Being Fearless and Turning $1,000 into $400,000

10/10/2013 10:50 am EST

Focus: TRADING

Rob Booker

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

In another great episode, host Rob Booker flies down to Mexico to interview a daredevil/trader/pilot, who prefers to remain anonymous, about being fearless and about turning $1,000 into $400,000! This episode isn’t as much how he pulled off such a feat, but more about the elements of his approach to the markets. Rob also talks to this trader about taking calculated risks.

Rob Booker: I flew down to Mexico in order to interview a trader. Some people go to Mexico to go on a vacation or to meet, I don’t know, loose women, or I don’t know, buy drugs, or I don’t know, get cheap Viagra or whatever. I don’t know what people go to Mexico for, but I went to Mexico to interview a trader, and this is a friend of mine, and I’m going to keep his name private because well, I guess, just because he asked me to, and we don’t do this often, and maybe I’m being over cautious, but I flew down to Mexico to meet with a friend and let me tell you what. He made a stunning amount of money. He turned $1000 into $400,000. Can you believe that?

 
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Jason Pyles: That’s incredible.

Rob Booker: Yeah, so in this upcoming interview, I sit down with my friend, and we not only talk about how he did this, and it’s not as systematic as maybe we all would have hoped, and Jason, he really, in some cases, can’t even remember how he did it.

Jason Pyles: Oh bummer.

Rob Booker: Well, right, that’s incredibly frustrating from one point of view, but then from another, we touch on some subjects that are more important than just the trading system that someone uses. We talk in this interview about being fearless and we have a conversation about the fact that he knew who his opponent was, and he was a consummate risk taker and he’s traded equities, he’s traded futures contracts. He made $400,000 trading cotton—of all the things in the world. I mean, it’s just unbelievable.

And then he also has experience in trading currencies, and I’m just fascinated with this interview.  It’s going to be a short episode for those of you listening to the Trader’s Podcast, and it’s definitely worth your time to stop for a moment, put down anything else that you’re doing, and listen up for one of the most entertaining stories about outrunning the police and trading a bunch of money and you’ll meet my friend. We don’t specifically in this first portion of my interview with him talk about exactly, like I said, exactly how he made all the money, Jason, we just talk about the elements of his approach to the markets, and I think there’s just at on to learn from this episode.

Jason Pyles: All right, well, I can’t wait. Let’s give it a listen.

Rob Booker: All right, so you traded equities—you’ve traded forex and equities.

Daredevil/Trader/Pilot: Yeah, I started—I did pretty good in the stock market, but that was mainly during the tech and Internet. I did really well; I was in the Army at that time. Actually, I was going through flight school at that time when I was trading mostly biotech and Internet startup.

Rob Booker: You told me a story one time where you had a very limited amount of time.

Daredevil/Trader/Pilot: Oh yeah, it was the middle of US Army flight school, helicopter flight school, and I had about 30 minutes for lunch, and that’s out of about a 12-hour day between flying and school and physical activity and everything. It’s pretty rigorous, I mean, it was about six days a week we did that. Anyways, I was tracking, I think it was eStamp.com, and I just happened to buy it at the right time, and it literally went up. I don’t know how many thousands of percents, but I made my whole military officer pay for the year including hazard pay plus maybe another 10% in 30 minutes. I just bought it and literally sold it right before—after I ate my sandwich and I was going to go back to my unit to train.

NEXT PAGE: Stick to Your Trading System

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Rob Booker: What was the basis upon which you bought that stock?

Daredevil/Trader/Pilot: That was a while ago. I don’t remember, I’m just not afraid of taking calculated risks and I always put in a stop loss as I’m putting something in. I don’t remember what the basis was, but it was whatever system I had I kept on implementing it and it eventually paid off.

Rob Booker: Well, that’s what I wanted—I was hoping that’s what you were going to say, because to a certain extent, it does matter what system you use, and then to another extent, there’s something to be said for being fearless in the application of your system, and I’ve met traders who applied their system, but the ones that are outrageously successful, who tell the best stories, are the ones who were fearless, who could just put on size that was not appropriate, and I think those are the best stories ever. You say you had a stop loss, so you were protected to a certain degree, but you really—you went in there and you were a trend trader. Would you describe yourself as a trend trader in your experience?

Daredevil/Trader/Pilot: Yeah, back in those days I was definitely more of a loose cannon. I guess you can call it a trend trader. It wasn’t a total gamble, but yeah, things were just moving so fast back then.

