Digital Social Hour - High-Frequency Traders Exposed: The AI You NEED To Know I Charles Moon DSH #501

Starting point is 00:00:00 I think the top end traders that are manually trading could be somewhere in the range around 70 to 80%, but they're usually like in and out for small gains. For me in our industry, this doesn't sound crazy, but the most successful traders will win between 45% and 55%. That's it? Yeah. Wherever you guys are watching this show, I would truly appreciate it if you follow or subscribe it helps a lot with the algorithm it helps us get bigger and better guests and it helps us grow the team truly means a lot thank you guys for supporting and here's the episode all right guys we're gonna talk socks today we got charles moon on here today love the outfit man i appreciate

Starting point is 00:00:40 it man that's my favorite brand what is that uh malbon. Malbon. You know, it's weird. It's like the street game, streetwear game has taken over into golf, and this has been pretty much the most popular brand out there. Damn. I'm a hacker, as I say, so I wanted to represent. I love it. I used to want to be a hacker growing up. Those people are different, man.

Starting point is 00:01:02 Yeah, you know it, man. You ever hacking anything interesting? No, no. You know you know actually it's funny i have a friend that was kind of in that uh groove and then he ended up becoming a um a tech entrepreneur so he kind of took that skill set and you know he's he's really been big into ai he he's really got into deep language models and disseminating through data and basically got really popular, really big in Silicon Valley.

Starting point is 00:01:33 And then he got so big that he ended up getting leveraged out of his company by a major tech company. They wanted to buy him, and he didn't want to sell out, so you know what they do. They just kind of pound you with litigation until you pretty much give up, and that's what he did. Damn, that sucks.

Starting point is 00:01:50 Yeah, it's tough to enter that space, man, when you don't got the money. Yeah, you got that right, man. When did you get into stocks? You've been trading for a while now, right? Yeah, so 2007. Timing was perfect. Learned how to trade stocks pretty much right at the top of a heavily inflated market. And it was a really weird kind of path to get into it because

Starting point is 00:02:14 I had no interest in stocks. I didn't even know what it meant to buy equity or shares, but it was my background because I was playing a lot of poker that's pretty much what i was doing at the time for living and um you know in chicago at the time they didn't have poker rooms in in casinos in illinois so we always had to go across the border to indiana so instead of taking that long trip because i was on the north side of chicago and it's like 45 minute hour trip to go to the casino, there were a lot of smaller home games or games in warehouses. Yeah.

Starting point is 00:02:51 And in one of these games, I met my friend Amith who just randomly said, dude, I think you'd be great at trading. I'm like, what's trading? And he had seen me in a lot of games and he had saw that I was a pretty consistent winner. And he's like, there's a lot of correlation. He's like, if you're ever interested, we're hiring right now. And so at the time, people really frowned on playing poker full time. It's a little different now.

Starting point is 00:03:22 But so I was like, maybe I need to get a big boy job. So I took him up on the offer. And thankfully, the principal owners or the sons of the principal owners who were running the Chicago office at the prop firm were avid poker players. So I knew nothing about stocks. So instead of the normal interview process that they would take with their, you know, candidates, they really kind of tested me on game theory. So they asked me a lot about risk management, money management, you know, how I approach certain hands. And, you know, it really intertwines with poker. with trading because you got to examine the situation and decide whether we're going to be aggressive or we need to throttle back, whether this is a good opportunity to take that chance or not.

Starting point is 00:04:11 And certainly risk management, money management, that's the end game because that's really where success lies. So through that, I went through training, had the worst training experience. My trainer didn't want to teach me how to trade. Why? You know, he was, in all respect, this guy would sit there. I'd see him make $10,000 in like 35 minutes of work.

Starting point is 00:04:38 And that's just what his focus was on, you know. He didn't like whatever money he was going to make from my end um as a trainer just wasn't worth it to him so i'd ask him questions he was just a really introverted guy and he's just like i don't know i'll tell you later so finally i got fed up and i told amith and luckily amith and his trainer or his mentor at the time the guy that trained him um kind of took me under the wing so i would just kind of like slide over there got it and um you know that's to be honest that's probably the core reason why i'm here today wow because just remembering how helpless i felt in a situation where i knew that you know it was a big opportunity for me, especially at that time in my life.

