What led to the beginning of Compounding Quality?

I worked in the industry as a Professional Investor. I loved my job, but I absolutely hated the short-term mindset of the industry. 

As Warren Buffett said: “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” There are so many commercial incentives in the industry, and Professionals focus on filling their own pockets instead of the ones of their clients. Furthermore, it’s way more important to sound interesting than to be interesting in the industry. That’s why all professionals focus on quarterly results and why less than 10% of all funds outperform the S&P500 over time.

That’s not the way I wanted to live my life, and why I created Compounding Quality in June 2022. Via Compounding Quality, I genuinely want to help investors along their investment journey. It’s a true honour to help others full-time today. With the newsletter, I combine my two passions: teaching and investing.

The Compounding Quality portfolio consists of three baskets - ‘Owner Operator’, ‘Monopolies and Oligopolies’ and ‘Cannibal’ stocks. What was the reason behind the selection of this group?

The essence of Compounding Quality is very simple:

1. Buy wonderful companies

2. Led by outstanding managers

3. Trading at a fair valuation

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Here’s the reasoning behind every bucket:

• Owner-operator stocks: 

  • Owner-operator stocks are companies that are still run by their founder

  • Academic studies found that family companies and founder-led companies outperform the S&P 500 with 3.7% per year and 3.9% per year, respectively

“Some of our key managers are independently wealthy. They work because they love what they do and relish the thrill of outstanding performance. They unfailingly think like owners. They are the best kind of managers we can wish for.” - Warren Buffett

• Monopolies and oligopolies

  • Only one or a few companies dominate the entire industry

  • Monopolies and oligopolies are usually great investments because they are able to operate at attractive conditions due to the lack of competition 

“Over the years, Buffett followed his philosophy of buying into industries with little competition. If he can’t buy a monopoly, he’ll buy a duopoly. And if he can’t buy a duopoly, he’ll settle for an oligopoly.” - The Myth of Capitalism (Book)

• Cannibal stocks

  • Quality stocks which heavily buy back their own shares

  • When outstanding shares decrease, your stake in the company increases

“Pay close attention to the cannibals.” - Charlie Munger

Most of the portfolio will be invested in owner-operator stocks. 

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Why do you only include equities?

Good question. For me personally, it's quite simple in the sense that in the short term, it can be risky to invest in stocks. If you are investing in stocks, you should only do it with money that you don't need for the next 5 to 10 years. 

There’s a book called ‘Stocks For The Long Run’ by Jeremy Siegel. In his book, he shows that since 1870, stocks have never underperformed bonds over a 20-year time period. 

So, in the short term, investing is risky, while in the long term, not investing is risky. 

In the long term, stocks are always better investments than bonds. Why? Because you're the owner of these companies, and those assets are generating cash flow for you every single day. 

When you invest in equities, you’re making money while you sleep. That’s not the case with bonds or commodities like gold or cryptocurrencies.

Given the time horizons that you look to, do you use market events (such as a Fed meeting) to buy for the long term? Or do you avoid the noise?

I’m really a bottom-up stock picker.

For example, at the company I used to work for as a Professional Investor, people made predictions about interest rate hikes, what the VIX (volatility index) and certain currencies would do…. it doesn’t matter at all, and it will only harm you as an investor. Peter Lynch used to say, “If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” 

All investing is, is trying to buy companies for less than what they’re worth. That’s why you should look at the fundamentals. You want to buy wonderful companies at a fair price. 

I also think that, especially in the US, some stocks and some sectors are trading at quite lofty valuation levels. But that doesn’t mean that you can’t find attractive investment opportunities in the market today.

To add one more point, I don't think the next fifty years will be as good as the previous fifty years for stocks. Why? It's quite simple. The main driver for the earnings growth of companies is economic growth. Economic growth is driven by two main factors: productivity growth and the growth of the working population.

When you look at the situation in the United States, but also in Europe, you see that the working population will stagnate or decrease a bit over the next decades. That will make it harder for the economy to grow.

However, this doesn’t mean that you shouldn’t invest in stocks. You should. Investing is the best protection against inflation, and in the long term, stocks will outperform all other asset classes.

Have you noticed any changes in the industry in your time?

From my personal experience, I can spot one clear bubble. It’s everything related to ESG.

Environmental, Social, and Governance. Some stocks are blindly bought just because they score very well on ESG metrics. Professionals don’t care about the valuation. They just buy the company to greenwash their portfolio.

To give you another example, at the company I worked for, you weren't allowed to own Berkshire Hathaway. What's the reason for that? Because Berkshire Hathaway owns BNSF, and BNSF transports coal. That’s just ridiculous if you ask me. 

Have you ever been a contrarian?

I'm probably not increasing the reputation of Professional Investors here. But you have the saying, “When you're a professional investor, it's way better to fail conventionally than to succeed unconventionally. Nobody gets fired for buying IBM or Apple.” It’s 100% true.

