Elite Trader: Managing $25 Million at Just 25 Years Old - Ted Zhang

Elite Trader: Managing $25 Million at Just 25 Years Old - Ted Zhang

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Background & Asset Management

Ted Zhang manages $20-25 million personally and co-manages at River Asset Management, which oversees approximately $400 million in assets under management (AUM). The firm primarily focuses on:

• Downside protection and growth
• Managing mostly retirement accounts (Roth IRAs, 401ks)
• Restrictions on leverage and shorting; uses inverse ETFs instead of shorting individual stocks

Ted and his co-manager Connor began as interns, trading their own money before managing client capital. River Asset Management offers two main portfolios:

• Growction:

  • Represents ~90% of AUM
  • Aims to match S&P 500 returns with lower drawdowns and risk
  • Maximum position size: 8%

• Turboction:

  • Represents ~10% of AUM
  • More aggressive, aiming to beat the market
  • Position sizes up to 12.5%

Minimum investment per strategy is $100,000. The firm is closing Growction near $400M to launch a new mega-cap and ETF-focused portfolio.

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Trading Strategy & Methodology

Ted emphasizes growth-oriented momentum trading, influenced by William O’Neal’s CAN SLIM system but with modifications.

CAN SLIM Acronym

• C: Current earnings/revenue growth (targeting double to triple-digit growth)
• A: Annual earnings and Return on Equity
• N: New product, management, or unique business aspect
• S: Supply and demand (price and volume analysis)
• L: Leader stocks showing relative strength and base-building
• I: Institutional ownership (accumulation)
• M: Market direction (75% of stocks follow the general market)

Ted’s Adaptation: “Super Stock Criteria” or “Magic Elixir”

• High liquidity and Average Daily Range (ADR) for smoother price action
• Linear price movement (avoiding volatile roller coaster stocks)
• Hot theme or catalyst (fundamentals optional for some trades, e.g., crypto)

Trading Universe

• Sectors: Tech, healthcare, biotech, crypto, gold, silver
• Focus: Primarily growth names
• Crypto trades in late 2024 included Bitcoin, Ethereum, MicroStrategy (MSTR)
• Entry approach: Avoid trading during extreme price extensions or chasing late breakouts; prefer pullbacks or after bases form

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Risk Management & Position Sizing

Risk management is the most critical layer beyond technical analysis:

• Use position sizing and progressive exposure: increase exposure when the strategy works, pull back when it doesn’t
• Employ stop losses and trailing stops primarily at 21-day and 50-day moving averages
• Trim positions into strength at ATR (Average True Range) extensions:
  • 3-4 ATR above 21 EMA
  • 8-10 ATR above 50-day SMA
• Avoid revenge trading or increasing size after losses
• Drawdowns typically capped below 15% in Growction, significantly lower than S&P 500 drawdowns (30-50%)

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Market & Macro Views

• Market cycles are driven by human psychology and supply-demand laws, which remain constant over time
• Current market (as of Nov 2024) viewed as a bull market since early 2023 with signs of a healthy correction/pullback
• AI bubble narrative approached with caution:
  • Strong hype but fundamental ROI yet to be proven
  • Bubbles can last longer than expected
  • Fed easing reduces risk of bubble bursting due to rate hikes
• Uses moving averages (21, 50, 200-day) and market breadth indicators to assess market health and timing
• Prefers trend following over mean reversion or scalping
• Recognizes distinct phases for growing assets versus protecting capital, adjusting portfolios accordingly

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Portfolio Construction & Client Management

• Clients typically hold diversified allocations between Growction and Turboction based on age, risk tolerance, and goals
• Average holding period: weeks to a few months; rarely long-term capital gains
• Focus on intermediate-term swing trades with trend-following methodology
• Managing clients’ money involves managing their emotions and expectations, not just executing trades
• Daily team calls (morning and afternoon) cover market news, economic data, upgrades/downgrades, and trading ideas

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Historical & Educational Foundations

Ted emphasizes learning from classic trading and investing literature:

• How to Make Money in Stocks by William O’Neal (CAN SLIM)
• Reminiscences of a Stock Operator by Jesse Livermore
• Market Wizards by Jack Schwager
• Stan Weinstein’s Stage Analysis
• Books by Mark Minervini, Howard Marks, Charlie Munger, Warren Buffett

Learning is layered:

1. Technical analysis
2. Risk management
3. Market environment awareness

No shortcuts to mastery; requires 5-10 years of persistent learning, failure, and adaptation. Ted advocates building a personal brand and network (used social media DM outreach to land his asset management role) and forming or joining trading pods/communities for accountability and idea sharing.

