Brent Donnelly on What It Takes To Be a Winning Trader

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

You know, we haven't really talked about sort of the pure markets in a while. We've been talking a little bit about crypto. We've been talking a bit about macro. We've been talking about supply chains a lot, obviously. But the other big sort of story for the last year and a half has just been this incredible boom in trading.

Tracy Alloway (0:42)

I'm going to ignore the subtle dig at crypto there, this idea. We haven't been talking about markets except for crypto.

But yeah, no, you're right. So it feels like so long ago, but really it was only six or seven months when we had the GameStop phenomenon, the big boom in retail trading and Wall Street Bets, and this idea that everyone was suddenly pouring into meme stocks. It feels so, so long ago, it's weird.

Joe Weisenthal (1:10)

Yeah, and of course, so I personally first started getting interested in markets, just as a thing I was interested in, like in the late 90s in high school and there was the dot-com bubble going on. At that time, it was just retail trading was really taking off, but also just really became like part of the culture. People were talking about the stocks they were trading and what they were bullish on and so forth.

Then it felt like that basically went into like a 20-year hibernation. Then when everyone was locked in their homes with the coronavirus crisis for the first time, it really came back.

Tracy Alloway (1:46)

Yeah. I remember writing about this earlier in the year. I think the way I framed it was flows before pros.

This idea that if you have this immense buying momentum from retail traders or retail investors, then maybe if you're a retail person, you're in a better position to judge that momentum than someone with a professional background, say a self-side analyst at a large bank, someone like that who's looking at fundamentals. I think that was kind of borne out, at least temporarily by some of the meme stock price action, but it does beg the question of what exactly is the difference between a retail trader versus a professional trader?

Joe Weisenthal (2:32)

Absolutely. And there's also the question, and of course, we've had all these people come into the market, probably a lot of them have done really well. Probably people have made a ton of money and made multiples of what they make of their daily salaries. And because it's been this small market, which means some are going to be tempted to go pro on some level, not necessarily go work for a bank or a fund, but say, oh, I made a ton of money, I could do this, why would I go back to my job?

And so some people will be thinking about, do they want to make trading their full time vocation?

Tracy Alloway (3:05)

Yeah. And again, the question is whether or not the past six or seven months have been extraordinary in one way or another. I think we all agree that the experience of COVID and the markets during that time have been somewhat unusual.

And whether or not their success over that short timeframe can carry on longer term.

Joe Weisenthal (3:24)

Right. So people are going to be asking themselves, A, do they have what it takes to be a trader? And B, if they do, how to win? So today, we're going to be speaking to a guest who knows a lot about trading, a longtime veteran, and he will tell us whether you have the stuff, whether we have the stuff, whether the listener has the stuff to make it as a pro trader. And if they do go into it, how to win at it.

Tracy Alloway (3:48)

All right, let's do it. I'm excited. All right.

Joe Weisenthal (3:50)

I'm very excited. We're going to be speaking with Brent Donnelly. He is the author of a new book, Alpha Trader, The Mindset, Methodology and Mathematics of Professional Trading. He's a long time veteran for over 25 years. He's worked at HSBC, Numura, Citi.

Very excited to learn from Brent. Brent, thank you so much for joining us.

Brent Donnelly (4:14)

Hey, guys. Great, great to be here. I'm a huge fan. So thanks a lot for having me on.

Joe Weisenthal (4:18)

So I guess the first question I have is, what is a trader?

How do you define a trader? Because some people invest, some people sometimes reallocate, some people are moving in and out, I guess, day trading. But when you talk about a trader, what does that mean?