037: Futures Trader 71 – Understanding Areas of Acceptance, Thinking in Probabilities, and Creating a Legacy

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chat for more information. Tasty Trade Inc. is a registered broker dealer and member of Finra, NFA and SIPC. The biggest secret of the best traders in the world is that they're just like everyone else. However, they've worked hard to learn the markets and discover what works and what doesn't. But how can you with traders. Here's your host, Aaron Fifefield.

Hey there, what's up? You're listening to episode 37 of the Chat with Traders podcast. It's great to have you with me, and thank you very much for tuning in. This week I had the pleasure of speaking to another brilliant trader who has been heavily requested. His name is Morad, but many know him best as Futures Trader71 or FT for short. To give you just the 30 second rundown, FT has been an active trader since 2000, when he started out scalping Nasdaq stock.

A few years in, he made the transition to trading futures and later started his own proprietary trading firm where he funded and mentored a team of traders. These days, FT runs a brokerage where he provides continuous education and risk control to a structured community.

And of course, he remains an active futures trader with a great focus on reading market profile and volume profile, which we get into in great depth during this interview. We also speak about how you yourself can find a statistical edge without the need to be a programmer or have any knowledge in that field.

And guys, all the show notes for this episode can be found at chatwithraders.com forward slash thirty-seven. So a full recap on this week's episode, um, any of the links, resources, etc. that are mentioned can all be found there. And just while you're listening, I'd love it if you could please leave a brief review on the podcast in iTunes.

This helps in such a huge way to increase the rankings and reach more listeners. So if you could do this, I'd be super grateful. Just go to chatwithraders.com forward slash iTunes. Alright, now for this week's interview, I'm your host Aaron Firefield and here is my guest, Futures Trader 71. F T, what's up man? Thank you very much for coming on the podcast. How are you doing today? Good, good. Thanks for having me on.

No trouble at all. I mean I've had many requests to bring you on the show, so it's really great to have you here. Now let's get this started like we normally do by taking it right back to when you first got into markets. So tell us. How did you first discover trading and what were you doing prior to this? Okay. So uh back in two thousand, um I was in construction. I was a construction manager. I I uh I have a degree in engineering.

uh with a minor in economics and I was working for the largest construction contractor in the US. Um and um I s I learned to meditate just a couple of years before that. And on a weekend Memorial Day, a weekend I believe in in two thousand, I um went on a retreat. I was living in Florida, drove up to a retreat and um a meditation retreat. And I

I met a a guy who uh was a trader. As we were talking, uh the markets, the uh conversation about the markets being as it is it was two thousand and the crash had just happened, you know, two months prior. We were talking about the markets and he said that uh he's you know, he trades equities. Uh he was part of a group uh known as the Sows Bandits, S O E S. And uh and he based on our conversation, he's he said, hey, I I think you've got the right personality for this. You should check it out.

I guess I'd complained about my job, the hours and the problems with labor and equipment and all that stuff. And he said, you really should look at this. And so I thought, mm, yeah, maybe. Uh I was already investing. I was uh I was on Motleyfool dot com a a lot and I was an I B D uh subscriber and I was kind of running some money. I I was doing that through college as well.

But this was trading, which was a full time uh thing. Uh so once the weekend was over, I went back to work and I requested to have a fright the following Friday off and I drove from Miami up to a a town called Vero Beach. uh which is w just north of West Palm Beach, and uh and basically join this guy in the morning and he he said, you know, the market opens at nine thirty. I trade intensely from nine thirty till about ten thirty or eleven.

So why don't you come around, you know, ten forty-five and I could show you what what we're doing as a group and uh you can give me your thoughts on it. So I arrived on time, I watched, I sat down quietly, he said, just don't say a word. And it was a a room it was c sort of an arcade that he created with a group of people. It was a room full of traders and uh for the first time in my life I I see guys with

multiple monitors on their desktop and so forth. Remember two thousand, that's when L C D started coming out. And um and it just looked really impressive. And I as I sit there, I see this guy just clicking away on his keyboard. And um and I look at his PNL and it was like eighteen thousand seven hundred dollars.

Um, and so I thought, mm, maybe that's just his buying power or the account value or something. Um, and then he's he he gets done and we uh go out to lunch and I said, I I know this is private, but It says you're up eighteen thousand seven hundred dollars. Is that is that a real number? He says no, no, that's not actually that's not that's not the correct number. You have to deduct commissions from And uh that blew me away. He said uh he said he had traded uh

several million shares that morning to generate that much uh revenue. And he probably owed about five thousand dollars in commission. And fees. And it just it just shocked me to see that he had made in an hour and a half of trading uh what I would normally make at my normal job over, you know, a couple of months.

Um, and so I was, you know, initially just like everyone else, I was hooked by the earning potential and so forth. But uh, you know, as time went on, I learned that that's not what it's about. Um, I basically put in my notice the following week. Uh took'em two months to find a replacement for me because I was a project manager and it would be very difficult to

just hand the reins over in a two week notice on a forty million dollar project that I was assigned to in Miami. And um it took two months and by then I I was ready to move. I'd set up my account. And I basically that's when I started. Uh so I quit the salaried, uh, you know, uh regular employment world and I joined the uh cowboy world of uh trading and or that's what it seemed like at the time. So that's that's how I got my start.

That's a that's an excellent story. So I mean, that's a pretty bold move to quit uh your job so quickly, um, you know, after experiencing what you did. I mean What was your what was your thoughts behind that? I mean, di were you worried that um trading wasn't gonna was gonna be difficult and that you might not pick it up right away? Like how did you plan on supporting yourself?

So one of the conditions uh th the guy who introduced me to this is is uh is an extremely close friend to this day. One of the conditions uh was that I would need to read a couple of books before I started. Um he said just wait, you know, read the books, don't quit your job, and then decide if this is for you, and then quit your job.

I I didn't listen to him because, you know, uh being uh an arrogant uh you know, pup, I uh I knew what I needed to do and I just quit my job the next week. But, you know, I read The Discipline Trader by Mark Douglas. and I picked up a couple of other books and it just seemed to me like I didn't have a choice because

I was doing work that I didn't like doing and I knew I needed to make a change and I knew that I was in the best position I could be in the business that I was in. I was highly paid for my age. I was the one of the highest paid people in my age bracket in a company that's been around for a hundred and fifteen years, the construction company. Uh I was well taken care of. I had stock options, which I cashed to open my account for fifty thousand dollars.

And um I was you know, I I had a cushion and I figured because of my my the projects that I was on and the tenure that I had, if I spent two years and failed at trading, uh, that it wouldn't be a, you know, an end-all for me to uh get back uh into the construction business, which is always, you know, there's always work, always something to be built.

Um, so to me it was and and this is the the case uh with my personality and with pretty much everything that I do, it's it's you're either gonna dive in all in or you don't. Um, and so I wasn't gonna do that transitional thing where you know, uh go to work at ten A. M. and trade the market from eight A. M. to ten AM type of thing. I was either gonna do it and figure out that I'm no good at it.

um or um or not do it. And so that the it wasn't a it wasn't a big issue for me to to quit my job and just pursue it because I had the means to do that. I had the savings uh and so on to be able to just um leave and and go do it. The pain that followed though pr probably, you know, gave me a lot of self doubt, but it was definitely worth

Sure, okay. Well let's let's get into that pain and self doubt. So you've quit your job. What was the next step from there? Like what what was your experience like for the the early years? Um, this is gonna sound all too familiar probably to your audience, but basically I had the best possible um environment to become a trader. And I've always traded in a professional environment. So I was surrounded by guys who I'll give you an example.

Um the the the most the last guy before me who joined this group on his best day, he made over ninety thousand dollars in one day. The guy who brought me into the group Uh his best day was two hundred and eighty thousand dollars in one day. But in trading, being in good hands doesn't it helps. You know, I was in a room that had was very focused. It was there were blinds on the windows, even though we're in a s you know, sunny Florida.

