Mirage Trading

06/20/2013 11:00 am EST

Focus: TRADING

Rob Booker

Author, Man Vs. Market: Lessons from Trading on the Road

Are you a mirage trader? Do your biases blind you to seeing the reality of what’s actually on your charts? We hope not. Today, your host Rob Booker speaks with veteran trader Jared Johnson, the CEO, founder and president of Day Traders FX.com, about the emptiness of mirage trading, the scary phenomenon of seeing something that isn’t there. Rob was recently speaking with a trader who was struggling and complained that no one appreciated how difficult trading was for this person. Jared describes his friend who would secretly trade from her day job by having a little laptop hidden under her desk. They also talk about their daily pre-trade routines and discuss Jared’s average amount of sleep on any given night. Rob describes his own odd morning routine that occurs before he starts trading each day. And Rob and Jared bring you an update on their combined trading account for charity, and they comment on how nice it’s been not to worry or stress about each other.

 
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Jason Pyles:  Hi, Rob.

Rob Booker:  What is it?  What do you want?

Jason Pyles:  I want to talk to you about trading.

Rob Booker:  You always, you make me do more podcasts. 

Jason Pyles:  I know.  It’s insane.

Rob Booker:  No one, no one appreciates me.  Have you ever heard anybody say that?

Jason Pyles:  Yeah.  It’s pretty hilarious. 

Rob Booker:  Someone told me the other day, no one appreciates how hard I work.  I thought well, who cares?

Jared Johnson:  Hi, gentleman.

Jason Pyles:  Hi, Jared.

Rob Booker:  Hi, Jared.  Have you ever heard anybody say anything like no one appreciates how hard I work?

Jared Johnson:  Of course, indeed.

Rob Booker:  I think that’s the funny thing in the world.  It’s like what are you like work in a coal mine?  What is it that you do that’s such a, your life is a struggle.  I go home.  I get in my car and I go home.  I have to make dinner.  Oh, do you have a place to live?  Oh my gosh, that must be a struggle.  Oh, you had food when you got home.  Oh, that must be a real struggle.  Oh, you’re old enough to drink alcohol.  Why are you complaining about anything? 

Jared Johnson:  I think all those fall into the category of first world problems or something.  Wasn’t there some comedian talking about those?

Rob Booker:  Yeah.  Louis C.K. is, I think he’s the guy.  Maybe he calls them white people problems.  Is that what he calls them?

Jared Johnson:  Yeah, one of the two.

Rob Booker:  I don’t like the phrase white people problems especially as I live in the desert I’m getting tanner and tanner. 

Jared Johnson:  You’re becoming less and less white by the second.

Rob Booker:  Nothing would please me more than to become.  This is really becoming inappropriate.  We’re bordering on, oh, wow.  Yeah, I was talking to someone the other day, Jared, who was struggling.  This is a trader who I haven’t known this trader for very long but they said one of the issues with which they were struggling was that they felt that no one really appreciated how difficult it was for them.  I was hoping since I have no sympathy whatsoever for this person, I was hoping that you would have some sympathy, empathy, or words of wisdom for someone that’s in the position of really struggling to find anyone who appreciates how difficult it is to try to have a fulltime job and a family and trade for a living. 

Jared Johnson:  Yeah, that’s a tough one.  I guess I’m a full-time trader so I have one less thing to juggle.  There’s no full-time job there but it’s hard to have the sympathy.  I’m up at four o’clock in the morning and I don’t get any shoulders to cry on.  It’s tough but I definitely do appreciate.  I’ve had a lot of people in my trading group that I’ve worked with and talked to over the years that have literally been juggling.  I had one person that I grew up with that I talked to her and she said she bought a little net book, those little laptops, and would put it on her lap under her desk while at work and she would trade looking down at her lap and then she would have her regular computer on her desk.  I really appreciate people so I can kind of take it back a little bit.  I really appreciate people that put in the effort and really try to balance the two because I can’t count how many times I’ve heard people say, oh, it’s too hard.  I can’t do it.  I can’t do both.  I’m thinking oh, you actually can.

NEXT PAGE: Dedication to Trading

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Rob Booker:  That was a hilarious voice.  I can’t do both.

