Price action, market tops and bottoms

Transcript

Andrew Swanscott 0:00: Panel, the show where we talk about all things market, all things trading with traders from different backgrounds, different levels of experience so that we can get different opinions, I guess. So, welcome to the show. Today, we have Pavel, Jason, and Mesh. Jason, do you wanna get started?

Jason Kurz 0:17: Yeah, no, I'm super excited to have Mish with us today. He's a good friend of mine. We've known each other for many years and no one's really better to understand the economic landscape that we're living in today. Basically, Mish has a really great way of kind of The one thing I think Mish has a major edge doing is she can really see the future in a way.

Mish can kind of understand like through using price action, using the charts, looking at what's going on in the world and kind of have a general direction on where she sees the market going and how she should be positioned in it. I think that's a very interesting quality that not many people have. So I'm excited to have Mish on today. Other than that, Mish is just a great person, love her to death. How are you today, Mish? I'm great.

And I get all my visions from these two guys behind me here. So as you can see, I'm I'm flanked.

Mish Schneider 1:12: Flanked by canines.

Jason Kurz 1:15: Sometimes they have to take a break. Have a dog. I remember one time I had a friend over and he was asking me to learn how to trade. And I was like, oh, yeah, I actually learn everything from my dog. He had no idea. He was a younger guy. He was like, what? I was like, yeah, yes, Professor Cupp. Like my dog's name is Teacup. And so I'd be like, yes, Professor Cupp. And I was like, you have to call her Professor Cupp.

And he looked at me like I was insane. And then he was like, okay, Professor Cupp. I was like, yeah, that's her name. And after that, I started busting up laughing. I couldn't keep it going anymore. Well,

Mish Schneider 1:47: yeah. I mean, when somebody starts talking about how they hear things from their dog, I have to think of Son of Sam. I'm old enough to remember that.

Jason Kurz 2:01: Today's just basic general discussion, nothing really off the cuff. We're just kinda trying to see and understand different strategies in trading. And, like we said earlier, Mish, where do you where exactly do you start as a trader when you're looking at these markets?

Mish Schneider 2:18: Yeah. That's a that's a common question. And it's a very interesting one because people start at different points and then often wind up having to work backwards in order to fill in the gaps that they think they will be able to avoid because it's so easy. And as we know, it's not so easy. It looks easier lately, but it hasn't always been easy. And clearly, it's not most of the time.

I was fortunate because I got started at the beginning in futures in commodities on the New York Commodities Exchanges back in the day during the most exciting period of commodities. So I had to learn from really the bottom up. And so when people ask me that question, I try to think, okay, so what was my progression? Right? So the first thing I had to learn was why?

why in the case of futures is it important to understand what sugar is doing or gold or crude oil or copper or orange juice? So there was a fundamental component to it. But what you learn very quickly is that the fundamental component, especially back then when there was no social media, is only a part of it.

Really what makes a trader a trader is to understand maybe a bias based on some kind of fundamental, which of course can change on a dime, but really what happens technically makes it most important. So again, second part was I had to learn how to look at charts. And for me, it was it was sort of a necessity because the guys in the pits were running huge orders. I was working for Conti, so I didn't have huge orders, but I had some orders.

But they also had a physical bravado that I didn't have, and they had a voice that could carry that I didn't have. And so I learned how to point and figure chart. So this first step was, okay, why am I paying attention to, let's say, sugar? Then the second step was, okay, now that I know why I should be paying attention, there's a lot of liquidity, there's a lot of momentum. What price breaks I need to look at a chart.

And then I went from a very kind of point of figure active intraday trading chart to then starting to look at weekly charts, which of course the next thing was understanding chart patterns. And that's kind of where I evolved from is not only that, but then you had to know when you were wrong. So I automatically learned about risk. And then you had to have some comfort in as a trader in taking profits, so you start to learn how to take profits.

And that's really, I think, very simple way to get started, and then you can adjust it accordingly. I mean, obviously, we've been in the business now forty years, so we're very rules based, but that's the beginnings.

Jason Kurz 5:00: No, I love that. Also, your lessons, and we did a video that I thought was just so cool, is lessons on a floor trader. You trading and really cutting your teeth on the floor. It's funny I said cutting your teeth because that's a term you use all the time. But you really getting on the floor and understanding the price action in a way that most people don't understand.

And I think I've learned from you and other floor traders over the years, the importance of really seeing the price action, but also when you're seeing the price action, understanding that's actually people behind the price action. So I'm wondering, I guess it's a question I've never asked.

When you were on the floor and you were doing that, what was a time where like an moment for you when you're on the floor as a trader and you kind of were like, oh, yeah, that kind of makes sense now. This is really just behavior and then I can see it in the price action.

