Transcript: Charting Masterclasses with a Trading Legend – Episode 5 – The Process of

Trading

Featuring: Peter Brandt

Published date: 17th of May 2017

Length: 00:44:09

Synopsis: Our exclusive series, chronicling the life and career of classical chartist and
trading legend Peter Brandt, concludes with Episode 5 – The Process of Trading. In this
episode, Peter breaks down the “dead serious” business of trading, running through his
process, every step of the way, in a typical week at Factor Trading. It’s a process that has
been enduringly successful with a track record of 40% returns over a 40-plus year career.

Topics: Psychology, Technical Analysis, Trading

Tags: Factor, Trader, Classical, Charting, TA

Video Link: https://www.realvision.com/channel/realvision/videos/

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The content and use of this transcription is intended for the use of registered users only. The transcription
represents the contributor’s personal views and is for general information only. It is not intended to amount
to specific investment advice on which you should rely. We will not be liable to any user for any loss or
damage arising under or in connection with the use or reliance of the transcription.
 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

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Peter Brandt: When I first became involved in commodity speculation, for me, it was a
pretty simple equation, at least in my mind's eye. It was a matter of picking the right market,
placing a bet, and collecting the money in the corner afterwards. And what I learned was
trading is a very complicated process.

I have had to learn, over the years, so many aspects of trading that, in the beginning, I
would have been daunted by. There are endless things that a trader must learn and
accomplish, speed bumps one must get over, a person has to learn, himself.

A person has to learn how do you select markets, how do you scale trades, how do you
do risk management? What kind of technology do you use? Just endless questions. And
you clear one road bump, and you think its smooth driving, and you got another one. And
so its just a never ending learning curve to become a trader and to grow as a trader during
the process of a career.

And it's quite a journey. And it's a journey that I have luckily been on for over four decades.
And I feel privileged to have been able to make my living as a trader.

And so really, today, I want to talk about just what this whole process of being a trader is
like. And that will really entail a couple of different looks at the idea process. One is looking
at a trader from the standpoint of having it be a business, being a professional, of having
trading be a legitimate profession. And then the second little angle, that I want to look at,
in this idea of process, is the process, itself.

What does the life of a trader look like? What all things are entailed in the business of
market speculation? What does my day look like? What does my week look like? What
steps do I go through in the process of being a trader?

First, the profession of trading-- I have been a professional trader since 1981. It is how I've
made my living. It is how I've supported my family. It has been how I've paid for a home.
It is how I have accumulated a nest egg for the future.

I enjoy trading. I enjoy trading, immensely. But first and foremost, for me trading is a
business. And it is a dead serious business.

Whether a person is a full-time trader, such as I am, or they do it to supplement their income,
on a part-time basis, or perhaps they even do it as a form of recreation, the reality is, to be

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

successful at trading, a person has to treat it as serious business. This is not fun and play
time.

There is a debate among my peers as a chartist. Is charting an art? Or is charting a science?

I think, frankly, the debate is a bunch of nonsense. Because, in my way of looking, charting
is a craft. I'm a craftsman, as a chartist, just in the traditional sense of what it means to be
a craftsman, to be excellent at something.

And as a craft, I view trading as my business. There are a few things that I do to really
attempt to treat trading, as seriously as I can, as a business. One thing I've noticed about
businesses that succeed, no matter what the field is, is that they know their business. They
know their product. They know what business they're in.

And I try to take that approach, too. I know my approach to trading. I have built the way I
traded over many years of trial, of error, of running into brick walls, of being slapped on
the head by markets when I've been careless. It has been a process.

I don't know any other successful trader who is not a good problem solver. And developing
a knowledge of the way you trade is really a process of knowing exactly what you're
doing.

I know, in many ways, my approach to trading as well as I know anything on Earth. I know
its heartbeat. I know where it's good. I know where it's bad. I know its weaknesses. I know
its strengths. I know my product.

I think the second thing I do, to try to treat trading as a business, is to take it as seriously
as I can. I have known traders who have been lazy. They've been haphazard. They trade.
And then they go have fun. And not that having fun is not something we shouldn't all do,
but they're not serious. They don't take it as a serious endeavor. And I try to take trading
as a serious endeavor.

The third thing is I have built my trading approach, from very early on, for longevity. When
a trader, a young trader asks me for my suggestion, what I tell him is build your approach
so that it can stand the test of time, so that it can last.

