Basics of Trading Forex

[00:00:00.07] - Speaker 1
It.

[00:00:44.15] - Speaker 2
Good afternoon, everyone. Welcome back. Happy Friday. Almost the end of the day, so everybody's ready for the weekend. Very excited to be here today because we have a very special session on Forex, I think is the second one that we do. We haven't really done a lot on Forex, but I'm really happy to be here, of course, with Patrick. Welcome, Patrick. Thank you for being here. And then I would love to introduce our special guest, Jay Mitro. Jay, I'll let you introduce yourself, but really excited to have you here. I want to learn more about your experience and we're going to talk a lot about Forex, but thank you and welcome.

[00:01:26.21] - Speaker 1
Thank you so much for having me. Fabio, I think over two years ago we had the first interaction, you and I, and I want to congratulate you and your team on building out a fantastic platform and a very great user experience and bringing relevant education of the markets to more people. I really appreciate you and your team and thank you, Patrick. I think last year we had our first call and I think we wanted to jump on a call for a few minutes and it ended up being almost two hours. So I'm very much looking forward to speaking to you guys today. Thanks for having me. My name is Jay Medro. I've been in the markets for over 30 years. It is my absolute passion. And I come from the institutional side. I was actually trained in the us I went to Virginia Tech University, and then I fought my way via Germany and London all the way back into the what we call tier one banking world. So the premier, the top of the row. And when I was a market maker, I started at a bank that's called HVB and it's now owned by UniCredit.

[00:02:34.16] - Speaker 1
So I was a corporate bond trader there during a time, Fabio, when we introduced the credit default swaps, if you were trading a 5 million credit default swap, that's it for the week, the market was done. That's all the risk the market could do was 5 million. And back then we were looking at. Because HVB wasn't a very good bank. And I would say it was like two and a half between the second and the third row at the time. And I'm trying not to insult anybody, but when we were given mandates for corporate new issuance, we got all the crap that all the big banks didn't want to have, like El Paso Energy. And then, you know, all shit broke loose with El Paso Energy and the bonds dropped in price and we needed to hedge them. And. And as a market maker, for these bonds, we actually started to look at, hey, can we hedge with puts on the stock? Because there was a high correlation. And you know all of this in terms of math because you used to sell, I think, data to hedge funds and you build models. And I lovingly often try to explain to people on who are not part of the market that I'm a professional speculator and my job has two legs, that my job is standing on two legs.

[00:03:51.11] - Speaker 1
Leg number one is mathematics and leg number two is I read a lot. So if you don't like reading and you really don't like math and self discipline and pain, this profession is not that good for you. Why do I say that? Because I'm an ex soldier. Before I became a market maker, I was a soldier in the German army, but it was stationed abroad in the US for over six years. So I was an exchange soldier. And then I always had this affinity to the US and my dad worked for the American embassy, my mom for the Australian embassy, but I have a German passport actually. So when I fought my way through the military, I went to university at night in the States and the military paid for my education and that education at the time. I have an MBA from Virginia Tech and financial management allowed me to get into investment banking, but not in New York City in the beginning back in Germany and the uk. So over the years I fought my way up and I went from trading into sales and I was running Germany, Austria and Switzerland for various large banks on the credit distribution side.

[00:05:03.01] - Speaker 1
And that's when I got to know the clients. And I would say my today I'm running my own money and I have an educational company. And most of what I learned came from understanding the different client basis because an insurance company has a completely different investment behavior than a pension fund, which is different from an endowment fund, which is different from a hedge fund, which is different from a public fund. I mean, it goes on and on and on. But to actually learn about the different clients and their investment behavior and to combine that with all of my years of experience of market making and I was running a lot of products as a market maker. So I started in bonds and then I traded swaps and I traded sovereign bonds. What's the noise? Patrick? You're okay? Sorry.

[00:05:55.09] - Speaker 3
Good. It's not me.

[00:05:57.01] - Speaker 1
So. So all of this experience over 30 years actually culminated in a process that I use for myself, that I built for myself, Fabio and Patrick and dear audience, which is called the fist process. So what I do is I look at f fundamentals, fundamental analysis I for in our market analysis, the different correlations, which is very important for the blind spots that you're building and then the s the sentiment, which is not only are we in a risk on or in a risk off mode currently or in which season are we in the markets? Because there's four different seasons in the markets like we have in nature as well. Yeah, we have summer and winter and spring and fall. We have the same thing like in the US economy right now as we speak today, we have what's called the reflation season. It's the reflation trade is where GDP is growing and inflation is going up. Inflation in a reflation trade, for example, you want to be long stocks. It's very important to be long stocks. If you're long bonds, that's not to your advantage because interest rates are going up and the bond market is at a disadvantage because as market rates are going up, the prices of bonds are going down.

[00:07:15.25] - Speaker 1
That's a mathematical formula. You know, there's no superstition, it's just math versus if you are in a contrarian scenario, for example, where the economy is shrinking and you have deflation, that is Prices are going down, the behavior of the consumer is very different. That would be, for example, a season in the market where you or us, the real money or us, the hedge funds, we are long bonds, we're not long stocks. It's the wrong season to be long stocks. So all of this is very complex and I built this fist model F I S T for fundamental intermarket sentiment. And I already, Patrick, thanks to you, you showed me earlier on that you even have CTA positioning data. Right. And we in our process, for example, every weekend we look at the commitment of traders report. So this is very, very important data to take a look at for us. And then we have t the technical analysis. So I'm very excited to look at the gamma levels and the blind spots with you today in the Forex market. I think it is fantastic opportunity for your client base to have another tool that may help you in enduring the pain that our profession inflicts on you on a daily basis.

[00:08:37.15] - Speaker 1
Because what does it do? Either the position goes against you and then you are in pain, or the position goes for you and then you are in a different kind of pain because you're worried should I take profits or not? And I think your levels are an excellent tool. And it's not a technical indicator. It is actually very important information which is part of our piece that we call intel market analysis. Very important information that drives the cash market, but put visibly on the chart. So again, thank you for your work, guys.

