Inaugurating The Next Cycle: Understanding Your Future
The Champagne Flows But The Danger Grows.
At the AXIA trading desks.
Monday 20th January 2025.
London, England.
BANGBANG! Max Size.
13:30 – TRUMP TO LAY OUT TRADE VISION BUT WON'T IMPOSE NEW TARIFFS YET - WSJ.
You lift 250 Spoos and 250 Euro—Go!
They scream higher; you soar onside—
——P&L: 40–60–£100,000!
——
—Wait!—
—–P&L: Flat! Zero!
Oh God, why isn’t this going? It just flashed back in like three seconds! I’ve missed something here…
You cut some of your size in Spoo and Euro but still hold a big chunk. Article–story… what does it say?… nothing weird! These markets are really about to go…
You add back into your Spoo and Euro positions. Do more markets: CAD!
You lift two clips in 6C… man I think I just bought the high here; fuc—it’s not extending! Hold it. What else? Chinese markets—they’ve got miles to go.
You put big size into Yuan futures. It starts taking out the first move lows, and you sell more as it slices through.
What else? Spoos is accelerating, but this DAX is lagging. You lift two clips in the DAX too. Do EuroStoxx too!
What else? Spoos has started to accelerate, but this DAX is lagging. You lift two clips in the DAX too. Do EuroStoxx too!
You start to manage the positions. Be dynamic. You add and contract positions like an accordion; scalp around in all of them—but hold the core positions. 6C—this CAD—has gone through highs; but Peso hasn’t—buy Peso! You lift the Peso and scatter some offers up the price ladder, and you then do the same for the Yen.
You manage and manage for about an hour; in, in, in,—out, out out———
14:30 – TRUMP OFFICIAL CONFIRMS WSJ REPORT THAT HE'LL STOP SHORT OF IMPOSING DAY-ONE TARIFFS.
Not a Denial—but Confirmation! The markets bump their highs and lows and extend the moves. You let this last pulse and flow ping the remaining part of your limit orders. Done.
You glance at that little window that holds great power. First ever multi-six fig day; a personal best. Perhaps it’s even a close contender for execution—skills best.
You take the PB, but that’s all you do. It’s Trump’s Inauguration Day, and you have a long week ahead. There is no Triumph, just the usual 7 a.m.–9 p.m. shifts. Little would you know that in the next few days, you’d pull multiple near twenty-hour shifts… just waiting on Trump and the headlines dropping—as another trader reminded you—“the most beautiful word in the dictionary.”
Debrief
Such was the mind of our good-lookin’, dark-haired, deep-voiced, hard-workin’ English lad on Monday, 20th January. Readers have already encountered him trading the events on 19 November 2024 with the ATACMS missile strike. This young trader is iterating, emerging from his foundational smash ’n’ grab skills to dynamic market navigation. And this was the key to accessing January 20.
Why have you outperformed in this instance compared to your previous trades? Was it due to an increase in size or an enhancement of your skills?
“I outperformed due to my aggressive approach to the comment. I was prepared for this—upside, downside, tariffs-on, tariffs-off. I knew it was all the market cared about. I had a clear plan for the two markets I wanted to hit [S&P, Euro]. I needed to get as much size away, quickly, at the best prices. And I did—which gave me room. Before, I would either smash ’n’ grab it or just snatch the P&L. I flashed onside £100,000; before, I would have banked it and thought—great trade! But it all came back in seconds. Before, I wouldn’t want to fight or compete with the market with size, but this time, I was willing to stick around. I knew I had to sit in it. Because this is exactly what I discussed with [our precariously tall Englishman] the night before—about not puking the big ones. We both learned our lesson from [Fed] Waller’s dovish comments a few days ago. The market pulsed yet collapsed. Then it ground higher. Yet we puked most of the size on the collapse and only held a tiny size as the markets ground away later. We were kicking ourselves, and I had to make sure I wouldn’t repeat this.
