are different, the
6:50incentives are different, and the reward
6:52and risk structures are different. So,
6:54so long as you can maximize how you play
6:57that game to benefit from the rule
7:00system that you're trapped in, let's
7:02say, you're going to do reasonably well.
7:05>> Hey guys, before we get into this
7:06incredible episode, I want to say a
7:08massive thank you for all of your
7:09support so far on both Words of Wisdom
7:11and Chart Fanatics. We have grown
7:14immensely and are still the fastest
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7:17industry. Now, a way to get back to
7:19every single one of you. If you want
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7:23free, go to chartfanatics.com. The links
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7:28and every single week, we will send you
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7:35the website. You can go straight there
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7:40input your email. On top of that, we
7:42launched a Chart fanatics free Discord
7:44community that has already over 10,000
7:47members of traders across the world. We
7:49have our live traders from Chart
7:51Fanatics Live in there. I'm documenting
7:53every single one of my trades in there.
7:55And we have exclusive discounts, massive
7:58giveaways, and so much more just to give
8:00back to every single one of you. Let's
8:02not forget updates on every episode and
8:05things that we are bringing to this
8:06industry that's going to change it
8:07forever. But for now, the links for that
8:09are in the description. Let's get into
8:11this episode. You mentioned a key word
8:13there, edge, and something I want to be
8:16able to again, very similar to how we
8:17talked about trading and that
8:18terminology and understanding. I want to
8:21do the same thing with edge because as
8:23we move through this conversation, no
8:24doubt we're going to be talking about it
8:26quite often and I want people to
8:27understand your perspective and maybe
8:29again a misconception that people have.
8:32People talk about edge. People talk
8:33about having edge and making sure to
8:35apply their edge and trade their edge.
8:38But what does edge really mean to you?
8:40That's a great question and this is my
8:43favorite question to ask traders. What
8:46is your edge? Now, it it's a bit of a
8:48trick question because an edge has a few
8:51different layers to it. But when I'm
8:53asking that question, you you know what?
8:56Let me let me answer again by telling
8:58you what edge is not. Edge is not
9:00discipline. Edge is not an iron will.
9:04Edge is not a setup. Edge is not even a
9:06strategy. An edge is some kind of
9:11mechanical cause and effect behavior or
9:14pattern that is regularly repeating in
9:18the market that you can structure some
9:20kind of risk framework around in order
9:23to survive normal variance. So normal
9:27random distribution of results of
9:28winners and losers and ultimately end up
9:31with positive expected value. So so an
9:34edge has those three components. There
9:36has to be some kind of repeatable cause
9:38and effect pattern, event or behavior.
9:41You have to have some kind of risk
9:44framework around it. And you have to be
9:46able to obviously execute that risk
9:48framework on a consistent basis. So
9:50there are elements of risk management
9:53and what people call trading psychology
9:56involved in exploiting that edge. But
9:58the edge itself, what I'm referring to
10:00when I ask traders, what is your edge?
10:02what the real question I'm asking is
10:04what is that one thing that you're
10:06looking to exploit in the market. Now
10:08there are some examples, some very
10:10simple, straightforward examples. An an
10:12example of an edge would be an
10:13informational edge. Now if I was very
10:17close to President Trump, you know, if I
10:19was his son or a very close adviser or
10:22confidant, I'm pretty confident I would
10:24have anformational edge and I would know
10:27about certain things that he might say
10:29or do that will lead to an expected
10:32market outcome before the general public
10:34knows. And I can exploit that edge. But
10:37you see that edge has an expiration date
10:40on it. Eventually I'm either not going
10:42to have that same access or President
10:44Trump will no longer be in office and
10:45then what do I do? Right? So that's an
10:47example of a very specific edge. And
10:50then there are other edges that I don't
10:53think retail should even try to exploit.
10:55There could be a speed of execution edge
10:58for instance. You know, now you're
11:00coming up against some of the best
11:02capitalized funds in the world who are
11:05dedicating obscene amounts of money to
11:07research and development. Their algos
11:09can trade faster than you can. So that's
11:12not an edge that I would like to try and
11:14exploit or be competitive in. Right? So
11:18the the real question is, do you
11:20understand if we're talking about
11:22retail, do you understand what that edge
11:25that you're looking to exploit actually
11:26is? Because it's not that chart pattern.
11:28It's not a fair value gap. It's not even
11:30advanced orderflow analysis. Those are
11:33all features. Those are all things that
11:34might tell you where edge lies. But you
11:37need to really understand what the edge
11:40is. So if it helps, you know, I can tell
11:42you a little bit very simply about the
11:44edge that I look to exploit on a regular
11:46basis. Right? So I mentioned before
11:49trading is about understanding the
11:51participants in an auction and
11:53understanding what their incentives are
11:55and what their constraints are. This is
11:57game theory applied at a very simple
12:00level, right? And it's something that I
12:02think a lot of retail traders, actually
12:04a lot of traders at every level could
12:06benefit from is furthering their
12:07understanding of how to apply basic game
12:09theory principles to this game that
12:11we're playing. And that's ultimately how
12:13I see my myself as I'm a player of I'm
12:16one player in a multiplayer game. So the
12:19edge I'm looking to exploit is
12:21understanding when certain market
12:23participants don't want to act, don't
12:27want to either supply inventory or or
12:30buy inventory from somebody else, but
12:32when they're forced to act. And there
12:34are certain market events, certain
12:38observable patterns, whether it's time
12:41of day, u a high impact news event like
12:43FOMC, there are certain instances where
12:47market participants are forced to do
12:49something. I I'll give you a very simple
12:51example and I love love love this
12:54example. Uh I believe when you had Fabio
12:56on, Fabio was talking about gamma
12:58exposure at some point. Now in in simple
13:01terms when you're approaching a certain
13:04level of gamma exposure market makers
13:07need to start trading directionally in
13:09line with the market and that's going to
13:11accelerate a move. If you know when that
13:14happens that is a way of exploiting this
13:16very edge I'm talking about because now
13:18it it's not a question of want to it's
13:20not a question of desire it's a question
13:23of must. Right? So what do we know? We
13:26know funds must rebalance month end,
13:29quarter end. We know that CTAs,
13:32commodity trading advisors, we know that
13:33they're largely trend following entities
13:35and they follow very specific patterns.
13:38We know that their algorithms are going
13:40to trigger certain signals based on
13:42certain events. A a very basic retail
13:46example of where this edge lies is the
13:48famous stop hunt. Right now, to be
13:51clear, nobody knows where the stop
13:53losses are. No trader knows unless you
13:56are the broker and you see where the
13:58actual stop orders are being put in.
13:59There's no software. There's no access
14:02to to level four data or beyond, you
14:05know, that that's going to tell you
14:06where the stops are. But we can surmise,
14:09right? We know that they typically
14:11cluster in round numbers, previous highs
14:13and lows, that kind of thing. And we can
14:15use that information to our advantage.
14:17The issue is that a lot of retail
14:19traders believe that a stop hunt is what
14:21triggers like a violent movement, you
14:23know, beyond, but typically the behavior
14:26once the stops have all been hunted is
14:28that we're actually going to fall back
14:29within that previous range. And we often
14:31do it in a fairly violent fashion,
14:34right? Hence, the the belief that some
14:37of these movements are quote unquote
14:38manipulated. But, you know, as I'm sure
14:41we're going to discuss more and more,
14:43it's not about manipulation. It's just a
14:45liquidity mechanism. It's a feature, not
14:47a bug of the system. My point here is
14:50that if you don't have a causal,
14:53structural, foundational understanding
14:55of how the plumbing of the market works,
14:58you are going to be guessing to a large
15:01degree. And I I don't know about you or
15:04or any other trader that I talk to, I'd
15:06rather not be guessing. I'd rather know
15:08what it is I'm doing, why I'm doing it,
15:10so that I can accept my downside risk
15:14while putting myself in a position to
15:16realize as much of the upside reward as
15:18I can.
15:20>> So if we're able to for the audience
15:22take this take an example if possible to
15:25what they primarily trade from what I've
15:28seen. So there's a lot of traders as we
15:30say trading prop firms which is a
15:32different game which I respect and I
15:34think we'll go into in more detail
15:36but equally a lot of them are trading
15:39futures probably NQ
15:42what sort of edge should they be looking
15:44at or how should they be framing edge
15:46when trading these sort of instruments a
15:48lot of them are scalping as well so they
15:49or intraday day trading
15:54from my understanding a lot of people
15:56assume edge is collecting data Right?
15:58Being able to collect data, seeing
16:00statistics that are playing out, win
16:02rates and you know averages in terms of
16:05performance and then they will use that
16:08as their edge to help their psychology
16:10have more confidence in their system and
16:12then they will trade this system and
16:13that system very much as we said is
16:16scalping whether it's whatever concepts
16:18it may be whatever strategy it may be
16:20but it'll be chart patterns a lot of the
16:22time certain risk-to-reward profiles
16:24time of days. So when you hear all of
16:26this, what do you think of that?
16:29>> I think that collecting that good data
16:32and and the emphasis here is is on the
16:34word good. The data has to be good, high
16:36quality. What does that mean? If you're
16:38trading a different strategy every other
16:40trade, for example, the data is going to
16:42be polluted. You're not going to be able
16:43to draw clean conclusions from it. But
16:45provided you've accounted for that and
16:47you are collecting a statistically
16:49significant sample size of high quality
16:52trades, that is validation of your
16:55ability to exploit the edge, but it does
16:59not necessarily mean that you have
17:01identified exactly what that edge is.
17:04Now, I'm not saying you need to know
17:06who's moving the market at what time
17:07exactly,
17:09but it's helpful to think of the market
17:12in those terms, right? So, if I'm
17:15sitting around the table and I'm playing
17:18a a card game or a board game and it's a
17:20competition, I need to put myself in the
17:23heads of the other players and I need to
17:25start thinking about what it is they're
17:27most likely to do based on what
17:29incentives and constraints. So, just
17:32adopting this mindset shift is
17:34tremendously helpful for a retail
17:36trader. Even if they've never worked on
17:38an institutional desk anywhere in their
17:40life or in their career, it doesn't
17:42matter. So let's talk about scalpers.
17:45Let's talk about those future traders.
17:47Futures traders on ES or NQ. You are
17:50trading, if you think about it, some of
17:53the most important financial markets on
17:55planet Earth. You're not trading some
17:58micro cap biotech stock or a memecoin
18:01where if it falls off the face of the
18:03earth, nobody's going to know, you know.
18:05But as we saw recently when Oracle drops
18:0914% on the open, that's going to have an
18:12impact on the market, right? So we're
18:14talking about important financial
18:16markets. So my question to traders is,
18:19do you think those markets are efficient
18:22or inefficient? And that's a bit of a
18:24trick question because sometimes they
18:25are inefficient, but most of the time
18:28they're fairly efficient markets. If
18:29they were inefficient, the American
18:31economy would be in disarray. So we're
18:34talking about very efficient markets.
18:36Now when we're talking about retail
18:37scalping or scalping at any level, what
18:40does that depend on? It depends on
18:42moments of inefficiency.
18:44So if if we can say that the whole
18:46trading session was overall fairly
18:49balanced. What does that mean? It means
18:51it was an efficient session. Now in an
18:53efficient session, there will be moments
18:56of inefficiency. Moments of
18:58inefficiency, not the entire session,
19:01>> right? So the question really is this.
19:05Can you identify when the market is
19:08efficient versus when it's transitioning
19:10from a state of efficiency to a state of
19:12inefficiency? Now from a technical
19:15perspective, this is where I spend so
19:17much of my time. Now I have this belief
19:20that if you are a day trader, your
19:23trading day is already going to be
19:25decided win or lose before you've even
19:28pushed the button on that first trade.
19:30And it comes down to whether you've
19:32actually thought through the market
19:34environment that we're in. And this is a
19:36very common symptom that I see with
19:38retail traders
19:41all the time. All the time. Let's take a
19:43very basic breakout trader for example.
19:46You know, and and I'm not going to pick
19:47on anybody in specific here, but if
19:49you're trading, your entire strategy
19:51revolves around chart patterns that lead
19:54to a breakout.
19:56You know, sometimes those breakouts are
19:58going to run and run and run and you're
20:00going to have a massive day. Other times
20:02it's going to feel like the market is
20:03out to get you and every breakout you
20:05buy is going to fail. Why is that? Is it
20:09to do with some kind of mysterious set
20:12of algorithms that are hunting your your
20:14entries? You know, they know exactly the
20:16moment you're pushing by, so they're
20:17they're wiping you out. Probably not.
20:20you know, does it have to do with, oh,
20:22that's just how the dice happen to fall
20:24on this particular day? Also, probably
20:27not. We can get a little bit more
20:28specific. We can get a little bit more
20:31knowledgeable about that. So, the
20:33foundation for me when it comes to the
20:35technicals is understanding market
20:37regime. And for me, we have a balance
20:39regime and we have an imbalance regime
20:41where the auction is looking for
20:43discovery. It's in search of new fair
20:45value. Most of the time, most markets,
20:48especially if we're talking about the
20:49super liquid ones, ES NQ to a lesser
20:52degree, but still super liquid. When
20:54we're talking about those markets, they
20:56tend to be in a balanced state most of
20:59the time. When you have balance, that
21:02means that buyers and sellers are
21:03equally comfortable doing business. And
21:07from a game theory perspective, no side
21:10is under any particular kind of
21:12constraint. They're happily exchanging
21:14inventory. And that's when you get those
21:16wide ranges where the market goes up and
21:18down in a defined level. But if you're a
21:21breakout trader, what are you doing?
21:22You're buying the the top and you're
21:24selling the bottom.
21:26And that's probably how you're going to
21:28get destroyed and you're going to get
21:29chopped up and spat out. So when I say a
21:32trader is likely to have already won or
21:34lost on the day before they pushed their
21:36first button, I'm referring to that have
21:38they thought through the regime that
21:40we're in. Right? And how can you
21:42identify a regime? There's a million and
21:44one ways to do it. The way that I like
21:46to do it is not by thinking about simply
21:48is the market making higher highs and
21:50higher lows, but where is the value
21:52migrating? Is value migrating sideways?
21:55Is most of the business being done in in
21:57a in a wide range or do we see value
22:01consistently being migrated higher or
22:03lower? That tells me something. That
22:05tells me about the pressure in the
22:07market and it tells me if someone is
22:09under constraints to do something or
22:11not. So, you know, using the language of
22:14of I would say order flow and and
22:16volume, you know, if I'm looking at a
22:19strong market, what do I want to see? I
22:21want to see aggressive sellers, market
22:23sells trying to knock the bid lower and
22:25lower and lower, but they're not being
22:27rewarded for that effort. They're being
22:29absorbed by passive buyers. And then
22:32eventually, I want to see those passive
22:34buyers that are sitting on the bid,
22:36absorbing that pressure, moving their
22:38bids up. What that means in not so
22:41subtle terms is that large institutional
22:44players are now willing to buy at
22:46slightly more and more premium prices.
22:49>> At the same time, we're going to see
22:50aggressive buyers hit the tape and those
22:53market orders are going to start trying
22:55to lift the offers. So those passive
22:58sellers sitting on the offer, if they
23:00get run over, we're going to get that
23:02release of initiative energy. The
23:04market's going to run higher. But then
23:05what's going to happen? What's going to
23:07happen is that eventually we run out of
23:09buyers willing to buy on the offer.
23:11Meaning that they're unwilling to buy at
23:13higher and higher and higher and higher
23:15prices anymore. And what happens when
23:17the last buyer runs out of gas? The
23:19auction is going to enter into another
23:22state of balance. It's going to search
23:23for fair value, right? Where is it going
23:25to typically find fair value in a strong
23:28healthy trend? It's going to find fair
23:30value at a prior place where
23:32institutional players were happy to
23:34accumulate positions. And this is what
23:37whether you're scalping, swing trading,
23:39it doesn't matter. What you have to
23:40understand is that the largest players
23:42in the market do not care about the
23:45direction of the market on any given
23:47day.
23:48I guarantee you that that a hedge fund
23:50manager managing a significant and I
23:54mean significant size portfolio is not
23:56walking into their office today thinking
23:58how can I send you know ES or NQ, you
24:01know, whether it's 30 points higher or
24:02300 points higher today. It's not about
24:04that. It's about what do I have to do
24:07today? Do I have to rebalance? If the
24:09market's gone up a lot, do I need to
24:10take some profits? Do I do I need to
24:12trim back on that exposure? Do I need to
24:15increase a hedge? And the answer to that
24:18question is ultimately going to be found
24:20in where can I properly do business? Can
24:24I do business when the market is flying
24:25higher? I can't. The liquidity is simply
24:28too thin. That's not conjecture. That's
24:30not speculation. That's just physics.
