$100M Trading Coach: I Fire Traders Who Make Money If They Make THIS Mistake!

This man has evaluated and trained thousands of traders at one of the most competitive prop desks in the world. And he has seen what elite trading looks like from the inside.

"Doesn't matter what you trade. What's your job as a trader? Your job is to put yourself in the opportunity to have a positive expected value for every decision that you make. Now, that doesn't happen all the time, but that's your job. So, if you're saying that the technicals don't matter in certain situations, then you better really understand every other element of that trade so you have positive expected value."

Introducing Jeff Holden, head of trader development at SMB Capital, the firm behind some of the most consistently profitable traders in the world and the man responsible for building the trading systems that turns raw talent into seven, eight, or even nine figure traders.

When we get into a room like this and there are six of us around the table debating, do we hire this person? Do we give them however many millions of dollars to trade? Do we back this person? Do we believe that they're going to be here for 10 years? There are two questions that we ask.

"You can say trading psychology is my biggest bottleneck, but that might not be the truth. It might actually be your system. If you're our friend that we talked about earlier who's selling half of his position too early, that has nothing to do with your trading psychology. But if you fix your psychology and you still sell half early, doesn't matter. We think of so many things as structural first and then psychology second."

Because we're talking about your top traders, just so the audience can latch on to something, what does good look like in the sense of the KPIs of win rates, risk-reward, risk per trade, trade frequency, how many assets do they trade? If you can walk me through what is someone good doing?

"Uh, this goes back to that. So what we have done to make sure you get the most value out of today's episode is we have prepared with Jeff an episode companion so you can extract more value out of today's conversation with exact frameworks, step-by-step, and systems so that you can refer back to it even after you've watched today's episode. So I encourage you to click the link in the description, download it, absolutely for free, so you can have it alongside you as you watch today's episode. Without further ado, let's get into today's episode with Jeff."

Ladies and gents, welcome back to another episode. Jeff, very excited to have you here because I think you're in a unique position, obviously from retail to then professional to then managerial role. I think we have a cool journey to explore.

"I want to kick off with technicals. Now, every professional institutional trader I've spoken to, technicals seems to be an afterthought, or a trade generation ideation is from a long list of things, but execution is primitive. Technicals, seems like you have stronger beliefs around the word technicals. So, what does technicals mean to you and what's its place in trading?"

"I mean, technicals is a weird term, right? It's this catch-all that a lot of people use. I like the idea of technicals being a little more grounded. Everything we do on the desk has to be grounded to something. So, when we're talking about technicals, what we're actually talking about is the price action structure, right? And that gets represented in a bunch of different ways. It gets represented through, uh, indicators. It gets represented through price structures. It gets represented through, uh, you know, even going down to the tape. It gets represented through the bid and ask and and kind of the imbalances that exist there. But when we're talking about when you ask about technicals, I kind of had to smile because I'm like, that's a huge category, man. That's that's like huge. And if you're saying some are relevant and some aren't, yeah, I would agree. Sometimes some are relevant and some aren't. But if you loop all this back into, okay, what's our job as a trader? It doesn't matter what you trade. What's your job as a trader? Your job is to put yourself, at least we believe, put yourself in the opportunity to have a positive expected value for every decision that you make. For every dollar you invest, you want to have a positive expected value. Now, that doesn't happen all the time, but that's your job. Put yourself in the best position possible to have positive EV and then as a result of that, hopefully you're making money. So if you're saying that the technicals don't matter in certain situations, then you better really understand every other element of that trade so you have positive expected value. We find that depending on the trade that you're taking, the technicals kind of get scaled up or scaled down. Right? If you're taking a trade because you expect price to move very quickly, you better have that technical structure for the price, or you better have a really big fundamental shift in the story that's causing that to to move right away. But there are times that things are pretty status quo and the technicals don't matter as much because you'll get price getting pushed in both directions. So when you ask a question like, how much do the technicals matter? I can tell you that they matter a lot sometimes and they matter a little less some other times. But you have to understand the situations that really those matter and they're the most important thing and the times that they're not as important. And that's, you know, the whole concept of what we do is built around a playbook."

"Okay. With that being said, technicals, of course, is a broad topic. Would you say technicals or its utility is skewed to more towards shorter time horizons? Using technicals to predict the next six months might not be as as profitable or positive expectancy compared to the next 10 minutes. So therefore, would technicals be more skewed towards scalping or intraday, intra-session?"

"Yeah, I think as as you move shorter and shorter on the time frame, the technicals matter more. If you're moving past, let's call it. Well, we have a great example right now, don't we? We have the semiconductors going absolutely bananas. They're not going bananas because they broke out of a technical range. Mhm. They're going bananas because there's a fundamental shift in the way that businesses are transacting, in the way these companies, you know, company like SanDisk, who I'm sure you remember, like used to look at every little like like SD card that you had and you were like, 'Oh, okay. This is like cool, whatever.' Like memory wasn't as important as it is now. So, you have this huge fundamental shift. That's what's driving that trade. It's not the technicals. The technicals don't matter as much in that trade. Now, when you get to an overextension, the technicals matter a lot. When you have a higher time frame range break, like maybe a five-day consolidation break, the technicals matter because that's really the participants playing. So, as you get closer and closer to player versus player, we call it PVP, right? Player versus player."

"What's the domain for that?"

"Player versus player."

"Player versus player is always, I guess, is zero-sum the markets. What do you mean by player versus player?"

"So, as you go further and further or shorter and shorter in time frames, you have more and more participants actively trading, essentially what they need to happen right now. If you're a big hedge fund, if you're a, we call them big players, right? So, if you're a big player, you're not really as active on an intraday basis. From what we've heard from a lot of the people that we interact with, they actually are active on an intraday basis, but they're not making decisions. Are we 100% in or 100% out of this specific position every single day? As intraday traders, we're making decisions. Are we 100% in or 100% out of our trade every five minutes? So, as you get shorter and shorter, you're trading against more people or with more people who are thinking similarly to you."

"So, as you get shorter and shorter, it is player versus player a lot more. The technicals matter there because those are really driving the psychology of the stock."

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"Do you think trade ideas can be generated and executed all with technicals, or does it require a, uh, a catalyst, fundamentals, a bias, or maybe even overextended? And then, uh, let's say over-positioning, these kind of things? Or can, you know, just technicals alone past price predict future price, which is generally the retail sentiment?"

"Yeah. Uh, I think that it is about 80% of the way there on the shortest of time frames. The past price tends to predict the future price. But the 20% that I, I wish more people understood, and again, I don't trade forex, so maybe in forex it's a little more that way, but I still think that extra 20% is dictated by players who aren't active participants in the market. Like, so say you trade, um, a forex pair and you trade it every single day and you understand that pair and the way it moves and it usually goes up to this resistance and fades, comes down to this support and fades. What if there's a fundamental shift in that pair? Are there going to be more or less participants that are coming into that pairing and adjusting positions? They're probably going to be more. So, you have a whole new group of players coming in because of that fundamental shift. So, at that point, you need to understand that there's a fundamental shift occurring in the market. And a lot of people tend to back away from news days because they say things trade differently. They do. Yes. Because you've had a fundamental shift. You have different players coming in to adjust their positions. And that actually, as an active, skilled intraday trader, creates a tremendous trading opportunity."

"Is that, let's say, there's a new conditioning coming in because of an opportunity, fundamentals, whatever it may be. But then, let's say you've built out a trade model, you've tested it, and you've got your predefined systems based on an environment not factoring this in. So then, the best thing, or just step aside and wait for this period to pass?"

"Yeah, it sounds like you're asking a question about, do you have edge? Would that be accurate to say?"

"Yeah, or how would you find an edge when the market conditions have changed?"

"Yeah, and that's that's that's one of the hardest things. You know, when I was starting out, um, one of my, I was really lucky when I joined the desk because it was a really hard market, right? When I first joined the trading desk, it was a really hard market. I remember sitting there and you'd make like a $130 in a stock and you'd be like, 'Oh man, I crushed that. Like I caught most of that whole, this was amazing.' Now it's like the markets, because of the liquidity and the range and everything, like, you know, we're talking about catching, we were we were joking about trading MU today and it's like going up and down 200 points or 150 points or whatever, you know? So the markets have shifted because there's more participants, which creates more opportunity. Our core belief is markets are opportunity-generating machines. Okay. So you you take that as your mindset going in, right? And your mindset is that the market's job is to generate opportunities. It's not to trick you. It's not to hurt you. It's not to take your money. It's to generate opportunities. Our job is to understand those opportunities and step into them when they become high expected value. Right?"

"So, let's lay that as the mindset of what we're here to do. So, if you are telling, if you are saying there is a new catalyst coming in and new participants coming in, should you step away or step into that moment?"

"I'm telling you that's a totally different trade than one where you've got the same structure. If you know a lot about craps and know nothing about blackjack, should you go play blackjack?"

"Probably not."

"Probably not. Right. But could you learn about it? Could you develop a system for it? Could you figure it out by watching somebody who already knows that? Could you model off of something that you've seen success with? Absolutely."

"Okay, let's let's pivot the conversation in that direction, which is generating a system, generating a predefined set of rules that can be, uh, with discretion or it can be automated. We can even get into that conversation. But the job of a trader is to build an edge and then adhere to the edge. So, in in your career now,"

"I'm going to push back on that. Sorry, I want to get to your question. But the job of the trader is, I don't think it's to adhere to the edge. I think that there are times you have to adhere to the edge. I think it's to build an edge and then to understand that edge. It's a little different than adhering to it because there are times we were talking about a trade today that literally was, it was the only reason that trade worked was because another trade that people have edge in broke and it didn't work. So you have to, if you understand the edge, if you understand why that edge exists, you can also understand when that edge is present but then gone. So the the conclusion to that sentiment is you need to know when to be discretionary in a predefined system."

"Yes."