Jared Johnson:  It’s so traumatic.  It’s so difficult. 

Rob Booker:  First of all, I want the name and the phone number of the woman who keeps the net book under her desk.  I will send her motivational messages while at work.  That’s inspirational to me, Jason, someone stealing time from their employer to dedicate themselves to trading.  That is impressive.  I have to say having been an employer from which much time has been stolen in the past from people who work for me, I applaud anyone who steals time from their employer.  I have found people who work for me doing some of the most amazing things while I pay them. 

Jason Pyles:  Give us some examples.  Give us some examples.

Rob Booker:  Well, let’s see.  There was the time that on the clock, okay, so I go to do a seminar in New York and my friends who work for me, that’s the problem. 

Jared Johnson:  Friends and work, yes.

Rob Booker:  They show up with this woman and they’re like okay, we hired this woman to be a greeter and she costs, I don’t know how many hundreds of dollars it was.  What I didn’t realize that the woman that was hired as a greeter also was a woman, also you could pay her to do other things.  I shelled out the cash for the greeter.  The guys that worked for me got the bonus.  I am not making that up.  That’s New York 2009.  If you came to that live seminar, you met, I remember her name, her name was Roxanne and you met her at the door.  When I found out what was really going on, I couldn’t stop signing the Police song Roxanne to my friends, especially as one of them was calling his wife on the phone back home.  I would be in the background like Roxanne.

Jared Johnson:  Would it inappropriate to say, you know, where are the workers?  Well, they’re on the rocks right now.

Rob Booker:  Between a rock and a hard place, no, that’s bad.  I’m sorry everyone for having…I didn’t realize what was coming out of my mouth at the time.  I do applaud those of you who are juggling lots of different things in your life and who have aspirations.  It’s difficult to do all the things.  You need to take some time away from your employer.  You need to steal some time away from your employer. 

NEXT PAGE: Jared’s Pre-Trade Routine

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There was a time, actually, I don’t talk about this much but I don’t know why I don’t really talk about this as if there’s some element of my life that’s personal and private anymore now that we know the National Security Agency is spying on all of us.  Anyway, but I remember when I was a Mormon bishop, Jason, back in the day that there was this instruction given from Salt Lake.  They would beam this transmission to you and they would give you lots of good advice, which you would then pretty much summarily dismiss and go back to doing to whatever you were doing.  I was a Mormon bishop and that’s pretty much, as a man I think that’s one of the most difficult things you can do in the church.  You’re always on call.  I remember I had a lot of really positive experiences and I have great memories of serving in that capacity at that time.  I have no regrets whatsoever about it but I remember this one transmission that came out.  It said you shouldn’t steal time from your employer.  Don’t ever take time away from your employer to do your church related duties.  Don’t take time away from your family to do your church related duties.  Don’t forget to take care of yourself.  I remember leaving that transmission early and I could chose between an emergency phone call from my family, like a website that went down on the job, a trade that was open on the side that needed to be attended to, and some woman who had overdosed and was laying in her bathtub and was a member of the congregation.  I thought that’s really great advice when we’re all sitting here on a Saturday.  Why are we here on a Saturday morning listening to this?  I got all this stuff I got to do.  I have heartfelt admiration for those of you that are struggling, your religious and spiritual duties, and your family responsibilities.  I think if you’re going to have to steal from anyone to get the time necessary to do some of your testing and some of your experimentation on the charts to get ready for your day of trading, it ought come out from your employer, defiantly.  You should defiantly find some time. 

I had some ideas about this, Jared, and I wanted to run an idea past you for how people can get themselves ready for the day of trading.  I wanted to see what you thought.  I don’t know what you do when you get up at four o’clock in the morning.  Actually, that’s a better question.  What do you do when you get up four o’clock in the morning?

Jared Johnson:  Well, I’m glad you ask.  I’m very professional.  I have a very solid routine and it consists of putting some sort of clothing item on that I usually, I can’t recognize until about a one-half hour after I get up.  I kind of stumble downstairs a little bit and I head straight for my computer.  I have no wakeup routine.  I literally am out of my bed and in front of my computer in two minutes looking for trades.  I just go right for it.  I’m up at 3:55 am and the computer’s on and everything is going by 4 am.  I used to have a bunch of different routines, as I was a little tiny bit younger.  You know when you’re like that college age or I was 20.  I started trading when I was about 21’ish, right around there, getting up early it’d take me like two hours to be able to understand what my name was.  Now, I’ve been doing it for so long I can be totally asleep to totally awake in one minute and that’s just what I do.  I just head straight to the charts and I just start looking for trades and setups.

