Prop Trading Secrets E-Book

Kathy Lien

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 568

Veröffentlichungsjahr: 2024

Beschreibung

14 revealing interviews with some of the world's best proprietary traders

In Prop Trading Secrets of Successful Funded Traders: How Individual Traders are using Proprietary Trading to Achieve Financial Freedom, Kathy Lien, author and managing director of FX strategy at BK Asset Management, and Etienne Crete, full-time trader and founder of Desire to Trade, deliver a collection of 14 revealing interviews with proprietary traders successfully making a living off the markets.

You'll explore insights from veteran traders with over 10 years' experience in the markets, winners of a variety of trading championships, and contemporary prop traders using methods like funded accounts to trade other people's money. You'll also find:

• A thorough introduction to the different kinds of prop trading, including funded trader programs
• Ways to get started with prop trading, trading methodologies, specific trading tips, and the most useful indicators of price movements
• What the world's best prop traders have in common and what sets them apart from the rest of the pack

Perfect for new traders, Prop Trading Secrets of Successful Traders is an incisive look at the discipline that belongs in the libraries of anyone with an interest in proprietary trading.

Leseprobe

Table of Contents

Cover

Table of Contents

Title Page

Copyright

Preface

About the Authors

CHAPTER 1: The Shift in Prop Trading

CHAPTER 2: Prop Trader Secrets

STRONG WORK ETHIC AND PERSEVERANCE

CONSISTENCY WITH INITIAL TECHNIQUES

YOUR FIRST FEW TRADES SET THE TONE FOR YOUR TRADING DAY

FOCUS ON ONE INSTRUMENT OR STRATEGY

SEEKING CONFLUENCE IN TRADES

PREFERENCE FOR BUYING CHEAP

THREE STRIKES RULE FOR BAD DAYS

LOWER RISK-REWARD RATIOS IN DAY TRADING

DAY TRADING FOR CONSISTENCY AND CASH FLOW

MANAGING SUCCESS EXPECTATIONS

ABILITY TO LEARN AND ADAPT

SELF-AWARENESS AND REGULATION

CUTTING LOSSES INSTEAD OF TRADING MORE

TRACKING AND REVIEWING TRADES

VALUE IN TRADING COMMUNITIES

PART I: PROP TRADING CHAMPIONS

CHAPTER 3: Rob Hoffman

THE SWITCH TO TRADING DOW FUTURES AND MORE

CHAPTER 4: Davide Biocchi

CHAPTER 5: John Bannan

PART II: PROP TRADERS TURNED FUND MANAGERS

CHAPTER 6: David Floyd

CHAPTER 7: Sunny Harris

CHAPTER 8: Ali Crooks

ALI’S TRADING TIPS

CHAPTER 9: Aatu Kokkila

CHAPTER 10: Andres Granger

ANDRES’S TRADING TIPS

PART III: PROP TRADING PROS

CHAPTER 11: Jean-Francois Boucher

CHAPTER 12: Austin Silver

AUSTIN’S TRADING TIPS

CHAPTER 13: Alyse Amores

ALYSE’S TRADING TIPS

CHAPTER 14: Matthew Miller

MATT’S TRADING TIPS

CHAPTER 15: Nick Syiek

NICK’S TRADING TIPS

CHAPTER 16: Vince Koehn

VINCE’S TRADING TIPS

CHAPTER 17: Ultimate 10-Step Checklist to Jumpstart Your Prop Trading

Index

End User License Agreement

Guide

Cover

Table of Contents

Title Page

Copyright

Preface

About the Authors

Begin Reading

Index

End User License Agreement

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Prop Trading Secrets

How Successful Traders are Living off the Markets

Kathy Lien

Etienne Crete

Copyright © 2025 by John Wiley & Sons, Inc. All rights reserved, including rights for text and data mining and training of artificial intelligence technologies or similar technologies.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Names: Lien, Kathy, 1980- author. | Crete, Etienne, author.

Title: Prop trading secrets : how successful traders are living off the markets / Kathy Lien, Etienne Crete.

Description: First edition. | Hoboken, New Jersey : Wiley, [2025] | Includes index.

Identifiers: LCCN 2024046181 (print) | LCCN 2024046182 (ebook) | ISBN 9781394243167 (Cloth) | ISBN 9781394243181 (adobe pdf) | ISBN 9781394243174 (epub)

Subjects: LCSH: Foreign exchange futures. | Foreign exchange market. | Speculation.

Classification: LCC HG3853 .L545 2025 (print) | LCC HG3853 (ebook) | DDC 332.4/5—dc23/eng/20241004

LC record available at https://lccn.loc.gov/2024046181

LC ebook record available at https://lccn.loc.gov/2024046182

Cover Design: WileyCover Image: © mineart1995/Adobe Stock PhotosAuthor Photos: Courtesy of the author

Preface

Whether it’s the pursuit of financial freedom, the desire to boost income, or the challenge of finding new opportunities after a job loss, more and more people are turning to trading. The universal appeal of earning extra cash and generating additional income streams is undeniable. Since the 2020 pandemic, the way we work has transformed. With more people working from home, there’s a newfound flexibility to explore side hustles like trading, and many are eager to leave the 9-to-5 grind behind.

While investing in retirement accounts, stocks, and real estate has long been seen as the golden path to financial freedom, not everyone has the extra cash or income to invest in the future. That’s where trading comes in, offering a chance to build capital and create a steady income stream that can eventually be invested in long-term wealth. The rise of modern prop trading has made this opportunity even more exciting and accessible.

