Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.
Speaker 1: I'm Joe Wisntal and I'm Tracy Allowit. You know, we
Speaker 1: haven't really talked about sort of the pure like markets
Speaker 1: in a while. We've been talking a little bit about crypto,
Speaker 1: We've been talking a bit about macro, We've been talking
Speaker 1: about supply chains a lot, obviously, But the other big
Speaker 1: sort of story for the last year and a half
Speaker 1: has just been in this incredible boom in trading. I'm
Speaker 1: going to ignore the subtle dig at crypto. There this
Speaker 1: idea we haven't been talking about markets except for crypto.
Speaker 1: But yeah, no, you're right. So it feels like so
Speaker 1: long ago, but really it was only six or seven
Speaker 1: months when we had the game stop phenomenon, the big
Speaker 1: whom in retail trading and Wall Street bets and this
Speaker 1: idea that everyone was suddenly pouring into meme stocks. It
Speaker 1: feels so so long ago. It's weird. Yeah, And of course,
Speaker 1: you know, like so I personally first started getting interested
Speaker 1: in markets just as the thing I was interested in
Speaker 1: like in the late nineties and high school, and there
Speaker 1: was a dot com bubble going on, and at that
Speaker 1: time it was just trading. Retail trading was really take off,
Speaker 1: but also just really became like part of the culture.
Speaker 1: People were talking about the stocks they were trading and
Speaker 1: what they were bullish on and so forth. And then
Speaker 1: it went felt like that basically went into like a
Speaker 1: twenty year hibernation, and then when everyone was locked in
Speaker 1: their homes with the coronavirus crisis for the first time,
Speaker 1: it really came back. Yeah. So I remember writing about
Speaker 1: this earlier in the year, and I think the way
Speaker 1: I framed it was flows before pros. So this idea
Speaker 1: that if, like, if you have this immense buying moment
Speaker 1: tom from retail traders or retail investors, then maybe like
Speaker 1: if you're a retail person, you're in a better position
Speaker 1: to judge that momentum than someone with a professional background,
Speaker 1: you know, say a self side analyst at a large bank,
Speaker 1: someone like that who's looking at fundamentals. And I think
Speaker 1: that was kind of borne out, at least temporarily by
Speaker 1: some of the meme stock price action, but it does
Speaker 1: beg the question of what exactly is the difference between
Speaker 1: a retail trader versus a professional trader. Absolutely, and there's
Speaker 1: also the question and of course you know, we've had
Speaker 1: all these people come into the market. Probably a lot
Speaker 1: of them have done really well, Like probably people have
Speaker 1: made a ton of money and made multiples of what
Speaker 1: they make of their daily salaries. And because it's been
Speaker 1: this bowl market, which means some are going to be
Speaker 1: tempted to like go pro on some level, not necessarily
Speaker 1: go work for a bank or a fund, but it's like, oh,
Speaker 1: like I made a ton of money, I could do this,
Speaker 1: Why would I go back to my job? And so
Speaker 1: some people will be thinking about do they want to
Speaker 1: make trading their full time vocation? Yeah, And again the
Speaker 1: question is whether or not the past six or seven
Speaker 1: months have been extraordinary in one way or another. I
Speaker 1: think we all agree that the experience of COVID and
Speaker 1: the markets during that time have been somewhat unusual. Um
Speaker 1: and whether or not their success over that short time
Speaker 1: frame can carry on longer term. Right, So people are
Speaker 1: gonna be asking themselves a do they have what it
Speaker 1: takes to be a trader and be if they do,
Speaker 1: how to win? So today we're going to be speaking
Speaker 1: to a guest who knows a lot about trading, a
Speaker 1: long time veteran, and he can he will tell us,
Speaker 1: whether you have the stuff, whether we have the stuff,
Speaker 1: whether the listener has the stuff to make it as
Speaker 1: a pro trader, and if they do go into it,
Speaker 1: how to win at it. All. Right, let's do it.
Speaker 1: I'm excited and I'm very excited. We're going to be
Speaker 1: speaking with Brent Donna Lee. He is the author of
Speaker 1: a new book, Alpha Trader, The Mindset, Methodology and mathem
Speaker 1: Addicts of Professional Trading. Is a long time veteran for
Speaker 1: over twenty five years. He's worked at HSBC New Mura City.
Speaker 1: Very excited to learn from Brent. Brent, thank you so
Speaker 1: much for joining us. Hey, guys, great, great to be here.
Speaker 1: I'm a huge fan, so thanks a lot for having
Speaker 1: me on. So I guess, I guess the first question
Speaker 1: I have is what is a trader? What do you
Speaker 1: How do you define a trader? Because some people invest,
Speaker 1: some people sometimes reallocate, some people are moving in and out.
Speaker 1: I guess day trading. But when you talk about a trader,
Speaker 1: what does that mean? Well, so that's a great question.
Speaker 1: So in the course of writing the book, Um, one
Speaker 1: great thing about writing a book is you get to
Speaker 1: talk to a lot of random people because people DM
Speaker 1: me a lot on on Twitter and LinkedIn. And your
Speaker 1: question is a really good one because a lot of people,
Speaker 1: I can tell by their questions to me, don't really
Speaker 1: know themselves whether they're an investor or a trader. And
Speaker 1: to me, I'm unbiased because my whole experience has been trading.
Speaker 1: But my belief inefficient markets is that on short time
Speaker 1: frames markets can be kind of inefficient, and on long
Speaker 1: time frames they're pretty damn efficient. And there's a lot
Speaker 1: of research that supports that, as you guys know, a
Speaker 1: passive versus active, I mean, Charles Ellis was writing about
Speaker 1: that in the seventies, um with data showing that that
Speaker 1: passive beats active. So then I think you really have
Speaker 1: to know what you're doing and know that you're what
Speaker 1: you're doing is trading, and then you might have a
Speaker 1: specific edge. And I think really the difference is, I mean,
Speaker 1: the obvious difference is time frame. You know, to me,
Speaker 1: trading is is something probably less than one or two months,
Speaker 1: and then you can call it kind of call like
Speaker 1: two months to one year swing trading. But that's getting
Speaker 1: closer to investing and much more fundamentals. But I would
Speaker 1: say that the definition of real trading is something that's
Speaker 1: that you're doing that short term where you have a
Speaker 1: solid risk management process and you have an edge that
Speaker 1: you can identify and you can explain to somebody who's
Speaker 1: not an expert in the business. I definitely want to
Speaker 1: ask you about the risk management aspect and also the
Speaker 1: idea of an edge in trading, But before we do,
Speaker 1: just because I think this will help maybe um conceptualize
Speaker 1: the idea of a trader. But over the past ten
Speaker 1: or twelve years, basically since the two thousand eight financial crisis,
Speaker 1: would you say that's been a good time to be
Speaker 1: a trader or a poor time? Because we've sort of
Speaker 1: heard it both ways. So there are people who argue
Speaker 1: that valuations are completely based on momentum and inflows, and
Speaker 1: the more money that's flowing into something, the more valuable
Speaker 1: it gets, and it doesn't really matter about, you know,
Speaker 1: things like price to book ratios and traditional measures of fundamentals.
