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Scot1and - Inside the Mind of Trading Legend Scot1and - AlphaCast Ep. 2 - 2023-02-22
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Dec 11, 2024
Welcome to AlphaCast Episode 2: "Inside the Mind of Trading Legend Scot1and." In this episode, we sit down with Scot1and, a legendary trader known for his incredible success in the markets. Join us as we dive deep into Scot1and's trading strategies, mindset, and journey to becoming one of the most respected traders in the industry. Through this exclusive interview, you'll learn from Scot1and's experiences, insights, and advice for traders of all levels. Discover his secrets to success and gain valuable tips to improve your own trading. This episode is a must-watch if you want to take your trading skills to the next level. Don't miss your chance to learn from one of the best in the business. āļø Learn the secrets of legendary traders and investors: https://bit.ly/4aCna7i š Follow along: https://analyzingalpha.com/slingshot-trading-strategy ā±ļø Video Chapters 0:00 Intro 1:16 How Scot1land got started 3:00 Working at the CBOE 5:57 You can't force your will on the market 12:32 Valuations don't matter until they do -- and then they matter very quickly 13:15 How to start as a new trader 15:23 And that's how you become a trader
View Video Transcript
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you're about to enjoy Alpha cast episode number two where I have the pleasure of speaking with legendary discretionary
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fintuit Trader who goes by the handle of Scotland tea who has multiple triple
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digit annual returns I'll put the exact spelling in the show notes we cover how he got started in the training some of
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the initial early setups that he used how he's evolved in some of the strategies and setups that he used today
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for anyone who wants to improve their trading I highly suggest watching this video in his entirety it is jam-packed
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with so much incredible information that you'd be a fool not to so without further Ado here's the man himself
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Scotland God I'm super excited to have you today I know you're sort of a legend on the
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fin twit I just kind of wanted to get an understanding of how you got into trading and your journey I'm glad to be
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here and uh you know it's it's talking about trading and in case my journey and
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maybe somebody can learn something from that and uh improve it and not make this all the mistakes I've had so funny that
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you mentioned that because there's been multiple Traders I mean in my last podcast who I just interviewed a person
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Parker is a market wizard said that you provided him some insights I got into I guess trading or the interest in the
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stock market specifically uh when I was in college and it was you know the internet.com era the environment was not
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unlike you know what we had over in you know 2020 2021 where you know it's
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everyone's talking about it it's actually going up a lot it's relatively easy to make money and
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um that you know certainly happened so I you know I got in I had I don't I'm not going to say it's skilled I had some
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tremendous luck or right place right time you know not in knowing these are not normal conditions but you know
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certain stocks have been buying their four or five hundred percent going up you know stocks like E-Trade and Rambis
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and um a night Trimark at the time was a like an electronic Market maker which is
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everything's going electronic that's certainly the right spot to do and you know these stocks are going 400 500
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percent and I think I'm a genius so uh you know but I I started you know figuring out how do we how do you trade
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how to get involved in that um isn't this risky isn't this you know so kind of yeah at the time you know
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there was no Twitter but there was a you know Yahoo it was Yahoo finance it's probably the the kind of the big
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Financial Hub and they had message boards and you know you know you could chat around stocks and you'd pick some
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stuff up along those times and then they had chat rooms and then Yahoo which are kind of like dis you know I guess
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Discord as and you know now and and so forth but that's you know kind of how you pick it up and kind of became really
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obsessed with it and you know I'm sure I thought it was much better than I that I was I you know the numbers I had some
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big numbers well we'll do this for a career this would be super easy and and unfortunately
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um I was in the I guess the the place where um companies were looking to recruit
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like you know finance companies and I got uh um I went into an interview with a market making company
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options um and they flew out to Chicago I interviewed there I got the job and I
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spent a year um on the floor of the Chicago Board of options Exchange
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um and that's kind of like what we saw over the last year you know where everything just you know dries up and it
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you know the environment had had totally changed the advantage of you know being a
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um at a market-making firm is I wasn't allowed to you know trade our own accounts so everything I had made in the.com era was you know safely packed
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away because I couldn't touch you know okay so that that was probably the best trade I made at that time
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um the job ultimately did not uh uh you know work out as the market sold off
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people traded less the volatility was less the options market makers made less
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money and they started you know you'd see the layoffs from such and such firm this week and the next week and you'd
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hear in like you know the firm really thinned out so um about a year in they they said well
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we're gonna have to cut their in our training program or our trainer you know it's a bloody see the next uh in the
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next step and uh thought you know I can see already at that time if trading was going to go from open outcry uh you know
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making markets uh you know uh pricing amount of in a
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pit style to gonna go electronic and what does that look like you know do you want to fight to try to get another job
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at a shop that's going to be a dinosaur so I thought I'd go to Grant school and and do that type of thing but you know
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ultimately if you're into trading you know the Allure is obviously it's you you know I've already said it has to be
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about the money you know you can see it's an intellectual puzzling and all this stuff but there's if we're being honest with her so there's a lot of ways
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to intellectually puzzle yourself um the ability to make a lot of money and money in a short time without you
