Ex-PE Turned Into Semi-Retired Trader. Q&A

During IB I didn't trade single names, thankfully had some investments from before but anything new was put into tech ETFs. During my first PE job, same thing. Second one I had more freedom as long as they got approved. COVID was very helpful for being able to trade during work and that's really when I think I evolved from a good investor to a good trader. When I was back in office, it became hard, but thankfully crypto is a 24/7 market, basically my nights became devoted towards research / trade setup. I wasn't sleeping a lot and it was becoming unsustainable.

Most helpful resources for me were 2 books, and certain Twitter accounts. The books are Market Wizards and Reminiscences of a Stock Operator. The rest is really just putting in time staring at charts and trading. It's something you have to learn by doing. Trial by fire if you will. And having the awareness and discipline to learn from it and improve yourself. 

I am single lol

Congrats, I think its more than enough cash to live a great life. I am consistently shocked when I find out peers of mine working crazy hours have a trust fund worth 10s of millions...

That's awesome! Are you just going to put $10 million into a long term low fee S&P fund and live off of the $8 million's interest in the meantime or are you still trying to make individual trades? 

What made you start trading seeing as your background is deal focused

Thank you. And yeah, responses so far have been surprisingly positive lol. Sounds cool and sure, feel free to dm me (if that's a thing? I haven't been on here in a while). I have never dabbled with any sort of exotic strategies like that in equities, but am always interested in learning more. I think it's important to find a strategy that you are good at and to be consistent with it. Traders fail when they let emotions get in the way and they deviate from their principles

Not sure why but my comment got removed. Will try again. Appreciate the kind words. And I am pleasantly surprised at the overall positive responses so far haha. I have not dabbled with those kinds of exotics in equities but sounds interesting. Happy to talk whenever.

Where in MM/LMM PE are you most excited about these days from a sector/sub-sector perspective?

• I haven't done enough research to give you a good answer here. I did my research before to decide on MM/LMM PE for a large portion of my funds, but haven't had the time to hone in just yet. I did my large cash out in December and took most of December / January off. Been taking it easy and focusing on health. It will probably be a mix of industries for diversity purposes, but will go heavier weight if there's an industry thesis that I find. I'll have to see what prospectuses come my way. Another thing that is very important to me is team. I'm a big believer on betting on teams. Particularly for any first-time fund founders, if I can get outsized economics, would be very interesting.  
• If you have any recs / ideas on subsectors, let me know

What are your favorite trading software programs?

• For equities I keep it pretty simple. I don't day trade equities. I use Trading View for charts and Fidelity for brokerage. BamSEC I guess if I'm gonna dig into a company lol.
• For crypto: Trading View, TradingLite, Hyblock Capital, Tree Terminal, various Twitter accounts for instant-news, Coinalyze, Coinglass. I think those are the main ones. I use a lot of data in my trading.

Any views on USD vs. CHF/JPY/EUR (over say next 12 mos)?

• None atm

How did you approach paper losses and position sizing? Did you get out after a certain % decline? Stay in until thesis disproven?