Recently, I released an article called ‘Foolish Wall Street.’ It talks about what I think is wrong with Wall Street, what you can learn from it as an investor, and what you should do differently as an investor to outperform markets.

In the long term, less than 10% of all professional funds outperform the S&P 500. But there are many great and straightforward strategies which outperform the market. Just think about quality investing or buying low P/E stocks, for example.

It’s the main reason why I created Compound Quality. I wanted to genuinely do the right thing. You really want to use the Buffett-like approach and think in the long term. That’s what really makes the difference.

Regarding a contrarian investment, the fact that Facebook (Meta Platforms) was my second largest position at the end of 2022 is probably a good example.

Do you believe in having an edge in the market?

An investor can have three kinds of advantages. 

• An informational advantage

• An analytical advantage

• A behavioural advantage 

An informational advantage means that you know something that other investors don’t. 

An analytical advantage is being able to do your homework better than others. This one is hard to achieve, especially for large caps such as Apple and Microsoft, … the market is quite efficient for companies like this. 

A behavioural advantage means that you can think and act more rationally than other people. This is by far the most interesting one and the most durable. Successful investing is 10% intellect and 90% behavioural.

What advice would you give to your younger self?

Try to become a bit wiser every single day. You can do this by reading as much as you possibly can. 

Most people work a 9 to 5. When they get home, they have dinner, watch TV, sports, etc. 

But if you just take one hour a day to work on yourself, you will achieve a lot in the long term. If you are passionate about something and are willing to work very hard, you’ll succeed.

We hope you enjoyed the interview. Please be sure to check out and subscribe to Quality Compounding here, and you can subscribe for free below to AlphaPicks.

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My introduction to trading came through a close friend of mine who visited my offices for one of the businesses I was running back in 2012. This friend, a fellow entrepreneur like myself, was eager to show me how he traded two leveraged ETFs for gold miners.

Initially, his trading activities were a mystery to me. Nonetheless, as I observed his trading routines over the subsequent days, I began to decode and comprehend his trading process. Before long, I established my own brokerage account and embarked on personal trading with these ETFs.

My early trading endeavors were notably successful, with one transaction alone bringing in a five-figure sum. This early victory in my foray of trading not only yielded a decent financial gain but also ignited a lasting fascination within the vast world of trading.

Where do you start when looking for a new trade? Is it technical, fundamental, or momentum?

Momentum trading is undoubtedly my favorite technique and it always gives me tremendous satisfaction. Throughout 2020 and 2021, I focused primarily on this style of trading. This approach was not only exhilarating, but it also played a crucial role in sharpening my skills in tape reading. I take significant pride in the breadth of my trading expertise, having explored a variety of asset classes.

My trading journey has seen me delve into large caps, small caps, futures, options, foreign exchange, and even cryptocurrency. My engagement with these varied market sectors and instruments has enriched my trading skill set, providing me with distinctive abilities that might be hard to attain for someone who has solely traded in, for instance, small-cap equities.

Is there something that you have implemented into your trading this year?

For the first half of 2023, my primary focus has been on trading the indexes, specifically the S&P and Nasdaq 100 indexes. By narrowing my focus to a few particular facets of the market, it becomes simpler to filter out any potential distractions that might arise from other market sectors.

In the late 2010s, I collaborated with a few of my close friends to formulate a unique strategy that allowed me to exploit price, volume, and options flow to my advantage. This methodology aided me in identifying areas where significant activity was anticipated, predominantly in large-cap tickers and the indexes. Utilizing this formula, I can identify precise price levels, which act as a navigational aid for my trades, similar to how a GPS guides you to your destination. To help others on their trading journeys, I share these crucial levels in my educational platform, the Market Clubhouse, on a daily basis.

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Do you enforce any habits/rules to improve your trading?

I firmly believe that discipline and self-respect stand as my most crucial qualities. In the realm of trading, the only person capable of truly helping you achieve your goals is yourself. During the initial phase of my trading journey, I grappled with a lack of discipline, often leading me to self-deception. This manifested itself in the form of altering my stops or failing to close a losing trade, actions I eventually recognized as indicative of a lack of self-respect and discipline.

It required numerous setbacks, blowing accounts, and a significant amount of time before I came to a profound understanding: “No one is coming to save you. Absolutely no one. You are the only one who has the power to help yourself.” This revelation was harsh, but it finally struck a chord with me. Now, the thought of trading without discipline and self-respect is simply inconceivable. I also believe it's vital to exhibit discipline consistently across all facets of your life. For instance, if you fail to maintain a healthy diet, neglect your physical well-being, or lack stringent discipline in various life aspects, it will invariably impact your trading performance negatively.

Are there any psychological aspects that you had to change to progress your trading?

Undoubtedly, the psychological dimensions of trading played a critical role in shaping my journey. As I delved deeper into the world of trading, I came to realize that trading is as much about managing one's emotions as it is about understanding charts and financial metrics. There were several psychological aspects that I needed to modify to advance my trading capabilities.