Mish Schneider 6:00: Well yeah. And it's funny because you mentioned behavior because I actually did a webinar talking about our quant models and the basis of them. And some of it, of course, is behavioral because all of us were from the floor, Keith and Jeff. And so I guess my moment for me was when you start to see the alignment of liquidity in terms of order flow, momentum in terms of when momentum would kick in.

That moment was almost like if you encapsulated in time standing still, you could see the switch between, oh, momentum is about to increase to, okay, it is now climaxed and momentum is fading. And if so, you put that together with seeing the liquidity as order flow comes in, and that's the advantage of being on the floor is that you're not looking at a screen.

You're seeing you're seeing it, you're hearing it, you're feeling it, you're smelling it, you're tasting it sometimes. And so and so that you put that all together is that momentum when it starts to go, the liquidity and the order flow starts to come in. And then you put that all together with some kind of a repeatable chart pattern based on what I was doing. And those were the moments that's when you strike. That's when you go in.

That's when you go in full guns. And I think my disadvantage because I couldn't always get in there when things were going nuts, I'd have to throw orders into the ring was that I never really fully realized myself in that discovery until actually I left the floor. I became a much better trader after I left the floor because I wasn't so swayed by the behavior because that herd mentality sets in and I became a longer term trader.

And when the momentum stopped, didn't necessarily mean it was the end of the trade. It just meant, okay, we were gonna have some kind of a normal correction or price consolidation. So I think I hope that answers your question.

Jason Kurz 7:57: No, that's perfect. Because it's really, when you combine all those things together, because I'll talk to people, fundamental people per se. If you talk to them about the charts, they think of it like voodoo, anything that's price action based, whether it's systematically looking at breakouts or whether it's just classical chart patterns. They think of it like it's voodoo and it's watching these magical levels.

And the only thing that makes sense to them is that these levels make sense because other people watch them. And the thing that kind of blows my mind about is there's just so much more to it than that. There is a simple fact of yes, there are people who watch them but at the same time, we're also watching these ranges. We're watching interest points.

We're also watching, when you're watching low volatility and breakouts, that also changes the game to the point where, okay, low volatility usually leads to high volatility. This is how we catch trends. So all of these things kind of go together and I think it's like incredibly interesting to just have that experience on the floor because most people now, they don't know what that's about.

My great grand uncle was on the floor for a little while, he would talk about it And then you talking about it so much and breaking it down. Because really like, you talk to most of the floor traders, they don't really have a way of breaking it down like you do. So I think it's good experience for people to come on here and just kind of understand it a little bit more.

Mish Schneider 9:25: Because I don't we don't do By the way, fundamental trading. I mean, unless you're Nancy Pelosi and don't need a chart because you have inside information. Yeah. I don't know how anybody successfully trades without an understanding of price.

Jason Kurz 9:39: Yes. Price is the most important thing. And I think everybody on here, I have met Quanta at the same time who say that they don't look at the charts or read the charts. No matter what you're getting your price action from something, whether you're not looking at the charts exactly or whatever, it's still the charts. We're all price action based traders.

And I think even the people I've seen who are extreme fundamental people when I've worked at funds and they talk about fundamentals, they still have charts up. They still are looking at levels where they're gonna buy. I've never seen somebody be completely just, hey. I'm I'm not even gonna look at the chart or the price. I'm just gonna look at the fundamentals. I'm just gonna buy. I've just never seen it.

So I think it's incredibly kind of interesting to just chat about that stuff.

Mish Schneider 10:24: Yeah. Well, being closed minded is not a good thing for any trader.

Jason Kurz 10:28: Yes. Yes. So Andrew, did you have one for today? Was that what I thought you'd bring up for a sec? Yeah. Sorry. I was just getting somebody prepared on the screen here

Andrew Swanscott 10:39: that Pavel shared with me. I think it was yesterday because we're talking about price and

Pavel Kýček 10:46: let me For just go you, it was yesterday. For me, it was after lunch. Okay. Yeah. Was last night. Yeah.

Andrew Swanscott 10:53: I'm just gonna put this on the screen. This is really interesting. Excuse me. I got a cough this morning. Sorry about that.

Pavel Kýček 11:00: So, actually, Pavel, do you wanna talk about this? Wow. Yeah. Well, I shared it with you because I'm going over a lot of chats and tweets about Kokoa and Nvidia and how it is trending and so on.

And guys, that I'm talking about crypto a lot because I'm trying to open some some eyes for other, like, traditional finance traders and investors because, for traders, what I think it is also connected with price, the volatility and trendiness of the market in general is what give us advantage in trading, I would say.

And in crypto, I still can't believe how many people are close minded as as Mitch used this this word because you can see some coin, I don't know them. You know? Maybe information I mean, crypto for volatility and trendiness. That's it. I don't know much about individual crypto coins. I just love how they are moving, how inefficient crypto is, and that's why we are trading it algorithmically in Robux sale.

