One Trader’s Secret: How to Look Beyond Strategy – Wayne Klump – Episode 072

Hello and welcome to the Consistent Profits Podcast brought to you by Inside out trading and Brian McAvoy, where the focus is on consistency, because when you have the consistent part down, profits become easy. Hello, everybody. This is Brian McAvoy with another episode of the Consistent Profits Podcast. It's brought to you by Inside Out Trading, where we focus on consistency. Today I'm excited to be interviewing Wayne Klumpf of the Environmental Trading Edge. Wayne, glad to have you here today, man. Thanks for taking time for this.

Hey, Brian, thanks for having me. It's a pleasure.

Yeah. Now, you're in the. In the. You're in the options space, primarily, correct?

Yes, yes, That's. I mean, options and macro portfolios, but predominantly options. That's where I started my career.

Okay, well, as far as starting out, I mean. Yeah, tell me. I'm always curious how. How people wind up in trading, because, you know, if you think about there's like a million different careers people can have, it's like, okay, how do you wind up in trading?

Yeah, you know, I. I feel like if you want a little bit of torturing yourself, you know, you definitely get into trading. Right? But, yeah, it's. It's one of those things that I think it takes a special person. Right. Someone that really likes to problem solve, someone that really likes to kind of get into that. But anyways, that's more about the personality, how I got into it. Yeah. So I originally was going through college, and I saw, you know, student loans racking up, and then I married my wife. She had a bunch of student loans, and I was like, whoa, how do I solve this problem? Right? You know, I was like, I didn't realize what I was marrying into. I should have seen the fine print anyways. So I was like, all right, well, you know, what. What can I do about this? And I was like, all right, well, let me. Let me start a business. So at the time, I was an automotive technician, and then eventually started to own automotive shops. And then I realized that I was like, well, I can scale this, but, you know, this is a challenging business, and it's a challenging. You know, and, you know, I was like, yeah, let me. Let me see what else I can do. So I took a step back, and in that step back, I. I was like, well, I've got money. I need to put it somewhere. And savings interest was total garbage at the time, and it still is, but, you know, we're like, okay, well, what can I do with this? Right? So I was like, well, let me. Let me throw it in, you know, some stocks and things like that. So of course that kind of opened up the can of worms. And what's really interesting is my, my dad from, I swear, since I was like maybe 7 years old, as long as I can remember, he was like, stocks, stocks, stocks. It's always like, hit me in my head. And I mean, he's always been like, you know, you need to make your money work for you. Right? You know, so anyways, so I was like, all right, went into that. And so that opened up this whole, like, you know, what are, what stocks to invest? Where, where, you know, what are ETFs, what are, what are interest rates? And what's interesting is I went to school for business, but, you know, and, and I, I studied some finance, but it's just, it's not enough until, unless, you know, you fully go into finance and you go deep into finance. And so I was like, all right, so interest rates, I started learning the language, all that stuff. And eventually, long story short, I ended up having a friend that was a trader that he was a much older trader. So he roughly 50s or so, he had been trading for many years. So we started to work on some algorithmic trading using ETFs and short volatility trades and things like that, right? And so that eventually shorting volatility eventually turned into realizing that implied volatility is in options, right? And so I was like, oh, well, can I convert this shorting volatility into, you know, into some options plays? So, you know, of course there's double diagonals and calendars, butterflies and all that jazz. So inevitably, I put together a structure, a system and kind of systematized my approach. I went to a trading convention. At the trading convention, I ended up just meeting some traders, and then those traders ended up introducing me to president of a hedge fund. And then president of hedge fund saw what I was doing and he was like, holy shit. And he was like, hey, you want to come work for us? And I was like, all right, sure. So, you know, started turn from retail into professional. And then from there worked that for a little while. And then I realized how much absolute horrible information is out there for retail traders. And so then I started up environmental trading Edge, where it's more about here, here's my system, here's my, you know, my version. And it's like, you can look at it, watch it all along if you want to, whatever you want to choose to. But it's a, it's a profitable type of trading methodology. And it's There for the public.

Huh. So was there something at any particular event or anything that kind of triggered it for you as far as saying, yeah, hey, I want to go and start this up as a business and helping other traders? Because, you know, I mean, most. Most people in the. In the space, you know, they. They got. They started helping friends or whatever you know, on the side, and then it kind of converted around or, you know, maybe something in particular happened. Anything spec. Happen with you or just kind of a notion to go ahead and, you know. Yeah, expand your horizons?

