Trading Legend Reveals The Truth About Market Mechanics - Enrico Stucchi

The trader I'm about to interview is literally one of the best and most competent traders I have ever met in my entire life. He is kind of working in the shadows. He don't like visibility too much. He never sold mentorships or anything. But I'm from Italy and in the Italian space he is like this underground trading legend. He's one of my mentors in learning order flow. He was a former book map educator as well, and in this video he's going to share some amazing insights on his approach to trading. This is, I think, the fourth or fifth episode of this series of podcasts that I'm posting on this channel where I take legit, highly experienced trading professional to share their insights with you and hopefully give you some different perspective and different insights to help you with your trading journey. So if you want to see more, subscribe now to the channel and click the bell to be notified when a new episode comes out. Now, without further ado, enjoy the interview with Italian trading legend Enrico Stucki. I'm not sure if you're familiar with Pokemon, but in Pokemon there are common cards and then there are legendary cards, ultra rare ones, legendary beasts, etc. For me, you're an ultra rare and legendary beast in the world of trading. For obvious reasons, those who follow the new school, perhaps the younger ones know, but the old guard, let's say my audience doesn't know you, or at least many don't. And it's an honor to have you here on the channel. So thank you for being here on the podcast with us.

Thank you so much, Andrea, for inviting me.

And of course, you're a rare beast in quotation marks, like in Pokemon. And you want to remain that way, by the way, right?

Yes, exactly. I'm not seeking visibility because fundamentally, in the world of trading, I make a living from trading. I don't seek visibility because I don't want to. Well, I'm not interested in providing education or selling signals or anything like that. Not that I have anything against those who do. On the contrary, I'm convinced that, let's say, you don't realize the cost of education until you realize the cost of ignorance. So it's definitely a very important value. But from my point of view, I prefer not to appear. So I ask you then, if you're interested, if you haven't already changed the channel now, if you haven't switched to another channel, not to contact me because I don't offer courses, coaching or anything like that. That's it for the future.

Okay, fantastic. So I Urge you guys, don't contact, okay? Don't bother. Mr. Stucky, I wanted to start right away by asking you a bit about, let's say, making a small digression about your background, both professionally and then what led you to trading and how you approached it at the beginning. So if you want to give us a little overview of your story.

Yes, so my background, I have a degree in chemistry, so I have nothing to do with finance. And frankly I absolutely knew nothing until I had the need to invest. That is, I eventually came to trading and the world of investment finance out of necessity because in 2000 I was 33 years old, already a manager, earning quite well, working in an industry, a telecommunications company. So telecommunications, mobile telephony in particular was what would represent artificial intelligence today. So it was, let's say the sector along with E commerce that was riding high. So I was earning very well. I was spending little also because I was working 12 hours a day. And then I've always been a bit frugal. Anyway, I had accumulated some nice savings and I had to. At this point I realized that I had to invest them. So I started investing my savings through managed savings, so financial advisors, etc. Managed savings products. And I subscribed to all those things that now if someone asked me for information, I would say get the behind me satan insurance policies, index linked unit, LinkedIn, that managed savings garbage. Now I'd get sued anyway. Things that I would never recommend now and that I nevertheless subscribe to at the time. And then I started to become interested in finance because I was watching what my portfolio was doing. I was watching it perhaps in the wrong way, because as an investor you shouldn't, if you have a long term horizon, you shouldn't look at the market's daily oscillation. But I did. And from there I said, wow, this stuff is cool. Finance is beautiful. This bulimic hunger for knowledge of the world of finance began with which for me, coming from the scientific world, was a completely undiscovered world. And it was just the beginning of the 2000s.

Yes, I imagine you started during the full dot com bubble.

Exactly. I started right at the peak working in the telecommunications sector. I had the opportunity to buy the ipo, for example, of Biscom, because, well, my boss came from that sector. And so I bought Biscom. Also I had friends who had moved to Tiscali, so I also bought Tiscali shares. I took all the hits from the dot com bubble, but luckily I was cautious enough so I didn't suffer monstrous losses. However, I learned the lesson that I understood nothing about this sector.

Perfect. So you started with buy high and sell low, practically.

Exactly. I bought right into the bubble like an idiot.

Ah, ah, well, it happens. But actually then. Well, we'll get to the more technical parts later, but for now let's finish the part of the journey from there on. How did you approach trading? What are the, I mean also in terms of trading process or information you used over time, how did your trading evolve?

Well, consider that. I know it's hard to believe now, but then I'm Talking about roughly 25, 23, 24 years ago, there wasn't the amount of information that there is now. YouTube didn't exist, or maybe it had just been born, I don't remember. And anyway, there wasn't much content. There were some websites of some pioneers that disseminated information, but there wasn't much. There were books and so I started with books. Then there were some sector fairs. There was already, I think, the Toll Expo in Milan, online Trading expo. There was the ITF in Rimini. There was also something called, I think King of Ducks that always took place, I think Rimini stuff, I mean sector events where I went and started to get passionate about seeing these gurus who told me their stories.

The old gurus.

Some are still around, still riding the wave, others are gone, disappeared. And from there I started this passion, this quest for information. So I started obvious, like everyone else, from technical analysis. Because the macro part for me was more complicated coming from the scientific world, the scientific background for me, the macro aspects, so understanding, I don't know, the price earning ratio was Arabic, so it was totally out of my jurisdiction. And so I started with technical analysis. So I started studying Pring Murphy, those.

Yes, Disney's great classics.

Exactly, Disney's great classics. And from there I basically started with this passion, researching markets, studying, analyzing. And I thought, as I said before, that it was easy. This was perhaps my biggest mistake because I started, I remember I started drawing trend lines. I started with drawing trend lines. So drawing trend lines, I said, well, of course, if I had sold here, where the price crossed the trend line, bought here, where the price returned above the trend line, I would have made a lot of money because markets move. So I considered if the market, I don't know, an equity index moves on average 15, 20% in a year, if I take these little oscillation pieces, I make a lot of money.

Sure.

Then I discovered leverage. Oh, what a wonder. I can really make millions. And not so it wasn't like that on paper.

Maybe it can be, but then clearly it's not that easy in practice.

Exactly, because you can see all these things exposed while ex ante. When you draw the line, it's not guaranteed to be this one. Then the trend line moves, you have to adjust it, and so on. So in the end it wasn't as simple as. Obviously I started with trading, let's say multi day, so with longer term operations, mainly in stocks. And this was my first approach to trading.

And so from technical analysis then, because there are also many schools of thought, many analytical schools, and I also started with technical analysis, I think my subscribers know that then I didn't find a great edge, especially for day trading, maybe for, I imagine, swing trading, or anyway, even for position trading, it may be that certain references are actually seen by all operators who then have a value for those who look at them all self predictive. Yes, self predictive, but especially for day trading, I didn't find any great advantage except in discretion. Okay, so I couldn't find a genuinely profitable mechanistic approach in technical analysis. So then I shifted to price action, a bit more elaborate then volumes, etc. Etc. What was the path you took from there onwards?

Yes, the path was more or less similar in the sense that I started with technical analysis. And so let's say I started to understand one thing, fundamentally this imprinting of mine of a scientific type, anyway, made me think that anything that cannot be demonstrated is not real. No. And I tried to understand if this stuff of technical analysis, the supports, the resistances, the trend lines, the Fibonacci, the triangles, the wedges, etc. Had a scientific value, I.e.

And cups with the handle, the cup.

And handle patterns, etc. So I realized that it wasn't easy to backtest technical analysis in the sense that it's difficult to backtest a support, a resistance, a trend line.

How do you trace it, for example?

Exactly, it depends on how you trace it. So there's such a strong discretionary component that makes it impossible for you to try to demonstrate it, quantify it.

Yes, of course.

And so in my logic, I tried to abandon these things a bit quickly because I didn't know if they worked or not. I could do backtests, so to speak, by hand, on the contrary, going on historical data, the trend. But I cheated because anyway, I already had future data, so it wouldn't have been a realistic back test, no, let's say a stress test, but not exactly realistic. And so I basically tried to verify as much as possible. And when I went to Industry fairs, I heard these gurus talking to me about magic patterns. I remember I won't mention the name of the trainer, but I don't know the IDNR4, which is a volatility compression pattern by Linda Raschke, which was inside her Street Smart. This one of the most probably read books in those years on trading. And I started to think, but if I apply this pattern every time, does it work or not? And from there I started programming. So I started to create trading systems simply to verify if these things they told me were true or not. For example, let's make another classic example, the crossing of the price with the moving average. No, the price crossing with the moving average is. Or of the two moving averages, it is one of the things that has existed for longer. Yes, well, it was really easy to back test, so I started downloading the platforms. The first one maybe I started working with was Pro Realtime and doing back testing of these things here. And, and I saw that basically there was no advantage, there was no edge. And I remember when I returned to industry fairs, I found the same trainer who had told me about that pattern. I said to him, but if I apply it every time, what happens? And he said to me, well, I don't know, I never back tested it. I said, I backtested it myself, it doesn't work, it's like flipping a coin. So they told me, well, why do you have to contextualize the trigger within the context of the price? So I said to myself, but excuse me if I have to contextualize the trigger, which has no advantage. So it's the reading of the context that gives me an advantage. That is the trigger doesn't give me any advantage. So I could read the context and decide whether to go long or short or stay still. Yes, with the coin.

Certainly.

There you go. From there I started programming and writing and looking for real demonstrable advantages. And so I started with trading systems, first with Pro Real Time, then I switched to TradeStation MultiChart and started writing systems. I spent a lot of time and wasted a lot of time looking for magic indicators, of course. So I tried all the available indicators first, rsi, CCI and so on. All moving averages.

Know that maybe I always considered that somewhat unscientific, frankly. So however, I tried all these kinds of things for years. I tried indicators of this kind and I wrote many of them. Also I wrote many based on volatility, Bollinger style, essentially similar. And of course, I'm not saying they don't work, but that wasn't the approach I followed in the continuation of my systematic trading. There you go.