Unlike traditional prop trading, once reserved for Wall Street professionals, the modern prop trading model is designed for the everyday trader. These firms enable traders to access substantial capital – whether real or simulated – and earn a portion of the profits, sometimes as much as 90%.

To seize this opportunity, traders need to qualify by hitting a profit target without exceeding the maximum daily loss limit. Each firm has its own set of rules, but generally, traders are required to generate an 8–10% profit on the capital while keeping losses under 5%. Some firms add extra conditions, like restrictions on trading during news events or using automated trading systems. Others assess traders’ competence through scoring methods. With so many firms offering different paths, including free funding from some brokers, you could be trading with $100,000 or more in capital for just a few hundred dollars.

As modern prop trading gains popularity, it’s easy for newcomers to make rookie mistakes. Even experienced traders can struggle to navigate the rules, leading to disqualification, often known as “blowing up their evaluations.”

This book is here to help both new and experienced traders avoid these early missteps and fast-track their journey to becoming successful funded traders. We had the privilege of speaking with 14 accomplished traders – ranging from those with just a few years of experience to trading legends with decades of expertise. This includes trading champions, prop traders managing significant funds, and seasoned pros who trade independently and make a living from the markets. In this book, we explore the shared traits of these traders, from their personalities to their trading strategies, providing valuable insights for anyone looking to succeed in the market.

You’ll hear from Rob Hoffman, a day trader with over 30 domestic and international trading competition wins, who emphasizes the importance of patience and taking the right trade at the right time for the right reasons. Davide Biocchi, who has won 10 real-money trading championships, discusses the value of focusing on the visible range and using volume-based tools for precise trade identification. John Bannan, who ranked third in the Robbins World Cup of Futures Trading, shares his unique cycle-based trading technique.

David Floyd, a seasoned veteran with over 30 years of trading experience, speaks about the art of listening to the market. Sunny Harris, a top commodity trading advisor with over 40 years in the markets, stresses the importance of staying focused and not succumbing to the fear of missing out on trades. Ali Crooks shares his inspiring journey from running a failing business to managing a regulated fund. Aatu Kokkila highlights how teamwork skills from his experience on the world’s top World of Warcraft team translated into his trading success.

Andres Granger, who manages a $10 million crypto fund, underscores the importance of learning from both positive and negative trades. Jean-Francois Boucher shares his inspirational story of losing everything trading options, battling leukemia, and eventually becoming a profitable funded trader. Austin Silver, a multi-funded trader, discusses the importance of treating trading like a business.

Alyse Amores, a single mother who grew her trading capital from a few hundred dollars to $8 million, shares her practical approach to determining when one’s ready to trade full-time. Matt Miller, who focuses on mastering one instrument and one setup, shares how this focus helped him withdraw $300,000 in profits over 85 trading days. Nick Syiek, who made $3 million by the age of 23 trading forex and indices, reveals his unique market approach. Finally, Vince Koehn outlines his journey of blowing up hundreds of accounts before developing a consistent methodology that enabled him to withdraw over $1 million from prop firms.

We hope you find these traders’ stories both encouraging and insightful. Each of them has faced their own set of challenges and found unique ways to overcome them. We believe their experiences offer valuable lessons for anyone looking to succeed in trading. Whether you’re just starting out or are an experienced trader seeking to refine your approach, we trust that their insights will inspire you, guide your decisions, and ultimately help you on your journey to becoming a successful trader.

About the Authors

Kathy Lien is the Managing Director of FX Strategy for BKTraders.com and an internationally recognized expert in forex trading. A prodigy in finance, Kathy graduated from New York University’s Stern School of Business at just 18 and immediately began her career on Wall Street. With over 25 years of experience in the financial markets, she has honed her expertise in foreign exchange, making her a go-to authority in the field.

Kathy’s career began at JPMorgan Chase, where she worked on the interbank FX trading desk, making markets in foreign exchange. She later moved to the cross-markets proprietary trading group, where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures. In 2003, Kathy joined FXCM and founded DailyFX.com, a leading online foreign exchange research portal. As Chief Strategist, she led a team of analysts dedicated to providing in-depth research and commentary on the foreign exchange market. By 2008, she had joined Global Futures & Forex Ltd as Director of Currency Research, where she managed a global team and delivered expert analysis to clients.

Kathy is the internationally published author of the best-selling book Day Trading and Swing Trading the Currency Market. She has also authored The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at Its Own Game, all published by Wiley. Her extensive experience in developing trading strategies through cross-market analysis and her deep knowledge of predicting economic data surprises are integral to BK’s analytical techniques.

As a seasoned expert on G20 currencies, Kathy appears frequently on CNBC and is quoted in major sources such as The Wall Street Journal, Reuters, Bloomberg, MarketWatch, Associated Press, UK Telegraph, and the Sydney Morning Herald.

Etienne Crete is a swing trader from Montreal, Canada. He is known for traveling the world while trading full-time since 2017 and is the founder of Desire To Trade, aiming to help aspiring traders develop profitable trading methods and achieve financial independence.

Etienne started his trading journey in 2013 and realized that the only way to succeed was by surrounding himself with traders ahead on the journey.

His platform offers a variety of resources, including educational videos, a podcast, and several programs, all designed to help traders get profitable and scale up their trading.

Through the Desire To Trade Podcast he has interviewed over 400 successful traders and experts who share their insights into trading for a living. Through his work, Etienne aims to help traders achieve the freedom to travel and live on their terms while following their passion for trading.