Starting point is 00:05:26 And I just never forgot that. So for me, what I do in my background, especially being as a coach, I'll never take it for granted when people want to take their leap in faith in trying to learn from me to do better for their lives. Yeah. Wow. Shout out to Amith, man. That's a real one right there.

Starting point is 00:05:45 Much love, brother. Much love. So trading in 08 and it's been about, what, 15 years? Has every single year been a profitable year for you? Yeah, for the most part it is. There's definitely some volatility in that. The longevity of trading is really just not trying to get blown out. And there's been circumstances from that time frame. You look at a chart, it's just pretty much like this, right?

Starting point is 00:06:12 On the S&P 500. You're like, oh, that's easy. It really isn't. I don't hold stocks for 25 years and tell people to do that. I'm not an investment advisor. So I'm in and out of the market. I'm trying to time it. And it's a great way of really compounding your account much quicker than trying to take on the average 5%. So if you're averaging like 3% to 5% on your winning

Starting point is 00:06:36 trades, well, you could see how accelerated your account could get. So there's been always like hiccups. It was the craziest, the Black Swan event. So it's certainly the longevity of being consistent is the trademark, you could say, for success. Some years have been much better than others, no doubt. But it's something that I'm very proudful or prideful on is that I've done generally well every single year that I've been involved in. Yeah, for 15 years, that's impressive.

Starting point is 00:07:08 Yeah, yeah. Again, that's probably why I'm here. Are you doing options or are you just buying straight stock? Both. You know, it's, again, really changed the game in terms of retail traders

Starting point is 00:07:21 getting interested in the markets. And the vast majority of these are people that have very limited funds. So, you know, some would start with these small, you know, micro cap stocks, you know, penny pumpers in a sense. Not so much the OTCs, the ones that are actually listed. But, you know, the interest in options exploded at that time. So it was more that I just had to constantly evolve with the markets and the retail participants. So definitely doing both. Yeah, that makes sense. Are you using any AI to trade right now?

Starting point is 00:07:56 Yeah. So AI is the hot topic, right? And this is something that I've really looked into probably for the last seven years pretty consistently. Just never found a product until recently that was worth any of the hype. But this recent tool that we've been integrating has been incredible. You could literally take someone who has never traded before, like being in a similar position as myself, but give them this tool and they could easily find success. It's almost silly in that sense. And it's almost unbelievable to hear, but it spoon feeds these trades ideas.

Starting point is 00:08:40 It tells you how to trade it and it tells you how to get in and out. Wow. I'm going to get it tonight, bro. That sounds like a money printer. It's pretty damn good, especially for those that have experience. And the best part of the tool itself is not just finding success with it, but there's people that have been actively trading in the markets that struggle with emotions. The downfall of most traders is really either lack of knowledge, lack of control, or dealing with emotions that may veer them off their original path.

Starting point is 00:09:12 Right. And the AI system that we incorporate, this tool, frankly just takes care of that. It's almost like a set it and forget it type of trade. Damn. Yeah. It sounds too good to be true. There's certainly a lot of, you know,

Starting point is 00:09:28 human elements that are involved. You do have to know some respects to options. You do have to make the decision. It's not going to make the decision for you in terms of actually executing the trade. But, you know, once you get into the trade, it's, you know, it's only trying to put you in high probability opportunities. Yeah, that's cool. I mean, I'm assuming these

Starting point is 00:09:49 hedge funds have some sort of AI they trade on, to be honest. Yeah. So, you know, these hedge funds have been so aggressive in pursuing, you know, the smartest minds, but not from a financial standpoint, but more from like a computer engineering or computer programming standpoint. Citadel, Renaissance Technology, Bridgewater, these guys have $50, $60, $70 billion assets under management. And then there's hundreds of others that are kind of in that same boat that just don't have the same money. And these guys are running these super intelligent, hyperactive,

Starting point is 00:10:29 high-frequency programs that have some integration. But AI is still so new that these funds just can't trust a program to take over everything. Because they could essentially move the market both in a positive and negative way. And it could also have a severe outcome in a positive negative way on their balance sheets, their overall P&L. So they always have these guys that are constantly watching these programs to make sure they're working. And that's their job. They're not really traders. They're there to make sure that the program is running how it should. And their edge is always going to be taking advantage of retail latency.