"And this is a complicated terrain to navigate because you can apply discretion through multiple lenses. Is it intuition? Is it, is it a good idea? But it's basically FOMO, masking as a good idea. Is it survivorship bias, recency bias? There could be a million things, which is why I think traders try to be as systematic or quantitative as possible because how can we trust this intuition, gut instinct, or, uh, small sample size decision-making when you should have already the data behind you to say you should stick to this plan. So, curious now, how would you know when to deviate away from the plan and not just adhere to it, as I was saying?"

"So, so this is getting to be a much more complicated discussion than we initially thought. And I know for a retail trader, or we call them independent traders, I hate the term retail because it sounds like you don't know what you're doing. But I was a, I was an independent trader, I was a retail trader, but then I became an independent trader, right? Once you start to grow and get better, I think you earn the right to say, I'm an independent trader. Once you have a system, once you follow that."

"When you're starting out and you don't know anything, I get it. You're kind of a retail trader, but your goal is to make it to an, an independent trader, right? An independent business owner. So, when you're setting out to do that, it's really hard. And a conversation like this between people who are trading can be a little bit overwhelming because you're saying you're, you know, you're telling me, let's develop a system, and I'm telling you, yeah, you need to understand that system, but you also need to understand all these other times that the system doesn't work, right? So that makes it overwhelming. And we can take a step back and we can start with a core concept that we've seen work in every, um, product that any of our traders trade. And it's actually the same system some of our even more experienced traders are going through now as they're learning to trade futures more effectively. Okay, right?"

"So, you take an idea and let's say you learn about, um, why a stock channels, right? Let's let's let's say a futures product or a forex product or crypto or anything. Why does it channel, right? Channeling up where it's going down and up and down and up, but essentially respecting channel lines. Is that a strategy that you think is straightforward enough?"

"Should be."

"Okay. Yeah. It's it's it's a pretty common strategy. I think it's after actually overlooked too much where people have a lot of edge there but aren't looking for it. So, we'll talk about that because I think it's a really high-value place where a lot of people can can kind of look. It's just kind of slowly making higher lows, higher highs, and it's not technically trending. It's just kind of channeling because it's a little more range-bound. So, if you take that strategy on its core, why would that have edge? Why would buying support and selling resistance have edge?"

"Interesting. It could be a case of if everyone believes it becomes a self-fulfilling prophecy rather than anything magical happening in that channel."

"100%."

"Because that's because that's the way the participants are viewing it. They're essentially trading a pseudo-trending mean reversion. If it gets too far away from this, okay, that's a little too valuable. All right, that's a little too low. All right. And and they're just playing that and it becomes this self-fulfilling prophecy amongst the participants that are trading that stock or that product at that point. Now, if news comes in, would you expect it to break that channel? If huge volume comes in, would you expect it to break that channel? Absolutely. But that's a whole different system. So, you have to understand the core of why there is an edge that is present."

"Okay, let's jump into stuff because you mentioned earlier player versus player."

"Yeah. So, player versus player makes a lot of sense to me. The market is zero-sum. Your money exchanges hands from the impatient."

"We're gonna have a fun conversation about this because I completely disagree with the zero. Yeah. Okay. But now we're not describing player versus player. It's players. Let's try and understand what we're all going to do together and take the same trades in the same areas that we all think we're going to do. So it's game theory. If I think you're going to do it, then I'm going to do it. But you're only doing it because I think I'm doing it. So, is that an edge or is that something to lead into?"

"It's, I believe it's a situational edge and I think it's a very important thing to understand. If your edge is fundamental, going back to the previous conversation. Okay. If it's because there's a fundamental shift in the valuation or perceived valuation of the company and that's where you know, if you go back even to like a Warren Buffett, he doesn't care about the technicals. I've never heard him talk about, you know, moving average or anything like that. He cares about the fundamental valuation, right? He's probably on one extreme. Right? And then you have hyperscalpers who don't even care about the technicals or the fundamentals. They just care about the tape, right? They care about the price action."

"Can everybody along that spectrum make money?"

"Yes."

"Can everybody along that spectrum lose money?"

"Unfortunately, yes. But you have to understand within that spectrum, you know, where does that combination of, I care only about the tape, and I care only about the fundamentals, where does that fit in? And without that structure, we call it a playbook, right? Going back to that core concept of that playbook is is essentially writing a story, saying in this market or in this environment, in this trade, this is what's happening. Here's who I expect the players to be. Here's how, why I expect them to be behaving the way that they are. Right? So it is sort of game theory in that situation. But if you have a shift in that, if you have a fundamental shift in the stock, if you have a volume shift in the stock and it technically breaks that channel, you actually expect there to be other players that come in because they have to. They have to act in their best interest. Everybody in the market is essentially having to act in their best interest. And that's where it's like, is it really a zero-sum game if everybody has the opportunity to act in their best interest at all times? I understand that there are people that win and people that lose, and I might win and you might lose, but then we might turn around and flip back and forth 20 times. But if we're both acting in our own self-interest, is that okay? And I, I, I think it is."

"So, here we're describing the the price action and the technicals, but then layers behind it is, uh, the intentionality, the objective. Someone's in there for 10 seconds, someone's in there for a year, correct?"

"So, when you have price action or technicals that is, okay, we can see, let's say a head and shoulders pattern, just to keep it simple. Some may optically appear the same, but behind the scenes, every single one of them is unique. Different participants, different objectives, different volume, XYZ. So then, trading, how do you separate technicals from signal versus noise to not just be pattern trading, basically?"

"Yeah, it's cool. Um, although especially, I love the head and shoulders pattern, by the way. So, so I'm glad you pulled that one up because I think it's a good one and it's easy to understand and it's easy to make sense of. Um, when you're talking about it, there's a ton of noise in that pattern as it's setting up. I mean, a tremendous amount of noise in that pattern as it's setting up. And it really only is supposed to work if it breaks the, what do they call it? The neckline. Yes. Is that right? Yeah. So, if it breaks the neckline, what sort of response, and this is what gets to like where the edge comes from, what sort of response is expected if it breaks the neckline? Is it supposed to be a slow response? Is it supposed to be something where, you know, all the the price action, uh, just kind of dips and then comes right back up and maybe bounces? It should be fast, right? Why should it be fast?"

"The way I like to see it is we're having a tug-of-war between buyers and sellers. And let's say in the head and shoulder portion when it's developing, you know, it's both playing each other and and it's kind of not going anywhere. But the moment you break the neckline, then you have a lot of activity because now the sellers are saying, 'Go.' The buyers are saying, 'Oh, we're sweeping.' And you know, there's just a lot of ideas concentrated in a small neckline and therefore that's where the battle takes place and the conclusion."

"Yeah. So, even just riding off that, uh, there is concentrated areas of opportunity in the market. So, if we can now extrapolate all the technicals that could exist, even indicators as you mentioned, where would those high opportunity zones be? And is that just correlated to liquidity or volume?"

"But then, a lot of times, yeah, I think I think they're not necessarily correlated, but again, it's a self-fulfilling prophecy because if you're looking at these discrete points, that's where the most people will be forced to act in their own self-interest."

"Why do you use the word forced?"

"So, if you're, let's use the head and shoulders example. I like that a lot. Right. And and you did a good job describing that battle that's occurring. Where are the sell, where are the buyers actually wrong in the head and shoulders pattern? Are they bullish and they had a stop at at that level to say, 'Okay, it's not bullish anymore'?"

"Yeah. But they're not wrong there. They were wrong when that low, when that right shoulder occurred."

"Okay."

"They're just stopping out later, right? But but they're wrong when it puts in a lower high and then starts to roll back over. That's where their hopes, their dreams, their aspirations for where that trade's going to go. I've been in that trade. I've been the long in that trade and you know you're wrong and it feels awful."

"You're still going to stop out below the lows, but you were wrong before that."

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"The, the, the derivatives of technicals, I'm curious on because in my own trading, I'm very technical-based and I'm in the lower time frames that I'm scalping. But then when I speak to a lot of other technical traders, they're more focused on, uh, order flow. They're more focused on positioning. They're more focused on fundamentals. So, what is the, if we use technicals as a foundation, what is an appropriate combination, or can it be technicals alone?"

"Uh, so it could be technicals alone. So, we're talking about four different categories, right? And so the way we do things on our desk is we have different meetings each week, right? And and and for anybody going through our training program, anybody who's participating in our desk, you have different meetings every week. And we have these different meetings not so that you can just have more meetings. It's actually your, we call them skill-specific training, right? So there's a reading the tape meeting that's about specific skills of reading the tape. There is a technical analysis meeting which is about specific technical analysis stuff. There's the top ops meeting which is about the top opportunities that the traders on the desk saw. Essentially, how to build your playbook out based on seeing success in other places. Right? So we have all these different touch points, these different meetings, simply because there are different skills involved in each of these things. And so I'll kind of answer your question here in a second. And what I mean by that is in a different trade, you're going to have certain things that matter way more than others. And I know that's a confusing and frustrating thing. And so the process, kind of getting back to to to the idea, the process is you need to master one thing and then you need to master five things. And if you get to five trades, that's usually enough that you'll have a lot of variety in what to do. But you master one trade simply by understanding it, unthinking through what's actually happening in the trade, describing it the way we were just talking about it, right? Like like describing it ideally with someone else so that they can kind of point counterpoint it, and then you actually trade it. And you have to trade it 20 times. And if you trade it 20 times, you'll have enough reps. And I mean like you trade it and then you think about what happened, you study what happened, you'll have enough reps and more importantly, you'll have enough feedback on that trade to be able to understand some of the nuances that maybe you couldn't without trading it live."

"Is a necessity to go from trade model, test it over a 20-trade sample size and then learn the lessons along the way? Is it a requirement after the 20 you need to have made money, positive expectancy?"

"No, that's the thing that's funny. Like, the 20 sample size seems small."

"It does. It seems small and I think quantitatively they require 35, but what we found is when you're actually studying it, it 20 is enough."

"Interesting."