CHAPTER 1The Shift in Prop TradingFrom Big Banks to Everyday Traders

Proprietary trading, or prop trading for short, has been around for decades. It started as a way for big banks to use their own capital to profit from market moves. Fast-forward to the 1990s, and advancing technology made markets more accessible, sparking the rise of algorithmic and high-frequency trading. This shift led to the birth of electronic platforms like E-Trade, which provided individual traders with online market access. They quickly gained popularity, with millions opening accounts to trade online.

During this time, modern contracts for differences were introduced to retail traders, followed by the emergence of retail forex trading firms around 1999. The dot-com boom was a real game changer, revealing the endless opportunities in the financial markets to traders worldwide. The global financial crisis slowed things down a bit, but the cryptocurrency bubble and WallStreetBets brought the excitement back in the early 2020s. It was during this time that the modern version of prop trading began to gain significant traction. Between 2020 and 2024, over 120 new prop trading firms were established, attracting more than a million new traders and generating a staggering $70 trillion in trading volume.

There are many differences between traditional and new prop trading firms. Traditional prop trading firms typically use their own capital. They employ traders who are often salaried employees or partners who receive performance-based compensation. This small group of hand-selected traders usually undergo extensive training before they are allowed to trade with the firm’s real capital. Once allocated funds, their performance is closely monitored to ensure they stick to strict risk limits.

New funded prop trading firms are shaking things up. Instead of employing traders outright, they offer aspiring traders the chance to prove their skills through evaluation challenges using simulated accounts. Traders pay a fee to enter these challenges, and those who succeed are given access to a larger amount of capital to trade, with profits shared between the trader and the firm. This setup is appealing because it allows traders to control significant amounts of capital – often $10,000 or more – by investing just a few hundred dollars on an evaluation. A $600 fee, for example, might provide access to $100,000 in trading capital, with the possibility to scale up from there.

To access the funds and reach the stage of a funded trader, individuals must pass an evaluation, which involves meeting specific profit targets without exceeding certain loss limits. Some programs require passing two evaluations before funding, but once traders are funded, they can trade larger positions and share profits based on those amounts. The maximum financial risk for a trader is limited to the evaluation fees, which is a low-risk way to access big capital.

This model opens the door to traders from all walks of life, particularly those just out of college or early in their careers who haven’t saved large amounts of capital. Saving $10,000 or more can take years, but with just a few hundred dollars these prop firms offer a chance to trade significant amounts if you pass their evaluation. The evaluation is essentially a test to identify skilled traders. Prop firms want to see if you can consistently hit profit targets, like making 6% without losing more than 3%, over a set number of trading days. Each firm has its own rules, but they all aim to find traders who can profit consistently without taking big risks.

Another appealing aspect is that these firms operate primarily online, offering flexibility and remote work opportunities for traders worldwide. This new approach not only opens doors for many aspiring traders but also ensures that only the most capable traders get funded.

Although new funded prop trading firms offer exciting opportunities, there are some downsides to be aware of. One significant drawback is that most traders, whether they are on evaluation or funded accounts, trade with virtual funds. Additionally, regulators are just beginning to look at this space, which could lead to changes in the future. Another concern is that a significant portion of these firms’ revenue comes from evaluation fees. This raises concerns about the firms’ primary incentives – whether they genuinely aim to find and fund skilled traders or to profit from the steady influx of evaluation fees. As this industry segment is still fairly new, these firms are adapting and evolving to become fairer and align their interests more closely with those of the traders. With so many different prop firms, each with its own unique rules, it’s essential for traders to do their homework and fully understand the terms and conditions of these funded prop programs before diving in. This way, they’ll be fully aware of both the potential risks and rewards.

The world of prop trading is diverse and exciting, encompassing traders who trade for themselves, those who work for traditional prop firms, and those involved in funded trader programs. In this book, we’ve had the pleasure of interviewing 14 standout proprietary traders. Among them are three trading champions, each with over a decade of experience, some of the most popular and widely followed funded traders, full-time traders turned professional money managers, and a select group of seasoned trading veterans.

These traders have shared their specific strategies and techniques, providing you with valuable insights. Whether you’re just starting or looking to refine your skills, their stories and advice will inspire and guide you on your trading journey. Get ready to dive into their world and discover the secrets to their success.

CHAPTER 2Prop Trader SecretsDiscover What the Best Have in Common

Through our journey of interviewing successful prop traders, we’ve uncovered some fascinating traits and practices that contribute to their success. Our conversations were filled with illuminating moments, revealing a mix of grit, strategy, discipline, and community spirit that fuels these prop traders’ achievements. From early hustles to mastering a single instrument, and from leveraging trading communities to refining their techniques, these insights are shared with the hope of helping you become a better trader.

STRONG WORK ETHIC AND PERSEVERANCE

By starting work at a young age, some as early as middle school, many of the traders developed a strong work ethic and a deep appreciation for the value of money. Their early ambitions instilled discipline and the importance of perseverance – key qualities for making and maintaining profits in the trading world. Starting with small accounts, they ambitiously grew and stacked them into larger ones, showcasing their consistent and conservative approaches. Their journey from small beginnings to significant successes is a testament to their drive and ingenuity.

CONSISTENCY WITH INITIAL TECHNIQUES

It’s remarkable that many of the traders we interviewed have stuck to the same general trading philosophy they learned at the start of their careers. While their techniques and tactics have evolved, their core focus remains on the original concepts that sparked their interest in the market. For example, traders who began with fundamental analysis and trading news events still rely on these methods. Those who started with technical analysis, focusing on volume and price action, have stayed true to these approaches. Likewise, traders who initially learned to trade cycles and breakouts continue to refine and use these strategies over time. This shows that you can be successful with a variety of trading methods, as long as you remain consistent and dedicated to mastering your chosen approach.

