Building confidence and consistency in trading

Transcript

Andrew Swanscott 0:01: Welcome to the trading panel. A show where we assemble a group of diverse traders from all backgrounds and all levels of experience to talk about the markets and trading and to get different perspectives. So what a brilliant idea, you may say, Andrew. What a brilliant idea. Well, it wasn't my idea. It was Jason from Against All Odds Research. Welcome, Jason.

Moritz Seibert 0:22: Hey, thanks, Now that it's spelled right. Andrew is the one that makes everything pretty. We got together recently, we were just talking probably a few months back, and we just had a conversation. I was like, Man, there's all these trading panels online. They're not actually like panels per se, but they have these spaces and there's like 20 different people in there.

And the conversations I was having, I was like, I don't know if these people are actually like managing money or any of that. I felt like I was talking to a bunch of analysts, just the way they were talking. And not to mention, I remember having a conversation, I told you this, Andrew, I was on one of those and I said, it was at the beginning of this year and I was like, Oh yeah, I'm down this much percent.

It was like three days into the year and I was like, down like 2%. And they were like, oh my god. Like the whole it stopped the whole space. Like everybody got quiet. Like it was like blasphemy to like say, you're down in your portfolio. And I was like, well, these people actually don't trade. They suck. Drawdowns are very normal. They happen a lot.

So, Andrew and I got to talking and we were like, yeah, maybe we have we'll come up with an idea, and we'll host it with real traders. And some weeks, we're having, like, kind of just one person kind of being the main focal point. Pavel's been here since the beginning. He's a great addition. I absolutely love having him on here as well. So, Maritz, you're kinda kind of the show today. So Oh.

Jason Kurz 1:50: I'm all, just at at risk of disappointing at at disappointing everyone. I'm I'm down 99%

Moritz Seibert 1:57: of the time, like, the way that I trade. 99%

Jason Kurz 2:01: of time, I'm in a drawdown and then one out of a 100. Mhmm. If that you make a new equity high and then you're going to draw it out again. So being a loser and a very professional loser, that's my job. Yes.

Moritz Seibert 2:16: And that's the truth, man. That's what drove me crazy about that was like, if you're out there telling people that their idea of how they're supposed to trade is to be up every single day, Like, one, it's a recipe to blow up. You will blow up at some point if you try to always take money out of the market. Two, this isn't a job where you're like, okay, well, a week to week basis, I'm gonna take my paycheck out.

Like, that's not how it works either. Sometimes the market's very conducive to my strategy. Most of the time, the market is not conducive to my strategy. Because of that, you limit your losses on the downside, your winners run to the upside, and you're in drawdowns a lot. This all happens. So this is about being a professional trader.

And that's why we kinda wanted to have you on here today, Moritz, is just to have that conversation as a professional trader. You also are part of Better sit. What is the name of the podcast? Did I say it right? It's not better system trader. Obviously, that's Andrew. That that's Andrew's show. I'm mixing things up. Yeah.

Jason Kurz 3:19: No. Top traders unplugged. Top traders unplugged. You know, together with Niels, and there's a bunch of people on there as opposed to some one of them. I run a show there that's called Open Interest where I focus a little bit more on commodity traders and some of the more nichey, maybe under the radar systematic guys that aren't that large yet, but that have something interesting to say or the way they trade is interesting.

And I just like finding love, finding these people and having conversations with them about their style of trading and see what it is that they do. And just to bring it back to this, like being professional about things, when you're down 99% of the time or even 99.5% of the time, if you will. The other part that's so important and that is an element of being professional is to not throw in the towel for the wrong reasons.

Like, that is the emotional makeup that you need to have is to accept the fact that your system, strategy, and I'm, talking about mine or the ones that I think are robust and resilient. I'm not talking about systems that have a four, five, six, seven sharp ratio. Different thing. Maybe. Whatever. I can't even go there. I don't know what that is. That's outside of my zip code.

But the stuff that is kinda like 0.5 to say 0.8 sharp, you're very easily tricked into questioning yourself, questioning the system that you're currently running when you go into a drawdown, especially if that drawdown happens quickly, if that drawdown is a little bit steeper than your peers. Because as a human being, you always compare yourself to benchmarks and your peers, right?

So if you look worse than the average fund out there, it's very easy to question your system at exactly that point in time. And you go, oh, well, I shouldn't have traded that position. I should be long even more of cocoa. I should have traded shorter term. I should have done this, that, and the other thing. And of course, you can find the data to support your thinking at that point in time.

But you will be making a decision that is very biased and very strongly influenced by the moment of right now. And it's not rooted in sample size like the longer term, like, observations. A big edge, therefore, is to have the makeup and the stamina to exactly stick to your system and not alter it for all the wrong reasons, which is a minor drawdown or maybe even a larger drawdown. You have to follow through with it.

And Jason, you and I, I think we spoke yesterday or the day before, clients don't like that. Is and then I'll stop. But because when you tell them that, I started with, you want to be a professional loser, and you have to stick to your guns when you go through drawdown, they don't like that. They don't absolutely like I mean, I don't like drawdowns either. Don't get me wrong. But I look at them from a different perspective.

If you don't trade yourself and somebody is down on your money 10 or 50%, then what you thought is going to be a long term investment very quickly becomes a short term investment. Then you become nervous, disappointed. You throw in the towel and you redeem. And that is in a way the sad, almost never ending story of client behavior, which is redeeming at the bottom and buying at the top. And that is destroying compounding massively.

There's no pill for that. Pfizer should maybe invent one at some point. Take it in the morning and that stuff goes away out of your head, but it is the reality. It's a fact. And so therefore, a lot of managers, they don't want the drawdowns either. They also want smooth return streams. Everything has to be in the body of that distribution and organized where things are mean reverting, where tails, by definition, don't exist.

But when you trade that way, you forget that the stuff that actually happens, the stuff that matters to your portfolio, happens in both tails of the distribution. The stuff that's in the middle actually is of almost no consequence. The stuff that really is the home run that makes you a bunch of money is cocoa right now and some a few other markets as well. But they are not in the middle of the distribution.

They are far out in the tails, stuff that you've never seen before. That means volatility because you can only get to the tail with volatility. And therefore, you have to embrace it and not shy away from it. But volatility also means drawdowns. It's the price that you have to pay. It's the it's not a penalty. It's kinda like an inconvenience fee on the way to bigger bank account. But getting that squared up in your head is a tricky thing.

Moritz Seibert 8:20: No, I love that. And that's kind of, the one thing Andrew and I were talking about, which we were talking about some topics. And one of those topics with you and listening to you a lot over the years on top traders, loving your system was one of the ones I wanted to jump into. And that's what you're talking about here. And for me, I understand, like, like, like you said, clients, they hate it.

When you're in a losing period, they're like, you need to change your strategy, your system, something's wrong. And you're like, well, I if you know your system well enough, and you learn to actually love your system, you understand that it goes through those periods, those flat periods, those choppy periods. And you learn to just understand that volatility at some point will lead to major returns, but it's not a smooth road.

That road's gonna be full of chop. That road's gonna be tough at times. And like, just like your clients, like you said, like nobody likes drawdowns and sometimes, you're gonna wanna throw on the towel, but you have to really understand, like, what's your goals here? Are your goals here to create wealth over this amount of time?