Uh, there were there was a news feed that was running all day long. Um there was there were uh there was an S P qu uh pit squawk that was running all day long. There was multiple L C D's with C N B C and Bloomberg on them. There was a Bloomberg terminal. It's just and I was with these traders that just came in and absolutely obliterated the market every day, it seemed.

But that's not enough. Um that's not enough because coming in, you know, watching someone trade, it's kind of like watching a Federer play tennis. It just looks so easy, you know. Oh, he just has to run and hit the ball. That's all he's got to do. Um, but try returning a serve uh in a in a profession from a professional tennis player, you know, good luck with that.

Um, so over the next few months I basically discovered that I neither had the right attitude uh nor did I know myself enough, and that's the hard part. uh uh to be able to extract any sort of profits out of the market. So I opened a fifty thousand dollar account. Uh, and I traded equities. I started with the slower uh products, uh Dell, JDSU and so forth. This was um Nasdaq equities.

Um and you know, the idea was to trade a a fifty share lot and to make, you know, twenty, thirty dollars a day at the beginning and then to increase your size and so forth. I basically did not make money for the first

Um I I think it was about three months I just consistently lost every day. And this is trading from, you know, the time the market opens till the time it closes. Uh so it's pretty intense to sit there all day just fearful that you might hit the wrong key on the keyboard and do something that that would, you know, destroy your account.

Um in the meantime I l heard guys yelling, breaking keyboards, uh rejoicing for the w for the profits that they just made, or uh it you just got a lot of there was a lot of imp Um And this this contrasts this with the some of the folks that I know now who trade online who are sitting in their basement.

you know, in a quiet environment, maybe they're a part of a chat room and it's a just a very sterile sort of environment where you're not getting all that feedback. The room I was in, you know, people would yell out things all the time. You know, the bids thickening up on, you know, Cisco. Take a look at Cisco or Um I'm getting short twenty thousand sh shares here.

Um, looks like the offer's not moving down. I'm out, I'm scratching this trade. Damn it, you know, that sort of stuff. You're just these guys are just constantly talking. And I was the guy in the corner with one monitor, you know,'cause that's all I could afford at the time. and uh just sitting there and trying to figure out what are they talking about? What is an offer?

You know, what is a bid? Why are they hitting the bid but not hitting the offer? Why are they lifting the offer? What does that mean? What it how do you read this? scrolling tape that's going up my screen. You know, what is this what what are all these blinking lights and numbers? It took a while. It was just it was just like Uh, you're just basically thr being thrown into the middle of a a lake and sa told to swim.

Uh there was no training or anything because we were all independent. There was n this was not a prop shop, but it was a professional environment. You know, people wanted to help out when they could, and that's a huge edge. Uh and then finally I started to get it. You know, I started to under understand that maybe I should be buying when I feel like selling, you know, maybe I should

wait for the market to tell me what it wants before I do anything, as opposed to just getting in there and saying, Oh, what the heck? It looks like it's gonna go up. Boop. Nope. It went down. Um So so that that was the pain, just coming home every day and basically seeing that some of the guys were leaving with five, six, ten, twenty thousand dollar winning days. Um, and I'm just losing five hundred dollars a day and I'm watching my account go from fifty thousand to you know

twenty tho to forty thousand, to thirty five thousand, to thirty two thousand, to twenty eight thousand, and it just seemed like there was no end in sight. Um and the more pain, the more fear there was and the more hesitation there was and the more losses there were. It's just a the cycle that uh somehow had to be broken. Uh and all you could do about it is just show up Turn on your monitor, sit down, watch the market.

It's all you could do. Just sit there. I read a bunch of books and all that stuff. And it all sounds great when you're reading a book. Oh, okay. Yeah. So all I have to do is be aware of my fear. Um Or all I have to do is look at this moving average. Ah, nonsense. You just had to reprogram your instincts. Uh because we were trading order flow and we were doing it in high volume and high speed manually. Uh and you just had to be in the flow of the market. Uh it's much like

You know, surfing. Uh, you just you just you can't you can talk about when you should jump on your board and when you should paddle and what part of the wave you should be in and how to ride a wave. You could talk about it all day long. But unless you're out in the ocean floating around waiting for the next wave, and falling off your board um with every wave and learning, you know, muscle memory and and teaching yourself that, you're not gonna make it. Uh and you certainly can't learn to surf.

uh while you're sitting on Lake Michigan in Chicago, you know, where there is no there are no You had to be in the middle of where everybody else is. And I was. And that's the saving grace. I think that's the key element uh that helped me see that there is, yes, you can do this for a career because there are people there. I had that hope, you know, and and I didn't need that much hope because

I could see that these guys were making money. It can be done. It's me. Something's wrong with me. It's not the market. It's not my equipment. It's not it's my head. Um and that made the transition or the turn come a lot sooner because I had continuous evidence

that uh this can be done, whether it's a slow day or a trend day or a fast day, it didn't matter. Somebody somewhere was making money. And somebody somewhere was losing money as well. And I was one of the losings uh the folks losing money. Uh I hope that answers your question.

Absolutely. No, that was a awesome answer. So would you say that after those After those initial three months of trading, were you did you start to gain some consistency or how long did it take you before you were consistently profitable as such? So I will define consistently profitable not as a dollar amount or metric. Okay. I will define it because I had to actually learn to trade twice in my career.

Uh, three times actually. One as a Soes equity bandit, uh as a Soze scalper, when this you know, when they had uh fractions uh and then moved to decimals. Uh, then I had to relearn to become a trader when I moved to Chicago and started trading futures, which is what I trade now. as a as an order flow high volume scalper, uh meaning, you know, tr regularly trading three thousand uh round turns a day, some some something in that volume.

And then I had to relearn to trade the market the way I do now, which is more structure, more uh a stronger position, um and more methodical, uh slower. Um and and I could I could tell you that um consistency uh should be defined in my opinion as The ability to confidently come in and say, yeah, I'll take something out of

as opposed to, oh yeah, I'll make a thousand dollars a day. I'm consistent I'm a consistent trader. No. Consistency is when you don't know what the market's gonna hand to you for the day. It could be fifty dollars, it could be fifteen thousand dollars. Consistency is the is the ability or the confidence to come in and say, yes, I am confident that I'll do what I'm supposed to do and that I'll walk away and I'll be rewarded.

And I would say it took three months during my equity days, like my first exposure to trading, took three months for me to stop bleeding. Took about a month of me just floating around. making a little bit and losing a little bit. And then something happened um about the fifth or so month where I could confidently come in and say, yeah, I'm okay making a hundred dollars today. I think I could do it. I I think I'll have at least a couple of opportunities to do that today.

And uh and that was, you know, around the fifth, sixth month. And then once you you're there and you string together a bunch of days where you confidently um put up money. Um amazing things happen in that you become a lot less fearful with res b but with with sufficient respect to risk uh in order to uh be reasonable. uh with your losses. Um and then you know There's a day where you hit six hundred dollars. You're just in the flow that day. Things just seem to happen. It's hard to describe.

Um, and then for the next couple of days you may not make much money at all, maybe flat or lose some money. And then one day you come in and oh wow, this is my best day ever. I made twelve hundred dollars. And all of a sudden there's a it's almost like a chart, you know, a trend where you have a trend, you have a breakout, then you have a small pullback, and then you have another breakout, continuation move, and you have a pullback. That's that's how it was.

And then as you get more and more confident, you get to the point where you think, hmm, well, I'm tr trading thousand share lots. Let me put on a ten thousand share kind uh uh trade. What difference does it make? You do that and then you lose your whole money. And unfortunately most traders have to go through that several times before they truly become consistent in that they

you just understand that it can bite your head off at any moment, you know, kind of like being an alligator handler. Yes, you can get it to, you know uh hold its mouth open and and and so on. But if you become if you lose awareness of that where that alligator is, it'll bite your leg off, you know. You need to kind of You can gain confidence, but you should always have a healthy respect for the nature of the market, if that makes sense.