[00:09:09.02] - Speaker 2
Thank you.

[00:09:09.17] - Speaker 3
Yes, thank you. But I have a question for you directly at the beginning because you give, I think our audience some really golden nuggets and they're thinking now what the hell? He is talking about the fist concept. And if they go into your website, they will see this, how are you? What is the concept? But can you give maybe we have also day traders who trading futures very often. Can you give them some gold nugget? What should be a good morning routine for them based on your concept, what they should looking for, maybe only one minute. If they want more, go to Jay and and find out what he's doing. But maybe some little tiny gold nugget what they should not miss.

[00:09:57.02] - Speaker 1
The first thing that I do when I come to the desk in the morning is I check the new squawk and I hit important and I check what Donald said overnight, what he may or may not have said. Why is the news. That's the first thing I check is the sentiment, you know, is do you understand when I say we have risk on or risk off? Does that make sense to you and your audience or do you want me to explain that? No, no, it makes sense.

[00:10:22.23] - Speaker 2
Makes sense.

[00:10:23.07] - Speaker 1
Okay, cool. Excellent. I apologize. I don't want to be redundant. So I first tried to check is the narrative risk on a risk off. And then much more important to me is the data. Which data came out and did it come in better or worse than expected? And then if you pay for it, you even see the ranges. So I obviously pay and I see what was the expected range. Let's take non farm payrolls or we had pce. The PCE today in New York. This morning it came. That PCE report was beautiful. If we wouldn't have Trump, the narrative, if we wouldn't have Trump and the tariff war, the Fed would be easing interest rates right now because the data is telling the Fed hey guys, it's okay to ease interest rates. That would mean long bonds and that would mean short dollar. So your morning routine, the first thing you check or what I check, I can tell you guys what you are doing is what is the narrative today for the open, then what is the data? And because that's going to affect the sentiment and believe it or not, then I actually check the different markets.

[00:11:36.11] - Speaker 1
So the first thing I always look at is the vix. The volatility is the most important to me of anything. And everything that I do I look at if I trade gold and I don't have gold volatility on the chart. I don't know what you're doing. Also, if you trade a chart and you don't have volume on the chart, again, I also don't know what you're doing. Except if you tell me. No. Jay. I trade on execution letters and I'm a flow trader and I look at every single tick on an exit on a depth of market. That's a different ball game. Right. But most of us I don't know, I think most of your traders may be looking at some form of chart. Patrick, let me ask you, what are you looking at? Are you looking at a candlestick chart or what is your preferred view when you trade?

[00:12:18.20] - Speaker 3
I'm looking in real time autoflow data. Okay. That's my edge.

[00:12:24.08] - Speaker 1
Absolutely. Okay, so the VIX and then I know exactly because the VIX is leading the yes. I know exactly what the yes is about to do. And every morning, almost every morning you have a great opportunity because the VIX is already turning where the ES is still hunting liquidity which again your levels might be super interesting for it to take a look at. Then obviously I look at the dollar. I personally look at the. As a bond trader I always look at very short term interest rates and all the way out to 30 years. Currently the narrative in the market across the globe is that governments are spending too much money and that is causing pressure on the credit worthiness of individual countries. And that causes the long end of the yield curve, that is debt by a government with long maturities, 30 years, for example, the yield to go up. So we have a steepening in the yield curve right now which may or may not be good for the market, which may or may not be good for whatever asset class you are trading. For example, if you're trading queues and you have a steepening in the curve and the 10 year is steep is is the yield is moving more than 60 basis points in one month.

[00:13:47.08] - Speaker 1
So like say from 4% to 4.6 or from 4% to 3.4 in one month. That is too fast. The NASDAQ will not like it and will get hurt. Okay, this is a correlation that's currently the 60 basis points. It doesn't mean it's not Moses law, you know, God's law number nine at 60 basis points. This is breathing. It can change over time. But currently as I speak today to you end of May month end also very important. Have always, always know that there is certain flows that are happening on a month end and there's not only month end, there's month end and quarter end. And then there's month end, quarter end and half year end, end of June, for example. And then you have year end, which is everything at once. End of December is the most important part. We were not allowed to go on vacation at the bank. There's too much going on year end because flows are happening all over the place. Okay, so back to the process. What I look at in the morning is the intel market correlations, the VIX and then the es. I look at the dollar, the dollar obviously.

[00:14:50.07] - Speaker 1
Next thing I look at is commodities within commod at gold. And I look at oil. And you know what commodity I also look at? No, it's not copper. No, it's not silver. Right. It's Bitcoin. Bitcoin is a commodity. The volatility is commodity. Like that's why institutional money is not going all in on bitcoin. They're not allowed. Institutional money is run by variance at risk models. VAR models. JP Morgan invented that decades ago. They wanted to have a number that tells them with a two standard deviation probability how extreme how much money could the bank lose overnight? Okay, not how much we make. Nobody in the professional world, Patrick, cares how great of a trader you are. If I'm a fund to fund manager and you come to me and you're like, hey Jay, look at my P and L, I'm like, I don't care. I look at your drawdown, what was your average drawdown the last three years? What was your worst drawdown the last three years? And then if that's small, I may allocate funds to you, but that's always based on how shitty your worst performance was. It's never about, hey, I can create.

[00:15:57.19] - Speaker 1
If you go to an investor and you tell them I make 50 a year, they will show you the door because they're not going to believe you. The institutional world is completely different than what some of our retail minds may actually assume it is.

[00:16:12.12] - Speaker 3
You know, it's about value at risk.

[00:16:15.10] - Speaker 1
That's something everything is about. And these days, in these days it's about liquidity. And that if you understand that, and early on I was joking with you guys that I'm a little bit older by now and I have so many crises that I traded through. It's always in a crisis, it's about liquidity. And the lender of last resort is a central bank. That is actually their job. And during Corona end of March when the Fed came in and they said, we're going to backstop everybody unlimited. That's when the market turned around and we were thinking hey, maybe I die in March 2020. I had no idea if I'm going to die of this ominous virus or not. You know I was locked up at home trading my ass off because I wasn't allowed to do anything else and I didn't know what was going to happen. But the markets were going towards all time highs because the market is always trading the future and nobody knows how far in the future could be three months, could be two years, could be. But it is some scenario in the future. But let me finish this up because you were asking me about what I look at the last thing is then the bonds, right?

