In this interview, Tim Justice, the host of the Trading Justice Podcast, interviews a trader from our community, Karl Hoffman, with 5 fast questions about how why he became a trader, how he’s developed his trading edge and what his trading goals are.
1️⃣Why did you get into trading?
2️⃣What is your trading edge?
3️⃣What is your daily routine?
4️⃣What are your trading goals for the future?
5️⃣What advice would you give a new trader?
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Tim: number one Karl Hoffman is a student of ours from Northern California originally you grew up in South Africa right
Karl: yep absolutely
Tim:yeah and you moved to the states in Northern California and you actually have been learning to trade for a couple years now I think
Karl: it’s about two years yeah I started starting this journey of legacy about two years ago but a little known secret is actually started looking at this in South Africa and has found the whole thing too difficult because the painter rates and all of those type of elements that that’s point in time so I gave up about 19 20 years
Tim: old so here’s my five questions for you Karl number one why did you get into trading
Karl:I’ve always had a great interest in it I’ve always wanted to understand the financial markets and I always have believed that everybody needs to manage their own money and I wanted to learn how to do that and reduce eliminate the risk and have myself to find exactly where I’m gonna go and manage my own destiny at the end day and I think trading is way to do that
Tim: you know I’ve got a little trick I do here it’s called five questions but there’s always the follow-up questions which I don’t count so you say you always had an interest in it when do you first remember hearing about the stock market were you a young man I mean what does that mean what does it mean
Karl: I can go probably back to another very young kid actually around six or seven years old it’s something my grandfather always did and he managed his own financial destiny and retired a very very wealthy man at the time and he was always investing in companies stocks in South Africa at the time and as Janice big stock exchange and and doing really well out of it
Tim:better position for a legacy they haven’t changed in thousands of years they’re not changing today you know education and and mindset but also learning how to buy and invest in the right kind of product that’s really cool grandpa Tachi my you know where I grew up nobody really bought and sold stocks right I grew up in coal country so I didn’t really think about the stock market much as a kid I started thinking about it more when I got into college and started you know seeing differently did stuff but it was very cool very cool what is your trading edge
Karl: I think it’s my ability to learn and self introspect and consistently adapt to new ways of thinking and constantly challenge myself about doing the right thing or the wrong thing and so for example I’m a great believer in making mistakes but learn from that mistake adjust from it and then always come back and because things are going to happen you are going to lose and I don’t believe also I can know everything about the market it’s impossible to know everything else out this you almost have to place trust and your knowledge at the end of the day and know that for example one of the topics today around back testing is extremely important because it gets a confidence in the system and once you have it I think then you then you can actually trade properly and get there
Tim: I agree with everything you just said and probably not just in trading but in life if you have the ability to think critically and evolve as new information and new data is presented to you you’re gonna find success in a lot of different areas I think those are important things in in your job in your career in this world we live in I love that answer you know it’s a complex answer by the way because critical thinking is not something that’s trained all that often and being able to be data-driven so that you can get to the point where you’re making those decisions it’s one of the reasons why that back-testing conversation you and I had is so important and too many traders don’t back test Karl I don’t know if it’s just not trained or or taught or maybe it’s just complex I’m not sure why why do you think that is
Karl: okay I can tell you why I personally didn’t do it and I don’t know if it’s true for other people I’m naturally quite an impatient person I just want to get out there and do stuff okay so for example some real examples not with trading so I was thinking the other day and about 10 50 years ago how can I improve my snowboarding and so what I did is I broke it really broke it down to its basic elements which you can’t break down any further because I have a couple of beliefs number one is life is fractal it’s a life builds on top of each other and then what are used to do is get really frustrated with myself and just going to go and do stuff so for example if you take a book okay and you see our concepts in there and I’ll get back you see a concept you want to go ahead and read about that concept instead of just leaving it and then go and learn about it later so with snowboarding I broke everything to answer its basic principles and then started rebuilding it back up again so I had the basic pattern is in place and once add the basic patterns in place it gave me permission to get to the next level again and the next level again and I consistently do that in my trading so for example I’ve been trading for two years my success in risk has been variable this year has been a bit better but what I do now is I break everything down and I think people try and shortcut that system and you can’t shortcuts thinking critical thinking and if you if you believe life is fractal shortcutting and going to the big macro picture before you’ve got the basic foundations and places is flawed so I think why people don’t back tests and why don’t why didn’t back test properly as well is because I tried to think I’m cleverer than the system and shortcut the system and that’s and I’ll try to do sports and it never works it’s never worked for me