Speaker 1: On the other hand, there are plenty of people who
Speaker 1: say that markets have been skewed by central banks and
Speaker 1: you don't really know like where anything is going anymore,
Speaker 1: and nothing makes sense. So I'm just curious, like if
Speaker 1: you could characterize the past decade or so um, for
Speaker 1: a trader, sure, So I would say anything related to
Speaker 1: valuation doesn't matter for traders. Um, that would be my opinion.
Speaker 1: And so I mostly trade currencies, but I have a
Speaker 1: lot of experience trading equities and that if you're trading,
Speaker 1: if you're a trader in my in my definition, you
Speaker 1: don't really care about valuation. And so one concept that
Speaker 1: I get into a lot in the book is the
Speaker 1: idea of adaptation. So anyone that's saying like this is
Speaker 1: a bad market, this market is a joke, this is manipulated.
Speaker 1: That person is not adapting and they're not playing the
Speaker 1: current game. So my question is always like, do you
Speaker 1: want to live in a world of you know, the
Speaker 1: current reality and play the current game or do you
Speaker 1: want to play a game that you wish existed? And
Speaker 1: then the subsequent question is do you want to make
Speaker 1: money or not? And if you want to make money,
Speaker 1: I think the key really is to first of all,
Speaker 1: understand what game you're playing, um, and then number two,
Speaker 1: adapt to that game. So I feel like the just
Speaker 1: the idea of saying like this was a good period
Speaker 1: to trade, this was a bad period to trade, isn't
Speaker 1: a great mentality for traders, because what you really should
Speaker 1: be doing as a good trader is adapting to the
Speaker 1: current environment. Now obviously that's not like as easy as
Speaker 1: just saying, okay, today, I'm going to do this, because
Speaker 1: it's obvious what the environment is. Regimes change in a
Speaker 1: subtle way, but then sometimes it's pretty obvious that the
Speaker 1: regime's changing, like for example, when the algos started two
Speaker 1: thousand four. Two thousand five is the first period when
Speaker 1: I really remember the algos, the algorithmic trading really becoming
Speaker 1: a forced in currency markets, and I remember there was
Speaker 1: a really sharp split on the desk um so at
Speaker 1: that time I worked at Lehman Brothers and talking to
Speaker 1: people in the market, not just the traders at even
Speaker 1: but just in general that there was a split between
Speaker 1: people saying, this is bs these algals are it's not
Speaker 1: a real market. Every time I put a bit in
Speaker 1: it comes in one point higher. And then there was
Speaker 1: another group of people that were like, this is weird,
Speaker 1: Like the market the texture is different. I wonder, how
Speaker 1: how can we beat the algals? What are the algals doing?
Speaker 1: Can we mimic them, but do it's smarter, you know?
Speaker 1: Can we figure out what they're doing and reverse engineer
Speaker 1: and then make money off of that. And so I
Speaker 1: feel like that was a real eye opener for me
Speaker 1: because like that was whatever fifty and sixteen years ago,
Speaker 1: so I was still kind of like transitioning between junior
Speaker 1: and senior trader, and it was really obvious that some
Speaker 1: people were adapting and some people were complaining. And so
Speaker 1: that has been consistent throughout my career is you see
Speaker 1: that people that adapt tend to do well in the
Speaker 1: long run, and people that don't tend to maybe have
Speaker 1: periods of success and then fail. So going back to
Speaker 1: your original thing about, um, you know, a lot of
Speaker 1: new traders have come in. Another thing that I've I've
Speaker 1: witnessed from conversations with a lot of retail traders is
Speaker 1: that a lot of people did really well in and
Speaker 1: are struggling now. And so an obvious explanation for that
Speaker 1: would be if you're if you were buying calls around earnings,
Speaker 1: Let's say that was a really good strategy. However, this
Speaker 1: hasn't been a good strategy, especially recently. So, UM, what
Speaker 1: I tell people who are new is that you you
Speaker 1: need to become an expert in one market, which could
Speaker 1: be a security or for me, it's G ten f X,
Speaker 1: but really it could be any kind of narrow part
Speaker 1: of capital markets. And then become an expert in that,
Speaker 1: but don't become an expert in a particular strategy like
Speaker 1: I'm a breakout trader, or like I buy options before zooms,
Speaker 1: earnings or whatever. Um. Like, the more narrow your strategy
Speaker 1: is the less chance that you're going to make money
Speaker 1: in the long run, because it's all about adapting to
Speaker 1: the new regimes. Um. Not that there's a new regime
Speaker 1: every single day, but certainly new regimes come their cyclical
Speaker 1: ones and their structural ones. So the structural ones being
Speaker 1: like retail kind of you know, was huge in ninety
Speaker 1: from ninety nine to or ninety eight to O two,
Speaker 1: and it's getting huge again. Algorithms came in, and then
Speaker 1: there's cyclical ones that are more about volatility, like is
Speaker 1: the VIX at ten or is the VIX at forty?
Speaker 1: Your trading strategy has to be different in those two regimes.
Speaker 1: And generally, I would say a lot of people are
Speaker 1: good at specific strategies, but in order to be good
Speaker 1: to to have a you know, multi year or multi
Speaker 1: decade career, you need to be able to identify regimes
Speaker 1: and then adapt and trade the regime and trade what works.
Speaker 1: And that's kind of the philosophy of like do what's
Speaker 1: working and stuff doing what's not working. That reminds me always,
Speaker 1: of course, you know poker advaceive owing the table that
Speaker 1: you're at and all the good ones to talk about
Speaker 1: the ability to shift gears. If you're going to make
Speaker 1: it as a professional trader, you have to have an
Speaker 1: identifiable edge, something that you can articulate. All right, So
Speaker 1: you've been a trader for over twenty five years, what's
Speaker 1: your articulate to us non professionals? Well, your edges that
Speaker 1: allowed you to have such a rare and durable career.
Speaker 1: My edge, in a nutshell, just try and keep it
Speaker 1: relatively short, is that I look at the macro world.
Speaker 1: So I'm my if if if any of your listeners
Speaker 1: have read my stuff, I tend to talk like fairly
Speaker 1: macro in terms of macroeconomics, fed policy, you know, Australian
Speaker 1: cp I, all that kind of stuff. And so what
Speaker 1: I'm trying to do is understand the current equilibrium where
Speaker 1: price is the sum of all the information that's in
Speaker 1: the world, and then as new information comes in. I
Speaker 1: think my edge is understanding what that information means in
Speaker 1: the context of the current or slightly in the past equilibrium,
Speaker 1: and entering trades into currencies before they move in order
Speaker 1: to capture the momentary disequilibrium from the new information. So
Speaker 1: that doesn't necessarily always mean like an event comes out
Speaker 1: and then euro goes up and I buy it after
Speaker 1: the event and sell it after the event. It can
Speaker 1: also mean something a lot more subtle, which is that
Speaker 1: as a narrative starts to get really really fully subscribed,
Speaker 1: you start to see positioning by metrics, but then also
Speaker 1: by because I have a pretty good network of people,
Speaker 1: I get a sense of not just what positioning is,
Speaker 1: but also like there's like an emotional edge to positioning sometimes,
Speaker 1: like if I send out a Barish AUSSI piece and
Speaker 1: I get like seventeen angry emails all like with pretty
Speaker 1: weak rebuttals, then I'm like, Okay, I'm definitely onto something.