Okay, then how did it evolve?

It evolved that well. Basically I started to analyze market data, so analyze historical series and try to understand the nature of the market. There's an old video of mine on YouTube from 2018 that I did in Bologna. I think it was with Class NBC. It was recorded by Class NBC, but it was also on my channel. And the nature of the market was probably the most important thing I discovered during backtesting analysis. So understanding if a tool was fundamentally trend following or fundamentally mean reverting. So there really exist. There's a characterization of some financial instruments that I can say I don't know. Oil, gasoline, diesel are typically trend following instruments. And even in the trend following world there was a logic that is, there are so called momentum logics. So basically if the price is rising, it will continue to rise and you can see it if it's rising even with a simple moving average or slope of moving average or something else. And other logics instead are precisely breakout. Breakout of supports and resistances. And they are the most difficult thing to write for systematic trading because support and resistance of the systematic are not exactly like the discretionary support and resistance.

Of course, which has the ability to better contextualize the range of movements where they occurred, etc. In systematic, it's more difficult to define a support and a resistance. So typically you go and see the highs of the last N periods, which in the Dunan Channel is probably the simplest of all filters to understand if a system is a breakout or not. There you go. So this was, let's say, one of the foundations on which I started to write systems that worked, I must say. Well, they work. Some of them are still online and alive and kicking, others are dead. I mean, the market changes. And so systematic work must still adapt to these market changes. But then if necessary, we'll talk about it in more detail later.

Yes, yes, which actually is also among the next questions. So surely we can actually already address it. Advantages and disadvantages between systematic trading and discretionary trading, especially in recent years, because as you said, markets have evolved a lot. I mean.

Exactly. But first let's finish wrapping up my story.

Some years ago, I don't remember exactly the year, but let's say five or six years ago, I started studying volumes. This is because I always realized that fundamentally either I had an edge in the market, a real advantage, or. Or I would have been killed by the market itself, by the cost of just trading. And it's Not a zero sum game, but it has transaction costs, so the more you trade without an advantage, the more money you'll lose. And so I understood that I absolutely must seek out advantages. I searched for them with indicators, first with other market logics, then with systematic trading. I also searched for them in other aspects, such as seasonality and all the analysis of statistical data, which still today is part of what has entered my head, like also trading systems. Because even though I'm currently much more discretionary than before, I don't forget what I learned with trading systems. That's important. I mean, I know that if I have to work on gasoline or natural gas, I won't tend to go contrarian. I mean, I try to follow the price movement. Something that I could do instead is go contrarian on a market downturn, for example, right? So buy the dip, sell the rip. Okay? So this kind of thing sticks in my head. So even when I do discretionary analysis, I know well that there are statistical advantages at certain times of the day, days of the week, months of the year and so on, and the nature of the markets themselves. But volume is something I found scientific.

In the sense that, as I was saying, the part I always sought in the edge was to find a logic. So I started studying volumes first with the classic, I mean the volume profile, probably, you know, once volumes were studied only on the time axis, right? So the volume on the X axis was the only thing that existed. Then later on, actually there was the market profile that came already, well, from Stadelmere, so already at the end of the 90s, if I remember correctly. But it wasn't volume, because the data on traded volumes, especially tick by tick, so for each single execution were not available on platforms at that time. So then when the data started to be collected, the shift went from market profile to volume profile, which clearly was much more precise, if you will, as information on the price. I started from that and then I discovered order flow. Order flow is, well, something you deal with every day. So however, I imagine you're following me, you already know it, but basically it's the order flow. The order flow means a dynamic visualization of what is happening. And they are both the executed orders and the resting orders, and that is those that are on the order book. So this type of information led me to study the micro mechanics of the market. Not that I didn't know what the order book was, what the bid was, the ask and what it meant to hit, let's say the type of order, the market order, the limit order, etcetera. It's something I've known for 20 years. But understanding the mechanics of each execution and understanding why certain things happen opened up the world for me. In the sense it was truly an incredible edge boost for me. I must say that then discovering, having also discovered, that there were data sources that also provided the market by order, that is the identifier of the order. And so knowing, I'm not saying who places the order, but how many orders are linked to that same one, that is how much size is connected to the same order, to the same operator, etc. And what it means, then the interpretation of iceberg orders, stop orders, and many other micro, let's say, facets of this world was definitely the big boost of this world. Absolutely an advantage that I found in this thing here. It's huge. And from here then you answer your question. Better discretionary or better systematic? This is a question to which I can't give an objective answer. I do both. I started with systematic and ended up predominantly discretionary, but not entirely more than.

Which one is better. I would say what are the advantages of one and the disadvantages of the other compared to each other?

Okay, so the main advantage, in my opinion of discretionary analysis in this case, especially as I do it with order flow, is its adaptability to market conditions. And you, when you're there and you look at your order flow day by day and so you see these executions. I mean, well, I don't know if we can talk about platforms or not.

Yes, yes, no problem.

I use. I started with bookmap, frankly. Well, first at the beginning I started with Footprint. Footprint is a tool invented by Market Delta, but then the year, let's say it was also changing its name, put on all platforms by Ninja, etc.

Yes.

And then I switched to Bookmap, which indeed showed me the atomic orders. So every single trade event, every single execution. And then I switched to Volbook, which is the volumetric platform that you also use.

Yes, which by the way, well, you also participated in the development.

Yes, yes, in the sense that they had already done it. I then, talking to Antonio from Volumetrica, I told him what in my opinion needed to be revised to try to get a better platform. I must say that now I use Volbook because it's cleaner than bookmap, in my opinion. Yes, it requires much less computer resources. And so I see it better then. But I don't want to say it is.

Yes, it's personal.

What was I saying? Yes, the advantage of using order flow in general discretion. And you Realize, for example, that the market changes directionality and volatility every day. Okay? And the logic, for example, systematic fundamentally, instead would hope it to be constant over time. That's why systems break. They break because the market direction changes, but maybe because the amplitude of movements in the market changes the holding of directionality in the day and greater. Most trading systems work well in high volatility context. Most, not all, when volatility is compressing, as has been the case in recent years. That is, we have the Vix below 15 for a long time now. And this thing doesn't fundamentally benefit the systematic part. So your ability to understand, to adapt day by day. But not only. Let me give you an example. Since the beginning of January, for example, there have been, apart from the days when data is released, you can see that the market is sideways. It has been like this, on average, since the beginning of January. This pattern, this clustering of behavioral modes in the market is something you observe day by day, and that maybe an artificial intelligence system or neural network can understand better than you. Of course, I'm not saying no, but a classic trading system, no. And so this thing here certainly gives me an adaptability advantage. Another advantage that I find important in order flow is that you can also keep tighter stops. So the systematic. When I wrote trading systems, I tried various. I mean, one of the characteristics trying how to exit the market when things go wrong. No. And the classic system is the stop loss. If you try various stop loss amplitudes, you realize that most systems, if you keep the stop tight, the performance is destroyed.

Why?

Because they don't have enough edge to absorb the random variations of market oscillation. When you work with order flow, for example, and you try to go long when the price has had an absorption, so the price in contact, a monster liquidity order has arrived, an iceberg order that has blocked the descent. You had a stop running that was absorbed and the market reverses. So at that moment you are entering because you have a precise reason that is on that level. It's not a level that is calculated by an algorithm ex ante based on the average oscillation that the price would have had in the last years. No, it's that moment. So if once I have crossed a liquidity level and the price continues, I know that I have misanalyzed, that is, I know that.

What I thought was not happening. That is, operators have decided to continue their descent, for example, so I exit.

Sure, this allows me to have tighter stops, which I couldn't have in systematic at this point.

The Question that arises spontaneously is whether the advantages of discretion are limited only to the fact that they are too difficult to quantify in an algorithm, or if there is something more in discretion even. Even at the level of intuition and at the level of implicit learning, after years and years in front of the charts where you see the same stuff and develop a certain gut feeling, if you will.

Well, I don't think it's the first one, because even though traditional trading systems don't cover all aspects of execution alpha, meaning all the execution structures that instead are used constantly by HFT market makers and indeed execution alpha algorithms, which we might discuss later if there's time, they have it. I mean, in the sense that the ability to interpret these things that I see, I see a stop run, I see absorption, etc. These objects, these tools have it in traditional trading systems, don't the ones that run on metatrader, tradestation, stuff like that, or multi charts or so on. These platforms don't reach this level of detail also because generally they don't have tick data and they don't have the mbo. So a whole series of information is devoid of important information because they have a poor quality of data that you provide them with. So crap in, crap out, as they say. I mean, so you can't pull out these things. But clearly those who work on the execution side, they. They have these capabilities from a discretionary point of view. I think it's the second one that is the ability to learn to read the context. Which means it's not just order flow in the sense that I don't start from order flow, order flow is my execution, I start from the analysis of what the volatility and directionality of the session are. So basically I try to understand if today is a trend day, or if it's a day that's typically reversal, swinging up and down, etc. If it's a trend, if it's a continuous type of trend, that is, if it's a surge where there's no. There's fomo, for example. So, so it goes up because everyone is getting in. I mean, there has been a shift according to the logic of the auction market theory of fair value that has risen and so the price rises, or if it's a liquidation day, for example, so where instead people do exactly the opposite, that is they exit because otherwise.

They lose a bit of profit taking. Yes.

And so this kind of trend that is very impulsive and very directional, has no retracements, etc. Or if it's a Classic rise, let's say channeled, in which there's more volatility. So volatility means variability of returns and at the same time still a decisive directionality. No. So I have always defined four possible. Well now a very, very banal simplification, four possible contexts. So high volatility and high directionality. So channeled trend, high directionality and low volatility. So the impulsive trend that rises without retracements, high volatility and low directionality. So the classic buy low, sell high. And then moments when you really have volatility compression, the market is still. And you're just watching flat C.