Initially, one of my significant challenges was dealing with the fear of missing out or FOMO. The constant fear of missing a lucrative trade often led me to make hasty decisions, jumping into trades without proper analysis or planning. I had to consciously work on this aspect, learning to accept that the market would always present new opportunities and that it was better to miss a trade than to enter one unprepared.

Another critical area was handling losses. In the early stages, I had a tendency to hold onto losing positions, hoping they would turn around. This often resulted in significant losses. I had to train myself to view losses as a part of the trading process and, more importantly, to not let them affect my emotional equilibrium. Accepting that losses are an inevitable part of trading, and learning to cut losses quickly, was a significant psychological shift that I had to make.

Lastly, the realm of trading often stirs up a whirlpool of emotions – from exhilaration to despair. I realized the importance of maintaining emotional stability, regardless of the market conditions. Cultivating a sense of detachment, treating both profits and losses as outcomes of a strategy rather than personal victories or defeats, has been a pivotal psychological change in my trading journey.

In essence, trading has required me to develop a robust psychological framework, one that emphasizes patience, emotional balance, and acceptance of both wins and losses as part of the process. The journey towards becoming a successful trader is not just about learning the mechanics of the market, but also about being a complete master of one's emotions.

What do you think is the biggest mistake that a new retail trader makes in the stock market?

In my opinion, the worst error a novice retail trader tends to commit in the stock market is entering the trading arena underprepared and driven by unrealistic expectations. Many newcomers approach trading with a mindset akin to gambling, fueled by the aspiration of making quick, substantial profits. They often perceive trading as a get-rich-quick scheme, and this misconception can lead to detrimental decisions.

The stock market is a complex and organic ecosystem that requires a thorough understanding of various factors, including, but not limited to, market trends, company fundamentals, economic indicators, and geopolitical macro events. A lack of comprehensive knowledge and a solid trading plan can leave a trader vulnerable to the volatile swings of the market.

Additionally, many new traders often neglect the psychological aspect of trading. Trading is an endeavor that demands mental fortitude, discipline, and emotional control. The inability to manage one's emotions during a trading session can lead to impulsive decisions, such as chasing losses or becoming overly greedy when winning. This is where the importance of having a strict disciplined approach comes into play, which includes setting realistic profit targets, adhering to stop-loss levels, and knowing when to exit a trade. I know it’s very much a common platitude, but trading is not a sprint, but a marathon. It requires continuous learning, meticulous planning, and emotional resilience.

You've become a very successful trader. What is your goal going forward?

Indeed, I've been fortunate enough to find significant success in my trading journey. As I contemplate my future goals, the spotlight invariably falls on education within the trading space. Since early 2020, I found myself privately mentoring about 20 individuals, and this experience brought me an immense sense of fulfillment and gratitude.

When I saw the tangible benefits of my mentorship on other traders' journeys, it was profoundly rewarding. It dawned on me that my passion lies not only in executing successful trades but also in empowering others with the knowledge I've accumulated over the years. This realization, however, comes with the understanding that mentoring requires a substantial investment of my time, time that could otherwise be devoted to different ventures.

Balancing these considerations, I made the conscious decision to dedicate the bulk of my time outside my personal trading to the creation of the Market Clubhouse at the beginning of 2023. The platform is a manifestation of my deep-seated desire to mentor and create educational content.

Going forward, my primary objective is to guide as many traders as possible on their respective trading paths. I aspire to share the wealth of knowledge and insights I've gathered throughout my extensive trading journey. My aim is not only to aid traders in achieving financial success but also to empower them with the skills and mental resilience needed to navigate the complexities of the trading world.

If you could give one piece of advice to your younger self, what would it be?

Looking back on my path and the insights I've garnered over the years, the main piece of advice I'd offer up to my younger self would be a primary focus on cultivating patience and fostering unwavering discipline.

The art of trading requires a realization that the market's movements are beyond our control. The only variables within our power to influence a positive return are our own actions and how we manage our trades. To me, patience and discipline are the twin pillars that underpin my trading success. These elements are integral in navigating the volatility of the markets, and I would stress this unequivocally to my younger self.

Thank you to Rips (@SellingRips on Twitter) for joining us for this conversation. We recommend checking out his community at Market Clubhouse to see what they provide for traders each day.

I started trading in 2010 when the last financial crisis happened. So basically, when the market crashed and started recovering, I was an engineer, and I lost my job during that recession. I picked up trading because a friend of mine did it, and then that's when I got my introduction to it.

So, after you'd been set up in the market, how did you get started with Rocket Scooter?

So, as the years went by, Rocket Scooter got started as a concept in late 2019. We started the company in 2020.

It actually started before that, but it wasn’t Rocket Scooter. So what we did was, early in 2015, I would start a Zoom call and stream every day. It was just trading with a bunch of friends. We had like a little circle. Most of them were engineers, actually. We just all kind of got together, so we're a little more technically minded and math focused.