Speaker 1: So there's like a more subtle aspect of positioning that
Speaker 1: that I sometimes can tease out as well. But then
Speaker 1: also the on the other side, it can be something
Speaker 1: like say news comes out and um, it's a New
Speaker 1: Zealand housing number comes out, and so in that example,
Speaker 1: I know the markets really interested and really cares about
Speaker 1: Kiwi housing. But then say another number comes out, and
Speaker 1: I'm like, I know the market doesn't isn't really that
Speaker 1: fixated on that, but you know, currency moves twenty pips
Speaker 1: on it. Then I'll take the golf fade and I'll
Speaker 1: take the other side. So I think my edge is
Speaker 1: understanding what matters and what doesn't, because that's one thing
Speaker 1: that's really frustrating for a lot of people is and
Speaker 1: actually for financial journalists as well, is trying to understand
Speaker 1: sometimes why things move when it doesn't always totally make sense.
Speaker 1: So if you, for example, like the classic example is
Speaker 1: current account deficits, so generally currency markets don't care about them,
Speaker 1: but every five or ten years will trade off of
Speaker 1: them for like a year, and then we stopped trading
Speaker 1: off of them. But the current account deficits themselves are
Speaker 1: pretty sticky. They don't change that much. Kind of knowing
Speaker 1: what matters as well is an important part of that.
Speaker 1: So for example, like if you trade a lot of correlation,
Speaker 1: which I do, knowing which assets people care about and
Speaker 1: which ones they don't, So like if oil has been
Speaker 1: in a forty five range for eight weeks. The correlation
Speaker 1: to dollar cat probably isn't that significant. But if oil
Speaker 1: is like on the front page of Bloomberg every day
Speaker 1: and it's breaking to new i'll, you know, new three
Speaker 1: year highs, then the correlation to cat is probably going
Speaker 1: to pick up. And so I have a good sense
Speaker 1: of like, Okay, I gotta have oil on my radar
Speaker 1: because we're you know, it's all over Bloomberg or or not.
Speaker 1: So then sometimes, like if you don't know what you're doing,
Speaker 1: you might see like the oil has been in a
Speaker 1: range for six weeks, and the range is and it
Speaker 1: goes from forty one to forty four, and people are like,
Speaker 1: how come dollar cats not moving? And it's like, well,
Speaker 1: because oil is not front of mind right now. Um So,
Speaker 1: so my age is understanding the current narrative and then
Speaker 1: surfing the move to the new narrative. What does an
Speaker 1: edge look like for retail traders? Because you're talking about
Speaker 1: you know, professional experience, maybe some insight into flows and positioning,
Speaker 1: which your average retail investor is not going to have. Sure,
Speaker 1: so I don't want to overstate positioning just to be clear,
Speaker 1: because actually, oddly enough, I think that's one of the
Speaker 1: most overrated variables. My view on positioning is that it
Speaker 1: kind of matters at the super extremes, and it can
Speaker 1: be like the only thing that matters at the super extremes,
Speaker 1: but most of the time it just doesn't matter. Um
Speaker 1: Like macro and stuff tens and and flows and all
Speaker 1: that tend to override positioning. But as a retail in person,
Speaker 1: I can answer that easily because that's what I did
Speaker 1: from us and three that's what I did. I was
Speaker 1: trading my own account during the nasdack bubble, and at
Speaker 1: that time my edge was first of all, I didn't
Speaker 1: have very much money, so I would risk management. My
Speaker 1: risk management was really good. I worked at a place
Speaker 1: called Swift Trade, which was like a place where you
Speaker 1: go in and sit down and it's you have it's
Speaker 1: a trading floor, legit trading floor, and you pay commission.
Speaker 1: I think it still exists actually, um Like people kind
Speaker 1: of call them bucket shops, but this was like a
Speaker 1: professional place. It wasn't a bucket shop. And whenever people
Speaker 1: walked by my screen, people used to always say, how
Speaker 1: can be your Your P and L is always green,
Speaker 1: And essentially the reason was so that obviously if you're up,
Speaker 1: it was green, and if it was if you were down,
Speaker 1: it was read. Was that I just cut my losing
Speaker 1: positions really really fast. So everything I did was momentum based,
Speaker 1: essentially looking at futures, and I had the future squawk on,
Speaker 1: and then when futures started to you know, you could
Speaker 1: get a sense of there was some electricity in the futures.
Speaker 1: Then you would get on the bid in six stocks
Speaker 1: that trade super wide, and then try and get given
Speaker 1: by other retailer, by whoever, and then ride it up
Speaker 1: a little bit. But I always cut my losses really fast.
Speaker 1: So one edge can be really good risk management, and
Speaker 1: the other one was I was really fast on the keys,
Speaker 1: which sounds stupid, but in those days there were so
Speaker 1: many ridiculous things happening. Like somebody would go on CNBC
Speaker 1: and say, hey, my stock of the week coming up
Speaker 1: after these commercial messages. It's a optical network maker in
Speaker 1: Texas or whatever. So you just frantically google like optical maker,
Speaker 1: you know, and find the three biggest ones or in
Speaker 1: that case there's probably only one. You buy it and
Speaker 1: go up four percent and you sell it. So there
Speaker 1: were so many trades like that that essentially almost felt
Speaker 1: like zero risk. But then I can give you the
Speaker 1: rest of that story, which could because that again relates
Speaker 1: to my my adaptation thing is that so what I
Speaker 1: was doing relied on pretty wide bid offer and then
Speaker 1: just catching brief momentum and kind of catching the the
Speaker 1: wide bid offer on a lot of these stocks. So
Speaker 1: every morning I printed out a sheet or a list
Speaker 1: of all the stocks over a hundred dollars, and it
Speaker 1: was around four pages long, and those are the ones
Speaker 1: I focused on because you need like high nominal value
Speaker 1: to have wide bid offer. And in two thousand two,
Speaker 1: when I printed out that thing, there were four stocks
Speaker 1: on it, so went from four pages to four stocks.
Speaker 1: And then in the meantime in two April one it
Speaker 1: was either April one or O two, I can't remember,
Speaker 1: but stocks went to decimalization. And so when the nominal
Speaker 1: value of stocks was way lower and then there was decimalization,
Speaker 1: the bid offers size collapsed, like so instead of some
Speaker 1: stuff was trading like fifty cents wide tons of stocks
Speaker 1: at that time, we're trading like one one cent wide.
