Notes for Beyond the PDT, Episode 21

Episode 21 … Brice Foose (79:41)

• Interview from 2019

• Lives in St. Louis

• Trades remotely for Seven Points Capital

• Pharmacist at CVS in evenings and weekends

• Started trading in 2011

• Graduated from pharmacy school in 2013

• Started at Seven Points in January 2019

• Joined subscription website, Bio Runup in 2012

• Focused on biotech stocks, had an edge being a pharmacist

• Good year in 2013

• 2014 learned how to short and lost money for the next three years

• 2016 took a loss in DRYS that was huge, shorted at $12 (it went to $100)

• Account went from $55,000 to $8,000 after DRYS loss

• January 2017 finally got traction, green year

• Couldn't overcome fees when shorting with small account

• In 2017 with $40K account, had $68K in gains, fees were $70K, so a red year

• 2018 his best year, 2019 should be even better

• Put in the time and never give up

• Every trader who is good has battled through things to get them where they're at

• Main things is controlling losses

• Have to have confidence in your method that you can make your losses back

• Got $20K from his stepdad

• Wanted a method that he could use for the rest of his life

• Anyone looking for a quick buck, trading is not the profession for this

• Oversized losses mainly explain his red years

• If you feel enough pain, you're going to change

• "Getting away with stuff" before big DRYS loss

• DRYS loss the best thing that ever happened to him

• Insitituted max loss after DRYS

• Can see through press releases since he's a pharmacist

• Does biotech catalysts, wants hard date and doesn't hold through catalyst

• Anything up huge in the morning that has an ATM, he's interested in shorting

• Knows all the companies that are notorious for pumping stock price

• Combines technicals with fundamental bias

• Looking for things to fade all day or a couple days

• Tough to have long bias with scammy company

• Liked Mike Katz on Twitter, impressed with attitude and demeanor

• Attended every Traders 4 a Cause since 2014

• Met Katz in Vegas at Traders 4 a Cause in 2018

• Asked Katz if he could trade remotely for Seven Points

• Failed one of his licensing tests at first, but it was a blessing in disguise (missed a bad market)

• Seven Points has great borrows and gave him more buying power

• People on TWTR never post about fees, they can be a killer

• Seven Points internal messaging system is key, surrounded by good traders

• A trader's midset can be fragile, good to have pep talks from fellow traders

• Uses hard stops for every short position, already mentally accepted the loss

• Tries to be positive, life is short, cut out the constantly negative people

• Dreamed of going to the NBA, realized he wasn't going to make it

• Worked out a lot in high school and college

• Did body building for two years, ultimate exercise in discipline

• Hard stops and max losses keep him disciplined, can't spiral out of control

• No more adding, no more holding and hoping (which he did in the past)

• If you trade with edge, and avoid bad losses, the sky is the limit

• If he takes a loss, he's confident he can make it back quickly

• Uses wide stops, sizes position to lose a certain dollar amount

• Uses 1-minute charts during the day

• Uses technical levels for targets

• His strength is he can hold winners for a long time, tries not to take partial profits

• Doesn't think of risk reward when he places his stops

• 90% win rate means risk reward can be 1 to 1 [or worse]

• Talked to a lot of top traders in person at Traders 4 a Cause, like Phil Goedeker (who spent 25 minutes with Brice)

• Met Brian (Lee?) at Traders 4 a Cause in 2016, became buddies, helped each other through tough times

• Another buddy, Justin, talks with him during Brice's half-hour commute

• Talks with ViperofDC (Jay) about mindset

• Essential to have some trading buddies who are on your level and have the same mindset

• Trading is a lonely business, amount of traders who come and go is staggering

• He wasn't profitable the first three years he attended Traders 4 a Cause (a tax deductible business expense)

• He had his eye on the big picture, looking 20 to 30 years ahead

• Traders 4 a Cause in October, best trader networking event he knows of

• Tips for beginners: trading is tough, you need to put in 10,000 hours at least

• Use ThinkOrSwim OnDemand ... it's an incredible resource, speed up your learning curve, use every weekend

• Embrace your losses and learn from them

• A losing year is not the end of the world, learn from it and move on

• The amount of money you can make is totally insane, mind-boggling to a normal person

• Use negative energy to improve your trading, channel it to motivate yourself

• His CPA in 2014 saw his statements and said, "you know we have investment services down the hall"

• Pissed off, motivated him, said to himself that yearly loss I will make in one day in future

• Feel the pain and build the habits

• You need to have a side income, pay your bills while you're learning

• Big believer in trading podcasts, loves listening to them

• Intuition developed through screen time is huge

• He never paper traded, need the emotions that come with risking real money

• Build a process that you can eventually scale

• Don't give up ... learn and improve ... focus on continuous improvement ... learn from your losses

• "Train the Brain" -- a SmashTheBid saying ... hold something longer than you planned to, build patience

• Had cancer when he was two years old, a survivor

• Pharmacist income is very high, opportunity cost too high to quit, spent seven years in school for it

• Focused on paying off his debt: car, mortgage, student loans

• Has real estate LLC, needs the W-2 to secure loans, lenders look askance at trader income (too volatile)

• On Twitter, but rarely posts, turned off by the nonsense ... @PharmDFoose

She's Obliged To No One

I like Andrew Bird … and there’s Madison Cunningham harmonizing (she’s amazing too). It’s Manifest.