Rob Booker: Did you trade things on IPOs or did you differentiate?

Daredevil/Trader/Pilot: I tried some IPOs, but it was really hard to get into high volatility, low volume stuff, but no, it was just biotech and new Internet companies. I just see them start taking off, and a lot of times, I just jump on the bandwagon, and you would just run.

Rob Booker: Was it easier or more difficult because you had a limited amount of time?

Daredevil/Trader/Pilot: I think it was better, because I think I get myself into trouble trying to implement too many things. When you’re very restricted on time, you have to really implement the only strategy—you know, the strategy you went in with. You don’t have the time to screw around and so you just implement that, and it probably keeps you more straight, and you don’t have time to play with it and let it run. You just have to let it—you have to execute it. I had a very limited time, so I had to just follow a certain protocol and that was it.

Rob Booker: Are you the kind of trader that can walk away from it or do you need to be there and watch it as it’s going as well?

Daredevil/Trader/Pilot: Well, it depends on how much I have into it, but nowadays, I can definitely walk away, because I have everything set up before I go in, and so I know okay, this is my loss, but if I win I know what my gain is, too. It’s calculated every single time.

Rob Booker: Well, before we move on to what you’ve done more recently, what are the—I want to—I don’t want to talk about the weaknesses of this approach, I want to talk about the strengths in particular. I don’t want to be—have the same old conversation where there’s a bunch of warnings and we treat everybody that listens to this like a child. I want to talk about the benefits of being fearless. Do you feel like you walked into the game of trading fearless? Did you just say, I could do this. Did you watch something? Did you see a commercial? Did you meet somebody who did it? What was the—what were the origins in all of this?

Daredevil/Trader/Pilot: My mom has been in the financial industry for a while. She never did really stocks per se, she was more into wealth management, but I went to Arizona State and I have a few degrees in business, one including finance. None of which would particularly help me with this specifically, just gives you a good overall good feeling about knowing something about the business world.

Rob Booker: Yeah, was it financial in nature? What got you started? So you just woke up one day and you were like…

NEXT PAGE: Self-Confidence & Risk Management

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Daredevil/Trader/Pilot: I don’t know, I just think it’s really exciting and the fact that it’s solely in your control and solely in your responsibility whether you make money or you lose it, and so I find it to be exciting and I also find it to be very rewarding if you follow what you’ve set out to do, and if you don’t, you’re the only one responsible. It’s nice to have that. I’ve always owned my own businesses, and I like being responsible to myself. I don’t want to blame anybody else and in trading, you can’t blame anybody else. Well, you can try to blame somebody else or the market, or God, or whatever you want, but it’s always on you.

Rob Booker: I have a definition of risk, as it relates to the financial markets, and trading in particular, which is risk taking is defined as making a move in the markets without understanding truly what’s going to happen next, and we talk a lot about expectancy and educational courses are sold on the basis of probabilities and win percentages and risk to reward ratios, but I found that a lot of traders who made a lot of money within a short period of time didn’t necessarily throw all that out the window, but they did accept that there was no way they were going to figure it out completely, and in the moment, they weren’t trying to figure it out, and it sounds like you had a limited amount of time, and you have—I wouldn’t call it cockiness about it, but you had a confidence about that you believed that you could do it, and you had a financial instrument of sector that you trusted at least in so far as it could be the vehicle for creating some of this wealth. Did I get some of that right, or is there…

Daredevil/Trader/Pilot: No, I think you’re right, yeah.

Rob Booker: This isn’t the only risk taking that you’ve ever done though. I mean, you would—I mean, so we go down to Mexico and we have these long conversations in this airplane that you’re flying, and you’re telling me these stories like you rode a motorcycle at 194 miles an hour?

Daredevil/Trader/Pilot: Yeah, this is that same time period. I was in flight school and all of us were young officers, 20 to 25 probably; most of us single, so we all had the bright idea of all getting crotch rockets, and I’m probably the shortest one out of all of us and probably weigh the least and I get the biggest one. I get a not Kawasaki, Suzuki Hayabusa, which is 175-horse power. Yeah, it’s more horsepower than I weigh and top speed of about 194 miles an hour. It was an interesting time where I looked at physical risk and calculated it very differently than I do now in my life since I’m married and have kids now.

Rob Booker:  Right.

