Wallstreet Trader reveals: How Hedgefunds ACUTALLY trade!

Today I will explain you a lot of secret strategies from the Wall Street. The ex Wall street scalper segue Hoffman is working with me together and explain you a lot of the strategies and it was so amazing. Nice for you to understand how we read the footsteps of the global players. It will be the biggest goal for you to understand everything very deep. We have created a nice video for you. My English is not perfect. Is the reason that we created this with AI that you will understand everything perfect on your site. Thank you for listening.

A very good day to everyone here from Trade the traders in the studio in Lanaka today. Visiting me is my dear friend and trading partner, Sergey Hoffman. And Sergey is here today because he's going to tell you a bit about how the real market works, how how scalping works, what he was able to learn back in America and how institutional trading really operates in the highly explosive world of day trading. What features and learnings you can take away from this. I think no one can explain it better than dear Sergey. Sergey, welcome. I'm glad you're here. So yeah, go ahead and get started. What were you able to learn back then in America that is still valuable to you today?

Okay, yeah.

So first of all, hi.

So where do I start? What do you learn best over there? Actually you learn very, very little there, just the basic foundation. But what you end up with in the end is something great, namely that you start to really understand how the whole thing works, how market dynamics and supply and demand actually function. And you learn that by understanding, for example, how to read the order book, the order flow and also the time in sales. Where do supply and demand arise and how quickly is everything processed? And that's usually where people like to start. Yeah, you're a bit of a different opinion there. You always look at things from above, but in this case it actually started from the bottom. In other words, you first make sure you fully understand the order book. In other words, the whole price action, the entire interplay of how everything is processed. And through that you could learn certain techniques like front running and in some cases, well, some things which are illegal now used to be somewhat acceptable and you could actually do them layering techniques and all that little so called subtle manipulation techniques. So you could gently nudge the price a little bit in a certain specific direction in order to effectively serve, let's say, a particular and important partner. And this game was played back and forth, kind of like in the market making game. In other words, all the knowledge you get there as a beginner is basically just to first understand the whole game that's really happening in the market, supply and demand, and then you build all your strategies on top of that.

Yeah.

It's interesting how you started by saying that we both like to tease and tattle on each other a bit. That's normal. And that's actually how we first met back then. That's really nice. Of course, we sometimes have slightly different perspectives, but that doesn't mean I haven't understood that the raw market, in order flow, requires a completely different strategic approach in trading than say, charting and so on.

Although it has to be said, you can also make money without it. So it's not always absolutely necessary to understand all of it, but it does give you a huge advantage, in other words.

Yes.

For example, if you want to time your trades optimally and.

Really understand exactly what's happening right now in the moment, that's what it's meant for. To really be right in the middle of the market. That's the advantage it offers.

Yes.

So our listeners over there are of course, very eager to really understand. Does this institutional edge that you've been able to get to know still give you an advantage in today's markets?

Absolutely, definitely. Because you don't just see some crucial information purely from the visual chart itself, but in a certain significant way. You also clearly see this dynamic interplay and movement within the order books, which can also provide you with a certain distinct advantage. For example, whether someone is currently buying very heavily or selling aggressively. Yes, that's something you can't really see just from the chart, even if, for example, let me give you an example, you have a sideways phase, and in a sideways phase, we all know that something is being accumulated or maybe even some absorption is happening at the same time. But if you look more closely into the entire candlestick formation or the dynamics, you might be able to spot on which side there's actually a big player, for example, someone who's collecting all the lower edges rather than the ones at the top.

Yes.

And that's where you could, for example, already apply certain techniques like counter trading or also recognizing pullback trades very well. And it's also really nice, for instance, when there's a dynamic breakout. Yes, you definitely have an advantage there. You can see things that you simply can't see anymore in the regular retail market.

Yes.

And would you agree with me that if you boil the whole thing down for yourself like I did, and we were just talking about a nice range where the markets are moving sideways, that you really don't have to learn rocket Science to be able to get a sense of whether it's going to break out upwards or downwards.

No, you don't have to. No, you really don't have to. So as I said, you can actually make money in the markets with a lot of different things. You just have to understand how. That's the question, how? And not you should never ask why, what, since when?

Or why.

