Transcription
This guy's strategy took a $1 million to over $100 million. The founder of episodic pivots, Pradep Bondi.
A lot of time people come to me and say, "I don't know any day trader who's making money." I know several day traders who make more than a million dollars a year, right? And I know exactly how they make it. Most likely, 80-90% of them are going to be focusing on that's the fundamental playbook kind of a thing. It's a heady feeling when you make half a million, a million very quickly that you start believing your own bull.
What makes profitable traders profitable and what separates them from everyone else?
The one signal factor which determines whether somebody makes it or not in this business is basically this.
In this episode, Pradep goes into exactly how he developed the episodic pivot strategy as well as the momentum burst trading strategy and how traders should be implementing this into their playbooks. I also see interviews of traders who made like big money and all. They talk as if like, you know, they figured it out, right? And the market is a bit like an it will invariably teach you a lesson once you get that god kind of a center. Now, do they want to hear this? No. Because they want to start trading today, tomorrow buy a Ferrari, have like bikini-clad women, have a boat, and in the process, then you lose your account. You need to be where the money is. I have seen that over any time period of the last 24 years, there are three sectors where the biggest money is in the market. Number one thing will be...
Welcome everyone back to the Words of Wisdom podcast, still the number one trading podcast in the world and the fastest growing, thanks to all of you and our incredible guests. Talking of which, today we have a very, very special guest. He has actually helped a significant number of traders become high performers, become profitable. We're talking seven, eight, nine-figure traders, even people who've been highlighted in Market Wizards and even the Future Market Wizards book. He is the founder of Stockby. He is the founder of the EP trading playbook, the episodic pivots. It's the one and only Pradep Bond.
Thank you. Thank you for having me.
It's my absolute pleasure. Thank you for being here today. I know we just got to do a Chart Fanatics episode. So, you know, really, really great insights for me coming into this podcast.
But I really just want to go straight off the bat. We were literally just talking before we started there in terms of like, over the 25-year trading career you've had, you've interacted one-on-one with thousands of traders.
Mhm.
And you really have great insight into like what makes profitable traders profitable and what separates them from everyone else.
Mhm. The one signal factor which determines whether somebody makes it or not in this business is basically their self-leadership. Uh, the people who have this ability to find solutions to their trading problems because trading is not easy. Uh, you have to find solutions to a lot of problems in order to make it work. Even if there is a template somebody gives you saying, "This is the edge and this is how you should do it and process," you have to make it work for yourself. So, every one of the successful traders I have seen, highly successful traders, they have this innate ability or they have this self-leadership where they can guide their own performance, they can correct their mistakes, they can like, and keep themselves motivated because there are periods when you don't become profitable in this business. It takes two, three years to put all these things together, and they have that self-efficacy belief or their fundamental belief that no matter what, I'm going to make this work.
Mhm.
And they don't give up then because of that particular belief.
Do you think a part of that also is the mastery of the trading process and actually a passion for the, the trading, uh, process and the markets as a whole versus just focused on the monetary aspect?
Uh, I think it's a combination. But, uh, it's like, I know a lot of people who are very passionate about the market. They're very passionate about trading, but they are not necessarily making money. So, it's not necessarily that passion is going to make you money, right? I think, and what I see, uh, like when I talk to traders and when I work with traders also, is there is something called mind clarity which you need to have about how do traders make money.
Mhm.
Right? And like, a lot of time people come to me and say, "Look, I don't know any day trader who's making money." I know several day traders who make more than a million dollars a year. Right? And I know exactly how they make it in terms of what is their playbook. What are they? If I know, if I talk to a day trader, I know most likely 80-90% of them are going to be focusing on news-based moves. Right? And that's the fundamental playbook kind of a thing. Right? Now, the people outsider or who are new to trading, they don't know this. Uh, they have this gap between, uh, what actual traders do and what they think traders do. So, once that mind clarity comes in and you figure out how does this game is actually played by people, uh, because a lot of time books on trading are very misleading, right? And basically, if you read a book on trading by, say, a market wizard, he shows two or three best examples of trades, or even when I talked yesterday, today,
Uh, I was giving you the best examples, but there are a lot of things which don't work, right? And, and a lot of money in trading is made by people by hitting singles, while all the books are about home runs.
Mhm.
While the most success, and you talk to a lot of successful traders, and most of the people whom you featured on your podcast, if you ask them, they had occasional home runs, but there are thousands of singles.
Yeah.
And those singles, uh, is a game which, uh, for a new boy who's coming to the thing, he thinks, "This is like an, I come into this to buy an island. I don't want to do this hitting singles." Right?
Yeah. Hey guys, before we get into this incredible episode, I want to say a massive thank you for all of your support so far on both Words of Wisdom and Chart Fanatics. We have grown immensely and are still the fastest growing channels in the trading industry. Now, a way to get back to every single one of you, if you want profitable strategies completely for free, go to chartfanatics.com. The link's in the description. Put your email in, and every single week, we will send you a free PDF with a profitable strategy of the guests that we host, as well as on the website. You can go straight there and you can go through the library of strategies completely for free. Just input your email. On top of that, we launched a Chart Fanatics free Discord community that has already over 10,000 members of traders across the world. We have our live traders from Chart Fanatics Live in there. I'm documenting every single one of my trades in there, and we have exclusive discounts, massive giveaways, and so much more just to give back to every single one of you. Let's not forget updates on every episode and things that we are bringing to this industry that's going to change it forever. But for now, the links for that are in the description. Let's get into this episode. It's understanding it's not going to be this exciting thing day in, day out. There are going to be those moments.
And I think, do you think the, the focus on the process and actually enjoying the process, not necessarily passion, but having such a focus on process, so whether it's hitting a single properly or a home run,
It's actually be the process of that that the real traders and the profitable traders are focused on.
And having that understanding, I think is very important because,
You know, it's a really great point that since we started to have, you know, professional verified traders on, that has been a focus point of The majority of your P&L will be probably made up of those home run trades, but there will only be a very small handful a year.
Of them.
But they may make up 70, 80% of your P&L.
But it's actually, you still need those base hits.
Mhm.
Because without those base hits, you won't have the, well, one, the mental clarity and sort of the viewpoint on the market. So, you won't be sharp with what's going on. But most of all, in terms of to make that huge P&L, to be able to size more,
You need those base hits profits essentially to be able to do that.
