Line Your Own Pockets

Michael: 00:00

All right, everyone. Welcome to another episode of Line Your Own Pockets. In this episode, we are going to go through just kind of a framework and a step by step on how what are the steps of systematic trading? Because like most things, most people probably aren't just gonna dive right into fully automated robots and machine learning systems and blah blah. So, you know, if you were getting into the pool, how what would the steps be to to take?

Michael: 00:27

And yeah, it's going be a cool one. I'm sure throughout the whole episode we're going to be getting deeper and deeper into it. So make sure you watch until the end where you kind of see where we end up there. But yeah, Dave, let's you had a story from a client that you were you're going to start this off with.

Dave: 00:43

Yeah. So I'm working with a client now. His name's Leo. He's a very interesting guy. Lives in England.

Dave: 00:49

He's a professional windsurfer, and he's he he coaches windsurfing in the Olympics. So he's a he's a high performance guy.

Michael: 01:01

That's really cool.

Dave: 01:08

Sort of, I would say he trades a system, but he does it all pointing and clicking, you know, basically a discretionary system. So he totally sees the value of full automation. He's in a great position to do that because now he's done all this back testing for four or five different strategies. He's put him through the cruncher. He knows exactly what he wants to trade and he could really see the full value, but he's never made an automated trade.

Dave: 01:44

He's just so comfortable making trades pointing and clicking. This is the exact kind of person and the kind of trader that is going to have a huge payoff from automation. I mean, this is Yeah.

Michael: 02:01

Already they can already see the benefit. It's I think the the people that you talk to that are still doing it purely discretionarily, those are the hardest to convince to kind of hand off the execution to the bot, because they kind of see themselves so integral in everything that's happening. But someone who has done the back testing work kind of has a good understanding of, Oh, right, now that everything is laid out in front of me, then why would I be the one to do this, right? And so, yeah, so it makes perfect sense.

Dave: 02:33

Yeah, so the way I approach people like this is I always try to figure out a way to introduce a strategy that is for them, that is completely additive to what they're doing. So they can continue doing what they're comfortable doing. They're making money. They can continue doing that, but then have this thing on the side where it's completely additive to what they're doing and they can see these separately and then introduce this in a way that makes sense. You don't want to rip out what you're doing, especially if it's working.

Dave: 03:17

I never suggest people do that. I always like to have an additive approach and then phase things in because you'll get accustomed to it over time and you'll see things differently.

Michael: 03:30

Okay, so what's step one to that, right? And let's just start going, okay, he's starting to get systematic, and that's kind of what we're talking about here. So even maybe outside of this particular example, you have someone and they come to you and then they're doing a thing and they've got the data and it's working for them. What's kind of step one into systematic trading or where to get that person started?

Dave: 03:55

Yeah. Well, I say the very first step before any sort of real automation is diving into your hot keys and your trading platform and figuring out how to make your process as quick and as smooth as possible. There's probably some automation You wouldn't think about it as full automation, but there's a lot of things you can do with hot key stuff that can save you a lot of steps. And that is like, it's a baby step, but it's definitely a step towards automation. And I can see from, like when you look at these platforms, especially with me from a CTO perspective and a developer perspective, it's pretty amazing the systems of hot keys that a lot of these software has.

Dave: 04:46

It's kind of mind boggling. It's probably way more complicated and more development went into some of these hot keys than into the GUI that you see sometimes. I mean, it's very extensive, a lot of these.

Michael: 05:02

Well, you know, I always used to give the story that when I started at the prop firm, they wouldn't give you a mouse. Would unplug it from the computer and you And had ever since then, just general productivity on these machines that kind of govern our lives. It's every time, you know, you reach over to grab the mouse, it's a good exercise to kind of think about what did I need to do there? Because you're right, if you're someone who is, has a setup that works for you, I would say kind of step one is you got to make sure that that's getting alerted to you in real time and says this is the thing that has to, you know, it's time to take action because this thing's occurred. And then yeah, if you're grabbing for your mouse, is which just such an imprecise tool, and trying to look for the thing to do, that's way harder.

