Linda Raschke on Having an Edge in Trading and the Importance of Data

Crowded Market Report by Jason Shapiro
29 Mar 202459:38

Summary

TLDRIn this insightful interview, Jason Shapiro speaks with trading legend Linda Bradford Rashki about the importance of having an edge in the trading market and the significance of data analysis. Linda shares wisdom from her book 'Trading Sardines', emphasizing the need for discipline, the learning curve of trading styles, and the balance between systematic approaches and experience. She also discusses the challenges faced by new traders and the value of understanding market nuances through trial and error. The conversation touches on the psychological aspects of trading, the impact of technology on market dynamics, and the concept of giving back and staying humble in the world of finance.

Takeaways

  • 📚 Linda Rashke shares her wisdom in 'Trading Sardines', offering market insights and life advice.
  • 🎯 Having an edge in trading is crucial, derived from a statistical advantage, experience, or unique opportunities.
  • 🔄 Successful trading requires consistent application of one's edge, with a focus on the long-term and money management.
  • 🔍 Developing a trading edge takes time, experimentation, and understanding of various market strategies.
  • 📉 Market dynamics are ever-changing, making adaptability and continuous learning key to maintaining an edge.
  • 🖥️ Technological advancements and data access have transformed trading, requiring new skills and approaches.
  • 📈 Understanding market trends and sentiment is essential, but technical analysis remains a primary decision-making tool.
  • 👩‍💼 Personal trading discipline and a well-defined process are vital for managing risk and capitalizing on opportunities.
  • 📊 Record-keeping and statistical analysis play a crucial role in refining trading strategies and understanding market behaviors.
  • 🤝 Giving back and maintaining humility are fundamental values that contribute to personal and professional growth.

Q & A

  • What does Linda Bradford Rashki believe is essential for successful trading over time?

    -Linda Bradford Rashki believes that having an edge is essential for successful trading over time. This edge could come from various sources such as modeling, arbitrage opportunities, or experience. She emphasizes the importance of applying this edge consistently and managing risk through a robust money management strategy.

  • How does Linda describe her trading philosophy in her book 'Trading Sardines'?

    -In her book 'Trading Sardines', Linda describes her trading philosophy as one that incorporates market wisdom, life wisdom, and personal stories from her experiences in trading and love. She emphasizes the importance of having an edge, managing risks, and applying a systematic approach to trading while also incorporating lessons from personal experiences.

  • What advice does Linda give to new traders regarding their trading style?

    -Linda advises new traders to explore different trading styles to find what works for them. She compares it to trying on hats, suggesting that they might need to try various styles such as spreads, options, season programs, or Commitment of Traders reports before finding the right fit. She also emphasizes the importance of gaining experience and capital preservation during this exploration period.

  • How does Linda view the role of discipline in trading?

    -Linda views discipline as the single most important aspect of trading. She believes that even with the greatest trading system, a lack of discipline can lead to failure. She stresses the importance of sticking to a proven process and not deviating from it due to emotions or short-term market fluctuations.

  • What is Linda's perspective on the use of technology and AI in trading?

    -Linda acknowledges the role of technology and AI in trading but also points out their limitations. She notes that AI systems are only as good as the data they are trained on and that they may not be able to adapt to new market conditions as effectively as a seasoned trader with a keen understanding of market dynamics.

  • How does Linda approach the concept of 'edge' in trading?

    -Linda views the concept of 'edge' as something that needs to be durable and robust, meaning it should hold up over time. She warns against strategies that may become less effective as more people discover and exploit them. She also notes that while some trading strategies may have a short half-life, others, like chart formations, can persist with lower frequency but still offer trading opportunities.

  • What is Linda's take on the importance of trial and error in developing a trading methodology?

    -Linda believes that trial and error are crucial in developing a successful trading methodology. She compares this process to scientific discovery, where much of what we've learned has come through trial and error, and sometimes, serendipitous discoveries. She emphasizes that a combination of trial and error, pattern recognition, and understanding the limitations of various tools and methodologies is key to developing a lasting trading approach.

  • How does Linda address the psychological aspect of trading?

    -Linda addresses the psychological aspect of trading by emphasizing the need to desensitize oneself to the emotions associated with trading and to develop a thick skin. She notes that until traders learn to manage their emotions effectively, they will be their own worst enemy in the markets. She also highlights the importance of understanding oneself and one's risk tolerance in the context of trading.

  • What is Linda's view on the role of experience in trading?

    -Linda believes that experience plays a vital role in trading. She suggests that it can take a minimum of three to five years to learn the nuances of different trading styles and to gain the necessary experience to make informed decisions. She also mentions that experience helps in understanding market dynamics and in developing an edge that can be leveraged for successful trading.

  • How does Linda approach the concept of market skew and its relevance to trading?

    -Linda views market skew, or the fat tails in market behavior, as a critical aspect of trading. She believes that understanding and recognizing these skews can offer significant trading opportunities. She argues that while backtesting can provide an initial idea of a strategy's effectiveness, it can miss the nuances of these skews, which are essential for identifying potential edges in the market.

  • What advice does Linda give about trading during market extremes?

    -Linda advises traders to position themselves in the direction of the aberration when markets move beyond their historical boundaries. She believes there is a strong reason behind such market movements and that traders should go with the market's direction rather than against it when it comes to extreme market behavior.

Outlines

00:00

📌 Introduction and Discussion on Trading Edge

The paragraph introduces an interview with Linda Bradford Rashki, a renowned figure in trading and money management. Jason Shapiro begins by mentioning Linda's book, 'Trading Sardines', which he found insightful and enjoyable. The conversation quickly delves into the importance of having an edge in trading, emphasizing the necessity of a statistical advantage or a unique approach that can be applied consistently over time. Linda shares her experiences and stresses the significance of money management, experience, and the iterative process of learning from various trading styles, which can take several years.

05:01

🌐 Market Nuances and the Evolution of Trading

Linda discusses her early experiences trading on the floor of the Pacific Coast Stock Exchange, highlighting the differences between past and present market conditions. She talks about the Wild Frontier-like atmosphere of the equity options market in the absence of computers and the arbitrage opportunities that emerged. Linda also touches on the concept of a trading edge having a 'half-life', meaning its effectiveness can diminish over time as more people discover and exploit it. The conversation then shifts to the importance of developing a durable and robust trading methodology through trial and error, and the role of discipline in managing emotions and staying in the game.

10:01

📈 The Role of Market Skew and Fat Tails

In this segment, Linda elaborates on the concept of market skew and fat tails, explaining that these elements offer the potential for significant profit. She argues that while backtesting can provide a general idea of a trading strategy's effectiveness, it can also obscure the skew and fine nuances that are crucial for trading success. Linda also discusses the importance of recognizing and capitalizing on market relationships when they are out of line, as this can signal significant opportunities. She references her book 'Street Smarts' and emphasizes that while technical skills are valuable, they are not as critical as understanding market dynamics and having the right mindset for trading.

15:03

🛠️ Trading Discipline and Process

Linda and Jason discuss the critical nature of discipline in trading. Linda believes that discipline is the most important aspect of trading success, regardless of the trading system used. She shares her views on the importance of sticking to a process and the pitfalls of deviating from it. The conversation also touches on the challenges faced by traders who do not develop their own systems, as they lack the necessary confidence to adhere to them. Linda advocates for traders to have their own methods and to be patient in waiting for high-probability opportunities.

20:05

🌪️ Trading in the Direction of Aberration

Linda emphasizes the importance of trading in the direction of aberrations, or significant market movements beyond historical boundaries. She believes that such movements indicate a strong underlying reason and present a trading opportunity. Linda shares an example from her experience with seasonal patterns and how failed seasonals can often lead to larger trades in the opposite direction. The conversation highlights the importance of not being stubborn and recognizing when a trading strategy or seasonal pattern is no longer effective.

25:05

💡 Adapting to Market Changes and Personal Trading Experiences

Linda shares her personal journey in trading, from equity options to various other markets. She explains her preference for currency futures over Forex and her reasons for focusing primarily on the most liquid domestic futures markets. Linda also discusses the evolution of her trading approach over the years, including her transition from strategic trading to more reactive and adaptive styles. The conversation underscores the importance of continuous learning and adapting to changing market conditions.

