189: Best of Risk Management, Pt. 2

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Welcome back everyone. It's nice to have you joining me here for episode 189 as we continue from where we left off last time. This is the best of risk management part two. Again, it's a compilation of highlights from past interviews, all of which are relevant to managing risk and staying in the game.

My hopes in compiling this best of episode is that you'll have a go-to reference for times when you need to sharpen your risk controls, as well as drawing your attention to some episodes that may have gone unnoticed. So, if you'd like to hear the full interview with any of the guests featured on this episode, All the links are included in the show notes at chatwithraders.com slash one eight nine.

Otherwise you can go direct by typing in chatwithraders.com slash the episode number, which I mentioned prior to each clip.

Now, this first clip comes from Greg Newman, my guest on episode one hundred and fifty nine. Greg is a founding partner of London-based firm Onyx Commodities, who are major players in global energy derivatives, active in exchange traded futures as well as the OTC swap market. And what about risk management? Do you have any core principles around managing risk? So I think first things first is is is the stop evaluation, you know. Um

So you have to determine the value expected that you you think it's gonna get to. But then you also need to determine where the value will get to or the price of the contract will get to where you know you've misjudged it. So If you think it's gonna go from sixty to sixty five on Brent, but you know, you put yourself and you envisage, okay, but if it does get to fifty seven or

lower. How would you feel in that situation? How are you looking at the market? Is that is that is that not a price which is telling you, you know, all the factors you consider the clearly wrong because the the then the price wouldn't be this this uh this low. So you have to kind of set that level for yourself.

And that might be a consideration of volatility, um, you know, market events and obviously the timing, the length of the trade. So you have to factor that all that in to, you know, the evaluation of

of your stop. And I think it's sounds it sounds relatively simple, but I just think that people don't do that thinking before. They don't actually and again it comes back to the original thing I was saying about believing, you know, you're not actually special. You're not this guru. You need to think, Oh, there's a very good chance I'm gonna be wrong here. So

When do I think I'm wrong? What price do I think I'm wrong? Um, but it's also not making that mistake of of putting your stop to a place where. Do you think that oil's gonna go from sixty to sixty five? That's a big move, uh, relative percentage wise. It's not gonna happen in a day. And if it did, it would be, you know, an event you could ne you never would have seen coming. Um so given your analysis and given your hypothesis and why you think that's gonna go up to sixty five.

you've got to give it uh enough time. And um so if you were there for to to put that trade on for a week and be like, Why is it not sixty five? Obviously that's silly. But also, you know, if you were not to if you were to put your stop at fifty nine, it's only a dollar and you're expecting five.

You know, a dollar, if you look at the Brent volatility, that's not a big deal. And that could just be someone, you know, someone doing a huge hedge and moving it and it's very temporary. Um, and you would have been stopped out. when there was no need to be stopped out, you need to f you needed to have fa factored that in to your analysis. And again, you know, it comes back to if you know when you're wrong or you've got a good idea of when you are um

not seeing what you would expect it, then that's the number you need to have in mind, uh, basis all these considerations. Um and then you go and start saying, right, so how much given this is what I the level where I think I'm gonna be wrong, if that's three dollars then you know, I need to only risk

I need to know that I'm risking three dollars, therefore I'm only gonna risk the amount of money that correlates to that to that three dollars and I shouldn't be risking any more. Does that does that make sense? Yeah. So if you've only got, you know, three grand to risk. And y you know first of all you need a three dollar stop, so you should only be doing a uh one one lot, which is'cause everything is a thousand uh a thousand barrels in in bread. So

Yeah, I hope I hope that makes sense. Yeah, so the next thing would be of your total capital available, if someone gives you X amount, you know, there might be a element of you know, I'm only actually going to risk ultimately ten percent of that capital. And of that ten percent, you know, I'm only going to risk ten percent of that per trade or even less. Um and you need to establish that and be really quite strict on that because

You know, you you need to keep yourself in the game for as long as possible and and you can't expect uh a ridiculously high win lo r win loss ratio ratio, you've got to expect that you are gonna be wrong a lot of times or you are gonna lose money a lot of times.

So this needs to be to be factored in. Uh there's too many people, they just risk too much up front. And um, you know, you could actually be have some great ideas and great approaches to the market, but because your tradecraft and your risk management's poor, you know, y you've you've been uh taken out of the game and uh a lot of careers are ruined over that. Um yeah, so You know, Paul Tudor Jones, um, big big time trader, um veteran in the market, um

He would say, you know, I spent all day making his risk kind of vanilla and exactly what he wants, you know, not sporadic risk and this and this and this. He's uh I have this view, this hypothesis. And this is how I'm going to express it and that's all I want in my book.

and um he spends his day, he says, making himself feel good in the sense that, you know, you're gonna feel good if you've got the right risk on. You know, you're comfortable with it, you've set your parameters, you know, anything outside of that and you get an edgy feeling and y you're unnerved, that's probably a big sign that you're doing something wrong.

Um, you know, another huge one. Huge, huge one. Not adding to your losing position. You know, you're you're you're you buy Bitcoin and it's coming down and everyone's panicking, you say, Oh buy more, I'll buy more'cause I think it's gonna go up and you averaging in to a losing position and it and it's it's

can be so cataclysmic and uh not just you know for money but biased in your head and your it's it's a terrible cycle to get into so just do not average into a losing position. Another guy is uh a top trader, Dennis Gartman, he has a a a list of rules. And yeah, one of them is buy what is strong, sell what is weak. And uh I love that quote because to really capture moves you have to not fall to biases such as anchor bias, you know, a perceived perception of

the price being too high or too low and not realising that highs and lows are always being set, new highs, new lows are always being set, and the market is constantly in this state of overbought, oversold. So to just say oh it's too high, you know, relative to what, there's there's no

Your history's not necessarily representative of what's gonna happen in the future and you need to, you know, run that winner or or um stop out aggressively uh or not be fooled just by a low price and think, Oh, I'm just gonna buy it'cause it's low because you There's no real definition of what that means. And I think that's that's a that's a great risk management principle as well.

Next up, this snippet is pulled from episode 39 with currency trader Tom Dante. It's an interview from way back released in 2015 during the first year of Chat With Traders at a time when my interviewing ability was highly questionable. Yet this particular episode still remains a favorite for many. Another thing was was composure under pressure. You know, watching guys have

big down days and not seeing it rattle their confidence at all. You know, seeing them be able to walk up the office, head held high, with a big smile on their face. And you knew for a fact. that the guy who is down a massive amount on the day. Like we're talking tens of thousands of pounds. And and again it it it kind of it it drilled into you that right mindset.

that you didn't you didn't have a pro trader ha you know, get his arse handed to him on a day and then turn up the next day and go, Oh, I I'm fucking scared. I'm scared to click the mouse. I I you know, I don't know what to do. And it and it it just i it made you stronger, i i if that makes sense.