"20 is enough. And so what you're doing through that 20, right? You get to 20 and that's that's you'll hear new developing traders all the time talking about, 'I'm just getting my 20 in. I'm getting my 20 in.' And you can ask them, 'What's your write-up?' They will have a trade write-up for every 20. Every one of those 20. And what's fascinating, a new strategy should be writing it up. And what you're doing is you're not writing it up trying to be perfect. You're writing it up trying to learn. And you're writing it up incorporating the feedback that the market is giving you. Not, 'I sucked so much in this trade. I was so frustrated in this trade. I can't believe I got screwed in this trade.' No, no, no. Those aren't the right questions to ask. The right questions to ask are, 'What happened? Why did it happen? And what could I learn from it? What's the feedback that the market gave me that's going to allow me to become a better player for that trade?'"

"Interesting. So, we're going to explore that alpha creation generation and even adherence psychology. But before that, I'm curious about the touch points which seems like a cornerstone inside of SMB. So, uh, what is the goal of so many touch points and is it necessary?"

"Yeah, I think you're probably referring to our idea that that each week we try and get 50 touch points for every trader."

"It's a lot. It's a lot, right? And you think about those as structured touch points, right? So, it's one to one. Uh, it can be one to three, one to five, but, you know, it doesn't always have to be one to one. About a quarter of them tend to be one to one. Um, we talked about our meetings. That's a good example of not usually one to one, but that's a good example of you're getting touch points. You're learning skill, different skills that you're going to apply to different trades. We do daily report cards and those daily report cards get reviewed and then you get a touch point back, right? So, you know, you'll send me your daily report card, I'll read it and I'll give comments, some feedback back on it, right?"

"So, the objective of that is just accountability."

"Accountability, but a lot of it's learning. A lot of it is learning because you will have had different, even if at the same trading level. Let's say we started together and we're just friends, you're going to see things differently than I will. And so if I can understand the way that you're seeing something and you can understand the way I'm seeing something, all of a sudden it's like we're starting to build a little bit of positivity and as far as our growth. It's also a lot more fun to do it that way."

"But here's what's crazy about it, especially as an independent trader. It feels like, where am I going to get this accountability? Where am I going to get this touch point? You can do that a lot with technology now. You can literally feed your trades into Claude and say, 'Analyze my trades for me. Here are my goals,' you know, and and you can create like like a whole parameters."

"Yeah. Yeah. Yeah. Essentially, a whole feedback loop off of that alone."

"Even with, uh, touch points, the the visual I'm getting is touch points with someone better, more experienced, or, you know, a mentor, a supervisor. But can it also be a peer?"

"Yes, it has to be a peer because then you still get the accountability portion. You don't get the learning portion."

"One, well, you do actually. And this is the funny thing. You don't get it as discreetly as you do when you're working with a mentor, right? When you have a mentor, usually they say something and you're like, 'Absolutely, I'll do that.' When you have a peer, they say something and you're like, 'Maybe I'll try that. Maybe I won't.' Right?"

"But when you have, one of my favorite lessons that I ever learned was one of the guys that I started trading with, right, at SMB. Uh, we were in the same class. He's still here. Great guy. Still like talking with him every day. We were in on like a Saturday just reviewing trades one day and he walked in with this like this thing that he had found on X and it was like, 'Okay, this is what macro market cycles look like, right?' And it was like this whole idea of you have the, I think it was from the tulip craze from like way way back in the day and there's like a, I'm sure you can find a chart online that that shows it, but it's like the exuberance and then the blow-off and then the turn. And I'm sure you know, and if you look back through all these patterns that are occurring, a lot of them resemble that. And so what was interesting was learning about that with him and I had never seen that before and he found it and he was like, 'This is cool.' So what we did was together we created a challenge out of it. How many examples could we find and then share with each other, right? And so it's not just like peer-to-peer learning. He tells me something and I'm like, 'Oh, that's nice.' It's then you create a little challenge out of it and you say, 'Okay, let's let's see, let's pull on this thread a little bit more. Let's really push it as much as we can.' Without that challenge, I think the learning kind of stalls. But if you're hungry and you're pushing yourself, then the learning kind of accelerates."

"Yeah, it's cool. You have camaraderie, you have teamwork, and and a joint vision. I'm curious, in a trading desk or a prop desk like yours, is the is the goal to have individuality and each independent trader within the firm has their own expression, their own edge, their own ideas, or is it supposed to be one unified force?"

"Uh, we use this term called pack hunting. All right. And so when our traders have a really big opportunity, it feels like people are packing. Everybody's going after the same objective. That is pretty uncommon. Most of the time, traders are trading their own discrete edges. Most of the time, I'd say 80 to 90% of the time, traders are trading unique edges. It's just in those rare moments where everything is lining up that people really come together and are trading in such a unique way where the entire desk is kind of big game hunting or pack hunting. Now, it's dangerous because if you are all doing that at the wrong time, you're wasting a ton of opportunity sets. And it's dangerous because if you're all doing that all the time, you're missing all the unique edges that got you there."

"The, the reason I asked this question is because if I was to imagine, okay, I want to find a mentor. I don't know any. But at least with the show, I've spoken to a bunch of phenomenal traders. But then if I thought, whose judgment would I trust or want? It's not to discredit them or or everything that they've achieved. Is what I want to learn from them relevant to my style of trading? If they're a fundamental trader, or they they used to trade 20 years ago, that was their golden era. So then, how, how do you have an environment where everyone's got uniqueness, individuality, and finding their own alpha, but then you do have a hierarchy where the mentor or yourself giving the feedback could also end up being a key man risk or a bottleneck of ideas, or you could be the weak link in the firm, let's say. How do you navigate that?"

"Yeah, so I don't think that we think of it as navigating. I think we think of it as just a part of the experience. I can tell you I've had some really bad mentors, especially when I was an independent trader, a retail trader. There were there was this guy that I thought I was following him on Twitter. I was reaching out to him, sending him emails every single day. I thought this guy was making so much money, right? Like like you're like like and I told somebody I was like, I was like, 'I got a mentor now. Like I think I'm really going to make it.' And I, everything he said I was like, 'Oh, yeah, that makes so much sense,' because you're starting out. You don't know. And this person supposedly was making a lot of money. Turns out they certainly weren't making that much money. Um, I didn't realize it at the time, but now looking back, that is re, that the experiences with them really helped me, right? Even though 80% of what he told me is probably wrong and I would never actually do that and he wasn't making money. And so that that kind of was a little bit of a gut punch when I realized all that stuff. You know, I can say now being removed from that, I'm really glad I had that experience because there were things that I took away from it, or there are things that I apply now that are kind of the seeds were planted then. So, I kind of view all this as a little bit of a journey and you have to sign up for the journey. And if you're just focused on getting the immediate results, it kind of becomes a little bit challenging. I think that's a hard thing as you're starting out as a trader because you want the results for validation. Mhm."

"You want to get on the right side of a positive psychology loop, right? And a lot of us measure that based on how well we're performing."

"But if you, is that the right metric to follow?"

"I don't know that it's the right metric to follow. What we'll talk about is the number of bottlenecks that you run into. What's your number one bottleneck? Right? So, let's think about a trader and and I can give you an example from somebody that I was working with today, one of our traders on our desk. He's doing a great job of capturing these big giant trending trades. We've had a lot of good big giant trending trades. One of his big challenges is that he is exiting half the position almost right away. So, if your job, if you're saying, 'I'm going to grow a business capturing these big giant trends, but I'm going to take half my risk off right away to protect my downside.' You're actually not experiencing the upside that you're supposed to in that trade. Mhm."

"He was saying, 'It's my psychology. I'm managing my psychology.' But he had a system and his system was broken."

"So, it has nothing to do with the psychology. He was actually following his system, but his system's broken. So, the way to really, really view progress is, is this an important bottleneck? Is this actually holding me back? And for some people, for a developing trader, it might be, 'I don't actually have discrete rules. I don't actually have like real risk rules. I don't know how much I'm risking in these trades. I couldn't tell you. I'm putting 100 shares on or, you know, whatever it is. Like I'm doing one lot and everything and and I don't know really where the risk is or any of that.' That might be something holding you back, but you can quickly identify that biggest bottleneck."

"And we view progress as the number of bottlenecks that you have worked through."

"What are some major common bottlenecks in a newer trader you found?"

"Most of them have to do with, uh, we call it a spaghetti against a wall trade. You know, you know, have you ever cooked spaghetti before? Literally, you throw it up and see what sticks, right? And so, so like, if you don't have a trade plan, and we, let's let's get structural because this is where our edge is from our desk, right? We have structure, we have protocols for everything. We've really enacted those protocols in the last year and a half because I think we we talked about them, but they weren't formalized. And then as we've been growing and we're trying to grow our firm even more, we're trying to reach out to the community more. We have to have this unified language and these unified protocols, right? Otherwise, it's just a bunch of like, 'Hey, we think this kind of works.'"

"Spaghetti on the wall."

"Yeah, it's sort of spaghetti on the wall, right? So, we created this, we call it an asset protocol. So, a trade idea has to have an asset protocol. ASM. Okay. It's an acronym. Yeah. Yeah. So, it's allocation. You have to understand what your risk allocation is to that trade. That's the first element of it. You should understand that before you even worry about anything else in that asset protocol, right?"

"Should risk be standardized?"

"So, that's a debate that a lot of people have and it's so interesting because there are people on our desk that say yes, especially for developing traders. You should be risking the smallest amount possible. I agree with that. But once you've gone through those 20 reps that we talked about, you should have some insight into when it's a higher probability trade or a lower probability trade. So I think once you've gotten those 20 reps, you should have earned the right to understand dynamic risk allocation for that specific trade."

"Should the best way to deploy sizing up be on the win rate of a setup?"

"No. No, no, no, no, no."

"What do you mean by higher probability if it's not win rate?"

"So, higher probability is an interesting combination, right? So, it's a combination of your risk-to-reward plus your probability."

"What is probability in?"

