YouSaid · the spoken record

Brent Donnelly

lines on the record: 45
first: 2021-08-12
most recent: 2021-08-12
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“And discipline conscientiousness, doing the work, how success transpires in the world in general. So there's a lot of subjects that aren't super specific to trading. And so Ben says in the end, this is the kind of book he would buy for his uncle or for his niece or whatever who aren't even in trading. Because hopefully it can teach you some of the things that I've learned about playing the bigger game or other games like poker and things like that. So I think it has some application outside of trading. From the feedback I got, that's what people said. And that's kind of what I hope that people also get out of it is some application outside of trading.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Everything from understanding the metagame, which we kind of touched on, to specific here's how I make my choices of what to trade correlation. I cover a lot of topics. So I think people that whether they have experience or not, the whole idea of the book was to try and add value to people across the spectrum right from somebody who's never traded before, right to someone who has a lot of experience. One cool thing that or thing that I found cool or validating was Ben Hunt wrote the forward to the book and his takeaway at the end of the forward and the interesting thing was a couple other people that like were early readers before the book was published said the same thing was that it's kind of a book about understanding the game that you're playing and and it can relate to the areas outside of trading as well so there's a lot of stuff in the book about self-awareness and adaptation obviously”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“More fun to read market wizards and the John Murphy books or whatever books you're reading. Most books are about trade selection and there's not that many books about risk management. So I try to cover that in a pretty easy to understand way. But I have a few chapters about risk management because I think that's a really important thing that gets left out of a lot of books. And especially young traders. But even you would be surprised because at a bank there's so many other things that you're doing like market making and all that that risk management isn't always taught either. So you tend to learn it more by osmosis. So I think my range of experience and then also the way in the book I try to go through”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Guess the main thing that I have, as you mentioned, is experience. But then my experience is pretty broad. So I tried to write the book not just for new retail traders, but also so that one of my peers who's been trading for 20 years at a major hedge fund would also get value from the book. That's the way that I tried to write it. So the three stages of my career were my real career in trading were trading professionally as a currency trader for a bank was the majority of it. But then I also spent about four or five years trading my own money on the Nasdaq, as we mentioned, on Nasdaq bubble. And then I was also at a hedge fund for three years. So I have one thing that really at that taught me was varying your risk size and really having proper risk management because a lot of people read a lot of trade selection books. Like those books are fun to.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So definitely my number one piece of advice would be be humble. It's easy to make money in a raging bull market. And there are specific things that happened in 2020 that may or may not ever happen again in our lifetimes. So I would say be humble. And then just behind that, like we were talking about is be sure to adapt as things change. Don't just get stuck in your one strategy that worked last year because it's probably not going to necessarily work this year or next year. So if you want to trade for the rest of your life, be humble and adapt.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“And if not, a trigger doesn't go viral enough and then it just, you know, how the Twitter algo just kind of drops in and nothing, no, you don't get any really meaningful reactions. So I guess my answer would be no. Maybe it's more because of macro. Like maybe if you're in single names, there might be more balance and more people interacting with your tweets. But I would say on macro, you either trigger people or you don't.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know what? I have thought about that, but generally I would say no. And I've tried to get my feed to be as balanced as possible. But the problem is that there's so much bias I find on Twitter, like just in general, Twitter tends to lean very bearish stocks, for example. It's more like going to TripAdvisor to check out the hotel and you're going to see like a lot of pissed off people in there. So generally I don't find it to be that great. Maybe it's just like the mix isn't good enough or that there's too much bias, but I just find you just generally tend to either tweak some, like tweak a specific topic that gets people kind of angry or annoyed, or you don't and you just get a couple of like weak replies that are supporting you. So it's more like, is your view a trigger? Yes or no? If yes, then you get a ton of responses.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was like tippy top was 11 30 or 1145. It's amazing. So there are some behavioral things I think that you can kind of unpack in the crypto space. But yeah, mostly it's technicals and flow that seems to be what dominates. And then there's this whole ecosystem of fundamental analysis going on in the altcoins, which is interesting, but that's an area that you really have to spend so much time to become expert.