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Insilico Terminal Podcast Episode 13 - TraderXO
122 Plays6 days ago
In this episode, Trader XO breaks down his journey from banking and computer science into the 2017 bull run - and the painful lessons that followed after losing it all in 2018. He explains why 90% of traders fail, how embracing uncertainty is essential, and why risk management is ultimately a survival skill. We explore defining edge, expectancy, pattern recognition, and his 6-pillar trading framework. XO dives deep into psychology, recovering from tilt, building routines, dynamic risk sizing, and adding to winners. The discussion also covers strategy creation, volatility regimes, using LLMs for coding advantage, and journaling as a tool for longevity - ending with reflections on avoiding CT envy and focusing on the long game.
00:00:00 Intro, Trader XO background, CS/Banking origins, 2017 bull run luck, losing it all in 2018
00:06:10 The 90% failure rate, why normal thinking loses, embracing uncertainty, risk management as survival 00:13:50 Defining Edge, expectancy formula, speed of understanding, pattern recognition vs. predicting
00:20:10 The Trading Process, 6-pillar framework, trading as a professional sport
00:32:20 Psychology deep dive, myth of "controlling" emotions, A-Game vs. C-Game
00:50:08 The "Reset" phase, dissecting a recent tilt, danger of short-circuiting, recovering from losses 00:58:05 Essential library, top book recs, leveraging LLMs/ChatGPT for coding edge
01:07:42 Routine & Execution, building situational awareness, dynamic risk sizing, adding to winners
01:21:50 Strategy creation, 15 principles, defining hypothesis, volatility regimes, building a living playbook 01:34:50 Closing thoughts, avoiding crypto-twitter envy, journaling joy, focusing on longevity over quick wins
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Transcript
Trader XO's Trading Journey
00:00:03
Speaker
you
00:00:12
Speaker
welcome to a new episode of the in silico terminal podcast today i with me trader xo and we have a bit of a different setup this time a bit more of a professional setup i guess but i guess first for people that don't know you could you introduce yourself who you are what do you do what do you have for us today yeah Sure, I'm Trader X, so fairly pseudo-anonymous. I've been in the trading space since 2016 when I first bought Bitcoin. You know, ever since 2017, I've been actively trading the markets.
00:00:50
Speaker
I've been through the highs, I've been through the lows, all the emotions associated to trading. But I have to say, you know, looking back, Next year is gonna be my 10th year. It's been one hell of a journey. ah I'd recommend anybody who's looking to start up, keep well away from trading. now but you know It's just such a a mental, emotional toll more than anything. And it can really wreak havoc on your,
00:01:13
Speaker
on your lifestyle but you know we'll talk about that in the stream today think at the end of the at the end of the day at the end of the day i think if you're truly committed to the game then you can have a lot of success as well uh prior to that i come from a tech background you know i graduated in computer science with mathematics and i mastered with computer science with cyber security worked in investment banking as a software developer for 10 to 12 years You know, and decided to step away. You know, like I said, I bought Bitcoin 2016, started trading in 2017, made a lot of money, lost a lot of money, went back to work because I sucked at trading for a while and then finally sat down. And it was in late 2018 after, know, losing a lot of money in the bear market that started to
00:02:01
Speaker
figure out in building a trading process which really laid the foundation of of kind of where i am today
00:02:11
Speaker
yeah sounds good so what do you what do you have prepared for us today the first real prepared guests yes off yeah so i think for me uh as opposed to just having a a podcast about me, me, me and how great I am and how shit I am or whatever it is. It's just basically about, well, look, why don't we do something different? and And I think it's more about sharing my journey in trading, but really giving back to the community as to where or what I've incorporated that. I hope, you know, can inspire somebody else to to follow a similar path or find today's ah stream. useful. um And that is the trading process. And I think, like I said, you know, having entered the space in 2017, I've wrote about it on my sub stack. You know, I made a lot of money and a lot of it was down to luck. You know, it was a bull market. Everybody's a genius in the bull market. But
00:03:03
Speaker
when shit hits the fan and you have no understanding of risk management, you have a lot of emotional attachment to your, you know, whatever your assets you're in.
Emotional Attachment and Trading Decisions
00:03:14
Speaker
You've got a heavy emotional bias for them to perform well. Anybody who talks badly about Bitcoin going down is ridiculed. And I was one of those people that was an absolute permeable, you know, very emotional about my trading. um to the point where I lost a lot of money. Thankfully, you know, it wasn't it wasn't I didn't lose my initial. I kind of doubled my initial at the end of it when I stopped trading in 2018. And that was it at the end of October. You know, I sat down after losing some money in leverage trading as well. You know, and on BitMEX, I've got some Bitcoin in the insurance fund, but sat down.
00:03:51
Speaker
And decided I need to stop doing what I'm doing because whatever I do, i can make a little bit money, but then I'm taking some really large losses. And I don't know if this is this is the career path for me, but let me be really structured. Let me really think about how to approach this game as a professional and discard everything that I've learned or have understood about...
00:04:15
Speaker
markets because a lot of my performance prior to that was just randomization. It was just pure luck. It was just pure fundamental analysis. Everything was going up. So you could kind of throw a dart at a dartboard blindfolded and kind of hit jackpot. That's how markets were for for the best part in 2017. And so, you know, in today's session, I want to talk about The importance of a trading process and why for me it was kind of the the defining point. it's's It's everything that I've built upon year after year after year, which has got me to where I am today. And and what I'm excited about the most is is not where I am today as a trader,
00:04:53
Speaker
It's knowing how much more potential and how much more I can get out of my game in the next three, four, five years where each year on year I look at my performance and I just feel as I'm getting better and better and better as a trader and I'm becoming i becoming more humble.
00:05:08
Speaker
more objective in my thought process, whereas it's very easy for traders to to marry a bias and lean towards predictability as opposed to appreciating the random nature of the market. And we can't control the market. We can't really ah predict what the market is going to do. But it's more about understanding who you are as a trader, understanding your edges as a trader. But ultimately, um You know, I think i think i said it before that a lot of new traders anchor their trading around learning the technicals, whether it's price action, whether it's Elliott ways, whether it's order flow, footprints, the DOM, the ladder, a bit of fundamental analysis. Unfortunately,
00:05:53
Speaker
I've been through that same journey and and I can tell you it's it's not the be all or end all of trading. It's just a small subset or a small segment of what you require to succeed in this game as a discretionary trader.
Risk Management and Trading Success
00:06:07
Speaker
And so the the reality of trading is such that over 80 to 90% of traders fail. um And it's rarely due to a poor strategy. I could give you my strategy. Somebody could give me their best performance strategy, but the chances are, if I don't have a process, if I don't have... a routine, a structure, if I don't understand risk management, then the chances are I'm probably going to lose a lot of money very quickly. And because of that, you know, the statement that I've put here, more often they blow up because they don't manage risk.
00:06:35
Speaker
It's not the market. that takes them out. It's often themselves. And we saw that on 10th of October. How many traders did we see, obviously, anonymously and on Hyperliquid just blowing up across the board? You know, the the liquidations were brutal on that day. and yeah And what does that come down to? Was it their strategy or was it really...
00:06:54
Speaker
themselves, their risk management, their emotional bias, their emotional attachment to their positions and not recognizing the risk in the markets once price started rolling over, you know? So it's it's it's unfortunate, but um the reality is that 80 to 90% of traders fail.
00:07:12
Speaker
And so when you're in this game, you really have to ask a question, well, What are the 80 to 90% doing that's causing them to fail? And in this game, when I refer back to the book by Tom Huggard, Best Loser Wins, and he states how normal thinking does not win in this game of trading, you really have to think differently and approach the the entire game of trading differently. to what the majority do. And if you think about Pareto's principles, Pareto's law, 80-20, 80% of traders fail, 20% make money. And even as ah as ah as a trader, as a discretionary trader, the bulk of your money in a year probably comes from 20% of your best traders. The other 80% is just you churning away, churning away, churning away, going sideways, going down, then slightly up until you hit, you know a couple of very good asymmetric plays. So that's the reality.
00:08:02
Speaker
of of trading failure and and one of the reasons why i feel traders fail is because we don't understand markets you know markets are unpredictable um but we can learn to understand them no one can predict market moves with certainty and i think That's the common flaw that many traders try to do.
Embracing Market Uncertainty
00:08:22
Speaker
We we all marry a bias. We've all got arrows pointing towards the chart that no price is going to do this. There's no chance price is going to drop, you know, to whatever level lower down. um And that's not really objective. Anything can happen at any time. And we saw that. Again, I keep talking about October the 10th, 2025, across crypto. I've pretty much lived through every major crisis.
00:08:45
Speaker
cascading liquidation events since 2017. And wood, I've survived every one since 2019, because for me, it's understanding that at any point, the market can do anything. All it takes is one bad day for me to be wiped out on my trading balance or my trading account as opposed to all the other days where i've done really well i've grown my account but it's just that one day and it comes down to survival and some of the risks in the market are global events war policy changes economic shifts we saw what happened with the covid crash You know, the market breaks out. it It has forced liquidations if liquidity is very thin or cascading liquidations on the way down, which we saw. And and and then you've got external risk factors such as exchange hacks, financial system shocks, interest rate decisions. And so there's always a level of risk in the market, and markets do not like uncertainty. And at any one point, as soon as there's a high level of uncertainty in the market, there's likelihood of ah of of a
00:09:47
Speaker
a risk event. But with that risk event, if you can read it and if you can play it correctly, you can capitalize on that. And so it's about embracing uncertainty. You know, even the best analysis or setup can be disrupted by unexpected events. Market moves are unpredictable and there's a high degree of randomness. And so what I've learned over the years is just be humble, be open-minded and and and and stop speaking in absolutes. The minute you start doing that and you start becoming more objective about the markets, you then appreciate that this game is all about survival. Risk management first, risk, risk, risk, and then you can think about taking the trade. But the mindset has to be there, is is is constantly questioning.
00:10:30
Speaker
where is the risk in the market that's going to cause me to be offside? Whether you're long, whether you're short, where is that evolving risk likely to occur and where or why? What are those drivers? ah But you have to be balanced because obviously if if you're too hesitant, then you're going to fail taking risk and your primary job is a risk taker, but in a calculated
The Role of Emotions in Trading
00:10:55
Speaker
way. And that's kind of where you have to embrace randomness.
