Forex Masterclass: Why Data is key to Trade Forex

[00:00:44.22] - Speaker 1
Good morning, everyone. Welcome. Very excited today. Today is Tuesday and we have special, special guest together with us. We have, of course, Patrick. Welcome, Patrick.

[00:00:56.12] - Speaker 2
And welcome everyone.

[00:00:58.20] - Speaker 1
And we have Jay. Jay, I think is our second session. The last one, which was a few weeks ago, was amazing. It was on Forex and we are very excited to have you here today. We're going to talk about and we're going to share some live trading. We're going to look at market action on Forex. But maybe, Jay, for those who haven't met you before, if you want to maybe briefly introduce yourself, that would be awesome. And then we can start.

[00:01:23.15] - Speaker 3
Good morning to you, Fabio. Good morning to you, Patrick. And good morning to all active traders and investors. It's a pleasure to be here once more. Thank you for inviting me. As you know, I'm a big fan of your, of your additional adding value to our tool set that we have as active investors and traders. So thank you, Fabio, for your great product that you and your team are building and bringing out. And I don't get paid for this. I say this because I actually use it and I enjoy it a lot. My name is Jay, Jay Medro. I've been working in the financial services industry for over 30 years. I come from the institutional side. I was a bond trader. I worked at large tier one houses, like for example, Lehman Brothers, Nomura Associate General. So I had seven or eight very large houses. Talib Preborn as an inner dealer broker, I have a lot of experience and I traded, as we say, on the banking side. I traded a lot of books and then I ran Germany, Austria and Switzerland on the credit distribution site, which is a fancy name to say sales.

[00:02:35.27] - Speaker 3
So I was running a sales team and my personal understanding of the markets increased significantly once I understood different types of clients. At one point in time, I then became the global head. Banks always restructured and it became the global point of how, how do you say the, the. The global head of pimco. Pimco is one of the largest asset managers. So for us at the bank, I was the one that coordinated globally all projects that we were doing with this very, very important client to us. And I would say at that point in time, my understanding of the markets and the interaction of markets and the needs of clients of the fund industry and the different types of clients opened up my eyes to something that allowed me to develop a process which I use on a daily basis since 2016 to understand the global flow of capital and to make educated trading and active investment decisions. So everything that I ever Built. And everything that I ever do is based on real life experience in the big leagues. It has really nothing to do with retail trading. And in 2016, I was shocked to find out that YouTube was filled in the German speaking space about technical analysis, which is something that doesn't necessarily exist in the institutional world.

[00:04:15.04] - Speaker 3
A portfolio manager at Pimco doesn't sit in front of charts as an example. But your world, Fabio, and maybe you can allude to that again as well. You were working a lot with what we call fast money accounts, hedge funds, selling data. And the real world works based on data and on information. The real world is based on macroeconomic modeling. The game that you are in, if you know or don't know, the game doesn't care, is the different changes in economic growth, in different developments of inflation. So that's the basic game, the, the, the economic game. Even if you trade equity, your sector, your company that you may be trading exists mainly in different geographies. An American company making a lot of their revenue, for example, in Europe, is dependent on the economic development in the US but also the economic development of their clients who may be, in my example, in Europe. So the game is, how is Europe developing economically, how is the US developing economically? How is the sector developing within that economy that your company that you may be trading as part of, and how is the company developing in terms of their revenues, their expenses, and their net income and their cash flow?

[00:05:44.26] - Speaker 3
So the game is always the same. It's about math, data and the change of the data. And once you understand that, and this is, you know where Mentor Q comes in, once you understand that all the markets are interconnected and who is the driver these days of capital, of flow into or out of the markets, and there's different players, then you have potentially an edge. And when you have an edge that you implement, then you have different tools that help you in generating your income, hopefully in the bet that you're taking. And this is where your company, with your levels, Mentor Q is coming in, like we alluded to last time, but I don't know if everybody saw the last video we did. So right back at you, Fabio. What did you do before Mentor Q that allowed you to build what you built for us, the user?

[00:06:41.13] - Speaker 1
Yeah, exactly. I mean, what you said is actually so, so true. And I think when I. So when I was working in the hedge fund industry, it was all about connection and correlation, right? So we are not living in a standalone country or a standalone company or like everything is interconnected. So one tweet can move the market in China, one tweet can move the market in Japan. So it's very important as retail traders to understand how those connection could affect your portfolio, your trade, your asset. And basically what I was doing, I was selling data that could help those large hedge funds make that connection and build a strategy or an edge on top of that. Because always remember that all the strategies, they are only good until somebody doesn't exploit the alpha that is derived from there. So whenever you are trading you need to build your edge because that edge is not going to be there forever. So what we are trying to build here is allow you user to potentially connect information and then potentially develop an edge that you can do and you can use it to become a profitable trader.

[00:07:54.27] - Speaker 3
So when we look at the levels, for example, and thank you for that Fabio, the BL4, BL5BL6 in dollar yen which is an asset class dollar if we look at it is basically a picture. The price is a picture of the interest rates in the United States of America. And what is an interest rates is the price of money versus the interest rate of the bank of Japan for the Japanese yen. So if you go on a daily chart in your, in your example right now, I know disregarding the levels right now, if you go on a daily chart, if you go under all down in the x axis to show all of the data, I want to explain something to you real quick. If you press it together real hard as far as the data would possibly go, you will see that something. Aha. That's the beginning. It starts at 2009. This data, if you think about and effects a currency as a stock of a country, of an economy, then what does this actually mean to us, this picture? Well, it actually means that the United States of America, their economy since the price is rising is in the, in the sense that the market is valuing this economy, it's worth more than the economy of Japan.

[00:09:28.11] - Speaker 3
Also, FX is following interest rates, especially the short term interest rates which is set by the central bank. So the interest rates right now is a lot higher in the United States four and a quarter percent versus Japan which is at zero, 0.5% right. At a half a percent. So if you look at a different pair, for example, if, for example you take as just an example Aussie vs Yen. Here you see what we call the business cycle. So they're both in Asia, both economies and they're not AI driven. Yeah. Australia is more a resource commodity driven economy. And Japan is an island that imports a lot of stuff, then adds value and exports a lot of stuff. So similar to what Germany used to be, it's an export economy. Right here you can see a cycle curve, right? If Aussie vs Yen on this macro chart is very high at a, what I call a top edge, like we recently were, it means, wow, the market perceives the Australian economy as a lot better than the Japanese economy. But then it cycles down again to a bottom edge where the market says, wow, the Australian economy is a lot worse than the Japanese economy.

[00:11:02.10] - Speaker 3
So before we start even talking about all kinds of levels and gamma and let's go long short here, you need to understand that what are you actually looking at? You know, a lot of people, for example, are trading gold and they think gold is. I don't know what they think gold is, but based on the volatility of gold, Gold is a currency, right? Whereas bitcoin. A lot of people think bitcoin is a currency. No, I said this last time. Bitcoin is a commodity because to produce it you need a lot of energy. And the volatility causes hedge funds like you used to work with, or banks and large buy side clients like I work with, they, they base everything on the volatility of an asset class. So Patrick, you trade every day and you asked me yesterday, Jay, what do you think about ATR is a stop loss? We're having lots of discussions within the team about ATRs and stop loss. And the correct answer from the institutional side is your stop loss depends on the volatility of the investment that you're actually involved in. Right? So ATR is some sort of. It's a smarter way than just to say, okay, I'll take the last swing low, right?

[00:12:18.07] - Speaker 3
It's a smarter way. It goes in the right direction because it captures at least historically, recently what the volatility was. But a lot smart, smarter way to go about it is to have an understanding of where a very important market segment expects volatility to be in this week or for today or in the next month or in the next year. So who is the very, very. There's a picking order within the industry. There's a very, very smart market participants. Then there's the also very smart second role. And then there's like a long time, nothing and comes a completely different economic model of valuing their asset class. What am I talking about? The smartest people on a trading floor are the bond traders. Starts with the math already. It's quite complicated. The second smartest people are the option traders. And I'm Alluding to implied volatility, the option market can tell you a lot of information about an asset. Where the options market makers who work only with math and models and supply and demand are of insurance. If you want to call an option an insurance contract, right, they only work with supply and demand. They give you.

