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This podcast is brought to you by the
award-winning prop firm, Fidel Cret.

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And it's for entertainment purposes only.

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So not to be like too cagey about it,

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but three or four weeks ago it was
half a million dollars over two days.

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I've never done that before. Whoa,

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I've never done that before and I honestly
don't ever expect to do that again.

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I really identify what the
idea of there's beauty in

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simplicity and I think most traders go
through this parabolic curve where you

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don't know anything,
you're not using any tools,

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then you're looking at
every tool under the sun,

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but you're not really seeing anything.

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And then you start to identify what
lets you see what you need to see.

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And typically it's pretty
simple stuff. One of the,

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the hallmarks of successful traders
long term is pattern recognition.

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So by forcing myself to manually input
my trade data into an Excel sheet,

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I am reinforcing pattern recognition.

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And I can tell you I even view
those patterns probabilistically,

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but I recognize that in my subconscious
even without me knowing I am processing

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vast amounts of information.

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Episode 223. Alright folks, we've got
Eric Smolinski in the house today.

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Now Eric is a real deal trader who is
trading a large amount of capital enough

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to get him that half million
dollars in two day scenario.

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You're gonna find out in the
show how he got there. Uh,

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other things that he did,

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which was quite interesting is he
automated a lot of the stuff to get the

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probabilities that he used
to then trade them manually.

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So you're gonna find out, uh,
more about that in the show.

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But if you are looking to do that
or take that kind of approach,

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then there's links in the description
to my Robot Builders Club and a various,

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uh,

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raft of other things that you might find
useful and be able to get you there for

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the mediterra for and five platforms,
which I know a lot of you are on. Um,

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look, folks, there's so many
nuggets in this interview today.

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I know you're probably gonna
have it on repeat for years.

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Eric's done a great job of sharing the
whole story and everything he does.

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Please do listen to the
end though because the,

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there are the nuggets just
keep coming. Alright, uh,

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other things going on here at Trading Up.

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We've got a new live streamer
on the show from South Africa,

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so please go and check that
out. He trades Luce's. Uh,

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he did learn from his fleet Luci now I
think he also has his own style as well,

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but uh, Le Lascik is a South
African trader who was on
the show back in the day.

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Uh, other things going on
there on the live streams.

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We've got Herrera who is just about to
pass the full-on Fidel CRE 50 K challenge

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and there's something new hitting the
channel very soon in line with this kind

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of stuff. So stay tuned
for that. Uh, other things,

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if you are a Trading View user
bet you want Trading View Pro,

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then there's links in the description
to these guys who give you Trading View

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Pro for free when you sign up and you've
just gotta trade one lot a month and

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you're gonna get it for free.
Alright folks, enough for me,

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let's get on with the show after
hearing from my sponsor, Fidel Crest.

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Fidel Crest is an award-winning profu
that funds traders will up to $2 million

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So one thing that really sets Fidel CREs
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And be sure to use promo code trading
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challenge. Click the link in the
description below or the card above to.

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Find out more. Alright folks,
here we are on Trading Up.

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We've got Eric Linsky in the house
all the way over there in Sandy Ogo.

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So welcome to the show Eric.

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Ah, thanks man. Super stoked
to be chatting with you.

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Well look, Eric is, has
been trading since 2007,

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so he is got a lot of experience and uh,

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the bulk of his 3 million net worth
is made up from his trading income.

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He's a stock options
trader on the retail side.

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There's a lot of technical
analysis. So folks,

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we're gonna dive into that and
start off with Eric's journey on,

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I should mention ears from ES invest
as well. So that's his own channel.

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So we've got him on the show.
So Eric, how did it all get,

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how did you get started back in 2007?
What were the, what was the journey to,

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to where you are now, which
is what are we over 10 years,

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14 years into the future?

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Uh, pure dumb luck is really what
it comes down to really. So yeah,

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so I started when I was in high
school. I'm one of those weird,

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weird people and the only reason why
I started then is I had a high school

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teacher and he saw that I was working
a lot because I came from a single

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mom. Like we essentially
struggled to pay the bills.

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It's like the same story
that most traders I talk to.

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We all start from some sort of
disadvantaged financial situation,

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so take that mold and
slight differences for me.

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But I was working a lot and I was
saving cause that's all I kind of

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figured out to do. And that
high school teacher said, Hey,

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what are you doing with all this money
that you're saving? And I was just like,

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uh, just saving it. And he is like, well
you need to look into the stock market.

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And at that point, you know, I was
still in high school, I was like, what?

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In uh, ninth grade I think.
And he's essentially saying,

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well you need to do this because it'll
essentially make your money work for you

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that whole bit.

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So I started with some buy and hold in
individual tickers and I got super lucky

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with some of the stuff I picked
that is also pure dumb luck. And,

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but I was a very little amount
of money is like $3,000.

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So it's not like I was
making a bunch of money,

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but I saw early success and that's what
changed everything for me because I was

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like, oh,

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this can actually do something and
I have a very natural obsessive

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personality. So as soon as I saw that,

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that's when I wanted to consume every
single resource I could find on it.

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And that's why I tell people, um,

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I do the math periodically out of
curiosity and as of right now I think I've

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spent over 32,000 hours on the markets
and it's just because of that obsessive

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personality. So it's really how it
started. A high school teacher said,

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you should look into this. I
started it, saw some early success,

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very fortunately, and then
from there it was, you know,

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had had or what is it, hook
line and sinker down I go.

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And so, so like you leave high
school and what do you do?

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Or even in high school were
you sort of sort of, you know,

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spending hours and hours at
the charts learning stuff or,

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or how did that all play out? I mean,

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I'm guessing there was some ups
and downs along the way as well.

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Of course. Yeah. So when I was in
high school, a lot of it was, um,

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it was reading. I actually, this
is, I'm older, well not super old,

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but like I'm, I'm 31,

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so we actually still had like a book
library and you would go to the book

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library and talk to the
lady and she would say, oh,

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here are the books you can find on
that. So she helped me, you know,

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navigate the card catalog to go
find the books I was looking for.

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And I just started reading everything I
could about the stock market first and

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then that's really how I bumped into
derivatives. And I was like, oh,

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those sound just interesting. I'm
generally curious about things.

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And derivatives at first seemed
completely insurmountable to

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me. It's like this completely foreign
language with all different kinds of

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terminology that none of it
makes sense. It's all fairy dust.

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So I had a really hard time
like understanding it and
that actually turned me

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onto it even more.

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And I'm thankful for that because when
I first started trading derivatives,

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it was my first year of,
uh, investing in general.

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I had no shortage of pure
failure and thankfully I

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wasn't using a lot of money,

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but I was attempting to
trade a hypothesis and then

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I would realize that it just isn't
working how I thought it should.

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So then that forced me
to study that much more.

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And it's just kind of this
cycle that perpetuated itself.

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And that really went all
the way through high school.

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It definitely wasn't like as
focused of a learning period for me.

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I was still spending time on
it literally every single day,

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but I was still going outside playing
basketball with my friends and stuff like

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that. It wasn't really until I went to
college, um, that I like really, it,

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it, I consider it my second degree.

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I literally probably spent equivalent
if not more time learning about trading

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than I did actually in academia.

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Right. Really. And so what,
what did you study in college?

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So my undergrad was in criminal
justice and statistics. It was,

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I was going through uh,

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a Marine Corps program cuz there was
no way I could afford to go to college.

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And that same mentor that turned me
onto, uh, the stock market, he said,

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well you should apply for the scholarship
cuz I wasn't gonna go to school.

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And he said, apply for
the scholarship. I did,

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thankfully I got it and it
was a full ride to Rochester.

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I instituted technology, so it's
just a tech school up in New York.

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And I started getting exposed to
statistics through the lens of criminal

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justice.

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And I started to realize like how
much I love statistics as a worldview,

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as a perception of risk
reward. I think the,

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I think life is statistics.
So actually when we, you know,

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dive a little further
into the session today,

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you'll notice that a lot of the
tools I use predicated on statistics

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and it's because it's
an observable pattern,

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an observable dataset that starts
to remove more and more of my

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subjectivity as a traitor.

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Because what I like to tell
people is I don't trust myself.

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I might have an idea, I might have
an i a hypothesis I want to test out,

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but I never think to myself
because I thought this idea,

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it's inherently correct, I
need to prove it somehow.

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And statistics have been a huge
lens. I apply that through.

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And so if you had to sort of like,

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cause I mean stats is is a big
part of trading, right? And I get,

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I've had traders on who, you know,
say they know stats about this,

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that and the other thing and they'll
reel 'em off. What, what, uh,

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I suppose what's a good thing for
somebody to do based on your degree

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around stats that will, I suppose,

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solidify or help with their trading? Like,

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so what's a good thing for them to
do? Like if they're gonna go, well,

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I'm gonna try and find a
stat out about like, uh,

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how many times a certain pattern happens
and goes in my favor, what, what,

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what would be something that would need
to back that up with to make sure that

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that stat wasn't like a
complete, you know, useless step?

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Yeah, and I think that's such a
great question because what was it,

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mark Twain said there's lies,

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damn lies and then there's statistics
and it's for that point precisely is

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you can overfit models,

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you can over quantify things to a point
where you just have numbers falling out

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of your ears for the sake of it.

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So the way that I think about applying
statistics to something is there needs to

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be a discreet problem
I'm attempting to solve,

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then I'm looking for data. It's
not even like a specific stat,

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I'm just looking for data to back up
whatever this problem is I'm trying to

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solve. So for example, if I'm
trying to, speaking of derivatives,

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so if I'm trying to trade variance, risk
premiums sounds kind of complicated,

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it's really not. But if I'm
trading that phenomenon,

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I need to quantify it. So I'm
gonna look for data to quantify it.

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And as I'm collating the data, now
I have an opportunity to see, huh,

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there's a propensity for this relationship
to emerge under these conditions.

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If I apply this rule set to that,

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this is the most likely outcome
and I can project it forward.

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So I think the idea of using
statistics as a way to view data in

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the service of solving a problem,

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I also will say that using
statistics to understand risk

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is probably one of the most
slept on parts of statistics.

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It's one of the things I'm
essentially an evangelist for.

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And the reason for that is
I think that people have way

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too much of a secular focus on
reward opportunity and trading.

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If you talk to somebody and
they're placing a trade,

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one of the first things out of their
mouth is always, oh, I'm gonna,

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I can make this much or I plan
to get out at this much profit.

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Guess what homeboy, that's like the one
part of the trade you cannot control,

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you have no say if a
trade moves into profit,

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the part you can control every
single time is your risk.

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So unless we apply good thought process
on how we're gonna manage our risk,

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and then correspondingly the
probability of that risk against

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whatever our perceived opportunity is,

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and the probability of that opportunity
is you're just kind of flying blind.

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00:12:07,160 --> 00:12:09,840
So this is why I'm such a huge
fan, what I just described to you,

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not very eloquently, but nonetheless
is, uh, expected return or expectancy,

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which is a statistical function.

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Right. And, and so the one thing I was
hoping you'd say, which you didn't,

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but may be an answer in here, uh, what
about like the quantity of, you know,

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if you, if somebody says, oh, I'm gonna
go back and I'm gonna test this out,

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and they go back and they test 10
scenarios, is that gonna be an issue?

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Or in like a, okay, well it was a, it
was a 60% win rate over the past 10.