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“your like money monetary systems orientation. Again, it doesn't matter if I believe or not. If a lot of people believe, then that's where the price is going to be influenced. So that's, again, yeah, that's a good example of the what, not the why. And it is definitely interesting trying to find a framework for Bitcoin, I think, is one of the great challenges right now. Like obviously a lot of people use technical analysis, but I think there's a really interesting behavioral aspect as well. The SNL Elon stuff being one of the most intriguing ones where it was the biggest buy the rumor sell the fact. And just to be clear, I was writing about this like a week before it happened. And I'm wrong all the time. I'm just saying in this case, I was right. And it was really obvious. It was like the greatest by the rumor sell the fact trade in history was to be long doge or long Bitcoin into S&L and sell at 1130.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“A competitor to gold, right? And some people might believe that, or some might not, but it doesn't really matter if you don't believe it because, you know, 38% of people do believe it and they're buying Bitcoin instead of gold to hedge the dollar debasement story. So to me, I think it's becoming, I don't really have a view on price at current levels, but as an asset class, I think it's just becoming a new asset class, kind of the way commodities really weren't that much of an asset class at one point historically. They were, you know, good that got transacted and hedged. And then they're a financial asset class. And that can happen once in a while. And that's what I think crypto, specifically Bitcoin is becoming and more narrowly it's becoming a meaningful competitor to gold because you get a yield on bitcoin and you don't get one on gold and and then depending on your age and and you're kind of not political orientation”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So I watch it closely. I actually think that Bitcoin is slowly becoming a pretty good proxy for the whole dollar debasement and Fed liquidity trade. So when, for example, Bitcoin peaked the night as Elon went on SNL, and that was actually a decent indicator for the currency market. So if you look at what Ozzie did or the more reflation-oriented currencies, that peak in Bitcoin was a pretty good signal to get short those currencies. Dollar Canada made a low at that time as well. So I think it's becoming an important proxy. And the other thing that I think is interesting is it does look to me like there's a pretty clear substitution effect between gold and Bitcoin, where there's a lot of on Twitter, hey, why is gold underperforming? And to me, it seems like Bitcoin is becoming...”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“That technical analysis is not a good forecasting tool. It doesn't backtest very well. If you backtest head and shoulders or any kind of patterns, generally systematically they don't backtest very well. And yet there's also research that shows that people that use technical analysis outperform those that don't. And that sounds like a disconnect, but I think the reason that it's not is that technical analysis is a great risk management tool. It tells you, you know, if you breach a certain level, then you're going to admit that you're wrong and it forces you to admit that you're wrong. And I think that's the real value of technical analysis as opposed to using it as a forecasting tool. So I think a good framework is to have your fundamental view, but then or your narrative view or whatever you want to call it. But then you overlay a technical parameters around it so that you have reassessment triggers or”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“From him in a while, but in that framework, you might be now thinking about selling calls or something like that because we might be more in a chop period now where it's not clear, I don't think which way liquidity is going. It's certainly not as clear as it was in 2010 or 2011. So to me, no, I don't think it's a momentum strategy. It's having the correct framework and then using that framework to trade. And the way that I kind of describe it is You want to be more concerned about what's happening and less concerned about why because the why is important, but like you said, Joe, you can kind of get bogged down in the why. And the thing is it matters and you have to have a framework that makes sense. But in the end, the what is what matters. And I think that's the useful part about technical analysis is that it's been shown in a lot of research.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“No, that's all right. I mean, I think I don't think it is because I think it's more understanding what matters and what doesn't. So looking at your framework, if you're more of a, so like I'm a combination of fundamentals, technicals, and positioning, but when I say fundamentals, it's more about narrative in the kind of, I don't know if you guys read Ben Hunt's stuff, but in that kind of vein of not necessarily the fundamentals as a weighing machine, but more as a voting machine. So like, what are people voting for? And I think, so I think if you have the right framework, then that's what, so it doesn't necessarily mean always being long stocks. In fact, right now, you might start to think, okay, now we're in the transition period between additional liquidity and reduction of liquidity. So maybe now for stocks, if you were using that framework, that TEPR framework, and I don't know if this is the case because I haven't heard.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was that easy. So, you know, he had an open mind to like, I don't care what I wish Fed policy was or I don't care what I wish how stock markets work. This is how they are currently working. And he was correct. And, you know, I know one anecdote of sort of friend of a friend of mine who opened a hedge fund in 2012. And the first train he did was sell S&P futures. And they closed in 2016 because performance wasn't very good. And the last trade they did was covering an S&P short. So not to say they were short the whole time, but you get the idea that that. Not looking at what regime you're in can kill you.