331 · Jeff Holden - How Top Prop Traders Find and Scale Their Edge

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[00:01:17] And so even in these simple reading the tape lessons that we're doing, we're talking about where to put your attention and your focus, which is the biggest challenge for I think traders in general. Where is your focus? Where is your focus? Where is your attention?

[00:01:29] You know, all of us are governed by a couple basic principles of every single trader has a timeline. Whether or not you're going to make more money to the point where you can, you know, never have to trade again, or you're going to, you know, completely lose all the money you have. Like there's still a timeline. There's a finite amount of time that all of us will get the opportunity to trade. So we're reviewing it time and time again. So when we say A plus B equals C, your career, right? A plus plus B, you know, your baseline.

[00:01:59] Equals a trading career. We're talking about you have to develop a baseline of strategies. And that's the thing that that a lot of independent traders need to do first is you need to get to the point where you have a baseline set of strategies where you're going to build out your runway. So Jeff, question here. I mean, this is this is fascinating to me because let's take let's take a trader that's trading maybe the baseline trade or a C trade where I saw with, you know, you have different dynamic risk allocation.

[00:02:29] I believe a was 80% of the daily stop a plus. Yeah. So yeah. So if you're talking about like, like a risk allocation, so that is it we're getting deep really fast. I hope we're not losing people and that's okay. You know, like everything we always say that the first couple of weeks is like drinking from the fire hose here. Right. So like there's a lot thrown at you really quickly. And we're going very deep, much faster than I think I've ever done it in any conversation. If I put risk on for every time my gut talked to me, I would not be a profitable trader.

[00:02:59] Because my gut talks to me all the time and every trader I know their gut talks to them all the time about this is maybe this is a good idea. Maybe this is a good idea. And so we need that extra check. And so that's why we created that asset protocol, because if you can't actually articulate it and turn it into a trade, then you're just kind of trading off of a feel that is, you know, not really there.

[00:03:22] But if you turn it into a trade idea, then you've actually got a plan to move forward. And if that plan doesn't happen, you just can't execute. Right. At the end of the day, trading is this thing that we get to do. And so that equanimity kind of gets built into you when you think about how this fits. We're all so lucky to be traders in the time that we're that we're traders. You know, 30 years ago, 25 years ago, you basically had to be on a floor at an exchange.

[00:03:49] So that meant you had to live in New York, Chicago, London, you know, and maybe a couple other places in the world, plus have a seat on the exchange to be able to trade the way we get to trade. I think at the end of the day, if there's one thing that that traders have to get right at every level, I think you have to always be. Markets, speculation and risk. This is the Chat with Traders podcast.

[00:04:17] Traders, welcome to an exciting episode of Chat with Traders. Now, I don't know how he has not been on Chat with Traders before. Jeff Holden, the head of trader development over at S&B Capital, he has helped identify, recruit and really take traders to the next level. He's helped develop traders into seven and eight figure traders. So yesterday, we actually were on the phone and we were talking and talking about the direction we're going to take this episode. And he said he wants to emphasize it adding value to you.

[00:04:46] And that's really the theme of the show, adding value to you. So that's what we're going to do today, traders. There's a few topics that we're going to explore. That's how our great traders developed, finding an edge, building a process, allocating risk and recognizing those rare moments when we got to swing the bat hard. That's something that Jeff is a principle, really, that he's guided by. So I'm excited to really just dive into that topic. Jeff, thank you so much for joining Chat with Traders. How are you? Good. Good. Thanks, Kevin.

[00:05:13] I'm excited about the opportunity to chat. And like you said, I mean, a lot of what we do is just trying to add value. I started out as a trader, just trying to find my own way. A lot of the traders on our desk started in very similar ways to the way I did. And what we really like doing is at the end of the day, we're a bunch of nerds that are really excited about trading, really excited about breaking it down. And we love talking about it. So this is a great forum for us to do that.

[00:05:40] Well, breaking it down indeed, because you told me that you just came out of a reading the tape session where you were breaking it down. So talk to us and the traders. You know, what are you guys looking at when you're doing these sessions on reading the tape? Yeah, reading the tape's a little bit of this. It gets a bad rap. People say, oh, you can't read the tape anymore, especially somebody that was trading, you know, way, you know, let's call it 10, 15 years ago, where there were actually you could see Goldman Sachs on the bid or you could see Bank of America.

[00:06:08] You could see these real players because there weren't as many different players as there are now. And so a lot of people moved away from reading the tape. We've actually gone deeper and deeper into reading the tape throughout the time that I've been leading the trader development at S&B Capital. And one of the reasons why is because we're thinking about each of these opportunities, whether it's a stock or an ETF or even if we're looking to trade options or if it's a futures product that we're looking to trade.

[00:06:34] We're watching the tape because it's helping us understand the story of not just what game is being played, but how are the players playing that game at any time? And we're kind of chatting about it offline because you mentioned, hey, how was that meeting? And I was like, it was actually fascinating because we're sitting there with 12 traders and, you know, 100 some people in our community who get to listen in to all of our meetings. We broadcast all of our meetings because transparency is huge to us.

[00:07:00] So there's an avenue that you can do it, and I'm sure there'll be a link somewhere or whatever. And we're not here to promote anything but just want to give people access. We don't do anything behind closed doors in the way a lot of other people, you know, have chosen to do it. We like transparency as much as we can give it. But we're sitting there with like, you know, call it 120 people, and we're asking our traders to read the tape. Tell me what you're seeing on the tape. And we took two charts from today that looked almost identical. You know, when you're looking at it before the entry, they looked almost identical.

[00:07:30] And the context was different. SpaceX was one of them. Some people were looking for a bounce in SpaceX. So that's the one that we really liked. But then when you're actually watching the tape, even though the charts and the five-minute, the one-minute or the two-minute look very similar, when you're reading the tape, you're really hearing the story as it's being told of what's happening when the interplay between the buyers and the sellers. And even people who are relatively new to reading the tape, when we pointed out just a couple things, we're like, oh, I see that.

[00:08:00] That's so clear of how aggressive the buyers are in this SpaceX trade and how they're just the bidders are stepping up and then holding. And then they'd give a little bit and they'd step up and they'd hold more. And it's like, as soon as you see that, you recognize that. That's what most people are like. A buy program's happening. It's like, yes, this is visually represented in the tape, in the time and sales, in the level two of exactly what a buy program looks like. And it sort of demystifies that.

[00:08:27] How do I walk into those situations where I have a tremendous amount of edge and trading opportunity? And the other example that we were looking at was something that looked similar on the chart, but that interplay wasn't there. The buyers weren't aggressive enough. So every time you'd see this flash higher on the bid, you know, the buyers would step up, up, up, up, up. And then you'd see this like almost rug pull happen. And it's like if you're managing those true trades the exact same way, one of them is just a recipe for frustration.

[00:08:57] Because every time it goes up, you're excited. You're thinking this trade is going to work out really well. That comes crashing against you. And so you have to go into risk management mode. And then that buyer step, you know, and it's like one of them is worth paying a lot of attention to and one of them is not. And so even in these simple reading the tape lessons that we're doing, we're talking about where to put your attention and your focus, which is the biggest challenge for I think traders in general. Where is your focus? Where is your attention?

[00:09:23] You know, all of us are governed by a couple basic principles of every single trader has a timeline. Whether or not you're going to make more money to the point where you can, you know, never have to trade again or you're going to, you know, completely lose all the money you have. Like there's still a timeline. There's a finite amount of time that all of us will get the opportunity to trade.

[00:09:42] And a lot of what we have to do is spend our time focusing on the most important opportunities for us and sidestepping some of those things that really just get us caught up in the emotional side of trading and get a little more frustrating for us when we're exposed to the randomness that can occur every day. Yeah. You know, focus and Jeff on the opportunity when it presents itself. I believe you would call this the A plus setup, right?

[00:10:08] You've discussed this before where you have the baseline plus A plus equals your trading career. Can you explain what that means to the traders listening? Yeah. So, you know, the opportunity that we were drilling into and we had covered it, I think, probably four times. We had talked about it by the time we got into the reading the tape today. So we talked about it in pre-market as this is what we might look for. Then we talked about it when it was happening live, right? We're in our calls and on the desk. We're talking about that opportunity.

[00:10:38] And then we reviewed it in the 11 a.m. meeting, you know, one of our trader development meetings. And so we had talked about it three, maybe four times before we even got into the reading the tape session. Well, this is for a baseline trade. This wasn't an A plus opportunity even. So we're reviewing it time and time again. So when we say A plus B equals C, your career, right? A plus plus B, you know, your baseline equals a trading career. We're talking about you have to develop a baseline of strategies.

[00:11:06] And that's the thing that a lot of independent traders need to do first is you need to get to the point where you have a baseline set of strategies where you're going to build out your runway. So it might be that you can make $5,000 a year or $5,000 a month in your baseline strategies, right? So your baseline strategies are, I understand a hitchhiker scalp or I understand a fashionably late.

[00:11:32] And I know if I just have just a couple of those a month, you know, a couple of those a week, I can make about $5,000 a month. You're right. So for some people, $5,000 a month is a sustainable amount, right? If I do $5,000 a month in those and I can grow that over time, all of a sudden I have room to take those A plus opportunities in a bigger and better way. A plus opportunities are, you know, they're really well known because of the work we've done with Lance.