Michael: 05:48

Because you're right, I would write out all the steps of, okay, I get an alert to take a trade, or I, you know, my conditions are met, or whatever it is, And then what are all of the exact steps you do? And then just try to use hotkeys like you're talking about to cross out some of those lines. Because you know, if the steps are, know, go to some drop down menu to try to, you know, figure out a position size or something like that. That's the easy stuff that could just kind of be cut down pretty immediately, right? And these these are really baby steps to get started, but sometimes it's these early steps I think that make the biggest difference.

Dave: 06:24

Yeah. And we won't even necessarily go into here creating a strategy, but if you think about it, looking at your routine, figuring out exactly what you do from a discretionary perspective and translating that into a strategy, into a backtest, there's a lot of steps there that you may not realize that you're doing that you need to capture. Just that part is We can assume that the trader does have a backtested strategy. They finish can see line. Wow, this is going to be great.

Dave: 07:01

I can make a lot of money with this strategy. But maybe there's a lot of trades there or they can't imagine being able to trade it manually. So yeah, it's important to go through that process and that step because that really that's the main thing that opens up the possibility for automating your stuff.

Michael: 07:20

Well, then one step back, I think would also be is make sure whatever broker platform you've access to has that ability, right? And it's twenty twenty five, so they should. And, you know, I'm specific specifically thinking of one broker, which is, you know, the most popular one out there right now, which is kind of just for casual people, because they just started with an iPhone app. Now, they've recently launched a full fledged desktop app, but I would say just because I know there might be comments of that step one is like, my broker doesn't do this. It's like, well, there's a lot of brokers out there.

Michael: 07:53

So I would make sure that whichever one you have is conducive to being able to, you know, shorten up that learning curve, of tighten up that so that you can just be faster when it happens. And what you'll probably notice is even on top of taking a couple steps towards automation, while at the same time, you're also kind of just tightening up and making sure that your broker is going to be okay for automation, right? Because that's the same brokers I would imagine if you did like a Venn diagram, the same brokers that have really advanced hotkeys on their platforms are probably also the ones that have some sort of service to help automate the system a little bit better.

Dave: 08:33

Yeah. That's probably true. So this whole when we discussed this topic, it made me think about my history in trading and when I got started. And I've gone through all I think I've gone through probably all the steps for how to dip my toe in to gain confidence over time. I've gone through probably, I bet probably six major iterations of software that I've developed just for myself to make trades or make parts of trades or enter my exit orders.

Dave: 09:13

I've kept those around and it's kind of an interesting stroll down memory lane looking at these. I think almost all of them still compile, which is the developer you're like, Okay, I must have done something pretty well if a lot of these are still compiling as old as they are. Because I think I wrote the first one in probably 2006 or 02/07.

Michael: 09:35

Wow.

Dave: 09:36

So it's a long time ago now. I remember the very first thing I did was created an app that would enter my exit orders. I manually enter the trade and then I would have a simple app just enter all the exit orders all at once. I did this through IB, and that's a very natural first step. You have to have your exit orders defined.

Dave: 10:12

You have to have gone through the work to figure out what those should be. Once you get those set, there's all sorts of mistakes you can make by doing that manually. When you can just click a button and have this all entered perfectly, that's a great first step because it's not going to do anything other than what you've already entered. That's a very easy first step towards full automation.

Michael: 10:41

Yeah. And I love that. And sometimes, you know, we did a little bit of a conversation about order types way at the beginning. If you'd have to scroll way back on the podcast for that, That's another one that you're kind of mentioning is that, you know, I would imagine when you first started trading, there wasn't nearly as robust, you can put out a trade and have a, you know, maybe a stop loss and profit target and time stop, and all of these different advanced order types attached to it. But I would kind of put that in the same ideas as you're trying to figure out what keys you're going to press to place orders, see if there's ones that you can place orders, and with that one order to get into your trade, there's a whole slew of so you have all of your exit criteria sorted.