24:33That's that's the plumbing of the market
24:35that I'm talking about, right? So, think
24:37about it this way. If I want to take
24:40profits, you know, and I've had a
24:42massive runup on the stock and it's not
24:44the most liquid stock in the world, but
24:46it's not a penny stock either. How do I
24:48want to take profits on that? If I'm an
24:50institution, I want to take profits on
24:52that as the market is ripping higher,
24:54not as it's, you know, not not as it's
24:56just sitting doing nothing where the
24:57liquidity is dead. I want to sell into a
25:00bunch of other traders excited about
25:02taking it higher and higher and higher.
25:04So what might what might I do? I might
25:06set say an iceberg order and and that's
25:10going to be purely algorithmic where my
25:12algorithm is just selling selling
25:14selling and dripping that liquidity back
25:16into the market and there are other
25:17people happy to take that side of the
25:19trade. But because my position is so
25:21massive, I might end up absorbing all
25:24those other excited buyers who bought at
25:26the prior high. And then what happens?
25:28That's when the market's going to roll
25:29over and hopefully I'll have been able
25:32to exit the majority of my position and
25:33have booked a really nice profit on that
25:36particular trade. You you know, so it's
25:38just thinking this way and it's it's
25:40very logical in in my opinion at least.
25:42It's very logical. It's very rational.
25:43But thinking this way helps you
25:45understand why you might not want to
25:47chase a break past prior highs or prior
25:50lows. why you might want to think a
25:51little bit more carefully about where
25:53the liquidity is thinning thinning out
25:55or or being added and whether or not it
25:57makes sense to do business when the
25:59liquidity is very thin or whether you
26:01want to wait for a reaccumulation period
26:04for example. Let's take a break for a
26:05minute there guys cuz I want to tell you
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27:31the description below. Now, let's get
27:33back to the episode. So it's a beautiful
27:35explanation and I think really what it
27:38boils down to is this is why having that
27:40understanding of the marketplace and
27:42what trading really is and how these
27:44markets are operating and its
27:46participants is important because
27:48regardless of how you trade as we've
27:50said you know a lot of traders may be
27:51trading prop firms whether they're
27:52trading NQ scalping whatever it may be
27:55having that understanding because a lot
27:57of people be like well you know I'm not
27:59a hedge fund or I'm not a professional
28:00trader I don't need to think this way
28:01right or I don't need to trade that way
28:03you're right you don't need to trade
28:04that way. But having the understanding
28:06allows you to make more informed
28:07decisions and have an understanding of
28:09why maybe it didn't play out that day or
28:12why it may have played out that day.
28:14Having an understanding of whether you
28:15should be holding this or not or just
28:18general market decisions and brings a
28:20sense of calmness and understanding to
28:21your trading on a day-to-day basis. One
28:24thing you have mentioned a few times now
28:26though is uh game theory and how that
28:29can apply to trading. I think for the
28:30audience it would be a great exercise if
28:32possible is how what is game theory and
28:34how do you apply it to your trading or
28:36the me mentality and the thesis. So in
28:41very basic terms applying game theory to
28:43your trading really just involves what I
28:46was talking about this entire time which
28:48is trying to understand what other
28:51players in the game want to do or are
28:55going to do based on a series of
28:57incentives and constraints. I'll give
28:59you an example. We talked about this a
29:02little bit before we started rolling. I
29:03I used to play high stakes poker. Now,
29:05I'm not going to say I was the best
29:07poker player in the world. I definitely
29:09far and away from that, but I understood
29:13something that a lot of the players that
29:15I was playing against didn't, which is
29:16that there are different orders of
29:18thinking to the game. And this applies
29:19to anything. You could be playing
29:21Monopoly around the dinner table with
29:23your with your friends and family. You
29:24could be playing highstakes poker. You
29:26could be trading. It doesn't matter.
29:27There are different orders of thinking
29:29and and the first order of thinking for
29:31me is really just what is my what is the
29:34best possible play that I can make. What
29:36are my cards that I've been dealt? I'm
29:39just focusing purely on that. So the
29:41trading analogy there would be do I have
29:44a setup whether that's a chart pattern
29:46whether it's a fair value gap whe
29:47whatever it is it's just the entry I'm
29:50just focusing on the entry.
29:53Second order thinking is where I start
29:55wondering about what maybe the other
29:57players want to do, right? And and this
30:00is where it's a seismic leap in terms of
30:04how your understanding of game theory
30:07can evolve and and your application of
30:09it in trading can be extremely
30:11beneficial to you. So, in trading that
30:14involves thinking about, hm, if we break
30:18beyond those highs, is that a trap? You
30:20know, maybe there are a bunch of people
30:22waiting for that breakout and then
30:24slamming the market back the other way.
30:27That's an example of second order
30:28thinking. Third order thinking is where
30:30the game gets really, really
30:32interesting. And this is where people
30:34start driving themselves insane by by
30:37thinking about all the possibilities.
30:39Right? Beyond third order thinking, we
30:40get into the world of extremely complex
30:43may, ifs, and and thens. So third order
30:47thinking is where I'm trying to make
30:49another player of the game believe that
30:52I'm trying to do something that I don't
30:54actually want to do. In poker, that's
30:56called the bluff, right? In trading. And
30:59and this is this is what I this is where
31:01my love of trading really starts to come
31:04out. This is what I'm most passionate
31:06about is the bluff in trading. I've had
31:08this debate with a couple of people
31:10unfortunately on X. Why? Like why do I
31:13even what is the point? Like what is the
31:15point? Why do I get involved in this? I
31:17don't know. But I've had more than one
31:18person tell me level two data is
31:20worthless because people can spoof the
31:22orders. Have you heard that before?
31:24>> I have. Yes.
31:25>> Okay. Well, my response to that is yes,
31:28the spoofing of the orders is a big part
31:31of the value of looking at level two
31:33data. What is a spoof? It's just a
31:35bluff. So, if there is a stock trading
31:37at $100, right, and it breaks through
31:40105, what's the obvious target? Give me
31:42a number.
31:43>> What's after 105? 110. 110.
31:46>> So, what do you think is going to happen
31:48on the level two? If you're looking at
31:50the order book or depth of market, what
31:53do you think is going to happen at 110?
31:55There's going to be a massive wall of
31:58sellers sitting on the offer at 110. A
32:01massive wall. Is that for real or is it
32:03a bluff? We don't know until we start
32:06trading closer to that. And sometimes
32:08those orders vanish. They get pulled and
32:10it was a bluff. But sometimes it's real,
32:13right? So fourth order thinking, fifth
32:16order thinking, that's where I start
32:18thinking. Okay, I know that you know
32:21that I know you're bluffing. So I'm
32:23going to try to make you think that I'm
32:25going to do something that I'm not. And
32:26this can go on to infinity, right? So I
32:28I don't like going beyond third order
32:30thinking because it there's a point of
32:31diminishing returns. But I'm really
32:34thinking carefully about that bluff. And
32:37if I think that wall of orders is real,
32:39what do I want to do? I want to frontr
32:40run it. I don't want to get out 110. I
32:42might get out at 109, for example,
32:45right? Or I might think to myself, you
32:48know what? There's some big players that
32:50are long here. Maybe they're the ones
32:53that want to get out at 110, right?
32:55Maybe they want to take profits.
32:57Maybe we want to test that level. So, I
33:00hold my position. We bump into 110. gets
33:03absorbed. Market pulls back a little
33:05bit.
33:06Those sell limits reload. Okay, now it's
33:09an iceberg. We go back to we test it
33:11again. We pull back a little bit. And
33:13this battle can continue for a while.
33:15And eventually all those buyers trying
33:17to lift that offer are going to get
33:19absorbed by the passive sellers sitting
33:21on the offer or eventually those offers
33:24are going to get pulled. And then
33:26picture this. If you run at a door as
33:29fast as you can and there's someone
33:31massive on the other side holding it
33:33shut, you're gonna bounce off that door
33:35and then you're gonna gather up speed
33:37again. You're going to run at it with
33:38pace. You're going to try to break
33:39through that door again. You bounce back
33:41again. And then on the third attempt,
33:42that massive guy just walks away and
33:45isn't there. And you're running at that
33:46door as fast as you can. What's going to
33:48happen? You're going to fly right
33:49through it. Right? So that could be that
33:51110 level. It could be. It could not be.
33:55We don't know until we start seeing how
33:58the auction starts to behave around that
34:00level. Right? So for for me a a manner
34:06or a variable, a feature of being able
34:08to exploit an edge effectively if we're
34:10looking for breakouts is not predicting
34:14what's going to happen. It's simply
34:16understanding what the spectrum of
34:17possibilities is. And that's called
34:19basian analysis. And based on how the
34:22market is behaving at that level, that
34:25sliding scale of probabilities is going
34:27to shift one way or the other. And
34:29that's all I want to do at the moment
34:31when it seems that one outcome is far
34:34likelier than the other. That's probably
34:35where the positive expected value lies.
34:38>> So it's allowing yourself to think much
34:40deeper than just what am I doing and
34:42what am I looking to do or how do I feel
34:44about the market and my sentiment. It's
34:46actually taking into account these extra
34:48layers. But then when you put those
34:50layers together, it's going to give you
34:51a much more
34:53yes it feel may sound and feel complex
34:56but overall through I'm guessing
34:58repetitions and we're going to go into
35:00sort of like your journey I think here.
35:02Um, but through those repetitions,
35:04you're going to have a much deeper
35:06understanding of what's happening within
35:07the markets and allow, don't get me
35:10wrong, as you say, like you don't know
35:11if that is correct, if that is going to
35:13be a spoof or or an iceberg or if it is
35:16indeed going to react at that level. But
35:18I guess that's the nature of markets. We
35:20never will know what's going to happen.
35:22Our game is to
35:25derive this information, think deeper
35:28than just a very simple singular entity.
35:32And the interesting thing so far through
35:34our conversation, I can imagine there
35:35might be a little sentiment out there
35:37from my experience of doing these
35:38podcasts is oh you know what's he got
35:41against retail traders, right? You not
35:43all of us can be professionals and not
35:44all of us you can get to that level etc.
35:48But what I think is a good point now to
35:50establish is that you were a retail
35:52trader coming into trading transition to
35:54semi-professional to then professional
35:56level that you're at now. you know, what
35:58were you like when you first came into
36:00trading? Like all this
36:02insights and intellect and and knowledge
36:05that you have now? What was the reality
36:08coming into trading when you first
36:09started? You know, if you were to
36:11compare yourself to the average retail
36:13trader that you're coming across on X
36:15maybe or or just generally, you know,
36:17from your experience of seeing retail
36:20traders of today, you know, how
36:21comparable are they when you first
36:23started? Is that like for like or were
36:25you did you have a slightly different
36:28understanding of the markets already?
36:30>> You know, I first off, I'll I'll say if
36:33I started trading today from scratch,
36:36you I I think and and probably every
36:38trader with a bit of experience will say
36:40this. I I don't think retail has ever
36:42had it as good as they have it now.
36:44>> Uh with AI especially, I think you can
36:48explode that learning curve. Of course,
36:50AI has dangers as well. And and I I just
36:52said this the other day. If you don't
36:54know what you're talking about and
36:55you're using AI, you're going to be
36:57talking absolute rubbish. It'll just
36:59sound a lot more intellectual and
37:01academic, right? But when I started off,
37:04you I I think I traded my first stock
37:08through my father's account when I was
37:09probably 16 or 17. He loved the market
37:12and I, you know, he's like, "You just
37:14placed your first trade. How do you
37:15feel?" I couldn't care less. Like, this
37:18means nothing. It means literally
37:20nothing to me. Mhm.
37:22>> Um and then you know when I was in
37:23university I I so first of all I don't
37:28have a degree in finance or
37:29macroeconomics nothing like that I I
37:32learned on the job really uh my degree
37:34is in history English and philosophy and
37:36it was in a philosophy class for
37:38whatever reason that I came upon this
37:40book called the Elliot wave principle
37:43key to market behavior by Frost and
37:46Prector. uh and and Robert Prector is
37:49unquestionably the modern godfather, you
37:51know, of the Elliot wave principle
37:52today. And the Elliot wave principle was
37:56a book that got me hooked on the
38:00behavioral side of finance. I at the
38:02time I still, you know, I was a I was a
38:04kid in university. Uh I did not care a
38:07wit about money. I I didn't care about
38:09that. I I just found it intellectually
38:12interesting, you know. So read the book,
38:14thought nothing of it, but it was this
38:16interesting thought in my mind that
38:18stock market behavior is a fantastic
38:22forecaster of human behavior, right? So
38:25that was in my mind.
38:27I keep an eye on the market every now
38:29and then just because of that exposure
38:31and you my father was putting some money
38:33into my own investment account and he'd
38:35force me to have a quarterly review with
38:37him every now and then. You know, we go
38:38through position. My heart wasn't in it.
38:40I didn't know anything about it. I
38:42didn't care. And then I went off into
38:44the corporate world, you know, and I was
38:45working my corporate job and my mother
38:48was thrilled, you know, my mother's
38:51Asian and and I'm sure much like your
38:53family, there was this huge focus on
38:56stability and and security and career as
38:58you're growing up.
39:00>> And my my mother was like, "Ah, I can
39:02finally relax. My son with a useless
39:04bachelor of arts degree has found a a
39:06job in, you know, in one of the tech
39:08darlings of America. He's set for life.
39:10I was making a great salary. I was on
39:12good benefits. Got stock options as a
39:15bonus. And I absolutely hated it. Hated
39:19my experience. I'm the world's worst
39:22employee. Like, I'm I'm just going to
39:25come right out and say it. I did not
39:27like playing in that corporate sandbox.
39:29Um I I wanted to do things my own way.
39:32And you know, I I met I met a a friend,
39:36a a man who at the time was the most
39:39angry client I'd ever come across.
39:41Turned out to be a very dear friend
39:42after some time. And he was unlike
39:45anyone I'd ever met before. You know, he
39:47he just came in fresh off a private jet
39:49flight, never even heard of such a thing
39:52before. He was complaining about how
39:54every second he was spending with me was
39:56time that he was paying his pilots.
39:58>> I was like, who talks like this? Like,
39:59who is this guy,
40:01>> you know? And I was just talking to him
40:02and and he's he's yelling at me in my
40:05face. Uh but I could tell he wasn't like
40:07angry with me. It was just his
40:09personality. And eventually I just had
40:12to ask him like, "Who are you? Like what
40:14do you what do you do?" He said, "You
40:16ever you ever push a shopping cart in
40:18the grocery store?" "Yeah, loads of
40:20times." He said, "I build all those." I
40:22was like, "What?"
40:24Like, "How can I be like you?" I
40:26remember asking him that. and he looked
40:27at me up and down, took a step back and
40:30said, "Well, sure won't do it
40:32working here. [snorts]
40:34You have to go into business for
40:36yourself."
40:37>> And that just like it was like an
40:39epiphany, you know? And and later later
40:43that night, I met him. He took me into
40:45his uh his amazing seats at the Toronto
40:48Maple Leafs hockey game. Like it was it
40:50was just like a different life. And it
40:51was it was life-changing because I saw a
40:54man who was truly living life on his own
40:57terms. But I I was thinking to myself, I
41:00can't build shopping carts. I don't know
41:01anything about that. And my mind just
41:03kept going back to this trading
41:06portfolio that I had. And I thought,
41:08well, I'm getting these stock options.
41:10Is it possible to do something here
41:12without knowing anything about anything?
41:14I was so excited to get started. I had
41:16no idea how difficult the journey would
41:17be
41:18>> and I just threw myself into it. I was
41:23day trading on the job and it turns out
41:24your employer doesn't particularly like
41:26it when you're day trading on company
41:28time
41:29>> of course.
41:29>> Uh so I was forced away from stocks. I
41:32had to trade FX forex. It was my first
41:34exposure to the FX market. Uh
41:38terrible experience. Hated every
41:39section. You know it was just it it was
41:42the days of the Wild West. I think my
41:43broker gave me a thousand1 leverage. I
41:45didn't even know what leverage meant.
41:46All I knew is that I had $1,000 in my
41:48account and I was taking like four lot
41:50trades, right? Uh and it was it was
41:52crazy. It was up and down, up and down.
41:54I'd blow up accounts. I' I'd make a few
41:56thousand dollars in in an hour, lose it
41:58all. But it was proof of concept to me
42:01that at least it was possible to make
42:03money doing this
42:06>> far too early. I do not recommend anyone
42:09do this. What did I do? I quit my
42:12corporate job with the good salary and
42:14the good benefits. I liquidated all my
42:17stock options
42:19and that was my trading base and I
42:21decided to go into trading full-time.
42:24The company I worked for was Apple.
