[Podcast] Special Report: Oliver Schmalholz Interview by Finance & Markets
Oliver Schmalholz, Co-founder and CEO of News Quantified, joins us on this special edition of Finance & Markets Cashflow Hacking Podcast.
By creating the News Quantified web-based platform, Oliver has helped countless investors across the United States to make better informed, and highly profitable trades that would have been nearly impossible before without special access to expense, property software. Oliver shares the story behind why he created the News Quantified service, and lays out the tools necessary to make money consistently in the stock market with little to no prior experience necessary.
Video Version Of The Podcast
People & Resources Mentioned
This is the Cashflow Hacking Podcast with Casey Stubbs where you will learn the tips, tricks, and strategies to increase your cashflow. And now, your host Casey Stubbs.
Casey Stubbs: 00:21
Hello, this is Casey Stubbs for the Cashflow Hacking Podcast from Finance & Markets and today we're really excited to bring on Oliver Schmalholtz who is the co-founder and the CEO of News Quantified. Thanks for being on the show. Oliver.
Oliver Schmalholz: 00:38
Hi, Casey, Thanks for having me.
Casey Stubbs: 00:42
So we like to focus on different ways to bring extra cash flow and you have a really great trading system called News Quantified. So we're wanting to bring you on the show to talk to you about how you use that platform to trade the news.
Oliver Schmalholz: 00:56
That sounds good. Love to talk about it.
Casey Stubbs: 00:59
Excellent. OK, so just start off, I was just looking through your profile and I noticed that you were originally from Germany and now you're in the states. How did that transition happen?
Oliver Schmalholz: 01:13
I grew up in Bavaria in Germany and a smaller town south of Munich, about an hour south of Munich, close to the Austrian and Swiss border. So beautiful area. And, figured out pretty early in my life that I got this entrepreneurial. I'm a drive in me. , so after college, I spent a couple years in the travel industry and it was great. At that time was the high margin business, got to fly a lot for three, , was working for a company that was partly owned by American Airlines, so I had all those greats travel benefits, but I quickly realized that the Internet in the very, very early days there in the nineties, you know, AOL and CompuServe or just coming out that it's probably not an industry that I want to make a career off the rest of my life. So I switched into the telecoms world and I knew nothing about telecoms.
Oliver Schmalholz: 02:16
So I relocated to the bay area, became a consultant for a telecom company. They sent me all over Asia and Europe, , , potential deals and, , gained my knowledge. , and that industry, and then I knew Europe is going to deregulate in [inaudible], they're going to open up that industry from an incumbent stage run a, you know, a phone service to having many, many competitors and everybody was looking at getting to Germany and France. So I picked a smaller country. I picked Austria, raised some from some us, a business angels and packed my suitcase a bent to Vienna, Austria, and got the first long distance license there. And extremely well sold the company to a large public traded at, ended at that time the fifth largest global operator and stayed on the old bits. Then a few more telecom deals.
Oliver Schmalholz: 03:24
And as I was doing that, I became involved in the markets and I started to invest mainly in the US, a stock market since it's the most liquid market in the world and has so many opportunities every day. And I wasn't one of the big brokerage firms. Had my advisor there. And, as the tech bubble started to get in full force and it's great at first as the market kept going up. And , then in March of 2000, the whole dream just burst a, that trees don't grow into the sky. So that was my early, experience and the markets and had a pretty painful couple of days there. And I had some huge draw-downs that got me started thinking, you know, how are those guys on CNBC that make money in up and down markets? How are they doing it? And can I do the same as an entrepreneur?
Oliver Schmalholz: 04:24
You're always trying to figure out you know, what's the problem that you can solve? And is there a market for you to bring out a new product and a trigger to maybe, you know, I would have a technology is developing. Maybe there's an opportunity to develop a, something automated that does the same thing, what funds do to create profits and up and down markets. So that's how I got into this industry from the world of a telecoms, a cashing in, a selling out to a large public utility company to then being invested in the markets myself and then a creating a product around the problem of this coverage that didn't have any out of the box from the ocean.