00:10:59
Speaker
um Because many traders struggle because they don't fully accept market uncertainty, you know. um And that leads to stress, frustration, poor decision making. We've all done it. We've all oversized or undersized. We've all hesitated on trades. We think the market has to go in certain way, so we oversize and then we get taken out. I've been there myself many times during, you know, 2018, 2019 and parts of 2020. And so really a lot of this trading decision making comes down to emotion.
00:11:28
Speaker
It's not a systematic way of trading. It's emotionally dreaded emotionally led, ah which causes a a dreaded reaction in in your performance, which then gives this negative feedback loop that You're perpetually in this loop of failure because you your trading is wrecked by what you think is technical decision making isn't. It's actually overridden by a level of emotional hacking of your performance and of your game, which is impulsively causing you to make bad decisions from oversizing to cutting the trade too early due to a lack of fear. ah
00:12:10
Speaker
you know so So there are various factors that we have to think about. And and the key to all of this is just appreciating the the randomness in the market. So you know that that's the power of ah objectivity. I talked about objectivity earlier is accepting that You know, uncertainty reduces stress, fear and emotional attachment. And staying objective allows you to see the market clearly without a body bias. You know, over the last two, three years now, I really don't care whether the price of Bitcoin is going up or going down. All I'm looking for is long opportunities at key inflection points and short opportunities. That does not make me bearish or bullish. Price could be in a downtrend and I could still be looking for longs at key support. price could be rallying and I'm looking to hedge out. Does that make me bearish? Not necessarily. I'm just objectively thinking about the the risk to reward profile for me as a trader, for my system, for my performance and who I am and my personality. So the market isn't personal.
00:13:11
Speaker
It simply moves. yeah And your job is to is to respond and and not to predict. So I've highlighted object object objectivity.
00:13:22
Speaker
Embrace this mindset.
00:13:27
Speaker
And so what is the truth about trading? when When you ask traders out there, what is trading really about? And you'll be surprised, including myself, if somebody asked me this question back in 2017, 2018. What is trading?
00:13:40
Speaker
you know Ultimately, what does it come down to? And it's all... under the umbrella of expectancy. Expectancy is your win rate multiplied by your average win minus your loss rate times by your average loss.
00:13:56
Speaker
And what is edge? what is What is edge? Edge is having positive expectancy. And if you don't have an expectancy greater than zero, then you do not have a profitable system. If your expectancy is just above zero,
00:14:13
Speaker
then you do have a slight edge and you can work on refining the edge to enhance that performance, to enhance that um you know edge and and to increase your expectancy. And and a lot of people attest expectancy to a trading strategy. It's not just about a trading strategy. The trading strategy is just one part which we'll cover in today's stream as to a series of sub-modules in what I like to call the trading blueprint or the trading framework or the process. um and And that's what trading comes down to. It's about do you have edge? Do you have positive expectancy? Everything else is it irrelevant. It's all about expectancy at the end of the day.
00:14:55
Speaker
um And um so then it comes down to, well, what is edge? Well, Edge is your ability to read the environmental market context. It's your speed of understanding. It's your discipline, your risk control, your pattern recognition, your ability to stay objective.
00:15:11
Speaker
that's That's what defines Edge for me when I think about all the things that develop Edge. And even when we look at today, you know, we've got the advancements of GPTs and LLMs, informational Edge.
00:15:24
Speaker
feeds into the overall edge of you as a trader. How are you taking advantage of that technology? Are you using indicators? Are you using custom scripts that you've built yourself? Are you building screeners and and and scanners? Because how often, right, as traders, when we begin, we're looking for opportunities all over the place. Well, if you've got a very good screener and a very good filter for one of your strategies, now all of a sudden you're not trying to find what the next trade is. Those trades are coming to you. And so therefore that is a level of edge, that's informational edge. You then have in front of you what is a set of ah assets and markets that you can decide, all right, you know
00:16:06
Speaker
according to the rules that I've defined on my filter or scanner, this could be a very good trade for me because it aligns, because I've built this scanner on filter system for this strategy. And then with that, you've got other scanners and filters rule-based, which are are aligned to the the various strategies that you deploy that you wish to trade in a given context as well. So that's what understanding edge is for me. um And so when I talk about my past journey where I was as a trader in 2016, 2017, 2018, 2019, this was me on the left.
00:16:40
Speaker
And it wasn't until, like I said, I stopped trading. There was a period where I stopped trading. it I didn't take any trades for three months. I sat down and I built a trading manual. And that was really difficult for me to do because you really start questioning who you are. You learn so much about yourself. And there are questions that you ask. What are your strengths? What are your weaknesses? What are you looking to achieve from the market? yeah what What are your objectives?
00:17:07
Speaker
What's your daily goal? What's your weekly goal? What's your monthly goal? What's your yearly goal? What's your daily routine look like? What does your weekly routine look like? What does your monthly routine look like? And so all of a sudden, you start realizing that, whereas before you'd come to the desk, you'd come to the chart, mark up a few levels, you'd only think about position sizing, or do you know what? I'm just going whack some money onto this trade.
00:17:29
Speaker
You don't even think about risk. You don't think about where you're invalidated. And so basically all all you're doing, and and and I think I've mentioned this in the past is that
00:17:40
Speaker
Everybody can trade, but not everybody is a trader. Yeah. Right. and And I've attested to this, like you can put put on a pair of boxing gloves and you step into a boxing ring. You're boxing.
00:17:50
Speaker
But are you really a boxer? Because you don't have the skill set. don't have the discipline. You're not doing the bag work. You're not doing the rounds. And so when you understand and accept that, well, trading really is a form of professional sport.
00:18:03
Speaker
and that's one way to look at it because which in the which other the industry or career path out there and and i've talked about professional sports mma you cannot go to an you can't go to anne nette an m mma gym and spend six months there and expect to fight in the ufc against pro elite level fighters you're gonna get knocked the fuck out so why is it any different with trading you know just remember that here's a market that It's easy to get some money, deposit onto an exchange.
00:18:35
Speaker
The minute you are about to trade, just know that you are competing against some of the best algorithms, some some of the best systematic traders, some of the best funds, some of the best discretionary traders. Do you really think you've got a chance to outperform some of the best in this game day in day out week in week out month in month out year after year after year or is the likelihood that they're just going come take your money away from you and then you're probably going to be depressed thereafter and you probably quit trading yeah and that's the reality until you accept that
00:19:09
Speaker
This is what it actually is. This is what you're doing. you are entering in an arena which is a level playing field for all and you're up against some of the best. And so that's why i come back to the start.
00:19:21
Speaker
Why is it that 80 to 90% of traders fell? Well, because normal thinking and and having a normal approach to trading does not work. And that's that's the wake up call. That's reality. If you're not going to do anything about it, and then don't fucking waste your time. going fuck up. You're going to blow out. Just like I did, just like how many others before me have done. And those who have come after me, they've probably experienced similar losses. And that's just the reality. This this is a very ruthless game. ah But you if you approach it with a level of structure, discipline, process, understanding every facet of of of discretionary trading, then you give yourself a decent probability that you have to find where you have edge. And that takes time.
00:20:02
Speaker
That really takes time. And so what I came to to develop over the years and what I've come to understand was was the trading process. And for me, these are the core segments of everything that i do today, which has incrementally evolved over the years since 2018. So what is that? It's about understanding yourself. Then you've got the psychology and the mindset of trading. Because like I said, how often do we see the psychological the psychological aspects of trading really...
00:20:32
Speaker
harm the way we trade you know how often do we see traders revenge trade they take a few losses they're going to oversize because they're trying to make it back on the next trade or a trader has taken three four losses in a row they're down six seven eight percent on their account and now when the next a plus trade comes staring at them they've undersized yeah or they fail to pull the trigger that that's That's not good trading. And and that undersizing or you're failing to pull the trigger, even though the setup was screaming at you, is is is not because of your strategy, but simply because the the emotional side of trading is damaging your performance. And...
00:21:16
Speaker
We then talk about routine and goal setting, which i'll I'll cover some of these segments in today's streamer. And then the kind of a high level, I'll go over it over each in high level detail. The one that I'll skip is technical proficiency, because I think that's more, you know, subjective to technical analysis, order flow, reading the market.
00:21:33
Speaker
yeah And we'll finish off with... ah strategy testing but but ultimately this these are the segments that i think is that if you just take remove one segment from out of here i think it affects your trading it certainly does with mine um if you don't journal then how are you ever going to evolve as a trader you don't know what your performance is like so how are you ever going to perform really well and i i liken it to you know, if you're bodybuilding and you're you're into aesthetics, right, you are going to follow a very strict routine. You're going to eat at this time. These are your macros. These are your macros. These are your, this is your calorific intake. These are the workouts that you're going to do today. You generally how much you lifted and you're looking for that week on week progress. One day,
00:22:16
Speaker
is not going to is going to define your body. But a thousand days in the gym over the period of three years, you're going to see drastic changes if you stick to your routine, if you stick to your process. When you come off your process, fine, there's going to be a good day. You come off your process. you know It's not going to make too much of a difference. And that happens as a trader. You'll never be on your process 100% all the time. But you've got to recognize that, like you have a cheat day, oh, shit, this was bad trading. I fell off my process. I need to get back on it. Let me review. So each segment,
00:22:47
Speaker
is ever so important. It's it's understanding yourself. you know if you If you don't know why you're trading or what what your objectives are, then why you in the scheme? What, because you want to make a lot of money? Well, yeah. No shit. We all want to make a lot of money, but it's about really understanding who you are and what your strengths are, what your weaknesses are. Are you a scalper, swing trader, day trader? But why? Why are you a scalper? What makes you good scalper? How do you know you're not actually a good positional trader? um so you know we'll talk about each one of these and and ah ultimately mastering the process is is about mastering yourself you know um it's a refined process and you can't expect to just come out with the process one year and and be absolute brilliant in the market you've just got respect the fact that
00:23:34
Speaker
It takes time to develop. um you You really have to approach the game as a professional. Even though you're a retail trader, which many of us are, we're discretionary traders, it takes time to develop. And i liken it to a university degree. you know We've both done computer science.
00:23:52
Speaker
We've spent three to four years at university. um We've done various modules, but after doing all the modules, Is it only at the end that we decide, I want to become a software engineer, I want to become a database administrator, I want to become a network engineer, I want to become a cybersecurity specialist.
