#69 RealPropTrader

April 17, 2023

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Proptrader is a derivatives trader with 9 years’ experience trading legacy markets and 3 years’ experience trading crypto. He’s an analytical thinker who’s always searching for an edge in the market.

What attracted you to trading?

I was seduced by the industry’s unlimited earnings potential and where success is based on merit rather than kissing someone’s ass.

The only job I had before trading was working in a warehouse. While it taught me discipline, it also gave me the motivation to work hard so I wasn’t forced to stay there. 

The first time I was exposed to a true meritocracy was poker. I’ve been playing since I was 14 and really enjoy how, similar to trading, you’re solely responsible for creating your own destiny.


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

I’ve been trading for over 12 years now. I got started trading equities on my account and parlayed that passion into an internship at an equities trading firm. Once I graduated from university, I got hired at a proprietary trading firm specializing in futures products.

What appealed to you about trading for a firm vs doing it yourself?

Trading for a firm was an obvious choice for me. Learning from experienced, profitable traders, and having a chance to size up quicker while also having a risk manager makes a real prop firm a great place to start. As the firm wasn’t officially hiring at the time, I had to send multiple emails and calls before finally getting an interview. Persistence pays!

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

It took me two years. I quickly recognized where I was consistently making money, but it took a while to stop the bleeding from trying out other strategies.

After a year of live trading, I’d built up a solid sample size of trades to analyze. It was painfully obvious that between 11am and 1pm, I was lighting money on fire. It turns out, scheduling long lunches every day was much cheaper than trading during that time.

It turns out, scheduling long lunches every day was much cheaper than trading during that time.

What does a typical day look like for you?

I typically wake up around 8. I don’t take any trades for the first 15-20 minutes as I’m just reviewing charts and digesting overnight news and movements. I then trade between 8:30-10:00 EST. Around 10, we have a daily briefing where we discuss anything that affected the market overnight and where to focus our efforts for the rest of the day. Lately, I’ve been spending a lot of time in the afternoon taking meetings with vendors and third parties as we scale up our operations. As well, there’s usually a few traders per day from our team that message me with ideas or issues that need to be addressed. I try to squeeze in a bit of trading in between if there’s anything interesting going on in the markets.  Afterwards, I review my legacy trades once the NY sessions closes. That takes about 30 minutes on average.

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

Originally, I looked up to hedge fund managers that were raking in unimaginable sums on a yearly basis. Once I got into prop trading, I looked up to the guys at SMB capital as they were one of the few putting out consistent, quality content. 

As someone with minimal trading knowledge, it was great to learn from those more experienced who were in a position I wanted to be in in the future.

Tell us about your most memorable trade

This isn’t a single trade, but I think this example applies. I managed to find a large anomaly in an obscure, low volume market. For almost a year straight, at the same time every day, a large trader would show up for 3 minutes and market buy size, regardless of price. I felt like I found a free money glitch as I loaded up as much as the market allowed and happily offered it to this entity a few points higher daily. Unfortunately, this uninformed buyer has since left that market.

For almost a year straight, at the same time every day, a large trader would show up for 3 minutes and market buy size, regardless of price.

Why would someone do that?

In futures, different market participants have different reasons for executing trades. For example, an airline is forced to regularly buy fuel regardless of price. This could’ve been the case of a single player needing to purchase this future in order to satisfy their business requirements when they took delivery.

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

Consistency trumps everything. Being consistent in following your plan, being consistent in taking wins and losses. Consistency breeds confidence, which in turn makes you perform better and leads to more consistency.

Consistency breeds confidence, which in turn makes you perform better and leads to more consistency.

What drives you to keep trading?

I love the game. Trading is the most competitive game in the world, with millions of participants and constantly changing dynamics. To me, it's the most interesting puzzle and every day I come in hungry to solve it.

Would you say you’ve ‘made it’?

I have not made it. Making it for me is probably very different from others. It’s being at a point where you don’t need to trade to sustain your lifestyle. My definition of that is having 30x your ideal annual spend in investable assets, outside of a trading account. For example, if you want your total annual spend to be $100k per year, that would be $3 million. It’s most eloquently described in The Gambler, as the “position of F*ck You”.


Trading:

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

Resilience. Every trader gets knocked down and takes hits. It’s about having the ability to come back stronger.

Early in my career, I had been doing well and sizing up appropriately. During the slower summer months, I didn’t adapt and was still pushing, causing outsized losses. I was forced to cut my size first in half, then in half again. That was a demoralizing experience that taught me the importance of not only cutting individual losing trades quickly, but more importantly to cut size quickly when you’re in a drawdown. You never want to be in a position where you’re unable to follow your plan because you’re so deep in a drawdown that it clouds your judgement.

I was forced to cut my size first in half, then in half again.

How would you describe the way you trade?

I try to find prices where traders are forced to interact because they’re on the wrong side of the market. I try to get on the other side of traders that are forced to puke their positions. After many years of watching tape, you can see it happening in real-time. Volume and velocity of trades are two metrics that help with this.

I try to find prices where traders are forced to interact because they’re on the wrong side of the market.

Has the way you trade changed over time?

As a trader, I’m constantly evolving and tweaking my strategy to fit the market environment. For example, if you’re trading ES, you need to recognize what kind of volatility regime we're in. I don’t do anything complicated for that besides watching the VIX and updating average true ranges on a daily basis. You can’t have the same stop when VIX is at 19 and when it’s at 34.

Why do you think you have success trading?

I’m willing to try new things, and not afraid to load up size when I feel like there’s a big edge. My best years have the same commonalities: I notice an anomaly early, understand why it exists, and size up as quickly as I can.

What's the worst thing about trading and why?

The mental game. Trading is very difficult due to the fact that you can give it your all and still come out behind in the short term due to variance.

Personally, I worked with @jaredtendler over the years to recognize the root cause of my weaknesses and improve my mindset.

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

If you’re in a down swing, just try to get a string of green days in a row. It’s amazing how confidence returns even if you’re only making 1/10th of what you’re used to.

If you’re in a down swing, just try to get a string of green days in a row.

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

Overtrading. My best tips have been to analyze your trades and find the days/times of day you’re consistently losing money. Then find hobbies/side projects to fill those hours

I like to go to the gym and enjoy playing sports. Depending on the time of year, I’m playing basketball, pickleball, golf and volleyball.

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

Start small. There’s a lot of truth to quote “Slow and steady wins the race”. Find a trading strategy that fits your personality. Just because your favourite twitter furu scalps on the 5 second chart means you have to do the same. If you’re more analytical, focus on longer term fundamentals. If you have a programming background, build tools to improve your process.

How would you describe your relationship with risk?

Let’s just say I’ve never been accused of using too little risk. While I’ve never blown up, I had to have a talk early on with the managing partner when I was deep in a drawdown. Daily stops are a must in order to protect yourself from any individual trade taking you out permanently.

What goals do you set for your trading?

I set both process and monetary monthly goals to keep me on track. One example of a process goal came from reviewing my monthly stats and recognizing my losing days were bigger than my winning days for that month. The following month, I was more aware of this during losing days and was able to stop myself from taking subpar trades to try and get back to breakeven. Trading is one long game, where individual trades and individual days shouldn’t matter in the long run.

Trading is one long game, where individual trades and individual days shouldn’t matter in the long run.

Fill in the blanks

  • Most traders would be better off taking fewer trades
  • What separates the pros from the rest is having a per trade and per day stop loss to keep yourself in the game
  • A good trader should never _ enter a trade without knowing his max risk
  • The biggest misconception about trading is _ that there’s only 1 way to succeed. There’s tons of different trading strategies for a reason.