Make as much money as humanly possible being stupid with not that much effort (Patreon)

If you're trading as a part-time retail degen with the exclusive goal of making as much money as humanly possible using the minimal amount of skill, effort, and time, (as I am)  the stuff that actually moves the needle in your trading profits might be different than you think.

When I started trading, I thought I was gonna have to get super good at data analysis, adjusting the discount rate on some cash flow model, or learning about boring nerdy stuff like mEaN vARiAncE OptImiZaTiON.

In reality, I really do just have some mental illness that makes me enjoy learning about that stuff, but the goal of trading is making money, and none of that has really made me money. 

These are the things that have made me money. 

1. Get around smart people you can copy

2. Do the fucking trades

3. Take more risk

These are the things that have actually made a meaningful difference for me. I don't know if this is necessarily right, it's just stuff that has worked for me.

1. Get around smarter people that you can steal ideas from/copy

There are mfs out there that literally tell you the exact trades to do to make money.

I never believed this when I first started. One of the dumbest things I've said (and there have been many) on my channel is "iF tHiS AcTuAllY mAdE mONeY, tHeY wOuLD juST sTaRt A hEdGe FuNd AnD bE MilLioNaIRes" when talking about scammy online trading course gurus or whatever.

While those courses do suck, that's a stupid argument. Some moron can't just raise a fuck ton of money because he minted cash holding SVIX.

There are strategies retail people can do that do not work at scale. Retail people can also diversify with a bunch of different stuff where a fund might be mandated to do one specific thing regardless of whether it fits the regime.

All that aside, getting around the right people is way more important than anything. They will literally give you the answers

Whether it be crypto, special situations, biotech, etc, there are plenty of smart people who publish their ideas online.

The meta-alpha here is the method of finding people that know what they're doing. I've found this is actually pretty complicated. 

There's a bunch of people who tell you they can make you rich, but they're scammers/don't know wtf they're doing. 

There's also people who are incredibly smart, but don't tell you how to actually make money. They wanna teach complicated math stuff because it's more fun than talking about the important boring stuff. 

A lot of people that do stonks are too smart for their own good. 

One of my partners at Predicting Alpha is an insanely smart dude who made this hedging band calculator. I attached it to this post if you wanna use it.  

It's supposed to tell you how often to delta hedge your long/short vol trade. 

Delta hedging reduces the pnl variance of your trade in exchange for higher trading- ahhhhhHHHHH just ask Chat GPT if you really give enough of a fuck about this boring stuff I can't write more about it. 

Here's the great irony: 

When you do all this complicated math bs to get an optimal hedging model, at the end, you realize you need to input a risk-aversion coefficient between 1 and 10. 

Which means it's entirely up to your judgement.

Which means you could have just asked how much variance is acceptable from the jump, and skipped ALL THE MATH. 

Relating this back to finding good people to copy, I try to find true practitioners. People that trade their own money are the best, because they're usually doing a style of trading that could work for you.

I'm sure there are people that have figured out hft from their parent's basement (maybe in crypto land?) but idk any of them personally. 

People that trade their own money also usually have other life obligations, which means they're forced to focus on only the most important and relevant trading activities. 

 A lot of the times I've found those activities are not what I would have expected. 

The meta-meta alpha is just to stay active on this Patreon, because I'll do my best to post any trading strategies I find on here. 

Imagine a human centipede of trading strategies.  

2. Do the fucking trades

You can find people that will literally give you answers, but there is one small caveat.

They won't give you some high frequency, news based, alpha signal that makes 8%/month.

This sucks for a few reasons. 

A big one is that your strategies lose money a lot of the time. 

Maybe you gamble on earnings announcements.

Maybe you you buy the top 10 stocks that performed best in the S&P over the past year.

                                                Courtesy of the Predicting Alpha community

Maybe you hodl SVIX or BTC with 50% of your portfolio, and drink bottles of Wild Turkey to keep your blood pressure just under the deadly range.

Maybe you trade biotech companies with insider information.

It doesn't matter.

Do the fucking trade.

You can make 15% on your money in one quarter trading earnings and lose it all in a day. Not because you did anything wrong, but because that's just how the trade goes. This has happened to me and it's miserable. 

You have to do the next trade.

You must persevere.

It will be painful, but you must persevere.

There's no semi-systematic, part time, trades I know that make money everyday. Most of them lose money a good bit of the time.

As Charlie Munger says: "The big money is not in the buying and the selling, but in the waiting"

This might sound like a bit of stock market voodoo, but I swear it's true: The SECOND you give up on one of your systematic trades, it does 25% the next quarter. 

All the big finance movies/media like to focus on bets that paid out in a big way. That really skewed my perspective on how much consistency and variance is involved in extracting money from stonks as a part time retail person. 

I do know some people whose trading strategy is just to find one massive arb or quasi-arb every year. I'm too stupid to do that. 

3. Take more risk

Being a degen can be the thing that makes you money.

Risk = Reward is something everyone says, but no one ever elaborates on what it means.

I always thought, If you're getting more reward, but taking more risk in the process, wouldn't the net outcome be 0 gain or loss compared to a less risky strategy?

Mfs talk about normalizations like sharpe, but what does that actually mean? If you make $10,000,000 with a terrible sharpe, who cares? Right? RIGHT?? Isn't our goal the absolute dollar amount of money we make?

For a lot of people that lose money professionally, no.

I know a guy who knows a guy who knows a guy who can't ever have more than a 5% drawdown without his capital getting pulled.

The volatility of his returns need to be low, otherwise he's not gonna have a job.

The problem is risk (which manifests as volatility in most stuff) is inextricably linked to making money.

And because you and I don't have limits on how much risk we can take, we should be able to reap the rewards of taking more risk.

This might be in the form of

• Levering things up above a socially acceptable level
• Taking only the most over(under)priced leg in a long/short strategy instead of both
• Depositing money on sketchy offshore crypto brokerages and prediction markets

This is not financial advice. This is gambling advice.

Generally speaking, if you're doing something that makes even a tiny bit of sense IE being long momentum stonks, selling ETF volatility, etc

The more volatility you have in your portfolio, the more money you can expect to make, but the more it's gonna suck in the process, and if you overdo it you're going to die.

That may not be the most elegant way to put it, but you get the idea.

More volatility = make more money up to certain point. After that point, it starts to go down, and the problem is no one knows where that point is. You can only infer it from the past and pray.

This mf learned that the hard way (video coming).

Practical tips to taking more risk

• I've gotten more comfortable with big swings over time, so I think increasing it slowly is good
• Your biggest loss is yet to come. Looking at the biggest loss in the past is a fallacy. There were no losses that big at the time it happened.
• Dudes say they're ok with a 20% drawdown when looking at a backtest, but 95% will quit trading forever when it actually happens. 
• Most brokerages allow you to stress your portfolio to different moves in the S&P, changes in commodity prices, changes in implied vol, etc. It's good to do this and see if a 5% drop in the S&P would be enough to make you hurl yourself from a high place. If it would, maybe size down a little. 

 Conclusion

I've sometimes found myself thinking 

I need to do deep value 

or 

I need to specialize in merger arb

or

I need to gamble in crpyto

But one of the biggest advantages of being a retail person is that you're nimble. You can follow deep value people, special situations people, and crypto people, then steal the best trades from all of them. 

I truly think if you play the game properly, (which involves stealing from the right people, sticking with something, and getting comfortable with a little more variance than a buy-and-hold index strategy) you can make money without that much work or effort. 

Hedging band calculator below.