Linda Raschke on Having an Edge in Trading and the Importance of Data

Summary

In this engaging episode of CMR Interviews, Jason Shapiro sits down with renowned trader Linda Raschke to discuss the nuances of trading, having a statistical edge, and the significance of data. Linda shares her wealth of experience, emphasizing the importance of developing a unique trading edge and process over time. They delve into the behavioral aspects of trading, the role of experience, and how patience and discipline—or a well-defined process—can significantly impact trading success. Throughout, Linda imparts wisdom on both trading and life, highlighting the reciprocal nature of giving and the essence of maintaining a positive outlook.

Highlights

• Linda Raschke emphasizes the need for an 'edge' in trading, whether through statistical data or experiential insights. 📊
• The importance of a robust trading model that isn't dependent on fleeting trends—consistency is key. 📈
• Experience in trading is invaluable, and the learning curve can be three to five years. 🕰️
• Discipline or a structured process is crucial to following through on strategies especially when trades don't go as planned. 📋
• The need to trade in the direction of what Linda calls 'the aberration,' understanding market dynamics. 📉📈
• Record keeping and honest self-assessment are indispensable tools for a trader’s success. 📂
• Success in trading, like any field, often requires a mindset of gratitude and a giving nature. ✨

Key Takeaways

• Understanding your edge is crucial in trading; it can come from experience, statistical modeling, or new market opportunities. 🎯
• A robust and durable trading approach helps withstand market changes over time. 🛡️
• Trial and error, along with experience, plays a significant role in developing a successful trading strategy. 🔄
• Staying disciplined or adhering to a solid process is vital for long-term success in trading. 📈
• Trading markets is a performance-oriented discipline likened to sports—requiring mental and physical readiness. 🏋️
• Practicing gratitude and maintaining a positive mindset can enhance one's life and work performance. 😊

Overview

In this insightful conversation, Linda Raschke shares her extensive knowledge on what it takes to succeed in trading. She discusses the necessity of having a statistical or experiential edge and how to develop it. This edge could stem from a range of sources, including trial and error, which Linda advocates for as an essential learning process in the markets.

Linda and Jason explore the psychological elements of trading, such as discipline and patience, stressing that a well-defined process is vital. Linda dispels the notion that one needs a degree or sophisticated programing skills to be successful, instead focusing on consistency and understanding one's own trading temperament.

Beyond trading, Linda shares her life philosophy on the importance of gratitude and giving. She shares how maintaining a positive outlook and being grateful can influence not just trading success but overall life satisfaction. Her perspective offers valuable lessons on living a balanced, fulfilling life while navigating the complexities of the trading world.

Chapters

• 00:00 - 03:00: Introduction: Interview with Linda Raschke The chapter titled 'Introduction: Interview with Linda Raschke' is a part of the CMR interviews by Jason Shapiro. In this episode, Jason interviews Linda Raschke, focusing on topics such as having an edge in trading and the significance of data. For more information about Jason and Linda, listeners are directed to check the episode notes in the description. This particular episode was recorded on March 26, 2024.
• 03:00 - 09:00: Finding Your Edge in Trading The chapter 'Finding Your Edge in Trading' is centered around a conversation with a legendary figure in the trading and money management sector. The discussion covers various aspects of trading, money management, and other related topics. The interviewee, Linda, sent the interviewer her book titled 'Trading Sardines,' which was appreciated for its easy-to-read style and insightful content. The book shares extensive market and trading wisdom, as well as life lessons.
• 09:00 - 15:00: Developing Trading Styles and Adapting to Markets The chapter delves into the essential question of how to make money over time through trading. The discussion is initiated by Jason, who invites Linda to share her insights on developing an edge in the market. The conversation suggests that having an edge is crucial for successful trading. Linda, who is honored to be part of the discussion, brings a mix of anecdotal wisdom, fun stories, and practical advice on love, life, and trading to the table.
• 15:00 - 25:00: The Importance of Process and Discipline In the chapter titled 'The Importance of Process and Discipline', the discussion revolves around the necessity of having a statistical edge in any competitive endeavor, such as games like Bridge, gambling, or trading in markets. This edge could stem from various sources like modeling, early arbitrage opportunities in emerging markets, or even from accumulated experience. The key takeaway is that possessing an edge is crucial, but equally important is the consistent application of this edge. Over time, success becomes a game of large numbers, as evidenced by the example of making 1,000 trades.
• 25:00 - 35:00: Trading Experience and the Evolution of Strategies The chapter discusses the importance of having a trading edge and the positive expectation it generates. It explains that the more trades executed with a certain thesis, the closer one comes to guaranteed profit, emphasizing the necessity of a money management algorithm. The text suggests that systematic hardcoding or experience-based knowledge can guide trading strategies.
• 35:00 - 44:00: The Role of Technical and Sentiment Analysis The chapter discusses the importance of technical and sentiment analysis in trading. It emphasizes the need for gaining experience and trying different methods to find what works best for an individual. Different strategies like spreading, options, and seasonal programs are suggested to manage the financial aspects more effectively.
• 44:00 - 51:00: Market Trends and Money Flow This chapter discusses the importance of understanding market trends and money flow, emphasizing the necessity of gaining hands-on experience in market analysis. It highlights the commitment required to learn various trading styles and strategies, pointing out that becoming proficient in trading is a long-term process that typically takes between three to five years. The chapter uses the analogy of learning to play poker to illustrate the concept of capital preservation while acquiring the necessary market experience.
• 51:00 - 59:00: Wisdom in Life and Trading In this chapter, 'Wisdom in Life and Trading', the conversation revolves around the notion that successful trading isn't something that can be achieved instantly. The speaker reflects on the unpredictability of the stock market, as exemplified by the sudden rise in value of GameStop stock options a couple of years ago. The dialogue includes a mention of a movie that captures the essence of that event, suggesting that it is worth watching for historical context. Overall, the chapter suggests that experience and understanding of market fluctuations are keys to success in trading.