YOUR FIRST FEW TRADES SET THE TONE FOR YOUR TRADING DAY

Trading is an emotional roller coaster, and many of the traders we’ve interviewed know that the first few trades of the day can set the tone. They carefully pick their initial trades, aiming to build a cushion early on. This smart move gives them the confidence and financial buffer to let part of the trades run or take bigger positions later in the day, knowing they’ve already pocketed some profits. If those early trades go south, they often spend the rest of the day trying to claw back their losses, which can affect their mindset and emotions. This scramble to recover can lead to impulsive decisions and high stress, ultimately hurting their performance. By prioritizing cautious and strategic early trades, traders can dodge this downward spiral and stay calm throughout the day.

FOCUS ON ONE INSTRUMENT OR STRATEGY

Many of the traders we’ve interviewed achieved success by zeroing in on a single trading instrument. By focusing exclusively on one asset, they develop an intimate understanding of its movements, reactions to news, optimal trading times, and more. Other traders prefer to focus on a single strategy to trade on a small number of instruments. This laser focus reduces the stress of constantly reevaluating different instruments and hunting for new opportunities. Plus, it gives these traders lightning-fast reaction times because they know what they trade so well. This approach enhances their ability to select trades with greater confidence and manage their positions and profits effectively.

SEEKING CONFLUENCE IN TRADES

Confluence is also important to many of the traders we interviewed. They hunt for multiple factors that support a specific trade direction or level, like technical indicators, volume patterns, and prior highs or lows. Finding confluence boosts their confidence in the setup and helps them decide whether to take a smaller or larger position. When several factors align, these traders can make more informed and confident trading decisions.

PREFERENCE FOR BUYING CHEAP

Everyone loves a good deal, and the traders we interviewed are no exception – they don’t like to chase price. Instead, they prefer to buy at a discount, often waiting for a pullback before jumping into a trade. This smart tactic boosts their chances of success, reduces risk, and maximizes value. Many of our traders look for breakouts and then wait for a retest of the breakout point before getting in. By doing so, they enter trades at more favorable prices, enhancing their risk-to-reward ratios. This disciplined approach not only helps them be better positioned but also fosters greater patience and strategic thinking in their trading practices.

THREE STRIKES RULE FOR BAD DAYS

In baseball, a player steps away after they miss any pitch that is in the strike zone. Many of the traders we interviewed use a similar three strikes and you’re out rule for their trading. If they strike out with three consecutive losing trades, they step away from the market to avoid further emotional and financial damage. This rule helps them stay disciplined and prevents a bad day from turning into a major loss. By taking a break after a rough patch, they keep their cool and come back stronger the next day, ready to hit the market with fresh energy. This straightforward yet powerful strategy ensures that a streak of bad luck doesn’t knock them off their game.

LOWER RISK-REWARD RATIOS IN DAY TRADING

Many of our day traders are successful because they use risk-reward ratios, such as 1 : 1 or even lower. While higher reward, low-risk setups sound great in theory, they’re rare in day trading. Consistently successful traders know that the real secret to success is maintaining a high win rate. Most of their strategies focus on high accuracy, getting in and out of trades quickly. Protecting profits is also important, so these traders might use emergency stops with a risk-reward ratio of less than 1 : 1. However, they will move their stops up swiftly as the trade moves in their favor, locking in profits and minimizing losses.

DAY TRADING FOR CONSISTENCY AND CASH FLOW

Day trading, or scalping, is the primary focus for most of our traders. Since trading is their main gig, these traders’ top priority is to generate steady cash flow and consistent results. Even those who lean toward longer-term swing trades know the importance of consistency, liquidity, and financial stability. If you dream of becoming a full-time trader, you’ll need a strategy that provides regular cash flow to cover expenses like rent, bills, childcare, and tuition. A useful tip from one of our traders is to try living off your trading income for a while to see if it’s enough. Or aim to match your weekly or biweekly paycheck with your trading profits.

MANAGING SUCCESS EXPECTATIONS

Traders with high expectations often put unnecessary pressure on themselves. Good trading shouldn’t be about expecting a certain profitability since there are factors we cannot control. In the end, one can only take what the market gives. Trying to force positive results beyond that is pointless. Start with the expectation that it’s going to be really hard to stay consistent in trading. It will not get anyone rich overnight. It’s also been emphasized by one of the traders in this book that success comes from expanding your time horizon. Instead of looking for results in the short term (day, week, or month), traders should let the odds play out in their favor and expect results to come only in the long term (quarter, year).

ABILITY TO LEARN AND ADAPT

Mistakes present a great learning opportunity. Traders who stay successful over many decades are lifelong students. They are finding new ways to learn about the market and themselves. They are also highly adaptable. When the market context or other conditions change, these traders are quickly looking at how to pivot. While some would be afraid of change, successful traders look to the future instead of worrying about the past. Whether through a wide collection of books or by talking to others in the industry, the traders interviewed in this book always stay curious and continue evolving.

SELF-AWARENESS AND REGULATION

Knowing who you are and aren’t presents an edge for many of the traders interviewed in this book. Consistently profitable traders know their trading strategies and personalities inside and out. Some of the traders we’ve interviewed have a very specific trading style they like and don’t deviate from. Others know when they’re not likely to perform well and add trading rules that match themselves better. It’s important to be patient with who you are. One can always get better, but it takes time. Self-awareness is also a great way to be more disciplined, since you’re more likely to find your pitfalls early.