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know pressing buttons as opposed to uh dealing with customers or you know picking rocks and doing Dental Works on
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these other jobs I had in college um it certainly it is very very uh
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appealing but you know it kind of figuring out the game what it applying your angles testing that you know it is
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very you know kind of an enjoyable process well um you know I suppose that you know the
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challenges that that I had from going for the.com to then you know not training equities
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um and then you know kind of being in a position where I could trade again is that the markets had changed you know
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the strategy you could do a breakout and frankly I was always doing in the.com area is buying you know stocks that were
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hitting new highs that would break out and God they'd Gap up almost every day 30 40 50 if not more sometimes and it
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you know try that uh you know the next day you get hits and you gap down against you or you know like as a more
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realistic market and you you know trying to refind a strategy
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um that was gonna you know you can't force your will on the market that's not gonna that's not gonna let you so that was
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that was probably the biggest uh challenge that I had is being able to to readjust and you know I guess I could
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come talk about that process but uh um you know what that looks like and you
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know you just really had to to uh kind of look at stocks and you know
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unfortunately there's so much information out there there's really doesn't take you to tell you how to follow it in the past so you know you
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pick up something in a book and you know there's another book that says something else and oh this looks good because all
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the examples in every book they work beautifully it's funny how that works right you know every every example that
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markini has and you know trade Like A Champion those are all those all went up but you know they always say take your
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losses but they don't show you the you know the the the trades if not more that or is losers
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that you know you have to manage and risk off but you know I mean you can create kind of
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false expectations for yourself but you need to be able to find okay what are they some of these criteria that allows
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me to get into a stack um profit from that move if it when it happens and I don't know make sure it
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fits your personality yeah I think you bring up an excellent
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point right the market is always changing and you have to find a system that essentially works for you I got
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started with investing before trading that did you go right into trading or did you invest first like my parents had
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said you know stocks away for for college and yes all things you know that
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went up in the 1990 that you know the stocks did well I mean I didn't think that like try climb gold with like the
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Pizza Hut you know yum they had Microsoft and some of these you know stocks that just they did really well at
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that time but you know so I see the Investments but I you know I didn't know how to make the transition between I'm going to be an investor and buy that you
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know you hear the word Buffet strategy and like sit under you know I don't have the patience I know myself I'm not gonna
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you know like I I do have separate accounts that I you know I do long term you know retirement stuff and I gotta
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you know my mutual funds and I I'm out of what the trading my brain is a traitor to affect that as the investment
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strategy so I'm not um of doing the investment I think it's a harder
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um to wear both hats I definitely agree I got started with investing and got pretty deep into it
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you know understand valuation models all that stuff but then uh realized uh I didn't want the drawdown and you know
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quite frankly when you really dig into formants Traders particularly with you know on Warren Buffett size Capital can
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outperform investors at least that's what I've seen uh with with much better products you know
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you see the you know obviously the fundamentals in such Manner and how they
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move a stock but like you said the drawdown are you do you have the stomach to hold that 30 40 50 and you know and
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everyone's like you know you know give me an example Amazon you know I look through the.com crash I know that for
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every Amazon that survived uh there were you know 99 companies that didn't make
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it and you know frankly Amazon had what a 95 drawdown you know I mean who held
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that you know I only think one person in the world did his name was Jeff Bezos nobody else stomach holding you know
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going down with a ship there um right you know so I but you know if investment if that's your your
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personality then then certainly do it I mean because otherwise flipping around or worrying about every fluctuation in
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the market you're gonna drive yourself nuts and so there's that that quote what is you know the market say what a voting
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machine in the short term right so essentially in a weighing machine in the long term um so yeah but no no that's great
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um so I guess you know when you when you first started trading some of the strategies or how did you like learn or
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you know get your feet wet the first thing is you hear a stock tip from a buddy and I think that's probably
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started trading in 2020 got in and you know my brother started trading you know kind of with you know his buddies and
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you know they'd hear some stuff and you know he would do it remarkably well because these stocks are all getting bit up and like how the hell do you own this
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stock that went up 700 today you know yeah everybody's only only like five shares of it I'm like okay well you know
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it's it's a little different but yeah I mean I I had people that actually want uh London
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that you know we're following them more and you know they would say hey I think this is a good stock and you know and he
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had been one you know he had some street cred because he invested in Qualcomm which stock of the day and you know it
