Notes for Chat with Traders, Episode 67

Episode 67 ... "Jerry Parker" (60:57)

• Parker is one of Richard Dennis's original Turtle Traders

• 1983 ... Dennis ran ad in Wall Street Journal and New York Times

• Parker was a public accountant working in Virginia when he saw the ad in the WSJ

• "Rich" was a very smart and nice person

• Parker has mild Southern accent

• Jan. 1984 Parker started trading in Chicago using Rich's money after 2-3 week course

• 12 people hired

• "Rich" visited turtle farm in Asia, that's where the turtle nickname comes from, raising traders not turtles

• 1988 program ended, Parker went out on his own

• Turtle name has a lot of cachet, everyone knows about it

• Fall of 1984, second group of really smart nice people, second turtle group even sharper than first

• Don't get drunk on good performance

• Parker definitely wanted to exit the accounting business

• How to size the trades is something he may not have gotten right if not a turtle

• Trading is hard, trading is uncomfortable, do the hard thing, trade small, don't risk too much

• Build systems that can last for a long time

• Trading shouldn't be easy

• Low win rates, frequently give back all your profits

• Idea of finding a trading method that fits your personality is silly

• Finding a trading method that works at all is incredibly hard, forget about your personality

• Buy the highs, sell the lows

• Add to winners, never add to losers

• Lose 30% you'd be in trouble, if you lose 50% you'd be in big trouble

• Are you following the rules but losing money? It's fine said the mentors

• 1986 Feb or March and crude was going from 40 to 10 and they were up 200%, looking at a million dollar bonus

• Experienced a 60% down day, so ended up 140% on the period ... didn't do anything wrong, was just leveraged

• Wrong means you don't follow the system

• Only one or two people had a computer and the ability to program it

• Used moving averages as targets?

• Trading a few million with Rich was fine, but not hundreds of millions

• Turtle trading was mathematical, systematic, diversified, rule-based ... no discretion whatsoever

• Feb. 1988 went out on his own ... involved in grain markets that year

• Four year track record gave instant credibility

• People are greedy so they threw money at him

• 25 markets when he started, now trades 120 futures markets

• Trades 100 single stock futures

• We're in a zero interest rate world [interview in 2016], so 12% returns amazing

• Average holding time of a year

• His win rate in the low 40s

• Tries to take optimal losses, not too tight, not too loose ... 20% is too tight

• Average win 2-3x the average loss

• 5-10% of your trades will make all the money, it's very hard to stick to it without monkeying

• What's the sample size in your backtest?

• Entry parameter, exit parameter, stop loss parameter, that's it... don't add more

• Don't get fancy and eliminate trades, get the largest sample size possible

• Don't try to develop systems by market, make something that works in ALL markets

• You have to go both short and long, adds diversification and increases sample size

• Risk profile rises dramatically if you just trade one market or trade one side only (long or short)

• Don't fall in love with numbers or think the future will look like the past

• Zero interest rates force one to think outside the box

• Managing other people's money is a great business

• More rules, more regulations, more compliance

• Fire your bad clients

• Don't promise returns

• Most important question to ask a CTA: can you maintain your faith in your system when you're losing money?

• You can't succumb to fear and abandon your system when you're losing

• It's a huge edge if you can trade like a robot

• If you trade too large, then you can't stick with it

• Be mechanical, be robotic

• What he learned in 1983 still works today

• Website: Chesapeake Capital

• Twitter: @rjparker09 … looks defunct, new one: @rjpjr12

Notes for Chat with Traders, Episode 212

Episode 212 … Kristjan Kullamägi (76:09)

• Swede in his early thirties

• Started investing 2010

• Started trading 2011

• Full time from the beginning

• Focused 100% on trading, dropped out of college, didn't finish degree

• Worked as a security guard part time while studying ("mall cop")

• Started with $5,000

• Doubled his paper trading account in two weeks in May 2011 and was sure he'd get rich by that fall

• Lost it all

• Saved money for six months, tried again and again

• Blew up three or four times in first couple of years

• Blew up with $3,000 or $4,000 accounts several times

• Horrible experience to lose three years of savings when he was 21 years old

• But every time he blew up, he'd learn something new

• Started day trading but had no method, just went all-in on every trade

• Never bothered with Swedish market, no action, traded US market from the get-go

• Became profitable in 2013, two years after started trading

• Big moves take weeks and months and years to play out

• It's hard to catch a 50% to 100% move while day trading

• Learned about swing trading, gravitated to it

• In day trading, you're fighting near your entry all the time

• In swing trading, the stock can quickly move above your stop and stay above it for a very long time

• Realized swing trading more scale-able than day trading

• Liquidity and slippage a major problem when day trading microcaps and small caps, it's not scale-able

• Took a couple years to go from 95% day trading to 95% swing trading, wasn't overnight

• Control your risk through position sizing in swing trading

• Day trading more hazardous than swing trading, he believes

• Made his first million day trading, but everything after that has been swing trading