[00:17:22.29] - Speaker 1
So I look at the major asset classes in the morning. I know what is the narrative this morning I was communicating with my team. We are on telegram together and I was like hey it's Friday, let's see what Trump is doing. So the market is coming off and then on Sunday what he will say so the market will recover. It's almost a joke by now in our team. You know it's like it's, it's unbelievable. You know they call it the taco trade by now they gave it a name. You know the market, they always look for a name. So and I think and then I want to pass it on to you because otherwise I will speak for 60 minutes straight and you guys will get bored and your audience as well. I think if you then know what you want to trade. If you know for example that crude is in a range right now. It is the front month crude market is in a range. And then you know that we have OPEC plus tomorrow and the rumors were already spread last night. They were in Bloomberg, they were in Reuters. 411, 000 more supplies barrels per day.

[00:18:25.05] - Speaker 1
That's negative for the market. We had data this week that was surprising. So you know you want to buy the bottom edge hopefully you know you want to buy the bottom edge and then you see a little bit of weakness in the month end. Today's the 30th in the dollar so you have more confidence to buy the bottom edge in oil. And then if you put later on the oil chart up with your blind spot levels I wouldn't be surprised to see a level down there that held and it's going towards the next higher level. I bet you right now I'm a trader. My, my job is to bet. I'm betting your money right now Patrick, that oil did exactly that.

[00:19:02.09] - Speaker 2
I take the bad J.

[00:19:08.14] - Speaker 1
I love it. Yeah, there you go. Look at that. You look at, look at that, look at that. And it's not magic. What's happening is there is, we call it gamma. There's gamma exposure from options market makers. And then your model also takes into consideration cross asset class correlations and cross it as class volatility. And then you have some really high quality levels and the market tends. And this is what we teach in our firm. The market goes from liquidity to liquidity. It's very important when you are a market maker you realize it's always liquidity. Liquidity meaning some people may not understand what that means. If you're a new retail trader and you get into the market and you open up your platform, you think when you press a button, you are guaranteed the price. You are if it's an exchange, you are not if you're trading, for example Forex, it's an intel bank market. So there's no law on earth that says to some market maker at let's say for example Deutsche bank that he asked to buy euro dollars from you at 110, there's no law for it. We assume this is retail traders, but let a crisis hit and all your bids and offers go dark.

[00:20:27.11] - Speaker 1
And you can see that on some platforms where right 10 seconds before an economic number, you see all the buy limits and sell limits disappearing. Then the number comes out and then they all come back in, they repopulate. What, what do you continue to see through the number is the gamma hedging levels. You will see that the buy limits and the sell limits of the option market makers remain throughout the event because there's no risk to them. They have the gamma on the book and this is the level where their algorithm will hedge the position. So I love looking at these types of platforms right before an event like non farm payrolls because it's almost like you get to see in a poker game the cards of your opponents. You know then that liquidity is real because it is option market makers hedging liquidity, liquidity. Whereas all other liquidity you see in an order book that you look at, Patrick, you just told me may or may not be real, which is called in English. When liquidity appears, the market trades towards it and liquidity disappears. It's called spoofing, right? Spiffing and spoofing. It's, it's, it's, it's market manipulation.

[00:21:40.11] - Speaker 1
Highly illegal and done every day just like Trump the pump. But he does unmask. I mean it's insane. The Time we live in today that the President of the United States of America and his family made a billion dollars in crypto so far by, by pumping their own crypto investments. It's crazy. It's nuts.

[00:22:04.22] - Speaker 2
Today we want to, we want to focus about Forex. Jay, so the question that I have for you is like, so you obviously were a market maker in the bond market and you told us about your experience. So when you look at Forex, like, what are the biggest challenge that a retail trader would face when trading Forex? You already mentioned the, the fact that liquidity is not necessarily guaranteed because of course, we are in an OTC market. So for those who don't know, it means over the counter. So it means that banks are trading in behalf of you. So you're trading with the bank, you're not trading with the exchange. And of course, if the liquidity crisis happens, you're not guaranteed that you're gonna be able to trade because you're not. There's no obligation for the bank to be able to trade with you. So that's why also there is not a lot of information, there is not a lot of data available. So how, like, how do you approach this market and what are the biggest challenges for a retail investor that would want to trade? The Forex market?

[00:23:06.20] - Speaker 1
I would say that the forex market, not, I would say, I am saying when I started an educational company, it was coincidence and ended up loving it. I was a drill sergeant in the military, and then I still like to teach. I love it, I love passing on knowledge. But when you're a bond market maker or when you're in the investment banking world, it's a very small world and we know each other. So the number one thing that you have to protect at all times is your name is something that people these days forget. But we trade billions of dollars on the phone and when we say, fabio, yours, and you say J, mine, the trade is done on the phone. So your word means everything. Your word means everything. So there's a lot of assholes out there in the retail trading arena. And during Corona, there were so many coaches and companies coming up. And hey, we teach you how to make money and it's easy. I was always the opposite because of my name. I have a very good name in the institutional world. And the only thing where I put my name, J Medro.

[00:24:19.02] - Speaker 1
Here, put the hat on so you can read it. J Medro, FX Trading. I work for Liberty Brothers now. It's a company out of Texas. The only product, the only asset Class that I felt comfortable putting on my name on where I feel I can teach you. Your son, Fabio, if he comes to me and this has happened, this happened, that fathers come get trained by me and they send their children. The boy sends his best friend, the best friends ends up in the next seminar bringing his dad. So we could call the company friends and family too, right? We don't do much marketing, hardly any. It's all word of mouth. But the forex market is the only market that I truly believe I can teach your son or your daughter how to make money in next to next to taking 10 of your monthly income and putting it into an equity index etf. That is a must in my opinion. And before that my a must is. And I have it on my cell phone to this day and I have a lot of money, but to this day, every time I spent money I put it in an application and every time money comes in, I put in an application.