• 59:00 - 60:00: Conclusion and Final Thoughts The speaker talks about their reluctance to watch 'The Wolf of Wall Street' due to personal connections with the penny stock industry during college. Eventually, they watched it and found it amusing, now enjoying it frequently. The speech shifts towards the necessity of having an 'edge' for development.

Linda Raschke on Having an Edge in Trading and the Importance of Data Transcription

• 00:00 - 00:30 [Music] welcome to CMR interviews by Jason Shapiro in today's episode Jason interviews Linda rashy on having an edge in trading and the importance of data to learn more about Jason and Linda check the episode notes in the description Hello today's March 26 2024 I'm Jason Shapiro with crowd andm marketreport tocom today I have the pleasure um of welcoming Linda Bradford
• 00:30 - 01:00 rashki who is a legend in the trading and money management business um and we are going to have a conversation about trading and money management and and anything else that uh falls into line here um I will start by saying before I did this interview uh Linda was nice enough to mail me her book which is this thing right here it's called trading sardines and um I read it and it was awesome because it was such an easy read uh she shared a lot of market and trading wisdom as well is a lot of Life
• 01:00 - 01:30 wisdom and some really fun stories about love life and trading um and I would recommend it to anybody so on that note uh Linda welcome and thanks for joining thank you for having me Jason it's a real honor so I usually um start with this very simple question um how do we make money over time trading the market let's just open up the whole can of worms right off the bat how do we make money you know that's what we want to know right that's what we want know you have to have some type of Edge that
• 01:30 - 02:00 would be obvious in any game that you play be it Bridge or gambling or the markets you need to have some type of statistical Edge that may came from modeling or it may come from an early Arbitrage opportunity with the new Emerging Markets it might come from experience even experience is a form of an edge but you do have to have some sort of Edge and then you need to apply that consistently so over time it's just a big number game if I make 1,000 trades
• 02:00 - 02:30 and I have n Edge I will have a positive expectation and the more trades you can make with that type of thesis uh the closer you come to a guaranteed profit and of course you always need to have that little money management algorithm in the background um but I think that uh you know you can either be very systematic and have it hardcoded in your brain or your uh system or um just through experience you might know how to
• 02:30 - 03:00 manage the bottom line a little bit more appropriately so you know I think that the initial um problem is getting that experience or when people first start trading out uh it's like trying on hats you know you have to try this style is it going to work for you maybe you try that for 3 months you know maybe we try uh spreading maybe we try options maybe we try season programs maybe we try
• 03:00 - 03:30 commitment of Traders reports you know but you can't um you can't arrive and start to learn the nuances of something until you have explored many different styles if you are new to the markets and that whole process can take uh a minimum of three to five years so just like anything it's like playing um you know poker and capital preservation until you get that experience under your belt
• 03:30 - 04:00 excellent advice see mean I can't just start trading today and start making money right away and go for you know if you bought those gamestock options a couple years ago you never know huh did you see that movie by the way oh I'm not supposed to ask you questions it was fun I did not see D money yeah I watched it in livetime yes yes which I thought was was enough um but maybe was the movie good maybe I should see it I don't know you should for history's sake it wouldn't make sense if you weren't to trade but
• 04:00 - 04:30 you know you'll get it I didn't see that movie about the penny stocks with Leonard DiCaprio for a lot of years because uh I knew people when I was in college that were in the penny stock game and and the whole thing made me sick Wolf of Wall Street yeah so I refused to watch that movie for many years and then once I did it was actually yeah it was actually hilarious so now I watch it all the time but um sometimes I just don't want to watch something that I I kind of lived in in in lifetime anyway um okay so you need to have an egg Edge and to develop an
• 04:30 - 05:00 edge is going to take you time um what are the things we're looking for in that edge and I'm not telling I don't need you to tell me oh well the edges you trade when the five day moving average crosses the 25 day what do we need to look for in that a perfect world okay I'll start off with a perfect world and then we'll deviate from there in a perfect world you need something that's durable and robust okay in other words not optimized um you know will hold up over time and for example with my trading
• 05:00 - 05:30 career when I started off trading I was in the floor and Equity options on the Pacific coast Stock Exchange and it was a little bit like the Wild Frontier we did not have computers we didn't have the uh you know the programs that keep all the options in line so there was a lot of lucrative opportunity for those first couple years until it slowly got armed out and everything got computerized but um you know I've seen that time and time again with um many things in the markets it's uh you find
• 05:30 - 06:00 something and if you find it other people can find it as well and eventually has what we'll call a halflife you know with a system uh a halflife and it'll start to lose its Effectiveness now that's not true with everything for example you could take chart formations a gorgeous weekly chart formation which now has a lower frequency of occurrence so everything's a tradeoff on the flip side of that as the mark have become more crowded with
• 06:00 - 06:30 different Market participants you have an increase in the noise level which means an increase in false breakouts and so forth so you know everything's this sort of balancing act and and tradeoff But ultimately you do want a style I will say an approach or a methodology that will uh last over time and to develop that style and that methodology it seems like Char and error is really the best way to go you know trial and
• 06:30 - 07:00 error goes a long ways that's with you know look at uh medicine and biochemistry and physics you know so much of what we've learned through uh Through the Ages has been trial and error and then freak chance you stumble across something like penicillin you know so there is a little bit of that but there's also more than that there's uh some Savvy with pattern recognition there's some Savvy as to what we can do what we cannot do for example with neural networks or artificial
• 07:00 - 07:30 intelligence which is so in Vogue right now they're only as good as what we train them on um you know and uh it's uh you know some people have a better temperament for risk-taking because ultimately if you have not been in the markets for a long period of time it doesn't matter whether you have an edge or not you're end You're Going to Be Your Own Worst Enemy you know just with your emot motions until you learn to
• 07:30 - 08:00 desensitize and get a very thick skin and so forth so a lot of this game is just being able to stay in the game as with anything you know you're going to go to college you're going to go to four years medical school you're going to do two to three years residency there is a uh big time period there before you start to get to that point where you can make the big bucks and that's that's just with more I'm saying that in the light of of the retail type of the side