It kind of made a man of you, I guess, if if that's the the the right way of describing it. One thing that I learned that that that really stood out and really made a big difference for me personally is understanding the support uh or understanding the There's no such thing as a free trade, right? So um A lot of people move to break even very, very quickly and they say that they, you know, they've got a free trade. And I was taught, you know, not to think like that.

Um and I have a big, big problem with this nowadays. So um because I found that I would keep moving to break even in the early days because it is you know, it is comforting to to to know that your, you know, your risk is eradicated on the trade. But I just simply found that it didn't work because the market would keep coming back, knocking me out, and then going in the direction that I'd anticipated.

And At one point one of the guys there that was a huge trader had kind of taken me under his wing. And we actually spoke about this and I said, you know, I just got stopped out at break even again and that that damn market has moved, you know, right where I thought it would. And he said to me, Why are you moving to break even?

And I said, look, I bought this, you know, this level and it you know it moved up I can't remember now, but let's say it moved up twenty ticks and it's come back. You know, I don't want to take a loser on it at that point. And he said to me, Look. If you buy support, right, which is why you got in that trade.

And it goes up 20 ticks and it comes back to the support level. What are you doing? You're s you're scratching the trade. You're puking it right into support. What? Because you don't want to lose money? That doesn't make any sense. Like you're literally trading your PL. Um, you're focused on the PL. And he said to me, trade the fucking market, you know? Don't trade your PL. And it was a really, really powerful lesson for me. And again, it's kind of aligned with that.

That whole, you know, that principle of when people get in trades and they get up a huge amount of money and they move to break even just so that they can't lose. I've seen people that maybe are going for a hundred tick target and they're up 90 ticks and they say right I'm moving to break even now, free trade, nothing to worry about. And I'm thinking, nothing to worry about? How about you worry about the fact that you're risking ninety ticks to make ten? Like th that's pretty worrying.

Um, people make a huge mistake of not realizing that risk reward evolves. during the trade. It's not a static concept that you have a a ri uh you know a trade outset. So you can start a trade with, you know, going for a three to one risk reward, but there'll be points in the trade where, you know, that will might have massively diminished. And the odds, you know, uh are now against you. So this was again something that I took.

from a very, you know, very large trader just basically not to trade my P and L by constantly, you know, uh hunting for the you know, for the free trade. and you know, and to and to remember that that risk reward evolves and it was a very, very powerful lesson and I I I don't think I'd be where I am now without you know without having had that lesson, Aaron.

How do you determine whether or not the trade before you get into it has a worthwhile risk to reward before entering? Do you have profit targets or or how do you judge that before you get into it? Right, so whenever I get into whenever I'm looking at a trade, looking to get into a trade, I have an idea um of where I'm looking to take profit and I have a you know, a a firm idea of where I'm wrong.

on the trade. So then what I've got to think about is is that risk reward ratio good enough to merit taking the trade? Now, um, I guess I I differ from a lot of traders in this in this respect because there are a lot of people that are um taught to always go for a two to one, or always go f you know, for a three to one or what have you.

And that is good. Don't get me wrong, the higher that your reward to risk ratio is, the better, for sure. And I wouldn't dispute that. But what I would say is that it's It is um dependent, your edge is dependent on your risk reward ratio combined with your strike rate. If you have a high strike rate, you don't need a high risk reward ratio to make money. So um I'm aware that I can get away, because of my strike rate, with a with a risk reward ratio of one to one.

I don't like going lower than one to one, although I've worked out over time that I can get away with it. Just going fractionally lower than a one-to-one, like a 0.9R. But generally I'll look for one to one or higher. Um, now obviously I wanna get as high as I can. So one of the things that I do is I try to establish very early on in the trade, is this a trade that I am going to try and run? That's really a key question for me.

And I think it should be a key question for all traders because a lot of traders get into the trade and they find that managing it is the hardest thing and a lot of time managing it is hard because they don't know

They don't have an expectation of where they think it's gonna go. They just they they they they get in and they think, well, the market is likely to react here. Maybe we're a bit overdone to the upside or the downside or this is a this is a big trend line that we've just broken out of, I think it can tank. But tank how far? You know, so you've got to have an idea and what I try to do is I try you know, I have

Two types of trades. I have those where I feel that the market is poised from a higher time frame to make a big move. And then I'm going to get in on a lower time frame, like the 60 minute, and try and enter that trade and run it. sometimes for the whole day, sometimes even for longer, to try and capitalise on a bigger move. But the other type of trade is is where I will literally play from one level to the next intraday. So it might hit a support and trade up to the next level.

Um and I you know, as you would expect, I'll find the trades where I will run onto a higher time frame will be the ones that pay out in terms of giving me a higher uh risk reward ratio. But

I always I trade the market, right? I don't trade risk reward. So what I mean by that is sometimes I see people, uh, they they come into the they come into the market and they say, okay, so I'm planning on taking this trade. And I'm buying, let's say, this support level and I think it's gonna go up to the next level. And they look at that trade and they say, Well, hmm but that's only got that's only got a one to one risk reward. I've really been told I should get a two to one.

So I'll tell you what I'm gonna do. I'm still gonna take that trade, but I'm gonna make my stop tighter. Or I'm still gonna take that trade, but I'm gonna make my target bigger. And you see what they're doing there is they're completely ignoring the structure of the market. They're trying to impose their risk reward on the market.

And to me that's crazy because you've got to trade the market. You know, the market doesn't give two shits about your risk reward ratio. So, you know, if you're not trading the market, what are you trading? And I think again, that's where a lot of people a lot of people go wrong.

I would now like to share with you a couple segments, a total of about 15 minutes, from episode 150 with Aaron Brown. Aaron has been a dedicated risk manager for the past thirty years, and he's perhaps most renowned for the ten years which he worked at AQR. A large quant-driven fund with near$200 billion of assets under management. Can you give us an example of a couple questions that traders should be asking themselves?

or, you know, if they have access to someone more experienced, uh, about risk. Like some questions that traders maybe often ignore, don't even think about, or just plain simply don't ask themselves. Well I guess the first one, and this is almost a definition of being a trader, you know, a lot of people come up to you and they say, you know, I think I think, you know, gold has is has gotta go up in price or I think that, you know, the stocks are overvalued.

