Brazil Value Talks: Patrick Pasek (TC - Transparent Account)
Multiplied Invested Capital by 2x in 2 Years
Today I have the pleasure of interviewing Brazilian investor Patrick Pasek.
From April 2023 to August 2024 his historic performance will be the envy of anyone.
His portfolio returned more than 132.83% in the period, versus 21.66% for Ibovespa.
He multiplied the invested capital by 2x!
This guy knows how to generate real value.
Shall we meet him?
BS: Patrick, could you tell us a little about yourself?
PP: Well, my name is Patrick, Patrick Pasek. I'm 28 years old, I have a law degree, yes, a law degree, because I never took the OAB exam, lol.
This was actually the subject of a lot of arguments at home. I was raised in a family where it was impossible not to have a degree, not to be educated. Thank God, I had the opportunity to study at a great college. I followed the path of my mother, who is a lawyer and had a law firm. I believed that was what I wanted for my life.
And, in fact, it was.
However, when I got into the day-to-day routine of the profession, I realized that I didn't fit into the monotony of the routine. Basically, a lawyer spends his time copying and pasting documents. I always considered myself too dynamic, curious and active for that. I loved Law, the content itself, and I loved participating in meetings with clients and discussing cases. But, there came a time when I didn't see myself doing that for the rest of my life.
I already had some interest in the financial market. I had already bought some shares. I joke that I considered myself a "fundamentalist", because the first share I bought was from Azul. I decided this because, when I flew with Azul, I thought it was better than flying with Gol. So, in my head, the company was better, and that's why I should invest in it. Of course, over time, I learned that there are other factors to consider, such as cash generation, profit, EBITDA, among others.
Patrick is like that: an extremely curious and, at the same time, undisciplined young man, who is learning day by day, in this marathon that is the financial market, to be more disciplined. I usually say that discipline is not a characteristic present in an individual, I see discipline as a momentary state.
No one is disciplined, the person IS disciplined in a certain area.
BS: What is your strategy for making money on the stock market?
PP: Well, my strategy for making money on the stock market, oddly enough, is to simplify things.
What is a trader? Trader is a foreign word, an imported word that is not in our dictionary and means merchant, someone who negotiates.
And what we do in the financial market is exactly that: negotiate. We buy an asset with the intention of selling it at a higher price. No one wants to buy at 100 and sell at 50, even though that happens sometimes.
The most important characteristic of any trader, whether a used car salesman or a drugstore salesman, is to buy cheap to sell expensive. That is the basis of my strategy. Approximately 90% of the time, I use technical analysis, charts and price action, and in 10% of the cases, I use flow and volume to make decisions on the index, the dollar, and on 5 and 15 minute charts.
In the past, I used to use a lot of indicators in my charts, but I realized that this led to overtrading. Over time, I simplified things, removing the indicators, and today I operate with a clean chart. I use candlestick charts in 2, 5, 15 and 60 minutes, without indicators. My approach is based on classic technical analysis, price action, and I also use Wyckoff and the controversial Smart Money.
Basically, I focus on the most important thing: the price, and I operate using support and resistance in a simple and effective way.
BS: So you only do day trading?
PP: In the financial market, it's hard to say that we only do one thing, but I can say with certainty that most of my operations are day trading. In fact, I think it's interesting to address this point, because it seems that there is a certain social taboo regarding day trading today. I take this naturally, because, for me, the only difference between day trading and swing trading is that positions are opened and closed on the same day.
About "sleeping without a break", I usually say that one of the best changes I've had in my life was precisely getting a good night's sleep again, lol.
When we trade more intraday, without carrying positions, we have a better night's sleep. I joke that I was selling the S&P for a while, which lasted two weeks, and the reason I closed the position was precisely because I was having insomnia. Jokes aside, sleeping without a break brings me a lot of peace.
BS: Why do you like Wyckoff and why is Smart Money controversial?
PP: Excellent question! I've always wanted to talk about this in a serious way. Well, Wyckoff (who some may not know) deals with a peculiar way in which the market moves. Do you know that famous chart that shows capitulation, extreme fear, euphoria? Wyckoff basically represents these feelings in the form of candles, both in one-minute and weekly movements. He suggests that these emotions are present all the time in the market, and that "smart money" migrates from the hands of the impatient to the hands of the patient. It's the famous idea of "don't buy at the top, don't sell at the bottom".
My suggestion for further reading for those who study Wyckoff is the book Antifragile, by Nassim Taleb, which, although it does not directly address the financial market, provides valuable insights.
What I like most about Wyckoff is his vision of the market that includes a more emotional and psychological analysis, involving fear and euphoria. Even though algorithms dominate most of the operations, those who create and control these algorithms are people. So, in the end, it is people trading against people, and the emotional and psychological side cannot be ignored.
Now, about Smart Money: it is a concept derived from Wyckoff, but a well-known trader on the internet, called ICT, developed the Smart Money Concept (SMC). It is abstract in the sense that it is not as standardized as common setups, such as "moving average of 9 crossed the 21, buy". In the SMC, it is necessary to understand the entire context to operate in this way.
What makes it controversial, especially among technical analysis traders, is that they claim that Smart Money is nothing more than support, resistance and price action. And, honestly, they are not entirely wrong. We use concepts such as polarity reversal and structure breakout, and yes, these are part of the SMC.
