15 Years of Cannabis Trading . Why I'll Sell Early (Unless This Happens) ft. Dan McDermitt

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Bryan Fields: Dan, a lot of people still talk about rescheduling like it's the catalyst that unlocks the cannabis sector, but at this point it still hasn't happened and the stocks are stuck where we are. It raises a harder question: is this really a catalyst problem, or is cannabis equity still dealing with a deeper structural issue — capital, liquidity, or market plumbing? Dan McDermitt: Both, honestly. I'd say it's a little bit of both. The biggest thing for those of us who've been following the sector for a prolonged period of time is the words out of DC — the words from politicians that don't follow through. The biggest punch in the gut to people newer in the sector was the whole Biden situation, where the Democrats came in with the president, the House, the Senate, saying, 'We're going to do this, this, and this.' Four years went by, nothing happened, and that was the peak. We're still in the slow bleed trying to recover from that. So you get a bunch of jaded people, myself included, where it's like, prove it. Show me the concrete change, show me the law changing, something fundamentally shifting — because in this moment it is still a federally illegal substance. Without a concrete change, it's just words. Bryan Fields: So how do you feel like you're in the right position? Because it is still early, but the companies are doing well — some have fortified moats, maybe the fundamentals are moving in the right direction. But how do you still balance understanding that the industry is struggling with these elements, but is also positioned to ride really quickly, like we've seen, if and when things change? Dan McDermitt: For me as a trader, it's just knowing that if we get the momentum and the shift, I don't have to nail the bottom for it to be worthwhile. I can be 20% off the reaction, and if it's the real deal, there'll be plenty left that's worthwhile after that. That keeps me — I recently just keep a little bit of a position so it forces me to keep looking at it, like, don't fall asleep on this. But it's not materially moving anything until something actually changes and we get the volume and the follow-through and the trend changes. One big pop is not enough — we've seen we can just give it all back. We need the higher lows and higher highs on the daily, the weekly, the longer-term timeframes. Then I'll look to play that momentum. If you go back and look at any breakout sector — even recently, metals, whatever it is — there's plenty of opportunity to ride the trend when it's in your favor, if it's going to be a sustainable move. Bryan Fields: So then the question becomes, for people who are really jaded — from a risk mitigation standpoint, and knowing which players to play — is there something specific you're looking for from a company standpoint, picks and shovels, location, or is it more about finding a ride and having criteria that internally check the box for you? Dan McDermitt: The easiest thing, speaking just as a trader, is MSOS, because it's listed on a higher exchange. Even simple things like on Fidelity, I can market order — if I need to rush in, I can market order that. On the OTC names, Fidelity doesn't allow stop-losses on OTC, there's just little nuances. So the easiest volume and liquidity is MSOS. But as we've seen plenty of times, it'll halt on a headline, and when it halts, the individual names keep trading. So if I'm trying to get in and MSOS is halted, that's when I go to some of the major names, whether it's Curaleaf or Green Thumb. I've paid a bit more attention, at least the last couple of years, to Trulieve, just because of the extra dangling carrot of Florida — but as we know, that didn't work out. I positioned for the run-up into the vote and knew to take some profit just in case, because it was, in my opinion, a 50/50 coin flip whether we'd get it. And it failed. But I'll always keep an extra eye on Florida — just the population size, plus the number of visitors the state gets yearly, increases the target market significantly. Honestly, not being a fundamentally focused person, I'd imagine the best thing for Trulieve would be if the state legalized while the federal situation remained a gray area, because their target market would increase by multiple hundreds of percent. That's how I've been viewing it. When things are slow and boring, it's just MSOS, because I'm watching 15 other sectors, 35 other stocks. And if we get a catalyst or a shift, then I zoom in and look at who's got relative strength, who's got enough volume and liquidity, things like that. Bryan Fields: Maybe break down the difference between traders and fundamentals — I think that might be really important to understand. Dan McDermitt: As a trader, there's so much I don't care about at all that a fundamental person would care about. Obviously the balance sheet and things like that, but