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The EXACT Strategy Behind a Six Figure Gamma Trader — Transcript

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0:05Tesla course where I almost made six
0:07figures and that with the age of 20.
0:12The problem in the market is you can do
0:14everything right and be wrong.
0:16And you can do everything wrong and be
0:17right.
0:18>> Most traders are looking for the perfect
0:20strategy, the perfect setup, the holy
0:23grail. Our guest today, Manuel, stopped
0:26looking 17 years ago. He started trading
0:29at 17 and today he trades the world's
0:32biggest indices [music] with a framework
0:35most traders have never even heard of.
0:37>> And when you know about gamma, then you
0:39know have to know about two things. You
0:41need to know about positive gamma and
0:43negative gamma.
0:45>> In this episode, we walk through 17
0:47years of edge. From his biggest win to
0:50his biggest loss to the framework he
0:52uses every day.
0:54>> Most of the drawdowns do not come from a
0:57wrong trading approach. The trading
0:59approach might be fine, might be great,
1:01but the blowing of accounts only happens
1:04when they're trading emotionally after
1:07losing trades.
1:08>> So, if you want to understand why so
1:10many serious traders don't even trade
1:13their own money and how you can explore
1:15that path yourself, this episode is for
1:18you.
1:18>> If you can just look at the market and
1:20sit on your hands without feeling the
1:22need of doing anything, then you're
1:24better than I would say 60 to 70% on the
1:27market.
1:28>> Now, let's see what Manuel is made of.
1:35A lot of traders think that advanced
1:38traders are doing something secret,
1:41complex, or impossible to understand.
1:44What's the most simple part of your
1:46trading process that contributes the
1:48most to your results?
1:51>> I think the simplest part of my trading
1:54approach is just looking at volume per
1:56se. And
1:58volume You hear volume all the time,
2:00right? When you're looking at trading
2:01nowadays on YouTube, you hear about
2:04volume. But um
2:06I feel like this is something that a lot
2:09of people miss. They all have the volume
2:10profile on their chart, but they're not
2:12really looking at it and and
2:14understanding it. And the simplest thing
2:16I do, for example, is just looking at
2:19volume. Where was the distribution?
2:21Where was the accumulation? And
2:24how did the distribution or accumulation
2:26happen? And then I just put the market
2:30in this one frame during the day where I
2:33know, okay, these will be approximately
2:36the implied day high or the implied day
2:39low. And this is the range that we are
2:42most probably going to be trading in.
2:45And in that range, I want to stay.
2:48>> So, what does volume tell you about a
2:50session
2:51that a simple price move or an indicator
2:55like RSI does not tell you?
2:57>> Yeah, this is something I will show
3:00later as well. Volume in general just
3:02shows me where price got accepted. So,
3:05when I know price was accepted at a
3:08certain price range, I know that this is
3:11a pinning point. And why the pinning
3:13point happens is to be determined later.
3:17But at first, we just need to know
3:19there's a point of like gravity where
3:22the market can pull back to. And
3:26the market will have a I call it or it's
3:29said like that
3:30slow like lower realized volatility. And
3:34the lower realized volatility helps me
3:37understand, okay, this is uh the farther
3:40we move out of that range, the more
3:43likely we will come back to that high
3:44volatility point. And this this is how I
3:47can structure the the market for the
3:50day.
3:51Just rotating back to the values or
3:54levels of interest.
3:56Right?
3:57>> And you figure this out with the volume
3:59profile.
3:59>> Exactly. Exactly. Yes.
4:02>> So, before you even think about entering
4:04a trade, what are you trying to
4:06understand
4:08about the market?
4:09>> So, what I want to understand about the
4:11market, and this is also something a lot
4:13people are doing wrong, is to put too
4:15much focus on the setups, right?
4:17Everyone wants the the correct setup
4:20that helps us winning every day. But, um
4:24for me, the most important thing is
4:25context. So, at first, I will try to do
4:28a market brief for myself, you know, so
4:31I can um
4:33so I know what macroeconomic events, for
4:36example, are happening or are
4:39just important for the week. And then, I
4:42will try to see
4:43if the market actually um shows what the
4:48theory um says it must be like, right?
4:52Are we trending? Is the market actually
4:55trading like it's supposed to be in the
4:57way that the the news and everything
5:01lines up? Or are we like in a maybe
5:04mispriced um
5:07area during the day?
5:09And for that, I want to just simply see
5:12are we trending? Are we ranging? And um
5:15have the bias or the context for the day
5:18to just know if I'm looking for, for
5:20example, only for long trades or if I
5:22can do trade both. Where is my
5:24probability the highest for the day? And
5:27that I do with the market brief, which
5:29which is like a 30 minutes of work
5:31before I start trading at the day. Um to
5:34just gather all the information I need.
5:37I have a setup for this and just put
5:40everything in the pipeline I know
5:42and create like a brief for myself for
5:46for trading day.
5:48>> So,
5:49what is one thing
5:51beginner traders focus on too much?
5:55And one thing that they don't focus on
5:57enough.
