Episode 016: John Papa – Maximum Logarithmic Scale of Wealth

June 21, 2019 beyondthepdt

John Papa is a very well-known name in the trading community as a new trader who is beginning to find true success in his trading. While he did go through a bit of a losing streak during his first 6-7 months trading as many new traders do, he learned the power of tracking data on his trades to help him better his trading ability in the future. Being about 2 years into his journey, he has found a lot of recent success after having developed a number of strategies to help him diversify his trading overall.

In this episode, we talked to John Papa about how he got started, what he does to become more consistent, how he sizes, and the different style of trades that he plays. There is a lot to learn in this episode and we highly recommend checking out the whole episode if you have time!

How Did John Papa Begin Trading?

We have talked to many traders in the past few months who were introduced to the market by Tim Sykes, and John Papa was no exception. In the beginning, John thought that Sykes looked to be a bit sketchy in the sense that he was always promoting a lot of materialistic items. However, after some time, John realized there was likely validity to making money in the stock market and decided to give Sykes a try.

However, in the very beginning (for the first few months of his trading journey) he tried to simply follow alerts for trades and make money that way. Of course, as many of us know, that simply does not work out for any extended periods of time. It was right around this time that John began to realize that he was going to have to put some serious work in if he wanted to find success.

In doing so, he began watching a lot of videos that Sykes had available on his site and learned a lot from the videos by Tim Grittani. While he was beginning to learn a lot, he also was trading a lot of different setups for no apparent reason. It was not until he began to focus on tracking data that he would see changes in his trading.

How Tracking Data Helped John Papa to Become More Consistent

In this interview, John Papa tells us that the tracking of data allowed him to see what setups were working best for him. Because he was trying to trade so many different strategies and was not doing a whole lot of tracking when he first started, he had no way to see what was working for him and what was not.

With time, he began by tracking very simply data such as the time of the day that he entered, the prices of the entries and exits, and whether he was long or short. Eventually, he began tracking the setup that he was trading to see what worked for him. This allowed him to find the setups that were making him not only the most money but were delivering him with the highest win percentage.

How Does John Papa Trade Today?

In this episode, we talked a bit about some of the styles that John trades frequently. Overall, he has four main strategies that he looks to use; a long and short setup on OTC stocks, as well as a long and short setup for NASDAQ listed stocks. With that being said, we really focused on his long setup for listed stocks in this episode, of which he learned from Roland Wolf’s DVD.

The setup essentially involves finding recent reverse split stocks, as these are normally the ones that will look to release news and drive their price up. What John does with these recent reverse split stocks is simplistic in nature but takes a lot of work to find the perfect setups as well as great timing to ensure that there are good entries and exits.

While we did not go too much into the strategy in terms of the specifics in the episode, the idea is that John has a list of stocks that he is watching for after digging through some filings that have recently gone through reverse splits. When he has a good watchlist, he will then look to buy in the premarket if and when they release news. It allows him to get in with relatively minimal risk with very high returns. If you are interested in learning more about this strategy, click here.

 

Exclusive Beyond the PDT Merchandise 

John Papa’s Idea on Sizing

John has a very interesting take on sizing. While many of the traders that we have talked to in the past have essentially said that you should begin sizing up with experience, John Papa uses the Kelly Criterion for his sizing decisions. Unfortunately, that could be a whole blog article in itself for those who do not know what the Kelly Criterion is. That being said, if you want to learn more about the Kelly Criterion, click here to read up on it.

The reason that John uses this is because it allows his results to be very consistent. Think of it this way – if you have high conviction with one trade and use massive size but it does not work, you are going to take a massive loss. On the other hand, if you don’t have much conviction on another trade and take small size but end up with a massive percentage win, it is going to bring about skewed results. To this, John believes that the Kelly Criterion has helped him to remain consistent in his trading and uses it to this day to determine position size based on his account.

Closing Thoughts

This was a great episode regarding a different aspect of risk management and learning how John Papa looks to take his trades. This is one of the most interesting views on sizing that Matt and I have heard yet and it is absolutely something that may benefit some new traders.

On top of this, John gave us some great insight as to his trading strategies. If you want to learn about all of the strategies that were mentioned in this episode, be sure to check it out and give the whole thing a listen!