42:27[laughter]
42:28I was getting Apple stock at a crazy
42:31discount based on my company plan, my
42:33employee plan, and I liquidated it in
42:36the 2010s.
42:39Can you I joke about this all the time.
42:41If I hadn't done that and I just held
42:42that stock, I would have outperformed my
42:44own performance as a trader for a long
42:45time,
42:47>> you know, but it's it is what it is. And
42:50I wouldn't I wouldn't trade it for
42:51anything in the world. But I also
42:53wouldn't recommend anyone do this.
42:55>> And it it quickly became clear to me
42:58that this was not a game of what I call
43:01linear progress, which is what most
43:03people in life are used to. You go to
43:05the gym, you lift a certain weight, you
43:07keep lifting that weight, eventually
43:09you'll be able to lift more and then
43:10more and more. And that's linear
43:12progress. And that is what the human
43:14brain craves. Trading is like the polar
43:16opposite of that. And
43:20all I knew was that failure was not an
43:23option. I just kept thinking about how
43:25miserable I was in that job and that as
43:29tough as it was to figure out this
43:30trading thing, I had to do it. Over the
43:33course of a couple years, year, year and
43:35a bit, I managed to hack together an
43:38ugly track record. It was profitable,
43:41but I knew deep down that it was luck
43:43and it was not sustainable.
43:45I knew that I needed more professional
43:48guidance. I I'd paid for courses.
43:51You know, they were all rubbish, right?
43:53But but been there, went down that road.
43:56I knew I needed more professional
43:57guidance. I found a prop firm, real prop
44:00firm, you know, real money. Not, you
44:03know, it sounds like I have something
44:04against these sim prop firms. I I don't.
44:05I just don't understand them uh the same
44:07way that I do real money prop. I begged
44:11that prop firm for a job. Begged them.
44:15Got hired conditionally. No salary,
44:18nothing like that really to start. I
44:20think maybe a very, very small salary at
44:22first. I was just so grateful to be
44:24there. my own capital was my risk
44:26buffer, right, with the firm and I just
44:29wanted to sit and observe other
44:31professionals trade. I just wanted to be
44:34a fly on the wall to see what they were
44:36doing differently. Now, I wouldn't call
44:39this uh
44:41and it's no offense to them. It's just
44:43their place in the market. They weren't
44:44a tier one firm like like a Jane Street,
44:47for example, right? These were guys that
44:49had been in the trenches for 20 years,
44:5130 years, 40 years, and just developed
44:55consistent techniques to making money.
44:58And that's what I learned. I learned
45:00risk management, right? I learned how to
45:03survive in my trading long enough to
45:05realize an expected return over time.
45:08And that was transformational, right?
45:10Helped me tremendously in my growth
45:12personally as a trader. My favorite role
45:15that I ended up having at the firm was
45:16being a performance coach for the
45:18traders of the firm. That was a
45:21phenomenal experience because our
45:23recruitment process was varied. We would
45:25take people with track records. We take
45:27people that that had very minimal
45:28trading experience like like like me,
45:30but I guess showed a glimmer of promise
45:33and we would attract old school traders
45:36who came from the pits or were being
45:39phased out at larger firms because uh
45:42automation was already becoming all the
45:43rage then, right?
45:45>> And they had to transition to a new way
45:48of trading. That was crazy. I I I've
45:51coached tra It's crazy. I coached
45:53traders that came from pits. I coached
45:55uh traders that worked at Millennium
45:57Capital, one of the largest funds of
45:59funds allocators in the world. Uh I've
46:01coached a trader that was a VP at Credit
46:04Swiss, you know, and and I'm like, why
46:06am I coaching these guys? They have so
46:08much more experience than me, but the
46:10experience was in a completely different
46:11arena and it it just didn't translate,
46:13right? They didn't have access to all
46:15the information that they used to have
46:17access to. So, they were kind of trading
46:18in the dark a little bit. So it it was
46:21that process of adaptation, you know,
46:23and then from there I call that the the
46:25semi-pro phase, you know, from from
46:26there I was head-hunted by uh one of the
46:30most legendary Wall Street traders of
46:31all time, Andy Kger. And to this day, I
46:35don't know why or how really I I just
46:38know that he was coming out of quasi
46:40retirement. He was looking for talented
46:42traders to try and execute a big idea
46:46that he had brewing in the markets. He's
46:48a phenomenal big picture thinker. That's
46:51his that's his 100% his strategy and his
46:53his edge for Andy. And he recruited me.
46:58I I actually thought it was a prank. I I
47:00could not believe I had to Google him.
47:02>> I had to match like the face to
47:04pictures. I was like, "Okay, this this
47:05gentleman's a little bit older than than
47:07than some of the pictures would suggest,
47:08but yeah, it looks like him."
47:10>> I went to the owner of the prop firm and
47:12you know, I asked for his blessing. I
47:14said, "This is a tremendous opportunity.
47:16What do I do?" He said, "You grab it
47:18with both hands." So, I did. And that
47:22this is a really important distinction
47:24that I have to make here. The difference
47:27from going semi-pro at that prop firm to
47:30to truly the big leagues with a trader
47:32like Andy didn't improve my ability to
47:35read a chart. It's not like he taught me
47:37some secret trend line technique that
47:39nobody else knows about or how to
47:41combine, you know, stochastics and RSI
47:43with MACD to to find an entry that
47:45always works. No, it it was all about
47:48what we're talking about today, this way
47:51of thinking. And I I felt like in the
47:53first year of working with Andy, I got
47:54like my MBA, you know, and and a PhD in
47:57macroeconomics allin one. And it was
48:00that learning experience of just seeing
48:03how people think, of watching one of the
48:06biggest traders in the world. I mean a
48:09guy who by his estimation has traded I
48:11don't even know how how much money but
48:13but well over trillion dollars in
48:15notional size. Um how he is thinking
48:19about the market, how he's communicating
48:21with other market participants and
48:23trying to find out what their positions
48:25are. You know it was like this old
48:27school game of cat and mouse and and
48:29that just that just completely changed
48:32my view of the market and trading.
48:35And so talk to us in terms of the being
48:38a performance coach. How did that come
48:39about? You being in the position you
48:41were when you went there. How did it
48:43come into a position where you were then
48:45coaching people?
48:48I had a lot of bad habits to unlearn
48:51when I came to the prop firm. And
48:54I think what got me hired was that I I
48:58made it extremely clear that I don't
49:00have an ego. I don't have a chip on my
49:02shoulder. I'm not here to prove anything
49:04to anyone. I'm here to learn. I know
49:07that I got lucky. And I think that was
49:09the difference, right? I I was so open
49:11to learning.
49:12>> And that's been a philosophy that I've
49:15tried to carry with me my entire life. I
49:17I try to treat trading, and this is
49:19something I've said many times before, a
49:22common trait I've seen in almost all
49:24successful traders is that they have
49:25some sort of competitive athletic
49:27background, right? some it doesn't mean
49:30they were professional but like Andy for
49:32example played on the professional
49:33tennis circuit uh you know I I've uh
49:36represented Canada at a national level
49:38in fencing I've boxed my entire life
49:41I've wrestled my entire life played
49:43football my entire life and one of the
49:46things I've always tried to carry with
49:48me as an athlete has been this idea that
49:50there was always more to learn and being
49:54around coaches I think set me up to
49:57start feeling a little bit more
49:58confident to coach others. But here's
50:00the other thing with coaching. You want
50:02to be a good coach. It's not about
50:05transferring knowledge. That's that's
50:07just something that any can do. And in
50:10this day and age, AI can do that. AI can
50:12transfer knowledge from one person to
50:14another person to another person because
50:16that's just information. Information is
50:18useless without a very specific specific
50:22framework on how to apply that
50:24information in a practical context.
50:26Right? So when I see large trading
50:29communities or groups, my head I'm
50:31thinking if anyone succeeds here, the
50:33odds of success are almost random,
50:36right? Like if you have a thousand
50:37traders in a Discord server, there's
50:39going to be a couple success stories.
50:41Can guarantee it regardless of who the
50:43community is,
50:44>> but that's not necessarily down to the
50:48mentor or the guru behind that
50:50community. It could be, but but then the
50:52success rate would be much higher for
50:54that community, right? So what does it
50:56ultimately come down to then? I I think
50:59good coaching comes down to being able
51:00to spend quality time with people. You
51:04know, quality time. It's it's it's a
51:06love language, one of the more important
51:08ones. And you have to be able to spend
51:10that quality time with your traders,
51:11too, right? And I I think the reason for
51:15that is that every trader is ultimately
51:17different on a very individual basis.
51:20There's no way, RZ, that I can trade the
51:22way that you trade. And there's no way
51:24that you can trade the way that I trade.
51:25Even if we're using virtually identical
51:28strategies because we're just
51:29fundamentally different people with
51:31different personalities, different
51:32emotional and psychological baggage
51:34we're bringing to the table. So I saw it
51:37as my job to really understand the
51:39traitor inside and out from, you know,
51:42we talk about early childhood stuff.
51:44We'd talk about early relationships with
51:46money. And then we would talk strategy,
51:48we talk tactics, we talk all the the
51:50stuff that people would assume you talk
51:52about when you're talking to a trading
51:53coach.
51:54>> What was the most common sort of mental
51:57loops that you would come across that
51:58were negatively impacting traders?
52:01>> That's a very good question and without
52:03a doubt it is a feeling of self-imposed
52:06pressure that traders put on themselves.
52:09Okay, this is really interesting. The
52:13human brain from its factory settings,
52:16let's call it, is designed for failure
52:19when it comes to trading.
52:21>> Why is that? It's because the chip that
52:25runs a lot of our instinctual decision-m
52:27is called the amydala, right? That
52:29that's like the the CPU in in many
52:31parts. Now, we have a couple of other
52:33CPUs. We have the prefrontal cortex,
52:34which is the rational part of our brain,
52:37but the amygdala fires at an unconscious
52:39level. Not to, you know, get all into
52:42the neurochemistry and neurology of it
52:45all, but this is this is important
52:46stuff. It helps with understanding why
52:49you behave the way you do as a trader.
52:51So, the amygdala is the threat reaction
52:54center of the brain. And if you're
52:59taking a hike in the mountains and you
53:01see a mountain lion, the amydala is
53:03fantastic. It's going to trigger that
53:04fight orflight reaction. And if you're
53:06smart, you're, you know, you're probably
53:07going to run would be my guess. never
53:09encountered mountain line, but that
53:10would be my guess. That would be my
53:12first instinct. So, the amygdala works
53:15fantastic in those situations where you
53:18have to make a snap decision. The
53:20amygdala rewards immediate action
53:22>> and urgency and getting out of a harmful
53:26threatening environment.
53:28All things that are completely counter
53:30to what you should do as a trader. Good
53:33trading tends to reward patience and
53:35inaction over a lot of action. and
53:38certainly usually not urgency. So when
53:43traders are making poor trading
53:45decisions, whether it's cutting a winner
53:47early, it all links back to the
53:49amigdula. What does the amigdula want?
53:50It wants to diffuse a threat. So when
53:52you're in a winning trade and you cut it
53:54short. How is that diffusing a threat?
53:56Well, the trade could turn negative,
53:58could stop you out. So, by closing the
54:00trade early and grabbing a small profit,
54:02you can justify to yourself on a
54:05conscious level that I'm making the
54:07right decision for such and such reason.
54:09The market's overbought, whatever. It's
54:10going to turn around and stop me out.
54:12The amydala doesn't care about any of
54:13that. All the amigdala cares about is
54:16that threat detected, cortisol high,
54:18adrenaline flooding the system, do
54:20something about it now. So when you make
54:24a decision like that and you know it's
54:26the wrong decision because you saw the
54:28trade run, you know, another 100 points
54:31to your target or whatever the case
54:32might be,
54:34>> you now have this voice in your head
54:36that says, "You idiot, how could you do
54:38that? You know better. Why couldn't you
54:41just let the trade run? You knew it was
54:42the right decision." And you start
54:44putting this pressure on yourself. You
54:45start putting this urgency on yourself
54:48to become better. But what does that do?
54:50it creates a negative emotional feedback
54:52loop that now when you're in that same
54:55situation again, your amydala is going
54:57to continue firing, right? So, so that's
55:00the number one problem that I see
55:01traders run into on a continuous basis,
55:04whether it's at a professional level,
55:06retail level, it almost doesn't matter.
55:09The problem they run into is that
55:11they're working, they're running the
55:13wrong software for the task at hand. and
55:15and they need to rewire their brain,
55:18literally rewire their brain in a sense,
55:20in order to be able to trade
55:21effectively.
55:22>> So, taking that biggest problem that
55:24pretty much all traders have, what was
55:27the process you would do or undertake or
55:29did you observe would help them rewire
55:32their brains?
55:33>> First, it was understanding why this is
55:36happening and then understanding what to
55:38do about it. I've seen quite a few
55:40people say, "Well, you just aren't
55:42disciplined enough. You need an iron
55:44will.
55:46My rebuttal to that is that if you don't
55:48know what you're doing, having more
55:50discipline isn't going to help you. If
55:53you don't know how to swim and I throw
55:55you in a pool where you can't touch the
55:58bottom with your toes, is discipline and
56:01an iron will going to stop you from
56:03drowning? It's not because you don't
56:05know how to swim.
56:07So, you need to know how to swim first.
56:10And that goes back to understanding what
56:13trading really is. So that we can start
56:15putting together these different
56:17techniques so that you can not just
56:18float in the water but swim to a
56:20destination. So once you understand
56:22that, you start to understand that the
56:24answer isn't more willpower. It isn't
56:27more determination. It isn't more
56:29discipline. It's about understanding the
56:32environment that you're in, which is
56:35triggering a series of decisions and
56:37behavior on your part that you actually
56:39have no control over. If I traded the
56:42way that most traders trade, I would
56:45still be making the same mistakes that
56:46they're making even today.
56:49>> Doesn't matter how many years of
56:50experience I have. If you put me in the
56:52wrong framework with the wrong tools,
56:55the wrong sets of expectations, I'm not
56:58going to perform well. So, what does
57:00that mean? It means that no matter how
57:02good of a trader you are, the emotions
57:04don't go away. You just don't let the
57:07emotions dictate the behavior. Easier
57:10said than done. How do you do it? The
57:12answer is a a lot of it has to do with
57:14predetermining your decisions. Now, this
57:17might sound obvious to a lot of traders
57:18listening to this. Well, of course, I
57:20need to know where my stop loss is
57:21before I enter the trade. Of course, I
57:23need to know what my position size is.
57:24Okay, for those of you scalping, how
57:27true is that? How often are you really
57:30getting into a trade with predefined
57:32risk, predetermined position size, and
57:35allowing that trade to run? My guess is
57:37probably not all that many. Not all that
57:40many people are capable of doing that or
57:42they haven't really predetermined that
57:45series of behavioral steps in advance.
57:46Now, this is a very simplified example,
57:48but it rings extremely true to me
57:51nonetheless. So a big part of reframing
57:54that is understanding how we deal with
57:57bad decisions after the fact. So one
58:00thing that I was really curious about
58:01was how to do that because I don't know
58:03about you in myself I have this
58:06extremely overbearing voice that loves
58:09to beat me up whenever I make a mistake.
58:11There's probably stuff from the the
58:13fifth grade, you know, that that I did
58:15something stupid and embarrassing that
58:16occasionally my mind would bring up and
58:18and bash me over the head with. And
58:20almost every human being has this. It's
58:22it's natural. I wanted to understand
58:24that better and that led me to a really
58:27interesting
58:28process. Uh so I saw a classically
58:32trained Freudian psychoanalyst for I
58:35think better part of of three years or
58:37so, four to five times a week, an hour
58:40each session doing deep introspective
58:43Freudian psycho analysis. And and that
58:47was that was let me tell you a roller
58:49coaster of a ride but incredibly
58:51valuable
58:52>> going into that deeper. What does that
58:53actually look like? A lot of people will
58:55be hearing that terminology but they
58:57won't understand what that means and
58:58what that actually the process of what
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1:00:00your edge, and optimize [music] your
1:00:02edge by automating your trade
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1:00:22description below. Now, let's get back
1:00:23to this episode. So, we have this sense
1:00:26of identity, right? And and in basic
1:00:28terms, now we can call that the ego, but
1:00:32we also have this super ego.
