My worst losses becomes from that conviction of yeah, this is a long it cannot be. You know that that fighting between the fundamentals and the and what the price is. Yeah, telling you like the price is telling you no bro. I'm going down like why why would you keep buying you eventually will be right on small caps Like eventually you will.

The market could be more rational that you can be solvent. Oh yeah, you know for sure you you could blow up before. You're right, So be right. But you might not survive.

So can we H into what you just mentioned about your draw down a little bit the past month? So you're saying you, you're experiencing a draw down because it's okay. Do you need some tissue? We're here today in Sunny Los Angeles with a Trader who famously turned $2,000 into 1 million Eduardo is a Spanish speaking educator in a trading space and he's one of the Traders I respect a lot for his commitment and transparency. In our conversation today. he discusses openly about his position, recycling strategy in trading, and as well as his recent 40% draw down in his P&l over the span of 3 weeks.

In today's podcast interview, you're going to learn how to make a living from Trading how to develop a risk controlled small cap trading strategy, how to deal with drawdowns and mature as a Trader and how to make trading A Min career. Make sure to smash the like button and get ready for a very heartfelt and insightful podcast. We're here today in Los Angeles with a Trader who famously turned $2,000 into over a million dollars in profits. Thank you for being so open with us today! Ardo with our audience Um, how would you describe your trading and what kind of Trader are you I would say first I I'm I'm really into a niche so I only trade small caps? That's like my thing.

and then what would characterize my trading would be the recycling of shares. I remember that I that I sent you once? Uh, a trade of mine. you were like oh my God I'm having one of those people with one chart. It would be like a million arrows there.

Yeah, totally totally. but that that's like the way I do it if you see me trading live it will make sense. like it will make so much sense once you. once you see the picture it's like crazy.

But when I see when you see it like I'm just recycling shares and I I have like a core idea and I uh take advantage of the noise on that idea. you will get it better. Yeah, that's it's. more like position sizing and and risk management more than taking profits right away.

You know, scalpy kind of scalpy kind of way. Yeah, we're going to dive into that a little bit later later, especially about recycling shares, position sizing, and risk management. Um, so are you predominantly long biased or short biased? I'm price action driven. so I'm like 5050? Yeah, okay and strictly on small caps.

Strictly on small caps. Yeah, every time I try to to trade like meat Caps or something like that I screw up. So yeah, and how long have you been trading now? I've been trading like for eight or nine years. Okay, so it's been a while.

How did you get into trading in the first place? like did you have a real job before getting into trading? Yeah, of course. um I Remember remember I was I was in the corporate world I think when I when I started digging in into trading but then uh, as I was getting into trading I tried to get jobs where I can be more flexible with my schedule. Yeah so I I got like an insurance broker kind of deal. Oh and I did that for a while.

Okay while while I was trading so you were trading part-time while you working a full job like I I didn't make any money with trading the first pro only 3 years or so. Oh okay, so it was your job at the time as a broker. that kind of got you through. was my job Yeah I left the corporate job I was doing some engineering things and then I went to this insurance broker thing just because of the schedule, just because of the flexibility that it gave me.

and I could trade while I was you know, working that was back in Venezuela So oh okay so you were trading stocks when you were back in Venezuela yeah yeah I started when I was in Venezuela I was started uh especially learning about all these things I remember I made a a trading and investment course where I saw like Forex Futures blah blah blah I all those things and I like volatility and liquidity really got my attention and I was like okay if I want to make cuz I was I was doing the NBA thinking that it will give me an idea to get into trading and to get to you know manage my money and stuff it give you an edge because you know Finance yeah you know such such a great idea of M but then uh I remember that it was not dead and I and I did this course and I saw that if I want to be a DAT Trader I have to get uh instruments that would be volatile and liquid. yeah so I started digging in and I saw small Caps or panty stocks back then okay were like the thing of volatility and liquidity for a small account and I saw obviously when you back then when you put that Tim SES was all over the place and that's what how I learning about small caps and all these things. Okay I feel like Tim Sykes is like the granddaddy of everyone who trades small caps totally. he's like everyone that that Trad Small caps.

does it because because of his framework I Don't know if you have seen his framework but the bubble. you know the bubble framework. that is the the the crazy sector Hypes that's that thing is what gave me like okay, this thing has an edge so that's why I focus on on small caps that deep? Yeah, No. I Think it makes sense because small caps is probably there's different.

like large caps mid CS Small Caps Probably the most inefficient Market Where there's a lot of scams, right? You need that to be able to make money as a Trader Totally. And you know what? I think due to the large or bigger fish. Uh, you don't get that in small caps like the huge hedge funds they don't They don't care about small caps CU because of the liquidity. but it's a good liquidity for us that maybe if you have like less than $50,000 it's perfect for you the liquidity that it provides.

Yeah, so maybe a headphone that H has to move. Uh, $50 billion? They don't care about small caps. so I think that's an edge in a way if you understand what they're doing. Yeah, so you said earlier that you started trading when you were still in Venezuela So at which point did you? why did you decide to immigrate to the US And do you think that there as a Trader there's more you know you technically can trade anywhere.

right? You don't need to be in the US but what? what? What made you decide to move here? Yeah well if you guys see a little bit of Venezuela it got into a really really tough political and economical situation so it was kind of crazy back then. like we got like riots and all those things like it was really unstable I got like kidnap there and you know it was so unstable and I was like you know what, it's not worth it but I remember that uh when I was traded back then I had to had like sources of power cuz power went went off um home it was. it was crazy. So I think as long as you have stable internet you could trade anywhere.

