From Pro Gamer To Millionaire Day Trader (With Brian Lee)

Rayner (01:16)

All right, Brian, welcome to the show. Happy to have you.

Brian Lee (01:21)

Hey, thanks for having me.

Rayner (01:22)

By the way, I’ve listened to a few of your podcasts and I feel that if you are not in trading, you could well just be a DJ. I hear that voice, man, that’s a soothing voice you got.

So, something to consider, right?

If you want to stop trading someday, a DJ might be an option.

Brian Lee (01:38)

Yeah, I thought about doing audiobooks or something like that. Maybe.

Rayner (01:49)

Yeah, I would say you have a gift for that, right?

So yeah, to kick things off, I’m just curious.

In one sentence, how would you describe your childhood?

Brian Lee (01:54)

My childhood. Very competitive.

I had a cousin that was about a year apart and he was kind of like my brother from another mother.

I have a younger brother now, but he’s 10 years younger. I grew up with a younger sister.

I think I killed this one, but like very competitive.

We would always play video games, Smash Bros, and halo, and try to get the best of each other.

Rayner (02:21)

I understand you know where you’re from; you played Esports, and we’ll get to that later, but I just kind of like want to understand.

What kind of person you were like back in school, so you were kind of like competitive gaming.

What’s maybe the first game you played, right? I guess that should be, you know, something you remember?

Brian Lee (02:39)

I think it had to be one of those Mega Man or something on Super Nintendo.

Rayner (02:46)

Mega Man, Super Nintendo. All right, yeah, that’s kind of my time.

I played Super Nintendo.

That was my first cartridge back then. It cost like 70-80 bucks.

My dad used to spend money on that.

So, in school then, what kind of kid were you like in school?

Were you a studious type?

Is the one getting into trouble or what?

Brian Lee (03:04)

I think people thought I was smart, but I always thought it was just because I put in a lot more effort.

Like I felt stupid.

So, I just put in a little more effort than other people, so people thought I was smart. That’s how it was.

Rayner (03:21)

Do you get pretty good grades consistently through?

Brian Lee (03:25)

I almost flunked out of high school and I didn’t graduate from university.

I dropped out of university as well.

But when I was applying myself, I was a straight “A” student.

I just wanted to do other things.

Like I didn’t see the value in school very much.

Rayner (03:39)

Why do you say that?

Brian Lee (03:41)

I just feel you can’t apply a lot of it.

You know, there’s no direction.

I feel like if they taught us things like taxes and like stock market and how to transition into adulthood, like practical skills.

I felt like everything was just leaning towards like…

You’re either going into a science major or doing something more like engineering.

But, like literally when I went to college, I was like…

“I’m just going to do creative writing because, I like writing,”

I realized how useless it was, so I was like…

“There’s no way that I’m going to go through school and come out of this like with a career”

Rayner (04:17)

So, when you decide to drop out of school, despite people thinking that…

“Hey, Brian is pretty smart”

What was your parents’ take on it?

Brian Lee (04:30)

My parents are pretty relaxed.

My dad’s smart.

He went to one of the top universities and he is a doctor.

My mom is from Cambodia.

She has a very impoverished background. She’s a refugee from the genocide.

Rayner (04:49)

Sorry to interrupt you. I was…

Please continue and I’ll just take it from there later on.

Brian Lee (04:55)

So basically, she just really pushed me very hard to do the traditional thing, just be a doctor or whatever.

But my dad never really put pressure on me.

So, I got away with a lot.

Like I pretty much ditched half of high school and just played video games all the time.

Rayner (05:12)

Maybe just to dig a little further back in time about your parents because you mentioned the genocide, and I was in Phnom Penh.

I think a couple of years back and I went to the killing grounds.

I think it was in the 1960s or 1970s.

This group, I won’t call it an organization, but you know, people in control, right? They killed about a quarter of the population.

I mean, the numbers could be higher, probably higher right, but I think where I read was like a quarter of the population because of that event.

Was it like during that event, that’s when your mom decided to move away to the States?

Brian Lee (05:50)

Yeah, they considered my grandfather an educated person because he was a professor and they were going to kill anyone who was educated.

So, my entire family was basically on the chopping block.

Luckily, one of the army officials had a crush on one of my aunties and helped them escape.

They had to cross over to Vietnam through snakes and land mines.

She did lose some siblings on that journey and they got sponsored by a Christian family here in the States.

Eventually, one by one just started flying over here.

Rayner (06:36)

Gosh, that’s a crazy story, man.

That’s wow.

I mean, I can’t believe what your family went through.

Because I was actually at the killing grounds and they were showing us, you know, kind of like a whole level of all the bones, right?

The skulls that were being penetrated by, I don’t know what objects, yeah, it’s crazy.

So, I’m glad all is well, and all is safe for you.

And, you know, your future generation as well, I think in the States, is a lot safer.

Thank you for sharing. I think that is something, a history I think not many people know.

If I did not know it until I went to Nong Penn for a holiday, I didn’t know that.

Man, they have such a history, which is quite recent, like just 20-30 years, a bit further back.

I hear a lot about, you know, gaming, and no surprise right now on other podcasts, you mentioned e-sports competitive gaming.

Let’s talk about how that happened.

How do you transition from just a casual gamer to…

“God, let’s do this right, let’s go to the international, you know”

Then you know, go big, right?

How did that happen?

Brian Lee (07:39)

I used to be a pretty popular kid in school.

I didn’t play many games and mostly hung out with people.

But one of my neighbors who lived down the street was really into StarCraft.

So naturally we just started hanging out and I was like…

“What is this game?”

And I started like it was with dial-up internet and I was like…

“You can play versus other people,”

This is amazing because before you’re just playing games by yourself and you’re like…

“Okay, well”

Once you start seeing all these different people online and like all those different personalities and stuff like that.

It’s just like it’s so engaging.

Then other people started playing it and eventually at some point I was just so competitive.

I was like…

“I just got way better than them”

And I was like… I need to find new friends.

Otherwise, these games are just too easy.

At that point, I just started looking for competitive teams and stuff like that and just doing it as a hobby.

But I just really loved it.

Because you know, as a young person, especially as an Asian kid, not very athletic and things like that.

So being able to do something competitive was super fun, especially in a team environment.

I was like always trying to compete in tournaments and stuff like that with my friends.

Rayner (08:48)

So, you start with StarCraft, and if I recall; you end up playing competitive Dota 2, right?

If I’m not wrong?

Brian Lee (08:56)

Mm-hmm.

One of my older cousins recognized I was playing a lot of StarCraft and he showed me this documentary.

I think it was of the Moon.

Moon was a WarCraft 3 player, and he’s very famous because he’s unconventional.

But he was one of the greatest of all-time Korean players.

They were doing a documentary about showing how he made a living playing video games, which was not a thing.

Because it’s like, look, you can make money playing games or something like that. I was like…

“Oh, that’s outstanding”

So then at the back of my mind, I was just thinking about like…

“Well, why can’t I do that too?”

Rayner (09:34)

So, you mentioned that you’re getting way too good for your peers and you had to find new so-called teammates or people to play around with.

So how do you find them?

Was it based online or were you in the land shop, you know, kind of like, you know, socializing with other players?

Brian Lee (09:48)

It’s just online, you know, you just, you naturally just make friends because you like if you’re good, you know, people just want to talk with you and like add you.

Rayner (09:56)

The best reality is you have money; people will just come to you…

“Hey, let’s be friends”

Same for gaming. Okay. So, yeah.

Brian Lee (10:05)

It’s not unlike trading where, you know, if you, um…

Well, trading is a little more difficult to tell who’s real and stuff like that.

But, you just shoot your shot.

You know, if you put yourself out there a little and show like…

“Hey, I have this kind of skill, or like, I’m trying to improve”

You know, even if you don’t have the actual skill, if you show effort, people kind of want to connect to that, cause if they have the same kind of ambition, you just kind of attract each other.

And so, you know, it’s not very unlike trading as well. You actively attract people that you’re looking for and try not to be so isolated, avoiding doing everything on your own.

Rayner (10:42)

So, when you got into professional gaming, what made you think that you could do this as a career?

You mentioned you just watched a documentary and then what gives you the conviction, the confidence to do it?

“Hey, I can do this too.”

Brian Lee (11:03)

To be honest, I did it as a passion.

It was more fun than anything.

I just consistently felt like I was getting better and better.

At some point, it just kind of felt like a little too easy.

So, I wanted to see if I could do this, in a tournament style.

I wonder how far I would go in the tournament, considering we only played it for pizza every month.

They held it on a forum and, like every week, my goal was just to get to the next round.

Like if you’re in round 32, get to the 16, get to the quarterfinal, etc.

Eventually, we won it.

When we won it, I started recognizing that we had just beat everybody in North America, like the best player.

So, when you conquer your region, naturally, you want to think about like international stage as well.

Rayner (11:58)

So, on the forum where you guys came in first, I suppose it’s a pretty big forum, right?

To be top of the forum and then conquer the whole of North America?

Brian Lee (12:06)

Yeah, it’s a small niche.

Like, I know you’re not like necessarily part of the small-cap community, but kind of everybody knows everybody.

Anyone who’s like very serious or just kind of out there, you’re only like a couple of degrees apart.

Like you’re usually just one person away from the next person.

So, it’s kind of like the same thing was in gaming.

It’s a small community. Everybody knows each other.

There’s just one place we met.

Because there was no Twitter or stuff like that.

So, we just use forums and chat rooms, stuff like that.

Rayner (12:41)

From my understanding, Dota is its 5 players.

 So where do you find the remaining 4 players to form that team?

Brian Lee (12:48)

Well, I made a post saying that…

“Hey, I want to compete and I’m looking for this kind of teammate”

So, you just list out the roles you want.

And I was like…

“Okay, I’m going to be the leader”

I play this support role and I’m looking for a carry.

I’m looking for other support players and stuff like that.

Then eventually you just kind of try people out and see if you mesh and if you have the same goals.

Then eventually… you just kind of commit to it.

I met everyone at different points in my career.

There were different teams, but like the major team that pushed me into the international stage.

It was a team that like…

“We did this process and then I made them sign a contract that they were just going to like to go hard for an entire year”

Then we pretty much did it more than full-time, like all of us.

Rayner (13:39)

So, it’s like an interview process where you’re interviewing the right candidate.

It’s going for a trial and deciding, is this a good fit or not?

If it’s a good fit, you know, sign that contract, and let’s go all in.

Brian Lee (13:51)

Yeah, exactly.

It was not as official as these days.

These days there are so many incentives.

I mean, if you have a sponsor, you can be like…

“Hey, we’ll pay you a salary and stuff like that”

Do you want to join us?

We’re very reputable, whatever…

Back then, you had to convince people to play for free every single day for 16 hours.

Like it’s a different skill back then.

Rayner (14:12)

That’s a passion at its highest level, like playing for free…

I’m curious, do you have to like…

When you say play for free?

I’m guessing that they have to be at home playing, right?

Not stay at a land shop paying like, you know, one dollar, two dollars an hour and stuff like that.

Or they are playing from home remotely, 16 hours a day.

Brian Lee (14:31)

Yes, and everyone’s scattered all over the United States and Canada.

So, we have time zone issues and we also competed on the European servers because they were just way better than Americans.

So, we were up at four or five o’clock in the morning and you know, motivating young people to wake up earlier than they wake up for school is very difficult.

Rayner (14:53)

The incentive has to be right.

You guys have the incentive at the top of your head.

Let’s do this.

OK.

So, when do you first meet your teammates in real person?

Brian Lee (15:09)

Oh yeah, the first time we met was when we qualified for the international.

That’s the biggest tournament.

We all got picked up by Val.

They had someone to pick us up in a limo or whatever at the airport and we stayed at our manager’s house. We slept on his floor.

He had like a one-bedroom apartment.

We had like six guys sleeping on the floor and we contacted a local land shop and said…

“Hey, we’ll like, give you some exposure if you let us practice here for like two weeks, three weeks.”

We got to know each other there, but I felt like on the internet, I feel you; you get to know people pretty well.

Like, I don’t feel like there was any shock about like who they were.

Anything like that.

We spent so much time together. Being in person doesn’t make a big difference, to be honest.

Rayner (16:04)

They were quite close to how they were online In an India physically.

Brian Lee (16:12)

Yeah, you can’t fake that.

I mean, when you spend so much time together, you can’t fake it.

Unless you’re crazy, I don’t know. Some people do that.

Rayner (16:21)

So, I think I read on.

I mean, I heard on podcasts that your goal was just to join the international.

So, I don’t, from me back in Singapore, I would think the biggest competition is called World Cyber Gaming, WCG.

Is that an uncommon thing altogether at your end?

Brian Lee (16:35)

I think that organization is trying to be Olympics, which is pretty fun.

Like I’ve competed in that term before trying to represent the USA.

But usually, that’s pretty fragmented.

Because like I said, a lot of these teams were kind of like spread all over some Canada.

When I competed, like we had to form a USA team and then my Canadian teammates had to form a team in Canada.

But all I knew was they had a lot of money, which is why I don’t want to play.

They had a lot of money.

Rayner (17:05)

I see.

So, the international is kind of like an even bigger competition to assess the skills of people all around the world.

Brian Lee (17:13)

The International is like the pinnacle of Esports.

I mean, like even amongst all the games today, I don’t think any single E-sport has the prize pool of the International.

It’s the top 16s in the entire world.

So, I think it holds the most prestige in the entire E-sports scene.