5:58>> Yes, that's a good question and I think
6:02like I mentioned in the beginning, it's
6:04usually the setup. So, beginner traders
6:07usually focus on and I mean you can't
6:10blame them because there's a lot of
6:11noise and a lot of info out there on
6:14YouTube and wherever you can get a lot
6:16of good quality free info, but you can
6:18also get a lot of bad quality info and
6:21you don't know how to filter that. So,
6:23the first thing which you naturally
6:25focus on is
6:27when I want to start trading, I need to
6:29have like uh
6:30um just a setup or um
6:33a structure or like uh shoulder head
6:36shoulder formation, like certain
6:38formations that you just have to see in
6:41the plain chart and then you try to make
6:43something out of it or try to get the
6:45trade with that formation. And I feel
6:47like this the the mistake right in the
6:49beginning cuz the focus
6:52um stays with the setup. So, if
6:55something's not profitable, beginner
6:57traders
6:58just look for the next setup. So, they
7:00go to the next YouTube video and there's
7:01another guy showing the next setup. So,
7:04you try that. But, what you always miss
7:07is the context which I was talking
7:09about, which helps you understand what's
7:12even going on in the market and where
7:14are your levels of interest which are
7:16really worth looking at because you do
7:19maybe have a winning setup, but the
7:21winning setup is only a winning setup in
7:23a certain market environment, in a
7:25certain regime. And if you don't know
7:27about the regime, if you don't know
7:29about the market environment, you can't
7:31really
7:32have any setup. Like the most profitable
7:35setup wouldn't be profitable in
7:38a wrong environment for the setup. And I
7:40think that's what most beginner traders
7:43are doing wrong.
7:44>> Now Matt, well, this is one of the
7:45hardest things in trading. When looking
7:47at news events, fundamental releases,
7:50>> Yeah.
7:51>> how do you know
7:53when you should classify it as bullish
7:55or bearish?
7:57>> That's actually pretty hard because not
7:59every news is automatically only bullish
8:03or only bearish. Um the topic is way
8:06more nuanced. I mean, this is something
8:08also a lot of beginning traders um try
8:11to think of is oh, that news must be
8:14bullish for the market, so I just go
8:16along and this must be an easy trade.
8:19But um the market is more complicated
8:21than that. Um it's always what the
8:23market expects, what the market has pri-
8:27or has been pricing in, and what's
8:30actually the reality.
8:32And news can be bullish, for example, uh
8:35rate cuts, right? Um usually are bullish
8:38for the market, but if the market
8:40expected a 0.5
8:42uh bps rate cut, but it only um happens
8:46uh 0.25 bps rate cut, then the market
8:49tanks. So, bullish news can actually be
8:52bearish. And I I think you have to
8:55understand that um as a beginning trader
8:57as well, that um
9:00n- every news can be bullish or bearish
9:03based on what the market expected, and
9:05for that you have to see
9:07um how we've been trading.
9:09Right? And if we've been trading, for
9:12example, very flat, very consistent,
9:15just a s-
9:17slow skew upwards, and the market just
9:19trending upwards, and everything is
9:21fine,
9:22um then you have to see why is that, and
9:26what news could um trigger
9:30a different pricing.
9:32And that's that's about it. So, news
9:35will trigger something, and you just
9:36have to see how our traders protect them
9:39then protecting themselves for the news.
9:41Are they
9:42measuring high significance for the
9:44event or low significance? And they
9:47might be wrong, right? They might be
9:49thinking, "Oh, this event will be very
9:51significant for the market." So, the
9:53market tends to be very volatile.
9:55But maybe the news didn't trigger
9:58anything. So,
10:00it got mispriced, right? And that can be
10:02bearish news, but the market rips. So,
10:06I feel like this is something you really
10:08have to understand.
10:10>> So, Manuel, what would you say to a
10:12trader
10:13who doesn't trade fundamentals or news
10:16and only focuses on technicals?
10:18>> Yeah. If you only focus on technicals,
10:21then we can draw the circle back to
10:23volume.
10:24If you're not really interested in or
10:27don't understand the fundamental side of
10:29the markets, then it's fine because you
10:31can
10:32actually isolate
10:34profitable trading from understanding
10:37everything behind the market. And then I
10:39would say definitely focus on volume
10:41because if you know where you're
10:43trending relative to where volume has
10:45been built, then you know a lot already.
10:48Then you know if the market is more
10:51bearish or bullish just based on that.
10:54And then you can even
10:56to some extent at least, not care about
10:59why a move happened, why this candle is
11:02so big and green or or red and uh huge
11:06uh
11:07because you just need to know where is
11:09the candle relative to the volume
11:10profile, for example. Then you already
11:12know a lot. Yeah.
11:14>> If someone's brand new watching this
11:16video, would you tell them skip RSI,
11:18skip MACD on your technical side, start
11:22with options, news, volatility, volume
11:25profile?
11:25>> Yes. Yes. 100% skip the lagging
11:28indicators. I'm not looking at a at any
11:31of these and they are not helping. They
11:34never helped me. Um I don't also want to
11:37be um arrogant in that regard and say
11:40they can never help and this is all
11:42because it's not. You can
11:44actually if you have the deep
11:46understanding of the market then you can
11:49take those things
11:50and maybe sharpen your trading edge that
11:54you found because sometimes it helps,
11:56right? But only to use RSI, MACD,
11:59whatsoever as a plain signal which most
12:02of the people are doing or which most of
12:04the YouTubers that teach those things
12:07are
12:08um
12:08are perpetuating that it might be the
12:11right thing to just uh
12:14to just have as an entry signal. This is
12:16wrong. First, you understand volume, you
12:18understand the market itself and then
12:21you can use those things to sharpen your
12:23edge, to sharpen your trading approach.
12:25Um and then you know how to use them,
12:28right? But before I would skip it and
12:31learn about the
12:32the real stuff at first.
12:34>> The real stuff?
12:35>> The real stuff.
12:36>> Exactly.
12:37>> [laughter]
12:38>> Now, would you say you're predicting the
12:40market
12:41or are you identifying areas where
12:44forced behavior
12:46>> Yes.
12:46>> might transpire?