30:06

📊 Measuring Market Sentiment and Capitalizing on Opportunities

Linda and Jason discuss the importance of gauging market sentiment and identifying excess cash on the sidelines. Linda explains that while she primarily relies on technical analysis, she also considers sentiment readings and data from money market funds as part of her holistic approach. The conversation also touches on the role of AI programs in incorporating sentiment data and the challenge of dealing with the sensory stimulation and information overload present in today's trading environment.

35:07

🌟 The Importance of Giving and Staying Humble

In the concluding segment, Linda reflects on the wisdom she has gained over her trading career, emphasizing the importance of giving and maintaining humility. She shares a powerful quote from her book, highlighting the idea that everything given will return tenfold. Linda discusses the value of gratitude, recognizing one's blessings, and the impact of a positive mindset on trading success and overall life satisfaction. The conversation ends with Linda sharing her website for her book and expressing her philosophy on life and trading.

Mindmap

Keywords

💡Trading

Trading refers to the act of buying, selling, or exchanging financial instruments such as stocks, bonds, or currencies with the goal of making a profit. In the context of the video, trading is the central theme, with the interview focusing on strategies, the importance of having an edge in the market, and the psychological aspects of trading. Linda Bradford Rashke, the guest, shares her experiences and wisdom in trading, emphasizing the need for discipline, patience, and a systematic approach to capitalizing on market opportunities.

💡Edge

In trading, having an 'edge' refers to a competitive advantage or a unique approach that allows a trader to consistently outperform the market. The video discusses the necessity of developing and maintaining an edge through experience, knowledge, and effective strategies. Linda Bradford Rashke explains that an edge could come from various sources, such as understanding market patterns, exploiting arbitrage opportunities, or leveraging data to make informed decisions. She also stresses that an edge must be durable and robust, capable of withstanding market changes over time.

💡Data

Data in the context of the video refers to the information and statistics that traders use to analyze market trends and make informed trading decisions. Linda Bradford Rashke highlights the importance of data in trading, as it helps traders identify patterns, gauge market sentiment, and predict potential movements. The use of data is crucial for developing an edge in trading, as it allows traders to backtest strategies, measure performance, and adjust their approaches accordingly.

💡Money Management

Money management is the process of controlling and allocating financial resources, particularly in the context of trading and investing. In the video, Linda Bradford Rashke discusses the importance of having a sound money management strategy to protect and grow one's capital. This includes setting stop-loss orders, determining position sizes, and ensuring that the trader's psychology does not interfere with rational decision-making. Effective money management is crucial for long-term success in trading, as it helps mitigate risks and ensures that losses are kept within acceptable limits.

💡Psychology

Psychology in the context of the video pertains to the mental and emotional aspects that influence trading decisions. Linda Bradford Rashke emphasizes that understanding and controlling one's emotions is critical in trading, as fear, greed, and other psychological factors can lead to impulsive decisions and poor risk management. She suggests that discipline and a systematic approach to trading can help traders overcome these psychological biases and maintain a rational perspective in the face of market volatility.

💡Discipline

Discipline is the ability to follow a set of rules or a strategy consistently, especially in the face of temptation or adversity. In the video, Linda Bradford Rashke stresses that discipline is the most important aspect of successful trading. It involves sticking to a proven strategy, managing risks appropriately, and avoiding the trap of emotional decision-making. She suggests that even with the best trading system, a lack of discipline can lead to poor outcomes and ultimately, failure in the markets.

💡Market Report

A market report is a comprehensive analysis or summary of the performance and trends of financial markets. In the context of the video, Jason Shapiro hosts the 'Crowd and Market Report' where he interviews experts like Linda Bradford Rashke to provide insights and analysis on market conditions. The report serves as a resource for traders and investors to gain a deeper understanding of market dynamics and make informed decisions based on expert opinions and data-driven research.

💡Book - Trading Sardines

The book 'Trading Sardines' is authored by Linda Bradford Rashke and is mentioned in the video as a resource for those interested in trading. The book is described as an easy read that offers wisdom on market and trading strategies, as well as life lessons and personal stories. It is recommended for anyone looking to gain insights into the world of trading and understand the principles of successful money management. The book serves as a testament to Linda's experience and expertise in the trading industry.

💡Experience

Experience in the context of the video refers to the practical knowledge and skills gained through involvement in trading over a period of time. Linda Bradford Rashke emphasizes that developing experience is crucial for traders to refine their strategies, understand market nuances, and learn to manage risks effectively. She suggests that it takes a minimum of three to five years for new traders to gain the necessary experience and develop a consistent edge in the market.

💡Trial and Error

Trial and error is a method of learning through experimentation, where one tries different approaches and learns from the outcomes, particularly the mistakes. In the video, Linda Bradford Rashke discusses trial and error as an essential part of developing a trading edge. It involves testing different strategies, learning from both successful and unsuccessful trades, and continuously refining one's approach based on the results. This process is crucial for traders to discover what works best for them and to adapt to the ever-changing market conditions.

Highlights

Linda Bradford Rashki, a legend in trading and money management, shares insights on having an edge in trading and the importance of data.

Jason Shapiro interviews Linda Rashki about trading, money management, and the application of experience and data in making informed decisions in the market.

Linda emphasizes the necessity of having a statistical edge in trading, which can come from modeling, arbitrage opportunities, or experience.

The importance of money management algorithms is discussed as a critical component of successful trading.

Linda's book 'Trading Sardines' is recommended for its easy readability and sharing of market wisdom, life wisdom, and personal stories.

The concept of gaining experience in trading is likened to trying on different hats to find the right style that works for an individual.

Linda shares her journey from trading equity options on the Pacific coast Stock Exchange to developing a durable and robust trading methodology.

The idea of 'half-life' of trading systems is introduced, where strategies can lose effectiveness over time as more people discover and utilize them.

Linda discusses the importance of discipline in trading, stating it as the single most important aspect regardless of the trading style.

The conversation touches on the idea of trading in the direction of aberrations, capitalizing on market movements that go beyond historical boundaries.

Linda shares her perspective on the evolution of her trading approach over the years, from equity options to focusing on the most liquid domestic futures markets.

The interview highlights the importance of developing one's own trading system rather than relying on others', to build confidence and maintain discipline.

Linda and Jason discuss the psychological aspect of trading, acknowledging the emotional challenges and the need for mental fortitude in the markets.

The conversation emphasizes the value of record-keeping and statistics in tracking performance and making improvements in trading strategies.

Linda's advice for new traders includes starting with a short-term horizon, using simple indicators, and desensitizing oneself to the stress of trading.

The interview concludes with Linda's philosophy on life and trading, emphasizing the importance of giving, staying humble, and maintaining a positive mindset.

Transcripts

play00:00

[Music]

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welcome to CMR interviews by Jason

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Shapiro in today's episode Jason

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interviews Linda rashy on having an edge

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in trading and the importance of data to

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learn more about Jason and Linda check

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the episode notes in the

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description Hello today's March 26 2024

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I'm Jason Shapiro with crowd andm

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marketreport tocom today I have the

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pleasure um of welcoming Linda Bradford

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rashki who is a legend in the trading

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and money management business um and we

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are going to have a conversation about

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trading and money management and and

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anything else that uh falls into line

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here um I will start by saying before I

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did this interview uh Linda was nice

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enough to mail me her book which is this

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thing right here it's called trading

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sardines and um I read it and it was

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awesome because it was such an easy read

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uh she shared a lot of market and

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trading wisdom as well is a lot of Life

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wisdom and some really fun stories about

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love life and trading um and I would

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recommend it to anybody so on that note

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uh Linda welcome and thanks for joining

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thank you for having me Jason it's a

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real honor so I usually um start with

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this very simple question um how do we

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make money over time trading the market

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let's just open up the whole can of

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worms right off the bat how do we make

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money you know that's what we want to

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know right that's what we want know you

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have to have some type of Edge that

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would be obvious in any game that you

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play be it Bridge or gambling or the

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markets you need to have some type of

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statistical Edge that may came from

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modeling or it may come from an early

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Arbitrage opportunity with the new

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Emerging Markets it might come from

