Wall Street Trader: 60 Year Trading Veteran Exposes The Market Algorithm

Algorithms: They're written by a programmer, and they have to be written to go somewhere. Okay, where are they written to go? These technical areas that we're putting out; those algorithms are going to that. As sure as we're having this conversation, there's no doubt they want to shake out the longs, and they want to get people short. And what do the smart people do that are on the bottom of these algorithms that are scooping this stuff up? They're feeding into these people; that's what algorithms do. I'm able to take advantage of what they give me; printing the money, man. That's what we do, and we do it every day, hundreds of times, in terms of market makers and hunting stops. There's a big thing in the retail space of like, price hitting your stop loss, then going completely the other way, and people feeling very targeted.

I've heard you say that that is a case; that is something that does take place. Yes, you're 100% right. I started focusing on the algorithms a very long time ago. It wasn't my world; I was an agent. Algorithms are there to create volatility and liquidity. They want to travel. One of the trades that lose money 85-90% of the time is when you sell a failed breakdown. Those algorithms know that; you just know it. And I know that those algorithms are going to make that print, and they're programmed in to go to those strike paces. A lot of retail traders, they all make the same mistake. The important thing is for retail traders [Music].

Is the number one podcast in the trading space, the fastest growing, and that's thanks to every single one of [Music] you. Welcome back everyone to the Words of Rydom podcast. We are back once again and still the number one podcast in the trading space and the fastest growing, thanks to all of you and our incredible guests. Talking of which, we have a true veteran with us today. You first set foot on the New York Stock Exchange in 1965, so in one year's time, that will make 60 years. Absolutely incredible, the amount of knowledge that is going to be shared here with us today. At one point, he was responsible for 90% of the volume traded in IBM, which was almost 20% at one point of the S&P, and I am proud and honored to announce that we have Richie Nesso with us today.

Hi. Thank you so much for that. I appreciate it. I'm trying; I'm trying to work on my intros, but Richie is an absolute honor, like I said. And what we like to just start off with is sort of how you got into trading, like what, what were the mindset going into trading, especially at that time, you know, the New York Stock Exchange as well? What was your mindset? Why trading in the first place?

Yeah, it, it's pretty amazing. Uh, you, you know, first of all, I thank the good Lord because I, I, I, I couldn't have carved out a better situation for myself without really knowing what I was doing. Um, you know, I started out in a typical, uh, my family is a typical Italian family growing up in Queens, New York, but I grew up in a very tough neighborhood. And although I was a very big sports fanatic and everything I did, at sometimes in high levels, uh, like getting a scholarship to high school for basketball, um, and, and so you know, I formed many baseball teams and many softball teams and traveled around a tri-state area playing for money. Okay, my family had bingo games going on at the end of Sunday dinners at my grandmother's house. You, always the kids always wanted to use their real money to play bingo with the older people. Okay, I grew up in, again, in a Queens neighborhood, a very tough Queens neighborhood, and uh, pitched quarters against the wall, pitch, uh, uh, traded picture cards and flipped picture cards for money, um, uh, played poker for money, played, played anything for money, played anything. I once sat in my basement at 15 years old, and I'm prefacing this on a reason on purpose. I, I once sat in my basement and had four decks of cards face upside down, backwards, so I couldn't see what I was doing. I placed a baseball hat against the wall, okay, against the wall, and I stood there for hours, days and hours and hours at a time flipping those cards against the wall and counting up what suit, what suit just fell into the hat. Didn't know what I was flipping at the end of the day. No matter what I did, the club suit always came out on top. Gave me an edge if I'm playing poker, if I'm playing konami poker. And I played with bookmakers, and I played with the best wise guys. I played with everybody, but always clubs came out. So if there were three clubs on the board and konami poker, poker, and there was one, one card in the deck that had to be pulled out, and I had three, four clubs, three clubs and one on the board, and I needed a club, I know what I was doing. If I needed a diamond, I probably would have folded it. So that's the level, and, and you know, I had no real idea of, of what my future would be, and so it's, it was an unbelievable, you know, the experience of winning and losing. You cannot replicate it. You know, I tell people on my sessions to this day, well, I'm going to go on a simp account. I'm going to go on a simp account. I said, do yourself a favor; you're not going to learn anything on a simp account. The reason you're not is because you're not risking anything. You got to feel the emotion of risking; you got to feel what it is to lose. You can't; everything is not fun and games. So anyway, it, it just made, it was a tremendous preparation for me to walk in there, uh, you know, graduating high school, they, they all started in with the yearbooks, and they all wrote these salutations of what they're going to be in life. How they knew that at 17, I don't know, but they all knew it. They all knew it. I had one line; I put one, one, one word, and that was business. Did I know what business was? It was where it was; what kind of business it was? No, I didn't. I just wrote business. I mean, I sold encyclopedias door-to-door. I mean, I was a, a manager trainee for John's Bargain Store. People in this part of the country will know what that was. Um, you know, soup to nuts, across the cour, you know, delivering newspapers at 5:30 in the morning, you know, stuffing groceries at the supermarket for a quarter a day, whatever the hell it was, you know, stuff like that. But it all, I'm saying this for a reason; nothing is an accident, folks. Really nothing; it's all predetermined. Nothing is an accident. And so when the trading came into your sort of path…

Yeah, so I never traded a stock in my life if it didn't have the money. Um, I, I saw an ad in the New York Times that said, uh, you know, Wall Street Runner or whatever they called it, uh, da da da da da. I said, oh, New York Stock Exchange, that's impressive to me. Uh, yeah, I'm going to go and apply for this job. So I put on my Easter suit, the only suit I owned; it only came out once or twice a year, and, and walked into the stock exchange, filled out an application, got hired. I want to say one other thing, and I want to say one other thing because it's important, the way things are supposed to work out. My first job interview was for an assistant accountant at a bookkeeping firm, okay, and I didn't get the job, but the woman, I didn't get the job because I tested worse than the kid who was looking for the same job, and but the uh, HR person or whatever they were called in that day, uh, came up to me and said, I'm sorry, but I have to hire the other; he got hired on a test, but she said, I know I'm making a mistake, and that was the end of that. Then I went to Wall Street; then I got this clerk, a job as a runner on the floor of the New York Stock Exchange. That simple. But I remember one thing, and one thing that, no, I found the home when they suited me up. You had a special jacket, blah blah blah, and then you walked into that trading room; they escorted you into that room. It was like, it, it, it was like you got hit with a boulder. I mean, the energy that came out of that room, that I felt, went through my bones from the toes, the top of my head down to my top of my bottom of my toes, man. It was stupid; it was like, oh my God, I had no idea, no idea. And that was it; I was hooked after that. I just did what I did; I did my, I did my studying, I did my due diligence, I passed whatever I had to pass. I was not a great student in school; I didn't care; I didn't think they were teaching me anything, quite frankly. And you know, I, I rose through the ranks of the New York Stock Exchange as a runner and then as a reporter, somebody who recorded all the sales that took place. And after nine months, uh, they offered me a job as a clerk, as a clerk. What is a clerk? A clerk is a trainee, but they work for a firm, and that was a big step because that put you on a level where you could start to advance if you were good enough to advance. Nobody gave you anything. Um, and I had a hard time; I can tell you honestly, I had a, a really hard time because I couldn't understand what a quote was. I didn't understand what a bid and offer was; I really didn't. I mean, I was a workaholic, but I did not, I couldn't; it was couldn't get it through. Okay, so my boss at the time sent me up to the over-the-counter desk. Over-the-counter, over-the-counter was rock and roll; there was no NASDAQ. This was a thousand people making markets in every stock on a planet that wasn't listed on a New York Stock Exchange, and it was, this was, this was Dodge City; check your pockets, I'll tell you that. It was Dodge City, but when you were making markets, it was the best education I ever got because after that, it, it just all came together, down to the trading floor again, da da da da da, and just kept moving up on a trading floor, you know, where I was, got the confidence of many, many different companies that called me, uh, you know, to represent them, to be their cloak, and to stuff like that.

One thing you really, you said there which really stood out to me was nothing was ever handed to anyone on the floor. Uh, can you just speak on that a bit more?

Yeah, I mean, look, I was never handed anything, and but the good news is that I didn't want to be handed anything. You know, I have a sibling that was handed everything, but I never wanted to be handed, handed everything. I always wanted to earn it, and so it fit my personality real well because when you're competing against other people, the best comes out. And if you, and if you know the job that you could do, and if you know what you're capable of doing, and you have confidence in what you're doing, you are going to beat these other people. And you know, I mean, that's the way it is; that's capitalism; that's, that's it. You want to get a job; you want to do better than somebody else; you, you just do the best you can, and you automatically better than somebody else as long as you don't cheat along the way, as long as you put in the time. That's where the confidence comes from, putting in the time. You need to be a student of the game. How important is that mindset going into something like the floor? Were there even, at that time, people who would be entitled and think they deserved something? Think they had done enough time and therefore they should get something?