Because if you're running a long term trend following system, like, we're not looking for the craziest returns every single year. We're looking to catch those major outliers. Like Moritz said, we're talking about cocoa. You have something like cocoa in the portfolio. It's just going up every single day. That's wild. Something like Bitcoin. It's gone up a ton. That's also wild. You know, you you have those things in your portfolios,

and as you're catching those outliers, all that chop starts to not even matter because basically, you're set up to have, 50 basis points or 1% of your losers basically taking away 1% or 50 basis points of your portfolio and your winners being three, four, five x that. So as you're able to kind of understand like, hey, my losers are just this, it's not the end of the world,

and you have your position sizing right, you're set up right, your systems are set up right, you start to gather that conviction to just go, hey, it's gonna be a matter of time and then things will change. I mean, look at, 2020, 2021, like, these were insane years for us as trend followers. So it could come back, like, commodities are in a lot of buy signals now. It could be a whole different year this year.

Like, we just have to continue to see, but that's how you catch the outliers. If we were to change all of our systems, we wouldn't catch things like Cocoa or Bitcoin. That's right.

Jason Kurz 10:46: Look. When you when you say love your system, like, you look through that statement or when you go deeper, that also means like you break down the system into all its component parts. If you love your system, you can't just love your winning traits. You have to love the losing traits because they're part of the system. It's kind of like your kids. I can't just love one half of them. I either love them or I don't, but I do.

The good, the bad, and the ugly, that's all part of the same thing. So that's one thing. You love everything. And the trickier part, at least for me, but everybody may be different there, is the initial risk budgeting on a trade, kind of like, oh, I'm risking x basis points of my closed trade equity or some kind of balance or budget that you have. And if it doesn't work, well, it doesn't work. We cut the loser short.

We take that small loss, and we move on to the next trade. That, to me, is absolutely zero problem, like nothing. That is the cost of doing business. Now it gets a little trickier when you have a position that has accrued large open trade profits. So your open trade equity on that position has increased. And you now have a greater distance between the last price of the instruments and you exit or stop.

So that means that you can now lose more than the initial risk budget. Think of Cocoa. That is a great example, right? Cocoa is essentially in a parabolic phase. Shouldn't say that. I don't know what a parabolic phase is, but I've I've read this on Twitter. Some people say it's in a parabolic phase. It it's it's moving higher. That's it. Right? And it's moving higher quickly.

Now if you're a long term trend follower, that means that you're sitting on a bunch of profits. It will also mean that very likely, if you're not using dynamic position or any of these other techniques, that your exit, which sits below the stop somewhere, is relatively far away. It's further away than 50 bps or 10 bps or 1%. So that means you can lose substantially more on Cocoa.

Now, that therefore may be more inconvenience because it shows in your NAV and in the drawdown, than the initial loss on a position that you've sized it and immediately goes into the initial stop. But when, again, like when you then step back from that viewpoint, and that's also important, I think, is what you're risking here in the example of Cocoa is no longer your core capital.

It is no longer the initial risk budget that you carved out of your RIP source. Like, here's my $0.50 out of $100 that comes out of my wallet. It's actually my equity. No. You're now risking open trade profits.

And open trade profits, by definition, in futures markets and derivatives are a zero sum game, absent of commissions and stuff, if I have open trade profits, that is variation margin showing up in my brokerage account, that means somebody else will have the opposing position and sit on a loss because it is a zero sum game at the end of the day.

So somebody else's money has moved from this account to my account, which to me means I'm now playing with somebody else's money, with other people's money, not in a casino, right, but in the markets. And I should if we were to go to Vegas, we'd be playing blackjack with other people's money all night long, right?

And so here, my thinking is I have no business really to alter the position, reduce the position, is my belief when I sit on these open trade profits because when we, at the end of the day, analyze the trade from start to finish, it's going to be a great trade, unless Coco gaps massively down to whatever, 2,500 tomorrow. If there's not this discontinuity, Coco will be one of the greatest tries or one of the great tries.

It's just the question, when is it going to stop and how great is it going to be at the end of the day? But whatever we have in terms of give back from whatever, 7035 is where the May contract just settles to, I don't know, where the exit is, yeah, that's going to feel inconvenient. But my entry for the long position, it's far below 5,000. Right? So from start to finish, Coco is and this is how I look at it.

Look at it from kinda like just on a trade by trade basis. And that means Coco is going to be great.

Moritz Seibert 15:53: No, I love that. This is a stuff that's really important in trading because I think in general, too many people think that every single thing has to be a winner. You know, it's a it's a common misconception as you start trading. And I just talked to a guy, he's building a really cool product, basically able to kind of systematize seasonality is his idea. But the guy is a mathematician and we're having this conversation. It's really cool.

And I'm like, look, yeah, like, could probably, possibly have some 50% win rates from this. And he got upset. Yeah. It was like forty, fifty. And he was like, why would he said, my goal is to be right every single time. And I was like, that's that's insanity. You're never going to be right every single time. You know, what what you can do is try to create a system that you're right.

Your winners are bigger than your losers, you basically have a better risk reward, something there, positive expectancy, and he was just bent on the fact that he had to get every trade right. And really, I think that happens to a lot of people, not to mention, you'll find people, and this is a good question for you, Maurice, you'll find people that get into trend following

and you build a system and you're like, it's 40% win rates, got positive expectancy, you're like, cool, run with it. For them, they don't think that. They think that, oh, this trend following thing doesn't work. Look, it's only 40% winners or 50% win rate on my system.

So what do you say to people who say things like that, Mermit, when they think that trend following isn't really a good thing because the win rates are lower than something like a very short term day trading system?

Jason Kurz 17:33: Sure. I mean, it's about how much do you lose when you lose and how much do you win when you win. And by cutting off the losers, by cutting off that left tail in my trade distribution and never allowing a losing trade to become devastating, that means that, I'm essentially losing on average one r or one r is the risk budget that I have, and that's it. And that's where we stop. But the upside of that trade is unconstrained.

It can go wherever it goes. So I can have 30% winning trades. It's kinda like what I have, and 70% losing trades, and still come out ahead because the average winning trade is so much larger than the average losing trade in terms of magnitude. And every once in a while, you get an outlier. Not every winning trade is an outlier.

But every once in a while, you get an outlier that is so big, Coco could be that one or seems to be an outlier at the moment, where kind of like this trade alone pays for so many probing trades that I put into the market to just kind of like figure out, could this work? Could that work? No, it doesn't. Okay, whatever. Next one, next one, next one. And now Coco comes along and pays for all of this many times over.

This is also like important to understand. A 30% winning trades doesn't mean that the 30% are going to be big winners. Most of these 30% winning trades, 20 out of the 30 are going to be, where, little bit. Right? Maybe scratch a few basis points. And then you have 10, maybe five and then 3%, they really go like, who would have thought that? They just go and go and go. That is that is difficult to do because it means you have to be so patient.

That's it. It also means that we need sample size and obviously the faster if we could trade shorter term if our systems had the same edge on the shorter term time frames, which my systems do not and the trading costs are also higher then I would do that because I would have more sample size and it would take less time to crystallize my engine. The return stream would be smoother.

But the systems tell me that the longer term time frames are better, but that comes with the inconvenience of being patient. So you also have to train yourself in being a patient participant of the markets, which means that you can go through these phases where for a month you sit in drawdowns for years. Maybe sometimes you will sit in a drawdown. It'll take time for you to come back. It's difficult for you.

It's even more difficult for your clients because, like you say, Jason, they are in a way predisposition to want to make money every month. If you are as a hedge fund manager, not and, supposed to be absolute return. But if you're not making money for a year, year and a half, or two, or you're underperforming your peers, you have a high risk of being fired, probably at exactly the wrong time.

But that is the business that we chose to be in with my money, with friends and family's money, and with investors money. And I but I do love it. I have to say that. My investors, all of them, I do know, I speak with them, there's not a single one where I don't have a personal conversation with. And I think they get it.

