High-Frequency Traders Exposed: The AI You NEED To Know I Charles Moon DSH #501

I think the top end traders that are manually trading can be somewhere in the range around 70 to 80 percent, but they're usually like in and out for small gains.

For me in our industry, this is sound crazy, but the most successful traders will win between 45% and 55%.

That's it.

Yeah.

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All right guys we're going to talk socks today.

We got Charles Moon on here today.

Love the outfit man.

I appreciate it man.

That's my favorite brand.

What is that?

Malbon.

Malbon.

You know it's weird.

It's like the street game, streetwear game has taken over into golf and this has been like pretty much the most popular brand out there.

So

I'm a hacker as as I say, so I wanted to represent.

I love it.

I used to want to be a hacker growing up.

Those people are different, man.

Yeah, you know it, man.

You ever hack into anything interesting?

No, no.

You know, actually, it's funny.

I have a friend that was kind of in that

groove, and then he ended up becoming a

tech entrepreneur.

So he kind of took that skill set.

And, you know, he's really been big into

AI.

He's really got into

deep

language models and disseminating through data.

And basically, you know, got really popular, really big in Silicon Valley.

And then he got so big that he ended up getting leveraged out of his company by a major tech company.

They wanted to buy him, and you know, he didn't want to sell out.

So, you know what they do?

They just kind of pound you with litigation until you pretty much give up.

And that's what he did.

Yeah, that sucks.

Yeah, it's tough to enter that space, man, when you don't got the money.

Yeah, you got that right, man.

When did you get into stocks?

You've been trading for a while now, right?

Yeah, so 2007, you know, timing was perfect.

Learned how to, you know, trade stocks pretty much right at the top of

a heavily inflated market.

And, you know, it was a really weird kind of path to get into it because I had no interest in stocks.

I didn't even know what it meant to buy, you know, equity or shares.

But

it was my background, you know, because I was playing a lot of poker.

That's pretty much what I was doing at the time for a living.

And,

you know, in Chicago at the time, they didn't have poker rooms and casinos in Illinois.

So we always had to go across the border to Indiana.

So instead of taking that long trip, because I was on the north side of Chicago and it's like a 45-minute hour trip to go to the casino, there were a lot of like smaller home games or games in like warehouses.

And in one of these games, I met my friend Amith

who

just randomly said, dude, I think you'd be great at trading.

I'm like, what's trading?

And, you know, he had seen me in a lot of games and he had saw that I was a pretty consistent winner.

And he's like, there's a lot of correlation.

He's like, if you're ever interested, we're hiring right now.

And so,

you know,

at the time, like, people really frowned on playing poker full time.

It's a little different now.

So I was like, maybe I need to get a big boy job.

So I took him up on the offer.

And thankfully, the

principal owners or the sons of the principal owners who were running the Chicago office at the prop firm

were avid poker players.

So I knew nothing about stocks.

So instead of the normal interview process that they would take with their

candidates, they really kind of tested me on game theory.

So they asked me a lot about risk management, money management.

you know, how I approach certain hands.

And, you know, it really intertwines with poker.

It's like you got, or with trading because you got to examine the situation and decide whether we're going to be aggressive or we need to throttle back whether this is a good opportunity to take that chance or not and certainly risk management money management that's the end game because that's really where success lies so through that went through training

Had the worst training experience.

My trainer didn't want to teach me how to trade.

Why?

You know, he was, in all respect,

this guy would sit there.

I'd see him make $10,000 in like 35 minutes of work.

And that's just what his focus was on, you know?

He didn't, like, whatever money he was going to make from my end

as a trainer just wasn't worth it to him.

So I'd ask him questions.

He was just a really introverted guy.

And he's just like, I don't know.

I'll tell you later.

So finally, I got fed up and I told Ameth.

And luckily, Ameth and his trainer or his mentor at the time, the guy that trained him,

kind of took me under the wing so I would just kind of like slide over there.

Got it.

And,

you know, that's, to be honest, that's probably the core reason why I'm here today.

Wow.

Because just remembering how helpless I felt in a situation where I knew that,

you know, it was a big opportunity for me, especially, you know, at that time in my life.