12:47>> I think predicting is always something
12:50um you can never use as a professional
12:52trader
12:53because predicting would mean that you
12:56know something's going to happen. But
12:58you can't do that as a trader. As a
13:00trader you always only have
13:01probabilities and you know or what you
13:03can make out is where's high probability
13:06for something to happen and where's low
13:08probability for something to happen. So
13:10with uh identifying these levels
13:13I know that I have a certain probability
13:16of the market reacting at those levels
13:18and depending on how significant those
13:20levels are to just uh do the trade there
13:23and with that probability probability I
13:25have confidence and with the confidence
13:27I have conviction in the trade, and
13:29therefore, I'm able to to stay
13:32emotionally
13:34calm and detached, and just do the trade
13:38because I know the probabilities on my
13:40side in the best case if I do it if I
13:42did everything correctly.
13:43>> All right, man. Well, you've given us an
13:45excellent overview of what you look for
13:48in the markets that's helped you be
13:50consistent and find success.
13:53I think it's time to show us on a chart
13:56specifically what you're looking for.
13:59We're on the chart. What's the first
14:01thing we do?
14:01>> So, this is um
14:03as you can see here, it's a 30-minute
14:06chart.
14:08And what you can do here in general is
14:10just
14:12have a look at the structure itself,
14:14right? What you can see
14:16is just a plain chart for now with the
14:19volume profile, which is actually the
14:21volume profile that shows the whole
14:23month or the volume for the whole
14:27contract, right?
14:29Um in that case, I use a continuous
14:31contract um
14:33that um
14:34the the information is 100% full.
14:38>> Now, what are you looking for next? We
14:40have our monthly volume profile on the
14:42chart, and we're on the 30-minute chart
14:44specifically.
14:45>> Yes, exactly.
14:46>> What do we look for next?
14:48>> So, what are we looking for is where did
14:51the volume
14:52um or where was the volume built
14:55in general, right? And when we zoom out,
14:57we can see
14:58that the week before, so starting from
15:01Friday, May 8th, until
15:05Friday, May 22nd,
15:07we
15:09traded this huge range, right? And we
15:11built most of the volume during that
15:13month here.
15:16And what we can see now is that we broke
15:18out of that. So, we're technically long,
15:21right? Just by looking at it, we can
15:23definitely determine and just looking at
15:26it objectively that we're long in the
15:29structure.
15:30>> You said we broke out of the range. How
15:33do we know what the range is based on
15:35volume profile?
15:36>> So, to determine the range, I would use
15:39the 30-minute chart just by looking at
15:43it. Where are the points that got tested
15:46for amount X, maybe two times, maybe
15:50three times, maybe four. And where is
15:53the volume breaking up um significantly?
15:57If we try to determine that, I will undo
16:00the old level or I will cancel the old
16:02levels, so we have a clean view on the
16:03chart and it's not distracting. But,
16:06what we can see here is for example it
16:10that area between
16:13here and here, for example, we have
16:16significance in the cut of the profile,
16:20right?
16:21So, we know
16:22that
16:24these levels
16:26make out the range uh where the markets
16:29has been trading between. Like, these
16:32are the steps,
16:33I would say.
16:34And in order for the market, for
16:36example, to get back into that range, it
16:39has to overcome the first resistance
16:42where volume started to
16:45or was built again, right?
16:49So, I I What I know is that this is the
16:53bigger range.
16:54If I look at this price point here
16:57and down here
16:59just from the technical side, because
17:02this is the big If you just look at it,
17:05this is the big area where the market
17:07traded between basically most of the
17:11month for until now to date. And when it
17:15broke out, it had very low volume and
17:17typically for a significant breakout is
17:22the imbalance, the low volume. And after
17:25that,
17:26you know, prices get accepted again when
17:28volume is being built. So, since today
17:30is the Memorial Day, we don't know for
17:32sure. We can't really account for that.
17:35But, um
17:36if, for example, tomorrow the market
17:38keeps holding that level and maybe fills
17:40that low volume node or rejects it, then
17:44we are prone for a move higher.
17:46>> Why is acceptance and rejection
17:47important? What do these mean?
17:49>> So, that what we have to understand is
17:51the the
17:53um market itself. Like, for example, the
17:55Chicago Mercantile Exchange has only one
17:57job. It has to match buyers and sellers
18:01in the most effective way.
18:03And when we know volume is being built,
18:06buyers and sellers could be matched most
18:09effective in that price area, right? So,
18:13what's acceptance and rejection means is
18:15when we see the market rejected a
18:17certain level or it didn't really trade
18:19around that level, then we know that
18:21market participants weren't interested
18:24and the um market itself or like, for
18:27example, the Chicago Mercantile Exchange
18:29in that case
18:30couldn't match buyers and sellers around
18:33that prices, but could do so
18:36in that area.
18:38So, we know that the prices here got
18:40accepted, but we got rejected here and
18:43where rejection happens,
18:45another rejection is likely.
18:47>> And
18:48you mentioned on this breakout a retest
18:51of the low volume node.
18:53>> Um I mentioned Yes, exactly. So, what
18:56I'm looking for it in yesterday is
18:59uh tomorrow. Um what I what I will be
19:01looking for is, for example, another
19:04test into that low volume area. This
19:08would also be a market profile single
19:10print, actually, which I mentioned
19:11before, which I um which I can look at
19:15automatically.
19:16And I know for a fact because of this
19:19this has been actually proven by our
19:21systems is a profitable trading approach
19:24trading single print rejections. So,
19:27these have a very high significance. And
19:30when the market trades in that level,
19:32it's very likely that it will reject
19:35this low volume area
19:37and the single prints.