But I was sending it to Andrew because of some comparison with these traditional assets like Nvidia, Kokua. Then you can see some with USDT, which I don't know at all, but it did like over 1,000 starting 2024 and some other assets. Of course, the liquidity is not that big, but we are still talking in over dozens of mills a day. So it is pretty well tradable for any retail trader and even for smaller hedge funds.

That's why that's why I'm talking about it that much because I can see even on our results that you cannot compare crypto to anything else and other traditional assets from, I would say, volatility and inefficiency point of view.

Mish Schneider 13:01: Absolutely. In fact, that's why I love them because they sort of remind me of the heyday of commodities. It trades like a commodity. I love it.

Pavel Kýček 13:09: That's why I wanted to ask you about because I'm taking a lot of inspiration from very old algorithmic or systematic approaches from the past, like Larry Williams, Rashke, and her very first work and so on. Because I can see that those type of trading signals or trading patterns are working well because of the huge volatility that is on crypto these days.

Mish Schneider 13:41: Right. And then you have some of these coins where you don't have to know anything. You just know that they're going up and the crowd's in it. And so you just jump on board, which also is a little bit like it was back in the day when, let's say, gold was going crazy.

Pavel Kýček 13:56: Yeah. In fact, if I'm going over some out of sample periods or out of sample data for my crypto strategies building, I'm using very old commodity charts and equities in the stake bubble, start of 2000 or 1999. These are exactly those periods that are pretty similar in

Mish Schneider 14:22: on many levels with crypto these days. Yeah. You could also look back at the Tulip Mania too, which is, of course, as a commodities trader, there was always comparisons too.

Pavel Kýček 14:34: Yeah, of course. But I wouldn't mind trading too late on the way up. Know? Exactly. No no problem with that. No problem with that. Exactly. We'll trade anything.

Jason Kurz 14:48: I think for me, that's also a thing that Pavel and I were talking about this a little bit the other day, which was using multiple strategies. And in general, I think it's incredibly important to have multiple strategies in your portfolio and something we're talking about is these bubbles. And so we see these crazy bubbles and these crazy moves in the market. And basically, what do you do during those times as a trader?

You know, Pawel, you could talk about that being in the crypto bubble. Let's figure out what do what do you do right now as a trader? You only run and run strategy or do you have multiple strategies running?

Pavel Kýček 15:26: Me? Yes. Well, right right now I'm running I'm running 10 strategies, but we are giving another five strategies into the portfolio. So basically, we are running fifteen fifteen struts, but I'm always having, like, five to 15 strategies in some incubation incubation period on incubation data because I'm not adding strategies to the portfolio just for the purpose to have as many struts in the portfolio as possible

but just if they have some some uncorrelated uncorrelated part for the portfolio in general. But I'm not doing anything. I'm just running my portfolio automatically. Every strategy has pretty low weight, 10% to 20% of the overall portfolio. And that's basically it. Every strategy can trade up to 15 open positions, even 20%, 25% in one time.

So basically, our portfolios look like 20 to 50 open positions anytime, especially if markets are moving that crazy as they are moving right now. So my approach, to crypto, is to be as uncorrelated or as diversified across many different trading approaches as possible.

Mish Schneider 16:53: And what are you using for trade management as far as risk and profit taking?

Pavel Kýček 16:59: Risk management. Well, this is good question. I'm not using stop losses. I had quite a big discussion today and yesterday too. I'm not leveraged at all. So that's why I'm not using stop losses because crypto tends to overreact. For example, you can look at yesterday price action. For example, many coins were 40% down, and they mean reverted pretty heavily. In fact, we got into very nice, mean reversion long trades on these moves.

And the worst, I think, from risk management point of view, the worst thing in crypto is using stop losses if you have better approaches. For me, it, for example, means that we are having very simple breakout strategies to the short that are basically hedging the long part of the portfolio. So this is how I'm approaching approaching risk management in general.

Mish Schneider 18:04: Oh, so you're hedging. That's interesting. Well,

Pavel Kýček 18:07: basically, I'm hedging, but not on the same coin, but on crypto market in general because we are trading that. Yeah. So it would be one coin versus another. Then what about profit taking? Based on strategy, we are running trend following, breakouts, min reversion strategies. I don't use profit targets at all. Profit target is again not the way to go.

I made, I would say, thousands, at least thousands of tests on profit targets and stop losses, and I've never or almost never found a solution with profit targets or stop losses that would be better than different exits. And I don't mean just I'm I'm not talking about performance. I'm more talking about the robustness of the solution.

Because to me, profit target is just another another parameter that is somehow optimized on the past data, And that's why this is not the way to go for me. I'm using usually different approaches to exiting the trade.