• In his first few years while losing money he was constantly depressed, "scarred for life"

• Felt unreal when he first started making money

• Realized if he could find patterns for swing trading like he had for day trading, he could scale up

• Day trading is a lot of effort, he was getting tired of sitting in front of computer from open to close

• He says he's a lazy person, doesn't want to work too hard

• Got swing setup ideas from stockbee and read William O'Neill's How To Make Money in Stocks in 2015

• Went through every single stock in US market and found all stocks that conformed to the pattern

• Just a breakout setup and variations of the setup he'd stumbled upon

• Built database by taking screenshots and saving them in Evernote of what the setup looks like

• It's all about pattern recognition, but he also looks at fundamentals

• Look for a breakout on the daily time frame

• Stocks move like stairsteps

• Leg higher, sideways, volatility contracts, range gets tighter, next leg higher, volatility contracts, range gets tighter, next leg higher, etc.

• Uses 10 and 20 day moving averages to trail a stop

• stockbee taught him that stocks move in momentum bursts

• The stronger the stocks, the better ... mid caps, large caps

• By strong he doesn't mean microcap pumps that move 100% in a day

• Look at the perfect stair step patterns in Tesla or Nio

• You want to be in the fast moving stocks

• Wants to hold stocks for as long as possible

• Sells 20-25% of position into first burst of the move, then it becomes "stress-free," no large loss possible

• When his account was smaller he did trade small caps and mid caps but now he's forced to trade large caps

• $150 million average daily dollar volume is now the cutoff for scans, two years ago his cutoff was $20 million

• Scans for biggest movers (strongest 2%) over the 1-, 3-, 6-, 12-, and 18-month time frames

• Wants a list of the strongest, most liquid stocks

• Looking for linearity, how orderly is the pullback following the burst higher

• After a burst, stocks pull back to 10 and 20 day moving averages, how do they act there?

• If you trade random setups, your results are going to be random

• Look for the relative strength winners, the stocks that hold up the best when the broad market declines

• Leading stocks are the stocks that go up the most and are the most liquid

• Leading stock don't go down when the broad market goes down

• You need an uptrending broad market for this method to work

• Fundamentals drive stocks at the end of the day -- big earnings and revenue growth

• If you know the story behind the stock, and understand the fundamentals, it gives you more conviction

• He enters everything at once, very aggressive, responsible for many "big wicks"

• He scales out, sells some into strength and trails the rest using the 10 or 20 day moving average

• He buys above the opening range high, first one minute, first five minute, or first sixty minute candle

• Always uses the low of the respective one minute, five minute, or sixty minute candle low for his initial stop [edit: or the low of day, whichever is lower]

• His win rate last year was 35% (2020), year before was 25% (2019)

• You have to get used to getting stopped out a lot using this method

• He often buys, gets stopped out, then buys once again minutes later

• He stops out without hesitation

• Once the ten day moving average catches up to his initial stop, then he begins trailing using the ten day

• He ignores intraday violations of the moving average, he only gets out on a close below the moving average

• In addition to his trailing stop, he has a hard "crash" stop in place [my term for it]

• He doesn't add to winning positions

• Treats adds to an existing trade as a new trade

• Strong stocks should hold up well during broad market declines

• Understanding trend and sentiment of the broad market are important

• Every time he gets 30 positions on, it marks a top (a proprietary indicator, he laughs)

• Swing trading is a low effort affair once you learn what to look for

• Doesn't know his average win versus average loss, doesn't sweat the small stuff

• It's all about small losses and big winners

• Most of his money comes from a few big winners ... maybe 20% of his trades are home runs, the rest break even

• He's addicted to trading, controlling himself is difficult, tends to over trade

• Many times he'll think something can't go higher and he just sells it, violating his trailing stop rule

• Every time he overrides or outsmarts his rules about trailing a stop, he screws himself, but he keeps doing it

• He has no problem taking a loss, this is not something he struggles with

• His position sizes and percentage risk never change, it's all relative to his account size

• He uses margin "quite a bit" ... but you have to "deserve the risk"

• He was reckless in the beginning, went "all-in" all the time, doesn't do that now

• People focus on the wrong things, lots of indicators instead of the price, just focus on price

• People mistakenly focus on other people's opinions

• Tune it all out, tune everyone out, just focus on the market and what the leading stocks are doing

• Go back and look at thousands of examples of the setups you trade, study what the broad market was doing then

• People master their setup but they haven't been able to scale their trading, still trading the same size for ten years

• Your size and risk should double as your account doubles

• Talking about points or dollar profits is meaningless, think in percentage risk and return instead

• He read all the Dan Zanger letters going back as far as he could back, studied obsessively in 2015

• His life hasn't changed much since he has made tens of millions of dollars

• Now he plays video games on his days off, doesn't study much anymore

• Politely and humbly thanks the host, Aaron, for the invitation to the show

• Twitter: @Qullamaggie

• Blog: Charts and Stories

• Twitch: Qullamaggie

• YouTube: Qullamaggie

Notes for Chat with Traders, Episode 204

Episode 204 ... Brian Lee (70:05)

• Lives in California

• Pro gamer for 10 years, "FLUFFNSTUFF" (Dota 2)

• Dropped out of college to become pro gamer

• Traveled a lot as a pro gamer

• Similar to being a rock star [but did he get laid?]