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Is the, is the number
of like, uh, iterations,

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is there sort of like a minimum
that you would say, you know,

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if you're gonna go go
and get a bunch of data,

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you need to have a certain amount of data
before it becomes statistically valid

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and what would be that number? Yeah.

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Uh, typically we need at least 30 and
equals 30 is like the minimum viable.

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But I would argue in trading that's
still way too low. Like I, and again,

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it depends on, um, the sample
that you're talking about,

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but I actually love that you're talking
about that concept because the law of

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large numbers essentially tells us that
as we achieve more samples in a data

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set, we are gonna approximate
towards the mean result of,

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or whatever that data set is.

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So the short answer to the question
is the more you can put in,

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the more representative the outcome is
going to be of the data set that you

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observed. The problem with it is there
are a lot of, especially in trading,

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you can look back and when
you back test something,

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it, it, who doesn't look
smart in a back test,

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I can literally spend four seconds
and show you the coolest, you know,

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00:13:42,590 --> 00:13:46,000
system with incredible
numbers on a back test.

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So I think in trading it's even more
important to have a larger sample size

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because of the periodicity of markets.
We go through different periods where,

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for example,

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last year people were so
shocked that bonds and equities

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were moving so closely in tandem with
one another and they're like, well,

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what's going on? This is supposed to be
an inverse relationship. And it's like,

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well not really fam if
you look back at other in,

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and this is speaking
about the US markets, um,

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but if you look at like
previous inflationary periods,

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that's actually not that uncommon.

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So unless you have a wide enough data
set to capture those circumstances,

253
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you just completely missed that boat.

254
00:14:25,250 --> 00:14:28,280
Alright folks, I'm here at Blackpool
Markets headquarters in Auckland,

255
00:14:28,280 --> 00:14:30,840
New Zealand. You can see this amazing
view behind me of Auckland Harbor.

256
00:14:30,840 --> 00:14:34,000
Now talking about views. If you do
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257
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258
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they're gonna give you a free trading
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259
00:14:40,680 --> 00:14:43,000
click the link in the description
below or the card above.

260
00:14:45,650 --> 00:14:48,240
So when you are doing like your
own testing, what would you,

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00:14:48,240 --> 00:14:51,120
what would be your number that you'll
be going for? Like if you said, said,

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00:14:51,120 --> 00:14:55,480
okay, well if, if 30 is like minimum,
what would be your number and saying, oh,

263
00:14:55,540 --> 00:14:59,240
I'm happy if I, if I do 75 or whatever
it is. What, what would be that number?

264
00:14:59,250 --> 00:15:00,060
Oh.

265
00:15:00,060 --> 00:15:02,710
I would say if I'm testing
a system, one of 'em,

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and not to give you another conditional
answer, but it kind of is if it's like,

267
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um, like a day trading trigger way
more like at least 150 samples,

268
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like absolute minimum.

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If it's longer term timeframes
with longer term triggers,

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you inherently have less
samples to pull from.

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So that's when I would start guiding
that number down at least 50 as like at

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least 50.

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If you can't find 50 samples of something
for a system that you're attempting to

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like reliably deploy going forward,
you're gonna struggle anyways.

275
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So actually what I tend to do is get
thousands and I'll use something like

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Python to run through the large data set,

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and then I will do a, what
I call a personal sample.

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I'll pull up the time periods
that I saw a trigger go off,

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and I will essentially look at the
actual chart with my own eyeballs and I

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will look at it and trade it out.

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00:15:54,880 --> 00:15:59,300
And that's kind of that hundred minimum
sample that's like a manual sample

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with the way that we can automate so
much data now there's no reason for most

283
00:16:03,740 --> 00:16:05,660
things not to have
thousands of data points,

284
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especially for shorter term timeframes.

285
00:16:07,960 --> 00:16:11,060
And so, so going back
into your journey and, uh,

286
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you're at college and you're
sort of, you know, you,

287
00:16:13,420 --> 00:16:17,540
you're learning stock market and you're
learning the statistical stuff with the

288
00:16:17,540 --> 00:16:20,260
criminology. What happened
after that? I mean,

289
00:16:20,260 --> 00:16:24,020
and did you apply something to
come up with your own approach?

290
00:16:24,400 --> 00:16:25,660
How did that pan out?

291
00:16:26,610 --> 00:16:30,260
Yeah, so while I was
still in school, it was a,

292
00:16:30,260 --> 00:16:32,940
a lot of trading and then I was
going through the ROTC program,

293
00:16:32,940 --> 00:16:36,700
the commissioning program for the Marine
Corps. So once I got outta college, um,

294
00:16:37,550 --> 00:16:41,240
I was on active duty in the Marine
Corps for six and a half years. Um,

295
00:16:41,240 --> 00:16:45,080
so I was a marine officer, loved that
gig, but I traded that full-time as well.

296
00:16:45,300 --> 00:16:46,760
And the only thing I did,

297
00:16:46,760 --> 00:16:51,040
that's one of the cool part
about derivatives is I can
adjust my strategies to

298
00:16:51,040 --> 00:16:55,640
fit my availability and timeframes because
a lot of people paradoxically think

299
00:16:56,100 --> 00:16:59,760
I'm gonna trade for freedom
and control over my time,

300
00:17:00,310 --> 00:17:04,240
then you fast forward 10 years
and the successful traders,

301
00:17:04,240 --> 00:17:09,040
a lot of them are strapped to a
screen all day and it's like, hmm,

302
00:17:09,040 --> 00:17:12,840
that doesn't actually sound like
freedom to me, not what I'm going for.

303
00:17:13,610 --> 00:17:18,280
So I wanted to make sure that I have
different approaches to trade different

304
00:17:18,280 --> 00:17:20,480
timeframes so that I could take
advantage of opportunities,

305
00:17:20,480 --> 00:17:24,360
but then also remain involved in the
markets when I was time constrained.

306
00:17:24,360 --> 00:17:28,240
So during college, it was a
lot of both trading and that,

307
00:17:28,240 --> 00:17:30,200
that learning side of things. Afterwards,

308
00:17:30,200 --> 00:17:33,360
even when I was on active duty in
the Marine Corps, um, I was trading,

309
00:17:33,580 --> 00:17:36,880
but all of the systems that I run now,

310
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and it's not even that complex
if I'm being completely honest.

311
00:17:39,120 --> 00:17:41,400
A lot of the stuff I do, I would
consider to be very simple,

312
00:17:42,020 --> 00:17:46,800
but I I create and maintain large data

313
00:17:46,800 --> 00:17:51,350
sets on all of them, both
back testing and again,

314
00:17:51,580 --> 00:17:53,150
I am wary of back testing.

315
00:17:53,210 --> 00:17:56,910
Overfitting is a real thing and it's
very easy to make a back test look good,

316
00:17:56,910 --> 00:17:59,430
but the way I view that is that's
like the minimum threshold.

317
00:17:59,680 --> 00:18:01,790
If you can't make something
look good in a back test,

318
00:18:02,140 --> 00:18:05,390
good luck making it look good in
real trading real, real tough.

319
00:18:05,960 --> 00:18:10,750
So I maintain those data sets and I
optimize things actually quite a bit

320
00:18:10,750 --> 00:18:14,950
based on the data and the statistics
that I'm seeing. So, um, for example,

321
00:18:14,950 --> 00:18:17,830
last year, a lot of my
premium selling strategies,

322
00:18:17,860 --> 00:18:22,750
I would change some of the
Delta selections for the
options based on a shift

323
00:18:22,760 --> 00:18:26,670
in perceived optimal delta exposure
based on the numbers that I saw.

324
00:18:27,550 --> 00:18:31,880
It's interesting. So, so you, I
mean, it sounds like you are, um,

325
00:18:32,820 --> 00:18:37,280
you are manually trading these systems
even though you've built algos to to,

326
00:18:37,280 --> 00:18:40,800
to go and back test them. I mean, how
does that, how do you manage to do that?

327
00:18:40,860 --> 00:18:43,280
How does that work out and how
do you sort of know that you're,

328
00:18:43,280 --> 00:18:46,680
you're taking the right trades or is it
just a function of you can't execute the

329
00:18:46,680 --> 00:18:48,360
trade automatically? Yeah.

330
00:18:48,990 --> 00:18:53,600
Yeah. If so, the reason why I
still prefer to trade manually,

331
00:18:53,600 --> 00:18:58,040
especially in the, the way that
I trade, it's very difficult.

332
00:18:58,190 --> 00:19:01,160
I believe at least as of
right now for retail traders.

333
00:19:01,160 --> 00:19:06,000
It's not like algos are becoming available
to retail traders as of recently.

334
00:19:06,000 --> 00:19:10,600
It's like big thing in the last few
years they've been around for decades and

335
00:19:10,600 --> 00:19:14,880
they are already deployed
large scale by huge

336
00:19:15,480 --> 00:19:20,360
resources. All the high frequency trading,
that's all gonna be done via algos.

337
00:19:20,810 --> 00:19:25,440
So it's very difficult to compete against
algos specifically in very short term

338
00:19:25,440 --> 00:19:29,360
timeframes. So that's why most of my
trades will span anything from, you know,

339
00:19:29,360 --> 00:19:32,400
three days, four days out to 60 days.

340
00:19:33,050 --> 00:19:37,760
So even though I look to
offload a lot of the backend

341
00:19:37,760 --> 00:19:42,520
work to view large data
samples for me to execute,

342
00:19:42,520 --> 00:19:45,560
it really doesn't take me that long
to deploy the strategies myself.

343
00:19:45,560 --> 00:19:49,160
And I still insist on
data logging my own stuff.

344
00:19:49,270 --> 00:19:53,520
I import some of this stuff via
like r t d data relationships with,

345
00:19:53,930 --> 00:19:56,720
um, the platform I use in
like Excel or whatever.

346
00:19:57,300 --> 00:20:01,800
But I still go through and I plug in
what the ticker was trading at when I

347
00:20:01,800 --> 00:20:05,040
entered to the trade, what was the
implied volatility when I, I do it myself.

348
00:20:05,260 --> 00:20:09,000
And it's because I think even though we
can automate all of these things very

349
00:20:09,000 --> 00:20:09,833
efficiently,

350
00:20:10,340 --> 00:20:14,840
the relationship I've been able to develop
with the products is second to none.

351
00:20:15,180 --> 00:20:18,560
And that's one of the things
I'm really big into reading, um,

352
00:20:18,560 --> 00:20:21,400
papers about trading and
markets. And you can check out,

353
00:20:21,400 --> 00:20:24,240
I'm not sure if you're familiar with
S S R N, have you used that before?

354
00:20:24,810 --> 00:20:25,643
No.

355
00:20:26,140 --> 00:20:30,540
Writeable resource, it's essentially
all different kinds of, um,

356
00:20:30,540 --> 00:20:34,180
scholastic papers on different
things we can look at.

357
00:20:34,920 --> 00:20:39,500
And you can look up all sorts of
stuff on the stock market and trading.

358
00:20:39,590 --> 00:20:42,740
Barbara Lee and Odine are
three of my favorites.

359
00:20:42,740 --> 00:20:47,120
Most of them are from University of
California Berkeley. And one of the, the,

360
00:20:47,120 --> 00:20:51,600
the hallmarks of successful traders
long term is pattern recognition.