[00:12:01] And Lance talks about them all the time and is always putting them up and everything like that. But they're really big telegraphed opportunities that a ton of traders are looking at. Those are the ones that you want to risk up. That's what we get excited about. We don't shy away from those opportunities when they come in and we don't want to shy away from putting risk on in those opportunities. But if you don't have a baseline, yeah, go ahead. Yeah, yeah, go ahead. I want to dive into those A plus setups too and risk allocation as part of that.

[00:12:30] But when you're developing traders, Jeff, I mean, how many edges in their playbook do you normally suggest they start with? Because you were just discussing, you know, maybe find the one. But how many in your baseline should a trader have that's just starting out? Yeah, so it's interesting, right? Because what we see is similar to if you've ever read Atomic Habits or any of the books about growth and personal development, Atomic Habits is a great one.

[00:12:59] You have to start with one win first. And that doesn't mean that you get a little win and then you move on to the next one. It actually means that you develop one strategy, you know, and we call it a setup and a trade combination, right? So maybe you're really good at range breaks, a higher time frame range break, and then you're good at an opening range break coming from that range break, right? That would be one trading strategy.

[00:13:27] The setup plus the trade equals one trading strategy, right? Once you develop one of those, it takes a little bit of time, but you study it and you understand it and then you look for it and you start to execute it. And then the fun thing happens is all of a sudden you realize that you build the trust in yourself that you can start to scale it a little bit. And I don't mean a ton, but just a little bit.

[00:13:51] You know, maybe you go from risking $50 to risking $70 or you risk $100 in a baseline trade to risking $200 in a baseline trade, right? Once you can do that, then all of a sudden you built a machine, right? You've built a factory of how you can, you personally can understand a strategy, understand the components of it, and then start to put that into practice and then scale that strategy.

[00:14:19] So each one's sort of a little bit of a business that you're building on its own. And once you've built one, then the goal is to get to three and then to five. And if you're at five, that's where we really see traders have that sustainability. So it's, you have to start with one, which is the hardest thing early on, because you really feel like you need to get to five, but you kind of need to win at one first. And then you very quickly can get to five once you've been able to skip. So Jeff, question here.

[00:14:49] I mean, this is fascinating to me, because let's take a trader that's trading maybe the baseline trade or a C trade, where I saw with, you know, you have different dynamic risk allocation. I believe A was 80% of the daily stop. A plus, yeah. Yeah, so if you're talking about like a risk allocation, so we're getting deep really fast. I hope we're not losing people. And that's okay. You know, like everything, we always say that the first couple of weeks is like drinking from the fire hose here, right? So like there's a lot thrown at you really quickly.

[00:15:19] And we're going very deep, much faster than I think I've ever done it in any conversation. We'll probably talk about why in just a second, just, you know, why I think it's important to get this deep this quickly. But when we're talking about our risk allocation, so what we see on the desk is traders break up their risk into different allocations, right? It's like walking into the casino and saying, I know I'm really good at blackjack, so here's how much I'll spend on blackjack.

[00:15:45] But I really like playing craps, but I don't tend to win that much there. So I'll have this budget for craps. And then, you know, sometimes I just like to sit there and do slots. And so I'll have this budget for slots, right? But you're not walking in and saying, I have all this money that I can spend every day and I have no plan on how I'm going to do it. I'll just do whatever feels right. That's not how we approach trading as much. We're pretty dynamic with our allocation.

[00:16:11] When you know you have a positive expectancy, you likely want to increase your bet sizing. When you don't really understand it as much, you massively want to decrease the amount that you're willing to put at risk, right? It has nothing to do with your P&L. It has everything to do with you being in control and treating it like a business. Have you heard this before, though, Jeff, that 90% of the profits come from 10% of the trades?

[00:16:36] But I'm wondering with your traders that are taking the C setups or the baseline trades, can those B or C setups evolve into an A trade during the trades? Maybe taking that quote into... Yeah, I think you're looking at it the wrong way. I mean, yeah, it can. And there are times that it does. And that's great. That tends to happen on a little higher timeframe.

[00:17:00] Like on an intraday basis, sometimes if that is transitioning from a C to a B to an A, that's happening really, really fast. And a lot of times it's hard to keep up with that. What I think that 90% or 10% of your trades makes 90% of your profits or something like that. What I find about all this is that's a very accurate statement over your trading career for most people.

[00:17:26] But it's a somewhat misleading statement as a developing trader. You know, we have... I've pushed and we push each of our traders to not worry about their size. We actually had a trader today email me. He's been with us for like a couple weeks and he's up, you know, two stops, two daily stops in, I think, five days. Right? So you think about it and he's not risking very much, but he's making really good returns.

[00:17:54] And he goes, you know, shouldn't I ask for a risk bump? And I'm like, you're like, you're less than a month in. Don't even worry about a risk bump for three months. Don't even think about it for three months. Because if you're starting to worry about your allocation and how much you have to risk right away, you're probably going to add a dynamic variable that really is coming a little bit too early.

[00:18:20] So I think for most traders, the goal should be consistency first. And we say it on our desk. The first goal of the desk is be consistent. The second goal of the desk, be consistent. The third goal of the desk, be consistent. Only after that three months of consistency should you even think about, do I need to change my risk sizing? Do I need to be betting bigger in certain things?

[00:18:47] Do I need, you know, like that's not as important over the course of your career as people think early on. Certainly when you've shown, what do you think it is? Yeah, that's exactly it. Yeah. And we did it. We pulled all this data around it too. It was interesting. Like we have these monthly reviews with our traders. And so we pulled all this data around traders that were coming up the curve.

[00:19:12] Not our experienced traders, not traders who had been, you know, at the firm for a long time like me, but traders coming up the firm, right? And what was interesting was traders that would show consistency for one month and then lose that consistency. It was almost like they got set back in time until they started to get that consistency back. They would sort of level off in their P&L.

[00:19:35] And if anybody out there is like noticing I can be consistent for a month, but then things get really wonky, you have to ask yourself this really honest question of, am I really focused on being consistent? Or is that voice in my head saying, oh, I can start to make more money by increasing my risk. And then you're sort of starting to change your trading because you're increasing your risk a little bit and you're not really focused on just being consistent first, right?

[00:20:03] So the goal for our traders is just be consistent and be consistent. And what we found was there was a tipping point at month four. We actually all assumed it was month two. And so we were like, this guy's been consistent for two months. Let's start to think about how should we increase their risk? What we found was for all of the really successful traders, it was about four months of just being consistent.

[00:20:32] That then if we started to push their risk, then if we started to challenge them a little bit more by increasing their daily stop, they had built up that muscle memory of they knew how to be consistent. And it became this really exponential growth curve. You know, the puzzles coming together for me, Jeff, four months of repetition and repetition doing what? When you start with S&B Capital and you're developing these traders, they start with scalping.

[00:20:59] And this is such an interesting thing I want to discuss with you. Why is that? Is it because you just build in this repetition and learn that consistency over time? So I think to really answer that question, I want to take a step back and talk about why I started trading, right? Because we didn't just randomly choose to develop our traders that way. But, you know, so I had this unfortunate experience when I was like sixth or seventh grade.

[00:21:28] You know, my dad, who I respect a ton, you know, is certainly one of my heroes, if not my primary hero in life. He was let go. You know, he ran a department. His entire department got cut, right? I mean, I think it was seventh grade, you know. And so, like, one of those things that you're just like, I didn't really realize what was happening. You know, I was a kid in middle school. Like, you know, I knew my department got cut, whatever. Like, you know, fine. It wasn't that traumatic or anything like that.

[00:21:57] But what hit me, what made it personal for me was I was at my buddy's house and we had this little community pool, right? Down the street. It wasn't anything special or anything, but we would all go hang out there. We had been going there for a long time. And it was the beginning of the summer and we were all going to, you know, go hang out at this community pool. I think probably ride our bikes there. And, like, one of my friend's mom said, well, Jeff, you can't go.

[00:22:22] And I was like, like, I remember this so vividly of, like, her saying, well, you can't go. Your family's not a member anymore, right? And, like, that was the first time I really understood, like, how impactful, like, losing a job could be. And that was the only time I know it made it personal for me. But that was, like, the time that I was like, holy shit. Oh, so this is what it means down the line, right? Right?

[00:22:48] And a little bit later through talking with my dad and stuff, I realized he didn't have any control, right? The market shifted and that department that he was running just got completely moved away. That was a really important moment for me looking back because that taught me that, first of all, I don't want to ever be in a position where I'm completely exposed, right? If I lose, I want it to be because of me.

[00:23:15] And also, if I win, I want it to be because of me, right? I want to have a little more control over that. And I'm sure if we worked with our colleague, Dr. Steenbarger, he and I could have very long conversations about what that ultimately means. But to me, that meant that, okay, I love trading. I want to pursue trading. I feel like trading, like, picked me just as much as I picked trading, right?

[00:23:40] I need to make sure that I'm always in control enough where I'm always making money and I have reliable strategies so I can stay in the game. So that opportunity doesn't get taken from me. And so we studied all the different strategies and we looked at what are the ways to be the most consistent so that you can just constantly have something to fall back on where if your big trade ideas aren't working, right?

[00:24:07] If the big opportunities you're looking for aren't there, how do you still show up and put together a good month where you're taking money home, right? We say this expression all the time on our desk, right? You eat what you kill as a trader. So you better learn how to kill a lot, right? Like, you absolutely need to know that.