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“That's pretty much trading 101, is adjusting your position to volatility. Yet a lot of people don't do it. So that's one way you can identify regimes. There's a lot of quantitative ways looking at rolling 20-day correlation of assets against each other and things like that. But then also I think part of it is just paying attention and listening to what people are saying and being thoughtful about it. So I think if you're not in that mindset of adaptation, then when new things come along, you're just more fighting it. So, you know, the classic example of that is I remember in 2010 I might have the year wrong, but around there, David Tepper went on CMBC and he's like, there's a lot of liquidity. You got to own stocks. And a lot of people were like, that's so simplistic. Like, it's just not that easy, dude.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Of, I think, subconsciously to go, maybe it'll come back. One really obvious way, sorry to answer your question more directly, Tracy, to identify regime is using a volter. So if VIX is below 15, that's one regime, 15 to 25 is another one, 25 to 40, and then above 40. That's one really simple way. And I think if you have any experience trading, you do that a little bit by intuition or you do it just because you feel it. But doing it more systematically and adjusting your position size based on current volatility is something that people generally don't do very well. So you'll see in a bank, you'll see a trader that just always is long or short, 20 euros, 20 million euros. And that makes no sense if fall goes from six, one month euro goes from six to 12. You shouldn't just always have the same position.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, and the other thing is, too, is that the blogosphere exploded at that time. So the overlays, so when I sent out an overlay of Kiwi-N against S&Ps in 2006, that was kind of a novel thing. And people would be, oh, that's cool. Yeah, risk appetite kind of drives both of those things. They should go up and down together. And now, I mean, those things, those overlays are so common that there's just not a lot of edge left with that. But because I started trading that way, and it was a huge edge for me, and including 08, it was a huge edge as correlations went to one, it's really hard to give up on that because you kind of have some ownership in it and that thing kind of paid your bills for a long time or did well by you. And so to throw it in the garbage feels bad. So there is a challenge to saying, okay, first of all, identifying that things have changed, which I think I was doing at the time, but then I stuck with it way too long just because it was such a good strategy.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So that's one thing that it's also really hard to, you can see something changing. So for example, I trade a lot of correlation. So I see like gold rallying, that's generally bad for the dollar. So if you're on a super short-term trader and you see yields lower, gold up, and dollar hasn't moved, then you might think that gives me a clue that the next 20 pips in the dollar is probably down. That's kind of like a basic framework of how correlation works. Pre-2008, that was a huge edge because a lot of people didn't even have live feeds to stuff like even working at an investment bank. There were traders that sat to over for me that didn't have live feeds to gold and oil and stuff like that, which is mind-blowing now. So then OAI brought all that into focus because correlations went to one between every single asset class. So a lot of algorithms obviously plugged into that. But then every human being as well.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Doing something and making money doesn't mean that that thing is going to work next year. So having one eye on the horizon and saying, okay, and I mean, that takes a lot of humility to say, okay, I'm not a god because you feel like a god when you're 22 and you quadruple your account. to be able to say okay and to be able to admit admit okay i was in the right place at the right time here but next year might be different so i'm going to have one eye on the horizon and get ready to adapt”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Every area. The problem with trading, if you're overconfident, you tend to blow up. And if you're not the right amount of confident, then you just tend to not be able to pull the trigger. Or the other side of that is every time you get into a trade, you just see danger everywhere and you just want to get out. To come in at 22, 23 years old and be rational, conscientious, and have calibrated confidence, man, that's a huge ask. Like, yeah, there's a few people that are like that, but that's a huge ask. And then the other thing that we kind of talked about is adaptation.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“If you are trying to make your money in three hours trading the open and then go back to bed so that you can go clubbing till 3 a.m. or whatever, that's not going to work. And I think fundamentally, a lot of people, including myself, didn't really, I never was very conscientious as a young person. I was the opposite, whatever the opposite is. So unless you have that really strong mentality of coming in and doing the work and grinding every single day. And actually, it's the same with poker, right? The people that really find success at a young age are the people that can grind and grind and grind. And then the last thing I would say is the right level of confidence. So I call it calibrated confidence. So generally, you know, the poll or the survey or the research that says 86% of people think they're better than average drivers. That sounds like a joke, but it's true. And the research shows that in every...”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“To be a professional fiction author, is that the barriers to entry are so low and the rewards are so massive that it just attracts a lot of people. And obviously that means there's a lot of competition plus there's transaction costs. So the negative sum game with a ton of skilled individuals, you have to do the work.