Yes, flat C. And you're just watching and waiting for the evolution, which will probably be an explosion of volatility. So also, among other things, the importance of not trading is as important as trading in the sense of knowing when to wait.

That's also a discretionary advantage, in my opinion.

That's also a discretionary advantage because you objectively see it. So this part here is a part that you have to train and you train basically by watching, burning your eyes. I've always said, yeah, you have to watch, train, train. That is, if you want to learn to read, whether it's typical price action analysis or something more like the X rays you have with order flow analysis, you still have to train, train.

Yes, absolutely. But in fact, I say it even against my interest because we also do some order flow training, but we always say it in webinars, all the guys that we, we can show you the way and understand how to interpret the reading. But then everyone has to develop their experience the eye and practice a lot, especially with order flow, but also with everything else. Actually, even with price action, I believe that, well, in the end, trading is damn practical. So without a lot of training, a lot of practice, results are really difficult.

Yes, it's exactly like a sport. That is, if you want to become good at performing an athletic gesture, you have to repeat it. But sports or any activity, even artisanal, for example, to become good at doing something, you have to repeat it thousands of times. That's the reality. And this is perhaps one of the disadvantages of discretionary trading. That is, you have to spend a lot of time understanding hours and hours in front of the monitor, which doesn't necessarily mean hours and hours of execution. I, for example, in the order flow part, at some point developed the ability to work only in the last two hours of the day, because that's when the most volume comes in, where there are all sorts of advantages, like Market on close orders and so on. So this kind of thing means that I still may focus my execution part in the last two hours of the day, but I still spent tens, dozens, hundreds, thousands of hours before observing. Okay, sure. So this is, in my opinion, one of the disadvantages of discretionary trading. The other two major disadvantages are one, all the psychological and emotional aspects.

Which.

We'Ll talk about extensively later.

And the difficulty of transmitting it. I mean, systematic trading has an advantage, in my opinion. It's easier to transmit. That is, if I give you a system and tell you to attack, you might tend to have the same performance as me with my system. However, if I instead try to transmit information to you about the nature of order flow, saying, be careful here, there's absorption here, there was exhaustion, here was the elephant pattern, here was the barbecue, which are all names I've given to my trading patterns. It's not guaranteed that you'll interpret them in the same way.

The replicability is not the same.

Exactly. So teaching systematic trading is easier to transmit, therefore. But here's an important thing to say. It's not like you just set up the system and go to the beach, okay, I managed about 200 active systems, so I had really a lot of active systems. And I can assure you that they need to be monitored. So you might have the best infrastructure in the world, etc. But the system needs to be watched. Not only do you need to maintain it in the sense that. I'll give you an example, rolling contracts, for example, when you work with oil, with gas, you have monthly rolling, maybe a bit less with indices because you have quarterly rolling, but with commodities you have monthly rolling. So when you have to roll positions, you have to do a manual activity. And you say, well, once a month. But it's not just that. Sometimes platforms get misaligned. The order, for example, because there was a limit order and so the price was touched, but you weren't in priority, so you didn't get filled. So at this point, the platform tells you you're long, but you're not. So you have to check and realign the system. Sure, there are automatic realignment systems, whatever you want, but it's not as simple as that. And then there's another important aspect. Systems break, so they need to be maintained. From an innovation perspective, that is, those who make trading systems aren't really lounging on the beach, but spend the day writing new systems and doing research as well. I imagine doing research like I do on the discretionary side. However, when I was doing systematic Trading, I was still doing constant research. So it's not just a job in the sense that this is my job, my only source of income since May 2009. And so I take it as a job, so as research and development and execution. So there's the execution part, which is part of my day, but it's not necessarily the predominant one. Maybe it's predominant now with discretionary. It wasn't before when I was mostly systematic.

In terms of what you see in the markets lately, or what you expect in the coming years, artificial intelligence of neural networks. And actually now it's been the trend of recent years, but actually it has been around for at least a decade or more. Do you think it will influence the market? If so, how? And especially from the perspective of algorithmic trading, there will be increasingly more competition on micro market inefficiencies. I imagine that competition is already quite fierce. You say it will play a role or it has already played a role in the deterioration of systematic edges.

I don't know. I mean, if I have to be honest, you can't know for sure.

You can't quantify it.

So I've done some research projects, participated in some research projects in the world, for example of artificial intelligence, pattern recognition, also in the order flow partners. And so far I haven't seen particularly encouraging results. But that doesn't mean that someone else hasn't been able to do it. In fact, for example, the whole world of cfts etc works on these micro market inefficiencies. Right? It's clear that what, for example, Virtual Financial or City of securities used to earn, which were the two biggest HFTs in the world, which continue to be, by the way, the two biggest market makers in the world. What they had when the world of HFT started is not the the same advantage they have now because they've reduced it. I remember the first stories I heard about HFTs that never had a losing day in the first 10 years, etc. And that's not the case anymore. So they've greatly reduced their capacity because competition and the search for inefficiency have definitely reduced them considerably. But surely there will be, there will be a huge research part on this, because if we think about it, artificial intelligence is not just Alexa listening to me and suggesting the movie or whatever, but it's on this kind of, let's say, developments that could have enormous profits.

Wow.

Right now, though, I still don't see it. That doesn't mean it won't happen, of course.

Yes, it's difficult to know and the.

Part of reducing the edge, surely you can see it, but you can also see it in volatility compressions in the sense that the fact that there are no more days of more or less 5 on the S&P 500, I don't know how long it's been since there's been a day like that. Sure. And while before. Well, sure, the volatility of COVID was very particular, but well, in short, you can see the compression. And so the search for inefficiencies becomes increasingly difficult. And so I hope that even in the order flow, which actually reads the micro mechanics in the market, fundamentally the market always works like this. I mean, it's not that it can work differently. There are people who buy progressively higher prices and erode all the ask levels in the the book and people who instead are there waiting. And there will always be this, because that's how the market works. But to say that the oscillations will always have the same magnitude and therefore allow you to cover your trading costs, frankly, I don't know. As long as I win, I play as the joke goes. So for now it's fine. So it's fine.

Of course. And obviously, clearly we mainly talk about trading on derivatives. So we're at zero sum. And there the efficiency and efficiency discussion becomes much more, let's say A gets into the thick of things because clearly in traditional investments it's not necessarily a zero sum game. My question is whether it's precisely the fact that it's a zero sum game that creates, let's say, rebalancing of inefficiencies. A question I've always asked myself and never found an answer to is do futures move stocks? Do stocks move futures? Or do they do it in different measures? I mean, because there's an index that goes up, let's say it's a weighted average of stock prices, and so it goes up. And so I've always said to myself it's the order flow that moves prices because in the end when they hit the ask, we go up by a tick. When they hit the bid, we go down by a tick. But how does it work? I mean, what is it that really moves the market? I don't know if I've explained myself.

It's a question I've always asked myself too. And I've given myself a quantitative answer, obviously once. And so I started to do the following analysis. I took the NASDAQ index because it only has 100 stocks, stocks in the S&P 500 Russell were more complicated to do, of course. And I took the daily traded values. So I multiplied the volume of the, let's say NASDAQ traded during a day. I multiplied it by its average price, by its price per point, which is $20 per point. And so I kept the traded value of the NASDAQ contract. Then I took the top 100 stocks of the contract.

Futures. Perfect.

Then I took the top 100 stocks of the NASDAQ and did the exact same thing. So I multiplied the average price of the day by its volume, obtaining the traded value. Okay, okay. I add them all up. I get the actual value of the NASDAQ index. In the case of the Nasdaq, when I did the analysis, the futures were significantly higher. So basically the futures. So the index essentially moved the prices of individual stocks because there's still a logic of, of arbitrage.

That's it. And that the answer I gave myself, I mean, there's arbitrage with the underlying at that point. There's arbitrage with the underlying.

In the book, which is called Flash Boys, I think. Oh, yes. Which is by the same author as the one who wrote the Big Short. Yes. There's a very interesting story about the largest infrastructure ever built in the United States, which is an Internet backbone between Chicago and New York. And practically it tells the whole story of the construction of this backbone of a very high network of fiber optics, let's say throughput that was specifically needed to do this kind of arbitrage because the delay between Chicago and New York with the traditional lines that pass through, I don't know, Oklahoma was too much, let's say there was too much latency. And so they had to do this. So to do statistical arbitrage between the index and the basket of stocks. Okay. Then the basket of stocks. I suppose those who do statistical arbitrage don't necessarily buy all 100 stocks or all 500 stocks or the 2000 stocks of the Russell, because it would be very expensive in terms of fees. But maybe considering the weighted average that we know is not exactly equal in the sense that the NASDAQ's top four or five stocks account for 50% of the list. So. So this was the answer I gave myself. So exactly. This kind of arbitrage makes it so that obviously there's then variability in the individual stock which derives from what's happening in the perception of the fair value of that individual stock in this period, or Tesla a few years ago, etc. That really have movements that are out of standard and that also drive the index because they're still much wider movements movements than the historical average of what they've moved. Returning to that aspect of discretionary systematic, one aspect that must be taken into consideration is that systematic is not devoid of emotionality. It it's simpler but not devoid of emotionality. Because you still have systems that break down and so you have to change them. And so you have to be the coach. And so you have to bring out a player who is burnt out and put in one who was on the bench and is performing well. But the question you ask yourself is okay, but the one who performed well but was on the bench, and so I don't know when he performed in reality, when I put him on the field, what happens, will he continue to perform or not, etc. So actually one should do an analysis. There are tools, software that do this automatically and try to do the weighting of the portfolios. One should also reason it, even in this case slightly discretionary, trying to understand what the volatility of the underlying instrument is. Because you tend to know that if your system benefits from volatility, you'll have to put in place the system that works on the instrument that has higher volatility. Yes. During the war in Ukraine, corn and wheat were things that shot up in price like cocoa. This year. No, it's clear that a system on cocoa that may have underperformed was dead for years. With these price problems of shortage of stocks on cocoa has created such a boost that instead cocos the IS systems have become interesting. So inside there also needs to be a minimum of discretionary capacity in understanding this aspect. And the other thing is that you still feel like intervening manually on the system, because if you have a bit of discretionary competence, you say, but look what an idiot this one who sold me when the market is going up. And that's it. Okay. And so you either close the system earlier or take profit earlier, etc. And then you alter the result. But an advantage that systematic has is that a discretionary can also have an monitors like I have, but only two eyes. So basically I try to focus on one or two instruments. Of course I have my passion. So maybe, of course, certain days I look at, I don't know, the energies, the gas, the oil, etc. On other days I look at the indices, but in fact I can't work on 20 instruments simultaneously. Of course, systematic trading can work on an instrument simultaneously. So you have a greater smoothing of your line.

