Table of Contents
Today’s interview features JJ Kinahan—CEO of IG North America, president of Tastytrade, and a former Cboe market maker with two decades in the pits—sitting down in Chicago for the Words of Wisdom podcast. Kinahan’s been hands-on with platforms, education, and risk for years, which makes his perspective rare: he’s seen both sides of the terminal and the trading floor. If you’ve heard the line, “The first time you say ‘this time is different’ is the most money you’ll ever lose,” that’s him—equal parts coach and realist, with a bias toward defined risk and repeatable process.
In this piece, you’ll learn how JJ structures a trader’s strategy from the ground up: start small, define risk first, and let probabilities—not ego—do the heavy lifting. He breaks down common myths (like “market makers hunt my stops”), shows why round-number levels get tagged, explains when to stand aside, and stresses the mix of confidence and humility that keeps you in the game. Expect practical takeaways on sizing, routines, community, and system-building—everything a beginner needs to avoid the 90/90/90 trap and build a durable edge.
JJ Kinahan Playbook & Strategy: How He Actually Trades
Risk First, Always
Before chasing wins, JJ builds from the downside up. Define the worst case, cap it, and only then look for the upside. That mindset keeps you in the game long enough to let skill and probability compound.
- Set a hard daily max-loss (e.g., 1R–1.5R of your average risk). If hit, you’re done for the day—no exceptions.
- Predefine “catastrophe exits”: platform failure, halt whipsaw, or news shock = close at market, no debate.
- Use bracket orders: entry + initial stop + first target placed together before you click.
- Risk per trade ≤ 0.25%–0.50% of account for active day trading; ≤ 1% for swing trades.
- If you break a rule, the size in the next session is cut in half until five consecutive rule-compliant trades.
Position Sizing Like a Pro
Sizing is where most traders quietly blow up. JJ treats size as a function of volatility and confidence, not emotion. You earn size only when your data says so.
- Base size on ATR(14) or average 1-min range for day trades: bigger volatility → smaller shares/contracts.
- “One-lot rule” for new setups: prove you can execute 20 trades cleanly before adding size.
- Scale in only on confirmation (higher-low for longs / lower-high for shorts) and never widen stops to “make room.”
- Cap exposure by product: max two concurrent positions highly correlated to each other.
- If three trades in a row violate the plan, the next session’s first trade must be half-size regardless of A+ signal.
Finding A+ Setups
Edge comes from repeatable behavior where your stats are best. JJ prioritizes clean structure and liquidity so fills are fair and slippage is tame.
- Trade liquid names/products with tight spreads during primary session hours.
- Favor trends with pullbacks to VWAP/20-EMA when RVOL ≥ 1.5 and structure is not choppy.
- Avoid first candle breakouts unless there’s exceptional RVOL (≥ 3) and a catalyst.
- Skip inside days/range sludge: if ADR compression < 60% of 30-day average, look elsewhere.
- Keep a “do-not-trade” list for tickers that repeatedly slip, halt, or gap against your style.
Entries That Don’t Chase
Entries should feel boring and planned. You want the trade to come to your level, not the other way around.
- Longs: wait for a pullback that holds above VWAP with a higher low; enter on the first strong close back above a micro-level; stop goes beneath that higher low.
- Shorts: mirror it—lower high below VWAP, enter on a decisive close under a micro-level; stop above the lower high.
- Use limit orders at your price; only use market orders for forced exits.
- If spread > 0.5% of price, reduce size or pass.
- If you miss the entry, let it go—never “market in” far from plan.
Exits You Can Live With
Great exits are planned before entry and executed without drama. JJ uses rules to remove the “should I hold?” second-guessing.
- First target at 1R; move stop to breakeven only after a fresh structure break in your favor, not simply at 1R.
- Trail below/above higher-lows/lower-highs or use a VWAP loss-of-hold rule: two consecutive closes through VWAP = partial or full exit.
- Time stop: if price doesn’t move ≥ 0.5R within 30–45 minutes (day trade), exit flat or small.
- If RVOL fades below 1.0 and momentum stalls at a key level, trim 50% and let the runner trail.
- Never turn a trade into a “hold ’n hope”: if a stop is hit, you’re out—no moving it.
Options: Defined-Risk Plays
When he leans options, JJ prefers clarity: prepaid risk, sensible probabilities, and no “lottery ticket” fantasies.
- Directional view but want limited risk: buy at-the-money or slightly in-the-money options with 30–60 DTE; risk is premium paid, stop is a time/price rule.