even the situation where we get a headline — because we're so illiquid in this sector, we shoot straight up 5% or whatever, that marks the top, and then we slow-bleed for a few days from there. Unless it's the concrete change, I don't care at all what the headline is. Someone who's fundamentally based probably doesn't have — for me as a trader, I have an invalidation for my thesis. This support level is going to hold, or I'm wrong and it breaks and I'm out. Whereas a fundamental person could say, 'This sector is undervalued.' Okay, well if we drop 30% more, that thesis doesn't change — so where's your invalidation? Where do you know you need to get out? How do you protect against becoming a bag holder? I think that's the biggest change fundamental people in markets need to adopt: invalidation points for their thesis. You can stay correct on something, but the market environment can shift enough that you need to reassess — say, 'Okay, I was wrong, I need to protect myself.' Everybody's learning that lesson in this sector over the last few years. I learned it in 2013 trading cannabis penny stocks — we had monster runs back then, 500,000%, and then we just slow-bled for years and years. I learned that you take profit into euphoria, or you can give it all back. Everybody in markets has to learn those lessons; it's just whether you learn from them and improve or not. Bryan Fields: Was that lesson learned the hard way? Dan McDermitt: Oh, for sure. I turned $7,000 into $42,000 in my early 20s in a rare earth penny stock, then picked the next one — 'this is the next big winner' — and fell in love with the story. Everything I teach people not to do, I did. I gave back the entire move. I learned what convertible debt and dilution are — I didn't know that when I was picking the stock that was going to change my life. I applied those lessons to the cannabis cycle. I made significant gains in cannabis, gave back some — 10, 15, 20% from the highs. But the next cycle, crypto in 2017, I didn't give anything back. Each euphoric cycle, I improved a bit in terms of learning the lessons and applying them. Bryan Fields: I think the difference between the trader and the fundamentals perspective is so important, because so many retail folks get excited about the opportunity, recognize they're early, see the quick run and then the comeback, and think, 'The thesis is still good, we're still moving in the right direction, we just need one catalyst.' But then it becomes 6 months, 12 months, 18 months, and that time period gets really difficult — is the thesis still correct, or am I just missing something? Dan McDermitt: Yeah, and it's this perspective too — people think they're early right now. Meanwhile, I've been trading cannabis stocks for 15 years. Literally 15 years. We were early before any state had ever legalized cannabis — that's early. When you have a sector that's gone through multiple cycles of pump and dumps, you're no longer early at that point. And again, you can turn on the fundamentals and say, 'We're not even federally legal, what if we get [rescheduling]' — I understand that concept, and that can be your approach. But for a sector like this, so unlike anything I've ever traded — number one, federally illegal; number two, OTC market participants and an ETF that does swaps — this is all very foreign. MSOS trades unlike any ETF I've ever observed; it's got its own nuances. What I've learned, the takeaway for me, is: don't bag hold. Get in when there's momentum, take profit into euphoria. If I'm in at 3.50 and we shoot up to 4, I sell half the position and stick my stop at breakeven, and maybe we get follow-through, and that's it. The problem is so many people are looking to change their lives, viewing this as a life-changing opportunity, without a plan B — what if I'm wrong? What I see with a bunch of fundamental people is they look at all the reasons they're right, all the press releases, all the message boards agreeing with them, and that's it. I'd be looking for everything that's a red flag. If I'm going to be wrong about this, I want to know how before I'm slapped in the face and surprised. Fundamental people don't want to talk about the dilution we just had, when those shares become free-trading — meanwhile, if I'm long, that's the most important information for me. You should be looking for the cracks and red flags so you're not blindsided. Bryan Fields: Can you explain why MSOS trades uniquely? I see that sentiment all the time online, but I don't fully understand what it means. Dan McDermitt: I don't fully understand it either, and that's important as a trader — being able to look your ego in the mirror and say, 'I don't know.' I've been watching it since inception, traded it hundreds of times, and I still don't fully understand the mechanics behind the swaps and cash balances. You can observe little nuances — we've had patterns where in the last 10 minutes of the day we'd free-fall; that's diminished recently. Traders