Speaker 1: So what I was doing stopped working, but I just
Speaker 1: kept on doing it. So my account went from like
Speaker 1: twenty five thousand to three D fifty thousand back down
Speaker 1: to like seventy thousand by O two oh three. And
Speaker 1: it was as I never adapted. I just kept on
Speaker 1: doing the same thing. And so one thing I say
Speaker 1: in the book is one of the reasons that you
Speaker 1: really have to have an edge that I don't think
Speaker 1: people fully understand, and I try to lay it out
Speaker 1: in in with some graphs of gross and net, is
Speaker 1: that you can be gross positive and net negative and
Speaker 1: that's not going to pay the bills. So generally what
Speaker 1: happened to me was throughout my whole time when I
Speaker 1: was day trading, I was always gross positive, so I
Speaker 1: always made money. I had some kind of edge. But
Speaker 1: there's commission, right, So as I was trading more and
Speaker 1: more shares because the value of the stocks went down,
Speaker 1: they're my commission was slowly rising, rising, rising, until the
Speaker 1: point where a lot of days I was net negative,
Speaker 1: even though I was still mostly gross positive most days.
Speaker 1: And so people have to understand that, Like people think, oh,
Speaker 1: it's a zero sum game. I'm a smart person. I
Speaker 1: cannot smart. You know, I'm smarter than average, which is
Speaker 1: that the classic bias. But anyways. But the thing is
Speaker 1: it's actually a negative some games. So you have to
Speaker 1: be able to whether you're paying you know, visible commission
Speaker 1: or not you are paying attacks every time you trade.
Speaker 1: Even as an institutional trader, there's still brokerades and prime
Speaker 1: brophees and bid offer and all that, so you have
Speaker 1: people have to understand it's it's a negative some game,
Speaker 1: and so that's why it's so difficult. So anytime people
Speaker 1: bring up dot com your stories, I get excited because
Speaker 1: I was a small retail trader around then too, and
Speaker 1: you know, I definitely saw exactly what you described, especially
Speaker 1: with friends who like made a ton of money in
Speaker 1: early two thousand and it didn't they didn't realize that
Speaker 1: the market had shifted for like two years, and so
Speaker 1: they just kept doing the same thing, and so that
Speaker 1: really resonated. But actually, so I graduated from college and
Speaker 1: O two and I got a job offer. I was
Speaker 1: kind of a job offer at one of these like
Speaker 1: trading shops, and like two people applied and they gave
Speaker 1: four people offers, and it was like one of these
Speaker 1: places where they would like start you with X amount
Speaker 1: and if you did well, and it was you know,
Speaker 1: I actually got one of the offers, and I didn't
Speaker 1: take it for whatever reason, because I was young. I
Speaker 1: want to party and I didn't. I just I didn't
Speaker 1: feel ready and I ended up not doing it. And I,
Speaker 1: you know, twenty years later, almost twenty years later, I
Speaker 1: I sometimes think back and I like, did I make
Speaker 1: a wrong choice? I Could I be a billionaire? You know,
Speaker 1: could I be like a huge hedge fund mogul now
Speaker 1: if I had taken that job and really gotten into trading.
Speaker 1: So which raises the question I'm I'm guessing the answers. No,
Speaker 1: I don't think I would have been good. What does
Speaker 1: someone have to know about themselves? How can I like,
Speaker 1: if I think back to that moment, is like, did
Speaker 1: I make the right choice in two thousand and two
Speaker 1: to either to not take this offer? What should I
Speaker 1: know about myself to determine whether that was the right
Speaker 1: call or not? Sure? So, I think the first thing
Speaker 1: that that successful traders who I mean, what you're describing
Speaker 1: is someone that kind of comes in and pretty much
Speaker 1: does well right away. And and generally most people don't
Speaker 1: do that because there's a lot of painful lessons, which
Speaker 1: is kind of what my book is about. Like I'm
Speaker 1: not saying I'm the holder of absolute truth on trading.
Speaker 1: It's more like here, I made all these mistakes and
Speaker 1: and saw other people make mistakes, and then train people
Speaker 1: who made mistakes. So a lot of success in trading
Speaker 1: sometimes comes more from like having adequate runway. And that's
Speaker 1: why I like going to a bank or whatever, you
Speaker 1: have more runway, whereas coming into a day trading shop,
Speaker 1: the problem, the biggest issue really is that you just
Speaker 1: don't have a ton of runway, usually because you have
Speaker 1: a finite amount of capital or you have like a
Speaker 1: you know, pretty tight stops and all that. So the
Speaker 1: point that you have to get to is you pretty
Speaker 1: much have to start from the point that that a
Speaker 1: lot of people get to eventually, UM, which is being rational.
Speaker 1: Um is the number one thing. So what tends to
Speaker 1: happen is people can be rational when they're invaluate, when
Speaker 1: they're analyzing the market. But then what happens is as
Speaker 1: soon as you put on a position, you're like just
Speaker 1: like the steaming hot pile of bias because you have
Speaker 1: emotional attachment to the to the position itself and the
Speaker 1: new information. You're kind of generally a bit more white knuckling,
Speaker 1: so new information, you tend to overreact to the new
Speaker 1: information to the conmon and two verse. Key stuff kind
Speaker 1: of goes into this, but a lot of that is
Speaker 1: in an experimental setting. So what I try to do
Speaker 1: in the book is also relate a lot of the
Speaker 1: conmon divers key stuff to trading, because all that stuff
Speaker 1: that happens in an experimental setting obviously happens in real life.
Speaker 1: And then I think you also have to be really conscientious.
Speaker 1: So it's funny he said you wanted to party and
Speaker 1: all that. And that's one thing that kind of hurt
Speaker 1: me in in the two era was that, you know,
Speaker 1: I was twenty two three. I had a lot of
Speaker 1: other things that I wanted to do. Besides, I wanted
Speaker 1: to go and trade for a couple of hours and
Speaker 1: make my money and then go have fun. And that's
Speaker 1: just not how the world works. Like so I think
Speaker 1: conscientiousness again, And so I did a little bit of
Speaker 1: research for the book. Most of it is my experience
Speaker 1: watching watching people and watching myself, but I did some
Speaker 1: research as well on what are the fundamental underpinnings of
Speaker 1: success in the world in general, and conscientiousness is the
Speaker 1: is the one that generally in athletics, academics, business in
Speaker 1: almost all domains, the research shows that conscientiousness is the
Speaker 1: number one driver, and interestingly, conscientiousness is the one trait
Speaker 1: in the Big five that goes up over time throughout
Speaker 1: your life. So again, I think that makes it really
Speaker 1: hard because you have to do the work. Like there's
Speaker 1: so many people out there trying to compete. It's it's
Speaker 1: very similar to like you mentioned, poker, professional sports, trying
Speaker 1: to be a professional fiction author. Is that the barriers
Speaker 1: to entry are so low and the rewards are so
Speaker 1: massive that it just attracts a lot of people. And
Speaker 1: obviously that means there's a lot of competition. Plus there's
Speaker 1: transaction costs, so the negative sum game with a ton
Speaker 1: of skilled individuals. You have to do the work. And
Speaker 1: so if you are trying to like make make your
Speaker 1: money in three hours trading the open and then you
Speaker 1: know go back to bed so that you can go
Speaker 1: club until three am or whatever, that's that's not gonna work.