• Trading another competitive "sport"

• Pro gamers making multimillions now, but wasn't the case in his day (made thousands then)

• Fulfilled his dream of competing at The International (2013)

• Paper trading will warp you, no liquidity concerns, no emotions

• A lot of trader education is scammy

• Shorts microcap hard-to-borrows exclusively now, using a "mean reversion" strategy

• There's an edge to taking the other side of newbie long trades

• Size up your risk in a systematic way

• Started with around $30,000 (his gaming winnings)

• Refunded a couple times to stay over PDT (Pattern Day Trader minimum $25,000)

• Changed colors of bars in ThinkOrSwim to try to control his fomo, didn't work

• Built systematic entry method to defeat his fomo which has worked, no details given of course

• Took him a year to become consistent, learning the rules of the game

• Lost 50% of his gains when pot sector was in runaway mode

• Would revenge trade tickers and would average losers

• End of year two he lost all his profits, blew up his account which had grown to around $100,000

• Broker bought him in at the top when he lost it all, froze when he got margin calls

• Pro gamers used to taking a loss and being able to re-focus

• Fiancee told him after he blew up to get a job

• Without a college degree, he could only drive for Uber or work at Starbucks

• Father died later that year, left some life insurance money

• Mom let him re-fund account to bare minimum

• Started to take things super seriously as a result

• Implemented max loss rule, that's the thing that truly saved him

• Equity curve is now parabolic

• Wires out money regularly, treats it like a real job, hasn't sized up since reaching dream size

• Doesn't want to be a superstar

• Focused on small caps, screenshot 1 min and 5 min charts of all runners to find patterns

• Noted patterns and figured out where to enter, stop and target to come up with at least 3 to 1 reward to risk

• Connected with traders on Twitter who traded similar niche, met together on Discord after hours, collaborated

• Always pick someone slighlty better than you and someone slightly worse than you to maximize learning

• Loves trading trash stocks with heavy dilution, companies that need capital badly

• Companies release bogus public relation announcements, create supply demand imbalance

• Scales into front side of moves, then adds once supply comes in

• Plays reversion to a mean, exits there (examples of "means": VWAP, moving averages, some daily level, etc.)

• "Haymaker" ... running price up thousands of percent, make sure shorts get bought in

• Most people who try what he does get blown out because they revenge trade, have no max loss

• Best supply comes not just from dilution but also from bagholders (people stuck long the stock from higher prices)

• Find companies that are toxic by nature ... same underwriters involved in all dilutions

• Can identify style of play by underwriter involved, different tricks employed

• Find broken charts that are full of spikes where all the gains are instantly given back

• Uses calculator in Excel, inputs stop and target and generates optimal entry based on risk reward

• Doesn't want to set stops too tight or too loose [Goldilocks principle]

• Uses a couple different indicators to trigger him into the trade

• Very patient, he maximizes moves ... average winner is six times his average loss

• 26% win rate on per trade basis because he cuts a lot of starters

• He's confident to put on a trade every time because he understand his average win to average loss ratio

• Every trade is a drop in the bucket, doesn't think about trades individually

• Won't reveal his custom indicators, but does say he takes what the average trader looks at and uses that against them

• Does not look at level 2 when putting on a trade, he just enters and sets stop and target

• Normalize your trade outcome by betting a consistent amount

• Find a goal number where you are slightly uncomfortable and use that as your R

• Scale risk down when you're losing, scale risk up when you're winning

• You have to feel like you deserve your gains

• Once you're really comfortable with the amount you are risking, then you can move up a level to slightly uncomfortable

• Will double risk on trades that he's super confident on, the A+ setup, but....

• Most of his trades are the same bet size

• Trades you don't take full size on, if you win, you won't feel good about it; when you lose, you're tempted to add

• Beginner traders vary bet sizes wildly day to day so their results make no sense

• His starter position is very small, secondary signal says take full size, tertiary signal says add to winner

• Doesn't get emotional when small starter goes against him, he's instantly able to cut it

• Feels he has enough experience now to be a bit more discretionary about exits (targets and stops)

• If it's pushing higher midday, it's likely that he's wrong ... time of day is key

• With his starter, it could be a 0.5R loss, so he can make many many attempts with 6R average win

• Built his own way of understanding average true range for small caps

• Figure out how much range there is, how much "meat on bone" to target, can then set stop appropriately

• Waits patiently for price to get to target, or "close enough," never takes partial profits

• Doesn't want "decision fatigue" of exiting and re-entering over and over

• Doesn't carry positions overnight ... fees too high, 7x overnight locate fees, interest, plus gap risk too great