I still had decent size on [S&P and Euro] when they traded higher, regardless of cutting some of the size when it came back. I did that because when it comes back like that, on a two-sentence headline, knowing there’s a full story or article behind it, you have to think: what have I missed? What’s in the story? Why has it reacted like this? So risk management has to kick in. But as soon as the S&P and Euro started to extend the move highs, I started to build big size across the board, like Yuan and CAD, then smaller clips in DAX, EuroStoxx, and Yen.
It was a combination of aggressive sizing and willingness to stick with the trade, where I normally wouldn’t have waited as much.”
Given this was a confirmation, not a denial, how did you trade this differently? Did you hit the WSJ headline and prepare for denial, perhaps by storyboarding and considering possibilities? Once you received confirmation, did you act differently or take profit?
“I was scared a Denial could come anytime—social media, newswires, TV—because this is a story based on ‘sources’ and not immediate confirmation. It made me scale some of the size quicker than I’d like. I was too fearful of the Denial response. But I hit the initial headline. After five minutes, I thought I had to prepare for denial or trim some positions and keep a core size to cut and reverse fast if a Denial comes. I was holding positions over eight markets. And—I’m quick, but not that quick! Can anyone reverse eight markets that fast?
I was storyboarding in my head—what could the Denial be? Where can it come from? My big mistake was not considering confirmation as a good trade. When it happened, it put a three-minute bid across the markets. It topped you out but gave you a decent move. I should have re-sized and used that as the final, big, flush-into-the-highs trade. Instead of adding, I used the flush as an exit. Such was the mistake.”
Was the approach different between the Jan 20 WSJ-tariff trade and Nov 19 ATACMS missile strike?
“The difference was in the management. The ATACMS trade [Nov 19] required you to ebb and flow with the market until it released. If you traded it, you remember that S&P was locked in a horrid chop for a long time. Nothing showed it wanted to go. Yet, on this WSJ-Tariff [20 Jan] trade, you knew it had to go. This allows you to wait, persevere, and hold the size. I knew I would just have to grin, bear it, and assign a specific risk. To say, ‘If this goes against me, and if this becomes a one-in-a-hundred-chance dinger—where this trade doesn’t work—so be it. I would take the loss. Either way, I would take this trade every time. Because it is cut and dry, you’d do this trade every day of the week if you could.
With the ATACMS [Nov 19] trade, you’re unsure how far the moves can go. Conversely, with the WSJ-tariff [Jan 20] trade, you have a rough idea of market history and pricing, indicating the overall potential.
Both performances came from the sizing. With the WSJ-Tariff [Jan 20] trade, I sized aggressively from the start and tried not to cut, but to hold the size. Whereas for ATACMS [Nov 19] I sized aggressively but had to cut a lot quickly, and later built a decent position across markets. By then, the markets released, allowing for the performance.”
Opportunity & Payouts
Let’s review January 20 firm-wide, as there was a stark difference in performances. A trader likely had a milestone day or close to it. Those that didn’t were virtually flat or at a small loss. Usually, traders would fall anywhere in between small-up to big-up! This anomalous difference must be investigated. And to the learner—a gift.
The main differentiator is navigating the spike. Alex Haywood explains it through “opportunity profiles” in trading these volatility injections: headlines, comments, data points, etc. These diagrams illustrate the market move shape and the P&L curve of a trader who executed these three moves almost ‘perfectly.’ Despite the contentious ‘P’ word, we shall borrow Haywood’s diagrams and explanations.
Consider the afternoon of 6 January, the Denial—chronicled in A Tale of Two Truths. The market reaction and execution put a trader straight ‘on-side.’ They were never challenged by going ‘off-side’, or to be in a negative open P&L position as the market was against them. And for a trader who goes all-in, holds, and exits all-out, they applied that skill at the perfect opportunity. The payout for the opportunity can be summarised in Diagram 1 (D1):
This looks similar to the aggressive Denial moves and the P&L of trading this directionally.