Moritz Seibert 21:26: We'll see. I think that's important. I think that's really important to have, your That's one thing you learn over time. It's something that I didn't do quite well at the beginning is having investors that match my personality, who I am, my trading. That's really important because you need also your investors to also be like, hey, our system is great. We're gonna get back to it.

We've had a because you're never gonna have Every year's not gonna be great. And that's the thing also, when we're having really, really great years, we had a really, really great year in 'twenty one. Everybody in the world's hyping me up at that point. Every client loves me. And then we get into Q1 twenty, basically where most of us are paid quarterly.

And so they're looking at quarterly, quarterly, and the first quarter of twenty two, fantastic.

After that, very flat. And you start to have questions, are you still gonna run your strategies? Is your strategy still okay? Like, it's like, wait a minute, it's even a year where the S and P and everything's getting hit, you still get asked questions, even if it's not that you're only underperforming. Sometimes it's the expectation of your client. And that's also another thing you have to do well is manage their expectations.

Some people get into the market and they think you're going to give them 403% returns a year. They're like, I gave my money to a pro, I bought options one time. I made 200% on these options. Why aren't they doing that to my portfolio every day? You also have to weed out people like that and be like, okay, your expectations are insane. This is never gonna happen like this.

So once again, you have to, all of these things are incredibly important when it comes to managing other people's money. Managing your own money is one thing. Managing other people's money is managing their expectations, managing what they can handle too. That's also another very important thing. And also just to add to Maritz's point earlier, so when we're talking about ours, we're talking about risk to reward.

I made a chart I just posted on Twitter. I made this the other day when I couldn't find one that I liked. But basically, if you're looking at one to one, meaning if I make $1 I lose $1 Make $1 or lose $1 per trade. I have to be profitable about 60% of the time to make money, 50% obviously breaks even.

Then if we jump to the other end of it, if I'm doing one to five, meaning I'm losing 1% of the portfolio, I'm making 5% of the portfolio, or however you wanna set that up. You can be profitable with just 20% of your trades winning. So this is why it's very important to understand like you don't have to have some insane 90% win rate to make money. Actually, most of the times the systems I've seen with 90% win rates and created, they blow up.

Basically you get, let's say you have a 90% win rate system. There's a system I created just to show people this. It was a day trading system, short term swing trading, basically four days down the S and P 500, you let, you basically sell an option, put spread, and basically it goes up. Let's say, let's just keep it easy, no options, the S and P 500, the SPY, you buy it, you let it go up 1% and you get out when it hits 1% every time.

This is about a 90% win rate system. However, to get those winners, your downside is much bigger than your upside. So it's about a five to one risk reward. So basically this system blows up if you have a losing trade.

So most of the time when people are telling you, because I see that all the time, and I was the panel we were talking about earlier, I've seen people talk about their 90% win rate systems and stuff, and it's like, that doesn't really exist. And when it does exist, and I've seen that stuff and Mertz and I have been in the hedge fund world and just seeing it when people start talking like that, most of time, I'm like, okay, it's either fraud

or they're going to blow up at some point. The one thing you're seeing in the hedge fund industry right now is a lot of spread basis trades between the bonds, bond yield, cash bonds and bond futures. There's funds that aren't doing too well today because they're starting to lose money. And this was supposed to be a 100% you cannot lose. Also go back to 1998. What was the name of that fund in '98? Do you remember it, Muritz? LTCM.

Jason Kurz 26:01: LTCM.

Moritz Seibert 26:02: Yes, LTCM, that whole crisis that happened. They gave the money to a bunch of PhDs. PhDs found a 100% win rate trade, they put everything and then some into it, they ended up blowing up and Wall Street kind of had to come in and save them as a company as well. So I mean, it's really, you really don't wanna get too into that. I'm stuck on trying to win every single time in a trade.

You wanna get more to, hey, I figured out a way to set up my risk to reward properly. Figured out a way to set up my stop losses properly. Like, these things are incredibly important. And, I know Pavel doesn't use stop losses, but he uses exits. And however you do it, just figure out a way to set up your risk to reward right, and you will make money.

Jason Kurz 26:52: Is no trader that wins on every trade and just a final thought on that, even HFT, like you could say that's the ultimate systematic trader, right? Because no human being can trade as fast as they can, But even HFT and market making operations don't have 100% winning trades. They will have losing trades, but they have substantially, massively greater sample size than us.

Bringing it back to your example with the 1.5 or like, you if if you have a 20% win ratio, if you could do 1,000 trades in a day and you have a 20% win ratio but you're making, I don't know, three to one reward to risk, then you would have a winning day every day because it'll come through. Statistically, you will have, at some point, a small losing day as well, but your edge will crystallize because of that large sample size. Now,

but in the example that you used with the S and P 500, if it's at the end of the day, there is at most one trade that you can do in a day and then you hold it maybe for, I think you mentioned the 1% profit target and maybe that's only active for the next day and you get out by the close. But by definition, you will have one trade per day. You know, to get to 1,000, you need four years. So after four years, you need to be up.

But in that four year time frame, which is massively long for human beings, every day feels long, right, You're very likely to give up. And this is such an important thing is that people don't or most people don't realize how much diversification and how much protection they need, also protection from themselves. An easy example is the tech bubble. Just that comes to mind. Right? You look at the NASDAQ. The NASDAQ is an ensemble of everything.

And it's it's been down, what, 90% peak to trough, something like that. I'm not sure if the number is right, but a massive drawdown. Right? So you look at that index now with the benefit of hindsight. It's, twenty three, twenty four years in the past. Maybe you're young enough, you haven't even lived through that period with your own money. You look at that index and go like, ah, okay. Every once in a while, it goes down.

It's going to be very inconvenient, but look, it's going up over the long run. What you're completely forgetting is that, very, very, very likely in time probability space or, like, you're you're as you as an individual, you're very likely to have given up or altered your bet size. You will it's so difficult for you to go through that drawdown and stick to it so that you can make it on the way up.

You will either have redeemed or you will have reduced your investment down there at 90. And what that means is that your experience from that point forward is going to be very different than the ensemble. It's going to be very different than the NASDAQ. You can never track the NASDAQ again because you've Yeah. You've it only takes one occasion for you to, to not be a 100% allocated, and that's it.

So that is why diversification is so important that, an uncorrelated return stream so that you have more of a balance in your portfolio, and you don't come into these situations where you have to where where you have essentially reach your uncle point which then destroys your compounding.

Pavel Kýček 30:36: No. Perfect. It's also

Moritz Seibert 30:38: Go ahead.

Pavel Kýček 30:40: Yeah. That's also the reason why I would say that most of traders shouldn't try to be full time traders only because then going through drawdowns that can be easily a few years is pretty hard to withstand and to have this belief in your only income stream that you have. And basically, this percentage win, I think it is a lot about ego, know, because we are in trading for making money.

And sometimes we are putting too much of our ego into trading in general. And we are trying to be right instead of making money. And these are two very different disciplines because I have many strategies that have win rate 90%. All of them will lose money at the end of the day, it would be all these martingales type of strategies, know, that you are averaging down.

It would be these shorting, triple x ETFs on VIX, for example, these kind of struts. Yeah, they have like even higher than 90%. But you will always have one day when you will lose basically everything during this very short day. And to drawdown what I think that is pretty interesting is how people are thinking about drawdown if they have the experience with some deeper drawdowns,

because we are dealing with clients that are investing in crypto, in our crypto trading solution. And I used to be dealing with clients from traditional finance. And what's interesting is that we have for example low risk portfolio that has average drawdown about 10% or so. And do you know how many clients we have on this low risk portfolio? Zero, exactly zero.