19:39It's called single print because you
19:41only have this one move in that only in
19:44that one auction
19:46where the price got um
19:49got painted. But um
19:51here you see
19:53the prices stay for a longer time. So,
19:55this is also an area of low acceptance.
19:58And if it's an area of low acceptance,
20:00the probability that the market's going
20:02to reject it is very high.
20:04>> Now, you'll treat a rejection at this
20:07low volume node as a potential long
20:11entry opportunity?
20:12>> Exactly. I mean, not that I would marry
20:15the idea of trading a long here,
20:18but I know that uh
20:19reaction here is possible and likely.
20:22This is the only thing I know, right?
20:24It's not that I know the market's going
20:26to retrace from here and will like do
20:27another will do another long.
20:30But I know it's likely.
20:32And since I have that
20:35low value area, that low acceptance
20:38area,
20:39when the market is coming down, this is
20:41an area of interest for me and I will
20:43try to look for uh significance
20:47in for example order flow here, maybe an
20:50absorption of sellers that will confirm
20:54that this level
20:56is going to be rejected.
20:59And then, as soon as we enter
21:02the area of acceptance again,
21:04I know the probability that we test the
21:06high
21:08is definitely higher
21:10than the probability of us testing the
21:13lows again.
21:14So, I will look look for a long
21:16opportunity.
21:17>> You mentioned absorption of sellers.
21:19>> Yes.
21:19>> This would be a confirmation technique?
21:22>> Yes, exactly.
21:23>> How do you confirm that?
21:24>> I confirm an
21:26absorption when I see high significance
21:29in volume and delta at a certain price.
21:32And we don't have
21:35um what I call market participants
21:38getting paid.
21:39So, if you think logically about it, if
21:42there's
21:44huge market selling volume
21:48and the same volume just moved prices
21:51and now it stops. There has to be a
21:53reason for it. There has to be a passive
21:55buyer that's absorbing
21:58these this volume.
22:00So, if I see that and I see the
22:02significance not only in delta itself
22:04because delta itself is
22:06only half of the information you need.
22:09You need also volume and you have high
22:11volume high delta combinations which
22:14actually these
22:16dots here, the red and the green dots
22:18show, then you know that there's an
22:22absorption happening because the market
22:24is not going through. So, so the sellers
22:26that actually sold aggressively sold
22:29markets
22:30are not getting paid.
22:32And if the sellers are not getting paid,
22:35the other side is getting paid. So, the
22:37buyers are getting paid when the sellers
22:38are not getting paid. So, you always ask
22:40the question,
22:42who's getting paid and who's not? And if
22:44the sellers move into the market
22:45aggressively but are not getting paid,
22:47then you know the buyers are getting
22:48paid. So, the side you want to
22:50set trade on
22:52is the long, for example, right? At the
22:54level where you're looking for a long
22:56anyways, that's when you have high
22:58conviction.
22:59>> And what would absolutely invalidate
23:01this idea?
23:02>> Yeah, So, so we have uh um couple of
23:05things that could happen here.
23:07For example, the market accepts these
23:11prices.
23:12So, it trades beneath that level,
23:14beneath that area, and just stays here.
23:17So, volume is being built.
23:20Then you know there's acceptance.
23:22And acceptance is slow.
23:25Acceptance means the market is in um a
23:27slow environment, and nothing really
23:29happens. So, this is not what happens
23:32during a rejection. A rejection in
23:34general it tends to be fast. So, you
23:36know that with the order flow itself,
23:38you know that with the volume that's
23:39been that's that is being traded per
23:41second, for example. High volume per
23:43second, the market just dips in here,
23:46retraces. That's a typical rejection.
23:50Acceptance would mean the market accepts
23:52these prices. Accepting means stays at
23:55these price levels, builds volume. So,
23:58this would invalidate the idea for me of
24:00going long.
24:02So, the market has to be fast in order
24:04for me to
24:05um know that this might be an
24:08an a rejection.
24:10Or what could also happen is the market
24:12is fast, but just moves down this level
24:16again, back to that range, or enters
24:18that range again.
24:20Then the trade idea never really um
24:23got at all anyways. So, I wouldn't even
24:26have looked for the long, because the
24:28market just didn't do anything that
24:30could
24:31made it interesting for me. That could
24:33have made it interesting for me.
24:35>> So, Manuel, how does options volume,
24:38news, macroeconomic data, where does
24:40this tie into your market structure and
24:43volume profile analysis?
24:44>> Um so,
24:46what I can show you, or what I wanted to
24:48show you, is the typical market brief
24:50and how that looks like for me. Right
24:52now, this is in German, so um you won't
24:54make most of it, but just to get a
24:56picture of how it looks like, right? Um
24:59this is like a daily technical brief for
25:01me, um which is um
25:04including the executive summary. So, it
25:06it's it says about the regime Iran
25:08headlines AI narrative volatility crush
25:12that the market um
25:14that holds the market in the long
25:16regime, right? And then just where the
25:18SPX is, where the uh
25:21VIX is, where the V W um BBIX is, and um
25:27what's the general bias. So, I know for
25:30the ES and the NQ the general bias and
25:33um what what's it saying about uh what
25:36the market is doing, right? So, this is
25:37what I look at every day,
25:39um which I'm creating every day for
25:41myself.
25:42And if I know that,
25:44I know the regime which we were talking
25:47about in general, and then I look for
25:49high conviction levels, which will be
25:52for instance the market maker hedging
25:55levels. And I will look at a heat map
25:58with uh certain trading tools I'm using,
26:01and where I can confirm that. For
26:04example, let's look at the Friday here.
26:07This was Friday 5 minutes before open.