Yeah. Your singles allow you to finance your larger trades.
Because if you're dependent on a larger trade and larger trade didn't work out, and you have like a 10% drawdown, 15% drawdown, now you are under pressure. Look, I need to find another home run to hit that. But if you have a combination strategy of singles and home runs, then you are not under pressure because you know, look at, okay, I had this particular trade didn't work out, but I can hit 25 singles, I can hit 30 singles and make up for this. So that's one. And second, in terms of sheer learning, right? And when people come to me, always say, "Look, it's much easier to learn something which you can do with higher frequency than infrequently."
Yeah.
Right? And if you're going to be taking a trade which is going to, you are going to hold for six months, one year, and which is going to double, triple, you are going to get a feedback about whether it worked or not only six months down the line or one year down the line. So your learning is going to be very slow. Now, as against that, when you do day trading or when you do singles as a strategy, I do two to three-day hold swings kind of a thing, which is my equivalent of a singles.
Mhm.
The feedback loop is immediately there, and then you can correct, right? So that a lot of people don't understand that they read this and you need to hold for longer term or trend following kind of methods, and, uh, that does it work? Yes, it works. A lot of things work in the market, right? But for a learner, uh, you need to try something which is higher frequency first.
And then you might transition to like, and now I don't want to do because it's a grind, doing singles, doing all these things. I'm also like, and I'm not young, so I'm semi-retired now, so I don't want to do the grind. So I'm more likely to do through the other things. But if I had to learn, what I can learn if I do 200 times, 300 times in six months faster, I will not be able to learn if I just do it two or three times.
Yeah. So, it's understanding that if you are in that sort of beginner stage and, and that process of learning, it's actually about trying to get as many reps in so that you can, it's not even about speeding up the learning curve necessarily, but it's meaning that you can actually get enough data, enough time, enough things to get feedback off of,
To be able to learn effectively, uh, and be able to sort of do it within that two to three-year period. Otherwise, if you are very low frequency, that period only gets longer.
One thing, however, in terms of having those longer-term trades, you know, because we talked on Chart Fanatics in terms of seeing trades that could run for months or even longer, how did you, is that something you had to develop a skill set for of being able to have the patience to let your trade play out and hold it longer term? Uh, you know, seeing those fluctuations in P&L, making sure not to micromanage the trade and end up getting out too soon because of, uh, moving the stop loss too aggressively, etc.
Like, these, is that a skill set that took time to develop?
Uh, I think, and, uh, it's a skill set, but more than skill set, you have to, if you want to hold a trade for a longer term, you need to have a setup where you can hold it for a longer term. So, I have a specific setup of turnaround stocks where I know based on their history that it can be held for a little longer than the growth stock. But growth stocks have a very different, uh, characteristics and all. Fundamentally, uh, there are two types of moves in the market. One kind of a move is a magnitude where the speed or the velocity with which the move happens is very rapid. And it's a big magnitude, like a 100, 200% move. And then there is a duration move. And a duration move, the stock is going to keep on going up for two months, three months, six months, one year, three years. But the velocity of that move may not be very high.
Right? So, these are two different, distinctly different moves in the market. The problem for many traders is that, like, you know, they want to hold for longer term, and they are getting into these, uh, kind of trades which are magnitude moves. Magnitude moves, it's a very simple observation in the trading, uh, in the stock market is, fast moves tend to mean revert, and slow moves tend to persist. Right? So, you can't have a fast-moving stock and hold it for a longer term. Right? It just doesn't work. So, you have to start with a setup which is designed for longer-term holding. Intellectually, it doesn't appeal to me to hold something longer-term because you get addicted to short-term profits, like, you know, basically as a trader and personality types. But if I have to do longer-term trading, I will base a lot of my longer-term trading on a setup which is very, very analysis-based, which is based on valuation, which is based on projecting how many quarters in a row that stock is likely to have a growth.
Yeah.
So, the setup per se is the most important thing. Just forcing yourself to like, hold for longer term and saying, "Okay, I'm just going to put a stop at a 10-day moving average or 20-day moving average and let my trade run," um, is not going to help because the underlying setup, if I don't select which is longer-term hold,
It doesn't work. Would you say that a large gap in what traders are doing is that they're not going deeper into their setups, like creating different playbooks that then have different rule sets and are used when within certain context within the market when something's in play, and then based on the stock itself, based on the news catalyst that's doing that? But plus also, that's another point in terms of,
You know, do you feel like a lot of traders are kind of ignoring news and trying to purely work off the technical setups when the news can be the perfect catalyst to create not only high risk reward trades, but to be on the right side of the market when you're in line and have an understanding of fundamentals?
Mhm. Uh, I think you have a good point. Like, and that is what I keep saying to traders also, a good chart itself is not a setup, right? And you have to find a start, a chart which is good, and there has to be some reason why the stock is going to go up. Stock goes up for a reason, right? And they don't go up just because there is a pretty good chart or support or resistance, right? Uh, you have to trade stocks which have a reason to go up. According to me, that reason must be, might be a theme, that might be a sector, that might be whatever earnings catalyst story, but that particular stock should have a reason to go up.
Setup itself, or like just a chart, is not a pattern, or it is not a setup, or it is not a thing. Now, United Health has gone down a lot in the last one month. There is a reason why it went down a lot, right? Or some other stock has gone up a lot. There is a reason. If you know the reason, you'll become. So, it's not really that traders are not trying hard, right? And basically, if you are not profitable at that stage, you are just stuck in the mud, and nothing makes sense, right? The traders who develop these edges or like expand their edges are profitable. Once you are profitable, you have the luxury of like creating multiple edges or creating a playbook with multiple plays. So, the first task for a trader is to become profitable. And how do you become profitable? When people come to me, because a lot of people come to me who are members, non-members, and just by word of mouth, and people like Russ, again, others tell them, "Can I go talk to him or something like that?" I always tell them, "Look, can I just copy somebody? Copy some trader who is profitable and what he does? Don't reinvent the wheel. In the first, make something which is a formula work, and then do your own thing."
I started not by creating my own playbook. I started, I found a book when I was just starting trading, and there was this book called Hedge Fund Edge, where there's a Mark Butcher, there was the author, and he had this short-term trading, uh, setup which he detailed in that book. I took that, made it work as it is, without making any changes. Once I made it work for two years, then I improvised and created a setup of my own around it. So, in the beginning, you need to copy somebody, and that's the easiest way. Actors copy others, right? And businesses copy others. Everybody does this.