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turned out at a couple hundred grand as you know Juniors or software in college and so I'm like I'm going to listen to
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this guy and you know his next guys so I mean you know as I heard about Rambis from him and that's the stock they did
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for 500 percent for me and it was incredibly uh you know very important building you know my account up and so
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I'm like oh this guy could do no wrong and then he mentions info space and uh you know in that you know blew out or
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didn't do much but all right um so if that's not a sustainable method
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obviously getting tips you know you'll get one and you'll you'll make money at it and then you're the whole end of the
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tip source and I don't know but you know I started doing my own learning how to scan learning how to kind of what move
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stacks um really the book that was instrumental at that time and it's still instrumental
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is how to make money in stocks by O'Neill psychologically and I was you
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know I had a psych slash business major but you know kind of both those and psychologically it's made a hell of a lot more sense that people are going to
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be happy when their stocks at all-time high and it's pushing higher and there's going to be no fear you know no need to
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sell the greed and fear uh dichotomy made a lot of a lot of sense to me and O'Neill was the one to say you know
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don't buy these cheap you know cheap stocks buy them there's something they all make new highs they make new new
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highs and find the stocks that are are going up so that's essentially what I I did I was I wasn't looking to bottom
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fish or buy the dip I was looking to to buy the stocks in a bull market that were making new eyes and they tend to
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made a lot more new eyes right right yeah they have to make a new hobby to go higher right you know why am
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I going to sell it my his accident yeah that was a lesson that took me a
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while to kind of assimilate because I was again on the valuation side of things so if you told me oh buy it at
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high I was like well you're crazy and I guess you know if you you have the you know Market philosophy of an investor
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that makes sense and I've always said this and you probably heard me say this you know
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valuations don't matter until they do but when they do they matter very quickly and uh you know you get a rapid
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repricing of assets which you know I mean how many times we see that last year over the you know the stocks I mean
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what was was Pelton down to you know 15 bucks and it had been up to 200 yeah I
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mean you could go hundreds of examples you know that we probably think about the top of our head but
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um it's it's funny how you know fear is much more powerful emotion than and agreed is but greed can last a lot
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longer than evaluation guys right yeah that whole escalator elevator
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analogy right okay so that's how you got started now how would you tell a Trader who is
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getting started today what would you advise them on how to get started sure I I think the where I was started I I
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appreciate this question it's a good question um I think you need to observe you know
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now we have it's so much easier now than when I started to get stock charts and all the way back and you want to
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basically make make your you know your greatest hits record you know like if you're gonna make a greatest 10 10 best
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acts of the last year then you know and kind of study them how did they move to that point what what you know made them
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you know move how do they move how far back do they move or pull back rather how far you know after a base you know
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how many bases are there how many how much above the base and you start building up your kind of your repertoire
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in your memory because you're not going to have the experience right so you can create that experience through studying the moves take a bar by bar uh and kind
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of see and be honest with yourself when I sell it here you know it's easy to say a stock at you know let's let's pick something that went up 500 right
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this is the best stalker this year it went up but realistically were you going to be able to hold if you bought that breakout Point were you going to be able
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to hold this this you know Swift move back to the 50-day moving average you know there's going to be it was down
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six days in a row are you gonna hold that you know and you got to be honest with yourself where is your stop loss every every single day what's going to
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get you in what's going to get you out and you know I think that's a you know first where I would I would start you
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know and then you know start thinking about making a list of kind of one of the criterias and how would you get how
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would you find the stock that that made this move um what are the what the objective criteria you know can you can you create
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a scan for it can you describe that and not just you know say I found it on uh Seeking Alpha or stock twits or Fen
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twits or you know that that's not a strategy you gotta say okay you know I'm gonna find it because I'm studying this
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industry or I'm going to find it because I search for big volume spikes and these
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are the stocks I'm interested in and there's objectively this meets this criteria so I guess you know
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doing that as many times as you can as many stocks as you can that's how you build an edge uh and then you start
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watching it in real time and being able to apply it in in real time and that's how you become a Trader
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now would you do that analysis on a multiple time frames yeah or was that just absolutely and I still do it on
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multiple time frames you know the week the weekly is probably you know I mean there's a huge you know body of
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popularity of people that love the weekly chart and you know for reasons I mean like when I started when O'Neill
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started charts didn't come we didn't have the options to zoom into a minute chart or a five minute charger you know
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but now now we do the week the weekly charts can show you that the extent of the move and it puts things in
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perspective how far a stock can move I think that does it you know kind of better than other stocks but you know
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when I look at the daily absolutely I mean this big weekly bar what really happened here you know it's probably an