Yeah, yeah, it's always. It always does start with a friend or so, Right. So I had a client that was also a friend, or your client turned into a friend. And then he lived up here near me up in the Seattle area. And so we were hanging out one time, and he was like, hey, you know, I need something to do with the rest of my portfolio. And I was like, oh. I was like, well, not necessarily my expertise at the time, but so then I was like, all right, well, let me. Let me start working on some things. And so that's when I started really diving into the macroeconomics of things. And then that started to change, really, my whole approach, because, you know, fast forward, even the macroeconomics are part of my options modeling now. So it's like, it's amazing how everything intertwines into macroeconomics at the end. But, yeah, eventually I started building a portfolio for him. That. What drove me nuts about portfolios is this whole static thing and this. And I mean, portfolio construction is just really kind of sad, but there's really cool stuff out there, too. And so inevitably, what I did is I kind of mutated, like an all weather approach, right. If you're familiar with, like, Bridgewater or the All Weather from Ray Dalio, I kind of took that. But then I took the macroeconomic variables of things that I used in, you know, options trading, and I said, okay, well, if these pieces move, have the portfolio move with them because of the likely risk adjustment to those assets. And so then I simplified it, inevitably, and converted it. And he was like, dude, more people need to have this. And he was like. I mean, he was like, you literally made money through Covid and all this stuff with a long portfolio. And I was like, like, well, it's. I'm sure there's lots of people that did it, right? And he was like, no, dude, no one did it. I was like, all right, so fine. I was like, okay, here, I'll release it to the public. So I ended up Meeting Tom Nunn Maker and we offered that to the public. And then now I, you know, I pushed it into my site as well. So that's how it started going into retail. And then of course, retail customers were like, hey, you know, I want to know more about this option stuff and all this stuff. And I was like, well, I'll see if I can convert it for retail. And there you go, I converted that. And so I'm like here. And so. And then eventually now it's like, now I've got clients that are like, hey, I don't want to trade this, but you know, can you make a fund? And so I'm like, yeah, sure. All right. So I'm just kind of going with the flow.

Oh, there you go. Now just for clarification, so do you differentiate between macroeconomic and fundamentals?

Yeah, so I stay more on the macroeconomic side of almost everything just because I'm broad based, indice driven. Everything. Right. My options are broad based indices. All of my research is and all of my expertise are completely in macroeconomics. And so like even assets like gold bonds, short term bonds, long term bonds, all macroeconomic driven. And so I stay in that realm. But what's interesting about the conversation you said is that in general, the macroeconomic landscape affects the fundamentals of companies as well. And so I think what's interesting is typically the macroeconomics are the first push and then eventually the fundamentals start showing up because we kind of get those on a delayed basis most of the time. And then that's when everyone kind of understands the, you know, or do they start gravitating towards the why the stock has actually gone down. But of course that's after the fact, so it doesn't really help.

So, so how do you differentiate the two? Do you. Are you saying the macroeconomic is going to be more like what the general economic climate and the fundamentals going to be more pertinent to a specific company?

Right, right. That's how I always. Yeah, the macroeconomics are definitely much more about monetary policy and government spending or inflation or relative inflation to other countries or other currencies. And that's a big deal. Right. And two different aspects there, right? There's inflation and then there's relative inflation. So you're looking at those things, whereas the fundamentals, sides of things, you're looking at, okay, what's the, what's the rise in profitability or the acceleration of profitability in a. And, and profit in a company or their earnings or their earnings per share how much is their buybacks versus what's their, what their earnings acceleration is. And then you start looking at their cash balances. And so you start looking at the fundamentals of a company and that's more of like you're starting to drill down into something very specific.

Okay. Okay. Yeah, I wanted, no, I wanted to just clarify that for our listeners because depending on what you trade, the fundamentals can be things that are not necessarily related, specific to the instrument you're trading, but they're, and, and some people I know just from conversation, they look at some things that you might consider macroeconomics, they consider fundamentals.

Oh yeah, I see what you're saying.

Yeah, okay, cool. Well, that is kind of a cool, cool path even been on. And now as far as your, your environmental trading edge, I gotta ask, how do you wind up coming up with the name environmental trading anyway in the first place? That one, it's, it's like really, you're part of the ea, you know, what is the ESG movement now?

It's so funny that luckily the names of funds in companies don't really correlate with how well the companies do. You know, I mean, who would have thought Apple would have been a good software name? But yeah, it's one of those things. Environmental trading edge. It really just came down to like when I was originally building this, I had taken on a student, which I don't, don't normally ever do or whatever, but she somehow swindled me into it. So I took on a student and I was teaching her how to trade and then we were like, here, let's just convert this into a business. And so that way we can offer it to retail and. Right. And so, but I, we were going through names and it was just one of those things that the first element of my trading approach or I think really any professional trader that I've almost ever met that is successful and consistent long term looks at the environment of, you know, whatever they're trading. Right. Maybe they're a macroeconomic trader. Well, what's the environment that you're in? Right, well, interest rates dropping and inflation going down or something like that. Right. You know, you kind of in general have just an environment and so you can define that into, you know, various variables. But anyway, so that was where the environment came in. And then she was always just kind of like, well yeah, but it has to do with trading. And so of course, you know, trading and then of course an edge which is you're looking for something in the market that specifically either has some sort of mathematical edge or has some sort of a consistency in it that you can press on and extract money out of the market. And so that's, you know, so there you go. Environment, trading, edge.