So, it's best to rather than go out there and try and almost create something, especially off the back of not having any results prior or having a process prior. You'd rather go to someone or take something that's known to work and has the data and has the results already.
Replicate that, and then through doing that process, you're going to develop your process. You're going to develop discipline. You're going to develop the skill set and the knowledge and awareness of the market.
Build your reps up to a point where then you can start to make tweaks or make it your own effectively.
Mhm.
Let's take a break for a minute there, guys, because I want to tell you about our incredible sponsor, Alpha Prime, the first of its kind in the industry. Now, evaluation firms have been in the industry for the last few years and done absolutely phenomenal in terms of its impact for traders. As you can see here through Alpha Capital and Futures, so many payouts to so many traders across the world. But now, for the first time, there is an incredible route for traders to become professionals and to trade live capital, and that's through Alpha Prime. So, let me quickly tell you how it works. You can just buy a challenge on Alpha Capital, Alpha Futures. Doesn't matter which one. So, have Alpha Capital, you have phase one, phase two, phase three challenges. On Alpha Futures, you have standard and advanced plans. Whichever one, purchase a challenge, show consistency, build your track record, and then you can be invited to Alpha Prime. Alpha Prime, you will get access to live capital. You will get access to risk management and resources at a professional level. You will have a salary as a trader and access to trade on live trading floors starting here in London. This is the first of its kind where an evaluation firm is finding talented traders and then backing them with live capital and creating a route to professional trading. I am very proud to be sponsored by Alpha Prime. The links for both will be in the description below. Alpha Capital and Alpha Futures. Use the code RZ for 20% off all challenges. Link is in the description below. Now, let's get back to the episode. Would you say in terms of, you know, by now you've come across thousands of traders, no doubt, who have used EP and that playbook, is there anything that stands out to you for people who start to use it? Anything that they struggle with? Anything that they potentially do wrong in the beginning that you could say, "Okay, if you actually did it in this way, or this is the best practice to start using this playbook, um, effectively and, and, you know, in a smooth process, if that makes sense?"
I think the, uh, problem for a lot of new traders who start trading any method, whether it is EP or any method, is like, and basically, uh, their profit expectations and their win rate expectations are not in line with the reality of what professional traders are dealing with, probably, right? And if you get something like, and I say, there was an example of just three days ago, there was a stock, and I'm trying to recall the ticker, I don't recall, I think YTX was the ticker, right? And that stock went up 30 or 40%, 30% something in a day, right? And there was a trader who bought it right at the, uh, beginning of the day, and we had discussed it in a pre-market meeting and all, and then,
Uh, he didn't take profit, right? And basically, and then the next day, the stock ended up giving up all the gains, and then he's crying. And I said, "Like, look, and what did you expect? If a stock made from your entry 20%, 30% in a day, what were you expecting? That there is going to be a miracle going to happen, and you're going to buy an island and you'll have bikini-clad women on the island? Uh, take that profit, right?" And this, these are things which professional traders have learned through experience. If you get a home run kind of a thing, you know, one hour, two hours, my first reaction is to just lock in some profit. I'll keep a smaller position and see what happens.
Mhm.
Now, that kind of a learning is difficult, or finding solutions to the problem like that is difficult for new people because they just are thinking very differently.
Mhm.
Uh, his real thinking is, "X has gone up 20% in one month, it was going to go up 200%." And things like that, right? So, it's like a lot of traders start pre-planning like how this trade should go, how much it should make me, and the potential, and they kind of lose sight of the process when they're in the trade and it's starting to move.
In terms of, uh, you know, starting out as a trader, we're talking in 2000, right? Is when you started your, your career. Like, what has it been like the different market conditions and the different market cycles? You know, we've just come into the start of this year, and we've seen quite a change already.
Like, what can you speak on in terms of, is there any sort of recurring theme when you've seen cycles change? Is there recurring themes in what you, mistakes that traders make when these changes take place,
Or things that you've noticed from yourself and other professional traders,
That they do well when they, you know, the common practices, if you will, or when these market conditions change?
See, uh, like I've been, I started trading in 1998, so it's almost like 26 years now, probably, right? Uh, the markets have become much faster. Moves are much, much faster. The magnitude of the moves has increased, right? And basically, uh, news sources are the retail traders are much luckier today than they were earlier. You have this podcast, you can actually talk to a real trader and send him a DM, and like, he will respond. There's no mechanism like that. I remember when I started trading, right? And the internet was just starting, because 1999 was like an, so you still had like a newsletter which used to be mailed to you. There used to be some newsletter which used to send a telegram, right? Can you imagine like that? So, information is available, but what hasn't changed is that, uh, especially for certain styles, if you're a swing trader, uh, there are periods when everything works, and there are periods when nothing works. And the ability to identify that is very critical.
Uh, if you are a day trader, the today, if you're a day trader, you're much more lucky because there is so much information available for what really works in day trading, and what are the things which people are. I know for a fact that if I'm talking to a day trader and who made two million, three million, or five million last year, I know that what he's likely to be doing that money using is small cap shorting, right? Or like doing some news plays or like some catalyst-based kind of a thing, right? That information was not available for a retail trader.
Yeah.
Because all the books were like about support and resistance, chart patterns, and things like that, which is,
One of the things which you use in trading small caps, but that's not the edge, right? And the really edge, if I talk to a good day trader, I know today is, uh, understanding that the small caps moves which may are like going to just peter out because there's nothing below the scene. Now, that kind of a knowledge base which is getting passed on from one generation to another to traders who are really motivated, didn't exist. If it was not that it didn't exist, but it was very difficult to tap into that.
Yeah.
Right? So, that's the benefit which is there.
The thing which I didn't know, there are a lot of things I didn't know, and which I learned. One of the things which I definitely didn't really appreciate or understand is, uh, who is your daddy if you are in the stock market, and that's the Fed. The Fed is such an important part of how the market behaves. And what happens in a market, when the Fed decides that the market needs to go up, nothing is going to stop. And I have seen so many people losing money shorting when the Fed becomes very accommodative, and they just like, you know, pumping money like crazy, right? And basically, so those are things which I didn't understand.
Uh, now I understand that I didn't understand this role of, like, on an overall basis, the bigger secular bullish moves and secular bearish moves. So, these are things which you learn, if you survive and prosper in this business, right? And basically, but, uh, for a beginner trader, I think this is a golden age.
