David Aferiat, CoFounder and Managing Partner at Trade Ideas LLC.
He helps FinTech product and marketing managers grow and retain their trading communities with content designed to make better market decisions.
Trade Ideas was founded in 2003 by a team of financial technology entrepreneurs who had already been leaders in the Self Directed Investment movement. Investors were looking to manage more of their own money instead of having other people do it for them for a fee.
Fueled in the 90’s by the overall technology boom of the Internet, online trading brokerages like E*Trade and TD Ameritrade allowed investors easy access to the market. Other types of brokerage firms sprung up to cater to the more active investor, sometimes known as the “Day Trader”. People looking at the market were desperate to find good stocks. The question is, how do you catch them, as they happen in real-time? The founders decided to call the new company Trade Ideas to distill it to the very basic essence of investing. Every investment first starts as an idea, and when it is placed, it becomes a trade. Hence the name Trade Ideas.
Connect with David on LinkedIn and follow him on Facebook.
What You’ll Learn In This Episode
- The problems they solve and what impact they have
- Active investors in the current market
This transcript is machine transcribed by Sonix
Intro: [00:00:04] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Atlanta Business Radio, brought to you by on Pay Atlanta’s News Standard in payroll. Now, here’s your host.
Lee Kantor: [00:00:25] Lee Kantor here another episode of Atlanta Business Radio, and this is going to be a good one. But before we get started, it’s important to recognize our sponsor on pay. Without them, we couldn’t be sharing these important stories today on the Atlanta Business Radio. We have David Aferiat and he is with Trade Ideas. Welcome, David.
David Aferiat: [00:00:44] Hi, Lee. Great to be with you. Thanks for having.
Lee Kantor: [00:00:46] Me. Well, I’m excited to learn a little bit more about trade ideas. Can you share a little bit about that mission purpose?
David Aferiat: [00:00:53] Yeah. Yeah. Our mission is for a 19 year old fintech company, constantly innovating. And our mission is pretty simple. It’s to help anyone that’s in the US equity markets make better decisions.
Lee Kantor: [00:01:06] And then how does one do that with your service?
David Aferiat: [00:01:09] Yeah. So, you know, a lot of active investors, a lot of traders deal with an onslaught of information and we try to organize, curate that information, turn it into powerful decision making guide rails for for, for better decisions. So what we do is we spot opportunity oftentimes where no one else is looking in places before anyone else that can that can direct them to. These are opportunities that are happening in the market. Sometimes they’re short term, sometimes they’re short term. They can be intraday, sometimes they’re long term. For us, it’s maybe swing trading types like two or three days to even a week in length. But either way, when you make a decision in the markets, it’s good to have the guardrails of like this is the stop loss where the whole idea fails, you should get out, preserve capital. And then there’s other price points where we have a first profit target where you might say, okay, if it reaches this level, this is where I can take my principal out and let the the profits ride or I can double down and increase. It helps we help with those kinds of decisions.
Lee Kantor: [00:02:11] And then who is the buyer of this? Is it a software? Is it a machine? What actually is it?
David Aferiat: [00:02:18] Yeah, it’s a it’s a SAS model. So it’s a subscription as a service. And anybody with any amount of experience, although the ones who tend to stay with us and find us are ones who are well on their journey of having understood the markets, they know how to place a trade and they’re just starting to understand their own preferences for what they like to see. And we accent that and then we start to show more information based on what you like to you and again in a really timely manner. What’s what’s the main the experience of using trade ideas is to give back time, time that is usually spent by traders. You know, the night before preparing for patterns, looking for patterns, marking charts and saying, okay, if it makes if this chart, if this stock reaches this price, I’m going to I’m going to buy it. But somehow during the markets, we all get distracted by the day. You might not be able to have your eyes everywhere they need to be. And trade ideas is like eyes on the market and it will find you setups that you don’t have to spend any more time looking for the night before or setting up for. We bring you these opportunities and they’re matched to, again, your preferences. You can design, you can actually it’s it’s a very robust tool. You can design your own strategies, you can rely on the ones that we have and that we test.
