Archive for January, 2009

Jan
26

The Chinese Bamboo Tree

Posted by: Don Miller | Comments (0)

Please Note: The following is a reprint of a post by Eric Aronson from www. dashlive.com, whose website domain apparently expired on 1/1/09. The content reflects one of most powerful concepts I’ve been exposed to in my 47 years, and had a profound impact on me throughout 2008. All credit for the material goes to Eric.

Keep Watering Your Bamboo TreeEric Aronson

In the Far East, there is a tree called the Chinese bamboo tree. This remarkable tree is different from most trees in that it doesn’t grow in the usual fashion. While most trees grow steadily over a period of years, the Chinese bamboo tree doesn’t break through the ground for the first four years. Then, in the fifth year, an amazing thing happens – the tree begins to grow at an astonishing rate. In fact, in a period of just five weeks, a Chinese bamboo tree can grow to a height of 90 feet. It’s almost as if you can actually see the tree growing before your very eyes.

Well, I’m convinced that life often works in a similar way. You can work for weeks, months and even years on your dream with no visible signs of progress and then, all of the sudden, things take off. Your business becomes profitable beyond your wildest dreams. Your marriage becomes more vibrant and passionate than you ever thought it could be. Your contribution to your church, social organization and community becomes more significant than you have ever imagined.

Yet, all of this requires one thing – faith. The growers of the Chinese bamboo tree have faith that if they keep watering and fertilizing the ground, the tree will break through. Well, you must have the same kind of faith in your bamboo tree, whether it is to run a successful business, win a Pulitzer Prize, raise well-adjusted children, or what have you. You must have faith that if you keep making the calls, honing your craft, reading to your children, reaching out to your spouse or asking for donations, that you too will see rapid growth in the future.

This is the hard part for most of us. We get so excited about the idea that’s been planted inside of us that we simply can’t wait for it to blossom. Therefore, within days or weeks of the initial planting, we become discouraged and begin to second guess ourselves.

Sometimes, in our doubt, we dig up our seed and plant it elsewhere, in hopes that it will quickly rise in more fertile ground. We see this very often in people who change jobs every year or so. We also see it in people who change churches, organizations and even spouses in the pursuit of greener pastures. More often than not, these people are greatly disappointed when their tree doesn’t grow any faster in the new location.

Other times, people will water the ground for a time but then, quickly become discouraged. They start to wonder if it’s worth all of the effort. This is particularly true when they see their neighbors having success with other trees. They start to think, “What am I doing trying to grow a bamboo tree? If I had planted a lemon tree, I’d have a few lemons by now.” These are the people who return to their old jobs and their old ways. They walk away from their dream in exchange for a “sure thing.”

Sadly, what they fail to realize is that pursuing your dream is a sure thing if you just don’t give up. So long as you keep watering and fertilizing your dream, it will come to fruition. It may take weeks. It may take months. It may even take years, but eventually, the roots will take hold and your tree will grow. And when it does, it will grow in remarkable ways.

We’ve seen this happen so many times. Henry Ford had to water his bamboo tree through five business failures before he finally succeeded with the Ford Motor Company. Richard Hooker had to water his bamboo tree for seven years and through 21 rejections by publishers until his humorous war novel, M*A*S*H became a runaway bestseller, spawning a movie and one of the longest-running television series of all-time. Another great bamboo grower was the legendary jockey Eddie Arcaro. Arcaro lost his first 250 races as a jockey before going on to win 17 Triple Crown races and 554 stakes races for total purse earnings of more than $30 million.

Well, you have a bamboo tree inside of you just waiting to break through. So keep watering and believing and you too will be flying high before you know it.

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Jan
17

Posted by: Don Miller | Comments (0)

High up in the North in the land called Svithjod, there stands a rock. It is 100 miles high and 100 miles wide. Once every thousand years a little bird comes to the rock to sharpen its beak. When the rock has thus been worn away, then a single day of eternity will have gone by. Hendrik Willem Van Loon

I first came across this quote when I was young, and it had a profound impact on me then. And like many of life’s principles, it also forms part of the underlying foundation for my perspective on trading.

Ever get upset or overly excited about the results of a single trade execution? First re-read the above quote (chest-beating advisory service horse race callers included), and then consider the following:

If I took my 2008 trading volume of 637,766 contracts and adjusted it downward by 10% for conservative purposes, that would total about 574,000 contracts per year. If I then divided that by an average trading size of 40 contracts (probably in the ballpark, keeping mind I’m sometimes far heavier), and then divided the result by two to try to capture a complete buy-sell sequence, that would result in over 7,000 trade sequences annually, or about 30 per day.

We’ll also assume there are 230 trading days in the year (there are actually about 250 U.S. trading days excluding holidays, and we’ll take off another 20 days for vacation and other commitments), and that one has a 20 year trading career. The career span of course assumes a successful trader with longevity, and so the 20 year figure may be ultra-conservative.

