#7) Deep Dive - Reviewing 420 Streams from Kristjan Kullamägi
Okay so I haven’t published a post in a little bit, but I think for good reason. For the past 3 weeks, I have been going through 420 streams from one of the most famous momentum traders, Kristjan Kullamägi (KK).
There are a lot of lessons I learned going through everything that this one person has said for over 4 years and 1000s of hours worth of streams. I could talk about the patience, mental fortitude, or self-control that is needed to be a trader. But really, the single greatest quote that he has said, that really resonated with me, and that all you need to know is this…
“You can steal ideas but you can’t borrow conviction.”
This after the 403rd stream, is the thing that got to me the most. For me, it sums up literally everything that he has talked about in those 4 years of streams.
The first part of that statement “You can steal ideas”. Well, what does this really mean? Well, he explains that he hasn’t come up with any of the things he uses, not a single thing. He has “stolen” every single trading concept he uses. Every concept that he used and implemented in his trading is taken from some book, resource, video, or trader… There is really, for the most part, no original concept he has created. Now, obviously, I am giving him less credit than he deserves (he did make over $100M in his mom’s basement) but it’s to drive home the point. In one of his streams, he even goes on to say that when he bought a new yacht, he was surprised they didn’t ask if he had made the money from things he invented himself or from borrowing other people’s ideas, no one asked him that. No one ever asked him what the risk to reward on his trades was, if he made the money shorting or going long, or what positions he had, no one ever asked those questions.
Now, the more important part of his statement. That you “can’t borrow conviction”. For anyone reading this, this one statement is probably the essence of what KK preaches. After listening to this bald-headed man for 1000s of hours talking about SETUPS, SETUPS, SETUPS, over and over again, this is what he was talking about. For anyone who doesn't know, KK preaches the concept of having a specific setup that one trades consistently over and over again. For example, momentum breakouts. And the only way to get better is by studying over and over again, the same setup, by creating a database of stocks that have had the same pattern, the same factors repeated, and studying how they move. That is it. Thousands of hours, over and over again, studying the same setup from past stocks, is how you become a successful trader. That is how you build conviction. Because you have to remember, trading yes is different than most jobs or skills, but one thing that is similar to any skill you want to get better at is that conviction, is acquired through repetition. It is gained in the gym, in practice, in studying, not on the day of, or in the championship game, or on the day of the test.
And for a while before the 403rd stream, I thought to myself, why not just see if other people had databases I can look at from a momentum breakout perspective and essentially review it? This isn’t the same. For me, conviction is seeing with my own eyes that this is possible, that you can make 100, 200, 300% annually. No one is going to do my homework for me in order to put that into my pea brain! And especially, no one in business school, trading communities, or finance tells you anything about this as well.
*Conviction in the more general sense relates to confidence in the trade/setup and when to push risk and when to reduce risk to maximize your returns.
I can give you an example relating to “conviction” that occurred to me. I had a revelation about Technical Analysis (TA) that after watching and reviewing his streams, something clicked. Normally, you see on social media or even just in trading-related courses or material, that these TA patterns, that drawing these dumb lines on a stock chart will make you rich. It’s not about seeing a pattern on a screen and then trying to trade it. For most people, myself included, there is no explanation or understanding behind the usefulness of it (I can go into the behavioral finance aspects of why it’s a thing as some people don’t even believe it’s real, but let’s not today).
Something clicked as I understood that for momentum breakouts specifically, there are very specific reasons why a consolidation pattern (flat top, flat bottom, and symmetrical triangles) is used when trading momentum breakouts. They are:
An incredibly favorable risk-to-reward ratio.
By finding a stock that moves very quickly and that consolidations within a very tight price range for a period of time, you are able to capture asymmetric risk, in your favor
A higher probability of a directional move
When a stock that likes to move up or down dramatically starts to sit in a very small range, the likelihood of it moving in a given direction increases
There are probably more I can add but I hope that the same thing clicks as it did for me!
I leave you with this video… This is Derrick Rose, for anyone who doesn’t watch basketball, he was the 2011’s NBA MVP of the League. This was one year before he won the MVP title. This to me is conviction.
References:
Annotated Stream - I used a website called FewMoreDays, where an incredibly generous guy by the name of @Nevonal on Twitter published annotated streams of KK. The site was incredibly helpful in creating my own notes and thoughts.