Tim: that’s right well first of all I think it’s it’s really a smart answer it’s the right answer you have to actually learn this stuff there are no shortcuts right I mean for true comprehension and true confidence you have to know why your system is working the way it is I’ll give you a even the simplest example from our conversation today why you buy why you sell and where you set a stop loss and target on just a basic stock trade I find that really advanced traders who’ve gone through six or eight classes maybe and they’ve studied for years they could not answer that with data right and I think it’s because we always want to get to that next thing faster quicker so that we can get the payout right and it’s natural human thing but you get to a point in your evolution as a trader where you’re like okay I’ve got to perfect the little things fundamentals fundamentals matter there’s no doubt about it I love the answer what is your daily routine
Karl: my daily routine okay so during the during the week I’m doing a couple of things right now so let me just take a step back why I do this I love exercise I love having fun I love the intellectual stimulation of manage to the market and I’ve got a big advice prison tour so the big software companies so I’ve got to balance all these things out and I’m currently training for an Ironman Half Ironman again so typically I’m out of bed at 5 in the morning I hit the gym for probably an hour and a half then gets listen to a book or Bloomberg on the way to work so that’s productive get to work at around 7:30 then either a balance that arts have calls with Europe in the morning or if I don’t have calls then it’s all about let’s have a look at what’s going a stock market read The Wall Street Journal maybe pick up a book like trade your way to financial freedom and study that in the morning before work starts or I also have to do a lot of study for work so try and do some that in the morning nine o’clock it starts and then normally I can’t be engaged with the market said sometimes I can and then when I can I am I’m just gonna have a look and see what’s going on I also read the investor’s business daily by the way every single morning and the one thing I did forget is I look at the entire stock market every morning look at the futures just to see what’s happening should I be doing any hedges then I let that go during the day and then just at lunchtime I have a quick look at the markets to see if there’s any adjustments or changes I need to do if I do have the time and continue working until 6:00 6:30 in the evening and then I spend about 45 minutes on the stock market afterwards as well so I really look at all the commodities what’s happening with my positions just stops and actually produced myself a full stock market report every day what’s going the news economic indicators what’s happening with things like oil the psychological that you guys predict and then get home in about 7:30 have dinner into in bed by 9:00 and rinse and repeat and then typically on the weekends on Saturday and Sunday I spend two hours in the mornings to to three hours and the stock markets and then I spent anything up to four and a half hours training every day and then in the afternoons to read the newspapers or when the Sun comes up summers back I’m out kitesurfing probably every single afternoon on the weekends as well
Tim:You’re a rockstar saying I wasn’t saying well first of all I hope you do at least every once in a while take a day off right
Karl: eh not really
Tim: yeah yeah you don’t seem like the type I’ll tell you I love the daily routine and reminded me when you were talking about it Ben Franklin had a very similar routine you know even back in the 1700s in fact is famously out there all over the internet you should look it up Ben Franklin’s daily routine and he has times up day where he works where he analyzes his investments where he reads where he exercises where he has social interaction listens to music reads books all that kind of stuff and he broke it down hour by hour by hour throughout the entire day I I’m a structured guy that way I’m a morning person as well so I think you and I share that I prefer to get up with the market and study it in the morning and get ready for my day because the cash open in the u.s. is is a critical point to have your your stuff running but I do love what you said by nine o’clock you shut it off and you focus on your job because you’re still working you know it’s not like this is your full-time thing in the stock market so you have to have it built into where it fits into your life not the other way around very awesome awesome routine number four what are your trading goals
Karl: so number one is it’s really to pick up the skills that I need to be the successful in the market and we’re not going to talk about being successful in the market the the metric that I would use is can I supplement my monthly cash flow and an add-on to that right now look I love my work I love my jobs I think it’s go rebalance between the two of them and up until the point when the investing income supplements my income to a reasonable level and then consider retirement I think the main thing about really trading for me is not so much to replace a job because I do love what I do and doing technology it’s they’re ready to start building a legacy for me and and giving more the freedom because as I love doing sports I love being out there and hopefully one day I can give me the freedom to do more of that and then maybe scale back on the job a bit and they’re going to enjoy life a bit more and go mountain bike I’d surf and do more half Iron Man’s and all that type of stuff and then leave a legacy and we’ve always had this vision my wife and I of and taking kids and coaching them in the real aspects of life so not only financial but how do you present how do you coach people to to get into the right place in life how do they they do the basics correct because I don’t believe those things are actually taught anywhere in schools or I wasn’t ever taught them and I still don’t see them being taught so take kids from underprivileged community pay for them let’s say a week you go take them to weiu or something like that and then go and coach them for a week and then put them back into the system and hopefully they’ve learned something from you and you incorporated there’s some cool sports so maybe go kite surfing because I think activities like card surfing mountain biking extremely complex and really test the mind at the same time and form a different dimension I’m thinking than just the financial or the trading aspect so you want to build that sort of legacy behind us as well