NEXT PAGE: Trading on Little Sleep

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Rob Booker:  How much sleep do you get, at 3:55 am, that’s not much sleep, right?

Jared Johnson:  I’m like a four to four and one-half hours a night kind of sleep, which is why.  You and I talked about this on one of the podcasts of Friday.  Friday, I don’t trade in the morning because usually by Friday I’m pretty out of it so I try to sleep a little bit on Friday.

Rob Booker:  I don’t anybody that gets any sleep anymore.  This is unhealthy for me.  I’m going to catch some kind of illness from associating with people who get up at three or four o’clock in the morning.  What time do you get up, Jason? 

Jason Pyles:  Well, it’s 5:40 am typically, to be honest.

Rob Booker:  That is just disgusting.  We have to, I need some friends who are lazy.  I need some lazy friends.  I need to know some people whom.  I’m going through a list in mind of traders that I’ve met in the last 60 days;  Jared, Ryan in Knoxville, boy I love that guy, Brian in Mississippi.  I was just writing a chapter in the book about him.  I would talk to that guy for four hours every day.  He probably gets up at the crack of dawn.  He gets up before breakfast every single day.  Jason, you’re an accomplished individual.  You get up early in the morning.  I know Jennifer gets up early in the morning.  At least, I think.  She’s awake when we’re doing the live trading after at least 15 minutes.  I don’t know anybody.  I would like some friends.  If you are a lazy unaccomplished individual with no goals in life, I want to be your friend.  I want to hang out with you for a while.  Gosh, 3:55 am and you go to bed at like 11 pm?

Jared Johnson:  Yeah, because you know we put Stella, my little baby on this schedule, so she will not go to sleep before 11 pm and she keeps us both up pretty well because I need her to sleep in later in the morning so I can trade and mom goes off to work for a few hours.  Yeah, it’s 11:30 pm to 3:45 am, 3:55 am is kind of the typical sleeping.  By the way, if somebody does contact you that are a little bit lazy that maybe has a lot of interest in Doritos, I mean pass them over here as well, because I feel like I could use a little bit of lack of motivation, someone to wind me down a little bit. 

Rob Booker:  So, it’s there something productive you could do with those four and one-half hours where you’re sleeping.  Isn’t there something you could do?

Jared Johnson:  Besides keep my sanity, I can think of nothing. 

Jason Pyles:  It’s rough.

Rob Booker:  You know what I like about, you know people say about trading from home, that you can trade from anywhere, I don’t actually trade from home.  I do the webinar thing.  I get up in the morning at four o’clock and then I get in the car and I drive somewhere.  Then I drive right back.  There’s no place open in Arizona.  I don’t know where the people are most hours of the night.  I go looking for them.  Then I drive around like I’m going to work and then I come back to get the feeling that I’ve gone somewhere.  I do my trading business for about an hour and one-half or whatever.  Then I go work other places.  I go find.  I call them my offices.  I have offices all over the Phoenix metropolitan area.  I’ll go work at a Starbucks for a while and then I’ll go work at a diner, or whatever.  I love being out of the house but I find that by like 10:30 am, I’m falling asleep in a public location. 

Jason Pyles:  That will definitely happen.  Those 4 am, I’ll tell you that 10 or 11 o’clock in the morning it kind of feels like our five o’clock in the afternoon like you’re got that end-of-day kind of feel going. 

