Today we welcome Pearl Li to the podcast.  Pearl is a trader and investor from the Seattle Washington area. Listen in as we talk to Pearl about her journey, her perspective and approach to the markets.  Before that, Mark, Noah, Pearl, and Tim analyze the recent market conditions during our Skyline.

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Video Transcription

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Tim

Guys, I’m gonna bring in Pearl here real quick. I invited Pearl, the podcast today and you know, we do a lot of interviews on this podcast I would say. And every now and then we bring in some big real, you know, name in the industry like we did last year with Steve earns or you know, with Jack Schwager and whatnot. But most of our interviews and most of our podcasts are just hanging with our community. We’ll bring in people who’ve been in the hall of fame like best Salamanca a couple of years ago or somebody that is one of our vendor relationships like Pete Thomas from over at Zaner who’s a gold expert and things like that. Or just hanging out with Gino and, and Noah and, and Pearl. You know, you are definitely a part of this community. You’ve been a part of it for a long time. I’ve known you for a long time. Uh, I know your background. Introduce yourself to the audience if they’ve never heard from you though.

Pearl 

Yeah. So, uh, I am a regular Friday feature blogger on tackle trading. I publish your first Friday of every month. And, um, I joined a tackle trading for about four years ago as a real beginner and have learned enough that I was able to leave my full-time career job at Amazon in 2018 and my very first blog that I published the was why I decided to leave my 200 K job. And that was, um, it’s been a life-changing experience for me and I’m so glad to be here to share that with everyone.

Tim

Yeah. You know, you’ve recently had a lot of changes in your life. I mean, yeah. You’ve been building a community there in Seattle for some of the locals where you guys meet in person. Uh, you’ve taken leadership roles in that community as well as others. Uh, you recently got married as well, right? Yes. Congrats kiddo. I mean, that’s pretty, pretty awesome. Uh, you married a military man, you’ve been dating for a while. I think when this whole coronavirus thing, you were planning on some big wedding, I believe, but you just went down to the courthouse, said, let’s get this out of the way.

Pearl

Yeah, we didn’t want to wait any longer with all of the unknown situations. And it was an excellent timing because you know, as we predicted, right, things got really unpredictable now. Um, so I’m glad that neither one of us wanted to wait that long. So we literally just went down to the courthouse and it was a very beautiful day. Um, we were both very happy to share that with our closest friends and family.

Mark

 What I’m hearing, Pearl is your day traded your wedding.

Pearl

 You know, I am still not a day trader. I packed is that in the current market condition with paper money. But you know, I’m still just, I’m very laid back. I find that I tend to over-manage, so I want to be able to build a system that will let me pack this, the psychology of a real basis thinking before I can kind of advance myself into proper day trading because I find most successful day traders I’ve met, uh, within tackled trading, not work and whatnot. I mean they have the most rule-based mindset and I felt like my progression, I wanted to really nail down a swing trading and position trading with that rule-based mindset before I move on to a faster timeframe. But I did a very, you know, in the current environment. I mean I, I day trade on paper money with the micro-mini. Uh, yes, yes.

Tim

so you’re building some of those skill sets in, uh, but you’ve built other systems over the years that you’re more comfortable with, right? Yes. You know, it’s amazing, Mark, they’re one of my favorite quotes of all time and all of trading, uh, comes from a doctor van [inaudible] who wrote a, you know what? It was that great book. He wrote trade your way to financial freedom. He said you don’t trade the market, you trade your beliefs about the markets. Pearl feels more in control actually in longer-term cashflow than she does in day trading. Am I accurate with that pearl?

Pearl

Yes. It deals with my psychology a lot better,

Tim

but a lot of traders feel more in control when they’re in cash. At the end of the day, control is a perception thing. It’s not a real thing is how you see risk and reward and being able to control the outcome of a trade and things like that for life. I feel like, and I know you pretty well, I mentored you, you know, at one point I’m one of many mentors that you’ve had that you and I had that direct teaching relationship when I was coaching you. And uh, I think that you love the idea of planning, whereas stop-loss should go your max loss, your reward to risk. In fact, I, you said something earlier before we started this podcast, you’re calculating max loss and reducing position size on everything you do right now. Is that right? 

Pearl

Yes.

Tim

 Yup. And just naturally coming down, but there’s something about this control thing. I mean, Mark, you’re at, when you’re day trading, you feel like you’re in control because you’re watching it, right? 