1:00:35And and I think Freud's model had we we
1:00:37had the id, the ego and the superego. A
1:00:39lot of my work focused on the ego and
1:00:40the super ego. The sense of selfidentity
1:00:43and then the superego which sits in our
1:00:46subconscious almost. And it is kind of
1:00:49like the hall monitor, the governor, the
1:00:53overbearing judge of all our behavior
1:00:56and our actions. And the super ego is,
1:01:00as I understand it, something that's
1:01:01formed in fairly early childhood through
1:01:04our interaction with adult authority
1:01:06figures. So if you were ever yelled at
1:01:08by an aunt or an uncle, your your
1:01:10mother, your father, a school teacher,
1:01:12all of those authority figures had some
1:01:15role in shaping your super ego. And your
1:01:16super ego is kind of this amalgamation
1:01:18of all those voices. And the superego's
1:01:21job is to be overbearing and incred
1:01:23incredibly harsh and negative towards
1:01:25you, right? And for traders, this
1:01:28manifests itself in you telling yourself
1:01:31how stupid you are after taking a trade
1:01:33that you can't believe you fell for it
1:01:35again after you said last time you
1:01:37weren't going to make that exact same
1:01:39decision. So the work that I did was on
1:01:42reforming that super ego and turning it
1:01:44into what the clinician I was working
1:01:46with termed a benevolent super ego. So
1:01:49the end result of that is at at the end
1:01:52of that journey when I take a trade at
1:01:55the end of the trade I wouldn't be in a
1:01:57rush to congratulate myself if if it was
1:01:59a good outcome nor would I be in a rush
1:02:01to to beat myself up if I lost money.
1:02:04>> Rather the thought process was well did
1:02:07you follow your process? You know did
1:02:09you stick to your predetermined risk
1:02:12parameters? Would you take this trade
1:02:14again? And if the answer to any of those
1:02:16things was no, you know, then it would
1:02:18be like, okay, forgive yourself, move
1:02:20on, but understand very clearly why
1:02:23you're feeling about the situation the
1:02:25way you're feeling. So instead of your
1:02:27own mind working against you, it's it's
1:02:29now like in your corner rooting for you
1:02:32and trying to help you win. Now, is that
1:02:34in and of itself the solution to
1:02:36rewiring the brain? No. But it's a very
1:02:39important step along the way. So, when
1:02:42we're talking about rewiring the brain,
1:02:44for me, what that means is understanding
1:02:47that we need to think of trading very,
1:02:50very differently. We're wired to think
1:02:52of trading in terms of immediate
1:02:54outcomes, even though we know that we
1:02:56should be thinking of trading in terms
1:02:57of long-term distributions of outcomes.
1:03:00We know that trading rewards patience
1:03:03over extreme urgency and a need to act.
1:03:06Like, we know these things and yet it's
1:03:09very difficult to stick to them. I don't
1:03:10know about you, but I've been in more
1:03:12than one trade where I find myself doing
1:03:14something to get out of it at a time
1:03:16that I shouldn't. Whether it's ex
1:03:18expanding my stop loss or getting out of
1:03:20a win or two early and at the end
1:03:21thinking,
1:03:22>> wait a minute,
1:03:24I know I shouldn't be doing that, but it
1:03:25was almost like something took over me
1:03:28and did it.
1:03:29>> So, what is that? That is the amygdala
1:03:30firing first because the amydala fires
1:03:32at an unconscious level. So by the time
1:03:35you're already feeling those emotions,
1:03:37the amygdala is already flooding your
1:03:39brain with chemicals, with adrenaline,
1:03:40with cortisol. And when you take action,
1:03:44that's when you get hit with dopamine,
1:03:46right? So a lot of people believe that
1:03:48dopamine is like the happiness chemical.
1:03:50It it it's not. It's a chemical that
1:03:52rewards anticipation,
1:03:54>> right? So when I'm anticipating that I
1:03:56have to do something to close a trade
1:03:58early, I'm going to get rewarded with
1:03:59that hit of dopamine, and that's going
1:04:01to create a self-reinforcing loop.
1:04:04So for me, the solution is really to
1:04:06predetermine as many of the outcomes as
1:04:10possible before I get into them. And
1:04:13this is where I think the type of market
1:04:14you're trading, the style of trader you
1:04:17are, how you're expressing your view can
1:04:19play an enormously significant role.
1:04:22Most retail traders, for example, are
1:04:24trading what I would call a spot market.
1:04:26They're buying straight futures. Very
1:04:29few people are utilizing options
1:04:31effectively at a retail level. One of
1:04:34the reasons professionals gravitate
1:04:36towards options over treating a spot
1:04:38market is because when you're using
1:04:40options, you have far more control over
1:04:42your risk and exposure. And you remove
1:04:45the urgency from having to do something
1:04:48in order to manage a profit or manage a
1:04:51loss. Now, this is really interesting.
1:04:53Have you ever been in a trade RZ where
1:04:56you take that entry, it's in profit,
1:04:59comes back to your entry, and now it's
1:05:01just kind of chopping around, it's going
1:05:02sideways, and you have no idea what's
1:05:04going to happen next, but you can't
1:05:05bring yourself to to do anything. You
1:05:07just sat there kind of paralyzed. And
1:05:09then the market goes up again, and then
1:05:11a boom, it stops you out, and you say,
1:05:12"Why didn't I just close the trade?"
1:05:14>> Yeah.
1:05:16>> So, the market typically remain in a
1:05:19state of balance. It's typically
1:05:22efficient. It's atypically inefficient.
1:05:26But retail traders and directional
1:05:29traders, even at a professional level,
1:05:31get rewarded on what? Inefficiency.
1:05:33>> Mhm.
1:05:34>> Right. So, when you're in a spot trade
1:05:36where I have an entry, a stop, and a
1:05:38target, my outcome is fairly binary,
1:05:41right? I'm either going to make money or
1:05:43I'm going to lose money. Sure, you know,
1:05:45we can call a scratch, uh, break even,
1:05:47but let's stick to winning and losing.
1:05:48The outcome is binary. price has to go
1:05:50to X before it goes to Y. That's the bet
1:05:53that I'm making. Well, when I have those
1:05:56constraints on me, all tying back to
1:05:58game theory, right? I, as a player in
1:06:00this game, also have constraints. When I
1:06:03have those constraints working against
1:06:04me, am I more or less likely to be put
1:06:07in a position where I can make good
1:06:09decisions? I would say less likely. I
1:06:12would argue that point all day. However,
1:06:15if I have an option structure where my
1:06:18bet isn't as binary, it's not about
1:06:20price has to go to X before it goes to
1:06:22Y. It's about just price has to
1:06:25generally do something. And maybe that's
1:06:27something is it does nothing. And if it
1:06:29is a directional view using options,
1:06:31maybe price can go here before it goes
1:06:33here and I can still be profitable on
1:06:35that trade. It just expands the
1:06:37parameters and the framework and the
1:06:39environment in which I can take risk,
1:06:42define risk and then hopefully realize a
1:06:44positive outcome from it.
1:06:46>> There's a lot to unpack there. I'll
1:06:47start with one thing in terms of the
1:06:50basis of the previous question. Do you
1:06:51think there's a lot of traders out there
1:06:53who have experienced things in their
1:06:55life growing up when they were younger
1:06:58totally unrelated to trading but yet is
1:07:01impacting their trading but
1:07:02subconsciously they don't well
1:07:04consciously they don't realize it
1:07:05because it's happening at a subconscious
1:07:07level.
1:07:07>> Every single one of us. Every single one
1:07:10of us. Yes. I I believe that without
1:07:13question.
1:07:14And it it's not necessarily just the
1:07:17relationship with money. It's really the
1:07:19relationship with resources, right? And
1:07:21this again comes back to that primitive
1:07:23amygdala running that primitive
1:07:25operating system. We need resources to
1:07:27survive at a very primitive evolutionary
1:07:30level, right? So if we saw our parents
1:07:32arguing about money for instance, what
1:07:35does that do? It instills in us a
1:07:37scarcity mindset. You know, now I saw
1:07:39you you posted this phenomenal, dare I
1:07:42say phenomenal trade on the euro.
1:07:45Now, I'm going to guess that you were
1:07:47very handsoff on that trade and there
1:07:49were probably many times where you more
1:07:52or less even forgot you had the trade
1:07:53on. Is that is that true?
1:07:55>> Yeah. It's taken time to get to that
1:07:56point, but yes.
1:07:58>> Now, here's the other thing. If that
1:07:59trade went the other way
1:08:02>> stopped you out, does that change your
1:08:04life in any way whatsoever?
1:08:06>> No.
1:08:06>> No. You're not operating as a trader now
1:08:10from a place of scarcity.
1:08:12You're trading from a place where you
1:08:14really are able to make the
1:08:16probabilities work in your favor, right?
1:08:20Most traders trade like they got
1:08:22everything to lose because they do.
1:08:25Everything hinges on that next trade
1:08:28working out. We all know you could have
1:08:30a 55% win rate and still lose seven
1:08:32trades in a row. How many traders can
1:08:35withstand losing seven trades in a row?
1:08:39Very few, in my opinion. Very few.
1:08:41Right? So, that's what I'm talking
1:08:43about. When you're putting yourself in a
1:08:45framework in an environment where you're
1:08:47heaping that pressure on you and your
1:08:51financial well-being, emotional
1:08:53well-being depends on those trades
1:08:55working out, do you really think you're
1:08:57going to be able to make good decisions?
1:08:59I don't think so. I don't think so.
1:09:03>> So, off the back of that, would you say
1:09:04that two parts? One, more people should
1:09:07be looking into doing this work and this
1:09:10inner deep work
1:09:13to be able to identify these
1:09:14subconscious elements that are impacting
1:09:17their trading. And then two,
1:09:21the final point that you just made,
1:09:23should people be looking at not relying
1:09:26on the success of their trading? Well, I
1:09:30guess the unsuccessful part of their
1:09:32trading, but mainly the success of their
1:09:34trading to finance their goals, dreams
1:09:36and visions that they have and that they
1:09:38should be coming to trading with a much
1:09:41more stable position cuz that was a you
1:09:43know to your point as you made with
1:09:44example of myself that transition for me
1:09:48of being able to not worry and allow the
1:09:51probabilities to play out. Let the edge
1:09:52play out. Win, lose, or break even.
1:09:55Whatever the scenario, it doesn't
1:09:57impact. But we go back
1:10:015 6 years ago that was a different story
1:10:03you know when I was essentially didn't
1:10:06have any capital but bleeding small
1:10:08amounts into small accounts and trying
1:10:10to flip and undo all the losses I had
1:10:13made and every time I did go on a bit of
1:10:15a run I would think about oh finally I
1:10:18can recoup these losses finally I can
1:10:20get into X position or do X Y and Zed by
1:10:23X Y and Zed
1:10:26only when that was removed D was I was
1:10:28able to be more balanced, calm, allow
1:10:31the probabilities to play out and take
1:10:33place. So yeah, those two-part
1:10:35questions, one being should more people
1:10:37be looking at doing this deeper work and
1:10:41what maybe avenue should they be looking
1:10:42into and two is it of your position that
1:10:46people should be coming to trading
1:10:50reducing that pressure, that financial
1:10:52pressure, that need for success from
1:10:54trading. Yes to both questions. But
1:10:57let's dive into that. So part one,
1:11:01I I won't even say you should do this
1:11:03deeper work. I think if if you want to
1:11:05have any chance of success in this
1:11:07business, you must do that deeper work.
1:11:11If you don't, I I just don't see how you
1:11:14can expect long-term success here or
1:11:18longevity. If you That doesn't mean you
1:11:20can't have short-term success. You
1:11:22absolutely can. But the beautiful thing
1:11:25about being a trader is there's no
1:11:26retirement age, right? You you can do
1:11:28this as long as you can click a mouse
1:11:30button and and you can see a chart or or
1:11:33a trading platform screen, right? So,
1:11:36you probably want to be in this game for
1:11:37a very long time. You need to do that
1:11:40work. So, what do you need to do in
1:11:42order to do that work? In my opinion, a
1:11:44big part of it comes down to the very
1:11:47beginning of this conversation, which is
1:11:49understanding what trading actually is.
1:11:52It's not about making a binary bet on
1:11:54direction. It's about understanding it's
1:11:57a multiplayer game and I want to know
1:12:00who the biggest players are and what's
1:12:01going to force them to make certain
1:12:03decisions at certain times that I can
1:12:07take advantage of. What I don't know is
1:12:09is the next trade going to be a winner?
1:12:11Is the next trade going to be a loser?
1:12:13How much of a winner? Who knows? I don't
1:12:15need to know it. It it it's almost
1:12:17irrelevant. What's far more relevant is
1:12:20that I identify those opportunities
1:12:22because I understand how the market
1:12:25actually functions. And once I've
1:12:26identified those opportunities, I need
1:12:29to create a framework around which I can
1:12:31put myself in a position to potentially
1:12:34capture those opportunities. That is the
1:12:37very essence of being in a positive
1:12:40expected value situation. And when you
1:12:42have positive expected value, you have
1:12:44to go for it every single time. you have
1:12:46to go for it. And no, not every
1:12:49situation that's positive EV is going to
1:12:52work out, but those are the situations
1:12:55that you want to be in because if you're
1:12:57in a negative EV situation, the chances
1:12:59of it working out are even less, right?
1:13:02So, you need to understand what it is
1:13:04you're actually doing. You need to
1:13:05understand and be able to clearly
1:13:07articulate what your edge is, how you're
1:13:09going to exploit it. And that allows you
1:13:11to build frameworks around which you're
1:13:13not fighting your own mind.
1:13:17So you're still going to feel those
1:13:18emotions, but you're able to take a step
1:13:21back and recognize those emotions and
1:13:23say that is not going to drive my
1:13:25decision-m because I've already made the
1:13:28relevant decisions that I need to make.
1:13:30But I can only make those relevant
1:13:31decisions with confidence because I
1:13:33understand what it is I'm actually
1:13:36trying to do here. Right? So, one thing
1:13:38I do when I'm trading, huge on this, I
1:13:40measure my biometrics, particularly
1:13:43heart rate. I love measuring my heart
1:13:45rate while I'm trading. Right now,
1:13:48again, just goes back to treating
1:13:50trading as a similar to athletic
1:13:52performance. Right? My resting heart
1:13:54rate typically is in the low 40s. When
1:13:57I'm trading, it can hit 120, which would
1:14:00be like a light jog.
1:14:01>> Now, that's information. That's really
1:14:03valuable information cuz that tells me
1:14:06that my amydala is firing. It's raising
1:14:09my adrenaline. It's pumping me full of
1:14:11cortisol and I want to do something. So,
1:14:15it's being able to recognize that as a
1:14:18signal, a biological signal, and that's
1:14:21information, right? So, if I'm in that
1:14:23position with my heart rate up and I'm
1:14:25on the right side of that trade, what's
1:14:27everyone else thinking? Because I'm not
1:14:30alone. It's not just me and a sea of
1:14:32algorithms and robots. There's other
1:14:34human traders out there. I hope they're
1:14:36probably feeling similar emotions,
1:14:38experiencing similar things. And what
1:14:41are the odds that they're going to make
1:14:42a stupid mistake? Pretty high, too,
1:14:45right? So I want to ensure that through
1:14:48my holistic understanding of my edge,
1:14:50the auction, my specific framework for
1:14:54allocating risk
1:14:56that I'm putting myself in a position
1:14:58where I'm far more likely to
1:14:59consistently make good decisions and
1:15:01minimize the bad ones.
1:15:03I was talking to a friend of mine like
1:15:05this year has been
1:15:08so exhausting in so many ways. It's been
1:15:10a while. It's been a minute since we've
1:15:12had a Trump presidency and I've
1:15:13forgotten I've forgotten how volatile,
1:15:16you know, that that can be
1:15:17>> great for trading, not so good for
1:15:19sleep.
1:15:21And one of the things I noticed is that
1:15:25my performance in this year was
1:15:27definitely optimized at the beginning of
1:15:30the year, right? Like February, March,
1:15:33early April, amazing. I told my friend
1:15:36like, I think I think those are just the
1:15:37best year uh months of the year for me.
1:15:39Like what do you mean? I know my
1:15:40performance. I know statistically I'm
1:15:42unlikely to continue outperforming for
1:15:44the remainder of the year.
1:15:45>> Mhm.
1:15:46>> Statistically unlikely. Happened to be
1:15:48true. Self-fulfilling prophecy. Maybe,
1:15:50maybe not. But what I noticed was my
1:15:53position size started to decrease.
1:15:56So not, you know, and and I would
1:15:58rationalize it. There were definitely
1:16:00reasons for that. But when the market
1:16:02conditions started to develop more
1:16:04favorably for me, I had a hard time
1:16:06dialing the position sizing back up.