Rayner (17:38)

I see, yeah.

So, I understand your goal was to just join the international.

If I’m not wrong, just take part in it, right?

I think that was the goal.

It’s not even to win, right?

If I hear correctly from the other podcasts that you go on.

So, I’m curious, what if your goal was instead of just to take part, but it’s actually, let’s say to win or even to be in the top three?

Do you think that things will be different?

Brian Lee (18:00)

I did want to win.

I mean, everyone wants to win.

I did.

My goal was to get there, but kind of similar to trading.

It’s like, most you can do is perform your best.

So, the result it’s a factor of luck and timing and stuff like that.

At the time, I felt like I was probably top two in the world at my role.

So, I did have confidence in myself.

However, like when I formed that team, we were all amateurs.

Like I didn’t pull any former professional players or high-tier players.

We experienced a significant reduction in our skill ceiling compared to the international scene.

The main advantage we had was our high discipline, which was comparable to drilling and practice, and our refined strategies.

In a lot of cases, we won on strategy alone or just teamwork.

But when it came down to individual skill, I knew that we didn’t necessarily have what it took to win compared to the rest of the field.

My ambition was basically to see how good I could do with all those in mind.

But, you know, as an individual, I felt like I was good enough.

Rayner (19:24)

Earlier, you mentioned that you thought that you were like the top two in the world for the role that you’re playing.

So how do you define where your positioning is?

Is like because it’s a 5v5 game.

How do you like to assess your skill on an individual level?

Brian Lee (19:39)

Each player on the team receives a specific role, one through five.

So, like one is the most important person.

They’re the one who get all the resources and they’re the ones who are supposed to kind of carry the game to the end.

They’re like the damage dealers.

Then, like my role was number five.

So, in the ranks of priority, I was number four.

Number four is like the second support character.

Essentially, they’re the ones who make the shot calls.

They initiate fights and they are usually the first to go in.

So, on my end, like I’m comparing myself to other players in that position.

It’s pretty easy to tell who’s playing what.

Because at the time I had a very diverse pool of like characters, I could play strategies.

I felt like my skill level was very high.

I kind of knew, I was very confident.

Rayner (20:40)

So, at a competitive level, you mentioned that there are individual skills and then there are like strategies.

From what I’m hearing, I mean, in the ideal scenario, each player in the team is very highly skilled and, as a whole, their strategy is pretty top-notch as well.

But let’s say a team like yours, where the skill is not so high, but the strategy is pretty top-notch.

It can get you to pretty far places.

Am I right to say that?

Brian Lee (21:04)

Yeah, it’s actually, I lost faith in that after a while.

But when I look back, I do think strategy and teamwork discipline were the most important thing.

Because like what a lot of really good players do is they just kind of go in without a plan and they just rely on their skills and their instincts and that works because a lot of times they can just outplay people.

But like when you play against a team that knows what they’re doing, they know how you’re going to counter them; they know how to react.

It’s just on a completely different level.

As I relate that to trading, it’s kind of like, I always try to go into trades now with like a strategy that I’m going to follow that I already pre-planned versus trying to react.

I think that’s one thing that we did well because when we had good strategies; we had like a 98%-win rate over like 50 games.

That’s what people who know what you’re doing and they’re trying to counter you all the time.

The thing is, we just knew how to play, but we did so well that when they try to counter us, like they’re playing our game, we’re playing our game.

We had the advantage, you know, it’s like completely different when somebody comes in with their strategy and you feel you’re on the back foot because they just know how to do it better than you.

But when you make it so that other people are constantly reacting to what you’re doing, you can take control of so many variables.

I think it’s a really important concept to just have a strategy that’s well thought out.

Rayner (22:42)

Am I right to say that just like trading, in gaming, there’s no like best trading?

I mean the best gaming strategy, because something else can counter every strategy?

It’s up to the team to kind of like react or adapt accordingly when someone uses a strategy that is supposed to counter you.

Brian Lee (22:58)

Yeah, I think the feeling that you need to win everything is just kind of ridiculous, but that’s the feeling that most people have, like people expect always to win when you figured out, they feel like…

“Oh, I’m just going to crush the competition a hundred percent”

But, um, in reality, like the teams that will win championships are the ones that just, you just win the best of threes repeatedly, you win the best of three; you win the best of five.

You don’t have to win all three games.

You just need to win two games at the best of three.

So effectively you have like 66%-win rates.

It’s just about being consistent.

Like if you tried your best, your strategy didn’t pan out.

Next game run another strategy.

If you perform well, you know, hopefully, you take the game and then eventually the series.

Back then, I felt like the goal was to win a hundred percent, but now I feel you just have to win more than you lose.

That’s all you have to do.

Rayner (23:54)

So, you and your team, you guys like to put in like 16 hours a day.

I’m curious to know what putting in the reps looks like for gaming.

Take, for example, weightlifting if you’re going for competition: you raise 4-5 sets, 10-20 wraps twice a day, and clock in the volume for lifting weights.

The same for swimming waking up early in the morning 20-30 laps in the morning.

What is it like for gaming when you say you guys are putting on the laps?

Brian Lee (24:22)

We wake up at 5 a.m. on the West Coast.

I purposely just roll into the game.

I just roll out of bed and go straight to my computer.

We have scrim partners already scheduled.

So, we’re usually playing at least two or three games with another partner.

Each game lasts about an hour.

After that’s set, we’ll either do a review or we would have had another scrim partner scheduled for another two or three games right after that.

So that’s about like six hours of gaming nonstop.

If I was feeling very feisty, I would do the rest.

So, we’d go up to nine games, nine hours.

Afterward, it was my responsibility to review.

So we’d go over the replays, figure out what we did right and wrong after we’re done with it, like not having any emotions about the game and we can kind of look back at it.

So usually that takes another two hours and we have a team discussion.

After the team’s done, I’m thinking of strategies and figuring out if I can implement them and I’ll sometimes I’ll test them in the game to see if it will work.

After all of that, we’ll play public games individually and each person basically should just be practicing their role and like what they want to do and getting more insights into how they can improve the team.

That’s how it pretty much goes.

Then, in your off time, you’re just thinking about it all the time.

Rayner (25:52)

Wow, from what I’m hearing, it’s like gaming is your life, right?

From the moment you wake up to the time you sleep.

Brian Lee (26:00)

Yeah, but it’s fun. Like it’s, it’s really fun.

It’s not hard.

Rayner (26:04)

Is there any aspect to it that you didn’t enjoy?

Brian Lee (26:08)

Oh yeah, I hate how immature people are.

So, it’s a young person’s game.

A lot of the newer talents are like 17, 18 years old, or 20 years old.

Even if they are, let’s say, 22 or 23, they are typically four years behind mentally.

So, when it comes to conflict and you know, if you are just trying to tell the truth, their emotions will flare up.

People will get defensive or they’ll walk away from situations.

You must have this huge trust in each other.

Like at the end of the day, I just really disliked how individual people were about their emotions and not thinking about the team or having any empathy for basically a leadership role, which is like…

“I’m not any different from you guys”

Like I’m just one person, but like so much responsibility, is on the leader to make sure there’s harmony, trust, and like if somebody’s upset, you have to go and talk to them.

Everyone else can go watch anime or something.

It’s just a lot of work for things that I feel could be very simple.

Like just let’s work it out.

Let’s talk about what we can do better.

We all want the same thing.

I’m not trying to be malicious or they might not be malicious either, but improving and having like a growth mindset and just thinking about how to win is the most important thing, and not everybody was equipped for that mentally.

Rayner (27:42)

I can imagine how much work the leader needs to put in.

Not only do you mention doing the review, then you also have to strategize for a team.

You know, what new strategies should we implement?

You have to manage HR as well.

Who’s upset with who and you got to be like a nanny?

I figured that would be a manager’s role.

So yeah, I used to come from a gaming background.

That’s why I got quite a few questions about competitive gaming. I’m just curious to know how.

I’d like to hear from you what are the different levels of competitive gaming are.

For example, I believe hobbies like playing for maybe one hour a week, then they have those like playing five hours a week.

So how many levels do you think there are before they reach the level that you did at the international level?

Brian Lee (28:35)

In every single game, like in every sport, in every single game.

The top 300 or 500 players in the world are not good.

You have to be within the top 1% of that to be at a pro level.

So, like, you’ll play ranked games or whatever, and if you team up with people who are like, let’s just say rank 200,300,350.

Every single one of those players will get trashed by a professional player.

The difference between those players and professionals is just that the professionals are on another level in terms of skill, in terms of communication, and in terms of strategy.

The only way really to kind of pick up those skills is to be a part of a team.

If you are just good at kind of like playing the game normally but don’t know how to play within a team environment and know how strategies work, then you’ll never be capable of playing on a Professional level and the difference will always be there.

Rayner (29:39)

What’s the average lifespan of a professional gamer?

Brian Lee (29:48)

I’d say, I think people in their thirties are kind of where it starts to top off.

But the way these teams work is usually, you have a fresh mix of older veteran talent.

So, people in their late twenties, thirties, and then you have a kind of like newcomer rookies who are just like highly gifted mechanically and have no fear.

Those people are usually like 17, 18, 19 years old kind of players very flashy and it’s kind of balance.

Most teams that are skewed too heavily one way or the other are not really that successful.

It’s usually having the wisdom and the experience to share and pass down to temper young individuals, but also having younger people bring in innovation and just being quicker to react and not having as much baggage.

Because things are always changing.

Like the game is always updating and improving and it’s harder for older people to just constantly pick up new things over and over again.

Rayner (30:51)

Earlier you mentioned… gifted mechanically.

What does that mean?

Brian Lee (31:00)

I think just when your younger, you just have the synapses firing.

You know, like much quicker.

Like you are connecting the dots quicker.

You’re reacting and adapting quicker.

Like I said…

“You don’t have the baggage”

Like a veteran player would be like…

“Oh, you know, like five years ago, that was the preferred strategy, and this is how we played it”

But like newer people, they don’t think about that.

They just see like what works now and they’re like, this works and I’m going to do this.

So, they don’t bring any preconceived notions into the game.

I just think overall their ability to put pressure on their bodies is much higher.

Like I don’t have as much tolerance, for example, with how long I can sit at the desk without getting a backache or my hand cramping or something like that.

Young people never have to care about that.

You could play like 24 hours a day.

Rayner (31:50)

Earlier, you also mentioned that when they are younger, they have no fear.

So, I’m thinking, what’s the kind of fear that’s coming up in gaming?

Brian Lee (32:00)

I think the fear is just being able to jump into unknown situations or do things differently.

Like I think younger players, they’re more innovative in the sense that they see things differently just because again…

There’s no baggage.

Their fearlessness is like…

“They don’t see competitors as like out of reach”

They just think of them like people that they’re going to dominate.

They’re like…

“I’m going to go in and just going to crush you.”

Older people are like, you know…

“This guy’s a legend”

Like…

“You did this, you did that”

I know, like I looked up to that guy.

There’s a lot of things that just psychologically affect you.

Rayner (32:49)

I can relate to that.

It’s like you see a pro player, someone who’s like a legendary status and you meet him in a battle that fear sometimes might even cripple you.

You know kind of like hold you back in terms of a mental capacity where you just get nervous and your clicks might even fumble right especially back there for me was playing counter-strike you know you see the opponent and you just kind of like freeze.

When you see like you know someone with a godlike status in front of you.

Brian Lee (33:11)

Yeah.

I talked to young traders all the time.

I’m like…

“You got to be safe with your risk management”

They’re like…

“No, screw you. I’m going to like 10% of risk per trade. I’m going to be a millionaire tomorrow”

I’m like…

“Dude, stop!”

They just don’t care.

Like they literally, I think it’s because they have nothing to lose.

I think that’s really what it is.

Like when you’re older, you’re like…

“Oh, I, I can’t let these people down. I have to. I’m responsible for this or whatever”

They’re like…

“They just don’t care”

You know, they really can just go in completely reckless and just find out by making mistakes.

They don’t care about wisdom.

Rayner (33:48)

Probably a rite of passage I think all of us have to go through.

Okay, so after the international competition, you guys placed well, right?

Top eight and then you kind of like decided to…

“I can’t do this anymore”

That’s where you make the transition to trading.

Before the transition to trading, what was the top process in your head to kind of realize…

“Man, this is not something that I want to do for the rest of my life or the next 5 or 10 years”

Brian Lee (34:15)

A lot of it was a kind of those emotional issues I mentioned where I’ve had players amid tournaments are like a $3 million prize pool.

They shut down completely.

Like literally, we’re in a room together.

Sit on a swivel chair, and flip opposite of the team, just like facing a wall.

Ask them questions.

They won’t say anything in front of your manager, in front of the person who owns the freaking company.

Completely shut down.

Uncooperative.

And I’m like…

“Dude, this is not possible”

Or people will have a feud with each other and will refuse to talk to each other like coming to meetings or just being active and helping the team.

For just the most stupid reasons ever.

When that happens, you’re just like…

“Dude, it doesn’t matter how much work I’m putting in”

Because it only takes one person to ruin the entire team.

I don’t care if they’re the best players or what, literally just attitude can sink the ship.

So, I’ve been in so many situations like that.

I’ll give you a really good example.

There was this tournament where we were going to qualify for the international and I was playing against my former teammates who also qualified for the national the year before.

Instead of practicing for that tournament, one of my teammates, who’s like a young guy, decided to go to EDC, which is the Electronic Dance Music Festival in Las Vegas.