Don't think about next week. Don't think about your next trade. Think about trading is
something that's good for a whole generation, that may take you through the end of your
career.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

The fourth thing I try to do, to treat trading as my business, is to think in terms of having a
comprehensive business plan. I don't think businesses succeed without thinking their way
forward. It's just not a matter of opening their door today. They have a comprehensive plan
for what they're going to do. And that is what I tried to do in my trading.

For me, a comprehensive plan, as a trader, goes way, way beyond just simply a thought
of, what am I going to buy or what am I going to sell, at what price am I going to trade?
I'm thinking in terms of a framework for understanding the markets.

How do I think about the markets? How do I understand the markets? How do I understand
the function of the market? What primary method do I use for understanding price
behavior? Through what lenses do I look to try to understand what markets are trying to tell
me?

What level of capitalization do I use for a trade? What guidelines do I need to have for
selecting what trades I'm going to do and how I'm going to enter trades? What are my
overall risk and trade management guidelines that need to steer my ship? How do I think
about sizing?

I'm a futures trader. So I just go in and say, how many contracts can my money buy? No.
I always think in terms of sizing per unit of money. I think in terms of risk. What conditions
will I use for exiting a trade?

These are some of the things that I kind of fit into this big bucket called having a
comprehensive business plan. This is, to me, the essence of what a trading plan is all about.

The fifth thing I try to do, to treat Factor Trading as a serious business, is to do a systematic
review and critique of all my business practices, of all my trading practices. I systematically
review every trade I do and give it a grade on an A through F basis.

I take a look at trade selection. I take a look at entry. I take a look at sizing. I take a look
at exit. I take a look at correlations to other markets. And I give it a grade that I attempt to
have as honest as possible. In fact, I grade each year of trading.

And so I'm trying to always look and improve and be cognizant of my trading decision
making process. And part of that is this critique in terms of metrics. There are three major
metrics that I keep. And I keep those up and review those, on a rolling basis, to find out,
am I on track, is the map going the way it needs to go?

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

And then the sixth thing, the final thing that I do to treat what I do as a business, is to have
a board of advisors. One thing I recommend to young traders is ask some other traders if
they will be on your board of directors-- of course unpaid-- but unpaid members of your
board of directors to review what you're doing, to review your processes, to review not just
that you bought or sold something, but how you go about the business and to be honest
and do critical but honest review of what you're doing.

I developed that, early on, by asking traders, who knew the way I traded, who understood
the way I traded and were sophisticated, in their market knowledge and their trading
abilities, to serve as my board of advisors.

That group is still together today. It's a group that I utilize. And they don't always tell me
the things that I want to hear. But they're honest with me. And I rely on them to keep me
accountable, on a quarterly basis, for my trading activities.

So I think you get the idea. And these are just a list of half dozen of the things that I do to
try to take the business of trading as seriously as I can.

Earlier, I talked about the fact that the process of trading really kind of entailed two different
things. First, the profession of trading, and I talked about how trading really is a profession.
Whether it's done full-time, whether it's done to supplement income, it has to be treated like
a serious, serious business. Trading is a business endeavor.

And now I want to talk just about the procedures of trading. What does that look like? And
I want to get into, really, even what my week looks like on a day-to-day basis.

The idea of a trader is glorified. Sometimes I'll meet somebody and they'll say, well, what
do you do? And I'll say, well, I trade. And what do you trade? I trade Swiss francs and
gold and crude oil. And they get this idea of, wow, what a glamorous job.

When, in fact, really, just the opposite is true. The process of trading is really the process
of just entering orders. At its basic core, a trader is an order enterer. What do I do for a
living? I enter orders. I enter orders in a very quiet, procedural, systematic, repeatable way.
I am an order enterer, through and through. And that is what my job entails.

And so I always need to ask myself the question, when I'm entering orders, does this order
make sense? And I'm a chartist. I'm a classical chartist. And so I'm looking through my
charts.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

And when I look at a particular chart, that I may be looking to trade, the question that
stands out, in my mind, more than anything else, screaming at me, is I'm about to put in an
order based on this chart. If I were to take this chart up and put it on a wall and put a
stickpin in this chart, does the order I'm about to enter make sense relative to the chart that
I'm looking at?