[00:13:40.03] - Speaker 3
You can calculate based on implied volatility. Where Australian dollar versus Japanese yen, for example, is expected to go with 68 probability based on market pricing. Today is expected to go today or this week or however long you want to derive the data. Now, the more liquid an asset is, the more people participate in the voting of hey, what should be the fair price of this asset, right? If you and I, us three, if we have an auction right now about my watch, we only have three participants. It's similar like to the FX Asia session. There's not that many participants in the Asian session. So the, the fair value of the auction is less effective. If you go into the London session, in effects, most of the participants are there. If you go during the two hours where London and New York intersect, you basically have almost everybody who's trading in that market participating in the auction process of what is the fair value of the watch or in this case, what is the fairest value of Aussie yen. And all of this trading takes place. And like you said, Fabio, Trump is tweeting something the Israelis, you know are sending rockets to Iran.

[00:15:00.16] - Speaker 3
All of this will overshadow. We call it sentiment. Your trade, your edge. Sentiment can blow fundamental modeling out of the water temporarily. So what happens when rockets are flying? Implied volatility shoots up. We can look at oil, for example, and oil volatility and you see it goes through the roof. Now, this means we have an opportunity as traders. So if you say no, no, no, Jay, I followed online this YouTube guru and he told me I have to become very, very good at Euro dollar. Well, you can, you can. But my question is today, this morning, is Euro dollar the best opportunity for you today? Or is the best opportunity that asset class where you have the most volatility and where you have the most action occurring? Because something either data wise or something news wise, we call that sentiment is new information that changes the positioning of our former clients. Fabio. Right. Pimco will not touch their oil positioning until something new happens where they say, I don't know, if they say, sorry, we are not long enough oil with Iran maybe closing the street of Hormuz, we have to increase our oil long position or we need to decrease our oil short position.

[00:16:34.28] - Speaker 3
If that happens now, you have very large players changing their positioning via execution algos. And we see that. And this can be our opportunity because we don't move the markets. The big boys move the markets.

[00:16:50.17] - Speaker 1
Yeah, I hope I didn't say too.

[00:16:51.27] - Speaker 3
Much, but I'm trying to say, you know, sorry. Go. Go ahead, Fabio.

[00:16:56.21] - Speaker 1
I mean, this was awesome. And I think it goes like, we get a lot of questions from our users, like when there's a volatile day. I think when we. We had a 10% in the stock market a few months ago when Trump was tweeting, like, oh, the levels are not working. What should I do now? And the thing is, like, models can only account for the information that we have as of today. Right. But if something happens, like you mentioned, there's like rocket launch or there's like a tweet that happens. That is information that cannot be captured by any, any models. And I, I always give the example of COVID Right. Most of the macro funds kind of either went bust or lost a lot of money during COVID And the reason is simple. They were not prepared for what happened. They were not equipped with the data that could potentially forecast what would have happened if a pandemic was to hit at the level that it did. So I think it's always important to be able to react to new information.

[00:17:53.12] - Speaker 3
That is the reason why they react. Again, I said in the beginning, and I'm sorry that I say so much, somebody who's interested might have to rewatch this recording. Everything is based on macroeconomic modeling. Even if the word turns you off, it doesn't change the reality. So big funds doesn't matter if they're quant funds or if they have a different approach. They work based on a process. So my question to you is, if your process is you open up your chart in the morning, you slap your dollar on there, and you start going from level A to level. That is not a process. What I do is similar to what, what the institutions are doing. We have a model that we run and we have an idea what we want to trade this week based on the result of our model that we run on the weekends. And then we observe if data that's coming in, like economic data, we just said retail sales. We can look at that in a little bit. Is it coming outside of what was expected or sentiment? You know, is there another tweet? Trump left the G7 last night.

[00:19:03.26] - Speaker 3
People are speculating. Twitter was filled this morning. Sorry, I still say Twitter was filled this morning with the Chinese embassy is being evacuated in Tehran. Trump is Telling people in Tehran to please evacuate the city. We have more refueling aircraft that you need in a hot war situation deploying from US bases to European bases, so they're closer to the flash zone to, to, to Iran, Israel, GE geography. So it looks very, it looks very much like it's heating up.

[00:19:41.10] - Speaker 1
But.

[00:19:41.29] - Speaker 3
And can I show my screen real quick?

[00:19:44.14] - Speaker 1
Yeah, absolutely.

[00:19:45.20] - Speaker 2
But, but Jay, let me, let me jump in before you go.

[00:19:49.05] - Speaker 3
No, I just wanted one real quick one one things. So this is something that, you know, I look at every day. So based on the color, you see the eight largest fx, just the fx, not the pairs, because we're not pair traders. We trade economies, you know, and what I see right now, so this is the last 30 days. This is the last week. This is the last session, 8 hours, and this is the last hour. So the FX market is the largest market that you can look at, the most liquid market. Okay. And what I'm seeing here is that right now, as we speak, Pat, money is flowing into the Aussie dollar, money is flowing into the New Zealand dollar, and money is flowing out of the Japanese yen and out of the Swiss franc. So this is what we call a risk on scenario. Risk on means the market is. The market, in its entirety is interested in adding risk assets. This is positive. Risk on doesn't mean. Oh, you know, a lot of people misunderstand the terminology. They think risk on means it's risky. If something was risky, we would see the Japanese yen and the Swiss franc rise.

[00:21:06.13] - Speaker 3
We would see treasury bonds rise. So the next thing that I do. And then I'll let you jump in. I just wanted to show it real quick. What is the VIX doing in this moment in time? Right. The VIX is the fear index. Oh, that's just a derogatory term for it. The VIX is derived on at the money options 30 days out maturity on a rolling basis. And it tells us that in the next year, the, the S P, The S&P 500 cash index is expected to be 20.7 higher from the current level, or 20.78% lower from the current level. Let me tell you something. 20.78 is a trading environment. It's not an investment environment. The industry, the financial services industry is built for investing, not for trading. It doesn't exist. Somebody's sitting at a bank who looks at charts and fires long and short. Doesn't exist. Even after the Volker Rule was dissolved. That does. That's not how the industry works. That's something that retail people came up with depicting this. Oh yeah, I want to be a trader. There's no trading in a bank. There's market making. It's very different. But let me go back to this.

[00:22:31.21] - Speaker 3
So the Vix is a 20.8. So what happens in the industry is the volatility is high and a lot of the real pension funds, the insurance companies, the, the regular funds, they're being told, hey Fabio, today you have less capital that you're allowed to invest in. Why? Because 21 higher or lower is a lot more volatile than 12% or 10% or 9%. So then we go over and the VIX is always leading. So the options market is leading the cash market, which is very important. Fabi, you can explain this later. You can explain it if you want. Do you see that bombs are flying and we have all kinds of negative, you know, Tehran Embassy is being evacuated. Do you see this fear in the equity market this morning in the American equity market? No, you don't. We were at all time highs and we're at 60, 50 in the ES front month. There is no fear. So why did I say this? Because the FX market is risk on. The equity market is risk on. So disregard all the noise and all the newsletters that are telling you this morning that the world is ending right now.

[00:23:58.28] - Speaker 3
As a trader, the world is not ending right now. I'm looking at opportunities where I could go into risk assets from the long side, disregarding all the noise. So there's a difference between what's really happening and what is the noise in the market. So back to you, Pat. Sorry, I said.

[00:24:21.14] - Speaker 2
Okay, that, that's a really good example. So I have so many questions, but I, I will ask the questions based on the community because I think so, so much people have the question. So we was not really talking about this, this, this stop loss. So let's, let's talk about as a swing trader, position trader, when we talk about the stop loss, how you would be dealing with a stop loss when you would be, say if you go now, for example, long or short on gold on, on some fxss, when you, when you would be placed your stop loss and, and how much room you will give.