"So, the probability of the trade actually working, right? So, if it's 50/50 at a, yeah, it's a 50/50 at 1:1 versus a 70/30 at 0.5 to 1, right? Or a 60/40 at 3:1, right? You have to factor both."

"It's basically the, the EV equation."

"Yeah. But it's also understanding how far it's going to go because you want to maybe partial out."

"Correct."

"You're hitting exactly the point."

"It's really hard to trade them structurally soundly all the time. And if you're then selling half, like our, like our friend who we were working with today, you're selling half. Are you adding to the expected value of the trade by doing that, or you just cutting yourself off at the knees? Right?"

"I like this. Let's go through the acronym assets. But let's start off with the, uh, the risk portion. So, even, um, you can have risks appropriately, you can have the good setup, but the way you manage the position, whether you broke even too early, or you partial too much too early, as this example you're giving, or you let a runner run too far and it came back. So, you can mess up a good trade and a good execution with the management. Correct. So, should there be a formula to this? For example, in my own circumstances, where I used to be discretionary take-profit, it used to be based on technicals, higher highs, targets, whatever."

"Yeah. But then I realized if I have, I can draw 10 targets on a on a screen, I would fluctuate between the earlier one and the later one based on if I was fearful or greedy. So I realized I don't have a system here. It's just discretion, but it's emotion masking as discretion. I tried to then fix it to just fixed risk-reward profiles, which then comes into your, uh, equation of win or probability and risk-reward. Would that be a smarter way to do it?"

"So, I view it as as an interesting thing and this is the way we talk about it on the desk. And I'm trying to kind of gather my thoughts as we're talking because I think this is an important thing to not just say, but"

An important thing to for for everybody at home to be able to take with them, right? A lot of what we do comes back to the expected value equation. But then, and then there's always a button trading, right? But then you have to be able to understand when that core model is broken. I might be taking a trade that's normally a 3 to one, right? And I think a standard good base if you're just starting out, you look for a 3:1 reward to risk profile, right? And you look for a trade with a 50/50 probability.

Once you've got that, then you can enter that standard bet sizing zone. And I know there's tons of people who make money at a 1:1 risk/reward. I know there's tons of people that trade 10 to one or 20 to one. I'm not saying this is this conversation isn't about them. I'm telling you if you just started out, look for 3:1 with a 50/50 probability. The reason why I say 50/50 is listen, we I think as humans, we tend to overvalue the probability. We tend to overexpect the probability and we actually tend to underexpect on the reward/risk. So if it's a 3:1, it might actually be a 5 to 1. If it's a 50/50, it might actually be a 40 to 60, right? So you want to kind of allow that equation to balance out for you over time.

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I want to throw a thought at you around this which is there was an experiment that went around. It was basically a guy going around in the street and saying let's flip a coin and uh if I win I get $100. If if you win you get $100. And most people said no because it's a random and it's a it's a it's a equal expectancy. Then he and he started to move the needle towards okay let's do uh if I lose uh I give you $150 but if you lose uh whatever it is $100 to $150. So now there's an expectancy the reward/risk there. Most people still said no. And then the experiment went on towards people only started to say yes uh when the I would lose $100 but you would make $250. So then the the ratio is basically a 1 to 2.5. So they found this loss aversion ratio was 2.5. Um, and that's interesting because that can now go into the conversation where I went to take it, which is dynamic sizing during winning or losing periods because let's say you go through a losing period. The some people say uh maintain risk. Other people say maybe even size up. Other people say size down. Size down kind of makes sense until you realize, okay, well, if it would take me five trades to get back out of the hole, well, now it might take me 10 trades. Uh, and you might now prolong your duration in draw down, which could have the psychological implications. But then the next thought that comes to me after this loss aversion is even if you get back to break even whether it was maintaining size or whatever, you don't mentally recover because you have this 2.5 ratio which is whereas the delta for psychology to take over where your capital is replenished but your mindset isn't. So any thoughts on that around the topic of risk and maybe sizing up.

Oh, you got a whole lot going on in that one. I think this is a great conversation to think about and especially for somebody at home because I've been there. I've gone through that where you're you're losing and you're like, "What do I do? If I size down, it's going to take me 20 trades to make that back. If I size up, I could make it back in one." And it's tough to say, but I think this is where if you treat yourself as a business owner, right? Every single trading strategy is its own business. If you trade a head and shoulders pattern, and you trade a head and shoulders pattern better than anybody, you have a trading business around head and shoulders patterns. It doesn't mean you'd be a good, in our term, rubber band trader, which is an overextension to the downside or an overextension to the upside with mean reversion. Those two have nothing to do with each other. If you're a really good head and shoulders pattern, you might trader, you might understand that, but you haven't done the work to earn the right to trade that. Does that kind of make sense?

Interesting. So, you have to be a business owner. Yes. If you're a business owner, and let's let's take this away because I think a lot of trading, you have to get perspective on to understand how ridiculous some of the decisions we make as traders are if you put them in real world, right? So, if you're a business owner and let's say, you know, we're in New York, so there pizza shops everywhere, right? You're all of a sudden it's a Monday, you're not selling as much pizza, you're losing money. It's a Tuesday, you're not selling as much pizza, you're losing money. It's a Wednesday, you're not selling as much pizza, you're losing money, right? All of a sudden, like, are you going to change your menu? Are you going to change your prices? No. As long as you're doing everything right. Now, let's say you hire somebody who insults all the customers, all of a sudden you get less people coming in because they're getting insulted. Maybe in New York, they would actually like that. So, you'd probably get more people, but like, you know, anywhere else in the world, they might not like that. Should you change that person? Absolutely. So, the way we're relating it back to trading is if you're doing everything right, should you change your sizing? No. If you're following your system, should you change your sizing? No. As long as there haven't been variables that have shifted in your core strategy.

Now, it might be >> you asked me to push back on you. So, I have something that comes to mind >> which is I agree with you. I think sizing down sizing down in losing period I think philosophically makes sense but in practicality you prolong the down period and you're more likely to go on tilt because of that. However, I I wonder if it's linked to temperament meaning uh some people skew more towards fear or anger or revenge. Other people skew more towards pessimism or desperation or you if we if we say let's say the eight deadly emotions in trading. I think everybody has an affinity to one or the other. So if I'm someone that is very uh angry and revenge oriented, then for me sizing up or maintaining size might be a problem because if I continue losing, I'm more likely to mess it up. So therefore I'm protecting myself mentally by uh sizing down because of my psychology, not because of the business around the setup. But then if you're someone that doesn't feel formal is not it's not a loud emotion for you, then missing out on trades is okay. So then you don't need to worry about how many trades it will take to recover. So I wonder if there's anything intertwined with temperament and how you do risk management.

Yeah, there could be. I mean, I think you're talking about where are you prone to make mistakes, right? And so when you're talking about your personal temperament, where are you prone to deviate from your system? There are some people who, as you said, I don't I'm not familiar with the eight deadly eight deadly sins. You said >> I had a guest on the show recently. He authored a book and he he called it eight deadly sins and I liked it. That's cool. I like that. I'll have to learn about that. Um, but I I'm not familiar with those. I do think that there are there are elements of each of us that can get exposed through the markets, right? So, you might be somebody who runs a little hot. Well, listen, that's actually probably your competitive advantage used the right way. If you run a little hot, you're going to want to be the person who's there in the trade. Now, you have to be very careful because if you don't have the opportunity and you're running a little hot and you're revenge trading, that's exactly what you're talking about. But are you actually following your system at that point? No, you're not. You're just again going back to spaghetti against a wall. One of our traders said this in a monthly review and I thought it was really important and we had our whole a lot of our trading community there when they were going through this and he said you need to be ruthless with yourself when things are going well and everybody was like what and he was like when you're trading the way that you want to be you want to be studying everything that you're doing to understand how am I this person and when you're trading not well. You want to be so forgiving of yourself.

So it seems like we are trying to understand the polarity or tension let's say between psychology and temperament and individuality and I want to get into that personality types but also what places psychology and risk and trade management. So it's it's a web that we're I'm getting in my head. I I want to get clarity on it all. So, first let's talk about when you're hiring someone or vetting a trader, are you vetting simply their performance and and their P&L or are you looking at the undertones of their temperament and their personality or intelligence, IQ? Yeah. What are the what are the telltale signs of a star trader you see? Yeah, we get asked probably once every quarter by one of these very fancy research firms to, you know, oh, we'll do personality tests on all your traders and we'll show you which ones are most successful and we'll tell you exactly why and we'll talk about that and we'll give you a profile that you can then hire from, you know, and makes sense to me. It makes sense, right? Yeah. Yeah. Yeah. And you know, I've sat next to and along the row with almost every single actually probably every single one of our really successful traders. We've all been in rows together. You know, I got to tell you, they probably know more about me than any psychological test could ever tell you. And I probably know more about them than any psychological test could ever tell you. And I can tell you for sure, just because when you sit next to somebody and you're trading with them, you see everything exposed. Y >> I mean, that's one of the beauties of forming a network. And it's really scary at first because you're exposing yourself and you're like, "What if I make what if they think I'm an idiot and all that stuff?" I can guarantee you every single one of the traders on our desk has thought I'm a total idiot at some point, right? And I've thought they're a total idiot, too, at some point. But I've also recognized some of the beautiful things that they do, some of the ways that they participate in markets that are so unique that like are just like inspiring. And I I hope the same is true for me of of them, right? So there is something that is really um almost scary about allowing yourself to share your trading with somebody else but you learn so much about yourself by doing it and you learn so much about the other people by doing it.