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earnings Gap you know and then you see the big volume and you say okay now it's an earnings Gap I understand what I'm looking for in a daily chart to trigger
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this type of candle similarly you know I I'll even just zoom in and over the last year I really grown
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to this this five or ten minute candle um I'm not looking I'm looking to see how the the price comes in at those kind
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of congestion areas um and a lot of times you'll see a look for example a wick formed on a daily
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chart or a weekly chart what did that Wick really look like in in real time and most of the time I've
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seen that like if I'm looking at a 10 minute chart well that all happened in the first Gap up five minutes of the day
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and then it was closed but if I'm looking oh I'm gonna put my my trigger at the top of it and I guess looking at
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thousands and you know I don't know how many Untold many charts I've I've looked at you know with this if you see you
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know these these candles it doesn't matter if it traded you know the stock if the daily candle you know a lot of
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people would say well I'm not gonna I'm gonna buy it when it's the new high of the day I don't think it matters you know I've
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looked at it I I personally like the congestion areas when it established a congestion area and it goes above that
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congestion area and it's able to hold it I you know by looking at the 10-minute chart that has more significance than if
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I'm just relying on that the longer term for a chart but you know certainly the battle zones are are there and at every
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time frame and you know the charts really do line up together you know like a pivot point on a daily is going to
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line up with a payment plan a weekly in the 10 minutes and you know you can even get to let's let's say you have a week
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up weekly breakout level and really no no everyone knows where it is it's kind of funny I mean you know and I'll do it
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for uh just entertainment value but pull up a one minute chart and you know the stock will trade above that that let's
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say it's twenty dollars it'll trade you know 2805 20 and like if the orders are getting filled because they're you know
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they're going back and forth It's not like 2001 is going to be your trigger that's going to go up but it's basically
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you're in a battle Zone at that point and you're watching to see who is really going to take control of that balance
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and Supply is demand um you know you're not gonna I'm not making the decision on an admitted chart
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or you know but uh I want I like to see how you know our stocks actually uh
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behaving like you would expect them to see at these congestion levels you know you want to see the kind of the full
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fight and then you pick the winner and you join the weight side when it becomes clear
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sure now from uh you know obviously I'm a systematic Trader so rules are sort of set in stone when I hear these
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conversations with you could just scratch new Traders and it seems like they've built a lot of intuition around
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how the market works and just kind of has a feel for that so that that brings up two questions you mentioned earlier
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about your stop loss do you have like systematic rules or any of that type of stuff uh in a rule set in stone and then
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from a from an entry perspective I know we've talked about the slingshot and and things like that previously but you know
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is it more feel or is it more uh you know here are the rules and here's how I'm going to tackle it because I mean I
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guess the long answer is I I know where I'm setting my my stop loss and it's going to be I'm going to look at a
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congestion this is I want to I'm either gonna say if it
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gets into this congestion Zone that's a failure you know for example if I've traded a break on it I want to take a
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very tight leash on that I know that if it's pushed back below that breakout point I don't why do I need to wait to
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the end of the load of the day it's not it's not gonna show me what I what I want to see
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um if I even know if it's a stock that's traded a little bit loose and I'm going to put my stop at the you know the
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congestion Zone I want to say hey here's where buyers came in last time I'm expecting them to to see it now
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objectively how do I I you know I just you know describe what that is I guess I really haven't tried I just I
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know Laura's I can see it on the chart and that's where I immediately put in when I entered the order when I'm in um you know whether it's a manual or
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exercise I'm you know I'm certainly alerted to myself where I'm out yeah you know what I mean
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got it no that means most of the time I'll study a hard stop just because uh
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and I might I might plan to get out of it earlier before that but you know you never want to be in a situation where
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technology goes out and you don't know if you let us know a place that you plan to get out on a map you know manually
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and you can't log in you know if you want to have that system in place the other risk
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management sure that makes sense and I think you bring up an excellent point I mean I
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guess you know your rules uh depend upon you know the setup so for new Traders if they're thinking about maybe a setup to
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to take also think logically if it's going to be a breakout it should break out so it really shouldn't retrace back
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prior to your your entry is that essentially what you're saying I'm saying you know I mean you could have a breakout that technically doesn't fail I
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mean you know like how many people will put it at the low of the day I mean that's yeah it seems to be such common
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um practice that if you if you've got a breakout and you see a failure I mean I can look you know I'm looking at uh Palo
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Alto right now that's you know the head earnings thing and you know it pushed over 188 right now but at the next bar
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it's it's back under that why would I wait till it goes to 183 it already you
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know if I were to create a stock I'm not trading right now but you know it why why wait till it comes all the way down
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it just showed you it wasn't ready to move right there you can always rebuy it if it shows sets up again but I guess