take advantage of that — 'I'm going to short right into the end of the day and cover on the dump' — and it becomes a self-fulfilling prophecy to a degree. As for what's going on right now — I'm not accusing anybody of anything, but there's a certain Twitter account, Oracle, that takes a headline, whether from Marijuana Moment or Marijuana Herald, and posts it. As soon as they post it, you can see there are clearly algos and automated trading systems linked to that post, because MSOS on the one-second timeframe shoots up on big volume, and often a fairly meaningless headline leads to a halt because it's such an illiquid cascade effect — some shorts cover, some people go long, and when you top out on that initial 10–15 minute move, it's a playbook bears have been repeating over and over, because we stop right at resistance — the last daily lower high. We'll get within 1% of it, top out, and then slow-bleed into the afternoon and the next day. It's a bear playbook. I've never seen a more consistent one than over the last six months or so — headline spike, tweet, volume spike, then slow bleed, rinse and repeat. They'll keep doing it as long as it keeps working, and time is on the side of bears in this sector because government is so slow. If we don't get the catalyst, we'll stay in a perpetual slow bleed, then get a bigger spike, then slow bleed again. Even when it eventually stops working, they'll have made enough already that it won't matter. Bryan Fields: I know exactly what you're talking about — it looks like a cliff. And you wonder about the people who see the headlines, get excited about cannabis as a gold rush, buy MSOS wanting to get involved long-term — they're the ones over the long run asking, 'What the hell happened to the stock?' Dan McDermitt: Right, and even the two-times-leveraged MSOX — people don't understand there's time decay built in. That thing is designed to go to zero based on how leveraged ETFs work, unless you're in a strong uptrend. Leveraged ETFs are not the spot to be unless it's like a shorter-term options bet — it's got to go up in a short period or it's very detrimental by the mechanics of what makes something leveraged. The day-to-day settling leads to perpetual erosion of share price. Bryan Fields: With MSOS being as unique as it is, are there other ETFs that could replace it, or a preferable alternative? Dan McDermitt: It's really just about uplisting. If we can uplist and trade the individual names — those who played the Canadian boom, when Canopy and those names uplisted, it was a game-changer for daily trading opportunity. Volume and volatility went through the roof; it gave that move significant juice. A lot of people forget MSOS is the reason the sector ran 1,000% into Biden being elected — we wouldn't have run that hard without it. It was an instrument; liquidity works both ways. If you lack liquidity and everyone's trying to get through the door long at the same time, things go straight up, and likewise to the downside. Uplisting will shift a lot, because there are full-time traders and hedge funds who won't touch OTC. I can't apply my trading style and edge to OTC stocks — it doesn't work. Personally, given the dollar volume some of these OTC names are doing, I'd rather bring that volume myself day trading a liquid, volatile name. So uplisting for me is almost as important as rescheduling — though speaking as a trader versus as Dan personally who cares about medicine helping people, rescheduling matters there too, but trader Dan wants uplisting. Bryan Fields: I think that's important to separate — Trader Dan is the one people see online asking how to make sense of these charts, but underneath there are two perspectives: the fundamentals of the companies and how they're doing, versus the trading mechanics that give an edge in the short term. Dan McDermitt: Yeah, and from the fundamental perspective, these names are so high risk that as soon as growth potential slows a bit and we get numbers showing growth is slowing, that can really hurt them, because the reason people take the risk is the growth reward is great — the moment that shifts, you get issues. Then there's the question of oversupply — if we get rescheduling or descheduling, which would be more of a holy grail, do we reach a point where the price of cannabis is cut in half because of how much supply floods the market? There are so many questions. Personally, being a trader, not an investor, I'm not interested in long-term cannabis positions — I've got friends who've grown illegally for decades, and I know it's not a great business. It changes when it's legalized, but potentially changes for the worse aside from an initial surge. So personally, I'm in the sector for the rush of euphoria around actual federal concrete change. The long term — what the sector looks like five years after that — I have no idea. I'm not confident enough to just buy and hold for five years, because I've seen so many people with that mindset in Canada