Yes. In the end the result is that it's not necessarily, because in the end the capital is always the same, even if you might diversify it. I mean, the opposite argument could be even if you can diversify to have a pretty broad portfolio of systems, however, in the end, the risk budget is what matters. So I mean, yes, rather than making more money, you optimize. You optimize the performance, I would say yes.

And one thing one must also keep in mind is scalability. Right? I mean, this is the scalability of the systems, for example. And the whole algorithmic world has a huge impact on hedge funds.

Sure. Clearly my audience usually doesn't consider these issues, but it's absolutely fascinating.

Yes, there are some things. Let me give you an example. Today, on average on the SP 500 book, during the afternoon there are 8,000 contracts. So if I move 8,000 contracts with a single trade, obviously I'm going to remove a level from the book by myself and sooner or later they'll notice me. I mean, they'll sniff me out and then they'll start working to figure out who my ID is, etc. So it's not exactly the smartest thing to do, even if. Yes, exactly. So I have to fragment myself too. I mean, if I had to work with these sizes, I'd have to start fragmenting myself too. Now, I'm talking about 80100 contracts which are here on the offer. And on the S&P 500, I remember that the size to be considered reportable on the mini S and P 500 is 1000 lots. So below 1000 lots, you're considered retail.

Okay, you call someone retail if they have 999, you were saying.

Exactly, someone who has 999 contracts of S&P 500, which is a huge capital capital, since with each S&P 500 contract being $250,000, basically dollars of average notional. And well, it happens. It's a retail for the market, right? So when you start moving really important figures, a whole series of issues come into play that are different and are related to the scalability of your systems and the fragmentation of your orders. After all, this is what order flow teaches you. I mean, for example, if you look at the order flow flow of the bund or the T note and you zoom in, you can easily see the intervention of algorithms because they have this perfect cadence in order scheduling. And from there you can understand that this is an algorithmic order that doesn't move the price. But in reality you see the sequence of orders all at the same distance, which helps you understand that someone interesting is intervening there. So maybe it's better that you sharpen your senses and raise the antennas because probably from there, at some point, when they're done accumulating at this price, they'll probably trigger so called momentum ignition, meaning they'll fire off market orders at this point to move the market in the direction they've accumulated.

Sure. I think this is one of the most interesting conversations we've ever had on the channel. So beautiful. I hope we'll definitely help ourselves with some visualization because obviously I can imagine all the things you're saying, but we'll definitely help ourselves with some visualization. Will put in some order books, probably some split icebergs. It's interesting. Yes. And speaking of large orders of non reportable ones and of also icebergs, for example, with the order flow, you realize that there are, well, different types of traders, right? So we retail traders are the various little fish. But who are these sharks? These sharks. Because very often this question is not asked or not given an answer.

Yes, exactly. There's this concept that we poor retail traders are up against this smart money, these strong hands, these sharks, etc. But these sharks may not necessarily consider us. This is the first important aspect precisely for the reasons I mentioned earlier. If one goes for example to the CME website, here's a piece of advice I give to anyone trying to trade and study diligently. The CME website is the greatest source of information I've ever found. It beats 100 courses and 12,000 books. To truly understand how the market works. You realize that, for example, the top for operators. This is data found in the COT report move, for example from 30 to 40 or 50% of the market, depending on the underlying type. This is data found in the detailed COT report. But there's also, for example on the CME website in the dedicated section of the COT report, which helps you understand that the world is very concentrated on a small number of operators. Right? And these people need to trade tens of thousands of contracts about my little contract that gets stopped out. I couldn't care less because I'm not like the the plankton of the whale shark. No. Which still feeds on tons of plankton. There aren't tons of retail traders, there are many, but they don't weigh anything. However, in The S&P 500, for example, the non reportables under 1000 contracts make, if I remember correctly, 14, 15% of the market. So there are still thousands and thousands of. But they don't count for much in size. So these large operators who Are they? And what are their needs? They're not all the same. That's the important thing to understand. They don't have the same objectives. Let's take an example. Let's say I am a fund manager, okay? Fundamentally what I have to do is if I have to manage a U.S. equity fund, I have to belong on U.S. equities. Okay? I can rebalance my portfolios because I have to, because Tesla has fallen in weight compared to Nvidia. And so I have to rebalance and do this stuff here. But I don't have to decide which way to go. I have to be long because my mandate is to be long, period. So depending on the masses coming in or out of my fund, I'll have to rebalance portfolios and buy and sell. But I can't choose to go short or not. I don't do that kind of thing. I don't hedge unless it's an edge fund, like, I don't know, J.P. morgan's famous one. Well, we'll talk about that later maybe. And this kind of thing makes me understand that their need is fundamentally executive. It's not a directional choice. Okay. The same goes for a pension fund. The same goes for a central bank because central banks are stock accumulators. Okay, so we're talking about the Swiss National Bank. Japanese are huge operators in this sector. Sovereign wealth funds. Sovereign wealth funds, which is something that is huge but almost nobody knows about its existence. Also in the Arab world. Exactly. Sovereign funds in the Arab world. What do they do? They invest the proceeds from the sale of oil. Okay. The same as it happens with the other big one, an enormous sovereign fund is the Norwegian one, which is exactly the same kind of thing. Or the Chinese ones invest in trade surplus. So they are state like funds of kingdoms or similar entities that invest proceeds from other types of activities. Even they essentially their need is not to do day trading. So when they enter they have to fractionate their entries over days. They have a very long term view, obviously. Yes, because you can't move that amount of capital within a day. You can't do it. You don't have enough quantity to do it. Then instead you scale down and start to move to, let's say all the managed savings world, which is huge. So investment funds, etcetera, which fundamentally have more or less the same needs and then you scale down a bit more below, for example, the world of hedge funds instead have the ability to go long, short and can do trading or endowments, which are something that, that doesn't exist in Italy. They are the foundations of American universities. No. Including some that are truly among the best investors in the world, like Yale and so on. In short, the so called Ivy League companies are those that have the largest amounts of money to manage. And then you have the whole world of prop trading.

Yes, prop desk.

Prop trading. True. Okay, I want it.

We'll talk about it later.

Yes, I'm not talking about that specifically for retail, which doesn't give you anything to manage in real, which doesn't mean it's not a good thing. I mean, I don't want to make judgments about this kind of thing, but it's not true prop trading. So there really is someone who has their own capital to invest. And so then there are those who do hedging. I mean, let's realize that not everyone has an interest in where the price goes. If we, for example, look at the court report, that tells me the fraction of contracts that are long and short by various categories of operators. I see that on one side I have speculators and on the other side I have hedgers, for example. No. And these are fundamentally of similar scale. Okay, so there's not a quantity of people who are not interested in where the price goes because they hedge.

Right.

Now, regarding commodities, the price of corn hedging is quite evident. This is told by Ray Dalio, for example, when he made the contract with McDonald's to ensure that the price of those little pieces of chicken they sell, the Chicken McNuggets, remained constant over time. So he collaborated with a company called Lin Production, I don't exactly remember the name. And McDonald's to do it.

Yes, corn hedging.

They hedged on corn because it was the discriminating element that could change the price of poultry. Right.

Absurd.

And Ray Dalio tells this story in his first principles book. So this is quite evident. How is hedging done on commodities? On the financial products side, it's a bit more complex, but even there it needs to be understood and you can see that there are opposing needs. So not everyone thinks like us. I mean us retail, we have to earn from the direction of the market. Typically, if we work on directional instruments, then there's the world of options, which is a whole other story. But let's talk about directional instruments. It's clear that in our approach we think that everyone else thinks like us, but that's not true. For example, there are those who do spread trading. Let's take the world of energies I spread trading in. The world of energies is predominant. So I go to collect the contango of commodity storage, etc. This is something that really has a huge impact from the perspective of sides. So in spread trading, one is not interested in whether the price goes up or down. One is interested in the difference in the speed of rise or fall of two contracts. Sure, okay, so we have to get rid of this kind of thinking. But this actually also has an impact on the semantics we use when we talk about trading. When we see a rising trend, we should call it an uptrend. When we have a downward trend, we should call it a downtrend. And yet I hear people say the market is buy or the market is long. The market can't be buy because there are as many buys as there are sells. Every transaction is a buy against a sell. The market is not long because the number of longs is identical to the number of shorts. Okay, so when I have a market that is rising, I simply have someone who is willing to buy at progressively higher prices and someone selling is willing to sell at progressively higher prices. So I have control of the market. A portion of an operator, a sequence, a set of operators who are essentially for fomo, for hedging logic, for any reason, essentially going to buy at increasing prices or sell at decreasing prices. So this is an important aspect to understand, understand. And another truly important part to grasp is market making. Often market makers are thought to be bad, moving the price, etc. But that's not entirely true. The market maker isn't really interested in where the price goes.

The less it moves, the better.