Boom. Gotcha. That works. Okay. Yeah, just when I first saw it.

I was like, okay, yeah, might not be fancy, but you know, at least it's self explanatory. Right.

Well, well and like I said, that is like your first, your first thing. And, and that is, that's just kind of a wise philosophy. Yeah, whatever, whatever you're wanting to trade, you got to take a look to. Yeah. What's the current environment? And I noticed, so you got your five pillars that you like to focus on. That's like the, the base of your, your, your, you know, what you, what you do with your trading, what you teach. So why don't we just have a, have a walkthrough on those. I think it's pretty worthwhile for people to understand these. The first of which. Yeah, go ahead and expand on the, the environment pillar.

Yeah, environment is the first pillar. I think, you know, I think anything, anyone that wants to be a successful trader long term needs to pay attention to just in general, the environment. I kind of always use a methodology of like if you're going to get dressed, right. If you're going to make a decision about something, right? So say you're getting dressed and you kind of want to know what the weather is outside, right? Like is it, are you, are you in Antarctica, are you freezing? Right. Or are you on a beach in Belize or you know, just wherever. Right. Or you know, Hawaii. Right. The various different things are going to change how you're going to get dressed. And so as a trader, the first pillar, right. Know what your environment is, right. Even things that you might not think impact your trade. So I would have never thought when I first started this out that interest rates, macroeconomics, inflation, right. You know, Fed policy was going to have a large impact on my options trades, but they're massive. It's, it's huge, huge variable weightings when you start looking at correlations. So yeah, environment is, is definitely the number one. And, and I think the easiest way to define a environment is find variables that correlate to your specific trading style. So like let's say you're a swing trader or something like that, then definitely look at something like volatility of the underlying. Right. Because the more volatility you have, the more swing you're going to be able to extract, right. The more movement which Might make two things. You either might make more profit when you're higher volatility, right. Depending on your trading style, or you might need to say, reduce your trade size because you might get swung out of your trades or something like that, or loosen up your stops. And so therefore you've got to reduce your trade size, things like that. When it's higher volatility, just variables like that, you start putting all those things together and they, you see how they impact your trade and then you can delineate what an environment is. Right. So, and then the second pillar is position size, which actually I just kind of alluded to that. So position size is, you know, if you've got the most profitable strategy in the world and you put leverage, 500 of it and it draws down 20%, you're out. Right. You know, so you got to pay attention to what you're, you know, I feel like we have to pay attention to what our position sizes is. Right. And so if you're pairing multiple trades against each other, so say maybe you've got five different swing trades on, and I was saying something like volatility impacts your trade and let's say inverse correlation. So you need to reduce your position sizes, the more volatility you got. Then do that, right? And do that across all of your trades and keep it normalized. And so now you can have 20 trades on, but now they're all balanced against each other. Right. And so that's a big thing.

Oh, yeah. Well, and, and one thing that I've noticed especially over the last couple of years, with prop firm trading becoming more and more popular, is it. Well, it's funny because when, you know, when somebody's trading their own account, you know, you say, well, you know, what's your, what's your maximum drawdown that you're willing to accept? And a lot of traders will be like, I don't know, or you know, they'll say 20% or you know, 40 or something like that. And, and everybody that's in a prop firm, you know, account trading, it's like, no, you got maybe 10%. A lot of them, it's five. So you learn. Yeah, position size matters a bunch.

Gotta shrink it down now. You know, you gotta make it smaller. It's.

Yeah, that's up a conversation that it used to be so.