CUTTING LOSSES INSTEAD OF TRADING MORE

Being profitable in trading isn’t about finding more winning trades. It’s about minimizing losses that eat into your profits. The traders in this book have shared trade and risk management techniques to reduce their losses. Small mistakes repeated can often lead to large changes in results over time. Tracking and reviewing trades is also one of the key habits to see where money is lost. Any good trader would tell you that this isn’t a one-time exercise. It is a principle to continually strive for as one evolves in a trading career.

TRACKING AND REVIEWING TRADES

Keeping track of and reviewing their trades is a habit that all successful traders swear by. It helps them understand their trading patterns, spot strengths and weaknesses, and make the necessary tweaks. By analyzing their own data, they learn from their mistakes and weed out the problems. This process has been a game changer for many of our traders, helping them correct big mistakes and hit their stride. Plus, with tons of journaling platforms available, they can get detailed insights into their trading performance. Using these tools for self-assessment can significantly enhance your understanding of your trading habits, improve your skills, and increase your overall success.

VALUE IN TRADING COMMUNITIES

Community is key in all walks of life, and it’s even more essential in trading. Every trader we interviewed raves about the value of trading communities, even if they don’t always adopt the strategies shared within them. These communities are a goldmine for exchanging ideas, learning new techniques, and diving into market discussions, which is a lifesaver in the often solitary world of trading. Plus, being part of a trading community means fantastic networking opportunities, a sense of accountability, and opportunities for self-reflection.

PART IPROP TRADING CHAMPIONS

CHAPTER 3Rob Hoffman

Rob Hoffman is a 33-time real-money international trading champion born in Germany and raised in northern Illinois. Since the early 2000s, he has won 16 domestic trading competitions in the United States and 17 international competitions in countries such as France, Italy, and the United Kingdom. Rob’s interest in trading began just before the 1987 market crash when he recognized the opportunities for gains on the long and short side of the market. At the time he was limited to paper trading because he was only 16 years old, but he knew he wanted to become a trader. Born to an army and law enforcement family, structure, regimentation, and discipline were always a part of his life. In this chapter, you’ll learn how Rob’s commitment to structure and patience played a pivotal role in his trading decisions, particularly his unwavering approach to selecting the right moments to trade even when facing public embarrassment during competitions.

Today, Rob maintains a disciplined routine, rising at 5 a.m. to trade and run his many trading businesses. This includes Wealth365, which hosts the world’s premier online trading and investing summit, and WealthCharts, an award-winning charting and trading solution tailored for the active trader and investor used by traders all over the world. This relentless commitment not only underscores his dedication to trading but also to the enterprises he has built based on this passion.

Q:

Rob, how did you get into trading and into the markets?

Rob:

When I was a teenager, my passion was the financial markets. I was 16 years old and I knew that I really wanted to do something with the stock market. I believe it came from my love of chess back then, and understanding the game and thinking several moves ahead. I would look at financial publications and watch TV. I’d see charts of different symbols on financial television or

Investor’s Business Daily

and the

Wall Street Journal

– the type of publications that were available at the newsstands. I would look at the different stock charts and the rankings for the day. Then I’d go back and see those same stocks listed a week or two later, and I’d compare them to what I thought they were going to do. It was a very early way of spotting and analyzing patterns on the charts.

In January 1987, the year of the ’87 crash, it was a real blessing for me. I had no money to trade at the time, I was just a paper-trading kid. However, I was watching, monitoring, and studying the market and this crash taught me to focus on learning how to make money on the way down with short positions, not just on the way up, because there’s so much opportunity in falling markets. This was an important key to my future trading endeavors. It’s a skill and advantage I see validated over and over to this day when seeing those who only focus on trading and investing in bullish markets really struggle and often give back too much in bearish market environments.

Q:

Did you have a trading mentor?

Rob:

No, I didn’t have a trading mentor, I was completely self-driven. I made a lot of mistakes. Even to this day, as I’m managing a fast-growing charting and trading analysis company, I’m sitting here looking at a wall of charts right now. I love trading so much that I built an international company focused on technical analysis and trading with much higher probabilities. It has been my passion from the very beginning. So I try to be the mentor to others that I didn’t have when I was learning to trade and invest.

Q:

So it’s really interesting that you talked about how you were exposed to chart reading and to looking at charts in the mid-1980s because information flow and chart availability was pretty much nonexistent at that time, especially for someone who didn’t have the resources. Someone who was a teenager, not a professional trader. How did you get that information? What were you looking at? How were you getting updated?

Rob:

The newspapers! I’d flip through many charts from the

Wall Street Journal

and

Investor’s Business Daily

– creating my own off-screen charting view of the market. I was strictly looking at the paper without much more in the way of indicators. I think some of the charts had like a 200-day moving average but that was it. They were just open, high, low, close bars. It was very rudimentary but it allowed me to really focus on price action, and the ebb and flow of trends.

Q:

Given the lack of intraday information at the time, were you focusing on a longer time frame?

Rob:

Yes, absolutely. The concept of day trading was completely foreign to me. I didn’t have the technology or resources to focus on any sort of day trading when I was younger. I was strictly looking at the long-term charts on paper. I’m a day trader now, but honestly, that training was just as good, if not better, to prepare me for day trading. Ultimately, because a chart is a chart is a chart as it relates to technical analysis. So I generally use the same strategies on a one-minute chart that I use on a daily, weekly, or monthly chart.

Q:

So you went into law enforcement after graduation? Did you trade while working? How did you get the capital to trade?