00:24:11
Speaker
Yet all the other modules that you did at university, some of them may have relevance, others probably won't. And I feel that's how trading is, that you there's no way that you can understand yourself experience all the psychology aspects, understand what a routine looks like, risk management, technical proficiency, developing ah various strategies, creating a playbook, having trade execution, and then understanding journaling in the space of six to 12 months. I just think it's a very, very tough feat unless you are under the guidance of a professional trading firm with some professional traders and it kind of speeds speeds up your
00:24:48
Speaker
learning curve but quite often we don't have access all the luxury to prop firms or trading at a hedge fund or trading at a desk as a proprietary trader so really it takes time to develop all these various skill sets and it's really all the skill sets that you're developing it's you that you're trying to develop as an individual more than anything so you know every every every segment every segment builds towards developing your reg and that's why if you miss one or two out i think you're just setting yourself for failure yeah um and it's your your ability to read price rhythm flow is a direct result of your process right you can read the market everybody's a great analyst right on twitter we see everybody marking all uh order blocks supply demands oh look i called it i nailed it
00:25:35
Speaker
Well, how much risk did you put on that trade? How did you size up for that trade? um What was your execution trade execution trigger? How did you just scale into that trade? Did you limit chase? Did you T-wap?
00:25:46
Speaker
Or was it just randomness? You just thought, oh, fuck it, I'm just going to slam, hit the buy button, and and let's see what happens. You know, that's not really, you can do better than that. You know, it's easy to fall into that trap of, fuck it, let me just smash market buyer, let me just put some limit orders here. Well, why are you putting those limit orders there? What are you actually looking for?
00:26:04
Speaker
in the execution process. And we'll talk about that in in today's session as well. But ultimately, trading success comes from self-mastery, not just mastering the market. It's more about yourself. And I just feel as though technical proficiency, understanding price action order flow, you can be a brilliant order flow guru but you can't trade for shit why is that maybe maybe because your psychological aspects of your game is damaging your performance maybe you're a degenerate how often do we see people on twitter sharing 700k pnl wins but as a result of that it's come out of 40 drawdown so how how long or how soon is it that it's only a matter of time before they blow because 40 50 drawdown
00:26:54
Speaker
on a level of degeneracy. You can't repeat that over a thousand times. And I always say that you you can't scale up randomness and you can't scale up high degree, a high degree level of variance because eventually the market is going to find you out.
00:27:08
Speaker
and and And it's not that the market is going to find you out. You actually, it was upon yourself because you didn't really have a ah true framework for trading the next 1000 trades ah and incrementally reviewing your performance, which is where journaling comes in. How do you know what your best setups are? How do you know what time of the day you're performing well? um How do you know what you're you know which setups you should be leaving out? It really gives you a lot of structure, I feel. So you know that's that's kind of the core tenets of what I think is key to a a successful ah discretionary trader, whether it's a day trader, intraday, intraweek, positional trader, swing trader. These are the facets that I feel that have helped me really get to the levels yeah where I'm at today.
00:27:58
Speaker
But it's also that these core foundations are going to help me propel to the next level and the level after that as to where I'm going. So there's ah there's a logical progression to where I want to be. And as traders every year, we're always evolving. evolving We're always trying to get better. We're always learning something. And um you know if you think of the hockey stick curve, you know for the first two, three, four years, you're experimenting, you're tinkering, you're figuring out various systems. Then eventually, once you find that there's a strategy with with a higher degree of positive expectancy, That's all you need. For as long as the edge keeps working, you have edge, you've got positive as expectancy, you are now able to extract money from the market and your performance will improve as you...
00:28:44
Speaker
develop your skill set over time. But I mean, so far, so far has as what I've said made made sense to you essentially with kind of the various segments in trading and why they're really important. They all complement each other.
00:28:59
Speaker
um And so if you're looking to improve as a trader, you've really got to have an appreciation for each one. And like I said, I don't i don't think you can really truly get an appreciation for every single facet of trading until at least a good two, three years. yeah and And with that really comes...
00:29:15
Speaker
a large level of deep learning, you know, discovery, finding, understanding psychology mindset, understanding what is routine goal setting, understanding the various types of risk management frameworks, because within risk management, you you also have trade execution. um You know, with technical proficiency, well, that's your analysis of the market, your read of the market. Can you read the market in real time, do you understand microstructure? Or maybe you're more of a ah swing trader that realises moving averages. Well, do you understand every nuance of the the tools that you are using, you know, which form various strategies that you're looking to trade? And and then obviously you go into strategy testing, trade execution, because once you have a strategy, part of that strategy, you've got trade execution as well.
00:30:05
Speaker
And then all that goes into iterative journaling, you know, do you you How you plan the trade. Did you follow your process of planning, executing as you intended to? Did you see the patterns of execution? um And so it's it's an iterative process, you know, and and that's just for one trade, the entire trade lifecycle.
00:30:25
Speaker
And then you've got to repeat that over again and again and again. And and look at your weaknesses, find your strengths, remove your weaknesses or understand your weaknesses and why that's slowing you down in your trading or holding you back so but that's why i think each tenant here is very very core to to you know elite trader performance i think you did a great job in summarizing all of this uh what is part of the process and like um displaying it and talking about it in a very coherent way like it makes a lot of sense to me and i think it Most of the time people usually talk about um maybe technical proficiency most, like what kind of tools they use, or like a little bit of risk management and like the psychological aspect, but I think you really like nailed it down in making all of these like a core tenant of what it actually takes to be successful in trading.
00:31:21
Speaker
Yeah, yeah, thank you. Yeah, it certainly helps. And it's just having a level of appreciation. And it does take time. It does take time with some guidance. You can get there, but you've really got to dig deep and understand each of these facets of of trading.
00:31:38
Speaker
um and and so then it comes to like i said understanding yourself i'm not going to spend too much time here but this is where i created 60 page trading manual um of which some of these questions were what are my strengths what are my weaknesses how do i work under pressure um do i thrive in structure or do i prefer flexibility and and and i think it's so it's a very fine balance and like it's really more about understanding you your personality and And then understanding what type of strategies or what type of trader you wish to be, you want to be. um And then in terms of psychology, Sonny, well we'll talk about the second segment, which is the second segment which is psychology and mindset. I'm not going to spend too much time on this, maybe five minutes, but a lot of people say you've got to control your emotions.
00:32:29
Speaker
And I think that's a really... bad way of understanding the emotions of trading. You can't control your emotions. And by controlling your emotions, you're just basically trying to suppress what is just going to keep surfacing time and time and time again. Yeah. When when it comes to understanding trading psychology,
00:32:54
Speaker
You've got to have a level of awareness, self-awareness during the entire trade process. So when you're planning a trade, when you're mapping a trade, when you're marking out your levels on the chart, you'll notice that, you know, your emotions are relatively calm. um When you're going through your process of, you know, whether you follow structured process of of daily morning pre-market prep, your emotions are fairly low. You're just planning the day ahead. You're planning the possible trades ahead. But your your emotions are heightened when?
00:33:27
Speaker
During the point of execution. When prices come into your level, your emotions are are are are generally heightened. And if you don't have structure,
00:33:38
Speaker
in your trading, this is what I've come to understand. If you don't have structure in your trading where you don't know how much you're going to risk, you don't know what position size are, you don't know you don't know what your execution trigger is, you're blindly punting on the level, of course you're going to be emotional. When you hit the trade, how often, right? We've probably all done this.
00:33:56
Speaker
You've entered a trade, price is reacting, it's come down, you're offside, just marginally, but you've cut the trade. One hour later, price moves. It finally takes off, left it behind, and then you start choosing it. Or how often do you see when price, you've nailed the entry.
00:34:12
Speaker
Brilliant. You were calm, you were collective. Price pushes away. Oh, shit, I think it's going to come back down and stop me out. You you start quitting the trade because you think you might get a better entry, but price pushes up even higher.
00:34:25
Speaker
Now, was that emotionally driven trading? Because if you were looking to quit the trade, that's a fear of losing. Mm-hmm. The flip side to that is greed.
00:34:36
Speaker
Or I think this is going to be a brilliant level of trade. Let me really oversize. Or greed in the sense, or revenge trading. Fuck, I need to make make back some of my losses.
00:34:48
Speaker
And then you you go on a tilt. So... Really having a self level of awareness and and and understanding that during the point of execution, write down soon after how you felt during the trade execution, during the trade management, just get a pen and paper on a sheet and write down your emotions for the day whilst you're actively trading. Even before you take the trade in the morning, how do you feel? So you've got to have a a level of confidence.
00:35:17
Speaker
observational aspects of looking at yourself as to who you are. And, you know, i'm not going to repeat some of the pointers here, but you can see that You've got to recognize emotions in real time. and It doesn't mean that you can stop them because emotional patterns have strong momentum. um Initial recognition may feel like control, but it's just often a temporary effect driven by novelty, not real correction. And true change requires more than mapping your emotions. You need a deeper performance review. um And you've got to you've got to
00:35:51
Speaker
You've got to dig out your floors. It's like when you've got weed going through the grounds, you know, you can spray some weed color on it. Fair enough. The the the weed might die, but it it resurfaces again.
00:36:02
Speaker
That's a classic example of your trading emotion. You might think you control it. You're all right. You try to control it, yeah but it it resurfaces again. The true aspect is that you have to get down to the root cause of why is this making me feel this way when it comes to trade execution? Why am I suffering from fear, from greed, from revenge? What's causing that?
00:36:24
Speaker
And then you've got to think about, well, if I keep doing this, how is this going to affect me as a trader in the long term? And then the fourth part is, all right, what do I need to do now to stop feeling this way? And sometimes it's it's it's as simple as understanding risk management. All right, for each and every trade that I'm going to take, assuming you're on a bad run and you risk 1% per trade, you take six trades, you take six losses in a row, you're down almost 6%.
00:36:53
Speaker
Now, if you're suffering from trading performance, psychologically and you know that your strategy is fine, then reduce your risk to half a percent. You take six losses in a row, you're only going to lose less than 3%, if that.
00:37:07
Speaker
And now all of a sudden losing 3% after six trades doesn't feel so bad. And if you're risking too much, say you're risking 2% and you're in a six trade losing streak, well, you're down 12%. And even then,
00:37:20
Speaker
if you've got poor risk management where you didn't really respect your stop losses or the amount that you were willing to risk, you're gonna lose 30% in a matter of weeks because you didn't adhere to your risk management levels. So risk management and survival is really key and you've got to recognize how emotions ah can play or have a real impact on on trading performance. And so like, when you think when you think about trading performance, you've got to think about it as a as a bell curve now. I learned this concept from,
00:37:49
Speaker
uh the mental game of trading a book by jarrett tendler really fantastic book okay um that really gives you an actionable framework to work on your trading especially from from the mental side and i just want to say one thing that you can't just go away and think all right i'm going to start working on the mental game of my trading because If you don't have ah a system or a strategy, then what the fuck are you working on? Are you working on yourself or actually are yeah are you actually working right? Okay, here I am as a trader. i understand who I am.