As the years went by, we started making tools to share with each other, like newer tools that didn't really use technical analysis. We used different kinds of analysis, methods that we eventually evolved into RocketScooter. As the years went by, I'd make a spreadsheet with information on it, I'd stream and show the spreadsheet and we would talk about it. Then I developed an app and shared the app on the stream with people. Then I began distributing the app for people to use. After a while, they wanted more from the app - charts, the scanner, a watch list etc. It just kind of evolved as time went on into making RocketScooter.

So, before Rocket Scooter, it was just me personally, and I had a little app that people could use to get some of my tools and calculations on. And then, I decided to build the full trading platform. So we staffed up a bunch of people and we converted from the small app, which we call the classic app, into the big full platform that you see now. It just became a scale-up thing as we grew.

We built the platform off of the framework of the app. So, it was a journey that was kind of driven by our user base, as every time we'd make something, they'd want something more. So we’d make it… then they want something more. And I was like, well, you know, I might as well build a whole platform then.

In 2020, we chartered the corporation, and then we built the RocketScooter Company.

How does RocketScooter give you an edge against the market?

In the purest form, we will show you where market makers and institutions are positioned. There is no technology out there that does that. There's no data feed out there that gives that. We mathematically determine where institutions and market maker positions are from options data, and you line yourself up with the larger part of Wall Street.

The market makers and institutions are the major driving force. You know where real bulls are, and real bears are. It's a much more straightforward analysis type. The edge is repeatability. Their positions and hedging is done the same way every day. So you don't have to analyse things differently. It's very cut and dry. It's black and white. This is where the pivot is, and there's no other place.

You make discretionary choices in how much you bet, when you stop and when you get out. Those things are always there. But where you take action on the market is almost the same every day. The calculations that we give you are high-volume pivots, and the edge that you get is us predicting those high-volume pivots before they happen. That's a very unique feature of our platform.

As a trader, you want to trade where the volume will be. If we can show you where volume pivots will be, just like for any stock, anything that has options, we can calculate this, then it really narrows down your options of where you wanna act in the market. You don't long from everywhere, you don't short from everywhere. You're pivoting from something to something, and it narrows down all possibilities to just a few action points.

If you can know where volume will be, it really gives you an edge, so you’re not just guessing or using price action as your determinant to where you want to trade. So only trade where volume will be, right?

Some of the other tools we made are forward-looking indicators as well. That's another edge. So, all indicators by definition that use price action are always lagging. We create indications that try to lead the market.

This indicator is called resilience. It's a gap-fill predictor and uses a mechanic that exploits arbitrage.

Right here, it is below zero (blue square), and the S&P is rallying up. This is a great, great, great short signal. The S&P is moving higher, but you don't believe that move because the stocks themselves did not fill their gaps to the upside. This is like a market cap weighted aggregate of what the stocks themselves are doing in their gaps. And clearly, the stocks have gapped down and are staying down, but the S&P is rallying up. It's a clear arbitrage opportunity, which is pretty cool.

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What is something that you've implemented in your trading this year?

Yeah, actually. This year, one of the newer things that I've implemented in my trading is based on the CBOE creating daily expiring options for SPY and QQQ. Now they expire every single day, I have a rule now that I don't trade after 2 p.m. Eastern. I don't trade, ever. I close all my trades, and I don't enter new trades.

The market is just behaviorally random because people are exercising options daily now. So the new rule is: I don’t trade the last two hours because it's a coin flip.

People are exercising options, you don't know if they want the shares or want the cash on the option. There are all these random variables, so I don't try to trade. We noticed that every day at 1400, the last two hours, the market just randomly goes in a direction. So it's impossible to predict. And so that was kind of my new implementation this year, time-based rules.

Does psychology play a part in your trading?

Absolutely. That's the most important part of any trading diet. There are two problems that traders face. There are problems you face when you're a bad trader and there are worse problems you face when you're a good trader. I'll start at the top.

When you're a really good trader, you've mastered your art, mastered your craft, you win a lot, you have a high win rate… you kind of forget how to lose. And when you lose, it's really bad because you might have a high win rate, and you’re not used to losing. For example, if you've never fallen off of a bike, the first time you fall, you might break your leg because you don't know how to fall.

So, the better you get, there's a side of psychology where your ego can come into play, or you just feel like, I can't lose, and then when you lose, you take it harder, or you can't accept it. Therefore, you emotionally lose control. So that's one side of the coin that traders who get really good have to deal with.

If you have a strategy that works every time, what do you do the first time it doesn't work? You probably freak out, right? I always like to start there because it prefaces the idea that losing is a natural part of the diet of a trader. You have to lose. And the less you lose, the less practice you get at losing. The more you lose, the less practice you get at winning.

There's really this happy medium where you have to lose enough that you still remember how to lose right, and you have to win enough that you make money. And the balance between the two is only conditioned by years of struggling to balance those two. Each person has an ego they deal with, each person has a naivety they deal with, each person has confidence problems, and each person may or may not have an attachment to money.

