What attracted you to trading?
I was first attracted to cryptocurrency trading because of the potential to earn income online. It looked like an exciting and innovative way to make money, and I was curious to learn more about the process.
As for Bitcoin, I was attracted to digital money not subject to government regulation. I started trading because I wanted to grow my cryptocurrency holdings. At the time, the biggest exchange Mt Gox was about to collapse, so I learned how to "short-sell" on Bitfinex with margin. Once you do that, there's no going back, right?
I learned how to "short-sell" on Bitfinex with margin. Once you do that, there's no going back. Right?
I was 17 years old, so I was more risk-tolerant and had fewer financial obligations. Margin trading is risky, but I was attracted to the possibility of making big profits. I also knew the volatile cryptocurrency market, so I prepared for possible losses.
Full interview originally by: https://www.getalphamail.co/interviews/48-romano
How long have you been trading, and what markets have you traded over your career?
I've traded for about 9 to 10 (as of the time of writing in 2022) years in various markets. I bought my first Bitcoin in 2012 and began trying to learn trading in 2013 when Bitcoin's price began to increase. I've also experimented with move contracts and VIXY. Right now, I'm focusing on delta-neutral trading strategies.
Delta-neutral trading is a strategy where the trader attempts to offset any price movement in the underlying asset by making appropriate trades in other assets. A delta-neutral strategy can be used in volatile markets where large price movements are common, as it can help the trader to avoid incurring any losses.
How long did it take you to become profitable?
It took me three years to become profitable. That was, at least in part, due to luck. I was in the right place at the right time and in a thriving sector that was doing well.
Who did you look up to when you first started trading?
ActualAdviceBTC, CryptoCobain, AngeloBTC, Jebus911 (2013-2014)
ColdBloodShill mentored me in 2020 during the bear market/covid because I did have trouble managing my risk and emotions. Most of us are probably familiar with trading without a stoploss (believing in a mental stop) or moving/removing existing stoploss.
What were their admirable qualities?
They had a great sense of humor and fantastic emotional and impulse control. They understood token economics and gauged fear and greed well.
They were also able to sell assets when the price hit their target instead of believing that “it might go up forever,” which I struggled with due to the fear of “what if this is the last chance to make it big?
I struggled with the fear of “what if this is the last chance to make it big"?
What does a typical day look like for you?
That varies somewhat from time to time. I can dedicate a few years to programming or finance/trading. Since 2020, I have had irregular sleeping patterns. Still, it generally begins with me sipping coffee, taking a few nootropics pills, monitoring my Twitter account, and reading news sites like Bloomberg.
Later in the day, I analyze the equity options markets and the bitcoin options market on Genesisvol. By analyzing it, I estimate the intraday price range in which bitcoin is likely to trade. I modify my ping-pong bots and market-making bots. Most of my profits come from something other than leveraged trading but from spread and maker fees on FTX.
My typical days are boring. The least boring part is studying and watching Youtube videos about finance.
Tell us about your most memorable trade
My most memorable trade was during the Xi pump in 2019. I turned an initial investment of $300 into $100,000 over a single day. As the price rose, I kept compounding my position and eventually made a very sizable profit. However, I was young and impulsive at the time and didn't take profits when I should have. I later learned that relying on stop-losses only during black swan events is not advisable, as liquidity can dry up quickly when needed. This was my most profitable trade, but it was my most memorable trade.
What’s the best trading advice you’ve been given?
You Gotta Go Down, To Go Up.
“Convexity or gamma is the second derivative of a contract’s value with respect to price. Used correctly, convexity can supercharge your portfolio’s returns. However, if you do not understand how convexity affects a derivative you trade, you will get rekt repeatedly.”
Used correctly, convexity can supercharge your portfolio’s returns.
Convexity is important because it can significantly impact a portfolio's return. You could lose money if you don't understand how convexity affects the derivatives you trade.
There are two main types of convexity: positive and negative. Positive convexity means that the value of the derivative increases as the underlying asset's price increases.