And and the first question I ask is I say, um, okay, how much would things have to move in the other direction before you would decide you were wrong? And if the person has never even thought about that question, I just know right away they're not a trader.

Um, because they're not really you know, they're they're planning one course. This is like the risk avoiders. They plan the most likely course, or they plan what they think is gonna happen and they get mad when, you know, things don't go a as they plan. A trader has to be able to really internalize, not just, you know, give lip service to not just write it down on a piece of paper, has to really internalize kind of two ideas. One is that they might be right.

Uh and when is it they might be wrong? And Each one of those views has has, you know, consequences to it. And so if you thought about a trade, if you thought about it in trader terms, you have an idea for, okay, when I say gold is going up.

I'm thinking that, you know, here's the approximate amount of money I would want to make on the trade and if it went in this direction by two hundred dollars if something I would know that I was wrong or or perhaps you know something had come in to change the situation that I didn't expect. Or maybe I was just wrong in my analysis.

And those are kind of the first two numbers you think about when you're trying to think about the risk of the trade. How much does it make if you're right and how much does it lose if you're wrong? Of course there's a lot more work to do after that. But if you haven't even thought of that, if you just thought of one scenario, there's nothing a risk manager can do for you.

There are some people, really great traders, who can, you know, think of three or four or five scenarios and really hold them in their mind at the same time, but uh that's pretty rare and I don't know how useful it is. You know, if you really have two good scenarios And you know, you plan a trade that that works for those. Um, you're gonna do most of the work uh that you need to do to make good risk decisions in trading. Would you say

As a risk manager, you focus more on what there is to lose instead of what there is to gain, or do you focus on both with somewhat equal weights? No, it's it's gotta be exactly equal weight. If if anything You focus more on uh the opportunities. That on the downside, what you're really thinking most of the time.

Uh, you don't wanna uh have like intermediate, um, you know, cut your losses early kind of things. You kind of figure out how much you're willing to lose if you're wrong. And there's no great advantage in losing less than that. Um typically you wanna, you know, go with the idea until you've lost what you're willing to lose and then uh And that's when you get out if you're you know on the on the downside.

So on the downside, you're kinda looking at a floor, a limit, like, you know, okay, what's the worst that can happen? And how am I gonna deal with that? Once you decide, okay, I can survive, if if the worst happens, you know, my plan isn't completely Uh throwing out, I can still make my annual goals, whatever. Then you stop.

You don't think too much about that. Then you start thinking, okay, now how can I squeeze the maximum I can out of this? People leave a lot more money on the table on the upside than on the downside. Um and a risk manager has a lot more help.

Um when things are going well. You know, if things just go against you, you do your s stop yourself out, you go on and find a new trade. You don't need to pay a risk manager a lot of money to tell you uh that. But When things are starting to go your way and and you know, then got little reverses, things like that, that's where your attitude or toward risk becomes very important.

Can you expand on that a little further? You said that traders leave a lot of money on the table on the upside. How can we take some of that money off the table? Yeah, it it's uh y you know, i it it's a question mostly of thinking things out ahead of time. I mean again, the w the way a lot of traders approach things is okay, I've I've got this thesis. And uh it looks like a good thesis.

And then they and and once once they convince themselves, okay, this is a good thesis, they immediately turn to the downside. If they don't turn to the downside at all, then they're not traders. But they turn to the downside and they say, okay.

You know, what might go wrong with this? How could I lose money on this? How can I size it or or set it up? You know, often there are trades that are too risky on a naked basis, but you can figure a way to do it on a spread, you know, with with some other positions such that you uh And they tend to spend a lot of time planning that. I would say a lot of eighty percent of the pre-trade strategizing tends to go on.

uh, you know, uh capping the downside and and uh and and dealing with it. I I tell'em, you know, switch that around. Spend twenty percent of your time, you know, capping the downside's important, you gotta think it through, but

Honestly, if on the downside, things aren't going the way you predict, and it's not worth spending a lot of effort figuring out exactly what. You know, once you're wrong, you could be wrong about a lot of stuff and and it's hard to predict exactly how you're wrong. Um but if you're right.

Why exactly are you right? You know, often you have three or four reasons why you like a trade. Well, you know, trot'em out one at a time and figure out exactly how much each one means. And, you know, set a reasonable strategy for uh Um for for for taking profits. Not just, you know, gee, I'm gonna get out what I've made, you know, uh ten ten points on this one, but

Um, okay, you know, if it goes up quickly, this is what I'm gonna do. If it goes up slowly, if it goes up and this other thing goes up, I'm gonna do this. You you don't have to map everything out. You don't have to have an algorithm that tells you exactly what you're gonna do. Although I have spent a lot of my career doing quantitative trading where you do exactly that. You write a computer program to do all this stuff. Um but you don't have to do that level.

You oughta have some fairly sophisticated thoughts. um about how you're gonna exit this exit this trade at a profit. Um and that's where it's so easy to, you know, you're right, you're happy, you wanna grab, you know, what you've got to date. Um it's especially here's a one that happens a lot, you know, you made a lot quickly and now it's kind of slowly giving back. Um, but you really haven't gotten up to the point where you uh

uh where where you would plan initially. Um, people love to win, you know, and people would rather, you know, win eighty percent of the time than, you know, win forty percent of the time but actually walk away with more money.

Uh this is something we know we see in poker too. They're people they want to win a lot of pots. And that's not really the goal. The goal is to walk away with more money than you started, and sometimes that means losing most of the pots, but you know, winning a few big ones.

Um trading doesn't have to be like that. You know, there are traders who make money 80% of their trades, there are traders who make money five percent of their trades, but they just make so much on those they can afford it. You gotta know who you are and you gotta know what you're going for.

I think this is an interesting question. Are there types of risk that are either hidden or unknown to most traders and investors? And I guess I'm partly asking this question because I've just recently read Uh black swan from a buddy of yours, Nassim Taleb. You know, he talks a lot about this stuff like the unknown unknowns. How do you think about this sort of thing as a risk manager and do other traders need to kinda wake up to these unknown unknowens?