1:16:09why, you know, and and that was
1:16:11something that's been running on my head
1:16:13in my head for for weeks now. Why? What
1:16:15is going on? Why do I feel loss aversion
1:16:19now that I didn't feel earlier in the
1:16:21year, right? And and that's something
1:16:23that I have to work through. That's
1:16:24something that I have to unpack. So, the
1:16:25deep work doesn't stop regardless of
1:16:27where you are in your journey as a
1:16:29trader, in your career. It it never
1:16:32stops. We all deal with stuff. And
1:16:35anyone that pretends otherwise, you
1:16:37know, is either lying to you or yeah,
1:16:39they are a robot literally, right? And
1:16:41that's probably not the case. So, we're
1:16:43all continuing to work on stuff. But
1:16:46what keeps me steady through all of
1:16:47this, and this is the second question
1:16:49that you asked, it it really cuts to the
1:16:51heart of this. What allows me to stay
1:16:53steady through all of this is my ability
1:16:54to treat trading as a game. And I
1:16:58intentionally use that kind of language.
1:17:00>> I'm trying to play a game. And if I
1:17:06think of it in more serious terms than
1:17:08that, I'm setting myself up for
1:17:09psychological and emotional failure,
1:17:11right? And that's going to translate to
1:17:12real world consequences very
1:17:14[clears throat] quickly. So to be able
1:17:17to think of trading as a game, I I like
1:17:19to say this, trading in the market is
1:17:22what's going to make me wealthy, but
1:17:24it's not going to it's it's not what's
1:17:26going to make me rich in the here and
1:17:27now, you know? And and that doesn't
1:17:29necessarily mean that you need to be
1:17:31running five different side hustles on
1:17:33the side, working two full-time jobs,
1:17:35but it it it does mean that if you're in
1:17:36a place of relative financial stability
1:17:38and security, whatever that means for
1:17:41you, whatever, given your circumstances,
1:17:43I think the odds of you succeeding are
1:17:46much, much higher. The most stressful
1:17:48years of my life was when I was 100%
1:17:50reliant on trading and I didn't know
1:17:52where my next dollar was going to come
1:17:54from.
1:17:55I I just had this conversation with a
1:17:5717-year trader in Puerto Rico,
1:17:59successful guy, trying to decide whether
1:18:02he wants to make the leap to working on
1:18:03a professional desk or not, you know,
1:18:05and and I said, "Well, the biggest
1:18:07downside I remember from trading my own
1:18:09book and only being responsible for my
1:18:11own book was I had zero sense of what
1:18:15normali personal finance even meant
1:18:17anymore. I didn't want to pay a monthly
1:18:20rent check because I didn't know if I
1:18:21could afford it. I wanted to buy
1:18:23everything in cash. Uh, I had these
1:18:25stupid sums of cash just sitting around
1:18:27because I was I was scared of going to
1:18:29draw down and I have to rely on it. It
1:18:31just wrecked havoc on my brain and on my
1:18:33mind. But not everyone is wired that
1:18:37way. I'm I'm a very riskaverse guy. I
1:18:39like to be in a position where my risk
1:18:42is very minimal, you know. So, I
1:18:44specifically engineer not just life
1:18:46situations but trades that put me in
1:18:48those positions. So, everyone's wired
1:18:50differently and there are exceptions to
1:18:52the rule. There are a couple amazing
1:18:54success stories of traders that have
1:18:56come from absolutely nothing and by
1:18:58virtue of trading prop or bankrolling
1:19:02their own trading bit after bit after
1:19:04bit, you know, they've achieved
1:19:05tremendous success.
1:19:07>> Those are called exceptions to the rule.
1:19:10They are not the rule. And yet everyone
1:19:12thinks that they're going to be the next
1:19:14exception.
1:19:14>> Yeah.
1:19:15>> Right. Odds are you're not,
1:19:17>> you know? So, if if there's one thing I
1:19:18can say about what I think my greatest
1:19:20strength as a market speculator is, I am
1:19:22painfully self-aware. I am not afraid to
1:19:26look in the mirror and confront what
1:19:27stares back at me and and to work on the
1:19:29parts that I need to fix. I'm not the
1:19:32best analyst, trader, executor, risk
1:19:35manager, whatever. I don't have to be. I
1:19:37just have to be myself.
1:19:39>> But I need to be really comfortable in
1:19:41what that self is, right? And and I
1:19:44think when you are comfortable with that
1:19:46and secure with that and you have a
1:19:49relationship with the market that comes
1:19:50from a place of peace and gratitude and
1:19:52humility rather from a place of want,
1:19:56you know, trading is more likely to open
1:19:59up to you. At at least it it definitely
1:20:01did for me. You know, when I trade now,
1:20:04I really try to keep in mind the fact
1:20:06that I want to be in a harmonious
1:20:08relationship with the market. I've I've
1:20:10talked about this with a couple people
1:20:12before. I might have even mentioned this
1:20:13to you. The [clears throat] visual
1:20:14metaphor in my brain is that the market
1:20:16is a swirling source of energy like a
1:20:18river, an ocean, many rivers, many
1:20:21oceans. I just want to go down with a
1:20:24bucket, my bucket, and take a little bit
1:20:27of that energy out. And every now and
1:20:29then, my bucket is leaky, you know, and
1:20:30I give some energy back to that river,
1:20:33that ocean. But my relationship with the
1:20:36market is two-sided, right? I take
1:20:38liquidity, I provide liquidity.
1:20:40I've been humbled and fortunate enough
1:20:43that the market's given me more
1:20:44liquidity than I've taken and and that's
1:20:46all I need. Everything else is a bonus.
1:20:48Everything else is an extra. I don't
1:20:51have anything to prove. Not to myself
1:20:53anymore. When I did, that's when trading
1:20:55was the hardest. And what was it like
1:20:57for you when going through this process
1:21:00and this selfwork,
1:21:02scaling your capital and scaling your
1:21:04career as a trader as well? Because
1:21:07going from retail to semi-professional
1:21:09to then a professional there's huge
1:21:11differences as we've talked about the
1:21:13framework and the foundation of our
1:21:16understanding may be the same but the
1:21:20variance in your application and the
1:21:23types of trading the types of capital
1:21:25personal to maybe investors or however
1:21:28it may be set up. How did you handle
1:21:30these different roles different
1:21:32methodologies and processes that you had
1:21:34to go through? Were they things that
1:21:36were quite easy to adapt to because of
1:21:38this deep work that you did relatively
1:21:41earlier on or was it still quite a
1:21:44process to implement and barriers to
1:21:47overcome and hurdles that you had to go
1:21:49through in order to essentially level up
1:21:52your game and level up to become that
1:21:54next trader in this essence the
1:21:56professional trader that you are today.
1:21:58>> It's always a process and it never gets
1:22:00easier. Uh I I mean working with Andy
1:22:04was a gamecher. It was a multiplier in
1:22:06terms of access to capital and and
1:22:09credit lines and leverage and so on
1:22:12without a doubt. That's that's a very
1:22:14different and almost unique situation
1:22:16that I find myself in. I'm incredibly
1:22:18grateful for that. But everyone I think
1:22:22has a limit, a psychological limit. And
1:22:25I don't know if for you that means
1:22:26putting on a a million dollar position,
1:22:28a $10 million position, or a billion
1:22:30dollar position, but at some point that
1:22:33number crosses a certain psychological
1:22:36threshold that you can no longer
1:22:37withstand. And and that's when the loss
1:22:39aversion kicks in. I think it's very
1:22:43prudent to see where those limits are
1:22:46gradually over time because if you could
1:22:49be the type of trader where if you trade
1:22:51with one micro, you you're just not
1:22:54going to feel enough of a P&L
1:22:56fluctuation that you're going to care
1:22:58about it. And that can be good, can also
1:23:00be bad. But if you're trading with five
1:23:03minis instead on on NQ, which would be a
1:23:05really big position if it's on personal
1:23:07capital,
1:23:08I mean, geez, that that could trigger
1:23:11something in you. And now you realize,
1:23:13okay, my limit is not one micro.
1:23:16It's definitely well beyond five minis
1:23:19right now. Now, obviously, that's a wide
1:23:20range. And and you're going to want to
1:23:22find where your sweet spot is. And I'm
1:23:24not necessarily even talking about
1:23:25stop-loss, right? Like if your stop is
1:23:2810 points on NQ versus 30, I would hope
1:23:31you're sizing differently. My point is
1:23:33each point is going to have a different
1:23:35dollar value. Each tick is going to have
1:23:36a different dollar value. That's what
1:23:38I'm talking about. There's going to be
1:23:39that limit where you're like, "Oh, this
1:23:41feels like this is crazy." You know, I I
1:23:44used to make that in a trade and now now
1:23:46that's that's my per point fluctuation.
1:23:48What's going on? Right? And you have to
1:23:50think through that and understand that
1:23:53that is discomfort. It's psychological
1:23:56discomfort. You have a choice. You
1:23:58either run away from it or you slowly
1:24:01start to normalize it, right? That's not
1:24:03easy. But that is repeated exposure. And
1:24:06that repeated exposure is the only way
1:24:08that it starts to normalize. And it's
1:24:10why I try to encourage people to start
1:24:12thinking of trading in terms of a game.
1:24:14Now, some traders out there, and I don't
1:24:16think it's bad advice necessarily, will
1:24:19turn off the P&L on their screens. So,
1:24:20they'll see I'm I'm up ticks, not or
1:24:22points. I'm not up dollars and cents.
1:24:25I personally disagree with that. Uh
1:24:28personal opinion, you know, I I want to
1:24:30see the dollars and ticks. I want to
1:24:31feel it. I want to know that I'm not
1:24:34cheating myself psychologically in terms
1:24:36of not experiencing that emotion. I want
1:24:38to experience the discomfort,
1:24:41internalize it, and still be able to
1:24:43make good decisions. I don't want to
1:24:44have some kind of hack that's going to
1:24:47kind of create a synthetic buffer.
1:24:51Maybe I'm a masochist. Maybe I'm a
1:24:53glutton for punishment. Very possible.
1:24:55And I'm just saying this is what works
1:24:57for me. It might not work for everybody
1:24:58else, right? But there is this concept
1:25:01of steadily pushing the boundaries,
1:25:04right? And and I think that's essential
1:25:05if you want to continuously evolve as a
1:25:07trader. We talked about options a few
1:25:10times and the one element that was super
1:25:12important to the discussion is that
1:25:14options in comparison to futures, forex,
1:25:17pretty much every other type of trading
1:25:19is
1:25:20more multi-dimensional, multi- faceted
1:25:24in comparison, right? You're not just
1:25:27trying to say this is going to go long,
1:25:28this is going higher or lower. There's
1:25:31so many other elements. Why is that
1:25:33important to understand? And why do you
1:25:35think that a lot of traders
1:25:37lack that understanding and insight or
1:25:39don't look to options as an asset to
1:25:42trade?
1:25:42>> That's a great question and I'll speak
1:25:45from personal experience. When I met
1:25:47Andy, I was just starting to dip my toes
1:25:50into options,
1:25:51>> but I was extremely skeptical. Extremely
1:25:54skeptical even after working with Andy.
1:25:57And Andy is like, I don't want to say
1:25:59he's a pure options trader, but that is
1:26:01really the sandbox that he knows inside
1:26:03and out. I've never met someone more
1:26:05knowledgeable on options than Andy.
1:26:07>> And he would ask me these weird
1:26:09questions about the market. He he would
1:26:11ask me not just where do I think the
1:26:14market's going to go next, he said,
1:26:15"How's it going to get there? Like, is
1:26:17it going to be a slow grind or is it
1:26:19going to be a quick violent move? How
1:26:21long is it going to take?" I look at him
1:26:23and I'd say, "I don't have a flipping
1:26:25clue. Why? like how am I expected to
1:26:27know that? Why does it even matter? As
1:26:29long as it gets there to your target,
1:26:30who cares, you know? And and through
1:26:33talking to him, he completely changed my
1:26:36view on that. And what I realized is
1:26:39that when I'm long,
1:26:42doesn't matter if it's a currency pair,
1:26:43a stock, a crypto, whatever, whatever it
1:26:45is, when you're just long the
1:26:47underlying, you're dependent entirely on
1:26:50direction. But there are these other
1:26:52variables you know and and uh some
1:26:55people will have heard the term the
1:26:56Greeks right there second and third
1:26:58order derivatives in some cases right so
1:27:00it's not just about price exposure it's
1:27:04about well do you want price to
1:27:06accelerate to your target or not or do
1:27:09you not even care about that do you want
1:27:11to benefit from the market taking a long
1:27:14time to get there or are you going to
1:27:16get hurt if the market doesn't go
1:27:18immediately to target you have all these
1:27:21well they're called options for a
1:27:22reason. You have all these options in
1:27:24terms of how you want to engineer
1:27:26certain outcomes. And and as for why I
1:27:29think a lot of retail are hesitant or or
1:27:32ignorant about options, I'll be blunt.
1:27:35They're more complex. They're more
1:27:37complicated. Price is two-dimensional.
1:27:40Options are three-dimensional because we
1:27:42have the introduction of time. And that
1:27:44time piece is such an important
1:27:46variable. But if you are willing to dip
1:27:50your toes into the waters of options,
1:27:52you'll find them incredibly rewarding. I
1:27:55say this all the time. When you're
1:27:57trading the underlying, your curve is
1:27:59linear. In other words, if if I'm long a
1:28:02stock at 100 and it goes to 200, I've
1:28:04doubled my money. But with options, if
1:28:07the stock goes from 100 to 200, I could
1:28:09have made a 50% return, but I could have
1:28:11also made a,000% return depending on how
1:28:13I've structured that trade. So the P&L
1:28:16curve can be bent.
1:28:19It can literally be reshaped in your
1:28:22image however you want to. The
1:28:24creativity that you could express using
1:28:26options is off the charts. It's unlike
1:28:30anything that exists out there. And the
1:28:34other really neat thing with options,
1:28:36and this is something that you can't do
1:28:37on a spot basis, you can sell options
1:28:40just as easily as you can buy them.
1:28:42Right? If I'm taking a spot position,
1:28:45like I said, my exposure is directional.
1:28:47When I'm taking an options position, I
1:28:49could be selling that option to you. I
1:28:51mean, not directly to you. We're not
1:28:53like signing a a contract with with our
1:28:55signatures on it, but de facto, I'm
1:28:57selling an option to another trader. I'm
1:28:59providing that liquidity through the
1:29:02brokers with their help, but I'm
1:29:04providing that liquidity to the market.
1:29:06And that changes the dynamic incredibly.
1:29:08Right? So this year, the strategy that
1:29:11Andy and I have been working on has been
1:29:14a very market neutral strategy where
1:29:17frankly we don't care what the market
1:29:19does. The market would have to crash
1:29:21over 40% in a in a remarkably brief
1:29:24period of time for us to be stressed
1:29:25about it.
1:29:27But there's no such thing as a free
1:29:29lunch. So if the market is ripping
1:29:32higher, you know, we're going to
1:29:33underperform that rip higher on a
1:29:35relative basis. But we don't care about
1:29:37direction. That's the benefit. That's
1:29:39tremendously relaxing, which is
1:29:42something I never thought I'd say as a
1:29:44trader, right? That part is really
1:29:46relaxing. But we we talked about gamma
1:29:48before, right? So, a lot of what we're
1:29:51doing right now, we're basically market
1:29:53making for other traders. But how do we
1:29:56exploit an edge? Because we still need
1:29:58an edge here, right? So, the edge that
1:30:00we're exploiting in very basic terms is
1:30:02this, and I think this will resonate
1:30:04with a lot of traders. When the market
1:30:06is crashing lower,
1:30:09there will be market participants that
1:30:11are forced to not want to, forced to buy
1:30:15protection because they have net long
1:30:18exposure.
1:30:19>> So, as most people know, we have calls
1:30:21and puts. Now, you buy a put if you
1:30:23think the market's going to go down in
1:30:25very basic terms, right? So, if you are
1:30:28long a stock, one way that you might
1:30:30hedge that stock crashing is by buying a
1:30:33put, right? And I can decide to what
1:30:35ratio I want to be hedged. Usually I
1:30:37don't want to be perfectly hedged where
1:30:39you know then if the stock goes up I
1:30:40don't make any more money. Right? So
1:30:42typically I want to be partially hedged,
1:30:44but most people tend to want to hedge
1:30:48when the market's already crashing.
1:30:49Right? If we all knew when the market
1:30:51was going to crash, we would have bought
1:30:52the the protection ahead of time and
1:30:54then the crash probably wouldn't happen
1:30:55because the market's too efficient,
1:30:58right?
1:30:59So the metaphor I like to use is that we
1:31:02sell fire insurance to people when their
1:31:05house is already on fire. So if your
1:31:07house is on fire and you want to buy
1:31:09fire insurance from me, you have no
1:31:12leverage in that negotiation.
1:31:14I hold all the power and I can charge
1:31:17you whatever I please. So, I'm going to
1:31:20sell you an expensive piece of insurance
1:31:24and then I'm going to turn around
1:31:25because I fancy myself a little bit
1:31:27clever and I'm thinking two, three steps
1:31:28ahead and I'm going to buy my own
1:31:30insurance to protect against your
1:31:32insurance.