• Hit his dream risk amount in January 2020

• Increased his R by one every month this year

• If your risk is too tight, you're constantly going to stop out

• Don't force the range, take advantage of it ... you can't do that with a short time horizon

• He doesn't have tight initial risk, he has wide initial risk, then tightens stop as price goes in his favor

• Three things you must have:

1) max loss, a failsafe that will keep you from fighting something into oblivion

2) systematize your entry and exit so you can measure how you are doing

3) normalize your risk, very small R in the beginning, give yourself time to make all the mistakes you need to make

• Once you are consistent, you can start to scale up; money made later will be many times your early losses [assuming you find an edge]

Blog | YouTube

Twitter: @BrianLeeTrades

Notes for Chat with Traders, Episode 198

Episode 198 ... Christina Qi

• "That's a really great question."

• Went to MIT

• Dormmate staked $100K by rich kid roommate at Harvard, made $40K with it

• Didn't like environment/culture (hazing) at place she interned (Goldman), wanted to start her own place

• "No thought leader in the space."

• "That's a great question."

• Had no money, no credibility, no connections [except for MIT/Harvard]

• Raised venture capital, built all technologies from scratch, create operational side

• People invest in people at the angel/seed stage

• Raising money for the fund another matter, you need numbers, backtests at least

• No one has ever seen a bad backtest

• "What's interesting, Aaron, is that...."

• "That's a good question."

• HFTs changed language post-Flash Boys to "low latency trading" or "electronic market making"

• Their highest trading volume this year (2020) was 7.1 billion shares in a day

• They don't buy order flow

• Took two and a half years to build the system

• Felt like a fraud up till launch, no track record

• Everyone at domeyard was called a partner, free food, unlimited vacation ... all bad ideas, naive mistakes

• Giving people too much choice is a bad thing

• On average, recently, they do 2,500 trades per day ... could be 25,000 depending on environment

• Holding periods are microseconds to hours (latter called mid-term strategies)

• Flat at end of day, always

• "Good question!"

• One losing day can wipe out 29 days of profits

• They mainly trade futures and forex, not equities

• Aim for 1-3% of average daily volume of the products they trade

• They try to predict market a few seconds out

• Mainly use order book market data

• Half life of a strategy could be one to three months

• "That's a really interesting question."

• Trading strategies are constantly being monitored by humans, tweaking the code

• They don't play the hardware game ... next year there will be a new FPGA after all

• "That's a great question."

• Not many HFT firms that were around a decade ago are still around

• Can't talk about returns, considered marketing

• Also works on a project called databento

• domeyard dot com is a suspended webpage?

• Twitter: @christinaqi

Notes for Chat with Traders, Episode 184

Episode 184 ... Mike Mangieri (72:20)

• Met Mike Katz in 2000

• Applied for back office job at firm where Mike Katz was trader/broker

• Partners of firm had falling out, a new firm needed to be formed with Gary Roth providing capital

• Did all the grunt work with FINRA to get new broker dealer approved

• 2008-2009 world comes crashing to a halt

• Firm acting as a broker mainly at this point ... more and more redemptions

• Moved from being a brokerage firm to a proprietary trading firm

• 12 years later they're still standing

• Market went from two exchanges to totally fragmented

• Needed to understand all the new routes

• Doesn't talk specifically about how much capital they had or have

• Original partners: Gary Roth (deceased), Mike Mangieri, Mike Katz

• Looked for recent college graduates as new traders

• 2012-2014 got up to 20 to 40 traders, that was the sweet spot

• 30-40 traders in total at Seven Points now, including branch offices

• Seven Points not run like a factory, they build relationships with their traders

• Mike Katz trades and Mike Mangieri handles regulatory things, paying bills, etc.

• Calls around to the traders to see if their heads are right

• Easily watches risk / buying power / positions for all 30+ traders on a single monitor

• Halt risk is a constant worry at the firm

• Twitter has screwed up a lot of traders

• "Tell people I'm a dentist" (not a trader)

• Mangieri makes fun of Twitterers talking about the "process," that it's OK to blow up

• Youngsters follow rooms, "I short low floats, I use the pre-market high, I use that as my risk, then I short against there" .. always the same script

• Twitterers don't take ownership of their losses

• Twitterers standing in front of their Ferraris, laptop out at the Sistine Chapel

• "I killed it in the morning, so I flew to Italy for the weekend ... Asshole"

• Daily lockout numbers of $300 to $3,000

• Your Twitter friends are not going to write out your rent check

• Trading is the side hustle of guys who run chat rooms that have hundreds or even thousands of subscribers

• Everybody can hit a 90 mph fast ball in the batting cage, it's a different matter when it's coming from the mound

• Losses make you doubt everything

• There's a domino effect when you're losing money

• People get in a panic state ... I have to make it back as soon as possible

• You forget good news in 30 seconds

• You have to have a life outside of trading, otherwise you'll burn out

• Don't be on social media all night after being on there all day

• You can't live and breathe trading, you will burn out

• Figure out the max loss that you can take without sending yourself on tilt before things get dark