Instead always ask how, when and where does something happen? And once you've adopted that for yourself, where you say, okay, from that I've now built a completely technical approach, then it should work. Why not?

So you also completely and wholeheartedly agree that this dynamic and evolving concept you've learned and of course have continued to develop and refine for yourself brings a significant amount of logic with it, right?

Yes, yes, logic.

And above all, where it really brings an advantage is in the timing. Yes, yes. So you can time things exactly, see.

Exactly where you have an entry.

Mm. And that's one of the, well, in quotation marks, biggest advantages, the timing that you can see exactly. Okay, now is the moment to get in.

Yes.

What would you say if someone completely new comes to the capital markets and says, I want to learn this. I always have this phrase of yours in my head. We had to draw the charts in our minds.

Exactly, yes.

And could you explain a bit what a newcomer should actually do if they want to apply these dynamic concepts in high frequency day trading, trading for themselves?

It's quite simple. The way I learned it or the way it was taught to me is nothing more than at the beginning, you basically just, in quotes, boom, look into the order book and simply try to understand the movement. So if a movement goes up, then you can start to visualize in your mind, aha, the movement kept going up the whole time at first. And then at some point the market comes to a stop and that's when you can stand against the movement. And that's the first phase where you learn, so to speak. Well, I'm not sure if I'm allowed to reveal how you actually learn that. You can reveal it, everyone reveals it to you. It's nothing more than simply observing everything in the book, the movements. And let's say for about half an hour, you take the book, open it up and just watch how the market moves. If the market moves upward and then stops somewhere, you can already make a mental note like, aha, the price moved up and then somehow stopped. Did it correct for a certain period of time again? Or was it just, let's say, a small tick range where it moved back and forth. Then you know, it shows you that it moves sideways for a bit, and if it continues again, then it moves upward again. And then you close the whole book. Take a pen and paper and from memory try to recall what kind of movement you saw in the order book. Just draw it on a sheet of paper or a notepad. Then take a one minute chart and compare whether the movement you saw in the book roughly matches what you see on the chart. And if you practice this a bit, as they say, you'll develop your own chart and you won't necessarily need to understand every little movement happening in the chart at the moment. You then visualize it in your mind and from that you can also filter.

Out this price action.

That's the dynamic part. It's what you learn there. Of course, later on you'll also start to take speed into account a bit, because that's what gives it that drive. As I always say, you can compare it to the highway. It's an example I always use. So when you're on the highway, on the German Autobahn, if you're on the highway and you hit the gas, if the road is clear, you can really step on it, push it to the limit, and at some point you notice, oh, there's a buildup or more and more cars are coming. So basically a traffic jam is forming. And when that traffic jam happens, you automatically slow down. And that's exactly how the market works. Whenever there's a kind of congestion, the market slows down and could then undergo a correction. Or when the whole traffic jam slowly clears up, then you automatically start accelerating again. And it's the same in the markets. When the jam, or so to speak, the congestion dissolves, the market speeds up and can move in one direction. And that's what this dynamic part is all about, so to speak. And that's what I had to learn first. Back then, with stocks, the game was a bit different than with futures. Futures are a bit easier. But at that time I first had to learn how to read time and sales. How quickly were all the sales or purchases happening? You could see from the time and sales whether things were dynamic at that moment or rather slow. And that's how you adapted and learned the whole thing for yourself.

Cool.

So I've now developed these different trader avatars to be able to assign people to what might actually be promising for them. I know from you that you sometimes went to universities and then did studies there, or rather encouraged people to say what kind of video games they play and what would you say, are the most important skills you need to bring in order to gain a foothold in highly dynamic scalping and order flow trading.

Reaction time. So, reaction. So you really have to react a bit faster. Ah, because the market changes very quickly. It's so fast and dynamic and depending on the market you have to react quickly as well. That's why I always say for those who, for example, like me in my youth, played Counter Strike or other shooter games where you have to get in and out quickly, I always loved fast paced games. Then I get shot, then I'm back in the game, then I go at it again. And if you have these qualities, then you already have a bit of a, how do you say it?

The skills. The skills, exactly. For example, to be active in high frequency scalping as well.