He’s like…

“No, I’m not going to practice. I’m just going to go do some drugs and like listen to music for like a week”

I was like…

“You can’t be serious, right?”

 So, he left us as four players to practice without him for this entire time.

When he came back, he was like…

“What’s up guys, let’s play”

I was like, dude…

“Come on”

The difference between us qualifying for the international, I think it was probably like 8 to 12 million prize pool at the time, was one game.

Like we needed to win one game in the final and this guy did not practice with us the whole week because he didn’t care.

So, there’re just situations like that where you’re like…

“Why is my fate? In these people’s hands, if I could just do this by myself, it would be so much easier”

That’s why trading was so appealing because I was like…

“I don’t have teammates anymore”

I was sick of teammates. I don’t want to have teammates. I want to just be able to rely on myself.

Because I know that you can only control what you do.

I mean, you can try to influence people, but at the end of the day, If they’re irrational, what can you do about it?

Rayner (37:11)

Have you ever thought that maybe I should play games that are individual solo like Street Fighter that come to mind?

StarCraft?

Brian Lee (37:23)

Yeah. I love, I do love team games.

I think there’s something about the camaraderie and just having this group that becomes like a family.

They come back to your brothers and when you win, it’s so much sweeter because everyone’s there with you.

That’s just the game I love.

That’s the game I committed my life to.

There was no other game.

Rayner (37:42)

But at the same time, it comes with the risk where one player could just give a rip about the consequences and just solo and do whatever he wants at the expense of the entire team.

Brian Lee (37:51)

Yeah, I’m going to write a book about it one day.

Just has so many stories that you would never believe it.

Like there’s a guy.

We needed a fifth player, and we paid him a salary and we’re like…

“Hey, come over here”

You’re talented.

We can win with you.

He joined for one day after signing the contract.

We played three games and he quit the next day right before we had a qualification tournament for the international game.

At that moment, we had to find another player at the last second.

He completely breached his contract.

I don’t know if we pursued it, but like, he just decided…

“Oh, never mind. Like I don’t want to do this”

He never competed again. He never played on another team.

I was like…

“What happened to this guy?”

Rayner (38:38)

Yes. I’d like to hear the story of it.

I think I read in your blog post that you guys upset one of the top contenders in the international, right?

That’s why you guys made it to the top 8.

What was it like upsetting, you know?

I mean, you guys were the underdogs.

How did the entire thing play out?

Brian Lee (38:54)

It’s so much easier being the underdog.

Everyone loves being an underdog because there’s no pressure.

This team was like the second, they played second at the last international.

They’re like a heavy favorite.

Not only that, but China was the number one region in the world.

Every team from China is expected to win this tournament.

The funny thing is like, when you play against the Chinese team, you’re not just playing against one team, you’re playing against all of China.

The reason is that, when they scrim when they practice, and when they go to the TI, which is international, they litter each other.

They don’t care which team wins.

They just want a Chinese team to win.

Like…

You’re playing against like three or four Chinese teams that are the best in the world who are collaborating.

Whereas on the American-EU side, nobody wants to talk to each other.

No one wants to help each other.

You just feel like the odds are stacked because you could have been practicing for someone and they leak your whole strategy to another team.

Like we’re playing it in those kinds of odds and basically like, no one expects us to win.

We go into the game and it’s very slow, but eventually, we just started picking up this momentum.

Eventually, at some point, we’re like…

“Wait, we can win this game”

Once that triggered in our minds, everyone got so hyper, like we got so hyped, and like, we just started making plays that we never made before.

Just super in the flow and catching them off guard and just creating a lot of chaos and like…

“That was one of those games where like every single thing you did right”

Because everyone is watching you.

Even if you just walk the right way, the crowd is cheering for everything you’re doing.

We are like; it felt like we could do nothing wrong.

Every single play that worked, we just kept getting more cheers and more claps and stuff like that.

It’s like, let’s keep doing it and eventually we just won the game and like…

“The entire crowd was like on their feet”

Everyone was just super excited.

There’s a bunch of recordings online where like my teammate ripped his headphones off before the game was even over and just started running out on the stage because we were so happy and we like, everyone was treating like USA! USA!

I was so happy.

But like the thing that we didn’t realize is that you can’t celebrate your win suit early, so like we were so happy that we didn’t even think about the next game at all.

That was a very tight game. We lost that to another Chinese team, which was also a favorite.

It was like, I learned at that moment, like…

“You just can’t celebrate your wins too soon”

Like you still have a job to do, like you, you have to be like…

“Okay, we won, this is awesome”

But then, like, go back to work.

So that could have been a miracle run that we just kind of cut short because of our happiness, I guess.

We never really got that far in anything.

It’s too weird.

Rayner (41:51)

I can imagine the crowd.

I believe the Chinese team was there like a silent line or they’re cursing all the vulgarities in their head as you guys are winning the game.

Now let’s move on to trading.

We’ve talked quite a bit about gaming and then yeah, I enjoyed that portion, man.

You talked about why you wanted to leave gaming because teamwork does come with its disadvantages as well.

How do you first get exposed to trading?

Brian Lee (42:20)

I was always thinking about investing afterward with my funds because I knew that gaming might not last forever.

Originally, I was just going to invest in the stock market, but I learned that with trading, you could do a lot more.

I didn’t necessarily leave Esports with the amount of money that I wanted.

Like I would say, I walked away with Esports with less than 100k.

After taxes got worse.

It’s kind of like, I didn’t think that I could retire from that.

Like in my vision of playing as an Esports player.

I was like…

“I’m going to place highly at TI and I’ll probably walk away with a couple hundred thousand dollars”

I can invest in that and I’ll be good, but cutting my career a bit short, I was like…

“No, I think I have to trade”

You know, you go on YouTube, you find a lot of different things and it’s very appealing.

The marketing is very good. I can say that.

You just like…

“Okay, well, I mean, like, it’s faster, less risk”

You think it’s less risk because you’re in and out and you don’t have to hold through things, but of course, there’s more risk in a way.

So yeah, I just got into the marketing channels.

Rayner (43:47)

I think I heard somewhere about your journey of learning how to trade.

How do you then learn how to trade?

or rather, how do you find your edge in the markets?

Brian Lee (43:59)

I think what I trade is very heavily marketed.

So, it wasn’t difficult necessarily to find an edge.

I think it was difficult to figure out who understood the edge well.

A lot of people just kind of rely on the fact that small caps have certain percentage tendencies because a lot of them are gaps and gaps tend to fill and things like that.

So, people could rely on just the overall kind of like mechanics of gaps to explain why there’s an edge.

But there’s a lot more that goes into it in terms of doing fundamental analysis and technical analysis.

It’s not all just like things gap and then you train them.

I think naturally what people do is go to YouTube.

But I went to Twitter, and I just started finding people who I felt were credible and just investigated their thoughts and their feeds and eventually figured out who I thought was legit and then just started cutting out people.

Got scammed a couple of times, got into bad chat rooms or whatever, or paid for things that weren’t very good.

But like at the end of the day, I could just figure it out.

Okay…

“I don’t trust this person anymore and just unfollow them”

Eventually just narrowed it down to one or two people and studied everything they had to say and it was constantly hitting.

What they were saying was constantly congruent with the market.

I was like…

“Okay, these people understand the best”

That was all I had to focus on.

Rayner (45:36)

You mentioned about Twitter.

I’d like to hear more about how you use Twitter to then find people that you want to learn from.

I believe you use probably the search function, but are there any more things that you can expand on?

Brian Lee (45:53)

Yeah. So, early on I learned that on Twitter, there’s like the cash tag kind of feature where if you use the dollar sign and put the symbol.

It’ll connect you with other people who are trading similar things.

Like naturally in a small smart me, like the small-cap space that I traded, you would see reoccurring characters a lot of times.

I also tried to participate in that by putting the cash tags of the stocks I was trading or that I was watching and making comments about it or sharing my charts or my thoughts.

Eventually, I just started to understand who was consistently here and started sending messages that were like…

“Hey, you know, like I see that you traded this, and I was curious if you want to talk to me about it or like if you could look at my stuff”

What I did was I used the feed as a kind of journal slash content blog where like, even if I didn’t know anything, I was just kind of explaining what, how my trading journey was like and what my ambitions were and stuff like that.

I think when I was sending out messages and stuff like that, people saw my feed was not just like an empty thing with an egg.

It was actually like someone trying to do this.

I think that attracted people towards me, but more or less like, I think I only really made a couple of really good friends on Twitter.

The main way was like making one friend who knew other friends, right?

And then they just kind of bring other connections.

They’re more trustable as well.

You just kind of create a group. And then at that point, like you’re just pulling resources.

Because it’s kind of like if you have 10 guys in one room and someone sees something or sees some relevant information, they’ll pull it in and you have like this aggregator of information.

But to me, that was the most helpful at the time.

Rayner (47:57)

When you say small-cap stocks at all, are they below a certain market capitalization that you trade?

Brian Lee (48:03)

Yeah.

They’re like stocks that are below $1-15.

They can’t be below a dollar as well.

The market caps are usually less than a hundred million, like very small companies.

The floats are very varying sizes but considered low float, like relatively everything else.

Rayner (48:27)

Could you then share a little bit more about your trading methodology to how you trade the markets today?

Brian Lee (48:35)

Mm-hmm.

So, I trade primarily mean reversion strategies.

I do that to the short side, just because a lot of the small-cap companies are very volatile and they move large percentages.

It’s easier basically to let it come to you.

I mean, you can do mean reversion both ways, but just the nature of this market, it lends itself more towards the short side because there are constantly new candidates to evaluate versus kind of like trying to pick bottoms, which is like in a small cap.

You know, if you’re picking a bottom on a small cap, you’re catching a falling knife versus like if you are dipping buying the SPY during like COVID or something like that.

That’s a good mean reversion trade.

I don’t trust the company’s long side.

I am trading mean reversion and I am systematizing it so that I can eliminate a kind of like the discretion in terms of like using signals.

Know when to start in or to build a position.

I’m typically starting in very small as there’s the most risk when you kind of like lower probabilities and it’s going against you.

But I will typically manage risk very tightly, get back in, and build positions based on price action working in my favor.

Usually, that is kind of like enhanced by fundamental technical analysis, understanding of the market psychology at the time cycles, and being able to understand the news.

Combining all those four things helps with this disadvantage.

Rayner (50:16)

Okay, that’s quite a handful over there.

Let’s kind of unpack them one by one.

Just to make sure we’re on the same page.

When you say mean reversion trading on the short side, I imagine that it’s maybe a stock that has made a parabolic move for whatever catalyst or reason.

Then you’re looking to short that move down lower in anticipation that it’s a fake breakout or something along those lines.

Brian Lee (50:40)

Yes, these moves are sometimes 1000% move.

Something very insane. 50%, 100%, 300%.

These are very large moves, right?

You don’t see those in large caps, which is where the opportunity lies.

It’s just that the volatility allows you to take advantage of these ranges.

I mean, even if something does a normal correction of like 50% or something like that when it ran up.

A very large percentage, you know, that’s still like a lot of meat on the moon.

Rayner (51:12)

Okay, so I’m visualizing that the stock is in a downtrend, and then for whatever news or reason, boom right, we have this huge spike up a thousand, two thousand percent, and then you’re looking to short it because you don’t believe this stock is valued at this, whatever this price is.

So, then what’s kind of like the next step?

What kind of like gives you a trigger to say…

“Oh, now it’s the time to enter, or let’s wait and see you know if it goes up higher.”

What’s your top process when you see such a pattern?

Brian Lee (51:36)

You pretty much start understanding that each type of meta-version trade has different variations.

Some of them have technical setups like they run into certain resistances or trap longs.

Like in a sense you mentioned fake breakout, that’s a perfect example.

Just something where everyone is anticipating a bigger move and the stock stuffs quickly and starts selling off like.

That kind of move triggers additional selling pressure.

But most of the time it has to do with like fundamental pressure.

So, these companies are usually trying to raise capital to stay alive.

They do it using dilution or offerings and when you can kind of understand the way that companies raise capital from the markets, you recognize that they’re either adding additional supply to the market, which creates that mean version trade.

Or they’ll do like very quick offerings that will impact price rather quickly.

Like you’ll see these 20, 30, 40% drops instantaneously on news of like pending offering or like an offering that’s effective or something like this.

So that risk gives a benefit to the short sellers because we’re able to kind of anticipate that or play around the fact that those companies do need to use dilution to raise capital.

Rayner (53:04)

So maybe before they tried to raise capital, there’s a spike up higher. What usually led to the huge spike up higher?

Brian Lee (53:13)

It’s typically manipulation.

These companies hire institutions that specialize in generating liquidity.

A lot of these companies do not trade actively every single day.

They typically trade very sporadically.

And usually, when they do it, it’s based on news or based on some sort of literal manipulation from these institutions.

So essentially like you’re like…

“Hey, my company is going to be bankrupt in like three months”

What can we do about that?

You have run and done offerings for a lot of these companies in similar situations.

Could you help me out?

They’ll be like…

“Yes. But to do that, we need to strike a deal where you give me something in return”

They’ll be like…

“As part of the dilution process, we’re going to give you some percentage of the additional shares that you can raise capital on your own. ”

Those companies will then be incentivized to run the stock as high as possible so that not only are they raising capital for the company themselves.

But they’re going to have like a huge sweetener deal such as like hugely in the money in warrants or additional shares that they can just sell off onto the market and generate like a large amount of capital.