Michael: 11:24

Because now you've gone from someone who's pointing, clicking, and going through, and here I'm going to buy this here, and I'm to set a stop loss here, and I'm going to put a profit target, and then I'm going make sure it gets out at the end of the day. And already, you can see that you can kind of probably shrink that to like one or two button combinations, where you're buying the stock, and then immediately your stop loss hits, your profit target's out, and it's all good. So you've gone from something that probably took a minute or more to something that now has taken like a second or more.

Dave: 11:52

Yeah. And would you distill something down to a button click or a hot key combination? It reminds me of our discussion about standard operating procedures, SOPs for what you do. Once you distill it down to that, if you want to make an adjustment, it's more like you're a general manager versus a player. At this point, you can make an adjustment to that workflow, but your workflow still stays the same.

Dave: 12:23

You're clicking the button, you're hitting the hot key, but what the logic behind that changes. That's a really powerful thing to be able to do, and it's a really good workflow to have. It just makes you more efficient and it gives you better perspective about what you're doing.

Michael: 12:39

Yeah, and that's, again, I love the business analogy there because it's the same thing. I have my processes the same, so if I were to implement even a new, an entirely new trading strategy to what I do right now, my process remains the same. It's just a more data gets kind of copied from one place to another, but it's not like I'm doing a whole bunch of different, different steps or different processes. So, and I just couldn't, you know, this is the place to get started because yeah, you've gone from someone who's manually looking at 10,000 things to you're hitting one button as it went through. I'd actually just experienced the same thing where recently when I was going through my SOPs and I introduced a new entire trading strategy to kind of my repertoire, and all I had to do is like add like one or two lines into the document and then move on from there.

Michael: 13:34

Where before it would, I probably would have forgotten a handful of times until you kind of get that muscle memory. And also, once you've laid it out like this, I think it also makes it way more glaringly obvious, which are the unnecessary steps. Once you're having you hit the one button and it does all this for you. Well, now you're looking at, Okay, what doesn't need to happen? And it gets you a little bit closer to that goal of, well, if at the end of the day, if I'm just sitting here and hitting one button every time an alert comes through, you can start to see how the natural push towards automation comes, because at that point, you're probably actually getting really bored.

Michael: 14:12

You're waiting for an alert to go off and then you're hitting one button and you're like, what am I doing here?

Dave: 14:17

Yeah. Yeah. It's somewhat depressing if you have a high, you know, high value of what you do. I mean, you're really replacing yourself. You're outsourcing a lot of what you do.

Dave: 14:30

So it could be scary to people, but yeah, you're right. I love that approach and getting rid of steps is great. So, okay, here's another iteration of a program that I wrote. I think this was later. So at this point, I was trading a system that looked for a specific candle pattern.

Dave: 14:59

So I would have to have the chart up and look at it. At this point, I had probably four monitors just so I could have all these charts up so I could see, watch the pattern appear and then take the trade. So to get rid of anxiety and get rid of mis trades that I was making at the time, came up with an app that would ingest data from IB and sort of look for the pattern automatically. So I could enter a whole bunch of symbols and it would be watching the data for each of these symbols. It would be ingesting the candle, the bar data.

Dave: 15:43

IB has a really nice feature in their API where you can turn on five second bars that are sent to you. Now, the reason that's nice is the alternative is you're getting every trade, like a Oh, trade

Michael: 16:02

yes. Okay.

Dave: 16:03

So, yeah. Five second bars from a data perspective is a lot less data than getting every single trade. The app would take those bars, build one minute bars, kind of detect the pattern that I was looking for. And then I had a checkbox there for There was one last check for, Okay, automatically take the trade if I check the box. So I could see the setup happening.

Dave: 16:34

It needed to wait for the pattern to be in the past before the trade entered. So I could be eyeballing and check the box and only if I checked the box would it actually submit the orders. That was like this one phase where, okay, I'm not 100 sure.

Michael: 16:56

I still want

Dave: 16:56

to have this one last thing of my manual checking before it actually entered the trades.

Michael: 17:04

I like that as another little baby step, because like we just talked about, you know, basically building ourselves out of a job, but that would be a way to kind of if the person thought that there were some discretionary control in the system itself, it allows them to keep that right. They're basically getting asked a question periodically. It's like, yes, do you want to buy the stock or no? Or, you know, do you want to short the stock or no? And then you're just clicking through yes or no.