Well, okay, here's the problem and I'll tell you, Nassim gets very frustrated'cause people say people come up to me they've asked him this question, actually since even before he wrote the book,'cause he was, you know, saying a lot of this stuff. Um, before they say, Okay Um, what should I do about it? You know? Um how can I predict black swans? And the whole point is you can't predict them. If you can predict them, they're not black swans. Um, you know, and a and how can I plan for them? We

That really misses the point. What those people are really saying is they don't really believe they're black swans. They just think there are things other people overlook that they can be uh clever enough to see. And uh Nassim's uh position, and I completely agree with him on this. Is there are just fundamental things that we can never predict. There are things that happen because they're unexpected. Uh the example he gave in Back in Fooled by Randomness, one of his earlier books.

is, you know, we had this uh terrorist attack on nine eleven, uh, two thousand one. And before that we knew there were hijackers. There'd been lots and lots of airplane hijackers. But all of them had wanted to survive. And we had lots and lots of suicide bombers, but all of them were low skill young men with very simple plots who struck close to home. Um and so we had defenses against both of those things.

But because we had never had a sophisticated, uh higher skilled people uh who were willing to do a suicide attack using hijacking airplanes, we really didn't have any defenses against that. But that's exactly the reason it happened. If somebody had thought of that and we had built defenses against that, they would have figured out something else. to do. So it it's it's pointless to try to

figure out all these things that might happen. What you need to have is you would you need to have a plan, a long term life plan, basically, but certainly a trading plan that on average will be able to take advantage of unexpected events of disruptions. You don't want to have something that's so um fragile and so uh you know tightly constructed that if the markets change behavior in any way, it's gonna blow up everything you do.

And this is what happens sometimes. People have these very highly levered, very specific strategies based on um, you know, empirical regularities or theories that that have worked very well in the past. But if anything changes in the market, um they they they can get blown up. Uh you much, much prefer to have these uh robust strategies that actually do better. uh if something uh um Unexpected happens.

And uh one of the ways I like to put it is and and this is this is actually I use this to summarize Nassim's investment philosophy, you know, you s fill one of your pockets with insurance policies and you fill the other pocket with lottery tickets.

And then if anything, you know, unexpected happens, probably you got something in one of your two pockets uh that's gonna profit from this. Uh if you make a business writing insurance policies and selling lottery tickets, then if anything unexpected happens, you're probably toast.

I tell you people spend a lot of time worrying about exactly what bad events or or surprising events are gonna happen, and there just isn't very much um value in that. Uh another thing I like to say is I say, okay, there's an infinite number of uh disasters that could happen to us, but there's actually a fairly small number of ways uh that they're gonna play out. Um, you know, if you're running a hedge fund for example, you know, anything could happen in the world. But

You know, what's gonna do well, maybe it's gonna, you know, seize up all your cash and you're gonna have trouble making margin calls. Maybe you won't be able to trade something. Uh maybe you won't be able to get good price information on something. Uh maybe somebody who

owes you money or otherwise has promised something won't be able to deliver. And and if you think about things in that sense, you really think, okay, so I gotta worry about my cash. I gotta worry about my access to trading. I gotta worry about my counterparty risk.

I don't really have to worry about why those things went bad in some future scenario or how bad they might get. I just want to say, okay, I've got some some plans in place, some contingency plans in place, uh, to protect me against those things. And they're never gonna be big enough to cover anything that might happen. But you, you know, make them as big as you reasonably can and you just live with whatever else, you know, whatever residual risk comes up.

Yeah, is that difficult to sort of accept as a risk manager? Like, you know, as the title says, you're there to manage the risk and you have to in some ways just accept that you're not going to be able to manage Every possible risk that might play out. Well no, I I wouldn't put it that way. You're not able to predict the risk. Again, you know, so a lot of people think that a risk manager's job is to predict and prevent disaster, but that's actually closer to the opposite.

You know, the people who try to predict, who try to guess the future are the enemies of risk management. You know, they're the ones who say, you know, build the wall on the north side of town'cause that's where the attack will come from. And the risk manager says, Look, if you leave any gap in the walls anywhere, that's where the attack will come from. Uh don't try to guess what's going to happen. Prepare for anything that might happen.

And and you know you spend all your time trying to prevent disaster, you just kill risk, you kill opportunity. Um the idea is to survive disaster. And and generally speaking, as a risk manager, if you find that we have, you know, mitigants in place or or, you know, uh uh things in place that limit our our actions that are designed to make things better in the worst case.

You wanna be sure those things only kick in when it gets really bad. I don't wanna have, you know, limits that protect against uh, you know, moderately bad down day. I want limits that, you know kick in when survival is at stake. Um, you know, you do too much protection and you uh you kill more opportunity, then you reduce risk. And by killing the opportunity, you're not going to have the profits, you know, accumulated over the good times uh enough to pay for the problems in bad times.

Uh another thing I tell people, I say, look, every you know, anytime I'm talking about a new product approval process or a new strategy or a new fund, whatever, somebody's trying to do something new, I say, you know, every idea anybody ever had.

uh uh makes money for a while and then loses it. You know, something always happens that uh causes some loss. And and you wanna prepare for that. And you wanna, you know, build the thing so you're making enough money when things are going well that it offsets The loss when it ends. And the mistake people make, a classic uh risk avoider uh mistake

is to s you know, start really small to kind of look at something and stay out of it until you're sure it's gonna work and because lots of people have been doing it for years and it always works. And then you start really small to make sure you don't make any mistakes. And then once you kinda get confident that this thing works, then you're way behind everybody else because you waited so long and you started so small, so you start getting bigger. You get bigger and bigger and bigger.

And what that guarantees is when there is a problem, when things do turn around and you have a loss, you have far larger exposure than you had in the good times. So you don't have the profits from the good side, good times to pay for the losses on much larger positions, uh, when it fails. And so, you know what I tell people, you plan for success.

You know, you don't spend too much time worrying about stuff. When you decide you're gonna take a risk, you take it. You pick a size and you stick with that size. Um, and you know, that way you can accumulate enough uh when you're when you're working and and when it goes bad, you know, you won't have bigger exposures and you'll be able to afford them.

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This next bit is taken from episode one hundred and thirty-six, featuring Mike Agney. Mike came up as a fixed income trader at TransMarket Group in Chicago. Today he's a CTA manager and trades in a way that's probably best described as using futures and options on various asset classes to express his views on global macro events. Now these two traders who really helped you and kind of molded you into the trader who you were early on.

What was some of the big things that you picked up from working so closely with these guys? I mean, you were clerking for them. What were some of the things that like, is there anything that stands out? Which they really tried to instill in you. Yeah, yeah. I think this was kind of the balancing act because Mark and Jeff were very disciplined traders.