Mhm.
They have, if you don't have money, you can go to a proprietary trading firm. Right? And there is information. You have instruments like, and like, if you don't have money to trade with $30,000 as a day trader, you have the day, weeklies, and daily options, and so many other, uh, things, right? And the sheer amount of information which is available on YouTube channels and TikToks and all these things from real traders is like, so much information is available, and the playbooks are available. You have traders who are like talking on Twitter every day, showing things. So, there's a lot of information.
If, if you were a new trader today, and, uh, yeah, as you said, there's a lot of information out there, and as you know, there's good information, and there's also bad information, or there's good, there's real traders, and then there's people who,
Can talk about trading, but they're not trading. And the reason I say that is, what would you recommend to people to look out for when they are looking for information? Like, how would you say is best to decipher, "Okay, this is a good person to to look at and and follow along." Maybe is it accolades? Is it time in the market? What is it that you would say people should be saying, "Okay, this is their, their checklist for, okay, this is a good person and information to follow."
I think I don't go by what the person is. I look at what is the content, right? And then can I see that content? Like, like, and I say, if you take the EP as an idea, and if you on your own look at like, the last 200, 300 big moves, you can find that this is how the stock actually works, right? Or there is this, uh, thing in the market which people keep saying, "Look, whenever the market corrects, after the market corrects, the stocks which held up the best are the ones which make the biggest move." Now, I tended to believe this when I was new in the market, right? Till I actually checked it out. And when I checked it out, I found that actually the stock which make the biggest move are the ones which were written down the most, right?
So, I don't trust any information, but I verify by doing a deep dive, by looking at it, "Does this make sense?" Right? And basically, by just checking whether this makes sense. So, that is the way to approach it from, from a skeptical point of view. But looking at, like, an, say, if I was a new day trader starting out, right? And if I go through 20 or 30 well-known day traders on Tw, uh, Twitter, or who are in the public domain, and I start tra looking at their, what they are saying, I will come to the conclusion that one of the best ways or the big edge in day trading is to short small caps, right? That is not something which is debatable, right?
Then, if I go back and start analyzing the small caps and start really looking at moves in small caps where there was a some sort of a PR and, um, pump and dump, and then I start analyzing, I'm going to come to the same conclusion, right? So, take ideas from people. Sometimes, like when I am on Twitter, or when I'm watching somebody's YouTube video or interview, I find an idea or a solution to a problem which I had never thought about, kind of a thing, right? I'll give you an example, like, uh, just two or three days ago. So, we have a Zoom meeting in Stockby every day, in the morning, and three times in a day, right? And basically, so there is this problem of how to enter a stock which has news, because many times if you enter it early, it shakes you out, and then it goes up, right? So, this is a problem, common problem traders like us face. And I was just like, in talking to some trader who does this for a living in the stock community, and who's good at it, right? So, he said, like, "One of the ways in which I do do it is, I wait for the stock to revisit the pre-market low, and then I buy near the pre-market low." Now, that immediately, I wrote it down because that makes sense to me. Now, I went and verified that information, and then I incorporated that into my next trade.
Uh, so that's how you have to look at it. Personality terms, what people say, uh, just don't go by that. Like, any, you can have an idea from anybody.
Collect ideas and then use the ideas is what I'll do. It's like you said, collect the ideas and then go and check out the ideas and check, see if it works for you.
Because most of the trading problems people have found solutions to.
Right? One of the trading problems which I encountered a lot in the first few years, a lot of my trades used to make 20, 30% gains, and then I used to like think, "Okay, this is 20, 30%, so it will keep going up," which is what exactly new traders also think, right? And I would end up closing the trade break even or just like when it started reversing because I was giving them room to run. Then I realized one of the best ways is to sell into strength, and selling into strength is what, like, you know, uh, all professional traders realize after going through this kind of a period, right? Now, that kind of an idea is something which,
Can change your trading completely, and which a new trader cannot even imagine or think about that kind of an idea. And a lot of successful trading is these small, small, small ideas. They're not like one big idea, right? And it's just, so now, what, what I do is like, if I get into a trade and it makes 10, 12, 14, 15, or 20% in just two or three days, I sell 80% of my position and keep 20%. Right? Now, that solution, if I had found in the first 10 years, I would have kept so much of my money, right? So,
Do you find that actually, over the long term, it's only like, very small details that make actually the biggest difference?
It's all very minute details, small things like in terms of entry techniques, execution. It's not like, you know, there is no edge in an idea. Episodic P is not going to make you profitable till you find execution tactics.
The process and the execution is an edge. In day trading also, shorting small caps or stocks in play as like news-based plays is not something which is secret. Right? The difference between somebody who makes a million dollars in a trade versus somebody is their execution.
All right? Execution is the edge. And, uh, you can take a generic set of idea and convert it into a highly profitable by creating execution edges.
Mhm. And that I see time after time when I see a trader who's successful, people think that there is something special. He might have some extra leg or head or something, right?
But it's their minute execution and the something which is like, you would not have thought about the way they do it.
Mhm.
Which makes the same idea very unique. It's the same thing in the restaurant industry, right? And I like, I went to London, right? Couple of months ago, and when I was in London, one of the staff members, he took me to a Mediterranean restaurant. I've been to many Mediterranean restaurants, right? And he said, like, "See, I'm from Mediterranean, but I'm telling you, this is one of the best Mediterranean food which you'll get. Even you'll not get this in Lebanon, right?" And basically, so it was a Lebanese restaurant. And yes, it was like, now, what is so special? They're using the same ingredients, everything, right? It might be the just the small tweak and small execution which they are doing different, right?
So, it's the same thing in trading.
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Yeah, you have to take it in bite-size, and you have to trade one setup idea if you're new.
If you try and like expand your playbook too early, I only traded one setup idea for 10 years.
Wow.
Just one setup idea I had, right? And basically, I didn't have a variation of that also. So, then you become expert in it, right?
Mhm. So, you have to trade one set of idea for a long period of time till, and which is true in any other field also, right? And basically, I, before I came to the US, I was in Bombay. Okay.
Mhm.
In Bombay, there was one guy who was a camera repair expert.
Mhm.