Starting point is 00:11:16 These guys, they used to work with fiber optic networks. Now they've created these microwave antennas to send that information so they could get milliseconds faster than we would on our platform, no matter how fast our internet is. And then to try and scoop in quicker, then we would be able to get our entries and then get out quicker than we would be able to get out. Wow. Yeah. So if you're buying on Robinhood, you're late. You're late and you're not getting the price that you want.

Starting point is 00:11:43 Yeah. Wow. So what's the best platform then for retail? For me, you know, I, I use think or swim. I think it's very user friendly.

Starting point is 00:11:51 It's, um, it's got a ton of information in terms of indicators that people use. I'm not an analyst. I'm not, uh, a fundamentalist, you know,

Starting point is 00:11:59 the way I've always traded is through technical analysis and price action. And price action is, is always going to be king. The rules of the market is whatever side has more money is always going to be the winner. And so price action determines how that money is being traded. And so if you could read it properly, which is kind of, I guess, where one of my biggest skill set is, like I like i said you're never going to beat the market you just ride the waves you just go with the market swim swim with the current against uh

Starting point is 00:12:30 versus swimming against the current yeah when you're doing ta how accurate is that usually i you know there's always going to be times where um you're going to get fooled uh there's no trader that ever hits at 100 skill rate or 100 win rate uh usually you know there's always going to get fooled. There's no trader that ever hits at 100% skill rate or 100% win rate. Usually, you know, there's always going to be some sort of, you know, just a misinterpretation of the information. So I would say experience is a good indication of how accurate things can be. I think the top-end traders that are manually trading can be somewhere in the range around 70 to 80

Starting point is 00:13:05 percent wow but they're usually like in and out for small gains yeah so when we are looking at a more broader term picture with a lot more exposure i i for me in our industry and this doesn't sound crazy but the most successful traders will win between 45 and 55 percent of the time. That's it? Yeah. The reason being is that the successful traders will maximize their opportunity. And they learn to, when they're wrong, cut bait quicker. So if you think about it, right, let's say you win $1,000 for every trade and you lose $200 for every trade,

Starting point is 00:13:43 your scale of being correct mathematically only puts you in a range where you have to be right three out of 10 times. And you're still profitable. Wow. And that's the human element, right? So now if you're working on that scale and then you're actually hitting at 50%, I mean, you're actually doing really, really well. Yeah. I never thought of it that way. I just thought, yeah, because I thought you were winning and losing the same amount. So 50% is break even. You can.

Starting point is 00:14:08 Again, that puts you in a really difficult position as a trader because it always turns into these 50-50 moments. So what's the difference between that and flipping a coin? You always have to have some sort of edge as a trader. And, you know, the easiest edge, especially for people that are learning, is to understand the values of opportunity versus the values of risk. And I'll tell you right now, for people that are trying to get into this game or just learning, no matter what, that's going to be where your success is determined, your risk management and your money management. Anybody could buy a stock at any time and find success. Don't think that the entry

Starting point is 00:14:51 is the most important aspect. It's the back end of the trade. It's what happens after that entry that's going to determine your success going forward. Yeah. Is it true most day traders don't make money? I mean, I would say maybe 10 years ago. Yeah. I think there's a lot of information and the markets are more knowledgeable. Market participants are more knowledgeable now where I don't believe that to be true. I have a celebrity's wife as a client yeah and in the stuff since the start of 2024 she's up over one and a half million dollars holy crap in fact four months yeah in fact he actually gave me a shout out on Twitter which is hilarious and it she's been she's a active trader I think she's been involved in the markets for about 10 years.