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that's kind of how how I do it sure and then I guess I should clarify
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when you when you say congestion point do you mean just a lot of action there were we talking about volume profile
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it's you know I've read the kind of the value profile um uh you know book I don't use volume
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profile charts but I think there's a lot of the concept I like you know where time at a you know how much
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price how off how much a time has spent at a certain price level
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has a lot of significance more so than the volume the volume
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certainly can weigh into it but you know seeing that it's not just renting a lot of time and that's essentially the
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volume or the market profile charts but you can just put up a uh you know I don't know any time frame you want and
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you can see kind of there's areas where it's a stock sets up a trading range you know it might it might be on a 10 minute
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chart but an attempt chart might have a different you know training range than a a daily chart and a huge it should right
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but uh you see kind of those multiple trading ranges and stocks will trade between trading ranges so if it gets
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into one it breaks out it'll go you know typically test the next you know congestion area and either it gets
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accepted in that and you know gets back into that range and builds up and maybe goes higher maybe or it gets rejected at
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that point but they'll typically um you know kind of bounce between levels you know a lot of times
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I'm sure you've seen this but you the stock will Gap down and it'll trade back
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to the opening price and then it'll sell off again you know that's just making sure that that you know that initial I
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guess bet of the sellers that are going to Gap it down is is still on the table but uh that's kind of how I I refer to
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these congestion areas okay okay so now take me back to
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um you know I'll have to link in the description uh about the Fish Hook and the slingshot strategy but uh you know
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take me back to how do you you know obviously as a professional Trader start developing these trading strategies and
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and what would you what process would you work through in developing a shot and I'll actually talk through how I you
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know kind of work through the the slingshots and Fish Hooks so those are the two main strategies I use or what I
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call the setups I have a I don't know habit maybe some defended annoying but I name my setups
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um just and then so I like it because then it makes it easy for me to remember I
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yeah I remember that but so what what it what I've essentially started the cost of this slingshot was I wanted to find a
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way to buy um stocks on a pullback that had that were strong I got sick of
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buying breakouts that just got chapped you know he failed breakouts I hate getting you
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know you buy a stock it looks great and then he just gaps down on you the next day uh or something I thought that was
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just more risk than I wanted to take and so I started kind of working out okay well first off how how do we might or
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how might I get into the stock I mean I could buy a dip or to a 10-day moving average or or something like that you
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know and that's certainly um something that you know people do always with the 10-day event we're going to buy
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it but how do you know it doesn't just keep slicing through and going going down and that was the problem I was
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trying to solve is how do I when can I buy a stock at the best level right before the momentum you know Works its
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way back up so you know first off you want to give Ian and it just as a general a strong
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stack you know stock that is established a trend um and then you want to see that it's
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pulling back and that downward momentum has exhausted so I guess through trial and error and looking at you know so
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many charts I kind of realized that if a stock could reclaim the moving average of the highs and that was the Revelation
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I've had I've never seen anyone use a moving averages of the highs before but
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once I you know I did that I'm like oh you know what's it triggers above this it's telling me that the stock now has
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more male mint than the last the highest price of the last four days and you know it tended to be a you know lead kid made
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great entries that the downside momentum had dropped and you know even if the stock ultimately failed I it was you
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know if it would go back up test the breakup but even though that failed light is already in the money and you know I'm not taking you know losses like
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I'd get out it even at worst and so I don't know that's just the kind of how
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I thought through the process had an idea tested it and kept redefining it and then re-uh optimizing it
26:27
yeah and to give you credit I've probably read almost every systematic or algorithmic trading book out there and
26:33
uh you're the only one that's really ever mentioned uh you know moving average yeah you know like well the foreign I tried
26:42
the you know various moving average on the other one but yeah you know so that was that was you know whether what I
26:48
don't know what inspired it but we tried that and uh and it just worked and then I what made it viable is this trading
26:55
system or you know approach is then once I could Define it I could scan for it it just didn't it didn't matter I didn't
27:01
need to just look at it oh this looks okay because what what the hell does that mean right you know it it's uh
27:06
stock kind of looks good and you know I mean and that's some of the problems I had with some of the people that you know say uh this setup is uh like a
27:14
volume contraction setup and I certainly understand the kind of what's what's happening in the in the pattern but you
27:19
know how how do you find that without rope manual uh just going through it you know I'm not a good enough coder to be
27:25
able to define those criterias but with the the slingshot like if going is find
27:30
me a sec that's in an uptrend that's you know over the four or that's Crossing through the you know 4 AM of the highs
27:36
that became relatively uh easy for somebody with limited coding to be able to code
27:44
and then it becomes repeatable you can look at it and you know set your alerts and and they kind of
27:50
find it no that's great now when you set out to
27:55
create this strategy or this setup did you come at it from like uh from it
28:01
let's think about this period I'm trying to this point of view I'm trying to find stocks that are moving up or was it something that you're sort of observing
28:06
in the market and then it you know worked backwards yeah yeah absolutely I mean you'd you'd see stocks any trending