There's a consistency to how you behave and you have to discover psychological consistency, which means you have to trade from A to B. When you're upside down, you have to always know what you're gonna do. Before you go upside down, you know where your emergency chute's gonna be, where you pull the plug before you get in that situation.

That leads quite nicely onto the next question. Do you think that people, especially new traders, stay too biased on a trade plan? And what do you need to stay objective?

I would say that most traders lack the ability to construct a trade plan. The trade plan is missing pieces. Here at RocketScooter, we've created a trading boot camp. People come in and they're overwhelmed by how much knowledge is in the boot camp. But there are a lot of normal things in there that people are shocked about too. I'm sometimes surprised that people are like, “Wow, that's amazing. You teach me position sizing and things like that?” I'm like, “Didn't everybody teach you position sizing?” That's a pretty standard thing.

So, you learn that there are a lot of things out there people learn from that are just not giving the whole picture. Trading is the art form of counting cards or calculating the odds of what's dealt to you that you can't control. There's a random element to which cards are flipped over. You know the odds of winning or losing with whatever technical system you create or if you use Rocket Scooter, for instance, it creates a technical or a level that you're gonna act on. Your brain has to know what are the odds of you winning and what are my odds of losing. Do you have a real numerical method? Is it like 80%, or 90%, or do I just feel that it's greater than 50 or less than 50? You have to know how your brain is working around, figuring out what the odds of your success are. And then, you scale your betting size according to your odds.

If you feel like your odds are great, or you have a technical that says your odds are great, you should bet larger. If you don't feel like it's good, or it feels mixed-signal, or you just feel weird, that's smaller. And the trader has to learn how to scale their bet, linearly with their confidence.

Or the other side is how confident are you that you're wrong? Because if you're 100% confident that you're wrong, you need to cut as fast as you can. If you're 10% confident that you're wrong, you may be willing to double down or hang in there. So developing those styles and trade plans requires all pieces. Knowing where to get in, where to get out, how much to bet, where to bet again if you need to, where to pull the plug, where to scale out, and how to gauge confidence in each one of those decisions before you act.

What advice would you give to yourself starting out in the markets?

My biggest hurdle was ego. I always tell people that. I went to engineering school, graduated with honours and won the top of my class. I was kind of like a math prodigy as a kid. I had all these people force-feeding my ego, “You're great, you're gonna be smart, you can do anything.” And then I go to engineering school, kick ass there, go to work, kick ass there, get laid off, jump in the trading. Everyone I saw on TV that talked about Wall Street sounded like idiots. I thought, “I can beat these, easy.”

In reality, they're really smart, and I was dumb. It's like the ego that was fed to me all my life as a kid didn't translate into the trading world. I didn't know how to lose. That comes from personal experience. And the first losses I took as a trader early on, my ego couldn't handle it. I was like, “I'm smart, I shouldn't be losing. Well, whatever, I'm gonna win, I'm pretty sure I'm right.” And then it just spirals you out of control. It was a hard, humbling experience to realise that I was the idiot early on.

So, I would go back in time and tell myself, “Look, you're a baby in this world. You're not going to walk in and be able to master this. You're going to walk in, and these people who sound dumb to you are going to be ten times smarter than you. They're going to know things you don't, and this is not just a cut-and-dry, two plus two equals four… this is a completely gray area type. Art meets math meets science. There's a whole lot of skills you haven't mastered.”

It took me many years to be able to control the emotional side of trading. I would tell my original self that you're about to get humbled. You better understand you're about to change yourself as a person. And as the years went by, I learned to respect anyone that had experience, anyone that had wisdom and anyone that had anything to say. There's always wisdom you can learn.

To begin with, could you give us a bit of background on how you first got interested in the stock market?

“I’ve been passionate about stocks from a very young age, even from second grade. I believe that you don’t choose your passions, your passions choose you and that’s been true with me and the stock market.

In high school my Grandma put some money into a trading account, she wouldn’t give me the money directly but did give me the login details. From there I would invest it, which elevated my interest in markets.

Another big step forward in my interest came in my Freshman year of college when I met hedge fund manager Marc Cohodes, a professional short seller. I took an hour-long Uber up to his chicken farm in Northern California and he just got me completely hooked on the short selling. He told me stories about the frauds he had exposed and spoke with such passion about his job.”

Could you talk us through the key elements you look out for when you analyse a company?

“In terms of models, I don’t really focus on financials. My sweet spot is $1-10bn market cap US-listed companies generally in the consumer tech space that are misleading investors or harming customers. That’s what I focus on.

In terms of harming customers, this can be explored through different areas. One example of what I look at is auto renewal polices/cancellation policies. Everyone makes it a little difficult to cancel, but some take it to an extreme. Doing so degrades your business value and credibility in the long run. Planet Fitness is a case here, whereby they don’t let members sign up with a credit card but rather a debit card where stopping payment is much harder.

Another element is noting companies taking advantage of the elderly, minority groups or vulnerable customers.