Mish Schneider 19:18: So is it more of a rotation? One sort of runs its course and you're out and you rotate into another kind of thing that you're using Some

Pavel Kýček 19:28: kind of trailing, not stop losses, but let's say some trailing like moving average or Don Quan channels and these kind of things but I'm not using, like, rigged solid profit targets or stop losses then we are using some kind of overbought, oversold characteristics of the market for Mineraversion Struts, for example. So relative strength, basically. Yeah. Something like that. Yeah. Yeah. Okay.

And basically, most of our strategies are one, two entry conditions, one exit condition, maximum one regime filter. And that's that's basically I tend to as I told Andrew in our interview, I tend to really oversimplify strategy building, like single strategy building, especially in crypto, because we just don't have enough data. So for me, it is better to run the strategies very simply and being a little bit more complex on the portfolio level.

Mish Schneider 20:33: Interesting. I would definitely like to talk more about that another time

Pavel Kýček 20:36: because

Mish Schneider 20:37: we have found kind of in some ways the other side of that coin, which is pun intended, is that we have to have a certain level of, repeatable strategy in terms of risk and stop loss and profit targets, mainly because we sell to the public. Obviously, that's one reason in these quant models.

And secondly is because we're running people's money and we have to understand they have to understand what we're doing back to the risk appetite we talked about before the show. So I would love to understand what you're doing

Pavel Kýček 21:10: Yeah. Let's meet, of course. I would love to. Okay. No. I like because

Jason Kurz 21:16: I think in general, something that we we don't talk about enough in the systematic community is also fitting those strategies to your personality. Because I think too many people, the Jerry Parker and Tom Basso, they get in this argument every single time that the two guys get on, which is, hey. You have to ball target, basically trimming down your positions as you go along. And then Jerry Parker is like, no.

And, Jerry Parker has his data, and then Basso has his data, and they fight about it. And really it's like, you could do both ways. It just really what fits you because for me, like, I'm like Jerry, like, don't I don't trim down my positions as I go. However, I know that's not for everybody. That's not, the way everybody trades and also depends on how you're sized. I'm sized very small going into each trade.

Step I up my size most of the time going into a trade. Those strategies work well for me. But at the same time, if you do it the other way, I know Mish, you use profit targets and so on and you trim down positions as you go along. And I've seen Mish be incredibly profitable doing that and I'm profitable doing it my way and Pavel has a different way of doing it. Everybody can have a different way of doing things.

I thought also the cool thing you brought up was, I saw your post on stop losses, and so many people get so heated about it, and it's like, what I like about Pavel's stuff is that he's just really looking at the data. You know, he's always saying, yeah, my data says this and it's the same thing for me. It's the reason why I didn't fall target in my trend strategy because the data was telling me not to.

So, when but also I do use a trailing stop, but I also only trade bit So if I traded the Altcoins, like we talked about today, I would have no ability to use a stop loss. Depending on which coin, like Ethereum, sure. When you're talking about these very small coins and obscured coins, the volatility per day is insane. My Bitcoin stop trailing stop is already between 3035%, 90% of the time. So the volatility is just that high.

So I don't even wanna know what type of trailing stop you'd have to use on, let's say, Dogecoin or something really small. You're probably talking like fifty, sixty, 70%. You know, I doubt that you did find the strategies make more sense that way than using a trailing stop.

Mish Schneider 23:43: Well, you bring up a really good point in terms of the volatility because a lot of what we do, our stops are determined on the volatility, and we use that measure through average true range. Now, of course, if you're talking like something like Dogecoin, I wouldn't even begin to know what the average true range is.

But in terms of actual stock trading, a stock like Crowd, which, obviously went crazy this morning that has a $16 average true range per day versus Vietnam, which we're both in that has a 16¢ average true range will definitely affect right. How much what your your configuration is in terms of stop loss, profit target, etcetera.

And I will get bolder in terms of not having a stop loss per se, or at least I have a mental place where I know I'm dead wrong if the smaller the ATR, because, I can control it on a day to day basis.

Jason Kurz 24:43: No. I think all all of that just makes so much sense. And especially, you have to you have to understand what you're trading. PAVL is primarily in the crypto space. Do you trade more I've I've had we've never had that conversation. You trade more than just the crypto space.

Pavel Kýček 24:58: I'm trading equities basically the same way as I'm trading crypto. So broad portfolios of uncorrelated strategies, breakout, trend following, miner version struts. Basically very similar to crypto. Very interesting. Or not started, but that's where I involve, I would say. So these days I'm trading almost only equities and crypto. I used to be trading breakouts on commodities, on futures basically.

But one day you just find out that you cannot trade everything. Or you can, if you are a trend follower like you, for example, Jason, then you can. But I prefer having broad portfolios on some assets, not trading everything, even though I love this approach. But again, as you said, this is not for me that much.