Oh, sure. I love, though, I love to compete against those people because that was easy stuff; it was just easy. And especially on a floor, this New York Stock Exchange floor has a very high tradition and heritage, okay? The specialist system had lines of heritage, uh, grandfathers, uh, grandfathers to sons to sons, all right? And many of the specialist firms had heritage like that running through them. So conversely, speaking to answer your question, a lot of the offsprings of these, uh, senior people, if you will, you know, they thought that this was easy life for them; they were, you know, they were like, uh, you know, they already had money; they knew they were getting money. And, and so, you know, it's good to compete against those people; that's all I could say. When you come, when you're a kid that comes from a rough neighborhood and, and you're able to work your way up through it, uh, and, and you find yourself in an arena, uh, you know, where people think they deserve something, you stand out.

Going back to what you said about your, your sort of upbringing into the trading journey, you mentioned about essentially everything was winning and losing; everything was trying to play those odds. How important was that when you're coming into the New York Stock Exchange? Was it simply just some, like almost familiar to you? Was it something that you just thought, this is just a larger game of what I've played before?

Um, you know, intellectually, uh, at that point, no, no, but somehow, some way, my system knew it. I did not; I did not recognize it at first; I really did not. It, it was, I don't know, a couple of years, two, three years where I started realizing, forget it, and I started moving up quicker than a lot of people were moving up, and then, then I figured out. And the answer to your question is, at, at one point, but not from the beginning, not from the beginning. I knew I belonged there because of the energy, and I knew that's what drives me, and that's what's always driven me, no matter what I did. So from that perspective, the energy was just, oh my God, this is where, this is my home; this is where I belong. And I remember I said, wow, when I got my first job, I, I, and I was making, I was making $60 a week; that was the pay in 1965, $60 a week. I cleared $482, and that's what I remember, and I remember also I wanted, I said, said to myself, wow, if I can make, my goal was to make $40,000 a year; that was my goal. And now I'm dead serious; that was my goal, to make $40,000 a year, which was a lot of money at that time. Yeah. So in terms of, as you said, in terms of the energy, I'm sure there would have been people who would have gone there and, rather than energy, they would have said chaos, would have said something maybe more of a negative feeling because they couldn't handle it.

You're right, right. And you know what, what was it about you that felt that energy instead? What was it about the energy on the floor that really resonated with you and wanted you to be…?

The gambling instincts; the gambling instincts. I, there were two times I had that feeling in my life. Once, uh, I was in the Marine Corps and stationed in 29 Palms, California, uh, which is only two or three hours away from Las Vegas. I'd never been to Las Vegas; I'd never been anywhere. And, and the same feeling is when I walked into a, a, a Las Vegas casino. MH But that was second to the New York Stock Exchange. The, the, the gambling Mecca of Las Vegas is second to the gambling that goes on every day in, in what, what, you know, what I did. Nothing comes close to that; nothing.

What would you say is the separation then between the gambling and the trading? I'm sure there were traders on the floor who were so emotional that you call it gambling, but then what would separate those from the traders to the gamblers?

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Uh, gamblers take risks; I say it to my, in my sessions all the time, folks. We're not here to gamble, okay? We're not here to gamble. If you're in the Las Vegas casino, they don't want you in there if you, if you bet, if you win 58.9% at a time, okay, they don't want you in there, all right? I want, I take pride in figuring out, uh, the nuances that lead to a trading decision, and there are a lot of them, and they change rapidly; they don't stay the same. You can go in and gamble in a Las Vegas casino, and you know, you know what the odds are; you know what you're doing; you know you have a disadvantage every, every bet except one in a whole casino where the house does not have an advantage. But I say it all the time; I say, look, we, I'm not here to gamble. I said, "Don't laugh because I'm dead serious; I'm not here to gamble. I am here to have a, make a bet, and I'm here to be on the right side of the percentages of that bet." I said, that's what I do, folks; that's what you're paying me for; that's why you're in these sessions, and that's what I do. So what's the difference? I'm not a gambler; I'm not a gambler; I'm a technical, technical, uh, player that slices and dices, slices and dices everything that goes on on a, on, on a daily basis, on a second-to-second basis, slices and, and dices that come up with an advantage, at least what I feel is an advantage, uh, and then make the play.

In terms of that, though, like the differences between when you started your career and, and you're starting your career as a trader in the pits and, and within that energy in the room and the other traders in the room, you're able to read the order flow in the room because it's happening there and then in the room versus today where you're trading from screens remotely, uh, if you want to read the order flow, you're using like Level II charts, for example; you're not really getting that direct emotion, but as someone with your experience, potentially you're getting that from the actual candlesticks and the way that the moves are printing within the technicals versus what it used to be in the pits. Is, is there similarities that bridge the two?

Well, yeah, there is; there is. Again, the specialist system was prominent; they dictated the flow; they had the buy and sell orders that were above and below the market on what's called a specialist book. And you know, depending on the level of player you were, or, I.E., the, the size of the order flow you used to have when you went into a specific trading crowd, you know, you want to know where the supply and demand is. Now, that wasn't public knowledge, but if you were a sizable player and had sizable order flow and you went into a trading stock, they know you meant business, and so they would, uh, help you, uh, uh, and, and, and speak to you about where their order flow was; where was the supply, where was the demand? Okay, if you had a large buy order, you wanted to know where the supply was, and vice versa. So in its day and age, you know, there are different ways to navigate that, and one of them is there's a Superdome that we have and display every day on our sessions, and it's a Superdome, and you know, a lot of the firms offer these domes, but these domes are not, this is, this is a Superdome, and it shows, it shows the size of the order imbalances every, depends what bar you're in, but if you're on a NASDAQ bar, it's 3,000 ticks I have set up, and 3,000 ticks will show, and a, in a 3,000 tick bar, it will show you the order imbalances with the sizes, with the sizes. So you see, and you see the NASDAQ size coming in in blue, imbalance orders in size, you know, and, and it gives you a little bit of an edge. Why? If I, if I see the market shooting, I, I mean, I left early today, but if you see the market shooting up, it's at a high, an intraday cycle high, high, high, okay? And you see the Superdome light up with blue, imbalance orders; I'm watching that very closely because I know these buy orders, these buyers here, they're lingering at the top. So number one, I know that it's going to be a difficult road to really break out if you want to get short; I know that. And I do know also that I'm going to be, I'm going to be covering my short when these people start to puke if they're wrong. MH And so that's an edge, and that's, we have a Superdome; it's expensive; uh, it's propri, it's not proprietary to us, but you know, we own it, uh, and it's, it's, I don't know anybody else that has this Superdome; I really don't. So that, that's relative to the specialist book, and not everybody that, in my era or errors well before me and after me, for that matter, you know, their precious book was the Bible because you don't want to look like an idiot by buying into a large seller that's just slightly above the market, and vice versa on the downside; you don't want to sell into a huge buyer, you know. So, so edges like that, it comes from the experience level. And so…

I think very interesting what you said there in terms of that, like depending on you and the size that you're sort of fulfilling and essentially your track record, if you will, like there's a lot of talk about track record nowadays about traders, you know, trying to acquire them, whether it's to get capital to prove themselves as traders, but the same happened back in the pit; like if you didn't have the performance behind you to be able to handle that size, no one was going to give you that size.

100%. So for you to be able to get the size that you got, you showed the skill set, the track record to be able to handle it and then continue to perform to this day.

100%. I mean, that's just the fact of the matter. You know, I speak to my, I speak to my subscribers all the time, uh, about the volume-weighted average, and you know, the 80% of the order flow that comes down today; volume-weighted average is a huge factor, why? Because, uh, the…

Size of the positions today, uh, with the amount of money under management, you can't have a million-share position if you're managing 10 billion. Do or 20 billion, your positions are 20 million shares, 30 million shares, okay? And 80%, 80%, give or take, it's probably more, uh, 80% portfolio manager says, all right, I own XYZ, uh, it's up substantially, and they own 20 million shares. I want to take off, uh, you know, 5% of of that, okay? So sell an order, take an order, uh, to sell a half a million shares, two million shares, a million shares, uh, and they give it to the trader on a desk, and they sell to the trader, just, you know, go along, beat the volume-weighted average.

