Go Where Orders Flow · Dylan Maltman

Episode Overview & Host Announcement

• Podcast Context: "Chat with Traders" Episode 302, hosted by Tessa and Ian Cox, featuring guest Dylan Maltman.
• Host Transition: Tessa announces her shift from co-host/producer focus back to prioritizing her personal trading career after three years of balancing both roles.
• Guest Profile: Dylan Maltman is an intraday futures and forex trader and founder of Apex Capital Management, based in Cape Town, South Africa.
• Sponsor Information: Plus500 sponsors the episode, offering a futures platform with access to S&P 500, Nasdaq, Bitcoin, and Forex, requiring a $100 minimum deposit and providing an unlimited risk-free demo account.

Early Trading Career & Proprietary Experience (2018–2019)

• First Exposure: Maltman's introduction to trading occurred in Grade 11 via a school presentation by a prop firm/hedge fund manager, initially sparked by the high-risk/high-reward nature of crypto.
• Entry Strategy: He secured an entry-level position at a prop firm in high school by persistently arriving early to make coffee and soup, demonstrating a "winning" mentality.
• Initial Trading Focus: His first assignments involved macro swing positions on crypto assets and learning quantitative strategies on a prop firm's quant desk.
• Market Conditions: He entered during a high-volatility crypto cycle (2018–2019), learning aggressive "response-style" trading focused on volume, standard deviation breaks, and ATR breaks.
• Team Dynamics: Initial trading decisions were collaborative; Maltman traded alongside a team rather than executing solo, treating the experience as a paid learning phase ("school fees").
• Performance Metrics: The fund leveraged the crypto upswing to 3x the portfolio value within a six-to-eight-month period.
• Firm Type Distinction: Maltman clarifies that physical prop firms trade their own capital, whereas "funded" programs typically offer demo accounts where traders pay an evaluation fee, with the business model often relying on the 90% failure rate of participants.

Strategy Development & Quantitative Methodology

• Algorithmic Shift: Following a return to South Africa during the 2020 pandemic, Maltman transitioned to algorithmic trading to avoid the emotional pitfalls of discretionary trading.
• Target Markets: Initial success was found in exotic FX pairs (e.g., USD-ZAR, EUR-GBP) due to higher directional volatility and less competition compared to major pairs.
• Backtesting Data Volume: Maltman advocates for testing on 5,000 to 10,000 data points rather than a fixed time period, noting that five years of 1-minute data differs significantly from five years of daily data.
• Over-Optimization Prevention: To avoid "curve-fitting," the team uses:
  • Non-consecutive sample testing: Testing strategies on disjointed data segments.
  • Walk-forward optimization: Optimizing for periodic data sets and verifying performance on subsequent sets.
  • Out-of-sample testing: Validating strategies on data not used during the creation phase.
• Strategy Logic vs. "Black Box": Maltman argues that building one's own strategy is superior to buying off-the-shelf algorithms because it teaches the trader why a strategy works, enabling them to identify when market conditions change and the logic fails.
• Failure Detection: Traders can identify a broken strategy by monitoring core variables (e.g., if a breakout strategy relies on volume and volume is low, the strategy should logically be ignored).

Apex Capital Management & Current Operations

• Founding Motivation: Maltman founded Apex Capital Management to leverage the higher risk-return asymmetry of proprietary trading compared to traditional hedge funds.
• Business Model: The firm operates as a prop trading firm with shareholder capital, with a future goal of launching a hedge fund product for external investors.
• Team Structure: A core team of four traders operates across liquid CME sectors (NASDAQ, S&P 500, Natural Gas, Gold, Crude Oil) with some FX exposure.
• Trading Style: Focus on intraday trading with an average trade duration of approximately six minutes, primarily during the US session.
• Core Philosophies: Strategies are built on three pillars:
  1. Order Flow: Dissecting volume to understand participant intent and "heartbeat" of the market.
  2. Asymmetry: Targeting high expected value ratios (risking 1 to make 3, 5, or 7).
  3. Risk Management: Optimizing for smooth equity curves and chart ratios rather than just raw returns.
• Order Flow Mechanics: The firm utilizes tools like footprint charts and cumulative delta to detect:
  • Absorption: Large resting limit orders absorbing aggressive buying/selling without price movement.
  • Liquidity Exhaustion: Identifying when passive liquidity is depleted to confirm sustainable breakouts.
• Performance Metrics:
  • Sharpe Ratio: Currently in excess of 3, with recent checks exceeding 6.
  • Sortino Ratio: In excess of 9.
  • Fund Returns: Approximately 30% for the simulated hedge fund division; 0.2% to 0.72% maximum drawdown.

Risk Management & Position Sizing

• Tolerance Matching: Position sizing begins with defining personal maximum drawdown tolerance (e.g., 10%) and adjusting for market conditions.
• Monte Carlo Simulation: The firm uses simulations multiplied by a "realism factor" (20–30%) to estimate worst-case consecutive loss scenarios.
• Dynamic Sizing: Risk exposure is adjusted based on strategy potency:
  • High Potency: Increasing size when variables (e.g., volume) align perfectly with the strategy.
  • Diluted Potency: Reducing size to 1/3 or 1/10th (or not trading at all) when market conditions do not support the strategy's core logic.
• Edge vs. Risk Management: Maltman asserts that edge must exist first; superior risk management alone cannot turn a losing strategy into a profitable one, but it can transform a good strategy into a great one.

Future Outlook & Career Advice

• Institutionalization: Apex Capital is currently focused on institutionalizing operations, including creating robust documentation and processes to build trust with potential institutional clients.
• Investment Access: No passive investment options are currently available; the firm maintains a waitlist for a future hedge fund launch.
• Programming Concerns: Maltman suggests that non-programmers can use "no-code" platforms for backtesting and that the risk of idea theft is low unless the strategy is already generating millions in revenue.
• Advice for New Traders:
  • Patience: Accept that profitability takes years and initial losses are part of the learning curve.
  • Psychology: Avoid self-imposed pressure that hinders progress; enjoyment of the process is critical for long-term efficiency.
  • Process Focus: Prioritize mastering the learning curve over immediate results to build a sustainable career.
• Contact Information: Interested traders and investors can reach Apex Capital Management via their website, www.apexcptl.com.