Jason Kurz 25:53: Yeah, just all depends on which type of strategy you wanna run. I'm actually looking for a, I have a strategy sheet which all of them are on there. Because I also keep track of my strategies too, like what's doing well and what type of market regime at the time. So, I have a volatility squeeze breakout breakdown strategy. I have a trend following long term strategy. I have a volatility long short, basically it's like a gamma scalping strategy.

I have a W bottom strategy and all these are back tested. So basically it's a really once you start to back test all these strategies and start to understand what really can fit into your systems, start to figure out what would smooth out your returns.

I think that's a thing that we could talk about next, which is, there's periods of time in trend following, especially if you're a long term trend follower like I am, where you're just gonna be getting chopped to death. I trade a lot of markets so most of the time I'm not at a point where nothing is trending but it happens a lot. So you can get into a point where everything's flat.

Then you have to figure out what type of systems do you use during that time? There are some people who say, well, don't care, the market will come back and it'll make my money back at some point and that's true but also once again, fitting into your strategy, your personality, if you wanna smooth out your returns like some of us do, you have to kinda use different strategies during those periods of time.

Know, Mish, I know Mish is really good at I'll I'll watch Mish during certain times in the year and I have no idea how you do this because I have no idea. I am the worst day trader on earth. I just don't do it. But I will see Mish doing day trading strategies at certain time in the year when like things are just getting chopped to death and the market is just a mess.

So I'm just wondering, how many people up here also like use very short term strategies as well as their very long term strategies?

Mish Schneider 27:52: I've definitely walked away from a lot of the short term strategies and have been doing more of the long term strategies myself, partly because of the fact that we have the quants that have done very, very well, because they are finding the outperformers. And if you look back statistically from 1929, the outperformers always outperform. And the underperformers usually well underperform, and that's using the benchmark of the spy.

So just from a pure math standpoint, it makes total sense to have a good algorithmic system, something that I've only learned really even though the company's been doing it for years. It kind of took me a little a minute to, catch on, because I was so, stimulated by making my own trading decisions until I realized as I got older, why make it harder, when it could be so easy.

But getting back so that goes back to why I'm not doing so much short term. Instead, I'm taking what I've learned from the quants and trying to apply it to my discretionary trading in terms of blends. Right? So, like, here's a perfect example. We got into Coinbase at $80. We're still in it, but a tail. But I'm cool with that. I'm okay because I if it comes down, I will buy more.

And by the way, when you when you talk about trading too many assets, the first thing that came to my mind is back in those days in the commodities exchange. These guys were not trading, like, 25 different instruments. They were in the pit that they were in, and maybe they dapple elsewhere

but they made their fortunes catching these massive moves, adding on the rallies, adding on the dips, if it was trending up, that kind of thing, doing spread trading, kinda like what you were talking about with hedging where they would be long one month, short another month. Yeah. So that's that's another thing that I learned from back then. But anyway, getting back. So yeah.

So if I'm long Coinbase and I have such a cushion like that and it's a good percentage of my overall portfolio capacity and I buy GDX, which is this is all true story at 30 and I watch it go down to 25 and 62 and I don't get out. Why? Because A, I was convinced, 100% convinced I was right.

Number one, I can afford to know that after all these years that I'm pretty good, sometimes a little early because I have an inflation narrative in my head on everything else. And number two is it blended out the results. I was still a net net winner even with that loss. And now here I am actually, it's almost back to where I got in and coin is even higher. So the results have come back better.

So you see what that's kind of what I'm learning from doing the algorithmics is how to apply that to be a better discretionary trader as well and a more relaxed human being to boot.

Jason Kurz 30:45: I think that's a great a great point. Go ahead, Pavel.

Pavel Kýček 30:49: No. No. I just it is very good idea because I used to be intraday discretionary trader, and this is exactly the idea that I had yesterday that if I would like to start right now trading discretionary intraday, I would be much better with all the data and all all the research I went over over all these years that I don't want to go back. Like, never ever for me, systematic algorithmic trading is the way to go.

But, yeah, the knowledge that I have, thanks to all the research is on another level compared to where I used to be when I used to be trading discretionary. So I think it's very, very good idea in general. In fact, I think that even for many discretionary traders, it should be the way to go just to understand, for example, minerverting characteristics. That if something is way overreacted, it usually tends to go back.

I know it's like super simple concept, but not many beginner traders really fully understand it. Or this, I don't know, I would say the only cycle that is 100% in market and it is low vol, high vol. If you go over the data, you can see it very with 100 certainty that you have low volatility periods. And the longer this low volatility period is in the market, usually statistically, the bigger the following movements.

So these are very, very simple characteristics that all of us know, but not many starting discretionary traders know too. So that's why I would recommend anyone starting somehow at least semi algorithmically

Mish Schneider 32:44: or going over very basic research first. I wish I had you on my webinar this morning. I was trying to say that. You just said it much better than I did.