Well, and it's a thing that we, we deal with in the hedge fund space and you know, even when you're starting to manage other clients is like when you first bring them on, there's two things Right. Number one is you kind of think about, okay, you ask, like, what's their risk tolerance? Right. You kind of need to know what their risk tolerance is. And you might as well take whatever they say and just chop it in half because that's about what their actual risk tolerance is. Like, oh, yeah, I can handle 10%. No, you can handle five. Okay, perfect. You know, so it's kind of funny where that goes to because anytime you get close to that 10%, they're so squeamish, they start to actually end up making bad decisions. And then if you got someone that comes in there is like 50%, it's like, yeah, chop that down to like 20. So anyways, yeah, yeah, Position size is a big deal with managing clients money. But then also at the same time, you try to structure a fund or you try to structure some sort of product so where it's tolerable for the general people that are, that are using that product. Right. And so, you know, hey, keep it. Typically you keep it below two digits. So you try to keep it at 9%, 9 and a half or 8% or something like that, right? Oh, yeah, yeah, big thing. So, moving on to the pillars, right? Let's see, what was the next pillar? Probability theory. Okay, so I'm sure you're familiar with probability theory being a consistent trader, right? So, yeah, probability theory just goes back to the concept that if you have some sort of historical basis on the occurrence of something happening, you can lean on that. Right? So if you've got an 80% probability based on these variables. Right. And one of the old arguments is. Yeah, well, if you flip a coin and it lands a hundred times on tails, if you flip it again, is it going to land on tails again or is it a 50, 50 shot? Right. And so that's typically the argument that you hear with probability theory. And yeah, we're just going to throw that little thing out the window because we're going to look at more things than just flipping a coin in a vacuum. Right. Because we're not in a vacuum. Right. Is the wind blowing the same way? Is it the same guy flipping the coin? Is he the same distance away from the ground? Is it starting out heads or tails every time? Right. If you can perfectly control or measure every single variable at the beginning of that coin flip, you can have a significantly higher probability of making sure that you know what it's going to land on. Right. Is it the same surface that it's landing on? So in the markets, we do the same thing, right? Like okay, Interest rates are dropping, right. Interest inflation is decelerating, right? You've got quantitative easing going on or something like that. You've got accelerating government spending, right. Going into US based companies, right? You got all this kind of stuff. And it's like, okay, well what's my probability of going long on a profitable company that has had a recent pullback? Well, you're starting to get higher probabilities, right? So you get this Bayesian theory, right? And so that's something really big. And then four is trade frequency. Trade frequency. You know, a lot of people, oh, here we'll just call it trade frequency in general is just make sure that you've got different time frames, maybe that you're trading on or that it's lined up with something in your life that works really well, right? You've got to match it to something that you can use. And then diversification. I think everyone hears diversification. Everyone kind of lets that like roll off their shoulder. And what's interesting about diversification is you can make a lot of money in diversifying properly. In fact, I started to make the highest returns ever when I started to understand proper diversification. And it's because when you take, let's just take two assets, two assets, and you've got an inverse correlation to them on the downside, but yet they both have positive upside correlation or something like that, right? Sounds like a holy grail. I kind of am talking about a holy grail right now. But in general, you, you pair those two together and if they're always winning, right, Relatively at the same time, but then when one draws down the other one remains its or accelerates its wins or something like that, then what you end up happening is you pair those two together. And now when you pair those two together, your downside risk is almost completely eliminated. And so now you go, okay, well, I go from investing in one of these and having a risk of 20% and now investing in both of these and allocating to them on a property on a consistent basis. And then all of a sudden now I can go, now my drawdown, say 7% or 8%. It's like, well, if I was willing to tolerate the 20 originally, can I leverage now and now get better returns? Right, and so you can get significantly more returns by doing it properly.

Oh yeah, well, properly is the key word.

Yes, yes.

Well, I mean, because I remember back, even like when I first heard, you know, heard about, you know, stock trading, it's like, well, you know, you always got to balance stocks and bonds for the reason that you're talking about because they're supposed to be in opposite directions, but in today's wacky world, it's not guaranteed by any means.

Yeah, I made a presentation in 2020, I think it was. Yeah, it was late 2020. I made a presentation and I. It's still on YouTube. I think it was over at Airmere or something like that. But I was talking about the fact that stocks and bonds were going to have a problem at the same time in the near future because of an inflation spike. And I wasn't necessarily thinking I was telling the future or anything like that. I was just talking about the reason why I made the portfolio I did, which was the Sleepwell portfolio at the time. And it was just like, it's very clear as day. The reason why stocks and bonds typically are inversely correlated in a recession is because most of our recessions are deflationary recessions. But if you have an inflationary recession, then that doesn't work. Right. So, so you know, where do you go at that time? Right. And then typically it's, well anyways, it's other assets. But a lot of the time you want to go into the currency that is having the inflation spike the most, which I know sounds completely crazy. Currency on a relative basis. Most likely that central bank will be tightening more aggressively and then you'll get a strengthening currency, which is what we had.

Now a couple of things I remember hearing you mention in your video where you're talking about your five pillars is minimal technicals. So what are your thoughts on that?