Michael: 17:32

I think, you know, the obvious kind of counters to that people could think of pretty quickly is that you're adding a level of lag, and then you'd have to ask yourself periodically, and you know, tracking, I guess, would be everything, right? You would gather one dataset, what happened if you did all of them, and then versus the dataset of the ones that you said okay to, and see if there is some benefit for you waiting and hitting okay or not. And that would be a fairly easy thing to run over time as long as you're keeping both those I data would imagine what you're probably gonna find is either no difference or even maybe you being there being slightly negative, but, that's gonna be up to the user and you'd need a large enough data point. But the very least, again, it gives people that control. So it's kind of like having a self driving car that kind of still has a steering wheel where if you want to, you could still kind of grab onto it and and do a little input, or, you know, it's like, hey, do you really wanna turn left?

Michael: 18:32

And you go, yeah. Yeah. Turn left. But I I like that again as another little little lever of comfort because you still again, I I think it's kind of pretending, but I still think you feel like you've got some control kind of at that point.

Dave: 18:45

Yeah, well, it's sort of like, I mean, all these steps are really important because as anybody that's done software development, like it's, you can debug certain things, you can test certain things, but when you trade live, it's a completely different thing. And things are going to happen that you can't imagine when you're developing could happen. I mean, that happens to me all the

Michael: 19:11

time

Dave: 19:11

still. It's really important to have that. I set up that specifically for this. I wanted to make sure that when I see the data coming in real time, I see that the setup being calculated, is it calculating properly? Are the orders going to be going in properly when I do this?

Dave: 19:31

It's just a nice way to do it. The other thing about this checkbox, I could the the next step after that would be change the default to have that box automatically checked. So instead of the default of me having to go check it to take the trade, the next step would be, okay. It's automatically checked. I can go uncheck it if I feel like I need to.

Dave: 19:56

So it's another real small step towards being more comfortable.

Michael: 20:00

So it would give you a time limit? If you don't uncheck it in this period of time, then will place the trade. But at candles close or something like Yeah.

Dave: 20:11

Yeah. It was waiting for the candle close, and would if the box was checked, it would take the trade.

Michael: 20:17

It's interesting. Yeah, and I like that too, because these are the steps that I think people because I talk to people all the time as someone who's still kind of in the, I guess you call it like discretionary trading community and trying to push them, nudge them a little bit over. And it's, I think, important for the audience that as we're going through this, you realize that these are all little tiny steps on on a way. And, you know, if you're not comfortable in going the full way, well, probably will be eventually, but just find the area of the trade in which you feel like you can best automate, and then take one step towards that, and then sit there for a while, like a month or a couple months or something. And then again, like with you, you probably, I could see instances where a wicked trade came through and you had to go and click the box and maybe, you know, you were distracted with something else or whatever, and you just kind of missed the trade.

Michael: 21:15

And then you kick yourself enough time saying, oh, you know, man, I should have really taken that night, you know, I was in the bathroom or whatever. So now it's okay, you know, you come up with that next little baby step to say, okay, I need to say no to it first and then and then go from there.

Dave: 21:32

Yeah. Alright. So here's another phase that I went through. So back probably fifteen years ago, I was true. I would trade futures.

Dave: 21:45

I was trading a system that would trade the ES and I used a different tool to set up some automation for that. And I used Amabroker. Now Amabroker is a platform that I mostly use for backtesting. I love the charting in it too. And what I love about the charts is you can set up anything you want in the charts.

Dave: 22:10

You could have custom columns right from your backtest. You could display those right on the chart in exactly the way you want to set it up. You can literally have the same script that runs your backtest run-in a chart. It's beautiful. So I was trading with ES.