Speaker 1: And I think, you know, fundamentally, a lot of people,
Speaker 1: including myself, didn't really I never was very conscientious as
Speaker 1: a as a young person, I was the opposite whatever
Speaker 1: the opposite is so unless you have that really strong
Speaker 1: mentality of coming in and doing the work and grinding
Speaker 1: every single day. And actually it's the same with poker, right,
Speaker 1: The people that really find success at a young age
Speaker 1: are the people that can grind and grind and grind.
Speaker 1: And then the last thing I would say is the
Speaker 1: right level of confidence. So I call it calibrated confidence.
Speaker 1: So generally, you know the poll or the survey or
Speaker 1: the research that says of people think they're better than
Speaker 1: average drivers. Um, that sounds like a joke, but it's true, um,
Speaker 1: And that the research shows out in every every area.
Speaker 1: The problem with trading if if you're overconfident, you tend
Speaker 1: to blow up, and if you're not the a right
Speaker 1: amount of confidence, then you just tend to not be
Speaker 1: able to pull the trigger. Or the other side of
Speaker 1: that is every time you get into a trade, you
Speaker 1: just see danger everywhere and you just want to get out.
Speaker 1: To come in at three years old and be rational, conscientious,
Speaker 1: and have calibrated confidence, Man, that's a huge ask. Like, yeah,
Speaker 1: there's a few people that are like that, but that's
Speaker 1: a huge ask. And then the other thing that that
Speaker 1: we kind of talked about is adaptation. So doing something
Speaker 1: and making money that doesn't mean that that thing is
Speaker 1: going to work next year. So having one eye on
Speaker 1: the horizon and saying okay, and I mean that takes
Speaker 1: a lot of humility to um to say okay, I'm
Speaker 1: not a god, because you feel like a god when
Speaker 1: you're twenty two and you you quadruple your account, you know,
Speaker 1: so to be able to say okay, and to be
Speaker 1: able to admit admit, okay, I was in the right
Speaker 1: place at the right time here, but next year might
Speaker 1: be different. So I'm going to be have one on
Speaker 1: the horizon and get ready to adapt. So just on
Speaker 1: that note, you know you talked about identifying regime changes earlier.
Speaker 1: How do you actually go about doing that? Because you know,
Speaker 1: it's one thing to say, like, well, obviously you have
Speaker 1: to adapt, but in order to adapt, you have to
Speaker 1: actually spot that something is changing. So how does one
Speaker 1: do that as a trader? Sure, so that's one thing
Speaker 1: that it's it's also really hard to you can see
Speaker 1: something changing. So for example, I trade a lot of correlation. Um,
Speaker 1: so I see like gold rallying, that's generally bad for
Speaker 1: the dollars. So if you're on a super short term
Speaker 1: trader and you see yields lower, gold up and dollar
Speaker 1: hasn't moved, then you know, you might think that gives
Speaker 1: me a clue that the next and the dollar is
Speaker 1: probably down. That's kind of like a basic framework of
Speaker 1: how correlation works. Pre two eight, that was a huge
Speaker 1: edge because a lot of people didn't even have live
Speaker 1: feeds to stuff like even working at an investment bank,
Speaker 1: there were traders that sat too over for me that
Speaker 1: didn't have live feeds to gold and oil and stuff
Speaker 1: like that, which is mind blowing now. So then oh
Speaker 1: eight brought all that into focus because correlations went to
Speaker 1: one between every single asset class. So a lot of
Speaker 1: algorithms obviously plugged into that, but then every human being
Speaker 1: as well did. Oh and the other thing is too,
Speaker 1: is that the blog is fear exploded at that time.
Speaker 1: So the overlays. So what I sent out an overlay
Speaker 1: of um, you know, kiwi and against SMPS in two
Speaker 1: thousand six. That was kind of a novel thing and
Speaker 1: people be, oh, that's cool. Yeah, risk appetite kind of
Speaker 1: drives both of those things. They should go up and
Speaker 1: down together. And now I mean those things, those overlays
Speaker 1: are are so common that. Um, there's there's just not
Speaker 1: a lot of edge left with that. But because I
Speaker 1: started trading that way and it was a huge edge
Speaker 1: for me, and including a way, it was a huge
Speaker 1: edge as correlations went to one, it's really hard to
Speaker 1: give up on that because you kind of have some
Speaker 1: owner ship in it and that thing kind of paid
Speaker 1: your bills for a long time or did did well
Speaker 1: by you, and so to throw it in the garbage
Speaker 1: feels bad. Um. So there is a challenge to saying okay,
Speaker 1: first of all, identifying that things have changed, which I
Speaker 1: think I was doing at the time, but then I
Speaker 1: stuck with it way too long just because it was
Speaker 1: such a good strategy. I was kind of, I think subconsciously,
Speaker 1: to go maybe it'll come back. One really obvious way, sorry,
Speaker 1: to answer your question more directly, Tracy, to identify regime
Speaker 1: is using a Volve filter. So if vix is below fifteen,
Speaker 1: that's one regime fifteen another forty, and then above forty.
Speaker 1: That's one really simple way. Um. And I think if
Speaker 1: you have any experience trading, you do that a little
Speaker 1: bit um by intuition or you know you do it
Speaker 1: just because you know you feel it. But doing it
Speaker 1: more systematically and adjusting your position size based on current
Speaker 1: volatility is something that people generally don't do very well.
Speaker 1: So you'll see in a bank, you'll see a trader
Speaker 1: that just always is longer short, twenty euros twenty million euros,
Speaker 1: and that makes no sense of fall goes from six
Speaker 1: one month, year of all goes from six to twelve.
Speaker 1: You shouldn't just always have the same position. Like that's
Speaker 1: pretty much trading one on one is adjusting your position
Speaker 1: to volatility. Yet a lot of people don't do it.
Speaker 1: So that's one way you can identify regimes. There's a
Speaker 1: lot of quantitative ways um looking at you know, rolling
Speaker 1: twenty day correlation of assets against each other and things
Speaker 1: like that. But then also I think part of it
Speaker 1: is is just paying attention and and listening to what
Speaker 1: people are saying and being thoughtful about it. So I
Speaker 1: think if you're if you're not in that mindset of adaptation,
Speaker 1: then when new things come along, you're just more fighting it.