80% of the order on these deep-pocketed investors and funds, I have orders that are that are following an algorithm that allows them to stay close to the volume-weighted average. Why that? The trader doesn't want to be embarrassed. The portfolio manager doesn't really care; he's banking money, so he doesn't want he doesn't want anybody playing the market on his dime. He'd rather just know that he's about around the mid-price of the stock for the that it trades for the day. But it's a very important factor when you're doing what I do because where the volume-weighted average is, you know, if a new bar comes up on a super super doome, for instance, and the bar is above the volume-weighted average, those those orders that are in there following an algorithms on the volume-weighted average are buyers, and when it's below the bar, they're sellers, and and that's how they keep up. It's a balancing act, so um, so the up is really really important.

My clients like what you just said, which prompted me to speak about this. Is my clients, I mean, you know, I represented Vanguard, and I represented their index funds, so every time a stock went from one S&P 400 to 500, they, you know, they restricted and they balance, they had to balance the mathematics out to to reflect what their index was. M, and so so my customers, to your point, they didn't give me the order I could put on an algorithm, too. No, they they they wanted me to trade the order and use my expertise. So to your point, that's exactly what took place, and you want to know what? I I destroyed the volume-weighted average. I destroyed it almost every time. Never really got hurt, played in the market without any algorithms, without any machines, without anything. I mean, I I can't tell you the amount of money I made for that index fund. A lot of a lot of those people owe me a lot of money. They really do. Their subscribers owe me a lot of money. Uh, uh, I I would tell you that what was it like though, going from obviously being a runner to being a clerk to then obviously starting to manage these positions yourself on behalf of your clients as well, but as the size was incrementally getting larger, did you face any sort of psychological issues, any barriers at all?

Or interesting question. The answer is no. Never phased me one bit. It was all the same to me whether is a thousand shares or a million shares. Yeah, I put up so many million-share blocks in IBM, you know, they counted on me to price it and and to trade out of it. So the size never intimidated me at all. It's all relative. Uh, I I I, you know, I just ambivalent to it. It don't mean anything; it's just numbers, and so I just increase the numbers, and no, the answer is no to your to your question. I it never affects me at all. I never was intimidated by it, and it never affected me. Where do you think that came from? My upbringing in a very tough neighborhood in in a lot of different ways, drugs, Wise Guys, a lot of stuff. It was a good nice middle middle-class neighborhood in Queens, but there was a lot of stuff going on, a lot of stuff. And so where did it come from? I, you know, just my personality, I guess, uh, I can't tell you where it came from.

Well, what do you think when you see people going through psychological problems when it comes to trading, you know, even if they're handling much less a size than what you were, for example? Yeah, like what what do you say to people when you see them or or speak to them in that regard? Yeah, uh, I I say to them that number one, they have to know their personality. If you have to you need to know your personality. I said, and I say all the time, don't laugh, don't laugh when I say that, you have to know your personality because your personality dictates the level of Tolerance, uh, and level of controlling your emotions, and and so it's extremely important to be able to to uh manage your emotions in this game, and the way you do that best is to understand your personality. Everybody's personality is different. Everybody can risk a certain amount, uh, without being not effective any longer. It's extremely important to know your personality; it really is, and you have to stay focused. All right, you have to stay focused. What do I do? I give them an example all the time, uh, a horse races on a a racetrack, and and a horse does, uh, you know, it's getting beat, getting beat again, getting beat again, uh, horse, you know, on a on on a warm-up track, uh, sets huge numbers and does great, gets in the race, horse can't do anything, and and the trainer finally figures out that, uh, wait a minute, the horse is getting distracted by looking preferably. So what do they do? They put what they call blinders on them, and so the blinders make the horse look straight ahead, and that's an example I give my my my people all the time. Stay focused, man.

Cuz that is an interesting point. A lot of people are so focused on the wrong things rather than what actually will make them into a better Trader. Correct, like obviously trading in the pits is far different than say trading on your own, especially as a retail Trader, um, and as part of that, a lot of Traders will need like trading plans, right? They'll need their systems that they follow, um, in order to create their Edge in the market, what have you? What can you speak to on in terms of like trading plans, maybe outside of the trading floor era, I guess? Yeah, um, well, I had to go through that. I really had to go through that because I had no experience trading, uh, you know, in front of screens until after I left. And so what could I speak to that? Um, you know, people have to understand that what's good for one Trader is not good for another Trader. What one Trader looks like looks at another Trader looks at something different. So you have to understand that that this this game is wide in scope. It is wide in scope, and so you know, manage manage manage your trades, protect your money, protect your protect your uh uh investment with stop orders, but know what your limitations are with that. Just know what your limitations. I don't think I answered your question.

No, you did. In terms of uh your trading plan, as you said, it every Trader is different, so it's not going to be fixed, of course. I think the benefit of trading is that there are so many options of how to do it successfully equally. I feel like a lot of people think of that, and then they start trying everything, and therefore they find themselves very scattered as a Trader versus, as you said earlier, focus on on and know your personality. So if you combine those two, yeah, that's where you can start to probably really build that trading plan out. No, it's true. It's true, and and you know, Simplicity is best, and and I I I refer to this a lot, and and and you know, and I say keep it simple. You don't need all these things. You don't need all the all the don't get carried away when you start flipping around from one way to trade to another way to trade, one chart, another chart, one, you know, one technical area, another technical area, uh, you know, one Cel a channel. I said, whoa, you know, it's too much. You're confusing yourself, and and you know, I can delineate that, but you can't you can't, and that's going to [ __ ] your growth by exposing yourself to too much. It's okay to get to an area, you know, I still I had only two monitors, but I I got to an area, you get to the area, but you need to conquer Simplicity first, or you're going to [ __ ] your growth like I just said, and and you're going to it's it's going to it's going to store your journey. This is a journey.

Well, that's where a lot of people find themselves, I think, is that they find themselves in this boom and bust cycle where they're just con they're not losing, they're not winning; they're just going on along sideways for a long chunk of their time, and right. A lot of the time they're not really trying to learn, or to be fair, on the flip side, they're learning too much and trying to over complicate things, correct, because they think that's a quicker way to get to where they want to be, and they're wrong. What would you say in terms of people trying to manage larger Capital? What is it that you've noticed, you know, because obviously you were handling large size, but I'm sure there were other players around you who you also recognized were handling large size too. What were the common traits among those people? Oh, that's an interesting question. The uh common traits were keeping you cool, keeping you focused, uh, not getting flustered, holding, controlling your emotions, uh, do your best not to get swept away, uh, in an emotional situation when there were many many many many, and those people were able to keep their cool, keep their focus. All right, um, you know, baseball player Andy Pettitte, New York Yankees, it always stuck me even when I was a kid watching this, his hat was bent downwards and bent in a way where he can only look forward. There, the same example, it's a simple example, but that's the kind of focus that you need. And so the people that were confident, people knew were not intimidated by the sides of the order flow, were straightforward, honest people who stated their case. All right, listen, man, I'm going to buy a million shares of stock here, okay? Tell me where the supply is. Tell me now I'm putting up a block of a million a million 18 IBM right now. Don't anybody leave the crowd. Stay here. Tell me what your interest is now. All right, customer A, customer B, customer B, this guy represents that, but the people who were straightforward and and stated their case at the time you put the block together and you slapped it on a tape, all right, and and those are the people that impressed me growing up, and those are the people that I learned from as well growing up, people like that.

Does there ever any sense of like missing those times because obviously that energy must have been so contagious, so almost addictive to some degree? No doubt, and to not be in that environment anymore, even after even if it's been some time, do you ever miss those days and that that sort of that flow? Let's take a break for a minute there, guys, cuz I want to tell you about one of our sponsors, Alpha Capital. Now, without our sponsors, it's not possible for us to host such incredible podcasts around the world and get the level of guests that we are getting. So again, thanks to Alpha Capital for sponsoring the podcast. Now, Alpha Capital is one of the best prop firms in the industry. So far this year alone, they have done over $50 million in payouts, which is Absolut absolutely incredible. They have the very best infrastructure in place for longevity from an in-house broker, so they can offer the very best trading conditions and platforms that all Traders love to use. They're still able to offer services to the US as well, so the US Traders can still trade with them on particular platforms. They have institutional experience, so they know how to manage a Prof correctly and have such an incredible team on hand. On top of which they have both a pro and swing plan, so depending on your style and strategy, you can choose which one is best for you. Now, you can use and get the highest discount available at anywhere using Riz 25, so that's r i z 25 for 25% off all challenges. The links in the description below. So let's get back to the episode.