The other element is misleading investors. I say they often have more bark than bite! Embark Trucking is a good example, that went public via a SPAC with a $5bn merger. It has since fallen 99% in value, as it never recognised a penny in revenue from core products. If you look deeply at it, it was a 25-year old CEO employing his college roommates trying to make software for autonomous trucks. In some situations it’s difficult to prove there is nothing there, but you can look at the circumstantial evidence and highlight all the red flags.”

Embark Technology Inc Share Price:

What advice would you give for those that want to get into financial analysis but don't know where to start?

“I’ve learned a lot from Twitter and YouTube. Watch Warren Buffett’s interviews, watch interviews with hedge fund managers. From Twitter, build up a good feed and you’ll learn from osmosis. To this end, I’ve published a list of 100 great Twitter accounts to follow here.

One person gave me the advice that ‘you learn by doing’. Putting a small amount of money into a trading account makes a huge difference just for the purpose of starting to learn.”

What do you make of the power that other firms (e.g Hindenburg) have garnered and the impact it can have on a share price?

“We’re definitely seeing a transition between activist shorts that used to just release a short report online to now becoming a form of journalism. Firms like Hindenburg seem to be focused not just on reporting for the investing community but to society more broadly. It’ll be interesting to see how this transition progresses.

I feel in the future there will be more activist short companies positioned almost as more of a newspaper, with a focus on corporate misconduct.”

You've managed to have large success in growing a readership base from the ground up. What are some of your tips for others to replicate?

“The number one is growing a Twitter audience. I can tell if someone is going to be a successful Substack author based on their Twitter persona. Naturally, part of this is based on the number of followers, as you get the conversion to newsletter subscribers in the early days from this.

Further, the same traits that make you successful on Twitter carry through to longer-form written content. Are you a clear communicator? Are you a genuine person? The internet is good at sussing out who’s genuine. Getting likes and retweets doesn’t always correlate to having true support and a loyal fan base. The only way to grow true support and have people actually want to pay for your product is to be a genuine person, add value and care about what you are doing.

To anyone thinking about starting a newsletter, start by building a Twitter following. If you can’t get people to follow you for your content, there’s no chance of you getting anyone to subscribe to a free email. If you can’t get people to read your emails for free, you’re never going to get people to pay for a newsletter! Learn what resonates with people, grow a Twitter following, launch a free newsletter, start a paid element.”

When you started out, did you feel it was a realistic goal to make a living from publishing your reports?

“I love this question! When I was starting out in 2020, Substack was still new. What gave me hope was noting a publication that covered corporate bankruptcy (Petition) was earning over half a million a year from their newsletter. I reached out to them to see if I could replicate their success and they kindly replied with helpful points.

I realised that putting out great content wasn’t beyond me, it wasn’t superhuman.

At the time though, I thought I could make some money and then get hired into a hedge fund. But with the growth in paid subscribers, things have gone a little differently!”

What are your next goals for The Bear Cave?

“Aside from The Bear Cave, I have a second newsletter called Sunday’s Idea Brunch where I produce an interview great off-the-beaten-path investors. I’m also thinking about launching a third publication to recap all the long-biased tweets and research published by others online

I also want to get into YouTube. It’s a really powerful platform, and I feel I could take my reports and put it in a more mass-market format visually that could do really well.”

If you could go back in time and visit yourself in college, what piece of advice would you tell your younger self?

“It gets better in the future!”

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I was always fascinated with investments. When I was younger, I was very into computers and technology. I was fortunate that my parents had set aside some money for me. When I was around 12/13 years old, I heard that Steve Jobs was going back to apple. I had my mom put that money into apple for me and I’ve been watching the market ever since.

After that, I was always buying commons in companies I believed would continue to grow over time. Eventually, I started trading options. I had never done short-term trading before and I definitely paid my fair share of market tuition at first. Eventually, I got my groove and it has been a wonderful ride since.

What made you start following options flow that led to a very successful period?

I came across one of the original flow services and showed it to a few of my friends that I was trying to help teach options. The existing products were all lacking, but it was all that existed.

One of those friends is now my partner at WhaleStream. He actually started building the prototype and showed it to me and asked me if I wanted to do this with him… and WhaleStream was born.

How has your current trading style changed?

I think I trade very differently than a lot of people. My style changes based on market conditions. An important rule I set for myself is if I have two red days in a row, I will actually take a few days off to watch the market and see what may have changed. Then, I adjust and pivot.

Currently, I watch ATR (Average True Range) levels, EMAs, VWAP and Flow. I watch the 1-minute and 5-minute charts and only trade SPX while trading off of the SPY chart. I stare at the 1-minute chart and watch the candle action and watch the buyers and sellers battle it out. This is not something I recommend new traders do. 1-minute charts can give you extreme anxiety. I use this to visually see momentum slowing which can lead to a reversal. I look to flow for confirmation. I like to see a lot of sold puts/bought calls coming in around the time I am looking for calls and vice-versa if I am looking for puts.