Basically, the higher, the better, you know, for them.

The incentives match at that point.

Rayner (54:39)

Right, that’s insightful.

I’m not in a small-cap space.

This is very new to me.

Okay, we have a huge spike run up and it’s backed by fundamentals because companies are trash, and are trying to raise capital to survive.

So that’s why supply will come in.

When supply comes in naturally, the stock price will go down, and whoever buys that high gets caught holding the back.

Since you have this kind of inside note, when supply comes in, the price is about to hit lower.

So where do you feel it’s a good time to enter a trade?

Brian Lee (55:10)

So personally, I never, try not to guess my entry.

I systematize it in the sense that I try to create a signal that will put a probability on a level holding based on selling pressure.

I’m never adding or starting a position into a straight-up spike, because if you do that, you’re entering where there’s 0% probability.

You have no idea if it will continue going higher or what because buying pressure is just based on momentum.

If the stock starts giving signs of selling pressure, you can now start assigning a probability toward that risk.

You can say…

“Hey, this is the first pullback it ever had”

It might have a 5% chance of holding.

At that point, maybe not enough risk, but when it starts creating structure, let’s say putting in lower highs or whatever head and shoulders patterns, whatever, that’s a very basic technical analysis.

But I’m just trying to illustrate you can essentially assign probabilities to your risk and start putting position sizes that match that probability.

So, you know, if you have a 50% chance of the risk holding, you can maybe put on half of your position and essentially like I’ve systematized that using indicators that are based on price action.

If the stock starts pulling back and starts being weak, I’ll be able to get in with a small amount of size and then eventually I’ll start having much safer confirmation signals.

Signals and those will allow me to go in full size.

I may try to add into the winner as well to increase the win and pull my stop down to compensate for that risk.

I’m putting in more position, but you know, I’m pyramiding the strategy basically at times otherwise like you’re just putting a risk on the high and my main advantage is like a very risk-reward focus.

So basically, I don’t care if I lose.

Necessarily because I know that when I win it’s going to be much larger than those losses, especially if your position size is sweet.

Rayner (57:14)

You mentioned that you, I mean, the inverse of catching a falling life is I guess you don’t shoot a rocket that’s taking off.

That’s how I interpret it.

You then mentioned you would assign a probability like for example if you mix a head and shoulders pattern right, you know, how do you then assess a probability let’s say…

If a head and shoulders pattern forms, how do you then assess it?

Let’s say…

There’s a 30% probability of it reversing down low?

How do you like to come up with that figure based on maybe the structure that you see on the chart?

Brian Lee (57:44)

I was using that as a way to illustrate it for people to understand it on a basic level.

But the true logic is like using indicators that you can backtest.

So basically, if you have enough samples of a similar scenario, you can say like…

“I can use X indicator, like X moving average or whatever as a signal and I can go over all those charts”

And say like…

“When that moving average cross or when this moving average form a cup or whatever it is that produced like a 50%-win rate on that signal”

You can go into those, the next trade with the understanding that you have back-tested something on the same niche, within the same samples, and you can put on the risk pretty confidently at that point.

Because like mean reversions, typically you’re mostly trying to pick the top in a way, or you’re trying to pick the bottoms.

But I think it’s not intelligent to try to get in the way of a runaway train or whatever.

Like you don’t want to step in front of momentum.

Instead, you want to see signs of reversing or like some people would say capitulation and essentially using that information to make an educated, risk-aware bet that there’s a decent chance that this will hold.

It’s a lot of back-testing to figure that out, but it’s not difficult because mean reversions in a way are just kind of like making a parabolic move and then topping out or bottoming out and then just going the other way.

It’s just kind of trying to catch the backside of that.

Rayner (59:30)

Okay, we’ll get to the backtest part in a moment.

But for now, I just want to just kind of follow-through, now I have an understanding of how you enter, basically letting the market show you a market structure, a price structure that sellers are coming in, take a position.

What about stops?

Where do you then place your stops to get out of the trade if you’re wrong or proven wrong?

Brian Lee (59:48)

Those signals are meant to put a probability on the most extreme point.

Like, if something made like an all-time high, right?

Then you would probably assign a probability that high.

That’s the most obvious point to place a stop because that’s where the selling overwhelms the demand.

You typically would put a stop there.

Now you can put more risk of that.

You can say like…

“I’m in half size now, I’m going to go full size”

That helps us with the same resistance level.

But as the trade moves on, like mean reversion trades typically turn into trending stocks in a way.

The difference between like a range-bound stock is that it’s just ping-ponging between two ranges, but a trending stock is going to do lower highs or higher lows, etc.

Just constantly do these retests, finding sellers or buyers, and then just going the other way depending upon if they’re still there.

So, if you recognize that it’s a trending market, you can move your stops with the actual trend.

That’s a lot more discretionary.

There’s not a good way to systematize that in my opinion, but there are ways that you can kind of like dumb it down to learn.

For example, if you’re just trying to learn how to do it, you could say…

“At this third signal or whatever, I will put on like 50% size”

Something like that.

Just like some very generic number.

You know that it’ll always pull your stock down a certain amount.

That’s a very good way to just kind of introduce yourself to the idea, but eventually, it’s mostly discretionary.

You have to have a good understanding of how stocks move, what you’re trading, and understanding that you could get stopped when you’re not even wrong.

You try to stack it to where like you place your stock you have a very high likelihood that if it gets there, you’re wrong, but it’s never a hundred percent.

For that reason, I typically like to use the extremes initially.

I always advocate that people don’t add to winners and move stops unless they know what they’re doing because they can kill your strategy and your mental.

It’s very important that you just understand how to do the basics first.

Rayner (01:02:11)

Okay, so from what I’m hearing is that let’s say you spot a setup and you enter your first position.

Your first stop is usually at the extreme high, all-time high.

For example, where there’s a maximum selling pressure.

Let’s say…

“If the market progressively moves in your favor, you could scale into your position”

This means adding more size, and then your stops could shift down to maybe, for example, to the previous swing high or something along those lines.

So, your stops will progressively move in the direction of the trade that’s moving in your favor as well progressively.

I think from what I also heard, I think maybe from other podcasts, is that…

Your risk is always the initial risk that you have set for yourself and not anything more.

Because sometimes if you, let’s say for example, your original stop is at an all-time high, you add a new position, but you don’t shift your stops.

Now your risk has increased, right?

Because of the new position that you’ve taken up.

When you talk about scaling in, right?

Now I have an understanding of how you set your entries and your stops.

When you talk about scaling in.

What are some things you look for before you skill into your trade?

Brian Lee (01:03:15)

Like I said…

“I’m very systematic in this way.”

I build out systems or indicators that will capture these moves.

However, as I’ve advanced as a trader.

I’m a little bit more discretionary.

Sometimes it bites me in the ass, like with those ads, but I feel like you can’t achieve the maximum potential if you don’t use discretion at that point.

This is why I consider it very advanced for traders to use the higher timeframe confirmation signals.

For example, if you use a signal on like the one- or five-minute chart, you’ll generally get a signal that’s like relatively quick, but if you use a signal that’s like 15 minutes, it’s only going to trigger possibly once or twice within that trend.

The reason why you wouldn’t solely use that is that you’re not going to get in like where you have a good risk reward, but because it’s so lagging.

Like those probabilities of it holding or like being an effective signal or like much higher probabilities, like you could boost your probabilities from like 50% to 90%.

Those are really good points to add because essentially, it’s showing you that the stock is doing exactly what you want it to do.

It’s trending and it’s going in a direction very heavily.

At that point, I would make that decision or I would use the predefined position sizing as well if I was a beginner, but now I adjust it to the exact level.

Rayner (01:04:54)

Am I right to say that when you scale into your positions, usually you’re doing it more on a pullback rather than on a breakup?

Brian Lee (01:05:02)

I could do both.

Basically, like typically my signals are, I’m only adding two winners.

All my signals are within my direction.

I might have like three signals.

The first thing I was like starter put on 50%.

Then the second one might be like put on the full size.

So now we’re risking the full R and then the third signal might be like…

“Let’s move our stop… so let’s put on more position and move our stop accordingly”

If you can take that as far as you want, you can add like as many times as possible.

You just have to recognize that the more you add like closer to your targets or towards the mean version, the less expected value of each trade.

Like, imagine if you just put on a trade at that moment where you added the risk rewards, not very good, right?

But the win rates are high.

So, it’s kind of like…

There’s an art of balancing that to where you don’t like to obliterate your average cost too much.

Typically, the reason they call it pyramiding is that you’re usually adding less size as it goes on so that you’re just getting bigger, but you’re not killing your trade.

It’s just sweetening the deal so that you, your winners are that much bigger than your losers.

Then the long run that helps a lot in helping you be consistently profitable.

Rayner (01:06:20)

Would you say that a huge part of your age comes from scaling into your trades?

What if you don’t scale into your trades?

It’s just kind of like entry stops and targets.

How would things change for you?

Brian Lee (01:06:31)

Not much, actually.

Even if you have a higher win rate and a lower risk-reward, there are a lot of things you can do to optimize that.

You can increase your initial position size.

You have the benefit of much less drawdowns; you know?

In terms of growing your account, like I compound my account.

If you have a higher win rate, you are naturally going to compound your account, very effectively.

Because you’re not taking losses necessarily.

You could have a very conservative strategy.

I think the edge comes down to whether can you consistently do it.

Being consistent allows you to plug that into like…

“Let’s say an equity curve simulator”

And understand that if your trajectory is positive and not just good, it should be a great trajectory because of human nature.

Like you’re going to make mistakes and you’re going to pay fees and stuff like that.

Understanding if you can create a baseline strategy that will produce a positive expectation performing as well as you can close to that and then optimizing in terms of like…

“Can I add, can I increase my position size?”

“Can I use more risk?”

“How much drawdown am I willing to tolerate?”

All of those factors allow you to compound your account pretty safely.

I would say.

But the overall edge is not about risk-reward or anything like that.

You still need to have a good stock selection.

You still need to have a good understanding of the mass market psychology.

You know, sometimes like if the psychology of the market, for example, during COVID, like everything was grossly exaggerated.

I mean, you could see a move that typically would go 50% spike.

Going 500% just because of the mania.

You could see GameStop, AMC, whatever, all these stocks just ripping hard at any one thought.

You just have to be able to recognize like…

What is the environment that I’m trading in and be able to adapt to that?

Otherwise, you will just basically get frustrated.

That awareness is something that you just get from experience.

I think you get experience from just position sizing correctly so that you have enough attempts to just keep losing, keep making mistakes, and stay in the market.

There is a lot of edge in a lot of different things you do.

It’s kind of like the culmination of that, but if you don’t pick the right stocks, you can’t make money, that’s important.

Rayner (01:09:10)

Okay, and you earlier spoke about the market environment.

Are you kind of referring to what the overall stock market is doing as a whole in terms of the market environment?

Brian Lee (01:09:20)

No, it’s a, well, you do want to know about it just in case.

In certain circumstances, like with the interest rates increasing, the macro environment causes a kind of depression in the small-cap space.

But if all things are going well, it’s a pretty healthy market bull market.

There’s more money going around.

People are riskier with their money.

They’ll be investing in small caps and small caps will make bigger moves.

So that’s typically when you have a green light, but even within that, there are cycles within the smokehouse space.

It largely revolves around who’s in control.

So, like, are the long buyers in control or the short sellers in control?

Or is there no edge?

It’s just completely neutral.

During the kind of recession time in 2022, there was not much opportunity. It was a neutral cycle.

There was not much going on, but like typical it’s not like that.

Typically, it’s like one side’s getting greedy.

One side is being very aggressive and usually, they get caught.

Kind of like…

“Oh yeah, I just show up and just short everything”

The fact of the matter is that the market is hyper-aware that short sellers exist and short sellers lead to squeezes, like short sellers are the reason GameStop and AMC go insane, right?

When shorts get aggressive and, you know, focus on kind of growing their accounts and stuff like that, it creates these insane squeezes.

That’s when people blow up.

That’s where the risk comes in trading and that’s where the awareness needs to be there and the risk management.

Otherwise, you can feel like you’re winning every day, but get overconfident and just lose everything in one or two days.

Rayner (01:11:16)

When the shots get squeezed, is that where you come in to kind of like the parabolic move higher?

To see if you can let it

Brian Lee (01:11:23)

No, I get squeezed, to be honest, but the thing is like…

I get squeezed, and there’s not that much you can do about it.

You can kind of brace for it, but the thing is I don’t care.

I risk very modestly to the point where even if I take a max option like that, it’s just kind of…

“Okay. Like you got me today”

The idea is that it’s always going to happen. It’s kind of like, you know…

If you play poker, you kind of have to take bets, right?

Like you’re going to lose, sometimes it’s not like you’re going to win all the time.

Sometimes you have a good hand, you place a bet, and you lose.

Chips are just constantly cycling across the table.

That’s the way I see it.

It’s like…

As a trader, I lose as much money as I make.

It’s just that the amount I make is in the aggregate.

It’s just bigger than how much I lose.

So that’s the net P and L, but I still would say like…

If you looked at my gross P and L loss.

It’s still relatively high.

It’s like I’m giving as much as I’m taking, basically.

So, it’s fine. It’s that’s natural to normal.

Rayner (01:12:32)

So far, we have talked about the setup, the entry, the stops

Now let’s talk about targets.

Where do you kind of like…

Think right now it’s time to exit the trade for a profit

Brian Lee (01:12:40)

There are a couple of different ways.