And the second part of that, which is kind of the look-back part, is, does the order I'm
entering going to stand the test of time? And I'm going to use is this mental picture of a
chart blown-up on a whole wall. Can I take the chart of gold, for instance, and make it
wall size and get a bunch of red stickpins and get a bunch of green stickpins and push the
stickpin every time I traded gold?

I'll stick a red one in for a sale. I'll stick a green one in for a buy. And then step way back
across the room and take a look at that gold chart and say, do they all make sense? Can I
look at that a year after the fact and say, I know I did that trade? That trade made sense.
The order made sense.

And that's what it means, to me, to really reduce trading to the whole process of trading.
To some degree, I know that I've made trades that I thought were really good trades, but
they lost money. But they were good trades. Because they were trades that made sense.
They were trades that stood the test of time.

By contrast, I know there are trades that I've made more money than I should have made
on them, because they're absolutely stupid trades. So sometimes good trades make money.
Sometimes bad trades lose money. But for me, trading is really a process of entering orders.

For me, order entry is really just an organized, systematic, repeatable process procedures
for not only doing market analysis, but then doing trade analysis, calculating trades, and
then leading up to the order flow.

And I think I should best explain this by really kind of walking you through my trading
week. What does my trading week look like? Because it is very repeatable. It is very
predictable. If somebody told me, what am I going to be doing a year from today at a
certain time, I'd be able to tell you. Because I do the same thing every Thursday afternoons
at 2:59, year in and year out if I'm not traveling.

So I want to kind of take you through the week and kind of give you a flavor of what my
week looks like as a trader. And so let's start by basing this thing and re-fixing it to a Friday
afternoon.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

It's Friday afternoon. I'm in Mountain time or in Arizona as the case may be. And the
market's closed. That really becomes not the end of my week. That becomes the start of my
week. My week starts on Friday afternoons when the markets close.

It's at that point that I begin my look at markets. And I do that by taking all the markets I
trade, which is, basically, every major futures market with liquidity in the world. It's all of
the major forex crosses that deal with the primary currencies and then the primary
secondaries.

And so there's probably a list of 75 markets that I scroll through. And even those 75
markets, I may look at individual contact months. I may look at continuation charts. And
then just this gives you kind of a flavor.

This is my super-long list. And I'll just kind of scroll down. I know you can't read this. But it
gives you a feel for all the different markets that I'm looking at, on a Friday afternoon,
beginning at about 3:00, 3:30 Mountain Time.

And what I do is I look at weekly charts. I scroll through the weekly charts. And I just go
through each of those markets. And I write down the markets that pop out to me as
something that is consistent with the type of market that I'm looking for, the setup that I'm
looking for in a trade.

Now, I start that list by writing down the markets that I know I already have a position in,
because I know those are markets that are going to go further into my examination. And
so I know that, on this weekend, here, coming into the next week, that I've got six different
trades that I'm going to be looking at. They are eventually going to be markets that I really
closely examine.

And so I start with this list of 75 markets. I scroll through this list of 75 markets. And then I
write down markets that for, one reason or another, are of interest to me. Maybe there was
as trade immediately setting up. It's a trade I'm in. It was one I'd been looking at the
previous week.

And I end up, then, with what I call my long list. And this is a list of 15 to 20 markets that
have caught my eye for one reason or another. And I transfer those markets into a list here,
which is my long list, which is here. And these are the markets that I'm looking at, right
now, on my long list.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

So I've talked about going through this big, long list of markets and taking that big, long
list and going to what I call my active long list. And so, by Friday afternoon, late afternoon,
early evening, I've pretty much gone through the weekly charts and my full list of markets.
I've made notes. I've reduced it down. I've created this active long list.

And this active long list then takes me into Saturday. And I'll spend some time on Saturday
going through the active long list and looking at not only the weekly charts, I looked at the
day before, but also looking at the daily charts. I start looking at the daily charts.

I have not began order flow yet. That comes Sunday. But I'm moving into that. I'm getting
close. And so on Saturday, I'm starting to think about the markets. I have a mental picture
of the patterns I'm looking at. I'm mulling through my mind, what if this happened, what if
that happened? I'm playing up various scenarios. And I'm starting to get a mental picture
for the type of orders or strategy that I may take in these markets.