[00:25:30.15] - Speaker 1
So what I'm trying to say is step number one is know how much money do you actually make and how much do you actually expense? And know the difference between what is an asset and what is a liability. If your girlfriend is very expensive, that's a liability. All right? If she's super rich and you're, you marry her and you get 50% of her assets, you just, you know, increased your assets. Or a house, A house is usually a liability if you live in it yourself, if you rent it out, it's an asset. Most people don't understand the difference. That's the first thing. The second thing is save some money and put it in the stock market. Why in the stock market index, we're not talking about trading. If you have a child, the day it's born, you start an ETF fund. 10% of that payment plan, 10% of your annual income or your monthly income goes into that etf. End of story. Take the spy for example, or take the MSCI world. If you don't do those two things, don't even think about trading or investing. Trading is the most complex friggin job on earth.

[00:26:33.27] - Speaker 1
And if you don't believe me, you might end up in our training school one day and learn it. Because you tried all the easy ways. I promise you right now, dear viewer, there's nothing easy about this profession. There's awesome tools these days. Awesome tools. And I guarantee you if you get mentor cues, blind spot levels, you will find out very quickly what your issue is. Because the Euro dollar going from this level to a higher level and our fist Process telling you you want the euro dollar to be long and you're not capable of holding from BL4 to BL10 tells you your problem. Your problem is then psychological. And you might think this is an easy job because at the end of the day it looks easy, but it's not. So there are several challenges. To answer your question, the easiest asset class in the world to learn is forex. And I'll tell you why. Because forex the dollar or the euro, or the Swiss franc, or the yen, they follow their own economy. If an economy grows, if the USA grows, think about it, that the US dollar is its stock, the stock will go up in value.

[00:27:50.21] - Speaker 1
And if Euro grows, Europe grows right now. And you know why, right? Not because everything is so friggin super in Europe right now. No, because they are printing billions of euros and are putting it into defense.

[00:28:03.29] - Speaker 3
Okay?

[00:28:04.12] - Speaker 1
It's, it's like a stimulus program. It's a stimulus program, yeah, but it's hardcore because mathematically there's a concept that's called base effect. And let me explain this to you real quick. If you grow from 1 to 2, how much in percentage terms did you just grow from 1 to 2? Do you know?

[00:28:26.01] - Speaker 2
100.

[00:28:26.28] - Speaker 1
100. Thank you, Fabio. 100. How much did you grow from 10 to 11. Another economy grows from 10 to 11. So the GDP this year is 10%, and next year they expect it to grow to 11%. How much did that economy in percentage terms grow?

[00:28:44.02] - Speaker 2
10%, 10%.

[00:28:46.04] - Speaker 1
So if the euro grows from 1% to 2% GDP growth and the USA grows from 10 to 11%, what will the euro dollar do? And this is so nuts. I asked this to my students and then they say, oh, I would put my money in $. And I, I say, why? Yeah, because 11 is much bigger than 2. They have no mathematical understanding. They don't understand that the euro dollar will rise because 100% rate of change is 10 times larger than 10% rate of change. So I'm fighting the simplest that should be taught in school, when I have adults sitting in my seminar in the beginning and then I turn them into nuclear weapons. Because I explained to them that the market follows the economic growth of an economy. And an economy doesn't grow today and tomorrow afternoon it shrinks. And then On Thursday at 7, you know, it rises again. No, these are trends. So the Forex market is very, very safe because it's following economic growth. And economic growth data is. Sorry, Fabio, for free. It's for free. And you have some of the best Economists working for you, you know where they work at the central bank.

[00:30:04.03] - Speaker 1
I know, I love making fun of the central bank too, but actually it's some very smart people work at the central banks, you know, and they give you their own economic projections for the three years and you can fight it all you want. These guys are the king of your currency. They determine how much your currency will cost you in terms of interest rate. They determine it right now. The dollar, if I borrow money in the US costs me four and a quarter percent. That's the interest rate the Fed actually put in place. So it's very important because when they make money cheaper, the economy will grow and when they make money more expensive, the economy will grow less, maybe even shrink. And the fun bit, fun, fun bit. For a barbecue party on Saturday, a central bank always oversteers because it takes up to 18 months for, for an interest rate change to actually end up in the real economy. So there again is this concept about we're trading the future. We're doing something today, it will have an effect in a year and a half, but we're trading the effect today. This is, I love this.

[00:31:15.19] - Speaker 1
It's, it's, it's so weird, but it's, it's actually, that's what we do. You know, every day the market is betting on what the future will actually look like. And it's nuts because none of this has happened. But think back to Corona. You were locked up and the equities were going to all time highs because the market was already trading the future. All will be well. Because what, how are we trained at an investment bank? Whatever happens, we are trained to look in the past and to look at it and say, hey, when was the last time this happened and what happened then? Not to say it will happen the exact same way, but to give us an indication of what happened in the past. And maybe this gives us a bit of a roadmap of how this one could actually play out. So what we did is Corona hit. We looked at how many times, what's the cycle of a pandemic, how often do they show up and how long do they usually last? And you know how long the average pandemic lasts, correct? Three years. Remember how much, how long corona lasts? Three years.

[00:32:18.15] - Speaker 1
Even though in March 2020 the market already turned around and was trending towards new all time highs.

[00:32:26.20] - Speaker 2
I think also Jay, when we mentioned before, you know, all the big quant funds lost money during 2020 because they never saw an event like that in history. Like, meaning like a pandemic yes, happened, but a pandemic where the whole economy shut down never happened. We have to go back to the 20s or something. So I think the reason why those models could not predict is because they never saw something like this happening and therefore they were, they were, they didn't know what to react and they didn't react. They weren't able to predict what could have happened. So I think that's a brilliant point.