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Go have fun. And that's just not how the world works. Like, so I think conscientiousness, again, and so I did a little bit of research for the book. Most of it is my experience watching people and watching myself. But I did some research as well on what are the fundamental underpinnings of success in the world in general. And conscientiousness is the one that generally in athletics, academics, business in almost all domains, the research shows that conscientiousness is the number one driver. And interestingly, conscientiousness is the one trait in the big five that goes up over time throughout your life. So again, I think that makes it really hard because you have to do the work. Like there's so many people out there trying to compete. It's very similar to like you mentioned poker, professional sports.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“But then what happens is as soon as you put on a position, you're like just like the steaming hot pile of bias because you have emotional attachment to the position itself and that new information you're kind of generally a bit more white knuckling. So new information you tend to overreact to the new information to the Kahman and Turversky stuff kind of goes into this. But a lot of that is in an experimental setting. So what I try to do in the book is also relate a lot of the Kanman Tversky stuff to trading because all that stuff that happens in an experimental setting obviously happens in real life. And then I think you also have to be really conscientious. So it's funny he said you wanted to party and all that. And that's one thing that kind of hurt me in the 9902 era was that, you know, I was 22, 23. I had a lot of other things that I wanted to do besides I wanted to go and trade for a couple hours and make my money.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So I think the first thing that successful traders who, I mean, what you're describing is someone that kind of comes in and pretty much does well right away. And generally, most people don't do that because there's a lot of painful lessons, which is kind of what my book is about. Like, I'm not saying I'm the holder of absolute truth on trading. It's more like here I made all these mistakes and saw other people make mistakes and then train people who made mistakes. So a lot of success in trading sometimes comes more from like having adequate runway. And that's why going to a bank or whatever, you have more runway. Whereas coming into a day trading shop The problem, the biggest issue really is that you just don't have a ton of runway usually because you have a finite amount of capital or you have like a, you know, pretty tight stops and all that. So the point that you have to get to is you pretty much have to start from the point that a lot of people get to eventually, which is being rational is the number one thing. So what tends to happen is people can be rational when they're analyzing the market.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Time when I was day trading, I was always gross positive. So I always made money. I had some kind of edge. But there's commission, right? So as I was trading more and more shares because of the value of the stocks went down, my commission was slowly rising, rising, rising until the point where a lot of days I was net negative, even though I was still mostly gross positive most days. And so people have to understand that like people think, oh, it's a zero-sum game. I'm a smart person. I can outsmart, you know, I'm smarter than average, which is the classic bias. But anyways, but the thing is, it's actually a negative sum game. So you have to be able to, whether you're paying visible commission or not, you are paying a tax every time you trade, even as an institutional trader. There's still brokerage and prime bro fees and bid offer and all that. So you have people have to understand it's a negative sum game. And so that's why it's so difficult.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“And so when the nominal value of stocks was way lower, and then there was decimalization, the bid offers size collapsed. Like so instead of some stuff was trading like 50 cents wide, tons of stocks at that time were trading like one cent wide. So what I was doing stopped working, but I just kept on doing it. So my account went from like 25,000 to 350,000 back down to like 70,000 by 0203. And it was because I never adapted. I just kept on doing the same thing. And so one thing I say in the book is one of the reasons that you really have to have an edge that I don't think people fully understand. And I try to lay it out with some graphs of gross and net is that you can be gross positive and net negative and that's not going to pay the bills. So generally what happened to me was throughout my whole”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Go up 4% and you sell it. So there were so many trades like that that essentially almost felt like zero risk. But then I can give you the rest of that story, which could because that again relates to my adaptation thing is that so what I was doing relied on pretty wide bid offer and then just catching brief momentum and kind of catching the wide bid offer on a lot of these stocks. So every morning in 1999 I printed out a sheet or a list of all the stocks over $100 and it was around four pages long. And those are the ones I focused on because you need like high nominal value to have wide bid offer. And in 2002 when I printed out that thing there were four stocks on it. So it went from four pages to four stocks. And then in the meantime in April 01, it was either April 01 or 02. I can't remember, but stocks went to decimalization.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Things happening like somebody would go on CNBC and say, Hey, am I stock of the week coming up after these commercial messages? It's an optical network maker in Texas or whatever. So you just frantically Google like optical maker, you know, and find the three biggest ones, or in that case, there's probably only one, you buy it.