The less it moves, the better. That's why when you see the order flow, for example, look at the order flow on the release of news like CPI, unemployment or rate announcements, etc. And you see the order book completely opening up. Because the market maker knows that moment is dangerous for him. When the price moves so much, he will be imbalanced. Instead, the market maker's goal is to earn the bid ask spread on each transaction. So if I'm in this business and I have a clear majority of people buying, I'll find myself short against the market. So if the market keeps going up, I'll lose money. So the market maker's goal is to work in certain conditions and be very present there from here. This kind of thing also explains auction market theory. Well, that is why you observe the market by looking at a volume profile. There are times when it's generally balanced and times when it's generally imbalanced because the market is created to facilitate exchanges. So most operators intervene within price ranges. That are, let's say, narrow. And they don't like to trade during fast market phases.

Of course.

But the price moves because the perception of fair value changes. What is the correct price? Because of novelties like on one side, manipulations. And then there are news and changes of opinion that cause your price of 5,100 to no longer be adequate. You have to go to 5002. This is the logic behind the movement of market theory. So understanding these aspects, understanding the micro mechanics of the market, understanding the needs of the operators is fundamental. The market maker, for example, in options, which is a huge world, the options world has huge trading volumes. Even if they're not concentrated, they're spread out over many strikes, meaning many price levels and many expirations. But they're huge in terms of volumes and they influence the price of the movement of futures. Because futures are often used as hedging by the market maker for option strategies. Yes, okay, okay. There was indeed a fund called JP Morgan Edged Equity Fund, which is a huge fund that basically deals with option structures. So it covers the downside risk of the market with, let's say, selling buying puts. It's not exactly like that because it's a bit more complex than that because selling buying puts would cost a lot. But, well, let's not delve into technical details now, but basically on one side you have this fund that has purchased millions of dollars of options, but who sold them? The market maker, who acts as the counterparty, typically. So the market maker is exposed to market movements, the completely opposite logic of the one who bought the option. So it's a seller of put options, so it will suffer from the decline and will be required to hedge with the future when the market goes against it because it's imbalanced, it's exposed. This thing here is called dynamic delta hedging. So it's hedging the delta. The delta is the change in the option price as the underlying price changes. So it essentially means that if the price goes down, they are losing more and more. But the delta is not a constant value. It's a value that varies depending on how close you get to the strike. Now, I don't want to get too much into it, but this stuff is called gamma. And so gamma hedging actually is a key factor in defining the amount of contracts a market makes. Must buy or sell to hedge his position. So if I'm balanced, I don't care. But if I'm imbalanced, I'm forced to defend myself from price movements. And so I go to the futures market, those who work, for example, with order flow of stocks. I also use stocks a lot in order flow because they're cleaner than futures. And you'll notice that the major liquidity levels are positioned at round price levels of stocks because there are the strike prices of options, right? So if there are options strike prices, which by the way are not equidistant from the central price, because options on stocks are narrower, there are more strike prices near the central price and they thin out as you go further away. You see this thing on liquidity. You see it right on liquidity levels and you'll see that round or semi round levels. So I don't know 175 on 175 and 50 have the highest liquidity. And this stuff helps you a lot because an old video I had made included the analysis, for example, of how much correlation there is between major stocks. The Magnificent Seven, for example, with the movement of the nasdaq.

Do they find it on the channel?

Yes, on my YouTube channel, trading with Balls. Yes. Fortunately it has few views.

Not yet. Maybe that will change after this video.

Let's hope not. Let's hope no one writes to me though. There, there was this correlation analysis and also an explanation of why this phenomenon is exists.

By the way, if I may interrupt the discussion about market makers, I have clearly noticed over time that in the last 10 minutes of the session, the order book fills up with embarrassing amounts of orders. What happens in the end, in the last almost five minutes of the session?

Well, in the last five minutes of the session, there are two technical aspects called order market on close, that is those who do day trading simply, which are not only retail, because there are many large institutional traders who do day trading and close positions at the end of the day. And in fact, you can verify this simply by looking at the difference between the value of open interest and the traded volumes. If you look at the open interest, I don't know about the S&P 500, you'll see that more or less, except when there's the rolling, the value is constant, meaning the same number of contracts remain open and traded in the market during a day while the volumes are significantly higher. So it means that a good part of the operations are trades that open and close within the day, because there is no change in open interest. So it means that many traders close their positions at the end of the day and use a type of order called moc, which stands for market on close. You can place a market on close order on the New York stock exchange until 9:50pm and on the NASDAQ until 9:55pm so it means that basically at those two moments you can place orders and then you can't revoke them anymore. Okay? And the exchange's function is to ensure that all closures take place in the last seconds of trading, meaning they match all buy orders and all sell orders. That can be opening longs, closing shorts, and on the other side, closing, opening shorts and longs. They match them and try to fill them as much as possible. There is then a number called mbalance, which instead tells you if there are many more attempts to close with mark buy orders than sell orders. And so at this point you have an imbalance. And this, if you can read it well, allows you to understand what volatility there will be in the last 5, 10 minutes. If the imbalance is very large, you will have a very high volatility. I remember when I discovered this kind of thing. You could see at a certain point at 9:50pm These immense equidistant strips of limit order of market makers appearing that lasted a few seconds and then disappeared and then reappeared at 55. And I had given them fantasy names, I don't remember. Palin, the Mule. The Mule is the order of. It was a pattern that worked very well in 2320 when there was the highest volatility because there was so much volatility and it was a movement contrary to the market direction. That is, if the market had, for example, risen all day, typically from 10pm onwards in the last, in the first minute there was a strong retracement. Okay. And I called this the mule, because when it works well, when it doesn't work, you take it.

Perfect. Beautiful.

Sorry for the vulgarity. But anyway, that was my thought. So what was it? But in the logic of studying and researching, I went to study all these things here on the CME website and I understood this pattern. What was the reason why?

Memorable moments. So I would ask you, have there been any truly memorable trades, both good and bad, that you vividly remember and would like to share with us?

Yes, some. I remember very well. In the bad. Well.

Yes, yes, yes, there have been. The best year for me was 2020, because apart from the fact that I was already working with order flow and then because it was a year of incredible volatility. So I remember that I had perceived that the market would crash around February and I wrote a post, I remember on the Traderpedia Facebook group saying, from now on, just hit sell. Something like that. I found it and still, if you look in 2020, February 2020, I suffered for a few days because the market was still pulling. We were coming from a market that never stopped. There was no retracement, it was by the dip. No, every single retracement had to be bought, etc. But the first news about COVID in China started to arrive. Well, those came in January, but nobody cared. Chinese, who cares? And they started to have problems when they closed some factories, some mega factories, for example, I started to say, ah, wow, something is happening here. When they closed the mega factory that made components for the iPhone in China. And I said to myself, there could be a problem with the supply chain here. I had no idea what the pandemic was, what it would become, but I sensed the problem with the supply chain. I said here, since we have now relocated all production to the countries of southeast Asia, China, etc. And if there is a problem in China and they close everything, we remain without production of anything. And so I said, I started to short. Then the first cases of COVID arrived in Italy, then in the United States, and from there the market started to plummet. The volatility was immense. I had very large short positions and I had my, my super top performance of my life. Okay, yes, of my life.

So mainly shorting stocks.

Shorting equity indices. I was short on the S&P 500, NASDAQ, Russell, YM, Dow Jones, everything, everything I could sell. I was short, I was short. And so it was definitely the. Unfortunately, when the Fed's bazooka arrived, I admit I wasn't quite ready to understand that it would reverse the market. So I held on to the shorts for a while.

A bit too long.

A bit too long. Except for, let's say I reversed this one. So I wasn't smart enough to understand the extent of the macro effect that Powell had mentioned had given throwing printing.

Money, bringing helicopter money.

Exactly. So I didn't perceive this precisely because of this, let's say, not a bit.

Of cognitive bias for short.

Cognitive bias, exactly. I, I had this short bias, which by the way is one of the typical cognitive biases of a trader. And so I missed out on something a bit. Then there was perhaps also one of the biggest losses I had in April 2020 on oil. Oil, do you remember? I don't remember exactly which date, but in April 2020, perhaps on the May contract. I don't remember that contract. Yes, because the April contract expires in March. So it was the May contract that went negative. Yes, it went to minus 40 intraday, then closed, if I remember correctly, at 5 so negative oil. And I had started buying oil when I saw that oil was below the average production price. And I thought it can't go below because it's no longer profitable to produce it.

It was around 10, $5.

Yes, it was around 15, essentially the production price at that time. And I hadn't really considered the storage problem. That is the Nymex, that is the market where oil is traded, has oil storage tanks on site. It's called Cushing, Oklahoma, which is a remote town where they are, if you look on Google Maps, because it's interesting, you'll see all these huge oil storage tanks. Now these are the tanks where, for example, the oil needed for the NYMEX is stored. Clearly, when contracts are traded on the energy market, people don't actually go buy oil and pick it up in Oklahoma. But the NYMEX market still needs to ensure a certain amount of underlying storage because if you go for physical delivery, which is impossible for us, but if you're a big operator, you could even request to go buy your barrels of oil in Cushing, Oklahoma at the future closing price. And the tanks were so full and all the ships with oil were parked at sea because they didn't know how to dispose of it. Of course it consumed oil. Everything stopped worldwide. Absurd. So storage had become so expensive that if you took the oil away, they gave it to you for free. So they paid you to take away the oil. Okay. And this stuff had this effect that lasted only one day, for heaven's sake. But it hurt me.

Yeah. Of course.

After that though, once this emergency was over, I ended up with a mega long position on oil that I had taken. However, since I didn't know how long the pandemic would last, I made a bet on contracts far in the future. So I started. Since oil, like gas, has contracts up to 10 years ahead, oil, I don't remember, maybe two, but I bought the furthest ones. So I said maybe not today, but in a year this stuff will be over. And so the price of distant oil will rise. And indeed it did. And that was the other biggest trade of my life in monetary terms. Then I took made on gas, another product that I love, that I really like because it's super macro, I mean really tied to climate trends and many other factors, let's say really consumption related and. And there I took some good hits and some nice satisfactions here. Gas has truly been a blessing and a curse for me.