So then that brings me to Sunday. And Sunday is then really my stage two, where I take
the long list of markets, that I've already looked at, and I've decided, from that long list,
what needs to be put in an active short list. And so that's the process that I go through as I
scroll through all of these various markets on the active shortlist.

And I check off those, that I feel will now move into the process, that I will consider them
for placing an actual order in the market. They will no longer just simply be on a watch list.
They are markets that are now eligible for an order to be placed in or to be alert to be
placed into my computer, so that I may know if something might happen based on the
contingencies that I've set forth.

And so I go from my active long list to my active shortlist. And this takes place, then, on
Sunday. Is from this active shortlist, then, that I prepare myself for the markets that will open
up several hours later.

And it's also this active shortlist that I review every day. This is the list of markets that I will
review every day as we go through the week. And so that's stage two. And that usually
takes me up until about 2:00, 2:30 in the afternoon on Sunday.

And now I start getting ready for markets to start opening up in Asia, for the Globex markets
in the US to start open, for trading to start. I'm now prepared to start doing my order entry.

And that, then, takes me into what I consider to be stage three, which commences around
Sunday afternoon, prior to the markets, where I will go through each and every market on

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my list. And I will determine that, if it's a market that I'm already in, it's an easy thing. I
look at that market. I review what my stops and my targets were from the previous week.
And I make the decision.

I'm in this market. Now I need to have a protective stop. Is the protective stop I had in the
previous Friday still the one I want to use? Has there been any reason for me to change my
target? And by the way, I always have orders in to take profits when my targets are hit.
And so we're coming into that point.

And then the markets that I'm not on that are on my active short list, I make a determination
whether this is a market that I actually want to enter if certain things occur. I'm a breakout
trader.

As I mentioned, I'm looking at horizontal patterns. I'm looking at horizontal patterns in the
10 to 26 week range. That's my sweet spot. Let's say, I found one of those or perhaps one
that's even maybe a little bit bigger in magnitude. And I'm watching those. And I'm saying,
if this market does certain things, I'll want to get in.

And so I start laying out what my strategy is for entering the stop and target orders, for
markets I'm already in, as well as my entry orders, for markets that I will go into, from my
shortlist, if certain price action ends up doing what it could do.

Where that ends up taking me, by the way, is usually I enter a Sunday evening with actual
orders working, at the exchanges, in between five and eight markets. And there are some
markets where maybe I'm not ready to enter an order, but I know, if a certain price is hit,
I want to know about it. And I will enter an alert, a price alert for that market, so I am
alerted if a certain price hits.

Wherever I consider to be an important price, and that would be where I have a target,
where I would get out of a market, if I'm stopped out, where I'd get in a market, or it could
be just a crucial chart level that I want to know about, I put those all into an alert system.

And so if any of those prices are hit, at any point during the subsequent week, I receive an
email, and I receive a text alert on my iPhone. And so that is really how I stay connected
with markets, at that point. From the point at which I enter orders, on that initial Sunday
evening, is I'm living by the fact that, if something happens I need to know about, I'll get
an email or I'll get a text alert.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

Again, it's Sunday afternoon. I'm at my shortlist now. I've gone through my big, long list,
the real, long list. I've gone through my long active list. I've reduced it down to my short
list. And now is really where the work begins. Because, now, things get converted to orders
for markets that I'm actually in or could be in by the end of the week.

And so, this is the short list that I've got coming into this week, probably, although this was
from Friday. And I modify this as the week goes on. But it may have some change. But it'll
give you an idea.

Here's a case where I'm looking at the Aussie-US dollar. It's on my short list for the coming
week. Again, I'm looking at horizontal patterns. In this case, we have a rectangle that dates
back to late April of 2016 right in the sweet spot in terms of my duration. It's right in the
sweet spot in terms of the patterns I'm looking at.

And so it's a rectangle. And so this particular chart is a weekly chart, but I go to a daily
chart. Because it's daily charts that I use for actually determining where I place orders. It's
difficult to do tactics based on weekly charts. Tactics belong on a daily chart.

I'm not going to have an order in this market, but I'll have alert. But this is definitely a
market on my short list. I'm not in the market. But it's market I'm interested in being involved
in.

Here's another market on my short list, which is the euro-US. This is the market that I have
watched and traded, quite frequently, in the last two and half years. But this particular
market has formed, now, a 24 going on 25 month rectangle.