[00:33:02.19] - Speaker 1
That you're bringing up, Fabio, because the models were not trained for this. They never had this experience. We had this experience. We can look back, but the models didn't. And, and during Corona, Renaissance capitals, Renaissance capitals, outside fund went bust. I mean, that to that day was the best fund you could possibly be in. If, if I here, if you have nothing to do next weekend, start reading the man who Broke the Market. It's one of the best books I've ever read on the market. You know, like I said, we're in the business of reading a lot, not only news articles, but also about financial history and the biggest and most important important players. You know, read up on that. Or Reminiscence of a Stock Operator is also a very good one, Edward.

[00:33:43.13] - Speaker 2
And I think what if we want to go back to the pandemic? What the pandemic brought us is really a lot of time to think and a lot of time to try to make money and a lot of leverage. So if you remember the GameStop saga in 2020, 2021, this really opened up kind of like the Pandora's box for option traders where you could come in the market and similar what you do in effects, because in effects you have a lot of leverage, which could also become a problem with the option data. You could actually make double digit return in a matter of a day or even less. Right. So that opened up a lot of more opportunities. And that's, I think, and I want to ask you this question. How do you see the option market changing the way we trade not only in equities, but also in forex?

[00:34:30.01] - Speaker 1
Oh, tremendously important. That's a very good question, by the way, Fabio, because again, before we went live, we talked about this briefly. The derivatives markets are in English. We say the tail is wagging the dog, like the dog's tail is now moving the dog. So the derivatives market have a very strong influence on the cash market. Now if, if, if, if you are unaware of the blind spot levels, you are trading at a disadvantage because people like us, our, our teams, the most sophisticated players in the world, this is, this is Such a common tool now. And this happens to everything in the market, Fabio. When it's new, it's an edge. And then the adoption comes in and it becomes less and less of an edge. Right. Which is another thing why I love X, because it's the concept of alpha decay macroeconomics. And I love macroeconomics. Right. Like I said, Nvidia might beat, might not beat. If you look statistically at every single market reaction after Nvidia numbers, there's absolutely zero correlation. The stock tanked after good numbers and it tanked after bad numbers and the stock rose after good numbers and the stock rose after bad numbers.

[00:35:50.20] - Speaker 1
I could never take your son, train him how to trade and lie to him and say, hey, I'll show you how you trade. Quarterly number announcements, you know, during earnings season trading earnings. No, there's nothing there. There's no edge there. There's no, you know, if you have inside information, maybe there is some edge. But I don't have inside information. You have all the inside information that you need. If you look at the puzzle pieces I found to be important that I put into my sequence F I S T. Right? And then inside of those columns there's certain things that I look at and I completely agree with you. The as you said early on correctly, the FX market is an inter market. And still we, every day we look at at least where is the largest open interest outstanding in the different forex pairs in our fist process that we do on the weekends gives us one or two high probability trades. Single FX trades in certain pairs because we don't trade pairs. You know, I hate people like, hey, you need to focus on euro dollar and only trade euro dollar and, and that's how you start in forex.

[00:37:05.26] - Speaker 1
That's why is it not to say that it might not work for you? I'm not disclaiming that it's nonsense because we are following eight economies. We are looking every day at the eight largest, not the largest, but eight different economies. We're following the dollar, the euro, the pound. I'm looking at it right now, the Aussie dollar, the New Zealand dollar, the Swissy, the cat and the yen. And you can wake me up at 3 o' clock in the morning. I can tell you exactly what's going on with the bank of Japan versus the Fed. I can tell you what if the economy is growing or if it's shrinking and what the inflation is doing and what the narrative is and the positioning in the market. Is the market short New Zealand dollar aggregated or are they long. And that gives me the highest probability where I risk my hard earned money after taxes. Yeah, My earned money. I bet my own money on my decisions. And I love that about this job. It's me, myself, and I only. No government, no employer, no boss who I need to kiss his ass. Nada, zero. It's me, and I love that.

[00:38:15.11] - Speaker 1
I love being independent. It's my decision. I take the bet. When I make money, I go into the weekend, good week. I lose money. I go into the weekend, good week. You know why? Because our process has 87%. 87.7% hit ratio, which is phenomenal. But is it 100? No. Does 100% exist? No. Is it guaranteed that the euro dollar will go to blind level number 10? No. That is one of the core concepts people have to understand in this profession. Two plus two is often four, but sometimes it's 80, and there's. Sometimes it's minus nine. And if you want to be right, this profession is not for you. If you love this profession and if you love being independent and if you want to take responsibility for your own actions and. And if you want to endure pain every day because nothing. This job will never make you feel great, ever. I think it's. It's super fun. But that's just because I'm nuts. First, I was a soldier, and then I went into the financial markets. You know, the financial markets are just extremely painful because what are the two functions of any market? Fabio, what are they?

[00:39:35.06] - Speaker 1
One is finding the fair value. How do we do that? Auction process. The data that you look at, Patrick. Right. The order book, bids and offers, and supply and demand. But two, the second function of the market, and a lot of people don't know this, the market is in the business of exerting the maximum pain to the maximum amount of market participants at an unforeseen point in time. That is what the market also does. The crowd is right until they're not right anymore. And that is the perverted thing about the market. And with somebody like Trump leading the global economy, it makes things a whole lot more interesting. To say it in the most positive way that I can.

[00:40:23.26] - Speaker 2
Jay, if I. If I give you another analogy. So when I was selling data to large institutions and funds. The concept that you explain where the hedge is, is there at the beginning is a concept called alpha decay, where at the beginning you start learning a strategy and you have an edge and you're making money. But when the. When the world starts seeing that they can make the same amount of money with Your strategy with your indicator, then they start using it and therefore there's no more alpha because that alpha becomes better, right? So when we talk about Forex, because the data is so sparse and there's not a lot of information, typical traders start using technical indicators, right? You know, trend indicator, macd, rsi, all of that, which are great, but at the same time they're also used by the rest of the market. So there's no hedge in using that because everybody's seeing the same information. And that's why what you see in this chart, we're trying to create like a tool that can give you an edge because we are looking at different types of information that are not currently widely looked at and widely used.

