#63 Lance Breitstein

March 6, 2023

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Lance spent over a decade at Trillium where he was one of the best intraday traders on the street. Lance managed Trillium’s Chicago office, trained dozens of traders, and was the firm’s Top Trader in 2020 and 2021 with back-to-back 8-figure PNL years. In 2022, Lance stepped down so he could share his knowledge with the trading community. Lance is Trading Advisor to SMB Capital in addition to running his non-profit, The Impact Competition. The Impact Competition challenges students to solve issues for local non-profits and then gives them the seed money to implement their ideas. His dream goal is to promote The Impact Competition to the trading world while live on CNBC.

What attracted you to trading?

The Market Wizard books were what really helped me fall in love with the idea of being a trader and trying to beat the market. The meritocracy, the challenge of it, the competitiveness of it… the ability to build up this skillset that allows you to compound money seemed like an ultimate skill to build!

What’s your take on whether the markets are PVP?

This is a tough question to answer because ultimately, markets are nothing more than the aggregate of its participants, weighted by the dollar value of their positions. Without the individuals, you don’t have the market. So you can get into a debate of semantics. But if I had to answer, I’d say our job is to beat the market rather than any specific participant. Because many individuals can make a correct decision for their strategy or their timeframe. Someone can sell a stock for tax reasons and win, even while I buy the stock from him and win as well.

The other important reason why I don’t think wish to define trading as PvP is because I believe in teamwork. And I believe that the sum is greater than the parts. PvP mindset fosters too much lone wolf mentality. Too many traders trade independently and alone when they would be better and win more if they formed up in pods. We can spot more opportunities, make better decisions, be more informed when we operate as groups.

Ultimately, markets are nothing more than the aggregate of its participants, weighted by the dollar value of their positions.

How long have you been trading and what markets have you traded over your career?

I was professionally trading equities for about 11 years. I continue to trade part-time and do equities, options, and futures.

Have you ever been tempted to trade crypto?

I was heavily involved trading crypto between 2012-2018. A friend and I were one of the first to build algos that arbitraged crypto across exchanges, made markets on various exchanges, as well as trade the coins directionally. I was there for the fall of Mt. Gox, I took the 'haircut' when Bitfinex socialised their losses from the 2017 hack. I was printing money for many years trading crypto but stopped due to partnership issues and the toll a 24/7 market takes on you. This info takes many by surprise because I am a fairly vocal hater of crypto nowadays. 

I was there for the fall of Mt. Gox, I took the 'haircut' when Bitfinex socialised their losses from the 2017 hack. I was printing money for many years trading crypto but stopped due to partnership issues and the toll a 24/7 market takes on you.

I have seen the same bull arguments for crypto for over a decade, yet none of them have come to fruition beyond the same old niche cases. A decade later and still no real adoption has occurred of using crypto for everyday transactions, crypto wasn’t an inflation hedge, and the reality is that crypto doesn’t need to have intrinsic value to utilize the technology it’s based on. Blockchain, beyond how it already existed, has in no way had any affect on my (or almost anyone’s) life. I view crypto as one of the greatest ponzi schemes of all time because the price is almost all driven by speculation as opposed to true demand for any use.

I’ll still dabble in trading crypto during the massive panics or breakouts, but I don’t trust a lot of the exchanges. It’s hard to hold meaningful assets on most exchanges with such opacity around counter-party risk. 

How long did it take you to become profitable? Were there any major milestones where things just started to click?

I was negative every month of my first year. But then things started to click slowly but surely. Sizing up conceptually made sense to me, so then it was just rocket fuel. I very quickly started having $100k+ months.

Were there points in that first year where you thought of giving up?

The beauty of being employed by a reputable prop shop is that they gave me all the capital I needed and were very patient in the training process. Not only did I think about giving up, but 1.5 years in I even started to interview elsewhere. I truly questioned whether I’d ever make it. I was putting in so much effort and trying so hard. But my progress was just so slow. Thank god I didn’t get the job I had interviewed at. Those next few months were when everything turned around for me and things finally started coming together.

What does a typical day look like for you?

Nowadays my life is a hodgepodge mix of following and trading the markets, providing free trading education content, running my non-profit, and managing various business I’m involved with.

Tell us about your non-profit

My non-profit, The Impact Competition, is my small way of trying to make a better world. I sponsor competitions at Universities where we challenge students to learn about the social issues facing a local non-profit and then to provide solutions to help that non-profit be more effective. We then seed the winning solution so the students get to actually implement their winning ideas.

It is amazing because students learn about real issues in the world around them and are shown that they can make a difference when they tackle them in a local actionable way. We have tackled everything from housing insecurity to mental illness to gun safety. Hundreds of students have been inspired by these competitions to make the world a better place over the course of their lives.