There’s a technical.

So sometimes, like I mentioned gaps, they tend to fill stocks that gap up.

They create that downward pressure.

You have also technical levels such as breakout levels or levels on the chart that have significant vault trading volume that you can use as consolidation areas.

Then there are fundamental levels.

Sometimes, it’s written out in plain English.

Like we are going to dilute based on this exercise price of a warrant and it’s like…

“Okay, well, if there’s so much in the money stock, then why not just run it down as much as we can”

So sometimes it’s explicit, other times it’s not and then there’s like the systematic way, which is like using indicators that you can back test and those would be mean reversion indicators, like moving averages.

You could use Fibonacci retracements, things like that.

It’s not like an entirely scientific Fibonacci.

Example

But like in terms of mean reversion, it makes a lot of sense. I mean, it doesn’t matter if it goes to the 50% of retracement or 70% or 60%, whatever.

As long as you can back this out and figure out if that is consistent.

If it’s consistent, that’s good enough.

I have multiple targets.

It’s kind of like… I read the room, whatever the price action is telling me.

Like if there’s like a lot of selling pressure if I noticed that, or if I noticed like it’s kind of thin and I feel like this market is absorbing a lot of like selling pressure, there is a demand at these levels.

If I’m seeing that, like I’m reacting to it, but like I would say…

“I probably have like eight different price targets, actually”

People think that you just need one or two, but I’m very adaptive and I know which setups use which ones and which kind of price action corresponds with different price targets.

So, you know, I kind of use all of them and they’re all mean reversion, like the process.

Rayner (01:15:04)

Could you perhaps give an example of when you have eight, like one example of how you would exit the trade based on one of your eight targets?

Brian Lee (01:15:10)

Yeah.

I typically operate from the mindset of like, what is my most conservative target?

So based on this setup, what can I expect to hit most of the time?

Usually, that will be like a faster kind of moving average potentially, or like a, let’s say if we use Fibonacci for example, you could say like a 50% retracement.

But obviously, there’s potentially more left in the tank.

So basically, when it gets to those conservative targets, I’m looking at the time and sales level two, and also the chart, and I’m trying to see like…

“Is the selling pressure sustained?”

“Do I feel like this level is going to break?”

“Do I feel like there’s more meat on the bone?”

That would be like the main way, and I would have a stretch target and be like…

“Okay, now let’s repeat the process at the stretch target”.

I’m not trying to catch the exact bottom tick, or the low or whatever, I’m trying to catch the reversal.

I’m trying to look for the moment. It’s like mean reverting again.

Like you mean revert one time to short and then you mean revert to long basically, but that’s a cover.

It’s just doing the opposite literally.

You just systematize what would be the long entry and that is the short cover.

Yeah, I guess I don’t think about it that way, but that’s exactly what it is.

Rayner (01:17:34)

From what I’m hearing, although you mentioned mean reverting, it seems like you’re actually sort of like a trend trader.

But towards the short side, you try to capture the meat of the move, because you’re not selling at absolute highs or buying at the absolute lows.

Let’s talk now about backtesting.

Earlier you were talking about it.

I like to hear about your process of doing your backtest to gain confidence in your trading system.

Brian Lee (01:16:58)

Yeah.

So, I try to collect as many samples as possible.

The good thing about my market is that we just get so much frequency that you can get like a hundred and two hundred samples in a couple of months.

So, the nature of that is, I just screenshot everything.

My scan is always picking up the same stocks or the same type of stocks.

From there, I’m going to categorize them like…

“Oh, this is this setup”

This is that setup, then I’ll just screenshot all of them. I’ll screenshot the intraday chart, and higher timeframe, and then like the daily chart.

Typically, I’ll just kind of save those charts with like my indicators on them.

But if I were like completely going to back-test a new system, I would just be archiving those trades so that I have a list of likes, this is the date, and the tickers that I was interested in watching based on my scan.

You want to try to tune your scanner so that you’re only picking up more or fewer trades that you would be interested in taking.

From that point, you take it a step further and you could do the analysis I mentioned, like you do the technical, fundamental news and cycle analysis, which I just call the four pillars.

You do a pillars analysis and figure out furthermore, if that would categorize that setup as a specific trading setup.

Is it a fundamental trade or technical trade?

Based on supply or is it a trade because…

“There’s so many traders trading it and there could potentially be a trap or there could be like, it’s just way too overextended statistically, there’s a top edge”

In those cases, you kind of have a different set of expectations.

Literally what I’ll do is I’ll just go on my charting platform.

I like Thinkorswim a lot.

First, I’ll just think of like…

What was my problem?

What is the issue that I’m trying to solve?

I’m trying to find an entry signal.

So, I’ll just isolate it to one thing.

I’ll be like…

What are indicators that I could use to coincide with entry signals?

You can use anything.

There are so many types of indicators and they’re all pretty fleshed out.

I don’t see how it’s not useful because I think that at the end of the day, all they need to do is provide a probability.

I think it’s more useful, actually.

To just throw up indicators that you believe have the characteristics that would match, like entries or exits, for example, whatever you’re focusing on.

For example, oscillators are a good example.

Feels like an oscillator like RSI or something, and then the extension can be measured basically by overbought.

You would have the default settings, but essentially what you could do is like…

“Put that on your chart and tune it, fine-tune it, so that on the samples that you have in your niche, that it’s more reactive and more accurate.”

What you’ll find is like on all types of signals, like the smaller timeframe signals are always very noisy.

You’ll get like 10 signals or whatever.

The goal is basically to scale that up like either changing the values for yourself to create the conditions where it has, it’s less noisy, or just literally bump it up, like from one minute to five minutes to whatever.

In doing so you’ll notice that the characteristics of indicators are that they are getting less and less noisy, and the higher the timeframes you go up.

It’s about recognizing like…

“Can I create probabilities based on these signals? can I reduce the noise?”

Or can I take a noisy signal, pair it with something else, and create an invalidation factor?

If you maybe had like five signals and you’re like, this is way too noisy, you add another layer on top of that, maybe another indicator or another price action condition.

You make sure it’s as black and white as possible so that you can recognize it in real-time.

That will help you reduce the signals from like five signals to maybe two signals.

Two signals for an aggressive entry are rather good.

I mean, if you can put on a starting position, like lose quarter R, half an R, put on another position, and that one works, like I would take that any day.

The advantage of this is that you get a good risk reward because you’re starting in much closer to the mean reversion point and from that position, you can build out quite a much better position because of the ability to have like a higher average cost.

Like more comfortable average costs in that case.

You can put on more position size, basically as it’s working versus if you try to go so slow that you’re prioritizing win rate, and then you have a very low-risk reward, which is completely fine.

I mean, I think you can go either way.

That’s the beauty of trading is that you can tune your stats and how you feel comfortable.

I’m very aggressive. I want to take part in a lot of movies.

Like I have FOMO, it’s hard for me to wait for signals like that.

I go for aggressive signals and I pair that with slower, more disciplined signals to make it work.

So, you put up those in whatever indicators you’re interested in, you might put on different variations just so you can see all at the same time.

Start literally, like go on demand, ThinkOrSwim, go start at the earliest point you can.

Type in the symbols one by one.

Just look at it. You can find out if it works in like.

Five seconds. I’ll be like…

“Oh, this doesn’t work. Oh, this works. This worked. This has a 50%-win rate”

The more astute people might put it into Excel and add the numbers and stuff like that, but for me, the visual confirmation is enough.

If I see literally like three months of this and I know like the signal is working for me, that’s enough.

Then I’ll just literally codify that.

So basically, I’ll create my script that will add labels or alerts that come in sounds or whatever.

And I will say like…

“On the setup, this signal is meant to work. I have back-tested this. I know what it looks like”

If it triggers, like if it repaints.

For example, a five-minute signal might take five minutes to confirm.

I go in knowing those flaws and I go in knowing the characteristics, trade it live, and recognize if there was something I overlooked.

If that’s the case, and I try to correct that for the next time, or if I recognize like it’s, it’s just not feasible, then I’ll just give it up and I’ll just repeat the process.

I will just back-test nonstop.

The idea is basically like finding a situation or a stock price action that you like, for example, a mean version, like a massive mean version, like an excellent move.

You reverse engineer that.

Then you create a system to capture them in the future. And then if you have other very similar situations.

Like, let’s say…

“You have five other stocks that looked very similar to that one”

You can back-test on all those and create a thesis.

Then the next time that setup happens, you can apply the system you created to execute on it that would have captured what you missed in the past or what you were interested in.

That’s basically how I create new setups.

So, the idea is you just have to recognize when to use a certain system.

I just kind of like reducing the complexity by focusing on a setup that is very similar to each other or setups that are very similar to each other.

So that I don’t have to use too many different sets.

Like I probably only have like three, three, or five different sets of indicators and I know when to use them.

It’s all set up dependent.

You just build on one by one.

At the beginning, I had one. I had two entry signals at the beginning and one price target signal for like year and a half, like every single day.

That’s all I did. But I just recognize that there’s so much more nuance that you can build on that.

So, it’s gotten more complex over time, but it’s not that necessary.

Rayner (01:25:11)

From what I’m hearing, you have different types of trading set up even though they are trading in a similar methodology which is shorting stocks.

So correct me if I’m wrong, but one could be for example, price making a huge move into key resistance and all-time resistance and you want to see how you can take advantage of a shorting opportunity towards the mean.

Another one could be what you spoke about stocks right, diluting the supply right any more supply because they want to raise money for the shitty ass company and you’re seeing how you can you know find a pattern to short and go back to the mean.

I think these are the few different setups that you have mentioned and is this what you mean by setups?

The context behind the trade?

Brian Lee (01:25:50)

Yes, the context is very important.

A common example is called a fail-fall through.

It’s a stock that is ripping insane.

There’s always a point essentially where, like either the last short got squeezed out or the last buyer came in and like had the most FOMO.

A ton of volume goes through, but the stock no longer goes higher.

That’s a potential reversal point and that’s completely based on supply and demand.

That’s going to trade much differently than let’s say a stock that has a constant stream of supply that’s coming in from like institutional side.

Typically, for example in large-cap stock, if large institutions try to accumulate a stock, they’re not going to just send a market order however size they want.

They’re going to tear it over time.

You know that large size needs to be traded in a specific way.

They have to be more passive, be more patient, be trendier, and they may not fill their entire order in one day.

Recognizing the difference between irrational exuberance or trapping behavior and institutional behavior is pretty important.

Rayner (01:27:13)

Once you recognize these different behaviors, then you have your different set of custom indicators that tell you when to enter based on the backtesting work that you have done previously.

Brian Lee (01:27:21)

Yes.

Rayner (01:27:24)

Okay…

I’m curious, let’s say…

You do a back test and you realize maybe the indicators, the parameters.

If it’s a negative result, for example, then what’s your process to refining it or abandoning it altogether?

Brian Lee (01:27:37)

I’m super quick to abandon.

Like I’m just kind of like how the Edison approach.

You know, just try a bunch of things.

I’ve failed hundreds; thousands of times and you just find something that sticks.

Like you find something…

The needle in the haystack.

It works.

You’re like…

“I understand this. I understand how it moves. I’m completely happy with this, with its flaws”

I accept that its strengths, like really fit what I’m looking to trade.

There is this funny quote…

“I’m going to butcher this, but like Qullamaggie “

Everyone knows Qullamaggie.

I think on one of his streams, someone told me that…

He had like a 50-moving average, something like that. And the chatter was that 50-day moving average, do I need to put that on?

He’s like, it doesn’t matter what this moving averages.

He changed it to 69. I think it’s like…

I’m just going to use the 69 movie yards.

I don’t care because, like, ultimately it doesn’t matter.

What the number is… These indicators more or less behave the same.

You just kind of have to tune it to what fits your strategy and what kind of behaviors you expect around it.

It’s not going to make a big difference, whether you use a one-minute moving average, two minutes, or five minutes.

You can put it on any random number you want.

The backtest is there to validate your idea that it’s feasible.

I don’t think I’ve ever shipped an idea that didn’t work on the backtest.

Most of the ideas fail because of the unseen issue.

This is too difficult to execute.

Like no human can execute this, or this is too disciplined.

It’s very hard for me to wait or repainting is probably the biggest issue.

It’s like, if you’re using a high timeframe confirmation, the reason it looks so good in your backtest is that it disappears when it doesn’t work.

But like you might see, it flashes somewhere in between its cycle of initiating the signal and the final confirmation of it.

Again, if you have a signal, that’s based on the five-minute timeframe, it could signal on the first minute, the second minute, the third minute, and fourth minute, and even the fourth minute and 50 seconds.

But if the second before the signal invalidates, the signal will no longer be under TARP.

When you go on backtests, you’re not going to get that information.

Now, one advantage you can have is you can replay the trades on demand.

You can go second by second and understand what that looks like, and you have to understand what repainting is to be a good systematic trader.

Because the result on the final chart is always going to look too beautiful and you have to recognize what are the flaws of this indicator.

It’s always things that you kind of recognize.

It’s kind of like paper trading.

You can paper trade and kind of get a good understanding of what you’re going to do, but like until you trade it and understand like what is the psychology behind how you’re going to execute or the difficulty of what you’re doing?

You’ll never really get that full experience.

I’m always very quick to ship a system because first of all.

I don’t risk an insane amount.

I risk like 1-3% of my gout per trade.

I don’t care if I pay to find out information because that couple of mistakes could lead to like a really good strategy in the future, or just quickly cut off an idea that sucks.

