Episode 108 ... John Netto (55:25)

Placed first sports bet at age 8
He lost the first bets he placed but didn't discourage him
Doesn't bet on sports anymore
Father conservative, imparted importance of saving and investing
Remembers the 1987 crash, he was 13 then, age 42 now
Oliver Stone's movie Wall Street made strong impression on him
Stone didn't realize he was turning kids onto the market instead of off
He wasn't a bookie, he was a liquidity provider (in high school) [has a sense of humor]
"The Netto Number" -- redefining alpha [they didn't explore this idea]
Claims creating "Progressive Points Spread," not a binary outcome on sports betting
Poor grades in school but worked hard on his bookie business
Grew up in East Bay Area, Interstate 80
Recorded Stardust casino opening odds delivered via radio
Dec 1992 graduated high school and joined the Marines, 18 yo
Classic underachiever, poor grades, low self esteem in high school, so Marines transformed him
First assignment in Japan, in two years
Learned Japanese language, passionate about it, 1994 (no Google translate)
Assigned to Tokyo (embassy detail?), continued to study Japanese, two more years
Came back to US in 1998
Opened eTrade account
Studied Chinese at Univ. of Washington
Wouldn't say he's "fluent" in Japanese (smart to say that), it was just "effortless"
2200 hours to become "professionally competent" in Level 4 language (like Arabic, Chinese, Japanese)
Had horrific sense of timing in the markets at first
He had no process then, just impulsive
Thought he should just do the opposite of what he naturally did
Truth is that throwing darts at the wall with good money management, you'll do ok
But held his losers, cut his profits short
Left Marines in 2002, joined prop trading group
Joe DiNapoli's book really helped him
Still uses DiNapoli's Fibonacci ideas
Managing risk not a problem for someone with Marine-like discipline once he had a process
Trades futures markets and options
Uses eight monitors
"Protean" trader ... highly adaptable
Developed multiple strategies: mean reversion, relative value, momentum, trend following, breakout systems -- uses all of these
Key is knowing which strategies to apply to current market environment
"Global Macro Edge" -- name of his book
He's a fast talker
Three keys to be successful trader: operations, analytics, execution
(He has a lot of set-phrases memorized, clear military training)
Hired programmers to automate things, on a contract basis
His wife helps him organize things [she must be an angel]
Hires people based on word of mouth
Wants people certified on certain APIs
"Prow-ess"
When to lever things up and lever things down -- that's what it's all about
"Market Regimes" -- technical, fundamental, sentiment
Spends a lot of money on bespoke research (~$80K a year)
Makes $500-600K a year trading [on how much capital? Netto says $1MM in capital]
Spends $26,000 a year on his Bloomberg Terminal
Uses CQG as well
Great asymmetrical trades (paying 5 to 1) come with a great deal of discomfort
Wrote a 580 page book, self-published? (yes, self-published)
Low volatility for years now ... have to adapt to that
Make your lack of capital your biggest strength, small positions can be an advantage
Trades from home in Las Vegas
Has patents on his process, but won't talk about it
Global Macro guys can be brilliant but don't know how to manage risk
Importance of getting out of your comfort zone
Want to be a little bit afraid in a trade
Be aware of your emotions, feelings, instincts
Does daily "Qualitative Self-Assessment" -- preparation, focus, routine
Journal everything constantly
Be in tune with yourself
You need to be uncomfortable to hold your winners
You need to feel the nnnngggggg, but power through it [I know what he means]
Overconfidence > complacency > mistakes > losses
Respect the market
Embrace your losses
If you're not losing money, you're not taking the risk necessary to succeed
Separate discomfort from fear, confidence from complacency
Boy he talks fast, sort of an interesting rapid-fire military cadence throughout
Twitter: @JohnNetto