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it still exists, actually. Like people kind of call them bucket shops, but this was like a professional place. It wasn't a bucket shop. And whenever people walk by my screen, people used to always say, how come your P&L is always green? And essentially the reason was so that obviously if you're up, it was green. And if you were down, it was red, was that I just cut my losing positions really, really fast. So everything I did was momentum based essentially looking at futures and I had the future squawk on. And then when futures started to, you know, you could get a sense of there was some electricity in the futures, then you would get on the bid in six stocks that trade super wide and then try and get given by other retailer or by whoever and then ride it up a little bit. But I always cut my losses really fast. So one edge can be really good risk management. And the other one was I was really fast on the keys, which sounds stupid. But in those days, there were so many ridiculous.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So I don't want to overstate positioning just to be clear because actually, oddly enough, I think that's one of the most overrated variables. My view on positioning is that it kind of matters at the super extremes. And it can be like the only thing that matters at the super extremes. But most of the time, it just doesn't matter, like macro and stuff tensed and flows and all that tend to override positioning. But as a retail person, I can answer that easily because that's what I did from 1998 to 2003. That's what I did. I was trading my own account during the Nasdaq bubble. And at that time, my edge was, first of all, I didn't have very much money. So risk management, my risk management was really good. I worked at a place called Swift Trade, which was like a place where you go in and sit down and it's a trading floor legit trading floor and you pay commission.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“People care about and which ones they don't. So, like, if oil's been in a 40, 45 range for eight weeks, the correlation to dollar CAD probably isn't that significant. But if oil's like on the front page of Bloomberg every day and it's breaking to new three-year highs, then the correlation to CAD is probably going to pick up. And so I have a good sense of like, okay, I got to have oil on my radar because it's all over Bloomberg or not. So then sometimes like if you don't know what you're doing, you might see like oil's been in a range for six weeks and the range is 40, 45 and it goes from 41 to 44. And people are like, how come dog cat's not moving? And it's like, well, because oil's not front of mind right now. So my edge is understanding the current narrative and then surfing the move to the new narrative.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Say another number comes out, and I'm like, I know the market isn't really that fixated on that. But, you know, a currency moves 25 pips on it. Then I'll take off 8 and I'll take the other side. So I think my edge is understanding what matters and what doesn't because that's one thing that's really frustrating for a lot of people is, and actually for financial journalists as well, is trying to understand sometimes why things move when it doesn't always totally make sense. So if you, for example, like the classic example is current account deficits. So generally, currency markets don't care about them, but every five or ten years will trade off of them for like a year and then we stop trading off of them. But the current account deficits themselves are pretty sticky. They don't change that much. Kind of knowing what matters as well is an important part of that. So for example, like if you trade a lot of correlation, which I do, knowing which assets”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Buy it after the event and sell it after the event. It can also mean something a lot more subtle, which is that as a narrative starts to get really, really fully subscribed, you start to see positioning by metrics, but then also by, because I have a pretty good network of people, I get a sense of not just what positioning is, but also like there's like an emotional edge to positioning sometimes. Like if I send out a bearish Aussie piece and I get like 17 angry emails all like with pretty weak rebuttals, then I'm like, oh, okay, I'm definitely on to something. So there's like a more subtle aspect to positioning that I sometimes can tease out as well. But then also on the other side, it can be something like say news comes out and say New Zealand housing number comes out. And so in that example, I know the market's really interested and really cares about Kiwi housing. But then”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“My edge in a nutshell, I'll just try and keep it relatively short, is that I look at the macro world. So if any of your listeners have read my stuff, I tend to talk like fairly macro in terms of macroeconomics, Fed policy, you know, Australian CPI, all that kind of stuff. And so what I'm trying to do is understand the current equilibrium where price is the sum of all the information that's in the world. And then as new information comes in, I think my edge is understanding what that information means in the context of the current or slightly in the past equilibrium and entering trades into currencies before they move in order to capture the momentary disequilibrium from the new information. So that doesn't necessarily always mean like an event comes out and then euro goes up and I”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“You need to be able to identify regimes and then adapt and trade the regime and trade what works. And that's kind of the philosophy of like do what's working and stop doing what's not working.