I’m more willing to just try things.

That’s my thing. I’ll fail a lot.

Rayner (01:31:40)

On the topic of backtesting, because from what I hear, you’re doing this manually, am I right?

Manually backtesting.

Would there be times when your bias might kick in and then end up giving you an inaccurate view of reality?

Say, for example, you’re doing a backtesting and then this.

Is a losing trade and then you know the human mind sometimes can reason know why this is a losing trade and then or why you wouldn’t have taken this trading setup because of you know kind of like hindsight bias so is this something that you have to deal with?

Brian Lee (01:32:13)

Well, first of all, I always recognize that trading is a probability game.

Good setups can fail.

Bad setups can work.

The major advantage really in this trading environment is the frequency.

You can get proven correctly very quickly or incorrectly very quickly.

There’s not as much hindsight bias compared to, let’s say…

Like a swing strategy that has like very few trades throughout the year, because the sample size is just constantly coming in.

When you’re talking like, I’m on my seventh or eighth year now, and I’ve been recording like every single chart of every single day for that entire time.

I can go back literally with eight years of data with the same specific scenario and see that it works.

I would say it’s not as timeless, let’s say like Jesse Livermore’s kind of strategy, because it is dependent on outside influences, like underwriters and things like that, or institutions.

But I would say the fundamentals, like the logic of my mean version strategy, would apply basically to any kind of mean version.

I’m just systematizing the reversal and I recognize the probabilities are lower at the beginning.

I understand how to create high timeframe confirmations that have very high win rates.

It’s extremely easy to create a confirmation signal.

Because let’s say…

Whether you use like a higher timeframe moving average, you use MACD or RSI, whatever.

There’s always confluence with other signals.

Like if a signal went off, like on a very high timeframe there’s a very good chance that everyone using whatever they use, Stochastics, Ichimoku Cloud, whatever you want to call it, their signals would have also triggered a bearish signal before that even happened.

So the confluence is what makes it very viable in terms of everyone seeing the same thing or thinking the same way.

But the harder signals are all are always the ones that are catching, like the tops or the bottoms.

Because those signals require a lot of invalidation.

They require a lot of fine-tuning.

However, they’re not even really necessary.

If you come in with a very modest signal that you can see very easily, like signals maybe once or twice per trade, has a 50%-win rate and I can get two-to-one trade off of it.

Those stats can make you profitable.

There’s no real stress. It’s just more of like, I’m very perfectionistic.

I want to dominate the trade in a sense.

It’s just more of an ego thing, but I could very quickly and easily create a retirement strategy in the sense of like super modest return, a very good win rate, and a low drawdown.

There’s confluence with other strategies.

So, I think it’s fine.

I’ll give you an example.

The swing trading strategy is to use multiple moving averages and reclaim the average not only by testing it but testing it and then pivoting off and just continuing on its merry way.

That kind of system has confluence with so many other systems.

If you use any of the things I mentioned and there’s more, like I’ve probably tested like all of them, they all like a measure of kind of very similar move.

What I tend to do is put on a lot of indicators that I know people care about, and that I may not necessarily care about.

That helps me even more because I know how other people are thinking.

I might think like…

“This person is thinking that it’s going to be a reversal, or this person thinks that’s going to be, that the move is over, or this person thinks that the move is not over and that there’s more momentum to be out and I’m going to take a loss”

Just being aware of all how people think, I think that helps me as well.

Having a lot of different perspectives.

If you consider all these different people’s perspectives, you can build out a pretty robust idea of Meta patterns.

Let’s say…

I always put a couple of daily moving averages on my charts, even though I don’t necessarily care about them.

Occasionally, they work well.

I’ve just over time recognized a pattern within what I’ve just passively been observing and I could use those at different points in time.

That’s kind of like the advantage.

Like I just feel like I see things that you normally wouldn’t see on the chart if you weren’t looking for it.

People can say like…

“Oh, let’s go like full minimalist. ”

Like price action time and sales level, too.

But I feel you will not break.

You will not see so much of the details of them recognizing and not only just my system, but others like I can see someone else’s system and not react to it, but like…

No, it’s there.

That’s the kind of the way I think.

Rayner (01:37:57)

Do you think that…

Or rather, under what scenario would you say that your trading strategy might no longer work one day?

Brian Lee (01:38:07)

I think that it will continue to work.

I think the main thing is that it’s just not going to be scalable to a high degree.

However, like even at the base levels of scale, it’s still more than like, you know, most people would be happy with, so it depends on the ambition of a trader.

Like a lot of traders, even Qullamaggie mentioned that…

“He graduated basically from small caps to large caps because of liquidity”

That’s if you’re trying to go for like nine figures level, but you can easily do like seven, eight figures and small caps.

I am not complaining about that.

For me, I don’t think it’s necessarily going to go away.

I do think it’s over-marketed and that I’ve seen strategies die.

I’ve seen edges die, but I’m constantly adapting and like learning new strategies.

As long as that remains, I think that I’ll still have an edge.

I also talked to a lot of traders of all different levels.

I talked to like intermediate traders, etc.

What I recognize is that the difference of edge is not necessarily the knowledge, but it’s just compounded experience and skill.

Like what takes someone, let’s say a minute to do would take me like five seconds, like brief gaps in knowledge.

Also, just kind of like psychology, just knowing how people think, how people tend to make mistakes, like the major fail points and cycles and things like that.

I’ve internalized so much of the information that I think that is a kind of where the edge is in terms of over your peers, not like the overall edge of the strategy.

In this market, it’s very unforgiving.

If you don’t know what you’re doing, you can blow up your account.

Like I’ve seen people who have made well over eight figures in trading lose it in one or two days.

That’s the cutthroat nature of this trading market.

When those people bleed out, it creates opportunities for people like myself who are not like trying to swing for defenses, but like be consistent.

As you mentioned, when people get squeezed out of your opportunity, I get squeezed too.

I get squeezed and I don’t care because I know if I’m getting squeezed, other people are getting squeezed.

Most people tend not to manage risk very well.

If that’s the case, then unfortunately, they just create opportunities for me to trade.

That cycle just repeats on and on and on.

The major way that you kind of avoid that is like position sizing very modestly, being aware of your risk of ruin, understanding your drawdowns and your strategy so that you don’t get too emotional, and focusing on performance, not outcome.

Wiring out capital from your trading accounts so that you remove even more risk of ruin off the table.

For example, a lot of traders leave all of their net worth in their trading accounts, whereas I have wired out over 90% of my net profits over the last eight years.

Therefore, like even if my entire trading account blows up several times,

I’m still in the game.

However, I even do not want my trading account to blow up, so I’m very risk averse on the account as well.

These are the things that I do to shield myself from those market cycles.

Whereas like a lot of people, they want to grow their account very heavily and commit all of their resources to it.

You know, it’s like, if you’re risking 30K and you lose 30K, that’s not like the worst thing.

But if you grow your account to 500K and you lose 500K, you can still do serious damage.

Like your problems only scale with your account size and you can always lose significant money no matter how much you grow it.

Being able to kind of reduce that opportunity for the market to take from you is kind of a key.

I use systems to wire out money in a logical way.

Not like…

“Hey, I’m just going to take a paycheck every Friday or whatever. ”

Like I don’t do that.

I take money out when I have outlier victories and outlier wins.

That’s just a role that I have that allows me to like, keep the money I make.

Because in trading, it’s just like, how much can you keep?

It’s not really about how much you can make.

It’s rather easy to make money because a lot of times it’s just really coined flip if you have the risk-reward on your side, then you know that you only have to win a certain amount of the time, a certain percentage of the time, which is very low.

Like three to one can lose.

You can win like a 30% kind of win rate, which I’ve done.

I feel like that is the major advantage, like people’s psychological human nature towards greed, towards desperation, wanting to fulfill their needs in the market, financial, and emotionally.

Everything like that allows traders who kind of can develop into a more professional mindset to take advantage of this repeating cycle.

Because I think overall, like just answering your fundamental question, these companies will always exist.

They have always existed.

This has been a thing for many years.

If a company is facing a delisting, they will do anything they can to stay in the market because its infinite money.

I wish I could start a company because I know exactly how to manipulate the crap out of it and you can just make exactly infinite money.

I mean, as long as you put the paperwork down, you have every incentive to stay on the market, no matter what.

It’s the best thing you can do.

I know that these companies will always exist.

If they don’t, then… I’m not that concerned because one thing about traders, it’s not like…

It is not linear.

If you can, some traders did super well on COVID-19 and can just retire.

It can only take one or two years of really huge gains or whatever, or just maybe three or five years, let’s say something modest 10 years, and you could retire like you only need your strategy to work for that long.

You know, I’ve thought about retiring like many times and I felt like I could very easily.

It’s kind of like don’t focus on that, focus on things like, is the edge exist?

Can I exploit it?

Does it make sense in terms of that?

It’s not a gimmick.

For example, like when Bitcoin came around, back in the day.

I was like…

“Will I trade stocks on the equities or will I trade Bitcoin?”

I was like…

“I don’t have confidence in Bitcoin at this moment in time that it’ll be around”

Whereas the market has been around forever and it’s tied to our society.

It’s kind of like…

I’m going to go with the safe path, even though I see Bitcoin going insane because I know it’s far less gimmicky in my mind.

You just kind of have to like to make sure that your edge is not dependent on some kind of like very niche factor, but something that’s kind of been there.

I feel like that’s how this niche exists.

Rayner (01:45:53)

I’ve been meaning to ask you earlier.

So, you trade the small-cap stocks.

How do you find potential trading setups on a day-to-day basis?

Brian Lee (01:46:04)

Yeah.

You just scan for stocks that are moving with significant volume.

Stocks that are gapping up or stocks that have made significant moves, like over the past couple of days

For example.

There are so many stocks that are just making huge moves every time and it’s because of the price.

It’s so easy for them to make large percentage moves and those moves attract lots of different types of traders.

You know, even large-cap traders may occasionally see that this stock is running like 500% or something like that, and maybe get interested in it.

It attracts a lot of different people to this market.

That’s why I like mean reversion on the short side, because it kind of comes to you.

Typically, on those days, there’s a lot of volume.

Like you scan for stocks that are gapping pretty large percentage.

It’s up to you 22, 20, 30, 40, 50%, whatever you feel like.

Have a minimum volume criterion, because we do need volume to trade.

The gaps have an implied range.

It’s kind of like you have everything a day trader needs.

You have volume and range, and ideally, volume is also liquidity as well.

When you have all three things, there are opportunities, whether you scalp it, whether you trend trade it, mean revert it, or even long it.

There are plenty of opportunities to go along these things too.

I want to learn how to do that, but yeah, you know, it’s super easy.

Like they just kind of come to you.

You just fall on your lap.

Rayner (01:47:41)

So, the scans are done pre-market I suppose?

Brian Lee (01:47:45)

Yeah, you can scan any time between pre-market.

Some people do it the day before, but I typically scan through the pre-market and a little into the market open.

Some people scan all day long, which is viable, but I just don’t like constantly being on edge.

I found that there’s less opportunity for me.

So yeah, I scanned pre-market.

Usually, there are a lot of different stocks up, and you kind of just do your due diligence on them.

It gives you enough time to build a case, basically see if there’s an edge, grade the stock, and then figure out if you want to trade it.

That’s the process. You just repeat that repeatedly.

Rayner (01:48:27)

Okay so you scan the stocks based on the gap, huge price run-up, enough range, then you probably shortlist a list of candidates based on how the charts look like I suppose, and from there, within the day, you focus on maybe the top 5 or top 10 charts that you have to create the watchlist for yourself for the day.

Something along those lines?

Brian Lee (01:48:46)

I’ll trade anything.

Like if there were times in COVID, I trade like 12 stocks.

Sometime, 13 stocks.

Some days, on average, it’s not liked anymore.

The volume or the amount of craziness died down.

It’s more like anywhere between one and four on average.

Usually, you’ll get maybe eight or anywhere between four and eight to 10 kinds of pings per day on average.

You have to kind of sort through that and find the best one or two.

But sometimes there are many opportunities to trade.

So, I’m not going to say like…

I’m only going to limit it to whatever

As long as I have buying power, I’ll trade the stocks.

A lot of times I run out of buying power just because there’s too much trade.

Rayner (01:49:35)

Also, this brings me to earlier when we talked about scalability. I think you said 7-8 figures is still doable for this strategy, but 9 figures.

I think liquidity is an issue.

I’m thinking out loud over here.

So, let’s say someone has a million-dollar account.

You risk 1% on each trade, it’s $10,000.

If you were to short small-cap stocks, $10,000 worth of small-cap stocks, is it still pretty easy to enter in and out of your trades with that kind of size?

Brian Lee (01:49:59)

So, in COVID, you could go very large.

You can probably go like a hundred thousand.

But as of late, the volume has dried up.

I would say 10,000 is pretty much on the high end, where you’re experiencing some slippage.

Dependent upon your strategy.

Like if you are having a wider risk and stuff like that, obviously you can risk a lot.

You could risk 50K if your risk is far away, right?

But if you’re like being aggressive about like adding into position and you’re also trying to take advantage of like big moves, then you want to fall within not above 15-20

That’s just the nature of the market at this moment, but it can get a lot better, I’m sure.

Especially since the overall market, like the macro environment, is like a lot of things are doing well, a lot of assets are doing well, including like Bitcoin and things like that.