[00:41:31.08] - Speaker 2
So I think that's important as well.

[00:41:33.13] - Speaker 1
I think that's a very important point. And you cannot look at these lines and think that they are support and resistant lines of former swing highs or swing lows. They're not. Again, I think maybe Fabio can take a minute because you explain it super well to me. I know what's in the lines. Maybe you can try newer words as you develop the model, explain a little bit what information is conveniently conveyed on the chart. And if I may suggest, use the Tesla example again, because it was brilliant, in my opinion. It was brilliant what you said. So what I, what am I actually seeing? The line, I'm a new guy, I've never been to mentor Q. What, what is this line? What am I actually looking at when I look at the blind spot?

[00:42:16.26] - Speaker 2
Yeah, so basically, like we released those yesterday, right? And so we are obviously providing gamma levels, looking at option data on futures stocks, ETFs. But the forex market is challenging, right, because the only real option data that you can access is the futures option. So the, the 6e, the 6a and those are very important. So we have those. So you can access those on the, on the, on the chart already. We've had those for about a year now. But the problem is that a lot of the volume comes from the spot market, right? So options are very important, but they can only tell a side of the picture. So what we've done is we've built a more complex algorithm that looks across correlation of different assets that are affecting the Forex market. And then we also build a lot of beta analysis and a lot of other algorithms that we put in to develop these new version of the blind spot. So the idea behind it is those are lines on the chart, but there's a power behind. So the example of the Tesla is When you want to. When you buy a Tesla, you don't need to know how the electric machine is built or how the autopilot is built.

[00:43:34.23] - Speaker 2
You sit on the Tesla and you just need to learn how to use it. Right. Similar with what we are building, we are building a complex system behind and we are giving you a very, very simple format, which is lines on the chart, but those lines are very, very powerful. So the idea is like, you don't need. And we won't disclose how we calculate the algorithm, but the idea is that you can use them as supporting tools. If we go back to the euro example, they could help you not only jump on a trade like. And I was giving you the example before, Jay. So let's say that we look at this movement here. Let me see if this loads.

[00:44:23.15] - Speaker 1
And thank you for doing that, Fabio. Actually, thank you for hitting the levels.

[00:44:29.29] - Speaker 2
This is a good.

[00:44:31.11] - Speaker 1
Because it's. I think it's very important for people to understand that these are. This is actually very valuable cross intermarket. It's different products and it's different assets that the model is calculating in the background. So this is not a simple line on the chart. This is different information. That's the quality information is much, much different. And you need to have it, in my opinion.

[00:45:01.25] - Speaker 3
Yeah.

[00:45:02.07] - Speaker 2
And I think the example is like, let's say that we look at this candle, right? So you see a strong uptrend and a very, very strong candle to the downside. So let's say that you take a short here, right? You, you. You're looking for. Exactly, for like a reversal, like a rejection. How do you, like, manage the trade? Where do you stop? What do you do? How do you handle the risk? So now you have clear path, leveraging the data. So you could potentially use this area right here as maybe the first profit target that you want to see. And then, of course, now you have your blind spot for here as well. And this exactly is the end of the trend and the start of a reversal to the other side. If you take this long trade, where do you go? What are your areas? Without these levels, you can, of course, rely on support and resistance areas, but again, those are also widely looked at in the market, and therefore everybody's looking at that level. So it doesn't really bring you the edge that you might be looking for.

[00:46:13.19] - Speaker 1
I don't know, are you putting the levels on right now, Fabio, or you, Patrick? Exactly. If we look, for example, BL10 at the picture we're looking at right now, the assumption is, is that BL10 had a stickiness to it in terms of the gamma. If you then look at BL1, which used to be sticky, obviously turned into a slippy level. That means that all of a sudden market makers were selling the underlying the euro dollar to hedge the puts that they were short at BL1 level. So that basically makes. It's like flushing oil into the fire. It makes the trend stronger. You know, it slips through the level. That's what we stay sticky or slippy. When the level is sticky like BL10, there's gamma scalping going on. The option market maker in that example would be long the options and it's fortunate for them to trade against the position. Do we lose? Fabio, are you still there?

[00:47:16.16] - Speaker 3
I'm here, yeah. I don't know. Fabio will be come back maybe.

[00:47:25.07] - Speaker 1
Last night I dreamt about the end of the world. I'm not kidding you.

[00:47:28.23] - Speaker 3
No, no, I think, I think.

[00:47:30.28] - Speaker 1
I don't hope. I don't know. I don't hope that happened now. It was great seeing you guys.

[00:47:39.29] - Speaker 3
I think, I think the last blackout was a little bit too extreme in Spain. So I think that will be not happen so fast anymore. Yeah.

[00:47:52.27] - Speaker 1
Can you put the chart back up or is the chart down?

[00:47:55.21] - Speaker 2
Yeah, I'm coming. It's coming. I think I had. Sorry for that.

[00:48:00.15] - Speaker 1
You know, we were joking early on because I'm not at the office because we don't have any power here in my beloved third world country. I had to go with a laptop to. To a friend's house and I'm sitting in the living room to do the webinar with you guys. And now, Fabio, you have the same issue and you're in Europe right now, so. Yeah. There you go. Two of the biggest economy.

[00:48:23.05] - Speaker 2
We're back.

[00:48:24.08] - Speaker 1
There you go. I wanted to ask you if you maybe could show me a dollar yen because that was a pair that I had some activity going on this week and it would be lovely for me to see if some of the levels that you had identified from the algo were actually in play.

[00:48:47.23] - Speaker 2
Yeah. And apologies is a bit slow, so.

[00:48:54.25] - Speaker 1
That's okay. You're on the Commodore C64, right? That was my point.

[00:49:02.13] - Speaker 2
We're building complex models but.

[00:49:06.27] - Speaker 1
But that doesn't tell anything about the Internet quality.

[00:49:12.08] - Speaker 3
But I can tell you I was crushing three laptops because of all this.