361
00:20:52,130 --> 00:20:56,960
So by forcing myself to manually input
my trade data into an Excel sheet,

362
00:20:57,070 --> 00:21:01,360
I am reinforcing pattern
recognition. And I can tell you, um,

363
00:21:01,510 --> 00:21:04,160
I even view those patterns
probabilistically,

364
00:21:04,160 --> 00:21:07,080
but I recognize that in my subconscious,

365
00:21:07,350 --> 00:21:11,520
even without me knowing I am
processing vast amounts of information.

366
00:21:11,520 --> 00:21:15,800
So I'm trying to equip that as efficiently
as I can so that even though I might

367
00:21:15,800 --> 00:21:18,920
look at something and think
I am like looking, okay,

368
00:21:18,920 --> 00:21:21,240
what's the linear aggression
channel at? Where's support,

369
00:21:21,240 --> 00:21:25,520
where's resistance behind the scenes
of all of that very process conscious

370
00:21:25,520 --> 00:21:29,120
processing is all of this subconscious
processing that's occurring.

371
00:21:29,120 --> 00:21:32,400
And that's when you get that feeling of,
hmm, something doesn't look right here,

372
00:21:32,400 --> 00:21:34,840
or, ah, I gotta just dig
into this a little bit more.

373
00:21:34,900 --> 00:21:38,240
And I'm trying to feed that.
So I automate a lot of stuff.

374
00:21:38,310 --> 00:21:41,760
I automate at least what I would
consider to be the more menial tasks,

375
00:21:41,900 --> 00:21:46,360
and then I still remain intimately
involved as much as I possibly can in the

376
00:21:46,360 --> 00:21:47,020
rest.

377
00:21:47,020 --> 00:21:50,360
And so, so diving back into your
journey again, like you're at college,

378
00:21:51,180 --> 00:21:54,320
the first trading system you
started to trade, I mean,

379
00:21:54,320 --> 00:21:58,000
did were you profitable outta the gate
or did you have some hurdles along the

380
00:21:58,000 --> 00:21:58,833
way?

381
00:21:59,010 --> 00:22:00,380
Yeah, first,

382
00:22:00,880 --> 00:22:05,020
the first series of trading systems I
attempted to deploy were like just very

383
00:22:05,020 --> 00:22:09,620
basic long and short options.
And it did not go well.

384
00:22:09,620 --> 00:22:12,260
It didn't go horribly.
Like I wasn't bleeding,

385
00:22:12,440 --> 00:22:17,420
but I was kind of just carrying sideways,
maybe at a slight negative carry. But,

386
00:22:18,110 --> 00:22:20,060
um, yeah,

387
00:22:20,210 --> 00:22:25,180
I think what really started to change
the way that that worked for me is

388
00:22:25,180 --> 00:22:29,260
when I started to actually quantify all
this stuff. Because like most people,

389
00:22:29,260 --> 00:22:33,180
when I first started trading,
obviously I was gonna be the one,

390
00:22:33,720 --> 00:22:37,660
and I didn't have a trading log. I
didn't have a trading plan written out.

391
00:22:37,660 --> 00:22:39,500
It was all just kind of winging it.

392
00:22:39,560 --> 00:22:43,820
And when I was first trading my initial
system, I didn't even write it out.

393
00:22:43,820 --> 00:22:46,500
I was too cool for that. It, you
know, I couldn't be bothered with it.

394
00:22:46,720 --> 00:22:50,500
But then when I was like, huh, this isn't
working the way I thought it should.

395
00:22:50,950 --> 00:22:54,900
So then I started just kind of logging
some stuff down and I was like,

396
00:22:54,900 --> 00:22:56,900
wait a minute, why would
I enter at this point?

397
00:22:57,130 --> 00:22:58,940
That's not what I
thought I would be doing.

398
00:22:59,040 --> 00:23:02,220
And that's when I realized
that I can't trust myself.

399
00:23:02,510 --> 00:23:05,980
So in the beginning it was
kind of inefficient at best,

400
00:23:06,360 --> 00:23:11,340
but it was also probably
the most important learning
experience that I had that

401
00:23:11,340 --> 00:23:13,020
really transformed the way
that I approached things.

402
00:23:13,280 --> 00:23:15,380
And so on the second
attempt, what happened then?

403
00:23:16,610 --> 00:23:21,520
So I started forcing myself to define
what I thought I was going to do.

404
00:23:21,520 --> 00:23:26,280
So this kind of starts to build out the
trading plan and then I started looking

405
00:23:26,280 --> 00:23:31,200
at what data points were important
to quantify the success of what I

406
00:23:31,200 --> 00:23:34,880
wrote down on my trading plan. So it
was kind of a bifurcated approach.

407
00:23:34,910 --> 00:23:37,160
I was theorizing what I
thought I was gonna do,

408
00:23:37,260 --> 00:23:40,320
and then I was tracking what
happened and then I kept,

409
00:23:40,830 --> 00:23:45,000
I wouldn't like just inline edit, like
delete what I thought as I updated it,

410
00:23:45,000 --> 00:23:45,120
it,

411
00:23:45,120 --> 00:23:49,160
I would keep 'em and then I would just
iterate on it so that I could review what

412
00:23:49,160 --> 00:23:51,080
I originally thought, then
what I thought the next time,

413
00:23:51,080 --> 00:23:53,040
then what I thought after that. So for me,

414
00:23:53,040 --> 00:23:56,040
it was a very iterative process for
me to start backing into things.

415
00:23:56,040 --> 00:24:00,400
And this is also when I started coming
across really just transformative

416
00:24:00,630 --> 00:24:02,040
work, um,

417
00:24:02,040 --> 00:24:06,960
via books that just 100% accelerated
the learning curve more than I

418
00:24:06,960 --> 00:24:07,960
ever could have on my own.

419
00:24:07,980 --> 00:24:12,880
And that's why I'm such a huge advocate
of kind of the scholastic style of

420
00:24:12,880 --> 00:24:17,850
trading because if you feel like I
thought the same, we all say like, oh,

421
00:24:17,850 --> 00:24:21,410
I learned better by doing. Sure,
I think that's fair for all of us,

422
00:24:21,410 --> 00:24:26,410
but if you are unable to learn from
other people's doing, go ahead,

423
00:24:26,410 --> 00:24:28,970
make all the same stupid
mistakes, waste all the money,

424
00:24:28,970 --> 00:24:32,770
waste all the time when you literally
could just learn it just from reading.

425
00:24:33,020 --> 00:24:36,970
So I kind of started to change that
mindset quite a bit. And that's when I,

426
00:24:36,970 --> 00:24:39,330
I grabbed, this is like my
bible, it's why it's right there.

427
00:24:39,330 --> 00:24:43,530
It's called options As as a Strategic
Investment and it's by Lawrence McMillan

428
00:24:43,530 --> 00:24:44,810
changed everything for me.

429
00:24:44,980 --> 00:24:49,690
So it was an iterative process that
was then drastically accelerated

430
00:24:49,690 --> 00:24:51,090
by reading works like that.

431
00:24:51,430 --> 00:24:54,810
Wow. And and so you didn't, you didn't
do any sort of online education.

432
00:24:54,810 --> 00:24:58,290
It was purely had had
copy books, hardcover.

433
00:24:58,290 --> 00:25:01,730
Books. Yeah, it was, it was the majority
of hard copy books at the time. The,

434
00:25:01,860 --> 00:25:04,290
so when I was really,
really getting accelerated,

435
00:25:04,290 --> 00:25:08,850
it was probably 2010,

436
00:25:08,850 --> 00:25:13,850
11, 12, 13 kind of in there. So there
were definitely online resources,

437
00:25:13,850 --> 00:25:15,810
not like the internet wasn't
a thing or anything, but it,

438
00:25:15,810 --> 00:25:18,250
it wasn't as robust as what it is now.

439
00:25:18,820 --> 00:25:22,370
So the stuff specifically for options
trading as well wasn't super deep.

440
00:25:22,370 --> 00:25:26,210
I did start watching things like Tasty
Trade because that was when they were

441
00:25:26,210 --> 00:25:29,330
first coming on the scene. And I, I like,

442
00:25:29,760 --> 00:25:31,730
I like aspects of tasty trade.

443
00:25:31,730 --> 00:25:34,970
I actually interviewed Tom on my
channel not too long ago. I liked them.

444
00:25:34,970 --> 00:25:38,170
I've had a long relationship with
Tom, like literally over a decade.

445
00:25:38,900 --> 00:25:43,370
So I, but I found a lot of, um,

446
00:25:43,370 --> 00:25:47,330
minor faults in the way that they do
things compared to the way that I was

447
00:25:47,330 --> 00:25:50,890
seeing things. And I started to realize
some of what that was. You know,

448
00:25:50,890 --> 00:25:55,170
they're making really
complex financial tools,

449
00:25:55,900 --> 00:25:58,890
as simple as they possibly can.
In the process of doing that,

450
00:25:58,920 --> 00:26:02,090
you're gonna cut off some
efficiency and optimization,

451
00:26:02,090 --> 00:26:04,170
which is totally reasonable.
I get why they do it.

452
00:26:04,380 --> 00:26:05,730
It just doesn't align with me.

453
00:26:05,730 --> 00:26:10,410
Like I am obsessed with efficiency
and optimization obsessed.

454
00:26:10,980 --> 00:26:15,890
So that's why I really
enjoyed like actually taking a

455
00:26:15,890 --> 00:26:16,970
book down and reading a book.

456
00:26:16,970 --> 00:26:21,810
It's for that same tactile function
because there's nothing else to distract

457
00:26:21,810 --> 00:26:25,570
me if I pull up a computer, I consider
myself relatively disciplined,

458
00:26:25,570 --> 00:26:28,970
but more often than not, an
email pops up, something pops up,

459
00:26:28,970 --> 00:26:32,210
and then I'm distracted a little bit.
And even though I get back to my work,

460
00:26:32,210 --> 00:26:36,170
there's still that intermittent
distraction slows me down. So books,

461
00:26:36,170 --> 00:26:40,530
I don't have that. Um, most of
my books now are online like, uh,

462
00:26:40,540 --> 00:26:44,120
on a Kindle or a PDF so that I can,
I can review them more quickly.

463
00:26:44,460 --> 00:26:45,760
But I still am very,

464
00:26:45,760 --> 00:26:48,800
very dedicated to that style of learning
cause it's served me pretty well.

465
00:26:48,980 --> 00:26:52,360
And so did the, the, did the books
give you the ideas around like, yeah,

466
00:26:52,360 --> 00:26:53,200
you mentioned, you know,

467
00:26:53,200 --> 00:26:55,880
having a linear regression
channel and that sort of stuff,

468
00:26:55,980 --> 00:26:57,640
the technical analysis side of it.

469
00:26:57,640 --> 00:27:00,240
Did the books give you those ideas or
did you just sort of come up with them

470
00:27:00,440 --> 00:27:01,680
yourself after trial and error?

471
00:27:02,570 --> 00:27:03,900
Glorious mix of both.

472
00:27:04,310 --> 00:27:09,260
So actually some of my like
favorite technical analysis tools

473
00:27:09,260 --> 00:27:14,100
are from equity traders and they're
from, um, people like Elder Menini,

474
00:27:14,100 --> 00:27:16,700
like people who trade
like can slim esque style.

475
00:27:16,730 --> 00:27:19,660
I deploy a lot of their stuff
for general trend analysis.

476
00:27:19,660 --> 00:27:21,020
I like Jesse Livermore's work.

477
00:27:21,350 --> 00:27:25,780
So I dr I read a lot of
equities traders books on just

478
00:27:25,830 --> 00:27:28,620
overall market construction
and technical analysis.