Yeah def. but if you don't like you got to be careful. especially if you're trading small caps. CU If you got one of those volatility things, it's not good.

Oh I see So what? what got me into getting out of there was that crazy political and and economical situation. So at that time, how did you get the capital to fund your trading account? cuz I know you struggled a little bit just like most people would in the early stages of trading. Yeah! I Remember that I I My first account was was like a $2,000 account or something like that. Yeah, uh I didn't trade with that much money and I blew that account.

Obviously the first one we uh but um we had like savings back then and and I I think like I had a job and cost of living in Venezuela was not that great so we managed to you know, uh, save some money and and open the account and and obviously get the courses and all those things were were your friends and family supportive of your in like you know, diving into trading? you know, like well like my wife was pretty supportive like all the way but like my close family, like my father and like what are you crazy what trading what the freak are you doing like you're an engineer like why would you do that I see you know but I I always been like this entrepreneurial kind of mindset where yeah I I I probably did uh, one or two years of corporate jobs but then I started doing this insurance broker thing I did even um I open up a mini golf I had a restaurant I had an event company I I broke all of them I got bankrupt on all of them. um but but I tried I tried I tried I tried I tried I tried until I you know saw this and I think this is the best opportunity ever. that's why I promote this thing this much because I know the value of it and I know that yeah it's you have to be an outlier in order to you know to to be successful at it as an entrepreneur is. So how many years did it take for you to eventually become profitable and was that after you moved to the states? Yeah it was after I moved to the states cuz I had in in my mind I was like okay, um I can make this amount of money and I could move to the states and I could live.

You know if I can make this amount of money in a daily basis I could you know survive? Yeah and obviously I you know blew a couple of counts more trying to do that? Yeah because of the I Think if you if you treat trading as a survival mechanism or as a survival income it's going to be so hard for you. It's very rather if you treat if you treat it as a growing mechanism like if you supplement your income. and if you if you get this skill as not to pay the bills but to grow your maybe get your standards higher or something like that it's going to be so much easier for you. But if you get that pressure of trying to pay rent you're not risking you know to ,000 you're risking your whole rent.

M You know that kind of feeling will Cloud you from from the decisions that you need to take and that's why I think it's so important to detach from money? Yeah I I I Agree with you and often kind of describe it as two phases. There's a going to school phase which all the Traders like I did it. you did it. We have to go through.

When you're going to school you're not worried about. you know, making a career out of it. you're just trying to learn the best you can and find out what your Edge is, what strategies work for you. And once you can start making like $10 $50 consistently, then that's the actually okay.

I'm making money consistently I can use it to pay bills. That's like the second phase. I Think a lot of people try to do both at the same time and that's why they sadly ultimately fail totally. And you know what that? that's why you have to start with with small kind of money.

cuz if you start because we try to, um, the time that we invest in trading, we try to make it worth by getting paid. Yeah, and you. That's why you bet so much at first. But then if you realize that first two or three years, maybe it's going to be like a school for you.

It's going to be like developing the skill. You're going to see it in another way. and you're going to be betting $1 I don't care? You know? yeah. But the commissions? Yeah.

But you don't care if you if you lose $1,000 your first year, that's a huge win. Like a huge win and people are like no. but I have to get paid this amount of time that I invested in this thing and they don't realize that this career can probably last 20 or 30 years. Yeah, yeah.

I Think that that comes with the you need the right expectations as well. I Think a lot of people unfortunately dive into trading thinking they are going to make it work in 6 months and they are not giving themselves enough Chance by doing so totally managing the expectation I Think that's key and if you see it this way, if you see it like okay, I'm I'm making a career as a doctor or something like that, you'll be going to school like eight years. Yeah, you know. and this thing, you're giving it what 6 months like that's you won't give being a doctor 6 months and that's it.

You'll give it more time. Why you should give trading, which is probably one of the hardest you know. Professions there is not because of the markets are difficult. Because of that.

That's a war between you versus you. So it's it's It's a matter of developing the skill more than making money out of it. So when you started making money small amounts consistently, what do you think was the process for you were there. You know a couple things.

One or two things that you really focused on and honed in during that process to make you realize maybe it's not one click, but you finally realize okay if I repeat the same process I can make money consistently What was the process I think it's a matter of uh of habits more than it was like a click for me, it was a matter of going to the same process over and over again and I realized that I could make money every single week if I stick to that process. So I had to become really? that's why I think I have such a unique uh trading style. It's just because I couldn't afford to lose money back then and with trading not to lose money, that's crazy. But I I managed to get this uh, trading style based on on risk management that it was really really good on protecting my my gains in a in a way.

So yeah, totally it was a it was a matter of process. It was a matter of okay uh, down the computer making a watch list making this criteria for each stock and you know what? Obviously being in the right moment like the market of 2020 was a blast for me and it was. It was crazy because it was and many people were like devastated because of that. and I was so blessed because that market was so perfect for the way I trade it that I capitalize myself thank to that market and I think that's key.