00:38:21
Speaker
Here's a strategy that I trade. I'm having issues trying to execute this strategy because of the emotional aspects. I have got some edge, but the emotional side of trading is not allowing me to execute as per all my back testing and forward testing that I've done that in the real environment, I keep fucking up.
00:38:38
Speaker
So the strategy is actually fine. The issue is the emotional aspect. And so it's it's about digging deep into your emotional side. And there's two sides. So you've got your mental game of trading. Are you confident? Are you relaxed? Are you patient with a purpose?
00:38:52
Speaker
Being patient and being disciplined basically means that you are following a strategy with a positive expectancy or a level of positive expectancy with with an edge. with an edge ah And so like, and and many people can relate to this because when you've got your BK and prices come to your level, are you hesitant? Are you second guessing? Are you reacting too slow, too late? Did you fail to pull the trigger?
00:39:16
Speaker
So that is actually not a technical issue. That's the emotional state that that you have to appreciate. And then your C game is you're just being lazy. You're distracted. You're probably out and about. You're trading on your mobile. You decided to take a trade. You didn't put a stop loss in place and you're trading your P&L. That's just dog shit trading. You carry on doing that for the next two, three, four, five years. you're probably going to blow up quicker than you know it. And then you've got your tactical game, which is, is your, do you understand the current environmental context? Are you aware of what it is that you're actually looking for in terms of an execution trigger? Are you letting price come to your levels?
00:39:53
Speaker
And then you go to your B game, which is somewhat substandard. You're taking too many attempts on the trade, you know, because you don't really have a true execution process. You don't have, ah a repeatable process that you've back tested, forward tested, that you've seen play out in the market over and over and over and over again, right? Because how do you build performance. How do you enhance your performance? Just like a boxer goes to the gym, does bag work day in day out, and month after day after day, week after week, month after month. He gets the repetitions in his bars. He's done all, all the hard work. And now when it comes to execution in a real fight, he's able to perform his highest peak performance. Trading is the same. If you're looking to execute a trade, but you don't know why you're executing a trade or you don't know what you're looking for, then what are you actually doing?
00:40:47
Speaker
you You're just trading randomness to an extent. But if you can really nail down, thought all right, this is what I'm looking for at this level. Here's the microstructure. Here's what I'm looking for. It could be shifted microstructure. You're looking for trap traders. You're looking for maybe a liquidation event. You're looking for, um you know, for sellers or for buyers.
00:41:06
Speaker
That is. a better reasoning to execute a trade as opposed to, oh look, this is a demand zone, so I'm just gonna, I think this is worth buying. I think we're gonna get a reaction. I think we're gonna get a reaction. You don't know why, you don't know what you're looking for, but you think you're gonna get a reaction.
00:41:22
Speaker
Well, but but that's just guesswork. What's the probabilistic edge of that trade execution. And I keep talking about it. So many people talk about, oh, look, liquidity grab under this high or under this low. Or if that's a liquidity grab, then why did your price roll over soon after?
00:41:36
Speaker
so so So you get the notion. It's really understanding What is the shift in that inflection point in the market that is giving you a reason to execute a trade? And that's just one facet. That's just trade execution. We we haven't even talked about what type of strategy you're trying to trade. And so, you know, we talked about your B game is you're quitting good entries, your front running entries, because when you front run an entry, you you're then offside, then you puke it, then you think, oh fuck, I'm actually gonna execute again. So you've just pissed away a small amount of your capital. You keep doing that over and over and over again, you're gonna get capital erosion. You're gonna eat into your P&L. You're not trading efficiently, you're trading emotionally. And then your C game is just, again, dog shit trading. You're chasing price, you're copying other traders, right? How often do we see people on Twitter say, oh hey XO, why don't you ever drop any calls, but you never called it, you know? Well,
00:42:27
Speaker
What are you doing? Just think about what you've just said. You are fucking copying other traders. you're not You're not going to make it. I'm sorry, but you're not going to make it. yeah I've never to this day ever copied any other trader. and and And the one time that I did was in 2017. And I just thought, well, this is a shit way of trading because I don't know what the fuck I'm doing.
00:42:46
Speaker
Like, why am actually taking this? Because he said so? or right, let me follow him. And when that trade loses, oh, he's fucking shit. but So so the minute the minute you take somebody straight and you lose, all a sudden that person is crap in your eyes. is Well, guess what? As good traders have a 50% win rate. Some of the best traders in the world have a 40% win rate.
00:43:07
Speaker
Are they bad traders? No, they're not. They just understand. the mathematics behind trading and the probability probabilistic nature of trading. So it's really about being on your A game.
00:43:19
Speaker
um And the book Mastering the Mental Game of Trading talks about how to evolve your A game and your B game and your C game. What you really want to be doing is that focus on your A game.
00:43:32
Speaker
And eventually, as you get better, your A game then replace replaces your B game and your B game replaces your C game. And you've got an even more better a game. So your old A game,
00:43:44
Speaker
becomes your B game. And you've gradually got to keep stepping forward as a trader, making those refinements, iterative refinements, getting better each year, every six months, every year, every two years. Eventually, where you were two years ago, say, you know, it's 2025 now, or whatever your A game is, you should be striving that your A game eventually becomes, at some point later in time, a C game. yeah And you've got now this new elite level of A game, which is your a A star setups, which is your absolute brilliant best and set the ones that you only want to be taken. You don't care about anything else because you've seen this play out again and again and again and again. So it's like when I trade the range highest in the market.
00:44:29
Speaker
i know that there's there's very I know that when price comes to range high, the old me in 2020 would have been, oh, range high, execute. Oh, shit, I'm offside. I'm going to cut this here. I'm going to wait for it to deviate and then get back inside. All right, i execute again. And guess what? Price failed to break down. It goes even higher.
00:44:45
Speaker
I've just taken two losses in a row. yeah That was because i was just trading in some zone, but I didn't really understand what's actually happening under the hoods. Fast forward today where I am, people talk about trade the reclaim, trade the confirmation. I think that's just a bullshit way of taking a trade. I'm actually looking to execute whilst, let's just say the deviation is developing because I'm looking at the order flow. I'm looking at the positioning. I'm looking at where...
00:45:15
Speaker
whether people are forced buyers or forced sellers at a given level and i want to take advantage of that inefficiency in the market what you're trying to do as a trader is exploit inefficiencies in the market that are repeating over and over and over again once you understand what that pattern is what that inefficiency is then you've got to figure out all right how can i actually take advantage of this have i seen this play out not just once, two, three times, four times, five times, but 10, 15, 20, 30. Have I gone back and back tested this across various charts on Bitcoin and Ethereum and Solana? Is this passing playing out at the extremes of of range highs and range lows? Yes, it is. All right, now how can I actually structure a trade around this?
00:45:55
Speaker
You know, do I just randomly place my stop at some level or is there a a calculated way I can place my stop at a given high or a low? Because if you think about it,
00:46:07
Speaker
What is variance? Well, we've talked about variance in the sense where if you're taking a trade, how often do we see traders talk about, all right, I'm going to take a trade here and I'm i'm going to place a stop above this high.
00:46:20
Speaker
Just think about that for a moment. Look how random that stop placement is. Because on the next 100 trades, you can't replicate that. For for each stop low or stop high, it's going to change each time. There's no way of quantifying that. So sometimes you have to think about, you know, this is something that I've been thinking about for last year, year and a half, is that I'm trying to move away from this ideology of, oh, I'm just going to um put my stop at this high and then structure for a trade around it. I think that's just a shit way of trading. I want more of a statistical edge, a numerical edge, a mathematical edge, where I can say, all right, i can take the day's ar range and I can place my stop above...
00:46:56
Speaker
x percent of the ATR. Now I can apply that to 100 trades and over 100 trades I can see all right here's what actually happened and I can back test that. I can then carry that forward into forward testing and I now have more of a systematic way of defining my trade execution with a a logical stock placement that I can then review in my journal and slowly tweak You can't do that if you're randomly saying, I'm going to just place my stop at this high and my stop at this low. That's not really being systematic. That's just a high degree of variance. thought It's difficult then to understand what your edge actually is because some trades going to stop you out and the trades are going to work out. But if you have a way to define your risk structure per trade, per setup, per strategy, whether you're risking 0.2, 0.5 or now you're talking...
00:47:46
Speaker
now you're talking more about the probabilistic mathematical nature of thinking like a professional risk taker as opposed to a higher degree of random. So it's really about understanding your tactical game, your mental game, and this is where trading psychology comes in. um I've probably got on here, I'm not going to read through this is quite exhaustive, but here are all the A game points that I've listed out. Here's all my B game points that I've listed out and here's all my C games. So when I'm reviewing the trade, when I'm in the trade, I sometimes quickly scan through this.
00:48:20
Speaker
You know, once I've executed the trade and I'm just watching it play out, I quickly make a note, all right, which one of these was I experiencing and how many are applicable to me? Because this is going to go into my trade journal. when i When I review my performance at the end of each week, at the end of each month, I look at all my emotional performance across Each trade that I take and each trade see sits under a strategy. So I know the the emotional response for a given trade and the the the strategy of, all right, this strategy is causing me to be hesitant. Why is that? Let me let me now go back to the charts. Let me do...
00:48:56
Speaker
some further learning as to why am I hesitating when it comes to trade execution or why am I cutting this trade because I keep doing this as a regular occurrence nobody is ever going to teach you that no course is going to teach you that no technical strategy that somebody gives you will ever teach you that it has to come from within your trading performance your evolution and your development as a trader is you your biggest edge is yourself and you're working on various edges which complete or combine together to to give you an overall edge for a given strategy. That for me is what edge is. It's you. We are our own edge because we're not systematic traders. We're not algorithmic traders. We are very much human decision makers, risk takers in real time. And so there's a degree of variance with our emotions.
00:49:48
Speaker
and is trying to figure out how can i um narrow the the level of variance so I i see more um consistent performance moving forward. So that's mental game characteristics, that's tactical game characteristics. And then let's talk about the the final part, which I think is so important in trading.