Speaker 1: So you know, the classic example of that is I
Speaker 1: remember in two thousand and ten, I might have the
Speaker 1: year wrong, but around there David Tepper went on CNBC
Speaker 1: and he's like, there's a lot liquidity. You've got to
Speaker 1: own stocks, and a lot of people were like, that's
Speaker 1: so simplistic, like it's just not that easy, dude, And
Speaker 1: it was that easy, So you know he was. He
Speaker 1: had an open mind too, like I don't care what
Speaker 1: I wish FED policy was, or I don't care what
Speaker 1: I wish how how stock markets work, this is how
Speaker 1: they are currently working. And he was correct. And you know,
Speaker 1: I know one anecdote of of of sort of a
Speaker 1: friend of a friend of mine who opened a hedge
Speaker 1: fund in and the first trade he did was sell
Speaker 1: SMP futures and they closed in because performance wasn't very good.
Speaker 1: And the last trade they did was covering an SMP short.
Speaker 1: So not to say they were short the whole time,
Speaker 1: but you get the idea that that that not looking
Speaker 1: at what regime you're in can kill you. You know,
Speaker 1: I remember that the Temper call, and you know what
Speaker 1: struck me about Temper at the time was and you know,
Speaker 1: not overthinking it. And I feel like again, I'm like
Speaker 1: thinking about my own temp were meant in life and
Speaker 1: why I don't think I would have been a good trader.
Speaker 1: I feel like the people who go into journalism it's like, well,
Speaker 1: you know, technically speaking, when the FED expands the balance
Speaker 1: sheet and that's not really at a liquidity and it's
Speaker 1: a nasset swap. But we like to think like that,
Speaker 1: and we like to explain why some white white people
Speaker 1: are wrong, or we explain why some popular conception doesn't
Speaker 1: actually the mechanics of something that everyone's talking about doesn't
Speaker 1: actually work that way. And I feel like there are times,
Speaker 1: and maybe there are times when that's called for, but
Speaker 1: I feel like our times in Post two thousand nine
Speaker 1: was one probably uh you know, last April was one
Speaker 1: where overthinking and it can really really not just following momentum. Sorry, no,
Speaker 1: that's all right. I mean I think it's I don't
Speaker 1: think it is, because I think it's more understanding what
Speaker 1: matters and what doesn't. So looking at your framework if
Speaker 1: you're if you're more of a so like I'm a
Speaker 1: combination of fundamentals, technicals, and positioning. But when I say fundamentals,
Speaker 1: it's more about narrative um in the kind of I
Speaker 1: don't know if you guys read Ben Hunts stuff, but
Speaker 1: um in that kind of vein of not necessarily the
Speaker 1: fundamentals as a weighing machine, but more as a voting machine,
Speaker 1: so like, what are people voting for? And I think so,
Speaker 1: I think if you have the right framework, then that's
Speaker 1: what what it. So it doesn't necessarily mean always being
Speaker 1: long stocks. In fact, right now you might start to think, Okay,
Speaker 1: now we're in the transition period between additional liquidity and
Speaker 1: reduction of liquidity. So maybe now for stocks, if you
Speaker 1: were using that framework, that that temper framework. And I
Speaker 1: don't know if this is the case because I haven't
Speaker 1: heard from him in a while, but um, in that framework,
Speaker 1: you might be now thinking about selling calls or something
Speaker 1: like that, because we might be more in a chop
Speaker 1: period now where it's not clear. I don't think which
Speaker 1: way liquidity is going. It's certainly not as clear as
Speaker 1: it so to me. No, I don't think it's a
Speaker 1: momentum strategy. It's it's having the correct framework and then
Speaker 1: using that framework to to trade. And the way that
Speaker 1: I kind of describe it is you want to be
Speaker 1: more concerned about what's happening and less concerned about why,
Speaker 1: because the Y is important. But the like you said, Joe,
Speaker 1: you can kind of get bogged down and the Y
Speaker 1: and the thing is it matters, and you have to
Speaker 1: have a framework that makes sense. But in the end,
Speaker 1: the what is what matters And I think that's the
Speaker 1: the useful part about technical analysis is that it's been
Speaker 1: shown in a lot of research that technical analysis is
Speaker 1: not a good forecasting tool. It doesn't back test very well.
Speaker 1: If you back test head and shoulders are any kind
Speaker 1: of patterns, generally systematically, they don't back test very well.
Speaker 1: And yet there's also research that shows that people that
Speaker 1: use technical analysis outperform those that don't, and that sounds
Speaker 1: like a disconnect. But I think the reason that, um,
Speaker 1: it's not is that technical analysis a great risk management tools.
Speaker 1: So it tells you, you know, if you if you
Speaker 1: breach a certain level, then you're going to admit that
Speaker 1: you're wrong, and it forces you to admit that you're
Speaker 1: wrong UM And I think that's the real value of
Speaker 1: technical analysis as opposed to using it as a forecasting tool.
Speaker 1: So I think a good framework is to have your
Speaker 1: fundamental view, but then or your narrative view or whatever
Speaker 1: you want to call it, but then you overlay technical
Speaker 1: um parameters around it so that you have reassessment triggers
Speaker 1: or or exit or action triggers based on technical analysis.
Speaker 1: So a slightly random question here, but you bringing up
Speaker 1: technical analysis reminded me of this. With your background and
Speaker 1: currency trading, what do you think about bitcoin? Because to me,
Speaker 1: like trading bitcoin is sort of it's sort of like
Speaker 1: the ultimate expression of this of the idea that you know,
Speaker 1: it doesn't sot so much matter why stuff is happening. Um,
Speaker 1: the focus should be on the what. And I have
Speaker 1: to say, as financial journalists, you know, every time there's
Speaker 1: a big surge or fall in the price of bitcoin,
Speaker 1: we're all sort of scrambling to try to figure out
Speaker 1: a reason, and often for most of the time it
Speaker 1: doesn't even really matter, right, The only thing that matters
Speaker 1: is the price move. So I'm just curious whether or
Speaker 1: not that's something you're looking at and how it kind
Speaker 1: of relates to your overall trading strategy. Sure, so I
Speaker 1: watch it closely. I actually think that bitcoin is slowly
Speaker 1: becoming a pretty good proxy for the whole dollar d
Speaker 1: basement and and fed liquidity trade. So when for example,
Speaker 1: bitcoin peaked the nights, Elon went on sn L and
Speaker 1: that was actually a decent indicator for for the currency market.
Speaker 1: So if you look at what Aussie did, or or
Speaker 1: or the more reflation oriented currencies that peak, and bitcoin
Speaker 1: was a pretty good signal to get short those currencies.
Speaker 1: Dollar Canada made a low at that time as well,
Speaker 1: So I think it's becoming an important proxy. And the
Speaker 1: other thing that I think is interesting is it does
Speaker 1: look to me like there's a pretty clear substitution effect
Speaker 1: between gold and bitcoin, where the gold there's a lot
Speaker 1: of on Twitter, hey, what why is gold underperforming? And
Speaker 1: to me, it seems like it's Bitcoin is becoming a
Speaker 1: competitor to gold, right, And some people might believe that
Speaker 1: or some might not, but it doesn't really matter if
Speaker 1: you don't believe it, because you know, thirty eight percent
Speaker 1: of people do believe it and they're buying bitcoin instead
Speaker 1: of gold to hedge the dollar debasement story. So to me,
Speaker 1: I think it's it's becoming like I don't really have
Speaker 1: a view on price at current levels, but as an
Speaker 1: asset class, I think it's it's just becoming a new
Speaker 1: asset class. I know the way commodities really weren't that
Speaker 1: much of an asset class at one point. Historically they were.