26:10And what we can see here is a heat map
26:13that shows market maker hedging
26:15pressure,
26:17where it might come in and where it
26:19might not come in. And what you can see
26:21is that the map in general is very blue
26:25bluish. So, that means we're in positive
26:28gamma regime, so that in general means
26:31it's supporting the market.
26:33And when it's supporting the market, it
26:36means um for us that we can
26:39be supported in the move that's
26:41happening. So, if the market tends to
26:42trade long, we're looking for longs. And
26:45what you also can see
26:47is the net OI, so the net open interest.
26:51And this is for example, just you get
26:54the idea, the call wall we're talking
26:56about.
26:57And the call wall here at 77500
27:02shows that here's a significant call
27:04position of 20,600
27:07contracts that the market makers are
27:10holding long.
27:11And here
27:12a net put position
27:14of
27:1615.6 thousand contracts. So, this is the
27:19call wall.
27:20And
27:21this also means a high
27:24probability of the market
27:26first trending there,
27:29testing that level,
27:30and
27:32if the market regime stays in positive
27:35gamma,
27:36a rejection at that level will be very
27:38likely. So, what we can see now, if we
27:42for example,
27:43move the timeline a bit to 1 hour later,
27:46we see the market tested this call wall
27:50at around um
27:5210 minutes after US open
27:54and rejected it at first.
27:56But you what you also can see is that
27:58the gamma support, the positive gamma
28:00support,
28:01goes
28:03um
28:04back, right? So, we have negative gamma
28:06coming in at those levels. And if we go
28:10further for another hour,
28:12we can see the market always pins back
28:15to that call wall, right? Because this
28:18is a
28:19like has a
28:20um magnetic effect on the market. And
28:24always when it starts approaching, the
28:26market gets rejected again
28:29because of the market maker hedging
28:31pressure that comes into play
28:33at this price, right?
28:35So,
28:36you can see three times during that day
28:39the call wall has been rejected.
28:41And now we have negative gamma to the
28:43upside.
28:44And what's very interesting
28:47is when you
28:48look at it,
28:51this is what happened during the open,
28:54the the pre-session open today.
28:57We have negative gamma to the upside.
28:59So, higher vola- higher realized
29:00volatility to the upside is expected.
29:03And what happened? We had very high
29:05volatility to the upside
29:07right the next day during the open.
29:10So, this is something this information
29:12we can get
29:14just by looking at the at gamma itself.
29:18And we know, okay, if the market
29:20breaches the call wall breaches that
29:22level which has been here, right? So,
29:24this is the call wall. We can see that
29:25in our trading software.
29:27And it breaches it, which it did in the
29:29pre-session on Monday.
29:32We have high realized volatility because
29:34we knew that from the heat map here.
29:36And the market just broke above.
29:39>> Manuel, I see a lot of colors here.
29:41>> Yes.
29:42>> And it all looks really interesting.
29:43Would you be able to break this down for
29:45me as someone who's never used this tool
29:47before? What do these colors mean and
29:49what am I looking at?
29:51>> So, we focus on the heat map itself at
29:53first. And what the colors mean is in
29:56general, where is negative gamma in red
30:00and where is positive gamma in blue.
30:03And
30:05in general, that means
30:07what we talked about in the beginning,
30:08blue positive gamma means low realized
30:11volatility. Red means higher realized
30:14volatility. And the areas of white,
30:18here the gamma is relatively neutral.
30:20So, we don't really have
30:23um
30:24high conviction in saying this is
30:26positive or negative gamma, it's just
30:28neutral.
30:29Doesn't really mean much. So, what we're
30:31looking for is the gamma support in
30:33strong blue or the negative gamma um in
30:37in red, right?
30:39And in general, what we're trying to
30:42look at is
30:43where is the market
30:45to those significant levels, right? So,
30:48you want to see the net open interest
30:50positions
30:51and where the market is in general
30:54trading in relation to those. And we
30:57know now, for example,
30:59that the market at this point at um 25
31:03minutes before US open traded above
31:07two relatively or three relatively
31:09significant positions approaching the
31:12most important position for the day, the
31:157500.
31:17And since the market is doing that,
31:19we can expect with a high probability
31:22that the call wall is the level that
31:24will be tested during the session.
31:27Because it has an magnetic magnetic
31:30effect, as I've said.
31:33And moving onwards, the colors, as we
31:36can see, change.
31:38And with change of this color,
31:41the gamma regime, of course,
31:43um
31:44changes as well. Because the colors are
31:46showing the gamma regime, right? And
31:49as we are moving on during the day,
31:52the gamma regime goes from
31:55positive before open to neutral during
31:58open to more negative
32:00during the
32:02course of the day,
32:03right? And as more or as further we
32:07approach um the end of the day,
32:10the regime to the upside is negative,
32:13while to the downside we have support.
32:16So, to the downside, we can expect
32:17market makers hedging against market
32:20movement. So, every dip can be bought,
32:23basically.
32:24But to the upside, we expect, if the
32:26upside happens, if the call wall is
32:28breached, explosive moves. Because red
32:31means explosive moves.
32:33And
32:34blue means support.
32:36This can also change. The gamma heat map
32:39here, what we are what we're seeing
32:40could also be blue to the upside and red
32:43to the downside, which would mean
32:46the
32:47moves higher will be hedged against the
32:50market movement, so we will
32:52not really look for breakouts long
32:54because we have to expect market makers
32:56to
32:57um
32:58have slow or lower
33:00realized volatility to the upside. We
33:02expect reversals, so every rip will be
33:05sold,
33:07so to say. And if the area here is blue,
33:11we know we don't have any gamma support
33:13to the downside, so realized volatility
33:15will be high. And if the market
33:17moves down fast, we will look for shorts
33:20because the market uh makers will hedge
33:24in the direction of the market itself.