We bust out of the bottom of this rectangle in December, early January. I got short,
accordingly, because I thought that we were having a downside breakout. There were
some other reasons I was interested in the market. One of them deals with something that I
call the January effect, which was a subject of a paper, that I posted on Real Vision
publications, for those of you who want to go back and take a look at that.

But still, this is a market I'm actually in. This is a market that I was in last week. It's a market
that I'm carrying a long position in. Even though this is a big rectangle, what I see, in a
daily chart, is really quite interesting. And that is the possibility of a head and shoulders
bottom here, which could then launch the eventual break out of the big rectangle.

And so, I'm jumping the gun on this market, a little bit, to tell you the truth. Markets that I
attempt to jump the gun on, to be honest, I've mixed experience on those. I think if I were

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to add up all of the markets, over the years, to which I've jumped the gun, to tell you the
truth, I can't probably tell you that I'm miles ahead.

Because, sometimes, it's frustrating trying to get involved into a market when it's in the
trading range before you get the final breakout. But in this case, it's a market I'm in. And
so, again, I'm just scrolling through my short list.

This looks at crude oil. This is a market that I was short. I covered my short, actually, on
almost a low tick of the breakdown that we had in the last week or so in this market. But it
was a trade that was put on, on the basis of a descending triangle on the daily chart, with
the possibility that it was rolling over and failed to really accomplish a breakout that it had
on the weekly chart.

And so it met its target. It met its target. And so I took profits. I'm flat in the market. But I
talked a little bit about these shorter duration patterns, the flags and the pennants. This is
an example of one of those. As even though this trade originally was based on a
descending triangle, I'm looking at crude oil as if we're putting in for a five-day flag. And
we'll probably put in an order to re-short it if this flag is completed. I'm looking for crude
oil to perhaps go eventually much lower.

But again, it's a market I'm looking at. I'm looking at a number of interest rates in Europe,
which I'm negative. This is a massive head and shoulders top that is present in Euribor,
which is basically, as the eurodollar is to the US, this is really the short-term, 90-day interest
rate of the European Central Bank.

And to me, it looks as if the market is topped, which means yields are in the process of
bottoming in Europe. We've had 0% interest rate policy in the European system for a long
time. And we've even had negative interest rate policies in a number of the European
countries, particularly the major European countries, Germany and the northern countries.

But it looks, to me, as if it is a market where the prices are topping, with head and shoulders
top, and yields are bottoming. I am actually short the Euribor, right now, based on what I
view to have been a completion of this head and shoulders top.

And so this is one of those cases where, early in the stage, the market hasn't given me
much room. This is a case where, if the market jerks the wrong way, I'm out. Because this
is a perfect example of money management being the boss of market analysis.

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I have a negative opinion of this chart. But money management takes priority. And so if I
have a trade that goes into a losing position, it doesn't matter what I think about the chart.
I'm here to protect my assets, because, by protecting my capital, I can play the game long-
term.

Now, when I put in an order to enter a market, and, let's say, it's on a stop basis, what I
also do is I attach orders to that order. And so if my entry order is filled, automatically, an
order gets placed by the computer to put in a protective stop as well as a target. And so
oftentimes, when I put these orders in, I put them in as a lump order and what's called
contingency orders.

It's an order to get in on a breakout. It's an order to put in a stop, if the order of the breakout
is filled, as well as an order to take profits at a target if that's fulfilled. I do not like being
what I call naked on the order side. I want to make sure that I have orders in, in place, to
do the things that I think discipline would require me to do.

And so that kind of summarizes where I am on a Sunday afternoon, at 3:30, 4 o'clock

Mountain Standard Time, in Colorado. I've taken a look at all these markets. I know what
orders are going in. I've placed my Sunday evening orders, at least.

I've identified where I want to buy, where I want to sell, where I want to protect trades.
And it's at that point, where I'm going to let the markets take care of themselves as the
week goes on. I've done my work up to that point.

So now, we're past Sunday evening, and we roll on to early Monday morning. And that
kind of takes me to stage four of my week. There are some orders that I'm comfortable with
sending in 24-hours a day.

But there are a number of markets where I'm really not comfortable having orders in during
what I consider to be the nighttime markets. Only because, they're subject to being stops
picked off by high-frequency trading operations and algos. And so there's a number of
markets, that I trade, that I only use day orders in.