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Strategy like I'm a breakout trader, or like I buy options before Zoom's earnings or whatever, like the more narrow your strategy is, the less chance that you're going to make money in the long run because it's all about adapting to the new regimes. Not that there's a new regime every single day, but certainly new regimes come. There's cyclical ones and they're structural ones. So the structural ones being like retail kind of, you know, was huge in from 99 to or 98 to 02. And it's getting huge again. Algorithms came in. And then there's cyclical ones that are more about volatility. Like, is the VIX at 10 or is a VIX at 40? Your trading strategy has to be different in those two regimes. And generally, I would say a lot of people are good at specific strategies, but in order to be good, to have multi-year or multi-decade career.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“To maybe have periods of success and then fail. So going back to your original thing about a lot of new traders have come in 2020. Another thing that I've witnessed from conversations with a lot of retail traders is that a lot of people did really well in 2020 and are struggling now. And so an obvious explanation for that would be if you're if you were buying calls around earnings, let's say that was a really good strategy in 2020. However, that hasn't been a good strategy, especially recently. So what I tell people who are new is that you need to become an expert in one market, which could be a security or for me it's G10FX, but really it could be any kind of narrow part of capital markets and then become an expert in that, but don't become an expert in a particular”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Talking to people in the market, not just the traders at Lehman, but just in general, there was a split between people saying, this is BS, these algos are, it's not a real market. Every time I put a bid in, it comes in one point higher. And then there was another group of people that were like, hmm, this is weird. Like the market, the texture's different. I wonder how can we beat the algos? What are the algos doing? Can we mimic them but do it smarter? Can we figure out what they're doing and reverse engineer it and then make money off of that? And so I feel like that was a real eye-opener for me because like that was whatever 15, 16 years ago. So I was still kind of like transitioning between junior and senior trader. And it was really obvious that some people were adapting and some people were complaining. And so that has been consistent throughout my career is you see that people that adapt tend to do well in the long run and people that don't tend.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“The algos started 2004 2005 is the first period when I really remember the algos, the algorithmic trading, really becoming a force in currency markets. And I remember there was a really sharp split on the desk. So at that time, I worked at Lehman Brothers.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“That person's not adapting and they're not playing the current game. So my question is always like, do you want to live in a world of, you know, the current reality and play the current game? Or do you want to play a game that you wish existed and then the subsequent question is, do you want to make money or not? And if you want to make money, I think the key really is to, first of all, understand what game you're playing. And then number two, adapt to that game. I feel like just the idea of saying like this was a good period to trade. This was a bad period to trade isn't a great mentality for traders because what you really should be doing as a good trader is adapting to the current environment. Now, obviously, that's not like as easy as just saying, okay, today I'm going to do this because it's obvious what the environment is. Regimes change in a subtle way. But then sometimes it's pretty obvious that the regime's changing. Like, for example, when”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“So I would say anything related to valuation doesn't matter for traders. That would be my opinion. So I mostly trade currencies, but I have a lot of experience trading equities in that. If you're a trader in... Anyone that's saying, like, this is a bad market, this market is a joke, this is manipulated.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“Doing and know that what you're doing is trading, and then you might have a specific edge. And I think really the difference is, I mean, the obvious difference is timeframe. You know, to me trading is something probably less than one or two months. And then you can call it kind of call like two months to one year swing trading, but that's getting closer to investing and much more fundamentals. But I would say that the definition of real trading is something that you're doing that's short-term where you have a solid risk management process and you have an edge that you can identify and you can explain to somebody who's not an expert in the business.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's a great question. So, in the course of writing the book, one great thing about writing a book is you get to talk to a lot of random people because people DM me a lot on Twitter and LinkedIn. And your question is a really good one because a lot of people, I can tell by their questions to me don't really know themselves whether they're an investor or a trader. And to me, I'm biased because my whole experience has been trading. But my belief in efficient markets is that on short timeframes, markets can be kind of inefficient. And on long time frames, they're pretty damn efficient. And there's a lot of research that supports that, as you guys know, passive versus active. I mean, Charles Ellis was writing about that in the 70s with data showing that passive beats active. So then I think you really have to know what you're doing.”
2021-08-12 · Odd Lots · Brent Donnelly on What It Takes To Be a Winning Trader · IDENTIFIED FROM THE TRANSCRIPT · source