Fantastic. By the way, the oil issue was something Patrick told me about too. They also had the same problem and then even with interactive, they had the problem that there were simply no orders below. I mean there was practically no book. So even executing stops they hadn't anticipated.

Negative prices in the algorithm. In fact. Then they refunded the money too.

They refunded. In short, they did some serious damage to them, I imagine. Anyway, yeah, these are moments of volatility. Black swans unfortunately happen. I look, I always regret not knowing a bit more about macro in that period because really with a minimal trend following strategy or even with some well placed orders, really during COVID you could still make a lot of money. Many speak as indeed of 2020, 2021 as the years with the best and worst trades. So yes.

Moving on to the aspect, an aspect that interests many traders who are starting out or who anyway find themselves struggling psychologically. In your opinion, in a 100% pie chart, what percentage of success do you attribute to the technical edge you have compared to the psycho emotional management that interferes somewhat with your operations?

Well, I don't know if I'm able to answer this question objectively and I'll explain why. I do a lot of research on the technical edge and so I have a constant hunger to continue finding sources of edge and improving my edge and becoming better at the execution. Part of what I do that I've neglected, if you will, the importance that this aspect here has on my discretionary part. So I don't do research on my head, okay, I do it on my edge. But because of my head after I've banged it against the wall so many times, all in all I've learned something. Yeah. So today I couldn't give you a weighting because in fact today I could tell you it's 80% technical edge and 20% is psychological. But only because the psychological part I've already. I won't say sorted out because I keep making a series of huge mistakes.

Yeah, of course.

But I've already analyzed it, classified it and rationalized it in my life as a trader. Since I've made every mistake imaginable, I've tried to rationalize these mistakes. He maybe if we can also talk in a more concise way though this for me has made it so that today, so to speak, the discipline part of money management. So defining the entry size, because money management is only this defining the entry size, even if for many it's the stop loss. No, a money manager answers the single question how many contracts do I enter the next trade trade with and these aspects here. So Discipline, when to trade, when not to trade, when to stand and watch, when to be the sniper and therefore stand totally by the window, completely still waiting for the opportunity are aspects that I've learned to do. I won't say that I no longer make the same behavioral bias mistakes, because I do, but I make far fewer. But observing others, I have to say that the psychological part is fundamental because I see that people who have followed me, for example, with within the technical path have not had the same results that I have had.

Precisely because they haven't cultivated that part of the head. And so they are much more at the mercy of their fears of all their behavioral biases.

Which then by all means, is a human thing that everyone has. At the same time, I say to myself, if you as a person can develop an edge so concrete and so mechanical as to cover the eventual mistakes you make psychologically, it might make more sense to do much more research on the edge and focus on the technical part. I would say sometimes not, however, clearly, if you have a really good edge, but at the same time, you don't manage money management well, because revenge trading tells you no. This time I'll open three contracts instead of one. Clearly.

Exactly. So probably if I had to give advice to someone starting out or someone who has problems at this moment, it's to cultivate this aspect, try to rationalize the problem. Try to understand what your characteristic mistakes are. Revenge trading over trading, anchoring bias, cheering bias, all those, if you will.

Yeah, we can start addressing them.

Okay, to address them. However, these ones really have a significant weight. Okay. And I see this kind of behavior, for example, a behavior that in my opinion is common among all traders, and I experienced it many times too, is what my friend Tony Choli defines as the sack. What is the sack? The sack is that situation where you find yourself with a loss that is significantly larger than what you probably expected. Okay. Or that you're able to manage and that is bigger than the average profit you make in a trade. So you find yourself having gained steadily. Tick, tick, tick, tick, boom.

Boom. Yeah, okay. This thing happens to everyone. So the sack is something that psychologically erodes your financial capital on one side, and on the other side, it erodes your psychological capital because you'll find yourself banging your head against the wall, not sleeping at night, because what have I done? I've ruined my family. I don't know how many people find themselves in a situation like this.

Dam.

On the other hand, it can lead to a whole other series of irrationalities, which are apathy so the total inability to react and therefore you do nothing. You would have never accepted a loss that's even half as much. You would have stopped earlier, but you didn't. At this point you find yourself in a situation where you don't know what to do. And so you're totally at the mercy of apathy. The apathy from the sack is a classic you do nothing, or worse, you try to make up for it by increasing exposure. Increasing exposure. And then at that point you're technically probably doomed because you're making all the mistakes of over trading, taking excessive risks without a real edge. Okay? And so probably one of the most important things is to not end up there. That's the important aspect. But I remember once being in the sack because I had such a long series of positive trades that I didn't want to accept the idea that there would be a negative trade in my statement. So when I think about it I say, how stupid am I? Who would see this? Who would see this negative trade? My statement isn't public, only I saw it. So who cares about having a negative trade? But then I thought, then even the broker sees it and maybe thinks I'm good, but who cares? The broker doesn't even know. But no one knew. Absurd. But inside me there was this logic that I didn't want to accept. This thing took away from me maybe in two days, the profits of 100 positive trades. Done before, for sure. So you need to have the ability to understand that trading is made up of a series of positive trades, a series of negatives, and that these must be more or less comparable in size. Now I don't mean that there has to be that thing, that nonsense that is told, the risk Reward must be 1, 2, 3, 1, 2.

It shouldn't be something, it's cosmic idiocy. No, because clearly when I set a reward greater than my risk, I am decreasing the probability of closing the trade at a loss. There is indeed a mathematical relationship in the so called stochastic events, that is, in events that are totally random, the probability of winning is equal to 1 to be 1 plus R, where R is the ratio of return to risk. Right? This applies to all games. Yes, and so it also applies in trading, fundamentally. So it's clear that I'll have a 50% chance of winning if I set stop loss and take profit at equal, equal distances. Whereas if I move my take profit further away, I'll have a lower chance of hitting it. Precisely because the market is fundamentally oscillations that even if they're not random from the point of view of why they were generated, they appear to be. And so the background noise then catches me on this thing here because we.

Talk, then we talk about it.

It's a huge topic. But here's this thing here.

I should close my position. Because if I close the position at a loss, I have the possibility to do different things. First of all, I could do a stop reverse. So I have a trend. I've gone long in the wrong direction. The market is crashing, but why should I stay there? And I can take advantage of the opportunity to exit, to be flat and resume the direction in the opposite way, something that I will never do. Instead, when I'm still in position, that is, for example, I could be long in the SP 500. The market is going down. If I were irrational, I could say I don't want to close this position, which doesn't make sense. I could go short on nasdaq, but I don't do it. Why don't I do it? Because inside there's another cognitive bias, behavioral bias. So bias means systematic psychological error, prejudice, which is that of the bias of rooting for. Since I want to be right, I root for the market to rise. So I'll never go short.

Certainly.

And this is an absurd mistake, isn't it? And so this type of bias then becomes fixed, even when I've managed to close the trade, which I call anchoring bias. I've given names to these things.

Yes, yes, we like it here.

I invented them myself. I'm not a psychologist. I don't know anything about this stuff. I just tried to rationalize the mistakes I made on my own skin. So I gave them names. Maybe there are scientific names from trading psychologists and coaches that are much more scientific than mine, but I gave it the anchoring bias, which is the fact that basically I assumed I had a reason, no, a market view, and thought that today it had to go up, it had to be as many say, it had to be long, it had to be in an uptrend. Okay, more correct definition. The market had to rise. Well, the market gave me here. It went down, so I took a stop. What do you think? What will most traders do on the second trade? Will they go long or will they go short? They'll go long. Because the anchoring bias makes me have to prove to someone that I was right. My view was correct. So the market had to go up. It went down. The market was wrong.

Yeah, sure.

The market is not wrong. The market does what it wants. So it's me who was wrong then? Wrong, not wrong. I can't really predict where the market will go, so I have to try to adapt to what it's doing. And this is one of the big advantages of order flow. That is to see really who is dominating the market at this moment, which of the selling or buying forces is prevailing over the other. Now, this aspect means that I tend to make all trades in the direction of the first trade. Okay. The routing bias is another bias that, for example, I noticed as an investor. So I had both long term investing positions and intraday trading positions. And since I was, I don't know, long on the investment side, if I were rational and see that the market is crashing, I should go short because I'm hedging. And instead. No, because since I want it to go up, I go long over there too. Sure, another gross mistake. And then there's the whole world of the so called, what I called the bastion contrarian. Sure. That is the fact that traders tend to be reversal. Yes. Okay. Now there's nothing wrong with seeking reversal because there are instruments that, as we said before, are inherently mean reverting. So it's okay to revert, but on the right day, there are all the instruments that sometimes have strongly directional days. And so the trader's tendency is to say.

Sooner or later it stops.

Where do you want it to go? Sooner or later it goes back up. Okay, who told you that?

Look at the last 18 weeks of.

S and P. Exactly. Okay, so all the short sellers got beaten up. Okay, so the concept is where do you want it to go? It's one of the stupidest things a trader can do. The market can be irrational longer than you can remain solvent. Okay, so the problem is you have to try to understand which way the market is going and not always necessarily have the reverse view, because it works sometimes. Of course, what I call buy low, sell high is a strategy that works when the market is in that condition of certain volatility and directionality. But when the trend is a trend day, I never go against the direction of the market. But why do you think this type of contrarian logic arises? Because in my opinion, then my view. Tell me your opinion too. Is that the trader would like to buy the lows and sell the highs.

Without a doubt. Yes.

Okay. It's a direction of his. Damn it. I can post on Facebook. Look how I entered here.

Yes, yes. How I got in. We call it the stubborn sniper syndrome.