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experience even experience is a form of

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an edge but you do have to have some

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sort of Edge and then you need to apply

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that consistently so over time it's just

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a big number game if I make 1,000 trades

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and I have n Edge I will have a positive

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expectation and the more trades you can

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make with that type of thesis uh the

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closer you come to a guaranteed profit

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and of course you always need to have

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that little money management algorithm

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in the background um but I think that uh

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you know you can either be very

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systematic and have it hardcoded in your

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brain or your uh system or um just

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through experience you might know how to

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manage the bottom line a little bit more

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appropriately so you know I think that

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the initial um problem is getting that

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experience or when people first start

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trading out uh it's like trying on hats

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you know you have to try this style is

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it going to work for you maybe you try

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that for 3 months you know maybe we try

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uh spreading maybe we try options maybe

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we try season programs maybe we try

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commitment of Traders reports you know

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but you can't um you can't arrive and

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start to learn the nuances of something

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until you have explored many different

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styles if you are new to the markets and

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that whole process can take uh a minimum

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of three to five years so just like

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anything it's like playing um you know

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poker and capital preservation until you

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get that experience under your belt

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excellent advice see mean I can't just

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start trading today and start making

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money right away and go for you know if

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you bought those gamestock options a

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couple years ago you never know huh did

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you see that movie by the way oh I'm not

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supposed to ask you questions it was fun

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I did not see D money yeah I watched it

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in

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livetime yes yes which I thought was was

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enough um but maybe was the movie good

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maybe I should see it I don't know you

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should for history's sake it wouldn't

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make sense if you weren't to trade but

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you know you'll get it I didn't see that

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movie about the penny stocks with

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Leonard DiCaprio for a lot of years

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because uh I knew people when I was in

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college that were in the penny stock

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game and and the whole thing made me

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sick Wolf of Wall Street yeah so I

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refused to watch that movie for many

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years and then once I did it was

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actually yeah it was actually hilarious

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so now I watch it all the time but um

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sometimes I just don't want to watch

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something that I I kind of lived in in

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in lifetime anyway um okay so you need

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to have an egg Edge and to develop an

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edge is going to take you time um what

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are the things we're looking for in that

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edge and I'm not telling I don't need

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you to tell me oh well the edges you

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trade when the five day moving average

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crosses the 25 day what do we need to

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look for in that a perfect world okay

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I'll start off with a perfect world and

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then we'll deviate from there in a

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perfect world you need something that's

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durable and robust okay in other words

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not

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optimized um you know will hold up over

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time and for example with my trading

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career when I started off trading I was

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in the floor and Equity options on the

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Pacific coast Stock Exchange and it was

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a little bit like the Wild Frontier we

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did not have computers we didn't have

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the uh you know the programs that keep

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all the options in line so there was a

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lot of lucrative opportunity for those

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first couple years until it slowly got

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armed out and everything got

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computerized but um you know I've seen

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that time and time again with um many

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things in the markets it's uh you find

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something and if you find it other

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people can find it as well and

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eventually has what we'll call a

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halflife you know with a system uh a

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halflife and it'll start to lose its

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Effectiveness now that's not true with

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everything for example you could take

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chart formations a gorgeous weekly chart

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formation which now has a lower

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frequency of occurrence so everything's

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a tradeoff on the flip side of that as

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the mark have become more crowded with

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different Market participants you have

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an increase in the noise level which

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means an increase in false breakouts and

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so forth so you know everything's this

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sort of balancing act and and tradeoff

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But ultimately you do want a style I

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will say an approach or a methodology

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that will uh last over time and to

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develop that style and that methodology

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it seems like Char and error is really

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the best way to go you know trial and

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error goes a long ways that's with you

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know look at uh medicine and

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biochemistry and physics you know so

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much of what we've learned through uh

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Through the Ages has been trial and

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error and then freak chance you stumble

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across something like penicillin you

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know so there is a little bit of that

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but there's also more than that there's

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uh some Savvy with pattern recognition

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there's some Savvy as to what we can do

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what we cannot do for example with

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neural networks or artificial

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intelligence which is so in Vogue right

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now they're only as good as what we

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train them on um you know and uh it's uh

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you know some people have a better

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temperament for risk-taking because

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ultimately if you have not been in the

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markets for a long period of time it

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doesn't matter whether you have an edge

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or not you're end You're Going to Be

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Your Own Worst Enemy you know just with

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your emot motions until you learn to

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desensitize and get a very thick skin

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and so forth so a lot of this game is

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just being able to stay in the game as

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with anything you know you're going to

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go to college you're going to go to four

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years medical school you're going to do

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two to three years residency there is a

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uh big time period there before you

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start to get to that point where you can

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make the big bucks and that's that's

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just with more I'm saying that in the

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light of of the retail type of the side

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of the business because there is

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opportunity for some uh quants that are

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very sophisticated I know some friends

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that are doing really interesting work

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you know but it's it's um it's a

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different science if you will so even

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you know the most successful Fund in

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history everybody likes to look at Jim

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Simmons and his Medallion fund right

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it's not that he's a Trader it's just

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that he had the most amazing insane

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infrastructure Network you know that

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nobody else would be able to replicate

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and what people don't understand with

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his particular fond I don't know the

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stats now I knew the stats 20 30 40

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years ago because I had clients that had

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uh monies with him his average holding

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time was under 24 hours so it wasn't

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like putting on big bets it's just that

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they worked every Market in the world

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you know milliseconds at times every

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single edge that could be and uh you

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know that is not um possible for

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somebody like you or me you know it just

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takes this insane amount of

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infrastructure and Technics and you know

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Engineers to keep everything going so

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we're talking about a different type of

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business here there's something I like

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to say a lot to people which is you have

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to trade you would you agree with and

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you know what if you don't know who you

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are the markets are a very expensive

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place to find out I I have that written

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down here I have about 10 quotes from

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your book written down here and that's

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one of them so you just covered one of

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my quotes thank you um but you know

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being that like a lot of people it's

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funny I saw it on a u on a panel a few

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months ago and we were talking about you

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know back testing and and all this stuff

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and somebody in the audience raised

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their hand and said you know I don't

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know how to program and I don't have

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back testing software so you know I

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can't do that

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stuff and one of the guys I was on the

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panel with um said so what you're

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telling me is you want to make money

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trading the markets you you just don't

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want to do the work that's necessary to

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make money in the markets which I

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thought was a little harsh but was

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absolutely true you know I don't know

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how to program um but you know you get a

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trade station and and you hire somebody

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for $50 an hour quite frankly and and

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you can get pretty far and if you

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actually take a little time programming

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something like trade station is very

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simple it's all just a question how much

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how much you want it I think you know

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you know I um for the first uh really 10

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years of my um career I did everything

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by hand and I would print off charts and

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I would go by hand and I would calculate

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the variance for every single trade and

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um I learned more by doing that and

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seeing the times where it didn't work

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and the problem with back testing it's