• Paper losses are very real losses. I think it's a dangerous word and people often find themselves losing a lot more than they were prepared for because it wasn't realized or they didn't have a plan to get out. I say people, but I have been guilty of this before too. Taking a big drawdown sucks, but it's part of the game. They say that every bad trade is your tuition to become a better trader, which I firmly believe -- but only if you learn from that trade. I journal all of my trades and have learned to be a lot more selective with when I trade. I used to always want to be in a trade which I think is a very bad habit. The best traders I know are the most patient ones. Some think that they can only do that when their book has grown to a size where that's possible, but I don't agree.
• Position sizing -- it ranged drastically depending on the size of my book, the volatility of the asset, the invalidation, and the conviction I had. In earlier days I risked more, so position size as a % of total book decreased gradually over time. If the asset was less volatile, i.e. BTC (as opposed to alts), then my positions were larger. If the invalidation was very tight and I really liked the setup, I'd sometimes take a larger position. Lastly and most importantly is conviction. A majority of my $ was made in a small # of my trades. A lot of the other trades ended up canceling each other out or keeping me occupied. They allowed me to keep my pulse on the market and refine my edge, but I wasn't taking it to the bank. The big winners came when the stars aligned and I had both the capital and mental capital to take advantage. Often times these moments can get missed if you have poor risk management because you are down bad from previous trades. 
  • An example of this was Q4 + the Trump trade. Crypto is historically very bullish Q4 and we were just coming off of a brutal ~6 month downtrend / range. I knew Q4 was historically bullish, and I felt that the market was also underestimating Trump's chances to win and what that would mean for crypto. His odds started to creep up before crypto moved, and all my advanced research found that polling was extremely skewed. I knew I wanted to get in with size, but didn't want to get chopped up before the move, so I waited for a good entry. The TA setup on the BTC chart told me $52-54k was a really good area to bid and if we breached $52k, we were likely heading for the lows. So, sure enough, $52k came, and I levered up big. In the prior 6 months, holding onto any long for more than a few weeks was a bad idea. But I knew the range had to break soon, and what better setup than Trump winning and a historically very bullish Q4. So I held the longs and this ended up being at the time my most profitable trade ever, all with very little drawdown.

Guessing you had to deal with a lot of compliance stuff for your trades while in IB and PE?

• Yes, I touched on this in another comment. In my first IB and PE jobs I couldn't trade individual names. In my second one I thankfully was able to if I got approval

Thanks for the good questions!

HFs don't do this kind of work. They have a self-righteous attitude that TA is effectively astrology or that every investment needs to be modeled out in some inane granular detail. Perhaps the pods may be more receptive if he can call quarters (just a hunch) but SMs will laugh him out the door but who wants to work for one anyway. Prop traders may be the most receptive.

Thanks. Agree mostly with the comment below. Will reiterate that I don't want to work for anyone or in an office lol. Other things -- executing these strategies at a larger scale is a completely different game due to liquidity and risk profile. Managing people's money / working for a firm adds stress. If I were to do something I would either join a small shop / team, or, raise my own capital as you said. But with raising your own capital there is a lot of BS that you have to deal with. Legal, compliance, tons of fees and infrastructure costs. It's really a nightmare. I've made enough thankfully to where I don't feel I need more. If I was still sub 8 figures (but had performed well), I'd likely be thinking of raising my own fund right now. Maybe one day I will start some sort of family office, cause I really like that style of investing (macro / diversified). But I'm not too keen on managing a trading firm right now, it's a lot of stress. And I also wouldn't do a prop firm, I don't need the seed capital (I think most prop firms arent very good for this reason. If you're a good trader, you don't need the $. If you're a bad trader, they shouldn't want you). It's a weird paradox.  

I haven't had enough discussions to give you a good range, but smallest I heard so far was $500k. These will only be direct investments, I don't like the idea of paying double fees to a FoF. I'm interested in non-US as well, but will likely do 80%+ in US. I'm hoping to leverage connections from friends that are VPs/directors in MM funds, so we'll see. I have a call planned with a friend of a friend who works in placements at an EB and that should get me more color / opps

Haha well this is all pretty new for me. Took most of December and January off to relax, focus on health, go on some dates, see friends, exercise, etc. I still track markets and am starting my research on how to manage this capital and where to deploy, etc. so that's enough intellectual stimulation for now. Will probably start to read more soon as well.

Aside from that I plan to travel a lot this year. I had always said I'd be really good at being retired. Never understood how people wanted to work their whole lives. So, I think I'll find things to do lol. Hopefully get really good at golf. 

I don't have many. I was a STEM major but worked in finance out of school. I'm really good at math. Subpar at coding but i dabble. I use data a lot in my trading but wouldn't really call that quant. I am interested in developing some algorithmic trading bots in crypto if I can find the right devs. I think it's still an underserved market and there is some really good exotic data out there that can be leveraged. We'll see.      