Negative convexity means that the value of the derivative decreases as the underlying asset's price increases. Most derivatives have some convexity, but the amount will vary depending on the contract. For example, options have more convexity than forwards because their value is more sensitive to changes in the underlying asset's price.
Convexity can be used to generate higher returns in a portfolio. For example, a portfolio with a mix of long and short positions in derivatives can benefit from both types of convexity. The downside of convexity is that it can also amplify losses. That is why it's important to understand how convexity affects the derivatives you trade before entering any positions.
What drives you to keep trading?
My drive to keep trading comes from my passion for finance and my interest in computers. The flow state achieved while trading is exhilarating and stimulating, and it helps me to stay sharp and focused. Continued personal development is essential, and trading is one way to challenge me and push my boundaries.
Would you say you’ve ‘made it? If not, what does ‘making it look like to you?
I don't think I would necessarily say that I've "made it." To me, success is more about the journey than the destination. I'm constantly striving to learn and grow as a trader, and there's always room for improvement. Making it would mean that I've reached a point where I can no longer improve or add value. And that's not something that ever really happens.
Money can be acquired through deceit, prostitution, OnlyFans, grifting & trickery. However, some things can only be obtained through honest hard work. Such as skills and knowledge.
So, the answer is no. I wouldn’t say I’ve made it.
What’s the most important quality in a trader, and why?
Traders must control their emotions, especially after a winning or losing trade. It is easy to get caught up in the excitement of a win or the disappointment of a loss, but it is important to maintain a level head to make the best decisions for your next trade.
It’s very tempting to continue trading after winning without a plan. Go outside, watch a movie, or do anything that makes you “forget” trading for a minute.
It’s very tempting to continue trading after winning without a plan.
How would you describe the way you trade?
I mostly make money by trading on the spreads and getting maker rebates. I do this by following a ping-pong style/liquidity-providing approach within a limited range that I adjust. I don't day-trade often, but when I think I have an edge. I look at the options market on Genesisvol to decide my range etc.
Has the way you trade changed over time?
As my experience increased, my trading strategies evolved and became more refined. I used to be a very aggressive trader, but now I have more impulse control. Perhaps the result of maturing as a trader.
Why do you think you’ve survived in the markets as long as you have?
My experience has helped me survive in the markets. I've been in the markets for a long time, and I've seen a lot of ups and downs. I've lost everything many times, but I've always been able to bounce back because I'm young and didn't lose that much money.
In 2017, I made a lot of money, which kept me going for a long time. There have been some black swan events, but I've often survived because I had a few investments locked away. For example, I had a presale allocation for Filecoin, which did very well. Not to forget, I gave my referral link to people during the Bitmex days. That helped me a bit through 2018 and early 2020. The referral rebates weren’t that much, but I did not have that many financial obligations at the time, like most people who are married and have kids. I do have a 3 year younger sister who’s still in school. Little sisters can be expensive.
The 2020 COVID crash was very detrimental to the market. I began working on an API for the cryptocurrency exchange btse.com with a new friend. I met this person because @ActualBTCAdvice wanted to work on a specific project.
He introduced me to DeFi (decentralized finance) since I was more familiar with derivative trading. Not many weeks after @ActualAdviceBTC and I met, he passed away. This led to depression, but I kept working on the API with my friend.
Many people without formal education or training in finance do not have much chance of surviving in the markets. My experience has been critical to my survival in the markets. I think luck has played a part in my success, but my experience in crypto, tech and my willingness to work have been key factors.
What’s the worst thing about trading and why?
The worst thing about trading is the potential for great financial losses. While some trade successfully and make a profit, some people lose a great deal of money, which can lead to financial ruin. For some people, trading stress can be so great that they commit suicide. This is a tragedy not only for the person who dies but also for their family and friends. While I don't personally experience this stress when trading, I know it is possible for some people.
I’ve had bad moments, too, like having a few days when I did not feel like coming out of bed.
What’s something you’ve learned in the last 6 months that has made you a better trader?
One of the things that I’ve focused on lately is understanding option flow. That is important because the value of an option contract is linked to the derived price of the underlying asset. When the price of the underlying asset goes up, the value of the option contract goes up; when the price of the underlying asset goes down, the value of the option contract goes down.