Yeah, I think some technicals are needed. They can definitely give you a picture, a framework to deal with. It's kind of like if you're a golfer and you start using aim point putting or something like that, it gives you a process for making a decision, a framework on a decision. And I think that that's good. And sometimes it gives you a risk management process as well as far as whether it works or not. Right. You can start to use some sort of. Right. Some Bayes equations to basically say, okay, here if I have enough of these technicals and I weight them, maybe you can start getting a higher probability of success. So that's possible. The one thing about technicals that I've seen with retail traders is they get them wrong. They, they, they mistraw them or they're constantly adjusting them or they're, they get hyper focused on them. Right. And then so they, they start leaning on them so much. Or then of course, by the time you see the pattern, most of the time, the patterns start to change. Right. That's very common as well. So in general, I think technicals can be a little bit misleading. I mean, I still think Wyckoff and in general, supply, demand lines and, you know, areas of interest in the market, high volume areas of interest in the market are definitely worth it, but that's only needed if you're really trying to do some advanced stuff. Whereas, like, like the Adapt Daily, one of my, one of my strategies that I run, I mean, you don't, you don't need technicals. I take care of all of the, the, the environmental metrics, 100% behind the scenes. So. But if you need to do that on the, on the front end for a retail trader, I think for me, as far as, like the Adapt Daily, the technicals that I use are not necessarily chart technicals. Right. They're more of the, the values of the options on the underlying and how they're moving through time and how they're projected through time and how is the probability of the underlying affecting those prices? That's really much a, much bigger part of a strategy for options, at least. Right?

Yeah. Yeah. Cool. Yeah, different take. Well, and what. Well, the technicals, it just one thing and I was, I was guilty of it too. It's, it's so easy to want to find an indicator that's going to be that little magic crystal ball for you. And it's like, yeah, I can bank on this.

Baby dolls give me good drinks.

It's like, no, they're just, you know, 99 of them. Pretty. All of, you know, they're lagging indicators. So it's like, yeah.

Yeah. How do you get in front of that? Right. I mean, that, that's the whole thing is how do you know what's coming and. Yeah, I mean, a lot. A large thing. I think some technicals out there, I've seen some indicators that are beautiful. I mean, vwap, for instance, or things like that. I mean, there's, there's very good ones. And of course, on the institutional side of things, you know, in the ease of movement, we're looking for where the order flow is going. Right. Those types of things. But, you know, in a vacuum, one indicator doesn't always necessarily tell you a lot, but you start stacking, you know, maybe 10, 15, 20 of these indicators together and you weight them, right. Like, like I said in, you know, Bayesian probability, now you can start leaning on something because you might only have a 1% edge or a 2% edge on a single indicator. And that's not enough to extract out of the market because of, you know, risk and margins and all that jazz. But you start stacking enough 2% edges together and you can start doing something strong if they all line up. Right.

Well, the other thing I know you, you like to focus on is scalability.

Huge, Huge. Man, that's something that everyone misses, especially in retail trading, right? Of course, the instant you go into the institutional side, like I walked into the fund at the first day, like, well, how are we going to get this bigger and how are we going to grow it? And it's like, oh, well, I mean, I thought we'd just trade it. And as it works, we just get bigger, right? You know, and he goes, well, let's look at the math of this. And I'm like, oh, okay, so this is a big deal, like something really simple, right? And this is just counterintuitive, but most people, if you just ask and you go, hey, if I've got $100 and I make 10%, what do I got? And they go, I got $110. And I go, Great, now what if you lose 10%? They'd go, well, I'd have a hundred bucks. And I go, no, you got less because 10% of now 110 is 11. So you're back to 99. You've lost money, but you've gained up and down 10%. Right. Especially with trading, right. A lot of. There's a lot of trades out there that work on high probability or definitely an options and options income. And they keep the. This, the static trade size. And it's because if you try to scale it so your next trade is using the profit of your previous trade or, or your next trade uses the loss of the previous trade, it makes it much more difficult to scale up. And then that's when you start to get into Kelly Criterion and things like that for how do you actually scale up a trade and is it scalable actually at the end of it? And then a lot of the times what retail traders do especially is they go, oh, well, it's been working really good for a while, so I'm going to start to put more money in, more money in. And then of course, mean reversion kicks their butt. And so there it is. Right.

Well. And yeah, it's good to pay attention to that. One of the things that I like about the fact that you bring it up and just in general, as far as the concept and this is in the, you know, the whole mental construct of treating trading like A business is. Yeah. How am I going to scale this up to a point where I can continue growing it and also be drawing money out of it? And, and so you got the, the trade. Trade scale that, you know, you're looking at, and then you got the account scale that you're looking at, and it's like, okay, yeah, how we're gonna, how are we gonna work this all out? So, yeah, five years from now, I'm where I want to be. Both account size and draw, you know, income from it.