Jason Kurz 32:53: Okay. Thank you. No. It's spot on. Like, what exactly he said is just spot on. Because in general, I always think, like, people would all bet traders, would all benefit from some form of I call it, like, bumpers and bumper bowling. Like, you have something that kinda keeps you in the lane so you don't fall in the gutter.

Just something that goes Simply put, you have the S and P in a downtrend, something that just tells you it's in a downtrend and you shouldn't be trying to buy it right now. Simple things like that help. Mish over the years has been Mish is one of the few people I've ever seen actually who can actually pick bottoms pretty well. For the rest of us normal people, it work for me. And I used to have a problem with it.

That's part of the reason why I kind of really am disciplined on staying away from those things because when I first started trading, that was my biggest problem was I was always trying to find bottoms and things. And then through back testing, you learn a lot too about the volatility of each product and about the how the product reacts to situations, like, basically, if you look at commodities and you oh, here's a good system.

If you use a four day down in the S and P 500, and if you sell a put option on that fourth day down, most of the time you're gonna make money. However, if you do that same system, I think it's like a 78% win rate. It's a pretty high win rate for a very short term trade. At the same time, if you do that same system in crude oil, you're gonna lose everything. Four days down is usually the start of a trend in crude oil or any commodity really.

So basically, kind of get to just put through back testing, you can understand the price action and understand, like, how you should be trading around it. Because if you're really trading these things all like, like, a lot of the trend followers always talk about trading everything exactly the same. And I completely disagree with that.

And I'm the only person who ever gets in arguments about this all the time, but really it's like, I know my systems for commodities and I don't trade any individual stocks for the most part, but I trade the ETFs. And so my my systems for commodities compared to the ETFs, they're they're very different

Mish Schneider 35:12: because they react differently and different Well, they should be. I mean, commod you can't do stock buyback in a commodity. Yeah. Right? You know, you can do do a certain amount of price manipulation, but it's nothing like the way it would be for a company. You don't have to worry about the CEO leaving. No earnings. You know, no earnings to right. All of that. So, of course, you're gonna have to trade that differently.

But, what's interesting about the bottom picking because I really owe that to the floor, to being on the floor for so long. Because in the crude oil pit, for example, actually, there's a there's an article where I'm in the middle of a sea of men for Business Week magazine. It was when crude oil hit a bottom at I've seen that picture. Yeah. Right. I post it once in a while just because it's so much fun to see me in this big sea of men.

And and I'm right in the middle too. So I must have wormed my way in that day. Maybe because I knew the newspaper, the magazine was there, but whatever. Alright. Because I'm not a ham at all. And so anyway, getting back, it was interesting because if the whole article was about how crude oil was over and it was going to go even lower.

And yet as a floor trader and also of course I had the advantage of having a lot of conversation with some very, very brilliant people down there who had a lot more experience than I had. But you started to see the signs of what a bottom is. So if you're looking at a commodity, the selling just dries up at some point. You might see a couple of days at a certain level or you see, kind of a volatile and a blow off bottom.

It it would be the way way to describe it technically. You get these blow off bottoms, then the volume starts to switch. You get one good update with some volume coming in. You got a low risk to underneath that point of the day and made a low. That's how you pick a bottom. I've learned that from trading commodities on the floor and the signs to look for it, and you never pick a bottom without having a really good reason, and it has to be.

It could be a mean reversion type thing, but even the mean reversion has to be met with some kind of a real either explosion in volume to the downside that dries up or just as it's going down, the volume continues to dry up then you get the mean reversion. Always though with a point that you know if you're wrong.

that's where we I can obviously differ a little bit, Pavel, is that I always had to think of where I would be wrong when I was down there, and I still think that way. But my breath has gotten wider in terms of where I feel I'm wrong because I've gotten more confident over all these years because I'm so good at picking a bottom. And getting back to that GDX, as a commodity trader, I'm thinking there. I'm sitting there and I'm going, okay.

Gold's here. Silver's here. Miners are here. Where is that relationship going? It's so distorted. Where is it going to switch? So what happens? Gold continues to rally. You knew. You just knew at $26 for GDX that we that was it was bottoming out. You just knew it's silver at 20, dollars an ounce. It was bottoming out. I mean, you just knew that. You had to know that. And then knew that, Mitch. I knew that.

But if I were on the floor, we would have been discussing it and the and the buying would have come in. And then, of course, it's a self fulfilling prophecy because then they would get on the phone with their brokers upstairs, and they would say, hey. We think it's bottom. We think you should buy it here. You know, that's where the herd mentality came in. So I'm saying everything I know, I know from the floor. I'm so fortunate.

Jason Kurz 38:58: You know, it's also a super interesting point. And I also have to talk about this and give you your flowers because we talked about it on the spaces. And I always say the same thing, which is I don't have any signals yet, but I wouldn't bet against Mish. And so we were you you might not remember, we were talking about China. We're talking about China.