And so early Monday morning, there are some of those markets I've entered orders in,
Sunday evening. They're good for the week. They're good till canceled orders. But on
Monday morning, about 5 o'clock, Mountain Time, I'll get up and start entering orders, for
instance, in the grains or livestock or markets like that. I'll only work orders that are during
the day.

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But again, those are already orders that I've pre-determined from the evening before. I
already know what those orders are. I've already got them written up. They're already in
the queue. And it's just a matter of entering them as day orders.

Another consideration I have to take into effect, because I deal with stops, is, is it a stop
that I want active during the day? Because in some cases, I don't want to be picked off
during the day because of high frequency trading operations, particularly in the thin
markets.

In those cases, what happens is I'll use stop close only orders. I'll wait for a market to close.
Like I've mentioned, the closing price is the most important price of the day. And so I'll take
a look at where a market's closed and determine, with few minutes that come into the end
of the day session, whether I want to end the day in that market.

But again, these are not markets that appear to me during the day. These are markets that
are already on my short list. And so that ends up wrapping up the day.

And then I really go into what I consider to be stage five of my week. And that's the boring
part of the week. That's Monday from Monday's close through Thursday afternoon, Friday's
close. And that's just reviewing everything at the end of the day.

We're at the end of the day, Monday. Are there any new positions I'm in? Are there any
positions I closed that I need to appraise myself on? And so I'm always working against
the short list that I have.

Every afternoon, after the close, I go through my short list. I go through day charts. I go
through weekly charts, just taking a look to make sure that the orders, that I have in, are
orders I want to continue to have in, to make sure that there might not be a change. If it's
an entry order that I had in Monday morning, maybe I want a slightly different price on
Tuesday based on what I saw from the price action on Monday.

And this usually happens around 2:30 in the afternoon, Monday through Thursday. I kind
of start going through this. Now, in terms of stop management, trade management, I move
stops very, very actively and very aggressively. And I'm talking here about protective stops
on positions that I have.

I use what I call active and aggressive trade management protocol. It's a fancy word for
basically saying that I'll move stops to break even as quickly as I can. And as a trade is
moving, I'll move a trailing stop. And so orders from me are constantly in flux.

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 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

And that really comes back to the whole business about trading really being a function of
managing my order flow. And it's fine tuning it, and it's doing it day after day.

So that's my week. And we roll around to Friday afternoon, and the merry-go-round starts
all over again. And I do it all again another week. And I've been doing that, week after
week after week, year after year after year. And here we are.

And what I'd like to do is just kind of go through a couple of the trades and show you how
this all comes together to give you a feel for what it looks like.

Because when I put a trade on, I'm looking at out how do I identify a candidate trade, how
do I enter, how do I size it, how do I know when I'm wrong, what will tell me if I'm right,
how do I get out? And so I'd like to show you two examples of recent trades to attempt to
put this all together and see how a trade actually comes together.

So I want to take a look and show you through a trade I did in eurodollar futures, this last
year, and give you an example of these components that come together. Here was a trade
that I had been looking to do for quite some time.

In fact, I was among everybody else in the world that was waiting for the Fed to start raising
rates. And how long is this 0% interest rate policy going to be lasting? But I need to see
something on a chart, just not some idea that the Fed's going to raise the rate. That doesn't
make me go ahead and short the eurodollar markets.

But I had been looking, really, throughout most of 2015, even into 2016, most of 2016,
looking for a signal based on the charts that, in fact, the Fed was ready and interest rates
were going to start to raise.

And this is a chart of the eurodollar monthly charts, which gives you a feel for the yo-yo
nature of eurodollars over the years. It's one of my favorite markets to trade. it trends very
well. And you can see this massive topped negative interest rate policy that began in 2009
and extended all the way out into 2016, where we basically had flat rates by the Fed.

I view this as an eight-year rectangle. And it's a little longer than a pattern that I really like.
But nevertheless, it was a rectangle. It was a horizontal pattern. So it was a pattern that I
identified on the monthly chart. But I needed to see something more. I won't trade based
on the monthly chart.

May 17th 2017 - www.realvision.com

 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

Here, I'm going to switch over to a weekly chart. And finally, this pattern was completed,
this massive pattern was completed, as you can see, in August of 2016, when the market
penetrated the lower boundary of this rectangular pattern.