28:12
stock is going to have a pool deck they're not going to set a new high every single day and they're gonna some of them are gonna
28:18
have a base and you know the other thing like when you're chasing a breakout there's a lot of eyes on a
28:24
breakout setup and you I was getting slippage in the stocks you know like if you're you're trying to get your stack
28:29
everyone else is trying to get a stack and all of a sudden you get a you know that first candle and that first Spike uh just you get a terrible fill and I
28:36
hated that as well because then I meant I had to either tied my stab or take stock off because you know my my fills
28:42
are bad I was taking more risks than I wanted to but it was like you know observing you know kind of where where's
28:48
fewer people interested in this and you know kind of and finding that and you
28:53
know zero in and trying to optimize the strategy off of that so that that's my pullback strategy I do you know I still
28:59
will trade range breakouts all things are equal I'd rather kind of
29:05
let the others you know price exploration happen and and uh you know not not chase the crowds
29:13
yeah that makes sense and then not chasing the crowds that's also part of the uh the fish hook strategy right can
29:19
you elaborate a little bit so the fish will fish a lot of something and I had been a member of a stock uh
29:25
website called the stock beat I know you you've talked with mhpu is also you know
29:31
a member there it was a great uh environment because so many people that
29:36
you know Christian qualmagi came out of there uh you know just all these great Traders and we bounce you could bounce
29:42
ideas and then you know and stock be a pradeep you know his philosophy was always old you know just because someone
29:49
says that relative strength is going to perform better in a pullback why why you know have you tested it test it look at
29:55
it you know to run run the thing and you know there's certainly the people that that would that would do that so one of
30:01
their favorite their favorite you know strategies that you know that stock beat uses is the EP
30:08
um episodic pivot in other words there's this big change then that's that's that's happening
30:14
and it's gonna you know Inspire the change this is a stock that's been ignored and all of a sudden now
30:20
everyone's going to want to want to buy it it's gonna go up you know Facebook it was a great example of that you know the
30:26
first everyone thought Facebook was going to be down on arrival and then it has that first earnings report that everyone chases in and
30:32
so I'm like oh I like this idea the problem is is you know every earnings
30:38
Gap you'd think oh my God is this an epidemic all together these are good maybe I didn't have the fundamental uh
30:43
analysis that you know you you had as an investor but I I had so many false triggers that it just didn't seem to be
30:50
something I could effectively do and I know there's people that that do it you know really well but it wasn't me so I
30:57
started looking at these stocks that uh were you know had the episodic pivots
31:02
and and what what what would I and I ask myself what did I give up and what do I
31:07
gain if I don't buy that first aid if I don't I let other people's determine whether this is going to be an episodic
31:13
pivot you know this new big earnings gapper you know I mean how many uh ways
31:18
that you know people describe those you know these big moves and say you know what what
31:23
characteristics do the winners have versus the stock that just gaps up on earnings and then Fades you know over
31:28
the next couple days and what I started seeing is okay well on day two the stock usually trades below you know that close
31:35
on on day one but it gets bid back up maybe it's maybe it takes day two to three for you know whatever but it
31:42
happens relatively quickly it establishes kind of this this trading range that what they're saying is people
31:47
that you know just got this windfall of the stock Gap up they're not taking profits or if they are it's getting absorbed by bigger bigger fish and you
31:55
know and Wednesday was ready to push through that that high end that or that now I look at the congestion area but where's the congestion area on day one
32:02
once it's ready to go through that that point the stock seemed to be you know
32:07
rapidly accelerate in price and you know all the sellers were gone and you see
32:13
those models so that's kind of how I came up with you know what I was looking at what I was thinking through and then
32:18
you you know so any of these stocks that Gap up and say and alerts and I've watched every single one of them but I'm
32:24
not buying unless they prove themselves and and day two day three and Etc now
32:29
are there some instances where I'll miss a stock because it you know the next day it gaps up again and yeah I mean it
32:34
happens but that's one of the things you miss out on if uh you know if I was a great fundamental analysis I could tell
32:40
you which you know which earnings winner is going to keep going up for the next you know three months you know that
32:46
that's uh that skill I don't have I wish I did but uh I think it's very uh very rare so I did the next best thing
32:55
yeah I like how whenever you're developing these strategies and I think it's important because I approach it
33:01
from the the same angle is you have to like think about why is it doing what it's doing it's not just a EP or this or
33:08
that I mean you think about the price action and you know who was actually buying this who's on the other side and
33:14
I think not only is important for you to understand what's doing it also gives you confidence when I you know if I try
33:19
to trade something that maybe I don't understand I'm not going to have the conviction to hold it longer or maybe if
33:26
at all yeah I think that's true I mean I think you need to think it doesn't
33:31
matter what your strategy is why is this price action forming as opposed to I'm going to scan for I don't know how many
33:37
different candle patterns there are but you can probably find a thousand random patterns in every stack every every day
33:44
um but you know when does when does it go from random to to significant and why and what are people you know what is a
33:51
buying that signifies it what what is I don't know I think that's kind of the you know question that we need to ask
33:58
ourselves is what does it look like if when why and why this is happening what's my theory on that
34:04
you know I mean how many times do you see in this just an example that you know you'll see somebody will say in
34:10
fibonazis or it hit the retracement or this moving average or you know or or
34:16
whatever and you know maybe that's a viable strategy maybe it's not but you know I've seen people say well I mean
34:22
look there he goes here's an example where it hit the moving average and balance and I'm like sure it did but it
34:27
also this was a support area from there's all this price congestion at that same level is it the movie is it an
34:34
imaginary you know line that people are rushing into buy or is it because this is where it had previously found support
34:40
you know and I I think uh you know kind of asking the broader questions if I manage in a you know a multi you
34:48
know billion dollar hedge fund am I am I am I buy into it because it is a moving average or is it because it's an
34:54
evaluation level at that level you know that I feel like I can spread that right speaking of evaluations
35:02
uh MHP did say that you actually helped him create a strategy when he was uh
35:07
looking for new strategies around IPOs can you get a little insight into that sure MHP is a you know great uh
35:13
systematic uh Trader and he was a member of stockby and uh um and he actually helped me create some
35:20
of the coding for the slingshot and tried to get rid of some of the false signals so I I uh by the admiration you
35:26
know is Mutual I respect the hell out of it okay um so what with the IPOs I I decided why
35:35
you know every there's always a pain point that makes you want to go do a study and uh I I saw that there were
35:41
these IPOs that just took off and I you know I swung out of it I made a couple
35:46
points and you know then this it was the it was a stack of the year you know something that goes from 20 to 120. and
35:53
um I'm like why why did I miss this why why did I why did I I just so I studied
36:00
every IPO I went back and uh took got the data and you know every for I don't
36:05
I think five six years and I I don't have the coding thing that uh you know
36:11
that uh some people might but so I manually went through every single chart of every single stock and looked was it