[00:24:28] And what we found was that scalping offered us a structural way to teach and allow our traders to learn consistently. They were able to get a lot of reps in so they could learn very quickly. And then they were able to build that baseline because they had lots of different trades that they could execute.

[00:24:49] And so all of a sudden, this becomes a really tremendous opportunity instead of it being this big threat of people worrying about what if I don't get an A-plus setup this month? Okay, fine. If you don't, that's fine. You still have your scalping baseline to come back to. You can still put up P&L that way. You can still take advantage of it. And it gives people a little more control of their destiny, of their opportunity to be a market participant for a long time.

[00:25:17] When you can just, whenever I need to, just come back to the scalping strategies that I know so well. Look for those. And don't get me wrong, when the market's really hot and there's a tremendous amount of volatility and we've had pockets of it this year, those are times to kind of go away from those scalping strategies and take those bigger trades.

[00:25:38] But for most of the time, it's really comforting to come in and go, listen, I know I can put up whatever P&L I need to just by showing up and trading these scalping strategies day in and day out. Jeff, you start these traders with scalping. And, you know, I did when I was watching one of your prior videos, I consumed a lot of your material. And it's gold, traders. You guys got to go out there and watch Jeff's videos. And I heard you say that based on the report cards, now you would take these in year after year.

[00:26:05] And just echoing what you just said, Jeff, year after year, these report cards would say what sustained the traders were those baseline trades and C trades. Not necessarily the A plus trades. It's right, it's what sustains their trading career and their journey were those baseline trades. So it makes sense why you start them there. Now, a couple things based off of the scalping that I want to discuss with you is, you know, maybe take one of these strategies.

[00:26:34] There's a couple routes I want to take with the scalping. One of them is, I was watching this called the Bella Scalp, Mike Bella Fury Scalp. And now tell us what that is and what he's looking for. And a couple of the ideas like the REM, the reasonable expected move and the shot clock. Break that down for the traders listening. Okay, cool. I love talking about the scalp because it just reminds me so much of, you know, when I started at the desk, I didn't know this trade at all.

[00:27:03] And it took a while for somebody to explain it to me. But I, my first big boy seat, you know, we have a section where the interns, the new developing traders sit. And then, then you kind of, as you grow, you get to sit in a big boy seat, right? Or big girl seat, right? So you're kind of on the main desk. And it so happened that my first seat was right next to Bella. And so I would watch Bella take this trade over and over and over every single day.

[00:27:29] And the whole story behind it is, you know, Bella's a master at reading the tape. And he's a master at understanding, you know, when something's gone a little too far. I think that's probably the way that he was taught and the types of trading that he did early on in his career. And so it's sort of that, like, that's his version of one of those strategies that he can just show up. And he knows it so well that when he sees that opportunity, it's like, all right, it's go time, right?

[00:27:57] And so I'd be sitting next to him. And we used to joke, and I hope I'm not embarrassing him by telling this story. But we used to joke that he would have a Huffy meter where he would get really Huffy when the price would go too far against him. And not because it, like, went against him, but because he knew that that was just not right. And he would say things like kind of muttering under his breath, like, why the hell are you still selling it here? You could literally lift and sell it, like, 30 cents higher, right?

[00:28:26] So he would, like, be talking to the stock nonstop of, like, talking to these imaginary participants, giving them trading advice, right? You'd be like, don't sell it here. Like, you know, when somebody would be pushing the stock all the way down and selling it, you can sell it a dollar higher. Like, why are you doing this? And so he would get, like, Huffy, right? He would get frustrated about it. And it was like when that Huffy meter started, that's when all of us knew to start to pay attention to the stock.

[00:28:53] Because he'd be, like, you know, really, really, like, what the hell are you guys doing? This is just bad trading. And I remember him vividly saying that this is just a bad decision. And it's like, oh, I got to watch that stock now, right? Like, so as that would be happening, what it is is essentially off the open. It's a sell program. If we're looking for a long, right? It's a sell program that hits ideally in a stock that's gapped up more than 3% on good news, right? Elevated pre-market volume.

[00:29:23] You know, the stock pulls in hard off the open, but it's got a good news catalyst. And typically what's happening is it's some, and he would use this term all the time. It would be like, that's just lazy. That's lazy. And what it is is it's a lazy sell program that just is selling, selling, selling, not even trying to fight for price at all. Just selling, selling. And then it starts to sell a little bit more and a little bit faster and a little bit faster.

[00:29:48] And the best versions of the Bella Fade are ones that you can watch the tape and you can actually see the seller stepping down, stepping down, stepping down, stepping down. But essentially, you know they're walking into what should be a tremendous amount of buying pressure, right? There should be institutions wanting to buy the stock. There should be family offices wanting to buy it. There should be market makers willing to step in and support it because they're trying to take it back up. You know, there should be all of this support for the stock going higher.

[00:30:16] But there's this one lazy seller that's just, you know, taking it lower and lower and lower. And so what would happen would be we would be sitting there and Bella would get all huffy and we would know to start watching the stock. And then we would look for the seller, seller, seller all the way down. And as soon as that seller lifted, it was almost like it was like the end of that sell program would happen. And then the natural inflow from the buyers would take the stock up and it would take it a little bit higher.

[00:30:44] And then there'd be this pause and then it would take it higher. And then there'd be this pause. And then it would take this last capitulatory move, usually higher as people were kind of chasing it. And that was kind of the trade, right? And so we started breaking it down and we just took these observations we had from sitting there watching it and then watching tape on it, talking about it. And we formalized a structure around it. So for the Bella fade, the structure is pretty simple.

[00:31:10] You know, you have a stock gapping out ideally more than 3 percent positive news. Hopefully it's gapping out of a range, you know, away from some resistance area. And then off the open, you have a seller that steps in. Well, we're not trying to predict where that seller is going to stop. We're going to let that seller do its thing. And then as soon as that seller lifts on the tape, we're going to enter long. Our stop is going to go right below the low of the day because that seller should be done, right? The stock shouldn't go lower anymore.

[00:31:39] The natural buyer should come in. I think you were asking about measured moves and how we calculate targets essentially. Right. That's kind of where you wanted this conversation to go, I think, right? Yeah. Yeah. Yeah. I'd like it to get into the measured moves for the traders listening because some, like with scalping, Jeff, some traders may be, you know, eager to get in and then eager to get out. So how can they slow that tempo down a little bit with the measured moves?

[00:32:07] And I think it comes back to kind of how we started the conversation. It's about expectations, right? If my expectation is that I'm going to tape scalp this, this fade, right? My expectation is I'm going to buy as soon as that seller lifts because I see something on the tape and I'm going to sell all my position as soon as that momentum stalls. That's a tape scalp. You're literally just using the tape for your entry and the tape for your exit.

[00:32:33] And those happen all the time in markets, right? And there are traders that trade that way. Even on our desk, they'll trade the tape in and out. That's a really hard thing to do, especially for a developing trader. And I think you can fall victim, unfortunately, to feeling like you understand the stock.

[00:32:56] But when the situation changes in that stock or in that product, you know, when there's new news, when there's a fresh catalyst, when there are different participants involved, the whole playing field changes a little bit. So your ability to read the tape is not as clear as it was before. So we don't teach people to tape scalp right away. What we do is teach people to read the tape in what we call price action scalps.

[00:33:25] And that price action element is essentially a descriptor of what is happening between the interplay of buyers and sellers, right? So we talked about that lazy seller coming down and then those natural buyers coming back in, right? If I describe that to you, you could probably almost envision a little bit of what a chart should look like, right?

[00:33:50] It should be somebody pushing, pushing, pushing down, pushing down, not fighting for price at all, not letting it lift, just trying to get their order done, right? They're just trying to dump the shares as much as they possibly can. And then those natural buyers where they're just going to lift it and lift it and lift it, you know, as it goes through. So price action scalping is different than tape scalping. Price action scalping has structure to it.

[00:34:16] And it has usually very repeatable historical patterns that you can observe. So when we're teaching traders this idea, we're not just teaching them what a good entry looks like because of the structure of the price action scalping. We're actually helping them and forcing them and teaching them what to expect all the way through the move. You know, when we go and recruit for our internship program, right?

[00:34:44] We're almost at the end of our internship for the summer. I get to be on the recruiting team for that. I get to help out a little bit with the internship. And it's really fun because we get to watch these interns come in. And most of them have been trading on their own. Most of them assume they know how to trade. Most of them come in with some knowledge of something, which is great.

[00:35:08] But then when we kind of put that structure around it, almost all of them leave the internship or leave this experience by going, oh, now what I'm doing makes more sense to me. And a lot of that, like selling too early, typically occurs because the entirety of the move doesn't really make sense to you.

[00:35:34] We were using this example the other day, and I'll share it here. I think we used it in trader development, right? So we were talking about a trader had sold way too early. And I said, well, let's imagine, you know, they were talking about what's the new, there's a new big movie that came out on IMAX, The Odyssey, I think, right? So like you probably can figure out when this interview was shot based on that. But it just came out, right?

[00:36:03] And I was like, imagine you bought a ticket to The Odyssey, right? And you like went with all your friends. And you're excited to go see this movie, this blockbuster movie on IMAX and shot on IMAX film, first one ever to do that. And you go into the movie. And you watch the, you know, it's like a two hour movie. I have no idea what the runtime is, but let's assume it's two hours. You know, it's a two hour movie. Are you going in with the expectation that you'll be sitting there for two hours?