[00:25:04.14] - Speaker 3
That's a very good question. So it always in, in my instance, always build into a position and I built out of a position. So I don't go. Let's take a, take one of your levels, for example. No, that's not it. Where is here? Maybe we can take gold because I would trade gold from the long side right now. So. The first Thing you can do is you can add. Gold volatility to your chart, right?

[00:25:50.14] - Speaker 1
Yep.

[00:25:52.26] - Speaker 3
And you can give it a new own scale so you can have an understanding of what you're seeing. So it's not, it's here, it's not updating in real time, but I'm seeing roughly 20. So gold is expected to be up or down 20.19.87 within the next year from the current level. That's crazy, right? That's nuts. That's really crazy. That's absolutely nuts. 20% is okay to give you an understanding back to the industry, depending on which time frame you look in the past. And at Lehman we always said never trust the statistics that you didn't fake yourself. Right. Depending on how bad, how far we look back in history, The S&P 500, if you just invest in the US stock index, S&P 500 generates about eight and a half percent return. That is amazing. Why is it amazing? Because if I currently invest in the so called risk free rate, the market is based mathematically on the risk free rate. What is risk free in the sense of the market? I'm lending the US government money. So if I lend the US government money, the federal funds rate is at four and a quarter right now, meaning I lend the US money for one year.

[00:27:17.21] - Speaker 3
I get roughly 4.25% or 43, $500. Up until Trump, this was tax free in the sense there's no, in German we say there's no withholding tax on it. Right. The US has so much debt, so they needed to incentivize foreigners to purchase their debt. So there's no withholding tax. If you invest in U.S. government bonds, so I invest a million, I get 42,500. A lot of your viewers right now could live off of $42,500 income. Especially if you're in a tax free area like Cayman Islands, Bahamas, Dubai, you know, that's another thing we can talk about one day. Your trading account needs to be, in my personal opinion, in an, in a region where it can grow without taxes, you're trading investment because otherwise you keep fighting the government stealing your money. But that's a whole different thing. You know, it's very important. Like everybody who's very, very, very smart has money in an offshore tax location and trades in that location. It's, by the way, not that difficult. We do this in our company a lot. We, we, we give people the connection of people who can help them with that. If you have no money, not important.

[00:28:33.28] - Speaker 3
But if you have A little bit of money, very important. Okay. So your levels. And you can talk about your levels now. And you tell me which one you want me to put on or you want me to put off. What a regular retail trader, potentially, I don't know, I'm making this up, you know, would say, okay, I want to be long. You can't show any charts. You said that. Right. So if, if you wanted to be long today, what is for example, a very good spot to belong. Let's incorporate your levels. Right. To belong. And then I tell you if I would concur or not based on your levels. Tell me the best trade. We're not saying it's going to happen. What, what would be the ideal trade in your opinion? And as, as a trade today, based on your levels, from where to where would you go?

[00:29:25.17] - Speaker 2
Oh, so I tell everyone my A plus setup is always trading from the high wall zero dte. So you see this also high wall or high voldte. And then target the one day mil if you'd be battling on the upside or targeting the one day max. So that's, that would be my, my entry depend on the market action.

[00:29:49.13] - Speaker 3
Okay, so let's, let's put this in. You're saying hypothetically from the high volume zero dte level. Yeah. And ideal would be min. I don't see the min level.

[00:30:02.07] - Speaker 2
So the max. Sorry, if you target the one, they're max for the upside.

[00:30:06.05] - Speaker 1
Yeah.

[00:30:07.13] - Speaker 3
Okay, perfect. I love it. So. And now we can talk a little bit about a. About gamma. So if this was a trade that institutions were to be looking at as well. Institutions have to move a lot of money. A lot of money. They're not trading 0.01 lots like you and I do. And I'm joking because I know you trade larger. But you know, we don't move the market. So gold is a very thin market. So know your market. If this was treasury bonds, very thick, very different behavior, very different behavior about the levels by the way too. Like if you look at your levels at a Treasury market, they will work very differently, very differently from oil, gold or es. For example, right now we are in what's called a positive gamma environment in the equity market. So how can we explain in two sentences what gammas? Or let me put it this way, the derivatives market, the option market is so big these days, is so big and so important and keeps growing that the hedging behavior of the options market maker will actually have an influence on your trading on the cash market.

[00:31:32.15] - Speaker 3
And I think we're showing My screen. So let me teach you something since I love teaching when we, when we learn about options and all of us, all of us, whoever worked at a bank in the trading function. I was a bond trader. I need to be URX certified derivatives trader. So I actually have to go physically to Eurek's in Frankfurt back then and take their examination. So there's a lot to learn. And we are all certified derivatives traders, all of that, all of us. Why? Because the options and the futures are hedging products for us. Hedging is just a fancy English term for I'm offsetting risk. If a client sells bonds to me, let's say a corporate bond, BMW and a bond that has five more years to run until it matures. My job as a market maker is to provide liquidity to the market. So I'm buying 5 million bonds. So let's think about what type of risks I have when I own 5 million BMW bonds. Okay, Pat, what could happen that changes the price of this bond? What do you know what could happen?

[00:33:00.13] - Speaker 2
So I'm basically, I'm not a bond trader. So to be really fair. So.

[00:33:09.04] - Speaker 3
Right. They could go bankrupt. Then I don't get my money back. Right? They could go bankrupt. The, the, the insurance product that we can buy for that is called cds, Credit default swap. Right. There's a huge market when I start in the industry, CDS just started, just started in the beginning. So cds, the interest rate can change in the market. So based on bond mathematics and we're not doing this here today, you know, when interest rates go up, bond prices go down. So that's something that could happen. So and I could maybe have it in a different currency and not euro, then I would have forex exchange rate risk on the book. We always call risks being on the book. So if I want to hedge something, in this case the interest rate risk. Right. I don't think BMW is going to go bankrupt. As a market maker, I'm allowed to have that position up to three months on my book. Then I need to sell it based on law. I'm not an investor, I'm a market maker. Right. I need to get rid of this position. So. But the interest rates change all the time in the market based on supply and demand, based on rockets flying and based on Jay Powell says something.

[00:34:19.17] - Speaker 3
Right. Like this week we have fomc. Very important by the way. So if I am in a situation where I am long and asset, this is what happens when I'm long and asset. What do you see on the, on the X axis somewhere. I can write, right? Can I write on your.

[00:34:41.17] - Speaker 1
I think you can use the magic pen.

[00:34:44.01] - Speaker 3
Is it called magic pen or. What was the name of the magic pen? What is a epic pen? All right, let me do it this way. It's easier. Real quick. I hope we have time. It's going to be value adding to. For you, for you. For you watching this. It's going to be value adding because you'll understand how awesome. How awesome the gamma levels are, how important they are, and why I'm such a big fan of Fabio and the company offering it. All right, so I got a pen and here's what I'm doing here. On this axis we have what's called P and L, profit and loss. And here we have in financial mathematics, S, which is just the price of the asset.

[00:35:23.16] - Speaker 1
I think. One second. Are you sharing something else? Because we can only see your training view screen.

[00:35:28.15] - Speaker 3
Oh, no. Why can you not see? Yeah, I'm sharing a paint.

[00:35:35.04] - Speaker 1
Okay, maybe what you want to do is you want to go and present and reshare your screen again.

[00:35:40.03] - Speaker 3
Okay, let's do that.

[00:35:41.07] - Speaker 1
Because.

[00:35:42.15] - Speaker 3
Super.

[00:35:44.18] - Speaker 1
Yeah. And click Stop sharing and. Yeah, exactly.

[00:35:46.24] - Speaker 3
Stop sharing and present again. Let's try that. Thank you so much for letting me know.

[00:35:52.20] - Speaker 1
Yeah, and guys, also, if you have questions, please send us. Yeah, we're here for you guys.

[00:35:59.02] - Speaker 3
So cool. Okay, so it's happening. All right, super. I think you can see it now. All right, so what I was writing, and I hope it shows, is up here is P and L. Can you see P and L? Because I can't see that. You can see what I'm writing on here.

[00:36:19.20] - Speaker 1
No, we cannot say. We can only see the lines.