The option’s delta quantifies this relationship. The delta is a measure of how much the price of an option contract will change in relation to a $1 change in the price of the underlying asset.
If the underlying asset is a stock, the delta will tell you how much the price of the option contract will change if the stock price goes up or down by $1. For example, if the delta of a call option is 0.5, that means that for every $1 increase in the stock price, the call option will increase in value by $0.50.
Dealers/liquidity providers must continuously adjust their positions to maintain a delta-neutral position. For instance, If you buy an “out of the money put option” with a delta of -0.3, the dealer will be on the other side of that trade. He will have a “short-put” position, which gives him a positive delta exposure and a negative gamma exposure. He has some directional risk. To delta hedge it, he has to sell/short 0.3 delta worth of the underlying to stay delta neutral. Let’s say the delta of that “put option” now has a delta of -0.6. On the other side, the dealer has to sell another 0.3 deltas more of the underlying to stay delta neutral. Now, if the underlying price starts to fall even more with magnitude, the “put option” from the traders becomes “in-the-money.”
Maintaining a delta-neutral position can be difficult and time-consuming, especially when the underlying asset is volatile. It requires constantly buying and selling the underlying asset to offset changes in the option’s delta.
Suppose a large number of options are being traded. In that case, liquidity providers will have to delta hedge, which impacts the market since there’s a lot of buying and selling of the underlying asset to maintain delta-neutral positions. This buying and selling can have a significant impact on the price of the underlying asset.
If there’s a lot of open interest on a strike price for an option, it can create a situation where the markets are being driven by the derivative contracts rather than by the underlying asset - the “tail wagging the dog.”
Also, another great video to watch: “Volatility Trading: The Market Tactic That’s Driving Stocks Haywire”
What’s the mistake you find hardest to avoid when trading?
I need to take more profits on investments or close the position if I think I have no edge. After all, I am human.
I prefer trading the spot market and trading within a range. Setting TP targets is good. I set them when trading BTC, ETH, and Solana futures because I can look at options and estimate where resistance and support should be.
If you could give someone starting trading tomorrow one piece of advice, what would it be and why?
Read my medium articles and other sources!
The Medium articles are the most important.
Okay, now, a real piece of advice.
Start by developing a strong understanding of the underlying principles of trading and investing. Markets are constantly changing and evolving, so it's important to grasp the fundamental concepts before trying to trade. Once you have a solid foundation, continue to educate yourself on the latest market news and developments. And finally, always remember to risk only what you can afford to lose.
Start by developing a strong understanding of the underlying principles of trading and investing.
Amass enormous fortune. Never grow attached to what you own. Prepare to lose everything.
1. Amass an enormous fortune: You should focus on accumulating as much wealth as possible. You shouldn't be content with a comfortable lifestyle - you should aim for financial security and abundance.
2. Never grow attached to what you own: Don’t get too attached to your possessions. No matter how much you have, there's always a chance that you could lose it all. Be prepared for that possibility, and don't let your possessions own you.
3. Prepare to lose everything: You should always be prepared to lose everything you have. It's a harsh reality, but it's one that you need to be aware of. Be careful with your money, and don't take unnecessary risks.
These three steps are like a cycle. You know, like the wheel of Samsara. I just don’t know if there’s nirvana.
You know, like the wheel of Samsara. I just don’t know if there’s nirvana.
Do you have any guidance on risk management?
Review your risk management strategies on an ongoing basis. It is important to be flexible with your risk management rules. For example, consider reducing your position size if you are uncomfortable losing $500 five times in a row. So only make trades where you lose only $20. It should be as boring as possible. That will help keep your emotions under control. Taking smaller losses is often better than taking one large loss.
Remember, staying disciplined and focused when trading with leverage is important. Do not let your profits get to your head, and do not take unnecessary risks.