Casey Stubbs: 05:13
OK, well that's a pretty interesting journey and how you got in right at the top of the bubble. That must've been very difficult to experience, to go through a, it's also interesting that you were from southern Jeremy. I actually lived in Germany for four years. I lived in trying for, which is probably I, if my memory serves correct, maybe an hour away from Munich.
Oliver Schmalholz: 05:38
Yeah. It's, it's pretty close to me and I guess. Well, yeah. , do you miss the charm on the food and the German beers?
05:44 You know what? I actually really enjoyed my time there. Unfortunately, I didn't learn any German. Only German I learned was I'm beer bitta. That's all I can say.
Oliver Schmalholz: 05:55
That's a pretty difficult a language from a grammar, a pond, a few. It's not easy, it's a great place. I still go back like once or twice a year really enjoy the term on culture and that's great spending time there. But , I prefer being in the US time zone. It's just a lot more convenience. I now live in Scottsdale, Arizona. The desert snow had enough of that when I grew up. No, I'm sorry, the heat's a.
Casey Stubbs: 06:30
So when you were a first experienced in the market, in that bubble happen, you said you experienced some pain did that help act, was that negative experience actually helpful for you and developing you as a trader?
Oliver Schmalholz: 06:44
Absolutely. That, that really you know, set the frame of going forward. I still remember the exact date was April 15th of 2000. The market gap down by, I don't know, five or six percent. And I looked at my online account statements and I was down over a million bucks before the markets opened. A single day, a last, last, a hundred and 20,000 an hour and a let me tell you, it takes a lot longer to make your middle. And then you know, then to lose it. And I said to myself, I'm never going to do that again. I gotta change something. This is too crazy. It really yeah, puts so much stress on me and I never wanted to repeat the same again. And that's when I started to really figure out that the discretional approach and you know, not having a real systematic best Leading Indicators For Day Trading, approach him plays a that is completely rule-based, that just doesn't give few consistent results. So I started to go to a lot of conferences and started to you know the , subscribe to all the industry publications by as I'm about at that time, you know, trade station was pretty big so try it out, some indicator based stuff, but it was all lagging and that was really looking at something, you know, that's getting in the ride as the move happens and not a, you know, 40 years later because you've got a lagging indicator regarding Brian.
Casey Stubbs: 08:24
I actually really liked the fact that you responded to that difficult situation by going out and educating yourself and to realize that it was a problem and you went out to try to find a solution to that problem which could help you later on rather than, you know, just, you know, feeling the pain and saying, oh, this is horrible. And just kind of wallowing in self pity, which I'm sure you may have felt like doing. You went out and was proactive to find a solution.
Oliver Schmalholz: 08:53
Well, yeah, I mean that day, , still remember to this day I was in Paris a, it was actually my, , anniversary with a advice number one. And , I, I was ready to take it and throw it out the window and saw this big a gap down. There was just a crazy about it. Decided, hey, after a couple days or weeks you get over, you got over the fact that I worked in a systematic plan how I'm going to turn things around, and there was some really good conferences out there, but the bond made sure one that really changed my life was a hedge fund conference. Indiana chairman, he was pretty expensive of three grand for the day and I'm the keynote speaker was Myron Scholes who won the noble prize for the options, price theory and lactic acid as slack has had it. I mean there was a couple of hundred people there.
Oliver Schmalholz: 09:51
I sit right next to him and, , I got really, really lucky. I mean, how many times do you have the opportunity to sit next to a noble prize winner that also made billions of dollars and then lost billions of dollars. So I really utilize that opportunity to ask him question or request or question. I still remember the lunch, the poor guy could hardly. I wanted to suck everything out of his brain that I could. And I did. The most important thing he told me is that it's trigger events, also known as news that really triggers people to buy or sell a stock or whatever investment vehicle. And once I heard that it was clear, I go to a, it all makes total sense that all the other indicators are lagging and you're just a, you know, running behind. And sometimes you know, it's OK if it's an extended move, but if it's a, you know, just, just a quick reaction, you've got to get in there right when it happened.