Tim: I mean that’s a beautiful answer I mean you know everybody has their vision and I would challenge and encourage everybody out there to identify how you can give back I mean to community to society whatever it might be and we’re not even it’s not even just about money I mean you don’t always it’s the energy it’s the time it’s the knowledge it’s the other things that are just as valuable as the cash that you know and whatever it might be I love your answer I think that’s really inspiring last one what advice would you give a brand new Trader
Karl:keep it simple and forget all this them indicators that are out there
Tim: hey I’ll tell ya you know that’s a great advice don’t use a tool if you don’t know what it’s for you know I can’t count the number of times I’ve had a conversation with a trader where they’ve got like 12 indicators on the chart they’ve got obv and you know RSI and MACD and stochastic and all this other stuff in there oh and it looks great but I ask them well why would you know do you have it and they may not be able to answer or where are you gonna buy and they can’t answer that simple thing you know the simplicity of a rule should you should understand it right you know I love that answer keep it simple are there areas where you could have kept it simpler that you did not is that with the indicators or anything else
Karl: number one is I didn’t really understand any of the indicators I didn’t understand the mathematics behind them you know I think if I if there are three things that I would suggest the trader does is just shut down the lab at the laptop shut down the computer forget about all of that again and if I had to go back I would study the study probably about two or three books I think the number one I would do and I’d read them about two or three times each before I even got started to understand the concept so the one is this book here and trade your way to financial freedom I would say yeah the second one I would say because I can give you some amazing insight into how did you analysis the multiple timeframes as that book okay
Tim: you know Tyler recommended that book I don’t coach Tyler I’ve never read it
Karl:yeah it’s actually it’s a fantastic book because it gets you into multiple time frame analysis and and the way to think the other book I would suggest is it’s a bit of a fun read as well and you’ll start learning a lot I felt this is what probably changed a lot of the way I thought was the way of the turtle and the reason the reason I like it is because he talks a lot about the things that are real and and brings some of the concepts in with he traded or not is another story and then Noah’s favorite as well you got that book there as well as see yeah you got that one
Tim: you not well I do have a copy of that not in this office though not on this bookshelf but I do have a copy to that one of my favorite things about that Japanese candlestick analysis yeah the history teaches in there and just it’s it’s a really cool read this one all of them are great I have not read the technical analysis when I will what I love about curves face book as well and and by the way I think there’s another bit of advice we’re giving brand new traders and that study a lot you know check train your brain read a lot do a lot of you know webinars or whatever it might be to where you’re around other traders and you’re actually having conversations about the data or how to approach it Curtis faith the way he approaches testing in the way he approaches even just creating a system there’s some really really great takeaways in this book so I love that one as well these are all strong recommendation
Karl: yeah I would say that’s that’s that’s where I started questioning a lot of my my systems was when I read this book is what other what are the back testing principles and I never understood what a Monte Carlo simulation is and why it’s relevant okay and and really how he backed it’s all the various different SMA these systems the expectancies and and that’s really and then about two pages of rules the two or three pages of rules in for what the turtle traders do one thing that sticks with me as well as why do most people fail at trading is because they don’t stick to the rules that they’ve defined
Tim: yes right you know it well in the father of the turtle traders he he even once said you know Richard Dennis I could print my rules in the newspaper it’s not like they’re not magic it’s just most people wouldn’t follow up the emotions get involved or whatever it is and and I think the one of the reasons why people don’t follow other people’s rules is because they didn’t develop them or design them through data it goes back to our conversation we’re having an earlier Karl which prompted this interview you know if you’ll back test enough to where you have enough information to clarify why you do what you do in a trading strategy then you’ll confidently be able to take those decisions in the real market in the real time when the money’s going up and down because you know okay I know what a drawdown looks like in my business I know what the expectancy is I know what my overall you know win-loss ratio should be and your emotions don’t get pulled in as much I love this my friend a great job Karl and you know what will happen here is people are now gonna want to ask you questions and I know that you’re in the clubhouse I Actually recently made you a moderator and you’re trying to do some pretty good things helping other people out there I appreciate you giving back in that way Karl
Karl: no no you’re welcome let’s get the Bay Area community set up but the last thing I would say is my biggest learning and was I mean I read books on canceling trading I’m covered call trading on Bollinger Bands and nobody take tells you how to position size that they don’t spell you how much to put in do they sit on that yeah and biggest problem with canceling and they say well allocates so much cash to the strategy what is so much cash how much is so much cash I ask that question and you will be successful
Tim:portfolio design my friend I crowd great job we will be with another interview next week
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