get absolutely destroyed, and I'm not going to let that happen. Bryan Fields: Long-term in this industry could mean pretty much anything — I think long-term should really be evaluated on a 6-to-12-month basis, because things change, sometimes for good or bad depending on the specific company. That's where the trader/fundamental difference comes in — you don't need to know every company's specific opportunities; Trulieve in Florida is very important, but if a company opens in Virginia, it's not really something you need on your radar. Dan McDermitt: Definitely. Everybody focuses on their favorite name, and that's led to me losing money in my career, so I do my best not to allow emotional attachment to an individual name. That's why I have a split personality — there's Trader Dan and there's Person Dan, because Person Dan does have emotional attachment to this sector. The reason I got into the stock market 15 years ago is because I read The Emperor Wears No Clothes by Jack Herer, all about industrial hemp — I was reading about CBD back then thinking this could change the world, and seeing it transpire, however slowly, has been awesome. Seeing President Trump repost a video about the endocannabinoid system, I couldn't believe it was real. It hasn't transpired into concrete change yet, but that's still a huge win. If I let my emotions tie into that, I'm putting a bunch of capital in on that tweet and now big red, and I can't let that happen. I have to detach the two. Bryan Fields: It's really difficult — you feel that emotional attachment and excitement, but you make a good point that the fundamentals today shouldn't influence strategic investment decisions. Maybe that's where risk mitigation and diversification are important — don't put all your eggs in this basket. So how do you balance all the different sectors you're looking at? Is it based on numbers and limits you've set, or something else? Dan McDermitt: My comfort comes from experience and technical analysis. If I can look at a chart to trade something, I don't care if it's the price of dirt — I'm comfortable. I know how to manage risk and reward, I know the patterns I've seen 10,000 times. There are times I'll trade a company and have no idea what it does. Yesterday I shorted a penny stock — I have no idea what it really does — it was based purely on a level: we'd been surging, way overextended, here's resistance, we opened right at resistance and pulled back a little, I'm short, I stick my stop right over that level. That's how I approach markets. To touch on overexposure — people go for the home run, and I get it, but it depends. I went for the home run when I was risking $3,000 of high school job savings, all in on cannabis penny stocks. That's very different than if you've got an IRA, a full-time job, and a mortgage. You allocate based on your lifestyle and where you're at — this is as high risk, high reward as you can get in markets, comparable maybe to altcoins or psychedelic stocks. The mindset should be a 50% loss or 100–200% gain, and accepting the amount of capital with that as the basis if approaching it from a fundamental perspective. Bryan Fields: So on a 200% gain, would you sell it all, or a percentage? Dan McDermitt: It depends on the catalyst. I love positioning risk-free. Right now I'm looking for a Tesla daily higher low — I've been day trading Tesla all day, little flips, and my breakeven on this attempt is at the low of today with a stop right under that level. If I'm right, I make money; if I'm wrong, I stop out at breakeven. I suggest people sell partial — that's what I did into the Trulieve vote, positioning for the run-up as people priced in the possibility, selling partial into that because we didn't know if it would pass. That way if it doesn't pass and dumps hard, you keep back a bunch of profit but don't go red if you had a good entry and scaled out. It's not going to change your life approached that way, but it keeps you in the game. With trading and investing, the number one thing is to stay in the game — it's a marathon. So many people want the payoff here and now, to their detriment. Bryan Fields: It's like people trying to hit a grand slam on their first swing versus singles and doubles. The way you describe it, it should be kind of boring. Dan McDermitt: I actually had a conversation with someone on Twitter who didn't agree that trading should be boring — I agree with it. If you do it long enough, same routines, it gets repetitive. My standard day trading is boring, and I can make or lose what was my entire net worth 13 years ago in a day and not feel a thing, because I've done it enough times. Trading and markets should be boring in my opinion. But there are times a home run is warranted — the stars all have to align: the right concrete catalyst, volume, uptrends and follow-through, social media hype, Wall Street Bets talking about it, being the number one trending stock, a short squeeze going on. All those things have to align — that's when you size up and go aggressive, not on just any old headline that pops the price 7% and gives it back in two days. Bryan Fields: In that scenario, uplisting happens, Wall Street Bets is talking about it, all those headlines — that's when people feel like this still has a chance to run, but we should be cautious that the actual items still need to transpire. Dan McDermitt: Right, and what was great about the Canada run is you knew it was going to be legalized, which gave confidence to buy dips leading up to it. Then you get the uplisting catalyst, and it was a slow dopamine drip of things to keep it bullish — but then we ran so much you had to be cautious of a sell-the-news event into the first day of sales. I was talking about that possibility and people were trashing me on Reddit. I wasn't anticipating it would be the forever top — I said maybe we pull back for a few weeks — but because I had that mindset, I could take in information week after week saying, 'wait, this is a long-term top.' You've got to have the multiple catalysts. Bryan Fields: Let's play a fantasy game — US rescheduling, official path to uplisting, uplisting happens in four to five weeks, massive volume increase into individual names, then talk of a descheduling commission — one catalyst after another to keep an uptrend going. That's the moment most people almost can't believe is a real event, given everything they've gone through before, and I think that's part of why people keep coming back — they can't get enough, thinking maybe the thesis is correct but the timing was the problem. Dan McDermitt: And the question also becomes how many times people have been burned and won't trust it. We're seeing that in crypto altcoins — it's been pumped and dumped so many times, people have sworn off the sector because they lost too much. That's in the back of my mind — there's a lot of overhead supply of bag holders; somebody out there, if MSOS pops 100%, is going to sell at breakeven and be grateful for the opportunity. That's one reason I've been focusing on psychedelic names more over the last year — they haven't had multiple runs burning everybody, it's a fresher story and possibility. If we get a catalyst and a significant move, I will sell early — I already know that will happen, because I'd rather sell early and leave profit on the table than give it back. That's been my approach to this sector for a long time, and it keeps serving me well. Maybe one time it won't, but if something has served me well six times in the past, I'm not going to look for things to be different this time. Bryan Fields: That's a really powerful point. So how does the rise of AI influence your strategy — does it alter it at all? Dan McDermitt: It shifts narratives for individual sectors. I'm trading software stocks for the first time in my life this year. It's interesting from a market perspective how narratives grab the herd — back when GameStop was pumping, there was a short-hunting campaign: if a stock has a high short float, we're going in and going to run it. Then with AI over the last couple years, anything to do with AI, people put their money in expecting it to rip. I've seen it a ton on the long side, but most recently I've seen it on the short side — headhunting longs, like 'cybersecurity can be disrupted, let's dump this massively for two days,' or software stocks, or the fake-out in shipping and trucking stocks where a penny stock claimed something that would shake up the industry and billions were erased from market cap in one day, then everybody realized it wasn't as legit and the market quickly repriced it. Fascinating to observe — it's professional traders taking advantage of narratives, and that's all markets really are: professionals taking advantage of emotional regular people acting on headlines or the big red or green number in front of them. AI has fundamentally shifted things — there's so much unknown, and because of that fear, the moves are greater, which is more beneficial for professional traders utilizing that volatility. Bryan Fields: That's where the fundamental-versus-trader-Dan difference is a core thesis for you — fundamentally they can say whatever, but as a trader, this is what you're seeing and how you'll act. Dan McDermitt: Yeah. Software stocks had been dumping for weeks and weeks, then Anthropic had a conference saying something like they're going to work with these companies, and that marked a low that day — not a massive rally, but a meaningful percentage bounce. I started focusing long on those names because I love bounces — that's one of my edges as a trader. It's about detaching, accepting I have no idea what the future holds, I can't even make a good educated guess — that's not my edge. I'm going to take advantage of what's in front of me in the short term and the volatility: this level's going to hold, or I'm wrong, and I structure my risk and reward around that. Bryan Fields: Do you think AI agents being used for trading will