Starting point is 00:15:46 But she's never looked at it a certain way. So she was a part of my small group mentorship and really learned this very quickly, understood the dynamics of what it takes. Really, really disciplined and just nailed it. I mean, the run in NVIDIA, the run in SMCI. Are you interested in coming on the digital social hour podcast as a guest? We'll click the application link below in the description of this video. We are always looking for cool stories, cool entrepreneurs to talk to you about business and life. Click the application link below. And here's the episode guys. She was involved in that running lly and

Starting point is 00:16:26 she was able to take it early enough and maximize and recognize it and it wasn't like she just bought and held um i would say some of her holding periods were for maybe a couple of days but she was really actively in and out and playing on both sides and just absolutely crushed it like it's not like she started with five million to make 1.2 yeah so she started with far less than one point you know 1.5 and like i said it's just her biggest year she said that's cool man yeah to play both sides you got to be super disciplined you know yeah it's it's all you know just like everything else in life it's all about timing and you know we could be in the stock in the direction and if we mistime it we end up with the loss even though we'll eventually be

Starting point is 00:17:11 right and that's you know that's the most frustrating part about trading yeah you're like a day off yeah i mean it's it's kind of the same thing with crypto too it's like you mistime it and next thing you know a week later it's up like 50 60 and you're liquidated while it's up yeah that's the worst crypto is another game have you dabbled with crypto too yeah you know again just just for me i always look at situations as opportunities right um i guess i would say i'm an opportunist i like making money yeah and so whether it's flipping shoes or i was just talking with your producer flipping head covers golf head covers you know it doesn't matter you know i like i like winning and i like you know i'm very competitive

Starting point is 00:17:56 and i like making money so you know people are like i don't believe in crypto what intrinsic value does bitcoin who cares man yeah if it moves,000 points in three and a half months, I mean, where else are you going to get that? Nowhere. Maybe options, but that's about it. Even then, even then, I just, you know, there's, you just see it all over Fintwit. You know, people that are flipping like 500 into 40,000.

Starting point is 00:18:22 Oh, yeah. See it all the time. It's just crazy. But, you know, there's a commonality they recognize an opportunity they trade without fear they they go for the risk for the reward and when they're right they get rewarded and so you know you throw 500 into 10 different you know meme coins and one of them hits the 40000 well the end game is you made a ton of money and a million and didn't didn't need to risk much you know yeah yeah coins are another game man made a lot and lost a lot but it's it's uh you meet some cool people yeah you're right about that

Starting point is 00:18:57 yeah it's very cool people now i gotta ask this because obviously you're asian you're very smart but you dropped out of high school i did i did i did. I had kids when I was young. You know, I guess I've always been kind of been told that you're smart. You just don't put in the effort. School's always kind of, I guess, the idea of being institutionalized, it just never really sat well with me. I just, you know, I was never comfortable in class. I was always one of those kids that was able to get by just never doing homework but did well on the test that I needed to do. Finals would be like 45% to 55% of your score, and I'd just do well.

Starting point is 00:19:36 And the teachers kind of just had to pass me along. So it just got to a point where I was just like, you know what, I'm done. I've got to figure something out. I just want to go out and live my life being know being young and dumb I just said forget it so I went got my GED I didn't study just aced it it was really easy you know and just started grinding out trying to work you know I've always been I guess that's the Asian mentality it's like you gotta hustle hard you know I didn't come from a affluent background you know as a single mom she struggled hard and i just hated seeing that so i was always just

Starting point is 00:20:11 trying to figure out what i wanted to do and poker was initially my niche i didn't really have any great particular skill set in anything uh didn't really have the knowledge you know i had a sports background. Again, not going to school kind of screwed that up because I was being – What sport? Baseball. Oh, ****. Yeah. So some D1 interest, but more so that there was a school called St. Francis out of Michigan.

Starting point is 00:20:39 Their coach was like the winningest NCAA coach. So they took a particular interest interest but once they saw my grades they're like damn and you're asian bro you're supposed to be getting age you know again it's sixth grade fifth grade no problem yeah you know it's it was tough because i i didn't have a father figure my dad was out of my life when i was like four. My mom was working all the time, and she had to live her life. So she wasn't always around to be able to discipline. So I just kind of had this free reign. And again, this is like when I found poker,

Starting point is 00:21:16 it really started with watching rounders and then playing with my friends and then just constantly taking their money. And then we discovered that there is online poker. So my buddy threw $100 into account. The first night I won a $5,000. It was like a total guaranteed pot of $5,000. So I made like $400 or $500. I didn't win the tournament, but I cashed.

