23-Year-Old Prop Trader on Why Process Beats Chasing Trades

I started actually my trading career about, you know, I'm young. I'm 22 now, almost 23 now. Uh I started about six years ago, but after college, I was able to get picked up um by a trading desk. And so I've been at SMB Capital for the last few years now. Um and learning through professional proprietary trading desk, you make a lot of friends and you get to be mentored by some of the best in the world. and shadowing different traders across the desk, I I realized kind of how important it is not only to just be developed in your craft, but uh to use the free time that you have for process and to studying. And so um you know, ironically, I wasn't actually doing the radar report at first for the public. It was more so I was writing reports for myself to better memorize micro and macro stuff. Um because my free time was only on the weekends because during the day of each week, I would be either trading or just reviewing with other traders. So, I actually found that in my weekends, hey, I like doing this enough anyways. I'm a single 23-year-old guy with absolutely no responsibilities other than to feed and clothe myself. So, I can do that on weekends. And so, I've done that week after week after week for two years, and it adds up um for recollection and everything else. It's just now part of my process that I publish um which happens to to also be a little side quest business I'm doing. >> So, last week we had Scott Redler from T3 Trading here on the show. He was actually the first boss of one of my good friends from college who slept on my couch when we were first learning how to trade almost 15 17 years ago at this point in time. Wow, time's flying. Um, I'm curious what has been the biggest piece of advice that you're learning on the desk these days? Because back then it was all order flow and then alos came into the market so you had to lean on technicals or write your own algorithms. You couldn't, you know, get around the spoofing, the iceberging of orders. What's the biggest challenge that you find that new traders are running into these days from a you know a retail or smaller prop count perspective? >> Uh it's actually iron it's pretty interesting. So uh big focus on the desk here is playbooking. Uh you know each of us as human beings we have a kind of tendency where we like to do things how we like to do things. Me personally I've never been the hyper scalper ultra liquidity taking and providing entity who wants to get in and out every few seconds. Uh so I naturally fell into more longerdated ideas such as SUNE today uh longing small caps and that uh and swinging it over a few hours as it develops and you know holding it down to the after hours for potentially another 50 cent to dollar move. Uh I've always found these bigger ideas, these longer lasting ideas to be more fitting of my personality. Um and so playbooking is one of the biggest things and part of playbooking is building an archive of charts. I use notion and Evernote and these are you know when I first started on the desk here the biggest emphasis from all the people I was mentored by was just sit your butt in a chair and every day review the best opportunities whether you traded them or not and over the course of a year I've compounded a huge database that whenever something comes up to I have a ton of comparables to say this is where the stop is this is how much it's sizing this is how big of an opportunity this actually is and over time right you're able to not only develop and see what opportunities are which but also grade them and that allows you to have exponential bet sizing when the big opportunities like gold short in January February of this year hap uh was that was like the A++ op and even recently right SanDisk investor day that was probably one of the bigger ones and most notably SpaceX a lot of people at our firm especially the younger guys do really well with IPOs and so we've developed an IPO playbook you know opening print trade trade the opening drive then look to trade the high day break and even um in the days to follow or even the options unlock right? I talked about it last time when SpaceX actually on this show when it IPOed was that um as soon as options unlocked on SpaceX that often causes a top for a lot of these names that run up into it and that was the topping day for SpaceX. So um it's a huge focus on process and playbooking and I don't think a lot of retail focuses on that because they want to jump to trading and when you jump to trading you skip the process which is inevitably you know that's actually the way you get the output that you want. Um it's not actually the other way around. Yeah, I'm very much with you there. So, let's take a look at some of these markets, so to speak, from the seasonality perspective because I know that you write about seasonality, too. I like talking about seasonality. We've had the folks from stock traders all come in here. They've contributed to the program before as well. Seasonality in September is an absolute nightmare. U JP Morgan just put out a research note saying that don't get worked up about September seasonality. It's not for any good rhyme or reason. It's basically random noise here, but here we are. September starts, volatility is up. Um, since the midterms, actually should say since 1990 during midterm years, the market fears faces about an 8.1% average draw down between August 31st and election day here. So, how are you incorporating seasonality, if you're looking at it all when we have so many of these um unique events, right, these outlier events that are constantly popping up on our radar every few weeks or months. >> Yeah. So, this is a great thing. So, seasonality is a huge portion. Uh I say this pretty often, but um market environ market environment makes the trader. So you can be the best trader in the world, but if the