33:27So, for the macroeconomic events, um for
33:30instance, what you definitely need to
33:32know about is just in general the events
33:34calendar, right? You need to know where
33:37is uh what is happening throughout the
33:39day, when are the next um significant
33:42events. For example, on Tuesday the
33:4426th, you will have CB consumer
33:47confidence.
33:48Um on Thursday, you will have personal
33:50income, etc. etc. So, these are just in
33:53general the things you need to know
33:54about.
33:56And of course, earnings, so you just
33:57know um when the next earnings are and
34:00if this if these are earnings about um
34:03or of significant stocks that can move
34:07the indices if you're trading indices,
34:09of course. Um it's lesser important if
34:12you're trading other futures like
34:14commodities, but uh we specially focus
34:18on indices, so this is important for us.
34:20Or you can have something like that that
34:22like that like an earnings chart just in
34:24general, so you have a
34:26overview of what you try to look at,
34:28what the information that is um
34:30important and interesting for the day,
34:32right? So, there's earnings, there's the
34:34events calendar,
34:35and of course, the headlines.
34:38>> As an example, Manuel, let's say a
34:41trader
34:42gets this information,
34:44simplify it. They have three bullish
34:48news or macroeconomic pieces of info and
34:51three bearish.
34:54How does someone take this news, compile
34:56it all together,
34:58and actually have it affect and improve
35:01their decision-making?
35:02>> Yeah, that's a really good question. For
35:04example, the example you gave, three
35:06bullish news, three bearish news, it can
35:07be very
35:09um off-putting, right? You don't know
35:11what's important right now, how do you
35:13weigh
35:14um these these things? And what I want
35:17would look at, um
35:19if you had six headlines during the day,
35:22you look at the VIX index.
35:24If you look at the VIX, what you can see
35:27is
35:28did the volatility spike,
35:30or did it not spike? The VIX measures
35:33the volatility for the S&P 500 index.
35:37So, just by looking at that, that's the
35:39simplest way of telling if the market is
35:44putting significance to the news in
35:46general, or not. And what you can also
35:49know is that if the VIX spikes during
35:51the day, maybe 5%, 7%, or more,
35:56then most probably not you don't have to
35:58look at the charge at chart, but you
36:00most probably know
36:02the chart the market will be down.
36:05If the VIX
36:05>> Mhm.
36:06>> goes down,
36:07then you not even by looking at the
36:09chart, you know the market might be in a
36:11range or be supported and go um trending
36:14long.
36:16And
36:17that's the the best indicator of knowing
36:20if a news event triggered something
36:22significant that market participants
36:25really um
36:26pay attention to, or price in at the
36:29moment and is relevant for you. So now
36:32you can reverse engineer for example and
36:34see okay,
36:36the VIX spiked 10% what news came out
36:39today and then you see a big headline
36:41and you know that's
36:43an important information that moved the
36:45market today, right? So this is how I
36:47would go about it for example to show
36:49you that now and if you want to have
36:52free resources where you can see
36:55ideas on how markets move, you just get
36:59analyst reports for free for example on
37:01investing.com or Finviz.
37:04>> Can we go back to the chart and see
37:06exactly how does Manwell now tie all of
37:10this together?
37:11>> The approach here to just keep it very
37:14simple is for example if the market
37:17tomorrow
37:18will open in that range we're trading
37:21right now and it tests and we see
37:23pre-market for example we see the London
37:26session did the dip down here, we had
37:29the
37:30we had the a rejection of that level
37:32tested the highs and trading above the
37:35highs
37:36what we want to see for the US open
37:40is if these highs will be hold or held
37:45and the market trades above these so we
37:48can continue higher accepts the 30,000
37:51level which is also I have to mention a
37:53very strong cycle logical level where
37:56the market tends to react and we break
37:58above that and hold these prices, we
38:00will definitely trade the long
38:02continuation
38:03and we are looking for longs.
38:05If the market
38:08during US open
38:10doesn't accept the higher prices,
38:11rejects the 30,000 and we are trading
38:15here and accepting these prices fill the
38:17volume at that prices and we come down
38:20beneath the call wall we were looking
38:22at,
38:24then the long is definitely
38:26over, and we will be looking for shorts.
38:29If that comes together with a headline,
38:32which is already brewing, for example,
38:34just to put it into context, that there
38:36is, for example, no deal between Iran
38:39and the US, and oil spikes back to 100
38:43or more,
38:44then we will definitely have risk on.
38:47Most probably definitely is a tricky
38:49word in trading. Most probably have risk
38:52on, and looking for shorts during the
38:55day, accepting the range again, most
38:57probably be beneath the call wall, and
39:00we're looking for prices back to 29,500,
39:03for example, back to that support.
39:08So, this is how I put it together, and
39:11to confirm the exact entry,
39:14I will, of course, look at a different
39:16chart, for example,
39:19a range chart like this,
39:22to have a more granular view.
39:25Just you so you can see it, this right
39:28here,
39:29what you can see is the range here in
39:31the 30 minutes.
39:32So, what you know is
39:36what you can see here is
39:37the order flow on a more granular view,
39:40right? You see the red and blue or green
39:42bubbles.
39:43So, you can see where buyers are
39:45aggressive, where sellers are
39:46aggressive, and where we had a typical
39:50absorption followed by aggression from
39:53the other side. This is when, for
39:55example, I have these blue levels or red
39:58levels here drawn,
40:00when there's absorption and aggression
40:01on the other side, which is typically a
40:04entry signal for me. So, for example,
40:07what you can see here is the market
40:09already dipped into that low volume area
40:14today,
40:15and rejected that price exactly at that
40:18level that has been drawn.