Who did you look up to when you first started trading?

I had nobody to emulate but my boss. I was in a small satellite office. I saw on some days the ludicrous money he would make and all I would tell myself was “no matter what I need to sacrifice, no matter what it takes… I NEED to make it at this job and make even a fraction of the money this dude is putting up!”

no matter what I need to sacrifice, no matter what it takes… I NEED to make it at this job

What kind of a trader was he?

He was very strict and had a fiery temper. To this day, I haven’t seen too many people flip out like he would. But above all, he was a caring teacher who gave me all the tools to succeed. I could ask him any question about any strategy. He had crafted such an incredible system of technical analysis through endless hours of his own study. He was  so detail-oriented and this was an amazing trait to model after. Most importantly, I was role modeling a trader that was extremely aggressive. He always thought big and pushed limits. There is no way I’d have become the trader I did without him.

Is there any trade that was particularly formative in your development as a trader?

One of the most memorable trades I had was an exhaustion gap short in TSLA. Which is funny, because the stock is probably up 100x since. Tesla had been running up and getting overextended over multiple days then it had a really euphoric gap-up. This was a pattern I had seen many times and was one of our favorite patterns. It was also a pattern that I was able to strategize for.

This was occurring at a time when I was starting to lose faith in myself. I had been interviewing elsewhere, questioning whether I had what it takes. Knowing my back was up against a wall and that I might not see such an amazing opportunity again given how rare this pattern was, I gameplanned and made the conscious decision to bet big on this. Extra confidence also came from knowing my boss was going to be betting big too.

This was occurring at a time when I was starting to lose faith in myself. I had been interviewing elsewhere, questioning whether I had what it takes.

Sure enough, the play worked EXACTLY as expected and I think I made $10k in one day which was an unfathomable amount for me at the time. I think my previous best days were a few grand. So with that win, I bought myself a ton of time, but more importantly the trade gave me the recognition that I could learn from past misses and correct my behavior to capture the opportunities in the future.

What’s the best trading advice you’ve been given?

I’ll cheat and not really answer the question. Atomic Habits by James Clear is the Bible I wish existed when I started my career. Many of the major principles I operate by and learned independently, ended up being perfectly summarized and gift-wrapped in that book.

What drives you to keep trading?

Welp, I guess I’m not too driven anymore now that I no longer do so full-time. I find it interesting to still keep up with the markets and sadly still get seduced by the opportunity cost of me otherwise not trading.

Would it be fair to say that you were first driven by the money, but then by the mastery/competition element to become the best?

I’d say money was a big factor, but it would be an oversimplification. I loved the appeal of the stock market and what a performance sport it was. I loved the challenge of doing the impossible and beating the market. I loved the culture, the work environment, and level of autonomy you were provided. So there were many factors that made trading so appealing to me. But yes, money was certainly a big factor having grown up and seen what a stressor finances can be and how much people can struggle to stay above water.

I loved the challenge of doing the impossible and beating the market. I loved the culture, the work environment, and level of autonomy you were provided. So there were many factors that made trading so appealing to me

Would you say you’ve ‘made it’? If not, what does ‘making it’ look like to you?

I’m not sure when I would say that I “made” or even what it means to “make it”. Because everything in life tends to happen gradually and then all at once. Maybe my first Top 10 trophy. But even then I think you are always refining and trying to improve your game and always just trying to be better the year ahead. Or maybe I made it when I no longer had to worry about rent or feeding myself? Who knows.

Trading:

What's the most important quality in a trader and why?

Trick question. There really isn’t a most important quality. There are a zillion different qualities that come together in various ways to make one a successful trader and no two traders are alike. It’s hard to put people into boxes. I’ve seen traders succeed of all different personality types and skill sets. 

OK, what about overlooked qualities?

I think the ability to change one’s behavior or to make concrete progress after a goal. What I would call “coachability”. How receptive is someone to feedback? How quick is someone to incorporate feedback? How stubborn or arrogant is someone? There is a fine line between confidence and overconfidence. The smartest people I’ve ever hired often ended up being some of the worst traders because they weren’t malleable. They thought they were too smart to struggle or be coached.

The smartest people I’ve ever hired often ended up being some of the worst traders

How would you describe the way you trade?

A lens for technical analysis. Interpreting all the nuances of the chart and the level 2 box in a fairly systematic way despite still being a discretionary trader.

Do you feel most beginners should stick to being purely systematic?

After training dozens of traders, I think most certainly would be better off starting purely systematic. Just because it is simpler and rule-based. It is less cognitively intensive. It is much easier to teach someone to do X when Y occurs. People can practice and gameplan that more easily as well.

