36 Material Scientist
Aug 15, 2022
Material Scientist is the co-founder of Material Indicators.
What attracted you to trading?
My first trade was back in 2012. It was in my final year of high school and I used to follow a lot of tech news. At the time, the Windows Phone ecosystem was revived by the partnership between Nokia & Microsoft, and I believed they were going to take off. I wanted to capitalise on that conviction. So, I bought some Nokia shares under $3. A year later, the price had tripled, but the project hadn’t gained as much traction as I had hoped. So, I sold.
How did you get into crypto?
In 2013 I had also heard about Bitcoin and wanted to get into mining. But after some research on cloud mining (Butterfly Labs), I determined it was a scam, and forgot about it all until a friend reintroduced me to Bitcoin in mid-2017. That’s when I first bought some. I remember how the volatility excited me and having to try to time the best entry. Due to on-ramp delays, I was lucky to buy a local bottom. But I soon learned the pain of selling too early in a bull run and having to chase price higher. It didn’t take long for me to start dabbling in shitcoins, which allowed me to outperform Bitcoin.
Soon after that, I learned that things aren’t always going up. And despite Bitcoin looking bleak, I kept thinking “alts seem to hold up well”, and kept playing them instead of locking in profit (something the class of ’21 now also knows as exit liquidity).
But I soon learned the pain of selling too early in a bull run and having to chase price higher.
How did the bear market affect you?
2018 was my first bear market. And even though I was still above my initial entry, I knew I had to improve in order to survive. So, I got familiar with coding indicators on TradingView for various market conditions. I started off with a trend-following model, but realised I was also going to need a mean-reversion model for choppy environments. Despite some good results, I still wasn’t happy with the risk. That’s around the time Brad got in touch with me, and we formed ‘Material Indicators’.
What inspired you to build your own indicators from scratch vs using existing?
I’m always critical of what I’ve not verified myself, and I love to tinker. The hands-on experience also gives you a better understanding of the data itself.
I’m always critical of what I’ve not verified myself, and I love to tinker.
You’re well known for your distinctive charts, tell us about them.
Given my academic background, I like to keep things scientific. The urge to try and understand what moves the markets and quantify it, motivated me to start looking at more granular data that was not available via TradingView. After learning Python and familiarising myself with exchange APIs, I started plotting orderbook & orderflow data. Internally, we called it ‘FireCharts’ due to the default ‘fire’ colormap. Users in our public Telegram group loved it and asked me to make the app available for them as well. So, I turned it into a product.
How do FireCharts help you trade?
FireCharts allowed me to reduce my risk by showing me explicit support & resistance levels. Despite all that work, I never outperformed BTC as much as I did back in my shitcoin YOLO days, but I managed to reduce the drawdown and survive.
In hindsight, that made the difference this time around as I managed to sell the top.
What mistake do you still make when it comes to trading?
My biggest problem to date has been overcoming my fear. The only way I could regain some of my confidence was through data. As VolQ says “manage your drawdown, and returns will follow”. So, I didn’t outperform as much as I could’ve if I YOLO’d into alts, but I did keep the profits due to improved risk management.
Does not taking profits still haunt you? Are you better at that now?
I am happy to say that this time around, I was able to lock in profits by getting out near the top. The reason for this decision was pulled bids & stacked asks as a result of Powell’s speech in November ’21. Acknowledging that inflation was no longer ‘transitory’ meant they were going to do something about it (tapering & rate hikes). So, I fully exited the market at the time.
How much do you look at external macro factors in your trading?
Before 2021? Almost not at all. Since then, I’ve been orienting my mid and long-term bias around the macro picture and filled the gaps by analysing market data.
How long have you been trading and what markets have you traded over your career?
I’ve been in the crypto game since 2017 though I’ve traded stocks a few times before then.
How long did it take you to become profitable?
I joined during a bull market, so profits were easy to come by. Keeping them was the difficult part. I took a beating in my first bear market, but still managed to survive and keep what I originally put in. The road to profitability in all conditions was a long one. The things that helped me most were to learn & improve, as well as discuss ideas in our community and with friends. Iteration & perseverance are key to survival, and that’s often all you need to come out ahead.
profits were easy to come by. Keeping them was the difficult part.
Do you have a daily routine?
I’m pretty chaotic. I don’t have routines. The reason I dislike routines has to do with my ADD. I’ll easily get bored doing the same thing over and over. So, the great thing about my job is how diverse it is - every analysis is unique, while still adhering to the scientific method.
Does being chaotic help with trading at all?
You get creative when trying to avoid repetition. As such, you come up with tons of things you could investigate and implement into your strategies.
You get creative when trying to avoid repetition.
What's the worst thing about trading?
You’re always thinking about the market wherever you go or whoever you’re with. I wish I could turn it off.
What are some things you enjoy doing away from the charts?
Dalio taught me how there’s always fighting when money is tight (i.e. recession). As such, I’ve tried to spend less time on Twitter during this year’s market rout, and rather go outside with my wife & dog.
Tell us about your most memorable trade
During this cycle, I got out near the top with conviction. Conviction is the key here. You can have all the data analysis in the world. If you don’t have the conviction to pull the trigger, it’s useless.
What’s the best trading advice you’ve been given?
"When credit is easily available there's economic expansion. When credit isn't easily available, there's a recession." ~Dalio
We stand on the shoulders of giants, and legends like Dalio help us navigate the markets.
In what market conditions do you thrive or struggle?
I suppose the most difficult thing to trade for any trader is a regime change. The inflation-induced transition from QE to QT changed correlations most had become accustomed to (e.g. bonds no longer hedging equity risk), and put us in an environment that’s not occurred in 50 years. It’s very difficult to overcome your recency bias, especially if you’ve not even lived through similar periods.
I think that’s what the saying “follow your rules, but know when to break them” refers to. Know what to do in any given regime, and know which one you’re in.
I like fast-paced price action (such as in crypto) that helps you learn more regimes in a shorter period of time.
What's the most important quality in a trader and why?
Do your research and follow your rules, but know when to break them. We’re currently in a regime we’ve not seen in 50 years. Indicators that worked for the last 20 years no longer work due to QT.
Why do you think you have success trading?
Iteration & perseverance. Present your views to fellow traders and let them poke holes in them to find out where you might be wrong or uncertain, then go back to the drawing board (Feynman principle). Do it often enough, and you’ll see progress.
Present your views to fellow traders and let them poke holes in them to find out where you might be wrong or uncertain
What's something you've learned in the last 6 months that has made you a better trader?
Don’t overtrade the bear market - just step away.
What does making it look like to you?
Having enough to be able to give back and foster growth.
If you could give someone starting trading tomorrow one piece of advice what would it be and why?
Given how we’re now in stagflation, manage your risk, and take profits on the way up. Chances are, we end the decade with an overall 0% return like in the ‘70s. Make sure you have enough to live in case you lose your source of income.
Fill in the blanks
Most traders would be better off stepping away when the market’s trending down. They’ll either get liquidated or chopped up.
What separates the pros from the rest is keeping your profits on the way down. Everyone is a genius in a bull market.
A good trader should never categorically dismiss a scenario. “If you worry, you don’t have to worry. And if you don’t worry, you need to worry.” ~Dalio
The biggest misconception about trading is underestimating how one bad trade can wipe you out.