Rob:

Yes, I traded and worked at the same time. I basically worked the equivalent of two and a half jobs at one point. I had my regular full-time job at the sheriff’s department and I did court overtime duty because they had a major jail overflow problem. I’d work a 12-hour shift sometimes at the sheriff’s department from 6 p.m. to 6 a.m. Then I would take a quick nap and come right back for court overtime work about 8 a.m. When I was working overtime duty in the judge’s chambers court, I had to transport prisoners from the jail to the judge’s chambers and my only task after that was to wait. I’d sit there for hours and I’d look at the charts. I printed out hundreds of charts that I’d take with me to work, flipping through them and looking for the ones I thought were the most interesting pattern-wise. If I was out in a patrol car for one of my side gig law enforcement jobs, I’d sit there sometimes in the squad car while on break and looking at charts of indices and individual equities, and I’d dial out for a current quote because I didn’t have a computer with me.

Q:

What was your strategy back then when you started trading mid-1990s?

Rob:

I was doing the equivalent of what they called SOEs, small order executions. Everything was trading in quarter points or so. You could buy on the bid, try to sell on the offer, do a quarter-point trade here and there, and try to make $250 a trade with 1,000- share lots. I would look at daily charts but I was using that for shorter-term trading, looking to hop on a trade near the open and close it by the end of the day for profit.

Q:

If you were watching end-of-day charts and trying to forecast moves the following day, were you trading the continuation?

Rob:

Yes, at the time I was looking for continuation trades. I’m definitely a trend-based trader, not a counter-trend trader.

Q:

How did you decide to transition to full-time trading, and what made you feel prepared to leave your full-time job?

Rob:

That’s a great question. At some point, I felt that because of all of the jobs I had, the time I had to trade was very limited and I was very tired. One thing I share with people is that if you’re in a bad emotional state or you’re physically exhausted, or you’ve had a fight with your spouse that day (especially if about money) or you have health issues requiring heavy medications, it is not a good place to trade from. I realized that I couldn’t mentally make good decisions when I was physically exhausted all of the time. I felt confident in my systems but I was always looking for patches of time to trade. So I decided to take the plunge. I didn’t have a guaranteed nest egg of a certain amount but I had the confidence that I was going to figure this out as I had with a lot of other things in my life.

I also knew that if I needed to get a part-time job, I could get a moonlighting gig in law enforcement or something else, which ultimately I did at one point as I was getting serious. I knew that I’d land on my feet because I had a lot of skills and certifications. I always encourage people even to this day to consider getting a part- or full-time job if they have bills to pay, money they can’t afford to trade, money they can’t lose, or they start making terrible mistakes with their money management. When you have extra income coming in, it’s a huge psychological comfort.

Q:

Did your trading change once you became a full-time trader because you had more time?

Rob:

Yes. I came to realize that the more time I had to make money, the more time I had to sit in front of the computer and the more mistakes I would make. I know that may sound counterintuitive, but more screen time was a problem. I came to realize that not every minute of every day should be traded.

That’s just a reality, and I wish I could go back to those days with what I know today. I’ve learned over the years that when you sit in front of the screens, you want to do something. I was constantly looking for the next trade, the next trade, and the next trade, but what I’ve come to learn after many years, and a few gray hairs later, is that in reality, less trading is more. My strategies today are effectively the inverse of back then by incorporating all of the things I learned, and all of the mistakes that I’ve made. When you are sitting in front of the computer and you think “I should be trading right now because that’s my job to sit here and be in the market all day long” you are setting yourself up for failure. It’s just not true that you have to trade, trade, trade like a crazy person. Being slow, steady, and consistent and focusing on the right trade, at the right time, for the right reasons, wins the day, week, or year. The biggest gains are usually made in very finite times. The other times, it’s a great opportunity for you to enjoy life, develop additional strategies, and automate the trade-finding process, things of that nature.

The idea that you should be in the market all the time is not the right course of action for me and for many other people who are actively trading. Now, I’m not referring to traditional investing or even swing trading, when you might have several positions open with various options hedging and so forth. I’m referring to day trading specifically in this case.

One of my strategies, the thrust, pullback, thrust (TPT), was developed in the late 1990s during the dot-com bubble when I had all the time in the world to trade tech stocks.

I would be watching the screens looking for a big green bar. The price would creep up and creep up. I’m thinking at the time that this is a new uptrend and then it explodes to the upside. I would jump into a trade because I don’t want to miss it, but I didn’t realize at that point that every other person in the world is also jumping into that big green bar. Then the market would pull back, pull back, pull back, and stop me out! I didn’t realize it at the time but statistically, that’s when you’re actually most likely going to get a pullback for the next several bars back into the direction of the original trend. At the beginning, I thought, that isn’t good, that’s not supposed to happen, so I’m going to take my loss like a good trooper because I want to be conscientious about risk-reward and take the loss. Then after I got out, I would watch it go back up without me and I knew I had the direction right, and the trend right, but the timing was off. So I studied it and studied it and that’s where the concept of TPT was born. Most of my work even to this day comes out of the idea “don’t chase that trade; look for the high probability trend resumption trade!”

“My whole mentality changed from the hunted to the hunter.”

When I started developing signals for the reentry rather than chasing, my whole mentality changed from being the hunted to the hunter. Instead of being the hunted, the person running in on the big green bar or after a large move, only to get stopped out and watch it go right back the other way, I started seeing the green bar, watching it pull back, and then I would wait. I wanted to see it come back out of my indicators before I would get in. That way, I’m in the momentum for the new run back into the direction of the trend.