And that guy was only doing camera repair, and that only for certain, like, a brand of camera, and people used to come from all over to, he used to do camera repair, which is same in New York City. You'll find people who specialize in something. Uh, if you try, the one of the problems with all this Twitter and YouTube and all is, you get exposed to so many different styles of trading, right? So, you feel like you're in a Chinese buffet, and you need to eat this, you need to eat that, and you need to eat that, and as a result, you can like, bo like, overload your plate. It makes, takes almost three to six months to make one setup idea work. And sometimes it takes just six weeks, seven weeks, or sometimes six months to get just the entry techniques right, or exit technique right.
Mhm.
If I change my setup every day, or every week, or every month, I never build expertise.
Yeah.
But you can't blame new traders because they don't know what will work for them. So, they have to also try different things, right? Uh, but you try and don't lose money. Uh, which is easy for me to say now. But,
Do you think that's, uh, one of the biggest things that kind of hold traders back and, and why they end up maybe prolonging their journey a lot of the time, or even some people leaving trading, is because during that testing period, they're too quick to throw money into trading? You know, whether it's not even from the educational standpoint, more so from just the trading element, like,
Throwing money into a brokerage whilst they're in a testing phase. Do you think a lot more traders would have longevity and probably actually,
Faster profitability if they were able to during that testing phase, really reduce down how much they're trying to trade, how much money they're willing to put into trading,
And focus purely on developing their skills.
Yes. And I, that's exactly what I tell anybody who comes to me, right? And, and who doesn't have experience trading. And when I say, "Okay, you want to learn this setup, right? Start with five shares or 10 shares, right? Doesn't matter. You might make only $20 on that trade, but make it consistently for six weeks, three months, and then go to 40 shares, 100 shares, 300 shares." Now, do they want to hear this? No. Because they want to start trading today, tomorrow buy a Ferrari, have like bikini-clad women, like, and have a boat, right? So, uh, and in the process, then you lose your account. And if you lose your account, unless you have some way to refinance and all, something. Now, if you want to learn, say, any trade, when I personally try some new trade ideas or setup ideas, right? I start by putting only 20 shares or 30 shares to check out the idea.
Just test market it. I don't want to lose money, because if you lose your stake, the game is over. And which is what happened to a lot of traders. They, many times traders are just on the cusp of becoming profitable, but then they run out of money.
Mhm.
So, that's the problem.
Would you say that you, during your, your career, as you said, the first 10 years, you had one setup? Looking back, would you say that was probably too long of one setup, or was that, do you think that's probably the right way to go about it before starting to develop?
It's like an, there was no other setup I knew, right? And there were not many people I knew also in the business. I was sitting in my basement doing trading by myself. There was no social media. There was no way to know people kind of a thing, right? And so, there was like that limitation also.
But, uh, most of the people I know who trade, um, they only trade one or two setups, even the highly profitable traders, right? And they have variations of that setup, but it's just fundamentally, there is Coke, and there is a Cherry Coke, and there is a Vanilla Coke, and all Cokes, but they are basically the same thing. So, they might call that like, "Oh, I have like EP is one set of idea, delayed EP is just a slight twist on that, it's not a new setup, right?" And,
Got you. Yeah. So, that,
So, that one setup, you still had variations within that.
And fundamentally also, I've seen some personality types are there. Some traders can buy breakouts and make breakouts work. There are some people who are personality terms, not born to buy breakouts. They are pullback traders. And the pullback trader, uh, some traders can never buy a pullback.
Mhm.
So, you have to also find what suits your personality, because it's the same thing like I go to a grocery store. I don't even look at price. I buy things. And I have a friend, I went with him to a grocery store, and he compared prices, and he went on phone and said, "Like, this olive oil is here this much, this is in shop and shop, right? It is this much." This is, and I will go and buy it. I don't do that. So, the personality type, some people are highly analytical. Whenever I see a very analytical person, I say, "Can I go for something which is EP kind of a thing, which is more analytical and things like that?"
Mhm.
Some people are cut out to be scalpers.
Mhm.
And they can scalp. I have a member, I have seen like, you know, he has consistently, consistently makes money. He has like shown me his figures, and five years in a row, he doesn't have a loss-making thing. Or some other people who came in recently, met me, they wanted me to help them like in a transition from scalper to a swing trader, because it burns you out, right? And scalping is highly profitable, but it burns you out. So, they wanted, and I looked at their results, and they were consistent. But that personality type is also there in the trading, and you have to find what suits your personality also. And without losing money, right? Yeah, you give it a try. So, is there anything in terms of personality types? Is there anything that you've noticed as like a correlating factor? Is there certain things they can look at either within their trading or just outside their trading that can help point people towards?
So, I think it was very individual.
Whenever I talk to traders, right? And I talk to traders, and that's why I don't like talking to traders on phone. Uh, I ask them to come in on a Zoom meeting, and I ask to see their, like, face and things like that. Uh, one thing which I look at in a trader is leadership. All right? Uh, if they don't show leadership in any aspects of other things, right? And I, I don't think they will make it in trading.
Uh, all the successful traders, they are leaders also in personal life, or in the way they approach it. Uh, because the personality type which is required to be profitable needs to be a leadership type personality. It's interesting though, right? Because obviously trading is a very individual,
Individual, yes, thing.
But leadership in terms of a self-leadership, not necessarily leadership in terms of leading others.
Self-leadership in terms of, "If I don't have an answer, you go, you go and find it. If I don't know," like, an, I, when I was a beginner trader, right? Uh, I used to define a problem, and I used
To go for a walk, I used to walk for 2 hours, 3 hours. Used to come out with, "Say, thinking, what can be the possible solution? Solution one, solution two, solution three." Right now, as against that, if I just sit there and wait for answers to come in, I don't have self-leadership.
Right in my group, when I teach, like I have these people who are members, right? And a lot of them, they have a trading problem. Like, first thing is, "Hey, eg, they call me 'E the Guru' is my handle on the side. Can I have a meeting with you?" They don't even make an attempt to find a solution first. As against that, like when Christian Kulami joined Stockby, right, he went through the history, he read all the past posts and all, and he just figured out things, right?
So that ability, I think, in self-leadership is the most important variation which I've seen between successful and unsuccessful traders. Now that you mentioned it in that way, I think definitely, uh, because I think it comes down to the essence of that they're not willing to just give up, uh, in terms of when faced with a problem or when facing even changes that will need to be made or answers. They're not willing to accept "no" as an answer, if you will. And they will go seek the growth that's necessary or whatever they need to look for, they'll go seek it. So, for example, if they need, uh, new information and they don't know it, they'll go and find the right person, and they'll take their time to find that right person.