So getting back to that psychological profile >> is is there a common denominator amongst your traders uh a certain trait or a temperament or a even if it's just work ethic consistency is there anything that >> so there are similar there are similarities across all our traders right there similar general profiles but I don't think they're unique to what we hear from anybody who's coming into the trading space they're competitive they want to work hard they enjoy by working hard, right? They're hungry. I think that's one thing that you have to have more than anything else when you're starting out is you have to really want to be that seven or eight figure trader. This job is is is really hard to do. It challenges you in the most beautiful ways. It's the best job in the world. There's no question about it. It's the best job in the entire world. being a trader, being an independent trader, being a prop trader, being a funded trader, like whatever. It's the best job in the world. It doesn't mean it's easy to do, and it doesn't mean you're gonna get paid the way that you want to all the time, but it's the best job in the world.

Is uh intelligence important? Uh less so than we would think. What's really important is your desire to learn. So, you have to want to learn. But your base level intelligence, it it it helps, but it's not a deterrent, right, for us. It's really one of, you know, it's one of the things that's super interesting. So, somebody asked me, "Do you only hire from the top universities?" And, and I kind of was caught off guard by that question. I was just thinking, I was like, "No, we don't just hire from the top universities." But in the interview process, and this is something we would do even for um experienced traders that aren't coming through the internship program, we are trying to study when you're going to college, right? You might not even get to pick the college that you go to. Your parents might have an is saying it your grades in high school like whatever. But when you're in college, are you performing above the standard or are you just meeting the minimum requirements? That's the first time in your life as an adult >> that you are responsible for most people that's the first time in their life as an adult that they are actually responsible for the outcome of what they're doing. So when we're looking for kids, it's not because they're more intelligent. It's because when they've gotten to college, they've done well in college because it's the first time you're truly accountable for your own actions. And in trading, we are all truly accountable for our own actions.

Like I said, the trade therefore becomes I mean they're just general traits for success as you mentioned, but it's also showing proactiveness. It's showing the ability to go above and beyond, which of course is a >> desire to too, right? like like you have to want to be the person that presses the big key at the big time in the big way, right? You have to want to be that and there has to be this this voice in your head that is is driving you that you are going to be that. So there's something that's really beautiful about this is is we all have these dreams and these hopes and these aspirations, but there's something a little different when it's like just something I want to do versus something I'm actually motivated to become.

I'm going to throw an analogy around entrepreneurship and and maybe you can help me connect the dots for a trader. So if you have someone that is very studious, very academic and works very hard in the you know university environment, they make for great employees because they know deadlines, they know frameworks and uh academia helps in in following a system. But then when you look at let's say top entrepreneurs, they were kind of um very optimistic, very let's say even delusional and they were go-getters. So there you know an intelligence or academic doesn't always serve the entrepreneur because you got to take risk and that's not logical sometimes. So how would you draw between let's say as I'm trying to do here between an employee and a entrepreneur or you know independent business owner versus a professional trader in a desk versus an independent trader versus you shouldn't be a trader.

Yeah, I think the only thing that that really is hard and the only consideration we'll start at the end first. The only people that really shouldn't be traders are if you cannot and it's tough. So 80% of the people that tra we'll go here. 80% of the people that trade often times need to be pushed to take more risk once they have edge. 80% of all the traders out there I believe need to be pushed a little bit more when they actually have some trading edge because they're a little risk averse. Right? That's 80%. That's most of the people out there. Okay. Yeah. So that's been our experience. Right. So it's about 80% of them need to be pushed a little bit more because you actually have more edge than you think. So you need to kind of be pushed a little bit. Now that's assuming that you're doing a lot of the hard work already. And that's assuming there are all these other characteristics. But most people need to be pushed to take risk. It's okay. We understand that. We accept that 20% of the people need to be pushed to not take so many effing risks because that 20% is like just a totally different mindset. They want to put on every trade. There is not a trade that they haven't met that that that they don't want to put max risk on or as much risk as they possibly can. Those are two different conversations that you're having with when you talk about personality types. Now, is one better than the other? Absolutely not. They're just very different. And

So when you're talking about that mindset, I think you hit it perfectly. First of all, you have to want to take risk. This is a job that you take risks in. If you do not want to take risk, then you can buy, you know, T-Bonds or more importantly, if you do not want to be the person who pushes the buttons and takes the actual risk, please go hire a financial adviser because then you're just putting the blame on them if something goes wrong. You have to want to be the person who puts that risk on and you have to be able to manage it because that's our job. Mhm. At the end of the day, our performance is dictated by our ability to manage risk.

As someone who is guiding traders or harnessing their strengths and weaknesses, uh, one thing that I see a lot in newer traders, even myself a bunch was, uh, I take a wrong action because I I I didn't adhere to the plan, so I just took a yolo trade or I sized up or it looks good enough and I chased an entry and I did the wrong behavior, but it played out and I got a winning trade out of it. So that becomes now a terrible feedback loop because it encourages to do the bad thing again and again and eventually will bite you. So how do you explain to a trader that you see who deviated away from the plan in one of these touch point meetings, but you got to tell him, "Hey, I know you made money, but don't do that again." How do you help them visualize that correctly?

Oh, so those are I'm unfortunately getting a little bit of a reputation. So I'm a pretty calm guy most of the time. I get excited about happy things. I I love sharing in the success that traders are having. That's why I ultimately started in the trader development role because uh the first traders I worked with, you know, we were lucky. It was during COVID and so they got a really hot market. But all of a sudden, I remember this day that I got a call or text from from one of the traders that I had just started working with and I had been at the firm for three years at the time before COVID or two years I guess three years at the time before CO. Um, so I didn't really know what I was doing on a mentoring side or leadership side or whatever, but I recognized we had all these traders at home cuz all of us were at home and they didn't have a call that they were on. So during the day, they weren't talking with anybody. They were just at home. And I said, "All right, guys, like I'm on this call. You guys can join, right? So these two younger traders came in and and they were I had a lot of fun working with them. They joined our call. They shared their ideas, all that stuff. And I remember getting a text from one of them and he was like,"I made $10,000 today." And this kid was, you know, just out of college, right? He's like, "I made $10,000 today." And it was first like five figure day. And like he was so enthusiastic about it. And it was great. It was like, it was amazing. It was so rewarding. I realized how much I enjoyed seeing and sharing in his success. And I was like texting Bella. I was texting C. I was like, "Hey, you know, like like all that, like saying like how great it was for him." And Belle was like, "I'm shocked." He's like, "I'm so surprised you're so much more excited about his performance than you've ever been about your own performances ever." And I was like, I was like, "I don't know." Like I was, it was so awesome, right? And so Bella was like, "Okay, I think you might want to try and start mentor. You get a lot of value out of this." And and so I do I get a ton of value out of seeing the success of others because I can see it in them. A lot of times you can see people who are working hard, doing the right things, you know, approaching trading as if they are going to be the next superstar. For a lot of us, you can see it before they can even really see it. Maybe they believe it, but they haven't seen it yet, right? And I'm sure you've had this experience when you've talked with traders who really are there and you can almost see it. There's almost this palpability to it to their energy and everything, right? And the same thing's true of those developing traders that are really on their way. You like walk out of a room and you're like, he he's got it. He's he's on his way. And it's usually a product of the habits that they have and how well how consistently and how high quality those habits are being executed. It's not like some intangible thing. It's actually almost like a system of how consistent are they with the habits that they set out to do and how how quality is the work that they're doing towards each of those habits. So that consistency and quality metric, right? And if for anybody at home, if you are not consistent enough with it or they're not high quality enough, there's your job. Go do it. Um, but it's fascinating to see their successes. And when you get those successes, when you can see those successes, you get to celebrate with them. But what you're talking about with that random outcome, those are the meetings that I lose my and I will start. That's the only time I ever really yell at anybody. It's the only time I get super super animated in in a way that really tries to drill home a point because I have been subject to that so many times in my trading career, especially early on. I was like, "Oh man, that worked. That's amazing. I did this." And then I realize how dumb some of that stuff is. And just because you get rewarded doesn't mean that you should feel good about it. That's an independent variable that sometimes you'll just get rewarded for really poor behavior. Um, so if there's a core trading principle, that's when I tend to get the most animated. That's when I tend to get the loudest because I want I really want people to understand how that is not tolerated. That's a standard that you cannot do. If you yolo a trade that isn't deserved to be yoloed, that's just not something you can do at our firm. And I would rather not have to fire someone. I would rather somebody learn the lesson, adapt, understand, and move forward. Because if it happens again and then it happens again, you're done. Like period and I hate that. That's the worst part about what we do.

Is the reason you get you or you take it almost personally because that tips into trader versus gambler. I know it's disrespect. It's disrespectful for every person who's ever been at our firm and it's disrespectful to that person who is committing themselves to being the best trader they can be. They're truly in my mind they're disrespecting themselves, right? And they're disrespecting the firm. They're disrespecting the firm's capital. They're disrespecting the people on their team. You know, if they didn't know it was a mistake, then that's on us, right? As as as helping them develop. If they didn't know that that was a mistake to do that, that's our responsibility. But if they understood what they were doing, that's completely disrespectful to do that. And I think you really have to hold yourself to a standard of, you know, take it back to that human element. Am I being respectful? Am I walking into a to a we use the restaurant example and am I being nice to the person or am I being an If I'm just being an to them, like, you know,

So earlier we spoke about psychology is not necessarily adhering to the plan, which is what I understood it as. So here we're talking about a scenario where they didn't adhere to the plan and they got a positive outcome. The reason they didn't adhere to the plan was probably some emotion because they were saying I'm feeling greedy or you know whatever the emotions could be but that could be the reason they got in. So for me it seems very clear that the psychology component of trading is your psychologist either adhere to the plan or knowing your plan is decayed and find a new uh find a new edge. So if we can go explore deeper why you don't believe exclusively that trading psychology is simply to adhere to the plan which is a predefined system you have.