A lot of reasons. As a trader, I think crypto has been by far the best market in the world to trade. The gap is closing though and it is getting harder. But here are some reasons:

• Predictability -- you basically know that every 4 years, a halving occurs which reduces BTC supply emissions by 50%, catalyzing a bull market. So it's quite obvious to just deploy $ on this 4 year cycle and take profit as the top is reached (which most people get greedy and fail to do)
• Trading Products -- by far the best trading products in the world. Perpetual futures are a traders dream and they don't really exist in traditional markets. 24/7 market also means you know at what price you will get stopped out. With equities you don't know as after hours are super fishy. An overnight spike down makes it impossible to get out. The UI is also just far superior and is super clean and easy to use.
• Leverage -- crypto exchanges offer really good leverage. I used higher amounts before, particularly for certain types of trades like news trading (~10x on larger coins). But even so, the ability to use 2-5x is night and day vs. ~3x on margin accounts (you can go higher, but only intra-day). And I think intra-day trading stocks is nightmare fuel
• Volatility -- the most volatile asset class in the world. You have things doing a 10x in a month, some stuff dropping 50-80% in a month, days where major coins make 20% moves. The fact that you get so much vol in such short periods of times allows for some really insane trades
• Data -- there is an incredible amount of data availability in crypto. A lot of which is on-chain and published. And a lot that is published by exchanges, in the ethos of crypto, making data available. Utilizing this information for trading is really powerful. I'd say it used to be more powerful than it is today, since a lot of people have started to implement data in their trading, but it is still a great source of information and something that can set you apart from others if you pay attention.
• Competition / Counterparties -- the competition in crypto is so much worse than in equities. You are mostly trading against (1) retail, who are awful traders and (2) fund allocators, who are large in size and trade much higher time frames so you can generally track their flows pretty well. They also move slower and by being nimble you can often front run their moves. There aren't a lot of sophisticated crypto hedge funds, and even the ones that are, most aren't that great and they come from crypto backgrounds, not trad-fi, so their prior success was a function of bull-markets, not from being good traders. 
• Long / Short -- maybe my favorite thing here. In crypto, 90% of stuff is garbage, 10% is actually good. I'd often hedge risk when I thought the market was frothy by shorting bad coins. So, instead of selling my good positions, I'd leave them open, and simultaneously short bad coins which would fall much harder, making my book ~delta neutral at wherever I thought the local top was. This was effectively the same as taking profit at that local top, but more effective because the bad stuff fell harder than good. You can run these strategies on a longer period of time as well "pair trades" and perform quite well with minimal risk. There is just a huge dispersion of fundamentals in crypto and many people buy the dream, when in reality their coin has 0 value or has massive VC overhang that will make the coin asymptote to 0 over time
• Early to a New Asset Class -- there hasn't really been anything that has performed better than crypto in the past 10-15 years. If you were early to BTC, ETH, SOL, etc., you made a significant amount. The returns are just pretty astronomical if you picked correctly. So as a trader, if you are riding these trends at the right time, it pays off handsomely versus 10-15% in a year in the S&P. This, combined with volatility, makes it a great asset to trade if you are sharp. Even just the past 1-2 years, BTC went from a low of 16k to a high of 108k and SOL went from $10 to $300. That's a 6.75x on BTC and a 30x on SOL. Obviously these are pico bottoms and tops, but gives you an idea of the returns. Now imagine that with leverage. HYPE was / is another one that was fundamentally obvious and went from $2 at launch to $35 in just 2 weeks, and you could have sized into that with nearly whatever amount you wanted (8 figs at least). If you are good at picking times to be aggressive and defensive, a lot of $ is there to be made, much more so than equities.
• Counterparties Lack of Finance Knowledge -- last one here and this goes into understanding good coins vs. bad coins. If you have basic finance skills and understand multiples and profitability, you can often find diamonds in the dirt in crypto. These coins may not reprice immediately, but often times find themselves to hold up much better during downturns and slowly outperform over time. It's a sporadic market and this always isn't the case. You need to be aware of MOATs, etc. as well. But I've found this to be quite helpful. Especially on the L/S side -- i.e., long good, short bad.