• 08:00 - 08:30 of the business because there is opportunity for some uh quants that are very sophisticated I know some friends that are doing really interesting work you know but it's it's um it's a different science if you will so even you know the most successful Fund in history everybody likes to look at Jim Simmons and his Medallion fund right it's not that he's a Trader it's just that he had the most amazing insane infrastructure Network you know that
• 08:30 - 09:00 nobody else would be able to replicate and what people don't understand with his particular fond I don't know the stats now I knew the stats 20 30 40 years ago because I had clients that had uh monies with him his average holding time was under 24 hours so it wasn't like putting on big bets it's just that they worked every Market in the world you know milliseconds at times every single edge that could be and uh you know that is not um possible for
• 09:00 - 09:30 somebody like you or me you know it just takes this insane amount of infrastructure and Technics and you know Engineers to keep everything going so we're talking about a different type of business here there's something I like to say a lot to people which is you have to trade you would you agree with and you know what if you don't know who you are the markets are a very expensive place to find out I I have that written down here I have about 10 quotes from your book written down here and that's one of them so you just covered one of my quotes thank you um but you know
• 09:30 - 10:00 being that like a lot of people it's funny I saw it on a u on a panel a few months ago and we were talking about you know back testing and and all this stuff and somebody in the audience raised their hand and said you know I don't know how to program and I don't have back testing software so you know I can't do that stuff and one of the guys I was on the panel with um said so what you're telling me is you want to make money
• 10:00 - 10:30 trading the markets you you just don't want to do the work that's necessary to make money in the markets which I thought was a little harsh but was absolutely true you know I don't know how to program um but you know you get a trade station and and you hire somebody for $50 an hour quite frankly and and you can get pretty far and if you actually take a little time programming something like trade station is very simple it's all just a question how much how much you want it I think you know
• 10:30 - 11:00 you know I um for the first uh really 10 years of my um career I did everything by hand and I would print off charts and I would go by hand and I would calculate the variance for every single trade and um I learned more by doing that and seeing the times where it didn't work and the problem with back testing it's great for overall modeling and giving
• 11:00 - 11:30 you an initial idea and um but the problem is is that uh you're lumping so much data together you're missing the skew and the problem is that I mean with the markets you have to understand that the skew is where the edge is in other words those fat tails and so when you lump say for example uh statistical testing with a sample size of 500 it wipes all that out and everything cancels each other out and you'll miss those fine little nuances and that's
• 11:30 - 12:00 really about what the market is about to me is that there's that skew that's what offers the fat opportunity here and it takes a lot of time to recognize that you know um because our humanness um you know we want to buy wholesale sell retail that type of stuff uh and we're always looking for that Arbitrage or that reversion to the mean type of thing just subconsciously you
• 12:00 - 12:30 know if you see a car that's marked up too high you're going to wait till it comes down that type of thing but what the markets do is they impart incredible information to us when these relationships get out of line and they get out of line for a very definitive reason and so it's hard for us to understand as humans because we don't see enough of that we don't have enough sample size to really understand you know what's going on but if you have a banded type of um you know relationship
• 12:30 - 13:00 and something starts to push outside that band okay there's a very strong reason why and you generally want to go with that and that's very difficult for people to get their hands around that you know just like you've learned Now by watching the commitment of Traders reports that just because it gets extreme sometimes when it gets so extreme uh you actually want to be positioned in
• 13:00 - 13:30 the direction of that because there's something crazy going on there and of course eventually everything does a little bit of a reaction in the opposite direction but um you know so I wrote a book many years ago and it was with Larry Connor and the name of that book was Street smarts and so uh there definitely is a little bit of Street smarts when it comes to the markets you know it's not necessarily about having
• 13:30 - 14:00 that master's degree in Applied Mathematics or you know something that would allow you to have these uh incredible programming skills which are of value for certain hedge funds or uh you know Quant shops that do that but for the individual I don't think it's necessary I really don't think you have to do that I think what happens is that especially with electronic trading it's so easy just to click that Mouse and
• 14:00 - 14:30 it's very difficult for most people to have the patience and be very discriminating in waiting for the opportunities where uh not to be cliche because it did get to be a very cliche word in the last couple years that asymmetrical opportunity you know um you know or that high win rate uh but the the good opportunities just don't come along as often as people might think
• 14:30 - 15:00 it's a fact and it and it speaks to it speaks to discipline which to me is the hardest thing in the world you can have the greatest system in the world if you're not disciplined over time even the greatest system in the world is going to have losing trades and get things wrong and sometimes get things very wrong and if you're not disciplined you're doomed um that's what I believe I think discipline is the single most important thing in this game I don't care how you trade and I think you'd probably agree with that um I hate that word I'm sorry well to me you know what it is it's it's like um I
• 15:00 - 15:30 like I like phrasing it as having a process because if you have a process you're not putting yourself at the mercy of being disciplined or undisciplined or doing you st disciplined to that process well there okay all right we're doing semantics here but yeah process so that um I see people all the time they they have a process but then they don't stay disciplined to it okay I'm going to get in here I'm going to here the stop comes
• 15:30 - 16:00 it's like well I'm going to let it drive for another day well you know what I mean it's like they probably haven't gone through that learning curve yet no they will they still you know newer in the game so why it's a it is definitely a game of attrition because uh you know you you can't have so many people winning at this game I hate to say it you know it's um not that every Market is a zero some type of game that's not true either but uh you are competing in
• 16:00 - 16:30 Arena with um major money that has exceptional execution skills it's all automated and they are going to beat you to it you can't leave yourself at the mercy of oh I'm going to get out if it hits this point no put your stop in if you get hit you can always get back in you know so um yes fact um the first things that I wrote down from your book some of these quotes trade in the direction of the aberration and you've mentioned this a few times in the book
• 16:30 - 17:00 okay and I love it because trading the direction of the aberration the market is never too high to buy or too low to sell when something moves Beyond its historical boundaries there's a strong reason why which is what you were just saying a Trader should be positioned in the direction of the aberration I believe in this so much this is what triggers pretty much every one of my trades is when a market does something that it's not supposed to do I go with the market and not with what the supposed to do thing is um and I think that's an important point I don't know