And I just never forgot that.

So, So, you know, for me, what I do in my background, especially being as a coach, I'll never take it for granted when people want to take, you know, their leap in faith and trying to learn from me to do better for their lives.

Yeah.

Wow.

Shout out to Ameth, man.

That's a real one right there.

Much love, brother.

Much love.

So trading in 08, and it's been about, what, 15 years?

Has every single year been a profitable year for you?

Yeah, for the most part, it is.

There's definitely some volatility in that.

You know, the longevity of trading is really

just not trying to get blown out.

And

there's been circumstances, you know, from that timeframe.

You look at a chart, it's just like pretty much like this, right?

On the SP 500.

You're like, oh, that's easy.

It really isn't.

You know, I don't hold stocks for 25 years and tell people to do that, right?

I'm not an investment advisor.

So I'm in and out of the market.

I'm trying to time it.

And

it's a great way of really compounding your account much quicker than trying to take on the average 5%.

So if you're averaging like 3% to 5% on your winning trades, well, you could see how accelerated your account could get.

So there's been always like hiccups was the craziest, you know, the Black Swan event.

So

it's certainly the longevity of being consistent is the trademark you could say for success.

Some years have been much better than others, no doubt, but it's something that I'm very proudful or prideful on is that I've done generally well every single year that I've been involved in this.

Yeah, for 15 years, that's impressive.

Yeah, yeah.

Again, that's probably why I'm here.

Are you doing options?

Are you just buying straight stock?

Both.

You know, it's

again,

really changed the game in terms of retail traders getting interested in the markets.

And

vast majority of these are people that have very limited funds.

So,

you know, some would start with these small, you know, micro cap stocks,

you know, penny pumpers in a sense, not so much the OTCs, the ones that are actually listed.

But, you know, the

interest in options exploded at that time.

So it was more that I just had to kind of, you know, constantly involve with the markets and the retail participants.

So definitely doing both.

Yeah, that makes sense.

Are you using any AI to trade right now?

Yeah.

So, you know, AI is the hot topic, right?

And,

you know, this is something that I've really looked into

probably for the last seven years pretty consistently.

Just never found a product until recently that was worth any of the hype.

But this recent tool that we've been integrating has been incredible.

It's, it, it, you could literally take someone who has never traded before, like, being in a similar position as myself, but give them this tool and they could easily find success.

Really?

It's almost silly in that sense and it's almost unbelievable to hear, but it spoon feeds these trades ideas.

It tells you how to trade it and it tells you how to get in and out.

Wow.

I'm going to get it tonight, bro.

That sounds like a money printer.

It's pretty damn good, especially for those that have experience.

And, you know, the best part of the tool itself is not just finding success with it, but, you know, there's people that have been actively trading in the markets that struggle with emotions.

The downfall of most traders is really either lack of knowledge, lack of control, or dealing with emotions that may veer them off the original path.

And the AI system that we incorporate this tool,

frankly, just takes care of that.

It's almost like a set it and forget it type of trade.

Damn.

Yeah,

it sounds too good to be true.

There's certainly a lot of

human elements that are involved.

You do have to know some respects to options.

You do have to make the decision.

It's not going to make the decision for you in terms of actually executing the trade.

But, you know, once you get into the trade, it's, you know, it's only trying to put you in high probability opportunities.

Yeah, that's cool.

I mean, I'm assuming these hedge funds have some sort of AI they trade on, to be honest.

Yeah.

So, you know, these hedge funds have been so aggressive in pursuing, you know, the smartest minds, but not from a financial standpoint, but more from like a computer engineering or computer programming standpoint.

Citadel, Renaissance Technology, Bridgewater,

these guys have 50, 60, 70 billion dollars assets under management.

And then there's hundreds of others that are kind of in that same boat that just don't have the same money.

And these guys are running these super intelligent, hyperactive, you know, high-frequency programs that have some integration, but AI is still so new that these funds just can't trust the program to take over everything, right?

Because they could essentially move the market both in a positive and negative way, and it could also have a severe outcome in a positive, negative way on their balance sheets, their overall P ⁇ L.