Sometimes we have a process like a perfect process, but if we're not in the in the correct environment, if we're not in the correct Market in order to apply that process and and push it, we're not going to be able to make money. So it's a matter of keeping the process. So when the market environment sets in, you get to push it. Yeah, that makes sense I know a little bit about your Trading style.

Basically what you really need is a lot of volume and volatility, right for you to be able to recycle your shares in and out. Yes, that's perfect segue into okay. tell our audience about how you recycle shares and how does that help you in terms of your risk management? Okay for example. First, we got to dig into the bias.

Okay, like that's the first thing and that's the that's the most important thing and that's what I teach when I when I teach about trading I don't teach about my style. That would be stupid cuz if someone tries to replicate me, they're going to lose money. But it's not the technique but the strategy. So first you got to know what the bias is and that's made uh with criterias that I use in order to understand what a stock is about to do what a stock is going to do.

For example, if you have gappers of 100% I I focus a lot of on first days because they have the most volume. Yeah! so if I know what a stock is going to do the first day like in a group of stocks. For example, if you treat Biotex and you uh, understand that biotechs that run 100% they tend to go down from the open to the close 15% or something like that. So my statistical approach would be my strategy would be my bias.

So if the stock has dilution, if the stock has a doesn't have any Catalyst or the catalyst is just uh, a really good uh news about their product or something like that. it's not an FDA approval, it's not, It's just a good news about their product. Stuff like that uh gives me this bias that I will take. Okay is it's going to be a short or it's going to be a long, then if it's going to be a short, what I do is okay.

If I'm wrong in this thesis, what would be the level on the chart that will tell me that I'm wrong. So that will be my risk level. and when I have my rist level, what I try to do with all those arrows and all those things is position myself the closest to that risk level. so my average uh position would be close to that and my size position would be suitable.

So if that risk level is hit I lose the amount of money that I want. Okay, so let's say for example you're long biased on a stock and your risk level is is $5 MH and let's say your risk is let's just say $1,000 MH So that means if you're long right above that $5 that's your risk. If you're long have let's say average of 510 you'll be 2,000 shares 2,000 shares and you'll trade around that until it either cracks $5 and you take a loss or it goes to PL area That this is what happens like this is when you see a lot of in my chart this is what happens it Trends up starts trending up and it goes in my favor. So what I do is I start like trailing that $5 risk because if you keep that that risk as $5 and the stock goes like seven and it goes all the way to five.

That's not a anymore. Yeah so you you want to be uh on the trend you you want to be that that uh you know that. perfect up Trend when higher higher lows and the bwap also remember that as I trade momentum stocks Bwap is really re relevant because it as it probably is the the most volume in in its history of the stock and it probably is the the the highest volatility on on its you know in the history the VW becomes really really relevant. So I try to um keep that uh trailing stop with the Vwap if it goes in my favor.

And if it's along for example. and what happens if the stock starts consolidating because I can see that working really well if it just keeps on. you know, especially if it's a low float stock like goes from $5 a 10 I can see like that works really? that would be that picture perfect. What happens if a stock just start consolidating around $5 How would you you know manage that r lower the size.

think thing with the triangles is they don't reveal any of my technique because if if you could put the size of the triangle as my size as my position, sizing that will be you know, revealing my Edge but as the triangles are the same, you wouldn't understand how I treat them when it consolidates I just lower my size cuz I just lost the edge. Yeah I I I want to be in the trend I want to be in those Trends So if I'm long highas and the trends goes up yeah it's perfect for me. but if it if it starts consolidating I don't want to be in the in the in the trade with too much size. Maybe I could hold a little bit just because the consolidation might indicate.

uh, you know, another leg up for example. And and if it breaks I'm so close to my risk that I wouldn't mind. So what I try to do in consolidations is lower a little bit my size. They usually do it on midday.

so I I don't like to trade a lot of size on midday. I usually do, um, trade in on middays specific opportunities and if they don't appear like I don't trade on midday. but I usually go a lot of time. you know, trading in in the whole day.

So just to clarify the arrows, you're talking. The triangles you're talking about are the execution arrows right? the shorts, the Ls the okay yes, the sells and the buys I See yeah I think a lot of people will m AK how much arrows you have a scalping but you're saying that that's one entire position in In, Out, in out cuz sculping would be if I get in at 510 and get out at 513. H that's not what I do Yeah, What? what I try to do is I try to build my position around the core, the trading around the core, the the that that's pretty famous you know phrase the trading are all the core thing what gives you is okay. you have this risk level and all you have to do is position yourself near that risk level so that your bias will tell you your ride by.

you know, pushing the stock up. Okay, that's pretty much what I think Yeah, I Think that that makes a lot of sense on an execution standpoint. Do you have less of a headache when I explain you that? No. I If I see a chart right now on screen I'm going to be like oh, this is like a thousand different arrows on one chart I Understand I Understand, Yeah, but but I think now that you explained, it, makes a lot more sense that that's why recycling makes you see it if you see it in life like I I Trade with my team.