• You need someone in your life who holds you accountable for your losses

• Your mentor should not be trying to sell you a DVD

• Lockouts at Seven Points are very low

• Struggling traders are sized down quickly

• Trader A is comfortable trading 5000 shares... give him 7000 shares and he goes haywire

• You can only get a little bit bigger every day ... you can't double it overnight

• When you push the size on people, it'll screw them up

• Position size does not equal penis size

• No one wants to see a paper trader anymore ... don't try to apply at any firm if you haven't risked real money

• "I short low floats" ... why? They all regurgitate the same thing

• Don't be a one-trick pony

• You have to find people who fit in at the firm .. one bad apple ruins the bunch

• "I don't want to sit next to this guy."

• Guy who slams his keyboard constantly, he's probably going to have to go

• They put the new traders on demo at first, massive amount of journaling in TraderVue

• How do I find liquidity in this stock? What route do I take?

• Not a lot of hand-holding today

• Have to tell people even though they're hard working, they have to go

• Trading, whether at home or in an office, is a very high turnover business

• Most common problem is that people are too afraid to trade

• People take tiny gains because they're afraid

• People won't stop themselves when they're on tilt, you have to stop them

• Trader who has a new rule every day to prevent himself from doing something -- has has to go

• Used to be a million prop firms that used RealTick ... not the case anymore

• Twitter: @MMangieri34

Honor Thy Stop

Another great Chat With Traders episode, this time with Nishant Porbanderwalla, a prop trader with Kershner in Texas … lots of great bits, especially his insights on patience and confidence, you should listen to it all closely, but this was my favorite bit:

“I spoke with a senior trader and he said if you have a stop, you respect your stop and get out. If you still like it, take some time, and get in again. I learned that the hard way.”

The original text from Buzzy:

View fullsize

Click to enlarge

Notes for Chat with Traders, Episode 171

Episode 171 -- Stan Gluzman (77:46)

• Doesn't trade the close anymore

• The close used to be his go-to time, but not anymore

• Doesn't hold overnight

• Biggest position on by 9:45 AM, trades around core until 11 AM, usually flat by noon

• Things are mispriced in the morning, but fairly priced by noon

• Forgets tickers shortly after he's done trading them

• Aaron mentions Stan's CLRO trade from morning of recording

• Looks at VWAP

• Tries to short near top, covers half on washout, re-shorts the next pop, covers wash, etc.

• All chat rooms watch the same stock, pump it multiple times throughout the day

• Trading full-time 4.5 years, another 1.5 years part-time before then while in college

• Started in 2013 when in college, made 30% on a $5 stock in two days, "bitten by the bug"

• Started studying trading on his own while still in college, joined chat rooms, bought DVDs

• Locked himself in his room and "started blowing up accounts" in 2014

• Realized he needed to be surrounded by professionals, joined prop firm in 2015

• Was a breakeven trader when he joined the prop firm, before accounting for commissions

• Undercapitalized, so commissions made him a net loser despite breaking even on trades

• At prop firm he first learned how to scalp for half a penny trading millions of shares

• Read on a forum that a good prop firm doesn't take your money, no capital contribution

• Seven Points Capital office right next to his college

• Seven Points doesn't require capital contribution, charges no commissions

• Seven Points wanted people who were teachable and passionate about trading

• Advantage of being prop trader versus retail trader: "like working out in a high-end gym with a personal trainer versus working out in your backyard with buckets of water"

• In prop you're trading other people's money, not your own, so no psychological pressure

• Routes are important, has access to ten dark pools, six aggregators, plus all the exchanges

• Have to figure out how to jump the queue by figuring out which dark pool is actually buying or selling

• Has 150 (?!?) hot keys set up

• Most used hot key, "F2" short the bid [I laughed]

• Uses scroll wheel to select position size

• Mike Katz was his first real mentor

• Mike Katz always keeps his eyes open, in the right places at the right times, on his toes

• Red two days in a row? Try to figure out the error

• When losing money, he sizes down, divides his daily lockout dollar loss by four

• Got his first paycheck five months in at Seven Points Capital, been sizing up ever since

• 2015 his first full profitable year

• In 2016 he traded 260,000,000 shares, more than a million shares a day scalping [no commissions key?]