Speaker 1: They were you know, good that got transacted and hedged
Speaker 1: and then uh, they're a financial asset class and that
Speaker 1: that can happen once in a while. And that's what
Speaker 1: I think crypto UM specifically bitcoin is becoming and and
Speaker 1: more narrowly, it's becoming a meaningful competitor to gold UM
Speaker 1: because you get a yield on bitcoin and you don't
Speaker 1: get one on gold. And and then depending on your
Speaker 1: age and and you're kind of not political orientation, but
Speaker 1: you're like money monetary systems orientation. UM. Again, it doesn't
Speaker 1: matter if I believe or not. UM, if a lot
Speaker 1: of people believe, then that's where the price is going
Speaker 1: to be influenced. So that's again, Yeah, that's a good
Speaker 1: example of the the what, not the why. And uh,
Speaker 1: it is definitely interesting trying to find a framework for bitcoin,
Speaker 1: I think is one of the great challenges right now. UM.
Speaker 1: Like obviously a lot of people use technical analysis, but
Speaker 1: I think there's a really interesting behavioral aspect as well. Uh.
Speaker 1: The SNL elon stuff being one of the most intriguing
Speaker 1: ones where it was the biggest by the rumors cell
Speaker 1: the fact. And just to be clear, I was taught
Speaker 1: writing about this like a week before it happened, so
Speaker 1: and I'm wrong all the time, I'm just saying in
Speaker 1: this case, I was right, and it was really obvious.
Speaker 1: It was like the greatest by the rumor cell. The
Speaker 1: fact trade in history was to be long does or
Speaker 1: or long bitcoin into SNL and sell at eleven thirty
Speaker 1: and it was like tippy top was eleven thirty or
Speaker 1: eleven forty five. It's it's amazing. So there are some
Speaker 1: behavioral things I think that you can kind of unpack
Speaker 1: in in the crypto space. Um, but yeah, mostly it's
Speaker 1: technicals and flow that seems to be what dominates. And
Speaker 1: then there's this whole ecosystem of fundamental analysis going on
Speaker 1: in the alt coins, which is interesting. But that scenario
Speaker 1: that's you really have to spend so much time to
Speaker 1: become expert. You know, you said something interesting earlier on
Speaker 1: and you're talking about uh, sentiment or positioning and how
Speaker 1: positioning is not always the best indicator. But sometimes if
Speaker 1: you overlate with sentiment and you mentioned if you say,
Speaker 1: put out a note about the Aussie there was bearish
Speaker 1: and what you've got a bunch of bad anger responses
Speaker 1: that might tell you something. Do you use can you
Speaker 1: use social media that way? Can you like put out
Speaker 1: a tweet with some idea, some trade idea, some theme
Speaker 1: with the express purpose of trying to gauge the sentiment
Speaker 1: of the reactions. Well, you know what, I have thought
Speaker 1: about that, but generally I would say no, And I've
Speaker 1: tried to get my feed to be as balanced as possible.
Speaker 1: But the problem is that there's so much bias I
Speaker 1: find on Twitter, Like, just in general, Twitter tends to
Speaker 1: lean very bare stocks. For example, it's more like UM,
Speaker 1: going to trip Advisor to check out the hotel, and
Speaker 1: you're going to see like a lot of piste off
Speaker 1: people in there. So generally I don't find it to
Speaker 1: be that great. Maybe it's just like the mix isn't
Speaker 1: good enough, or that there's too much biased, But I
Speaker 1: just find you just generally tend to either tweak some
Speaker 1: like tweak a specific topic that gets people kind of
Speaker 1: angry or or annoyed, or you don't and you just
Speaker 1: get a couple of like weak replies that that are
Speaker 1: supporting you. So it it's more like is your view
Speaker 1: a trigger? Yes or no? If yes, then you get
Speaker 1: a ton of responses, and if not a trigger, it
Speaker 1: doesn't go viral enough, and then it just you know
Speaker 1: how the Twitter Elgo just kind of drops it and
Speaker 1: and nothing. No, you don't get any really meaningful reactions.
Speaker 1: So so I guess my answer would be no, Maybe
Speaker 1: it's more because of Macro, Like maybe if you're in
Speaker 1: single names, there might be more balance, um and more
Speaker 1: people interacting with your tweets. But I would say on macro,
Speaker 1: you either trigger people or you don't. So I guess
Speaker 1: I'm wondering. You know, for all the people that sort
Speaker 1: of got into retail trading over the past year or so,
Speaker 1: what would be or advice to them going forward? Like
Speaker 1: you're one big piece of advice. Sure, so my definitely,
Speaker 1: my number one piece of advice would be be humble.
Speaker 1: It's easy to make money in a raging bull market, um.
Speaker 1: And there are specific things that happened in that may
Speaker 1: or may not ever happen again in our lifetimes. So
Speaker 1: I would say, be humble. Um. And then just behind that,
Speaker 1: like we were talking about, is be sure to adapt
Speaker 1: as things change. Don't just get stuck in your one
Speaker 1: strategy that worked last year, because it's probably not going
Speaker 1: to necessarily work this year or next year. So if
Speaker 1: you want to trade for the rest of your life,
Speaker 1: be humble and adapt. One last question. You know, again,
Speaker 1: you have this new book out, Alpha Trader. Obviously, if
Speaker 1: someone has been a professional trader for twenty five years,
Speaker 1: there's presumably extremely rare, especially if you sort of start
Speaker 1: from the universe of everyone who thinks about getting into trading.