479
00:27:28,880 --> 00:27:33,540
But there's a handful of tools that
I use that I haven't seen in a book.

480
00:27:33,540 --> 00:27:35,580
I'm not saying I made it up, I
didn't, they're there already,

481
00:27:35,840 --> 00:27:39,580
but they're just not as popular I
think for like equities traders,

482
00:27:39,580 --> 00:27:44,020
like the linear aggression channels like
I V H V plots, um, things like that.

483
00:27:44,020 --> 00:27:48,660
But even my technical analysis
has gotten very paired down.

484
00:27:48,810 --> 00:27:51,300
I really identify, um,

485
00:27:51,730 --> 00:27:56,590
what the idea of there's
beauty and simplicity

486
00:27:56,970 --> 00:28:00,510
and I think most traders go through this
parabolic curve where you don't know

487
00:28:00,710 --> 00:28:02,110
anything, you're not using any tools,

488
00:28:02,420 --> 00:28:05,270
then you're looking at
every tool under the sun,

489
00:28:05,270 --> 00:28:06,870
but you're not really seeing anything.

490
00:28:07,090 --> 00:28:10,390
And then you start to identify what
lets you see what you need to see.

491
00:28:10,390 --> 00:28:12,510
And typically it's pretty simple stuff.

492
00:28:13,120 --> 00:28:17,230
So a lot of my technical analysis
tools have been informed by

493
00:28:17,780 --> 00:28:22,270
equities traders and then I kind of
adapt pieces of them to fit, you know,

494
00:28:22,510 --> 00:28:24,030
whatever I'm attempting to do.

495
00:28:24,270 --> 00:28:28,190
Cause I use different technical analysis
tools for different trading hypothesis,

496
00:28:28,190 --> 00:28:29,830
different timeframes and stuff like that.

497
00:28:29,970 --> 00:28:32,950
And so if you just sort of
break it down into like, uh,

498
00:28:33,380 --> 00:28:36,830
your tools and let's call 'em
indicators versus price action,

499
00:28:36,830 --> 00:28:40,590
pure price action and, uh, I
suppose options, strategies.

500
00:28:40,590 --> 00:28:44,270
What would the percentage of each
of those sort of comprise and uh,

501
00:28:44,270 --> 00:28:47,510
over an average set of your
strategies that you trade?

502
00:28:47,760 --> 00:28:48,400
Uh,

503
00:28:48,400 --> 00:28:52,470
do you mean the level of analysis I
would put into those three buckets before

504
00:28:52,470 --> 00:28:53,180
placing a trade?

505
00:28:53,180 --> 00:28:56,310
Yeah, yeah. How much waiting on each
of those, like, so how much waiting,

506
00:28:56,310 --> 00:28:56,710
you know,

507
00:28:56,710 --> 00:29:00,830
do you rely 90% on if the indicator
does this and that da da da I'm in,

508
00:29:00,940 --> 00:29:04,990
I don't really care about price action.
So that's like 5% in option strategies,

509
00:29:04,990 --> 00:29:09,190
like 5% as well. Or is it much more
heavily weighted in different ways?

510
00:29:09,760 --> 00:29:12,110
Totally understand. Yeah, it's,

511
00:29:12,110 --> 00:29:15,510
that's actually a really
fascinating question because
the way that my trade flow

512
00:29:15,510 --> 00:29:17,750
typically works, there's,

513
00:29:18,340 --> 00:29:23,310
I either am looking for a specific
piece to fit into my portfolio's

514
00:29:23,310 --> 00:29:28,230
puzzle or I saw something that
looked interesting to me and

515
00:29:28,230 --> 00:29:30,110
now I'm trying to figure out
what makes sense for that.

516
00:29:30,210 --> 00:29:32,310
And I know it's kind of a weird answer,

517
00:29:32,450 --> 00:29:35,430
but based on which part
of that tree I start down,

518
00:29:35,460 --> 00:29:39,590
what I weight is very different
because let's say I see a really cool

519
00:29:39,590 --> 00:29:44,560
opportunity in stock Apple and the
opportunity is based on a technical

520
00:29:44,800 --> 00:29:47,680
analysis indicator that I
see, then in that scenario,

521
00:29:47,700 --> 00:29:52,640
I'm gonna form fit a strategy that
lets me take advantage of the theory

522
00:29:52,640 --> 00:29:55,680
that I have. Whereas
it's kind of the inverse.

523
00:29:55,730 --> 00:30:00,600
If I have a specific gap in my portfolio
and I know the strategy I want to use

524
00:30:00,600 --> 00:30:01,300
to fit it,

525
00:30:01,300 --> 00:30:06,160
I'm then gonna apply technical
analysis to screen to find things that

526
00:30:06,160 --> 00:30:07,720
fit that hole in the portfolio.

527
00:30:08,260 --> 00:30:12,880
And then price action for me is
like price and volume is king

528
00:30:12,970 --> 00:30:16,400
in almost any timeframe, but if we're
talking about actual order flow,

529
00:30:16,910 --> 00:30:20,360
I probably only care about
that intraday training,

530
00:30:20,400 --> 00:30:24,800
which for me might be 5%,
10% of total trading volume.

531
00:30:25,340 --> 00:30:29,920
I'm engaged in short term timeframes,
but it's definitely not the,

532
00:30:29,920 --> 00:30:31,120
the waiting of what I tend.

533
00:30:31,120 --> 00:30:34,000
To do. Tired of missing trades
or spending hours at the charts.

534
00:30:34,520 --> 00:30:36,640
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535
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537
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538
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539
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541
00:30:55,480 --> 00:30:57,160
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542
00:30:57,160 --> 00:31:00,000
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download a free robot. Yeah.

543
00:31:00,410 --> 00:31:02,400
Um, and, and like sort of,

544
00:31:02,540 --> 00:31:06,000
you talked about the hole in your
portfolio and plugging it, I mean, what,

545
00:31:06,060 --> 00:31:09,080
can you give us an example of a hole that
you would would consider to be a hole?

546
00:31:09,690 --> 00:31:13,630
For sure. So the way that I like to
break my portfolio out, I have a,

547
00:31:13,630 --> 00:31:17,310
what I call my core allocation
and my speculative allocation.

548
00:31:17,770 --> 00:31:20,670
And the way that I differentiate
between those is my core allocation.

549
00:31:20,720 --> 00:31:23,310
In the Marine Corps we have
what we call a main effort,

550
00:31:23,310 --> 00:31:24,590
which is like your bid for success.

551
00:31:24,740 --> 00:31:27,870
That's how I'm attempting to
achieve my investing objectives.

552
00:31:27,870 --> 00:31:32,710
My core allocation and my speculative
allocation is as I'm looking at things as

553
00:31:32,710 --> 00:31:34,110
I see, um,

554
00:31:34,430 --> 00:31:39,430
S P X bumping up 41 95 what on the
second of Feb and then it just can't

555
00:31:39,430 --> 00:31:40,263
get back up there.

556
00:31:40,300 --> 00:31:44,510
That's a speculative hypothesis that's
developing in my brain because I'm

557
00:31:44,510 --> 00:31:47,510
thinking weakness. I want to trade
this to the downside and fade the move.

558
00:31:48,300 --> 00:31:52,730
So when I'm looking at a core, the
core allocation of my portfolio,

559
00:31:53,200 --> 00:31:56,690
very simple. There's a handful of
tickers I trade for the core allocation,

560
00:31:56,690 --> 00:31:58,530
and there's a handful of
strategies that I use.

561
00:31:58,860 --> 00:32:03,570
So if we come up on an
expiration Friday for options and

562
00:32:03,570 --> 00:32:05,530
there's a bunch of positions falling out,

563
00:32:05,530 --> 00:32:07,650
that means a lot of risk is coming down.

564
00:32:07,960 --> 00:32:11,770
It's time for me to add more risk in
order for me to continue to meet my

565
00:32:11,770 --> 00:32:14,210
investing objectives. I now
have a hole in the portfolio.

566
00:32:14,280 --> 00:32:18,930
I need to add risk if I'm gonna continue
to meet what my typical monthly annual

567
00:32:18,930 --> 00:32:22,490
targets are. So that's one example
of a hole in the portfolio.

568
00:32:22,580 --> 00:32:27,170
Or if I close a trade down that's a
profit and I need to add more risk,

569
00:32:27,320 --> 00:32:28,410
it's another example.

570
00:32:28,580 --> 00:32:33,290
Or if my deltas my overall
directional disposition of the

571
00:32:33,290 --> 00:32:37,970
portfolio starts to get overweighted
one direction or the other.

572
00:32:38,180 --> 00:32:42,680
So if I have too many long deltas and I
I'm not that bullish in general on the

573
00:32:42,680 --> 00:32:46,720
overall market, then I need to
add some short deltas somewhere.

574
00:32:47,130 --> 00:32:51,320
So I typically apply like a top-down
portfolio approach to when I'm then

575
00:32:51,320 --> 00:32:55,320
deciding to look for trades if I'm talking
about like the core allocation of the

576
00:32:55,320 --> 00:32:58,320
portfolio. So that's a couple
different ways that I, you know,

577
00:32:58,320 --> 00:33:01,360
plug these gaps that I see in
the portfolio as they come up.

578
00:33:01,940 --> 00:33:04,720
And and how did you educate
yourself on, on portfolios?

579
00:33:04,720 --> 00:33:08,440
Because it sounds like you are quite
sort of on the top end of, you know,

580
00:33:08,440 --> 00:33:12,440
where you should be from
managing portfolio of, of uh,

581
00:33:12,630 --> 00:33:14,800
well portfolio, investment
portfolio. I mean,

582
00:33:14,800 --> 00:33:19,480
what was your steps to get to
that level of education and

583
00:33:19,480 --> 00:33:20,313
knowledge?

584
00:33:20,640 --> 00:33:24,290
Yeah, it's a fascinating question. Um,

585
00:33:24,390 --> 00:33:29,170
and there's really two things I can
hang my hat on. The first thing is I am,

586
00:33:29,170 --> 00:33:30,930
like I was telling you
a compulsive planner,

587
00:33:30,930 --> 00:33:34,210
it's one of the main things I did as a
marine officer and it was only bolstered

588
00:33:34,210 --> 00:33:38,410
during that timeframe. So at no point
do I look at a portfolio and think, oh,

589
00:33:38,410 --> 00:33:42,050
how am I doing today? How I'm
doing today is part of it,

590
00:33:42,050 --> 00:33:46,810
but it's inconsequential against a
longer runway that I'm executing here.

591
00:33:47,300 --> 00:33:51,690
So what I started to do is
quantify and add observable metrics

592
00:33:51,960 --> 00:33:55,290
that I can track towards
intermittently throughout the year,

593
00:33:55,290 --> 00:33:59,410
throughout the years so that I can
make sure that I'm on the right path.

594
00:33:59,420 --> 00:34:03,410
So I think that's a really big part
of how I've developed my portfolio

595
00:34:03,410 --> 00:34:04,330
management theory.

596
00:34:04,710 --> 00:34:09,290
And then the other thing is
I had a trading mentor that I

597
00:34:09,290 --> 00:34:10,123
stumbled across.

598
00:34:10,620 --> 00:34:15,290
He was a old army doctor that
traded options and he was an

599
00:34:15,480 --> 00:34:20,290
ornery old dude that wanted nothing
to do with me and I loved him.