Daredevil/Trader/Pilot: Yeah, there’s all sorts of fun stories and risk-taking activities including outrunning…

Rob Booker: So did you really outrun a police airplane? So you’re on some desert highway or whatever and…

Daredevil/Trader/Pilot: Yeah, well out where I was at in Alabama there’s a lot of wide open roads and spaces, and I was on this freeway where there was nobody there, and I would speed all the time, and that’s saying it lightly—more than double the speed limit.

Rob Booker: So you’re going 120 miles an hour regularly.

Daredevil/Trader/Pilot: Yeah, 120, 130, and then I was with a friend of mine at one point in time where I was doing this, but the one story I’ll tell you know is the type of helicopters we would train in were the same types of helicopters that the police would use, so I knew exactly what their maneuverability and their speed was, and I knew my bike could outrun it by about 60 miles an hour, so I was on this straight piece of highway and—actually, at first, I was being chased by a cop. He’s pretty much limited to about 140, 150 miles an hour, so I would be cruising down the road. I’ve have to slow down, so he can catch back up to me.

Rob Booker: So if you were going to let him catch you, you would have to slow down.

NEXT PAGE: Know the Competition

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Daredevil/Trader/Pilot: Yeah, well I was getting close enough where he couldn’t see my license plate, but he was still in the game. I don’t know what I was thinking, but, so then he finally got smart and he would radio ahead and I’d see cops pulling onto the highway ahead of me, and I’d be going so fast I was just I was like a blur. They still couldn’t read my license plate, and then they called police helicopters in, but they were exactly the same types of helicopters we were training in, so I knew they were limited to about 120 knots, so I just gunned it for about eight minutes or so, literally about between 185 and 195 miles an hour for eight minutes. You travel real far real fast. Everybody disappeared, all the cop cars, the helicopter, went into a wooded area, and then that was that. I tried not to repeat that behavior, but it was crazy.

Rob Booker: That’s out of control. So you knew what the—I’m going to reduce this amazing story to its integral—it’s more important components, but you knew what the competition was, you knew what you were up against, you knew what its capabilities were. You knew when to stop. You knew what you own limits were and you knew that you couldn’t look up from the wind screen while you were going 190 miles an hour. Did you ever look up from the wind screen?

Daredevil/Trader/Pilot: I had—one time I was on that freeway, I was just by myself, and I wasn’t totally paying attention to what I was doing, per se, and you have to be completely present while doing that, and I lifted my head just a couple of inches too high—a couple of inches above the wind screen, and it literally whipped me back so I was laying—my head hit the back seat and I had to do a sit up to get back up, and the bike’s just cruising by itself at 185 miles an hour. Yeah, it’s—you really have to be present for that.

Rob Booker: Jason, that’s the story about outrunning he police on a motorcycle at 194 miles an hour. That’s nothing that I think I could ever imagine doing in my whole life.

Jason Pyles: That is great. Well, you just got a new motorcycle, so maybe you could work up to that, Rob. Maybe.

Rob Booker: I could work up to 19.4 miles an hour. Now, Jason, we’re really fast approaching episode 200, so in our next episode coming up, I think we probably ought to talk more specifically about how we’re going to celebrate episode 200.

Jason Pyles: Yeah, because this is episode 190, and it’s just 10 episodes away.

Rob Booker: Do you remember how I—you might not remember this Jason, but in April, do you remember that I took a little bit of a trip?

Jason Pyles: Oh yeah, I do remember that actually.

Rob Booker: It’s a big deal around these parts, and I’m thinking that our friend with whom I just spoke—I had lunch with him again today, Jason, and I think we might go on a barnstorming tour around the country, so if you are listening to the podcast and you are in Texas, Colorado, or Utah, I would very much like to hear from you and we’re going to meet up with some traders again. It’s the same deal it was the last time around. If you’re in Texas, Colorado, or if you are in Utah. I think we may take a two-week trip in an airplane this time, Jason, and try to see as many cities as we can in all of those places during the upcoming weeks. So if you’re interested and you live in those places, and if you live outside of those places, I’m still interested in hearing from you, so if you live close to Texas, Utah, or Colorado, I want to hear from you, and somewhere along the way there, Jason, we’re going to plan a big event and we’re going to record episode 200 live.

Jason Pyles: Oh, I love it. That’ll be so much fun.

Rob Booker: All right, thanks for listening everyone. Jason, how can these good listeners of The Trader’s Podcast contact the show and say I live in Texas, Utah, and Colorado?

Jason Pyles: They can email us at Producer@TradersPodcast.com or they could just leave a comment in the show notes for this episode.

Rob Booker: Perfect, we’ll see you next time.

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

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