David Aferiat: [00:03:35] We even have a machine learning AI that actually runs through about 70 or so simulations and then it every night does this optimization exercise and then right before the market will publish, okay, these are the six or so seven algorithms that I’m going to use to look at the market today. And it’s the result of the previous day’s market, plus all the history that it’s crunching. And it’s no different than we’re in the baseball season, right? So in the playoffs and it’s no different than a a manager saying, who am I going to who’s healthy enough to be on the field, who’s on a hot streak, and what do they set up? Well, against the opposing pitching and so forth. They meet all that criteria. They go on the field and play. And so these six or seven algorithms are will produce ideas during the day, and some of them may not conform to the way our individual subscribers trade. So they take them or they leave them. But the idea is that here’s a co pilot who is understands tons of information about the market and is condensed it down into a view that it’s looking at to find opportunity. And you can ride that wave as well or you can look at even other strategies that we create from our data scientists and people that we have using the tool for for decades that designing these strategies.
Lee Kantor: [00:04:53] Is your ideal client, the individual active investor. Is it a firm that is managing other people’s money is a combination.
David Aferiat: [00:05:03] Yeah, it’s a it’s been a combination, but by and large part it’s the individual active trader. It’s someone who has a a brokerage account and actively trades, takes time out of the day to do so. We have dentists or lawyers and people who are actively engaged in the markets again for that time savings are looking for. I’ve got a few. To engage with the market. I want to know. I want to understand how the overall market is. And I want to understand what. What are some of the ideas that that I can take advantage of and do so in a way that protect me? It’s not just a lot of services will help you get into a trade. Not many will help you get out. And we do just that. So when you make a decision, you understand where the exit is and it enables a lot of people to to take advantage of the market in a new way without having to put money into a 401. K and let someone else manage it. I’m not saying to do that with your entire portfolio. In fact, I’m not giving any investment advice at all today. But what I am saying is that with a tool like trade ideas and with the allocation, if you, if you will, of what what someone would plan to invest in the market on an active basis, our tool is the perfect solution for finding these setups.
David Aferiat: [00:06:16] And we have some creative ways of visualizing the data. Like, for example, we’ve figured out a way to instead of looking at like 12 charts and scrolling through each one and trying to understand, well, where is the activity in this chart? We’ve condensed it into one viewing space and we make it look like a race and it’s got the stock logo, the company logos as on this kind of starting line and the movement of these of the race over the course of 10 minutes or 15 or an hour or however long you set it, it will track what, what what stocks are racing ahead of the others. And you think, well, how is that different than looking at like a data table? Well, in a data table, our eyes go to the very top row and they say, well, who’s the leader and who’s maybe the one after that? But what you don’t see is the movement further down that data table of stocks that may be moving faster or rising to the top. And this visualization that we have, which we call a stock race, actually shows you what’s what’s in the undercurrent, what’s what is happening within that time period, 15 minutes, an hour, however long you set the race for. And it will show you movements in a data table that you just wouldn’t see.
Lee Kantor: [00:07:30] So what was the genesis of the idea? How did this kind of what’s the origin story.
David Aferiat: [00:07:36] Origin story? Well, it came out of pain. Oh, as most great ideas do, pain on multiple levels. It came from this kind of frustration of, as I was mentioning before, like the time that I would spend and many others would spend looks at creating, how are we going to deal with the market the next day when these ideas come up and we’d mark up charts, we’d have, I mean, at the time printouts and other things and notes that we would have about what charts we were going to look at. The so the scanning tool that we have and not a screener, by the way I call a screener is something where you can find on almost any site that says what’s the top five gainers of the Nasdaq or the top five stocks performing today? Those are screeners. They screen information to show you a result. But scanning is a different tool. We are scanning is a different act. It’s actually going across all of the it’s going across all of the issues in the market, all of the stocks in the market to find the patterns that it’s looking for that either have been set, they’ve been requested by by you, the user, or by us. It’s scanning and filtering that way. Screener isn’t quite the same. But the pain that this came out of was basically we wanted an unregulated tool.
David Aferiat: [00:08:58] So we did want to create a brokerage. We wanted to create a easy to subscribe to tool that gave insight as to what was interesting in the market. And a lot of people, when they use the tool, often come to us and say, well, what can this tool, what can trade ideas tell me about Apple or Tesla, for instance? And we can say a lot about what Apple and Tesla is doing. But if that’s what you’re looking to trade, you don’t use trade ideas. You look for trade ideas when you say, well, Apple and Tesla aren’t doing anything today. What is it that’s moving and what is it that I can take advantage of? Instead of waiting for Apple or Tesla to do what I want it to? And that’s another problem that we saw with like these are the stocks that are actively doing something. And in fact, all of our analysis is based on what our stock’s doing that on a statistical basis are unusual for versus it’s normal behavior. I’ll give you one more. I’ll give you another give you an example. So we use a concept called relative volume. And so we understand and we track. The volume for Apple or for a pharmaceutical stock say we know what the normal volume of for Apple, for instance, is as of 11:00 in the morning to, you know, an hour and a half into the trading day.