[00:36:31] Or are you going in with the expectation that maybe you'll be there for five or 10 minutes? Like, you know, you're going in for two hours, right? You have a clear expectation of what you're there to do. With trading and the price action scalping, you have a clear expectation of what should happen. Does that mean if something wrong happens, you say, no, I'm staying in the trade? Absolutely not. But at least you have a guide for this is what should happen. And then this is what should happen.

[00:37:01] And then this is what should happen. And if it happens, I'm prepared for it. Unfortunately, without that structure, you're going in watching the first five minutes of the movie, making a decision. If you want to watch the rest of it and you're leaving and you're not really sure and you're going to miss out on a lot of it. And I think that's what happens with trading. And I know there's a long way of saying you kind of have to understand what your expectation is for the trade.

[00:37:25] But I think it's important because I don't think enough people realize once you have an entry, that's really a small portion of everything that you have to do. Because you really have to understand what you expect to happen and what you absolutely don't want to have happen. Yeah, there's a lot to unpack there. I wonder how you go about teaching your traders. When they get involved in, let's say, this scalp, do you say to disengage from that trade, set the stop and step away?

[00:37:54] Because what if, OK, let's say there's any invalidation period within the trade. Maybe you were expecting that break, but then the buyers don't really step in. But Jeff, it also doesn't come back to the lows. Is there a point in time which the trade can be adjusted in which, OK, it's invalidated based on my reasonable expectation in which I'm going to reduce risk or take it off? Yeah, absolutely. That's that shot clock concept that I think you hit on earlier, right?

[00:38:22] So with every trade, and you're hitting on a lot of these cool concepts that we've taught over time, and hopefully they're adding value to people. But we have a shot clock for every trade, right? And it's not a finite shot clock of this is exactly what it has to be. It's not 30 seconds. It's not, you know, but we stole the idea from basketball, right? You get the ball. You have a certain amount of time to make something happen. If you don't make anything happen, the other team gets the ball back, right?

[00:38:51] When you have an entry and trading, there's a certain amount of time that something should help you understand that your entry, other people are thinking the same thing as what you were thinking, right? Just because I enter a trade doesn't mean the market's going to move in my favor. My job, in fact, is to understand when the market is going to move in my favor and then enter the trade, not enter the trade and then hope it moves in my favor.

[00:39:16] It's this inverse relationship that we often get sucked into of like, I think I see it. Now I want the market to move for me. And it's like, no, no, no, you should see the market getting ready to move for you. And then you can enter the trade. And so the shot clock idea is for each trade, there's a reasonable amount of time in which you expect something to happen

[00:39:39] that your expected value in the trade will start to increase or your expected value in the trade will at least start to play out. And the inverse of that is there's a period of time where the stock's doing nothing and your expected value is actually diminishing, right? And so only when you have something like that happen do you need to adjust your position. We actually don't teach traders when they're starting out to do that at all because it adds too many variables.

[00:40:07] When traders are starting out, we teach traders to put the trade on. As soon as you have your signal, put the trade on, right? Start very small, but put the trade on when you have your signal. You have to make sure it's hard enough as a trader to make sure that you actually have your signal and you're not just guessing that you sort of have your entry signal, right?

[00:40:35] So don't worry about what you're going to do right after that. Just make sure you actually have the rules for your trade present. And if you have them, put the trade on and manage your risk. Don't worry about managing your reward quite yet, right? Just manage your risk the way it's supposed to be managed because that's a really hard thing to do. And if you can do that, the pathway to really pushing and growing and becoming a great trader

[00:41:04] is a lot more accessible to you than if you can never just put the trade on and manage your risk. I've heard this great quote from the infamous Mark Douglas, be rigid with the rules and then flexible with the profit expectations. And I know with the measured moves, you kind of are taking pieces off along the way. So now we have the traders listening. You got the playbook. You have the one trade. Now, I think one thing too, Jeff, that would be helpful for them is understanding the framework,

[00:41:30] which is this acronym you've discussed before, ASET, A-S-E-T. Can you tell us a little bit about that? Ever watch a stock rip and think, I could have nailed that if I had real capital? The truth is many capable traders never reach their potential, not due to lack of skill, but lack of scale. Trade the Pool was built to solve exactly that. A firm designed for serious individuals who want access to the U.S. equity markets with meaningful buying power,

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[00:42:56] Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus. Yeah, so asset, this is actually a funny story behind asset. So I was getting really frustrated with one of the traders that's now a very successful trader on our desk, because you can sort of start to see it when somebody's doing the right work, and they're doing a lot of things well.

[00:43:24] And, you know, you can't really see it early on, but you can start to see it over time where this person has a lot of potential. But there's almost always some sort of, you know, downturn that happens to them, right? Like they're looking really good, or they're just not accelerating to the upside, and then something happens, and it's really traumatic at the time, right? And I feel like this happens almost to every trader that I've interacted with

[00:43:54] that truly has gone on to something great, is there's always this like gut check moment, right? Where you're doing all the work, you're doing everything right, and you have this gut check moment of something, whether it's within your control or out of your control, it just happens. And it's almost like the market's testing you and teasing you and almost saying you're really close, but, you know, and I don't know why it happens, but it seems to have happened with a lot of people, especially on our desk. And hopefully it doesn't happen with everybody, but I've seen it a lot.

[00:44:25] There was this trader that we were working with, and I was working with very closely, and he had done all the work. He was starting to see some growth, and then he had this gut check moment, right? And we're sitting there and trying to not just say, oh, that's too bad, I hope you get out of it, but actually come up with a process, right? As soon as that happened, it was like, okay, let's cut your risk down so you can get some consistency back. Again, we went back to that consistency, that groundwork, right?

[00:44:53] And he pushed back and he said, but I need to maintain my ability to push in my A-plus setups. And we said, okay, that makes sense. That's a good thing, right? He recognized that was one of his strengths, and so we wanted to help him with that. So he was like, so how do I do this? And one of the really distinct problems he had was he would enter a trade

[00:45:18] and then set a stop based on kind of where he thought that would, where the appropriate stop was. And it was the appropriate stop. But the fact that he was entering first meant that his risk profile was always a little bit off. It was always a little more inconsistent than he needed it to be. See where you're going with this. And it didn't really make that much of a difference when you look at it because it didn't change his win rate really that much.

[00:45:48] But what it changed was how much he was making in trades versus losing in trades. You know, when you extrapolate these numbers, if we're talking about up or down $20 differential in a trade, that doesn't sound like a lot. But if you're then multiplying that out and you're talking up and down $20,000, that's all of a sudden a significant amount of money. And so we needed precision in his process so that he could then grow from there.

[00:46:18] So we came up with, and it wasn't the asset protocol initially. There were about four or five versions of them. There were all acronyms with different steps that we worked through. But over time, what we settled on was this asset protocol, which is you start with your allocation, right? So that's what we talked. I think we started a lot of this conversation with what's your allocation and your dynamic risk allocation.

[00:46:46] We don't expect allocation to be perfect, but you're constantly getting better at it. And what we mean by that is your A+, which is 80% of a daily stop, A, which is 30% of a daily stop, B, which is 15% of a daily stop, or C, which is 5% of a daily stop. And these are standard numbers. And as you get better, you tend to manipulate those numbers a little bit. But we teach a basic protocol that anybody can follow and at least start with, right?

[00:47:15] And so that's the allocation component to this asset formula. And the allocation component is important because you need to understand when this is a better opportunity or a less quality opportunity. And you want to start to basket that into, okay, this has everything lined up. This is where I need to bet the most.

[00:47:44] You know, we take this from playing cards and poker. It's like I have pocket aces, right? I have to bet big. I have to do everything right there. Yep, exactly. I have to push it on this one. Otherwise, I'm just middling and it doesn't help me at all. There also has to be times when you have to kind of pull it back and bet really small, but you need to have that experience, right? So that's why we start with that allocation component. So every trade you take has to have an allocation score.

[00:48:13] So if you hear traders on our desk, they're like, I really like this. I think it's worth like B risk, right? And that's what they're starting with. They're saying, I really like this. I think it's worth B risk. Now, here's the fun thing. If you're trading, if you and I are trading together and I'm like, yeah, just see a couple C opportunities. And then all of a sudden I go, I'm looking at this A plus. How much of the hairs in the back of your neck going to stand up when I say that? And you're going to be like, I got to look at that, right?

[00:48:41] Like, so it becomes like almost this signal of like, I've got conviction here. This is really good, right? And so that allocation is the first element of this protocol that we use. The very, very next element of it is what we learned from that trader. You have to set your stop. You have to understand where your stop is next. And the reason is, is because you cannot be in a position of playing offense first.

[00:49:11] You kind of have to be in a position or a mindset of where am I wrong in this trade? You have to know where you're wrong in that trade first. What invalidates the trade? What price action tells me I'm wrong? And where would that be? So you have to have your stop first. So that's why we say, you know, asset, A, allocation stop, right? Yeah. There's a significance to the order of it. Correct. Exactly. Exactly. Yeah.

[00:49:39] And like I said, this is like the third or fourth version of it, maybe even the fifth version of it. And we didn't always have that stop, that second thing. It used to be kind of one of the last things, which is like we realized the error of our ways and started to readjust, right? That stop takes away a lot of the psychological pressures. Because if you've already accepted the risk and knowing where you're wrong, and you've done that as a logical exercise, it's really hard to let the emotions win at that point.