Yeah, and if you see it live and you understand that, it's position sizing and risk management. What you're doing by getting in and out, in and out, in and out and getting this core position like, what? What you said? 2,000 shares. What you're uh, trying to to leave is 1,500 shares. and with those 500 is the recycling the recycling would be with with a little portion of your size.

I See, that's pretty much it. Oh okay. I'm revealing all my edge here so there's nobody. like too many people watching, right? No, no, maybe like 10 people if we're lucky.

Thank God Yeah, yeah, Edwardo Just shared a lot with us about his struggles, both as a traitor and as an immigrant. Does this story remind you of the past? Or does it inspire to keep pushing forward in this very unique path? Let me know your thoughts in the comment section below. So go. let's take a step back and talk about how you get to your bias Cuz you you mentioned that before you take a trade, you'll do the research on the stock and achieve the bias of whether you want to be long biased or short bias given the price action.

and you know fundamentals. So what's your research process like before you take a trade on stock? I I Do it like this. Like what's a perfect long and what's a perfect short? If a perfect long has these characteristics that I'm going to tell you. um, and this stock fits in this perfect long, that will be my bias.

But as you know, obviously you're going to have red flags all over you're going to have. Okay, there there's it's really, really hard to get all the stars aligned. So for example, a perfect long. that would be no dilution.

Uh, not of extension of extension would be I Don't like a stock that is a th% up? Well, okay on Tpst, you never know, right? Went to 4,000% especially when it's came from with penny stock like an actual Penny St No, that's crazy. We're seeing a lot of crazy things. but like on a on a regular basis. you don't want to see something that is 100% up.

You want to see something like 50% You want to see extension though, because you want those short sellers to be attacking. Yeah, you know, so you have to have that extension, but it doesn't have to be like 100% then uh I I Rather not to have dilution. CU If you have like an ATM or you have like warrant obviously they're going to be converting um those warrant into stock or they're going to be diluting a lot of shares so that's not good for for a along um lately you you got these people like pumping stocks that were like really dilutive kind of stocks so they got those crazy uh short squeezes but regular. you don't want to see a dilution on a stock.

uh so you got to have volume rotating the float. So if you have like a 10 million uh 10 million float on a stock you want to see 20 million uh volume? something like that is this by the open or you want to see all these things pre-market or like on pre-market I I tend to multiply by seven the the volume in premarket I tend to multiply it by seven. so I can know like a a range of what the volume would be on the day. obviously it's not accurate I've turn I've heard times four or times seven either or yeah I do it times seven so you you probably have that and if I see that it could rotate the float a lot that'll be ideal.

Uh then the other thing you got to have a catalyst. If if you don't have a catalyst that's and you have to have a strong Catalyst something like uh a contract something like you know that brings re to the company. that's that's ideal and you don't have to have like. It's really important that you don't have overhead resistance like if you have overhead resistance with volume like you just look left at the chart.

and if that thing if if the price is below the level that has volume, you don't want that in a perfect long. So those criteria I think I probably miss one, one or two. but th those are the the criteria that I see in a perfect long and in a short will be the opposite. It's it's easy.

like it's just what I do is when I try to teach these things. Uh, there's a future uh feature in uh Thinker Swim where you just put a minus symbol be uh before the ticker yeah and it gets the chart. Okay, that's pretty much it. like it's the same that.

that's why I'm telling you that I I I'm really like a price driven Trader yeah and that's why I I probably go 6040 or 50/50 on the on the long and shorts because you have so many good opportunities on whenever uh, a a really really good short sets in and it doesn't go your way. That's probably opening an opportunity for a long. Yeah, because you get so many short sellers like dilution. It's so important to have dilution when you're a short seller and if the price keeps keeps going, that means that probably either the dilution is already done because the the volume overwhelmed all the the supply that it it created with with the new shares or they just don't want to sell still or they're holding it till the next day.

Of course they're holding it more people of course. so you never know where where these things are coming. But when you have so many short Sellers and one side of the trade and that's what what we're seeing a lot Lately the liquidity is so important. like we don't have the same liquidity that we used to in 2020 2021.

So if you have tons of people in the same side of the trade the thing could go 4,000% of we'll see right? especially now that short selling has gotten so popular and easy to do with the with the new Brokers You know back then it was so hard to get borrows and stuff. Now you get all these Brokers you know providing all these uh amazing deals to get locates that anybody could get locates. and there are so many people in the same side of the trade that if you understand, uh, the other side of the trade you can have it as an edge. And if you see a perfect short that becomes a long probably at 11 or 10:30 in the morning, that will be such a good long too.

So that's why I try to be flexible on my on my bias and I'm really really aare of the price action So that's why I'm telling you, if this risk level is broken, there's no way that I oh yeah, this is a perfect short there. There's no way that I'll be in that trade. that makes sense. So let me just sum up you.

you just shared a lot of like golden uh Snippets about your strategy. Let me just kind of sum it up a little bit. So how you pick stocks is basically you want to see for a perfect long. You want to see a stock with no dilution on the SEC violins.

You want to see a hyper percentage Gap but not too high. so maybe like 50% right? You want to see, you know, volume forecasting to be above the average daily volume usually times seven right from premarket. No, that'll be no the flow rotation because you can have a stock that probably on an average is like trading 50,000 shares or less. Yeah, and if you get 1 million shares and the float is 10 million I'm not interested even seven times the float.