play10:56

great for overall modeling and giving

play11:00

you an initial idea and um but the

play11:04

problem is is that uh you're lumping so

play11:07

much data together you're missing the

play11:10

skew and the problem is that I mean with

play11:13

the markets you have to understand that

play11:15

the skew is where the edge is in other

play11:17

words those fat tails and so when you

play11:20

lump say for example uh statistical

play11:23

testing with a sample size of 500 it

play11:25

wipes all that out and everything

play11:27

cancels each other out and you'll miss

play11:29

those fine little nuances and that's

play11:31

really about what the market is about to

play11:34

me is that there's that skew that's what

play11:37

offers the fat opportunity here and it

play11:41

takes a lot of time to recognize that

play11:44

you know um because our

play11:47

humanness um you know we want to buy

play11:49

wholesale sell retail that type of stuff

play11:53

uh and we're always looking for that

play11:55

Arbitrage or that reversion to the mean

play11:57

type of thing just subconsciously you

play12:00

know if you see a car that's marked up

play12:02

too high you're going to wait till it

play12:03

comes down that type of thing but what

play12:05

the markets do is they impart incredible

play12:08

information to us when these

play12:11

relationships get out of line and they

play12:13

get out of line for a very definitive

play12:16

reason and so it's hard for us to

play12:19

understand as humans because we don't

play12:21

see enough of that we don't have enough

play12:23

sample size to really understand you

play12:27

know what's going on but if you have a

play12:29

banded type of um you know relationship

play12:34

and something starts to push outside

play12:36

that band okay there's a very strong

play12:40

reason why and you generally want to go

play12:42

with that and that's very difficult for

play12:45

people to get their hands around that

play12:48

you know just like you've learned Now by

play12:51

watching the commitment of Traders

play12:53

reports that just because it gets

play12:55

extreme sometimes when it gets so

play12:57

extreme uh

play12:59

you actually want to be positioned in

play13:01

the direction of that because there's

play13:03

something crazy going on there and of

play13:06

course eventually everything does a

play13:08

little bit of a reaction in the opposite

play13:10

direction but um you know so I wrote a

play13:15

book many years ago and it was with

play13:18

Larry Connor and the name of that book

play13:20

was Street smarts and so uh there

play13:24

definitely is a little bit of Street

play13:26

smarts when it comes to the markets you

play13:29

know it's not necessarily about having

play13:32

that master's degree in Applied

play13:34

Mathematics or you know something that

play13:37

would allow you to have these uh

play13:39

incredible programming skills which are

play13:42

of value for certain hedge funds or uh

play13:45

you know Quant shops that do that but

play13:47

for the individual I don't think it's

play13:50

necessary I really don't think you have

play13:53

to do that I think what happens is that

play13:57

especially with electronic trading it's

play13:59

so easy just to click that Mouse and

play14:02

it's very difficult for most people to

play14:05

have the patience and be very

play14:08

discriminating in waiting for the

play14:10

opportunities where uh not to be cliche

play14:14

because it did get to be a very cliche

play14:16

word in the last couple years that

play14:19

asymmetrical opportunity you know um you

play14:22

know or that high win rate uh but the

play14:25

the good opportunities just don't come

play14:28

along as often as people might think

play14:31

it's a fact and it and it speaks to it

play14:33

speaks to discipline which to me is the

play14:36

hardest thing in the world you can have

play14:38

the greatest system in the world if

play14:40

you're not disciplined over time even

play14:41

the greatest system in the world is

play14:43

going to have losing trades and get

play14:44

things wrong and sometimes get things

play14:46

very wrong and if you're not disciplined

play14:48

you're doomed um that's what I believe I

play14:50

think discipline is the single most

play14:51

important thing in this game I don't

play14:52

care how you trade and I think you'd

play14:54

probably agree with that um I hate that

play14:56

word I'm sorry well to me

play14:59

you know what it is it's it's like um I

play15:02

like I like phrasing it as having a

play15:06

process because if you have a process

play15:09

you're not putting yourself at the mercy

play15:11

of being disciplined or undisciplined or

play15:13

doing you st disciplined to that process

play15:16

well there okay all right we're doing

play15:18

semantics here but yeah process so that

play15:21

um I see people all the time they they

play15:24

have a process but then they don't stay

play15:26

disciplined to it okay I'm going to get

play15:28

in here I'm going to here the stop comes

play15:30

it's like well I'm going to let it drive

play15:31

for another day well you know what I

play15:33

mean it's like they probably haven't

play15:36

gone through that learning curve yet no

play15:37

they will they still you know newer in

play15:40

the game so why it's a it is definitely

play15:43

a game of attrition because uh you know

play15:47

you you can't have so many people

play15:49

winning at this game I hate to say it

play15:51

you know it's um not that every Market

play15:54

is a zero some type of game that's not

play15:57

true either but uh you are competing in

play16:01

Arena with um major money that has

play16:06

exceptional execution skills it's all

play16:08

automated and they are going to beat you

play16:10

to it you can't leave yourself at the

play16:12

mercy of oh I'm going to get out if it

play16:14

hits this point no put your stop in if

play16:17

you get hit you can always get back in

play16:19

you know so um yes fact um the first

play16:23

things that I wrote down from your book

play16:25

some of these quotes trade in the

play16:27

direction of the aberration and you've

play16:28

mentioned this a few times in the book

play16:30

okay and I love it because trading the

play16:32

direction of the aberration the market

play16:33

is never too high to buy or too low to

play16:35

sell when something moves Beyond its

play16:37

historical boundaries there's a strong

play16:39

reason why which is what you were just

play16:41

saying a Trader should be positioned in

play16:42

the direction of the aberration I

play16:45

believe in this so much this is what

play16:47

triggers pretty much every one of my

play16:49

trades is when a market does something

play16:52

that it's not supposed to do I go with

play16:54

the market and not with what the

play16:56

supposed to do thing is um and I think

play16:59

that's an important point I don't know

play17:00

if you want to expand on that you might

play17:01

have done that a little bit already I'll

play17:03

just give you one example that's sort of

play17:05

a different dimension and I did a lot of

play17:08

work with Steve Moore and Moore Research

play17:10

Center back in uh in the early 90s and I

play17:14

learned a lot about seasonals and the

play17:17

statistics behind them and Steve's run

play17:19

this stuff for like 30 plus 40 years

play17:22

he's probably I think the best in the

play17:24

business that does it more research

play17:26

center but you can look at seasonal that

play17:29

goes back say 20 years or just say 18

play17:32

years and let's say it's seasonals are

play17:35

very much like an Actuarial Table

play17:37

there's a window it's not necessarily

play17:39

timing sensitive on either end but

play17:41

there's a window where you would see a

play17:43

positive expectation and so we can say

play17:46

okay you know the market rallied during

play17:49

this month uh 15 out of the last 18

play17:52

years which is not a high sample size so

play17:55

that means that on a walk forward basis

play17:58

even though it was 85% win rate in the

play18:01

past going forward it might only be a

play18:03

60% win rate but now do that across a

play18:06

portfolio of 20 different markets and

play18:09

names so it's all a numbers game but

play18:11

here's what Steve taught me was that a

play18:14

failed seasonal often ends up being an

play18:16

even bigger trade than the actual

play18:19

seasonal okay so there's a very strong

play18:21

reason as to why that seasonal fails and

play18:25

so you know we can't afford to get

play18:28

stubborn these things and you do have to

play18:30

have a cut off by which you can say this

play18:32

system is no longer working this

play18:34

seasonal is not catching this XYZ may

play18:37

you know uh be the case so that would be

play18:41

an example there just having a failed

play18:43

seasonal could be a bigger win in in the

play18:46

opposite direction yeah I like

play18:49

it um something really you know things

play18:52

don't work all the time and again A lot

play18:54

of times when they don't work it's an

play18:57

even better signal it's going to work

play18:58

the other way there you go there's

play19:00

always a reason so stop being stubborn

play19:03

it appears to me from your book that and

play19:06

you talked about this earlier about

play19:07

things give you an opportunity and they

play19:09

get arbed out tell me if I'm wrong but

play19:11

it appears you have traded very many

play19:13

different things over over the years

play19:14

maybe you you you you used to do this

play19:17

and that worked for a while and then it

play19:19

stopped working because maybe it got

play19:20

arbed out so you you contined to do

play19:22

research you found this you started

play19:23

doing this and that worked for a while

play19:26

and then it stopped working and you did

play19:28

research and you moved on to this is

play19:29

that correct yes and no I started off in

play19:32

the equity options which was very much a