Right? Yeah, yeah. Treat it like a fund. Treat your own portfolio like a fund, right. You know, you're like, okay, here, I'm gonna take a management fee for this and then just take your management fee and make sure that with taking that management fee, you can still grow it and grow it at a rate that you're. That's acceptable. But I mean, you'd be amazed at. Once you start taking a management fee. Right? I'm sure you wouldn't. But I mean, just saying in general, like, I'm. I was amazed the first time I ever saw it is that when you start to draw, start to make a draw on the account, right. How much accentuates the downside volatility and caps off your upside returns. Right. And so you actually, it really does kind of hammer it down, but it hammers the returns, but it keeps the volatility there. Right. Especially the downside volatility and can actually amplify it depending on how much you're drawing. And so, yeah, you know, you're used to a 10 drawdown or so, but now you've got a 4% drag on it because you're taking 4% off of it. Or maybe you're taking 2%. Well, now your drawdown is going to be 12 or 14%.

Yeah, well, yeah, just as far as, look, you know, looking at things on a time frame and. Yeah, you know, yeah. If I, if I lay out a spreadsheet and I'm, you know, year zero, year five, and then start putting, plugging the numbers in, it's like, wow, okay, does this work?

You know? Oh, yeah, yeah. Does it, you know, am I still growing it? Am I happy with that? Am I, you know, and then you're like, well, how do I generate more alpha, Right. Or, you know, a more return over the. Or the market? You know, how do you do that? Right. So, yeah, diversify.

Well, now, as far as what you. I know you're big on, on trading education, you know, and you've got your own YouTube channel now. @ your site though, you've got a couple of different things going on. I know you got your private coaching and you've got an indicator but as far as your, the other things that you do, you got what the macro portfolios and in the to trading systems, can you tell, can you tell me a little bit about, you know, what it's like when somebody's coming to work.

With you or you know, looking, looking.

To you for help? What, what, what all you got going on and how do you generally help traders?

Yeah, so I, you know, I, so I just to start out first, the coaching side of things, I do offer one on one coaching for a select type of student. Right. We do talk first and we go through an interview and I don't charge for that. But the point is, is I want to make sure that it's, it's a good fit. It's a good fit for me. It's a good fit for you. Right. It's, it's, you know, it's going to work. Right. Otherwise you know, I'll refer you to someone else that might be a better coach. Right. Because my specialties and what I look at and how I can trade. Sure. I can, I can pull in trading principles over to someone for sure. Right. You know, if you're a swing trader, I've, I've had a swing trader student before and I've been like, okay, I can get you profitable, I can get you consistent, I can get you all this and we can work with your system, we can systematize it, you can make this into a very good generating strategy. But they came to me with kind of some sort of a base strategy, right. So that's one way to work things. And then of course if I'm teaching you or teaching some of my process, right. I go through something like the Adapt Advanced, which is where you're much more of an adaptive trader based on a series of variables that I've turned into something that you kind of have and you get access to that by being a student. But yeah, like I said that goes through kind of an interview process to see if it's really a good match as far as my other products are concerned that I have available for retail. The Adapt Daily is, is the high flyer of everything. So that one is basically like the Adapt Advanced which is what I do is like us like a kind of a discretionary type of options trader. But I systematized everything and that's kind of what I did in generating like a fund. So right now we're in the seed round. So I'm taking on new clients right now for the fund. But the point is, is that thing is, you use different structures in different environments, and it's based on an indicator. And so what I learned with dealing with retail traders in the very beginning, right, first I was trying to educate and trying to go down that road, right? And you know, as. As you know, there's a huge long path to take someone from not knowing anything or even being an intermediate trader to actually being a consistently profitable trader. And there's a lot of. There's a lot of headwinds and stepping stones along the way and a lot of hurdles that you've got to deal with, especially personal hurdles, right? People that want to always be right, right. Don't let go of their trades and just all sorts of biases that show up. And it's just amazing. So, yeah, I finally was like, look, okay, fine, here we go. Let me just give you. Here's the base strategy. You don't really need to learn anything except how to execute things, right? And it just says here, this is what we're doing today and it's going to be profitable. And you just follow along, follow along the yellow brick road. And so now it ma. It matched up with so many people that were just out there. And you and I were talking a little bit too, on this earlier, but they just want something that works. They just want to see that actually profit actually can come into their account, right? And it's like, this isn't an unreal thing. And it's because I think when we all start out as retail traders, right, we know intuitively that you can make a lot more return than just market, you know, 7% garbage that's out there, 10% garbage, right? And then taking 50% downside drawdowns or 33% in Covid, like, I mean, that's crazy, right? It's crazy. The upside to downside risk profile is just completely unacceptable to just be a passive investor anyways. So, yeah, here is one way to make profit. And then, you know, I've got the intraday, which is someone that's look, you know, wanting to stare at the market intraday and run that. That's kind of an opening bell type of trade. And then, yeah, so and then the macro portfolios are. Where I started out with is like sleep well portfolio and stuff like that. And awake is a little bit more leveraged, but people have leveraged the sleep well portfolio too. And so I, I talk about that too. But yeah, that thing's done really well. I think it's up close to 50 for the year. So. Yeah, anyways, Nice.