confirm this approach, or will you have to re-evaluate, since everyone using AI agents adjusts how the charts look? Dan McDermitt: It will impact things a bit. The number one thing as a professional trader is you have to stay agile — you cannot get stagnant, you have to adapt with the market. I used to not look at Twitter when I started trading, then realized it was influencing things — I made a video eight or nine years ago called 'Tweets Moving Trillions' because a tweet about oil completely moved the market. Social media changed the game of trading and investing, and that's always going to keep happening — there's always been high-frequency trading, automated trading systems, that's not new. I just took a trade on oil — it dumped back down to the 70s, I played that bounce well, though I didn't keep a runner long enough as it's now back up towards 100. It was the exact same playbook I used in crypto in 2017, and I had a moment that day thinking, I can't believe this is still working eight years later. Some things stand the test of time, but it's a mindset of always observing and always adjusting, because the one constant in markets is things will keep changing. Bryan Fields: How do you know if information sources are valid? There's so much noise, and keeping your eye on the pulse across multiple industries simultaneously has to be difficult. Dan McDermitt: It's getting harder and harder. It's about the price level. Yesterday I was trading oil, we got a headline — Iran could potentially attack, whatever it was — the market dumped quickly and oil shot straight up. But oil went right to the high of the day and rejected, so I shorted it, put my stop right over the high of the day, small risk, ended up being about a 1% trade, a base hit — but it was based on the level. So much of it is fake these days — someone posts an image or a headline about a ship in the strait, then deletes it right after — it's a game that impacts price movement, but as long as I'm setting my stop losses and trade levels based on price, it's going to be fine. Playing that oil bounce, I lucked into a headline that popped it up, but I was already positioned so that if it was a bearish headline, I would have stopped out at breakeven. So yes, luck played a role, but with correct risk management, you just let the headlines happen — sometimes they benefit you, sometimes not, but you don't let it significantly hurt you. Bryan Fields: The thing I thought of first when you mentioned the headline is an AI algorithm pulling a tweet and acting on it — like an AI agent having to verify if a headline is accurate before pulling the trigger. Maybe that's what needs to happen to prevent the chaos. Dan McDermitt: I don't know how it's going to evolve. We can still tell when a video is AI for most people, for a little bit — but that's going to change. There will come a time when video evidence doesn't mean anything, which is a crazy thought. That's going to be a never-ending thing in markets — determining what's a trusted source, and even trusted sources will put out something fake and have to apologize for it. I treat markets as a video game with flashing numbers in cyberspace — the price of Apple has nothing to do with actual tangible products in a store. By detaching that association in my brain, it's allowed me to take price as it is, and that detachment has been most important for succeeding — treating it just as numbers flashing around. Bryan Fields: I think that's a great way to end. Last question: what question do you wish more people asked you? Dan McDermitt: Ooh. I wish more people asked things that acknowledge this is a multi-decade endeavor in terms of approaching markets, because the majority of questions are about how to profit now, how to succeed now — meanwhile, the things you learn now are going to benefit you years from now. Everything I learned in my first seven years of trading, I leveled up on in year seven, when my life changed with thousands of percent gains in the crypto environment — nutty stuff — and that was seven years of putting in the work to capitalize on that one moment. What you're learning now is going to benefit you years from now, if you can make those lessons stick. That's the correct approach to markets, versus the get-rich-quick-scheme mindset, which is so tough. Bryan Fields: So Dan, for our listeners who want to get in touch and learn more, where can they find you? Dan McDermitt: An insane amount of content for free on YouTube at ChartGuys, ChartGuys on Twitter, chartguys.com. I've been making content for 10 or 11 years now, so a nice track record of being someone trusted with a good reputation — our reputation at ChartGuys is something I'm most proud of. Ask AI about us, they'll tell you. Happy to help answer questions — free content along with paid stuff, but plenty of free stuff, a year's worth you can dive into. Bryan Fields: Thanks for taking the time, this was a lot of fun. Dan McDermitt: Absolutely. Thanks for having me.