00:50:10
Speaker
um This is from the book by ah Stephen Goldstein. I think it's called The Mental Game of Trading. um I've built my trading frameworks, my trading psychological frameworks around these two books. I really highly recommend anybody, everybody who I've recommended to has always come back and said to me, brilliant book, really, really good books. um And really, when you think about trading, every time I take a trade,
00:50:35
Speaker
you know i i view each trade as a life cycle and it's so important to reset after every trip after every trade whether i got stopped out whether i took profit whether i cut the trade i want to finish reviewing that trade before i even jump into the next trade um and um and this is where traders go until because They don't reset. They're acting, and they're acting, and they're acting again. Their ego has taken over their trading.
00:51:01
Speaker
And what does that mean? What can that lead to? Well, if you really think about it, this was Eduardo's P&L during this period, right? And now this phase where he didn't reset, he just shortcutted his entire process, his entire circuit. He failed to plan the next trade. He impulsively took it because he thought, oh, you know what? Price has come to good level. Let me just hit it.
00:51:21
Speaker
Well, his short circuit in that resetting phase phase, eventually he goes through a period of tilt. yeah And that's what happens when you come off process. I i personally experienced this um two weeks ago.
00:51:35
Speaker
I broke my process. Bitcoin was trending down from 98, sorry, from when it went from 88 to 82. I tried to long 88K, even though every single indicator of of mine, every single process would would have said to me, Exo, this trade is not for you. You're looking for continuation. yeah What did I fucking try to do? Oh, look, I think price is oversold. I think this is worth a good buy here.
00:52:02
Speaker
Nope, price went all the way down to 82k and I took a two and a half percent account loss because I was short on, I was long on ah Bitcoin, I was long on Ethereum. And then when you look back and you think, fucking hell, what a shit bit trading that was because really I didn't follow my system, I didn't follow my process. i I would have been better off not taking the trade or just waiting for me to short it again if I got the short setup. Instead, I came off process, I didn't do my morning review,
00:52:28
Speaker
I was over trading because I was trying to get too intelligent. I was looking for a long back into a short as opposed to, oh, if price bounces and comes back into my bounce, I'm going short this again.
00:52:40
Speaker
Well, neither happens. So was that me following my strategy? No. Was that me following a process? No. Was I resetting after after the previous set of wins? No. Therefore, I went on a bit of a tilt.
00:52:53
Speaker
And it's the reason for that, because I never reset. I never truly reset after the trade. And when when we go back to what we say, was I really on my A game? Or was I just on my C game? That was game trade.
00:53:06
Speaker
That is what's holding me back as a trader. And even my decision-making, it's being distracted. I wasn't really focused. I didn't have patience in my decision-making process. There was a lack of mental game plan or strategy.
00:53:19
Speaker
um I'm not blaming anybody, but it is a lack of control. So it's very easy to pick out your C games. And once you see what's... playing out over and over and over again. Is it your A game, B game, or C game that's coming to the surface? You'll soon figure out where your flaws are as a trader. So these are the resources that I recommend that really think are fantastic books.
00:53:39
Speaker
I talked about the start, why normal thinking never wins the trading game. and I think Tom Huguard's book is just such a fantastic book, especially when it comes to adding to a winning trade. How often do we see traders, right, when they enter a trade and price is going towards the target, they start scaling out.
00:53:54
Speaker
versus really if you want to make it big in this game, why don't you do the opposite? And start thinking about, hang on a minute, i'm going to go for the jugular. Let me add to this trade. If there's a higher probability of degree of price going to your target, then add to it, you know?
00:54:08
Speaker
Go for the jugular. Keep your risk static. You can still keep adding to a trade, risking 0.5%, and you can get some serious notional size behind that trade because you're dynamically, you are not not statically, but you are dynamically adjusting your stop loss and as you're adding to adding size to the trade and it doesn't have to be significant size right it could be in small increments you just keep adding chasing chasing chasing all the way down you could be using like the in silico terminal you could be using a ah chase function yeah but then in order to use that you cannot just rock up to the chart on a trade and think oh you know what today i'm going to use a chase function because you never back tested that yeah you don't know what that You don't know what that looks like. You haven't got a strategy for that. You haven't got an execution game plan for that. So why you now all of sudden thinking, oh, look, here's a cool feature in Silico Terminal. Why don't you use chase them? Well, have you actually backtested that over 30 examples of over 30 scenarios? No, you haven't. So again, you are trading randomness. You are not trading a trading process. You are not trading a trading structure. You are literally just second-guessing randomness.
00:55:11
Speaker
that what the market is going to do because you don't have any statistical way of defining or quantifying your performance. So again, it comes down to, is this something that you've verified e number of times, back-tested, forward-tested, sample-sized in a live environment on a small account where you've done this over the last 20 times? Because you're going to learn more from that.
00:55:32
Speaker
then you will try to actually do it in a live environment with with very little performance review, with very little backtesting, very little forward testing, because you are then at that point trading something that you haven't, you're performing in a way in in a way that you've never performed before. You might get away with it. It might be one-off. It might be an anomaly. There are certain conditions that you can't plan. You can't trade. I understand that. That's why you've got have a level of flexibility. If this is something that you're trying to do again and again and again for the next 1,000 trades, well, how do you know this is going to work for you if you haven't back-tested it? So that's the psychological aspect aspect. That's the mental aspect. That's kind of the the whole...
00:56:12
Speaker
you know the the way i've really come to think about trading really in a nutshell when i think about trading how could i summarize it best you are looking for market inefficiencies that play out over and over again and you are looking to exploit those inefficiencies by figuring out What happens every time? What are the variations of this happening? Like what the subtle differences between exhibit A, exhibit B, exhibit C?
00:56:38
Speaker
And how can I trade this? How can I structure a trade around this? How can I structure my stop loss? What's my position size? I'm going to look for this trade. What kind of targets am I working for? Right? Quite often we see crypto traders go from A to B, from supply to demand.
00:56:52
Speaker
Well, what if you can chalk off in which Which might be a two hour trade, but what if you can chalk off a four hour trade where you're covering less less than half the distance of what you used to do before because you've now managed to really refine your execution. So edge is an execution.
00:57:08
Speaker
and and and And people talk about having a trading strategy. But nobody ever seems to talk about execution strategy. You've got to have trading strategies, patterns that you play, and within each of those strategies, you're going to have two, three ways that you execute a trade. Is it a funding thing? is it and is is it Are you looking for...
00:57:27
Speaker
a drop off in open interest and a spike in liquidations. you know Are you looking for, like I said, forced sellers, forced buyers? are you looking for tapering of a volume profile at the edge of ah of ah of a composite or at the edge of a trading range? Whatever it is, figure it out. Back test it. Look at how you can structure um your trade around those and then we go into routine obviously i think you know it's a nice segue into routine but before we do i don't know if there's any questions i've been rambling on so um maybe we can just go go back another slide um to the resources and just read them out for like the people that are only listening oh for the for for the resources yeah yeah yeah because i think they're all right so good to know yeah so in terms of the the further resources that i really highly recommend i think there were four books
00:58:17
Speaker
There is a fifth book that I'm reading, which I probably won't mention yet until I've reviewed it, but the four books that I think were very, very impactful on my trading over the last three, four years. The first one is Mastering the Mental Game of Trading by Stephen Goldstein.
00:58:32
Speaker
The second one is The Mental Game of Trading by Jara Tendler. I think these two are really central in So i've got I've got the technical ability, but then how can I encapsulate my training from a psychological performance perspective, mindset performance, understanding that it's It's the mental game of trading which is actually going to make or break me, not just my technical skill set, but the two combined. And like I said, you've got to have a level of positive expectancy, an edge, a strategy where this then becomes applicable because now you're applying it to something that you're looking to repeat in the market as opposed to, oh, I need to work work on my mental game of trading because I keep losing.
00:59:23
Speaker
All right, you keep losing. But is it because you're following a strategy? Is it because you're following a process? Or is it the case that one doesn't exist? And so if you try to go down the psychological route, it's not really going to make much difference because you're not you're not able to um incorporate the psychological the psychological aspects of your training into what is a clearly defined blueprint. And if you can't explain, and and I've got a question that I always say to people, if you can't explain one trading strategy within five minutes, then do you actually have a strategy? Do you have edge? You can't have edge because you don't have a strategy. And if you can't explain the strategy, then you need to stop trading. You need to go back to the drawing board like I did, sit down and work out and read the market, understand the market, see what patterns are playing out. And then just say, oh, do you what? This happens again and again and again.
01:00:12
Speaker
It's the same with with humans, right? When when we see... Black Friday is around the corner. Are we really going to go purchase some electrical goods one week before? Yeah, some people do, that's fine. Other people want to buy value.
01:00:24
Speaker
Well, what's the pattern there? Well, you know, Black Friday's coming. There's an opportunity in the market for you to actually buy that watch out 30, 40% or buy an iPad at a heavily discounted price. you're going to take advantage of that because that doesn't only happen. It's the same with trading. You see these inefficiencies, you see these opportunities. Well, have you seen them enough times to think, oh, do you know what?
01:00:44
Speaker
I need to figure out how to actually trade this because I can make some good money out of this. And therefore you're now thinking about trading professionally. You're thinking about the game in a different dimension than than randomly just rocking up, oh, here's support, here's resistance, let me take this trade.
01:01:00
Speaker
And the beauty of that is that once you've then got the um trading strategy, you can then create a filter around that. So when these set of rules occur,
01:01:12
Speaker
then let me know which trades I should be looking at, which I need to take or act upon. And so the two work together now. Now you have, instead of some random filter where you chase some momentum,
01:01:24
Speaker
that there's actually a real purpose behind you developing that filter because it's derived from your strategy. So instead of looking for trades across the market, let's just say you trade equities, thousands of equity pairs out there, you now have a system which is going to bring you, oh, you know what, EXO, these three trades are the ones that you should be paying attention today because They've just given you a trigger to think about executing your freight, the breaking out, or they've just had a surge in relative volume. Something's happening. Go check it out. Look at the volatility. So they're the two books. And the other one is the Alpha Trader by Brent Donnelly. And then The Best Loser Wins by Tom Huggard, which I think is a another brilliant book.
01:02:04
Speaker
um insight into somebody who is a high stakes trader, you know, somebody who isn't just trading a thousand dollar account. We're talking about somebody who's putting on some serious size on trades and has been doing it at a high level for many, many years. And if you want to learn to become better, then you've got to look at what the best of doing this game and and take it from there and try to replicate and emulate their process, their mindset, not their strategy, not their technical skill set, but their core genetic mental emotional framework that has led to them being successful and on where they are today.
