Finding Your Trading Process: The Travis Woo Case Study
How Travis Woo navigated the trading challenges that you will face and found his sweet-spot.
Welcome back!!
My last podcast had Travis Woo in the hot seat!
Travis probably has one of the craziest trading journey’s I have heard to date.
He very quickly found himself trading large Bitcoin positions and faced with many of the key challenges in trading.
His story has a happy ending where he found a process that now works for him.
Learn from it.
It’s faster than living it out yourself.
Be Weary of Initial Success
Although initial success in trading can feel great at the time, it can often create additional challenges down the line.
Why?
Well, when you’re winning, risk management can become an afterthought and you see trading for all the positives, without the negatives.
This can make it seem easy and like you’ve “figured it out”, when in reality you now have one experience, i.e., a successful trade.
There are many other experiences / processes that then need to be mastered to become a seasoned trader.
Trading for Necessity
Travis had an interesting perspective I haven’t heard from other guests.
The idea of trading for necessity.
For example, we had massive QE during COVID which drove significant inflation, i.e., depreciation of the dollar, which was his original thesis for buying Bitcoin.
But it was less “sit around and figure out how to make millions”, and more “if I don’t do this, it will significantly impact my wealth”.
I think it’s a great perspective for wealth protection.
It means:
You need a basic understanding of the monetary system and currency / asset class valuation
You need to be aware of government and central bank actions that may impact both
You need to find ways to mitigate that risk via different asset classes
He noted that some of his best trades were out of necessity.
Avoid Prop Trading at Scale
Travis had some horror stories working with online prop firms.
He scaled to 7-figures in prop funding accrued tens of thousands of dollars in payouts and in many cases was refused those payouts.
Not only that, those same firms still exist today, they just rejected his request and carried on doing business.
They can be ok when payouts are small, but when they increase to material payouts, the risk of a firm not paying you significantly increases.
If you can, avoid.
Systematise Your Process
After experiencing psychological challenges in his own trading, Travis pivoted towards the world of trading systems and algorithms.
He worked with a young quant to build algorithmic trading systems based on his ideas and trend-following concepts.
He emphasized the importance of robust systems that work across multiple assets and timeframes which was learned through a failed deployment of his initial system.
Largely if you struggle with the act of trading, I think this is the right approach.
It’s similar to how Rob Carver approached trading.
He said he wasn’t good at it naturally and found it boring, so he built systems around it.
And actually, trading systems perform significantly better in the vast majority of cases than human traders.
Finding Trend Following
Some of my biggest learnings from Travis were around the world of trend-following
He transitioned to a long-term trend-following strategy inspired by the Turtle Traders.
Some of his system features include:
No take-profit targets.
Wider stop-losses (e.g., 3 - 4 ATR').
Entries based on new all-time highs or “dip buys” above the 200-day moving average.
Dip buys are where a daily candle falls below a calendar low (swing low of a calendar month) and closes back above that low.
Incremental pyramiding during trends.
Uses the 200SMA as his cut-off for longs, i.e., does not trade long when we’re below the 200SMA.
Although this may not agree with your trading approach, many of these were statistical findings in his backtest, so they may be worth a second look!
I have added the approach of “one open, one close” i.e., one entry, no profit target, and a plan for scaling, to my own trading.
Mind Your Psychology
Travis openly discussed the topic of trading addiction, which is rarely spoken about in the industry.
Jason Shapiro also touched on trading, like gambling, as a vice.
When Travis was trying to hedge his Bitcoin position with perpetual futures, he was constantly checking his positions, which began to negatively impact his life.
He advocates for creating an exciting personal life to reduce over-dependence on trading for stimulation.
You may not think this is for you, but be mindful of your emotional state around trading.
It can be as addictive and compulsive as gambling, even if it seems a little more sophisticated!
Philosophy and General Trading Advice
Like many traders, Travis pivoted away from day trading and towards long-term trend following.
Building and scaling into longer term trades, especially in assets like equities, swing the odds in your favour because they tend to drift upwards overtime.
This supports his philosophy on trading well that: trading should complement your life, rather than consume it.
Overall, long-term systematic trend following is where he has found his sweet spot to use trading to create a meaningful life.
You now need to find yours but his journey is a great case study to start with.
Good luck!
Hope you enjoyed this newsletter, see you next week!
(This newsletter is not investment advice, all views are my own.)