Spectra School Ask Me Anything Sessions

This is the first Spectra School AMA / Q&A session.

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.

Questions in this session:

(9:05) Short vs Long. Simple question that may be obvious to many. I’d like to get your advice on the definition of these terms. For example, what’s the difference between being “short JPY” and “long USD”. How would this apply in the case of stocks, bonds, or commodities (ie gold)?
(11:52) Trade Duration. What recommendations do you have on trade duration? As a matter of principle, how long do you allow yourself to trade a position?
(15:29) Can you describe your daily routine?
(21:01) Given that your trades ideas are mostly generated from fundamentals do you believe that a pure technician can be profitable in the market, especially on very short time frame?
(25:00) I have read your book ” The art of currency trading” and it seems that some of the things mentioned in the book no longer hold true ( like the association between CAD and oil or the safe heaven that was JPY or CHF) do you feel like the concepts in the book are still accurate nowadays?
(28:07) I am working as a dentist and try to work at least 2h/ day on trading. I wish to make the transition to full time trader sometime in the next 3 years. What advice would you give to someone in my situation?
(30:33) Is the most important thing, above all, to be rational? If so, how can this be done practically?
(35:00) You wrote in depth about different biases, which is great. The problem is that it seems impractical to run through all of the different biases (and those not even talked about) for each thought/idea that comes to mind. You (and Charlie Munger) suggested thinking about the inverse by looking for evidence and arguments against your hypothesis. Is this the best way to be rational without dissecting each thesis that comes to mind for every type of bias that can be applicable? The main thing I am trying to accomplish is to make sure my thinking is rational in real-time without having to analyze the thought for each potential type of bias.
(39:30) One thing that stood out to me was how you said, “Listen to policymakers, they are the game masters. Follow whatever they follow.” How can I learn more about monetary policy and the game that policymakers are actually playing? I actively research topics I am not familiar with and am always learning, but for some reason, I can’t find a way to DEEPLY understand how the monetary policy game works on the level I would like to. Any suggestions?
(42:45) I have a question on correlations: Do you always need to have a gap between the 2 assets, or do you think it works to just look at direction of travel? An example: Yield differentials of AU05Y/CA05Y are trending up, the 50ema is above the 200ema, & AUDCAD is following it up, however there is no gap they are trading in line with eachother. Would you take this as reason to be bullish the pair if you had a technical setup (if that’s your thing)?
(44:50) HI! I’m about 30% through Spectra School and very happy so far. The lessons explain the topics clearly and open your eyes to some topics that are probably difficult to learn without an experienced guide. My question is regard the video with Ben Hunt where around 11/10 minutes from the end we speak about the concept of derivative (first, second, third and forth derivative) . This caught my attention because I’m not sure I have the full or right idea of what they’re referring to and it seems something important, so I’m asking if it’s possible to clarify this. Thank you!
(50:12) I’m 14 years into my career in tech (FAANG engineering, lowly middle manager with no desire to climb the ladder). I’ve been trading futures (mostly micro ES, occasionally a full size 1-lot mini) for about a year and a half with slightly better than breakeven success (no more tilt tho!). My question is, would it be worthwhile or even possible to attempt a career change into trading at this point? Or should I stay the course at my day job until I can go out on my own? Are there any other options besides a bank or hedge fund given my resumes reads backoffice? Markets have played a large part of my life but always in the background. This last year and a half is the first time I’ve sat down and treated it like a business, analyzing past performance and making tweaks to my nascent system and this has been one of the most intense but fulfilling journeys I’ve been fortunate enough to stay the course on – and I’m not even consistently profitable yet haha.
(53:15) How do you know to decide between expressing a trade view by using options or simply using the underlying asset?
(54:08) What are your thoughts on using the 200-day MA as a primary trade filter? For example, only get long security if it’s trading above its 200-day. Or never sell a naked put if security is trading below its 200-day.
(56:40) Do you believe that the US debt situation is sustainable? If not, do you think there would be a tipping point such as Social Security funds running out?
(58:30) Given we have had an inverted yield curve for so long without a recession, has it ceased to be a reliable leading indicator for a downturn?
(59:30) How do we interpret what the market is pricing in terms of odds of a soft landing, recession or a stagflation (or other scenarios) from the yield curve?
(1:01:30) I can’t join the session live today, as I’m in the UAE and it’ll be midnight here, but I have a question I’d love to ask about something I noticed in the commitment of traders report. I’ve been reviewing historical futures positions and I’ve noticed that traders have been collectively short Aud since late 2021 (just varying more or less short, but always short overall). I wondered does this represent a longterm bearish view on Aud, or is caused by something else, an effect of commonly used hedging strategies maybe?
(1:03:50) May I know if you could share with us how to trade the FX forward curves / manage a forward book? I often hear people talk like 1×3, 6×9, 3×12 etc. but really have no idea how they play this curve whether on DF or NDF market. I found there are few books that talk about this topic. Do you have any recommendations?
(1:05:10) I’d like to ask about prepositioning for an event. Although I imagine it most likely depends on the event, where we are in the cycle, etc., How far in advance can one typically pre-position an event if you’re focusing on hourly and daily timeframes, is it or can/should it be hours? days? one to two weeks?

And two other questions which we didn’t get to in the video:

Can you recommend other newsletters to subscribe to – like yours am/FX? And are there any specific news sites you recommend for FX (Bloomberg / Financial Times etc.)?

Newsletters (all on Substack)

Macro Compass
Cubic Analytics
PauloMacro’s Substack
Thomas Pueyo from Uncharted Territories
Alyosha (metals and oil)

Not Substack

Tony Greer Morning Navigator

The best, least biased financial media is simply Bloomberg and Reuters.

Best advice for someone taking courses in college with the goal to become a professional trader? What are the best sectors/places to work to get higher comp?

Best track to become a professional trader is to try to get to an analyst program in a bank or hedge fund. The other tracks are doable (prop firm, retail trading, etc.) but are much more difficult and you are paying a higher tuition. At a bank you get to learn on their dime and surround yourself with other professionals.

Compensation comes and goes by sector but generally procyclical desks like credit and mortgages tend to get paid the best because they make money when the bank is doing well and the stock is up. Countercyclical desks like FX can sometimes be frustrating because the best years for the desk are the worst years for the bank.