Because all of them went through like drawdown 60%, 70% just by holding some crypto asset and all of them on all these calls are right. Okay Pavel, like 2030% it's no problem at all for me. But what I find interesting is that one thing is drawdown and from the client perspective, how I see it is that probably even worse is giving back open for profits as Maurice was talking about,

because these open profits, everyone is always having their lumbles and prepared to keep the money for something. And then immediately, especially on trend strategies, you simply give away 50% of your open profits, 30% without any problems. And this is something what is probably emotionally even worse for clients that are not informed enough, at least from my experience.

Jason Kurz 33:43: That's right. The other thing is, sometimes you see these strategies where you're essentially selling tails. I mean, you I think, Jason, you've mentioned, selling puts and so you can back test that stuff. And obviously, can find the strike and the frequencies and this and the other things so that the backtest will look good. It will have drawdowns, but it doesn't blow up.

Now the thing is, if you do this long enough, it is not a question of how much will you lose. You will blow up. At some point, you will, statistically speaking, blow up. And you will either have a complete blowout in terms of you will go to zero, or you will reach a point where, for whatever reason, say, you're selling puts on the S and P 500, the loss is going to be so large.

And now there is parameters coming in which you cannot control, your broker may ask for initial margin variation and oh, sorry. Maintenance margins go higher. Right? Initial margins go higher. You may have liquidity and funding problems with your broker because other positions that you have in the portfolio also work against you at exactly that point in time because you have that correlation shock.

And even if you don't lose a 100% of your capital, and so you have the complete blowout but let's say you lose 60 or 70, again, it's like almost a one probability, unless you have cash, raining from the skies from other sources, that you will, at that point in time, change your posture, change the trading system, change the sizing, do something else and boom, there you have it.

You have the deviation from the trading system, and you're now no longer participating in what could potentially be the recovery. You're seeing uncharted territory, and very likely you're not going to make it up to 100%. But it's so easy to overlook this, because you're looking at the recent experience, and the recent experience is 90% winning trades or 95% winning trades. What could be nicer than that? That feels really, really good.

But the devil's in the detail, and there's a lot of hidden risk in that type of trading behavior. Especially, final point, as a function of volatility or implant volatility, now we have what is the VIX at fourteen fifteen. I don't know. I'm not really trading it, but it's relatively low. Yes. We've seen the VIX in single digits. Right?

But historically speaking, a VIX or implied volatilities for the next thirty days or variance in that case at around 13 to 14 is relatively low. Equities used to be 20 vol when I started trading, and everybody was fine with 20 vol. But, oh, my gracious. 20 vol is now far too high. People don't even know what 20 vol is anymore, most of them. Nobody wants 20 vol, right?

But so if you now have a strategy that goes like, oh, well, I want to make 1% per month, and I want to achieve that by selling volatility, well, you now have to sell even more options, right, in order to get to that 1% level because implied vol premium is lower.

And that just means that you're opening yourself up to even greater risks to the downside, presumably and probably at the worst point in time, which is prices are high, stock prices are high, vols are low. If the shock comes, you get put in the mixer. So I'm not saying that there aren't people out there that don't know how to run these strategies or have alpha in the vol space, in the short volatility trading space.

But you should probably always find one or talk to one that has the tail covered by, for instance, put spreads, right, or having some ratios or being long a VIX call, something that can at least mitigate or avoid the complete blowout.

Moritz Seibert 37:53: No, that's absolutely right. And we talked about this the other week, but you remember the optionsellers.com guy. That's a

Jason Kurz 38:02: great example. That was on Natgas, right? Natgas and oil.

Pavel Kýček 38:07: Was selling

Moritz Seibert 38:08: calls, naked calls on natural gas and selling naked puts on oil. Both of them in 2018 ended up going the other direction all at once. And he just blew up. And like, that's, that's the thing that does happen. Like, you can make some money doing it. And I'll see it all the time where people send me a back test of a system like that.

And they'll basically take out like a certain amount of years in the middle of it or a, oh, look, only have a, know, I'm only back testing the last three years. You know, this is why it's important to really try not to curve fit your back test and try to go as far back as you can. Really, I think going really far back too helps me to just understand and manage my expectations during certain environments.

The 70s can be one interesting environment, a lot of inflation. You go also through the Great Depression, you get to understand a different environment. As far back as you can go in these products, like as far as you need to go.

And if you can go back far and you're not sitting there trying to say, Hey, I'm only gonna go back three years because this is the new market or something, you're going to have a lot more luck than someone who's just going to do the last three years. You really have to go far back in your back test. I can't really stress that enough. I don't know if you guys will believe that as well, but I really try to go as far back as I can.

Pavel Kýček 39:30: I think one reason why people are trying to make these high percentage win strategies is because they are trying to find something that is not in the market and it is stable income. They are just trying to make as Maurit said, make money like this is very funny like 2% a week or 5% a month, 1% or whatever, doesn't matter, know, but anytime I see these types of statements, it's always a strategy that has to end up very bad at the end of the day

because it's not how it is working. Can't like make profits if markets are not offering profitable opportunities basically. So this is the approach that is always wrong and that usually leads to massive losses at the end of the day.

Moritz Seibert 40:29: And I think about it the same way as you were like, that's why I think it's important to, if you are just a trader, know, I'll have friends will come up to me and they'll be like, I put together a small amount of money, like really to trade for yourself, you need quite a bit of money. Because if you go through those drawdown periods, you're in a rough period, you might need to take money out.

There's a lot to trading just your own money and living off of it. So it's good to have another form of income, something else that you're doing. Or, even like Maritz, you have a fund or and like you as well, Pavel, you have a fund, you're able to kind of bring in some money through that, like, well, however you're doing it, these are all very important things.

But if you continue to just kind of stress about, hey, I need to make this amount of money a month, hey, I need to pay my rent per month, you're going to miss out on those big winners. For me, it's like if I was doing that, I would be hitting and I watched a trader do this, I worked with one once, he would be on the cusp of a really great trade. And it would be towards the month end because he always wanted his month end to look good.

He would settle with like a 1% month or a 2% month. And he would just do this over and over again. And then you have one big losing month and it wipes away all your gains for the year. For me, and I've heard Maritz talk about it on Top Traders Unplugged too, which is lumpy returns. Like, think it's incredibly important to understand like your returns are gonna be, I'll have a really great month. 2020 is a great example for me.

The first two months of the year were pretty terrible. I made most of my returns in March, and then I was basically flat and shopping around until the last part of the year in November, December, which was my two best months ever in my portfolio. So once again, it's like those lumpy returns and not thinking that I was gonna just get out with a little bit of gain here and there, it's important.

If I'm having a 5% down month here and there, and then I'm able to have a couple months that, or just one month in a year that's 20%, That could make my entire year. So once again, those lumpy returns, it's incredibly important to understand. So I'm glad that was also talked about.

Pavel Kýček 42:44: These are the wrong expectations. Had huge years 2021, 2022 on my equity portfolio trading. And then I was in drawdown basically one and a half year. It's normal, and everyone everyone has to expect this type of this type of like returns in trading because otherwise he's just lying or they are just lying themselves.

Moritz Seibert 43:10: Yes. Yeah, exactly. Let's put some Andrew, I saw a bunch of them.

Andrew Swanscott 43:17: You read my mind. Was just about to suggest. We got some questions in the chat here. So let's, I'll do it from the top. So we got one from Zion here. You put it up on the screen. How many algos are you all currently running in your portfolios?

Jason Kurz 43:37: Well, I go first. I run a bunch of different trend following algorithms. They are very similar in design. They're essentially different trading speeds. That single market trend following. So put this as like one bucket. And then I have another one which is trading spreads, momentum and commodity spreads, and that is essentially another group of algorithms, one algorithm. So you can really say it's two strategy types which I'm running.