600
00:34:20,940 --> 00:34:25,610
So I started mentally manipulating
him to get him to interact with me,

601
00:34:25,610 --> 00:34:30,050
which worked beautifully. And he
and I actually kind of spurred a,

602
00:34:30,050 --> 00:34:31,050
a long-term friendship,

603
00:34:31,050 --> 00:34:36,010
but he identified with me
a lot of the faults in the

604
00:34:36,010 --> 00:34:38,290
way that I was approaching not
just my trading strategies,

605
00:34:38,290 --> 00:34:43,010
but portfolio management strategies
and some of the input that he gave

606
00:34:43,010 --> 00:34:46,330
me, like, you are going to blow
up your account at this rate.

607
00:34:46,800 --> 00:34:48,530
I took it very seriously. Mm-hmm.

608
00:34:48,540 --> 00:34:52,530
So getting some of that external input
was probably the most important stuff for

609
00:34:52,530 --> 00:34:56,090
me to develop kind of the way that I
think about portfolios, strategies,

610
00:34:56,150 --> 00:34:57,610
and then individual trades.

611
00:34:57,780 --> 00:35:01,650
Awesome. Now, now, um, what
about like finances and,

612
00:35:01,650 --> 00:35:06,290
and getting the capital to trade
initially and talking about blowing

613
00:35:06,290 --> 00:35:08,250
accounts. Did you blow any
accounts along the way?

614
00:35:08,250 --> 00:35:10,210
How did that all play out on your journey?

615
00:35:11,180 --> 00:35:14,730
So I started working really young.
Cause like I was telling you, we,

616
00:35:14,880 --> 00:35:17,090
I didn't come for money.
Like again, most traders,

617
00:35:17,090 --> 00:35:20,250
so I used to split wood for a dude
that I hunted on his property,

618
00:35:20,280 --> 00:35:24,170
sold Christmas trees, which, uh,
cheat code for anybody that's,

619
00:35:24,170 --> 00:35:27,210
there's the tips in Christmas
trees is really good.

620
00:35:27,210 --> 00:35:28,890
Like literally a couple times my mom,

621
00:35:29,460 --> 00:35:32,370
my mom literally thought that I was
selling drugs <laugh>. And I was like, no,

622
00:35:32,370 --> 00:35:36,290
I'm, I'm literally selling happiness.
I'm selling Christmas trees. Um,

623
00:35:36,290 --> 00:35:40,840
but like the, the tips were insane. And,
um, I used to work at a bowling alley,

624
00:35:40,840 --> 00:35:44,280
long story short, worked a bunch of
odd jobs. Then when I was in college,

625
00:35:44,390 --> 00:35:47,360
I started getting into kind of
different kinds of businesses.

626
00:35:47,360 --> 00:35:48,800
I got into angel investing,

627
00:35:48,830 --> 00:35:51,840
hard money lending to friends that
were starting small businesses.

628
00:35:52,110 --> 00:35:54,400
I was flipping cars, flipping motorcycles,

629
00:35:54,950 --> 00:35:58,440
I didn't race for money. Um,

630
00:35:58,690 --> 00:36:02,800
so all kinds of stuff like that. And I,

631
00:36:03,510 --> 00:36:08,150
I made a commitment to
myself early on based on the

632
00:36:08,150 --> 00:36:12,390
projections that I made
on a 15% per year return.

633
00:36:12,390 --> 00:36:16,390
I wanted to be aggressive but
conservative. And that was my goal,

634
00:36:16,390 --> 00:36:17,710
15% per year.

635
00:36:17,850 --> 00:36:21,630
And I projected out based on my
current principle investing balance,

636
00:36:21,720 --> 00:36:25,190
my current savings rates, my
expected growth in my savings rates,

637
00:36:25,540 --> 00:36:30,450
when would I start to hit what I would
consider to be escape velocity and

638
00:36:30,450 --> 00:36:33,650
am I comfortable with the trade off?
And when I first ran those numbers,

639
00:36:33,650 --> 00:36:35,450
the answer was a resounding no,

640
00:36:35,700 --> 00:36:40,610
it was gonna be like essentially
55 before I would've hit where I

641
00:36:40,610 --> 00:36:44,090
wanted to be. So I was like, okay,
that tells me one of two things.

642
00:36:44,090 --> 00:36:48,810
I need to either make way more money
or I need to save way more money.

643
00:36:49,380 --> 00:36:51,930
So I decided to try and do both.

644
00:36:52,520 --> 00:36:57,330
I got even more serious about finding
different sources of income and then I

645
00:36:57,330 --> 00:37:00,930
got even more serious
still about saving and the,

646
00:37:01,550 --> 00:37:03,930
the sacrifice of saving early on.

647
00:37:04,700 --> 00:37:09,490
It cannot be overstated in its utility
to accelerating compounding returns.

648
00:37:09,740 --> 00:37:10,930
Doesn't seem like it.

649
00:37:11,150 --> 00:37:14,810
But if you pull up a compound growth
calculator and just play with it for a

650
00:37:14,810 --> 00:37:16,530
little while, start with your
original principle balance.

651
00:37:16,530 --> 00:37:21,290
If it's $10,000 and then say that
you're gonna save $100 every month

652
00:37:21,470 --> 00:37:25,450
for 20 years at 10% just standard
market returns, whatever,

653
00:37:25,590 --> 00:37:29,770
and see what the number is, then
bring that to $150 monthly savings,

654
00:37:29,770 --> 00:37:31,850
$200 monthly savings. You get the point.

655
00:37:32,230 --> 00:37:36,850
But the point being is you
start to see a big change

656
00:37:37,100 --> 00:37:40,730
in the outcome in the timeframe
it takes you to get somewhere.

657
00:37:41,180 --> 00:37:45,530
So embracing that delayed
gratification and truly

658
00:37:45,530 --> 00:37:50,050
prioritizing savings early
on, it is second to none.

659
00:37:50,050 --> 00:37:51,410
What I tell people all the time is like,

660
00:37:51,410 --> 00:37:55,610
you're not gonna trade a $5,000 account
into a meaningful amount of money.

661
00:37:55,960 --> 00:37:58,090
Well, I don't like to speak definitively,

662
00:37:58,090 --> 00:38:02,370
but the propensity for that to happen
from a probabilistic standpoint is

663
00:38:02,770 --> 00:38:07,090
astronomically low. Is it possible?
Yeah, baby, probably not gonna happen.

664
00:38:07,740 --> 00:38:12,530
So I wasn't willing to allow my
future wealth to be predicated

665
00:38:12,580 --> 00:38:14,290
on a low probability event.

666
00:38:14,880 --> 00:38:19,210
I knew that I had a single mom
that needed to be taken care of.

667
00:38:19,210 --> 00:38:23,850
I am the retirement plan, I pay for her
mortgage, like I am her retirement plan.

668
00:38:23,850 --> 00:38:25,650
And I'm cool with that.
That's part of my job.

669
00:38:26,380 --> 00:38:29,650
So in order for me to be able
to do that though successfully,

670
00:38:29,650 --> 00:38:33,050
I couldn't wait my effort
on low probabilistic events,

671
00:38:33,050 --> 00:38:37,200
I need something that was essentially
assuredly gonna happen barring some sort

672
00:38:37,200 --> 00:38:38,720
of massive fallout in the world.

673
00:38:39,570 --> 00:38:44,360
So that's really the way that
I thought about saving early on

674
00:38:44,700 --> 00:38:48,640
and then increasing income. If you
can do those two in any sort of way,

675
00:38:48,980 --> 00:38:51,320
you are going to be light
years better off for it.

676
00:38:51,740 --> 00:38:55,480
And did you have like a sort of a,
a time where you were, you know,

677
00:38:55,480 --> 00:38:58,200
you'd finished the trading week
or, or the month or something and,

678
00:38:58,200 --> 00:39:01,520
and you'd actually sort of were
quite shocked at how much you'd made?

679
00:39:02,150 --> 00:39:06,960
Absolutely, yeah. There,
there was a couple times e
even recently this year. Um,

680
00:39:06,990 --> 00:39:11,720
I, I haven't given out any details. I I
haven't even made a video on it yet, um,

681
00:39:11,790 --> 00:39:16,680
just because I'm waiting to see if the
same situation emerged. But I have made,

682
00:39:17,010 --> 00:39:20,400
um, massive, at least relative to me, uh,

683
00:39:20,490 --> 00:39:22,680
amounts of money in very
short periods of time.

684
00:39:23,250 --> 00:39:27,400
So not to be like too cagey
about it, but like what,

685
00:39:27,400 --> 00:39:31,040
three or four weeks ago it was half
a million dollars over two days.

686
00:39:31,390 --> 00:39:33,040
I've never done that before. Whoa,

687
00:39:33,040 --> 00:39:37,080
I've never done that before and I honestly
don't ever expect to do that again.

688
00:39:37,620 --> 00:39:41,800
But it was essentially a lifetime of

689
00:39:42,200 --> 00:39:47,080
education that was able to identify a

690
00:39:47,080 --> 00:39:51,040
very rare opportunity and I was able to
move fast enough to capitalize on it.

691
00:39:51,340 --> 00:39:55,640
But like that definitely is probably
the most on a dollar figure,

692
00:39:56,170 --> 00:39:57,120
um, amount.

693
00:39:57,120 --> 00:40:01,960
But even I've had more impressive
percentage on the over account moves,

694
00:40:01,960 --> 00:40:03,120
you know, longer terms.

695
00:40:03,820 --> 00:40:08,680
But I think the thing is is for
me it was always the consistency

696
00:40:08,830 --> 00:40:10,800
year over year returns.

697
00:40:11,070 --> 00:40:13,920
That's what I care about
year over year returns,

698
00:40:14,090 --> 00:40:18,560
because that is what was going to get
me again to the, to the escape velocity.

699
00:40:18,560 --> 00:40:21,120
But there was plenty of those instances
where I'd looked and I was like, damn,

700
00:40:21,350 --> 00:40:24,160
like this is actually working.
There's something to this.

701
00:40:24,540 --> 00:40:28,520
But to answer your question
before actually that I missed, uh,

702
00:40:28,520 --> 00:40:30,000
I've never blown up an account,

703
00:40:30,220 --> 00:40:33,960
but I've had a massive drawdown on
in the account actually when I was in

704
00:40:33,960 --> 00:40:35,960
college. And that per,

705
00:40:35,960 --> 00:40:39,160
it's the largest percentage
drawdown on a dollar basis,

706
00:40:39,160 --> 00:40:41,880
it actually wasn't that much money, it
was less than a hundred thousand dollars,

707
00:40:42,380 --> 00:40:44,760
but on a percentage of the
account it was massive.

708
00:40:45,460 --> 00:40:50,360
And that was like the
cleanest shot across the bow

709
00:40:50,360 --> 00:40:55,320
that I've ever had to force me to
essentially reconsider everything I was

710
00:40:55,320 --> 00:40:59,720
doing. And that's kind of what spurred
and reen reinforced a lot of this,

711
00:41:00,290 --> 00:41:03,520
um, dedicated tracking and
review protocols that I run now.

712
00:41:03,710 --> 00:41:05,960
Well, and and were there any
sort of like, you know, uh,

713
00:41:05,960 --> 00:41:09,720
similar kind of days when you were
after that big drawdown that you,

714
00:41:09,740 --> 00:41:11,800
you actually have were
going, what the hell,

715
00:41:11,980 --> 00:41:16,640
I'm only 21 and I've managed
to do X amount of dollars in,

716
00:41:16,640 --> 00:41:18,800
in a week or something like that.
Was there anything like that?