Yeah, the float. the though the the volume in pre-market mhm cuz I see gappers a lot. So if you see uh, a stock that has 10 million or 5 million float. for example, if you see 5 million float and if you see uh, the volume in premarket is five 5 million, you will see that that stock will have a FL a flow rotation like a really high flow rotation and that's what I like to see.

okay and you don't want to see too too much overhead resistance on the daily if you were long. Okay, that makes sense and basically you don't want the stock to break down that key um level yeah I have a lot of like I I have a couple of strategies like a really really detailed strategies in my playbook. so I can know uh for example a stock that is r in the day and Below bwap has to have really really really good conviction in order for me to trade it in a long in the long side it has to have crazy Catalyst you have to have like really really strong um things that are not price and it has to have you know holding a key level. yeah if it's downtrending, one of the my my worst um losses becomes from that conviction of yeah this is a long it cannot be You know that that fighting between the fundamentals and the and what the price is yeah telling you like the price is telling you no bro I'm going down like why why would you keep buying and I still like no you got to go up you got to go up That's where my my worst losses uh come from.

So I try to be really aware of what the price is telling me and that's why my risk has to be a a key level on the on the on the chart. Yeah I can kind of see what you mean by that I think a lot of Traders especially the short sellers. They get so much conviction from the SEC Fings research. sometimes they they ended up bag holding.

you know a little bit too much just because they have so much conviction. and that's the thing about small caps. like 90% of the small caps like Revenue they don't make any Revenue if you see the the financials it's crazy. They're crappy companies and that's why you get so much conviction on the short side.

and that's why you get so many um percentage of of uh accuracy on the short side cuz 80% of them. if you if you check the tool that I'm using right now in order to check the the gappers and all those things you will see that probably 85% of the uh gappers more than 100% they all close red eventually. yeah that the first day but a lot of them they can Spike from like let's say a dollar to 10 before coming back down. that's a 20% Yeah that.

so the 80% of them of all the gappers of 100% blah blah blah I could check the the the specific statistics. maybe it's 79, maybe it's 81. but overall if you see a small cap that gaps 80% uh 100% 80% of those close right on the day. if they're not right on the day.

don't short them. It's that easy. But sometimes you get so much conviction that it will go down that you keep finding the stock, fighting the stock find and you end up like the broker will eventually Buy in your shares cuz you're not. you know providing the margin that it requires and that's why they and and as liquidity is low, they go up so much.

Yeah basically what you're saying is 80% of the time shorting small caps is like you know, definitely going to be a profitable strategy, but it's what you do with the 20% that blow up a lot of shorts of course cuz the thing about short selling is it's so risky. so so risky because if you if you're not aware of it and if you like be a a deer on the on the lights you know like heads yeah yeah yeah you could freeze I I've felt that I don't know if you have felt that. that's me with uh that ticker. uh we will have that ticker SPI was mine.

oh mine was uh BPTH BP oh my God yeah I saw that well SPI was really similar. uh dates. it's like 2021 I think I think SPI is recurring though I think BPTH was 2019 SPI was 2021 and it went from one to 60. yeah and and I shorted in the 35.

Oh it was such an amazing entry, but it went all the way to 61st and I was like oh no, it was like that. that feeling once you experience that feeling, that's why I think it's really important for you to if you want to be a a long bias or a short biased. Trader you got to understand the other side of the Mhm. and if you understand what shorts are feeling once they're getting squeezed you, you will know that is a good like there's an opportunity and there's a win opportunity.

There's a really, really good La in that kind of situation. So that's why it's really, really important to understand what the other side of the trade's feeling and what is thinking? In a way, Have you been in situations where just like you said, you were short, you were heavily short and you were stuck trying to get out and you realize hey, this is like a perfect loan? Now you switch Well I think one of the things that I have like my thing I I know how to flip bias like really really well because I'm really flexible guy like my personality like I'm really really flexible I'm not like determined like yeah, this has to be it. no this is my position and no I'm like good Yeah I could be wrong and I I know I could be wrong. So I don't mind to be wrong.

There's sometimes obviously that you're so convinced like so conin. That's why I think fundamentals are really tricky when you're trading momentum CU It matters, but it doesn't really matter. It matters a lot. You have to know that this stock has illusion.

You have to know that this thing has you know, warrants or whatever, a lock up period or whatever. But if you're trading the momentum Madness could set in. Yeah and you especially if you see all the uh liquidation place in Chinese IPOs like recent IPOs and where you see like what we saw on MTC a couple of days ago I think it was on Thursday or or Friday uh and you see that crazy momentum going. and if you if you you eventually will be right on the small caps like eventually you will but you can.

How's that phrase? Uh, you can be uh, the market could be more rational that you can be solvent. Oh yeah, you know for sure. Yeah, you, you could blow up before you're right, you eventually be right. but you might not survive.

Of course, you might not survive that crazy runup at first. So that's why it's so important to yeah. you got to understand filings. You got to understand every single detail on the fundamental because you got to know what you're trading.