1:31:32>> Mhm.
1:31:33>> That I've just sold to you. Right. So,
1:31:36it's uh a strategy I lovingly call, you
1:31:39know, getting paid to buy lottery
1:31:40tickets in in the market. you know,
1:31:42we're getting paid a little bit to issue
1:31:44these expensive insurance premiums to
1:31:46other people whilst also locking in the
1:31:48potential for our own insurance premiums
1:31:50to really kick off. And it it's it's a
1:31:52style of trading that, like I said, is
1:31:55very relaxing, but it also requires a
1:31:58lot of day-to-day heavy lifting, a lot
1:32:01of deep quantitative research, data
1:32:03analysis, statistical modeling, the kind
1:32:06of stuff that I personally don't enjoy.
1:32:08I'd rather be in the trenches slinging
1:32:10futures contracts around, you know. So,
1:32:12it's it's very interesting the amount of
1:32:15creativity you can express with options
1:32:17and and that's what I love most about
1:32:19them. They let you engineer risk.
1:32:21>> Do you feel like more people, even if
1:32:23they're futures traders, FX traders,
1:32:25should be looking and have an
1:32:26understanding of options?
1:32:28>> A million%. So, so there is this thing
1:32:31called gamma scalping. Uh, I'm not going
1:32:34to go into the whole weeds of what gamma
1:32:35scalping is, but let I'm I'm going to
1:32:37put it this way.
1:32:39There is a level in the market, let's
1:32:42say ES, the S&P 500 E- mini futures.
1:32:45There is a price level where if we go
1:32:48below that, my options portfolio might
1:32:51be in trouble. So, what do I do if I
1:32:56think ES is going to go through that
1:32:57level? I probably want to be short a
1:33:00bunch of futures to offset.
1:33:03Why? Because my options portfolio gives
1:33:05me natural bullish exposure to the
1:33:07market. So if the market just goes up,
1:33:09I'm under no pressure. So really now I
1:33:12only need to trade the short side. Well,
1:33:15that right away is extremely relaxing.
1:33:18Now the question in terms of position
1:33:20sizing, how many futures do I want to be
1:33:22short? Well, that depends on how bullish
1:33:24I am on the option side. So I can
1:33:26engineer situations based on position
1:33:28sizing with the futures where I can de
1:33:31facto trade without a quote unquote
1:33:32stop-loss because I have options profits
1:33:34to buffer against draw down on the
1:33:37futures. So I can if if all I wanted to
1:33:39do was scalp, I could put myself in a
1:33:42situation where I have certain gamma
1:33:43bands above or below the market where in
1:33:47the middle I'm somewhat neutral, you
1:33:48know. So that means if the market starts
1:33:50slowly drifting, I can do what market
1:33:52makers do and sell against that drift.
1:33:54But as we start crossing thresholds
1:33:57where I think we're going to get
1:33:58acceleration in price now, I want
1:33:59directional exposure in the futures,
1:34:01right? And and I can do this in any
1:34:04number of ways. I can do it over
1:34:06multiple time horizons. I can do it in
1:34:07in different markets if I wanted to. The
1:34:10creativity is all on me. So even if you
1:34:12don't actively want to trade futures um
1:34:15sorry options as a futures trader, there
1:34:17is still enormous benefit in
1:34:18understanding at least the basics of how
1:34:21options flows can influence market
1:34:24making in the futures.
1:34:25>> Cuz to your point and off the back of
1:34:27that, something I got, you know, a
1:34:28better understanding of earlier this
1:34:30year with an interview with Chem Carson
1:34:33was that the expirations have a big
1:34:35impact on the overall markets as well.
1:34:37And if you don't have an understanding
1:34:38of when these expirations are taking
1:34:40place, you're kind of just left in the
1:34:42dark. It goes back to our foundational
1:34:44point of the the game, understanding the
1:34:46participants and how that impacts in the
1:34:48markets and based on their decisions,
1:34:50how that's going to impact you and how
1:34:51you can use that understanding of their
1:34:53decisions to make your own. If you don't
1:34:56understand when, even if you don't trade
1:34:57options, if you don't understand when
1:34:59these expirations are taking place and
1:35:01what that means for the marketplace,
1:35:03you're just going to be again one of
1:35:04those people who's like, "Oh, the market
1:35:06has just sold off or or gone higher.
1:35:08Why? There was no news. This is" and
1:35:10then just be in a state of confusion and
1:35:12you'll probably end up just being in
1:35:14that way for a few days until volatility
1:35:16or things rebalance and then you'll just
1:35:18move on and probably repeat yourself
1:35:20again down the line. So even that how
1:35:23important is having the understanding of
1:35:25the expirations
1:35:27to even if you're a futures trader or FX
1:35:29trader or whatever it may be opex is is
1:35:31huge right options expiry windows are
1:35:34huge some of them are more important
1:35:36than others right there are times when
1:35:37you have multiple options expiration
1:35:39windows kind of all aligning at once and
1:35:42that is that is like a a volatility
1:35:44event and if you have no idea what's
1:35:46happening on that Friday
1:35:49good luck to you really good good luck
1:35:51to because you might get your face
1:35:52ripped off. So options expirations are
1:35:55incredibly important because to to your
1:35:58point, you just said it, it aligns with
1:35:59incentives and constraints. If there is
1:36:02a tremendous amount of put concentration
1:36:05at a certain strike and the market is
1:36:07pretty close to there,
1:36:10now we have a battleground. Now we have
1:36:13a war and it's very clear what the
1:36:15objective for those participants are.
1:36:18Some people will want to push the market
1:36:20past strike and other people will want
1:36:22to desperately defend that strike. And
1:36:25that's where the battle is. And here's
1:36:27the best part. If you're not already
1:36:29committed, you can switch sides. You can
1:36:31be very mercenary, right? Depending on
1:36:33what the order flow is telling you. So
1:36:36that that is an incredibly incredibly
1:36:38important piece of information. But
1:36:40closely aligned to options expiry would
1:36:43be known volatility events on the
1:36:46economic calendar, right? Like an FOMC
1:36:48event for example. What happens in the
1:36:52minutes before FOMC and the minutes
1:36:54after FOMC? If you're looking at level
1:36:57two data, you're going to see the order
1:36:58book thin out. You're going to see
1:37:00market makers pull pretty much all that
1:37:03liquidity out of the book. If you're
1:37:05looking at an orderflow heat map tool
1:37:07like bookmap for example and you're used
1:37:10to seeing those thick lines dark red or
1:37:12yellow or orange you're going to see the
1:37:15heat map go blank.
1:37:16>> Mhm.
1:37:16>> It's fascinating to see. Why is that?
1:37:18Well, it's because in that kind of
1:37:21environment we are going to see
1:37:23emotional market responsiveness. Some of
1:37:25that is algorithmically driven. There
1:37:27are there are algos out there that that
1:37:29run keyword searches on the Fed
1:37:31statement and and will push through
1:37:32orders faster than you can blink. Crazy.
1:37:36And then there's of course going to be
1:37:37retail emotionally buying and selling
1:37:38the market. But without the liquidity
1:37:42from the market makers there to buffer
1:37:44those movements, you're going to get
1:37:45incredibly emotional price reactions.
1:37:48Incredibly emotional. Now, why aren't
1:37:50liquidity uh providers there in the
1:37:53immediate aftermath and just before the
1:37:56event? It's because it's a lose-lose
1:37:58proposition for them. They can't
1:37:59effectively provide liquidity in that
1:38:02kind of environment. So, that's why the
1:38:04spreads widen. That's why the liquidity
1:38:06thins and that's why the price movements
1:38:08are so extreme. So, if you're aware of
1:38:09that and if you can see that clearly on
1:38:12the level two, then you can exploit
1:38:14that. Why? Because let's say the with
1:38:17FOMC the market sells off like crazy
1:38:20>> and there are no bids there to support
1:38:22the market. So it's just possibly a a
1:38:25decent amount of volume just ripping
1:38:26below but there's no buy limit orders to
1:38:28absorb or buffer it. Well, what do you
1:38:30think all those short sellers that all
1:38:32that sellside volume is going to do?
1:38:35They're going to have to cover their
1:38:36positions. How are they going to do
1:38:37that? By buying them back. What happens
1:38:39when there's no liquidity to buffer
1:38:40that? You're going to get that rip in
1:38:42the other direction. And then eventually
1:38:44when the liquidity comes back into the
1:38:46book, what's going to happen? The
1:38:47extremes of those moves are going to get
1:38:49faded. And more often than not, what do
1:38:51you see? You see the session ending up,
1:38:53it's not a rule, but you can see the
1:38:55session ending up more or less where
1:38:57that explosive movement all started. Why
1:39:00is that? Because that's where the
1:39:01balance, that's where the equilibrium
1:39:03point actually exists. That's where the
1:39:05institutions want to do business. They
1:39:08don't want to see retail run the market
1:39:10higher 3% and then they're stuck and
1:39:12then they can't do business anymore.
1:39:13They don't want that. So, it's not a
1:39:16manipulation. It's just how the plumbing
1:39:18of the market works. It's just how the
1:39:20liquidity redirects those currents of
1:39:22order flow back to a place where people
1:39:25can comfortably do business. Because
1:39:26after all, the market doesn't care about
1:39:29a retail trader passing a funded account
1:39:32evaluation or getting a payout. It cares
1:39:34about being able to do business as
1:39:37efficiently for as many participants as
1:39:39possible most of the time.
1:39:41>> One question I definitely want to ask is
1:39:44you have a very deep understanding of
1:39:45all these different market mechanics and
1:39:47players and the different elements that
1:39:50take place alongside that through
1:39:52different events as the FOMC example
1:39:53there.
1:39:55Are there resources that people who
1:39:57listening right now can go to or what
1:39:59should be their pathway to start
1:40:02learning and having these deeper
1:40:03understandings that they can apply to
1:40:04their trading or at least even if it's
1:40:06not applying anything but more so having
1:40:08a deeper understanding of the market
1:40:11players and the mechanics and the
1:40:12different attributes that they're doing
1:40:14that they can have a better
1:40:16understanding of.
1:40:17>> It's a great question. I hate getting
1:40:19asked that question because I I don't
1:40:21have a good answer and and I I don't
1:40:23like not having a good answer. Mhm.
1:40:26>> I am really fortunate that I was able to
1:40:29learn on the job. I wasn't given a
1:40:32training manual. I was sat next to
1:40:34traders, sat next to Andy, and he would
1:40:37literally explain to me what's happening
1:40:39and why that's important.
1:40:42Really fortunate to have learned on the
1:40:44job. I I don't have a book or a YouTube
1:40:46video or a course to point people to.
1:40:48But what I will say is that you can
1:40:50still get that level of understanding by
1:40:54simply observing not the price action
1:40:56but the order flow. Price is a
1:40:59consequence of volume. Right now in
1:41:02theory, is it possible to have prices
1:41:05change without any volume flowing
1:41:07through the market? In theory, yes. Does
1:41:08that ever happen in a very liquid
1:41:10market? Practically never. Watch the
1:41:12order flow.
1:41:14Watch not just the amount of orders
1:41:16coming in or or exiting, but watch the
1:41:19speed at which they enter at various
1:41:21windows. Right? So you want an exercise
1:41:25look at ES on the open from 9:30 to
1:41:29about 10:30, sometimes maybe 11:00 a.m.
1:41:32Eastern. That is the window where you're
1:41:34going to see peak inefficiency in the
1:41:36morning. Mhm.
1:41:37>> I guarantee you if you are trying to
1:41:40scalp all day on the market and you
1:41:42review your trades, you're screwing
1:41:43yourself up between like 11:30 and 2:00
1:41:46p.m. Eastern. I guarantee that's the
1:41:48window where you're giving back all your
1:41:49gains or blowing up your accounts.
1:41:52And then again
1:41:54towards the end of the session, 3 maybe
1:41:573:30 p.m. Eastern to 400 p.m. Eastern,
1:41:59you're going to see a flood of orders
1:42:00come in again. Now, is that
1:42:01manipulation? Is that stop hunts? No,
1:42:03it's just mechanical. There are funds
1:42:06that need to rebalance at the end of the
1:42:07day. There are people exiting profitable
1:42:09positions, people trimming exposure.
1:42:12There could be any number of reason for
1:42:14those flows, but they will come in at
1:42:16the end of the day and then you can get
1:42:17another brief burst of inefficiency,
1:42:20right? So, watch the order flow, watch
1:42:22the order book, watch a time and sales
1:42:24chart or a footprint chart, watch volume
1:42:27bubbles on heat map. I don't care what
1:42:28you do, but watch how the order flow
1:42:31engages with the market with the price
1:42:34around those times of day and around
1:42:37specific high volatility expected events
1:42:39that will give you if not a mechanical
1:42:43understanding in terms of being able to
1:42:44explain who is doing what and why, you
1:42:47can at least visualize the patterns.
1:42:49Right? So there is something to be said
1:42:51for pattern recognition. It's just
1:42:53understanding the context in which those
1:42:55patterns take shape that ultimately
1:42:57determines how likely those trades are
1:42:59to work or not. So my favorite example
1:43:01here is if you are a breakout trader,
1:43:03all you're trading are breakouts. If
1:43:06you're trading breakouts in a balanced
1:43:08regime where the incentive structure for
1:43:10the market is to remain in a range
1:43:12because buyers and sellers are equally
1:43:14comfortable doing business in that
1:43:15range, your breakouts are going to fail.
1:43:17However, when the market is truly
1:43:19transitioning into a state of discovery
1:43:22and one side is capitulated and they
1:43:24have constraints and the other side is
1:43:26firmly in control of the market, that's
1:43:28when you can expect breakout trades to
1:43:30work very well. That's when I'm looking
1:43:32for shallow pullbacks, right? So, it
1:43:35depends on the market regime on the
1:43:36context, the types of trades that you
1:43:39can expect to work out. And you're going
1:43:42to see that on the order flow first and
1:43:44foremost
1:43:45>> when it comes to uh one thing you
1:43:48mentioned as well when it came to
1:43:50options as there are some very important
1:43:51dates. Do those dates change like year
1:43:54to year and and so on or are they are
1:43:56there some key dates that stay the same
1:43:58that people should be aware of?
1:44:00>> I'm terrible with specific dates to be
1:44:02honest with you. So I I would check the
1:44:04calendar personally. Mhm.
1:44:06>> I have all of this written down in a
1:44:08notebook somewhere, but it it's not
1:44:10something that I memorized top of mind.
1:44:13Um
1:44:15I mean there there are some events in
1:44:17the calendar around which you can plan
1:44:20volatility around and look for how open
1:44:22interest on the on the options chain
1:44:24looks like. Uh for example, on at an
1:44:27FOMC event, if if I wanted to buy a
1:44:30call, I had a friend say, "Hey, buy me a
1:44:31call uh for this price at the at the end
1:44:34of of the FOMC day." I said, "Yeah, you
1:44:36and your mother all have the same idea."
1:44:38It's does if the if the trade is too
1:44:40crowded, it's not going to work, right?
1:44:42So, so you want to keep in mind how
1:44:43these fixed dates on the calendar can
1:44:45impact options liquidity and options
1:44:47pricing. So, when are options going to
1:44:49be very expensive, earnings dates for
1:44:51example, uh high impact news events like
1:44:54on the economic calendar like FOMC,
1:44:56right? But we're also going to have
1:44:57those periods of time where weekly,
1:44:59monthly, quarterly expirations all line
1:45:01up, you know? So, so you want to make
1:45:03sure that that you keep those in mind as
1:45:05well.
1:45:06>> One thing you mentioned very early on in
1:45:08the podcast is the use of AI and how it
1:45:10can really really supercharge someone's
1:45:12learning curve, but only if used in the
1:45:14correct way. So, I would like to ask for
1:45:16the audience and even for myself, what
1:45:19is the correct way to use AI in order to
1:45:22supercharge that learning curve and you
1:45:24know the use of AI within your trading?
1:45:26>> That's a great question. Where I'm most
1:45:30excited about AI heading is the capacity
1:45:33to do research at incredibly quick
1:45:35speeds. More so on the heavy
1:45:37quantitative and data modeling side of
1:45:39things. Still exploring that the
1:45:42hallucinations that I'm seeing in terms
1:45:44of the data and the sets that I'm
1:45:46providing is still too high for it to be
1:45:48extremely reliable. Now, but if you're
1:45:50wondering about can I learn more about
1:45:53some of these market mechanics you've
1:45:54been talking about, I do think you can
1:45:56do that. I don't have a preferred AI
1:45:59engine, but what I have noticed works
1:46:02really well is ask the AI to really
1:46:05drill down and site specific sources for
1:46:08information. You know, so that way it's
1:46:10not just take my word for it, chat GPT.