There are other market reactions characterised as ‘slow-burn’ moves that don’t place the trader under significant P&L pressure; rather, it’s just a sheer unnerving experience. You flash on-side and off-side many times. The market ought to be reacting! But it isn’t. Why? Am I right or wrong? Staying in this P&L purgatory is frustrating; time for second-guessing and emotions to surface. At worst, it can bleed P&L profusely as the trader enters and exits the market—I’m getting chopped up!—often making back what they lost. This can be summarised in Diagram 2 (D2):
The choppy nature of the ATACMS missile strike on 19 November is described. These situations demand more dynamism, sizing in and out of the markets, necessitating a framework to remain in the trade, leveraging up and increasing exposure at the right time. As Haywood mentions, these opportunities elude traders who lack the experience or aren’t positioned to take advantage of time. Or, to not be hurt by time exposure. Those who exit as fast as they enter mismatch the skills needed to trade market flows like D2, because the trade duration is longer than expected.
Now, we arrive at a close cousin of D2, a type featured many times in the past few months—the market spasm, a whipsaw. Diagram 3 (D3):
It’s the most insidious type because trading this—for who anticipate, and only trade D1 moves— it will feel as if they made each decision and reaction at the worst time.
This is due to a tactical dilemma. The whipsaw spike lies in the unknown future—and as our young trader demonstrated—it requires one to strike first and navigate thereafter. If it’s big—it should be going! Wait. Why is it coming back?
You can’t wait for the whipsaw to pass, as that will forgo the best prices, and the trader will end up with a weak hand; any pullback will force them out. Instead, grab the best prices, then hold the trade, to withstand the pressure of flashing off-side and avoid ‘puking’—liquidating all together, often at a small loss.
This remains true even when one observes their open positive P&L evaporate in seconds or slipping into a negative P&L for the day while holding significant size. One can see this on the risk screens, as Haywood says, pointing to the spike in D3: “That is where many traders paid down here. So many people hit this that when the markets flashed back. Kyriacou [AXIA’s risk manager] told me we were down, as a group, multi-six figures for a few moments.” You must endure the opening salvo, because as Haywood said, that was the last time many traders tried trading this headline—explaining the stark contrast in performance.
Further, D3 type moves require not price action confirmation, or flow confirmation; but another reason altogether to stay in the trade. Perversely, price action as a validator or invalidator of trades—which works so well for D1 moves and skills—is precisely what makes the trader exit at the worst moment during a whipsaw.
As our young trader said, navigating this is recognising the wider contextual opportunity and being willing to take a hit blindly. Almost to be stubbornly inactive, hunker down—hold!—and let rip violent action—to go from two markets to eight in moments when the whipsaw has cleared. Best prices allow this. It’s preferable to take the hit than to forgo the best prices. That’s how much a tactical advantage is valued. So speaks a pure market asymmetrist. That’s what happened to our young trader; the early prices gave him room to manoeuvre, allowing him time to scrutinise the Wall Street Journal (WSJ) article.
In an image, our young trader evolved from trading D1 opportunities to navigating D2 and D3. As the markets evolve to Trump 2.0, it will demand a wide skill set of trading D1-3 and more, whatever strange market manifestations occur. Our young trader demonstrates how to survive ‘the shakeout’ in an individual trade and career. The next shakeout is coming.
Shakeout: The Coming Cycle.
Inauguration Day generates discussion of next steps. But we won’t discuss transient trades—but something more important. We move upstream—why revel in future trades when an entire career minefield is around the corner? The following outlines consistent patterns in our strange landscape; observations exchanged between the author and Haywood.