Yes, exactly. So this thing makes him so eager to make a good impression with himself, to feed his Ego or with others or on social media, if he does it, that he wants to buy the low and sell the high.

Of course.

Now in reality in trading you profit from price movements.

Take what the market gives you.

Take what the market gives me. Meaning, if I buy the low and sell at the high or take a piece of a long trend, it's the same thing.

Yes, indeed identical.

So I have to think in probabilistic terms. If the market is in a very strong trend and is very directional, it means the market is imbalanced because there is a reason a macro data has come out, there's news, the FOMC minutes have been released, whatever it may be, the market is tilting, it's seeking a new balance and probably won't find it until the end of the day. Statistically speaking, typically trend days close near the highs or lows, meaning on directional days it's unlikely to see a retracement until the close of the session. Because the clock, I've always said in trading the clock matters a lot because the sessions are different. Yes, when the RTH USA session closes at 22 under Italian time, Americans continue for a while because there's all the after hours trading, etc. Then the Asians come into play. Then the Europeans enter in the morning around 8. They're different operators, even if they're connected because I don't know, JP Morgan's or Morgan Stanley's desks talk to each other and obviously have top down approaches that tell you you have to do this. But fundamentally the reactions, the traders are different, they have different logics and reversal movements are more frequent at sessions changes. So on a trend day, don't go against the trend. Another typical thing for traders is the optical illusion. If you look for example at the days when the market makes a V reversal, okay, V reversal, you see it and always look for it. So the logic for which the trader is a bastion, contrarian, that is goes contrarian to the price is because he hopes for a V reversal. Of course. But if one has studied, for example Wyckoff's logic, he knows that statistically the V reversal is rare. You see it on the chart, but it's rare for there to be a trend reversal to V only when I look at the chart, I don't see all the times that the trend instead has it went down and did this before going back up.

Of course, then I'll see this type of movement. So this logic leads me to think that the V reversal is much more frequent than it actually statistically is relevant.

Of course.

And this is an example of bastion contrarian. Well, there are others, then there's over trading, etc. And there are so many of them, all about these things. In my opinion, the trader should work with the head to try to rationalize and understand. Then discipline is needed. It's something that I've always advised to those who engage in this kind of activity and risked over trading. Because when you, especially those who followed me in order for flow. Well, I said I never did training, but I had a Facebook group where I exchanged ideas with a number of people. And I saw that people saw opportunities at any time of the day. And instead, no, I believe I had the strength to have the discipline to make few trades when I see directionality, to let them run. So my difficulty at the beginning of my career was to let profitable trades run. And then the use of discipline in staying still is important because staying still counts as much as trading. Trading, of course, because your non choice to go long is a choice. Okay, so one solution I recommend, and moreover, some platforms, like volumetric ones, for example, have, is to block the maximum number of trades you can make in a day, or you can set it yourself. And I say, I have three bullets. I can only shoot three times during the day.

Yes. Can you repeat, I have three bullets.

Yes, I have three bullets. I have three bullets. I can only shoot three times during the day. I say three, it could be two or five, it doesn't matter. The point is that if I have a maximum limit of trades I can make in a day, I'll try to find the right opportunity. If instead I know that well, I hit the first stop, I'll recover it with the next one. Huh? No, it's not true that you'll recover it with the next one. Maybe with the next one. With the next trade, you'll try to recover that trade. You messed up because you didn't have an edge, and then you have to keep going. If you then get a second stop, recovery becomes increasingly difficult. So you'll have to increase the size to recover. So you enter the world of revenge trading, which is destructive.

Yes.

So all this part here is if I give myself a limited number of bullets during the day, I become a sniper. So a sniper, not stubborn, but a sniper who really looks for the opportunity. And so I go look for the moment when they absorb. I see the volume spike, I see the absorption. I speaking of order flow. But obviously, even if I work with price, action or any other kind of things, I try to be disciplined in the amount of Trades I make.

Okay. Yes. Another thing is mentally preparing for the risk of the day. In short, these are clearly things that help. One thing I've seen help a lot, and that was explained at the last conference I did with Tom Hougaard is the horror book where he takes all the worst trades, he's made the worst sessions and he looks at them before each session. He looks at them and looks at himself and he sets the intention not to make those mistakes. For example, that too.

Yes. It's a great resolution. A trading journal where you write down your mistakes.

Yes. You still note down the trades at the. The time has passed, I did it, but it's gone.

You acquire them, you remember them and try not to make the same mistakes, even if you keep making them. Because, for example, the problem of being there during the day and not creating. There are no opportunities, you get bored.

Yes. The boredom trade. That's also a mistake.

Exactly. Because you do it without having a real advantage. You see opportunities when there are none.

Sure. Now, before we move on to the questions, which will be very interesting, if I could go back to when you first started trading, what would be the three pieces of advice you'd give yourself without a shadow of a doubt?

Well, the first one, considering my history, how much time I wasted. Don't waste too much time with oscillating indicators. I definitely removed them from my chart because they are derived from price. So I keep those indicators and oscillators that give me additional information beyond price. So, for example, market internals, we can consider Vix as market internal sentiment indicators like LAX or FairGrid or similar things, but not price based indicators. Another thing I would do, which I regret having done too late, is to try to understand the mechanics of the market. So the micro mechanics of the market, the micro mechanics of the market are everything related to order, flow and how the book really works, how orders work, how they are passed, who is eating them, why, in what way, etc. This is definitely one of the things that has really boosted performance and knowledge for me and understanding who the market players are. This is something that I think nobody deals with. But it's really important to understand who the market players are, why they do it. For example, I had a huge enlightenment when I discovered what the role of market makers in options is, what influence they have in trading futures or stocks on the underlying. Because I'll give you an example on spy. If I look at SPY as the most traded ETF and I look at the volumes traded on spy as ETF and options options trade 30 times the volumes of SPI ETF. So the option does more than the underlying. So it's clear that it has an influence on the performance of the underlying. Now, and the other thing we haven't talked about, but which is say the thing that maybe I delayed because I considered it a bit more difficult, is the study of options. The study of options is a passion of mine in the last period and although I knew them in theoretical logic, knew what delta gamma vega theta were and so on the Greeks, and how a long put works, cell put, etc. I had never delved into them because I always tried to work in a directional logic. Right? So while options give you this huge advantage of being able to work even on non directional logic, the passage of time and so on, to say so this is something I would do and then I would really look at the CME website from beginning to end. There are some extraordinary tools within the CME website that allow you to understand how markets work in their essence. Really important I say CME because it's the largest market in the world, but obviously it's also where I think the best information is as a site. But it could also be the CBOE or understanding how the CFI works, how the etc. They're also new York, the largest markets in the world. I would say this is definitely something you should do. Spend less time on charts and on nonsense, draw fewer lines and try to understand how an exchange works. Because that's where the trading happens, why it happens and what needs it has and how it does it.

Okay, perfect. If I could go back, surely one of the things I would tell myself is buy Bitcoin.

A decade ago on Bitcoin, my fault, I traded bitcoin on which when it was possible to place market orders on bitcoin futures. So I remember until 2017 I got good results. I had breakout systems that worked very well. Then afterwards they prevented them. And so not being familiar with unregulated exchanges, I missed a good opportunity. So let's say clearly I missed a good opportunity. But if you think about it, actually bitcoin has definitely had a parabolic upward trend and a big volatility, but at the same time it also has lower levels leverage. So actually it's not certain that if you work with the same leverage on a less volatile instrument, you'll have significantly lower performance as a trader than as an investor. It's a different dynamic.

Of course, of course, of course.

So having some crypto component within a portfolio makes sense. It would have Fit. Well.

Of course, of course. Okay, now let's move on to rapid fire questions to wrap up. These will be questions we can answer briefly, but we can also delve into them. So you if it could be a yes, a no, an agreement, a disagreement, it could be a bit. Well, whatever we see fit. So let's start with the market moves in a completely random manner. And the random walk theory holds.

No. Okay, but we can delve into this.

Yes, we can elaborate.

Do you want to do it now or not?

Go ahead, let's delve into it.

So, on this theme of the random walk, thousands of pages have been written from Eugene Fama at the beginning of the century to Burton Malkiel with his book A Random Walk down Wall street, something like that. And obviously the market tends to move in a way that may seem random. But if it were totally random, the smartest thing to do would be not to trade. Okay. And yet, in my opinion, there are people who have shown over time to consistently beat the market. Very few.

Okay, we have one here at this table.

I don't aim that high, but James Simons, I mean, if it had been possible to invest in Renaissance Technologies in the medallion fund, I wouldn't have done this in life. No, obviously it's not possible. It's a closed fund. Also for scalability reasons. But obviously they have shown to basically earn consistently over the years. Okay. And so for me, as a thesis, just proving that someone can do better than the market. And for me, the market means it's not random.

Of course.

I mean, in the sense is definitely not random in the way it forms. That is the auction market theory, order execution, etc.

Irrational. Yes, but it doesn't mean random. I mean.

Exactly.

Okay, so do you think it's possible for a retail day trader, or any retail trader to beat the market?

Yes, as long as they have reasonable expectations. I mean, if they expect to achieve the kind of performance seen in trading competitions.

Of course, if instead you have rational expectations. When I say rational, let's compare ourselves with the best like medallion. 30% average per year. Okay. Beyond that, it's true that as a retail trader you don't have the scalability issues that Medallion has. But let's be clear. I mean, achieving more than these percentages isn't that straightforward. Well, you can do it with smaller sizes, it's true. But even then one should really think, is it worth it if I'm not adequately capitalized? And from there you enter the world of prop trading though.

Sure, yes. By the way, the next Question. In terms of capital and time, how much time and money would it take for someone starting completely from scratch to be able to make a living from trading? What do you think? It's clearly a very rough estimate.