So they always have these guys that are constantly watching these programs to make sure they're working.

And that's their job.

They're not really traders.

They're there to make sure that the program is running

how it should.

And their edge is always going to be

taking advantage of retail latency.

These guys, you know, they used to work with fiber optic networks.

Now they've created these like microwave antennas to send that information so they could get milliseconds faster than we would on our platform, no matter how fast our internet is.

and then to try and scoop in quicker than we would be able to get our entries and then get out quicker than we would be able to get out.

Wow.

Yeah.

So if you're buying on Robinhood, you're late.

You're late and you're not getting the price that you want.

Yeah.

Wow.

So what's the best platform then for retail?

For me, you know, I use Thinkorswim.

I think it's very user-friendly.

It's got a ton of information in terms of indicators that people use.

I'm not an analyst.

I'm not a fundamentalist.

You know, the way I've always traded is through technical analysis and price action.

And price action is always going to be king.

You know, the rules of the market is whatever side has more money is always going to be the winner.

And so price action determines how that money is being traded.

And so if you could read it properly, which is

kind of, I guess, where one of my biggest skill set is,

you know, like I said, you're never going to beat the market.

You just ride the waves.

You just go with the market.

Swim with the current against

versus swimming against the current.

Yeah.

When you're doing TA, how accurate is that usually?

You know, there's always going to be times where

you're going to get fooled.

There's no trader that ever hits at 100% skill rate or 100% win rate.

Usually, you know, there's always going to be some sort of...

just a misinterpretation of the information.

So I would say experience is a good indication of how accurate things can be.

I think the top end traders that are manually trading can be somewhere in the range around 70 to 80 percent.

Wow.

But they're usually like in and out for small gains.

So when we are looking at a more broader turn picture with a lot more exposure,

for me in our industry, and this is going to sound crazy, but the most successful traders will win between 45% and 55% of the time.

That's it.

Yeah.

The reason being is that the successful traders will maximize their opportunity and they learn to when they're wrong cut bait quicker so if you think about it right let's say you win a thousand dollars for every trade and you lose two hundred dollars for every trade your scale of being correct you know mathematically only puts you in a range where you have to be right three out of ten times

and you're still profitable wow and that's that's with that human element right so now if you're working on that scale and then you're actually hitting at 50

I mean, you're actually doing really, really well.

Yeah, I never thought of it that way.

I just thought, yeah, because I thought you were winning and losing the same amount.

So 50% is break-even.

You can.

Again,

again, that puts you in a really difficult position as a trader because it always turns into these 50-50 moments.

So what's the difference between that and flipping a coin?

You always have to have some sort of edge as a trader.

And, you know, the easiest edge, especially for people that are learning, is to understand the values of opportunity versus the values of risk.

And I'll tell you right now, for people that are trying to get into this game or just learning,

no matter what, that's going to be where your success is determined, your risk management and your money management.

Anybody could buy a stock at any time and find success.

Don't think that the entry, right, is the most important aspect.

It's the back end of the trade.

It's what happens after that entry that's going to determine your success going forward.

Yeah.

Is it true most day traders don't make money?

I mean, I would say maybe 10 years ago, yeah.

I think there's a lot of information, and the markets are more knowledgeable.

Market participants are more knowledgeable now, where I don't believe that to be true.

I have a celebrity's wife as a client.

And

since the start of 2024, she's up over one and a half million dollars.

Holy crap.

Four months.

Yeah.

In fact, he actually gave me a shout out on Twitter, which is hilarious.

And

she's been, she's an active trader.

I think she's been involved in the markets for about 10 years, but she's never looked at it a certain way.

So, you know, she was a part of my small group mentorship and really learned this very quickly, understood the dynamics of what it takes,

really,

really disciplined

and just

nailed it.

I mean, you know, the run in NVIDIA, the run in SMCI.

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She was involved in that, running LOI, and she was able to take it early enough and maximize it and recognize it.

And it wasn't like she just bought and held.

I would say some of her holding periods were for maybe a couple of days, but she was really actively in and out and playing on both sides and just absolutely crushed it.

Like, it's not like she started with 5 million to make 1.2.