(they say it's what's always existed with a cute name, lol. I find this crap funny)
I went to the Smart Money side for two main reasons: first, because I believe its teaching method is simpler for beginners. And second, because SMC seeks large asymmetries, which allows my operations to have a short stop with the possibility of a much longer target, unlike strategies like a bullish pivot, which require more expensive stops.
BS: What is your process for finding a new buy opportunity? What filters do you use?
PP: Well, to add to that, how do I find a buying opportunity?
The chart shows us the price behavior over a given period. I like to make analogies: if the dollar is at R$5.60 today, what has changed since the last time it was at that value, for example, six months ago? If the scenario hasn't changed much, it might make sense to sell, since the risk is small and the payoff is large.
My strategy is to always look for trades where I can lose little and win a lot, maintaining a risk-return of 3 to 1. If the trade doesn't offer that, I don't even enter.
In short, I look at the past, do a quick analysis of the current scenario and enter trades where risk management makes sense, always looking for a positive payoff.
BS: Why don't you trade specific stocks using your strategy, but only the index?
PP: Excellent question, right? I once heard a trader comment on a podcast that anyone who trades mini-indexes in Brazil can trade anything in the entire world, and he's right.
We do see much more technical movements in highly liquid stocks, such as Petrobras or Itaú, than in a mini-index. It's not because of liquidity, but because the mini-index has a more "evil" character than the stocks themselves.
I am, indeed, very interested in diversifying, but since I'm working on the Transparent Account project now, the account needs to grow. In other words, the net worth (PL) needs to increase. My intention is to start swing trading stocks, not day trading.
BS: What is the TC Transparent Account?
PP: Well, some people say that the Transparent Account is my son or daughter, but it's not really. It's the child of all TC users. The Transparent Account came about because of a pain I had, which I also identified in younger subscribers, whether due to age or time in the market.
There was a huge curiosity in understanding how a mentor or favorite trader operates, positions orders and controls risk. However, I understand that this can generate anxiety, such as the desire to operate large amounts in the mini-index, which also affected me in the beginning.
I decided to be as transparent as possible. I conducted a survey within TC so that users themselves could choose the initial amount, which was R$18 thousand. This amount was deposited in the brokerage firm, and I began to operate in an extremely leveraged but controlled manner. If something went wrong, it would not affect my standard of living. And the result was positive: we started with R$18,000 and reached R$44,000 or R$45,000, with a profitability of over 130% since June of last year.
But I always make it very clear that as we have more capital, the risk per operation should be inversely proportional.
The Transparent Account aims to show the real pains and challenges. Even on difficult days, I show how to maintain control and believe in the payoff, keeping the account healthy. Over time, the account gained recognition within TC, both by subscribers and directors, which allowed more people to join the project.
I don't like to call it a course, because we address issues beyond the operational, such as personal problems that affect the trader. Sometimes, the problem is not in the strategy, but in life outside the market, such as family issues. Even when I'm not in a good frame of mind, I announce that I won't operate, being transparent and showing that I'm human.
The project is transforming many lives and I invite anyone who wants to learn more. I believe we are doing something really positive.
BS: I've heard that what kills a day trader is often that one day of rage. How do you defuse that bomb?
PP: Yeah, I don't know who told you that, but it's the purest truth, lol. Well, for a long time I've been saying that people always say, "you can't have a day of rage." Okay, and how do you avoid it?
Several strategies, but I'll highlight a few. First, in large funds, we see that there is a sector dedicated to risk management. Unfortunately, individual traders can't hire a risk controller, so using tools like automatic locks, which many criticize, is very important.
So a lot of people are all over it, saying that turning on locks in Profit, at the brokerage is a sardine thing. If it is, I'll beat my chest and say that I really am a sardine, lol. I think that any technology that we have in our favor to prevent us from doing stupid things has to be used, and I use it without any shame.
It’s also important to understand what triggers these bad days. Often, it’s behavioral. A personal example: whenever I start looking at buying a new monitor, I know I’m about to have a bad day, usually after a winning streak. This behavior is common because when we win, we tend to want to reward ourselves. However, it’s vital to recognize these triggers and remember that most bad days don’t come from the market, but from external factors, such as personal issues.
BS: Do you only trade long or do you also trade short and long & short? Could you give more details about the operations you set up and what leverage you usually use?
PP: I have no prejudice against long or short operations. I trade both and sometimes I even do one by financing the other, although this is not common. What I avoid is going short directly on stocks. Whenever I want to trade short, I prefer to use options, buying puts dry.
My risk management in the Transparent Account involves risking 1% of the value per operation. Although this is a considerable amount, it brings controlled leverage, applied only to the fraction of my equity that I am willing to risk in the Transparent Account project.
In other words, it is that leverage on a fraction of my equity, which is very important, that I was willing, that I was interested in putting at risk. So, I think it is very interesting to take 1% risk to pursue 3%. And then they will say to me, oh, Patrick, of your entire PL, of course not. It is that small fraction that I decided to put at risk. That small fraction that I decided to start the Transparent Account project.
BS: How can I manage my risk effectively to be able to day trade indexes and dollars?
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