Absolutely. No, that's that's really good. I like the way you described um consistency there. I think that's that's really on point. Um now let's dig into how you're actually trading today in current times. So would you mind giving us just an overview of your approach to trading?

Okay, so um just a little bit of background. Once I stopped trading equities and I moved to futures and moved to Chicago from Florida. I basically traded order flow, I basically traded momentum. All we did was watch multiple markets. and we you try to be the first. Like if the S and P starts moving up and the Dow is lagging, then you'd buy a bunch of Dow and you would wait for it to catch up to the S and P and

and so on and so forth. There was no technical analysis involved at all, even though you know, we paid for very expensive charting packages and things like that. I did that for a prop shop, uh which which is a proprietary trading shop means Um the there's a company that puts up the who owns the account, puts up the risk capital, you come and trade it and you get a payout, a split of whatever profit you make, and they carry all the risk and they charge you for things like

uh rental of a desk and uh the cost of a computer and a phone line and so on. And so I did that for a while and then I went and and and uh I left that that uh business and I actually created my own property. And I started to back people uh and and train people and so forth. I was training people, I was training new traders while I was at the first prop shop. after I became profitable again in futures.

and when I train people I would get a cut of their profits. I would share the house's cut of the profits. So I got to see how people go through the process of learning uh what issues they are there are. I I got to work with a couple of floor traders who are transitioning to the screen who are by far the worst guys that I ever tried to work with, uh, going from trading, you know, a hundred lot SMP in the pit, uh, which is, you know, five hundred or two hundred and fifty dollars a a point.

uh and then telling them to trade one lots in the S P E minis doesn't g doesn't go well with these guys. So I learned a lot about psychology, the psychology within others

Um and in teaching others I could see within myself what I needed to do, what I needed to work on. Um and then once I started my prop shop and started got that going, I was very successful. I backed s uh I backed about a dozen people on my own. Uh over time I could see that the markets were paying less for more risk. Uh so after 2005-2006 the the uh scalping algos, predatory algos and things like that started to come into effect and co-locating and high speed execution and high speed order flow.

started to eat into my bottom line. Uh and so I I started to cut back on or I s I stopped backing newer people and I just let my current traders just run out their contracts and it just seemed like they're always asking for more and more buying power for the same returns or less. And I didn't like that at all. So I started to look around um and uh e educate myself about different ways to trade. I could not compute I could not compete with the computers.

at a microsecond uh level. Um but what I could do is increase my uh time frame and and potentially catch bigger moves. And that transition is extremely difficult to make when you go from clicking away all day long on the mouse and and trading two thousand, three thousand round turns in a day to you know, putting on a position and taking a bunch of heat, meaning letting the position go against you for a while and waiting for it to turn. That whole it was it was like trying to turn

a sprinter into a marathon runner. It was just it required a whole different group of muscles and a whole uh recalibration of my mind. So I so that was my third learning

Uh phase. So as as I developed that, I went from just trading order flow on the depth of market. To um studying every indicator and every little thing that existed. I would recreate RSIs on a spreadsheet. I would create these dynamically linked spreadsheets that give me the same information that. on the charts so that I could understand what the chart how the line on the chart's being created. You know, what's what how is an exponential moving average different than a simple moving average?

Um, things like that. So I started to look into that and I wasted a lot of time looking at these lagging indicators. And uh eventually I came across market probes. Which made a lot of sense. I was I'm a member of the CME. Uh and and the CME was pushing um market profile as a as a there was a free course on it. Um and and actually Dan Gramza, which is maybe someone you've interviewed, um, was offering a course on market profiling. So it was free to to exchange members. So I went.

And I started to dig into that and I started to study it and it made sense to me how we're organizing the the information based on thirty minutes time slots into a statistical histogram uh so we can see where the market traded a lot, uh what prices it accepted versus what tri prices it it rejected. I did that for a while. I basically became an expert in market profiling and I started to use that um as a basis. But over time and having, you know, a very expensive charting package.

uh a nine hundred dollar a month uh CQG integrated uh charting, uh there was a feature in there that would allow me to not only look at a market profile, but to actually look at the volume. At every price.

uh to create this volume profile. But nobody was using that. Nobody knew anything about it. Uh and it just made more sense to me that, wait, why do I care about time? I should care more about how much. traded at every price. So I started to do studies using Excel and so forth. um into volume profiling. And um I I just started to develop this approach of looking at volume at each price versus volume at each bar.

um and and understanding how the auction is working. If the key participants in the market feel that a certain price is fair or there's nothing more to there's no reason to move price away. from an area, then it would trade a lot in that area. And it would create this very bulgy uh uh profile in the in that price range. And what that clearly showed me is that

Okay, it's got nothing to price, but people still are trading and for every contract that's bought in futures, another contract is sold. There's never There's never an occasion in the market where there are more buyers and sellers. That does not exist. There are more aggressive buyers than sellers, but for every contract that's bought, there's a contract that's sold. And if the market's trading in this tight range and it's got a ton of volume in that range.

And for every if for every buyer there's a seller, then what that means is if the market starts to move away from this area that's been accepted, then half of the volume that went into the creating that bulge

is wrong and they're gonna have to cover their positions. It's gonna trigger some stops and they're gonna have to cover their positions. And so I would observe that over the next few days. I would look at Okay, if the market's in the tight range because they're expecting news or there's nothing you know, it's it's dead and there's nothing further to do. What happens when we break away from

Uh, what happens when we break away uh and we pull back? Where does it pull back? How long how much of a pullback do we get? So I started to do the scientific engineering kind of approach to looking at what the market's doing in the form of an auction. And that's how I trade. Um my you know, the folks who suggested that you um reach out to me and uh but to have this conversation with you for b I appreciate it by the way. Um

Those folks are followers on Twitter because of this approach. Because this is all I talk about and it's all I do and I have not changed it since 2005 or six. And it's the same thing and it's what drives the market. So you can sit there and impose VWAPs and CCIs and you can put all kinds of indicators on the market. But the bottom line is What price did they trade and how much trading occurred there? That's what governs. Uh and so you can express that in all kinds of different mathematical ways.

Um, which which is fine. I'm I'm not poo pooing that. I I think that's you use whatever you feel you you need to um um in order for it to make sense because ultimately it's your money that's at stake.

But to me, understanding how the market goes from An area of acceptance. to a another area of acceptance, to another area of acceptance. That's very important. And we see it in everyday life. Uh we see it with the most valuable things that we buy uh on a regular basis. Uh you know, i i i think of um When we look at retail, it's a one way market. There's usually one seller. You know, we we show up at the supermarket to buy milk.

uh you're only buying milk from that retailer. You can't go somewhere where you're looking at you're able to buy milk from many different retailers all at the same time. Uh so it doesn't represent what the market uh what we see in the market every day. But it's very similar. If milk is something you consume every day. And let's say a um a liter of milk is a dollar fifty.

And that's what you commonly pay for it. That's value. So if I charted the number of units of milk that have been sold at at a dollar fifty, I would end up with a very long line. And then I could go to a convenience corner store, which is gonna charge you a pre premium for that convenience. They may sell that that uh same carton of milk, liter of milk, for two dollars. But they will sell much fewer units because people are people know that they can go buy it for a dollar fifty.

So that's the high end of value. And but there are days that, you know, you can join a uh a a price club like uh Costco or Sam's Club here in the in the US. where you can buy things at wholesale rates. So I can go and buy instead of a liter of milk, I can buy ten liters of milk at ninety cents. And so um so that becomes the lower extreme of what a liter of milk should cost. But let's say you're dependent on buying this milk for$1.50, and all of a sudden there's a there's a mad cow disease.