36:17
the underlying was it the flow was it things that was there any Edge I could develop from what traded IPOs just by
36:24
looking at every IPO and it kind of turned out that well gosh what an IPO and they trade indifference and I guess
36:32
uh get to the conclusion is yeah absolutely um you know IPOs trade different depending on how old they are you know
36:39
whether they maybe it could be attributed to you know have its institutions taken a a uh position yet
36:46
is their lockout expired you know very various things but really
36:51
you know just like if you have kids and if it's different than a toddler you know an infant is the emotions that you
36:58
know go up and down and um toddlers are a little bit more normal as a toddlers too so maybe maybe the
37:06
analogy but I call IPOs and you know difference between infants and toddlers infants can Spike and they can go up
37:12
really high toddlers are more sustainable for you know longer longer Trends so just kind of knowing that
37:18
information tell me am I going to take a stock is a swing trade or am I gonna try
37:24
to you know squeeze something more out of it um in IPOs when they hit a new High
37:31
um they can rip like you know even at the infant stage however when you know
37:37
let's say the toddler two three years out after his stock is IP address I know seeing something that's ipoed two years
37:44
ago and then I've got this big we'll call it the EP that's I think that's the highest time my my list all the time
37:51
because this is the first time that people have done the research they're willing to put a ton of volume into this
37:57
they're you know and a lot of times that's where the biggest moves of all time have have started it's these newer
38:03
companies that have had their first big winning earnings report it takes a little time yeah you're you're too to uh
38:09
to to work through that kind of you know the infant uh hiccups but once you get there
38:15
um you know that's certainly something so you know upst you don't have that kind of that criteria in 2020 right you
38:22
know where it started 50 and you know then reset so you want to see a reset and then uh you know another push push
38:30
higher as it works through this process and then they but most of them you know if you're getting the statistics and I
38:36
think a lot of people why they might ignore the IPOs is they'll see well 90 some percent of ideals actually trade
38:42
below their IPO price and like yeah that's true that you know but it doesn't mean you shouldn't trade them you can
38:49
you answer that for yourself for me I saw there were edges
38:54
um and on certain time frames you know certainly don't invest in day one and expect a hold of for 10 years and that's
39:00
your your uh you know your strategy hmm yeah there's there's two things that
39:07
you said there that that really resonate with me uh the first is that I feel like almost every you know traitor story
39:14
who's you know really made it has done some type of Deep dive and really dug into the details I mean both you just
39:20
with your IPO story you know Christian with you know his EPs and whatnot and
39:26
then it makes me a little nervous because as a programmatic Trader I fear you know what am I not getting as close
39:31
to the details yeah and you know I mean I guess you have to answer that for what it means on you know like you know do
39:38
your Deep dive on the you know even a systematic Trader who does if you look at a different your holding time frame
39:44
does that does that impact you know what your your trade might be you know I I think it you know that's something that
39:50
really everyone needs to answer for themselves and it's not their personality I don't care what you know strategy like I'm never going to be a
39:56
Quant I know that you know it's not my my you know my psychology isn't built
40:02
that way um you know and if you're if you've got an itchy trigger finger you know maybe
40:07
position trading isn't for you and you know conversely if you you know you get stressed out of it every you know
40:13
50 Cent pop you know maybe you don't want to be a day trader or whatever I
40:18
don't know um but you have to find something that works for you right right yeah I think the market and
40:26
your style chooses you I don't know if you choose it at least that's what I don't think you know who you are I mean you find out very quickly you know
40:33
there's a line in the movie uh Wall Street and I'm gonna paraphrase it uh but you know where the character looks
40:38
at uh um Bud Fox right as he's about to go to jail and he's he says you know man looks
40:44
into the abyss and sees nothing staring back and that's when he finds character and I think the market you know teaches
40:50
you that very quickly uh because you know there are going to be pain points I
40:55
don't care you know how good you think you are how many books you've read you are going to be tested on every single rule that you think you've set for
41:01
yourself and you're gonna break half of them and you're gonna have to figure out how to put it back together and you know
41:08
really you know kind of what trading is is how how much can you fail and keep getting your ass off a little better and
41:14
keep coming out back at it so true yeah everyone thinks oh I'm fighting the market but you know I think
41:21
it's you're both fighting the marketing yourself I mean don't tell me about the elgos or the hedge funds or the high
41:26
frequency you're fighting yourself you know like it's all like what the landscape is it's you know I don't care
41:33
who uh was at the on the AMC you know they didn't make you lose money in that stock you know that's right your greed
41:42
and you're uh you know an ability to take a loss or an inability to take a profit I mean I know people that You Know It uh we're bigger than ads and
41:49
they were convinced it was going to go to you know the moon without realizing it's already hit the moon it's coming back
41:56
perfect perfect so now we've discussed you know three different setups is do you have any more setups or you know
42:02
what do you think uh uh you know a new Trader I guess you maybe start with one set up one one or two you know do
42:08
something that you can be consistent at it I mean there there are other things I I'll use I'll use range breaks like just
42:15
this is a normal you know breakout but it usually fits in within a pad you know I mean I I will stack those patterns so
42:22
you can use a slingshot within a official for example
42:27
um in one of my my father's pointed this out is that he started using an hourly
42:32
chart and looking for a slingshot in a stock that you know was a potential Fish Hook and looked at it and I'm like you
42:39
know he's right you know that it really signals uh when the kind of the the volume hit you know Sonic is ready to
42:46
run um so yeah I mean you can you can you can have a range break within any of
42:51
these you know but kind of annoying studying price uh and you know I would
42:57
start probably the daily level and then you know find something that works that you can execute on and you know
43:03
gradually add more tools to your repertoire okay okay and then uh you know we've
43:10
sort of talked about how to get started trading you know what are maybe some of the uh less common things maybe an
43:16
advanced Trader to should think about or any any thoughts on that well I don't know if it's less common but you know I
43:22
think journaling is good um thinking you know and that's I actually had started Twitter or the
43:28
United kind of a Blog before I you know just kind of putting your thoughts out there why are you thinking through why
43:34
are you taking those those trades I think you know forcing yourself to think what your actions were it really is uh
43:42
um one of those tools you know people say that you know you're reading the book but until you actually do it you
43:48
kind of see the value from that I guess I mean my one of my suggestions
43:54
okay perfect and then um how about any resources that you feel you know are
44:00
truly valuable for for both new and experienced Traders sure I you know I think
44:05
YouTube is phenomenal the amount of content that is out there that you know
44:11
you can you can you can interact with people that you had never heard of or see new ideas and
44:18
and get Concepts broken down it's not even just crazy it's every you know any skill that's out there you can learn it on YouTube and it'd be pretty good to
44:25
handle I think Twitter is great um I think
44:30
you know I mean don't just follow you know the flavor of the month but you know kind of get a sense for that
44:35
person's you know setups and stuff and you know like I mean I bounce ideas off of Traders and Twitter all the time
44:42