I think, you know, not only on what trades they would actually do, but, you know, I I think on the risk side of it, you know, being risk averse and knowing Uh when to take risk, when not to, and not just putting something on just to put it on. Whereas Ray Common was kind of more like a risk. risk taker. So they were the balance between that little bug in my ear, Ray Common, and saying, hey, take the risk and let let let's see what you can do. And then these guys were more of the

I don't want to say conservative because it's very hard to be a trader and be conservative, but they were disciplined. And I think one of the main things that they installed in me was discipline of knowing that like You could put this trade on it. And it's might not go your way so then you're up

Up it's up to you uh what you do with it from there. Do you add on? Do you take the loss? Would do you, you know, just get out and reconfigure it and see why it's not working out. I think they were very good at at installing that early on for me. uh, you know, just that discipline of of those choices of and when to take'em. You know, timing is everything. So you may have the right trade on, but if you put on at the wrong time, then you're you know, then you gotta figure out like

you know, where you go from there. And I think they were very good at at that, vr you know, the timing piece structuring the trades and why they were doing it. you know, they had ra good rationale. I I understood their traits, so you know, they would explain to me why they were putting something on, whether it be for like a you know a repo play or a calendar role play, something like that.

Which some guys in the industry, if you're not in the bond, you know, market, you might not understand repo and and that stuff, but that might be a topic for another day. But i it's just stuff like that where on a on a bond arbitrage, you know, as a bond arbitrage trader, you you need to know those things and learning from guys that can do it and do it well is is I think highly advantageous for a young trader.

So you had quite an interesting path into actually becoming a trader. Like you started out as a phone clerk and then you graduated to becoming a trader ultimately. So you kinda had a different path into this than I guess what most traders do, especially nowadays anyway. Yeah. Were there still challenges for you when you did begin trading?

full time because you said, you know, towards the end there when you were clerking that you were almost kind of guiding these guys on what trades to make and how to manage certain positions. But When it actually came to it and you were trading for yourself, uh still at Trans Market of course. Were there any challenges that you still came up against?

Yeah, sure. I think the biggest challenge was getting over that hump of trusting that you know how to do it and you can actually do it. Uh you know, I'm never gonna forget the feeling in your stomach when you put something on and you don't n you know, obviously you don't know it's gonna go your way. It looks good, it feels good, but you know, it might not necessarily f you know, go your way.

And that's not for everybody. And I think that's what separates successful traders from guys that think that they can just do it is the fact that you can handle certain types of risk and you don't jump the gun or you don't, you know, do something irrational where

Y your mentality kind of, you know, dictates could be dictate your profitability or or your, you know, you may lose money or, you know, because you make a silly decision because you let your mind take over instead of letting your rationality take over. So Um but I'll never forget that feeling of putting like one of my first

you know, trades on because I was always worried about Ray Common coming over and saying, Why'd you do that? What you know, you're if you're you know, especially if you're a wrong, you know. He loved you when you were right, but he really didn't like you if you're a wrong. But

But that was part of the of how he did things. And I think it made it made you a better trader because not only did he want you to put on risk and take the risk, but he wanted to see how you handled it. This isn't s you know, that I that's why I don't really believe in paper trading. You know, because i it it will never be able to supplant the real life experience of actually risking money and capital.

And I think Transmacro was very instrumental in teaching that as well. They knew that that it takes money to make money, and they know that not everybody's gonna be a winner. But in order to find that winner, you have to take some risk and believe in some of these guys that come in. Um and I don't think your demographic or your background really mattered to any of these guys. It mattered whether or not, you know, you could actually do it do it.

You know, and like I said, it's not for everybody. And I don't think many people like to take risk. I think a lot of people, you know, take the safe route and that's okay. And that might be for some people, you know, but for some others, you know, taking risks

Now I don't want to say it comes naturally, but it's just easier for some more than others. Absolutely. Yeah. How did you begin to build up your risk tolerance? I presume Ray was certainly a big influence on that, but I mean, can you kind of give us a bit of an idea on how you became I don't know if more comfortable is the right word, but let's just run with it. Yeah. No, I know exactly where you're going with it. And the simple answer is, you know, you have to build up capital. Um

You know, he always said, you know, having skin in the game will make you a better trader because uh you know, because you have s you have something to lose at that point. Yeah, everybody can come into a prop group and and trade their money and risk whatever and walk away and maybe get a job somewhere else if it doesn't work

and work out. But if you go into this thing with that mentality, forget it. You'll never do well because you don't respect the capital. Um so that's one of the things Ray and Trans Market taught early on as well is that you have to respect the capital. And you have to respect the fact that markets can stay irrational a lot longer than you can stay solvent. So that was one of their

you know, key mantras there and, you know, I I think it it worked for me because it gave me the discipline, you know, on the heels of, you know, Mark and Jeff and what they taught me to build up something before you actually take excessive risk. Or maybe t you know

move up in size, which that's all you know, you can make more money it that way. Not only hold on to something longer, but you can you can create more alpha by adding on and and building a bigger position. So but the only way to do that is to you know, have successful runs and build capital up so that you can do that.

You know, I always felt more comfortable when I was doing well that I could put on more size. And that's really what turned the tide for me in trading was that I got very comfortable putting on risk as I was making more and more money. And that might not be the progression for everybody, but for me, I felt that with the capital behind me and I knew my risk that I was very comfortable. And I think being comfortable is one of those stepping stones of being a successful trader.

Coming up now is an audio clip from a live Chatwith Traders event with special guest John Moulton, or as he was famously known in the trading pit of the Sydney Futures Exchange, Rambo. After moving to Australia from Chicago, John became a very large spread trader of government bonds and bank bills. And forty years on, after placing his first trade, he's still active in the market today.

This clip somewhat blurs the lines between risk management and psychology, but I really like this bit and I wanted to include it here. For many gems, listen to the full audio on episode 163. The way I've always traded, I w I don't want to use the word high frequency because you guys have algorithms that are high frequency trading algorithms.

And I'm more of a hands on trader. And what I'm always doing is I'm focusing on the next trade. I don't think about the trade before it and and I'm not analyzing the risk I just took with that previous trade. It's just a fucking trade. I don't care. You know, it's just put it in the books. Let's get on to the next trade. And because I'm mainly a spread trader, so I'm buying here, I'm selling here, I'm trading twenty different things all the time on the bid and offer, blah blah blah.