You know, I mean, it it was the greatest education one could ever get. You know, I I consider myself blessed and very lucky that I that I found my way there. I had no idea, trust me, none whatsoever. But looking back at it now, you know, been there, fine. Another aspect of my life I didn't expect to start LPQ trades. I did not expect it. I was trading my own money, like I said earlier. I did not expect to start a trading room. I did not expect to probably start a hedge fund by the end of the year. I did not expect any of it. I'm not the to retire in type. I'm just not. So I'm occupied as the answer to your question. Do I miss that? No. Do I treasure it? Oh, my god, do I ever treasure it? Again, I will tell you, you can you can bundle together all the great colleges of the world, and you could not get the education of growing up in those times that I grew up. You could not experiences King as they say because even just when I look at, you know, footage nowadays, it's really just footage or stock phot of of those times, and you see it, and a lot of the time maybe slightly dramatized with some some music or whatever it may be, but you still see it, and you think, wow, that must have been like chaos. That must have been crazy to trade in then when you speak to the Traders like yourselves, you learn a whole another level of of perception that's actually going on in those moments.

It is chaos, but it's very organized chaos. 100%. It's very, as you say, educational for to be in those moments because you're learning and picking up on so much that today's Traders, they don't get that same sense, right? They're learning, and it's not a negative thing necessarily, but they're learning just from the charts normally by themselves in their in their office or at home, whatever it may be, but they very rarely know other Traders. But in that environment, the only way to really know a Trader is to then actually be in the room with all the Traders. Bingo. I mean, you just hit it on a head. That's exactly right. And again, and a reason why I started this room, uh, is because I replicated a Wall Street trading room. You know, when I sold my broker could dealers, I went to a a hedge fund friend that were there were customers of mine, pretty big name by the way, and they said, you know, come on in, you know, blah blah blah. I went in, and and they offer me and they say, Richie, we don't understand. You don't need to give us 30 or 40% of your P&L because we're giving you extra money to trade, but we know you don't need that. I said, that's correct. Why are you doing it? The chairman of the company, why why do you want want to sit in this hedine? Because I want to be in a trading room environment. So there you go, and that is a freaking letter of the law. All right, I never went there, but I started doing what I'm doing, and now I I I I hate to keep repeating myself, but I I re, you know, you you hit on ahead what I can bring to people with the experience level is unparalleled. So I tell my people, I said this room is a replication of a Wall Street trading room. There are three Master Traders here comparing ideas during the whole session, so that's what we're giving you, and and that is Head and Shoulders above anything out there.

And nowadays you are trading Futures, right? Trading Futures. I could trade anything, man. Doesn't matter. I choose to trade Futures. What is it about the Futures Market that got you s of focused on it? The future markets are liquidity and volatility. All right, the liquidity is Paramount. The volatility is Paramount. The other thing is that the market, the stock market, is based on hope. Everything is based on hope, hope, uh, you know, Apple's getting killed. Apple doesn't have any growth. Where's the growth coming from? Apple, China's shutting them out there. China's right there. You're not selling your phones here anymore. Whatever, blah blah blah. They come out with their earnings now. Everybody knows I know that their earnings were going to be bad. Okay, they're not they were not going to be good. So what a what a what do they do? They give their investors Hope on a conference call. What's the hope? We're going to we authorize a buyback of 110 billion dollars. That's the hope. Hope. Elon Musk earnings bad, you know, two three earnings ago. Ernie's bad. Saker's 150. What did he do? He gave him hope. What was the hope? His robotics game, robotics stockers are 250 now, I mean, 290. I don't know where it's 290 or yesterday. Gave them hope. So the future Market gives you hope. It's also helps you stay focused on the stock market. How does it stay focused? I have one of my monitors has three one-minute charts up, the ES, the NQ, and the YM, and they all have Micro and mini contracts, so 10 to one usually, all right, 10 to one. So these nothing nothing, they're one-minute charts overlaid by technical area is 9 EMA and the volume-weighted average. Nothing can take place in a Marketplace without those stre without it being reflected in those three charts because it's a bet on Hope and it's a bet on the future. And when you can get into a contract like that and and and turn 20 30 40 handles, uh, in in a NASDAQ, uh, by P picking off a Divergence from one to the other, future markets are the place to be. I mean, I I and and the other thing is the other thing is how much money you going to invest to make 50 cents on Microsoft at $350 a share? How much do you have to invest? You know, LPQ stands for limited exposure. L, limited exposure. I I mean, it I put on three trades yesterday that were I put on three trades this morning before I left. One was one was $450 at 23 seconds. One was $300 at 6 seconds because I'm able to take advantage of what they given me and keep printing the money, man. That's what we do, and you can the liquidity. I'm sorry, but the liquidity in the future Market allows you to do that. You want to pay up a nickel for to buy Microsoft at 350 a share or any of these other wild names. H, how how long you going to stick around if you're a day trader? You don't have the capital to do it.

You mentioned earlier in terms of the algorithms, and you gave a a good description in terms of uh your your medium, your low, your High, um, you're looking at the orders at these points as well, and I've heard you previously, you've had a very viral uh video that went around, I remember on Twitter, like millions of views, yeah, in regards to algorithms talking about discounted prices, premium levels, um, and then, you know, the algorithms hunting these buy stops, those stops, like can you speak more in terms of the the intricacies and and sort of where the knowledge comes from? Again, IBM was 19 78% of the of the S&P, so that ES contract, my eyes were peeled on it. It also was it also touched off buy and sell programs, okay, buy and sell programs. So I started focusing on the algorithms a very long time ago as my order flow was touching off buy and sell programs at will. Wasn't my will. I I I was an agent. I had to do with the order. I had I listen, I had complete discretion over my order flow at 90% of the time, but that's what my customers paid me for, as I mentioned earlier regarding um, you know, regarding clients all. So the order flow, uh, just came, and and the focus on the ES contract just came, and therefore, if that that being said, the algorithms come into play. Algorithms fuel The High Frequency Traders, algorithms, and there's a video out there on this, and this is really everybody should just go find that one because it really does describe algorithms are there to create volatility and liquidity. They want volatility. They want they want volatility to create liquidity. How does that work? Markets coming down to a major technical area, and we put out technical areas every day, 6 o' in the morning, technical areas to major technical areas that one should be aware of. Technical areas are borders. They're borders. Nothing is the end all of be all when it's when an algorithm, a perfect example of an of algorithms, what they do, all right? Technical area here, marks are getting killed, boom boom boom boom. Looks like it's resting here. Not going to rest there. The algorithms are going to come in here and touch that technical area, which is usually a discount area, and they're going to come and touch that off, two reasons: number one, they want a trap. One of the one of one of the one of the trades that lose money 85 90% of the time is when you sell a failed breakdown. Sell a failed breakdown. Those algorithms know that, and by the way, what broke me through on the algorithms to make that video was discovering that listen, ladies and gentlemen, uh, algorithms make may be mathematical equation generated by a pro by a a um by a uh code, yeah, but they're written by a programmer, and they have to be written to go somewhere, okay? Where are they written to go? These technical areas that we're putting out. That's a good example of where they're going to go if the situation arises. So what happens? Let's go back. Market comes down, Market come down, Market comes down, Market comes down, stops here, Market looks like it's firming up. Those algorithms are going to that as sure as we're having this conversation. There's no doubt. Why do they want to do it again? They want to shake out the Longs, and they want to get people short because at that point, it looks like the Market's going to fall out of bed. What happens? Market stops, Market stops, Market starts going up. The shorts have to cover, and the longs so they knew they realize they've been had, and they were right on the long side, and what do they do? They jump on a bandwagon too, and what do the smart people do that are on the bottom of these algorithms that are scooping this stuff up? They're feeding into these people that missed the market and have made bad sales. That's what algorithms do, and there's a way to look at these, and there a way to track them, and we do it every day, hundreds of times.

Does if I'm not sure, are you aware that in the retail space is a very large community of of traders who uh follow say a mentor if you will who describes himself as someone who has like coded the algorithm or coded an algorithm and therefore teaches Concepts that are supposed to help you decipher this algorithm and um, you know, they they get very fixated on essentially having Concepts that literally can allow them to sort of decipher the algorithm in the markets, uh, my answer to that or my question to that is do they trade their own money based on their methodology? That's my answer. That's my question to them. If they don't, I don't trust it because what we do, I I can I don't to say guarantee, I don't like the word, but um, I know our methodology, and there's nobody there's nobody better on picking it off because I help toine it, and it's that simple. All right, everybody know where a bar chart comes down and one bar CHS right from the other, and there's a little space between them. It's course the algorithms are piling in are piling in that area, and and wherever direction that Bar's going, it's going down lower. M, those are algorithms, but it's the mentality. It is really the mentality. It's knowing where the premium area is. It's knowing where the discount area is. It's knowing where the gaps are. Algorithms will always come back and fill gaps. That was one of my trades this morning. All right, I bought I bought the what did I buy? I don't know what I bought the NASDAQ. I I bought N I bought NQ this morning because at 9:26 or whatever it was, the the uh there

Was I think they call it a pre-market mini puke. And I look for an opportunity there when it when when it does that. But what I what I saw was I saw a gap here. And you know, gap—what what is a gap? A gap is: market comes up, market comes up, all of a sudden it shoots up. There's a gap. Algorithms love to come back to those gaps. Same scenarios, same same instance I just gave—that come down here, down here. Now the gap is here, down here, down here. Most of the time, you know, 50% of that gap is filled, if not all of it. M, and you know that's it. I took a long when it hit that gap. And you know, I mean it was about an 8C trade. And I don't care where it goes after that, folks, I really don't. Take what the market gives you; don't turn your nose up at what the market gives you, especially if you can turn over that kind of money in in six seconds. So more so for you, it's uh following the algorithm, but just taking what the Alor, you know, no matter even if it's a few seconds, a few minutes, wherever that play may be. Correct, that's the edge. Would you say the the algorithm is designed for efficiency? Is that what it's designed for?