What's been your biggest trading mistake? What went wrong / what are the lessons? 

• Too many to count. My biggest mistakes were oversizing and getting stopped out too soon, only to watch my stops get hit and my thesis play out (coin runs a bunch). I started to use lower leverage and wider stops, as well as be more patient with my entries, and this helped me a ton

How difficult was it to leave? Did you spend a ton of time marinating on that decision or was it a predetermined thing by the time you had enough invested to serve as a cushion? This is particularly interesting to me because I'm around the same level of cushion now and would love to "retire" from corporate life.. but frankly, I feel like I don't trust myself enough to do it.

• It was very difficult at first. Thankfully some close people around me were very encouraging and told me I should do it. I think that played a big role. I'm pretty risk averse naturally so it was hard. The market was really hot when I decided to quit though and I was coming off some big wins, so that made it easier. Also, I knew how much I was missing out on and just couldn't take it anymore. If it was during a less "easy-mode" time, it would have been a lot harder to leave

How important do you feel "Luck" is in trading generally, but also in your specific path to where you're at now?

• It's a good question and I think it depends on the trader and their style. Some people can get lucky and make a lot with bad risk management. But most of those people end up giving it back. I guess there are a few that are smart enough to realize it was luck and keep it. I think to be a successful trader on any meaningful time-horizon, there is very little luck. I don't think my path was a factor of luck, as I often felt I got unlucky in my trades tbh. My luck was probably that I found this asset class relatively early and was super interested in it / fell in love with trading. I'm also a very competitive and determined person, which I think is needed in trading.

You dabble in investing/collecting anything "exotic" like watches or cars? 

• No cars (yet). Watches yes, I have some good ones

Experienced any major lifestyle creep with the gains in NW? How modestly (or extravagantly) do you live now?

• Not really. More so just less stress which is nice. I live pretty modestly. Flying first class on long flights is nice, that's probably been the best thing lol. Outside of that I haven't really changed spending habits all too much    

I am not. Thanks though

This is the time where you have to make sacrifices. Sacrifice your weekends. Stay up late. Find the time. It's not for everyone, but if you are really determined, it's the only way you'll be able to pull something like this off. When you're at work, try to be efficient with your time so that you have some downtime in between comments or w.e to hone in your skills. If you can't trade individual names, paper trade them, but be disciplined about it. Or find a way to trade through a parents account, even if it's a small amount of money, so that you can feel what it's like. When you are at work, stay late if you have to and focus on reading / studying. I often did this as I knew I was more productive in the office vs. when I'd transit home. You just have to find the time and be proactive in doing things that will lead you to your goal. Books, youtube videos, research, podcasts, actual trading, whatever it may be. I wouldn't be in a major rush either though. It's important to build a capital base for trading and there's no better way to do that than with a real job. Just try to make the right investment decisions over time while bringing in an income and refining your skills. 

ByBit and Hyperliquid

I'll do one market post since a few others asked similar questions

General thoughts are that BTC has clearly shown it's the asset that institutions and large money wants. Many crypto natives have had little BTC exposure during this entire run and it shows. SOL probably continues to reprice vs. ETH over time, but has some really big unlocks coming up and is likely showing some weakness because of that. It will be interesting to see how SOL does with inflows when its inevitable ETF comes probably later this year -- ETH's ETF has been a bit of a flop. In general, most alts have gotten destroyed and most will continue to trend to 0. Keep an eye out for the ones that aren't doing that, or that are in fact trending up -- those are the ones you want to spend time on. Hint: there aren't many.