A lot of times I have no idea what I'm doing. I'm just trying to make good trades. And then and then the market closes and I go, I wonder what my position is. Let's try to look at that position calculator. I look at the position and go, Whoa, okay. I'll get that up on the chart I'll get that up on the charts and see if that looks good. Oh yeah, it looks good on the charts. I like that position. I might keep that for a day or two.

You know, like i it what motivates me to make trades is is is when I'm looking at the markets is a lot of different things. It has to do with relative value. Uh it it has to do is there a buy program in the ten years, is there a sell program in the ten years? Are these spreads reaching historical levels? Are we getting near expiration now? These spreads historically have a tendency to move a certain way going to expiration. So there's a lot I'm thinking about when I'm making treads.

When you're talking about learning how to lose, I mean, I know who who's who here has been trading let's say less than two years? Who's been training for more than ten? Woo. Cool, young crowd. That's cool. So I imagine, especially for newer traders, that's a very strange concept to put forward. Yeah? Learning how to lose. How would you actually know if you've learnt how to lose? You stop doing it. You you you don't lose as much and you lose less frequently.

And then you say to yourself, ah, maybe I'm getting this now. Okay? Um, but you're gonna lose. So I I don't dwell I once again, I'm repeating myself, but I I I I I'm so focused on the next trade. This is real zen shit man. This is like living in the now and spitting out what's happened in the past.

If you're a Zen Buddhist, if any Zen Buddhist here, you'll make a fortune trading. So what you're trying to do here is you're trying to focus on the absolute moment of the price information that you're getting off the screen. And that's what you're focused on. And everything that's happened before that, you can look at it later, but if in an active market when you're trading, you want to be focused on the now of the price action that you're looking at.

And if you're dwelling on other things that have happened in the past. It's gonna it's gonna keep you from from doing that. It's as simple as that. As far as losing is concerned, I mean y you know, like

When do you really actually realize that you've lost money? Well, it's when you get your statement the next day and you look at the total equity at the bottom and say, fuck, I lost money yesterday. But I but I don't I don't do that. I've gone months and months without looking at my statement to see if I've made or lost any money. I've gone months with that.

One of the things when I first started trading, like a lot of you guys are new traders, I had to keep track of how much money was making a daily basis. I used to go from Chicago on the Chicago Northwestern trade up to Lake Forest every day. It's about a forty five to an hour uh train ride, depending whether I'm taking the express train or not. And I'd sit down, I'd count every trade I made and figure out exactly how much money I made or lost on the day. I did that for a few years, right?

So it's an evolutionary thing. When I first started training I really wanted to see how I was doing on a daily basis, right? It was important to me. Then I realized after a period of time that it wasn't so important. Then I got to a point where I said, actually, if I can completely divorce myself from money, I'm going to be a much better trader.

I know that's hard to do, but I'm telling you now, if you can if you can get away from the money aspect of trading and just focus on the market and making good trades, you'll have l you'll be distracted by less things.

There you go. I mean I I just I'm at a point now and I have been for about fifteen, twenty years, where I just don't care about the money. I I get a monthly statement now, I'll look at a monthly chart of where my equity's been and that's it. I don't look at daily statements, I look at nothing. I'm focused on my on my position and the trades I want to make, the trades I'm making.

I'm a big believer in trading your own money. If you want to trade someone else's money, just be really careful, especially family money and grandma's pension. Just try to just try to trade your own money and go from there. And grow organically. You know, if you start with ten thousand dollars an account, that don't that there's nothing wrong with that. It gets up to fifteen, pull a couple thousand out, build, build, build, grow organically, and don't try to make it happen too fast.

You gotta stay on the test of time. If you really wanna trade for a longer period of time, you can't go ballistic too early. Um but what I mean is I knew a lot of traders that would trade for nine months and they'd make money every week. Every week. Good money. Money, money, money, money, money coming in. And then in three days, after nine months, they give it all back. They give it all back.

And I thought about this over the years because I've seen this more than once. And I said to my I've said to myself, well, why does this happen? There seems to be a self-kill in a lot of traders. And I can only put it down to the fact that I think one of the One of the things that happens to us as human beings is we really Enjoy the challenge of trading and the climb up the hill.

And that's where the thrill is. The thrill is climbing up the hill. And if all of a sudden you think you've reached the top of the hill, because you've made a bit of money, a bunch of money. You don't like that. Your subconscious mind takes over and goes, I don't like this, let's climb the hill again, and you lose everything. In just two or three days, all gone. Now I'm back where I want to be. I'm back down here, and now I'm gonna have fun climbing the hill again. So be careful.

Be careful. Don't be one of those people. It's no good. Not good. No, no, no. Okay? So but to be aware it's out there. If you let it crawl into you it can happen. You gotta really know yourself really well. Talk to yourself. Have a chat. Get to know yourself really well. It's very important.

Now you'll hear a short clip from episode 79 with global macro investor Ruhl Powell. Rawl spent roughly twenty five years in the hedge fund industry before leaving that all behind him and co founding a financial streaming service, Realvision TV. How do you think about and how do you manage your risk? Like at what point do you determine your initial analysis to be incorrect?

Well, if you're using a chart pattern, then you tend to know if the chart pattern's not working. So if it's not working, if it doesn't if it's not playing out like a head and shoulders top should do, then you should stop yourself out. Um I don't use tight stops'cause I'm not one of those kind of short term

Traders, I just think of the amount of capital I wouldn't t uh I'll I'll be willing to risk. I'll have a much wider wiggle room than most other people. Um, you know, you get used to taking a bit of pain over time as well. But as long as the the amount you're risking is is a fraction of the amount that you hope to gain should your trade play out, then you can do that, you know, over time.

I'm not a s you know, I uh I I find stop losses not good because everyone gets stopped out in the same place. I'd rather be kind of a bit more vague in my stopping out process and entering process so I might scale myself out. as I m scale myself in on entering trades too.

So I I tend to be very different to other traders in that respect because I I really don't like hard stops unless it's a really obvious line that I've shorted or bought against and said, right, if it doesn't do that, then I'm wrong. You know, then I'm happy to use stops.