So, the following stats are relevant when I close my first trade on Monday:

The trade will reflect 0.014% of a trading year and 0.0007% of a trading career. Double the career span to 40 years, and the trade will reflect 0.00036% of all trades made. Then, factor in the ongoing mental decisions that are made over the course of the trade sequence (sizing, holding time, scaling in and out), and one could argue the % truly approaches zero.

Trade far less frequently? No problem, simply adjust all of the numbers downward. The % results would be similar.

Now it’s of course true that the financial impact of a single trade or day can have a large impact on one’s bottom line, as it’s often those home run or disastrous single results that can drive the bottom line hard one way or the other. And this might be especially true for swing traders needing to ride profitable trends, traders executing inappropriate strategies, or momentary brain cramps. Yet, the point obviously is that a single trade decision or sequence often means so very little in the scheme of things.

The countdown clock to the left is simply one way of my keeping the Svithjod rock in perspective over the course of the year’s “single trade”.

It’s my way of stepping out of the moment … in trading and in life.

Look for additional posts over the weekend as I look at making a few blog enhancements to benefit all.

Categories : Motivational
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Jan
11

The Weekend Trader – The Jazz Trader

Posted by: Don Miller | Comments Comments Off

Note: This piece, which I originally posted on the original Don Miller Journal in January 2009, was subsequently syndicated at various venues including MoneyShow.com.  Enjoy.

Yesterday, I had the pleasure of attending a concert of the state’s top high school musicians, of which my daughter (who plays violin) was a part. The concert participants consisted of a chorus, jazz band, symphony orchestra, and concert band. And the music was simply incredible, especially considering that those involved had just two practice sessions together (Thurs and Fri), although they’d of course each individually practiced their pieces for a month or so leading up to the event.

Yet when the jazz band took over, I couldn’t help my mind drifting back to trading throughout much of the 20-minute session. The reason was that I saw similarity after similarity between the players, each of whom took a turn to step out of the band to do an improvisational solo, and futures traders. And here’s why.
 
Throughout the performance, there was an underlying rhythm — a pace which was kept by the director subtlety through some simple finger snaps — as well as sheet music, which was of course used as a guide for the players. Yet when it was time for the improv pieces, up stepped each player to the front where he/she performed without sheet music, playing the tune as he/she saw fit from the heart. And while the underlying beat provided by the director and rest of the band remained in the background, the inspiring improv solo performances clearly reflected each player’s soul, vision, and individuality, and they combined for a truly outstanding performance.
 
Yup, here’s where I segue into trading. Those of us that take up the “instrument” of trading and are “students” of the market are indeed those improv soloists, where the market provides the beat and we are free to trade as we interpret the piece. As I’ve often said, there’s no right way to trade (except I suppose for ultimately making sure net purchase prices are less than net sales prices after expenses like any business), just as there’s no right way for an jazz saxophonist to play his/her piece.

I’m sure there were a few missed notes, momentary loss of the underlying rhythm, and some performance stress during yesterday’s jazz band set … which also happens to describe almost every day of my trading career. Yet I certainly didn’t notice them as they were buried in the net performance, which was all that mattered.

There may very well be as many ways to trade as there are ways to interpret one’s musical soul: Speculating, providing liquidity, hedging, swing trading, scalp trading, range trading, breakout trading, trend trading, 5-minute chart trading, 60-minute chart trading, emotional extreme contra-trend wholesaling … not to mention the thousands of trading “instruments” out there. There’s simply no “holy grail” or “right way”.

Someone asked me last night why I didn’t short into the shallow 30-second chart pullbacks on Friday’s opening cliff drop. My response was essentially that I wanted to short, but personally rarely take shallow pullbacks on market spikes as I prefer lower-risk deeper retracements, which may appear as the first pullback on a larger timeframe (my eventual short was the first pullback and bear flag on the 5-minute chart). And as I’m waiting, I may very well test the waters and provide some liquidity to those bailing on pure emotion, which eventually snaps back at some point … often hard.

And while the question was completely appropriate, perhaps my response should have been more along the lines of yesterday’s soloists, in that it’s probably as irrelevant for me to look back on how I played a given pattern as it would be for me to ask why the horn player chose to pass on the screeching high-”C” climax and instead took a momentary breath to rejoin the band’s rhythm. Neither was right, yet both were right.

As a quick aside, I also read a recent piece that essentially concluded that one can’t profit from trying to time short-term price movements. Wowzer … talk about a head-scratcher.

I suppose we are all market “players” in the truest sense of the word. We must learn the underlying market beat of course, yet the best players seem to play their own tune that reflects their individual strengths, heart, and soul.
The sheet music will always remain unwritten until we step out of the band and up to the mike to write it.

Don’t be afraid to step out of the crowd and up to the mike in trading — or life — and play your soul. Don’t be afraid to write your own music.

I suspect that some of the greatest tunes ever contemplated were never heard because they remained on the composer’s desk or in the solist’s heart. And perhaps some of the best trades ever considered were never made because they remained in a trader’s mind for fear of doing something unique or against popular convention.

Have a great and inspiring week.

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