And you were Mish, as as China is crashing and basically, everybody in the world's, like, running from it, I'm kinda I'm I'm also, like, I wouldn't touch that thing either. Mish is going, oh, it's bottoming here. And I'm going, that's that's ridiculous. Like like, I would never touch this right now. And she's starting to buy it, actually. And then literally, she I just looked at the chart to double check right now, and she she nailed the bottom.

You you really nailed the bottom right there. So it's really interesting. Alibaba, I bought. I didn't buy all of China. I bought Alibaba. Yeah. Before before Jack Ma made the announcement. Yeah. Mhmm. But, again, it was partly because I exactly what I saw. I saw the volume drying up. I saw a good little reversal.

Mish Schneider 39:59: It got down to around $66 a share and popped up to 69. I got in at 69 knowing, okay. I'm wrong under 66, because it could go down to 50 or 40. I didn't wanna be in it forever. Too volatile. Too much bad news. Got up to 77, took my first profit, and now I'm writing the rest looking to add. I have my add point now because now notice the narrative is changing. Oh, Alibaba's bottom looks pretty good. Oh, Jack Ma bought. Oh, oh, oh? Mhmm.

Called the broker. Hey. Guess what? China looks like it's bottom. Right? Yep. Yep.

Jason Kurz 40:35: Mean, also you've also explained to me too, which is I think very also important to talk about right now which is the there was a quote and I heard it first from Paul Tudor Jones and then I've gotten to see it in person trading with you which is Paul Tudor Jones in the first market wizards. They always talk about, he'd be like, yeah, they always write about me in the newspapers.

Paul Tudor Jones nails the top of the market because it doesn't sound as cool to say Paul Tudor Jones on his fifth attempt nails the top of the market, which you've also taught me that too, which is probing. Also will happily understand, hey, this is my low, I'm taking a very tight risk here and take a few shots at it too. And what like more times than not, you nail it right on top. So I think that's really cool.

I think it's the way you explained it using the floor kind of makes more sense to me. I know it's not my cup of tea still, but I think I hope somebody out there listening thought caught that and was very interested in that one part of what you said.

Mish Schneider 41:36: Yeah. Well, Paul and I were on the floor at the same time. I know I'm aging myself here. So everybody, even back then, watched what he did. He was a hotshot trader right from the get go. The guy was just born to do this. And so people would follow him around. And I remember he would mostly stay over by orange juice futures and cotton.

He had a lot of friends in the cotton pit, but the way that the floor was built back then, cotton was here and oil was here. So if he made the trip all the way over to the oil market, believe me, all of a sudden, would be instead of five feet deep of people standing, there would be 10 feet deep of trying to figure out what Paul was doing. So, yeah, he was the king of probing, but doesn't mean he was always right the first time.

Like he said, it's true.

Jason Kurz 42:26: No. I love I love that. That's that's great. Does anybody else I'm I'm hogging Mish. Does anybody else have have a question for Mish?

Andrew Swanscott 42:34: Yeah. I've got a question for Mish. So you were talking then for a few minutes ago about, I guess, some indicators or signs that potentially a bottom is forming. What about a top? What do you look for? Very similar,

Mish Schneider 42:47: actually, Andrew. It's a great question. And I like to pick tops too. I mean, like to be early, not because of my ego by any means. It's because I did get very good at it. And it often is the best way to make money because by the time the public figures out what you're already in, that's when you get the real momentum to it and you start to make some good money. So the top, it would be the same kind of thing.

You might see a blow off top and that would be another huge surge of volume that at some point now you can just see it exhausts. The next day maybe a gap down and now boom, you've got a stop above the highs of the day that it went, ended its parabolic move. It could be a mean reversion like what Pablo was talking about. It could be just that things just sought to drift volume wise and you could see that the momentum has died.

You know, then I go back to the floor where I would look in the trader's eyes and I would know that the buyer buying orders, there were no more and they were all long chasing their trades. Right? And you could see the look in the eye, that one moment of look, they'd be like, oh, shit. This is the top. And then the selling would come in. And it now I can't see people's eyes.

I'm looking at just, a bunch of green and red, but still it's that you can feel it almost when you get to that point where it just gets exhausted and boom. Now, of course, time frame would be everything. Is it top, top, top, or is it top correction? I mean, that's where experience and trade management comes into play. I much rather pick a bottom for a major trend change than a top.

Although this year, January 2, I said Tesla topped at $2.60, and I never shorted one share of it because I don't love shorting so much like I used to on the commodities exchange. But, yeah, nonetheless, trading at around $1.77, that's turned out to be pretty true. There was a fundamental factor to that too. That's the other thing is when the fundamental shifts, you start to look for the signs.