Yeah, so, so Dr. Seamberger, I'm sure I think you I think he's he's coming on. So, he might disagree with me and that's okay. We co-authored a chapter in his his recent book together. And so, that was a lot of fun because there's a lot of back and forth of that, right? He's a trained psychologist, but he's also a trader, too. So, you know, and he's worked with our firm for a long time. So, he's seen all of this different stuff. From my seat, and this is just my own experience. It's not, you know, I'm not a licensed psychologist. never, you know, gone through any of that schooling, but I have seen a lot of different things on our desk. And I've seen a lot of traders come in and be successful. And I've seen a lot of traders come in and fail. Some say it's their psychology and they have to get their psychology right. Some say it's, you know, their trading strategies. I think that, you know, we've got this table in front of us, right? So, your trading psychology, I believe, are the legs of the table. I'm sorry, your edge, your edge is the legs of the table. Your trading edge is the legs of the table. The top of the table is your trading psychology. If you don't have a stable base, is the table going to be stable at all or is it going to be wobbling? It's going to be bounc without an edge, the psychology doesn't matter. It doesn't matter at all. Right. And so when when we're talking about this, I think so many people and I was guilty of this too when I started and I see developing traders get very guilty of this when they're starting and they'll come into a meeting and they'll say, you know, my my my trading psychology is way off this month. It's like no, it's not. They're like, no, it's re I just can't seem to do anything right. Right. And you think it's a psychology challenge. I've been there. Believe me, I've I've I've done that. and I've read every psychology trading psychology book there is and all that stuff. Most of the time it's actually an edge challenge. So when we talked about bottlenecks earlier as as we talk about bottlenecks, you can say trading psychology is my biggest bottleneck, but that might not be the truth. It might actually be your system. If you're our friend that we talked about earlier who's selling half of his position too early, that has nothing to do with your trading psychology. you're mitigating you're you're doing that because of your psychology. But it actually is if you fix your psychology and you still sell half early, doesn't matter. You can feel as good or bad as you want to, you're not making as much money as if you trailed your stop appropriately, right? So, we think of so many things as structural first and then psychology second. There's a lot of interplay between them as you get to higher and higher levels in your trading. your ability to adhere to the rules of your system, your ability to understand when your system's broken and how do you respond. That's probably actually one of those eight deadly sins of that your friend mentioned is like you have everything working and then it breaks and then you don't adjust. That's probably I mean I know on our desk that's a pretty deadly sin.

I I can completely agree with you. I think uh good psychology without edge. You bring David Gogggins uh into the markets great mindset but no edge you're not going to make money. So I'm with you on that. I'm curious should when you're developing your edge so one thing is you know allowing your edge to play out but first is the arena of building the edge should psychology be considered in that or is there any psychology involvement in edge development.

So it's interesting on our desk and and we've created again we create these these kind of principles if you want to call them that or you know whatever around everything because we have to create structures you have to be able to teach something you have to be able to share something and you need everybody to be able to understand what it is Okay. So, we think of all of this as as three to discrete points. There's there's your psychology, which is one of the three that we're talking about. There's your systems, right? And your systems are essentially your strategies, right? So, I don't mean systems from a quantitative perspective, but I think of it as a combination of a catalyst, setup, and trade. That's that's what I would call one strategy, right?

Walk me through that. Catalyst is the >> maybe the fundamental or the narrative behind it, right? How do you separate trade? The setup. The setup would be usually the higher time frame technical. So, is it trending? Is it overextended? Is it breaking out of a range? Is it, you know, like in a range? Is it channeling like we talked about, those are all just the setups, right? And when I think most technical analysis is really good at identifying the setups, especially higher time frame. Is it using an ups sloping moving average? And you can get into all this, but that's probably a whole episode just on the technicals, but but I think identifying what the what the setup is is a really big part of of trading with trading edge. And then the third thing that we do on our desk is then we actually get into the trade. What is the actual price action that's occurring? That's where you get into the player versus player mentality because that's where you can read the tape. That's where you can understand it. You can't really you can try and read the tape by just understanding the catalyst. But without the setup, you don't really understand the urgency with which people need to act in that trade. When we go back to our head and shoulders example, the reason why it should work really quickly is because you should have longs that are dumping and should have shorts jumping on. If you don't have that, the trade's probably not going to work. Like it might eventually grind down, but it's not the same trade, right? Technically, it's the same trade, but the response is very different than what we actually one confluence for you is when you've got into the trade, how fast it plays out. Well, it's our expectation for that. It doesn't always mean that that's a hard and fast rule, but with every trade, there should be a reason why it goes the way it goes, right? There should be other participants that see the same thing you do. And if not, you're the person standing there hoping for something to happen that may or may not occur, right? And that's usually not a good situation to be in as a trader.

Yeah. So the the reason I was getting into the topic of psychology with building an edge is because we can all understand our personal temperaments around what emotions allowed for us and should we strive to build an edge catering for that. For example, I know some I I know myself I'm pretty impatient. So once I get into a trade, I don't want to be a swing trader that's waiting two weeks and it's hovering around my entry and then finally goes because I'm one decision away in that two week period to exit or do something silly. So I like to be in the lower time frames because I have quick entries and quick exits. I want to hit my stop loss fast or my take profit fast. So I knowing that about myself I cater it through my edge. Is that something important or examples such?

Uh so you have to have a little bit of trading experience, right? Because if you go in and you say I'm this we've had a lot of traders like this. They go in and they say I'm this type of trader and then you actually have them trade that way and they don't make any money and then you're like oh well let's trade this way. You know we start all of our traders with scalping. Oh even if they're not even if they're not going to be scalpers afterwards. The reason is is because you just get more reps. You get more reps of different things and you're forced to develop really good habits quickly. If you're an intraday price action scalper, and I don't mean tape scalping. We don't just scalp the tape. We actually you need to have that catalyst setup trade combination, right? And so once you have that trade, let's call one of our one of the trades that we were talking a lot about today was a backside, right? So, it's where something pulls in off the open, tries to break a new low, doesn't, right? Comes up, puts in a higher low, and then there's this little consolidation that occurs often that's a little bit higher, and then you're looking for that mean reversion back to VWAP, right? Very straightforward. I think anybody that's been trading has probably shorted the lows and then bought it too early and then punted out on the higher low and all, you know, so a lot of people have been through that. I certainly have been as well. But what's interesting is that setup allows you for one really good rep. That trade allows you for one really good rep on the day. You might have, if you're a scalper, 10 to 15 really good reps on the day. If you're a swing trader only, you might only get one rep one day and then you turn around and you're expected to cluster because you have 30 things firing at the same time. You're going to get overwhelmed so quickly. And so we start all of our traders with scalping and then we expect them to try different strategies and then they build out the strategies that make sense to them. It sounds like you've been trading long enough to try swing trading and be like I know myself. I don't like that. You've also been trading long enough to know that you like scalping, right? But that it's really tough if you go in saying I know my personality. Okay. Versus I know I got to go find you got to go find it a little bit. Yeah.

Um, we were touching on the assets acronym. Let's before we get to that that acronym, let's talk about how you find it because this is the part that nobody asks me and I always wish they did. Right? So, here's exactly how I think you actually find it, right? Everybody's like, "Yeah, you go find it." Then the conversation ends. So, so this is an exclusive conversation, right? Nobody else has ever asked me this. And I had to ask, too, but that's okay. when something just makes so much sense to you that you don't understand how anybody or why anybody does anything different in the markets, right? So, I don't know if you've ever had this experience. I certainly did early on in my trading. This is something that made so much. There was a trade that just made so much sense to me and I was trying to tell the other traders around me about that trade and they're like, "Yeah, yeah, I get it." And that's where I realized I was so pulled towards that style of trading because I was like, why aren't you guys doing like literally like what the hell are you guys doing? You're wasting your time. This is where the trading edge is. This is what like when you feel that feeling and you don't understand why anybody does anything else. That's what we see from all of our top traders.

I like that. They literally can't understand why the other top trader who's making just as much money from as they are is trading in the bad way and they're con constantly on our desk. Our top traders are criticizing each other in like behind each other's backs a little bit like almost like a little bit of a nudge but like it's like yeah you know they're only making money because the market's going higher and it's like you know so like like there's always that little like I'm a little bit driven by them but a little bit frust you know so there is a little bit of that. It's a competitive Yeah. It's a competitive business. So, so I don't view it as a bad thing. I actually view it as a great thing. But, um, and and no one's ever negative on our desk. We have a no policy, right? Like, like if you're an just leave because this is this is it's a lot of fun what we get to do. So, um, but that is the one thing that I think you have to kind of study a lot of things, but when you're just like, I don't understand how anybody makes money doing anything else or why anybody would do anything else. That's where you found something to really pull on.

Interesting. Because we're talking about your top traders, uh just so the audience can latch on to something. What does good look like in the sense of if we walk through the KPIs of win rates, risk/reward, risk per trade, trade frequency, as how many assets do they trade? If you can walk me through what what is someone good doing? Are they usually trading one thing or are they trading many? if we go through certain major KPIs. Uh this goes back to that when we have you know people coming in and saying we'll do psychological evaluations on you individual it's really all over the board. I mean it's astounding because I thought this when I when I first joined the firm I was like I'm going to learn to trade like this and you do learn the fundamentals but when you really get into it you learn to trade a lot more like you. And this is the funny thing. If you start trying to trade like somebody else, it I don't mean this early on. When you're early on and you're starting out, you should find a model. You should copy that model. Legitimately copy that model and then make it your own a little bit. Put your own little spin on it. Maybe you like to take profits faster. Maybe you you really want to wait for that moment where you're right or right out, right? Maybe you want to see that moment where this trade should absolutely accelerate. That's my moment to get in. Maybe you're okay holding some with smaller size, waiting for that moment to occur. Maybe you're really good at pyramiding into a position, right? These are all different versions of essentially things you could do on the same trade. But the way that you kind of grow as a trader is by becoming more of what makes sense to you and you avoid the things that don't make sense to you. When you start out though, copy. Just go on YouTube and find something and don't follow it blindly. Just copy it and try it. Because if it doesn't make sense to you, then probably don't do it. But, you know, when I look across our desk, the way somebody learns a new strategy is they study what somebody's doing well and they try it out and if it makes sense to them, then they create their own version of it. Yeah. Very rarely is it like I copied this exactly the way it is because then you're kind of giving away ultimately people think about it as like you're not trading the edge. I actually think you're not enhancing the trading edge. Mhm. I think the human element brings so much trading so much enhancement of every trading edge.