[00:49:20.17] - Speaker 1
Yeah, look at that. I mean it's a two time framing market. Absolutely love it. Is this today? Only today. 10 minute chart. Can you show me the whole week? Patrick, is that possible or. Fabio, I don't know who's controlling the chart right now.

[00:49:31.08] - Speaker 2
Yeah, I can show you the, the data but the levels are the ones for today. So they're not.

[00:49:37.09] - Speaker 1
Ah, the levels are the ones for today. Okay. Yeah, that's right. That makes sense because it's updating at night and you get the end of day data and then that's level is in play for tomorrow. Yeah, but those, those were awesome levels for today. Awesome levels. Yeah, absolutely.

[00:49:51.28] - Speaker 2
Like here you see a range BL2 will become your support area by support not derived by past price. Action is derived by a complex methodology that we develop basically.

[00:50:05.23] - Speaker 1
Yeah. And you know we have a play that we teach our traders that's called the low volume test. So I would bet you that the second time that we tested into your blind spot level there probably coincides with what we call a low volume test where you want to look for a long in that instance and then you go either to the POC if you were to put on a volume profile on there or to the top edge. And the top edge had another blind spot level at the top there that I saw earlier on. Right now I don't see it. But that may be because the Internet slow. I don't know. Yeah, so there's a beautiful, there's a beautiful, there's a beautiful trade for you right there. You know, dollar yen. On a Friday into the month end. Beautiful, beautiful intraday opportunity. I'll tell you what, we're gonna, we lost them. But I tell you Patrick, because we're connected on, on, on, on, on WhatsApp. I'm gonna incorporate it this week and I'm gonna send you some screenshots of the trades that, that I'm doing with that. I'm going to make sure that we put your levels onto our chart for the fist result that we are developing the coming week.

[00:51:27.14] - Speaker 1
And I want to share that with you and I'm going to tell you how much money we generated with, with utilizing your tool because you said early on too. Please repeat that. You said you trade your edge and then what was it that you said Pat? What do the levels give you? Do you remember what you were saying?

[00:51:47.04] - Speaker 3
Yeah. I say this in every life and every last session what we have because I think there's a really misunderstood understood on mentor Q I think and, and I can replace again. You should trade first always your trading edge where you'll be really good with. So that's really important because if you listen to us or if you be long time enough in the market, you have an edge. I hope that your edge is not losing money but this will be really stupid. But I think you have an ad and you really put in something. But we from mentor queue we provide you with a second confirmation. And that's not a critical point because maybe you can execute your trades or not. And with Mentor Q we're giving you an idea how the market is looking like based on data based on our algorithm. And you can now basically saying okay, if we are now in the range now between BL5 and BL6 and BL2 can possible target to the upside and what can a possible target to the downside. And then I know exactly how much I could risk and where is a good place to put my risk on.

[00:53:06.05] - Speaker 3
Because if you want now shorting BL2 and you target but let's say BR9. So it would be really stupid if you say okay, my stop loss is on BL6. This would be not working because basically you're on the range and you get stopped out and you will lose. So if the blind spots will be giving you an a nice idea where mix and stop loss really sense. Because here it would be over BF5. Think about the pinwheel. There's always pinwheels. We. We maybe flip out a little bit of the range but then we come back. So you have to be calculate everything in there. Otherwise you get stopped out from the noises you don't want it. And that's something where we can help you with with the profit target with the stop loss when to enter into exit and give you the second confirmation based on your trading ads. Everything starts with you with your training edge. And that's the important part. It's not like trading now only the blind spots. This will be not working. It works with your trading edge what you really good with. If you be using volume profile. If you're using.

[00:54:16.08] - Speaker 3
I don't know whatever you're using. I'm using options order flow. I'm looking into the flow data. And now I'm trading idea of trading edge. I think like okay, now I won't be go long. Is this now a good opportunity based where we are located? Think about timing, setup and location. Is this not the right time to go into the market? This is the right setup and last but not least, how much I should be risk and if I be fine with the risk and is my profit area at the moment a good target? Yes or not? Can I take it? I'm a day trader. Is this now end of the day? Can I really realize now the profit target is. This makes sense to take the trade, yes or no. And everything we can do with Mentor Q and help you based on the levels. Really simple.

[00:55:04.14] - Speaker 1
Yeah. And I have two value adding inputs for Fabio and you. What you can also include is you can look at the implied volatility from the options market for that day for dollar yen. And that will give you the expected range that the market makers have, $4 yen that day, which already incorporates the supply and demand of their institutional clients, either for protection to the upside or to the downside. That's called the skew. And it will already have incorporated in the price in the information, the economic calendar, because you know, if there's a high risk event, that implied volatility will be higher. So the implied volatility combined with that will give you a third confirmation, so to speak, that you are more confident that the outer blind levels will be reached. And when the implied volatility is smaller, you go for the closer targets. And now the second thing that I would, I will use it for is Trump comes out. We are having a, you know, you and I were trading. Trump comes out and he has another narcissistic fit and he's like 150 tariffs on Europe, immediately I will go short the dollar yen.

[00:56:15.21] - Speaker 1
But now I'm holding all the way down to BL10. I'm not going to get out of that trade until I hit BL10, maybe even BL9. So that's what I mean by understanding. Also the narrative of what the market is trading right now, I dislike as a professional, who knows how the clients who run trillions of dollars, the real clients, we call them real money and fast money. On the hedge fund side. These guys do not have charts. I cannot overemphasize this enough. Only retail traders have charts. Only us sitting in front of wherever we are, the beach or whatever, we have charts. There is no charts in institutional money. Harvard Endowment will run trillions of dollars. There's nobody sitting in front of charts. Okay, that's important to understand because they allocate the money depending on how much your maximum drawdown was, what they can expect to lose. And then in the second example, they look at how much they can generate. So if they don't have charts, the information we are getting here on this chart tells us where an opportune next mechanic level is, where some market participants have to actually touch their positions.