I don't have strong market views right now. I was bearish the last couple of months and felt there was a lot more downside than there was upside given where we are at and how fast we got there. Now, with many alts going back to bear market lows in just 1 months time, and a ton of leverage being wiped from the system, things look interesting again. However i don't think we trend hard or get any sort of easy-mode style run right now. The market needs to heal and re-establish a base. Either that, or we get some sort of catalyst (strategic Bitcoin reserve or QE) which can propel us to fresh highs. Until then, BTC looks like its in a range and most alts will stay bleeding, while a couple of strong ones may have enough juice to make a move or at least stay afloat.

I wouldn't touch XRP with a 10 foot pole unless it's a for a trade. Jokes on me though (and the rest of crypto natives) as it obviously has performed well the past few months. That's the funny thing about crypto though, sometimes things don't make sense

Anyway -- as I said, this is a hard market right now and I don't feel as if I have a strong read, which I am perfectly ok with. I had felt strongly about how the market would move for the last 2 years. Soon enough I'll probably have conviction in one way or another again. The key is to survive and preserve wealth when things are not clear. I.e. you don't always need to be in a trade

a) What investment vehicle(s) from a tax perspective do you use (Roth, personal account, etc.)? You said you traded in college so I assume the latter, but that then brings me to

-- I have a Roth and 401ks from my jobs. I'd trade with them sometimes, they are actually nice for trades because you don't get hit with short term cap gains unlike personal. But of course you don't want to nuke those accounts either. Now i mostly just have them in ETFs.   

b) What did you do with your IRA’s? You surely had some principal basis that would be significantly penalized if withdrawn, no?

-- I left them, never had a need to withdraw

Hope this answers your q's. I was never super into these things as some were. I max'd my 401ks and I transferred them to my brokerage firm vs. leaving them in my providers. But that's about it. I never got too savvy with them 

Yes feel free!

I think I started learning them at the same time (in college). Trading took a lot longer to learn because of the emotional aspect of it. It's a much more difficult game. Investing came pretty easy once I learned basic valuation principles. 

I paid a lot of attention to things that I liked, i.e. Apple and Amazon in 2013, Tesla fairly early, etc. A lot of people are inherently bearish and pessimistic. They try to find reasons to go against a popular company. But the reality is that good companies just win over time. If the brand is good and people like it, it will likely continue to be that way. One of my favorite investments of mine was Apple in 2013. It was trading at a ~11x PE multiple, but if you backed out their cash, it was more like 8x. That to me was insane. And I had really just started learning what a multiple was. Growth had slowed, but they clearly had a monopoly on high-end phones in the US, and I personally felt the product was far superior than anything else. Those kinds of advantages have staying power and demand premiums. 

I've seen these types of narratives play out plenty in recent years as well. META was an investment I made during the 2022 stock market sell-off. I was told by everyone in tech that the new privacy laws were going to destroy their advertising revenue. Once again, a monopolistic tech giant was trading at a 10x LTM PE multiple with 50% profit margins. I felt some deja vu there. Now it is 7x off the lows. Some other ones in recent memory which I did not take -- CAVA, Spotify, Netflix, Uber. Might sound simple.. but a lot of people don't practice it. Invest in leading companies with products that you love.

Trading I learned from practice. Thousands of hours staring at charts, whether I was in trades or not. There were some Twitter accounts that were really helpful in my journey. Some books that I read that were truly instrumental. Youtube videos, etc. I was and always will be a student of the game. There is always more to learn and the market is constantly evolving. But at the end of the day, the best way to learn is to learn by doing. You have to put skin in the game and learn what it feels like to win a trade or lose a trade. I learned the most from myself. I journal all of my trades and my reflections teach me a lot about why or how I went wrong, or how / why I was right. 

Dislocations is a good word and I would say yes, that embodies a lot of how I think about both trading and investing. My biggest conviction bets came from when I felt I spotted major dislocations.