THE SWITCH TO TRADING DOW FUTURES AND MORE

In the late 1990s, when the Dow Futures were launched, I was so excited because it was much easier for me. I didn’t have to print out 100+ charts and follow the earnings calendar for each of these companies, their news releases, and similar companies’ news cycles as well, all of which would often destroy my trade opportunities if they countered my intended direction. Since I was already looking at the Dow anyway to see which way it would go and how it could affect my trade, it was a logical transition for me to start looking at Futures as well. This way I could go long or short and not have to worry about an uptick rule. I traded Dow Futures primarily until 2008/2009 and at that point there was a lot going on in the currency market. Since I was already trading with the exchanges, the next logical progression was euro, pound, and yen futures. About that time the Russell became very popular. It was $10 a tick and moved like the Nasdaq does by today’s standards, which is hyper-parabolic all over the place. I also traded gold and crude oil futures.

Q:

You’ve broadened the instruments that you’re trading. How do you manage to follow all of them?

Rob:

I built a technology company, now called WealthCharts. I built it for me first and foremost as a hardcore trader. I programmed the strategy into the charts, and then it triggers alerts and scans the market for me. Then it’ll email me, text me, and pop up the alert on the screen. It gives me three different forms of communication to say,

Hey, one of those little ideas that you like is happening now

. So now I don’t have to sit all day in front of the screen.

Q:

So, by harnessing the technology you developed, you’ve managed to expand the range of instruments you monitor, rather than just concentrating on a single one?

Rob:

That’s exactly right. Technology helped me diversify the markets I follow, but of course, I still have my favorite instruments that I love to trade; make no mistake about it. I’ve really enjoyed day trading Nasdaq Futures because of the volatility, the action, the movement, the range, and how that can add up very quickly. It really opens up a lot of opportunities because I thrive on that ebb and flow. I love the movement, that boom, boom, boom, pullback, then resumption! Boom, boom, boom, pullback, then resumption! Whereas a lot of people may feel like “no, no, that’s just too much for me. I’m getting heart palpitations. I need something much slower.” Everybody has what’s interesting to them and there’s something for everyone! I personally thrive on that action, plus I’m busy. I still have two lovely little ones at home now, an 8- and a 10-year-old. They’re both very active in school and extracurricular activities and my wife Sarah and I are very active in charitable events and organizations. I run multiple international companies, so as a CEO, as a dad, as a husband, there’s a lot of honey-dos on Rob Hoffman’s list. I have to be in a situation where I can systematize and automate the trade identification process because I found that it is just not healthy to sit there all day and stare at the screen waiting for something to happen. If you do, your mind starts to trick you into wanting to do something to keep the market interesting. Sometimes I used to find myself wanting to put a trade on just to pay attention more to what’s happening in the market. Now with the automation capability, the trade identification where the scanners will just find it and pop it up to me, I can have my cake and eat it, too. That’s really the big benefit of the technology. I’ll let the system do all the heavy lifting for me, so I can take care of all the other things in my life that need to be well taken care of. I know people have very busy lives trying to grow their businesses, trying to manage their families, and sometimes really recognizing that and trying to look for technical solutions can actually really enhance their trading. I’m a strong believer in that.

Q:

Your system scans for trade ideas. Do you take all of them, or are there criteria for selection? Is there room for discretionary decision-making in this process?

Rob:

Personally, I’m still a discretionary trader. I like automation, I like bot trading, but until I have my Garry Kasparov moment where the machine beats me consistently, I’m still taking all of my trades manually. (

Note: IBM computer Deep Blue beat Garry Kasparov, a World Chess Champion in 1997. Rob Hoffman is not being beaten regularly by machines at his competitions as of yet

.)

I’m old school and I still enjoy trading manually. It’s kind of like pilots. The computers fly the airplane mostly but the pilot is always there, ready to take over. I have a passion for the markets. My wife Sarah is always joking, taking pictures of me because I’m looking at the mobile version of WealthCharts when we’re at events for our children’s school, a charity event, or out with friends. I’m still a big financial markets geek. I still have this passion, so I keep a very close feel on the market despite the fact that the automation will help identify the trading opportunities. I’m still that person who likes to execute the trade live. I’ve traded in competitions against bots. I got some great videos and some great pictures where these bots were just green, green, green, and nearly every trade the bots were doing were winners and I still beat them by nearly two to one. I would sit there and wait, and wait, and wait, for a few select trades, then jump in.

Q:

How long do you usually hold your trades for?

Rob:

With all of the geopolitical risks, trades could figuratively and sometimes do blow up overnight. I’m much more cautious about naked positions. I want to sleep like a baby so I put more intraday trades on and if I am going to swing trade, it will be with options where I have a defined rather than unlimited risk. I like to know where I’m at any time of the day. My holding period, typically for those types of trades, is anywhere from several minutes to several hours within the day. The goal is to exit all of those stock index futures trades by the end of the day so I’m not carrying extremely high leverage positions overnight. If I were to want to carry an overnight position, I’d want to do it more with an options strategy that has a defined risk, and those types of trades could last for days to several weeks depending on the objective of the trade.

Q:

Are there certain times of the day when these pullbacks are more effective?