play19:35

strategic type of game it's not like

play19:37

you're in the Futures pits with the snps

play19:39

and everybody going totally you know

play19:41

crazy all day long although we did have

play19:43

green mail and blackmail and some

play19:45

craziness in the pits you know back in

play19:48

the 80s um but yes the edge and the

play19:51

options did get arbed out so everything

play19:54

was pretty much right in line um I don't

play19:58

trade crypto I don't trade Forex I mean

play20:01

I trade the the currency Futures I love

play20:04

the currency Futures but there's really

play20:06

no Advantage for me to trade Forex

play20:10

versus the currency Futures I would much

play20:12

rather trade the currency Futures where

play20:14

I can buy on bid sell on offer that type

play20:17

of thing and and use them on my uh

play20:19

execution platform with the same uh

play20:22

trade management tools or so forth that

play20:24

I do with everything else I don't have

play20:26

to have several separate accounts so um

play20:29

I have traded stocks on and off you know

play20:31

for like 30 40 years and I'll be

play20:33

brutally honest it's like uh I find that

play20:37

I get more banged for my buck in the

play20:38

Futures because of the leverage and the

play20:42

um it's so much easier to move size

play20:44

going in and out you know with the snps

play20:47

you know one Mouse click you can do a

play20:48

couple hundred and with stocks you can't

play20:51

really do that it's a different type of

play20:53

uh execution feel to it and it's a

play20:56

little bit more Capital intensive it at

play20:58

least for the way that I trade so I

play21:01

pretty much stick to Futures and I've

play21:03

traded um urx the jgbs the Italian bonds

play21:07

I mean I've traded Futures all over the

play21:09

world but now um you know I pretty much

play21:12

just stick to the most liquid domestic

play21:15

Futures markets and trust me that's

play21:17

enough to get into trouble it certainly

play21:19

is um again I'm going to quote some your

play21:22

book these are more my f some of my

play21:24

favorite ones it's hard to muster the

play21:26

necessary confidence in a system unless

play21:27

you develop it yourself and this is

play21:29

something that has come to my attention

play21:31

since I've started this Discord page and

play21:34

newsletter type thing because I find we

play21:37

started this thing with the idea of

play21:39

helping people to understand the bigger

play21:41

picture of what it takes to be

play21:42

successful in trading not to copy trade

play21:45

Jason shapira okay um and I do put my

play21:48

trades on there because I want people to

play21:50

see what I'm doing and therefore the

play21:52

discipline that I'm using and my stop

play21:53

losses and my risk management so that

play21:55

they can see that that is the more

play21:57

important thing but what I find is a lot

play21:59

of people copy the traits and I beg them

play22:01

not to for this very reason that you

play22:03

mention in the book if you didn't

play22:05

develop this yourself you're not going

play22:07

to have the confidence in it I I've been

play22:09

trading what the way that I've been

play22:10

trading for over 20 years I go through a

play22:12

losing period I know that that's part of

play22:15

it I have all my statistics you know so

play22:19

I don't say oh those last three trades

play22:21

stunk I'm not going to take the next one

play22:23

you know I know how important it is for

play22:25

me to take the next one because the next

play22:27

one may very well be the big one right

play22:30

um so yeah did you want to expand on

play22:33

that a little bit the fact that you

play22:35

really need to develop your own thing

play22:37

and not you know well sure everybody has

play22:40

different temperaments and uh some

play22:43

people are more nervous and need a

play22:44

little bit more uh you know some people

play22:46

can take heat like I can take a

play22:48

ridiculous amount of heat you know but

play22:51

that might not be the case with

play22:52

everybody and it might not be a good

play22:54

thing either you know I'm also uh very

play22:58

uh pro- risk I I take a lot of risk and

play23:01

it doesn't bother me you know I and it

play23:03

gets me into it's gotten me into trouble

play23:05

in the past I'm very much uh leap and

play23:08

then look you know and assess uh but the

play23:10

opportunity comes I want to get it on

play23:12

and then I can evaluate sometimes um I

play23:15

will say that even though I do so much

play23:19

crazy modeling and I always have and

play23:21

I've always hired people that have been

play23:23

full-time for my hedge fund that did all

play23:25

the number grinding for me um my real

play23:28

for is that I'm just an exceptional tape

play23:30

reader and that probably came from my

play23:32

years of standing on the floor when we

play23:34

didn't have charts I didn't have

play23:35

computers I didn't have software you

play23:37

know where I could see these things but

play23:40

there's a certain way that a market will

play23:43

trade when there's an increase in

play23:45

interest and an increase in volume and

play23:48

an activity and I don't need to plot the

play23:50

volume on um you know on the chart I'm

play23:54

usually looking at the uh my quote board

play23:57

you know so I'm trading off of the

play23:59

little net change is pretty much what I

play24:02

watch but I do it across a basket so

play24:04

it's a very holistic type of dynamic

play24:08

markets to me I mean I watch the stocks

play24:10

I watch the currencies the metals the

play24:12

crude all these types of things but I'm

play24:15

kind of watching The Net change and I

play24:17

can see when something's going plus or

play24:19

minus and I've usually done my uh

play24:21

homework the night before that says okay

play24:24

this if this dips below the previous

play24:26

days low and starts to come back up I'm

play24:28

going to get long um but I use a lot of

play24:32

discretion on entries I'll use a little

play24:36

bit more systematic approach on exits

play24:39

and I've pretty much categorized you

play24:42

know my approach to exit for small

play24:45

Target which is if you're scalping or

play24:47

day trading on the snps 80% of the time

play24:50

you want to just play for a small Target

play24:52

because they're very noisy markets so if

play24:54

a market is going through a

play24:56

consolidation period or Market profile

play24:59

terms would say bracketing Market you

play25:02

want to play for a smaller Target pretty

play25:04

much you know a mean reversion type of

play25:06

thing if it's um you know just starting

play25:11

to get some legs then you can reach for

play25:13

a larger Target and then there are you

play25:16

know about six to seven structured

play25:19

categories that I have where I would

play25:21

Trail a stop and that is maybe 30% of

play25:25

the time are there cases where you can

play25:27

go into the marketplace place and Trail

play25:29

a stop and do better than playing for a

play25:32

small Target or a large Target I tend

play25:36

not to scale out so I'm pretty much all

play25:38

in all out that's just what works for me

play25:42

I find that people when they scale out

play25:44

often it's more to satisfy that

play25:46

psychological need but it does alter the

play25:50

numbers so as if you want to do that for

play25:54

yourself that's fine but just recognize

play25:57

that that's why you're doing it to

play25:58

scratch that little mental itch that you

play26:01

might have um so you know I like to do a

play26:06

little bit of everything uh you know if

play26:09

I'm day trading the snps I might only

play26:12

make one or two trades a day and then

play26:15

I'll be looking for my you know

play26:18

positions that I can put in one day out

play26:20

the next day or hold for two or three

play26:22

days and then those opportunities where

play26:25

we can hold a trade for say two weeks

play26:28

you know without really taking much heat

play26:31

uh maybe you get seven of those per year

play26:34

per Market you know so it's identifying

play26:38

the pre-existing conditions and then

play26:41

understanding that I might only capture

play26:44

if I have 120 trades I might only

play26:47

capture 60 of the 60% of those trades

play26:51

you see it's uh and then if you have a

play26:54

system that says you should make n%

play26:57

you're doing great if you capture 80% of

play27:00

that you know because it's pretty hard

play27:02

to um you know for numerous reasons

play27:05

psychological execution software

play27:07

Hardware time of day all all kinds of

play27:09

things why people will 99% of the time

play27:12

underperform a quote system unless it is

play27:15

100% automated and systematic and even

play27:18

then you've got can of worms for a

play27:21

smaller individual that doesn't have

play27:23

that sophisticated uh reconciliation

play27:26

going on in the background and so for

play27:28

it's a whole different business though I

play27:30

think it's an interesting comment if

play27:32

that's what you're doing you were

play27:33

talking about the scaling out thing

play27:35

that's fine just recognize why you're

play27:37

doing it um and I love that because

play27:40

that's how I feel about all of this I I

play27:42

think this whole game is a battle

play27:45

against yourself um and recognizing why

play27:49

you're doing things to me is the most

play27:50

important thing you can do right finding

play27:53

and being honest about your own biases

play27:57

so that you can

play27:59

overcome them you know is to me the most

play28:02

important thing that you can do and what

play28:04

people have the most trouble doing not

play28:06

just in trading but in life I mean I see

play28:08

it all the time with almost everybody I

play28:11

talk to these biases that they can't get

play28:13

over be it and I don't want to get into

play28:15

it but be it political be it religious