And there's a shortage of milk. And all of a sudden, everybody's selling milk for two dollars and fifty cents. And now, over time, as more and more people buy that milk'cause they don't have a choice, now you have value moving from a dollar fifty to two dollars and fifty cents. And it stays there. The fact is you're gonna buy less of it. You're gonna try to find alternatives, maybe water it down or something. You're gonna buy less of it because the market is much higher in value.

As soon as this issue that caused milk to get more expensive goes away, then you immediately as a naturally as a human being remember that the market was at$1.50 for a liter of milk. And so your expectation is as prices drop, they will likely continue to drop until it goes back to a dollar fifty. To me, that represents a short trade opportunity. from a temporary high price back to the most uh accepted price, which is the point of con what's called the point of control.

Uh and the market does this all day, every day, except it doesn't have one value point like the price of milk does. That's a just a simple example. It creates value every day. Every day it picks an area where it trades a lot and it moves away and it picks another area. But if it does not hold that higher area,

The most likely thing it'll do is it'll move back to the prior value area. If it cannot hold that value area and it continues, look for a lower value area and so on and so on and so forth. So I'm watching volume of price. I'm watching the quality of the rotations, in other words. How quickly did price move uh from one area to the next? How desperate were the participants in that area? Is it done?

um moving to that next area, or is there more liquidity available that's gonna prevent it from waiting there and it's gonna push it lower? And there are ways to detect that. And I talk about those. Every day. I mean, I opened up how I trade to the public back in two thousand nine as a way of giving back.

Um and it's it's not some it's not a system. Uh so it's not something where I'm I'm concerned that my edge is gonna disappear over time. Most people who've watched me talk about this stuff since two thousand nine, uh, will will attest to the fact that it has not changed in that long and on a day to day basis.

uh at eight a m Chicago time, nine nine a.m. Eastern, before the market opens, a half hour. And I sit there and I say, here's what it's here's what we said it would do yesterday. Here's what it did. Here's why it did or did not work. Here's what was set up yesterday, here's what's set up overnight, here's what I expect to happen today, and here are my my key trades for the day.

Uh, and then the next day I look back and I say, here's what I said it's gonna do, and I repeat it. And I call those trader bites. And I post those every day and are done live on YouTube as a way to demonstrate to other traders that they don't need to go out and pay for some ridiculously expensive course or be part of some crazy chatroom or signal service that they can do this on their own. And that's really an important factor for me. I've done well with trading.

uh and and I have something that explains the market at its core and you can throw your moving averages on there, fibs or drumming geometry or or Gartley patterns or whatever you want to use. It's okay. uh use what may own it. Uh ultimately you have to own what you're doing, but first and foremost understand what makes the market move and how it moves, what what causes these rotations. And it's all about

price discovery. The market's constantly the market's job is not to run stops and make everyone lose money and give it all to good the big houses, the Goldman Sachses and the JP Morgan's of the world. They're in the same situation as everybody else. The market's uh main purpose is to get as many buyers and sellers to meet and agree on price as possible. The market's mechanism, key mechanism is to discover value, because that's where the most trading will happen. Does that make sense?

Totally. Yeah, no, I really appreciate you going to such uh great lengths with that answer. That's really, really good. Are you ready to get serious about trading? Then join Tasty Trade, Investopedia's best platform for options trading in 2026. Stocks, options, futures, and more. Tasty Trade has everything you trade all in one platform. Get low commissions, including zero commission on stocks.

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Um and just so we're clear, so we've just discussed their market profile and volume profile. Um obviously volume profile is um how do we describe this kind of like the horizontal bars that go up the vertical axis of your chart. How is market profile plotted on a chart? Market profile is plotted on a chart the same way, but instead of

uh using I use tick volume so it it's taking every single tick that trades and is organizing it at every uh price level. Market profile just basically takes half hour slots. and creates either a dot or a letter and then organizes that dot or letter the same way. So where volume profiling is representing the exact volume. Hopefully, if you have a good enough data feed and a strong enough charting package.

It should represent the exact volume that occurred at any given price. Market profile is only looking at time. So a market profile where the market traded a lot of volume within a certain range is going to look exactly Um, the same as a market profile chart where the market just traded very little volume but continued to trade that same rate. it'll basically show the exact same thing. But to me that doesn't represent uh the same information. If I have if I'm able to represent volume at price

it's a it's a true indication of the of how motivated uh the different traders are at trading at those prices. Uh to me, time should not be

I don't like time being a factor in my trading. I'm not interested in 15 minute bars or five minute bars or three minute bars. I hear I remember when I was researching uh moving away from uh tick scalping to um to trading, you know, more technically, I would hear things like Yeah, you know, what I look for is for the five minute bar to close below the twenty period moving.

And it just seemed to me It just didn't make sense to me personally, it may make sense to others, it just didn't make sense to me personally why it should be a five-minute bar that has to close under the 20 period average.

Why not six minutes? Why not three? Why not ten? Why not twelve? Why not some random number? Um I just it just did not make sense to me because I felt like You know, does it make a difference to the merchant whether you buy that milk between eight and eight thirty two AM versus nine and nine oh two AM?

It doesn't matter. You're still buying a certain volume of milk and you're buying it at a certain price. And that's what determines You know, whether or not that merchant uh should restock its shelves or if the milk is just sitting there rotting. It doesn't matter how much time there is. Well, in the pro in the example of milk that doesn't apply'cause the stuff rots, but

Um, but does that make sense? So that's the difference between I I I felt like market profile was great back in a day when you didn't have all this volume information. But these days I get tick volume. And I have that information. So why am I why would I be stuck uh organizing the market in the in the in terms of time when I can organize it in terms of price and volume?

Yeah, yeah, I think that's a really fair point. Um, and I like the milk analogy too. I think that helps to make things a little bit clearer. And what I'll do is I'll actually link to your YouTube channel. So people who are interested in finding out more about this. um can go there and check it out. So a link to your YouTube channel will be in the show notes at chatwithraders.com forward slash 37. So I recommend um you know anyone who wants to find out more definitely check that out.

Um now I've got another question around market and volume profile.

So you're using them sort of intraday for intraday trades. Um can they provide benefit to traders who may not operate on an intraday timeframe, such as swing traders and position traders, etc., or do they tend to become less effective as you zoom out by time frame? Great question. Um I'll let you in on a secret. in my own portfolio, my own for my own investment.

Um, I use volume profiling. For example, you can do a volume profile on Apple and look at Apple over, you know, how has it traded since since it split? and look at how much volume, how many shares were traded at every price, and you could get the exact same information. I organize things by day because I'm a I trade in a daytime I never carry I shouldn't say never, but I

hardly carry any positions past the close. Prefer to it's just not my style. Uh in fact the fact that I trade uh can hold the trade for several hours during the day is a huge leap from the few seconds I used to hold trade. Um but it's the same thing that applies. In my own investments, the way I determine like if I if I was to um

Trade an option, for example. If I was to if I held shares of say Potex, And I wanted to let's say I owned a hundred shares of potash and I wanted to generate additional revenue. I could sell uh an option, a call option against that position, uh collect the premium. And the way I would decide what the price of that option should be, what the strike price of that option would be, is to look at uh a profile that that carries for more than a day.

And it's very easy to do that. If someone goes to my website, for example, future straight seventy one dot com. and looks at some of the some of the images that I have in there, they'll see that there's a what I call a a composite profile. And this is a profile that's collecting data at every price over years. And it shows you over the last couple of years. Where the market has traded a lot versus where the market has rejected prices. So it's the same process. By the same token.

on very slow days when the market tends to be locked into a range, uh what I do is I look at five minute profiles. So not really five minute, but it's a I basically have the uh the software draw profile every time it trades 10,000 shares. So I look at these mini profiles. um uh I call them intra profiles. They're like within each bar I can see a profile of the bar. So I can see, you know

When you look at a candlestick, let's say you're looking at a 15 minute candlestick. That candlestick is showing you where that candlestick opened. How far it went down was a wick. And then it shows you how far it went up with a wick and it shows you where it closed, right? That's all the information you're getting out of a candlestick. If you attach a volume histogram at the bottom, you can also find out how many c how many shares or contracts traded within that candlestick.