David Aferiat: [00:10:17] And if it’s if today’s normal volume at 11:00 is normal for what, the first hour and a half of trading is for Apple, but we don’t really pay attention to it. But if Apple’s volume in that first 90 minutes is three times or four times or any amount really above what it normally trades, that relative volume is an indicator that we look at to say something unusual is happening in this particular stock because it’s got more than usual volume in it up to this point in the day. And we are making that calculation constantly across every single stock. It would take a lot for Apple, for instance, to trade like 17 times more than what it normally trades. But there are other stocks that are smaller, obviously a smaller cap stock. We’re 17 times 30 times what it normally trades isn’t. So I mean, it’s extremely unusual and and possible because it’s a smaller stock and not that we trade. Just do we look at only small stocks. We just look at whatever is unusual statistically from how it normally behaves. And then we start putting a lot more real time analysis on this so that. In real time if you’re between patients or if you’re doing when you need to see this information. We are tracking it in real time to show you.
Lee Kantor: [00:11:30] So when you have kind of the the technology figured out, which is a challenge, obviously unto itself, how do you know there’s kind of a market fit? Like when were you getting clues like, hey, you know what? There’s a bunch of people that that would be open to using and purchasing and would value this enough to pay money for.
David Aferiat: [00:11:55] Oh, I mean, you know, again, the experience is if this if this tool can save me money and it can point me in the right direction. I mean, we have we have subscribers who pay for their year or their month of trade ideas, you know, in a single trade.
Lee Kantor: [00:12:10] Right. But at the very, very beginning, when you’re like, okay, we’re going to solve this hard problem to create the software. Did you solve it before you knew for sure that there were people there or was it a build it and they will come situation?
David Aferiat: [00:12:26] That’s a good question. When we started 19 years ago, there was a need for this and there were some tools out there that we that we looked at and compared to what we thought was the ideal that we were building and said, okay, these are lacking. They don’t for instance, these don’t track all the stocks, they check the track, they automatically make a cut and they say, Well, we’re only going to trade the most active 100 stocks. And we thought, well, we can do better. We can go beyond that. And I will tell you, the other partners that that that I co-founded the company with, they are the two partners. We all have our kind of divisions of labor. And one partner is kind of introverted, as you might suspect. And he’s really in charge of the architecture of of how all these servers need to work to with each other and the different jobs they have to do and putting all and working together to take in information, analyze it, and then meet requests that our customers are asking for and sending that out to each individual subscriber.
David Aferiat: [00:13:32] All this in real time, of course. And and now with the cloud, we’ve made that transition with that arm, with the architecture. You know, it’s constantly in need of evolution. But he is his background came from defensive from the defense industry. And he was like, rather than making like systems that track and kill, I feel much better. I can sleep at night if I can create something like engaging in the stock market where there isn’t so much literal physical carnage. And then my other partner is kind of like the Bill Gates. He’s very much he has the longest amount of experience trading among all of us and understands how the tool has always needed to be constantly evolving to to, to, to not only make his demands and needs as to what kind of information would be useful to make a good trading decision. But two steps ahead, like what’s the next thing that we need? And that’s taking us into some not just within equities, but now the plan is to also do this with cryptocurrencies as well.
Lee Kantor: [00:14:37] So once you but but so at the very beginning and so someone has an idea and they in themselves, they see I’m the power user that I want this, these are the things that I would want as a power user of somebody that could really benefit. And I wish there was this thing that trade ideas solves. At one point, did you start putting it out to the real world to get kind of that market input, to say, you know what, this we are on to something. Look at the demand of this is, you know, they just have to be educated that a tool like this exists.
David Aferiat: [00:15:10] Yeah. And when we started the the vision, the tool, the arc that we’ve taken was so much simpler. I mean, it was when we first started, it was just web based, it was a website. You had a few indicators that you would pick like filter the market based on price, based on some volume, based on some industry perhaps, or based on some earnings percentage growth rates. And then boom, Let me see the list of stocks and we have it color coded and we had it and it was very simple. And that’s where you have to start. I think we learned from previous companies and experiences that we had is that a lot of companies hold hold back the software because there’s just one more thing to add. If we can add just just one more feature, If we can do this one more thing, then we’ll release it and it’ll be perfect. Well, it’s never perfect. You have to. You have to. It’s vaporware until you actually put it out there. Then it becomes okay. Working useful software and your customers guide you. The reaction, seeing it live also guides you and and and boy I mean we went from so for example we went from a simple website where we had a few indicators to growing the list of indicators that led to a complexity of, well, how do we put all this together? Well, we have to do some of that ourselves for our customers.