Would you say as well, as part of self-leadership though, like they have a good tolerance for time horizon, meaning that they understand the actual realistic journey they're going to take? 'Cause I understand most people who get into trading probably come in thinking, "I'll probably be able to do this in a year or two." Um, which is fair. Like, when you're coming in, 'cause I used to have this mindset that everyone has to be passionate about trading, which is interesting when we talked earlier about, you know, plenty of passionate traders who aren't making money. Um, but why I say that is because I believe when traders come in only for the money, it's not the right mindset either. But equally, why did I get into trading? Yes, I was passionate and was interested in the markets, but obviously I got in for the money. I'm saying, I'm sure everyone who gets into trading originally, it's because of the money. Um, but would you say that these professional traders and profitable traders are able, at some point, hopefully early on, but at some point, able to change the time horizon expectation in their mind around trading so that they understand it's not, you know, for them to reach seven, eight figures, let's say, is going to take X amount of time?
I think, and it's also like, how you start your trading journey is going to determine that, right? A lot of younger people nowadays can start in a proprietary firm. If you are getting into a proprietary firm, your pathway to getting profitable can be significantly different because you already have a role model, kind of a thing. You can see and you know what works, and you're starting with a certain amount of thing. If a neural trader sitting in his basement is trying to become, his pathway is going to be different. Yeah. And he has many challenges ahead of him. Right?
And, uh, I think more than the pathway, kind of a thing, how much time which is required and all, there is a second element, uh, which I said, like self-leadership is one element, right? Um, if you talk to traders who are successful, after they are successful, they say, like, you know, they are very disciplined, right? But discipline doesn't make you a successful trader. What makes you a successful trader is creativity and innovation. Because when you don't have a pro solution, when you have a problem, look, entry is a problem, or exit is a problem, you need to iterate and creatively find a solution to your problem, right? And you will see, you have interviewed a lot of traders also, they have their own unique way of doing it. So they have found, they were creative, innovative enough, but once they find it, they become disciplined. So that's the thing. Paradox. Look, if you are very disciplined in the beginning, you'll never go outside the box, and you'll never be innovative and creative, and you'll never be able to solve problems because the fundamental problem for a trader as a beginner is to solve your own trading problem, right? And to solve problems, you need creative innovation. So that's another element which I see in successful traders, that if something doesn't work, they have that, uh, tinkering ability to hustle and find something which is a workable solution, not an ideal solution.
What was it about trading for you, you know, when you first came across it? What was it about it that got you interested?
I think an, it's an accidental entry which I had in trading. Like, what happened was, I came to US, uh, in '98. Mhm. And as soon as I came, there was a dot-com bubble. So that was like, everybody was trading. That was one of the things. And I joined, uh, as soon as I came in, I joined a dot-com. The person who had invested in that dot-com, the person who was behind the idea, he was a trader, and he was like, in a trading kind of a thing. I was just watching him. I was not interested in trading at that time. And for some months, we were working on this startup, and we had, I had to go to California and stay in his house because we are hustling for raising money and all. So he gave me a bedroom to stay, and where he had all these books on trading. And there I had nothing else to do. So in the evening, so when there was nothing else to do, I was just reading this book and I just read this book on trading, and I got interested. So by the time we ran out of money and we closed the dot-com, and I came back, uh, my ex-wife, she was also like, an, everybody was into trading at that time. If you came like, in that time, they were like, everybody was into office. Like it was like the COVID-19 time, right? So she had bought some shares because all her colleagues were trading, and they were all going down. So when I came back, she said, like, "Can you have a look at these? They are going down every day." And I said, "Okay, I'll have a look at it." I started looking at it, I got interested, and one thing led to another, and I never looked back.
Wow. Yeah, that is a very unique, unique journey. And, you know, when you look over your career, is there certain moments that stand out to you as really pivotal? That really, you know, any moments that were kind of like your quantum leap?
Mhm. Yeah. So the first trade which really changed my, like, I had become profitable, not making like, you know, big money, but making good money to make a living, kind of a thing, doing this swing trading, kind of a thing. And then one night, I was reading a book, and there was just one paragraph at around 11:00 at night, which is just a thing which the author says, "Look, when you have these stocks and they come out with earnings, and the earnings is like phenomenally good, 300%, 400%, 500%." Then those stocks can double or triple. Mhm. And I just bookmarked that page before going to sleep. And next morning, I wake up, and that time, this Investor's Business Daily newspaper used to be a physical newspaper delivered to you every day in the morning at 6:00. And I opened the newspaper. It used to have the list of stocks which are released earnings last night. And there was this small stock called USLB. At that time, it was called US Laboratories. And that had come out with earnings, and the sales growth was some 900%, and the profit was 2,600%. So I said, like, this author said this can double, triple. So I just put all my money in that trade, and in less than like, six weeks, I made more money than I had ever imagined in my life in one trade. Wow. And that changed how that became the EP kind of an idea then.
So, and so developed from there. Yeah. From there, then I started hunting for trades like that and, uh, systematized a way to find that trade, and that completely became like an, I never mean like, it's an accident, just happened to read that one paragraph and notice it, and next day you see a trade. And it so.
Is it, is there a case where, or have you ever noticed that, you know, winning streaks in your trading are followed by losing streaks, and they seem to sort of correlate with each other?
Mhm. Yeah. So like, and now that I'm much wiser, right? And it means I've been doing this for many years, and also I have a personality where I, uh, self-analyze and look at my, uh, self, like what happens. So I have seen that, look, and whenever you are in a good streak, when you're making money, you start getting this God syndrome. You think like, you're a gift to the trade. I also see interviews of traders who made like, you know, big money and all, you talk, they talk as if like, you know, they figured it out, right? And the market is a, like, and it will invariably teach you a lesson once you get that God kind of a syndrome, right? So the moment I have like, a really that feeling, or like I make more than what I think, now I have an internal clock. So I reduce my trading. I write down on a post-it note in front of me saying, "Look, be very careful, 'cause invariably drawdowns come in after a good streak." Right?