I'm not running anything in mean reversion or swing trading or any of that type of stuff. Everything I do is essentially rooted and grounded in trend and time series momentum. Yes.

Pavel Kýček 44:26: Yeah. Well, I'm trading especially in crypto, I'm trading right now 15 strategies, trends, momentum, breakout, revelation two because I'm quite believer in this type of in this type of strategies in broad portfolio for stabilization of profits a bit. And on equity, some trading nine strategies right now. So, again, French struts, but mean reversion to the long side and some shorter terms to the short side to for a hedge.

But with average holding period, one to two days maximum, really, most of my struts on equities are to the long side because it just makes a lot of sense to me.

Moritz Seibert 45:15: Think for me, I think one thing to talk about is the different strategies. I think Pavel and I talked about this off mic recently, just on Twitter, just talking about all these different strategies that we run. For me, I run a lot of different strategies. I even have some mean reverting strategies. It's literally just one mean reverting strategy. I run a lot of volatility breakout systems. That's kind of my bread and butter.

That's what I kind of go to over everything else. I really gravitate towards those. I think those work very well for me and just my methodology and the way my personality works. So you have to be very patient with those. There's not a ton of trades in those a lot of the time. So that's also something you could be sitting on your hands for a long time.

And then classical trend following systems, one hundred day highs, one hundred and fifty day highs, even two hundred day highs, classical systems like that. I think, and I'm missing something. I think there's also a spread system in there. I call it a cross asset mean reversion system.

Basically, it's not exactly mean reverting, but it's basically you have something like corn and live cattle, and it basically creates spread trades between the two of those. It kicks in on certain times. It has a seasonality aspect to it. It was kind of an interesting thing. It's part of the reason why I'm working on that one product with that guy right now. So it's a kind of a couple interesting ones there.

It's cool to actually hear everybody else's stuff. Andrew.

Andrew Swanscott 46:46: Yes. So for me, I don't know exactly. Actually, I think it's about 10 to 12. The reason why I don't know exactly is because I've got a small team who we all do separate parts of the, I guess, the management. So I've got someone who's much smarter than me at portfolio construction who chooses the strategies and how they combine. So somewhere around 10 to 12, but we change quite a lot at the moment. So we're testing some new ideas. So there's that.

And by the way, Zion also said, Love your work, Pavel on Twitter, Robuxio looks fantastic. Thank you. I have to agree. Pavel and I actually had a little call yesterday on Robuxio and he showed me some pretty cool stuff. So if you're interested, go and check that out. Now next question. Here we go. Let's get philosophical. This is an interesting one. Does the panel have any advice on trading costs and broker selection?

My algos trade mostly forex based strats and transaction costs spread plus commission form a large percentage of my gross p and l.

Pavel Kýček 47:57: Yeah. I think go ahead, Pavel. No. Okay. So but maybe I will be too honest here, but if a strategy if cost of trades would be too high compared to average trade and I don't know how much it means in this particular case, I wouldn't even trade the strategy because then just a small change in your trading catch or in market behavior or whatever. Anything can happen like your trading infrastructure can have some problems, whatever.

You just have your margin of profits basically could be, I don't know, but could be pretty low also. For example, my solution is always to try to have the highest possible average trade and that's why, for example, I'm not trading smaller timeframes under one day or twelve hours sometimes, but like one day to one week are my timeframes to trade.

Moritz Seibert 49:03: And I was gonna just add that, if whenever I've seen this question come up, it's usually that someone is trading so much, You know, I don't hear that in really in my timeframe, like, doesn't really affect me. I'm also through Stonex. We do have pretty high commissions, because you have to use another basically, once you're at that end, you have to use another thing like trading technologies or something to put on your trade.

The commissions are pretty high. However, I would have to trade a lot more toward the point where it would it would cost me a major part of my P and L. So I would say, maybe look at your system, see how much you're trading, see maybe if you're overtrading. I see a lot right now in crypto, I'm sure Pavel could also say this as well. In crypto, there's so many people who are like, they're buying and they're selling every other day.

And it's like, well, riding this bull trend. Like, why are you buying and selling every single day? So kind of look through that, see if maybe you're overtrading, see if you can run a little bit longer term system. Doesn't mean you have to be as long term as I am, but being a little bit longer term than you might be today might be helpful for your P and L.

Pavel Kýček 50:20: I remember one thing that one experienced trader taught me a few years ago and it was like your average trade should be as high that you don't have to care about your cost of trading that much. It doesn't mean that you shouldn't be thinking about them,

but it means that probably the solution should be robust enough that if your average slippage would go a little bit higher or, I don't know, commissions would go a little bit higher or whatever, you never know, Your solution should be robust enough from this average trade perspective. And that's something I am trying to do all the time.

Jason Kurz 51:03: I have a spreadsheet here, which, by the way, I'd be happy to share. There's nothing confidential in it. But it also depends on the market that you're trading. So some markets, some futures markets are more cost efficient to trade than others. When you think about the CBOD and some of the grain markets, the exchange fees there are really high. When you compare that to, say, the S and P E mini, the exchange fees are very low.

So if you have, like, a higher frequency trading strategy, you'll be tempted to trade the S and P mini or some of the futures markets that have relatively low cost, are very liquid as opposed to Kansas City hot red winter wheat, which is definitely more expensive to trade. But the total calculation is kinda like, you have execution commissions. So in this spreadsheet here, have, say, 75¢. You have exchange fees, 50¢. Clearing fee, 50¢.

And then very importantly, there's bid offer and slippage, which in my calculation is part of the trading cost because you don't get done at the mid price. If you are, taking liquidity, you lift the offer, you hit the bid, you cross bid offer. And you may even have slippage compared to your system target price. So let's say that's another, in my calculation, year $5. It could easily be $20.

If it's only 5, then the sum total of what I just said, again, I'm happy to share that spreadsheet, is $6.75 per lot, but that is only one way. You also have to get out, so multiply that times two, and then multiply that by the round terms per million per year, which is a system statistic that you can get from your system. In my spreadsheet, it says $12.50. That means you have about $17,000 of trading costs per year. Per million, that is 1.7.

So just put that in that could easily be higher. But I would then say, I got somewhere around 2%. You have to overcome that hurdle. 2% is pretty steep. That is an example. It is not applicable or reflective of my trading. I don't have that much trading cost.

But it's kind of nice to play around with that spreadsheet and see like, well, how much does it really cost to run a higher frequency, shorter term trading system where you then go into like, okay, I have 2,000 roundturns per million per year, 3,000 roundturns per million per year.

At that point in time, you may actually start thinking about becoming an exchange member and having lease a seed or buy one of these seeds in order to have reduced transaction costs. Obviously, most people don't do that. But if you ran a larger organization, you actually start thinking about these things, exchange memberships.

Andrew Swanscott 53:55: Yeah. Thank you very much for that, Maritz. I like how you broke down those costs into the individual components because I think a lot of traders don't do that. They don't pay enough attention to the cost of trading. Just scrolling through the chat. We've had a lot of good comments from Eccentric and The Dave. So thanks for contributing. This question here from Crypto Nick really stood out.

It goes a lot to our discussion about conviction, which is I guess the theme of today. When did it click for you and you became a solid and confident trader?

Moritz Seibert 54:34: That's a great one. Hey, Nick. He's on our channels a lot. His comments. He usually has a lot of great questions and comments. But yeah. So for me, being a solid and confident trader took years. I think I made it I knew about markets and trading from a young age. I had a great, great uncle who was in into trading.