Starting point is 00:21:44 And then i entered a smaller tournament but found out that it was like a satellite into a bigger one and then i ended up winning i ended up coming in third place and that was for 5400 bucks and then i went on a heater damn for like a year and how old are you during this? Probably in my early 20s, like 22, 23. Wow. You were young. Yeah, just like I said, I was just really carefree at the time.

Starting point is 00:22:17 I guess somewhat reckless. But really, poker gave me a big foundation. It sounds so funny to say it but it really like honed me into being more disciplined giving me control because this was you know i haven't i never saw money like this and i didn't want to you know blow the opportunity i wanted to keep the money train going so uh you know it's just it's just funny how life rounds up into this moment. And then it translated into finding this for me, what I feel is like why I'm on earth is why, you know, I'm not a deeply religious man. I found God through my wife once, you know, we started dating and,

Starting point is 00:22:59 you know, when you find purpose, it really gives you a good foundation to kind of build off of. And that's why I'm doing what I do because I feel like people need help. And I feel like this is why I'm here. And I can relate. I have seen the struggles. I'm not, you know, like I said, I didn't start from a hedge fund. I didn't start with a trust fund.

Starting point is 00:23:22 So I've always kind of just worked hard to build up into, you know, being a just decent person. And again, just trying to help people on a daily basis. You'd be surprised on how many people go through just immense struggles, more, you know, financially is, is one aspect, but it's just the mental aspect, the mental strain and the drain of constantly losing so so this is just basically what i do every day i love it man you got thousands

Starting point is 00:23:52 of students now right yeah more i i don't know just on a daily basis the interaction sometimes it gets overwhelming yeah but you know i try my best but yeah i don't have the following i'm not on social media a lot you know so yeah you're low yeah i don't have the following i'm not on social media a lot you know so yeah you're low-key i saw you guys big on youtube but that's pretty much it right yeah yeah i mean through the company for sure it's a just i rarely tweet i rarely post anything it's more personal than anything else yeah you know i'm not uh out here to be like a um motivational speaker so to speak. Yeah, there's a lot of stock guys that are flexing on Twitter and Instagram.

Starting point is 00:24:35 But you always have to wonder in some respect too about that. More than anything, like I said, it's one thing to flex and tell people that you're a great trader. There's tons of great traders out there. That's not my niche. My niche is helping people become or get to that level of greatness. And so, you know, I'm not, I don't want to call myself this, but I shouldn't. You know, I've had people become millionaires under my wing, through my tutelage and my teachings. And I't take credit it's more in this respect that these these you know individuals and again it doesn't matter about gender it doesn't matter about age

Starting point is 00:25:14 it doesn't matter about background yeah you know once they learn the foundation and they build this foundation you know they run with it they say you know teach a person to fish. You could feed them themselves for their lifetime. And so we now have a tool in this AI system to make things so much easier for individuals. And really, the problem has always been is this huge learning curve that we've always tried to shorten and help. Because experience within trading is always going to be the best teacher and this ai system is almost like a event horizon where it just folds it yeah and that crossover and that learning curve is so small now and so this is really where the acceleration of retail knowledge and experience is going to grow and be expedited way faster than at any point in the stock market history. Wow.

Starting point is 00:26:14 That's cool. Yeah, the technology has already made such big advancements over the last 10, 20 years. Just wait till you see the next 5 to 10. Dude, that's super exciting because for normal retail traders, it was really hard to penetrate stock markets like five, 10 years ago. Yeah, without a shadow of a doubt. And people didn't know what to do. People didn't know what to turn to. They watch these financial networks. They read these articles. That's why I got out, honestly. I haven't had stocks since college, but it just seems so one-sided.