• First time he lost $1,000 was a shock, but as he sized up, it became a regular sized hit, no longer hurt

• In 2016 he would take advantage of inefficient algorithms, "short the offer, cover the mid"

• In 2016, Sprint (S), Sirius (SIRI), Ford (F) were ticker symbols he'd trade: high volume, small range

• Short the offer, saw offer was about to lift, would cover the offer or cover at the bid once it flipped up

• 96% success rate doing the kind of scalping, but that was 2016, can't do this anymore

• Can gauge "Book Pressure" by watching the tape

• Algos didn't care about book pressure, it would just execute at some regular interval

• Could spot the algo because the same price and quantity was printing at a regular interval

• Midpoint is price between bid and offer, there is "invisible" liquidity there, "peg to midpoint"

• BYX is his preferred route for the midpoint

• "Can't get the bid, go for the mid"

• Crappy little penny stocks are volatile and retail-driven, small order sizes, not scalpable with size

• Switched from scalping stocks like Sprint to scalping SSR (short sale restriction) stocks

• Using his superior routing skills, he could short SSR stocks at the mid as they fell

• Most people are at the offer or the bid, they don't even know about the mid

• Gives example from his SSR trading that day: one gain was five cents, other gain was 35 cents -- "scalpy"

• SSR strategy just a tool in his toolbox now, the edge has sort of disappeared

• Small-cap stocks gap up and fail, a "fader" [no mention of locate fees, alas]

• Small caps are volatile, full of dumb money: newbies plus true believers

• Also trades big cap stocks on earnings days

• Small cap stocks gap up for a lot of reasons, usually a press release

• Uses gap scanner, filters by float and market cap, less than 100 million share float, usually under 20 million

• Uses multiple entries and multiple exits ... this is the secret to his success

• Takes 1/4 position at point he thinks is the top, if wrong he just loses 1/4; if he's right, he adds as it falls

• Scalps half his position and holds half for the all day fade

• If he thinks he's right, and a big bid appears, he'll smash the bid

• You'll never pick the top or the bottom, you always have to scale in and out

• Give yourself room to be right

• If stock drops sharply, will take off a quarter, drops sharply again, will take off another quarter

• After every sharp drop he covers, then re-shorts the bounce if it happens

• Has a set risk amount on every trade that he's willing to lose

• When he doesn't follow that set risk amount, "gets stubborn," he takes his biggest losses

• "Do you want to make money, or do you want to be right?"

• Tracks performance of his setups: size of float, size of gap, time of topping out, pre-market volume, etc.

• Has created "money box" ranges where he expects stocks to top out or bottom out

• Visualizes the "money box" on his charts

• Learned how to code to create the "money box" visual indicator on his charts

• Stocks that continue to squeeze up are outliers

• Tries to line up fundamental reasons, tape reading, basic technical analysis, on every position

• Learned about volume forecasting from AllDayFaders

• Idea is to forecast volume to predict if price will fade or squeeze during the day

• Unusual demand leads to squeezes

• Stan doesn't want to get a job, so he trades for a living [chuckling]

• June 2018 he had a red month, it was rough, he pulled a lot of all-nighters

• Learned a ton from JTrader, who helped him get through June slump

• Mike Mangieri encouraged him, had his back despite the losses

• NYC is expensive and the weather isn't great, so he left for Florida (also taxes too high in NY)

• Set up Ft. Lauderdale office with Krishna Joshi

• Has three other traders on the desk in Ft. Lauderdale, plus one studying for his license

• New traders shadow him for a couple of weeks, can figure things out more quickly that way

• Records his screen every day, posts it to group intranet so colleagues can study

• Eliminate mistakes, don't repeat the same mistakes

• Being fearful when entering a trade is a mistake to be worked on

• Sized up in 2018 and wasn't as consistent as 2017

• Goal for 2019 is to find balance between taking full-size positions and not shooting for home runs (holding too long)

• Added many new setups to his toolbox in 2018

• "If the market changes, I will adapt."

• Twitter: @ciocanatrader

Notes for Chat with Traders, Episode 168

Episode 168 ... Anand Sanghvi ... "Sang Lucci" (95:20)

• Prop trading model doesn't make sense any more, commissions too low

• Prop trading firms now sell education

• Prop firms take the other side of their own (poor) traders' trades

• Recently moved to Puerto Rico

• Live there 183 days and get serious tax breaks

• No federal income tax, no capital gains tax in Puerto Rico [really??]

• Sales tax in Puerto Rico is 11.5%

• Island living very expensive though... everything is imported

• Ton of crypto guys in Puerto Rico, waiting to take gains tax-free [gains?]

• Crypto guys are now all "distraught"

• Electing to mark-to-market is important if you're an active trader

• Trading under a business entity, you can deduct a lot of things

• Pay the $500 to set up an LLC if you are seriously active

• Had a hedge fund, had a couple of bad months, biggest investor pulled out, shut it down

• 95% long options strategy in the past

• Looking to set up a new hedge fund in Puerto Rico, with less risky strategy, more automation

• Trading strategy has changed completely in the last three years

• Now he's 60% short options, 40% long options

• Knows immediately if he's wrong when there's momentum

• No momentum then you are in la-la land, no idea if you're right or wrong

• Theta -- time component to options pricing

• Trades NFLX, AMZN, NVDA (etc.) options

• Used to be up a million in a month, then down 500K the next month, returns were too volatile

• Holds things for one, two, three days max

• Has traded options on the same stocks, the Usual Suspects, since 2010

• AAPL options are so thick you can put 250K position on and take it off in minutes

• You need portfolio margin to get more creative

• Right now he's swing long TSLA ... long March 2019 400 strike calls

• Sells short-dated TSLA calls against his core position to collect income

• Follows his instincts ... has been trading for over a decade

• If your trades are too short-term, you're going to get shaken out

• There's a fine line between following your instincts and being stubborn

• Instinct tells you to get out, but you're too stubborn to get out

• Where are you trying to go with your $5,000 account?