So she started with far less than 1.8, you know, 1.5.

And like I said, it's just her biggest year.

She said, that's cool, man.

Yeah, to play both sides, you got to be super disciplined, you know?

Yeah.

It's, it's all, all, you know, just like everything else in life, it's all about timing.

And, you know, we could be in the stock, in the direction.

And if we mistime it, we end up with the loss, even though we'll eventually be right.

And that's, you know, that's the most frustrating part about trading.

Yeah, you're like a day off.

Yeah.

I mean, it's kind of the same thing with crypto, too.

It's like you mistime it.

And next thing you know, a week later, it's up like 57%.

And you're liquidated while it's up.

Yeah, that's the worst.

Crypto is another game.

Have you dabbled with crypto too?

Yeah, you know, it's again, just

for me, I always look at

situations as opportunities, right?

I'm, I guess I would say I'm an opportunist.

I like making money.

Yeah.

And so whether it's flipping shoes or I was just talking with your producer flipping head covers, golf head covers, you know, it doesn't matter.

You know, I like

winning and I like, you know, I'm very competitive and I like making money.

So, you know, people are like, I i don't believe in crypto what intrinsic value does bitcoin who cares man yeah if it moves 20 000 points in three and a half months i mean where else are you gonna get that nowhere yeah so maybe options but that's about it even then even then i just you know there's

you just see it all over fintwit you know it's uh people that are flipping like 500 into 40 000 oh yeah see yeah memes it's just crazy but you know there's a commonality they recognize an opportunity They trade without fear.

They go for the risk for the reward.

And when they're right, they get rewarded.

And so, you know, you throw $500 into 10 different, you know,

meme coins and one of them hits the 40,000.

Well, the end game is you made a ton of money.

Made a million.

And didn't need to risk much, you know?

Yeah.

Yeah.

Coins are another game, man.

Made a lot and lost a lot, but it's, it's, uh, you meet some cool people.

I say that.

Yeah, you're right about that.

Yeah, some very cool people.

Now, I got to ask this because obviously you're Asian, you're very smart, but you dropped out of high school.

I did.

I did.

I had kids when I was young.

You know,

I guess I've always been kind of

told that you're smart, you just don't put in the effort.

School is always kind of, I guess,

the idea of being institutionalized, it just never really sat well with me.

I just, you know, I was never comfortable in class.

I was always one of those kids that was able to get by, just never doing homework, but, you know,

did well on the test that I needed to do you know finals would be like 45 to 55 percent of your score and i'd just do well yeah and they just the teachers kind of just had to pass me along so it just got to a point where i was just like you know what i'm done i got to figure something out i just want to go out and live my life you know being young and dumb i just said forget it so i went got my ged i didn't study just aced it was really easy you know and just started grinding out trying to work you know i've always been i guess that's the Asian mentality.

It's like you got to hustle hard.

You know, I didn't come from an affluent background.

You know, I was a single mom.

She struggled hard, and I just hated seeing that.

So I was always just trying to figure out what I wanted to do.

And poker was initially my niche.

I didn't really have any great particular skill set in anything.

I didn't really have the knowledge.

You know, I had a sports background.

You know, again, not going to school kind of screwed that up because I was being

baseball.

Oh, yeah.

So some, some D1 interest, but more, more so that there was a school called St.

Francis out of Michigan.

Their coach was

like the winniest NCAA coach.

So they took a particular interest, but once they saw my grades, they're like,

you know.

Damn, and you're Asian, bro.

You're supposed to be getting A.

You know,

again,

it's sixth grade, fifth grade, no problem.

But, you know, it's, it was tough because I I didn't have a father figure.

My dad was out of my life when I was like four.

And, you know, my mom was working all the time and she had to live her life.

So she wasn't, you know, always around to be able to discipline.

So I just kind of had this free reign.

And again, this is like when I found poker,

it really started with like watching rounders and then playing with my friends and then just constantly taking their money.

And then we discovered that there is online poker.

So, you know, my buddy threw $100 into an account.

The first night I won a $5,000

guaranteed pot of $5,000.

So I made like

$400 or $500.