717
00:41:19,670 --> 00:41:20,800
Yeah, I think so.

718
00:41:20,800 --> 00:41:24,920
There was a couple times that I
made slightly outsized returns,

719
00:41:24,940 --> 00:41:28,810
but unfortunately most
of those instances I,

720
00:41:29,440 --> 00:41:31,690
I really tra trading as a business.

721
00:41:31,840 --> 00:41:36,080
I do my absolute best to
avoid any sort of emotional

722
00:41:36,080 --> 00:41:39,760
irregularities that means highs
or lows, elation or sadness.

723
00:41:40,580 --> 00:41:44,920
And as soon as I saw would see like
larger returns, I would always say,

724
00:41:45,030 --> 00:41:46,920
what risk didn't I see?

725
00:41:46,920 --> 00:41:50,320
What risk did I just expose
myself to that I didn't perceive?

726
00:41:50,580 --> 00:41:52,560
And sometimes there was none.

727
00:41:52,560 --> 00:41:56,240
And then that's actually when I would
pivot more resources to that opportunity.

728
00:41:56,780 --> 00:41:59,520
But after that drawdown, my,

729
00:42:00,450 --> 00:42:04,280
my mandate to myself on the way that I
emotionally interacted with the markets

730
00:42:04,280 --> 00:42:05,080
changed a lot.

731
00:42:05,080 --> 00:42:09,840
And it also forced me to start the
idea of really trying to decouple

732
00:42:10,750 --> 00:42:13,610
the investing capital from me.

733
00:42:14,080 --> 00:42:18,050
It's very difficult to maintain a
healthy relationship with trading,

734
00:42:18,050 --> 00:42:22,690
investing in any endeavor. If you look
at the money in the account as, man,

735
00:42:22,690 --> 00:42:26,170
this is my hard-earned money,
this is X hours of work.

736
00:42:26,170 --> 00:42:27,370
When you start doing that,

737
00:42:27,370 --> 00:42:31,650
there's all sorts of emotions that start
poking through and it's so difficult to

738
00:42:31,850 --> 00:42:35,330
maintain like a pragmatic
approach to the market.

739
00:42:35,420 --> 00:42:40,410
So I started going through a lot of
efforts to reconfigure the way that

740
00:42:40,410 --> 00:42:43,370
I viewed the money, the money that
went into the trading account.

741
00:42:43,370 --> 00:42:46,170
It's so colloquial, but it's
exactly what I did. It's gone,

742
00:42:46,170 --> 00:42:50,930
it's like the South Park episode where
Stan goes to the bank and he gives him a

743
00:42:50,930 --> 00:42:53,930
hundred dollars that his grandma gave
him, and the banker goes and it's gone.

744
00:42:53,930 --> 00:42:57,570
And he's like, what? Where'd my money go?
It's like the same exact thing, right?

745
00:42:57,570 --> 00:43:00,850
And doing that is probably
the most important things
I've ever could have done.

746
00:43:01,710 --> 00:43:04,450
Now, now talking about sort of
emotional side of it, I mean,

747
00:43:04,450 --> 00:43:08,730
did you struggle back in the day with,
with the emotional side of trading?

748
00:43:10,580 --> 00:43:14,910
I struggled with it in
the regard that I didn't,

749
00:43:16,390 --> 00:43:20,480
I didn't respect that it was there,
especially at that point I was, you know,

750
00:43:20,630 --> 00:43:24,600
a young aggressive dude. I played
rugby, I was doing martial arts,

751
00:43:24,630 --> 00:43:26,800
I was getting ready to go
in the Marine Corps, right?

752
00:43:26,800 --> 00:43:31,600
So I have like this tougher than thou,
I am unbreakable mindset and it's like,

753
00:43:31,600 --> 00:43:34,360
oh, emotions in trading, whatever.

754
00:43:34,980 --> 00:43:38,960
And that was probably one of the worst
possible things I could have done because

755
00:43:38,960 --> 00:43:41,520
what happens in those
instances is, you know,

756
00:43:41,520 --> 00:43:45,560
whether I feel like I should experience
emotions doesn't really matter.

757
00:43:45,560 --> 00:43:49,720
They're very often subconscious
processing of information and inputs.

758
00:43:50,130 --> 00:43:53,920
So I would have emotional
responses that I didn't even

759
00:43:54,800 --> 00:43:57,000
identify accurately as
emotional responses.

760
00:43:57,200 --> 00:44:00,840
And the way that I would identify that
is I would go through my trade log and I

761
00:44:00,840 --> 00:44:05,280
would say, Hmm, that doesn't line up
with the way that I've run this strategy.

762
00:44:05,300 --> 00:44:06,360
Why did I do that?

763
00:44:06,860 --> 00:44:11,200
And in the notes I would read the notes
that I would put in and there's no good

764
00:44:11,200 --> 00:44:13,640
reason. And I was like,
that's not a correct trade,

765
00:44:13,640 --> 00:44:15,720
there's something wrong there.
Even if it was a good trade,

766
00:44:15,720 --> 00:44:16,553
even if it made money.

767
00:44:17,020 --> 00:44:21,880
The thing for me is I'm not interested
in like one off successes. Like I said,

768
00:44:21,880 --> 00:44:25,840
it's the consistent viability of of an
approach that really mattered to me.

769
00:44:26,370 --> 00:44:31,040
So I started realizing that there were
definitely emotional decisions that,

770
00:44:31,080 --> 00:44:33,880
that were being made subconsciously
that I didn't know were there.

771
00:44:34,300 --> 00:44:37,520
And I didn't even really acknowledge it
much at the time. I always thought, oh,

772
00:44:37,520 --> 00:44:39,680
maybe I just saw an opportunity,
I wanted to go for it.

773
00:44:40,060 --> 00:44:42,960
But the more I looked back at that period,

774
00:44:42,960 --> 00:44:45,760
the more I realized how
emotionally driven a lot of it was.

775
00:44:45,760 --> 00:44:49,130
That's why now I tell
people the idea of like,

776
00:44:49,130 --> 00:44:53,010
trading like a robot is nonsense.
You're not a robot, you never will be,

777
00:44:53,310 --> 00:44:58,010
but that doesn't mean that you don't
control and regulate the emotions.

778
00:44:58,010 --> 00:45:02,170
But the only way you can successfully
do that is if you identify they exist.

779
00:45:02,500 --> 00:45:05,130
If you pretend they don't exist,
there's nothing for you to control.

780
00:45:05,360 --> 00:45:07,050
You're gonna fall subject to 'em.

781
00:45:08,520 --> 00:45:11,730
Good, good. Great answer. Great
answer. Now, now what about, um,

782
00:45:11,730 --> 00:45:14,290
walking us through your typical
trading day? What does that look like?

783
00:45:15,190 --> 00:45:15,860
For sure.

784
00:45:15,860 --> 00:45:20,610
So I used to trade the opens
most days and in the last,

785
00:45:20,610 --> 00:45:22,210
I don't know, like five years, I,

786
00:45:22,210 --> 00:45:25,290
I don't really bother with it
because I like to train martial arts.

787
00:45:25,300 --> 00:45:28,250
So now I'm going to do jujitsu or
Muay Thai first thing in the morning.

788
00:45:28,250 --> 00:45:32,330
I'm Pacific time. So for me,
the market's open at 0 6 30.

789
00:45:32,980 --> 00:45:33,340
Um,

790
00:45:33,340 --> 00:45:38,090
so normally I'm out training at
that point and then I get back and

791
00:45:38,240 --> 00:45:41,290
I will pull up kind of my
preferred news sources.

792
00:45:41,470 --> 00:45:43,970
I'm very careful and this is actually
an important note for people.

793
00:45:44,500 --> 00:45:48,570
If you just subscribe to every single
news source that's free that's out there,

794
00:45:48,680 --> 00:45:50,250
you're gonna do what most people do,

795
00:45:50,250 --> 00:45:53,330
which is you're gonna get 35
emails every single morning.

796
00:45:53,330 --> 00:45:54,850
And because it's too many emails,

797
00:45:54,850 --> 00:45:57,490
you're either not gonna read them or
you're just gonna delete all of them

798
00:45:57,490 --> 00:46:00,050
without reading them. You've
done nothing in that scenario.

799
00:46:00,500 --> 00:46:04,850
So I'm actually pretty careful with what
I subscribe to for information sources.

800
00:46:05,310 --> 00:46:10,010
But I will normally hit the hot tub in
the morning and I'll just start reading

801
00:46:10,010 --> 00:46:11,490
through some of the news for the day.

802
00:46:11,510 --> 00:46:14,090
And then after I get through
reading the news for the day,

803
00:46:14,090 --> 00:46:15,050
I'll check the portfolio.

804
00:46:15,150 --> 00:46:19,850
Now this is all predicated on a couple
things that I have no overnight trades on

805
00:46:19,850 --> 00:46:21,170
that I needed to manage that morning,

806
00:46:21,170 --> 00:46:24,170
which I do sometimes if I have an
earnings play that's coming up,

807
00:46:24,480 --> 00:46:26,930
I will absolutely sit there
and watch the market open.

808
00:46:27,100 --> 00:46:30,090
So it's not that it's always
not there at the market open,

809
00:46:30,090 --> 00:46:32,490
but it's just not the inverse
where I'm always there.

810
00:46:32,770 --> 00:46:35,930
There has to be a reason for me
to specifically be observing.

811
00:46:36,350 --> 00:46:40,130
And then normally I'll just run
through the portfolio real quick,

812
00:46:40,130 --> 00:46:43,250
make sure that all the risk metrics
are where I want them to be,

813
00:46:43,250 --> 00:46:45,170
see if there's any trades
that need to be managed,

814
00:46:45,170 --> 00:46:48,890
whether it's based on time or
profit or loss management targets.

815
00:46:49,230 --> 00:46:53,570
And then that's when I'll start
kind of casually looking for

816
00:46:53,570 --> 00:46:56,130
opportunities if I need to
add risk to the portfolio.

817
00:46:56,500 --> 00:46:58,010
If I don't need to add risk,

818
00:46:58,010 --> 00:47:02,290
then I just kind of casually look through
the markets anyways at a collated list

819
00:47:02,290 --> 00:47:05,970
of things that I look at pretty much
every day it's like 65 products from

820
00:47:06,140 --> 00:47:10,850
Futures bond or um, commodity
futures, um, equity futures,

821
00:47:10,970 --> 00:47:14,130
bonds, a lot of ETFs, sector ETFs,

822
00:47:14,130 --> 00:47:16,610
and then a handful of individual
tickers that I like to follow.

823
00:47:17,350 --> 00:47:21,770
And from there it is as
of late either trading

824
00:47:22,450 --> 00:47:23,140
announcements.

825
00:47:23,140 --> 00:47:28,130
So things like C P I for here in the
US or the rate statements here in the

826
00:47:28,130 --> 00:47:30,560
us, those are really big
tradable events for me.

827
00:47:31,010 --> 00:47:33,360
So I'll base trades around those,

828
00:47:33,360 --> 00:47:35,800
whether it's before the
announcement to trade volatility,

829
00:47:35,800 --> 00:47:38,840
if I'm trading the follow through, if
I'm trading earnings, so on and so forth.