1:46:14It's really back up what you're saying,
1:46:16give me the causal explanations why. My
1:46:19hunch would be that that will lead to
1:46:21deeper and deeper rabbit holes. Yes. But
1:46:23ultimately, you'll still be able to
1:46:25arrive at a bedrock of information that
1:46:27hopefully you can independently verify.
1:46:30>> And one thing that we've talked about
1:46:31many times, knowing that the retail
1:46:33trading audience is really prominent
1:46:35within the what the new coin term prop
1:46:38firms and the stolen term, if you will,
1:46:42and as you said earlier, you know,
1:46:44greatly put, it's not that you're
1:46:45against it and equally, you just think
1:46:47it's a different set of rules. And I
1:46:49would love to hear your perspective when
1:46:50you observe
1:46:52and I don't know how much interaction
1:46:54you've had within the space or you know
1:46:55within traders who may operate within
1:46:57that space. So it' be good to hear that
1:46:59as well. But
1:47:02what are the observations you make when
1:47:04it comes to the biggest pitfalls you're
1:47:07identifying within traders operating in
1:47:09that space? You know why they may be
1:47:11struggling, why they may be failing, why
1:47:13they're not seeing those consistent
1:47:14payouts. more importantly if those are
1:47:16different rules
1:47:18because they for the most part for
1:47:21better or worse there seems to be almost
1:47:24a ceiling within that space and within
1:47:28that path it serves a purpose I think
1:47:30for those traders that we talked about
1:47:32who don't have that capital so it serves
1:47:34a purpose but then unfortunately there's
1:47:37like almost a limit of how far they can
1:47:39go and when that limit is reached I
1:47:41think a lot of traders unfortunately
1:47:43because they don't have that
1:47:44understanding of the different rules,
1:47:45the different psychology that's in place
1:47:47as well, the different skill sets almost
1:47:49incomparable to prop firm trading and
1:47:52and simulated trading to live capital,
1:47:55personal capital.
1:47:58You know, what are the things they
1:47:59should be aware of? The different rules
1:48:02that are in place that they might not
1:48:04understand because I think a lot of
1:48:05traders, one, they never think about
1:48:07trading live or personal, number one,
1:48:09which I think is a disservice to
1:48:11themselves in terms of a trading career.
1:48:14But two also is they don't realize there
1:48:17is a difference.
1:48:19They're just so used to this ecosystem.
1:48:21They don't know anything outside of it.
1:48:22So when you observe it and you look at
1:48:24it, what are the biggest pitfalls you're
1:48:26identifying? But equally, what are some
1:48:27of the things that you think traders
1:48:29need to be aware of for making that
1:48:30transition when that time comes?
1:48:33>> That's a great question
1:48:35for for me. Let's let's start again with
1:48:37game theory.
1:48:39the prop firms has have a certain set of
1:48:41incentives that are not necessarily I
1:48:44say that word charitably they're
1:48:46probably not aligned with their client
1:48:49base for the most part especially
1:48:52if it is primarily a sim funded prop
1:48:55firm right if you're a if if you're a
1:48:57prop firm and the only accounts accounts
1:48:59you're providing to your client base are
1:49:01simulated funds then your interests are
1:49:04diamet diametrically opposed to your
1:49:07clients
1:49:08You want them to lose money, but you
1:49:10don't want them to lose so much money
1:49:11that they give up. You want a couple
1:49:13people to succeed so that they become
1:49:16aspirational stories for everybody else.
1:49:17That's just good marketing. I get it.
1:49:20We're all adults. We all make adult
1:49:21decisions. If you're buying a proper
1:49:22account, you should know what you're
1:49:23getting yourself into. But you should
1:49:26also understand that they don't want you
1:49:27to win. So, you have to accept that risk
1:49:30upfront, right? And and whenever I see a
1:49:34thread or a story on X go viral about
1:49:36someone being denied a payout, you know,
1:49:40it it it's awful, especially if they
1:49:42earn that payout legitimately. But
1:49:44that's also in my mind the counterparty
1:49:46risk that you have to accept. They just
1:49:48might not pay you. They just might not
1:49:51pay you. What can you do about it? Cuz
1:49:53they're not regulated. It's a private
1:49:55business. probably not much except raise
1:49:57a stink and maybe that's enough to
1:49:59convince other people not to do business
1:50:01with them. Then the firm shuts down. So
1:50:03you have to understand the incentives. I
1:50:05would want to work with a firm who at
1:50:08some stage of the program does align
1:50:10their incentives with mine. What does
1:50:13that mean? Does that mean giving me live
1:50:14capital? Not necessarily.
1:50:17Not if I can always have more capital in
1:50:21a simfunded account or set of accounts
1:50:23than I could ever get my hands on in
1:50:25terms of live capital.
1:50:26>> So, if I can get, just making this up, a
1:50:28million dollar in simulated accounts,
1:50:32>> but on live my ceiling was like 200,000.
1:50:35>> Mhm.
1:50:36>> Okay. Your interests aren't really
1:50:37aligned with mine. You know, I can make
1:50:39way more money getting payouts on on an
1:50:42imaginary 1 million than I can on a real
1:50:44200. So you have to really look
1:50:47carefully at where the interests are
1:50:48aligned and where they're opposed and
1:50:50understand that you can exploit the
1:50:53situation for each of those depending on
1:50:55how those firms are structured. There
1:50:58are some some prop firms and I'm doing
1:51:00my best not to, you know, not to name
1:51:01names. I I I definitely don't want to
1:51:03don't want to go there, but there are
1:51:05some prop firms that will offer a very
1:51:07quick pass the evaluation stage, right?
1:51:10And then you're funded. I think I think
1:51:13if I was trading a prop firm with that
1:51:15kind of setup, I would focus very
1:51:17carefully on how I can pass as quickly
1:51:19as possible,
1:51:21model that out statistically
1:51:24based on the variance I can expect. That
1:51:27determines the size of the account I'm
1:51:28going to buy, like whether it's a
1:51:2950,000, 100,000, whatever. That's my
1:51:32cost of doing business over a month. I
1:51:33have an expected pass rate. But the
1:51:35thing is, as soon as I'm at that funded
1:51:37stage, I now have to take a very
1:51:39different approach to trading. You know,
1:51:42so this is just me. If I was trading a
1:51:45prop firm account in that kind of
1:51:46scenario, I'd look to pass as quickly as
1:51:48possible, very aggressive, pass or fail
1:51:51on on one trade,
1:51:53except that I'm going to fail more than
1:51:55I'm going to pass. But on the ones that
1:51:56I have passed, now I have to start
1:51:58trading that account very differently,
1:52:00especially if there's a so-called
1:52:02consistency rule, which in my opinion
1:52:05does nothing in terms of being of
1:52:08service to traders. that is the firm
1:52:10protecting itself. That's not a bad
1:52:11thing, you know. I mean, if if you know
1:52:14that that rule is there, it's on you to
1:52:16agree whether you want to play the game
1:52:17by those rules or not. Where traders get
1:52:20into trouble, it's not whether you know
1:52:23the rules and decide to follow them or
1:52:24or not. It's if you don't understand how
1:52:27the rules incentivize certain types of
1:52:30behavior, right? So you need to find the
1:52:33types of behavior that this prop firm
1:52:35wants you to wants you to to enact and
1:52:39decide whether you have an edge there
1:52:41still or not. I if I started trading
1:52:45from scratch today
1:52:47100%
1:52:49I would go the prop firm route.
1:52:51>> But and I say this with the benefit of
1:52:53experience and wisdom today proper
1:52:56trading is not like trading real
1:52:59capital. It's it's almost not the same
1:53:01thing. And I I made this joke a couple
1:53:03of times. Just because you you play Call
1:53:05of Duty doesn't make you a real soldier.
1:53:07Just because you know you're a superstar
1:53:09on on FIFA doesn't mean you're going to
1:53:11be a worldclass football player, right?
1:53:13So, it is a game with its own set of
1:53:16rules that don't necessarily translate
1:53:18to live trading. just how you could be
1:53:20an incredible pit trader and be an utter
1:53:23failure once you're behind a screen and
1:53:25you're not in that live environment of
1:53:27human emotion and behavior in real time
1:53:30right in front of you. It's it's just a
1:53:31different game.
1:53:32>> But
1:53:34we're in I I think we're in the late
1:53:36stages of the golden era of of prop
1:53:38firms. The wild west seems like it it's
1:53:40passed us by. Um so we're in that late
1:53:42stage. I think there is still
1:53:44opportunity to to take advantage of. Um,
1:53:47but I would in the back of my mind be
1:53:49preparing for that day when I am forced
1:53:52to trade my own capital, build a track
1:53:54record, and then raise other people's
1:53:56money responsibly in order to have
1:53:58access to more leverage.
1:54:00>> One thing we spoke about before we got
1:54:02on camera was in regards to people being
1:54:05very singular in what they trade and
1:54:07thinking that I should only trade one
1:54:09pair, one asset, and nothing else. Like,
1:54:12what are your opinions on that? I'm a
1:54:14big fan of being a specialist over a
1:54:16generalist. If you are a generalist, you
1:54:19are going to be exit liquidity for true
1:54:21specialists. Now, that's not true across
1:54:25the board. For example, I could be a
1:54:27dollar trader. I could my my primary
1:54:30focus could be on the US dollar. And at
1:54:33times, I might want to express my view
1:54:35on the dollar through the euro as a
1:54:37vehicle. I might want to use the yen as
1:54:39a funding currency. There could be
1:54:42different ways that I express my view
1:54:43there. But if we're talking NQ versus
1:54:46crude oil, those are two completely
1:54:49different markets. You know, if you
1:54:51don't know about EIA inventory on
1:54:53Wednesdays in crude oil, you're going to
1:54:54get absolutely run over. Whereas in NQ
1:54:5710:30 is like, well, there's usually no
1:54:59news event at 10:30, you know. So, so
1:55:02understanding the participants in each,
1:55:05you know, I call them games. In each
1:55:07game you want to play, whether it's ES,
1:55:09NQ, the Russell, silver futures, gold
1:55:12futures, you have to understand who the
1:55:13players are. You have to respect them.
1:55:16You have to understand when they're
1:55:17incentivized to take action, what forces
1:55:19them to take action, and what they don't
1:55:21want to happen in order to figure out
1:55:23how you're going to win at that specific
1:55:26game. I liken it to racket sports. You
1:55:29know, if you're good at at tennis,
1:55:32you're probably gonna lose to a
1:55:34professional ping-pong player in a game
1:55:35of ping pong, but you'll beat many other
1:55:37ping-pong players, right? So, trading
1:55:39has transferable skills, sure, but if
1:55:41you're jumping blindly from one asset
1:55:43class to the other without understanding
1:55:45the nuances or intricacies of that
1:55:48specific market, I think you're setting
1:55:49yourself up for failure. To that point,
1:55:51do you feel like a lot of people or even
1:55:54from experience yourself, do you find a
1:55:57lot of people will be too quick to trade
1:56:01actively
1:56:02while trying to learn to trade?
1:56:04>> Million%. But but that's that's
1:56:05neurology. That is going back to the
1:56:08amygdala. What does the amygdala want
1:56:11from us? It's urgency. So why do we
1:56:14overtrade? Why do we take a loss and the
1:56:17next second we find ourselves back in a
1:56:19trade even and not even knowing how that
1:56:21even happened,
1:56:22>> right? It's like, oh my goodness, I've
1:56:23got a position on what happened.
1:56:25>> It's because as soon as we take a loss,
1:56:27what do we want to do? We want to offset
1:56:30that loss. That is loss aversion
1:56:33behavior at its peak. Right? So the
1:56:35amygdala is hijacking our decision-m at
1:56:39that subconscious level. We find
1:56:41ourselves overtrading. Why? Because
1:56:44whenever we take a trade, deep down
1:56:46inside, what do we really think we're
1:56:48doing? We're exerting a measure of
1:56:50control.
1:56:51Are we really though? You know, to to
1:56:54what degree do we have control? Control
1:56:55over position sizing and control over
1:56:57the direction, control over what market
1:56:59we're trading. But the biggest control
1:57:02that we have is whether we take the
1:57:04trade or not. Right? So I I think
1:57:06overtrading is a
1:57:09fundamental misunderstanding of what's
1:57:12happening.
1:57:13in the neurochemistry of the brain or or
1:57:15ignorance, maybe not even
1:57:17misunderstanding, and not creating
1:57:20frameworks intentionally that are going
1:57:22to circumvent that issue from ever
1:57:24happening. Here's a very simple
1:57:25framework that I use. I in my mind, in
1:57:29my mind's eye, have this visualization
1:57:31exercise where I physically have to flip
1:57:34this huge freaking switch in my mind
1:57:38that allows me to then start looking for
1:57:40trades. It's like if you've ever shot a
1:57:42gun before, the gun will have a safety.
1:57:45You have to take the safety off before
1:57:46being able to fire a bullet. That's kind
1:57:48of how I picture it in my head. I have
1:57:50to disengage the safety before I can
1:57:53start taking shots. And it's it's a real
1:57:56visual exercise that takes me about 15
1:57:58seconds to complete, right? It's
1:58:00intentionally a little bit longer. And
1:58:02it's so ingrained in my day-to-day
1:58:04routine that it it really forces me to
1:58:07slow down and say, "Well, I can't take
1:58:09risk. I haven't flipped the switch yet,
1:58:11right? So, I have to flip that switch in
1:58:14order to start looking for reasons to
1:58:17take on risk.
1:58:18>> What would be your biggest steps for
1:58:21traders to become more self-aware, you
1:58:23know, in real time?
1:58:24>> It's understanding why you do what you
1:58:28do from a behavioral standpoint.
1:58:30Understanding that everything ties back
1:58:32to loss aversion and the amygdala firing
1:58:36and understanding that your day like I
1:58:39said before is decided in terms of its
1:58:41outcome before you even push that first
1:58:43button depending on that amount of
1:58:45preparation that you have or haven't
1:58:47done. For me, frankly, a lot of that is
1:58:50done on the technical and and
1:58:51quantitative side. Regime modeling is by
1:58:54far and away for me the most important
1:58:56step in my technical process that
1:58:58determines already what types of trades
1:59:00for the session I expect to work and
1:59:03which types of trades I want to avoid
1:59:05like the plague or even re uh fade. You
1:59:08know, if we're in balance and I'm seeing
1:59:10a breakout in my head, I'm thinking a
1:59:12bunch of trap breakout traders. I
1:59:14probably want to take the other side,
1:59:15especially if it lines up with a certain
1:59:17location on the chart, especially if the
1:59:19order flow is lining up, right? But
1:59:21already ahead of time, I've kind of
1:59:24premeditated that plan of attack. So,
1:59:26part of it is technical, part of it is
1:59:28an awareness of the neurochemistry, and
1:59:30then part of it is
1:59:32that mental visualization exercise of
1:59:35disengaging the safety, giving myself
1:59:37permission to to take a trade. If you
1:59:39were to reflect back on your trading
1:59:42journey, is there a a standout moment
1:59:45for you that really was a pivotal
1:59:48pivotal point in progress or
1:59:51profitability?
1:59:52>> I'm going to say Brexit.
1:59:54>> Really?
1:59:54>> Yeah. Yeah.
1:59:57I had no idea how that vote was going to
1:59:59go, but if you if you ask me then, I
2:00:03probably would have said remain and
2:00:06stay.
2:00:07>> Wow. you know, that's probably what I
2:00:09would have said. And I remember thinking
2:00:12that I have no clue what's going to
2:00:15happen with the pound. I just know it's
2:00:16going to be a crazy move.
2:00:18>> Mhm.
2:00:18>> You know, and then at the same time, we
2:00:20had we had uh Trump won, you know, we
2:00:22had that presidential election.
2:00:23>> We did that. Yeah.
2:00:24>> Right. So, it was like volatility
2:00:26stacked on top of volatility. And I I
2:00:29remember priding myself
2:00:31up to that point on being like this
2:00:33incredible chartist, you know, and and I
2:00:36was like, "Ah, like I just read chart so
2:00:38much better than everybody." And the
2:00:41owner of the firm when I was working
2:00:43there at the time said, "Yeah, you can
2:00:46just throw that all in the bin. You
2:00:48know, it's not going to matter now."
2:00:50Said, "What do you mean? Market always
2:00:51respects my charts."
2:00:53And he said, "You you don't understand."