When gold was going crazy in 1979, it was pretty obvious in 1980, the fundamental shift when Volcker started jacking up those interest rates. And yet people were still buying gold thinking it would never end, And yet there was the sign that went that final parabolic move and that was a top and it never looked back straight down. So you remember all this stuff.

Andrew Swanscott 45:18: Yep. We got a question in the chat for you, Mish. Let me put this up on the screen. Here we go from Crypto Nick.

Mish Schneider 45:25: Crypto Nick. What

Andrew Swanscott 45:27: does Mish want to see in a beginner system trader to trust potential is present?

Mish Schneider 45:33: What does Mish want to see in a beginner system trader to trust potential is? So when you say a beginner system trader, do you mean discretionary or do you mean algorithmically trading? Because I'm not sure because we've talked about so many systems so far today. If you can clarify that, and if somebody else has an idea of what he's saying and wants to answer it, I'm I'm happy for that.

Pavel Kýček 45:57: Jason? Yeah. I would say algorithmic,

Mish Schneider 45:59: but not sure. Yeah. Okay. That's so I'm glad I asked the question.

Jason Kurz 46:03: So I'm I guess if I was to get take a guess, it's just what exactly

Mish Schneider 46:08: would you look for to trust a potential system as as you're first starting to trade? That's what I would think he's trying to say. Okay. Alright. That that's a good okay. That makes a lot of sense. Well, I think the first thing would be I it would have to be something that you can explain, a strategy you can explain. If people can't explain what they're doing, run for the hills. I mean, I then I don't trust it.

So if if assuming that it's a strategy you can explain, like, obviously, Pavel has a very in-depth complicated system that he made very simple, but he could explain it. So I already trust it, which is why I said I'd like to talk to you further. So that's the first thing. You gotta go with your own instincts. If it makes sense to you and it resonates, that's step one. Step two is, okay. They explained to me their system.

Again, Pavel might disagree with me on this, but is there any kind of trade management that goes along with that? You have a system I fully agree with it. Right. Right. Do do you know when you're wrong? Do you do you have a some kind of a parameter for taking advantage of taking a profit and, seeing your your portfolio grow? That would be the next thing.

And and I think if those two things could be answered, then, I guess my next step would be, well, what do you like to focus on and why? Do you like to focus on equities? Do you like to focus on ETFs? Do you like to focus on crypto? Do you like to focus on futures? You know, what is your focus? Because we know that it takes a long time to be able to do a lot of different things.

And another lesson from the floor is get good at one thing first and then branch out.

Jason Kurz 47:48: Yeah. I think that's the way I think I have a hard stop at three guys. So Yeah. We'll start to do outros now. Mitch, where can everybody find you?

Mish Schneider 48:00: Oh, me? Yeah. Well, here. Me here now? Well, outside of the year. Oh, god. God. I'm aging myself all over the place. My goodness. Quoting Timothy Leary. So anyway no. Get back, Mish. Okay. So x, my handle is at market minute. That's where I spend my most time. I think it for me, it's great because I miss my days of being with all the guys and standing around and trading and having fun and, BS ing when things are quiet.

So I spend a lot of time there because I get the chance to do that with a lot of people, including Jason. I we have a marketgauge.com is our website. I do a free daily most days of the week. I do a lot of media hits and a lot of also other type of hits like this one. We post all those links on the daily and on the site. And, I'm on LinkedIn, Facebook, Instagram, everywhere. I mean, it's really hard to miss me if you wanna try to find me.

Jason Kurz 49:06: Thank you. Thank you so much for coming on, Mitch. This has been an absolute pleasure to have you on here.

Mish Schneider 49:12: I'm glad to introduce you to Andrew and Pavel as well. And hopefully Yes. I'd like both of your contact info, by the way, if Jason can share that with me. And then I'll I can arrange. Yeah. We'd arrange for you to talk with Keith.

Jason Kurz 49:25: Mhmm. Sounds good. Alright, guys. You guys can find me at against all at against all odds research, AAO research. And, yeah,

Mish Schneider 49:34: that's it for me. Thank you so much. This was so much fun. Bye.

Andrew Swanscott 49:39: Thank you very much for attending and everyone for joining us on the show today. Great comments in the chat. So catch you next week at Wednesday, 2PM Eastern, isn't it? Yes. 2PM Eastern. We'll see you

Jason Kurz 49:52: Andrew's

Andrew Swanscott 49:53: in Australia. Good job, Andrew. Always trying to convert the times in my head. So it is 2PM Eastern. It's hard to say I'm Australian.

Jason Kurz 50:01: All right. Enjoy the rest of your week. Thanks, guys. I'll connect Mish with you guys. I'll give her your Twitter handles and we'll talk soon.

Andrew Swanscott 50:08: Great. Thank you. Thank you. Bye. You.