But what you don't know, what you're blind to, is where that volume occurred within those prices. So if Apple moved five dollars in a fifteen minute candlestick, Um you don't know if the volume occurred at the bottom of the candlestick where most of that trading occurred, or did it occurred the evenly distributed within the candlestick, or did it occur at the top part of the candlestick? That's important information because if it occurred at the top part of the candlestick.

and the close of that candlestick was below that high volume area at the top, that shows weakness. It shows that as the market tried to push higher in this fifteen minute bar that there was a supply, there was liquidity there And it continued to trade and trade and trade and it uh the mar the the the traders failed within that candlestick to overcome that liquidity. If I was holding a long position

I would start to consider, hmm, I should lighten up here. I should take some profits and reduce my risk. So it does apply to pretty much any time frame. I use it for I look at weekly profiles, I look at monthly profiles, and I also look at a few seconds worth of profiles. Because all I'm looking for is just detail within a time period of where the volume has occurred, where the trading has occurred. Um and that gives me a lot of information.

Hm. Okay. That's a that's a brilliant answer. Thank you very much.

Um now let's let's keep this moving a little bit. So I know you have a very specific way of determining what defines a setup. And what actually defines an edge. So would you be able to share with us how you define these two commonly used terms like what is an edge and what is a setup in your eyes? Соенедж то мі. To me, an edge is simply a probability of one thing happening over another. So an edge is as simple as Look, the market has sold off for the last four days.

And and I do a lot of statistical study because I think that's the missing link for a lot of traders is that they just wanna follow a head and shoulder pattern or cup and handle or whatever. but they don't have the they haven't built the confidence or the background of of of how often something works. But I think in probabilities. The times when I didn't think in probabilities, I was probably

thinking emotionally'cause I think that's the alternative. That's the only other alternative there is. And emotional trading leads to losses. An edge is as simple as Look, if the market's been selling off for four days, in other words, it's made lower lows for the last four days. Let me look at statistically over the last three thousand days.

How often has the fifth day been a selling day? And if I look back given any stock or any commodity, If I look back and I see that the probability, the number of times that after four days of selling, that the fifth day was a selling day has occurred. Just one and a half percent of the time. Then the next day, I'm not gonna look for selling opportunities. I'm gonna I'm not gonna be aggressive about the selling. I may still sell, but I'm not gonna be aggressive with the selling. That's an edge.

Something as simple as that is an edge. I know the probability of today making a lower low is one and a half percent given a large sample, three thousand trading. So if the market gets close to the low and is I can see an opportunity where I can get in and my reward, my upside is much better than

then m the loss, which could be the prior days low, that would be my stop out somewhere beneath that would be my stop out point, then that's a huge edge. And all I have to do is just put that on whenever it shows up, indiscriminately. Another another way to describe an edge, and and and the description of an edge is very simple. It is the probability of one thing happening over another that provides you a one to one or higher reward to rip.

period. Over a period of time, that concept alone should show you uh profit, you know, given that you overcome your costs, your commissions and fees and so on. That that's that's all you need for an edge. A lot of people when they talk about edge and I read a lot, I look at forums a lot, I've done a lot of talks on on several forums with with regards to m different ways. I'll give you a simple edge.

I trade the S P five hundred futures, the minis. Uh statistically, and I have a video on this on YouTube. You just have to look it up. Uh just look up Future Straighter 71 statistical edge or something, statistical analysis. And I show how I I extracted this. uh study using Excel, very simple study, where I showed that ninety seven percent of the time given seventeen hundred days of a sample.

97% of the time, the SP 500 will either touch or break the overnight high or the overnight low in that session. So the market opens at 9 30 Eastern. 9 30 Eastern till uh 4 15 Eastern is considered RTH. That's the regular trading hours. That's that's the what we call the pit session. If I look at that session.

97% of the time, the high or the low of that session should have touched or exceeded the high or the low of the overnight session or the glowback session. Does that make sense or is that complicated? No, that's good. That's good. A luck we gun with this. So that's an edge. Ninety-seven percent. So the only thing I have left to do now is figure out w what where can I, given where the market is opening today and knowing that the overnight high, let's say

The overnight high is nineteen thirty two in the S P and the overnight low is nineteen fourteen. The market looks like it's opening around nineteen twenty. All I have to do is figure out, okay, who's dominating the auction at the beginning.

Is it the sellers that are in control?'Cause if the sellers are in control, I'm gonna target that nineteen fourteen low, the overnight low, and there's a ninety seven percent probability that it's it's it's It the the low or the high is gonna be tagged or touched today. And so if I'm trading with the dominant side and sellers look like they're in control, in other words, the market drops quickly and then moves up extremely slow slowly and is and laboriously.

that I'm going to try to get short somewhere uh where I can define my risk. And that's a very fluid decision. The the context of it is very fluid. Um and and uh I would have to have a screen in front of me to describe that, but I I talk about that all the time. It's it's I've eliminated, I would say, eighty percent of the decision-making process on the spot as I trade. I've eliminated it. by identifying that simple edge. My job now is to find an area to get short. Period.

Um in the example of four um four selling days with the fifth day having only a one and a half percent probability of making a lower low, I have already eliminated most of the work. I am gonna look to push my long trades today. versus my short trades. I'm gonna be tentative with my short trades, meaning I'm gonna have very small targets. I'm gonna trade them with one quarter of the of the unit size. But my long trades are gonna are going to be my the bulk of my focus.

That in itself, identifying that small piece of information puts me ahead of a huge number of traders who have no idea what could happen today statistically. And I have the data to back it up. And everybody's got the same data. I'm just digging into it and creating a probability out of it.

So that's an edge. As far as a setup, um, that's another thing that's very fluid. I if if I could describe what I'm doing in the form of if then else statements. Aaron, I would not be sitting at my desk every I would hire a programmer, you know, I would go on Eland. Hire a programmer, create a system, and just invest money in it and you know just let it rip all day long. But that's not how I trade, that's not who I am. My setups are dependent on my edge. My setups are

mainly built on the price action, the current price action versus what the context of the auction is. In other words, what is the volume profile telling me who is the dominant force? The best example of How I trade. Best analogy would be if you were in a bar brawl, you you know, you're s you're in a bar, suddenly a fight takes place. You can't leave. You're gonna be a part of this fight. Where most traders just are like, Well, I'm here to brawl, so I'm just gonna start punching somebody.

Uh and so they they're very impulsive. Um and and remember I I'm part of a brokerage now. I started a brokerage uh s several years ago that takes my prop experience. and brings it into a brokerage setting. Uh it's called stage five trading. And I've watched how retail traders or online traders trade. And the analogy that comes to mind is they come in, sleeves rolled up, they know they're gonna have to throw a punch today, even if they don't have an advantage.

Even if the guy they're about to punch is 300 pounds and f and and it has two percent fat, uh, they'll throw a punch. That's not smart. My approach is to wait. Find out who's throwing the better punches and who's got the better fighters and to go and fight on that side. That's my approach. I want to identify through my volume profile

through the detecting how the market is rotating. In other words, from the swing high to the swing low of the last few uh bars, which side t tends to um gain more ground with every push and then what I do is I trade with that side. So I wait, I generally don't throw a trade out there right at the market open. There's no edge for me. I still don't have enough information.