um you know build up your network and yes if you're contributing something you're researching and you know you
44:48
don't have to be the you know the most experienced person if you if you can show something of value to you know the
44:54
Traders and don't bug them all the time but you know I pop up every once so I ask them a question you'll develop
44:59
relationships with them you know and it's I mean I mean you know so how you you and I met right you know
45:05
and uh I think that's a a great resource there's there's what I I like soccer for
45:12
I think that's a great uh but I like the environment I think you know it's educational there's
45:18
there's sign ups that you can learn you learned inside and outs um there's a ton of you know ticker
45:24
monkey there's uh you know just so many different great you know I guess third-party uh services that uh you can
45:33
you can kind of see someone showing you the ropes you have to find whatever you know is
45:38
right for your time for anybody what do you think and sometimes uh you know if it's a very trade happy group and you
45:47
have a full-time job you know maybe maybe it's not the best fit and more of a you know kind of a longer term thing
45:52
would would work better for you but I think that's it can be a good way
45:58
obviously the books I I like the old classics I love uh um how to are the
46:03
remnants of a stock Operator by Livermore I guess something new out of that every time I read it
46:09
um O'Neill's books you know how to make money in stocks I think that I I think
46:14
that's those are gold and then there's various variations of those minervinis very good um you know it's kind of a
46:21
combine you know it's kind of like you know we're just talking about your stack setups well minor video kind of stacked on top of uh you know the
46:28
O'Neill systems and you know it came kind of more you know even more powerful setups
46:34
you know so I think those are great um Richard moglund you know he's been a
46:42
nice kid you don't get right out of college doing some great interviews and I I met some interesting Traders by
46:48
watching his his looking forward to you know all your areas and that you've already
46:55
interviewed a market a wizard which is asking for your first interview huh
47:01
and Marsden is uh uh what was the book he was in um
47:07
uh the unknown Market Wizards yeah and you know there were I know there were it
47:14
and he came out of this the the um you know kind of a systematic training background and I mean but it
47:20
just goes to kind of the strength that you know he he's in Stock B there were other people that I know were asked to
47:25
be in that book but uh they turned it down um somebody that was a mentor of mine
47:31
I'm not going to name him just because it's uh publicly wants to be but uh
47:37
um you know he was very active in that group when I was and uh took me on the ropes and you know the kind of that
47:43
encouragement and this is kind of why I like responding to younger uh Traders now I was like you know he said it I see
47:49
something in you I think you're gonna be great you know a good Trader a great Trader um you know keep up and you're on the
47:55
right track and you know that we just meant so much to me to getting you know an older you know guy that
48:00
um you know was getting triple dividend returns and you know incredible Trader
48:06
you know have him reach out and say something like that and you know certainly to kind of let a fire to yeah
48:12
I'm gonna go get it and you know then he was able to I kind of put out some of these ideas a slingshot the fishhook and
48:18
what he was able to do with it and you know I I was originally a fish hook was not uh the uh necessarily the earnings
48:25
winners that's what it's become but it was like you know how do I find one of these you know stocks that are just going to go up a lot and you know I was
48:31
creating kind of junk stocks at the time but he started you know kind of using it in earnings and he's like he's like holy
48:36
[Ā __Ā ] this is part of my life this is uh you know this this is worse I can use this and I'm like okay well and maybe I
48:43
am down to something and so you know I I think that's that that's great um find a mentor and but it's not gonna
48:51
be like I I don't think if I would have said hey what you meant to read that you know it doesn't work that way it doesn't
48:57
matter whether that's training whether that's you know frankly if you know even if you're a landscaper you can't just go to landscape or get the best landscaper
49:03
in the area elementary right you know you need to uh kind of show your your chops a little bit too
49:10
yeah no I think that's great advice and uh thermos uh in a lot of the people
49:17
that uh for members uh but he was great in the sense that you know he got under
49:22
a lot of people with feathers but he was great because he would always challenge your assumptions and he said something
49:27
else that he's like no have you tried this this you know and it it you know it's just kind of these things and he
49:33
did he you know poke holes in every great idea you thought you had and it made it so much better and you know it's
49:40
like yeah you know I owe him a lot of gratitude and and that he was he was so good at you know just you know I mean
49:47
these certainly aren't the only you know strategies I've tried I'm like automated try a weekly chart what makes a new high
49:52
is this going to work and works once or twice and then you know thermos blows a hole in your thing and that uh so I I
49:58
thought uh you know kind of having somebody that is going to not just let you fly on your
50:05
assumptions and somebody's gonna challenge it you know it's so easy to have like well let's see
50:11
emergency biasy right it's either your assumptions or your money right be your assumptions
50:17
yeah you can't have them you know we I think as a Traders do net it's naturally to have a big ego I think it's
50:24
hard to mitigate that and you know people say oh I've got no eagle or trees or no I mean it just isn't I mean that's
50:30
it's kind of this humble brag I think trade good trading is is boring but it's uh it's not you know right you see I
50:38
don't care who you are you're gonna get excited about uh you know the money piling up and or the money going out and
50:44
uh that you have to mean you have to kind of have the confidence that in yourself that you're going to figure
50:50
this out right right yeah any any time I've uh started to feel like I've gotten an ego
50:56
that's a basically the best Market indicator that I needed to sell everything you know 100 but I you know it's funny
51:04
because we all we all have it you know we'd nobody like maybe like to come out and uh oh I'm a machine I'm a robot you
51:11
know particularly with discretionary Traders and you know I think what there's one guy who joked that he's kind
51:17
of get the uh the have you told your wife about your games and once you if you reach that point it's definitely
51:23
time to sell because you know you feel that good at your your overconfidence that's that's kind of the good signal so
51:30
if somebody tells their wives uh how good the market is uh we're gonna head over
51:37
yeah that's fantastic perfect perfect okay well is there anything else I know that you have a uh
51:43
you know a sub stack uh and you know how can people get a hold of you that are that are interested yeah you can look in
51:48
on uh Twitter uh Scotland I think T at uh at Twitter I've got us some exact
51:54
linked to that I don't you know update it all that much but uh you know we'll see how uh how things go whether I add
52:01
more or less I don't know I'm in a good spots and I I feel like you don't need to chase this market and kind of kind of
52:09
letting it uh set up but uh um you know we'll see but yeah you know
52:14
feel free to reach out and uh you know we'll say hey perfect and then I'll also link all of
52:20
your information in the in the show notes so uh awesome Scott well I appreciate your time today I felt like
52:25
it was extremely valuable for you know both new and experienced Traders alike and uh can't wait to uh to see what uh
52:32
what else it was a pleasure all right thank you two episodes under my belt one thing
52:39
that surprises me with both of these legendary Traders is how absolutely humble they are now I'm not sure if this
52:45
is due to the market being a master or if you need to be introspective in order to beat the market maybe it's a little
52:51
bit of both I wonder if this trend will continue regardless if you like this episode with Scotland please give it
52:57
five stars or thumbs up on whatever platform you are so that other Traders can hear this fantastic guest thank you
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