If you're more the type, let's say, like a World of Warcraft player, where you approach things tactically, take your time to think things through and plan everything out, then you might have less of a chance to be successful in high frequency trading than someone who can quickly.

Adapt to everything on the fly. Right.

Which doesn't mean it's impossible, but it's simply an advantage for someone who, for example, plays these kinds of fast paced.

Games like Counter Strike and so on.

You can really see that that's really the case. So when someone comes to me and.

Says I want to scalp, I ask.

Do you play Counter Strike? Or what kind of games do you play? And those who play shooter games are generally better at spotting things than those who play games like World of Warcraft which are more tactical. They are usually much better at day trading or even swing trading.

Whereas all of the shooter gamers tend.

To be at a significant disadvantage in swing trading because they are a bit more impatient, generally speaking.

So you would agree that this job as a hardcore scalper mainly requires skills like being loud, assertive, dynamic and yeah, just super focused and loving to sit in front of the screen.

Yeah, you really have to love it. Yeah, yeah, absolutely. You really have to be dynamic too. You really have to be fast as well. You also have to react quickly. You can't spend too much time thinking. You basically have to be your own algorithm. You need to have that if, then.

Function like in programming languages.

If this condition is met, then that should happen and if that happens, then you should press there. If that doesn't happen, then you wait. So you really have to be able to process all the information a bit faster. And yeah, then you just click there. You can't wait too long otherwise it'll be gone.

And if you compare back then on Wall street to today, how would you say the markets have changed?

Has there been a change?

Or would you say that basically everything always works the same way?

Well, let me put it this way.

At the core of it all, so.

To speak, the essence of the market has stayed the same. Price, time, volume and speed are always the same. Yes, that's always been the case for 100 years.

Yes, there are people who claim that it's constantly changing.

No, no, it doesn't change.

The only thing that changes is the technology. And the technology is getting faster than humans, so to speak. And as a result, nothing else changes except, let's say, the speed in the markets, which is what changes. And that's the only thing that makes.

The whole thing a bit more difficult.

For example, what used to work very well in scalping is simply no longer possible for regular consumers like us, the retailers, or even some professional traders, because the algorithms can now execute trades in nanoseconds. But that doesn't mean we can't use this to our advantage because we can also recognize the games they're playing. And that's how you can use it for yourself. We just can't use the same strategy because others can execute it much, much faster than we could do it manually. So that's the only thing that has changed the dynamics. So the dynamics and what has changed quite a bit is simply the liquidity. It's become a bit lower than it was back then. But that also has to do with all the pit traders who used to trade huge volumes and simply couldn't really adapt to this automated, that is electronic trading. But as I said, the core always stays the same in markets. It's only the dynamics that have changed.

So there are people out there who claim that the big trades made by institutional investors take place in so called black pools.

Dark pools.

Dark pools. Sorry, it's the same color. Here we go, arguing again. No, but you're absolutely right. Would you say that these executed transactions that take place in these dark pools are simply missing, or would you clearly say that it's still possible to legitimately make money with this process of scalping?

Well, if the transactions really do take place in a dark pool, then they will eventually become visible in the time and sales. I mean, they do get executed at some point. The dark pool works like this. You access a dark pool, you don't know exactly how much you're buying, just a certain amount, a certain number of shares. And when that's executed, you'll also See it in the time and sales. The only thing is, you have to make a bit of a distinction here. When people talk a lot about algorithmic trading, they're usually referring more to the stock market sector. So in the futures markets it's a.

Bit different because you have to make a distinction. For example, if I want to buy Tesla now, I can do it through.

Different routing options, for instance, but if I want to buy the S and P index, then I can only do that through the cme. That means if an algorithm wants to play certain games like market making or whatever with stocks, it can do that through different routings and combine it with dark pool. So it's a bit more difficult to see the whole picture, but in the end, once it's actually executed, you can still see it. The advantage with futures, for example, is that if someone wants to buy using such an algorithm, they do it through the cme, for instance, via the Exchange. And they can't play as many games because if they want executions, they have to do it through the cme. As I said, with dark pools, you don't always know the exact quantity or sometimes the price you'll get. But when you do get it, you can still see the execution in the order books. The only place where you don't see it is in over the counter trading, so to speak, when stocks are being moved back and forth under the table. You don't really see that, for example, when company B sells a stock to company C or something like that. But as far as all those stories with dark pools and so on are concerned, that's not what harms us as traders. So it's.