Well, so for a little clarification. So with your portfolios, that's where it's, it's more the longer term investing and maybe just moving things around. Regular portfolio management, but with a strategy behind it.

Yes, yeah, yeah, it's, it's a simplified version for a retail trader. So like, you know, typically someone would look at a portfolio and, and you know, think of like, you know, quote unquote a portfolio and go, okay, I need this many hundreds of stocks and I need to be diversified this much and I need to constantly reweight all of my allocations and here's my stock or here's my bonds and let me make a bond ladder and all that kind of stuff. And you know, here's some alternative assets and here's some internationals. And so you know, that's typically the way that we go through portfolio construction but nowadays we have the ability to, you know, retail traders have the ability to just buy an ETF like the Spy and Bam. You've instantly got exposure to 500 stocks and then you've got something like IWM and now you've got the Russell 2000. You got 2000 small cap stocks. And so you use them now as an asset class rather than thinking of it like, oh, I need this many individual stocks. And so then when you get to that approach, really there's six, arguably seven assets that you would really kind of want in the mix. And Right, so that's large cap U.S. bonds, gold, the dollar as far as on a relative currency and then you know, emerging markets and then small cap US Right. And if you get those six assets together, weight them appropriately for the macro environment. Right, Environment number one. And you, you let them move each other or move around. And so you can make this really simple every Monday just like what I've got. Right. Every Monday you adjust the allocations based on the changes in the macroeconomics and that's it. Right. Every Monday you just kind of reallocate your portfolio just a little bit every week. And so like right now we're in predominantly, we're predominantly bonds, predominantly gold and I think we have a little bit of emerging markets in there as well. So.

Well, so, so it is more regular traditional portfolio management on a simplified basis.

Rather than trading, Right? Yeah, rather than trading things. I mean, you know, don't get me wrong, like I've got some members that have converted into options and then they found out how to do Tax efficient to where they're using options for delta hedging rather than selling under the underlying. But anyways, that's advanced stuff that people get into.

Well now with your, with your trading systems though, your spx, I mean you got sps, SPX options, you got the intraday, daily and advanced. So now with the intraday, obviously that's intraday trades, but with the daily and the advanced. Now since you're talking options, are you, are you talking mostly buying options, selling options or a mixable Both.

Yeah, it gets very. You're so in retail trading land, typically you'd want to not be naked any selling. Right. So you, I'm. You. Some. Sure. Some people do crash cash secured puts, but in general you're dealing with spreads. And so we're almost always dealing with spreads now whether we're in horizontal spreads like most retail traders know as like calendar spreads or whether you're doing something more like vertical spreads or a combination of vertical spreads and calendar spreads and things like that. So there are different areas on the options chain that will be undervalued or overvalued depending on the current environment. Right. Macroeconomically and market underlyings and then also in the actual options pricing themselves. And so you can combine all those, pull them in together and then you can make a structure that historically and has proven right that it can have high probability of success with a good risk reward ratio when managed well. And so yeah, rather than, you know, putting on some sort of trade and adjusting it and trying to milk out some sort of income based trade like what most retail options trading is, it's more of like, hey, let's put on a good structure that's set up for this environment, put it on there, take it off if it hits certain parameters and then there you go. So you just make one good trade at a time every day. Right. And then you just keep it on like a campaign basis and you know, there you go. And you can make just consistently profitable trades over and over again. You know, maybe one trade doesn't work out here or there, but it's all about the campaign, right?

Yeah. Okay. Very cool, very cool. Well, I wanted to explore that just a little bit just because you know, when you say options trading there are a lot of different ways to go about it and, and right, different, different educators, you know, they've got their, their philosophies that they teach and everything. And I, I mean it, I like, I like what you have going on. It seems much more reasonable and logical than some of them that are out there. I know when like the, the binary trading, you know, got was real big a few years ago, that drove me nuts because so many of them, it's like, oh my God, you're just selling garbage. People just cut it out. And, and so no, this is good. And just, you know, hearing you talk and everything and your history and everything, it's like, yeah, you, you've got a really, a well reasoned approach to what you're doing. And, and that's, that's awesome because yeah, there's so many people in the trading space that are just, they're, you know, they either kind of got lucky and they figured out how to make money and now they want to teach other people or, you know, they're just kind of, you know, hucksters by their nature. And it's just, it's so nice to run across somebody who's actually, you know, intelligent and has a good history and is taking a very intelligent approach to it. Especially just kind of taking a look at the environment because that is so much of what trading is just paying attention. Hey, what's, what's the environment that we're working in? Because that drives everything else.