NEXT PAGE: How Rob Missed Something in Front of Him

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Rob Booker:  Yeah, so I had a routine.  The other thing that I like to do before I get started with my trading for the day is spend no less than one minute and no more than five or six minutes.  I trade from the one and the five-minutes trades Monday through Thursday mornings.  What I’ll do is go back on the recent one and five-minute charts for like the pound Australian dollar, the dollar yen, euro yen, and maybe a few other financial instruments like gold, old, and the S&P e-minis.  I’ll look back on the type of trading setups that I like, in particular, divergence trading setups, I will go back on those charts quickly and I will re-trade recent movement in the way that it should have been traded, like perfect practice.  I know I already, I have complete information about what the result of each one of those trades were but I go back and I watch them.  It felt a little bit like cheating when I first started doing this years ago but it doesn’t feel like cheating anymore.  I really actually feel like it's the reinforcement of a pattern that I know that I’m looking for.  It helps to wake me up because I don’t really actually like to take the first trade that I see in the morning.  I’ll often kind of mess it up.  You ever see something on the chart that isn’t really there.  There’s an episode of the Sopranos.  I don’t know if you watched that, Jason.  Were you a fan of the Sopranos?  It doesn’t strike me that you were. 

Jason Pyles:  Oh, totally, I loved it. 

Rob Booker:  I’m a huge, Jared, I don’t know if you ever watched the show.

Jared Johnson:  I have never seen but I’ve heard great things about it.

Rob Booker:  Well, let’s disconnect to Jared and we’ll continue our conversation.  I’m just kidding.  I believe this is in the first season around episode five or so or maybe episode four.  Tony Soprano is in the office of Dr. Melfi, his psychiatrist, and while in the lobby before going into the psychiatrist’s office, he looks at a painting in her office.  His mind is playing tricks on him.  Later on in a conversation, he accuses her of playing mind games with him by placing a picture of a barn with a rotted tree in it out in the lobby to convey subliminal messages to the patient.  In fact, there is no rotted tree in that painting.  He sees something that isn’t there.  I think that there is this danger that I live with when I wake up that early that I’m going to see something that isn’t there.  I have done this many times in my trading life where I believe that I see one thing and I’m so concentrated on it that I don’t see another. 

Here’s a quick example.  A couple of days ago, I think it was Wednesday of last week, I was trading the pound Aussie and I wanted to sell the pound Aussie because I saw a divergence setup on the five-minute chart that had come recently.  It was a particularly good-looking divergence setup.  The slope of the lines was appropriate.  It had fallen through a level of support, which is exactly what I look for when I look for a divergence trade and I’m plotting.  For those of you that want to know more technical information, I’m plotting the MACD, the Moving Average Convergence/Divergence, with a 12, 26, and a nine.  Then it breaks through a level of support after the divergence trade and I’m all excited about it.  The entire time there’s a blind spot like I’m driving in the car and I can’t see it.  There is divergence in the opposite direction right in front of me that immediately came after the setup that I wanted to trade.  The setup that I wanted to trade had already happened.  It had fallen a bit already.  I was still thinking of selling it again and I was thinking sell, sell, sell.  I completely blanked out on the divergence in the opposite direction until about 45 minutes into the trading session.  I look at it and I’m like I can’t believe I missed this.  I stopped out of one trade because the one that I should have been looking for was on the way to its profit target, so to speak.  I thought how interesting that we become so finely tuned into one type of trading that it blinds us from our own strategy sometimes, our own biases can blind us. 

NEXT PAGE: What Jared is Trading These Days

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With that said, how are the markets looking for you lately, Jared?  Have you taken any trades in our charity account?  I didn’t check that today. 

Jared Johnson:  You know, I have not taken any trades this week on anything yet but I’m trying to.  I don’t know.  I have to come clean a little bit here.  I talk pretty bad about the yen pairs sometimes on Twitter, my daily videos, sometimes I just hate on the yen pairs because you know, sometimes I get in there and the trade looks so great.  I’m stopped out at 80 pips in one second and I think, I’m just going to trade a dollar pair, dang it.  Now, trading is like a constant rollercoaster, right.  We had a pretty good little run the end of last week.  In my trade group, we closed a 295-pip trade on the pound yen.  Now, I’ve got the pound yen all dialed in and I’m excited about it.  I think we’ve got some really good setups.  Some that will be great for the charity account.  I’m just waiting for the setup to happen and maybe even the euro yen, as well.  My point in saying that is, I’m kind of the yen bandwagon this week and I think we’ll have a couple of yen trades coming up.  It’s interesting.  I was looking at the COT data on all of that stuff and I think we’re going to have a tricky, crazy week that people aren’t expecting.  I could go into more detail but I don’t want to bore people too much.  Just be prepared to be surprised. 