[00:50:09] But if you haven't accepted that risk and those emotions come into play, it's really, really hard for you to override that and get back to that logical thinking. It's just the way our brains are wired, right? This is why I think some people say AI is going to take over trading. I don't see that actually happening. I see, you know, a lot of AI slop coming into the market and like kind of mucking things up for all of us. But that's going to tend to, you know, create opportunity for us more than anything else.

[00:50:35] But the fact that we can start with our stop, we've emotionally taken some of that risk, that emotional component off the table, right? We've said, this is where I'm wrong. You've said it out loud or you've said it to yourself or you've admitted this is where I'm wrong in that trade. In that Bella Fade example we talked about, right below the low of the day, right? If that seller isn't done selling, I'm wrong. That's it.

[00:51:00] And just by saying that, Dr. Steenbarger taught us this and working with Lance, we've learned this. You're committing yourself to saying, yeah, I know I'm wrong here. And I know there's a probability I could be wrong here. And that's okay, right? So you kind of desensitize yourself to that moment. And then, only then, do you even go to consider where your entry actually is going to be.

[00:51:25] So you have to mention the allocation and the stop first, and then you can look at what your entry criteria actually is, you know? And because of that, you've automatically calculated your share size. If you know where your stop is and you know where your entry is, you know exactly what size to put on, what share size to put on, right? You're not guessing. You're not just doing a thousand shares because you want to do a thousand or 500 because you want to do a 500.

[00:51:53] You're actually saying, I know what my allocation is. Okay. I know what my stop is and I know what my entry is, right? And then you can kind of get into this really important mindset, which is T for target. And I think most people mess up on target because they overcomplicate it. When you're developing as a trader, T for target is usually pretty static.

[00:52:20] It's usually like, okay, a measured move is a very straightforward target, right? It should move one measured move for a range break. We often talk about a measured move or two measured moves of the range, right? They just become these self-fulfilling prophecies. That's all it is, right? That's all we do. So that is a base level concept that you can use in almost every trade of saying measured move.

[00:52:48] That's the straight up target. If you cannot hold to that base target, don't mess around with the exit. But if you can execute the strategy, like we said, you have the opportunity. You just put the trade on and you manage your risk, right? And you try and see if I can hold it just to that target. Think about all the positive things you've done just by working this asset protocol, even a single time.

[00:53:18] You know, you mentioned Mark Douglas and all the trading psychology books, and you can go back to Ari Keeve and you can talk about Dr. Steenbarg and you can talk about Jared Ten. All of them have written about all these things that you need to be doing. But what we found on the desk is just by practicing this asset protocol, it's actually incorporating all the things they're teaching us in actionable things that we do every single day. Man, traders, if you're fond of value, let us know.

[00:53:47] I mean, Jeff, there's so many directions I want to go with this. I'm excited about it. So, okay, traders, you got the playbook now. Now you have the asset protocol and there's many edges in that trade though, right, Jeff? It's not just one edge. Now, I had a conversation with Peter Brandt recently and he told me trade identification, while it's important, is not necessarily the most important thing in identifying what the trade is, but then thereafter, what are you doing in the trade?

[00:54:16] Are you letting it get to that measured move, traders, that Jeff is teaching us about? Are you taking the profits too early on them? So there was a recent example of, for me, it was an A plus setup. Maybe a C for somebody else, Jeff, but it was Avis Group. It was CAR. It went from like 50, 100 to 800. I hit it short day one, but mistakenly, I'm not leaning in.

[00:54:43] Now, this reminds me of something you said, Jeff. You said, you'll have traders come in that are developing and you've noticed that 80% of them need to be pushed to put risk on. And that was speaking home to me. It really was because here I am with an A plus setup in my mind. The thing goes from 800 to $200 that day, you know, and I don't take advantage of it at all because this disposition effect that you talk about, that is when I'm right, I'm fearful. And when I'm wrong, I'm hopeful.

[00:55:13] So for the traders listening that may be in a similar position, you know, how can you take advantage and swing that bat? Like you discussed when that edge A plus presents itself to us? Well, if you don't mind me putting you on the spot. Yeah, yeah, yeah. No, if you don't mind me putting you on the spot, right? Like you brought it up. So I'm going to open it up and I'm okay. I'm okay with a little friction here. So I'm okay with pushback and I'm perfectly okay. And I'm sure the viewers would be fine with you saying, no, I don't want to talk about

[00:55:42] my own trading, but this is what we do with our traders. This is why I'm in the role that I'm in of trader development, because, you know, I found that conversations just like this can be hugely impactful or they can be just nice conversations to have. So if you're comfortable with it, I'd like to ask you some questions about your trade and your thinking in this trade. And I'm okay if you want to keep the episode about something else. I'm okay with it, but it would be, I think, kind of fun to push in. Yeah.

[00:56:12] Okay. Yeah, we can. Okay. Let's push into it. All right. All right. So let's push into it. Had you been short car previously? No, but can I, can I ask you something about that? Cause this is on my mind as well. When, when we discuss these a plus, this was on my mind, the car trade where I'm like, what if, cause there's a lot of great traders that focus on this first red day over ticker that's overextended.

[00:56:37] So what if they're seeing Jeff and a plus setup on car on when it was at 300 and then not wrong. And now it's at 400 or wrong, 500 all the way to eight. Like at what point do you blacklist the ticker? And it's like, okay, I keep trying the a plus setup and it keeps failing. So at what point do you say you shut the computer down? Say no more. Yeah. Yeah. And we had a couple of traders that were relatively close to shutting it down.

[00:57:04] I was relatively close to saying, you know, if you remember at the top of that, the stories about it were insane, right? These, like, I think when it got to 400, people started circulating those stories about the floats being locked and 140% short float or 127% short float. Like all these stories that everybody's like, this could go to a thousand, this could go to 5,000. Like nobody knows. And if you remember, it wasn't trading very well for a lot of that up move. It really wasn't.

[00:57:34] You know, it was going up, but it wasn't trading like there was a ton of participation. It wasn't trading with a lot of liquidity. You know, a lot of people actually got pretty afraid of it because of that, right? And we had a lot of discussions with our traders about it. And is this getting good? Is this getting better? Or is it actually getting worse? And that was one of the things, you know, we've had examples of this before. HKD was an awful example of it before where as it went higher, it actually got worse and worse and worse.

[00:58:04] Yeah, yeah. It got worse and worse and worse. And that was dangerous for some of us. Um, but this one was one that was really interesting because it got worse and worse and worse and then better and better and better really, really fast. And so you're asking kind of two questions. And this is why I like having these discussions because I think I'm big on finding the bottleneck, right? And if you find the real bottleneck, then you can actually start to use this model that we use the five whys, right?

[00:58:31] But if you're, if you're not really using that bottleneck, then you're kind of trying to solve a problem with the wrong tool, right? And so you're asking a question that's different than what we're probably ultimately going to talk about here. But let's entertain the thought. I tried it once. It was exactly what I wanted to see. I got stopped out on big size. That sucks. But didn't you sign up for this as a trader? Right?

[00:58:59] Like at the end of the day, like, isn't that a part of being a trader? Now, let's assume you stayed within your risk controls. Even if you lost a decent amount, right? Of your daily stop or whatever. Isn't that within the scope of normality? Yeah. I mean, that is going to happen. And it does emotionally hurt a little bit. But we have some rules on our desk that we've learned from other traders.

[00:59:26] You can only mourn a loss for 24 hours. Bad loss. You have 24 hours to be pissed about it, work through it emotionally, whatever you need to do. 24 hours. At the end of 24 hours, you have to go back to being a trader. That comes with another rule. You can only celebrate a win for 12 hours. You can only really sit there and, like, be really excited about a win for 12 hours. Because at the end of the day, then you kind of have to go back to being a trader. Right?

[00:59:54] Like, and we found this to be something that is a worthwhile thing to try and do. Okay? So, you can... Although you may be driving in your celebration for many days there. Well, I mean, I'm not saying you can't feel the emotions, but really, genuinely, you can only allow yourself that moment for 12 hours. Right? Because at the end of the day, we're back into being a trader. Yeah. Yeah. You come back to being a trader. Yeah.

[01:00:20] So, let's assume you tried it once and 24... You gave yourself 24 hours to mourn that loss. You know, that trade didn't set up again for another few days. Right? And let's say you tried it again. There is a point where you're just like, this stock is not what I expect. But that's really where you have to ask yourself, did I identify this A-plus opportunity correctly? Because I think a lot of times we get really slippery with our identification of what an

[01:00:50] A-plus is. You're right to point out that it was the first red day at the top, but it was also, I think, three consecutive gap-ups. And it was the first time we had had two or three consecutive gap-ups with acceleration away from a moving average, with acceleration away from a Bollinger Band or outside of a Bollinger Band, with accelerating volume. There were all these characteristics that were there for the first time that most of us would identify as pivotal for an A-plus opportunity that really didn't show up until later in the trade.

[01:01:19] And so, you know, there's a couple different dynamics. The first one is, are you accurately identifying your A-pluses? Or are you just assuming they're A-plus because of something you read? Yeah. It sounds like you accurately identified your A-pluses, which is a huge starting point, right? So let's, you know, if everybody can just applaud for that, because if you didn't short it two days before and the day before and all that stuff, and you waited until you actually had a signal, that's huge. And you never want to discount how important that is.