Absolutely. I mean, it's amazing even, you know, running into professional traders. And you know, I was actually talking to someone the other day and he's like, yeah, I'm a short, small cap seller, right? You know, that's, he's a short, small caps. That's his, that's his whole, you know, trading career. That's what he does. And I'm like, wow. Yeah, you probably had a really hard time in 2021 then, didn't you? And he goes, dude, one of my worst years. And I was like, yeah, well, you know, macroeconomically they were printing a bol. Boatload of money, you know, and so I was like, there was a lot of stimulus going on and there was a big bubble going on. And so I was assuming that that was probably going to be a little bit of a rough year. But he goes, yeah, but it really started to work well at the end and I was like, oh yeah. When they started to slow down their printing and you know, so yeah, it's, it's amazing what the environment does to even individual trades, right?

Oh yeah. Oh yeah. So very cool. Well, so if, if anybody wants to find out more about what you got going on, Environmental Trading Edge is your site and I'll make sure to. Now, are you, do you, do you publish on, on the social media sites or primarily just at your own. At your own.

Yeah, I'll throw it up on YouTube every now and then. But yeah, I don't really manage the social media side of things. I mean, that's one thing is, is that I'm, I'm a trader first, right. I'm a, you know, like I said, we're going to be opening up an adapt daily hedge fund. And so that's kind of where my focus is predominantly. So as far as content creation, you know, sometimes I'll get around to it and I'll make something or I'll make a video, especially if I get requested a lot and stuff like that. But I mean, predominantly that's where my focus is, is making money, extracting out of the market and adding value to some traders when they reach out to me and things like that. Right?

Yeah. Awesome. Wayne, this has been really cool, man. I really enjoyed the conversation with you and well, as far as, you know, consistency in trading, I mean, what would you say is one of the, one of the most important factors or mistakes traders make that they need to address when it comes to just being able to profit consistently?

You know, being static, 100% being static. You know, the markets are in their own nature, constantly evolving and constantly changing. And so in order to be consistent, you have to change with them and adapt with them and you have to know what's changing, what's the environment, right? And that can bring you some significant consistency if you can move with the market. Kind of like flowing with a river rather than trying to just drill a hole straight through every bend in the river and just dealing with fighting the current sometimes.

Makes sense. Makes sense. Very cool. Well, everybody that's listening, I applaud you for taking time out of your day to, you know, listen and not just chase strategies, but, you know, try to learn and develop and grow as a trader. Like Wayne and I were talking about before, before we started the record reporting. Really important, no matter what you're doing with your trading, always focus on developing yourself because you are definitely part of the process. And as you get better, it's just going to help everything else that you're doing. So and again, you know, if you enjoyed this, if what Wayne shares with you, you know, it makes sense, definitely swing by a site Again, it's environmental tradingedge.com and the link will be in the description or the show notes down below. But go ahead and connect with him if, you know, if you're trading, if you'd like it to be better. And again, you know, this resonates with you. Don't let this just pass. As you know, that was cool, you know, kind of cool podcast and you know, tomorrow you've forgotten about it. Go ahead and act on it. Go ahead and swing by site and connect with him. He's got some good stuff going on. And as you can tell by, by talking to him. Yeah, you know, he's, he's not just pumped on, you know, selling courses or whatever. He's. He's actually wanting to, you know, make, make a positive impact in the trading space and helping his, his clients. So, Wayne, again, thanks for taking the time and we'll actually love to have you back on sometime. We can explore some of the, some more details about what you have going on because I like what you're doing and I'd like to learn more about it. So today was kind of an introductory getting to know you conversation. But yeah, and everybody, you know, if you enjoyed the podcast, you know, definitely subscribe, share with your friends and we'll see you on the next episode of the Consistent Profits podcast. Talk to you soon. Thank you for joining us today on the Consistent Profits podcast brought to you by Inside Out Trading. Make sure to swing by InsideOutTrading.com and pick up your free copy of break the cycle 10 things you can do to stop reinforcing the past and get your trading on the right track. If you enjoyed the show, make sure to subscribe on your favorite channel and we'll see you on the next episode. Cheers.