[00:36:22.11] - Speaker 3
Okay, that sucks. That sucks. But it is what it is.

[00:36:27.15] - Speaker 2
You used to use the pen from. From paint.

[00:36:31.08] - Speaker 3
Where's the paint pen?

[00:36:33.25] - Speaker 2
Here at the top. Yeah, yeah.

[00:36:37.23] - Speaker 3
Ah, perfect. Thank you, mate. Awesome. All right, cool. So if I buy a stock, Nvidia. This is Nvidia stock, right? And I buy it at a hundred, and that's what I paid. You know, my P L is zero. So the 100 should be here. So this is a hundred, right? I didn't make any money. It goes to 110. So the way that you read the chart is I just made plus $10. Okay? Very simple chart. Does everybody understand that? We call these hockey sticks. This is what you have to do when you. When you get into. When you get into trading options. All right, so what happens next is P and L can stay and this can stay as well. I need to get rid of the this line. So we're taking. You're not long Nvidia right now you're an options market maker. And I'm in the process of explaining to you why the levels are so awesome and why it's very important to understand where the option market has levels in the asset class, whatever that may be that you're trading. If a client sells a call or he buys the call, Nvidia call.

[00:37:50.26] - Speaker 3
Okay. The client is long the call. So hypothetically, what that means for the client. I'm drawing the client. The client has to spend some money, minus, let's say he buys a 30 day call for 110 for $5. Okay. So the client spends $5 for Nvidia to go to 110 and higher. Because higher at 115, that's his or her break even point. At 115, the client has made no money. Who earned the $5 so far? Who earned the $5 so far, the options market maker. The options market maker sold the client the right to purchase 100 Nvidia shares within, let's say 30 days. And that costs the client $5. $5 times 100 shares. So it's 500 per contract. Are you still with me or is that too complicated? I hope you're still with me.

[00:38:53.00] - Speaker 2
Yeah, I'm good.

[00:38:54.03] - Speaker 3
If Nvidia keeps rising and rising and rising, the client makes more and more and more and more money. So what happened during GameStop? And there's a great movie on it that I forgot what the movie's name is. You have to watch it. This was during Pandemia Pandemic when we were all locked up. Right. Some X options market maker explained to 1.1 million Reddit users how we can screw. I was going to say the F word. Sorry. How we can screw the options market maker. Because the options market maker has the opposite position. Do you want me to show you what the options market maker looks like? Because the minute, the minute that the client has Nvidia going above 115, the options marker market maker is losing money. Right, because he only earns $5. So the options market maker first makes $5. This is his plus $5 up to 115. At 115 and lower, the options maker, market maker is starting to lose money. The client makes money, the options market makers loses money. Do you think we are in the business of losing money? No. So what do we do? The moment that the Nvidia stock goes above 115, the market maker has this position.

[00:40:21.10] - Speaker 3
This is the position that the market maker has. He wants to protect. And it's not him doing it physically himself. It's actually the algorithm doing it. The. The market maker will go ahead. Can I make the pen thicker? Do you know if that's possible somewhere? If I can make it thicker, doesn't matter. So in order to offset this hockey stick going down, the market maker will just go ahead at 115 and buy the stock. Delta hedged. Delta hedged. Delta means you buy us. You buy any option. It has a delta of 0.5. We say it's at the money, basically, in that moment in time, Patrick, because Fabio knows us, you probably as well, but I'm just pretending I'm teaching you. At that moment in time, this option has a 50 probability to end up in the money at the time when it expires. If we now have the situation that Nvidia is rising and rising and rising, this call option will rise along with Nvidia. Why? Because it's a contract that gives you the right to buy Nvidia at the price, the strike price that you purchased. If the stock increases, the option becomes more and more worth.

[00:41:44.06] - Speaker 3
Yeah, it rises in value. So the delta starts rising. It's not 0.5 anymore. It's 0.6, 0.7, 0.8, 0.9. So here's an important lesson. At one point in time, this option that the market maker sold will have a delta of 1, and the market maker will have exactly 100 shares long. And this position is hedged. Fully hedged. Fully hedged. Now, you're looking at gamma levels in your chart, and we'll go back to the chart right now, and the question is, is this gamma level negative gamma or positive gamma? And this discussion that I had with Fabio is quite tricky, and it's too much for today's webinar. But what can happen is two things can happen. Either the market makers, they're very, very, very much short options here. Lots of short options. Then you have a situation where the market turns before that level in your trading. Have you ever seen that, Pat, that you have a very important level. Wow. Something's just happening. One of us changed them. One of us. Because I hear myself. Did you change something, Pat, or you, Fabio? Okay, it's gone. Super. Thank you very much for changing it back. Perfect.

[00:43:16.12] - Speaker 3
Or it gets slippy. And that means what I tried to explain to you. I tried. Maybe I didn't do a good job. Who knows? What I tried to explain to you is in that moment in time where it crosses such a barrier, where there's a lot of options outstanding, the hedging activity of the options market makers, them buying the underlying, may it be Euro dollar, may it be gold, may it be oil, doesn't matter. It's. It's like a turbo. It flies through the level. So that's if that's the case, the level was very short gamma from the point of the options market maker and we call it a slippy level or it's slippy and then it turns out returns before the level. Knowing this, Pat, I'm watching like a hawk as whatever I'm trading, let's say gold is approaching your level in the chart. I'm watching it because I'm watching either this will happen or this will happen. And it's very easy. And you, you said this yourself, you said mentor Q levels are tools that you put on top of your edge. So I love the levels because they give the trader structure for today.

[00:44:34.10] - Speaker 3
There's a great structure. What's the best structure? You go, just like you're saying you go to the high volume node. Yeah. To the either day max. But depending on the environment, the context, you may or may not reach. Today's day max. Yeah, that, that is headlines, Trump tweets, economic numbers, what I tried to explain earlier. Or the environment gives you enough firepower, enough reason that portfolio managers come to work and say I'm not long enough. Go oil. And then you want to target these levels and you want to maybe even go beyond the levels. So how do you know that? You need to know your markets and, and you need to know the news headlines and you need to know the data. If you don't know the economic calendar, you come to a game where professionals who do this shit for 30 years, day and night, never sleep, work all the time, have the best education in the world, and you think it's enough to open up a chart in your MT5 and to trade from one level to the other. That's not good enough. If that was enough, you, my friend, would be working at Goldman Sachs and making them billions.

[00:45:48.26] - Speaker 3
They would give you all the capital in the world. It's not that easy, but it can be easier if you wait for very good opportunities that you understand. And that's possible. It's absolutely possible. I see your mouth. You wanted.

[00:46:04.15] - Speaker 1
Yeah, if I can add to that, Jay. So I think it's important to understand that the trend that we are living in today. So first of all, I think something around 80 or 90% of the execution in the option market is done by market makers. That means that there is somebody on the other side that is taking a risk. And market makers are not, like you said, in the business of taking risk. So that means that most of the option trade that we see are basically not executed by other customers. Like when you sell shares, you buy my shares, I sell your shares. There's an exchange of 100 shares of Apple that goes from one account to the other one. In the option market, most of the time the, the shares are not executed, the contracts are not executed. Second thing, we are at the highest level we've ever been in history on option volume. So again, we have a lot of, a lot of option activity and therefore there's a lot of hedging. And then of course, we have the, the macroeconomic context. So I think understanding all these pieces of the puzzle together can really help you understand when the level will have an inflection point to the upside or the downside, or when it become a strong supporter resistance.

[00:47:17.08] - Speaker 3
Absolutely, absolutely. And, and again, that can be your edge. So we're looking at today's level and looking at this. For example, just being. Think logically about what you're seeing. Just logically. I'm seeing a very large bar, a red bar in a, in a one hour chart. And I see a lot of volume compared to everything that happened prior. What happened here is what I call institutional selling. Ex colleagues, ex clients of mine. There's some real institutional selling going on here at this level. 3, 4, 15. So going back to your trade idea right now, Pat, you know, I'm gonna make it better based on what I'm. What I'm saying, what I'm seeing based on the fact that here we have the beginning, so to speak, of an institutional move that then compressed a little bit lower. I am automatically updating my trade. I'm updating my trade and I'm lowering the target to here. Why? If we're going higher, this was the last time an institutional cell activity can be observed in a candlestick chart with volume. That's the last time I saw it. So this is the first time I see potential stress if this institutional seller is still there.