The more experienced someone gets, the more it becomes an art rather than a science. They know the rules but have the experience to know when to break them. There is no one answer for when to break them, that is part of what makes the great discretionary traders so great. They have decades of experience whispering to them in their subconscious.

The more experienced someone gets, the more it becomes an art rather than a science. They know the rules but have the experience to know when to break them.

Has the way you trade changed over time?

Yes and no. The technicals and principles always remain the same, but at the same time, markets and strategies and ourselves are always evolving. We must improve at our craft, faster than the competition / market becomes more efficient.

Do you think AI will disrupt trading?

I’m not sure AI will disrupt trading a great deal. If it does, it’ll be slowly and gradually because trading is so heterogenous. There is no one strategy or one way to make money. Plus the markets are always changing and adapting. Technology and algos and HFT and AI has slowly been disrupting over time yet discretionary traders still exist. Since the beginning of electronic trading, every year people have claimed that humans have lost their edge in trading. Yet every year human traders still are out there crushing it. It will be a show-me story until the end.

Since the beginning of electronic trading, every year people have claimed that humans have lost their edge in trading. Yet every year human traders still are out there crushing it.

Why do you think you have success trading?

I outworked people, I avoided limiting beliefs, I had the cognitive abilities to better grasp the principles, I was hungrier and more competitive, had more grit, more curiosity. It is a zillion factors that makes a trader successful.

What's the worst thing about trading and why?

The bad days feel far worse than the good days feel good! In behavioral finance world, this is called prospect theory. I think every trader would agree with what the behavioral science researchers are finding out much later than us. 

The other downside of trading is what it does to your stress levels and how the stress leads to poor sleep patterns. I’ve had to put a lot of time and effort into re-learning how to sleep again and not wake myself up to check markets are ruminate on positions.

What's something you've learned in the last 6 months that has made you a better trader?

I’ve been developing a set of principles and rules to keep me safe with a new options trading strategy I’ve been doing. Essentially building a way to safely sell vol during huge price spikes. Key is always to size small and stay safe.

How would you describe your relationship with risk?

Everything in life comes down to risk and opportunity cost. The risk of one job vs another. Spending your time on health vs wealth vs relationships. I think the smartest and most successful people recognize this interplay and how integral risk is to every aspect of our life. They recognize how finite time is and make sure that they are allocating it for the greatest return.

So, regarding financial risk, I’m always handicapping the odds and trying to make the smartest decisions I can. What do I stand to gain if right? What will I lose if wrong? I’m a huge fan of taking massive risks, but only when I know the odds are hugely skewed in my favor and that I can endure the loss if wrong.

Life is nothing but a series of risks and the winner is the person that takes the smartest risks given the hands they are dealt. Financially or otherwise.

Life is nothing but a series of risks and the winner is the person that takes the smartest risks given the hands they are dealt. Financially or otherwise.

What's the mistake you find hardest to avoid when trading?

I think most people always tend to overestimate their edge. As a result they are overconfident. They play way too many trades. They bet too much on most plays. Most traders would do better by being far less confident in the number of hands they play and their edge in any one spot.

The best way to avoid this bias is to always leave a buffer for extra uncertainty or what I call employing “the 20% heuristic”. As humans we tend to be overconfident and overlook a lot of biases. I try to assume that my win rate on a trade or my reward will be 20% less than i expect and my risk will be 20% more than i expect. This helps me be more selective and conservative. You always need to handicap extra the fact that things go wrong more frequently than we otherwise expect.

If I ever still fall into a trap, it is because I get sucked into a trade that isn’t as selective as I need to be. Much like in poker, the worst thing you can do is get emotionally and financially committed to a hand that isn’t going to hold its weight in the end.

If I ever still fall into a trap, it is because I get sucked into a trade that isn’t as selective as I need to be.

If you could give someone starting trading tomorrow one piece of advice what would it be and why?

Really make sure you’re all-in or else don’t even bother stepping into the Thunderdome. The failure rate is incredibly high and the job is not meant for most people. No matter who you are, it is so difficult to survive, let alone thrive. It never gets easy.

No matter who you are, it is so difficult to survive, let alone thrive. It never gets easy.

What goals do you set for your trading?

Nowadays, I try to wait for the home runs and make sure I don’t get sucked into much else. I sell a lot of option premium now adays and just patiently wait for the fat pitch.

Fill in the blanks

  • Most traders would be better off not quitting their day job. Too many get fooled by randomness.
  • What separates the pros from the rest is everything. The level of professionalism, work ethic, capital, the tech, the environment, etc.
  • A good trader should never think they’re invincible
  • The biggest misconception about trading is so many fallacies that people blindly spit out like can’t go broke taking profits.