So if I were to sum up what I'm hearing now, it's that there are just a lot of ridiculous stories out there, but the essence of the market still operates, operates exactly as it always has. Liquidity has dropped a bit. And for you, algorithmic trading is actually more of an opportunity than a disadvantage, because it has allowed you to develop new strategies where you can use exactly the things you learn there to your advantage. Because there are always so many people who say everything is broken, it doesn't work anymore, and so on and so forth. But I see every day that it works for you. And I can only tell everyone out there, when people bring so much innovation, and I have to say it, intelligence, people who really get to the bottom of things and understand what's happening, then you can always find ways. The real question is just whether you're stuck on a static element or open to new things. Sometimes you have to adapt, but that doesn't happen every three weeks. It's a long process. And I think it's really important for the listeners to understand that these strategic approaches you use are actually always in line with the laws of nature.

Yes, always the same ones.

And that's what's so awesome about it. And I can tell you when you see Serge working his magic in the markets, especially when there's volatility, it's really impressive. And I don't always understand everything he sees there. And yeah, maybe that's an interesting question. So what would you say, how many days would you need to teach a third person the knowledge required to do your job?

You mean in scalping or in general?

No, no, just in scalping, please.

Scalping. So teaching the knowledge for scalping always depends, as I said, on the person's characteristics, what qualities they bring with them. If the person is more dynamic, for example, if they're a fast player or do sports that require speed and reaction time, that's actually an advantage. And it means you can generally move through things faster. But the basics still take a certain amount of time. I would estimate, depending on the person, that it takes about two to three months to understand the basics and be able to work with them. That's possible. All the strategies, or rather the patterns that you can see in all the books, there are a huge number of them, and understanding, applying and learning each one individually also takes time. Of course, that depends on the person and how quickly they learn. I have to admit, I wasn't one of the fastest myself, but I really went at it intensively. So it's hard to pin down exactly. But you can start do doing something with the basics after about two or three months. And in a way you can already start making some money. But if you want to go deeper, as I said, it depends on the person. It can take one or two years. It's like any other training, really, especially if you want to do it professionally.

And when you look at pure charting, when people trade using only charts, do you think it's really possible to make sustainable money that way?

If you've discovered certain significant advantages somewhere, then maybe this approach could be beneficial. Personally, I couldn't entirely commit to it. It's a bit challenging for me to rely solely and exclusively on the chart for all my decisions. However, I certainly don't demonize charts. As I've previously stated, in a way, you can indeed accomplish everything without ever looking at the chart. But if you truly want, let's say, to time things absolutely perfectly and achieve that level of precision and perfection. You should at the very least understand the fundamental basics of how the market truly operates, this intricate interplay between supply and demand, because then it also becomes considerably easier to accurately read and interpret a chart. Then you naturally start to recognize certain specific patterns, much like the ones you've carefully adopted and integrated for yourself, and you just understand them much more easily and intuitively. That way you can also consistently make money with it. What I see a bit critically is when you simply trade certain superficial patterns, or as I sometimes teach and demonstrate, show specific candlestick patterns, and people then trade those signals blindly without truly understanding the underlying core principles of how the market actually functions and behaves, if you only trade these isolated candlestick patterns, it simply won't work effectively in the long run. So you really have to, like I said, yes, it is absolutely possible to make money with charts, but you absolutely must understand the fundamental underlying basics of how it all genuinely works. How does the market truly come about and how does it function at all in its entirety and not just think, oh, we have a clear trend, so.

I'll just buy right now.

That simplistic approach definitely won't work in the long run.

So are you also someone. Because I have the same attitude that with normal candlestick formations, first of all, you have to know where they actually occur, right? Is it even an interesting area? That's something many people don't even realize. And the second thing is when you have such structures, you can never know just by looking at the past, whether they were fast or slow, where the volumes were. And it's really true. If you combine these dynamic aspects with a chart or with market profiling, then you really have a great edge. That's the path I choose. And you're also very experienced in market profiling and do some really exciting and great things with it. What would you say is the ultimate way in trading to be able to earn money sustainably, long term and consistently? What would your approach be?