He read a lot of seasonality stuff, did a lot of cycle work, very interesting guy, made a lot of money in the markets, was very talented. So I got to learn at a young age. Did it click for me because I got to learn from somebody? Absolutely not. I still made all the same mistakes, all the ones that he told me not to do. Hey. I don't know if you're really, you really wanna be day trading. Maybe your life's a little bit too busy to day trade.

I day traded. I lost money that way. And then I maybe your, fundamentals, I don't know if that's really like the way you should be looking at the market is what he would tell me. So I looked at fundamentals and thought that was the way I should be trading the market. I lost money that way. I continued to make a lot of mistakes really until I don't know if confidence is the right word.

I think I started to go the other direction and understand that risk management was everything. You always ask when you're a younger trader, you ask the older traders the same thing. And I got to learn from a lot of floor traders. And I would say, what's the secret? How do you trade these markets? How do you make money in these markets? And they would all tell me the same thing, risk management. Oh, here's this book.

Then And they give me a book on Van Tharp on risk management. I'd get so angry. I'd be like, why don't you just give me what to buy and sell and when to do it? Why aren't you guys telling me the secrets of trading? And that's how I started to kind of learn like, hey, maybe it is that maybe I should just sit down and read this book.

And so finally I read that book and that helps me kind of to understand what we're talking about here, which is risk to reward. And understanding the risk to reward started to change everything I thought about trading. You think in trading is like these people, I'm sure we all get it all the time.

If you have a fund, people wanna give you money and they basically think you sit in a room and you take their money and you're like, you have 20 guys and you're all PhDs and you're coming up with some crazy thesis and you're like, okay, we're all going to put it into this stock over the next ten years are going to make all the money in the world. And that's not trading.

Trading really is figuring out that risk to reward, using your stop losses, setting your position sizing right, figuring out the volatility of each product so you can let your winners run. Like all of these things are incredibly important. And once you figure those out, the rest of it's really, it's a lot simpler. That's the hardest part of trading.

So if you just kind of focus on that part and almost, protecting, like Paul Tudor Jones said, protecting your ass over everything else. If you're kind of just working on that, over time, you will get confident, but it won't be because you're overly confident. Sometimes you're overly confident at the beginning.

It will just be more because you understand your systems, you understand your strategies, then you're confident in your system and your strategy. I'm not confident in myself or my ability. I'm confident in my system and my strategies.

Andrew Swanscott 57:57: Well said, who wants to go next? Pavel, looks like you're about to say something.

Pavel Kýček 58:04: Well, I'm thinking because this is one of those very good questions I don't have good answer to. Like one simple, one simple, because I was thinking about the whole journey and I'm really trading eighteen years right now and I would say that maybe it clicked to me like after maybe ten years or so.

I'm not saying that I wasn't profitable before but being satisfied with the level of knowledge or how thinking about trading, it took me such a long time because I had to really because to me it was function of being able to deal with uncertainty on really deep level and then having really bigger trading account and being able to diversify across many approaches.

So it was the time when I started being not confident, but being really thinking like about myself as a trader, I would say, the real trader to know that I know what I'm trading, what I'm doing. I'm thinking about strategies because everyone can build some kind of strategy on some historical data.

Another thing is if you can trade it confident, really, yeah, if you are satisfied with the solution, if you know how to deal with drawdowns, if you know how to switch strategies if it is necessary, how to read the strategy performance compared to for example, market period we are in and so on and so on.

I think that the level of experience one has to have to say that he's really like professional trader or trader on some level takes a lot of time like probably much much longer than most of traders think at the start, at least this is at least my how I'm thinking about it.

Moritz Seibert 1:00:20: Let's give Maritz a chance to say bye. I know Maritz has to go. So just want to give him a chance. Yeah.

Andrew Swanscott 1:00:26: You're on mute. You're on mute, Maritz. I think I can unmute you here. Yep.

Moritz Seibert 1:00:35: I think I think you remuted him maybe.

Andrew Swanscott 1:00:39: We can't hear you for some reason. No. We can't hear you. I can see your mouth moving, but no audio. Nope. Maybe while he's figuring that out, I can give my answer. Nope.

Moritz Seibert 1:01:01: I think he's got it. Just give away, Maritz. We'll see you. Forward your links so people know where to follow you, Maritz. Thanks so much for coming on.

Andrew Swanscott 1:01:14: That's fine. Thank you very much. I think for me, it really started to click once I figured out what type of style worked for me. So initially, I was, started trading forex and doing swing trading and joined a prop firm and learned some of their strategies, which turned out to be crap. But I also tried day trading, e minis. It doesn't sound like too bad, but when you consider the time zone, I had a corporate job.

And so I was working, eight, ten hours during the day, come home, get a couple hours sleep, get up at midnight, try and trade the E Minis for a few hours, get a few hours sleep and back to work. It was ridiculous now that I think about it, but that's kind of what I was trying. I was trying to find my way.

And then I think once I discovered that you could back test and you could trade algorithmically, which really works a lot with my and I'm a very evidence based person. I like statistics and that kind of thing. And once I was able to figure out how to do testing and I tested a bunch of these strategies that this prop firm was teaching people and they were out of rubbish and they didn't work over the long term.

So switching to something that really suited my personality was a big click for me. And obviously you can back test in a good way and there's things you shouldn't do, which I also had to figure out over time.

But I think that the key is for most people will probably say most traders would probably say, once I've I've figured out something that really kinda worked with me personality wise, that really that's a really big step forward in conviction.

So what about you, Pavel and Jason? Do you you think that's the same for your journey as well?

Moritz Seibert 1:03:13: Yes. Absolutely. I mean, the way you explain it is really good. And I think that's generally, like like you said earlier, it's it's important to understand how your personality works. I've seen people make money in all all different ways. You know, I've seen people, great fundamental traders. I don't know how it works, but they do it. And they don't know how what I do works though either.

They look at me like I'm doing some sort of voodoo and I look at them the same way. I'm not one to say anybody should trade one way or another. I'm just saying what works for me. I also saw he made a question about which also goes into this too, about do I still think day trading is crazy? And for me, yes. But also, I've also haven't seen too many people over the years do really, really well as day traders, like I haven't.

So that would help to change my mind. I have seen a few people over the years who've made good returns doing that. They make their living doing that. But I've seen a lot more blowups. I've seen a lot more people lose money. And I also for me, it's absolutely insane because I could not imagine to continue to just get in there and check into the market every day almost like it's a job. But I've all and I've also seen day traders.

This is the thing that also, like, really was disturbing to me. Most of the day traders I've I've met, and not saying everybody does this because, obviously, this is the wrong way to do it, but a lot of the day traders I met almost clocked in, like, 09:30. They're clocking in. They're taking some trade, they would trade one or two stocks, and somehow there was always a trade to take every day.

That's not there's no such system in the world or strategy in the world or methodology in the world that will give you a trade to do every single day all the time. And they would trade all the time. So for me, that was something that I was like, it's just doesn't fit me. It's not something I wanna do. I don't really understand how to do it well. That doesn't mean that somebody out there doesn't do it well.

Somebody, I'm sure somebody, it's great for somebody else, somebody meticulous, somebody different than me. But I think a lot of us, when we start, we gravitate towards that because of that feeling that we wanna get some money out of the market. I think that's where we all start. You know, we go, okay, well, if I just bought an option and I just bought it here and sold it here, I would make this much money a day.

Therefore, I'll take this many trades a day and I'll make this much money. You know, you start to do things like that. And really, like, over time you learn, like, even if you're a day trader, you learn, like, there's only so many setups in a day. And because there's only so many sets in a day, I could not trade for, a month. I just have to wait for my setups to happen.