Yeah. So, uh, there is some self-regulatory mechanism. I walk away from the computer, or like, you walk away from trading for some time, just to reset myself, because it's a high feeling when you make half a million, 1 million, very quickly, that you start believing your own. Mhm. So, and same way, when you go through a lean period, it's terrible. Yeah. You feel like this is never going to work. And I've been doing this for 25, 26 years now, and I'm telling you, it is never easy. Every year you start with a fresh challenge. Every month you start with a fresh challenge. That's the fascinating part of it. You are not guaranteed that you're going to make money. Yeah. Ever. Right.
And what's the experience like in terms of at this stage, when there, if any, but when there are losing streaks or losing periods, like how do, how do you handle that? What is your sort of, uh, thought process when going through those losing streaks? Because I think there's a, and maybe actually, you, another topic you can touch on, is the reality of full-time trading and profitable trading, because I think there's a misconception that a lot of traders assume that once you, you know, can read the market and be profitable, pretty much you're profitable month on month, year on year, every single time for the, for the, for all of time, you know?
I mean, it depends on your style. If you're a scalper, I would say yes, or if you're a red trader, maybe. But again, there are cycles to the market and all. So there is, like, when I'm going through a losing phase, right? And I always have this, uh, four-factor model of like analyzing my performance or what is working and what is not working. And the one factor is setup, right? And if the setup itself is wrong, then there is, if you're trading a right setup, then why the setup is not working? You made a process error. Sometimes it happens, right? And that day, I was trying to put an order for 3,000 shares, and I ended up accidentally putting in a 30,000 shares order, and I lost money, and I had to take like, almost like in a one month to recover from that big loss because it was like beyond the limit, kind of a thing, right? So process error can be an error. The third is, most of the time, if you have a setup and a process, and you're not making setup and process error, then it's the market. Mhm. Right? And the market is not in your favor, and which is what is happening to a lot of things in the last one and a half months for choppy for swing trading, kind of a three, three to five days kind of a trade, right? Yeah. So then situational awareness becomes important. And the fourth factor is a trader factor. Uh, you can have a setup, you can have a process, you can have, but your own motivation goes through and flows depending on your own personal circumstances. Like a couple of years ago, I was going through a divorce. So it affects your trading, right? And basically, or like, there are periods when you're not fully emotionally like invested in trading. For me, now, motivation becomes a bigger and bigger problem because I am 62 now, right? I made my money. So to me, to get motivated some days is difficult because, you know, what am I going to do with the money? So just motivation can ebb and flow. Then you know you have the ability to trade, but you just don't have the, uh, fire in the belly. Same what you had when you're starting with nothing and you didn't know how you're going to make it. All these factors, and especially I've seen, uh, once you're successful, right? And I, and I've seen this with a lot of traders who come to me and hit batch and all, uh, they become successful. Human tendencies when you become successful is to like, go splurge on something, take a holiday, or like, do buy a house or something. And in that process, your attention gets diverted to that particular activity, and trading suffers. So it's never easy. Mhm. Right. The good traders who continue to do it for a long period of time, they are extraordinary in terms of motivation. Uh, they are like, in a unique in terms of, uh, keeping the flame alive. Basically, you'll see a lot of traders who made their money, they just like, go into some other business, or they just like, uh, lose the focus or motivation. I think, and even for that matter, Christian may not be trading the same way he's trading today because he's made his money, right? He got a boat, he's got a girlfriend, he's building a house. So motivation is different, right? Versus somebody who's starting and who doesn't have anything and he wants to make the money. So his challenges never go away. Your life changes, your life situation changes, and your, and you cannot, you can have a setup, you can have everything, and if you don't have the motivation, uh, money doesn't come automatically.
Does that go back to your point in terms of leadership as well, like the having that leadership quality, that self-leadership, means that in those moments, whether it's you're going through a, uh, certain situation outside of trading that can impact your trading, or whether it's, as you say, the motivation sort of diminishing, that self-leadership allows the individual to pick up on this, and therefore make the adjustments, maybe not every time, right? Not, not straight away, but quite quickly?
That self-leadership really comes down to like self-accountability and being in tune with oneself. Uh, which I think is probably huge as part of trading is like, you need to know when you're operating at your best or not. Mhm.
In terms of part of trading that, and building that process, and, and sort of getting to that point where you can, you make these trading decisions independently, how important is journaling and collecting data as part of your trading?
It's important, like, kind of basically, especially in the beginning years, it's extremely important, right? Uh, at that time, what you're trying to do is, you're trying to correct what are the things which are going right, and what is going wrong, right? So it's very important. But I think any, once you have enough experience, um, it just intuitively, you know, a lot of things, right? And unless you really hit a patch where you're like, you know, things are not working, or the market circumstances change, market dramatically changes, and then you need to go back to it. But a lot of successful traders I see, after some time, like it just becomes, uh, you don't do the things which you do in the beginning, kind of a thing. But for a beginner trader, yes, like that's how you're going to correct your own mistakes, and you're going to correct your performance, basically.
If someone was coming into trading now, and, uh, you knowing what you know now, and and knowing the the landscape of the trading community and all the resources, what would be your recommendation of starting out? Like, where, where should someone begin at this point?
I think the first question which one should answer is, what is the time frame I want to trade? Right? Because if I can decide the time frame I want to trade is day trade, then there is a whole pathway, and there is a whole different plane and airport which you can take and go to that destination. Right? If you want to go into swing trading, then you have a different pathway. If you want to do position trading, longer-term trading, that's the most critical. A lot of time for a new trader is lost. I was also like, in a lost in the beginning. I did options, I did futures, I did currencies, is it currency futures, day trading, scalping, everything I tried. Right? Uh, time is wasted, money is wasted. Uh, if you can make that decision, you can focus your energy, uh, very quickly. Once you say came to a conclusion that day trading, >> I would say that you can then copy something which is working in day trading, like small cap shorting is a proven strategy in day trading, or stocks in play, which is a news play for the day, is a proven strategy. Then I would not go and do something exotic, right? And I would just make that work. Mhm. And then, uh, so your pathway becomes much more clearer. You know, look at this is, I'm going to go to Washington, and I'm going to go to Washington by road, and I'm going to take this particular route. Uh, otherwise, so much time is spent on deciding whether I want to go to Washington or Colorado or where, or like, and money is lost in that decision making.