01:02:40
Speaker
I actually have another question. um Sure. Most of my questions have been previously taken by you already because they've been pretty extensive, for which I appreciate a lot. um But I'm thinking because you've mentioned before to me that you're interested in more um algorithmic traders.
01:02:58
Speaker
um Would you say like the the end game of everything that you're describing here is becoming an algorithmic trader or is it still going to be discretionary but just like way more systematic and refined?
01:03:12
Speaker
Does it make sense? um Yeah, it's it's an interesting question. um I think where I am today, look, I come from a software engineering background. you know I was a software but developer for 10, 12 years. um I kind of fell out of love of coding. you know I kind of got bored of it.
01:03:30
Speaker
2020, quit my career to go full time trading. But now with the emergence of charged GPTs and LLMs, it's given me a whole new lease of life.
01:03:41
Speaker
What would have taken three, four weeks to figure out is taking a matter of days to put together as a prototype. And so I... I'm not looking to become a quant by any means, but I am incorporating a high degree of um scanners, screeners, filters, custom built by myself, for myself, with push notifications, because this is Information Edge. This is um systems that are aligned to my strategies that I'm looking to trade the opportunities that I want to trade. And so it's about finding those opportunities in the market, finding those inefficiencies in the market. ah and And then when I think about it from a systematic approach, um it's more, well, we live in a time where
01:04:34
Speaker
you know, raw data isn't just the only edge. It's about filtering that data, understanding that data and where real edge is found. And so that's where I've been transitioning towards, you know, building tools in in AI to understand my trading journal, my trading performance. Can I extract all the trades that I've journaled into a CSV file and then put it through some LLMs and then query and filter it and find out more about my own trading performance? So that's another insight that I feel people could tap into to really get some insight. But to get to that level, you have to journal your trades, obviously. um And then I'm trying to build systems that track volatility regime changes, ah that show that show um ah shift in ah structural levels, that monitor monitor statistical patterns, ah that scan for certain setup conditions.
01:05:24
Speaker
And then it's not just about trying to find, find, find. I'm also, like I mentioned, I took a trade when I tried to loan Bitcoin and Ethereum on the way down. Well, I've started to work on that because I realized that I need to keep that shit out of my game if I really want to hit true elite performance. And so i've built out a filtering system now to alert me. Not alert me in the sense, oh, here you go, here's an alert. It's just to show me that, you know what? Keep out this trade. It's visually telling me that this trade isn't for you. Keep well away. So sometimes it's about...
01:05:55
Speaker
creating filters that keep you out of bad trades and then other filters that bring to your attention some really good trading opportunities. And and so the whole edge here is really decision-making edge.
01:06:06
Speaker
And you're reducing that aspect of human variance, that human variability that creeps in our game time and time again. um And so yeah, that's why I think the power of LLMs and GPTs and automation comes in. And then you can take it further. you know ah The other thing that I'm currently trying to revamp is to create an automated dynamic trailing ATR based stop.
01:06:33
Speaker
So you know if I'm away from the screens, if I'm away from the desk, I don't have a hard stop or a static stop, I can switch on the algorithm and it will incrementally keep adjusting my stop based on some parameters. Now that's something, again, that I'm back testing. I'm trying to figure out how to build that. ah And it's no different, I think, when you start thinking in a quantitative way, in a systematic way as ah as a discretionary trader, you'll actually realize that implicitly it enforces you, enforces you to think about trading in a different dimension. It really opens your mind to thinking, and actually, you know what? I really need to think long and hard about my trading now because I'm really trying to get as much edge and extraction out of my performance as opposed to just doing what everybody else is doing. And it comes back to what are you doing different?
01:07:19
Speaker
that that's going to allow you to become a better trader not you against other people you're just competing against the market it's about you against yourself and that's where i think technological edge really comes into play
01:07:35
Speaker
yeah that makes sense i think uh we can go on with what you have further
01:07:43
Speaker
Yeah. but So I think we'll talk about routine for two, three minutes. You know, really, if you think about it, routine is core to everything that I do. If you recall the example that I gave you that I took a trade on Bitcoin and Ether ether I lost.
01:07:57
Speaker
Why? Because I bypassed my routine. i I've always said that you've got to have a routine. If you don't enjoy it, you're not going to do it. There's no point in creating a training manual. So I've just made my a daily routine. And then one week later, you haven't even looked at your daily routine. You haven't even done anything about it. Well, were you just playing mental gymnastics to make yourself feel better about the fact that you've written a training routine but you're not following it well that's not very helpful so it's something that you have to understand about yourself what's going to enforce you to to to remain this is discipline you know when people talk about discipline when people talk about patience
01:08:39
Speaker
Well, what does that mean? You've got to have a a systematic way to to approach that. And for me, that's that's having a routine without structure, without consistency, we're we're setting up for failure. um and and And so why is a routine important? Because it builds consistency. It sharpens your focus. It improves execution because you're thinking about the trade. you're You're trying to get into that flow state. You're trying to get into the zone of trading. You're trying to be in sync with the market. You're looking for um market rotations. What environments are you in? you're trying to gauge the market sentiment on a daily basis. What is the structure telling you? What is the momentum telling you? So everything here that I've written it is exactly where I broke. when I didn't even go through any of this when I took that took a losing trade. So it's very easy for me to rectify that. But there's nothing more frustrating or annoying than actually taking substandard trades that have nothing to do with who I am as a trader. yeah It's just shit trading. That's it.
01:09:37
Speaker
um And so the key steps of a daily routine, what does mine look like? So I kind of summarise it here. It's reviewing the process, reviewing any overnight positions, reviewing any limit orders, stop orders, whatever it is. Understanding the current market context and volatility regime. I think this is really important, which we'll touch upon. ah Building situational awareness, you know, understanding yourself really and the situation that you are looking at in the market.
01:10:02
Speaker
Creating a focus list, being organized, that is where scanners and filters come into play. Building the game plan, all right, you've mapped out your levels, you looked at market profile, you've looked at the flow, you looked at the book depth, you've looked at the overnight 24 hour volume, were there any liquidations, were there any news events? um You know, is open interest building up, which is going to cause us a risk to the market? so it's just having awareness about the domain that you're operating in. And then obviously trade execution. What are you looking for to execute that trade? What specifically do you need to see? And this is where...
01:10:34
Speaker
you have a level of um implicitness in in your mind because you've seen this play out again and again and again from a trade execution point of view You know exactly what you're looking for. Is it a three drives into resistance? Is it three it drives into support? is it Are you waiting for that third drive to take out the previous low with aggressive selling into those lows to get long?
01:10:53
Speaker
You know, that's... a really logical way of thinking about the market when it comes to trade execution. You're trying to anticipate if price does this, here's what I think could happen and here's what i worry it could probably look like because I've back tested this over 30 times as opposed to, or price does that support, I think I'm going punt along here, stop below this low. Yeah, fine, you can do that, but What if you can enhance that execution from being a three hour trade to a four hour trade because you've really understood the context of price when you're looking to execute that trade. And not only that, you'd have to take a full one hour loss because you realize that, all right, your execution was on point. The market did what it did to the point of execution. But half an hour later, there's a news event.
01:11:34
Speaker
Now all of a sudden, You have to be questioning what is the market doing? Where is it trying to go? Is it doing what I expected it to do? Or do I need to change my plan? That's what you call having a level of of of adaptability during trade execution because you're still managing that trade at the point of execution and soon after execution until it's pushed away. away And then obviously, you know,
01:11:56
Speaker
at the end of the day write down what you did well what you what you didn't do very well and sometimes you can be mentally fatigued come back the next day don't take another trade until you reviewed your performance from the previous day or if you missed the trade why did you miss the trade were you out were you disorganized did you not have alert set so that's part of a routine for me yeah and obviously i don't want to keep delving on that i'm sure people can figure out what a good daily routine would look like for them Risk management, obviously, we're not going to talk about this too much, but you've you've just got to, you know, can pause or watch this. But when it comes to risk management, there are several facets of risk management, which I feel everybody, not everybody, but let's just say a large part of us ignore. When we think about risk management, what do we think about? We just think about money, how much money that's in. But really, risk management is is more than just that. It's your psychological risk.
01:12:46
Speaker
your emotions, your fatigue, your stress, your cognitive bias, all these are going to impact the way you execute a trade. um And you've you've got to remember, you control risk, not outcomes. You know, the market's are a level of uncertainty. Trade setups fail.
01:13:02
Speaker
So when trade setups fail, you can control how much you lose. You can't control what the market does, but you certainly can control. Absolutely, you can control how much you're willing to lose per trade if you follow your control risk procedure and you follow your process. And then you've got drawdown management, you know.
01:13:20
Speaker
With Drawdown, if you take a 30, 40% loss on account on one trade, what does that come down to? was it Was it down to the fact that you didn't follow your process your system? Well, it's psychologically going to impact you because now you're in a really shit state and you've got to figure out how you're going to make it back. um And so you it affects your psychological performance moving forward. Your confidence drops. It takes much longer to recover. I took a, like I said, I took a 3% loss.
01:13:49
Speaker
I stepped away from trading him because thought, fucking hell, I don't want to take any more shit trades. I just need to take a break. I think I'm fatigued here. I've probably been over trading. I've made so much. I've taken so many trades, done really well. I'm at that point now where I think I'm starting to give it back. I'm coming off my process. I need to step away. So again, situational and awareness.
01:14:09
Speaker
I don't want to revenge for it. i I don't want to try and make it back on the next trade. I'm just going to step away. Let me take a few days off. I'll come back to trading in the market next week. And that's what I did. Started off with ah with a very decent win. Made 1% back of of the account loss. But that's not how I look at trading. Because I look at it from...
01:14:26
Speaker
Every week is a fresh week. Whatever happened in the previous week, I've journaled, documented, logged, done. Next week, here is my target. I'm trying to operate at 1.5% account gain per week with a maximum of maximum drawdown of 5%. That's rolling drawdown. So really...
01:14:45
Speaker
I don't care i if I've taken 10 losses and only lost 2% of my account, I don't really care about that in the sense where you see a lot of people talk about, oh, if you take two, three, four losses in a row, you should stop trading. I disagree. I think if you've got very disciplined risk management, what if I've taken six losses in a row all of them equated to just a minus 1% account loss because I've just taken small scratches? Should I stop trading now? No.
01:15:08
Speaker
I followed my process. I followed my system. i'm going to go into the next trade because I've got very good control of my risk management. I'm not going on a tilt. I'm not losing control of my emotions. i mean I'm very i'm seeing very structured and very disciplined. And the risk management aspect of that works simultaneously with the emotional side of trading from my own experience. and so When you appreciate these two, I think it really helps you think about, all right, well, I've got to appreciate risk management. It works the psychological aspects of trading.