I wanna know who is the gorilla the eight hundred pound gorilla in the room and who's controlling the auction, if there is anybody, um, and to trade from that. If the eight hundred pound gorilla in the room doesn't show up, in other words there isn't an immediate push and control from the buyers or sellers, and it just seems to

float around kind of like uh yesterday's market did when it opened, then I know that I'm gonna be trading against short-term traders. I'm gonna be trading against scalpers and short-term position traders. And if I'm trading against those people, those are the dominant participant in the market. then we're gonna be basically b playing whack a mole with price. We're gonna be beating each other over the head. And so I'm going to trade with the expectation that my targets have to be very

uh short ranged and uh that there's going to be a lot of fluff. There's gonna be a lot of back and forth that is kind of point until somebody comes in, a higher time frame, uh, you know, somebody with some real business uh to transact comes in, pushes the market in one direction, at which point I'll probably take a loss.

Uh, but then it immediately gives me an opportunity to go with that participant. Um it again, uh it's very technical, but it's hard to describe in words. It's much easier to describe on a screen, of course. Of course, yeah. So we'll definitely link to your YouTube channel in the show notes. Um just before we move on though, um I'd just like to ask another question on on uh your answer there.

Do you still do all your studies in Excel or have you or do you use more advanced um software for some of your other setups and and when you're looking for an edge? So the because because I'm trading in a more traditional way. Uh it's sufficient for me to use Excel and because I'm I'm an expert at Excel, it's easy for me to manipulate the data using filters and so on. uh to get what I want. However, there are studies that cannot be done uh in Excel.

Um and and so what I do is I've I've looked at, you know, uh several statistics statistical packages like uh JMP or R. Um and um I'm not very good. I'm not a coder. Uh, and I just don't have the time running a brokerage and doing this this education stuff plus running a charity. I I just don't and being a father, I just don't have the time to sit here and learn the code. But the software that I use, it's called Investor RT by Linsoft.com. Um the software I use has made a lot of advances.

and I have worked very closely with the developers, uh, has made a lot of advances in that it I'm able to extract more complex data uh very, very quickly with Uh and and um luckily because I have such a close relationship with them, if it's too complex for me. I just call them up and I say, Hey, you know, how often does ABC happen when, you know, D E F happens? And I get the results that I want.

The proper way to do that, if I was to operate like um more of like an institution, is to have someone who's just sitting there cranking out studies all day long. But frankly, I'm just a trainer. I am not interested in dissecting the market. in fifty different ways and to know to the tick and to the fifth decimal place how often some probability occurs. I feel like I'm at risk of

uh because I'm an engineer by nature, I'm at risk of getting lost in all of the numbers. And I've done that to myself. I start a spreadsheet and I've been looking for one thing and I end up spending six hours extracting so much stuff that really but I still haven't answered the initial question that I set out to do. What I do with trading is keep it simple. The banner for my site says simplicity in trading. Trading is simple. It's not easy.

It's not easy, but it's simple. And I found the more complex I make it, whether it's by you know, statistical studies or I start to play with some indicator or create some sophisticated system and I've worked on trading systems in the past. I find that I it loses something. And it it one of the key loot things it loses is expected value or expectancy or return on capital. The more complex I make something, the less I get out of it.

Um, so in general, I look for simple things. Let me ask you, what is your favorite instrument that you trade, Aaron? Uh it would be US equities. US equities. Give me throw one out. Uh Goldman Sachs. Goldman Sachs. Okay. So if you look at Goldman Sachs. one of the things I would look at is what is the what is the magnitude of movement per unit of um Earnings per share release beat or uh or mix.

How far if they come out with their earnings and they always beat their earnings uh expectation and guidance, how far should I expect the market to move. That's number one. The second is so um this is an earnings season. Uh so I get to play it four times a year. Um the second thing is when it gaps, how often does it move back to where it was the night before the earnings released, the day before the earn and how often does it actually move away from that price?

I want to know, does it generally return back, let's say, I don't know, what is Goldman trading at these days? I have no idea. But let's say it's let's throw a number,$40. And then earnings come out, they beat as usual, and it gaps up and it's at forty five dollars the next morning. before the open. I think they announced it like six A. M. uh Chicago time before the open. And

Let's say it jumps up to forty five dollars. The question I would have is, okay, how often does it go back to forty dollars? How often does it retest the last most accepted price? um before that earnings announcement. That's number one. Number two, in how many days does it take? Does it do it the next session? Does it do it in three sessions on average? Or what? And that creates a position trade or a swing trade edge potentially for me. It also creates an option trade edge for me.

Uh so I keep it simple. That sort of question can be answered with just a pen and paper pad or an Excel sheet. You know, there's no need uh to pull in tick data and use R to get statistics uh and correlations uh on that sort of study. That's the sort of thing that I prefer to trade. something that is created on the actual market movement or the actual market process rather than

uh something that's purely mathematical. It has to make sense to me from the perspective of buyers and sellers coming to trade versus what does it do mathematically. That's why I don't use floor pivots, floor pivot numbers and so on, or Fibonacci retracements or anything like that. I I need to understand how how this makes sense from the perspective of someone who's who thinks a product is, you know, Goldman Sachs is too expensive or who thinks it's too cheap from a technical perspective.

So I don't I don't have a use for a high-end statistical package, but I do have sometimes I do come up with scenarios, things that I observe that are just too complex to do with Excel. And for that I rely on the actual charting package and the capabilities of the built into the charting package itself.

Okay, sure. Now that's a great answer. That that definitely explains it. And I mean it it's good to know that you can do so many things with Excel. I mean, I'm a bit of a novice with um Excel, but it's good to know that it has the the the scope and the capability to do these sort of things. So do you trade it on a uh do you day trade it or do you trade it on a position basis?

Uh, I'm not a day trader, no. So I'm more of a swing trader. I could get into a position and hold it for, you know, a few days to a few weeks if it goes well. Um but in saying that I could be out the same day if it if it goes sour. So Yeah. Um yeah. Yeah, so so in that with that approach, like I uh if if I was trading in that method, uh I would wanna know, for example, what is the range um what is the range per day uh to expect in Goldman.

uh what is the range per week? How much of the week have I covered? For example, if I put on a Monday position and it's going for me and it's already covered ninety nine percent of the range, the average range. Um and it's Thursday. Hmm, maybe I shouldn't wait till Friday to close that position. You know, maybe I'm I'm pushing it to get that extra 1% if it gets there.

that sort of s that that's sort of simple then that stuff is very easy to pick up, right? Uh right out of a chart. You know, you you just need to look at a weekly bar and look at its range and and just put it on a put it on a spreadsheet, okay, for this week and that week and that week. This is the range. And so on average I get this much range on a weekly basis. And since my time frame is about a week

this is how much range I should expect on my next trade. So I shouldn't be pushing for, you know, a six dollar move in Goldman Sachs when I don't hold over the weekend. Um You shouldn't be pushing for a six dollar move when the most common move is about four dollars. I should be looking for an area to exit around four dollars. That's an edge. Mm. Okay. No that's that's really good. I appreciate your going into going into depth on this. That's really good.

Um, all right, well let's just do a couple more questions. I mean we're pushing just over an hour now, so we'll do a couple more questions and then we'll um we'll start to wrap this up. So I mean you mentioned earlier on that you originally started out as an equities trader and a couple of years later made the switch to trading futures.

Um so for anyone listening to this who may be interested in doing the same, what are perhaps some of the greatest differences that they should be cautious of? Uh with regards to switching to futures? Yeah, from equity. Okay, so once I switched to futures, I never look back at equities. And for several reasons. One, extremely use uh efficient use of capital. I don't have to, the notional value of one SP contract right now is approximately$100,000.