And some people do it differently, like like me, I wait for my setups to happen, but I'm a very long term timeframe. Some people are a short term timeframe. I think either way, the one thing to take from the conversation is that for any trader to do well, you have to really wait for your setup, wait for your system to tell you to enter, wait for your strategy to tell you to enter.

I think that whatever strategy, whatever timeframe, I think that's the most important thing to take away from this conversation.

Pavel Kýček 1:06:22: Yeah, exactly. And again, I would say that we are again back to the expectations because it is really something that is driving traders the right way,

but also the wrong way because expectations, yeah, they can just ruin any trading activity because I lived through it with intraday discretionary trading and I had huge expectations based on many proclamations, based on many ads and so on and most of traders that are starting tend to gravitate to intraday discretionary trading. I'm not saying that it is not possible,

but there are so many, like so many blocks that you have to push through, like cost of trades, for example, emotional state and so on and so on, like many barriers and they are for sure the highest barriers to be profitable trading in discretionary trading, to be profitable trader I think at least.

And based on I know quite a few traders who try to be discretionary intraday traders and none of them is trading discretionary and intraday these days.

Or they they trade intraday but systematically, not discretionary because this is really the hardest I would say this is the hardest type of trading.

Andrew Swanscott 1:07:53: Mhmm. Yep. So how are you guys for time? Do you have you got a few more minutes? Or I could answer one more. Yeah. Do you have a favorite one in the chat here? We've got a bunch of questions here.

Moritz Seibert 1:08:05: I know. I'm You'll need to go just a few minutes. I also had to laugh about the voodoo indicator. That's hilarious. I think think Eccentric said that. That's funny. But, I wanna also thank Dave. Dave's Dave's been trading a long time. It's another person I've gotten to talk to about trading for a while. He knows his stuff, so it's cool that he's on here sharing his knowledge, just talking. So thanks for coming on, Dave. Let's see.

Dave asked a similar question to what when we already answered, which is when then when did we have an moment? And I think that we don't have to talk about being consistent and profitable and confident because we already talked about that. But the moment, I think, is important. I think that could be fun to talk about more in on that. I can go first.

But just on the moment, I think what's important to understand is that I don't think trading has moments, or at least I don't generally in my life. Moments are a thing that you can come in, moments are a thing that when you're looking at the market, I feel like I had to go through all of those bad, painful periods.

I've blown up an account, I've lost money, I've been stressed out to the point where I'm crying in a bathroom, sitting on the ground going, Why am I interested in doing this? I think I needed all of those bad periods, the good periods, the back to the bad periods, the hard periods, the flat periods. I think I needed all of that to get to where I'm at. I don't think there was ever a moment where I was like, everything's great. I figured it out.

I think there's been times where I thought that, I think my brain thought that I wanted to believe that I did. But really like now as time moves on, I'm just like, well, I'm kind of stupid. My systems are kind of smart. I just continue to sit in that.

And I've gathered the conviction at this point to where and I always make that joke where, I could, like right now, our systems are still on cocoa, and it's, parabolic, and it looks like it could crash any day now. God could come down on a cloud and be like, Jason, I've seen the future. Cocoa is going to crash tomorrow. You need to pull your position. I'd be like, Well, I'm sorry, God, I don't have a cell signal.

Like, that's the level of conviction I have on my systems nowadays. Whereas when I first started, it was the opposite. Anybody could have I could have read something online, I could have walked into some random person, Anything could have spooked my conviction early. So that's that's taken a lot of time, but I think all I needed, all of those things to get there.

Pavel Kýček 1:11:00: Yeah. I got my moment, like, after three or four weeks of my studying of trading, like maybe after first month of when I started like reading articles about trading and I was like, yeah, simple, you just follow the CCI indicator, Woody CCI and this type of trading was pretty well known at that time. And it was my moment. And it was the only time I got this moment.

From that point I just started being a little bit better, to know something more, to educate, to backtest better, to understand markets better, to make research basically. But no other moment in my trading career. I'm just trying to be better every day and thinking about trading on a daily basis because at the end of the day, this is just another job, know.

You are just trying consistently being a little bit better on a daily, weekly, monthly basis. At least this is my journey.

Andrew Swanscott 1:12:06: I like that Pavel. I think that personally I have moments all the time. Think as you mentioned, trying to get better at trading every day. I think there's a lot of opportunities to learn from trading no matter how long you've been trading. And it's something that I've discovered from on Better System Trader, interviewing traders that have been trading for fifty years and saying, I'm still learning a lot every day.

It's a never ending journey, I think. But one big moment for me, I think was really a turning point in my trading was in 2008 when the market was tanking and I was heavily leveraged trading mean reversion long. So buying a lot of dips, which were not did not end up in dips and was not very kind to my trading account.

So from there, it was a pretty horrible experience at the time, but it really, taught me a lot about risk management, market regimes, the context of the trades that you're taking. So I think a lot of my really big moments have come out of, what's the word, adversity, I guess. Getting through drawdowns, having ugly trades and going, Oh, why did this happen? What could I do about it? What's the lesson that I need to learn?

I think if you come at trading with that kind of perspective, like we're all here to learn, none of us have figured it out. Something different will happen tomorrow and it's all a journey. I think that's really a good way to approach trading, whether you've traded two years or two hundred or maybe not two hundred, but a long time. So I think moments are everywhere. You just need to kind of look out for them.

Moritz Seibert 1:13:56: Yeah. I think generally, need to figure out the conversations are kind of turning to that over and over again. I think it's important to understand you need to figure out either a mentor or figure out someone who you can trust that you can kind of model yourself after in some form of way. That doesn't mean they have to be the exact trader like you. That just means they're transparent. They talk to you about their trading.

I think those things are really important so you can grow from those moments. You are going to have technically an moment, but there could be a million of them. And as trade as trading goes on, it's not something that any of us can ever get complacent about and think we know everything. So you need to have someone who will put you in check. You need to have someone you can trust, even with the LED lights. I did just see that comment.

But, it's really important to understand, like, even That's kinda why on my page, I'm trying I really am I always try to be very transparent and open about what I'm doing. I see you guys do that as well. You know, like it's always about transparency to me, constantly being able to show, I have a newsletter and really, I don't really need to have one, but I enjoy the discourse. I enjoy the conversation.

And generally, what I really like to do is show people what I'm doing and the consistency of it and my process and the fact, we just bought China recently. It's a great example. I just said, probably, was it a month or two ago that I was like, oh, it's in a massive downtrend. I would never buy China. Everybody's interested in it. And then here it comes, a couple of weeks later, it changes trend, it starts to move up, I get a buy signal,

And you got to get long China because I also understand that, like, sometimes need to fade my own feelings because my systems tell me what to do. And two, I think it's also important for people to just see that's the transparency that I want to bring is understand that I can have whatever feelings I want. But if my systems tell me something, I'm just going to do it.

Pavel Kýček 1:16:10: Yeah. And not being emotionally connected with the trading strategy or with the trading approach in general, I would say, because falling in love with the way how one is trading is always the bad position for having the open mind to getting into different approaches, different assets or whatever. You know? Just as a trader, I think being open minded is very, very important just to find good opportunities in the future.

Andrew Swanscott 1:16:46: Yeah. Well said. I think that's a great way to end the show today. What do you guys think? Had a That's great.

Moritz Seibert 1:16:53: If if We've had a lot lot of I guess we could ask if anybody has one, because I do have five minutes if you guys do. If one if everybody has something that they think was a question that we missed, please put it in now and we'll answer Good idea. Before we go.

Andrew Swanscott 1:17:08: Yep. And while that's happening, how about we all share where people can find more from us? Pavel?

