Ask Me Anything
August 13, 2024

This is the Spectra School AMA / Q&A session from August 13, 2024.

In these live video sessions, students of our Spectra School course, Think Like a Market Professional, can ask Brent and Justin anything they’d like.

We discuss careers, markets, analysis, trading, course materials, and anything else the students want to talk about.

For a list of the questions we discussed in this session, as well as additional notes and links, see below the video.

(2:03) How do I overcome wanting to be flat when I have a position and wanting to have a position when I’m flat?

(5:46) Do you think the carry trade unwind could factor in the Fed decision as to the magnitude of the cut in September i.e. 50 vs 25bps as rate cuts would only make the situation worse?

(9:17) How do you best balance your time between trading/quoting, following the market action, conducting in-depth analysis, and writing? My goal is to become a profitable trader without having to rely on flow. I work approximately 60 hours a week but still find myself short on time and unable to finalize analysis while it’s still relevant, as most days are consumed by market making. P.S. I already follow your advice about planning the day before I start clicking the buy/sell buttons.

(12:25) How do you recommend making directional trades and measuring trading performance ex. the bid/offer P&L from market making? I really want reliable feedback on directional trades, so I’m hesitant to use incoming flow to take positions, as that gives me an unrealistic head start. On the other hand, crossing the spread just to get feedback don’t seem to make sense either.

(14:33) I would like to know where and how to more reliably find how much an event is priced in, i.e. the probability of realizing the outcome of an event or central bank meeting in the absence of sophisticated software such as Bloomberg Terminal. For example, U.S. MoM CPI forecast is 0.2% but how much confidence do the economists who made that prediction have? Another example is where I can find how much a hike/cut is priced in for the various central banks? At the moment I only know the reliable way to view the Fed probabilities through Fedwatch CME.

(19:26) I’m aspiring to be a retail forex trader and I have been dedicating myself full time for 2 years of which the first year mainly studying (books like alpha trader, the art of currency trading, thinking in bets, basic economics and learning everyday from am/fx) and the second with a more operational approach but I have the feeling that any trade I execute is already priced in and therefore destined to fail (maybe this is a too tough year for a rookie). I do not have any degree in economics, mathematics or anything else that can be directly related to trading. I don’t want to give up because I’m one of those who prefers to die in search of satisfaction rather than stay on the sofa but wanting to be rational makes me ask myself: what outside of the P&L and emotional self-evaluation (we all think we are rational or intelligent exc exc) can make you understand if you are at least in the right direction to achieve this goal or if you need to totally change your approach or perhaps job?

(22:53) Jump Crypto is said to have trouble and has to sell its crypto holdings recently. My question is how a market maker can lose money? What tools do market makers usually use?

(27:51) What is a carry trade? And do you trade them?

(29:49) How do you manage a losing streak? How many losing trade do you need to consider before you reduce the percentage of your risk?

(34:05) How many percentage of your normal risk are you going to reduce and when are you going to go back to your normal risk?

(35:02) There is plenty of data that comes out around 2am EST from the EU, UK, NO, etc.  that can be impactful. As a NY trader I’m already up early, but usually not that early (a guy’s gotta get some sleep!) Is it possible to trade out of the data (when it’s released) if you’re not following it at the time of release? Is the only option to wait and see if there is an opportunity for a pullback later on?
I’ve seen you frequently use The Deviation indicator for mean reversion on TradingView charts, is that a public indicator by chance? If it is, would you mind sharing which one you use, thank you.

(38:00) In your August 09 Speedrun, you said your bet was that oil would break $60 before it breaks $90.  How do you reconcile the political crisis and threat of war in the Middle East with the technical side of oil?

(39:16) If you’re using a 1 hour chart, how can you possibly use cycles/ regime changes to your advantage. Wouldn’t it take much more time for a cycle/ regime change to unwind than a take profit / stop target on a 1 hour timeframe?

(41:14) How to you measure your certainty (0-10) for a news type event vs a regime change bet? Do you have criterion by which you grade your certainty?

(44:02) Follow-up to the certainty question, if you have a technical edge of 65% win rate that has been back tested for 1:1, would you only trade that edge if you had a certainty higher than 70% on a news or regime change? Is this an expected value problem? Lastly, say you had a 70% certainty and 65% win rate, is this the time to bet more as percentage of your account?

(46:44) Is there a good correlation market for Uranium (I.e.- currency pairs or specific country)?

(48:07) Do the useful technical indicators change as you increase your trading time frame from hourly/daily to daily/weekly or do only the time frames for the indicators change?

(49:31) Recent market trends were well-timed for the material covered in Lesson 13 “Liquidity, Fat Tails, and Crashes”.  Lots of food for thought.  What do you consider to be some of the key takeaways from last week’s volatility when it comes to “Thinking Like a Market Professional”?

(55:10) I found your discussion with Ben Hunt regarding the degrees of narrativism to be particularly interesting. Your characterization of yourself as more of a “medium-form” narrativist (just before min 17) due to your experience in the FX market (which implies certain markets are more driven by narratives than others) made me wonder: What do you think is the strongest argument for and against strong-form narrativism in FX markets?

(58:19) Do you think there are general characteristics that make certain markets more or less prone to strong form narrativism and if so, what are they?