Your. My approach? Well, I can actually tell you, for me, the moment where it really clicked, where I understood what was actually happening in the markets. So in other words, the whole concept of what context is what context means in the market, where is the highest probability of where the price could move in, say, the next few minutes? That is the art. And for me, when I achieved that, it was a real breakthrough. And then of course, I refined it for myself by combining it with order flow for timing. So to be successful in the markets, you simply have to understand where things are most likely Headed first, that's what I say. And that's the context. And if you master the context, you can, in a way, build many strategies on top of that. I always say you could even use the famous. Well, I wouldn't say it's my idea, but the famous coin flipping strategy. And it would work with the highest probability as well. So context is the key, in my opinion.

So you also believe that if you can properly assess the context, that is the market structure, that gives you the probability to anticipate a certain direction. That's much more important than all the little fluctuations and every setup that people sometimes try to sell as the Holy Grail. That's why learning to trade is difficult.

Yeah, yeah, that's exactly how it is. Like I said, there are a lot of signals and strategies out there and so on and so forth. But if you just learn a strategy without understanding the context behind it, or without understanding the context in the market, then with the highest probability, you won't be successful. So it's not about which strategy you trade, but you first have to understand the context, and then you can build a lot of different strategies on top of that. Without context, nothing will work in the.

Markets in the long run.

Yes, that's absolutely what I would say as well. That means you really need a very strategic approach. And you can't just sit down at the market and get started. You have to have already taken a few steps beforehand to develop a certain picture and a certain clarity. So what was the worst thing that ever happened to you in your entire trading career? Where would you say, what were the worst things that happened to you while trading?

So the absolute worst thing that has ever happened to me in my trading journey, and what still, unfortunately happens to me quite often even to this day, is that I completely forget to remove all stop orders from the market. This, without a doubt cost me a significant amount of money. Because you might show up one morning feeling optimistic and ready to actively trade, and then you're abruptly told, no, my dear friend, you have already reached your daily loss limit for today. And then you always find yourself wondering why this unfortunate situation occurred. So in the context of trading, that's truly the absolute worst experience, and it has indeed cost me a substantial sum of money. It's simply that sometimes one can be a bit careless and, let's say, not disciplined enough in their approach. For example, I didn't always diligently check my entire workstation to thoroughly see if there were any lingering orders still placed or not. Sometimes it was just the end of the day, a quick click, log out and simply not disciplined enough in my routine. And of course that cost me money, a very significant amount of money. Otherwise, the second worst thing that has ever happened to me simply is that I came to the market too late.

With the knowledge that I have.

But we just wanted to hear about the worst thing. And if we now ask, what was the best thing for you? What have you experienced in the whole trading world that was the most beautiful for you? Was it a win? Was it gaining knowledge? Was it the people? What would you say was the best thing that happened to you?

First of all, the significant challenge.

I truly saw all of this as.

A profound and personal challenge for myself. I'm a bit different in that particular way. I also perceived it somewhat as an.

Engaging game for me.

When I was actively involved in the financial markets, I wasn't really fighting against the market itself, but rather I was always intensely fighting against all the other participants. And I always had a strong desire to emerge victorious. So for me, this entire challenge was.

Incredibly interesting and captivating. And the absolute best thing for me.

Personally speaking, was that I genuinely learned a tremendous amount about my own self. Many good and positive things, but also quite a substantial number of less desirable aspects, particularly personality wise. It's truly remarkable and very true. You learn an extraordinary amount about your own character. But the most beautiful and memorable experiences are simply the fascinating stories I encountered and experienced there. Like when someone just casually left during a short break and excitedly said, hey, I'm definitely going to buy myself a brand new car now because I just successfully shorted Ford stock. And many other compelling stories just like that. Those are indeed the very best stories. Those are the truly cool and unforgettable experiences. Otherwise there wasn't really a single isolated experience where I'd emphatically say, wow, that.

Particular moment really pushed me to my.

Absolute limits and beyond.

There were just too many situations like that, you know.