830
00:47:39,180 --> 00:47:42,520
And I'll start structuring my trades
and there's kind of two primary trading

831
00:47:42,520 --> 00:47:47,200
periods that I look to expose myself
to typically would be mid-morning here,

832
00:47:47,200 --> 00:47:51,960
which is kind of afternoon on the
east coast, which is what most people,

833
00:47:51,960 --> 00:47:56,120
you know, tend to quote market
hours in and then before the close.

834
00:47:56,450 --> 00:48:00,360
So that's also a, a big time while our
run through, make some adjustments,

835
00:48:00,550 --> 00:48:04,200
a lot of times there's an uptick in
liquidity, stuff like that. But overall,

836
00:48:04,270 --> 00:48:09,160
like unless there's a
specific desire or want,

837
00:48:09,700 --> 00:48:13,280
I'm not behind the screen all day, A
lot of the day I'm playing with my dog,

838
00:48:13,280 --> 00:48:14,920
I'm going for a drive like that.

839
00:48:14,920 --> 00:48:19,840
That is really the whole purpose of why
I do what I do is to give me freedom.

840
00:48:20,340 --> 00:48:21,480
But I will tell you,

841
00:48:21,480 --> 00:48:26,160
I look at the markets nearly
every single day and most of the

842
00:48:26,160 --> 00:48:31,080
trades that I think about, I think
about them after hours. So, uh,

843
00:48:31,080 --> 00:48:34,400
later tonight, right, there's a
handful of trades that I put on today.

844
00:48:34,400 --> 00:48:37,920
I'm gonna review them all tonight and
the market's closed. There's no rush,

845
00:48:37,920 --> 00:48:40,120
there's no emotion. They're
on, they are what they are.

846
00:48:40,380 --> 00:48:45,120
And I use that market closed period
almost more effectively than when

847
00:48:45,120 --> 00:48:50,000
the market's on because a lot of times
there's just so many things that pull my

848
00:48:50,000 --> 00:48:51,480
attention in different directions.

849
00:48:51,870 --> 00:48:56,320
I've become very calculated
with when I'll review active

850
00:48:56,390 --> 00:49:00,040
trades because essentially what I'll do
today is on the trades that I need to

851
00:49:00,040 --> 00:49:03,410
take a look at, I'll say, um, okay,

852
00:49:03,410 --> 00:49:05,890
let me update my risk
metrics, profit metrics,

853
00:49:06,270 --> 00:49:09,210
and if I see X, Y, or Z,

854
00:49:09,360 --> 00:49:14,290
then I'm going to do whatever my
management protocols are and I just do

855
00:49:14,290 --> 00:49:18,570
that after hours and then I can project
out essentially when I intend to apply

856
00:49:18,570 --> 00:49:22,050
those management protocols provided that
they don't, you know, come up sooner.

857
00:49:22,550 --> 00:49:25,730
And and how many typical, typical
trades a year gonna take in a day?

858
00:49:26,710 --> 00:49:31,060
In a day? Um, I think
if you average them out,

859
00:49:31,210 --> 00:49:34,820
well there's days that I don't
take any trades to be very clear,

860
00:49:34,820 --> 00:49:36,820
but if you were to average
them out over the year,

861
00:49:36,820 --> 00:49:40,340
it can be anywhere from 2000 to 10,000.

862
00:49:40,670 --> 00:49:44,460
It really depends on just how busy of a
year it is and what opportunities there

863
00:49:44,460 --> 00:49:46,340
are. Especially like during the,

864
00:49:46,340 --> 00:49:50,980
the Covid crash and even last year busier
years for me and it's just because I

865
00:49:51,260 --> 00:49:52,540
kept seeing a lot of opportunity,

866
00:49:52,560 --> 00:49:57,540
but if I were to think about like the
number of day trades I take like in a week

867
00:49:57,540 --> 00:50:01,460
would probably a good metric
for me. It might be 15,

868
00:50:02,080 --> 00:50:05,100
but it's not always centered on one day.

869
00:50:05,100 --> 00:50:07,620
Like today I didn't day trade
literally at all. I looked at it,

870
00:50:07,620 --> 00:50:08,940
there was something I
was trying to put on,

871
00:50:08,940 --> 00:50:11,140
but it didn't look the way
that I needed it to look,

872
00:50:11,420 --> 00:50:13,780
so it didn't go on and Okay, no problem.

873
00:50:14,360 --> 00:50:18,260
And what about win rates and
things like risk to reward ratio?

874
00:50:18,260 --> 00:50:19,780
What would you put those at?

875
00:50:20,700 --> 00:50:23,660
Those vary a lot by strategy for me.

876
00:50:23,830 --> 00:50:28,680
So I have strategies that are
lower win rates with much higher

877
00:50:28,690 --> 00:50:33,560
payouts because I'm playing larger
themes. So if I'm applying some sort of,

878
00:50:33,770 --> 00:50:34,400
um,

879
00:50:34,400 --> 00:50:38,840
ratio diagonal that's designed to
take advantage of a longer term trend,

880
00:50:38,840 --> 00:50:42,440
those have lower win rates for me because
I have very tight risk control metrics

881
00:50:42,700 --> 00:50:44,040
and I'll get stopped out a lot.

882
00:50:44,220 --> 00:50:49,080
But the overall size is very
big for wins relative to the

883
00:50:49,080 --> 00:50:51,320
size of the losses,
whereas it's kind of, uh,

884
00:50:51,320 --> 00:50:55,640
inverse for a lot of the variance
risk premium strategies that I run.

885
00:50:55,640 --> 00:50:59,920
A lot of those have very high win
rates, but much lower win sizes.

886
00:51:00,130 --> 00:51:04,800
So I like to break it out by strategy
because it's a little more scalpel in

887
00:51:04,800 --> 00:51:08,600
terms of what I apply when. Um, so yeah,

888
00:51:08,600 --> 00:51:10,200
it's definitely dependent on the strategy.

889
00:51:11,110 --> 00:51:11,600
Cool.

890
00:51:11,600 --> 00:51:15,360
And I suppose last question before we d
dive into a bit of a quick fire round.

891
00:51:15,360 --> 00:51:16,520
What would you,

892
00:51:16,520 --> 00:51:20,880
what steps would you give a retail
trader probably working a day job, uh,

893
00:51:20,880 --> 00:51:23,280
to what steps should they take
to get to the point where,

894
00:51:23,570 --> 00:51:25,000
or close to the point where you are?

895
00:51:26,020 --> 00:51:28,550
I think the first thing is commit to it.

896
00:51:28,550 --> 00:51:32,270
Like if it's this hobby thing that you
kind of do sometimes when you feel like

897
00:51:32,270 --> 00:51:33,830
it and you don't do it, when you don't,

898
00:51:33,830 --> 00:51:36,830
you good luck achieving anything
like that. Very difficult.

899
00:51:37,080 --> 00:51:40,550
So I think if it's something that
somebody like truly wants to make happen,

900
00:51:40,550 --> 00:51:43,390
it's the only way that you can
make the time for it to happen.

901
00:51:43,390 --> 00:51:46,270
That's one of the most frustrating
things. I hear people, I have no time,

902
00:51:46,270 --> 00:51:48,550
we all have time, we all
have the same amount of time,

903
00:51:48,570 --> 00:51:52,790
but how you use that time tends
to vary widely. And that's okay.

904
00:51:52,790 --> 00:51:54,030
You're gonna have your priorities,

905
00:51:54,030 --> 00:51:57,270
but let's not pretend that we don't have
time. You have different priorities.

906
00:51:57,320 --> 00:52:00,110
Anyways, rant aside,
<laugh>. Um, I think the,

907
00:52:00,110 --> 00:52:03,950
I think the first thing is to commit to
whatever it is that you're attempting to

908
00:52:03,950 --> 00:52:05,550
do. And I think it's
important to define it.

909
00:52:05,810 --> 00:52:10,430
But then the second step is probably
the least popular piece of uh,

910
00:52:10,430 --> 00:52:14,470
just personal advice I give to
people is if you are new to trading,

911
00:52:15,180 --> 00:52:17,950
I would probably stop trading real money.

912
00:52:18,180 --> 00:52:21,990
I would invest in in index
ETF and I would paper trade.

913
00:52:22,570 --> 00:52:27,550
And it's so unpopular because paper
trading gets this really bad rap because

914
00:52:27,550 --> 00:52:30,390
it's not real trading. You
never get the full emotions.

915
00:52:30,690 --> 00:52:35,070
And what I tell people is, thank God
the military doesn't think like that.

916
00:52:35,280 --> 00:52:39,870
If the only time I get to practice
getting shot at is when I'm

917
00:52:40,190 --> 00:52:41,270
actually getting shot at,

918
00:52:41,270 --> 00:52:44,150
it's a real tough way to learn
to perform under pressure.

919
00:52:44,640 --> 00:52:49,480
So that's why I talk about paper
trading is if I look back at

920
00:52:49,480 --> 00:52:53,600
what I accomplished in my first two
years of trading, nothing special,

921
00:52:53,790 --> 00:52:58,320
I probably racked up way too high
at commissions and I didn't make any

922
00:52:58,320 --> 00:53:00,680
meaningful amount of money. I probably,

923
00:53:00,680 --> 00:53:03,640
I actually genuinely think I would've
been better off with buy and hold at that

924
00:53:03,640 --> 00:53:06,680
point. And I think by
paper trading though,

925
00:53:06,680 --> 00:53:09,640
you do a couple things
while you're paper trading,

926
00:53:09,900 --> 00:53:12,120
you write out a trading plan,

927
00:53:12,160 --> 00:53:16,440
which is a very difficult process cuz
it's overwhelming and one of the most

928
00:53:16,480 --> 00:53:18,520
nefarious things starts to happen.

929
00:53:18,660 --> 00:53:23,600
You become responsible for what
happens. A lot of people will say,

930
00:53:23,600 --> 00:53:26,280
oh, the market did this today. Who could,
could have saw that coming? Whatever.

931
00:53:26,280 --> 00:53:26,880
It doesn't matter.

932
00:53:26,880 --> 00:53:31,400
You're interfacing with a
unlimited variable input

933
00:53:31,400 --> 00:53:35,920
machine, which is the stock market. So
by writing out a trading plan though,

934
00:53:35,920 --> 00:53:38,960
you start to become responsible
for the pieces you can control.

935
00:53:38,960 --> 00:53:42,560
It's very difficult for our ego to accept
that responsibility cuz it means we're

936
00:53:42,560 --> 00:53:46,040
gonna be wrong a lot. But it's an
important step. And then trade log.

937
00:53:46,270 --> 00:53:51,160
I would trade log everything you're
doing from your paper trading plan

938
00:53:51,160 --> 00:53:55,800
and your paper trading itself and see
how you do once you start to establish

939
00:53:55,950 --> 00:54:00,160
actual observable, quantifiable
profitability, sure,

940
00:54:00,160 --> 00:54:00,960
start going live.

941
00:54:00,960 --> 00:54:04,960
Maybe give it six months at least and
start going live with the small testimony

942
00:54:04,960 --> 00:54:08,360
of your money and then slowly scale
from there. The fact of the matter is,

943
00:54:08,360 --> 00:54:11,600
again, you can go on to S S R N,
and this isn't to dissuade people,

944
00:54:11,600 --> 00:54:13,640
but the vast majority of day traders,

945
00:54:13,640 --> 00:54:16,280
day traders is the worst group
they wash out at the highest rate.

946
00:54:16,540 --> 00:54:18,040
But then traders in general,

947
00:54:18,040 --> 00:54:22,120
active traders also tend to underperform
the benchmark, especially after fees.