Let's take a break for a minute there, guys, cuz I want to tell you about our sponsor, TradeZella. TradeZella is the number one trading tool for all traders. Doesn't matter whether you're a crypto trader, a futures trader, or a forex trader; whatever trader you are, all you do is connect your trading platform directly with TradeZella. It automates and makes your trading journaling so easy. If you want to be a profitable trader, you need trading edge, and that is exactly what TradeZella does. It allows you to identify edge, maintain your edge, and optimize your edge by automating your trade journaling, in-depth analytics, back testing, bar replay, and so much more. Now, W gets you 20% off your yearly subscription with TradeZella, so use W for 20% off your yearly subscription, or RIS10 for 10% off your monthly subscription. The link is in the description below. Now let's get back to this episode. The algorithms are designed to to create volatility and liquidity. They want the fractions moving, and high-frequency traders live it; they live for that because they can get in the middle of trades, especially for the retailers, especially when you're with a broker that says you're not paying any commissions—uh, you know, free free brokerage—ah, check your pockets with that one, because you know your order flow is being sold, because well, where would they make their capital then? Yeah, that's where where would the the brokers, if they were doing free commissions, they wouldn't be making anything unless, as you say, the order flow or the data or whatever it may be. Correct.

What would you say in terms of uh common pitfalls that you see amongst like retail traders of today? Yeah, you know, Li—this as we discussed—that a lot of the time they are just by themselves. At most, they have a community or some sort of trad room that they're part of, but at the end of there they still are by themselves for the majority of the time. What pitfalls do you recognize within these traders? They don't know how to protect themselves. You you need to know you need to know what you're willing to risk on a trade. Uh, if you're if you're lucky enough to be green on a day, you don't want to be in a position to give it back. And so you want to set a limit to what you're willing to give up of that uh of those profits on a given day. And and certain situations, you know, they ask me all the time, they ask me, you know, where should I put your stop on this particular trade? And I say I don't have any specific area; it's the relative to where I am on a particular day and where I am relative to where the market is on that particular day. For instance, for instance, if I'm gonna if I'm buying, if I see strong strong strong, and I see a divergence with the NASDAQ trail and the YM, which is another trade I made this morning—NASDAQ trailing the Y trail in YM—and I know the NASDAQ coming up, and I know the NASDAQ is coming up, and I know I'm long, all right, and I make my profit, and then I see the NASDAQ continue to go up, and I also see the technical area, a huge resistance area, a major resistance area right here on a market that's up pretty good during the day, all right, if I want to short this here, I know that if it goes higher from there, it's going much higher. But if I want to play in case it's the top of the market, intraday intracycle whatever, I know I can protect that down three or four handles because uh yeah, I can protect that three or four handles down. If I'm wrong, it means they're taking it right up. And if if I'm right, I'm covered. So you know uh and I I put that the opposite way, but if I'm short here and I want to protect it going to a level, I'm want to protect it up four handles, all right, uh you know, 100 bucks, 200 bucks, whatever it is, but I know want protect it because I know that if it's going through this area here, it's going through, but I have a chance to hit a double and maybe even more than that because I know that this technical area is major resistance. So like just accepting the fact that okay, at this level the risk reward makes sense, right? Because if the price does break through there and it hits my stop loss wherever I've set, correct, it's going to go anyway. But if not, the reward of this trade, correct, could be huge—100%. That's the kind of situation. So so so the question is relative about where the place should stops; there is no one place to place a stop, ladies and gentlemen. The important thing is for retail traders is to place a stop, whatever whatever your tolerance is relative to the size of your account; that's the important thing. Place a stop always. Do not leave leave yourself naked. Do not you know you must protect your money and you must PE as in lpq prevent blowups—what I just made up these names—I made up the names—P prevent blowups. Master trader, any master trader and all your experience in the world in the life or whatever it is, they will tell you prevent blowups, prevent blowups. You once you blow up, you blow up your account, you blow yourself up. You know, we people pass Apex accounts and people don't know how to do it; they roll the dice. Yeah, I'm going all in, I'm going all in. Yeah, pay another whatever it is for, pay another fee, pay another fee, pay another fee. You don't do that. You know, you you build up small with those people, and you build up small, and you build up small, and and stay under the radar until you're getting ready to get paid.

Okay, what are your thoughts in in terms of that like these uh prop firms, or they're not the traditional prop firms that were truly around, but the new evaluation firms that have entered the futures market. We're seeing a lot more enter the futures market now as you said, you know, people who trade them. Yeah. Um, now what are your thoughts on them, being it's such a wild different um sort of product that has been around previously, yeah, but yet there is huge benefits to under capitalized traders too. So what are your thoughts on them? Yeah, I mean you're referring to funded uh broker dealers that are fund account, pay a fee, and you get a quarter million or whatever it is. Yeah, uh check your pockets; that's my feeling. If you really want to know, check your pockets. There's been a number of situations—I trade three different accounts—and there's a number of, and I always keep that one around too, because I'm trading anyway. What's the difference if it cost me $40 to have a a third or fourth account? You know, I'm going to spend $40; I don't you know, I'm wheeling around hundreds hundreds of thousands of dollars; I want to give myself the best chance. So I've been in a couple situations where I was about to hurt these people, hurt them, passed the test, all right. Last week alone it was a $188,000 swing in an account where I had them, all right. I bet against an earnings report; I was short than NASDAQ based on uh based on uh whatever Magnificent Seven stock reported. I don't remember, maybe Meta or maybe Amazon; I don't know. I think it was Meta as soon as I I I was up, the NASDAQ puked; the NASDAQ puked. I was short 10 NQ contracts, 10 in in a funded in a funding account, 10. The profit went to I don't know, what—$18,000? Okay, certainly way past the amount of money you need to pass an account and get paid. What happened? My system froze; they wouldn't allow me to take the trade off. I said, what what are you talking about? And then what happened was the trade went the other way and blew up my account. Well, I went crazy; I just went crazy. And they said, oh well, we're sorry, we can't do anything. I said, oh yeah, I said, listen, the SEC is going to be very happy to hear about this. I said, in the timing of this, this happened to two of my friends, and the timing of this does not sit well with me. So I would suggest and and and you know, they reinstated my account, but I I I I don't like those firms; I don't I don't trust them. That's the answer to your question.

In terms of uh the changes we see within the industry, we see a lot of traders stepping in, especially since Covid. We've seen so many people become traders. What are your thoughts in general around trading? Do you feel like anyone should give trading a try if they're interested, or do you think that trading is really for those who have the personality traits and I would say passion for the actual markets rather than just making money? Yeah, you know, it comes down to who you're going to listen to, who is going to be your mentor. I know what I bring to the table; I know I want to help people. My group, we want to help people; the money is good and all that stuff, but first and foremost, I want to help people. Well, listen, a drug company could come up with a drug to to uh you know, help sick people with a certain disease, and that's good, but it's only a small percentage of the population, relatively speaking. But what we're talking about here and you know the the the potential of how many people you could add and help. But in this day and age where where uh uh people are paying a lot of money for groceries and gas and rent and insurance and so on and so forth, and and people are living check paycheck to paycheck, and people are paying 23% interest to credit credit card companies that maintain their standard of living, okay, that's worse than you would pay a bookmaker in a neighborhood I grew up in to to borrow money or [ __ ] as you would call them. I mean, it's unbelievable. So people are getting hurt, and I I'm I'm really—my group—one of the main reasons I started this company is to help people augment their incomes, show them how to make $200 or $300 a week. That's nothing; it's nothing. So I I think if if you with the right person and they with the right group, yes yes, who can cut out reading a novel and and you know, go to the library—I'm going to really you know, it's nice to be able to to have that sense—go to the library and read every book you can on on economics and and trading and this and that and that. But man, it's the mentor that means everything. Because what I could say to these people at one specific time in one particular instance could help them for the rest of their lives, and that's what gets my juice going; and the people that are with me.