[00:48:48.05] - Speaker 3
And I don't mean him or her specifically, you know, it's not like, oh, Jay, Meadow was selling there. No, that's not what I mean. But the market aggregated, had an interest of selling it here. Now why is this interesting? Because earlier on we saw an institutional buying interest at this level. Do you see this type of bar, volume bar. There's A lot of institutional interest there, otherwise we would not see volume. Now, what was the reaction of price? Price rose afterwards. Now let me tell you what I did as a bond trader. So I'm sitting there. Unfortunately, I don't have an old phone, so I'm going to use this, right? And my phone rings and it's my sales guy, Fabio. And Fabio covers the central bank of China. Yes. Actually US Tier one investment banks speak to other central banks. We speak to every hedge fund, every central bank, governments, you know, this parties involved in the institutional market. The whole world is trading and investing. So I'm here at this moment in time and I'm getting a call from Fabio and Fabio tells me, jay, I got the Chinese People's bank of China on the phone and they want to buy gold.

[00:50:09.25] - Speaker 3
Now how does that make me feel as a market maker in gold when one of the largest central banks in the world is calling me and they want to buy gold? Do I feel good about this or do I feel bad about this as a market maker? Because in logically, what do you think is going to happen next? Patrick, think about it.

[00:50:39.28] - Speaker 2
I would look first in and okay, why is this happen? So always ask the question first. Why? Why is someone getting stressed? So check the news, check what is going on in the market and then I will find the answer and then I will follow. Follow the. The big money. Of course, I will not battling against them.

[00:50:59.14] - Speaker 3
Exactly. And as a market maker, I have to sell to them. I have to sell, right?

[00:51:06.08] - Speaker 1
Yeah.

[00:51:06.21] - Speaker 3
Let's say I have 100 contracts of gold, I'm making this up and they want to buy 1000. So I have a problem, right. I can't give them my 100. If I give them the thousand, I'm short 900. And now think logically. If the People's bank of China buys gold and exactly like you're saying, why the are they doing that? You know who's going to buy next? Well, I tell you, the European Central Bank's going to buy gold and the bank of Japan is going to buy gold and the Federal Reserve is going to buy. Everybody's going to buy gold. And this is exactly what's happening. When you see large institutional interest with candlesticks going ballistic afterwards. One of the things that I can teach you from my decades, decades of playing in the first league, is the buy side. They all do the same, but they do it. The smartest are doing it first, then the second smartest are hearing about it and then they implement it. And by the time it's on the build newspaper, which is a tabloid in Germany, and it says, buy gold. The trade is over. You know, I'm exaggerating, but retail hears about.

[00:52:24.07] - Speaker 3
Yeah, I hear myself again. So, all right, so why do I like this level? This level I like because I saw institutional buying there last time. Now what's happening? I saw institutional selling here. So if I get a buy signal, maybe on a lower time frame, and if I see the dollar falling but I see oil rising, as an example, I have two factors that go into a macroeconomic model that will flash to my ex colleague saying, you are not long enough oil. Did you hear what I just said? Two factors. One is the US Dollar. Why is the US Dollar important? Because gold is paid for in dollars. So let's look at the dollar. I don't know if it's showing it again or not. No, it doesn't. So I need to stop again. Wait, I need to stop and then I need to start again. This is a little annoying that you always have to do this, but it's important that you see the next picture. Okay, Here it is. Wait, wait, wait, wait. Is it coming? Can you see it? Yeah. All right. Right now I'm seeing the dollar getting stronger. So let's say you're getting a buy signal based on technical analysis in your chart, and you want to buy gold.

[00:54:01.09] - Speaker 3
But if the dollar gets stronger, is that good or is that bad for gold? The answer is it's bad for gold. Why? Because a European investor needs to exchange euros into dollars. The dollar is just getting more expensive. Then he or she needs to take these dollars and buy a gold contract in dollar. Do you understand? So for everybody else in the whole world, when the dollar rises, gold becomes more expensive for them. If the dollar were falling right now and you get a buy signal for your gold chart, that would be positive for your potential long. Okay. Because you told me, hey, Jay, people need an edge. Need an edge, dude, if you don't have an edge, don't even trade, right? So now let's look at the treasury market. Okay, now I need to stop again. In the future, we're going to use a different, hopefully different platform because I switch around a lot. Fabio, if I always have to go, stop, select new. Okay. Anyway, so wait, wait. It's gotta come. It's gotta come, it's gotta come. Oh, funny. Okay, you can see it now. It's working. All right, so now let's look at oil.

[00:55:17.20] - Speaker 3
Okay, good. Oil is rising right now, right? It's going from the left, bottom left to the top right. So oil rising means inflation is rising. There's a very high correlation between oil, which everybody needs and all the products we derive from oil and inflation. So inflation rising is positive for gold. So looking at two different input variables, right now the dollar is rising negative for gold. Oil is rising, good for gold in the sense that inflation is rising. You look at the bonds, the bonds are falling right now. That means the yield is rising. Why? Because inflation is rising again. I can, I can teach you for 800 days. People will come into my company. They, they learn a lot. They learn a lot. But let's take these two examples in very important input variables. Gold reacts to the real yield. We just looked at inflation, which is a very component of real yield and gold reacts to the dollar. So if we see that one is positive and one is negative, it can explain to you why there is no direction in gold right now. Do you understand? It's a two time frame, we call it two time frame market.

[00:56:39.27] - Speaker 3
It's going sideways so you could scalp it. So you just took your, hey, this is my long trade, this is my playbook. I played football in high school, right? And you get a playbook. And I was like, oh, there's no trend today right now. So you get rid of this play and you get the other playbook and the other place I'm scalping. I'm going from top to bottom and from bottom to top, okay? So you need to understand what's driving your market, what character your market has in this moment in time and then accordingly, trade. Now I'm using your levels differently right now. I would potentially go ahead and say, all right, it's a very tight market. Everybody's waiting for the next headline. I'm looking for on maybe a five minute chart or lower. I'm looking for a long. If we go into what I call liquidity down here because institutionals need liquidity. And then when I go back up above the high volume 0dte, I'm going to go to GEX 2. Okay, so now I have my range. Now I say I take 1% of my account. This has a high probability. And then now I can decide my stop loss based on the structure of the market and how much profit I expect to make and I adapt to according to the volatility.

[00:58:12.19] - Speaker 3
Is there more data coming today? No, there is not. Is anything happening right now with risk on, risk off? I'm looking and I'm seeing yes, it's a little risk offish, little risk office. And that means if we hit into this liquidity here. Super. I'm looking for a long signal and then I would say I'm willing to risk 1%. I want to make let's say 1.5%. So I am calculating what is the distance between high Vol 0DTE all the way to GEX 2. That's my distance. I calculate that into 1% of my account or you know, how many dollars 1% of my account is and this is 1.5 the distance. So I divide that, that the distance divided by 1.5 and then I have my stop loss. So I'm risking 1% to make 1.5%. I hope that made sense. Otherwise we'll go through the calculations next time if you we see each other again. But there's a, there was a lot in here and, and I didn't prepare any slides. Usually you know, I have a lot of slides and blah blah, blah. Now I need to take into account and I taught this to my guys yesterday.

[00:59:22.26] - Speaker 3
We had a four and a half hour session yesterday with my traders, 108 traders, four and a half hours where I went into all kinds of different topics based on their questions. Time of day, what time is it? Is it. It's. It's 10:30 right now. It's very good because the algorithms update every half hour and every hour. It's crazy, but they do, right? Economic numbers comes at 8:30 or at 2 to 2pm Right. Us humans, for whatever reason, we still look on the hour and on the half hour. So when I started trading, I was forbidden to go to the toilet when there was economic numbers, I had to be on the desk. And when there's a full hour or half hour because new orders are hitting the market at that moment in time. And today, like Fabio said, JP Morgan estimates that 90% of all equity flows in the stock market in the United States of America are all rules based and algorithmic trading. If you don't know the gamma level, I don't know what you're doing. I really don't. You need to know these levels and then you need to put it in the context.