Traders are more confident or people are more up on their investments, there are usually more losses and there’s more liquidity.

The massive drop-up was incited because the bubble kind of burst like after 2021.

A lot of fear and uncertainty happened with the war in Ukraine and interest rates and things like this and a lot of investors and traders just didn’t have liquidity anymore.

Fewer traders, less equity, more happy people, more liquidity.

I anticipate it can go up and that is just to say within like a day trading sphere, it’s not like there aren’t opportunities that have, like not infinite scale, but like a very large scale.

Like every once in a while, there will be opportunities where you can pretty much go to your heart’s content.

Those in my mind would be like the A+ trades that larger traders would wait around for.

The larger the account size you have, there will be opportunities for you in the niche.

 You just have to wait longer for the next one.

I was just saying that 10K is kind of on the high end for like on average, if you’re coming day to day and like really want to push the risk.

But you know, everyone has different risk management styles.

I know people who don’t have stop losses and stuff like that.

For the risk-conscious person, you’re going to have some slippage and stuff like that, especially if you’re trying to add in all that depends on their strategy.

I would say like on average, that’s a pretty good number to say.

Rayner (01:52:31)

After hearing several podcasts, I know often you talk about the R multiple.

I don’t want to go down that path, because I think you have beaten that to death.

You say that repeatedly. I think you are pretty tired of repeating that.

I think for those of the listeners who are interested in R multiple which Brian Lee is so passionate about, I think there are other podcasts and resources that you guys can check out.

But for now, maybe I’d like to just go back to a time.

I think there’s this interview you did where you talked about how you went from 5k to a million dollars in your trading account.

Maybe could you give an overview of the entire process of growing the small account to seven figures and beyond?

Brian Lee (01:53:17)

I should mention I blew up my account right before that happened.

Initially, I started with 30,000 and I grew that to like a hundred thousand.

I forgot the exact number, but I blew up over a hundred thousand dollars and I had to restart.

In the United States, you have PDT, which, like, you have to have an account over 25,000.

When I restarted my account, basically I started again with 30,000 and I subtracted the 25,000 from my usable capital because I consider that a blow-up if I go under PDT.

If you go under PDT, you can only trade three times a week, which is way too little for a day trader.

I started with $5,000.

The main reason why I was able to do this at the time was because, the way that I grew my account initially was very controlled, very stable with edge and everything, this went and all that.

I blew up my accounts on account of two trades that I lost control of.

That was a result of just not having systems in place.

It was kind of a slow burn because I was at the tail end of this.

I was starting to grow my wrist to a point where I no longer accepted the risks or like I was having a harder time executing and I started having those bad habits, like you add to a loser and eventually like you win.

You’re like…

“Oh, that works”

Then you just keep doing it right.

It reinforces the bad habit until you know that the tail risk exists.

So, the tail risk caught up at that point very quickly, actually.

I blew up the count.

So, I recognize that at that moment when I restarted, I was like…

You know, until that point, I was doing everything right.

I did lose control in a way.

I feel like a lot of traders learned that lesson the hard way, because it is like, you’re, you’re getting rewarded for destructive behavior and emotionally, psychologically,

it’s very hard not to repeat that behavior.

So, what I didn’t recognize at the time was that there are ways that you can protect yourself from that.

Like a broker institute of max losses and things like these systems that are out of your control that can stop you from making those mistakes.

I reasoned that those blowups were a result of not having proper systems in place when I was losing control of my emotions and everything like that.

Having instituted those corrections and trading my SIM exact process, I had a lot of confidence.

I could grow that over time.

I didn’t just like to start from that point.

I did grow my account already.

It’s just that I made a couple of big mistakes.

I would say it was a kind of like at an intermediate stage at that point already.

I knew what I was doing.

It still does take time, and even within that journey, I still made a lot of mistakes where like…

I thought I was getting the hang of it stepped out of my lane for a second and pulled back.

But the exercise of starting over is an exercise of discipline and staying in your lane.

So, I recognize that I have to just do what I do best, cut out all the noise.

That journey was just repeating the same process that got me there the first time but doing it with the utmost discipline and just not paying attention to anyone, anything, any new strategies, or whatever, and compounding it.

Compounding is the big part.

You have to constantly be growing your risk to achieve gains like that.

Because when you reinvest your profits into the next day as your risk, you’re able to grow your account like really quickly.

I mean, a lot of those equity curve SIMS uses compounded value.

So if you go on the equity curve SIM and you plug in like any kind of equity curve, a statistic line, you’ll see that you can grow your account quite quickly.

That is the reality if you can execute it.

You know, that was kind of all my North Star.

I just knew that if I compound my account at this rate, then I will hit my goals.

It’s just a matter of not blowing up, not making major mistakes, and being realistic with yourself you’re not going to call like to do a perfect job of getting there.

So, I recognize like…

“Hey, look, I’ll get there, eventually. I may not get there as quickly as the SIM says”

But I’ll get there.

That helps you trust your process and sense of how many times you lose and just focus on trading well because you know that if your risk management slips and your statistics start to draw down.

That can have a massive impact on your ultimate equity curve.

So, you’re just like really focused on keeping those stats in line and optimizing them as much as you can without ruining your system.

That was just kind of the journey, just like constantly growing my capital base and trying to do it safely.

Like there’s a lot more that goes into it.

I detail a lot of that in like my content, my blog, and stuff like that.

There’s like a methodology for position sizing and making sure you don’t grow too quickly, which was my fundamental mistake before wiring out capital.

I wired out like 90% of my profits. I was wiring out during that entire process, even when I was at 35,000-40,000.

Like I didn’t care.

That does hurt the compounding, sure.

But psychologically, that does give a tremendous benefit for the trader because you recognize like, you no longer have to live your life based on the P&L.

Like you’ll be good if you wired out the money.

Now the trading capital is just business capital.

You’re trading as a business.

Whatever happens in this account it’s for the business, it’s not for you.

That’s how I view it.

That helped a lot with transporting my trading and getting to the next level.

Rayner (01:59:31)

I want to be respectful of your time.

We are currently at a two-hour mark, so do you feel like continuing further or do you think you’re pretty much kind of maxed out at this point?

Brian Lee (01:59:41)

Let’s go.

Rayner (01:59:42)

So yeah, earlier you talked about compounding, right?

So I just want to maybe just allow you to expand a little more so the listeners know what you kind of mean by compounding the account.

Brian Lee (01:59:54)

So, typically at the time I was risking 1% of my account.

So, whatever your account value for that day is, you take 1% of that and that will be your R per trade.

If you have a green PNL on that day, then you’ll take that to the next day, take a percentage of that new value and that could be a very shallow move.

It could be like changing a risk from 50 to $51.

Not very much.

You could have a larger gain and it can go from $50-$60 or $65-70, whatever.

Basically, like by continuously adjusting your risk per trade, and I don’t want to make it sound like you’re always going up, you will also go down.

If you lose capital, you risk less.

It has a self-regulating factor to it where when you’re underperforming or the market’s not working with your strategy, you’re going to be sizing down and vice versa when you’re performing well and the market’s going great, you’re sizing up.

So, through that process, you manage the position sizing conundrum by using this algorithm.

Now you can just focus on trading.

Like your position sizing is essentially like, it may not be perfectly optimal and there are ways to optimize it, but like on a base level.

You have a lot of things taken care of. s

We don’t want to go into those intangible numbers.

We just want to make it easy to understand, but effective, like if you’re going to be a professional trader, you’re not going to lose a hundred times in a row.

Even if you randomly bought and sold, you probably would have an okay winning rate with Edge, you should win a lot more than that.

So, without understanding you can start mapping out like…

“Okay, this is my typical output, like my average winning trade, my average losing trade, my average win rate”

Then start understanding how much you should draw down per day and start mapping out, like how many times can draw down in a row.

Like…

“Can I max out five days in a row?”

You have to map out basically scenarios that you think are outliers because outlier scenarios happen all the time.

Like black swans happen all the time.

So, recognizing those failure points and then building that into your system with your position sizing strategy enables you to withstand some pretty adverse market conditions or just terrible performances on your end.

That also gives you the confidence to execute because you understand that each trade doesn’t have such a significant impact on your trading account and trading balance and stuff like that.

But you also understand the major implication that if you do it correctly and you compound it, the upside is much bigger specifically when you pair that with a large risk-reward ratio.

If you’re like one-to-one or two-to-one, like you’re not going to pull ahead too much when you win.

But if you’re going like three, four, five, six, etc. on your winners to your losers, then whenever you win, your competitive values grow quite rapidly.

You also gain a lot of distance between, let’s say…

You win one time, now you can lose six times in the future.

I’m not saying that you want to, but like without actually taking a loss.

For me, that combination of risk-reward compounding and being cognizant of the risk of ruin is what allows me to just grow my risk over time.

It’s extremely motivating because typically traders have issues understanding progression, but when the way you position size is like growing or diminishing with your results, you understand like…

“Oh yeah, I’m here because I put in this work or I’m at a lower risk”

Because I drew down and I’m performing like crap.

It also eliminates the aspect of sizing up and sizing down.

I never understood how people are so discretionary about sizing because they’re like, today I’m going to risk a hundred, and then if I make good trades, I’ll risk a thousand tomorrow or like I’ll risk 500 tomorrow.

But they don’t have any idea about the implications of the risk of ruin on their account.

They haven’t naturally built a tolerance to the risk that they were at, nor have they experienced the levels of risk in between.

For example…

Like if you’re at a hundred dollars risk and the next day you decide I’m going to risk $500.

How do you know that you can execute 200, 300, $400 perfectly?

The only way you would know is if you had experienced that like to a pretty significant degree and so through compounding.

You experience each level pretty intimately and you build confidence. I have a process called the freeze method.

Which is basically if a risk level becomes pretty significant for you that you’ve competent to you, basically stop increasing your risk until you’ve executed on that risk enough times through thick and thin through good markets, bad markets, the drawdowns wired out.

Like you went through the gamut and you understand psychologically, this risk affects you in the sense that you accept it in totality.

You can put the risk of performing exactly to your standards from that point, then move on.

I’ve never had an issue besides way back in the day when I blew up with sizing up and I’ve sized up literally from like $30 of risk when I was down like 3000 over PDT to like $60,000 of risk per trade.

It’s just not something I ever worried about.

The scale is just limited by the market you trade.

I have to be cognizant of scale because of the liquidity.

However, if the market was like COVID or whatever like I said…

You can go with like a hundred thousand dollars risk, probably even more.

Like I haven’t ever been past that level.

It’s hard to say, but I know that at least you can take an exorbitant amount of risk to where you don’t even really recognize that money as a real-life commodity.

You think of more like points and the difference is that you completely accept it and you’ve experienced everything.

So, the difference is…

If I risk $60,000 and I’m now risking $30,000.

Well, I know how to trade $30,000 perfectly and I trade $40,000 perfectly. I will have no problems whatsoever trading that, but the moment that you, if you ask me…

“Oh, you traded $6,000, why don’t you just trade $120,000 next time?”

I’m pretty sure like…

“I would fuck the trade-up.”

I would scalp it. I would not cover my target; I would not accept the risk.

That’s ultimately one behavior that people blow up on.

They always blow up as a matter of time.

They cannot accept the risk and they do one of the deadly sins of adding to losers, Let’s just freeze and let the stock go against them and hope and pray that it comes back.

You know, ultimately, if you can just kind of normalize the risk in your mind and emotions and everything in psychology.

Then you have no problem with executing.

That’s the main important part about trading is just how consistent can you be.

Can you show up, do exactly what you need to do, and not make any mistakes?

That’s all you have to do.

Rayner (02:07:43)

Well said.

This kind of reminds me of weightlifting in the gym.

You can’t just go out there and just do a 20 kilos dumbbell biceps curl.

At the start, you’ve got to start from five to six, or seven to eight to nine.

Progressively go all the way up before you deal with the 20-kilo biceps curl.

Yeah, that kind of hit my mind, as you were sharing that.

You mentioned about the freeze limit.

Am I right to say that right now, you are kind of at a level where your risk portrait is largely determined by the liquidity of the markets?

Maybe you feel that you can go like 50K per trade, but as you said earlier, the market currently on the high end is about 10K per trade.

You can’t do that 50K because of the current market condition.

Brian Lee (02:08:23)

Yeah, exactly.

It’s it.

I learned that the kind of the hard way because after 2021; I was like…

“Oh yeah, let’s just go insane. ,”

Then the liquidity dropped off a lot, and I was exploring, like pushing the bounds of liquidity, trying to go higher and higher.

I learned the hard way that like…

“You’re going to get slipped on everything and entries, exits. ,”

It didn’t even matter if I was trading thicker names, if you’re trading even like Peloton or Nike or something, you can still affect the price in the short term.

It’s not like you can’t.

Those slippages add up, like even if you start just occasionally taking 1.5 R loss, two R loss, or you’re going to take a three R win, but it turns into a two R win, like all of those things contribute to a strategy decay.

You could have a strategy that if you could execute it with equity, it would work, but because of liquidity, you no longer can execute it at the same level and get the same stats despite having a good performance.

Those factors contributed to me basically to sizing down to adjust to the market.

In essence, I’m just basically biding my time, waiting for a harder market if it will ever happen.

But if not, like, you know, it’s plenty of risks for me.

I don’t necessarily feel the pressure to build anymore.

I got the ego kind of beaten the hell out of me from trying to push it when it’s not the right time.