Next, I present to you Larry Haidt from episode 180. Larry's been in markets since the 60s. He co-founded hedge fund Mint Investments. and he is considered to be one of the forefathers of trading systems and a pioneer of trend following. He was also profiled in Jack Schwager's first book of the Market Wizards series. Do you have any risk management rules which you live by? Like I guess just going a little further into your risk management philosophy there. Yeah. Yeah. I I I I I always figure out

what the loss could be. And if I can't take the loss, I cut the bet down to a point I can. I I'm totally indifferent to what the fucking market does most of the time. I would rather win than lose, but I'm gonna be really willing to be the house. One of the things which stood out to me from reading uh your Market Wizards interview with Jack Schwager from oh, when was that? Was that the nineties when that book came out? Um

Somewhere around that time. You can tell me. Yeah. Kind of like eighties, nineties. Okay. Yeah, I'm right. Yeah. And also your book which is is coming out, it seems like Early on in your career you were around or you knew of numerous people who had made quite a lot of money in the financial markets. And then also later on lost that money. And not even necessarily like way further in their career, but in a short period of time had lost a lot of the money they had um made.

That must have really shaped your philosophy on risk. Yeah. Yeah, that's why I always go against my core capital. I don't feel I'm Superman and I'm only want to bet a given percentage of my core capital. I don't break those rules. I make money by staying alive. Embedded.

One of the things which I I feel like I should probably bring up here is we're talking a lot about, you know, betting when the odds are in your favor. Th this I think the second part to that is also sizing your position correctly. Correct. So how do you think about position sizing? I I go from where I enter to where the stop would be divided by what my core capital is. It's really third grade shit. Yes, it is it is very simple. No, but simple. Thank you.

Simple has a very bad reputation. Sure. But I'll tell you what simple really is, it's robust. I don't want to be in anything that is very complicated or they don't know how to unwind it. I want to come out and stay alive because the more I stay alive, the more money I make. And I have a great lifestyle. Married a beautiful woman. I live on

in Miami and in New York to the best streets around in Easy City. And for a guy who's left back Once in school, you know, um, who was never in the bright classes, who was never a great athlete.

Lastly, this compilation comes to an end with Rob from Episode 72, which was titled Why Risk Management is King and Why Gambling Isn't Such a Dirty Word. Rob's an active trader who scalps futures and places a great emphasis on modeling and managing risk. One of the things you said a little earlier was that entry is the least important thing for most people. And another thing you've said to me in prior conversations is it's the bankroll and risk management that truly matters.

So could you just spend a few minutes to help us understand why this may be the case? I think, you know, c it we would probably go back to the core philosophies that I talked about earlier. And if we if we use a casino as an example, you know, um We we embrace the idea of gambling. Uh it's a dirty word to so many people and in certain aspects of the industry it's it's a really dirty word. Uh nobody wants to to accept that that when you're taking risks.

of any kind that you're that you're playing a game of chance. Um You know, so a a lot of the work that that we've done in in quant research has has been aimed at treating markets as if they're random. they're absolutely not random at all. There's nothing random uh about markets, but very interesting things uh can be discovered if you start uh you don't have to, you know, study them to the depth that we have, but if you start thinking about markets

uh uh as if they're random, it can pave the way to kind of understanding how uh edge can be created through risk models. So um if you think about a casino And you think about a typical casino, they have a whole bunch of different games, with table games and they have slots, and they have various betting limits across those games.

And these are all games of chance. And and I always say the word uh you know, I always bring up this analogy for gambling because I think it's really important. You know, if you knock on a hundred doors in your neighborhood and you say, hey, I'm doing a survey, what do you think about gambling? you know, a very large percentage of those people are gonna say Oh gambling. Oh gambling.

you know, this guy down in his luck that, you know, was you know, betted on black and was stuck in Vegas and can't get home and he's lead you know, living in a CD hotel or whatever. And uh but if you go back the next day and you knock on the same doors and you say Uh sorry, you know, I'm back again for another survey. Uh how would you like to own a casino?

Now all of a sudden, you know, everybody says, Well yeah. You know. And of course, you know, it would be fun on some level at least if you could say to them, well What's the difference? I mean, do you think that the casino isn't gambling with the player on every hand that they play or on every pull of the slot? Um again, you know, what we're talking about here is is is edge. You know, we're talking about mathematical edge. Uh casinos lose all the time.

um in in various pits and in various games and y you know, guys come in and they catch a run of carts and they beat'em for a hundred thousand, two hundred thousand, a million, two million. Happens all the time. But they know that over time that because of the edge that they've built into the game in the case of the casino, it's actually the structure of the games, to a lesser extent the betting structures.

Some of the betting structures benefit the players and so on. But at the end of the day, what they're really doing is grinding out a risk model. So a casino never has a meeting after a shift and goes, Hey, listen, blackjack dealers, we gotta do something about these hands. I mean you guys are losing way too many hands. I mean what

What would the blackjack dealer say if their boss said that? Like, what are you talking about? How can I control what hand comes out of the deck? So when we talk about, you know, entries being the least important, at least, you know, um uh in the context of this conversation, that's what we're talking about. Um uh you know, you don't your entry doesn't really necessarily have to mean anything. There's other caveats. I mean you certainly you have to be diverse enough, you have to

you know, uh th there's other components to it. I don't you know, it's not realistically n necessarily too to trade, you know, a a single market, for example, intraday with very few occurrences and expect to replicate an edge entirely from the risk model.

Um, you need to, you know, have enough events. Obviously, you know the casino deals a lot of hands and so on and so forth. So all of those things matter. But that's really what we're talking about when we talk about um uh math advantage risk management, um, you know, having the ability in a market uh is unique to set your own payout odds. You know, nobody no casino lets you walk up, you know, to a black check table and say, Hey, you know, I'd love to play this game and

I'm I'm totally comfortable with your you know, with your uh one percent or less house edge or or whatever it is, you know, based on the structure of that particular game. But here's the deal. You know, you don't even have to give me three to two in blackjack. Just any hand I win, you give me two chips and every any time I lose I'll give you one chip. Well of course no floor m no floor man's ever gonna give you those odds because they can't win, right? Um

That's what I'm talking about. When in a market, nobody says to you that n nobody tells you how to create your betting structures. So, you know, you If you wanna if you wanna risk three points uh for you know, to your stop on some trade that you make and every time you get out you start to get nervous and you take a one point win.

Well your your risk math is inverted as we call it. So, you know, you get a couple a couple losses for three handles apiece, you know, you're gonna have a lot of one point wins that you're gonna have to crawl back from. Or to do that.