[01:00:43.20] - Speaker 3
So if you don't have a news feed, what are you doing? Will you, will you. You know I pay thousands of dollars per year for news and analysis from top, top, top providers. I have two different nude fees, news feeds up and running and in real time they tell me if something happens, you will know it too. Because when you're trading gold and something happens, the gold market will go through the roof. And 30 seconds later one of the speakers Will come up and say holy. The Chinese embassy in Tehran just got accidentally hit by one of the rocks rockets from the Israelis. That would be immediate risk off oil would go through the roof because everybody would think world war III has just broken out. So gold oil is going to go to 120 and gold will rush too. Look how awesome this is. We're going right? This trade is starting to happen. I love it. As we speak, this trade is. Look, you have sellers. You have sellers. Why is there more volume right now? Because there's liquidity. If you have something like bookmap, you can see it right now. There's liquidity happening as we speak.

[01:01:53.13] - Speaker 3
If we go into the 32nd chart. Yeah, they're running stops. Whoever they are. The market, you know, I'm not saying there's anybody there. Oh, there's Patrick. Patrick P. And his stop. And we're gonna get his stop. That's not how it works. But they're generally entry liquidity.

[01:02:10.14] - Speaker 1
Sorry Fabioption that a lot of retail traders have that market makers are here to take our money. Right. That's a misconception. They're just executing based on market structure. So yes, they are on the other side and they are against the retail traders, but they're not there to take the money. They're just executing to stay delta hedge and stay protected. Right.

[01:02:34.21] - Speaker 3
And look at what you're seeing right now. This is awesome. Really. You see, look the way I look at a chart and I'm giving a lot away from stuff that I teach people and I teach a lot. This is how I look at any chart. At any chart. So if you have some guru who shows you a chart without volume, I don't know what the you're looking at. Sorry for my French. I don't. Because I don't see institutional interest and I don't see the absence of institutional interest. Both is ultra important to see. Right. So I'm seeing buyers here, buyers here and buyers here. And I'm seeing more sellers. So if I look at the chart right now, the buyer here. Yes, there was some buying. Was. Were they effective? No selling came in. Okay. The buyer here, were they effective? No. It's even a doji. They weren't effective at all. So every time I'm seeing. But he has more buyers, were they effective? No. No. So there's no way in hell that I'm gonna buy this market right now. I'm not. I need to wait until the sellers are done, until the buyers are showing up, until the reaction of price is bullish.

[01:03:48.17] - Speaker 3
And that's why I have all the time in the world that I can wait for the market to find its bottom and to turn around. And I trust trade. What I see. This was my idea to go long. We already said it's a two time frame market. Right. I'm seeing the dollar is rising and rising. This is really shitty for, for gold, really bad. And what are the bonds doing and what is oil doing? Oil is right. That this is actually good for gold. So I'm still, I'm waiting, I'm waiting until the dollar strength is done. I'm waiting until I see buyers. I'm waiting until the sellers are done. And then you know, it's 9:37, 10:37 right now look, there's even. This is interesting too because this is. You see a lot of distance with not much in the beginning, not much selling interest now or institutional interest now. There's a lot of institutional interest coming in. Why? Because it's a gamma level. So what I showed you earlier and now imagine I'm pulling in what I drew earlier on the picture with the hockey sticks. I can't do it because you know it's going to take too long.

[01:04:58.29] - Speaker 3
But this is happening right now. There's put options. Put options, the opposite picture of what we saw early on. And these put options by the market makers are increasing in delta. That means at one point in time the market maker is now losing on puts that he or she sold to clients. And the hedging is they are shorting the gold futures into their short put options to offset their risk. You need to know all of this. So put support is actually a cool name because maybe it is support, maybe it's slippy. We don't know that. All we know is that there's a lot of exposure down there on the put side. And if they defend the level, the gold market will, will turn around before the level. This is one of the major, major teachings I can give you tonight. Today. Yeah, you wait. This was a lot of selling interest. Here's decent buyers. They're not effective. You have a little bit fewer sellers right now. The candle is not as long, so there's some sort of absorption there. You know I, I used to spend so much money on software and I had every tool on earth.

[01:06:14.17] - Speaker 3
Do I really need bookmap? Maybe I do, maybe I don't. Right. And I'm not trying to go against bookmap. I'm just saying sometimes all it needs is, is a brain and think about what you're actually seeing and Tell yourself that I am seeing a lot of sellers and they are effective. I'm seeing a decent amount of buyers. They are not effective. Don't fucking buy. You do not buy right now. You don't, don't. You are the only one and you're doing what we call catching a falling knife. Have you heard of that? Catching falling knife. Don't catch a falling knife. So. Yeah, but I miss these guys. No, wait, wait. Because what they're doing is this hedging behavior of the algorithms. They will check if the sellers are still there. So you will see at one point in time, if this is turning around, you will see a red candle with no volume. And that is what we call a low volume test. They're testing if sellers are still there, institutional sellers, not you and I. If they're not there, then it's safer to go back to your original trade idea and look for the long.

[01:07:25.12] - Speaker 3
And there's a specific buy and sell signal that I teach to my traders that obviously because they paid money, I'm not going to teach right now for free. But, but this is. It doesn't matter if you intraday on a 30 second chart or if you're on a daily and you're looking at McDonald's, which I am currently looking at if I want to buy McDonald's down here. And alarm fired early on. It's always the same. Do you see how now you have buyers in the market, how different that is? Right. And we turn around at a level where some hedging activity is because it was a gamma level. GEX1 is a gamma level. So now these guys who shorted the stock or the gold futures, the same algorithms, because the delta is changing, are buying back the stock right now and that creates a V And a V has absolutely nothing, nothing, nothing to do with an investor buying. This is option market maker hedging activity. They're hedging. There's no more threat. The sellers are not there. So the algo unwinds the hedge. That's all that's happening. So this is like down, up. Did you see any sellers yet?

[01:08:40.08] - Speaker 3
No. So could it be that I'm missing the long? Yes, but at a later point in time the original trade will come in and it can work then. Sorry. Yeah, Fabio, not sorry to add the.

[01:08:56.03] - Speaker 1
Blind spots level on the chart. It's also another good example.

[01:08:59.27] - Speaker 3
When you do what, tell me again.

[01:09:01.17] - Speaker 1
If you want to add the blind spots to that chart, you will see that basically we also have kind of like a blind spot level there as well, awesome.

[01:09:11.24] - Speaker 3
Awesome. I love it. Thank you for that. Yeah. This is the zone that Patrick creates, right? You create zones with blind spot and gamma Patrick.

[01:09:22.23] - Speaker 2
Yes, that's correct. So that's basically I see this as a magnet. So I'm not a market maker like, like you. But I highly believe that if we see some blind spot, we're supporting some gamma level. This have some reason so why we see this because there's a strong magnet and the market goes to. The strong magnet goes there. Take it and then we will touch this and that's the opportunity. So basically I'm looking always we are blind spots supporting gamma levels and that's my magnet area.

[01:09:57.17] - Speaker 3
Perfect. Okay, cool. To me is still not the best trade right now because the dollar is getting stronger and stronger and stronger. So that's another thing a lot of retail traders have fear of missing out. You know they get nervous. I missed the trade and this was. And they get nervous. This is quality wise not the best trade. It's not the best trade yet. If the dollar comes off and I see that sellers are exhausted. The original trade idea that you had earlier on Patrick is on and that trade idea is trading from that we showed early on trading from the zero dte level to the liquidity that we're seeing here. I would take it even further down around right. Because there's liquidity here and this is where the institutional selling started. So I'm adjusting the level a little bit and I'm saying this is the trade. I'm going to send you a picture if that trade happens because we went over an hour already. I don't know if that's good or bad but if you put a volume profile on here, from here to here, and I don't have to be exact between the value area low and the value area high, there was a lot of volume.