- Income view with a level to fade: sell credit spreads (bear call above resistance/bull put below support) with short leg at 25–35 delta; exit at 2× initial credit or at 21 DTE—whichever first.
- Hedge stock swings with put spreads into known catalysts; size the hedge to cover the worst-case daily loss.
- Avoid naked short options in earnings or low-liquidity names.
- Roll only to reduce risk or lock gains; never roll just to avoid taking a loss.
Catalyst & News Discipline
Markets can and will ambush you around catalysts. JJ treats news as a volatility switch you either respect or avoid.
- Know the day’s calendar: if a major release hits within 15 minutes of your setup, stand down or size down 50–75%.
- After halts/SSRs, require reclaim of VWAP within 10 minutes to stay long or cover shorts—if not, flatten.
- Post-news, demand RVOL ≥ 2 and clean tape before re-engaging.
- If a sudden headline expands beyond your limit, cancel all resting entries immediately.
- For swings, place alerts at key levels instead of guessing the reaction bar.
Building Your Daily Process
Consistency beats brilliance. JJ’s routine is simple: prep, execute, review—every single day.
- Pre-market (15–30 min): mark overnight high/low, prior day’s close, VWAP anchors, and a/b levels; shortlist 3–5 names with RVOL potential.
- During session: trade your shortlist only; no new tickers after the first hour unless a top-tier catalyst hits.
- Post-close (10–15 min): tag each trade A/B/C for setup quality; log R, entry screenshots, and rule compliance.
- Weekly: prune playbook—keep what’s working, pause what’s not; update stats by setup and hour.
- If the win rate for a setup drops below 40% over 30 occurrences, put it on probation until you re-validate.
Psychology You Can Actually Use
JJ emphasizes humility with confidence: protect capital, be process-obsessed, and let probabilities do the heavy lifting.
- Write your “if-then” script for tilt: “If I take two consecutive rule breaks, I stop and walk 15 minutes.”
- Keep a “lies I tell myself” card on your desk (e.g., “It’ll come back”); read it before each session.
- Use a timer to force breaks every 60–90 minutes; decision fatigue is real.
- Celebrate rule-following, not P&L: track a weekly “rules score” and aim for ≥ 90%.
- When emotion spikes (fear/greed), size defaults to minimum until your heart rate and thinking normalize.
Playbook Metrics That Keep You Honest
What gets measured gets improved. JJ manages the book with a handful of simple, powerful stats.
- Core metrics to track per setup: win rate, average R, max adverse excursion, average hold time, and slippage.
- Aim for expectancy ≥ +0.3R with a minimum of 30 trades per setup before scaling.
- Enforce a “two-strike” rule per day: two plan violations = stop trading.
- Maintain a capped universe: 20–30 names/products total, 5–8 active in any given week.
- Quarterly “stress test”: simulate a 30% volatility increase; if your plan breaks, tighten risk or reduce universe.
Risk First: Size Positions By Volatility, Not Your Hopes
JJ Kinahan reminds traders that hope isn’t a position size—volatility is. Start by asking, “How much can this name realistically swing against me in the next 30–60 minutes (or next day)?” and let that dictate how small you must trade. When ATR expands or spreads widen, your size should contract automatically; when conditions calm, you can carefully scale. The whole point is to survive the outliers without flinching.
Kinahan’s rule of thumb: price risk sets share size, not conviction. If a stock’s average bar can wipe out your stop in one move, you’re oversized—period. Tie the risk per trade to a fixed fraction of your account and let the instrument’s volatility choose the quantity. That way, the wild names don’t quietly blow you up, and the quieter names don’t waste your capital.
Defined Risk Wins: Use Spreads, Stops, and Preplanned Exits
JJ Kinahan hammers home that defined risk isn’t optional—it’s the price of admission. Before entering, decide exactly where you’re wrong and put the stop there, not where it “feels better.” If you trade options, structure the idea with vertical spreads so your max loss is prepaid and visible on day one. The market can surprise you; your plan shouldn’t.
Kinahan also pushes preplanned exits to kill hesitation. First target takes partial profits, then a trailing stop locks progress without babysitting every tick. If momentum or RVOL dies, he trims mechanically instead of bargaining with the tape. In short: define the downside, automate the out, and let the math—not your mood—do the heavy lifting.