David Aferiat: [00:16:32] So we started putting together combinations. And then the question, the feedback was, well, how do we know this is good? And in fact we would take a look and say, Well, it was great when we started it. Two weeks, three weeks later, the market’s always changing so it’s not as good now. So we created a backtesting tool to say, okay, if it worked in the recent history, we might suspect that it would continue to work. And we gave that backtesting tool capability to our customers. And so they started doing their own back testing for strategies that they would like to put on. It’s still. So that adds a little bit more complexity and people would rapidly find that, you know, the things I’m coming up with mixing indicators and alerts and filters to try to create a strategy. The backtesting tool is telling me that this is awful and so that it’s true. What you’ve created is terrible and even again, forced on us the ability to say, Well, for our customers sake, we need to be using this backtesting tool that we call the oddsmaker. That’s still part of the trade ideas. We need to find what’s working for our our customers and give that to them. And that proved the way.
David Aferiat: [00:17:41] That oddsmaker was first built to be a pretty laborious process because we had to do the iterations ourselves, hit the button, manually, see the report and kind of tweak it. And the AI and the machine learning was born from that process. It was like, Well, rather than us keep doing it manually, let’s turn this over to a system that can learn and evaluate and actually change the strategy and the settings within that. In order to create a more optimized result. And so and so that’s what it does. It creates it does millions of calculations and millions of simulations in order to arrive at. Yep. And the result is the market’s always evolving. So out of these 70 or so strategies that the there’s only six or so that are picked, the rest are just they’re great strategies at one point, but they have decayed as the market has evolved and they may come back and as if they come back. I mean, the system is looking at all of them. So it will recognize like, okay, this this particular strategy not seen for three or four weeks, is now actually ascending in performance. And it will make at some point it makes a cut or it doesn’t and says, okay, this is this is now a lens through which it’s going to view today’s market activity.
Lee Kantor: [00:18:52] So it must be pretty exciting to have seen it kind of in a more rudimentary tool to the robust tool that it is today. I mean, probably the vision was always there to be what it is today, but you’re seeing the growth over time of the evolution of it for sure.
David Aferiat: [00:19:09] And we have a saying. It’s like, how do we deliver for our customers the most value on the first impression? Because that’s all you have. You have one chance to really make a great impression and you’ve got to show the tool very quickly. Can this this is going to this is going to help me. I can use this because active investors and traders, they’re they’re very set in your ways. It’s like anybody who’s going to excel in any particular endeavor in life has to have routines or has to be set in their ways for everything else in their life so that they can just focus on what they’re going to excel at. So, for instance, you know, a Olympic swimmer has got to be very set in their ways about when they go to sleep, when they wake up, what food they’re going to eat, when they eat it, when they practice, how often do they practice so that when the time comes to actually swim in the heat, everything is focused on on those variables. It’s no different than trading. I mean, you have to be set in your ways about what’s the technology, what’s my monitor look like, what are the times that I have to make these trades? What tools am I going to use? Do I belong to a community, and what kind of input am I going to get from that community? Do I get ideas from them? Do I get help on regulating my ego? Do I exercise enough? Do I work out? There’s tons of considerations that go into anything we want to do that have to be set so that what we want to excel in and the variability that’s within what we want to excel in, we can react to better trading is no different.
Lee Kantor: [00:20:42] Now in growing a business like yours from an idea to where it is today. Were you part of any communities or were there any mentors that helped you get to this level that you’re at today?
David Aferiat: [00:20:55] Most definitely. So I think you could probably qualify me as being a lifelong learner, someone who is always in some respects trying to take like a beginner’s mind to certain things and with questions, but at the same time wanting to constantly learn new models and new ways of looking at things because you can get things can get stale pretty quickly, and then you start to see other competitors show up and exceed or match what you’re doing that you’ve got to be ahead of, especially if some of the strategies you’re using or practices that are not getting results. And so even before trade ideas, I was a consultant for energy and Internet companies, and I thrived in that scenario because I had started that job on the heels of getting my MBA and going back to school and learning and then applying all that and consulting and then starting trade ideas. And after a while, though, I trade ideas, I also started to kind of plateau where our growth, kind of our growth, frankly, kind of leveled a little bit and we started to see some more competitors. And that kind of prompted us to to kick things into gear. But for me, I needed to find advisors and mentors, and I found that in an organization that I still belong to. In fact, I lead as a chapter president. It’s a global organization with chapters all over the world, but it’s called Entrepreneurs Organization. And I joined because two people close to me, my cousin and a dear close friend here in Atlanta, I saw the change in their decision making and their behavior and the results impact their business from being very scattered and unfocused to being very planned and very achieving.
