Chat With Traders · Ian Cox and Tessa Dao

An Edge with Correlations Across Time Frames

September 21, 2023·1 hr 14 min·4 clips

A rare earth trade turned $7,000 into “40 something thousand dollars,” then he gave back all the profit.

1. Chat With Traders follows Dan McDermott of The Chart Guys and his approach to correlations across time frames in stocks, crypto, and other markets. 2. Dan McDermott is the guest trader, and Ian is the host who frames the discussion around market structure, risk, and technical analysis. 3. The episode asks how Dan uses weekly, daily, hourly, and five-minute charts together to decide when to enter, exit, or step aside. 4. Dan says he grew up in Andover, Massachusetts, studied business management at UNC Wilmington, and now lives in Western North Carolina. 5. He explains that his college major was broad and did not cover the stock market, so he had to learn market mechanics through self-directed study. 6. A $5,000 mutual-fund investment in college fell to about $3,000 during 2008, and that loss pushed him to look for ways to make money online. 7. He says he did not want a standard nine-to-five job, and he used the 2008 drawdown as motivation to study the markets directly. 8. His first stock was MJNA, a medical marijuana penny stock, which he chose after noticing changing cannabis laws and the 2010 California legalization vote. 9. He describes the early cannabis market as very small, with only a handful of penny stocks and little Google search visibility. 10. Message boards such as Investors Hub shaped his early process, and he learned the phrase “sell the news” from how penny stocks reacted to press releases. 11. Dan says he found a trader named Osprey on the boards and copied his RSI, Bollinger Bands, and volume-based chart reading. 12. He even mirrored Osprey’s writing style, including using multiple dots instead of a period, which shows how closely he studied another trader’s process. 13. A Chinese stock that delisted overnight cost him about 15% of his net worth, and he says that shock also showed him he could recover emotionally. 14. A rare earth mineral company then ran roughly 600% to 700%, turning $7,000 into more than $40,000 before he gave the profit back. 15. That trade taught him about dilution, convertible debt, and the danger of believing price action proves a thesis is right. 16. He says he moved away from penny stocks around 2013 or 2014 and began focusing on listed names such as Twitter and 3D printing stocks like DDD and SSYS. 17. Dan describes that period as a lesson in hype cycles, where he watched a 3D printing run and then a 95% plus pullback. 18. He says crypto in May 2017 changed both his capital base and his style, leading him to simplify charts, remove most moving averages, and use EMA 12 and EMA 26. 19. Listeners who trade momentum names, crypto, or technical setups will get direct chart-reading methods from Dan McDermott. 20. Listeners looking for a beginner trading story with sector bubbles and personal losses may find it less useful.

As heard by us

A clear look at how market memory turns into trading edge.

This episode follows a trader who thinks edge comes less from prediction than from spotting the same market behavior again and again, then putting hard risk controls around it.

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Press play for a trader's take on bubbles, risk, and how capital base changes the bets you can make.

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