[01:11:20.12] - Speaker 3
The function of the market is to find the fair value of a market. And that's called price discovery. In this area there's no price discovery needed anymore. The market already discovered all the prices prices that it wanted to discover. Right. So there's a very high likelihood that I can trade from the value area low through the POC to the value area high. So I like this trade more and more and me personally, the trade that I'm going to take today then at a later point is this. Sorry, is this trade. This is what I'm gonna. This is. So you ask me, you know, can I use your tools and put another edge on there? And I say yeah, this is, this is what I do a lot. We call this the inside day trade. Right. I'm taking it once we if, if you know, if we go back here I see the dollar coming off oil is still high. This is the trade I'm taking. And then I took a high quality trade. That is according to the sentiment. There's no more data today. And now I'm now I'm putting a technical correct market structure on top of the trade with the correct trade playbook and then I make my money.

[01:12:29.19] - Speaker 3
But it takes a lot of experience, a lot of knowledge and you have to be cool as ice. Don't get excited. This is just business. There's nothing to get excited about. Trading, nada nil. It's a lot about observing, understanding what's happening and waiting for the best opportunities.

[01:12:49.26] - Speaker 2
So it's one point. I think it's also be patience as we will see. Jay, so the as you was confirmed so the trade idea looks good. But we are be patience. We are not stupid that at adding directly our trades to go long we won't see first how everything plays out and then we will come in. So we be patience. We have a trade idea in our mind what we will be execute. But we will have patience. We will wait until we're getting the right time to enter the market and not directly. If, if it maybe it doesn't mean if it hits high volt zero dte or it hits some level. This doesn't mean that you have immediately go into the market. Be patience. Wait and then you can execute. Never execute directly. Only if there's a really big news coming out. That's a different approach. But for now where we stay here, it makes no sense to go directly into the market. Wait until we retest this, we come back and let it play out and then boom.

[01:13:54.17] - Speaker 3
You can go 100 correct. 100 correct. And I'm watching the dollar. The dollar is still too strong. The trade, the quality of the trade is not there yet. I go back to what I tried to say earlier on today. The real world, the, the the the financial services industry is based on macroeconomic models. So they take different data points and gold reacts to real yield. And the US dollar so we have real yield that is coming down. That's good for gold in the form of oil rising which is a placeholder for inflation rising. That's gold. Good for gold. But the dollar is too strong. Once I see the dollar get weaker, I'm ready to go now. Which currency do you know could benefit could benefit from a rising oil prices from rising Oil prices, Patrick.

[01:14:54.12] - Speaker 2
The Canadian, the Canadian dollar.

[01:14:56.17] - Speaker 3
So, so look at the Canadian dollar and what is the problem? Right now the Canadian dollar is rising, but the dollar is rising. So is US Dollar. Canadian dollar, is that maybe the best currency pair that you can look at right now just because you have gamma levels for it? No, it's not. Because it's going to go sideways. Let me prove it to you. Where's dollar cad here? Both are strong, so you don't have the best opportunity in a market where both are going in the same direction. Meaning both currencies are strong, but the Canadian dollar is strong right now and the New Zealand dollar is weak. So if we would say, okay, and I'm going to switch it back. New Zealand dollar, Cat. Canadian dollar is strong. New Zealand dollar is weak right now. I can see this. We would expect it to go down. Ah, very interesting. Right now we're on a one hour chart. So we just went into liquidity. Yeah. And we did an inside day play that I just showed to you. So if you go on a five minute chart, I know we don't have levels for it, but what we can see is exactly one of my trades that I would do.

[01:16:15.14] - Speaker 3
I'm seeing seller, seller, sell us a few buyers. We're going into liquidity. Remember this is from an hourly chart. We're testing into it. Yeah, we're not effective. And then we see sellers coming in, you see more sellers coming in. And we're going from value area high through the POC to value area low into the opposite liquidity. On the other side. There was, as we were talking about gold, there was a very easy, logical trade based on oil is rising, Canadian dollar. I would look to go long. Takes me one minute to look at my strength versus weakness indicator. And I see New Zealand dollar is the weakest currency right now. So I look at this, I get my cell signal and I take the play from my playbook called inside day. And I just made the money.

[01:17:07.20] - Speaker 1
Right.

[01:17:08.02] - Speaker 3
So nothing has to be complicated. You just have to, in my opinion, you have to learn a lot in the beginning of your career. Take your time observing these things. And that's why I think intraday is a horrible place to learn this business. And it's also a horrible place to think. You have to rush your education and you'll have to rush your career as a trader or active investor. That's like, you know, hey, you want to become a brain surgeon? Okay. Get a PDF and start doing surgery on open brains. That's a horrible idea. Okay. It's your money. It's hard enough to get money. You don't want to lose money in the markets because you're the guy who we eat for lunch. We meaning the professionals, right? Don't be the sheep that we slaughter and we drink your blood and eat your food, eat your meat, you know, don't we. We call it donation. Don't donate your money to us. Learn the business, understand what is driving what, what are the drivers of my market and then use excellent tools like you have in the form of for example the GAX levels and the blind spot levels that we saw earlier on in, in the gold market.

[01:18:24.26] - Speaker 3
And now, now this is, I'm telling you, I'm gonna laugh my ass. I spend all this time with you. I'm gonna take this trade today. You know, I'm gonna, I'm gonna take it.

[01:18:39.19] - Speaker 2
Let me, let me add something to this because you was making a really. And you know what, what is the first question from a beginner trader when he shows up in a live trading room or he shows up on mentor queue? How long it takes until I be profitable, how long I can, is this possible? That I make consistently profitables in one year. So then I, I give them always a little, little tiny background and say hey you know we playing with institutionals, we playing with really big players. So what do you think how long they take until they getting a huge edge and what they have on the background. So they have on the background the best tools ever in the market. They have all the news feeds, what you never have, they have all the education outcast to a really good point, before you can start on a desk you have to have first the great and biggest education available. So they will teach you all the lessons before you're doing something. And this is all the part what you're missing. And they're doing this full time. They spending months over months over months before they taking his first trade.

[01:20:06.22] - Speaker 2
And now you came as a retail trader and telling us without, without all the education, without all the tools, what's available on institutionals that you can become as a part time trader would takes maybe one hour each day that you can become in one year consistently profitable. There's no way. That's no way. So that's the donation what, what we're talking about. And this is why I'm so happy Jay that you're here because you teach us in let's say 90 minutes, it is now 80 minutes. Really good stuff. But it's only a little tiny cookie. It's not the big One it's only a little tiny cookie but if you want to get the full big picture I highly recommend to everyone reach out to Jay because what he is teaching now to you that's so amazing. And Jay, I have only one little tiny questions I know we have so many questions from the people but the people should should. The people should. Should send you a message you should be go in contact with the people if they have a really question but only one little question for everyone because this is so important to understand and you was talking about this in the beginning and I think so many people don't get the point where you see when we have a risk on event where you see when we have a risk off event especially for indies traders who are trading ES or NQ because that's so important to understand risk on risk of how you can measure this.

[01:21:51.00] - Speaker 3
Yeah perfect. Thank you for the very intelligent question. So the FX market being the most liquid market is my first view. That's why I had years, years, years ago program One guy for MT4 based on my input variables he programmed me my strength vers versus weakness indicator. Right. And, and it's in real time and it's actually calculating mathematically. Correct. Correct. In which currency money is flowing into and out of which currency money is flowing out to. So there's no moving averages. There's none of this nonsense. Right. What do I need a moving average for? I can look at price and volume and volatility in real time. I don't need an indicator to show me this. I can do it. So the, the. The I taught you today or I showed you today that and in a chart the first thing I look at is the volume. I don't even see the bars because price is marketing. Price is just marketing. It's like if you only look at price. That's why price action courses are ridiculous to me. Price high prices are supposed to attract institutional sellers and this is what happens in the economy. If oil goes super high it's going to be very opportune at very high prices prices to start looking for new oil reserves and investing in new oil platforms again.