You got to do due diligence, but my weight would be more on the price when I'm trading momentum when I'm trading some stock that is overextended in a few days and volume is decreasing. and all those things like fundamentals kick a little bit more. Yeah, but I think price action is Keen when you're trading momentum. Yeah, you don't want to be fundamentally right, but technically wrong.

Oh my. God You don't? You don't? Definitely. So we talked about earlier that you only trade small caps. So what do you think about the small cap environment this year? Is it more competitive? Is it more difficult to make money? I Think it's difficult to adapt lately.

Uh, cuz it's so I liquid. That for example, 2020 and 2021 was the perfect Market Yeah, and everybody made money in the 2021. but 2022, it went like really, really steady and less volatility. But liquidity was not a thing right now.

you're getting a lot of volatility. Like a lot of volatility more. I think more than 2022, but you're getting less liquidity and you get this like it's not like Momentum sectors, for example. And and what you got from oil and Gas on March of 2022, for example, what you got from AI on January on 2023, you're not getting that.

you're You're getting these crazy moves that that they don't have enough liquidity and you get so much volatility that is so dangerous to trade them that you got to adapt really, really quick. So the what I feel is the the most difficult thing to trade small caps right now is that you get this crazy change of environment in two or three days that you think is going to change and it doesn't change like I think that's probably the the hardest thing that that got me. but as I am really flexible like I manage to keep uh, a really consistent uh, profitability trading small caps like I I I really understand them like I Really? I'm really on sync with them. So I don't think it's hard.

So how would you adapt? Do you just size down more and scale in and out more? Okay A Lot Like that's my thing. Like if I if I see that I'm My Equity curve My Equity curve is what dictates my size and my conviction on the market. whether I'm in syn of the market or not. If I'm in a huge draw down, it means that I'm not understanding the market and I should, uh, size down.

so I can understand the market first and then push it up whenever I in sync again. So this year I haven't had a lot of draw downs, but this past month I had huge draw Downs But that was because I'm I'm trying to escalate my strategy and I'm trying to push my size a little bit more. Okay, and psychologically, that was so hard. Like that was so so hard.

So I think my draws comes more from what I did than from the market is doing. okay. So I think if you are in a market that you don't understand quite well, you got to size down or you get don't even trade it at all. but you got to be in sync with the market first.

And the difficulty this year would be that you see three or four days and you think the market is changing and then it drops again. Okay so I think it's that like adaptability. this in in this market environment is a lot harder than you you got in 2021 or even 2022. So can we H into what you just mentioned about your draw down a a little bit the past month.

So you're saying you you're experiencing a draw down because it's okay. Do you need some tissue? It's okay, you got this. I Didn't mean to make you cry, but for these draw Downs Are you saying that you are experiencing the draw down because you're trying to push size in a liquid Market environment I Think what size does to you is the unrealized profit that you see. Yeah, it's harder to to manage in a way.

So I get clouded for my decisions when I see such a volatility in my in my unrealized so I think it's a matter of Tolerance I think it's a matter of risk tolerance that I'm pushing it but that's so good. like that made me such a better Trader just because I'm able ble to handle the swings of P&l more like when I size down I had the the huge draw down and I size down Now that I size down it's so easy for me. Like so easy. Like psychologically a loss of three grand was really like maybe I got a little bit Shake uh shaken uh, probably 5 months ago or something.

Now a loss of 3,000 it's like not already lost like 20K already being losing like 10K 15K and it does something to you I think it gets you like more I don't know harder in a way and and you get more darker in a way I don't know how to say it okay but that risk tolerance uh allows you to as as you go. Sizing down allows you to see the chart better when you size down to your former large size. I See, you know. So that's say when you take the losses you were trading, let's just say 5,000 shares, you size down to a thousand and you find that you're trading better and you are more like you said, detached from the money 100% And it's not.

maybe it's not detached because that's hard like I try to be detached for money all the time I try to to trade points all the time I I don't I don't like to trade my rent I don't like to trade you know my my my kids education I don't like to trade that but there's sometimes that you do like. It's really really hard to be completely detached from money I even H have this $20 bill in front of my in front of my desktop just because I got so detached from money that I had to, you know, bring myself down to Earth So I can understand that I'm trading money. Okay, but this is not about detaching from money I Think it's about risk tolerance. It's about what you can handle.

So if you could handle $3,000 loss for example, and you go big on on on setups like $3,000 I I don't care to lose $3,000 now that you lose 15 your risk tolerance that you had when when you lost 3K it's nothing like you. You don't get that you know insecurity or you don't get that uh, you know cloudiness in your in your decisions when your risk tolerance is way bigger. So that's why I Think sizing down is so important when you want to understand what you're doing. Yeah, that.

but it's really important for you to push it too. because if you don't push, if you don't get uncomfortable, that former size wouldn't be former. ever like you, you'll be so comfortable of the same size that you not be pushing yourself to. You know to.

One of the things that that I love about trading is that you're not capped like you're not. Yeah, if you make this amount of money like you're you're not be able to. You know it's not like a salary where you have a cap. That's right.

Yeah, I get what you're saying. That's right. So if you push yourself, you could aspire to to get more money. And not only money because it's not a matter of money already.

it's a matter of being better. It's a matter of growth. It's a matter of and that's what keeps you trading better and better. Because if you trade the same way way that you traded a year ago, you know that you will lose a lot of money.