Dave: 22:31

So that was just one chart to look at. Right? So I set up buttons in the chart, very simple to do or relatively simple to do in Amibroker, and the button would only appear if the setup occurred. And when you click the button, then the setup would be sent to Interactive Brokers. So it's another way, like right on the chart to see, and you could put text on the chart near the button or around the button sort of describing the setup to Basically a way to merge what most manual traders are doing looking at charts with some automation, have some automation running right on the chart there and really customizing it so it only appears in the exact price situation that you want and it doesn't appear otherwise, it's a really nice way to phase in some automation.

Michael: 23:36

One thing I love about just chart trading in general, which I did a lot of, as soon as when I was discretionary, I would gravitate to platforms that I could trade just from the chart. And the main reason for it was something that we talked about a couple of times now, I think about hiding the P and L and focusing purely on the setup. And that's what I really like about that, where you're seeing it form, you know, you hopefully have either backtest or you have a whole bunch of examples of this thing working in the past or whatever it is you do discretionarily, and you're not going into the area of your broker that normally contains P and L and things like because the order windows and P and Ls are sometimes and you're just looking at the does this thing meet the criteria for entry and you're clicking yes and trading from the chart that way. And then does it meet the criteria for exit? Yes, and then go from there.

Michael: 24:30

So again, that's another way to do it. Even I would even argue that for the people who are not interested in really getting bots to do things at all. The just the ability to not see the P and L and to not and to be able to focus on that visual side of things, I think is is huge from just like a mental benefit if nothing else.

Dave: 24:52

Yeah. I've I've done so much extensive stuff with Amber Broker. Like I've got it can automatically pull in my orders and it'll plot those on the chart. It'll automatically pull in my executions, plot those on the chart so you can see the slippage in real time, exactly what's occurring. I love the extensibility of it.

Dave: 25:17

Yeah. It's just it's just a great platform and one that I really like.

Michael: 25:23

Mhmm. Yeah. And I there's just something about just having the thing that you're trading just right there and the ability to trade with it, think is big. I do the same thing with real tests when you run a script and it will show you all of the entries and exits for every single trade in the backtest on one chart. And you can just start to see things as well.

Michael: 25:47

Because again, we are always in idea generation mode. So I think there's a benefit there as well to being able to visually, you know, see things. Because, you know, if you're going through 20 trades and you notice that every time you buy it, it bleeds down a little bit first and then goes. Well, that's the, you know, the the spark of an idea that you can then go somewhere else. So I I think keeping the attention on the price action as you're trading is vital for, yeah, a handful of reasons.

Michael: 26:13

Again, not seeing the P and L, and then also seeing what price does the moment you enter and what price does the moment you exit to see if there's over time something, you know, comes up with an idea to test to maybe make your system a little better.

Dave: 26:27

Yeah, so each of these steps are getting you way, way closer to automation. I mean, in a lot of ways, you're pretty much there, right? You're real close. I mean, I think we're gonna go ahead.

Michael: 26:37

Well, I was just saying, let's just summarize from kind of beginning where the dude was probably seeing an alert somewhere, and then going to a completely different application, and then filling out an order form, and then hitting buy, and then putting out a stop loss, and putting out a profit target, all the way to now, right, something flashes up on a chart and says, hey, is this what you want to do? And you click yes or no, and then everything is kind of handled in the background. That is, yeah, it just the amount of mental work and the amount of time it takes from idea to execution has shrunk by like 10x by now.

Dave: 27:11

Yeah. So there's a couple different things that I wanna mention about Interactive Brokers specifically, which is quite nice for this kind of thing. First of all, is they have a full paper trading account that you can log into. You can have it running alongside your regular Trader Workstation. You go two instances of Trader Workstation, one with your live, one with your paper trader going.

Dave: 27:37

And you can run all your automation through the paper trader first. That's certainly recommended because not only just for seeing if your strategy works, but you really want to see if the automation works in a way that makes sense. You want to see that it's working in real time. You can easily do that without risking anybody at all. Everything about the API, your program is going to be exactly the same.

Dave: 28:09

You're just going to tell it to connect to the paper trader instead of the live trading account.