Pavel Kýček 1:17:17: Yeah. Of course. You can check our website, rabaxio.com or my Twitter account on Robaxio. By the way, in the section blog, you can find a lot of articles about trading in general, how we are building strategies, some thinking about building strategies, robustness testings and so on. So this is a good way to see how we are approaching trading in general.

Andrew Swanscott 1:17:47: Tyson?

Moritz Seibert 1:17:48: Yeah. So AAO Research, that handles on everything. You know, the I have a substack. I have a website. AAO Research is also YouTube and Twitter. You can find me on all those things. I'm pretty easy to get ahold of if somebody wants to get ahold of me. I also have a newsletter through Substack. So if you guys wanna check that out, feel free.

I put out a free weekly report on Fridays every week, just basically going through all the charts and all the systems and the strategies and kind of posting what I think is important. Yeah, that's it.

Andrew Swanscott 1:18:25: Jason, I really need to get a banner for your links up on the screen like I did for Pavel. I'm not favoring him. Just he was on the Better System Traders show a month ago and I still haven't cleared it off.

Moritz Seibert 1:18:36: No, no worries. I didn't even think about it.

Andrew Swanscott 1:18:39: That's going to be my assignment for next week. I'll make sure I've got your links up there so I can show it on the screen. You're honestly the

Moritz Seibert 1:18:45: professionalism of it looks great. So no complaints at all above and beyond.

Andrew Swanscott 1:18:53: And if you want to find out more from me and all the fantastic traders I've got to interview over the years, just look up Better System Trader on bettersystemtrader.com or YouTube, Twitter, Facebook, wherever. I'm streaming to a lot of places. So I don't see any questions all of a sudden that's gone quiet. So maybe we've scared somebody out. Are coming up. I think they're just they're going like in our StreamYard, they're backwards.

Moritz Seibert 1:19:19: So if you look up, you can see a bunch of them, but they're past Dave's. It's almost like the Twitters go to the bottom and the other ones are up top. We do not have I do not have a Discord at least. I do run the newsletter, which you can find or talk to all of us on that. And then a question that did come in, in which realm of great investment fund traders are you? And where did you meet?

Andrew Swanscott 1:19:50: I'm not sure

Moritz Seibert 1:19:52: what's the question in which oh, here we go. We'll just we'll quickly we'll just yeah. There you go. We'll just name, like, what what what we've trade and then how we meet, and then we can jump to the question right before that, then we'll just get off on that.

Andrew Swanscott 1:20:10: I don't I'm not sure I understand the question. In which realm of great investment fund traders you are did you meet? Which realm of great investment? Do you know

Moritz Seibert 1:20:20: I'm not sure.

Andrew Swanscott 1:20:21: Myself as an investment fund. So I'm not sure.

Moritz Seibert 1:20:25: So I guess we could just name like what what what we where we trade. I'm primarily a futures trader. I do trade the I do have an ETF space as well. Pabul,

Pavel Kýček 1:20:36: you're in the crypto space, but you also have other things. Right? Yeah. I used to be trading commodities too, like, breakouts on commodities. Right now, I'm trading equities for on my account and crypto on my client's accounts. So this is what we are doing right now.

Andrew Swanscott 1:20:56: Yep. And I'm a I trade futures, commodities and all purely algorithmic. I tried charts, fundamentals. I'm terrible at that stuff. So it's all all computer algorithms. Plus I live in Australia and I like to sleep at night rather than looking at markets. So that was a lesson I learned early on. And so now the computer just runs while I'm having a snooze, which is great.

Moritz Seibert 1:21:22: I think we just wrap it up there, Jason, or did you say something you like? The other one I just wanted to touch on quickly, which was how would a 90% win rate strategy blow up? So we did talk about that a little bit earlier. I don't know if you missed the one part of it. If you go to my if you go to my Twitter, I literally just posted a spreadsheet about it.

The risk reward, basically, if you flip the risk reward, and you go, you put it five to one, meaning like, if you have a 90% win rate strategy, and one of your There it goes. And let's say you have a 90% win rate strategy, and one of your losers are going to be outsized. So let's say you make you have a dollar per win. So you have nine wins in a row.

One 9 $1 $1 all the way to $9 You've made $9 Your next one to make this strategy work, most of the time, you either have to be an option seller or you have to have a lot of downside to give it room to run. That downside could be $10 So once again, you would lose money over time. So let's say you continue to do that. Make $9 and you lose $10 you make $9 and you lose $10 At some point, you would lose money on that.

Most of the time, those are set up to be options selling strategies, which are very easy to lose even more on. So this is how you really blow up on that. But if you do it the other direction, one to five, one to three win rate.

Now you're talking about you only have to be right about 40% of the time to make money, meaning you're only losing a dollar to make $3 or you're only losing a dollar to make $5 So I hope that explained that a little bit better.

Pavel Kýček 1:23:11: Yeah, plus these high percentage strategies always tend to have very small type of profit target or profit in general, and they are not managing risks at all. So basically you never know when these black swan scenario will hit your account. It can happen basically anytime and you just blow up your account on one trade very simply.

Moritz Seibert 1:23:36: Yeah, there's a guy out there, know, he has a very big following. Really, it's not even a bad product, but he has a trading thing where he promotes how much money they make and how right he is all the time. And really, there's a really very important point I learned about trading that changed trading for me. So I guess if I did have an moment, this would be the one, which is there's a huge difference between being right and making money.

Like, you don't like, being right and making money, they're two different things. You know, Larry Hite probably said it best, which he said, I'm paraphrasing this quote. Well, I'm gonna try to say as close to it as I can. He said, there's good bets and there's bad bets. There's good bets where you make money. There's good bets where you lose money. There's bad bets where you make money and bad bets where you lose money.

So your goal is to always put on the good bets. Alexander Elder, another person who talked about it. Our goal as traders isn't always just to make money, it's to take the right trade over and over again. What I mean by that is find the best risk to reward setup, figure out the best strategy, figure out like when how to put that together, and you will make money over time. But you can't think of every trade like it has to be right to make money.

So the risk reward is everything in that conversation.

Pavel Kýček 1:25:00: Plus, if I can give here one warning, be careful with these simple copy trading companies or copy traders in general, because they usually have pretty high percentage win but they are doing it very often that way that they just open five, six, seven, ten accounts. They are running the smartingale strategies.

Most of them die pretty quickly and some of them just survive long enough to get a lot of copy traders on board or they are trading with them and they are making money from the fees you are giving them.

So be careful because that way you can yeah, high profitability can take much longer than one would expect and that way you can build really some performance, real performance, even though most of your trading accounts or their trading accounts just died in the past. So be careful because most copy traders, not most, but many of these copy traders are building their performance that way.

Andrew Swanscott 1:26:15: Yep. Well said. All right. I think, well, I've got to bail. So thanks everyone for joining us today. We had a lot of great comments in the chat from everyone. So thank you very much. And just a reminder, this show is on every week, every Wednesday, 2PM Eastern. So come and join us next week. And if we missed your question today, apologies, we might talk about it next week. You never know. So any closing thoughts, Jason, Pavel?

Moritz Seibert 1:26:45: Nope. Thank you guys so much. Great comments today. A lot of interaction. We like that. So thank you guys for leaving questions, helping us direct. We know we're trying to be here and answer questions for you guys too. So that also makes our job easier and makes a lot funner for you guys. So thanks for interacting. The engagement was great, and I'll end on that.

Pavel Kýček 1:27:08: Yeah. Love lovely discussions. I think it is worth before for anyone who who is trying to trade profitably. So perfect in my opinion. Yep.

Andrew Swanscott 1:27:19: All right. Well, enjoy the rest of your week. Happy trading. See you next week.

Pavel Kýček 1:27:24: See you.