So you got to be better in order to be the same in. MoneyWise You know. So you got to push yourself in order to become better in that risk tolerance kind of. Um, part of your trading.

I Know just earlier you mentioned the importance of downsizing when you are going through a draw down just to kind of recollect yourself, gain, regain your confidence. And kind of like you said, like when you were losing 10,000 you size down. Now you're risking 3,000 You can actually trade better right? So I think a lot of newer Traders They tend to do the opposite where they're in a draw down. Let's say they they are losing $1,000 they sizing even more so they can make that, back so they can recover it and you know why.

You know what? See it this other way, when you're winning money, you got to push it more. Yeah, people don't. people size down when they're winning money cuz they're they're There's so much fear to lose the money that you're gaining, and it's so much urgency to gain back the money that you're lost that you got to backwards when you're earning money. That means that you're in sync with the market.

So that's why I'm telling you that my Equity Curve will dictate my size if my Equity curve is up on a month. Yeah, I Go. Okay, that makes sense. Yeah, that means you're trading well as well.

Course, and you're in Syn with Mar the market. Yeah, if you push it, you get uncomfortable. That's where you know things start happening because you're pushing it and psychologically, you're not making the best decision. You might get a draw down.

What does your P&l tells you? Size down. That's why it's really important that people understand that if you're in Sy with the market, go for it. Yeah, maybe not risk all of what you gain, but you had you got to risk more so you can uh, take it advantage of your your your synchronization with the market. If you're losing money, stop losing money.

You know, stop risking so much. Stop the bleeding. Thank you for sharing so much insights with how you kind of manage your risk and dial up or down with your position sizing. So if you don't mind sharing from your perspective and the way you trade, what's kind of like your typical risk word ratio when you are trading and recycling your shares and it's is that important to you I suck at it actually.

Um, there. There's a thing that I think personality is really, really important when you're trading okay and I am kind of a guy that likes to be right because my confidence goes up and that way I can um perform better? so I'm I'm a really uh, an accuracy kind of Trader So my, if you see my statistics, I I'm right like 77% of the times. Okay, but my risk reward sucks. Like my RIS reward, you're aiming for higher win rate, higher higher win rate.

Yeah, uh. but when I'm teaching and when I'm being a coach I always try people to aim for that two to one. CU if you don't get the the risk reward on your side uh, it's it's really really hard for you to to take advantage of the real opportunities. Like you'll see a lot of opportunities, especially in small caps and especially in the long side.

Like there, there are so many OPP opportunities that it's not a matter of risk reward even. it's a matter of you know, understanding what the stock is doing so you can squeeze everything like maximize. Yeah, every single unit of risk that you're putting in you got to maximize it. So as I trade every day and like I literally trade every day since like my probably Last 5 Years I would probably have lost maybe like 20 days on my trading like I trade every day so I probably don't SE like that's what I'm working on the most I probably don't seize opportunity as as I would and that's why my risk reward is so lame.

Like it's really really bad, especially in in the weeks that I'm really really for the LA this October has been like really really bad for me. uh I I still like managed to break even on the on the month I don't know how but if you see my risk reward it's like one to three or something like that. Like it's really bad. so three to one like I risk three units to gain one.

So bad. but I I I compensate that with with the high win rate with the high winning rate. but that means that I get so stubborn on some trades. Yeah, lose probably 10.

uh 20 grand on a stock I see but I gain probably seven gotcha you so that that's something that I'm working on and that's something that size did to me. like the size when I push the size. it was so hard to be flexible. the flexibility that we were talking about it was so hard it was harder and that's why I think I got into all those losses.

What? What's your biggest loss ever if you don't mind sharing? Um, I don't remember quite well. but if I have to say I probably have like four of the probably the same amount, but the one that sh shocked me the most was spbi like shorting SPI was shorting. uh that parabolic move like it was huge parabolic move back in 2021 and I remember I was probably at the 35 or so. I did have a great entry and it went all the way to the 60s and it was no and I keep adding and adding and adding.

it was so bad it's one of those uh, like what you said earlier, dear in the headlights events 100% It was so so hard to and and that I'm so grateful for that loss because it led me to ever, ever, ever short something like that again. And more than that, take advantage from them and flip. Yeah, yeah, yeah. instead of adding, keep adding shorts.

You should just cut your loss and go long. Of course of course it's easier said than done for sure. But I think it's it's good that you are Now you're like kind of neutral. you're not too short biased.

you're not too long biased. I Think if you haven't ever felt that before, you couldn't talk about it. Yeah head moment people people think that it's so easy to say hey, cut it and if you see the other people doing it, you see them like digging their grave. You go like stop right? And but when you are in in that screen and you see that thing going against you and it's just it's just a matter of as you know that there will be a pullback, you're like I'll just wait for the next pullback.

Yeah and it keeps halting up, halting up, holding up. It's so it's so powerful that I don't even know how to describe it, but if you feel that you can understand whenever you see something like that again, you will know what what the other side of the trade is is thinking and feeling. Thank you so much for sharing the recent draw down you're experiencing. Um, when you're going through this going through kind of losses day after day, how how do you deal with with these losses CU they slowly add up.

yeah I Think it's really important that the first thing you have to do is see it as it is and not worse than it is cuz sometimes we get like okay I lost this kind of money I'm the worst Traer in the world uh I don't like. you get to question yourself a lot and that's not it that you just made a mistake. you just lost money and you could fix it. and when whenever you approach that loss in that way, it's so much easier to deal with it, then if rather, you go like yeah, I'm the Worst RA in the world how can I do that or am I good for this? Am I Am I sufficient enough for this.

