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An Interview With RocketScooter CEO, Matt Cowart
From his start in the stock market to building one of the most cutting-edge platforms around, we sat down with Matt Cowart, CEO and Founder of RocketScooter.
What was your introduction to the market? Was it something you started when you were younger or got into later in life?
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.
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.
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