Um, it's your choice. In other words, you can you can say, Oh, I don't care if I have a twenty percent win rate, a fifteen percent win rate, whatever. I'm gonna bet a dollar and I'm not gonna get out or accept a win until I've made, you know, eight to one on my money or whatever the number is. um you're probably not gonna like it psychologically, but it doesn't mean for a second that that's not the best application that's going to make you the most money. Typically what makes you

feel the best as a discretionary trader is never what's gonna get you the money. It's always, you know, we always say, you know, being being being a trader in general, but especially being a discretionary trader, is is about managing discomfort. And it never gets any easier. I mean, I've been doing this a long time and um I'm never comfortable. about being in a trade. I'm never like, oh, I got this licked

I'm gonna win this, you know, uh I got this. Uh I'm always nervous, I'm always skeptical, I'm always uh thinking I'm I'm early or I'm late or I'm not making the right decision. You know, it's just something that you have to settle in with and and realize and make sure that it's not influencing um

you know, how you should react, um and how you should manage your your position or put on a position at all. So um that's really what we're talking about when we talk about the importance of that stuff. But if you're uh if you're focused on you know, when this indicator lines up with this and that's that's where you think you're gonna you're gonna make your money, it's it's it's not. And and even if it is temporarily.

It's if that kind of inefficiency exists in the market it won't for long. So the market will eventually find find it and it will will render it uh obsolete. So, you know, y you really have to be focused on How to manage your money, uh you know, not only how to how to risk manage each individual trade, but

how to not you know, it's not gonna be linear. You're gonna have to adapt to changes, you know, in volatility or even how the markets change and the way they move and cadence as we call it. And um it's just it's just something that you have to do. And most people that fall into that retail trap, they don't they don't want it to be adaptable. They don't want it they they want the easy route. What's red light, green light. This lines up with this, this does this. I get long. I go to the beach.

You know, and a year from now I'm just printing money. I mean, that's the dream that a lot of people get sucked into and I'm I'm Sorry to say, but there is just no light at the end of that tunnel.

Is there anything Anything in particular that you've noticed amongst um traders on a retail level that they often don't think about or consider when it comes to risk? And I guess lastly, why do they have a tough time being profitable? I think A l a lot of a lot of people think that risk is they say, well I manage my risk. I use a stop loss on every trade. Uh that's a that's a common one. Um you know, we we think of stops as placeholders, you know, for the most part. Uh

as a way to sort of define, you know, your your max risk on a trade, but it r you know, that alone isn't really a risk model. I mean when we think about risk models, you definitely have to have those components of you know, uh, striving to to uh

to really understand what your typical average win is and what your average loss is. And these are very complex issues because some people trade all in, all out strategies, some people scale out only but not in. Some people scale in but not out. Some people scale in and out. Um uh and depending on what the strategy is, all of these things can be different. But that's definitely a component that you have to understand and you have to understand

that that is part of the risk model and not just using a stop on every trade. The stop to us just defines your your uh you know placeholder or or or theoretical percentage risk on a trade. So in other words you use it as a a divisor to create your trade size. So, you know, if somebody trades

I don't know, you know, they're trading one they're trading one contract in the ES, for example, and uh their maximum stop that they ever use is is three three handles, right? So it's fifty bucks a handle in the ES so it's a hundred and fifty dollars. Well then You want to divide that$150 into your equity in the account and understand what it is on a percentage basis. So if you lose that trade, what percentage of your equity are you going to lose?

And then the f the so now you understand. So let's say it's one percent. So you're risking one percent of your equity theoretically to your stop point in every trade.

Well is that enough? Well I don't know. How many occurrences are you gonna have? How how frequent do you trade? Are you trading eight times a day, you're trading once a day? Uh you know how How many over the course of a month, how many events or occurrences do you have? And how does that play into it? Well now let's go to the wind side of the equation. Are you scaling out? Are you not scaling out? How far, you know

all of those things come into play. So you start to create this construct of kind of understanding that you're trading. So if you're tr in other words, if you're sort of developing a risk model that's based on having a typical maybe one, two, three events max per day trading this one market, well y you can't just

all of a sudden start trading twenty times a day and think that it's not impacting it and it's well it's okay, I got my stops in place, right? I mean you know, all of that stuff really matters. And and I think the other thing that we see is again, this goes back to the psychology and the trying to mitigate pain, which is very common.

uh amongst humans in general. Uh but trying to too hard to achieve a linear a linear result or um of tr or or better yet, evaluating their prowess as a trader or the effectiveness of their strategy solely on its linear ability. you know, to produce results. In other words, they go, Well, if I'm if I'm winning three trades uh every four trades I win three. Well on every single of series of four trades I wanna have three wins and one loss. So it's like win, win, win, loss, win win, win

And I mean I'm not even joking. People really c you know, whether consciously or subconsciously have stuff like that in their minds. And you have to accept things like um uh you know, starting to stop over analyzing every individual trade.'Cause again, like I say, the decks being reshuffled, it's it doesn't mean anything. It only seems like it does. And any one event, any one trade, what's happening with that trade?

really has nothing to do with anything. So you want to stop analyzing well, well, if I lost this trade. it must mean that I made a mistake. And if I win this trade, it must mean that I'm pretty smart, right? Unfortunately, a lot of people think that way. Um and and the truth is is neither is true. It's just you win some and you lose some when you're a trader. You have to become uh very, very comfortable with that. And uh

uh grinding it out as we say. So we we tell people start thinking about blocks of trades. I mean we we say for a typical day trader, you shouldn't be analyzing anything statistically or evaluating your risk model. until you've got a month's worth of trades. Um, you know, because the idea of of s it's whatever happened today, you had three trades and you lost them all. Oh my God, back to the drawing board.

You know, I gotta change my model. This is I can't believe I live I I got fully stopped out on three in a row. This model's broken. Well, you don't know that. It's just you know. It's really inconsequential. But uh so it just these things are what feeds the back to the drawing board, back to the drawing board, back to and they keep going back to drink from a well that doesn't have any water.

You know, and then eventually they lose interest. I mean the typical we we've heard from some of our clearing firm relationships that right now the typical Average retail account attrition is inside of three months. So the average person that gets interested in enough interested enough in active trading to open an account doesn't last three months.

So that doesn't mean they all blow up their accounts. It just means that for whatever reason and a big number of them from from the people that we've experienced and and interacted with from that world are are definitely ending up at in that in that line of failures, not because they blew their account out or because they don't have what it takes to be a trader, it's because You know, they're focusing on entries.

hyper analyzing each individual individual trade, you know, using that as ammo to quantify success or failure, go back to the well, try to create a new model, rinse, repeat, rinse, repeat, rinse, repeat. So That's it. I mean, in a nutshell, it's not most of'em never even get to the point of where we could have a discussion about what's wrong with their risk model or how to develop it better'cause they're stopped in their tracks at that.

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