I didn't win the tournament, but I cashed.

Nice.

And then I entered a smaller tournament, but found out that it was like a satellite into a bigger one.

And then I ended up winning.

I ended up coming in third place, and that was for $5,400.

And then I went on a heater for like a year.

And how old are you doing this?

Probably in my early 20s, like 22, 23.

Wow.

You were young.

Yeah, just, you know, just like I said, just,

you know, I was just really carefree at the time.

I guess somewhat reckless.

But really, poker gave me a big foundation.

It sounds so funny to say it, but it really like honed me into being more disciplined and giving me control because this was,

you know, I haven't, I never saw money like this and I didn't want to, you know, blow the opportunity.

I wanted to keep the money train going.

So,

you know, it's just, it's just funny how life rounds up into this moment and then it translated into finding this.

For me, what I feel is like why I'm on earth.

It's why, you know, I'm not a deeply religious man.

I found God through my wife once, you know, we started dating.

And,

when you find purpose, it really gives you a good foundation to kind of build off of.

And that's why I'm doing what I do because I feel like people need help.

And I feel like this is why I'm here.

And I can relate, right?

I have seen the struggles.

I'm not, you know, like I said, I didn't start from a hedge fund.

I didn't start with a trust fund.

So I've always kind of just worked hard to build up into,

you know, being a just decent person.

And again, just trying to help people on a daily basis.

You'd be surprised, Sean, how many people

go through just immense struggles.

More, you know, financially is one aspect, but it's just the mental aspect, the mental strain and the drain of constantly losing.

So this is just basically what I do every day.

I love it, man.

You got thousands of students now, right?

Yeah.

more.

I don't know.

Just on a daily basis, the interaction, sometimes it gets overwhelming.

Yeah.

But, you know, I try my best.

But yeah, I don't have the following.

I'm not on social media a lot.

Yeah, you're low-key.

I saw you guys big on YouTube, but that's pretty much it, right?

Yeah.

Yeah.

I mean, through the company for sure.

I rarely tweet.

I rarely post anything.

It's more personal than anything else.

Yeah.

You know, I'm not out here to be like a

motivational speaker, so to speak.

Yeah, there's a lot of stock guys that are flexing on Twitter and Instagram.

But

you always have to wonder in some respect too about that.

More than anything, like I said, it's one thing to flex and tell people that you're a great trader.

There's tons of great traders out there.

That's not my niche.

My niche is helping people become or get to that level of greatness.

And so, you know, I'm not.

I don't want to call myself this, but I should.

You know, I've had people become millionaires under my wing, through my tutelage and my teachings.

And I don't take credit.

It's more in this respect that these

individuals,

and again, it doesn't matter about gender, it doesn't matter about age, it doesn't matter about background.

You know, once they learn the foundation and they build this foundation, you know, they run with it.

They say, you know, teach a person to fish, you could feed themselves for their lifetime.

And so, you know, we

now

have a tool in this AI system

to make things so much easier for individuals.

And really,

the problem has always been is this huge learning curve that we've always tried to like shorten and help because experience within trading is always going to be the best teacher.

And this AI system is almost like a Havana horizon where it just folds it.

Yeah.

And that crossover and that learning curve is so small now.

And so this is really where the acceleration of retail knowledge and experience is going to grow and be expedited way faster than at any point in the stock market history.

Wow.

So this, yeah, the technology has already made such big advancements over the last 10, 20 years.

Just wait till you see the next five to 10.

Dude, that's super exciting because for normal retail traders, it was really hard to penetrate stock markets like five, 10 years ago.

Yeah, no,

without a shadow of a doubt.

And people didn't know what to do.

People didn't know what to turn to.

They watch these financial networks.

They read these articles.

Yeah.

That's why I got out, honestly.

I haven't had stocks since college, but it just seems so one-sided.

Yeah.

Because I think I saw this on PBD's podcast.

He said six companies own 80% of the stock or something.

Yeah, you know what?

He's not right.

He's not wrong in that sense.

Essentially, when we're talking about those hedge funds and those HFTs, they provide somewhere between 60 to 70% of all liquidity in the market environment.