Michael: 28:14

Well, and I've actually given this same recommendation to a bunch of traders I know, and almost like a competition to kind of prove to themselves that they should be more systematized is okay, if you're not, you know, build a bot to do what your system is, and put that on a paper side of things, and then you trade live. So we're not changing what you're doing at all, and then just compare the two every day. Yeah. And and you'll again, most times, I don't think anyone has ever come back to me and said, no, I'm better. Most times over time, it it is either close enough that it doesn't shouldn't matter at all, or the bot is significantly better.

Michael: 28:54

There's never been a time that the manual trader has been better. And that's usually a really good convincing moment where they're like, okay, if if it had been switch, and I was paper trading, and this thing was trading live, I would have made more money, and I didn't have to do all the thing and spend all the hours that I spent actually hitting the button. So that kind of, like, bake off mentality of it's you versus the bot you built, I think is is a great way to kind of push people to that final. Right? That's like the final.

Michael: 29:24

Okay. Now it's time to start getting serious because I I can see it make more money than I am, and it's obviously way less work. So and who doesn't want more money for less work? Right?

Dave: 29:36

Yeah. So there's another feature in the Trader Workstation Interactive Brokers API that's really nice for this. So we, you know, we talked about connecting to a paper trader. You can actually set up, let's say you're ready to trade live. One step in there, there's two statuses for an order.

Dave: 30:01

You can actually queue the order in Trader Workstation or you can have it automatically transmit. In every application I create that interacts with Interactive Brokers, I put a little button in there for actually transmit the order. It's either a checkbox. It's either enabled or disabled. If it's disabled, it's going to queue the orders in Trader Workstation but not make them live.

Dave: 30:29

What that allows you to do is go eyeball them and then actually manually go click the transmit button that you're used to clicking when you're trading manually in Trader Workstation. It queues everything up exactly like you could double check it, then you can click transmit there. Usually, you could do it really fast. I love that step precisely because of what we're talking about here. It's a step toward automation, but you don't have to do the whole thing.

Dave: 30:59

There's this very, very convenient step before going to full automation and making it live.

Michael: 31:06

Well, yeah. And this is kind of like, right, everything raring to go. You know, you're not pressing to place a trade, you're not whatever. You are just kind of like a traffic guard at that point, like the the car is coming. You're either going to stop it or not because, yeah, I've played with that a little bit with a bot that you've built.

Michael: 31:27

It just the order goes and just sits there and it's just waiting to hit transmit. And you're right, if you're still a little bit nervous about letting the trades go through automatically, and or I guess the other thing is if you're trading a new system and you want to make sure that everything you has calculated correctly, then yes, I I would have something that you expect to happen, and then have that actually order go in and have those line up. I could even see a world where you're still running something in paper, and then just making sure the two orders align. So in paper, if it bought you 100 shares at $10, you're waiting for the order to come into live. If it says 100 shares at $10, you're just hitting Okay.

Michael: 32:06

So that final check just to go, Okay, everything is lined up. Now we hit go. And then I'm sure everyone's already known what the next step will be and it's just send it right through, right?

Dave: 32:20

Yeah, so the next step is yeah, or you know, enable that checkbox so that when signals come in, they're automatically sent to Trader Workstation, they're automatically made live. So by the time It's actually interesting because by the time you make that step, you're really confident it's gonna work because you've gone through all these steps to verify over a period of time. We talk a lot about what's your path to confidence. This is a path to confidence. That's exactly what you're doing, getting more confident in your software and you know, your workflow for making trades.

Michael: 32:58

Well, and even beyond that, I think there is a there's a moment where it would in my mind when you were going through these steps that it switches from like a fear to excitement. Like, I could see someone saying, okay, you're gonna be a robot trader and they're currently discretionary and they go, my God, that's impossible. But breaking it down to these baby steps like this, I would say by the time it got to the point where, like the order, like the thing pops up on the chart and says, do you want to buy it? I would say about a month of that, and I am excited. I'm no longer nervous to go through the rest of the steps.

Michael: 33:32

I'm like, okay, get me get me going, because this this is boring. Right? This thing just pops up and I click yes, and then it goes and it pops. So I think getting you to that tipping point is huge where it's like, Okay, we're just going to push you kind of gently. It's like you're going to push you gently to the edge of a hill, and then eventually you're just going to roll down.