• 17:00 - 17:30 if you want to expand on that you might have done that a little bit already I'll just give you one example that's sort of a different dimension and I did a lot of work with Steve Moore and Moore Research Center back in uh in the early 90s and I learned a lot about seasonals and the statistics behind them and Steve's run this stuff for like 30 plus 40 years he's probably I think the best in the business that does it more research center but you can look at seasonal that goes back say 20 years or just say 18
• 17:30 - 18:00 years and let's say it's seasonals are very much like an Actuarial Table there's a window it's not necessarily timing sensitive on either end but there's a window where you would see a positive expectation and so we can say okay you know the market rallied during this month uh 15 out of the last 18 years which is not a high sample size so that means that on a walk forward basis even though it was 85% win rate in the
• 18:00 - 18:30 past going forward it might only be a 60% win rate but now do that across a portfolio of 20 different markets and names so it's all a numbers game but here's what Steve taught me was that a failed seasonal often ends up being an even bigger trade than the actual seasonal okay so there's a very strong reason as to why that seasonal fails and so you know we can't afford to get stubborn these things and you do have to
• 18:30 - 19:00 have a cut off by which you can say this system is no longer working this seasonal is not catching this XYZ may you know uh be the case so that would be an example there just having a failed seasonal could be a bigger win in in the opposite direction yeah I like it um something really you know things don't work all the time and again A lot of times when they don't work it's an even better signal it's going to work the other way there you go there's
• 19:00 - 19:30 always a reason so stop being stubborn it appears to me from your book that and you talked about this earlier about things give you an opportunity and they get arbed out tell me if I'm wrong but it appears you have traded very many different things over over the years maybe you you you you used to do this and that worked for a while and then it stopped working because maybe it got arbed out so you you contined to do research you found this you started doing this and that worked for a while and then it stopped working and you did research and you moved on to this is that correct yes and no I started off in
• 19:30 - 20:00 the equity options which was very much a strategic type of game it's not like you're in the Futures pits with the snps and everybody going totally you know crazy all day long although we did have green mail and blackmail and some craziness in the pits you know back in the 80s um but yes the edge and the options did get arbed out so everything was pretty much right in line um I don't trade crypto I don't trade Forex I mean
• 20:00 - 20:30 I trade the the currency Futures I love the currency Futures but there's really no Advantage for me to trade Forex versus the currency Futures I would much rather trade the currency Futures where I can buy on bid sell on offer that type of thing and and use them on my uh execution platform with the same uh trade management tools or so forth that I do with everything else I don't have to have several separate accounts so um I have traded stocks on and off you know
• 20:30 - 21:00 for like 30 40 years and I'll be brutally honest it's like uh I find that I get more banged for my buck in the Futures because of the leverage and the um it's so much easier to move size going in and out you know with the snps you know one Mouse click you can do a couple hundred and with stocks you can't really do that it's a different type of uh execution feel to it and it's a little bit more Capital intensive it at least for the way that I trade so I
• 21:00 - 21:30 pretty much stick to Futures and I've traded um urx the jgbs the Italian bonds I mean I've traded Futures all over the world but now um you know I pretty much just stick to the most liquid domestic Futures markets and trust me that's enough to get into trouble it certainly is um again I'm going to quote some your book these are more my f some of my favorite ones it's hard to muster the necessary confidence in a system unless you develop it yourself and this is something that has come to my attention
• 21:30 - 22:00 since I've started this Discord page and newsletter type thing because I find we started this thing with the idea of helping people to understand the bigger picture of what it takes to be successful in trading not to copy trade Jason shapira okay um and I do put my trades on there because I want people to see what I'm doing and therefore the discipline that I'm using and my stop losses and my risk management so that they can see that that is the more important thing but what I find is a lot of people copy the traits and I beg them
• 22:00 - 22:30 not to for this very reason that you mention in the book if you didn't develop this yourself you're not going to have the confidence in it I I've been trading what the way that I've been trading for over 20 years I go through a losing period I know that that's part of it I have all my statistics you know so I don't say oh those last three trades stunk I'm not going to take the next one you know I know how important it is for me to take the next one because the next one may very well be the big one right
• 22:30 - 23:00 um so yeah did you want to expand on that a little bit the fact that you really need to develop your own thing and not you know well sure everybody has different temperaments and uh some people are more nervous and need a little bit more uh you know some people can take heat like I can take a ridiculous amount of heat you know but that might not be the case with everybody and it might not be a good thing either you know I'm also uh very uh pro- risk I I take a lot of risk and
• 23:00 - 23:30 it doesn't bother me you know I and it gets me into it's gotten me into trouble in the past I'm very much uh leap and then look you know and assess uh but the opportunity comes I want to get it on and then I can evaluate sometimes um I will say that even though I do so much crazy modeling and I always have and I've always hired people that have been full-time for my hedge fund that did all the number grinding for me um my real for is that I'm just an exceptional tape
• 23:30 - 24:00 reader and that probably came from my years of standing on the floor when we didn't have charts I didn't have computers I didn't have software you know where I could see these things but there's a certain way that a market will trade when there's an increase in interest and an increase in volume and an activity and I don't need to plot the volume on um you know on the chart I'm usually looking at the uh my quote board you know so I'm trading off of the little net change is pretty much what I
• 24:00 - 24:30 watch but I do it across a basket so it's a very holistic type of dynamic markets to me I mean I watch the stocks I watch the currencies the metals the crude all these types of things but I'm kind of watching The Net change and I can see when something's going plus or minus and I've usually done my uh homework the night before that says okay this if this dips below the previous days low and starts to come back up I'm going to get long um but I use a lot of
• 24:30 - 25:00 discretion on entries I'll use a little bit more systematic approach on exits and I've pretty much categorized you know my approach to exit for small Target which is if you're scalping or day trading on the snps 80% of the time you want to just play for a small Target because they're very noisy markets so if a market is going through a consolidation period or Market profile terms would say bracketing Market you