It's trading around the 2,000 point range, and it's worth$50 a point for the SP Mini. So it's a$100,000 notional value. I don't have to put up a hundred thousand dollars to hold a trade. And some brokerages, and I disagree with this, you only need five hundred dollars to hold that much um that much buying

So I don't need that much capital. When I started my trading business for myself, my prop shop, I started with twenty five thousand dollars. And I I got a rate of return monthly rate monthly. And this may seem really nonsense to you, but the monthly rate of return was between sixty five and eighty five percent per month. That only exists because of leather. Now that's the upside. Let's talk about the risk. If you're trading a hundred thousand dollar product for five hundred dollars

in in in an in a in an account. It takes very little to wipe out your account. So you have to with futures, you can't mess around with risk. I think stocks are a little bit more forgiving. But at the same time, I don't like about stocks that they can be uh they can make them their move on their own based on one factor alone. I'll give you an example.

You're long Goldman Sachs and something happens. You find out that they're being sued by the US government or something, and this lawsuit's gonna cost them billions of dollars. And you had your stop just below um yesterday's low. And you come in and you see that it's trading at 50% of yesterday's price, closing price, way below your stop.

And guess what? That's where you're gonna get filled on your stop. There's no there's no liquidity there that's gonna stop that's gonna fill your stop at market where you set it. And it's because some some actions being is taking place or some news events taking place in that one stock. That doesn't happen in future. uh i if you are trading a liquid product. You can't have one company controlling what the S P five hundred is gonna do as a as a as a as a commodity. It it

It's it's representing five hundred stocks. And so there's plenty of liquidity and it's much more methodical. Futures, however, are more competitive. Uh it's a level playing field. There are no surprises there. So it's to extract money, you take advantage of the fact that you have this leverage. um to to make money. Um so there's positives and negatives. The key positive, one of the key positives to futures is that I don't have to deal with this day trader, day trading pattern rule.

I don't have to deal with that. I don't have to have a twenty-five thousand dollar account to buy and sell and buy and sell and buy and sell futures hundreds of times in a day. And come back and do it again and again and again tomorrow. I all I need's five thousand dollars, ten thousand dollars or whatever. And I'm able to trade as much as I want. And then whatever profits I make are taxed in the US

uh on a long term as well as a short term basis. So the tax liability by trading a commodity is much, much better. My taxes are much lower and my costs are much lower. when trading futures than when I was trading equities. I had liquidity provider versus liquidity taker fees. Um I had, you know, routing fees. I had all kinds of fees. It was very expensive to trade the one stock and I still had to put up even with margin being offered by my broker

um like four to one margin meaning offered my broker, I still had to put up with fees and I had to pay interest on that margin and incur penalties on that margin. That doesn't exist in future. I feel like futures are just a lot cleaner. However, futures are more difficult to learn on because the leverage creates a much higher emotional response in people.

Um you can trade a 10 share lot while you're learning. You can trade a 10 share lot in in equities. Pick an equity and just trade 10 share lots and You can't do that in futures. You're either gonna play with the big boys or you're not. There's no there's no way the the the lowest amount of c uh uh quantity of trading you can do is one contract, and that one contract maybe worth a hundred thousand dollars or fifty thousand dollars. There's no

There's nothing smaller than that. Uh so it kind of freaks people out. The ideal situation is You start out if you're trading equities. Switch over to trading, say, spiders or some other ETF and and trade small and put together a good number of days. uh put together a good ex expectancy or a good edge, see that you have a positive return, and then make the switch to future. Um and and may do it with a broker that

that what that helps you watch your risk or provides you the tools that help you watch your risk, which is really why I got into the brokerage business, is to create that environment. But any, you know, most brokers will be able to help you with that.

Okay, and just to add on to this, um I mean one thing I often hear about aspiring futures traders or people say about aspiring futures traders is that they're often undercapitalised. Um so in that case, I mean what would be the ideal amount of starting capital a trader should obtain uh before possibly going into futures markets? So I think whether it's you're going into futures or equities

It's likely to be the same. Uh, you know, the thing I always recommended, and it seemed like not many could do it, is the minimum amount you should be trading is really twenty-five thousand dollars. That's a pretty that's a minimum amount. Um that gives you the ability to make mistakes. Um

And and your loss should be based on what your account value is. So you sh with twenty five thousand dollars, you should be able to get many, many, many, many, many samples of trades under your belt uh and still have, you know twelve, ten thousand dollars left once you figured it out. What most people do is they come in with five thousand dollars. You know, some brokerages take two thousand dollars.

That doesn't give you any room for error. And believe it or not, just like Just like learning to ride a bicycle or learning to walk. You're gonna fall. There's no, there's no way to avoid that. So stop being afraid that somehow you're gonna lose money. You're guaranteed to lose money. It's part of the process. You cannot exhale without inhaling. An arrow cannot move forward without being pulled back. This is the same. You're gonna have to lose money to learn.

Because it's part of the learning process. And so if you're gonna lose money to learn, then you wanna minimize the risk. And you wanna have as much capital as possible to to allow you to take the losses. It's just part of your tuition. Um and still have enough remaining to continue to to practice and be in the business. Um, so to me,$25,000 is the absolute minimum. And you should expect to probably lose at least half of that. And I'm saying this.

with a a very strong statement. Losing half of it means you are a disciplined trader controlling your risk, and you will still lose half of it probably based on my experience. And that is okay because when things get going on a futures contract with the leverage, making that twelve thousand five hundred or thirteen or fifteen thousand dollars back is not that um is not that uncommon in a very short period of time. When I made the turn Once I hit a thousand dollars on a day.

Putting up four hundred, five hundred dollars on a day was fairly fairly straightforward. And all I had to do then, and this is what I did the the the main reason my prop shop was successful, is because I was an absolute Nazi about risk loss. about risk control and daily losses. I made a commitment to myself that if I exceed a daily loss or a loss limit on a trade, that I have to sit out the next day, which is painful because you expect to make money every day.

And so even with controlled losses, uh uh you know, controlled risk, you're gonna experience losses. Just accept that this is part of the process. Most people come in and they think I'll put up five thousand dollars in an in an interactive brokers account and I expect to make a return of, you know, three hundred percent a year. Good luck with that. That's not realistic. The reality is

It'll take a long time because the key element, we didn't talk about this much here, uh the key element of the entire process of trading is your psychology. is your level of awareness of yourself, is your level of honesty with yourself about who you are and what your nature is. And most of the losses and take this from a guy who's who's turned traders around and made them profitable for myself, for my own prop shop.

Most of the cost of my operation in turning a trader around was invested, I would say eighty percent of the losses that a trader took when they're learning was the cost of them. um adjusting their behavior. It's not about, oh man, I'm losing money, so I better learn a new indicator. Oh, I'm losing money, so I better get on this forum and find out what this guy is doing. Oh, I don't have a good enough charting system. Oh, I need a more powerful computer. None of that's gonna help you.

Most traders after the first few months of studying technical analysis, studying fundamental analysis if that's their if that's what they want to do, uh you know enough technically. It's not the technical end of things that is that is turning you around, that's that's causing the problem. The problem is Behavior modification is your ability to do what's right, even though emotionally and instinctively you want to do the opposite. A market's running up.

What is what do most traders want to do? They want to see it get weak and I want to sell it. Well, maybe it's running up for a reason and selling into a run up is just a pause before it continues to run up. Your instinct is not to buy it after it's run up, your instinct is to sell it after it's run up. But selling it after it's run up has a low probability in most cases. Things like that.

Stopping yourself from getting emotional is a key one. Being aware that you're angry, that you are afraid, just it doesn't mean you can I'm never gonna tell you to control your emotions. It's a very, very hard thing to do.