No, no, it was just kind of overwhelming back then. I didn't really pay attention to whether I was making money at the beginning. I wasn't really aiming for it. Like, yeah, I want to make a ton of money with this. I mean, sure, that thought was in the back of my mind, but when I actually got into it, it wasn't really the main focus anymore because after a while you notice it. Like when you get a check back then you always got checks, not bank transfers. And then you just look at the check and think, wow, Today it's wow, that's a lot. No, wow, there's an extra digit at the front. And that was always an experience. But I have to say, that experience also came in a way, from other characters or other traders who just opened your eyes. For example, those great moments when you're sitting there with other people and they're trading and you see, well, hey, why is he actually making more? Why is he getting more size? I'm still running around with a small size and it's nothing else. There was someone who just said to me, you know what? The only difference between you and me is that you have small balls and I have big ones. That's the difference. And that was kind of a click moment for me, a great experience. He just said, hey, I'm braver. He wanted to tell me, I'm just braver. I'm willing to take risks. At certain moments. We were always trading the same things, nothing different. But he was just a bit braver than me when it came to taking risks. And so he made higher profits and accordingly got bigger size. Those moments were interesting, those happy moments. But at the beginning, it was mostly the sad moments.

Yeah, sometimes it's a tough road just going through all that schooling. And if we think about it today, when someone starts trading, they're faced with such an overload of information when they start searching on the Internet. So I'd like to ask you to give us one or two short, punchy guiding principles for anyone who wants to get to know and learn the profession of trading. What would you say are the most important things they should pay attention to?

So in my opinion, the most important thing. Well, first of all, you've actually built something similar before, something nice where you can figure out what type you are. Are you more suited for swing trading or scalping or something else? In a certain way, you should also have some prerequisites. That would be one point. But the most important points, the most important, in my eyes, what I would say is maybe even the edge in quotation marks and is simply that you need to be very disciplined. You really, really have to be disciplined. You should also have a certain routine in the whole process. And the third factor is to write everything down for yourself. So for me, whoever does that has the greatest possible chance of being successful. And of course, if you also engage with the context, with the market context, those are, for me, the prerequisites for being successful in the markets at all.

So to sum up, first, understand how you actually tick. Does this or that approach suit you? Second, implement everything with a lot of discipline. And third, above all, write a lot about it and monitor Whether what you're doing is actually effective in the end, I think that's how you should proceed in all areas. But why does no one do it? It's laziness.

Laziness. Laziness. I think so too. When we talk about ourselves, I mean, in a way, people who are learning now, they basically get everything served to.

Them on a silver platter.

And yet even though things are handed to them on a silver platter, they say, hey, it was shown to me, so I don't really need to sit down and work on it. I just click and start. And that's usually why it doesn't work for people. They really need to learn everything with discipline. For example, I know cases like I had someone in mentoring, for instance, who said, I always sit in the office in the morning and do it in between other things at home, in the office, just in between. And I said, but how can you concentrate on it and do everything? He said, yeah, it's sometimes difficult because in between my wife calls, we have to go shopping this and that, and it kind of disrupts things. So I told him, just set a rule that from 9 to 12 you're not available, things like that. So you have discipline. And then things change because then he was just focused on what he was doing. So I always say you have to create a routine. You have to be disciplined and you have to keep track of everything, like in a journal. And if you do that, you'll see which steps bring you success. And as I said, it doesn't have to be just about trading. If you're working on projects, it's exactly the same principle.

It's really the same everywhere. If you think about it, if you want to be successful, you have to be disciplined, you have to be focused on what you're doing. And I think enjoying it is also a very important part for you. As soon as the markets open, you're in the zone. Right.

Still like when I was 16. Right.

Awesome. But only with discipline, please.

Of course.

That's a must. I had to learn that too. And sometimes the hard way.

Well, Serge, I want to thank you very much for everything you've shared with us here. Is there anything else that's on your mind? Anything you'd like to add? Or would you say that's pretty much it. People have now had the chance to get a glimpse into the world of someone who's maybe been trading short term perspectives for a bit longer. Is there anything else you'd like to add as a final thought?

Yes, just make sure that whatever you.

Do and learn, especially when it comes.

To the stock market.

Don't do it under pressure. And don't try to rush things or push everything to go faster and faster. Otherwise it just won't work out.