• 25:00 - 25:30 want to play for a smaller Target pretty much you know a mean reversion type of thing if it's um you know just starting to get some legs then you can reach for a larger Target and then there are you know about six to seven structured categories that I have where I would Trail a stop and that is maybe 30% of the time are there cases where you can go into the marketplace place and Trail a stop and do better than playing for a
• 25:30 - 26:00 small Target or a large Target I tend not to scale out so I'm pretty much all in all out that's just what works for me I find that people when they scale out often it's more to satisfy that psychological need but it does alter the numbers so as if you want to do that for yourself that's fine but just recognize that that's why you're doing it to scratch that little mental itch that you
• 26:00 - 26:30 might have um so you know I like to do a little bit of everything uh you know if I'm day trading the snps I might only make one or two trades a day and then I'll be looking for my you know positions that I can put in one day out the next day or hold for two or three days and then those opportunities where we can hold a trade for say two weeks you know without really taking much heat
• 26:30 - 27:00 uh maybe you get seven of those per year per Market you know so it's identifying the pre-existing conditions and then understanding that I might only capture if I have 120 trades I might only capture 60 of the 60% of those trades you see it's uh and then if you have a system that says you should make n% you're doing great if you capture 80% of
• 27:00 - 27:30 that you know because it's pretty hard to um you know for numerous reasons psychological execution software Hardware time of day all all kinds of things why people will 99% of the time underperform a quote system unless it is 100% automated and systematic and even then you've got can of worms for a smaller individual that doesn't have that sophisticated uh reconciliation going on in the background and so for it's a whole different business though I
• 27:30 - 28:00 think it's an interesting comment if that's what you're doing you were talking about the scaling out thing that's fine just recognize why you're doing it um and I love that because that's how I feel about all of this I I think this whole game is a battle against yourself um and recognizing why you're doing things to me is the most important thing you can do right finding and being honest about your own biases so that you can overcome them you know is to me the most
• 28:00 - 28:30 important thing that you can do and what people have the most trouble doing not just in trading but in life I mean I see it all the time with almost everybody I talk to these biases that they can't get over be it and I don't want to get into it but be it political be it religious be it whatever you know the bias is just overtake any kind of ability to think in an open-minded way and and that's fine in life if that's what you want to do you're not hurting anybody necessarily
• 28:30 - 29:00 but in trading you know um you're going to lose money so you know to me that that that's the most important thing to me I don't know how you feel but and it goes back to the whole discipline argument as well but to me it's psychological discipline you know what I would do would be anybody that you know maybe's been in the game for less than 10 years maybe you know a little bit more than three years but they want to uh step up their game um pretend that
• 29:00 - 29:30 you are going to manage money and you know this Jason because you had to do this as a CTA you prepare a a document and in that document it states markets that you trade your trading style perhaps some general statistics as to average holding time average drw down these types of metrics and um then trade that as if you are your own best client trade it as if I'm going to take one
• 29:30 - 30:00 unit one unit might be one contract it might be five contracts depending on your account size it might be uh 10 contracts in corn and two contracts in the NASDAQ I adjust everything by a dollar range so that it's uh even you know fairly even risk there and uh say I'm going to do a six-month period here of my Approach and style so that I can see the numbers and then go raise money on that okay okay maybe you have no intention of doing that and truly to
• 30:00 - 30:30 become a CTA or a hedge fund or something is so insane with the regulatory burden and the counting and the auditing and everything else that most people don't want to go down that road but if you did an exercise saying uh you know I'm going to demonstrate my style and I'm going to do it and keep these statistics you know and if you really want to put the heat on yourself show your statements every day to a friend or a colleague or a spouse or
• 30:30 - 31:00 something like that so you are fully accountable and I think that that accountability problem is really uh what can solve a lot of people's you know um ruts that they get themselves into if they had to be accountable to somebody in some way because you know face it you can hide your statements nobody sees it except you and you can lie about it to people too it make you oh yeah oh yeah but if you had be accountable it might be a whole different game changer you
• 31:00 - 31:30 know you might be more apt to exit a losing position at the end of the day if you want to reestablish it the next day you can but at lean you're not carrying this crap on your sheets overnight that's going to get you off to a bad foot the next day of trading so there's all kinds of Creative Solutions that you can do and uh I am not a coach and I'm but I'm sure there are coaches out there that could you know help out in that area uh but you know it's you will find
• 31:30 - 32:00 a way if you want Mr Bill who was your trade your trainer yes recordkeeping is a critical part of building a good foundation and he wasn't even talking about trading um monitoring your statistics is also a tool that can help you stay focused and gain control over areas that are prone to distractions it is vital for tracking performance which is exactly what you were just saying and I think that he was about your physical training but and how to be successful in
• 32:00 - 32:30 that and what I have come to the conclusion of over the years is that success in any in Denver um is a Formula whether it be success in bodybuilding success in trading success in relationships I is a formula and part of that formula is to keep records and to keep statistics and to keep honest unbiased notes on this stuff because that helps you an immense amount it
• 32:30 - 33:00 helped me an immense amount when I finally came to the conclusion after 10 years that whatever the hell I was doing it was not getting me anywhere with this and I had to make a decision of what I wanted to do with my life and I decided I wanted to go on trading I was lucky that I had been keeping statistics and trades for you know a good seven eight years and I was able to go back through that and really see what was working and what wasn't working you know and we have this this multi- learning thing I read in one book the guy called it where
• 33:00 - 33:30 we'll remember the trade that did great but we'll forget the 50 times we put that same type of trade on and it didn't work right whereas if you're keeping the records of all that you can go back and look and see hey I remember that that worked great once but it doesn't work great over time um I think that's such an important thing for people and and Mr Bill was saying that that was important for you and nothing to do with trading so just on that subject um this was an interesting quote cuz I love it you were talking about something I think the
• 33:30 - 34:00 stock market there was excess cash on the sidelines the number one variable in my book that drives Trends and I live that world okay I I live in the world my trading is all about trying to see where possible money flows are going to come from right if I'm looking at the coot stuff and I'm looking to short something that people are very long it's because I'm hoping that I'm getting in front of the money flows coming out if I'm looking to buy something and people are very short obviously I'm looking to get in front of the money flows that coming in how do you measure because you say the number one variable in my book that