play28:18

be it whatever you know the bias is just

play28:22

overtake any kind of ability to think in

play28:26

an open-minded way and and that's fine

play28:28

in life if that's what you want to do

play28:29

you're not hurting anybody necessarily

play28:31

but in trading you know um you're going

play28:34

to lose money so you know to me that

play28:38

that that's the most important thing to

play28:40

me I don't know how you feel but and it

play28:41

goes back to the whole discipline

play28:43

argument as well but to me it's

play28:44

psychological discipline you know what I

play28:47

would do would be anybody that you know

play28:51

maybe's been in the game for less than

play28:53

10 years maybe you know a little bit

play28:55

more than three years but they want to

play28:57

uh step up their game um pretend that

play29:01

you are going to manage money and you

play29:04

know this Jason because you had to do

play29:06

this as a CTA you prepare a a document

play29:10

and in that document it states markets

play29:13

that you trade your trading style

play29:16

perhaps some general statistics as to

play29:18

average holding time average drw down

play29:20

these types of metrics and um then trade

play29:25

that as if you are your own best client

play29:28

trade it as if I'm going to take one

play29:30

unit one unit might be one contract it

play29:33

might be five contracts depending on

play29:35

your account size it might be uh 10

play29:38

contracts in corn and two contracts in

play29:40

the NASDAQ I adjust everything by a

play29:42

dollar range so that it's uh even you

play29:45

know fairly even risk there and uh say

play29:49

I'm going to do a six-month period here

play29:52

of my Approach and style so that I can

play29:55

see the numbers and then go raise money

play29:57

on that okay okay maybe you have no

play29:59

intention of doing that and truly to

play30:02

become a CTA or a hedge fund or

play30:04

something is so insane with the

play30:06

regulatory burden and the counting and

play30:07

the auditing and everything else that

play30:10

most people don't want to go down that

play30:11

road but if you did an exercise saying

play30:15

uh you know I'm going to demonstrate my

play30:17

style and I'm going to do it and keep

play30:19

these statistics you know and if you

play30:23

really want to put the heat on yourself

play30:26

show your statements every day to a

play30:28

friend or a colleague or a spouse or

play30:30

something like that so you are fully

play30:32

accountable and I think that that

play30:34

accountability problem is really uh what

play30:38

can solve a lot of people's you know um

play30:42

ruts that they get themselves into if

play30:45

they had to be accountable to somebody

play30:47

in some way because you know face it you

play30:50

can hide your statements nobody sees it

play30:52

except you and you can lie about it to

play30:55

people too it make you oh yeah oh yeah

play30:57

but if you had be accountable it might

play30:59

be a whole different game changer you

play31:01

know you might be more apt to exit a

play31:04

losing position at the end of the day if

play31:06

you want to reestablish it the next day

play31:08

you can but at lean you're not carrying

play31:11

this crap on your sheets overnight

play31:13

that's going to get you off to a bad

play31:14

foot the next day of trading so there's

play31:17

all kinds of Creative Solutions that you

play31:20

can do and uh I am not a coach and I'm

play31:24

but I'm sure there are coaches out there

play31:27

that could you know help out in that

play31:29

area uh but you know it's you will find

play31:33

a way if you want Mr Bill who was your

play31:36

trade your trainer yes recordkeeping is

play31:39

a critical part of building a good

play31:41

foundation and he wasn't even talking

play31:42

about trading um monitoring your

play31:45

statistics is also a tool that can help

play31:46

you stay focused and gain control over

play31:48

areas that are prone to distractions it

play31:51

is vital for tracking performance which

play31:53

is exactly what you were just saying and

play31:56

I think that he was about your physical

play31:59

training but and how to be successful in

play32:02

that and what I have come to the

play32:04

conclusion of over the years is that

play32:07

success in any in Denver um is a Formula

play32:11

whether it be success in bodybuilding

play32:13

success in trading success in

play32:15

relationships I is a formula and part of

play32:19

that formula is to keep records and to

play32:22

keep statistics and to keep honest

play32:25

unbiased notes on this stuff because

play32:28

that helps you an immense amount it

play32:31

helped me an immense amount when I

play32:33

finally came to the conclusion after 10

play32:35

years that whatever the hell I was doing

play32:37

it was not getting me anywhere with this

play32:40

and I had to make a decision of what I

play32:42

wanted to do with my life and I decided

play32:43

I wanted to go on trading I was lucky

play32:45

that I had been keeping statistics and

play32:47

trades for you know a good seven eight

play32:49

years and I was able to go back through

play32:51

that and really see what was working and

play32:54

what wasn't working you know and we have

play32:56

this this multi- learning thing I read

play32:58

in one book the guy called it where

play33:00

we'll remember the trade that did great

play33:02

but we'll forget the 50 times we put

play33:04

that same type of trade on and it didn't

play33:06

work right whereas if you're keeping the

play33:09

records of all that you can go back and

play33:11

look and see hey I remember that that

play33:12

worked great once but it doesn't work

play33:14

great over time um I think that's such

play33:17

an important thing for people and and Mr

play33:19

Bill was saying that that was important

play33:21

for you and nothing to do with trading

play33:23

so just on that subject um this was an

play33:26

interesting quote cuz I love it you were

play33:29

talking about something I think the

play33:30

stock market there was excess cash on

play33:32

the sidelines the number one variable in

play33:35

my book that drives Trends and I live

play33:37

that world okay I I live in the world my

play33:39

trading is all about trying to see where

play33:42

possible money flows are going to come

play33:44

from right if I'm looking at the coot

play33:45

stuff and I'm looking to short something

play33:47

that people are very long it's because

play33:49

I'm hoping that I'm getting in front of

play33:50

the money flows coming out if I'm

play33:52

looking to buy something and people are

play33:53

very short obviously I'm looking to get

play33:55

in front of the money flows that coming

play33:56

in how do you measure because you say

play33:58

the number one variable in my book that

play34:00

drives Trend so how do you measure this

play34:02

idea of cash on the sidelines excess

play34:04

cash on the sidelines if you do or is it

play34:06

just a feel thing or um it is a big feel

play34:09

thing for me now because I've integrated

play34:11

so much like holistically over all the

play34:13

years but I would say that first of all

play34:15

you can look at sentiment readings I

play34:17

think are huge okay they're very

play34:19

important because if you have too much

play34:21

bearishness that's people that are

play34:23

sitting in cash if you have too much

play34:24

bullishness they're speaking their

play34:26

position so there's a you you a modicum

play34:28

of that going on you can also look at

play34:30

like fred is a site that has all kinds

play34:33

of Statistics in terms of um you know

play34:35

the data that's in Money Market funds

play34:37

and so forth I mean many many years ago

play34:40

there was a service called trim tabs

play34:42

that would you know tell you the flows

play34:43

going in and out um so I'm pretty much a

play34:48

pure technical an analyst you know

play34:51

technici I really don't look at news or

play34:54

events or macro at all I do believe that

play34:57

you know it'll show up in the charts and

play35:00

the sentiment and some of these other uh

play35:02

things um but uh yeah you know and

play35:07

there's something to be said for as

play35:09

Ralph Aur put it the broader the base

play35:12

the higher into space the broader the

play35:14

top the bigger the drop you know so

play35:16

these adages you know about accumulation

play35:19

and distribution period still play out

play35:22

um uh you know we never know for sure

play35:27

because if you did somehow it would be

play35:29

priced in and there are lots of AI

play35:32

programs out there that incorporate

play35:34

these sentiment readings and so forth

play35:36

and you know people have put these into

play35:38

their models you know I'm sure Rayo has

play35:41

models that include these types of

play35:43

metrics so uh you know I don't try to I

play35:48

I consider those to be secondary

play35:51

variables okay so for me secondary

play35:53

factors are sentiment seasonals

play35:56

commitment of R trade TR reports they're

play35:58

like a a they color the market for me

play36:02

you know leadership in the markets you

play36:04

know group sectors those are all

play36:06

secondary factors I'm not going to make

play36:09

a trading decision based off of those

play36:11

I'm going to make it purely off of the

play36:14

technicals in the market structure and

play36:17

then I just have to be confident that um

play36:20

you know for every 10 trades that I make

play36:23

2% might be big wins you know or I might

play36:26

catch a runner it's just a really a pure

play36:28

numbers game as would be any game of

play36:31

cards you know you just keep playing

play36:33

keep playing and uh you know sometimes

play36:36

the the data is choppy and noisy and

play36:38

there's no volume there's not much going

play36:40

on and that's the way too with cards you

play36:42

know sometimes the cards are just like

play36:44