Mark

 No, I know. And knowing Pearl, I would be the worst mentor for Pearl ever. Like she would listen to me and she’d be like, no, that’s not who I am. No, that is not, I, no, absolutely not. No. Like, you know, Pearl and I would clash because we approach the market different. And that’s the beauty about the market, right? Is that there’s lots of different ways to approach it and succeed.

Pearl

It really comes down to, I think it really comes down to that. I, I’m in the West Coast, I can’t get up early at 6:30 AM I just can’t do it.

Mark

Another example of liberals being lazy,

Pearl

any that’s serious, I mean, I make the worst decisions when I’m not, I don’t, I don’t look at the market until it’s, you know, 10:00 AM my time. Right. So, uh, I’m a, I’m a closer, I’m becoming more and more disciplined as a closer 

Noah

coffee is for closers. What are we talking about? 

Tim

Oh, we just chatted it up with Pearl. Pearl. In your four years in trading, you’ve built your routine around maybe a little bit later in the morning, going through the whole thing. What are some of the big transitions you’ve had to make, you know, from one type of trader to the other?

Pearl

I think the biggest transition I had to make was adding more Delta into a theta of focus. So as you know, when you mentored me, I was all about theta for quite some time. And then I think I understood the importance of having Delta when the market is really moving. So these days, right? I have three different factors that are um, you know, crunching in my portfolio, I have feta, I have Delta and I have Vega. So I just find it to be very defensible in a way that all these three factors are working. So the biggest transition is, uh, from a singular point of view to a multi-pillar point of view. So I essentially don’t have much opinion from day to day basis and I just have multiple factors naturally built-in. So I’m not really in a hurry or I don’t need to feel like I am reacting to too many things.

Tim

And that system development is now been in the works for years. Right? I mean this is not for rent for a brand new trader. Like we like to say off the turnip truck. Uh, they hear like adding Delta to theta system there is probably sounds incredibly complex. It’s actually not as complex as it sounds if you just are newly introduced to the verbiage. Uh, but it took some time, Pearl for you to get to the point where you understood these concepts, right?

Pearl

Oh yeah. Oh yes. Um, I would say the, the Vegas evolvement also just from a characteristic as I, one from a single strategy trader to a, to a portfolio manager where I am really managing multiple strategies, right? So that’s the biggest shift over the years. And I, I see that being kind of pretty comfortable for me. Um, I like the multi-variant. I, I naturally go that way. I don’t like to spend too much time on the computer screen. So even when I practice day trading, um, I would only do day trading at the last hour of the day. So around 1130 or so would be a good setup because most, mostly at closing, right, we see another big rally or a big sell. And that’s where I feel very comfortable because throughout the day there has been support and resistance. That’s a building already. So I just need to calculate some of these things and leave it alone. And my, my screen time is only like an hour or two. And that’s it. 

Tim

Do you feel confident when you log into your accounts and you’re seeing a dynamic portfolio with a lot going on that you know how to take action the way you’re supposed to?

Pearl

Yes, mostly. I mean, even in this environment, right in February 25th, um, when I had to liquidate my account, uh, the most, the the the saying that I tell a lot of my group is that cash is also an active position, right? Don’t think about cash as being boring. Cash is great. It’s active.

Tim

How many new traders need to hear that? All of them. All of them. I, yeah. Yeah. I mean, so many beginners, they just want to raise that again. Say that again. I mean, repeat it. So important. It needs to be repeated again.

Pearl

Cash is an active position. Manage it. Like it’s active. Like you need to know when to take a small loss and liquidate everything when you don’t understand something and wait it out.

Tim

Yeah, I think, uh, I mean there’s so many little things that beginners and intermediate traders and veterans, we all learn all the time. Uh, but learning how to move into cash, learning how to move into smaller position sizes in the face of the unknown guys doesn’t mean you stop trading. You’re always active. I love the question Mark asked earlier about what are you doing right now? What are you actively doing right now? Cause we all have things we’re doing, but it doesn’t mean you have to be fully leveraged in trading every day, you know? Uh, and it doesn’t mean you have to stop trading at all and turn your accounts off and not look at them for two. That’ll be made and there are still patients to be exercised. Yeah, yeah, for sure. For sure. Now, Pearl, a couple of things I do want to talk to you about as well. Number one, you’ve been writing this Friday feature for a while, but you actually just started the first part of a three part series on thriving in bear markets. Uh, first of all, I think if you want to go read Pearl’s blog, by the way, it’s a free blog we put on tackle trading. Just go and find the blogs at tackle trading or find the tackle today blog at the top of the menu and you’ll find that Friday feature for what is this a little, a three-part series all about.