• 34:00 - 34:30 drives Trend so how do you measure this idea of cash on the sidelines excess cash on the sidelines if you do or is it just a feel thing or um it is a big feel thing for me now because I've integrated so much like holistically over all the years but I would say that first of all you can look at sentiment readings I think are huge okay they're very important because if you have too much bearishness that's people that are sitting in cash if you have too much bullishness they're speaking their position so there's a you you a modicum of that going on you can also look at
• 34:30 - 35:00 like fred is a site that has all kinds of Statistics in terms of um you know the data that's in Money Market funds and so forth I mean many many years ago there was a service called trim tabs that would you know tell you the flows going in and out um so I'm pretty much a pure technical an analyst you know technici I really don't look at news or events or macro at all I do believe that you know it'll show up in the charts and
• 35:00 - 35:30 the sentiment and some of these other uh things um but uh yeah you know and there's something to be said for as Ralph Aur put it the broader the base the higher into space the broader the top the bigger the drop you know so these adages you know about accumulation and distribution period still play out um uh you know we never know for sure because if you did somehow it would be priced in and there are lots of AI
• 35:30 - 36:00 programs out there that incorporate these sentiment readings and so forth and you know people have put these into their models you know I'm sure Rayo has models that include these types of metrics so uh you know I don't try to I I consider those to be secondary variables okay so for me secondary factors are sentiment seasonals commitment of R trade TR reports they're like a a they color the market for me
• 36:00 - 36:30 you know leadership in the markets you know group sectors those are all secondary factors I'm not going to make a trading decision based off of those I'm going to make it purely off of the technicals in the market structure and then I just have to be confident that um you know for every 10 trades that I make 2% might be big wins you know or I might catch a runner it's just a really a pure numbers game as would be any game of
• 36:30 - 37:00 cards you know you just keep playing keep playing and uh you know sometimes the the data is choppy and noisy and there's no volume there's not much going on and that's the way too with cards you know sometimes the cards are just like crummy Bridge hands or something but then there's other times where the I think the biggest factor is is that you have to recognize when you are dealt a good hand you know and play that to the hilt and that's you know cards baseball markets anything
• 37:00 - 37:30 it's really about capitalizing on those very few open doors that uh you know come across our way and then that's where you really have to step on the gas and increase your leverage and play it to the health but you can't force that and so I find for me um I'm not trading full-time like I once was I don't trade by any chance on The Leverage that I once did you know I've kind of toned things down a lot um but
• 37:30 - 38:00 um that was probably my greatest strength was knowing that I got it right and to really go for it and play that and uh so in the meantime you have to keep yourself involved in a uh fairly structured routine ritual process a lot of grunt work you know I logged numbers at the end of the day logged I didn't keep the statistics on my trades in in much later years you know that was more for the beginning and kind of things but you know you know damn well when you're
• 38:00 - 38:30 screwing up you know when you're doing something you shouldn't do I don't need to log the trade to you to tell me that I you know I know when I've got a bias you know and I recognize it but it's just like keeping yourself I hate to say it for me I was the markets were there like every tick in my head every second of the day you know I just eat sleep breathe them and um you know it it's like it's in your blood and uh it's it's
• 38:30 - 39:00 not that way right now but I mean I've got enough residual that uh you know that helps I kind of diverged from our question there but I mean that the baseball term I use all the time is wait for the fat pitch there you go wait for that fat pitch and you know I now and I've done a lot of different trading in my life but I now only wait for the fat pitch and sometimes I'm waiting a very long time and it can be very difficult but um again process is process discipline is discipline and I'll wait forever for the
• 39:00 - 39:30 fat pitch if I have to because I hate you know I wait for the fetch pitch and sometimes I swing and I miss anyway okay but um I'm okay with that what I'm not okay I can't hit a curveball so when I swing and Miss at a curveball I hate it I just can't I can't deal with it personally so when you first started trading Jason did they have electronic execution the way they do now or did you have to call down to the floor to your broker had to
• 39:30 - 40:00 call so I do think that I was trading before the internet so yes okay so I do think that you me Peter brand all of us had a different experience than somebody coming into the marketplace in the last 15 years and I do feel strongly that um the little mouse you know and our little uh which does release dopamine in the brain um it is addicting it is very
• 40:00 - 40:30 addicting and it changes your uh you know your brain neurology there it it definitely does and so um that I think is a big problem for people because it's so easy just to go in and out during the day and it's counterproductive into the way that you're programming your brain and I don't know what the answer is how to get away from that un unless you had a colleague sitting next to you and
• 40:30 - 41:00 you're like okay is this it yes is this it you know maybe trying to work through it that way um I don't know what the answer is but I do think it's been um a challenge for people coming into the markets you know with this sensory stimulation and even you know my screens you know the amount of data now is coming into them is probably 50 times greater than was you know 30 years ago I remember had a big giant satellite dish
• 41:00 - 41:30 in my backyard at one point you know and uh that that out got outdated you know 25 years ago so um I think just being aware of these things and once again it's a game where you know that it's uh maybe 4% of the people will really make it don't overtrade is a very old trading adage but as you say a very difficult one more difficult now because of the ability to just click a mouse and have
• 41:30 - 42:00 fun um my answer for that is not the only way but the most likely way that people are going to get over that is they're going to lose enough money doing it and eventually they're going to get sick of losing money hopefully and they're going to stop doing it okay I think that's the only way to do it you know I mean that's the one thing about this game that personally I love is that are you saying it's Darwinism Jason yes you know I'm I'm saying you know we all know things that have
• 42:00 - 42:30 happened in life where people have gotten lucky and made bad decisions and gotten lucky anyway or whatever and and in this game any individual trade sure but over time you're not going to get lucky and make money in this game over time as you very well know um and so that's what we have to start off with something you know that's what you and I uh you know have to acknowledge that somebody that's just coming into the markets in the last two to three years you have to start off somewhere you know
• 42:30 - 43:00 you have to start off with a little gimmick a little indicator perhaps um a longer term time Horizon is not appropriate if you don't have that experience under your belt then what's more appropriate is desensitizing yourself to putting on a trade taking it off and because a lot of times you know putting on that trade when you've got some money on the line there's a little Adrenaline Rush there for people that haven't desensitized themselves right