crummy Bridge hands or something but

play36:46

then there's other times where the I

play36:48

think the biggest factor is is that you

play36:51

have to recognize when you are dealt a

play36:53

good hand you know and play that to the

play36:56

hilt and that's

play36:58

you know cards baseball markets anything

play37:01

it's really about capitalizing on those

play37:04

very few open doors that uh you know

play37:08

come across our way and then that's

play37:10

where you really have to step on the gas

play37:12

and increase your leverage and play it

play37:14

to the health but you can't force that

play37:17

and so I find for me um I'm not trading

play37:20

full-time like I once was I don't trade

play37:23

by any chance on The Leverage that I

play37:25

once did you know I've kind of toned

play37:27

things down a lot um but

play37:30

um that was probably my greatest

play37:33

strength was knowing that I got it right

play37:36

and to really go for it and play that

play37:39

and uh so in the meantime you have to

play37:41

keep yourself involved in a uh fairly

play37:44

structured routine ritual process a lot

play37:47

of grunt work you know I logged numbers

play37:48

at the end of the day logged I didn't

play37:51

keep the statistics on my trades in in

play37:54

much later years you know that was more

play37:56

for the beginning and kind of things but

play37:58

you know you know damn well when you're

play38:00

screwing up you know when you're doing

play38:02

something you shouldn't do I don't need

play38:03

to log the trade to you to tell me that

play38:06

I you know I know when I've got a bias

play38:09

you know and I recognize it but it's

play38:11

just like keeping yourself I hate to say

play38:15

it for me I was the markets were there

play38:18

like every tick in my head every second

play38:21

of the day you know I just eat sleep

play38:23

breathe them and um you know it it's

play38:27

like it's in your blood and uh it's it's

play38:30

not that way right now but I mean I've

play38:32

got enough

play38:34

residual that uh you know that helps I

play38:36

kind of diverged from our question there

play38:40

but I mean that the baseball term I use

play38:41

all the time is wait for the fat pitch

play38:43

there you go wait for that fat pitch and

play38:45

you know I now and I've done a lot of

play38:48

different trading in my life but I now

play38:50

only wait for the fat pitch and

play38:53

sometimes I'm waiting a very long time

play38:55

and it can be very difficult but um

play38:57

again process is process discipline is

play38:59

discipline and I'll wait forever for the

play39:01

fat pitch if I have to because I hate

play39:04

you know I wait for the fetch pitch and

play39:06

sometimes I swing and I miss anyway okay

play39:08

but um I'm okay with that what I'm not

play39:12

okay I can't hit a curveball so when I

play39:14

swing and Miss at a curveball I hate it

play39:16

I just can't I can't deal with it

play39:18

personally so when you first started

play39:21

trading Jason did they have electronic

play39:24

execution the way they do now or did you

play39:26

have to call down to the floor to your

play39:28

broker had to

play39:30

call so I do think that I was trading

play39:33

before the internet so yes okay so I do

play39:36

think that you me Peter brand all of us

play39:39

had a different experience than somebody

play39:42

coming into the marketplace in the last

play39:44

15 years and I do feel strongly that um

play39:51

the little mouse you know and our

play39:54

little uh which does release dopamine in

play39:57

the brain um it is addicting it is very

play40:01

addicting and it changes your uh you

play40:04

know your brain neurology there it it

play40:07

definitely does and so um that I think

play40:11

is a big problem for people because it's

play40:14

so easy just to go in and out during the

play40:16

day and it's counterproductive into the

play40:19

way that you're programming your brain

play40:22

and I don't know what the answer is how

play40:25

to get away from that un unless you had

play40:28

a colleague sitting next to you and

play40:31

you're like okay is this it yes is this

play40:32

it you know maybe trying to work through

play40:35

it that way um I don't know what the

play40:37

answer is but I do think it's been um a

play40:40

challenge for people coming into the

play40:42

markets you know with this sensory

play40:46

stimulation and even you know my screens

play40:49

you know the amount of data now is

play40:52

coming into them is probably 50 times

play40:56

greater than was you know 30 years ago I

play40:59

remember had a big giant satellite dish

play41:02

in my backyard at one point you know and

play41:06

uh that that out got outdated you know

play41:09

25 years ago so um I think just being

play41:12

aware of these things and once again

play41:15

it's a game where you know that it's uh

play41:18

maybe 4% of the people will really make

play41:21

it don't overtrade is a very old trading

play41:23

adage but as you say a very difficult

play41:26

one more difficult now because of the

play41:29

ability to just click a mouse and have

play41:30

fun um my answer for that is not the

play41:35

only way but the most likely way that

play41:38

people are going to get over that is

play41:40

they're going to lose enough money doing

play41:41

it and eventually they're going to get

play41:42

sick of losing money hopefully and

play41:44

they're going to stop doing it okay I

play41:46

think that's the only way to do it you

play41:48

know I mean that's the one thing about

play41:49

this game that personally I love is that

play41:52

are you saying it's Darwinism

play41:55

Jason yes you know I'm I'm saying you

play41:58

know we all know things that have

play42:01

happened in life where people have

play42:03

gotten lucky and made bad decisions and

play42:05

gotten lucky anyway or whatever and and

play42:08

in this game any individual trade sure

play42:10

but over time you're not going to get

play42:12

lucky and make money in this game over

play42:13

time as you very well know um and so

play42:16

that's what we have to start off with

play42:18

something you know that's what you and I

play42:20

uh you know have to acknowledge that

play42:23

somebody that's just coming into the

play42:25

markets in the last two to three years

play42:27

you have to start off somewhere you know

play42:30

you have to start off with a little

play42:32

gimmick a little indicator perhaps um a

play42:37

longer term time Horizon is not

play42:40

appropriate if you don't have that

play42:42

experience under your belt then what's

play42:44

more appropriate is desensitizing

play42:47

yourself to putting on a trade taking it

play42:49

off and because a lot of times you know

play42:52

putting on that trade when you've got

play42:54

some money on the line there's a little

play42:56

Adrenaline Rush there for people that

play42:57

haven't desensitized themselves right

play43:00

it's like jumping off a high dive you

play43:01

know my heart would be pounding out of

play43:03

my chest but if I've jumped off that

play43:05

high dive a hundred times it's not such

play43:07

a big deal but you know it's okay to

play43:11

start off with a little gimmick a little

play43:13

indicator take the pressure off of

play43:15

yourself to make money keep a very

play43:18

short-term Horizon because it is not

play43:21

about calling the markets or a macro

play43:25

perspective or being right or wrong you

play43:29

know it's finding one little spot where

play43:31

you can pick up a dollar bill off that

play43:33

sidewalk and you have to then take that

play43:36

from there and uh you know the other

play43:40

thing is you've got all these I don't

play43:41

know Twitter and chat rooms and I I

play43:43

don't want to you know Discord can be

play43:45

fine if you have a good group of people

play43:47

that provide the camaraderie which is

play43:50

important you know comaraderie uh can be

play43:52

very important but um everybody has to

play43:56

learn to throttle that noise level down

play43:59

to a level that's not going to be a

play44:02

distraction for them or influence their

play44:06

decision making process which is very

play44:09

difficult I'm the first that's I'll

play44:11

never have a TV in my officer listen to

play44:13

the news because I know myself you know

play44:16

it's it's going to influence me one way

play44:18

or another I'll be like ah damned if I

play44:20

do damned if I don't he already put that

play44:22

out there on you know on the air wve so

play44:25

um yeah so just be careful of that noise

play44:27

level eliminate the distractions it's

play44:30

okay to start off with a little gimmicky

play44:32

trade that's you know oh wow five

play44:35

minutes I'm in the trade I did a little

play44:37

breakout of that first 15 minute range

play44:39

in the snps and I CAU two handles hey

play44:41

Pat yourself on the back you know sit

play44:43

back for a little bit and uh you know

play44:46

take the pressure off of yourself to try

play44:48

to do so much so soon patience is a

play44:53

virtue understand there's a learning

play44:55

curve yes um I have two more things I

play44:58

want to say um because I don't want to

play45:01

keep you for too long um but in the

play45:04

midst of all this some of these things

play45:06

that we've talked about right in terms

play45:09

of what I was saying about too much

play45:11

money on the sideline and that's what

play45:12

pushes the trends and feel free to tell

play45:14

me I have no idea if you'd like but

play45:16

where are we now I have no idea where

play45:19

are we now right now in the markets with

play45:21

that where are we in the stock market

play45:22

right now well there's still a lot of

play45:24

money out there in in the money market

play45:26

funds I mean we got up to historical

play45:28

levels on that money market funds you

play45:30

know the monetary base on a Global

play45:32

Supply expanded by like 25% on a global

play45:35