• I'm assuming that if you've been trading for years prior, that overlapped for a decent amount of time in your PE career although not sure what asset classes were contributing to most of your trading during that time period. Did you ever leverage your investment/trading analysis through moving up or initially starting in the PE vertical in terms of recruitment and landing offers? 
  • Started off with stocks. Got into crypto around 2017 and did pretty well but it was with smaller amounts. 2021 is when I was able to start to run things up. I did not leverage my analysis for my job or for recruitment. The most it did was help me sound intelligent around seniors whenever people wanted to talk equities. But nothing meaningful
• From the beginning, how did you manage your trading funds? Did you start with a lump sum and just continually trade, live off some of your profits, add funding once you were in your PE career, etc.?
  • Parents gave me a small amount to start with in college which allowed me to get my feet wet with markets. Post-college I'd just save my money and put all my savings into my brokerage account. I lived off income, never really took profits out for living expenses. Yes I continued to add funding. Every dollar I ever made went into either crypto trading or stocks, aside from whatever amount I'd leave in the bank for general purposes.
• I'm currently attempting to land a role in either investment banking or alt. asset management (hedge fund or similar strategy team in more comprehensive asset manager)...with my experience IB seems to make more sense to start with in terms of potential exits. Also willing to go to S&T, but would most likely do that with the intent of moving to something product related in banking or the buy-side. I've had experience with options, typically consisting of longs (intra-day), credit spreads, debit spreads, various unbalanced strategies. Fundamental analysis and due diligence on longer term equity holds. ODTE spreads on indices. L/S on M&As/fundamentals in equities at times. Less experience in futures but that's been generally fairly macro...rates on policy/economic indicators, L/S commodities on volatility from global markets moves, etc. I've consistently outperformed for around two and a half years now and I'm sure there has to be a way to get more value out of that in terms of recognized previous industry experience. Obviously that's going to be seen a little bit differently in S&T, but how would you recommend leveraging this type of experience in terms of the initially mentioned sectors in the industry?
  • I think if your industry is relevant for it (S&T, AM, HF), then it probably makes sense to talk about. Or if you don't love your extracurriculars and you want to fill your story / resume with stuff on trading. Especially if you are confident in talking about it. I liked markets in college but wasn't that prepared to get grilled on them in an interview by any means. Defer to others tbh on this though. I'm very removed from the recruiting game and never interviewed for those industries. So this is just me guessing. 
  • I would just keep doing what you're doing. If you are beating the market, that's great. Use what you learn in your job to make you an even better trader. Compounding with an outperforming book can go a really long way. Just be patient, don't blow up, and keep at it 

Nice, happy to hear another success story. I've always found options interesting but never felt comfortable enough to price them. I will take a stab at them every once in a while for more levered exposure when I have strong conviction, but actively trading them is something I'm pretty far away from still.

Curious what kind of strategy you run and what trade setups you look for. Fundamental, long-dated vs. short, momentum, etc.?

better question is would he want to with $18M+ in the bank at a relatively young age

Thank you. I think like any subject matter (sports, academia, music) there is an element of talent and an element of hard work. To be the best you need both. Some people are inherently good traders and some people aren't. I do believe your brain needs to be wired a certain way to really be good at this. Gut feeling is not something you can teach. Nor is the ability to think clearly during times of euphoria and despair. 

That said, there is a huge learned element as well. You have to be extremely motivated and dedicated to succeed as a trader. You also have to be extremely disciplined, which is probably the most unique one here because I think it is both an inherent trait and one that can be learned. I know of some traders that are naturally gifted and then some that aren't as much so, but have willed their way to success because of their determination.

You also have to find what you are good at. "Trading" is an all-encompassing word for participating in markets which have thousands of different strategies. The key is to figure out which one speaks to you, or where your edge is and stick to it. 

There are also a lot of ways to make money / escape the grind that aren't actively trading. Compounding good investments can go a really long way in building a portfolio. Whether this is finding stocks before they run, buying secondaries, investing in good crypto tokens early, etc. I think this is a much more realistic route for most people and takes less time than actively trading. 

Thank you. I won't comment on where I'm from. But what you said is correct, offshore LLC. Hyperliquid is the best non-KYC option