Secret 95% Win Rate Strategy The Banks Use Revealed | Isar Chaudry

Summary

The speaker discusses various trading strategies used by banks and hedge funds, emphasizing the existence of different categories like AAA and AA grade setups. They reveal a high-probability strategy known as insider trading, which, despite its legality issues, is lucrative for those who use it. The conversation also touches on the imperfections of institutional trading, referencing the 2008 financial crisis and the downfall of major firms due to poor analysis and preparation.

Takeaways

• 📈 The speaker discusses deploying multiple trading strategies based on different categories, such as AAA and AA grade setups, which represent varying levels of probability for successful trades.
• 🏦 A key strategy attributed to banks and hedge funds is insider trading, which, despite its illegality and ethical concerns, is mentioned as a high winning rate strategy.
• 💡 The speaker highlights that large financial institutions like banks and hedge funds have access to non-public information, which they use to their advantage in trading, sometimes crossing legal boundaries.
• 🚨 The script mentions specific cases of insider trading involving high-profile individuals and institutions, such as Steven Cohen from SAC Capital and an executive from HSBC.
• 💼 The corporate world's approach to strategy is characterized by categorizing trade ideas and ensuring that any profitable information is acquired, regardless of the means.
• 📺 The script references the TV show 'Billions' as a portrayal of the hedge fund world, where buying information is a central theme.
• 🤔 There is a reminder that the retail trading space often idolizes institutional traders, overlooking the fact that they are not infallible and can also make mistakes, as evidenced by the 2008 financial crisis.
• 💡 The discussion points out that not all institutions are equally prepared or successful, as seen in the 2008 financial crisis when many banks and firms failed to predict or prepare for the downturn.
• 💰 The script suggests that the risk-reward ratio for insider trading can be attractive for those who engage in it, even with the potential for significant fines if caught.
• 🔍 The speaker emphasizes that there is no perfect trader, whether institutional or retail, and that the perception of institutional traders as infallible is a misconception.

Q & A

What are the different categories of strategies mentioned in the script?

The script refers to different categories of strategies such as AAA grade setups and Double A grade setups, which are configurations based on the requirements for taking a trade.

What is the significance of AAA grade setups in trading?

AAA grade setups are described as the best format for high probability trades, indicating they are the most favorable conditions for making profitable trades.

Why are Double A grade setups still considered viable for trading?

Double A grade setups, while less high probability than AAA setups, are still considered sensible for taking trades due to their potential for profit.

What is the one strategy from the banks with a 95% winning rate mentioned in the script?

The strategy mentioned is insider trading, which involves using non-public information to make trades, although it is illegal and unethical.

Why do some large financial institutions engage in insider trading?

Some institutions engage in insider trading because they have access to information and can use it to make significant profits, despite the risk of getting caught and fined.

How does the script describe the corporate world's approach to strategies?

The script describes the corporate world's approach as having different categories for different trade ideas, and using strategies to ensure they profit from any information they can acquire.

What is the main point of the TV show 'Billions' as it relates to the script?

The main point related to the script is that the TV show 'Billions' is based on hedge funds and one character's strategy of buying information to make trades.

Why do retail traders often look up to the institutional trading space?

Retail traders often look up to the institutional trading space because they perceive it as elite and perfect, and aspire to emulate their strategies and success.

What is the counterpoint made about the infallibility of institutional traders?

The counterpoint is that not all institutions are infallible, as evidenced by the 2008 financial crisis where many firms and banks failed due to a lack of foresight and preparation.

What is the final takeaway message about trading perfection mentioned in the script?

The final takeaway message is that there is no perfect trader, highlighting that even institutional traders can make mistakes and are not infallible.