Michael: 33:50

And I could see it's like, Okay, give me a month of just sitting there. And yeah, I'm just approving like like I'm on a factory, like approving things as they come out of the conveyor belt where I'm like, yeah, how do we get a robot to look at and approve this thing? This is boring as hell I could be doing so many other cool things and think of new strategies and testing things. Let's just get the thing down. I think that's really important, because it does seem like a hugely daunting task if you just take someone who's in the push button mode, and show them the end.

Michael: 34:19

There's so many things that they're probably afraid of, But yeah, but halfway through this process, they kind of they would see the value, first of all, and they would realize that if they're just hitting the button all day, that the leap to making a robot hit that button all day isn't nearly as huge as it looked like when they were way in the the discretionary side of things.

Dave: 34:40

Yeah. Totally. And and I like that you're I mean, you have a skeptical mindset. So you you understand that you need to go through these steps to really gain confidence. But there's other traders that go back to square one, they've done a back test, it looks freaking awesome, and they're ready to go jump in the deep end.

Dave: 35:06

I always encourage people to take those steps because they are really important because you really want to understand everything about what's going on in a way that doesn't risk money. The more rope you give yourself, the more time and the more iterations of getting confident in what you're doing, think the better.

Michael: 35:30

Well, and the speed, I guess, note, the speed of those steps could certainly vary depending on your whether you're more skeptical like me or whether you're someone like you mentioned who's raring to go in. For for me, it might be, you know, a couple weeks of this, a couple weeks of that, a couple weeks of that, and someone who might just be a day or two, right? And they just kind of jump down the steps. But I agree it's important to do them. Just might be a little faster.

Michael: 35:56

Someone who's very skeptical of the whole thing. It might take months, right? They might take a month at each individual step, and then it takes them, you know, went for probably six-seven steps, so it might take them a year from now. They may say, this time next year I want to be completely fully automated, and I think that's good. And I think there's other people who could say two months from now or three months from now, I want to be fully automated and then going from there.

Michael: 36:19

And that's just kind of, I think, a level of comfort thing and how comfortable you are in passing passing the buck to a robot.

Dave: 36:26

Yeah, totally. Yeah, I think it's you know, you the analogy there of, you know, pushing somebody down a hill, eventually they start rolling. Yeah, I think that's not only in confidence that the automation is going to work, but another light bulb moment that happens is they realize, okay, there's a whole set of strategies that I haven't been able to trade before or even been able to think about or consider. Now that I have this automation, I could trade a strategy that trades 20 times a day. What does that look like?

Dave: 37:03

All of a sudden, there's all this greenfield that they can run-in that they weren't able to before. Somewhere along these steps, that light bulb moment's going to happen. To see it actually occur, it's a really cool thing to see. All right, I was trading manually. I'm a little skeptical about this automated stuff.

Dave: 37:24

Is it going to blow up? How is it actually going to work? When you see it and the systematic way it happens, it's really eye opening.

Michael: 37:34

Yeah. And we talk about all the time to the mental bandwidth like so that I'm just thinking like, say that person was, you know, trying to trade for a living and they were doing this kind of all day, every day and he didn't have a cool, cool job on top of it. Well, he's gone from like, super laser focused probably the entire day and filling out orders and doing math in his head and all of that. And then you fast forward to how you feel at the end of the day. And then every step along the way, he probably has more and more mental bandwidth that's freed up.

Michael: 38:02

And that's made him think of potentially more strategies or different instruments to trade or different time frames or whatever it is. And that was really what the big thing was for me is that for a lot of the things I do, I'm gonna be sitting here anyway. But it was the fact that if I've got robot A doing one thing, it allows me to just freeze up the mental bandwidth to be able to do this and that and the other thing. So, yeah, there's the the time of it. There's the fact that you can trade more.