[01:01:49] Well, you've talked about this before where you almost over time developed this aha moment where your traders see something that's like, hey, you guys seeing this on the desk and nobody else is seeing it. Yeah. I mean, it's not, I don't know that it's nobody else is seeing it. But I think what it is, is you kind of just do the work and for the love of trading, analyze

[01:02:18] what's happening in the market. And then you're like, I've seen this situation before. I've seen the stock trade this way. I know. And, you know, very few of us have seen something go from 200 to 800 in the way that it did. But we've seen shades of this stuff before. You know, we've seen shades of these opportunities before. And we always say the market doesn't, it doesn't, what, oh, shoot, I'm going to have to, I'll remember the statement later, but it's essentially like it rhymes.

[01:02:48] It doesn't mirror exactly what it was before, but it tends to rhyme. Right. So it doesn't repeat, it rhymes. Right. So I think that's the sentiment. Yeah. The market doesn't repeat, but it rhymes. So you, you can see these things again and again. And it's almost like this, we call it hit you between the eyes of when you've done the work, when you've identified a setup, when you've done the work for it, when you've practiced it, when you've talked about it, when you've studied it, you start to see it again.

[01:03:14] And you're like, oh yeah, I kind of see the game that's being played here. And then that's, that's what, yes. And that's where you start to go into an asset protocol because that, that gut starting to talk is just an idea. If I put risk on for every time my gut talked to me, I would not be a profitable trader because my gut talks to me all the time. And every trader I know their gut talks to them all the time about this is maybe this is a good idea. Maybe this is a good idea.

[01:03:44] And so we need that extra check. And so that's why we created that asset protocol, because if you can't actually articulate it and turn it into a trade, then you're just kind of trading off of a feel that is, you know, not really there. But if you turn it into a trade idea, then you've actually got a plan to move forward. And if that plan doesn't happen, you just can't execute. Right. So let's talk about your trade. So you're, you're waiting for that first red bar. Is that, that what you were waiting for?

[01:04:14] That first day with that first red candle. Is that right? Yeah. First red day. First red day. Okay. First red day. Okay. The overextended move. And if I remember correctly, and I don't have the chart in front of me, but if I remember correctly, it sort of started out with like a little bit of a sell off. And then it kind of like looked like it was going to pop. And I think a lot of people expected it to kind of catch VWAP and go higher. And that was it. And then it just kind of went sideways.

[01:04:41] And then, you know, it's based right off the expectations, like you mentioned earlier, and these can cripple traders having expectations that are these visual representation of what you think is going to happen. You mentioned it, a lot of traders were thinking, okay, basically the whole float is locked and it was approaching a thousand. So the expectation was this thing's going to hit a thousand. It did exactly what you said. It kind of, we did a little red to green move and then down she goes. Yep. And it went down and it went sideways though.

[01:05:11] And I think that sideways part was the trickiest because people have been rewarded before. And I certainly was in this boat of you were up a lot of money on the short side, but then it all got taken away really, really quickly by these vicious up moves that were happening. Yes. And it looked like maybe we might walk into one of those vicious up moves that was happening. So were you involved in the trade before that moment or later? Before the moment. Before the moment. Okay. So. So you're in the trade, right?

[01:05:41] And you have a clear stop high of day, I'm assuming. Right. Is that right? Okay, cool. Generally, let's, let's assume that's correct. And then you're thinking this can unwind. Maybe. Now this is where I think they get, this, this gets really interesting. It's great. It's a great. Yeah. Yeah. Where did you, where in your wildest dreams did you think it could possibly go?

[01:06:11] If you tell me 200, I know, I know you're full of it because I don't think, I don't think any of us that day thought it was going to 200 the next day, but maybe four or maybe five. Yeah. I certainly thought, I mean, this thing could start the descent back into, back into normalcy land, but I, the problem really is the PNL, you know, you see it and then you take it

[01:06:40] and it needs, there's been a lot of trades, Jeff, maybe the traders listening can learn from this too, where it's almost like if, I don't know, you've mentioned turning the PNL off, but there's so many often times where if I just shut the computer down, took a nap or something like that, where it would hugely benefit me to just to set the levels, like you said, set the, set the stop, but be kind of flexible with the, with the target. I mean, maybe with the measured moves to having, it's having some orders out there to

[01:07:07] take partials, but with a certain piece of it, definitely just let a rip, Tater Chip. Yeah. Yeah. And maybe that's a part of your strategy moving forward is you have to, that's a rule that you have to put in place of, I need to hold, but you have to solve that before you put the trade on, because here's an interesting thing that starts to happen, right? So we've studied this with traders and the way our brains work, right?

[01:07:34] So as soon as you put a position on, right? So you put a position on and, and it's, it's, it's like a risk element. It becomes an emotional exercise before it's totally a logical exercise, but the trade's on and it becomes an emotional exercise, right? We'd all like it to remain logical, but that's not the case for most of us, right? Most of us, it becomes an emotional exercise. So it's interesting because as you're holding your core, there tends to be a lot of, for

[01:08:03] some traders, there tends to be a lot of fear or overconfidence or something along those lines, you know, almost like a disbelief that this is going to work out. And those traders tend to suffer from sort of that, like, oh, I've got something in my past that really, you know, like, I don't, I'm not here to talk about trading psychology as much. I just call them like I see them. And that's what I've seen before is people are like, oh, you know, I'm, I'm self-sabotaging. I think it's the term I've heard a lot, right? I'm really good at self-sabotaging.

[01:08:31] And that's why people are like, I take off too early because I have a pattern of self-sabotage. Maybe that's you, maybe it's not, but I've heard that many times before. I don't, I, I look at things a little more logically and a little more like, well, self-sabotage is this big giant thing. How do we get it to the bottleneck where we can actually solve a problem? Right. And so here are some things that are interesting with regard to when we're in a trade, we have

[01:08:58] a couple decisions we can hold, we can add, or we can start to take off. Just let the trade take you out is what you said. I heard you. Well, that is true. That is true. And, and it's certainly in a situation like this, um, that probably is a solution. But I think that there's a component that we have to uncover first. This is what we do with traders all the time on our desk is we actually get to that bottleneck and then we move forward.

[01:09:26] This is why I think we're successful at what we do at developing traders because we don't assume everything and we don't assume everybody's the same. So I'm going to ask you one important question. Did you take partials in that first down move? Meaning taking, taking, taking a position off. Right. Okay. So you took a position off. Yep. Quarters off. Okay. So what do you think happens to your brain as you're taking quarters off?

[01:09:52] Do you go into more of a retreat mode or do you stay the aggressor in the position? Yeah. That's a good point. You stay, uh, go into the retreat mode, which, you know, then, uh, Don Stein of wall street said this too, you know, he, it's an, it's an emotional thing. It's not a logical thing. It's an emotional where you're adjusting your stop. Now I no longer can be read on the trade. And you said this too, which it hit, it hit hard with me.

[01:10:18] There's a pain threshold and with it's double, it's double that. How does it go? You know, you, you feel the pain twice as much of a winner turning into a loser than you do a loser. And that's why we get so hopeful in those. And that makes sense. I feel, certainly feel that. Yeah. It's interesting because as soon as you go into that retreat mode, right?

[01:10:42] As soon as your mind goes into profit taking, it really is hard and you have to be very conscious of no, no, no. This is an opportunity to stay the aggressor. Right. And, and so what I, what I hear is, is, and I'm not trying to put words in your mouth, but what I'm hearing is this pattern that we've seen over and over. You probably size the trade perfectly fine. You probably size the trade relatively close to what you wanted to size it. Is that correct?

[01:11:14] Correct. Okay. But you made one, maybe fifth of what you thought you could have made in the trade. Had you done kind of what your ideal plan. Okay. You know, that's what it is. But, you know, and then I had a conversation with Alex Timmis. He, he, he spoke on how, you know, he sizes his winners. He doesn't care what his average is. He hits, hits, hits into those winners. So it's not retreat mode. It's aggressor mode. Which is what you just pointed out. Yes.

[01:11:42] Which, which maybe you don't have the highest win rate doing that, but that becomes almost superfluous. Right. Right. And it's, but it's understanding your psychology because if you're the type of person that is going to be the aggressor all the time, and then you're going to get your face ripped off a bunch of times being the aggressor, and that's going to set you back psychologically where you're going to feel uncomfortable with that, then do not try and do that. Right.

[01:12:12] We talk about playing to our strengths as much as you possibly can. And each of us have individual strengths. So it might be as a developing trader, you try that. You try to add, add, add, add, add, but that might not fit your psychology. It might not fit your personality. And you have to admit that that's not for me. I feel uncomfortable when I add, add, add, add, add. Right. Me personally, I feel much better when I'm in the trade, but I have, you know, I kind of find

[01:12:40] that pivotal, we call it pivotal moment in the trade, that moment where I can have my asset protocol. I know where the entry is. I know exactly where this trade should start to work in my favor. And that's the moment for me to put the risk on. I don't need to stay the aggressor by adding, but I do need to make sure that I am not going into retreat mode by taking off.

[01:13:06] Or if I do take off, I have to remind myself to stay the aggressor with the rest of my position. I watched a live trade with you, and this demonstrates it perfectly, how you were working the 9 EMA. And for traders listening, this may help you as well if you're getting rid of your winners too early. What Jeff was doing is he attached essentially his take profit to a break, crack of that 9, and until then, not touching it. Yeah. And it's not me adding into the position.