Oliver Schmalholz: 10:57
So I started researching it and sure enough, it all confirmed on the charts. It was all the major turning points. So I started to hire a couple of really talented programmers and purchase some data and I'm just reverse engineer what the hedge fund guys were doing there and come up with a systematic strategy figuring out what kind of news. And 97 percent of news is irrelevant. They're just pure noise. They don't do anything. So once I knew what that is, I could focus on the [inaudible] and then really generate some nice profits as the market was going up and the market was going down. That was really the turning point.
Casey Stubbs: 11:43
Well, that's really cool. And I have a couple of questions based on that. And the first thing again is I think it's another great learning experience that a learning opportunity from, for the listeners and myself is that you sought out someone who had the knowledge and you said you got lucky, but you took advantage of the opportunity. You had this brilliant guy and you, you were just going after information and I think remaining teachable, knowing that we don't know everything and having a quiff quest for knowledge and information is really important and you, you definitely demonstrated that. And that's actually one of the reasons why I'm really glad to have you on the show is because now I could ask you questions and try to learn from a really smart guy as well, which is pretty cool. , so, , however my question is after that day you made some adjustments with news and I'm really interested in that and I'm going to get to that, but I want to know what you did differently to handle risk because I think w when you, like you said you were down a million dollars, I think that managing risk is really important.
Casey Stubbs: 12:51
And have you changed the way you manage risk and are you now not susceptible to down moves like that?
Oliver Schmalholz: 12:58
Yeah. Yeah. So, so two things, that's a really a great question. So, but I lost a million of that signal day. I was primarily long, so I didn't have any short positions in my account and no returns. A lot of times come unexpectedly. You get no advance wording you know, they don't send you a message in your email box or a, or a letter in the mail that says you know, a fasten your seatbelt. Now very answering. So I was positioned wrong. , as I analyze the impact of news on stocks I saw clear patterns that on the very same day there is a group of stocks that move up and there's another group of stocks at that moves down and those are the big stocks and even does a general update in the market. You still have stocks moving down on a news.
Oliver Schmalholz: 13:54
And as I researched, the hedge funds were all further, I ran into this market neutral strategy approach where hedge funds by strong companies and they sell short, big companies all at the same time. So they got 50 percent of their money on the long side and 50 percent on the short side. So they really don't care about the market as if it goes up, down or sideways. They make money either way. Once I started to do that everything changed. Like in an eight crisis. I didn't care if you had a two or three percent a move a day it didn't just go down. You'll have a couple of down days than you have a strong update. Again, as things start a back and forth and I was pretty much half long, half a short during that time and had some monster days on one day made a hundred grand in 30 minutes a felt so much better than losing a million in a, in a day.
Oliver Schmalholz: 15:08
And , so the first part of the answer is number one, if you position yourself in the market neutral situation where you have long and short positions that already positioned so you're pretty well. But then the second part is I took it from the approach on stops all of us use to look at my wrist from a per position point of view. And I would put in a stop loss order, but quite frequently I saw stocks turning exactly at my stop-loss level. They will trade down to my level and take me out and then recover from their, I mean, down to the tech. So I'm market makers, you know, left to run stock levels, especially on the smaller market cap, a more thinly traded stock. Somebody, you're not going to see that on an apple or, or Google possession. But on smaller market cap stocks you can see that quite frequently that if you put it in a three percent or four percent or five percent's the stop level, they'll trade right down there and then recover from that level.
Oliver Schmalholz: 16:17
So I ditched that, that tried st present. I for presented, presented five present. And , I kept seeing the same things. It goes to my level on a good percentage of my possessions. I undercover straight from there, so I ditched it and replaced it with a portfolio approach. And what that means is I take the Pfeiffer stays out of the year and look at, you know, what's my maximum risk on those five days and I don't, I don't want to get stopped out more than five days a year and that's x dollars or x percent off of the portfolio value. And I sat that doesn't stop a put an alert on the trading platform in there at my broker when I first started doing it and was a lot more complicated broker's platforms that didn't have such great capabilities. So I had to, again, hire another programmer that rode me a risk management piece that would send me an alert on my iphone, , that really changed from a technology point of view once I was able to get alerts on a, on my iphone that came out over 10 years ago and I'm a block away from the computer, but still, you know, get an alert if another flash crash a happens, , that really added to the you know, to have the equality of life.