Starting point is 00:26:47 Because I think I saw this on PBD's podcast. He said six companies own 80% of the stock or something. Yeah, you know what? He's not right. He's not wrong in that sense. Essentially, when we're talking about those hedge funds and those HFTs, they provide somewhere between 60% to 70% of all liquidity in the market environment. So when certain stocks are driven up it's not it's not always going to be in relation to retail it's really these institutions you know they're the ones that provide the backstops are

Starting point is 00:27:16 the one that could provide the ceiling to prevent stock prices from going up but you know outside of the programs they still have you know traders that manually will execute trades but and you know when we look at it from a individual and a human standpoint emotions are the same FOMO is the same demand is the same and so if people recognize there's going to be an opportunity of making money you're left with two choices Take the risk or watch it go up. Or, you know, maybe the timing is down. But, you know, the ad that now is that we're now seeing just a massive movement in retail, along with these, you know, high frequency trading firms and these banking institutions. And when everything gets on one side, we all line up.

Starting point is 00:28:11 Well, you see movements like NVIDIA. You see movements like SMCI. I mean, these are crazy. SMCI in particular, people don't realize this is a $30 stock not even a year ago. Now we're beating on the door of $1,000, $1 hundred bucks you know partly it's the profile of the stock as well it's like a small cap you know crypto coin but yeah you know nvidia is not like that nvidia has done multiple splits and they went on a four or five hundred dollar crazy did you see that one coming that's crazy you know that's a it's a great question.

Starting point is 00:28:50 I've been on TV, like the financial networks, and I said 2024 is going to be the year of AI. And so far, I haven't been proven wrong. And what year was that when you went on? This was actually just recently. So doing these appearances in October, November, the AI hype was just starting to pick up, but I was like, if this hype is going to be real, 2024 is going to be a game changer. And little did I know that NVIDIA in particular made this move in two months.

Starting point is 00:29:15 They broke 400. It was a big ceiling. It was multiple levels of resistance. And once they broke, it was literally just like this. What is that now? It's that like, yeah, well, they're, they're, they're, they're stuck around 900 bucks right now. They're starting to look a little toppy. Yeah. I mean, for stocks to triple at that market cap, it's insane. In that short period of time. Yeah. It's just, but again, that's, that's where when the stars align, retail institution and high-frequency firms are just all in the same spot.

Starting point is 00:29:49 This is what can happen. Yeah. You still playing poker or you stopped? You know, it's – I don't – when I was in Illinois, I just moved to Colorado. I lived next to the first real big casino that opened up a poker room. And for a year and a half, I lived 10 minutes from this casino, and I played poker twice there. So I play a little online, but I got to be honest with you.

Starting point is 00:30:20 I know you're a really busy individual, and so you might understand that sometimes you just don't have the time. Yeah, if it's not worth the stakes, right? Because the game next to you was probably like one two or whatever i mean they'll they'll play the higher stakes i just don't have the time i mean i you know i'm i dedicate a lot of my time not just to you know working with the clients and students every day but once that's done i got to prepare for the following day yeah you know and so it's a lot of research on my end, you know, whether it's reading articles or going through charts. And then once that's done, it's me and my wife. I always make sure to leave some time for my wife. Same.

Starting point is 00:30:54 Yeah. Very supportive. Yeah. Shout out. You need it, man. It's that support system is what kind of keeps you going every day. It's a good motivation. And, you know, it's like I said, dinner is served.

Starting point is 00:31:08 I spend time with her. And then before the bed, I just look at the markets, probably spend about an hour going through everything. And then we go. Love it. Love that, man. It's been fun. Anything you want to close off with or promote?

Starting point is 00:31:19 Any website? Yeah. If you guys want to check us out, prospertrading.com. We'd love to have you guys check out our rooms um you know shout out to you know a couple of mentors of mine you know especially scott bowery our ceo he's the guy that really took me under the wing my man mo shigini uh it's in here right now he's a big reason why i'm here as well um they're the driving force for our success but you know for me my daily focus is

Starting point is 00:31:46 always going to be on you so if you have interest feel free to come check us out be more than happy to speak with you and uh hopefully i could be of some help boom we'll link it below thanks for coming on man that was a really fun episode much love yeah thanks for watching guys and i'll see you tomorrow

Digital Social Hour - High-Frequency Traders Exposed: The AI You NEED To Know I Charles Moon DSH #501

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.