• Hedging allows you to stay alive until volatility returns

• Find what strategy works for you and when it works for you

• BTFD "buy the dip" worked for six years in a row

• Trying to make your losses back -- that's how people go to zero

• Your instinct will try to save you but you'll be stubborn and ignore it

• Find ways to hedge your life and who you are as a person -- guard against depression

• Figure out how to protect yourself from yourself

• If you hold options till expiration, "the shit's going to zero"

• There's a fine line between conviction and recklessness

• If you're too attached to a position, you won't be able to cut it

• After 2007, high frequency trading changed everything

• All markets are emotional ... all auction markets are the same

• Retail traders can't make any money because they're too emotional

• Retail traders know they suck but they have no solution

• With automation, you're only as good as your code

• [He sounds like a profane Jim Cramer, not just the voice, but the pacing ... it's fascinating]

• Interesting idea about using facial recognition technology to save you from yourself

• You have an app on your phone that saves you from yourself

• [Segment from 1:16:50 to 1:17:20 made me fall off chair laughing … “your daughter’s mother”]

• Script stops you from trading the same ticker repeatedly within X amount of time

• You need to create a behavioral profile of yourself as a trader, like Facebook has of you as a human

• Multi-level marketing thrives in places where people have no opportunity and they're ignorant

• Most people can't stick it out until they make it trading, it's too difficult, they quit (and who can blame them?)

• Website: www.sanglucci.com

• Twitter: @sanglucci

Notes for Chat with Traders, Episode 87

Episode 87 ... Tom Sosnoff (60:58)

• Aaron recommends Sosnoff’s Ted Talk

• Caddying 18 holes is called a "loop"

• Jimmy Rocko, his caddy master, grifted him out of all his earnings, cheap life lesson

• Current generation way too risk averse

• Current generation has too much student debt, makes them scared

• Take risks when you're young ... it's common sense

• Risks usually aren't efficiently priced

• Graduated college in summer of 1979

• Wanted to work for a lobbyist but couldn't find job

• Worked for Drexel Burnham right out of college, fall of 1979

• "Bullshitted his way" in

• Pre-Milken, he was long gone before the collapse of Drexel

• Gold and silver exploding then

• Stepped on floor of CBOE and knew that's where he belonged

• National Semiconductor (NSM) pit, first words to him: "f-ck you!"

• Trading floors: all alpha males, strong egos, independent, grifters -- fit his personality

• Spent 20 years on the floor of CBOE

• 3-5% of the people they hired made it

• He just got lucky and made it

• Only instruction to trainees was "go make some money"

• Couldn't outsmart anyone so tried to outwork them

• Made enough money so he could build ThinkOrSwim

• The only way to make money with options: trade small, manage profits, sell options naked

• All about creating a statistical chance of success with options

• No such thing as a quantitative model that can beat the markets

• Market making models (and HFT) can beat the market, but that's it

• The world prices everything perfectly -- no free money, no edge out there

• Derivatives overprice for fear, take advantage of this opportunity

• Sell high implied volatility

• There are people who make money, but they're outliers

• Can't steal money from your customers anymore, this is how people used to make money

• Be product and strategy agnostic, all your focus is on liquidity

• Manage your winners, forget about your losers

• Learn all about implied volatility, learn how to sell premium

• Price is not mean reverting, but implied volatility is

• He's on pace to do 10,000 trades for the year (2016)

• Start young and start small and learn

• If you can order a pizza, you can trade. It's not rocket science

• 100,000+ tastytraders [not sure what this means? active viewers?]

• Markets 35 years ago were inefficient

• Individual investors today at no disadvantage to professionals -- fees, technology the same, only know-how different

• Trading psychology is 100% bullshit

• We make people feel good about their lack of know-how

• People aren't successful because they don't take the time and the commitment to be successful

• Industry makes money by managing other people's money

• There's no psychological element to blackjack or even poker (it's all mechanics, playing by the book)

• He stood in the same two foot spot for twenty years in the pit

• Saw the hurricane coming and wanted to be the first one out

• Scott Sheridan his partner ... hired great technologists to build ThinkOrSwim

• Hired smart people to execute their vision

• He didn't see his family for ten years while building ThinkOrSwim

• Built a great company and product

• Didn't want to sell ThinkOrSwim, but it was a public company and TD bought them out

• Sold ThinkOrSwim for $750MM

• Went to CEO of TD Ameritrade and told him he wanted to leave

• Built tastytrade, which is a media company, profitable since Day One

• In order to trade for a living: you need capital and need to know what you're doing, stay small

• His biggest revelation was that he was trading too large ... got smaller, got successful