The Immortal Cypriot observes that the nature of opportunity will change—dramatically and brutally. Trump’s effect on the market and the emerging ‘Tariff Theme’ will warp and evolve over time, regardless of duration. Current best practices—aggression—will become the worst. If there are no swift developments, the market will grind these opportunities into dust, taking many traders with it. It will dismiss what were damning headlines. Consider Russia-Ukraine, Covid-19, Trump 1.0 with China, post-Brexit EU deal-making; trading these in the same manner at the beginning and end was—and will be—a disaster. Yet, that’s what most traders—retail and professional alike—will do. The key skill is identifying the change in environment and changing what will become a reflex and habit that worked in—what will become apparent—an expired market environment. To shift instantly to the opposite reflexes and practices. Will you? Many traders will give back everything they’ve made and then some. In the end, it is what you keep, not what you make. So echoes the Immortal Cypriot. And man—can that guy keep! He kept his way to eight-figures and counting. Thus is one market cycle—a shakeout, a purge—summarised.
Wider afield: high volatility conceals, but low volatility reveals. The low-hanging fruit from increased opportunity and volatility will result in a P&L surplus not collateralised by skill. In a phrase, it will “make average traders great again,” says Haywood. However, the market is here to close spreads—and it will close that P&L–skill spread with extreme prejudice.
High volatility allows slack and laziness; it permits no structure or practices to build the ‘boring’ parts: routine, reflection, debriefing, etc. There’s no time for the boring when the champagne starts flowing. The next exodus from this thing of ours will be those trading in this high-opportunity period. Woe betide a trader unfortunate enough to start in a high-volatility, high-opportunity landscape, as in early 2020 and 2022. How many kept the March 2020 gains through the brutal summer of 2020? How many retained the gains of 2008 or those from 2011-13 into the low-volatile grind of 2014-2018?
AXIA’s core performers were lucky to start their careers in low-opportunity conditions. Give it your all for scraps, yes? New or returning traders must realise they were born into an aberration. The market will collapse volatility and expectations swiftly. This shakeout has occurred and will happen again for all; especially for those who feasted too well without paying for it.
Another cycle emerges: many give up just before new explosive opportunities. Unfortunately, this was also the scene among new graduates—fresh intakes of traders—from the AXIA ranks in Q3-Q4 2024. These traders endured the low-opportunity pains of early 2024 and 2023, built their foundations, hoisted their sails, then tore them down and quit before the wind came. Among them were those who showed great potential. Numerous veteran traders have noticed the same patterns, as if on cue—a signal. One trader recalled how many older traders at his first firm left during volatility heat death in 2015, weeks before the Bund collapsed rapidly, shattering his novice understanding of this strange landscape. And that was how he went from negative to big-up on account for the first time. He built the sails for the first two years. He is now an eight-figure trader.
Let’s take one last cycle and pattern. A trader is not made in this cycle but the next. Our young trader, whom you’ve read about, developed his skills, increased his size, experimented, iterated, and made mistakes in a market environment—cycle—that suited his ‘edge’. He allowed enough opportunity for scrappy experimentation for skill development; for R&D—as Haywood says. He did not let abundance excuse laziness, avoiding the opportunity to grow. But here comes a potential trap: the conducive market environment allowed for size growth. However, the environment will change just as they increased their size, firepower, and leverage to an all-time high. The same trades, now less potent—or loss-making—can blow a hole in their account faster than ever. That’s why the ability to consolidate is a marker of mastery. Will he—and others—survive the next low-opportunity purge? To keep most of it as others give it all back? Can he consolidate to survive the next market cleans house?
If he can, he can keep the firepower and leverage and hit the next opportunity cycle with his biggest size, alongside the razor-sharp street fighting tactics of surviving on low opportunity scraps. This hungry trader would become a dangerously effective practitioner, waiting to reap the next low-hanging fruit. He’s built the cannons and hoisted the sails—and when the wind comes, may he feast like a King; the world is yours.
Acknowledgements, Permissions & Disclaimer
Grateful acknowledgement to AXIA for granting access to their traders.
The photograph, provided by Axia Futures, is used with their permission, and they retain full ownership and copyright over the image.
Disclaimer: Do Not Do Stupid Financial Decisions. This Is Not A Game.