Diversify Smart: Underlying, Strategy, and Duration—Not Just Names
JJ Kinahan urges traders to diversify the way risk actually shows up: by product behavior, strategy type, and holding period. Owning five tech stocks isn’t diversification if they all move on the same macro headline. Pair an index future or liquid ETF with a single-name, add an options income spread, and keep a cash or bond-proxy sleeve to buffer shocks. When one engine stalls, another can still pull the account forward.
Kinahan’s twist is duration mixing—blend intraday scalps, multi-day swings, and medium-term option structures so you’re not hostage to one time frame. Stagger expirations and thesis clocks: an earnings play shouldn’t live or die with your morning VWAP trade. Cap correlation by measuring how positions reacted during past volatility spikes, not quiet days. The goal is simple: multiple independent edges, each small, together compounding into something durable.
Mechanics Over Predictions: Rules, Checklists, and Repeatable Execution
JJ Kinahan argues that traders lose money trying to predict the next headline instead of mastering mechanics. He leans on rules that fire regardless of mood: entry conditions, stop placement, profit targets, and time stops. A pre-trade checklist keeps him from “winging it,” while a post-trade checklist grades discipline, not P&L. The market is chaos; your process is the constant.
Kinahan’s edge is repeatability: same scan, same times, same setups, same order types. He uses if-then statements—“If RVOL ≥ 1.5 and price reclaims VWAP, then take first pullback”—to cut hesitation. When a rule breaks, he reduces the size automatically and logs why, turning mistakes into data. Prediction is a story; mechanics are a system—and JJ chooses the system every time.
Daily Process Discipline: Prep, Execute, Review, Then Earn Size
JJ Kinahan runs his day like a pilot’s checklist: brief, fly, debrief. Pre-market, he marks levels (overnight high/low, prior close, key VWAP anchors), picks a tight watchlist, and writes one sentence for each trade idea that would justify entry. During the session, he sticks to those names and executes only when the if-then rules trigger—no new tickers after the first hour without a top-tier catalyst. The goal is fewer, higher-quality decisions, not more clicks.
After the close, JJ Kinahan scores discipline first and P&L second. Each trade gets tagged (A/B/C) for setup quality, plus quick notes on rule adherence, slippage, and hold time. Only when the data shows consistent rule-following and positive expectancy does he allow size to increase. That way, size becomes a reward earned by process, not a gamble placed by mood.
JJ Kinahan’s message lands the same way every time: you don’t earn the right to chase upside until you’ve boxed in the downside. He treats risk as a fixed cost—predefined stops, defined-risk option structures, and a daily max loss that ends the session without debate. Sizing flows from volatility, not conviction: when ATR and spreads expand, size contracts; when conditions normalize, size can scale—but only if your rule-compliance and expectancy deserve it. And forget the myth that “they hunt my stops”—round numbers get hit because crowds cluster there, so place levels where the structure proves you wrong, not where the crowd is comfortable.
From there, the playbook stays ruthlessly practical: trade liquid products during liquid hours, let RVOL tell you when attention is real, and let VWAP and higher-low/lower-high structure police entries instead of FOMO. First trims come at 1R, runners trail behind structure or a VWAP hold rule, and time stops kick you out when momentum fades. Diversification isn’t five tickers—it’s mixing underlying, strategy, and duration so one bad tape or headline can’t sink the day. The daily cadence—prep key levels, execute only A-setups on a tight watchlist, then review and tag each trade—builds a feedback loop where size becomes a reward for discipline. In JJ’s world, mechanics beat predictions, process beats personality, and survival—day after day—creates the only edge that actually compounds.
Related posts:
- Market Wizard Trader Strategy: Larry Benedict on Risk, Discipline, and Consistency
- A Trader’s Trading Strategy Playbook: Why Tom Sosnoff Says “Trade Small, Trade Often”
- 90% Winning Rate Edge – Prop Trader Trading Strategy Description!
- Traders With Edge Review – Best Funded Trader Programs
- Mike Aston’s 7-Figure Trading Strategy: Achieving Financial Independence Through Discipline and Focus
- How a Veteran Trader Thinks: The Strategy Behind Staying in the Game
- Risk Management Strategy When You Trade for Prop Company!
- Laptop Legend’s Trader Strategy: How David “Laptop Legend” Stayed in the Game After a Massive Drawdown
- Traders With Edge Prop Funding: Do They Really Pay Out?
- Best Forex Broker in SGSSI: Trading from the Edge of the World
- Risk Return Ratio – Risk Reward Ratio Explained
- Win a Car as Trader – Free Car for Excellent Trader