[00:57:35.16] - Speaker 1
This is what I try to teach my new students. The market only moves when real big boys are touching their positions. When data comes out better Than expected. We are not long enough Tesla or we are too long dollars, you know, or New Zealand dollar. The RBNZ had a hawkish cut. To this day, I don't see it. I lost 1% this week because I was playing Aussie New Zealand. Long Aussie CPI numbers were higher than expected. It looked to me like an accumulation and Mr. Hey, I know the world. I'm joking about myself goes long Aussie noisy New Zealand comes out with what I thought was a dovish cut. And they cut and the New Zealand dollar rallies. And you know, I bet you if you look at your CTA positioning chart within Mentor Q and your tool set, you will see that the market was very short New Zealand dollar and there was a short squeeze with this hawkish cut. Could be, you know, that's my expectation. It's definitely going to look different next week for sure. It's going to look less red or more green either way, you know. So back to what I'm trying to say.

[00:58:48.26] - Speaker 1
I'm not trying to.

[00:58:50.06] - Speaker 3
I think, I think for the retail traders, they lose money by the noises. So they have to understand their market noise and their market action. And basically when the retail trader goes in the market when they are the noises and that's, that's, that's one of the reason why you never become consistently profitable because you don't understand when there's action and when is noises. And mostly you take the bet on the, on the noise. And that's something what not working because you become the pinball and you don't want it. So they bring, they bring your long position down and you say, oh man, I get out now. You go, go short and boom, they go again long. And you do this, they chase the.

[00:59:32.29] - Speaker 1
Market and then the retail trader starts intraday trading. I mean, again, you are trading against algorithms all day long. Okay? It's like Warren Buffett at one point in time decides, Today I'm selling 3 million shares of bank of America. Part of it is done in the dark pool and the rest of it is done over the next 14 days or 10 trading days, you know, and he gives it to JP Morgan exclusively. And JP Morgan says, okay, Warren, we're gonna sell this VWAP plus five basis points. And then Warren says, that's okay, you know, that if J.P. morgan now executes the, the millions of shares at VBOP flat, you know, sorry, they're selling the shifts at vivo plus 10 basis points. They get to keep the difference. They agreed with Warren on a price. If they execute better, they get to Keep the difference. That is their opportunity as market makers to outshine. To put his shares into the market without ruining the market. So that's an art. Being a market maker is actually there. Some of the best market makers are geniuses because you're not supposed to make any money based on logic, right?

[01:00:46.14] - Speaker 1
When people sell stuff that they don't want to have, the market maker is long radioactive shit that nobody wants to have. And when people want to have something, the market maker is short what everybody wants to have. Does that make sense? Right. So you're always on the wrong side. It's called negative selection portfolio. In financial terms, the market maker always has the wrong side. A market maker that actually ends up making money for his or her bank was a genius that year because they overhedged or under hedged, you know, which is illegal after the Volcker rule, but we do it anyways. You know, maybe they even took some bets on something where they didn't hedge at all, at all. You know, they leave certain positions unhedged. And what we're coming towards the end of the call, what I hope people can understand is that may broaden your horizon. Hopefully nobody there who runs billions of dollars is looking at charts. You are looking at charts, algorithms, and I'm not joking. You can look at your own stupid one minute chart. They start on the hour and every 30 minutes. So you often see moves happening on the hour.

[01:01:58.10] - Speaker 1
To this day it is insane to me. Why do banks and hedge funds turn on their execution algos on the hour? If I was a, you know, I would go, all right, Fabio, let's turn hours on at 13, 13 hours and 17 minutes. No, it's at 1 o'. Clock. They turn it on, you know, or it, or 4pm you can look at it dollar cat. You can, you can draw vertical lines in your chart and you can see, holy cow, that line. That market turned on the hour. Yeah. And that is because algorithms are turned on on the hour and on the half hour. And I don't know why, you know, and maybe I said it publicly, they stop tomorrow, doesn't matter. I'm joking. But there's so much we could talk about for hours and hours and hours. It's the best job in the world in my opinion. But just remember, the market only moves significantly if there's new information that wasn't known prior to this coming out. And when I mean information, I don't only mean Trump tweeting something, I also mean data, economic data, you know, so if you are like a retail trader who Says, ooh, I, you know, I don't, I don't look at the economic calendar or I don't have a newsfeed.

[01:03:16.20] - Speaker 1
I honestly, I swear to you, I'm happy if you're making money. If you're not making money, maybe it's because you are too naive. This is the most complex hardcore game in the world. To me, it's a game. It's nothing funny about money, but it is a game. You know, you're going to get your ass handed to you. One day. I got a cut up here that needed to. And, and, and the next day you feel like you're the greatest. Stop feeling anything, really. I mean, feel everything. You're going to feel it anyways. But don't act on your emotions. Start really learning this business. And if you're, if you want to, if you have any questions for me, I'm on Instagram, J underscore Medro or you go to libertybrothers.com happy to engage with you and your community. Or you tell me, Pat, where can I add value? And Fabio, on your discord, you tell me where. I'm more than happy to, to, to, to. To come join your community, you know. Yeah, you guys are doing wonderful.

[01:04:16.00] - Speaker 2
So first of all, I want to thank you for being here because it's, your experience is really important because we talk about market making and institution a lot and having this conversation with you made a lot of sense. Thank you, Patrick, for organizing this and for connecting us and I look forward to having you again.

[01:04:35.09] - Speaker 3
That is costing us. Adon Pere John, by the way, insider information.

[01:04:44.27] - Speaker 1
Fabio, thank you for, for starting the company and, and for having talent like Patrick on your team. And I remember when we talked two, two and a half years ago, I really like your business demeanor and I love what you're doing with mentor Q. And I want to thank you for such a good product and thank you for the opportunity to share a super, super valuable afternoon with you guys. I appreciate you and I love talking to sensible people in the market and you guys are more than sensible. Thank you for your time.

[01:05:17.03] - Speaker 2
Thank you guys. Have a great weekend.

[01:05:19.15] - Speaker 1
Have a great weekend. Smart. Live free. See you soon. Bye.