Rob Booker:  What did you say?  You didn’t want to, what?  You can find, Jared, on the Twitter as my parents would say.  What’s going on with the Twitter?  How does the Twitter work?  Did you send me a Twit?  Anyway, Jared’s on Twitter at Day Traders FX.  You can follow him.  Once of his recent tweets said we’re live in the chat looking over the UK-EU markets and setups.  This is like at 1 am sometime.  You don’t really sleep much.  I’m figuring that out now. 

Jared Johnson:  So, the first part of the week I always like to try to warm up with my trading week to see the UK and European markets open.  I’ll trade all night long.  Last night I was up for a few hours trading and then the rest of the week I trade the US markets and sleep through the European markets or at least, the open of them.  I’m kind of a bum. 

Jason Pyles:  That’s fantastic.

Rob Booker:  One hundred and forty-five pips profit.  That’s just absolutely brilliant.  I think the last time I got 145 pips was 2010.  That’s a long time ago.

Jared Johnson:  Honestly, I’m not the type that will let trades run forever but you know how these yen pairs go sometimes.  You just say, I’m going to forget about it for a few hours and hundreds of pips later, it’s either fantastic or horrible.  This time it was pretty fantastic. 

Rob Booker:  I can’t forget about anything for a few hours.

Jared Johnson:  You’re always on it?  You’re always there?

Rob Booker:  No, I’m just always thinking.  I’ve got to turn off the brain somehow.  I have one last update about turning off the brain.  Remember, Jason, that I was just sick and tired of the heat and I hate it, the last time we talked about Arizona and the heat. 

NEXT PAGE: A Recipe for Trading Disaster

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Jason Pyles:  Yeah, yeah, I was worried. 

Rob Booker:  You know what, I love it.  I’m absolutely in love with this weather.  It’s so odd.  I was complaining about the weather when it was 97 degrees here and all the people from Arizona were like chortle, chortle, you’re going to die.  You get used to it and whatever else.  They all gave me a hard time.  Frankly, I was being a whiner about the whole thing.  Now, it’s 108, 111, and I absolutely love it.  I think it’s the greatest thing ever.  I totally love the weather.  Now, I overhear all the people from Arizona complaining.  They’re all complaining.  I’m loving it.  I think it’s the greatest thing ever.  I go to Starbucks and they say you want that hot or cold.  I’m like hot.  I don’t understand what happened, Jason, but there was a transformation that occurred like the flick of a switch.  I drove back here to Arizona and it was blazing hot and I think it’s the greatest thing ever.  In fact, I don’t care if it ever cools down, ever. 

Jason Pyles:  If you can’t beat them, join them, Rob.  That’s what you did.

Rob Booker:  That’s right.  I got back here and my house was 92 degrees inside.  I set my air conditioning to 85.  I’m like yeah, that cool breeze.

Jared Johnson:  They need to have a setting on the thermostat for that that’s like tilted like slightly sweating or something.  Just turn it to slightly sweating, we’re going to splurge today folks. 

Rob Booker:  That’s hilarious.  Everybody open your doors.  We’re going cool this place down.  Absolutely, well, Jared, it’s a pleasure.  I’m really looking forward to a week of not trading.  This is not traditionally a great week for me trading.  I may take one or two trades and we’ll certainly update people when we come back around on the flip side of things.  We definitely need to get together and do a webinar of some kind and talk about this because I’ve never been in a trading partnership where we talk as little as you and I do and feel as comfortable as we do.  I don’t really know when you’re in there.  You don’t really know when I’m in there.  We don’t supervise each other.  If either of us lost the whole lot, it wouldn’t matter.  I think this is actually turning out to be quite a recipe for success where we do all of the things wrong that you would ordinarily expect people to do in order to get it right. 

Jared Johnson:  You know, and I think that is kind of enlightening a little bit, right.  Don’t we get so caught up with rules and the “right way to do things.”  I think we’re here to mix it up and just show people that there’s a million ways to do it right.  Let’s forget about the wrong and let’s just get a result out of it.  I think that’s what you and I are going to do.

Rob Booker:  There’s no worse recipe or the best recipe for disaster in trading is to feel like there’s someone else looking over your shoulder judging your every move. 