948
00:54:22,460 --> 00:54:24,840
And after 11 years,

949
00:54:24,960 --> 00:54:28,560
3% of them remain small cohort man.

950
00:54:28,890 --> 00:54:32,680
So unless people are willing to actually
put in the time and effort to become

951
00:54:32,680 --> 00:54:36,080
part of that cohort, you're
gonna, more likely than not,

952
00:54:36,080 --> 00:54:40,240
probabilistic become part of the statistic
that just wasted a bunch of time and

953
00:54:40,240 --> 00:54:43,480
money and fell outta something because
it was a half committed haphazard

954
00:54:43,720 --> 00:54:47,200
approach. So I don't say any
of that to dissuade people.

955
00:54:47,200 --> 00:54:51,000
I actually say it to encourage people and
motivate people because it is entirely

956
00:54:51,280 --> 00:54:53,280
possible. I'm not that
smart of a human being.

957
00:54:53,430 --> 00:54:57,320
I am from the same starting
point that a lot of people are.

958
00:54:57,500 --> 00:55:01,040
But if you take a very calculated,
pragmatic approach to stuff like this,

959
00:55:01,130 --> 00:55:06,120
it breaks a huge impossible
problem down into tiny bits

960
00:55:06,190 --> 00:55:07,760
that now become solvable.

961
00:55:08,060 --> 00:55:12,800
And just about anybody that passed
high school can solve those problems.

962
00:55:13,020 --> 00:55:17,080
The problem is too many people just look
at the entire problem set and try to

963
00:55:17,080 --> 00:55:19,280
solve all of it at once. And
it's very difficult to do.

964
00:55:19,530 --> 00:55:21,520
So if we understand the challenge,

965
00:55:21,790 --> 00:55:26,560
I think we have a much greater
efficacy rate to actually rise to that

966
00:55:26,760 --> 00:55:27,260
occasion.

967
00:55:27,260 --> 00:55:32,240
The last analogy that I'll use here
is if somebody wanted to climb Mount

968
00:55:32,240 --> 00:55:36,240
Everest, they need to understand how
tall it is. How long does it take,

969
00:55:36,240 --> 00:55:38,520
what kind of food do you need?
What kind of sleep do I need?

970
00:55:38,520 --> 00:55:41,080
What kind of hydration do I
need? You have to plan for it.

971
00:55:41,180 --> 00:55:46,160
You don't just start trying to climb
Mount Everest and statistically

972
00:55:46,440 --> 00:55:48,520
peop uh, statistically speaking,

973
00:55:48,520 --> 00:55:51,440
the number of people that attempt
to climb it is not too indifferent,

974
00:55:51,440 --> 00:55:54,480
that succeed compared to successful
traders. Mm-hmm. Interesting.

975
00:55:54,480 --> 00:55:55,640
So just kind of a Yeah analogy.

976
00:55:55,640 --> 00:55:59,320
Great analogy. Yeah, great analogy. In
fact, just what you were saying before,

977
00:55:59,320 --> 00:56:03,440
I was actually thinking about a minute
before you said it, I was thinking, damn,

978
00:56:03,440 --> 00:56:06,480
this guy's smart <laugh>.
And you just said, I'm not,

979
00:56:06,620 --> 00:56:09,560
I'm no smarter than anyone
else. I'm thinking I man,

980
00:56:09,560 --> 00:56:12,960
this guy's like at a different level
here. But, um, anyway, let's let's.

981
00:56:12,960 --> 00:56:13,920
Jump into the, yeah, don't feel that way.

982
00:56:14,320 --> 00:56:17,440
<Laugh>. Let's jump into the quickfire
round and then we'll wrap things up here.

983
00:56:17,440 --> 00:56:20,880
So, um, how long did it take you to go
from newbie to consistently profitable?

984
00:56:21,620 --> 00:56:25,800
Uh, probably consistently
profitable, I would say. I mean,

985
00:56:25,800 --> 00:56:28,440
really starting year three
I was making money, but I,

986
00:56:28,470 --> 00:56:32,240
I still had high variance in returns.
So I would say probably year five,

987
00:56:32,240 --> 00:56:36,840
year six is when I essentially at the
start of the year had a pretty good idea

988
00:56:36,840 --> 00:56:39,920
of where I was gonna land and what
my movement bands were gonna be.

989
00:56:39,920 --> 00:56:42,800
So that's when I would consider a
little more efficacy in the returns.

990
00:56:43,350 --> 00:56:44,960
What's your favorite entry setup?

991
00:56:46,700 --> 00:56:50,660
Favorite entry setup, again, depends on
the strategy, but more often than not,

992
00:56:50,660 --> 00:56:55,460
I like things that are high volatility
where implied volatility is drastically

993
00:56:55,460 --> 00:56:57,300
overpriced compared to
historic volatility.

994
00:56:57,300 --> 00:56:59,860
I know for a lot of people
that doesn't sound super sexy,

995
00:56:59,860 --> 00:57:03,500
but for a derivatives trader
that is, that's where it's at.

996
00:57:04,270 --> 00:57:08,820
Uh, what about strategies for exiting,
uh, or managing trades? What do you do?

997
00:57:08,930 --> 00:57:10,220
Easy, easy day.

998
00:57:10,220 --> 00:57:13,980
That's all predefined by the strategy
before the trade even goes on.

999
00:57:13,990 --> 00:57:18,060
So the favorite method is literally
following a predefined approach.

1000
00:57:18,200 --> 00:57:20,940
And the way that I think about
that is I think about the strategy.

1001
00:57:21,050 --> 00:57:23,660
What am I trying to
accomplish on a profit side?

1002
00:57:23,660 --> 00:57:27,300
What kind of risk side makes
it positively expected? That's.

1003
00:57:27,300 --> 00:57:30,340
It. Uh, what book or
resource would you recommend?

1004
00:57:31,330 --> 00:57:36,320
Um, there's two of 'em that I think
should be reads for everybody specifically

1005
00:57:36,320 --> 00:57:38,760
When we talk about derivatives,
it's a little different.

1006
00:57:38,760 --> 00:57:42,240
So I would kind of save people,
um, that side of things.

1007
00:57:42,520 --> 00:57:44,800
Although I do think options
as a strategic investment.

1008
00:57:44,800 --> 00:57:49,040
I'm pulling up my little Kindle library
here cause there's two books, um,

1009
00:57:49,040 --> 00:57:50,120
that I think are useful.

1010
00:57:50,120 --> 00:57:54,160
Reminiscence of a Stock
Operator by Edwin Lefa,

1011
00:57:54,160 --> 00:57:57,200
that's how to Pull it up. I
can't say that dude's name. Um,

1012
00:57:57,390 --> 00:58:00,040
that is probably one of the more,

1013
00:58:00,940 --> 00:58:03,280
the more transformative books I've read.

1014
00:58:03,700 --> 00:58:07,160
And then the same thing
is there it is, sorry,

1015
00:58:07,220 --> 00:58:09,680
how to Make Money In Stocks
by William J. O'Neal.

1016
00:58:09,680 --> 00:58:14,400
Those are like my two kind of
preferred equity, um, equity pieces,

1017
00:58:14,410 --> 00:58:16,240
broader trend pieces, stuff like that.

1018
00:58:16,360 --> 00:58:20,960
Brilliant. Well look, um, last question.
If you could leave our question, uh,

1019
00:58:20,960 --> 00:58:23,080
our listeners with one piece
of advice, what would it be?

1020
00:58:24,380 --> 00:58:27,770
Um, get serious about it and make a
plan. Otherwise it's not gonna happen.

1021
00:58:28,020 --> 00:58:30,770
Awesome. Well look folks,
before we wrap up, uh,

1022
00:58:30,920 --> 00:58:33,530
what's the best way for the
traders to get a hold of you?

1023
00:58:34,440 --> 00:58:38,990
Um, so I'm on YouTube at ES invests
and on Twitter at the same. That's it.

1024
00:58:39,650 --> 00:58:42,520
Awesome. Well look a big thank you
to Eric for sharing with us today.

1025
00:58:42,520 --> 00:58:43,440
Everything we've discussed here,

1026
00:58:43,440 --> 00:58:45,560
along with all those links
will be in the show notes.

1027
00:58:45,560 --> 00:58:50,040
To find them simply you search for Eric
in the search box on trading nut.com

1028
00:58:50,300 --> 00:58:54,000
and that's E R I K, is that correct?

1029
00:58:54,420 --> 00:58:55,253
Yes, sir.

1030
00:58:55,640 --> 00:58:59,520
Until next time. We're show my listeners
training Happiness and Success there.

1031
00:58:59,520 --> 00:59:01,280
Folks interviewed Dan
and Duster with Eric.

1032
00:59:01,280 --> 00:59:04,800
Now we did shoot a video after the show
where he breaks down his mean reversion

1033
00:59:05,160 --> 00:59:06,520
strategy in full detail.

1034
00:59:06,520 --> 00:59:09,440
It takes about 15 minutes to get
through the whole thing. In fact,

1035
00:59:09,440 --> 00:59:11,160
I think it's even less than that. Uh,

1036
00:59:11,160 --> 00:59:15,960
you're gonna learn that strategy and
how Eric applies it and he'll take you

1037
00:59:15,960 --> 00:59:18,760
through a trade example. So that's
coming up on the YouTube channel.

1038
00:59:18,760 --> 00:59:20,520
So if you're not there,
go and subscribe to that.

1039
00:59:20,560 --> 00:59:22,240
Other things do remember, you know,

1040
00:59:22,240 --> 00:59:24,760
he talked about automating
stuff to get the probabilities.

1041
00:59:24,760 --> 00:59:28,320
Now if that's something you're after or
interested in using the Mediterra four

1042
00:59:28,320 --> 00:59:32,000
or five platforms, then my Robot Builders
Club is probably perfect for you.

1043
00:59:32,000 --> 00:59:33,880
If you wanna give it a
go, we'll try it out.

1044
00:59:33,880 --> 00:59:37,480
There's a $1 trial of the Robot Lab live
where we actually build out strategies

1045
00:59:37,480 --> 00:59:40,520
a bit like this, what
Eric's put together, um,

1046
00:59:40,540 --> 00:59:43,280
all live and all recorded it as well.

1047
00:59:43,280 --> 00:59:47,360
So you guys not just get to see the
recordings, uh, or attend the lives.

1048
00:59:47,420 --> 00:59:51,320
You also, uh, get the downloads
at the end of it as well. Uh,

1049
00:59:51,320 --> 00:59:53,000
other things going on here at Trading Out,

1050
00:59:53,000 --> 00:59:55,160
we have got those that new
live stream of this week.

1051
00:59:55,370 --> 00:59:59,600
So Trading Lascik strategy or a variation
of, we've got Herrera almost ready to,

1052
00:59:59,600 --> 01:00:02,040
to pass that Fidel CREs 50 K challenge.

1053
01:00:02,220 --> 01:00:05,880
And there's something new that I'm not
gonna tell you about just yet coming up

1054
01:00:05,880 --> 01:00:09,760
on the channel, which I know
you're gonna absolutely love. Uh,

1055
01:00:09,760 --> 01:00:13,280
and if you do want that Trading View Pro
from these guys, you know where to go.

1056
01:00:13,280 --> 01:00:17,480
Links below the video or in the
podcast description. Alright folks,

1057
01:00:17,480 --> 01:00:19,200
enough from me. We'll see
you in the next episode.