Oliver Schmalholz: 17:44
You're being able to walk away and do other fun stuff and travel the world as long as they've got an internet connection, equity, get the alerts and back to the risk and key economic indicators. So total risk identified as, you know, I picked the [inaudible] stays and if that's, you know, 20 grand in a day the maximum would I want to lose or 500 bucks depending on your account size. , you know, set that once you reach the limit, get out, be done for the day and then start over fresh. And that made a huge difference once it started to take the portfolio approach. And since I, to really diversify and never putting more than them like to present in a single position, maybe two and a half percent at Max, even if a stock goes down 20 percent, 30 percent. Remember once I was in Wells Fargo a up and I was down over 30 percent in a single day. , if you only put down two percent possession on six percent drawdown, but for sure, you know, it doesn't make me nervous. So that's my, , that's my approach. And I liked it a whole lot better than looking at individual a risk. It's a portfolio risk if a diversify, if you have a few bad apples, but you'll have a few great out-performance there as well.
Casey Stubbs: 19:06
That's actually pretty interesting on the portfolio method and I would probably enjoy talking to you in depth about it sometime, but I'm going to keep it on task for our listeners, even though I would really enjoy to do that. A lot of the people who are listening to this show are probably, maybe not even in the markets, but they're just average people that are looking to make some extra money on the side. , they're working a job and there they are listening to this and you're thinking, well man, could I actually take advantage of the markets in my spare time on the side with maybe a minimal financial investment? What would you say to someone like that?
Oliver Schmalholz: 19:48
It is a never a B or we've never been in a better time than now. , a number one, you know, with, with the way technology has gone, you can work street transform 10 minutes a day into a, into profitable trades. All you need is a tablet, a laptop, or even a smartphone on an iPhone or an Android device will do it as well. , you can get alerts whenever great setups a half, and then on the days where you have Robin Hood's office commission free a trading, you can do it straight on your iPhone or Android phone. You can trade commission free. I didn't have that when I started, they were charging me a percentage of trades, it was crazy. So to get in one percent to get out on present, so my break even Ross to presents a, now you can trade a commission-free, so as long as you got a phone or a tablet or a laptop and access to the Internet, you can set up alerts to take advantage of some really, really good setups and you don't need a degree in mathematics or statistics.
Oliver Schmalholz: 21:06
I don't have that either. I'm a business guy, I'm an entrepreneurial guy. , , I know how to turn on a computer and I know how to enter trades, but I'm for sure I'm no expert in statistics. I hired all the right experts for that. I don't even know how to code any software we've got a great team that does that and I'm, the software was developed over 10 years ago and so far invested into the seven figures. I'm improving it and they've had hedge fund users use it since 2012 and then turned that into really easy to understand a map application that the average user out there that can really understand it. And the best example is, you know, they've got one great testimonial from a dental receptionist, she enrolled last year into the newest quantified program, took the training, started using it just once a week she decided entering and exiting once a week is what she wants to do. And , she made a 55 percent performance and , in less than 10 months, a so great example of somebody that had never invested in the US stock markets before.
Casey Stubbs: 22:32
OK. So then it is definitely something that someone could do without a lot of time, which is really interesting and I think is a great opportunity for people if they're willing to try new things and to learn something and put a little bit of effort out into making an extra side revenue. Now you're program is called news quantified and it's a software dashboard that gives you information on news that can potentially, , impact a stock price. Can you tell us a little bit about the dashboard and how it works and all that.
Oliver Schmalholz: 23:07
So you log in with a username and password and you'll get to a signals page that displays you the best opportunities after day. And that's really the very simple I was put off a lot of stuff that gets calculated in the background. So on average, there are five to 10,000 news items a day that affect the US stock markets. I'm stuck and the accepted change and Amex listed stocks and be bringing in those news items. We gets a what a ticker do they belong to be tacked them, we categorize them with leading economic indicators. And then we look at what has happened in similar situations in the past. That's all based on the concept that history repeats itself. Million historic events in our database and we're able to extract what has happened in the past to translate it into a predictive signal. What's most likely going to happen this time?