Speaker 1: But what do you just was a little bit more
Speaker 1: about your background, and for someone considering the book, like
Speaker 1: why should they why should they listen to you? I
Speaker 1: guess the main thing that I have, as you mentioned,
Speaker 1: is experience, But then my experience is pretty broad. So
Speaker 1: I tried to write the book not just for new
Speaker 1: retail traders, but also so that one of my peers
Speaker 1: who's been trading for twenty years at a major hedge
Speaker 1: fund would also get value from the book. That's that's
Speaker 1: the way that I tried to write it. So the
Speaker 1: three stages of my career were or my my real
Speaker 1: career in trading were trading professionally as a currency trader
Speaker 1: for a bank was the majority of it. But then
Speaker 1: I also spent about four or five years trading my
Speaker 1: own money on the nazdac as we mentioned on Nazak Bubble,
Speaker 1: and then I was also at a hedge fund for
Speaker 1: three years, so I have one thing that that really
Speaker 1: that that taught me was varying your risk size and
Speaker 1: really having proper risk management. Because a lot of people
Speaker 1: read a lot of trade selection books like the those
Speaker 1: books are fun too, are more fun to read market
Speaker 1: Wizards and and the John Murphy books or whatever books
Speaker 1: you're reading, most books are about trade selection, and there's
Speaker 1: not that many books about risk management. So I try
Speaker 1: to cover that in a in a pretty easy to
Speaker 1: understand way, but a few I have a few chapters
Speaker 1: about risk management because I think that's a really important
Speaker 1: thing that gets left out of of a lot of books,
Speaker 1: and especially young traders. But even you would be surprised
Speaker 1: because at a bank, there's so many other things that
Speaker 1: you're doing, like market making and all that that that
Speaker 1: risk management isn't always taught either, so you tend to
Speaker 1: learn it more about osmosis, So I think my range
Speaker 1: of experience UM and then also the way in the
Speaker 1: book I try to go through everything from understanding the
Speaker 1: meta game, which we kind of touched on two specific
Speaker 1: here's how I make my my choices of what to
Speaker 1: trade correlation. I cover a lot of topics UM. So
Speaker 1: I think people that whether they have experience or not.
Speaker 1: The whole idea of the book was to try and
Speaker 1: add value to people across the spectrum, right from somebody
Speaker 1: who's never traded before right to um, someone who has
Speaker 1: a lot of experience. And one cool thing that or
Speaker 1: the thing that I found cool or validating was Ben
Speaker 1: Hunt wrote the foreword to the book, and his takeaway
Speaker 1: at the end of the forward, and the interesting thing
Speaker 1: was a couple of other people that like were early
Speaker 1: readers before the book was published, said the same thing
Speaker 1: was that it's kind of a book about understanding the
Speaker 1: game that you're playing, and and it can relate to
Speaker 1: the areas outside of trading as well. So there's a
Speaker 1: lot of stuff in the book about self awareness, UM
Speaker 1: and adaptation obviously, and discipline, conscientiousness, doing the work, how
Speaker 1: success transpires in the world in general. So there's a
Speaker 1: lot of subjects that that aren't super specific to trading.
Speaker 1: And so Ben says in the end, this is the
Speaker 1: kind of book he would buy for his uncle or
Speaker 1: for his niece or whatever who aren't even in trading,
Speaker 1: because hopefully it can teach you some of the things
Speaker 1: that I've learned about, you know, playing the bigger game
Speaker 1: or or other games like poker and things like that.
Speaker 1: So I think it has some application outside of trading.
Speaker 1: Um from the feedback I got, that's what people said,
Speaker 1: and that's kind of what I hope UM that that
Speaker 1: people also get out of it is some application outside
Speaker 1: of trading. Brent Donnelly, thank you so much for coming
Speaker 1: on Odd Lots and congrats on the book. Thank you.
Speaker 1: That was awesome. Thanks, thanks very much, thank you. Obviously,
Speaker 1: I always really like those episodes. I mean I really do.
Speaker 1: I always go back in time to like two thousand
Speaker 1: and two and whether I could have been a trader,
Speaker 1: and I actually think no, I really think I went
Speaker 1: I made the right decision to not pursue that. I'm sure,
Speaker 1: like I think, you know, oh, I could have made
Speaker 1: a bunch of money, but I just have a feeling
Speaker 1: I wouldn't have been a wain. Why don't you set
Speaker 1: up one of those like fantasy football type portfolios and
Speaker 1: see how you do? Although actually that's that's a terrible idea,
Speaker 1: because if you lose loads of money, you just feel bad,
Speaker 1: and if you make loads of money, you feel bad
Speaker 1: because you haven't actually made loads of money. Yeah, well,
Speaker 1: I thought it was interesting his point about like sort
Speaker 1: of runway and risk management and if you like to
Speaker 1: enter the game at like some like day trading shop
Speaker 1: where you're on like really really sort of tight stops
Speaker 1: and so forth, versus say coming up through a bank
Speaker 1: where you're a market maker and you have like a
Speaker 1: lot of time to learn and you have like a
Speaker 1: lot of liquidity behind you. Like, I just feel like
Speaker 1: that's such an important lesson and it just seems so
Speaker 1: easy to get chopped if you don't have like a
Speaker 1: you know, a really good risk management framework and you
Speaker 1: don't have a lot of cash behind you. You's just
Speaker 1: got to be so easy to get like chopped out
Speaker 1: at the beginning and be out of the game day
Speaker 1: one before it even gets started totally. Um. The other
Speaker 1: thing that's struck me was this idea of not worrying
Speaker 1: about the why and focusing on the what. And to me,
Speaker 1: that just kind of characterizes the past, you know, certainly
Speaker 1: the past ten or twelve years since the two financial Crisis,
Speaker 1: where we had so many people who were talking about
Speaker 1: markets being artificially inflated by central banks. Nothing makes sense anymore.
Speaker 1: Everything is distorted, but in the end it might not
Speaker 1: actually matter. Like the thing that matters is what people
Speaker 1: believe in, Um, the actual flows in the story that's
Speaker 1: behind those flows. And so how do you bet on
Speaker 1: you know, stocks in two thousand eight or two thousand nine,
Speaker 1: you'd be doing phenomenally. Well, Yeah, I think that's really hard.
Speaker 1: And again I really do think that, like my mind
Speaker 1: is not like and I really believe I don't know
Speaker 1: about you, but I really believe a lot of journalists
Speaker 1: would not make for good traders because I truly believe that, like, well,
Speaker 1: they tend to overthink things. It's two different skill sets. Yeah, yeah,
Speaker 1: and it it's more important to be right, you know.
Speaker 1: It's like the classic thing, it's like do you want
Speaker 1: to be right or do you want to make money? Journalists,
Speaker 1: I want to be right, and we don't want to
Speaker 1: make well, I mean with good reason, right, Like, the
Speaker 1: whole point is you're trying to build up credibility so
Speaker 1: that people believe in your journalism. Um, you're not trying
Speaker 1: to make money obviously as a journalist, you're not trying
Speaker 1: to make money. No one goes into journalism to become
Speaker 1: rich and famous. Okay, shall we leave it there, Let's
Speaker 1: leave it there. Alright, this has been another episode of
Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Allaway and I'm Joe Why
Speaker 1: Isn't All? You could follow me on Twitter at the Stalwart.
Speaker 1: Follow our guests on Twitter. Brent Donnalley, He's at donne
Speaker 1: leye Brent, and he's the author of the new book
Speaker 1: Alpha Trader, The Mindset, Methodology and Mathematics of Professional Trading.
Speaker 1: And be sure to follow our producer Laura Carlson. She's
Speaker 1: at Laura M. Carlson. Followed the Bloomberg head of podcast,
Speaker 1: Francesca Levy at Francesca Today, and check out all of
Speaker 1: our podcast at Bloomberg. Unto a handle at Podcasts. Thanks
Speaker 1: for listening.