• Eight hours a day of live content on his website every day, tens of thousands of hours archived

• Website: www.tastytrade.com

Notes for Chat with Traders, Episode 164

Episode 164 ... Nick Fabrio (84:10)

• Wanted to be a doctor
• Started working at a casino, 4 AM to midday
• Working in a casino is depressing, everyone's losing
• Sold cars after that, was pretty good at that, lasted a year
• Started frozen yoghurt shop, hard work, paid off debts, sold out, 23 yo then
• Retail is horrible, too much competition, frozen yoghurt is "optional" [discretionary spending]
• Doesn't regret yoghurt experience, learned a lot 
• Got job at something called Wholesale Investor. Boutique broker. Not high pressure sales
• Willing to take a risk, it's in his nature
• "Bryce" turned him onto trading, back in 2010, 2011 [Bryce Edwards]
• Learned a lot of from Bryce and others in chat room he was in 
• Replaying stuff on Spark? [no idea what that is ... it's this]
• Did year abroad studying in US
• Started with $10,000. Lost $300 in first month, second month made $800
• Added $10,000 more in second month once confident
• Built account up to $65,000 within five to six months (January 2016)
• Only traded stocks between 30 cents and $3
• One tick is a full cent over $2, half a cent under $2, and then lower from there
• Would risk $50 a tick on his highly confident trades, $25 a tick on less confident ones
• Scalping when he began
• Watches market all day long even though he is in trades briefly
• Only focused on one setup at first
• Always been fearless about losing money, unlike most people
• Been trading full time now just under three years
• 2016 on exchange to US, didn't trade as much
• Scalper trading off catalysts, news
• More comfortable short than long
• Average holding time is ten to twenty minutes
• Wishes he could hold for at least an hour
• He's holding when he should scalp, and scalping when he should hold, working on this
• Comes in each day with a watchlist, filters through looking for candidates
• 40 stocks on his watchlist at the open, many charts open on Spark 
• ASX opens by alphabetical group, two minutes apart [odd]
• Earnings news, contract wins ... these are good catalysts
• From 7 AM to 4:10 PM he's in front of the market
• Received a cease and desist letter from GetSwift(?) after posting four page report on Twitter
• 20 cent IPO went to $4.50 and now it's back at 35 cents
• "Rubbed him up the wrong way"
• Took his information to the AFR [whatever that is ... it's this]
• In a thick book, he'll risk $500-$1000 a tick
• Peruses the AFR [whatever that is ... see above]
• Learned about Daily Report Card from Austin Mitchum
• Internalize what you're doing right and what you're doing wrong
• Trying to grade his setups in the moment now
• Sizes by tick value and liquidity, how much protection he has in the book
• Fair bit of spoofing in Australian market, algo activity, bid propping common
• Recent Cobalt Blue Holdings trade was an A+ short for him
• Illiquid stock, so good opportunity for a move, took a large sized trade
• Got out within 20 to 30 minutes, but should have held longer
• He is critical of himself, always room for improvement, a bit of a perfectionist
• Does all his trades manually
• Only uses mental stops, something else he has to work on
• Does everything off the cuff, all feel based
• If something goes against him, he gets out
• If a trade does not work right away for him, he'll get out
• Scratches lots of trades
• Gets in and out in one go
• He's an adrenalin junkie, if position not large enough, he loses interest
• 70-80% of his profits happen in the first 30 minutes to an hour
• Trades Australian market from Texas
• Mean reversion "wallet padder" trades, "income" trades
• Recently crossed $1MM in trading profits mark... after two and a half years
• Has financial freedom but doesn't really care about the money, doesn't spend it
• Bryce's mentorship was key, learning curve greatly reduced
• "Nick is a freak" ... trading a game that suits his personality
• Strengths: cutting losers quickly, "learn to lose," unaffected by losses, doesn't fight losers
• Weaknesses: shorts too much, looks for reasons to short with obvious buys, doesn't relax enough
• Plays reversals to VWAP
• Not really a charting guy, more of an order book guy
• Internet failures really "grind his gears"
• Has no dollar loss limit for the day, he just grinds back
• Lazy about doing daily report card now
• Advice for amateurs: having a mentor is key, focus on doing one thing and doing it well, size up
• People who aren't passionate aren't going to make it, you have to live and breathe it
• Trading isn't a path to freedom, it's a path to prison (in front of the screens) [I'm chuckling]
• Trading isn't stimulating or interesting to many people, yet they still try to trade and wonder why they fail
• Trading isn't a job, it's just enjoyable
• Don't over-plan starting, just dive in, immerse yourself
• Let the smart people do the algos [or people who think they're smart; Nick is clearly smart :-)]
• Paper trading is the worst thing you can do
• Risk $1 a tick at first, don't even cover commissions, but *never* paper trade
• Read Bella's books, they're awesome
• Trading is like poker ... 95% psychology, 5% skill
• Trying harder to hold longer ... at least an hour
• Twitter: @longhorncapital