40:21So, what we are going to look at
40:23is when the market comes back to that
40:25level and we already established that
40:26this is an area of interest because of
40:29the low volume and the long context, we
40:31will look for a long again when the
40:33market is approaching here and best case
40:36we see a red bubble a red dot like that
40:39which shows us aggressive on the sell
40:41side
40:42aggression on the sell side but
40:44absorption so then we can look for the
40:46move higher. This is how I will on a
40:49granular view
40:51look for an entry level
40:54and it has to be supported by the
40:56cumulative delta
40:58and the demand index. So, I only want to
41:00trade longs if the demand index as an
41:03indicator trades over
41:06the zero line
41:08and the cumulative delta trades
41:12positive in a positive trend. And this
41:15is what I was saying in the beginning,
41:17I'm not a fan of these technical
41:18indicators, Bollinger Bands, etc. just
41:21for trading itself but you can use it if
41:24you know how to use it for example for
41:25the cumulative delta just to filter it
41:28better. You know, when we are really
41:30high trending and the cumulative delta
41:32so the net buying is higher than the net
41:35selling. It supports our long idea even
41:38when the market retraces, right? Because
41:40when the market retraces and we get an
41:42absorption here
41:43but the demand index is strong which
41:45also matters part partly the cumulative
41:48delta and the cumulative delta is for
41:50example over our
41:53um
41:54Bollinger Bands in that cumulative
41:56delta, we know we still have net buying
42:00and it supports our long idea after the
42:02pullback and we can trade this long at
42:04our designated level. There's a lot of
42:06moving parts here. For a new trader,
42:08which three are the most critical pieces
42:10to this entire plan? The most critical
42:12pieces for the entire plan is volume
42:14profile. You should definitely have that
42:16and I think that's the easiest to and to
42:18access.
42:19Uh the most accessible like um volume
42:22profile and CBD uh to just to confirm
42:25trades. Also footprint chart to uh see
42:28the order flow which we had here with
42:31the bubbles. You can also see that with
42:33the
42:33um with the with the footprint chart and
42:36I would say this is something you need
42:37to learn before you look at anything
42:39else. Then you can decide which one you
42:41like better. Maybe you're more of the
42:42visual type and you need the bubbles.
42:45Maybe you're more
42:47numbers guy then you are fine with the
42:49footprint chart. But you need to
42:50understand it. You need to see and
42:52understand what it shows you just to
42:53confirm trades. So I would say this,
42:56order flow tools in general, volume
42:58profile, and gamma regime.
43:01And if you
43:03um
43:05want if you if you want to have a very
43:08um
43:10like um just a understanding where we
43:13might be in the gamma world. Then you
43:16look at VIX. If the VIX is high, you can
43:20just very simple speaking, right? This
43:23is not um
43:25um this is not really the correct way to
43:27look at it. But just simply speaking, if
43:30the VIX is high, you can
43:31um
43:32say with a high probability that the
43:34gamma will be negative in general. So
43:37the market tends to move more. It's um
43:40higher realized volatility. If the VIX
43:43is low
43:44um or under or at the historic average
43:47of of a price of 17, then you know the
43:51market will not be making crazy moves
43:54today. It will be in a
43:57normal range. The realized volatility
43:59will be very normal and you can um work
44:02with that. Man, well, you've got a lot
44:04of moving parts in your system. You've
44:06been doing this a long time. We haven't
44:08talked about risk management yet. You
44:10said you have a two loss stop rule. This
44:13means if you have two losing trades in a
44:16single session, why is that rule
44:18important?
44:18>> It's important for me, I would say,
44:20because what I realized throughout the
44:22years, either you want it or not, you
44:24will be affected by the
44:26losing trades. By having two losing
44:28trades, this is usually more than enough
44:31because what most people are doing after
44:33that is not trading the market
44:35objectively anymore, but subjectively or
44:38are fighting with the market.
44:40And that's when they blow their account.
44:41That's when they reach their drawdown.
44:43So,
44:44most of the drawdowns, and I also see
44:46that with working with our clients, and
44:48I know for myself as well,
44:50do not come from
44:52a wrong trading approach. The trading
44:54approach might be fine, might be great.
44:57It might be a really good analysis,
44:59really good entries, exits.
45:01But, the blowing of accounts, of funded
45:04accounts, for example, only happens when
45:08they're trading emotionally after
45:11losing trades, when they try to make it
45:13back because they want to end the day in
45:15the green.
45:16But, what they don't realize is that if
45:19they just took the loss,
45:21end the day in the red, they would still
45:23have their account,
45:24and the self-esteem would be still high
45:28because the next day you have another
45:30chance, right? The market is open the
45:32next day, the next week, the next year.
45:34And this is something you really have to
45:37um
45:37get into your mind again and again
45:39because
45:40um it's not about today. It's not about
45:42the next trade. It's not about having
45:44the the green day every day. It's about
45:47knowing when to stop, and when you don't
45:49do that, and most people don't do that
45:51if they don't have this hard rule,
45:53um then they will eventually blow their
45:56accounts
45:57at every day. Even if they have one or
45:59two months of consistency, they will
46:01blow it eventually. And this is
46:03something we will definitely have to
46:06as a discretionary trader, we have to
46:09just eliminate completely because even
46:12after a year, something like that could
46:14happen to you. Maybe you have a bad day.