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Technical Tools & Processes

• Technical indicators used:
  • 21 EMA, 50-day SMA, 200-day SMA for trend identification and exit signals
  • ATR for measuring price extensions and trimming positions
• AI tools like ChatGPT and Perplexity help quickly summarize company fundamentals, news, and catalysts
• Platforms: Market Surge and Trader Lion for sector and momentum scanning
• Applies Stan Weinstein’s Stage Analysis to identify price cycle stages:
  • Stage 1: Base/basing phase (sideways)
  • Stage 2: Uptrend (ideal to buy)
  • Stage 3: Top/topping phase (avoid trading)
  • Stage 4: Downtrend (short or avoid)
• Prefers simple, proven methods over chasing new or complex strategies

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Psychological & Lifestyle Insights

• Trading combines competition, strategy, and psychology, similar to sports and video games
• Daily routines include meditation (12-15 mins), journaling, gratitude practice, inspired by stoic philosophy
• Uses Atomic Habits by James Clear to build discipline and habit formation
• Emphasizes self-awareness and emotional management as critical to trading success
• Personal challenges (loss of father, health issues) impacted discipline but reinforced the importance of balance and mental health
• Faith and belief in a bigger purpose help manage ego and stress

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Performance & Drawdowns

• Early success trading SPACs with asymmetric risk/reward, but suffered a 50-60% drawdown, leading to a hiatus and re-evaluation
• Current portfolios aim for max drawdowns <15% vs. S&P 500 drawdowns of 30-50%
• Avoiding large drawdowns is key to long-term compounding
• Focus on consistent inputs and disciplined execution to enable reliable performance measurement and improvement

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Explicit Recommendations & Cautions

• Avoid chasing extended moves or late breakouts; wait for pullbacks and base formations
• Never increase position size during losing streaks or emotional distress
• Master one strategy rather than mixing multiple conflicting strategies
• Use trailing stops and trim into strength to protect profits
• Study history and timeless principles rather than chasing new trends blindly
• Build a trading community or pod for support and shared learning
• Trading mastery takes years; no shortcuts
• Use technology and AI tools to enhance research efficiency
• Manage client emotions actively when handling others’ money
• Stay adaptable but disciplined; recognize when your edge is in or out of favor
• Avoid mean reversion or bottom fishing during strong downtrends; trend following requires patience

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Mentioned Tickers, Assets, Sectors & Instruments

• SPACs: VTIQ (merged with Nikola), CCIV (Lucid), IPOA, IPOB, IPOC (Chimath’s alphabet SPACs)
• Stocks: Nvidia (NVDA), SMCI, MSTR (MicroStrategy), NUVB, GH, Palantir, BE, Olo, LEU, SMR, RGTI, InoQ, Grail
• Crypto: Bitcoin (BTC), Ethereum (ETH)
• ETFs: Inverse ETFs for shorting (due to restrictions on shorting individual stocks)
• Indices: S&P 500, NASDAQ
• Other sectors: Gold, Silver, Healthcare, Pharma, Biotech

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Methodology / Framework Highlights

• CAN SLIM (William O’Neal) for stock selection
• Stan Weinstein’s Stage Analysis for market cycle and timing
• Trend following using 21 EMA, 50 SMA, 200 SMA for entry/exit and trend confirmation
• Risk management layers:
  • Position sizing
  • Stop losses
  • Trailing stops (21 EMA, 50 SMA)
  • Exposure scaling based on market conditions
• Theme identification:
  • Top-down sector ETF analysis
  • Bottom-up stock and catalyst analysis
  • Use of AI tools for rapid fundamental and news analysis
  • Follow smart money and thought leaders for early theme signals
• Trading pod formation:
  • Identify your trading style and goals
  • Use social media and communities to find aligned traders
  • Share ideas and hold each other accountable

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Disclaimers & Disclosures

• Ted Zhang is not a financial advisor; insights are based on personal experience
• No guarantee that strategies will work 100% of the time
• Emphasis on risk management to avoid large losses
• Minimum investment thresholds apply for their managed portfolios
• Past performance does not guarantee future results
• Use of AI tools and social media is a personal choice; not financial advice

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Presenters & Sources

• Ted Zhang – Trader and co-portfolio manager at River Asset Management
• Russ – Host of Words of Wisdom podcast

Mentioned Influences/Mentors:

• William O’Neal (CAN SLIM author)
• Stanley Weinstein (Stage Analysis)
• Jack Schwager (Market Wizards)
• Mark Minervini
• Howard Marks, Charlie Munger, Warren Buffett
• Stanley Druckenmiller (hedge fund legend)
• Ray Dalio (meditation inspiration)
• Trader Lion (Richard, Ross Haber)
• Andrej Karpathy (AI expert referenced)

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This summary captures the finance-specific content, trading methodologies, key numbers, and practical advice shared by Ted Zhang in the video.