A big debate that—seeing as you mentioned time—there is actually very interesting—a big debate that's been happening at the moment is between time and price: are both important? Is one more significant than the other? I've had ex-institutional traders saying that you know time is irrelevant; it's all about price, and when price meets certain levels, that's all that matters. Where I've had other people on the podcast where they say time is the most crucial factor, and that when you trade specific time windows, that's when you know that's the optimal times to trade, and anything outside of that is not optimal and shouldn't be traded. What are your thoughts from your experience? Is time and price just as important as each other? Is anything more prevalent than the other? Yeah, I mean the market has a different personality every day, okay? I've seen it all, all right? I don't I hear people say that all the time: I only trade between the hours of 9 and 11, or I trade, I don't trade in the afternoon anymore, or I don't do this, or I don't trade on news, or I don't trade at the opening, or I don't, I wait till 9:45. I I I don't get any of that myself; I don't get it. If you want to if you consider yourself a trader, you should you don't give in to not trading; you give you do not you apprise the situation and look at the opportunity. Now, you may have a pension; it may be mental, I don't know, and that maybe suit suit some people, but I don't close out any time frame of when or when not to trade, all right? If I looked at my uh trades over the course of a couple years, I'm sure there'll be pockets of times when I was more successful, but it doesn't deter me from trading the market uh from 8:00 a.m. or even 6:00 a.m. sometimes uh until until the market close uh closes. So you know uh and and the timing of anything is always about the entry; it's always about the entry; it's always about the timing of the entry, all right? And you know I talk about scalp trading with these things that these trades that took that took me six seconds, 20 seconds, 18 seconds—this is all fact—uh constantly constantly because I'm able to pick out this info, this divergence in a market where I know I can print money, all right? And it may still go up after I I sell it; I don't care about that, but it's a timing of the execu—it's a timing of the entry. And when you're trading with this mindset—I say it all the time—when you're trading with this mindset, you can you know it's a difference; it's a difference in your P&L. Because if you if you if you're paying up, and and by the way, retail traders don't chase—if you miss the entry level where you want to purchase, don't chase. A lot of a lot of retail traders, they they all make the same mistake; you know, they say, oh man, I didn't buy it here; I didn't buy it, meanwhile it's up whatever, and they're buying it here; they're chasing. Well, you know, you just made this thing quadruple diff different uh difficult for you to make money. But if your entry, the time of your entry is where it's supposed to be, man, that is the difference between you making four handles or five handles or seven handles or eight handles; that's the difference that pays the bills, that pays the commissions and so on and so forth. So you know the timing timing of the entry is is is really is really everything.

Yeah, so that making sure that you are there to strike. And how important is it though to be prepared for that? You know, so like a lot of people, they don't have a strict routine for their trading; for example, one day they'll turn up, one day they won't. Of course, a lot of these people are in that boom and bust or not profitable stage unfortunately. So that's why you know, as part of the podcast, we're just trying to educate and show showcase you know profitable traders and and what they do. Is that something that is important to a profitable trader, to making sure that they're consistently turning up so that if the time does arise, they're there to strike and not just essentially miss an opportunity just because of laziness or just not being prepared? Yeah, I mean you have to be prepared; I mean, you just is no—this is no sprint, this game; it is a marathon, and you need to give—if you really want to do this and try to make a living or augment your your income uh by by trading—you need to put in the time, okay? And it's okay uh and and you know, putting in the time helps your confidence, and confidence is the whole thing; you got to feel loose that you could do this and you can do this, but there's no easy way to do it. Anybody can roll the dice and get lucky, but that not—we're not talking about that—talking about consistently making money.

So what are your thoughts about journaling trades? I know obviously in the pits journaling trades as an individual as the trader themselves would be difficult uh because you're managing the flow all that day, but you have I believe clerks and people who would track them for you and that afterwards you would evaluate what trades have been processed etc, then you find your carry trades and as you said like days later you'd find out about those um but now like as you've stepped away from there, how important has it been to journal your trades and keep track in your P&L? 100%, okay, 100%. You need to look at your trades, and you need to learn from your trades. You know, it's one thing to see a profit and a loss, but it's another thing to see how you got there. And you will remember your trades as you're going over them; you will remember you you will remember the prices; you will remember the circumstances; you will remember okay—you—when you're journaling your trades, you don't want—you know, I hear people say, well, I'm 90% accurate. I'm not—you're 90% accurate? Oh, okay, great; that's that's great, but that doesn't mean anything. I'd rather be 65-70% accurate because when you look at your journal, you know some of the best trades you will make, some of the best trades you retailers will make, retail traders will make will be losing trades; they will be losing trades. Okay, why? Okay, you see something, you you know everything clicks in your head, you whatever reason you get long here, you're wrong, and you and the earlier you see that you're wrong and you're willing to pull the trigger and take that trade off, you want to see that in your journal. And and that kind of stuff is not going to promote 90%. If you're at 90%, you're not seeing that, and you're at 90%, you're never going to be able to do that consistently. You want to be at 65-70%. What does it mean? It means that you cut losses on trades, and it means that your road winners longer; that's what you want to see in your journal.

In terms of uh I've heard you talk one before, instead of having a single entry that you should be averaging into your entries instead, and is that more so in terms of if the market's going against you or do you mean once the market has shown you its hand and it's working in your favor then you should be scaling in? Both both. So uh what you don't want to do is you you don't want to use up all your ammunition when you're initiating a trade. I never do it; I know that makes that that puts pressure on yourself to be right immedi mediately. M, you know, sometimes you all right immediately, sometimes you feel no pain in a trade, and that's wonderful; doesn't happen like that all the time. So you know, you don't want a bunch together positions if you're going to average because you're not doing yourself a favor. If you buy something at 50, you don't want to buy it at 49 because that's bringing your average down a half a a half a two ticks; you don't want to do that; you're not accomplishing anything. Why? Because you just used up another 50%—whatever you used up—you doubled your money; you may have more buying power, but you're clumped together. Okay, you want to stretch that out; you want to bring that down to 45, so now you're talking 47 and a half, all right? You don't want to bunch together, but you don't want single entries because single entries will burn you every time; it will burn you every time. But don't clump together um when you're averaging down and you're and you want to average down to your initial position, don't clump it together; let it spread out, especially in the NASDAQ. You know, I don't maybe 10 to 20 handles; I don't average down in the NASDAQ. This morning it was much more than that during these some of these sessions where I was longed 20 or 30 NQ Futures okay, because man, they kept coming down, and if you have the bank to do it as it comes down lower and lower, you want to increase your size; you don't want to buy one if you're low four; you want to buy four to eight, and that brings your price way down, and that helps you feed in when the market turns. And the market always turns—for day trading purposes, may not trade for you know to write off into the sunset, but it will uh it will turn around, and it will allow you to feed to feed into a rally. But if you're only buying one or two down, you're not bringing your price down enough; it's going to make it too difficult. So you have to close your eyes and buy them if you want to do it right.

What are your thoughts on uh market cycles? Because you've been through your fair few, you know, you got your '87, you've got your dot-com, you've got your 2008, you had obviously your Covid crash recently as well, then last uh on Monday of this week—sorry, not even last Monday—until August 5th—is August 9th as of today—um, and yeah, like August 5th we saw the the market open up; we saw markets across the board red and selling off very aggressively, emotions extremely high, and yet we bounced back and and actually you know, printed new highs from those lows—amazing um you know how what can you speak on in terms of like recognizing the emotions, any sort of common traits amongst these um volatile market conditions that come in from time to time, and any of the biggest mistakes that traders make when these moments happen? Yeah, uh if the volatility is on a downside, as I mentioned earlier, uh one of the biggest fail trades is—and sometimes you could do it uh but but vast majority of times you don't—you can't get away with it—and that's selling failed breakdowns or buying failed breakouts. Okay, market's going crazy, going crazy, going crazy. I mean, sometimes I will go crazy when I recognize that they're out of control by the various uh uh components that I look at, and I realize they're out of control, and I'll just hit that buy button, and I'll just keep riding it, all right? And and I I'll just start flipping out as they as they come up. But you know, the you can just recognize the emotions; you can recognize the emotions by the way the tape is moving; you can recognize the emotions uh you know uh you know by the technical areas that are being invaded by algorithms; you could recognize it. And and you know when you know the market is out of control, I I have a couple 150-200 names; that's a watch list; it's a customized watch list; it's a watch list—whatever—the banks uh the oil stocks uh you know the sammies uh on and on and on—and I got a really good sense when all these things are puking at the same time at the same time and the volume picking up as such. Of course, I always monitor the volume bars. I mean, you just know that the emotions are running high, and that gets my juices going because the the emotions running high, you know, people make mistakes, and all the folks out there, retail traders are probably in that group that makes mistakes. And and and know for instance, you know uh up up up up market, everybody's having a grand old time; buy to buy, the market goes up, make money, oh, this is great, you know. Yeah, cab drivers talking about it—up up up up up up up—okay, but they don't have to handle down.