46:16So, you need to have a hard stop. You
46:17need to have a rule for the day that
46:19just doesn't allow you to trade any
46:21more. And for me, it's after two trades.
46:23That's um
46:25that are consecutively
46:27losing trades because then
46:30you just know you're not in the right
46:33state of mind anymore.
46:34>> This depends on position sizing also.
46:38How do you size positions?
46:40>> So, position sizing for me is um it's a
46:43very important topic because it's
46:44important that you really have a
46:47professional position sizing of maximum
46:491% loss um or account size per trade.
46:54So, this is what I try to um definitely
46:58um
46:59hold myself
47:01to as well.
47:02>> Do you use fixed position sizing,
47:05dynamic? Does it depend on the trade?
47:08>> So, my position sizing is it depends on
47:10the trade. I try to position size the
47:13position um on a absolute amount, always
47:17the same, right? The amount is the same.
47:20But um I can size differently with um
47:25if I go in with more contracts or less
47:27contracts based on how big the stop loss
47:31has to be for the trade because that's
47:34dynamic. I don't use a fixed stop loss.
47:36I only look at
47:39uh my risk reward. If the risk reward is
47:42um
47:42is uh in a in good terms, like two to
47:44one, for example, more more than two to
47:47one is always good for me,
47:49then I will place the trade if the
47:51amount
47:53um exceeds just because the the stop
47:57loss has to be so long um by one and I
48:00only trade one lot for example and it
48:02exceeds my max position um loss then I
48:06can't of course take it. Maybe I have to
48:08do
48:08um I can't do the trade or if this
48:12or if the stop loss is um
48:14short enough I can put on more contracts
48:18because I will still be in the same um
48:20max loss amount for the trade.
48:22>> How do you determine where to place your
48:24stop loss?
48:25>> So the stop loss usually gets placed
48:28beneath the or um above the absorption
48:31that happened. Because this is the uh
48:33the area where when the market moves
48:36lower or higher the trade in general
48:39will be invalidated.
48:41Or second option is um the volume
48:45profile that I use and I just place the
48:47stop between the last
48:50support or resistance based on the
48:52volume profile which we talked about in
48:54the beginning the areas of interest, the
48:56high volume nodes.
48:57>> And where do you determine your profit
48:59target?
49:00>> The profit target is also dynamic but
49:02usually it's the next option level, the
49:04next call wall, the next gamma flip,
49:06whatever but um
49:08I will go for the for the option levels
49:11as a target.
49:13>> Is there any
49:14reward to risk that you're not willing
49:16to take?
49:17>> Yes um everything that's just one to
49:20one, 1.5 to one depends on the quality
49:23of the trades uh of the entry
49:26but um in general I try to strive for
49:29two to one at least.
49:31>> So the risk then is always defined by
49:34levels. So just to be clear Manuel, if
49:36the stop loss is further from your
49:38entry, does this directly affect
49:39position sizing?
49:41>> Yes, definitely. So I always um look to
49:44risk the same amount per trade and if
49:46the stop loss is um bigger or longer
49:50then I will definitely size down
49:52or if the stop loss is too long that I
49:54can't be in my fixed max amount per
49:57trade,
49:58then I won't take the trade even if the
50:00setup might hold up.
50:02>> Do you think entries or exits are more
50:03important for new traders?
50:05>> I would say at first you have to master
50:08the entries of course,
50:10but generally speaking the exits um
50:13are more important because what I see
50:15is that a lot of traders
50:18are having good trades sometimes, but
50:21they take profit too early because they
50:23are scared of uh losing the amount they
50:26earned already.
50:27So, maybe they initially have a good
50:31um risk reward, they have a good entry,
50:34but
50:35when you um look at their performance in
50:38in general, they always take the full
50:40amount of risk,
50:42take the full stop,
50:44but limit themselves or cap their
50:46positions on the winning side. So, this
50:49is the actual problem, but the trade
50:51might have moved way longer.
50:53So, what they um are missing out on is
50:55their actual the the profits they would
50:57have had.
50:59So, um the entry to get the entry right
51:01is not that hard. I think the exit is
51:03harder. So, the focus should probably be
51:06on the exit to do that correctly right
51:08from the beginning.
51:09>> So, you say you started trading early,
51:11went through a period of a significant
51:13gain and a significant loss. Now, would
51:16you say your experience plays a bigger
51:18role in keeping your emotions under
51:20control
51:22or the risk management procedure that
51:24you have in place?
51:25>> I think it's the it's both, but it's the
51:28risk management procedure. Because you
51:30can have a lot of experience in the
51:31market and still be emotional. Maybe
51:33you're just an emotional person in
51:35general, and uh you tend to
51:38um
51:40have something triggered when you have a
51:41losing trade. For example, it's
51:43something I mean, you can get really
51:45deep down on that, but uh maybe
51:46something about your title then you you
51:48would trigger a a certain feeling when
51:50you have a losing trade and then you
51:52react emotionally. So, you might have 10
51:54years of experience, but you can still
51:57not be a profitable trader only because
51:59of that. So, a fixed risk um
52:03determination for your trading approach
52:05is
52:06necessary and if you don't have that, um
52:09you won't be able to make it. That's for
52:11sure.
52:12>> Manuel, thank you so much for your time.
52:14This has been excellent. Tons of
52:17information for traders of all skill
52:20levels and I'd love to have you back on
52:23in a future interview.
52:25>> I would love that.
52:26>> Thank you for your time again. IQ
52:28Capital community, that's going to be it
52:30for this interview. I hope you enjoyed
52:32it. Let us know in the comments below
52:34and you can try your first challenge on
52:37IQ Capital for as little as $1.
52:40Check out the link in the description.

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