Basically, I form my idea and then look to flow to check that the whales are on my side. There is a lot to my style, but these are some of the big factors.

Are there any psychological aspects you had to change to progress your trading?

I think doing small account challenges is a huge thing that helps with psychology. I’ve done multiple small account challenges for various reasons.

1 - To re-enforce my rules. When you trade with a smaller account, you HAVE to follow strict rules, or you risk blowing up your account.

2 - Less skin in the game. A lot of the emotion can be removed when your cost basis is only a small amount. You’re not trading scared.

3 - I like to use the baseball metaphor a lot… People like to swing for home runs all the time and yeah… you may hit some, but the issue with always swinging for home runs is that you will often strike out. If you start swinging for base hits, you will get on base a lot more. Compounding those base hits will eventually get your bases loaded and you may accidentally wind up hitting a home run.

When you are compounding, it feels slow at the beginning. The key is patience. Wait for the right trades and take profit. Forget what you see people posting online. I think keeping a consistent % of your account as your position size is the best way to grow an account and compound. If you use 10% of your account and aim for 30% gains per trade, your next trade is slightly larger due to the increase in account size. You still use 10%, but you are using 10% of the now increased account size.

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Do you enforce any habits to improve your trading?

I have a whole list of rules that I posted on my Twitter a few days ago, linked below.

What do you think is the biggest mistake a new trader makes in the stock market?

Everybody sees people post their gains and thinks it can happen overnight. There is no get-rich-quick hack. You need to put in the time and learn. A lot of people will post major gains, but lack simple risk management and they’ve lost it all on the next trade.

Trading is a marathon. Don’t rush it, or you will lose.

Do you have a goal for your trading?

I trade to fund my long-term investments. I trade options. I invest in shares. My goal is just to continue to grow and retire very early.

If you could give one piece of advice to those reading this, what would it be?

Be patient. Take time to learn. Listen to us on Spaces every market day FOR FREE. Don’t pay attention to what other people are earning. Focus on compounding base hits. If you ever find yourself wanting to “YOLO” or “Full Port” or break any of your rules that you have set up… WALK AWAY. You don’t need to trade every day. Also… Sign up for whalestream.com because it is the best option flow platform out there ;) 

We highly recommend following WhaleStream on Twitter and checking out the website linked above.

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AP: To begin, could you give us a bit of background on how you first got into trading/investing?

I first got into trading in November 2019. Unlike many traders, I had no big moment in my life that got me into trading. I was milling over ways that I could make money without a significant amount of overhead. Trading appealed to me for that very reason – all you need to get started is a phone and any money you can spare.

I started my first account with a couple hundred dollars, and the rest is history. I traded through some of the most volatile times in recent years, from the covid crash to the inflationary battle with the fed. These volatile conditions forced me to quickly learn to adapt and find a way to be consistently profitable – regardless of market direction.

AP: As a technical day trader, what are you looking for to enter a trade?

I have a system where I define A and A+ setups. An A setup for me is any setup where I can identify 3 pieces of conviction that agree with my thesis on market direction. An A+ setup would have at least 4 pieces of conviction. I am a trader who utilizes a wide array of TA tools to create a well-rounded methodology. Pieces of conviction can include an ema crossover, significant increase in volume, candle formation, pattern formation, trendline/channel break, key level break, MACD crossover, etc.

AP: What makes you trade options over shares? Have you always been an options trader?

I trade options over shares in order to maximize my potential returns as a scalper. Since I can be in a trade for as little as a few seconds and typically not longer than 20 minutes, trading shares would only allow me to make much profit with an extremely large amount of capital. Options essentially allows the leverage of 100 shares without the necessary capital. I was not always an options trader – I actually began in penny stocks. I hated how they didn’t respect technicals most of the time and were incredibly inconsistent.

AP: Are there any psychological aspects you had to change to progress your trading?

Absolutely – in fact, this was and IS the most difficult part of trading for me. I have an engineering and mathematics background – the TA is not hard for me to grasp. However, battling emotions such as greed, FOMO, anxiety, anger, and many others during trading was no small challenge. It took years of self discipline and repeated failure before I was able to finally get a grasp on the psychological side of trading.

AP: You’ve been very consistent in the market, now with an 80%win rate. How do you limit risk and maintain a high standard success rate?

The answer to this is quite simple in theory but more difficult in practice. There are infinite trades that one could take in the market – the key is to be incredibly selective with trades and only take those I have the highest conviction in. By only taking trades where I have several pieces of conviction, I drastically increase the probability of success. I always have a plan – enter with a designated size, entry-level, exit level, and stop-loss level. It all comes down to patience and discipline.

AP: What do you think is the biggest mistake that a new trader makes in the stock market?

The biggest mistake a new trader makes is rushing the process – believing that the markets can be a get-rich quick endeavour. This means “yoloing” plays with no technical backing, full porting, taking blind alerts, holding til zero or hero, etc. While this may give you a rush and lead to exciting short-term gains, it is in no way sustainable long-term.