Rob:

Yes, for day trading, within the first few hours of the market opening. To be clear, these opportunities happen throughout the day but I’m more focused in the morning and I find the most vigorous moves frequently happen anywhere between 8:30 a.m. Eastern time when news is released pre-US market open and through the lunch hour at noon Eastern. I feel the market often loses some of its energy in the afternoon as far as the speed at which it moves. The exception is when we have news events or a period of time in the markets where there’s a lot of risk of black swans and news that is taking place. Then the markets can get very excited in the afternoon and offer the same strategies. You’ll see the same opportunity during the European session after the European market opens. There’s an energy that takes place for a few hours until they go into their lunchtime, and then again, after 8:30 a.m. Eastern time when we get those morning announcements until about noon. The swing trades are not so dependent on the time of day as they are defined risk trades with options and are taken when the signals fire off. Although I tend to avoid earnings for swing trades.

Q:

What’s your favorite time frame chart?

Rob:

I’m looking for synchronicity between the daily, hourly, five-minute, and one-minute charts wherever possible. If I see a discrepancy between the hourly chart and the daily chart, for instance, that’s a market condition I refer to as mom and dad fighting. You have two big heavy hitter time frames where if one is going up, the other one’s going down, the market is all but guaranteed to be very choppy intraday. But I’m typically executing off that one- or two-minute time frame. I don’t look for extended moves. I’m not looking to try to put on a trade and let it run for hours because statistically speaking, it’s not going to.

Q:

How do you enter trades? Single entry, single exit, or do you scale in, scale out?

Rob:

This may be controversial but what I have found is that adding to winners sounds great on paper but it can be an execution problem for many traders. They can’t handle it. The problem with scaling in is that you’re basically pyramiding into trades. The trades are going in your direction, you add 3 more contracts, it is still working, let me throw 10 more contracts on this thing because it’s continuing to work and this is really exciting. Then suddenly I’ve got my heaviest load in the market at a point where statistically it is most likely to have a reversal. What I find in real trading is that you’re trying to add and add into the winner, but every minute, every hour, every day, depending on the time frame you are trading, that bend in the end is coming closer and closer. I find that for people making money earlier in the trades, they tend to give quite a bit of it back. They find themselves getting in too big, too far into the trend, and then the markets reverse against them. For me, it doesn’t work out so well. So, scaling up my size closer to the end doesn’t logically work out from my personal perspective based on what I’ve seen in general in the active trader community. From an exit perspective, typically I exit the whole position at once or scale out part of the position and let the rest run depending on my confidence level, and how far away we are from meaningful price resistance.

I’m looking for very specific types of entries, such as the pullback and resumptions entries mentioned earlier. I’ve come to realize that not every minute of every day should be traded. I’m trying to focus on extremely high-probability trades. I’m not happy unless I feel like I’ve got a 90+% chance of this trade working out. I look for a confluence of circumstances that can dramatically increase my probability of success.

That kind of pattern doesn’t happen all day every day, week, or month in the same instrument because of the different time frames that play against each other. There can be a lot of disagreement on different time frames. For instance, the five minute is up, but your hourly is down, and your daily is up, so the risk of a reversal against you is very high, and that is not a 90% trade. Same thing for swing traders when looking at the daily, versus weekly, versus monthly. The higher the confluence, the higher the probability when taking resumption trades.

Q:

You’ve won 33 trading competitions. Can you tell me what those competitions are like?

Rob:

Some of these events – the international ones in particular – can be very intense. The first time I was invited to do the big international competition in Paris was back in 2012. I’d won some competitions domestically in the United States so I was invited to France. In the beginning, my starting ranking was considered 15 out of 16, because Americans usually don’t win these. Traders represent their countries, your flags are in front of you, the competition is very fierce, and everybody’s out to win.

Meanwhile, it’s a highly regulated environment. You’re trading real money, you have to show your trade in a live account, and they’ve got to verify the accounts. There are all these judges standing behind you and when you trade. They’ve got to come over to verify the trade, write it down on a board. Most of them were speaking in French, Italian, or broken English, so trying to communicate with them can be difficult. “No, no, I went short, not long” and “Yeah, that was in the S&P.” There’s that pressure where I’m trying to explain the trade and show it to them to verify on the screen, but I just want to get back to trading.

Then on top of all that, there’s often an audience of hundreds of people and they ask questions. What are you doing? What is your strategy? What are you trading? Why are you trading it? Everybody is speaking in different languages so most of the time I don’t really understand what everybody else is doing until they give the official rankings that so and so is number one right now and so and so was number two. It can be very confusing and disorientating so I just focus on the charts. It is a lot of pressure. Most of the time I am the only person from the United States so I try to do a good job, explain to the audience what I am doing, and try to make sure I can get to the next round when applicable.

I was actually publicly shamed and embarrassed a couple of times. In a few of the competitions they would say so and so is doing this, and he’s up this much money, so and so is in this trade and down this much money. Rob Hoffman’s flat. Then so and so is doing this and so and so is doing this … Rob Hoffman is still flat. You could hear the audience chuckle. Imagine the pressure, their robots are making trade after trade and I’m sitting there waiting and waiting. I’m trying to explain to the audience that I’m waiting for my signals to come, for the right setup. Then all of a sudden … “Hoffman is in first place” and then they didn’t laugh at me anymore.

Waiting for the right trade at the right time, for the right reasons, is everything. I’ve seen this in competitions year over year over year. I wait and wait. Everybody else is trading a lot, some of the algorithms were very impressive, making a little bit of money with every trade and their equity curve was just straight up.

I would take one trade, and all of a sudden, I’m up. Then I would take another trade and another, and I would win two to one. Other traders would constantly be in and out, but I would win by waiting for the right trade no matter what, and I think that’s the secret to my success. I didn’t care about who was making fun of me or the distractions happening around me. I was representing my country as an individual and trying my best to make the right trades.