1) Don't take unnecessary risks - only take risks that are likely to generate a positive return
2) Have a well-defined and implemented risk management plan
3) Constantly monitor and adjust your risk exposure
4) Be prepared to take quick and decisive action to reduce risk when necessary
Following these principles can help limit losses and protect capital.
What separates the pros from the rest?
What separates the pros from the rest is the amount of capital they have to work with. Professional traders often have millions of dollars at their disposal, which gives them a big advantage in making trades. Retail traders, on the other hand, typically have only a few thousand dollars to work with. That means that professional traders can take much bigger risks and still make a profit, while retail traders are more limited in what they can do.
Another difference between professional and retail traders is the amount of experience they have. Professional traders have been trading for years and often have a team of people working with them. That means they know exactly what they're doing and are much less likely to make mistakes. Retail traders, on the other hand, often need more experience and are more likely to make mistakes that can cost them money.
Professional traders have access to much more information than retail traders. They have access to data and analysis that retail traders don't have access to. That means that they can make better-informed decisions about what trades to make.
Okay, that all sounds obvious, but there’s more. Let’s say a prop trader at a desk vs. your average retail day trader.
As a proprietary trader for a firm, there are many important differences between how risk is handled and how a non-professional day trader may manage risk. First, as a proprietary trader, you are constrained by a set of risk criteria established by the firm in collaboration with its risk management staff. These risk factors account for the various risks related to the options and futures contracts that you are trading, as well as how the value of your portfolio of positions may fluctuate if the underlying assets rise or fall in price.
As a proprietary trader, you can access tools that can view your risk profile anytime. This comprises your total vega, delta, and gamma exposure, in addition to your exposure to several forms of risk (e.g., credit risk, liquidity risk, etc.).
As a proprietary trader, you must trade within the firm's risk boundaries. The risk management team will notify you if you exceed these restrictions, and you may be asked to take steps to mitigate your risk. For instance, your vega exposure could be too high and exceeds the limits set by the risk parameters. You might have too much negative gamma exposure outside the risk parameters, and you may be required to take action to get closer to neutral.
Generally, a trader at a proprietary trading firm takes a more comprehensive and systematic approach to risk management than a day trader who does not work for a proprietary trading firm. That involves taking into consideration various forms of risk, assessing your risk profile on an ongoing basis, and trading within pre-defined risk limitations.
Proprietary traders at a firm don't usually don’t use stop losses.
Instead, look at the greeks, such as delta, gamma, and vega exposure, when managing risk. That is because stop losses only consider the price movement of the underlying asset and don't consider the different risks inherent in the options and futures contracts being traded.
By looking at the greeks, proprietary traders can get a complete picture of the risk involved in a trade. For example, delta measures how much the value of an option changes in relation to the underlying asset. If the underlying asset moves up by $1 and the delta is .50, the option will increase in value by $0.50. However, if the underlying asset moves down by $1, then the option contract will decrease in value by $0.50
By looking at the delta, proprietary traders can see how much risk is involved in a trade and can make decisions accordingly. If they are comfortable with the amount of risk, they can proceed with the trade. However, they may decide to exit the trade or adjust their position if the risk is too high.
In addition to the delta, proprietary traders look at the gamma and vega when assessing risk. Gamma measures how much the delta of an option or future contract changes in relation to the underlying asset. Vega measures how much the value of an option or future contract changes in relation to changes in volatility.
By looking at all three of these risk measures, proprietary traders can get a better and more complete picture of the risk involved in a trade and make more informed decisions about whether or not to enter or exit a trade.
The biggest misconception about trading?
It's not all about the money. Many people see trading as this glamorous job where you're making a ton of money and living a life of luxury. And while it can be those things, it's also a lot of hard work and long hours.
This is not chess; no magic algorithm can beat any player.
However, even if you put in the hours, hard work, dedication, etc., it’s still no guarantee for success. This is not chess; no magic algorithm can beat any player. Every time there’s a different financial situation, these are one-off events. Take, for example, presidential elections. Even professionals have difficulty predicting who will become president because there are so many inputs, and elections don’t often happen to gain sufficient experience.
There’s a great video about this
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Originally I was interviewed by illustratealpha