You want to quit Kind of. Yeah, Totally. So it's not that you, you made a mistake, you. you have to deal with it and see it as it is not worse than it is.

That's the first thing. And for that, you might take a walk or something like that to chill and to cool off all those crazy thoughts that you get. Then I think it's really important to reflect technically what you did wrong so you can set your rules. CU Sometimes we bypass our rules just because we get away with it.

Sometimes Yeah and rules are there just to avoid case like that. So it's really important that you reflect technically what you did wrong. so this never happens again. And then it's really, really important that you focus on gaining your confidence back rather than money.

And that's why sizing down is so important that if you can get that good trade on the on the next day, it's more much more important than getting all the money back. Cuz if you get all the money back and you're you're not reflecting what you're doing, you're going to experience yeah, you didn't learn anything. You didn't learn anything. So that's why it's really important for you to reflect size down and look for that confidence back rather than money Is that kind of the process you've been doing the last couple weeks.

And how's how's that going right now? Uh, it's doing well. Okay thing is, when whenever I had the chance to push it again because I I I lost half of my my draw down in a week uh I push it more and I had another time another draw down and when I what I saw is okay. Maybe this is not a only a technical thing. Maybe it's a psychological thing.

Maybe it's something that I I'm doing that. or maybe it's something that I'm going through that I over like bypass my rules or by bypass my technical rules or something I have to add in that process. So that's why adapting and adjusting is so important for Traders And you got to have. This is really important that the journaling part.

Yeah, you got to understand your statistics and you got to understand what you're good at. So when you're when you see that pattern that you're really, really good at, push it. and when you see that pattern that you're really, really awful at you, just avoid it. So speaking of Statistics how do you track it personally for yourself? Do you use any software or do you use a manual? uh Excel tracking I use a software I use uh Trader okay, uh I use Kino for transparency purposes MH and I use Trader for really being detailed on for example, the setup that I good at the setup that I I'm not good at uh I know that I'm not good at large cap For example, because I know like I Know every time I trade them I suck at it.

So that's why it's really, really important that you get that knowledge of yourself by knowing your statistics and journaling for whatever uh, adapting adapting to that market means to you. Um, so I know nowadays you're also an educator in this in the trading space specifically. Uh, for the Spanish speaking Traders how did you get into that and kind of what inspired you and what's your mission with educating um, people to trade? Well first, there's lack of knowledge and lack of understanding of the trading environment. in the Spanish speaking Community they see it as really skeptical kind of thing and that's why I I Try to be really, really transparent with all this journey and with all this process so people can see that it's possible because here in the States, for example it's it's really normal for people to you know.

get a an account and trade and get a broker and all those things. Yeah, especially after 2021 especially. and especially because you might know someone or you might see someone that is successful at trading and it's not trying to sell you courses and stuff in the Spanish speaking Community is the other way around is people who try to scam and people to try to as it is in this English Community too. but you see a lot of real people in the English speaking Community all the way.

but in the Spanish speaking Community is more skeptical. More like this guy wants to you know, wants money and all those things. So I I I saw that in the like we we had a lot of lack of that, a lot, lack of transparency, lack of honesty and I was like okay there's an opportunity here to for people to understand that it's not only Forex and Futures that's that's one thing like there's for me. For example, for me, equities are the If if you're starting trading understanding equities because of the supply and demand understanding equities is probably the the best first step for you to understand what trading is.

So I think um that that part that that concept of the supply and demand and that concept of being centralized by NASDAQ or or New York Stock Exchange that gives you a little bit more of an edge and that's why I Try to you know, give the Spanish speaking community that perspective of a different Market that is not Forex and Futures and from someone that actually does it every day. Yeah I know Forex Trading and Futures Trading is big but I personally know more day traders who make a living out of trading stocks. I'm not saying Futures Trading and for ex trading is not possible but I just feel like there's a lot more. It's a lot more inefficient in the in the the stock market equities.

and I think as you have a lot of large players because you have tons of liquidity. So large players in become involved in in these markets like Forex and Futures and that's harder for you Know the little fish for sure. Any advice or message you want to give to our audience watching this? Um, if you're beginning to trade like manage your expectations? Yeah, uh. research.

Trade small Like start small. You don't have to trade like with thousands of dollars like trade small like with one share. Doesn't matter because the first thing you need to understand is it you're acquiring a skill and this skill is probably one of the most lucrative skill there is in the world. So respect it, treat it as a profession and give it time.

Yeah, you know, give it time cuz it's totally worth it. Where can everyone find you on social media? Uh my. Twitter and Instagram it's @ _ trades. Thank you Edwardo Thanks for your time today.

Had a great time. Thank you so much. If you enjoyed our conversation with Eduardo today, make sure to hit the like button down below. Also, if you want to hear more stories from other inspiring Traders then check out this video over here.

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