Jared Johnson:  Yeah.

Rob Booker:  It makes you close a winner out because you want to show somebody that you did it right and it makes you hold a losing trade open because you don’t want to admit that you took a loss.  Then it makes you shrink away from that individual and not talk to them anymore because you don’t want to admit it.  I think this kind of a situation where if you took ten losing trades in a row, I might not even see it.  Then you would take your 11th trade and make it all back and I would never know that you had done it.  That actually works pretty well for me.

NEXT PAGE: Who Jared Follows on Twitter

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Jared Johnson:  I think it does work well because I agree 100% that somebody looking over your shoulder, which you and I talked a little bit or we talked about this on the podcast a little bit, a time or two ago, about trading managed accounts and having people constantly seeing what’s going on and having that pressure.  I currently trade managed accounts and I’m ever aware of the pressure.  It’s kind of nice.  We get in probably at different times.  We trade different things in different ways.  I think we’re going to be able to do some cool stuff with this account.

Rob Booker:  Let’s wrap this thing up and plug a few different people.  Once again, you can find Jared on Twitter at Day Traders FX.  You can find Jason on Twitter at, let’s see, let me get this right, Jason.  I don’t remember.  It’s like Movie Cast Weekly, isn’t it something.

Jason Pyles:  Lets it, Movie Cast Weekly.

Rob Booker:  At Movie Cast Weekly, you can find Jason.  Do you have a favorite, Jared, on Twitter, someone that you find to be one of the most interesting Twitter feeds that you follow?  We haven’t done this for a while.

Jared Johnson:  I mean, besides you Rob, I have a second favorite.  I follow probably 130 or 140 people and honestly, there’s probably two or three in there that I watch quite a bit. 

Jason Pyles:  One hundred forty-seven.

Rob Booker:  Oh, 147, I guess you have my Twitter page up.  A couple of people that I like to watch, I think Kathy Lien has some good stuff so she’s always good to keep an eye on.  Pip Train, I like Pip Train a lot.  She’s a nice lady and has some great advice.  There’re a few others but I’d say those two are defiantly some good ones to mention.

Rob Booker:  Okay, Pip Train.  I’m going to look that up right now.  Here’re some recent tweets from Pip Train.  Serena wins the French open. 

Jared Johnson:  Is that same Pip Train.

Rob Booker:  It’s actually a pretty interesting Twitter feed.  Pip Train, forex trading the spot market.  The Pip Train equals the trend plus momentum.  Ride it to profit.  This is a risky business.  See my blog for disclaimer, in New York City.  I like it.  That’s actually interesting.  Jason, any favorites for you, you know, movie related?

Jason Pyles:  I really like Eric D. Snider but I may have mentioned him before.  I still die laughing when I read his tweets.

Rob Booker:  D. Snyder, wasn’t D. Snyder the front man for Twisted Sister?

Jared Johnson:  Twisted Sister, that is great.  That is great.

Jason Pyles:  Nice, D. Snider with an ‘I’. 

Rob Booker:  Okay.  That’s it?  That’s the whole thing? 

Jared Johnson:  Are you leaving us hanging, Jason.

Jason Pyles:  Sorry.

Rob Booker:  Jason only follows one person.

Jason Pyles:  No, well, I mean that’s pretty much.  I don’t spend as much time on Twitter as I should to be honest.  I don’t know.  I need to make more time for it I guess but I haven’t been too active lately on there.  I mean, I still post when there’s a new podcast episode up, I’ll throw out a tweet or whatever but I’m not on there too much.

Rob Booker:  That sounds awesome.  It’s always nice to hear some recommendations out there on Twitter.  Twitter is a great way to spend some time.  You can follow me on Twitter at Rob Booker and you can follow the podcast on Twitter, Jason.  Where can you find that?

Jason Pyles:  It’s at Traders Podcast. 

Rob Booker:  We’ll see you next time.  On behalf of Jared Johnson, my friend at Day Traders FX, and Jason, the producer, I’m Rob Booker and you’re listening to the Traders Podcast. 

For more podcasts from Rob Booker, visit Traderspodcast.com. You can also follow him on Twitter @traderspodcast.

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