01:15:37
Speaker
Now I'm going to deploy it on the strategy. Here's my execution trigger. You feel far more calm and collective in the way that you trade. And it protects your edge. It ultimately protects your edge. What is a very good edge, right? um Just because you take one big loss, does that mean your edge is shit? No, it's just like your shit. You didn't follow your process. You didn't follow your risk management system, right? So it's a case of ah just because you're taking losses on a given strategy, why are you taking losses on a given strategy?
01:16:10
Speaker
You know, is it emotional or is it really technical or mental or what was it? So that that's another the reason why You could give me a brilliant winning strategy.
01:16:22
Speaker
And yet for me, that could be my worst performance strategy.
Strategy Execution and Elite Trading
01:16:25
Speaker
It's a losing strategy. Why is that? The strategy is fine. It's the person who's operating the strategy. You know, that's the issue right there. And so it protects your race risk management, protects your rage. You know, you, you rely on execution. you You have a consistent way of trading. You've got, it gives you longevity in the game. And then if you look at elite traders,
01:16:44
Speaker
they all use, they all understand Kelly criterion. They all understand bet sizing, position sizing, thinking in bets. They all know how to grade their setups. And if you don't journal your setups, how do you know how to grade them? How do you know which ones are your best performing strategies? um And so top traders, elite traders understand expected value. They understand on their A setup how much they're willing to size up.
01:17:08
Speaker
you know how much they're willing to risk. and And elite traders like Tom Hougard, who adds to his winners, that's dynamic position sizing right there. It's not one entry with a stop and a target. That's just very, very static. And I used to be like that. That's how I used to trade in 2020, 2021. And you realize, well, this is just what everybody else is doing.
01:17:28
Speaker
Surely there's got be more to becoming an elite trader than just entry you stop target and it is i think it's it's been dynamic where your risk is always dynamic your your position sizing is dynamic your notional size can be dynamic you know let's let's just say for in an example i executed trade with 0.5 risk price pushes away from my level it comes back on me it's now against me i've got two choices do nothing and let the market play out fine.
01:18:01
Speaker
Or I can reduce my risk, but still keep a level level of exposure on there. So I'm just reducing how much I'm losing all of a sudden, because if it goes further against me, I've not taken a full one hour loss.
01:18:13
Speaker
I've taken a half hour loss just because I reduced the risk as it was going against me. And that's where... thinking dynamically about risk comes into play as opposed to, oh, fuck it, I'll just take the loss, I'll just hit the one hour, it's only one hour. No, if you can save money, then then do that. if you can protect your P&L. So then that when when that setup occurs again, you can hit it just as hard with conviction and confidence that you don't mind taking a few scratches.
01:18:40
Speaker
And so you preserve your mental state because it depends who you are as a trader some traders like to have a high win rate um where each win is is not really significant other traders can operate at a 25 win rate so imagine that you're losing out of every 10 trades you're losing seven a half trades and you're only winning on two and a half trades out of ten that's out of 100 you've lost 75 trades you've only won 25 psychologically that would fuck up a lot of people yeah because they just keep seeing loss after loss. But if you can embrace the fact that you have phenomenal elite level risk management where those 75 losses, you've only lost, ah you know, let's say net minus 9% of your account, where the 25 winners, you've returned over 100% return on equity. Mm-hmm.
01:19:38
Speaker
That is is is phenomenal performance over a year. and and so really, so but again, it comes down to understanding that the the maths behind your performance, the mathematics as to who you are and what your risk appetite is and what your psychological psychological pedigree is as a trader. Can you can you handle a low win rate system? so Most people probably can't.
01:19:59
Speaker
Other people rely on a ah high win rate but where the wins aren't really exceedingly large. Mm-hmm. probably at a two to one, you know, maybe half an hour if that. Consistently over time, their accounts are slowly churning higher and higher and higher with a few drops and another shift higher. Just controlled, gradual growth is essentially what i'm saying.
01:20:21
Speaker
um So key risk concepts, you know, you're a risk manager first, a trader second, know your numbers like your life depends upon it, because in this game it does matter.
01:20:32
Speaker
um You can't build consistency if you are always recovering from deep drawdowns. Okay, that's going until you you are up against it. Every time you take a hit large loss or a big loss, it's really setting you back 10.
01:20:47
Speaker
and And I test, I think of that like that like the snakes and ladders game board where you roll a dice, you go six steps up, the minute you fucking land on a snake, you're 30 steps back down, you have start again. And that's, you've to avoid those snakes. And those snakes is you.
01:21:01
Speaker
with your poor risk management yeah and and and lack of discipline and lack of structure and lack of patience because again, people talk about, oh, be patient in trading. Well, a lot of people think being patient means waiting for the right setup. No, it doesn't. It's not only that. Being patient means, can you do this for the next 1,000 trades over a 10 year period? Because if you can,
01:21:20
Speaker
there's a very good chance that you you've got a very good career ahead of you. It only takes one bad decision to come off process. And then when you structure risk properly, you can be wrong a lot and still make some serious money, which is what we've touched upon.
01:21:35
Speaker
Win rate, risk reward, understanding expectancy is important. Stop obsessing over being right. 50% win rate, 40% win rate are phenomenal if you have positive expectancy yeah from those.
01:21:49
Speaker
Alright, so strategy creation.
Creating Effective Trading Strategies
01:21:51
Speaker
This is probably going last segment that I cover. um Now that we've built the foundation of self-awareness, understanding the uncertainty of markets, understanding what is edge, what is expectancy, what does the level of structure look like, understanding how the emotional facets can impact our trading, we can now talk about trading strategy creation. And so I'm not going to go into too much detail, but Like I said before, when you're looking to create a strategy, really all you're doing is looking for inefficiencies in the market and you're trying to exploit those inefficiencies.
01:22:29
Speaker
And so you have to understand the environment in which they occur, how they operate and how you can trade around them. So the 15 principles, and this is the template that I use every time I try to create a new trading strategy. this is something that I go through. um um And the first purpose is is to define the core hypothesis. And I'm just going to quickly run through this. But what does this mean? Define the core hypothesis.
01:22:55
Speaker
It starts... clearly by stating why the market should behave a certain way under specific conditions. So you're really understanding how the market is playing out. Is that following a set of moving averages where the moving averages and the degree of the momentum or the bands are increasing, that tells you the momentum is picking up. So should you be range trading that or should you be looking for continuation momentum? So define and understand, you know, um why the market should behave in a certain way under specific conditions. and And that is where it leans into identifying point number two or the second principle, identify the market condition. So many people try to deploy a strategy in the wrong environment. The problem isn't the strategy. The problem is you. You're not recognizing the volatility regime that you're in. um
01:23:46
Speaker
And so you've got to link any strategy to the high level context, key zones, structural levels, volatility regime, sentiment. Maybe it's a time of day. We know that in during New York session, Bitcoin volatility generally picks up.
01:24:01
Speaker
Principle number three, anchor the setup to the context. So this is it. This is what's important. So now that you've defined the volatility to to regime, you can now say all right this is the type of strategy that works best in this environment and there are five types it's either going to be trend it's going a range it's going be a breakout a rotation or mean reversion so now you've figured out all right this is a trend environment or this is a bracketing environment or this is a a range environment i've figured out the the volatility i know that by measuring the atr i now know what type of
01:24:36
Speaker
environment i'm looking at, I don't think we're going to break out into a new trend. I think we're just going to oscillate between Value area high and value area value area low. And I'm looking to trade around the edges of that volume profile or market profile. And then I'm looking to and understand, all right, now that I've understood the context and the strategy that I'm trying to trade, what's the ah entry trigger?
01:24:58
Speaker
So define the exact signal that confirms your entry. Is it a pattern? Is it a level interaction? Is it confirmation on the flow? Is it a structure break you know on on the one minute time frame? Is it a Renko chart?
01:25:10
Speaker
what is it is an awesome oscillator what is that gives you that shift or reflection point to start thinking about the uh about the entry trigger and then principle number five principle number five establish the execution rules understand the timing of the execution what type of order types are you going to use this is where using something like in silico terminal makes sense because what type of execution methodology are you now going to apply?
01:25:42
Speaker
How are you going to scale into that trade? What type of size are you going to look to run? um And is your execution consistent? Or do you have two or three varying execution strategies depending upon the environmental context? And I'll give you a classic example.
01:26:00
Speaker
if you're If you know that price is likely to trade in a range and you get a very fast move into the range high with a swing fail and you realize that that was a cascading liquidations slamming into some passive asks and price pushes very away very quickly.
01:26:18
Speaker
How are you going to execute on that? What is it that you're looking for to execute? Sometimes you have to take an aggressive execution where you might have to hit up market. Other times you might all right, I'm going to hit half up market and I'm going to switch on a limit chase only up to this point.
01:26:31
Speaker
But then you need to backtest that, replay that, run that through over 20, 30 samples so you know what that feels like, what that looks like, how that plays out. And then obviously you've got to manage your...
01:26:43
Speaker
risk around that. Where's your stock placement? In which instances have you been wrong on your back test and your forward test? So again, it's all about pattern recognition in every single aspect of trading that you've seen this enough times to execute with conviction, but execute it with conviction and that you know exactly where you're likely to be wrong. um Point number seven, backtest with discipline. Exactly what I said. Run the strategy through historical data. If you do this on a backtest and you record your performance, you can run that through Monte Carlo simulation tests to see how it performs over a thousand simulated traits.
01:27:17
Speaker
But don't curve fit it. Don't override the signals. um And then principle number eight, measure performance metrics. So track the expectancy of that trade. You know, if you've taken that trade and you say, all right, I'm going to target 3R, but it you've noticed that 80% of the time is on the back test. It doesn't even get to your target.
01:27:37
Speaker
Well, turn it down to too all You've increased the expectancy of that trade now, as opposed to, I'm going to hit a 3R trade. i' I'm waiting for a 3R trade. Price goes to 2R and it comes all the way back to your entry. Yeah, yeah, yeah.
01:27:51
Speaker
The reason it did that is because you didn't understand what you're trying to achieve out this setup. You've put all this emphasis on the execution part, but you've given very little thought to the profit-taking aspect.
01:28:04
Speaker
Maybe you took a trade at the range high and it lined up with some VWAP bands and you're looking, you know, the second standard deviation and you're looking to trade it back into the the VWAP ah price level.