market environment kind of sucks, you're never going to maximize P&L like you can in a hot market, right? Uh and you know, if you everyone has read I hope everyone has read the recent market wizards book, um you see a lot of stories of people like Lance B and other people like Simon Russo, you know, they're saying we did all this work and then eventually the right market hit. And that's the kind of thinking especially with seasonality is in this time right now how I'm thinking about it is first of all let's take a grounded view. You know everyone calls for a crash in September saying oh my gosh you know the market's going to go down 10 20%. But I disagree with that because markets are at all-time high profitability all-time high um you know just everything is good about what you would expect with equities right we're not losing money. This is not the.com bubble. So let's ground ourselves in reality first and then also come to the fact that if you actually look at the tape what is it telling us? Well, yes, it is seasonally weak. I mean, yes, growth stocks are going up from the LEO blow-up bottom. But look at how they're going up. I mean, look at Nvidia, right? Record earnings, just insane numbers, and it sells off over 50% of the move. Everything you look at has a congested tape. You know, the moves that should have worked aren't. The moves like memory that are going up and should continue aren't some of them. And it's very scattered. Of course, correlations are at all-time lows. Um, and we see that across the data. I think Goldman Sachs had some good charts with that. Um, even Jem, who you guys are talking to next, talks a lot about this. Like correlation is the all-time low. We're at this market that is a congested tape. Positioning is clogged. And that is the seasonality weakness in my view, right? It doesn't have to be a 10% drop. It's that kind of nowhere is the pain that the markets are doing right now. And so, will that change with rate hikes, which will inevitably be the most important data point this week? I think so. But you don't have to force it. So at the desk right now we are very um kind of changing our models to in perception like instead of targeting two ATRs on expansion now it's really just one ATR or even just discretionarily like is this move extended right now if you've been buying highs you have been buying high and selling low every move if you buy a resistance break it's just been going straight back down under. So it is right now like a positioning tape and how we're kind of trading is you sell into strength and you buy into weakness. That's pretty much it. Uh, it's been 2% either direction. We have uh TP Tom Preston here who puts on an SPX iron condor basically every day. I can't think of the last time that he's told me, maybe over the past two weeks, one day where it hasn't worked out >> because the market just it's just playing around in this range. Uh, Andrew, before we before we let you go here, we only have you for a few more minutes. >> In this tape today, there's a lot of strength in some of these, you know, some pockets of leadership are meta right now surging. It's up another what six and a half% here after a 4.8% day uh recently. news was released. Maybe all this AI cap spending was worth it after all. But the semiconductors here are holding up too. AMD having another great session up 3% maybe starting to break out right now. You mentioned the Liupold bottom. I found that so fascinating. The day that we found out he was knocked out, I was running around thinking, "Oh my gosh, this is said it here on air. This is just like when FTX goes down. The soon as Sam Bake been freed goes down, Bitcoin bottoms. Has the whale been killed?" I mean, talk to me a little bit about that. I know that you're on the younger side here, but this is not the first time in your trading history that you've seen an overleveraged person get knocked out and then we kind of just go back to the previously resumed programming. >> Yeah. So, what's really cool is uh when you look at leverage, right, and even the Liupold, did Leopold actually bottom the market? No, it was more of like he only ran like a 20 billion book. And when you take in account the amount of flows that it, you know, boosted one way or the other, it was much more than that. But what it was was a sentiment relief for the market. It was a sign that pain was deep in the market. And when there is a point of pain, it's often max pain, right? And you can get a relief. And so I always say like I always look at this like this, but good news is treated differently in different parts of the market. So for example, say you're a marathon runner. If if your wife is at the starting line and she gives you a Gatorade bottle and you drink from that bottle, the water is not going to be as beneficial or good to you than if you're already 24 miles deep and she's running beside you and gives you a water bottle, right? That water that it's the same water, but it's much better at a different location. And the same goes with news that at a lower level, at a higher point of pain, it takes less to actually move the market more. Um, and so the same thing with the markets right now. In my opinion, I think you're going to need an excuse to sell. It might not be in a big excuse, but to get this market to actually turn and and either one way or the other, you do need some sort of excuse to to do that. And so, will that be some sort of uh you know, Nvidia announcement, something like that. Right now, there's a lack of thematic basket and unity in that, right? Memories are scattered, opticals are scattered, neoclouds are scattered. Um there's a lot of different, you know, divergences between them. And you need something to either tighten them back up, bring correlation back in either to the downside or the upside. And so it's just about waiting and and being reactive to whatever that could be.