2:00:56like
2:00:58people build levies to protect against
2:01:00flooding,
2:01:02but if there's a tsunami, it doesn't
2:01:04matter. And he said, "That's that's kind
2:01:06of what's happening here." And I didn't
2:01:09pay attention to him or I I I respected
2:01:12what he said, but I I think I said
2:01:14something along the lines of
2:01:15respectfully, I appreciate that. I'm
2:01:17going to trade my setups and they're
2:01:18going to work or not work the way they
2:01:20always have.
2:01:22And
2:01:24I was humbled very very quickly. But to
2:01:27my credit, I was also able to pivot very
2:01:29very quickly. And I can't remember which
2:01:32side of the trade I was caught off sides
2:01:34on. I can't remember if I was long
2:01:36pounds or short pounds,
2:01:37>> but I was able to recover very quickly.
2:01:40>> And yeah, it it wasn't even about
2:01:44charts. It it was really throwing the
2:01:46chart out the window as as my boss said
2:01:49and really just relying on the fact that
2:01:51the risk was skewed so crazily in one
2:01:54direction versus the other. And I just
2:01:56went with what the odds favored from a
2:01:58riskreward standpoint and it happened to
2:02:01work.
2:02:02>> And it was a weird feeling because
2:02:05>> I threw what was my traditional trading
2:02:08plan out the window, took a calculated
2:02:10risk for justifiable reasons, and the
2:02:13trade worked out. But I had this feeling
2:02:14in the pit of my stomach that I did
2:02:16something wrong. So I went back to my
2:02:18boss. I asked him about it and he said,
2:02:20'Well, what you had here was a bad trade
2:02:23with a good outcome.
2:02:26I said, "What do you mean?" He said,
2:02:27"Well, the outcome was obviously
2:02:29fantastic from a P&L perspective. Well
2:02:31done you. But
2:02:34you had no plan.
2:02:36It just happened to work over a series
2:02:39of a few trading trading sessions. I
2:02:41maybe it was a couple of weeks or so
2:02:43just happened to be catching the
2:02:45momentum at the right time at the right
2:02:46place. So what if it went the other way?
2:02:50What's the conversation we would be
2:02:51having now? Be very different
2:02:53conversation. Yeah, you're right. So
2:02:57what's the lesson? He said the lesson is
2:03:00don't be dogmatic. He said the lesson is
2:03:02be open to multiple possibilities at
2:03:04once, but most importantly understand
2:03:06that there will be over the course of a
2:03:09year one or two macro events that don't
2:03:12give a damn about your charts.
2:03:14>> They they just don't care. And you have
2:03:17to position size differently for them.
2:03:19But most importantly, you have to
2:03:21understand not to be in the way. And and
2:03:24that's when it really stuck to me, this
2:03:26idea of fading extremes, you know, of of
2:03:29fading extreme highs, fading extreme
2:03:31lows, but not doing it blindly, right?
2:03:34There has to be some kind of logical
2:03:36reasoning for it. So that that's always
2:03:38been a pivotal moment that stuck with me
2:03:39because I I really do consider myself a
2:03:41trend follower at heart. Um, but that
2:03:45experience has allowed me to trade more
2:03:47comfortably in non-trading environments.
2:03:49It's so interesting you bring up Brexit
2:03:51because that was my first trade I ever
2:03:53placed was on Brexit and it's so
2:03:55interesting you mentioned how not
2:03:56knowing where it would land because in
2:03:58the UK I think it was so obvious what
2:04:00was going to happen.
2:04:00>> Exit. Yeah.
2:04:01>> Um Yeah. Yeah. Just because of the the
2:04:03general sentiment and probably all the
2:04:06media and and generally just hearing all
2:04:09the things uh that was taking place.
2:04:11Maybe that was just my feel as well.
2:04:12It's not like I asked everyone. Um I
2:04:14just felt like oh this is obviously
2:04:16we're going to we're going to leave. Um,
2:04:18and that was my first ever ever trade.
2:04:19That was the year I started trading. Um,
2:04:22so it's interesting bringing that back
2:04:23up. But if you were to say, is there a
2:04:28strong misconception
2:04:29about trading that you feel exists like
2:04:32people have a a really really wrong idea
2:04:35about something?
2:04:36>> Yes, I I do have a very strong feeling
2:04:40on this and it it we have we have
2:04:43touched on this throughout our
2:04:45conversation. It has to do with the fact
2:04:47that you can make any strategy there.
2:04:50I've seen this sentiment floating around
2:04:53quite a bit. Every strategy will have
2:04:55its day in the sun. If you have good
2:04:57risk management, that will prevail above
2:04:59all else. And I I don't disagree with
2:05:02that necessarily. I I think good risk
2:05:04management will keep you in the game.
2:05:06But let's examine the root cause of that
2:05:08type of thinking. And the root cause of
2:05:11that type of thinking
2:05:13is that maybe there is
2:05:16not necessarily a holy grail. We all can
2:05:19agree or accept on that. I I hope
2:05:21there's it's not that there's
2:05:22necessarily a holy grail or there isn't.
2:05:25it's that
2:05:27there is a limit to how much edge I
2:05:31personally can have or exploit, you
2:05:34know, and and I think a lot of traders
2:05:36simultaneously have crazy unrealistic
2:05:39expectations of themselves, but also
2:05:40limit themselves tremendously.
2:05:43And there is always more to learn. We we
2:05:47understand that and know that
2:05:48intuitively.
2:05:50Don't be afraid of putting in the hard
2:05:52work. The misconception is where you
2:05:55should put in that hard work. That was a
2:05:57terrible roundabout way of saying that
2:05:59the solution is not really in studying a
2:06:02price chart more.
2:06:04>> Nor is it in completely being
2:06:05introspective and psychoanalyzing
2:06:07yourself to death. The solution is
2:06:10really in understanding that you are
2:06:11just one tiny piece of this game. You
2:06:16are a player, yes, but there are other
2:06:18players too. So looking at a chart, if
2:06:21you if I see a chart pattern, a
2:06:23compression that's going to lead to a
2:06:24breakout, that tells me that there might
2:06:26be edge here.
2:06:28>> Mhm.
2:06:29>> But who's behind that? No, I'm not going
2:06:32to know specifically whose button is on
2:06:34the trigger. But who is behind that?
2:06:37Start thinking about the other players
2:06:38in the game. Don't think that all the
2:06:40work is just on me, myself, my
2:06:42psychology, my setups, my strategy.
2:06:45That's part of it. That's part of it.
2:06:47But isn't it just so much so much more
2:06:51beneficial to you to start considering
2:06:53what other players are doing? The ones
2:06:55that are making all the money versus you
2:06:57who currently isn't. The thing is most
2:07:00traders we know at at the self-directed
2:07:03level, right? My charitable way of
2:07:05saying retail at the self-directed level
2:07:07are not successful. And yet knowing this
2:07:11statistic, most traders are still doing
2:07:14what all the other traders are doing,
2:07:15which is focusing on charts, risk
2:07:17management, and and psychology.
2:07:19If you want results that go beyond the
2:07:22average, you have to do things that the
2:07:24average trader isn't doing, right? And
2:07:26and I think that goes to all the stuff
2:07:29that we've talked about. I think very
2:07:30few people are are considering those
2:07:33factors, those variables, those
2:07:35circumstances. But it's there that you
2:07:37actually build in my opinion a
2:07:39legitimate edge that is going to be very
2:07:41slow to decay.
2:07:42>> And before we round up the players, like
2:07:45which players come to your mind when you
2:07:47think about the different players that
2:07:48traders should be sort of thinking about
2:07:50and observing?
2:07:52>> I love looking at institutional players
2:07:55with very specific mandates. There are
2:07:57some institutions that are long only,
2:07:59right? They can't short stocks for
2:08:01speculative profit there, but they will
2:08:05add hedges to the market, right? So, if
2:08:07you are a huge fund, pension fund,
2:08:10whatever, what have you, and you have a
2:08:12tremendous long market exposure over
2:08:14time, you have to hedge that. And and
2:08:17even though that hedge might not be a
2:08:18large percentage of your overall assets
2:08:21under management, from a position sizing
2:08:24perspective, it's going to be pretty
2:08:25big. That's going to have an effect on
2:08:27the tape. So, I love looking at market
2:08:28participants that are constrained to be
2:08:32forced to act in very specific ways
2:08:34based on very specific events. So, long
2:08:36only funds would be an example. CTAs
2:08:38tend to be trend followers. Uh if if I'm
2:08:41trading a commodity, I want to look at
2:08:43what producers are doing, right? I I
2:08:45love this concept. Now, doesn't really
2:08:47apply to to stock market futures, but if
2:08:50we're talking about, I don't know,
2:08:52soybeans, for example, what are the
2:08:54commercial producers doing? Well, they
2:08:56need to hedge the cost of their
2:08:58production, right? That's going to have
2:08:59a market moving impact. And don't you
2:09:02think that those commercial producers
2:09:03who are in the business day in day out,
2:09:05literally working the soil, might know
2:09:08something about that market a little bit
2:09:09better than you do? You'd be a fool not
2:09:12to listen to them, right? They probably
2:09:14know loads more than you do. So find
2:09:17those edges, find those advantages, find
2:09:20those players that have either an undue
2:09:23influence on the market, have
2:09:25specialized knowledge about the market,
2:09:27or are forced to act in very specific
2:09:29ways under very specific sets of
2:09:31circumstances. There is opportunity
2:09:34there on a consistent basis and it it
2:09:37doesn't have to be a broad market like
2:09:38soybeans. It can be individual stocks as
2:09:40well. You I think a great example would
2:09:42be Michael Sailor and Micro Strategy,
2:09:44right? I don't want to get into the
2:09:47weeds of that. It's not a stock I trade,
2:09:49but I've thought many a times that if
2:09:51you see the pattern of what Michael
2:09:52Sailor is doing with that stock, which
2:09:55absolutely bananas if you ask me, this
2:09:57is going to go down in history as as a
2:09:59crazy moment in time and it's going to
2:10:01be a crazy trade, but there is an edge
2:10:03there. There is an edge there. If you
2:10:05look at the price of Bitcoin, if you
2:10:06look at the price of that stock, you
2:10:08look at the short interest, you look at
2:10:09the open interest, there is edge there.
2:10:11Undoubtedly
2:10:13>> the restricted funds and traders really
2:10:16stands out to me because it's the
2:10:18understanding knowing that okay if I
2:10:20think in this way think about the other
2:10:22players I think about their restrictions
2:10:24and then I think about okay where price
2:10:26is now or what's happening right now
2:10:28within this marketplace this is how they
2:10:31should react to be able to counter risk
2:10:33take profit etc. So Ben going down that
2:10:36line of thinking it allows you to then
2:10:37make a more informed decision or to try
2:10:41and work your probabilities accordingly.
2:10:44Right? And and that is so important. If
2:10:46I'm for example a large university
2:10:49endowment and I'm managing billions of
2:10:51dollars, right? Do you really think that
2:10:54I care whether today the stock market
2:10:56ends the day higher or lower?
2:10:58>> What about tomorrow, next week? No.
2:11:01Right? I let time do the heavy lifting
2:11:05for me. I have a thesis. I have a
2:11:07mandate that I follow. There might be
2:11:08certain exposures that I need to have as
2:11:11per my mandate, right? And I have to
2:11:14hedge those exposures based on certain
2:11:16conditions. So you it's always really
2:11:19important to remember that a lot of
2:11:21these institutionals players that the
2:11:23really big ones, they don't have an
2:11:25agenda for the day. They don't care
2:11:27about that day. They care about being
2:11:29able to do their business in an area
2:11:31where there's a lot of volume so that
2:11:33they're not disturbing the market
2:11:35accumulating literally for days or or or
2:11:38weeks, right? Or even months depending
2:11:39on the the position, depending on the
2:11:41idea, depending on the fund. So yes, I I
2:11:44think looking at those funds with forced
2:11:46mandates
2:11:48>> so so so valuable. There is a lot of
2:11:50information to be gleaned there.
2:11:52>> I could do this all day and keep going.
2:11:54I would love to as well. And I hope we
2:11:56can do something in the future. No
2:11:57doubt. Just to finish up a question that
2:12:00I've been reoccurring actually very
2:12:02funnly enough off the back of um the
2:12:06podcast like I did with Andy and and
2:12:08others is you know I would love to
2:12:11understand from your perspective unique
2:12:14to you what does success mean to you not
2:12:18just trading but generally speaking like
2:12:20what is what does success defined as to
2:12:23you? I don't think it's possible,
2:12:26speaking as a as a trader first, I don't
2:12:27think it's possible to be successful as
2:12:31a trader without having a little bit of
2:12:35a chip on your shoulder, a little bit of
2:12:37an ego. There is, I'm not ashamed to
2:12:40admit it, there is a part of me that
2:12:42thinks I'm smarter than most of you. I
2:12:45know things you don't, or I can
2:12:46interpret information in a way that you
2:12:48cannot. And I have the conviction and I
2:12:51have the psychological fortitude to put
2:12:53my risk where my thinking is and ride
2:12:56that position.
2:12:58And that was where I used to live for
2:13:03frankly for for most of my time as a
2:13:05trader. And that meant I was operating
2:13:10not just in trading but in my life from
2:13:13a place of ego,
2:13:15from a place of pride, dare I say
2:13:17arrogance at times. I don't like that. I
2:13:21don't like who that makes me as a
2:13:23person. I don't think that makes me
2:13:24necessarily a fun person to be around.
2:13:27And the funny thing is that every great
2:13:30trader that I've seen, worked with, had
2:13:33the privilege to have a conversation
2:13:34with, I've seen that exact same thing.
2:13:38>> There is uh certain darkness, a shadow
2:13:42that I think a lot of great traders
2:13:44carry. And being able to tap into that
2:13:48at certain times keeps you going. And
2:13:51I'm also not ashamed to say there there
2:13:52were many a night where I was crying and
2:13:55thinking that this is it.
2:13:58I'm done. I'm throwing in the towel. I'm
2:14:00giving up. And somewhere somehow I'd
2:14:03find the resolve to tap into that
2:14:05darkness, into that shadow, and say,
2:14:07"Failure is literally not an option.
2:14:09Keep going." And that got me to a
2:14:11certain point. I'm at a point in my life
2:14:15now where I want to operate from the
2:14:19complete opposite end of that spectrum.
2:14:21I want to operate from a place of peace,
2:14:23gratitude,
2:14:25and as much humility as I can muster.
2:14:28And
2:14:29faith has played a very important role
2:14:31in that for me. I've had some
2:14:34tremendously enlightening conversations
2:14:37with Peter Brandt on the topic of faith
2:14:39and that's gone a long way. Uh, I've had
2:14:42tremendous conversations about faith
2:14:44with other traders as well from from
2:14:46many different religions and ways of
2:14:48thinking. And the one constant universal
2:14:50thread that kind of ties all of this
2:14:52together is,
2:14:55you know, talk about game. I think life
2:14:57is a bit of a game and we're only
2:14:59playing this game for a certain amount
2:15:00of time.
2:15:02And I don't want to be remembered when
2:15:04I'm done playing this game as a trader.
2:15:07I don't want to be remembered as a
2:15:08market analyst. I don't want to be
2:15:11remembered for any of that. I want to be
2:15:13remembered for being a friend,
2:15:18being a family member,
2:15:21being a mentor, being an asset to my
2:15:24community. Those are the things that I
2:15:26want to be remembered for. Trading just
2:15:29keeps the lights on, pays the bills. I
2:15:32have to do it. I I've said this to you
2:15:33before. I love the markets. I don't
2:15:35necessarily love trading. So that to me
2:15:38that's what success looks like. It's
2:15:40being able to sustain the the economic
2:15:43engine right of trading for financial
2:15:45security and stability. And uh I have a
2:15:47saying that that you can't buy
2:15:49happiness. I've tried I've tried to buy
2:15:51happiness. You can't do it. But you can
2:15:53buy freedom. And I do think you need
2:15:54freedom to be happy and to be fulfilled,
2:15:56right? What that means for everybody is
2:15:58going to be different.
2:15:59>> But that's what success genuinely means
2:16:01like to me at this stage. It's trying to
2:16:04be consistently the best version of
2:16:06myself that I know is possible.
2:16:09>> I love that. I love that so much. And
2:16:11thank you for sharing so much with us
2:16:12today. I know there's a lot more we can
2:16:14go into and again we wish to have you
2:16:16back in the future as well. Hopefully
2:16:18we'll chat catch you on chags at some
2:16:20point too. Everyone at home different
2:16:23episode today really indepth so much to
2:16:25take away no doubt as well. Drop a
2:16:27comment with your biggest takeaway from
2:16:29this episode. Of course, like, hit
2:16:32subscribe if you're not already. I don't
2:16:33know why you wouldn't be, but other
2:16:35episodes are on screen. Links for Emry
2:16:37will be in the description below as
2:16:38well. So, make sure you check those out.
2:16:40And until next time, take care.

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