• 43:00 - 43:30 it's like jumping off a high dive you know my heart would be pounding out of my chest but if I've jumped off that high dive a hundred times it's not such a big deal but you know it's okay to start off with a little gimmick a little indicator take the pressure off of yourself to make money keep a very short-term Horizon because it is not about calling the markets or a macro perspective or being right or wrong you know it's finding one little spot where
• 43:30 - 44:00 you can pick up a dollar bill off that sidewalk and you have to then take that from there and uh you know the other thing is you've got all these I don't know Twitter and chat rooms and I I don't want to you know Discord can be fine if you have a good group of people that provide the camaraderie which is important you know comaraderie uh can be very important but um everybody has to learn to throttle that noise level down to a level that's not going to be a
• 44:00 - 44:30 distraction for them or influence their decision making process which is very difficult I'm the first that's I'll never have a TV in my officer listen to the news because I know myself you know it's it's going to influence me one way or another I'll be like ah damned if I do damned if I don't he already put that out there on you know on the air wve so um yeah so just be careful of that noise level eliminate the distractions it's
• 44:30 - 45:00 okay to start off with a little gimmicky trade that's you know oh wow five minutes I'm in the trade I did a little breakout of that first 15 minute range in the snps and I CAU two handles hey Pat yourself on the back you know sit back for a little bit and uh you know take the pressure off of yourself to try to do so much so soon patience is a virtue understand there's a learning curve yes um I have two more things I want to say um because I don't want to
• 45:00 - 45:30 keep you for too long um but in the midst of all this some of these things that we've talked about right in terms of what I was saying about too much money on the sideline and that's what pushes the trends and feel free to tell me I have no idea if you'd like but where are we now I have no idea where are we now right now in the markets with that where are we in the stock market right now well there's still a lot of money out there in in the money market funds I mean we got up to historical levels on that money market funds you
• 45:30 - 46:00 know the monetary base on a Global Supply expanded by like 25% on a global basis you know so it's hard to say how all that filters down and there's really two classes out there you know on one hand you have your uh middle class and your lower class who's got you know fairly maxed out on their credit cards and inflation took a hefty dent in that but on the other hand you know the wealthy have gotten so wealthy and there's a lot of money sitting there in Money Market funds and that is
• 46:00 - 46:30 increasing because if I can sit there with my money in a fund getting 5% you know out of treasuries or something I'm just only adding to that you know if you want to think about it that way there's just increasing more and more money out there even though we know that eventually the government will be um you know eating into the you know it's always the private sector versus the public sector so they might be uh you know attributable to a greater percentage of the GMP than perhaps in the past but um there's still a lot of
• 46:30 - 47:00 money out there I not sure that valuations you know have reached extremes that we've seen in the past and you know I'm not a macro person but I just gonna say this is incredi I was just gonna say it's an incredibly macro talk for an intraday techn know I can't help it you're still there you know but I'll look at the charts and you can say that the weeklys are you know a little rich in term terms of the uh Trend but you know even so once we stop going up
• 47:00 - 47:30 okay which could be you know maybe we've stopped going up typically you rotate and you form a prolonged trading range okay to digest everything so it's pretty rare that market tops are straight up straight down it's much more likely that you'll have a market bottom that unfolds that way you know so that to me says that we we should have great trading opportunity you know don't go out there
• 47:30 - 48:00 and mortgage the house to buy puts it's not like that type of environment right now um I still think my opinion is that the vix is still a little high I don't don't get me for that but you know I've Just Seen every 10 years that vix goes down to single digits so it is a possibility that it will go down to single digits again you know which means that the implied volatility is based off of the historical volatility and so so typically at marks the historical Vol at tops historical volatility tends to
• 48:00 - 48:30 contract and I don't know if we have quite seen that contraction to the extreme in the historical volatility it is coming in you know you can look at bottoms and see it was so much greater and at Market bottoms you'll see oh uh things like Market breadth plus 1800 - 1800 plus 1800 minus 1800 and at Market tops you'll start to see oh Market breadth plus 300 minus 200 plus 500 this
• 48:30 - 49:00 type of uh and that's why they always say it's complacency it's not that it's complacency it's just that um that's the nature of the price Behavior once it starts to reach that you know point where uh all the funds have bought the AI stocks and you're starting to see some rotation right some rotation doubt um yeah but that could still be a process you know if we look at election
• 49:00 - 49:30 years uh typically and you know again keep in mind the sample size is small here you know but election years tend to hold together you know so they do you know but it doesn't mean that we can't have some like lovely little sell-offs along the way as well I call them long liquidation flushes and um my Approach is pretty much one day at a time you know I look at my my stuff and I say well does this look like it's a great sell short day is it is there a little
• 49:30 - 50:00 breakout coil here going on you know is this a do we just have a long liquidation flush and it's a buying opportunity and then I don't fry my brain because I'll fry my brain if I try and look out too far in the future I think the idea of how Market's top and Market's bottom is is really really valuable because I have been harping for a while here on people that just keep wanting to short the stock market um and I'm like listen you're not going
• 50:00 - 50:30 to miss anything okay like you're trying to short when a market closes on new all-time highs you know don't do it you know I mean it's not going to close in an all-time high and you're going to wake up tomorrow and the S&P are going to be down 300 and you missed it I've never seen that happen every crash I've ever seen you traded through the 87 crash the 87 crash the market topped in what August and it crashed in October you have time right and I think that's an interesting comment about how workk at tops because while I have never done the Quant work that you have I have
• 50:30 - 51:00 noticed that as well they Spike bottom they don't Spike top um they I follow a lot of the uh Global indices too again just purely on a technical basis I'm not going to ask how or why but you can't have markets like the Dax which is still one time framing meaning consecutive higher highs and higher lows on a daily bar chart uh you know you're not going to have a selloff in the US market as long as you have some of these other indices just going uh crazy you know
• 51:00 - 51:30 Japan's been nice I mean the uh you know Mexico's been nice there's all sectors in the rest of the world where even when they stop going up even when that Dax stops going up it's going to rotate it's going to form a trading range and probably that will um parallel you know price action in the US markets yeah I mean my issue all of the markets here is that I think there's been a switch personally you know what I mean last year people were so massively bearish