Down, down, down, down, and and there's less sophistication in down, down, down. And they make more mistakes, and down, down, down. All right, they'll sell at the bottom, and that's what they do. And and that's the emotions. How interesting has it been to recognize that over the last 60 years, so or coming up to 60 years of your career, the mistakes that traders make and and the things that make traders be unprofitable are still the same, 100%. That's ex—that no TR statement was ever made. You can beat their head against the wall; you can do anything they want, and they'll still make the same mistakes over and over again.

And part of it is because new traders come into the fray, uh, and they and they they're at a different stage and make mistakes. Maybe the people that started this two or three years ago have advanced somewhat, but they'll still make the same mistakes. But collectively, as new traders come in, and everybody wants to be a trader, and new traders come in, you know, as an average, they still make the same freaking mistakes. It's amazing.

Has trading always been sort of this aw, this this thing that people have always been interested in?

Yeah, yeah. I I absolutely absolutely, you know, you know, you know, I I mean, I I don't live in New York anymore, but everything I do is in New York. And um, you know, people ask me—I just came over from a—doesn't matter—from a doctor and just normal stuff. And um, oh man, give me give me give me a thing. I'm a, you know, a cardiologist, nurse, nurse practitioner. Oh, oh really? Give me, I want you—uh, give me give me give me your give me your email address, give me this. You know, so yeah, the answer is yeah, it's true. It's true. People feel like they're missing a boat, uh, number one. Number two, uh, people are looking to augment their—when com—because of the reasons we stated earlier.

So one thing that did come out after August 5th as well, around that same time, uh, earlier this week was that um Warren Buffett, Berkshire Hathaway, is sitting on the most cash, and they sold a huge, huge portion—billions of dollars worth—of Apple shares. Um, you know, are these sort of traits that you've recognized previously when you know things are all-time highs? You start to see these huge funds start to liquidate their shares and start to sit on cash. I know there's a lot of talk of potential recession and market downturns. We're currently in election years across multiple—not just the US, but UK just had an election, France just had an election—y um, when these things have happened in the past, what are the common occurrences that usually take place?

Yeah, well, you know [Music] usually in election years, they'll buy the market in the last two months of the year. You have tax tax selling at the end of the year as well. Uh, that's another famous play that I always made. I always specialized in, you know, stocks that have gotten beaten up, uh, gotten beaten up during the year—down 30, 40% in in an up year. All right, uh, those stocks are going to be sold and replaced in a new year. So I mean, that's a that's a play—to be fair, it's been a play or been in talk, should I say, in whispers of it for many years now, since before co—co—we had that crash, which sort of instigated it being that the co and Corona virus instigated the crash. They turned the money printer on. Um, interest rates were were down at, you know, pretty much near zero. Everything turned back up—all new time highs. Um, and now it seems like we're starting to stagnate again. You know, we've got interest rates risen, inflation at all-time highs. We've got a lot of uh, wars across the world. We've got a lot of iCal distress as well. Um, and it seems like there's something on the horizon. There's a lot of talks of the US dollar collapsing and the end of that Empire. What are your thoughts after being in the markets for so long and seeing different rises and falls from different stocks, for example, and and different sectors of stocks like right now we're in the sort of like AI Tech uh, sort of sector and the boom there? Like is anything worrying uh, to you when you look at these markets?

I mean, yeah, absolutely. That's why you saw the last three or four days doing what it did after it made a high couple weeks ago—made an all-time high. You're not talking a long time here. You know, Warren Buffett uh, is, you know, that's what smart people, deep-pocketed investors do. You know, they they're sitting there with cash. They buy at bottom, and then they start peeling off millions of shares in a questionable environment, which is what he does. And and you know, I assumed he was doing that. I didn't have to read it, tell you the truth. And it doesn't really mean anything that he's doing it because I assumed he was doing it because that's what smart people do. Uh, you know, when they're throwing it out the window, uh, smart people are there to to catch it, and when they're coming up the other way, smart people there to let it happen. So when was he doing this at the height, near the height of the market? Does it matter to him? Is the market going up another 20%, 10% in his face? Probably not. Probably not. Was it going up another 5%? Maybe. But it doesn't matter to him; he's printing money by by liquidating these positions. You know, one of the smartest investors on the planet is Stanley Dren Miller, who who who sold all his high-tech names and bought the IWM—IWM—lesser names, less growth names—potentially more growth names, actually. That's why he bought it. You know, the IWM—list companies that are 30%, 7% of them do not make money, but what they do do is have research and development. And if you buy a basket of those socks in a in a an ETF like that, one or two of them can hit. All right. And and and and that that's what he did. Very smart dude. But as far as the concept on Wall Street will never change. Uh, we talked about a number of times during this conversation about uh, selling bottoms, selling bottoms, selling bottoms. Well, in essence, or buying tops, buying tops. Well, the smart people in the world that deep park, they know this. Okay. So when people are puking and in a market is puking, they have to place their bets, and they have to stay in power to just to hang on until it turns around. And and when it's selling up here, he's printing money. So this goes on over and over; it'll never change.

Do you feel like once when everyone's talking about recession, that's obviously not when it's going to take place? It's normally when it catches everyone off guard, uh, when peak euphoria essentially. So like every time we make a new all-time high, everyone expects us to then suddenly crash. It keeps doing it over and over again. Correct, until the point where no one questions it anymore. Correct. This—oh, this is going to keep happening. Perfect. That's when it takes place. Perfect. I I I stood up, watched the .com era the same way. Okay. You shook your head. None of those companies ever made money. Uh, they didn't make money at the time; it didn't matter. And every day I shook my head. I said, you got to stop this. My customers shook their head; they couldn't believe it. They were getting running all over the place. What's this? What the impetus on on the money are capable of this until, as you just eloquently said, until it's not okay. And then it gets ugly. Okay. I firmly believe in the last three weeks. Okay. What were they talking about? Where—what word did you hear? Bubble. It's a bubble; it's a bubble. Want to know why the market made new highs, all-time highs two weeks ago? Because everybody was talking about a bubble. Exactly what you said. That's the way it goes. Simple common sense, man.

What are your thoughts in terms of—I know that you did—you were part of history with the New York Stock Exchange. You placed the first uh, trade, if I'm not mistaken. Um, was it executed? Fire—I don't know if it was electronically—something—you—buyback—the the uh, program trade orders—program trade orders. That's right. Yeah, first ever—first ever on a New York Stock Exchange—first ever. I had six million shares, give or take, of of 60 S&P names to buy Market on close when there was no supply—no supply—stack of orders like this—no supply—buy 100,000 mobile market on close, buy 20,000 IBM Market on 20,000 IBM, right? 20,000, 500 shares of IBM in those days. The buy Market on close could could take the stock up a buck and a half or two bucks. 20,000, 60 S&P names. I I I had 25 brokers, seven of which work for me, 25 of which were just, you know, my friends that were representing, and I'm I'm staying in a separate location handling every freaking order. Okay. And and I said, wait a minute, this is this is not going to work. It's not working; there's no supply. The place was in a panic. Uh uh, the chairman of the stock exchang—the the the the directors, the board coming down—are these real orders? Are these real? I said, fellas, what do you mean are these real orders? Yes, the real orders. Oh yes, they are. Oh my God, what are we going to do? What are we do? Nothing. Get away from me. I'll I'll take care of this. 25 brokers running all over the place. Finally, I realized that the traditional way to do this is not the not the way to do it. So what did I do? I call the the largest, the biggest firm on Wall Street, who—client of mine and what paid me to trade IBM for them—$115,000 a month in 1980, 1981—a lot of money, just as a retainer, just as a retainer. But they had the most successful person that headed a trading desk and the most powerful person on Wall Street—excuse me—named Stanley Shopcoin. And Stanley Shopcoin was a the head trader of Solomon Brothers, and Solomon Brothers noted as a bond house, but they a huge Equity desk, and every piece of merchandise that came down the pike to get placed called Stanley. Called Solomon Brothers. I said, I I need somebody with strength here. I go to the phone. I say, give me Stanley. Stanley Richie, what's happening? Stanley, listen to me. I have done—I have B to buy. Okay, so you know, call me back. This is what he said. He says, so call me back, back and will white somebody. I said, no, no, no, I there's no way—cannot do that. There's none of that. He says, give me my clerk. Gets his clerk, and he says, give Richie sell orders up to the amount of shares that he has to buy at his discretion to fill every one of those buy orders. And that was an incredible day, and we just went up, talked about the specialist book, find out where supply was, uh, you know, and then we filled it in with Solomon Brothers proprietary sell paper and priced every damn one of them.