[01:13:35] I don't, I personally, I can't be more aggressive because it logically doesn't make sense to me. Typically, as the position's moving in my favor, if I find pretty close to the ideal expected value point, any ads after that are diminishing returns, right? So like my expected value in the trade is lower at that ad than it was when I entered the trade. So why would I bet in a worse position after I put a bet on that's working, right? So that's just my personality. It's the way it works.

[01:14:05] And some traders that way, others can be, stay that aggressor. You know, we have a lot of different archetypes of traders. There are really three different archetypes, whole different discussion, but there are really three archetypes of traders that we've identified. And some of them are able to just add, add, add, add, add, and they don't mind if they get blown up, right? Not blown up, but like blown out. They were up a lot in the trade and then it comes back to a break even. They're comfortable with that.

[01:14:33] That's great if you're that type of person. Others need to maintain that sense of control through the entire trade, right? And it sounds like you were trying to do that, but you're also trying to be this third archetype, which is you let that trade work for you as well. And all the, yeah, the difference in those three, which is interesting to me, is the self-talk that they use. This is Kevin. We hope you're enjoying this episode so far.

[01:15:02] If you are, take a second to leave a comment. We read them all and truly care about what you think. And if you haven't yet subscribed to our email list, visit chatwithtraders.com and click subscribe so we can keep you posted on information that matters. Now back to the chat with our guest. Right? The self-talk of somebody who's adding that entire time. Every time it gets there, they're adding more and they're ideally hopefully lowering their stop, lowering their stop, lowering their stop or, you know, in the case of a long raising their stop, raising their stop.

[01:15:31] Their self-talk needs to be, this is okay. This is okay to be doing. If I lose everything, that's okay. Because they have to kind of have that self-talk. If I lose it, that's okay. Because if I win big, I'm going to really, really win. And that has to be their self-talk when they're in the trade. Right? For the group that's kind of in the middle, right? The ones that are kind of over-managing the trade and over-managing is the wrong word, but they need that control.

[01:16:00] Their self-talk needs to be, I'm going to catch the meat of the move. I'm going to catch the easy meat of the move, right? I'm going to catch that core part of the move. And I don't care what happens after that because I know I'm in this game and I'm going to catch that core part of the move, right? And that's what I'm here to do. And that has to be their self-talk for them to be effective.

[01:16:26] A lot of times it's the type of traders who are really actually very good at capturing that core part of the move. But they have to remind themselves that I can't worry about how far it goes after I'm out because I did the right thing, right? And then that other group, yeah, you did the right thing. Yeah. For you. And maybe over time that evolves. But then this third archetype, this third group, and I know we're kind of throwing a

[01:16:52] lot at everybody, but this third group, their self-talk, maybe it's something where you take profits into extensions, but you want to hold for the bigger move. Your self-talk has to be, I'm staying the aggressor. I'm not adding, but until they rip these shares out of my hands, they have to show me that they're taking these out of my hands.

[01:17:20] And it's really interesting because you would think the voice of the aggressor, that first group, is the most aggressive voice. Actually, typically that's the most passive voice because they're kind of saying, whatever happens, happens. I'm just going to keep adding and let's see what happens, right? That middle voice is usually a moderate voice of like, it's okay if I miss at the end. That last voice typically is the most aggressive voice, right?

[01:17:49] The one that they need to take these shares out of my hand. I'm going to make them beat me. And it sounds like to me, if we were talking through this, we were in a trade development meeting, I would say your mindset was of that middle group, right? That core archetype of I want to catch the meat of the move. But you're trying to ask, why couldn't I be that third group? The one that like really forces it to take it out of my hands.

[01:18:20] You know, you're 100% accurate. And obviously doing these interviews, you know, I'm hearing how different traders operate. And I wonder if your interns ask these questions too, when they see some of your top performing traders at the firm trading a certain way. And they too are asking, you know, I want to trade that way. But do you think it's important that we trade?

[01:18:48] I mean, you touched on this with trading our psychology, that we need to find a strategy that is congruent with our personality. Because the first market wizard, actually, Michael Marcus said, if you take two of the best traders and combine them, you'll get the worst from both of them, which is so fascinating. But have you seen that? I mean, so we get asked probably a couple times a year, right?

[01:19:14] We'll have some somebody from a very esteemed university or somebody from a, you know, PE funded company that comes to us and says, hey, I've got this brilliant idea. All right. Why don't we study the personality types of all of your top traders to identify commonalities? Right. And so let's say we have 15, 20 top traders that they would want to study. Right.

[01:19:39] And their pitch to us is we're going to tell you the personalities, the commonalities of all of your traders. Right. So we're going to tell you what all those traders have in common. And it's interesting because we we take it seriously. We look at the science behind it and all that stuff. But behind closed doors, our discussions are always like, well, these guys are all these guys and girls are all so different. And that's what makes them special.

[01:20:08] If we try to say these are all the commonalities, it probably would be sort of what you talk about of this mismatch of like, yeah, that's sort of that way. But the reason why I think every person that I've ever met that's been successful in markets, the reason for their success is because they're bringing themselves into the market. They're allowing themselves to be the guide. Now, they're copying, they're learning from from the masters in front of them first. Right.

[01:20:35] So on our desk, mentoring is not a one person thing. You don't have one mentor. You have a series of mentors. And the reason for that is because you're going to pick up a little bit here and a little bit here and a little bit here. And then all of a sudden, if you're a developing trader, if you're a college kid coming in for an internship or you're a new developing trader wanting to join our firm, or even if you're an experienced trader who's looking to work in the team environments that we create, you're

[01:21:03] going to have different voices helping you grow. And the thing that's interesting about that is if you take all of those voices and then ultimately put that, you know, internally process that information, but then take what makes the most sense to you out of all that. That's really where the success comes in. You know, we just launched a video where we highlighted one of our top teams and you

[01:21:30] even hear them talking about their different strengths. Right. Right. That's the coolest part is they all have different strengths. They don't have one personality type that makes them great. What makes them great is all of these different personality types. You know, Stanley Druckenmiller, he emphasized there's certain traits like passion, competitiveness, open mindedness, humility. But he said something. He suggested that IQ, you know, you don't have to have the highest level of IQ, which I'm

[01:22:00] thankful for, to be a successful trader. I mean, it's largely not a part. I mean, what are some of those traits? Are there certain traits like these guys are highly competitive? They're passionate. Passion runs deep. And a lot of the interviews I discuss with traders is this passion. What are there any of those specific traits? Yeah, there are. You know, we screen for them during the interview process. I would say that competitiveness is one of them. Diligence is one of them.

[01:22:30] I think being diligent is really, really important as a trader. I think that gets underrated, unfortunately, a lot of time. But being diligent is very important. That competitiveness goes along with it. Equanimity, we think, is very important. Like, as a trader, you know, I shared a little bit about my family history and a little bit about me growing up. But, you know, just like everybody else in life, I've gone through, my family's gone through some really traumatic experiences.

[01:23:00] You know, we've had family members get very, very sick. And we've struggled with that. And, you know, all those experiences are so painful in the moment. They really are. But they also are a great reminder that trading is just trading, right? Like when you're sitting there with a family member who's going through something awful and you're going through something awful as a family, you know, then you come in to trade the next day.

[01:23:27] You know, you obviously have to be careful with your sizing and everything like that. But like at the end of the day, trading is this thing that we get to do. And so that equanimity kind of gets built into you when you think about how this fits. We're all so lucky to be traders in the time that we're that we're traders. You know, 30 years ago, 25 years ago, you basically had to be on a floor at an exchange. So that meant you had to live in New York, Chicago, London, you know, and maybe a couple

[01:23:55] other places in the world, plus have a seat on the exchange to be able to trade the way we get to trade, right? Like, like we have technology, we have artificial intelligence. Now we have we have Claude to help us with all of these things that we can do research that used to take teams of people hours and hours and hours of doing. I can do by myself in 10 minutes. You can do by yourself in 25 minutes. You can just like knock it all out.

[01:24:22] You can probably do it in five minutes or you can even create an agent that does it for you while you're sleeping. So you wake up and all the research is done for you. Like it's it's astounding the resources we have. And so I always view it as we just get this opportunity. And so we need to never allow ourselves to get too high or too low, because the reality is this is an opportunity for us to take advantage of. And we're really fortunate to be able to trade in the way that we trade on our desk with the people that we trade with.

[01:24:51] You know, that that's that's the beauty of it. So I think that equanimity is really important. I mean, you hit on a couple of the other things that I think the characteristics that are really important. I think passion is overrated. And I've said this before, and I know it's controversial. Some people say they're very passionate about the markets. I don't think it's a predictive signal. That's why I think it's overrated. I've seen intensely passionate people about the markets that never really explore edge.

[01:25:19] They're just really big fans of trading. Right. And, you know, the Knicks won the won the championship this year. The streets were filled with passionate people about the Knicks. None of them were playing basketball for the Knicks, but they were really passionate about that. Right. And so I think you really if you're going to be a trader, you have to ask yourself that question. You have to come to terms with that. Am I here to be passionate about it? Or am I here to trade with edge because those are two different things.

[01:25:48] And I can be fascinated by markets. I am. I love talking about them. We all love talking about them. You know, when we recruit, we look for that interest in markets and specifically in the type of trading that we look to do. You know, when we teach, when we have have inside access, which is our product that we just broadcast all our meetings that people can kind of come and listen, you know, so we can provide something to the community.