Movies Watched -- The Big Red One (1980)

163 minute running time so at least an hour too long … Sam Fuller made one great movie (Pickup On South Street) and a lot of bad movies, including this one. I like Lee Marvin in almost anything, but…. Luke Skywalker is also in this … it just goes on and on and on … give it a miss. Farr got it wrong.

I can understand you being horny, Fritz….

Movies Watched -- Days of Heaven (1978)

93 minute running time so the right length but it still feels like an epic … a W.D. By movie … he threw out the script and thankfully cut cut cut as much as he could … an unusual one, created a mood, a sense of time and place (turn of the 20th century), however romanticized … sparse dialogue, mainly voice-over from a child’s perspective*, it’s all about creating a feeling, a mythical or fairy tale world … with a Biblical plague of locusts and hellfire no less! … but it does give you a sense of a country unformed and people untamed … pretty boy Richard Gere and young Sam Shepard (too young to be a wealthy farmer? I guess he inherited it) … and Linda Manz can dance (that was my favorite scene) … with an Ennio Morricone score and lush cinematography … I can see why this movie is widely loved … it’s a green-go.

(*”It was a last-minute decision by Mr. Malick to have Ms. Manz do the voice-over narration, without a script.”)

He must think we’re awful people

Savage Geese: Cars to Keep

Big fan of Dr. Goose… these are his cars to keep, mentioned in this video: Cars and Trucks Are Changing Forever

• Highest horsepower Corvettes and Camaros

• Dodge Hellcat Demon / Redeye

• Ford GT500 / GT350

• Honda S2000

• Lexus LC500

• Mazda Miata (ND2)

• Nissan 400Z, 370Z

• Nissan GT-R

• Porsche GT3 (992, 991, 997)

Movies Watched -- Brick (2005)

110 minute running time … a W.D. By movie, this had a strong Trust Fund Kid Project feel … an incomprehensible story that puts Chandler-esque dialogue in the mouths of attractive, rich-kid, California high schoolers … I didn’t last long before tiring of the gimmick … give it a miss (waste of a borrow).

I'm not heeling you to hook you. [Line after line like this!]

May Be The One To Change My Ways

I featured another song off this album earlier, but the Spotify algo was smart enough to also suggest “Change My Ways” sung by Pip Millett, whom I’ve featured before. She has a great voice… love this:

Movies Watched -- Suture (1993)

96 minute running time… this was terrible, had the feel of a Trust Fund Kid project … in black and white, about identity … just bad, pretentious. tiresome, poorly done … Roger Ebert, of all people, could even get it right when he panned it. Give it a miss.

How is it that we know who we are?

Linda Raschke on Who Succeeds in Trading

Nice connection to my Matt Marino post:

“All the people who I have observed who have made it over the years found one thing, and it might have taken them five years of doing their own journey, it might have taken them ten years, but eventually they will wind down and find one thing that really works for them.”

Who Pays for Robinhood Order Flow, Part II

Original post.

There are more details on Robinhood’s payment for order flow arrangements in the Prospectus. I wonder who is behind Jump Trading, er, Tai Mo Shan … sounds like Chynar money. Let me dig around. Bill Disomma and Paul Gurinas don’t sound like Chinese names, hmmm.

“A majority of our revenue is transaction-based, in that we receive consideration in exchange for routing our users’ equity, option and cryptocurrency trade orders to market makers for execution. With respect to equities and options trading, such fees are known as payment for order flow ‘PFOF.’ With respect to cryptocurrency trading, we receive ‘Transaction Rebates.’ In the case of equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded; that is, we receive a fixed percentage of the difference between the publicly quoted bid and ask at the time the trade is executed. For options, our fee is on a per contract basis based on the underlying security. In the case of cryptocurrencies, our rebate is a fixed percentage of the notional order value. Within each asset class, whether equities, options or cryptocurrencies, the transaction-based revenue we earn is calculated in an identical manner among all participating market makers. We route equity and option orders in priority to participating market makers that we believe are most likely to give our customers the best execution, based on historical performance, and we do not consider transaction fees when routing orders. For cryptocurrency orders, we route to various market makers that we believe offer competitive pricing, and we do not consider Transaction Rebates when routing cryptocurrency orders.

For the year ended December 31, 2020, revenue derived from PFOF and Transaction Rebates represented 75% of our total revenues, and for the three months ended March 31, 2021, represented 81% of our total revenues. Computer-generated buy/sell programs and other technological advances and regulatory changes in the marketplace may continue to tighten spreads on transactions, which could lead to a decrease in our PFOF earned from market makers.”

“… on June 23, 2021, FINRA issued a regulatory notice reminding member firms of the requirement that customer order flow be directed to markets providing the ‘most beneficial terms for their customers’ and indicated that member firms may not negotiate the terms of order routing arrangements in a manner that reduces price improvement opportunities that would otherwise be available to those customers in the absence of PFOF. The impact that this notice may have on the ability of market participants to enter into PFOF arrangements, if any, has not been determined.”