Michael: 38:28

And then, you know, we have a whole go back couple episodes about how you should be utilizing as much buying power as you possibly can. But then also just the, you know, you only have so much gas in your your mental tank at the every every day, you know, and if 80% of it is allocated to actually doing the trading you and can shrink that down to 5% of that's doing the actual trading, just think of all the other things that you could be doing with that mental gas tank to to, you know, make it further along, build new strategies, all that kind of stuff. Right?

Dave: 38:57

Yeah. So I to rewind and go back and mention a step zero. The very first step for somebody that may be trading manually now, haven't even really thought about this, what's step zero? Now, a lot of times what I've seen is traders will be using a scanner like Trade Ideas and when you're making manual decisions about things that come into your scanner, one thing you could do, like the very first step is configure your scanner in such a way where you're only seeing the stuff you're actually going to trade. And for some traders, that's hard to do.

Dave: 39:44

They may be used to seeing a whole bunch of stuff come through there and they're sort of manually weeding stuff out mentally. But that'll force you to figure out, okay, what exactly are the signals that I want to trade and what are the ones I don't want to see? That's more mental bandwidth. If you can get rid of the signals that you don't want to see, that's that's incredibly empowering too.

Michael: 40:12

Yeah, and I think it all comes down to that. You know, you talk about it that developers wear as a badge of honor the word lazy, right? Then you're able to go through and say, yeah, I'm intentionally looking at the end of every day and saying, what can I remove from either whether it's just stimulus of looking through a bunch of charts, or whether it's actions that I have to take myself, or, you know, even emotional side of trading, what can I get rid of? And then you can see that every step that we described along the way just pairs that back a little more, right? And it detaches you a little bit more from the actual trade itself until eventually you're just in a situation where, you know, you're just sitting there and you're watching your robot take orders and maybe looking at them to see what's happening.

Michael: 41:00

And then all the other work of journaling and keeping up and doing all that stuff. So I was going to ask this particular client, this individual that you were talking about, how long do you think it will take them to get there? Do you do you have a road map or plan set up already? Or

Dave: 41:17

Yeah, I don't think it's gonna be long. I think it's gonna be like a month or so because he's, you know, he's got the whole workflow. He's creating these strategies, doing the back testing. He can see, you know, he's putting his stuff through the cruncher. He's He knows what's possible.

Dave: 41:34

But he also has been trading for a long time, so he knows to be skeptical about things. It reminds me of some really good advice from a very good developer I got many years ago. He's just always be paranoid. Always be paranoid. Like, what are you not thinking about that you should?

Dave: 41:58

So he has that mindset, but he has enough experience now where he's not going be paralyzed by that. He knows the steps to go through. And I predict about a month and it's super exciting because I know what he's gonna you know, it's the same thing I experienced fifteen years ago. It's just your the whole game changes.

Michael: 42:21

Well, listen. Right? And you can you can get there as well. Listen to the the viewers. And at least I would say after you listen to this, you know, commit yourself to one of the steps because you can see a lot of them, especially the earlier ones are very minor.

Michael: 42:36

They're like housecleaning, They're like just little tiny things that will save you a couple seconds here or there every day, and those alone will add up over time. But kind of like we mentioned, the. That's the start, right? And then as you get going, I think very quickly you get to that tipping point where you go from this is a daunting task that I'll never be able to do, kind of all the way into into that side of things. And it's really interesting from a, you know, systematic approach what you can cut out.

Michael: 43:08

And it kind of leads to one of the reasons that we did this episode, we're not going go too deep in it, we are going to do a little tease of something really cool that's going to happen in the next episode that's going to talk about this discretionary systematic and the split between them and the ability to do where things shine and all of that. So definitely make sure that you're tuning in to that next episode. I'm certainly pumped. I know Dave is.

Dave: 43:30

Yeah. Yeah. You're not gonna you're not gonna wanna miss the next episode.

Michael: 43:33

Yeah.

Dave: 43:33

Let's just say that.

Michael: 43:35

Sure you're subscribing and following and signing up for email list and all that because we'll definitely get out to you when this is done. It will be super cool. But as always, I'm Michael Noss.

Dave: 43:45

And I'm Dave May. Thanks for joining us online in your own pockets.