I don't know. But let's reason based on this logic. Let's suppose someone is good and performs like James Simons, averaging 30% per year. How much is that? Everyone should ask themselves, how much money do I need to live? Okay, but be aware, you don't only have the money that trading earns you. They're net, so you have to pay taxes on them. For those living In Italy, it's 26%. Then there's the fact that it would be nice to be able to invest this money. But a portion of it precisely goes towards daily living expenses, bills, etc. There's a part you should consider for your pension. So you don't have the capital. Perhaps a bit higher than you imagine just by simply calculating the 30%. So in my opinion, it's objectively difficult to think of making a living from trading with an account under a hundred thousand dollars. Objectively, I think it's really utopian. It might make sense to trade with less than a hundred thousand dollars with the purpose of learning and for any other reason, like Grandma Pina passes away, I inherit and at that point I'll be ready to trade when I have the capital. But I see many people wasting a lot of money and time trying to do things that are unrealistic with unrealistic capital. So there I'd say don't do it, because trading will destroy you and it's just a matter of time. It took me a long time before becoming good, because I started living from trading in 2009 as my sole source of income. And I started trading around 2000. So it took me, let's say, nine years. Also doing another job.

Of course. So initially having another source of income, would you say is essential?

Absolutely. It was essential for me. Then when trading became part time, it gradually became more important. And when I realized I was consistently performing over time, I burned my jacket and tie and became a full time trader. But here's the thing. Probably today there are many more sources of information, much more training, 99% garbage. But there is. You can find someone something good. And so there's a path. This can be accelerated in this way. There are many more opportunities. So if someone is smart and I'm average mediocre in terms of intellect, so it's possible that someone could take much less time than me. In any case, I see it a bit difficult to become good in less than three or four years. Think about it. It's more or less equivalent to a master's degree. And also in terms of time, the amount of hours you dedicate, well, it's not much different from preparing for a private law examination.

Yes, great. For a trader who is under capitalized, would you recommend prop firms, let's say the modern ones?

This is a difficult question and I want to avoid getting sued. No, I would recommend them. Although one must be aware of the business model of prop firms. Prop firms sell challenges, they earn by selling challenges, not by profiting from the traders who succeed. Because it's out, it's unrealistically out of the market. I mean. I mean, if a prop trading firm gives you 80% of the profits and keeps all the risk on their own capital, it's unrealistic. The market standard is 220 in the hedge fund world, which means 2% management fee and 20% performance fee. This is the average standard of a successful hedge fund. So in reality, those who give you intake the stuff also pay you less on performance, like 10, 15%. So thinking that someone would give you 80% risking all the money is truly insane. So it's clear that yes, prop firms sell challenges, so they sell the possibility that this hope people have of passing the challenges. But they pay you. Yes, as long as it works. So if you're good, you make it. Because why not? It's a way to be more capitalized and all in all, not risk your own capital. The risk, because buying challenges, buying tokens, and finding yourself in a situation similar to the old man who puts his pension money into video poker machines. It's exactly the same thing. But all in all, maybe it's better than risking capital. Risking one's own capital.

Of course, yes. Then it's also true that if you're a good trader, in my opinion, you won't struggle to find money in the sense that if you can demonstrate that you're good, that you're consistent over time, even presenting yourself to a fund, etc. Etc. Even without paying for a challenge. I mean, it's feasible.

Yes, it's not as easy as one might think, but yes, it's possible. You need a serious account track record, because between us, no one will take you if you've doubled a $10,000 account. Apart from the fact that the idea of doubling is already frowned upon by fund managers, you need to manage risk. Risk. You don't need to have stellar returns, eh? Conceptually, stellar returns, paradoxically, are almost unsellable in the market. Okay, so it's not in the interest of the management market to deliver stellar performances.

No. But to protect capital.

To protect capital to have normal returns and earn performance fees based on assets under management, that is, I want to manage a lot of money and earn from managing a lot of money, not from stellar performances, risking not having assets to manage afterward.

Of course, of course.

So be realistic about this. If you want to pursue this profession, try to achieve performances with credible track records. Never use my X book because fundamentally they laugh behind it.

Of course. Yes, but futures are used and so.

You need, let's say, a statement from a serious broker and made with a.

Somewhat decent capital, with an audit from someone.

Yes, yes. Okay. Otherwise they really won't consider you.

So, moving on to some myths that still exist today in the world of trading. We talked about smart money. Clearly not. So what operators are there in the market and how do they reason? And up to there, all good. From there to saying that banks hunt down retail stop losses.

I think we talked about it earlier. No, it's a legend. They don't care about retail stop losses. There may be movements where stop losses are hit, but it's simply because it's the randomness of the market. Sometimes one should also think for a moment. Suppose you want to hunt down stops. No. Which are, for example, above a support or below a resistance. No. And you know that retail have stops there. But what economic effort do you have to make to go get them?

That's what I've always wondered.

Because to make sure to get these stops. No. You have to invest by pushing the price up. Suppose you have your resistance and there are stops above it. No, you go up and you have to push the price above to execute these systems here. And you are actually there selling. Now the problem is. But you had to buy, so you had to spend money. Okay. Another thing you can do is look at the volume profile. How many trades are executed at the extremes? None.

Very few.

Because the volume profile never has little teeth, as I call them at the top. They're always distributions that are independent. Where you find the hump the center doesn't have. They are always thin tails on the end of it. So. So there's no. There's no trading. It's unfounded.

It's unfounded. I agree. Yes. Do you think there's an algorithm that governs every single market move?

No.

No. But there are many algorithms. Yes, there are many algorithms. Again, many of the algorithms are precisely those of market making of HFT. By the way, we said earlier that HFTs like Virtual Financial, Tower, Research, Seal securities And so on. Two Sigma. No, with the biggest HFTs that only did HFT, they even did illegal things, front running, etc. And now they are also the main market makers in the options world in futures. So objectively, these here do this kind of thing. And then there are many people who do alpha execution. That is, they are companies that are commissioned by big ones. They tell you you have to buy me 100,000 lots of S&P 500. You can't do it by clicking buy 100,000 lots. Obviously market or even setting limits. Anyway, you see that the book doesn't have this kind of thing. So they have a market fragmentation logic. And therefore. Therefore they have. I don't know. There are logics like View App View App which are precisely volume weighted average price. I'm not talking about the indicator. It means just the type. The type of execution is based on weighted volume and the moving average of the weighted volume, so. Or time weighted so T View, which are just execution mechanisms, that is you have to fragment orders. There are many. Not all of them are algorithmic. So there's no big algorithm them. There's no big brother of the thing. But execution is certainly largely delegated to the executive part. I see. I couldn't do certain things. You couldn't do them. I don't know. The gamma hedging of options market making is unthinkable to do manually. Unthinkable because of the number of strikes, because of the number of things there have to be. There are huge computer algorithms. You see all this part. These companies that spend millions of dollars to have the colocation of their servers was next to the market. So seem to Aurora or in New Jersey, where the servers of the New York Stock Exchange or NASDAQ are located, which are not in New York City. So they are not on Wall Street. They are not in Times Square where the NASDAQ headquarters is. But they are all in New Jersey. Yes, server farms without windows armed surveillance. If you take a trip to New Jersey, go see them. They're very nice. I went on pilgrimage to these things.

The Journey of Santiago.

About Santiago. I remember trying to enter NX at NYMEX, which was at Battery park and there was a black guy kicking me.

Out, of course.

But I trade on nasdaq.

Okay, fantastic. Okay, okay. Forex or futures? CFD or futures, let's say.

Well, I've always worked with futures.

Okay. Futures or options? Both okay, perfect.

In fact, together is even better. But, well, footprint or heat map? Heat map.

Selling signals and copy trading. Yes or no?

No.

Okay, Would you like to elaborate a bit?

No. Well, then I believe that being dependent on someone in something like this is not a good thing. I mean, if, well, you buy a passive fund and follow that, which in a way is more regulated and safe, right? I believe there's this saying that if you see a poor person, don't give him a fish, but teach him how to fish. Right? Maybe that should be the logic that a trader should have. Try to understand how the market works and become independent, not be dependent on a trading room that could shut down and whose performance is of dubious verifiability. Look, for example, on Facebook groups I often come across. Look at this fantastic copy trading or this bot, okay? Where you see that the operations are all on MetaTrader. They are generally with microscopic size and they are all the same. I mean, you see, to show that it's all the blue screen of the Metatrader on the phone. Because then you also go there, you see the. These bots with the Metatrader on the phone. You always wonder, but okay, and yet you see that it's the same operation. I mean, I sell, I don't know, eurusd and then I have euro dollar sold at a certain figure. And then a second later you have the same euro dollar or GBP USD, which is still correlated, so it's always against. And so in fact it's the same operation. And I have 20 blue operations, all the same, identical. They may have entered fractionally a second apart. And I see them all blue, because at that moment it's blue. Obviously on the other side, there was the exactly opposite operation on the other demo account, where I had them all long and the other pair are all short. And so in the end, one of the two goes, and I'll publish that then it went well.

Look, they make scams today, even collaborating with the broker who provides them the white label. They even modify the histories on MyFex. Nothing is reliable in the world of CFDs. Unless you have an auditor who verifies. Really?

Yes, exactly. In fact, I don't consider track records and my faxbook, even for those that are occasionally proposed to me to say, I can manage something for you.

Of course. Okay, fine. I'd say we've been longer than usual.

Sorry everyone, many others, the length of this.

No, no, don't worry.

But rather, who knows who made it to the end. It would be interesting to see the YouTube statistics of who makes it to the end.

However, there will surely be many other questions that the community will have. Many questions that will come to mind for me as I review it. Many questions that will come to Fabio's mind. So if we happen to do another episode, it will be cool. Otherwise, we'll see. Anyway, thanks for being here with us and it was truly enlightening from many perspectives. A truly unique knowledge bible. So thanks again.

Thank you. Thank you all.