Oliver Schmalholz: 24:14
And it's a simple list that shows you the assemble and, ll you do is you select your whole time. So we cater to a day traders anywhere to swing traders and position traders. We have full times from one day to one year, all you're going to do is select the right whole time. And then there's a couple of filters if you run on our it down and it displays a list from the highest strength to the lowest strength opportunities. It's that simple as looking at a top 10 list that shows you the to highest opportunities for a bias and the 10 highest opportunities for sales.
Casey Stubbs: 24:58
Yeah. And , I actually just recently tried it out myself, which, and I didn't have any experience at all and it was pretty easy to use and that it was me not being an expert in the platform or even knowing what I was doing. My strategy was I was trying to find one by trade and one cell trade every day. Or maybe I would do to sell trades, but I would always do an equal amount. I do one cell one by or I do [inaudible] buys and sells and just in the five days I'm in the five days of using the platform, I was able to make $4,600 a return and I lost a couple. I lost a couple trades and it worked, but without really knowing what I was doing, it was, it worked really well.
Oliver Schmalholz: 25:38
That's great to hear. And you didn't even go through the full boot camp, a training ride, you just took an intuitive approach.
Casey Stubbs: 25:47
So I scanned I w I didn't dive into it but I just kind of skimmed over it a little bit, but I did check it out briefly.
Oliver Schmalholz: 25:55
That's super cool. So even without fully going through the whole training that you were able to make a $4,600 a prophet Joseph, it's possible. It doesn't take a lot of time. How many minutes a day would you say you spent generating?
Casey Stubbs: 26:16
It was not a lot. I actually videotaped every one and put them on Youtube. And so the videos are like five to 10 minutes each. So you're talking five days at 10 minutes, that's 15 minutes in a week,
Oliver Schmalholz: 26:29
that is super cool and know, do a couple of things right here andthe consistency is what breaks of most investors and traders. So what they do is they decide to take a specific set up, they take a trade or two, then they run into a or then they say, oh, I chose the wrong setup that let me switch things around and they keep jumping from one thing to the next without any discipline. And no strategy will have 100 percent winning trades. I've made seven figures in annual profits on strategies that has slightly more than 50 percent accuracy, but the vendors are this big and the losers are a lot smaller. And so you don't have to be a, you know, 80, 90 or a hundred percent accuracy at typically what you see set ups anywhere from 60 percent accurate. So you don't even have some losers.
Oliver Schmalholz: 27:32
And I would never base my results on anything less than 30 traits combined take 30 traits off, set up if you're scared of doing, has been real money using simulation account until you got the confidence. Take 30 setups, look at the performance and then go from there. And that's probably the number one mistake people make, is they're looking for the next shiny thing, sticking to one strategy and really believing in that and not jumping a too early on to the next shiny object. And we have our biggest hedge fund customers you know, they're subscribed for years, they keep renewing every single year, they keep adding a staff. So obviously they wouldn't be doing that if they didn't make money at it. So if you stick to it, the returns are bigger and there's higher volatility in the markets. And obviously, you know, they go down, a volatility is smaller and every day there is fantastic opportunities in the markets that you can take advantage of. And even if you only do it once a week there's plenty of opportunities to capture some profits.