So, you know, when certain stocks are driven up,

it's not always going to be in relation to retail.

It's really these institutions.

You know, they're the ones that provide the backstops.

They're the ones that could provide the ceiling to prevent stock prices from going up.

But, you know.

Outside of the programs, they still have, you know, traders that manually will execute trades.

And, you know, when we look at it from an individual and a human standpoint, emotions are the same.

FOMO is the same.

Demand is the same.

And so if people recognize there's going to be an opportunity of making money, you're left with two choices: take the risk or watch it go up.

Or, you know, maybe the timing is down.

But

the advent now is that we're now seeing just a massive

movement in retail along with these

you know high frequency trading firms and these banking institutions and when everything gets on one side like we all align up well you see movements like nvidia you see movements like smci

i mean these are crazy smci in particular people don't realize this was a thirty dollar stock not even a year ago and now we're you know what beating on the door of a thousand eleven hundred bucks you know partly it's the profile of the stock as well It's like a small cap, you know, crypto coin, but, you know, NVIDIA is not like that.

NVIDIA has done multiple splits, and they went on a $400 or $500.

Crazy.

Did you see that one coming?

That's crazy.

You know, it's a great question.

I've been on TV, like the financial networks, and I said 2024 is going to be the year of AI.

And so far, I haven't been proven wrong.

And what year was that when you went on?

This was actually just recently.

So, you know, going into, so doing these appearances in October, November, you know, the AI hype was just starting to pick up, but I was like,

if this hype is going to be real, 2024 is going to be a game changer.

And little did I know that NVIDIA, in particular, made this move in two months.

They broke 400.

It was a big ceiling.

It was multiple levels of resistance.

And once they broke, it was.

literally just like this.

What is that now?

It's that like...

Yeah.

Well,

they're stuck around 900 bucks right now.

Crazy.

They're starting to look a little toppy.

Yeah.

I mean, for stocks to triple at that market cap, it's insane.

In that short period of time, yeah.

But again, that's, that's where, when the stars align, retail institution and high-frequency firms are just all in the same spot.

This is what could happen.

Yeah.

You still playing poker or you stopped?

You know, it's, uh, I,

I don't, I, when I was in Illinois, I just moved to Colorado.

I lived next to the first real big casino that opened up a poker room.

And for a year and a half, I lived 10 minutes from this casino, and I played poker twice there.

Wow.

So I play a little online, but I got to be honest with you, and I know you're a really busy individual.

And so you might understand that sometimes you just don't have the time.

Yeah, if it's not worth the stakes, right?

Because the game next to you was probably like one, two or three.

I mean, they'll play the higher stakes.

I just don't have the time.

I mean, I, you know, I'm,

I dedicate a lot of my time, not just to, you know, working with the clients and students every day, but once that's done, I got to prepare for the following day.

Yeah.

You know, and so it's a lot of research on my end, you know, whether it's reading articles or going through charts.

And then once that's done, it's me and my wife.

And I always make sure to leave some time for my wife.

Same.

Yeah.

Very supportive.

Yeah.

Shout out.

Shout out.

You need it, man.

It's, it's, that support system is what kind of keeps you going every day.

It's a good motivation.

And,

you know, it's like I said, dinner is served.

I spend time with her.

And then before the bed, I just look at the markets, probably spend about an hour going through everything.

And then

love it.

Love that, man.

It's been fun.

Anything you want to close off with or promote?

Any website?

Yeah.

If you guys want to check us out, prosper trading.com, we'd love to have you guys check out our rooms.

You know, shout out to a couple of mentors of mine, you know, especially Scott Bowery, our CEO.

He's the guy that really took me under the wing.

My man, Mo Shagini,

it's in here right now.

He's a big reason why I'm here as well.

They're the driving force for our success.

But, you know, for me, my daily focus is always going to be on you.

So if you have interest, feel free to come check us out.

Be more than happy to speak with you.

And hopefully, I could be of some help.

Boom.

We'll link it below.

Thanks for coming on, man.

That was a really fun episode.

Much love, bro.

Yeah.

Thanks for watching, guys, and I'll see you tomorrow.