Trading Lab Podcast Lecture Notes

Introduction

• Host: Richard Moglen
• Guest: Leo Smokoka, top performer in U.S. Investing Championship with a 409% return.
• Focus: Review of past trades, strategies, and key principles for achieving high returns.

Key Concepts Discussed

Trading Entry and Strategy

• Cheat Entry: Identifying low handle below the 50-day average with a decent volume profile.
• Risk Management: 13% risk initially, but adjusted to enter as price crosses previous highs.
• Volatility Contraction: Look for volatility contraction characteristics and time compression.
• Shakeout: Recognizing shakeouts and handling them, especially around resistance/supply areas.
• Volume Analysis: Increased volume can indicate potential breakouts, while drying up hints at consolidation.

Trade Execution

• Free Rolling: De-risking by moving stops and taking partial profits to ensure a breakeven if stopped out.
• Aggressive Entry: Entering with tight stops (e.g., 5%), willing to be stopped out multiple times but controlling risk.
• Position Sizing: Typically 25% of account, but adjustable based on market traction and risk.
• Using Margin: Selectively, based on market conditions and recent trade success.

Analyzing Themes and Patterns

• Identifying Themes: No shortcuts; requires diligent screening and watching for technical and sector themes.
• Example: Nuclear theme with stocks like SMR and GEV performing well.

Risk and Loss Management

• Avoiding Mistakes: Stick to rules to avoid cascading failures when breaking one leads to breaking others.
• Handling Drawdowns: Reduce position sizes and tighten stops during low traction periods.

Case Studies and Example Trades

Successful Trades

• ARM IPO Base: Perfect setup with IPO base, handling, and breakout analysis.
• SMR: Aggressive entry with tight stop, good volume and trend analysis.
• PHA: Clean and simple base with strong follow-through and volume breakout.

Challenging Trades

• LUMN: Aggressively trading off 50-day moving average, highlighting the need for nimbleness.
• MSTR: Worst trade due to revenge trading and breaking rules, demonstrating the danger of chasing losses.
• SE: Another revenge trading example illustrating the impact of poor risk management.

Key Takeaways

• Risk Control: Central to trading success; multiple mentions of managing risk through position sizing and stop adjustments.
• Game Plan: Have a premeditated strategy and stick to it to avoid paralysis and impulsive decisions.
• Self-Discovery and Style: Focus on developing personal trading style rather than copying others.
• Mindset: Trading success attributes heavily to mindset; likened to bodybuilding's focus on diet (mindset) vs. exercise (technical skills).

Closing Remarks

• Connect with Leo Smokoka: Twitter: @Mikulkal
• Final Advice: Emphasize consistent risk management and staying true to one's trading plan.

Additional Notes

• Future Opportunities: Importance of adapting to market conditions and recognizing that not every year will present identical opportunities.
• Resource: Encourage engagement with the Trading Lab Podcast for further insights and interviews.