[01:26:16] You know, when we're talking about it, we're talking about the type of trading that we do. And there's a lot of energy and emotion about it, but we always are careful that that passion has some edge to it, has a little grit to it because it needs that. There needs to be a positive expectancy out of it. Not just I'm doing this because it's fun, but I'm doing this because I expect there to be a positive outcome from this. You know, I can tell so clearly how passionate you are.

[01:26:44] I mean, as head of trader development and recruiting, you're so passionate. And thank you for taking the time. I have a few more questions if you are available for them. But, you know, as far as what you were saying about just being so lucky to be able to trade alongside your peers, your colleagues at SMB. I mean, how important do you think that is? Is that almost an edge itself? Because I had a conversation with Jason Barry, Mr. Consistency from The Next Generation, and

[01:27:13] that was one of the largest takeaways from the conversation with him. He was discussing how if you can pair yourself with some other traders, it sharpens you significantly. What are your thoughts on that? Yeah. I mean, let's see. It would have been 2020, probably 2019. We started the concept of team trading. And I think this is a big, big thing that we've done. And I think other people are starting to do it as well. But we've really.

[01:27:41] Just like anything else we do, just like anything else I do, we have really worked hard to put clear ground rules around what these actually are. When we say team trading, we don't mean a group of people that are sharing ideas and talking about their trades, but then all executing independently. That's not team trading to us. That is community trading, which is really good, right?

[01:28:07] And that's a big step beyond what trading as an independent trader without any support actually is. You know, community trading is a big leap forward and it will help everybody. You'll get to share your ideas. You'll have a little more accountability. You'll get to talk with people. They'll get to talk with you. You'll hear things maybe over the course of a month. You'll pick up two ideas that you weren't really thinking of that could turn into the opportunity of the month or even just a good baseline trade, right?

[01:28:37] And hopefully you're adding that value back to the people in your community. I think community trading is a really nice first step. There's a difference between community trading and team trading, though. The biggest difference is something that, you know, and I'll just share this as a team. If you had a team that wasn't on the same playbook, would they be a very good team in any sport anywhere? They probably wouldn't, right?

[01:29:06] They probably struggle with consistency. They would struggle with direction. They might have some ups. They might have some downs, but they would really struggle with what are we all here to do? And that tends to be one of the things that we use to structurally define a team. Are you on the same playbook or not? Because if you're not, you're more like a community of traders than you are a team of traders. And so we developed this team trading concept.

[01:29:32] And we've allowed and really our traders have allowed us to participate in them building teams. And that's one of the most interesting things is seeing how these teams evolve and seeing how everybody starts as an independent trader. And then you get into a community of traders. And then as a community, you ultimately move into, you know, you pair up with a couple other people. You start to share a playbook. And then you start to do something that we call pack hunting, right?

[01:30:01] When they're your best opportunities, you know, when it's a big game for a sports team, when it's a football team, when there's a big game coming up, like I love college football. I grew up, you know, around college football. So when there's a big game coming up, I bet you that team's preparation is a little bit, you know, tighter. Everybody's ready. Even the guy running around, guy and girl running around squirting water in people's mouths are a little bit snappier than like, you know, when it's just like a normal summer practice, right? Like that intensity is there.

[01:30:30] And so the same thing I think holds true when you get into team trading is it really allows people to bond together. And our traders are terrific. I mean, the people that I look at on our desk are spectacular. They're inspirational to me all the time. And I feel so lucky to be a part of it. But at the same point, you know, we've got this amazing opportunity and really we have a responsibility to see how far we can push it, right?

[01:30:59] Everybody that I work with, everybody that we work with, we have a responsibility to see how good we can get. And I don't think we're nearly there quite yet. I think we're showing that we have that room to grow, but I don't think we're nearly there yet. And we're always looking for great people to help us push that even further. I think that's an important thing for us, whether it's in the trading community or people that are experienced traders or even interns in college who are thinking about trading.

[01:31:26] You know, we're always looking for those people who are really going to help us achieve what we're capable of achieving as teams and as individuals and as a firm. You know, talking to some amazing traders on here, they're doing exactly what you're saying. They're always hungry for more. Even if they've gone to the seven-figure level, they still want to consume podcasts. They still want to learn from other traders. It's quite amazing, you know, hearing that.

[01:31:53] But Jeff, as we're wrapping up, you know, one of the final questions I have here, and we could be talking for another two hours. Maybe we'll do a part two one of these days. But, you know, you've spent years developing traders. So I want to ask you the single most important thing for developing traders that you want them to get right. Oh, the single most important thing for developing traders that I want them to get right.

[01:32:22] I'm going to have to think on that for a minute, because that is an interesting question. Because I don't think that there's one thing that they need to get right. I think there are a lot of things that they need to get right. But I guess if I had to answer it as one question, and by the way, most of those things are the things that are in my mind that I'm thinking they need to get right, right? And maybe this will be part two or whatever.

[01:32:49] But the things that I'm thinking of are all, I classify things in two ways. Are they easy to do or hard to do, right? And if they're easy to do, and I think all these things that I'm thinking of are easy to do, but all of them are easier not to do. So like all the things that I'm asking that we want our traders to do are actually relatively easy to do. They're just easier to not to do, right? So it's easy to do a daily report card every day, right?

[01:33:19] It's a lot easier to not do a daily report card every day, right? So like that's that slippery slope of a lot of the things that I'm thinking about, right? I think at the end of the day, if there's one thing that traders have to get right at every level, I think you have to always be in a position where you are allocating appropriately to the trade.

[01:33:45] I think you have to get the risk management right in this, because without it, you don't have a very long runway. You just don't have, you won't have the staying power. And even if you do have an insanely high win rate, it's really, really hard to grow as a trader if you can't manage your risk. And so you don't have that scalability on the other side of it, right? So you might not even stay in the game very long, but even if you do, it's impossible to continue to

[01:34:15] scale your trading. And it's important for us to be surrounded by. It's important for us to hold the standard of traders on our desk being a path to be seven and eight figure traders. The only way to do that is by being scalable. For me, it's important to work with teams that are infinitely scalable over a period of time. That's what I'm passionate about now more than ever, is not just the individuals, but the teams

[01:34:41] I get to work with and seeing the incredible results our teams are generating much faster than we expected them to generate. You know, that's a lot of fun for me. Well, Jeff, you know, we've talked, I mean, there's so much value here, building the baseline, the edge, creating systems, protecting capital, having really the courage to, like you mentioned, to swing when you need to swing. It was an incredible conversation. There's so much value here. Traders, let us know what you think in the comments below.

[01:35:11] But Jeff, the last word is going to go over to you. And of course, let the traders know where they can keep up with you and follow along. Yeah, I'm sure there will be a bunch of links in there and people can take a look at them if they want. You know, we just try and provide as much value as possible. I mean, I started out as an independent trader. I have an interesting backstory in trading, but we'll save that for another day. But, you know, when I started out, I was, you know, kind of learning from YouTube and trying to learn from anywhere I could.

[01:35:38] And so I understand how hard it is when you're starting out to trust information. And so we really hold ourselves to a high standard that anything goes out, that goes out is quality. You know, we try and put content out on YouTube. You know, a lot of times it's just, it's stuff where, funny story about it actually. So I didn't start wanting to do videos at all. I didn't want to do any of that stuff. Bella asked me and I was like, no, no, no.

[01:36:03] But I was writing emails to all of our traders, not all of our traders, but like each week I would write an email to a trader. And I would always CC Bella. And it was always something like, hey, I saw you doing this really, really well. Appreciate you. Like it was just like a gratitude exercise, right? Something simple. And he was like, these are really good. Like he was like, you should just turn them into videos so they can go up on YouTube and then they're there forever versus you just having them lost in your email.

[01:36:32] And I was like, yeah, I'll try it once. And so I tried it. But every video that I ever do is actually just that same concept. It's a letter to one specific person that, you know, then goes into this video. So every time we're sitting down to produce a video, at least from the work that I do, it's always to one person. There's a lesson that I want one person to learn or something that they've done really well that I want to highlight for them.

[01:36:59] And I don't really ever tell the person who it is, but, but, you know, if you see a video and you're like, he was talking about me, there's a chance that I was talking about you. So, you know, like that's, it's one of the things that's, that's so much fun about what we get to do. But, you know, as far as closing words, I mean, if you see us saying don't sell here and here's exactly, you know, like all that stuff, but like, like, like, no, we probably won't do that.

[01:37:24] But it's always, we're so lucky to be able to participate in markets at the time that we do. We're so lucky to be able to do what we do and be traders. You know, we could have been born anywhere in the world. We could have been born at any point in the history of humanity. And, and we all are living right now. Let's take advantage of the opportunity presented. And all of us, like I said, I believe this firmly.

[01:37:49] Everything that makes a successful trader successful is easy to do, but it's just easier not to do. So you just have to hold yourself to that standard all the time. Hold yourself to the standard. Well, traders baseline plus a plus equals the trading career. If you made it this far, comment that below, Jeff, I appreciate you. Thank you so much for coming on, adding value to the traders. And until next time, sure. We'll see you soon. Thanks. Take care.

[01:38:15] You've reached the end of this episode of chat with traders, but rest assured there are more episodes loaded with real market insight and zero hype on the way soon. So to stay updated with each great new release, subscribe to the podcast and we'd love it if you'd leave a rating and review. We'll catch you next time on chat with traders.