And that told me that it is time to really be all hands on deck looking for a shorting
opportunity in eurodollar futures. But again, I don't use weekly charts for timing. It has to
be a daily chart. And so I'll convert over and take a look at what I saw on a daily chart.

And the chart that came out of it we built in the weekly chart of the December 2018
contract. You see this big channel, which I identify on the charts. But more than that, that's
a diagonal pattern, as you remember. But then we form this descending triangle on the
daily charts.

So now we're cooking. Now I have a monthly chart that's rolled over. I have a weekly
chart that's broken out. And now I have a daily chart that has a horizontal pattern and
gives me a breakout on November 9th. And I shorted the market, accordingly.

What I do when I put on a trade, I have an idea of where I'm going to get filled. I have an
idea of where I'm going to get out if I'm wrong. And so based on where I'm going to get
in, where I'm going to get out if I'm wrong, I can calculate the amount I'm risking per
contract from that.

Then I back myself into sizing. And I say, if I do this trade, and I'm going to risk, let's say,
8/10 of 1% or 1% of my capital on this trade, based on where I'm going to get in, where
I'm going to get out, how many contracts do I do? And so that's how I end up working my
way back to the size of the trade that I'm going to do.

And so that situation, then I'm judicious during the course of this trade, moving my stops
down, trailing my stops, and eventually got knocked out of this trade, finally, at the end of
December. It was a very profitable venture into the eurodollar trade on the short side.

All parts of the trade ended up profiting to the tune of just over 500 basis points. It's 5% of
my account based on the short trade. And so that summarizes one of the trades that I did.
And that was a good trade. And they're not all good trades.

Boy, I wish I could tell you all that every trade I do is like that eurodollar trade and walk
away with 500 basis points. But the reality is that that's not the case. As I've mentioned,
my win rate is 40%. So they can't be all that way.

May 17th 2017 - www.realvision.com

 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

As a matter of fact, there's usually only somewhere between five and eight trades, in a
year, when I profit to the level that I profited in, in eurodollars. A much more typical trade
for me is a trade in which I lose 20 or 30 basis points.

I start off being willing to risk 70 or 80 basis points, clamp down my risk, and get bumped
out with a small loss. That's a much more typical trade. And that's one that I'm going to
take you to next to show you what really is a much more usual trade for me to be involved
in.

And we're going to take a look at a chart here of the May copper market, which is a trade
that I did. As you can see on this chart, May copper started forming a rectangular pattern.
And in October, it went through a rectangle pattern. And on February 10th broke out of
the rectangle pattern.

I'm a breakout trader. So as it broke out, I was there to buy the breakout. And in this
particular case, it was an alert that I had set. And the alert went off. And I pulled the trigger
and bought the market. I set my stops. I was fortunately able to move my stops up a couple
of times in this trade.

But lo and behold, I was stopped out of the market, fairly quickly afterwards, on February
16th, which is usually not uncommon for me. Winning trades obviously last a lot longer
than losing trades. And this was a trade that I was in and out of in about a three day period
of time.

It was a trade in which I think I lost about 28 or 29 basis points in the trade. And so it's in
that 20 to 30 basis point range. And again, this is a much more common trade for me than
the trade I walked you through in eurodollar futures.

It has really been my pleasure to have brought you this content. I'm so appreciative to Real
Vision to allow me to participate in this project. It all started off with me sitting down,
informally, with Raoul Pal, down in the Cayman Islands, and talking about the journey I'd
been on as a trader, the long journey that has been a wonderful journey for me. What a
pleasure it's been.

I count myself so blessed to be have been able to trade for a living. What a great profession
that's been. And then we went through a segment on risk management and talked about
the importance of risk management.

May 17th 2017 - www.realvision.com

 Charting Masterclasses: Ep 5: PROCESS: OF TRADING

I went through a video on charting, talked about classical chart patterns and the pits and
falls of various ways to look at a chart. Then we moved on to a video where I went through
the role that emotions and character traits play.

And now here, in this last video, I've been able to talk really about the profession and the
process of being a trader and what my day looks like. And this has been a great experience
for me.

I hope it's been beneficial for you and that you've picked up something that has been a
good reinforcement to something you're already doing or given you some ideas on what
you can do to improve your trading.

And so I thank you very much for your time. You've given me a lot of it. And I don't take
that for granted. So signing off, this is Peter Brandt.

May 17th 2017 - www.realvision.com