01:28:18
Speaker
what What if it doesn't get there? you know what if gets to the first under deviation only? But then you realize, hang on a minute, every time I've gone through my sample size of back test of 50 trades, there's a high degree of probability and expectancy that price always mean reverts from the second to the first before it gets to the view up level.
01:28:37
Speaker
This is a really good trade. Maybe I can take 50% off of this level, or maybe I can just, maybe this is maybe this is an edge I can develop. Maybe this is all I need to trade. A mean reversion from third standard deviation to the first standard deviation, if I can do that over a thousand trades, I've got a good trading trading career ahead of me with a good level of expectancy, given that I've understood the environmental context that we are in a bracketed environment, not in a rare air trend environment. So again, this is where environment context comes into place and meuring measuring your performance.
01:29:08
Speaker
And then, like I said, forward testing real time, that's common sense. Now that you've backtested it, you try it out in a simulated environment, a demo environment. Maybe you get a $100 account and just trade $1, trade position sizes over 30 trades over a two, three month period until you get calm confidence, right? Just like you would in in a boxing ring, you go to a boxing academy, you're not going to step into a professional fight. You're going to have many, many sparring rounds with other amateur boxers before you actually go into a live environment. It's the same with trading.
01:29:34
Speaker
um establish principle number 10 so that was principle number nine forward test in real time principle number 10 establish minimum sample size again we we talked about you know collect at least 20 30 occurrences not of just a trade strategy but of the execution as well around these edge zones where you're looking to operate um to validate robustness in this trading strategy and trade execution um um Point number 11 is then evaluate the strategy you fit.
01:30:10
Speaker
Assess whether the strategy matches your personality, your strengths, your schedule, your decision-making. Maybe you're a day trader. Maybe you're a scalper. Maybe you rock up to the desk and all you want trade is a New York session on Bitcoin or equities.
01:30:23
Speaker
Then focus on that timeframe. Focus on the window. There's no point in saying, oh, look, I've tested all these. ah Oh, look, I found some brilliant edge. But that edge only ever happens. in the Asia session, ah but you're turning up to desk in the New York session, you're waiting, waiting, waiting, and it doesn't happen.
01:30:40
Speaker
Well, does does that actual strategy fit you, your lifestyle, your personality? ah what's the time What's the average time where this, or what is the time of the day that this execution sets up?
01:30:53
Speaker
Do you track that? Have you defined that? So again, all these are metrics that that I think are important to recognize when it comes to the strategy creation. Um,
01:31:04
Speaker
And then point number 12, break the strategy into high, medium, and low quality versions. So you know when to size up or size down. So remember we talked about the A game, the B game, the C game? Yeah. Well, if this is a strategy, but it's falling into your C game, what do you need to do then to get it into your B game to eventually progress it into your A game? It's going to take more training, more repetition, more backtesting, then running it forward testing because you've made those subtle changes. Now you're looking to reenact those in a live environment. um Principle number 13, understand the reward structure. Determine whether the strategy relies on big winners.
01:31:38
Speaker
Or is it frequent small wins? Or is it asymmetric reward to risk profiles? 14, stress test the strategy. So we talked about how does this perform and in a volatile environment? So we saw 10-10, right? If you're looking to play, oh, look, price has come down to, you know, the third standard deviation of VWAP bands. I'm going to log this and price shifts through that level.
01:31:59
Speaker
Well, that's trading because you fail to recognize the volatility shift. And so therefore, your strategy does not work in an environment where the volatility regime volatility regime has changed really what you should be thinking is hang on a minute ah i shouldn't be looking for a vwap mean reversion strategy this is a trend strategy i'm looking for continuation so again that that's where you then can start thinking about right so this actually fails in this environment i need to start thinking about a trend continuation strategy now and so it it evolves then the last part
01:32:35
Speaker
build principle number 15 build and maintain a playbook that is basically a living document database of a given strategy, you've gone in the charts, you've've you've you've collated a sample size of 50 examples of of this execution or of this strategy playing out over and over and over again. But not only that, as you forward test it, as you trade it in a live environment, you can only store so much in a journal, but there's no reason why you can't tag your trades in something like Evernote or OneNote and then use that tag in the Evernote
01:33:16
Speaker
and and also log that in your trade journal so that you can then reference that. All right, here's a trade I took, trade ID number one, two, three, four, five. ah And in my Evernote, it's trade ID one, two, three, four, five under this strategy name.
01:33:29
Speaker
You can now look at all the screenshots or screen recordings that you took to review your performance, just like a boxer, just like an MMA fighter. You've just had a five five round fight, a 12 round fight.
01:33:41
Speaker
Is that it? are you just going to go into the next fight or are you actually going to review? your fight are gonna replay back your fight to see how you perform what you did well what you could do better that's how you improve not by taking more technical courses and joining more paid groups and going to every trading seminar it's actually doing the work that most of us to begin with never thought of doing or wanted to do and so for me That is the the summary of everything. you know Throughout this process of trading over the last nine years, this is where I've got to, this is who I am as a trader, this is how I approach trading, this is what I wish I knew when I started trading. ah And moving forward, this is the foundation of what I believe for myself
01:34:25
Speaker
You know, I'm not saying that this is gonna be the foundation for other people. But again, I'm just sharing my own experiences as to this is what has been key for me to get to where I am today, to go to that next level, to get to the highest level possible that I can achieve but before I walk away from this game. So but that's what it comes down to for me.
01:34:45
Speaker
Yeah, that makes sense. Thank you very much for all good all of that. that was very like It was very different from what I usually here, but i'm very ah yeah I think it is very... like You really gave the whole playbook from a really professional lens, which is often quite underappreciated on CT, I feel like. Because so yeah yeah crypto also skews our perception of of trading, what trading is a little bit um like with meme coins, mostly it's just gambling and stuff like that. But I think you really did a good job in putting together what it takes to be a professional and long term successful at trading.
01:35:26
Speaker
And that is more than just some looking at charts, indicators or whatever, but like really understanding not only the market, but yourself.
01:35:36
Speaker
I
Crypto Trading and Market Perceptions
01:35:37
Speaker
agree. and i I think you're right in the sense where crypto kind of warps your perception of trading. I think if I started trading equities, FX, I think my approach to trading would have been different. Yeah. um Because we come into the space of trading meme coins and altcoins and we see other people making shit ton of money and it's it's circulating on social media on instagram right it's a oh i i want a bit of that too you know soands so and so made hundred thousand dollars he only put in yeah he's made a hundred thousand dollars i'm gonna buy five thousand worth of fuba inner right or brett or whatever the shit um and so we're just trying to replicate
01:36:17
Speaker
the success of others without really appreciating, that's not actually trading, that's just pure speculat speculative gambling at best, where the chances are you're probably going to lose a lot of money you doing that. um And so, you know, like i said, I was one of those people. I used to marry the fundamentals. I used to think every project that I bought in 2017, like Neo, Lisk, Stratus, um is going to be game changing. Yeah. We've all been there. So unfortunately unfortunately, that isn't the case. And then you come to realize that, look, you know, i'm sure a lot of people did very well on Mean Coins, but that's not my strength. I know that my strength is...
01:36:58
Speaker
Everything I've worked hard towards over the last nine years now is coming to fruition of it come to fruition over the last two, three, four years. yeah And I'm more excited now about my performance as a trader. I'm more excited about where I'm going to be in three, four, five years' time, knowing what I know now and continuously working on my game. And there's nothing that gives me more...
01:37:20
Speaker
joy than journaling my trades and actually looking at my performance. It's like, like said, you've just been into a fight, into UFC fight, or you've you've been playing golf masters as a professional sports player, or you've just, you know, you've, whatever it is you play football, you're a professional footballer. The chances are you're going to review and watch your own performance to see how you performed on that given match day, yeah on that fight day.
01:37:44
Speaker
I see trading the same way. I really enjoy looking back at like how I performed during this week. And knowing that this one week is not going to define me or change me. But if I've had a good week of trading, this is what I need to do for the next 1000 weeks to get to the end goal of being a trader with positive expectancy with good risk management.
01:38:06
Speaker
I do not want to make a lot of money with huge drawdowns in between like 30, 40, 50%. That to me is not really operating it as ah as a really professional trader. For me, I want to do it in a systematic way where I've got very, very clearly defined risk that if I can do this with a thousand dollar account, if I can perform over a hundred trades on ah on a thousand dollar account, I can probably do it with a $10,000 account a hundred thousand dollar account or a million dollar account because I know
01:38:37
Speaker
that I'm looking at percentages, I'm not looking at P&L, I'm following a process that has worked for me time and time and time and time again, that I know I can scale this now, as opposed to getting to say, high net worth, but with a lot of variance that every time I take a trade,
01:38:53
Speaker
I'm very much on edge. I'm very nervous because I'm scared of taking a big loss, but I could take a big loss knowing how i I don't really have ah a systematic way of trading. So i think that that's the realization. Once you realize that, once you start really thinking about the probabilistic nature of trading, thinking in mathematics or the math of trading, and understanding edge and expectancy and and all the various components that I've discussed today, it really sets you off in in the right mindset moving forward. That whatever you did before without a process doesn't mean shit.
01:39:24
Speaker
You might be able to read a chart, doesn't mean you can trade. You might be an order flow guru and footprint doesn't mean you can trade. You might be very good at psychology, but your shared technical analysis doesn't mean you can trade. You know, you might be a very good risk manager because you only lose small amounts, but you haven't got anything demonstrable that you've got positive edge. You're just a very good loser, but you're not good at winning. So every single facet comes together to hopefully e evolve into continuously learning and and evolving as a trader.
01:39:55
Speaker
I definitely really appreciate all of that as as someone that loves the the art of trading. And I feel like a lot of our listeners will also really appreciate and enjoy this episode.
01:40:06
Speaker
um To wrap it up, do you have any any final words that you want to share with the listeners, the watchers? I think I'm looking forward to the Insilica terminal um using that more often. And I think that's that's a really good way of of approaching trading because if you can play around with the various execution strategies. And if you can start journaling your trades, it will start forcing you to think about trading in a different perspective as opposed to opening up your mobile phone and just punting on the trades.
01:40:40
Speaker
You won't remember what you did two months time. But I think with a level of systematic ah purpose, having a process and using the right tools for for trading, you know, with a terminal, with a journal,
01:40:55
Speaker
um with a with a framework then then hopefully it it'll help you step towards the direction that you wish to progress in yeah thank you very much for for coming on today thank you for thank you explaining everything and bye