But your losses and the amount that you're investing, the capital that you're risking, the great the overwhelming majority of it will be spent on you, um on the time it takes you and the experience it takes you, the cost of the experience it takes you to Change the way you behave and to accept who you are as a person.

you know, look, I get emotional about losing. I don't like losing. I hate losing, so I fight. I continue to fight and fight and fight and fight, even though I'm clearly out of sync with the market. Well, that's not a good plan. And that'll cost you twenty percent of your account before you stop. Maybe for some people I've watched people melt eighty percent of their account away before they stop, before they realize, oh my God, this this isn't this isn't working. That's a very expensive way.

to to learn. If you're gonna lose eighty percent of your account Do it on 3,000 trades because you're picking something up on every trade. But if you start with$2,000 or$5,000, how many trading samples are you gonna get? How many experiences or notches under your belt are you gonna get? before your mind starts getting the concept or you you start to internalize the concept of what it takes. um to to make money. Uh does that make sense?

Absolutely. No, great answer. Another great answer. So yeah, very good. Let's just do run through one last question and then we'll wrap this up. And this one came through on Twitter. It was from uh Alexander. And he's asking what's the importance of giving back and leaving a legacy? So I think you've got something interesting to share on this. So keen to hear your thoughts. So

A question came up during uh one of the interviews as I was recruiting a a trader into my prop shop. And uh it was a college grad and he said He said, you know, I I n I know I could be good at this, um, but why do people do this? Like what's the point? It seems kind of selfish what we do as traders. Um, you know, you're just going there and you're clicking and it's very capitalistic and it's very self-serving. We're just after the money. What's the perk?

Well, the purpose of trading, your purpose as a trader is something you need to believe in and be aware of. Your purpose as a trader is to create an orderly market. The idea that day traders create exaggerate moves or create volatility is absolutely false. My participation in the market allows much, much bigger traders, bigger institutions to have more prices.

For them to get in and out of the market. So I serve the market in that sense. Much car much like a car dealer exists for the purpose of taking uh cars out of factories, holding them in his or her lot, and and helping people uh buy have a selection and buy a car and and and enjoy the inventory that he has. We traders have inventory. Every time we're we have an open position, we're holding inventory.

And if I didn't exist, then imagine uh a factory making a car and trying to sell it directly to the consumer. It would be very difficult to do that. It would be very it would be much more expensive. And so there's that service that we provide. Imagine the spread that would exist in Goldman Sachs. if traders were not in there. You would have, you know,

multiple price levels. You'd have multiple ticks that are blank because there's nobody there willing to fill those in. And that's what we do as traders. So on a day to day basis, I I know that I'm allow I'm giving I'm dampening the markets volatility by taking the risk in the inventory. Um from those who wanna sell or those who wanna buy and holding it for a period of time and I get paid for that risk. That's my purpose. I I help regulate the cost of uh you know, I'm just a little

Drop in a bucket, but I still help regulate the cost of crude oil or cotton or whatever it is that I'm trading. But The end result of what I'm doing is I've got a big trading account. Great. I've I live off of my trading account. I can buy nice things with it. But your legacy has to outlast the material uh purpose of your existence. As a trader, I control my time. I control where I trade, when I trade. It's one of the beautiful things about this business.

If I do that for myself, then I'm really not serving the uh a a purpose for a greater society. And so it's important to give something back. It's important to help others. If it weren't for that friend in a meditation retreat who would took me in and showed me the basics. I would still be grinding away working uh in a in a construction farm somewhere. Not that there's anything wrong with it, but I've lived a much better life now than than I did when I was doing that.

He took the time to do that. It's my obligation to do the same. This is why I share openly what I do on Twitter. I have I think almost twenty-four thousand or twenty-five thousand followers on there. This is why I have so many videos on my website. Um this is why I've created a stage five trading. It's it's because if I help someone else achieve the independence or achieve their goal of wanting to um have better control of their life, then that person is going to

feel obligated at some point to give back to their community. This is why I run a charity. Um, it's it's another way of giving back. I have the ability and I'm lucky enough to be able to do that, to control my time, volunteer and so on. So that's what I do because ultimately Even if I were the greatest futures trader in the world, who cares? Who cares? Ultimately, my legacy is in my children. My legacy is in how I helped others achieve their goal. In the end, it's a small blue planet.

It's a very tiny place that we live in. It's a tiny little dot in the galaxy. If I help other people achieve their goals, then they there's it's just human nature. There's no way that they're not gonna do that and pass it on. And in one way or another, I get the benefit from it. Not to mention the fact that when I started backing people and training people, I went from being an okay trader who made money. I think my first year at a prop shop, I made like three hundred thousand dollars.

And that was okay. But once I started to back people and really pour my heart into their success as opposed to just giving them a trading account, giving them a a trading platform and saying, Make me money. No, I would pour my heart into them. I would make sure that they are successful before I hired the next guy and that's a huge part of my success as a as a prop shop.

uh once I started to do that, I started to really learn the business. I started to really learn how how I react, why we do the things we do when we f don't follow our rules. Um, I started to really understand the ins and outs of what it takes to trade by helping others. So having had that experience. on directly made it clear to me that I have to continue to give. And I love this business. I love trading. It's a it's a passion. It's it's not a job. It's not work. It's not

painful. It's something that I'll do all day, every day if I could. So if I can go and talk about it, if I can provide something, if I could help someone out. Uh, if I can do an intervention like I've done many times, someone who's struggling and is about to give up, if I can do an intervention and look at their statistics and look at their performance and say, here's what you need to focus on. Get back to me once you've done fifty trades this way.

there something lights up in them. And when something lights up and they see some success They have a an obligation, a human obligation to do that for someone else, be it their brother, their friend, their cousin, some stranger on Twitter, uh or whatever. What you're doing, Aaron, with these chats with traders.

is you're creating a legacy. You're creating a legacy for other traders and you're create you're improving the legacy of each one of your guests, including myself, by creating a recorded record. a rec a a recorded archive of of what we're doing, right? You're serving me, I'm serving you. We're both serving other traders. It's a small community and and I I'm driven to continue to do what I can within limits.

As I get older, I'm forty three years old. You know, that's why it's future straighter seventy one. I'm forty three years old. I ha my time is becoming more and more valuable. So my time is focused more and more on just building that legacy more so than building wealth or whatever, you know. So this this is a very important topic. And I think ultimately all traders have the obligation

to do something that helps the greater good. Um, that's the whole purpose of money. It's not to hoard, it's not to throw it in, you know, six Porsches and a big mansion, mm, that's meaningless when you're dying. What's important is what have you done with your money to improve the flow of prosperity in the community that you're in or around the world, as you and I are trying to do.

Hm, very, very good answer. Well said. So thank you very much for for going into such great depth with that answer and big thanks to Alexander for asking that question too. Um obviously led to a very great answer. So

Alright, FT, well we should probably wind this down now. So before you go, do you wanna share with listeners where they can go to find out more about you? Uh, the best way to get a hold of me is really on Twitter, Future Straighter71. Um, my website's future straighter71.com. if you um wanna be involved in the day to day participation and and help and context and all that stuff that I do for our um brokerage clients, our traders within our brokerage, then check out stage5trading.com.

Um, you know, I I don't I'm I'm I'm not a broker. I don't sell things. I'm not interested in selling you on anything, but I do look at everyone that joins there as a as almost like a prop guy. And I do what I can to make sure that um they they they stay in a business that they they continue to to do this uh passion, to follow this passion. So

FutureStrader71.com, Future Strader71 on Twitter or Stage5Trading.com. Uh those are the best places to get a hold of me. You can always contact me through those uh any one of those venues. Excellent, good one. And I'll make sure to put those links in the show notes as well so anyone can can visit them through any means. But

This has been phenomenal. So thank you so much for giving up your time today. I mean it went for a little bit longer than uh we expected to, but I don't think anyone's complaining. So thank you very much for doing this. Thanks for having me on. It's an honor. No trouble. Take care and let's talk soon. Take care. Bye. You've come to the end of this episode of Chat with Traders, but don't worry, more great episodes are on the way. And we'd love it if you leave us a rating and review.