Pearl

It’s really about, I focused my entire blog on trading psychology, right? So I think we have a lot of content on tackle trading that art strategy specific before. For any strategy to work properly, you have to have the psychological mentality to even trade. So I love this three-part series that I just started, um, where I get to talk about the bear markets because so far we’ve had the longest bull market in history and we really haven’t had a chance to talk about the bear market psychology where we really have to be counter-intuitive, you know, in a way that when the market is fearful that you have to be excited, right? From a financial perspective, when the world is not in such good shape, you have to realistically have that mentality to want to be able to have a longer-term investment plan. So, and you have to constantly think about your psychological state of not becoming paranoid, like the rest of the population, not becoming stressed out like the rest of the population and manage your life, your psychological state, so that you’re ready to continue to manage your trading business. And I, I think the bear market is especially important because the tests are a psychological state the most, right? Everybody feels fine when they’re in a bullish market, but it’s the real testing period of a bearish move that makes your psychologically more fearful and you have to overcome that. So I love the Series that I started doing to kind of help people and guide them in terms of benchmarking their own psychological state against,

Tim

I think they need an ending. There’s the market closing. Uh, I think it’s a really important point though because guys, there’s going to be incredible opportunities. You have to be in a good peak mental, physical, and emotional place. Or else you’re not going to be able to take advantage of, you know, if you let the news and the gloom of the day drag you down and wear you down to a way to where you’re not looking at data properly, you might miss those opportunities. Uh, it now is the time to rely on our processes, you know, our daily routines and things like that because Pearl, there will be opportunities in front of us. I mean, you’ve been trading now for four years. They happen all the time, even after you’re forced sell-off, right?

Pearl

Oh yes, definitely. And I’m really excited because I think this is once in a lifetime where we might see some really, really good companies coming out of this entire crisis being on a, you know, on, on a really, really great place. Right? And I, I do see, uh, you know, in, in a longterm perspective, I’m also bullish like Mark because I do think, you know, our economy will withstand as longterm will come out of it, you know, and better, we’ll probably have lots of things we’ve learned through this crisis and be able to manage things a lot better and different sectors are going to thrive. Like they never thrived before. 

Tim

yeah, no, I’m with ya. Pearl. You’re an incredible addition to our community. Uh, I’m proud of what you’re doing over there and working with people and helping others. And now giving back in terms of blogging and sharing mindset, what is some advice you give to beginners? Let’s, let’s end with this question here and then we’re gonna, uh, you know, wrap up with a pint, a little game here in a bit with the crew. But, uh, what advice do you give brand new traders out there who are, who are new and maybe intimidated by the markets? You know, uh, you have a lot of friends from the tech industry who’d been interested in this, but they don’t know how to start, right? So what do you tell beginners out there?

Pearl

I would just, you know, I see this a lot with beginners is that there Jack of all trades and master of none. So when you start just learn one thing for racing a ball, you want to learn a bullish setup, just learn one set up and trade that only and learn one strategy at a time and be able to accelerate acute that regardless of market condition, be able to read one proper setup, do one strategy correctly, manage the risk correctly in any condition. Uh, that’s all you need to do. So I think a lot of beginners are, so, I mean, I was guilty of that myself because I was overenthusiastic as a learner, I probably learned so much, but I wasn’t able to execute them correctly. So now that I, I look back, right? I’m like, you know, I could have just done one thing correctly on a continuous basis and I would actually be better off in the long run. So I would just be like, Hey, so you don’t need to think about 10 things. You just need to think about how do you manage 10 different market conditions with one thing over a period of time. Uh, yeah, that was, that would be my biggest advice.

Mark

Oh, what I heard you say Pearl is the one thing you should do is learn how to build a longterm position on oil. Right.

Pearl

Well, that’s what I heard. One skillset right amongst us.

Tim

One Oh one oil building skillset. I hear you. Okay. I’m on the same page with ya. I’m with a lot of things day trading, volatility, trading, theta trading, portfolio managing or oil building. For sure. A lot of those things could apply there. Partly you’re awesome. Thanks for joining us for the interview.

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