[01:23:21.19] - Speaker 3
Right. Which is one of the reasons why every week we follow the Baker U Rick count how many new oil and gas rigs are there or are they withdrawing oil and gas rigs? Like I said, I can teach you. I have 30 years in the market but the first thing I look at is volume. It shows me institutional interest and the absence of institutional interest. Then I look at the chart because prices is marketing. High prices attracts Sellers, low prices are supposed to attract buyers. Right. But that's not the fair value. The fair value is where you have the highest volume at price. That in that moment in time is the fair value that the market finds based on the auction process. Buyers and sellers meeting in the market. And to say a market is rising because there's more buyers than sellers is nonsense. When you think about it, it doesn't make any sense. It's illogical because for every buyer there's one seller. So it's not true that somebody is One group is more, one group is less. That's not the case. What they try to say and they it up all the time is the more important client in the market is buying.

[01:24:36.22] - Speaker 3
That causes prices to rise because the more important client is leading the pack. The dumber clients. And the dumbest client is the dumb. Money is us, is retail. I'm saying this so people don't say, oh, the guy's so arrogant. He calls me dumb. We are the uninformed money here. It goes back to what you just said. Citadel has rocket scientists working for them. Rocket scientists. Fabio, Your former clients. Right. These guys have two heads. They're so intelligent. What the am I doing? I was just a bond market maker trying to joke. I mean, I wouldn't be have worked at Lehman Brothers. Yeah. Which is like Goldman. You have to have the top education from one of the best universities in the world. World. You had to be top of your class. And then you have to prove yourself in that shark tank that you can make money every week. And it's never about how much money you make. The first thing is don't lose money. It's also different from the retail trader. It's always about your max drawdown. It's never about how much money you made. Nobody cares about that. Everybody cares about, hey, Patrick, in the last three years, what was your maximum drawdown?

[01:25:50.26] - Speaker 3
Because then we have an understanding. Something. I'm going to shut up.

[01:25:56.27] - Speaker 1
Yeah.

[01:25:57.17] - Speaker 3
Tell me. About. I look at the volatility. I look at what the equities are doing. I look at what the bonds are doing. I look what oil is doing because oil is driving the bonds. I look at what the dollar index is doing. Yeah. There's no way I can buy gold if the dollar goes through the roof. Right. I need to wait for the dollar to be rejected. I look at dollar yen as an indication of risk on or risk off in an engine. And gold and commodities. So this is up all the time. All the time. Last time we talked about, okay, you're a NASDAQ trader, right? Okay. If you're a NASDAQ trader, you also need to, also need to look other indices to look at the Dow, right. And the transportation index to see if you have confirmation or if the NASDAQ is doing its own thing because there was news out on Nvidia that is particularly important. Only for Nvidia, then you lose. Then then you're missing breadth. Breadth means how many of the members of that index are participating in the rally or is it just based on one or two members who are very large members of that capital weighted market cap weighted index, Right.

[01:27:21.17] - Speaker 3
So again, it goes back to understanding a lot of things. But this is my, this is why this is called risk on, risk off. This is the answer to your question. This, I understand this because I put this together for myself and I'm a bond trader. So I come from this world world and I'm looking at ultra long bonds here because they are an indication based on supply and demand of inflation. That's why inflation, the oil market is right next to it, right? And below it the index. And then here's a dollar because this dollar is driving the commodity index, right? And then the dollar yen just shows me the two central banks which at the moment have the largest discrepancy in terms of yield. Yield being the price for money. Money cost 0.5% in Japan on Thursday. Money will cost nothing in Switzerland. So I could put dollar Swissy on here. Why did I not do that? I put dollar yen because the Japanese economy is a lot larger than the Swiss economy. So you see, even after one and a half hours of talking and talking and talking, you already in me just sharing with you, you see how everything is interconnected and how there's always logic.

[01:28:38.27] - Speaker 3
Whatever I do is there's always a logical reason why it's there. Everything has a reason. Nothing I do is a waste of time or doesn't have a reason why it's on the chart. Everything I do is I completely understand what the is going on in the world completely. And it's my job to make money. And I'm telling you I have been doing this for 30 years and even I get that's a fact. It happens. I was completely naive on April 2nd. I was very long risk. And then Trump comes up with this liberation day. And I didn't have the experience after 30 years and I didn't have the imagination that a president of the United States of America would the world up and throw us back 80 years and reintroduce tariffs yes, he talked about it through this entire campaign. But I heard it, but I didn't hear it. And this is something what I often teach my, my own traders. I say, I know that you're hearing my words right now, but since you haven't experienced it yet, you don't hear me. That is the difference between hearing and hearing. You know what I'm trying to say, right?

[01:29:55.05] - Speaker 3
So now I know that this guy is in sane and now I trade very, very differently. Very differently. I'm, you know, I don't trust come out with a new headline and a new tweet and then I have to be. I'm, I'm much shorter now. Right, right now I'm much shorter in trading or I'm very hands off in investing because Trump creates great investments. He makes life interesting, somewhat difficult for trading interesting. You know, it can have great opportunities, but it's a difficult, different environment we live in right now. Again, a Vix at 20.75 is a completely different world than we had last year when the Vix was at 12, for example. Right. It's a lot easier to to make plays when the market behaves. A Vix at 21 is a market that's like your ex wife being drunk and throwing nasty words at you because she thinks you misbehave. Which you didn't. Right. It's hysteric. The market is hysteric right now. Fabio.

[01:31:07.14] - Speaker 1
Jay. But I think we're gonna get cut out. So I don't know if Patrick, you have anything to add, but.

[01:31:17.09] - Speaker 2
Yeah, so I have, I have to add about something about this. Of course, always. So I think I was reading something really interesting and as, as Jay was saying, you have to be really careful with the news. You have to be proof this. And we were speaking about the rates. So Jay was saying, okay, we get now rates on zero on Switzerland and we have the Japanese on, on, on zero. And he was talking about the importance of the fomc. So guys, please be careful because what was happened the last time when we get the Japanese carry trade, everyone know it if this will be messed up. So you have to be really careful. This is something where you can connect your experience. And I think only it was last year the Japanese carry trade where we get really strange the downside. And this is something where you was experienced but maybe you was never understanding the background. Why was this happen? And now it's the best time to educate yourself all listeners to understand what was happened on the Japanese carry trademark. Because it could be really possible that we Getting some next idea what would be happen in the future.

[01:32:45.02] - Speaker 3
Yeah, yeah, very good point and happy to do a topic next time. I mean you if you get questions you know we can, we can see what is the most important question to your clients and then we go ahead and do one hour on just you know and I teach you something something about for example the carry trade as an example.

[01:33:06.00] - Speaker 1
So for everyone guys send us an email if you want to get in contact with Jay if you have questions about the session. I think this was an amazing master class for 90 minutes on really forex market structure gamma and why is this important? So I really thank you Jay and Patrick for being here and look forward having you in the next session.

[01:33:28.27] - Speaker 3
Thank you very much. Thank you very much.

[01:33:30.22] - Speaker 2
Thank you also. And then also I can only add to this if you want more. I cannot stress it enough. This was a master class 90 minutes. But think about how you could be rise as a trader if you be one year on the side on J. So we talking on mentor queue always you need an edge and mentor Q will give you the second confirmation how you can place your trades about your edge and Jay is someone who can build and help you to develop an edge. So take the opportunity really seriously and send a message to infoentorq.com with any questions you have. We will send this to Jay, you will get the answer. Jake, did we get the promise that you will answer?

[01:34:20.17] - Speaker 3
Absolutely.

[01:34:22.00] - Speaker 2
So here you get here you get the promise. So don't be shy, send us a message. We will forward this and and you can stay in contact with Jay. This is a one time opportunity for you guys.

[01:34:33.23] - Speaker 3
Great, thank you very much to work with you as always and greetings to all you traders. Trade smart, live free as we say in our company and I'm looking forward to seeing you soon. Goodbye.

[01:34:46.12] - Speaker 1
Thank you guys.

[01:34:47.21] - Speaker 3
Thank you.