Do you think that just modeling that or even in your the amount of capital SMB may have that you can experience some sort of alpha decay by just copying? Yeah, I guess we could. Oh, yeah. I mean, certainly if everybody was just copying everybody else, then uh I don't think it would be a fun place to be because then you're essentially player versus player against each other. Yeah. Right. Like like like that would be kind of the things. And I I I've heard stories uh from way before I was on the desk of actually and I don't even think SMB Capital was founded. I think it was a different firm of uh one guy fighting another like oh physically physically fighting because they were one was cutting somebody else in a trade, right? So it's back in the day when like you could actually see who was on the tape on everything and he knew somebody cut him on the trade and like clearly this was a different time but they actually got into a fist fight about it. Like I haven't seen that on our desk but also we're not fighting for that same edge. Most of the time we're trading in different ways a little bit. So there could be alpha decay if we're all trying to do the exact same thing. But I think culturally we're just, you know, we're trying to help each person be the best version of themselves and trust that that's going to be a little different.

Let's go back to the acronym. So we're talking about assets. We covered a. What was the rest? So A for allocation. That's the first part that you start with with every trade should have an allocation. You should have a number that you're willing to risk in that trade before you ever get into that. Most people go right to the E, which is entry, right? As soon as you see a chart, you're like, "Where's my entry? Where's my entry? Yeah. Yeah. How do I get in?" Right? But no, you need to ground yourself in A for allocation. And that is a dynamic number. If you're starting out, keep it static. Keep it at like a very small amount, right? So, like we could spend a lot of time talking about small amounts, but essentially what we think is a good model is take whatever your account size is is and divide it by 50, right? So, 50 daily stops for your account. So, if you divide it by 50, that's your daily stop number. So, basically 2% per day. Yeah. Yeah. Yep. And so you and then you shouldn't even bet that full 2% on every trade. You should bet a subset of that depending on

The quality. Does that make sense? This is I I know that we're we're we're getting pretty deep pretty fast.

>> But that also means then you're expecting multiple trades per day.

>> Correct.

>> So you're allowing a buffer.

>> Correct.

This is for traders who are trading multiple trades a day, right? So you're not going to bet that full, you know, 2% on every single trade. >> Because all of a sudden you could take trend trades, be down 20% of your daily of your total capital. And that's where that real slippery slope that we talked to talked about really gets nasty, right? So you know, you're betting a subset of that 2% per day, assuming multiple trades a day, right? So that's your allocation. And I I understand, I apologize, we got a little confusing on that. If there are questions, you can email in and we'll we'll get them answered.

But but that allocation is a really important part to start with, not where's my entry, how much do I want to risk in this. And it kind of flips the mindset, right? I think mindset's a really important thing. If I'm saying how much am I willing to risk in this, I'm putting a little bit of the onus on the stock or on the product that I'm trading, right? I'm taking responsibility first of all, but I'm also saying you're not worth all my risk.

>> Okay? You're not worth it unless you show me something, right? And that's an important mindset to have in trading is listen, I'm only going to give you my risk, my capital. If you show me something really nice, not because I need to get the money, but because you got to show it to me that you're worth it, right? So that's why we stop with start with the allocation. Then we get into the S. What do you think the S is? I'm curious.

>> I'm not sure.

>> Stop. So before you even get to your entry, you identify where your stop.

>> Yes, that makes a lot of sense.

>> So again, we're flipping this whole like our natural instinct is to look at a chart. Where's my entry? Okay, I'm in now. Where's my stop?

>> Okay, how much am I risking? I don't really know. Like that's that's the the human instinct, right?

>> But the way that you can approach this is your allocation and then identify your stop >> to get your position size.

>> You finally have a position size. So now you're accurately betting,

>> right? You've already put yourself in a position where you're not impulsively reacting. You're accurately betting and then you have your entry, right?

>> And then your entry is really that okay, you're showing me exactly what I want. And you usually can predict where the entry is going to be. Like maybe it's above a level, maybe it's, you know, if it clears this, maybe it pulls into this and that's where my entry is. Like you usually can get pretty clear about what that is. And then the T

>> time

>> target.

>> Target. Okay.

>> Target. So you want to understand what your target is, right? And the reason is is because you want to start to map out in your mind how it's going to get there.

>> Is that going to be based on technicals levels?

>> Yeah. A lot of times a simple way that we use it is measured moves. So when a trader is starting out and learning a new strategy, we just think of everything in terms of measured moves or we teach them everything in terms of measures.

>> Meaning like average daily range, ATR.

>> No. So an opening range break, you're familiar with the opening range break trade. Okay. So let's say the opening high, >> let's say it's a 15minute opening range break, right? So 9:30, US open, 9:30, it trades up to, let's say, we'll just use round numbers, trades up to 100, trades down to 98. That's your opening range. When it breaks that range to the upside, you can enter at 100 or 100.01 and your stop goes below 98. And then you're looking for two measured moves. That's a standard for an opening range break.

>> Okay.

>> Two measured moves would be the measuring from the high of the range to the low of the range and then you're adding that up.

>> So you'd be looking for four points roughly, right?

>> Why would you reference the opening range as standard deviations for your target? Why is that the metric?

>> It's I think it's a self-fulfilling prophecy. A lot of a lot of a lot of people do this.

>> Yeah. Yeah. Actually, we learned that from Dr. Steamberger who was like I you know it was probably a year after I started and he's like I don't know why you guys aren't all using measured moves and I was like do your hedge funds use measured moves? He's like of course they do. I was like oh okay well maybe we should be thinking about it too. But it's it's really interesting because measured moves gives you a standardization.

>> It gives you a standardization of risk-to-reward

>> and it also allows you to do you know a pretty standardized version of not secondguessing yourself. If you know I'm looking for this. It's not like a, oh, it's up a little bit and now it's maybe coming back. Yeah. Yeah. Yeah. Yeah. So, when you're starting out, using measured moves is a really good way for any strategy.

>> Yeah.

>> And for the entry, I mean, there's a million ways to enter, but I like to categorize them into two areas. One is >> um places you leave limits on a support level, on a trend line, and they're just uh predictive levels. And then the other camp I'll do is reactionary where it comes to the level, and then you wait for something, whether it's engulfing, break, whatever it may be. But within these two camps which or any other way of breaking down entries, how would you like to say the best way is?

>> There isn't a best way. I mean, it depends on the strategy itself because you describe two very different things. If it's pulling into a nine out of 10 support level, really important support level, I might be able to buy it right there.

>> Just set a limit.

>> Just set a limit and buy it right there.

>> Um, if it's pulling into a less important support level, right? Like maybe it's not lined up on a daily, maybe it's not lined up on an hourly, maybe I'm not really sure or it's in a downtrend. I might want to wait for that prior bar break, right? I might want to see that engulfing candle.

>> The other thing that's really interesting is I might just want to scale into the position.

>> Oh,

>> right. And this is something that is it's a really slippery slope and you have to be very careful because when we're talking about scaling in, you still have that asset protocol.

>> Yeah, you can mess up the A. You can mess up the A really quickly, right? And you can also mess up the stop.

>> So in that case, when you're scaling into a position, very often you're actually using this ridiculously wide stop and you're scaling in so small when you start. And that's where that A really gets screwed up because if you're scaling in at say 50 shares, 50 shares, 50 shares, 50 shares, all of a sudden it's like you're getting pretty big as it goes closer and closer to your stop. But if you're like five shares, 10 shares, 20 shares, you know, as you're going down, all of a sudden you're putting yourself in a much better position.

>> What's the advantage of doing that?

>> Uh, it's usually in extreme circumstances.

>> Okay.

>> And usually it's because you just kind of you've seen this and it's accelerating at a rate that's way too aggressive. >> Because both of these feel to me in the prediction camp where you're predicting a limit or you're predicting a support level and you're saying it might not even reach it, so let me just get in early. Whereas at least myself, it makes a lot of sense to me to be always reactionary where

>> you're a reactive trader. Yeah.

>> And is that a good way to separate uh mentally say I'm I'm this or that.

>> You'll just see it in your trading if something just makes sense to you like you I could see it in your face when we were talking about scaling in like you've probably done that a time or two and you've had a just horrible experience.

>> For me it makes more sense to get in with the initial as the a parts. You have your risk you get in and then if it goes in your direction and you break even or then you can reuse the risk and ladder in. So lading in after makes sense, but before just Yeah.

>> And so you should never be trying to do it before, right? There are other people that it just makes sense to them.

>> It's it's they don't understand why you wait for why would you wait for the turn? I can get really good prices down here and then, you know, like like so it's just it's this this little thing. And who am I to say one's right and one's wrong? I've seen both of them be eight figure traders. I multi-year eight figure traders. Like completely different people doing completely different things. And believe me, one's gonna, you know, behind closed doors say, you know, maybe if he didn't leg in, he would be having a much better year. And the other one's gonna say, maybe if he didn't wait for the turn, he'd be having there's enough money in the market for everybody. There's enough opportunity generated by the market every day for everyone.