Casey Stubbs: 28:57
OK, I have a, a little bit of, maybe this is an advanced question, but it doesn't have to be too difficult, but when I was doing it, one of the recommendations was Netflix and Netflix. I don't really remember the price, but it was, it was a lot of money for share. And so when that, when I saw that, I was like, oh, well that's costs a lot of money to buy a lot of shares to make money on Netflix. I ended up making that was my best trade because they hadn't. After you recommended it, the next day earnings came out and it boosted really high. , but, but my question is, can you trade these recommendations with options or do you have to use shares? No,
Oliver Schmalholz: 29:35
you're, you're able to do options. , now that direct fire some basic understanding how call options and put options work. There's a lot of great free stuff. , you're on Youtube, a lot of great training videos and if you have anybody you know, you can recommend a, I think it would be a good reference there. And so you can use options a obviously a little longer hold times, make more sense than a day trading it, but if you're in it for three, four or five days a, you can use that. But then the other approach, if you do admit stocks, instead of taking a fixed amount of shares, you can take a fixed dollar amount. So for example, a few on the thousand dollars or 5,000 the position you just calculate how many shares that is. You get a higher amount of shares on lower price stocks and a lower amount of shares at a higher price. Stocks, I think you've taken a, it was I think about 200 chairs. A, a,
Casey Stubbs: 30:47
Yeah, I was doing a fixed position.
Oliver Schmalholz: 30:49
So. So you ended up at a lot higher dollar amount on that. And I've personally all this a calculated my supposition size based on the dollar amounts, but then now you can't do that on a, like a, you know, if you get to a 20,000, 25,000 that position and you've got a stock that's only a dollar, you really, when I botched executions, if you're trying to take 20 or 25,000 a share can be a little bit more advanced stuff. But that's a nice problem to have to trade through big how do you know? And that's how it was a fun problem.
Casey Stubbs: 31:33
Yeah, I'll definitely call you when I get to that point. You can help me out so I know that you're doing webinars for people that are interested in learning about your News Quantified system. Can you tell us a little bit about those webinars, how to get into them? I'm going to put a link below this podcast, but like what time they are and what you are teaching in that.
Oliver Schmalholz: 31:58
So we do them multiple times a week. And we just go over the whole ingredients. What do you need? If you want to profit from a news, it really gives you a list of new sources and what kind of news you need to look at if you want to do it yourself. If you don't want to subscribe to quantify a, you get all the value and the training and my full backstory how I got to that and we'll also share the results of an academic study that we had for universities do. It was actually published by the Journal of investing in the spring 2018 edition and we go over all of that in the Webinar and then we have a special offer for webinar attendees if they want to sign up and use the service and a q and a session at the end. , so would love have your listeners here on one of our upcoming webinars and it's a 60 minute training session, including the q and a and would love to have your listeners on their join us and learn more.
Casey Stubbs: 33:13
Yeah, and I would definitely recommend if you're looking for something, whether you're a stock trader that's been trading a long time or whatever you trade, I would definitely look into the system because it's pretty cool and it's easy to use and even if you've never traded before too, I would really recommend you getting jumping on one of these webinars with all of her because he said, , someone that was totally not used to trading was able to go in and get a nice return and it's certainly better than trying to put your money into savings or , you know, just letting it sit because this can get you a return. Now there's obviously there's risk, but there's going to be a risk in everything and just holding your money. You're losing money because of inflation. So I think it's just really something that everybody should take a look at if they're interested in making some extra cash flow.
Oliver Schmalholz: 34:06
That's a, that sounds spray the had the buy and hold. All I think is over the everything is moving so fast now. We are in this instant gratification world and computers are getting faster and faster crunching numbers and crunching data, so it's really the time if you don't deploy a data-driven approach yet where you take advantage of all the great new technology that's out there and all the artificial intelligence and machine learning, then you should really give this a serious looked. You don't have to be a tech to yourself. It's a heated all the work for you and it's really easy to do so, take advantage of what's out there and we got your all users from Newbie to I already got an existing strategy that's pretty successful, but I want to amplify it and increase the profits on that so whatever category you're in, you'll be able to benefit from it. So thanks a lot, Casey, for having me on the show and a much appreciated and, , a great questions and hope to see your lesson nurse on the enzyme at one off the next webinars.
Casey Stubbs: 35:22
All right. And yeah, it's been really good having you, congratulations on all the great stuff you've built. Really good work, so thanks for coming on the show today.
Oliver Schmalholz: 35:22
Thanks a lot.
Thank you for listening to the Cashflow Hacking Podcast. If you want to get the show notes, visit our podcast page at financeandmarkets.com