David Aferiat: [00:22:44] And I was like, Whoa, what is this? What is this change? How have you gone about making this change? And it’s like, well, this peer group of entrepreneurs and the organization that I belong to called EO or Entrepreneurs organization has helped me expose me to new ideas, puts me in a peer group with other people once a month with whom I meet Seminar eight. And then there are chapter events where the larger chapter meets together. And I was like, That’s for me. I’ve got to be connected to, I’ve got to be constantly inspired, I’ve got to be. And so each month now I meet with a group that is kind of like a mastermind or a group of people that I trust to tell really everything, you know, whether it’s family or business or personal issues, just to help the the entrepreneur focus and stay and really share experiences that can hopefully be used to help in any of those three areas. As I said, it goes back to, you know, how can I make my routine better? How can I upskill my routine level so that I can be set in my ways and perform where I need to and face where I’m performing that variability the best I can.
Lee Kantor: [00:24:01] Now, for entrepreneurs out there listening that maybe weren’t aware of EO or weren’t aware of these type of organizations that involve peers talking to peers, business people, talking to business people about kind of the good, the bad, the ugly. It requires a level. Vulnerability and humbleness. And in order to get the most out of it, what would you say to that person who’s never done this before and always thought of themselves as, you know, that that almost is a sign of weakness, that they look at themselves as kind of a lone wolf out there and they want to be that person. And here they are now looking for help or needing help. How would you kind of sell them on the benefits of the.
David Aferiat: [00:24:46] Yeah, I mean, you know, you kind of have to look in the mirror and say, am I bloodied enough from hitting my head against the wall and not getting any? Not going through it, but just hitting my head against the wall. Have I got enough bruises on my face that I realize maybe I don’t have all the answers here? And yeah, you have to come to that so that when someone can share with you like, Hey, I’ve been through that same experience before. Like, I have know I also found an employee that was a dear and trusted employee. That’s that was cheating me out of that was taking money or I’ve got a large partner that’s about to cut off a contract that 80% of our revenue depends on those kind of situations. You’re not looking in any way. We learn to talk about the experience of going through that and telling that story rather than turning around and saying, Hey, here you need here’s advice and pointing your finger at somebody and saying this is what you need to do. We’re fundamentally we share and retain a lot more information when it’s told as a story than what it is when it’s just saying like, Oh, do this, do as advice. The meeting could end and you just might forget what the advice was. But you do remember the story. And we try to when we’re sharing, we try to acknowledge that and share those experiences. But that’s when you realize, like, why would I try to solve this on my own when six other people or two other people have have gone through this and I can learn from I mean, it just it starts to you start to get back time and you start to get back. I don’t have to waste those years learning that lesson from this myself, from from being with this person. I’m literally taking back time into my life.
Lee Kantor: [00:26:31] So if somebody wants to learn more about EO, what is the best way to do that?
David Aferiat: [00:26:36] Yeah, so there’s some qualifiers and that we don’t take everybody. But if you have a if you have a business that has a million in the last 12 months worth of revenue, that’s $1,000,000 business or more, you, you, you can join EO and you can join the Atlanta chapter at EO Atlanta. If you don’t have a business that’s $1,000,000 in revenue but makes perhaps at least 250,000. There’s an EO accelerator program where we literally create an accountability system and we for those smaller companies making 250 in revenue or more, and with that accountability group and and meetings, we accelerate their growth to get over and into the million dollar mark.
Lee Kantor: [00:27:25] And then for the folks who want to learn more about trade ideas, what’s the best way to do that?
David Aferiat: [00:27:30] Yeah, your journey of making better decisions starts at trade ideas. There’s a little hyphen there. Trade hyphen ideas dot com.
Lee Kantor: [00:27:40] Well, David, thank you so much for sharing your story today. You’re doing important work and we appreciate you.
David Aferiat: [00:27:44] Oh, Lee, this was great. I really appreciate it. And thanks for the time.
Lee Kantor: [00:27:47] All right. This is Lee Kantor. We’ll see you all next time on the Atlanta Business Radio.
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