I understand like…

“Just not the way to go”

I’m just kind of grateful that I had the experience during COVID where I could kind of like push it and just see what’s going on.

Because I learned so much about the dynamics of markets and how one trader can change your trade.

Because like if it’s at a resistance point where your stop’s at and someone just panics out, if they’re big enough size, like everyone’s going to get taken out.

Or situations where I’ve been like…

“Oh, this support level looks juicy. If I just slammed it right now, I think I could get everyone to panic and I would push the button”

Sure enough, like a huge waterfall.

I’m like…

“Holy crap, like… I’m influencing the market”

From that point, you can develop new strategies.

People want to say that trading is like you’re just trading against the market and it’s very ambiguous and amorphous.

But if you’re a bigger trader and you can move markets and you can mess with people intentionally,

It’s kind of like…

“You can create strategies where you hit some offer or some bid and get everyone to panic out and then just instantly get out like the liquidity is there”

They’re going to panic into you.

It’s kind of a scalp, but like you have the power to do that.

You can create a lot of different strategies that in maybe give more edge.

I just didn’t get to explore that as much as I wanted, but it was happening from time to time and I learned a lot about just how much influence people can have.

How much you can push it responsibly and realistically; I just want to stay with my balance.

One way that I do that is just kind of looking at the overall volume, like the volume peaks, and trying not to over-represent those volume bars.

You don’t want to be like 100, 200% of a volume bar because at that point you’re moving the market.

Regardless, even some smaller traders at this time can feel low liquidity stocks where they can push themselves.

Imagine being, you know, like five, 6X that amount, like it’s just not going to work.

My experiences just allowed me to recognize like…

“This is not the time to push it and trade for the business aspect of it”

The performance aspect, make sure you’re still doing good trade for fun kind of…

“Just collect whatever kind of income comes at that reduced size”

It doesn’t matter.

I mean, it’s still a lot of money.

It’s not a big deal. It’s just really if you have that kind of ambition.

Rayner (02:12:24)

So earlier you mentioned that you could start to move the market and make people, for example, trigger their stops and from what I hear is pretty lucrative.

So, what’s kind of like stopping you from doing more of that type of strategy where the meta came from?

Brian Lee (02:12:40)

I hate scalping.

I see that as a scalping behavior because usually after that many capitulations, the stock will just reverse the other way.

If you feel like…

“Oh, I’m going to trigger these stops and then the momentum will continue”

Like a lot of times, it’s very short-lived.

So ultimately you do have to kind of scalp those situations.

Yeah, I don’t like scalping. My average whole time on trades is like hours long.

I prefer risk-war trades.

I don’t like being a big force.

I remember the first time my broker sent me an email saying…

“You’re supposed to register as a large trader ID with the SEC and whatever”

You have to file an annual form and like to tell them what your brokers are and stuff like that.

I was like…

“What the hell is this?”

Like they tracking your account now?

One time my broker called me and he said…

I think it was EdgeX or maybe it was Arco or something like that.

They were asking who this person is at your broker executing these orders.

I was like…

“I’m just way too visible right now and I feel like I don’t understand”

Like who sees what, you know, I’m sure that people can see more than that I can see.

Like I’m just a retail trader and I don’t want, I don’t want to have a dark on my back.

I much prefer to be smaller in terms of the overall trading volume so that I can just do what I do with less stress.

I think the most aggravating thing about size is just slippage.

Knowing that you’re going to be your worst enemy someday when you cover, whether it’s a win or a loss, is so frustrating.

It’s also very apparent.

Like when you have a larger size and you take multiple levels of the bid or offer.

I feel like it’s extremely obvious.

Whether you interact with a trader or a market maker, their incentive is exactly the opposite of what you just did.

If you’re, and I much prefer to be like riding the wave, like if I was buying a large cap, I want some larger institution to be there accumulating behind me.

I’m just taking a piece of it.

I don’t want to be the institution that has to execute over days or weeks or months like that to me it sounds awful because what if something random happens?

You know, like a price shock or whatever. It’s not fun.

Like I don’t like it a lot.

I don’t.

Rayner (02:15:18)

Okay, and are there any other trading strategies that you’re looking into since right now the environment kind of caps the size of your trades?

Brian Lee (02:15:29)

There are still opportunities to grow within the space, whether it’s going much broader into swing trading or taking the opposite side on the long side.

The other strategies I’m looking at are cooler than my strategy.

I feel like that can be easily systematized and kind of coincides a lot with like my main trading philosophy, which is like lower win rate, higher risk-reward, and holding positions.

But more or less what I realized is that it’s better to just kind of be the best that we do.

Like I feel like unless you want to be like an amazing, like all-star Warren Buffett kind of guy, if you’re doing well at what you do, you can have a fantastic life and shift those trading profits into investments or things of that nature.

Where it’s kind of like…

You know, I don’t necessarily think that you need to trade your entire life.

You just have to make enough money such that your money works for you versus you working for the money.

Rayner (02:16:37)

Are there any investments that you have right now where your money’s working for you?

Brian Lee (02:16:43)

I own a couple of ATMs and they generate really good passive income over time.

I could depreciate them, which was nice for taxes.

You do certain other investments, similar to that where, like you hire an operator.

So, you hire a third-party operator.

They take a percentage of it, but like they do the labor.

Like I don’t have to go out and like to do that.

Those are good investments, but I mean, like really you can like…

“Why not just put a lot of your…”

I don’t want to say like investment advice

But like historically, you could just put your money in the spy or something like that and it will grow.

It’s kind of like you don’t necessarily have to beat the market.

I also invest in a hedge fund, one of my friend’s hedge funds.

You mentioned earlier in our pre-convention that trade buster, David.

Yeah. I invest in his hedge fund.

So far, it’s so good. I like it.

I also invest in whole life insurance, which is like an alternative strategy that grows every single year, no matter what, at a certain dividend rate, and they’ve never missed a payment through like the great depression or whatever.

The advantage is that you can grow your money with that dividend rate that’s compounded, and you can take a loan against the cash value to invest in whatever.

If let’s say…

There’s an opportunity, an investment, or like let’s say the market crashes and I just feel like I want to dip by this opportunity, you can basically take out like 95% of the cash at a certain interest rate and then invest into the opportunity while it also grows at the same rate.

Because your cash is still there invested.

So you can grow your money in two different places.

It’s basically like…

I have a pretty diversified kind of investment strategy passively and all of them are kind of on the safe side.

Like I don’t put money into things that are not either generating cash flow or just growing pretty stable.

I’m not, I have no exposure to like…

Cryptos or anything like that.

But yeah, most of my money is just in those kinds of investments.

Rayner (02:19:07)

You spoke about owning two ATMs earlier and that got me curious. How does that work?

Brian Lee (02:19:12)

Oh, not two, I own a lot.

Rayner (02:19:13)

Oh, so what’s the business model behind owning an ATM?

Brian Lee (02:19:23)

They do these studies on where to place them strategically.

I don’t think I will invest in the future.

There’s a kind of cash that is not going to stay around.

I don’t think so, but basically like they find areas, like high-traffic areas where communities still use cash.

You just basically take a percentage fee for processing the transaction.

That is a pretty good income.

There’s another trader who also owns ET machines. His name is Splendorous.

He was interviewed with Investors on the Ground as well.

I think he does that legitimately himself.

I just paid a third-party operator.

But you know, there are a lot of different things you can do.

Honestly, like, the only reason I need to go to these links is largely because I’m from California and the taxes are extremely high at some point you can have like a 50% tax liability.

Unless you find like really smart investment strategies that reduce your taxable income, you’re going to lose so much.

If I lived, you know, in a non-tax state or something like that, then I don’t think I would own ATMs.

Like I’d probably put it in different investment vehicles.

Rayner (02:20:43)

Any plans to move to other states where it’s more tax-favorable?

Brian Lee (02:20:47)

Nah…

I think it’s the families here and I enjoy California very much.

Like the food is great. Nature is great, and I have traveled all over specifically, like I’ve been to Japan, and I went to Italy as well.

You can find very comparable food here. Like, very comparable.

If not, in some ways, like even better.

I know that’s harsh to say, but like someone who enjoys food, there’s like a huge amount of amazing food here.

I kind of appreciate the quality of life in California a lot.

Rayner (02:21:32)

Got it, nice.

You know, since you have plans, investment plans, and passive income, so is day trading something you plan to do for the rest of your life, or eventually there’ll be your cutoff points?

It’s like, that’s enough, I’m out of here.

Brian Lee (02:21:50)

I would, I think I’ve slowed down a lot more to be willing to take off more time and I can see myself potentially automating some strategies in the future.

I’ve always built systems in the back of my mind of, like, if I did retire, this is how I would execute.

So, I know that those can still capture the opportunities I’m looking for.

However, like they won’t capture as much.

So right now, like I feel like I’m still young grinding. I enjoy it.

I am getting more tired of it though and feel like I’m not going to trade for the rest of my life.

Until I think I’m just exploiting whatever I can as I can right now.

I would be I don’t have to work traditionally to retirement age, I could retire young.

It’s not a big deal.

Rayner (02:22:40)

Perhaps now you can be the one sponsoring the prize money for the international competition.

Brian Lee (02:22:43)

No, I thought, there’s another game called Valorant that I enjoy.

Rayner (02:22:48)

Valorant… Yeah, it’s like Counter-Strike but it’s more fast-paced if I’m not wrong.

Brian Lee (02:25:50)

Yeah, their price pools are so low that I’m like…

“Dude, I could just run my tournament”

I mean, what is this?

It’s like, I’ve thought about sponsoring teams, things like that, but you know, people thought a lot of things are in COVID and things change when the money was not as it’s not coming in as they used to.

I’m just like, I’ll wait.

If those industries do not make money. Esports does not make money.

A lot of times they are hemorrhaging because people don’t, and investors don’t understand the actual product.

It’s a lot of mismanagement.

You’re working with young professionals who expect a lot of money.

 Also, the companies are very greedy.

They don’t reinvest the capital.

Valve was pretty good about it because they like to increase the price pools based on the sales of in-game products and pass it on to players.

However, it’s very top-heavy.

So even if you’re not in the top 1% of 1%, you probably will not have a living wage, and you probably still be in poverty.

I think there’s a long way to go in terms of esports.

But as someone who’s competed and looked into the management side of it, it is just not good.

You don’t want you to want to stay far away from esports right now.

Rayner (02:24:14)

Yeah, so earlier, just a couple of more questions before we conclude.

So earlier you talked about like, you want to stick it slow, then to have some like retirement trading system, right?

What’s an example of a retirement trading system?

Brian Lee (02:24:26)

Yes, the higher the timeframe confirmation signals, the higher the win rates.

So, fewer drawdowns would not compound the risk.

I would keep it at stable risk and just have it execute on the most ideal setups.

Like you can still trade me in a version in a lot of ways.

So, there are two different ways I would say that one is called an ideal trade location, having fresh parabolic moves.

Virtually the entries that you get will have good risk reward and more risk.

But you can still take the trades as what I call continuation, which is like if the trend is obviously, like if the trade is broken and reversing, it’s created structure already, and you’re just joining the trend to capture like a smaller portion of that meat of the bone.

If you capture that portion of the meat of the bone or meat of the move, then it can be pretty consistent because the trade is already broken.

It’s just that you’re not going to have as good of a reward.

Like I would say…

A lot of these retirement strategies would be more on the continuation side and are just not as optimized, but pretty easy to manage.

The trades already showed his cards.

It’s kind of like coming into poker, where you’ve already seen like four cards on the table or three cards.

And you’re like…

“Okay, my hand’s pretty good”

Let’s go, you know, place the bet.

Rayner (02:26:14)

It’s pretty much still the same trading principles but you’re doing it on a longer duration basis where the market has kind of like reversed a little already before you enter the trade.

Brian Lee (02:26:25)

Yeah, and then like in terms of all those price target signals, stuff like that.

I would just use the conservative target.

So, it’s something that would hit most of the time.

That way you just stop our target, that’s it.

Rayner (02:26:40)

Before you go, I just have one question for you here.

What is one piece of advice you would give to your 20-year-old self if you could see him in front of you today?

Brian Lee (02:26:53)

Oh, my 20-year-old self.

I would say that…

Get into trading ASAP or if you do not believe me, because I’m an apparition from the future. If you were going to compete in Dota, still.

Always stay true to the idea that you need to have a strategy.

Do not wing it, think everything through, come into each game with a plan that you’re confident in, and that you put in the work.

Do not adapt so much to your opponents, but play your own game and make sure that you discipline everybody to follow your idea.

In hindsight, it was not very helpful to be influenced by so many people, and this also applies to trading.

I feel like if you have the mind for like strategy and things like that, and I’m not even really like good at strategy in general, but again, I just work pretty hard at what I do.

So as long as you put in the work and you’re confident in the work and effort that you put in and you feel like that’s reasonable.

I feel you should just hard commit to what you want to do because, at the very least, you’re taking control of variables that you can’t control.

Let your opponents make mistakes.

Just be the best at what you do.

That’s all you need to do to succeed, I think.

Rayner (02:28:30)

Nice, awesome.

Thank you so much, Brian.

I enjoyed this conversation with you here today.

We talk about e-sports.

You give me insights into what competitive gaming is like, something that I have never achieved anywhere near your level of achievement.

You explained to me step by step your trading methodology in a very systematic way.

Thank you, I appreciate your time and I’m so happy to be able to speak with you today.

Thank you, Brian.

Brian Lee (02:28:54)

Yeah, anytime. Thank you.