• 51:30 - 52:00 you know looking for the recession and you know I'm I trade this sort of fade the mass psychology whereas now that's totally gone nobody can call for recession anymore um and people are bullish uh I don't think that they have put all their money to work so I don't think it's a short but for me and I trade on a different time frame than you you know I'm picking sort of major turns and trying to catch major Trends very early um I am not into being long here I'm also not into being short here you know that that's just me but neither
• 52:00 - 52:30 here nor there there's one last thing that I want to say that I read in your book that personally it had so many your book had so many great nuggets of wisdom um and I thought this was the best one and you put it right at the end which I thought was op propo because I think it is the most important thing and and and this is something that I have learned I'm now 56 this is not something that I ever would have understood when I was 30 years old okay when I was 30 years old my man was I want to be a billionaire come Heller high water that's what I'm going for okay me I'm going for me right
• 52:30 - 53:00 um but what you said here is give and everything you give will come back to you in tenfold stay humble but remain confident and never forget if you don't know who you are the markets are an expensive place to find out I think that's such a great conclusion to all this because it says nothing about markets well the last part does but give and everything you give will come back to you tenfold um this is something I never would have believed or understood um until I had some
• 53:00 - 53:30 experiences with some people in my life who imparted that upon me and I still didn't believe it but as I've gotten older now I have come to understand that and I think if anybody takes anything away from any of this that that's the most no one's going to believe it and most young people aren't going to believe it but I have learned especially in the last five years or 10 years of my life um the more you give the more you get so I didn't know if you wanted to come comment on that but I just think it's such an important know it's just uh
• 53:30 - 54:00 all that mindset of gratitude and uh recognizing how lucky and fortunate and blessed we are to live in the uh United States where we do and um you know how you choose to look at things my mom was always one that's like okay you can look at it as half full or half empty you know make lemons out of lemonade all that type of stuff and so um I think think by uh taking the rosy side of the
• 54:00 - 54:30 equation looking at uh positive our blessings and so forth that opens up your mind you know to receive and uh you know whereas if you have um you know if you can't let go of things and you've got some negative energy and so forth you'll have a block and it's just not going to flow the same way I think that you won't be as happy of a person and you know sometimes the happiest people out there really have very simple lives
• 54:30 - 55:00 and in the long run that's what it kind of comes down to you know uh what we choose to fill our life with I mean it might just be you know gardening or cooking or something simple or our children or a friend um but it allows you to then proceed with your work in a more seamless type of mode you know without getting stuck in rucks and blockages and why did I do that I can't
• 55:00 - 55:30 you know I and I did that when I was younger I mean I'd wake up in the middle of the night and going oh my God I can't believe I did that and why I tap my husband at the time on his shoulder I'm like I'm so stupid why did I do that you know and I'm like how much negative energy did I waste and I really think that's why I got sick for a period there as well you know so we want to keep ourselves functioning functioning optimally first phys physically you know Good Health Nutrition and so forth uh
• 55:30 - 56:00 you know mentally spiritually whatever that may mean to you and then I think that you will be able to perform your best in the markets because it is a performance oriented discipline period it's just like going out and playing tennis or any other performance oriented discipline and you can't be performing well when you have you know negative you know cancerous energy inside of yourself so that's my philosophy I love it I love
• 56:00 - 56:30 it words from a successful person um to be listened to thank you so much Linda it's been uh an absolute pleasure you are an absolute gem um please read her book please listen to the things that she says um about trading and about life and I don't know is there a place people can can that you want to be found or anything like that or do you not want to be found hi Rock Jason I never want to be found again I don't know if you have a web page I do have a website it's
• 56:30 - 57:00 gotten greatly paired down because it was under so many cyber attacks I probably need to redo it uh you know but that's the only place that you can buy my book which only has I don't know maybe 200 or 300 copies left and then I really need to uh I just you know hate dealing with this stuff I need to either sell the rights off to a publisher get stick it on Amazon or something like that I'm probably the only person that didn't stick the book on Amazon cuz I'm like they can't have 40% of my profits I
• 57:00 - 57:30 did all the work on that damn thing you know and you know it was kind of cool so it was fun because um and I do have an assistant who helps out with all this stuff because I just would not have the patience to deal with self-publishing but what was super cool was that 60% of the people that purchased my book were overseas and I subsidized the shipping I pay for half that shipping because it's expensive to ship books overseas but I just felt very strongly that I wanted to produce a really pretty book with the
• 57:30 - 58:00 highest quality paper and the old traditional jackets and I was willing to pay the shipping for somebody you know to get it in Australia and uh I don't have many copies left but um I thought that was interesting that 60% of the sales were overseas because people are so conditioned to using Amazon they just want to go with that one click Boop you know and uh I don't know we'll see what happens in the future thought it'd be really fun to do an audible version I just you know God if we had 50 hours in
• 58:00 - 58:30 every day it's one of those things so yeah I mean I thought the world was going to end today because some Bri that that thing hit that bridge in Baltimore and the Amazon warehouses right there and they were saying it might delay Amazon deliveries I was like oh my God the world's going to end everyone's gonna have to wait an extra 48 hours for their Amazon delivery I was shocked I Wasing and I heard uh the uh amount of millions of dollars of trade that passed through that Port I did not realize that
• 58:30 - 59:00 so many cars were delivered into that Port from Europe so kind of interesting yeah I mean well get your Volkswagen now step right up grab it off the lot yeah right awesome thank you so much Linda I hope we keep in touch again um you're a special person and I really appreciate your time thank you for having me on your show Jason and just the best of success to you and let me know next time you need some warm weather and come down to Florida
• 59:00 - 59:30 okay sit here every day and I I was actually looking at Florida today I'm looking at those bare trees in the background behind your image I'm like oh that's Bleak know it's Bleak it's Bleak up here in Rhode Island but you know we love it you like it in the summertime yeah no I like it all the time my wife's here I like it here that's what she's my life so that's what counts that sounds good all right best team thanks subscribe to the crowded market report YouTube channel for more CMR
• 59:30 - 60:00 interviews and other content from [Music] Jason