Wow. Crazy. Wow. Crazy. So like being part of that history, so like you being part of the history of being one of the first people to instigate a sell—a program—a trade, and how does that make you feel though, like knowing that you're part of that history?

It was just incred—I wish I had that those original papers. I wish I really did; they'd be worth millions of dollars, but I don't. But how did it feel? It feels very satisfying. Here's a kid growing up in Queens with nothing. I wasn't—I didn't grow up with a poor family—middle-income people worked hard all their lives, you know, lived in a 10, $12,000 house, uh, you know, uh, I had everything that I wanted, which was really not much, and and and here I am dictating flow—it's the the the the top firm on Wall Street and the top top top trader on W Wall Street—basically—not basically—you go look him up—top guy. I mean, he controlled everything, and here I am, you know, one-on-one with this person, and he's given me discretion over millions of shares. So how does it make me feel? Makes me feel great, man. Really does.

As it should. As it should. And you know, as part of this whole interview, there's so many gems that we've taken away, that's for sure. And and to speak from the experience and wealth of knowledge that you've had, you know, I know it's going to have a huge impact on trading—is out there, as we discussed—like people of, you know, this audience, the retail audience of today, you know, we've talked about like the issues being more so of of rushing, their greed, their lack of focus. Um, but when it comes to—we talked about sizing trades, right? We talked about handling size for yourself, but what would you advise to traders out there who are going through that scaling process themselves? You know, they're going from—I would say—trading a few thousand dollars into the tens of thousands, the six figures, the seven figures. You know, and a lot of them have these barriers when it comes to that psychology of being able to handle, you know, new size, whether it's new stop-loss amounts, new take-profit amounts, or new contract sizes. Is there anything that you can sort of advise them to help them overcome those barriers?

I I would say something in a very profound manner here: if you find yourself in that position, stop, and and and and manage what you can manage, because it's not for you. You will make mistakes, and it's going to cost your money. If you you think you can fight through it, it's your prerogative to try it, but if you have a roadblock and you sense a roadblock because the the the chips on a table have changed, uh, you know, you may have to look in the mirror and say, maybe this is not for me, or you may have to just stand in one place. You know, I think it's very fair. I think it's very very fair. And it's interesting you mentioned about chips on the table—how how close of a relationship between say poker and and trading is there? CU—as you mentioned earlier—actually a similar thing where you you need to know the personalities—obviously that was more so for the pits—but do you treat the the markets even now in the similar fashion of trying to recognize the emotion within the charts, if that makes sense? Like if you're seeing a lot of a down movement, a lot of emotion just within the chart itself, like when you're looking at the charts, you're seeing these huge red candles, is that how you're operating? Are you looking at, okay, this this is how the average trader is probably feeling right now, or the traders are out there, this is what the flow may be telling me, and therefore acting accordingly?

Yeah, I mean, I listen, I made my I made my living and and and as of today have learned uh, under very stringent conditions uh, how to control emotions uh, and how to manage emotions. Um, again, the size doesn't really matter to me; it doesn't—it means nothing. I can, you know, it doesn't mean anything—trading that kind of volume under those circumstances with what the what the stock meant in the overall picture of market—every trade, most of the trades during the day, I can recount and look at the percentages of every one of those trades and the decision process take that takes place to pull the trigger on a specific trade. Yes, it does. So you know, and I believe that those decisions really are the decisions that control the the decisions we make in our everyday life, whether it's to stand on a curb, whether it's to take a step this way, whether it's yell at somewh—whatever it is, there's a percentage in everything. So you talk about a poker game; there's a percentage in a poker game. It plays—do I want to play? Do I want to go all in? Do I want to fold? Am I going to make a bet? Am I going to make a raise? Blah, blah, blah. But the stock market boils all that down, and the difference is there is no time. You have to make a split decision, and you make a split decision based on the time you put in and and being a student of the game, as I say that word again, you you need—you you need to get to a point where your gut spits this out, and you can—you you are capable of doing that, providing you have the right mentor—that I'll tell you—providing you have the right mentor, you can—you're all capable of doing it—but the decisions that I make—that I make to this day—are based on that gut feeling. I tell everybody, look at the rhythm of the numbers. What do you mean? I said, watch the quote and watch the size that trades—watch it—that'll that'll spit out scalp trades to you without looking at another thing. Yes, it will. You'll see the momentum go; you'll see it. So you know, those decisions are are are based uh, wholly on mathematics, and and I I say, if you're a student of the game, your gut will start spitting out—spitting out these moves. You will see it. And learning from way—the way I learned it and and lived it to this day, it holds up; it just does. So it's all about mathematics, man.

To finish up on the algorithm side of things, y—you know, what would be your advice for people to start trying to observe, you know, these algorithmic plays within the markets? I know you've described really well previously in terms of having sort of your range, knowing where your premium, your discount is, understanding your buy and sell stops within those ranges and acting accordingly. Is anything that we can elaborate on that at all?

You need to remember that algorithms are there to create liquidity and volatility. They have no mind. They have to go to an area. They don't just go to an area; they're programmed by—no matter what you say—it comes down to a programmer programming them—programming whatever technicals they put in, whatever the mathematics is that make up this algorithm. So it's not only the the premium and discount areas, but when you see the NASDAQ going to a full number—coming up 20 or 30 handles—19,200, all right? 200, 230, 240, 250, 270, 275, 280—market's rallying—275, 280—you know, it's printing at the main number. You just know it, and I know that those algorithms are going to make that print. But it's—it's a same example could be made by any major—any firm—even number. Okay? Okay. Where is that 10, 20, 30, 40, 50, 60, 70, 80—especially 50—you know, they they sit and they sit. They want to go to those numbers. Why? We should spend a little time talking about algorithms going uh, to option strike price areas. You know, we specialize in that as well, because this market and is enormity—we gave the example—the positions in this market this day and age are multi-million share positions. It's not easy to put that kind of money to work, and they have to put it to work. It's their mandate to put it to work. Why am I giving you my money if you're not putting it to work? So they have to. So their positions are huge. Does anybody out there think that that they just sit back and they buy and hold and smile and go home and have dinner with their wives? No, that's not the way this worked. They hedge their positions as well. Where do they hedge their positions for the most part? All right, options. So these strike prices become huge, and the amount of puts and calls that sit at these strike prices—the algorithms know where they're sitting, and they're programmed in to go to those strike places. Why? To create liquidity and volatility. That's all their mandate is; they're not human; they don't care about P&L. Understand that.

Interesting. Uh, to finish up on, because I know it's a topic discussed previously on the podcast, but I haven't for some time—um, in terms of market makers and hunting stops, there's a big thing in the retail space of like the market makers—like you—you know, price hitting your stop loss, then going completely the other way, and people feeling very targeted. Correct. And um, I've heard you say that that is a case—that is something that does take place.

Oh, 100%. Uh, one of the lock—lock trades as a member of the New York Stock Exchange that a specialist made or if you were an agent and had order size flow is to be on the other side of stop orders. Okay. So conversely speaking, here's another little gimme for you folks out there, retail traders especially. If you're going down to a number and the market is coming down and down and down and it's, you know, the algorithms are going to print a number—put an order in two ticks underneath the number, because why? Because you'll wind up being—the assumption is that there are stop orders at those prices, and the assumption is that you will be on the other side of of a bad sale. The market is a buy and sell; there's a buyer and seller on every transaction. Somebody's going to be right, and somebody's going to be wrong. You want to be on the other side of stop orders? Yes, you're 100% right. You want to be on the other side of stop orders, but it's not easy to identify where those stop orders lie. If you're going to put a stop order to protect yourself again, don't put it at 50 because they're going to get hit. You know, put it at 40—give yourself a chance—give yourself a chance to breathe and for the position to be right. Don't put it at 50; you're going to get swept away by some intelligent buy like myself who wants to who want to get long. Or if you're a mistake, Richie.

I love that. I love that. And I'm sure we could keep going, but um, thank you for being with us today and sharing so much with us. Please—and everyone at home, drop a comment with your biggest takeaway from this episode. There was so much as always, and the links for Richie will be in the description below, so make sure you check those out as well. There'll be other episodes on screen, so check those out; hit subscribe. And until next time, take care.