basis you know so it's hard to say how

play45:39

all that filters down and there's really

play45:41

two classes out there you know on one

play45:43

hand you have your uh middle class and

play45:46

your lower class who's got you know

play45:47

fairly maxed out on their credit cards

play45:49

and inflation took a hefty dent in that

play45:52

but on the other hand you know the

play45:54

wealthy have gotten so wealthy and

play45:55

there's a lot of money sitting there in

play45:57

Money Market funds and that is

play46:00

increasing because if I can sit there

play46:01

with my money in a fund getting 5% you

play46:04

know out of treasuries or something I'm

play46:06

just only adding to that you know if you

play46:08

want to think about it that way there's

play46:10

just increasing more and more money out

play46:12

there even though we know that

play46:13

eventually the government will be um you

play46:16

know eating into the you know it's

play46:19

always the private sector versus the

play46:21

public sector so they might be uh you

play46:24

know attributable to a greater

play46:25

percentage of the GMP than perhaps in

play46:28

the past but um there's still a lot of

play46:30

money out there I not sure that

play46:34

valuations you know have reached

play46:37

extremes that we've seen in the past and

play46:40

you know I'm not a macro person but I

play46:43

just gonna say this is incredi I was

play46:45

just gonna say it's an incredibly macro

play46:47

talk for an intraday techn know I can't

play46:49

help it you're still there you know but

play46:51

I'll look at the charts and you can say

play46:52

that the weeklys are you know a little

play46:56

rich in term terms of the uh Trend but

play46:58

you know even so once we stop going up

play47:03

okay which could be you know maybe we've

play47:05

stopped going up typically you rotate

play47:08

and you form a prolonged trading range

play47:11

okay to digest everything so it's pretty

play47:14

rare that market tops are straight up

play47:17

straight down it's much more likely that

play47:19

you'll have a market bottom that unfolds

play47:22

that way you know so that to me says

play47:26

that we we should have great trading

play47:28

opportunity you know don't go out there

play47:30

and mortgage the house to buy puts it's

play47:32

not like that type of environment right

play47:34

now um I still think my opinion is that

play47:38

the vix is still a little high I don't

play47:41

don't get me for that but you know I've

play47:43

Just Seen every 10 years that vix goes

play47:45

down to single digits so it is a

play47:47

possibility that it will go down to

play47:48

single digits again you know which means

play47:51

that the implied volatility is based off

play47:54

of the historical volatility and so so

play47:57

typically at marks the historical Vol at

play47:59

tops historical volatility tends to

play48:03

contract and I don't know if we have

play48:06

quite seen that contraction to the

play48:08

extreme in the historical volatility it

play48:11

is coming in you know you can look at

play48:13

bottoms and see it was so much greater

play48:16

and at Market bottoms you'll see oh uh

play48:19

things like Market breadth plus 1800 -

play48:22

1800 plus 1800 minus 1800 and at Market

play48:25

tops you'll start to see oh Market

play48:27

breadth plus 300 minus 200 plus 500 this

play48:31

type of uh and that's why they always

play48:33

say it's complacency it's not that it's

play48:36

complacency it's just that um that's the

play48:39

nature of the price Behavior once it

play48:42

starts to reach that you know point

play48:45

where uh all the funds have bought the

play48:47

AI stocks and you're starting to see

play48:49

some rotation right some rotation doubt

play48:54

um yeah but that could still be a

play48:57

process you know if we look at election

play49:00

years uh

play49:02

typically and you know again keep in

play49:05

mind the sample size is small here you

play49:06

know but election years tend to hold

play49:08

together you know so they do you know

play49:12

but it doesn't mean that we can't have

play49:13

some like lovely little sell-offs along

play49:17

the way as well I call them long

play49:18

liquidation flushes and um my Approach

play49:23

is pretty much one day at a time you

play49:25

know I look at my my stuff and I say

play49:27

well does this look like it's a great

play49:29

sell short day is it is there a little

play49:31

breakout coil here going on you know is

play49:34

this a do we just have a long

play49:36

liquidation flush and it's a buying

play49:38

opportunity and then I don't fry my

play49:40

brain because I'll fry my brain if I try

play49:43

and look out too far in the future I

play49:45

think the idea of how Market's top and

play49:46

Market's bottom is is really really

play49:48

valuable because I have been harping for

play49:52

a while here on people that just keep

play49:55

wanting to short the stock market

play49:57

um and I'm like listen you're not going

play50:00

to miss anything okay like you're trying

play50:03

to short when a market closes on new

play50:05

all-time highs you know don't do it you

play50:08

know I mean it's not going to close in

play50:09

an all-time high and you're going to

play50:11

wake up tomorrow and the S&P are going

play50:12

to be down 300 and you missed it I've

play50:14

never seen that happen every crash I've

play50:16

ever seen you traded through the 87

play50:17

crash the 87 crash the market topped in

play50:20

what August and it crashed in October

play50:23

you have time right and I think that's

play50:25

an interesting comment about how workk

play50:26

at tops because while I have never done

play50:28

the Quant work that you have I have

play50:30

noticed that as well they Spike bottom

play50:33

they don't Spike top um they I follow a

play50:36

lot of the uh Global indices too again

play50:38

just purely on a technical basis I'm not

play50:41

going to ask how or why but you can't

play50:43

have markets like the Dax which is still

play50:45

one time framing meaning consecutive

play50:48

higher highs and higher lows on a daily

play50:50

bar chart uh you know you're not going

play50:53

to have a selloff in the US market as

play50:55

long as you have some of these other

play50:57

indices just going uh crazy you know

play51:00

Japan's been nice I mean the uh you know

play51:03

Mexico's been nice there's all sectors

play51:06

in the rest of the world where even when

play51:08

they stop going up even when that Dax

play51:12

stops going up it's going to rotate it's

play51:15

going to form a trading range and

play51:18

probably that will um parallel you know

play51:21

price action in the US markets yeah I

play51:23

mean my issue all of the markets here is

play51:26

that I think there's been a switch

play51:28

personally you know what I mean last

play51:29

year people were so massively bearish

play51:32

you know looking for the recession and

play51:33

you know I'm I trade this sort of fade

play51:35

the mass psychology whereas now that's

play51:38

totally gone nobody can call for

play51:40

recession anymore um and people are

play51:42

bullish uh I don't think that they have

play51:45

put all their money to work so I don't

play51:46

think it's a short but for me and I

play51:49

trade on a different time frame than you

play51:50

you know I'm picking sort of major turns

play51:52

and trying to catch major Trends very

play51:54

early um I am not into being long here

play51:57

I'm also not into being short here you

play51:59

know that that's just me but neither

play52:02

here nor there there's one last thing

play52:03

that I want to say that I read in your

play52:05

book that personally it had so many your

play52:08

book had so many great nuggets of wisdom

play52:10

um and I thought this was the best one

play52:12

and you put it right at the end which I

play52:14

thought was op propo because I think it

play52:15

is the most important thing and and and

play52:17

this is something that I have learned

play52:19

I'm now 56 this is not something that I

play52:21

ever would have understood when I was 30

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years old okay when I was 30 years old

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my man was I want to be a billionaire

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come Heller high water that's what I'm

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going for okay me I'm going for me right

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um but what you said here is give and

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everything you give will come back to

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you in tenfold stay humble but remain

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confident and never forget if you don't

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know who you are the markets are an

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expensive place to find out I think

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that's such a great conclusion to all

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this because it says nothing about

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markets well the last part does but give

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and everything you give will come back

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to you tenfold um this is something I

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never would have believed or

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understood um until I had some

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experiences with some people in my life

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who imparted that upon me and I still

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didn't believe it but as I've gotten

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older now I have come to understand that

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