AP: What is the goal of your trading?

The goal of my trading is to provide a low-risk, high-probability methodology that can be scaled and repeated consistently. In terms of lifestyle goals from trading – the profession appealed to me initially for the potential freedom and materialistic items it can provide. But, in reality, I fell in love with the process and my passion for teaching. This is something I want to continue doing for the foreseeable future.

AP: If you could give one piece of advice to those reading this, what would it be?

Stop comparing yourself to others in your trading journey. There will always be someone making more than you, faster than you. It doesn’t matter. What matters is that you stay disciplined, consistent, and forever curious to learn more. You don’t need crazy gains every day. Small and steady wins the race in trading – compound those base hits over time.

We highly recommend giving StockManTrading a follow on Twitter and checking out his links here.

The post An Interview With StockManTrading appeared first on our previous website.

AP: To begin, could you give us a bit of background on how you first got into trading/investing?

I got into the markets in early 2019, simply buying and holding large-cap equities with the money I had saved in college. I was the Residence Advisor on a basketball scholarship and worked a part-time job out of season, so I was constantly funnelling money into my Robinhood account at the time, buying large-cap names that I thought would do well long-term, like AAPL and TSLA.

I kind of “hit it big” (for that period of my life) because I have a lot of close friends and family in immunology and infectious diseases. After talking to them a lot about COVID prior to it becoming such a large-scale issue, I began to accumulate mRNA and make my first real money in the market in a relatively short time period. From that point forward, I was pretty much hooked! Early 2020 began my day trading journey, and thankfully, I had the foresight at the time to understand that options were where I perceived the longevity to be and threw myself into it with a total obsession.

AP: Where do you start when looking for a new trade? Is it technical, fundamental, momentum? 

I have criteria I talk about often regarding what I am looking for before entering a trade. I am strictly a technical trader, so I don’t concern myself much with fundamentals or news. In essence, I’m looking for these things to confirm the type of conditions + signals I want to see prior to putting on a trade.

1. An obvious intraday trend backed by volume

2. Trading above / below key levels (supply and demand zones) 

3. Technical pattern / EMA retest

4. An area I can enter the trend where risk makes sense 

In totality, range expansion with confluence at key levels supported by volume and minimal risk pullbacks is the bread and butter of my trading system.

AP: Do you trade options or shares? Is there a preference?

I primarily just trade options! I used to swing trade more often, but I’ve found a lot of peace and fulfilment in my daily trading process, simply looking to flip premium from an intraday momentum standpoint.

AP: Are there any psychological aspects that you had to change to progress your trading?

I could probably write a book about this one day due to the challenges I experienced attempting to overcome myself as a trader. Ultimately, I discovered my emotions in trading (as most people do) were truly the only thing holding me back from consistency once I was about 12 months or so into that journey. I “hijacked” my mind and my entire life and decided to commit myself to a standard of excellence in everything I do outside of the markets—fitness, business, relationships, etc. As I started to hold myself to an entirely new standard (mind you, I was pretty disciplined before this as well), I noticed slow but very significant changes in my trading. It’s not that I no longer felt FOMO, greed, or hesitation; I was now equipped with the mental faculties to make conscious choices that served me instead of harming me.

Most people look at charts all day in an attempt to solve their problems in trading; furthermore, I actually believe this becomes a cyclical cycle of self-depreciation because the effort they perceive to give daily doesn’t yield results directly proportional to that same effort. My proposition is to get everything outside of the market in your life in proper order prior to attempting to day trade at a high level. At least for me, that made all the difference in the world.

AP: What do you think is the biggest mistake that a new retail trader makes in the stock market? 

Failure to identify their niche and specialize in 1 specific style of trading. Most people have a goal of “making money” – my goal is to master my craft as an intraday momentum trader. You need to develop 1-2 A+ setups with a positive expectancy. Find what speaks to you as a trader and seek to master it before spreading yourself too thin.

AP: What is one good habit you have as a part of your trading?

I have a very clearly defined and optimized morning routine that prepares me psychologically and technically for the day. I genuinely believe this is a cornerstone of my trading process that allows me to maintain a high degree of mental dexterity and consistency.

AP: If you could give one piece of advice to those reading this, what would it be?

Consistency is a state of mind. Most people don’t need to know everything under the sun about day trading to produce consistent results. Commit yourself to an identity of excellence and find exactly which vertical suits you best. Futures or options, indicators or no indicators, supply and demand or key levels, the trick is it all works! The human brain is incapable of performing at a high level in the trading arena when constantly attempting to logic out the “why” behind every fluctuation in price. Develop a system, develop rules focused on risk management, and hold yourself to a standard of excellence in your specific niche! Trading is a skill and can become a very profitable business model when respected like one.

We highly recommend following Darth on Twitter and checking out the MoneyLine page.

The post An Interview With DarthTrader appeared first on our previous website.