>> You just have to understand what makes sense to you, and you have to avoid doing the things that don't really make sense to you. And it's so interesting. I could see your body language change as you were talking about the thing that you like to do >> versus like the thing that you don't like to do and I have the same reaction and every trader that we work with has the exact same physical reaction because a lot of times you tried something and you're like I I don't ever want to do that again, right? And other times you you're doing something that you're like no that makes sense to me and you get excited. So yeah,

>> I've spoken to a variety of guests on the show and a unanimous common denominator between all of them is the emphasis they put on data and actually knowing the inner workings and the insights of your edge and your performance. That's why I'm proud to bring a partner of the show, Tradzella, the number one journaling, back testing, and all-in-one insight experience created by traders for traders. What Tradezella really gives you is deep insights about your trading that would ordinarily not be visible. Whether it's through understanding your trade types and playbooks or even insights powered by artificial intelligence through Zella AI. Whether you trade forex, futures, cryptos, the stock market, it all seamlessly connects to Tradzella, so there is no additional work. You've seen me reference it dozens of times and all of the benefits I've had in my trading from the insights I found from my Tradzilla. So join myself and thousands of other viewers of the show. You'll get the best discount using the link in the description or code toot for Titans of Tomorrow. I want to talk about now um let's say you found an edge, you worked in your psychology, you got years under your belt, and now you want to scale. And you might start off with, I don't know, $10,000 you had in savings and now you're like, okay, I want to make a career out of this. And there's multiple paths in front of an individual that has talent. Uh, obviously you have the professional route which you're involved in, but then you also have the online prop firms, the simulator capital.

>> Uh, I wonder your thoughts in general on one side or the other or uh why maybe people should consider the professional route when these funded accounts are so cheap.

>> Yeah, the funded accounts are cheap. uh a lot more I think exposure. I don't understand the funded accounts enough. I'll be I'll be honest. I've never spent that much time doing

>> I mean just to summarize it, it leaves it leaves you open to not needing an edge and you can just gamify the process because you have asymmetrical gain if you pay 100 bucks for a challenge, but you can make a 2K payout.

>> Yeah.

>> You don't need a positive expectancy. You just need to keep spinning the wheel. You need it's you have reset button for very cheap. So, uh you can get away with no edge but still make payouts. Oh, so that's why that's why a lot of those funds can make the the I've seen some numbers that are absolutely astounding from some of those funds.

>> Of course, there there are big firms or whatever.

>> Yeah, there are big payouts, but it's just a

>> No, no, not the payouts, the amount that they're making.

>> Oh, yeah. Yeah, for sure. For sure. I mean, like anything, when you have 95% of traders lose, then you're incentivized to be book and that's your problem.

>> Yeah. Yeah. Yeah. Yeah. Yeah. Um, so I think so I started trading, you know, I have I I have a fun story, but we don't we don't need to get into it now, but but I started trading uh with my own capital. Not much, but it was my own capital. And I really wish that I had something like that that I could have tried. It is dangerous because if you're just going to try it to try and make a payout, you're not actually trading. You're not getting feedback from the market. You're doing what's what's very dangerous, which is just I'm trying to win. You might as well go play ski ball and tell me you're a good ski ball player, right? Like like it like it doesn't really matter that much. But I will say the place for that is if you're trying to develop a strategy, following that strategy, then you're using it as this amazing proving ground where you can for a very small amount of money learn to trade like a professional.

>> Well, so basically it should be a tool to get a proof of concept

>> like a business owner. Yeah. Like a business owner. Yeah. Yeah. Yeah. It's a to it's a great tool for proof of concept. It's also a great tool where you could probably make mistakes and you're you're you know you're not losing that much in the in the process.

>> The the reason I asked the question is because a lot of traders we get into it because we already have a career path in front of us whether that's university or a job whatever and we look towards the markets for a better life. And it's it's a lifestyle driven decision. Wanting to be a trader. So if that's the reason people are getting, they're looking for freedom, time, freedom, flexibility on their own terms, XY Z firms tick all those boxes. But then you also have the roots with uh let's say traditional prop firms, but then that comes with uh risk team, it comes with a boss, it comes with office, and it comes with all the things traders didn't get into the market. So I I'm I'm curious to know what you would encourage traders to or why you would encourage traders to consider uh the routes that you're on which is the traditional problems when it's doesn't seem from the outside as appealing.

>> Yeah. And I get that, right? Like it doesn't seem as appealing, but I I am very lucky to be surrounded by amazing people on our desk. And when I look at the people across our desk, the experienced traders, the developing traders, and even this new group of interns that we have come in, and then outside of that, we have a trading community who are some of the most inspiring people I've ever met. There's this woman who's going through cancer right now, and she's learning trading. Wow. Because she said, "I want exactly what you talked about." Right? Like that's inspiring. Like it takes all the perspective of everything. All these things that I think are challenging. Oh, it's tough to do my daily report card. It's tough to do this. It's, you know, I'm tired of like all those things. And I'm like, if she can do it and she's wanting to do it, she's overcoming these tremendously challenging situation just to be able to trade every day, right? That's so inspiring. I think the official the the the traditional sorry traditional prop route uh like a firm like SMB Capital I think you have to want to be a big time player to be here. You have to truly want to be a professional to be able to show up at our desk every day and make our desk better. The two questions we're always asking ourselves in every interview we do. You know, we ask a ton of different questions about people's psychology and their background and everything else. But when we get into a room like this and there are six of us around the table debating, do we hire this person? Do we give them however many millions of dollars to trade of the firm's capital? Do we back this person? Do we believe that they're going to be here for 10 years that we can help them grow? There are two questions that we ask. Is this person going to be better because they're a part of the firm? Not just their trading, but are they going to be a better person entirely because of the firm? And are they going to make the firm better? That's it. That's all that we do.

>> If we can't honestly answer both those questions, yes,

>> then they might not be for us, right? Big part of being at a firm like ours is you have to want to be just exceptionally great. You don't want to get good results. You want to get great results.

>> You don't even want to get great results. You want to get outstanding results. You want to stand out from everybody else. You want to stand out on your own terms, right? And yes, that comes with risk management, all those things that you talked about, but those are all value ads for a lot of our traders, like huge value ads.

>> Because that gives you accountability. It gives you support. It gives you an ability to trade markets that maybe would be challenging to trade. It gives you better execution. It gives you all of these different things. Gives you way more capital, right? It gives you all these things that maybe you couldn't get on your own. Is there anything I didn't ask you that I should have?

>> Probably. I don't know the answer to that. I actually really enjoyed our conversation. Um I think I think I think certainly for for one thing that I always wish people asked more of is um whenever we do a conversation like this is what's the most important thing for developing traders to get right because I think that's something that is really important for everybody at home is I remember being at home watching videos on YouTube trying to learn all that stuff and I would feel like I'd get to the end and there would be like 20 takeaways, Right. And so I I'll challenge you to ask what do you think is the most important thing for for for you know anybody at any level to get right in their trading.

>> Oh yeah to to condense down this conversation to one main takeaway.

>> Um I'm I'm falling back to assets. I I think of course a big thing that traders feel is it must be my psychology. It must be a holy grail. It must be XY Z. But without an edge uh you got to build the edge which is something predefined. And you got to build and that's the hard part of a trader.

>> Um, so of course that would that's an undertone but I think using assets to find it the acronym is probably a good takeaway that people should remember.

>> Yeah, I think it I would agree with that. Right. I think that that's a really important thing for anybody that's trading any product to use because if you use that you then take a little bit of the pressure off yourself and you put it on the stock or the product that you're trading. That's a much better mindset to have than oh my god I need to be perfect. I need to be perfect. I'm so tight. I'm so tense. I need to get this entry right away.

>> If you haven't thought about the allocation, if you haven't thought about the stop and you haven't thought about the target.

>> In fact, you just reminded I was going to wrap up but I got a question which is you differentiated between psychology and mindset.

>> Yes.

>> What was that difference?

>> Yeah. So, so three principles that we have, you know, there's the psychology principle, there's the mindset principle and then then there's the the system the the the um strategies principle, right? So those three aren't they're overlapping but they're not the same. Right? So the mindset is I think the way that each of us approaches the market, right? Your psychology is the way that you interact with the market. The psychology is the way you engage with the feedback. Sorry, it's the way you engage with the feedback the market gives you. Right? That's a little bit of the lens. Right?

>> The mindset is the way that you approach. Am I, you know, your psychology can feed into it for sure, but like, am I showing up because I believe the market is an opportunity generating machine, or am I showing up because I think the market's ripping everybody off? Am I showing up because I want to be great, or am I showing up because I want to make a little money? Am I showing up because I have something to prove, or am I showing up because I want to improve my life? Very different mindsets. Your psychology is kind of that next tier down which is how do you take the information the market gives you? You get stopped out of a trade. Is that a threat or is it something to learn?

>> And lastly, yeah, go ahead.

>> The the the last part I have was

>> I think a lot of the audience the objective seems to be I want to get all my confluences and not be spaghetti on a wall but rather make them trade models, make themselves, make rules behind it and now I have these trade models. I can follow this in my portfolio of trades and now I'm a systematic objective trader and I just got to allow my edge to play out.

>> But then it seems like something a creative flare in the firm is allowing serendipity, allowing curiosity to be discretionary.

>> So what is the correct way to apply discretionary when the north star usually seems to be objective, mechanical, predefined?

>> I think when you're starting out, you need that. You need to create structure. I mean, the markets are the only thing that I know of in the world where you can walk in with as much money as you want and you can make as many bad decisions as you want and you might be rewarded and you might not. Like, you know, it's like going to like the I've never been to one. I guess I went to to one, but the uh the food vendors like in Thailand and and like in Asia and stuff like that where you can walk in and there's just anything.

>> Should you eat? Yeah. Yeah. Yeah. Should you eat all that stuff? Like, you know, but you can you can do anything you want to, right? The markets are just like that. You can go in and trade any strategy. You can make up anything you want and we've seen some of the weirdest things work, things that we don't understand and they work exceptionally well. That's perfectly okay, right? But I think the important thing across all of that is making sure that you're approaching the markets in a way that you're a professional. Making sure that you're approaching the markets with the mindset that I am going to go in this to get better. and make sure that you're approaching the markets with enough uh belief in yourself that you are going to be that one out of however many people that's going to make it. And I'm going to follow through on that action every single day. I think that's the most important thing that you want to make sure you're bringing to the market every day.

>> I think that's a wonderful note to end up on, man. It was a epic episode and thank you for joining us on the show today.

>> Thanks. It was a great conversation.

>> Boom.

>> That was good. That was epic, man. I loved it. That was a lot of fun. A lot of fun.