Yeah. Because they are so different. And obviously, the nature of trading is the same, and principles might be the same, but they are very, very different. And especially going back to your point about personality. If you're just trying stuff for the sake of trying it, and it doesn't fit your personality, and again, you people are really inclined when early on to throw money at trading, then it's just going to do more damage than good.
Like, how, how often have you found that when someone has been a bit too eager and, uh, allowed themselves to really pick up a lot of bad habits, how often have you found it to be, you know, a real challenge for people to undo a lot of the, the negative work they've built up, and negative habits to then make progress? So, for example, you take someone who's been trading for two, three years, and they really haven't gotten anywhere, but they picked up a lot of bad habits through that two to three year period, and then, you know, they come, they're either working with you, or, or you've observed this. How, how often have you been able to actually see people remove those bad habits?
Uh, I think, and it's very difficult once you build bad habits to change them because there's procedural memory, and if you learn the wrong way to drive, some people like ride the brake, once they learn it's very difficult. Same way, right? Uh, so it can be done, but in order to do that, you need to have a very high self-leadership thing. The same thing as like, losing weight, right? Or fitness, right? And in the last five years, I have lost like 60 pounds, right? But I go to got to gym every day, workout every day. Now, that is a self-leadership and self-discipline, right? And to change something which is wrong, first, there has to be a realization, "What I'm doing is wrong." And then you have to keep on, and everyday remind yourself to change that, so it becomes difficult. And, uh, unfortunately, uh, most people lose the money by the time they figure out. Sometimes like people change. I've seen some people change if they really lose money, and that shock and that particular, like, I had an example in Stockby, say, many years ago, I think it's 10 years ago now, almost, right? One guy wrote a long email to say, he's saying, "This is my sad story of life." He said, like, "I started trading, I made some money, and then like, and I got so overconfident. I had a girlfriend, I asked her to give 200,000, and I put all of that money, and I lost. I lost my girlfriend, and I had nothing." Uh, and he just said, like, "Can you help me?" Mhm. Uh, I said, like, "How can I help you? Like, I can't give you money. I don't give money to people, right? And basically, what I can give you is I can give you a free membership to Stockby, and I can talk to you multiple times whenever you have a problem, feel free to ask me to talk to you." Right? Mhm. And this guy was so like, in a desperate that, uh, in six months, he developed a method to trade and went on to make big money and like, became very successful. But before he became successful, he had reached the rock bottom. It's like, you know, uh, some of the alcoholics or people who, they one day they hit a rock bottom and they say, "This is it. I'm not going to be like, I'm going to be a better person." So sometimes that helps. Uh, but the worst is people who have a lot of money. Mhm. Right? And they try trading, these doctors and dentists and things like that. Right. They never want to learn because they say, "Oh, like, okay, I lost this much. I can make it up in my practice." Right? So, is that a very dangerous game? That's a dangerous game.
How important is it as a trader to be able to constantly follow the money, like know what's in play? Because I spoke to, uh, Lewis Borcelino, who used to trade on the Chicago floor, right? Never transitioned to, uh, electronic trading. However, the principle of following what's in play and following the money flow, as he called it, was still true then as it is now. And I don't think, I think that's something that will always be the case, regardless of where trading goes. But how important is that as a trader to be able to identify and then react accordingly? And just as a secondary question, off the back of that, is there anything that stands out to you that can help traders to identify those moments when some, when something's shifting, when something's becoming more in play?
Yeah. So take the first point, right? And which is, you have to trade what is in the market, likes, right? And basically, I did a video many, couple of years ago, saying that if you want to, the title of the video or the Zoom meeting I did with my members, I said, like, you know, okay, if you want to be the best pickpocket in Barcelona, right? Where will you go? Right? You go to a square where the tourists are. Six million tourists pass through that square, right? Every day, every month, right? Uh, same way, if you are not trading the big moves of this week, if you want to make money, or this month, like the last month is over, May. Right? Which stock? United Health? Were you in United Health? Were you in, uh, CRWB? Were you in this? These are the big moves. Or like before that, uh, the Trump trade happened, right? So you had to be in the big trades. Uh, and it was easy when you had the outcry market, where physically people were, uh, you could see, uh, shouting, you could see. Or it's like, even if you, like, in US, you seldom see these markets, but in India, you still have these open outcry markets, right? You know what is popular because you'll see a lot of customers there, right? So same thing applies in this market today, but today you have tools to find that. And that is the, that is why I use the 9 million volume because I know volume is an objective way to find where the crowd is, right? Because when you see a lot of volume, right? Similarly, I have some scans in Trade Ideas software which I use, uh, where I look for a stock which makes 60 new highs in less than 3 minutes, right? Mhm. So when you see something making 60 new highs, you know there is, this is where the crowd is, right? Then you put that stock onto your radar and start try and find it. It's much easier to make money in something which is in play than something which is dead money, right? Somewhere like people all the time on Twitter ask me questions, "What do you think of the chart? What do you think of the chart?" And all. Mean, that's not even on my radar. That's not something which I'm looking at, right? Why not that it's not a good chart or something, but that's not in play. Right? Today, if you have to make money, what is in play? AI, uh, robotics, humanoid robotics, or like crypto wallets, or things like that. And you need to be where the money is. Mhm. And more fundamentally, I have seen that over any time period of the last 24 years, 25 years, right? There are three sectors where the biggest money is in the market. Technology, biotechnology, or healthcare-related stocks, and third is consumer discretionary. You can get rid of everything else if you really want to make money. All year, everywhere, once in a while, you'll have gold stocks making money. Once in a while, you'll have uranium stocks making money. But just trading technology stocks is where the money is. Mhm.
And just to finish off, as a final question, what would be your say, top three tips for traders out there? Let's say, for example, they're they're in that beginning phase. They haven't quite found consistency yet. They're a year or two in. They, uh, they've learned strategies, but they may not have a playbook. Like, what would your, you know, top three tips to those traders to make progress and start to really start to accelerate in their journey? What would you say those three?
Number one thing will be to first be very clear about your time frame of trading. Right? That decision is the most critical decision. Second, use deep dive. Deep dive as a technique of finding out things, going back, because the deep dive allows you to learn about the market without risking money by looking at the past moves. The third thing, if you want to be a profitable trader, is process, process, process. You need to be process-oriented. If you are not process-oriented, you'll not be a profitable trader.
I love that. Thank you for being with us today. It was an absolute pleasure, and, you know, hopefully, we get to do something again in the future.
Sure. Thanks.
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